By KIM BELLARD

The most interesting story I read in the past week doesn’t come from the more usual worlds of health and/or technology, but from sports. It’s not even really news, since it was announced last fall; it’s just that it wasn’t until last week that a U.S. publication (The New York Times) reported on it. In a nutshell, a Paris football (a.k.a. soccer) club is not charging its fans admission during the current season.

Since last week I wrote about medical debt in the U.S. healthcare system, you might guess where this is going. The club is Paris FC. Last November it announced:

For the first time in history, Paris FC is offering free tickets for all home matches at the Stade Charléty, starting from the 11 November until the end of the 2023-2024 season from its Bastia reception, in a bid to offer a new and innovative vision of football by welcoming as many people as possible.

The policy includes the men’s second division team and the woman’s first division team. The NYT article clarifies that fans supporting the visiting team might be charged a “nominal” fee, and that hospitality suites still pay market rates.

Pierre Ferracci, Chairman of Paris FC, said: “We are proud to support this ambitious and pioneering project, which goes beyond the simple framework of sport in terms of the values it conveys. We want to bring people together around our club and our teams, while committing ourselves with strength and conviction. In a context of difficult purchasing power, we are confident that a club can be an ideal tool for bringing together people of goodwill and engage with societal issues.”

Fabrice Herrault, Paris FC’s general manager told NYT: “It was a kind of marketing strategy. We have to be different to stand out in Greater Paris. It was a good opportunity to talk about Paris F.C.” The club estimates it might cost them $1 million.

It seems to be working. The NYT reports:

Months later, most metrics suggest the gambit has worked. Crowds are up by more than a third. Games held at times appealing for school-age children have been the best attended, indicating that the club is succeeding in attracting a younger demographic.

The idea is not entirely de novo; last spring Fortuna Düsseldorf, a German second division football club, announced it would offer free admission for at least three matches this season, with the intent that eventually all home matches. “We open up football for all. We will have free entry for league games in this stadium,” Alexander Jobst, the club’s chief executive, said at the time. “We call it ‘Fortuna for all’ which can and will lead us to a successful future.”

In a NYT interview last spring, Mr. Jobst added: “We think it is completely new. We were trying to think about how we could do the soccer business completely different from before.”

I’m always a sucker for efforts to think about a business completely different than before.

Fortuna has now had two of its three free matches, and Mr. Jobst told NYT last week: “Our average attendance has gone from 27,000 to 33,000. Our merchandise sales are up by 50 percent. Our sponsorship revenue is up 50 percent. We have reached a record number of club members.”

Sure sounds like a success.

Keep in mind that for most professional sports, ticket and concession revenues are gravy; the real money is from TV deals, as well as sponsorships. The NFL, for example, only gets 17% of its revenue from fans, the NBA 26%, and MLB 31%, while MLS and NHL need over 40% (not such good TV deals!). Fortuna, in case you’re interested, only gets 20% of its revenue from tickets, even though it is only in the second division.

Meanwhile, Paris FC only gets 4% of its budget from ticket sales. “We’re not taking a big risk, and we won’t lose out,” Mr. Feracci told Le Monde. “The balance will be positive, thanks to new sponsorship income and the arrival of new shareholders who have shown themselves to be keen on our vision.

Spectators matter, not just as a revenue source. We all remember American professional sports during the early days of the pandemic. The NBA finished its 2019-2020 season in a bubble, with players, staff, and media quarantined, playing in empty arenas. Most of the NFL and MLB games that year were also without fans. Players and television viewers hated the experience; it just didn’t seem real without actual fans in attendance.

“Since the pandemic, there has been a growing awareness of the role of spectators in the ‘production’ of sporting events,” Luc Arrondel, a professor at the Paris School of Economics, told NYT. “The presence of supporters in the stadium increases the desirability of the television product, and therefore, possibly, the value of television rights,” 

Professor Arrondel has even made the case in a paper (“Faut-il payer les supporters?”) that it might actually make sense for professional teams to pay the most ardent fans to attend in-person.

Yes, all that is thinking about the business completely differently.

=========

Meanwhile, there’s the U.S. healthcare system, which treats its “fans” – i.e., patients – as revenue from whom every dollar should be squeezed. E.g., ever pay a facility fee for a doctor’s visit, or pay the inflated U.S. prices for prescription drugs? It’s not surprising that we end up with all that medical debt. As I wrote last week: “why are so many charges so high, why aren’t people better protected against them, and why don’t more Americans have enough resources to pay their bills, especially unpredictable ones like from health care services?”

So here’s a thought” out-of-pocket spending is “only” 11% of national health expenditures. What if we just abolished it? Healthcare’s version of not making fans pay to attend football matches.

Now you might say – that’s crazy, how would the health care system make up that 10%? I’d say two things: first, we all know that there’s 10% of savings to be had in our bloated system; what better to use them for than this?  Second, and more importantly, we need to admit that the current business model in the U.S. healthcare system does not work.

It’s time to think of ways to do the business of healthcare “completely different than before.”

Not making patients pay out-of-pocket might not be the “right” way to do that, although we could do worse, but, in any event, we better think of something completely different before the system crashes.

Kim is a former emarketing exec at a major Blues plan, editor of the late & lamented Tincture.io, and now regular THCB contributor

By KMI BELLARD

I’ve been thinking a lot about infrastructure. In particular, what to do when it fails.

There was, of course, the tragic collapse of Baltimore’s Francis Scott Key Bridge. Watching the video – and, honestly, what were the odds there’d be video? — is like watching a disaster movie, the bridge crumbling slowly but unstoppably. The bridge had been around for almost fifty years, withstanding over 11 million vehicles crossing it each year. All it took to knock it down was one container ship.

Container ships passed under it every day of its existence; the Port of Baltimore is one of the busiest in the country. In retrospect, it seems almost inevitable that the bridge would collapse; certainly one of those ships had to hit it eventually. The thing is, it wasn’t inevitable; it was a reflection of the fact that the world the bridge was designed for is not our world.

Transportation Secretary Pete Buttigieg noted: “What we do know is a bridge like this one, completed in the 1970s, was simply not made to withstand a direct impact on a critical support pier from a vessel that weighs about 200 million pounds—orders of magnitude bigger than cargo ships that were in service in that region at the time that the bridge was first built,” 

When the bridge was designed in the early 1970’s, container ships had a capacity of around 3000 TEUs (20-foot equivalent foot units, a measure of shipping containers). The ship that hit the bridge was carrying nearly three times that amount – and there are container ships that can carry over 20,000 TEUs. The New York Times estimated that the force of the ship hitting the bridge was equivalent to a rocket launch.

“It’s at a scale of more energy than you can really get your mind around,” Ben Schafer, a professor of civil and systems engineering at Johns Hopkins, told NYT.

Nii Attoh-Okine, a professor of engineering at the University of Maryland, added: “Depending on the size of the container ship, the bridge doesn’t have any chance,” but Sherif El-Tawil, an engineering professor at the University of Michigan, disagreed, claiming: “If this bridge had been designed to current standards, it would have survived.” The key feature missing were protective systems built around the bases of the bridge, as have been installed on some other bridges.

We shouldn’t expect that this was a freak occurrence, unlikely to be repeated. An analysis by The Wall Street Journal identified at least eight similar bridges also at risk, but pointed out what is always the problem with infrastructure: “The upgrades are expensive.”

Lest anyone forget, America’s latest infrastructure report card rated our overall infrastructure a “C-,” with bridges getting a “C” (in other words, other infrastructure is even worse).

What’s the plan?

——–

Then here’s an infrastructure story that threw me even more.

The New York Times profiled the vulnerability of our satellite-based GPS system, upon which much of our modern society depends. NYT warned: “But those services are increasingly vulnerable as space is rapidly militarized and satellite signals are attacked on Earth. Yet, unlike China, the United States does not have a Plan B for civilians should those signals get knocked out in space or on land.”

Huh?

At least in Baltimore drivers can take another bridge or container ships can use another port, but if cyberattacks or satellite killers took out our GPS capabilities, well, I know many people who couldn’t get home from work. “It’s like oxygen, you don’t know that you have it until it’s gone,” Adm. Thad W. Allen, who leads a national advisory board for space-based positioning, navigation and timing, said last year.

“The Chinese did what we in America said we would do,” Dana Goward, the president of the Resilient Navigation and Timing Foundation in Virginia, told NYT. “They are resolutely on a path to be independent of space.” Still, NYT reports: “Despite recognizing the risks, the United States is years from having a reliable alternative source for time and navigation for civilian use if GPS signals are out or interrupted.”

The economic and societal impacts of such a loss are almost unfathomable.

———

And, if you assume, well, the odds of satellite killers taking out all of the GPS satellites is unlikely – Elon can just send more up! – then think about the underseas cables that carry most of the world’s internet traffic. According to Robin Chataut, writing in The Conversation, there are some 485 such cables, with over 900,000 miles of cable, and they carry 95% of internet data.

What you don’t realize, though, as Professor Cataut points out, is: “Each year, an estimated 100 to 150 undersea cables are cut, primarily accidentally by fishing equipment or anchors. However, the potential for sabotage, particularly by nation-states, is a growing concern.”

The cables, he notes, “often lie in isolated but publicly known locations, making them easy targets for hostile actions.” He recommends more use of satellites, so I guess he’s not as worried about satellite killers. 

We’ve recently seen suspicious outages in West Africa and in the Baltic Sea, and cables near Taiwan have been cut 27 times in the last five years, “which is considered a lot by global standards,” according to ABC Pacific; accordingly, “it has been happening so frequently that authorities in Taiwan have started war-gaming what it would look like to lose their communications with the outside world altogether and what it would mean for domestic security and national defence systems.”

It’s not just Taiwan that should be war-gaming about infrastructure failures.

————–

If all this seems far afield from healthcare, I have two words for you: Change Healthcare.

Until six weeks ago, most of us had never heard of Change Healthcare, and even among those who had, few realized just how much the U.S. healthcare system relied on its claims clearinghouses. With those frozen due to a cyberattack, physician practices, pharmacies, even hospitals weren’t getting paid, creating a huge crisis.

Infrastructure matters.

Think what would happen if, say, Epic went off-line everywhere.  Or have we forgotten one of the key lessons of 2020, when we realized that over half of our prescription drugs (or their active pharmaceutical ingredients – APIs) are imported?   

Healthcare, like every industry, relies on infrastructure.

Infrastructure is one of the many things Americans like to avoid thinking about, like climate change, the national deficit, or healthcare’s insane costs. I understand that we can’t fix everything at once, nor anything quickly, but at the very least we should be coming up with Plan Bs for when critical infrastructure does finally fail.

Kim is a former emarketing exec at a major Blues plan, editor of the late & lamented Tincture.io, and now regular THCB contributor

By KIM BELLARD

These are not happy times in America.

Now, I’m not thinking about the increasing cultural wars, the endless political bickering, the troubles in the Med-East or Ukraine, the looming threat of climate crisis, or the omnipresent campaigning for the November 2024 elections, although all those play a part. I’m talking about quantifiable data, from the latest World Happiness Report. It found that America has slipped out of the top 20 countries for the first time, falling to 23^rd – behind countries like Slovenia and the U.A.E. and barely ahead of Mexico or Uruguay.

Even worse, the fall in U.S. scores is primarily due to those under 30. They ranked 62^nd, versus Americans over 60, who ranked 10^th. A decade ago those were reversed. Americans aged 30-44 were ranked 42nd for their age group globally, while Americans between the ages 45-59 ranked 17^th.

It’s not solely a U.S. phenomenon. Overall, young people are now the least happy, and the report comments: “This is a big change from 2006-10, when the young were happier than those in the midlife groups, and about as happy as those aged 60 and over. For the young, the happiness drop was about three-quarters of a point, and greater for females than males.”

“I have never seen such an extreme change,” John Helliwell, an economist and a co-author of the report, told The New York Times, referring to the drop in happiness among younger people. “This has all happened in the last 10 years, and it’s mainly in the English-language countries. There isn’t this drop in the world as a whole.”

Jan-Emmanuel De Neve, director of the University of Oxford’s Wellbeing Research Center and an editor of the report, said in an interview with The Washington Post that the findings are concerning “because youth well-being and mental health is highly predictive of a whole host of subjective and objective indicators of quality of life as people age and go through the course of life.”

As a result, he emphasized: “in North America, and the U.S. in particular, youth now start lower than the adults in terms of well-being. And that’s very disconcerting, because essentially it means that they’re at the level of their midlife crisis today and obviously begs the question of what’s next for them?”

Gen Z is having a mid-life crisis.

The researchers speculate that social media, political polarization, and economic inequality between generations contribute to the low scores for younger Americans. Jon Clifton, CEO of Gallup, believes: “Young people have more social interactions, but feel more lonely,” and that they aren’t as connected to their job, churches, or other institutions.

“One factor, which we’re all thinking about, is social media,” Dr. Robert Waldinger, the director of the Harvard Study of Adult Development, said in a NYT interview,. “Because there’s been some research that shows that depending on how we use social media, it lowers well-being, it increases rates of depression and anxiety, particularly among young girls and women, teenage girls.”

Others note the impact of the pandemic. Professor De Neve said: “general negative trend for youth well-being in the United States [was] exacerbated during covid, and youth in the U.S. have not recovered from the drop.” Similarly, Lorenzo Norris, an associate professor of psychiatry at George Washington University, who was not part of the World Happiness study, told NYT:

The literature is clear in practice — the effect that this had on socialization, pro-social behavior, if you will, and the ability for people to feel connected and have a community. Many of the things that would have normally taken place for people, particularly high school young adults, did not take place. And that is still occurring.

“It’s a very complex time for youth, with lots of pressures and a lot of demands for their attention,” Professor De Neve diplomatically observed.  It was not true in all countries that younger people were the unhappiest, and Professor De Neve suggests: “I think we can try and dig into why the U.S. is coming down in terms of wellbeing and mental health, but we should also try and learn from what, say, Lithuania is doing well.”

Did you ever expect Lithuania might be a role model for our young people?

Professor Helliwell told CNN that young people are reflecting what is going on around them: “Almost whatever institution you’re in, people in North America seem to be fighting over rights, responsibilities and who should be doing what to improve things and who is to blame for things not going well in the past.”

Amidst all the gloomy findings, the report did say: “The COVID crisis led to a worldwide increase in the proportion of people who have helped others in need. This increase in benevolence has been large for all generations, but especially so for those born since 1980, who are even more likely than earlier generations to help others in need.” They may be less happy, but Gen Z and millennials aren’t less charitable.

So there’s that.

Honestly, if young people aren’t depressed, they’re not paying attention. Social media is dominating their lives, whether Instagram is making them feel depressed or TikTok is driving them to harmful mental health content. They can see the impacts of climate change but not any sign that their elders plan to do anything about it. Their jobs are neither satisfying nor economically viable enough to allow them to build wealth, especially when suffering from crushing student loans. They don’t expect Social Security to help with their retirement, whenever that may be and whatever that might look like. They have no reason to think that the largely geriatric politicians understand them or their needs.

And when it comes to health care, they can see the attacks on women’s health, the inadequate support for mental health, and the gap in technology versus in the rest of their lives.

They have every reason not to be happy. 

The thing about mid-life crises is that they’re supposed to happen, you know, mid-life. Youth is supposed to be a time of optimism and exploration, of wanting to change the world. If current youth is already unhappy, we can’t assume they will grow happier, like those of us over 60 seem to have. This is the America we’re bequeathing them; the question is, are we OK with that?

Maybe a trip to Lithuania isn’t a bad idea after all.

Kim is a former emarketing exec at a major Blues plan, editor of the late & lamented Tincture.io, and now regular THCB contributor

By KMI BELLARD

I’m thinking about electric vehicles (EVs)…and healthcare.

Now, mind you, I don’t own an EV. I’m not seriously thinking about getting one (although if I’m still driving in the 2030’s I expect it will be in one). To be honest, I’m not really all that interested in EVs. But I am interested in disruption, so when Robinson Meyer warned in The New York Times “China’s Electric Vehicles Are Going to Hit Detroit Like a Wrecking Ball,” he had my attention. And when on the same day I also read that Apple was cancelling its decade-long effort to build an EV, I was definitely paying attention.

Remember when 3 years ago GM’s CEO Mary Barra announced GM was planning for an “all electric future” by 2035, completely phasing out internal combustion engines? Remember how excited we were when the Inflation Reduction Act passed in August 2022 with lots of credits and incentives for EVs? EVs sure seemed like our future.

Well, as Sam Becker wrote for the BBC: “Depending on how you look at it, the state of the US EV market is flourishing – or it’s stuck in neutral.” Ford, for example, had a great February, with huge increases in its EV and hybrid sales, but 90% of its sales remain conventional vehicles. Worse, it recently had to stop shipments of its F-150 Lightning electric pickup truck due to quality concerns. Frankly, EV is a money pit for Ford, costing it $4.7b last year – over $64,000 for every EV it sells.

GM also loses money on every EV it makes, although it hopes to make modest profits on them by 2025.  Ms. Barra is still hoping GM will be all electric by 2035, but now hedges: “We will adjust based on where customer demand is. We will be led by the customer.”

In more bad news for EVs, Rivian has had more layoffs due to slow sales, and Fisker announced it is stopping work on EVs for now. Tesla, on the other hand, claims a 38% increase in deliveries for 2023, but more recently its stock has been hit by a decline in sales in China. It shouldn’t be surprising.

As Mr. Meyer points out:

The biggest threat to the Big Three comes from a new crop of Chinese automakers, especially BYD, which specialize in producing plug-in hybrid and fully electric vehicles. BYD’s growth is astounding: It sold three million electrified vehicles last year, more than any other company, and it now has enough production capacity in China to manufacture four million cars a year…A deluge of electric vehicles is coming.

He’s blunt about the threat BYD poses: “BYD’s cars deliver great value at prices that beat anything coming out of the West.”

The Biden Administration is not just sitting idly.

Last December the Administration proposed rules that would limit Inflation Reduction Act subsidies going to materials from China – it doesn’t just make cheap EVs, it makes cheap batteries – and last week warned that internet-connected Chinese vehicles, including EVs, could pose a threat to national security: “China’s policies could flood our market with its vehicles, posing risks to our national security…Connected vehicles from China could collect sensitive data about our citizens and our infrastructure and send this data back to the People’s Republic of China. These vehicles could be remotely accessed or disabled.”

And, of course, underprice American-made vehicles.

Mr. Meyer identifies the core problem for at least Ford and GM: “Specifically, Ford’s and GM’s earnings rest primarily on selling pickup trucks, S.U.V.s and crossovers to affluent North Americans…In other words, if Americans’ appetite for trucks and S.U.V.s falters, then Ford and GM will be in real trouble.”

He believes that President Biden will need to impose trade restrictions, but not blindly:

Mr. Biden must be careful not to cordon off the American car market from the rest of the world, turning the United States into an automotive backwater of bloated, expensive, gas-guzzling vehicles. The Chinese carmakers are the first real competition that the global car industry has faced in decades, and American companies must be exposed to some of that threat, for their own good. That means they must feel the chill of death on their necks and be forced to rise and face this challenge.

It’s the 1970’s all over again, when American was selling over-priced, gas-guzzling sedans while Japan and South Korea were offering cheaper, more energy-efficient, higher quality compacts. Now it is China and EVs versus our internal combustion pickups & SUVs. Look how that turned out for Detroit.

The “chill of death” indeed.

———–

When I think of the Detroit Big Three analogy for healthcare, I think of hospitals (30% of all spending), clinicians (20%), and pharmaceutical companies (9%). When I think about the affluent Americans buying the big SUVs/pickups, I think about the small percent of the population who account for most of spending: the top 1% accounts for 24% of spending, the top 5% for 51%, and the top 10% 67%. The bottom 50% of the population accounts for 3%.

The healthcare system is designed around the big spenders, and price is seemingly no object for them (although, of course, unlike the affluent and their big vehicles, we all pay for the big healthcare spenders through our premiums and taxes). If we magically made them healthy (which seems like a good thing), the healthcare system would collapse (which seems like a bad thing).

Fifteen or so years ago one might have hoped that EHRs and the digitalization of healthcare generally might be the equivalent of EVs hitting the automotive industry. That didn’t happen; as it is wont to do, healthcare just absorbed them and kept making things more expensive. Today one might hope that AI will make everything more efficient, more effective, and, goodness knows, less expensive, but I’m not holding my breath. Right now, I don’t see anything that will “deliver great value at prices that beat anything coming out of the West.”

I want the US to be a leader in EVs, and other clean energy technologies. I want us to be a leader in all the 21^st century technologies, including those, AI, quantum computing, robotics, nanotechnology, synthetic biology, and materials science, to name a few. And I want our healthcare system to be a 21^st century leader too; as I like to say, I want it to be more familiar to someone from the 22^nd century than to someone from the 20^th century, as I fear is still true today.

Unfortunately, I’m still not sure what the thing is that will give healthcare “the chill of death” and force it to be better.

By KIM BELLARD

It’s Cyber Monday, and you’ve probably been shopping this weekend. In-stores sales on Black Friday rose 2.2% this year, whereas online sakes rose almost 8%, to $9.8b – over half of which was via mobile shopping. Cyber Monday, though, is expected to outpace Black Friday’s online shopping, with an estimated $12b, 5.4% higher than last year. 

Lest we forget, Amazon’s Prime Day is even bigger than either Cyber Monday or Black Friday.  

All that shopping means lots of deliveries, and here’s where I got a surprise: according to a Wall Street Journal analysis, Amazon is now the leading (private) delivery service. The analysis found that Amazon has already shipped some 4.8 billion packages door-to-door, and expects to finish the year with some 5.9bn. UPS is expected to have some 5.3bn, while FedEx is close to 3bn – and – unlike Amazon’s numbers — both include deliveries where the U.S. Postal Service actually does the “last mile delivery.” 

Just a few years ago, WSJ reminds us, the idea that Amazon would deliver the most packages was considered “fantastical” by its competitors. “In all likelihood, the primary deliverers of e-commerce shipments for the foreseeable future will be UPS, the U.S. Postal Service and FedEx,” the then-CEO of Fed Ex said at the time. That quote didn’t age well.

Amazon’s growth is attributed in part to its contractor delivery program, whose 200,000 drivers (usually) wear Amazon uniforms and drive Amazon-branded vehicles, although they don’t actually work for Amazon, and a pandemic-driven doubling of its logistics network. WSJ reports: “Amazon has moved to regionalize its logistics network to reduce how far packages travel across the U.S. in an effort to get products to customers faster and improve profitability.”

It worked.

But I shouldn’t be surprised. Amazon usually gets good at what it tries. Take cloud computing.  Amazon Web Services (AWS) in its early years was considered something of a capital sink, but now not only is by far the market leader, with 32% market share (versus Azure’s 22%) but also generates close to 70% of Amazon’s profits. 

Prime, Amazon’s subscription service, now has some 200 million subscribers worldwide, some 167 million are in the U.S. Seventy-one percent of Amazon shoppers are Prime members, and its fees account for over 50% of all U.S. paid retail membership fees (Costco trails at under 10%). There’s some self-selection involved, but Prime members spend about three times as much on Amazon as nonprime members.

The world’s biggest online retailer. The biggest U.S. delivery service. The world’s biggest cloud computing service. The world’s second largest subscription service (watch out Netflix!).  It’s “only” the fifth largest company in the world by market capitalization, but don’t bet against it. 

I must admit, I’ve been a bit of a skeptic when it comes to Amazon’s interest in healthcare. I first wrote about them almost ten years ago, and over those years Amazon has continued to put its feet further into healthcare’s muddy waters.

For example, it bought online pharmacy Pillpack in 2018. “PillPack’s visionary team has a combination of deep pharmacy experience and a focus on technology,” said Jeff Wilke, Amazon CEO Worldwide Consumer. “PillPack is meaningfully improving its customers’ lives, and we want to help them continue making it easy for people to save time, simplify their lives, and feel healthier. We’re excited to see what we can do together on behalf of customers over time.”

PillPack still exists as an Amazon service, but has broadened into Amazon Pharmacy. PillPack focuses more on people with chronic conditions who like the prepacked pills, while Pharmacy offers home delivery to other customers.  At its introduction, Doug Herrington, Senior Vice President of North American Consumer at Amazon, said: “PillPack has provided exceptional pharmacy service for individuals with chronic health conditions for over six years. Now, we’re expanding our pharmacy offering to Amazon.com, which will help more customers save time, save money, simplify their lives, and feel healthier.”

Amazon Pharmacy has since introduced RxPass, a $5/month subscription service for many common generic drugs, but it still hasn’t cracked the top ten U.S. pharmacies, so there’s work to be done. One pharmacy analyst writes: “Perhaps one day Amazon will be a true disrupter. For now, Amazon is choosing to join the drug channel not fundamentally change it.”

PillPack’s co-founders have recently left.   

Earlier this year, after all the fumbling around with Haven and Amazon Care, Amazon bought One Medical. “We’re on a mission to make it dramatically easier for people to find, choose, afford, and engage with the services, products, and professionals they need to get and stay healthy, and coming together with One Medical is a big step on that journey,” said Neil Lindsay, senior vice president of Amazon Health Services.

Then this month Amazon sought to entice Prime members to join One Medical by offering membership for $9/month, or $99 per year. “When it is easier for people to get the care they need, they engage more in their health, and realize better health outcomes,” said Mr. Lindsay. “That’s why we are bringing One Medical’s exceptional experience to Prime members—it’s health care that makes it dramatically easier to get and stay healthy.”

Of course, One Medical is only in 25 metro markets, with some 200 doctors office, and it doesn’t contract with every insurance plan. Plus, One Medical CEO Amir Dan Rubin is already on his way out of the door. Scaling will not be easy.

Amazon’s success with its healthcare ventures is hard to tell.  HT Tech reports that monthly active users of the One Medical app are up 16% since the acquisition, and that Amazon claims Amazon Pharmacy doubled its active customers from 2022 to 2023. Still, Lisa Phillips, an analyst with Insider Intelligence, scoffed: “It really hasn’t made a big dent. I don’t think anybody is scared of it anymore.”

Maybe. Healthcare is hard, and usually confounds outsiders who aren’t familiar with its byzantine structures. But I look at it this way: Amazon has been delivering its own packages for less than 10 years, and now it is bigger than UPS and FedEx. That’s not nothing. So for the first time I’m starting to think that maybe Amazon can make its mark in healthcare. 

Amazon the biggest healthcare company in ten years?  Don’t bet against it.

By KIM BELLARD

You had to know I’d write about the new Humane AI Pin, right?

After all, I’d been pleading for the next big thing to take the place of the smartphone, as recently as last month and as long ago as six years, so when a start-up like Humane suggests it is going to do just that, it has my attention.  Even more intriguing, it is billed as an AI device, redefining “how we interact with AI.”  It’s like catnip for me.

For anyone who has missed the hype – and there has been a lot of hype, for several months now – Humane is a Silicon Valley start-up founded by two former Apple employees, Imran Chaudhri and Bethany Bongiorno (who are married).  They left Apple in 2016, had the idea for the AI Pin by 2018, and are ready to launch the actual device early next year.  It is intended to be worn as a pin on the lapel, starts at $699, and requires a monthly $24 subscription (which includes wireless connectivity).  Orders start November 16.

Partners include OpenAI, Microsoft, T-Mobile, Tidal, and Qualcomm.

Mr. Chaudhri told The New York Times that artificial intelligence  “can create an experience that allows the computer to essentially take a back seat.” He also told TechCrunch that the AI Pin represented “a new way of thinking, a new sense of opportunity,” and that it would “productize AI” (hmm, what are all those other people in AI doing?).  

Humane’s press release elaborates:

Ai Pin redefines how we interact with AI. Speak to it naturally, use the intuitive touchpad, hold up objects, use gestures, or interact via the pioneering Laser Ink Display projected onto your palm. The unique, screenless user interface is designed to blend into the background, while bringing the power of AI to you in multi-modal and seamless ways.

Basically, you wear a pin that is connected with an AI, which – upon request – will listen and respond to your requests. It can respond verbally, or it can project a laser display into the palm of your hand, which you can control with a variety of gestures that I am probably too old to learn but which younger people will no doubt pick up quickly.  It can take photos or videos, which the laser display apparently does not, at this point, do a great job projecting. 

Here’s Humane’s introductory video:

Some cool features worth noting:

• It can summarize your messages/emails;
• It can make phone calls or send messages;
• It can search the web for you to answer questions/find information;
• It can act as a translator;
• It has trust features that include not always listening and a “Trust Light” that indicates when it is.

It does not rely on apps; rather, it uses “AI Experiences” – on device and in the cloud — to accomplish whatever goals smartphone apps try to accomplish.  The press release brags: “Instead, it quickly understands what you need, connecting you to the right AI experience or service instantly.”  

Ken Kocienda, Humane’s head of product engineering, contrasted the AI Pin with smartphone’s addiction bias, telling Erin Griffin of The New Times: “It’s more of a pull than pushing content at you in the way iPhones do.”

Health and nutrition is said to be an early focus, although currently it is mostly calorie counting.

Ms. Griffin summarizes the AI Pin thusly: “It was, like any new technology, equal parts magic and awkward.”  Inverse’s Ian Carlos Campbell was also impressed: “Added together, the Ai Pin is exciting in the way all big swings are, the difference being it seems like Humane could back up its claims.”  

Mark Wilson of Fast Company, on the other hand, was more reserved, noting: “In practice, the AI Pin reminded me of an Echo Dot on your chest,” and wondering: “Where was all the magical stuff?…The stuff where, because the AI Pin is so overtly planted on our person, the rest of its demands could disappear?”   

Mr. Chaudhri defended using a pin instead of another version of smartglasses, telling Mr. Wilson:

Contextual compute has always been assumed as something you have to wear on your face.  There’s just a lot of issues with that…If you look at the power of context, and that’s the impediment to achieving contextual compute, there has to be another way. So we started looking at what is the piece that allows us to be far more personal? We came up with the fact that all of us wear clothing, so how can we adorn a device that gives us context on our clothing?

Or, as Mr. Chaudhri said earlier this year: “The future is not on your face.”

Color Mr. Wilson unconvinced:

Humane’s issue in a nutshell isn’t that a wearable assistant is inherently a flawed idea, it’s that Chaudhri’s product doesn’t yet solve the problem he has diagnosed and set out to mitigate: that removing a screen will solve our dependence on technology… it appears Humane hasn’t unlocked the potential of AI of today, let alone tomorrow, nor has it fundamentally solved any significant problems we have with technology.

To be honest, it isn’t everything I’d hoped it’d be either. The AI is impressive but, at this point, still limited. The laser display is cool but not really ready for prime time. The pin is sleek, as would be expected from Apple alums, but I don’t want to even be aware of a device; I want it embedded in my clothes, maybe worn as a “smart tattoo.”  

But these are, really, quibbles. The AI will get exponentially more useful. The device will get much smaller. The display will get much better. As others have pointed out, the iPod was a revolution but was limited, and led to the iPhone, which itself was initially fairly limited.  Similarly, the AI Pin should get much, much powerful, and have even more awesome successors.

In the press release, Ms. Bongiorno and Mr. Chaudhri say:

AI Pin is the embodiment of our vision to integrate AI into the fabric of daily life, enhancing our capabilities without overshadowing our humanity. We are proud to finally unveil what we and the team at Humane have been working on for the past four years. For us, Ai Pin is just the beginning.

The introductory video closes with Mr. Chaudhri promising: “It is our aim at Humane to build for the world not as it is today, but as it could be tomorrow.”  We should all be designing for that.

Kim is a former emarketing exec at a major Blues plan, editor of the late & lamented Tincture.io, and now regular THCB contributor

Joining Matthew Holt (@boltyboy) on #THCBGang on Thursday October 26 at 1pm PST 4pm EST were delivery & platform expert Vince Kuraitis (@VinceKuraitis); author & ponderer of odd juxtapositions Kim Bellard (@kimbbellard); futurist Ian Morrison (@seccurve); and our special guest was Kat McDavitt(@katmcdavitt) President of Innsena.

The video is below. If you’d rather listen to the episode, the audio is preserved from Friday as a weekly podcast available on our iTunes & Spotify channels

BY KIM BELLARD

Earlier this year I urged that we Throw Away That Phone, arguing that the era of the smartphone should be over and that we should get on to the next big thing.  Now, I don’t have any reason to think that either Sam Altman, CEO of OpenAI, and Jony Ive, formerly and famously of Apple and now head of design firm LoveFrom, read my article but apparently they have the same idea.  

Last week The Information and then Financial Times reported that OpenAi and LoveFrom are “in advanced talks” to form a venture in order to build the “iPhone of artificial intelligence.”  Softbank may fund the venture with as much as $1b.  There have been brainstorming sessions, and discussions are said to be “serious,” but a final deal may still be months away. The new venture would draw on talent from all three firms.

Details are scare, as are comments from any of the three firms, but FT cites sources who suggest Mr. Altman sees “an opportunity to create a way of interacting with computers that is less reliant on screens.” which is a sentiment I heartily agree with.  The Verge similarly had three sources who agreed that the goal is a “more natural and intuitive user experience.”

OpenAI’s ChatGPT took the world by storm this year, and continues to wow; last week OpenAI announced that it could now “see, speak, and hear,” offering “a new, more intuitive type of interface by allowing you to have a voice conversation or show ChatGPT what you’re talking about.”  No wonder a future less reliant on screens makes sense. 

“Given Ive’s involvement, it’s most likely to be some sort of consumer device, like a reimagined phone,” write Jessica Lessin and Stephanie Palazzolo for The Information. “One possibility is OpenAI is building its own operating system… Imagine an AI-native operating system that could generate apps in real-time based on what it believes its user needs, or one that listens to nearby conversations and automatically pulls up relevant information for its user.”  

I sure hope we wouldn’t get just a “reimagined smartphone.”  Carrying around a tiny computer with a screen seems so 1990’s, or at least so 2007.  In the soon-to-be world of ambient computing and virtual displays, as I discussed before, the mobile phone will soon be an outdated concept entirely.

The New York Times speculates that the initiative may be as much about control as it is innovation, saying:

One reason Mr. Altman may be determined to develop his own device is to avoid having OpenAI depend on Apple or Google’s Android for distribution. Relying on other platforms has challenged tech giants, such as Facebook and Amazon, because Apple and Google take a cut of sales across their platform. Apple also has introduced privacy limits, which cut into advertising sales.

Several tech outlets reporting on the talks noted that there is a long list of software companies with a rather dismal record when trying to shift to hardware. Ars Technica quotes former Microsoft Windows Division President Steven Sinofsky: “”Anyone can build a phone. Watching Google and Microsoft should be good evidence that few can distribute one.”  TechCrunch says: “But hardware is a tricky business. OpenAI knows this well,” mentioning the robotics research division it shut down in 2021 due to “major technical difficulties.”  

What I’m wondering is if we really need Mr. Ive or the OpenAI team at all.  Perhaps you haven’t been paying attention to the work being done at Wharton on AI, but Wharton professors Christian Terwiesch and  Karl Ulrich, former Wharton graduate student Lennart Meincke, and Cornell Tech professor Karan Girotra ran an entrepreneurial competition between Wharton MBA students and ChatGPT – and ChatGPT won. 

“I was really blown away by the quality of the results,” Professor Terwiesch said. “I had naively believed that creative work would be the last area in which we humans would be superior at solving problems … so we set up this horse race of man versus machine.”  ChatGPT not only produced more ideas, but vastly outperformed students in ideas that were rated “exceptional.”  Quantity and quality of ideas.  

Their three takeaways are:

• First, generative AI has brought a new source of ideas to the world.
• Second, the bottleneck for the early phases of the innovation process in organizations now shifts from generating ideas to evaluating ideas.
• Finally, rather than thinking about a competition between humans and machines, we should find a way in which the two work together.

Another new study, in Scientific Reports, found that, yes, chatbots outperformed most humans when “asked to generate uncommon and creative uses for everyday objects,” but “the best human ideas still matched or exceed those of the chatbots.”  I guess we can breathe a (temporary) sigh of relief, but I have to worry about the quality of those Wharton MBA students. 

The authors of the latter study cautioned:

However, the AI technology is rapidly developing and the results may be different after half year. On basis of the present study, the clearest weakness in humans’ performance lies in the relatively high proportion of poor-quality ideas, which were absent in chatbots’ responses. 

The Wall Street Journal’s Christophe Mims warns we’re not going to be able to avoid or ignore AI, in either our personal or professional lives: “Soon, most of us will use tools like these, even if indirectly, unless we want to risk falling behind.”  Along the lines of what Messrs. Altman and Ive may be hoping, Mr. Mimms speculates: “Another way generative AI could make itself impossible to avoid: by becoming the default interface for information retrieved from the internet, and within companies.”

The moral of the story is that, if you’re looking for new ideas, and the best ideas, you better be using AI.  And soon, those ideas may come from the AI alone.

————-

 I usually try to link the topic of my articles to healthcare, however tenuously, and this one shouldn’t need much elaboration.  Healthcare may or may not need “the iPhone of artificial intelligence,” but it needs AI built into almost everything it does.  It also badly needs new ideas and serious innovation, and failing to use AI to generate those harms all of us.

AI is no longer science fiction.  It is the future, but it is now also the present – in our personal lives, in healthcare, and everywhere else.  I wish Messrs. Altman and Ive the best of luck, but what they’re doing should be the norm, not the exception. 

Kim is a former emarketing exec at a major Blues plan, editor of the late & lamented Tincture.io, and now regular THCB contributor.

Joining Matthew Holt (@boltyboy) on #THCBGang on Thursday September 28 at 1pm PST 4pm EST are futurist Jeff Goldsmith: author & ponderer of odd juxtapositions Kim Bellard (@kimbbellard); and patient safety expert and all around wit Michael Millenson (@mlmillenson).

You can see the video below & if you’d rather listen than watch, the audio is preserved as a weekly podcast available on our iTunes & Spotify channels.

By KIM BELLARD

Like many of you, I’m watching the war in Ukraine with great interest and much support. For all the fuss about expensive weapons — like F-16 fighters, Abrams tanks, Stryker and Bradley armored fighting vehicles, Patriot missile defense systems, Javelin anti-tank missiles, Himars long range missiles, and various types of high tech drones — what I’m most fascinated with is how Ukraine is using inexpensive, practically homemade drones as a key weapon.

It’s a new way of waging war. And when I say “waging war,” I can’t help but also think “providing health care.” It’s not so much that I think drones are going to revamp health care, but if very expensive weapons may, in fact, not be the future of warfare, maybe very expensive treatments aren’t necessarily the future of healthcare either.

Just within the last two weeks, for example, The New York Times headlined Budget Drones Prove Their Value in a Billion-Dollar War, AP said Using duct tape and bombs, Ukraine’s drone pilots wage war with low-cost, improvised weapons, ABC News reports: Inside Ukraine’s efforts to bring an ‘army of drones’ to war against Russia, and Defense News describes how Cardboard drone vendor retools software based on Ukraine war hacks.

This is not the U.S. military-industrial complex’s “shock-and-awe” kind of warfare; this is the guy-in-his-garage-building-his-own-weapons kind of warfare.

Ukraine’s minister for digital transformation, Mykhailo Federov, says the government is committed to building a state-of-the-art “army of drones.” He promises: “A new stage of the war will soon begin.”

NYT detailed:

Drones made of plastic foam or plastic are harder to find on radar, reconnaissance teams said. Ukraine buys them from commercial suppliers who also sell to aerial photographers or hobbyists around the world, along with parts such as radios, cameras, antennas and motors. The drone units mix and match parts until they find combinations that can fly past sophisticated Russian air defenses.

“The doctrine of war is changing,” one Ukrainian commander said. “Drones that cost hundreds of dollars are destroying machines costing millions of dollars.” The AP discusses how an elite drone unit – “a ragtag group of engineers, corporate managers and filmmakers” — “assembled with just $700,000, has destroyed $80 million worth of enemy equipment.”

Dmytro Kovalchuk, CEO of drone manufacturer Warbird, told ABC News: “In Ukraine, not a single state enterprise is producing drones. It’s all private enterprises, sometimes partnerships…It [the drone] costs $1,000 and can destroy a tank that costs $500,000.”

And it is not just attacking tanks or just from the air; Just last month, Ukraine used a sea drone to damage an expensive Russian warship. 

One of the many reasons the war in Ukraine is important is because China is watching closely to see what might happen if it were to invade Taiwan, and I’m hoping Taiwan and its allies, including the U.S., are paying close attention to the importance of drones. NYT is skeptical, charging: “A new generation of cheaper and more flexible vessels could be vital in any conflict with China, but the Navy remains lashed to big shipbuilding programs driven by tradition, political influence and jobs.”

“The U.S. Navy is arrogant,” said retired admiral Lorin Selby, who used to head the Office of Naval Research. “We have an arrogance about, we’ve got these aircraft carriers, we’ve got these amazing submarines. We don’t know anything else. And that is just wrong.” Another former officer agreed: “Right now, they are still building a largely 20th-century Navy.”

“We are trying to improve Navy power, but we need to do more than that: We need to reimagine Navy power,” he also said. “We’re kind of at a pivotal point in history. It is vital that we throw off old conventions.”

It’s not that the Navy is unaware of the potential of drones; as NYT acknowledged, it has been testing integrating “drone boats, unmanned submersible vessels and aerial vehicles capable of monitoring and intercepting threats over hundreds of miles.” It’s more that it isn’t a priority; the budget devoted to it, one officer lamented, is “the dust particle on the pocket lint of the budget.”

The Wall Street Journal was more optimistic, reporting on details of a recent speech from Kathleen Hicks, the deputy secretary of defense. She vowed that DoD “plans to spend hundreds of millions of dollars to produce an array of thousands of air-, land- and sea-based artificial-intelligence systems that are intended to be ‘small, smart, cheap’”

Of course, when fighter planes now can cost $135 million each, aircraft carriers cost $13b apiece, and the overall DoD budget is closing in on $1 trillion annually, spending “hundreds of millions” on alternative weapons does kind of sound like pocket lint. The Pentagon admits that China is “displaying growing numbers of autonomous and teaming systems,” including “a substantial amount of development displaying efforts to produce swarming capability for operational applications.” They’re taking this seriously.

“The hundreds of millions of dollars range, while a great start, would only provide hundreds of the truly capable ocean drones we need to establish true deterrence to China and other adversaries,” Kevin Decker, chief executive of Ocean Aero, told WSJ. “They’ve got to start somewhere, and they’ve got to start now.”

“Quite frankly, industry is well ahead of us,” Marine Lt. Gen. Karsten Heckl, deputy commandant for combat admitted. “So we’re trying to catch up but [there is] a lot of promise.”

As the Ukrainian commander said, the doctrine of war is changing.  Weapons systems started in the 1990’s (F-35 fighter) or early 2000’s (the Gerald Ford aircraft carrier) are just going into service and are already outdated.  Admiral Selby has it right: “It is vital that we throw off old conventions.”

———–

So it is with healthcare. Capital sinks like hospitals are healthcare’s aircraft carriers – once essential, but now vastly expensive and hugely vulnerable. Prescription drugs that can cost hundreds of thousands, if not millions, of dollars annually are 20^th century pricing in a world of AI drug development, CRISPR, and 3D printing, to name a few innovations. Adding facility fees to even telehealth visits is (stupid) 20^th century thinking. Health insurance premiums that are unaffordable even to middle class customers reflect 20^th approaches.

Similarly, I’m not worried that healthcare won’t find many uses for AI; rather, I’m worried that it will co-opt AI into making existing cost structures even higher, rather than using it to make healthcare become “small, smart, and cheap.”

The doctrine of healthcare must change.  Where is its ragtag team of engineers, computer scientists, physicians, and entrepreneurs making it faster, smaller, smarter, cheaper, more personal, and definitely more effective?

Kim is a former emarketing exec at a major Blues plan, editor of the late & lamented Tincture.io, and a regular THCB contributor.