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Challenging the Status Quo of Healthcare Investment with Annie Lamont · Masters in Business

0:02
Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is Master's in
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Speaker 1: Business with Barry Ridholds on Bloomberg Radio.
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Speaker 2: What can I say about this week's rock star guest?
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Speaker 2: Annie Lamont incredible track record as a venture capitalist. She's
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Speaker 2: co founder and managing partner of Oak HCFT. I can't
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Speaker 2: list all her accolades because they're just one hundred most
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Speaker 2: influential people in healthcare Forbes Midas List five times, Top
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Speaker 2: one hundred venture capitalists according to CBE Insights, Top vcs
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Speaker 2: on the New York Times List, Top twenty Private equity
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Speaker 2: power Players, Fintech Finance forty. She has had seventy exits
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Speaker 2: seven zero over the past twenty five years. Fifth ten IPOs.
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Speaker 2: Just an incredible track record of investing, primarily in the
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Speaker 2: healthcare but also the financial technology space. There as surprising
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Speaker 2: amounts of overlap in terms of access, outcomes, cost speed, friction,
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Speaker 2: especially those last three cost, speed, and friction between the two.
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Speaker 2: She's also First Lady of Connecticut and married to Governor
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Speaker 2: Ned Lamont. She's been doing VC work for thirty five
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Speaker 2: forty years and just as as insightful as anyone in
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Speaker 2: the world about those areas, especially healthcare. I found this
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Speaker 2: conversation to be absolutely fascinating. I think you will also
1:45
Speaker 2: with no further ado, my discussion with Oak Hcfts.
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Speaker 3: Annie Lamont, thanks very great to be here.
1:53
Speaker 2: I've been really excited for this conversation. You do so
1:56
Speaker 2: many interesting things. But let's start with OAKEN Investment Partners.
2:01
Speaker 2: You were a GP there starting in eighty six and
2:05
Speaker 2: eight c ventures. What led you to that part of
2:08
Speaker 2: your career.
2:09
Speaker 4: Well, very early on, I got out of Stanford when
2:12
Speaker 4: Silicon Valley was really at the very beginning of Silicon
2:17
Speaker 4: Valley and joined somebody called hambrickton Quist, which was a
2:21
Speaker 4: boutique investment bank venture firms or of legendary at that time.
2:25
Speaker 4: I think I was the fiftieth employee and really fell
2:28
Speaker 4: in love with venture from day one and working with entrepreneurs.
2:32
Speaker 4: I Carrie Steve jobs Bags on the Apple IPO road
2:35
Speaker 4: show in my first three months there. Wow, the first
2:38
Speaker 4: three months we also took Genentech public, so I worked
2:41
Speaker 4: with two of the greatest entrepreneurs ever.
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Speaker 1: I didn't know that at that time.
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Speaker 2: That was my next question is did you have any
2:48
Speaker 2: sense of who you were upping shouldiers with or was
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Speaker 2: just like fast moving blur.
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Speaker 4: I certainly those two seemed like extraordinary people, and I
2:57
Speaker 4: extrapolated that to most entrepreneurs. I quickly learned they were
3:01
Speaker 4: two extraordinary individuals. But that was it just got me hooked.
3:05
Speaker 4: I thought, if I could just learn and be with
3:07
Speaker 4: people like this and not be the entrepreneur, but be
3:10
Speaker 4: the person that supported, helped, edited, therapist, whatever was required.
3:15
Speaker 4: I just wanted to spend the rest of my life
3:17
Speaker 4: with people who envisioned the world as it should be.
3:20
Speaker 2: And H and Q is known for a lot of
3:23
Speaker 2: their software, internet hardware technology. What led you over to
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Speaker 2: the healthcare sector.
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Speaker 4: So when I joined Oak, which was really just a
3:32
Speaker 4: couple of years out of out of Stanford. We were
3:37
Speaker 4: founding Genzyme the year that I joined, one of the
3:39
Speaker 4: also very first biotech companies, and there was only one
3:44
Speaker 4: public software company at that point. And I wasn't really
3:47
Speaker 4: interested in one of the three hundred disktrive companies that
3:50
Speaker 4: were being created.
3:51
Speaker 2: Not an Iomega fan, I remember that one.
3:54
Speaker 4: Just yeah, they had done seagates for the original Seagate
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Speaker 4: shuegart And so I said, I want to create my
4:01
Speaker 4: own space, you know, I want to create my own
4:03
Speaker 4: expertise in an area that I could fundamentally be interested in,
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Speaker 4: and that ended up being biotech and so focused on
4:09
Speaker 4: life science is the first fifteen years of my career,
4:12
Speaker 4: and that companies like Alexian, Cephalon, Alkermes, all host of companies.
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Speaker 2: Were you anything healthcare or medical or biotech related at Stanford?
4:23
Speaker 3: Well would you do?
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Speaker 2: Now?
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Speaker 4: I should have been a hum bio major, but I wasn't.
4:26
Speaker 4: I had no idea how interested I was in the topic.
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Speaker 4: But I became fascinated by it and educated myself and
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Speaker 4: I wish it would have been nice to have had
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Speaker 4: the Internet back then.
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Speaker 2: But what what'd you study at Stanford?
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Speaker 4: I was a political science major, so of course that
4:40
Speaker 4: prepared me for my life with my husband ultimately. But
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Speaker 4: I did have an interest in politics, but.
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Speaker 2: No technology, no engineering.
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Speaker 4: I mean, everybody takes a computer science course at Stanford.
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Speaker 2: But huh really interesting. So Oak Investment Partners very sophisticated
4:56
Speaker 2: VC platform going back to like the late seventies, I
5:00
Speaker 2: think is when they launched. Yeah, so when you joined
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Speaker 2: them in the eighties, what did you what did you
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Speaker 2: focus on? What? What was was it healthcare right out
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Speaker 2: of the gate or how did that transition take place
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Speaker 2: from carrying Steve jobs bags on the road show to
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Speaker 2: focusing on healthcare.
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Speaker 4: I think my interest, I said, and we found a
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Speaker 4: genzyme it just intellectually interested in the area, but worked
5:26
Speaker 4: on you know, some software companies back then, and then
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Speaker 4: decided I really needed my own hook. Like the reality
5:33
Speaker 4: is in every career, you know you should, you need
5:36
Speaker 4: to create your own expertise and your own special lane.
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Speaker 1: And that was going to be my lane.
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Speaker 4: I wanted to differentiate myself from all the other engineers
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Speaker 4: at at OAK and do my own thing.
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Speaker 2: Was was that kind of a white sheet at that point?
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Speaker 2: There wasn't a lot of there. Yeah.
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Speaker 4: Yeah, that was the other thing. It wasn't any real
5:56
Speaker 4: competition at OAK. And in terms of the market, it
5:59
Speaker 4: was a burgeoning area and you didn't have to be
6:03
Speaker 4: a PhD. You could hire PhDs to help you analyze
6:07
Speaker 4: these things.
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Speaker 2: What was Oak's core focus when you joined them was
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Speaker 2: was healthcare something that had they had previously played in?
6:15
Speaker 2: Or you essentially did you stand up that sector? Yes, Oak? Yes,
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Speaker 2: huh So what else were they investing in at the
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Speaker 2: same time?
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Speaker 4: Well, a lot of hardware is, I said, a number
6:27
Speaker 4: of disk drive companies PC. I mean we did actually
6:30
Speaker 4: invest in compac during that period, and so it was
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Speaker 4: more PC hardware telecom related.
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Speaker 2: So clients, the LPs who come to Oak, were they
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Speaker 2: just giving them cash to be allocated across all these
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Speaker 2: different sectors or did people say all right, I'll try
6:49
Speaker 2: a little bit of healthcare and a little now.
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Speaker 4: We always had and we do have an OKHCFT one
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Speaker 4: fund at everything, and we would choose the allocation.
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Speaker 3: Huh.
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Speaker 2: So that investors are getting bosure to whatever you guys
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Speaker 2: think has the most potential. Right, So you're listed as
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Speaker 2: a managing partner at Oak as well as a managing
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Speaker 2: partner and co founder at Oak HCFT. What's the relationship
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Speaker 2: between the two companies?
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Speaker 4: There is there is no relationship. Ok Investment Partners is
7:19
Speaker 4: Wine is wound down effectively, I'm still there until the
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Speaker 4: last company is.
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Speaker 2: Just waiting for a right.
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Speaker 3: Yes, for the last.
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Speaker 4: Exactly have an obligation to those LPs in that firm,
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Speaker 4: But the reality is there is no relationship. We started
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Speaker 4: ok HCFT because we had had two practices obviously in
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Speaker 4: healthcare and fintech. Andrew Adams and myself launched the firm
7:44
Speaker 4: and ten years ago and really wanted to focus on
7:48
Speaker 4: the new model of investing that wasn't just Jedi Knights
7:52
Speaker 4: from you know, twenty five years ago, where it was
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Speaker 4: just you're a good advisor and you don't have a
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Speaker 4: talent function and you're not The really changed to become
8:01
Speaker 4: a service entity to entrepreneurs, to support entrepreneurs. And it
8:05
Speaker 4: was always partnering with entrepreneurs in the past, but the
8:08
Speaker 4: reality is that became a far more competitive world. You
8:11
Speaker 4: really needed to be deep in a specialty to differentiate yourself,
8:14
Speaker 4: and you needed to have things like tech support. Talent
8:18
Speaker 4: support is enormous because it is all about people. We
8:21
Speaker 4: have five individuals that are just singlely focused on talent
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Speaker 4: and attracting talent for our companies and also introducing us
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Speaker 4: to repeat entrepreneurs we haven't invested in before.
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Speaker 2: So you've used the phrase Jedi Knights in the past.
8:36
Speaker 2: Tell us a little bit what you mean by that.
8:39
Speaker 2: I get the sense the world of venture today is
8:42
Speaker 2: very different than the eighties and.
8:44
Speaker 1: Nineties, very different.
8:47
Speaker 4: I think the Jedi Knights means that it's just a
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Speaker 4: group of individuals, maybe a firm, but it's a group
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Speaker 4: of individuals that are sort of all out for themselves
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Speaker 4: just investing directly with entrepreneurs, with no real overlap between
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Speaker 4: anyone else in the firm and that entrepreneur, whereas now
9:05
Speaker 4: I would say, like, okay, safety is very much a
9:08
Speaker 4: team based approach where we support the entrepreneur in a
9:11
Speaker 4: myriadive ways. Whatever they need, you know, will we will
9:15
Speaker 4: supply as a firm.
9:17
Speaker 2: So some of the VC books and autobiographies and the
9:21
Speaker 2: like that I've read kind of imply the early eighties
9:26
Speaker 2: and earlier days of venture was first they would write
9:29
Speaker 2: a check, and after they had been writing checks for
9:32
Speaker 2: a few years, they ended up having a bit of
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Speaker 2: a network of other engineers and other venture funds and
9:38
Speaker 2: other entrepreneurs, and so people would plug into that network.
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Speaker 2: It sounds like you're describing something much more comprehensive and
9:46
Speaker 2: holistic than the venture of old. Servicing the entrepreneur put
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Speaker 2: some flesh on those bones. How much service does oak
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Speaker 2: provide to the companies you work work with besides funding?
10:02
Speaker 4: I think that first of all, that we should just
10:05
Speaker 4: talk about that the difference between a world where everything
10:09
Speaker 4: there was more, There was less capital and more entrepreneurs
10:14
Speaker 4: in the early days, so the supply demand balance was
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Speaker 4: such that there was a lot more power I would
10:20
Speaker 4: say with the money than with the entrepreneurs and the
10:23
Speaker 4: great entrepreneurs. And I would say that's flipped in this
10:26
Speaker 4: world and that there are obviously many more entrepreneurs, but
10:32
Speaker 4: there's also a lot more money in the industry, and say,
10:35
Speaker 4: you really have to differentiate yourself. And I think that's
10:38
Speaker 4: where this service model came in of support that is how,
10:43
Speaker 4: in part, you differentiate yourself. And yes, it's great relationships
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Speaker 4: and great advice, but it's also the wrap around of
10:52
Speaker 4: talent which is huge, like recruiting and understanding that you're
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Speaker 4: providing someone go to market advice at times exit, really
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Speaker 4: understanding the process in terms of exiting companies introduce you introductions,
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Speaker 4: which is the importance of being deep in these two
11:09
Speaker 4: sectors is you know the customers. We know the customers intimately,
11:13
Speaker 4: we have great relationships with them broadly, and so we
11:16
Speaker 4: can help make the introductions as well as many of
11:19
Speaker 4: those customers end up being buyers of the companies, and
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Speaker 4: so just understanding that life cycle and being completely connected
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Speaker 4: to those communities is really is hugely important.
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Speaker 2: So that flipping of the power dynamics from the capital
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Speaker 2: to the entrepreneur. Does that have anything to do with
11:38
Speaker 2: companies now staying private for so much longer that seems
11:42
Speaker 2: like there's endless amounts of money around and no shortage
11:46
Speaker 2: of people willing to fund startups. How does that dynamic
11:50
Speaker 2: play out with all these companies just postponing IPOs for
11:55
Speaker 2: seemingly much longer than they used to.
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Speaker 4: Less about postponing ipo. So though certainly some of the
12:06
Speaker 4: major you know, some of the very large companies are
12:09
Speaker 4: doing that in order to realize full value, I would
12:14
Speaker 4: say that the IPO market is not as you know.
12:17
Speaker 1: It is so cyclical.
12:19
Speaker 4: It's just not For example, it's not friendly right now,
12:22
Speaker 4: and it's hard to get exits. So I would say
12:24
Speaker 4: in these two sectors, I mean, a stripe can go
12:27
Speaker 4: public anytime it wants. Is when to choose to go
12:31
Speaker 4: public when it feels like the values there and they're
12:35
Speaker 4: in the best position from a profitability standpoint and growth perspective.
12:42
Speaker 4: The reality is most companies cannot go public. What has
12:46
Speaker 4: changed dramatically in the last thirty years is that companies
12:49
Speaker 4: could go public much earlier in their life cycle. Now biotech,
12:53
Speaker 4: which we don't do anymore, we do all technology enabled
12:57
Speaker 4: software and services and healthcare that it started in two
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Speaker 4: thousand with Athena Health.
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Speaker 1: The reality is is.
13:06
Speaker 4: It is not an exit to go public, and with biotech,
13:09
Speaker 4: it's just a funding mechanism, right, there's a it's a
13:12
Speaker 4: public private world in biotech. The rest of the universe,
13:16
Speaker 4: you really have to be a more mature company. You
13:18
Speaker 4: have to be an over billion dollar market cap company
13:20
Speaker 4: to haven't make any sense to go public. You know,
13:23
Speaker 4: there used to be companies that have one hundred and
13:26
Speaker 4: two hundred million dollar market gaps that would go public,
13:29
Speaker 4: but it's been it's been made much more difficult to
13:33
Speaker 4: be a public company. There are far fewer people that
13:35
Speaker 4: play with those companies. If you don't have a large
13:37
Speaker 4: market cap, people don't the liquidity isn't there. The dollars
13:42
Speaker 4: are so much larger going into these public companies that
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Speaker 4: it's just a it's a very different world than it
13:47
Speaker 4: was thirty years ago. But now we've created in the
13:50
Speaker 4: private markets a sort of private public world. And I
13:53
Speaker 4: would say while eighty percent of our exits are through strategics,
13:58
Speaker 4: the financial pe world is our buyers for early stage companies,
14:05
Speaker 4: but we have to get them profitable, you know.
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Speaker 2: It seems odd that markets are at all time highs
14:13
Speaker 2: at the same time. Not a friendly IPO market. I'm
14:17
Speaker 2: trying to remember the last time those two things happened
14:20
Speaker 2: at the same time, right, Like you think back old
14:23
Speaker 2: time highs, late nineties, red hot IPO market, even mid
14:27
Speaker 2: seventies before the financial crisis, pretty robust IPO market. And
14:32
Speaker 2: then again venture and IPO is right up and through
14:36
Speaker 2: the early part of the pandemic, you know, red hot market.
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Speaker 2: This is my first example of all time highs and stocks,
14:45
Speaker 2: but not so much in IPO issuance.
14:48
Speaker 4: But I think if you looked at the market, so
14:50
Speaker 4: much of it has been driven by the top seven
14:54
Speaker 4: tech companies. So it's a bit of a head fake.
14:57
Speaker 4: You're now seeing rotation right in terms of other companies
15:00
Speaker 4: through you know, other companies now benefiting by the markets
15:05
Speaker 4: from being higher. But I think the reality is right now,
15:09
Speaker 4: we just have an overhang from certainly in my world
15:12
Speaker 4: I can speak to healthcare and fintech, a number of
15:14
Speaker 4: companies going public and then disappointing or evaluation just being
15:19
Speaker 4: excessive compared to the maturity of the businesses. So I
15:23
Speaker 4: think there's just a hangover from that, and people are
15:26
Speaker 4: going to invest in known entities that are already public
15:30
Speaker 4: at this point, and we still have a ways to go.
15:32
Speaker 4: I think for some of those companies, many of those
15:34
Speaker 4: smaller to mid sized companies being valued in the marketplace
15:39
Speaker 4: and appropriately really interesting.
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Speaker 2: So let's talk a little bit about some of the
15:46
Speaker 2: companies that you guys have invested in. You were very
15:50
Speaker 2: early in some iconic names. You mentioned Athena, there's also
15:55
Speaker 2: one medical Village MD Devoted Health. Quite a on of
16:00
Speaker 2: really big names. Tell us what led you to these companies?
16:04
Speaker 2: How are you so early so often in companies that
16:08
Speaker 2: turned out to be, you know, big movers in the space.
16:12
Speaker 4: Well, I would say it started with Athena Health, backing
16:16
Speaker 4: Jonathan Bush and the Park brothers there, Todd and Eddie Park,
16:19
Speaker 4: then founded cast Light actually by Todd, and then then
16:24
Speaker 4: devoted So a lot of what we do repeat entrepreneurs.
16:27
Speaker 4: Once you find a great entrepreneur, you develop a deep
16:30
Speaker 4: relationship with them their friends as well as business colleagues,
16:35
Speaker 4: and then you back them over and over again. And
16:38
Speaker 4: so we've done that very successfully over time. But it
16:41
Speaker 4: did start with that. The whole tech enabled services approach
16:46
Speaker 4: and healthcare started with Athena, and it started with our
16:50
Speaker 4: view that we really just wanted to invest in things
16:52
Speaker 4: that lowered cost, improved outcomes, and patient experience in healthcare
16:57
Speaker 4: period the end.
16:57
Speaker 2: Give me, give me those three again, improved outcomes and
17:02
Speaker 2: patient experiences. Yes, well that sounds like, you know, the
17:05
Speaker 2: Holy grail if you can do all three of those.
17:07
Speaker 4: So you don't always do all three, but at least
17:09
Speaker 4: two of them. It really is a mission for us
17:12
Speaker 4: and trying to improve healthcare. And we started Athena was
17:16
Speaker 4: the first cloud based healthcare company, and we invested in them,
17:22
Speaker 4: and really it was just a red cycle management company then,
17:24
Speaker 4: which was part of art thinking also around why we
17:27
Speaker 4: did payments and fintech. A lot of overlap in the
17:29
Speaker 4: whole payments world in healthcare. But so and then and
17:33
Speaker 4: then it became an EHR Electronic health record company seven
17:38
Speaker 4: years later actually, and so now they have one of
17:41
Speaker 4: the most important EHRs in the country and in that space.
17:46
Speaker 4: But really it was just a like paid doctors faster,
17:50
Speaker 4: better using technology. And so if you're looking at some
17:56
Speaker 4: of the newer companies, think Devoted, which is a fascinating
18:01
Speaker 4: company that's focused on medicare advantage and is competing with
18:06
Speaker 4: all legacy companies, United, Humanita, Elevants, Anthem. If you think,
18:13
Speaker 4: if you look at what Devoted is doing, they have
18:17
Speaker 4: redesigned the entire tech stack. They're using gen Ai in
18:21
Speaker 4: their function. They are a combination of a villager, Oak
18:25
Speaker 4: Street and an MA plan, meaning that they're actually they
18:30
Speaker 4: have Devoted Medical Group which started as virtual but as
18:34
Speaker 4: a network managing network of the care because you cannot
18:38
Speaker 4: you cannot as a health plan, directly manage the cost
18:42
Speaker 4: of care is eighty five percent of all healthcare, and
18:47
Speaker 4: so as a health plan, in order to manage care,
18:50
Speaker 4: you actually have to in part own the care. And
18:54
Speaker 4: so Devoted Medical Groups starts with you know, primary care
18:56
Speaker 4: docs virtually wrap around services virtually as well as extending
19:01
Speaker 4: their networks so that they can actually impact the quality
19:04
Speaker 4: and cost of care. So there really is nobody else
19:08
Speaker 4: effectively doing both being the NMA plan as well as
19:12
Speaker 4: being a source of managing the care. And so they've
19:16
Speaker 4: done that amazingly well. The fact that they have a
19:18
Speaker 4: modern tech stack that no one else has. Everybody else
19:21
Speaker 4: is writing off of thirty and forty year old legacy programs.
19:25
Speaker 4: Even I mean, if you look at Epic just from
19:27
Speaker 4: the software side. I mean, there's literally based on mumps,
19:31
Speaker 4: you know, from the nineteen seventies. So what's exciting about
19:35
Speaker 4: Devoted is that you're now seeing the impact of all
19:38
Speaker 4: of that, whereas MA plans all over the country are suffering,
19:42
Speaker 4: and they're actually excelling this environment.
19:45
Speaker 2: So let's talk a little bit about quality and cost.
19:49
Speaker 2: It seems like healthcare, unique in the US business space,
19:54
Speaker 2: has been so resistant to an end to end form
19:59
Speaker 2: of technology that improves quality reduced costs, like technology and
20:04
Speaker 2: computers and software seem to have improved productivity and lowered
20:09
Speaker 2: costs everywhere twenty thirty years ago, and it's still compounding.
20:14
Speaker 2: Why has healthcare been such a challenge to build in
20:19
Speaker 2: basic technologies? Why are they still working on thirty forty
20:23
Speaker 2: year old legacy systems?
20:26
Speaker 4: Well, so a little like banking, as many of those
20:30
Speaker 4: are also working off of cobol systems but are now
20:32
Speaker 4: finally being reinvented. I would say healthcare. If you actually
20:37
Speaker 4: to most people who have worked in healthcare, there's almost
20:41
Speaker 4: like a right brain left brain disconnect and that you're
20:44
Speaker 4: either tech focustory or healthcare focused. And I would say,
20:47
Speaker 4: what's happened in the last decade is that you have
20:50
Speaker 4: a younger generation coming into the industry that are just
20:54
Speaker 4: naturally tech focused, right your tech savvy users. There are
20:58
Speaker 4: a number of technologists that are interested in healthcare and
21:01
Speaker 4: so there's been much more reinvention. I mean, I think
21:04
Speaker 4: not to talk about devoted too much, but the reality
21:08
Speaker 4: is the CEO Eddie Park is a computer science major
21:12
Speaker 4: from Herbert So that is is like a different mentality.
21:16
Speaker 4: And I would say if you look at most healthcare companies,
21:20
Speaker 4: they just have not focused on that and they haven't
21:23
Speaker 4: if you're a hospital system in general, you've not been
21:27
Speaker 4: forced to be truly efficient. HCA different story they have,
21:32
Speaker 4: but in most cases they've implemented epic or in some
21:36
Speaker 4: cases than the ambulatory side, maybe in Athena. But they
21:41
Speaker 4: are not tech. This is not their business. You know,
21:45
Speaker 4: their core business is delivering healthcare and they really haven't
21:48
Speaker 4: understood the power of tech. I do think what's changing
21:53
Speaker 4: and the massive inflection point right now with jen Ai,
21:57
Speaker 4: you now have all this unstructured data that is abundant
22:02
Speaker 4: in healthcare, and you now can take that and have
22:06
Speaker 4: the power of that to change workflow, to change and
22:10
Speaker 4: support the doctors and nurses that are delivering here in
22:13
Speaker 4: a way that doesn't require behavior change but makes their
22:16
Speaker 4: lives easier, and that is going to be a game changer.
22:19
Speaker 2: So I want to put a little It's almost a
22:22
Speaker 2: cliche to say flesh on the bones, no pun intended.
22:26
Speaker 2: So I have my Charts by Epic on my phone
22:30
Speaker 2: and it's the first app I've ever used where I
22:33
Speaker 2: can renew a prescription, I could set up an appointment,
22:35
Speaker 2: I can ask a doctor question. But literally six months ago,
22:40
Speaker 2: if I wanted a record before I put this on
22:42
Speaker 2: this phone, the doctor's office would say, fax your request
22:46
Speaker 2: to us, Like, what's a fact? I mean, really, we're
22:50
Speaker 2: still using fifty year old technologies. But that seems to
22:53
Speaker 2: be in most of the medical profession. I know there's
22:58
Speaker 2: some security concerns and some rules about what can and
23:01
Speaker 2: can't be emailed, but faxes, I mean they're living in
23:05
Speaker 2: the nineteen seventies. Is it that far behind the curve
23:09
Speaker 2: for much of the medical US?
23:12
Speaker 4: Yes, just even in New York City. Just got any
23:16
Speaker 4: doctor and you will find that they're still faxing or
23:20
Speaker 4: handing you a piece of paper, and they're not integrated
23:23
Speaker 4: with their own hospital system that they may be affiliated
23:26
Speaker 4: with or have surgical privileges at is.
23:29
Speaker 1: It's absolutely insane.
23:30
Speaker 4: My images, I'm still carding around on discs right, it's crazy. Now.
23:37
Speaker 4: The amazing thing and the problem with Hippa is you're right,
23:41
Speaker 4: like you can't do zoom.
23:42
Speaker 1: You're not supposed to do zoom.
23:43
Speaker 2: Right because it's not secure.
23:45
Speaker 1: It's not you don't have it's not hippo compliant.
23:47
Speaker 4: You. What makes absolutely no sense is that a fax
23:51
Speaker 4: is considered secure.
23:53
Speaker 2: Right. It sits on the fax machine somewhere for hours.
23:56
Speaker 4: Anybody can see it, right, you know the sanitation worker
24:00
Speaker 4: that night, can you know, like see, the whole thing's
24:02
Speaker 4: crazy so much somehow you know your private email is
24:06
Speaker 4: not private enough?
24:07
Speaker 2: So I mentioned my charts. Epic is still private, very
24:12
Speaker 2: large private company. There's been some litigation because of any
24:16
Speaker 2: trust concerns with them. How big is their penetration if
24:21
Speaker 2: so many offices are still you know faxing records around.
24:26
Speaker 4: Their penetration is enormous and growing and I effectively you
24:31
Speaker 4: know Serner is losing traction and losing clients every day.
24:38
Speaker 4: Really and yes, Epic is is owning that market.
24:43
Speaker 2: Is that because the software is so good? And I
24:45
Speaker 2: will tell you my experience with the app, you know,
24:49
Speaker 2: ten out of ten. But what else is happening behind
24:52
Speaker 2: the scenes that's giving them such an advantage over everybody else.
24:57
Speaker 4: Well, I think Cerner lost its way in manner a
25:00
Speaker 4: decade ago. Oh really a decade ago. So it just
25:03
Speaker 4: create opened up the it just opened up. There wasn't
25:05
Speaker 4: you know. It takes time to create all the different
25:07
Speaker 4: modules and all the different departments. So this is just
25:09
Speaker 4: a time game almost and that you know, Epic had
25:13
Speaker 4: a lot of time to create integrated software across all
25:16
Speaker 4: of these different departments. And and because they got every
25:20
Speaker 4: academic medical institution in the country to effectively adopt them,
25:24
Speaker 4: you know, they they've become a standard and there there
25:27
Speaker 4: is a danger in that in terms of talking about monopoly,
25:31
Speaker 4: they are going to have a growing monopoly in this market.
25:35
Speaker 4: They've also as you say, it's it's a benefit you know,
25:38
Speaker 4: their views like Apple, they're going to be a walled
25:39
Speaker 4: garden and that'll be a benefit to the customer. And
25:44
Speaker 4: that's that's okay. And certainly hospitals you know, like it
25:48
Speaker 4: and there's a real benefit to it. I do think
25:51
Speaker 4: the issue is, I mean, we would never sue epic
25:55
Speaker 4: for any of our small companies that are trying to
25:57
Speaker 4: interface with them. That isn't the way we roll. But
26:00
Speaker 4: do think that there it's a cautionary note about the
26:04
Speaker 4: amount of power.
26:05
Speaker 2: They've become the eight hundred pound gorilla in the space.
26:08
Speaker 4: Is that what's happened, no question, And you as an
26:11
Speaker 4: innovator has to have privileges to link into that system.
26:16
Speaker 2: So they were the disruptor, and now like Apple was
26:20
Speaker 2: the disruptor, now they become the dominant player. So that's
26:25
Speaker 2: why there's some challenges. I was kind of shocked when
26:29
Speaker 2: I saw the chatter about anti trust because literally it's
26:33
Speaker 2: the first app that just works as a patient. Wait,
26:37
Speaker 2: I could do all these things, prescriptions, appointments, I could
26:40
Speaker 2: see X rays or whatever. Wow, nothing else has ever
26:43
Speaker 2: worked this well, they always send you to a website,
26:46
Speaker 2: which opens up a different site. Like nothing really felt secure.
26:50
Speaker 2: This really does feel like a secure app. So does
26:55
Speaker 2: that create opportunities for other companies to come in and
26:59
Speaker 2: being disrupted disruptors or are they sort of blocking the
27:04
Speaker 2: entrance way to new startups that want to compete in
27:07
Speaker 2: that same space?
27:08
Speaker 4: Well, I think you know, let's define the space right
27:11
Speaker 4: that is just for providers and hospital systems specifically, not
27:15
Speaker 4: independent providers there. But you think about the way we
27:19
Speaker 4: think about healthcare in general. What we do in tech
27:22
Speaker 4: enabled software and solutions is we're treating pharma services so
27:27
Speaker 4: farmer as a client, employers payer, employer market as a client,
27:32
Speaker 4: and payers our clients beyond our customers of our companies,
27:36
Speaker 4: beyond hospital systems.
27:38
Speaker 1: Actually, this has.
27:40
Speaker 4: Been the hardest place to play and where we've made
27:43
Speaker 4: the least number of investments, the fewest number of investments
27:47
Speaker 4: is in hospital systems because Epic owned it, and so
27:53
Speaker 4: you know, it's been a sort of dangerous territory for
27:55
Speaker 4: a young innovator to go into. But there's plenty of
27:58
Speaker 4: opportunity to have payers, solutions to focus on provide creating
28:03
Speaker 4: companies that are value based or focused on out how
28:06
Speaker 4: do we create better outcomes in medicare, medicaid and commercial.
28:10
Speaker 4: That don't mean that you're competing in the hospital environment. Again,
28:14
Speaker 4: but back to Jenai, I think the reality is because
28:18
Speaker 4: of the power of our unstructured data, I think that
28:22
Speaker 4: there will be many more opportunities to be a disruptor
28:26
Speaker 4: in the hospital market. And I don't think it's certainly possible.
28:30
Speaker 4: My dream would be in a decade, ten to twenty
28:33
Speaker 4: years that you wouldn't you wouldn't need an EPIC because
28:37
Speaker 4: you would have the ability to integrate with all these
28:41
Speaker 4: solutions using unstructured data across the hospital.
28:44
Speaker 2: So you guys aren't necessarily an investor in hospital systems
28:49
Speaker 2: or hospitals. But when we look in the hospital space,
28:53
Speaker 2: there's been a lot of private equity activity. There's been
28:55
Speaker 2: a lot of consolidation. A ton of not for profit
28:59
Speaker 2: hospitals still carrying that moniker have been picked up by
29:03
Speaker 2: for profit private equity players. How do you look at
29:07
Speaker 2: the consolidation taking place in the hospital chain area? How
29:10
Speaker 2: does that affect how you think about software technology and integration.
29:16
Speaker 4: There will be more consolidation, it will mostly be done
29:19
Speaker 4: by not for profits. That is, the vast majority of
29:23
Speaker 4: hospital systems now are part of not for profits. Right
29:28
Speaker 4: the private equity world, we consider ourselves venture capitalists or
29:32
Speaker 4: growth growth investors, not PE but p you know, has
29:36
Speaker 4: bought several hospital systems, not all of it's gone well.
29:42
Speaker 4: I do feel there's some backlash to that. You know,
29:45
Speaker 4: our goal is to reduce costs in healthcare and improve
29:49
Speaker 4: the patient experience, and you can't really do that if
29:53
Speaker 4: you're focused on owning hospitals. The reality is, everything we
29:56
Speaker 4: want to do is keep people out of hospitals. That's
30:00
Speaker 4: the goal, right. Nobody wants to be in hospital, Nobody
30:03
Speaker 4: wants to die in a hospital. So everything that we
30:07
Speaker 4: want to do is a better patient experience in the home,
30:10
Speaker 4: right in military surgery or in the home, outside of
30:13
Speaker 4: the hospital system. So that that's our goal and focus,
30:17
Speaker 4: not being not owning hospital systems. I will say I
30:20
Speaker 4: was on the board of HCA for a while, not
30:22
Speaker 4: as an investor, but an observer of the best hospital
30:25
Speaker 4: system in America. And if you think about that, that
30:28
Speaker 4: was a pe deal. It was owned by a family,
30:30
Speaker 4: but multiple times right they went public, they went private,
30:33
Speaker 4: they went public again, and that is the best run
30:36
Speaker 4: hospital system in America as a for profit really, yes,
30:40
Speaker 4: the best run, the most efficient, great outcomes. And I
30:45
Speaker 4: think the way you've got to look at this not
30:47
Speaker 4: for profit hospitalism is that every not for profit hospital
30:51
Speaker 4: is a for profit hospital because every decision is made
30:55
Speaker 4: by a for profit doctor.
30:57
Speaker 2: Right somewhere along the line, someone is making a decision
31:00
Speaker 2: and obviously.
31:01
Speaker 1: That impacts their income.
31:03
Speaker 4: Right, So that there's no such thing as a not
31:05
Speaker 4: for private hospital in America.
31:08
Speaker 2: So what are the better known hospitals that HCA manages
31:12
Speaker 2: If I'm not familiar with eight c A generally, Well.
31:17
Speaker 1: They're going to be brands.
31:18
Speaker 4: You know, there's Baptists, there's They're gonna be brands all
31:21
Speaker 4: over the country and they're gonna be different in every
31:22
Speaker 4: market because they.
31:23
Speaker 1: Want to be local.
31:24
Speaker 4: You feel local, and so you wouldn't necessarily know the brands.
31:28
Speaker 4: It's gonna be Florida, and it's going to be city
31:31
Speaker 4: by city, and every hospital will have a different name.
31:33
Speaker 2: Like I've been fortunate to not spend a whole lot
31:36
Speaker 2: of time in hospitals, my experience at NYU Lang Gone
31:40
Speaker 2: was kind of eye opening. Well, first, you know, sometimes
31:44
Speaker 2: you get advice, Hey, go someplace that specializes what you need.
31:48
Speaker 2: So they've seen every variant. And even with that, I
31:52
Speaker 2: wasn't prepared for what an amazing factory assembly line. And
31:57
Speaker 2: I mean that the most positive sense of it. It's like, yeah,
32:01
Speaker 2: we do a million of these a day. Whatever you have,
32:03
Speaker 2: it's not a problem. We've seen it. And it was true.
32:07
Speaker 2: They had it down to like bing bang bing, you're
32:11
Speaker 2: in and out and it was really impressive to see.
32:15
Speaker 2: I'm just curious if that degree of competency. I think
32:21
Speaker 2: my whole copay for the whole experience was fifty bucks,
32:24
Speaker 2: which I guess just means my wife has good health
32:27
Speaker 2: insurance as a New York teacher. But it was really impressive.
32:33
Speaker 2: Is that specifically a function of one hospital or is
32:38
Speaker 2: that a broader management approach to the whole chain?
32:42
Speaker 4: New York does not allow for hospitals, so you wouldn't
32:47
Speaker 4: experience it in New York state.
32:49
Speaker 2: It did not feel like it was a not for profit. Yeah,
32:52
Speaker 2: it felt like everything was structured to get them in,
32:55
Speaker 2: get them out, move on time.
32:57
Speaker 4: We have New Yorker's a lucky and that they've got
33:01
Speaker 4: a somewhat competitive hospital environment and for sure excellent care
33:06
Speaker 4: here right.
33:08
Speaker 1: So No, it's and that's that is.
33:09
Speaker 4: I think if you sat in a boardroom of a
33:12
Speaker 4: not for profit and a for pro hospital, you'd be
33:14
Speaker 4: amazed how similar the conversations are.
33:17
Speaker 2: I don't doubt that at all. How do you think
33:20
Speaker 2: about having sat on a board how do you think
33:24
Speaker 2: about managing problem hospitals? I just got off the phone
33:28
Speaker 2: with a friend in Florida who jokingly said, you know,
33:32
Speaker 2: if you fall and break your leg in Florida, you
33:34
Speaker 2: don't call an ambulance, You call cab. You call an
33:36
Speaker 2: uber to take you to the airport to fly up
33:39
Speaker 2: to New York. I think he was exaggerating a little bit.
33:42
Speaker 2: But that's not the first time I've heard things like.
33:44
Speaker 1: That over and over again.
33:45
Speaker 4: People come dig you know, from Connecticut, and people come
33:49
Speaker 4: back to Connecticut all that they do their healthcare. Connecticut
33:53
Speaker 4: may be there, or Northeast could be their second home,
33:56
Speaker 4: and maybe theyre domicile now in Florida, but they come
33:59
Speaker 4: back for the hospital.
34:01
Speaker 2: How does the system that has that sort of reputation,
34:04
Speaker 2: how do they address that. It seems like in Florida,
34:08
Speaker 2: you would think that they have lots of people who
34:10
Speaker 2: were older. They should be really good.
34:13
Speaker 1: At that, they should be really good.
34:16
Speaker 2: It's a it's just a you know, it's just a
34:19
Speaker 2: I'm just musing. But it just seems like I mentioned
34:23
Speaker 2: somebody I was speaking to you, and they're like, find
34:26
Speaker 2: out why Florida hospitals are not good. I don't think
34:29
Speaker 2: she invests in hospitals.
34:30
Speaker 4: Well, you know, and I think there's there's just a
34:32
Speaker 4: long history, like they have doctors going to to Florida
34:36
Speaker 4: to there's been a culture of like making money there,
34:39
Speaker 4: you know, and the more specialists you have, the more
34:42
Speaker 4: it's it's amazing. The more specialist you have, more surgeries and.
34:46
Speaker 1: More things to get done it right.
34:47
Speaker 4: And so I just don't think they have the same
34:50
Speaker 4: tradition of quality that other states have had, or the
34:54
Speaker 4: Northeast has had.
34:56
Speaker 1: So I can't.
34:57
Speaker 4: Obviously they're good HCA hospitals and Florida, but for some reason,
35:02
Speaker 4: the whole ethos there has not been the same in general.
35:06
Speaker 2: So I'm kind of intrigued by a couple of things
35:10
Speaker 2: you've said about wanting to improve outcomes, reduced costs, and
35:15
Speaker 2: enhance experiences, and you talk about five levers of change
35:21
Speaker 2: that the fun looks at, and let's go through all
35:24
Speaker 2: of these access, outcome, cost, speed, and friction that sounds
35:32
Speaker 2: like everybody's combined headache in healthcare. Tell us a little
35:37
Speaker 2: bit about those five levers.
35:40
Speaker 4: Well access. I think we all learned a lot about
35:42
Speaker 4: that during covid R. There is differential access and it's
35:47
Speaker 4: not just minority or city based. Obviously rural. The rural
35:50
Speaker 4: environment is very challenging a.
35:52
Speaker 2: Little bit of a healthcare desert.
35:54
Speaker 4: In some healthcare desert, you've got pharmacies closing, you have
35:59
Speaker 4: hospital that are a year and an hour and a
36:02
Speaker 4: half away from people. You have challenged hospital systems. I
36:05
Speaker 4: would say in suburbia and urban environments, hospitals are actually
36:11
Speaker 4: doing quite well in making a fair amount of money,
36:13
Speaker 4: but in rural far more challenged. So that is something
36:17
Speaker 4: that we're actually addressing in whatever our company is called
36:20
Speaker 4: main Street, which is focused on it's a oak Street
36:24
Speaker 4: maybe Village MD for the rural environment, but with a
36:28
Speaker 4: different business model, and the point is for them to
36:32
Speaker 4: actually own everything in those environments except for cute care
36:36
Speaker 4: hospital and try to keep people as much as possible
36:39
Speaker 4: out of the hospital, but provide a broader set of
36:43
Speaker 4: care opportunities to those in rural environments.
36:46
Speaker 2: So I have a vivid recollection of a television show
36:50
Speaker 2: called Northern Exposure. They wanted more doctors in Alaska, so
36:54
Speaker 2: the state of Alaska would pay for your medical school,
36:57
Speaker 2: but you had agreed to practice there for five years.
37:00
Speaker 2: It seems amazing that in the United States in twenty
37:03
Speaker 2: twenty four there are healthcare deserts. Why haven't states? And
37:09
Speaker 2: I know this is not your expertise, but it seems
37:12
Speaker 2: like states should have addressed this a long time ago.
37:15
Speaker 2: How is it possible in a modern era you could
37:17
Speaker 2: be two hours away from an emergency room. It's unthinkable,
37:21
Speaker 2: at least in the Tri state area. It's hard to imagine.
37:24
Speaker 1: Yeah, no, I agree.
37:25
Speaker 4: I'm the fact that they should be in setting primary care,
37:27
Speaker 4: paying for people's medical school that will go into primary
37:29
Speaker 4: care and go to rural markets, and there are some
37:32
Speaker 4: that are doing that. I think about virtualization though, because
37:34
Speaker 4: of one of the aspects of a main street or
37:37
Speaker 4: some other models we have care Bridge is that virtual
37:40
Speaker 4: care and wrap round care so much of this actually
37:43
Speaker 4: can be done virtually. You can have specialists in a
37:47
Speaker 4: network that don't you know, your best oncologist from MSK
37:52
Speaker 4: in New York City can be advising people in rural environments.
37:55
Speaker 3: Right, memorials locattering, Ye, yes.
37:57
Speaker 1: Memorials loancuttering exactly.
38:00
Speaker 2: Difference between virtual and wrap around how do they differ?
38:04
Speaker 4: Well? I think wrap around may mean that you have
38:06
Speaker 4: a connectivity locally, plus you have virtual care that extends
38:11
Speaker 4: what is available locally. But wrap round could be you
38:15
Speaker 4: have in Carebridge's case, you're you're managing what we call
38:19
Speaker 4: dual eligibles, which are those who have Medicaid and Medicare.
38:23
Speaker 4: They're the sickkest of the sick that are in long
38:26
Speaker 4: term services home based services, so they're in the home.
38:29
Speaker 4: Generally they're sick enough to have a caregiver and who's
38:31
Speaker 4: either a family member or a caregiver who's hired to.
38:36
Speaker 1: Help them out.
38:37
Speaker 4: And then you're supplying you know, nurses and mad and
38:41
Speaker 4: others that will they get to know these patients, but
38:45
Speaker 4: all virtually but end up you know, developing a relationship
38:48
Speaker 4: with the caregivers that have a you know, we have
38:50
Speaker 4: an iPad in the home with a button essentially, you know,
38:54
Speaker 4: like the nine one one button where you hit the button,
38:57
Speaker 4: as opposed to all of a sudden for every issue,
39:00
Speaker 4: sending that patient to the emergency room, which is wildly expensive,
39:04
Speaker 4: right and not constructive because often they get admitted and
39:07
Speaker 4: you know, and then all of a sudden you have
39:08
Speaker 4: a thirty thousand dollars expense. The reality is that button
39:12
Speaker 4: is going to a nurse that's on you know, on
39:15
Speaker 4: call or in a call center for a care bridge
39:19
Speaker 4: and or a main street that's taking care of that
39:21
Speaker 4: individual and actually knows knows the medical records, has gotten
39:26
Speaker 4: developed a relationship with the caregiver and the patient so
39:30
Speaker 4: they can walk through what are the issues to say
39:33
Speaker 4: mental health crisis, which is you know often is or
39:37
Speaker 4: get ahead of some of the challenges of wound that
39:40
Speaker 4: gets taken care of as opposed to in the er,
39:43
Speaker 4: you know, by somebody going to the home or getting
39:45
Speaker 4: them to another facility. So these are the things that
39:48
Speaker 4: it's just like long digital care management of individuals and
39:52
Speaker 4: the chronically ill are those that end up in the
39:54
Speaker 4: hospital most often.
39:55
Speaker 2: And you mentioned Carebridge, that's a company you have an
39:58
Speaker 2: investment in. It seems I'm so obvious. How do we
40:01
Speaker 2: get better outcomes and less expensive costs by intervening before
40:06
Speaker 2: they end up in an emergency room? Again, how has
40:10
Speaker 2: this not taken place before? Is that is that what
40:13
Speaker 2: care bridges business?
40:15
Speaker 4: Yes, and yes they mainish the sickness of this chronically
40:19
Speaker 4: ill in the home that are in that are dual eligibles,
40:22
Speaker 4: and that is what they do. They develop a relationship,
40:24
Speaker 4: they wrap around, but they it's all about part of
40:27
Speaker 4: this is financial alignment. They have contracts with the health
40:29
Speaker 4: plans to take care of these individuals. They get paid Basically,
40:33
Speaker 4: they have full responsibility for the cost of care for
40:36
Speaker 4: these individuals, so they're highly incentive to take.
40:38
Speaker 3: Good care of them, preempt those emergency.
40:42
Speaker 4: Those emergencies rooms. The two most expensive things are in
40:45
Speaker 4: healthcare are rising hospital costs, which are up like twenty
40:49
Speaker 4: percent this year, and drug costs, So if you can
40:54
Speaker 4: manage drug compliance better, and most importantly the easiest but
40:59
Speaker 4: not easy thing to do is to keep people out
41:01
Speaker 4: of the hospital appropriately. Nobody wants to be at the hospital.
41:05
Speaker 4: I mean, this is the thing I always hospitals always
41:07
Speaker 4: talk about utilization management. You're keeping people out of the hospital. Well,
41:11
Speaker 4: that's actually our job is do preventative care and keep
41:14
Speaker 4: people from using the most expensive resource in America.
41:17
Speaker 2: And it's always astonishing to when you read I think
41:21
Speaker 2: medical errors are the third most common cause of fatalities
41:24
Speaker 2: in the United States. That's a stunning number. And I
41:29
Speaker 2: guess why none of us really want to be in
41:31
Speaker 2: a hospital this weekend.
41:32
Speaker 4: It's dangerous to be in a hospital. It is dangerous.
41:36
Speaker 4: Think about the infection rate in a hospital staff, and yes,
41:41
Speaker 4: it is actually dangerous to be in a hospital. So
41:43
Speaker 4: there's better be a good reason to be there.
41:45
Speaker 2: So we talk about access outcome. I'm kind of intrigued
41:50
Speaker 2: by the focus on cost, speed, and friction because all
41:54
Speaker 2: three of those seem to apply to both healthcare and
41:57
Speaker 2: financial technology. You mentioned they both live on old legacy systems.
42:02
Speaker 2: They're not nearly as cutting edge as they should be.
42:06
Speaker 2: Is that how you ended up being both a healthcare
42:08
Speaker 2: and a fintech investor?
42:11
Speaker 4: Certainly between insurance and payments and rev cycle, we thought
42:15
Speaker 4: it was in two thousand and two and obvious place
42:18
Speaker 4: to go. And having gone into biotech early and then
42:21
Speaker 4: tech enabled you know, software using leveraging the Internet in
42:24
Speaker 4: healthcare early, I just felt like payments in fintech I
42:28
Speaker 4: wanted to be early, like that was an area you
42:30
Speaker 4: could just tell the tailwinds were there. And so we
42:33
Speaker 4: came in two thousand and two before anybody knew what
42:36
Speaker 4: fintech was, and we were focused initially on the sort
42:39
Speaker 4: of prepaid underbanked market.
42:43
Speaker 2: And prepaid an under bank.
42:46
Speaker 4: Underbanked being sixty at that time, sixty million people in
42:49
Speaker 4: America did not have checking accounts or credit or debocards, right,
42:53
Speaker 4: and think about what you can't do, okay, and you
42:55
Speaker 4: had the advident of the internet, you can buy things online.
42:59
Speaker 4: You could and reserve a hotel room, you couldn't rent
43:02
Speaker 4: a car, like all these things that change your life.
43:06
Speaker 1: So by investing in netspend, which is one of the.
43:09
Speaker 4: First prepaid debit cards, people could actually do those things.
43:13
Speaker 4: They could buy online, they could reserve a hotel room,
43:16
Speaker 4: they could rent a car. I mean, these are game
43:19
Speaker 4: changing things to someone.
43:21
Speaker 1: So that was.
43:22
Speaker 4: Exciting because we were changing people's lives and giving them access,
43:27
Speaker 4: you know, democratizing credit effectively.
43:30
Speaker 2: So it's interesting you started in fintech in two thousand
43:34
Speaker 2: and two, because I recall former fitcham and Paul Volker
43:38
Speaker 2: said only half in Jess and I want to say
43:41
Speaker 2: it was twenty eleven, twenty twelve. You know, what innovation
43:46
Speaker 2: is there in the financial space? Other than the ATM,
43:50
Speaker 2: nothing's happened, And it seems like that really isn't true.
43:53
Speaker 2: There's been a ton of innovation in the financial space.
43:57
Speaker 2: Tell us some of the other fintech investments made.
44:03
Speaker 1: More recently. And fraud. Just think about fraud as being
44:05
Speaker 1: an area.
44:06
Speaker 2: Of constant, constant.
44:08
Speaker 1: Battle arms race.
44:10
Speaker 4: It is an arms race, and well even more so
44:12
Speaker 4: when you think about what happened was in the payments
44:14
Speaker 4: world you had card present right, you're swiping at the
44:18
Speaker 4: point of sale. And then we had the Internet come
44:21
Speaker 4: along and they had virtualization of payments. Then fraud exploded, right.
44:26
Speaker 1: And now with.
44:29
Speaker 4: You know jen ai and obviously deep fakes, you have
44:32
Speaker 4: person at present, So you've got a whole different level
44:36
Speaker 4: of fraud that is being experienced right now, right where
44:40
Speaker 4: somebody's mimicking your voice for a call right.
44:45
Speaker 2: Literally, just had this conversation yesterday with my head of compliance.
44:50
Speaker 2: It was a I don't remember it was Gizmoto or
44:52
Speaker 2: one of those sites that talks about the fake calls
44:56
Speaker 2: you're getting supposedly from Google, who will never really call you.
45:01
Speaker 2: Assume any foone call you're getting it is a fake.
45:04
Speaker 2: But the AI agent on the other side sounds so realistic.
45:11
Speaker 2: Always ask them to sing a song and that was
45:14
Speaker 2: that was the solution, and AI app will sing it
45:17
Speaker 2: until or whatever silly thing you ask. But it just
45:21
Speaker 2: seems like the ability to impersonate people is just getting
45:25
Speaker 2: better and better. Who's going to win this arms race?
45:29
Speaker 4: Yeah, Well, I think it's just going to be a
45:31
Speaker 4: continual battle of they'll create new ways to implement fraud
45:37
Speaker 4: and then we'll create solutions against that fraud, and so
45:40
Speaker 4: it is I think will be a perpetual and continual battle.
45:44
Speaker 4: We have companies like feeds I and Prove that are
45:48
Speaker 4: focused on that area, and it.
45:50
Speaker 2: Be feeds I focuses on risk management and combating fraud.
45:55
Speaker 4: Combating fraud for Yes and Prove is that when you
46:00
Speaker 4: get the pin and you're you're putting, you're doing sort
46:03
Speaker 4: of double authentication. They're the ones that are integrated in
46:06
Speaker 4: the operating system of phones and effectively are giving you
46:09
Speaker 4: that number that pen when you're typing in that second
46:13
Speaker 4: number to authorize a transaction. So so we have a
46:18
Speaker 4: number of companies, probably seven or eight in that space.
46:22
Speaker 4: Other companies that do If you think about the America
46:27
Speaker 4: and where we are here in terms of credit payments,
46:31
Speaker 4: think about La Latam is two decades behind us, and
46:36
Speaker 4: so we're seeing a number of opportunities in fintech.
46:39
Speaker 2: And two decades behind.
46:41
Speaker 4: Yeah, two decades behind, which actually will probably be an
46:44
Speaker 4: advantage and they will leap frog us because they don't have.
46:47
Speaker 2: These they'll start from scratch.
46:49
Speaker 4: Those start from crutch and scratch. And if you look
46:51
Speaker 4: at Brazil, they've created something called Picks, which they built
46:55
Speaker 4: for two million dollars, which is amazing by their central bank,
46:59
Speaker 4: and it's real time payments, and effectively it's a protocol
47:03
Speaker 4: and effectively allows bank to bank authentication. So if you
47:06
Speaker 4: think about ACCH and your cash account to somebody else's gay,
47:10
Speaker 4: it is incredibly complicated in the US to do an
47:13
Speaker 4: ACCH transfer your bank account to another bank account.
47:16
Speaker 1: Right, there's this takes forever.
47:20
Speaker 2: I wanted to address that. I grabbed my phone and
47:23
Speaker 2: I'm opening the folder with the fin tech apps on it.
47:27
Speaker 2: So Venmo is the easiest thing in the world to
47:30
Speaker 2: use just to send money to someone else. But I
47:34
Speaker 2: did something in South American Colombia. I had an old
47:39
Speaker 2: truck rebuilt in Colombia and I was using remitly and
47:44
Speaker 2: World remit to send as long as it was less
47:47
Speaker 2: than ten thousand dollars at a time. Internationally, it was
47:50
Speaker 2: like click click, click done. That was an unthinkable nightmare.
47:56
Speaker 2: I don't know five years ago, ten years ago, I'm
47:59
Speaker 2: looking at at the t D and the Schwab app,
48:02
Speaker 2: I'm looking at the chase. I mean, just the amount
48:06
Speaker 2: of things you could do on your phone. So it
48:09
Speaker 2: feels like the innovation.
48:11
Speaker 4: Certainly, the innovation from the consumer experience is there. It's
48:15
Speaker 4: ironic though, because if you think about Venmo, everything runs
48:17
Speaker 4: on on the credit card rails right now, right, I
48:21
Speaker 4: mean that's actually what's happening on the visa rails, the
48:23
Speaker 4: master card rails or MX and the reality is that
48:26
Speaker 4: because it scur it exists.
48:29
Speaker 1: Right, and it's easy.
48:30
Speaker 4: So I mean think about Apple, right, they run on
48:32
Speaker 4: you're putting your credit card in for Apple.
48:34
Speaker 2: Pay, right, I just drop the phone on it and
48:39
Speaker 2: that's right, that goes right through the credit So that's.
48:41
Speaker 4: If you think about Latim, that's an expensive option. And
48:45
Speaker 4: so what they've done in Latam has created a pretty
48:48
Speaker 4: friction free visa like rails, but the very cheap like
48:54
Speaker 4: sense pennies like virtually no cost. So that is then
48:58
Speaker 4: that is probably taken like forty percent of credit card
49:03
Speaker 4: and debit card transactions.
49:04
Speaker 2: Really and wasn't there a couple of things done over
49:08
Speaker 2: cell phones in parts of Africa where they didn't have
49:12
Speaker 2: a credit card system and just you know, necessity being
49:16
Speaker 2: the mother invention came up with some things. So my
49:19
Speaker 2: question is are all of these various things secure or
49:25
Speaker 2: you know, what is the challenge building the next generation
49:28
Speaker 2: what's going to replace I think will anything replace credit cards?
49:33
Speaker 4: Well, I think real time payments will replace credit cards.
49:35
Speaker 4: But you are going to build costs on top of it,
49:37
Speaker 4: because if you're talking about large B to B payments, right,
49:41
Speaker 4: you're still going to be talking about something that needs
49:43
Speaker 4: and even larger B two C payments. There is more
49:46
Speaker 4: fraud capability that needs an identity authentication capabilities that need
49:50
Speaker 4: to be built on top of it. There will be
49:52
Speaker 4: great opportunities for companies for us to invest in that
49:55
Speaker 4: will create B to B opportunities on top of picks
49:58
Speaker 4: and on top of other infrastructures that are being built
50:02
Speaker 4: in Latam or India or Africa.
50:06
Speaker 2: H really kind of fascinating. So, given these two areas
50:11
Speaker 2: that you focus on and the track record you guys
50:15
Speaker 2: have put up, I just wanted to mention again you
50:18
Speaker 2: were named one of the top ten venture farms of
50:22
Speaker 2: twenty twenty four and a number of other accolades last year.
50:28
Speaker 2: How does this affect the deal flow you see in
50:31
Speaker 2: the companies you look at. Do you have your own
50:34
Speaker 2: space and that's what you drill into or are you
50:37
Speaker 2: guys a little broader thinking about a variety of different
50:41
Speaker 2: types of companies.
50:44
Speaker 4: For example, we define fintech very broadly. If that is
50:48
Speaker 4: e commerce infrastructure, you know, it's fraud and identity, it
50:53
Speaker 4: is payments, it is general infrastructure. So it's fairly broad
50:59
Speaker 4: and to how we look at it. I think the
51:03
Speaker 4: as we think about opportunity in the sector, think of
51:07
Speaker 4: us as starting things or backing an entrepreneur who has
51:12
Speaker 4: started something, because we have a whole thematic approach to
51:15
Speaker 4: an area, and I'll talk about something we just did
51:18
Speaker 4: all the way up to a classic ABC round, right,
51:21
Speaker 4: And we'll even do an occasional buyout or two where
51:26
Speaker 4: we think there's huge growth opportunities if we invest in
51:29
Speaker 4: the tech portion of it. So something we did recently
51:33
Speaker 4: I think is emblematic of what we're doing more lately
51:38
Speaker 4: with a two billion. Our most recent fund was two billion,
51:40
Speaker 4: and we backed the individual Dave Clark out of Amazon,
51:46
Speaker 4: who built the for twenty two years, built all the
51:49
Speaker 4: supply and logistics chained at Amazon, and he brought his
51:53
Speaker 4: chief scientific officer and a number of people from Amazon
51:56
Speaker 4: and others that he's worked with. And when we announced
52:00
Speaker 4: this company, twelve hundred people that day submitted resumes. Wow
52:05
Speaker 4: to them it was it was extraordinary and speaks to
52:08
Speaker 4: his reputation. And the idea is that we will build
52:11
Speaker 4: a Jenai software native AI software platform that will incorporate
52:17
Speaker 4: some of the supply chain software boutique best to breed
52:21
Speaker 4: software systems that are out there that constitute the supply chain,
52:25
Speaker 4: because if you are in Amazon or someone else, you're
52:29
Speaker 4: working with twenty different vendors to complete your supply chain,
52:33
Speaker 4: and the reality is you really want that integrated in
52:36
Speaker 4: one infrastructure. And so their plan is to basically build
52:39
Speaker 4: the supply chain infrastructure.
52:41
Speaker 2: And to end one company for software from when it
52:45
Speaker 2: leaves this place to what ends up that place and
52:47
Speaker 2: all the quantitative metrics and tracking and everything that with it.
52:51
Speaker 1: Huh really really, So we committed one hundred million to that.
52:54
Speaker 2: Oh no kidding. Oh so that's you're pretty that sounds
52:58
Speaker 2: like a pretty big bet.
52:59
Speaker 1: Yeah, we're all in.
53:00
Speaker 4: But yes, we're doing more of the one hundred million
53:03
Speaker 4: plus investments seventy million dollar investments because we want concentrated
53:07
Speaker 4: bets in the areas that are most exciting to us
53:10
Speaker 4: with the best entrepreneurs.
53:12
Speaker 2: So I only have you for another ten or fifteen minutes,
53:15
Speaker 2: and before I get to my favorite questions I ask
53:17
Speaker 2: all of my guests. I gotta throw a curveball at you, Okay,
53:22
Speaker 2: which is you know, normally at this point in a
53:26
Speaker 2: conversation with a VC, we talk about you've had seventy
53:30
Speaker 2: exits and fifteen IPOs, and but you're also the first
53:36
Speaker 2: Lady of Connecticut. You're married to Ned Lamont, the governor
53:40
Speaker 2: of Connecticut. Kind of an unusual role for first ladies
53:44
Speaker 2: being a VC. Tell us how you juggle these two roles.
53:48
Speaker 2: It's it's You're the first VC I've spoken to who's
53:52
Speaker 2: also in a state house.
53:54
Speaker 1: Right, it is unusual.
53:56
Speaker 4: The great news is that there is no expectation for
54:00
Speaker 4: the first Lady of Connecticut either. There is no established role,
54:05
Speaker 4: and so I'm really just a partner to my husband
54:09
Speaker 4: as I would be in terms of just their support
54:14
Speaker 4: and guidance. But I do campaign with him. I go
54:17
Speaker 4: on week you know, on weekends, we do things together.
54:21
Speaker 4: But he's very much running the state of Connecticut. Well,
54:24
Speaker 4: I am doing my thing, you know, during the week,
54:26
Speaker 4: and then we come together in Connecticut and Greenwich during
54:29
Speaker 4: the weekend.
54:30
Speaker 1: But it's been I mean, it's fascinating. He loves the job.
54:33
Speaker 4: It's I you know, I'm biased, but I think he's
54:36
Speaker 4: done a great job for Connecticut as a businessman himself,
54:40
Speaker 4: but somebody who has a you know, his social conscience.
54:44
Speaker 4: So it's been fun to watch because he does love
54:46
Speaker 4: the job and.
54:48
Speaker 2: Really really interesting. All right, let's jump to our favorite
54:52
Speaker 2: questions that we ask all our guests, starting with since
54:56
Speaker 2: since you mentioned you like to uh spend the weekends
54:59
Speaker 2: with your your husband the governor, what do you guys
55:01
Speaker 2: do on the weekends? What are you watching listening? What's
55:04
Speaker 2: keeping you entertained?
55:06
Speaker 1: Right?
55:07
Speaker 4: Yukon basketball? I can't wait to have it back. So
55:10
Speaker 4: women and men are going to be amazing this year.
55:13
Speaker 4: So and they I have been obviously, the men have
55:15
Speaker 4: won two years in a row.
55:17
Speaker 2: Huskies have a great team. They've been they've been winning for.
55:20
Speaker 1: A long time, amazing.
55:22
Speaker 2: And the women's team has done really well. Also the past.
55:24
Speaker 1: Gina is incredible.
55:25
Speaker 4: I mean, the fact that they had five injured players
55:28
Speaker 4: and got into the basically the final four was incredible.
55:32
Speaker 4: So between Gino Oriama and Dan Hurley to the best
55:36
Speaker 4: coaches in the country. So that's been super fun. We
55:38
Speaker 4: go to games and we and we watch on weekends,
55:41
Speaker 4: but we're we're I don't know, I don't know if
55:43
Speaker 4: I'm an athlete, but I love sports, and we love sports.
55:46
Speaker 4: We play golf and tennis and hike and it's being
55:49
Speaker 4: out ski and being outside as much as possible.
55:53
Speaker 1: Uh.
55:53
Speaker 4: And he watches and you know, he's been a long
55:56
Speaker 4: suffering Jets fan. We're hoping the Jets are back, and
55:59
Speaker 4: I having to be a Pack fan being from Wisconsin.
56:01
Speaker 2: So really interesting. Tell us about your early mentors who
56:06
Speaker 2: helped shape your career.
56:08
Speaker 4: Yeah, there was an individual, Jerry Gallagher. I'm from Wisconsin.
56:11
Speaker 4: He was from Minnesota and he ran for a prior firm.
56:17
Speaker 4: He ran the retail investing and was a brilliant investor.
56:22
Speaker 4: I mean it was somebody at Donaldson, Luff and Jen
56:25
Speaker 4: Ratt in the early days. He was the retail analyst
56:27
Speaker 4: and he actually invented the same store sales metric.
56:32
Speaker 2: Oh no kidding.
56:33
Speaker 4: If you can imagine, people were just saying, oh, that
56:35
Speaker 4: company's growing one hundred percent a year. They didn't know
56:37
Speaker 4: if they'd added one hundred store you know, double number
56:39
Speaker 4: of stores. But yeah, so he actually invented that. He
56:43
Speaker 4: joined us and invested in well, there was a filing's
56:46
Speaker 4: basement Whole Foods Amazon Whole Foods, which we sold Amazon
56:54
Speaker 4: Dick's Sporting Goods office depot. It was just a pfang Jambajews,
57:01
Speaker 4: I mean, just an unbelievable track record, the best retail
57:05
Speaker 4: investor in the country. And he taught me a ton.
57:08
Speaker 4: So he was the first person, when I was twenty
57:11
Speaker 4: seven years of age who said to me, you're focused
57:14
Speaker 4: on the idea. You're not focused on the CEO enough,
57:16
Speaker 4: You're not focused on the people like you have got
57:19
Speaker 4: to raise your bar on CEOs. And of course it's
57:23
Speaker 4: of course it's I mean, it's so obvious it's all
57:25
Speaker 4: about the people. But I think people you do get
57:27
Speaker 4: enamored with trends, secular trends and ideas, and ultimately it's
57:33
Speaker 4: it was the most important advice anybody ever gave me,
57:35
Speaker 4: because it's it's all about the CEO at the end
57:37
Speaker 4: of the day, and the team they can attract and
57:39
Speaker 4: how they treat people. It's and I think it was
57:42
Speaker 4: very much golden rule, you know, he was. Some might
57:45
Speaker 4: have considered Jerry old fashioned, but the reality is that
57:48
Speaker 4: that old fashioned message just cycles back and every crazy
57:51
Speaker 4: cycle yeah have with entrepreneurs, and that is you know,
57:54
Speaker 4: just obviously do the right thing, you know, and treat
57:58
Speaker 4: people like you'd like to be treated, and be kind
58:01
Speaker 4: and yet you know, be be direct of you tough.
58:04
Speaker 2: I don't remember which VC it was that said the
58:07
Speaker 2: same thing that you just said about backing the team
58:11
Speaker 2: and the entrepreneur, not the idea, but to drive the
58:16
Speaker 2: point home. Hey, each of these companies that have had
58:19
Speaker 2: a successful exit, they've pivoted five times and however it
58:23
Speaker 2: works out. It's never the initial idea, it's always the person.
58:28
Speaker 2: And I never really thought about that until right. It's
58:32
Speaker 2: if you're betting on the idea, your you're three iterations
58:36
Speaker 2: away from where it's going to end up.
58:38
Speaker 4: Yeah, and the general idea and secular trend maybe right,
58:42
Speaker 4: but actually the business model is wrong. So getting the
58:44
Speaker 4: business model is so right is so critical.
58:49
Speaker 2: Really really interesting. Let's talk about books. What are some
58:52
Speaker 2: of your favorites?
58:53
Speaker 3: What are you reading right now?
58:56
Speaker 4: Well, original favorite was To Kill a Mockingbird, and but
59:00
Speaker 4: that like influenced my sense of social justice. And then
59:05
Speaker 4: it's probably the Robert Massey books. And you know, I've
59:07
Speaker 4: never been to Russia, but I've been fascinated by you know,
59:10
Speaker 4: Peter the Great Nicholas and Alexandra Catherine the Great. I
59:13
Speaker 4: mean one, it's so if you look at what's going
59:17
Speaker 4: on in Russia now, same exactly like you understand cultures, right,
59:20
Speaker 4: I mean, it's sort of like understanding history and culture.
59:22
Speaker 4: Don't It doesn't change that much, right, I mean, it's
59:25
Speaker 4: a It is a that is a country that understands
59:27
Speaker 4: suffering and likes autocrats basically, you know.
59:31
Speaker 3: They like Not a coincidence, right.
59:34
Speaker 1: Yeah, yeah, not a coincidence. So yeah.
59:36
Speaker 4: And then recently The Money Trap, written by a friend
59:41
Speaker 4: of mine of Lokes Soma, is a fascinating book. He
59:45
Speaker 4: was the head of soft Bank during the crazy period
59:48
Speaker 4: in North America. Yeah, and he actually had never written
59:51
Speaker 4: a book. He went to the Creative writing program Okay,
59:54
Speaker 4: got his visa, was able to stay in America, went
59:57
Speaker 4: to the Creative writing program in New York City and
1:00:00
Speaker 4: and wrote this book. And it's absolutely beautifully written and
1:00:02
Speaker 4: it's fascinating. So I highly recommend it Money Trap.
1:00:05
Speaker 2: I'm gonna I'm gonna put that on my list. If
1:00:08
Speaker 2: you're you mentioned books about Russian I know you're talking
1:00:12
Speaker 2: more historically. If you haven't read read Notice.
1:00:16
Speaker 3: By I know Bill and yes, so you did.
1:00:19
Speaker 2: Yeah, astonished. It's it reads like it's fiction and it's
1:00:24
Speaker 2: such a page turner. All right, Our final two questions,
1:00:28
Speaker 2: What sort of advice would you give a recent college
1:00:31
Speaker 2: grad interest in a career in either venture investing, healthcare, fintech?
1:00:37
Speaker 2: What would you would you how would you advise them?
1:00:41
Speaker 4: They have to go work inside companies, and they should
1:00:44
Speaker 4: go work in a startup, in an early stage company,
1:00:48
Speaker 4: and maybe mid stage, and definitely a larger legacy company,
1:00:53
Speaker 4: because they need to understand business. I mean when I
1:00:56
Speaker 4: read the New York Times Business section, now, I think
1:00:59
Speaker 4: these people have never been in business. And obviously Bloomberg
1:01:04
Speaker 4: specializes in it, and so it has a lot of
1:01:06
Speaker 4: reporters that deeply understand it and respect it. But I
1:01:08
Speaker 4: think that you can't write about something you don't haven't
1:01:12
Speaker 4: actually lived at all and truly understand what is. They're
1:01:16
Speaker 4: obviously things that are very flawed in business, and it's often,
1:01:19
Speaker 4: particularly in the early stage, extremely chaotic, but it is
1:01:24
Speaker 4: what drives our economy, which provides jobs for people and
1:01:28
Speaker 4: employees people and allows them to pay their bills and
1:01:32
Speaker 4: support all our great social programs.
1:01:34
Speaker 1: So it's important to understand and.
1:01:36
Speaker 2: Our final question, what do you know about the world
1:01:39
Speaker 2: of investing today you wish you knew back in the
1:01:42
Speaker 2: nineteen eighties when you were first getting started.
1:01:44
Speaker 4: It's an interesting question because I, you know, and maybe
1:01:48
Speaker 4: because I have a tough, long memory, but I feel
1:01:50
Speaker 4: like I only remember the good things. I think, you know,
1:01:54
Speaker 4: knowing that large secular changes are the most important thing
1:01:58
Speaker 4: that drive investment waves and right and and ultimately build
1:02:02
Speaker 4: great companies, just focusing on those. But I feel like
1:02:06
Speaker 4: I ended up actually doing that well, you know, picking
1:02:12
Speaker 4: the secular wave that made sense and getting ahead of it,
1:02:15
Speaker 4: but not too far ahead of it.
1:02:16
Speaker 2: I was going to say you did that well, but
1:02:18
Speaker 2: you were You were also early in a lot of
1:02:20
Speaker 2: big secular trends.
1:02:21
Speaker 4: Yes, So I would say that ended up working out well.
1:02:25
Speaker 4: You can't be Being too early is a killer, right
1:02:28
Speaker 4: right in investing, So that worked out well. But I
1:02:31
Speaker 4: would say, you know, in general, I don't sweat the
1:02:36
Speaker 4: small stuff. You know, get the large things right and
1:02:39
Speaker 4: the rest of it will take care of itself. So
1:02:42
Speaker 4: I would only caution those that are starting out now
1:02:45
Speaker 4: in the investing world, or frankly in any career, to
1:02:48
Speaker 4: just all those things that seems so important that are
1:02:51
Speaker 4: so small during the day, Like just remember that, you know,
1:02:55
Speaker 4: think about yourself forty years from now, what's going to matter,
1:02:58
Speaker 4: what will have mattered to you, what will matter to
1:03:00
Speaker 4: your success, and just focus on those things and don't
1:03:04
Speaker 4: focus on all of the petty small things that it
1:03:08
Speaker 4: may go on wrong or the people around you, you know.
1:03:12
Speaker 4: And then otherwise, just stay away from toxic people and
1:03:15
Speaker 4: make sure you carefully work with people you love and respect.
1:03:20
Speaker 4: And I think in general I've done that, but I
1:03:21
Speaker 4: think there are times where I would have walked away.
1:03:23
Speaker 4: I would have started OKHCFT so much sooner, and that
1:03:26
Speaker 4: would be like the one change in my career that
1:03:28
Speaker 4: I would have made.
1:03:29
Speaker 2: Huh really interesting. Thank you Annie for being so generous
1:03:33
Speaker 2: with your time. We have been speaking with Annie Lamont,
1:03:36
Speaker 2: co founder and managing partner at okhc FT. If you
1:03:41
Speaker 2: enjoy this conversation, well, be sure and look up any
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Speaker 2: of the previous five hundred discussions we've had over the
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1:04:03
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1:04:16
Speaker 2: I would be remiss if I did not thank the
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Speaker 2: Crack team that helps me put these conversations together each week.
1:04:22
Speaker 2: Anna Luke is my producer, Sean Russo is my head
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Speaker 2: is the head of all podcasts at Bloomberg. I'm Barry Ritoltz.
1:04:35
Speaker 2: You've been listening to Masters in Business on Bloomberg Radio.