More than 50 million American adults, are paying off medical bills for themselves or a family member, most of them servicing balances less than $10,000, but totaling an incredible $88B. Historically, when these debts were handled in a timely fashion, healthcare providers like doctors and hospitals sold them to collections agencies for pennies on the dollar. This had an adverse impact on an individual’s credit report.
Not any more. this weekVantageScore, a credit score provider owned jointly by Equifax, Transunion and Experian said it will no longer factor medical debt payment into its calculations. The CEO stated that there is overwhelming evidence that shows that paying medical debt is not a reliable predictor of a consumer’s proclivity to repay revolving consumer debt … which is the point of a credit score. If you loan me money, how likely am I to repay it?
“You can shear a sheep many times, but skin him only once.”
— Amarillo Slim
I made 80+ early stage investments in the past 20 months. I’m watching valuations very closely, as I know we deployed capital into a rising market. Some of the fallout has already begun. One of my funds declared a total loss on an investment representing about 13% of its total fund. That’s a disaster and an overallocation. Interestingly, it was the first or second investment made by the fund, a pretty clear indication that the managers were making an investment to get a deal done.
Another company I advise should raise additional capital to build out a sales and marketing channel, but their VC is trying to raise Fund II and doesn’t want the risk of a down-round. Their incentives are not aligned and guess who will win?
On the whole, early-stage median pre-money valuations are showing signs of contractions that are tracking the larger public market. For the first time in 2 years, these valuations have decreased, falling 16% over the past 12 weeks. Seed-stage investment has held up better than any other stage, with deal counts and sizes remaining elevated and median pre-money valuations up 33% this year over 2021.
You can still sell hope and promise in seed stage deals. Later stage deals, though, which have premised high valuations on an eventual public exit or an acquisition aren’t faring so well, with both deal participation by larger institutions and valuations falling 13%, material but not dramatic.
It all goes back to the public markets. By this time last year, we had already taken 100 companies public at north of $1B in market cap each. This year the number is 10. Several of the pre-IPO companies we’ve invested in have shelved plans for public offerings until some stability returns to the market.
I don’t see it happening any time soon. I’ve written often and hotly about the Crusader heading the SEC who literally doesn’t believe there should be any more public companies. He’s an apparatchik who thinks that bureaucrats know better than the investing public. They don’t, they never have, but it’s easier to leech off the productive power of other people’s hard work if you control the keys to the exit.
“Now is the moment of power.”
— Huna proverb
I spend a ton of my time studying and hacking human productivity and performance. When I began my career, I was amazed to see how many things could be done better, faster, and cheaper but improvements and innovations were stifled because of unwritten rules of authority, territory and power. It wasn't that anyone ever consciously looked at something and concluded “I want this done in the worst way possible.” It was moreso that people and cultures find it easier to support something that is already done, than doing the heavy work of deconstruction and reconstruction of processes and systems to produce optimal results.
One of the great examples of this, to me, is the annual employee review process. All large business with robust HR staffing engage in this charade. In fact, I think it’s an entrenchment tool used by HR to ensure job security … no one else wants responsibility for this beast. It’s a corrupt institution — meaning that it exists to check a box, to appear like something productive is being done, but it accomplishes little and wastes time, resources and goodwill. And yet … it’s a staple of corporate life where no one pays it any attention throughout the year and then writes up a subjective review of someone’s performance tailored to the pay raise that has already been decided in advance.
But what’s the alternative?
First, there are now dozens of featherweight tools that give real time and useful feedback to organizations about how their people are feeling at work. TinyPulse is my favorite. It sends micro surveys each week, collates the responses in anonymous format suitable for sharing with the team at large. It’s flexible, inexpensive and gives you a better handle on how individuals are existing within organizations. Employees don’t see it as a chore, and if the data is used by management in a transparent fashion, feel as if they are actually being heard. And if you still insist on having an annual review like they did in the 1920s, you can use the data to actually support your positions.
The second, though, is more important. If you ask yourself the question of what employees really need to improve and maintain at high levels of performance, the answer is simple: Guidance. As humans in authority structures we want to know how we are doing and where we could do better. There is an innate desire built into us to please other people. Any boss or manager worth a damn realizes this and focuses on giving targeted guidance to those in their charge.
Once a year, in my organization we do a career pathing exercise where the management team pulls all the information available for each individual team member. We spend time discussing, debating and deliberating on where that person is in their career arc. We provide recommendations for how they might improve. These recommendations are intentionally and excruciatingly specific and tactical, not pie-in-the-sky where clarity is lacking.
For example, we have a team member who struggles with punctuality and scheduling issues. It was discovered in our career-pathing discussions about her, that she didn’t know how to properly synch calendars across multiple tech platforms. One of the managers took the time to write up a step-by-step guide on how to accomplish the assigned task of fixing the problem, and assigned a deadline of 3 days after receipt to have it completed. The wider problem of punctuality wasn’t a character issue, as we had assumed, it was a tactical issue that was so dumb that she couldn’t ask for help on it. In some ways, she couldn’t even see it.
As part of this exercise, we also share our candid assumptions about what the future holds. If we see a person who has plateaued, we let them know that they can expect to remain where they are until they make efforts to position themselves better for greater opportunity. If we know a person is ready for a promotion, we very transparently show them what the path to that promotion looks like with obligations on the organization and the employee. If we know someone is failing, we let them know that and show them how we expect to get out of business with one another.
Radical candor culminating in useful guidance is the greatest dignity we can give our team members. It is always premised on thoughtful reflection, management ownership and investment, and the belief that truth delivered lovingly is better for all involved.
“There is no room for facts when our minds are occupied by fear.”
— Hans Bowling