37 – Mixed Economic Signals | Alarming Cancer Rates | Apple & Epic Flex Market Power | General Catalyst’s Big Swing | Humana’s Medical Cost

Marcus: [00:00:00] Alright, man, we uh, we braved the cold, and uh, Blizzard of 2024, Arctic Vortex, or whatever this thing’s called. It’s totally insane. It’s totally insane. So I think we agree this is the most snow we’ve

Vic: I’ve seen in Nashville for 22 years. At one time. I had 9 inches at my house.

Marcus: And now we have a bunch of sleet.

It’s going to freeze again. So we’re going to be locked down for another 3 days. Um, but I was glad I was able to get out. So my wife’s car’s got four wheel drive. Yeah. My car doesn’t. Uh, her car has the garage. My car doesn’t.

Vic: Yeah, we know who is in charge of the car

Marcus: situation. There’s a trend here. Um, but uh, she was kind enough to let me drive her much nicer car.

Yeah. Uh, so I was able to get in. Uh, how you doing man?

Vic: I’m good. I, I don’t mind the, the snow. It kind of uh, I don’t know, reminds me of, Where we grew up, Boston, but I don’t want it that long, so the second snowstorm [00:01:00] today is, is enough. I want it to rain now.

Marcus: It was super pretty on Monday, and we were home, and it was Martin Luther King Day, and it was like, oh, this is great, and now, like Yeah, enough.

Yeah, enough. All right. Uh, busy week this week. I mean, we’re not going to talk a whole lot about the World Economic Forum. Uh, maybe we’ll do a recap next week once, once, once it’s all in, it’s still kind of going on right now. Uh, but certainly a lot of chatter about. All sorts of different happenings and goings on.

And, and, you know, unfortunately the world economic forum has become kind of a caricature, um, in recent years, just the whole sort of elites thing that we’re, we’re here to work on climate, but look at our lineup of amazing jets and, you know, sort of all that stuff, always eventful, always, there’s a lot

Vic: changing in the world.

And a lot of people are trying to make sense of it at the work at Davo. So it’s worth looking at. I mean, I don’t think it’s the, it’s not sort of the be all and end all, but a lot of data coming out of there.

Marcus: Yeah. Yeah. So we’ll, we’ll, we’ll talk about that next week. But, uh, but this week, um, we’re going to dig [00:02:00] in and start.

Vic: Yeah, so we watch the macroeconomics and financial markets really because they then flow into kind of healthcare policy and rates and capital markets. And so people, you know, the feds sort of signaled end of the year that they were, I think they’re finished raising rates and they were sort of trending towards at least looking at cutting rates.

Right. Everyone got super excited about that. Um, and there’s been a several economic reports. This week that are kind of mixed and so we’re just going to review them. Uh, the holiday shopping season was really strong, which I think surprised surprised me. I think surprised

Marcus: a lot of people. Yeah. Surprised me.

Vic: And so that, you know, the U S consumer spends and spends and spends, you don’t matter if you don’t have any money, but [00:03:00] they’re going to spend, which is great and scary. But I think that’s a good sign for the economy. Yep. But then, uh, the U the New York fed is called the empire fed. It’s a. You know pretty well, there’s all the fed regions are pretty strong, but but new york is was one of the strongest, right?

They run a manufacturing Um, it’s a dispersion survey So they talk to lots of manufacturers about how they’re feeling, you know, they ordering more they’re hiring more They’re making more supplies several different points and they had a negative 43 Um, which is really bad. It means that manufacturers are not feeling good about the economy.

They’re not adding to the staff, they’re not building, not getting orders. It’s the lowest since the pandemic and we’ll pull it up on the screen here. It really, um, you know, it kind of swings zero would be neutral. And then if, if the economy is growing [00:04:00] well, these are manufacturers. So it’s, it’s all the actual stuff you can products you can buy, they make, they ship it and it’s us basis, not, not of course from China, but it’s very negative.

Now, so it, um, it’s been trending lower since, since, um, really since the pandemic, it’s been kind of negative, but this, this month was especially bad.

Marcus: Yeah. I mean, overlaying that with, with an incredible holiday season is a, is a really interesting juxtaposition. Don’t you think? I mean, that’s trying to make sense of that.

It’s kind of hard.

Vic: Yeah. I’ve been trying to sort through to the last two days. I think there’s something around, um, The retail holiday retail is not, um, it’s not inflation adjusted, so you can have growth in retail sales because the prices are higher, but for a manufacturer that they’re not shipping more volume [00:05:00] of units, I think that’s a piece of it.

But I also just think it’s a, it’s like a bumpy process where people are. Spending money, but maybe they’re not spending it on a lot of goods, more like services, or gift cards, or other, I don’t, I don’t really know. I think a piece of it is real versus nominal, and a piece is, it’s kind of like a bumpy economy.

There’s some aspects that are, this is only the U. S., I mean, there’s only a New York Fed, so it wouldn’t count manufacturers. In other parts of the country. Right. Uh, and it doesn’t count international. I think we buy a lot of international products to put under the tree or give people at holiday season.

But it’s not, it’s not positive. So, we’re in this, um, and then, I don’t think we have a story about it, but there’s been decent number of layoffs like keep coming. Oh, man Um, I think google announced their second layoff like for this year or for the last couple of months

Marcus: Well, I [00:06:00] think over the over the weekend the news that I saw was um that youtube laid off a hundred people But that started kind of a internal conversation And I think uh sundar pichai kind of communicated You Uh, foreshadowed to the company that more cuts were coming and sort of framed it.

I mean, everyone is universally framing it around AI, right? They’re all, they’re not hiding it at all. They’re saying, listen, we have ambitions around AI. And it would be one thing if they were saying, you know, we’re gearing up for the war of AI. We’re going to, you know, You know, we’re going to staff up and keep building more and more AI.

You know, the fact that they’re saying they have ambitions for AI, I think it means that they have ambitions to make more of their services AI enabled and less human enabled. Right. Right. Um, so that’s a, that’s an interesting fact. Yeah, that that’s a fact pattern that’s that’s building has been building, I would say, for the last six months.

I mean, there were layoffs all of last year, but the [00:07:00] sentiment around AI really heated up the back half of last year, and it hasn’t really relented.

Vic: Yeah, and in every, um, in every session, there’s a thing called labor hoarding, where Employees will hold on to their employees because they don’t really want to lay off a bunch of people and then have to two months later hire back new people and retrain them.

But as AI comes in, if it does turn into like a super bumpy economy. Then they’ll start to be you won’t need to hoard their employees. So I don’t know. We’ll see It’s uh, the prediction of six rate cuts this year Most banks jp morgan Wells fargo b of a they’re all predicting six rate cuts this year really and there’s only maybe eight windows There’s only eight meetings.

Yeah, so really six cuts. I don’t think that is That’s not my prediction. I don’t think that’s possible.

Marcus: I thought what I saw mostly was three cuts. Three is probably,

Vic: three back end loaded, I think, [00:08:00] sounds pretty right to me. That

Marcus: was what I saw. I saw a lot more around three. Well, we’ll see. I mean, we need to see what the CPI point comes out for January.

I think that’s gonna be the Telltale about whether or not we’re going to kind of hold flat, um, for most of the year, at least. Yeah. Um, or if we’re, or if we can look for some cuts in the first half of this year, even, I mean, who knows?

Vic: Yeah. And then, you know, something might come that really has nothing to do with inflation, like the next story.

Marcus: Yeah. Yeah. Which is, uh, all around commercial real estate. So I, I, I have to admit, I’m, I’m happy to see this story. I’m not happy about what’s happening, but I’m happy to see this story It did feel like people were kind of sweeping it under the rug for a second there. You know, um, I, I know based on the commercial real estate developers that I know and the projects that they have effectively put on pause, you know, they’re, they’re finishing out the things that were already sort of underway.

And, and, and, you know, my friends are in Nashville and Nashville is one of the hottest markets in the country. So, um, we’re actually still [00:09:00] doing projects here. Things are still getting built and getting green lit here.

Vic: But they might not do the phase three. Correct. Yeah.

Marcus: Correct. And they’re not, they’re not, they’re downshifting their ambitions.

They’re saying, I’m just going to wait this thing out for another, like two or three years. Why? I don’t, why would I put myself under that debt burden? Right. And I think part of that is because like, they’re going to have to make the payments on all this refinance that that’s going to be refinanced. Yeah.

And the rate is a lot higher. This year. Yeah. So more than 2. 2 trillion in debt is maturing before 2028. And much of that is going to have to be refinanced at higher rates. This is a wall street journal story headline. The bill is coming due on a record amount of commercial real estate debt.

Vic: Yeah. So I was talking to one of our common friends.

It’s a banker yesterday. Um, and they don’t have a lot of real estate debt, but you’re saying it’s really like a double whammy, you’re getting less cash flow because not a lot of people are using the office space that much, and they’re, if they’re extending, they’re getting less space or wanting to pay lower square foot price.[00:10:00]

And then the cost to borrow, so the debt service is going up. And so it’s really a challenging, challenging environment to get it refinanced.

Marcus: Yeah. I mean, this, this is a really, uh, telling quote here from, uh, Gwen Rauch, senior vice president at Morningstar, borrow, borrowers have simply been unwilling to accept reality, but reality has to come due at some point.

I mean, that feels like our conversations about founders for a year and, and, and did it not come due? It did come due. Right. I mean, um, it, it’s, it’s, It’s, it’s, uh, I think it’s, it’s, It’s fair to say that having to recalibrate your brain to the, to a shift, the magnitude of the one that the fed put, put us under, um, you know, over the course of the last 18 months, it’s just near impossible for an entire industry to do.

I feel like we got to watch it play out in the venture space. So I have a pretty good idea of what’s going to happen in the real estate space. And, um, [00:11:00] one, one insight that this article provides is that there were a bunch of one or two year extensions that were built into the original loans that. Uh, the lenders were able to use, uh, the borrowers were able to use to, um, to kind of kick the can down the road and hope that everything sort of caught up with itself, but obviously we’re not, we’re never going back to 0%.

So even if we end up going to, you know, 100 basis basis points down, you’re, you’re still somewhat upside down. And then you layer on top of that layoffs, you layer on top of that, a shift away from, from, uh, you know, centralized working to remote working. Just all these trends are just lowering the overall value of the asset class in a way that there’s no way that there’s not a massive loss and a repricing and someone’s going to swing in.

You know, we, we, we covered the story about Japan coming in and starting to like buy up. I mean, to me, there’s a huge transfer of wealth that’s going to happen here because the folks who were priced in at those, you know, late stage [00:12:00] Zerp prices, there’s just almost no way they can. You have to be in a perfect market to come good, you know, from, from those heights.

Vic: Yeah, I think I agree with that completely. And the one difference between venture and private equity and real estate is that it’s at least valued much more of a commodity. Right, so if you have class A, you know, downtown urban office space, and one building next to you trades, like, is sold for a price per square foot, the appraisers will pull that across all the buildings, there’s not that much that distinguishes one building from another, where like a company, there’s more Uh, kind of idiosocratic parts to it and can at least pretend that, well, we have this product that’s unique and different.

Maybe there’s a few buildings like that, but most of them are somewhat commoditized, right? It’s class A, class B may have some, some amenity. There’s a [00:13:00] fountain in the lobby or whatever, but it’s not that different, right? So I think that’s, that can make it, uh, it’s just a more efficient market. It will spread more quickly as you start to get.

Japan, Japanese investors or, or anyone sort of buying an asset at a much depressed rate, then all the, all the owners, all the banks will have to write their other assets down to that, to that new

Marcus: price. What kind of pressure does this overall put on the healthcare industry? Like, so I think about some of the indirect, uh, issues, you know, one being that the healthcare bond market is shrinking, um, and that’s just from overall pressure on the banking.

So this is going to create more pressure on the banking industry because they’re a little bit of the backstop from this stuff. Right. I mean, you know, the, the tenants or the developers, they can just sort of hand over the keys and say, okay, like, fine, bankrupt me. I’ll, I’ll, I’ll clean up and live to fight another day.

But at the end of the day, the bank is the backstop, you know, um, and ends up having to take a wash and figure out [00:14:00] how to make something good out of the actual asset. Um, and the broad asset class of which they, you know, banks are. The backs up on a lot of commercial real estate in America. Um, how do you see this impacting health care, you know, over the course of the next two years?

Vic: I mean, I think that there’s, there’s some chance that the Federal Reserve creates a new program to, to help support banks in buying these assets. There’s some chance that they reduce rates dramatically.

Marcus: Probably a good chance of both right be

Vic: both right depends how widespread it is. How how drastic it gets, right?

Right. Yeah, and so I think that uh for for healthcare for healthcare systems I think the bond market is a good call out that they it’s a tight. Uh, there’s not a lot of um, Banks that will represent them and get get deals done. It’s a shrinking market shrinking. Yeah, it’s a shrinking market And it’s harder and harder to have [00:15:00] investors that want to buy those bonds.

Right. And so that, that’s going to, I think, cause a challenge. But then after that, I think it’s, it’s a, it’s a macro economy, capital markets, like diffusion mechanism where it’s going to, it’s going to drive, I think it’s going to drive, my guess is it’ll drive higher inflation and capital markets will go up quickly.

But then inflation is a challenge for healthcare systems because they’re. Their workers and all their input costs go up at the rate of inflation, and then their revenue is fixed by, you know, largely by CMS. And so if it’s, you know, inflation is not good for health systems, so they’re going to have, unfortunately, more pressure on them in financing their ongoing business through the bond markets, and then I think we’re going to have inflation.

But we don’t have it right now, or it’s coming down right now. Right. Sort of the reason [00:16:00] we had the challenge in inflation over the last two years is because of the, the money that was used to sort of help us navigate through the pandemic. Right. And this will be a, not, you know, a pandemic, but it’ll be another time when I think the Fed’s gonna have to provide a whole bunch of liquidity to, to help these markets, you know,

Marcus: clear.

Seems like it. Seems like it. I mean, um, I don’t, yeah, seems like it. Alright, shifting to pure healthcare stories, uh, a, a very discerning, uh, discouraging story about, uh, cancer striking more young people and doctors, Not really understanding why, um, I’m getting more and more sensitive to the realities of, of cancer and, uh, how, how difficult it is for us to address this, this threat to society.

Um, and obviously it’s something that we generally [00:17:00] think about hitting people in their late, you know, mid age, um, part of their lives. We generally don’t think about it being something that, uh, Attacks people when they’re in their 20s. Yeah. Um, but the rate of that is, is growing.

Vic: It’s growing and, I mean, the title’s at an alarming rate.

It’s, we can maybe show the graph. It’s, um, for young people it’s growing very quickly. And it’s, it’s scary because it’s unknown why. Right, there’s lots of theories about, uh, people maybe aren’t eating that well. Or that some people are blaming aspects of the pandemic response. I, I don’t think anyone has any idea, but the, the growth in the rate of cancer for that 15 to 40 or 39 year old is, is really scary.

And it, it, it’s, um, tied to colorectal, uh, uterine, kidney, stomach, [00:18:00] pancreas, it’s like a lot of the, Digestive tract like. So that’s why people are looking into the food systems. Yeah, GI cancers. Yeah. Interesting. I’m uh, I’ve been taking a deep dive into heart disease. There’s a lot of nutritional aspects of heart disease.

Um, And our industrial food complex is, you know, doing a lot of stuff that makes them money, but, but lots of hormones and things going into the food system that who antibiotics that we don’t really know what they do. I mean, they help that they help the animals not get sick and produce more. beef, pork, chicken.

We don’t really have good idea of how it affects the humans that are eating this stuff. Right. And, but no one really knows. So that’s, that’s almost what makes it more scary. It’d be, it’d be less scary if we could identify at least this is the problem. Um, we need to follow this. It, it is, and it’s a big area where there’s [00:19:00] a lot of treatment that’s needed.

And so that’s a thing that’s going to be helpful to health systems, but not for the reason that we want. I mean, it’s not good. Young people getting cancer is not good.

Marcus: No, no, it’s a. Um, on the other side of the, uh, life ledger, we’ve got a story here that I said reminded me of the Peter Attia mindset. Um, I think he calls it the, uh, I forget what he calls it, but it’s the whole focus on your last 10 years of your life.

Vic: Yeah, it’s health span versus lifespan. I don’t know what his Tagline is yeah,

Marcus: he he’s got some some hard to remember tagline. Otherwise, I would have remembered it Uh, but the this wall street journal story your health span is as important as your lifespan and it’s declining Basically the the point being we we are living longer On the long arc, obviously we have seen life expectancy receding in recent years, but on the long arc we’re living longer Uh, then we lived 50 60 70 years ago um But people [00:20:00] are not living healthier, long lives.

Um, they’re living 20 years of sort of impaired life.

Vic: Yeah.

Marcus: Um, and that’s expensive. It’s, requires a lot of caretaking. Um, and it’s also just not great, right? I mean, people don’t want to spend the last 20 years of their lives in an impaired, non independent state. Yeah. So I think our

Vic: healthcare system has largely taken things that you would, you would have died from in the 70s, 70s and 80s.

Um, our grandparents or great grandparents would have, would have, would have died of a liver failure or kidney failure. Um, and now we keep you alive. We’ve turned it into a chronic condition. Right. And that is, I think, better. I think most people would choose to live in a, in a Less healthy state than then die

Marcus: and certainly their children would like to have more [00:21:00] years Yeah, you know with their parents, so that’s you know, even if they’re impaired, you know, having more time with them alive is is important

Vic: yeah, but there’s some point at which the amount of treatments Um, getting like weekly, daily treatments, you can’t, you can’t get around anymore, you can’t, you can’t really live an active life anymore.

You have to question like, is it worth the chronic suffering for the benefit? And I don’t think there’s any, no, I don’t really have a way to judge that. We’re definitely extending life, uh, but not extending the health, health span.

Marcus: Yeah, and, and, and the health span is something that has to be focused on. By the way, I remembered it.

It’s called the centenarian decathlon, which is why I couldn’t remember. That’s a ridiculous term. Um, but, but the, the point being, you know, how, how do you live in the last 10 years of your life, right? Is, is, is sort of the whole, the whole point of that, of that term. [00:22:00] Um, And, and look, the reality is it’s, it’s about socioeconomics and lifestyle, you know, those are the things that have the most impact on your health span, right?

Like, are you well enough, well enough off economically that A, you’re not stressed, B, you can eat well, C, environmentally in terms of being able to walk, get fresh air, get fresh water, all those things are sort of positive, right? And we’ve got all the zip code data to sort of prove that that’s, that’s, you know.

Um, and then on top of that, so let’s say where’s your, where’s your zip code and how are you doing in life from a socioeconomic perspective? Um, you know, are you, are you lonely or are you in community? Then it’s, what are you doing? You know, are you moving? How are you eating? Are you sleeping well? Like all of those other types of things.

And we, we simply do not have a culture. That emphasizes those things as important for older people, right? It there’s, there’s a strong, uh, [00:23:00] culture around health and fitness for young people, especially social, especially social media, right? You know, everyone’s walking around with, you know, bikinis and no tops on and all this other kind of stuff showing off their ads and all this, all this stuff.

But those people are never 50 and older, right? They’re always in their twenties. So when it gets, once it gets to 50 and older, I mean, what is our cultural focus as it pertains to our health? I mean, Pickleball actually, I feel like, has been the one thing that has emerged that’s really positive, uh, as a cultural, uh, phenomenon for older people.

Um, and I think it’s, I think that’s awesome, right? We need more things that become, not just culturally appropriate, but like culturally encouraged, cool even, right? For older people to do that keeps them active, um, and promotes a better healthspan.

Vic: Yeah, so I, I, uh, on another podcast, I met with this guy, um, talking about yoga.

And there’s a thing that like, especially for guys, um, like I used to [00:24:00] jog every day. Yeah. And I played basketball and I played all kinds of much more intense sports when I was in my teens and twenties and even early thirties. 30s. Yep. Um, and then you, your body ages. Yeah. Right. So my knee started really hurting.

I was 41 and that the primary care, primary care doctor said, well, you just can’t run anymore. Right. Of course. And so I now run once or twice a week, but, but my main source of exercise. And I think for a lot of guys too, like their community, maybe they play golf or they play basketball or they’re play tennis and then something happens and they can no longer do that.

And so you get this like really bad two fold hit, right? You can’t get out and do the exercise with the friends that you always hang out with. So you end up not exercising. And being much more [00:25:00] lonely and, and stuck. Yeah.

Marcus: And it’s not It’s a huge identity issue.

Vic: Yes. Yes. And there’s not, sort of, uh, easy ways to learn a new thing.

Right. What I, what I love about pickleball is I can play with my wife and two teenage boys. My teenagers are much older. Better athletes than I am. Yeah, they’re just better than I am, but the game’s the game is small and slow And like we’re all fairly even it equalizes. Yeah, yeah equalizes attributes, right?

Well, if I tried to play tennis with my boys, they’d kill me. They’d kill me. Yeah, right exactly and so there’s like this thing of uh Making it competitive and fun and there’s a social aspect. It’s so close the social aspect, right? That I think, um, even though people kind of pick on Pickleball, it really is, it’s that unlock where it’s everyone has fun.

Yeah. You can pick up the game in five minutes and you can, there [00:26:00] is certainly a lot of skill, but you don’t have to be, an expert to have fun day one. And in, in tennis or basketball or golf, it’s just a high, much higher learning curve. It takes longer to get into it.

Marcus: Well, you, you also do yoga, right? Yeah,

Vic: yeah.

So I do hot yoga and Pilates. Yeah, I do Pilates.

Marcus: I

Vic: did

Marcus: it

Vic: today. And so I love hot yoga. Hot yoga is um, like I sweat a lot. And for me, right now, the flexibility and um, kind of core muscles, stabilizing muscles. Right. Are what I think is really important to work on and I, I mean, the reason I did the podcast with my buddy that does yoga is to try to celebrate that and try to convince more guys to do it.

But it’s, you know, I think it’s not as easy as pickleball to convince one of our guy, one of our guy friends to go try it out.

Marcus: No, because, because I would say, One of the challenges with yoga that you don’t necessarily have with pickleball, it was to your point that [00:27:00] in pickleball, the game slows down.

Right. But yoga has its own form of competitiveness. Right. And, and there’s a lot of comparison comparing your body, your ability, your flexibility to someone else. Now, if you’re, if you’re the kind of person and you are Vic, if you’re the kind of person who’s very self confident and just kind of cool with yourself and where you are, right.

Like you just kind of look at that and you’re like, that’s amazing, but I’m going to do my, you know, I’m going to play my game. But I think a lot of people walk into yoga studios and they’re just, it’s intimidating. It’s intimidating. It’s intimidating.

Vic: Right. And there’s a whole, um, ritual thing to it.

That’s not everybody. It’s intimidating. Yeah, you can’t vibe with necessary, but it’s also just like a little confusing, right? Right. Like, okay, you can’t wear shoes into the, into the yoga room. Right. And so especially guys will make mistakes and then they’re embarrassed and they don’t want to come back.

And I think, I don’t know, we need to find new ways to get people [00:28:00] plugged in because I have different communities. I have a community in the yoga studio. I have a community here at work. I have a community, you know, different parts to my social life. It’s hugely important. That is important. Yeah.

Marcus: Yeah.

Usually important. All right. So with that, we’re going to take a break. Let Doug share a little bit about Jumpstart Foundry. We’ll be back to talk about the mighty, mighty Apple.

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. 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 [00:29:00] 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 Dumpstart, 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 preceded stage companies in the country.

Through those most innovative solutions that Jumpstart Foundry invest 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 [00:30:00] 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. Apple is pulling out the,

Marcus: the, the blood sensor from, the blood oxygen sensor from their, uh,

Vic: from their watch.

I mean, it was one of the, Four or five like promoted features on the website like buy an Apple watch so you can Track your blood oxygen level and they’re pulling it out now. This is an amazing

Marcus: David winning story like David is beating Goliath Yeah, it’s amazing But they I don’t know why they wouldn’t just license it Well, I think, so, look, in the short term, obviously, um, the Apple Watch is the number one smart watch on the market.

I think they have 30 plus percent of the market. Um, I certainly see a lot of older people wearing Apple Watches. Because, you know, Apple has become a very friendly brand for [00:31:00] older people. Yeah. People can use the Macs and iPhones and sort of the whole ecosystem. Yeah, that whole

Vic: wall garden thing. Yeah. It just, the watch will work with your phone easily.

Everything works. It just

Marcus: works, right? So that’s, that’s friendly for older people from a tech perspective. Um, but you know, the business practices piece of it. I mean, you know, for us as innovators who are, you know, investing in really, really smart, passionate founders who want to bring new things to life.

Um, the wall of big tech is becoming more and more problematic. It just, it just is, and their ability to not just fight in the free market, but to fight with regulatory capture, to fight with lobbyists, to fight with just You know, lawyers in the courtroom right to just fight on all these other fronts, um, that are making the pure game of capitalism that much harder.

And really, quite frankly, just impure. Uh, look, I’m sad to see the feature removed from the watch, but I’m happy to see a case where, um, A company that [00:32:00] fought against the biggest or second biggest company, you know, in the world, uh, was able to win and protect their intellectual property. That’s, that’s amazing.

Yeah, and that, I

Vic: mean, that should be the American way. But like, Apple is a great inventor of IP. But they need to respect other people’s IP. That’s right. And so, I don’t know why they’re not just paying the IP holder to keep the feature in, but clearly they’re going to just go without the feature.

Marcus: Well, probably because the price has gotten way out of pocket, right?

Yeah. And so at this point, it’s like, well, they got to pull it. Um, but I think it’ll be interesting to kind of see what the next steps are here. Will they end up adding it back in? Will they end up licensing it? Yeah. Will, you know Other companies end up partnering with that company and licensing it and taking it to market.

This is certainly not the end of blood O2 sensors, uh, you know, inside of smartwatches. So a lot to be figured out here, but just the general pathway of, um, consumer [00:33:00] devices becoming medical devices, uh, not smooth, not smooth and not easy. Well, and

Vic: that’s the amazing thing about this is that it’s, uh, I mean, it’s arrogance and they’re probably right.

Well, we’re just going to take that out and people will still buy the watch anyway. Oh, they will. Thanks. Well,

Marcus: yeah, they will. No question, but still like it’s, it’s still a victory, right? Yes. They’re not getting to just pirate it. It’s still a victory. So maybe on the, on the other side of the coin, um, there was a victory in court between, uh, one of the big, uh, App makers, epic, um, epic games and apple with their app store.

Just really, you know, arguing that it’s, it’s kind of ridiculous that all monetization of, um, of, of any app that happens in the app store has to go through the app store, right? Especially

Vic: the in app purchases. I mean, fortnight. Most of the money comes through in app purchases. That’s right.

Marcus: And it’s digital goods.

It’s like, there’s no [00:34:00] shipping required. The supply chain is in game. Right. You know, there’s no need to go out of the game into the Apple transaction process to go back into the game. It’s just, it’s simply not necessary. So anyway, um, But you can’t,

Vic: you can’t install Fortnite on an Apple phone

Marcus: Yes. Right now.

Right. Unless you go through the app store. Right. That’s right. Well, you can’t really install anything

Vic: on an Apple phone. Yeah, you can’t, you can’t do anything. Yeah. I think in Europe, now I’m mixing stories. Did they force them to open it up? In Europe, not yet. I think it’s like February or March. Okay.

They’re going to have to. They’re going to allow you. Have a second app store that’s just, you know, open. Third party. Yeah. Right. Yes.

Marcus: Um, so, so anyway, Apple. Lost and now digital transactions can happen on an iOS device, right? Because everything on an iOS device goes through the app store. So it can happen on an iOS device without Apple sort of forcing you to run that [00:35:00] transaction through their systems.

And Apple said, okay, cool, but we’re still going to charge a commission on the back end.

Vic: Yeah, they’re charging in a slightly different way, the same amount of money. Okay.

Marcus: Yeah, so Apple issued a new policy requiring developers to pay a 27 percent commission. As opposed to like 30 in the App Store. Yeah, it’s a 3 percent discount for your troubles of going outside of their system.

Right. Um, amazing. Yeah, I mean.

Vic: Amazing. It’s, it’s, both of these moves I think are going to make all of the. All the software engineers and developers and entrepreneurs hate Apple more. But they have

Marcus: distribution. Yeah, what are you going to do? They control distribution. They’ve made the distribution platform, right?

Um, and that actually switches us to a healthcare version of this story. Um, Going from one epic epic games to another epic [00:36:00] epic, the electronic medical record, um, epic overhauled their app market. I feel like for the third time now, I think this is the third time they’ve done it. So it was app orchard before.

Now it’s the epic showroom, um, and reading from modern healthcare. I’ll just, I’ll just sort of read, read the article here. Uh, on Wednesday, Epic rolled out three programs within its app market to connect third party vendors into a health systems EHR. One of the programs will help customers implement technology from a small group of select vendors that have a co developing relationship with Epic.

The changes could have an effect on the third party vendor market amid Epic’s growing dominance in the hospital EHR space. So we’re here in Nashville. We can tell you. Epic is dominant, they’re dominating every health system that actually cares about having sort of a high level integrated EMR experience, they’re moving to Epic, and they’re forcing all of their facilities to go on Epic, and so Epic’s Market share is [00:37:00] absolutely growing and just as iOS is the dominant, um, mobile device platform in America, um, Epic is the dominant EHR platform in America, and that means that if you want to integrate with those platforms, or you want to be able to build technology on those platforms, you have to go through those companies.

So in Apple’s case, they’ve sort of You know, at least allowed many, many, many vendors to go through there. But Epic has argued that because we’re dealing with much, much more sensitive data and there’s a, the compliance, you know, barriers are very, very high. They need to have a much more hands on approach to how they select vendors.

And what I have basically seen is that their, um, app ecosystem overhaul is getting smaller and smaller and smaller and more and more controlled. Um, And I and what I’ve seen innovators kind of say is, you know, forget it. We’re just going to go around epic. We’re just like, we can’t integrate anymore. It’s just not, it’s not a viable business model anymore.

Vic: Yeah, I think that’s right. [00:38:00] They are. I think this is a, like a, it’s not a fake story. They do have the showroom, but it’s not actually an app store that in the way that anyone else would think about an app store. And so they do have a dominant position. I think they have almost all the health systems that are, you know, You know, at scale, except for very few that have intentionally decided to not go that way, but I think it’s not likely to be any kind of an open system.

It’s just gonna be their apps that they already have worked with to build

Marcus: just as a question. I mean, Maybe it is true that they do not yet or have not historically had the market share to trigger this, but it does seem like we’re getting close to the point where some form of lawsuit, you know, would be brought up on this topic.

Doesn’t it feel like, I’m not a litigious guy, but I mean, it just feels like there,

Vic: especially when the cares act funded their [00:39:00] ability to get it all installed. Right. Like taxpayers paid for this software to get built and installed in health systems. And they have now taken that position and monetized it since 2009.

And great, they have the, like, the marquee, uh, position for the medical record. It, not even as a, as a free marketing, it just, we need a lot of innovation. Like Apple is one thing because the experience is wonderful. Like I, I, I like the freedom of installing whatever junk on my phone. So I have an Android, but it is harder to have Android.

Apple is a very well integrated, it’s a walled garden, but inside that garden, it all works really well. Epic is the opposite of that. It’s not any good. Hold on, hold on, hold on, hold

Marcus: on, hold on, hold on. It’s not an experience. I’m gonna stop you. I’m gonna stop [00:40:00] you. Okay. So, one of my healthcare providers uses MyChart.

It is for sure, I think, the best healthcare, like full healthcare management interface. I have that actually interfaces with the real health care industry. I don’t think there’s anything better. You know, now Apple’s health app is probably the best, you know, and then if you look at all the consumer health and wellness things like my, like my aura ring or those kinds of head and shoulders above.

Vic: Yeah, but they don’t have the same data.

Marcus: Correct. Right. But as far as like a platform that’s integrated with the actual health care systems, I think Epic like didn’t used to have the best system. But now I think they have emerged to actually have the best system. Um, I, I, I just have to admit that as a user.

I think they have the best system. Is it like amazing? Is it like a great user experience versus like consumer apps? No, [00:41:00] but does it get the job done and get the job done pretty well in a mobile first model? I, I would, I would say it does. I would say it does.

Vic: I think it’s probably, maybe it’s the best EMR best interface, but that’s just because there aren’t a lot of choices.

I mean, the, the way that doctors. get access to data and the way they put in new data, and the way that patients sort of work through the system. It’s not, it’s not a very well oiled, like, IT system. It’s been added on and patched. There’s like 30 different epic versions. So if you’re, if you’re, If you build, you know, I’m definitely biased because I have portfolio companies that are doing this.

They build for one system that’s on Epic. Right. But then they try to go to another Epic system and it’s a different, it’s a whole different thing.

Marcus: Yeah, it works within a single health [00:42:00] system, but not health system to health system. Yeah, even though they

Vic: both could be Epic, it doesn’t work. Right, the

Marcus: instances are usually very different.

Right. Yes, that’s right.

Vic: Yeah, and so, yeah, it’s probably the best, it’s definitely the best EMR. But I just don’t think EMRs as a class are very

Marcus: good. No, no, no, no, no, no, they’re, they’re not. And it hasn’t been a very competitive space, and yeah. So anyway, what, what They are opening up a new app market. No.

That’s the news. No, they’re overhauling an app market. I don’t even know if this is a market. Is it a market if like All the vendors who are in it are your partners that you’ve very closely vetted.

Vic: the right way to say it. Right. It’s like the,

Marcus: at

Vic: the GM dealership, they show you the eight car models they have.

Marcus: Right, right. You can have any car you want as long as it’s black, right? Yeah, right. Um, okay. So, I think what’s interesting with this and, and probably one of the two biggest healthcare stories of the week is that this, this inability to actually do [00:43:00] technology innovation at scale In health systems anymore because of E.

A. E. M. R. Dominance, right? And then not even epic dominance, E. M. R. Dominance, right? E. M. R. So just become this blocker to being able to build cool tech for health systems. It’s just the E. M. R. Is the is the thing if you don’t plug into the E. M. R. They all kind of act like epic epic is the best of the batch.

You know,

Vic: part of the frustration is the federal government. Wanted to digitize all the health records. Yeah, but they did funded it, but then they didn’t do it very well Well, they didn’t think

Marcus: about the unintended consequences, which is which is to your point something you bring up often Which is the government tries but they’re well intentioned but poor executors when it comes to stuff.

So anyway, I Think that drove this this general catalyst story. Oh, there’s

Vic: no question. I think they Yeah, well, good. Give the story.

Marcus: Well, look, I mean, the story is they tried. They spent a lot of money on Commure and Olive. And I mean, really [00:44:00] big investment dollars, right? To try to build platform technology for health systems.

Right. And I think they found themselves just bumping up against the EMR wall over and over and over again. And they said, screw it. Like, we’re gonna go get one of the top health system CEOs in the country, Mark Harrison from Intermountain. Hands down, Intermountain is one of the best systems in the country.

So we’re gonna go get a top CEO. And we’re just gonna buy a hospital. And we’re just gonna compete at that layer. Right? Like, we’re not, we’re not gonna try to build on their platforms. We’re literally just going to build our own platform, um, and, and realizing, recognizing the platform is either a payer or a provider, right?

You know, you pick your flavor, you pick your entry point, but the true platform is not the tech, the true platform is, you know, Life management. Yeah, right, right. Um, and I think,

Vic: I mean, I think general counsel would agree with this. My impression is that they think the true, [00:45:00] like, base platform has to have, like, serious ORs.

You have, you have to have You know, the ability to do really high acuity procedures, and uh, not a lot of, maybe no payers have that yet. So, so they, I think they wanted to buy a health system because that’s the foundational piece that you’re going to have to have.

Marcus: Yeah. And so what did they do? They, and also like, let’s, let’s also keep it real.

Uh, we just watched a whole run of, you know, DeNovo payers try to get started up. Yeah. To, to go after the big guys and for the most part, I think, I think Oscar is still swinging, but like for the most part, those guys got crushed, they got crushed, right? So, it’s different on the health system side, right? It is truly more fragmented, you know, if you get, you get a territory where you can be sort of, there’s a geography aspect to it, um, it is very different.

State to state. So I think if you think about [00:46:00] what your entry point would be, if you’re wanting to spend, you know, three or four billion dollars. Yeah, probably health system is the right. That’s the right direction to go in. Yeah. Well, I

Vic: mean, I they announced it maybe last year that they were starting to look in.

Yeah. Yeah. Yeah. So I’m excited to see that they now have one under loi in Ohio. Yeah, Akron, Ohio, suma health three hospitals and 15 community medical centers. That’s a and it’s a nonprofit. That’s a pretty interesting, that’s a workable size, but enough scale to, to, To learn a lot

Marcus: of things. Yeah. So let’s, let’s just read, uh, Harrison’s quote here, because I think it, it really talks about why they went after this profile.

Um, so, uh, Harrison says we weren’t looking specifically at a region of the country, but the characteristics of the health system. First and foremost, we were looking for leadership that was seeking change. Second, we wanted a system that had serious market relevance in the area they served. Third, we wanted it [00:47:00] to be the right size, not small enough that, that they didn’t have all the services available.

But not so big that it was going to be impossible to change. So this is like, you know, kind of what PE would do, except for PE would start cutting out everything and like trying to just, you know, grow bottom line by making as many cuts as possible. And these guys are going from a transforming, uh, mindset.

Right. I mean, they’re, they’re going to go in and say, we’ve, we’ve invested in all this technology we’ve got. Serious leaders who know how to run a health system. I mean, Harrison runs a much, has run a much bigger health system than Suma. Um, and we’re going to combine great leadership with what we think is great technology and screw fighting the whole epic thing.

And we’re just going to try to. Transform a, you know, a community, which is look, I mean, now that they’ve actually picked it out, it’s going to watch. Yeah, it’s good. Yeah. Like, let’s see what they do. Yeah, let’s, let’s see what they do.

Vic: I think it will be. There’s a whole tech stack that General Catalyst knows well that they’ll bring in, [00:48:00] but the cultural transformation is going to be the thing that I’m excited to watch.

Yeah. The fact that they were looking for leadership, yeah. in part of the process. I think they probably were trying to screen for, I don’t know, aptitude or willing to lean in and learn about this, be a leader for other systems. You know, they take big swings. I mean, I don’t know if it’ll work or not, but I’m excited that GC is doing it.

Marcus: Well, I feel like now that I’ve seen the kind of health system they’ve purchased, I have to say I think I’m rooting for them. Because listen, what we need right now is more shots on goal, not less. And we need different thinking. It’s just the truth. And look, they may fail. They may fail, right? But, you know, quite frankly, it’s, it is bold thinking and how else do you address this sort of EMR wall that we just got done, you know, walking through and talking about, right?

Vic: I’m definitely rooting for them. I mean, I think [00:49:00] we need to have better sort of integration from the community health center to diagnostics to the physician clinic to the inpatient facility. Have that all work well, have the information and intelligence work, and then have a culture that actually is trying to iterate and learn and improve.

If they can do any part of that, um, Then other systems will start adopting it and stealing it and building on it, and it could be great.

Marcus: Could be great. Um, and also, like, if they can prove out that they can, um, outperform, that could be the, the best possible portfolio piece for their technology companies, right?

You know, kind of show you, show you, like, Hey, listen, it’s not just a matter of like buying a license. It’s like this, there’s a whole playbook here. Yeah. Here’s how you actually transform your health system. So it feels to me like they’re going after that business. The business of let, let us build the playbook on how to transform your, your health system.

It’s [00:50:00] as you said, several times, culture, technology. Um, and, and it’s a full stack approach, right? Yeah. Full stack approach. Yeah. And also, like, like, let’s, let’s be honest with the FTC blocking a lot of mergers, right? You know, like we were just talking about with Emily, um, there’s going to be a lot of systems out there that aren’t going to be able to get swallowed up, um, especially nonprofits.

I think that’s another interesting thing, like, you know, especially nonprofits and, um, Having a new option for how those health systems might survive, that’s great. That’s great. That’s

Vic: great. That’s why I was saying the, uh, the foundational, like, unit of a couple clinics around the, around Akron, you know, a acute care inpatient facility, maybe I think they need a couple of diagnostic centers to sort of feed it.

Um, that, there’s a lot of cities the size of Akron. I mean, I don’t know how [00:51:00] many, several hundred cities that way. So, yeah, there’s a lot of, a lot of health systems that can co opt and take pieces and follow this. Which we get. Yep.

Marcus: All right. Final story. Uh. Gosh, Humana, um, what a, what a story, uh, Humana stock crumbles as forecasts cut on higher medical costs, so basically, um, they announced that their MLR was effectively non viable.

Vic: Yeah, I mean, 92 and change, that just doesn’t work, I mean, it’s not

Marcus: possible. And, and, and, I mean, I think we have to be clear here, Humana is at least respected as the best in the Medicare Advantage business. Oh, there’s no question.

Vic: They are, they’re, I think of them as good operators and, and the biggest and pure play

Marcus: Medicare advantage.

Right. So, so when, when you hear these kind of results, you know, when you [00:52:00] hear huge swings in the MLR, um, which by the way, I think it knocked their EPS down by 2, I think. Yeah. That’s right. Which is rough. That’s rough. Um, look. Is that a statement on Humana as a, as a company in terms of their ability to operate or is that a statement about Medicare Advantage?

I think it’s

Vic: M. A.

Marcus: Right? I

Vic: mean, I think that they are a very large pure play Medicare Advantage. platform and there was a lot of utilization by seniors at the end of the year that humanity didn’t plan for but i don’t think any ma plan plan for it right and then i think the star system the new star ratings are putting a lot more pressure on ma plans and It’s not that it isn’t a well conceived way to drive incentives to where it would be good for everyone.[00:53:00]

Uh, it’s showing that it’s really causing a lot of pain right now. Yep. And so, you know, Cigna looks pretty smart right now. They look really smart. They, they, they sold their, Make an advantage plan. They almost, they sort of danced with humanity and decided not to do it. They have mostly a commercial book.

Um, I don’t know. I think it’s a, not a good sign for MA in general.

Marcus: So what does this mean? I mean, like right now we’re just going to see a bunch of, you know, companies taking financial losses, but companies won’t do that forever. They’ll just start opting out of doing this, this line of business. So what does this mean for seniors?

I mean, I’m thinking about, you know, My parents. Um, you know, what does it mean for, for the, the availability of these kinds of plans and, and how coverage for seniors is going to shift? What, what, what do you think? Well, the other thing that,

Vic: that Humana doesn’t have, that I think is a requirement is control on the direct drug spend, right?

So they don’t have a [00:54:00] PBM, right? But with that one thing to the side, I think we, we as a country are going to treat our seniors. And so, you know, at the end of the day, we could do it all Medicare fee for service. Medicare Advantage was designed to try to align incentives and give Give payers a reason to really push and take on risk.

It’s a capitated model. So they take on risk only for one year. So it’s not a huge amount of risk, but take on risk for that year. Um, and I think, uh, when it was really created here in Nashville, Hellspring started it, um, it was an experiment, right? And there was a lot of opportunity for an MA plan to take the right risk, work with particularly patient populations, maybe geographies.

work with docs in networks and align things. And then now it’s 15 years later or something. [00:55:00] I think that sort of opportunity to make really significant profit margins just is not there anymore. They’ve sort of squeezed MA down and down and it made it more efficient, better for the federal government, harder to execute.

And I think that may, You know, eventually, if companies start abandoning, they’ll have to either not do Medicaid Advantage, or they’ll have to make, they’ll have to widen that spread where they, they allow you to make a little money.

Marcus: Yeah, I mean, I, the, the thing I worry about, and I don’t, I’m not close enough to it to actually know, um, but this feels like one of those things I want to do some research on this year, is really sort of understand on the spectrum of the kinds of services that, you know, um, have been made available and maybe have even become standardized in the MA world, um, as sort of like, Table stakes, um, how, how prevalent, if prevalent at all, are those same services on the fee for service side of the house, right?

You know what I mean? What, what, what aspects of health care that seniors have come [00:56:00] to, uh, love and get used to may be going away as we’re moving away from a capitated model to a pure fee for service model. I don’t know the answer to that, but it would feel to me like there would be things around, um, you know, lifestyle, community, um.

Uh, fitness, sort of those kinds of things, nutrition, right, right, right. And, and it feels like we might, you know, we just had a whole section talking about healthspan and how we’re struggling with healthspan. And the concern I have is, um, if, if we, if we have health plans backing away from the very kinds of things that, you know, ideally would, would promote better healthspan, you know, we might be going further down, uh, down that path of, of, uh, you know, longer lifespan, poor healthspan.

Vic: Yeah, I mean, I think the, uh, what I want to see, but I haven’t figured out how to bring it to life is a longer underwriting timeline. Right, so, fee for [00:57:00] service, you don’t underwrite, there’s no risk at all. Right, right. It’s a processing thing. Right. It’s really the, the providers delivering a procedure and getting paid.

I think what, what CMS did was create a one year capitation. And then said to Medicaid Advantage, if you manage this, this risk for this year, then you can make money at it.

Marcus: Yeah. That, that Because the age group doing it more than a year doesn’t really make that much sense. I mean, you probably could stratify, stratify it out a little bit, but

Vic: Well, I mean, I guess, I don’t know if nutrition has a big effect in six months.

So, like, some of these, uh Well,

Marcus: well, on,

Vic: uh Yeah, I mean, it’s all debatable, right? Yeah, I mean, it’s, it’s, there’s marginal benefit, but Yeah. It’s, if you could have a patient for a longer period of time, and work with them to be healthier, and then [00:58:00] hopefully they cost less money over time, I think that would align interests better.

Okay. But it’s, it’s not, we don’t have a structure for that right now. Life insurance is that way. Yep, yep. But health insurance is not that way. Yep. And so it just drives really short term thinking. Yep. We’re not going to solve that right now.

Marcus: All right. Yet another busy week. I’m looking forward to this weather subsiding for sure.

I need some sun. I need some outside time. I need to not buy

Vic: by next week. It’s going to be

Marcus: 50 degrees. So looking forward to that. So looking forward to that and definitely look forward to doing a rundown on all the stuff at the world economic forum. I mean, look, by the way, I mean, the reason why we’re having this storm is because we are In the middle of climate change, okay, which is what the W.

E. F. is talking about, and, you know, it really is interesting how these kinds of things do impact health, right? I mean, [00:59:00] uh, you know, my normal workout routine has been, you know, Impaired for sure. Um, you know, I’m, I’m very fortunate. I get to reach out to my Pilates teacher and say, Hey, can we do a zoom session today?

I can’t come into the studio. We did it all through the pandemic, so we know how to do it. And so I didn’t miss that. But, but even in that session, she was like, you’ve been sitting a lot, haven’t you? And I’m like, yeah, you know what I mean? Like she could tell, she was like, oh, your hips are a disaster. So it’s just all these like little incremental things that are going, that are, that happen as a result of extreme weather.

Right. Yeah. And, um, We’re not going back. We’re not going back. We’re not going back. So, uh, trying to trying to parse out how this intersection of climate change and, uh, and and health care continues to be more and more wed tightly together and innovation is going to need to sort of address being more resilient.

I mean, we’re not going to change the climate from the path that’s on. We just have to be more resilient.

Vic: Yeah, and unfortunately, I think it, I [01:00:00] mean, like everything, it really hurts people that have less, less money, less financial means.

Marcus: Yep.

Vic: They, they, in everything, like they live in flood plains. They, they don’t have the access to a Pilates teacher to come in.

They don’t, I don’t know, it, it, it un, un, unevenly affects the lower socio economic classes. Yeah. Which is, which is great.

Marcus: And how it always is. Yes. Unfortunately, how it always is. Um, anyway, another great show. Thanks for putting it together. See you next week.