E245: From $0 to Billions in a Regulated Market
Timestamps are as accurate as they can be but may be slightly off. We encourage you to listen to the full context.
Podcast Summary
In this episode of How I Invest, host David interviews Pete Kadens, one of America's most respected first-generation wealth creators and leading philanthropists. Pete co-founded Green Thumb Industries (GTI), building it from scratch into a $6 billion cannabis company before retiring at 40 to focus on philanthropy and purposeful ventures. (00:27) The conversation explores Pete's counterintuitive business strategies, including targeting unsexy markets and overlooked consumers, which ultimately led to exceptional profitability. (01:49) Pete shares his transformation from a ruthless business operator to one of the top philanthropists in the U.S., discussing how achieving his wealth goals allowed him to find deeper fulfillment through generosity and social impact. (21:26)
- Main Theme: How to build massive wealth through unsexy strategies while maintaining ethical leadership and creating lasting impact through purposeful generosity.
Speakers
Pete Kadens
Pete Kadens is a first-generation wealth creator, entrepreneur, and philanthropist who co-founded Green Thumb Industries (GTI), building it into the world's largest cannabis company by revenue. (00:32) He became a millionaire before 30 with his first business exit and had multiple successful ventures before GTI, including in commercial solar. Pete is a Crown Fellow at the Aspen Institute, where he works alongside elite entrepreneurs like Reid Hoffman and Reed Hastings, and teaches a collegiate-level course called "Mastering Wealth."
David (Host)
David is the host of the How I Invest podcast, where he interviews successful entrepreneurs and investors to extract actionable insights for ambitious professionals. He has a master's degree in psychology and recently got married, with plans to start a family.
Key Takeaways
Target Unsexy Markets for Maximum Profitability
Pete built Green Thumb Industries by deliberately choosing unglamorous locations like Joliet, Toledo, and Erie, Pennsylvania instead of prestigious markets like Chicago or Cleveland. (02:49) This strategy created monopoly-like conditions where the nearest competitor might be 72 miles away, leading to some of the highest margins in the cannabis industry. The key insight is that while everyone else was trying to be "the Apple Store of weed," GTI focused on blocking and tackling fundamentals in overlooked markets. (01:50) This approach requires discipline to resist the social pressure of having a "sexy" business location, but the financial rewards far outweigh the temporary ego costs.
Go After Non-Obvious Customer Segments
Instead of targeting the traditional cannabis consumer (32-year-old males who had been smoking since college), Pete identified and pursued American women aged 30-50 as the untapped market. (04:12) This demographic drives more consumer behavior than any other group globally, and GTI successfully converted them from their evening glass of wine to cannabis gummies. The strategy worked because they were "skating to where the puck was going" rather than where it currently was, following Wayne Gretzky's famous advice. This required developing products, form factors, and taste profiles specifically for female consumers, which seemed questionable to many at the time but proved highly profitable.
Build Disciplined Frameworks with Autonomous Execution
Pete's success came from creating clear disciplined frameworks while giving talented people autonomy to operate within those boundaries. (08:39) At Green Thumb, they had specific steps to reach their north star goal of being the most profitable cannabis company, but employees were treated as "CEOs of their own domain" with significant agency. This approach included full transparency through displaying the 10 key KPIs on a whiteboard in headquarters, measured week by week, so everyone understood the standards needed to meet their vision. (10:13) The combination of clear direction with autonomous execution created exceptional performance while maintaining accountability.
Create Ownership Culture Through Equity and Education
Pete made many employees millionaires at Green Thumb, extending equity far beyond the executive team. (11:03) However, the crucial insight is that employees don't feel ownership based on what you give them, but based on what they give to the company. (12:25) This requires educating all employees, even janitors, on financial implications of their work - understanding how their actions affect cost of goods sold, inventory, and balance sheet metrics. Pete applies this principle across all his companies, ensuring every employee is an owner and understands the financial impact of their decisions. The "trash test" mentality emerges naturally when people truly feel like owners.
Generosity Creates Sustainable Competitive Advantage
Pete operates on the principle that "the more generous I am, the wealthier I get," which applies to energy, intellect, and network sharing, not just money. (15:07) This generosity creates deeper commitment from team members, better company culture, and superior business results. KKR's published data shows companies with employee stock ownership plans outperform competitors by 3x in EBITDA growth. (17:54) Pete builds a "culture of compliments" where people support and celebrate each other, creating a distinct competitive advantage in today's corporate world. The key is not forcing commitment but earning it through kind and generous gestures while maintaining clear performance standards.
Statistics & Facts
- Green Thumb Industries reached a $6 billion market cap and currently maintains around $2 billion, making it the largest cannabis company in the world by revenue with projected $1.4-1.5 billion in revenue. (01:32)
- KKR's published data shows that companies with employee stock ownership plans (ESOPs) have EBITDA that is 3x higher than companies without such plans, demonstrating the financial impact of ownership culture. (18:42)
- American women aged 30-50 drive more consumer behavior than any other demographic globally, which was the key insight behind Green Thumb's successful pivot from traditional cannabis consumers to this underserved market. (04:32)
