What is value? VCs say they add it, grocery stores say they have it, and we all want to be it. What’s difficult to understand is why when I think about it, its difficult to come up with a first principles based way of answering what exactly is value.
For me, I began thinking about this problem when listening to the Plenary Session podcast, hosted by Dr. Vinay Prasad. It’s a podcast targeted at medical students to provide a better understanding of the patient care landscape. Let me walk you through my thought process.
In healthcare, who are the stakeholders? It’s a bit of a mess, but on the whole, we have physicians, patients, hospital providers, insurance companies, and drug/medical device companies. I think there is general agreement that good products in the healthcare space have some benefit to patients. Even if you’re a SaaS company for healthcare administrators, value eventually trickles down to patients in the form of decreased costs and headaches with hospital bureaucracy (in a good world).
So what do patients want? Lower costs, shorter wait times, less paperwork, are all important but people come to the hospital to feel better, live longer, and stay healthy. I bring this up because a big part of Prasad’s show is essentially a commentary on how clinical trials using surrogate endpoints are failing patients and not delivering clinical value. The most common endpoint he gripes about is progression free survival (PFS), defined as the length of time during and after the treatment of a disease that a patient lives with the disease but does not get worse. To the engineer in me, this seemed like a pretty logical thing to track during the course of a trial. If a drug is doing something like this to a patient, I’d say there certainly is an effect.
But after with more diligent listening, I realized that as a patient, this doesn’t really matter. If my tumor is hidden away in my body, I don’t care how large it is, all I care about is how I feel and whether I live longer on a treatment. Unfortunately, a lot of these trials are not statistically powered to find differences in overall survival, and in fact many of these new drugs do not improve overall survival compared to existing standards of care despite larger toxicity. If I were a patient, I would not want a drug with comparable overall survival but greater toxicity. For the FDA to approve such a medicine, especially if cost prohibitive, this does not provide value.
It’s pretty easy to criticize a pharmaceutical company, but I think the real takeaway from this is that the baseline value that already exists is quite often ignored. Or at the very least, the baseline solution is often an indicator about how difficult a problem is to solve. There are no pancreatic cancer medications because it is a uniquely toxic and hard to cure disease.
So when I see people take a blind stab at what they think is a problem and think of a genius solution to solve it, I can’t help but be wary. Good work inevitably takes time, and I worry when we don’t think through our decisions and conduct the necessary due diligence before embarking on ‘solutions’, we are not creating value. Unfortunately, I think a lot of this has to do with the promotion of careerism among professionals in order to advance careers. It’s the sort of quick gratification that comes from listing something on your LinkedIn, that causes people to play this game, even if deep down we know that the goalposts are wrong. Part of this problem is information asymmetry. It is easy to make something seem impressive by only reporting results and not methods, or only speaking to the big picture without considering details. For example, a seasoned data scientist knows that the quality of a regression model is dependent on the quality of training and validation data. A hiring manager or anyone unfamiliar with drawbacks of a flawed dataset on the other hand would be caught up admiring a phenomenal accuracy statistic.
An increasing trend I’ve noticed especially among college students is the propensity to engage in startups. They do some shallow market research, enter business plan competitions, even make a website. The worst are business majors and surprisingly, also biomedical engineering majors. This shouldn’t really actually be surprising though. Tons of unmet needs (because the problems are genuinely tough!) and tons of unvalidated and ‘too expensive to try without funding’ potential ideas. The absolute worst are those that start pharmaceutical companies during college, it’s ridiculous. The barrier to entry is so low, that we’re getting too much noise. I work at the patent office at my university. 99% of disclosures from students do not go anywhere. These projects have value, but none of it is shared with stakeholders, only the ‘entrepreneur’ benefits.
The problem is that there is very little risk from the student’s perspective. Really the only thing you are sacrificing is your time and other people’s money. And one’s own time commitment isn’t exactly a sacrifice because you’re still in college! Every day that passes is 24 hours closer to graduation. And so, the only thing the school can really get out of your project is some publicity, which is mutually beneficial in the short term, but intensely damaging to the next generation of impressionable students. It’s an unfortunate cycle.
While meditating on this subject of value, I have to admit, it’s difficult for me to consider and incorporate value from experiential education. When students engage in startups, they are in most cases learning something. So, the question of whether careerism type activities is worth it is more complex. On the one hand, everyone knows that no value for others is being created, but it is possible that the experiential value is so beneficial for oneself that these activities as a whole are a net positive. Hopefully, I’ll write more about this in the coming days. For now, I’ll end with a process for assessing value in a true stakeholder focused sense.