This video of Salman Khan’s TED talk has been making the rounds all week. Though I love the mission of his Khan Academy, I was most struck by its history.
For those unfamiliar the Khan Academy was born in 2006, not with a grand plan to change the face of education, but as a few math tutorials posted to YouTube by a hedge fund analyst in Boston for his cousins in New Orleans. His training was not as an educator and his vision was not to transform the educational system. Fast forward to TED 2011 and there he is, on stage, being praised by Bill Gates for providing a view into future of education.
Earlier in the week I read a piece by Andy Kessler in which he distinguished between two types of entrepreneurial approaches to heavily legislated or deeply incumbent markets. One he calls the “political entrepreneur”. The other he calls “market entrepreneurs”. He distinguishes them as follows:
These “political entrepreneurs” leverage their political power to own something and then overcharge or tax the crap out of the rest of us to use it. Political power instead of competition. Easy money forever. But then again, maybe not. Because for every stroke of the pen, for every piece of legislation, for every paid-off congressman, there now exists a price umbrella that overvalues what he or any political entrepreneur is doing. Real entrepreneurs, “market entrepreneurs,” recognize the price-to-value gap and jump in. Ignoring legislation, they innovate, disintermediate, compete, stay up all night coding, and offer something better and cheaper until the market starts to shift.
He then goes on to detail how Cornelius Vanderbilt used a market approach to subvert the heavily legislated steamship monopolies of his time and opening up new business models the incumbents simply couldn’t compete against. Andy’s whole piece is worth a read if you have the time.
So many of the biggest and most exciting markets are wrapped in legislation and red tape that favor incumbents and value deeply entrenched conventional wisdom. Market entrepreneurs will fail trying to play by their rules.
So don’t.
Salman didn’t meet with existing publishers in the education business to license their content. He didn’t hold focus groups to see what students wanted. He started simple. He watched how his cousins, and others, interacted with his content. He used the subversive power of the web to create a cost structure and distribution channel the incumbents couldn’t match. He kept his mission modest enough that he could easily be dismissed, until he couldn’t be ignored.
There are so many lessons entrepreneurs looking to disrupt large industries can take away from this talk. That’s why Salman Khan’s TED talk is required weekend viewing on BRYCE DOT VC.
I agree. This is medicine’s predicament. I have long felt that governments move in to regulate businesses that appear to have an inelastic demand. Look at the most heavily regulated markets: education, medicine, energy, food. They are all staples that have demonstrated a nearly perpetual revenue stream. The politicians sense this. There is little risk in jumping in to the fray. Just insert yourself into the revenue stream by force and keep your political ideology alive with the siphoned funds. It’s all done in the name of your own good,of course. Which is why it continues.
Politicians are not true risk takers in the entrepreneurial sense of the word. By that I mean, they do not risk their own capital. It is always some other person’s capital (taxed gains, forced levies etc.). Medicine will continue to fall into this trap if we continue to play by political rules. At some point the system must dislocate itself from the politically sanctioned CPT payment structure, from government subsidies and any number of legislative encumbrances in order to meet patient needs instead of third party needs.
I have no idea when this will happen in total. It is already happening in piecemeal fashion. I would like to see it happen peacefully and without giant bankruptcies of the state so that the most vulnerable and dependent are not unduly hurt. I am not so sure though. Political power is tough to unseat. A market based approach often has to be so extraordinarily efficient to beat out a state sponsored competitor that the solution never makes it to the surface.
There is hope though. Companies like Medibid, Hello Health and others are leading the way. Time will tell when (not if) they will win out
