Cannabis Tax Relief, AI Regulation, and Consumer Value Shifts - Episode Hero Image

Cannabis Tax Relief, AI Regulation, and Consumer Value Shifts

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Original Title:

TL;DR

  • Reclassifying cannabis from Schedule I to Schedule III could provide a significant tax benefit to the $32 billion industry by allowing normal operating expense deductions, potentially improving cash flow and margins for a more survivable business model.
  • President Trump's executive order challenging state AI regulations aims to create a unified national framework, preventing fragmented rules that could slow innovation and reduce global competitiveness, though its legal teeth are questioned by experts.
  • The Next Playground console's success, outselling Xbox and topping Amazon charts, demonstrates a pivot from an AI basketball app to hardware by following user data, highlighting the market's demand for family-friendly, movement-based gaming.
  • Diners are increasingly ordering appetizers as entrees due to financial anxiety, with mozzarella sticks up 36% year-over-year, indicating a consumer shift towards value and smaller, more affordable meal options.
  • The evidence for medical cannabis benefits is often weak or inconclusive, with nearly 30% of patients meeting criteria for cannabis use disorder, suggesting a need for more robust research despite potential reclassification.
  • The AI industry has lobbied for federal preemption of state regulations, arguing that a single national framework is crucial for competing with China, a stance supported by figures like David Sachs.

Deep Dive

President Trump's expected executive order to reclassify marijuana from Schedule I to Schedule III drug status is poised to significantly benefit the $32 billion cannabis industry by alleviating oppressive tax burdens and potentially spurring research. Concurrently, an executive order blocking states from enforcing their own AI regulations aims to create a unified national framework, though legal experts question its enforceability against states' existing laws. Meanwhile, a small gaming console, the Next Gen Playground, has experienced explosive, word-of-mouth growth, outselling the Xbox and highlighting a market shift towards value-driven entertainment. This trend is echoed in the restaurant industry, where consumers are increasingly opting for appetizers over more expensive entrees due to financial anxieties.

The reclassification of marijuana from Schedule I to Schedule III, a category that includes substances like Tylenol with codeine and anabolic steroids, would grant cannabis companies substantial tax relief. Currently, IRS code 280E prevents these businesses from deducting normal operating expenses, leading to effective tax rates as high as 70-80%. By moving to Schedule III, which acknowledges medical use and a lower potential for dependence, these companies could see improved cash flow and margins, creating a more sustainable business model. However, this shift also introduces potential risks, including increased federal enforcement for prescription drug sales without a license and heightened competition from major pharmaceutical companies. This development comes amid growing questions about the efficacy of medical cannabis, with recent research suggesting weak or inconclusive evidence of benefits and a significant portion of patients meeting criteria for cannabis use disorder.

President Trump's executive order on AI regulation, which seeks to prevent states from enacting their own rules in favor of a single federal framework, is intended to foster innovation and maintain global competitiveness, particularly against China. The White House argues that a patchwork of state-by-state regulations would hinder progress. However, this directive faces significant criticism for potentially prioritizing big tech interests over states' rights and consumer protection, especially given the absence of current federal AI regulations. Legal experts suggest the order may lack teeth, as only Congress can override state laws, leading many states to continue developing their own AI regulations. This creates a dynamic where states and the federal government are staking out their positions on how to regulate this rapidly evolving technology.

The Next Gen Playground's success illustrates a powerful pivot driven by user data and a focus on an underserved market. Initially an app developer, the company transitioned to hardware, leveraging its AI and camera technology to create a console that emphasizes physical activity for children, a demographic largely overlooked by major gaming companies. Its affordability, compared to high-end consoles, and licensing of popular children's content like Bluey and Sesame Street have fueled its rapid ascent. This mirrors the trend in the restaurant industry, where consumers facing financial pressure are gravitating towards more affordable appetizer options, with mozzarella sticks, pickle chips, and cheese curds showing significant year-over-year growth. This "appetizerization" of dining reflects a broader consumer search for value and a desire to experience more variety without the high cost of traditional entrees.

The core takeaway is that evolving economic pressures and regulatory landscapes are driving significant shifts across industries. From the cannabis sector seeking tax relief and legitimacy to the tech industry navigating AI regulation, and consumers re-evaluating spending habits in dining and entertainment, adaptability and a keen understanding of market dynamics are critical for success. The current environment favors businesses that can offer value, leverage data-driven insights, and anticipate regulatory changes, while consumers are prioritizing affordability and tangible benefits.

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Key Quotes

"Christmas might be coming early for the cannabis industry with president trump expected to substantially ease federal restrictions on marijuana as soon as today according to reports trump will announce a push to reclassify marijuana from a schedule i drug where it's in the same camp as heroin to the less dangerous schedule iii home to tylenol and steroids this does not mean marijuana would be legalized or decriminalized at the federal level and as a consumer who regularly picks up gummies at a dispensary you may not even notice a change however reclassification could be a game changer for the 32 billion cannabis industry first it'd give companies big tax breaks since they're operating under a pretty oppressive tax regime by selling a schedule i drug next it could light up scientific research in the field as schedule i drugs have strict limits on studies and finally it's a symbolic boost legitimizing cannabis as part of the mainstream national economy and potentially foreshadowing more integration to come"

The author explains that reclassifying marijuana from Schedule I to Schedule III could significantly benefit the cannabis industry. This change would provide companies with substantial tax breaks by removing them from an oppressive tax regime. Additionally, it could stimulate scientific research by easing restrictions on studies and serve as a symbolic validation of cannabis within the national economy.

"president trump signed an executive order just before the weekend that aims to turn ai regulation from a group project into a solo one the order blocks us states from enforcing their own ai regulations with the goal of creating a single national framework for ai rather than a patchwork of state by state rules if there's fragmented regulation the white house argues then that's a recipe for slower innovation and reduced global competitiveness with china that's the idea at least in practice there aren't really any federal regulations for ai right now so states have stepped in to create laws almost half of all states have some sort of rules around things like ai ai generated deepfakes and misinformation algorithmic discrimination in hiring and general consumer protection but the white house wants those horses held for the time being while they work with congress to create a federal framework"

The author details President Trump's executive order aimed at centralizing AI regulation. This order prevents states from implementing their own AI rules, intending to establish a unified national framework. The White House argues that fragmented state-level regulations hinder innovation and global competitiveness, particularly against China, and seeks to pause state actions while federal legislation is developed.

"the issue with this approach is that the cart appears to be in front of the horse by neutering what states can do without national rules in place the ai industry gets to continue on its merry way without any real oversight leaving critics on both sides of the aisle to preempt the order as a carve out for big tech that dilutes states' rights it's funny this country is almost 250 years old and we're still having the same arguments as we were when the country was founded i mean if you just have to go to watch see the musical hamilton to see the fight between states' rights and federal government we're still having those same debates today and now when it comes to regulating this new technology with ai"

The author critiques the executive order, suggesting it places the cart before the horse by limiting state actions before federal rules are established. This approach allows the AI industry to proceed without immediate oversight, leading to accusations that it benefits big tech and undermines states' rights. The author notes this reflects ongoing historical debates about states' rights versus federal authority in the U.S.

"the next playground costs 249 and a big reason for its success on black friday was it was heavily discounted to 199 so everyone was scrambling to get it for their kids and just by focusing on this one particular market they have licensed bluey they license sesame street so they know exactly who their audience is the market has literally abandoned the rest of the market all their competitors have literally abandoned all these families with small kids and then they are absolutely taking it to the bank it is a great story into going into the data rather than listening to maybe your ego you start this app you think this is the next big thing and then you have to pivot not once but twice into your this final third iteration it's letting the market tell you what to do and saying like hey we want this and then you're actually serving those needs and then it's also just surviving long enough i mean the founder of this company was taking out loans against his own assets in order to keep this thing alive so very cool story i'd never heard of it i want parents to weigh in because you're kind of ground zero for this thing it's been circulating around in group chats feels fun i kind of want one for the office"

The author highlights the success of the "Next Playground" console by focusing on a specific market: families with young children. This console is priced more affordably than competitors and was heavily discounted, making it attractive during Black Friday. The author emphasizes the company's strategic licensing of popular children's shows and its ability to pivot based on market data, even to the point of the founder taking personal loans to sustain the business.

"diners are ordering way more appetizers than entrees these days to save some money when they eat out appetizer sales are up 20 year over year through august according to data from buyer's edge who looks at over 200 000 restaurant locations one vp at the company thought the 20 spike was a data error because entree sales were flat and typically grow only around 3 per year but a hankering for pickle chips egg rolls and jalapeno poppers is leading to massive growth in appetizers because they feel like full meals sometimes with much less sticker shock for cash strapped consumers restaurant chains are following the data too applebee's recently launched a 15 ultimate trio appetizer designed explicitly to replace an entree and who can forget chili's triple dipper appetizer which has powered insane foot traffic and same store sales increases for parent brand brinker international throughout the year"

The author explains that consumers are increasingly opting for appetizers over entrees when dining out to save money. This trend is supported by data showing a 20% year-over-year increase in appetizer sales, while entree sales remain flat. The author notes that appetizers are perceived as more affordable meal options, leading restaurant chains like Applebee's and Chili's to develop appetizer-focused promotions and offerings to attract budget-conscious customers.

Resources

External Resources

Books

  • "The Princess Bride" by Rob Reiner - Mentioned as a film directed by Rob Reiner.
  • "This Is Spinal Tap" by Rob Reiner - Mentioned as a film directed by Rob Reiner.
  • "When Harry Met Sally" by Rob Reiner - Mentioned as a film directed by Rob Reiner.
  • "A Few Good Men" by Rob Reiner - Mentioned as a film directed by Rob Reiner.
  • "Stand by Me" by Rob Reiner - Mentioned as a film directed by Rob Reiner.

Articles & Papers

  • "Review of 15 years of research on medical cannabis" (JAMA) - Discussed as a study concluding weak or inconclusive evidence for medical cannabis benefits.

People

  • Rob Reiner - Mentioned as a Hollywood icon, actor, and director.
  • David Sachs - Mentioned as the White House's AI czar and co-founder of PayPal.
  • Elon Musk - Mentioned as a co-founder of PayPal with David Sachs.
  • Ron DeSantis - Mentioned as the Governor of Florida, critical of the AI executive order.
  • Steve Bannon - Mentioned as someone who believes AI needs more regulation.
  • James Cameron - Mentioned as the director of the Avatar franchise and Titanic.
  • Jake Sully - Mentioned as a character from the Avatar franchise.
  • Devin Emery - Mentioned as the President of Morning Brew.
  • Emily Milliron - Mentioned as the Executive Producer of Morning Brew Daily.
  • Raymond Lu - Mentioned as the Producer of Morning Brew Daily.
  • Olivia Graham - Mentioned as an Associate Producer of Morning Brew Daily.
  • Olivia Lake - Mentioned as an Associate Producer of Morning Brew Daily.
  • Karen Makeup - Mentioned as someone wondering about the last mozzarella stick.
  • Ryan Reynolds - Mentioned in a paid partnership advertisement for Mint Mobile.

Organizations & Institutions

  • Morning Brew Daily - Mentioned as the podcast hosting the episode.
  • OpenAI - Mentioned as a tech company lobbying for federal AI regulation.
  • Google - Mentioned as a tech company lobbying for federal AI regulation.
  • Andreessen Horowitz - Mentioned as a venture capital firm invested in AI companies.
  • PayPal - Mentioned as a company co-founded by David Sachs and Elon Musk.
  • National Football League (NFL) - Mentioned in relation to fantasy football playoffs.
  • Oklahoma - Mentioned in relation to college football playoffs.
  • Alabama - Mentioned in relation to college football playoffs.
  • San Antonio Spurs - Mentioned in relation to the NBA Cup finals.
  • New York Knicks - Mentioned in relation to the NBA Cup finals.
  • Applebee's - Mentioned for its appetizer promotions and "ultimate trio appetizer."
  • Chili's - Mentioned for its "triple dipper" appetizer.
  • Brinker International - Mentioned as the parent company of Chili's.
  • Papa John's - Mentioned for customers shifting to medium pizzas and fewer toppings.
  • Pizza Hut - Mentioned as a pizza chain looking for ways to appeal to squeezed consumers.
  • Domino's - Mentioned as a pizza chain looking for ways to appeal to squeezed consumers.
  • Public.com - Mentioned as a platform for investing and its "Generated Assets" tool.
  • Open to the Public Investing Inc. - Mentioned as a brokerage service provider for Public.com.
  • FINRA - Mentioned as a member of Open to the Public Investing Inc.
  • SIPC - Mentioned as a member of Open to the Public Investing Inc.
  • Public Advisors - Mentioned as the provider of the "Generated Assets" tool.
  • Mint Mobile - Mentioned in a paid partnership advertisement.
  • David Protein Bars - Mentioned in a paid endorsement for a promotional offer.
  • Goldman Sachs Bank USA, Salt Lake City Branch - Mentioned as the issuer of Apple Card.
  • Shopify - Mentioned as the platform for Morning Brew swag availability.

Tools & Software

  • Generated Assets - Mentioned as an interactive analysis tool by Public Advisors for creating investable indexes with AI.
  • Home Court - Mentioned as Next Playground's initial iPhone app for tracking basketball shots.

Websites & Online Resources

  • public.com/morningbrew - Mentioned as the starting point for using Public.com.
  • public.com/disclosures/ga - Mentioned for disclosures related to Generated Assets.
  • public.com/disclosures/matchprogram - Mentioned for terms of a match program.
  • public.com/disclosures - Mentioned for general disclosures.
  • davidprotein.com/mbd - Mentioned for purchasing David Protein Bars.
  • applecard.com - Mentioned for Apple Card terms.
  • mintmobile.com - Mentioned for switching to Mint Mobile.
  • megaphone.fm/adchoices - Mentioned for ad choices.

Podcasts & Audio

  • Morning Brew Daily - Mentioned as the podcast for the episode.

Other Resources

  • Schedule I drug - Mentioned as the current classification for marijuana.
  • Schedule III drug - Mentioned as a potential new classification for marijuana.
  • Tylenol - Mentioned as an example of a Schedule III drug.
  • Steroids - Mentioned as an example of a Schedule III drug.
  • Heroin - Mentioned as an example of a Schedule I drug.
  • LSD - Mentioned as an example of a Schedule I drug.
  • Anabolic steroids - Mentioned as an example of a Schedule III drug.
  • Ketamine - Mentioned as an example of a Schedule III drug.
  • Testosterone - Mentioned as an example of a Schedule III drug.
  • Tylenol with codeine - Mentioned as an example of a Schedule III drug.
  • IRS Code 280E - Mentioned as a tax code affecting cannabis businesses.
  • K-shaped economy - Mentioned as a concept related to consumer spending habits.
  • AI (Artificial Intelligence) - Mentioned in relation to state and federal regulation.
  • Deepfakes - Mentioned as a type of AI-generated content.
  • Algorithmic discrimination - Mentioned as an issue in AI regulation.
  • States' rights - Mentioned as a historical and current debate in US governance.
  • Federal government - Mentioned in relation to AI and cannabis regulation.
  • Next Playground - Mentioned as a gaming console that outsold Xbox.
  • Wii - Mentioned as a predecessor to Next Playground's concept.
  • Xbox Connect - Mentioned as a predecessor to Next Playground's concept.
  • Bluey - Mentioned as a licensed property for Next Playground.
  • Sesame Street - Mentioned as a licensed property for Next Playground.
  • Hamilton (Musical) - Mentioned as an example of the debate between states' rights and federal government.
  • Powerball - Mentioned in relation to a large jackpot drawing.
  • Lump sum vs. annuity - Mentioned as a decision for Powerball winners.
  • Mario - Mentioned as part of a puzzle game.
  • Garfield - Mentioned as part of a puzzle game.
  • Spongebob - Mentioned as part of a puzzle game.
  • The Hulk - Mentioned as part of a puzzle game.
  • Cookie Monster - Mentioned as part of a puzzle game.
  • Fantasy Football - Mentioned in relation to playoff implications.
  • Devante Adams - Mentioned in relation to fantasy football performance.
  • Jobs Report - Mentioned as an upcoming economic data release.
  • Monthly Inflation Report - Mentioned as an upcoming economic data release.
  • Retail Sales - Mentioned as an upcoming economic data release.
  • Fed (Federal Reserve) - Mentioned in relation to interest rate decisions.
  • Dot plot - Mentioned as a Federal Reserve projection.
  • Avatar: Fire and Ash - Mentioned as an upcoming movie release.
  • Pandora - Mentioned as the setting for the Avatar movies.
  • NBA Cup - Mentioned as an in-season tournament.
  • College Football Playoffs - Mentioned as an upcoming sports event.
  • NBA Finals - Mentioned as an upcoming sports event.
  • NFL Week 16 - Mentioned as a current week in the NFL season.
  • Apple Card - Mentioned in a paid partnership advertisement.
  • Daily Cash back - Mentioned as a reward feature of Apple Card.
  • Mozzarella sticks - Mentioned as a top-growing appetizer.
  • Pickle chips - Mentioned as a growing appetizer.
  • Cheese curds - Mentioned as a growing appetizer.
  • Onion rings - Mentioned as a growing appetizer.
  • Cheese bites - Mentioned as a growing appetizer.
  • Pizza - Mentioned in relation to changing consumer habits.
  • Medium pizzas - Mentioned as an alternative to large pizzas.

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