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Management in Practice

Can Legal Cannabis Drive Racial and Economic Justice?

Communities of color have been disproportionately impacted by the war on drugs. Ebele Ifedigbo ’16, co-founder of the Hood Incubator, believes that the legal marijuana industry can serve as a tool for correcting that damage. 

This interview was conducted at the Yale Business of Legal Cannabis Conference, a student-led event held at the Yale School of Management on February 16, 2018. 

The war on drugs has disproportionately impacted communities of color. “Studies have shown that blacks and whites use and sell marijuana at similar rates,” the Washington Post noted as California considered legalization in 2016. “But in California blacks are roughly four times more likely to be arrested for any marijuana offense than whites.”

With the legalization of recreational marijuana in California and other states, are communities of color reaping the economic benefits? The Hood Incubator, an Oakland-based nonprofit that aims to help people of color take part in the legal cannabis economy, estimates that black people own less than 5% of cannabis companies nationally and have received 1% of venture funding. Wanda James, the first black owner of a marijuana dispensary in Colorado, told the Boston Globe that among the hundreds of businesses launched since that state legalized the industry five years ago, fewer than 10 are black-owned.

Oakland has officially embraced marijuana not just as a legal business but as a means to repair damages from the war on drugs. Among other steps, the city has launched a cannabis assistance program to help low-income people and those previously convicted of marijuana-related crimes to start cannabis businesses. But communities of color aren’t uniformly welcoming legal marijuana businesses. In January 2018, Compton, California, voted against allowing cannabis businesses in city limits. Many opponents cited the community’s fraught history with drugs and with the police.

Yale Insights talked with Ebele Ifedigbo ’16, co-founder and co-executive director of the Hood Incubator. Ifedigbo discussed bringing a startup’s ethos and social enterprise’s mission to shaping a fledgling industry to include social, economic, and racial equity.

Q: What’s the inspiration for the Hood Incubator?

I grew up in a low-income black community on the east side of Buffalo, New York. The businesses were rent-to-own stores and check-cashing shops, extracting much-needed resources as opposed to nurturing and enriching the community. Ever since, I’ve had a passion for figuring out how my community can have what we need to thrive and prosper like everybody else. It really was here at Yale SOM that I figured out how to mold the passion and use business to serve the goals of racial and economic justice.

Then, with the marijuana industry in the news as it has moved toward legalization, knowing that black and brown communities have been the ones taking on the vast majority of the risk as marijuana has been under prohibition, it clicked for me: This is the thing. This is the opportunity for our communities. More risk should mean more reward.

The impetus to create the Hood Incubator was this window of opportunity to turn the marijuana plant that has, until now, been used as a weapon to separate and devastate communities of color, into a tool to repair some of those harms and build economic prosperity.

Q: How does the Hood Incubator work?

Our mission is to increase the participation of black and brown communities in the legal cannabis industry. We want to create an ecosystem and set of conditions that will allow these communities to tap into the industry however they see fit, whether it’s as an investor, business owner, employee, consumer, or patient.

We work toward our goal in three basic ways: community organizing, policy advocacy, and economic development work. We see all three as interrelated; at this point in the industry, you can’t really do one without the others.

The community organizing work is focused on bringing people together, especially black and brown people in the industry. There is a legacy of trauma, stigma, and isolation. Imagine if your parent went to jail because of cannabis distribution or your sibling was killed in a DEA raid. This is not a light issue for our folks. We do the community organizing to have a safe space where people can talk without a fear of being targeted and also to galvanize around this moment and what it means.

We use the energy from community organizing to spark advocacy. This is a new industry, so state by state, city by city, regulations have to get written. Many places have not even started thinking about it, and so we want to be proactive and shape what the frameworks are going to look like. We want to be sure that the communities that have been most impacted aren’t shut out of the opportunity because of socioeconomic background or race.

Then there is the economic development work, which is ultimately how we are repairing the harms of the war on drugs by helping people become economically and politically prosperous.

In this area, we have a business accelerator program which graduated 10 startups last year. Six are in the process of getting or have already received their permits from the city of Oakland and the state of California. They are doing delivery services, edibles, or topicals products. The other four are working either as consultants or as employees of companies within the industry. It’s just one year of anecdotal evidence, but we see it demonstrating demand and desire for folks to make the transition to the legal industry, and value of programs like our accelerator helping people in the process.

We’ve also been piloting an apprenticeship program. At the end of the day, there’s going to be more jobs than business owners, and not everybody even wants to be an entrepreneur. That’s a special kind of work. We’ve been working with existing cannabis businesses to establish apprenticeship and workforce development programs to make sure that black and brown communities are in those pipelines.

There are going to be a lot of high-growth, high-wage, career-ladder-type jobs, and knowing the ways that black and brown folks have been building expertise in this industry over time, we feel it’s imperative that we are able to take on those leadership roles, even as employees.

Q: How did you choose Oakland as the home for the Hood Incubator?

Oakland was a strategic choice. My co-founders and I realized that if this issue of racial equity in the industry was going to take off, Oakland would be the place for that to happen.

Oakland has been on the forefront of the marijuana industry, even through the gray market. California legalized medical marijuana in 1996, so that’s 20-plus years that businesses in California have been able to operate, albeit through a medical framework. People have figured out how to grow businesses and develop best practices, so there’s an organized marijuana business community that’s conscious of this racial-equity issue.

Oakland is also a politically active and socially engaged city. It’s the birthplace of the Black Panthers. City councilmembers and administrators were already engaged in the conversation. That’s a trifecta of industry, community, and city buy-in.

Q: Could you expand on the role of underground cannabis in communities of color and what the transition to the legal industry might look like?

The underground marijuana industry has been part of communities of color for decades if not generations. A big driver of that is the fact that, over the last 20, 30, 40 years, we’ve seen formal-economy jobs leaving communities of color. Look at Detroit. It used to be the headquarters of the auto industry. People had careers. Whether it’s outsourcing, automation, or a multitude of other factors, those jobs are no longer available. But people still have to feed their families. People still have responsibilities. People still have goals and aspirations. So how have they been sustaining themselves without access to formal-economy jobs? Many turned to the underground marijuana industry.

Many of our members talk about how their parents or siblings or friends have been arrested or incarcerated, but they also talk about how their father or mother or aunt doing marijuana distribution was what allowed them to be the first person in their family to go to college.

This industry was supporting communities of color before this wave of legalization, and so we think it’s imperative that it continues and grows now that things are legalizing. The legal industry was $7 billion or $8 billion in 2017. It’s projected to be $20 billion by 2020, and it’s just going to keep growing from there.

There’s an opportunity not just to hold onto what we had but also to expand as the stigma and pressure of it being illegal is alleviated. We can do bigger volumes, be more open, and have this as more of a core to how our communities are operated. But because of the way it is legalizing, there are barriers.

Q: What are the barriers?

Stats show that marijuana consumption is pretty much identical across races, but nationally black people are four times more likely to be arrested and convicted of marijuana-related offenses. Black and brown communities are disproportionately targeted for the same activities that other communities are doing.

In Colorado, if you had a past conviction for marijuana, you couldn’t get into the legal industry. California decided past convictions would not be a bar to entry, so I think there’s progress in terms of legal and policy frameworks making the legal industry accessible for black and brown communities. California also set a precedent writing racial equity and community reinvestment into the law. But it’s all new and the actual implementation will be key for whether it follows through.

Oakland is the first city in the country to pass an equity permit program explicitly saying that we’re going to do reparations for the harms of the war on drugs. Again, the spirit is there, but there’s still work to be done to make sure the details are too.

Q: What are you seeing to date?

It’s a very capital-intensive, highly regulated industry. The people who have the largest foothold are those who either have the best connections or the biggest pocketbooks. In California, the folks who have been operating in the medical marijuana space for the past 20-plus years have been able to navigate the gray areas, frankly, because of what they look like or the amount of capital they’re able to access. Those industry veterans include a lot of older white men who are coming out on the other side and maintaining their businesses.

That hasn’t been the case for a lot of black and brown folks in the industry. In Oakland, there are two or three notorious drug dealers in the ’80s, black folks, doing a lot of business, but they got caught up with the DEA, so they weren’t able to continue to hold onto the wealth. They had been entrepreneurs just like everybody else. If they were drug dealers, so were the white people who were doing it. Everybody was a drug dealer, but for some because of the color of their skin or where they came from, they were targeted and sent to jail, whereas other folks were able to just keep building businesses.

That’s still reflected with legalization and who has that first-mover advantage. Some are able to go through the process faster. Some are struggling to come up with the permit fee, let alone the fees for inspections or money for real estate.

A brick-and-mortar dispensary or a cultivation facility is especially capital intensive. Making edibles or a delivery service have a lower barrier for entry. It’s still early to know the impacts of Prop 64 or Oakland’s equity program. We’ll see, two, three, five years down the line, how things have shifted.

Q: What is the state of the underground market?

For the moment, the underground market is still thriving. As we work out the kinks of the legal market, the underground market is probably going to shrink. I don’t know that it will ever fully go away. Some people don’t particularly want to switch over to the legal market right now. We try to argue that the transition to legal is a form of protection and security for those currently in the underground. That isn’t how everybody sees it, especially in black and brown communities. There are still issues around trust and stigma that affect a black or brown person’s decision to enter or not enter the legal market. Legalization does not automatically mean the end of systemic racism and discrimination. We all have to work with a high level intention and commitment to make social equity a lasting reality in the legal industry.

Q: Will consolidation eventually impact the industry?

California wrote a provision into the legislation limiting mega-players. Permit applicants looking to do a large volume can’t enter the industry until 2023. That offers a five-year buffer period for smaller businesses.

Everybody knows Big Tobacco, Big Pharma, and Big Ag are just waiting for federal risk factors to go away before they leap in. They have all the infrastructure, all the capital, all the supply chain stuff that they need to just take over their piece of the industry. That does put the pressure on. They are coming, so what are we doing right now to get and protect a foothold?

Hood Incubator is thinking about how we tap into cooperative models to help smaller players compete. For businesses that are manufacturing products, maybe that can happen in a co-packing center that centralizes distribution and marketing to share those costs. Smaller-scale farmers in Humboldt County, in Northern California, see the same risks. They’re looking to band together through co-branding and other cooperative arrangements, too.