Tuesday, 4 November 2014

The Problem With Legalization

If you read around Colorado,and the states preparing to approve marijuana usage....there's a new problem.  Everyone for twenty-odd years kept talking about how wonderful it'd be if you could finally have legalized marijuana sales.  Then they'd always hype up how you could tax marijuana and the public would benefit from the tax revenue collected.

Well....they've come to admit in the last couple of months that the tax rate that state governments envisioned.....is going to EAT UP most profits on the sales.  In some cases, people are talking up the possibility that legalized marijuana sales will require so much taxation.....that there is marginal profit, and you 'd do just as well to sell it on the illegal market, thus avoiding the taxes and enjoying the profits.

Yeah, the government would screw up the whole thing enough....that you'd be better off illegally selling your weed.

The same thing would occur with alcohol, if it weren't for the fact that there aren't that many people making their own booze and selling it on the side.  If the weed industry had gone the way of booze.....there wouldn't be an underground market and no fall-back position.

An eighth of an ounce on the illegal market typically runs $25.  The same amount in a legal shop....runs anywhere between $35 to $80, depending on profit margin and state taxation.

The illegal $25 gimmick?  You can figure that some grower guy in the region....probably out of a house or old storefront, is making fifty to seventy percent of the $25.  The distribution guy?  Somewhere between twenty-five and fifty percent.  It all depends on the local situation, competition, and how much cop pressure is applied in some region on growers.

So, you sit and compare the legal sales gimmick.  You have a real store, with heat and electricity needed.  You have to hire at least three or four people, although they may be part-time help.  If full-time, you worry about health care and benefits.  Then you have the state tax that gets dumped onto the final line.  Your profit is questionable, unless you were also the guy growing the stuff....but you have to figure all the growing costs will also take a chunk of money.

Will legal weed sales fail?  My humble opinion is that three years into the great expansion.....around a quarter of all weed shops will close down because they just weren't going to make enough to cover their lifestyle and expectations.  Another quarter of the shops will undergo a dramatic change, with lesser hours open and fewer employees.  Somewhere in this mess....some shops will just be sold out to people who got hyped up and think there's some money in Colorado for weed sales, when there isn't any profits.

It's an odd thing.....making something legal and thinking that it'd survive in a free-market economy.  The truth is.....while sold illegally....it was a profitable thing in a capitalist market.  In the contrived market that exists today with various gimmicks?  It can't truly survive, as is.

A Giant in Car Mechanics

For probably two decades....I used to listen to NPR's "Car Talk", with the two brothers (Tom and Ray Magliozzi).  They announced late yesterday.....Tom had finally passed away.

NPR in the 1980s.....had lousy programming.  Between intellectual and fake artsy-type shows, it was the AM/FM network that drew probably one-percent of the national audience.  At some point around 1987.....I can remember reading some newspaper commentary over the weekend show, and thinking I'd listen to it and see what the hype was about.  After one show....I was addicted.

Tom and Ray were natural talkers.....from an Italian family, and graduates of MIT.  They were THAT smart, and you have basic engineering, chemistry, and science explained in various ways that made sense.

The call problems?  After several years, I came to realize that the knowledge they passed down.....had sunk into my head and I could diagnose fifty percent of the problems that came to occur with my vehicles.

Tom was the guy who had stayed in science, and Ray took his vast knowledge and ran a mechanics shop.

Yeah, I was entertained, and educated at the same time.  Generally, they always gave 'safe' advice.....telling you NOT to drive an unsafe car, or when to dump the vehicle.  They would occasionally cross the line and tell what dealers were doing to trick you, or what crappy cars that GM was attempting to sell.

Somewhere in this mix.....I will admit that NPR had one really decent show, that was highly valued and worth listening to.  This guy and his brother made a show that took engineering, science and entertainment.....combining them to draw a vast audience.  And the world is a little bit less today, without the Einstein of car engineering to discuss matters with.