112 – AI Replacing Jobs, JP Morgan’s Bold Move, and Healthcare’s Biggest Shakeups Yet!

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[00:00:07] Vic: Happy JPM week. Yes, 

[00:00:09] Marcus: we both, uh, did not make it out there this week. So happy to not be there. So happy to not be there. Uh, I was up in New York and, uh, we met with some of our LPs at Nova, Catherine and I.

[00:00:21] Marcus: Yeah. And uh, it's great to, you know, kick, kick off the year, see some LPs. Yeah. Um, not be in San Francisco for all the JPM Madness, but it was really cold up there, I have to say in New York. Yeah. Not, oh, the weather was not fun. Yeah, not fun at all. Uh, but the city's doing great, you know, it's alive. Lots of stuff going on.

[00:00:39] Vic: Yeah. Yeah. And I had several portfolio companies at JP Morgan. I was trying to help connect them, but it's much more fun to be here, like saying, Hey, let me connect you to this person, but then going home and going to sleep. 

[00:00:51] Marcus: Yeah. Yeah. I mean, it feels like every other year thing I think is going to be my, my cadence with it.

[00:00:56] Marcus: Yeah. 

[00:00:56] Vic: I'm two years in a row missing it and I don't feel like I missed [00:01:00] that much, but we'll see. 

[00:01:01] Marcus: Last year. Yeah. Yeah. Yeah. You know, we kind of had the purpose of, um, specifically engaging, I think really with our existing LPs. Cause so many of them were out there kind of letting them know, Hey, here's sort of the status of things, you know, we're, we're starting up the fun to process, et cetera, et cetera.

[00:01:18] Marcus: Um, so that was, it felt like we had to go out there for that purpose. Um, this year I was just like, Oh, okay. Uh, what's, you know, why the, the, the, the question is why the hotel rooms are 2, 000 a night, et cetera. So it's like, why are you doing it? 

[00:01:33] Vic: I was talking to an LP about it. I think, uh, I mean, there's no deal flow for me out there.

[00:01:38] Vic: There are me either. It is a good place to sell assets. Yes. And I have two companies exploring that out there, but they didn't need me hanging around. We are, we're, um, so it just depends on the purpose. I mean, 

[00:01:50] Marcus: yeah. The, the, the Nova portfolio was not in a selling posture yet. Right. We're still in a, like, value creation.

[00:01:56] Marcus: Right. Yeah. Posture. Um, we did have a couple of portfolio [00:02:00] companies. I talked to one today, they had a great time meeting a bunch of folks. Mm-hmm . Getting some great interest for future financing. Yeah. But yeah, I, I, I just. 

[00:02:08] Vic: Especially with Vive coming to Nashville in a month. Right. All the same people that I could shake hands with and kiss babies are going to be here.

[00:02:16] Marcus: Yeah, yeah. And I do think like there's been this trend year over year where the news around JPM is kind of like becoming less and less critical. Yeah. 

[00:02:29] Vic: I think that's right. It's just, it's more of a, like a, always on the, the new cycle is going all the time, so you don't necessarily save up things for it.

[00:02:38] Vic: Maybe if it happens at Christmas, you do, but people aren't saving things like they used 

[00:02:43] Marcus: to for JP Morgan. Yeah, I agree. The new cycle is kind of always going, but we have the overlap of JPM with Q4 earnings starting, starting to roll out with. The inauguration next Monday. Yes. And all the 

[00:02:56] Vic: policy 

[00:02:57] Marcus: [00:03:00] Biden administration, all these things, a lot of news going on and, and, you know, just throw a Tik TOK in there.

[00:03:05] Marcus: Right. Right. Uh, so, uh, yeah, with that little preamble, let's dig in,

[00:03:18] Marcus: uh, starting with the economy. Let's talk about jobs, Vic. 

[00:03:22] Vic: Yeah. So Friday, right after we recorded last week, the jobs report came out and it was pretty good. Incredibly strong, very strong report. 256, 000 jobs. It was, it was good on every level. There were, there were a lot of jobs. The unemployment rate went down slightly, but went down.

[00:03:42] Marcus: So I guess the question is. Why is this story coming out juxtaposed with so many stories talking about, you know, Harvard MBA is graduating and it's taking them six months and they're not finding jobs, uh, middle managers who have been fired or finding that they [00:04:00] can't sort of find the next job. So how, how do you, um, I'm pulling us off of the script a little bit here, but it wasn't lost on me that we had those two kinds of stories going out at the same time, not to mention the meta and Salesforce stories talking about no longer hiring mid, mid level, um, engineers, cause they're going to use AI to do that.

[00:04:18] Vic: Yeah. I don't know that the BLS jobs data is all that reliable. So I have some concern about. you know, how real the jobs are. And then there, I think there are a lot of seasonal Christmas time workers that it's a job and you're working at an Amazon warehouse, which is a legitimate job and counts as one job.

[00:04:48] Vic: But it's temporary and it's, yeah, it's seasonal and it, they scale up and they scale back down and that gets counted in these figures. And so, um, I think the better way to [00:05:00] look at it is like over a 12 month period or something, but that's not how the government or the financial markets or anyone else looks at it.

[00:05:07] Vic: Right. 

[00:05:08] Marcus: All right. Uh, continuing on, cause we got a lot to cover today. Uh, inflation did take up and it's headed back to your target of three. We're at 2. 9. 

[00:05:17] Vic: Yeah, yeah, I mean, I think, uh, this combined with the jobs has really taken the, the probability of rate cuts down very low or to zero. Um, I, I'm not surprised.

[00:05:34] Vic: I don't think. Really, anyone is that surprised that inflation is headed back up again. I think we're just going to be in this world where we have a two and a half to three and a half percent inflation. And unfortunately, which, which is not great, it's bad compounding. That's just not good because we had that huge supply shock.

[00:05:58] Vic: Resetting of price is much [00:06:00] higher, right? And then even though it has come down, all that means is 

[00:06:04] Marcus: high. 

[00:06:04] Vic: All it means is that the, the Starbucks that cost me 10 bucks next year, it's going to cost me 11 bucks. It doesn't go down. Um, so it's going to continue to put pressure on people that are living paycheck to paycheck, which there's a lot of people.

[00:06:19] Marcus: Yeah. Yeah. Which, which in turn will put pressure on, uh, consumer goods and retailers. Yes, right. And healthcare. I mean, I think healthcare is healthcare. 

[00:06:30] Vic: Part of the drag on healthcare stocks is they don't perform well in a, in a inflationary environment. Yep. 

[00:06:37] Marcus: So Wall Street Journal article, why bond yields are surging around the world.

[00:06:41] Marcus: It's, it's time for us to talk about bond yields, Vic, because this has become, uh, sort of, uh, a new parallel narrative to everything going on at the Fed, right? Um, people are talking about the, the, the rate cuts, but, um, bond yields are not. Correlating, they're not ticking and [00:07:00] tying to what the Fed is doing, and it has to do with, uh, geopolitics, the total, uh, apple cart turnover of governments around the, around the world, and just sort of the sense of confidence that, uh, that the markets have in, in, uh, in this government debt.

[00:07:17] Vic: Yeah, go down a little bit. I think they have a, a, another graph that talks about when the, uh, so go right there. So this is sort of the bond yields over the last few months. And they really have gone up as the Fed was cutting and talking about cutting. Right. Um, and so if you're buying a house or buying a new piece of equipment for your small business, your financing cost is more now than when the Fed started cutting.

[00:07:44] Vic: The Fed has lost the ability to influence, I mean, of course they influenced a very short end of the curve, but that's not what 30 year mortgages priced off of, right? I think that, um, there's multiple things in the bond market. I mean, people are looking [00:08:00] for like safety and liquidity more than. Then they're worried about keeping up with growth and that ends up 

[00:08:10] Marcus: favoring bonds, favoring bonds, and also like the S and P is pretty great.

[00:08:18] Marcus: Yeah. Right. So, you know, it's, it's, it's almost like you can have your cake and eat it too right now. You know, if you're an investor, um, you get the liquidity, you get the certainty of the bonds and two years running, it's pretty hard for the private illiquid markets to beat the S and P. 

[00:08:35] Vic: Yeah. 

[00:08:35] Marcus: Right. So it's like, okay.

[00:08:38] Marcus: You don't have to be a, you know, a brainiac to kind of figure out your allocation strategy when it's lining up the way it's, it's, uh, it's turning out right now. 

[00:08:47] Vic: Yeah, I think that's, I don't know that it's going to be great for job growth, but that's not great for a lot of things. Right, but that's, that's the reality.

[00:08:54] Vic: But it is what, it is what we're 

[00:08:56] Marcus: currently experiencing, right? Uh, okay. [00:09:00] JP Morgan Chase disables employee comments after return to office backlash. So, uh, beginning of the week, JP Morgan announced that they will require their 300, 000 employees, uh, to return back to the office five days a week, right? Not, not a, not a three and two, five days a week, starting in March.

[00:09:21] Marcus: Um, obviously they've done the math. They, they knew what they were, what they were wanting there, uh, in terms of, uh, You know, feeling about this topic, the Jamie diamond has been pretty consistent about his view that he feels. A company needs to be going into the office. This is not, not a new position for him.

[00:09:41] Marcus: Um, however, the world has changed. Many employees have felt over time that, uh, you know, this is a perk that employers need to provide, but no longer. And so there's, there's all sorts of turmoil and so much turmoil that there was a lot of backlash. In the, in the post [00:10:00] internally, and they had to turn off the comments.

[00:10:01] Vic: Yeah, I think that, uh, I think you summarized it. I'm not sure that leadership at J. P. Morgan is that concerned if the employees are frustrated. They want their culture to be, I mean, starting with Jamie Dimon and probably many levels down, they've been bankers for a long time, and they're used to a certain culture.

[00:10:26] Vic: And I think they want to return to that, and they now have enough power where they can, they can do that. 

[00:10:32] Marcus: And we need to say, like, uh, white collar jobs right now are not growing on trees. Yeah. So that is another sort of, uh, lift for them. And JP Morgan and Goldman Sachs both reported their best Q4, like, ever.

[00:10:47] Vic: Yeah. 

[00:10:49] Marcus: Here recently, so I think they're feeling like they're in a strong position, right? Like like if you don't like it, we can we can replace you. We absolutely can replace you and not even I don't think it's like AI I think we can [00:11:00] get another we can have another human really capable human to come in here and do this work 

[00:11:05] Vic: Yeah, and I think I mean my I'm I'm old too, but I think there are benefits To being in person and there and there also are benefits if you structure your business correctly To be to being remote to be remote.

[00:11:23] Vic: We are remote Um, but we have a small team, and so I think it gets exponentially harder the more employees you have, and so I can, I can see how it would be just easier to manage and control the culture, and we're going back to this. Yeah, 

[00:11:37] Marcus: yeah. I mean, you can't compare Jumpstart to JPMorgan. It's just not even the same, you know, universe.

[00:11:41] Marcus: Well, what I 

[00:11:42] Vic: was trying to say is I think there are situations where a remote culture can outperform an in person culture. Sure. Sure. But at the scale J. P. Morgan is and the number of employees they have, I think it would be, it's difficult. Yeah. 

[00:11:57] Marcus: Yeah. Agree. Next article also from Wall Street [00:12:00] Journal, uh, the headline is, Balance of Power Shifts Back Towards Bosses.

[00:12:04] Marcus: Subline is, uh, With Labor Markets Less Tight, Workers Face Return to Office Mandates, Smaller Bonuses, and No More Pet Sick Days. So I love 

[00:12:13] Vic: the no more pet sick 

[00:12:14] Marcus: days. My dog 

[00:12:15] Vic: is sick. sick. I, 

[00:12:16] Marcus: it's hard for me to come in. Uh, yeah, I mean, look, we, we definitely feel that as the market is getting more competitive, uh, the forces of inflation, uh, AI kind of winner takes all, you know, big capital being able to play games that little capital can't play.

[00:12:34] Marcus: Um, the, the changing in the administration, which is I think going to reduce the regulatory barriers to large, strong players kind of asserting their dominance through their size and. Yeah. And, you know, other competitive advantages that they may have. Um, these bosses are feeling pretty, uh, you know, pretty cheeky right now.

[00:12:53] Vic: Yeah, I think that's right. I also think there's likely to be some kind of [00:13:00] movement against that. Um, just because high inflation and high mortgage payments and I can't, you know, the same kind of job flexibility and perks, people are getting frustrated or will be frustrated about that. 

[00:13:15] Marcus: I mean, I don't know where it ends, but yeah, I mean, I mean, I guess my question is like, what is the recourse they have, right?

[00:13:24] Marcus: I mean, we've, we've spent two years consolidating value into. The biggest players we talk a lot about the magnificent seven, but you can look at the banking world and basically say the same thing is going on there, right? 

[00:13:38] Vic: Yes, there's a small number of big market share winners. Yeah, 

[00:13:43] Marcus: yeah, yeah. And they are having incredible performance, right?

[00:13:52] Marcus: Yeah, yes, 

[00:13:54] Vic: yeah. And it's not from increasing their lending book. [00:14:00] I mean, it's investing, it's M& A, it's the advisory business, it's trading, um, they are getting better net interest margin because the spread is getting better. But then I was, I looked specifically. They're not really growing the number of loans that much.

[00:14:19] Vic: Um, I think it's mostly, um, like a social issue. People are going to be frustrated that we're going to talk about a strike a little later that you could do things like that, but it's, it's not very powerful. Yeah. 

[00:14:36] Marcus: I mean, and, and before I move into the next story, I mean, We are, we are starting to see early signs, you know, kind of the, you know, the Steve Bannon versus Elon Musk thing that's going on.

[00:14:49] Marcus: Right. Um, we are seeing early signs that, um, some, some segments of the, the, the MAGA movement have [00:15:00] identified that all these new tech guys who used to be Democrats, right. Kind of prior to this Trump run, they were not, these people were not there in, you know, 16. 

[00:15:11] Vic: Yeah, you know what I mean? They're not, um, like the George, they're not the George Bush senior kind of Republican crowd.

[00:15:19] Vic: No, no, more populous 

[00:15:20] Marcus: kind of than they are Republican. Yeah. Yeah. And, and, and I think they, they're identifying, hey, all these big tech guys that have come in, uh, you know, They're not us. They don't have the same, you know, ideas about, about things. And they're actually not really populist. Right. I mean, and the first issue where this has popped up has been around the, the, the visas, um, and immigration policy as it pertains to bringing in, you know, um, new talent from, you know, I think they've been talking a lot about Indian talent just because look in the tech industry, I mean, you know, Indian talent's been unbelievable.

[00:15:52] Marcus: Yeah. Unbelievable. Right. Um, and that is not necessarily aligned with many of the, You know, MAGA, [00:16:00] populist, nationalist, you know, neocon. Yeah, thinkers. So, so, so I do think you're right that there, um, there's something brewing, right, that is going to come up in the weeks and months and quarters ahead as all of the big money folks who got behind Trump look to sort of Ram maximizing their return opportunity, um, through and that will come at the expense of, uh, of, of the lower classes.

[00:16:32] Vic: Yeah. And there's no question about that. And the Democrats have to get their act together and put forth some new people that can try to attract those people. And I'm hopeful about that in a five year view, but not in the five months. 

[00:16:53] Marcus: Oh, no, no, no, no. Democrats are in too much disarray right now to do that.

[00:16:56] Marcus: So it's just, it's just a vacuum. You 

[00:16:58] Vic: can complain about [00:17:00] the Republicans, but there's no one else to. To get behind right now, 

[00:17:04] Marcus: but, but I think your point is right. It does create an opportunity for the AOCs of the world. Um, you know, some, you know, Bernie's going to be the bellwether, right? So it's like, who can sway him?

[00:17:14] Marcus: He's never going to run for president again. He's too old at this point, but you know, he is kind of the barometer for, for the, for the populist swayable vote. 

[00:17:24] Vic: Yeah. And I think some of it's just going to be interesting to watch some of those. Democrats, Bernie, for instance, I'm not sure about AOC. They're going to end up siding with some Republicans to get stuff done that helps people.

[00:17:40] Vic: Yeah, 

[00:17:40] Marcus: AOC probably will not. Right, she, that's what I 

[00:17:42] Vic: mean, she wouldn't, I think Bernie is already talking 

[00:17:44] Marcus: about it. Oh, he's already done it. He's already done it. He's already basically abandoned the Democrats. I mean, he was never, like, fully Democrat, but he's kind of abandoned them already. Alright, so Mark Zuckerberg continues his, uh, sort of media tour.

[00:17:55] Marcus: Um, he went on Joe Rogan, he talked about how we need more masculine energy, and he was [00:18:00] raised around a bunch of women. Uh, the more masculine energy in corporate America, uh, you know, uh, said, said he's ending all of his fact checking stuff, says ending his DEI stuff. And now, I mean, he's just, he's just getting it all out of the way every day.

[00:18:13] Marcus: Another thing, you know, that he's doing leading up to the inauguration, right. Making sure I'm firmly team Trump by the time, uh, the 20th rolls around, um, well team 

[00:18:23] Vic: Trump and also he's making Meta more profitable with every move too. Well, look, so it's both and like it's in his financial best interest and his political interests.

[00:18:36] Marcus: I don't think he has real political interest I think he only has only financial. I think he only has financial interest and I think Your your point is your point is the point. Yeah, right The point is all these things he's doing is because they will continue meadows Right, that's that's all he cares about and 

[00:18:53] Vic: if the political winds change in four years, he'll change he'll change again, 

[00:18:56] Marcus: right?

[00:18:56] Marcus: He'll change again. He is not he doesn't have any real [00:19:00] political Right Ideology or backbone. I mean, he's just kind of doing whatever he needs to do to keep meta growing. 

[00:19:06] Vic: Yeah This story is more similar to the jp morgan story. Really? I 

[00:19:09] Marcus: mean there I mean the this story, you know Um, there has been a really interesting thing that's happened across tech.

[00:19:18] Marcus: So first of all What is the story for our listeners of the story? The headline is on Bloomberg, uh, meta to cut roughly 5 percent of staff targeting lowest performers, right? This is sort of a continuance of the tech industry leaders. Acknowledging Elon kind of as their thought leader, right? I mean, Mark has done a lot of that over the course of the last week.

[00:19:45] Marcus: Um, and to me, this is it again, you know, uh, but I would say this, this even goes further than, than, uh, Then Elon, you know, the words targeting lowest performers, that is [00:20:00] Jack Welch, uh, terminology right there and going back to the Jack Welch era of corporate leadership is something we really have not seen in a, in such an explicit way in the internet era.

[00:20:15] Marcus: Right. I mean, yeah, I can't think of the last time I saw somebody just come out and say, I'm going to regularly cut some meaningful percentage of the lowest performers of my very large publicly traded company. 

[00:20:29] Vic: Yeah, I mean, I think I think of it as Google led, but meta was right there to the sort of founder led public companies.

[00:20:40] Vic: I mean, one, they build incredible businesses that just print a lot of money. And two, at least in the early years, they wanted to attract the most talented software engineers and other, other talent to, to continue [00:21:00] their business. Dominance and so I think they created all of those things like the freelance massages all that Service stuff just sort of included on our campus.

[00:21:11] Vic: Yeah, and then it got extended and extended and more and more probably You know, peaking right after the pandemic, people were sort of having two jobs and quite quitting one place, but I didn't tell anyone and I got a new job and we're seeing, so the pendulum swing back now, I mean, all the way to, to Jack wealth and G 

[00:21:35] Marcus: yes, it's pretty, it's pretty incredible.

[00:21:37] Marcus: Uh, it's, it's, it's pretty incredible stuff. So, all right, let's move into VC deals, innovator. Clinch's 275 million Series F funding to build out AI cloud capabilities. Uh, their post money valuation, 3. 45 billion. 

[00:21:55] Vic: Incredible size of the round and valuation. [00:22:00] It's a one stop sort of platform for healthcare AI tools.

[00:22:06] Vic: Um, and, and history, and I, I don't know all the tools, but, but, Having one place where you can sort of easily go and, and get your AI tools, I think makes a lot of sense. 

[00:22:19] Marcus: Yeah. Yeah. So look, I mean, definitely 

[00:22:20] Vic: benefits 

[00:22:21] Marcus: to scale. Look in total, they've, they've raised 675 million. I mean, that's, that's unbelievable amount of capital, but it's also, you know, not as much capital as all of race back in the day.

[00:22:33] Marcus: So, you know, on one hand, it's like, it's a lot of capital, but also I think they've made a lot more progress than some of really propped up deals that raised more money than them. Yeah. Right. So congratulations to them. Uh, and, uh, congratulations to jumpstart, uh, our portfolio company into scare announced that they, uh, have now increased their total funding to the 27 million and raised, uh, 11.

[00:22:55] Marcus: 5 million. We really did this round, uh, in the. And the, um, [00:23:00] fourth quarter of last year's in November, we really worked it out. But, uh, for lots of reasons, wanted to hold off until this week to announce it. Uh, jumpstart Nova was super happy to participate alongside Deerfield management that led the deal and, uh, city impact fund joined us.

[00:23:15] Marcus: So we're really excited to have them on 

[00:23:17] Vic: pretty good syndicate. Jumpstart Deerfield and city. 

[00:23:20] Marcus: Yeah. Yeah. And I had a great call with, with, uh, uh, Robbie Felton, who's the CEO today. This company is super exciting. We need to get 

[00:23:27] Vic: them on as a guest. Probably we will, we will, 

[00:23:29] Marcus: we'll, we'll, we'll, we'll get them on maybe this quarter, maybe we'll get Robbie on this quarter.

[00:23:33] Marcus: Uh, but you know, basically if you, if you know anything about the pay space and just care is really becoming the platform for the entire pay space and now, uh, expanding into other market opportunities, but incredible team. Great board. Uh, Oh, I got to join the board. Yeah. So I'm now on the board. Yeah.

[00:23:47] Marcus: Congratulations. Yeah, I mean, they, they haven't like announced and announced it, maybe they will in, in, in the coming month or mm-hmm . Whatever. But I'm jumping, I'm jumping the gun here. Um, but I'm on the board with, uh, Gito, who is, um, uh, SVP at, [00:24:00] uh, CVS Health. He was, he was the CEO and founder at Rubicon md.

[00:24:03] Marcus: Um, and then, uh, uh, David Feinberg, um, who's the chairman of Oracle Health on the board. So it's, you know, strong board. Board board, yes. Yeah, it's a great board. Um, you know, Julian Harris, who's operating partner at mm-hmm . At, uh. That Deerfield is very, very involved in the company. So it's, it's a great group around the table, great management team and great market opportunity.

[00:24:23] Marcus: So, um, you know, talking on, we never talk on book. 

[00:24:26] Vic: Yeah, we need to do that, especially, I mean, this is a good origin story. They've done a good job operating and getting it. So we need to have Robbie on and let him tell it. 

[00:24:34] Marcus: Yeah, absolutely. Absolutely. Very excited. Um, all right. Uh, continuing on, uh, okay, this, this was a big deal.

[00:24:42] Marcus: Um, Eli Lilly and Andreessen Horowitz are partnering on a 500 million venture fund. So, uh, big deal here. You know, Eli Lilly is a, is an LP with, with us here at Jumpstart. Um, they're incredible to work with. Uh, you know, some of my favorite partners that we, we get the [00:25:00] opportunity to work with. And, uh, really innovative, uh, in, in so many ways for a pharma company, uh, here in 2025.

[00:25:07] Marcus: I 

[00:25:07] Vic: think they were the first one to go direct last year with Louis Direct. Yeah. With 

[00:25:11] Marcus: the whole Lilly direct thing. Yeah. Um, and, uh, and, and here they are partnering with, uh, a 16 Z on a $500 million venture fund. They have their own venture business called Lilly Ventures. Mm-hmm . Their LPs in, in multiple funds.

[00:25:23] Marcus: Yeah. Known to be like a really strong lp. But now partnering with, uh, you know, I think probably, uh, the leading brand in VC today, a 16 Z on a 500 billion venture fund. 

[00:25:34] Vic: Yeah, I think it's great. It's going to bring, um, you know, much more on the ground health farmer biotech experience to partner with a 16 Z, which will be a good, powerful combination.

[00:25:48] Vic: Yeah, 

[00:25:49] Marcus: and it's totally focused on, um, you know, bleeding edge of the intersection of technology and R and D for drug discovery. Yeah. So I [00:26:00] think that's a perfect partnership between those two firms, you know, 

[00:26:03] Vic: tons of innovation going on, tons of 

[00:26:04] Marcus: innovation going on there. So, uh, real exciting and congratulations to Eli Lilly and V16Z.

[00:26:11] Marcus: Uh, all right. This story is from Modern Healthcare. The headline is VC Firm's Back Exchange Based Employee Health Benefits. So, uh, I, I just, you know, Thought it was interesting, uh, with the title, uh, but Vic, you read through this. So tell me a little bit about what this is, uh, talking about. 

[00:26:26] Vic: Yeah. So I wasn't really up to speed on this, but there are individual coverage, health reimbursement arrangement.

[00:26:34] Marcus: That's the ICRA. 

[00:26:35] Vic: ICRA. That's what ICRA stands for. So ICRA is, provides the ability for an employer to not, um, go to one or two payers and sort of offer a set plan, but instead. Take that allocation of funds and allow their employees to, to choose amongst, um, an exchange, you know, a bunch of different choices.

[00:26:58] Vic: I think it's great. It gives [00:27:00] more options to the employees. You still get all the tax benefits and things and 

[00:27:05] Marcus: it drives more business into the exchange, which, which makes these change a more robust environment for VCs to bring more innovative models. 

[00:27:12] Vic: Yes, exactly. So, so you could get a flywheel more and more, um, optionality.

[00:27:20] Vic: And I think that would lead to better plans and more innovation. 

[00:27:24] Marcus: Yeah, we we've, we've got, uh, one of our portfolio companies, uh, that one of their big agenda items for 2025 is, uh, is really focused on exchange plans. Um, and it's, it's looking like a really exciting opportunity for them. So. Yeah, this is, this is, this is really good.

[00:27:40] Marcus: And, and, you know, while there are certain markets like Medicare Advantage that have really been hit hard, and I know a lot of VCs and PE firms were looking at Medicare Advantage as a core place to innovate, new things pop up. And, uh, I think both the exchange, but also looking at the employer, um, as a, as a payer segment for opportunity more [00:28:00] broadly is, uh, is, is an emerging trend that I'm seeing for sure.

[00:28:03] Vic: Yeah. I mean, I think the, the. The government is around half of the U. S. business and employers are the other half. So it's a huge opportunity. 

[00:28:14] Marcus: Uh, Wall Street Journal, Trump says world is free riding on U. S. health spending. He has a point. So this story, you can point to a lot of different things on this, but this is not the, uh, external revenue service that, uh, he, he mentioned in a recent truth social post.

[00:28:28] Marcus: This is, uh, this is a discussion around the. The imbalance in cost, uh, for pharmaceutical drugs between what we pay in the United States and what is paid in the rest of the world. Um, and I think it's, you know, while, while we can understand the system and how it works, if you're an American citizen, you got to look at this and say, yeah, there is some imbalance here, and it would be nice to figure out a way that doesn't have too many unintended consequences, [00:29:00] um, to bring some balance to this.

[00:29:02] Vic: Yeah, there's, there's no question that, I mean, Europe does its part too, but, but the U. S. is the R& D center for drug discovery and new innovations in pharma for the world. And then, and then we don't get the benefit of that, we pay the top prices. Yes, I mean, that's how we fund it. That's how we fund it. And that, that's how we fund it.

[00:29:29] Vic: was fine when we didn't have big deficits and our senior population wasn't that big. But those days it has changed and we have to figure out some way that still fosters innovation and encourages new innovations and Lillian A16Z finding something new and solving a big problem while also not sort of just taking [00:30:00] All the money from the You know, CMS basically from which is paid by taxes.

[00:30:05] Marcus: Yeah, we'll, we'll include this, uh, this link in the show notes. I mean, 

[00:30:09] Vic: there's a lot of data in there. 

[00:30:11] Marcus: Yeah. I mean, anytime you're talking about one of these kinds of systems that's been baked in for a long time and you start talking about changing it, of course, it's going to create issues and we need to understand all of the issues for sure.

[00:30:21] Marcus: For sure. But I think if you can see to the other side. Of of a change on this front, I think ultimately it would it would be good for the reputation for pharmaceutical companies in the United States, you know, in a way that I don't know anything else would be right. You know, the idea the American public didn't feel that it was just getting killed with with drug prices, right?

[00:30:49] Marcus: Yes. So if there was a path to do that and make it a little bit more equitable, um, I think that would be popular, uh, you know, amongst the electorate. And I think it would be positive [00:31:00] for the pharma industry. So, yeah, but that recognizes that there's all sorts of 

[00:31:05] Vic: there'd be a transition, right? There'd be, there'd be.

[00:31:08] Vic: a lot of complications in a five year, 10 year period. Yes. But then there are other developed countries. I mean, Europe and Japan, and you don't have to like charge the developing world a ton to, to, to spread it more 

[00:31:25] Marcus: evenly. That's right. That's right. This article from HFMA in a surprise move, the Biden administration terminates the Medicare Advantage value based insurance design model.

[00:31:33] Marcus: So this is not going 

[00:31:36] Vic: I could not believe when I read this. I mean, I just was shocked. I'm not surprised that it got shut down. I'm surprised that Biden did it. 

[00:31:45] Marcus: Yeah. So this is a huge, huge, huge deal. Right. Um, and I, next time we see Emily, we'll have to give her her flowers for, for predicting the, the end of this.

[00:31:59] Marcus: Um, [00:32:00] but you know, my, my view is. That, um, there were so many, uh, growing reports and analysis that were coming out that were showing that CMMI basically was ineffective. Um, a lot of people may not recognize the CMMI is actually part of the Affordable Care Act. It was part of that entire It was created It was created as part of that body of By the Affordable Care Act.

[00:32:23] Marcus: Yeah, as part of that whole body of legislation that, that, that went through. And so, um, uh, My view is that Biden knew it was, there's no question. This was going to get killed by Trump, by Doge, by RFK. It was going to get killed. Yeah. Right. Um, the real, the real opportunity here was for Biden to be the one to kill it.

[00:32:47] Marcus: To not allow the Trump administration to have the satisfaction of killing a key element of the Affordable Care Act. So even, even if they get the talking point of being able to say, Hey, you know, this thing was terrible. Biden [00:33:00] had to kill it, blah, blah, blah. At the end of the day, Biden took care of the job.

[00:33:04] Marcus: You know? 

[00:33:05] Vic: Yeah. He like put it out to pasture. Nice. More nicely than Uh, quietly, quietly at the end of the 

[00:33:12] Marcus: term. So when things change over and next year, there is no CMMI basically, right? Um, he, you know, Biden will be able to say, I'm the one who, who wrapped that thing up. That's, that's my view on probably why he did it.

[00:33:25] Marcus: That 

[00:33:25] Vic: makes sense to me. There's no other, I can't imagine any other reason would do that. No. It is, uh, It probably needed to be shut down, and it's also kind of sad, I mean, it was a, there was a lot of promise in the concept that we will do all kinds of new programs, we'll try things, we'll try to encourage patients to behave more healthier, change what they're doing, go to the doctor more often.

[00:33:54] Vic: And that will result in healthier people and less expensive care over [00:34:00] time. But it didn't. But it didn't work. 

[00:34:01] Marcus: Yeah, but it didn't work. Didn't work. And I think our industry, the healthcare innovation industry, because I feel like what we do in VC is just a component of the broader healthcare innovation industry.

[00:34:16] Marcus: We've got to deal with that. You know, we run around talking about value based care like it's, The Holy Grail and the bottom line is it got its time to run and it didn't work. Yes, it didn't make people healthier or save 

[00:34:36] Vic: money. 

[00:34:37] Marcus: No, no. All right. Couple back to back stories here from Politico. The Supreme Court agrees to hear the challenge to Obamacare is preventative care coverage.

[00:34:46] Marcus: Um, and it sounds like they're going to focus on getting this done later, later on this year. 

[00:34:50] Vic: Yeah. So this is, um, One of the components of Obamacare that various people have been complaining about from the [00:35:00] beginning, which is access to, sort of, preventative or health and wellness, so um, Birth control is the, is the thing that is the hot button issue, but, but any, any health and wellness kind of things need to be covered.

[00:35:17] Vic: And some companies are frustrated with that. Um, I think it's being sort of, like all these Supreme Court things, it, it's sort of being leveraged to cause challenges to the, to the law for a whole bunch of other reasons. Sure. But that's, that's the discussion. And I think it has a, I mean, they haven't even started yet, but they're going to pick it up this, in this, in this year, the, the arguments will be the spring, and then we'll hear in the fall.

[00:35:50] Vic: And I think it's, you know, there's a decent chance that, that there'll be some change. I mean, Supreme court's pretty conservative. 

[00:35:56] Marcus: Decent chance on that one. Uh, next story from Politico, the [00:36:00] house GOP puts Medicaid, ACA, and climate measures on the topping box. These are sort of three back to back ACA related stories.

[00:36:06] Marcus: ACA is going to be under siege. 

[00:36:09] Vic: Yeah, that's right. And this also, um, Emily predicted was going to, was going to happen. Um, the place where you have, I mean, Medicare is, is a hard thing to attack in detail because seniors vote in, in huge numbers. Um, but Medicaid has all kinds of complexity. And I think the, The state waiver programs, which we're doing a program tomorrow with the portfolio companies to talk about.

[00:36:43] Vic: Um, it's not like it'll be shut down, but it's not going to be a lot of new waivers created and the Republicans are going to shift more to like block grants. Right. Here's the money and do what you want. 

[00:36:54] Marcus: The FDA banned artificial dye red three from food. So got out in front of this before, uh, [00:37:00] RFK got the satisfaction of doing it.

[00:37:01] Vic: Yeah. This is, I think, probably very similar to the other story. Yeah. I mean, why the heck didn't they do it? Previously politics, 

[00:37:09] Marcus: man. You know? Yeah. Politics 

[00:37:12] Vic: mean we don't need red dye number three. No, of course. 

[00:37:15] Marcus: Everyone knows that. Yeah. Right. Um, but sort of just, yeah. 

[00:37:20] Vic: So there's a, for people that are listening, there's a picture of some, uh, fake ba I guess it's fake bacon.

[00:37:26] Vic: Yeah. Veggie bacon strip strips. Gie bacon strips 

[00:37:28] Marcus: Yeah. Are no longer star. They're 

[00:37:29] Vic: not gonna be as Red. Red, yeah. In the future. . 

[00:37:32] Marcus: Yeah. Or strawberry yuhoo. Yeah. They'll have to find another way to make that, that strawberry yuhoo look, look, look pink. Like that. Uh, okay. And five, I think this is the final story.

[00:37:41] Marcus: And, um, this is, uh, uh, this is a big one. So there is a new app in the U S app store. That is number one, like Tik TOK is from China. The English name for it is red note. I cannot pronounce the [00:38:00] Chinese name for it. Um, it is their answer to Instagram. We have Instagram here. 

[00:38:07] Vic: And it's in America. 

[00:38:08] Marcus: It's in English, but this new app, Red Note, that is not in English.

[00:38:14] Marcus: There's a Chinese app hosted in China. The language is Mandarin throughout the app hit number one in the app store. 

[00:38:22] Vic: Yes. So just a little background. ByteDance that owns TikTok has announced that they're going to shut down the app as of Sunday. Now, whether they actually do that or not, we're talking on Thursday, the day 

[00:38:41] Marcus: before the, uh, inauguration.

[00:38:43] Vic: Well, and the day that, that it is, um, supposed to be shut down by the court case. Um, but the, the, the law does not require them to shut it down completely. The law doesn't. Would prevent Google and Apple from doing [00:39:00] updates through their app store. So you could, you could have a much longer period of transition and they're electing to have a clean, like shut down time, I think for the biggest effect.

[00:39:15] Vic: And they're allowing their customers to take all their data. Um, so whoever they're following and their information, um, and they're I think Americans, some subset of Americans, but enough that made this app be number one are so mad at their government and meta and meta and musket. They don't want to go to the existing alternatives, and I think they it's a form of protest.

[00:39:49] Vic: Yeah, they're there. It's a form of protest. They're picking. Another Chinese app, and what's really interesting is that I was listening [00:40:00] to this, uh, guy describing, I tried to look at it and then I could not get through the, uh, all the, uh, You know, um, acknowledgments of the legal stuff because no, it was in English, but, um, you're giving them all, all of your data, right?

[00:40:18] Vic: Which I do for Google and other apps, but I was not, I'm not sure that it was right. And so they, uh, they have Chinese people welcoming the Americans and showing them how great life is in China. And, you know, you can get lobster for lunch for a dollar and you should come visit and, you know, life is great.

[00:40:38] Vic: Great in China, it's propaganda, of course, but it, but it is, I think, reasonably working. So all of these young people are very mad that TikTok's disappearing. And they're on red note doing who knows what 2025, man, 

[00:40:58] Marcus: it's crazy. We're only in 15 [00:41:00] days in so crazy. All right, moving to the payer sector, uh, Q4, uh, earnings for United health were announced.

[00:41:08] Marcus: Um, CEO defending the company as the stock sinks on earnings. Um, medical costs are up and, uh, the medical, you know, Um, yeah, they beat 

[00:41:19] Vic: on earnings, but they missed revenue and MLR was 

[00:41:23] Marcus: up. Yeah. Yeah. 

[00:41:24] Vic: Yeah. So, and you know, United is, we were talking about this before the show that they have a lot of levers to pull and they're really good at not missing.

[00:41:34] Vic: So for them to miss it is surprising. Yeah. And it means that the industry overall is facing real headwinds. 

[00:41:42] Marcus: Absolutely. Absolutely. Yeah. Um, so look at. The whole sector is going to be down, uh, kind of, kind of from that. Um, but look, I, I, I think let's just call 24 what it was for, [00:42:00] uh, UHG, a tough year, you know, from, from the change healthcare started the year to the, to the Brian Thompson tragedy and the end of the year, just a really hard, hard year.

[00:42:11] Marcus: And, um, you know, my sense is if I, if, if I had to bet and I, you know, I We don't give investment advice on this show, but I think they're going to rally this year. I think, um, they're, they're resilient organization. They're highly talented. They have all, all of the best assets you could possibly have. And, um, unless they somehow become, uh, A target of the new administration, which I haven't seen any real signs that they would.

[00:42:39] Marcus: I mean, maybe, maybe aspects of what they have because they have everything. So, you know, maybe PBMs get targeted a little bit or things like that, but that's not going to be isolated to them. Those are just sort of structures inside of the overall healthcare industry that they, because they have everything except for a hospital, they're going to have it.

[00:42:56] Marcus: Um, but my sense is they will be pretty resilient. 

[00:42:59] Vic: [00:43:00] Yeah, I think that's right. I mean, part of the question is. Do does one want to invest new money into health care in January 25? Right. I don't know. It seems like payers are having a lot of headwinds, but providers are as well. And so, um, I, I do think. So is pharma.

[00:43:26] Vic: And so is pharma. So, so it's, we talked about this the last couple of shows that the overall market is, is struggling. I think united is an indication of the whole market. They're so big and and well run that agree that they will be fine Eventually, but they're, the whole market's down. I feel the same about HCA.

[00:43:45] Vic: They're, they're, they're both great operators and I'm not sure that we're at the low point where I'd want to put my own money in. I own both those stocks today, but I haven't bought a lot of new, new shares. Um, I think we [00:44:00] have a, a quarter or two of headwinds before it really turns. 

[00:44:05] Marcus: Yeah, no, no, no. Listen, I, I, I very much agree with that.

[00:44:07] Marcus: And I think, um, I think, I think from our perspective, We've been watching this industry just kind of grow and grow and grow. I think when we started back in 2014, uh, I think the number was 2 trillion. Yeah. You know, it's been 10 years. The number is 4 trillion. Right. And, um, at some point, some, there have to be some cracks somewhere if we're going to turn this, this ship around.

[00:44:32] Marcus: Yeah. And so, um, as much as we would love to see the sector kind of keep up with all the AI giants and things of that nature. I think the change that the American people need from this healthcare industry is probably going to be reflected in some chinks in the armor, um, in terms of stock performance.

[00:44:53] Vic: Yeah. And then that leaves an opportunity for a venture backed company to get some market share, private equity. Yeah, yeah, [00:45:00] 

[00:45:00] Marcus: yeah. Fierce Healthcare. Docs incensed by Medicare Advantage hike, demand physician payment update. This is probably going to be an opportunity, uh, that Dr. Oz, uh, will, will pick up on.

[00:45:13] Marcus: Yeah. Um, I, I think we, we talked when he was announced as, as the, the pick for CMS. Mm hmm. That one of the, the key opportunities for him was to turn around the sentiment of, of physicians and the AMA in particular, um, relative to CMS and kind of get them, get the docs paid again. Uh, and I think this, this sentiment as like, um, the final, the final grudge between the docs with the Biden administration gives a great starting point for Dr.

[00:45:46] Marcus: Oz to sort of turn this stuff around. 

[00:45:48] Vic: Yeah, I, I, I agree. It's sort of adding insult to injury, like they already were frustrated with the very low increase, um, in the physician [00:46:00] fee schedule and now it, it is insulting that, that Medicaid advantage is getting a 4 percent bump when, when docs didn't get that.

[00:46:09] Vic: I, I don't think the physicians. Would really care about the ma changes if they felt good about their change. That's right. That's right So that's your point about dr Oz like he can he can fix this by fix just fixing it and then You know ma should do whatever and it's an easy target, you know You overlay ma getting a hike

[00:46:29] Marcus: with shutting down the whole value based model in ma because the thing didn't work Overlaid with the last year of ma nonsense that's been going on and you're kind of like hey How much you just pay us as doctors? How about you simplify this? Just like pay, pay the docs, right? So, uh, yeah, I think this is good, um, starting fuel for, for a Dr.

[00:46:50] Marcus: Oz, you know, physician friendly agenda. Another strike. 5, 000 Providence nurses, doctors launch Oregon's largest healthcare strike. 

[00:46:58] Vic: Yeah, so they [00:47:00] went on strike, uh, beginning of the week and I guess Friday and they haven't come back to the table yet. Um, both sides are saying the other side, of course, the other side is being irrational.

[00:47:15] Vic: Um, in general, I have noticed that the, the nurses and there are some doctors in this, um, have been able to organize and get better terms. It happened with. Maybe 

[00:47:32] Marcus: Kaiser it 

[00:47:32] Vic: was California before we saw 

[00:47:34] Marcus: that 

[00:47:34] Vic: quite 

[00:47:35] Marcus: a bit last year. Yeah, I think there were at least three situations Yeah, where the nurses won in their strikes.

[00:47:42] Vic: So they were the nurses rejected a 20 percent raise over three years Um, and I think they'll probably get more. 

[00:47:52] Marcus: Yeah, I mean, if we, if we had to go based on last year's track record, um, it sounds like striking is a [00:48:00] viable model for nurses to get the wage, you know, or at least get closer to their goals in terms of their negotiated wages.

[00:48:09] Marcus: Yeah, right. Uh, and I think maybe just one other thing I'll say is, is that because we've seen multiple, um, nurse strikes happen, it also seems like health systems are able to absorb the shock for enough time for it to not have significant impact on their ability to deliver care to the community. And then they kind of have a time limit.

[00:48:28] Marcus: Yeah, it's almost like they can 

[00:48:30] Vic: withstand for two weeks. It's something like two weeks, right? Yeah, it's something like two weeks. They let it go to a strike and then they have to figure out something. Right, right. Exactly. 

[00:48:39] Marcus: Um, all right. A little bit of JPM news here. So Modern Healthcare did a nice synthesis, uh, really looking at the nonprofit health systems and noticing that this 30 billion revenue target is, is kind of a consistent target that a lot of these nonprofits talk about.

[00:48:53] Marcus: And, uh, In this article here, they sort of focus on, you know, your big names, your common spirit, your advocate, [00:49:00] which is a new big name, right. You know, putting together, um, atrium and advocate Aurora, um, uh, obviously Ascension, right. You know, the big ones that are already Kaiser. Yeah. They're already, they're already at 30 or, or, or, or moving through it.

[00:49:13] Marcus: Uh, but they also noticed that, uh, Advent Health and then Novant Health, um, uh, have also each set these 30 billion, uh, annual revenue targets. And, you know, what I've When I saw that I was immediately my eyes went to Novant because I you know I know a little bit about what's going on in Carolinas and uh, Novant is just Small relative to advocate, especially you look at the moves that atrium slash advocate have made over the last, you know, three years.

[00:49:41] Marcus: Um, Novanta is just pretty small. I mean, 10, 10 billion, uh, is what they say in this article. So to three X, you're talking about some serious MNA. You can't grow, uh, you know, through any type of like organically, not through construction. You gotta You know, M& [00:50:00] A your way to 30 billion. 

[00:50:02] Vic: Yeah, I think I wouldn't have had the number 30 billion, but we have talked about for probably since we've started this show that you have to have scale as a health system.

[00:50:17] Vic: Or you have to have the sort of pay vider integrated model, which also gives you a lot of revenue because the insurance side has a lot, has a lot of revenue attached to it. Um, or both. And I think groups like Navant, It's a, there's no middle path that they can't stay at 10 billion. They don't have the negotiating power.

[00:50:46] Vic: They don't, they can't go to the bond markets. They can't attract the staff. They can't win deals that they can't negotiate with payers. It just doesn't work. No, it doesn't 

[00:50:56] Marcus: work. 

[00:50:56] Vic: You either have to be. Like a [00:51:00] three hospital system that has community support. I'm not even sure that works, but there's a lot of those, or you have to get to scale.

[00:51:10] Marcus: I mean, I, I think, I think the only alternative to that is if you are truly a community health system where you're in these smaller markets, where you're really the only player, so you have much more pricing leverage, but Novant, I think is in competitive markets. That's, that's what I see is like the real problem.

[00:51:35] Marcus: It's like you're in competitive markets. So when you're negotiating with insurance providers, you know, you're not well positioned at all. Um, you have to sort of do things that are likely going to be lost leaders where you pick up somewhere else, you know, advocate things. I'm thinking specifically in the case of Novant, like advocates going to have all this leverage over you.

[00:51:56] Marcus: And you know, 

[00:51:57] Vic: I mean the overlap probably in all their [00:52:00] markets. 

[00:52:00] Marcus: Yeah. Yeah. 

[00:52:01] Vic: Um, I mean, we know because it's sort of a Nashville playbook. The for profit systems are much more, um, explicit about what market they want to enter. What's your strategy is within that market. That's right. That's right. And I mean, I would say even LifePoint and Arden are in kind of smaller markets, but they have very differentiated strategies.

[00:52:23] Vic: They're not in the same markets and they have a very different approach. Yes. That works for the set of assets they've acquired. Non profits traditionally haven't been that disciplined or like focused or Detail. So you have to get to scale if you're going to be kind of just. Everything. 

[00:52:42] Marcus: That's right. Avel eCare acquires Amwell Psychiatric Care, expands to 46 states.

[00:52:48] Marcus: That's a pretty big sell off slash acquisition here. 

[00:52:51] Vic: Yeah, yeah. I was surprised about Amwell getting, you know, getting rid of their behavioral health [00:53:00] side. Because in telehealth, which, so Amwell's pretty much all telehealth, I think. And selling the psychiatric care unit has to be a significant percentage of their business.

[00:53:12] Vic: You would think. Um, so I don't know where, my takeaway was that I don't know where Amwell is going. Yeah, right. Probably nowhere, I mean, it seems like they're selling off pieces. 

[00:53:21] Marcus: That's kind of what it feels like, right? This is maybe the, one of the more valuable pieces. Yeah. Yeah, it's kind of what it feels like.

[00:53:26] Marcus: I mean, in the article, they talk about how Amwell struggled in the stock market. Yeah. And that they had lost 66 percent since the start of the year. Um, you know, versus the S& P's gain of 5. 6. So I mean, they're, 

[00:53:37] Vic: they're sort of a fast follower to Teladoc. 

[00:53:40] Marcus: Yeah. And not as good as Teladoc, and Teladoc has not been great.

[00:53:45] Marcus: Saying you're a fast follower and not as good as Teladoc is a bad position to be in. So yeah, I think. I think kind of the wind down of them. Well, maybe what we're looking at here. Right. Yeah. Uh, and then another than also not so great story, [00:54:00] uh, prospect medical holdings falls for chapter 11 amid criticisms of prior PE ownership.

[00:54:04] Marcus: So this, this makes a little bit more clear. The PE story we were looking at and decided not to cover, I think two weeks ago, maybe, or did we cover it? Did we cover it? I can't remember if we covered it now. Yeah, I think we didn't. I think I was just like, I don't really want to talk about it. Yeah. It was 

[00:54:19] Vic: questioning.

[00:54:20] Vic: So this private equity firm bought a prospect which has maybe 20 to 25 facilities around the country, California, but not only in California, Leonard green, Leonard green. They bought it in 2010 and they, they did the private equity playbook, right? They, they did, uh, they put debt on it. They paid a dividend out.

[00:54:46] Vic: Then they did a sale lease back of the real estate. Pay the dividend out. This is not unusual stuff, but it does leverage up the balance sheet and put a lot [00:55:00] more debt service on the business. And then they sold and they're, they're 

[00:55:05] Marcus: out. I mean, it hollows out the actual health system is what it does. Yes.

[00:55:11] Marcus: It, it, it no longer has the asset base, so it's got a really poor margin operating business that doesn't have any underlying assets on the balance sheet that it can leverage, probably not bondable, subscale. I mean, it's kind of a nothing. No, really. I mean, we just got done saying these nonprofits have to be like, you know, in the right markets, 30, 30 billion plus, blah, blah, blah.

[00:55:36] Vic: It is legal to do and not. 

[00:55:42] Marcus: Good. Not good. Not good. Not good for the communities that depend on those system, on those systems, not really understanding the macro of what's going on for health systems today. Right? 

[00:55:52] Vic: Yeah. Yeah. That's right. And there's a need for change to the laws. And so [00:56:00] now it's going into chapter 11 bankruptcy protection and they will do whatever they do to change the, the leases and the debt holders are going to.

[00:56:15] Vic: Take a haircut, and maybe taxpayers will have to bail him out. And meanwhile, the private equity firm didn't do anything illegal, but, but, everyone, including me, thinks it wasn't right. 

[00:56:27] Marcus: I, I, I think the worst part of it is just It makes the, it makes the asset very hard to rescue. Yes. You know, you, you, you've hollowed out its ability to even be an attractive acquisition target.

[00:56:44] Marcus: Yeah. Right. Yeah. You're I 

[00:56:45] Vic: mean, the, the dirt had the dirt in the buildings had some value and you sold those. Yeah. That's, 

[00:56:53] Marcus: that's the point. Like, like, if you don't have that on the balance sheet and your subscale, and you're probably not [00:57:00] operating your ass off. And you probably don't have great technology and you probably don't have great payer mix who the hell wants to buy it.

[00:57:07] Marcus: You don't even have the building. 

[00:57:10] Vic: Yes, that's right, right? That's right, too. Does not make sense to have non profit health systems Go through this process. I mean, it happened with Stewart happened with prospect. I think it's probably happened hundreds of other times. These are just the highest profile 

[00:57:32] Marcus: ones.

[00:57:34] Marcus: Uh, all right. Moving into the pharma sector, two deals to talk about Johnson and Johnson to acquire intracellular and 15 billion deal. That's a pretty big deal. Yeah, it's a good size deal. 

[00:57:44] Vic: Yeah, they're, they're, um, they're a decent size company in, in mental health. And I, I think J and J was. strong and sort of adding that they will continue to sort of build their, their portfolio of mental health [00:58:00] 

[00:58:00] Marcus: tools.

[00:58:00] Marcus: Yeah. There's, there's a drug called Calypto that treats bipolar depression and schizophrenia. Um, they're projecting that the drug sales could reach 4 billion by the year 2030. If regulators approve expanding, it's used to major depressive disorder. So 

[00:58:15] Vic: that's, that's the bet that they're taking, that it will get expanded.

[00:58:19] Marcus: And it seems like there's enough tailwinds around supporting, you know, mental health and the need to bring all sorts of different modalities, especially for treatment resistant depression. Yeah. So, yeah, seems, seems like a good bet. Uh, and then, uh, Eli Lilly, uh, is buying Scorpion Therapeutics, uh, drug program and a 2.

[00:58:38] Marcus: 5 billion deal. 

[00:58:39] Vic: Yeah, this is a breast cancer treatment. I didn't really know much about it. Um, decent. I mean, Lily marching on Yeah. Lily marching on. 

[00:58:49] Marcus: Yeah, we always, 

[00:58:49] Vic: always good. 

[00:58:51] Marcus: Alright. And then, uh, in terms of health in US kids turn to a mental health chatbot to share their anxieties. We continue to see, uh, [00:59:00] chatbots and AI becoming integrated in our daily lives in a really kind of meaningful way.

[00:59:05] Marcus: I mean, it's, no, no two ways around it. 

[00:59:08] Vic: Yeah, it's, it's really interesting just to track like the public opinion and news articles where. This story a year ago would have raised all these alarm bells and been an issue and now it now it's just like a fun story and This this girl is chatting with Charlie and it's a natural.

[00:59:33] Vic: Yeah. Yeah, this girl's from Nashville. Yeah, the writers from Nashville yeah, and and parents are feeling much more comfortable giving their kids a chatbot because it's everywhere. I don't necessarily think that means it's, it's good medicine or safe, but, but it's just like the society is just like, we're just, [01:00:00] Accepting it.

[01:00:00] Marcus: It's, you know, it's, it's, uh, and, you know, this reminds me, it's time to schedule, um, TK to come back on the show. Yeah. Yeah. But it's like he told us the first time. It's like, it's, it's, it's inevitable. Yeah. This is inevitable. You know, the, the need to scale access to care will drive the adoption of it. Yeah.

[01:00:21] Marcus: Right. 

[01:00:22] Vic: Yeah. And so I think we have to, I mean, I've certainly come around to this, like it, everything is accelerating. And the only thing to do is to try to put some guardrails so that we go generally in the right direction. And there's going to be hallucinations and things that happen. But we're going to do it.

[01:00:46] Vic: But we're going to do it. We're going to do it. It will be mostly good with some bad and that'll be it. But it's, it's, this is a good segue. I mean, MultiCare is investing in Layer [01:01:00] Health. Layer is, uh, talking about c clinical decision making. 

[01:01:04] Marcus: Like 

[01:01:05] Vic: in very complex cases, how do we make decisions? 

[01:01:12] Marcus: And look, we're, we're now going on well over a year of proof that these LLMs beat the docs.

[01:01:22] Marcus: Yeah. You know what I mean? Like, so you do get to a point where you're not saying the doc goes away, but you are saying, is it even ethical to send docs into the theater to practice medicine without these tools? Like, is it even appropriate to do that? Like, is that the best standard of care anymore?

[01:01:47] Vic: And I think it's probably better to have. AI empowering docs, but I just think it's interesting to note that the positioning has completely [01:02:00] changed in the last year where it used to be these tools. are predictive, but, but they're not, they're not definitive. They're, it's randomized. So there's going to be times when it doesn't come up with the right answer.

[01:02:18] Marcus: It's stochastic, not deterministic. 

[01:02:20] Vic: Yes. Yes. That's the 

[01:02:22] Marcus: accurate way to say it. Yes. 

[01:02:23] Vic: And a year ago, I would have said it can be used in non clinical settings, but we should keep it out of the, like, between the doc and the patient. Yep. And now, I agree with you. It's being positioned and everyone is accepting.

[01:02:44] Vic: We are adopting this. Back to Ambar. 

[01:02:47] Marcus: Yes. Right. Ambar Bhattacharya. Yes. Came on. We need to have him back on. Yes. Yeah. He said we're good. He said the term that everyone's okay with is co pilot. Yeah. The term everyone's not so okay with now is autopilot. Yes. [01:03:00] But planes fly on autopilot all the time. All the time.

[01:03:05] Marcus: And the idea that we're not gonna have autopilots happening in the clinical world is just. It's not real. 

[01:03:15] Vic: Yeah, that's an interesting example, because I think, uh, there's many flights that take off, fly, and land on autopilot. But the pilot sits in there, and we pay them. Of course! Of course! And that is valuable.

[01:03:32] Vic: As a safety component, but then when the Boeing planes had probably wasn't in the U. S. when they had problems that the A. I. was not, you couldn't, the pilots died too, because they couldn't really take control back over. Um, I mean, that's an issue. Did 

[01:03:49] Marcus: you recently see the, the, the way mo that was just like in a loop?

[01:03:52] Marcus: Like there was some situation where it, it was confused and it just was [01:04:00] like doing a circle, like just kind of going in a roundabout. Right. And it wouldn't stop. Couldn't get it to stop. Right. I mean, and this is the thing with the autopilot, right? It's like there, there's no question. There's 100 percent certainty that case will happen.

[01:04:14] Marcus: Right. It will get it wrong at some point. 

[01:04:17] Vic: Yeah. And what we are coming around to as a society, but it's not smooth, right? Of course not. People are realizing at a different pace is that, let's just take cancer care. If you're using an AI with a doc, it will uncover more optionality and you'll probably get to a better.

[01:04:40] Vic: end result 99, maybe, maybe four nines percent of the time. Sure. And then one out of a thousand times, it'll make a mistake and the doc maybe won't have caught it. And I think we are starting to accept that. Like, okay, well, it'll be better [01:05:00] for a lot of people. And then once in a while, when it hallucinates, we'll, we'll have to mitigate that, but we're going to do it as we As certainly in self driving with looking at how many humans fall asleep or texting or whatever.

[01:05:17] Vic: And yes, the AI will have challenges, but it's not going to have those challenges. And we're just trading one risk for another. So anyway, layer is, is pretty interesting. 

[01:05:31] Marcus: All right. Uh, wrapping up our AI rundown general catalyst teams up with AWS to co develop and deploy AI driven solutions. I don't, you know, the first sentence in this article with fierce healthcare venture capital firm, general catalyst has teamed up with Amazon web services.

[01:05:48] Marcus: My question is, is General Catalyst a venture capital firm anymore? 

[01:05:52] Vic: No, they choose to call themselves that, 

[01:05:57] Marcus: but what they 

[01:05:58] Vic: do Once 

[01:05:59] Marcus: you buy [01:06:00] a hospital Yes, and Doesn't that turn you into something different? 

[01:06:05] Vic: And they, yeah, so they own a hospital and they manage, I don't know, 5 billion. I mean, there's a lot of money.

[01:06:12] Marcus: Here's the thing, I like them. Yeah. Yeah. I like, they're very smart. I like what they represent. I like the innovative, you know, if we didn't have them, we wouldn't have any fun stories to talk about. Right. You know, they're doing all sorts of like really fun out of the box thinking kind of things. It's cool.

[01:06:26] Marcus: I'm, I'm just not sure they're a 

[01:06:27] Vic: VC firm anymore. They began life as a VC firm. Yeah. Right. And I think. They prefer that term. 

[01:06:38] Marcus: It's a benign term relative to like the stuff they're trying to do. 

[01:06:41] Vic: Right. That's why they like it. And they're partnered with Amazon to deliver AI. at scale. Right. And sort of, of course they are right.

[01:06:53] Vic: They only had three to pick from. Yeah. Sure. So, 

[01:06:56] Marcus: all right. And, uh, this is a story from the, [01:07:00] uh, the information, which, uh, for any of our listeners who don't know, the information is, uh, Um, a really great inside scoop source for stories around, uh, Silicon Valley. Yeah. So the headline here is NVIDIA's top customers face delays from glitchy AI chip racks.

[01:07:17] Vic: Yeah, the Blackwell chip, which is their flagship, right? Flagship. Flagship chip, isn't it? Yeah, it's a flagship. It's the really expensive, you know, it's a, it's called a chip, but it's pretty big. Oh, yeah. Size. 

[01:07:29] Marcus: I mean, it's heavy. It's like 

[01:07:30] Vic: heavy. Um, it has been returned by Microsoft, Google, and Meta. because they were having power issues and it was overheating and not working.

[01:07:46] Vic: The benefits of Blackwell, I think, are that supposedly it's a lot faster, but doesn't use as much power. So, uh, all of these data centers are really constrained by power [01:08:00] first and then compute or the chips next. Yeah, but power is the fundamental. And so I think this article seemed to imply that. NVIDIA can fix these problems and get their shipments back going.

[01:08:18] Vic: They weren't like such big problems that it was a. You know, a death blow, but definitely a setback. Yeah. 

[01:08:24] Marcus: I mean, a little bit of bad press for them makes them seem at least like, yeah, they're like, maybe they're humans running the company. Yeah. Yeah. Like, Holy cow. Yes. 800 percent growth over the last two years.

[01:08:36] Marcus: Yeah. Since insanity, total insanity. All right. Final story, us targets China with new AI curbs, overriding Nvidia's objection. So this feels like another one of those, like, Biden not letting Trump get all the satisfaction of, uh, you know, playing hard ball, um, uh, in, in, in terms of, uh, foreign policy when it comes to trade, uh, certainly with China and in our [01:09:00] biggest, uh, area of competition, AI.

[01:09:03] Vic: And like a lot of things, uh, if the Biden administration had been this on top of it and politically savvy the whole time, it might've been different. The last two weeks they've done a lot of smart things, but, um, 

[01:09:17] Marcus: Begs the question if these smart things were even their ideas. 

[01:09:19] Vic: Yeah. Yeah. Yeah. So, um, we have already blocked the sale of these advanced chips to China, but we were selling them to peers of China, like Brazil, and then it just gets re sent to China.

[01:09:39] Vic: And so now, so now they have a much more, much more detailed, holistic sort of list of countries. The G7, I think they added one other company, but there's basically like seven or eight countries that can buy what they want. 

[01:09:54] Marcus: I mean, basically limiting Nvidia's market. 

[01:09:55] Vic: Yes. Yeah. So our, our strong partners, the G7 [01:10:00] countries basically can buy as many as they want.

[01:10:02] Vic: And then the next 130 countries have limits where whoever in the Biden administration decides for their population, you can have this many because you, you need that many and you can't have any more. Right. Um, so that's how they're planning to control it. And then are enemies, which I'm not going to get right, but China, North Korea, Iran, Russia, maybe there's someone else in there.

[01:10:34] Vic: They are barred altogether. Yeah. Um, I think it makes sense. I mean, yeah, NVIDIA is upset with it, but. Oh my God, please. 800 percent over the last two 

[01:10:43] Marcus: years. Right. Yeah, um, I, I, I think what will be interesting is, um, how this actually takes effect. You know, um, Jensen Wang has started to be more vocal about his, um, uh, [01:11:00] sort of disappointment in the Biden administration and excitement about the Trump administration, uh, that's, that's new for him, uh, sort of voicing that.

[01:11:08] Marcus: And so it'll be interesting to see how, how sticky this is and whether or not, you know, Trump just says, no, you can sell it everywhere. It just tariffs. You know, just, just extra, extra costs, extra fees into the, into the United States, but no sell everything to everybody, but just make sure that the United States gets revenue out of it.

[01:11:26] Marcus: Right. Right. Which seems to me more kind of his thought process on this as opposed to like playing limiting games. And 

[01:11:35] Vic: what's gonna be interesting is, uh, you know, gr which is Elon's thing, they have the biggest compute and power in Memphis. Yeah. Their models. Rock version one was not that great, but I think version two, it's getting better.

[01:11:50] Vic: Yeah. And version two is gonna be competitive with everyone. 

[01:11:53] Marcus: Well, isn't two already out and they're working on three, maybe three is the one. Is it if three is the one that they're saying is gonna like actually be, be [01:12:00] charge worthy? Like you can actually charge for it. Yeah. I think 

[01:12:02] Vic: three is gonna be. Like a frontier model competitive with everything.

[01:12:06] Vic: Proper 

[01:12:06] Marcus: competitive frontier model, yes. 

[01:12:07] Vic: And that's already in place. And now they're in the training process in Memphis. So there's going to be U. S. People that want to, U. S. companies that want to buy as many Nvidia chips as they can produce. So I don't feel too bad when, when we have supply shortages for U.

[01:12:28] Vic: S. customers. That's right. Agree. We'll see how it evolves. Yeah. 

[01:12:31] Marcus: I mean, as, as much as I have issues with Meta, Uh, I would prefer a meta to have access to the chips over, you know, some Chinese companies. There's no question about it. 

[01:12:40] Vic: Yeah. Although we want Red Note to be very performative. All the young people trying to protest.

[01:12:47] Marcus: But isn't, isn't that, I mean, I do want to wrap up talking about that, which is to say, We we've spent all of this energy in the Senate and now in the court [01:13:00] system around banning tick tock, and doesn't this yet again demonstrate the ways in which government Trying to regulate and legislate, um, economic activity is like whack a mole, right?

[01:13:16] Marcus: I mean, it always has these unintended consequences and economic actors will find a way, you know, and in this case, I would say the economic actors are all the people on TikTok in the United States. Yeah. Like it's, it's actually not RedNote. That's not who's doing this. No, they're just the recipient. It's the U.

[01:13:34] Marcus: S. 

[01:13:36] Vic: It's the influencers that have built a little business, but it's, it's their business that's really important to them. Exactly. And they feel like the Senate and the government and the Supreme Court has taken it away from them. And the reason they're taking it away is that, China could do something at some point, maybe 

[01:13:59] Marcus: maybe [01:14:00] already is or already is doing things that we can't be certain of.

[01:14:05] Marcus: Yeah, 

[01:14:06] Vic: yeah, my I'm cynical enough to think that China is doing the best they can do to influence American voters. On, on Instagram, that's my, and on, on X and on, on tick tock and everywhere. 

[01:14:22] Marcus: Yeah, except for the tick, the reason why tick tock has been so successful is because they have a different algorithm and a different engagement model.

[01:14:30] Marcus: Yeah, it's, it's not about comments. 

[01:14:33] Vic: No, no, they don't want, there's no, I mean, maybe their comments, but they don't, they don't affect 

[01:14:37] Marcus: the feed. It's not, that's yeah, the tick tock algorithm and the tick tock serving model of content is different from any other app. The other apps are trying to get like tick tock, but they're not, they're still not.

[01:14:50] Marcus: And I think that is, um, I think your point about influence is, is likely, right? That yes, they are on all of the U S owned platforms as well. [01:15:00] Their abilities. In terms of what they can do when you fully control the platform is much different than being a content You know producer on another platform. Yeah being the platform itself is is Hugely powerful.

[01:15:13] Vic: What can they do when the user is right in chinese and then the chinese government is translating for americans 

[01:15:21] Marcus: Uh, well, we'll have to watch and see yeah Yeah, so 

[01:15:25] Vic: it will uh be It's going to be a crazy week on Sunday and then Monday with the inauguration and everything. 

[01:15:33] Marcus: Yeah. Yeah, for 

[01:15:34] Vic: sure. I will not be in DC.

[01:15:36] Marcus: Um, so let, let me just see here. Uh, am I on the show next week, Dick? Uh, I don't know. I am not on the show next week. Okay, well, I will have a guest host. Yeah, you gotta have a guest, man. I'm uh, I'm uh, You gotta have a guest 'cause I'm not on the show. 

[01:15:54] Vic: Okay. 

[01:15:56] Marcus: I can figure that out. Alright. Uh, good luck with it and um, [01:16:00] uh, I look forward to listening.

[01:16:01] Marcus: Yeah, we'll 

[01:16:01] Vic: talk about 

[01:16:01] Marcus: all 

[01:16:01] Vic: the, all the crazy DC stuff when you're away. Yeah. 

[01:16:04] Marcus: And, and we have a whole bunch of our regular guests. We need to be scheduling. Emily, we need to get Emily in here. We need to get, uh, TK in here and we need to um, uh, we need to get on bar back on the show. Yeah. Yes, definitely.

[01:16:15] Marcus: Yeah. Alright. Uh, until next time, thanks for putting the show together. Alright.