Investing in Psychedelics w/ Brom Rector (Ep.138) | Infinite Loops
Brom Rector joins the Infinite Loops podcast to discuss the current state of the psychedelics industry, lessons learned founding a fund, the differences between psychedelics and cannabis, and more
Key Takeaways
In the United States, we often politicize things that don't need to be politicized (COVID, psychedelics, etc.)
Recent clinical trials involving psychedelics, as well as improving public onion point to a bright future for psychedelics
Psychedelics can be a tool in combatting mental illness - 20% of Americans are diagnosed with some form of mental health illness
We should not let fear stop us from experimenting and making progress
We didn't leave the Stone Age because we ran out of stones. We innovated and pushed boundaries forward
Do not be discouraged by naysayers - up until the 1800's medical doctors thought hand washing was dumb
Brom recommends that people at least research psychedelics to better understand them. From there, they can decide whether or not they want to try psychedelics
Trust your gut and intuition (as a bonus, measure the amount of times that your intuition has been right or wrong)
The Legacy of Richard Nixon's War on Drugs
Jim thinks Richard Nixon was genuinely crazy
Growing up, the propaganda directed at Jim and his friends was that psychedelics were off-limits
Kids were told that people on acid would jump off a roofs, among other outlandish stories
The State of Mental Health in the United States
20% of Americans are diagnosed with some form of mental health illness
1 in 6 Americans are on some form of psychiatric medication, most commonly SSRIs
For 1 in 3 people, SSRIs are completely ineffective
Even before COVID, mental health trends were moving in a negative direction
Deaths of despair (which includes deaths by suicide, drug and alcohol poisoning, and alcoholic liver disease and cirrhosis) have doubled since 1999
Recent clinical trials point to the positive impact that psychedelics may have in treating mental illness
The stigma of psychedelics is finally waning, but there is still hesitancy
Ultimately, Jim and Brom foresee psychedelics being integrated into modern medicine
Treating PTSD with Psychedelics
Veterans are one of the first groups to get approval to treat PTSD with psychedelics
The political story of treating veterans with PTSD was effective in convincing both Republics and Democrats to greenlight clinical studies
We often politicize things that don't need to be politicized
Jim is funding two films that tell the story of people experimenting with psychedelic treatments
Investment Opportunities in Psychedelics
Brom is currently in the process of raising funds from investors for his venture capital fund
The target investor profile is someone who is already keen on the idea of using psychedelics, for either medical or recreational use
People who decline investing in Brom's fund typically say that they will have a hard time explaining the investment thesis to stakeholders
Some institutional investors are afraid of taking risk. For them, there is limited upside, but plenty of downside risk
Nobody gets fired for investing in IBM
Business Models in the Psychedelic Industry
Drug Development: Taking drugs that already exist, like MDMA, and trying to get it approved by FDA or other regulatory bodies
Drug Discovery: The process of trying to create new drugs that are better than the current ones
Drug discovery is a more complicated and risky business model
Psychedelic Medical Treatments: Delivering psychedelic telehealth (or in-person) treatment to patients
Brom's fund invested in a company called Nue.Life. Nue Life provides at-home ketamine treatment. A single dose of Ketamine can be prescribed via app. Then, they can provide a telehealth supervised ketamine experience
50,000+ experiences have been provided since inception
Beond.US is a clinic in Mexico that provides Ibogaine treatment for Opiate addiction
Infrastructure and Accessories: Accessory businesses such as software and other services in the psychedelic industry
Wavepaths is a software that generates music to use during psychedelic treatments
Dealing with *psychedelic* naysayers
Many of the current psychedelic drugs were invented by humans over 100 years ago
Issue #1: 5-HT2A and 5-HT2B receptors are agonized by the drugs. Historically, the FDA has pulled drugs over agitating these receptors
There is concern that using psychedelics can cause heart valve damage. Level of risk varies by patient, and further study is required
Issue #2: Not everyone has 6+ hours to spend in a psychedelic state
Can we get the same result from psilocybin in 2 hours rather than 6 hours?
Issue #3: Not everyone is comfortable with hallucinations
Can we eliminate hallucinations from psychedelics? Do we need the "trip" to benefit from the psychedelic experience?
Brom believes the hallucinations are a critical component of introspection and self-discovery during a hallucinogenic trip
Non-hallucinogenic psychedelics can potentially aid in increasing brain plasticity. Potential applications include recovering from stroke, preventing dementia, and more
We should not let fear stop us from experimenting and making progress
David Deutsche - We can't possibly know what our future knowledge will be
What role does Big Pharma play in psychedelics?
Brom does not buy into the narrative that Big Pharma is opposed to psychedelics
Many of the anti-depressant patents expired many years ago; pharmaceutical companies don't make that much money off of SSRIs
Perhaps the business model and treatment paradigm change. Instead of a daily SSRI, maybe people go for a supervised psychedelic treatment twice a year
Cessation of depression usually only lasts for 3-12 months before it returns
Exciting Psychedelic Business Models
In terms of business models, Brom is most excited about:
Pangea Botanica: They are combing though the catalog of less-commonly known psychedelic compounds to discover how they might be turned into psychedelic products
Opiate addiction Treatments: There are no great solutions to treat opiate addiction currently. Ibogaine appears to be very effective in treating opiate addiction.
For whatever reason, ibogaine seems to diminish withdrawal symptoms overnight
1-3% of people who take ibogaine have some form of detrimental heart episode
Connection between the Mind & Body
Historically, western medicine has refuted or ignored any discussion about the mind-body connection
Dr Russell Kennedy on anxiety: "Our society worships the mind and doesn’t trust our body. We cannot use the mind to heal the mind, we need to also involve the body".
Dr. John Sarno had incredible success in curing people, largely by integrating both the body and the mind
Psychedelics can play a major role in bridging the mind body gap
Many people think they have no mental health issues. Most, if not all, people would benefit from introspection and improved mental health
Psychedelics work by agonizing serotonin responses. The body has more serotonin receptors than the brain
Many people are sharing anecdotes of treating irritable bowel syndrome with psychedelics
If you are alive, you're going to have problems. The only way to solve those problems is to keep learning and pushing forward
We didn't leave the Stone Age because we ran out of stones. We innovated and pushed boundaries forward
Cultural Lag & Convincing Others to adapt
There is always cultural lag - there are people who are tuned in and those who are not yet tuned in
Hand-washing was once seen as dumb by medical professionals
Hungarian physician Ignaz Semmelweis worked in a maternity clinic in Vienna. Dr. Semmelweis investigated why so many women were dying from puerperal fever — commonly known as childbed fever
Dr. Semmelweis discovered that one of the maternity wards had a nearly 5x rate of death than the other. After much research and analysis, Dr. Semmelweis identified the key difference - hand washing
After much convincing, Dr. Semmelweis convinced his colleagues to start washing their hands - death rates immediately dropped
However, Dr. Semmelweis passed away. His successor reversed the decision to require hand washing, and death rates skyrocketed for the next 70 years
Cannabis Vs Psychedelics
The medicinal benefits of cannabis are mostly immediate relief of physical pain
In comparison, the benefits derived from psychedelic use are a bit longer-term and involve multiple touch points (also multiple business opportunities)
Psychedelics are a portfolio of products versus cannabis is a single product
There are multiple clinical trials ongoing for psychedelics, but not much clinical research going on for marijuana
Cannabis is similar to old SSRI model. Have to consume consistently to get desired effect
Drug Tolerance
There are certain people that do not get any impact from psychedelics - people metabolize and react to psychedelics differntly
Micro dosing
Not many clinical studies that have been conducted on the effects of micro dosing
Micro dosing is largely anecdotal, more study is required
Many people micro dose for work and productivity - but the results are mixed
For example - what is the exact amount to be considered a "Micro-dose"?
Not enough evidence to reject the hypothesis
How has Brom's life changed since starting his fund?
As a hedge fund analyst, Brom spent most of his time building models and coding. Now, 95% of his day is talking to people
Fundraising takes significant effort
Operating in an emerging sector has pros and cons
There is plenty of whitespace and opportunities in the psychedelic industry
At the same time, people need to be pitched and convinced to invest because psychedelics is still an emerging industry
Psychedelics has built in virality - people tell their friends and family about their experience
Brom believes that this is a great time to invest in psychedelics
Brom recommends that people at least research psychedelics to better understand them. From there, they can decide whether or not they want to try psychedelics
Trust your gut and intuition (as a bonus, measure the amount of times that your intuition has been right or wrong)