The great management guru Peter Drucker is often quoted as saying that “you can’t manage what you don’t measure.” Drucker promoted business discipline and focus by advocating for measurement of clearly established metrics for success.
And so it was with great promise that California began the legalization of Cannabis with a focus on Drucker’s maxim for measurement with the state-mandated computer system for “track and trace” called METRC. So far however that promise has failed to deliver and it shouldn’t be much of a surprise if we examine the track record of government bureaucracy and info-tech. Has the government ever met a computer system it couldn’t make less efficient at a much higher cost than the private sector?
The intentions and motivations behind the government mandated tracking system were important for several reasons. With a deeply entrenched illegal, unlicensed cannabis cultivation business, how would government sort out the legal from the illegal? Of course, the other major motivator is that cannabis is consumed and people care a lot about what goes into their bodies. Consumers care about methods of cultivation and they want to know, does their cannabis come from a regulated, licensed and tightly controlled company or was it grown by unscrupulous, unlicensed farmers by any pesticide-laden means necessary? You also can’t tax “what you don’t measure” and taxes are really what this (at least for the government) is all about.
When California voters legalized marijuana, they were promised a sophisticated platform of RFID, databases, point of sale systems and other components that would be integrated throughout the cannabis marketplace to form an all-encompassing “track and trace” system. Products would be closely monitored from seed to sale. However, more than a year after sales commenced and the track-and-trace system isn’t doing much of either.
According to an AP story, as of April 2019, only nine retail outlets were entering data into the network even though there are over 600 shops licensed to sell marijuana in California. Likewise, of about 4,000 licensed growers, only 250 are using the system. Considering that the state contract for METRC $60 million over two years, the cost per company using the system could be about $100,000 per year. With only $288 million projected to come into the California state treasury from cannabis taxes and fees, any government expenses have to be reconciled against the tax revenue – although that kind of financial analysis is deeply buried in opaque layers of government finances and the real net revenue will be difficult to uncover.
The headline of poor METRC adoption levels is somewhat misleading in the sense that compliance is only required of existing annual licensees; but, the related licensing issues also have backlog and regulation problems that could further compound the problems with legalization.
By most accounts, the METRC system itself is functional; but, adoption of any computerized system across thousands of different companies coordinating with the government is a very big challenge. Efforts are underway to catch up by first providing some regulatory relief with extra time (SB 67) and with improved education. But, for now, how are state officials watching over the nation’s largest legal cannabis market? It’s essentially a paper trail.