How do we make sure that when tech eats the world we don't all get indigestion?
I read three seemingly unrelated things last week that suddenly collided in my head so hard I spent 15 minutes searching for the third illusive reference so I could piece this story together. (Note to self, Google History and Substack Inbox are your friend.)
Expanding Tech’s Total Addressable Market
The first piece I read was this entertaining, thought provoking and techo-optimistic long read from
.
Packy points out, as have many others, that in 2023 the largest companies by market cap are overwhelmingly dominated by names that we recognise as ‘Tech’ companies.
Ten years ago, the top ten was mostly dominated by oil companies and the market caps were almost an order of magnitude smaller.
The size of the opportunity is growing as tech – software and hardware – accesses more areas of the economy, and eats more areas of the economy.
What’s notable about tech’s dominance of the top companies by market cap list is that it doesn’t map very cleanly to the list of top companies by revenue.
Apple, Microsoft, Amazon, and Alphabet come in ninth, thirty-first, fourth, and eighteenth, respectively. Meta, Tesla, and NVIDIA don’t make the top 50. Their market caps are so high because they’re insanely profitable, fast-growing, or dominant within their categories.
But other than Amazon in retail and now Tesla in automobiles, they haven’t made a dent in the world’s largest pools of money.
Tech is Going to Get Much Bigger, Not Boring
Hmm, OK, you could see the market cap / revenue mismatch as evidence of a mass delusion on the part of investors (i.e. all of us) too. But let’s instead follow Packy with the idea that the big market caps and a penchant for driving revenue back into expansion into new markets is going to give these companies enormous leverage as they break into new industries and access ‘pools of untapped revenue’. Untapped so far by tech that is.
So where do we see Big Tech companies making sustained forays into huge buckets of spending? I’d argue that Google is doing this with agriculture and of course pharma. And Amazon is having a pretty good crack at the enormous bucket of money that is primary healthcare.
Amazon takes another run at primary care
Chronologically, this was actually the third thread to catch my eye but it makes for a clearer story this way around. I have rearranged reality for your reading pleasure, Einstein would be proud.
Late last week, Amazon launched an add-on subscription services from Prime customers in the US.
Amazon Prime members have a new offer in addition to the usual delivery and streaming services: Access to One Medical, the Amazon-owned primary care company. Members have the option, announced Wednesday, to pay an additional $9 per month, or $99 per year, for One Medical’s telehealth services and in-office appointments at a discount of about half its typical $199 yearly cost.
One Medical, acquired by Amazon earlier this year, is arguably the most successful out of a growing number of businesses, like Amazon Clinic, Carbon Health, and Oak Street Health, that offer services designed to smooth out some of the wrinkles of the American health care system — usually with a strong telehealth component. In the case of One Medical, subscribers can get 24/7 access to virtual visits, and same or next-day in-person appointment availability. (The average waiting time for a primary care visit in major U.S. cities is about 21 days, according to a survey last year.)
In-person visits to One Medical’s 125 offices in the U.S. are still billed to the patient’s insurance company, so patients seeing doctors in person pay the One Medical monthly fee on top of what they pay for a visit. The company’s bet is that the convenience will be worth it.
What Amazon Prime’s new One Medical offering reveals about the future of health care, STAT News
For my AU and NZ readers to better understand why you would pay a monthly fee for the privilege of telehealth appointments when you still have to have insurance to pay for an actual in person consultation, the impression I’ve gathered from some digging is that it’s the strong suggestion of guaranteed access to a visit that is the draw card. They’re not kidding in the quote above when they say that it takes on average 21 days to get an appointment to see what we would call your local GP.
Amazon has actually been experimenting in healthcare for years
Looking at some of the back history here is really intriguing. Amazon seems to have been experimenting with what makes sense, and presumably what feels both profitable and scalable.
Haven, launched in early 2018, was a collaboration between Amazon, JPMorgan and Berkshire Hathaway. Haven was intended to be “independent and free from profit-making incentives and constraints” and wanted to focus on providing “simplified, high-quality and transparent care” through a focus on technology. It lasted three years. When the dissolution of the partnership was announced in Jan 2021, Amazon said that while Haven “worked very well” as a place to come up with ideas and test them, “now that we’re ready to implement, we realize that doing so independently makes the most sense.”
Then there was Amazon Care, launched Sept 2019, shuttered in Dec 2022. Initially for Amazon employees, “the Amazon Care offering included both virtual and in-person care, with telemedicine via app, chat and remote video, as well as follow-up visits and prescription drug delivery in person directly at an employee’s home or office.” This was later extended as an employer offered healthcare program to other large employers and had a number of companies as clients including Whole Food Market and Hilton.
Neil Lindsay, a 13 year veteran of Amazon and SVP of Amazon Health Services for the last two of those years, announced in August 2022 the winding up of Amazon Care, saying that “it is not a complete enough offering for the large enterprise customers we have been targeting, and wasn’t going to work long-term.”
Earlier that same year, Amazon had announced it was planning to buy One Medical. Founded in 2007, One Medical was a “not yet profitable” “membership-based, tech-integrated, consumer-focussed primary care platform” with around 750k members and 188 offices around the US.
It’s the One Medical acquisition that now underpins the Amazon Prime add-on, subscription-based telehealth plus experiment.
I’m guessing we may soon see the amalgamation of Amazon Clinic with the Prime subscription model. Or maybe not, as Amazon is famously quite happy to race internal ideas against one another in search for the best commercial proposition.
All in all, an impressively disciplined commitment to experimentation and learning which implies a long term intent to enter this arena.
So what does this all have to do with indigestion?
Some weeks before I spotted the Amazon announcement, I read and became absorbed in this deep dive from
on the challenges of private equity getting involved in healthcare.
Lina Khan is the newish, Biden-appointed chair of the US Federal Trade Commission with her own fascinating history of not being a big tech fan. And in September, the FTC filed suit against a private equity-owned financial firm U.S. Anesthesia Partners and its owners, PE firm Welsh Carson for a “multi-year anticompetitive scheme to consolidate anesthesia practices in Texas, drive up the price of anesthesia services provided to Texas patients, and increase their own profits.“
According to Matt and The Petris Center this is not an isolated incidence
In every area of health care - hospitals, pharmaceutical distribution, ambulances, emergency physician services, insurance - there has been massive consolidation, which increases prices and lowers the amount of care delivered. Private equity, a financial model focused on ruthless extraction, came into health care in a big way after the financial crisis of 2008, and it super-sized this trend. PE funds look specifically for areas where they can acquire pricing power, and then they squeeze.
"Cha-Ching!" Lina Khan Attacks PE in Health Care, BIG by
Yes, I hear you. Private Equity is not Big Tech. But the story of moving in with large amounts of capital and rewriting the rules in a way that leaves the average human worse off? My point is that it can happen.
So here’s why I found this all so thought provoking
The action orientated, “let’s get on and optimize this” side of me is delighted with the idea of revamping industries that are critical to human flourishing. What’s not to like about giving more people access to healthcare? But as the Matt Stoller story above illustrates, this is an area we have to mess with very carefully.
We all know the old adage ‘you get what you pay for’. In healthcare, a similar maxim seems to be ‘you get the type of care you can profitably bill for’. Many people I talk to who work in and around healthcare believe that significant change is possible only if we change the way we bill for service. How do we do that mindfully?
At the moment I’m pondering whether the opposite is happening as entities with long track records in valuing market dominance above all else seem to be entering the market in increasing numbers. And what we might do about that?
Call me sheltered, but in general I don’t believe folk set out to be evil. However I do think a lot of people are more than prepared to profit within a distorted framework, possibly at the same time as decrying the framework for not being fit for purpose. This Politico article about a potential antitrust revolution in the US is interesting reading.
Until next time, take care of yourselves and do something that puts a smile on your face every day. For me today, that’s heading off for a walk along the river on a fleetingly beautiful summer day (I’m not a fan of the +40C days to follow).
The market cap of the top 6 AI/tech Companies (Microsoft, Google, Apple, Amazon, Nvidia, Meta) equals $10 Trillion. The GDP of the 3rd and 4th largest economies in the world (Japan and Germany) is $8 Trillion. These tech companies concentration of power has never been seen before and there is no regulatory movement to stop it. As someone said, we are all "digital serf" now.
Projecting 10 years from now, could these numbers be $16 Trillion as 8 Trillion (double), possibly realistic given exponential power curves of AI and some digitally based businesses.
Pretty insightful. I had not read the articles you reference but the Amazon foray into healthcare was on my radar. Combine this with their team-based API culture and customer obsession makes for an interesting future.