An industry veteran shares observations on the recurring pattern of hype and pitfalls in emerging substance markets like psychedelics, drawing parallels to the experiences with cannabis, hemp, and CBD. The article offers advice on avoiding common mistakes and building sustainable businesses in these spaces.
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“So…Hanes sells T-shirts for $10 and Gucci sells the same one for $500. We’re doing that, but with psychedelics. ”I’d heard this exact pitch at least a dozen times before.
First in cannabis. Then in hemp.
Then in functional mushrooms. And now here it was again, wearing a slick new suit, standing in front of a different product, absolutely convinced he was the first to dream up designer drugs. I’ve been in these industries since 2008, which is long enough to spot the pattern: new substance catches fire, founders rush in convinced they’ve got a new idea, then suddenly the same expensive lessons get learned all over again.
This is my guide to avoiding the same mistakes that get made early in the cycle of a new market, and my tips on what to do instead. CBD is the clearest case study. At its peak, you would have thought it cured everything from arthritis to gout. Half the claims weren’t grounded in science, and those that were often hadn’t been peer-reviewed.
But they were grounded in enthusiasm and venture capital, and when consumers didn’t experience miracles, the whole category lost credibility. Functional mushrooms are following a similar path. Lion’s Mane has genuine research behind its potential cognitive benefits, but the claims in the market have completely outrun the evidence. According to the brands, it helps you think like a Mensa genius, sleep like a baby and poop like a champ.
At Champs a few years ago, I had this conversation at the bar with a guy who’d been in the space for 20+ years. He looked at his whisky glass and said: “If someone handed you a pill that gave you the same feeling as this drink—no glass, no ritual, just the effect—would you want it? ”Changing how people consume is one of the hardest things to do in business, even when the alternative is technically superior.
In this space, you’re already asking the market to accept something unfamiliar. Asking them to accept two new things at once—a new substance and a new format—is extremely difficult. I watch founders in psychedelics make this mistake constantly. They’re trying to reinvent the delivery format before the core product has anywhere near mass acceptance.
Bro, the market isn’t ready for your ketamine cotton candy. The pitch I’ve heard most often across three industries goes like this: “This compound costs $3 to produce. People pay $65 for it. We can charge $40, and still make a killing!
” That’s the sound of the starting pistol being fired on the race to the bottom. The Sound of Success: Why Recognition and Positive Reinforcement Matter in Any IndustryMarisa Abela’s Yasmin Is the Broken Heart and Spoiled Soul of ‘Industry’ When the smoke shop market got flooded with cheap synthetic analogs designed to mimic the effects of real mushroom products, the price floor collapsed overnight.
Operators who’d spent years building quality supply chains found themselves competing with guys selling research chemicals for pennies. Once the price floor breaks, it almost never recovers, because the consumer’s reference point has been reset and the category has to rebuild its value from scratch. The race to the bottom doesn’t just torpedo your margins. It sinks the category for everyone in it.
Nobody wants to talk about this, but it’s probably the most destructive mistake on this list. When a new entrant comes into a young market with a cheaper or easier-to-access alternative, the incumbent’s instinct is to attack. In cannabis, it was Delta 8. In mushrooms, it was synthetic analogs.
The people who’d spent years building credibility for their products turned around and started spreading the same kind of Reefer Madness propaganda that had been used against them. These industries have been doing this in every cycle I’ve watched. The anger is understandable, but it’s pointed in the wrong direction. If you want to blame someone for the gray market operators selling products you can’t compete with, blame the regulatory system that gave them the opening.
This is a little lighter, but it needs to be said. The guy at the trade show with the Gucci pitch shows up whenever a new substance emerges. But he has absolutely no idea that most consumers in these categories are buying on value and efficacy, not aspiration. The packaging catches their eye once, maybe twice, and then they want whatever works at a price that makes sense.
The Gucci of pre-rolls is stupid. So those are a bunch of very important don’ts. But what about the do’s? Well, if you’re going to put your swimsuit on and jump into the choppy waters of an emerging industry in a gray area of regulation, the most important thing you can do is stay nimble.
Things will change. New form factors will emerge. Some sneaky actors will lobby for regulation that favors them. But one thing that has remained consistent is that you can find stability by building your distribution channels.
Smoke shops are interested in whatever sells, so if you stay nimble on the product side and consistent with your distribution, you’ll find success where others drown. James Broadnax Executed After Being Sentenced to Death Based on Rap LyricsDavid Allan Coe, Singer of the ‘Perfect Country & Western Song,’ Dead at 86 Rest assured, the sharply dressed Gucci man is still out there somewhere, but today he’s pitching ultra premium ketamine vapes or cocaine gummies to someone.
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