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2 Things We Learned From Elon Musk Smoking Pot During a Podcast Interview

By Sean Williams - Sep 16, 2018 at 7:21AM

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All this buzz actually means something.

Rarely do a few days go by without the visionary CEO of Tesla ( TSLA -6.42% ), Elon Musk, finding himself in the spotlight.

Musk is known for bringing a variety of thus far successful ventures to life. This includes the introduction of what looks to be the first successful automotive company in more than five decades, as well as pet projects SpaceX and The Boring Company. SpaceX is responsible for launching advanced rockets and spacecraft with a growing success rate, with The Boring Company primarily working on the Hyperloop One project that could transform the speed at which we travel from one location to another.

A man holding a lit cannabis joint in his fingertips.

Image source: Getty Images.

Elon Musk smokes weed and creates quite the buzz

However, Musk also likes to push boundaries, which means the news he creates isn't always of the good variety. Just over a week ago, Tesla's Chief Accounting Officer, Dave Morton, announced his resignation less than a month after taking the job because he felt that he wasn't being heard or listened to by Musk or the board regarding the company's then on-the-table go-private deal. On the same day Morton resigned, Tesla's head of human resources, Gabrielle Toledano, announced she was stepping aside after a leave of absence. 

While these key departures should be headline stories, they've taken a back seat to a separate event involving Elon Musk. On Sept. 6, during a 2 1/2 hour-long video interview with host Joe Rogan, Musk shared a marijuana cigarette with Rogan. For more than a week now, it seemingly has been the only media story that financial outlets can discuss with regard to Musk and Tesla.

With that being said, here are the two things you should understand following Musk's "controversial" weed-smoking video.

A man smelling the leaves of a potted cannabis plant.

Image source: Getty Images.

1. We've come a long way on cannabis acceptance in a short amount of time

First, despite all the hoopla surrounding Musk's use of a cannabis cigarette, it demonstrates just how far the legal weed movement has come in such a short period of time.

Picture this for a moment. It's 1995, not a single state in the U.S. allows physicians to prescribe medical marijuana and the idea of recreational weed being legalized at the national or state level is almost laughable. According to the latest Gallup survey, just a quarter of the population favors the idea of legalizing recreational marijuana.

Today, 30 states have passed broad-based medical marijuana laws, including the Republican-leaning state of Oklahoma, which became the 30th in June. Republicans traditionally have a more negative view of marijuana than self-identified Democrats or Independents, so this legalization is a big deal. Of these 30 states, nine also allow adult-use marijuana to be consumed, and eight have OK'd the licensed sale of recreational marijuana (Vermont being the one exception).

When it comes to favorability, an all-time record 64% of respondents in Gallup's October 2017 poll supported the idea of legalization. An even larger percentage of survey takers (93%) in an April 2018 poll from the independent Quinnipiac University were in favor of medical marijuana being legal.

Marijuana is now regularly discussed by political candidates. Once considered a taboo issue, talking about cannabis has become somewhat commonplace in American households.

And for the record, Musk is far from the only CEO to have ever admitted using marijuana. George Zimmer, the former CEO of Men's Wearhouse (now known as Tailored Brands), admitted to smoking pot, and billionaire Richard Branson regularly admits use of the drug. 

A drug free zone street sign in a quiet neighborhood.

Image source: Getty Images.

2. We still have a long way to go

Yet for as far as the marijuana movement has come in America, the Tesla chief's on-air pot antics also demonstrates that there's still a long way to go.

Even though marijuana is legal in California, where the interview took place, the grim reality is that the substance still is illegal at the federal level. Marijuana is a Schedule I substance, according to the Controlled Substances Act, meaning it's entirely illegal, prone to abuse, and has no recognized medical benefits. This classification puts it on par with LSD and heroin, and actually one level behind cocaine, which is a Schedule II drug.

One issue with marijuana is that lawmakers still aren't convinced that it provides benefits or isn't a risk to the American public. The obvious solution would be to run Food and Drug Administration-approved clinical trials with federally grown cannabis, but a mixture of red tape and supply concerns have constrained medical research to this point.

Arguably an even bigger problem is money. As long as cannabis remains a Schedule I or II drug, Section 280E of the U.S. tax code is applicable. This more than three-decade-old tax section disallows businesses involved in the pot industry from taking normal corporate income tax deductions, save for cost of goods. In short, it can lead to an effective tax rate of perhaps as high as 90%.

Even though weed is illegal at the federal level, that doesn't stop Washington from collecting tax on marijuana industry profits. Legalizing marijuana would no longer subject these businesses to 280E, which would actually reduce long-term tax collection for the government. That's right. Even with the added sales from legalization, not being able to tax existing profits at a high rate would result in less revenue for the federal government. This suggests any chance of legalization in the U.S. is probably still a ways off.

Ultimately, the media probably has made Musk's marijuana antics more of a story than it needs to be, but it has exposed both marijuana's triumphs and failures in the United States.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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