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What The Internet Teaches Us About Healthcare


Obamacare could cause untold unnecessary deaths by destroying healthcare innovation. To explain, let me offer an analogy.

In 1993, almost everyone in the technology industry agreed that the next wave of innovation in computing was going to be related to some global network to which consumers and businesses could be connected and shop and converse.

However, almost no one thought that this global network could be the internet, which was the province of academia and wasn’t user friendly.

In Silicon Valley in 1993 the conventional wisdom was that this global network would be some sort of connected TV run through the cable system, and that it would be controlled by gatekeepers (such as cable companies and media companies) which would approve and run the services that would be on top of it. If you remember the Philips CD-i (and bless you if you don’t) people thought that would be “the internet.” Microsoft was very, very hard at work on some sort of global network (that Microsoft would control).

At the time, Jim Clark, who had been the founder of Silicon Graphics (the “Google” of the early ’90s), wanted to do a start-up around that and spent some years and millions trying to develop some sort of connected/interactive TV device, until a graphical web browser called Mosaic came along, grew at an astonishing rate, and became user friendly. Clark recruited the developer of Mosaic, Marc Andreessen, to build a new web browser, called Netscape, and the internet era began.

No one expected the internet to take off before it did.

People today remember that no one expected the internet to take off before it did, and that’s true, but what people remember much less is that most people actually very much understood that something like the internet would happen. They “understood” the potential of a global network. What took people by surprise wasn’t the “concept” of the internet, it was the internet itself, meaning the specific incarnation of the internet.

Why is this stuff important?

Because it’s important if you imagine a parallel universe where the internet never takes off and instead everyone gets “the internet” of 1993. What would be the state of internet innovation under such a global network? It’s very easy to see that it would be much lower. Because the network would be controlled by gatekeepers, it would be much harder to start things. It would be a walled garden.

Is this something you agree with? That if the “internet” had been a walled garden there would have been much less innovation on it?

Imagine a parallel universe where the Internet never takes off.

There would be no Google (the thing would have its own search interface). There would probably be no Amazon (instead the Barnes & Noble of the world would have their own storefronts to which they would dedicate almost no resources and would suck). There certainly would be no Wikipedia, or Twitter, or Business Insider. There would be services! People could certainly “communicate” and “shop” but with nowhere near the kind of efficiency and ease of use and innovation that we have today.

The point here isn’t that we would miss the hundreds of billions of market capitalization that have been created by the internet, although that’s nice. The point is that we would miss the tens of trillions worldwide in consumer surplus created by all the time-saving and productivity-enhancing capacities of the internet, not to mention the sheer happiness and vibrancy of countless websites, blogs, multimedia projects, marriages and impact on the culture and so on and so on and so on.

Now, imagine, still, that we’re in 2013 in this walled garden internet alternate universe. Everyone’s on the network and it “works” well enough. Now imagine that someone writes that the global network is actually horrendous and that we would have so much more innovation if there were no gatekeepers. That person would be universally seen as crazy. First of all, they would say, why are you saying that we need a global network, since we already have one? Second of all, they would say, why are you saying there’s no innovation, since there is already plenty? I mean, we can shop and communicate and leave each other messages.

If you described the internet as it exists on this universe to someone from that parallel universe, they would never believe you. Imagine describing Twitter to such a person. Imagine saying, well, we should have an open internet because then people could communicate in 140-character bursts. Or Wikipedia. An open internet is a good idea because people could work on a collaborative encyclopedia that anyone could edit. Yeah, like that’ll work! Oh, and the most profitable thing on the internet would be “search” and the search company would be so profitable that it would come out with self-driving cars. People would think you were just a complete lunatic.

The whole point of decentralized innovation is that nobody can tell in advance what the innovation will be, exactly.

In fact, if you were a person from this alternate universe, and you didn’t know about the other internet, all you had was a “simplistic” faith in Hayekian and Schumpeterian principles, you couldn’t even begin to describe these things. You would know that the walled garden internet would be bad for innovation, but you couldn’t point to any specific thing that the open internet would provide, because no single person can come up with the idea for Amazon and Twitter and Wikipedia and Google on their own. That’s the whole point of decentralized innovation, nobody can tell in advance what the innovation will be, exactly. So you would be left spouting off platitudes about “innovation,” and people would smile and nod politely, and say, well, that certainly sounds very nice, but over here in the real world, things are a little bit more complicated than that.

I think you can get to the point I’m making. The healthcare system in most advanced democracies is like the walled garden internet. Just like in the walled garden internet, you can “shop” and “communicate” and do other things, in these systems, you have “hospitals” and “innovation.” Things happen. But as a matter of fact, there’s no real innovation–disruptive, changing the status quo.

This isn’t “free market: good; government: bad.”

Again, I want to emphasize the point that the key thing isn’t “the free market” vs “the gummit.” As all ideological advocates note, the government had plenty of a role in creating the internet. But it did so in a decentralized fashion. If you read about the history of DARPA, when a guy had the idea for TCP/IP (the fundamental protocol on which the internet runs) he basically went to his boss who was an engineer like him and the guy said “Sure, I’ll give you $3 million [of 1960s money] to try it out” and the engineer went and convinced other guys who were assigned to other projects to work on it with him. That’s not how government typically works, but it’s definitely how decentralized trial-and-error innovation works.

When you see how extensively we use hospitals even though they are inherently dangerous places, you see potential for innovation being untapped.

Similarly, in healthcare, discussions of “free market” and “gummit” quickly lead to dead-ends. There’s no telling where one begins and the other ends. And because of widely-shared (including by me) moral intuitions about the desirability of common access to healthcare, government will always be involved in that sector. But the question is: how decentralized is decision-making? And the answer is: in most non-US countries, very little; in the US, not by much, and Obamacare makes it worse. This centralization is much more the fault of the insurance-driven view of healthcare than of the government as such.

Now, what are these precious innovations that healthcare centralization is making us miss out on?

Like walled-garden-internet-universe-guy, I’m at a bit of a loss to say for sure.

We can see hints, though.

When David Goldhill mentions the idea of “healthcare agents” who help you navigate the healthcare world and act as advocates, you can see some of it. I know I’ve said it about a billion times, but this article really is the fundamental and best analysis of the US healthcare system.

When you see headlines such as “India’s Walmart of Heart Surgery Cuts the Cost by 98%” you see inklings of it.

When you see new business models being attempted, such as subscription-medicine, or apps like Sherpaa, or the low adoption of evidence-driven medicine, or the lack of intermediate professions between doctor and nurses for routine care, you see potential for innovation being untapped.

When you see how extensively we use hospitals even though we probably shouldn’t and hospitals are inherently dangerous places, you see potential for innovation being untapped.

Status quo bias is really, really powerful.

But we do know a few things:

  • Bottom-up trial-and-error experimentation is a very, very, very powerful force in human affairs when unleashed.
  • Like many complex ecosystems, it mysterious, and robust, yet brittle. We know it’s powerful even though we don’t fully know how it works. It can withstand a lot of centripetal force, but it is also subject to catastrophic breakdown if the force is too strong or applied in a particularly vulnerable place.

Back to Econ 101

Obamacare is firmly in the camp of saying that the problem with the healthcare sector in America is not enough centralization.

Not enough electronic health records? Surely that must be because there’s no central authority that can use sticks and carrots and prescriptions to make people adopt electronic health records. (Nevermind that this is totally opposite to the way the rest of the economy adopted IT.)

Costs are too high? Why, it must be because costs are not controlled. (I assume you’ve read ’90s Krugman on rent control.)

Things held to be true about healthcare would be immediately seen as absurd about any other sector

Insurance is unaffordable? Well, first of all, let us equate “healthcare” with “insurance” and thereby completely entrench the idea that all healthcare money flows should go through gatekeepers and third parties. Second of all, if it is unaffordable, it must mean that the sector has not enough mandates and carrots and sticks and subsidies.

Sorry if that sounds like a “simplistic” right-wing rant, but there really are times when Econ 101 applies. Many of the things that are held to be true about healthcare by smart, economically literate observers would be immediately seen as absurd if they were said about any other sector.

We could have the internet. Instead we have AOL. And we’re about to turn AOL into cellphone apps pre-iPhone.

Follow Pascal-Emmanuel Gobry on Twitter.