Look carefully.  Then think about this statement about US job creation:

The only firms that create jobs on average are brand new ones.

So yes, you can save the world with startups.

Related posts:

1. Saving the World with Startups
2. Robin Hood Foreclosure Fund, part II

“We are in the lazy habit of thinking that the flow of the currency in a transaction is the one that matters instead of the actual flow of goods, services, resources, knowledge or participation which flows COUNTER to an exchange currency.

Those real-world currents shaped and enabled by currencies are what make them so valuable and powerful.

The currency itself is actually just a flow of information. But there are two reasons we myopically focus our attention on the currency flow as if it is the one that matters:

1) We are big-brained, symbol-using creatures, and it’s much simpler to us to deal with those nice clean symbols than the actual sloppy flows — dollars are easier to account for than time, random quantities of random things and other stuff which is difficult to count (such as the state of relationships), and

2) The REAL flow is an event which happens in a moment and is gone. If you were NOT there to witness the service being performed, the good being exchanged, or the participation of that person, then once that moment has passed, the only consistent way we have of knowing what occurred is the record we keep of the event. We use currencies to keep records of currents.

I believe this is the single MOST CRITICAL CONCEPT for currency practitioners to grasp. It allows us to break out of bad habits of thinking about currencies in very outdated ways (such as believing they have or should have intrinsic value because precious metals were once used as coins). This allows us to see currencies for what they truly are: formal systems which shape, enable and measure currents which allow communities to interact with those currents.

Of course, the story itself has passed. All we have left are the tracks. But the tracks can tell quite a lot to the right set of eyes: what types of animals were involved, how long ago it happened, which direction the bird flew off, etc. This is the role that currencies play in our economy. Actual currents of resources and relationships occurred and currencies are the tracks they left behind. The tracks are very informative to the right eyes, so we use them to make business and policy decisions.”

Source:  http://newcurrencyfrontiers.com/wagn/Introduction_to_Currencies

The centralized currency of our governments is undergoing a crisis.  But that’s simply evidence that the short-sighted hierarchical system of power in our politics and positively reinforcing system of capitalism have become obsolete in light of our electronic technologies.  Recommendation and trust network systems unbiased by the speed of light and low cost of competition are exposing the idiocy of godlike decision makers.  Do you really think the emperor cannot be naked in this Day and Age?

The point is NOT that these new systems of aggregative expertise and opinion are and will continue to be “better”.  Rather we are on the frontier of extracting patterns from behaviors we haven’t been able to capture before, due to the inferior biological, mechanical, and electronic technologies of the past.  The new systems will also become obsolete, and definitely at a faster rate.  But do you think we have a say?  Unless you think we can slow down or stop the pace of quantification of behavior when everything is becoming electronic?

What do you think about the last slide – Wealth a Living Systems Model?  OR do you want to wait a few months or years until “60 Minutes” tells you what to think?  That IS the question. Find sources of expertise YOU TRUST and trust yourself to move on when YOU judge them to be obsolete.

That’s precisely what MLK meant by this:
“Power properly understood is nothing but the ability to achieve purpose. It is the strength required to bring about social, political and economic change. … What is needed is a realization that power without love is reckless and abusive, and love without power is sentimental and anemic. Power at its best is love implementing the demands of justice, and justice at its best is power correcting everything that stands against love.”

Now don’t make me quote Eminem or Buddha. :)  Once you really understand that this means that the power is within you, you will be able to kill goats with a stare.

Related posts:

1. Towards an Economy of Abundance
2. Another Must Read on the Origins of the Crisis
3. Financial Crisis Act III: The Flailing Response

You may recall that Saving the World with Startups explained the “why” of RSCM. Our goal is to increase the number of technology startups. In some sense, this post describes the “how”. Well, at least part of it. One of the biggest barriers to getting a company off the ground is finding working capital. Ergo, we need to figure out how to facilitate investments in startups. More precisely, we need to promote seed-stage investments because those are what help founders initially launch their companies.

The ideal solution would be an investment vehicle that can turn huge chunks of money into digestible seed-stage bites with a return that induces plenty of investors to participate. But here are some slightly scary statistics. 50% of all seed-stage startups fail and returns come disproportionately from the top 10%. As all you poker players in the audience will note, you’re making big bets with high variance. The natural question is, “How many bets should you place?”

To answer this question, I’ve built several generations of seed-stage investing simulations for RSCM. My models are rather complicated because we wanted to evaluate a bunch of secondary questions such as whether it’s better to do follow on investments, what happens if the balance between seed and Series A valuations changes, and what happens in cases where a startup does poorly initially but then takes off.  Therefore, I actually had to model the startup lifecycle round by round and the mechanics became very complex. (If you’re not a quant, you can stop reading now.  Things are going to get real geeky real fast).

However, a simplified single-round version of my model will illustrate the missing pieces of Jeff’s model. The first is what diversification means. He focuses on the risk of total loss and the chances of not getting at least one “hit”. In my opinion, the question you really want to ask is what the probability is that you’ll under-perform the market by more than a given amount. For example, what’s the probability that you’ll under-perform by more than 25%?  The logic here is that you invest in an asset class because of the overall return of that asset class, so you want to know the chances that you’ll realize returns in that ballpark.

The second key oversimplification is that Jeff uses a discrete probability distribution of returns. If you’ve read Taleb’s The Black Swan, you know this is a mistake because at least some seed-stage outcomes probably follow a Pareto distribution. The key characteristic of this distribution is that regions of extreme outcomes are self similar.  So not only do the top 10% of companies represent a disproportionate share of the returns, the top 10% of the top 10% represent a disproportionate share of those returns.  And so on.  And so on.  20 investments may be enough to get you a fair share of the top 10%, but not enough to get you a fair share of the top 1%.

So here’s my simplified model, which roughly follows Jeff’s qualitative taxonomy:

• 50% failures: the company utterly fails. The investor gets 0 money returned.
• 20% break even: the company achieves some limited success and the money returned follows a lognormal distribution with a minimum of 0, a, mean of 1, and a standard deviation of 1.  So an average outcome is 1.0x and 1 standard deviation above is 2.0x.
• 20% decent: the company achieves substantial success and the money returned follows a lognormal distribution with a minimum of 2, a mean of 4, and a standard deviation of 4. So the minimum outcome is 2x, the mean outcome is 4x, and 1 standard deviation above is 8x.
• 10% homeruns: the company achieves massive success and the money returned follows a Pareto distribution with a location of 10 and an index of 1.5. So the minimum outcome is 10x and the mean outcome is 30x.

Now, we can compute the expected value of an investment as .50*0 + .2*1 + .2*4 + .1 *30 = 4.0.  The data I’ve seen puts the average hold time for successful angel investments at 6 years, so this would imply an IRR of about 26%. This is in line with the available research on angel returns (RSCM has a summary of this research here).

I ran a simulation with these parameters using Oracle’s Crystal Ball, producing an overall return distribution for a run of 100K trials. Here’s the excess distribution plot (the probability that the money returned will exceed a given multiple), truncated at 50x for some semblance of readability:

The return across the entire simulation was 4.05x (very close to the analytically expected return of 4.0x).  The maximum return was 8,361x (think Andy Bechtolsheim’s $100K investment in Google which was eventually worth about $1B).  The top 10% accounted for 77% of the total return.  The top 1% accounted for 35%.  The top .1% accounted for 17%. We can already see that a portfolio of 20 will be insufficient.

The source file is here. Most of you probably don’t have Crystal Ball so this will look like a pretty useless Excel file to you.  However, I set up the run to output a TXT file with the results of each trial (for some reason, WordPress thinks CSV files are a security risk but thinks TXT are OK).  It’s just a list of the 100K different returns generated by the model.  Anyone can analyze this with standard charting tools or import the data for use by his own code.

I’ve also got another Excel file with a macro that generates 10K random portfolios of a given size from the trial data (because WordPress doesn’t like macro-enabled Excel files either, you’ll have to install the macro yourself).  I’ve run it for portfolio sizes from 10 to 200 in intervals of 10. After sorting the portfolio returns at the specified size, the macro calculates the probability of hitting 75% of the market return by seeing what percentage of the portfolio returns are greater than 3.0. Here’s a chart of those probabilities:

[Edited 5/14 in response to suggestion from AN]. As you can see, 20 investments isn’t nearly enough if you’re a fund investing other people’s money.  Worse than a coin flip that you’ll hit 75% of the market return. In fact, in my simulated portfolio data, there’s about a 7% chance that you’ll lose money with a portfolio of 20 investments.  Personally, I’d say you want a fund to be in the 100 to 150 investment range.  But it’s different for individual investors putting in their own money.  I’d say you want to hit at least a 50% chance of realizing 75% of the market return, which would be 30 investments.  Now, if you think you think you have some forecasting skill and less than 50% of your seed investments will fail and/or more than 10% will be homeruns, 20 may be plenty.

Of course, if you accept the thesis that 100-150 is the right range for a fully diversified fund-like portfolio, you may now be asking yourself how making that many seed-stage investments  is logistically possible. The challenge is actually worse than that.  Due to vintage risk, you probably want to make 100-150 investments per year or at least every few years. But that’s a story for another day…

Related posts:

1. Revolutionizing Angel Funding
2. Announcing a new kind of Angel Investment Fund
3. What I'm Working On: Supercharging Innovation

I want to make the world a better place.  But it’s not clear precisely what interventions will lead to the best outcomes over the long term. I think I’m a really smart guy, but I’m quite sure I can’t evaluate all the potential interactions within a system as complex as the world society to figure out the optimal plan.

Luckily, I don’t have to be that smart. We just have to collectively be that smart. And economic markets are the best way I know to organize collective action. The more effectively we can all create value, the better off we’ll all be. Creating wealth won’t directly solve a lot of problems, but it enables the solution of an incredibly wide range of problems.

So here’s the math that leads to my conclusion that increasing the number of startups we can fund is the best thing I can do for the world. This study shows that a 5% improvement in startup creation leads to about a half a percentage point improvement in the economic growth rate. If we could increase the rate of startup creation by 10%, we could add a full percentage point to our economic growth rate.

From this dataset, I determined that the world GDP growth rate over the last 30 years has been about 4%.  So we could probably achieve a 5% growth rate by increasing startup formation by 10%.

This seemingly small shift has dramatic results over the long term. In 50 years, world GDP would be 60% (1.6x) greater.  In 100 years, GDP would be 160% (2.6x) greater.  I think a world in which everyone were 2.6x richer would be pretty sweet.  That’s a gift I want to give to my great-great grandchildren.

Seed-stage startups are the key because that’s where businesses are born. A larger pool of innovative seed stage companies will naturally attract a larger pool of investment in later stages.  About $10B every year goes to professional investments in seed-stage startups in the US. So if we can add $1B, that’s 10%.  Even better, if we develop a better process, this process can be copied all over the world.  If it’s a lot better, I bet we can do significantly exceed a 10% improvement.

That’s why I’m focusing my time on revolutionizing the process for funding seed-stage startups.

Related posts:

1. Yes, You Can Save the World with Startups
2. What I'm Working On: Supercharging Innovation
3. You Can't Pick Winners at the Seed Stage

The first task is to make the sharp distinction between the economics of scarcity and the economics of abundance.  Books could be written on the topic, but I’ll sketch what I mean and hope you get the basic idea.  All economic theories you are likely to have heard of are based on the assumption that we live in a world of scarce resources.  Commodities markets allocate those resources based on price equilibrium, but in the end the market does not actually create any new value.  The supply of oil in the world, for instance, is already set, and it’s limited.  As we approach that limit it becomes scarce, and the price (i.e. marginal value) goes up.  More fundamentally, with a limited resource, my acquisition of it precludes you (or anyone else) from simultaneously having it.  From a value perspective, it’s a zero-sum game: if I win, then you must lose.

If we assume there are resources that are not limited, but rather are abundant, then an amazing shift occurs.  Such resources cannot become scarce (by definition) and thus the price/value of those resources does not rise the more they are “consumed”.  In fact, it’s just the opposite.  The value of an abundant resource increases the more it is consumed.  This is the so-called network effect.  The very first telephone was worthless and it only became worth something when it was connected to the second telephone.  The more telephones were added to the network, the more valuable each pre-existing telephone became!

You will probably be objecting right now that there’s a limit to how many telephones can be created since the raw materials are finite.  And you will probably also note that the added value in going from two phones to three phones is smaller than going from zero to one; in other words there are diminishing returns.  Both are true statements, but miss the crucial point that if the universe is more abundant than it is scarce, then the fundamental rational economic motivator goes from competition and acquisition to cooperation and giving.  Let me explain by example.

I was scheduled to meet with Stephen recently and as the meeting time approached I realized that Kim and Jose (whom I’d been meeting with just prior) would benefit from meeting Stephen and joining the conversation Stephen and I were about to have.  I also felt that Stephen and I would benefit from the inclusion of Kim and Jose in our conversation, so I invited them along.  At the close of our four-way conversation Stephen took a book from his shelf and gave it to me as a gift.  He said that, based on our conversation, I would probably get a lot of value from it.  As I prepared to stuff the book into my backpack, I noticed Kim and Jose straining to get a glimpse of the title, and I lamented to myself that there was only one copy available when it was clear that all three of us would benefit from it if we could.  So I took a picture of the cover with my iPhone and emailed it to Kim and Jose so that they could locate a copy and enjoy the book at the same time as I did.  In doing so, I also happened to connect Kim, Jose and Stephen via email.  Prior to that they only way they could get in touch with each other was to go through me.

One great thing about information is that the cost to replicate it asymptotically approaches zero, whereas the cost to replicate physical materials approaches some value greater than zero.  Just look at what it would have cost to get a physical copy of the book for Kim and Jose vs the 30 seconds of my time that it cost to snap the photo and email it.

But more importantly, information has this other crazy aspect to it: giving away information (unlike physical objects) does not diminish its value; more often than not, giving away information increases the value of that information.  There are exceptions to this rule, of course, but on average this is true.  (At the least, this is an empirical assertion that can be falsified, and you are invited to explore whether it holds true in your experience or not).

The question that I’m trying to answer here is what would it look like for a currency to be based, not on a scarce resource, like physical materials, but on an abundant resource like information?

It’s hard for us to even conceptualize an economy of abundance because our brains evolved in a time of relative scarcity.  Furthermore our thought patterns, beliefs and models of the universe have been colored by scarcity through the lens of culture.  Science is not immune to this bias either, as I’ve suggested before on this blog.

So to help with the mind-shift necessary to explore the world of abundance, I’ll ask you to observe that the constant injection of energy from the Sun into the Earth’s biosphere eventually gets converted, at least partially, into value that drives our real-world, present-day economy.  That oil came from fossils of living organisms, grown and nurtured by the Sun.  I will leave it for another time to argue for why value-creation is pervasive in the universe, and not just a function of where you draw the system boundary (as sunshine hypothesis implies).  But suffice it to say, if you grant me that value is created by the Sun and converted into a form that drives our economy, then we can proceed.

By the sunlight hypothesis, it should follow that, on the time scales that matter to us humans, there is at least one truly abundant resource: energy from the Sun.  If you are worried about a billion years hence when sunlight runs out, then I doubt we will ever see eye to eye anyway….

It also follows from the sunlight hypothesis, and the arguments I’ve sketched above, that the information economy that is so widely talked about, truly is an economy of abundance.  And as more and more human activity is devoted to the creation, spreading and sharing of information, the more our “real” economy becomes based on abundance.

It may be true that we will never move entirely away from material needs and scarcity economics.  But regardless, as a percentage of the total real economy, we are on a trajectory that suggests that the vast majority of economic value will be backed by abundant resources rather than scarce resources.

In other words, if we were to imagine a currency of abundance, we’d also have to re-imagine what what happens when the “federal reserve” for that currency grows all by itself (or if you prefer, as the sunlight pours in).  In such a world, in order for the currency to represent the true value in the economy, we’d be forced to print new currency on an accelerating basis just to keep up.  A currency of abundance is a very different beast than the currencies of scarcity we know of today, which is to say all of them.  Instead of runaway inflation being a bad thing (as it is with currencies of scarcity), it’s actually a great thing, something to be desired, and something worth striving for.

I know that last sentence is going to lose a lot of people.  And I understand why, because it is hard for me to fathom the implications too.  It means redefining just about everything, including what it means to be human.  It begs the question of what is the true nature of “value”?

One thing I’ve gleaned about an economy of abundance is that it begins with the gift.  In particular, it replaces the basic transaction of a scarce world — I give you something if and only if you give me something in return of equal or greater value to me — with the unilateral action in which I give you something, and expect absolutely nothing in return.

There’s so much more to say here, but I will leave it at this for now.  I had choices about what information I would reveal to you when I told you the story of the book.  One of those choices was whether or not to reveal the exact identity of the individuals in the story.  Another was to reveal the name of the book that Stephen gave me.  It would have cost me a lot less to share both pieces of information than the benefit you would receive by knowing them.  That is, the act of knowledge transfer could be viewed as a gift to you that I chose not to give.  As an important aside, that very same act would have benefited Stephen, Jose and Kim as well.  And it would have benefited me.  And yet, I  didn’t.  Why not?

There’s lots more about that meeting and the events leading up to it that would benefit you and many other people to know.  Time is valuable precisely because it’s scarce.  In the end, it may be the only scarce resource we humans depend on.  I could spend all of my time giving you gifts of information and thus have no time left for myself.

Just before the meeting, Jose and I were at a bookstore and he gave me a book (not the same one as Stephen gave me though).  It was at least the fourth time he’d suggested I read it, and since I hadn’t yet (despite my stated and real desire to do so), he bought it for me right then and there.  And because I trust Jose, I bought a copy right then for each of Stephen and Kim.  Here’s the book.

Related posts:

1. The Currency Crisis Is In Your Head
2. Eliminating Political Parties
3. 3 Interesting Articles on The Economy

It’s not just the lives of individuals who eat crap (which is most of the country, frankly, even though they have no idea how toxic what they are eating is).  It’s the happiness and achievement potential of today’s youth.  It’s the emperor with no clothes at the center of the healthcare debate.  And it’s a lynchpin for economic recovery and sustainability.

Watch the premiere, and spread the word…

Related posts:

1. Two Important Links
2. Is Hunger Really a Problem in U.S.?
3. The Problem With Processed Foods

I don’t know exactly what Cameron said because I can’t find a public video archive. This Guardian account indicates that he mostly hung platitudes on the scaffolding of giving people more choice and transparency.  Choice is a big part of small government, but I thought it would be worth outlining what I think is the non-politician’s version of the libertarian small government ideology. It’s far from ivory tower.  More like back alley.

It’s based on two observations: (1) local knowledge is important to good decision making and (2) concentration of power leads to abuses. I think few  students of  political history and organizational behavior would argue against these points, so I won’t detail them here.  However, if anyone honestly thinks they are in doubt, I’d be happy to cover them in a subsequent post.

So, any time society assigns a role to government, it incurs the costs of (1) and (2).  These costs tend to increase over time and as a situation departs from the ideal future path. So the expected net present value of these costs can be substantial. Libertarians therefore conclude that  the benefits that the government brings to a role should, as a general rule, be quite large before we even consider it as an option. Notice that this does not imply no government at all. Rather, it implies we should use government sparingly.

The repeated pattern observed by libertarians goes like this. A problem arises. Everyone (even libertarians) agree that it is problem. Progressives push through a government program to address it. Initially, the program somewhat ameliorates the problem. However, the problem turns out to be trickier than first believed, so the benefits are usually not as great as expected. Over time, the problem evolves and adapts, further eroding program benefits. The government program evolves and adapts too, but more to promulgate its own survival than address the problem.

So we are left with much lower benefits than forecast and significant unforeseen costs (in the form of an everliving, mostly useless program). Libertarians conclude that in many cases the “cure” is worse than the disease.  Not that it doesn’t suck having the disease. The irony of course is that the progressives then identify the results of an old government program as a new problem that requires… another government program (cough, cough, government intervention in financial markets, cough, cough).

Of course, some illnesses are actually bad enough that the (painful) cure is better than the disease.  In those cases, bring on the government program. But let’s be realistic about the long term benefits and costs.

Related posts:

1. Financial Crisis Act I: Government Meddling
2. U.S. Government is Open for Questions
3. Switching Government Service Providers

However, I think he goes off the rails at the end where he suggests the federal government should prop up spending by state and local governments.  No.  They’re the problem, not the solution.  Fortuitously,m Bryan’s partner Arnold Kling referred just today to this Reason essay by Steven Greenhut revealing that the number of state and local workers per 100 citizens has grown from 2.3 to 6.5 since 1946.  Yes, that’s 180% growth in the fraction of people employed by state and local governments.

Recall my own analysis showing that real per capita state and local spending in California increased 38% in the last 10 years and that we would have no budget problem if we had kept real per capita spending at 1999 levels.

The problem is we have more bureaucrats riding on the backs of productive workers.  Economic innovation and growth comes from the private sector.  Much better to substitute every single dollar Reich wants to give to state and local governments for more tax breaks to private sector employers that hire people.

Related posts:

1. More on the California State Budget
2. Disgusted with the California Budget
3. Stimulus Is a Bust: I Want My Money Back

The table below shows the salient aspects of each plan.  To compare apples to apples, I had to estimate the 2010 premiums for the previous plan. I used a 9% increase over 2009, which is what a PricewaterhouseCoopers survey says will be the average for employer sponsored plans. Note that this is less than the 10.8% actual increase my company saw from 2008 to 2009 on this plan.

We see something very interesting here. The annual premium on the new plan is $9,833 less than the estimated annual premium on the old plan. Now, we all get checkups each year.  Also, my wife and son have monthly medications they take for allergies.  Adding in the copays for those yields extra $500 on the old plan, pushing us to $10,333 more guaranteed expenditures on the old plan than the new plan. Obviously, this excess is more than the new plan’s deductible.

So there’s no way I can loose on the new plan.  If we stay healthy, I get to pocket $10,333 minus the cost of routine visits and medications.  If something bad happens and someone has a major medical issue, I save at least $8,333 due to the deductible and coinsurance on the old plan. Probably much more due to co-pays for additional office visits and prescriptions, which are not limited by the out-of-pocket maximum.  I actually ran the scenarios and there’s no way I don’t save at least $5,000 per year.

Moreover, the new plan is much better at insuring against catastrophic loss.  The lifetime maximum is 2.5 times as high.  That’s a real selling point for me. I don’t want the plug pulled on my ventilator because my insurance ran out.

How can this be? Why do we even have PPO plans? You may think the tax deductibility of employer-paid premiums is the reason.  But this doesn’t explain why employees wouldn’t choose an employer-sponsored version of the high deductible plan. Those are paid with the same pre-tax dollars.  (It also doesn’t affect me because I’m technically self-employed and deduct my premiums anyway). It certainly explains why the CEO of Whole Foods is absolutely right to offer his employee’s a high deductible plus HSA plan.  It saves everyone money. The math speaks for itself.

The only explanation that makes sense is that people want to spend more on health care when it doesn’t come out of their own pockets. A combination of moral hazard and mental accounting. On the moral hazard front, they go to the doctor more often than they otherwise would because the marginal cost to them is so low. On the mental accounting front, the automatic monthly deduction from their pay is less painful than personally writing checks to pay doctors. But it’s irrational.

Perhaps some marketing wizards should figure out how to pitch high-deductible plus HSA plans in a way that the average person would find attractive.  How about an infomercial that promises to save you thousands of dollars every year with a proven system and throws in a set of handy dandy steak knives if you act now?

Related posts:

1. Quest for Insurance Part I: The Search
2. Fixing Health Care I: The Uninsured
3. Fixing Health Care III: Hospitals

I started by going to eHealthInsurance and hitting up the big three companies: Aetna, Anthem (BlueShield/BlueCross), and HealthNet. My first disappointment came when I discovered that there is no universal application. You have to type in roughly the same information in substantially different formats for each company. What value exactly is eHealthInsurance adding here?

My second disappointment came when they all rejected the applications for different reasons. There are four people in our family. One of them was rejected by two companies, two of them were rejected by one company, one of them was not rejected at all. The reasons were allergy shots, acne, possible acne, and being underweight. The first two are minor ongoing issues.  Considering we were applying for $10K deductible plans with no office visit or prescription coverage, it’s hard to see what the problem is. The second one was unconfirmed by the first doctor, totally minor, and subsequently excluded by a second doctor. The last one is the only one that should have been of any concerned and a check with that person’s doctor would have eliminated the concern.

My working hypothesis is that these companies don’t actually want to offer individual health coverage. For regulatory or political reasons, they have to appear to offer such coverage. But unless an individual is so low risk as to be obscenely profitable, why go to the effort? It’s so much easier to focus on selling group coverage to employers.  This is a side effect of the tax deductibility of premiums for most companies but not most individuals.

Luckily, there are niche providers that pursue opportunities that are not attractive to the largest players. One of them is Assurant Health. After filling out the online application at their Web site, I received a call from their underwriting department within two days. They wanted to review the medical records for the two family members receiving allergy shots to make sure these were not indicative of larger issues. No problem, we had signed a release and I had no objection to paying a premium based on actual risk.

Now, the story takes a funny turn. Apparently, HIPAA has made doctors so paranoid about penalties for breaching patient privacy, that they don’t want to give out your medical records to anyone. Despite the general release we signed, two medical clinics wanted us to sign special releases. It took a month to actually get these special releases so we could sign them. Even then, one of the clinics also required us to call them on the phone and give them verbal permission as well. Government intervention strikes again! If the government had clearly specified the mechanism for releasing medical records, there wouldn’t have been a problem. Even better, if the government hadn’t distorted the market for insurance toward employer-sponsored coverage, this transaction would be so routine that the free market would have solved the problem

The story has a happy ending.  In Part II, I will analyze the excellent coverage we got from Assurant in the context of my previous recommendations.

Related posts:

1. Quest for Insurance Part II: The Coverage
2. Fixing Health Care II: Doctor’s Visits
3. Fixing Health Care I: The Uninsured