Flip the switch Episode 41: Entrepreneurial Industries

SOPHIA: Today on Flip the Switch. Amazonians are upset that Bezos is selling face recognition technology to the police. PayPal invests 120 million dollars to protect your identity. And the Supreme Court makes a decision on the new Internet sales tax.

Our main topic revolves around the 4 emerging markets for the entrepreneur in all of us. Let’s get into it.

01:00 PAT: Welcome to Flip the Switch presented by Power Digital Marketing. This is episode number 41. Our Dirk Nowitzki episode

01:06 JOHN: Wow.

01:07 PAT: Had a good athlete for this one.

01:09 JOHN: I was actually going to ask you if we had one prepared.

01:11 PAT: I always have one prepared. They can be well known or poorly known.

But again, not a sports podcast. Getting into some business news and trends. We have some great news today, and then we’re going to get into a little bit of a main topic discussion around emerging markets for entrepreneurs. A few areas of key interest that have had great surges during 2018. That we see that kind of propelling into 2019.

But first, jumping into a little bit of business news and trends. So the very first piece that we want to talk about today, Amazon. One of our favorite topics.

Resident Amazon guy, Joe Hollerup here to discuss this with me. It came out that Amazon employees have been asking their fearless leader, Mr. Jeff Bezos, to stop selling facial recognition to cops.

So basically, I guess what’s been happening is that they have some concerns about the power of Amazon’s recognition. And recognition is a project that they’re using to… that’s facial recognition. They spell it with a “k.” So I don’t really know what’s going on with that.

But basically they’ve been licensing out some of that technology to police officers. And some of the employees are a little bit concerned about that. One of them actually said, “Our company should not be in the surveillance business. We should not be in the policing business. We should not be in the business those who monitor and oppress marginalized populations.”

So I think this is a pretty interesting trend just because we’re seeing again that crossover between the social climate and the social landscape of today’s day and age. Mixed with the intersection of technology. And kind of the role that both of those play.

02:42 JOE: Yeah, I mean, I have a bone to pick though too. First and foremost is the fact that Amazon employees are calling themselves “Amazonians.”

02:50 PAT: Are they calling themselves that?

02:51 JOE: Yeah, it says, “As ethically concerned Amazonians, we demand a choice in what we build. And say how it is used.”

02:58 PAT: Amazonians.

03:00 JOE: And I don’t really think that is necessarily the case. But yeah, this kind of reminds me of that whole thing with Apple when they refused to give the backdoor code to the FBI. When there was the terrorist attacks?

And this kind of seems like the opposite. But yeah, that’s pretty interesting just knowing that they’re kind of doing that under the Iron Curtain. And keeping it behind closed doors.

03:23 PAT: Yeah. And I think that really like the key thing here too is just Amazon… and we’ve talked about this before. They have an ethical issue with how they are targeting marginalized people. How the police are targeting marginalized people. And how Amazon is almost like supporting them in that.

But honestly, if you look at the scrutiny that a company like Apple was placed under for not giving access to the police for that terrorist attack. This is almost like they’re trying to be proactive so that they’re not putting themselves under that kind of scrutiny by the public. Instead, internally. Their own infrastructure is kind of collapsing in a sense. Their own employees are just not okay with this.

04:03 JOE: Yeah, and at the same time too. This is kind of a blanket statement, because their claiming not to be in the surveillance business, but they are in the technology business. And if they can provide something that could potentially keep people safe. Or help the police in a positive way. I mean, you never know.

Cause I’m assuming that these employees haven’t really looked too far into what exactly is going on. In kind of the outrage culture we live in today, you could catch wind of something or a headline. Next thing you know, you kind of blow it out of proportion without actually looking into it.

04:41 PAT: Formulate a huge opinion on it. Post for hundreds of thousands of people to see.

04:44 JOE: Yeah. And I feel like this is definitely a case of that. Just kind of… Well, not definitely. I’m just kind of speculating here. But I don’t know. It could be for good. I think if Jeff Bezos is doing it for a reason, he probably has good intentions, and I don’t think that this is more so kind of dictating how the police are acting. But it’s kind of assisting them.

Making more accurate assumptions or whatever it may be.

05:09 JOHN: I think it’s like a blanket reaction to other companies in Silicon Valley helping the US government. It says at the bottom of that Forbes article it says that there’s bunch of protests in Silicon Valley about tech giants working with the US government, so I think that’s just a reaction to it. Cause Peter Thiel’s company works directly with ICE. There’s pay statements from ICE to Palantir. I think they made 12 million dollars from ICE last year. In aiding them.

05:38 PAT: So here’s my thing too. So we’re talking about the new age of corporate social responsibility in a sense. And when a company has… if a company in the private sector possesses technology that can be leveraged for what is supposed to be the greater good of societal infrastructure, it should be. And I think that was the method behind this entire thing rolling-out. They have the capability to assist. They’re trying to empower the police to be able to do their jobs more effectively, and keep the public safe.

I think that they intentions are good there. And I think we’re just seeing another example of the private sector being able to develop technology and the means for infrastructure at a faster, more efficient and more comprehensive rate than government entities. Like, they can just move faster, and they have the better technology. So why wouldn’t you try to help leverage that societal infrastructure a little bit and make it better?

06:29 JOE: Yeah, and even at the end of the day too, police are definitely highly trained. But when you boil it down, they’re still human. And there’s room for that human error. So maybe this could help reduce that margin of error in stopping bad things from happening in the future. This is all speculation, but still… I mean, it’s one of those things where someone catches wind of something. They get outraged about it. Write an article. Call themselves an “Amazonian.” And the next thing you know, we’re talking about it on a podcast.

06:57 PAT: Fair enough. Well we’re going to keep monitoring this. Again, this is a trend we’re seeing throughout a bunch of Silicon Valley companies. So we will be bringing all new news on this topic to you guys as more comes out about it. But very interesting trend to note.

Moving into the next piece here. It came out on TechCrunch this week. PayPal–obviously Elon Musk’s first venture–is set to buy Simility which is a Specialist in AI based fraud and risk management. And that acquisition is going to be about 120 million dollars.

So PayPal had been an investor in this company for a little while. Along with a couple other ventures. And at the time, they had raised just under 25 million dollars, and was valued at only 52 million.

So basically PayPal is set to purchase this company at 70 million dollars more than their valuation. Which is very interesting. I think it’s a testament to the fact that they see the immediate application for this technology.

And if you think about it too, this is actually very timely. So one of the first podcasts we ever recorded, we talked about the Equifax data breach. And basically how that opens the door for the means of financial fraud.

There’s a lot of online pay options. You have Google Pay, Apple Pay, Venmo, PayPal, Buy With Amazon… whatever.

08:13 JOE: The Cash App.

08:15 PAT: The Cash App. The Cash app if you listened to part of my take…

08:18 JOE: Hopefully a sponsor of ours soon.

08:20 PAT: Yeah, exactly. But you have all these different means of basically wiring money to each other. You can even do it bank-to-bank. But the problem is that since that data breach took place, people are a lot less settled in the fact that they can do that without getting their data compromised.

And we’ve even seen smaller microcosms of data breaching happen across every major tech company in the last year. Facebook, obviously, is notorious for that. That’s the whole reason that the GDRP even rolled out.

08:48 JOHN: GDPR

08:50 PAT: GDPR. Thanks

08:53 JOE: That’s one of those things too where we’re past the point of no return in terms of all of our information being on the internet. Whether you like it or not or want to accept that fact. But having this kind of in-place it definitely will help us sleep soundly at night. But I mean, 120 million–70 million over–they must have something up their sleeve, and reason why they would do that. But, you know, I’m all for this. This is going to be great.

09:24 JOHN: They’re just building PayPal to be even better and better. Because right now PayPal is almost flawless in payment transactions. But this is more of a preventative thing. It sounds like more of a risk management program for companies who use PayPal. So it’s just bolstering PayPal as a business, so the acquisition itself is really just taking that name and making it a PayPal name.

09:45 JOE: Well, also even think about it too. Kind of comes to mind, somewhat relevant in our everyday work life is this is only going to make PayPal stronger. Or I guess, more powerful. But then there also kind of comes in–which we’ll talk about later in our discussion–how much power they have and how much control they have over who can and cannot use PayPal. And this kind of bolsters that a little bit more. And that might ending up hurting a few industries, like the cannabis industry and things like that. So that’s going to be kind of an interesting angle to take a close eye of.

10:17 PAT: Yeah, exactly. Well that’s not real English, but I see what you’re trying to say.

10:20 JOE: Just trying to spit out buzzwords.

10:22 PAT: And I think another thing to keep in mind, and we’re going to actually get into this when we talk about the Internet sales tax. But one of the biggest inhibitors for e-commerce growth despite the fact that it has blown up is that risk of identity fraud and financial fraud. And I think that’s a lot of means for hesitancy with older generations of people too. I think that… at least growing up, that was always the biggest hurdle to buying things online. It’ was like, “Well, your identity is going to get stolen.” Almost like it’s a definitive thing.

And then for a while there was that reassurance that, “Oh, you know what? It’s safe. It’s probably not going to be.”

And then we see that that still isn’t the case. So this is really timely. And I think it’s going to help propel forward some e-commerce growth within sectors of the US age demographics that wouldn’t normally engage with e-commerce. Cause they have that reassurance that’s like, “Hey, we know for a fact that PayPal’s a credible name.” It’s been a credible name and now it has even more means to support that notion. Because smart acquisitions that they’ve been making.

11:22 JOHN: Any e-commerce clients that we have I always recommend instead of using some sort of payment process that’s like ASP.net or anything like that. I always recommend trying to use PayPal processor. And that’s why like Shopify sites are so successful, or at least they have such a good recurring revenue from their stores is because the checkout process is like one process for millions of different stores. And it goes through PayPal.

So I think PayPal getting bigger and bigger it’s going to allow people to make safe payments. I mean, that’s so stupid that I just said that.

12:05 PAT: But it’s true, though. I mean, it’s like the idea that you can pay with the reassurance that you’re not going to be compromising your data in the process. For me right now, if I were to go… even if we’re just looking at the industry, right? The fact that they’re making this acquisition is more of a mind market growth play. They’re trying to consolidate as much of that market share as they can, because–like we’ve said–there is Google Pay, Apple Pay, Amazon One-click, and couple other like Venmo. And this is like, “Hey, we are making the right acquisitions to be able to support this in the long-term. And potentially steal away customers that are skeptical from these other online payment options.”

Just even looking at this article that came out on TechCrunch we can see that they’ve been making a lot of other acquisitions in the last few weeks. So they’re trying to grow at a rapid rate, and I think that the reason for that is to steal away market share in a saturated market.

They acquired a European mobile payments and financial services business called IZettle. A payments aggregator that’s called Hyperwallet. And an AI based CRM specialist called Jetlore. So not only are you going to be able to help drive those purchases, but you’re going to be preserving the data in a way that if you’re the business, you’re going to be able to go back and leverage it later on.

And so it’s kind of a win-win for everybody. The businesses are going to see the benefit of using PayPal, and then the consumers are going to see the benefit of checking out with it. And I think that’s really the key here.

13:33 JOHN: Yeah, definitely.

13:34 JOE: I mean, yeah. I’m going to feel a lot more soundly if I’m going online and say in this hypothetical situation I’m buying Pat a Louis Vuitton jewel wrap, then I won’t have to think twice about my purchase.

13:48 PAT: You shouldn’t have to think twice.

13:49 JOE: I’ll sleep soundly at night.

13:50 PAT: Moving into our last piece of news here, it came out on Forbes this last week too. So the Supreme Court recently had a pretty pivotal ruling about the Internet sales tax. And I think that this was something that was coming for a while. Seeing them starting to dabble more and more in the online space. We saw a Supreme Court hearing just about data protection with the whole Facebook scandal. We’re seeing Silicon Valley entrepreneurs and CEOs being called to the Hill more and more to talk about what kind of data they have on people. How they’re leveraging it, how they’re using it.

And so I see that more as the US government kind of starting to play more of a role in the e-commerce space. And the online space.

And I think that the reason for that–and kind of what this article that we’re looking at asserts–it’s because this is a growth market. It’s an area that needs a little bit additional regulation in the mind of some people in our government.

And also it’s kind of a testament to the shift in landscape from retail to online. And I think that’s really what the biggest key is here. It’s the fact that it’s so prevalent and it has so much of that power that it can change the economy.

Even one of the Supreme Court justices, Anthony Kennedy, he was just talking about this. He says, word for word “The Internet’s prevalence and power have changed the dynamics of the national economy. Internet players that are not collecting sales tax have cost some states as much as 33 billion dollars in sales tax revenue every year.”

So what they’re trying to do essentially, is put infrastructure in place so that when, you know, a high volume of sales are taking place online, states are able to collect those taxes because they’re missing out on a huge chunk of revenue that’s only going to be growing year-over-year if they’re not doing that.

15:24 JOE: Yeah, that’s kind of sticky situation too. Just cause trying to regulate it by state on the Internet. I kind of feel like there’s gotta be a way to work around that. Or if people are kind of savvy enough to get away with it.

15:36 PAT: Yeah. I almost wonder that. If a company is an LLC that’s technically based out of Delaware for tax reasons, but they actually are located in California… we see that a lot. Does Delaware get that sales tax? Does California get the sales tax? Is it distributed evenly among the amount of sales that are purchases in state? Accounted for.

Like, how is that going to roll-out? And is that the right way to do it, is really my question.

16:01 JOHN: Right. They’re saying… right now it says that this will help online retailers will no longer qualify for an arbitrary advantage over their competitors who collect state sales tax by claiming they don’t have a physical presence in the state.

16:17 PAT: What?

16:18 JOHN: Yeah. So saying that online retailers who have claimed that they don’t have a physical presence have some sort of advantage now, where they don’t have to collect the same sales tax as a mom-and-pop shop that’s in a physical store somewhere. So that’s what they’re shutting down essentially. They’re saying that if you’re registered in a state as a business, you’re basically going to be paying the same sales tax.

16:39 PAT: That makes zero sense. Because here’s the difference for me. The key difference is if you have a retail location that’s in California, you know definitively that all those sales took place in California.

Online, you can have an IP registered wherever. It could be somebody that doesn’t… I don’t know… there’s just so much variability with that. How can you really one-to-one that?

The whole point is that it shouldn’t be a one-to-one

17:05 JOHN: I think they’re just making it so that the customer’s paying the sales tax of the company and where they’re registered. So if I’m from Delaware and I’m buying from an online retailer who’s registered in Arizona, I’m paying Arizona sales tax.

17:16 PAT: Yeah, and that’s why I think there’s so much variability with it.

17:20 JOE: So that kind of brings into play of getting a VPN and if you just throw in a VPN and connect to Malaysia and start making purchases?

17:32 JOHN: It has nothing to do with the customer though. It has to do with where the business is registered. So if I run an e-commerce store and I’m in Arizona then anybody who buys from me is paying an Arizona sales tax.

17:45 PAT: Exactly

17:47 JOHN: So it has nothing to do with the customer. It’s wherever the business is registered. They have to pay the sales taxes. It’s not what the customer is paying, it’s what the business themselves have to pay in sales tax.

17:55 JOE: That’s interesting. I feel like that’s going to kind of start weeding out the more savvy and less savvy business owners. Because if you’re a savvy business owner, you just re-register yourself in Delaware or somewhere that doesn’t have a state sales tax.

18:04 PAT: That’s what I was saying.

18:06 JOHN: Just open an LLC in wherever you have to pay the least amount of sales tax.

18:09 PAT: That’s exactly what people are going to do.

18:11 JOHN: I don’t know what state that is, but all of a sudden, every e-commerce store is registered in South Dakota.

18:16 PAT: South Dakota and Delaware.

18:17 JOE: Everyone’s opening up bank accounts in Panama.

18:21 PAT: Well, and I think here’s the thing about this that is a little bit encouraging about this. I think that e-commerce has always been like the little brother to retail in a lot of ways. I think that’s at least the notion. Especially for a lot of more traditional thinkers and more traditional businessmen. Retail is the real deal. You see a lot of CPG companies still dependent on retail for sometimes up to like 80% of their revenue in a year.

And we know that not to be healthy, because a lot of these big box retailers, or one stop shops–like a Target or a Walmart–they cut into your margins pretty heavily. And they have a lot of control over your bottom line. Like if they just don’t like one of the SKUs that you’re trying to put in their store, they can say… One buyer from that store can not like it. And say, “Yeah. You know what? We’re not going to be taking the inventory we thought. I’m not really feeling this.”

And that affects your bottom-line in a huge way, when you’re that dependent on it.

But it’s always been given that much credence and it’s always been given that much stock by people. And I think this is almost a reaffirmation at the highest level that, “hey, you know what? E-commerce is such a legitimate means of revenue for businesses that we actually need to start taxing it in a different way to make enough money for states to maintain their infrastructure.”

It’s a big takeaway, and it’s a little bit my interpretation of it. But I don’t know… That seems to be the sentiment. Especially lately with a lot of the things that have been happening on the Hill. A lot of Congressmen and Congresswomen are learning the online space because it’s so crucial in today’s day and age. And it has so much potential to be that big player.

19:53 JOE: I’m convinced sports betting was a result of that as well. Because everybody was already doing sports betting. Even if it’s an off-site location that you’re doing it all through online.

20:05 PAT: Bovada.

20:06JOE: why not just bring all that revenue into the form of taxes and so it kind of reminds me of this.

20:13 JOHN: It’s funny I said South Dakota because it says that this decision was made because they didn’t want to give any special breaks any more but specifically the highest US court made the decision after South Dakota in 2016 filed a lawsuit against major online retailers Wayfair, Overstock and Newegg regarding state tax collection.

20:32 PAT: Yeah, that makes sense too. I mean Overstock got bought into a ton by people because they’re tied to cryptocurrency. Which we know is one of the emerging markets that we’re going to be discussing.

And then also you have these other huge companies that are registered in South Dakota, and South Dakota’s not making any money off of it. And the whole reason that they were doing it though, is because of the fact that South Dakota isn’t making any money off of it.

So my whole thing, is okay there’s states are going to start collecting taxes on companies that are registered there. But the whole reason that the companies are registered there is because they weren’t going to collect taxes. Now there’s no incentive. And I think it’s honestly going to hurt a lot of these local economies.

21:11 JOE: Yeah. I was going to say, I think it’s just going to be a roadblock. A temporary roadblock for some businesses, but people are savvy enough and smart enough to find those loopholes. And this is essentially not going to have a long-term effect on a lot of big time businesses.

21:25 PAT: All right. Our main topic discussion for today. We’re about half way through 2018, so we want to discuss some of the high-growth industries for entrepreneurs that we have seen to date. And how that’s going to translate into 2019 as well. Just looking down the field.

A lot of these are going to be topics that we’ve covered to an extent. Some of them are a little bit different. But I think, again, these are things that everybody’s keeping an eye on.

It’s really cool though to be able to put some numbers behind the growth that we’re seeing. Just because as a consumer you’re seeing businesses and related businesses pop up in these industries all the time.

So just kicking things off–one of our all-time favorite topics–cryptocurrency. So I think that we’ve seen the surgence of cryptocurrency popularity in the last year, despite the fact that it’s been around since 2012. 2011, 2012.

And so you can just kind of tell, looking at this chart–and this is actually on Entrpreneur.com–we’ll share this in our forum group with you guys. But we can see that the number of projects that are cryptocurrency related… back in 2013 it was like 57, 2014 we saw an increase, 2015 we saw a little bit of a decrease at first. But then between then and now there is a 458% growth. Going from 94 projects to 525 projects.

The most interesting part about this to me is that it’s like such a complex technological endeavor to take on. And it seen this much growth.

And we’ve talked about it before, but to me this almost like the gold rush. It’s like, we haven’t seen this much technological innovation and sense of urgency to do so, honestly, since the dot-com boom, or maybe even the space race.

23:10 JOE: Yeah. And this even kind of goes back to how we were talking about PayPal. The whole… it’s kind of an alternative way of banking. Or handling your finances on the internet. Doing it all digitally. And I think this was kind of that door that opened up, and now it’s like the digital kind of realms, or the digital companies versus the banks now.

And we’re kind of seeing that shift where people are trusting banks a little less. And going more towards the digital means of it. The cryptocurrencies, and PayPals and stuff like that. Which is super-interesting.

23:40 JOHN: Yeah, I think it exploded so hard though this year that it’s in a bit of a dip right now. But I think it’s going to come back and level out and be more of a…

Cause I think when it exploded it was so new to people that it wasn’t really like a long-term thing in a lot of people’s eyes. But I think when it comes back and levels out, I think cryptocurrency itself is going to make its way into day-to-day businesses in terms of just being an alternate way of running finances as a whole. I think when it comes back and when the value goes up again, I think it’s going to be a much more accepted thing. Whereas it was almost like a gamble when it exploded this year.

24:22 PAT: Yeah, and I think the coolest part about it, too. I agree with all of that. I think that’s going to help sustain some of that a little bit is… so when we saw that initial, huge uptick at the end of 2017 for cryptocurrencies. A lot of people just had no idea what they were doing. And further, a lot of people that were creating alt-coins especially were frauding people. With ICOs.

So a lot of that growth was kind of illegitimate in my mind. It’s not that we’re seeing a dip, I firmly believe that we’re still seeing a steady, sustainable increase in cryptocurrencies and coins that are of value. And actually have technological value as well. It’s not intrinsic, but it’s technological. And we’re just getting… we just lost that buffer of all the companies that had no idea what they were doing and were just taking people’s money by making a White Sheet, you know?

And just like looking at the growth here, I think it’s a really untapped area. Because to John’s point, it can change the way a company makes money. Like if you think about how the fact that cryptocurrency is an independent market and it kind of fluctuates a little bit in contrast to what the Stock Market is doing, you can–as a company–accept cryptos while the stock market is down, and people have less monetary purchasing power. And then take… shut that down if you see a dip in cryptos and accept dollars, US dollars.

And I think the interesting part about it is if people pay you with their coin. It can go up in value after they pay you for it. Whereas with the US dollar, it’s only going to fluctuate so much with that rate of inflation, you know?

25:57 JOE: Or if you’re like that guy that paid 10,000 Bitcoin years ago for a couple of pizzas. And it’s now worth 65 million dollars. You could be in that sort of situation too.

26:05 PAT: Yeah, didn’t they talk about that on Pardon My Take. They had Blake Griffin talking about that as his Mount Rushmore for biggest losses.

26:12 JOE: I got off the phone with them a few minutes before the show, and that’s why it reminded me of it.

26:15 PAT: Oh yeah, I forgot. Personal friend of the hosts.

I think the coolest part about it to… just like tying it back into Google is you can measure the increase in interest have that people have in this topic. Because you can see the increase in monthly searches. Right now, cryptocurrency gets searched 823,000 times a month. And actually that statistic is from 2017.

26:35 JOE: Yeah, it’s way more now.

26:36 PAT: I guarantee it’s way more. And it just kind of shows that people are trying to tap into this market. So if you’re an entrepreneur and you have a good, technical foundation. And you do have an understanding of what the blockchain is and how to create basically a new currency using that. And it has a technological value. This could be a very, very high-growth, untapped market to get into.

Again, the top cities that are going to be there. It’s a lot of the just normal metropolitan areas that we see. It’s like San Francisco, then we have New York. London. Austin. And Toronto.

With crypto, you see that a little more internationally widespread. With most of these we see the majority of the growth within the United States. So I thought that was kind of interesting. All right.

27:24 JOE: Moving into the second one. This one’s pretty relevant being from California. But the cannabis industry, kind of seen that explosion in the last year or so. I would say mainly in the CBD market, because that seems to be a little more “wholesome.” More kind of like less scary to a lot of people, to the household name.

So yeah, we’ve seen that one kind of explode in the last year or so. Especially I guess across the western United States.

But yeah, this industry all around is just opening doors for a lot of people. Whether it’s investing, whether it’s production. Whether it’s branding and design. There’s a lot of things kind of popping up, and it’s all super-impressive. And it seems legit up to this point.

Kind of that stigma is gone and it’s being seen as less of a drug and more of a medicine now. Especially now that we do have the two avenues for it between the cannabis and the CBD.

But yeah, it’s been pretty interesting to watch. And kind of impressive to see how fast it grew. And continuing to grow.

28:27 PAT: Yeah. And I think it’s just… you can measure that change in sentiment just from the change in the messaging that people are talking about it with. And what I mean by that is before you had the whole… what do they call it? It was like “Reefer Madness.” It was like the commercials showing people having hallucinations and going crazy and stuff when they would use marijuana.

And now that’s just not the case. Because there’s science coming out show that it has… the CBD side of it has medical benefits. So you can kind of tailor that to consumers.

Even one of the most successful companies that we’ve worked with leverages that fact as well. For pet supplements. And they have measurable results, where they have positively impacted the livelihood of those animals and their owners. And I think it is having a positive effect, and enough of those stories are coming out that unlike the crypto market we’re seeing a steady and sustained increase, year over year.

29:21 JOE: Yeah, there’s no dip.

29:23 PAT: Exactly. It has been steadily increasing since 2013. With a 59% increase from 2015 through 2017. That is even more now. Definitely. It’s even more now.

Because it’s been completely decriminalized in California. It’s… there’s always that federal versus state level issue. That’s always going to come into play.

But I think that we’re well on our way… I think recently Canada just became the first country to openly legalize it nation-wide at the federal level. So it’s just showing that there’s growth potential in this market. Even if you don’t want to operate out of the United States, you could use the United States top hat.

29:59 JOE: I think there’s a lot of potential here for entrepreneurs, because you could essentially just take any type of product in the food industry or health industry and just throw CBD into it. And then it’s a whole new product now.

30:16 PAT: Well don’t give away all our ideas.

30:17 JOE: And so it’s just kind of funny you see things like CBD water, things like that and stuff, and it’s just like, “Okay, I just have this bottled water. I’m just going to throw some drips of CBD in there and sell it for 4 dollars.”

30:27 PAT: Rebrand it. Yeah. It’s really interesting and I think that this doesn’t come as a surprise to anybody. Especially just with that stigma being a little bit less.

But if you look at the cities that are kind of leveraging that the most, they’re cities where people were… they were going to have growth there whether it was legal or not.

30:46 JOE: Yeah, right.

30:47 PAT: San Francisco, Portland, New York, Los Angeles and Denver. I’m not surprised by any of that at all, right?

30:57 JOHN: Denver’s a dead giveaway.

30:59 JOE: Yeah, and I’m even looking at this Google trends and seeing “Cannabis coin,” as one of the top searches, which is interesting to tie into the cryptocurrency market there too.

31:07 PAT: Yeah. It’s funny. It’s like the marriage of two of the most… first of all, millennial focused topics of all time. Second of all, like just timely topics in terms of industry growth.

So again, lot of growth potential in this market. I see a lot of opportunity too, once some of that payment issue gets cleared up for the online space.

Cause right now I think it’s relegated largely to brick and mortar. Which we have seen to not be super-sustainable. They’re taxing it at a pretty high tick. Each of… Every state that has it decriminalized is making a good amount of revenue on it. So it’s helping support that societal infrastructure.

31:40 JOE: I believe it’s around a 17% tax.

31:42 PAT: Yeah. Yeah. I think it’s right around there. And if you think about it, just the way that they position it now is much different than before. Even looking at some of the dispensaries in areas–like Urban Leaf. It’s extremely modernized. It’s clean. It’s almost like trying to communicate to the user “You’re not buying drugs.”

32:03 JOHN: Yeah. That’s the big switch with branding. Because a lot of dispensaries or even the CBD style are coming from the scientific perspective now. The clean, scientific, minimalistic… “We’re not like Deadheads.”

32:16 PAT: Here’s exactly what is in this. Here’s how much of what is in this. And here’s what it’s going to make you feel like. Here’s what it’s going to taste like. And here’s 7 different ways to do it.

32:25 JOE: The branding, packaging, design, presentation… everything of a lot of these companies is probably the best I’ve seen in a new market or in terms of emerging kind of styles. Or industries.

By far the cannabis industry right now it’s top-notch.

32:41 JOHN: It’s probably cause they got to… they have to make themselves look more legitimate than anybody else. They have to prove themselves more than any other industry, so I think that’s where a lot of that look and feel is coming from.

32:52 PAT: Because they’re battling like, over 100 years of stigmatization. And that’s a tough thing to overcome as a brand. In that type of market.

With cryptos, a lot of the detriment and negative press about it has come out after the big boom. Cannabis we’ve seen that industry growing at a steady tick despite that stigma as it has steadily been worn off with fact and science and just a general changing in national sentiment around it. I find that to be very interesting.

I do have a question for you guys, though, with that industry. What do you see as potential roadblocks for that sustained growth?

33:27 JOHN: I think it’s the tax rate.

33:28 PAT: I agree.

33:29 JOHN: Or just like regulation as a whole. What it’s going to be. You can legalize it and people can then buy it, but what is it from a business’ standpoint? What does that take a business to do to actually distribute that? So any blocks that a business is going to have… not necessarily on an individual consumer level. But the blocks that business as a whole are going to face, I think that’s what’s going to be… I don’t think it’s going to slow down. I think it’s definitely going to become bigger and bigger and bigger. But the rate at which that happens is going to be due to business regulations.

34:01 JOE: Yeah. Even like the federal versus state regulations as well. We’ve seen before with now PayPal getting even stronger. And then PayPal dealing with credit cards, which is on a federal level. If you’re a cannabis company or a CBD company, PayPal can technically block your ability to make money or execute transactions through their platform.

Because even though it’s happening on a state level, the credit card companies are on the federal level. And so they could hold your money. They could block it. They kind of have full control over that.

So trying to expand it across state lines or on a federal level is by far the biggest thing.

34:40 JOHN: And you see dispensaries can’t even deposit their cash in certain banks. Federal banks like can’t take the money that they earn and put it in those banks. So they just have a bunch of cash.

And you see the highest crime rates are coming from robberies of dispensaries because they have so much cash flow, but they can’t put it anywhere.

I don’t know how big of an issue that is now, but I know that was…

35:04 PAT: If it doesn’t get fixed though and it continues to grow in interest, that’s going to be a big problem.

35:10 JOE: But even in the spirit of entrepreneurial trends that a lot of people–like ex-vets or people that are ex-military are now starting security companies where they get hired as private companies or private security of dispensaries. And you see this whole new kind of wave of security and personal bodyguards and stuff like that kind of popping up all over too.

35:36 JOHN: It’s just like finding ways around regulation and what they have to do to get it done.

35:41 PAT: Well, and I think that’s the biggest key with all of these growth industries that we’re talking about. Not only is there opportunity directly within the industry, but you have all these ancillary applications that are tied to that industry.

Example–cryptocurrency. You can try to create a coin itself. And try to value that highly.

But then you can be a regular company and leverage the fact that that is so popular for your own business growth. So what I’m seeing is health and wellness companies starting to dip into the cannabis space a little bit more. Selling like, GMO, Gluten free, vegan whatever. Granola everything. And then also CBD everything.

Like I see them kind of applying that growth to their own business practices which is why these are the 4 most key areas for entrepreneurs to be keeping in mind in my opinion. Because not only because of the direct application, but because of the auxiliary application that it has as well.

And another good example of that–moving down the list–is the non-traditional travel businesses. Airbnb–massive. So if you look at their target market, they are targeting largely now millennials because we’re seeing that they’re going to have…

First of all, they utilize smart-phones the most. It’s been shown that they do probably the most shopping research of any demographic. They’re consistently price hunters. They’re the ones that have the most information at their disposal.

And they also have very particular tastes and interests and they have a hunger to travel. The millennial generation has traveled at a rate that a lot of others haven’t because they have the means to do so.

And tying into that trend and also what has helped support some of that trend is the non-traditional travel businesses. Camper Vans van rentals. Vacation rentals. Airbnb. These didn’t exist a long time ago and they’re usually much more affordable than hotel accommodations and less of a hassle.

37:31 JOE: Oh yeah. We’re staying at an Airbnb this weekend.

37:34 PAT: I’m staying in one in July when we go to Bali, which is another country entirely. We didn’t even look at hotels. We only looked at Airbnb.

37:41 JOE: It’s always the go to move now, because you know that you could probably get it at half the price. And still stay in a super-nice place. Have everything to yourself. And you kind of sacrifice some of those things that you don’t necessarily need that a hotel… it comes with it so you get charged for it. Like, the whole pampering and the room service and all those things.

You don’t get that with an Airbnb. But it’s affordable. It’s worth it. And you can find some really good deals wherever you go. It always works out.

38:07 JOHN: It is so weird how this just came about where all of a sudden everybody’s just staying in each other’s houses. It’s so strange to think about, cause the first time I stayed in an Airbnb I didn’t think twice about it. I didn’t think, “Oh, I’m not staying in a hotel anymore. I’m in someone’s home.”

38:23 PAT: Yeah, it’s like consensual breaking and entering basically.

38:27 JOHN: Yeah. I think with this industry though, the biggest thing is on the individual basis of like now people aren’t necessarily looking to buy a home as an investment to then sell later. They’re looking to buy condos, apartments in places in good areas to use as an Airbnb.

38:45 PAT: Short-term cash. I agree.

38:47 JOHN: That’s a huge…

38:49 PAT: Massive shift. Because we’ve always been taught that your property is your biggest asset. So people usually save up for a really nice piece of property so that it’s super-valuable to them.

And I have always… and that’s why I think this is so cool… I’ve always thought of that as a flawed train of thought. I think that you need to be able to create the means to afford that, and you can do that with smart investments along the way.

As opposed to just saving your money forever. And realistically, the clip that we are pacing at as millennials, a lot of us are not going to be home-owners. Just straight up. In California especially. Even looking at… you look at property value. You look at some of the areas that most people want to live… a lot of people want to live near the beaches, near the water. And then you have people that want to live up in the mountains.

The two most expensive types of houses to build are the ones at the water and the mountains. Because the landscape is so different. So you have all of those factors at play.

And then on top of that, you think about the HOA fees–Home Owners Association–that’s another 1400 bucks a month or something.

39:49 JOHN: It’s ridiculous, dude.

39:51 PAT: The dollar goes an inch when it used to go a mile.

39:54 JOHN: Looking at just San Diego to buy a home, you have to be somewhere in the 600 to 800,000 range just for something remotely okay. And it’s usually not at a good location.

40:05 PAT: No.

40:06 JOHN: And then if you go down to condos or townhomes it’s like 300k will get you like a 1 bedroom that is in the middle of like El Cajon.

40:16 PAT: And it’s crazy because you think about like… All we’ve heard is that millennial generation’s going to have the most purchasing power here in a couple of years. We’re going to be wealthier than our parents. We’re going to have more knowledge.

But the problem is that we have seen the issues with like the housing market. We’ve been exposed to fraud within the housing market. We’ve seen corporations and banks swindle people with money. We’re more conscious with our money, I think.

But at the same time we buy experiences more than any other generation. So we’re never going to be able to save up enough money to buy a permanent home. Which is why non-traditional travel businesses that allow you to essentially have a home in the places that you want to travel to is the perfect marriage between those two problems. And appeals to us in a major way.

40:59 JOE: I think too, even on that note, every generation has their kind of money maker. That opportunity. And our parents and our grandparents, that was property. A lot of it was buying up real estate and property and having that as a long-term investment. That opportunity is kind of passed for us.

Ours is the Internet and the ability to make money on the Internet. And so it’s kind of one of those things where we’re taking that sacrifice of we might not be able to buy property like our parents or our grandparents did. But we have the Internet to be kind of our saving grace on that front. And in many other ways…

41:32 PAT: I agree.

41:33 JOHN: But back to the non-traditional travel aspect of that. It’s really interesting to see the real estate market become not necessarily like “I’m saving up to buy a house. To live in this house, and that’s my dream.”

It’s like you have people who are straight-up hustling out there to just buy a property to just use as an Airbnb. And then they have a monthly income from that.

41:56 JOHN: It’s not like renting out to people. It’s like, “I’m gonna drive up the price on this because it’s in a good location.”

41:59 PAT: “I’m gonna drive up the price on this because there’s a popular concert in town this weekend. I’m gonna drive up the price cause it’s a holiday. I’m gonna drive up the price because every other Airbnb that I’ve been doing my own research on is booked.”

You can set your own price and you can make more money when you decide to and take it down when you need it to be recurring and passive. You need people to fill the spot.

42:17 JOE: I know there’s a big movement right now in Palm Springs where people are buying up houses at a low rate, flipping them… making them nice. And then just using them strictly for Airbnb. And they’re able to pay off their mortgage in about 2 years.

42:30 PAT: Dude, they probably just do Coachella and Stage Coach. And just Airbnb those out.

42:33 JOE: It’s crazy.

42:34 PAT: Well that’s crazy. Moving into the last piece here that we want to talk about–virtual reality. So we have talked about this a lot on this show already. We don’t want to belabor the point. But this is a huge growth opportunity market right now.

So we have seen a little bit of a dip between 2016 and 2017 in this market. As far as growth goes.

But the reason for that, I believe, is similar to crypto. I think that it’s because a lot of people were trying to figure out how to apply this type of technology. And after a while they found that it either wasn’t financially sustainable, that it wasn’t functional, or that they were just doing it incorrectly.

So I think we’re seeing a little bit more of that decline in the buffer. And we’re seeing a still steady increase in the high-tech companies that are leveraging this. Because in my mind, there are still millions of untapped applications with virtual reality…