Michael Ackermann compares software and healthcare markets, arguing that FDA approval, reimbursement requirements, and IP protections act as entry barriers that limit competition. These hurdles take years to navigate but create real moats around healthcare businesses, protecting them from the flood of competitors that plague software markets.
Chapters
The big difference between software and healthcare is that it's highly regulated, right? And then in addition to the regulation to even be able to get onto the market, you have this entire reimbursement side that has to be covered too, right? So not only does it have to be approved, but somebody has to agree that they're going to pay for it. And so how does that impact things and how are things potentially changing. So what I would say is that in some ways it's very tempting to think about those things as barriers because frankly they are barriers, right? I mean, you got to go through a lot to do that and you have to have knowledge of the system, right? You have to understand what this regulation thing is all about to be able to get a product onto the market and you have to understand what this reimbursement thing is all about to get there. What I will tell you is, I mean, It's a great thing. I mean, here I am, I am a total neophyte, just spun this thing out of Stanford just 4 years ago, and I don't have some high schooler at Paly High coming up with a competitive version of our product that's gonna launch immediately after, right? There's some complexity there, but there's an incredible network of people in this valley and beyond that understand the nuance, And frankly, it's not rocket science, right? So it doesn't take a lot to understand it. You just have to be able to get in and get that understanding and then play by the rule. And once you get on the other side, actually, it's really a really tremendous barrier that actually ends up being very protective. And there are things that are working to make it go faster, but inherently, I mean, these are, they're long processes, right? But I think that's part of the trade-off. I mean, the markets are equally as large, even a very tiny fraction of a $3 trillion market is still, can be a multibillion-dollar market, right? I mean, it's still enormous markets, and so there's really enormous opportunity. But you're not competing with, you have intellectual property, you have FDA, you have reimbursement barriers that really prevent competitors from coming into the space.
