Cannabis Investing Landscape, with Aaron Edelheit, Mindset Capital

Episode Summary

The haphazard state-level legalization of cannabis in the US has created a patchwork of vastly different regulations across states, from growing to retail licensing. How do we make sense of the opportunities that exist? 

We spoke with Aaron Edelheit, an investor in both public and private companies in the space. Aaron gave us an overview of the absurdities at the federal level, including how cannabis ended up as a Schedule I drug, what states have been doing over time in terms of medical and recreational use legalization. 

He also dives deep into the inefficiencies created in the market, in part because most institutional investors cannot participate. As one of the pioneers who turned the single-family house rentals into an institutional asset class, Aaron is reminded of how he was alone buying foreclosed houses literally on the steps of courthouses in the Southeast for years before “the big boys” showed up and prices skyrocketed. 

We further talked about the challenges of the cultivation of consistent product at scale, and why a certain grower in California is well-positioned with a large bank of greenhouse capacity and perfect climate. Further, we look into the future: will it be a brand-dominated industry, or will it be a commodity? We also touched on Aaron’s book, where he meticulously researched the benefits of unplugging from it all for one day a week. 

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Guest-at-a-Glance

💡 Name: Aaron Edelheit

💡 What he does: He’s the CEO of Mindset Capital.

💡 Company: Mindset Capital

💡 Noteworthy: Aaron is a crossover investor who is very heavily involved in the emerging cannabis space. Additionally, he is the published author of The Hard Break: The Case For The 24/6 Lifestyle.

💡 Where to find Aaron: LinkedIn | Twitter

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Key Insights 

⚡ Cannabis has medicinal value despite being classified as a Schedule I drug. Cannabis is a Schedule I controlled substance, meaning it has huge abuse potential and no accepted medicinal purpose. But is this really accurate? Aaron says, “How many people have overdosed from cannabis this year? Zero. How many people have overdosed from cannabis last year? Zero. So the medicinal value is we know that it helps cancer patients tolerate their drugs. It is clear pain relief. It helps people with anxiety, post-traumatic stress disorder. There is an approved FDA drug that is a synthetic form of cannabis that treats kids with epilepsy. So there are just so many, and now we're finding that it could possibly work against COVID. We're just starting to explore really how cannabis works and how it can work.” 

⚡ There’s a conflict between federal and state law when it comes to cannabis legalization. More and more states are legalizing marijuana, but it is still illegal on the federal level. Aaron talks about this conflict. He says, “You have like 38 or 39 states that have basically, like, we're just going to ignore the federal government, and we're going to legalize it in our state for medical. And then you have a number of states who are like, we're just going to make adult use. And what happened? The reason why more and more states are legalizing it is they legalize it, and then they're like, everything gets a little bit better.” 

⚡ The cannabis industry is a huge opportunity for investors. As an investor heavily involved in the cannabis space, Aaron thinks that