Tuesday, September 29, 2009

Dr. Atul Gawande - 2009 Commencement Speeches

Dr. Atul Gawande gave two commencement speeches in June. The first I found via the Farnam Street blog. (Below are some of excerpts. Click on the paragraphs for the entire speeches.)

June 4, 2009 Speech at the HSPH Commencement 2009

We have arrived, I think, at a difficult point in human history. For millennia, before this moment in time, we had little knowledge of what to do to improve and sustain the health of human beings. We lived in ignorance. The average longevity of a person was under 40 years. The body, and how it failed, was largely a mystery.

The 20th century, however, brought an age of remarkable discovery. In the last century, scientists have come to recognize more than 60,000 different diseases and disorders that can afflict the human body — 60,000 different ways the human body can fail. And they have discovered methods of prevention and treatment for nearly all of them — if not to cure them, then at least to alleviate their worst harm and misery.

That knowledge has ranged from how to construct sewage systems well, to how to provide intensive care technologies. And that knowledge is continuing to grow. But having discovered so much, we have hit, in this new century, a new problem — how to actually deliver on all that has been learned.

When Alexander Fleming discovered penicillin in 1928, it was, I think, a kind of fake-out for the future of medicine and for public health. Fleming gave us a simple injection that could cure numerous infectious conditions, and it led us to believe that managing disease would be easy and cheap.

But 80 years later, we found that the truth is far from this.


June 12, 2009 Speech at the University of Chicago Medical School

Nothing in medicine is without risks, it turns out. Complications can arise from hospital stays, drugs, procedures, and tests, and when they are of marginal value, the harm can outweigh the benefit. To make matters worse, high-cost communities appear to do the low-cost, low-profit stuff—like providing preventive-care measures, hospice for the dying, and ready access to a primary-care doctor—less consistently for their patients. The patients get more stuff, but not necessarily more of what they need.

Fixing this problem can feel dishearteningly complex. Across the country, we have to change skewed incentives that reward quantity over quality, and that reward narrowly specialized individuals, instead of teams that make sure nothing falls between the cracks for patients and resources are not misused. President Obama, I’m pleased to say, committed to making this possible in his reform plan to provide coverage for everyone. But how do we do it?

Well, let us think about this problem the way Jerry Sternin thought about that starving village in Vietnam. Let us look for the positive deviants.

This is an approach we’re actually familiar with in medicine. In surgery, for instance, I know that I have more I can learn in mastering the operations I do. So what does a surgeon like me do? We look to those who are unusually successful—the positive deviants. We watch them operate and learn their tricks, the moves they make that we can take home.

Likewise, when it comes to medical costs and quality, we should look to our positive deviants. They are the low-cost, high-quality institutions like the Mayo Clinic; the Geisinger Health System in rural Pennsylvania; Intermountain Health Care in Salt Lake City. They are in low-cost, high-quality cities like Seattle, Washington; Durham, North Carolina; and Grand Junction, Colorado. Indeed, you can find positive deviants in pockets of most medical communities that are right now delivering higher value health care than everyone else.

We know too little about these positive deviants. We need an entire nationwide project to understand how they do what they do—how they make it possible to withstand incentives to either overtreat or undertreat—and spread those lessons elsewhere.

I have visited some of these places and met some of these doctors. And one of their lessons is that, although the solutions to our health-cost problems are hard, there are solutions. They lie in producing creative ways to insure we serve our patients more than our revenues. And it seems that we in medicine are the ones who have to make this happen.

Here are some specifics I have observed. First, the positive deviants have found ways to resist the tendency built into every financial incentive in our system to see patients as a revenue stream. These are not the doctors who instruct their secretary to have patients calling with follow-up questions schedule an office visit because insurers don’t pay for phone calls. These are not the doctors who direct patients to their side-business doing Botox injections for cash or to the imaging center that they own. They do not focus, the way business people do, on maximizing their high-margin work and minimizing their low-margin work.

Yet the positive deviants do not seem to ignore the money, either. Many physicians do, and I think I am one of them. We try to remain oblivious to the thousands of dollars flowing through our prescription pens. There’s nothing especially awful about that. We keep up with the latest technologies and medications in our specialty. We see our patients. We make our recommendations. We send out our bills. And, as long as the numbers come out all right at the end of each month, we put the money out of our minds. But we do not work to insure we and our local medical community are not overtreating or undertreating. We may be fine doctors. But we are not the positive deviants. `

Instead, the positive deviants are the ones who pursue this work. And they seem to do so in small ways and large. They join with their colleagues to install electronic health records, and look for ways to provide easier phone and e-mail access, or offer expanded hours. They hire an extra nurse to monitor diabetic patients more closely, and to make sure that patients don’t miss their mammograms and pap smears or their cancer follow-up. They think about how to create the local structures and incentives to make better, safer, more appropriate care possible.

I recently heard from one such positive deviant. He is a physician here in Chicago. He’d invested in an imaging center with his colleagues. But they found they were losing money. They had a meeting about what to do just a few weeks ago. The answer, they realized, was to order more imaging for their patients—to push the indications where they could. When he realized what he was being drawn to do by the structure he was in, he pulled out. He lost money. He angered his partners. But it was the right thing to do.


Related previous posts:

THE CHECKLIST - by Atul Gawande

A Lifesaving Checklist - By Atul Gawande

Related books:

Better: A Surgeon's Notes on Performance

Complications: A Surgeon's Notes on an Imperfect Science


Related story from a Pabrai Meeting attendee (told via the Corner of Berkshire & Fairfax):

During dinner, Mohnish told the story of when he told Charlie Munger about Atul Gawande (the brilliant surgeon who wrote two excellent books and the essay "The Checklist"). Mohnish asked Gawande whether Munger had contacted him:

Gawande: "He did. He said he really liked my books and what I was doing. Interestingly, a couple weeks after I talked to him I got, in the mail, a handwritten envelope from him. I opened it up and inside was a check addressed to me for $20,000. I called him up and said 'Mr. Munger, I got your envelope. Thank you for the check, but I can't accept this.'"

Munger: "No, no, use it for something good."

Gawande: "Sir, I'm a surgeon. I'm seeing patients all the time. I can't really just spend $20000 to do 'something good.'"

Munger: "No, no, you're smart. You'll figure something out."

Gawande: "Okay, if you really want me to do something with it, I can give it to the Harvard School of Public Health."

Munger: "You fool! If I wanted to give it to the damn Harvard School of Public Health, I would've written a damn check to the Harvard School of Public Health."

Gawande then decided to send it back. A week later, he opens his mail to find another envelope from Munger.

Inside were two checks for $20000. One to Gawande, and one to the Harvard School of Public Health.

Return of the old ways of thinking threatens recovery - By Mohamed El-Erian

Today’s lack of appropriate anchoring frameworks appears to be exacerbating short-termism. The issue goes well beyond the still-limited appreciation of the multi-year realignment of the global economy, which is gaining momentum. It also relates to tendencies well-documented by behavioural economists – such as framing the problem wrongly and refusing to question past approaches.

Given all this, we would be all well advised to follow the admonition of Mervyn King. Last month, the governor of the Bank of England stated bluntly: “It’s the level, stupid – it’s not the growth rates, it’s the levels that matter here.” Investors have not yet accepted his insight that the absolute levels of income, debt, wealth and unemployment, not just the rates of change, are what matters today. They need to, and soon.

Monday, September 28, 2009

Simoleon Sense: Miguel Barbosa's Interview with Michael Mauboussin

My friend Miguel did a great interview with Michael Mauboussin.

Hussman Weekly Market Comment: We're Speaking Japanese Without Knowing It

If one seeks analysis about the recent financial crisis, and what most probably lies ahead, it would be wise to place particular weight on the views of economists who saw it coming (and ideally those who provided careful analysis rather than hyperbole). I've cited a paper by Reinhart and Rogoff above, which was published by the National Bureau of Economic Research in January of 2008. At a speech at the Princeton Club last week, economist Carmen Reinhart reiterated that by propping up unhealthy banks, the U.S. is unwittingly committing the same mistakes as the Japanese did in their decade-long stagnation, saying, “These are not zombie loans. They're just non-performing. We're speaking Japanese without knowing it.”


With the financial markets cheerily celebrating the end of the recession, credit spreads back to 2007 levels, and analysts referring to the mortgage crisis as largely a thing of the past, it is natural to ask why I would start pounding the tables again about debt restructuring. Old news. Problem solved. Why even bring it up?

The simple answer is that we have not solved the mortgage mess. We have temporarily buried it under a pile of public money, bailing out bank bondholders at public expense. As I've noted before, the best time to panic, in the financial markets, is before everyone else does. Similarly, the best time to consider responses to credit strains is before they surface. My sincere hope is that if, and I believe when, financial trouble resurfaces, we will be wise enough as a nation to prevent policy makers like Geithner and Bernanke from making the same bailout mistakes twice, protecting irresponsible lenders, and further burdening the nation with debt in the process.

David Winters and Whitney Tilson on WealthTrack

David Winters and Whitney Tilson on WealthTrack: Link to VIDEO

Sprott September Comment: Safe Harbour No More

The US dollar (USD) is the world’s “reserve currency”. This status is arguably the greatest privilege enjoyed by the US as an economic entity. Most people don’t appreciate its significance. As the world’s reserve currency, the USD is used by other countries across the globe to back up their own respective paper currencies. In some cases, it’s as basic as a country stockpiling US dollars in their central bank vaults. When asked what supports their Pesos, Rubles, or Yen, the powers that be simply point to their pile of US dollars as proof of value. Upon reflection, it’s quite obvious how tenuous it is to back up one’s currency with a pile of paper issued by another country, but this is exactly how the world of international currency has worked for decades. And it has worked quite well…until now.

Despite falling 36% since 2001 (as measured by the US Dollar Index (DXY)), it is only recently that the US dollar’s ‘world reserve currency’ status has been seriously questioned. The media pundits haven’t spent much time discussing this of course, but during the week of September 8th to 11th, the DXY actually fell to new 2009 lows every single day that week. Over the last six months there has also been a substantial increase in anti-US dollar rhetoric from China, Japan, Russia, France, Brazil, and even the United Nations. Reading between the lines, it appears the US dollar hegemony has finally broken, and what happens next will have major consequences for the global economy.

Because there is little hope of paying for their unfunded liabilities through current tax revenues, the Social Security and Medicare promises will undoubtedly require new bond issues. You probably don’t need a calculator to realize that the US can never cover the debt costs on $118 trillion. Even if the US Government were to spend 100% of their tax revenues on debt payments, the absolute maximum they could rationally borrow today couldn’t exceed $64.2 trillion ($2.157 trillion ÷ 3.36%). What is glaringly obvious is that the United States’ penchant for increasing its ‘promises to spend’ is directly threatening the future viability of the USD. While US politicians brazenly approve future spending promises they forget the real costs those promises imply – and there is no feasible way we can see those promises being paid for under foreseeable economic conditions.

So how will this US debt crisis ultimately resolve itself? Let’s consider the options. It would appear from our analysis that the spending ‘promises’ are the crux of the problem now facing the US Government. If there isn’t enough new capital in the current environment to fund new Treasury bill issues (as we argued in “The Solution... is the Problem”), then there certainly isn’t enough capital to pay for the US’s unfunded future obligations. The choices, therefore, are bleak:

1. Default on Medicare promises. (Unlikely given the current debate in Washington to expand medical coverage.)

2. Default on Social Security promises. (Unlikely given the increasing average age of the voting public.)

3. Put forward a credible plan to balance the budget. (Unlikely given the most recent budget projections.)

4. Default on outstanding debt. (Unthinkable)

None of these options are feasible for the US Government. So they realistically only have one option left – to print their way out of their debt crisis.

Sunday, September 27, 2009

Howard Marks: Oaktree Capital Memos 1990 – 2009

This is a GREAT find from Tariq at Street Capitalist. Thank you Tariq! From his blog:

Yesterday, as far as I know, Oaktree Capital decided to make all of their existing memos from Howard Marks available. Marks is a great writer and has a knack for forming clear and concise thoughts on financial markets and investing. I decided to put the memos together in one big pdf:

Oak Tree Capital: Memos from our Chairman 1990 – 2009 (PDF)

Thursday, September 24, 2009

Is Thinking Back in Fashion? – By Lane Wallace

Thinking may be coming back into fashion.

Never mind the fact that we have a President known for his intellectually rigorous abilities and habits. But three times in the past couple of weeks, I've encountered business people discussing Aristotle. Not in an esoteric conversation of culture or literature, either, but as a way to improve every-day life and business decision-making ability.

"We're capable, but not practiced, in the art of thinking," says Phil Terry, CEO of Creative Good, a business consulting company, and the founder of a web-based reading and lecture organization called Reading Odyssey. "We're all endowed with curiosity, but a lot of us, for very good reasons, stop using it after a certain point. After a certain age, we tend to substitute opinions for thinking."

Terry's assessment would resonate with anyone who's spent any amount of time watching cable TV news channels. But even if we recognize the problem, how do we get those dormant curiosity and decision-making skills back in gear?

According to Terry (and Berkshire-Hathaway vice-chairman Charlie Munger, among others), the answer lies in the classics. Why the classics? First, to gather a broad base of knowledge about the "big ideas" across all the major academic disciplines. And second, to develop the ways of thinking and the "habit of wisdom" Aristotle believed were critical to good decision-making.

Munger is apparently well known for his belief that good decision-making--including good investment decision-making--comes from having a "lattice-work of frameworks" with which to approach a subject. If, for example, you can compare how a historian, economist, psychologist and probability theorist would look at a given situation, you can see it more clearly--including angles or weaknesses one discipline alone might miss. And as a result, you're likely to make better decisions about what to do or where to head next.

Of course, "accumulating a broad knowledge base of all the major academic disciplines" isn't exactly a three-hour task you whip out over a long weekend. Fortunately, for anyone so inclined, there's Peter Bevelin. Bevelin, a businessman and investor, wanted to reduce the number of bad decisions he made in his business life. Drawn to Munger's approach, he took a year off just to read and study the big ideas in all the major disciplines. Bevelin's book, Seeking Wisdom: From Darwin to Munger, is the synthesis of the notes he took over that year.

But one of the other main points Bevelin made was that wisdom isn't just about knowledge. It's about a way of thinking. Darwin, he said, wasn't particularly brilliant. But he had exceptional thinking habits ... of observing, contemplating, reading, conversing with close confidants and, above all, of ceaselessly challenging even his own assumptions and beliefs.

Which brings us to Aristotle. Wisdom, according to Aristotle, isn't an object anyone acquires. It's a habit; something that emerges from a particular way of processing information and engaging with others and the world. And a habit that's essential for us to develop to make better decisions in business and life. That theme is prevalent not only in Bevelin's book, but also in Terry's Reading Odyssey teleconference-based lecture and discussion groups--which he set up to help curious adults explore and debate classics and "big ideas" from thinkers ranging from Homer, Aristotle and Herodotus to Darwin.


Related link:

A Reading Odyssey

Related books:

Poor Charlie’s Almanack

Seeking Wisdom: From Darwin to Munger

Related previous posts:

Interview with Peter Bevelin, author of Seeking Wisdom - from Darwin to Munger

Second Interview with Peter Bevelin

TED Talk: William Kamkwamba: How I harnessed the wind

TED description:

At age 14, in poverty and famine, a Malawian boy built a windmill to power his family's home. Now at 22, William Kamkwamba, who speaks at TED, here, for the second time, shares in his own words the moving tale of invention that changed his life. (Recorded at TEDGlobal 2009, July 2009, in Oxford, UK. Duration: 5:59)

Pershing Square - Bill Ackman's 2nd Quarter Letter

The Dollar, Inflation, and Risk to One’s Purchasing Power

In light of the large amount of credit creation, quantitative easing, and dollar printing that has recently taken place in the United States, it is reasonable to be concerned about the future buying power of the dollar and the prospect of higher interest rates that will be necessary to induce investors to purchase Treasury securities. Some investors have chosen to hedge these risks by buying gold. In that gold does not generate cash flow, it does not have any intrinsic value in our opinion. Thus, we have chosen to reduce the interest-rate risk and dollar weakness risk of our portfolio by owning high quality businesses that have pricing power due to market position and/or business model, and/or that earn their profits globally.

A Reading Odyssey

Whitney Tilson did an interview with Phil Terry from 'A Reading Odyssey' about Charlie Munger and Poor Charlie's Almanack: HERE.

I decided to check out the site a little more and it is really, really great. Mr. Terry has also done interviews with Barry Schwartz and Peter Bevelin, among others. I highly recommend exploring the site for yourself: HERE.

Monday, September 21, 2009

"You and Your Research" - 1986 Speech by Dr. Richard W. Hamming

A BIG thanks to my friend Miguel at Simoleon Sense for finding this and passing it along. I think it was one of the best and most useful speeches I’ve read. It also reminded me of this quote from Charles Darwin:
"I have been speculating...what makes a man a discoverer of undiscovered things, and a most perplexing problem it is. Many men who are very clever, -- much cleverer than the discoverers -- never originate anything. As far as I can conjecture, the art consists in habitually searching for the causes and meaning of everything which occurs. This implies sharp observation and requires as much knowledge as possible of the subject investigated." -Charles Darwin
Related previous post: What it takes to be great

Bill Laggner on King World News

Bill Laggner on King World News - Friday, September 11, 2009

Richard Bookstaber on WealthTrack

Link to VIDEO



TED Talk - Oliver Sacks: What hallucination reveals about our minds


Sunday, September 20, 2009

Charlie Rose Show: An hour about the life and work of Charles Darwin

This 2005 Charlie Rose interview with E.O. Wilson and James Watson ends with Mr. Rose calling it one in which he is most proud: Link to VIDEO


Related books:

From Bear to Bull - By James Grant

As if they really knew, leading economists predict that recovery from our Great Recession will be plodding, gray and jobless. But they don't know, and can't. The future is unfathomable.

Not famously a glass half-full kind of fellow, I am about to propose that the recovery will be a bit of a barn burner. Not that I can really know, either, the future being what it is. However, though I can't predict, I can guess. No, not "guess." Let us say infer.

The very best investors don't even try to forecast the future. Rather, they seize such opportunities as the present affords them. Henry Singleton, chief executive officer of Teledyne Inc. from the 1960s through the 1980s, was one of these enlightened opportunists. The best plan, he believed, was no plan. Better to approach an uncertain world with an open mind. "I know a lot of people have very strong and definite plans that they've worked out on all kinds of things," Singleton once remarked at a Teledyne annual meeting, "but we're subject to a tremendous number of outside influences and the vast majority of them cannot be predicted. So my idea is to stay flexible." Then how many influences, outside and inside, must bear on the U.S. economy?