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Tim Burke: Will hemp follow the historical patterns of past?

The latest trend in get-rich-quick ideas has spread to Nye County and Pahrump with hundreds of acres of hemp under cultivation or in the planning phase.

Every few years a new money-making concept pops up that gains a lot of interest before it loses momentum and the next great idea takes over.

In the 1990s it was the dot-com era. Stories were plentiful of employees and investors in dotcom companies hitting the proverbial jackpot when their dotcom became publicly traded and became worth millions. It was the in thing to have a cluster of startups funded by angel investors with each one working on the next great tech breakthrough and startups were everywhere, even Nevada.

I experienced the dotcom era firsthand. While working in the television industry, a former co-worker told me about a startup dotcom that she had just gone to work for. They were paying very good salaries and promoted a fun work environment. She suggested that I meet the new VP of sales and marketing and arranged a meeting. What was supposed to be an informal introduction became an offer of employment before the end of our meeting.

I took a position on the sales staff at a much larger salary than what I was making in television along with stock options. Everything was moving at a break-neck pace within the company. New employees were being hired daily and the company moved to a large 82,000-square foot building to have enough room for all the employees. It was everything you had heard about at a high-profile dot-com startup.

Lavish parties, company-sponsored breakfast and lunch every day, an on-site gym, generous expense accounts, and monthly company-sponsored trips for rafting, wine tasting, or glamping adventures. Every quarter each employee received a bonus that was often five figures. Six months into my employment at the dotcom it went public and generated over $65 million dollars in less than six hours on the stock market.

But it wasn’t a sustainable business model and the entire dot-com industry bubble burst. The dot-com bubble was a historic time of excessive speculation that occurred from 1994 to 2000. This was driven by a period of extreme growth in the use and adoption of the Internet. Investors fled the dotcoms in 2000 and pulled funding from the startups, forcing hundreds of startups to shut down practically overnight. My dotcom dreams of retiring to a tropical island vanished, along with the dreams of thousands of other dot-commers.

After the dotcom era came the “house flip” era. When the economy crashed in the 2000’s many homes were repossessed by banks. Those houses were often sold off for pennies on the dollar to speculators who then did quick remodels on the homes to flip them for profit. Cash was king during that time since credit was almost impossible to get. If you had access to capital and were able to hold onto inventory until market conditions improved, you could make money. That era saw a constantly dwindling supply of inventory as the economy improved and less homes fell into repossession, which slowed the house flip industry.

After the house flip era came the marijuana industry boom. As states legalized medical and/or recreational marijuana, entrepreneurs saw an opportunity to get rich in an emerging market. But there were problems. The biggest issue is that at the federal level marijuana is illegal. It is impossible to get start-up funds by federally regulated banks and to conduct normal daily electronic transactions, forcing the industry to become a cash-based business. States which legalized marijuana had to come up with new laws to regulate the industry. The high startup costs, cash requirements, and navigating the legal morass dissuaded many would-be startups.

Now it’s the hemp wave. The passage of the Farm Bill of 2018 includes language that legalizes hemp across the U.S. Hemp is a growing market and total sales for hemp-based products in the U.S. were about $1.1 billion in 2018, and are expected to more than double by 2022, according to New Frontier Data, a market research firm focused on the cannabis industry. Much of those gains will stem from the demand for CBD products.

If you take an informal survey of your friends and neighbors who have tried CBD products you will find a majority say that it is effective for many health-related issues. Hemp can also be used for a variety of other products, such as fibers, clothing, rope and building materials.

Will hemp follow the historical patterns of past “get rich quick” businesses of here today and gone tomorrow? Google, eBay, and Amazon emerged from the dotcom bust to become some of the most successful companies in the world. The HGTV and DIY media empires grew into prominence during the house flip era. Marijuana companies are continuing to enter the market as the feds loosen restrictions.

Like all emerging markets, the hemp industry will depend on the laws of supply and demand. Once supply begins to outpace demand, the hemp businesses that have solid business practices and quality products will be the most profitable. Like any successful business, hemp farmers who are in it for the long term and not to “get rich quick” will be the ones that last through the supply and demand market corrections. Maybe Nye County will have a hemp business that becomes the Google of the hemp industry!

Tim Burke is a businessman, philanthropist, educator and Pahrump resident. Contact him at timstakenv@gmail.com

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