Ok, we have the search engine and the iPAD. Now what?

After looking at the issues facing our country in the last 2 years, one thing has become clear to me: technology has not been able to solve things that matter the most. The two things Americans spend most of their money are housing costs and healthcare. And the two areas that technology has been least helpful are in these areas. Technology has not helped bring about a rational housing market, discover fair market interest rates, or evolve a market place where houses are bought or sold in a fairer way. This goes for health care as well. While we have excellent mobile devices with entertaining content, we are struggling to create efficient housing and health care markets or education markets. More people seem to be able to gain access to iPAD and Android phones than decent housing, education and quality health care. Drawing from Einstein's PhD thesis on Random Motion of particles (Brownian Motion), particles travel in the path of least resistance. People do the same thing as well. They adopt and subscribe to the path of least resistance. Right now, the value in an iPAD is fair, efficient and easily accessible (the path of least resistance) than the value of owning a house or getting healthcare or electing the Congress or investing in the stock market (the trading volumes have plunged). When people face resistance in a path, they tend to drop that path. So, owning a house, obtaining health care or electing the right people are going to go out of fashion, while buying video games, music, iPAD are going to catch on - simply because it is so much more easier to do so. The younger generation has certainly moved away from owning a house (they all prefer renting), buying health care (they prefer community clinics) and not participating in electoral process (they dont see the right candidates) and have instead resorted to buying mobile devices of all sorts and making friends on online social network (resistance faced in the actual world??). Note how Apple's stock or FaceBook's private stock has shot up in a time of volatile housing and healthcare markets. Everyone knows that an iPAD cannot give you better health care, cook better food for you - yet we choose iPhones and iPADs over health insurance or buying quality food. It is not the fault of the consumer that we've become so, but the amazingly resistant paths that powers-that-be have created to owning houses or investing in healthcare or working the stock market. Maybe I should have an XBOX, PS3, WII, iPAD, iPhone, plenty of friends in the online world and a large monthly broadband bill. Why bother about health insurance or food or a roof over the head? They dont come handy in the online world that I may want to live in.

Health Care reforms - cuts in R&D budget?

We are entering a very interesting phase in the history of governance in America. The democratic federal government is all set to usher in health care reforms - the core of which is offering a public option for insurance and playing an increased role in setting price limits for various medical services ala the NHS of the UK or the services in Japan. How will all this affect the flow of dollars to R&D grants for small companies? I believe that small companies will have to compete harder to get government grants and will have to operate under significantly reduced R&D budgets to achieve even break even revenue models. Generally speaking, despite active price controls in the Switzerland, their drug companies still lead the world in innovation. But, this was largely financed by revenues from markets such as the US. Will we see an outsourcing of R&D to places outside of the US and more outsourcing of clinical studies to outside the country? Time will tell but all indications are that a public option for health insurance will put a serious dent in the R&D budgets of the small drug discovery and biomedical devices companies. We for one will increase the discount rates when valuing such companies as there is a greater risk of achieving break even cash flows.

Biotechnology Financing

I was recently at the MIT-Harvard Health Program information session where I met a few folks who are active participants in the Biomedical/Biotechnology/health care start-up industry. When I queried them about the state of the health care start-ups and the financing trends, the majority response was that getting financing for new ventures is going to be a very difficult task during the next year and a half. Folks were of the view that established start-up firms have a much better chance of getting follow-on financing than new entrants. When I asked them about what areas of health care research are emerging, most pointed to medical devices/technologies that addressed nerve-related diseases and efficient localized delivery of drugs. Prosthetic body parts is another biomedical area where a lot of development is being financed by venture capital. Overall, it was an interesting session where I got to learn about the latest advances in immunology and biomedical devices.