Vinod Khosla: The healthcare startups I hate…

During J.P. Morgan week, Vinod Khosla stops by StartUp Health Festival to discuss entrepreneurship, what works in healthcare and the kind of startups he would never work with.

Steven Krein, CEO, StartUp Health, interviews Vinod Khosla at StartUp Health Festival

Steven Krein, CEO, StartUp Health, interviews Vinod Khosla at StartUp Health Festival

Maverick healthcare entrepreneur-turned-investor Vinod Khosla held forth at the StartUp Health Festival on Tuesday during J.P. Morgan Healthcare week in San Francisco. And true to form he kept the audience captivated with his against-the- grain philosophy on the future of healthcare and the value of startups.

It was only four years ago — late 2012 — that Khosla declared that 80% of what doctors do will be replaced by technology. At the time, that led to deep consternation and negative reaction with many assuming he meant that technology would replace whole human beings.

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And while he had meant that algorithms would do a lot of what doctors do, leaving open the possibility that doctors could focus on other, more important things instead, in 2017 that concept of replacing human beings with technology — take for instance self-driving cars — does not seem so radical.

And Khosla appears like a visionary. On Tuesday, the cofounder of Sun Microsystems and the founder of the investment firm that bears his name, reiterated the importance and growing influence of technology in healthcare, pointing toward the field of radiology.

“Today everybody accepts that,” he said to the audience of AI. “Nobody argues [about the fact that] radiology will be replaced 80 percent by machine algorithm ….”

While technologists hail the overthrow of traditional systems by machine learning and AI, they rarely address the disruption that will caused by the consequent workforce displacement. But that hesitation or glossing over doesn’t mean those changes should be resisted, or that they won’t be good for healthcare.

Of the latter – the healthcare industry – Khosla admits he doesn’t know much about. But in his mind that’s actually desirable. Here’s a slightly edited version of what he told the StartUp Health Festival audience about the kind of startups he values and the type of mindset required to achieve true, meaningful, industry-altering, innovation:

I never look at CPT codes, whether something is billable, what the business model is. I fundamentally look at where’s the value-add in this, what’s new and different. Healthcare startups I hate are the ones who help people increase their billing. Zero value-add from my point of view. I am uninterested. Not that it’s a bad business. People will make money at it.

I’d rather not make a clinic more efficient. I’d rather start a new one that has a radical set of assumptions. [And a portfolio company is doing exactly that, so stay tuned.]

Coming out with something that isn’t a tweak [of existing systems] and no healthcare experience is generally an advantage, not a disadvantage. Let me postulate the following. No large innovation has come from within a system. Tesla didn’t come out of the automotive industry. SpaceX didn’t come out of Boeing or Lockheed and by the way GM spent millions of dollars trying to do an electric car before Tesla. More money, more resources, more knowledge, too much knowledge. Wal-Mart didn’t innovate retail. Amazon did. NBC and CBS didn’t innovate media. Facebook, Twitter and YouTube did. Genentech didn’t come out of Pharma. It came from a guy who was an associate at Kleiner – Bob Swanson.

So, I am hardpressed to think of one major innovation that came out of an existing industry. The closest I have come to think of … is Bank of America doing credit cards in the early 1970s.

You have to start thinking from scratch.

Not being from healthcare sounds good but it also raises the question of how these novices will get their products or services fit into the clinical workflow if they know next to nothing about those processes to begin with. So I asked.

“You make an important point, and maybe I am making an overstatement here,” Khosla conceded.

But he noted that the visionary entrepreneur should be one that is not bogged down by the shackles of convention. [Khosla by the way repeatedly said there are many different startups that are making money and others, including partners at Khosla Ventures, do not necessarily subscribe to his philosophy of what is interesting.]

What I want to work on and the partners I want to work with have a radical new mindset. Someone is actually looking at a pattern of biomarkers to detect sepsis. Very different. This is a clinician but with a very strong data science orientation and background. They are not thinking traditional sepsis tests.  It’s more the mindset. Innovation can come from within the healthcare system. Eric Topol thinks of cardiology very differently even though he is a cardiologist. You want people who are thinking outside tradition. The fact that they happen to know something about healthcare tends to bias them but it’s entirely possible.

Photo: StartUp Health