Scorch the Earth

“In business, I look for economic castles protected by

unbreachable moats.” - Warren Buffett

I'm an intellectual. I like thinking about stuff. My favorite subject is business models. I love thinking through and analyzing business models. I find them to be fascinating. Nothing turns me on like a well-crafted business model. I'm also a writer that loves telling stories through analogies.

The best businesses on Earth are, as Buffet described, economic castles with by moats. By definition, every mega-cap company is a castle with wide moats. Otherwise the king at the nearest castle would have already stormed the new, massively profitable castle as it was being built next door.

A few examples of castles and their respective moats:

Coca Cola - marketing and distribution

Amazon - economies of scale

Walmart - economies of scale with retail presence

Microsoft - the Windows ecosystem (high switching costs)

Facebook - the Facebook ecosystem (high switching costs)

Google - search and the user data needed to optimize search

But the best kings aren't just those that build moats. After building moats, the best kings burn everything surrounding their castle to the ground, destroying any chance of prosperity in nearby lands. The further the enemy from the king's castle, the harder it will be to wage war at home.

What separates moat-building from earth-scorching? Earth-scorching is the process of making it unprofitable, and thus undesirable, to exist in related markets.

There's an old video of Eric Schmidt (that I can't find) in which he talks about some of Google's guiding philosophies. Schmidt learned the hard way what it means to lose on price. During the rise of business productivity apps in the early 90s, his team at Sun never thought that Microsoft could simply undercut them on price as they did. His strategic miscalculation cost him one of the largest fortunes in the history of humanity. He learned his lesson the hard way. That's why Google gives everything away for free. It's difficult to compete with free.

Being free is economically feasible in certain layers of the technology value chain, such as search, but obviously not in others, such as hardware. In hardware businesses, Google doesn't try to make money. They sell hardware at negligible margins to promote the use of their services at a higher level of the value chain. In the process of doing so, they're making it undesirable and unprofitable to be in the businesses on which Google relies to deliver customers to its front door. Android, Chrome, Fiber, the Nexus line, and the acquisition of Motorola were all driven by this meta strategy. Over time, Google will continue to milk profits at the end of the value chain while those who fall earlier in the value chain see their profits, cash, and resources wither. Google doesn't want anyone to even think about competing with them.

The best businesses aren't castles with moats. They're castles with moats that are oases in deserts.

Engineers are King

It's a well known fact that talent is the only asset that matters in early-stage technology companies. This is particularly true in software companies such as Pristine.

I just wanted to take a minute to write that down and make it public for any current or future Pristine engineers to read.

If you ever feel that I have forgotten this fact for even two seconds, please shove this blog post in my face and call me an ignorant hypocrite in front of my employees, investors, and publicly on the Internet.

I will thank you.

There Will Be Two Kinds of People in the World...

This post was originally featured on HIStalk. 

…those who tell computers what to do, and those who’re told by computers what to do." - Marc Andreesen, Andreesen Horrowitz.

I have a lot of favorite VC quotes. This one is without a doubt the most profound.

Every modern EHR already supports task lists, messaging, push notifications, and alerts. Medical professionals — doctors, nurses, technicians, therapists, etc. — are logging into EHRs to see which patients they need to treat, where to go, and what to do. Most medical professionals spend hours looking to a computer to know what to do next. The computer guides them through their day.

The vast majority of medical professionals fall into the latter camp of Andreesen’s quote. This was true in the analog era, too. Schedules, sticky notes, and charts drove what and when medical professionals did things instead of computers.

Looked at under another light, doctors, especially surgeons, are revered for how many years they’ve been practicing and how many of a given procedure they’ve done. More broadly speaking, people who fall into the latter camp of Andreesen’s quote are people who repeat processes and steps for a living. I can’t find any statistics on this, but I don’t think it’s unreasonable to assert that 80 to 90 percent of the workforce performs an intrinsically repetitive job. Perhaps 10 to 20 percent are in management and creative functions.

The quote also implies that clinical informatics will become the single most important medical discipline. Clinical informatics is also the newest medical discipline. In fact, it’s so new that no one is even officially certified in it yet. The first tests are this October. It’s an awfully bold claim to suggest that a not-widely understood, not-yet-available, what-will-be niche discipline will be the most "important." Let’s consider why that might be the case, though:

1. The clinical informaticists who select, customize, integrate, and roll out large-scale, intertwined health IT systems are making thousands of decisions on behalf of their users. Their decisions will help or hinder every employee’s actions and behaviors all day, every day. When companies, organizations, or systems fail, it’s because the managers failed, not the soldiers.
2. Building on top of the first argument above, medicine has traditionally been an individualistic practice. There weren’t “doctor managers”. Medical department heads don’t “manage” their “subordinate” doctors in the same way that white collar managers manage their employees. Clinical informaticists are analogous to traditional managers.
3. Computers aren’t going away. You will use a computer every day until you die. Computers may change forms and shapes, but we will continue to integrate computers into every aspect of our lives, businesses, and medical processes.
4. No one user understands the entirety of all of the interrelations between all of the users or systems. To the contrary, most users barely understand most aspects of the parts of system that they’re supposed to know. Every person’s actions affect others directly and indirectly. Mistakes and bad data may flow through two or three people before someone feels the effect further down the line. The design of the interactions between people are extremely important. By definition, good design makes it hard to make mistakes. In medicine, where mistakes can be extremely expensive and deadly, system and organizational designers have the most important job.

Clinical informatics is a growing segment of medicine. I know half a dozen physicians that are eagerly waiting to test in October to become certified. It’s exciting to see the AMA and the federal government recognize the tremendous value these folks bring to the table.

As a former EHR designer, the only problem I have with the scope of the current clinical informatics discipline is that the discipline doesn’t incorporate formal education or training regarding UI design, data visualization, or human computer interaction elements. Clinical informaticists are already designing macro systems and processes. They should be taught and be responsible for designing the micro interactions as well. The macro and micro designs are too related to be disintermediated. Don’t leave design to the programmers. They’ve been designing clinical screens for 30 years and we know how that turned out.

Thank you to all of the clinical informaticists out there who are pioneering the discipline. I must also extend a special thank you to the incredible CIOs and CMIOs of the AMDIS listserv. I’ve learned more about informatics by reading that list serve than anyone could ever learn from reading a book about informatics.

Is Glass a G+ or a Wave?

People ask me all the time if Google will pull the plug on Glass.

No, they won't. Ever. Well, at least not until they develop contact lens computers.

Here's the right way to think about Glass's viability: Is Glass a G+ or a Wave?

G+ is a company wide endeavor. G+ has been integrated into literally everything Google does - search, maps, Gmail, Android, Chrome, etc. It's a layer that lives across the Google-verse.

Does Plus make any money? No. Will it ever make money? No.

Does Google embark on lots of ridiculous projects that will never make a significant sum of money or inflate margins? Yes. See:

Gmail

Maps

Youtube

Android

Chrome

Fiber

In retrospect with 20-20 vision, would you kill any of these businesses because they aren't "profitable" in the traditional sense of the word? No. That would be stupid. All of these businesses are strategically valuable to Google.

Now let's consider some failed projects, such as Wave and Buzz. Both of these were isolated projects that never had any scope within the Google-verse. They were silted. And they never really had a defined use case. They most certainly weren't very ambitious, at least not relative to the projects listed above.

Now let's consider Glass:

1) most Google engineers are sporting Glass

2) Google ran the largest social media campaign ever, #ifihadglass

3) Google forked Android

4) Google "graduated" Glass from Google X into a free standing Glass division

5) Google invested in Glass's screen manufacturer

6) Google wants the concept of eyeware computing to exist, at any cost (data mining galore)

7) Google has the bank roll and the grit to do ridiculous things, hence Google X

8) Google isn't going to let Apple pioneer the next form factor revolution. Apple led the last two, smartphones and tablets, because no one else was structured to: creating new form factors without hardware and software teams is impossible. Google has figured this out, and Glass is a response.

Making any claim that Glass won't come to market is absolutely ludicrous. Glass is one of the most strategically important projects at Google.

"Your margin is my opportunity"

My favorite business quote of all time: 

"Your margin is my opportunity." - Jeff Bezos, Founder, CEO, Amazon

I can't talk about what exactly Pristine is doing just yet, but I can tell you that this quote is at the core of our belief system. Our market has already been validated by existing healthcare IT companies, and we're developing solutions that are 10x better, cheaper, faster, more flexible, and easier to support than what's in use today.

Perhaps best of all, the legacy companies that we'll be competing with are incentivized not to compete with us. Our legacy competitors have business models - and associated cost structures - that are predicated on fat margins.

Margins be damned. It's a race to the bottom, and we'll lead the way.

This is going to be a blast.