0:00:05 Hi, and welcome to the A16Z podcast. I’m Hannah. In some ways, the coronavirus feels
0:00:08 like something that came out of nowhere, a sort of black swan event. But at the same
0:00:13 time, it’s also been exposing a lot of the fundamental cracks and flaws in our healthcare
0:00:17 system that feel like a perfect storm when they all come together and have hurt our ability
0:00:22 to address a problem that many say we should actually have seen coming. So we’re here today
0:00:27 to talk with A16Z General Partners Jorge Conde and Julie Yu about some of those big forces
0:00:32 and dynamics in the healthcare system that led us to this moment at the intersection of
0:00:37 business, policy, and public health, and how in healthcare in particular, broken policy
0:00:42 can lead to broken business models that in the wrong circumstances lead to major failures
0:00:46 in public health like the one we’re seeing today. We talk about where we’ve seen this
0:00:51 before in the markets of vaccines, antibiotics, and diagnostics, and what should be different
0:00:56 next time so that when a new pandemic hits, we aren’t facing another perfect storm.
0:01:00 Since we have talked quite a bit about some of the cracks on the healthcare system side,
0:01:04 let’s start with the business or the market side. What was the underlying problem on the
0:01:06 market side that got us here?
0:01:12 Much like a virus attacks the weaknesses in the human body, this pandemic spreads by effectively
0:01:16 attacking or exploiting the weaknesses across the healthcare system writ large in the United
0:01:22 States, healthcare is a fairly unique case in that this is one industry in one area
0:01:30 where policy sets business models and where you have bad policy, you have bad business
0:01:34 models which can lead to market failures, which can lead to public health failures. We’ve
0:01:40 seen it happen in the vaccines industry. We’ve seen it happen in diagnostics. We’ve seen
0:01:45 it happen in anti-infectives and antibiotics more broadly. And so these aren’t isolated
0:01:47 examples where the system fails.
0:01:52 As a system, historically, we’ve made very little investment into prevention in general.
0:01:57 Really where the money has been made is in the treatment of patients who get sick. And
0:02:01 so there’s been really just an orientation around the incentives being aligned with waiting
0:02:08 until those patients do get sick to then provide treatments and therapies and procedures that
0:02:13 generate more revenue, unfortunately, and also higher margins for physicians and hospitals.
0:02:16 And you’re seeing a version of that here where, again, there’s been very little investment
0:02:20 in preparedness for these kinds of pandemic disasters.
0:02:24 So let’s pull apart those threads in those three different areas. So because vaccines
0:02:29 are so top of mind, let’s dive into vaccines. Why does that not a successful market?
0:02:33 Well, I think vaccines in general has been a difficult industry for a couple of reasons.
0:02:39 Number one, if you’re developing a vaccine for something that already affects humankind
0:02:45 broadly, those are considered pretty commodity products today, right? Your mom’s vaccines,
0:02:49 your, you know, any of the number of vaccines that children get in their regular stables
0:02:53 are relatively commodity product. They’re not differentiated. You can’t charge a lot
0:02:58 for them because these are almost basic staples of public health. And therefore, you know,
0:03:01 relatively speaking, we all need them. Yeah, we all need them. They’re well covered and
0:03:05 they’re widely available. The trick comes when you have something that emerges quickly
0:03:09 and has the potential to spread rapidly. COVID-19 is not the first example of this that we’ve
0:03:15 seen. We’ve seen this happen numerous times, whether it’s with SARS or H1N1 or West Nile
0:03:20 or Zika. Obviously, Ebola was one that was a wake up call and made a lot of people nervous.
0:03:25 And I think if you look at a lot of those historical examples, generally speaking, what
0:03:33 we saw happen was the companies that did have active vaccine programs were asked essentially
0:03:38 to stop doing everything they were doing to develop programs against whatever a specific
0:03:43 emerging threat was. And they responded to that call for action. And what happens with
0:03:48 vaccines is when the threat goes away, you know, the urgency tends to go as way as well.
0:03:52 And once the urgency has gone, the market goes with that, along with that, these companies
0:03:57 that were developing vaccines for these specific newly emerging threats. In many cases, they
0:04:01 were left holding the bag where, you know, in some cases, orders that governments had
0:04:06 put in for them kind of went away when the threat went away. And so the business model
0:04:09 of saying, well, ramp up production for an emerging threat, where if you are successful
0:04:13 the market for what you’re developing goes away. And so the public health efforts are
0:04:16 successful in containing the disease and you don’t need the vaccine. And therefore there’s
0:04:21 no market for it. And therefore you essentially wasted the effort. The other thing that’s true,
0:04:25 that has been true in previous pandemics is there’s generally a call on the industry by
0:04:31 governments to make sure that the vaccines become available at cost or at low cost. And
0:04:35 it’s very hard to build a business around that, where if you’re building for, you know,
0:04:40 an event like you called it a black swan event. But at the moment of that black swan event,
0:04:43 you’re not able to recoup profits for some valid reasons that you obviously have to make
0:04:47 this widely available. It’s a very difficult business model unless you’re in a situation
0:04:51 where it’s the entire globe, and then it’s all of a sudden. Well, yeah, but then you
0:04:55 need the ability to actually ramp up and be able to produce vaccines at that scale and
0:05:00 at that speed. Something that’s a silver lining in all of this is how rapidly some of these
0:05:05 novel platforms have been at looking to develop vaccine candidates. But for that to work as
0:05:10 a business model, you need to either be able to produce a vaccine for every oncoming pandemic,
0:05:15 and you need to be able to have a business model that will enable you to essentially recoup
0:05:19 and make a profit from the investments you’ve made in developing that platform. And that
0:05:20 goes back to policy.
0:05:22 Yeah. I mean, one interesting thing that comes to mind, Horace, you’re talking about this
0:05:28 is there’s a lot of characteristics of vaccines that are somewhat similar to some of the more
0:05:32 novel sort of gene therapies and cell therapies that we’ve talked about, where you essentially
0:05:36 need the vaccine once or maybe a handful of times when it comes to things like booster
0:05:41 shots for your entire life. And therefore, the opportunity to monetize that particular
0:05:46 intervention is very rare in the context of any one patient. You just have to wonder
0:05:51 whether some of the dialogue that’s happening around value-based payments for different
0:05:55 types of treatments, how that would be applied here, because to take the traditional fee-for-service
0:06:01 way of thinking about getting paid a commodity price for a one-time intervention just doesn’t
0:06:05 seem to match well with the paradigm of how vaccines are actually administered.
0:06:08 So I think the analogy is valid. And by the way, I think a lot of the proof is in the
0:06:15 pudding because that kind of incentive structure that you just described hasn’t existed historically.
0:06:20 There have been several calls for better policy put in place. Some of the key areas that have
0:06:27 pioneered this have been sort of the one and done therapies for very rare diseases. And
0:06:32 I think the reason why there was room to have that discussion was, number one, because the
0:06:36 prevalence of those diseases is fairly well understood, even though they’re very rare.
0:06:41 And so you can essentially run the actuarial calculation to say, “Okay, well, if we charge
0:06:47 $2 million to treat somatic muscular atrophy, we’re still benefiting the system a significant
0:06:53 amount by extending life and reducing the need for supportive care and all of those things.”
0:06:58 And so you can actually model those out. And it’s a rare event that with a high value,
0:07:03 you can put a high price on. Here, it’s a little bit trickier because it’s hard to model
0:07:08 out the actuarials on this because a pandemic is, generally speaking, an unknown event.
0:07:13 So unless you have a policy for pandemics broadly, where you essentially provide some
0:07:18 sort of incentive, whether they’re block grants or success fees, et cetera, that would have
0:07:23 to be really large for any institution that comes up with a effective vaccine against
0:07:29 a newly emerging threat, you’re sort of trying to solve for an unknown number. But I think
0:07:34 we could learn a lot from what we’re seeing with these new modalities like gene therapies
0:07:39 and cell therapies that have in many ways trailblazed novel business models to make them viable.
0:07:44 I understand how for vaccines that model falls apart when sort of a massive event like this
0:07:48 happens really quickly. But how about with antibiotics? That feels like something that
0:07:53 everybody needs, that we know there’s an increasing demand for the right kind of antibiotic. Where
0:07:58 does the market policy, health care, public health failure come together there?
0:08:03 Well, so there it’s, you know, similar situation with different circumstances, right? So in
0:08:08 the case of antibiotics, public health agencies and the medical practice broadly have been
0:08:15 very focused on how you prescribe antibiotics and in what order, in order to prevent the
0:08:21 emergence of resistance. And so we have broad spectrum antibiotics, and then we have narrow
0:08:27 spectrum antibiotics, and we have ones that are more potent than others. And once bacteria
0:08:32 become resistance to all things, and we have the threat of superbugs, where you basically
0:08:38 have no last line of treatment against a bacteria that has become resistant. And so the conventional
0:08:43 thinking around antibiotics has been to think of it as first line and second line and third
0:08:49 line. And so if you develop a novel antibiotic, you might be addressing a very important unmet
0:08:57 need. But by definition, physicians are going to use these new antibiotics as sort of last
0:09:03 line of therapy. I develop a new antibiotic, and it’s good, it’s only going to be used
0:09:09 sparingly. And if I’m charging per treatment or per use, that’s obviously not going to
0:09:14 be a very effective model for me either. Right. You don’t want to be having to use these unless
0:09:18 everything else has failed. That’s right. And by the way, we’ve seen the real world
0:09:23 examples of this as well. Large pharmaceutical companies have also exited, like with vaccines,
0:09:29 they’ve also exited the antibiotic space. Novartis has exited, Sanofi has exited. It’s
0:09:33 very hard for them to find a way to make a profitable business for all the reasons we’ve
0:09:37 been talking about. There was a startup called the Kaogen that was actually successful in
0:09:43 developing a novel antibiotic against a nasty bug. So they had a public health success.
0:09:48 But what they found was that they didn’t have a business model. And so they went bankrupt.
0:09:51 This is a really strange industry where you have something that’s so successful that you
0:09:55 cannot build a business on it. Scott Gottlieb, the former head of the FDA, who’s of course
0:10:01 been so vocal and helpful throughout this COVID-19 pandemic. He had floated the idea
0:10:06 a year ago of similarly creating some sort of incentive structure so people could develop
0:10:12 new business models around novel antibiotics. And these included things like, similar to
0:10:18 vaccines, success fees for developing a novel therapy. He even floated an idea on something
0:10:23 like subscriptions where, you know, institutions would subscribe to get access to antibiotics
0:10:28 and they wouldn’t pay for use. They would pay for access. So it’s almost like an all-you-can-treat
0:10:33 model versus, you know, a paper pill model. Why would that need to come from policy? Why
0:10:37 wouldn’t that just make good market sense for the market to respond in that way? Well,
0:10:40 I think you’re going to see a combination of those things. So some of it needs to come
0:10:46 from policy in the sense that you can require institutions to have a broad toolkit of antibiotics
0:10:50 and require them to carry all of them. And then if you require that, the companies are
0:10:53 developing novel antibiotics, come up with new business models to make it viable for
0:10:58 them and to make it viable for the hospital systems. But I mean, I think you do need policy
0:11:04 at some level to define what is required for standard of care. And if you can do that,
0:11:09 then you at least create some room for companies to develop novel business models. A great
0:11:15 example is in self-therapy and gene therapy. Like unless you change the way CMS pays for
0:11:20 therapies and how they calculate cost of therapy, you can’t have installment models in medicine.
0:11:22 So there had to be a policy change there.
0:11:26 People do look to CMS to be kind of the tip of the spear with regards to these things.
0:11:33 CMS reimbursement is the ultimate policy change that generally is what triggers this type of
0:11:38 business model innovation and adoption of these types of things in the market. And commercial
0:11:44 payers tend to follow suit when CMS makes those kinds of policies. CMS did put into place
0:11:49 a what’s called a qualified infectious disease products program in partnership with the FDA
0:11:56 around antibiotics to essentially up the reimbursement rate for the use of antibiotics in hospital
0:12:01 based settings under certain circumstances. So there is some precedent that shows that
0:12:05 there is a willingness to do this sort of from the top down. There was other legislation
0:12:11 proposed that has not yet been passed around the concept of essentially mandate that the
0:12:17 hospital report on the utilization of antibiotics and sort of demonstrate that they are abiding
0:12:21 by standard of care. And it’s sort of a quid pro quo where in exchange for doing that and
0:12:26 sort of demonstrating compliance with that kind of program, the proposal is that there
0:12:28 would be higher reimbursement rates for that.
0:12:32 The other interesting thing about antibiotics that I find is I’ve had a number of experiences
0:12:36 myself where let’s say you go to an urgent care clinic, you think you have strep, they’ll
0:12:40 do a test, but the test results aren’t going to come back for a couple of days and therefore
0:12:46 you are put sort of prophylactically on an antibiotic without yet knowing what the pathogen
0:12:51 is or whether or not you even have that pathogen. And there’s studies that show that it’s upwards
0:12:57 of a third of antibiotic prescription could be unnecessary, but given the delay in the
0:13:00 information needed to determine whether or not it’s correct, that’s just sort of the
0:13:04 general practice of how it plays out. So it’s interesting in that this sort of intersects
0:13:10 with how having better real time diagnostic capabilities could actually impact and just
0:13:13 reduce the inefficiency amount antibiotic use as well.
0:13:18 So it’s interesting not just the sort of market policy public health failure starts to come
0:13:22 together, those actual three buckets start coming together as well. But let’s talk about
0:13:29 diagnostics now and pull again apart these sort of different failures of market policy
0:13:35 public health. Why is the diagnostic market not as successful? Why was that broken?
0:13:39 Diagnostics historically have been a challenging area for a couple of reasons. The first one
0:13:46 is it takes a while to develop a diagnostic. It’s time consuming and expensive and it wasn’t
0:13:51 easy to really recoup that investment because reimbursement rates historically haven’t been
0:13:52 very high.
0:13:56 But why would it not always be better to know if you have some, I’m sort of like not clear
0:14:00 on the very question of why is a diagnostic not always valuable?
0:14:03 You know, look, I think diagnostics are a form of prevention. And I think if one thing
0:14:08 we’ve seen generally across the healthcare system is prevention is not always the most
0:14:12 effective business model. Whether or not it’s valuable isn’t the debate. It’s how it’s
0:14:16 reimbursed. There’s plenty of examples where reimbursement rates don’t always track to
0:14:21 value, especially in the system where a lot of things have been around fee for service
0:14:24 versus value based care.
0:14:30 Diagnostics as an industry is a fairly tricky one because reimbursement levels for diagnostics
0:14:36 have over time have trended down. If you look at things like diagnostics that could be used
0:14:42 to determine which patients should be a candidate for a therapy, for any therapy, for any number
0:14:47 of conditions, those have historically been underutilized. One of the reasons that people
0:14:51 speculate is because physicians are going to prescribe the treatment that they think
0:14:55 their patients are going to benefit from. And unless the diagnostic is meaningfully going
0:14:58 to change that decision, they probably won’t use it. They’ll use other factors like risk
0:15:04 factors or family history. In many ways, the diagnostics industry has been viewed, I think
0:15:12 unfairly, as a commodity industry. There is an element of competing on price and trying
0:15:15 to essentially make it up with volume. And that’s why you have very large players in
0:15:20 the industry that have these very, very large menus of tests that they provide and they
0:15:24 do it at scale because the amount you’re going to reimburse on a per test basis is relatively
0:15:30 small. And so this whole area of diagnostics as being viewed as a commodity has led to
0:15:31 generally underinvestment.
0:15:37 It’s not that it’s not perceived as useful. It’s more that the price that you get paid
0:15:42 for that component of the patient journey is not where the money’s made. Like a cholesterol
0:15:47 test, a very basic test that’s pretty routine. The value of the test itself is probably a
0:15:52 few tens of dollars in terms of how much you get reimbursed for that test. But the outcome
0:15:56 of that test, if you are in fact diagnosed as having high cholesterol, the result of
0:15:59 that is that you’re put on a statin really for the rest of your life. And that’s really
0:16:03 the blockbuster category of drugs. And so that’s just an example of where the value
0:16:10 distribution is very skewed. CMS very recently just published their list price sheet for
0:16:16 how they intend to reimburse for the COVID test. You do a double take when you see it.
0:16:22 It’s literally in the $35 to $50 range per test that would be reimbursed by Medicare.
0:16:26 And when you think about the value of the information being provided by that test, especially
0:16:31 right now when that information could literally mean life or death, it’s kind of astounding
0:16:36 to think that it’s so little compared to these disaster stories that you hear about patients
0:16:41 in the ICU on ventilators, having to undergo anesthesia to get those ventilators in. There’s
0:16:46 just a huge skew in terms of where the dollars flow relative to where the perception of the
0:16:47 value might be.
0:16:50 I think what we’ve seen in diagnostics in terms of how they have been deployed across
0:16:55 the country is a great example of, unless you have very clear policy on who can get
0:17:01 tested and what it will cost, it makes it very hard for this to be deployed very widely.
0:17:06 And we can put aside for a second any issues that actually took place in the logistics
0:17:11 of rolling out tests. The incentives just weren’t clearly in place early enough.
0:17:15 I mean, what we’re talking about is all these broken models that show up when something,
0:17:20 do we need to wait for these moments of really kind of horrifying failure when there isn’t
0:17:25 a vaccine available, when we don’t have the right antibiotics or the right tests in order
0:17:28 to change some of these ingredients to prevent it from happening again?
0:17:33 Well, I think the specifics will matter. But I think generally speaking, when the next
0:17:36 pandemic comes, there are a couple of key things that I think would be helpful to have
0:17:41 in place beforehand. One, from a policy standpoint, it should be clear that, number one, there
0:17:47 won’t be any cost for any member of the public to get tested, assuming tests are available.
0:17:52 Number two, for those companies that are providing tests that need to in many cases massively
0:17:57 scale up capacity in order to meet demand, that they will be reimbursed in a meaningful
0:18:03 and timely manner. Number three, I think it would be helpful to have from a policy standpoint
0:18:07 coverage of treatments associated with whatever the pandemic is.
0:18:12 And that way, you don’t have the situation where somebody that’s underinsured or uninsured
0:18:17 is avoiding the healthcare system out of fear of cost repercussions. I mean, that’s obviously
0:18:21 a challenging thing to do in a normal environment. It can be a catastrophic thing to do in a
0:18:25 rapidly emerging pandemic environment. And so I think there’s certain things you can
0:18:30 do from a policy standpoint to make sure that both the public is responsive, but also industry
0:18:34 and those that have technology to address the situation are also responsive.
0:18:39 But how about from a market perspective? I mean, are there things that you can do to
0:18:45 fix these basic market dynamics of dealing with rare emerging diseases and last line
0:18:48 of defense antibiotics, things like that?
0:18:53 So if the policy were to be anyone that can provide a validated test against the pandemic
0:18:59 is going to be reimbursed X amount, and these are going to be the reimbursement criteria,
0:19:05 then you have incentive to very quickly scale up production to do that. If the policy is
0:19:10 that anyone who wants and seeks out testing, regardless of whatever that individual circumstances
0:19:14 would be, they can get access to that test and they won’t be charged at all for that
0:19:20 test. You’ve also created demand. In effect, what’s necessary in a pandemic is to ensure
0:19:24 that you have a guaranteed buyer, whether it’s, you know, you’re developing vaccines
0:19:28 that are going to be deployed broadly, whether you’re developing tests that need to be distributed
0:19:33 around the country or around the world, you know, whatever the situation may be, if you
0:19:39 need to scale something up for a one time event, you need to be sure from the supply
0:19:45 side that someone is going to buy that product. And really the only institutions that have
0:19:49 that kind of scale when you’re talking about pandemic level events are nation states or
0:19:54 countries. And so I think another key aspect of the right policy in place is essentially
0:19:59 have the backstop guarantee that the government is going to step in and buy product if you
0:20:03 develop it to address an unexpected event like a pandemic.
0:20:08 One of the big failures that we’re experiencing right now is that we who are told to stay at
0:20:13 home and avoid the hospital don’t have a means to get tested at home. And, you know, there
0:20:18 were, I think there was a set of unintended consequences that occurred when the FDA intervened
0:20:23 and put into place this emergency approval process for new tests that were being developed
0:20:27 for COVID did actually, and I think this was done unintentionally, but is one of the major
0:20:31 reasons why there’s been such a bottleneck in getting new tests developed unintentionally
0:20:36 created a need or requirement that the FDA does approve under these emergency provisions
0:20:41 every test that is being developed. And so we saw a bunch of innovative companies, startups,
0:20:46 et cetera, spin up home based tests that would work for patients in their home setting, which
0:20:51 would not require them to go to a lab or go to a clinic to get the testing done. But those
0:20:57 were unfortunately shut down because they did not comply with these emergency rules.
0:21:01 And I think things like that where there are sort of intersecting policies that may conflict
0:21:05 with each other between different government agencies have to be looked at differently
0:21:10 such that the next time this happens, we’re able to respond and have the market, you know,
0:21:14 sort of do its thing and be able to get new product out there in a way that doesn’t get
0:21:15 hung up in bureaucracy.
0:21:18 Yeah, it’s interesting because I feel like a lot of what we’re talking about is this
0:21:24 delicate balance of regulation, right, in a heavily regulated space where regulation
0:21:28 can push forward innovation in some ways, but then time passes and you don’t want that
0:21:33 to then become kind of a weight that you’re dragging along when events change or things
0:21:39 unfold. Like, how do you generally think about that balance between the heavy regulation
0:21:45 that we need in place for helping to sort of perhaps create market incentives or the
0:21:49 relaxation we need in others like in testing therapies? How do you think about how those
0:21:52 evolve over time and making sure that we keep that balance?
0:21:56 Yeah, I mean, we talked a little bit about this with regards to telehealth and the fact
0:22:02 that many of the laws both at the state and the federal level that have prevented or at
0:22:07 least created friction for telehealth to be very broadly adopted. Our laws that were put
0:22:12 into place like decades ago before anyone contemplated telehealth. And so, you know,
0:22:16 even though it’s unfortunate that this kind of event and pandemic is the forcing function
0:22:20 for us to revisit some of those things and actually undo them because the world has
0:22:24 changed so much because technology has changed so much because the way that we deliver care
0:22:28 is changing so much where the laws that have been put into place are, you know, maybe very
0:22:32 outdated. I think that’s just a general thing that this whole pandemic is shedding a light
0:22:36 on is the fact that so many of those rules that have been put into place, you know, likely
0:22:39 don’t make sense anymore in this day and age.
0:22:44 Look, I think the idea that we need to ensure that, you know, we do no harm, that things
0:22:49 that we develop to be an effective intervention against how we treat or manage disease are
0:22:54 in fact effective to ensure that we have the processes in place to make sure that we are
0:22:59 in fact not blind to issues around safety or efficacy. I think it’s very important.
0:23:03 But as we’ve talked about before, the world has changed in terms of, you know, what medicines
0:23:08 look like. You know, now we have gene therapies and cell therapies and digital therapies. And
0:23:14 I think the regulation has to evolve so we can properly evaluate those opportunities to
0:23:19 change how we treat disease. And we’re also seeing a lot of innovation that’s coming down
0:23:24 the pipe right now in terms of how we think about how do we monitor patients, right? Historically,
0:23:29 that was always done, you know, at the point of healthcare at a hospital or at an institution.
0:23:33 But it’s, you know, things like, you know, monitoring of patients with wearables emerge.
0:23:37 That’s going to change a lot of paradigm. So I think the reality is that, you know,
0:23:41 it is true that regulation is always lagging behind innovation. I think that will always
0:23:42 be true.
0:23:47 But I think what we need to do is find ways to close the gap between the innovation that
0:23:52 emerge and the regulations that help us govern those innovations. And to the extent that we
0:23:56 can further close that gap, we’ll obviously be in a better position, you know, for future
0:23:58 emerging health threats.
0:24:00 Thank you guys so much for joining us on the A16Z podcast.

0:00:05 Hi, and welcome to the A16Z podcast. I’m Doss, and in today’s episode, Jason Warner,
0:00:12 the CTO of GitHub, talks with A16Z General Partner David Yulovic about the best and worst
0:00:18 practices of remote development and, more broadly, remote work. Shelter and place orders have more
0:00:23 companies making the move to remote faster than ever. So is this our new normal? And is it the
0:00:29 future of work? In this hallway-style jam, the two discuss the tools and strategies for communication
0:00:35 and alignment, what does and doesn’t work, from demos to burn down charts, and end on some reflections
0:00:41 given the current crisis. They begin, however, by talking about where location does, or maybe we
0:00:48 should say doesn’t come in. I’ve been a remote executive now for just over 10 years, and I myself
0:00:53 have never lived in San Francisco. I wonder how many people list their location on LinkedIn as the
0:00:59 San Francisco Bay Area, but don’t actually live here. I’m sure it overcomes the Silicon Valley bubble
0:01:04 bias of everyone having to be here, which I guess is what we’re talking about today. I think my career
0:01:08 would look very different if I didn’t put San Francisco on at one point. That’s really interesting.
0:01:14 I wonder if that’s going to change in the future. I hope it does. I really do. You can get more
0:01:19 efficiencies in your business. You can have better access to talent. And Silicon Valley has a bias
0:01:25 towards them being the best of the best. But the world has moved on from that. And I think what
0:01:30 you’re going to find too, and I think we will find this in time in this next decade, is that
0:01:36 the access to talent is the only game that really matters in the next 10 years.
0:01:41 The aperture will open for roles that previously people thought couldn’t possibly be done remote,
0:01:46 that this particular role had to be in the office. And then now, of course, that role is working
0:01:50 because it’s remote by definition because we’re in this moment in time. Jason, what are the dynamics
0:01:55 that you’re observing, I think both in this moment in time and then more broadly?
0:02:01 So I think the most common thing that I’ve seen when people try to go distributed and remote as a
0:02:09 company is that some of the worst human behaviors or tendencies tend to get amplified. So as an
0:02:15 example, if you are a person who is prone to gossipy type of stuff, you might seek out more
0:02:21 gossip. If you’re prone to anxiety and you worry about your job, someone not replying to you in
0:02:27 an instantaneous basis might give you heartburn. However, the worst one is micromanagement. If
0:02:33 you’re a boss who micromanages people when you’re in the office, it gets amplified 100 times remote
0:02:41 because you tend to “want to check in to see how things are going” or reopen decisions. Typically
0:02:46 to think about what the behavior mechanism of micromanagement is, it’s lack of either transparency
0:02:52 inside of trust. So figure out which one of those it is and fix that. How you fight that as a tendency
0:02:57 is you really have to clear up your lines of communication. What are you doing for why? How
0:03:02 are decisions being made and ratified? Who has the decision-making authority? How are we tracking
0:03:07 progress? Do you have the right structures, meetings, cadence, or updates that you need
0:03:12 to feel confident that things are moving in a direction? I think the ability to go
0:03:17 to a remote workforce for me as a leader means the ability to hold people accountable who aren’t
0:03:21 directly in front of me and know how to communicate over various communications mediums that don’t
0:03:26 involve just walking over to their desk and annoying them, which is manager 101. Sometimes
0:03:31 when you see somebody face-to-face all the time, you can write off that quick one-line email that
0:03:34 might be a little bit snarky or they might misinterpret because you’re going to see them
0:03:38 the next morning. But when somebody’s working remote, you start to put more context around
0:03:43 things and you start to say thank you and please, you can’t just see them in the morning and say,
0:03:47 “Oh, hey, sorry about that email last night.” I found that to be one of the most interesting
0:03:52 transitions for me personally. I got a lot better about communication in a remote company,
0:03:58 distributed company, really fast. And as you said, more context, a little bit more empathy
0:04:03 about how we read. And next thing you know, you have a whole bunch of autonomous leaders
0:04:07 emerge out throughout the company. Something I want to advocate for when people think about
0:04:12 distributed work is the types of communication channels that they need. Basically, if you’re
0:04:17 going to optimize for the fullness, you’re going to want three. But if you have to choose one,
0:04:23 choose async memorialized communication. So we will always have email. That will never go away.
0:04:27 And I don’t consider that part of the tool discussion. That just is. However, when I say
0:04:30 async memorialized, I mean things where you basically ratified decisions and threads and
0:04:35 you’ve locked them and they will stay there as your institutional memory. So that’s the first.
0:04:41 I think the second one is video calls. And then the third one, which is the one that most people
0:04:47 reach to first is something like Slack or IRC or any of those things. I think that should be your
0:04:52 third. That should be the optimization that you have and you never treat it as institutional memory.
0:04:55 I don’t think those tools are set up to be institutional memory. Backscroll is the worst
0:05:02 way to go find out the context to a conversation. I do think that you can use it for in real time,
0:05:07 slight communication between a couple of different people. But then once the decision’s made in that,
0:05:10 it should be ratified and memorialized in a different system.
0:05:15 I agree completely with the memorializing sort of in situ and the tool that you’re using. So if
0:05:19 it’s code and product decisions, maybe that’s in GitHub. And one of the things that’s been
0:05:25 interesting to observe over the last few years is that many, many tools, especially SaaS tools,
0:05:30 they’ve sort of been including more and more multiplayer support. But what we’ve observed is
0:05:34 that they’re actually adding more and more of the collaboration into the tool themselves. So for
0:05:41 instance, people that use Figma, they are commenting and talking about the Figma files directly in Figma.
0:05:46 Now, as it moves over to marketing and product marketing and other people in the organization,
0:05:50 away from the designer and into engineering and other aspects, all that comment history of like,
0:05:54 how did the design end up the way it is? Or why did we make this decision the way we did?
0:05:59 Is in that file and it stays there forever. And that’s super powerful. The downside is people
0:06:04 sort of have more places to look for commentary and things. The good thing is that the metadata is
0:06:10 now sticking around with the content itself, which is quite powerful. One comment about Slack that
0:06:15 I’ve observed with the companies that I work with that are distributed is that Slack ends up becoming
0:06:20 a notification mechanism for them. So, you know, obviously it has that water cooler like capability
0:06:25 that a lot of people use to talk about things real time and sort of synchronously. But it also
0:06:30 takes on this notification mode where all these tools where things are being memorialized or
0:06:35 being discussed sort of in situ, then get sort of centralized back into Slack for people that are
0:06:39 sort of just boy years and want to know what’s happening but aren’t maybe engaged in the day to
0:06:45 day. I have seen the exact same thing, which is Slack in particular is it’s a pinch point,
0:06:50 essentially every other system flows into it, updates it, then goes back out. And then people
0:06:56 stream all that stuff together. Just as basically GitHub and Slack can become platforms for exchange
0:07:02 of information, I imagine you’re going to see a lot of new tools emerge and basically say, okay,
0:07:08 hit this button, it’ll sync to X, Y or Z system. In fact, this may seem like a subtle point,
0:07:13 but turns out to be an important point that collaborating and discussing and working through
0:07:18 something in one tool is not the same as memorializing a decision in a way that
0:07:21 the organization can sort of keep that memory of it and make it easily accessible.
0:07:27 When you memorialize a decision, it only counts if everyone else knows about it. The other thing
0:07:31 is when things start to get memorialized, it allows new people to get up to speed more quickly. And so
0:07:36 that ends up being sort of a tailwind that just benefits all future people that join the company.
0:07:42 And so as these tools are creating sort of the collaboration inside the individual tools as
0:07:48 opposed to outside the tools, I do think it actually becomes more important to define where
0:07:53 decisions get memorialized, whether it’s in sort of like a wiki page inside of GitHub or
0:08:00 Confluence or Notion or whatever it is. So my approach has typically been you can choose Y tool
0:08:06 or Z tool if you want to do your local development practices, whether it’s tracking story points
0:08:11 or using Kanban style or so if you’re choosing Trello or Asana or something like that and you
0:08:14 want to track your stuff locally for your team there and you want to experiment with it. I’m
0:08:19 not going to stop you from doing that. However, the organizational institutional memory is going to
0:08:24 live in X. You can do yours locally and then you have to actually memorialize decisions or all those
0:08:29 things in the system of record. And that’s how we’re going to know what’s going on. I find that
0:08:34 works better as organizations get larger. If you’re smaller, I usually just say we’re all going to
0:08:39 live in X. Sorry, we’re not going to entertain other tools at this point. When people ask me about
0:08:44 habits of remote companies and I said, well, they’re just really habits of great companies.
0:08:50 And I want everybody who logs in in the morning to know exactly what they’re working on, why and
0:08:55 for whom. And that starts at the top and starts with context communication. And then you have to
0:08:59 have the swing all the way back up is are we actually doing it? Are we making progress? Are
0:09:03 things actually advancing? And the mechanisms by which you achieve those things are going to make
0:09:09 you a great company, distributed or co-located. And if you think about another aspect of leadership
0:09:14 in general is everybody in the organization is making the set of decisions that only they can
0:09:18 make. So if you’re the CEO, there’s a set of decisions that nobody else in the company can
0:09:23 make only you can make them. So you do, you make those decisions. And then every other decision
0:09:27 that somebody else can make is delegated to that person and et cetera, et cetera, all the way down.
0:09:33 But that only works if you are transparent enough and sophisticated enough with your
0:09:37 mechanisms to say, I’m going to make these decisions. Here’s our goals. Here’s our
0:09:40 measures. Here’s how we’re going to measure progress, all that sort of stuff at each one
0:09:45 of those levels. I paid attention to a project on GitHub called Home Assistant. And they’ve now
0:09:51 incorporated a ton of sort of automation, not just around is this code fitting a certain code
0:09:56 formatting policy, but also they now have these mechanisms like does this fit with our values?
0:10:00 And somebody has to sign off on that for the issue to get closed. Does this support all the
0:10:05 internationalization that we’re looking to do? And somebody who’s approved elsewhere quote unquote
0:10:09 in the organization has to sign off on that. And the issues get sort of redirected. And there’s a
0:10:14 bunch of bots that coordinate and facilitate all this. And so the mechanism of working in a
0:10:19 distributed way is being facilitated by technology in a way that I’ve never seen before. And I really
0:10:24 think that was driven by the open source community as you embrace source code revisionary kind of
0:10:28 paradigms and apply the dollars on the things that anybody can do a poll request and have it
0:10:34 reviewed and evaluated and considered or being able to fork the organizational code to improve it.
0:10:40 That feels like it breaks down these weird hidden power structures that sometimes can
0:10:44 emerge in very old or very large established corporations, which is basically like, hey,
0:10:48 we need to go do this. You’re like, oh, the only person who touches that bit of code or can make
0:10:53 that decision is X person. And you have to talk to the right people to go find out who that person
0:10:59 is. Instead, open source has basically built mechanisms for that. When you put an issue into
0:11:05 GitHub and it has this keyword into it, somebody automatically gets tagged who is responsible
0:11:09 for that. And then they’re notified and they have to go comment on the issue and have
0:11:15 discussion about it. I think the feedback loop mechanism of lowercase a agile is incredibly
0:11:20 important, which is it’s the only time that I’m going to find out how things are going is when
0:11:26 it’s released or at the end of a sprint or at the end of a quarter, the classic project management
0:11:31 red, green, yellow type of approach as probably not the right mechanism. So I’ve just introduced
0:11:37 a couple of different things. One is for remote stuff, obviously you want to have somebody responsible
0:11:42 for updating the progress of various projects, products or whatever across the organization,
0:11:47 particularly the ones that are interdependent upon other teams or organizations. The other is I like
0:11:54 to do review meetings now. And in those meetings, I’m getting updated on very large or ambitious
0:12:00 projects on a regular basis. And particularly I’m trying to edit in that meeting, not author.
0:12:05 So it’s really a time for me to either course correct or get updates. I also like the organization
0:12:12 to feel the same sort of progress. So I ask teams to give regular updates to the organization on a
0:12:19 weekly, bi-weekly or at most at absolute most monthly basis. And I ask them to do a write up
0:12:24 with a video demo of the progress that they made in that time period. I have not personally found
0:12:30 things like burn down charts to be that effective. I just think we as an industry are not great about
0:12:34 estimating progress. I agree. Things like burn down charts are sort of useless because they get
0:12:39 gamed, but just demoing very, very regularly creates those loops and those opportunities for
0:12:44 people to course correct and edit. I personally love demos. I get excited by them. I think the
0:12:47 organization gets excited by them. And I think there’s a forcing function. If you do it on a
0:12:52 regular time interval, you have to think a little bit of like, okay, how are we actually going to
0:12:59 showcase progress here? Because one of the worst habits I’ve seen of very large engineering teams
0:13:03 or large scale engineering efforts, large scale, maybe infrared ones or operating system ones is
0:13:10 to say we can’t actually demonstrate progress for months, which we all know from the way that
0:13:16 software can be written is that is never true. So the job now becomes how do you actually demonstrate
0:13:21 progress in a shorter amount of time? But also this is not just an engineering thing. It can be all
0:13:24 parts of the organization. So when people are listening to this podcast and they’re saying,
0:13:29 oh, that’s great for demoing some code or, you know, a new UI somebody built. It’s absolutely not
0:13:34 just for that. It’s for anybody in the organization. I’ve been lucky that superhuman Rahul Vora, the
0:13:39 CEO, lets me sometimes sit in on like their Friday demo sessions and afternoon demo sessions.
0:13:42 And they do a really nice job because you’ll even see the recruiting team come in and say,
0:13:46 hey, look, this is how we’re changing how we’re doing recruiting or this is how we’re changing
0:13:50 how we’re sourcing. I’ve seen the marketing team talk about how they’re thinking about some of the
0:13:55 growth of the business. So it really goes way beyond engineering. It’s a moment about celebrating
0:14:00 wins. It’s not a moment of critiquing. There’s other venues and channels and much more smaller
0:14:05 settings and directed settings. That is an incredibly important point. You know, we’re
0:14:10 currently in an environment where you can’t meet candidates face to face. And then just long term,
0:14:13 there’s going to be lots of situations where you’re interviewing wanting to hire somebody
0:14:17 who just it’s impractical to meet face to face. Are there things that you do to make sure that
0:14:22 you’re really doing a good job interviewing? Is this a non-issue? Is this an actual issue?
0:14:28 Yeah. Given that I’ve been doing this for a while, I find that it’s not so much about remote or
0:14:31 co-located. It’s actually about interviewing. And we’re just not that great at interviewing in
0:14:36 general. But for some reason, we have a better sense when we’re able to see someone in person.
0:14:41 So what I really say is it’s incredibly important that if you’re going to communicate to somebody,
0:14:46 you do it over video. And you can read the body language and you can have all those conversations.
0:14:51 And I’ve learned over the last 12 years of doing this to raise my voice at the right time,
0:14:56 to use the right intonation. If I’m on video, I overexpress with my eyes and my face and things
0:15:00 of that nature because you’re trying to send signals. And then I guess the other piece is
0:15:06 really, do you have to do things to make sure that the person being interviewed is prepared for a
0:15:10 remote style interview, maybe new for a lot of people? I just talked to a couple of different
0:15:16 companies and they had literally never talked to a candidate outside their physical building
0:15:23 until just recently. And here’s just some really tactical recommendations for this. One is, I think
0:15:28 from an interview process perspective, have a singular person who owns that candidate’s interview
0:15:32 process. If it has to be handed off to multiple people, it’s going to fall apart and get worse.
0:15:38 Once you have that ownership, identify what the days will look like, how it’s going to get done,
0:15:44 try to get to the conclusion as quick as possible. I think candidate experience from, “Hey, I’m
0:15:50 interested to yes/no decision.” If that lags, it’s an indicator of poor process. One small
0:15:57 recommendation, I see that a lot of companies do one-on-one interviews with candidates. And over
0:16:04 my career, I’ve really disliked one-on-one interviews except for executives. And I’ve
0:16:09 recommended that you at least go in two-to-one with candidates in interviews. And the reason why
0:16:14 is that if you look at interview processes, it’s about context sharing your experience with the
0:16:18 candidate with others. And this weird mechanism happens where you’re trying to say, “I liked
0:16:23 them. I did not like them for these reasons.” But you can’t corroborate any of that with somebody
0:16:28 else. I’ve always found that when you have at least two people from the same company interviewing
0:16:32 a candidate, it can go back and forth. It changes the interview process entirely and you get much
0:16:36 better results. Let’s also not forget the last most important part of interviewing, which is
0:16:40 references, which obviously can happen in a remote environment and often do. Maybe with the
0:16:43 exception of engineers where you really want to make sure that they can code and write code,
0:16:48 I think references are as important and oftentimes more important than even the interviewing.
0:16:51 There’s a lot of people that are great at interviewing that are just not great at doing
0:16:55 work and working with. And there’s actually a lot of people that are bad at interviewing that are
0:16:59 great to work with and do great work. And so references are often the way that you cut through
0:17:03 that and find out the truth. It’s less important for individual contributors,
0:17:08 but for people that are going to manage other people, the references have to be glowing.
0:17:12 I do like to give projects to people, very lightweight ones, but the project is not to critique
0:17:18 the style or code necessarily. It’s really to get to the way that they’re thinking, particularly
0:17:24 when it comes to senior folks. However, I still think it’s more about interviewing and we’re just
0:17:30 not that great at the ability to identify good talent. When you’re hiring engineers, I tend to
0:17:34 ask them to break down problems. I ask them to see if they can help me work through why they
0:17:41 made decisions. I like to see how much ownership they’ve taken on projects. And I don’t mean ownership
0:17:47 that they were given and then ran with ownership that they’ve more seen inherently implicitly and
0:17:52 then made explicit via their actions. We’re in the midst of a crisis that nobody who is currently
0:17:56 living has really ever experienced before. It’s both acute from a health standpoint.
0:18:01 It’s a massive shift for people economically and creates a lot of uncertainty. It may be a
0:18:05 lot of shifts for people in terms of the viability of the company that they work for or the changes
0:18:09 that a company might work for to survive. And it’s very hard to know what people’s personal
0:18:15 situations are. I got an email actually yesterday that there’s two executives and both of their
0:18:21 spouses actually work in emergency rooms. And I can’t really even imagine what it’s like in that
0:18:26 household where they have kids at home and their spouses on the front lines in the emergency rooms.
0:18:30 And so I think in this moment in time, you just have to give people a lot more latitude, a lot
0:18:35 more leniency, a lot more flexibility. If they’re new to the organization, you have to give them
0:18:39 forward credit for what you expect out of them when things are normal. And if they’ve been with you
0:18:44 for a long time, you certainly owe them the latitude and ability to be flexible and different
0:18:49 people cope in different ways. And I just think that managers and leaders who have been in a mode
0:18:53 of we got to grow or we got to hit our deadlines, we got to hit our numbers, all that stuff is on
0:18:57 pause right now. This is a good moment for lots of people to figure out, are they spending their
0:19:02 time on the right things? You’ve had this really, really focused growth mindset. You’ve been focused
0:19:07 on growth that is the only priority. And you can use this moment in time to say, is our product
0:19:12 roadmap the right product roadmap? If we know that the top line may not grow the way we had
0:19:16 expected it to, would we change our product priorities? Would we build something more exciting
0:19:21 or interesting or different? So just really pause and think about what are the priorities
0:19:25 for me while my day job is investor and meeting with startups and companies. And I’m doing a lot
0:19:29 of that because we’re open for business and we’re investing. I’ve spent a lot more time as both a
0:19:34 career counselor to friends, a lot more people reaching out, trying to figure out how do they
0:19:38 lead their teams. Yeah, this is not business as usual. We are not living in business as usual
0:19:43 times. As the venture community talks about, Hey, think about this time period over the next
0:19:50 whatever it is, year 18 months or 24 months. And what’s the scenario look like if your ARR
0:19:57 drops by a third or two thirds or whatever and start modeling those? Well, right now in unprecedented
0:20:02 times, I say the same thing about productivity. What does it look like when you’re at two thirds
0:20:08 productivity or 50% or then a one third of what you expected and start planning for some of those
0:20:16 scenarios? You know, the way that I’ve approached this at work is to say, one, take care of yourself.
0:20:23 Two, let’s talk openly about what’s possible and what’s not possible right now. And three,
0:20:27 understand why the work would or wouldn’t be important in the context of everything else
0:20:33 that’s happening. And I personally have a career and philosophical principle about what I do is
0:20:38 I try to run to the point of highest leverage. And I’m in a very interesting privileged position
0:20:43 at GitHub is that I run the office of the CTO. It’s a small staff at this point. And we’ve entirely
0:20:47 focused on COVID efforts. We’ve got some data scientists, we’ve got engineers, and they’ve kind
0:20:50 of said, you know, what right now is pause on some of the more exploratory work that we’re doing,
0:20:58 we want to go lend some effort and hands over to these in a personal story. But in 2009, my wife,
0:21:04 she’s a GP, a doctor, and she was at Mayo Clinic, and she got sick. We think it was H1N1 with
0:21:10 pneumonia, and she was intubated in the ICU for six days and in the hospital for 10. And here we
0:21:15 are, we’re finding ourselves in an epidemic that looks a lot like what she got. And we were young
0:21:20 and we had one kid and we realized that our life had been an autopilot for a little while. We didn’t
0:21:25 like it. And it caused us to have that moment where we reflected and said, are we actually doing
0:21:32 what we want to be doing? And we changed our life a little bit, we went to Australia. And I would
0:21:38 encourage everyone to use these moments to personally reflect on if your life is on autopilot.
0:21:39 Thanks, Jason. Thank you.