Michaela Petrone  0:05  
Welcome to joint ventures, a podcast where we delve into the cannabis investment landscape through the lens of investors and operators who helped fuel the growth of the cannabis industry. Today's guest Jesse Redmond spent a decade managing multiple hedge funds, including co founding to hedge funds of his own. In 2016, he pivoted and opened a cannabis dispensary in California, which became the number one medical collective in his region. Currently, Jesse is the managing partner at higher calling a consulting service for investors seeking informed opinions on cannabis investments. He also writes about cannabis stocks on green giants. dotnet thanks for coming on the show, Jesse. And here's your host, Jordan trit.

Jordan Tritt  0:48  
excited to have you with us today. Jesse, just to get started, why don't you go ahead and give a background on a little bit personal and professional as well as how you got into the cannabis space and some of your backgrounds leading up to this conversation.

Jesse Redmond  1:04  
Yeah, thanks very much for having me. I'm excited to be here. In terms of personal I'm a washed old dad in his 40s. I have two kids that I live just outside of Santa Barbara. I'm originally from Minnesota, but escaped to Santa Barbara for college and kind of never looked back. I always been in two stocks. I remember in sixth grade, we had a stock picking contest at my school. And I won by owning cray cray research, IBM and McDonald's back then. And ever since then I got into checking stocks in the paper. And it's just been always something that's a passion. I bring that up. Because I think we do best in life. Sometimes when we can follow our passions for our careers. That's cliche, but I've definitely found it to be true. So I've always been into investing. And when I went to college, the only question was whether I was going to do business or economics and at UCSB, where I went to school was called Business Economics. So that made things easy. After school, I moved up to San Francisco for almost a decade. And it worked for a couple of shops. Most of you will though first worked at Franklin Templeton, the big mutual fund company. And then I was an early employee at Fisher Investments. And that was a really cool experience. Because when I started we had about a billion dollars. And I think it was employee 30 of the plug Private Client Group. And today that firm has $150 billion and 1000s of employees. And so it will take almost zero credit for their success. But it was a great opportunity to learn and be part of something that was growing. And Ken was a brilliant guy to train under for those first few years, those opportunities led me to get offered a position to be co portfolio manager of a fund called Santa Barbara market neutral Fund, which was as it sounds back in Santa Barbara. So I moved back here. I manage that fund co managed to be clear for several years and that I co founded another fund called evolved alpha. The evolved Alpha I'm really proud of that was based off of the idiom partners model, which is a multi strategy hedge fund. But what we did differently is we didn't require traders to be in house. And so we allocated capital to outside managers, we have managed accounts, rolled up all the positions every night and in real time. And then did alpha risk overlays on top. So the goal of that fund was to learn the best qualities of a fund of funds and a multi Strategy Fund. And so I did that for several years. So focus there was on equity market neutral strategies and managed futures. And then in 2016, a couple of things happened. One is as one does, I got a little bit burnt out of the hedge fund industry and finance. I've been doing it super, super dedicated manner for about 20 years. And my dad ever since I was kid, he got a couple bad car accidents and has something called chronic regional pain syndrome. And what that means is you just have chronic ongoing pain moves around your body and they can't figure out why. And so he had gone down the opiates pain management route, which got him a bunch of side effects and didn't really seem to improve the pain that much. And he started seeing a cannabis doctor in 2016. And over the course of the next couple of years was able to slowly decrease his opioids to the point he's totally off of them now, and today uses things like CBD and CBG tinctures and flower and concentrates for relief. So seeing my dad improved so much from cannabis are really witnessing the medical side, which, for me, I always heard about medical cannabis. But I also always rolled my eyes a little bit because there's we can't do studies on it in the US it was like is this really helping people or people just wanting to get stoned. And that's cool too. But after seeing the really profound change in his life, be getting a bit burned out of what I was doing on the investment side and California at that point getting ready to move to prop 64 which I thought would be a good thing turned out it's not but but I thought it would that led me to drop the hedge fund stuff and to start a dispensary and so I started a dispensary just a bit north of Santa Barbara and I ran that for about three years. And once we got into the whole prop 64 regime which has, you know, insanely high taxes crazy licensing, licensing fees, a whole bunch of things that make it economically challenging. I decided to close the dispensary because I thought the bottle didn't really work anymore. And and I started to blend the 20 years on the buy side Doing investment management stuff with the three years as an operator in the California Cannabis Industry and start focusing on cannabis and investing. And so today I have a consulting business called higher calling. And with that I work to kind of the core business as some large family offices that use me as an outsourced kind of cannabis CIO, for lack of better term. And that I also do do some consulting for other high net worth folks and venture funds and ETFs.

Jordan Tritt  5:26  
Yeah, that's awesome. Thank you for sharing all the background, you're one of few, if any, that I know of that has the, you know, really the breadth and depth of the finance experience. And then now, we also the on the ground operational experience and understanding of the space, which, you know, as you and I have talked about, is, is really critical for being able to successfully navigate and I think we're seeing that, you know, more than ever right now, just in terms of the challenges this space has, and the importance of, of having a clear vision of where we can go and be successful in this space. So, you know, based on that, so you had this experience of three years of operating it, certainly anyone who's been in the California knows, the California cannabis market knows, you know, of at least some of the challenges that you mentioned. So decided to get out of that. And so now you're, you know, here we are, you're early 2023. What is your focus? You know, I'd say, like in terms of 2023, big focus, and then, you know, if, you know, based on that, is there something that you're gearing up for in 2023, and then building towards something more long term. So let's start there. And then we can kind of backtrack into how some of your experiences have led to this.

Jesse Redmond  6:54  
Yeah, Jordan. So I never imagined it would be this hard when I got into the cannabis investing side, the being a cannabis operator at his challenges, but it hasn't been as hard as being on the investing side. And you know, maybe the biggest reason for that, I think there's a couple of things. One is today is Day 701. Since the MSLs index or not index ETF peed on February 10 2021. So 701 Day drawdown, which I've been through some of you, I'm old enough that I was at Fisher Investments for the tech collapse in 2000. I was managing a hedge fund during the great financial crisis in 2008. So I've been through through difficult things. I've been through big draw downs. But what's been so brutal about this one has not just been the 88% decline in US cannabis stocks as measured by MSLs. But the fact that's gone on for 701 days, like that's there just aren't a lot of people that will keep showing up after that duration. You know, the magnitude is one thing, because usually it bounces back pretty quickly. And that hasn't happened. But just to go almost two years of a drawdown is going to shake a lot of people out. So I think that's a challenge that we all have in this industry. I think number two is that we also don't have instant real yield a lot of institutional investors. And so I talked to some endowments, I talked to some bigger family offices that do have billions of dollars, and they start to nibble on cannabis. But those are the exception. You know, I think most people listening today will know that the big the big institutional money hasn't showed up in cannabis, because of custody because of brokerage because of investment guidelines, because of federal illegality, because of schedule one. And because of safe banking. A late last year, we had that crack and safe banking, where a lot of people thought it was a 75% probability. If you listen to the analysts, the banks, the big boys and Twitter 75% was the number. And once we got into the lame duck, it felt like it actually never had a chance. You know, we got a snippet, the NDA, we're told no. On the bus, no floor vote no. And so here we are today. And we're in a space that, you know, has this big growth potential. You know, I always think about cannabis as a state like growth story. We have 21 states now we have 29 states left to go. And we have we're one of the few industries that's just going to have this expanding tam over the next decade as new states open. But you contrast that opportunity with the fact we've seen zero political progress. And we're in a basically a two year 90% drawdown. And so it takes someone it's really brave, for lack of better term, or patience to a stick around or be want to put in new money today. And so I'm sure you've experienced this with raising money for venture stuff, that it's not impossible, but it's pretty it's pretty hard. And so I think where we are right now in early 23, is it looks like a tougher environment. I think that's part of why the stocks are down so much a part is lack of political progress with part is legitimate. You know, we're seeing higher inflation everywhere except for cannabis. And everything else getting more expensive while cannabis gets cheaper is a pretty tough recipe for margins and revenue. And I think that sorry, I I think that the political progress is the other piece where without safe that that additional pool of capital didn't come into the space. And so it's only retail investors that are already down 80% that we're asking you to put more money in. And so I'd say I have low expectations for 23. But the good news is, so does everyone else, like go find me a bullish voice on cannabis, I literally, you know, can't find one. Even Todd Harrison has toned down his his bullishness that he's one of the most optimistic people you'll you'll find. And so I think that in terms of the stocks, the expectations are low, but they trade at one to two times sales. So how much of that is priced in, you don't think there's potential for upside surprise here. But we'll need some good news for that to happen. You know, I just saw today a report that excuse me, you know, California flower prices were up in the fourth quarter. So some things like that some small wins there. You know, we just saw Connecticut open, you know, Minnesota is talking about moving faster i legalization. So maybe if we get a couple of these mini catalysts, we don't get the big one, we could still have a decent year. But broadly speaking, I'd say have lower expectations this year. And in terms of the companies in which you want to invest, after Curtin who's chairman of ascend said something to me a few months ago, that sticks in my mind, he said, It's not about finding the stocks that are gonna go up 200% rather than 150%, it's about avoiding the ones that are gonna go to zero. And I think that's so important, because you can get clever by picking a two tier tier two or tier three MSO, that has a lot of debt, but he think has some growth ahead of it. And maybe that all works out. But if we're there tougher economic climate, climate rates continue to go up, flower prices continue to go down, maybe they're gonna have trouble servicing that debt, and maybe some of those businesses go to zero. So I'm happier to concentrated names that have scale, that have cleaner balance sheets, that have a lack of near term maturities, on those balance sheets, and are moving towards or actually generating cash flow. I think those are the things to look forward look for this year. Yeah,

Jordan Tritt  11:57  
makes sense. Everything that you're mentioning, unfortunately, is the current reality. So it's very clear that this is a, you know, it's about, you know, figuring out a way to survive, and, you know, finding the right paths forward. And, you know, just it's but it's not just about being reactionary, it's about being smart, in terms of how you get through, you know, a some period of unknown, and how do you position yourself to take advantage of opportunities that that will exist to be? And, you know, how do you just beyond that, like, how do you yourself for growth? You know, what, once some of these catalysts happen, or, you know, something happens at the federal level? You know, the thing is, is the frustration, I think, you know, to a certain extent is that we know, like you said, you have an industry that is growing 20 30% a year, because of the other states that are coming online, we see the just more and more support and, you know, strength for the overall legitimacy of the industry. At the same time. It's taking a long time. And the there's only so much staying power, like you mentioned, you know, when you're hit with things like a two year drawdown, it just it gets to the point where the state power gets challenging that that I think is the the biggest thing that that has an industry we're facing right now is it's it's just gotten tougher and tougher and tougher. And so therefore, you know, how do we react individually, collectively, you know, and so that's that, to me is, I think, where 2023, we're going to start to see, you know, it's it'll be a very pivotal year, because I think it'll show what what the direction will will be for I would think the next year, easily three to five years from there, based on just how the industry reacts to what's happening right now.

Jesse Redmond  14:05  
Yeah, it's a weird circumstance where you have the potential for this D scheduling or rescheduling to happen sometime in the next two years, and really to happen, theoretically, any day. I think there's a bit of a, I think there's, I think the most logical view, in my mind is that it gets saved for either before the primaries in 24, or before the actual elections in 24. If you look at the timing of the announcement of the scheduling review, that was right before the midterms, it was Biden's most liked tweet ever, and he saw an uptick in his approval rating. So he knows he has a political capital there. So to blow that, and 23 would be surprising. But you know, I'm used to being surprised at this point. But so that can happen any time or maybe that's a 24 type events. But eventually, there's going to be a point where this industry changes and changes a lot quickly. But as he mentioned, it's about two things. One is surviving, and she was having a little bit left to thrive when things do improve. So survive and thrive. things that are a few times this year. Right.

Jordan Tritt  15:02  
Exactly. Exactly. So in terms of your 2023, one of the things that you and I talked about that, I think is very interesting, and I look at as the beginning of a longer term conversation and evolution is this, this, we call kind of an institutional quality platform. So, you know, again, you've got the background of very deep finance and economics, then you now you've got the industry expertise, and position yourself having the conversations and building the relationships with, you know, the most likely capital for the next five years, which is the family offices, all dry networks. So, you know, it's all kind of, you know, I think lining up for for, you know, it makes sense for what you're developing. So I talk about just, you know, what your vision, what you see as the opportunity with this institutional quality platform, and you know, how the last both your career prior and what you've seen in the industry has informed, you know, how you're looking at, you're approaching this, this project and opportunity.

Jesse Redmond  16:14  
Yeah, so we're in a bit of a weird spot. As you mentioned, we're in a split, we're in an industry, that's about 95%, high net worth and about 5% institutions. Here, we talked about some of those reasons, and the institutions can't invest. So because that money isn't here, we don't have a ton of credible investment managers and a ton of credible platforms. There's some talent, talented ones out there to be clear, this a great venture funds like yourselves, there's a few good ETFs out there, there's some decent consultants, but it's a little bit of the renegades and cowboys phase as well, where you know, early on, especially in a business like cannabis that tends to draw the more interesting personalities, I'll say, sometimes it's just not what you consider an institutionalized space. And what I worked at Fisher Investments, I did a few things there. But one thing I did, there was institutional sales. Were in my like, mid 20s, I was going to IBM and Connecticut and meeting with the state of New York and talking about their global global equity and foreign equity products. So did a lot of those meetings with institutional allocators back then. And I say that because I think what those people want, you know, big, big returns is part of it. But what they're really interested in are things like verifiable long term track records, they're interested in things like audited financials, they're interested in things like credible teams, proper risk controls, repeatable processes, and they want a range of products from which to choose. And when you look across the cannabis industry, we don't have that right now there's, we have pieces of it. And that makes sense. Because a, it's a new space and be the institutions aren't here yet. And I think someone which you don't have to be a part of, and maybe I'll do it myself, maybe I'll do it with other people will eventually build that platform. So when the more serious money is ready to enter the space, and they have a place where it checks those boxes that they're interested in. And I think, you know, building a firm or building a platform that can do a few things, I think, you know, venture will always be a part of this business. And so I think different types of platforms at different stages would be interesting. On that side, I think they'll always be people who wants to separate accounts, you know, people might want to customize something, exclude GTI from it not have any Canada be able to customize the offering a bit. So I think a separate account platform, for a certain minimum just make up numbers, somebody has 5 million bucks or more, they can get a separate account that might have a lower fee than a mutual fund or an ETF. But I think it also does make sense to have a mutual fund or an ETF. So if somebody wants to stick in, you know, a couple million bucks, few 100 grand even 50 grand doing something like that, if it makes sense, the way Fisher did it back in the day, maybe this has changed was it took half a million to get a separate account. And they had a mutual fund that would that would take all the smaller amounts. And so I think that structure makes a lot of sense. And I think people will want the information around single stocks. I don't see anyone doing a great job of that right now. There is a bit of sell side research. But I think the quality there can be a little hit and miss. And so yeah, I think there's I think there's reasons why we don't have institutional platform. That's because the institutions aren't here. But I think the best time to build something like that if you can in advance of that occurring.

Jordan Tritt  19:23  
Yeah, I think it makes sense. And yeah, I think it's it's a little bit kind of it just given the the how the space evolves and the timing. It's to me, it's become clear as a, you know, someone who operates a venture fund and also an advisory firm, you have to find ways to remain active in the space and be relevant at the current time while also being mindful of where this industry is going to go. So yeah, like you've identified there's that huge gap in you know, went in institutional capital will be here and what will be needed in order to attract and cap and capture their capital? The same time? There's not much to do around that right now. So how do you use that platform, as an example, you put the Venture Fund, the ones that you know, or the, you know, some dead opportunities, and whatever, and you utilize it for the deals that are getting done now, build that audience, and then, you know, obviously add more products as the viability of those evolves. So I think that's, again, just something that I've realized, and maybe it's because of reflecting in the new year of, you know, what am I looking to accomplish this year? And how do I make it a different year than than last year is, you know, it's just this recognition that the timing pieces of this industry are, you know, we need to be really cognizant of that? And what is the impact of another year of, you know, a drawdown in stocks or a, you know, just the dearth of capital? So, you know, I think that's what I'm noticing is, like, you know, just much more. Unfortunately, I think there's a lot, you know, it's getting a little bit, you'll spread over with some negative sentiment, but the idea at the underscores look, we've got to do something differently, you know, the this, the old way isn't going to work if we can't just keep hoping for a different result, year after year. So how are we going to change the way that we interface with this space? And, you know, I think that's a question that everyone is in this space is thinking about, and trying to be realistic about, given what they've continued to see year after year? Yeah,

Jesse Redmond  21:47  
I think you're totally right there. One thing that we did back in the hedge fund side would be seeding share classes, which doesn't totally correspond to your business. But let's say you had a 1x and a two 1x 2x and 3x share class, for example, we had three different volatility targets, you know, 510, and 15%. And let's say we started out at 10%, we would see with our own capital, some of the five, which may be more for institutions, and some of the 15, which might be for more aggressive people. And we would see those with their own capital, knowing that money might not be there today, but it could be in the future. And I think that sort of a mindset still works for a lot of things today, in terms of if you can get some track record, skilling just emphasize track records over and over again, because people, some institutions sometimes want to wait two years, three years, five years before they trust a track record. So I think I think to the extent you have the capital, which is a trick, right, you know, if you can get some track records going, I think that's, that's, that's something that's helpful, too, is yeah, like building that audience, right. And that's something I think about a lot. I'm not much of a marketing person, but I tried to put myself out there, more and more, whether it's doing things like this with you today, which are fun. And, you know, hopefully, you'll get the word out there for both of us a little bit, or I try to do things on LinkedIn are trying to do things on Twitter, I've been hosting a bunch of Twitter spaces. And I do all that, because it's a great way to learn. But also when, what else can we do today, to put ourselves out there to introduce yourself to the world and raise your hand and saying, I, I'd like this, I think I might be good at this, you know, I want to head down this path. And, you know, I think one of the things that we can do is just trying to put a put ourselves out there so that, you know, investors investors know you, and then build some products in the meantime, and hope that one day those two pieces come together. And how do those pieces come together? It's not exactly clear. But I do know that you have to keep working on the investment side to get better, and to build things. And then then then you have to be putting yourself out there to meet with investors. Like I have a spreadsheet here is super boring and lame. It's just an Excel spreadsheet, but it has 1782 people that I've reached out to to see if they're interested in talking about cannabis. And a lot of these people are people I used to work with on the hedge fund side, some people are, you know, more cold call type people. But that's something I forced myself to do everyday is to reach out to 10 people reach out to 20 people. And like I said, I have over 1700 people that I've reached out to so far, which is great. I'm proud of myself for doing cold calling when I'm 48 years old. But one thing that I've found from that is there's a surprisingly low rate of interest. But I hope that planting those seeds down the road that when things do change, and people are more interested in investing, and cannabis becomes compelling that people are going to go back and say, oh, yeah, I remember that Jesse guy talking about cannabis. And maybe there's something to be done there.

Jordan Tritt  24:36  
That's really interesting in a lot of and you and I actually have talked about data. So I'm going to go in that segue in a second. But before I do that, so in terms of the just right off the cuff, like what are the top two or three reasons that you think people find that are interested in top two or three reasons that people are not interested in investing in the space that you found? 1700

Jesse Redmond  25:02  
Yeah, so the reason people aren't interested are things like investment guidelines is one. So I talked to family opposite San Francisco, Cisco yesterday and had a good conversation. They went back and look at their guidelines says no alcohol, no tobacco, no firearms, and oh, cannabis. So that's one. That's what reason I was talking to a bank and Silicon Valley, and had a good call with them as well. They wanted to look at it. And they ultimately found out that because they're a bank, they don't want to touch anything that has to do with cannabis right now. So I'd say investment guidelines are one thing. paucity and brokerage are another, there's, you know, I mean, institutional institutional level, you know, custody is a challenge on all level brokerage, it's a challenge, you know, places like Robin Hood, for example, don't even allow, you know, cannabis stocks. And other places you could access the the ETFs, which traded the higher exchanges, like the NASDAQ, or the New York Stock Exchange, but he couldn't find the OTC names. And so there's a lot of just structural challenges. And so it said, those are the biggest reasons, I'd say, adding on to that, just to be totally realistic, today is what a space is down 88%, you know, that's going to turn a lot of people off, you have the growth, folks will start to run away, even even if there is growth, you know, they don't see it in the share prices. But maybe the value folks, you know, find it attractive at, you know, one to two times sales for a lot of good businesses. But I'd say the drawdown is you know, as a real estate challenge that we're facing now, even though history suggests this is a less risky time to invest. People tend to view it as risky, or as things go down, even though as things are going down, generally, but not all the time. Risk is going down in terms of your entry points. So those are some of the challenges. I'd say in terms of the reasons that people are interested. I think the state by state growth story resonates right we have 21 states that have adult use cannabis 29 more to go New York has just opened in Connecticut just opened. Like I said, Minnesota is moving quickly, Wisconsin is next door, they're talking about moving more quickly. We have Maryland and Missouri turning on this year. We have huge states like Texas, which may be years away. But you know, that's a massive opportunity. Florida could be you know, 2024 Vote 25 type opportunity in Florida is fascinating because it has like 21 million people in a big medical program. But it gets 120 million tourists every year. And when Florida flips to adult use, all of a sudden, those honey 1200 20 million tourists, anyone who's over 21, at least can purchase cannabis, when they come down there to thaw out over the winter for places like I grew up in Minnesota or the East Coast, or for people that come for spring break. And our people that get off cruise ships, like I was talking to Brady Cobb, who operates sunburn in Florida, and they bought a bed bed location that's in Key West. It doesn't do great medical right now. But when that flips, that's right where the cruise ships drop off in Key West, that's going to be a monster store for them. So I think these types of conversations about state by state growth resonate with people because they're real. And there aren't a lot of industries growing at this rates over the next decade. I would say the other piece is the political part, which is part of the frustration because sometimes people now have this perspective, it's never going to change. But I look at it a little bit differently and say it's been wildly disappointing. But we still have safe banking, the scheduling rescheduling, decriminalization or legalization, and uplisting happening sometime in the next, what, five to 10 years. Maybe the first piece, I don't know if we get safe anymore, maybe just the scheduling or rescheduling handles that we'll see. But as we talked about, there's reason to think that the rescheduling could be a 24 type event. So we're looking at 12 to 24 months from now potentially some action. And it could be tomorrow could be five years. You know, this is so hard to predict. And you know, Biden had a campaign promise we're on decriminalization or legalization, we'll see if he if he comes through on that. And through D scheduling or rescheduling, there's two really important things that could happen there. One is to weigh two egos away. And that's the single biggest thing that could happen for these businesses. You know, not being able to deduct ordinary operating expenses is a crazy burden. If you look at greenthumb industries, they paid about 65 in gross taxes with 280 E if 280 e goes away, it drops down to the mid 30s. And so green thumb becomes instantly crazy, profitable. And a lot of businesses taking big losses today also get profitable. And that's huge for your operators in the venture space to short, right. The smaller you are in some ways the more to eat and you're going away helps you it'll increase the survivability so much. And what we need to do is get off schedule one, and it seems like three or below is a book called Lake lakes and it won't call anything in politics lightly. But schedule two is fentanyl hard to imagine cannabis should be where fentanyl is three still seems high to me. But three or below two things happen to any egos away which is the biggest and number two is that should be a path towards uplisting. And so if you follow these stocks day in day out like I do and you see the crazy low volume, if you look at the volume of something like truly versus Tilray you're truly evil trade, you know a couple 100,000 A few 100,000 shares Isn't Tilray will trade the 10s of billions of shares. And that's not because it's a better business. It's because one is on the OTC and one is on the NASDAQ. I think a lot of your listeners probably know this, but I'll say it again, because I think it's important. It's so weird that the US plant touching companies go public and Canada trade on the CSE, and get a dual listing on the OTC in the US. But the Canadian companies trade on the NASDAQ because they're not plant touching. They're touching plants in the US. So Canadian companies traded the us the best US companies trade in Canada, and that are relegated to the pink sheets on the OTC over here. And so I think uplisting doesn't change the value of the business necessarily what changed is the valuation but doesn't change the operations. But in terms of bringing in more investors, getting that uplifting piece, getting that uplifting piece would be huge.

Jordan Tritt  30:48  
Awesome. All right. Well, let's transition a little bit into data. Because I know you and I have had some conversations. So we're certainly very interested in data, you just give us maybe a high level of you know, how, you know, what data means to you in terms of the work you're doing in this space? And, you know, maybe one or two interesting things that you're looking at a longer term in terms of, you know, getting them off data?

Jesse Redmond  31:14  
Yeah, so data is huge. A bunch of the hedge fund industry now is built around data, analyzing data, and then having the computer power to make quick decisions around that data. I don't think cannabis will turn into a high frequency space, like a lot of the hedge fund industry has, but I think we'll use data to make better decisions. We need clean data, we need good data, we need tools to analyze it, and we need to make smarter decisions from it. I just had sighs Scott assume you know sigh. Yeah. So headsets have great data service, or they link into dispensaries and then collect a bunch of data based on the sales those dispensaries make. And I just did a Twitter spaces interview with with psi, and talked a little bit about their business. And I think they're a good example. And there's a few things you can learn from that. One of the things I track really regularly are flour prices, and cow and through I think it's cannabis benchmarks.com If I recall, but you publishes I think once a week flour prices for every state. And we've seen a general trend and those compressing which makes sense the rate at which they're compressing in some states, it's a bit alarming. But I'd say a key piece of data I analyze, because I think it's a pretty informative in terms of what margins and opportunities will be our flower prices. So if we look at the state, like New Mexico is one of the few ones that's actually up year over year, but almost all of them are down a lot of down in the teens or mid 20s. And then there's a few that stand out as being down a lot. And so down a lot is Arizona down like 50% down a lot is Massachusetts, down a lot is Michigan down a lot. But getting better is California. But Michigan is a great example, a huge state, huge cannabis consumption population, but open licensed structure, too much cultivation, thriving black markets, and you've seen flower prices just going to the floor and take terrassen for example, I did a interview with Jason Siyad at the after last quarters earnings. And it was they took a 231 million don't quote me on that number, right down on the gauge on the gauge acquisition already, which was only about a year old. And that's because gauges of Michigan operator. And when prices go down 50% The business doesn't necessarily get out 50%. But it's pretty, it becomes much more challenging. So they're taking some steps to improve that. But you know what to ask Jason. Jason Wilde, the executive chairman, I think is his title of terrorists. And if he regretted the gauge decision, he took a long pause, like six seconds, but eventually said Dell it explained why I think it's still it's still as a long term opportunity. But I say all of that because I think monetary flower prices can tell you where the challenges might be. And then look at is MSO or your single state operator or your investment, whether it's private or public operating in that state. And so if you're looking at investing in a cultivator in an open licensed environments, you know, I would make sure they have a super low cost of production. Otherwise, I think that's good. Those are pretty challenging things. If you're looking at investing somebody with huge Michigan and Massachusetts, Arizona, you're looking at truly great business in Florida vertical integration, selling a ton of flour, ton of stores, Florida's good market today great market when it flips flips rack, but they did the harvest acquisition. And there's been a couple challenges on that harvest acquisition side that truly but one of them isn't their fault at all. Well, maybe they could have predicted it. But flour prices have gone down so much in Arizona that that just made that business so much more challenging. And so I think sometimes by looking at that data, whether it's from headset or whether it's from Thailand, which I think is taken from cannabis benchmarks.com we can accurately forecast a bit who might be having challenges. Number two is an interesting trend on the consumption side. Were back in the day it was all about raw flour or just smokeable flour, people packing pipes, rolling joints, you know taking bong hits. That was the old way to consume cannabis today. flour is still key and a big part of the market, but it's pulling back. And it's pulling back, because people are going towards convenience in different form factors. And so one place we see that is in the pre roll business, which is kind of flour, right, that's the main ingredient for pre roll. But in California, pre rolls are just getting bigger and bigger. And two form factors are really popular. What are the minis, where rather than getting a full one gram joint, which is what we use, usually popular what I read a collective, you know, that's a pretty big asks, you know, depending on your tolerance to consume a one gram joint and maybe share it with a friend, but that everybody's smoking cannabis with a friend somewhere just by themselves at nights or their partner doesn't consume or whatever. And so nobody wants to put out a joint pick it back up the next day, that doesn't work all that well. So smaller form factors are huge law came out with these 30 fives that are point three, five, which are nice size for you know, after work or whatever one person, there's these things called cheaters. I don't know, do you know about cheaters, je te Rs. And those are smaller as well. And those also fit the infused category and fuse meaning adding some live resin or some diamonds or some rosin or some shatter to it, and sometimes does take it in kif as well to get more potency out of it. So three rules getting huge at the expense of flour. And on the pre roll side, smaller sizes and infused pre rolls are huge. Two is a paper carts are just getting bigger and bigger, and they're getting better, you know back when they were just distillate with fake terpenes in them. And some of the illegal ones had that vitamin E acetate problem carts, I didn't have a lot of interest in for a while I don't like distillate and fake Terps all that much. But now they're starting to make more live resin ones. And those are derived from fresh frozen flowers that are hydrocarbon X extract process like butane or something like that. And live resin cartridges, you have a lot more flavor and a lot richer effect I would call them. So I think that's a great trend. And those are getting bigger and bigger. Cresco does a great job. He does some one who's a public name lots of folks do but Cresco ones that are really popular. And even higher than that are the like rosin cartridges. And that's, again, fresh frozen flowers, which have a really high terpene contents, but rather than a hydrocarbon extraction using a solventless extraction, where you wash it into Bubble Hash, and then press the Bubble Hash into rosin, and make cartridges that way. So theoretically, they are you can have organically grown, fresh, frozen dug rotten material and a totally solventless extraction. And to me, those are the best cards out there. But they don't exist in every state. And they tend to be pretty expensive. But what I point out those two examples, I contrast, so flour going down, cartridges going up as people favorite convenience, and within cartridges nice to see a selection where you can hit a few price points, where you still want the BASIC cartridge of distillate plus terpenes. That's the lowest price point, live resin in the middle might fit a lot of folks, if you're more of the kind of sewer, you could go up to the live rasa. And I think we'll just see cards get bigger and bigger and better and better.

Jordan Tritt  37:53  
Awesome. All right. Well, I'm amazed Jesse at the depth of knowledge the that you've accumulated, and you know a lot of these different areas and how it informs your perspective. So I'm really looking forward to continuing to work together in this space.

Jesse Redmond  38:09  
No, first, thank you for having me enjoy getting to know you before and now as well. And just thanks to everyone that's listening, you know, this has been a challenging time. And I think to the extent that we can all work together to share knowledge, get through this difficult period, and have that survive and thrive mentality, not just with our investments, but with other people. And the messages we want to put out there. I think the more that we can build together, the better the industry will do. And so I appreciate everyone that's keeping it as positive as possible perspective and tie in this time and you're having conversations like this where we can learn and find solutions that get better together. So thank you for thank you for having me appreciate the opportunity.

Michaela Petrone  38:46  
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