A very interesting post by Arnold Kling at the EconLog. He very concisely defines the economic differences between entrepreneurs and workers:
As Taleb points out, there are safe professions where you charge by the hour, so I might call them Billers. As a Biller, your earnings tend to have a high floor but a low ceiling. Think of an accountant.
What Taleb calls scalable professions are ones where you are not limited by what you can charge for an hour. Recording artists, professional baseball players, entrepreneurs, corporate CEO's, and financial speculators enjoy scalability. But, as Taleb points out, they have to compete in tournaments where there are a few winners and many losers. So we can call these sorts of people Players.
Both Wallstreet and the technology industries have done an amazing job in not only delineating between "players" and "billers", but also rewarding "billers" (via outsized bonuses and stock options). That is not the case in the healthcare industry. Although, there are certain specialty physicians that garner tremendous compensation, the bulk of the "billers" just get a standard salary that is not tied to performance. IThat leads to tremendous inefficiencies because compensation focused "billers" are constantly jumping around for the highest paying job. Also, "billers" not so focused on money are stagnated, never realizing the potential rewards had they been rewarded like "billers" on Wallstreet and Silicon Valley. I can see that structure leading to "billers" looking at their profession as "just a job" and not really being motivated to innovate and foster change. Just look at the (lack of) progress in the healthcare industry as it lags significantly behind finance and technology in the last decade.
An interesting article passed along by good friend, Dipen Desai, regarding the expansion aspirations of Dubai World. Dubai has developed a very unique business model which has led to substantial growth in the past decade. The country is now investing in and advising other countries hoping to replicate the model:
So while petroleum-rich Persian Gulf states like Saudi Arabia, Kuwait,
and Abu Dhabi acquire chunks of companies like Citigroup (C, Fortune 500),
Dubai is on an international building spree. And it's not just hotels
and tall buildings - the emirate's companies are selling the developing
world nothing less than promises of Dubai-style economic success. Its
developers are building a $27 billion city in Saudi Arabia, $20 billion
worth of luxury projects in Algeria, resorts in Morocco, housing in
Vietnam, ports in Indonesia, free-trade zones in Senegal, and game
parks in South Africa. "Dubai is seemingly so successful that it has
become a brand to these countries," says Christopher Davidson, a
professor at Durham University in England who just published his second
book on the United Arab Emirates. "Governments want to have a little
bit of what Dubai's been able to do at home, and Dubai needs to find
places to keep growing."
The question, of course, is whether these countries can replicate the model without Dubai's deep sovereign pockets.
I had a conversation with an employee of mine about the role of healthcare worker within our company. As the conversation progressed, I indicated that the typical healthcare worker is now a commodity (in economic terms) within our company and in the healthcare industry in general.
It's important to note that by commodity I am speaking strictly of a homogeneous service (or good) that is fungible. As you could imagine, given that I was speaking to a registered nurse, my view did not sit well with her.
The point I was trying to make (and one which she quickly understood) was that the typical front-line healthcare worker (registered nurse, physical therapist, respiratory therapist, certified nursing assistant, etc) is readily available to companies like mine. There is an entire cottage industry, in which my company is both a participant and provider, built on the premise that a healthcare worker is accessible within minutes simply by making a phone call or sending an email. It is called per diem in industry lingo and is the equivalent of a temp employee in a non-healthcare setting. Unlike temps, though, these people are highly skilled specialists that deal with peoples' lives.
Having said that, though, that labor pool is still a commodity. For instance, we needed a physical therapist for a few of our patients. I simply picked up the phone and called an outside company to schedule a physical therapist for a few hours. This commodity status of the modern healthcare worker is not necessarily an indictment on the labor pool, but rather a testament to our accreditation process, the educational institutions that produce the labor, and the advancement of science so that patient care is "standardized".
I contrasted that with what would happen if I needed a knowledge worker (an overused term, but apropos here) at a moments notice. Unfortunately, it would be impossible to make a phone call and have a replacement within hours. Imagine I had an analyst that was going through reams of data for a proposal we were working on. Now further imagine that he got sick and was bed-ridden for a few days. Would I be able to make a phone call and find an immediate replacement? No. Sure, someone else could go through the data and come up with the same (or similar) analysis, but it would come at a great cost - time. Hence, the knowledge worker at my organization, or any organization is not a commodity. He is not homogeneous. His skill set is unique and although he is partially fungible, he is not immediately fungible.
Now, one can easily argue that specialist physicians, etc are not easily replaceable with a phone call. And I would agree. But, I would also argue that those are knowledge workers with a non-fungible skill set.
The above is actually one of the reasons we are in the healthcare business. The commodity status of the front-line labor pool proffers us a distinct advantage as we try and build up our knowledge worker team. We can continue growing revenues and servicing our patients because labor is always available to service the patients. Labor is a huge problem in healthcare, but if you view it as a commodity and focus on process and standardization, it eliminates some daunting management obstacles.