Speaker 1: This is Bloomberg Business Week with Carol Messer and Jason
Speaker 1: Kelly on Bloomberg Radio. So I'm still looking forward to
Speaker 1: Jason is too to our next conversation. Our next guest
Speaker 1: is a doctor hedge fund manager looking for answers to
Speaker 1: aging along with really promoting the greater good. Dr Junior
Speaker 1: and as president of Palo Alto Investors, based of course
Speaker 1: in Palo Alto, California, but he made his way to
Speaker 1: our Bloomberg Interactive Broker's studio here in New York. Welcome,
Speaker 1: Thank you for having me. We have been looking forward
Speaker 1: to having you on with us. Talk to us though,
Speaker 1: a little bit about your your world and your approach.
Speaker 1: And you're investing because you are looking I feel like
Speaker 1: to make things better in this world in a couple
Speaker 1: of different ways. Tell us a bit about Palo Alto
Speaker 1: Investors though. Yeah, we've been our thirty years and we
Speaker 1: invest in things that improved the lives of people, and
Speaker 1: healthcare is a great way to improve their lives. Now,
Speaker 1: all that said, we've been extending life without actually addressing aging.
Speaker 1: So the product of healthcare ultimately is old people that
Speaker 1: need more healthcare. So that's actually the vicious cycle. Um,
Speaker 1: So as amazing as the healthcare industry is and all
Speaker 1: the people that work in and uh at the tratructor
Speaker 1: we're on, it's just gonna self inflate, get bigger and
Speaker 1: bigger as populashing gets older, and then eventually is going
Speaker 1: to consume the whole economy. So as amazing as it is,
Speaker 1: I think we need something completely different. In fifteen years,
Speaker 1: the average healthcare costs of an American, I take care
Speaker 1: of an American, it's gonna equal the average salary. So
Speaker 1: it's gonna be game over fairly soon. So we need
Speaker 1: to radically shift our approach. So how about keeping people
Speaker 1: healthy uh and really work on the underlying causes of
Speaker 1: aging rather than treating the symptoms of aging. So treating
Speaker 1: things like uh, diabetes and hypertension and obesity are really
Speaker 1: addressing the symptoms and not your underlying cause. Then if
Speaker 1: you can actually improve the underlying health and make sure
Speaker 1: you don't age, then you don't end up with the
Speaker 1: symptoms of aging, then you would actually not only be
Speaker 1: able to live longer potentially, but have a much healthier
Speaker 1: quality of life as well. All right, So that makes
Speaker 1: an immense amount of sense. And and I think you,
Speaker 1: as someone who is not only a medical doctor but
Speaker 1: also an investor, understand that better than we do. That
Speaker 1: the economics of the business are such that that's not
Speaker 1: how it works. Is that the problem the the economics
Speaker 1: of the system or is it more structural than that. Well,
Speaker 1: it's interesting. So I think the economics actually play a
Speaker 1: key role here because incentives aren't there to look at
Speaker 1: that problem, the deeper problem, and so therefore it's just
Speaker 1: been hiding in plane side. It's just been lagging. Um.
Speaker 1: So I do think that people are becoming aware of
Speaker 1: just how important opportunity aging is as a scientific field,
Speaker 1: and also it's an investment investable opportunity. Where does traditional
Speaker 1: health care they'll play into this, like pharmaceutical companies and
Speaker 1: insurance companies. Are they the ones holding us back from
Speaker 1: really changing the model? No, it's actually us. So we
Speaker 1: just forgot to really do inclusive stakeholding. If you actually
Speaker 1: think about all the stakeholders in the system, um, then
Speaker 1: you would actually everything differently, including the science itself. But
Speaker 1: we've been doing narrow stakeholding, and so we've really missed
Speaker 1: the opportunity to think about the problem. Right now, everybody
Speaker 1: benefits a little bit from the system, except when you
Speaker 1: look at the long haul, the future version of ourselves,
Speaker 1: our bodies and the system is much worse off. So
Speaker 1: we've gotta we gotta internalize that externality so we don't
Speaker 1: pollute the world with old sick people. We actually need
Speaker 1: healthier population. And I think this is really really straightforward
Speaker 1: to do in terms of systems perspective. So how do
Speaker 1: we get there? So yeah, I'm trying to understand, right,
Speaker 1: So what does that mean in terms of our approach
Speaker 1: to how we do things? Um? Well, so actually I'll
Speaker 1: talk about the biology first and then how do we
Speaker 1: how do we get how do you do this in
Speaker 1: other systems because the healthcare and institutions were terrified of them.
Speaker 1: I mean, it's an amazing system, but people are not
Speaker 1: happy with health care. So really we have to redefine health. Um,
Speaker 1: the way you and I think about health. Um, there's
Speaker 1: like this vague definition. But biologically, I come from a
Speaker 1: medical background and study and your biology in college, and
Speaker 1: I think about health as homeostetic capacity and not homeostasis
Speaker 1: is when word change. But for the audience, they can
Speaker 1: think about as a weebo wobble. You're young when you
Speaker 1: push it. Everything self centers, and after forty, your weebel
Speaker 1: doesn't self set anymore. So all of a sudden, you
Speaker 1: can't do the things you used to be able to do,
Speaker 1: Like you can't ride a roller coaster because now when
Speaker 1: you come out of it, you don't recalibrate your kind
Speaker 1: of wobboys, I don't want to do it anymore. I
Speaker 1: am well aware of this phenomenon. Thank you for pointing
Speaker 1: it out, Like it didn't face you when you're younger
Speaker 1: forty it's gonna change. It's like, it's not gonna change
Speaker 1: for me, And then it did. Right. There's so many
Speaker 1: things we start to feel at forty then we never
Speaker 1: felt before, such as when you're young, you don't feel
Speaker 1: cold cold at fifty. My kids are running on a
Speaker 1: T shirt at fifty, I got two layers on. Yeah,
Speaker 1: when it's eighty, I'm sweating and I can't stand it.
Speaker 1: They're like totally fine. Um, So what's really happening is, um,
Speaker 1: we're not able to tolerate the dynamic range anymore, the
Speaker 1: variance anymore. Um, Like everybody wants to be saving to
Speaker 1: use all the time. When you go to California, your
Speaker 1: blood is not thin it. You're losing home. Instead of capacity,
Speaker 1: you're weels getting weaker. Same with late night jet lag, hangover.
Speaker 1: Everything's longer to recover after forty broken bone cuts, everything's longer.
Speaker 1: So you weebel doesn't self centered. Now I want to
Speaker 1: go to a restaurant, my pupils don't open up enough,
Speaker 1: so it's too dark. When I go outside, it doesn't
Speaker 1: close enough, it's too bright. It's all homeostidic capacity um
Speaker 1: altitude at eight thousand feet, I'm huffing and puffing. My
Speaker 1: kids are sprinting around there, like Dad, why can't you
Speaker 1: keep up with us? It's because my ability, my weebel
Speaker 1: bobble doesn't self So how do we are we just
Speaker 1: gonna have to deal with that? Or how do we
Speaker 1: better deal with that? Yeah, this is the I think
Speaker 1: one of the great paradox of the twentieth century. I
Speaker 1: think we swung and missed the twentieth century by the way.
Speaker 1: I shouldn't mention things like that. There's things that you
Speaker 1: can't feel that wobble when you're young, that always self centered,
Speaker 1: like your blood sugar and blood pressure always self center.
Speaker 1: After forty it stays high in some of us and
Speaker 1: we call it diabetes and hypertension. Inflammation is a good
Speaker 1: thing when it's self centers. If it stays lag, that's
Speaker 1: why it's dangerous. Right. So instead of about thinking about
Speaker 1: all these things that separate diseases, I'm a kind of
Speaker 1: a lumper. I think it's all one disease. It's impossible
Speaker 1: thousand different things are going wrong. One thing's going wrong,
Speaker 1: your weeble doesn't self center. And then the way we
Speaker 1: treat it, I think it's been uh seductive, but I
Speaker 1: think it's been exactly wrong. So the best way to
Speaker 1: lower blood pressure is not to take a blood presure
Speaker 1: lowering medicine. You know what it is, exercise exercise, and
Speaker 1: when you're exercise, you're ray in your boot pressure. So
Speaker 1: when you reach when you take a blood persure lowering medicine,
Speaker 1: it's like propping up chouldren. They get weaker. So every
Speaker 1: drug in the market were now causes atrophy of your
Speaker 1: innate system. So you need more drugs. This is the
Speaker 1: self fulfilling prophecy, more drugs. But this we have to
Speaker 1: take a break and we'll come back and talk more.
Speaker 1: But that gets to my point. That is part of
Speaker 1: the problem. Like the pharmaceutical industry. Right, the system is
Speaker 1: exactly right. We're gonna talk about this systems shortly, so
Speaker 1: we need to change it incentives. So what our family
Speaker 1: did was we actually need to focus on homeostetic capacity
Speaker 1: and studying the body dynamically. All of your book, all
Speaker 1: of your annual I'm sorry, so all of your tests
Speaker 1: we should be testing, not your blood presure, heartwrey, glucose cholesterol.
Speaker 1: We should be testing your HeartWare recovery, blood person recovery
Speaker 1: from exercise, glu close recovery. So everything should be four dimensional.
Speaker 1: Everything should be dynamic diagnostics intead of static dyno. Al Right,
Speaker 1: hold that thought. We're gonna come right back. We're talking
Speaker 1: to Dr June. You and he's president of Palo Alto Investors.
Speaker 1: We are still visiting with Dr June. You know, he's
Speaker 1: the president of Palo Alto Investors. He's based out in
Speaker 1: Palo Alto. So going to take this sort of quick
Speaker 1: a bit that we have here to ask you about
Speaker 1: sort of the mood and the tenor of Silicon Valley.
Speaker 1: Right now, you've been there for a long time, you've
Speaker 1: sort of seen it grow into what it is. How
Speaker 1: are people feeling right? Now, especially as big tech comes out,
Speaker 1: are a little more fire sure, and overall it's the
Speaker 1: rising sun mentality and Silka Valley there's a can do attitude. Yes,
Speaker 1: there's always challenges and everybody's always thinking about how do
Speaker 1: we make it better. So it's a little bit different
Speaker 1: than where I grew up in the East Coast, I mean,
Speaker 1: which is more um, you know, a little more pessimistic.
Speaker 1: All that said, there is a challenge out there about
Speaker 1: how to really address the issues that are emerging. And
Speaker 1: this is where I think we have an enormous opportunity
Speaker 1: to Silken Boy. His major constribution to the world was
Speaker 1: skin in the game, giving labor at a time when
Speaker 1: capital have had not included labor a hundred years ago.
Speaker 1: So skives them of capitalism and socialism. Uh, And we
Speaker 1: have that discussion today too, right, But the inclusion of
Speaker 1: labor changed everything because now you're on the same page
Speaker 1: Skin in the Game what. But what do you think
Speaker 1: about big tech in the future. Certainly in terms of
Speaker 1: the privacy concerns, I feel like certainly regulators on both
Speaker 1: sides of the AIS, I'll agree that maybe something needs
Speaker 1: to be done. I feel like those things are all
Speaker 1: symptoms kind of like the news going on today when
Speaker 1: you don't have inclusive stakeholding, if you don't include all
Speaker 1: the stakeholders and you inavertently actually exclude them, and that's
Speaker 1: that's when the suffering starts. So to me, internalizing those externalities, essentially,
Speaker 1: all those issues are pollutions of a system that doesn't
Speaker 1: include stakeholders. So while still confided that a great job
Speaker 1: included labor, we're not doing a good enough job including environment,
Speaker 1: including consumers. Imagine now tokenizing everything making them a stakeholder.
Speaker 1: So we're not We're thinking about them much more like
Speaker 1: the way parents think about kids. Will that change that?
Speaker 1: Will that change totally double? We have an algorithm now, no, no, no,
Speaker 1: But do you think Big tex is going to be
Speaker 1: forced to think a little bit more about that? I
Speaker 1: think they're gonna do it on their own, because everybody
Speaker 1: guess that we're in the global village where this closer
Speaker 1: great society, and I think we just internalize all the
Speaker 1: stakeholders were neglected. I think we have a path forward.
Speaker 1: All right, stick with us. We're going to continue this
Speaker 1: conversation in just a minute. Dr Jr, President of Palo
Speaker 1: Alto Investors, here with us in New York City. You're
Speaker 1: listening to Bloombergs this week. Jason Kelly, Carol Lasts are
Speaker 1: here on a Friday afternoon after a very busy week.
Speaker 1: A good conversation ahead. This is Bloomberg Continue our conversation
Speaker 1: with Dr Jr. President of Palo Alto Investors. We had
Speaker 1: such a fascinating conversation a few minutes ago about sort
Speaker 1: of the biology aspect of this. I want to broaden
Speaker 1: it into this notion that you have around inclusive stakeholding,
Speaker 1: because those are words that you hear, they're a little intimidating,
Speaker 1: and yet what you really have is a vision of
Speaker 1: the future that is quite holistic in all senses. Tell
Speaker 1: us about it's it's it's no fun to live a
Speaker 1: long life and healthy life if the plant is like
Speaker 1: in the decay. Right. So we want to now expand
Speaker 1: the same concept of not treating those symptoms, but treating
Speaker 1: the underlying cause of the things that were terrified. We're
Speaker 1: terrified of all of the institutions right now. Why is that?
Speaker 1: So we have the simplest explanation for what's happened of
Speaker 1: the last time thousand years. So I come from an
Speaker 1: old kin tribe, and once upon a time all of
Speaker 1: us lived in kin tribes, and in a kin tribe,
Speaker 1: the incentive of such that you had kins skin in
Speaker 1: the game, and everybody in your community. You stop genetically
Speaker 1: in your kids, in your grandkids, twenty partent cousins, and
Speaker 1: so it was like it was like a startup and
Speaker 1: you acted, You act on quenty where you have invested interests.
Speaker 1: That worked for a million years until about ten thousand
Speaker 1: years ago, after the diaspora, we remeden global tribes. Uh
Speaker 1: and in a global tribe with no kids skin in
Speaker 1: the game, people focus not on you. They focused on
Speaker 1: themselves as the first priority. So now again there you
Speaker 1: replace kinships with kingships. So stewards of a village were
Speaker 1: replaced by leaders of tyranny. So every mixed society went
Speaker 1: to a tyranny. So by your ten thousand BC, you
Speaker 1: had you know, king tup building pyramid schemes from sous.
Speaker 1: Finally Plato comes out and says, we have a format
Speaker 1: problem here, let's do the republic, let's vote these bombs out. Unfortunately,
Speaker 1: he didn't anticipate that republic leaders would also self deal,
Speaker 1: and so you had corruption, and by year zero all
Speaker 1: the Republican collapse in the nearest right. Um so it
Speaker 1: took about fifte years. You're in the dark ages, you've
Speaker 1: got tyranny of um uh, you know, all sorts of institutions,
Speaker 1: vassal states, feudalism. And then fifteen fifteen hundred we finally
Speaker 1: updated the algorithm, which is a biologic algorithm called Hamilton's rule,
Speaker 1: which is skin of the game with the social algorithm
Speaker 1: called the joint stock company. You can now finally give
Speaker 1: others a steak. But we didn't include labor, which led
Speaker 1: to split of capitalism and socialism. Sods capital was written
Speaker 1: and Mark's thought it was a capital as this you
Speaker 1: know inherent problem right now social things that capitalism um,
Speaker 1: you know is doesn't serve the broad public. Capitalist sying
Speaker 1: social doesn't serve the broad public. In reality, they both
Speaker 1: struggle because of exclusive stakeholding, whereas if you do inclusive stakeholding,
Speaker 1: you internalize the stakeholders, then they would both work. Now
Speaker 1: we also didn't include third world so imperialism and colonialism
Speaker 1: they're all epiphenomen the same thing. Exclusive stakeholding of third
Speaker 1: world and labor, so they let the labor unions now
Speaker 1: silicon values. Major contribution in the world is um, they
Speaker 1: actually included labor. So once you include labor, everybody is
Speaker 1: a stockholder, your co owners again, just like you were
Speaker 1: in the village. So all of a sudden, they self inflated.
Speaker 1: They created unbelievable things because they're all online that go congruous,
Speaker 1: incentives are aligned. The only issue is they didn't include
Speaker 1: users enough as a stakeholder. So now they're creating call
Speaker 1: before Congress. Well, and I want to pick up on
Speaker 1: that because that's such an important point. If you think
Speaker 1: about the Silicon Valley of forty fifty years ago, there
Speaker 1: was this sense that they are creating something for the user,
Speaker 1: and now when we think about Valley, there is a
Speaker 1: sense that the data is the is where the value is. Yeah, exactly,
Speaker 1: So everything kind of becomes a commodified version of itself.
Speaker 1: Like in a kin tribe, you tell the story because
Speaker 1: you want to serve the public, and the post contribe
Speaker 1: you tell the story to promote yourself. So all the
Speaker 1: stories that emerged after the kintribe era are the fake versions.
Speaker 1: They're the ones that are most sellable, but they're not
Speaker 1: actually true. So for instance, UM, in a kin tribe,
Speaker 1: your mom has your best interests in arts. So all
Speaker 1: the food she was giving you was for you. Now
Speaker 1: in the modern era, all the food is to maximize
Speaker 1: profits right of somebody else. Same with information, you just
Speaker 1: be for you and now it's about them. So now
Speaker 1: that the end, you have the race at the bottom.
Speaker 1: If you have one food company put in less sugar,
Speaker 1: another stuff puts in more. If get one media company
Speaker 1: put in less, clicking on another puts in more, so
Speaker 1: you always end up with high fuxiness corn syrup. You
Speaker 1: always end up the Cardassians. You can rerun the simulation
Speaker 1: of civilization. You always have the worst at the bottom
Speaker 1: because that's the race to the bottom line. And then
Speaker 1: what surfaces the power And then we feel like, oh
Speaker 1: my god, we're like we're at the We're kneeling before
Speaker 1: the powerful institutions all over the place, social economic, political ones. So, um,
Speaker 1: I think it's really getting the story right. Um, so
Speaker 1: this helps explain the equality gaps completely, right. Equality inequality
Speaker 1: is an emergent property of the power, right, So the
Speaker 1: way to solve that is to to internalize the stakeholders,
Speaker 1: and the stakeholder could be a sigling one like the environment.
Speaker 1: So if you're a company that doesn't include university stock stockholder,
Speaker 1: then you will probably extract from to and pollute them.
Speaker 1: Um same with like intertemporo imperalism. Roosevelt didn't sufficiently include
Speaker 1: future children as a stakeholder, so again that basically borrowed
Speaker 1: from the future and then leaving them debt. And you know,
Speaker 1: again they just didn't think it through. And that's why
Speaker 1: you have to include all these stakeholders. Be really mindful
Speaker 1: so we don't keep having these whackamore revolutions, just like
Speaker 1: what health care. So that's the solution, because we only
Speaker 1: have about a minute or so. So we have a
Speaker 1: grand challenge on inclusive stakeholding, and we want you to
Speaker 1: tell us how to rewire incentives to create a much
Speaker 1: better future for everyone. So we're proposing we give some ideas.
Speaker 1: Instead of universal basic income, which is a payoff from
Speaker 1: the system that has already caused inequality. We got to
Speaker 1: solve the inequality, and the way to do it is
Speaker 1: universal basic stakeholding. Give everybody stock in the country rather
Speaker 1: than a payout, so it doesn't feel like an extract.
Speaker 1: Do you give everybody stock in the kind of you
Speaker 1: can tokenize it like on blockchain. So just the same
Speaker 1: thing as like, how do you give stock in a
Speaker 1: company just assigned? The mistake? Right, just that I see
Speaker 1: you and here's a stake for you to the same
Speaker 1: thing with health insurance instead of getting paid on a
Speaker 1: one year tinder contract which is fee for service, and
Speaker 1: then they put your on drug and your one year
Speaker 1: older and sicker, and then you're somebody else's problem and
Speaker 1: at six five year the public's problem. That's just you know,
Speaker 1: they're just kicking the can down the road. How about
Speaker 1: you being paid as an insurance company as a one
Speaker 1: in twenty like a hedge fund, get paid a little
Speaker 1: bit of management feel front, and then you get paid
Speaker 1: as a percentage of health savings ten years on the road.
Speaker 1: So as an insurer, now I'm an investor in your health.
Speaker 1: I'll do preventative health and I benef I win as
Speaker 1: you win motif. That's very interesting. All right, You're gonna
Speaker 1: have to come back and see us, uh and let
Speaker 1: us know how this is going. There's a book. Where
Speaker 1: do we find the book? Inclusive stakeholder? You can just
Speaker 1: go go on Amazon, uh, and everything we just talked about,
Speaker 1: it's just a prologue. That's just a prologue, everything else,
Speaker 1: all the other chapters about what you can do from now?
Speaker 1: All right, very very good, really interesting. Dr June, you
Speaker 1: know what a great Friday conversation President of Pelo alto
Speaker 1: investors his idea about inclusive stakeholding. It's radical, but doable.