E245: From $0 to Billions in a Regulated Market

0:00So Pete, you're a first-generation wealth creator, you're a co-founder and CEO of GreenThumb, which you built from scratch, took it to a$6 billion market cap. Today, it's roughly$2 billion. Tell me about founding GreenThumb Industries. Specifically, how did you build a business in the cutthroat cannabis space? Yeah, so I had a couple tours of duty as an entrepreneur. I started my first business at 24 and sold it at 29, was a millionaire before 30, and then had started another business in the commercial solar space and had another nice exit. And I was working, running a billion-dollar subsidiary of a utility, the same utility I had sold my solar company to.

0:45And I got a phone call one day from a friend. We weren't that friendly, but someone I knew in Chicago. and it has asked me, he said, what do you think about weed? And I said, oh, I love weed. He said, no, I'm not talking about the product. I'm talking about the business of weed. It's starting to be legalized. And there's all these folks out in Colorado who are building$100 million plus businesses who don't really even know what they're doing. What if really sophisticated operators came into the space like you and I? So I started doing some private equity type due diligence on the current operators in the space with my partner and other people and learned a lot about the space.

1:24And I figured out is that, yeah, indeed, there's a massive opportunity to do something really, really different in the space. And that's exactly what we did. The Green Thumb Industries is the largest cannabis company in the world today. Revenue-wise, we'll do, I think, 1.4, 1.5 billion in revenue this year, operations in 15 states around the US. And we built this thing by just doing the unsexy things well. while everyone else was trying to be the apple store of weed or the starbucks of weed we were just busy doing the blocking and tackling good example uh david we're uh the company is headquartered in downtown chicago and we don't even have a dispensary you're the largest cannabis company in the world we don't even have a dispensary in our whole town uh the reason is is that the company is operated on the basis of profit uh you know profit above all else basically except for ethics and morality.

2:19And we do the unsexy things well. So instead of being in Chicago, we're in Joliet, Naperville, and Essingham, and Mundelein, other cities that some people may not have even heard of that are, you know, 30 ,000, 50 ,000, 100 ,000 people cities in Illinois. And that's just a good example. It's like that all over the country. We sort of zigged while everyone else was zagging. And I think that's why we were able to take this thing to, you know, what's unsexy about Green Thumb. Yeah. So being in Toledo, Ohio versus Cleveland or Columbus, or being in Erie, Pennsylvania versus Pittsburgh and Philadelphia, that's pretty unsexy.

2:59But when you look at the math, Erie, Pennsylvania is a great example. We got the highest score in the state of Pennsylvania. We could have picked anywhere we wanted to go. We picked Erie, which again, not sexy, but when you look at the MSA there, it's about 500 ,000 people. And the way the state had chopped up the licenses, the next closest dispensary was going to be like 72 miles away in Bradford, Pennsylvania. Now, I don't know if anyone here has been to Erie, but if you have, you know that for about six months a year, you ain't going anywhere. Like you're not driving 70 miles to get, you know, pre-roll joints that are$10 cheaper because the weather is very inclement.

3:39We went to places that no one else would go because our bias was we want a monopoly or oligopoly on a market. And that's why our margins are some of the highest in the world, in the industry, and certainly our profits. We are the most profitable company in the world. And I'm saying we, I've been gone for five and a half years, but I still feel very much a part of it, obviously. The other thing is a lot of times people don't go after non-obvious opportunities. We got really good at going after non-obvious opportunities. So let me give you an example. In 2013, 14, when we started this thing, the average marijuana consumer in that time was sort of like a 32-year-old man who had been smoking weed since college.

4:20The consumer was not the American woman, mother of three kids, age 30 to 50. But what we know to be true, what we knew to be true then, and what we still know to be true is that we went after the customer that was not yet the customer and pull them over from that glass of wine at the end of the night after raising three toddlers to a gummy, that that would unlock so much opportunity. Because the truth is that American women age 30 to 50 drive more consumer behavior than any other demographic in the world. You know, when my wife tells me we're going somewhere, we're going somewhere. You know, I think we all sort of feel that or acknowledge that.

4:57So instead of going to where the market was, it's sort of like the Wayne Gretzky. You know, we weren't skating to where the puck was. We were skating to where the puck was going. That was just something that we did better than anybody else. And it was pretty unsexy at the time. And frankly, a lot of people even thought it was a little questionable at the time. We directed all of our products, all of our form factors, many of our taste profiles towards the female consumer, and that ended up working out very well, obviously. It's a well-known meme or idea that if you want to make a lot of money, you go after unsexy businesses.

5:28You go after waste management or construction, things like that. I think it's much more difficult to implement it. Why? Because while you're building these unsexy businesses, you're living in the real world. When you go to cocktail parties, people ask you where your dispensaries are. You say Erie, Pennsylvania versus downtown Chicago. So how did you have the discipline to stick to an unsexy strategies and what are some lessons from that? My partner in the Green Thumb Industries was very, very operationally disciplined. He still is to this day, probably the most disciplined operator in the space.

6:06His name is Ben Kovler. He taught me a lot, frankly, about operational discipline. And, you know, when you have a partner, you know, Ben and I didn't always see eye to eye, but I think we respected one another because we each brought very complementary skills to the table. When I got out of line or was doing something that maybe didn't map to our vision or to our discipline, he sort of course corrected me. And similarly, sometimes when he was too sort of focused on the books and on the spreadsheets and not thinking about the big vision, I was able to hold him accountable and challenge him. And so I do think that if you're in a good complementary partnership, you can sort of stay the course and stay disciplined.

6:47And, you know, it's good if, you know, I think we've learned as a school of entrepreneurship, EOS, the Entrepreneur Operating System. And, you know, typically there's got to be one visionary and one integrator and a great partnership. And we had the visionary integrator balance going quite well. Ben has become the visionary of the business. And now there's another integrator in there named Anthony Georgiatis with him. And, you know, it's just that that partnership balance where you can hold each other accountable, I think, is the way we did it. And again, when the North Star is we want to be the most profitable company in the space, you sort of set aside some of the more undisciplined approaches that don't make you money.

7:26And that was always our initiative. It's like we want to we want to sell to the mass market and we want to, you know, brands distributed at scale. And we want to be the most profitable company in the cannabis world. And so we just held true to that vision. Okay. Perhaps what I'm getting to is you're also homo sapien like other people. Nobody does not want to make profits. You're limited to the same neurobiology that humans are limited to. How do you discipline your way into doing things that in the short term are not sexy? And what are some to-dos in order to replicate the strategy? I'm a big believer in manifestation and building roadmaps.

8:09and, you know, our roadmaps, my personal roadmap was always about reaching some level of attainable wealth. And, and, you know, so I knew the specific destination and just like that, my companies have always known the specific destination that they wanted to get to. And then from there you build sort of a discipline framework to be able to get there. And, and, and then you hire really, really talented people to operate within that discipline framework. But, but the key is, I think is you have the discipline framework to get to your North star. And you let really talented people operate freely within that discipline framework.

8:44What we did at Green Thumb is similar to what I'm doing now with my current companies, which is like, we give people a lot of autonomy. We say to people like, we trust you. And therefore, like you're sort of the CEO of your own domain. You sort of blow up the hierarchy, so to speak. And when you blow up the hierarchy and you give people agency and autonomy, magic happens. And, you know, but again, it has to be done with a disciplined framework. There were steps to get to our North Star. I'm a big believer in Jack Stack, his approach. He wrote a book called The Great Game of Business, right? And he talks about one of the best ways to keep everybody in the company on course and mission aligned and goal aligned is through full transparency.

9:22In fact, I will say like, I own an engineering company. We have about 100 employees. The company is headquartered out of Solidarsia. I bought the company a couple of years ago. and it was remarkable. When I first bought the company, we asked the employees, not me, but we sort of did a survey, an anonymous survey, and we asked the employees, what are the most important things to you about working at this company? It's called Mainstay. And then we took all the responses and we built a word cloud. And in the word cloud, right in the middle, in like 48-point font, where the next closest word was like 16-point font, was the word transparency.

9:59And I think just like Jack Stack did in the great game of business in Springfield, Missouri, like you just tell people what's happening, where they're at, where we're at as a company and what we need to do to get to our North Star. If you walk through a Green Thumb Ministries, there's a big whiteboard right in the middle of the headquarters and it had the 10 KPIs that we had to achieve and it measured them week by week. So everybody knew the level of accountability and the standards we had to meet in order to meet our vision in North Star. So that's sort of how we did it. I've adopted that strategy with all the companies I've ever managed.

10:30That's an old school book. I just was looking it up. It was written in 1992. I think I read it in probably the late 90s. I used to go to bookstores and read business books in high school. Jack Sack talks about this ESOPs, which is employee-owned organization. Is equity one of the secret sauces to making people do these unsexy tasks? Absolutely. A lot of people became millionaires at Green Thumb Industry, not just the executive team, far downstream from the executive team. And at all of my companies, I have provided equity. I own a company now called Warmer, warmer.com. It's in the peer-to-peer support space.

11:14And every single employee of the company, it's only 20 of us, but every single employee of the company is an owner of the company. That's sort of a mandate because you want people to act like owners. you better make them in my opinion and we want everybody acting like an owner you know we we we want everyone at our company to pass the trash test which is you know you see a piece of trash on the ground at the office don't let the person you know don't rely on the person who actually you know threw their trash on the ground to pick it up just pick it up yourself you're an owner right and so every company i've ever managed you know everyone meets the trash test and that's sort of a cultural norm uh at these companies so but you got to take it a step further um and jack Like Stack talks about this in his book, and you're right, he was very early on to this.

11:55KKR, the private equity firm, has now adopted this in many ways, and they found that the companies where they ESOP, there's an employee stock ownership plan, the EBITDA is 3X what it was 10 years ago when they didn't have an ESOP plan, for example. And so, but you can't just, here's what I would say. This is what's interesting. is, and if there's maybe there's one thing that a few employers take away from this call, maybe it's this, which is that employees don't feel ownership based upon what you give them. They feel ownership in the company based upon what they give you. And so they have to feel like they're giving value to the company.

12:37They have to feel like they understand the financials so they can add value to the finance. Even the janitor, as Jack Stack talks about in The Great Game of business, understood the financial implications of wasting disinfecting, right? Cost of goods sold up, inventory down. And he understood the balance sheet implications for that. And so it's great to have owners, but it's even better and more effective to have educated owners who understand the implications of the work they're doing. And that's what I've tried to do in all my businesses. I was essentially asking you the question of how do you build an organization where people are not going towards the flashy lights and the flashing headlines and the cool things you could tell their friends.

13:19And your answer was, you build a much bigger purpose, which is we're building something where we're self-actualizing ourselves through the business. We get ownership over domains. We're all part of this bigger mission. And we could also, you know, build wealth for ourselves and our families, which matters much more than telling some random person at a cocktail out party i have a dispensary in chicago versus erie you just have a bigger why so it's not that they're avoiding this other kind of cool nice to have it's that you're giving them something much more valuable no question no question and you know like i gotta say um i i operate on sort of a sleep at night quotient you know like if i'm not sleeping at night something's wrong um and and something's bothering me and i need to figure out what that is because i just want to be able to feel good enough about myself and my decisions that I sleep at night.

14:11And I got to tell you, as I sit here in my beautiful home on Lake Michigan, which I earned, I worked hard for, um, I feel, I can sleep so much better at night knowing that I didn't hoard all the, the benefits, you know? Yeah. I, I, I benefited and I live in this big, beautiful home and I have, uh, I have the type of life where I can do just about anything I want, but it wasn't just me. There are lots of people whose lives were altered in a really meaningful way and generational wealth was created. And I just sleep better at night knowing that I'm not selfish. I'm not greedy. I have a moral imperative to look out for others.

14:50And I know we might touch on this later, David, but maybe it's a good time to say it. It's like I have always said and when I speak in almost every podcast I do, I tell people the more generous I am, the wealthier I get. And that's not just about money and that's not just about equity. There's lots of forms of generosity. You can be generous with your energy, your intellect, your network. But I just feel like I am a little spiritual in the sense that, you know, when I give to the universe, the universe repays me. And I just believe that, you know, those of us who are very greedy, only looking out for ourselves and our own wealth and never share any of it, I question sort of the moral imperative there, you know, and also the true fulfillment.

15:32I'm very fulfilled that lots of other people have benefited from my work. Let's take away the morality of the equation from a purely rational standpoint. Give me an example of by not being greedy, by being giving at the margins, how are you able to benefit? How are you able to scale that as well? the more people around me feel like owners, the more they feel like they can give and contribute, the more committed they're going to be. And, you know, if you want to build a successful company, you have to have committed people working on your team. And so I think that, but instead of forcing commitment, it's better to sort of earn it through kind and generous gestures.

16:10And, you know, David, I don't really, to be honest with you, I don't really decouple my moral imperatives from making money. I know you asked me to do that, but I don't do that. I always tell people, I do not love my businesses. I love my family. I love myself. I do not love my businesses. I see my businesses as a vehicle to help people and to help myself grow and learn and build wealth. And so I try my best not to decouple those things. And while I've had my moments where sort of my moral imperative may have been diminished a little bit while I made some hard or even ruthless decisions, I try to make sure that I invoke the moral imperative in every decision I make.

16:51Because the truth is, you just get better results. When people like working for you, when people feel comfort, when people feel they can give a lot and be rewarded a lot, you build better companies. And I've done that a number of times now and it continues to work for me. I always tell people, the culture I build of the companies that I've founded, it's all about a culture of compliments. I want people liking working together with their peers and complimenting one another and supporting one another. It's just a much more fun, much more advantaged way to play the game. I think it's a unique advantage, a distinct advantage in the corporate world.

17:25A lot of people fail to see that one of the main benefits or main structures and startups that make so many successful is the equity, is this alignment. They think it's a tech thing. It's not a tech thing. It's an alignment thing. I think a lot of places outside of specific use, like edge cases, like a McDonald's or franchises with existing built systems, I think a lot more places would have a lot more upside if there was more sharing and more alignment. Literally, KKR, the big private equity firm, has published their data on the companies where every single employee is an owner of the company.

18:02And just benchmark those companies. There's an overhead door company based in Southern Illinois, I forget the town, that KKR owns. And benchmark that company since they gave all the employees ownership versus its biggest competitors. And again, they're like 3X outperforming their biggest competitors. And, you know, before KKR did this, they were sort of like performing on par with their competitors. So it's like the proof is in the pudding. The data supports that when people are aligned through ownership and opportunity, they perform. The exact report is called Creating an Ownership Culture by KKR.

18:37So I'll take a look. The data is very suggestive and supportive of what I'm saying. So think about providing ownership to your employees and also, again, educating them. Don't just give ownership, educate them on what the financials mean, how to read a balance sheet, how to read a cash flow statement. That's really important. You've been on 60 Minutes twice. I recently took a look at that. And one of the things that talks about is your character arc, going from this ruthless business person to one of the top philanthropists in the US. Tell me about this character arc. And what were your lessons along the way that changed, essentially, your character?

19:14I've always had a bias to action. And I've always been charitably inclined. But, you know, certainly there have been moments in my life where I was so focused on a business that I didn't feel I had the time to contribute to other causes outside of my area of focus. I'm teaching a class at the collegiate level now called Mastering Wealth. And I remind my students that when you think about someone who's wealthy, I know that you traditionally think about bank account wealth. But I spent a lot of time, I didn't then, but I spent a lot of time now thinking about the different permutations of wealth, health, wealth, relationship, wealth, family, wealth, you know, network, wealth, lots of different forms of wealth.

20:01And, you know, what happened, to be honest with you, David, is when I when I reached my wealth goal, I'm a big man, a sister, you know, a long time ago, I read Think and Grow Rich by Napoleon Hill, and I set my wealth objectives, and I did accomplish them and then some. And when I got to my wealth goal, I think I felt this sense of relief, but also this extraordinary sense of juxtaposition. Like, yeah, I'm bank account rich, but holy cow, do I feel really relationship poor? And I felt like I needed to do something about it. Ultimately, that led to my retirement. The other thing I'll say is this, like, if you made money the way I made money, which is at the time, rich white man, I didn't grow up rich, but I came over my history of my entrepreneurial career, I became very wealthy.

20:52But if you became rich the way I did, which is by selling marijuana, you can't look yourself in the mirror and not acknowledge that you did this on the backs of black and brown folk who have been selling weed in their basements and garages for like four decades. And instead of creating a fortune, they created a criminal record for themselves. And so I became, there was a lot of guilt. I've said that on 60 Minutes Live with Scott Pelley, a lot of guilt in the sense that I really needed to pay it back. Who were the people and communities who suffered and sacrificed so that I could succeed? And when I woke up on this day with extraordinary wealth in my bank account, I felt a degree of guilt and I felt some sort of this relief of this hubris.

21:37And I said, I got to go pay it backward to the people and communities who suffered for me to be able to actually actualize this. And that's how this happened. and it was just sort of a moment of real human clarity. And I think I've really, I've become such a better human, much less ruthless, much more kind, much more empowering to people around me. And the last thing I'll say is, you know, I used to give a shit about what I call extrinsic affirmation. I don't need extrinsic affirmation. I know the man I am. And so to have the ability to stop caring about how other people see you or what they think about you and just do the things that make you fulfilled and feel good.

22:18And to live that as your life purpose, like my life purpose is to help myself and people around me who I care for find the truest form of fulfillment. And so I think the way I do that is through charitable endeavors. And I feel very happy and proud of what we've done. And I'm never ruthless anymore, which is good. There's this navalism that there's two ways to reach this type of enlightenment. One is to be a monk and the other is to attain your goals and realize that you're good enough or you no longer need them. Would you have reached this kind of level of thinking and enlightenment if you hadn't achieved your goals?

22:56And isn't that a big part of why you're able to kind of do good and do these things to say? I'd love to say that no, I didn't need to achieve my goals in order to sort of get to this point of enlightenment. I mean, by the way, I often call it enlightened self-interest because I do believe I achieved some enlightenment, but I believe that some of it is still self-interested and I'm okay with that. I wish I could say yes, but the truth is that I don't think I would have gotten to this place had I not achieved my business and financial goals. That gave me a sense of security and safety and comfort that allowed me to sort of flourish in other domains.

23:35I do think I'm a good human. I do think I care about the world, but I care about the world a ton more because I achieve my business objectives. Now, if I was giving advice to somebody else, I'd say probably not the most ideal way to do it. You could find you could sort of stay committed to your your your more well-rounded objectives and be a thoughtful and charitable leader in your community outside of your business, even before you hit it big. but that's unfortunately not what happened with me. But I don't have any regrets but the truth is that I had to hit my goals before I could sort of open up and become really enlightened.

24:10I have a very paradoxical belief on this. So one of my masters in psychology and one of the things that I believe that almost nobody in psychology believes is that almost any disorder that people have is non-binary. Depression, I think everybody has trauma, all sorts of things. The very unusual belief that I have is that everybody has a form of multiple personality disorder. What does that mean? Today, it's called dissociative identity disorder. That's a new way people want it to be called. But we all have different drives within ourselves, which is oftentimes a time for conflict. Last time we chatted, we talked about your drive to succeed versus your drive to be with your kids.

24:53These are essentially different drives in ourselves. And if you subscribe to that, something like achieving your wealth can quell or satisfy that need. So you had this tough upbringing, you had this need to show people that you mattered and that you were good enough. Once that is satisfied, it kind of relaxes and allows you to kind of evolve yourself into a better human being. What are your thoughts on this? i i couldn't agree more i mean i've never actually heard it described uh in in uh that accurate of a way um and again i i wish it wasn't that that i wish that wasn't the case it's at least not for me but but the truth is is that you know sort of like sort of like we we have multiple personalities um you know as we're talking about we there's there's there's it's not just polar personalities It's sort of, there's a lot of polarity in, in business success.

25:50And I, in this class I teach at the collegiate level, I was just reminding my students this week, like, you gotta sort of like, in order to be a really successful entrepreneur, you sort of have to smooth, you have to smooth out the edges. You have to become really emotionally stable and you have to strike some form of balance. I actually think that's a really overused word, a balance, but because it's very, very hard to achieve that. What? Work-life balanced. Yeah, right. That's a hard one to achieve. But I got to tell you, for me, it's a lot about understanding polarity and acknowledging polarity and then trying to figure out how to bring things a little bit closer together versus sort of to accentuate the polarity.

26:33I'll give you an example. It feels like in many cases, it's bank account wealth up, health wealth down, you know, bank account wealth up, relationship wealth down, you know, bank account wealth up, happiness wealth down. Like it doesn't have to be that way. Maybe for a period of time, it does, you know, while you're really struggling or whatnot. But like, I absolutely, I definitely felt that polarity and it was hard for me to manage. But I mean, look, the truth is, is like, I will build, I was part of building a rocket ship from zero to a billion in revenue in a very short period of time, like, you're going to be on a plane 200 nights a year?