Health Insurance … An Unhappy Update

You may have read my earlier post about my analysis of my existing insurance vs. the ACA plans. There was no comparison, with my current plans being much better, at a better cost.

Well, I just got the notice of our annual increase. Both my policy and my daughter’s policy are going up over 20%, which puts them squarely in line with the ACA plans. The current plans still have slightly better benefits, i.e. a lower deductible, and a higher out-of-pocket maximum, but the monthly premium is now slightly worse.

Here are our monthly premiums since 2005, for a very high deductible plan:

    Donna Daughter
2014  625  235
2013  502  195
2012  457  161
2011  409  136
2010  285  94
2009  193  68
2008  193  68
2007  191  56
2006  156  45
2005  119  45

A simple average shows that the premiums have increased an AVERAGE of over 20% EACH year for the past 9 years.

I think this data underscores how critical it is to have health care reform. The jury is still out as to whether the ACA will provide that needed reform.

A Kodak Moment

Recently I had the opportunity to chat with Chuck Geschke, one of the co-founders with John Warnock of Adobe Systems, along with his wife, Nan. Nan and Chuck both are interested in history, and they have a great viewpoint from which to look back at the significant changes in the computer industry.

Chuck told a story from Adobe history that really grabbed my attention. His experience there with the transition from analog to digital content felt similar to my own experience in the transition from mobile telephones to smartphones. In fact, his “Kodak Moment” reminds me of my own “Nokia Moment”.

Chuck’s story went something like this.

Having participated in the creation of digital content through products like Postscript and Illustrator, Chuck and his colleagues could see that the photography business was going to migrate to digital as well. They worked to create a groundbreaking new product, Adobe Photoshop, to take advantage of that trend. In looking at the market it was clear that Kodak would suffer; after all, their business model had always been about the film – you can lose money on everything else, but you will make it up on film.

Chuck travelled to Rochester to meet with the executives at Kodak. He felt that if they could adjust while there still was time, there might be opportunities for Adobe to work with them. Kodak had been created in 1880, and had real staying power; he was sure that it would be able to cope with the latest change in technology.

Chuck couldn’t recall the exact timing of his visit, but I expect it was in the early 1990’s, after the start of digital photography and the creation of Adobe PhotoShop, but before the massive consumer rush into digital. Things were going pretty well for Kodak, and they were in no hurry to make any changes to their strategy. On the chart you can see that up to the early 90’s, when Chuck probably had that meeting, things were looking ok, at least as judged by the stock price.

An ugly picture

Chuck received a total brush off during that visit. The Kodak executive wasn’t the least bit interested in what Chuck had to say. The exec probably figured that digital images were a niche product suitable for computer geeks, but not for a wider audience. Kodak just wasn’t interested.

Jump forward to 2012, and Kodak declares bankruptcy.

*************************

I had my own Kodak Moment. It would have been around 2000 or 2001. We had been successful at Handspring in creating the Visor handheld computer, and sales were climbing. Indeed, we were the fastest growth company in American business history at the time. We had started the development of smartphones, but had not yet announced them.

Handspring was a small company. It seemed crazy to be going into the phone business against huge competitors like Nokia and Motorola, so I decided to approach Nokia to see if I could interest them in collaboration. Perhaps Handspring could focus on US sales, and Nokia could OEM the product for sale with a Nokia label in Europe.

I travelled to Helsinki to meet with a very senior executive. He was the most senior business development executive, reporting to the CEO. It must have been summertime, because I remember how eerie it was for it to be light outside when I arrived very late the evening. The next day I joined the exec for lunch in a small, private dining room, where we were served an elegant meal on a starched white tablecloth.

After some preliminary discussion, I reached into my bag, pulled out the Treo, and laid it down on the table. I told the executive that I was there to discuss the future of phones. They would be smartphones, I said, software-intensive phones with an application development environment. I suggested that we could work together with Nokia as this important transition played out. We could offer our software and computing expertise, and Nokia would contribute phone manufacturing and distribution experience.

Well, my exec, much like Chuck’s Kodak exec, showed not the least bit of interest. He didn’t even bother to look down at the device on the table! I felt I was showing him the future, and he thought I was some crazy Silicon Valley computer person who knew nothing about the phone business. To a certain extent, both of us were right. At Handspring we had no idea what we were getting into by making phones, but Nokia was equally blissfully ignorant of the computing tsunami that was about to hit them.

Nokia had been founded in 1865, even before Kodak. It had gone through several remarkable transitions in its past, from being a rubber boot manufacturer to one of the world’s leaders in mobile phones. Certainly, I thought, Nokia could adjust again to a technological upheaval.

Like when Chuck visited Kodak, things were looking up for Nokia when I went to Finland. They were just at the start of their amazing run as the world’s biggest smartphone manufacturer. The notion of smartphones as a threat simply was not viewed as remotely possible. Smartphones would be a niche part of the market, and not worth the effort for a company like Nokia. Look at the chart below; up to the mid-2000s, everything sure is looking good.

 

nokia mobile phoneSource: disruptiveinnovation.se

By 2013 Nokia’s fortunes had deteriorated dramatically, and Microsoft acquired what was left of the company.

So what can we learn from these two examples?

Here are my takeaways:

1. Just because everything is going great now, it is not a guarantee that today’s success will continue. Even though your company has been around for 100+ years, there is no assurance that it will be around in the future.
2. Avoid arrogance. If someone comes to tell you about the future, at least listen. They may be wrong, but they may be right. It’s worth contemplating the input, even if it comes from people with little obvious experience in your domain. They may be seeing something that you don’t see.
3. Keep your eyes and ears open. Big trends start as small trends. Products get cheaper. Both digital cameras and smartphones were extremely expensive at first, so Kodak and Nokia saw them as niche products for the wealthy. But they didn’t project forward and see that as prices came down, rapidly, the markets quickly expanded.
4. Small companies shouldn’t be too worried about the big guys stomping on them. If the disruption is big enough, they are unlikely to be able to turn quickly, even if they want to. Be cautious, because there are some moves that are easier for big companies to make than others. But don’t be afraid to compete with established players.
5. Don’t have an executive dining room.