THCB

Can Everyone Become a Billionaire?

I’m going to tell you something that Barack Obama doesn’t understand.

And because he doesn’t understand it, our country is wasting hundreds of millions of dollars at a time when we cannot afford to waste hundreds of millions of dollars.

Time and again President Obama has told us how he intends to solve our health care problems: spend money on pilot programs and other experiments; find out what works and then go copy it. He’s also repeatedly said the same thing about education. The only difference: in education we’ve already been following this approach with no success for 25 years.

Still, if the president were right about health and education, why wouldn’t the same idea apply to every other field? Why couldn’t we study the best way to make a computer, or invest in the stock market and do any number of other things — and then copy it?

I want to propose a principle that covers all of this: entrepreneurship cannot be replicated. Put differently, there is no such thing as a cookbook entrepreneur.

Let’s suppose for a moment that I am wrong. Suppose we could study the behavior of successful entrepreneurs and write down the keys to their success in a book that everyone could read and copy.

Consider Bill Gates, Warren Buffett and Sam Walton. If we could discover what they did right, and everyone copied their behavior, then we could all become billionaires. Right? Well, not quite.

Here’s the problem: In order for each of us to be a billionaire, we have to each be doing something that produces a billion dollars’ worth of goods and services. But if all we’re doing is copying action items out of a book, then we are not doing anything special. And if we’re not doing anything special, we are definitely not producing a billions dollars of value added.

In mathematics, Gödel’s Theorem says that no complex, axiomatic system can be both consistent and complete. What I am proposing is something similar for social science. Although there are some habits of highly successful people that can be identified and copied, there are not enough of them for each of us to become highly successful ourselves through copycat behavior alone.

I think I will call this Goodman’s Nonreplicability Theorem.

In health care, it’s already been borne out.

Scholars associated with the Brookings Institution identified 10 of the best hospital regions in the country and then tried to identify common characteristics that could be replicated. There were almost none. Some regions had doctors on staff. Others paid fee-for-service. Some had electronic medical records. Others did not.

separate study of physicians’ practices found much the same thing. There were simply not enough objective characteristics that the practices had in common to allow an independent party to set up a successful practice by copycat alone.

By the way, this is not bad news. It is good news. How much fun would life be if we all went around copying what we read in a book?

John C. Goodman, PhD, is president and CEO of the National Center for Policy Analysis. He is also the Kellye Wright Fellow in health care. His Health Policy Blog is considered among the top conservative health care blogs where health care problems are discussed by top health policy experts from all sides of the political spectrum.

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John BallardDr Jeremy HuntBilladrianne lukastim Recent comment authors
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John Ballard
Guest

Wow! This post is over two weeks old and I’m just getting to it. To much stuff on Google Reader, I guess… “Can Everyone Become a Billionaire?” A truly curious question for a place tagged for health care. But maybe not. I don’t think there are many billionaires working as physicians but I could be wrong. People who accrue that level of wealth don’t do it by working in the old-fashioned sense of the word. It helps to get started with generational wealth transfers, but if one starts from scratch about the only way to get that rich is having… Read more »

Dr Jeremy Hunt
Guest

It is not about copying billionaires. Probably it should be learning from what they have done. Of course, it doesnt mean everyone will be successful just by emulating them.

Bill
Guest

You must look outside of where you are to discover new possibilities. The people inside the box can only see the walls and contents not the overall possibilities. Great breakthroughs come from people who do not know they are doing the “impossible”. The system must have incentives to produce rewards. There needs to be a system where you pay when you are well and pain free then stop when you get sick. The present system would not reward such a person and could easily punish them for attempting a medical process without a license. The mind must expand and grow… Read more »

adrianne lukas
Guest

This is actually not the right time to point fingers. The damage has been done but it doesn’t mean the United States can no longer recover from the failure. It’s just a matter of working together for a common good.

nate ogden
Guest
nate ogden

if the person that created the problem is still at the table demanding we do more of what created the problem how is working with them going to accomplish anything?

Bad ideas are always bad ideas and should be treated as such

tim
Guest
tim

An argument seems to have erupted, interchanging the terms “innovation”, “entrepreneurship”, “best practices”, “technical progress” and “standardization” — as if they mean the same thing. And there are business consultants and professional writers in the argument, and they are not drunk.

Frank
Guest

Another great example that illustrates the inefficiencies of the government. The reason the private sector can do so well is because they have an obligation to succeed for the benefit of the company. On the other hand, what does the government do when things aren’t going well? They just throw more money at it. The government doesn’t have to worry about losing business or going under, and so the effort they put forth pales in comparison to the private sector. I believe this is the biggest problem with education, as well. Public education has no system to reward the best… Read more »

Mike
Guest

Net production would have to rise A LOT but even then its all relative and some would probably have more than others

Peter
Guest
Peter

Health care management does not follow the laws of physics. Each invention builds on the work (and education) of previous researchers. Where would Bill Gates be without IBM and their failed negotiations with Digital Research? http://en.wikipedia.org/wiki/Bill_Gates Where would Warren Buffet be without the influences on his life? http://en.wikipedia.org/wiki/Warren_Buffett Why do other industrialized nations do health care for about half the cost and by and large get just as good results? Do they use entrepreneurs and get out of the way or do they use government controls to balance the ambitions of investors, providers and entrepreneurs? Is the U.S. waiting for… Read more »

Merle Bushkin
Guest

Paolo, thanks for the clarification about the microprocessor team. However, the fact that Intel had no idea how the microprocessor might develop when they developed and launched it and that microprocessors were only a small part of Intel’s business for a number of years thereafter are text book characteristics of a disruptive innovation. A disruptive innovation by definition doesn’t require that you invent a technology, product or service that no one has invented or discovered before such as the wheel or fire. It means that you have developed something, probably using existing technology or practices, that meets a heretofore unmet… Read more »

Barry Carol
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Barry Carol

Paolo – You seem to know a heck of a lot about the development of integrated circuits and computer chips. I don’t. What I do know is that when I started my career in the financial industry in 1971, we used large, clunky mechanical calculators. It literally took the better part of 10 seconds to do one division calculation and made a lot of noise in the process. When I worked the prior summer at IBM, they had an early electronic calculator that cost $1,500. By the early 1970’s, electronic calculators were relatively cheap and widely available. I bought one… Read more »

Paolo
Guest
Paolo

Barry, the calculator business in the 1970s was certainly disrupted by rapid advances in integrated circuits, but not by the microprocessor. The idea of building a calculator using a microprocessor turned out to be uneconomical as it could not compete with ICs that were custom build for calculator functions. The Intel customer that built calculators using this approach went out of business. The microprocessor did not find its mass market until the IBM PC was invented.

James S. Walker
Guest
James S. Walker

While the article makes some correct points, I agree with Steve’s original post, and would add my favorite example to it: the US commercial airline system, every bit as complex as healthcare delivery, but going on 5 years with no fatal crashes. Gawande’s book describes these things in some detail. Standardization is the only way forward if we want to cut costs and improve quality…both essential elements to making US healthcare sustainable – which it is not now. Obamacare may indeed not be perfect; but it did move us in the right general direction. Our role now is not to… Read more »

Merle Bushkin
Guest

John, you’ve got it wrong. There are serial entrepreneurs all over this country so it isn’t a closed fraternity and the opportunity to be the next one is all around each of us. By trying to find common characteristics among successful people and then copy them, you are looking at the wrong things. Successful people in any walk of life see the world differently than the average person, and they have the courage and drive to pursue their vision. You and I see something funny and laugh but forget about it; a successful comic regales audiences about it. An artist… Read more »

Paolo
Guest
Paolo

“The first person to make a computer chip who did they study?”

It wasn’t a person. It was a team. They studied how computers were built using discrete components and COPIED it into a single IC. It was the Intel 4004. Technology is evolutionary.

BobbyG
Guest

Nice.

So many false dichotomies, so little time.

Merle Bushkin
Guest

Paolo, a team may have developed the computer chip but someone had to have the initial idea and organize the team.

Paolo
Guest
Paolo

Nope. There was no single individual or business decision responsible for the birth of the microprocessor. Lots of creative engineers, lots of good business managers, and a few accidents made a little toy with almost no business use developed in 1971 into a $50+ billion market today.

Merle Bushkin
Guest

Paolo, have to differ with you. A team didn’t conceive of the microprocessor. One man did. Then, as happens with most innovations, others helped develop it. According to what I read, like most disruptive inventions, the microprocessor resulted from one man, an engineer named Ted Hoff at then-fledgling Intel, coming up with a new way to meet a need. Intel’s CEO, Robert Noyce, created the environment that nurtured and funded new ideas. Hoff seized an opportunity to develop a new approach to chip design and led a team that executed his design concept. Royce and a customer funded it. According… Read more »

Paolo
Guest
Paolo

Actually, there are about half a dozen fathers of the first microprocessor. Hoff contributed only to the CPU architecture and never led nor participated in the design team. Faggin was the guy who figured out how to make a CPU fit in a single chip using new MOS technology. Faggin could have used any other CPU architecture available at the time. Both borrowed heavily on what they learned from previous generations of CPUs and integrated circuits. And in 1971, there was nothing disruptive about this technology. It was only a small part of Intel’s business and a tiny part of… Read more »

Nate Ogden
Guest
Nate Ogden

“When the President allows for variations ” Margalit what bill are you talking about? PPACA doesn’t allow for variations. Every plan has to cover wellness, can’t have annual or lifetime caps, can’t have a deductible over $2500, on and on. The only variation allowed is what shade of crap do you want. He eliminated all flexibility to design and price health plans. I think your also dismissing the likely culprit, he just makes the wrong decisions. Sometimes you need to allow varations, in plan design, and sometimes you need to be more open and flexible, ACOs. Notice in both cases… Read more »

BobbyG
Guest

“PPACA doesn’t allow for variations.” ___ That is simply not true. SEC. 1332. WAIVER FOR STATE INNOVATION. SEC. 3021. ESTABLISHMENT OF CENTER FOR MEDICARE AND MEDICAID INNOVATION WITHIN CMS. ‘‘(1) IN GENERAL.—There is created within the Centers for Medicare & Medicaid Services a Center for Medicare and Medicaid Innovation (in this section referred to as the ‘CMI’) to carry out the duties described in this section. The purpose of the CMI is to test innovative payment and service delivery mod- els to reduce program expenditures under the applicable titles while preserving or enhancing the quality of care furnished to individuals… Read more »

Margalit Gur-Arie
Guest

I believe Mr. Goodman was is discussing the delivery system, not benefit design.

BobbyG
Guest

Exactly.

The substantive empirical evidence of “benefits design” efficacy (uh. lack thereof, absent any quantifiable link to outcomes improvement) are are by now pretty plain.

Nate Ogden
Guest
Nate Ogden

yet no links or reference to said substantive empirical evidence which is so plain. I would think you could actually produce some instead of asking us toi trust you as to its plainess

steve
Guest
steve

http://www.kff.org/pullingittogether/What-Conservatives-Won-In-Health-Reform.cfm

A bronze plan limits out of pocket for a family to about $12,500. Deductibles will probably run about $5,000-$12,000. The silver, gold and platinum versions vary.

Steve

Nate Ogden
Guest
Nate Ogden

benefit design doesn’t effect delivery system? You don’t think it matters to hospitals if someone has a $1,000,000 lifetime benefit versus unlimited?

You don’t think providers will respond to preventive care being paid at 100%?

steve
Guest
steve

Not that much. Very, very few people go above $1 million. I had a long talk about this with our insurer when we converted to unlimited coverage. It cost about the same as the $1 million limit insurance because so few go above it. The size of deductibles and co-pays mattered more.

Steve

Nate Ogden
Guest
Nate Ogden

how long ago was this? 5-10 years ago this was true, today not at all. 1 million max cost 3-13% less then unlimited depending on the reinsurer, no carrier of the 50 I work with offer it at the same price.

Set a maximum of $2,000 annual deductible for a plan covering a single individual or $4,000 annual deductible for any other plan (see 111HR3590ENR, section 1302). These limits can be increased under rules set in section 1302.
Did they change this? Everything I have seen said you can’t buy a deductible over 2K come 2014

Nate Ogden
Guest
Nate Ogden

also if you go thjrough the data when plans had a 1 million max very few people ever meet it, once they moved it up to 2 million then 5 million all of a sudden 1 million plus claims became common

Margalit Gur-Arie
Guest

‘In mathematics, Gödel’s Theorem says that no complex, axiomatic system can be both consistent and complete.” I think the theorem applies best to the axiomatic system defining President Obama in certain circles. If the President would have devised one health care solution and decreed that it should be applied everywhere, folks would be screaming that the bureaucrats in Washington have no understanding of geographical and cultural variations and never worked a day in the field and no government committee should decide on a one-size-fits-all solution. When the President allows for variations and acknowledges that expertise is greater in the field… Read more »