Pod Insights a16z Podcast It’s Time to Build in Healthcare About this episode Half of prescribed medications are never taken, and 88% of Americans are metabolically unhealthy. Despite spending 20% of our GDP on healthcare—twice that of any other developed nation—our outcomes still lag behind.
In this episode, we explore why technologists must step into the healthcare ring. Solving medicine isn’t enough; we need to make healthcare a consumer-focused industry. a16z’s Vijay Pandey and Daisy Wolf discuss the rise of tech founders in healthcare, the potential of AI to transform patient care, and how this shift could lead to the next trillion-dollar company.
Can tech truly disrupt this complex, regulated industry?
Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:01 Steph Smith? Here are some facts for you. Half of medications that are prescribed are never taken. Eighty-eight percent of Americans are metabolically unhealthy. It's 20% of our GDP, which is like double that of any other developed country. Perhaps, none of this is a surprise to you. In fact, we've done several episodes on this topic, which we'll link in the show notes. But what we haven't quite touched on is why it's time for technologists to step into the healthcare ring. Because solving medicine is not enough. If you cure all cancer, you extend Americans' lifespan by three years. So in today's episode, we explore why, perhaps counterintuitively, we need technologists to be solving the equally real problem of making healthcare a delightful, consumer-focused industry.
0:44 Steph Smith? And indeed, we are seeing that trend, with founders from companies like Spotify and Coinbase taking their aim. But are these the right people for the job? And can they really disentangle the regulated and complex industry? Listen in to find out, as we explore with A16Z BioNTech's general partner Vijay Ponde and investing partner Daisy Wolf. So tech, what do you say? Are you ready to build in healthcare?
1:10 Steph Smith? As a reminder, the content here is for informational purposes only, should not be taken as legal, business, tax, or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any A16Z fund. Please note that A16Z and its affiliates may also maintain investments in the companies discussed in this podcast. For more details, including a link to our investments, please see a16z.com/disclosures.
1:40 Steph Smith? You two predicted in 2022 that the biggest company in the world will be a consumer health tech company. That's quite the prediction, so I'd love to just start out by setting the tone. Where are we today? Where do we sit in terms of that prediction?
1:53 Vijay Pande? I think when we wrote the piece, we had hot conviction. But you know, venture is kind of a humbly business where you can have great ideas and the market would tell you what the market tells you. I think the parts that have been exciting for me is that we've had a huge influx of excitement about that thesis. So, so far, so good. And I think we've seen a lot of companies that are, I think, very much vying to be that trillion dollar biggest company in the world. But obviously, we're not there yet. This is just early stages.
2:18 Steph Smith? Yeah, and maybe it'd be helpful to actually clarify what you mean by a consumer company. Because when I think consumer company, I might think Snapchat, I might think a sneaker company.
2:26 Speaker 02 Yes, oftentimes when people think consumer health, they think of these large consumer health companies like Ro or Hims that often prescribe drugs or provide telemedicine on the internet. And when we talk about consumer health, we actually mean something much broader. We think a consumer health company doesn't have to be direct to consumer. It can be distributed through B2B. It doesn't have to be cash pay. It could be something that's free for consumers because it's totally covered by insurance. And it doesn't even have to be a services company. So like providing doctor's appointments or prescribing of medication. It could be pure technology. But we think what defines a consumer health company is the ability to have amazing consumer experiences, which is something traditional healthcare has done a very bad job of.
3:11 Steph Smith? Totally. And in fact, most healthcare companies today are the opposite of that. And actually, some people might describe healthcare today as intimidating, regulated and complex. And in fact, you two both have referred to it somewhat in that fashion. And so what do you think the tech industry in particular is set to do in a way that others haven't in the past to address this unique combination?
3:33 Speaker 02 Yeah, people often say healthcare is intimidating, which is often a euphemism for healthcare is really big, which is in venture, a good thing. It's great to go after big markets. US healthcare is five times the size of the global advertising industry, which is what companies like Meta and Google make all their money from. And it's highly regulated, but tons of huge companies have been built in highly regulated markets. You know, if you look at Airbnb or Lyft, or even companies that have been built in unregulated markets, like Google and Facebook, eventually become regulated.
4:07 Steph Smith? Right.
4:08 Speaker 02 So we think regulation is kind of a marker of success and you run into it regardless, and it's a good thing in healthcare. And healthcare is complex, but every industry is complex when you dig under the surface of things. And everyone thinks, healthcare, don't I need a PhD? I don't know how to cure cancer. And the PhDs who are working to cure cancer are doing extremely important work. But the reality is, if you cure all cancer, you extend Americans' lifespan by three years. And we're still lagging behind other developed countries. And so you need technologists to come and do two things. One is like healthcare is a logistics, a data, an operations problem, and technologists are very good at that. And then the second is healthcare is really a consumer engagement
4:52 Speaker 02 problem. Even for really highly motivated people, it's super hard to navigate the healthcare system. If you're trying your best and want all the testing, it's really hard to know how to do it. And then we need people to help us kind of change our behaviors. Eighty-eight percent of Americans are metabolically unhealthy. Half of people don't go to the PCP. Half of medications that are prescribed are never taken. And so people might look at that and say, we have a societal problem. But the best companies change the behaviors of billions of people, and there's no reason to think that couldn't occur in healthcare.
5:25 Steph Smith? I want to get into maybe some of the pushback, because I feel like for some listeners, they might be thinking, oh, that makes sense, Daisy, but actually technologists are not the people we need. But interestingly, whether people believe they're the right people to provide a solution, we are seeing them start to take part. And in fact, both of you wrote another article that said, hey, tech, it's time to build in healthcare. And we're seeing founders from Instacart, Spotify, and Coinbase, probably among many others, that have started to build healthcare companies. So why do you think that is? What's the why now of these people participating?
5:56 Vijay Pande? Yeah, I think there are a couple of different elements, but one of the primary ones is that much of healthcare and life sciences is starting to become much more of an engineering discipline. I think that's what really attracts us to tech. I mean, the thing about computer science is that it's almost like the ultimate engineering discipline and software is just easy to engineer. But I think as we can engineer these other areas, it attracts that mindset. But also, I think they see the huge TAM that Daisy was just talking about. But then finally, I think it's more than just the means and the money. I think the mission actually also is very appealing.
6:26 Steph Smith? And Daisy, you shared this article, which was again, a call to technologists to participate. And there was, I think you guys shared it in several places, but just one of the posts had over 3,000 likes, over 250 comments. So clearly people cared, right? That at the very least was clear. Just would love to get your personal take. Why do you think there was such a response, both good and bad?
6:47 Speaker 02 I think part of it is it was controversial. We work in an industry, venture capital, where a lot of firms have written off healthcare and they've said, look, people have tried and failed. But the reality is of the 100 largest public software companies, one is a healthcare and life science company. And as consumers, we feel the pain of that every day. Every time we go to the doctor's office and are asked to fill out forms we've filled out 150 times in the course of our lives. Every time we have a loved one that dies because of something we could have caught, but our system wasn't set up correctly. And so I think, one, the take was controversial, that this is the next frontier, because a
7:31 Speaker 02 lot of people in our industry have written this off. But I also think it's something that everyone can identify with. There's no American out there who is like, we have a great healthcare system. We spend, you know, it's 20% of our GDP, which is like double that of any other developed country, and we have worse outcomes and we're all suffering.
7:49 Steph Smith? Let's talk about some of that pushback. I would love to hear your direct response to some of these people, who, by the way, I think have the same goals as the three of us sitting here. Just to share a few, so Tom says he still sees that there are flurry of issues from entrenched vendors, integrations, backroom deals and funding.
8:06 Vijay Pande? Yeah, I mean, the healthcare system is huge, right? So I think part of it, you're not going to fix the whole thing in one go. And so there's a couple of different approaches you can take. One approach is to work, let's say, in rebuilding something full stack. And so companies like Devoted Health do that by being a Medicare Advantage company and building payer and provider, basically doing everything. So that's really hard to do. But actually, if you can do that, you can address those issues directly because you're not sort of victim to any of those issues because you are the full system. Working within the system is a lot harder, and that takes a really special person. Somebody that knows tech and knows, let's say, AI and knows all that stuff very deeply, but also knows the healthcare system deeply. There aren't too many people like that, but actually, the number is growing very rapidly.
8:49 Steph Smith? Absolutely. Let's talk about another piece of pushback. So if you kind of touched on this issue of the unique incentives that exist in the United States. So Dave, for example, is saying he's still not seeing the killer argument for why now. Susan has said that tech has been addressing healthcare for quite some time, and we are seeing technology evolve in something like an MRI, but when it comes to more of the system, it's still breaking down. And then I'll just read out Dave's comment directly. He says, "The US is an outlier in terms of health spend as a percentage of GDP. In terms of a measure of that service, life expectancy in the US is worse. What technology has the rest of the world kept from the US? Why is technology necessary?"
9:29 Vijay Pande? So let's take that in two parts. So in terms of technology, I think there is technology in healthcare, but it's largely in a user interface. So like MRI is really the same MRI from like the 50s just now on a computer display. And so that's not really tech. I would call it the absence of tech. And a lot of the tech that doctors use are things like electronic medical records, which again, it's a record keeper. It's not sort of the high technology that we're talking about right now. We have this huge revolution in artificial intelligence that actually can do amazing things with data that actually we could never really even dream about. And so that's a huge difference in terms of why now. Now, in terms of what's actually different about the rest of the world is, well, those non-US healthcare systems don't have to deal with Americans. And American culture is different, right?
10:13 Vijay Pande? So it's apples and oranges to say, well, we have country A's healthcare system dealing with country B's people. And so the issues Americans have are different, and we have issues in terms of diet, in terms of lifestyle. And those things are independent of technology or not. We actually love doing clinical trials. The real thing to do would be to apply one system to another. Unfortunately, we can't do that. I think the reality is that what makes technology really powerful is the ability to actually affect behavioral change. And that's the thing that's really where tech maybe have some of the quickest impacts in America.
10:44 Speaker 02 I think one thing that makes the American system relatively unique is that most Americans get healthcare through their employer, which means they change healthcare insurance companies every two and a half years. I think that's on average how long people stay in a job. And what that's meant in effect is insurance companies don't feel incentivized to cover preventative care because they think some other insurance company will reap the benefits of that when you switch jobs in two and a half years, which is a really unfortunate situation. But I think a few things are happening. One is there has been a rise of high deductible health plans, which means your health insurance doesn't kick in until you've already spent X amount of dollars of your own before insurance will cover a dime,
11:29 Speaker 02 which is a relatively unfortunate trend. But the silver lining of that is you start to see some more free market dynamics in healthcare. When people are paying for their healthcare out of their own dollars, they start thinking about quality and shopping and what they really want to understand about their bodies. And the other kind of why now thing that's emerged is, I think, Beech will probably agree with me, that we wrote this article two years ago, in the last year, something has started to change. And it's partially driven by like, a lot of amazing founders who are building these oftentimes diagnostic companies that are offering hundreds of blood tests and full body MRIs. And there's just been this wave of consumers who really want to understand what's happening in their
12:12 Speaker 02 body. And it's not just biohackers and people in the Bay Area. It's people who have chronic health issues, who have gone to five doctors, who can't figure out what's going on. But there's been this real movement toward wanting to understand what's happening in your body. And I think it's kind of a delayed thing that has come out of COVID, where COVID reminded everyone of their own mortality. We all realize that like, health is the foundation on which you can build a really happy, fulfilling life. And if you don't have your health, it's a whole lot harder. And it just feels like we're seeing this real consumer shift.
12:48 Vijay Pande? Yeah, I have a strong gut feeling it's COVID as well. And I think it's not just understanding our body, but having real agency with it. What can I do? And I think COVID put that on the forefront of our minds, like what actions can I take for myself and my family and so on? And now the question is, what data do I have to make those actions? And that leads to, I think, this whole new crop of companies.
13:07 Steph Smith? Yeah. So what I'm hearing is basically the system is so entrenched and the incentives that exist between the provider and the insurer historically has not been there to actually create this consumer incentive. And now you're saying that things have changed. There's almost like this groundswell of people who are raising their hand who are saying, I want to improve my health and I want to have a part in this. And that in itself is creating a market. So on that note, you basically said that the most impactful thing that we can do to fix healthcare is to improve the consumer experience. So I'd love to just hear your take on where you would even start there and maybe elaborate on what that means.
13:44 Vijay Pande? Yeah. So I think first and foremost, you have to imagine like you're using the product or that your parents or your grandparents are using the product. And so I want something that is frictionless, where, you know, what is so exciting about using an e-tick product is that I don't have to click like a thousand different buttons or wait two days or something that happens quickly. So I would love it to be frictionless. I'd love it to be something where it's actionable, where it gives me that level of agency. And then finally, I think as funny as it is, I want it to actually have just a great experience. So why do people buy Apple products or Google UI? It has that whole experience as something that is seamless. And it shifts it from this burden to like, oh, I gotta sit in the line at the DMV to get healthcare done to this is actually something that is streamlined and really designed to
14:26 Vijay Pande? make my life easier rather than to make someone else's life easier, whether it be the payer or the provider.
14:31 Speaker 02 One question Vijay posed to me a couple of years ago now, and we've been debating ever since, is what does healthcare look like 30 years from now? And what about 20 years from now? And what about 10 years from now? Because our job as venture capitalists is to predict the future and try to invest in the future we think should exist. And we think healthcare probably looks like you have wearable devices
14:54 Steph Smith? Yep.
14:54 Speaker 02 that are monitoring your health at all times. Some of them are like the wearable devices we know today. Some are some little things that penetrate your skin that are monitoring all sorts of things that are happening in your blood. And these wearable devices are going to predict that you're getting sick before you even start feeling symptoms and know.
15:13 Vijay Pande? Some rings already do this.
15:14 Speaker 02 Exactly. We saw this during COVID. A lot of these devices could predict.
15:18 Steph Smith? Our ring, Aidsleep.
15:18 Speaker 02 Exactly. COVID coming on. And all of your data is going to be in one place. Every health record you've ever had, it's crazy. We don't have this today yet, by the way. But all of the data from these wearable devices is going to be married with all of your health records from every doctor you've ever seen. And 90% of healthcare is going to be delivered probably from your phone and in your home. So you're going to be able to chat on your phone with a world-class AI doctor, the best cardiologist in the world, or human doctor if it escalates to that. And we'll have at-home blood collection devices. We'll have at-home delivery of medication. And then you'll probably go to hospitals for a few surgeries. But that's kind of the forward version of what we think healthcare will look like in 30 years.
16:02 Speaker 02 And that's the amazing consumer experience. And then what we're trying to do is predict, okay, what do we have to invest in now to start making this a reality?
16:10 Vijay Pande? And also, I think this is a bit of a mindset shift because that really also makes healthcare a logistics problem as well. And that's something that we think about tech all the time. You think about, Amazon doesn't really sell things. It's a logistics company that makes it possible for all this stuff to get to us. And same from Walmart. And healthcare is really the right care at the right place at the right time. And doing that, actually, we need all the information Daisy talked about. But then we need it to be able to be actionable with that together. It'll feel like all the other experiences that we sort of love in our life that we have right now from technology.
16:39 Steph Smith? Yeah. And maybe one follow-up question there. In that future that you just painted, all those devices or those trackers that we're seeing the early emergence of now. Today, those options are very consumer-driven, right? I'm buying my Aidsleep. I'm buying my Oura ring. Do you think that all of those devices, the holistic healthcare system outside of maybe the hospital where you get your serious surgery, are those all consumer driven where I'm purchasing those? Or how do you see the overall large incumbent model evolve to that picture?
17:10 Vijay Pande? Yeah. So one thing is, I think is helpful is actually healthcare is a term that's applied to a lot of different things.
17:15 Steph Smith? Yeah.
17:15 Vijay Pande? And so in the most extreme cases, I need surgery because I hit my head and my brain is hemorrhaging or something like that. That's like this extreme kind of thing. That's not what we're talking about. Then the second one is, oh, I've gotten ill with something and I need some sort of treatment. In both of those cases, those are examples of sick care where those are procedures that just have to be done. There's a third area that actually isn't always associated with healthcare, which is the preventative side. And that's something that technology has a very natural role. With preventative, you can avoid getting into that second or to that third bucket. And when you start to think of healthcare that way, just even from a financial point of view, the most extreme thing is kind of like if you are a car, that's collision insurance or something like that. And then the middle bucket is, well, I'm gonna just do routine maintenance and stuff like that. But the
17:59 Vijay Pande? first bucket is, I'm not gonna be a crazy driver. I'm not gonna slam into things. I'm not gonna go super fast. I'm gonna do all that stuff. And I think healthcare is gonna be that combination of all those three. But people basically ignore that first bucket. And how we think about payment of these things will reflect those.
18:14 Speaker 02 And I think to answer your question head on, today, most of these products are consumer purchased. And I think there's totally a world where insurance starts to cover a lot of wearable devices and things today that we think of as consumer products. And we definitely see that. It's funny, when we look at these consumer health companies, we've invested and see a whole bucket of them that are trying to rebuild the healthcare system from the ground up and are basically saying, like, what you have over there, that's crap. We're starting over. And then we're seeing a ton that are trying to plug into the healthcare system. And a key way they plug in is they say traditional healthcare has the worst consumer experience in the world of any industry. And that really affects them. They can't get their customers to change their behaviors. And so they're building
18:58 Speaker 02 these consumer companies that layer on top of traditional healthcare and make the experience better. And you can envision a world where wearable devices start to play in that territory.
19:08 Steph Smith? Yeah. And maybe to address something you said earlier, Vijay, about the kind of experience that we can imagine, right? Why haven't we had? Good UX or this delightful experience in healthcare. One thing that comes to mind for me is if I go to the App Store on my phone, I have infinite possibilities. And again, it's consumer choice among those possibilities. When I think of my healthcare options, it's through my employer and I have two options, maybe even from the same company, high deductible plan or not, right? So do you see that changing as well? Cause I'm just thinking again, from that place of incentives.
19:46 Vijay Pande? I think it's incentives and I think it also helps to see who actually is going to pay for it.
19:49 Steph Smith? Yep.
19:49 Vijay Pande? So if someone's paying out of pocket, then it feels like a consumer app. And that's something where you probably see it first. And then those types of businesses may start to compete with the ones you're talking about. And then in competition, I think you'll see the incumbents feel like they have to move in that direction. We've seen this in other businesses.
20:05 Speaker 02 Yeah. Yeah. And just to layer on there, I think a key reason consumer experience has been so horrible in healthcare is health providers, so hospital systems, doctors offices, don't really see patients as their own customers because patients generally aren't paying for their care. The insurance company is. And so they're optimizing for the insurance company instead of the patient, which is a really sad existence. But what we think everyone has gotten wrong is that if you have amazing patient and consumer experiences, you can actually start to encourage behavior change, getting people to show up to the doctor if it's less of a horrible experience, filling their medication if it's easier, taking their medication if it's easier, affording the doctors if there's a financing option.
20:48 Speaker 02 And so we think everyone's gotten that wrong historically and there is a ton of opportunity.
20:54 Vijay Pande? But part of it might be too, like who needs to come into actually with the right mentality? So would Motorola have created the iPhone or something like that? Probably not, right? It takes someone that has a very different mindset. You know, when you look at companies that really change industries, often these are companies that come from the outside that work with the inside. So like in streaming music, it's something like Spotify. And they didn't create new artists and create new labels, but they worked with artists and labels, but they also came from outside the music system.
21:19 Steph Smith? And I think that brings up the point around these technologies. And it's like, what are technologies uniquely good at? And I'm thinking about some of these consumer engagement strategies like retention or gamification. So I'd love to hear from both of you. Where do you see some of these engagement strategies that maybe tech has previously flourished, being applied to healthcare that seems like an obvious potential fit?
21:42 Vijay Pande? I think it's gonna be all of it. I mean, you mentioned two in terms of retention gamification. I think it starts with just even there's the product.
21:49 Speaker 02 Yeah.
21:49 Vijay Pande? And that's the gamification and other types of things. And then there's the mindset for how to run the business. Often, to Deezy's earlier point, when we're not paying, people don't worry about retention. They don't worry about because you want your healthcare or don't want your healthcare. Right. I think those are not really choices. And so when you actually have choices, then people actually have to worry about retention. And that will actually feed into product. So it's that whole ecosystem shifting where we are much more in the driver's seat in terms of choice will lead to better products, as we've seen in many cases.
22:19 Speaker 02 Yeah, the best consumer talent in the world work in technology. It's crazy that today we all use apps for hours a day that didn't exist 10 or 15 years ago. And they've been so good at getting our attention and changing our behavior and changing the way we go about the world. If you go to a concert now, everyone's filming, so everyone can post it on Instagram.
22:41 Vijay Pande? And your ticket was probably on an app then.
22:42 Speaker 02 Exactly. And so the talent in tech for building amazing consumer experiences that change the way we go about our lives is insane. And that talent just doesn't exist at all in healthcare. And it's partially because what we were talking about earlier, no one sees consumers as the end customer and therefore doesn't optimize and no one has bred that talent in the industry. But I think when you marry people who understand healthcare and people who understand consumer tech, really magical things can happen.
23:09 Steph Smith? And in your article that we referenced at the very outset, this idea of becoming the biggest company in the world, especially when you're addressing an industry that feels so lofty and there's so many incumbents, I'd love to just hear your take on how that might actually happen. Like, how does a technologist potentially come into this huge industry? Is there really a path there?
23:30 Speaker 02 Yeah. We mentioned at the beginning, this was kind of a controversial take because the consumer health companies in the public markets today are relatively small. But I said, if you think about it from a first principles perspective, healthcare is 20% of the American economy. There's no reason this can't exist. And we basically laid out two ways we think a company could get to be the biggest company in the world via consumer health. The first is becoming a payvider. And payvider basically is an industry shorthand term for being both the insurance company and the provider of care. And United Health Group is that. It's United Healthcare, which is their insurance company, and Optum, which is their services company. They employ doctors who then provide care. And they're one of the biggest companies in the world. I think at the time we wrote
24:14 Speaker 02 the article, they were eight, and I think they've come down a bit since as AI companies have surpassed them. But they are one of the biggest companies in the world with a really crappy consumer experience. Their NPS is four. And so we ventured to say, what if you had that business model married with the consumer experience of Apple? That would obviously be the biggest company in the world. Every employee would demand that their employer offer that health plan. And you know, when you get to Medicare and you get to choose your plan after you're 65, every senior citizen would choose that plan and the competition would fall by the wayside. And so that was the first path we laid out. That's a vertical integration strategy. And the second was a horizontal strategy. And we'd said, either
24:59 Speaker 02 you can become a consumer marketplace. So the Amazon of healthcare, the place everyone goes to find their healthcare provider, to pick their healthcare insurance, to find the cheapest cost drug. And if you get a normal 20% take rate, which is what most marketplaces get, that gets you the revenue to be the biggest company in the world. And then the second path we laid out was a financial infrastructure layer. So what if you became the Visa of healthcare? Healthcare payments, I won't go into this because I think probably the general audience, it's a little dry. But healthcare payments are stuck in the 1980s. We do a whole lot of faxing of forms, mailing of gift cards, mailing of checks. And if you could build the financial infrastructure to service healthcare, we think that would easily be the biggest company in the world as well.
25:45 Vijay Pande? Yeah, I think in the fullness of time, this won't be even viewed as all that controversial. I think there's just a lot of building that has to be done. The one thing that I think people really tend to forget is just how huge healthcare is and how much it plays in all of our lives. And you think about what you'd pay for a phone versus what you'd pay out of pocket to have healthcare be a little better.
26:03 Speaker 02 Oh, my God.
26:04 Vijay Pande? So it just needs to be built.
26:06 Speaker 02 Absolutely. And maybe taking both of those paths on their own, what would you say the biggest obstacle is for each and actually making that a reality?
26:15 Vijay Pande? Yeah, I can take the first one. So in terms of the full stack, there's a lot to build if you're going to build a full stack company from scratch. You have to build out a provider and a payer and have technology throughout all of it. And that's something that takes a huge amount of capital and a huge amount of time. And then to scale that into multiple geographies. So there are companies working to do that. And that's something that just we can have examples of that in flight, but it will take time to build.
26:37 Speaker 02 I think on the second one is you have to build your way into the traditional healthcare system. If you're going to be the Amazon of healthcare, you've got to onboard every provider in America. You have to onboard every insurance company. You've got to work with the pharmacy benefit managers. And so it's just going to take time to infiltrate the industry. And so probably plugging into the system is the most challenging part.
27:00 Vijay Pande? I think one of the founders that we think a lot about today is like Jensen Huang, who's done amazing things. But Nvidia is an overnight success. What, 30 years?
27:08 Steph Smith? Yeah, I was gonna say.
27:09 Vijay Pande? So he's been making very thoughtful strategic decisions over multiple decades
27:14 Steph Smith? Yes.
27:15 Vijay Pande? to build this company and get to that point. It started a few decades ago. I think, I hope that maybe in 10 years, we'll have similar conversations with Jensen Huang's of healthcare.
27:23 Steph Smith? And obviously, we hope or almost expect that this may come from startups, right? And not the incumbents. But also, is there the possibility? I mean, you talked about maybe the Apple of healthcare, or you talked about payments and kind of replicating in some way what Visa has been able to achieve. So why wouldn't it come from them? Right? We actually have heard that quite a few of these large fang-like companies are trying to enter healthcare because it is such a big market, to your point. So could it come from them?
27:52 Vijay Pande? It could. But I think this is the traditional innovator's dilemma, and that it's really hard for incumbents. I think occasionally incumbents can disrupt themselves, which is pretty rare. And I think this is a case that would be particularly hard to because it's just so technical and difficult. And I think if you're an incumbent, your temptation is to stay away from healthcare. If you can be this massive horizontal, you probably want to do everything except the hard clinical AI stuff. You leave that to something else because that's a whole different beast. And so I suspect that for those reasons, it's something that the big tech companies will try. And we've seen Apple and Amazon and Google all dabble. But I think those experiments probably won't fit the way they want to build their company. And so I think they'll stay as experiments.
28:32 Speaker 02 Yeah, they've dabbled a lot over the years. They've all seen the size of the industry. And so I think they look at healthcare and they see dollars. But they're not healthcare native. And so they've tried to make these little plays to grab healthcare dollars without really investing in healthcare and changing our clinical outcomes and the kinds of really hard things you need to do. And so I think we'll see acquisitions on the margins like we saw with Amazon buying one medical and Apple's products are always kind of verging on health.
29:04 Steph Smith? Almost healthcare.
29:06 Speaker 02 They're going to count your steps for you. But we've been talking about this for a long time and we haven't really seen anyone pull it off.
29:13 Vijay Pande? It's like, you know, will the electric car come from Detroit? Maybe not at first.
29:16 Speaker 02 Yeah.
29:17 Vijay Pande? Maybe it was the fullness of time.
29:19 Steph Smith? Right, right.
29:20 Vijay Pande? But I think it'll take an outsider.
29:21 Speaker 02 And the flip side of that question is, might United Healthcare just get really good at consumer experience?
29:26 Steph Smith? Right, which doesn't sound like either of you are holding your breath. Maybe just to round that out, perhaps there's a case study or a learning, right? We have seen, to your point, huge industry, lots of opportunity. In some cases, you might argue, oh, well, Apple is the wearable you already have on you. So they have all the data. But then you also see interesting cases like Dollar General's getting into healthcare because they just have so many locations. Or you see Walmart try, but then they're closing their clinics. So is there maybe an example that comes to mind of some of these companies with maybe some of the right assets just approaching it incorrectly?
29:59 Vijay Pande? Another version of that question is, which incumbents do you think are closest with their assets?
30:03 Steph Smith? Is there one that you think might be actually taking the right approach?
30:06 Vijay Pande? Good question. Amazon's interesting because they've bought one medical, but that feels like a toe dipping rather than going all the way in. They'd have to buy a lot more. And then you start to look like a PE roll up. The question is, can they integrate in what they do really well?
30:21 Steph Smith? Right.
30:21 Vijay Pande? And so that becomes an interesting choice. But as Daisy was saying, they're all have done small experiments. And this is something that you can't build this huge horizontal or the full stack vertical with a small experiment.
30:31 Speaker 02 Right. Yeah, there are great people who work at all these companies. And so we don't want to disparage them in any way. But it feels like with the Walmart health of the world, it was almost a play to get you to stay in Walmart a little longer and spend a little bit more money. But without really investing in building world-class healthcare, you're never going to win in the industry. And I think that's what we've seen happen over and over with kind of big tech.
30:53 Steph Smith? So almost coming back to that idea of you have to give a better experience. And maybe some of the experiments have not focused on that. So we've talked a lot about technologists participating in healthcare, but that's a really broad brush. And we've maybe touched on like consumer, but that's also a broad brush. So we all know there's a few technologies that seem to really matter. AI, some people are looking at augmented reality is another potential interesting entry into healthcare. What is catching your eye in terms of the kind of technologies that can really move the needle?
31:23 Vijay Pande? You know, I love to talk about AI and I think it's natural. I think there's two sides of the coin that's really interesting. One is that you could argue healthcare really needs AI. In that the cost of healthcare is rising exponentially. There's a huge amount of data. There's all of these services that could maybe become compute. And it's not going to start with like brain surgery. It's going to start with the simple sort of maybe subclinical things first. And we've seen AI for nurses and AI for maybe therapists and other things like that. And that's going to be a huge change in the cost curve. The amazing thing about technology is that we'll all get the best. We'll all get the best nurse, the best therapist. Kind of like the Spotify in my pockets, the same Spotify Elon Musk has, the same Spotify billionaires have. Technology is a great democratizer. I think the things that people don't realize is there's a flip.
32:07 Vijay Pande? I was talking about why healthcare needs AI. I would make an argument that AI needs healthcare. And the argument there is that actually where is a place that AI could be applied to? Where the cost is so high that justify the cost of AI right now? Cause AI is really expensive. These models cost billions of dollars, there's lots of computer hardware. And to replace that with cat pictures is nice. And I love cat pictures, don't get me wrong, but that's not where we're spending huge fraction of GDP. So I would say AI needs healthcare because that's a place that's very data rich. And it's a place where actually the cost is so high now and increasing exponentially that it actually could have a huge impact.
32:44 Speaker 02 AI has far worse margins than traditional software, but it has way better margins than human services. It's way cheaper to use a large language model than it is to employ a human. And healthcare is a $4 trillion industry in America that's like probably 90% human services. And so we've talked about how there might be this leapfrog moment where, you know, I mentioned traditional technology software has really not penetrated healthcare. We have one of the 100 largest public software companies as a healthcare company. We all feel that. But just like in the developing world where you went straight from cash to mobile payments and leapfrogged over credit cards, we think we're about to have a similar moment
33:26 Speaker 02 in healthcare where we're going to leapfrog over traditional software and we're going to go straight from human services to AI. And so you don't have to go to these IT departments and hospitals and who have no budget and everyone is overtired and try to convince them to buy software that they're going to have to train their whole workforce on. You can say, everyone's burned out. We're going to hand you AI quote unquote, humans. And by the way, large language models and multimodal models are really good at doing what low level service humans do today in healthcare. And healthcare is the only industry that has call centers of thousands of people who are scheduling appointments, faxing forms, handling prior authorization. We're just really behind. And we've seen that.
34:09 Speaker 02 We've seen in venture, healthcare has been a traditionally under-invested category. And that's definitely changed with AI. I saw a stat that 20% of AI dollars have gone toward healthcare. And there's a reason for that. We have very clear problems that can be solved with AI that other industries don't have. I mean, the world needs more creative tools and all, but we have life or death issues and AI is going to be able to make a huge difference. And healthcare is increasingly data science and doctors are not data scientists. And so they need these kind of co-pilot tools to help them catch things they're missing.
34:44 Steph Smith? I just want to call out something you said earlier, which is that even if we cure all cancer, Americans' lifespans are only going to increase by three years. Do you guys have any other, just whether it's stats or thoughts around if we really are able to deploy AI in the ways that you're describing, what does that really change in real outcomes, whether it's for patients or Americans at large?
35:04 Vijay Pande? Yeah, I think in that spirit, I think the so-called social determinants of healthcare that are outside of the traditional healthcare system is actually a large fraction of what leads to mortality and morbidity. And so AI being able to do behavioral change is such an easy one.
35:18 Speaker 02 No one's been able to pull off behavior change in healthcare to date, but it really does feel like we have this why now moment. There's regulatory change that are enabling consumers to get access to all of their health records or grant that access to an app. There are these diagnostic companies that are running every test under a sun and tracking changes over time. There's more penetration of wearable devices than ever before. And if you marry all of those things, we're going to have these companions very soon that are providing actually helpful health tips and monitoring us and telling us when something might go wrong, far before we know something's going wrong or far before a doctor can diagnose us. And that's going to be a big step change for human health.
35:59 Vijay Pande? Well, I challenge you. So actually, this came up on our podcast with Tom from Aura, and you mentioned how actually all your friends after getting the ordering ended up drinking less alcohol.
36:06 Speaker 02 Mm hmm.
36:07 Vijay Pande? And I, yeah, it's just so it's funny you say this. So I get the ordering for Christmas and I'm like, well, Daisy's friends are going to drink less alcohol, but that's, I mean, I'm already in pretty good shape, but I end up drinking less alcohol. And then at like dinner the other night, people at the table were talking about their sleep score and stuff like that. That's real behavior change. And that actually is medically significant behavioral change.
36:27 Speaker 02 You're totally right. I'm wrong. Tech is real.
36:30 Vijay Pande? It's one example, and I think we could come up with a handful more. But I think maybe your original point is there's a lot more to do.
36:36 Speaker 02 Totally. There's a lot more to do. And if anyone solves the problem of alcohol disrupting your sleep, please come find us.
36:41 Vijay Pande? I'd love to continue. Solutions is drink less alcohol, but yeah.
36:46 Steph Smith? Talking about consumer change, I was at a wedding recently and people are gonna grill me for this, but everyone had an eight sleep. Every single person at the wedding table, the couples, there was maybe six or so of them, they all had eight sleeps and they were all like, what's your temperature? That is a social phenomenon and you're going around and you're like, oh, I'm the hot one, I'm the cold one. And now that you mentioned the aura, kind of social phenomena, I feel like we're seeing it with other devices as well.
37:12 Vijay Pande? I think a social phenomenon is a real thing and social is obviously a real thing in tech. And I think there is a movement, again, maybe post-COVID, towards health, where I think people are drinking a lot less alcohol, they're working out a lot more, and it helps. That's a social contagion of sorts, that it's sort of cool to do that. And I think we all want to improve our health and it helps when we're all doing it. So tech is an amplifier of that, where they're talking about social networks, but also it's not just the social networks. You need the number, you need the result, or you need the score. It's the beginning. I think there's a lot more to go from there.
37:42 Speaker 02 A similar thing, we invested in a company called Function Health that runs every blood test under the sun on you and explains what's happening in your body, system by system. And they provide you with something called biological age. And the number of texts I've now gotten that are saying, what's your biological age? And people are comparing their biological ages and having biological age birthday parties.
38:01 Steph Smith? I love that.
38:03 Speaker 02 Things are changing and you can change it, you can lower it, so.
38:06 Steph Smith? Yeah. And you know, you talked about how sometimes just the right number of things have to come together. And so I think about AI. Talk about how if we didn't use alt tags back in the day and we weren't labeling all these pictures, like where would we be in terms of the data sets that we have today, at least for imagery, right? And so it feels like some of the things you're both bringing up is, okay, so we're starting to get the data, we're starting to get the consumer buy-in, some of the incentives are changing and all of that coming together does feel like, oh, I know. So maybe closing things out, if there are people who maybe are still a little doubtful, they're hearing this and they're like, yes, I agree that I want this to change, but maybe I don't necessarily agree that technologists are the people right now. Who are going to be able to make this shift? What would you say to those people?
38:49 Steph Smith? And also, maybe what would you say to the technologists who maybe are on the fence?
38:53 Vijay Pande? I think part of it is that if you're a medical professional, I think the key thing of all these technologists are not necessarily complete outsiders. There are people that also know the healthcare system in and out. Because it does feel a little odd that like some person who just graduates with this undergrad CS degree is going to solve all the healthcare. That's probably not the case. These people are deeply rooted in the medical system, but are also technologists. And that's something that just didn't exist before. And that's kind of another why now.
39:19 Speaker 02 Yeah, I'd say startups are really hard. But you know, with the limited number of days and hours we all have on this planet, wouldn't it be amazing to be working on something that really matters? And you don't have to cure cancer. You don't need a PhD to save lives. Like a company that detects medical errors or helps people afford healthcare can save countless lives. And we would love to welcome you into our industry. So the water's warm, come on in.
39:47 Steph Smith? Absolutely. I think about there's websites where you can look at the very earliest versions of a Google or a Twitter. And you're like, wow, they started there. And so hopefully there's some sort of healthcare equivalent there, right? Where there's going to be an early version where it's, oh, you were just like providing one blood test for a consumer or even a subset of consumers. And then I wonder how that spirals. I hope we have some examples of that.
40:08 Vijay Pande? Yeah, like there's that internet bookstore that became more than that over time. It should become Amazon.
40:13 Steph Smith? Exactly. Which bought one medical, right? So I mean, you see how it spirals. Well, this was great. Thank you so much, BJ and Daisy. I really hope that 10 years from now, to your point, we can sit down and look back and think, oh, that was quite obvious.
40:25 Vijay Pande? Looking forward to it.
40:27 Speaker 02 Thanks for having us.
40:28 Vijay Pande? Thank you.
40:31 Steph Smith? All right, that is all for today. If you did make it this far, first of all, thank you. We put a lot of thought into each of these episodes, whether it's guests, the calendar Tetris, the cycles with our amazing editor Tommy until the music is just right. So if you like what we put together, consider dropping us a line at ratethispodcast.com/a16z. And let us know what your favorite episode is. It'll make my day and I'm sure Tommy's too. We'll catch you on the flip side.
Previous Latin America: A Tech Powerhouse? Next Governing democracy, the internet, and boardrooms Page updated September 30, 2026 · transcript and summary are machine-generated
