31 – CVS Pivots to Transparent Pricing | Pharma Leveraging Data Science | Google Unveils New AI tool | Small VC Funds Perform Best

Marcus: [00:00:00] All right. Episode 31. Vic, how you doing?

Vic: Good. I’ve been traveling, uh, down to Dallas and back in 24 hours, kind of lots of planes for investor dinner. You’re you’re, uh, in Vegas, I think. Is that right?

Marcus: Yep. I’m in Vegas. I’m here with my team, supporting them in, uh, their quest to become world champions. Uh, at the world, no gi championship, I’m not competing.

I’m in no shape. I’m still banged up from, from my competition back labor day. Uh, but you know, here to support the team and, uh, really enjoy being able to do that. It’s kind of fun to, you know, still be on a team and compete and support, you know, a bunch of young bucks going after it.

Vic: Not very good shape is, uh, you know, let head and shoulders above my, my shape day to day.

It’s all relative.

Marcus: Yeah. Well, you know, it’s, it’s funny when you’re, um, When you’re in your mid to late forties, uh, and you’re trying to do this athlete thing, not being in [00:01:00] shape is, is not not being in shape. It’s being injured, you know, which is something that if you’re not doing athlete stuff, you just don’t.

You don’t even think about injury like that, but I’m injured. You know what I mean? Like, uh, I’m in no fighting shape right now. I’m actually in pretty good shape other than that, but, um, pretty beat up and got to let the body heal. Anyway. Um, you know, we have had a ton of things that have popped up. I’m excited for the stories we’ve got.

We’re going to close out the year with, but, uh, man, fast and furious into the end of the year.

Vic: Yeah, it’s not, I think it’s accelerated. If anything, there’s a lot of. Continuously. So again, it’s useful to Talk to you about all the news coming in and try to assess where it fits in our worldview and how it needs to shape it.

Marcus: Yeah. Yeah. Um, earlier this week I was in Salt Lake City, uh, with the good folks at Celtic Bank. And it’s great to have, you know, [00:02:00] conversations with really, really smart, uh, capable people from the banking world and kind of get their thoughts about where things are going. Um, We’re definitely in a place where I don’t think anyone’s got the answers on what the fed is going to do next year.

You know, I, I think in the conversations I’ve had over the last, you know, two weeks, I’ve heard 20 different opinions, uh, about where we’re going to go from a rate hike rate cut, keep it flat perspective. So no one really knows where we’re going. Um, but yeah, so look, let’s, let’s, uh, let’s jump in. We got a lot to talk about.

All right. So let’s start with, uh, the Biden. Okay. First of all. Out of nowhere, every week, we’re talking about the White House having announcements like, do we just miss it for the first 25 episodes of the show? Or is this a new thing that’s happening in [00:03:00] the run up to the election cycle next year?

Vic: Yeah, it’s, it’s a change.

There’s no question it’s a change. I think that when they hit one year out from, from the. Re election, someone in the campaign decided to sort of buttress their health care policy and establish their platform of all the different health care things that they Have been wanting to do or want to do. I don’t, it’s not a lot of new things, but they’re sort of establishing their positions, I think.

So it seems like to me.

Marcus: Yeah, yeah, for sure. So this was, this was a pretty comprehensive and somewhat complicated, uh, fact sheet that they rolled out. They’re, they’re obviously talking about the big negotiation that they are going through as it pertains to drug costs, the top 10 drugs that they’ve decided to go after from negotiation.

We’ve covered that, but they bundled in some stuff around Medicare Advantage. Um, they bundled in some stuff around [00:04:00] private equity. Um, and that was the

Vic: really surprising thing. They decided to take some shots at private equity.

Marcus: Yeah. Yeah. So I, I kinda couldn’t find the common thread here other than lowering cost.

Right. You know, just, just they’re going after the private market. I don’t care if you’re a big drug company. I don’t care if you’re private equity. I don’t care if you’re a provider or a pair that’s not playing by the rules with MA. We’re going after everybody and we’re negotiating here. We’re reformatting, you know, Medicare advantage here, and we’re going to start forcing some transparency with private equity and their ownership of a provider assets.

I mean, just kind of taking shots across the entire private market. Right.

Vic: Yeah. I mean, it was, uh, I mean, I’m completely cynical, but I think it was sort of lining up their campaign thing, uh, positioning, uh, The Biden administration is looking out for the everyday man needing health care. And I’m [00:05:00] obviously biased, but I think that private equity does a pretty good job bringing better care at reasonable prices, not in every case.

We’ve certainly covered some cases that weren’t perfect, but, but in general, I think private equity does a good job.

Marcus: Yeah, I mean, we don’t hear about the all the good things they do. We just hear about the really bad stories. And look, you know, the truth is there are some bad stories out there, right? So, um, from a, from a political perspective, it’s a, it’s a pretty, they’re pretty easy to pick on, you know, no one’s crying for a super rich private equity people.

So,

Vic: um, exactly, exactly. It works. It pulls. Well,

Marcus: yeah. Yeah. And also I’ve noticed I’m seeing more in memes and now it’s even in the first paragraph of this fact sheet, uh, Bidenomics. So, so I guess, you know, we’re, we’re now going to really start hearing much more about Bidenomics as an agenda. Um, there weren’t, I think, I feel like I’m new to the party on, on that term, but I’ve seen it a lot in the last week.

Vic: Yeah, it’s not, it’s a made up [00:06:00] term. And I’m not sure it means anything except what their campaign decides they want it to mean in this moment.

Marcus: Yeah, exactly. Well, you know, look, I mean, it’s a play on Reaganomics, right? I mean,

Vic: yeah. And I think, you know, it’s, it’s probably good that they are documenting everything they stand for.

And that’s a, that’s a healthy thing. Then there’ll be, hopefully there’ll be a spirited debate. over time about how this stuff fits together.

Marcus: Yeah, absolutely. All right. So continuing on with, uh, massive change, uh, as it pertains to the cost of drugs, CVS has said that they are going to implement a cost plus model.

Now this comes on the, on the heels of, uh, sort of a big expansion of cost plus drugs from Mark Cuban. And also we got to remember Uh, probably two months ago, um, blue cross blue shield moved away from CVS Caremark, um, stating that they were, they were going to work with their own platforms at some, some combination of [00:07:00] Amazon cost plus, plus their own platforms, which we later on uncovered is, is Carillon RX, right.

Which is, um, the wing of Elevance, which is the evolution of Anthem. Um, so CVS not just gonna, you know, stay in the mud and continue on with what they’ve been doing. Uh, they’re moving to a cost loss model too. I

Vic: mean, this was the really the shocking news this week to me. Like, I think it’s a great move, really smart.

There’s they sort of are reading those eight guys, like negative attention towards PBMs is building. We’ve, we’ve talked about that at length and CVS has done again, what they have done. Several times around tobacco and other things with it. They sort of get out in front of An issue that they I think they believe is going to be a challenge And they’re willing to to take near term challenges to sort of get aligned and be more of a health care [00:08:00] partner um With their with their clients with with large plans with employers with patients Uh, but it was really surprising because a lot of their I don’t have it Uh the stats but a lot of their profits Come through the PBM.

And so it’s, it’s great, I think, and it’s really, um, it was surprising.

Marcus: Yeah. Yeah. So I, to me, I think again, pace of change every single week we’re seeing some, you know, this is a major, major change, right? Like we, yeah. We, we, we need, we need to be really clear. They are taking the disruptors business model and it’s really, I mean, a couple years old in, in terms of this being a disruptive business model.

And we’re talking about the, the second largest payer by. By volume, um, with retail footprint, with pharmacy, with massive pharmacy footprint, um, just saying they’re going cost plus, I mean, that, that pretty much says that by the end of next year, we’ll just be in a cost plus place. I mean, you [00:09:00] know, you’re not going to be able to not do cost plus when CVS has sort of set the agenda that that’s what they’re doing.

Vic: Yeah. I think that’s why it was really shocking and really positive. They’re going to set a tone that’s going to make it very difficult for other. There are large PBMs to not offer a leases as an option,

Marcus: right?

Vic: And the transparency is going to be really good I mean if a drug costs a lot for for CVS to acquire if the cost of it delivers a lot Then the patients maybe have to pay through the payers that way But but having a cost plus sort of really streamlines their incentives and and puts them in a really positive Kind of marketing position, which is great

Marcus: Yeah, and I think it also probably, you know, we, we had that whole, um, you know, rundown of the, the, the startup consortium of, of PBMs that are folk, you know, transparency is kind of one of their really big positioning statements.

Um, this seems like a real knock. To their [00:10:00] efforts, right? I mean, you know, if transparency is a core value prop there that they’re offering, uh, if the big guys just sort of decided we can do cost plus two, um, I think that really changes the disruptive offering that they are bringing to the market. And now it’s going to have to be much more focused on formularies that are very, very tightly.

Um, designed for niche employment markets, as opposed to what the larger PBMs are going to do, which seems to be much more incremental in terms of the value that it provides.

Vic: That’s right. It’s also, I think, important to note that the innovators dilemma, there aren’t a lot of companies in the history of innovation that have been the dominant incumbent, like CVS with their market share, that are willing to react to a disruptive model, like price transparency and cost plus.

It never works to try to defend your territory with something that is not popular and seems to be, you know, not in the best interest of your [00:11:00] customers. And yet, big companies have almost never responded the way CVS has. So, I completely agree. It destroys a lot of the potential value of these startups.

And it, and I just give CBS credit to like take that kind of hit. It reminds me of the tobacco decision, but not so tobacco. It’s the same kind of, it might be, it’s been for a bigger financially, but really a brave and I think smart thing to do

Marcus: So, uh, shifting into the pharma and biotech world, Roche, uh, has announced that they’re going to buy Karmat therapeutics for up to 3.

1 billion, uh, in a bet on you guessed it obesity treatments. Um, you know, these obesity treatments really are eating up the market. Uh, and the mindshare and all of the excitement and now all the, uh, M and a capital. So, um, you know, what, what did you think when, when you saw this, we haven’t heard the name Rosh a whole lot as we’ve been talking about GLP ones.

It’s been a whole lot of [00:12:00] Novo Nordisk and Lily. Right. Yeah. I

Vic: mean, I think, I think they’re trying to get into the game. I believe, I don’t understand it totally, but I think they’re, it’s different. Um, administration pass, like did not all shots. which is hard for patients. It’s pills and, you know, you might put it in your tongue, like different, different iterations, not approved yet, but, but could be really impactful and I think smart to like, get a play on it.

Obesity is so corroborated with really every chronic disease that it, that if you can find solutions, that’s why we’re seeing with the GLP 1s. It’s, this is a different pathway, slightly. Um, but it seems like it has a lot of science behind it. So, uh, pretty interesting.

Marcus: Yeah. Uh, and then next story in the, in the pharma world, Johnson and Johnson, uh, has hired thousands of data scientists really to revolutionize their efforts to discover drugs.

Um, I think this is something, quite frankly, I, I would [00:13:00] have assumed everybody was working on, but I do think. The number of thousands of data scientists is something to take note of, because I think what that signals is really that we know that data scientists already are in short supply, right? Um, and we’re already seeing the arms race that’s happening in big tech.

As it pertains to AI and just, you know, fighting for the absolute best talent. We started throwing pharmaceutical dollars in there as well. And, and quite frankly, I think a lot of data scientists who maybe are, you know, feel that they want to make sure that their efforts are being put to good use, right.

You know, to, to something that’s going to improve humanity. Um, I think pharma is going to be very, very attractive in, in pulling in those data scientists. I think it just makes it even tougher for smaller companies to get access to this great talent. I mean, thousands of data scientists going to Johnson and Johnson, that’s a, that’s a big number that people need to understand when they think about the total, uh, you know, talent pool of data scientists that are available.

Vic: And I think it is, um, [00:14:00] indicative of the pricing power is And so instead of J& J complaining about it, they’re sort of pretty aggressively moving to modify their, their R& D pipeline and can they do things kind of in silicon that are much faster? You can do hundreds of thousands of trials, you know, in simulation form.

We’ve already talked about AlphaFold and the other, uh, open source platforms. I think it could be really a powerful new source of R and D, uh, potential drugs. And then of course, they’ll bring it into the lab and into human trials, but being able to do that, um, after you know that, um, in the simulation, it has had this effect, I think it could be really a powerful combination.

So I was excited about it. And then I think it’s also important to note that J& J has been pretty innovative [00:15:00] They have the whole J and J labs network, which has not been so much data science yet, but they have that infrastructure. They can sort of immediately sort of add this to. It could, I think it could be a really powerful sort of a machine.

Marcus: Yeah, that’s exactly right. Uh, one of our portfolio companies at Nova view health went through J and J labs early on and has always, you know, spoken really highly about the support that they got through J and J labs. Um, and then our friends down at TMCX, we know that, that they’ve had that whole device, uh, you know, incubator in there, you know, quietly.

For years now. I mean, maybe, maybe 10 years, uh, you know, they’ve been there. So Johnson and Johnson has definitely been on the ground at the startup level. Uh, you know, when it comes to, to innovation for a lot longer than it was cool to do so. No question about it.

Vic: Yeah. And I think JJ has a big advantage relative to other pharma companies that they really understand consumer branding.

I

Marcus: mean, that’s right.

Vic: They, I don’t exactly know the history, but they have a [00:16:00] lot of consumer brands. They may have started off with consumer products, um, as opposed to some. Uh, like Roche, I think is much more sold through the provider channels, and it is as you think about sort of new products, and maybe some of them could be, uh, smaller markets or or something that has an effect, but it’s sold directly to consumers.

They just have a lot of optionality of where they use these discoveries could be could be pretty powerful.

Marcus: That’s right. That’s right. Uh, and then final story. Um, I saw a lot of debate on LinkedIn about this one. Uh, AstraZeneca launching, uh, a new company, uh, called, uh, Evan Nova, which is basically an entire digital health platform.

Business to just revolutionize the way that they do clinical trials, right? So this is a space that we, we see a ton of companies in the clinical trial space. Um, I know a fair amount of this from our work again, talking about view health, uh, no fair about [00:17:00] amount about. A lot of the challenges that exist in clinical trials.

Um, but I think what’s interesting here is that this is, you know, this is sort of like an optimum move, right? Where as opposed to just working with a bunch of CROs and vendors and small companies, no, you know, AstraZeneca saying we’re going to build our own platform company, and that doesn’t mean they won’t work with all of these other.

Businesses. I think what it means is they’re investing real capital. They’re going to create real talent. They’re going to create a real strategic roadmap. They’re probably going to try to sell these services across the entire pharmaceutical industry. Um, and they’re going to have a structured way within which they can, uh, embrace and absorb innovation from the market, as opposed to have some small department.

Um, so this seems like another, you know, pretty powerful, uh, bold step coming from a really, really large incumbent.

Vic: Yeah, and it reminds me, um, I don’t know, but I heard the first time a startup using a thing called reverse generative AI, which I didn’t know what that was, but it’s using [00:18:00] generative AI to collect information from consumers or, you know, sort of third party individuals at dramatic scale.

So instead of a bunch of individuals hitting the AI and chatting with open AI chat, Instead, they’re generating, you know, a much better surveying, uh, feedback mechanism, and it is sort of on the fly customized to the demographics and the needs and what they’re asking about, um, for a different use case.

But I think it could be interesting to do reverse generative AI, I gotta figure out how to say that, um, in clinical trials, because you need to get information from all of these people trying out the drug, and a lot of it is, uh, You know, what is your weight? How are you feeling today? It’s, it’s not necessarily that, uh, pharmaceutical related.

It’s just a lot of [00:19:00] data gathering to fill out the survey. And I think AI might be a really effective way to do that as opposed to what happens today, people calling and people with clipboards, like walking around and trying to get people to come in, I think it’s a pretty interesting, uh, use case. And I expect in 2024, we’re going to see hundreds, thousands of.

Different ways to utilize a I that we haven’t really thought through yet as bigger companies like AstraZeneca start kind of reimagining. Okay, we have to do all of these clinical trials. How can we do it more effectively using some of these tools? And so them getting control of that and building up like spinning up their own division that is branded separately.

Allows them to learn really quickly. And then I think you’re right. Sell it to other, other platforms or CROs or, you know, sort of leverage the knowledge.

Marcus: Yeah. Yeah. I mean, it’s basically them identifying that there’s a step change that’s going to have to happen in the market around clinical [00:20:00] trials. We can’t do it the way we’ve been doing it with incremental changes.

There’s going to have to be a whole sort of revolution in the way that we approach clinical trials. And. Saying, listen, you know, everyone’s going to need it, but maybe everyone won’t invest in it, right. And, uh, and so let’s invest first and we’ve seen what’s happened in the payvider world. Right. I mean, UHG being a decade ahead of everyone else on understanding that a data and services company was going to be a necessary, you know, complimentary, uh, component of an overall payers platform.

And now everyone has had to follow suit, but they’re late. To the game with that. Um, this could be the same thing. So we’ll see. Right.

Vic: And it’s interesting, you know, the, the Biden administration, the Bidenomics, whatever, whatever it is, applied pressure to this industry, uh, around pricing. And at least I’m seeing J and J and AstraZeneca both try to figure out how can we get more, more drugs through the pipeline, more effective, more cost effectively, um, so that they can, [00:21:00] you know, Deliver on their mission at a lower price point, which, which is great for everyone really.

Yeah. Except for the companies that don’t do that. I certainly,

Marcus: I certainly think making the pipeline more efficient, you know, lower failure rate, fail faster, less expensive, you know, more, uh, less expensively, uh, and then have a higher hit rate of things that get through. You know, I think that’s where, that’s where the data science as well as this kind of, uh, you know, clinical trial, uh, upgrade platform can really do both of those things.

No question. All right. Great. Let’s, let’s, uh, let’s end there and, uh, let Doug share a little bit about Jumpstart Foundry and then we will get back to our topic of the month, AI.

Doug Edwards: Thanks guys for the opportunity to talk about our pre seed fund Jumpstart Foundry. My name is 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 change the crazy world of healthcare in the United States. [00:22:00] 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 200 early stage, pre stage companies in the country.

[00:23:00] 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. So. Vic, you and I have been talking a lot about Google cloud, not so much on the show, but just, um, as I’ve been digging in and talking to, you know, real world data scientists who are doing real work in the space.

And, uh, we are learning a lot about the power of Google cloud. And I think as we’ve been learning that we’ve been sensing that. Google is a lot stronger in AI than I think most people are giving them credit [00:24:00] for. And there’s a lot of hype around, uh, open AI and, and, you know, fair play. I mean, GPT-4 and Turbo and everything they showed at Dev Day was incredible.

And the fact that it wasn’t just a, you know, a presentation, but they literally rolled it out that day. Super powerful. Right? Um, but this rollout of Gemini I think is just really, really impressive. Uh, and I should. I should qualify that it’s not fully rolled out yet, right? They, they put together a video kind of demonstrating how Gemini works and they’ve started to roll it out behind barred as an interface.

Um, but I would say it’s not really in full, uh, general availability yet, but what they’ve showed in there and in that, uh, that teaser video about what Gemini can do is certainly a full sort of version ahead of what generative, generative AI today. Thank you.

Vic: Yeah, no, no question. I think, um, well, first of all, [00:25:00] again, I think it’s useful for you to watch this, this three or four minute video just to get, you can’t really appreciate it unless you see it.

But, uh, it’s what I was expecting. I think a lot of people were expecting. Uh, of course, open AI came to the market, surprised everyone a year ago, a little over a year ago. And then Bard was Google’s answer. Maybe three months after that last spring, I was expecting with all of Google’s talent and alpha fold and their deep mind, Strength that they’d have something really powerful to respond And I think even though it’s google It’s still a very large company with bureaucracy and Bard was, you know, pretty disappointing.

It wasn’t it’s just not not as good Um, and this is where I think i’ve seen for the first time the the power of their their technology really beginning to take shape As you said, I can’t use it on whatever I want to use it on yet. Uh, but the multimodal [00:26:00] You Is sort of a quantum shift, you know, step function shift from what it was before.

I mean, you should watch the video, but the, uh, they had this demo of a physics, uh, like a high school physics problem set. And, uh, made up student had handwritten answers with multiple steps trying to figure out the physics. And they show a picture of the homework and the, and the work, the whole assignment to Gemini.

And it’s incredible, like, it, it understands it, it understands the step by step, it kind of grades it, and then gives the student, hypothetical student, like, advice on not just what the answer is, but what the steps maybe could be that would be the way to get to the answer. Um, just one of the use cases, but really.

That multimodal thing is, is, I think, a game changer.

Marcus: Yeah. And it seems, you know, I would, I would imagine there are. Limitations to this, and you know, this is [00:27:00] where they they’ve really sort of built an application layer on top of the LM to sort of meet specific use cases. But you can see where they’re starting to embed, um, agent like functionality, right?

You know, the part in the in the multimodal where. Um, you know, Gemini created, uh, a product requirement document and then and then used that product requirement document. You know, it’s like it’s it’s creating steps that right now in chat GPT, you pretty much have to sort of do yourself. You know, you said it’s something it gives you an answer.

You have to kind of take that answer and then, you know, often Microsoft Word or something like that, you know, Uh, reshape it, reform and kind of prime it, cue it a little bit and then send it back in and, you know, hope that you get the sort of next step in the process, but you have to kind of stitch that process together yourself.

Um, Gemini is doing that. Um, I, I remember I, I spent, I don’t know, [00:28:00] uh, an entire Saturday, one day, just watching all these YouTube videos, telling me about all this prompt engineering stuff and, and, you know, all these different methods and how I needed to orchestrate my, my prompts such that I could get chat GPT to give me the thing.

And it’s like, that’s about to be useless in about a month with Gemini. And I think that’s the, that rate of change where. You spend the time to try to learn a skill to use a new technology and legit 60 days later, it’s a useless skill,

Vic: right?

Marcus: That’s the part. I took

Vic: an entire course on Coursera about prompt engineering.

Um, and it’s, it’s complex and powerful and now, uh, Gemini infers what I want and just gives it to me. And it’s really, I mean, at least in the demo, which maybe is My assumption is it’s going to be what they launched, but it’s a demo, right? But it was fast, like bang, and it [00:29:00] releases, it presents the UI of a product like interaction.

It’s built the product in the half second behind the scenes. And then the other thing I think is really interesting is they are, they’re already embedded into Android. The other thing that Google has is Android. Now they’ve outsourced it and lots of people use Android, but Google still created it and has a lot of hooks into it.

I use a Pixel phone. Um, and so that integration directly into the operating system of the phone, It’s just different. I mean, I, I think it’s, um, open AI doesn’t have that kind of phone depth and Apple doesn’t have the same, I haven’t seen the same AI strength. And so it’s just, it’s, uh, It’s exciting to see a big player like Google stepping up.

It’ll, it’ll make OpenAI better. And I’m not sure that they can’t respond. It’s [00:30:00] just, but it’s going to, it’s going to drive innovation even faster than it has been already, which is going to be. Exciting, but also hard to keep up with.

Marcus: Yeah. I mean, the, the, the point is this is moving incredibly fast and just, you know, sort of two other anecdotes I’ll, I’ll say, because there’s not a lot of meat behind them, but one is, uh, we’re starting to get glimpses of Apple’s efforts in, in, uh, LLMs.

So, you know, you, you mentioned Apple. Uh, there’s been, you know, a couple of articles, obviously Apple, yeah, I’ve ever seen that. Yeah, I’ll, I’ll share it with you later, but Apple moves very differently from the rest of these companies that, you know, they’re not going to be pulled into announcing something off their schedule.

Right. You know what I mean? They’re going to let everyone do their thing and then just kind of figure out how they want to integrate, uh, you know, new technology into their overall platform and the aura that they have, but there are some, you know, some rumors starting to buzz around, around Apple’s, uh, LLM efforts.

And also, uh, Grok is being rolled out. [00:31:00] Today to premium plus members, uh, in the United States. And so that’s going to be rolled out, uh, over the next week. So Twitter now getting fully in the LLM game. Uh, and, and I gotta say, you know, Vic, I’ve been spending a lot more time on X over the last two weeks. And I, and I’m going to start calling it X because we need to shift

Vic: over.

Marcus: Yeah. Yeah. And, and also I think it’s important to recognize just how much work. Elon has done on the product there, you know, it was, it was pretty rough going in the early, in the early parts of, of him taking over the product. Uh, but the product is a different product than Twitter was now. Um, it, it really is, uh, you know, And now with the addition of AI in there, I mean, the bottom line is there’s no place else that you can get up to [00:32:00] the minute information on what is happening in this fast accelerating world.

It’s the only place. That you can get it.

Vic: Yeah,

Marcus: I’m sorry. No other platform is designed to push out information in as organized of a way. And what I’ve, I actually did something, um, pretty interesting, which is I removed all of the people I was, I was following, so I’m not following anybody on Twitter anymore, including, including, uh, I’m not following anyone except for like just.

X and Elon and just like the official X company stuff, that’s it. But what I’ve done is I’ve organized. All of the, you know, the people that I was previously following into lists so I can, you know, more effectively, you know, you can jump

Vic: into, I want to look at AI, what’s going on in AI or what’s going on in international politics or whatever.

You have different lists. You got it.

Marcus: Yeah. You got it. And, and, and [00:33:00] following in all of that into one stream just wasn’t working for me. So it wasn’t like, I wasn’t trying to hurt anyone’s feelings, just from an organization perspective, I needed it in lists, but here’s, what’s really interesting when I did that.

They have this for you stream of information and the for you actually got better.

Vic: That’s interesting.

Marcus: Yeah, like it, it, it, it understood what I was trying to do in terms of organizing all these different folks into different lists and now it’s serving up people that are helping me to populate my different lists.

Vic: They fit a category.

Marcus: Yeah, yes, exactly. So I, I think we’re going to have to spend a little bit more time watching what’s going on on X, especially as it pertains to the acceleration of, of AI. So I just wanted to, well, I mean, it’s a little divergent, but I

Vic: became a premium. It’s 8 a month or something. I became a premium subscriber just to try to support free and [00:34:00] open news information from the crowd, even though I wasn’t really getting 8 worth out of it.

But it’s gotten a lot better. I mean, to your point, it’s got a lot better for me to keep up with things. I don’t have it organized like that. I might need to look at that. And then I heard, uh, Elon on a podcast, you know, his tweets, his tweets, his posts are, you know, for some purpose, but when you hear him long form, He’s really damn smart.

And he was describing why he shifted the name. And he said, basically, you know, tweets and Twitter was good. When everything was 140 characters, it’s like a bunch of little sparrows tweeting around. But now they have spaces where it’s, it’s long firm form audio and they have, you know, much bigger content.

You can post entire blogs on there. And I think he’s going to keep coming out with new products. He was talking about. The product roadmap. And so I kind of [00:35:00] understand shifting the brand. Like it was too locked in at the old, everything’s 140 characters and not, it’s not just his ego. He had a, he has a plan.

And, um, it’s, I think we definitely need to follow it. There’s a lot going on there.

Marcus: Yeah. Yeah. I mean, we’ll, we’ll spare our listeners, but, uh, I do want to talk to you offline about it because, uh, there’s quite a lot going on over there on that platform. Um, okay. So to, to keep rolling on, on AI as it pertains to healthcare, um, Meta and IBM, who I think, well, first of all, IBM, I mean, they’re basically a consulting company, but, but Meta, um, you know, look that they’re in the game, but as we’ve, as we’ve discussed.

They are crushing it financially, and they’ve got a very specific surface area that they’re going to deploy their AI into, which is they’re going to deploy it into Instagram, Facebook, and WhatsApp, right? So for them, [00:36:00] they don’t have to kind of play this. We need a generative AI chat bot because that’s not necessarily social, right?

I mean, I think open AI was a threat to Google much more than it ever was to meta. So they are not chasing AI sort of in the same way, but I think they also understand it is a massively disruptive technology and they have to be very, very involved in it. So they’ve partnered with IBM to create this AI Alliance.

And there are, there’s a bunch of other organizations that are part of this, but basically the effort here is to, is to say, we need to make sure that there’s a lot of AI that is open source. Um, that that’s effectively what it is. They’re going to get a lot of great press from it because they’re being attacked.

A ton right now for all of their, you know, um, activity as it pertains to minors, um, you know, they’re getting the tremendous bad press right now, uh, on that, which maybe

Vic: they, I think they may be designated, but on this front, it is, it’s great for the, for the AI movement to, to have an open source alternative.

Yeah. Even if [00:37:00] I never use the open source alternatives It keeps everyone honest and having that out there is really healthy I think it was interesting that uh service now, you know, which is a nashville based company is signed up um They’re going to use it for you know, basically working with large softwares of service platforms to to make sure you renew or you have questions and um, I just think it’s It’s just another sign that it’s going to be an explosion of these tools and having an open source alternative is positive, I think.

For everyone, unless you are a shareholder of Microsoft.

Marcus: That’s, that’s exactly right. Yeah. So anyway, I mean, I just think it’s, it’s noteworthy that, um, Meta is sort of partnering in this way with the big old school, you know, um, software as a service and consulting companies. I just find that to be an interesting pairing.

Uh, and you know, IBM

Vic: Watson was early, early, way too early [00:38:00] and it didn’t work. But IBM has a lot of global reach, and I think they have a lot of contacts, and they can be helpful in sort of getting this out there.

Marcus: They are very influential in the enterprise. Yeah.

Vic: Yeah, that’s right.

Marcus: Right. So, so that, that, that’ll, that’ll be interesting.

Um, all right. And moving into sort of, uh, our final segment, we’re going to kind of talk about what’s happening, uh, at the end of the year, leading into 2024 from an, uh, economy perspective, but not just broadly, but specifically as it pertains to our world, which is sort of the intersection of venture capital and healthcare and institutional investor, uh, published a story yesterday Transcribed And the, the headline is big VC funds are underperforming smaller ones and their future is dim.

Um, this is coming out right on the heels of the, uh, news that broke on the information that open view, um, sort of, uh, you know, longstanding big brand out of Boston in the [00:39:00] VC space, just abruptly out of nowhere, close the doors said fired just about everybody said they’re not doing any more investments and close the doors.

I mean, that is. Uh, a shocking development, but at the same time, we knew the write downs were coming. We’ve been talking about, uh, the, the down rounds that are happening in the series D and the series, you know, C and even the series B space, we know who was writing those checks. It’s these billion dollar plus VC firms that were writing these checks.

We’ve talked about the implosion of olive. We’ve taught, you know, so we’ve, we’ve been chronicling back

Vic: to Sequoia in Sequoia breaking up. You know, yeah, it was the first time I started seeing, okay, big firms are admitting that they would be better off smaller, you know, able to sort of be more.

Marcus: Yeah, exactly.

And so, I mean, for this to come out on institutional investor, sort of a very clear statement about 2024, big funds are [00:40:00] underperforming smaller funds and their future is dim. I mean, yikes, that’s, you know, but at the same time, I mean, I think you and I, we constantly sort of wonder. How would we operate our business if somebody gave us a billion dollars to manage?

I mean, I don’t think we, you know, we have to change our whole operating model, right?

Vic: That’s right. I mean, the real place where I think the best impact is, and that is in the early stage and companies just can’t absorb 50, a hundred million dollars. And it’s hard to scale a VC business where you can’t have 300 partners that just, it doesn’t work like that.

And so I think this is not surprising that it is. Coming out. It is surprising where it came out. It’s too sure. Investor publishing that is really going to be impactful. Cause I mean, this is what everybody reads and it, they’re going to be asking hard questions of their consultants, uh, which couldn’t happen to a better [00:41:00] group of guys.

And, uh, and then, you know, hopefully come to firms like, like dumpster out there, you know, are, are. Big enough to have an impact, but, but not wasting and just throwing money around.

Marcus: Yeah. But isn’t this also a problem for institutional investors who want to be in VC because they need to deploy a lot of money.

I mean, that’s kind of why they liked the big funds, right? Because it’s like, this is easy for me, right? Hey, big brand that, you know, nobody, at least historically, nobody ever got fired for investing in. Big brand X, right? Uh, I’m going to just allocate 500 million to you. That’s nice and easy. It’s the easy button for me.

And I look like, and quite frankly, I look like a champ because I got a big allocation with you. Right. Um, now that whole story is being turned on its head.

Vic: And the consultants should do their job and figure out who are, who is the group of five, 10, 15 VCs that are not that well [00:42:00] known that you should allocate a piece of that to.

And I mean, if it’s too easy, maybe it’s not going to work. And so obviously I’m completely biased in this space because I have been in the smaller venture space for a long time, but yes, uh, biggest you could need to deploy capital, but they need to deploy it with managers that are going to generate alpha.

And I think the, the large VCs have a. multi year track record over several funds of not doing that.

Marcus: Yeah. So, um, so that’s, that’s a really interesting headwind for the VC industry going into 2024. Uh, let’s shift to healthcare. So, uh, published on fierce healthcare yesterday. Uh, basically a republishing of a Deloitte study.

Um, that says that a very, very tough 2024 is on the horizon and it, uh, it lists basically a series of different areas where challenges are going to occur. And I’ll just sort of read these off emanating consolidation, generative AI and digital transformation, workforce [00:43:00] challenges, outsourcing and offshoring.

Affordability and empowered consumers. So I feel like of those five, we talk a lot about the first three. We talk a lot about MNA and consolidation, a lot about generative AI and a lot about workforce challenges. Um, we don’t talk a whole lot about outsourcing and offshoring. Um, and maybe that’s just because we’re not internal operators and incumbents.

Right. Um, but that is, I think, an interesting dynamic that. Is going to play a big part in, in next year and then affordability and empowered consumers. I mean, I think we, we talk about that, but we talk about it sort of underlying everything, you know, we don’t necessarily call out that’s very specific issue, but you know, what, what are your thoughts about those five different things that Deloitte pulled out?

Vic: Yeah, I agree with you. And the first three we cover every week. And, um, the last two, I kind of feel like are opposites. We’re like outsourcing and offshoring and they list. Revenue cycle, billing [00:44:00] claims, HR, like. The for profit groups have largely already done that. Like maybe they can squeeze another couple of pennies out, but I feel like that trend is continuing of course, but it has been going on for a long time.

I think it’s fine, but I’m not that, not that excited. It’s way out on the, on the spectrum. I’ve already been doing it. We have a lot of story, which is Moody’s that’s in healthcare finance, but Moody’s came out with, An article, uh, or a rule, uh, view that of their 190 plus companies that they follow, um, 20 percent of them, 21 percent are at risk of default in a, in a very, um.

In a very scary sort of perspective. So the way the article reads they it’s 21 percent or in their negative and lower list category, which is up from about 18 percent last year. [00:45:00] So it’s just another sign that there’s a lot of weakness in the health care space, especially around that highly leveraged debt based companies.

Unfortunately, this is a combination of private equity and nonprofits and so kind of a sign of the times. Uh, 2024 is going to be a year of a lot of change. And I’m hopeful that we turn it around. Hopefully we can use AI and get some financing and turn the tide, but to continue to be a significant debt refinancing risks, uh, in the immediate future, the next six to 12 months.

So that is the show for today. Uh, great to have everyone on and we’ll be back next week. Thank you.