The Next Great Investing Sector

Where the world is going in the next few years is no surprise. Big tech wants your blood, they want your sweat, and they want as much data about you as humanly possible.

Over the next few decades, technology is going to invade the healthcare industry like COVID invaded the globe. In 2018, the global healthcare industry was valued at roughly $8.5 trillion and projected to grow to almost $12 trillion by 2022. This massive market opportunity coupled with the massive amount of data we are all willing to hand over Apple and Google leaves me extremely bullish on this industry as an investment over the coming decades.

Where We Are

This week, Patrick O’Shaughassey had Daniel Ek, the Founder & CEO of Spotify on his podcast. Daniel explained the healthcare industry is currently like the automotive industry in the ’80s. You have an issue with your car, you drive to a mechanic, the mechanic asks you a ton of questions to see what is wrong, then tries to diagnose the problem. Compare that to today where you see a light on your dashboard and naturally just head to the repair shop.

 ..As you would go to the car repair shop, the car mechanics today wouldn’t ask you a single question. They’re not interested. All they do is to take the cable, plug it into your car and suck out all the data and they know exactly what to do and they go cracking on. That’s where we are. It actually turns out the more complicated to fix the car now because it’s so full of electronics and all that other stuff, but the diagnostics is way simpler.

That is what we have to turn healthcare into. And it’s so obvious when you say it like that, but then the question is obviously, what kind of data will be usable? And there we have a whole other problem, because there, just in the grand scheme of things, just don’t exist that much data in the healthcare systems that’s real tangible data. But we have to build the systems to collect that data.

Daniel Ek

To say this another way, the Healthcare industry needs to pivot from a reactionary industry to a preventative industry. To do this, you need a lot of data. And to manage data….you need technology companies.

The Technology

About two weeks ago, I was out for a run before work. I felt completely fine, ran about 3 miles in record time, and headed off for work. It was a normal day, or so I thought. Around the middle of the day, I decided to check my WHOOP band and see how my sleep was from the night before.

For those who are unfamiliar with a WHOOP band, it’s basically a fitness tracker you wear 24/7. It charges itself without having to be taken off, you can take it in the shower, and you sleep with it every night. Below is a snapshot of my “Recovery” which basically tells you how rested your body is to attack the day today. A higher score indicates your body is more capable of taking some sort of beating with a workout.

My WHOOP Results

To my surprise, my vitals started to fall off on Wednesday with an alert stating “Your Heart Rate Variability (HRV) is below your normal range. This may indicate strain of your body is fighting off an illness.”

That afternoon, all of the typical COVID symptoms kicked in and I tested positive the next morning. The chills, the fever, the fatigue. Within the span of 8 hours, I went from feeling fantastic and running to laying on the couch and trying to find comfort. The rest of this post is not going to dive into COVID but the reason that this story is relevant is both my WHOOP Band and my Eight Sleep mattress detected a problem in my resting vitals 2 days before a single symptom appeared.

To circle back to Daniel Ek’s comment, the check engine light was going off on both devices. The warning signs were showing up which should have allowed me to start taking precautions.

The Future

How this connects to your investing is by looking ahead at where the technology is going and where money is being invested. Let’s start with a quick overview of recent news from the health-tech space:

The stories in this space are never-ending. From Peloton bringing the gym to your home to Oura creating a ring you can wear 24/7, the focus of all these companies is the same. Collect data, analyze data, and make predictions. It’s the typical model artificial intelligence uses.

Similar to how Tesla operates its autopilot feature, each individual vehicle sends its data back to the company who then analyzes the data across all its users. This is what is going to happen with your health. Maybe instead of going to the doctor and explaining what’s wrong, you will instead share your Apple Health data that summarizes your sleep health, your exercise routines, and potentially your health metrics.

Companies like Ultrahuman and Levers are real-time tracking your glucose levels and updating you throughout the day. Apple and WHOOP just announced blood oxygen monitoring in their latest devices. The avalanche of what data we can pull off our bodies has just started and the momentum is massive.

The Opportunity

As mentioned at the top of the post, the global healthcare industry is estimated to be roughly $12 trillion by 2022. Professor Scott Galloway, the author of The Four, argues that big technology companies have to move into markets large enough to continue growing. Think about it like a house plant, it can only grow to the size of whatever pot you put it in. Want to see more growth? Replant it into a larger pot.

This is where the opportunity lies. There are dozens of healthcare insurance companies, healthcare services companies, and operating companies with market caps greater than $50 billion. Big technology companies are licking their chops to get a piece of the action. The hard part is going to be finding which companies and which technologies are lasting for the world ahead. I would expect to see a lot of new companies and industries emerge trying to grab hold of that massive market opportunity.

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