A quick follow-up to my latest views on medical care in the “3rd World” from the surgical wards of Thailand.
Some months ago while spending time in New Zealand, I had inquired about some minor elective surgery. I was quoted a whopping NZD$1,000 for what amounts to a 15-minute operation. Since I knew I would be heading into the wild, crazy and dangerous “3rd world” in a couple of months I passed on the opportunity to spend a thousand bucks, preferring to take my chances with the restless natives instead. In all honesty I had been putting off this particular operation, but now that I’m here I really didn’t have any excuses left to delay any further, so yesterday I had the surgery. For the record, surgery is not something I have a problem with, unless it’s my body that’s involved.
Including pain killers and antibiotics the entire bill came to 3,634 Baht, or NZD$151. Superior medical facilities, highly-trained western doctors (mine obtained his PhD from the University of Melbourne) all at a fraction of the price, complete with no delays, which are standard fare at any state run hospital in the West these days. All this makes for comparing “free” medical care in the West to paid medical care in places like Singapore, Malaysia, Thailand and India a wasted exercise. There is no comparison.
Thanks to technology, the world has and is changing at a rapid pace, which brings me to… Open Sourcing.
The Legal Profession as an Open Source
My first example of this has to do with angel investing, and our determining the best structure for any deal. Angels have typically relied on lawyers to assist in drawing up term sheets. Now, anyone that has done business anywhere is likely aware that lawyers can and do often charge like wounded bulls were given the opportunity. I’ve found that with the progression of time, and becoming more competent in my abilities to structure deals, I now manage to typically draw up our own agreements and simply have a final version drafted by a competent lawyer. However, initially it would be fair to say that we have historically been our lawyers best friend… and not in a way that was easy on our wallets.
“Open source” is more often than not associated with software and the like. It increasingly exists in all realms of business, and it is one of THE MAJOR TRENDS that we pay attention to, and subsequently invest in. Previously angels would need to spend a lot of money hiring lawyers to draft term sheets, now we find law firms providing term sheets free on-line. One such example that I highly recommend is to be found here. How much longer before we have an entire Wiki complete with legal firms competing to offer legal advice?
Is this the beginning of the open-sourcing of the legal profession? We would argue that it’s already taking place.
Large corporates of all stripes have previously relied on such mediums as printed media and television to advertise their wares. The power of these media is being diluted daily. Take a look at any business that relies heavily on expensive marketing, especially print media, and that has failed to make the transition to online media. Take a good look. How’s that business model faring? Who gets their news from newspapers and TV news? I suppose lots of people, maybe even the majority, but these mediums are being displaced – and fast. If you are a Baby Boomer and are still using TV and newspapers tell me: Do your children use them too? How about the library? How do you or your children interact socially? MySpace, Facebook and Twitter? I believe this is likely to break down the structure of large legal and accounting firms, but why stop there? There really are few businesses that are not directly or indirectly being impacted by technology. That world has ended folks, welcome to a new one.
As an aside, where we do find enormous value from legal and accounting experts is in the structuring of cross border deals, where tax implications can be significant. Screw this up and it is all too often a very painful and expensive exercise in correcting poorly structured transactions. Some things to be considered are the type of company to be formed, where to domicile it, where to bank and so forth. On Thursday we will bring you some thoughts on this from an exceptional individual in this field.
Upheaval in the Music Industry
There are entire industries that are in upheaval from this open sourcing movement. One industry that we are presently interested in is the music industry. For my parent’s generation the way to make money as a musician was to get noticed by a big record label such as EMI, who are in crisis mode. Then the label would promote you, and if you were lucky you’d sell a bunch of albums. Part of the method of selling multiple albums was to do a roadshow, touring whole countries promoting your album and performing at concerts in order to drum up sales. I respectfully suggest that in the future artists will give albums away for free in order to drum up concert sales in order to earn money.
John Mayer is a perfect example of this. He decided to distribute all of his music for free on P2P networks and now makes a successful living from it. The interesting and wonderful result of this transformation is that only music which is virally contagious gets spread and becomes successful. It is true capitalism at work. No longer will a cozy relationship with a record label, a rich Daddy or back door deal ensure the success of a pop star. Where a musician is talented and their music in demand, they will rise to the top without the necessity of big label companies backing them.
Many of the big record labels are still desperately clinging to the old formula. Unfortunately for them it’s a broken formula in today’s world of technology. Radiohead for example was simply following the path of least resistance by offering their album “In Rainbows” on a “donate as much as you think its worth” basis for download. This netted them over $6M in the first week. Cutting out the middle man makes a lot of sense. The same is true of book stores, libraries, universities, and ultimately I believe the movie industry.
Coming back to the music industry, this upheaval provides enormous challenges and naturally enormous opportunities. What will replace the record companies? Something… nothing?
We are presently involved in a private placement for a company that targets this particular problem. How is an artist to make money in this environment? Katy Perry for example can garner 125 million YouTube video views, but sells only 100,000 records (or less than 0.1%). iTunes has managed to carve a very profitable niche in this market, yet 95% of all downloads which take place remain illegal. The company we’re investing in combines all the social elements that people are spending time on: Facebook, Twitter, YouTube etc. Make no mistake, this industry is changing at break-neck speed and we think it’s a trend worthy of our attention.
If we have any readers that are university professors, work for large recording labels, publication houses such as newspaper and magazine, or any other industry that is being open-sourced we would humbly suggest that you either look for other work, or step into the trend for a chance at the riches that are and will be made as a result of what is a revolutionary change.
Revolutions are always frightening to some, while exhilarating to others.
Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one!
– Charles MacKay, from Extraordinary Popular Delusions and the Madness of Crowds