The Healthcare debate

Before I jump into the topic, you might want to know: Why do we, venture investors, care about the debate? Is this another case of financially comfortable people getting in touch with their inner left-winger? I can’t answer for the deeper layers of my psyche, I’ve given up on such explorations. All I can say is: We The VCs don’t like the ever escalating portion of our GDP spent on healthcare, 17.6% in 2009 and expected to rise to 19.5% by 2017.
 More specifically, for our startups, the cost of employer-sponsored health insurance has risen by 119% (!) in the last decade. We’re in the business of financing the dreams of entrepreneurs, not lining the pockets of insurance companies.

(For more on the the GDP threat and other toxic issues see my January 11th, 2009 Monday Note here.) And, on the unproven assumption we have a heart and soul, how could we like the spectacle of close to 50 million (this is likely to be the 2009 number) uninsured people?

With this out of the way, on to the debate.

First, I see a terrible error in reasoning: we can’t keep treating healthcare like a business. We’re not dealing with the financials of Boeing, Walmart or Apple. Once upon a time, an aspiring executive, I wanted to be initiated into the brotherhood of executives. Knowing my pangs and playing on them, McGraw Hill,

 the publishing giant now trying to get rid of Business Week,
 sold me a subscription to management books series. Luckily, these were good books, I fondly remember Robert Townsend’s Up The Organization! and, to today’s point, Peter Drucker’s
 The Practice of Management.

 Take a look at the enthusiastic Amazon reviews. More than thirty-five years later, one idea from the book still sticks to my mind: the difference between businesses and institutions. The Army, Congress and, according to the great management sage, hospitals all are institutions; they shouldn’t be thought of, or managed like businesses. (I won’t get into the “business” of Congress with lobbyists.)
To our now costly regret, we’ve allowed medicine to be run like a business. When doctors mortgage themselves to buy expensive imaging equipment installed right into their office, guess what happens? Medicine leaving, rightly, much to the doctor’s judgement, a doctor now motivated to run expensive diagnostics, just in case.
If you have the time and stamina, read the great New Yorker article on a Texas town, McAllen, featuring the highest per capita medical costs in the entire country. Why? The equipment and a culture of treating medicine as a business, of milking/bilking patients and, in most cases, their insurance companies. The latter always have the solution of raising premiums on customers who can’t go elsewhere for fear of being denied coverage because of a pre-existing condition.
If you want an even more disheartening read on the state of healthcare in the US, versus the rest of the world, grab T.R. Reid’s The Healing of America. 
Again, take a look at the Amazon reviews. The subtitle reads: A Global Quest for Better, Cheaper, and Fairer Health Care; it foretells the awful story inside, not by a left-wing firebrand but by a moderate soft-spoken scholarly but readable writer.
In a nutshell: We, the US, are number one (we always like the sound of that) in per capita spending; but, depending on the way outcomes are measured, we rank something like thirty-seventh on the quality/efficiency of our healthcare.
To quote the author: “You don’t need an advanced degree in yajnopathy to recognize that the stars are aligned and the timing is propitious for the United States to establish a new national healthcare system.”

Yet, we’re mired in heated controversy and ugly lies. More

Time to think seriously about the iPhone

4:00am. I find myself reading an interesting story covering Portfolio’s web site – on my iPhone. As sleep comes back, I reflexively reach for the “save” (for later reading) button that is on every iPhone news application. But I am reading from the magazine’s site, as opposed to running an app on my smartphone; web sites don’t have a save button. I just became aware of a new set of habits, barely conscious and now ingrained thoughts/actions created by reading news stories on an iPhone (or an iPod Touch). A good sign.

In the Monday Note, for quite a while, Jean-Louis and I have been discussing the development of news-related iPhone apps (our first story “Why Publishers should grab the iPhone” goes back to a year ago,
or follow the iPhone tag on the Note). Since then, several news organizations have developed specific applications (not just tailored websites) for the iPhone. More

The Apple Tax

Today, let’s have a little fun with Microsoft’s latest attempt at countering Apple’s “Get a Mac” campaign. Their premise is simple: for the same amount of computing power you pay more for a Mac, you pay an Apple Tax. As Steve Ballmer, Microsoft’s CEO, puts it: You pay $500 to slap an Apple logo on a laptop.
Microsoft is right: Macs cost more.
Pundits and advocates on both sides use contorted arguments to make a point either way, but the point remains: Macs cost more – at the time of purchase.

But, before we go on, a few words on the color of my skin. Especially the operating system layer.I’ve been in the high-tech industry for 41 years this coming June and I’ve used (or even caused at Apple and Be) system software of many flavors. Regarding Microsoft, I’ve been a DOS and, later Windows user; a happy customer, an occasionally proud one as I acquired the skills to fix or quickly re-install systems in my family or at the office. Naturally, after leaving Apple, I continued to use Macs, even after my company, Be, lost the Apple opportunity to Steve Jobs’ NeXT. More

Advertising (2): fixing an antique model

Last week, we addressed the demise of the ad-only model. Solutions won’t emerge overnight, all the more of a reason to start searching. Here are a few leads. (This is the second of two parts, the first one is here)

The AdTech conference took place last week, in Paris; the mood there wasn’t exactly a statement of the internet advertising sector’s vibrant health. Light attendance, few commercial booths and presentations that were, at best, uneven. Speakers sported either the long face of gloomy realism or the pitchman’s forced grin.

Robin Sloan, VP of Strategy for Current.tv and co-author of the cult net-fiction Epic 2014 outlined the future, picturing himself at the AdTech Paris 2019 Conference. He envisioned high-tech enhanced ads, the development of social sponsorship boosted by new Google features as well as strong regulatory backlash initiated in Europe. I don’t want to say more about Robin’s prez, he will put it online soon. As for myself, twice in the same day, AdTech plus a roundtable held by the French Magazine Publishers Association, I delivered a talk based on our industry’s facts and figures (see this Monday Note entry and this one).  I also added material I’m gathering for an upcoming story: crowdsourcing, the destructor of creative value in design and photography. In summary, my pitch is these difficult times are a unique occasion, the best, most propitious moment for the invention of sustainable businesses. More

Revenue Model Breakthrough?

Micro-payments are an old idea, some say a bad fantasy. Chief, we’re rich: I found a way to get a millicent per page view…

So far, not much has happened. Unless you look at a tidy, not tiny, little billion-dollar business called iTunes. Three years ago, in February 2006, 1 billion songs served, sold, cashed in, since 2003. July 2007, 3 billion. June 19th, 2008, 5 billion songs. January 2009, 6 billion. Tidy it is at 99 cents for every song. A little so now, with three stages, 69, 99 and 129 cents, without DRM, without copy protection.

But, you’ll justifiably object, this is a unique phenomenon, it doesn’t replicate elsewhere. How can we draw lessons from Apple’s idiosyncratic, proprietary, ferociously monolithic, militantly anal practices? True when it comes to Apple’s style, but less so when it comes to substance, to the replicability, to the potential for use elsewhere. Apple’s competitors are rushing to build their own App Store; for their smartphones, they yearn for their own applications distribution platform. This certainly makes the case for the idea’s replication.

But what idea?

What Apple did was lowering the mental cost of the transaction. More

Advertising: real change must happen

The brutal recession reveals how flawed the current Internet business model is. As advertising-only business models are falling apart, even the Google ecosphere is under stress. The search giant’s preservation of its margins at the expense of its media partners’ revenue stream could be shortsighted.  –First of two parts.

Sorry to be blunt, but Internet advertising sucks. Most campaigns are an incentive to install AdBlock software, the most popular Firefox plug-in (45m downloads in 3 years).  “Splash”, “pull-down”, “sliding block”, all sorts of ads suddenly invade your screen. They are nothing but a nuisance. If you’re fast enough, you close the ad before it finishes loading.  And we have the most irritating form of banners, the ones with the sound always loudly on when you inadvertently mouse-over over them. More

Pixels: Size vs. Number

OMG, says the blogger, the next iPhone’s camera will have 3.2 million pixels instead of today’s measly 2 million! The blog entry gave me the final push for an occasional, meaning at irregular intervals, series of columns on digital photography. The idea is to find insights into what’s really going on in this very dynamic industry, to extract a few useful ideas from the flow of markitecture BS coming from hardware and software vendors on a daily basis. As you’ll see, these columns are intended for the ‘interested’ digital camera user and, on occasion, for the technophobe, but not for the pro – they use cameras to make money, not to have fun like we do. More

Creative cost cutting: focus on value

It sounds like the perfect oxymoron: Isn’t cost-cutting the enemy of creativity? True if your main cutting instrument is Excel, one that works pretty well for near-sighted managers.  First, rip questionable positions (some are always to be found) and, presto, your P&L looks healthier. Next, human resources problems: summon the victims, hand the letter, follow the procedure, bargain a bit, and you’re done. Such procedures result in post-traumatic stress, survivor’s guilt for the ones who have been spared and a confused organization that will waste precious time struggling to regain its previous performance level. More

The Future of Netbooks

You the attentive reader might ask why VCs like yours truly are interested in netbooks. Hardware made in Taiwan, running Linux or Windows, low prices, even lower margins…Where are the opportunities for entrepreneurs, and for those of us who invest in their creations?

This is a different question from: Why are netbooks successful? We know the answer to the latter: price and, to a smaller degree (no pun intended), size. This picture and this list show how this new incarnation of the personal computer has proliferated. Because of the recession, yesterday’s manly “must-have” features are now suspect frills. Small has become virile. Users who wouldn’t be seen with less than a “plus-size” keyboard have now received cultural permission to travel with a 10” netbook, perfect for flying (the rediscovered) Coach class. More