How come things like healthcare, education, and housing get more and more expensive, but things like socks, shoes, and electronics all get cheaper and cheaper? In this episode of Bio Eats World, a16z founder and internet pioneer Marc Andreesen, and general partner Vijay Pande, discuss the lesser known law of economics that explains why healthcare, education and housing is so damn expensive, and getting worse.
What’s really at heart is tech’s ability to transform (expensive) services into (affordable) goods: think of the cost of a live string quartet, versus a streamed recorded track; or the cost of a custom-made shoe, versus a factory-made one. Until now, using tech to similarly transform services into goods in healthcare has seemed like an impossible dream — how would you do this for, say, the service of doctors providing care? But in this wide ranging conversation all about technology and society across all industries, Andreessen and Pande talk about the massive new gains recent technologies have begun to make this seem within reach, from eye surgery in malls to using AI in processing medical claims. Is there a future in which what doctors are doing today feels analogous to farmers hand plowing fields 300 years ago? And what would the role of that doctor of the future be?
- How Baumol’s cost disease is distorting pricing in healthcare and education [1:56]
- How technology could reduce healthcare costs [5:52], just as it has in the past with other goods and services [10:41], and LASIK as an example of market-driven healthcare [13:33]
- The role of individual behavior in chronic health conditions [17:20], and ideas for how this can be managed [19:56]
- Using apps and wearable devices to drive positive behavior change [25:15]
Lauren: Hi, I’m Lauren.
Hanne: And I’m Hanne. And this is our show, “Bio Eats World,” where we talk about all the ways our ability to engineer biology and re-engineer healthcare are transforming our future.
Lauren: So, Hanne, this episode is called “The Cost Disease in Healthcare.” What disease are we talking about?
Hanne: It’s actually a reference to what’s called Baumol’s cost disease, or the Baumol effect, which is a phenomenon first described by an economist named William Baumol in the 1960s. In short, the Baumol effect is when there’s a rise in wages and jobs and industries that then haven’t had the same rise in productivity.
Lauren: Okay. But what does that really mean, and what does it have to do with healthcare?
Hanne: That’s exactly what this episode is about. a16z founder and internet pioneer Marc Andreessen and General Partner Vijay Pande discuss the economic forces that make some things like healthcare, education, and housing get more and more expensive but things like socks, shoes, and electronics all get cheaper and cheaper.
In this wide-ranging conversation about how society and different industries work and what that means for consumers, Marc and Vijay talk about tech’s ability to transform expensive services into affordable goods. Think of the cost of a live string quartet versus a streamed recorded track, or the cost of a custom-made shoe versus a factory-made one. But until now, using tech to similarly transform services into goods in healthcare has seemed like an impossible dream.
How would you do this for, say, the service of doctors providing care? Marc and Vijay talk about the massive gains in new recent technologies that have begun to make this seem within reach, from laser eye surgery in storefronts and malls to using AI in processing medical claims.
Is there a future in which what doctors are doing today feels analogous to farmers hand plowing fields 300 years ago, and what would the role of that doctor of the future look like? Take it away, Marc and Vijay.
Baulmol’s cost disease
Vijay: So maybe, you know, the place to kick this off would be to talk about what is Baumol’s cost disease and why it’s so important. I think maybe the Twitter version of it is, how come things like healthcare and education and construction exponentially increase in cost, whereas socks from Walmart or many other goods, especially anything electronic, decreases exponentially. How could that be? I mean, we’re living in this world where things magically get cheaper, but that college education or healthcare just is becoming this massive challenge for us as a nation.
Marc: Yeah. So, the way that you measure the impact of technological change in society is through what economists refer to as productivity growth. It’s the process of figuring out how to make more output with less input, right. And so, normally, we kind of expect the world to work this way, which is, every year over the last 300 years with a couple of exceptions, most industries got a little bit better at making things and costing a little bit less, and that led to this huge rise in living standards.
Agriculture is kind of the classic case where food is really cheap as a consequence of a lot of technological leverage applied to the challenge of growing food, and we just generate a lot more calories of food for a lot less money now than we did 100 years ago or 300 years ago.
The problem or the challenge is that different sectors of the economy have different rates of productivity growth, basically, depending on their idiosyncrasies and then depending on the extent to which technology is empowered or allowed to actually have its effect on things.
And so you see these industries like consumer electronics and media and food and clothing in which you’ve got this spectacular productivity growth and then correspondingly these spectacular price declines over time. And then you have these other economic sectors — education and healthcare and housing as three in which the price curves are going in the wrong direction.
The cost of a college degree gets more expensive every year. The cost of heart surgery gets more expensive every year, which is going backward, basically neutral, and maybe even negative productivity growth. Like, they might be getting worse over time.
Then you basically got this problem where you’ve got certain industries that are racing ahead in productivity growth, and so, those workers are kind of becoming super technologically empowered to produce a lot more with less input. And so, those workers are actually getting paid a lot more because they just got so much technological leverage to the work that they do.
Think about, for example, the producer of a TV show or something like the level of kind of power that you have with a modern computer to like produce a TV show. It’s leaps and bounds beyond what you would’ve had if you were literally cutting, you know, splicing film, you know, by hand with the scissors and tape, which is how things used to work.
And so you’ve got these industries in which productivity is growing very fast, prices are declining, and wages are exploding. And then you have these other industries like education and housing and healthcare in which that’s not happening, but the problem is workers can actually migrate from sector to sector. If I’m not excited enough about having a job as, like, I don’t know, a film editor or something, like, I can go to nursing school and I can become a nurse. And now I’ve migrated out of the media industry, and I’ve migrated into the nursing sector.
And then the problem is wages get set across these industries, and so you basically have industries with neutral and negative productivity growth that are now setting wages as if they had positive productivity growth, which they don’t. And then the result of that is just this explosion of price in those kinds of negative productivity sectors. It’s just horrible for consumers of healthcare, education, and housing because the same stuff gets basically more expensive every year without getting any better and maybe getting worse.
Oh, and then, the other big problem is, there’s no reason why this would ever stop. The way I would crystalize this whole thing is — because of rapid productivity growth in consumer electronics, a 100-inch big-screen TV that goes on your wall, in your house, and you can watch every movie ever made for $10 a month. The price of that TV is going to drop to, like, $100. That is, like, quite literally what’s happening.
Correspondingly, the price of a high-end private four-year university degree has leaped up dramatically over the last 20 years. It’s now in the order of, you know, $75,000 a year. So it’s like $300,000 for a degree. It’s not going to be that long before a four-year college degree costs a million dollars.
And so you’re going to have a $100 television set that covers your whole wall, and you’re going to spend a million dollars getting a college degree. And that’s just crazy. It’s just, like, such a horribly bad outcome, and yet there’s something in the structure of how these markets work that prevents us from kind of speaking openly about the trends that result in this.
Technology and AI in healthcare
Vijay: Yeah. I think, Marc, one key point that you laid out there was that this is very much the cost of labor and that there’s a sort of specialized labor. And in many of these industries that we’re talking about — healthcare, education — this is an apprenticeship, where you have to spend many years to be able to develop skills that are handed down from one person to another. Very, kind of, pre-Industrial Revolution kind of behavior. Whereas when you talk about goods, goods are made in factories that are completely automated, and that technology can be applied there to make them 10% better a year, and that leads to exponential performance over time.
And one of the key ideas that I was curious to hash out with you is what we’re seeing in AI. What we’re starting to see is that AI is turning what used to be something that had to be done by a service into something that can be thought of as a good. That instead of a person training in an apprenticeship-like way to do something, the machine learns these things. You can make copies trivially. You can get now the advantage of Moore’s Law, and this almost alchemical magical transformation seems to be one part of a potential solution to addressing Baumol’s cost disease. I’m curious how you see, at least, that part of it?
Marc: Yeah. So this actually goes to an example that Baumol used when he wrote the book, kind of on this topic. And so he used the hypothetical example of, like, a string quartet, right. There’s two ways to experience a string quartet, right, in your house. One way is the old way, which you can actually hire four musicians to come and set up in your house and play Beethoven quartets, and it’s going to sound great. And by the way, people still do this. You do this for, like, weddings, right, this is still a thing.
The other way to experience a string quartet in your house is electronic playback, a recording. And what’s the cost of a string quartet recording to playback in your house today? You know, it’s basically zero. If you just chart the price of getting four musicians to come play at your house from, like, 200 years ago to 100 years ago, to 50 years ago, to 20 years ago, to now, that price has exploded. The in-person version has gotten, like, wildly more expensive, right, because of Baumol’s cost disease, because those musicians actually work for a living, and they have other career options.
And then, exactly to your point, in AI, what’s the simplest form of AI? It’s a computer literally listening to what’s happening and playing it back. And it turns out that costs nothing. An enormous amount of progress in the modern economy is that, right. You also benefit from that, by the way, every time you buy a loaf of bread. Our ancestors were not buying loaves of bread carefully pre-sliced off the shelf. Our ancestors, to the extent that they were able to get access to the core ingredients in the first place, were, you know, making bread by hand.
Vijay: Yeah. Baker as a service.
Marc: Yeah. Exactly. This is actually the big lever that increases living standards. Exactly to your point also, it has been hamstrung by the fact that historically computers have only been able to do so much. Machines have only been able to do so much. And now we have these sort of much more flexible technologies kind of gathered under this term of AI that at least in theory give us the opportunity to now revisit a lot of our assumptions about what should be a product and what should be a service.
Vijay: Yeah. One of the fun things that we’re seeing is AI is nibbling in with the easy, mundane things that are annoying for people to do that they have to be trained to do, but then, that training that goes to people can now be done to the AI, and the AI can be trained once and then scale and actually learn from everyone else’s mistakes.
And so what we’re seeing, as initial go-to-markets in healthcare are in areas of billing or simple types of diagnoses or triage — areas where this isn’t trying to make some superhuman genius, which may in time come, but I think the first go-to-market is just taking the things that are just boring and reproducible that are just expensive because of the human power involved, not even necessarily because you need a super genius. And that’s something that we’re seeing right now.
Marc: There’s a famous story of Alan Turing where he was working on inventing the computer in the early 40s, and he was hanging out at Bell Labs in New Jersey with his friend Claude Shannon who’s the inventor of information theory. The two of them were having this heated lunch discussion at the AT&T headquarters building in New Jersey with all the top researchers and AT&T executives kind of sitting around nearby about basically this concept of AI. Like, what would it mean for computers to actually be intelligent to actually have brains.
And they were debating back and forth, and finally, Turing got frustrated, and he stood up and yelled at Claude Shannon. He said, “Look. I’m not talking about turning a computer into a super genius. I’m just talking about building a mediocre mind, like the president of AT&T.” And this gets into the emotions and the politics of how we think about automation, because the technological progress and productivity growth changes jobs, but in the fullness of time, what we will realize is that a lot of what doctors are doing today, for example — a lot of that work is going to be analogous to literally when farmers used to hand plow fields 300 years ago.
Like, if you took a modern farmer who’s running a fully computerized operation with all these modern combines and tractors and GPS and all these amazing hybrid engineered seeds and all these miracle fertilizers and everything, and if you told them that they had to go back to hand plowing fields, we would have much worse food at far, far higher prices and a lot of people would go hungry.
I am quite convinced the doctors in, you know, whatever, 50, 100, 200 years are going to look back at what doctors do today, and they’re just going to be, “My God. I can’t believe those poor people ever had to do all that.” And in fact, they’re also going to say like there was so much more important work to do.
Vijay: Yep. You know, it’s interesting to think about what the arguments against this could be, and one would be that — well, you know, could the industrialized process be really comparable to what a human being can do? People can do so many things. I was just thinking about how shoes were made. You would have a cobbler who could make shoes that were perfectly suited for your feet, and they’d be doing — everything would be one-off and bespoke and probably would be better shoes, maybe. But instead, you just define a series of shoe sizes — you know, I’m either like a 9, 9.5 or a 10 or whatever, and I could just get the closest one, and it’s good enough.
And the fact that it’s 10 times cheaper or whatever, and now with non-material so much better, that pretty soon you forget about the other experience, and you just get used to the new way of doing things. And that’s kind of my suspicion, that in the beginning there will be trade-offs that you have to make, and that people will have to get used to, but that in time I think you wouldn’t think of doing it any other way. And at least this follows industrialization in other contexts.
Marc: Yeah. And in fact, back “in the glory days” when like all shoes were made by hand, they were sold, like, [so] crazily expensive that you would have one pair of shoes, right. This idea that you’d have like a shoe closet would’ve struck people as just absurd because you have a pair of shoes. And then, by the way, they’re so expensive because of all the manual labor involved, right, relative to your ability to make money, you know, as sort of a normal worker that like if your shoes start to wear through the sole, you’re out of luck. You’re probably going to be wearing those things for five years.
Kids wearing, like, newspapers stuffed in their shoes, right, to be able to basically compensate for the holes in the shoes because shoes are just a lot more expensive to replace. Just imagine that shoes cost 1/6 of all GDP, right, which is where we’re at with healthcare, right. And so imagine if it was like 1/6 of all economic output had to be used to pay for shoes, and then it turns out nobody wanted to pay for anybody else’s shoes — and how terrible that world would be. And how that would really screw up, you know — we’d have all these crazily intense, like, political debates. We would’ve had these political debates between Trump and Biden on the national shoe policy.
Vijay: Oh, yeah. Yeah. Obama shoe, Trump shoe.
Marc: Yeah. Exactly. And then, you know, government-made shoes, right, getting these things out of the realm where you have to have these debates because things are like gigantic, expensive and nobody wants to pay for them is itself just a massive [inaudible] function increase in human welfare that you don’t notice it until you don’t have it.
Vijay: Well, that’s why I think it’s maybe not as much of a surprise why it’s showing up in healthcare because healthcare will eventually become 100% of GDP.
Vijay: So it’s something that’s not sustainable, this exponential growth in costs. So I think entrepreneurs are seeing that potential. They’re creating this in both front office for doing scheduling, for doing diagnosis, for doing back-office, for billing — all the sort of routine and horrible things that people hate. But I’m curious, let’s just posit that the technology will continue to advance and that AI will get a foothold and will do something and then eventually more and eventually more. I’m curious, Marc, if you think, is that it? Is that enough where AI is doing some large fraction of the work to really shift this cost curve, or is there more than just a technology that’s required as part of the solution?
LASIK as a case study
Marc: We actually do have a clear example of this happening in the area of medical treatment, and that example is laser eye surgery, right. Basically, LASIK — laser eye surgery which basically literally will fix your eyes, so you don’t need glasses anymore — is the kind of medical procedure that if you described it to somebody from 1950, they’d think you’d lost your mind. It’s literally beaming lasers onto the surface of somebody’s eye to change the shape of the eye.
Vijay: In your mall.
Marc: Yeah. In a mall, right, quite possibly right there in the front window. Right?
Marc: And so, it’s an amazingly technologically advanced procedure. It’s actually gotten even more technologically advanced over the last 20 or 25 years. There was a point when you had to, like, try to hold really still because the laser needs to hit the right part of the eye. And now, they’ve got all this advanced 3-D cartographic mapping where the laser follows your eye movement in real-time. And so it’s become this incredibly technically sophisticated kind of thing. And while that’s been happening, the price has been dropping.
And in fact, the reason why LASIK outlets are in the mall is because they can afford to be, right? It’s actually become quite inexpensive to set up a LASIK operation, and it’s actually quite inexpensive to get LASIK. This is the kind of thing where it’s like, this procedure as a technological feat is not more advanced than heart surgery. It’s not more advanced than certain forms of even, I would speculate, brain surgery. This is advanced stuff, and yet this thing is on a quality improvement and cost reduction curve completely unlike any other surgical procedure.
And then you kind of say, well why is that? And, of course, the reason is because it’s paid out-of-pocket, right. So it doesn’t run through the insurance system. It’s not something that other people pay for. It’s not something that has any politics around it. It’s an outpatient procedure. It’s voluntary. And if you don’t get it, by the way, then you get glasses. And if you do get it, then you don’t need glasses.
And so, as a consumer, you can actually make the trade-off of, like, is it worth to spend whatever — $1,500 for this surgery, as opposed to spending, you know, $200 for glasses every few years. What if we could basically re-engineer our whole approach to how we think about all this stuff? And, you know, we can’t literally do that, because consumers might be in a position to decide whether they need eye surgery and how that should work. Maybe they’re not quite in the same position to understand what it means to have a quadruple bypass. And then there’s also, like, it’s an outpatient procedure. Inpatient procedures are a lot more expensive, have, you know, lots of care requirements. But nevertheless, it’s like, “Okay. There’s a shining beacon for what’s possible.” So there’s that.
There’s also this big definitional question in my mind which is, like, what is healthcare? And we tend to think that healthcare is like a discrete thing and the politics are kind of all calibrated around that. And so the big political arguments are always about, do you have healthcare, or do you not have healthcare — as if you’re saying, like, I don’t know, do you have a shirt or do you not have a shirt, right? But that’s not really what it is. The definition of what it means to have healthcare keeps expanding, right, as sort of the number of things that people consider to be conditions that they want treated and the number of things that are actually treatable keep expanding.
And then there’s this whole other debate of inputs versus outputs, which is, how are we measuring healthcare? Are we measuring it by how much it costs and all of the things that go into it and all the procedures, or are we measuring it in terms of outcomes and literally things like health and longevity, right, and sort of physical vitality? And you really start to have different views on basically what it is we’re all paying for, what value we’re getting for it, and then, by extension, what shape and form healthcare will have in the future where it could end up being very radically different.
I’ll just give a thumbnail sketch for how healthcare can be radically different in the future. It may be that all the medical procedures, surgical procedures get basically automated and become very cheap, but it may be that we end up spending more healthcare than ever because healthcare basically turns into advanced therapy. And so instead, like I said, it may turn out to be the physical issues are the easy and cheap ones to deal with, and it may turn out that it’s the psychological and sociological issues are the complex and painful ones to deal with.
And so, maybe the job in the future of “doctor” and “therapist” merges, and we end up with this very different type of profession that’s really oriented around helping people optimize their entire life. And then it’s like, “Oh yeah. Every now and then, you need to go get a little laser surgery, but that’s, like, not the major part of the spending.” And then as a consequence, like, maybe doctors, you know, 20 or 50 or 100 years from now are paid a lot more, because they’re actually a lot more valued in our lives despite the fact that so much of the work that they do today has been automated.
The sheepskin effect
Vijay: Yeah. That they become the focal point for all that automation and keeping the human element. And your point about inputs and outputs, I think, is super important, because if you compare it to other areas where Baumol’s cost disease exists, like education — that also seems to be very much measured more by inputs and outputs. People ask, “Oh, did this school get as much money per student than that school?” Not, “How well did the students do?”
Marc: So, the crack in the matrix that makes me really wonder about education as a service, as a product, or whatever, is something called the sheepskin effect. And so, basically you assume that, you know, you go to school for eight semesters, you know, four years. You come out the other end, you get a job, and let’s say the job pays you whatever — you know, $80,000. So then, apply the following thought experiment, which is, what happens to that income once you’re out of college? What happens to your rate of income if you only complete seven out of the eight semesters?
Logically you would think, “Well, if the value of the education is all the stuff that they’re teaching me, then I’m going to get 7/8ths of the wage, and I’m going to be making $70,000 instead of $80,000,” right, or whatever that correction is. Of course, that’s not what happens. What actually happens is if you only complete seven semesters out of eight, you’re going to get paid $40,000, right, because you’re going to be a college dropout instead of a college graduate.
Vijay: And you get paid basically what you would’ve if you didn’t go to college.
Marc: If you didn’t go to college. Exactly right. And so that’s the sheepskin effect. There’s two possible explanations for the sheepskin effect. One is, all the actual skills are taught to you in that last semester. That’s one possibility, but we know that’s not true. And so the other explanation is, college actually does not have that much to do with the skills that are being taught. It’s something else. It’s basically a stamp of approval that says you can execute a task all the way to completion. The education may be somewhat beside the point. It may just simply be the fact you demonstrated you can get through a program.
The healthcare crack in the matrix to me is the fact that it used to be the medical conditions that mattered were things that just happened to us that we had no control over — or you’d be in a factory, and your arm would get cut off, or you would just die, and you had no control over it. So many of the medical conditions that we’re dealing with today as individuals and societally are as a consequence or downstream in behavior.
Marc: Obesity is the big one, right. It’s like obesity is cross-linked to all these issues, right, including heart disease and stroke and cancers and, like, everything.
Vijay: Massive comorbidities all over the place.
Marc: All over the place. And so the most effective form of healthcare is don’t eat bad foods and then exercise every day, right. And then, if you’re going to drink like only drink a little bit, and by the way, don’t smoke. “The healthcare system,” as we understand it, is that by the time you show up having had a heart attack or whatever, you had 30 years of basically bad behavioral characteristics leading up to that.
What does it say about us that we treat the healthcare system as basically the last-ditch attempt to keep us from dying after we’ve basically spent our life behaving very poorly. And that goes back to this idea of the doctor becoming the therapist. The answer to the actual health outcomes is upstream of what’s happening in the healthcare system.
Drivers of chronic health conditions
Vijay: And it goes to the bigger issue which you asked about, which was, what is healthcare? Because there’s this kind of mind-blowing article that came out that talked about the reasons for death, and what healthcare deals with is relatively a small sliver of the pie compared to genetics and social determinants. And social determinants being the biggest pie piece, 40%. If your spouse smokes, you’re probably going to smoke, or you’re going to get a lot of secondhand smoke. If your spouse is overweight, you’ll probably be overweight. If your friends drink heavily, you’re going to drink heavily — that the social determinants around you have a bigger impact on healthcare.
And actually, we’re starting to see now when finally the healthcare companies are going full-stack. You’re seeing payer/providers thinking about an air conditioner as therapy or as a therapeutic, because that actually has a greater chance of decreasing mortality or decreasing the chance of going to the hospital if you’re living in Florida, for example, than other things.
And so, I think that’s really kind of a key point that we need to sort of think about, and it goes to the market. And part of the challenge here is that healthcare itself is this kind of artificial market that’s created by the government where certain things are healthcare, certain things aren’t healthcare. We’re seeing Medicare Advantage and other things that allow you to go full-stack affecting this, but part of maybe now that after we get the technology in, it seems like there is no choice but to really revisit what is healthcare.
Marc: It’s like, okay, then, how do we think about paying for this? What are we paying for, right? What are we getting for what we’re paying for, and then, of course, like, who’s paying for it? And, you know, I would just propose when you have a system that’s 1/6th of GDP in which, like, a gigantic amount of the adverse outcomes are being caused by people’s behavior or social context — and most people’s healthcare is being paid for at least in part or potentially entirely by other people, and where consumers have basically surrendered to the system and don’t feel like they have any choice whatsoever, and don’t exercise any choice. And then you have a system as a consequence that’s so heavily regulated and subsidized by the government, you can actually say it’s a minor miracle that it works as well as it does. We basically just designed the worst possible economic configuration for industry.
Vijay: Well, and it’s funny, because some of these things are hidden almost like the germ hypotheses where people didn’t realize there were germs. That was really the hidden danger that we weren’t doing, and really sanitation is the way to fix things. It could be that eating healthy and avoiding Type II diabetes is the new sanitation. The AMA feels that they have a new initiative that nobody in America should die from Type II diabetes. And if you think about it logically, that makes total sense. Just like no one in America hopefully died from issues from sanitation the way we would maybe 200 years ago. I think maybe now it suggests that even now when we have the technology, the question is, how can we go from where we are now to this direction that we’re talking about.
Marc: Yeah. So the positive view there was an economist named Herbert Stein who had this famous thing when he talked about these issues. He said, “If something can’t go on forever, it will stop.” And so maybe contrary to what I said earlier, if there are no limits on how far this can go, healthcare being 1/6 of GDP becoming 1/3, becoming 1/2 — at some point it becomes the most important issue in the world and people are just not going to be willing to put up with it. Maybe just the pain — like, the economic and political pain just gets, like, simply too intense and then you start to realize you have to kind of unwind yourself from some of these assumptions.
But I think honestly the other thing is just more things like LASIK. More things where we can actually demonstrate what happens when technology kind of hits in the positive way. Like, what technology does, right — dramatic boost to productivity growth — which means dramatic improvements of quality combined with, you know, dramatic decreases in costs. The optimistic view there would just be, like, as consumers we’re getting trained to basically be able to like comparison shop and evaluate and get, like, ratings or reviews on everything in our life. Literally everything, almost anything you choose to do, whatever restaurant, you know, you go on Yelp or even these days online dating. You’re used to a level of kind of consumer choice and selection and quality control and decision-making.
If you go, like, buy a new car or something is just, like, the wealth of data that’s available to you — it’s extraordinarily unlikely that you’re going to buy a new car these days and be disappointed, just because you’re going to know everything ahead of time and you’re going to figure out how to get the best possible deal for exactly the car that you want. I think the other part of it is supply-driven, which is just, like, we need to actually drive more technologically superior approaches into the market and like make them available and make them obvious. Like the payer/provider model you mentioned, of just — align with the people who actually want to improve outcomes and just kind of demonstrate the new way.
It’ll be a little bit as if we had only ever had state-controlled media or something, and then all of a sudden somebody kind of had the crazy idea to like maybe actually start making movies in the private sector, and then it just turned out that those movies were 1000 times better. At some point, we just may need to make the new movies.
Vijay: Yeah. And also, what you’re describing is full-stack healthcare on the enterprise side, which an employer will have, but also direct-to-consumer healthcare, and that we’re probably going to start to generalize that. We may start to view Peloton and Peloton-ish things as direct-to-consumer healthcare. I think part of the challenge is that — and this is true for diet and other aspects of healthcare — is that things are so tailored to the individual that it’s been so hard. And nutrition, we can do a whole podcast just on nutrition and the sort of mess that is, but I think now with all that you can measure, even to the point where you could have like a continuous glucose monitor on you, and measuring that every minute, and having that tell you what you should eat, how you should exercise.
As we move into that, sort of, something in between LASIK and Peloton, we’ll start to emerge where maybe it’s not surgery in your eye at your house, but things that are much more clinical and that are getting to these social determinants. Getting to exercise, getting to Type II diabetes and all of its morbidities, getting to diet. You could deal with several of the top killers. That at least would be such a fundamental transition and would be the type of thing that could bend the curve that we’re talking about.
Health apps and wearable devices
Marc: A lot of what you just described can actually be done today. It is actually fairly amazing what you can have, like, as a consumer today just to go through the list — these fitness trackers have gotten really good, whether it’s the Apple Watch or the Fitbit or whatever. They’re now doing, you know, pulse, they’re doing blood pressure, they’re doing kind of comprehensive health state tracking, and they’re doing sleep tracking.
So, you’ve got all the sensor platforms kind of in that thing. You’ve got the sensor platform on the phone. You can’t do laser eye surgery in the house, but people should be able to do eye exams, right, because you basically now have medical-grade visual sensors in the camera. And then you’ve got continuous glucose monitor kind of thing. And then, on your phone, you can have the fitness app that basically tells you what to do to stay fit. You can have the food app that basically helps you figure out what to eat. You can track every aspect of your behavior. You could track alcohol consumption or whatever other recreational whatever. You can aggregate all this data up, and there’s like tons and tons of apps on the phone now that will, like, basically do all this for you.
Now, you know, the people doing this today are like the hyper conscientious types that are super into optimizing every part of their existence. That’s only a small sliver of the population that will voluntarily do this. You can just imagine a mandate, right, for people to get “healthcare coverage” or healthcare insurance at some point, you know, they have to kind of sign up for a better kind of personal behavioral regime, and they might use these technologies to support that. Or, by the way, you could imagine the voluntary version of it.
One of the sort of consequences of healthcare being so expensive right now is this incredible rise in the individual deductible. It might be that the deductible for you just, like, laying around eating Cheetos and smoking pot is, you know, $1,500 or $4,000 or whatever, but the deductible for you with a healthy lifestyle is $200. And then you’ve got, like, the so-called good driver discount that they do for car insurance. And so then you have this sort of behavioral kind of push to be able to directly save money. And that’s an enticing idea, because that aligns the interests of the consumer, right, with the interest of the system and kind of maybe could throw things back into some kind of calibration.
Vijay: Yeah. You think about all the parts you just talked about, that you can get this to be more consumer-driven in a market-like way. Take your previous example of the string quartet that’s in your pocket with Spotify. Now you have your doctor quartet or orchestra in your pocket — with you all the time, giving you the cure that you need. We have the motivations. We have the technology, and actually, we have the startups building it. The optimist in me sounds like this is going to happen, and this is happening, but we just have to sort of get all the pieces together to make it happen.
Marc: So, I have forced myself to watch some cable television for the first time in a long time over this election. So, I’ve actually seen some TV commercials for the first time in, like, a year.
Vijay: Oh, wow.
Marc: By far, the best part of the election coverage was the meditation app Calm.com. And actually, their commercials are actually quite nice because it’s just literally, like, 30 seconds of rainforest sounds. There was also this company called Pray.com which is an app to help you pray, like, if you’re religious. It’s got, you know, Bible study and guided prayer sessions and stuff like that. At first, I was like, “Okay. That’s a weird juxtaposition.” And then I was like, “Oh, no. I get it. Calm is basically selling secular prayer, right, or Pray.com is selling religious meditation.”
Marc: Which actually bears on health, right, because a huge driver of modern health conditions is basically stress and inflammation and, like, there are physical components to that, but there’s also a medical, psychological, sociological component to that. And so, if people are able to actually deal with stress in their lives, that could actually, like, you know, affect some of these things if it affects things like the rate of heart attacks. It can also affect things like stress-eating, which then leads to obesity.
Marc: It may be that the upstream apps that are, like, the key healthcare apps that we actually need on all of our phones are — take your pick — Calm.com or Pray.com. You could hire a pastor or a preacher or a priest to come to your house and pray with you or whatever advanced meditation, Zen Buddhist meditation, but it’s going to be a lot cheaper if it’s an app in your pocket.
Vijay: Yeah. They’re just probably aren’t enough to go around.
Marc: The serious part of this is what technology should do is it should empower us, right. It should basically give us capabilities, and it should give us reinforcement and expansion of our capabilities, and help and assistance in ways that make our lives directly better. And I think there is a very big reason for optimism that there is sort of this complete set of ways that we can actually improve our lives that the technology can really help us with.
Vijay: Yeah. Absolutely. Amen.
Lauren: Thanks so much for joining us on “Bio Eats World.” If you’d like to hear more about all the ways biology is technology, please go to subscribe to the a16z Bio Newsletter at a16z.com/newsletter. And, of course, subscribe to “Bio Eats World” anywhere you listen to podcasts.
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