Curious Times and Curious corporate bedfellows

Dear Jeff, Jamie and Warren

We haven’t met, but each of you express a candor that suggests you are open to informal input.

Image result for Dimon bezos buffett

Naturally, I was not alone in my surprise over  your companies- JPMorgan Chase, Berkshire Hathaway and Amazon announced plan to enter the healthcare marketplace.  The cover story I saw, explained your unified commitment to contain, if not reduce employee healthcare costs, without mentioning  any specifics.

My first thought was perhaps this was a prelude to a presidential bid.  The announcement’s bold leadership play has garnered great public enthusiasm.  My second thought recognized  the power vacuum that followed the failure of the national government to make change. Your united commitment, and unspoken appeal for other CEOs to join you could create further momentum for market driven change.

These thoughts still didn’t feel quite right. I remain optimistic and root loudly for other change agents to shift the tide.  As we all know, the challenge to deliver healthy outcomes and affordable healthcare for all are not one dimensional. The complicated systems presently in place fail to address the larger complex inter-relationships between community and individual health.

Have you read David Freedman’s recent assessment of US healthcare system conundrum?  It’s not that long, and should be a required read for every team  contemplating entering this space. He writes

“It’s easy to think of “health” as just another category of social-service spending. But a great deal of modern research suggests that it might be more accurate to think of it as the payoff of all the other services put together.

Are you Seizing advantage or opportunity?

I do hope this announcement, in spite of subsequent commentary suggesting otherwise, that your three musketeer esprit de corp adds up to more than a pure group purchase power play. Elizabeth Rosenthal commentary in the NYTimes explains

“Together, these three behemoth corporations will be able to wrest great deals and discounts in their negotiations from hospital systems, drug manufacturers, medical device makers and doctors’ groups.”

OK, it’s why I’m asking you to widen your goal. Don’t  settle for negotiating a better deal than what  present healthcare arrangements are able to wrangle.

To Jeff, I wondered why you sought out Jamie and Warren to play in an arena internally Amazon team’s have been working, and compromise your reputation and general industry slaying capacity? Amazon’s platform successfully  delivers efficiency and value to end users. Are you suddenly squeamish about squeezing healthcare providers and yes, your employees too?  Scott Galloway, the NYU Stern faculty describes in The Four  your outsized vision has long exceeded the pure e-commerce play that is Amazon today.  Galloway further empathizes your tireless advocacy for technology  touched by realism about automation’s impact and downstream effect on wages.

These last points makes Jamie a strange bedfellow, as the banking business depends on individuals’ with incomes.  But that’s a different letter and article.  Jamie, under your leadership JP Morgan Chase offers expertise in compliance, as well as payments and savings that can create some cost saving synergies in Healthcare.  More importantly, both industries service and needs are intensely local and subject to state regulations.  The consolidations in both banking and healthcare had to rethink bricks and mortar location and staffing. Increasingly, financial services delivery via un-staffed, self-standing kiosks/ATMs and/or rely on mobile enabled applications. Banks, relative to healthcare, historically leveraged technology savvy to fuel growth balance risk and reward effectively and efficiently.  Jamie your investments and innovation, though slow starting, and less evenly distributed across the investment, consumer and commercial bank–they do suggest you can leverage the to deliver greater opportunities and create value in  Healthcare.

Warren,  I’m also hoping these are a few of the elements of value you spotted too.  Again, several closer observers of your group planning reiterate that limiting your collective primary intention to lowering employee healthcare costs, reduces the life value of the proposal. That shortsighted objective is certainly not likely to deliver the return on investment necessary to make a dent.  I’m counting on you Warren, and your experiences creating larger and profitable opportunities from reorganization.

The flaws in a hasty solution

I’m equally certain you all noticed the dramatic rise of Net Income among healthcare insurers.  If you haven’t finished a deeper analysis, start with this one by the Leavitt group that reveals a more complex picture.  “[I]nsurers made money in the Medicare, Medicaid and group health insurance markets and lost money in the individual market, which is why some of them exited the individual market in many states.” 

As early as 2006, Michael Porter summarizes the strategic dynamics and cost challenges associated with creating quality healthcare outcomes in   Redefining Health Care: Creating Value-Based Competition on Results.  The environment he  describes of dysfunctional competition leads  players to “strive not to create value, but to capture more revenue, shift costs, and restrict services.” Porter felt that healthcare lacked discipline and a management and business focus.

Jeff, Jamie and Warren is that your take too?

I don’t know if it was conversations at Davos and chats with deeply knowledgeable wranglers of this problem that inspired you to act.

I’m inspired by data. As the Affordable Care Act continues to make available additional data, it’s possible to learn more about what works.

Since 2006, researchers in both social and medical science enable more models of service and extends understanding of human health at the individual and population level. Much of healthcare activities used population data to allocate resources. Efforts to reduce costs associated with an individual can now take into consideration individuals’ behaviors.  Continued use of aggregate process and success measures mask the affects of too many associated care conditions and reactive activities.

There’s a complex relationship among these issues, and how they are translated into interventions and dosage appear to prevent rather than deliver consistent beneficial outcomes. Hilary Hatch the CEO of Vital sign offered this explanation:

“Population health puts people into categories by conditions (diabetes, hypertension, depression), age, lab results and medical billing data. These categories presume their own importance. When in fact, psychosocial, behavioral and environmental factors determine individual health far more.  Patient goals, preferences and barriers to care tell us what stands between that patient and better health. Without this data, population health efforts are undermined.

The explosion of personal health monitoring devices correspond with more data that contribute to advancing understanding of the workings of the human body.  Another entrepreneur, Mario Schlosser recognized that “no entity in healthcare  has enough data visibility to help you[individuals] navigate the system.”

Is this your collective aspiration too?

Why not just partner with Success?

A few weeks ago, I attended a presentation at Chicago Booth’s Rustandy Center by the Chief Medical officer for Oak Street Health, Griffin Myers  This new medical group does not serve everyone, but the patient population they do serve have consistently better outcomes.  The business model that Oak Street Health adopted throws out the traditional fee for service model insurers favor. Instead they get paid when they deliver services that work, the successful outcomes embodied by Accountable Care Organizations as specified in the Affordable Care Act.   Oak Street established a value-based care delivery model exclusively serving  Medicare (and Medicaid dual-eligible) patients in low income areas. They presently operate 24 clinics across Illinois, Indiana, and Michigan.

This intereview with Griffin Myers on Tasty Trade gives a great overview

Another alternative model of care that should inspire the three of you is Oscar Health, whose estimated valuation of $2.7billion, and claims to be the first technology-based insurance company. Mario Schlosser, an immigrant from Germany realized before the birth of his first child an opportunity to put his own special skills as a data scientist to work.  His first hand experience navigating the complexity of  the healthcare system led him create Oscar Health in 2012. The company “uses data and product design to guide you through your health care and get you healthy.” As of Oct 2017, he has raised over $720 million and  delivers over 100,000 patients  concierge style team care in New York, New Jersey, San Francisco, Cleveland, Nashville, Austin, San Antonio, LA and Orange County.  Note, many of these cities feature innovative health care service providers but  boast a volume of technology talent too.

This interview with Mario on Techcrunch Disrupt in 2017 is a good overview.


Both these approaches recognize that healthcare requires high touch, and a constellation of services to produce the desired outcome.  Both of these innovative for profit companies are heavily invested in use of  data and  technology.

So Jeff, Jamie and Warren under your leadership, will you be equally committed to  facilitating connections between traditional care givers, services and systems or just cut out the human to human touch?

Whatever you do, it will be interesting and I’d be happy to help.


Can investment capital return a community?

Mutual funds pool funds collected from many investors to invest in a set of instruments in trying to produce capital gains and income for the fund’s investors. Typically, a professional money manager, whose job optimizes returns and minimizes risks, selects a group of specific instruments, stocks, bonds, REITS etc.  based on a set of key objectives.  Of course without risk there’s no reward. So high risk funds pay higher returns unless of course the risk gets realized.

Historically, private equity funds and merger and acquisition firms have been masterful at this game and consequently their earnings have been quite generous.  Among these firms Kohlberg Kravis and Roberts (KKR) and Goldman Sachs continued survival adds to their legend, so why are they dabbling in the mutual fund market?

FRANCESCO GUERRERA writing for the WSJ August 13, 2012 offered this explanation.

“KKR’s first two mutual funds will have much lower barriers to entry, probably in the $2,500 range. But they will invest in the likes of distressed debt and “junk” bonds, assets that can earn juicy returns and/or sleepless nights.”

No surprise, that to meet growth expectations , you have to assume some risks.  KKR choice of risks caught my attention as they plan to invest in distressed businesses and bolster assets expecting that the returns and  annuities generated will permit them additional investment options.

Goldman Sachs, like KKR , announced they will  create mutual funds to increase and diversify their funding base too.

“For Goldman, the goal is to curb its reliance on capital markets’ funding, thus reducing the risk of being caught short….”

I remember the 1980s well, when the junk bond kings reigned creating derivatives to swap debts and their subsequent fall when insolvency came to companies over leveraged.  Today’s landscape riddled with debt appears similar.  Unlike the 80s, today’s professional investors must temper investor risk a little differently.  Perhaps government should  sell EPA cleanup deals, why not, if you agree to pay to clean up a toxic site then you can have it.

Well, the straight swap of risk for assets doesn’t work that way does it.

So when a long neglected real estate situation came to my attention, I wondered why it has failed to prove golden.  The Rosenwald homes on the south side of Chicago, just north of Hyde Park where President Obama retains his private residence,  found a place on the historic registry and though once very beautiful, now sit vacant deteriorating for close to 20 years.   This full block, long abandoned residential building challenges the surrounding neighborhood’s  economic viability .

What if they succeed in cleaning up the site? What if the investment does restore it and the surrounding community?  Estimates of restoration costs greatly exceed any possible long-term payout. In other words, how long will investors wait to get some payback?  If property values rise, then the sale of the property would have to recover the investment in cleanup costs but also the debt service costs.  Today’s property valuations are close to zero, especially because the abandoned site serves as a crime magnet. The security costs and the demolition costs exceed the land value.

Hey Goldman Sachs, or KKR, you willing to buy in?

Employers getting Hip to Corporate Culture?

If you think the unemployment numbers are high, take a look at the compliment employee engagement, which by all accounts seems to be relatively low.

Blessing White , Leadership IQ and Kenexa Research Institute in Minneapolis all report low levels of motivation among US workers.    Approximately 60-70% are disengaged OR under engaged? These were the figures reported in the  GFK US employee benchmark 2011 survey of organizations with more 5,000 employees.  Kinexa  shows a slightly lower rate of 42% vs. the global average of 47% disengaged.  Of course there is variance by sector, age and  role as well as natural variation due to alternative definitions of engagement.

In a worsening economy, triggered by layoffs, naturally employees begin to despair or experience burnout as they raises or either non-existent or minimal in spite of  increases in their workloads.   Furthering the malaise, Hay group survey results, as recently reported in the WSJ, expect lower median pay increases  in 2012 , or about 3%, which is below the 3.5% annual rate of inflation.  The Labor department survey shows voluntary resignations have dropped to 1.4%, lower than in April 2007 pre-recession levels of 2.2%.  Executive pay however, has increased more sharply due to bonuses and other performance-based pay.

As the seeds of greater income disparities continue to grow, and the economy sputters, without a motivated, fully engaged workforce how will executive management deliver  healthier and consistent corporate performance?

More powerful than the prospect of gain is the fear of loss.  As long as employees continue to fear that the grass isn’t greener elsewhere, many of these survey companies predict that voluntary turnover will  remain low.  Then again, it has always been true that compensation is not the only variable that affects employee attitude, motivation or performance.

High performance companies tend to also been a culture of high performing, and presumably engaged employees.  The  June 2011 report by Kenexa found that firms that rank in the top 25 percent in employee engagement achieve earnings per share almost 2.5 times higher than average.  The variation in engagement definitions even among such leaders as Gallup who seek to align the attributes of behavior and company performance, likely correlate with other strategy initiatives or internal operating factors.

Social Capital and Social Media

Michael Porter has has been aggressively advocating  Shared Value, a new business model that emphasizes long-term sustainable strategy. This work encourages firms to pursue a different agenda, focus on the  need to find common goals and shared values as a basis of  meaningful social change. By focusing on a wider coordination and cooperation of resources, to look  beyond the near term profits, firms can deliver  sustainable returns.  The growth of Corporate Social Responsibility initiatives in many organizations, and the emerging role of outside voluntary compliance metrics are providing new opportunities for firms to distinguish themselves in the minds of a variety of stakeholders in spite of accelerating pressure from existing and new competitors.

Investing in Social Capital improvements , or encouraging the development of ties, networks, norms and trust across an organization not only delivers  higher employee engagement , but can be a winning performance strategy too.  Robert Putnam’s pioneering work on civic communities,  emphasized how the creation of norms around generalized reciprocity delivers higher economic and institutional performance.  Particularly true when the ties facilitate coordination and communication which amplify trust in each other.    Ron Alsop, in Workforce Management current editorial mentions the  pay off and importance of cultural and value alignment that has helped transform Cleveland Clinic and re-positioned Starbuck’s.

The Gallup organization is not alone in its creation of a feedback system for employers that identifies and measures elements of worker engagement most associated to key indicators that result in financial performance –things such as sales growth, productivity and customer loyalty.

If Values define culture and Culture drives values, then the shared value that comes from facilitated coordination and communication across your organization will be a powerful positive force.

Any stories you wish to share about the links between culture and performance in your organization? We’d love to hear about your experiences.