Winning the Hardware Software Game Winning the Hardware-Software Game - 2nd Edition

Using Game Theory to Optimize the Pace of New Technology Adoption
  • How do you encourage speedier adoption of your product or service?
  • How do you increase the value your product or service creates for your customers?
  • How do you extract more of the value created by your product or service for yourself?



  • Attracting Mainstream Consumers to Medical Cannabis

    The US medical cannabis market is currently in its early stages of adoption: the market has gained some penetration, but not enough to warrant adoption by the early majority, that is, more mainstream users. My book, Winning the Hardware-Software Game, describes the technology adoption lifecycle in detail. A brief summary and illustration (Figure 1) of the technology adoption process taken from the book indicates:

    [T]he consumption lifecycle of a new innovation entails adoption by four general groups of users: (1) innovators and early adopters, risk takers, who are attracted to novel innovations that offer new and different features and capabilities; (2) the early majority, who are more deliberate in their purchasing decisions, requiring bug-free products whose value has been validated by early adopters; (3) the late majority, a skeptical lot, who demand low prices and large amounts of product support; and finally (4) laggards, the traditionalists, who adopt new innovations only when forced to do so.

    Figure 1

    tech adoption

    By understanding the wants and needs of majority adopters, we can ask: how must the medical cannabis market evolve to become amenable to adoption by more mainstream users?

    Our goal is to surmise the wants and needs of more mainstream adopters. We can achieve this, first, by considering how cannabis provides value to those adopters. Once we understand the value proposition, we can then determine how the market will evolve to increase value to users.

  • Best Practices in Medicine Should Rely on Providers' Knowledge, Skills and Experience, Not Just Studies

    In 2005, a physician-scientist research pioneer, John Ioannides, published what has come to be a widely circulated paper, “Why Most Published Research Findings Are False.” The replication crisis we’re having in science embodies the concern voiced by Mr. Ioannides. Yet, despite much evidence that so many studies are not valid, scientific professionals continue to rely almost exclusively on study results when deciding on best practices.

    So many studies are flawed. As a simple example, please take my survey by answering the following question:

    Over the past 12 months, how many times have you visited a doctor?

    Take as much time as you need to answer the question…

    Got your answer?

    Okay, now let me ask you a few questions about the number of visits you just “reported” for my study.

    First, to answer my question, did you just think back in your mind, or did you actually check your records? Most people will probably come up with a “good estimate” based on what they can quickly recall. Relatively few people will make the effort to reference records to help them come up with a more accurate estimate.

    As for what we remember, researchers continue to discover new ways in which our memories paint an inaccurate portrait of “the truth” (to the extent the truth exists). For example, the telescoping effect is a common cognitive bias affecting our memory, where we tend “to displace recent events backward in time and remote events forward in time, so that recent events appear more remote, and remote events, more recent.” The telescoping effect is just one of many different cognitive biases – Wikipedia lists 42 different cognitive biases that affect our memories – any one of which may cause your reported number of visits to the doctor over the past 12 months to be more or less than the “true” number.

    Second, what types of providers did you include in your estimate? Did you include any visits to a dentist, nurse practitioner, therapist, optician, optometrist, pharmacist, herbalist, or other allopathic provider? Different people will have different interpretations of what’s included in the category “doctor.”

  • Cannabis Cultivation: Indoor vs. Outdoor vs. Greenhouse

    There are three basic locales for growing cannabis: indoors, outdoors, or in greenhouses. Greenhouses enable growers to benefit from natural light, while also being able to strategically block out light to induce quicker flowering. Budget-friendly greenhouse operations are more subject natural climate variations, while higher-end greenhouses are more similar to indoor grow operations that benefit from natural lighting.

    Which of the three locations is best?

    As with most interesting topics, each locale has associated advantages and disadvantages. I collected information on the advantages and disadvantages of the different grow locales and organized them into three general groupings: comparisons of grow environment issues, comparisons of flower quality issues, and comparisons of cost and effort issues. This analysis presents these comparisons.

  • Cannabis Cultivation: Seeds vs. Clones

    Cannabis plants are dioecious, that is, they are either male or female. Plant reproduction occurs naturally, when male plants pollinate female plants, causing female plants to produce seeds. New cannabis plants can thus be cultivated by collecting seeds from fertilized females and replanting them, or by buying seeds generated by someone else.

    Alternatively, new cannabis plants can also be cultivated using cloning, a form of asexual reproduction. Clones are cuttings taken from a mother plant that are cultivated separately to generate a new plant. Whereas new plants cultivated from seeds carry genetics from both mothers and fathers, cloned offspring carry genetics only from mothers. That is, clones are genetically identical to mother plants.

    Cannabis plants, then, can be cultivated either by using seeds or by using clones. Each method has its advantages and disadvantages; this analysis aggregates and compares reported plusses and minuses of each.

    In keeping with the same approach I used to compare indoor and outdoor growing, I classify different aspects of the seed vs. clone comparisons into three categories: grow environment, quality of flower, and cost or effort required. Tables summarizing the advantages and disadvantages of each grow method are provided in Figures 1 and 2.

  • Cannabis Industry Rollouts: Lessons Learned from States’ Experiences

    Bart Schaneman from MJ Business Daily recently released, “2020 Cultivation Snapshot: U.S. Wholesale Marijuana Prices & Supply.” The information contained in the report helped cement certain insights I’ve had about the evolution of the cannabis market.

    Background info

    In addition to the myriad other laws and regulations, all states essentially have two basic requirements:

    • Transportation: Transportation between licensed suppliers (Growers, Processors, Testing Labs, Retailers) must be carried out by licensed Distributors
    • Lab Testing: All cannabis products must pass Lab Testing before being sold by Retailers

    There are thus two possible paths to market (see Figure 1):

    • Flower: 1 → 2A, if pass testing regulations, then → 3A → 4A
    • Everything Else: 1 → 2B → 3B → 3B, if pass testing regulations, then → 5B → 6B

    Figure 1

    1 mj supply chain vert 

  • Cannabis Science and Technology Finally Got Hitched!

    The Separate Worlds of Science and Technology

    Throughout most of human history, science and technology existed within completely separate realms of society. Science, or natural philosophy, fell within the realm of the upper ranks of society. Natural philosophers were “uncommitted to any program of useful knowledge,” developing “abstract speculations about the natural world.”[1] Joel Mokyr calls science the sphere of savants.[2]

    In contrast, technology historically fell within the realm of the working classes, those who used their hands to earn a living, so-called fabricants: physicians, engineers, and skilled mechanics. Technology was developed as a tinkering, or learning-by-doing, process, without any understanding of the scientific underpinnings of how things worked.

    Historians James McClellan and Harold Dorn describes the worlds of science and technology as being completely separate, with only a small overlap of applied science:

    Only in those handful of subject areas where societies required and patronized specialized knowledge – astrology/astronomy, literacy, numeracy, aspects of engineering, and medicine for example – is it at all meaningful to speak of a limited existence of applied science. Otherwise, worlds of technology and learned science remained sociologically and institutionally poles apart. The vast bulk of technology was not applied science and had developed according to sociologically distinct craft traditions.[1]

    The Shift to Anticipating a Better Future

    Throughout history, society served gods and kings. New information was presented authoritatively and simply accepted by the masses as being true. During this time, society tended to be backward-looking; that is, people looked to the past and the ancients as the ideal, rather than looking to the future as inspiration as a better time, when society would progress.

    It was the Scientific Revolution (1543 – 1687) that finally ushered in a change in perspective, from a backward- to a forward-looking society: “At the deepest level, the common denominator was the belief in the possibility and desirability of human progress and perfectability through reason and knowledge.”[2] The fundamental features of the Scientific Revolution were: (i) the social utility of science, that is, that science and knowledge could be used to improved man’s well-being, and (ii) the emergence of the scientific method, where new information was gained through experiments that explained natural phenomena.[1]

  • Causes of Cross-State Differences in Legal Market Cannabis Sales

    Legal cannabis markets have existed for several years now in a good number of states. If we compared legal market cannabis sales across states and over time, what would that look like? Do states exhibit similar patterns in cannabis sales, or are they different? And if they are different, why?

  • Hemp and CBD Market Supply

    The information in this post was compiled in an attempt to understand 2 issues:

    • Does the cultivation of hemp differ depending on the hemp product supplied (fiber, seed, or flower)?
    • Is the CBD produced from hemp (cannabis with ≤ 0.3% THC) identical to the CBD produced from marijuana (cannabis with > 0.3% THC)?


    Hemp for Fiber vs. Seed vs. CBD

    The hemp plant has the potential to contribute resources into the production of a profusion of different end products. These end products are generally sourced from one of three parts of the plant: stalk, seeds, or flower (see Figure 1).

    Figure 1

    1 many uses hemp


    Currently, some hemp suppliers cultivate single-use (stalk or seed or CBD) hemp, while others grow dual-use (stalk and seed or seed and CBD) hemp. At the same time, marijuana cultivators also supply the market with CBD (see Figure 2).

  • How Regulations Shape the Cannabis Industry


    The cannabis industry is highly regulated, and the various regulations play a powerful role in shaping the structure, and thus outcome, of the industry. This analysis examines the following questions:

    1. How do cannabis market regulations shape market structure?
    2. Are the resulting outcomes favorable to suppliers and/or consumers?
    3. What are the pros and cons of vertical integration in cannabis markets?

    Players: Who They Are and What They Want

    Let’s start by considering who the major players in the cannabis game are – the Suppliers, the Regulators, and the Customers, plus the Distributors and Testing Labs – and what they seek by participating in the cannabis industry (see Figure 1). It’s important to understand what each party wants because the what they want, together with the extent to which they’re getting what they want, will determine (i) how well they follow the rules and (ii) the actions they might take if they decide not to follow the rules.

    Figure 1

    1 mj game 


    Cannabis Suppliers

    The players who supply product in the cannabis industry include Cultivators, Processors/Manufacturers, and Dispensaries. The Suppliers provide the products that Customers purchase and consume. Cannabis Suppliers care about three issues in particular:

    • Suppliers want to run profitable businesses, which means they must be able to generate revenues that cover their costs.
    • Suppliers want to comply with laws and regulations so they don’t lose their licenses to operate.
    • Suppliers want to differentiate their products to attract Consumers. The primary modes of product differentiation include offering nuanced products, creating product brands, and educating Consumers.

    Distributors and Testing Labs

    Distributors and Testing Labs grease the wheels of the industry. Without appropriate distribution and testing services, compliant products cannot make their way through the supply chain from Cultivators to Processors and Dispensaries to be sold to Customers. Distributors and Testing Labs care about two issues in particular:

    • Distributors and Testing Labs want to run profitable businesses, and
    • Distributors and Testing Labs want to comply with laws and regulations so they don’t lose their licenses.

    When there are enough Distributors and Testing Labs to create competition, then

    • Distributors and Testing Labs want to differentiate their products to attract Customers.

    State and Local Governments (Regulators)

    The State and Municipal Governments are the regulators. Governments use state and local laws and regulations to achieve two goals: (i) ensuring all activity is tracked and taxes are paid, and (ii) ensuring cannabis activity does not intrude upon local communities.

    • State and Municipal Governments want to make sure all product is accounted for, only licensed activity occurs, and all taxes are paid.
    • State and Municipal Governments want to make sure cannabis activity is inaccessible to minors and nonintrusive to local communities.


    Consumers of medical and recreational cannabis want cannabis products that are safe to consume and that are reliable in providing the expected effects. Also, finding the “right” cannabis product to meet a particular Consumer’s needs is no easy task. So then once a specific product is found that provides the desired effects, the Consumer wants to be able to continue to purchase the same product from dispensaries. What we have, then, is

    • Consumers want product safety.
    • Consumers want product variety.
    • Consumers want product continuity.
  • Hurdles to Mainstream Adoption of Medical Cannabis

    Based on the incentives facing different players in the US medical cannabis market, I believe the market will not achieve mainstream adoption unless or until the US overcomes several hurdles: (i) the classification of cannabis as a Schedule I drug, (ii) cannabis’s lack of FDA approval, (iii) the lack of clear information about and trust in cannabis as a safe and medically efficacious product, and (iv) the social disapproval of cannabis use by a significant portion of society.

    Players in the Medical Cannabis Game

    Let’s start by examining the incentives facing the main participants in the medical cannabis market.

    hurdles to adoption

  • Playing the Marijuana Market Transition Game

    Download PDF

    Timeline of US Marijuana Laws

    California Is Different from Other Legalized States

    Description and Implications of CA Legislation

    Marijuana Supply Chain Regulations and Realities

    Players of the CA Market Transition Game

    CA Market Evolution to Date

    Future Market Evolution


    California is currently transitioning from illegal and semi-legal markets for marijuana to legal markets. The black and grey markets for marijuana in California are enormous in both size and scope. For the State to successfully transition to a legal market, it must reign in the size and scope of black market activity. Will the State be able to do this?

    Key players in the Marijuana Transition Game include:

    • State and Local Governments
    • Marijuana Growers
    • Marijuana Distributors
    • Marijuana Dispensaries/Retailers
    • Recreational Users
    • Medical Users
    • Black Market Suppliers

    This analysis examines how the market has evolved to date and how we think the market will continue to evolve in the future.

  • Trends in Cannabis Patents Over Time

    Patent Counts by Year

    I searched the USPTO patent database for all patents for which the patent abstract contained any of the following terms: cannabis, cannabinoid, marijuana, tetrahydrocannabinoid, or cannabinol. My search yielded 914 patents.

    As seen in Figure 1, there were only a handful of cannabis patents each year until the late 1990s. Cannabis patent activity started increasing at a roughly constant annual rate between 2001 and 2010. Patent activity leveled off between 2010 and 2015, then accelerated through to the present.

    Figure 1

    1 mj patent counts

    Patent Counts by Category

    Category Descriptions

    Based on patent descriptions, I assigned each patent to a category and subcategory. I defined the patent categories as follows:

    Delivery: Methods of or compositions for delivering cannabis into the body

    Detect: Methods of detecting cannabinoids in products samples or in people

    Extract: Methods of extracting cannabinoids from plant matter

    Grow: Methods of cultivating cannabis plants

    Package: Methods of packaging cannabis products

    Plant: Plant cultivars

    Pre-Plant: Plant genomics

    Process: Methods of processing cannabis, excluding extraction of cannabinoids from plant matter

    Receptor: Patents addressing cannabinoid receptors: CB1, CB2, agonist, antagonist, ligand

    Smoke: Devices and formulations for smoking cannabis

    Storage: Methods and devices for storing cannabis products

    Synthesis: Methods of synthesizing cannabinoids

    Terpene: Products and methods involving cannabis terpenes

    Track: Software for tracking cannabis cultivation, sales, usage, or trading

    Treatment: Cannabis compositions for the treatment of specific conditions

  • Why Is Alcohol Accepted While Cannabis Is Not?

    Alcohol Use In America

    Cannabis Use In America

    Prevalence and Social Attitudes

    What Determines an Activity’s Prevalence?

    Social Attitudes and Laws

    Social Acceptance: Alcohol vs. Cannabis

    Social Narratives vs. Reality

    The Role of Common Knowledge


    Both alcohol and cannabis have been around for thousands of years, and both have been used for recreational, spiritual, and medical purposes. Both have been a part of life in America since our country’s founding. And to a greater or lesser extent, both have been socially accepted at times, while being prohibited at other times. For the past century, however, there has been a distinct difference in social attitudes between the two: while people tend to accept or reject alcohol, they don’t react to it with fear, a sense of taboo, or disgust, like they do with cannabis. Why is that? This analysis attempts to understand why people tend to accept alcohol but denounce cannabis.

    To better understand Americans’ attitudes toward alcohol and cannabis, I first examine the role each has played in America’s history. Next, I examine the nature of social acceptance of alcohol vs. cannabis, and then I propose some explanations as to why alcohol has been accepted, perhaps grudgingly at times, while cannabis has been so adamantly rejected.

    I conclude that alcohol has always been used overtly, so everyone can see its effects. Users have validated its use and effects for other users and non-users. However, cannabis has always been used covertly, so people can’t see that it’s safe, enjoyable, and effective for treating medical conditions; that is, users have not been able to validate cannabis use for other users and non-users. The overt vs. covert behavior has created feedback loops encouraging acceptance of alcohol, while enabling the contiued stigmatization of cannabis.


    Alcohol Use in America

    A Brief History of Alcohol Use in America[1]

    Since America’s founding, alcohol has been a part of everyday life.

    The colonists brought with them from Europe a high regard for alcoholic beverages. Distilled and fermented liquors were considered important and invigorating foods, whose restorative powers were a natural blessing. People in all regions and of all classes drank heavily.

    Drunkenness was considered a “personal indiscretion”:

    Drunkenness was condemned and punished, but only as an abuse of a God-given gift. Drink itself was not looked upon as culpable, any more than food deserved blame for the sin of gluttony. Excess was personal indiscretion.

    Drunkenness was controlled using a combination of physical sanctions (fines or whippings) and conventional mechanisms for control, including limits on tavern hours, requirements for taverns to provide food and lodging, and limits on who taverns could serve, as well as the activities in which patrons could engage.

    During the late 1700s through the mid 1800s, however, society experienced rapidly growing immigration, industrialization, urbanization and social change (see Figure 1). Immigrants flooded cities from rural parts of the US and from foreign countries. Massive dislocations, together with loss of support systems, left many unable to cope. They found solace in taverns.

    Figure 1

    1 us pop

    At the same time, the nature of taverns changed, from one overseen by respectable members of society who maintained social control, to one run by “common folk” seeking to commercially exploit liquor.

    These radical social changes created a breakdown in the social norms that had previously discouraged alcohol abuse. Heavy drinking became much more common and caused numerous problems: people were late to work and unable to fulfill their job functions, and drunken men were abusing their wives and children or leaving them without means of support.

  • Would the Endocannabinoid System Have Been Discovered Earlier without the Ban on Cannabis?

    Cannabis was used medicinally in the Western world from the mid-1800s through 1940, even though doctors did not understand cannabis’s mechanisms of action. The Marijuana Tax At of 1937 Federally banned the use of cannabis in the US for either medical or recreational uses, and it restricted scientific studies of cannabis. Nonetheless, from 1937 through the late 1970s, cannabis research proceeded internationally, as did illegal uses of cannabis for both recreational and medical purposes.

    Grass roots activists in the US have been demonstrating to legalize cannabis for medical use at least since the 1970s.[1] Yet, medical cannabis remained uniformly illegal until 1978, when the US Government was legally forced to make medical marijuana available to select patients, initially for use in treating glaucoma, and later for treatment of patients with HIV/AIDS. This compassionate use program was shut down in 1991.[2] The AIDS epidemic and Gulf War ushered in the 1990s. America’s focus shifted away from the War on Drugs and toward medical cannabis and the Middle East. [3] Soon thereafter, in 1996, California legalized cannabis for medical uses within the State. Over the next two and a half decades, 32 more states, together with the District of Columbia, Guam, Puerto Rico and U.S. Virgin Islands, followed California’s lead in legalizing cannabis for medical use.[4]

    The AIDs crisis created an urgent, medical rationale for more overt use of medical cannabis. However, it was the discovery of the endocannabinoid system (ECS) during the late 1980s and early 1990s that truly legitimized cannabis for medical use and paved the way for the current flood of medical cannabis research. An influx of new research is discovering the pervasive workings of the ECS in our bodies. These new discoveries provide a glimpse into the tremendous potential of cannabis for enhancing our health and well-being.

    This sequence of events begs the question: If medical cannabis research had not been restricted in 1937, would the ECS – together with its wealth of associated health and wellness benefits – have been discovered earlier?

    To answer the question, we must examine the state of science and technology during the 20th century. Restrictions on research surely caused difficulties in securing funding and/or cannabis samples for research. And if these restrictions were the primary constraints on the advancement of discovery, then we may conclude that the ECS may very well have been discovered earlier than it was. If, however, limitations on advancements in complementary science and technology played a role in delaying the course of discoveries on the ECS, then we cannot conclude that but-for restrictions on cannabis research, the ECS likely would have been discovered sooner.