continuations

Healthcare: Commerce Before Marketplace?

continuations:

I am generally not a big fan of strategies that involve pursuing business A now in order to pursue B in the future. I tend to believe that you should go for B right away. For example, if you are planning to disrupt textbooks I would likely prefer a strategy that figures out how to peer produce those instead of one that first tries to make the renting and exchange of existing textbooks more efficient. Why? Because there are few businesses that have pulled off the “A now, B later” trick — most everyone simply gets stuck in business A. Netflix is one the few that pulled it off. They first shipped DVDs and now successfully stream (even Netflix they almost botched the transition).

Two possible justifications come to mind for the “A now, B later” strategy. The first is technological progress. When Netflix got started, streaming was not yet a truly viable option. The second one is behavior change. When Amazon first got going, buying online was enough of a change for people. It would have been too much to also ask them to do so in a marketplace and so Amazon chose the commerce format. Bezos smartly picked books where an online store had big advantages over a brick and mortar one.

This latter justification seems particularly relevant when looking at healthcare opportunities. After many years of content sites a la WebMD we are now seeing a great many startups that want to actually provide care. This ranges from medical Q&A sites all the way to telemedicine applications on mobile phones. Going to the computer or your phone for a consult rather than a flesh-and-blood doctor is a big behavior change. That suggests that an Amazon like strategy where you start with commerce and only introduce a marketplace later may be the winning model.

So what would a commerce model a la Amazon look like in healthcare? It would be a branded service that provides diagnosis, prescription and if necessary referral. The service would use some combination of texting, possibly video chats / image uploads, and use of existing lab networks (eg for blood analysis). The logical entry point would either be primary care in its entirety or a large specialty such as dermatology. I believe the right service could quickly grow large, especially if it can be priced in a way where insurance reimbursement becomes a secondary consideration. The subsequent marketplace would be for cases that require a specialist or treatment other than prescriptions.

I am curious to hear from others whether they buy this argument about a commerce model coming first or think we will go straight to a marketplace. Also, if you know of any startups pursuing the commerce model please let me know.

General Assembly is doing both commerce (our own courses) and marketplace (our community taught workshops) at the same time. The workshops aren’t pure marketplace though, as we have some involvement with content and marketing, but there is a path to pure marketplace. You can’t go straight to marketplace in education because consumers have high expectations of quality and transformative impact, so you need to maintain editorial and curricular oversight. Otherwise you end up like Udemy or Skillshare, which have had trouble scaling.

Warren Buffett’s 2013 letter to shareholders is fascinating.

"We completed two large acquisitions, spending almost $18 billion to purchase all of NV Energy and a major interest in H. J. Heinz. Both companies fit us well and will be prospering a century from now. […] Though the Heinz acquisition has some similarities to a “private equity” transaction, there is a crucial difference: Berkshire never intends to sell a share of the company. What we would like, rather, is to buy more, and that could happen. […] With Heinz, Berkshire now owns 8.5 companies that, were they stand-alone businesses, would be in the Fortune 500. Only 491.5 to go."

dfdeshom

Comcast was the first last mile provider to recognize this and move peering from the realm of network engineers to the MBAs and started systematically refusing to upgrade existing private interconnects and in some cases systematically de-peering in other cases. Comcast neatly side-stepped the entire net-neutrality debate by degrading service to everybody who wasn’t willing to pay for a private interconnect. Comcast has had a relatively free hand because their customers are blissfully unaware of the politics of global peering and instead will just go somewhere else when a website is ‘slow’.

This has put a lot of pressure on companies like Amazon who know that a 100ms delay in the order process can result in a 1% decrease in sales. Since private interconnect arrangements aren’t public my guess is a lot of companies have caved and are paying Comcast to peer.

an anonymous network engineer commenting on The really strange Comcast-Netflix deal - Bronte Capital (via llimllib)
His new album, “Morning Phase,” is a triumph, possibly because he’s never made a record so focussed. He describes it as both a “healing” and a “reckoning.” For forty-seven minutes, Beck and some of his closest collaborators cast a benevolent spell that refuses to break. The album speaks powerfully and directly, without gimmicks or puns, and it maintains a near-total gentleness. After listening to “Morning Phase” almost fifty times, I can’t find a single thing wrong with it. Even if you listen to popular music all day, every day, you don’t get many albums like this in your lifetime. The relationship between the musician and the listener here is as simple as the outcome is intense: only the artist knows exactly how such an album is made, but only the audience can verify that it is perfect… .

Sasha Frere-Jones: Beck Puts It All Together : The New Yorker

Daaaaamn. I have never heard the New Yorker give greater praise.

thegongshow

thegongshow:

At a USV Annual Meeting of their Limited Partners (LPs) many years ago, Biz Stone asked a question during Q&A at the end of the meeting. He asked the partners (then Fred, Brad, and newly minted Albert), do you specifically seek to fund companies that also have a social mission in addition to a…

Omidyar Network does this.

Social good is a great bonus, but I imagine USV didn’t mind the IRR on Zynga either.