Bruce Linton was a tech CEO before he began what would become Canopy Growth in December, 2012. At Canopy he became the face of cannabis – not just in Canada but all over the world – and led Canopy in becoming Canada’s first publicly traded pot company. He was also one of the first of the big Canadian cannabis CEOs to get fired when the tables began to turn on weed stocks.
In a red blazer with a gold pin that read, “Hi,” Linton and I had dinner last month on the second floor of Hy’s steak house in Toronto, the night before he met with the owner of the Toronto Wolfpack to discuss a rugby-branded CBD. Over Old Fashioneds and bone-in rib steak, the 53-year-old cannabis pioneer offered these highlights from a three-hour meal.
Bruce Linton: Have the good stuff, man. It’s on me.
Ben Kaplan: No, no. I like this gig and that’s one thing I can lose it for.
BL: Okay, I don’t want to influence the article or anything.
BK: How are you doing?
BL: I miss it. Now in order to get energy, I sleep. Before, in order to get energy, I worked.
BK: Do you think $5-billion was too much to take from Constellation Brands?
BL: Probably, but they offered less and we got more. Three billion could’ve been the answer, but I have a BlackBerry on the table and BlackBerry wouldn’t exist if the people who founded the company didn’t say when it was valued quite highly that: ‘Yes, you’re correct. It’s valued highly. How much would you like to buy?’
BK: But BlackBerry had to stop making phones.
BL: Millions of cars use BlackBerry software. When things are robust rather than use capital to buy other things, you load up the bank account because cash is cash. Look at the current circumstances. There’s only one company, maybe two, not worried about going bankrupt.
BK: Which ones?
BL: Canopy and Cronos. Why? They have lots of cash.
BL: Because of the volume of trading they sold a bunch more stock in the market and raised a few hundred million bucks. There’s a lot of companies that can’t do that because they don’t have the volume of trading. There’s a whole bunch of companies right now going: ‘Holy [crap], I do not like having no money.’
BK: Usually when I do these we smoke and don’t drink alcohol and that feels good but also makes me anxious. With these drinks I feel more at ease.
BL: Alcohol is a depressant, but it adds a buffer – almost a soothing balm.
BK: What do cannabis companies need to do to get back on track?
BL: Look around this place. Not a lot of starving people. They’re going to be happy to have no carbohydrates, no calories. And look at the age demographic – 50 per cent of the people here are probably on pharmaceuticals. If they can have stuff that doesn’t interact with their medicines and won’t make you fatter, you’re going to sip cannabis. And it will be better for you.
BK: So of the 2.0 products, it’s drinkables that you think has legs?
BL: I fundamentally believe that’s true.
BK: I thought that stuff wasn’t selling in California and Colorado.
BL: Their products are terrible.
BK: What about the future of flower?
BL: The things that are super bad in cigarettes aren’t in cannabis, but inhaling smoke isn’t a super good idea. If you ask a thoracic surgeon if it’s a good idea to bring crap into your lungs – no. So imagine sipping it, knowing it’s purity and what’s going on through your ingestion process. It’s coming in the next few years.
BK: I spoke with your former director of innovation and he said he was working on bringing down the onset time of edibles.
BL: I’ve been pushing that in beverages for five years.
BK: Do people really want to drink weed?
BL: In business, you want to find the least resistance to the biggest outcome for the best bet of winning. The form factor of taking an intoxicant in the form of a beverage is similar to the way we [humans] figured out how make pottery.
BK: What did Bruce Linton bring to the cannabis business?
BL: Two things: One – do not embarrass the bureaucrats; Second – how do we make it scalable? Because there’s no doubt there’s massive demand and any business can start small and fail. Or you can start big and fail. And some you can start small and succeed, but not that many. A few you can only start big to succeed.
You want to have enough size that people give you money to create derivative products. You have to be dominant out of the gate ... My theory was that you had to start big in order to be successful.
BL: You have to start big to succeed.
BL: You want to have enough size that people give you money to create derivative products. You have to be dominant out of the gate, that’s based on taking over the world. My theory was that you had to start big in order to be successful.
BK: Can you be specific?
BL: I bought a 500,000-square-foot Hershey Chocolate Factory and 40 acres – and it was deemed extremely stupid, given the fact that we had no customers.
BK: This was 2013. Could you see that recreational cannabis was coming?
BL: I could see that if we start, it’s going to cost $2-million a year to make the regulators happy, and if we have a small footprint I won’t have enough product to pay the overhead. I had to at least grow enough cannabis to pay my overhead.
BK: Were cannabis businesses popular in 2013?
BL: By all accounts, it was the worst idea of my many ideas, but I liked that people disliked it. The typical players weren’t on the field. My competition was less capable.
BK: The other pot CEOs?
BL: If you went to Harvard or worked at McKinsey, you didn’t want to work here. You didn’t want to start one of these. In the early days, if you understood what money wanted and could raise money, people brought you deals. People ask me how the hell I did 31 acquisitions. They showed up.
BK: You saw value where no one else did.
BL: The One of the first greenhouse ever legally licensed in the world for cannabis was us. The guy who started it had outsourced raising money. But it didn’t happen. So the owner calls me and says, ‘You’ve raised money, will you buy me?’ OK, sure.
BK: You paid $3-million for a greenhouse.
BL: People were like, ‘You’re an idiot, man. You just paid $3.6-million for a 380,000 square-foot greenhouse with room to make it over a million square feet which was zoned and approved.’ Today (at least six months ago), what would you pay for that? Probably half a billion. That’s what happens when you’re moving along.
BK: Why did all the deal making dry up?
BL: The idea that you have to be profitable. That profitability must be good. But what fails profitability is paying dividends and to me paying dividends means you have no goddamn clue what to do with your money.
BK: It’s bad to pay dividends?
BL: I will never run a company that ever gives a dividend and the reason is that means I’ve lost all potential applications of capital greater than giving it back. That’s remarkable to have no creativity with free cash flow other than handing money back. Are you kidding me? Have a coffee and you can have ten ideas that are more creative than handing people cash.
BK: Why did institutional money leave the sector?
BL: CannTrust killed institutional participation. Just as institutional investors were starting to buy Canopy and CannTrust, CannTrust does a listing through Bank of America across a whole U.S. group – and what does that do? It makes all institutions say: ‘I’m out of this [crap] until there’s a sheriff in town.’
BK: Which feeds into that original resistance: potheads can’t run companies.
BL: Which also feeds back into point number one: bad headlines make retail run away and now you have that negative equation – more sellers than buyers. This was the best roller coaster ever and if you get sick on roller coasters, get off.
Let’s order, I’m getting the steak on the bone – it’s the best.
We’ve each had two cocktails and the waiter brings a bottle of Portuguese wine. Excusing myself for the restroom, I leave him my recorder, in which he records: ‘If we always eat tuna fish with mayonnaise, why don’t we feed mayonnaise to tuna fish?’ It’s a line, he says later, from the sitcom Night Shift.