The Business Of Medicine

There’s something unique about the business of medicine.

In a traditional business such as a burger joint, if you have more customers and sell more burgers, then the restaurant owner will make more money.

But in medicine, the more patients a clinic sees and the more patients a hospital serves, the less money they often make.

For example in my own clinic; The more patients I see, the more administrative work there is for my admin team (which I have to pay for), the more nursing tasks that will need to be carried out by my nursing team (which I will need to pay for) and the more paper work I will need to do (meaning more hours worked by me, meaning my hourly pay rate decreases). [1]

Why is the medical world so different to other industries?  

This essay is about i) money, ii) entrepreneurship and iii) entrepreneurship in medicine.  If you think about it, all three of these topics are mysterious in their own right.  But when you combine all three, things get a whole lot weirder.


There’s something really captivating about money.  If you’re ever giving a talk and hold up a £20 note, people will immediately stop doing what they’re doing and listen to you.  It’s quite mesmerising.  But why does if have this effect on people?  I think it may be a combination of respect and awe.  Not dissimilar to the way people react to a holy religious text.

There are a lot of theories about where money originated from.  The most famous myth is the one perpetuated by Adam Smith [2] who wrote the capitalist “Bible”; The Wealth of Nations.

Adam Smith argued that before humans had money, we would trade and barter.  For example if you grew potatoes and you needed some clothes, then you would have to trade your potatoes for the clothes.  Of course certain clothing items would cost more potatoes and some less potatoes.

The story goes that this form of bartering was too difficult to implement on a large-scale and that there was no robust way of keeping track of how much things would cost.  Is one potato equal to two apples?  What happens if the clothes dealer didn’t need any potatoes at the time?  Does that mean that people who grew potatoes couldn’t get clothes all of a sudden?  The obvious solution it seems was to create some form of universally accepted currency that people could trade freely for different products and services; Money.

The problem with this story is that there is absolutely no historical evidence that this is how money came into existence. [3]

Societies seemed to have functioned fine before money came into existence.  Most societies worked like this; If you were a butcher and the local clothes dealer came to pick up a chicken, you would just keep a mental note of this.  And then you would recoup the favour at some point in the future.  People would keep a mental note of who owed them what.  Sometimes, people would trade “IOUs” – if the clothes merchant gave you an IOU, you as the butcher could go to your local shoe smith and trade the IOU.  The clothes dealer now owed the shoe smith.  These IOUs were often traded locally and didn’t stray too far away.

But where did money actually come from?

The story of where money came from in England has been replicated all across the world.  It was initially created by the monarchy and the government to feed its army.  When an army was moving through the country, it needed food and water as well as a number of other essential services.  Of course if there was no money then the army would leave a path of destruction behind it and they would ravish the landscape.

So some business savvy people approached the king for a loan[4].  Could the King provide some pieces of paper with the royal families stamp?  The stamp would prove that the notes themselves were valuable and would prove that the notes represented something of real value – a fraction of the gold the king held in his possession.  The army could use these notes to trade for products and services.  The people who got some of these notes would be able to continue to trade them amongst themselves as it had the seal of the king on them, proving their worth.

The King was told that he would get more of these notes back from the peasants that traded them as “tax”.  The King could then use the tax to contract out work  to people who would work for more of these notes and even more tax would be collected.  To this day the initial amount loaned from the king has not been paid back in full.

Of course not, because if it were to be paid back then the British Pound would collapse and cease to exist.

The point of this brief overview is that money has always been a means to create a “market”, where products and services could be traded and where taxes could be paid to the King and government.

But what’s really strange is the fact that money supposedly represents something which is “inherently of value” i.e. gold.

But is gold actually of value?  It’s not particularly good at creating tools from, the only use people have for it seem to be making ornaments and jewellery.

Indeed in societies where gold was abundant, the local people didn’t really care about gold. They were confused when foreigners came to their land and showed a strange obsession with the stuff. [5]

The fact is that objectively, gold has no inherent value.  You can’t find some hidden “value” in it when looking at it under a microscope for example.

The only reason we believe gold is valuable, is because we believe that other people will also believe it is valuable and trade with us.  This is the same with money.  The only reason we believe money is valuable, is because we believe we can trade these pieces of paper with other people who also believe that these pieces of paper are valuable.

But the fact is that money is inherently not of value.  It’s just that there is a collective belief amongst humans that it is of value, which makes it valuable.

If everyone woke up tomorrow and decided that money is actually just pieces of useless paper then the whole financial system would collapse.

But while we all believe money is real, it is real.  We can trade these pieces of paper for real products and services – we can gain real knowledge by paying for an education, we can cure a real chest infection by paying for an antibiotic.

Money is a human construct which allows us to trade something which exists only in the human mind for real objective products and services.


Entrepreneurs are a vital part of the capitalist system we live in today.  They are the reason that society has thrived in the last few hundred years and why the world is wealthier than ever before.

Before entrepreneurship and the advent of money we lived in a zero-sum world  i.e. if someone became rich, it was because they took and hoarded wealth from the poor.  But with money and the capitalist system things really changed.  All of a sudden entrepreneurs could create new wealth by “creating value”.

Fast forward to today and entrepreneurs all over the world are creating innovative products and services to sell to the market place, which allows them to create more jobs and produce more, which creates more taxes and more circulating money.

The world has more wealth today than ever before.  When someone becomes a millionaire in China, he or she hasn’t done it by stealing money from someone in England.

Entrepreneurship is open to more and more people today.  With the cost of creating value forever decreasing.  Now even a Harvard student can launch a multi-billion dollar business from his dorm room.

Much of the “value” created however, is again only in the human mind.  When Zuckerberg created a social network, so that people could connect easier and share photos, where is the objective value?  Can someone look at Facebook under a microscope and find the value?  If an alien came to Earth would it be able to detect the “value”?

An alien would certainly be able to carry out scientific experiments and detect oxygen (an objective reality) and find swathes of H20 (another objective reality), but not the “value” in Facebook.

This objective lens can be applied to most things.  Is the owner of an airline, who transports millions of people around the world for their annual holiday really creating anything objectively valuable?  Actually, the value of hopping on a plane and travelling to another country is only valuable in the mind of the person buying the plane ticket.  There is no “objective value” in this case.

Entrepreneurship In Medicine

It is striking how often I hear in the news that the medical world is going to be “disrupted”, how new businesses are going to come and change how doctors practice medicine forever and how innovative services are going to provide massive “value” for patients.

Despite these claims, which have been floating around for decades now, the medical industry seems to be as rigid as a rock.  Even much of the current technology being used – for example the Electronic Health Records (EHRs) – which theoretically are easy to improve upon and recreate were built in the 1980s.

But why?  Where’s the innovation and new technology which is sweeping all the other sectors?

I believe it’s because medicine is where subjective reality (“money”, “value”, “creating value”) meets objective reality (cancer, infections, disease etc).

Doctors and the medical industry have an aversion to bullshit.  Doctors have long decided that they will not use sugar pills and trick patients into thinking that they are receiving real treatments, they refuse to serially dilute molecules in the hopes that a cancer will be cured (as in homeopathy, which is not based on evidence i.e. an objective reality).

Granted, it could be argued that doctors have taken this too far.  There is real evidence that placebos do help patients and reduce pain and suffering, but the medical community refuse to play this game. [6]

In my own clinical practice, I know something as simple as laying a hand on a patient and examining them thoroughly (even when not needed), puts the patients mind at ease and often reduces the pain they are experiencing.  But a lot of doctors would not admit that they do this.

I suppose that if doctors did start to use placebos on their patients and the treatment “worked”, then where would we draw the line?  By giving legitimacy to subjective forms of treatment, would doctors be validating them all?  Suddenly, doctors would start to resemble homeopaths and fortune tellers.

But this is precisely the reason why the capitalist system does not sit well with clinical medicine.

If someone develops an app, which diagnoses more people with atrial fibrillation even though they are asymptomatic and have no comorbidities, it will lead to more diagnoses of this condition.  But the objective evidence shows that these new diagnoses would not reduce the number of complications as a result of the condition.  This is the reason why atrial fibrillation is not screened for[7].  Even if patients / customers want to be diagnosed this is not a good enough objective reason to go ahead and screen the general population.

Equally if someone develops an app which increases access, for example to primary care physicians, if the correct cohort of patients do not use the new service (example if it is only used by healthy, young patients), then what is the “objective value” that has come out of it?  It could be argued that the old and unwell are being deprived of medical help at the expense of those who don’t need it.  Again, “subjective value”, where the fit and well feel like they have the right to get medical help is not the same as “objective” truth.

Medicine will be relatively slow to change because of this.  Change requires an objective truth in medicine, not just the creation of “subjective value”.


Notes & References

[1] – Michael Porter et al. have been writing about this problem since the 1980s.  They propose that a “value based” system should be instituted in the healthcare industry, where money earned by clinics and hospitals would be correlated to how much “value” they provide for their patients, rather than what happens now; a fixed “pie” of money which is provided to carry out a poorly defined set of work.

But the problem arises when you realise that not all medicine is objectively valuable, but only subjectively to the patient.

This is a point that is not addressed in their works, which may go some way to explain why “value based care” has not been implemented in over thirty years, since their works were initially publicised.

[2] – Adam Smith didn’t know any better at the time, because he had limited access to historical records.

[3] – The definitive anthropological work on barter was carried out by Caroline Humphrey, from Cambridge University.  As she put it in her work; “No example of a barter economy, pure and simple, has ever been described, let alone the emergence from it of money; all available ethnography suggests that there never has been such a thing”

[4] –  In 1694 a consortium of bankers made a loan of £1,200,000 to the king.  They charged the king 8% interest and they also charged interest to the clients who borrowed the money from them(!)

[5] – In 1519 Hernan Cortez and his conquistadors invaded Mexico.  The Aztecs who lived there used gold to make statues and jewellery, but they didn’t view it as valuable.  In fact they used cocoa beans to trade.

When the Aztecs asked why Cortez had this fascination with gold, Cortez replied: “Because I and my companions suffer from a disease of the heart which can be cured only with gold”.

[6] – The debate about using placebos continues to this day amongst clinicians:

[7] – The BJGP from Jul 2017 gave a good overview about the issues surrounding screening for AF:

The National Screening Committee have also published their thoughts on their website:

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