The picture in the header of this post is my attempt to create an image that represents Creative Destruction, or if you prefer a more dramatic term, Schumpeter’s gale. I will get back to those terms, but first let me fully explain the meaning of the image by describing an experience that I would expect we share. We all know that things change, but things have been changing faster and faster as my little picture attempts to demonstrate.
Not long ago we enjoyed listening to LPs on our expensive HiFi home music centers. We “collected” our favorite records into personal libraries of music from artists that we first heard on AM radio or saw on “American Bandstand” if it was the 50s or early 60s. Those “hits” were usually on 45s that we might have reviewed in a “booth” at a record store before we laid our dollar down. In the late 60s and 70s we listened to FM stations and bought LPs that were recorded on vinyl. If you cared about your music there was a lot of maintenance work. You cleaned your records, and handled them with great loving care. You spent time adjusting the turn table and checking out the “cartridge” or needle. Our parents, just a generation before us, collected their jazz on thick, and easily broken or scratched 78s, or listened to music on radios the size of shipping crates. Since my wife and I married in our mid thirties, and had “independent” record collections going back to high school, our marriage was a melding of record collections. We still have quite a vinyl library, with many duplicates, even after our sons, who have recently discovered vinyl, have picked through our combined collection.
My garage basement has hundreds of eight track tapes, tape cassettes, and CDs “archived” in plastic racks and cardboard boxes. I would never think about getting rid of them, but it’s been a while since I put a CD into a “sound system,” my computer, or into the little slot in my car’s dashboard because all of my music is now in “the cloud” and I just bluetooth my iphone into whatever output is convenient. Until recently I was content to buy my music online and electronically add it to my “collection,” but that phase was very short lived because now I can just shout across the room, “Hey Google,” play Ray Charles’s version of ‘You Don’t Know Me.’ ” Creative destruction has moved through recorded music with geometric acceleration. I will not bore you with what you already know about VHS to video stores and onto blu-ray briefly before Netflix and Hulu. The story of rapid change in our times has been more than bye-bye to Kodak, but photography is yet another good example of Schumpeter’s gale. These days only pros and fanatic hobbyist take pictures with a Nikon or a Canon. Most of us are delighted with the photography we get from our smartphone. Why spend thousands for equipment to lug around in big bags on vacation?
As my little examples illustrate, all of us have had personal experience with “creative destruction,” but if you are like me, you have just enjoyed the toys and not given a lot of consideration to what is going on behind the scenes. Older technologies are rapidly replaced by new more efficient processes, and we are not surprised, nor do we give much consideration to what havoc was generated to make it all possible. Out of our view a lot of things are happening. As many as 10% of jobs in our economy change every year because of creative destruction as inefficient companies, old processes, and old markets are replaced by innovative startups, new processes driven by new technologies that increase productivity, and as the expansion of those new applications and process create products the find new markets all continue in a process of change that has become hard to distinguish from what we once called the status quo. Constant change is the new status quo.
Joseph Schumpeter, a former Austrian finance minister who became a Harvard Economist, gets the credit for drawing our attention to creative destruction, but economic thinkers going back to Karl Marx have understood how capitalism drives change, destroying the old as consumers are drawn to the new products and services that it creates. We don’t spend a lot of energy focusing on the impact of rapid change in our processes and enterprises, but the juxtaposition of “creative” with “destruction” should be a clue that causes us to think about how to mitigate the human impact of such dramatic change. Creative destruction is a term that is definitely loaded with paradox, but it clearly hints at the ambiguities and conflicts associated with the process of change that creates progress.
It’s amazing how little deep consideration we have given to the management of the impact of change in our own lives, considering how important the reality of change is in the business world. The world has given us many new comforts through the reality of rapid change, but simultaneously rapid change has threatened the stability of traditional family and community life as it forces all of us to adapt to the rapidly changing world that has emerged since we learned how to harness the motivation of profit for the benefit of those who provide a service or product to the desire of consumers in the market for better services and products. It seems we have treated Schumpeter’s gale like we treat the weather. It is something that we think is beyond our control even as there is evidence that much of the volatility is the result of our own choices.
We do have people studying the weather, and we do have people who think about how we process change in our lives and in our enterprises. According to Dr. Ron Heifitz at Harvard’s Kennedy School there are two kinds of change, technical and adaptive, that are usually described when business people and psychologists talk about changes in business and institutions. If you followed the link you know that Heifitz sees elements of both technical and adaptive change in most big changes that impact a large number of people. Click here and you will see a YouTube clip of less than three minutes where Heifitz connects the importance of understanding the lengthy time course of adaptive change to the process of healthcare reform that is both technical and adaptive for most everyone, patients as well as providers. We are all in the boat together trying to survive Schumpeter’s gale. The storm of creative destruction gets everyone wet as we search for a better system of healthcare finance and service delivery to replace the one that some of us love while it damages others and undermines our economy.
I was delighted to stop buying film and give up concerns about F stops and exposure times when I discovered the nice pictures that I took with my phone. For me the change was “technical.” Technical change requires some learning, but the switch is usually pretty easy, sometimes a relief from drudgery, and rarely emotionally upsetting. All my HiFi equipment that I once touched several times a day just gathers dust now that my tunes are in my pocket wherever I go. I have no idea about what happened to the people that pressed the vinyl, worked at the cash register in the record store, or designed the lovely album covers that I no longer need to arrange on my shelf. The fellow who once developed my film into pictures that I put into an album seems to have shifted his business to being a drop off site for FedEx and UPS. He also has a machine that I can use for nominal fee if I want a make hard copies of my favorites to frame and hang on the wall. Perhaps the people who had a job change while I was enjoying the technical change of the product that ended their job did feel a little stress of the sort that is associated with “adaptive” change, but was that my concern? I feel sorry for the local bookstore and will occasionally pay more for a book out of charity or because I enjoy the “experience” of looking at books, but most of my retail purchases, and the gifts that I give for birthdays, graduations, and Christmas are obtained with a few clicks on Amazon.
Adaptive change requires time and significant learning. Adaptive change is usually associated with some sense of loss. There is uncertainty. Lives and processes are permanently altered. Moving to the ACA was a big adaptive change process that Republicans are still resisting with their current court challenges. Moving beyond the ACA to a revised ACA with a public option or “Medicare for those who want it,” if you prefer that description, will be an extended process of creative destruction and adaptive change. We are beginning to realize that moving all the way to “Medicare for all” will be even a bigger change that most people realize when they first hear about it because it makes the commercial health insurance industry a “victim” of creative destruction. Schumpeter’s gale has more than hurricane force winds of change. We are at the beginning of a process that will go on for a very long time after the 2020 elections, but just remember that your kids all have Spotify or Pandora accounts, and very few of them have stacks of the LPs like you once cherished.
Creative destruction with its requirements for technical and adaptive change occurs at every level of the economy, and it occurs at every level of our healthcare industry. It can occur within a production process within a larger enterprise, a good example in medicine would be the evolution of the use of fiber optics. Creative destruction can occur between companies and mechanisms competing to deliver a service like transportation, as Uber and Lyft have demonstrated to the chagrin of those who own medallions for taxis. In medicine we see ambulatory surgical centers compete with hospitals. Creative destruction can transform the distribution of products and services in ways that totally transform an industry, as my picture suggests, where analog recordings on vinyl are replaced by digital recordings on CDs that then make a short leap to streaming. In healthcare we see telemedicine and CVS clinics potentially destroying primary care as it has been practiced for centuries. Creative destruction is occurring everywhere in healthcare, even as we await the big changes that will be driven by legislation and the action of courts.
I do not know who will win the the 2020 presidential election, but I do know that the outcome will impact the evolution of healthcare. NPR reported this week on a study it did with Marist University examining current voter opinion on a variety of subjects. The complete list of issues and opinions demonstrates the shifting importance of healthcare in the minds of voters. The list is also interesting since many of the items on the list are not directly about healthcare, but are connected to the social determinants of health. I have bolded the most obvious opinions that impact universal coverage and the social determinants of health.
There are areas in which Democrats’ policy proposals are on solid footing with the overall electorate:
— Requiring background checks for gun purchases or private sales (89% say it’s good idea)
— Medicare for all who want it, presenting it as an option (70%) rather than doing away completely with private health insurance (41%)
— Regulating prescription drug prices (67%)
— Providing a pathway to citizenship for immigrants in the U.S. illegally (64%)
— Investing in so-called green jobs and energy efficient infrastructure (63%)
— Increasing taxes on those making more than $1 million (62%)
— Legalizing marijuana (63%)
— Banning assault-style weapons (57%)
— Raising the federal minimum wage to $15 an hour (56%)
Areas that are less popular include:
— A guaranteed universal basic income of $1,000 per month for American adults (26%)
— Providing reparations for slavery (27%)
— Decriminalizing illegal border crossings (27%)
— A national health insurance program that is available to immigrants in the country illegally (33%)
— Abolishing the death penalty (36%)
— Medicare for all replacing private health insurance (41%)
— Getting rid of the Electoral College (42%)
Further along in the article there is evidence that the ACA has come a long way toward permanent acceptance on the road of adaptive change, and that Republicans should be concerned about further attempts to defeat it.
The nominating conventions are still a year away, and the election is still fifteen months into the future, so attitudes will surely change, but the changes in opinion so far may suggest that there will be significant “creative destruction” ahead in healthcare. Is it possible that “Medicare for all” toned down to “Medicare for those who want it” will become an example of creative destruction? Could “Medicare for those who want it” be the Trojan horse that gets inside the defenses of the commercial insurance industry? Will the tens of thousands of employees in commercial healthcare insurance join the employees in record stores and video stores in the search for a new way to earn a living? Time will tell. My hope is that the next Democratic presidential debate will move past asking candidates to hold up their hand to signal whether they are for Medicare For All, and begin to examine how each candidate proposes to manage the adaptive change process of healthcare reform.
Earlier this week David Blumenthal wrote an excellent short article in the online publication, The Hill, about the realities of passing healthcare reform. I can’t think of a better person to write about the nuts and bolts of passing healthcare reform, or to give us a heads up for what to look for in a leader to manage the huge process before us. He co authored, along with James Morone, of Brown University, the best book I ever read on the subject of the history of healthcare reform, The Heart of Power: Health and Politics in the Oval Office. Blumenthal details that it will take much more than a Democratic victory and a big idea to give us the reforms in healthcare that would represent creative destruction of the current system. Here are his points:
- The requirements for enacting “Medicare for all” — or any similarly dramatic health care legislation that would result in universal coverage — are apparent from the demise of former President Bill Clinton health reform effort in 1993-94, and the success of former President Obama’s Affordable Care Act in 2010.
- Democratic control of the White House and both houses of Congress is needed.
- In the Senate, control would mean that a filibuster-proof majority is able to withstand the likely defection of moderate Democrats who would face pressure from opponents in the health-care industry. A 67-vote majority could possibly work — that’s 20 more seats than Democrats currently hold.
- Control of the White House and Congress is not sufficient. A second requirement is a president who puts health-care reform at the very top of his or her priority list, even at the possible cost of abandoning most other first-term aspirations.
- …even personal presidential commitment is not enough. We need a president who has fine-tuned command of the machinery of government and an understanding of Congress’s arcane byways.
- Having learned from Clinton’s mistakes, Obama enunciated broad principles, but left it to the Congress to draft the legislation.
- …there is one job in the health-care reform realm that only a president can perform: creating national political support for congressional action by mobilizing public opinion.
- As proponents and opponents of major health reform contemplate the 2020 contest, …they should be focusing as much on the Senate as on the presidency in their advocacy. For proponents of health reform, getting the necessary control of the Senate may be an almost impossible task — much more difficult than recapturing the White House.
- Reform proponents should… favor a president who knows Congress and the mechanics of governing, and has the charisma and eloquence to create and maintain the national political support needed to pass and sustain major health reform. [I bolded Blumenthal’s words for emphasis]
I like Dr. Blumenthal’s formula for positioning ourselves for “creative destruction” of our current deeply flawed, poorly performing, and incredibly expensive system of care that still excludes tens of millions of our citizens. I am convinced that someday we will look back on what we have now the way I look at the old LPs on my shelf, as something that was expensive, inconvenient, and not that easy to use. The ACA was a good start. It can be improved, and it will eventually be replaced. The process will be greatly enabled by a leader who matches Dr. Blumenthal’s description:
…a president who knows Congress and the mechanics of governing, and has the charisma and eloquence to create and maintain the national political support needed to pass and sustain major health reform.
When we watch the next debate I would suggest that we ask ourselves which candidate best matches Dr. Blumenthal’s description. That sort of leader will also understand the politics of creative destruction and have the skills to lead a huge process of adaptive change.
