By JONATHON FEIT
Journalists like being salty. Like many venture investors, we who are no longer “green” have finely tuned BS meters that like to rip off the sheen of a press release to reach the truthiness underneath. We ask, is this thing real? If I write about XYZ, will I be embarrassed next year to learn that it was the next Theranos?
Yet journalists must also be optimistic—a delicate balance: not so jaded that one becomes boooring, not so optimistic that one gets giddy at each flash of potential; and still enamored of the belief that every so often, something great will remake the present paradigm.
This delicately balanced worldview is equally endemic to entrepreneurs that stick around: Intel founder Andy Grove’s famously said “only the paranoid survive,” a view that is inherently nefarious since it points out that failure is always lurking nearby. Nevertheless, to venture is to look past the risk, as in, “Someone has to reach that tall summit someday—it may as well be our team!” Pragmatic entrepreneurs seek to do something else, too: deliver value for one’s clients / customers / partners / users in excess of what they pay—which makes they willing to pay in excess of what the thing or service costs to produce. We call that metric “profit,” and over the past several years, too many young companies, far afield of technology and healthcare, forgot about it.
Once upon a time, not too many years ago, during the very first year that my company (Beyond Lucid Technologies) turned a profit, I presented to a room of investors in San Francisco, and received a stunning reply when told that people were willing to pay us for our work. “But don’t you want to grow?” the investor asked.
Flabbergasted, I replied that we felt it was more important to deliver enough value that people were willing to pay enough that we could operate in the black, whereas the typical “growth at all costs” model is essentially about subsidizing enough adoption using outside capital that winning a market becomes a game of chicken with one’s competitors: the one who can lose the most for longest wins…and when the other guy is dead and desiccated, having used up all its venture money driving prices and margins to zero, the winner gets to raise prices. Like a victorious seal, lion, or bison, the winner controls the beach, the savannah, the prairie.
According to Business Insider, Matthew Wansley, a professor at Yeshiva University’s Cardozo School of Law said, “Progressive economists had long understood that tech companies, backed by gobs of venture capital, were effectively subsidizing the price of their products until users couldn’t live without them. Think Amazon: Offer stuff cheaper than anyone else, even though you lose money for years, until you scale to unimaginable proportions. Then, once you’ve crushed the competition and become the only game in town, you can raise prices and make your money back. It’s called predatory pricing, and it’s supposed to be illegal.”
Happily, cynical ways of doing business don’t work forever or in all contexts. Once interest rates rise, every contender has a handicap—but it is the biggest, strongest, most willing to go to the mat who find themselves vulnerable in a new and unhappy way. Profitable companies have both hands free to fight, and their weapons of choice are real metrics to show value and efficiency. By contrast, firms whose growth was fueled by “free” money are fighting with their hands chained to cement that is getting heavier. Using the language of the Great Recession, the teaser rate on their mortgage just skyrocketed, and those payments…yeesh.
But profit is more than just a financial metric—it is also a powerful and pragmatic signal. The renewed, overdue focus on profit’s second, more esoteric importance was on full-peacock display during the first day of the Digital Health Innovation Summit (DHIS) West earlier this week, where the main takeaway from seemingly every presenter was: Can you prove your value, and convince me that I cannot go another day without you?
Hospital and health insurance executives—whose names I do not need to recite here; you can find the agenda online—speaking frankly and alongside firms whose services they have hired, addressed questions about how to break through the noise of too many emails, too polished emails, too little focus on building real relationships. Then they acknowledged that they are slammed-busy and lack the time to build them while also traveling to conferences to talk about relationship-building…which means finding another way through the noise. That is the entrepreneur’s mission, and trick. One executive basically said, “Don’t call us, we’ll call you” if we want what you have to offer (Remember people, this is San Diego, not Hollywood!).
Another confessed that so many young companies are coached about the “right” way to phrase an opening salvo that the pitches begin running together, filled with plenty of heart and dripping with mission but still lacking individuality. In other words, a bit of roughness-around-the-edges may not be a bad thing when some organizational leaders highlighted their interest in building collaboratively. Because I would be remiss not to, I asked how Mobile Medical services can engage with hospitals to expand their role and showcase all the good they can do beyond transport—for example, Community Paramedicine. The advice was to sit down with the agency’s emergency department contact and straightforwardly say, “We’d like to help out more.” No fluff. No pussyfooting. Tactic #1: have a discussion. The worse anyone can say is “No.” Here’s something telling: I had a chance to explain some of the good that Community Paramedicine programs already do, and some of the interoperability wins that Mobile Medical services have already notched. Some of these executives did not even know about them—which just goes to highlight the noise. Both ventures and those who use them to do great things need to sing more about success….but, it seems, not necessarily more loudly. Rather, in a more targeted fashion that all the willing, listening ears can hear.
Which goes back to profit: More than raising another round of funding, or winning an award, or stacking a slide deck with logos, being able to say “people are willing to pay for this work—presumably more than once—more than it costs to make, and you should consider it to, and here is why” is curious to those who may not have yet been aware that such a solution exists.
One hospital executive here described their employer’s new ethos: “We don’t need to do everything ourselves.” But with the willingness to look beyond the walls of the institution is a Monkey’s Paw kind of change: careful what you wish for. The price for such willingness is a focus on accountability—those rising interest rates put on pressure everywhere, which means investments have to perform. Now they cost money in excess of people’s time (which they are getting paid for anyway). As every minute becomes more expensive, the last thing these executives asked for is more waste.
I arrived at the DHIS West prepared to meet old friends and hear old tropes. Perhaps I would even have been able to confirm that—as CEO of a company that is unusual by Bay Area standards, working in the world of Mobile Medicine that too few understand (“The sirens sound and your people show up…right?”)—there would be nothing to see because all the oxygen would have been spent talking about a hot new topic without fundamentals (or in the case of A.I. with declining fundamentals). Of course A.I. would be a bingo buzzword (“Take a shot!”) but I also expected boldface speakers reciting platitudes.
Boy was I wrong! Color me impressed! By dinner, my salty journalistic crust had washed away clean. Instead, I confessed to my tablemates—an entrepreneur, an insurance professional, and Michelle Snyder, a lovely, ever-curious person who I first met a decade ago (wow!)—that DHIS West almost immediately inspired me to look back at the arc of our profession, and in so doing, to recognize how much change has really happened—even though, like so many fleeting loves in life, on a daily basis we are too close to see it. As Michelle said, it’s not moving fast enough—but it never will be for someone who is committed to improving the status quo. I suspect that for her, the deadline to achieve impact at scale in American and global healthcare will always be yesterday.
I later described to Ilana Brand, a business development executive in the area of digital health for the law firm Cooley, my own mental wellness and mission-motivation trick, which I have done for years and recommend to anyone who has been venturing for as long as I have: look back on those old slide decks from time to time to see how much has changed—and what remains the same. The through-line orientation to address problems in the market should ideally be consistent until they are solved—but a company cannot be stubborn either, lest an asteroid come. It must adaptive to changing realities while keeping its soul. Ideally, in hindsight, one sees ups, downs, fumbles and tackles, but always progressing toward the goal (and sometimes a Hail Mary pass is just what the digital doctor ordered). I am writing this just days before Super Bowl LVIII (Go Niners!), so perhaps football offers an ideal entrepreneurial analogy after all.
What’s magical is to look back on the arc of change with a sense of wonder and gratitude for how far we have come when seen at a distance (as opposed to while in the trenches of innovation). It’s like watching the horizon bend in the distance while flying toward the sunset: we all know that the Earth is round, and if we get high enough, we can see so for ourselves. Yet that knowledge still pales against “Oh my gosh, look in the distance! The colors…the curve of our planet…how amazing to think we’re up so high. No strings!”
Finally: we spoke, of course, of artificial intelligence—but not of generative A.I. per se. A dichotomy is forming: some think A.I. will be relegated, for the foreseeable future, to administration, where it will automate the paperwork that everyone hates and so it becomes both expensive and neglected. This approach has the added benefit of delaying the introduction of perceived “replacement” technologies into clinical settings (with pushback anticipated just like it was in Hollywood and elsewhere). The delay may serve to our collective benefit because A.I. has not yet come close to solving its hallucination problem.
Others (including me) believe we may be selling ourselves short—and I was further inspired by investor Ryan McCrackan, CFA, who described an optimistic future: as soon as something extraordinary proves itself, the instinctual corporate risk aversion, which often blocks great things from happening, will be proven to have overblown. Attention will quickly shift to all that could be possible. Then we’re off to the races, together, seeking and supporting meaningful improvements to under-attended sectors (“White spaces”) of health, safety, and life in general. Until then, we’ll embrace the most excellent irony that emerged post-pandemic, in conjunction with the Dawn of Artificial Intelligence: In both medicine and business, “relationships still matter.”
Jonathan Feit is the CEO of Beyond Lucid Technologies