What does the cannabis industry and the Mona Lisa have in common?

"The noblest pleasure is the joy of understanding." Leonardo D Vinci

I’m regularly asked by journalists, operators and bankers to explain the cannabis industry.   It is difficult to give a complete, pithy and straightforward account given the sector’s complexity and uncertainty.

This ‘understanding gap’ is problematic.  It is hard to entice investors, attract talent or lobby regulators if you can’t quickly, simply and thematically elucidate what is going on and where the industry is headed.

Conflicting signals are everywhere:  Industry revenues keep increasing but profits remain elusive.  Competitive and product saturation in mature markets does not dissuade new entrants. Employment levels are up but many complain about the dearth of talent.

What gives?

Leonardo Da Vinci may have an answer.  Leonardo invented a painting technique, sfumato, to create the Mona Lisa.   Sfumato is a technique of allowing tones and colours to shade gradually into one another, producing softened outlines and hazy forms. Up close, sfumato gives little delineation of form.  Only when you zoom out can you see what Leonardo wants you to see.  Sfumato is the reason why Mona’s gaze appears to follow you and her simile is so perplexing.

Cannabis is sfumato in action. To wit:

> Finances – Markets are cyclical and irrationally driven by sentiment (good and bad).  Capital remains expensive and often hard to come by. In this environment, what is the optimal funding strategy?

> Strategy – Do you prioritize growth or stand put in 2023, and into 2024?  What might be good for financial stability might not be good competitively in the long-term.

> Consumers – They benefit from falling prices and more variety yet must also deal with brand confusion and a dearth of good product education. When will the market-leading brands emerge?

In short: prognosticating has rarely been harder, particularly when one is mired in the weeds.

Zooming out brings the strategic issues and fixes more into focus.  Even if you are unsure what your next move is, concentrating on these priorities will help any enterprise:

1) Strategic clarity – there are many growth and capability-building areas but insufficient capital and talent.  Pick a lane and mobilize to win;

2) Operational simplicity – you can’t quickly respond to market dynamics or transform your business if you are operationally flabby and complex;  

3) Maximize cash flow – nothing improves your financial performance, flexibility and valuation better than measures that enhance cash flow;

4) Assume the worst – our sector has been battered by many expected and unexpected shocks.  These will not abate.  Plan accordingly.

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