92 – Venture Capital in Crisis | Why Only 9% of Startups Are Getting Series B Funding!
Episode Notes
In this episode, Marcus and Vic discuss key economic trends, including inflation, disinflation, and Wall Street bank earnings, alongside the impact of rising credit card debt and healthcare layoffs. They explore challenges in venture capital, particularly Series B funding, and highlight innovations in AI for healthcare, including virtual digestive care, AI-powered psychiatry, and home testing solutions. The episode also covers the growing role of AI in healthcare call centers and major healthcare AI partnerships, addressing the future of AI and automation in the healthcare industry.
Stay Connected
Watch this Episode on YouTube
Episode Transcript
[00:00:00] Marcus: If you enjoy this content, please take a moment to rate and review it. Your feedback will greatly impact our ability to reach more people. Thank you. All right. Uh, before we get started, I just want to acknowledge the, uh, the passing of someone who was. Worked with us in the past on the health further brand.
[00:00:20] Marcus: Um, Alyssa Lockett's, um, she was an intern with us back when we were doing the health further festival. And, um, she was, she was killed this week in, um, in Nashville while she was just trying to exercise on the green way out in the Antioch neighborhood. Um, I just, I heard the story, but I didn't see the name associated with it.
[00:00:40] Marcus: And then I saw a Facebook post today and I saw the name and I was like, I know. That name. I know, I know that name and, um, went, went and searched it and saw her face and I was like, shit, I'll listen. So, um, Yeah, it's terrible.
[00:00:54] Vic: I didn't know the story because I don't watch the local news. It's too depressing.
[00:00:57] Vic: But, um, Someone that [00:01:00] we worked with just really close to home. Yeah, it makes you realize how vulnerable we all are.
[00:01:05] Marcus: Yes. Yeah, it's terribly sad She was she's brilliant, you know after her work with us. She went on to get her PhD and You know, just just a brilliant young lady young and had her entire life ahead of her and Was a pleasure to work with and, uh, very sad by this news.
[00:01:25] Marcus: So, uh, our, our thoughts are with her family and friends and, um, yeah, we're just very sorry, uh, as nothing else to say after that, um, let's, uh, let's do what we do, let's dig in.
[00:01:48] Vic: All right, let's start with the economy, Vic. We're in a earning season for all the big wall street banks and sort of two big takeaways that they're doing really well on the trading. [00:02:00] Um, and not a lot of activity, but but they're made up for it pretty much in trading and in net interest margin. Um, and then the credit book is getting is framed a little bit delinquencies, 30 day plus 90 day plus are all up.
[00:02:16] Vic: So, um, um. Not surprising, but I think worth noting that, again, the K shaped economy, like if you, if you work on Wall Street and are a trader, you're doing well. But if you have a credit card balance and are trying to pay off things, you're not doing so well.
[00:02:34] Marcus: Yeah, and I think, um, we are seeing that sentiment, that lingering impact of the economy.
[00:02:42] Marcus: Is, uh, it's, it's taking center stage in terms of the election that is less than three weeks away now, which is crazy. Um, which is that sense of, uh, of a lack of relief, right? I mean, even in the face of inflation getting down into the, you know, sub 2. 5 [00:03:00] range, it's not necessarily changing, uh, the, the, the comfort level of the average American household.
[00:03:07] Marcus: And, uh, and while. Americans have been sort of weathering the storm over the course of the last 18 months. Uh, credit balances did go up, savings did go down. And so we're still sort of in that mire. Um,
[00:03:21] Vic: yeah. And disinflation down to two and a half, or even say you get down to two, right. It's still increased.
[00:03:27] Vic: All the prices are increasing compared to last year. So you don't It doesn't go backwards. People think like, Oh, inflation's down. I'll be able to afford more things. No, it's just not getting as expensive as quickly. Right,
[00:03:39] Marcus: right. And you know, your access to credit is more limited. Yeah. And maybe you, you didn't make a raise this year or you make even less money.
[00:03:47] Marcus: Right. For some reason, there were a lot of layoffs that happened. So I think we're at this point where even though it You could say that the Fed avoided a recession and got to a quote unquote soft [00:04:00] landing. It doesn't mean that we, as a population, didn't experience a tremendous amount of pain and, and, uh, that's, that still has to work its way through the system.
[00:04:07] Marcus: Yeah.
[00:04:07] Vic: Yeah, I mean, I'm hopeful that we'll see. We have a couple more shows before we get to the election, but I'm hopeful that all the mudslinging and pointing fingers and stuff after election will go away and we can turn to, okay, how do we create jobs, create, you know, allow people to earn money and buy stuff.
[00:04:25] Marcus: Yeah. Yeah. I mean, uh, we. We're going to have a jobs number coming out here pretty soon and, you know, seeing whether or not the unemployment has at least started to turn around or at least stay flat, or if it's continuing to sort of move in the wrong direction. Um, and on that note, modern healthcare, I don't know if they regularly do this, but I happen to catch it this time around this, this story of where they're, they're tracking layoffs and closures in, in healthcare nationwide.
[00:04:50] Marcus: And, um, I just found it kind of interesting, uh, the, the tracker here, this is all from October. I, I see here. Yeah. The, the late, late life
[00:04:59] Vic: spans. [00:05:00] Yes. Yeah. So,
[00:05:01] Marcus: so it's September through October and it's all like big names. So, uh, blue, blue shield of California laying off 61 employees, CBS health cutting 2, 900 corporate jobs since our health laying off 200 employees, um, bright line laying off clinicians.
[00:05:16] Marcus: So just kind of a steady drumbeat of, of real names making layoffs. And it may not be like that huge, but that's still a trend of you're not hiring, you're doing layoffs. Right. And so
[00:05:27] Vic: layoff is the last thing you do. Like you move people around. If you're growing in some other department, you might move them there.
[00:05:34] Vic: And so, yes, if people, if companies are laying off, they're certainly not hiring. That's right.
[00:05:39] Marcus: That's right. Uh, so let's shift to the VC world. Um, Carta is, is becoming quickly sort of the, the day in, day out de facto data provider of what's going on in the venture industry. And they're doing a good job with it.
[00:05:53] Marcus: They're doing a great job. It's, it's, it's actually a, a, a great lesson in, um, uh, crisis management. [00:06:00] Right? Um, obviously the, the company had a couple of big fiascoes over the course of the year. You know, some of them were about internal employee culture. Some of them were about the whole secondary market thing.
[00:06:10] Marcus: Right. But the fact that they are providing real value to the entire ecosystem in terms of the data that they are kind of, you know, Solely able to provide, uh, it's kind of washing away all the negative stink that they've been dealing with. I think
[00:06:24] Vic: it's sort of two things. One, they, they took responsibility for the mistakes and have done their best to either exit, they're not doing the secondaries right now because they, they clearly weren't, didn't have it organized very well.
[00:06:38] Vic: And then they keep sort of trying to figure out how can they use their data to add value to the, to the industry. And this, um, for people that aren't watching, it's much better on video, but, but this chart is a really creative new way to look at data. So talk, you showed that you found it. It's really interesting.
[00:06:57] Marcus: Yeah. So it's, it's basically laying out. Uh, on the [00:07:00] bottom, it's, it's quarters, um, and it's got 12 quarters. So effectively three years. Uh, and then on the, on the Y axis, it's, it's covering quarters and years, but that's from the date of an A round. And so you've got like all these different squares that kind of show you at the intersection of those two things, quarter from, from when, you know, they, they were, uh, up and running to when they did the A round at the intersection of those two things, like when were they able to successfully raise the B?
[00:07:27] Marcus: Um, and. It's, it's worse than it's been in, in recent times. Right. So they, they kind of highlight the fact that right now only 9 percent of companies that are two years from their series A round, um, are getting to a, to a series B. Right. And that is a very, very low graduation rate. Like you think about all the companies that raise a series A, you're generally thinking inside of two to three years, you're going to get to the B.
[00:07:55] Marcus: Um, and if 9%. And two years of getting to the [00:08:00] B, uh, then they're showing, if you, if you look up to 2021, 26 percent in three years, I mean, that's a lot of companies that are either doing seed extensions or probably going out of business,
[00:08:13] Vic: right? So the reason I like this chart and just to sort of build it out, if people are not looking at it in 2018.
[00:08:20] Vic: There are four years, there's a little more than four years. So you, you have the full 12 quarters of historical record. It is what it is. And you can see that two years after the series A round, um, it ranges between 27 and 26%, but really sort of in the high twenties. So one out of four deals, maybe slightly better, we'll raise money.
[00:08:45] Vic: That feels kind of right. Yeah. And then how about 2020? And then 2020 is a kind of a, you know, a hot market, a bubbly, you know, you know, lots of capital chasing risk, right? And so you can see pretty clearly, uh, that graduation [00:09:00] rate spikes up to a peak of 41 after two years. Almost half, 1 in 2 is raising money.
[00:09:07] Vic: And that probably is not, I don't know that that's totally sustainable. Healthy, I think would be 25 to 35%. Right. And the bottom line, it's four
[00:09:15] Marcus: times as hard now
[00:09:17] Vic: as it was in 2020. Yeah. So now it's, it's down at 9%. So it's four times as hard as it was two years ago. Yeah. To raise your B. Another way to say that is that.
[00:09:27] Vic: If 500 companies raised money in a quarter two years ago, now it's going to be 100, 125 companies raised money. Yeah. So for my portfolio, I'm really stressing that it's, it's just a much higher threshold. It's going to be very difficult. You have to be almost like, Top 10 percent by this, by this facts, top 9 percent in the market to rate, to raise your next round.
[00:09:56] Marcus: Yeah. I mean, and, and with those odds, you have to sort of say [00:10:00] B as a pipe dream, right? Because you know, networks are accounting for a large percentage of those 9%. Like it's not actually that 9 percent doesn't reflect merit. No. Right. A huge, Portion, at least 50% of that 9% is just 'cause the networks. Yes.
[00:10:19] Marcus: Just 'cause of who knows who and who has access to who and who can convince who to do what. Because, because we're still in the private markets.
[00:10:24] Vic: Yeah. And I think there is some, uh, correlation to merit in the networks, but, but it's not like you can't just run really hard and get, raise your be.
[00:10:34] Marcus: Yeah.
[00:10:35] Vic: So I think the, the answer is you need to be, you need to have a plan for how you can grow on your own.
[00:10:41] Vic: On your own. On your own. Yeah. On your own.
[00:10:43] Marcus: Yeah. Yeah, so that's, that's helpful data for, uh, You know, where we are in the market. And then there were a lot of announcements of rounds that happened. Uh, so a series C round, and this is again, you know, a company that's going to be more baked and at the scaling point, they've already got their B done.
[00:10:59] Marcus: So now [00:11:00] they're into the C, but let's look at the name. So we're talking about Oshie health. Um, they're doing a virtual digestive care, 60 million series C. What are the names? Bessemer, flair, first Cressy, CVS health, Takeda. I mean, there's a lot. You know, it's like, that's what I mean when I say networks.
[00:11:18] Vic: Bessemer, Flair, Fritzgresi, especially those three. Yeah. They, all three of them work with Oak all the time. And so there is an easy network handoff there. And Oak looks at lots of things, but, but they like to invest with those, those earlier funds.
[00:11:37] Marcus: Those, those funds come along all the time. Right. Anything you want to say about OSHI before we move to the next one?
[00:11:42] Vic: No, it's sort of in this trend of, disease specific or maybe a certain patient type specific. Um, it's a way to carve off a part of healthcare services where you can make a difference, I think.
[00:11:55] Marcus: Yeah. Stay, stay away from the health systems. Yeah. Basically. Right. Uh, which, which I got to say, I [00:12:00] feel like that is becoming a part of the healthcare VC investment thesis.
[00:12:06] Marcus: Yes. It's part of my thesis. Right.
[00:12:08] Vic: Just like. You have to be aware that epic is this huge, like risk area. That you, you may not ever get through. It is possible to get through it, but you have to have big healthcare systems that are big Epic clients telling Epic, they want it.
[00:12:27] Marcus: Yeah. You got Epic on one side, you got Oracle on the other side.
[00:12:29] Marcus: Yeah. Right. Right. And Microsoft swimming around in there and Google swimming around in there. Right. You know what I mean? Right. And so with those four players, it just gets really hard. I
[00:12:41] Vic: mean, I've, I've been focused on the post acute space. because there's lots of different niches to play in. Yeah,
[00:12:49] Marcus: much smaller players, much less concentration.
[00:12:52] Marcus: Yeah. Agree. Agree. Lesion Health pivots to digital AI enabled psychiatry raises over 6 million.
[00:12:58] Vic: Yeah. So this is one of [00:13:00] several this week that are now using AI not only in the back office to organize things, although they are doing that, but also in, you know, sucking in all the patient health records and then using it to determine your preferences and when you like to come to appointments based on when you've been to appointments before, but also what happened in all your lab results and they, they shape their care plan that way.
[00:13:27] Marcus: Yep. Yep. And they're using LLMs as opposed to Wobot. Yes, generative
[00:13:31] Vic: AI. It's not, it's not, uh, sort of a guardrailed based, uh, step by
[00:13:36] Marcus: step. It's not deterministic. Not deterministic. Yeah. Wobot is deterministic. Yes. Um, and that, I'm confused by that, uh, because I know people keep saying there's all these guardrails you can sort of put in place, but no one's been able to demonstrate a hallucination proof LLM, and I, and I don't think we have clarity on what [00:14:00] the, how the liability is managed when it's not a person delivering the clinical care.
[00:14:07] Marcus: Right, when I, I just, I just, I just don't think There is, I mean, I was
[00:14:10] Vic: talking to this with a lawyer this morning. He's not investing in generative AI. in the clinic because of that issue. Then someone's going to die and it's not, there is no case law of who's responsible. And deterministic is the right way to do it.
[00:14:30] Vic: The large language models by definition cannot be deterministic. It's right. It's a probability based thing. That's right.
[00:14:37] Marcus: Yeah. So, um, and they're not going to give you the same answer twice. Yes.
[00:14:41] Vic: Well,
[00:14:41] Marcus: that's part of the problem. You can't do the same answer twice. Yeah. Ash wellness raises 10 million to expand at home testing.
[00:14:47] Marcus: Uh, let's see. They're using the funds to break into Medicare Advantage. The round was led by Merck, Global Health Innovation Fund. So this is So instead
[00:14:57] Vic: of going to a LabCorp [00:15:00] or, or, you know, they'll send you all the stuff to your home and then you send it back in. Yeah. And
[00:15:06] Marcus: this, this is more pharma companies outside of what they're doing in weight management, right?
[00:15:10] Marcus: Right. Right. Getting into digital health. And getting into, you know, lab at home and data at home and all that kind of stuff. So, um, makes sense. Tracks with the, with the thematic direction of things. Uh, Suki banks 7 million, 7D million dollars to build out AI assistance for doctors, expands health system partnerships.
[00:15:27] Marcus: So this is like, uh, a pocket EA for a doc that does things that are specific to what the docs day in day out workflow is like.
[00:15:35] Vic: Yeah, basically. That's right. That's what it is. supposed to do. They're doing it in partnership with a bunch of health systems. I think there's a little tension between the health system providing it and the physician using it.
[00:15:49] Vic: their own day to day, but a lot of docs are working in health, you know, working for health systems now, so it can work in that setting.
[00:15:58] Marcus: Yeah. Uh, it says they [00:16:00] integrate with the major EHR companies, Epic, Oracle, uh, Meditech and Athena Health. Um, they've developed an AI and speech platform. Um, So, you know, another big series, series D total funding up to 165 million, uh, they've been backed by, uh, Hedisphenia, Hedisphia, Venrock, March Capital Flair.
[00:16:24] Marcus: Um, I think this
[00:16:25] Vic: is a Brian Roberts. Yeah. Brian Roberts, Brian Roberts has been around and Venrock too. Longer. I've been doing this 25 years. He's been doing it longer. So he's been, he has a good network speaking about networks.
[00:16:37] Marcus: Parakeet Health expands AI call center announces 3 million seed round. So I was glad you found this.
[00:16:41] Marcus: I wanted to cover it because call centers have been consistently Pointed to as, uh, sort of ground zero for AI job destruction, right? The place where people are going to lose jobs. That's right. And, uh, and, and here we go. Right. 3 million seed funding, uh, by canvas [00:17:00] vendor ventures into a company that is specifically focused on healthcare call center work.
[00:17:05] Marcus: And it's going to be a hundred percent AI based. Yeah.
[00:17:07] Vic: Yeah. The AI takes inbound calls. and makes outbound calls and text messages. And it's, it's going to be good. I mean, it's going to It can schedule,
[00:17:21] Marcus: it can Yeah.
[00:17:22] Vic: Yep. Yeah. Um, there's going to be a lot of these. So whether Parakeet wins, I invested in one called Lena.
[00:17:29] Vic: Lena has this position that it's trying to differentiate by having humans talk to humans, but then empowered with all the other tools to be, to do much better. But it doesn't matter. You need many fewer people. Even if you use humans, you're supercharging the, yeah, you need one for, you know, 500 patients, not one for 10 patients.
[00:17:53] Vic: That's
[00:17:53] Marcus: right. That's right. Digital health funding. Gluco gets a hundred million and appoints a new CEO. So this is [00:18:00] kind of like an Omada company, a hundred million dollar series F, um, health catalysts. Canaan are, uh, big investors on the round.
[00:18:07] Vic: Yeah. I do not understand this deal, but a hundred million dollars, you know, gets my attention.
[00:18:13] Vic: Omada was a good idea a long time ago and I don't know that we need another one.
[00:18:19] Marcus: Well, look, it's, it's a, it's a series F right. And there's a new CEO. So to me, it feels like a bunch of money's already been pulled in. They probably have a lot of patience on it, but the business is probably not profitable, probably burning, probably a little bit messy.
[00:18:36] Marcus: And the new CEO is there with this funding to kind of. You know, turn it around. If I had to guess at a series F, that feels like that's probably what's going on. Yeah, I think that's, I think that's probably right. Radiant Graph raises 11 million for patient engagement. So, uh, this is another AI platform.
[00:18:55] Vic: Yep.
[00:18:56] Marcus: Uh, more on the payer side though. Yep. Sells the health plans [00:19:00] and healthcare organizations focused on substance abuse treatment, mental health care, chronic conditions, uh, and other complex conditions.
[00:19:07] Vic: Yeah, so what we used to call case management on the payer side, where if you have a lot of complex conditions, your insurance company give you a case manager to help you navigate that and.
[00:19:21] Vic: You're pretty aligned payers are get a bad rap, but when you have a lot of complex health care They're pretty aligned to keep you Out of the hospital and keep you healthy. Yeah um, and this is That but using ai to do it.
[00:19:37] Marcus: It's probably going to be superior because Yeah today's standard of case management is it's hard.
[00:19:42] Marcus: It's it's pretty archaic. Yeah, it's pretty archaic um, you know, it's it's more like uh concierge navigation Navigation It's kind of what it is today, but I don't I don't think it personalizes very well. So the idea that you're going to be able to take all the data sort of plug it into a machine and create something that is, [00:20:00] you know, Hey, how old are you?
[00:20:01] Marcus: What is your demographics? What's your culture? What's your address? Like, you know, and, and create a personalized plan based on all those different things. I think is that that's a step in the right direction for sure.
[00:20:12] Vic: I think it would be interesting to see how the patients respond to, um, a health system using AI to interact with them versus a payer.
[00:20:21] Vic: He's an inner AI to me. It's the same thing, but I, I don't know if there'll be as much adoption on the payer side.
[00:20:28] Marcus: Look, I, when you, when you're dealing with all of those, when you're in the middle of something and you need a care manager, you're, what you need is help. Yeah. Right. And so I think the, if the help is of a higher quality, yeah, you won't care.
[00:20:41] Marcus: You don't care. You don't care. This, this is not like bedside manner, you know, from a nurse or something like that. This is just like, help me navigate this situation. Um, and I think. I will do just fine at that. Uh, so this is adjacent to VC. It's actually in philanthropy, but, uh, Melinda Gates, um, sort of, I think she spun this out of pivotal ventures, which is [00:21:00] her female focused, um, women's focused venture fund.
[00:21:04] Marcus: They do LPN and direct investments. Uh, she has started a 250 million fund to improve women's mental and physical health, but it's going to fund nonprofit organizations globally. So it's called the action for women's health.
[00:21:17] Vic: And it's a decent amount of money. That's a lot of money. And she's, she's awarding it in chunks from one to 5 million.
[00:21:26] Vic: So I think that means it's going to be a significant number of them within the next year. So I think it could have a good effect.
[00:21:33] Marcus: Yeah, it's great. I mean, look, it's. It's, it's, it's decent vis a vis what we have seen being allocated to women's health thus far, right? Which is pretty paltry. Um, very small funds, relatively speaking, in the space.
[00:21:46] Marcus: Um, you know, I think, I think when the, when the White House announced their funding, it was far short of 250 million. Yeah, it was not 250 million. No, it might have been 10 million. Right. Something like that. It was, it was pretty low. So, uh, you know, this is, uh, this is great leadership action from Melinda Gates.
[00:21:59] Marcus: Yeah. [00:22:00] The FTC increases their pre merger notification requirements despite pushback from providers. So this, this is just one of those things I, I heard Lena Khan recently, she's doing a podcast tour, I guess. And she was on, uh, Scott Galloway's Prof G pod. Yeah. I heard it too. Did you listen to that? And you know.
[00:22:18] Marcus: Cool. I listened to it. They talked about how smart she sounded and I thought she did sound smart. I don't agree with her, but I think that's the thing. It's like she comes off as very intelligent. And I think in theory, what she is talking about at the highest levels. is correct, but the targets that she goes after hardly make sense to me.
[00:22:43] Marcus: Now the Google case, yes, that one makes a lot of sense. You know, anytime you're talking about big tech, I'm like, go for it because we've got to do something about big tech. I don't think there's any question about that. But pretty much every other industry outside of big tech has like [00:23:00] challenges, has real challenges and needs M& A as a tool to navigate those challenges.
[00:23:05] Marcus: And, um, just bucketing everything in the, we're getting to monopolies. There's no monopolies in healthcare. Epic is probably the closest thing we have to a monopoly in healthcare. And they're still not even a true monopoly, right? That's a duopoly for the most part, um, between them and Oracle. So I, I just feel like this is.
[00:23:29] Marcus: It's just, it just feels very misguided at this point. I understand the argument that people make around too much mergers is bad for the communities that, that these, these hospitals serve because there's not enough competition, but, but the thing to do there is to focus on the certificate of need. Yeah, that's, that's the thing, create an environment where true competitiveness is allowed.
[00:23:51] Marcus: Don't, you know, if, if you're not going to do that, then don't stop the mergers. Because these institutions can't run with all the different, you know, macro pressures that [00:24:00] they're dealing with.
[00:24:00] Vic: Yeah, I, I, I agree completely. I mean, we're, we're, I think, Lenacon sounds very Smart is that if a, if a company gets monopolistic power and is using it to harm competition and harm the value to customers, the government should step in.
[00:24:23] Vic: There's probably no one else that can step in. Where I think she gets it wrong is, She does not understand these markets in a way that she can just like come from the top and say this one is allowed, this one's not allowed. I agree. And so there are things that you could do to make it much more of a competitive like playing field, competitive landscape like Certificate of Need.
[00:24:47] Vic: And then I think there's something around the size of the deal. I mean, I'll just throw in a billion dollars, whatever, whatever the, I don't care what the number is, but there's some number where. Below that, let the, let the free [00:25:00] markets, like, let us, let other, let entrepreneurs, let people get started and then have a sale for 900 million.
[00:25:07] Vic: And then worry, like, the FTC and the Justice Department should worry about things that are You know, very large where it's a 10 billion company being bought by a 50 billion company Trying to like think about how these things are going to play out where i'm going to prevent a competition 10 years from now by preventing all these little acquisitions.
[00:25:28] Vic: I just think that's hard and she's going to get it wrong
[00:25:30] Marcus: Well the the thing I didn't I didn't appreciate about the interview was that she was positioning the agenda of the FTC as protecting, um, the ability for an innovation economy to thrive. And I'm like, you can't have an innovation economy thriving without M& A activity.
[00:25:49] Marcus: That's why the series B has dropped down to 9%. It's not just because of interest rates. It's because there's no exits. There's no liquidity. Yes. You know, and there's no liquidity because you keep blocking everything. [00:26:00] That's right,
[00:26:01] Vic: and the system needs liquidity at some level, and I think a billion dollars is the place I would set it, but it doesn't matter if you call it 500 or 1.
[00:26:13] Vic: 5, there's some threshold where it's a small enough deal that there's plenty of buyers. If they want to be involved and then it would create the right incentives for entrepreneurs to go, VCs to go, LPs to invest, there'd be money returned. Right. I just think it is. But so in this case, they are quadrupling the amount of pages, efforts, submittals for Hart Scott Rodino before.
[00:26:43] Vic: So when you, when you sign a merger agreement, you have to fill out this HSR form, and it, it typically takes, they said in the article, it takes like a week or two of lawyers putting stuff together. And now they have increased the threshold. So it's going to [00:27:00] be around four times as much as lawyer time and filing time.
[00:27:05] Vic: So the FTC is gathering a lot more data about every deal. And that's just going to put another sort of tax and friction into the process. And I, I don't believe that, that they're going to use that information in any way that's going to make a difference. Right.
[00:27:25] Marcus: Yeah. And
[00:27:26] Vic: so the AHA has been pushing back that they'd ignored it, and I think they're going through with it.
[00:27:30] Marcus: Yeah, I mean the bottom line here is the requirements were already probably satisfactory and they've made them four times harder Yes, this is what why what like that? That's that's like the That's the definition of bureaucracy. Yes, that is that that's a like literally you're just gumming up the system.
[00:27:49] Marcus: Yes Yeah, it's ugly. It's ugly. Wall Street Journal, health costs and flat raises are set to squeeze paychecks. So this is a story that in [00:28:00] a episode soon to be released, you all will hear Emily Evans and Vic and I kind of go into detail on what's happening. Yeah, probably a week or so after this. Yeah, we've already recorded it, but it's not going to go out for about another week or so.
[00:28:11] Marcus: But, uh, we go pretty deep into this because Emily's, uh, Always so great about pulling, you know, the data to sort of back up the narratives that we read about on a week to week basis. But, uh, I mean, basically look, uh, the health costs are going up. They're getting passed on to the employers. The employers are, have been over the last decade paying.
[00:28:32] Marcus: Yeah. We'll show as a family
[00:28:33] Vic: foundation has every. Later in the show, we'll talk to that.
[00:28:36] Marcus: Yeah. They've been paying at least their fair share, probably more than their fair share, quite frankly. Um, and now I just can't keep going. No, it's, it's, it's literally would bankrupt a company for like, you're doing everything else.
[00:28:48] Marcus: Right. Right. You're delivering a great product. You're keeping it affordable for the consumer. You're continuing to invest in R and D to make the product better over time. You're, you're continuing to pay your employees more and more as the company grows and gets more profitable, [00:29:00] but you have this, but you have this virus, this leech inside of your business.
[00:29:04] Marcus: That actually has nothing to do with your business, except for it's a requirement, part of the social contract of the United States of America, that you as the employer will provide health care for the employee and their family. Typically, it's the
[00:29:17] Vic: second biggest line item on the income statement, and the CFO has no visibility to what it's going to be next year.
[00:29:27] Marcus: They have to trust their consultants, their brokers to kind of tell them, Hey, just pat, pat, you know, grow that, that line out and grow it by five, six, seven, 10 percent next year. And it's like, okay, well, of course it's going to be things you're going to have to offset in order to make the bottom line continue to work while healthcare costs keep getting jacked up.
[00:29:44] Marcus: Right.
[00:29:45] Vic: Yeah. Yeah. So this story is that the, the, the raises for this year are likely to be not as much, many dollars as the extra healthcare costs to the employee. And so that's one [00:30:00] example of several around inflation. Yeah. Healthcare inflation is, is higher than regular inflation. And so it's, it's just, you're going backwards.
[00:30:09] Vic: But you're, and.
[00:30:10] Marcus: Yeah, the individual is going backwards. And also. And the company is
[00:30:13] Vic: not
[00:30:14] Marcus: making money. And also, I think on the whole, what's going to end up happening is not only is your, your raise not going to keep up with overall inflation, you will get past a higher healthcare, Cost yeah as a household you it will not all be born by the employer
[00:30:30] Vic: No that that's what they're saying is that your you might get a four percent raise And your health care costs are going up by four percent and you're probably getting worse coverage People don't even understand co insurance, but the co insurance is Getting more and more onerous on the member.
[00:30:47] Vic: Yes, which is of course driving bankruptcy due to health care all those things.
[00:30:51] Marcus: Yep so, um As you as you mentioned when we kicked the show off this was earnings week and um, Unh came out they had a [00:31:00] beat right, you know Delivered what they said they were going to do from a quarter perspective, but it is the third quarter and they They gave a forecast of 2025 and said, it's, it's basically gonna be depressed, obviously, because we've got Medicaid redeterminations and we got Medicare pressures with star ratings and all sorts of stuff that, you know, CMS is throwing at.
[00:31:18] Marcus: Yeah. And the MLR are the insurers. Yeah.
[00:31:19] Vic: That that was the thing that really took the stock down. Yeah. So they, I mean, but, but this is a sector,
[00:31:26] Marcus: right? I
[00:31:27] Vic: mean, yeah. Yeah. The, the entire payer sector right, is under pressure in their medical loss ratio. And it's due to higher acuity patients, more patients, and also redetermination where there have been some percentage of healthy people on Medicaid plans that weren't using it very much or didn't even had another policy and didn't even really remember they had that service.
[00:31:56] Vic: Obviously, those people have a very low medical cost. Yeah. [00:32:00] And so when you take them out, the The overall weighted average goes up.
[00:32:05] Marcus: So, uh, you and H, uh, came out with a beat, but they've, you know, had their stock come down, uh, Elevance missed and Medicaid was the big drag for them. Right. The redeterminations
[00:32:18] Vic: came home.
[00:32:18] Marcus: Same
[00:32:18] Vic: reasons. They, I think Elevance has fewer levers. UNH is a big system. They got lots of levers to pull. They're really good at, let's say, managing expectations and their financial package. Elevance is great, but, but they don't have as many. They're not as big.
[00:32:34] Marcus: Yeah. Yeah. And their MLR actually was, was a little bit higher than, than even, uh, UNH is.
[00:32:39] Marcus: So, um, yeah, again, tough, tough sled for the health
[00:32:43] Vic: systems. HCA is not out yet. It'll be out next week, I think.
[00:32:46] Marcus: Yeah.
[00:32:47] Vic: So we'll see. But it's expected to be,
[00:32:49] Marcus: I think, pretty
[00:32:49] Vic: strong. I think there'll be good. A lot of people. interpret negative payer results to be positive for the providers. I think that correlation is breaking down, [00:33:00] but ACA is, is I think going to perform well.
[00:33:02] Vic: ACA
[00:33:03] Marcus: and Tenet are likely to have strong, um, strong quarters. So I love this. The Wall Street Journal, uh, rolled out a story about Medicare plans. for the actual people, not about the, not about the companies, but for the actual people who have to get the Medicare plans. And, uh, you know, we've been talking about this for a while.
[00:33:20] Marcus: So ever since the whole Humana thing happened and Broussard came out and said, you know, it's going to be really rough going. We said, they're just going to change the premiums. They're going to change what they're going to cover. Right. I mean, they, they will, they will suffer for one year and then they will recalibrate and it will all get passed on to the, to the.
[00:33:37] Marcus: population. And that's that's the Wall Street Journal is basically saying it's coming. You know, I mean, this whole story here is about, hey, listen, seniors, whatever Medicare care plan you had this year, you're not going to have that plan next year, right? Right? You're going to pay more for it if you want the same exact plan.
[00:33:54] Marcus: Or if you want to pay the exact same, you're going to get a lesser plan.
[00:33:57] Vic: Yeah. And sometimes I think there's two [00:34:00] things that Everyone has done, including Humana and Elevance and UHG, all of them, is they have, they have left markets where, we've talked about this, where they don't have a lot of customers, where they don't have the sort of scale to be able to negotiate with the health systems and the provider networks.
[00:34:18] Vic: And then they're increasing the, the premiums and reducing the coverage. Yeah, and so yeah, this article is sort of preparing seniors for that reality that they're all gonna see like right now until December 1st or whatever the open enrollment is. It's pretty much now.
[00:34:37] Marcus: Yep So they say an estimated 5 million people will either have to get a new Medicare health plan or Part D drug plan as a part Of the shifts.
[00:34:45] Marcus: Yeah, those Part D drug plans are gonna be terrible. Yes Yeah, those are going to be a killer from a premium perspective. Those
[00:34:52] Vic: are going to be a killer and no one likes their insurance costs going up. We just talked about the employees, but the [00:35:00] seniors
[00:35:00] Marcus: fixed income,
[00:35:01] Vic: they're on a fixed income and they also have this.
[00:35:05] Vic: Uh, belief that we have told them as a society that you paid into this and we'll take care of you. That's kind of right, but it's also kind
[00:35:12] Marcus: of not right. Kind of true. Yeah, right. I mean, so there's like this, this feeling
[00:35:17] Vic: that, uh, they're being wronged in a way that is, I think, going to be really bad.
[00:35:21] Vic: Negative.
[00:35:22] Marcus: Yeah. And they do get cost of living adjustments and pensions and social security and things of that nature. But like, how are those going to keep up? I don't know that that's, that's a, that's a question. That's an outstanding question. Uh, so the Kaiser Family Foundation came out with a 2024 employer health benefits survey.
[00:35:38] Marcus: This is what you were talking about in terms of how much employers have been 10 years.
[00:35:44] Vic: Yeah, and so they studied between 2014 and 2024, of course. The overall cost for family coverage went from 16, 800 in 2014 to this year 2, 500. [00:36:00] So that's. not double as 40 percent more. Right. And then they have an interim measurement, sort of five years in between 2019, where it was 20.
[00:36:08] Vic: 5. So that's the total, a family, uh, probably a family of four, whatever. Um, that's what it costs to insure them. What is surprising, I kind of thought that the, my feeling was the employers were putting a lot of that responsibility onto the employees. But the facts from Kaiser are not that. That they have borne a lot of the x fix costs on for themselves.
[00:36:34] Vic: Yeah. And I think maybe it's because it's been pretty tight labor markets. During this time, but in the first five years, the, you know, the total premium went up 22 percent and the worker increased by not that much. I mean, um, well, I guess it's 25%, but on such a, such a small, so it's the [00:37:00] same percentage maybe, but it's just such a small around.
[00:37:02] Vic: So went from almost 5, 000 to 6, 000. And then the employee or a cost was from 12, 000 to 14. Well,
[00:37:09] Marcus: no, no, no, the, the, the, the jump between 2019 and 2024, that is not the same. You can, you can tell by the, by the slope of the curve, much greater increase for the employer than the employee there. Yeah. On both ones.
[00:37:22] Marcus: It is. But really the 2019 and 2024, that's, that's insane. Right. And that, and that tracks because those are the years where we've had these 10 percent annual year over year growth. And, you know, the employers had to eat that because for a large portion of those years. We had a sort of a labor friendly market where it was, it was hard to keep people moving all around.
[00:37:41] Marcus: So you had to be competitive. Um, and that kind of reset the floor, right? Even though we have sort of corrected with layoffs, we did reset the floor on like what the baseline is for what an employer's contribution is.
[00:37:53] Vic: Yeah. So they have really borne a lot of this excess costs over the last 10 years. I
[00:37:58] Marcus: mean, I mean, this is [00:38:00] pretty crazy.
[00:38:00] Marcus: Yeah. Like the average annual worker, um, contribution in 2019 from the employee, from the employer was 14, 561. By 2024, it's 19, 276 per worker. Yeah. So if you have 5, 000 more per worker.
[00:38:21] Vic: Yeah, and it's 20, 000 that you're not paying them in salary that you're paying your it's an expense That's right
[00:38:32] Marcus: bearing.
[00:38:32] Marcus: That's right.
[00:38:33] Vic: And a lot of the workers do not value in this. They don't really see it They don't care. Yeah, right too complicated. And so I I think this is gonna Reverse we'll see, but I don't think the employment environment is as friendly to workers right now. It's
[00:38:51] Marcus: not as friendly. And on a year to year basis, you can kind of recalibrate what it is you're going to do.
[00:38:58] Marcus: And, and, you know, when you're in a space where [00:39:00] people are just happy to keep their jobs, there's all sorts of stuff you can start doing. Right. So,
[00:39:04] Vic: so we talked with Emily about this, this, this, she's already seen companies sort of encouraging the families to get care elsewhere and having a much more friendly individual print for the employee, but not really that great of a family plan.
[00:39:19] Vic: Yep. Yep, exactly.
[00:39:21] Marcus: Uh, okay. So moving into health systems, nonprofit health systems, launch longitude health to improve performance care delivery at scale. So this is, this is kind of a consortium of, uh, nonprofit health systems, Baylor, Scott White, Memorial Hermann, Novant Health and Providence, all kind of on the smaller side.
[00:39:38] Marcus: These are not like You know, this is not an advocate. This is not a common spirit, right? Yeah, but pretty innovative
[00:39:45] Vic: like these are good systems. They're just they're regional. Yeah,
[00:39:48] Marcus: they're decent size, but they're not like a you know, right They're not super regionals, right? Uh, so the four of them come together, they've created a for profit holding company, um, equally owned by all the systems.
[00:39:59] Marcus: So they, they [00:40:00] don't, I mean, I think that part is really smart. They're non competitive, right? They're regional, so they're non competitive. They have, they have a lot of the same issues. Um, and they're saying, Hey, let's, let's go in together. Let's create a for profit thing that's dedicated and let's launch some operating companies.
[00:40:14] Marcus: I actually feel like, uh, this was the model that, um, you know, Bon Secours did, um, they created a wholly owned for profit to kind of do this and they've been doing it for, for, I don't know, maybe five, six years now, um, with, with some pretty good successes. Yeah, they
[00:40:29] Vic: bought one of my companies, which is
[00:40:31] Marcus: great.
[00:40:31] Marcus: Yeah. Um, so yeah, I think this is a, this is a decent, uh, model, uh, and it'll be interesting to see what they do over the course of the, you know, how much do they work with VCs? How much do they like fully sort of incubate everything themselves that that'll just be interesting to see, but it's, it's a new player in the market.
[00:40:46] Vic: Yeah, I think it's, it's good. We'll see how they, how they manage a four way equal joint venture, but having a for profit arm to do innovative things that are going to be highly risky, you need to [00:41:00] attract team and talent and capital. I think it makes sense. It's hard to do that in a non profit.
[00:41:04] Marcus: You know, I also feel like there's a little bit of a de risking like, so let's say we were to fund a company that was in that, in that for profit entity, right?
[00:41:12] Marcus: You know, a lot of times if you're working with one health system and, albeit it might be a more scaled health system, so I think about like 25M and LifePoint, right? Yeah. You know, okay, so LifePoint is your pilot and we'll sort of help you get off the ground, but then you got to get that next logo, right?
[00:41:25] Marcus: Yeah, right. And you know, at least with this one, you kind of have a pretty good shot of getting four logos. Right. And that's, that's. That's pretty good, right? I mean, that's different geographies
[00:41:35] Vic: that you, by, by its nature, your product will have to work with a lot of systems. Um, yeah, if they can pull it off, I think it'll be great.
[00:41:43] Vic: Yeah.
[00:41:44] Marcus: Alright, so Walgreens, uh, I found this from LinkedIn, right? Uh, you know, on the right, the right hand side of your LinkedIn page, they'll have like new stories, right? Mm-Hmm. And, uh, the, the story was that Walgreens is going to shut down, uh, 1200 [00:42:00] stores, uh, yeah. 1200 stores over the next three years. That was the story when I clicked on the, on a link for LinkedIn to like, see the story.
[00:42:06] Marcus: It was a link to Walgreens CEO's post about it, which. Didn't actually talk about that at all. So I just found that really interesting that like, even if you go on LinkedIn, you try to like spin something, you know what I mean? Like LinkedIn will take it and put the real news around it and then they will point back to your post.
[00:42:23] Marcus: That was actually why I wanted to like point this out because don't think you can use LinkedIn to kind of spin a story. Because actually you can't. LinkedIn will literally actually,
[00:42:31] Vic: they know what. The real story is
[00:42:33] Marcus: and they just, and they will point to your page to your post, trying to spin it, which is like crazy.
[00:42:39] Marcus: Uh, but he talks about, you know, the, the, the fiscal fourth quarter, um, you know, and, and the earnings and, you know, he's got this really heartfelt message here to our team members. You are the reason why I came to this company is because of you and the way you care for our customers that I continue to believe in this brand and our future.
[00:42:54] Marcus: And, you know, the comments are just like, Yeah, brutal.
[00:42:58] Vic: Yeah,
[00:42:59] Marcus: brutal, [00:43:00] right? You know, it's just like you're closing stores. You know, you're driving value. Yeah, you know. So anyway, I mean, Walgreens had a
[00:43:10] Vic: Walgreens had a misguided strategy 20 years ago to open a store on every damn corner. Yeah. And now they have too many stores.
[00:43:18] Vic: And let's be fair.
[00:43:19] Marcus: This is the turnaround CEO.
[00:43:21] Vic: Yeah. He's not the one that built that. He's
[00:43:22] Marcus: doing what he's supposed to be doing. Anyone who thought he was not going to close doors? Oh, he has to, he has to, he
[00:43:29] Vic: is right. It has to rebase his, his
[00:43:32] Marcus: asset load. There's no question. I just thought it was interesting that like he has taken the strategy of, of trying to be public and, and.
[00:43:42] Marcus: Be, you know, um, accountable on on social media. He doesn't have to do that, right? He could stick to like the Wall Street Journal and things like that and just let Walgreens do corporate postings. But the fact that he came on the platform and actually tried to sort of,
[00:43:58] Vic: yeah, I give him credit for [00:44:00] it. And it's hard to Spin something on LinkedIn.
[00:44:04] Marcus: That's, that, that's kind of the, the, the take home is Yeah. May, maybe you don't , you know what I mean? Right. May maybe you just, you sit that one out. Yeah. You know, and, and, and wait until you have good news. That's irrefutably good news. Right, right, right. Alright. So funny, I I, I just met a, um, a VC down in Atlanta today and one of their portfolio companies is called Pinwheel, and it is basically a child safe.
[00:44:26] Marcus: Smartphone. Um, so it's on the Android system and there's no social media on it at all. And all the apps are controlled by the parents and all that
[00:44:33] Vic: kind of stuff. I can call my son or daughter. They can call their, like their grandparents, a few friends, but there's no social media.
[00:44:40] Marcus: Yeah. Here's the thing. We take out social media, you know, there's still like hundreds of apps that are like, I mean, games and like just all these things kids can still do on the phone, but social media is such a massive part of what they actually do on the phone that, you know, That phone would still feel [00:45:00] incredibly crippled, even though it's an Android phone, right?
[00:45:03] Marcus: And you could do all these things. You could text family, you could text, you know, a lot, uh, you know, approved friends. Uh, you can play games. You can use all sorts of educational apps for the
[00:45:12] Vic: parent. That solves the, the main reason. Like, most parents don't care about social media, but they want to be able to have their kid call, or they want to call and say, I'm running late, or I'll meet you here, or we had this change of plans.
[00:45:25] Vic: That was, that was my dilemma.
[00:45:26] Marcus: You know, it was like modern life is too complicated for your kid to not have a cell phone. Right. It just is and they didn't have that kind of product back then. So, you know, you got them a real cell phone and then it was, it was kind of off to the races from there. So in this wall street journal article, they, they have this, um, this chart talking about the percentage of us teens from 13 to 17 who say they visit or use, um, you know, and then they list like, you know, the, the, the top social media sites and, uh, more than 50%.
[00:45:55] Marcus: Use Tik TOK and Snapchat. Um, and basically [00:46:00] Instagram too, right, right at 50%, um, every day. And a large percentage of them use it several times a day, way more than 25 percent of these teens use, use Tik TOK and Snapchat and Instagram several times a day. And, uh, something close to 20 percent of these teens said they use Tik TOK.
[00:46:23] Marcus: Almost constantly.
[00:46:24] Vic: I don't even know
[00:46:25] Marcus: what
[00:46:25] Vic: that means, but it's bad, like using TikTok almost constantly
[00:46:33] Marcus: is not good. I mean, but, but, but it is working as designed.
[00:46:37] Vic: Yeah, yeah, yeah. I mean, the algorithm is sucks you in and you just never leave. It is working as designed.
[00:46:43] Marcus: And to be fair, I mentioned a bunch of, I mentioned TikTok and Snapchat.
[00:46:46] Marcus: I need to, I need to, Be clear. YouTube is actually the number one, um, used platform here. So that's a, that's a big deal. Uh, close to 75 percent of teens use YouTube every day. That's more than [00:47:00] Snapchat, TikTok, Instagram, or Facebook. Um, and, and they've, they've got sort of much bigger percentages when it comes to the almost constantly and several times a day, I just think YouTube is a different kind of platform than, than TikTok is.
[00:47:13] Marcus: Um, so to me, I, I, I rate, I rate this, the, the severity of the problem here a little bit differently.
[00:47:20] Vic: Yeah, the story's about mental health in teens. I know YouTube has some shorts, but it, but it's, it's a more longer form medium in general. I'm sure you can find things that are not great. Yeah. It's just not designed the same way.
[00:47:35] Vic: No. So I, I agree. I don't think, even though there's a lot of use, I think the use is not as dire. Yeah, yeah. I think this is all in preparation for the. The court cases that are sort of rolling through, uh, holding TikTok accountable for, you know, their curation because that girl died. And there's a lot of people now jumping on that class action suit.
[00:47:57] Vic: Yeah. We might see Um, an [00:48:00] amendment to section two 30, there's some bipartisan talk around it. We need to update it. It's, it's like maybe 1995. It's a long time ago when that was, we,
[00:48:09] Marcus: we, we didn't have the, the context of these enabling platforms that are centralized brands that. captures such a large percentage of the population's engagement and attention that don't actually create the content, but the algorithms choose what gets served up.
[00:48:29] Marcus: So even though they don't create it, they do choose what gets served up. And that's the publishing nature of it. They are the, they're, they're the, they're the intake, but more important than being the intake, they're the curator.
[00:48:42] Vic: Yeah. And the, the con exactly, right. The context when Section 230 was written.
[00:48:49] Vic: There was not unlimited content. No. Like, there is so much content. That TikTok can pick any type of content it wants by the [00:49:00] KPIs it wants to serve me. And it doesn't matter what the content is, they have unlimited content. So it actually is more important how that is served up. Because no one's ever going to look at all the information on TikTok.
[00:49:13] Vic: That's right. That didn't exist in 95. That's right. There wasn't that kind of content out there.
[00:49:19] Marcus: Abridge, uh, AI scribe company and Walters Kluwer, uh, have inked a partnership. So this is a plus for Abridge because Walters Kluwer is a pretty old company.
[00:49:29] Vic: Yeah, I think it's a plus for both. I think it's a really interesting combination of, you know, one of the newest AI based ambient scribe, you know, futuristic tech with a very established, even like.
[00:49:45] Vic: old economy, um, system with really what, what is evidence based medicine in medicine and clinic? What should the doc be looking at and trying to marry them together?
[00:49:58] Marcus: Yeah. I think it's [00:50:00] great. I mean, it, it, it rhymes with the striker carry ideal. So that was an acquisition. This is a partnership embedding the a bridge technology.
[00:50:07] Marcus: Um, probably not enough, uh, of a strong value proposition from Walter's clue or to acquire a bridge, but I look, I mean, integrating it. And putting a bridge into a position where they kind of become a bit of, uh, Intel and inside of, you know, established brands is that's a great, that's, that's why I think it's great for them.
[00:50:25] Marcus: I mean, I think, you know, Walter's clue already had the distribution network, so they could have chosen any partner for them to choose a bridges. I think pretty great.
[00:50:32] Vic: Yeah, that's right. And it's starting to, it's not, I wouldn't call it a guardrail, but it's starting to bring evidence based medicine context into the scribing of, of.
[00:50:43] Vic: Ambient AI, you know, office visits, which is a good thing. It doesn't mean that it can't hallucinate, but you're having, you're beginning to have, you know, actual, you know, Data from a reliable source in there.
[00:50:57] Marcus: Yep. All right. [00:51:00] So Microsoft in their co pilot studio is introducing a healthcare agent service. I think their co pilot studio is basically, it's kind of like the custom GPTs that you can create with in, in opening eyes, chat, GPT, um, it's like.
[00:51:16] Marcus: Create your own copilots right now. They've, they've brought in the healthcare agent service and again, just the distribution that Microsoft has across the healthcare industry. Everybody, you know, every, every, anytime I work with a large healthcare corporation and I have a call with them, you got to get on teams, right.
[00:51:33] Marcus: It's on teams. Right. So again, that's just the power of that distribution that they have. That's going to, you know, SharePoint, they all are on SharePoint. That's right. Yeah, that's right.
[00:51:42] Vic: Yeah. They. They're smart. They're leveraging their existing distribution. They're bringing healthcare agent like services.
[00:51:54] Vic: I don't know if anyone knows what that means. I don't know if I know what that means. The agent stuff is thrown around. It means all kinds of [00:52:00] stuff. Yeah. But it's basically packaged, um, things that you can put into a healthcare environment. Yeah. And then they're partnering with Epic and Cleveland Clinic just to give them more credibility and they're going to try to sell it to every health system out there.
[00:52:15] Vic: Very similar to Salesforce. Two weeks ago or three weeks ago. So the big brands are coming into healthcare with AI tools.
[00:52:24] Marcus: And, and, and they're, and they're focusing on the word agent. Yes. Yeah. Salesforce is big announcement was about agents and now Microsoft's talking to agents.
[00:52:33] Vic: There's no generative. No, anything.
[00:52:34] Vic: Cause generative
[00:52:36] Marcus: has a negative connotation. That's right. Agent sounds cool. Agent sounds cool. Agent sounds like someone doing something for me. Yeah. Right. Yeah. All right. Uh, cool. Just three more stories. Uh, New York Times to Bezos back to AI startup, which is perplexity. Stop using our stuff. So the, the lack of clarity continues and New York Times, you know, it's the strongest, um, you know, media brand, uh, you know, non non cable media brand in [00:53:00] America.
[00:53:00] Marcus: Yeah, probably, maybe in the world. Maybe in the world, I don't have the context for that, but certainly in America, there's no question about that. And, um, you know, they are leading the charge on really holding these different AI platforms to account and forcing them to pay for licenses, right? Yeah.
[00:53:19] Vic: Yeah.
[00:53:19] Vic: And I think that, um, they are likely to lose from the, the, you know, hoard of AI backed things grabbing their stuff. But, but I think it is right that they stand up and say, this is our intellectual property and we need to be paid for it. And They're doing that through aggressive defending it.
[00:53:43] Marcus: So we'll see what this plays out.
[00:53:44] Marcus: The perplexity CEO, who's a very, very smart guy, um, basically saying, I don't want to be an antagonist, you know, I'll, I'll, I'll find a way to work with, with the New York times. The question is, can he afford to,
[00:53:56] Vic: uh, can he afford to, and meanwhile, he, I think [00:54:00] he has multiple bots. Crawling around gathering stuff as he's saying this,
[00:54:06] Marcus: but at a certain point, if he gets an injunction, he'll have to stop that, you know, and I'll have to block that those, for anyone who's listening, who doesn't know and hasn't used perplexity, it's basically an AI enabled search engine, right?
[00:54:15] Marcus: So it's not the same as like, uh, a lot of these chat interfaces. The fundamental feature is search, and then it, it generates sort of comprehensive integrated search results. Like an LLM would, uh, but, but it sources everything. That's what's so great about it is it sources everything. So, you know, if you search on Google, you get like this list of links, you search on perplexity, you get sort of a coherent answer about the thing, but that a bunch of sourced links that you can still go out to, um, to find the answer.
[00:54:43] Vic: I think it's sort of like chat GPT and is merged with Google search. That's right. That's right.
[00:54:49] Marcus: And, and look, I mean, I'm hearing more and more that. I don't know if I'd call it a Google killer, in fact I wouldn't, I definitely would not call it a Google killer, but I'm hearing more and more people using Perplexity, [00:55:00] right, I mean, so if you've never used it, you should try it, I've tried it, it's good, I encourage you to give it a try, uh, alright.
[00:55:07] Marcus: Amazon Databricks strike a five year deal around AI chips. So this continues to show that the NVIDIA dominance will not go unchallenged because you know, if, if, if there was ever a monopoly that we need to watch out for, it would be that one, Amazon, Microsoft, and Google, we know for sure, all three of those players, if you're a cloud player, you're working on AI chips, you cannot be subservient to.
[00:55:31] Marcus: In that capacity. And so Amazon has their own chip called Traum, and they, uh, just did a five-year deal with Databricks, which is a big, big player in cloud data. Yeah, yeah. Databricks is strong. And so,
[00:55:41] Vic: I mean, it's basically the, the training technology really, the chips, the cloud, compute and power, those are the three ingredients that you need and data.
[00:55:55] Vic: Um, and so the big players, the big, the big sort of [00:56:00] scale tech players are trying to aggregate. That yeah, NVIDIA had a huge lead, but they, no one, Amazon, Google, Microsoft, they're, they're not going to just sit by and let them dominate that space. That's so important. So it's just naturally going to be new tips that come up.
[00:56:21] Marcus: And NVIDIA is a very one dimensional brand, right? They're a, they're a chip maker. They're going to try to enter, try to move into software, have no distribution, right? If no distribution and no brand credibility in those spaces. Yeah. So I think that's going to be hard and it's actually going to be easier for these other players to get into the chip space.
[00:56:38] Marcus: Oh, yeah,
[00:56:38] Vic: definitely.
[00:56:38] Marcus: Because they're known as multi product companies, right? They do a lot of stuff. All three of those companies do a whole lot of stuff.
[00:56:44] Vic: Yeah, they already make chips. They just had to switch to, to, to, You know, have them designed for this purpose. They not only make
[00:56:51] Marcus: chips, they make hardware.
[00:56:52] Marcus: All three of those companies make hardware. So I think it's gonna be easier for them to eat away at NVIDIA than the opposite direction. [00:57:00] Uh, and then final story talking about this. Yeah, the other, the
[00:57:03] Vic: other. So
[00:57:05] Marcus: I think maybe two weeks ago we talked about Microsoft and Three Mile Island. Right, right, yeah.
[00:57:09] Marcus: So Google is backing a power plant, uh, it's really a manufacturer, Kairos Power, um, to power AI. I think everyone realizes we're going to be all in on nuclear, like that's,
[00:57:19] Vic: yeah,
[00:57:20] Marcus: that's just, we, we, we need, uh, a cleaner, but also much more efficient power source to power all this AI we're going to do. We can't do it with, you know, hydro and gas.
[00:57:31] Marcus: It's just not going to work. It's not going to get it done. So
[00:57:34] Vic: it doesn't, it doesn't scale. I mean, there's only so much water and gas and solar works in some areas of the world, but it's limited. That's right. Um, what I like about this deal is that they're using the modular kind of a nuclear, much smaller, it's like a 75 megawatt, uh, reactor and it's cooled with, uh, fluorine salt, whatever that is, but, but it, um, It doesn't [00:58:00] self destruct and cause a very dangerous nuclear release, like in Three Mile Island, Scare, or Chernobyl.
[00:58:08] Vic: It self destructs in a contained way, and I know it from the crypto world. They've done a lot of tests where they actually try to make it, you know, Whatever react badly just to see how it reacts in it and it is self contained and takes in shuts itself down In a way that doesn't kill people or a cause contamination and then it's also being made The first one's gonna be in Tennessee.
[00:58:36] Vic: And so I I'm pretty excited about I think being able to put 75 megawatt nuclear reactors You know, in several locations could be really good. It's, it's a long time flying. I mean, the first one in Tennessee is 2027, I think. Yeah. Then Google's contract is for 28, 29, 30. But still pretty exciting
[00:58:57] Marcus: that we can put this in place.
[00:58:58] Marcus: Brave new world. You know, [00:59:00] I grew up in the time when it was like nuclear scariest thing on earth. Chernobyl, Three Mile Island, these were like horror stories. And now here we are, all the big tech companies are in the nuclear power business. Yeah.
[00:59:11] Vic: Yeah.
[00:59:11] Marcus: It's crazy.
[00:59:13] Vic: Well, I mean, I think making a modular kind of assembly line where you can produce these and make them much safer, I think is progress.
[00:59:26] Vic: I mean, Europe has a lot of nuclear already. And we need to catch up.
[00:59:30] Marcus: Yeah. Agree. All right. We had to do a quick addendum to the episode because we wrap up on Thursday and then Friday we wake up and two massive things have happened in the payroll is fast. Holy cow. Okay. So really quickly, the first one is that Elevance formerly Anthem.
[00:59:48] Marcus: This is important. Elevance is adding to their Carillon portfolio with the care bridge acquisition. So care bridge Nashville based. This is, uh, bill for us and, and, uh, And Brad [01:00:00] Smith, once again, uh, this was number one on the Inc 5000 company last year, not this year, but last year fastest growing company in America.
[01:00:08] Marcus: And Elevance has acquired this company. The reason why it's noteworthy of other than the fact that even though the terms are undisclosed, I think most would assume based on the last valuation that it's over a billion. Um, I think the last valuation was definitely over two. Yeah. Yeah. Yeah. So, so certainly over a billion, but, um, I think in addition to that, uh, this is the second acquisition that Anthem then Elevance now, um, has, has made, uh, with the Frist Smith duo.
[01:00:36] Vic: Yeah. Yeah. We were talking about network earlier in the show or maybe later in the show. I don't know where this is going. Yeah. And there's a really good connection between those management teams. Yeah,
[01:00:47] Marcus: obviously. So, um, not much more to say other than congratulations for those who, uh, aren't tracking what CareBridge does.
[01:00:54] Marcus: They are a manager of home care and community based services. Um, and
[01:00:58] Vic: really complex [01:01:00] patients normally.
[01:01:00] Marcus: Yeah. Yeah. Um, so this is, and, and again, back to the networks of, of VCs, you know, uh, this is an Oak deal. Um, You know, very, very big company, very, very quickly grew and, uh, is now part of the Elevance Carillon platform.
[01:01:19] Marcus: Elevance is very busy on the MNA side, building up Carillon very quickly to try to get to, um, uh, parity with Optum. That's for sure. And with LHC and Amedas is kind of off the table, right? You know, you could see where they were looking for alternative forms of, um, high growth. innovative, uh, home home health businesses.
[01:01:42] Vic: Yeah. Yeah. And we'll have to see what the terms are. I think, uh, certainly a huge deal and nice to get liquidity back to back to LPs, back to investors.
[01:01:51] Marcus: Yeah. Uh, and then the second big news is, uh, if you're tracking the space, by the time you listen to this, you'll already know this, but the CVS [01:02:00] Health CEO, Karen Lynch, um, has been ousted and that was shared, uh, with their earnings report.
[01:02:07] Vic: They missed earnings. That's not surprising given the other payers that reported this week, right? Sort of expected the whole sector to be down, right? Her being ousted. And then, uh, the guy coming in, I, I used to be on a board with David Joyner, who's a great, great guy, really a sales focused executive. He's got a lot to figure out, but, but a good guy.
[01:02:28] Marcus: I mean, in a very, very short period of time, the, the head of Aetna and now the CEO of the entire enterprise, both, um, removed from their position. So, uh, clearly there are a lot of things going on at CVS that are, um, in need of. Addressing and a new chief, um, is going to be interesting. David is, is, uh, he's the new chief executive, but he was the president of CVS care Mark.
[01:02:56] Marcus: And so he, he is an insider who was elevated to the role, not an [01:03:00] out, not an outside turnaround person. So, uh, Uh, I don't think we necessarily know whether or not this is the current CEO must go. And we just have to pick, you know, our best option from within, or if David was really identified as the person to do the turnaround.
[01:03:16] Marcus: Cause it, I mean, we don't have a lot of clarity on what needs to be turned around, but you don't let go of the top two executives in the company, literally Aetna and CVS, um, within, Three months of each other without there being some real issues there.
[01:03:29] Vic: Yeah, I think there are large systematic issues with the assets that.
[01:03:33] Vic: are bundled into CVS. Caremark that David, you know, what started his career in and kind of came up, CVS acquired Caremark, which is how he came over there. He's been at CVS slash Caremark for his whole career almost. Um, he's not an outsider. He definitely is an inside CVS really is the most profitable biggest asset.
[01:03:56] Vic: Um, but Aetna is a, is a troubled [01:04:00] payer in my estimation. I don't have a lot of details of it, but it's, it's struggling. And then the. physical footprint, all the stores is a challenge too. So David's a great salesperson, great strategic guy, and he's got a lot to figure out.
[01:04:14] Marcus: Yeah. It's going to be interesting to see whether or not there is, um, a process of divesting that starts happening.
[01:04:20] Marcus: We just, uh, talked about earlier in the show, um, Tim Wentworth from Walgreens, you know, who was the turnaround CEO brought in, who, uh, had a flowery LinkedIn post, but really it's because he's going to shut down 1200 stores right over the next three years. And that's what's sort of necessary to do there is like, is that kind of, um, is that kind of work going to be necessary here at CVS?
[01:04:42] Vic: Yeah, and it's interesting that the PBM strategy has moved a lot of the margin, a lot of the profitability away from the pharmacy footprint. Um, and that made sense until they got bought up by all the, Pharmacies. And so, [01:05:00] I mean, we're seeing Rite Aid went through a bankruptcy, just came out, but they had a lot of things to restructure.
[01:05:06] Vic: They're now ahead of the curve. And we have Walgreens yesterday and CVS today going to have to figure out what they do with their physical storefront of pharmacies that are really probably a drag at this point.
[01:05:19] Marcus: We just had to do a quick addendum because there's no way we could like let this show go out With that news that rolled out on friday Normally, we wouldn't do that, but it's been a busy sort of 24 hours since we recorded the show
[01:05:30] Vic: Yeah, and we'll be back next week.
[01:05:32] Vic: There's a whole bunch of stories All right. Thanks for coming into this