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The Fiscal Cliff On Uber’s Road Ahead

April 19, 2017 By Dan Munro

Uber is not doing well. In fact, it’s hemorrhaging cash to the tune of about $2 billion (2016) and possibly as much as $3 billion for 2017. Also, the core service (individual rides) is largely a negative margin business. By some accounts, fares only cover about 40% of the cost of the ride.

Beyond that, the CEO has publicly declared that the whole venture is entirely dependent on driverless cars — at scale. Most scientific opinions I’ve read suggest that fully autonomous cars (at scale), are decades away (if ever).

And that’s just the first obstacle. Beyond the massive societal shift away from car ownership (which is still very popular), are some very real (and sober) technical obstacles.

  1. Like Marc Andreessen — I also believe that “software is eating the world,” but there’s a serious vulnerability with that evolution. Software is inherently insecure — and that represents an incredible risk for cars that rely entirely on software for all major functions. Cars have already been hacked and the result is both crippling and chilling. The selling of that safety and security to consumers should not be underestimated because it will require a long trajectory, federal support and millions of safe actual passenger miles (think air travel).
  2. Software has yet to cross a major ethical dilemma that really only exists in truly driverless cars. Should the software be written to protect passengers over pedestrians — or pedestrians over passengers? This isn’t trivial — and it’s critical — not just technically, but for consumers getting into a car where they are likely to know the logic (as they should).
  3. The financial calculations around the cost of truly driverless cars (with additional hardware/software components) are destined to be an order of magnitude more expensive for the foreseeable future. Think of this as Microsoft Windows but with ten times the complexity/cost/risk.

Those are just some of the big technical hurdles for driverless cars — which Uber itself has openly stated is critical to the success of the company. Then we get to the business challenges which are more specific to Uber individually (and autonomous car sharing more generally).

  1. The negative margin today with a physical driver may not change significantly (or enough) by eliminating the driver.
  2. Dispatch software (part of Uber’s core service) isn’t proprietary or protectable. It’s largely a commodity that other companies can (and have) duplicated easily.
  3. Uber doesn’t manufacture the core component on which its entire service depends — the car.

This last one is equally troubling because of the two core components — dispatch software and automobile manufacturing — one is commodity software (that’s easy to duplicate) and the other requires, well, a whole ton of other stuff.

A more likely scenario for driverless cars — at scale — is that consumers would hail a Toyota, Cadillac, Hyundai or Lexus driverless car based on those brand attributes (and tiered pricing) — not an Uber. It will also be a better experience (for both safety and quality) to build the experience as a single solution rather than as an amalgam from distinctly separate companies. A blended solution between 2 big companies also represents a big legal issue around the assumption of liability. This issue alone may be insurmountable because it would require competing commercial interests to agree (with precision) where the liability lines are — and for how much.

So no, I’m not that bullish on Uber’s future prospects beyond an insatiable appetite to burn risk capital on a Quixotic quest to own a market that may never materialize.

To date, the company has secured over $11 billion in risk capital over fifteen rounds (with more than seventy-five investors). With all this as the backdrop, I see only one remaining question: How much longer will investors keep funding this Ponzi scheme in hopes of at least recouping some of their investment — decades from now? An investment which, by most accounts, appears to be predicated on owning a large part of a market that has yet to materialize — let alone at scale.


A version of this article first appeared in Forbes (April 2017)

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Filed Under: Tech

Blockchain Hype Comes To Healthcare

April 5, 2016 By Dan Munro

As to be expected with any “new” and “breakthrough” technology, headlines abound on the promise and enormous potential of this “disruptive” innovation called blockchain. Outside of healthcare, the accolades are breezy, often breathless – if not breathtaking. A great example is this quote from Alex Tapscott.

We’re seeing a big problem where the world economy is growing unabated, but fewer and fewer people are benefiting, and we think blockchain could hold solutions to that.

Or this quote from “What the Internet was for your parents, the blockchain will be for you.”

If allowed to flourish, this technology has the potential to benefit consumers and enterprise on the scale [of] other transformative inventions like railroads, automobiles, telephones, computers, and the Internet itself. The promise behind the blockchain is clear, and its future relies on the collaboration between government agencies, lawmakers and industry leaders.

That “if allowed to flourish” is a little ominous and I’m always a little suspect of “futures” that rely “on the collaboration between government agencies, lawmakers, and industry leaders,” but we get the gist.

Just over two years ago, Marc Andreessen concluded a 3,000 word opus – Why Bitcoin Matters – with this grand vision.

Far from a mere libertarian fairy tale or a simple Silicon Valley exercise in hype, Bitcoin offers a sweeping vista of opportunity to reimagine how the financial system can and should work in the Internet era, and a catalyst to reshape that system in ways that are more powerful for individuals and businesses alike.

Given this level of general hype, it was only a matter of time before healthcare saw blockchain as a solution for many of its problems too. Here are just a few of the recent prescriptions I’ve seen for this new technology elixir.

  • Blockchain Technology: The Solution for Healthcare Interoperability
  • Healthcare: Can the Blockchain Optimize and Secure It?
  • How Bitcoin’s Technology Could Reshape Our Medical Experiences

Not surprisingly, the hype has also started to creep into the healthcare conference circuit. The first example I’m aware of was the Exponential Medicine conference in San Diego last November, but I’m sure there have been others and there will undoubtedly be more. Looking at all this hype, this blockchain is mighty powerful – able to leap tall buildings – solve world inequality stuff. There just has to be a fit in healthcare, right?

First a general definition from Wikipedia:

A blockchain is a distributed database that maintains a continuously-growing list of data records that each refer to previous items on this list and [that can be] hardened against tampering and revision

That’s really it. It’s a distributed database with some very powerful and innovative features. These innovative features are combined in a way to make a blockchain – any blockchain – comparable to a transaction ledger. Not surprisingly, that’s exactly how it acts. It’s a trustworthy distributed ledger.

This is critical because the hype is largely based on these innovative features – and this also goes a long way in understanding how blockchain instantly arrived at its first/best use case – the cryptocurrency called Bitcoin (summarized by its mysterious founder Satoshi Nakamoto’s in his 2008 whitepaper: Bitcoin: A Peer-to-Peer Electronic Cash System).

But much of the initial hype surrounding Bitcoin is officially ancient history. Earlier this year, a lead Bitcoin developer named Mike Hearn announced Bitcoin itself is a failure.

From the start, I’ve always said the same thing: Bitcoin is an experiment and like all experiments, it can fail. So don’t invest what you can’t afford to lose. I’ve said this in interviews, on stage at conferences, and over email. So have other well known developers like Gavin Andresen and Jeff Garzik. But despite knowing that Bitcoin could fail all along, the now inescapable conclusion that it has failed still saddens me greatly. The fundamentals are broken and whatever happens to the price in the short term, the long term trend should probably be downwards. I will no longer be taking part in Bitcoin development and have sold all my coins.

We’ll get to the why of the failure in a minute because it’s also a harbinger of things to come, but for now, let’s review the blockchain technology and why it was perfectly suited for use as a cryptocurrency.

General blockchain features:

  • Decentralized (distributed) database
  • Cyptographic signatures (using OpenPGP compliant programs)
  • Trusted timestamping (used to create irreversible transactions)

These features, stitched together in software, can create a unique “blockchain” that solves a very big, nasty problem for any and all digital currencies. The software engineering challenge is known as double spending.

Double-spending is a failure mode of digital cash schemes, when it is possible to spend a single digital token twice. Since, unlike physical token money such as coins, electronic files can be duplicated, and hence the act of spending a digital coin does not remove its data from the ownership of the original holder, some other means are needed to prevent double-spending.

This problem of double-spending really only exists in the world of cryptocurrencies and creating a unique “blockchain” that solves this problem is what led to the creation of Bitcoin. If that sounds circular – it is. The two are forever linked because the “double spending” problem only exists in digital currencies and the Bitcoin blockchain does solve this – elegantly. Even if Bitcoin itself is a complete failure, the Bitcoin blockchain is proof positive that the double-spending problem in the digital realm has been solved.

In fact, the rise of other cryptocurrency blockchain’s is a sure bet and already under way. Ethereum is a good example of a 2nd generation cryptocurrency that’s capturing Bitcoin-like interest – and hype. This New York Times/Dealbook headline appeared just yesterday. Ethereum, a Virtual Currency, Enables Transactions That Rival Bitcoin’s

Like Bitcoin, the Ethereum system is built on a blockchain in which every transaction is recorded publicly. The promise of such a system is that it allows the exchange of money and assets more quickly and more cheaply than relying on a long chain of middlemen.

The reference to Bitcoin certainly helps to frame the solution, but then there’s even more complexity.

The system is complicated enough that even people who know it well have trouble describing it in plain English.

The article concluded with this assessment by Joseph Bonneau – a cryptocurrency researcher at Stanford University.

Bitcoin is still probably the safest bet, but Ethereum is certainly No. 2, and some folks will say it is more likely to be around in 10 years, It will depend if any real markets develop around it. If there is some actual application.

Those are some mighty big ‘ifs.’

Just like Bitcoin, Ethereum is basically a cryptocurrency blockchain in search of other problems. Bitcoin and Ethereum are both non-trivial technical solutions, but what about building blockchain’s for purposes other than cryptocurrencies? Sure – but then we really have to look for similar business problems around “double spending” and that becomes the larger challenge.

The technical reality is that all of the features of a blockchain – except double spending – can easily be created with other tools that are readily available – and cheap – without technically being a “blockchain.”

  • Distributed databases (free, open-source or commercial)
  • Cryptographic signatures (OpenPGP – various flavors)
  • Trusted timestamping

The point is simply this. We don’t need a unique cryptocurrency in healthcare. Absent that need, there are other robust and mature technology tools that can easily (and elegantly) solve many of our existing problems that are often key features of the hype around “blockchain” (distributed, trusted, ledger, secure, etc…). In fact, this is also true for problems outside of healthcare as well.

A blockchain can certainly be used for many things, but is the resulting solution only available using a blockchain? Hardly.

But there’s also a larger, more general risk of blockchain that Mike Hearn referenced explicitly – and it goes to the heart of why Bitcoin failed.

[Bitcoin] failed because the community has failed. What was meant to be a new, decentralized form of money that lacked “systemically important institutions” and “too big to fail” has become something even worse: a system completely controlled by just a handful of people. Worse still, the network is on the brink of technical collapse. The mechanisms that should have prevented this outcome have broken down, and as a result there’s no longer much reason to think Bitcoin can actually be better than the existing financial system.

Mike’s credentials as a lead Bitcoin developer are beyond reproach and include more than 7 years (2006 – 2014) as a Senior Software Engineer at Google. He also worked closely with Bitcoin chief scientist Gavin Andresen (thought to be the successor influencer of Bitcoin’s development after the mysterious founder Satoshi Nakamoto). Mike’s assessment is also mirrored in other publications as well. This one from Bloomberg Gadfly just last week goes to the heart of the larger dilemma – evident not just in financial services (where “blockchain” is – or at least should be – a perfect fit), but healthcare as well.

But there are potentially unbridgeable gaps to cross before theory becomes reality. How do you get clearing-houses, exchanges and brokers to agree to a new system that would sweep away the one that is currently generating their profits? Wall Street is Blockchain’s Weak Link 

The question isn’t whether a blockchain can be used in any industry (including healthcare) but what’s the use case that a blockchain can solve exclusively? As a new technology consideration for healthcare, blockchain fails on two major fronts.

  • Healthcare has no “double spending” problem – and the larger question is – are there any industries outside of cryptocurrencies that do?
  • Existing, robust and mature technologies can easily replicate all of the other functions of a “blockchain” without fitting the purely technical definition of being a “blockchain.”

Beyond any of these technical challenges, however, looms the ever-present – and much larger business conflict. That conflict – mirrored so clearly by data interoperability – is using any technology that requires voluntary industry consensus and agreement among competitors to eliminate revenue and profits. On what healthcare (or financial) planet is this likely to happen without a government incentive (or mandate)? Certainly none that I’m aware of – especially for heavily regulated industries like healthcare.

The Bitcoin blockchain works technically and elegantly, but even the best use case to date – Bitcoin – is a global and resounding failure. Not because of the technology – a brilliant software engineering feat – but because of larger issues around voluntary industry consensus among competitors for the reduction of revenue and profits.

The even larger challenge in healthcare IT isn’t technology – we’re swimming in it. Adding a new buzzword to the IT word salad won’t save us. The fact that we don’t use existing technologies – that are robust, mature and low-cost – to solve some of the enormous challenges that we do have is tantamount to criminal negligence and won’t be solved with the breathless hype of any blockchain. Interoperability is a prime example – and has the exact same challenge that felled Bitcoin – voluntary industry consensus among competitors that result in lost revenue – and that’s before you get to any technical discussion.

As we have known for centuries, government mandates for national standards actually do work – even if they’re pedestrian and completely devoid of hype – and they continue to work long after we’ve come to take them entirely for granted. A great example is one of the most basic of all called fiat currency and I’ll bet there’s some of it in your possession right now. Healthcare IT needs more stuff that just works – not the glitter of more technology complexity that can’t be described – even by the people who know it. If there’s a banner definition of technology hype, that’s the best one I’ve seen.


This article first appeared in Health Standards (April 2016)

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Filed Under: Tech

Targeting the ‘Superusers’ of Healthcare with Telehealth

May 3, 2015 By Dan Munro

Peter Fine – CEO of Banner Health

The consumer version of “telehealth” is both easy to imagine and easy to use. Faced with a healthcare event or condition (that isn’t 911), a consumer uses a smartphone, tablet or desktop connection to engage clinical care in real‒time. The cost is relatively affordable (even outside of insurance) and it saves an annoying trip to either a walk‒in clinic or the local urgent care. It’s the video equivalent of “1‒800‒doctor” or the nursing call center.

It’s an important consumer category of primary care, of course, but what about the so‒called “superusers?” These are the 5% of patients ‒ often elderly ‒ that have multiple chronic conditions and account for up to 50% of all healthcare spending. For this group, healthcare needs and remote care management are vastly different. These solutions need to be industrial‒strength and much broader in scope. Not just from the technology side, but also from the business side of care delivery.

With facilities in 7 states, Banner Health employs over 46,000 people and is Arizona’s largest private employer. It’s also one of the largest secular, nonprofit healthcare systems in the U.S. with more than $5 billion in annual revenue.

While Banner’s formal commitment to remote care (often called “telehealth” or “telemedicine”) dates back to 2006, the results around a recent pilot with 135 “in home” patients is a strong endorsement for using technology as a strategic mechanism for the remote care of superusers. Banner and Philips announced the results of the pilot (started in 2013) earlier today at the opening of the 20th annual Telemedicine Meeting and Trade Show in Los Angeles.

  • 27% reduction in cost of care
  • 32% reduction in acute and long-term care costs
  • 45% reduction in hospitalizations

The only real doubt about the future of this type of remote care delivery is the moniker itself ‒ “telehealth.”

Tele will be dropped from #Telehealth just like online was dropped from online banking

— John & Diane Sculley (@johnsculley) April 21, 2015

In a conscious effort to drop the dated reference, Banner calls this version of their remote home care program Banner iCare™. It’s been so successful that they recently upped the dosage to 500 patients ‒ 90% of which are Medicare age.

A key requirement for patients in the iCare program is that they must have at least 5 chronic health conditions. The program also matches patients with health coaches, nurses, social workers, pharmacists and primary care “intensivist’s” in a way that delivers near‒instant access to patients by an entire care team. Combining team-based continuous care with remote delivery is a key part of the success. This isn’t consumer‒grade, episodic care by a single specialist working in isolation.

Telehealth has helped us move beyond the limitations of geography, access to specialists and constraints on time. First it was the technology which changed the paradigm and opened up new ways of serving patients. What has happened as a result is vastly improved patient care, not only because of increased access and efficiency, but also because of a new integrated team approach which came out of having a centralized hub of physicians, specialists, nurses and pharmacists. Telehealth, at its best, improves the physician/health care provider experience and improves not only the measurable care patients receive, but the care experience as well. Hargobind Khurana, MD ‒ Senior Medical Director of Health Management at Banner Health

The Philips supplied hardware includes an Android tablet, custom software and a range of biometric sensors for blood pressure, oxygen saturation, weight, and heart rate measurements. Also included is Philips Lifeline ‒ a personal emergency response device with automatic fall detection.

Banner pays directly for the home monitoring tools (no reimbursement through CMS) and patients like Marion Berg (turning 102 in July) are a great example of the “triple‒aim” benefits (better care, better health and lower cost).

While being around for a while, Telehealth has gotten a new lease on life with the advent of digital technologies, like wearables, two-way video and big data. We see a tremendous interest in telehealth models where people suffering from chronic conditions are monitored from their homes and cared for by multi-disciplinary teams of professionals. By taking a holistic, patient-centric approach and by leveraging digital technology, we foresee widespread clinical change to save lives, reduce costs and create a better patient experience. Our work with health systems, including our collaboration with Banner, demonstrates that telehealth can transform how care is delivered, while also helping organizations reduce costs and more effectively manage patient populations. Jeroen Tas, CEO ‒ Healthcare Informatics Solutions and Services, Philips

All of which is just one of three significant Banner commitments to remote care. The second is their TeleICU program for monitoring over 450 beds across 24 facilities in Arizona, Colorado, Nebraska, Nevada and Wyoming. While the primary TeleICU operations facility is tucked away in a fairly nondescript building located in Mesa Arizona, all of the equipment is state‒of‒the art ‒ including electronically controlled standing desks for round‒the‒clock clinical staff.

Telemedicine is becoming increasingly attractive to a health care industry that is re-inventing itself to provide better care at lower costs. At Banner we’ve experienced outstanding results in multiple settings where telemedicine is used – from ICUs to inside the home. Not only have we realized improved care outcomes, but we’ve seen cost reductions through reduced days in ICUs and a decrease in avoidable hospital readmissions. Peter S. Fine, President and CEO, Banner Health

A third program at Banner ‒ called TeleAcute ‒ is used by expert nurses in a separate Remote Operations Center for all adult medical/surgical patients associated with a select group of Arizona facilities. This program isn’t targeted at superusers per‒se, but at other patients that also benefit from watchful monitoring during their hospital stay.

There’s still a big disconnect between hospital systems like Banner that are able to lower their cost of care and consumers who don’t see this translate into lower premiums, but the results of the iCare pilot are impressive in terms of keeping patients healthy at home ‒ away from the high‒risk and high‒expense of the hospital itself. In combination, all three programs ‒ iCare, TeleICU and TeleAcute ‒ represent a significant commitment to enterprise-scale telehealth at the very heart of big healthcare delivery.

Now if we can just drop the antiquated prefix. The history dates back to 1837 and the French invention of the telegraph ‒ which pre-dated the telephone by almost 40 years. John Sculley is right ‒ the only future for anything “tele” is the “one ringy‒dingy” from Ernestine (Lily Tomlin) on Saturday Night Live reruns.


This article first appeared in Forbes (May – 2015)
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Filed Under: Innovation, Tech

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