This is Part II of my conversation with Dr. Jordan Shlain. For Part I, click here.
It strikes me that many of those lessons that you were beginning to learn in the late 90s laid the foundation for the company that you started about five years ago, HealthLoop.
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Dr. Jordan Shlain is a fixture in the Silicon Valley scene, a sharp witted, opinionated, and always on physician whose unusual career includes founding several health-related companies, inventing a new approach to private practice, co-founding a non-profit dedicated to redefining society’s approach to sugar in our foods, and launching Tincture, a publication which seeks to elevate our cultural conversation around health. Shlain also frequently flies to Washington, DC, where he speaks to policy makers about the frustrating realities of healthcare as a practicing physician.
Shlain is also a close friend, and he happens to be my doctor as well. He’s deeply connected to nearly every specialist in the Bay area and beyond, and is certainly a good man to know should you ever find yourself in a complicated or challenging health crisis. His approach to patient care is not for everyone — his practice, which has offices in San Francisco, Silicon Valley, and Los Angeles, is high end and quite selective. But while many doctors are experimenting with atypical approaches to primary care, Shlain stands out for his outspoken beliefs about how our healthcare system is broken, and what it will take to fix it.
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The stage coach lands in the ditch. It’s nuts, the sheer scale of this story: Since 2011, Wells Fargo employees created 1.5 million bogus bank accounts and another half a million fake credit card accounts to meet sales quotas and earn incentives (The Wall Street Journal). They signed people up for these accounts, and even moved money into them, without customers’ knowledge or consent. As these practices began to be investigated by Los Angeles prosecutors and federal regulators, the bank ended up firing 5300 employees, or about one percent of its workforce. Wells Fargo was one of the few big U.S. banks to get through the big bank bust of 2007–8 relatively unscathed; now it has been fined $185 million by the Consumer Financial Protection Bureau (the watchdog agency set up after that banking collapse). Remember how hard some defenders of the banks fought to keep the CFPB from being established? Banks, they said, could regulate themselves. If that card ever worked, it just expired. Banking (and all business) depends on trust; the more stories like this people hear, the faster they will flee big old institutions and seek new alternatives.
Facebook plays the censor. If you were looking for a test case illustrating exactly why people argue with Facebook when it says things like “we are not a media company,” you couldn’t invent a better one: After someone posted Nick Ut’s famous Vietnam War photo of an anguished young girl running down the street after a napalm attack, Facebook took it down (The Guardian). The company told him to “remove or pixelize” it (the girl is naked). When he refused — he’d included it in a gallery of images that had “changed the history of warfare” — Facebook suspended him. In protest, many others reshared the image — among them, Norway’s prime minister. Her post was deleted, too. You can expect more follow-ups, reversals, and contorted press releases as Facebook tries to extricate itself from the mess it has stepped into. Policing online content boundaries is a challenging business, and the bigger you get, the harder it becomes. Facebook still has a lot of learning to do.
Read MoreThe tragedy of Theranos. As the media’s attention today turns to the latest iPhone unveiling, here’s a morality tale that suggests the perils in over-imitating Apple. A Wall Street Journal investigation was the proximate cause of the downfall of med-tech startup Theranos, which once promised to revolutionize the blood testing business. But a new look at the story of the company’s implosion (Vanity Fair) suggests that Theranos founder Elizabeth Holmes built the firm on sand from the very start by choosing a path of secrecy rather than transparency. Holmes’ emulation of Steve Jobs extended to more than the superficial shared preference for black turtlenecks; like Jobs, she applied control-freak tactics to prevent rivals, neutral third parties, and even Theranos employees themselves from obtaining information about the company’s products. That meant that, when the Journal finally raised questions about its work, Theranos had no defenders. If Theranos was as bogus as it now appears, maybe there was never much to defend. Either way, the lesson for the rest of us couldn’t be clearer: Don’t trust anyone’s revolution unless the data is shared, the science is reviewed, and the conversation is open.
The Clinton campaign’s strength in numbers. If this year’s two presidential campaigns were startups, Trump’s would be the one that prefers winging it to wonking out. Clinton’s, meanwhile, would be the one that lives and dies by data. A profile of her campaign’s director of analytics, Elan Kriegel (Politico), shows how thoroughly statistics drive the Democratic candidate’s efforts — the timing of email campaigns, the houses that on-the-ground volunteers visit, the targeting of postal mailers and online advertising and TV campaigns. Trump famously scorns deep-diving into data, while Clinton has organized her entire effort around a “culture of testing.” In a few weeks we’ll know which candidate bet right. (If you’re betting against data smarts, though, hope you’re wealthy enough to take the loss.)
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The US government is famously slow and bureaucratic, but when it comes to digital transformation, the Feds have outdone themselves. Case in point is healthcare.gov — the original government solution for identity management cost $200 million to build and would have cost $70 million to run each year. Of course, it failed spectacularly — until a small group of Valley engineers recruited by the President re-built the site for just $4mm.
But while it’s easy to poke fun at our government, it’s also the single most impactful organization in our economy — with millions of employees and services that directly and sometimes dramatically impact hundreds of millions of Americans.
Read MoreThe European Union takes a tax bite of Apple. Apple owes about $14 billion in back taxes: So says the EU (Bloomberg). Apple says it evaded, er, arranged to avoid, those taxes fair and square via Ireland — so it doesn’t have to pay. Plentry of other multinationals have been basing operations and stowing profits in low-tax havens like Ireland for decades now. This latest fight is largely a jurisdictional squabble between Ireland, which defends its tax giveaways, and the EU, which wants to govern who pays and who doesn’t. The U.S. government is backing home team Apple. Even if it has to pay, the company’s got it covered, with a $232 billion cash hoard, mostly outside the U.S. How should global companies apportion their profits for tax purposes? There’s an army of accountants for that. But whatever the specific outcome here, there’s a clear message for Apple and other BigCos that slosh money around the globe, seeking maximum return through minimum tax rates: Profits are only possible in a society that supports its infrastructure, financial system, education, and healthcare. Taxes do that. Sooner or later, to paraphrase Bob Dylan, you’re gonna have to pay somebody. The more voters around the world feel they’re not getting a fair deal, the less they’re going to support free-trade policies. However much companies hate paying taxes on profits, they’re going to hate tariffs even more.
We know where that planet-warming carbon comes from. Carbon emissions cause climate change, and 90 companies are responsible for most of those emissions, according to one scientist’s accounting (Science). Also: More than half of those emissions took place since 1988 — the year Congress heard testimony that warming was definitely for real. In other words: Neither Exxon nor any other corporation can say, “We didn’t know.” Richard Heede is the “carbon accountant” who did these numbers, which have, predictably galvanized environmental activists and alarmed the energy industry and its political defenders. Critics say Heede’s work just pins big “kick me” signs on the backs of specific companies, when it’s really those companies’ customers — all of us — who are to blame. On the other hand, as a Heede supporter argues, “if everyone is responsible then no one is responsible.” Figuring out where all the carbon has come from is surely a valid first step toward arresting the catastrophic advance of global warming. If that data threatens the fossil-fuel industry, don’t blame — or subpoena — the messenger.
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Lately I’ve been writing about the relative virtues of basic income and child allowance proposals to counteract poverty and inequality. These seem like novel ideas on the American scene today. But in fact, there was a time when both of these ideas were seriously proposed on Capitol Hill. After forty-five years of lost faith in government, we are simply rediscovering the ambitions we once held.
In August 1969, President Richard Nixon unveiled a basic income scheme for needy families with children called the “Family Assistance Plan.” (FAP) Under Nixon’s FAP, a family of four would receive $1,600 annually from the federal government, or about $10,500 in 2016 dollars. For families deriving income from work, the FAP would gradually phase out above a certain level. Indeed, FAP included a work requirement for most “employable” individuals.
Read MoreStartup formula: Big data + lawsuits = profit. Legalist, a startup founded by two Harvard undergrads that launched at Y Combinator’s summer Demo Day this week, tries to figure out who’s going to win business lawsuits — then bankrolls the winning side to collect a share of the award or settlement (Business Insider). Yes, this is similar to what Peter Thiel did to Gawker, except he was out for revenge, not returns. Maybe it’s just a total coincidence that one of Legalist’s founders is a Thiel Fellow. But the company’s concept shares the financier’s traits: It’s appealingly radical in its thinking, and disturbingly casual in its disregard for collateral damage. Once upon a time, Legalist’s business model was known as “champerty,” and was against the law. Today it’s called “litigation finance” and has become a growth sector. Hedge funds are already investing in lawsuits, so why not apply some big-data-fueled, deep-learning-powered smarts to win such bets? Maybe because that’s just begging for a backlash. A sustained public outcry might could get federal, state and local governments to reform their legal systems to make them less easily influenced by infusions of cash. That’s an outcome we could get behind.
Is Vanguard un-American? A lot of investors like index funds because they charge low fees and therefore deliver higher returns in the long run. The folks at brokerage Sanford C. Bernstein & Co. want you to know that such “passive” investing, however attractive it may look, is actually anti-capitalist and probably un-American, too (Bloomberg). They’ve written an article — titled “The Silent Road to Serfdom: Why Passive Investing is Worse Than Marxism” (but curiously unavailable on their website) — that attempts to make a moral and social case for the value-add that active investment managers provide. “A supposedly capitalist economy where the only investment is passive is worse than either a centrally planned economy or an economy with active market led capital management,” they write. Of course, this is one big hypothetical; nobody has advocated outlawing stock-picking fund managers, and there will always be people who think they can beat the market. Mostly, it sounds like Bernstein & Co. are frustrated that so many investors have finally started taking the market’s common-sense cues and abandoning the active funds along with the high fees they charge.
Read MoreUnions win admission to Columbia. The National Labor Relations Board ruled Tuesday that graduate students and teaching assistants have the right to unionize at private universities (The New York Times). The Columbia grad students who won the case say it’s less about wages than issues of power and independence and their ability to protect themselves in the “corporatized, hierarchical” world that their university has become. The university says the grad students should be viewed primarily as students; the NLRB disagreed, ruling that if they get paid and supervised like other employees, then, like other employees, they should be able to join a union, too. The students join employees of some digital media outfits in the “unions aren’t as dead as you thought” parade. The NLRB’s move is a sharp reminder to companies and institutions of all stripes: share power and decision-making with stakeholders, or don’t be surprised when they organize. Related: If graduate assistants are employees, why aren’t college athletes? (Pacific Standard)
EpiPen train wreck shows how broken healthcare pricing is. EpiPens are easy-to-use quick-injection devices that save the lives of children and other people who are prone to sudden allergic reactions that block their breathing. The medicine in them — epinephrine — costs about $1. But one company, Mylan, has a monopoly, and it has aggressively marketed EpiPens (Gizmodo) while raising their price roughly six-fold in the past few years (Forbes). An EpiPen two-pack (the only kind available) now costs about $600. People need to keep lots of them around, and they expire every year. So, just another pharma price-gouging tale, right? Here’s the twist: Mylan gives patients discount coupons that cover their copayments, so in theory the customer shouldn’t care about the price— only insurance companies are on the hook. But we’ve spent the last decade pushing people into high-deductible insurance plans,on the theory that, if patients have some skin in the cost game, they will help introduce market discipline. That’s exactly what’s happening: Those sticker-shocked insurees are either raising a stink or forgoing the purchase entirely. Congress is up in arms, too, which surely isn’t what Mylan wanted. (Its CEO is the child of a West Virginia senator.) Moral: A company that views the health marketplace as an arena for maximum profit extraction and puts lives at risk will end up a pariah.
Read MoreStick a fork in the GDP. Much in our world depends on the Gross Domestic Product — the central yardstick by which we gauge whether a nation’s economy is growing or shrinking, healthy or ailing. But GDP is flawed and outdated, and now governments and economists are trying to figure out how to replace it (Bloomberg). The problems with GDP are legion: it misses key changes in income equality, technological change and living standards. It has a hard time capturing the impact of economic activity once it moves online. The GDP numbers that get headlines on initial release are almost always wrong and end up being substantially revised. If this was how you were measuring your family’s or business’s economic well-being, you’d want to replace it, fast. The trouble is, if you threw GDP out the window tomorrow, economists don’t seem to have many ideas of what you could use instead. Fortunately, this is precisely the kind of problem that so many other strong trends today — from deep-learning AI systems to networked sensors to digital cash — ought to help us solve in the long term. For now, when it comes to macroeconomics, we’d better get good at flying blind.
The elusive formula for a downtown renaissance. Some aging Rust Belt cities manage to reinvent themselves as welcoming turf for NewCos, and others don’t. Success “requires more than a good coffeehouse” (Toledo Blade). Toledo, Ohio launched a campaign a decade ago to retain and attract college-educated workers and new small businesses. With new museums and other amenities and a reasonable cost of living, the city has made some progress. But holding on to talented locals drawn by other towns and regions remains a struggle. Cities like Toledo still need to reverse a reputational deficit years in in the making; people need to know that they have, not only good coffee, but jobs, and downtowns that are no longer “dumps.”
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