By Bob Sweeney
March 25, 2020
In the fifth century BC, Zeno “proved” that Achilles, or, in some versions, a hare could never catch a tortoise who had even a small head start. No matter how fast Achilles ran, the tortoise would have moved some amount further ahead when Achilles arrived Physicians must feel a little bit like Achilles when their best efforts leave them behind in pursuing a balanced life style and financial opportunity. This article is about the latter—the race for financial satisfaction.
The physicians I know often feel left out of the conversation when investment bankers and financial advisors start talking about where to put their money. Surprisingly, such is the case even when the focus of discussion is health care or clinical innovations. Although physicians will end up having a boatload of responsibility for implementing and using new technology, whoever asks them on the front end if a proposed solution is workable, affordable or even likely to be adopted by physician users?
Even in circumstances where the physician gets into the original evaluation, what types of investments make sense for a busy professional? It depends on a variety of factors—how much money, how long can you leave it in place, what’s a reasonable expectation of return, how diversified is the investment? These considerations are amplified in times of stress or market instability as we see currently in the face of the coronavirus pandemic. Let’s take a closer look.
In times of crisis, most people scramble for liquidity in the short run. Of course, if you need money for groceries or a mortgage payment, you do what you have to do. But, beyond those existential issues, most people are tempted to move even their idle funds into short-term liquid assets. There is a library of formal articles on the trade-off between risk and time. But the bottom line is that people heavily tend to discount future events against the present despite the relative probability or risk of each event in its own right.
How do these thoughts affect physician investing and their prospects for improvement? The first factor to think about is the meaning and usefulness of “liquidity” as it influences returns over time. The reality is that, by most measures, a longer term, relatively illiquid investment, if properly diversified, has a far better chance of returning upside value than a shorter term liquid investment, whatever the diversification. Look around us. We have markets riding a weekly or, sometimes, daily roller coaster, driven by short term placements. No wonder, even well off investors, cringe and head for the sidelines. But that’s not what long term players do.
The current healthcare crisis clearly demonstrates for the world the integrity, compassion, and heroism of physicians, as well as all other healthcare workers. They are selflessly working the front lines, in most cases with inadequate support. In light of the Covid-19 pandemic, it may seem trivial to discuss the financial empowerment of physicians. However, there are many examples occurring today that illustrate the thesis of this essay: it is essential for physicians to ‘have a seat at the table’ when it comes to evaluating healthcare innovation.
In the absence of a coherent and consistent federal response to this crisis, doctors and hospital systems have been left to devise and implement strategies to safely care for patients by stretching their limited supplies as efficiently as possible. Physicians and scientists are also actively involved in clinical research to develop an effective Covid-19 test that can be distributed as quickly as possible. Multiple medical approaches to treating patients with Covid-19 are underway with the hopes of rapidly developing a best practice to treat. Physicians and entrepreneurs, anticipating the coming shortage of ventilators, are working on solutions. These actions aim to provide hospitals with ways to optimize current ventilator use and to fabricate new, low cost ventilators for deployment nationwide.
These efforts are much more likely to be successful if the medical community is involved from the outset. Physicians have always been the alphas and omegas in the relationship between innovation and healthcare. Ideas originate from their experiences and frustrations, through the filters of their knowledge of what can be accomplished. They drive implementation and adoption through integration into practice workflow, clinical advocacy, and, ultimately, the universal goal of improving the healthcare and well-being of their patients. Unlike day to day patient care, the scale of impact of these types of advances can be massive.
Savvy investors/physicians also know that innovation in health care can create tremendous returns on investment for those willing to leverage their capital. By using their expertise to identify and support an early-stage health care company, physicians can see opportunities earlier than most investors. They can also ‘bend the success curve’ through their involvement. If executed competently, and with a smartly diversified approach, real change can be accomplished and outsized returns can be realized.
The Covid-19 pandemic has shined a light on the importance of investment in health care innovation, particularly in digital health and telemedicine. Factors across the board are facilitating this sector’s growth, including reduced regulation, improved reimbursement, and aggressive adoption. As a result, the digital health care sector has actually increased its market value in the last few months. Global Health Impact Fund (GHIF) consistently has been in front of this trend and has deployed capital to support the most promising digital health care companies.
GHIF is physician-originated and physician-run. Its Limited Partners, many of whom are physicians, play an important role identifying and selecting investments, contributing to due diligence, and supporting portfolio companies as they grow. Their first fund, GHIF 1, is 80% committed and plans for a Quarter 2 close in 2020. To learn more, discuss joining, call or e-mail any of the Principals for more information.
Don’t play the game of chasing the tortoise. Take a new look at your current options today and reconsider your approach.
Bob Sweeney, Principal & Managing Partner
Global Health Impact Fund LLC