Hey Tech, It’s Time To Build. In Healthcare.

In recent months, the founders of Instacart, Spotify and Coinbase have all started new health companies. This may sound strange to some – why are these savvy tech founders jumping into tech-driven healthcare?

In 2013, Marc Andreessen observed that the largest and most successful companies have done something that seemed completely “crazy” at the time of creation. The examples of the last two decades are clear. Sleeping in a stranger’s house? Airbnb. Get into a stranger’s car? Lyft. Put a personal computer in everyone’s home, and then in everyone’s pocket, and then on everyone’s wrist? apple

But what sounds crazy in 2023? Certainly not another food delivery service, recruiting tool, or dating app. More broadly, we all agree that mobile, internet, cloud and SaaS are consensus and mainstream.

This is what seems crazy in 2023: trying to fix the gigantic mess of America’s health care system.

America’s largest industry, one-fifth of the American economy, is unspeakably broken. The United States lags far behind other developed nations in terms of health outcomes and costs. Hundreds of thousands of people die each year due to avoidable human error.

Modern technology has little penetration in healthcare. The industry still relies heavily on paper and fax machines for communication.

The most impactful companies are built on the frontier, and healthcare is the next frontier. It’s time to put our tech skills to use. The mother of all markets is ripe for disruption.

The most impactful companies are built on the frontier, and healthcare is the next frontier. It’s time to put our tech skills to use. The mother of all markets is ripe for disruption.

“But … health care is hard.”

we hear you Healthcare IS hard. It’s intimidating. It is regulated. It is complex. And that’s why it’s so exciting.

Let’s address these three concerns head on.

First of all, healthcare is certainly intimidating. But we have learned, and so have you.

The overwhelming nature of healthcare can be largely attributed to the size of the market. It’s unfathomably large ($4 trillion in the US alone) and made up of countless submarkets.

But of course the massive scale of the market is a good thing. The United States The healthcare market is five times larger than the global advertising market in which most of the big technology companies operate. The US healthcare market could support dozens of FAANG-scale companies (Facebook, Amazon, Apple, Netflix, Google), but only one exists today (UnitedHealth Group).

Second, we address the concern that healthcare is a highly regulated industry. That’s true, but many of the most iconic companies of our time—Lyft, Airbnb—have been built in complex, regulated markets. Additionally, those that were built in unregulated markets (Google, Meta, Amazon) have faced intense regulatory scrutiny and pressure. Regulation seems to be an input or output of all big business.

Like Lyft and Airbnb, healthcare faces national and state/local regulations. There is a federal system, with each state having its own medical board and insurance regulation. While this is certainly a source of opportunity, it also provides excellent grounds for experimentation, allowing a company to test different approaches in different geographies.

And the upside of government regulation is government dollars. The federal and state governments spend more than a trillion dollars on health care each year through programs like Medicare and Medicaid. This provides healthcare companies with very large and entrenched customers that never go away. Anyone who works in politics will tell you that Medicare is untouchable for cost reduction: the elderly (the most reliable voters!) would revolt.

Third, and finally, we agree that healthcare is complex. But so are most markets, be it the hotel industry, the taxi industry or the digital advertising industry. What makes healthcare feel even more complex is its scale, which we’ve established is a good thing. There are a wide variety of healthcare entities (providers, payers, pharmacists, etc.) that contribute to its complexity, but this is to be expected in any industry of this scale. Moreover, complexity has defensive advantages: simple markets and solutions have many more competitors and imitators and lend themselves to commoditization.

Why you should come to healthcare.

The above concerns can be summed up as “health care is scary”. We believe fear is where opportunity lies. So here’s why you should bring your tech skills to healthcare.

To begin with, healthcare needs technology. While the doctors who develop new cancer drugs and diagnostics are incredibly important, they are only a small part of that market. Even if we cured all cancer, the lives of Americans would only be increased by three years. Instead, some of health care’s biggest problems will be solved by technology. Healthcare at its core is (1) a data, operations and logistics problem, and (2) a consumer experience and engagement problem. Both are areas where the tech world excels.

When it comes to data, operations and logistics, the current state of healthcare leaves endless opportunities for improvement. $765 billion is wasted annually, and the main driver is human administrative costs. There is still no true data interoperability: A person’s important medical records are located in dozens of different doctors’ offices and health systems with little hope of being brought together. Most promising drugs will never go through clinical trials and become accessible to patients because we have not yet figured out how to recruit trial participants and conduct studies in a cost-effective manner. None of these problems require an MD or PhD to solve, and each is a multi-million dollar opportunity.

When it comes to consumer engagement, we’ve written before about how poor consumer engagement, caused by poor consumer experience, is one of the biggest problems in healthcare. Most poor health outcomes and deaths are caused by diseases we know how to prevent or cure. What is needed in these scenarios is not more science. In addition to cultural change and policy change, what’s needed are people who can build better experiences to engage patients in their health, whether it’s eating healthier, exercising, going to the doctor or taking their medicine. No one is better suited to solve these problems than technologists who have excelled in consumer engagement in technology.

In addition, healthcare offers the best opportunity to use the latest tools in technology, especially AI, to displace large incumbents. As we’ve written recently, deploying AI in traditional technology software companies presents a number of challenges, namely that AI has lower gross margins than SaaS due to heavy use of cloud infrastructure and continuous human support.

In healthcare, this situation is the opposite. Most of the healthcare sector is services, which have low gross margins. In healthcare, AI will dramatically improve the previously unpleasant economy, making construction in the industry much more attractive. Also, human-powered services tend to scale linearly with each incremental human added, but AI-powered services can scale exponentially.

And while the fringes are nice, the mission is nicer. When you think about the limited number of days you have on this planet and the crazy number of hours you’ll spend building a startup, wouldn’t it be great if you were working on something that really matters? You don’t have to be a doctor or cancer researcher to save lives. A company that detects medical errors or helps people pay for medical care can save countless lives.

Even if this isn’t a motivator for you personally, the mission orientation of healthcare will help you attract better talent than you would get in other industries. Eighty percent of college graduates say it is very or extremely important to gain a sense of purpose in their work. Millennials prioritize purpose in their lives even more than older generations, and they look to work harder than other sources to find it.

Working to improve health care is an obvious way to find purpose at work, basically every American can relate on a personal level to how broken America’s health care system is. Who hasn’t been asked to fill out endless pages of paper medical forms for the fifty-seventh time, received a large and unexpected medical bill, or lost a loved one to a preventable or treatable disease?

Additionally, healthcare mission orientation can likely help your talent perform better. Gallup reports that “there is a strong correlation between employee purpose and engagement and organizational performance.” McKinsey finds that “people who live their purpose at work are more productive than people who don’t. They are also healthier, more resilient and more likely to stay with the company.”

Finally, we believe that your technological mindset can be a great asset in leading a healthcare company. Of course, tech founders developing in healthcare need to learn healthcare at a deep level, and we recommend surrounding yourself with healthcare veterans to do this (this is especially true in the of ideation). But the advantages of coming from technology are clear. Technology moves faster than healthcare. The world of technology produces visionaries who do not accept that the way things work today will be the way things work in the future. Your fresh eyes are exactly what healthcare needs.

Trying to fix health care in 2023 seems crazy, and there’s certainly no consensus. But in what other industry could you build the world’s largest company?