Bold Business Logo

Big Gov Strikes Again: California vs. the Car Industry

For a long time, the state of California has called its own shots. Given its large population, California carries a great deal of weight in consumer markets. If a market trend takes off there, the chances of it spreading throughout the nation is quite high. There’s a reason so many technology firms choose California despite it no longer being one of the best states for startups. But this same influence businesses enjoy in California is the same one that can come back to bite them. This is especially true when state policies try to force change before a market is ready. And that’s precisely what seems to be happening with California’s electric vehicle law that will soon ban gasoline-powered vehicles.

(Which states are best for startups? Bold has a list for you.)

Recently, the California Air Resource Board adopted a new policy designed to accelerate electric car adoption. In essence, the policy progressively requires automakers to only offer electric vehicles as new purchases after 2035. Though California’s ban on gas cars after this only applies to new car purchases, its effect is nonetheless tremendous. While the motivations may be positive in relation to climate change, numerous challenges exist. And one of the most notable ones involve secondary market effects from California’s electric vehicle law. Rather than having a positive influence, the policy has just the opposite if supply and demand fail to match.

“It’s a hell of a way to set transportation policy. It has pretty significant consequences for consumers and the supply chain.” – Scott Segal, Partner at Bracewell LLP

California’s Electric Car Law

The policies set forth by California’s Air Resource Board establish a series of milestones that automakers need to meet. By 2026, the percentage of new vehicles that are electric must be 35% or more. This figure then increases to 68% by 2030 before finally requiring 100% electric care by 2035. What if automakers fail to comply? For every car sold over the assigned quote that’s not electric, a $20,000 fine is applied. Given that the state is one of the largest car consumer markets, California’s ban on gas cars has automakers’ attention. But despite a willingness to comply, many fear the milestones are simply not feasible.

It should be noted that California’s electric car law does allow automakers to sell up to 20% of these new cars as hybrids. Likewise, if automakers make early gains over the stated milestones, they can bank their surplus in years ahead. But the biggest concern for automakers is the tendency for other states to follow California’s lead. Many expect that up to 15 other states will soon adopt a similar policy to California’s ban on gas cars. Naturally, these ripple effects create an even bigger challenge for automakers in their endeavors. In essence, California’s electric car law may likely invite government involvement in car markets across the country.

“Whether or not these requirements are realistic or achievable is directly linked to external factors like inflation, charging and fuel infrastructure, supply chains, labor, critical mineral availability and pricing, and the ongoing semiconductor shortage.” – John Bozzella, President and CEO of the Alliance for Automotive Innovation

Major Challenges Ahead for Compliance

In looking at California’s electric car law, it’s essential to examine the overall electric car market currently. Without question, there is a significant consumer demand for these cars. Both Ford Motors and Tesla have waiting lists for their vehicles. But demand doesn’t necessarily extend to most Americans. Compared to the average cost of a new gasoline-powered car, which is about $48,000, new electric cars average $66,000. Even with the incentives for electric car purchases under the Inflation Reduction Act, demand may falter. If that’s the case, the California’s ban on gas cars may actually raise used car costs and make it harder on Americans. These are the kind of worries that many have when government starts interfering with market forces.

An electric car being charged by something blue
California’s electric car law is great for electric cars and bad for gas-powered cars… and bad for business.

Of course, this is just one set of issues posing challenges for California’s ban on gas cars. Another major one involves infrastructure and supply chain issues. In order for California’s electric car law to work, the state will need to significantly boost public charging stations. Estimates suggest it will need 1.9 million more by 2035 to meet needs linked to policy objectives. Likewise, supply chains for electric cars are formidable. Automakers already face issues with traditional vehicles related to supply chain bottleneck. This explains in part why prices have skyrocketed. But these issues are even more significant for electric cars. Specifically, scarcity of key resources like Cobalt, Nickel and Lithium for battery manufacturing exists. If these problems persist, then meeting California’s electric car law milestones will be extremely difficult.

“Right now, automakers can sell as many as they make. The bigger question is whether they can actually produce enough cars!” – Gil Tal, Transportation Expert, University of California, Davis

Not Just Too Much and Too Soon, But Too Far

When it comes to California’s electric car law, the state has some permissions other states do not. Based on its population size and air pollution issues, California has been granted a waiver regarding environmental policies. In essence, it allows the state to impose greater restrictions in areas deemed to potential affect their climate. As such, the EPA must sign off on California’s ban on gas cars. Even if this occurs, there’s no guarantee that consumers will suddenly flock to this new market. Some states may also challenge California’s electric car law legally, fearing the state’s broader influence. Nothing is set in stone just yet.

One thing is evident, however. The state did not have to go to these extremes to achieve progressive goals in renewable energies. Other countries have achieved remarkable consumer conversions to electric vehicles with the use of incentives alone. By encouraging the market instead of creating enforcements, countries like Norway have made significant progress. Financial and tax incentives have now led to 80% of consumers driving electric cars. By taking a less forceful approach, countries like Norway allow market forces to direct change. And these same incentives tapped into business innovation and creativity to solve issues proactively rather than being fined or coerced. Whether California’s ban on gas cars’ experiment works or not will eventually be determined. But generally, it’s never good to restrain the ingenuity of the markets and business’ ability to navigate them.

 

The government wants your whipped cream–can you believe it?

What’s Happening with Magic Mushroom Therapy? – A Psychedelics Industry Update

Over the last several years, an increasing amount of research appears to be supporting psychedelics benefits. The number of mental health conditions that seemingly respond to magic mushroom therapy are indeed several. These include conditions like PTSD, depression, eating disorders and a variety of substance addictions. In fact, some of the studies have shown astounding results in terms of percent response rates. The duration of effect has similarly been impressive among study participants who have a positive response. All of this has led to great excitement about the potential of psychedelics benefits. And naturally, many startups and companies are exploring this burgeoning new field of therapeutics.

While this is indeed good news for millions suffering from these mental health disorders, much remains in question. Recent evidence suggests that magic mushroom therapy and other psychedelics have unique effects within the brain. But there is debate as to whether a “psychedelic trip” is required as part of psychedelics benefits. And companies also differ in how they are approaching these new types of agents. Some are inclined to provide a range of natural-type products while others prefer streamlined pills and patents. Others see the current state of affairs as simply the start of a completely new approach to mental health. Given this, the following offers an update on where the psychedelics industry stands today.

“We’ve now got out to 100 days after a single treatment [of magic mushroom therapy], and we see really no decrease in outcome measures.” – Charles Nichols, Pharmacologist at Louisiana State University

Current Understandings of Magic Mushroom Therapy

Whether talking about psilocybin or other psychedelic compounds, all appear to have some similar features in common. These substances appear to work primarily at brain’s serotonin receptors. Interestingly, other antidepressants also work by increasing the brain’s levels of serotonin. However, psychedelics benefits have additional effects in both response rates and duration of effects. Several studies involving PTSD, depression and alcoholism show extended response times to magic mushroom therapy. Active research is ongoing in tobacco addiction as well. And in many cases, these responses are seen after a handful of treatments. Clearly, the mechanism of action of these drugs are different from traditional pharmaceuticals.

(Dig into Bold’s exploration of psilocybin as a tool to combat tobacco addiction in this story!)

As it turns out, recent research suggests that psychedelics and magic mushroom therapy may have a few different effects. Significant research now indicates these compounds “reset” our brain’s default mode network or DMN. Our DMN is what guides us in the same patterns of thinking based on learned experiences. By temporarily disrupting the DMN, psychedelics offer new ways of thinking that can cure a variety of mental health conditions. In addition, other research now shows that psychedelics benefits also result from nerve cell healing effects. Specifically, these substances seem to heal connections between nerves, which may also explain their lasting benefits. All of this offers further evidence as to why psychedelics have significant mental healthcare potential.

“What we’re seeing right now is only the first generation of these drugs. The third generation [of psychedelics] will be completely new compounds.” – David Olson, Neuro-chemist at the University of California at Davis

Major Industry Shifts in Funding Supports

At the current time, there are over 50 psychedelics companies that are publicly traded on the market already. This does not even include a number of startups that are similarly interested in magic mushroom therapy. These figures have led some analysts to suggest the entire industry will be worth $6.9 billion by 2027. Given the difficulty that advocates claiming psychedelics benefits had in gaining momentum previously, these figures are astounding. But the FDA has recently labeled both psilocybin and MDMA psychedelics as breakthrough drugs, facilitating their investigation. This has certainly fueled the growth of magic mushroom therapy research and other psychedelics studies.

A baggie and a bowl of shrooms
Magic mushroom therapy is gaining in acceptance–are you ready to take a trip?

Given these changes, it is worth noting that significant shifts in research funding have occurred. Prior to these developments, most researchers raised support through philanthropic efforts and donations. But with FDA encouragement, there are fewer individuals and organizations willing to lend such supports. Instead, these same entities would rather invest, now seeing the potential for a profitable industry in the future. As such, researchers have had to shift gears by creating special purpose investment vehicles to receive financial support. Companies like Vine Ventures, Palo Santo, and PsyMed have partnered with researchers in these efforts. In contrast, larger pharmaceutical companies involved in psychedelics research are attracting investors in a more traditional manner. In both cases, these shifts from donations to investing further show how rapid this industry is evolving.

“The concern that I have is that if we’re too quick to just open up access, knowing human beings and the way that we operate, we could miss the therapeutic opportunity.” – Payton Nyquvest, Co-founder and CEO of Numinus Wellness Inc

A Mental Healthcare Evolution

In addition to a growing field of competitors involved in magic mushroom therapy, there’s also a range of approaches. On the one hand, some companies are taking a more naturalistic approach and trying to simply develop high-quality products. Numinus Wellness is one such company as they embark on tedious efforts to cultivate a process that creates high-quality products. Their vision is that people should be able to choose which product they want to optimize psychedelics benefits. Other companies, however, like Compass Pathways Plc. believe in a more structured strategy. Specifically, they are pursuing product as well as therapy process patents in an effort to safeguard their investments. These reflect opposite ends of the spectrum when it comes to how the psychedelics industry may evolve.

While it is yet unclear how products and psychedelics benefits may be offered, one thing is clear. All forms of psychedelics and magic mushroom therapy approaches will involve therapy-assisted guidance. Even in existing studies evaluating psychedelics benefits, those receiving therapy with placebo did show some response over baseline. Thus, it will be critical for all potential patients to have increased access to therapists within this industry. Notably, this does not exist currently as many lack health insurance that covers such care. Given the incredible health benefits that appear to exist, this will be the more challenging pursuit in the coming years. But while these obstacles remain, it’s evident the psychedelics industry is moving ahead full force. Everything continues to indicate these therapies will play an important role in healthcare’s future.

 

Want to control your cost efficiency and protect your bottom line? Bold Business can help.

Rest in Peace, Cash

In 2015, when Apple Pay was first introduced, some claimed it would be the beginning of the end for cash payments. Of course, credit and debit cards had already helped move societies in that direction for a while. But having the convenience and ease of simply using your smartphone for payments suggested the days of the physical wallet were over. Since then, the transition to a cashless society has been rather slow but one that has consistently made progress. And while there are many reasons why consumer adoption has dragged, it certainly appears a cashless future is on the horizon. In fact, a handful of nations is almost there already.

Recent research reports now show that there are 3.4 billion digital wallet users worldwide. By 2026, these same reports project this figure to grow by 53% to 5.2 billion as many developing nations embrace the technology. Combined with advancing options of “Buy Now, Pay Later” and app-less digital wallet offerings, a cashless future looks inevitable. But what will a cashless society look like? And which companies are likely to come out on top as the digital wallet takes over? In all likelihood, digital and contactless payment systems will soon start adding new features to attract customers. And those who do it well will likely reap the rewards.

(Bold published an explainer on the “buy now, pay later” industry–check it out here!)

Apple’s Vision of a Cashless Future

The initial launch of Apple Pay certainly didn’t go as expected. Apple predicted that iPhone users would rapidly embrace the new technology, sealing the demise of the traditional wallet. But adoption was slow to say the least. The first year out, only 10% of iPhone users activated the Apple Pay feature. This only increased to 20% the next year. But unlike some of Apple’s other projects, like the Home Pod speakers, it chose to stick to its guns. Ultimately, the company believed in a cashless future that would eventually go digital. So, Apple Pay continued waiting for the world to catch up.

Now it seems that the world is much more likely to embrace a cashless future. Thanks in part to a pandemic that saw a boost in contactless payments, Apple Pay activation grew to 50% in 2020. It stands at 75% among iPhone owners. But even more importantly, roughly 90% of all U.S. stores and payment systems have Apple Pay options. Not only does it look more and more like a cashless society, but digital wallets are on the rise. Consumers use Apple pay to buy online, to purchase in stores, and to send money to friends. Apple believed a cashless future was inevitable, and it endured until that reality appeared.

“There’s a legitimate chicken-and-egg problem in payments. Consumer habits are very hard to change, and merchant acceptance takes many, many, many years.”- Harshita Rawat, Senior Research Analyst for AB Bernstein

Barriers to a Cashless Society

Despite many people now having active Apple Pay and other similar accounts, that doesn’t mean they use it constantly. There remain some barriers to use when it comes to contactless systems and digital wallets. One of the most notable barriers is that some vendors are reluctant to change their payment systems. Specifically, using Apple Pay and similar systems at restaurants and gas stations may not be possible. Other obstacles also exist among consumers themselves. While digital apps offer contactless transactions, they do not otherwise provide that much greater convenience or ease than credit cards. Thus, it has taken longer than expected for many customers to change their existing payment habits.

A person with a credit card and a phone
We’re not quite a cashless society yet, but we’re getting there.

While these barriers to a cashless future remain, innovative solutions are continuously being developed. One such company, eTip, offers a contactless, app-less platform that allows consumers to digitally tip for various services. Even if a restaurant or vendor does not allow Apple Pay or other digital wallets, eTip gives customers an alternative. If a customer wishes to tip a server, valet, or other person, they simply scan that person’s eTip QR code. From there, they rate the person, assign a tip, and choose their digital payment method. Options include Apple Pay, Google Pay, or even debit cards in their digital wallets. These are the type of innovative solutions that are driving us toward a cashless society.

“A highly competitive wallets’ landscape means that vendors must differentiate themselves by integrating machine learning to provide spending insights and introduce new services such as wealth management to add value.” – Damla Sat, Researcher in FinTech at Juniper

Trends Toward a Cashless Future

Believe it or not, the U.S. is lagging behind when it comes to progression to a cashless society. Other countries embraced contactless, digital payments years ago, and some are nearly cashless today. In fact, there are roughly a dozen countries today where cash represents 2% or less of all transactions. The top three include Norway, Finland and New Zealand. And as you might have guessed, these are the same countries where ATMs are becoming increasingly scarce. Because they are essentially a cashless society, the use for these “dinosaurs” are no longer needed. At the same time, other countries like Vietnam, the Philippines, and Thailand are expected to increasingly embrace digital wallets. By 2026, experts suggest that 75% of these countries’ populations will have activated various digital cashless apps. All of these trends point to a cashless future where digital payments are king.

Perhaps, all of this is not that surprising. Blockchain, cryptocurrency and fintech innovations look to be ushering in a new age of digital currency. Likewise, Apple Pay has many major competitors today, including Alipay, Google Pay, Cash App and Venmo. This means that a cashless future is likely to bring additional innovations to entice consumers use. Loyalty programs, personalized marketing, and unique features will soon appear with some systems. And as already evident with companies like Apple, tech giants are beginning to increasingly explore the banking and finance sector. It might have taken some time, but trends strongly suggest a cashless society looms on the horizon.

Rest in peace, cash.

 

Want to control your cost efficiency and protect your bottom line? Bold Business can help.

How can we help?