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- Why Google Health Really Failed—It’s About The Money
- Revolutions On The Road
- Skype’s Worthless Employee Stock Option Plan: Here’s Why They Did It
- After 50 Days Of Attacks, Hacker Group LulzSec Calls It Quits
- Fly Or Die: How Color Became The Ishtar Of iPhone Apps
- Card Designer: The Inspiration For Zuckerberg’s “I’m CEO, Bitch”? Steve Jobs.
- Facebook’s Ban Bot Leaves Some Developers Baffled (And Angry)
- Gillmor Gang 6.25.11
| Why Google Health Really Failed—It’s About The Money Posted: 26 Jun 2011 09:22 AM PDT
Editor's note: This guest post was written by Dave Chase, the CEO of Avado.com, a health technology company that was a TechCrunch Disrupt finalist. Previously he was a management consultant for Accenture's healthcare practice and was the founder of Microsoft's Health business. You can follow him on Twitter @chasedave. As reported on TechCrunch, Google shut down its medical records and health data platform. Since then, there’s been a lot of bits spilled offering explanations, but they all missed the most critical item. Money. Or in the language of healthcare—Reimbursement. I explain more below regarding why Google Health was doomed to fail in light of the legacy reimbursement model. First, let’s recap some of the explanations offered up so far. These are all valid but miss the biggest point. Adam Bosworth, who originally ran Google Health gave one reason: It’s Not Social. That’s true if one wants to create a weight management program or is simply interested in fitness-minded folks. Clearly that is important given the obesity epidemic, however there’s vast swaths of healthcare where being “social” isn’t appropriate or applicable in a doctor-patient relationship. In other words, being social is necessary but not sufficient to transform healthcare. In the comments of TechCrunch’s original article reporting the shutdown, I gave my immediate take…
If you are interested in more, I’ve written about this here. One of the better analyses was done by John Moore of Chilmark Research.
As much as we’d like to think it isn’t the case, the fundamental driver of most (not all) behavior in healthcare is the reimbursement scheme. As I described in an earlier piece on the “Do it Yourself Health Reform” movement, I spent much of my time as a consultant in the Patient Accounting departments of heatlhcare providers. The legacy reimbursement scheme can only be described as a Gordian Knot designed by Rube Goldberg. I expanded on the insidious effects of the reimbursement model in the U.S. in my overview of The Most Important Important Organization in Silicon Valley No One Has Heard About. For those who would like to be optimistic about the reimbursement model changing, read about Health Insurance’s Bunker Buster. In the meantime, it’s critical to understand the current reimbursement model to understand why Google Health failed to transform the landscape. To understand the impact, I’ll exaggerate to make a point—your healthcare provider doesn’t care about you unless they can see the whites of your eyes. Why is that? Today’s flawed reimbursement scheme only compensates the healthcare provider for a face to face visit. It’s hard to fault the primary care physician who has been put on a hamster wheel of 30-40 appointments per day and can’t even give their practice away upon retirement (that was once their retirement plan) for not wanting to deal with their patients sending email or sharing information from their personal health record. Interestingly, in the transformative models I describe below, doctors consistently tell me that half to two-thirds of their patient interaction time doesn’t need to be face-to-face. They can deliver high quality medicine without being in the same room as them. Yet, the fee-for-service model causes this country to waste mountains of time waiting to get appointments and then in the waiting room in order to facilitate the face-to-face appointment. The problem for a company like Google or Microsoft is their success is measured in the tens of millions. Those kinds of numbers are only present in the legacy reimbursement model. Frankly, Google could have done all the right things, but if the reimbursement model doesn’t change Personal Health Records will remain irrelevant for most healthcare providers. At best, we’re seeing Electronic Health Record vendors release so-called Patient Portals that are often driven more by a marketing objective than a clinical objective. Further, they are flawed in that they are a one-way broadcast of the silo’ed information from only one healthcare provider. Is there any hope for individuals to be more involved in the healthcare system as Personal Health Records promised? After all, it’s clear that healthcare works best and costs least when the patient/individual is a partner in their care with their healthcare provider. Fortunately, I believe that we’re seeing the first waves of a tsunami lapping the shore. It’s what I call the P.A.C. Tsunami. Patient-centered, Accountability and Coordinated. Today’s flawed fee-for-service reimbursement system is essentially the opposite of those three elements creating all the wrong incentives. In its place, we’re seeing the first waves. Both the Do-it-Yourself Health Reform movement and the government-driven health reform are creating incentives for what are called a Patient Centered Medical Home (PCMH) and Accountable Care Organizations (ACO). We are already seeing dramatic success with the first editions of PCMHs in the models such as MedLion that were highlighted in The Most Important Important Organization in Silicon Valley No One Has Heard About article. ACOs have the right goals in mind but remain like Unicorns—fantastical beings no one has seen yet and have been described as stupefyingly complex in their design. In contrast, one can’t help but be optimistic when studying the results of PCMHs such as 40-80% reductions in the most expensive facets of healthcare (surgical, specialist & ER visits) or a pilot program in Ohio with Medicaid diabetics that scaled could save Ohio $500 million annually. Or consider the case of Denmark that was the first country to broadly adopt the PCMH model. It’s been so successful, they have reduced the number of hospitals in that country by over 50% as they simply don’t need that many hospitals anymore. What does this mean for the tech community? I’d posit that as mobile technologies have fundamentally reshaped voice and data, there’ll be an equally radical transformation of healthcare. Just as legacy telcos had to fundamentally transform themselves or they’d be an artifact of history, so too will healthcare organizations transform (or die). With the transformed healthcare ecosystem, there are requirements for entirely new categories of software that a new generation of startups will develop. Exciting times indeed. Image credit: Colin Dunn        
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| Posted: 26 Jun 2011 07:10 AM PDT
The biggest change this trip has been my ebook reader. I have a Kobo. There is much about my Kobo that I really don’t like: its interface is clumsy and confusing; anything other than straight front-to-back reading is intensely frustrating; it can only use completely open wireless connections, so any wi-fi network with a login or click-to-agree-terms button is completely useless to me; and when I do connect, attempts to download new books fail approximately 50% of the time. But they do succeed the other 50%, meaning I’ve read nine books in the last month—and was able to buy and download books via ambient wi-fi in Kenya and Djibouti, which did feel like living in the future. There are also subtler and more negative repercussions. I saw my own second novel for sale in a supermarket in Mombasa, and instead of the slight thrill of pride I usually get, my instinctive response was: "In paper! How quaint!" More worryingly, my e-book reader means the serendipity of finding and reading random books by new authors, because there’s nothing else to read while on the road, is dead. It’s like The Filter Bubble in miniature. But on the whole that’s a tradeoff I’m willing to make. I still have some complaints. For instance, it’s still virtually impossible to add a stopover to an air itinerary without going to a travel agent. You can manage it directly with the Emirates and Icelandair web sites, but not with any of the aggregators. I’m very fond of Kayak, but if you have a complex many-city itinerary, their price optimization fails completely—it often works out cheaper to book all of the legs as individual one-way tickets—so I might soon defect to Hipmunk. And it irritates me that all of the various hotel-booking sites are apparently different skins on the same engine. Of them all, I prefer Booking.com, but I would like some actual competition. And then there’s the guidebook problem. I used to be loyal to Lonely Planet (in fact, they play a major and laudable role in my debut novel) but then the BBC bought them out and watered them down. They do have a pretty good city-guide app selection, and they let you buy and download individual subsections of books, but their content isn’t as good as it used to be. I think the future of travel guides is crowdsourced data on smartphone apps. In fact, I’ve taken a step in that direction myself: my app iTravelFree lets you download Wikitravel guides and OpenStreetMap maps to your Android or iOS device, and refer to them even while offline, to avoid roaming charges. Its 10,000-and-counting active users seem to like it, and it has come in awfully handy this trip: at one point I was hopelessly lost in Addis Ababa, until I realized I had the (surprisingly good) OpenStreetMap of the city on my phone, and my app saved the day. But while Wikitravel’s coverage of East Africa is better than I expected, it still isn’t near as thorough and detailed as its guidance for, say, Paris. It will improve over time, of course, but I still found myself flipping through my quaint paper copy of LP’s Ethiopia and Eritrea again and again. It’s worth noting that half the tech I’m carrying is verging on obsolete, and yet I have no real desire to upgrade. I’m writing this on a three-year-old Linux netbook; my phone is a two-year-old HTC Magic running Android 2.1; my music lives on a second generation iPod touch; and the Kobo, as mentioned, isn’t exactly cutting edge. The last three devices can all charge from the three USB slots on the netbook, which means I only need one plug converter. Alas, I also have two cameras. One’s a Canon S90, which is a joy; the other is an Olympus E-PL1 Micro Four Thirds, which is mostly a royal pain, but does take great pictures. This means I also have to drag along their proprietary battery cradles. Dear camera manufacturers of the world; please enable USB charging, ideally as of yesterday. This time next week I’ll be in India, which is something of an acid test for travel: …so we’ll see how everything holds up there. It’ll be interesting to see how Delhi and Mumbai have transformed in the eleven and seven years, respectively, since I last saw them. I expect the answer is “a lot”; but I also suspect that, almost invisibly, iteration by iteration, the changes wrought by technology on the experience of travel have been scarcely less profound.        
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| Skype’s Worthless Employee Stock Option Plan: Here’s Why They Did It Posted: 26 Jun 2011 02:34 AM PDT
Ok. But it gets worse. Employees aren’t even able to keep the vested portion of their stock options. The vast majority of stock options granted to startups have a vesting period, typically four years, with chunks of those options becoming vested during that four year (or whatever) period. If options are vested you can exercise them, pay for the stock and own that stock. At least that’s the way things have been done over the decades. Skype did things differently. With Skype stock options the company has the right to not only terminate unvested options, but also vested ones. And any vested options that you’ve exercised (meaning you paid cash for them) that were turned into actual shares could simply be bought back by the company at the price you paid, regardless of their current value. Here’s the relevant language in the stock option grant agreement. It refers to a Management Partnership agreement which isn’t public and it’s unclear if employees ever get to see it (my guess is not):
And here’s the letter the employee received when he was terminated:
CNN calls the language “intentionally incomprehensible.” Reuters agrees, adding that Skype is “evil.” Here’s What’s Going OnThis isn’t the first time I’ve seen a stock option plan like this. I actually worked for a company once that used the same mechanism. I dug up the clause from that agreement, which I kept because it was so audacious. Here’s the relevant clause – it says much the same as the Skype documents but in slightly more understandable language:
Until now that company I worked for long ago was the only example of this type of clawback provision that I’d ever heard of. The reason that company added that clause is that they didn’t want any outside shareholders, including ex-employees. If there was a liquidity event, fine, employees got the stock upside. But if they left or were fired before a liquidity event, they got nothing. There are only two real reasons for doing this. The first is that the company anticipates a long period of being privately held and doesn’t want to deal with outside shareholders. The second is that they don’t want to give away too much equity in stock options. Since they can take back the options of anyone who leaves, they can give equity more freely to employees coming on board. There’s a tradeoff, of course. If employees understand what they’re signing they will want a lot more compensation to work there – either a higher cash salary or a ton more options. Because they know the likelihood of payout is so small. If, for example, Facebook’s option plan was structured this way. all the early guys that left and founded companies like Quora and Asana would not have made any money at all (billions of dollars in value would have flowed back to Facebook). Multi-billionaire Shawn Parker, who was president of Facebook for a time, wouldn’t be a multi-billionaire. Or any other kind of billionaire. The fact that Skype adopted this plan in the first place isn’t in itself “evil.” But they’ve done two things wrong from what I can tell. First it appears that employees had no idea what they were signing and they probably expected it would be a normal stock option type deal that everyone in Silicon Valley has done for decades. If Skype wasn’t crystal clear with them, and explained it in normal human language that they understood, then these employees were intentionally misled. Skype had an incentive to make things unclear, because employees would demand far more compensation if they had understood. The fact that employees are so surprised that this is happening suggests that they didn’t understand the agreement. This is what lawyers call fraud. The second thing Skype did wrong was not to waive this clause with the looming acquisition. The company can deny all day long that they fired these employees for cause, not to save a few dollars on stock options. But the appearance is the exact opposite. These employees should simply hire a lawyer to sue Skype. There’s a valid fraud claim based on what I’m seeing, and the “atmospherics” (how lawyers describe the legally irrelevant facts surrounding the story that can nonetheless influence a judge and jury) are terrible for Skype. Also, Skype has to wrap up this deal. My guess is they’d just settle immediately and pay out on the vested part of the stock options. Get Ready For More Of ThisI bet that dozens of lawyers, venture capitalists and CEOs, now that they’re aware of this, are thinking “Hmmm, not a bad idea. We should do that.” And as long as they are crystal clear in their communications with new employees that these stock options, which are already a long shot, are likely to be extra-worthless, they’re probably in the clear legally. Then it’s up to the employees to take a stand. Or not.        
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| After 50 Days Of Attacks, Hacker Group LulzSec Calls It Quits Posted: 25 Jun 2011 04:23 PM PDT
LulzSec most recently released a torrent of data from Arizona law enforcement which included hundreds of classified documents including personal emails, names and phone numbers. The group was also behind attacks on Sony, attacks on PBS, the US Senate, the CIA, and a slew of gaming sites popular with 4Chan users including EVE Online, Minecraft and League of Legends. LulzSec was thought to have been the source of hacks against Scotland Yards and the UK Census, but the group denied involvement. As the post, says the group of six hackers has been “disrupting and exposing corporations, governments, often the general population itself, and quite possibly everything in between, just because we could.”
        
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| Fly Or Die: How Color Became The Ishtar Of iPhone Apps Posted: 25 Jun 2011 03:45 PM PDT Ever since Color launched its photo sharing app, the $41 million startup has been having a rough time. John Biggs and I reviewed it on Fly or Die back in March, when CEO Bill Nguyen joined us to defend the app ( you can watch that episode below, we both gave it a “die”). The company continues to struggle, so we decided to revisit our assessment in the new episode above. Things don’t seem to be getting much better for the company. Nobody is using the app. Co-founder Peter Pham left, or was fired, according to CEO Bill Nguyen, who also told the New York Times that the company is going back to the drawing board. It might scrap its photo app altogether in favor of, well, something big and vague. According to the NYT article:
Okay. Good luck with that. Their first idea didn’t work. It happens. At least they still have a lot of money left to try something else. We’ve analyzed this from every angle by now. But how many do-overs do they get? Can they overcome such a spectacularly bad launch? Or is Color doomed to become the Ishtar of iPhone apps? Watch more episodes of Fly or Die here.        
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| Card Designer: The Inspiration For Zuckerberg’s “I’m CEO, Bitch”? Steve Jobs. Posted: 25 Jun 2011 02:14 PM PDT
While the story of this title appearing on Mark Zuckerberg’s early Facebook business cards has been around outside the company since at least 2009, when Ben Mezrich’s The Accidental Billionaires was released, it really exploded into legendary status last year. That’s when the Acadmey Award-winning film, The Social Network (based on Mezrich’s book), launched the phrase into pop culture by having Justin Timberlake’s Sean Parker utter it as the exclamation point at the end of a key speech meant to inspire Jesse Einsenberg’s Zuckerberg. “This time you’re gonna hand them a business card that says, ‘I’m CEO, bitch!’ — that’s what I want for you,” Parker says. Later in the film, Zuckerberg opens a box of business cards that have the title on them. Of course, that’s Hollywood. That’s not what really happened. But the phrase, and the business cards were very real. David Kirkpatrick’s book The Facebook Effect, confirmed the existence of the business cards last year. The key excerpt:
Early Facebooker Andrew Bosworth (“Boz”) later confirmed this even further when he answered a question about the card on Quora last summer. But Bosworth downplayed the card:
But yesterday, Bryan Veloso, a Facebook Designer from 2005 to 2006, gave a more more interesting and enlightening answer on Quora. And he should know — he designed the actual card. According to Veloso, the idea for the “I’m CEO, Bitch” card stems from the fact that Zuckerberg actually used to utter the phrase. And as Veloso tells is, he did so to be more “aggressive” and to emulate the style of one man: Steve Jobs. The key part:
Veloso goes on to note that the cards was in many ways a “happy accident” in that he felt comfortable making thanks to his relationship with Zuckerberg at the time. He also says that eventually the cards were pulled towards the end of his tenure at Facebook. “In this designer’s view, these retired cards were an excellent representation of the company culture at the time. Their replacement reflected the changes a young Facebook needed to go through in order to be where it is today,” he writes. Indeed. So, no, the card was not inspired by a drunken nightclub party with Victoria Secret models. But it was very real. And you can thank Steve Jobs for that. Update: And as Dan Frommer reminds us on Twitter, the actual phrase itself sure seems like it may have been derived from comedian Dave Chappelle’s portrayal of singer Rick James on Chappelle’s Show. The phrase, “I’m Rick James, Bitch!” was pretty hard to avoid in the early-to-mid 2000s.         
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| Facebook’s Ban Bot Leaves Some Developers Baffled (And Angry) Posted: 25 Jun 2011 12:33 PM PDT
The sudden bans are the result of an automated Facebook bot, which automatically shuts down applications that it deems to be spammy. Obviously neither users nor Facebook want spammy applications on the platform, but there’s one problem: Facebook recently tweaked this bot to be much more aggressive, and it didn’t give developers any warning before it set it loose. Facebook declined to share any data on how many applications have been affected — it would only give us the same statement that it gave to All Facebook, which reported on the issue last night:
To be clear, many of the applications that Facebook shut down probably are spammy. But others, like GoodReads, are perfectly legitimate. Facebook now seems to be actively reinstating applications that were wrongfully blocked — GoodReads was fixed last night, and we’ve received reports from another developer that their applications were recently reactivated without any additional explanation. But it’s not as if Facebook can just wave its hand and suddenly put things back the way they were. Some of these developers are having to deal with an influx of user complaints. And some devs are losing faith in the platform entirely, as they fear having their business pulled out from under them without warning. As one developer, whose application was blocked and then reactivated upon appeal, put it:
       
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| Posted: 25 Jun 2011 10:00 AM PDT The Gillmor Gang — Robert Scoble, Phil Windley, Kevin Marks, and Steve Gillmor — celebrated the news that apps are moving past web sites as the default architecture of the planet. I say celebrate because I think the trend is one that will continue, and even accelerate, as iOS notifications make interoperation between apps more useful. In the process, as @windley notes, notifications and the processes that are triggered, become the focal point of what used to be known as the operating system. What that means for Windows is cloudy at the moment, pun intended. Though many analysts suggest Windows Phone 7 will gain significant penetration alongside iOS and Android, it will only be possible should important apps drive that adoption. @scobleizer is dubious, and @kevinmarks suggests the locus of power in notification has moved away from OS to Facebook and Twitter. @stevegillmor has his money on @mentions, where social and Web meet in a native wrapper too tasty to ignore.        
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Skype is being 
Hacker group 
“I’m CEO, Bitch.”
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