Here's Why Health
Insurance Is So Weird: A clever analogy explains it, here it is:
Let's look at a
simple property insurance example. Imagine a state where 50% of homes are
located on the ocean and 50% are not. The oceanfront homes have a 10% chance of
storm damage in a given year and the other homes have a 1% chance. Storm damage
always results in a loss of $50,000 and the insurer has a profit margin of 10%.
By my calculations,
oceanfront homeowners in this state will pay property insurance premiums of
$5,500 and non-oceanfront homeowners will pay $550.
This insurance market
will, in any given year, transfer money to the homeowners hit by storms from
the homeowners who escape storms. But it will not, in the long run, transfer
wealth from low-risk homeowners to high-risk homeowners. Over time, homeowners
on the ocean can be expected to pay 91% of all premiums and make 91% of all
claims.
Health insurance does
not work like this. A variety of subsidies, regulations and norms conspire to
ensure that people with high expected health costs — the equivalent of the
oceanfront homeowners — pay premiums that are less than their expected claims.
Their claims costs are cross subsidized by healthy people — the equivalent of
inland homeowners — who pay far more in premiums than they can be expected to
make in claims.
The financial-media
rollup strategy:
legacy financial press such as FT, WSJ, Bloomberg, and Reuters had substantial
subscription revenues that they cannot afford to endanger, so if an aggressive
digital financial media comes along and rolls up the likes of TheStreet.com,
Business Insider, Seeking Alpha, etc, what would the landscape become? Felix
argues for an interesting case… Source: http://blogs.reuters.com/felix-salmon/2013/11/15/the-financial-media-rollup-strategy/
Andy Kessler: Private
Startups, Where Investor Dollars Often Go to Die: “…just because you
can invest doesn't mean you should. The crowdfunding rule is now out for public
comment. Here's mine: Once you're allowed to invest in private startups, my
advice is: don't. Success is much harder than you might think.” The field is crowded
as it is, returns are rare, and those that have the most potential probably
don’t need your money. The true caveat emptor there is…Source: http://online.wsj.com/news/articles/SB10001424052702303914304579193991643871688
The rise and fall and
rise and fall of Crocs: We heard about the reports on privatization. Crocs had
ran into trouble in 2009 due to inventory problems and sent the stock into a
tailspin, but it managed to come back with marked profitability. In the past
few quarters, it ran into trouble again missing revenue and profitability
guidance. In essence, it's a case of expanding too fast in an endless quest for
new growth to satisfy investors — which was part of the problem the first time
around…Source: http://www.washingtonpost.com/blogs/wonkblog/wp/2013/11/15/the-rise-and-fall-and-rise-and-fall-of-crocs/
The Outsiders, a book I read this weekend: What makes a
successful CEO? For an industry not ripe for rapid disruption with possibility
to build long-lasting competitive advantages, the book hints at that it is not
all about industry expertise: It is a good primer on companies that are run by
owner-operators, or by people who think like them, where the top management
focuses on intelligently allocating capital to its highest use (which,
oftentimes when the company's stock remains stubbornly low compared to its
estimated intrinsic value, makes buybacks in the public market the most
intelligent option versus low margin growth) consistently outperform their
peers and their benchmarks on a financial basis. Good touch of illumination an excellent
history on some companies that performed…Source: http://www.amazon.com/Outsiders-William-N-Thorndike/dp/1422162672/ref=sr_1_4?s=books&ie=UTF8&qid=1384743363&sr=1-4&keywords=Outsiders
And the epic Volvo Truck commercial: http://www.youtube.com/watch?v=M7FIvfx5J10#t=60
No comments:
Post a Comment