🦄 vol. 27
karl and claude chat about health tech and complexity bias
beat the sting 🐝
Life expectancy is increasing! Not just that, health adjusted life expectancy (HALE) (adjusted for time lived in less than ‘perfect’ health) is increasing too, both have increased 8% globally between 2000 and 2016, according to the World Health Organisation (WHO).
An 8% increase in HALE over 16 years - is that something to be proud of? 😕
No, it isn’t but if we isolate low-income countries that number increases to 18% over the same time period. Better. Life expectancy and health in general remains heavily influenced by income. In 2016, life expectancy was 18.1 years lower in low-income countries (62.7 years) than in high-income countries (80.8 years).
Healthcare vs Health-Tech
Health-tech is a vertical within the healthcare space and can broadly be thought of as any tech-enabled healthcare product or service that can be delivered or consumed outside of a hospital. Considering the impact of the COVID-19 breakout, you can imagine how this sector leapfrogged in importance.
In 2021, of the ±$4.5 billion that went to funding African startups, around 5% or $220 million went to funding 67 healthcare related businesses. That’s almost double from 2020’s $125 million according to Africa:The Big Deal. So far in 2022, around 6% of the ±$650 million in funding has gone to healthcare, however this number does not include Reliance Health’s recent $40 million series B round.
Break it down 🧩
In the healthcare space, success is based on the rate at which we progress towards universal health coverage (UHC). There are multiple indicators used to measure this but two stand out:
Service coverage index
% coverage of selected essential health services, think access to safe, effective and affordable essential medicines and services.
Proportion of out-of-pocket expenditures on health care by population
% of catastrophic health spending where insurance or government does not support at all.
Insurance 🧠
Generally speaking, Africa has battled a sense of apathy towards health insurance as a large proportion of the population view it as “anticipating sickness”, according to Briter Bridges. This is only worsened by the low income levels in Africa, which mean that premiums for health insurance would make up a larger portion of the population's disposable income. Making the concept of insurance a lot more unattractive at first glance.
Unfortunately, things rarely go as planned and when your plan is to not have a backup, or better put - insurance, things tend to sting a whole lot more. So much more that 38% of Africans delay or forgo health care due to high costs, which leads to further complications down the line, if not fatality. On the other side, for those that do pay, 37% of Africa’s health spending comes from out-of-pocket payments. Effectively, unplanned expenditure.
Who’s solving this? 👀
The thesis is simple, insurance penetration is low, millions of Africans are forced to spend out-of-pocket for their health care because there isn’t enough governmental support. This out-of-pocket spending so rarely happens which leads to higher untreated illnesses and ultimately a lower life expectancy.
Mature companies like Reliance Health or much earlier like WellaHealth, aim to solve this exact problem. They focus on illnesses that are common, like malaria and provide low cost health insurance to their clients. This removes the cost consideration that comes with needing to go to the doctor, helping avoid complications and drive up the life expectancy. In addition to that WellaHealth provides their Nigerian customers with access to over 1000 pharmacies to do clinical tests and receive medication in a cashless manner.
karl
why’d you have to go and make things so complicated? 🎤
Complexity bias? 🤔
An understanding of complexity bias requires an understanding of complexity and simplicity.
Complexity is the state or quality of being composed of many interrelating or complicated parts. It’s inverse, simplicity is the quality or condition of being plain or uncomplicated in form or design.
Following from this, complexity bias refers to the human tendency to prefer the complex over the simple. As pointed out in this article, the irony to this definition is that it is a complex way of saying that humans are attracted to complexity.
Why the attraction? 👭
This article references Donald A. Norman’s “Living with complexity” and offers a valid explanation.
“We seek rich, satisfying lives, and richness goes along with complexity. Our favourite songs, stories, games, and books are rich, satisfying, and complex. We need complexity even while we crave simplicity… Some complexity is desirable. When things are too simple, they are also viewed as dull and uneventful.”
Let’s walk through some situations that touch on our attraction to complexity.
Investment 📈
The preference for complexity is evident within the investment landscape. Among investors and asset managers, the intuition seems to be that the complex investment ecosystem requires a complex strategy to navigate. Asset managers are also incentivised to communicate complex strategies, because they can attach higher fees to them.
Marketing 🎣
Marketing (👀) often makes use of complexity bias. Think of how stores are full of products that either contain some “extract X”, or are free of some “chemical Y”. These claims, whether relevant or not, carry an implied superiority of said product vs the competition.
Or even the low-level comparisons of phone specs that have minimal observable difference to inter-generational iterations.
I personally find myself buying products with “active charcoal” over the alternatives. Why? Well because of the active charcoal of course (🤓) but I’d be hard pressed to give you an intelligent answer 😂.
Engineering 🏗️
Avoiding complexity is a major theme in software engineering. Principles like KISS (Keep it short simple) have been designed to keep engineers and teams from over-thinking and over-complicating a task or solution (note again our implied tendency toward complexity in this definition).
Interestingly enough, complexity in engineering is defined as the measure of uncertainty in achieving the functional requirements of a system within their specified design range. So the more complex a system, the more likely it is to fail.
The takeaway 🤲🏾
The above is not to say that all differentiation in products is superficial, or that simple investing strategies always beat complex ones. Rather, it is highlighting that the complexity in these scenarios can be “simulated” and used as a bait and exploited to achieve a particular outcome… for example, a purchase.
Complexity in and of itself is not a bad thing. It becomes a problem when introduced where it isn’t needed.
“Simplicity is a great virtue but it requires hard work to achieve it and education to appreciate it. And to make matters worse: complexity sells better.”
– Edsger W. Dijkstra
claude
with a growing debt crisis and on the back of the events unfolding in ukraine, matt suggests reading ray dalio’s principles for dealing with a changing world order like yesterday
karl has really been enjoying the besties debates and diverse perspectives on the ukraine war