13 – The Fed Did What?! | Rates | Economy | Yellow | PacWest | HCA | The Politics of Hospital Mergers

Marcus: [00:00:00] All right. Episode 13 health further. What’s up, man? Welcome back. Thank you.

Vic: Do

Marcus: you rested? Do you, uh, I was until today

Vic: till we started talking about

Marcus: the show

Vic: and all the things we had to talk about. Oh my

Marcus: God. I honestly just did not think that the fed was good. I feel dumb. Uh, I knew the fed was going to raise, but I just, I bought into the CPI hype and I thought they would push it to the limit.

Another 30 days or until, until the next meeting. I just didn’t think it was thought they would

Vic: be responsible with a multi trillion dollar economy and not just like run off the rails and do stuff to see what would happen.

Marcus: Tell me how you really feel. Um, yeah, I just, it just was not what I was expecting.

So I’ve got some rewriting of things to do and. You know, just, just crazy. Well, look, let’s, let’s, let’s dig in, man. Uh, cause we got a lot to cover.[00:01:00]

We are back talking about the fed funds, right? I wish we weren’t. I wish we were talking about something different, but you can’t because when they raise the rate 25 basis points and we’re already, On the edge of some really nasty things from a credit perspective, uh, yeah,

Vic: we’ll talk about it through their own analysis.

Marcus: We have to keep talking about it. Okay. So you, as always, you pulled some great charts. Oh, and Kaelin, who’s our head of marketing, wanted me to say, if you’re listening. In the show notes, there is a link because she and Aaron, our producer have come up with a way to put all of our graphs on our show notes.

It’s incredible. They’re the best. So click the link in the show. You can see

Vic: everything. I’ll try to describe it, but it’s much prettier with Kalen’s work.

Marcus: Exactly.

Vic: So this is a chart showing, uh, when the fed has chosen to. Increase rates tighten the lending [00:02:00] situation in order to cut back on inflation. What has been the trajectory of those, of those increases.

And I like this chart because it shows this time is about twice as high and much faster. Your rate of change. The rate of change is dramatic. And I don’t, I don’t really appreciate it when I just hear 75 basis points, 25 basis points. Right. Okay. But when you look at it from the beginning, when they started tightening until today, we’re 15, 18 months in, and they’ve tightened very dramatically more so than any other time we didn’t go back further than 94, but in the last 30, the last

Marcus: 30 years, right, right, right.

Okay. So that’s, that’s just a visual to help us understand that the rate of change as well as the height. Of the overall rate change, um, fund rate change. It feels

Vic: dramatic because it is

Marcus: twice as fast. Yeah, it is actually dramatic. Okay. So this next

Vic: chart,

Marcus: um, [00:03:00] so

Vic: they came out with that yesterday. That was the 20.

What day is it today? The 25th, 26th.

Marcus: Okay. So this chart was super interesting. The share of distress firms. We had to spend some time actually going through it because it’s, it’s somewhat complicated, but, um, I want to just kind of talk through it. So first of all, this is a chart that is laying out the share of firms in the United States that the fed has determined are in financial distress.

And. It, it determines that based on it’s got a whole computation of how it determines that it’s in financial distress. But what is interesting is it then overlays that that chart over time with two key things. One are tightening episodes. So we just looked at the five tightening episodes we’ve had in the last 30 years, um, as well as recessions.

So you can see. How the share of distressed firms against all U. S. firms has changed relative to both tightening [00:04:00] episodes and recessions. And the highest point on this chart for distressed firms, share of distressed firms of all firms is the great financial crisis.

Vic: Over 50%, 55. Yeah, it gets

Marcus: over, it gets over 50%.

So that’s a, that’s a really good indicator of like the impact of a recession. But then you also see that it gets, uh, it gets, this number gets elevated often during tightening windows, but it also can go down during tightening windows. Right? So it seems to be pretty inconsistent. What happens across these different tightening windows, the tightening window we are currently in the number is skyrocketing.

It’s going from around 17%. Of all, which, which feels like a normal number, right? Like the number of share of, of, of firms that are in financial distress, which is related to their debt burden and their ability to manage their debt burden going from 17 percent to about 37, 38%. Uh, and that’s, that’s still in 2022.

So that number is [00:05:00] probably higher than that now, right? Cause this, this ends in 2022. Right. Yeah.

Vic: And it’s a really scary looking, uh, growth trajectory of firms in distress. It’s not straight up, but it’s rising pretty quickly.

Marcus: And the thing that, that really struck me about this particular, that struck me about this particular chart, debt is an event.

So, you know, we talked about, um, American physician partners, right. And it’s like, you don’t hear anything, you don’t hear anything, you don’t hear anything. And then one day. They’re just going out of business, right? That’s it. Right. Because once you’re in default of your debt, you’re done. If you can’t, if you can’t get your debt refinanced, you’re out.

So it’s not even this thing about they’re not performing or the revenues in the miss or, you know, labor costs are going high. All these other indicators that we, we, we get to see, you know, with full transparency in the public markets. And we hear about often in the private markets, that’s not what this is covering.

This is covering [00:06:00] one specific aspect of firms health, which is. How their ability to manage their debt burden.

Vic: Yeah. And we’re VCs, right? So we know, I know this from being on boards of small growth companies that happen to have debt. And unfortunately I’ve been through experiences where firms I was involved with on the board of were in this.

Potentially distressed, even some that went through bankruptcies, the CFO knows the board knows, but they’re not telling all of their customers and the employees. It’s it’s kept as quiet as possible. So they can. It’s called workout work their way out of it. And so the Fed knows and the CFOs of these companies know, but it’s not broadly known until they fail and they can’t refinance.

And then like all at once, they go into some kind of bankruptcy chapter seven, chapter 11, whatever it is.

Marcus: Right. So in 2022, the fed estimated that this number [00:07:00] was in the mid to high thirties. Let’s just go ahead and say, since the rate has continued to go up, it is almost certainly correlated with that number of share of distress firms going up.

So we’re, we’re getting close to the same number that we were at in In the middle of the great financial crisis.

Vic: Yes, that so this is the thing that I was kind of shocked by. And what I want to talk about is the U. S. Fed did this report and published it on July 23rd and then. Three days later, they raised the fed funds rate again.

That’s why I couldn’t

Marcus: believe they did it. That that’s, that’s why, because I know the credit pressure that’s mounting. And I was just like, I just think they’re going to like let a little steam off, you know, just let it lie. So I just couldn’t believe that they raised it again.

Vic: I mean, we showed the [00:08:00] trajectory early.

It’s been, uh, I don’t know if it’s the fastest ever, but it’s been really fast for the past 30 years, the fastest ever. Okay. Maybe there was some previous time they have done a lot of Work to cool down the economy and to put pressure and try to restrain growth get to Where they cool it and we don’t have a recession, but a so called soft landing and I agree I think it takes a long time for this uh impact to be felt another thing that they Talk about here is that it’s several years before you see the impact You So they estimate that it takes between 6 and 24 months for one change in rate to filter through these distress levels.

So, yes, they could have easily waited another, they could have waited until September and just seen some more cards, see what happens. But they chose not to.

Marcus: So. [00:09:00] You found a story about a local company, uh, in the trucking space. So it’s going to take us a while to get to the healthcare part of the show, by the way.

Uh, cause we, we got to talk about this, this, this fed thing. So you found this story, uh, that is about, uh, it’s a labor story. It’s a labor union story. So the headline in the wall street journal teamsters threatened strike at yellow as trucker, Mrs. Pension payment. And then the subtitle. Is the debt laden carrier is seeking to defer contributions as it struggles with liquidity.

So the headline. Is a labor headline.

Vic: Yeah. And it caught my attention because of the, the pen, healthcare pension was wrapped up in it, which I’m tracking.

Marcus: Yeah. That’s, that’s, that’s what got your attention, right? You’re not looking for trucking stories, right? Yeah. But then the subtitle is actually like the real story.

They’ve buried the lead. Right. And, and I think the reason why I wanted us to talk about this directly after the distressed firms [00:10:00] chart is the media latches onto themes. Over periods of time, right? And then they bundle stories into those themes and a huge theme We have going on right now because it’s because it’s a pop culture theme is the writer strike Yeah, right.

That’s happening, which is now the writers and the actor strikes.

Vic: Yeah, right. And it feeds into AI. It’s a good, it’s a good story. Yeah. Yeah. Because there’s a lot of AI buzz and everyone cares about the writers and their show. It’s a good story.

Marcus: Yeah. And movies aren’t going to come out and Fran Drescher’s on TV yelling at people and you know, it’s great.

It’s good TV, right? Yeah. And then there was a UPS story, right? And now that one got worked out, but another labor story. So the headline here is Teamsters threatened strike at yellow as trucker Mrs. Pension payment, because Hey, look, it’s another labor story. Wow. You know, but what’s really going [00:11:00] on here is why did they miss the pension?

Payment, right? That’s the real

Vic: just decide to not

Marcus: pay it. Correct. Correct. And you scroll down, you scroll down. And what you find is this paragraph here. A strike would be devastating for the trucker, which is teetering on the brink of bankruptcy as it seeks Teamsters cooperation to overhaul its freight handling operations while it seeks to refinance 1.

2 billion in loans that come due next year. That’s the actual story. And by the way, this is also the story in Hollywood. A lot of these companies. A lot of these Hollywood studios have really big debt burdens. Like have you, have you tracked at all the wall street, not the wall street, the Warner brothers discovery.

Vic: No, I don’t know. They got a

Marcus: big debt burden, really big debt burden, you know? And so a lot of these companies that we’re talking about with these labor [00:12:00] issues, where it’s coming to a head, it’s because of debt underneath it. Right. That’s really what’s going on. And the employer then, Somehow missteps on their obligation or decides to do really unscrupulous business models like take up an actor’s image and likeness and say they’re going to use AI because, you know, guess what their, their business is upside down.

Yeah, they have

Vic: to figure out some way to finance things.

Marcus: Exactly. And just to talk about how fast this debt stuff works, right? This story, uh, came out on July 18th and then this week, July 26th, the story comes out in the wall street journal. Trucker yellow prepares to file for bankruptcy as customers flee.

Yeah. That’s how fast this goes. Yeah.

Vic: And what is, um, really interesting is the feds chart about that red line going up, more companies in distress, the best financed, like super profitable companies will be okay. Right. But, but it’s [00:13:00] those companies that are maybe all right with 3 percent debt, 4 percent debt.

But when you, when you increase the cost of. Borrowing they can’t make the payments. So like that those ones that are like Maybe going to be okay with the cost of debt where it was 18 months ago Now they can’t it’s it’s those ones that like are on the edge or maybe not even on the edge, but they weren’t Super strong balance sheets.

They were kind of trying to figure it out. They’re the ones that get uh punished and

Marcus: And oh, by the way, these are all labor issues You And what’s the most durable part of the inflation? It’s labor costs, right? Right. It’s labor costs. So like these companies are getting it from both ends. Yes, exactly. What the fed is doing is actually not working to lower the labor costs.

So that’s screwing with their margins. And then their debt is going up to unserviceable numbers. [00:14:00]

Vic: Yes, and then further confounding that I can’t fully get my head around, okay, is that the Wall Street Journal that I read and subscribe to and I think does an okay job, they published this article on the 18th.

The story a week later, two weeks later, is the customers left. And of course, if I was shipping on yellow, And I hear there’s all these problems and I would find another

Marcus: shipper to I mean, it’s basically SBB, right? It’s like, and

Vic: so the truck

Marcus: run,

Vic: the reason it’s quiet and you never hear about debt problems is they’re so fulfilling as soon as it’s, it’s published, then it’s self fulfilling and it happens.

That’s it. And so it’s really hard to put it like back together again. And I think the Fed is a little bit cavalier about we’re going to keep raising. And yes, it’s [00:15:00] 35, 40, you’re right. It was in 22. So maybe it’s 45 now percent of companies in the country. That are in risk and financial distress. It’s not half the companies, but it’s a lot, 40 percent of the companies being cavalier and then increasing rates three days later, there’s people that work at yellow.

And it’s seems, seems short sighted to just feel like we’re going to, we’re going to work hard to cut inflation. That will cause all of this distress by their own report. This isn’t some other. Thing on Twitter now X, I guess. So that’s, we don’t know where it came from. It’s their report. And I don’t, I just don’t know what the line of thinking is.

All right. Let’s keep, let’s go to the next thing. Yeah. So today the, um, U S bureau of economic analysis, BA [00:16:00] came out with their GDP report. And we’re showing it on the screen. It grew last quarter. The, the U S economy grew from a rate of 2 percent growth to 2. 4 percent growth. It came out a day after the Fed raised rates.

But I think it’s, I think it’s pretty safe to assume that the Fed knew this. I mean, it’s Q2, so it’s been over for 45 days. That’s right. I think they probably knew what was going to come out. Yeah. So on one hand, it’s causing all this distress. But on the other hand, the presumable, I mean, the economy is still growing.

I wanted to unpack, it doesn’t feel like it’s growing at two and a half percent to me. So I wanted to like dig in and try to understand, okay, where, how did they get that?

Marcus: Yeah, well, we, I, I mean, we, we talked as we were trying to put together this show about how the benefit of [00:17:00] doing this show on a weekly basis is.

We’re starting to get it. Yeah. We’re starting to get it. Right. And I think what you pulled together two shows ago, where, so that would have been episode 11, in case you want to go back and listen to it, uh, where you showed the concentration of the markets, right? The concentration of the market. We read

Vic: the headline, the S& P is up and we all think, gosh, everything must be good.

Right.

Marcus: Right. The Nasdaq ripping.

Vic: Yeah, right. That’s like 10 companies. And by the way, it’s the same 10. In both, in both indexes.

Marcus: Yeah, exactly. So, so there is this, it’s like there’s two economies. It’s like there’s two economies happening in parallel right now. One is going to continue to grow because quite frankly, they’re not debt burdened.

They’re cash rich and they’re not even labor dependent. Like if you look at the revenue per employee of these tech companies relative to like all of these other companies that are in real trouble, it’s fantastic. So, [00:18:00] you know, more and more value is accruing to them. They are growing. Therefore, GDP is growing, right?

Um, and you’ve talked about labor participation being relatively low. And so we’re going to keep having unemployment below as people are just kind of moving around from job to job to job, and then also hospitality. I know we’re going to, we’re going to unpack this officially, but

Vic: let’s just talk about the big tech companies.

That’s really what it is. I mean, maybe Pepsi’s in there too, but we can go back and look, but it’s mostly technology companies that are driving. Both the NASDAQ, which everyone kind of knows, but also the S& P 500 index, and they are U. S. headquartered companies. We’re all proud of them and feel like they are American, but, but they’re also global, multinational companies.

And they [00:19:00] can elect to move operations wherever is makes the most sense. I think they all have tax strategies, of course, just like everyone does, to pay as little tax as possible. So, I don’t know that it is the right, I mean, I’m not a policy person, but I don’t know that it makes sense to say that if, if these seven companies are doing well, the whole country’s doing well.

There’s small businesses that really employ most of the people because these big tech companies. They’re tech companies. I mean, there’s some people there, but

Marcus: well, I, I think the economists should reconvene and probably consider in discussion that once you start having companies that are hitting 3 trillion in market cap, some of your standard evaluation models may be [00:20:00] compromised.

Some of them may be compromised because I think these basic numbers, they don’t tell the story they used to tell. There was just less concentration before. And the concentration was not in these unbelievably efficient, high margin technology, global multinational businesses, right? So they, they just don’t even tell the same story anymore.

And that’s, That’s the problem is if you’re, if you’re looking at this GDP growth and you’re saying, up, it’s going up, we got to still impact stuff. How do you square that with the share of distress firms approaching GFC levels? Right. Like that’s the part I’m like, I don’t understand. I

Vic: mean, where I was last week, and I agree, I’ve learned a ton in this podcast because I have to get my act together every week.

Um, where it was last week is I thought the fed didn’t care about the stock market prices. Because that is people’s net worth, and they feel like, well, rich Wall Street people [00:21:00] can take a haircut, they’ve made, I don’t know, 35, 40 percent in the last year, last six months, and if they take a haircut down another 40%, that doesn’t matter, we need to get inflation under control so that, Middle America people that are trying to raise a family on 50k, 70k, 100k can buy food and pay a mortgage.

And I kind of agree with that. I mean, the stock market is not part of the Fed’s mandate. But what I was, I’ve come around to is this distressed thing and then yellow going under, right? It just makes it more, by the way,

Marcus: a local company. Yeah,

Vic: they’re in Nashville, right? And it seems like the feds report says roughly 40 percent of companies are are in some risk of the same thing.

That is

Marcus: [00:22:00] jobs. That’s going to be jobs. Totally. No, I mean, here’s, here’s what’s so insidious about this. The debt issue causes the company to miss a pension payment. That triggers the union to get into an argument with the company.

Vic: So now the Wall Street Journal heard about it. That

Marcus: creates a media story.

The media makes a labor story. A week later, customers flee. Now we’re all screwed. Customers, customers are screwed because they got a transfer and that, and that’s a pain, that’s a hassle

Vic: is

Marcus: those jobs are going to be lost, right? I mean, I mean, maybe they go to another company, but not all of them, no way.

All of them. Right. And the company’s dead.

Vic: Yeah, right. So everyone loses. Yes, it was lose, lose, lose. And I think a trucker and it’s, it’s a, it’s a competitive market, right? There’s, there’s lots of truckers. One going out of business. Is not going to reduce prices. [00:23:00] No, I mean, that’s going to increase prices.

It’s more consolidations, less optionality, less competition. Right, exactly. So it just, maybe it’s over my head and the fed is making moves that I can understand with my small brain, but it seems like they are just driving a car blindfolded, just like riding around. But anyway, so let’s unpack a little bit.

Um, how did we get to this 2. 4 percent growth? This is how it all is put together. So there are several, uh, components to GDP. There’s consumption, there’s investment, there’s inventories, and there’s exports and government spending. And we have a couple other slides to show, but basically it’s pretty easy to see that inventories were really negative last quarter, way down as companies, I guess, had too much inventory [00:24:00] and didn’t buy any inventory and just sold off what they had.

Marcus: Yeah,

Vic: this quarter. They didn’t really add very much um The consumers which is the dark blue the biggest component last quarter was the consumer Buying a ton of stuff in the first quarter and that came down by half Significantly down a little more than half.

Marcus: Yeah.

Vic: Yeah Um, and it was sort of buoyed by this investment thing, um And so I have a couple other slides to sort of try to unpack what is this non residential and and residential investment?

So go to the next. Okay. So this is consumer spending a couple weeks ago. We looked at the retail sales. That’s a weekly chart. So it’s not surprising that it’s down. The retail sales was negative. And so it is down dramatically, [00:25:00] um, as you split out, you know, is it services or durables like a car or a washing machine or something?

It’s all services, basically. So, we’re still traveling and, um, going to restaurants. Airports are

Marcus: free. Right. Every plane is full. Yeah. It’s a disaster trying to travel out there right now. Um, hospitality packed. Yes. You go to restaurants, they’re packed. So people are still healthcare. We’re still being in healthcare.

Oh yeah, for sure. It’s probably spending more on that volume is up, uh, right now.

Vic: Yeah. So

Marcus: we’re not buying stuff,

Vic: but we’re not buying stuff and I don’t. I don’t see how that comes back. I mean, I don’t think that until

Marcus: it’ll cycle, but like no time soon.

Vic: Yeah.

Marcus: Right. No time soon. Right. Okay. So then the next, so the

Vic: next, this is what really changed business investment was up dramatically and I don’t have information of exactly what it is, but it strikes me that equipment, right?[00:26:00]

And intellectual property is 80 percent of 75 percent of

Marcus: it. Well, first of all, just let’s let’s let’s say this out for the listener. So there are three categories by which they they organize business investment from a GDP perspective structures, equipment and intellectual property, which I find to be very sort of interesting.

But okay. That’s fine. Uh, structure seems to be real estate. I would imagine, um, equipment is pretty broad category. A lot of things could probably fit into equipment and then intellectual property. Right. Yeah. Um, and equipment is the big gainer, especially compared to the two previous quarters, it’s the big, big, big gainer.

And I guess what you, what you said you thought it might be is chips.

Vic: Chips and other equipment, trying to figure out how to. Use artificial intelligence and other technology tools to deal with the worker shortage.

Marcus: Well, and NVIDIA’s growth would reflect that. That is probably You don’t

Vic: need to [00:27:00] buy that many NVIDIA chips to spend a lot of money.

No.

Marcus: Expensive. No, they’re very expensive. Um, so, so basically consumer spending is down. Business investment is up. The stock market, both S& P and the NASDAQ are up. They’re down a little bit over the last week. I think some of that is coming down from just the announcement of the rate hike. But over the last six months, they’re definitely both up.

Yeah. Um. And as we’ve said several times now, a ton of the value that we’re seeing reflected into these growth numbers, reflected into these investment numbers reflected into these value, uh, increased numbers are largely consolidated into high margin, high revenue per employee, multinational technology companies.

Vic: They’re not going to create a lot of jobs if it, I mean, I don’t have visibility of what it is, but if it is software. That [00:28:00] doesn’t create that many jobs, maybe a couple developers, but and then so then so the actual, they don’t follow the CPI for policy at the Fed. I don’t think I believe they follow this, which is the PCE personal consumption expenditures, um, for whatever reason, they favor this version of spending, um, and it comes out at the same time as GDP.

So it came out today and it is coming down the. The headline number headline numbers coming is coming down, but the core is pretty stubborn.

Marcus: I thought because the headline number made such an impressive decline in the last 30 in the last print, that’s why I thought they were going to take a break. Yeah, and I and I know we’ve talked about it.

I know that that’s not actually what they go against, but I was just like 3%. Like, and I think the [00:29:00] reason is because they’ve made no progress in the core inflation. Like that services number is just a, it’s basically a straight line. So that’s why I was like, well, they need to take a victory lap, at least for a meeting, just a meeting.

I mean, I would like them to

Vic: let the lagged effect actually play out. Right. The, uh, the way they calculate shelter and the cost of where you live. Is I can’t remember the details, but it’s averaged over a long period of time. So it takes about a year to filter through. So we know the shelter component, which is a significant component, is not going to come down until like the end of the year.

So if they use the core PCE, it’s not going to come anywhere close to 2 percent until past, past December. No way. I mean, well, actually let’s hold on now. The way it is 50 percent of companies go bankrupt or have distress. [00:30:00] That’s the, that’s the scary thing. And when you look at the yield curve, that’s what the bond market is predicting.

That’s what the bond market is

Marcus: predicting,

Vic: yes. But that is not a fun journey. No, it’s a disaster. And that’s terrible, right. No,

Marcus: I mean, so I think what scared me so much about that distressed, and I’m, I’m going to go back to it just because, you know, visualizing it is, is helpful. I think what, what, what really screwed with me was when I realized that the rate of change.

Was most similar not to another tightening cycle, but to the GFC to the to the global financial crisis. That was the part where I was like, Oh, but it’s self inflicted. Correct. That’s what I’m saying. It’s not a recession that was driven by some external event. It’s literally driven by a tightening episode.

That’s right.

Vic: I think the Fed believes it has tools to ride in and save the day like it did with Silicon Valley Bank [00:31:00] and find some way to bail out whatever’s needed to be bailed out when something goes off the rails and there’s a whole bunch of distress and say it is, um, the real estate market or some other category that really has a lot of trouble, they will try to do stimulus and correct the banking challenges.

And they probably do have tools. That’s gonna cost a lot of jobs, a lot of dislocation, a lot of Suffering, I am not sure is needed.

Marcus: All right. So let’s, let’s continue. So this story came out in wall street journal on July 24th. This is, we talked about this already.

Vic: We knew this was going to happen and

Marcus: now it is here.

It is occurring. Yes. Yes. Banks are going on a diet. Regional lenders are cutting back on some lending to preserve capital. So this was coming off of the story about, you know, reserve [00:32:00] requirements going up in a regulatory response response to SVB, again, this is a A regulatory response that makes sense.

But when you combine it with the yield curve and the rising rates, yeah, not good.

Vic: I mean, we are reading and trying to work hard. But if we can see this, how can the Fed not see it? Like the banks are going to increase the quality requirements and decrease access to lending. And if they give you a loan at all, it’s going to be much more expensive.

Yeah. And that’s rational behavior because they’re, they have much more expensive capital and they have a lot more oversight that’s expensive for them to follow up on. That’s right. That’s right. So it’s, it’s beginning to happen. Not surprisingly.

Marcus: Yeah. And, and look, part of this is certainly not going to be, I mean, I, [00:33:00] I even look in like our own portfolio management, right?

Like when times get tough, you re underwrite your own portfolio and you know, the struggling ones, you don’t. Yeah, reinvested, right? You cut them. You cut them. And, and that’s what’s going to happen here. Like they’re not going to say, Oh, you know, we’re, we’re tightening everything up, but we’re going to grandfather you and your terrible, you know, debt situation and, and give you another year when we know that ultimately you’re just going to come back in a year and need another year.

Right. I mean, they’re just going to, yeah. Wipe the slate clean. Yeah. So that’s, that’s going to accelerate these defaults. The scary part is how many of these are going to happen under the media narrative of a labor dispute, as opposed to what’s really caused or right. A credit default. Yes. Right. Cause you know, a lot of people don’t even understand like credit defaults at this scale.

They like, I think part of why that narrative doesn’t [00:34:00] play is because people It’s, it’s not really a layman topic for the media to explain, um, bankruptcies are, you know, the credit default is kind of pre bankruptcy, right? It’s, it’s just like in the yellow trucker story, right? The debt challenge happened a week before they actually prepared for bankruptcy, right?

So, um, Yeah. I don’t think it’s something that we’re going to see appropriately covered. I just don’t think it’s going to make it. It’s in the media the right way. It’s too

Vic: hard. I mean,

Marcus: yeah,

Vic: we have to spend several hours looking into it and then an hour talking about it and it’s still confusing and the Wall Street Journal can’t do it in, you know, something that they say right here.

You can listen to in four minutes.

Marcus: And by the way, it’s the journal. So, like, if any media is going to cover it correctly, it would be them.

Vic: That’s right. They’ll cover it after the fact, right? So yeah, once 30 [00:35:00] percent of firms default. Oh my God, they’ll cover

Marcus: that. So it’s terrifying. Well, what’s terrifying is that, and by the way, that’s also not good for banks.

Like, can we just also say that like bankruptcy means bankruptcy. The deck goes bad. Like that’s

Vic: the deck goes bad. They get the underlying assets or whatever. Yeah. But then you got to

Marcus: go through liquidation. You got to go through whatever

Vic: those assets have largely declined and

Marcus: depreciated largely. Yes.

Vic: So they, they probably are not appropriately reserved and it costs money to do that.

Yes. There’s just a lot of people that are working at one place. Their company had to cut back or went out of business. And it’s going to take a while for that retraining, moving around, figuring out where they go next. I’m telling my portfolio [00:36:00] companies I think it’s going to be a while. Because I, I, I’m fearful the Fed’s not going to cut until there’s some problem.

And then it’s going to be mopping up a bunch of, you know, Problems high rates and then some kind of six to 12 month lots of distress companies Is not a great time to raise venture money.

Marcus: No. All right. And, uh, speaking of venture money, uh, venture bank pack west, uh, that kind of went dark for a little while, uh, is, is merged with a bank of California.

Vic: Yeah. This is sort of a, uh, I would have called it a take under it. We had a good show last week with Grant Chamberlain from Ziegler. He taught me this, uh, he taught me this phrase of a merger of equals.

Marcus: Yeah.

Vic: This is sort of a merger of equals, like two midsize banks Wilbur Pincus put some cash in, they both [00:37:00] take a huge sort of haircut in their equity value and more dilution and put the banks together and now they can sell some of their really struggling assets and they have enough balance sheet strength to be able to survive that and not have a huge run of the bank.

Marcus: So I think what’s We’re going to transition in a little bit into health systems. Uh, but you know, is this a model because look, the big five can’t buy all the banks, right? So that a question is, are we going to see more of this, you know, more regional banks? Just not, it’s not like that’s an unheard of thing that regional banks merged, you know, kind of community banks roll up and they become, you know, regional banks and all that that happens.

But are we going to see more of that happen out of necessity? Yeah, I

Vic: think so. I think

Marcus: so.

Vic: The thing that I don’t really understand is what the future economic [00:38:00] model for bankiness. I mean, the, the biggest banks are, I think of them as almost government utilities. They are, they are,

Marcus: they’re by law. They’re written into law with protections that they have

Vic: protections.

And I think they also have this, um, I don’t know. It’s like a, it’s like a utility. They can make a certain amount of return. But it’s going to be like a water utility or something, right?

Marcus: And in exchange for that cap, they get scale, they get scale and protection.

Vic: So that makes sense. I’m not sure that it’s a great business, but it’s utility business.

But then there’s pretty sure Jamie Diamond is okay. Yeah, there’s thousands of regional banks and they don’t have that safety net. Nope. But we, we need people, we need banks to, to service the, the small and midsize businesses. I don’t think JP Morgan’s going to give us a loan. [00:39:00] Well, I mean,

Marcus: do we need that if rates are this high and commercial real estate, you know, is going to make leases on attainable and, If more and more value is going to accrue to these large technology companies.

I mean, how much do we need these banks? I I’m, I’m, I’m obviously playing this out more of a 10 year thing. That’s what I’m trying to think through, right? I’m trying to think through what overall economy are we going to have? Where the only acceptable model for survival is consolidation, which just takes competitiveness off the table for small to medium sized businesses, right?

I mean, And for the consumer, it’s also bad for the consumer.

Vic: Yes. I mean, reserve banking where you take in deposits and then you loan out some percent of those deposits to other people in, we’ve all seen it’s a wonderful life. We, [00:40:00] you know, you know, that kind of thing. Like the money doesn’t just sit there in every bank in the country.

It is there’s some percentage that is reloaned out usually 90 percent That core business model it has powered the u. s economy for a long time And it works because the fed is seen as supporting NFDIC is there, but if we don’t have a workable economic model for small and regional banks, when I buy a house, where am I going to get a mortgage?

Or if I want to start a sandwich shop, how do I buy the refrigerator? And just the stuff to do a small business, I don’t want to live in a world, I don’t think, when everyone works for four big tech companies and there’s no other jobs around. I mean, not that it’s a bad place to work, but I like to have [00:41:00] choices.

Headed in a positive direction.

Marcus: All right. Continuing on. There was a story. Yeah. Yeah. This CalPERS story. So CalPERS has been getting, I don’t, I don’t want to say beat up, but I think, you know, their, their investment chief has gone on record talking about how for. Um, the entire heyday of venture capital CalPERS, and she was not at the helm at that time.

But CalPERS was out of the venture capital literally like one of the greatest wealth accumulation. Yeah, they missed it windows And it was literally in their backyard and they didn’t participate so they’re not participating in that and a bunch of other stuff, but um, this is this is not a great But I don’t even think it’s isolated to CalPERS.

I think CalPERS is just more transparent. And so they’re, they’re sharing the reality. CalPERS

Vic: believes in the Freedom of Information Act. So they will share information that other state pension funds will not share. There’s plenty of states that are in the same situation. [00:42:00] Right.

Marcus: Yeah. So they’re a good proxy.

So private equity returns for the 12 months ending March 31st. And we just had negative returns. Yeah. Um, And this seems to be, uh, you know, connected to, to real estate, um, and, and the asset class correlation between private equity and real estate. Um,

Vic: yeah, I mean, it’s, it’s illiquid, uh, marks that are not updated daily.

And so it is sort of a correction that is not surprising, but it’s going to be really challenging. These pension funds are not, they have to get every dime of return they can because the pension years cost a lot of money. That’s right. And so that a lot of negative

Marcus: returns are

Vic: not,

Marcus: not

Vic: good.

Marcus: And, and just not expected in the private equity asset class.

Like private equity is generally pretty dependable. Like when

Vic: the chart, like except for 09. Up, up, up, up, up, up, up, every year.

Marcus: Variances [00:43:00] in how up, but yeah, yeah. So, um, that, that negative is, uh, that scary. And then that that’s correlated with the fundraising slump that’s happening in the private equity space, um, at the height in, uh, Q2, 2021 north of 250 billion, uh, raised.

And, and, uh, In Q2, uh, 2023, uh, just north of a hundred billion. So, um, and, and, you know, as a trend declining.

Vic: Well, I mean, I think that private equity is fair. Some percentage of it is reliant on inexpensive debt. And so one of the classic ways to, to generate return by kind of a low growing, but stable business, you put some 3 percent debt on it.

Pay a big dividend and then you try to do some operational [00:44:00] things to improve the business But you’ve already got a lot of your money out, right quickly,

Marcus: right?

Vic: Um, that’s the way that a decent percentage of those pe returns were generated And and that’s fine that that path that strategy doesn’t exist anymore So there are private equity partners and even firms that most of their return the like the game plan that they have been using You Doesn’t work anymore.

So, um, I think that’s part of the reason. And just when the returns go down, then people don’t want to invest it anymore. All right. We’re going

Marcus: to take a break there, uh, and, uh, have, have Doug come and tell you a little bit about jumpstart foundry. Then we’ll, we’ll wrap up with the story about, um, health systems.

Doug Edwards: Thanks guys. For the opportunity to talk about our pre seed fund jumpstart foundry. My name’s Doug Edwards, CEO of jumpstart health investors, the parent company of jumpstart foundry. We’re so excited to be able to talk about, uh, early stage venture investing, certainly the need for us to [00:45:00] change the crazy world of healthcare in the United States.

We are spending 20 percent of our GDP north of 4 trillion a year on healthcare with suboptimal outcomes. Jumpstart Foundry exists to help us find and identify and invest in innovative companies that are going to make a difference in healthcare in our country. Every year, Jumpstart Foundry invests a fund.

Raises a fund and deploys that across 30, 40, 50 assets every year, allowing ease of access for our limited partners to invest to help us make something better in healthcare. Some of the benefits of Jumpstart Foundry is there’s no management fees. We deploy all the capital that’s raised every year in the fund.

We find the best and brightest typically around single digit percentage of companies that apply for funding from Jumpstart and we invest in the most incredible, robust. Innovative solutions and founders in the United States. Over the last nine years, Jumpstart Foundry has invested in nearly [00:46:00] 200 early stage, pre seed stage companies in the country.

Through those most innovative solutions that Jumpstart Foundry invests in, we also provide great returns and a great experience for our limited partners. We partner with AngelList to administer the fund, making that ease of access, not only with low minimums, but the ease of investing in venture much better.

We all know that healthcare is broken. Everyone deserves better. Come alongside us with Jumpstart Foundry, invest in making the future of healthcare better and make something better in healthcare. Thank you guys. Now back to the show.

Marcus: All right. We’re back. Um, Vic just asked him during the break, whether or not this is too depressing of a show, tell a joke

Vic: or something, lighten

Marcus: it up a little bit.

Oh, I was not expecting this, man. You know, you go on vacation, the whole world falls apart, dude. Yeah, I can never leave. No, I mean, I really do mean it. I this this is the first time [00:47:00] and in all this time. I mean, I feel like I’ve been very, uh, aware and sober about when the Fed was going to raise the rates.

And this one actually did. Catch me off guard. I think part of it is because I was disconnecting, going to vacation, like not really worrying about tracking it very closely, but I think I just got duped by the CPI print. And I just really was like, there’s, you know, things are really pretty shaky in the banking world that everyone can see that.

That’s obvious. Like, certainly they’re not going to raise it again. I just, I just didn’t. So

Vic: I wasn’t there, but I was shocked. By the GDP report, I really did not think the economy had accelerated from last quarter, where like we’re doing. Better. We’re on an upward trajectory. We already had the soft landing markets.

It was in the second quarter. It’s over now and everything is good. [00:48:00] Well, I mean, the thing about fed report about distress.

Marcus: Yeah. So, so this, this is, this is good. Like, like, let’s, let’s talk about HCA. So HCA, uh, beats earnings expectations, boosts outlook and the stock falls. Now this is all happening today, the day after, you know, so I, I, I don’t think they benefited from the fed, you know, news at all.

Right.

Vic: Yeah.

Marcus: Um,

Vic: they also, I mean, they announced, This morning, I think. So it may change tomorrow, but right away the market was down, even though they beat and raised guidance.

Marcus: Yeah. And, and, and, you know, the overall market was, was, was down this. This announcement, this is a great quarter.

Vic: Yeah, they have, they have

Marcus: volumes up in every

Vic: line, outpatient surgery is up more.

Um, the cost of workers is being managed pretty well. Raised guidance on EPS. I mean, it’s what you would [00:49:00] expect from HCA, right? They, they are getting the volume. And they’re good operators. Yeah.

Marcus: Yeah. So, you know, I mean, for me, I’m just like, that’s a bicycle for me. I mean, they don’t,

Vic: they don’t use AI markers.

They don’t, they don’t have one, uh, Nvidia chip, right? Yeah. They do, they do actually have a D a decent number of people using machine learning, but they don’t promote it. They’re not like a story. So that’s what I mean.

Marcus: No, no, no, no. They’re not a story stock at all. They’re a, they’re a result stock, right?

They’re a full on result stock. Um, and. Yeah. I mean, to me, I’m, you know, okay. HCA is down on these, on this announcement. Yeah. I’m going to buy. Yeah. I mean, by the way, this is not financial advice to do not follow what we’re saying at all. We were just too dumb guys trying to figure out stuff. Uh, but for me personally, I, I’m going to go buy some HCA cause that’s like stupid.

Vic: Yeah. And I think, I think, um, HCA investor relations, in my opinion, they don’t try to spin a. Huge, multiple, big, uh, [00:50:00] bubbly story. That’s not their M. O. And they don’t

Marcus: raise guidance unless they have it locked. Yes. Like, like, that’s a lock.

Vic: Yes. They, again, we don’t have any insight into this, but in general, they’re pretty conservative.

Marcus: Yeah. Yeah, that’s right. So, so anyway, but I mean, look, it, it, uh, this is, The best performing health system in the country, best performing, I mean, by, by all financial measures, yes, best performing health system in the country

Vic: and they have,

Marcus: and they’ll, and they’ll be fine. They’re blue chip. They’ll be fine.

Like the stock bump. They’re in great markets. That’s right. That’s right.

Vic: Um, UHS also announced this week. I didn’t, I didn’t bring it in, but. They also did well. They beat, I think they might’ve got a better stock bump. Um, they have a different profile. There’s some behavioral health, some acute care. They have a whole mix of different things, but they also did well.[00:51:00]

So mentioned that it seems like healthcare systems. Volume is coming back. It’s a little more highly, it’s more acuity than before and their costs. Well, still high are, are manageable. They’re not growing at the same rate. And it seems like it’s for the for profits for the for profits. I think they’re doing okay.

Marcus: Yeah. Because their payer mix is right. And they’ve got the scale to be able to have good negotiations with the, with their commercial payers and they worked it out.

Vic: If there was a market where they didn’t have the right payer mix, they, they left it.

Marcus: No problem getting out of bad businesses. Right. Um, so.

So, uh, parallel to the bank merger story, um, we obviously have been talking for a while about the mergers happening in the health system world. And you found, um, Oh, I guess we have this chart just talking about this

Vic: sort of talking about HCA, [00:52:00] not getting the bump and sort of showing that, uh, the S and P 500, which is again, a small number of stocks really moving it that are mostly tech since January.

It has outperformed healthcare. Healthcare’s been largely flat, up and down. But I think healthcare’s on the upswing. Not sure where tech’s going, but

Marcus: I wish this was a 12 month chart, because if it was a 12 month chart, then we would see that. You know, the SMP and NASDAQ were down back half of the last year and healthcare, actually the healthcare portion of those indexes actually was up.

So to me, this is all just balancing out and it just shows that healthcare is just steady Eddie and yeah, healthcare is more stable, way more stable.

Vic: Doesn’t go up as high. It also doesn’t go down as low. Exactly.

Marcus: Yeah, exactly. So. So, but now I got it wrong. Uh, you’ve, you found the story in the New York times, um, around ballot, which is a, which is

Vic: in East

Marcus: Tennessee.

Yeah.

Vic: We know him. Um, [00:53:00] and it’s a New York times op ed, so it’s an opinion

Marcus: piece must be said,

Vic: but there’s a lot of really good reporting in here about when there was only one solution in East Tennessee and Kentucky, and maybe a little bit of North Carolina, that corner up there, um, sort of obviously choice.

Decreased. There’s only one health system. There’s only one place to find a doctor. There are no doctors that are that are associated with another health system. There’s no imaging places that aren’t Ballard, um, choice decreased and you have no choice and prices increased. And so the New York Times is saying correctly that, um, that is not very good for the patients for the community.

The thing that’s not said is. Why Ballard merged was put together and [00:54:00] allowed to go through. Yes, the health systems were really struggling and not able to meet their debt payments, not able to continue. And they had a lot of trouble finding a buyer. And so I think that in my opinion, it is a hard situation in that kind of rural ruralist geography, but I don’t know what else could have been done differently.

Yeah.

Marcus: This is another flavor of the labor story, right? You know, the whole, the whole mergers equal prices going up and, uh, less choice for the community and for the patients, all of which is true, the same way that, you know, labor issues arise when a company misses its pension payment, that is also true.

These things are true. They’re not. Inaccurate. It’s just not the understory. It’s just not the reason why these things are going south and they sort of paint the trucking company or the health system as kind of, you [00:55:00] know, nefarious, right? I mean, they don’t say it explicitly, but they kind of imply it, right?

As opposed to talking about the larger economic situation that’s At hand and what is driving these organizations to want to merge? What would drive a trucking organization that knows the peril it goes into when it misses a pension payment? It knows that that’s like a really bad thing, potentially catastrophic thing, right?

I mean,

Vic: yeah, and in healthcare, I think I’m on more solid ground. Like I understand the Ballard footprint pretty well. Yeah. And I understand rural health pretty well. It’s a hard market. There’s not enough patience. There’s not enough doctors that want to work there. There’s not, just not enough volume of patients.

And it’s a hard market to operate a health system in. And the payer mix is bad. And the payer mix is bad. And we just talked about HCA, they don’t have a facility up there. Nope. And I, [00:56:00] I don’t, I’m sure they saw the deal. I don’t, I mean, for whatever reason, they didn’t jump into that market. We as a society, or the federal government, or someone has to figure out how we’re going to deliver care in these communities, period.

And maybe it didn’t make sense to merge together several small non profits and create Ballard. But you have to figure out something. And so let, um, go to the next one because we’re, we’re sort of also seeing a state by state difference here. This happened this day. Yeah.

Marcus: Yeah.

Vic: This happened

Marcus: today. Yeah.

Sanford Sanford health and Fairview health services. They’ve been trying to get this merger done for a while. Uh, and it was just announced today that they are once again, not going to be able to do it. Uh, and this quote is, is kind of everything. Let me make sure I can, I can find it here. Quote starts, the significant benefits we identified for a combined system with Fairview Health Services compelled us to exhaust all potential pathways [00:57:00] to completing our proposed merger, Bill Gasson, Stanford president and CEO said in one of the releases, however.

Without support for this transaction from certain Minnesota stakeholders, we have determined it is in the best interest of Sanford health to discontinue the merger process process. So certain Minnesota stakeholders, you’ve got to kind of read later on and figure out who those certain Minnesota stakeholders are.

How do we have a vote in the process? And then you come down and you realize it’s, it’s. The University of Minnesota Medical Center and the Minnesota AG, uh, Keith Ellison, um, who’s a, who’s a relatively, you know, portent democratic, uh, figure in, in American politics. Yeah.

Vic: Minnesota is a different state than Tennessee.

Marcus: Yeah. I mean, I

Vic: think that’s fair to say. It’s a blue trifecta.

Marcus: Yeah. Um, and, uh, yeah, it’s a, it’s a different state. It’s a different state. Uh, look, you know, this is a situation where, okay, they’ve blocked a merger. [00:58:00] Yeah. And for the, for the community, right? The choice is better. I don’t think there’s any question.

The choice is better. It’s better to have today. Maybe today, right? That the choice is better today. Um, in the longterm, how did these two health systems operate? Because why were they trying to merge?

Vic: I think it’s probably because they don’t have enough volume and they have too much debt. I mean, I haven’t, this happened today.

I haven’t been able to look at it, but what’ll be interesting to like, I mean, I have no inside information, but this could be just like yellow where like it won’t happen so fast, but they may have trouble with, you know, refinancing debt, paying debt. There’s a reason they’ve been trying to merge since 2013.

There’s a reason no other, if it was such a incredibly lucrative deal, no one else showed up in 10 years. I just think it’s very likely that The [00:59:00] future outcome for the healthcare in this community is going to be worse five years from now than if it had gone through. Of course, I’m a venture capitalist, so like, I’m in favor of for profits, and in order for me to exit my companies, I have to sell them to somebody.

Keith, what’s Keith’s last name? LZ. Is he going to find some other way to, to stitch this all

Marcus: together? I mean, I think the bottom line is there’s no good answer. You know, there’s no good answer. You can absolutely understand why these mergers are scrutinized, right? I mean, the previous article that we just shared is Yeah, that’s why it’s a great story

Vic: to pair.

Yeah. Because the outcome is very predictable. It will decrease choice and increase prices. It will, that’s going to happen yet. It will also deliver care. So access to care. Needs to be considered as well as choice and price.

Marcus: Well, as a general [01:00:00] theme here, what I don’t see a whole lot of concern for. Is large organizations going out of business as a result of defaulting on their debt.

That’s that no, no,

Vic: no agency seems to care about the theme of the show

Marcus: is everyone seems to be totally okay with large employers and large organizations going out of business because they default on their debt. Everyone seems to have no empathy, no sympathy, and be totally cool with that happening.

Vic: Yes.

And even if that seems to

Marcus: be the deal,

Vic: even if you don’t care about the shareholders and the management. There’s, there’s people there.

Marcus: It’s a ton of people, customers, employees, patients, what, you know, whether it’s a trucking organization or it’s a health system. Right. Um, and we don’t, we don’t have the answers, but I certainly don’t think the rate hike this week was, didn’t help that helpful.

Right.

Vic: Didn’t help. Although the economy seems to [01:01:00] be accelerating. So I think we close our eyes. Well, Apple’s 4

Marcus: trillion. Just, just, just blink. You know,

Vic: there’ll be 4 trillion. I don’t know how many consumers are going to buy the new iPhone, but I’m on Android. So I’m not thinking of that. Ask,

Marcus: uh, well, look another great show.

Thanks for, you know, pulling it together, especially as I was coming back from vacation. Uh, it’s, it’s definitely a more depressing show. Um, Then I was hoping to come back to, but look, this is what’s going on right now. And we got to continue to track and kind of figure out what it, what it means for us and what it means for the healthcare innovation landscape.

I mean, interestingly enough, my, I think my synopsis of this is for, for us, for specifically us as healthcare VCs disclaimer, I’m talking my own book here, but if I’m looking at the themes here, we invest in. Healthcare companies, the healthcare industry, generally speaking, pretty stable, uh, [01:02:00] either technology companies or tech enabled companies.

So pretty efficient, pretty asset light generally don’t need debt. Um, you know, I feel like we’re on the side of the economy that is more protected in this environment. Um, and. You know, to the degree that we can keep our companies understanding that the broader capital markets, you can look at private equity, you can look at the banks, you know, they’re not healthy.

The capital markets are not healthy. So if, uh, if we can get our companies to understand that the capital markets are not healthy and they have to be productive and they have to get to product market fit in a very capital efficient way, then there’s still, there’s still a great deal of opportunity for us.

Um, and quite frankly, as. The health system, the broader one, not Sanford health system, you know, but as the broader health system in America continues to not really figure out how to get access to people, you know, new models, [01:03:00] uh, both on the payment side and on the provider side are going to emerge. And I think we can be, uh, participants in, in adding to that array of, of new models.

And so, um, I feel. I feel not great as an American and I feel relatively good as a healthcare VC.

Vic: Yeah. I mean, I think we invest in innovations that are going to bring some better product. Use people more effectively, use technology to deliver care better. There’s some advantage. And typically we’re doing something better, faster, cheaper, more effective than what’s out there.

I’ve been, I sort of have two worlds. I have my old fund, that’s a 2017 fund, fully invested. And I have a new fund. That’s this year, which is barely invested. I have one asset in it. And so I have two worlds. I have this existing portfolio that [01:04:00] raised money, mostly pre COVID or in COVID. And we had a board dinner on a Monday night, I guess.

And I was sort of telling the team, listen, you have to understand you’re competing with all of these seed companies that are coming to market right now. And I’m looking at them with a new fund. And they are using technology and they have such advantage. They don’t have all of this embedded, uh, invested capital for a few years.

And so I’m sort of preaching resilience to both sides. The, the, the established companies that, you know, in my world established, maybe they’re four years old. They have to cut costs. They have to be cashflow positive. They’re not going to raise money for 18 months. No one’s going to raise money for 18 months.

No, no. And then I am deploying money into new startups that are three, five people with a seed of an idea, but I’ve been holding them to be cashflow positive with this money. My [01:05:00] 500k, my 200k, my 400k has to get you to cashflow positive, or maybe pair it with someone else’s 250k. And there’s a significant number of deals that are saying, okay, we’re already cashflow positive, so fine.

And it’s because they haven’t, they came to life in this world and they have just not spent any money. That’s right. They were born in the darkness. And you can do a little bit with AI and with Copilot and GitHub and they’re sort of stitching together stuff. And they’re kind of hustling. And, you know, the board I was on, we have 86 people and they’re great.

Marcus: Yeah.

Vic: But it’s You wouldn’t build it that way today. No. And so it’s just, um, I don’t know, I’m preaching resilience everywhere.

Marcus: Yeah. So I think, I think, you know, there, there’s an aspect of this, this resilience is an aspect of this. That is how dependent is your business model on debt? Yeah. Um, because we’ve really upset that Apple cart, how tech [01:06:00] forward, right.

I mean, you know, really leaning into technology and AI. Is that’s just where the tailwinds are right now. And, and, you know, there’s an aspect of it that’s hype cycle, but there’s also an aspect of it where that’s, what’s going to survive given the, given all these economic parameters that we’ve gone through, that’s, what’s going to make it is really, really strong technology companies

Vic: in healthcare.

I think using technology to empower the workers that you have, because there aren’t enough workers and that new models of care, we can sort of Get risk in the right place and really manage people that that’s going to work, right?

Marcus: Yeah, but I I’ve I think in the past tech enabled services kind of meant like run a services company without a brick and mortar But with some really bad technology and I and I think the bar on how good the technology needs to be And how efficient it needs to make the worker Is it’s real now, like, like now we’re going to have to actually show our tech jobs and healthcare in a way that we, I don’t, I [01:07:00] don’t think we’ve had to for decades, quite frankly, you know, not, not relative to all these other spaces.

Like, you know, you think about like, like warehouse management, you know what I mean? And, and, and distribution centers and stuff like that and what they’ve done with, with technology relative to their workforce. Yeah, we, come on, we haven’t really done that in healthcare.

Vic: We never had to, right? I get. They were a lot of people that wanted to work in our facilities and they were good people and it was, you know, delivering empathetic care to humans.

So kind of nice to have a person watching them.

Marcus: Yeah,

Vic: but now those people need a lot more money. It’s a hard job and they’re, they’re not enough of them. Yep. So we, we have no choice but to automate and the technology is ready.

Marcus: Agreed. All right. Well, look, that’s going to wrap up the show, please. Rate us on, uh, your podcast stores, whether that’s, uh, you know, Apple or, or Spotify, I think you can write on Spotify.

Um, please give [01:08:00] us a rating. Please subscribe, uh, to our podcast. If you just got this forwarded, um, we have a YouTube channel. We’d love to grow subscriptions there as well. And. Uh, we have an email list and if you sign up to the email list, then you will get a notification. Whenever new episodes go live, you can get that at, um, health further.

com. So just subscribe and support us. Uh, you know, we are, we’re clearly here and not going to stop. We’re going to continue to try to unpack everything that’s happening in the broader financial markets, technology markets. Um, you know, when it makes sense, geopolitics, uh, but relaying it all back to healthcare at the end of the day.

So we hope you find value in it. Okay. And, um, Vic, anything else that I missed? No, glad you’re back. All right, man. Thanks. We’ll see you next week.