Medical students, residents and practitioners around the world are getting more and more interested in entrepreneurship for many reasons. With that, some are questioning the wisdom of doctors bothering themselves with “the business of medicine” , innovation and entrepreneurship given how difficult it is for most doctors to maintain state of the art medical skills, cope with a constantly challenging regulatory environment and keep up with the explosion of medical knowledge. One fundamental question that challenges every doctor is how to reconcile the ethics of medicine with the ethics of business where they practice.
The idea that we are living in an entrepreneurial age, experiencing rapid disruptive technological innovation on a scale amounting to a new “industrial revolution” is a pervasive modern myth. Scholars have written academic papers extolling the coming of the “entrepreneurial economy”. Policymakers and investors have pumped massive amounts of funding into start-up ecosystems and innovation. Business schools, universities and schools have moved entrepreneurship into their core curricula.
The only problem is that the West’s golden entrepreneurial and innovation age is behind it. Since the 1980s entrepreneurship, innovation and, more generally, business dynamics, have been steadily declining—particularly so in the US. As economist Tyler Cowen has found: “These days Americans are less likely to switch jobs, less likely to move around the country, and, on a given day, less likely to go outside the house at all […] the economy is more ossified, more controlled, and growing at lower rates.”
For all the entrepreneurship cheerleading of the last 15 years, the Great Recession accelerated an already alarming decline in new business formation in this country. In the United States, our rates of entrepreneurship have been declining for decades, and those new firms that have been created are employing fewer and fewer people. Meanwhile, techno-oligopolies continue to increase.
After remaining remarkably consistent for decades, the number of new businesses launched in the United States peaked in 2006 and then began a precipitous decline – a decline accelerated by the Great Recession. From 2002 to 2006, the economy produced an average of 524,000 new employer firms each year. Since 2009, however, the number of new business launched annually has dropped to about 400,000, meaning the United States currently faces a startup deficit of 100,000 new firms every year – and a million missing startups since 2009.
COVID has had a significant impact on entrepreneurship. Here is another take on the effect of COVID on entrepreneurship. But, entrepreneurship by necessity has its dark side.
Research suggests that over the past two decades, the number of high-value startups has declined, sparking significant debate over what’s causing the drop, how to fix it, and whether or not it’s a problem that needs fixing. Here are six reasons why that might be true:
Theory 1: Entrepreneurs are motivated more by the lifestyle than by viable business ideas
Theory 2: Tougher regulation is hurting high-growth companies
Theory 3: Big businesses have changed the way they operate
Theory 4: Entrepreneurs lack the right training
Theory 5: The gig economy is affecting would-be entrepreneurs’ experience
Theory 6: The problem is a measurement issue
Here is the tale of the tape:
- In 1980, 15% of all U.S. firms had been created the year before. In 2011, that share had been halved, according to census data.
- In 1997, for the first time in this country’s history, more Americans worked at companies with 250 or more employees. The gap has steadily grown since, aside from a notable blip in the early 2000s. The biggest single percentage increase was between 2007 and 2008, as the Great Recession took hold.
- Three-quarters of U.S. incorporations that we do have issue no payroll, mostly for the self-employed.
- Though our outsized venture capital market means we have a high share of iconic, rocket-ship growth companies, the United States is lagging other rich country peers in the crucial middle category: new, growing, innovative companies trying to bring efficiencies to industries that may last.
Part of the problem derives from some misconceptions and differences in our interpretations of physician entrepreneurship:
1. Each doctor has his or her definition of physician entrepreneurship, value and innovation
2. Physician entrepreneurs play many different roles creating user defined value
3. Those roles depend on whether they are medical practice entrepreneurs, social entrepreneurs, technopreneurs, intrapreneurs, educational entrepreneurs, physician service providers or investors
4. Innovation ecosystems vary from one domain e.g. digital health to another, like biopharma
5. There are vast international cultural, social and political systems differences that help or hinder physician entrepreneurship.
6. Rules drive ecosystems. Rules variation around the world often reflects the values of a given citizenry at a given point in time. While health system problems are universal (cost, access, quality, changing demographics, supply, demand, equity), the solutions vary tremendously.
7. Creating value and wealth is but one step. Sharing the wealth that results, justice and equity are separate issues that can either raise the overall standard of a health system in a given country or drive another wedge between the haves and have nots. It also determines how physician entrepreneurs are perceived as either ruthless, greedy profiteers or instruments of social justice and improvement.
8. The gaps between how younger generations and older rulers see the world are widening (e.g China and somewhat reflected by Sanders supporters in the US elections) The “dream” constantly evolves from financial security to higher levels of needs like democracy, international connectedness and security and a better life for families and children.
9. Regardless of which way physicians choose to pursue entrepreneurship, it takes teamwork and the involvement of many different participants with varying skill sets. Each contributes something different.
10. Biomedical entrepreneurship is a marathon relay race. As such, any team is only as strong as its weakest link.
11. Few health professionals have an entrepreneurial mindset, in large part because of how they are chosen and the lack of bioentrepreneurial education and training in their programs.
Judging by the headlines on their LinkedIn profile, more and more MD/DOs are innovators, entrepreneurs and non-clinical consultants. Many are starting or working with biomedical and clinical startups, including a group of medical school graduates who don’t do a residency. But:
- They are not trained to do so
- Entrepreneurship in the US has been in a downward spiral in the US for the past 40 years.
- Most startups will fail
- Most startups don’t have money to pay people
- There is an innovation bubble.
- Job security is low
- You have to deal with people who have entrepreneurial psychopathologies are simply untrustworthy.
- Students loan burdens are rising
- Many are not in it for the long run
- There are unrealistic expectations on both the consultant/employee and employer side.
- Most MD/MBA programs should be terminated
- Innovation theater is pervasive.
If you thought getting a side gig or pursuing a non-clinical career was Plan B but now realize the grass really isn’t that much greener, maybe it’s time for Plan C.
The underlying assumption behind creating incentives for early involvement of physicians in entrepreneurship is that it will improve outcomes and company success. However, we lack the data that validates that assumption.
Doctors are wasting their time typing into EMRs, complying with administrivia, being on hold to get prior authorization, and answering unnecessary phone calls from patients that could be avoided with proper engagement and education. If anything, they are not spending enough time creating user defined value through the deployment of innovation.
At its core, though, we need to change the rules about measuring quality, clearing products, paying to things, providing equitable access and insurance coverage, and eliminating waste and administrivia cost, and narrowing inequitable value sharing. Otherwise, we are just parading shiny new objects.
We need to do a better job of measuring the input, output and impact of physician entrepreneurship including not just creating new companies, but interventions in medical practice entrepreneurship, social entrepreneurship, intrapreneurship, edupreneurship and other non-commercial roles as well.
International biomedical entrepreneurship will continue to grow With that, however, will be more challenges to use the results to make patients, systems and societies better. By doing good, physician entrepreneurs can do well, but there are formidable headwinds preventing them from doing so. Unless we have evidence to the contrary, the null hypothesis is physician entrepreneurship is a waste and , in retrospect, just sounded like a good idea at the time. I hope the results prove me wrong.