An Ounce of Prevention…

Over the holiday I spent some time with a close friend of mine, an amazing pediatrician, exploring the trouble with the U.S. health care system. He is a huge advocate of prevention, investing in wellness, education concerning diet and exercise and non-traditional (e.g., Eastern herbal remedies, resulting in fewer drugs, fewer procedures) protocols. We then discussed how little money is going into prevention and how much money is going into acute care. Sure, we have state-of-the-art trauma centers in every metro area, sometimes many of them, yet reimbursement for preventive medicine and wellness care is atrocious. To be a pediatrician today who values patient time and accepts insurance is to accept a mind-bogglingly low return on investment. Who makes the big money? Acute care professionals. Think transplants. Yet acute care is the highest cost way to deliver health care, just like when the uninsured walk into an emergency room for a basic medical procedure. Our society has it all backwards. We should be investing in prevention and wellness to sharply reduce the need for acute care. Yet the financial incentives are for the hospitals and the pharmaceutical companies to push their most high-margin products.

This line of thinking is not strictly the province of health care. Consider the financial sector. Here we are, playing a massive game of catch-up. Yes, the patient, the U.S. financial sector, is in need of acute care. We are plying it with expensive drugs (TARP), and in the meantime are on the waiting list for a transplant (excising the bad assets). All this treatment is very, very expensive. A few trillion and counting. Now consider how a little prevention might have altered the picture:

  1. Basic conflict-of-interest guidelines addressing the rating agencies;
  2. Stricter application of FAS 157 and tightening of rules governing special purpose vehicles;
  3. Standardization of CDS contracts to move them towards exchanges;
  4. Tighter monetary policy sooner after recovery from the tech bubble; and
  5. Damping down the lending targets of the GSEs in order that they originate good loans, not just loans.

These points are neither earth-shattering nor revolutionary. For each one of these issues there was a lot of debate at the time, yet politics, lobbying and short-termism dominated the discussion. And now we have what we have today. Taking a little more time and getting things right upfront; pretty basic stuff. Yet we as a society consistently fail at this. We always seem to be in a rush. We love complexity. We are impressed by extremes. So much so, it turns out, that it is to our peril. Maybe if we’d slow down just a little, try and get the big things right and weren’t so impressed by fancy degrees and high IQs we’d be a lot better off. Innovation is great. It is the application of innovation that can either make you or break you. And at the moment, we’re kind of broken.

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About Roger Ehrenberg 94 Articles

Roger is an active early-stage investor, having seeded or invested in over 20 companies in asset management, financial technology and digital media since 2004. Prior to his venture days Roger spent 18 years on Wall Street in M&A, Derivatives and proprietary trading.

Throughout his career he has held numerous executive positions, including:

President and CEO of DB Advisors LLC, a wholly-owned subsidiary of Deutsche Bank AG. His 130-person team managed over $6 billion in capital through a twenty-strategy hedge fund platform with offices in New York, London and Hong Kong.

Managing Director and Co-head of Deutsche Bank’s Global Strategic Equity Transactions Group. In 2000, his team won Institutional Investor magazine’s “Derivatives Deal of the Year” award.

As an Investment Banker and Managing Director at Citibank, he held a variety of roles and responsibilities in the Global Derivatives, Capital Markets, Mergers & Acquisitions and Capital Structuring groups.

Roger sits on the Boards of BlogTalkRadio; Buddy Media; Clear Asset Management; Global Bay Mobile Technologies and Monitor110. He is currently Managing Partner of IA Capital Partners, LLC.

He holds an MBA in Finance, Accounting and Management from Columbia Business School and a BBA in Finance, Economics and Organizational Psychology from the University of Michigan.

Visit: Information Arbitrage

1 Comment on An Ounce of Prevention…

  1. Plug in cars would cost the equivalent of 60 cents per gallon to drive at the current average electric rates. The electricity to charge them could conceive ably come from solar or wind.We spent 168 billion on the last stimulus pkg that did nada for our economy. Why not invest in getting some alternative energy projects set up and running. It would create cheap clean energy and create new badly needed jobs. This past year the high cost of gas seriously damaged our economy and society. While we are doing the Happy Dance around the lower pierces at the pump OPEC is planning strategy to raise the price per barrel back up to between 75-100. per barrel.We really need to get on with alternative energy. Bail us out of our dependence on foreign oil and the control it has over our economy and society. There is a great new book out called The Manhattan Project of 2009 Energy Independence NOW by Jeff Wilson. I highly recommend this book for anyone who is worried about our economy and would like to see our country become energy independent

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