🪷S3T May 10, 2024 - Telehealth, PE scrutiny, AI for Architecture, Gen AI Firewalls, Robot Skill Acquisition at Scale, Gen Z

Happy Friday and welcome to the S3T newsletter and podcast for May 10 - this week we are diving into some key developments in Healthcare Economics as well as addressing head on some misperceptions about Gen Z. As always we'll be looking at the latest in emerging tech and other need to know insights for Change Leaders.

Before we jump in:

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In this edition of S3T:

• 🌐 Telehealth Trends: The American Telemedicine Association reports stable telemedicine adoption with varying rates across specialties. Mental health and endocrinology see higher telehealth usage compared to physical therapy and orthopedics. Major players like Walmart and United/Optum are exiting telehealth services, suggesting a shift towards specialty or hybrid services.
• 📉 Digital Healthcare Funding: After a peak in investment, digital healthcare funding is experiencing a downturn, with venture capital shifting focus towards advanced manufacturing sectors.
• 🏥 Private Equity Scrutiny: The U.S. Senate and federal agencies are investigating the impacts of private equity in healthcare, particularly the practices of overburdening hospitals with debt and reducing quality to profit investors.
• 🚀 AI Advancements and GenAI Firewalls: Innovations include using large language models (LLMs) for robotic skill acquisition and the introduction of GenAI firewalls like Galileo Protect to secure against AI vulnerabilities.
• 🌟 Support for Gen Z: Despite economic challenges, there's a call for better support systems for Gen Z, emphasizing the need for understanding and aiding their success in workplaces and communities.

Opinions expressed are those of the individuals and do not reflect the official positions of companies or organizations those individuals may be affiliated with. Not financial, investment or legal advice. Authors or guests may hold assets discussed.

Healthcare economics

Telehealth Consolidation

This week American Telemedicine Association convened their annual meeting - the group maintains that overall adoption of telemedicine is steady. Recent research suggests that adoption varies by specialty depending whether how frequently the patient needs physical exams.

Walmart is shutting down its Telehealth service, and so is United/Optum. To thrive, industry voices say players in this space must differentiate themselves with speciality services or hybrid virtual+in person offerings. But note that Walmart is shutting down both its virtual and its 51 in person locations.

Digital Healthcare - still not the favorite anymore

Digital healthcare funding had a mild rebound in Q1, but it’s still in the doldrums after significant investments failed to bring the value promised.

VC's new darling: Funding is instead going to advanced manufacturing. 

Private Equity in healthcare gets increased scrutiny

Last December, the Senate launched a bi-partisan investigation into the impact of private equity ownership on America's hospitals, and specifically a pattern where "private equity buys out a hospital, saddles it with debt, and then reduces operating costs by cutting services and staff—all while investors pocket millions."

In February Change Healthcare cyberattack and its paralyzing industry-wide impact offered a new angle on the same concerns: allowing merger and acquisition (M&A) to shuffle and trade healthcare infrastructure business units like baseball cards increases the risk that cybersecurity will be compromised.

Then in March the Federal Trade Commission, the Department of Justice and the Department of Health and Human Services launched a joint inquiry seeking information on the impact of private equity control over healthcare.

California also took up legislation AB-3129 that attempts to limit industry consolidation and limit the ability of private equity firms to have managerial authority over physician and psychiatric practices (legal commentary here).

Now the FTC, Dept of Justice, and Dept of Health and Human Services have launched a Health Care Reporting Portal HealthyCompetition.gov where anyone can report actions that are harming patients and or harming healthcare market competition.

Perspectives to balance

There's an old adage "if it's important, then you ought to run it like a business" and it has a certain appeal. Having a clear bottom line, being accountable, having a sense of urgency, being efficient...these are all characteristics that we have come to associate with business, in contrast with other less efficient entities like governments, non-profits, academic institutions.

So why not let a group of business people come in straighten things up?

Maybe it has to do with motives and goals. If your goal is achieve a healthy community with affordable, functional healthcare, and you want to "run it like a business" maybe that's a good thing. But if your goal is to fleece everything in sight, maybe you shouldn't be in healthcare.

Which brings us to the problem - certain types of investors are drawn to healthcare for the same reason pickpockets love to attend Mass: in both cases, you can make a killing off of people who are minding higher priorities.

For example, you'll notice that the private equity debate often mentions debt. What are they referring to? Well here's an analogy.

Let's suppose you are an Uber driver and you want to upgrade your car. Imagine that I offer to help. I take your credit card and use your credit card to buy your car from you. I pocket the money. Then I strip off a bunch of the parts from your car until it's unsafe and barely functional, and sell I them and keep the money. Then I turn around and lease your barely functional car back to you - for a really steep price.

This is what they call a "beautiful deal".

And I challenge you, find anyone who's been on the receiving end of a private equity deal in healthcare and ask them if I'm exaggerating.

Why are you here and what are you trying to do?

We always come back to the same key question: what is your intention? What will you do with the position, role and opportunities you have? To delve further into this check out the S3T learning guide titled "Clarifying your Purpose." This will guide you through a process of committing to a purpose driven career, and putting that commitment into action.

Have they've finally stopped trying to save commercial real estate?

Urban developers and their financiers may be throwing in the towel on the return-to-office influence campaign (its not great for retention, and its expensive) and instead have begun to focus on converting unneeded office space into badly needed downtown residential space.

Having affordable, functional living space (vs cramped and insanely expensive ones) in attractive downtown areas can over time reinvigorate the commercial real estate market - and in the process add fuel and talent to the top startup hubs of the world (excellent ranking of top 50 - note the capital raised vs exit value columns)

Back in the 90's my wife and I enjoyed a chapter in our DC metro careers where we lived practically next door to our respective workplaces. We walked to work and often met for lunch - in contrast to our previous experiences spending 2+ hours a day commuting.

As noted in the Gen Z piece below, Affordable housing especially near work places can be highly beneficial and can reap long term dividends for municipalities that are wise enough to invest with this kind of foresight.

LLMs that help robots acquire new skills

Researchers at Upenn, UT Austin and NVIDIA have demonstrated a new approach that uses LLMs to accelerate a robot’s ability to acquire new skills, bypassing the intensive process currently required to train robots. The new approach promises to enable robot skill acquisition at scale - for example a new behavior can be designed and refined in a simulated environment then transferred directly to a fleet of real world robots. 

An interesting derivative of this would be financial simulators that develop models or approaches that can be directly applied to real world financial instruments or platforms. 

GenAI Firewalls - a new emerging AI sector

Newly unveiled Galileo Protect is positioned as a “GenAI Firewall” able to intercept hallucinations, prompt attacks and security threats in real time. 

Galileo has created a handy Hallucination Index with benchmark tests showing that GPT3/5 and 4 are least likely hallucinate, while UAE’s Falcon and Mosaic ML’s MPT-7b are most likely to hallucinate.

AI-active companies are learning to pay attention to GPU costs 

Nvidia is tipping the scales in favor of smaller players. Some of the bigger players (like AWS) have 2x higher costs. See CBInsights 2024 Tech Trends. 

GenAI for Software Architecture & Design

Also: Eraser.io has a decent GenAI diagramming tool for engineering teams. In my own tests, providing it with detailed prompts that name the specific technical working parts enabled it to provide a reasonably good starting point diagram that a team of architects and developers could refine and finalize.

Their "Diagram as Code" conjures memories of the old Rational Rose tools...and I mean the version before IBM bought them :) Software history buffs, the full history is here, here, and here. Those were the days.

Younger generations need our support, not our envy or condescension.

No, Gen Z is not the richest generation

The Economist has run a piece claiming that Gen Z is the richest generation.

The author (not named in the piece) attempts to build a case based on 3 broad elements (normally a good practice), but in this piece the elements don't seem to support the claim.  

• First, the piece relies on this apparently mistyped chart indicating that 15 year olds in the US have a median income of $35,000. Perhaps this is based on figures suggesting 11.54-18.99 hr wages for 17 year olds, but doesn't consider that very few in this age group are working full-time year around. Here's a screenshot of the chart in question:

• 2nd, the author attempts to prove Gen Z wealth via an anecdote from a pop concert in NY, with the logic: “if they can go to a concert they must not be poor!” (reminds of the Reagan-era argument for cutting welfare: “If they got TVs they must not be poor!”). This doesn't consider who may have actually paid for the tickets (parents?), or whether these individuals were actually spending within their means vs. running up unwise levels of credit card debt.
• The Economist piece also refers to a Federal Reserve working paper which can be accessed here. As explained below, the paper doesn’t actually support the claims made by the Economist. 

The Fed paper states that they only offer a complete comparison of the Baby Boomer, Gen X and Millennial cohorts (p8). 

The paper further states that it is primarily concerned with comparing adults in their prime working age of 36-40 (p9). The paper uses the Pew definition of Gen Z (people born 1997-2012 - i.e. a person born in 1997 would be 27 this year).

Given these points, it’s safe to say this paper is not intended to be a complete source of information on the financial well-being of Gen Z.  This is further supported by Figure 1 on p.32, where the authors present a chart with black vertical lines to indicate the generational cohorts they are focused on. As you can see in the screenshot below, Gen Z is not inside that scope. 

The paper also acknowledges that parental income skews the numbers for more recent generations: “Yet most of the income boost in their 20s is a result of living in households with higher income individuals (i.e., their parents) rather than the effects of market income or transfers received by Millennials themselves” (p23). In other words Gen Z and Millennials may look like they have larger household incomes, but that’s because they’re living with or have continuing financial ties with their parents.

This aligns with data from other sources: 

• 61% of Gen Zers are financially dependent on their parents.
• 71% of Gen Zers have a side gig (compared to 54% of all Americans)

Sure Gen Z may have had some wage spikes due to the Great Resignation, retirements of older cohorts, recent increases in state minimum wage laws or increases in prevailing wages due to service worker shortages. These points more than likely explain the Economists breathless claim in their piece that “In America hourly pay growth among 16- to 24-year-olds recently hit 13% year on year.”

Supporting Gen Z and younger cohorts in your workplace, communities and family

It's unfortunate that a publication with the reach of the Economist issued a piece essentially dismissing the plight of a generation that is still finding their way, but its a reminder of how easy it is for all of us to be less than mindful about the challenges that others face. This is a great opportunity to reset our awareness, so we can be ready to support the upcoming generations, who very soon will be shouldering the burdens of the world.

We can better support the success and well being of younger generations in our families, our workplaces and communities when we operate with an awareness of their economic challenges.

Here is what to know - whether you are in Gen Z or whether you are someone who wants to support the success of younger generations in your workplace and community:

• Many Gen Z’ers have to choose between buying a house, having a family or paying back their school loans. This can mean they may need different kinds of compensation packages that help them manage student loans and prepare for major life events.
• Many may have challenging or alternative living situations - for example living with parents or roommates - that do not provide the traditional kind of home life experience most of us have come to expect. This can impact their ability to work from home. Affordable housing especially near work places can be highly beneficial and can reap long term dividends for municipalities wise enough to invest with this kind of foresight.
• The underlying issue that consumer buying power has not kept up with corporate pricing power, is particularly impactful to this group. For example, they are more likely to eat out, and even fast food is significantly more expensive now than a few years ago.
• Navigating healthcare is particularly challenging for this group. They may have extended needs that are not heard/recognized, and it is very easy for them to fall through the cracks, and accumulate medical debt. They can be particularly vulnerable due to HIPAA consent laws that in practice prevent parents or other advocates from sorting out bills, medication, and ensuring effective treatment (exacerbated by health provider's sloppy retention of previously granted consents).
• This generation needs to know they have a purpose in this world. Encourage them to share and activate their innovative ideas. Let them know these are valuable and - in spite of challenges, resistance and obstacles they may face - over the course of their career, they'll be glad they developed their own ideas for solving key problems. Talk to younger generations about the ups and downs that you have gone through. It's a wonderful way of letting them know, things are going to be alright.

Understanding the economic challenges faced by younger generations is crucial for supporting their success and well-being in our families, workplaces, and communities. Whether you're a member of Gen Z or someone looking to aid their success, it's important to be prepared to assist these upcoming generations who will soon take on the world's responsibilities.

If you are part of one of the up and coming generations, perhaps starting your career or somewhere the first 1/3 of it, this is for you: A few thoughts from my journey for you, the trailblazers, as you carve out your own paths:

• Stay Nimble and Keep Learning: The only constant in life is accelerating change, especially when it comes to the job market and tech developments. Whether through courses, books, or hands-on projects, make learning a lifelong habit. More Masterclass and Coursera, less Instagram. It’ll not only keep you adaptable but also open doors to opportunities that may not even exist yet.
• Balance is Everything: Your generation is refreshingly candid about mental health, and it's vital to keep that conversation going. I cannot stress enough the importance of finding your thing. What's that thing you want change in the world. Having a driving reason for doing what you're doing helps you be resilient. It's the difference between the challenges overcoming you vs you overcoming the challenges.Work hard, but make time for yourself—meditate, sleep well, pursue passions. It’s not just about enhancing productivity; it's about sustaining your happiness.
• Raise Your Voice for Change: You probably have an innate sense of justice and a yearning to improve the world. Own it. Whether through activism, volunteering, or starting something new, your actions can foster significant change. You are not just preparing to inherit the world; you are already shaping it. Find a community of like minded change leaders and work and think together. S3T is here for that exact purpose.

The road is rarely smooth, half the time it's not even a road lol, but it’s yours to travel. With creativity, courage, and compassion, you will have an impact far beyond what you are probably expecting. Rest up. You've got a great journey ahead.

🎯For Paying Members

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⚖️ Structuring for evenly distributed accountability

Drama involving dependencies is a symptom of uneven accountability: one group feels the full heat of accountability for an outcome but is forced to rely on/wait for another group that doesn't feel the heat. This practical guide will help you structure for more even accountability.

S3T Playbook: Shift to effective gatekeeping in the age of Generative AI

Gatekeeper and approval roles carry a supervisory workload that has been matched over time to the expected output of the human workers producing things that require review or approval. The current staffing for these roles is sized to match expected outputs from human teams - not GenAI. Organizational leaders and talent recruiters must navigate this unusual shift in the composition of the workforce, by focusing relentlessly on 4 key priorities.

S3T Playbook: Harmonize Different Kinds of Expertise to Achieve Success with Emerging Tech

Today's leaders must excel in getting very smart people with divergent sets of skills and expertise to work together as one team. This is not easy, and it's different from the command and control delegation hierarchy of the 2oth century. But it is the only way to avoid a brand and enterprise level catastrophic loss of control. This S3T Playbook shows you how to harmonize different kinds of expertise to achieve a desired outcome using GenAI, Web3 and other emerging technologies.

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