On May 10, 2019 I sat down with Phylos Bioscience CEO Mowgli Holmes and Phylos Director of Marketing Paige Hewlett for an interview.
I wanted to talk about the negative response from the cannabis community to Phylos’ announcement that they would be entering the cannabis breeding business.
You can read more about the announcement—and the fallout from it—in this week’s Cannabuzz column.
I asked Phylos to respond to the most commonly repeated accusation and fear: that they are using the results of their Phylos Galaxy—a crowd-sourced evolutionary map of different cannabis varieties—to steal from the growers who submitted them.
That answer required some explanation of what is scientifically possible, and not possible, which I had Holmes break down in an understandable way. That said, parts of this are science-heavy, so if you find your eyes glazing over, be aware that it’s not the majority of the interview.
What was scheduled for 30 minutes soon became 60, and resulted in the following 9,000 words. The conversation was edited slightly for clarity, and the transcription was provided to Phylos to review strictly to confirm some of the scientific terminology used.
MERCURY: Okay. You’ve put out a statement. I see a lot of people responding to it, but no one is bringing any specifics as far as further questions. The concerns that I hear from people, let’s try and break them down one by one. One, did you steal anyone’s genetics?
MOWGLI HOLMES, CEO of PHYLOS BIOSCIENCE: No, but let’s be clear. What on earth do you mean by that question? What does the word genetics mean in that context? Do you mean did we steal anyone’s plants?
MERCURY: That is the concern amongst people posting on the internet, which certainly isn’t the best basis of well-thought-out critical thought.
HOLMES: Well, so there’s this confusion that stems from the use of that word, actually.
And so genetics means the study of DNA, usually in science. In the cannabis world, genetics has come to mean the plants themselves. Like, “I have these amazing genetics.”
But this confusion emerged that we were part of, because we started selling this test where we would sequence the DNA of people’s plants and then tell them what plant they had, which we thought would bring a lot of transparency to the industry.
PAIGE HEWLETT, VP OF MARKETING for PHYLOS BIOSCIENCE: Well, not necessarily what plant they had, but about their plant.
HOLMES: It would tell them about their plant, and how it was related to every other plant. In many cases those relationships made it clear exactly what plant they had.
In some cases, if there wasn’t enough other stuff to compare it to in the database, it didn’t make it clear what plant they had, but often it did make it clear. But then we had these data files that were the DNA sequence from their plants, and people started referring to that data as the genetics, which is sort of more in line with how a scientist would use it.
And then people started to get very worried about the fact that we had their data, and so then we would hear from people, “Are you stealing my genetics?” And we would say, “Well, no, you sent in a dead stem sample that we used to get DNA out of, and nobody can bring a plant back to life from that dead stem sample.”
The whole point of the Galaxy is for you to put a stake in the ground and show that you own that plant. It’s a way for you to lock in your possession of the plant and publicly claim it. We have no rights over those plants at all, so we have literally no way to physically have those plants. We just had a dead sample, but you can’t bring it back to life.
We would say that and then they would go, “But yeah, but you have my genetics.” And I think what they mean by that is we have their DNA sequence, and their fear has been that, well, maybe that gives us some control over the plant somehow.
Maybe we can use that DNA sequence to patent it or claim ownership of it. And we could go to the USPTO [US Patent and Trademark Office] and say, “Here’s this DNA sequence for this plant. Now we own that plant.” And that’s not true either. Having the DNA sequence doesn’t give you any control over the plant that USPTO won’t accept that as a patent application.
And then in addition, we made all of that data public so we didn’t have anyone’s genetics in any way. And the data that we did have, we actually made public so that other scientists could use it, and so that it would be proof of the existence of these plants so that no one could ever try to patent them, because there would be proof that they existed in private possession, or in the public domain and no one could ever patent them.
Somehow the fact that we made all of that data public—which is very unusual, science companies don’t do that typically—we’ve lost investors because they feel like having access to that data would have given us an advantage.
But for reasons that I can’t understand, that has never mattered that much to people. It somehow never registered with people that we made that data public. Like, any access to that data that we have, everybody has. Our competitors downloaded that data. They used it to make their own tests.
So we don’t have people’s genetics in terms of their plants, or in terms of their data. We do have access to the data just like everybody else has.
So I think there are three concerns. One was, “Did you steal my plants?” The other was, “Do you have control of my plants? Somehow, because you have the data?”
And then the new concern was, “Did you use our data to develop your breeding program?
So what people are saying now is, “Phylos has your genetics and they’re using it to power their own breeding program.” But it’s just totally unclear. When they say that phrase, it just sounds terrible. It sounds like you stole their plants. It’s totally undefined.
But the truth is that we didn’t steal their plants, we don’t have proprietary access to their data, and we also didn’t use that data for our breeding program, because it’s actually not the right data to help you with plant breeding.
So the whole commercial tests that we offered to customers, the Phylos genotype test, it produced this dataset that was very small and limited and public, and it was not something that could help with a breeding program.
And I think we’re going to have to go into the gory details of why that is. Are you prepared for that?
MERCURY: I’m prepared for that.
HOLMES: It’s dense.
MERCURY: So am I. This works out.
HOLMES: It is true that if you get a lot of genetic data on plants in the right way with a lot of other things, you can use that data to develop genetic markers that will help with breeding.
And modern advanced plant breeding uses genetic markers to accelerate the process. A genetic marker is a DNA sequence, you know, AGCCDA [for instance], located somewhere in the genome that reliably correlates with a trait, a trait in a mature plant.
So if you look at tens of thousands of plants and you sequence the DNA, and you look at tens or hundreds of thousands of sites across the genome, those sites are called snips, [and] it just means one little site in the genome.
And you look at 50 or 100,000 of those for every plant, and then you collect exhaustive data on those plants. How resistant to [moths] are they? How resistant to powdery mildew are they? What’s the yield? What’s the terpene content? What’s the THC content? What’s the flowering time?
And then you have that data set of all the plant traits, and tens of thousands of sites in the genome for each plant. You can start to see out of that dataset, every time a plant seems to be incredibly high in limonene, it always has this marker, it always has this DNA sequence.
And then you have a genetic marker. And then, when you’re doing plant breeding, you make a cross and you create thousands of seeds and you plant them all. Normally you would have to grow the most of breeding for limonene.
You’d have to grow them all up and then smell them, or chemically test them after curing the flower, and you would figure out which ones were high in limonene, and then you would bring those forward in the breeding program.
If you have genetic markers at the seedling stage, you can take a leaf punch out of all those plants, sequence the DNA of all of them, identify the ones that have the marker you’re looking for. Get rid of the other ones, force those into flower, and move on to the next generation of your breeding program faster. So it accelerates a breeding program.
But to develop genetic markers like that, you need to look at tens of thousands of plants. You need to look at tens of thousands of sites in the genome of each plant, and then you need to have exhausted phenotype data, trait data on those plants.
What you would need is… Actually. Let’s say each one of those is a plant and those are the genomes of the plants. You need, let’s say 10,000 plants, and then you’d need 10,000 snips. I’m going to call them sites, across the genome. You need to look at that spot, and that spot and that spot and that spot, and that spot. A lot of sites, so that you… you need a marker near every gene.
And actually, 10K isn’t enough. You’d want 50K, right, so that you’re covering the whole gene. And then you’d need trait data on the mature plants, like about the leaves or whatever for all the plants. That’s what you need to develop a marker set….
Also, you would want the dataset, which would be very valuable, to be private. Otherwise all your competitors would have it. So we cannot develop markers, [and] we did not develop markers from that dataset.
Now, if you could get data on the plants you might be able to find a few markers, and we know of research groups that are trying to do that. It could be that there’s a few markers you could find in there. But you’d have to rely on data from Leafly—
HOLMES: —or other public databases, and you’d have to correlate that by strain name to the plants, and the whole point of the Phylos Genotype Dataset was that all the strain names were wrong.
So at least half of your trade data that you get from the internet will be wrong. You would have this terrible trade dataset that you could correlate to the 2,000 snips. And so we did not use customer data to develop genetic markers. It wasn’t a good enough dataset and we just made it public so that everyone could have it.
There’s all the concerns that are just crazy, and not true and not grounded in science or reality. But then there’s some concerns that we find understandable, even if there is still different, many different ways to look at it. So what we did do is we had a testing business, and then in the course of running our testing business, we did build all the infrastructure for plant breeding.
We absolutely used the testing business to incubate the breeding program.
And I think it’s been upsetting to people that they thought we were a testing lab; they were trusting us with their data, which they viewed as very valuable and they thought was this big leap of trust.
They didn’t understand that it wasn’t valuable. They didn’t understand how significant it was that we’d made it public. They felt like, “We trusted you and now you’re taking our data and using it to do plant breeding, which means you’re going to compete with us.”
So we didn’t take their data, and for reasons I’ll get into it, we’re not going to be competing with them in the way that they think.
But we did use the testing business to develop all the infrastructure for doing plant breeding.
And that’s absolutely true.
The thing about it that doesn’t fit with the perception out there is that we were totally open about that. We just went through this transition as a company. We were a testing business, but for three years we’ve been building a plant breeding business and we’ve been doing it openly.
It’s just that we believed, and this is the evolution part, that if we had made it clearer, I think a lot of this wouldn’t have happened.
We believe that we were a data company. We were federally legal. We believe that was important to our investors. We believe that we couldn’t see how to be a plant breeding program and be set up in every market we needed to be in, because we couldn’t picture getting licenses in every market, and we weren’t willing to move plants across state lines, so we thought.
But we knew that genomic data, if we could develop a proper dataset, which we wouldn’t be able to do from the customer data, but if we can develop a proper dataset somehow, we knew that this kind of data is what accelerates plant breeding programs.
So we switched our business model years ago to be a plant breeding data company.
And we had a website, a page on our website called tools for breeders, where we said, “We are not using the customer data for breeding. However, we are building all of the data necessary to do plant breeding.”
And we talked on our website about genetic markers and how valuable they were for plant breeding, and we said, “We’re a breeding company. We’re here to help other people do plant breeding.”
And our whole business model was around building the scientific expertise and infrastructure and data infrastructure to drive plant breeding programs for other people. And we started setting up partnerships to help other people with their plant breeding programs.
Our attention actually was once we found markers to make them available to our customers, so we can tell them if their plants were positive for a certain trait.
After working on that business model for a while, we realized we’re never going to be able to effectively do breeding or develop the genetic markers that we need to do it, in this, like, remote-control way. We need to look at—
HEWLETT: I think beyond that, though, it’s also challenging for customers. It’s challenging for the people who we’re doing breeding with.
HOLMES: That’s right. It didn’t really work for them because every one of the partners that we found was a production facility, and they just couldn’t really dedicate serious R&D resources to doing plant breeding at the scale and with the scientific rigor that was the only way we knew how to do it.
I mean, I think we were able to—and will be able to—accelerate those people’s breeding programs a lot over what they would have been, but it wasn’t ever going to… it just wasn’t working very well.
It was very hard to get people to really dedicate resources to R&D, and we realized if we’re ever going to do all the market development and all the branding, we need to have plants that we are in charge of so we can collect incredible detail of datasets from them and do plant breeding in the real way.
And you know, our vision at that point had come to be the… We had seen that cannabis hadn’t been through the modern plant breeding process that every other major crop has been.
In terms of being a developed crop, it’s about 80 years behind. It’s been developed in incredible ways by breeders in this distributed crowdsource breeding program that’s gone on for 50 years.
But a lot of the things that make a plant a viable crop, especially as prices drop, just hadn’t happened for cannabis. And we started to view it as our mission to bring out the full potential of cannabis. We wanted to be the company that drove the evolution of cannabis.
We thought we could do it by remote control, but we couldn’t. And so we said, “All right. We’re going to have to get our own license and work with our own plants.” And for us, that was a small transition.
For the outside world it was a huge transition. They saw us as going from a testing business to a plant breeding business that might be competing with them, but really we had turned into a plant breeding business a long time ago. We were just doing it for other people. We just didn’t have the plants.
But the plant work itself is a small part of, or it’s just one part of, a modern breeding program. Most of the infrastructure of a modern plant breeding program is in the data, in the scientific tools.
And for that reason we really thought, “Well, we don’t have to have the plants. We’ll have other people do the plant work under their licenses.” And we thought that would work. And we really tried hard to make that business model work. Didn’t work and we had to switch to doing it ourselves.
If we had somehow along the way let people really understand how we were evolving better? We thought we were; we thought we were telling everyone. “We’re driving plant breeding programs.”
HEWLETT: Well, I think that’s also maybe the point isn’t necessarily the evolution, because we did, we announced that we were pursuing our own breeding in our own facility before we broke ground in the facility, before we did any of that.
So we really did announce at the very earliest moment that we could have, especially as a business and as a company who’s moving forward and driving some of those discussions. But I think that a lot of it is not just… it’s not just the bringing them along on the journey.
But I think the clash, to your point earlier, of what’s happening in the industry overall, the impacts to the cannabis community who have been the breeders over a series of time, and the fact that we have worked really hard over the last five years to build a lot of the trust and the positive momentum in the community.
And because of the work that we were doing as an ag-science company, as a plant breeding company, as all of that, I think the perception is it mirrors so much of what has happened in traditional crops historically.
MERCURY: So kind of the Monsanto model?
HOLMES: Well, yeah. I think there’s a lot of positives and negatives of a traditional agriculture model, and it has meant incredible things for food supply.
But it also meant devastating things for the way some communities have been affected, and the way the crop has evolved, and the way a culture of food now is in America and industrialized countries, et cetera.
There are a lot of benefits, but there are also a lot of negatives. And I think the negatives predominantly affect a lot of the people who’ve been small-time breeders and very talented, but nonetheless smaller breeders, smaller farmers, smaller communities, and I think that’s really where the tension of changing legalization attentions that are within the old school cannabis community, and of the pioneers of the plant from through prohibition.
Really those tensions are coming to bear, and we are a company who looks and talks but acts a little bit different, and I think that’s where some of the tension is, is there hasn’t been a company who has really played in a different way.
And whether it’s right or wrong, there are a lot of cultural associations to agriculture companies that are negative. And I think, you look and you find there are plenty of agriculture companies out there who do good things, but that’s not what people think about when you think agriculture companies.
And I think that’s an area where we, as a company in the ag space or the ag science space, have an obligation to continue to drive a message of how we’re going to be a positive impact. But that doesn’t change the fact that the cultural association with that is challenging.
MERCURY: When did you make the announcement that you were moving into breeding? Because that seems to be something that’s taken a lot of people by surprise. And then coupled with the Florida investor video, it’s like, “Well, no one told us. This was all a surprise. I was really taken aback by this.”
HOLMES: We’ve had on the website since 2016 that we were doing breeding with customers. So we’ve been breeding, not ourselves, not our own plants, but with customers since 2016.
And we announced on the 16th of April that we were… We announced to the broader community. We announced to many of our customers in December or January that we were thinking about going down this path and that we are moving towards that direction. But we announced in April to the general public that we were opening a breeding facility.
You see, one thing that we’ve been trying to figure out is what we could have done differently, right? So normally companies aren’t very transparent and there’s a lot of good reasons for that, and you really can’t announce your plans in advance.
We have to sort of announce when you begin. But I think what I’m getting at is that when we switched to doing breeding for other people, there might have been something we could have done to help people understand that that meant we were becoming a breeding company.
I think people still thought, “Well, that’s just some more testing services they have,” but we could have helped people understand the evolution better if we had said, “Just so you realize, we’re building all the infrastructure for plant breeding.” I mean, it’s hard to know why we would have sort of emphasized it in that way, but if we had done that—
HEWLETT: In fairness though, a lot of customers had known that, and customers came to us because of that, they knew we were working toward breeding, they knew we could support the breeding. But I think there’s—
HOLMES: Yeah, the people we worked with closely knew all of that, and the people who are really mad now are, you know, many of them are not our customers and didn’t know that.
But certainly one thing that got missed by that community is that we were becoming a plant breeding company. We were open about it on our website. We were open about it with our customers, but maybe we could somehow have been even more open about it so that people would understand that when we switched to working with their own plants, it wasn’t that big a transition. That’s the evolution part of it.
But I think a part of it that was especially hard for people is that in those investor videos, they hear me saying, “Pretty soon all the cannabis hereditary is going to be gone. It’s going to be replaced by improved plants. We’re going to be the company that makes those plants.” And that made people feel like, “They took our data and now they’re going to turn around and wipe us out.”
One thing that I really wish I could get across is that I was not talking about the flower market, I just wasn’t. In the large scale ag market, there typically are a small number of dominant varieties, and small increases in yield will lead to those varieties being completely replaced by new ones.
Everything I said in that investor video is just absolutely true. I meant all of it, but I was talking about how large scale agriculture works, and that is not how the flower market works.
The flower market is this incredibly diverse, innovative place—
HEWLETT: Or even craft oil.
HOLMES: Or even craft oil. There’s a small segment that’s craft oil, that’s single stream, which is really the same thing, but so the craft market has thousands of breeders, tens of thousands of growers that are lavishing love on each plant, [and] there’s constantly new releases, and the market demands a lot of diversity. It’s also very driven by the skill of the grower, and skilled growers can take any genetics and make incredible flower out of it.
So that whole set of dynamics where I’m saying, “Plants are going to improve and then all that existing stuff is going to be wiped out and replaced by new stuff,” that’s just not true for the flower market. That’s not how the flower market works.
And not only is it not how the flower market works, but we were, I think, the first and loudest company to talk about the need for preserving all that genetic diversity.
So this idea that we want to wipe out that genetic diversity? I mean, nothing could be further from the truth. The entire reason we started the Open Cannabis Project was because we knew we are getting into advanced plant breeding, and that has had drawbacks in the past.
I mean, we’re Oregonians so we understand, in a lot of detail, the negative consequences of the advanced agricultural science that we’re doing.
And one of those has been that, as you put a lot of money into developing elite cultivars, those take over the market, and with other props, all of the existing diversity has just been thrown out, which paradoxically makes our food security situation much less secure.
We knew that advanced plant breeding had to be paired and balanced with programs to preserve heirloom diversity, because it’s an incredible loss to lose all of those genetic riches.
We also knew that you can’t separate genetic diversity from economic diversity. We knew that the networks of small farmers are the only people with the skill and the drive to keep all of those old varieties alive. And so we’ve been really vocal advocates for that ever since the beginning.
It’s partly because we were such a vocal advocates for that, that people felt betrayed when they heard us talking in a way that didn’t fit with that. If we hadn’t been such a vocal advocates for small farmers and built all this trust in the community, people would just think we’re being a company. But this feeling of reversal, led them to feel betrayed.
The truth is, everything I said in that video is true and everything we’ve ever said to small farmers about our values is just also true.
We just make a very clear distinction between the mass market and the flower market, and they really are in different worlds. So the tagline… On the Open Cannabis Project there were several pages of text talking about the need to preserve diversity, and I wrote all of that years ago.
The tagline for the Open Cannabis Project was preserving diversity. We thought that by making our data public we could enlarge the public domain, make it harder for big companies to patent stuff, and then bury it and go on to a world of monoculture. We were fighting against that world from the very beginning.
And then people heard me talking in a language that seemed to negate all of that, and I see how that was a shock to people, and it was a pretty intense example of code switching.
Like I speak in a different language to these two different worlds, and I wish I’d found a way to always speak in the same voice to every audience.
But that pitch evolved over the years. It took a long time to get investors to understand how agriculture works. The fact that plants are evolving was a totally new concept to them, until I whittled it down and got rid of stuff that was in my presentation that wasn’t helping.
Like I used to talk about, “But we have to support genetic diversity,” in my investor pitch.
Eventually that stuff just gets pared away because it’s falling on deaf ears, and you look for sound bites that will make them realize what you’re doing, and the idea that all the plants that are out there now are going to be gone and there’s gonna be new, improved better ones. That was how I finally got them to understand.
Yeah. But again, that is different if you’re looking at the large scale market or the flower markets. There will be other companies in the large scale market too, but there will be thousands of breeders in the flower market.
And the flower market already because of its demand for innovation, it already… We didn’t talk about this in the statement, but it already has a tendency to turn over fast, and—
MERCURY: From breeder to breeder? From strain to strain?
HOLMES: What I mean is that the flower market is already not doing a great job of preserving the heirloom genetics.
There’s such a demand for novelty, and the new varieties sweep through the market with such force sometimes that the community as a whole is already struggling to preserve the heirloom genetics that they love, and they know that and they’re working hard on it, and there are lots of preservationist breeders that do see expansions would land races and preserve the old stuff and really dedicated their lives to it.
But already the forces in the flower market are a threat to preserving the heirloom genetics. That market is very good at maintaining a lot of diversity, which is really unusual for any crop, but it’s already struggling to preserve the old stuff.
Our belief about the flower market is that we need to be helping people preserve the old genetics that are already under threat, just from the way in the flower market already works.
And we need to be helping people to have a thriving, diverse economy that leads to lots of new stuff too. And that’s that whole world.
But do we need to preserve the crappy CBD plants that are being grown now, that are 10 percent CBD and always hit 0.7 percent THC? Those are going to be gone next season because they’re not appropriate for growing CBD. They’re going to be gone. And they didn’t have great terpene profiles anyway. So it really is two different worlds.
I think the thing to get across that’s hard is of course we want to breed for the recreational market as well. You know, plant breeding takes… you have to pair scientists with artists.
We’re not just doing the data stuff, we have plant breeders with incredible noses and we can’t just make them work on hemp, right? They want to breed, they want the high limonene plants. They want to work on high THC.
And so of course we want to breed the cannabis that we love for the flower market.
But one thing that we need to find a way to get across now is that we are not going to be a damaging competitive force in that world.
There’s a whole set of reasons why we’re not going to be, and let me just go through them.
First of all, any plants that we release for the flower market, they’ll be good for growers. They’ll be really good for growers. At first we naively thought that people would be happy to get new improved plants that were sturdier and more resistant to disease.
And we thought we’d get them out to all the growers in Oregon and California and would help them survive the apocalypse.
I think we underestimated how much everybody also considers themselves a breeder, but we knew there were thousands of breeders too.
Anyway, we’re going to release varieties to that market. They will be very good for the growers. But even for the breeders, we don’t believe we’re going to be a negative competitive force. And here’s why.
First of all, it is expensive to do this work. Most projections show that 80 percent of the cannabis market will be based on oil rather than flower within a year or two. I think it’s at 40 percent now, and flower’s around 40 percent?
MERCURY: I think that’s about right, yeah.
HOLMES: I’ve always believed that the flower market would persist a little more than that. I think people still appreciate flower and I know I do.
And I think there will be a place for that that’s a little bigger than what people expect, but certainly that market is going to be compressed down. It’s going to be a niche in the global economy, and because the work we’re doing is so expensive and in order to make it work as a company, we have to focus on a larger market.
So the vast majority of our resources will go towards breeding for the mass market. We just can’t afford to focus on the flower market that much.
Also, the mass market is a place where all varieties really could get huge market share. Whereas in the flower market, I don’t believe that any single variety should get you market share.
But I also don’t believe that it could, because there is such a demand for diversity. And when you’re doing an advanced breeding program you can release it. It takes a long time to breed a new variety.
You have to do a lot of work and you have to do exhaustive characterizations. And the craft market, there’s dozens of releases, new releases every quarter.
So we couldn’t compete at that pace, and we just won’t be releasing many varieties into that market. When we do, those plants will only have a small market share, and in addition, that market is less sensitive to genetic improvements than the mass market is.
You know, for corn, their company spent incredible amounts of money, like, eking out another 0.5 percent increase in yield.
If you had a new variety of GG4 [aka Gorilla Glue # 4, a strain of cannabis] that had a 0.5 percent yield increase, no one would notice that, because the variation in grower skill is 10 percent, or 15 percent, so the raw genetics having a small improvement in yield is going to get swamped out by the skill of the grower. That’s the nature of the craft market, is that genetics still come through.
They come through, mainly, because of combinations of trades, or because of really interesting terpene profiles. Sometimes they’ll be plants that are especially sturdy, and have good terpene profiles, and they will get significant market share. But the skill of the grower is just so paramount in that world, that it’s just a market that is buffered from this kind of competitive threat.
Even if none of those things were true, we believe in that world. We have been dedicated since we started helping the cannabis flower community survive, and this whole backlash has been really painful for us. Not because it’s going to affect our larger business, which, for better or worse, is going to be on the global stage, but—
HEWLETT: Which I think sounds very callous.
HOLMES: It does.
HEWLETT: I mean, that’s such a callous thing to say, but it—
HOLMES: It does. It does, and I don’t think people are going to love hearing that either, because they’re like, “Oh.”
We can’t win, right? Because they’re like, “You’re coming into the flower world, you’re going to crush us.” If we say we’re not, they’re like, “Oh, you’re going to go breed mass market oil? Well, that’s lame, too.”
We can’t win in that battle, but all we can do is say what’s true, and what’s true is that most of our resources will be dedicated to the mass market. In a way, this backlash won’t hurt our business.
We just have so many people who have been dedicated to that community, and the perception that we’re not is painful for us. Because it’s just not true. I think it is true that, to that world now, we seem like the most corporate people in the cannabis world.
HEWLETT: We might be the most corporate people in the cannabis world.
HOLMES: We’re not, actually.
We’re not at all, actually, but it does seem like that to them.
You should come to some more of these investor conferences, though. In the big science world, we are the most radical people in the big science world. You know what? I’ve been reluctant to say, “It’s going to be someone who does this. You guys should be glad it’s us.”
Because I guess that’s not really for me to say, but the truth is that there will not be another planned science company to come into this space that gives a shit about the flower community.
It is just not a normal set of goals and values for an ag science company to have. The fact that we started in that world, and we have our roots in that world, means that we really could be a positive force.
We don’t want to be pushed out of that world, and forced to just do the large scale stuff. We want to play in that world, because we think we can be a good force in that world. And in fact, we wouldn’t have come through all these years of talking with all those people about how they’re going to survive, without having built kind of a plan for it.
I mean, for five years, every conversation we’ve had with our friends and our customers and our partners has been like, “How do we help small cannabis farmers survive that wave of consolidation and capital that’s coming?” We have a lot of smart people in this company, and we’ve been thinking about that problem for a long time, and I think we see a path for it to survive. Many people have said, “Small growers are dead. There’s no way they can survive.”
I don’t think that’s true. I think that as the flower market gets squeezed down to a smaller percentage of the total market, there’s something there that I can take advantage of. It will become a niche product, and that brings up the possibility of turning flower back into the luxury product that it should be, when the whole world is smoking crappy oil, with a hand grown top shelf flower.
HEWLETT: Well, not our crappy oil, someone else’s crappy oil.
HOLMES: Someone else’s crappy oil.
MERCURY: Corporate crappy oil, right.
HOLMES: But the whole world is smoking other people’s crappy oil. Those really dedicated flower farms will be making a luxury product, and if we pull the right economic and cultural levers… we can really turn it back into a luxury product that is getting the luxury price differential that it deserves. And we should be able to drive towards a future where craft flower is back up above $3,000 a pound, and those small farmers can survive, because they’re making a handmade artisanal product that no one else can make.
HEWLETT: I think that this whole idea of having a more profitable craft market, a more profitable small… whatever you want, however you want to define it… you know, the other way, we say we want to help the cannabis community fight for a more profitable craft flower. Then the argument is, “But it’s not about the money, it’s about the medicine.”
I get it, but also, the small farmers who are growing all of this, whether it’s medicine, or for recreational sales, or for whatever it is, across the spectrum, right? Consolidation… I mean, these farms have been small family farms, and they’ve used the power of high dollars per pound to subsist and survive for decades. We all know that.
The challenge in price compression is then the idea that they’re not able to survive. They’re also trying to put beans on the table, and in putting beans on the table, they have price compression, and they’re not able to put as much beans on the table. Or they’re having to find other methods, other paths, and they’re facing that whole constriction, right?
And so, if we say, “Yeah, we want it to be a valuable market again,” or, “We want to help drive this conversation, support you, grow this, et cetera,” whatever… really, whatever conversation we have in that space? Then the conversation becomes, “Yeah, but it’s not about the money, it’s about the medicine,” and I think that’s such a hard, it’s such an area where we can’t win.
And no matter how much good and how much help we try to do, it becomes then a conversation of: The medicine shouldn’t be, you shouldn’t have to pay $4,000 a pound, or whatever it is. And I think that’s a hard balance to be in.
HOLMES: Yeah, but those farmers, for the most part, know that it’s the economic forces that have led to this price drop. And that if prices don’t go up, they won’t be able to survive. I think many of them don’t feel the need to get rich anymore, and have abandoned that dream, but they need to survive.
HEWLETT: They need to survive.
HOLMES: And they’re not going to survive unless the price per pound goes up again. They just aren’t. And there’s a couple of things that can we do to help.
Anyway, to get that stuff to happen, it’s going to require a lot of work, and I think programs like the Appalachian projects are moving in the right direction. The Appellations projects are going to need to be tied to genetics, and we are going to have plant breeding resources that let us make really interesting new plants.
We want those plants to go into that world, be tied together with marketing and branding efforts, like the Appalachian projects, and use as the foundation for localized genetics, programs and collective programs that let those farmers produce stuff that is really, really incredible.
So, if we develop stuff that has outrageous levels of limonene, and even pinene [another terpene found in cannabis], we want those plants to go back to those farmers. We want them to be tied to specific regions and specific Appalachian regions. We want them to be the raw materials that those farmers use to create incredible luxury flower.
We made two commitments in our statement. That was always our intention, but we made it clear in the statement, I think. One is that we are specifically going to use our science to help other breeders. We don’t want to be the only breeder. So, as we do find markers, we’re going to make them available to the genotype customers.
I mean, people felt like we’re stealing their data, and we’re going to use it to develop genetic markers that are going to drive our own breeding program. But actually, the opposite is true.
HEWLETT: We’re not using their data; we’re using our plants to find markers, and then we’re sharing them with everyone else who’s ever done testing with us.
HOLMES: As we find them, we’ll tell people, even retroactively, “Hey, the plant you tested with us a couple years ago, we just found out that it’s positive for the PM resistance marker.” We will share that information to help other breeders accelerate their work. That’s really important to us. We want to be figuring out how to democratize our science.
We also need to start being more straightforward about the fact that we’re a company. We have to take reasonable steps to protect our IP, and not give stuff away to our competitors. There’s always a balance there, but in any way that we can, we’re going to democratize our science.
Like, doing that, making markers available to our customers. Doing genotype testing at all, it doesn’t help our business a ton, but it is important for us to get our science out to other breeders.
Then, in addition, when we release plants as clones to the open flower market, we’re going to do that under licenses that let people continue to breed with them, so those genetics aren’t going to be patented. They’re not going to go and destroy that community. They’re going to be raw material to feed into that cycle of innovation there, and we’ve committed to that, and we are going to do it.
For all those reasons, I think people will look up in a couple years, and they’ll say, “Wow, we’re still here. We’re thriving. Every now and then, a Phylos plant comes through, and it’s good for the growers, and it’s exciting for the breeders who get to work with it.”
We can test the Phylos, and they can help us accelerate our own breeding programs. And yeah, they’re killing it in that market, and breeding plants that we would never bother with. But when they come here, they’re a positive force. I think that’s what people will see in a couple years.
MERCURY: You mentioned the fallout from this recently. So within less than a week, there’s been the closure or the announced closure of the Open Cannabis Project, and the severing of ties with Cultivation Classic, and with East Fork Cultivars. Do you see something, even if it’s not by your own hand coming in, to replace the work that OCP was doing? Do you think someone’ll pick up that charge?
HOLMES: The OCP was shutting down anyway. They were already going to shut down. This is, I guess, what made them announce that, but my understanding was that they had seen that as inevitable, and that was already the plan.
HEWLETT: I think there are a number of organizations who could, from the conversations that we’ve had with the OCP recently.
The conversation is not just about the genetics, right? You can’t protect plants just by the genetics, and I think that’s where other labs were getting involved, and other companies were getting involved. There’s an opportunity for Phylos to continue to support that from a genetics end, for other labs to support that from a chemical testing end, for legal teams.
I think that the hard part about Phylos is, we are agnostic when it comes to true ownership or licensing power or any of those things. We say, “This is what you have given us, this is the information about it.” We’re not able to then say, “And we verify that you have owned since 1982.” We have no capacity to do that, but—
HOLMES: We also can’t even say, “This is definitely Sour Diesel.” That’s up to someone looking at the Galaxy to make that decision. And you can tell if it’s Sour Diesel from looking at the Galaxy, but we don’t say that.
HEWLETT: We can’t say that. I think the opportunity for the industry, and the opportunity for other players to come together, is not necessarily in being a nonprofit, or being an organization that drives that forward.
But for legal companies, true companies who have the legal experience, the skill set, the ability, the actual context, to be able to help growers, to help growers have a conversation that is not just about genetics. It’s not just about chemotype.
It is not just about verification of something from whatever point in time in history, but really, the idea of all that coming together, and creating licensing structures in a space where nothing really exists now. I think that’s an area where we’re doing some of that.
As we pursue varieties to in-license for our own breeding program, we are creating licensing structures, and we are creating those tools, and fair credit, fair compensation for the breeders that we work with.
I think that, combined with a number of other efforts across the industry from experts in plant breeding, from experts in the legal side of that world, there is a space for that. I think that there’s a huge market need for that, but there’s another conversation of trust, and operating legally, and a number of other things that have to happen for that to be true.
I think, as long as there’s not a change at a federal level, that’s also going to be a really challenging conversation. Because even relevant protections on THC varieties aren’t really feasible right now at the federal level…. But there’s a much broader conversation that has to happen with any industry, and I think no one company or no one organization can have that. I think that’s also part of the challenge that the OCP was facing.
Back then, the OCP team did a really great job in bringing people together. But I think it’s hard when it’s Oregon- or California-focused, when there’s an entire East Coast market. There are entire other regions who are having these conversations, and without a broader national conversation, it’s going to make it really challenging for something to take hold.
But I think that there is space for that and there is an opportunity for, we’re able to come together and start having these conversations. I think that’s an area where we want to be. We want to be open about how we’re doing this, because there isn’t really, there’s no book that you can go look at to say, “This is how we do it.”
And so, Phylos can say, “This is how we have done it. We’re constantly going to try and do it better every single time, and figure out a better way to do it, or a more impactful way to do it,” or to work with the folks who, on the legal end, really know that, what that language should be, and how to create those contracts, and what that should actually look like.
I think there’s an opportunity there, and it’s not something Phylos can do, and it’s not something any of the other individual companies can do. But it’s something we can all work towards together.
HOLMES: I mean, I think it turned out that the idea of making data public was just, wasn’t a powerful enough way to protect genetic diversity or small farmers, and it was incredibly confusing to people. It led to a lot of misunderstandings about the value and reading of data like that.
I still think that it’s a problem for cannabis that there isn’t a record of all this stuff that’s in the public domain. I still think that’s important, but it just came to be clear that more powerful things needed to be put in place to help small farmers, and to preserve genetics. One of those things would be an infrastructure around licensing contracts, that would help breeders actually get paid for what they paid.
The OCP started looking into how to do open source licensing contracts and things like that, and other people are working on that as well. And that’s something that Phylos can help with. In some ways, the genotype test is a good basis for a licensing contract, because it lets you uniquely identify your brand. And we want to help breeders however we can, and we will have various ways to help them get to market. That matters to us.
But to really help that world, there needs to be a concerted effort around licensing and contracts. There need to be seed bags. There need to be preservationist efforts, there need to be collective efforts that help people band together for pricing power. A lot of things, that, just making data public wasn’t going to be a powerful enough tool.
Yeah, let me say one last thing. The hardest part about this has been that intensity of the anger out there, I think, is based on the fact that people feel threatened. When the dust clears, people will find out that we are really, really dedicated to that community, and we’re not going to let ourselves be a negative force. We’re going to make sure that we are a positive force.
But because people feel threatened, the anger is very intense, and for us, the most hurtful thing is that it’s been directed at our partners, and our people that have been associated with us. That is really just unfair and cruel and wrong. We worked with a lot of really, really good people. We did have a lot of trust in a lot of places, and we worked with tons of incredible groups.
It is totally understandable that right now, it’s hard for them to work with us, and we want them to do absolutely whatever they need to do to succeed. And we totally understand that it’s hard for them to work with us right now. But what we don’t understand is why they’re being so aggressively targeted, even after they’ve decided to stop working with us. They haven’t done anything wrong.
Even if we had done some of the things that we’ve been accused of, our partners haven’t done anything wrong. And to make it hard for them to function is just vindictive and wrong and—
HEWLETT: It goes against the values that the community holds so dear.
HEWLETT: I think that’s also what’s really shocking, is that, instead of banding people together and bringing people up, they’re just pushing people down.