Vinit Nijhawan: Serial Entrepreneur, Venture Capitalist

Liberal Lion and Healthcare

I have been thinking about Ted Kennedy from this morning when my son commented about our meetings with him. These were brief "photo op" meetings but left an impact on all my sons. What made him memorable was that he was authentically personable and he spoke eloquently but with an economy of words. In some ways he epitomized the "great generation" that made America the envy of the world. I lament his passing to our generation that seems to have lost the qualities of (1) holding steadfast to beliefs yet be able to debate them and not call others who don't accept your beliefs pejoratives like "LOSER", (2) humility so we acknowledge flaws in ourselves (unlike Mitt Romney's planned book: No Apologies), (3) humanity to recognize that profit is not the only measure of happiness.

As the healthcare debate, if you can call the name-calling slugfest playing out at town hall meetings and airwaves a debate, gathers steam, the passing of Ted Kennedy is a serious setback for Obama. The primary reason for healthcare reform is not to cover the uninsured but to reduce the cost of healthcare to those who are insured. No one in this country is denied access to healthcare if they are uninsured--hospital emergency rooms are filled with uninsured patients every day. The cost of providing healthcare to the uninsured is paid by taxpayers and consumers since hospitals pass on their costs to Medicare and insurance companies. The spending spree on US healthcare infrastructure mirrors Japan's absurd spending on highways and trains, at some point the merry-go-round has to stop. The passing of General Motors and soon the Liberal Democratic Party in Japan is more than symbolic of these excesses.

So how did the most capitalist of nations end up spending twice per capita on healthcare than most developed nations with worse per capita health (as measured by obesity, longevity, etc). The market is not supposed to allow this and will certainly correct itself, right? On the contrary, we have set up the market so consumers believe that unrationed healthcare is a right and like all markets, producers (doctors and hospitals) are incentivized to sell consumers whatever they want. The key part of this equation is that the consumers not only believe that unrationed healthcare is a right, they also have no idea how much it costs. It is left to the insurers, including Medicare, to "negotiate" these costs with the producers. They don't need to negotiate hard as they can pass on these costs to consumers via insurance premiums and taxes.

The solution is simple, consumers have to directly feel the pain of the costs of healthcare that they are getting so they will self-ration care. The problem is that the only market mechanism to directly feel the pain is to pay for services rendered. Of course one could buy insurance just like one buys life or disability insurance. The problem is that many people, young and poor, will not buy insurance and will not be denied access to ERs. Therefore let us mandate "basic" insurance for all that includes disincentives for unhealthy lifestyle choices: obesity, driving too fast, riding a bike without a helmet (not completely tongue-in-cheek). The question is what does basic insurance deny you that premium insurance doesn't, eg would basic insurance allow "elective" surgery such as a kidney transplant? What if you were paying for basic insurance for years and then switched to premium just before an elective surgery, would that be allowed (a bit like signing up for AAA when your car is broken down so you get a free tow).

Anyways I am probably covering ground that many healthcare policy analysts have. The point is that that healthcare reform is complex and will need thoughtful debate on how it is implemented. The thought leader in this debate was Ted Kennedy and with his passing I dread the outcome. I especially worry that the purveyors of America is the Best are going to ignore Canada and Switzerland and even India in getting ideas of what works and what doesn't. America is best when it attracts the best brains and ideas from around the world and provides products/services to it venturesome consumers.

Kaavya Viswanathan

I was just reading a review in the Boston Globe of Kaavya Viswanathan's novel "How Opal Mehta got kissed, got wild and got a life" and was struck by the irony of it. The novel is about the "engineering for success" of Opal Mehta by her parents: admission to Harvard as the catalyst. Clearly Kaavya's real life parents have engineered a similar path for Kaavya. As a parent of three teenage boys living in a highly competitive town, with hundreds of parents similarly engineering their kids' resumes, I am sympathetic to Kaavya's parents, it is a competitive world and we want the best for our children. Parents in India and China are similarily pushing to their children to attain skills and entry to the right educational institutions to allow them to succeed.

While the world appears to have become more competitive the reality is that practically everything in nature is governed by normal distribution, also known as the gaussian or bell curve. There is no way for everyone's children to be "pushed" towards the right of the curve. Certainly as quality education becomes available to more and more children, we can squeeze the curve to make it narrower and therefore include a great portion of people within a standard deviation. Success, however, is determined by many other factors than formal education, it is especially determined by experience. One can compress life's experience into fewer years and of course some people learn from experience better than others. Nonetheless, there is no substitute for first hand experience.

Entrepreneurship is similar in nature. While there are first-time entrepreneurs who were very successful in 2-3 years of starting their ventures, the majority of us took 10+ years of experience to learn how to engineer success. I was recently on a panel at MIT put together by Asian MBA students http://www.talentforum.org/panel-entrepreneurship.htm. A student asked if it was better to work somewhere first or launch a venture straight out of school. Another VC on the panel Andy Goldfarb of Globespan said it was better to work at an established company, build a rolodex of customers and accomplished fellow employees and then start a company. I differed in my response by pointing to another panelist who was a very successful entrepreneur in China who started his company at a young age.  This leads to a good question, is it better to learn on the job like a staright-out-of-school first time entrepreneur or learn on someone else's nickel first. I believe both methods work. If you want to learn on the job, surround yourself with good mentors, and make sure that you have set everyone's expectations for a slow road to success. Good mentors can be drawn from VCs, fellow CEOs (there are CEO groups such as the www.ceo-roundtables.com) and advisors. If you want to learn on someone else's nickel choose a succesful company where you are more likely to find good role models.

So a lesson from Kaavya's troubles, don't be compelled by your parents or peers to attain success on their timetable. Be in a hurry but take care to build the foundation for future success. A strong foundation comes from experiencing things first hand and internalizing that experience into your own understanding and desire for success.