Should You Stay in the Cannabis Industry—or Should You Leave?

SAN DIEGO -My friend Annie Starr, a Harvard MBA, and a marketer I admire, recently left the Cannabis industry, and I thought it was a shame to see someone of her talent go. But as the market consolidates, opportunities for people of her caliber can become harder to find. Her departure got me thinking about the choices facing Cannabis founders, operators and other entrepreneurs.

Annie Starr- Harvard MBA

There are broadly three groups: those staying and making a sustainable living, those staying despite poor returns, and those leaving to pursue opportunities elsewhere.

For those struggling, the hardest question is whether staying still makes business sense—or whether they feel they have invested too much to walk away.

That is the sunk cost fallacy. Years of effort, money and personal sacrifice become reasons to keep investing. But the decision should depend on what the next investment could earn. Yesterday’s spending cannot make tomorrow’s opportunity more profitable.

Game theory helps explain how competition can deepen that trap.

In 1971, economist Martin Shubik described a dollar auction with an unusual rule: the highest bidder receives the dollar, but both the highest and second-highest bidders must pay their final bids. The runner-up gets nothing.

Imagine you have bid 90 cents and someone else bids a dollar. If you stop, you lose your 90 cents. Bid $1.10 and you could win the dollar, losing only 10 cents. Raising your bid seems sensible.

But your competitor faces the same incentive. They bid again, and so do you. Soon, both of you are chasing a dollar at a price neither would have accepted at the beginning.

The sunk cost fallacy says, “I’ve already spent too much to stop.” The competitive incentive says, “If I make one more move, I can improve my position.” Together, they can keep people committed long after the original opportunity has disappeared.

Consider how that could play out in Cannabis. An operator cuts prices to win business. Competitors match the discount. Margins shrink, so everyone chases more volume. One expands production to lower costs, others follow, and additional supply puts further pressure on prices.

Each operator can explain their decision. Yet the combined result can leave everyone working harder for less.

A founder might also keep funding an unprofitable operation because closing it would mean accepting a painful loss. Another capital injection buys more time, but unless something changes in the economics, it also increases the amount at risk.

These examples illustrate why effort alone cannot rescue every business. Better execution matters, but so do competitors’ responses, customer demand and whether the business can retain enough of the value it creates.

Before committing more money, Cannabis entrepreneurs should ask: if I were entering this business today, knowing what I know now, would I invest? What happens if competitors match my next move? What evidence supports a turnaround, and how much more am I prepared to risk?

There are good reasons to stay: repeat customers, sustainable margins, a defensible advantage or a credible plan supported by results. There are also good reasons to change direction, sell, close an operation or leave.

I was sorry to see Annie go. But losing talented people should make us examine the opportunities the industry offers, rather than assume they should have stayed.

Persistence can build a business. It can also prolong a loss. The challenge is knowing which one your next dollar is funding.

About the author: Mark Collins is President of Highly Capitalized Network (HCN), a B2B media platform covering Cannabis, hemp, psychedelics and wellness. A former CFO of Grupo Flor, he brings international experience in finance, marketing and business leadership to his coverage of the industry.