I recently met up with a friend who’s drifted in and out of the cannabis industry. I’ll call him Tom.
Tom has seen rooms full of money that needs to be turned and tumbled just so it doesn’t deteriorate.
Tom has also seen the inside of a federal prison as a convicted felon.
Tom has a “real” job now, and the world of pot is well in his rearview mirror. Still, my conversation with Tom brought up a few important points I hadn’t thought of.
As I now understand it, the cannabis industry represents untapped potential to invest deeply in American energy infrastructure and make a profitable but ignored and unrecognized industry a driver of positive change.
Let’s start at the lifeblood of any business: Cash flow.
Before we even get into the “flow” part, let’s deal with the elephant in the room:
What actually happens with all that cash? Due to pot still being federally illegal, you can’t put it in the bank. You can sit on it, but this isn’t just a few thousand bucks that you have under your mattress.
A million dollars in cash will fit (tightly) in a gym bag, but if you just leave it, eventually the money will start to break down. Paper is an organic product and has a limited lifespan. The Federal Reserve estimates that a $5 bill will last 5.5 years, and a $100 bill will last 15 years, although they’re not so sure about that hundo. They redesigned the $100 bill in 2013, so they don’t “have sufficient data to provide an estimated note life.”
Let’s say you have 30 of those gym bags. Where do you keep them? What happens if federal agents stumble across it?
While the first question has a less straightforward answer (because the successful people don’t talk about it), the answer to the second question is clear:
If the feds find your cash, they’ll seize it and you may go to prison. Remember, even if pot is legal in a given state, the federal government still thinks of it as a Schedule I drug and they stand to profit immensely just by taking your cash under the guise of it being tied to a federal crim. More on that in a minute.
What about spending it? You can spend it, and that sounds fun for us normal folks, but buying lots of big ticket items with cash has two problems.
First, buying fancy cars and big houses will cost you money in the long run. Maintenance on a Ferrari or a mansion isn’t cheap. You’re basically buying a drain for your money.
Second, lots of large cash purchases will rapidly put you on a watch list. Many federal agents backed by “civil asset forfeiture” watch carefully for cash expenditures over $10,000. What is “civil asset forfeiture”? One of the scariest ideas in the inventory of law enforcement.
“Civil Asset Forfeiture is a legal tool that allows law enforcement officials to seize property that they assert has been involved in certain criminal activity. The owner of the property doesn’t need to be guilty of a crime: CAF proceedings charge the property itself with involvement in a crime.”1
You don’t have to be guilty of anything, but your money can be. If that money was used in a transaction involving cannabis, it’s not uncommon to show up to a cash purchase and have all your money just…taken by the feds.
Why would they do that? Civil Asset Forfeiture is a revenue stream for the federal government, and through a process called “equitable sharing” can also pay out to local law enforcement agencies.
You can go to court to get it back, but the legal fees can be greater than the value to retrieve it and the success rate is low.
So, what would you do if you wanted to take your money that you worked hard to make (building a successful and sustainable business is never easy) and hold on to it for as long as you could reasonable foresee without running afoul of the law?
Setting aside the hurdle of Civil Asset Forfeiture, where should you invest your wealth?
The glaringly obvious advantage the cannabis industry has is that they are flush with cash.
Instead of trying to hide it (where it will deteriorate) or spend it on flashy purchases that will attract attention which will eventually lead to getting the money taken away, why not lean into the obvious and buy into a capital intensive business that will produce revenue for as far forward as we humans can predict and support American interests?
What business is that? Renewable energy and energy storage. While diets, designers, and divas come and go, the human demand for energy has no predictable decrease for as far ahead as we can see.
Renewable energy and energy storage (batteries large & small) is insanely costly to get into, only profitable at scale, and difficult to get financing for.
For any given wind or solar panel farm you need huge swaths of land, the capital to buy the actual machinery, and the long term cash reserves to get it up and running.
Still, those who can afford to climb over that barrier to entry suddenly stand on a field with almost no competition and an unending field of enormous profit potential.
Ok, ok, that sounds good. Still, how would it work? If you can’t risk buying something for cash over $10,000, how are you going to pay cash for a $10,000,000 investment?
Straightforward: You involve all agencies from the outset. Invite in federal agents who won’t prosecute, state agencies who want their share of the tax revenue, and work with the federal judiciary to build a structure where a cash purchase is pre-approved under the specific authority of a federal judge.
The companies selling the equipment and expertise are eager and willing partners; what business wouldn’t want to be paid up front in cash at that scale?
Why would any agency support this? Because this represents an investment in American energy infrastructure, which is badly in need of it.