Tag Archives: Elon Musk

Elon Musk and Your Feedback Loop

Although I sometimes can’t decide whether Elon Musk is the business genius of our time or is two bricks shy of a load, he sure does get a lot of key principles right.

The latest instance is a little-noticed announcement last week about how he’s using Tesla’s auto insurance offering to create a feedback loop to help him make better cars. When an accident occurs, his designers learn immediately through the insurance arm what happened and can consider whether some modification to the car would reduce the damage or at least lower the cost of the repair. Customers will become less likely to gasp, “That fender-bender cost how much to fix?” Word-of-mouth on the cars will improve, leading to more sales, creating more data via the insurance arm, allowing for more design improvements and so on, pumping ever more money into Musk’s pockets.

While emulating Musk won’t mean that you, too, can send astronauts to the space station, insurers have a number of opportunities to create feedback loops and virtuous circles that could let them dominate a major part of the industry.

Companies have long tried to incorporate feedback, largely by having customer service reps’ interactions interpreted in ways that can guide product design teams to fix problems or to understand customer needs that hadn’t previously been articulated. Over the years, we’ve published articles about innovations such as improved speech-to-text translation, which let companies plumb customer calls for key phrases that could lead to insight. Just last week, we published a piece on how companies should track every time they say “no” to a customer, to see if a “yes” might be possible and lead to innovation in products or services.

What’s different — and what creates major opportunities for insurers — are the newly available speed and specificity of insight, which can create such a tight feedback loop that the power increases over time and can lead to an insuperable advantage.

Technology companies dramatize the power of the right feedback loop. Facebook so dominates social media that it sees a huge percentage of the interactions and can mine them to see which ads work and which don’t, which algorithms generate the most interactions in people’s news feeds, etc. Facebook feeds its knowledge back into product design, and its competitive edge keeps growing (even though Washington is finally showing some antitrust concerns). The same holds true for Google’s search engine: When Microsoft announced years ago that it was pouring unlimited resources into its Bing search engine, to take down Google’s search engine, I was sure Google had nothing to fear even from a powerhouse like Microsoft. Google was seeing two-thirds of the searches, so it was learning and improving far faster than could Microsoft, which was seeing maybe one-fifth of the searches. Google Maps had the same sort of feedback edge over Apple Maps. Amazon, as the marketplace for so many goods, sees what works and what doesn’t in exceptionally fine detail — by color, by size, by time of year, by slight variation in price, etc. It’s actually facing antitrust scrutiny because competitors claim Amazon uses the information to decide which products to start making on its own and enters markets with an unfair advantage.

Because insurance isn’t nearly as digital as Facebook, Google or Amazon, the feedback loops will take longer to build, but they’re still possible.

I’m especially optimistic about claims. As the process is being digitized, particularly with auto, there seems to me to be a great opportunity for some independent company to become good enough that it will achieve critical mass. At the moment, real progress is being made, as those involved in an accident take their own pictures, as artificial intelligence offers on-the-spot repair estimates and as coordination with the body shop at least begins digitally. But imagine what might happen if one competitor got its nose far enough ahead of others. That competitor would see so many of the claims that it could learn faster than others about just which pictures matter and how they should be taken, could finetune the AI to offer much more accurate estimates of damage (addressing what seems to be a source of many complaints at the moment) and could generally smooth the process between accident and repair by continually spotting and removing friction points. Then that company would become even more popular, giving it access to more feedback… and away we go.

Wouldn’t you like to be that company?

Not every aspect of insurance lends itself to tight feedback loops. When you underwrite a batch of life insurance policies, for instance, you don’t get your feedback for years or even decades on how accurate you were.

But just about anything that can be digitized allows for the kind of fast feedback that could produce a dominant information position.

Distribution is becoming digital enough in these pandemic times that at least pieces of the process could be optimized through instant feedback from agents, carriers and customers about where the pain points are. The opportunity is especially large with independent agents because, no matter how big a captive sales force is, it won’t have the same scale as the universe of independents does, and information advantages are most powerful at scale (see, Facebook, Google and Amazon).

Business process outsourcing, buttressed by AI and robotic process automation, could be another opportunity for an information advantage from a tight feedback loop. That opportunity may be too immature still because, in general, if you’ve seen one business process at a company you’ve seen one business process at a company. There will likely need to be more more in common among processes before a company could swoop in and win the whole opportunity.

RiskGenius has always intrigued me as an information play, because of its AI that searches through policies to spot changes, compares clauses against similar ones in other policies, etc. If RiskGenius gets to critical mass in the number of policies in its systems….

There are surely other possible feedback loops, too, and if those of us in the insurance industry don’t spot them then others surely will. Always remember what Amazon founder and CEO Jeff Bezos says: “Your profits are my opportunity.”

Stay safe.


P.S. Here are the six articles I’d like to highlight from the past week:

‘Law of Computability’ Powers the Bionic Era

The bionic era automates symbolic work – perceiving and judging – and blends powerfully with the industrial era’s automation of physical work.

COVID-19: Technology, Investment, Innovation

There are two extremely different states existing within the insurance ecosystem: larger, well-funded participants and then all the rest.

Graph Theory, Network Analysis Aid Actuaries

Graph and network analysis helps organizations gain a deep understanding of their data flows, process roadblocks and other trends and patterns.

Voice Is the Future – Even for Insurance?

Wouldn’t it be good to be among those present at the start of voice-activated assistants, a technology of the future, and gain market share?

The Most Underused Channel for Leads

One advantage many captive insurance carriers overlook is tied to what may seem like a disadvantage— consumer preference for online research.

3 ‘Must Have’ Digital Investments

Transformation has advanced five years in eight weeks, and P&C insurers need to keep up with digital platforms, payments and communications.

Where Silicon Valley Is Wrong on Innovation

Silicon Valley exemplifies the saying, “The more things change, the more they stay the same.” Very little has changed over the past decade, with the Valley still mired in myth and stale stereotype. Ask any older entrepreneurs or women who have tried to get financing; they will tell you of the walls they keep hitting. Speak to VCs, and you will realize they still consider themselves kings and kingmakers.

With China’s innovation centers nipping at the Valley’s heels, and with the innovation centers that Steve Case calls “the rest” on the rise, it is time to dispel some of Silicon Valley’s myths.

Myth 1: Only the young can innovate

The words of one Silicon Valley VC will stay with me always. He said: “People under 35 are the people who make change happen, and those over 45 basically die in terms of new ideas.” VCs are still looking for the next Mark Zuckerberg.

The bias persists despite clear evidence that the stereotype is wrong. My research in 2008 documented that the average and median age of successful technology company founders in the U.S. is 40. And several subsequent studies have made the same findings. Twice as many of these founders are older than 50 as are younger than 25; twice as many are over 60 as are under 20. The older, experienced entrepreneurs have the greatest chances of success.

Don’t forget that Marc Benioff was 35 when he founded Salesforce.com; Reid Hoffman 36 when he founded LinkedIn. Steve Jobs’s most significant innovations at Apple — the iMac, iTunes, iPod, iPhone and iPad — came after he was 45. Qualcomm was founded by Irwin Jacobs when he was 52 and by Andrew Viterbi when he was 50. The greatest entrepreneur today, transforming industries including transportation, energy and space, is Elon Musk; he is 47.

See also: Innovation: ‘Where Do We Start?’  

Myth 2: Entrepreneurs are born, not made

There is a perennial debate about who can be an entrepreneur. Jason Calacanis proudly proclaimed that successful entrepreneurs come from entrepreneurial families and start off running lemonade stands as kids. Fred Wilson blogged about being shocked when a professor told him you could teach people to be entrepreneurs. “I’ve been working with entrepreneurs for almost 25 years now,” he wrote, “and it is ingrained in my mind that someone is either born an entrepreneur or is not.”

Yet my teams at Duke and Harvard had documented that the majority, 52%, of Silicon Valley entrepreneurs were the first in their immediate families to start a business. Only a quarter of the sample we surveyed had caught the entrepreneurial bug when in college. Half hadn’t even thought about entrepreneurship even then.

Mark Zuckerberg, Steve Jobs, Bill Gates, Jeff Bezos, Larry Page, Sergey Brin and Jan Koum didn’t come from entrepreneurial families. Their parents were dentists, academics, lawyers, factory workers or priests.

Anyone can be an entrepreneur, especially in this era of exponentially advancing technologies, in which a knowledge of diverse technologies is the greatest asset.

Myth 3: Higher education provides no advantage

Thiel made headlines in 2011 with his announcement that he would pay teenagers $100,000 to quit college and start businesses. He made big claims about how these dropouts would solve the problems of the world. Yet his foundation failed in that mission and quietly refocused its efforts and objectives to providing education and networking. As Wired reported, “Most (Thiel fellows) are now older than 20, and some have even graduated college. Instead of supplying bright young minds with the space and tools to think for themselves, as Thiel had originally envisioned, the fellowship ended up providing something potentially more valuable. It has given its recipients the one thing they most lacked at their tender ages: a network.”

This came as no surprise. Education and connections are essential to success. As our research at Duke and Harvard had shown, companies founded by college graduates have twice the sales and twice the employment of companies founded by others. What matters is that the entrepreneur complete a baseline of education; the field of education and ranking of the college don’t play a significant role in entrepreneurial success. Founder education reduces business-failure rates and increases profits, sales and employment.

Myth 4: Women can’t succeed in tech

Women-founded firms receive hardly any venture-capital investments, and women still face blatant discrimination in the technology field. Tech companies have promised to narrow the gap, but there has been insignificant progress.

This is despite the fact that, according to 2017 Census Bureau data, women earn more than two-thirds of all master’s degrees, three-quarters of professional degrees and 80% of doctoral degrees. Not only do girls surpass boys on reading and writing in almost every U.S. school district, they often outdo boys in math — particularly in racially diverse districts.

Earlier research by my team revealed there are also no real differences in success factors between men and women company founders: both sexes have exactly the same motivations, are of the same age when founding their startups, have similar levels of experience and equally enjoy the startup culture.

Other research has shown that women actually have the advantage: that women-led companies are more capital-efficient, and venture-backed companies run by a woman have 12% higher revenues, than others. First Round Capital found that companies in its portfolio with a woman founder performed 63% better than did companies with entirely male founding teams.

See also: Innovation — or Just Innovative Thinking?  

Myth 5: Venture capital is a prerequisite for innovation

Many would-be entrepreneurs believe they can’t start a company without VC funding. That reflected reality a few years ago, when capital costs for technology were in the millions of dollars. But it is no longer the case.

A $500 laptop has more computing power today than a Cray 2 supercomputer, costing $17.5 million, did in 1985. For storage, back then, you needed server farms and racks of hard disks, which cost hundreds of thousands of dollars and required air-conditioned data centers. Today, one can use cloud computing and cloud storage, costing practically nothing.

With the advances in robotics, artificial intelligence and 3D printing, the technologies are becoming cheaper, no longer requiring major capital outlays for their development. And if entrepreneurs develop new technologies that customers need or love, money will come to them, because venture capital always follows innovation.

Venture capital has become less relevant than ever to startup founders.

Where Is the Elon Musk of Healthcare?

I have been following and interested in space and rockets since I was a child. In April, I was honored to give the distinguished lectureship at the University of Mississippi Medical School, School of Population Health, titled SpaceX, Moonshots and Diabetes in Mississippi.

The announcement that the U.S. Air Force has contracted with SpaceX for a launch of its Falcon Heavy brought that point home again.

The gist of my presentation compared the current efforts to launch rockets into space with our healthcare system.

In the space race, there are two major players at this time, United Launch Alliance, composed of Boeing and Lockheed Martin, with decades of experience and strong government relationships, and SpaceX, the Elon Musk company.

ULA is like our current healthcare system — big names, big contracts, major impact on and strong relationships with our federal government — and the rockets cost a lot of money. In fact, ULA could also be compared to the Cancer Moonshot, which also has big names with strong government relationships and has big bucks. The Cancer Moonshot approach of using big data analytics, biologics and CRISPR to edit out the genetic defect are all needed and are all great ideas. They are also shiny objects, and they will most likely cost a lot of money.

See also: 10 Reasons Healthcare Won’t Be Disrupted  

As Buckminster Fuller said,

“You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.”

SpaceX is the upstart that is doing just that. It is based on Elon Musk’s original vision to re-energize the public to space exploration by putting a greenhouse on Mars. This initial vision has become the goal of “enabling people to live on other planets.” He quickly discovered that he could not do it with the rockets developed because they cost too much. So what did he do? He devised a new system/rocket and removed the waste, the waste of throwing away the rocket, resulting in lower costs and making his dream reasonable. Well, he did that and much more. His launches are considerably cheaper than those of the big guys of ULA. His Falcon Heavy is only the latest example:

“The launch contract will cost the U.S. Air Force $130 million, far less than the $350 million average cost of United Launch Alliance’s Delta IV, previously the heaviest lifter in the U.S. arsenal.”

So what does that have to do with healthcare and diabetes in Mississippi?

  • In 2015, Mississippi ranked first in the nation for overall diabetes prevalence, with more than 333,000 adult Mississippians living with the disease; that’s more than 14.7% of the adult population
  • Diabetes accounted for more than 1,000 deaths in Mississippi in 2015
  • In 2013, direct medical costs (e.g., hospitalizations, medical care, treatment supplies) accounted for about $2.4 billion, of which Medicaid spent almost $1 billion.
  • MS has an estimated 30% of adults with pre-diabetes, creating the potential that more than 600,000 Mississippians are on the path to develop type 2 diabetes

Yet we know that perhaps 80% of type 2 diabetes is preventable. We also know that an estimated 30% of healthcare is waste, fraud and abuse. So that’s roughly $800 million in waste, etc. that if freed up from the system could be applied to the social determinants of health that are driving this disease.

Imagine that, the money to solve the problem is locked up in the system itself.

Why not create a grand mission just like Elon Musk’s mission to Mars. A mission that people can work toward, as they do the incremental changes needed to create the new system to make it happen. Lifting a quote from President Kennedy, I said:

We chose to eradicate every case of lifestyle-related type 2 diabetes and pre-diabetes in the state of Mississippi, for no more than we are spending today on healthcare. We chose to eradicate every case of lifestyle-related diabetes and pre-diabetes, not because they are easy, but because they are hard; because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one we intend to win. 

So how do we do this?

By creating an Accountable Health Organization, implementing a broad-based population health program, changing the reimbursement to the healthcare system to a value-based approach, perhaps to capitation, and using the savings to fund the social services.

It’s a heavy lift, no pun intended, and it will take decade(s), but it can be done. It will require new systems, a long-term approach and a lot of small changes to get there. If we created the system to do this with diabetes, we could then apply it to the rest of the preventable issues, for we will have developed solutions for diet, exercise, patient engagement, adherence, appropriate medical care, rural care, urban approaches, personalization and on and on.

See also: How to Optimize Healthcare Benefits  

In fact, the UMMC School of Population Health and the Jackson Hinds-Comprehensive Health Center FQHCs have begun just such an effort by starting with pre-diabetes. Can you imagine the look on all our faces when we succeed…?

You can find the article originally published here on LinkedIn.

Do We Face a Jobless Future?

In Amazon’s warehouses, there is a beehive of activity, and robots are increasingly doing more of the work. In less than five years, they will load self-driving trucks that transport goods to local distribution centers where drones will make last-mile deliveries.

Soon afterward, autonomous cars will begin to take the wheel from taxi drivers; artificial intelligence will exceed the ability of human doctors to understand complex medical data; industrial robots will do manufacturing; and supermarkets won’t need human cashiers.

The majority of jobs that require human labor and intellectual capability are likely to disappear over the next decade and a half. There will be many jobs created, but not for the people who have lost them — because they do not have those skills. And this will lead to major social disruption unless we develop sound policies to ease the transition.

See also: May the Forms Be With You!  

The industry behind these advances — and reaping huge financial rewards from them — has been in denial. Tech entrepreneur Marc Andreessen, for example, calls the jobless future “a Luddite fallacy”; he insists that people will be re-employed.

But now others, including Facebook’s Mark Zuckerberg, Tesla’s Elon Musk and Bill Gates, are acknowledging a skills mismatch, with the potential for mass unemployment. They advocate a universal basic income (UBI), a payment by the government that provides for the basic wants and needs of the population.

[Mark Zuckerberg tells Harvard grads that automation will take jobs, and it’s up to millennials to create more]

But these tech moguls are simply kicking the can down the road and shifting responsibility to Washington. UBI will not solve the social problems that come from loss of people’s purpose in life and of their social stature and identity — which jobs provide.  And the politicians in Washington who are working to curtail basic benefits such as healthcare and food stamps plainly won’t consider the value of spending trillions on a new social-welfare scheme.

In a paper titled “A New Deal for the Twenty-First Century,” Edward Alden and Bob Litan, of the Council on Foreign Relations, propose solutions for retraining the workforce. They believe that there will be many jobs created in technology and in caring for the elderly — because Western populations are aging.

The authors say that young people starting careers should be equipped with the education and skills needed to adapt to career changes and that older workers who become displaced should receive assistance in finding new jobs and retraining for new careers. Government shouldn’t provide the jobs or training but should, the authors say, offer tax incentives and insurance, facilitate job mobility and reform occupational licensing. To encourage employees to gain new skills, there should be “career loan accounts” from which they can fund their own education — with repayment being linked to future earnings.

[‘Coal country is a great place to be from.’ But does the future match Trump’s optimism?]

To minimize the effect of wage cuts resulting from changing professions, Alden and Litan advocate a generous wage-insurance scheme that tops up earnings; enhancements to the Earned Income Tax Credit; direct wage subsidies; and minimum wage increments. They believe, too, that a voluntary military and civilian national service program for young people would help alleviate the social disruption and teach important new skills and provide tutoring to disadvantaged students, help for the elderly and improvements of public spaces such as parks and playgrounds.

These ideas are a good start, but the focus was on maintaining a balance between Republicans and Democrats, on being politically palatable. The coming disruptions are likely be so cataclysmic that we need to go beyond politics.

See also: Outlook for Taxation in Insurance  

We have already seen the increasing anger of the electorate from both the right and the left in the U.S. elections. We are witnessing the same in Europe now. As technology advances and changes everything about the way we live and work, this will get much worse. We must understand the human issues — the trauma and suffering of affected people — and work to minimize the impacts.

As Harvard Law School’s Labor and Worklife Program Executive Director Sharon Block said to me in an email: “I don’t think we can be limited in our thinking by what can get through Congress now — nothing can. We need to be using this time to come up with the big new ideas to develop a bolder progressive vision for the future — and then work to create the conditions necessary to implement that vision.” The problem here is that with this future fast approaching, not even the inventors of the technologies have a real answer. This is why there is an urgent need to bring policymakers, academics and business leaders together to brainstorm on solutions and to do grand, global experiments.