Admissions Blog

P&Q: When Weed Becomes A Business School Case

By 14th October 2016 February 3rd, 2018 No Comments

Source: Poets & Quants

by Nathan Allen,

The co-authors of “Cannabusiness in Washington D.C.” Pictured from left to right are Jamaur Bronner, Deena Malaeb, and Mohsin Alvi. Courtesy photo

The co-authors of “Cannabusiness in Washington D.C.” Pictured from left to right are Jamaur Bronner, Deena Malaeb, and Mohsin Alvi. Courtesy photo

[dropcap] W[/dropcap]hen California residents cast their votes on November 8, they do so with the potential to unleash billions of dollars into the market. With Proposition 64, California joins four other states that may legalize recreational use of marijuana for adults this November. But for those in the industry, California’s massive untapped market is where the focus is. Many predict first-year sales could reach $2 billion, dwarfing the nearly $1 billion made in Colorado following that state’s legalization that went into effect in January 2014. By 2020, some believe, California’s total take could rocket to $6 billion — even as nationwide sales top $20 billion.

And where there is a potential multibillion-dollar market and a motherlode of complexities — a big one being that marijuana, recreational or medicinal, remains illegal at the federal level — there also are MBAs looking to tap into the industry and innovate. And where there are MBAs, there are case studies. Now a team of two MBAs, one undergraduate, and a professor at UC-Berkeley’s Haas School of Business are claiming to be the first to write a case study focused on a specific marijuana company, which was published by UC-Berkeley Haas earlier this month.

Harvard Business School published “Marketing Marijuana” in 2014. But while the HBS study focused on marketing the industry as a whole, the team at Berkeley Haas combine a focus on the strategy of a specific company and an examination of what it’s like for minorities to tap into the industry.


The case study, “Cannabusiness in Washington, D.C.” follows the work of Corey Barnette, a Duke Fuqua MBA and former Bank of America investment banker. Barnette owns a Washington-based cultivation center called District Growers and a dispensary called Metropolitan Wellness Center, both founded in 2010. Mohsin Alvi and Jamaur Bronner, who both graduated with their MBAs from Berkeley Haas last spring, were set on writing a case study with a focus on under-represented minorities in business. Then, last winter break while visiting a friend in Denver, Colorado, Bronner toured a cultivation center and met with executives in the cannabis industry and was struck by what he learned.

“They were all older white gentlemen,” Bronner says. He soon discovered that many of them came from private equity and simply saw Colorado as a potentially lucrative market after the state voted to legalize recreational marijuana use for adults in 2012. “It was a very opportunistic move to enter the space,” Bronner says. When he told Alvi the two, who are both members of the Consortium for Graduate Study in Management, a national diversity network, joined Rui de Figueiredo, an associate professor at Berkeley Haas, and undergraduate student Deena Malaeb to write a case on a leader in the industry.

For the team, the objective was two-fold. “Our primary goal for this case was to write a good strategy case,” Alvi tells Poets&Quants. “The secondary purpose was to address these questions that aren’t ever addressed in the cases that we read in business schools, which are all about white male protagonists.”


Indeed, strategy is important. The political, legal, and ethical questions, as well as the simple newness surrounding the industry, make any recreational marijuana venture incredibly convoluted. One big, practical problem: Banks are hesitant to get involved for fear of federal auditing. The result has led to massive stacks of cash piling up alongside marijuana plants in come cultivation centers across the country. There are still major interstate commerce regulatory roadblocks, too. And the cultural taboo that is in many ways married to the product is still very much alive in parts of the country.

“That’s the exciting thing about this case. There really are no best practices,” Bronner says, noting that in most case studies the rules are already cemented in stone. “Right now with the cannabis industry there are no rules,” he continues, pointing in particular to insufficient sophistication among many in the industry. “Everything is being created. This industry is the ‘Wild West’ in a lot of ways.”

The uncertainty from banks has opened the door for private equity and, Bronner and Alvi say, set up a uniquely wide spectrum of players. “Once it became legalized, I think a lot of people saw dollar signs behind the potential of getting rich in the space,” Bronner says. At one end, there are highly accomplished and experienced business people pouring in from private equity and venture capital, “who brought their capital and political connections,” Bronner says. On the other end are “mom-and-pop shops” that “sink their savings into bidding on a contract and winning it.” But, Bronner explains, when it comes to actually running the business, these smaller operations are not as experienced and not following best practices.

“It will be a fiercely red ocean and highly competitive,” Alvi says. “There will be many winners and many, many losers.”

The losers are often those stifled by the massive price tag for entry into the space. Bronner says the bidding process for supply alone can reach into the tens of thousands of dollars. And if a bid is awarded, it can take up to $500K to accept the bid and quickly build the facilities. “We knew there was a certain financial barrier to entry,” Bronner says. “But we didn’t realize it was that high.”

Berkeley’s Haas School of Business

Berkeley’s Haas School of Business


It’s not really a secret who, demographically speaking, these private equity and venture capital players are. Those two spaces might be the whitest and most male-dominated of any in the financial industry. Globally, women hold about 12% of senior positions in private equity. For venture capital, the number is around 15%. For minorities, the numbers are less.

Between the four co-authors, they have recent combined experience at Google, Bain, Boston Consulting Group, and Berkeley Haas. “All of these institutions are disappointingly under-represented amongst minorities,” Alvi says. “And it’s also the case in this new business of cannabis.” But while those organizations are playing catchup now, Alvi and Bronner believe it’s important for industry leaders to set the tone in cannabis from the get-go.

But, in addition to the massive cost of entry, at least some regulations have tilted the tables in the wrong direction for minority players. Most states deny cannabis business licensure for individuals with a previous conviction. “In cannabis, there are legal obstacles preventing African Americans and Hispanics who got a possession charge when they were 17,” Alvi explains. “But their white counterparts in the suburbs never got charged because their dad had a lawyer friend.”

And while some states have loosened marijuana possession laws, at the federal level, the issue remains largely unchanged.

Still, “The federal level can set a tone that we don’t want to arrest people and send them to jail for marijuana possession charges,” he adds, noting President Obama’s more lax approach to the laws.


Though the minority community in the space remains small, it is highly connected and strong, Alvi and Bronner explain, with leaders like Barnette and Wanda James, who in 2015 became the first black and female CEO in the cannabis industry in Colorado. Both Alvi and Bronner are optimistic changes can be made before the industry really launches, which could be soon after the vote in November. “It becomes a conversation at our level, but hopefully action at a municipal level,” Bronner says.

And business schools, which have largely remained on the sidelines so far, have a part to play. One reason B-schools have watched from a safe distance is the stigma surrounding the industry, Bronner says. “You don’t necessarily want your brand, from a top-tier institution, to be associated with something that’s still sold on street corners at 2 a.m.,” he points out. Many MBAs are going out and playing major roles in massive beer companies, he notes, but they aren’t yet willing to put their reputation on the line for something like cannabis. There are notable exceptions. Most recently, Yale School of Management graduate Brendan Kennedy created Privateer Holdings, a $75 million private equity fund focused solely on cannabis.


Though recreational marijuana is a new path — especially for most MBAs — Alvi believes it’s a natural progression in business education. Barnette, for example, is still using concepts like vertical integration.

“Thinking about business schools fostering leaders — and not just in traditional industries like CPG and healthcare and banking — but using those skills in something completely new, I think is something students are really hungry for, and professors hopefully will be excited to teach,” Alvi says.

Bronzer agrees that B-schools should focus more on emerging industries and innovations, for example drone technology, artificial intelligence, and virtual reality.

“MBA programs and business schools are increasingly becoming the graduate programs for leadership, which is a very high ask of any program to do,” Alvi concurs. “And I think this was a really interesting exercise in how you lead in different industries and how you still pull from traditional business concepts.”

Of course, the two explain, B-schools can also do more to prepare leaders with a sensitive mindset toward women and minorities. Alvi says they hope the case helps business professors and students put themselves in the shoes of a minority entrepreneur and think about the pros and cons of getting into the business.

“Jamaur and I are trying to do our part in getting smart business students at the very best business schools to be smart about these things and putting themselves in the shoes of an actual minority,” he says, “regardless of what industry it is.”