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My experience as a healthcare guy in Silicon Valley seems well described by the technology “hype cycle,” beginning with a jolt of excitement triggered by the thrill of arrival. Progressive immersion led me up the “peak of inflated expectations,” followed by descent into the “trough of disillusionment” as I became better at distinguishing mythology from achievement.
Now, perhaps enlightened, I’ve reached what I can only hope is the “plateau of productivity.” I’ve an even deeper belief in the power that Silicon Valley technology and thinking could have if applied to healthcare problems, as well as an equally strong belief that while success may be enabled by technology, it will be driven by a sophisticated, nuanced, and (yes) humanistic understanding of the complex healthcare problems that need to be solved.
From my first moments in the Valley, I was struck – I remain struck – by the incredible energy and sense of possibility that seems to be in the air out here, the bedrock conviction that with some inspiration and hard work, you can change the world, make a dent in the universe, and potentially earn millions of dollars for your effort. It wasn’t surprising to learn from a recent WSJ article that a relatively large number of LinkedIn profiles from the Bay Area include the words, “change the world.”
I’ve found myself unconsciously comparing the feeling here with my experiences in med school, and even more, in grad school. In many ways, my PhD experience (in biology at MIT) seemed culturally almost the polar opposite of what I’ve witnessed here. While MIT biology certainly featured its share of self-promotion, the dominant ethic was to emphasize the limitations of your work, and the enormity of the unanswered questions remaining. It would be unimaginable to tell your colleagues that you planned to change the face of biology – not only because it would be arrogant, but also because it would seem so ignorant. I also don’t recall buoyant cheerleading (or even significant external encouragement) as a dominant feature of the MIT grad school experience.
On the other hand, most of my colleagues in grad school and I were drilling down on pretty fundamental problems, trying to work out the molecular mechanisms underlying cancer, cystic fibrosis, and Alzheimer’s disease. I often think about this when I hear Valley VCs forever exhorting others to work on something important.
The idea that the Valley has become more than a little caught up in its own hype is gaining currency. San Francisco Chronicle columnist James Temple hit the nail on the head in a brilliant recent piece, “The Hypocrisy in Silicon Valley’s Big Talk On Innovation,” noting the contrast between grandiose ambitions and disappointing delivery. For all the talk about disruption, innovation, and aiming ridiculously high, most of Silicon Valley, “concerns itself primarily with getting people to click on ads or buy slightly better gadgets than the ones they got last year,” Temple writes.
Many in the Valley share these concerns. In a now-classic post, “Why Facebook Is Killing Silicon Valley,” serial Valley entrepreneur Steve Blank argued that the growth potential of social media has created a situation where the total available market is in the billions of users, and “the potential revenue and profits from these users (or advertisers who want to reach them) and the speed of scale of the winning companies can be breathtaking.” He adds, “social media startups can return 100’s of millions or even billions in less than 3 years.” Technologist Dan Munro has argued along similar lines on Quora.
The tremendous upside opportunity can almost blind you to the fact that most startups fail, and only a small fraction – something like 1/700 (35 companies of the 25,000 financed between 2000 and 2010) – represent the billion-dollar exits we hear so much about.
(On perhaps a more positive notice, when Silicon Valley startups succeed, they tend to share the wealth with employees more broadly than most other corporations. According to Steven Johnson, citing “The Company of Owners,” the top 100 tech companies granted 19% of their ownership to non-senior executive employees, versus just 2% for the rest of corporate America. As Johnson points out, “billionaire founders or CEOs are nothing new; but multi-millionaire middle managers – that’s something else altogether.”)
From an investor point of view, healthcare turns out (perhaps surprisingly, as Bruce Booth points out) to have outperformed other venture sectors over the past decade; in fact, the two best subsectors in venture were reportedly healthcare services, followed by biopharma. The time required to achieve an exit in biopharma – again, surprisingly – turns out not to be longer than other sectors. The key difference seems to be the nature of the returns in healthcare – consistently solid, rather than occasionally spectacular. You get singles and doubles, not home runs. Consequently, and perhaps unfairly, life science funds are often regarded as “the ugly stepchild” of the venture business.
The lack of a dominant, brand-name venture firm in the healthcare space has created a gap several ambitious firms with roots on the technology side have tried to fill – VCs such as Google Ventures, Founders Fund, Khosla Ventures, and more recently, S+C. While these firms have each highlighted the importance of big innovative ideas, most have also invested in plenty of small-ball healthcare companies. Some of the more ambitious flyers they’ve taken (e.g. on life-extension) seem of questionable value, and often appear to be based more on the hope (and the narcissism) of the investors than the quality of the underlying science.
Moreover, it isn’t clear that the most successful companies are necessarily those that begin with the most grandiose initial thesis; as Scott Berkun describes in his (must-read) “Myths of Innovation,” many ultimately successful companies started out with far more limited ambitions.
“History tends to get rewritten by big successes, so that in retrospect it seems obvious they were going to make it big. For that reason one of my most valuable memories is how lame Facebook sounded to me when I first heard about it. A site for college students to waste time? It seemed the perfect bad idea: a site (1) for a niche market (2) with no money (3) to do something that didn’t matter.”
Graham adds, “One could have described Microsoft and Apple in exactly the same terms.”
Notably, Epic – the electronic medical records powerhouse that everyone loves to hate – grew out of a focused effort to solve a specific problem (a research group in the psychiatry department at the University of Wisconsin needed help tracking patient data over time), and not out of a desire to fundamentally reshape the way U.S. hospitals manage medical information.
Nevertheless, I can’t get away from the idea that having some kind of grand ambition is especially worthy. I admire companies trying to do something original and significant more than those trying to capitalize on the latest tweak – even as I acknowledge the value of such incremental innovation. When I read about biopharma R&D strategies that focus on formulation plays, or create drugs that are simply different rather than manifestly better – risk-mitigating strategies likely to remain a key part of pharma’s future – I resonate with Peter Thiel’s frustration with the quality of innovator ambition (though I recognize the new products may offer meaningful benefit to some patients).
My hope is that we’re inspired by technologies and ambitions of Silicon valley to go beyond the creation of more efficient healthcare processes and more consistent service delivery – as important and difficult as these goals are – and learn how to develop profoundly improved therapies, that cure – or better yet, prevent – disease and disability. And while I share Khosla’s belief in patient empowerment and consumer engagement, I also believe physicians offer patients – especially the chronically or acutely ill – far more than medical analytics, but also compassion, hope, insight, and comfort.
The game-changing technologies of the future will include those, like patient portals, that enhance the physician-doctor relationship – and those, like the polio vaccine, that obviate the need for one.
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