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Ok, I'm gonna try to talk loud, can you guys hear me, can you hear me ok? Ok, good, cause this microphones are, don't always work and this way I can walk around. Um, thanks for coming. Um, its fun to do this here, because I've been traveling around the country and uh, when I talk to groups outside of Silicon Valley, they give me funny looks when I tell them that, you know, we create industries from nothing. And uh, they go, no you don't and I go, well no, actually we do. We, you know, that uh, in Silicon Valley things get cheaper by 30% a year and you create these, these brand new markets, not over night, but over a decade, while no one's, no one's watching and all the sudden we get these big, massive industries. So, some of you may know who I am. I've written a couple books about Wall Street and about Silicon Valley, and so, I, for a long time, I started out as an electrical engineer, like a lot of folks around here and tripped across a job on Wall Street. I worked at Paine Webber and then at Morgan Stanley as an analyst who followed semi-conductive companies; Intel, Motorolla, Texas Instruments, AMD, Cyprus, VSI, LSI... you know all the names around here, and a lot of the folks that I worked with, besides getting' taken away in cuffs, I should say that my first job, the first guy I sat next to was a guy by the name of Jack Grubman who uh, he didn't quite get taken away in cuffs, but almost and I worked at Morgan Stanley, the investment banker I worked with was Frank Quatronne and I've worked with (unidentified) and I had befriended Henry Blodget and a lot of these guys, I won't mention the name, but perhaps Jack Grubman, knew people at the companies they follow that would kind of whisper in their ear what the next quarters earnings are going to be, right. And if you working on Wall Street and somebody says, "hey, AT&T's gonna make 22 cents and everybody else thinks its 20 cents, then you can make investors a lot of money and you know thats what a lot of analysts do. Now, I didn't know anybody, so stupid me, I was an engineer trying to figure out what the technology was and what the long term trends were and uh, so I had to do it some other way. And the way I did it is by just looking at Silicon Valley and what makes it what it is today, which is this whole idea that every time, you know, the next generation of line widths from Intel or any of these chip companies, the next big fad, the chips get smaller, cheaper, faster, better and you know, the cost per bit gate function drops by 30% when you get to these huge growth marks, we don't know what they are. PC's, cellphones, digital cameras, iPods, you know, on and on and on. And so, rather than run around and try to figure out what the next quarters gonna be, I did the lazy way of doing it, right? I would just close my eyes and count to ten. Every time costs went down, right, you close your eyes and count to ten and boom, six months later you get this, this growth mark. And it worked again and again and again and so I hit the sort of lazy man's job on Wall Street. And um, left Wall Street about ten years ago and started a hedge fund that a partner and I ran out of a, above the um, university art store in Palo Alto on Hamilton. And there was two of us in this dumpy, dusty office, probably as big as this table here. Certainly smaller than the chairs that you guys are sitting in today and we did the same thing. We went with bandwidth. You know we said that every time bandwidth gets cheaper, which no one believed ten years ago, right, you close your eyes, count to ten and these spectacular things happen. So we started with 10 million dollars, which is much too small for a hedge fund and by the summer of '99 we had a billion dollars under management and people were trying to throw money at us. You know we had, meet with two groups from from the Middle East at one week at Il Fornaio in Palo Alto and each of them tried to, tried to wire 500 million dollars to us the next day and, like its some petro dollar unit, that I didn't know about and luckily we did the stupid thing, although it is the right thing, which is we said no. We said, sorry, we already have too much money, we were looking for small companies and too much money chasing small companies is never a good idea. And so we said no to the first group. Then we said no to the second guy and on the way back to our office, from Il Fornaio to the university art store, I turned to my partner and I said, not only should we not take their money, whatever money we have, this billion dollars, we should ship back to our investors and as they say in Wall Street, there is no bell that rings at the top or the bottom of the market, but these two groups from the Middle East, trying to throw money at us certainly were the case. And so I had been writing for the Forbes and the Wall Street Journal op ed page and I decided, gee maybe I can write a book. And so, I wrote a book about working on Wall Street with Jack Grubman and Frank Quattrone. I wrote another book about running this hedge fund and you know all the crazy things that go on when you're running a hedge fund. And both books did well and "Running Money" was a, had a New York Times Bestseller list and so my publisher said, hey uh, what else you got? And I was like, what do ya mean what else I got? Well, you know you gotta write another book. I go, well, I wrote a book about working on Wall Street and another one about running hedge fund, I haven't done anything else, you know there is nothing else to write about. Well, go do something. What else? There's nothing else to write about. He goes, "Well, go do something." Right, its funny, the guy's telling me, you gotta go do something so you can write a book about it. Well, uh. I didn't know what to do, so what I did was, whats something thats worked again and again in my career is that I just started calling friends up and saying, what you do? What's going on. So I called an old friend who was a salesman at Morgan Stanley and uh, institutional salesman would call on accounts, he's out in San Francisco, I used to go skiiing with him. And so, I met him at the Oasis on El Camino for a couple of beers and um, I walked in and "You look great" and I said, "How ya doing?" And he says, "Well, I'm better". I go, "Better? What do you mean better?" You know its like the Monty Python, (Unidentified) to better get me a bucket, oh well you have to see the movie. And I go what do you mean? And he goes oh, you didn't hear the story? No. Well, turns out he was skiing in sun valley, and I said well, thanks for inviting me, right. And he goes, no, trust me, you don't want to be on this trip. But he's out there, beautiful sunny day and his skies go out from under him and he bangs his head on a mogul and he's you know, shaking and he goes into the lunch place and has a beer or two, figuring that would help in getting his senses back, it didn't work, so he goes down to the bottom and he, and he visits the doctor, it was a woman doctor on the premises. Had to wait in line behind two people who had hit their heads on a tree that day... anyway, they take an x ray and the woman says, it looks like a piece snapped off on the top of your spine and you may have broken your neck so they roll him on a board and duct tape his head to this board and here's this guy going, what the hecks going on and they put him in an ambulance to take him to Boise and just before he leaves, the woman comes up and says, you know, we think you've broken your neck, but don't worry about this now, but on the x ray it looks like there's a tumor, the size of a cocktail olive on the top of your neck. You may want to have that checked out. You know and here's a three hour bumpy ride and this guys freaking out. They do a CT scan at Boise and the doctor comes back and says, good news, you didn't break your neck, bad news is, there's this tumor on the top of you neck, you know, you might want to have that... Ok, i get it. Comes back here. He's got multiple myeloma, eighteen months of treatment, they take your bone marrow out and they harvest your stem cells and then they pour, what's basically battery acid through to clean it out. They put your stem cells back in to rebuild it and you know the good news is he's fine because he's having beers with me over at the Oasis. But I turn to him and I said, what you're telling me is that skiing saved your life? And he says, well, yeah, it did. I said, you know, I gotta use that line with my wife to justify some ski trips, and, but I'm forty-seven and that's not too old, not too young, the late baby boomer, but this scared the crap out of me and uh, a brother-in-law, who was in much better shape than I am, works out all the time, has a heart attack in the middle of the night. They rush him to the hospital, shove a couple stints in, on blood thinners for the rest of your life. Um, a woman friend was scuba diving and hurt her back, got an MRI they thought they saw something on her kidneys, its cancer, half of one kidney is removed and again and again, you hear these stories of sort of accidental diagnosis and uh, so, I got scared, I'm forty seven, I haven't been to the doctor for ever. I talk to my wife, she says, why don't you go in for a, your forty year physical, right. I go to our family physician. I say, we have a family physician? She says, yes, we have a doctor. So we go into this doctor and he goes, what are you doing here? I here for the forty, he says, your forty-seven. I know, I'm not good at math. I'm an engineer, but I'm not good at math. And so, he uh, I had been in for a blood test a couple days before and so, you know you sit there with the nurse who takes your temperature and all that stuff, so he comes in and in less than three minutes, takes a tongue depressor and shoves it down my throat, looks in my ears, thumps on my chest, takes my blood pressure and then, and this is what really set me off, takes out a rubber hammer and bangs my knee with it, right? And I look at this guy and I go, that's it? That's all you have? You know, you're whole bag of tricks, this is Silicon Valley, we got computers all over the place. You rip out a rubber hammer? He goes, ok, lets look at your blood tests. So he takes out the blood tests and he goes well, your blood pressure was a little high, lets check your cholesterol, oh your cholesterol is borderline high, you know, do you eat red meat? I go, yeah. Egg? Yeah. He says, well you know, you might want to get your down. I said, well why? He says, well the literature says to get your cholesterol down. And I go well what literature? He goes, the literature. Trust me on this one. You know you gotta get your cholesterol down or else we're gonna put you on a regime of statins, lipator and whatever else. I go, am I gonna have a heart attack? He goes, you know, I don't know. We don't know. Just, the literature says get your cholesterol down, so you know. Am I, do I have cancer, you know should i go skiing and bang my head, I'm trying to get some answers from this guy. So uh, I leave, I go to the parking lot and you know, the brave guy that I am, I fire my doctor from the parking lot. Right. I go thats it, he's fired, I'm going off the grid, I'm gonna go figure out if I'm healthy or not or if there is any tools around here in Silicon Valley that can save my life, I'd rather go bang my head skiing. So, I started, again, calling more people, going to visit companies and um, ended up at the Palo Alto Medical Foundation with a radiologist by the name of Dr. (unidentified), 70 year old guy, fantastic guy, and uh, and he agreed to let me sit and watch him read mammograms for awhile and you know, one its rare that doctors let you do that, but second, you know, when you're writing a book, you look for these sort of vivid scenes and funny stories that you can tell cause this book, its just a bunch of funny stories, which I'll tell you some of them. And um, and you know, I said I'm forty-seven, intellectually or emotionally I'm twelve and so nothing better than to sit around doing the Beavis and Butthead routine reading mammograms and so I'm cracking jokes a mile a minute, this guys not laughing at any of em. And you can imagine what some of them are, but you know, mammograms are, its x- rays, right, its x rays looking for breast cancer, you know, its like a scene out of the sixties. There is a machine that these films are, black and white films are on and when the guy wants to go to the next one, he pushes a button and you hear, whooo, you know these little motors worrying and then next set comes and the guys got a magnifying glass and he's looking at these things and uh, speaking into a Dictaphone, right and I go, this is, I'm sitting in the middle of Silicon Valley, you know if I was somewhere else, it wouldn't disturb me, but this is all you got? And so he's looking and so there's forty million mammograms done in the U.S. every year, two hundred thousand cases of breast cancer, so that's uh, one half of 1% and uh, a lot of, a lot of regions, mammograms are read twice. Ok, so there two readings, this is a full employment act for radiologists, right because, and its a 100 bucks, or a 129 bucks each time a radiologists reads, so it 200 and something bucks to have mammograms read. And why? Well because they are in a dark room with a magnifying glass looking for patterns that they may or may not, you know show to have actual breast cancer or not, and then biopsies, its all terribly messy. But this guy was sitting there reading them. And once in awhile he'd push a button. And uh, and below the films, these black and white films, were these monitors about this size and on these monitors would be the exact same image, but there would be this black (unidentified) or triangles or something and then you'd go oh, I see R2 (unidentified), oh R@ (unidentified) i don't see and, I was going, is this R2D2, did I miss an episode of Star Wars i never, or is it radiologists too. I go what is this? He goes oh no thats this computer system we use, its a system, you read the mammograms in and um, it using neuro networks it looks for patterns, its a company that just got sold actually down on 85, when you go from 101 to 280 to pass so R2, so sure enough since 2000 they have perfected a system that can find 9-16%, you could argue with the numbers, more cases of breast cancer than a radiologist on his own. And you now, its just spectacular technology and its still just a start. But finally, starting to find something where technology is making a difference in medicine. And whats the difference its making? Well, it got rid of one radiologist, right? How about the second one? So I asked the guy, hey, do you ever see the day where R2 will be the first read and not the second read? Oh, no, no, no... that could never happen? You need the expertise of radiologists in this pattern matching and I said well, I'm not so sure. About a third of mammograms today are the second read is done by a computerated detection, CAD, for computer design, but in medical terms its detection. And so um, here's a start. And uh, then I go home and in the mail that day, it took me four months to get me a doctors appointment with my family physician. It took two days to get his bill, right. 440 bucks for the five minute, three minute physical and another 220 bucks for the blood test. And now I'm livid, right? And so I go and I start... I go on the web and I say if I have some disease, I'm gonna figure this out. So I start ordering genetic test kits. You know am I predisposed to colon cancer or I left the ovarian cancer ones on there for their own, because I figures, I... And by the way, these genetic tests were a bunch of huey, but um, I ordered them anyway. So I have this pile of them on my desk and there is a funny story here where I also went and I ordered a genetic test kit to see if I had Willebrand's Type II disease which shows up in various types of dogs, right and so, I think, i fooled these dog DNA test places. So these things come and they come with these vials, these test tubes, right, and so, you got to fill these test tubes with blood. Now I get skirmish when I see blood, but I say well, how the hell am I going to fill this up? So I started running around to Quest and LabCorp to say, you know can I get, can you take my blood? They go well, lets see your doctor's signature, you know your doctor has to prove this. I go no, I fired my doctor, I just want to do this on my own. So I went to the local pharmacy in Menlo Park and I said, uh, excuse me, you know sheepishly, some pharmacist walks by, so um, do you guys sell syringes here. And uh, he said, uh, not since the '70's. And then threw me out of the store. So, I uh, ended up getting th blood tests and maybe I'm genetically predisposed to colon cancer and maybe I'm not, but I then started following cardiologists around. I spent a week at Cornell Medical in New York and watching what they do and sure enough I find myself in a catheter lab, I'm wearing a white coat that says "visiting student". It was a seminar that they put, it was me and 99 twenty-year olds. Which, you know, they all kept looking at me like, who's the creepy old guy hanging out with these, and it was about 80% women, kids who were thinking about going to medical school, were going to the seminar. So you know I felt like a jerk and so I said, you know, They go oh, uh career change for you? I go, no, I don't think so. But I am, I'm an investor and I'm looking at technologies, there is something interesting that you have. And you know, it turns out even in the most modern catheter lab even where someone has a heart attack and they open up a hole in your groin and they take a guide wire and they put a catheter up there and then a balloon that opens up the artery and then the stint that goes in. You know, a lot of stuff was invented here, perfected here, you know, Dr. John Simpson, who ACS and then sold it to (unidentified). And so I find myself in this catheter lab and there's, you know a sixty seven, sixty year old women so its paid for by Medicare, who had a heart attack and there she was laid out and there's a doctor. There is three doctors and two attendant nurses and this doctor's sitting there, you know, like bitting his tongue and squinting and shoving this catheter, you know, this guide wire, its like he's threading a needle. You know, I couldn't tell what he was doing, like, you know, what do you do? And there is an x ray and you can see this woman's artery. All the sudden this wire shows up and he starts looking, you know, am I going too far, too little, and you know its the most analog experience I've ever seen. And sure enough, you know, you squirt some dyes, this is called an angiogram where you take a look, a then boom, her arteries light up on screen and there it is. You can see the clogged arteries that were collapsed or clogged and then watch the balloon go in and then blow em up, and then the stints. Then I had gone out with friends the night before in New York and we had gone to Smith and (unidentified) and I had ordered the brontosaurus burger, right, the one they bring to you you car in the Flinstones, where it tips it over, so I figured, if there wasn't, you know, gunk whipping through my arteries, so I said, you know... I had looked up at the seminar, to just go have a look, to do the catheter procedure, Medicare reimburses the hospital 5,299 bucks, ok. And so I said, you know, I think my Visa card has at least that on the credit line, I wonder if I could put my Visa down and they could lay me out and shove the catheter, because my doctor certainly couldn't tell me anything and you know that wasn't going to happen. But I then went on a quest saying, ok, first thing I'm going to do is, I'm going to figure out whether I'm going to have a heart attack any time soon, because if you look at the numbers in health care, its a 1.8 trillion dollar business. The big three that money is spent on is heart, stroke and cancer. So if your going to do any change to the amount of dollars that are spent on health care, you gotta resolve those three first. And obesity is coupled with heart disease, but you know, if you could figure out heart disease as, first, and then work on the rest, you got something. So, I'm in Palo Alto, right and uh, like anything else I've ever looked at in my life, its within ten miles of Palo Alto, right, plus or minus, and I found a company in the other direction from here, but in San Mateo, that does 3D imaging. My kids play uh, Halo and uh, World of Warcraft, and so the same 3D graphics that are in those, you know there are companies using those for, for, in the medical business, so uh, I started learning about CT scans, Cat scans, computed tomography and uh, uh, these are x ray machines that rotate around your body, the source and the sensors rotate around your body. And there's an algorithm called the filtered back projection algorithm that was invented by a guy at Stanford, a professor at Stanford, by the name of Bracewell. In the '60's to map the weather maps of the sun. So that's now used in CT scans, they can rotate this thing around you and boom, here's a slice of your body on a film. Not different than, not all that different than that radiologist film, you shove it up against the wall, till about '98, '99, one slice of your body per rotation. So you gotta hold your breath, you gotta try to get your heart to slow down, you know, there is all sorts of blurs and artifacts, but then there is a bunch of companies that make these, its GE and Siemens and Phillips and Toshiba... sort of all coincidentally, I don't know who was first, but around '98, '99, they came up with four slice per rotation machines, ok. And so now you got four films, or you know, six, you got a bunch of films on the screen. Then in about '02 they came up with sixteen slice per rotation, and its just silicon, right, its silicon sensors and an x ray source and uh, what so we use today? Well, we use sixty four slice per rotation and that's the state of the art for for CAT scanners today. So I'm, this guys a 3D model character, cause when you have sixty four slices, you're not putting light things up on the board, there's, it too much of a hassle to handle the film. Well, there's enough data there that you, you know, you can just create a 3D model of the heart and do it in color and pull the arteries out and that's what these, its a company called (unidentified) and there's a bunch of guys that do this. And its fascinating. Boom. There's... you take an image and all the sudden there's you brain, there's your lungs, there's your heart on the screen, you can rotate it around, its like these video games. And so I'm talking to this guy and he's telling me. Four, and then sixteen and then sixteen and then sixty four. And so I look at him and go oh, let me guess, the next generation uh, CT scanners are gonna be 256 light scanners. And he looked at me and he said, well, how did you know that? I go, uh, I own a digital camera, all right, I mean its the flash code, its the magic numbers of Silicon Valley and we all know that, right. But it struck me first time to hear something that has the same pace of innovation as Silicon Valley. There is something in medicine thats advancing like flash memory and like processor speeds and like line whips and I, and all that kind of stuff and sure enough, the next generation 256 light scanners can scan your heart in a tenth of a second. So there is no breathing that is going to mess it up, there is no heart beat that is going to mess it up, and you can get this beautiful 3D image and find that arterial sclerosis, the hardening of the arteries or any, shouldn't say any, but most heart disease, right, non interventional. You don't have to slap me down in the cath lab, its by shining x rays and its gonna change the entire business of heart disease because you are going to be able to find these things early and if you find em early, you can either out them on the regime of statins that people with high cholesterol and blood pressure do, or there's companies (unidentified) which has since, John Simpson's company, goes in, its almost like a little Roto Rooter and starts pulling the um, the plaque out and so, you know the problem is that these scans are expensive. They are a thousand bucks today. And those initial, the machines are two to three million bucks, those initial scans are going to be a thousand bucks, so about 1% of adults have heart attacks every year. Now, I don't see a hundred people in here, so that means someone outside of this book store is gonna have a heart attack, not no one here, in the next year. But, it, it, you know, uh that, with stints and the hospital stay and the rush to the hospital in the ambulance and the aspirin and band aids, you know, it cost about thirty grand, no it doesn't cost us thirty grand, it cost our insurance companies or Medicare thirty grand for that one out of a hundred person who actually has the heart attack. Well, at a 1,000 dollars a scan, it would cost a 100,000 dollars to find that one with these CT scans. So Blue Cross, will they pay for scans? Na uh, they won't do it, why? Because 100,000 versus 30,000, they got a business, right. And it cheaper to let nature do their screening for them. Now its a brutal screening, but its, you know, its nasty and that's the economics of the business. So at 500 bucks, man, they are still not gonna pay for it. At 250 dollars a scan, they're gonna start paying for them. At 100 dollars a scan, they're not only going to want you to have the scan, but they're going to insist that you get scanned for heart disease, because it'll be cheaper to scan those hundred people, you know, a hundred adults, then pay the thirty grand and by the time, you know those things are a hundred bucks, its gonna be fifty grand when you have a heart attack and get taken to the hospital. And that's the economics of the business, is everything in health care goes up in costs, doctors, medical devices, hospital stays, just because there is so many people in the way, its expensive. But if you can, and this is the message that we have seen again and again, we know this in Silicon Valley, we've done it to tellers and operators and auto mechanics and stock traders and travel agents and its the same thing every time. You take the intelligence of doctors and you embed it in silicon and software so that you not only can deliver it cheaply and widely, but it can do something better, right. Looking inside me with CT scans is a heck of a lot better than banging my knee or more importantly the fuzzy cholesterol numbers and heart disease numbers and so, you know, I found what I was looking for, is technology that was going to invade medicine. Silicon, was going to invade medicine. And so, one of the people that helped out a lot with this book is Dr. Gary Glazer who runs the radiology, runs radiology at Stanford. He's doing all the advanced imaging work, all the people under him are doing this. And so he would send me to conferences and let me look at what was going on at Stanford and pointing me to other people in the industry and it was fantastic. So I went to him and I go, you know, with (unidentified) light scanners, uh, I get the sense that a lot less people are gonna have heart attacks or a stroke. And he looked at me and he said, like I was an idiot and said, oh yeah. Those are great. Heart attacks and strokes will be a thing of the past. And, you know, here's a distinguished head of a major university, you know the greatest university in the world, perhaps. And he's telling me that no one should ever have heart attacks and strokes again once these technologies get cheap enough. And then, and this is when I knew I had a book, right. And then he looked at me and said, but that's nothing, you know... what do you mean nothing? That's something, you know, you're crazy. He goes, we can do the same thing for cancer. And I, you know, this is then turned my head around, because he explained that there is new technologies and new techniques called molecular imaging. So I said, oh that means, you know 4096 slice CT scanners where you can look at uh, actual molecules and file a (unidentified) and he goes, no its not that, not at all. And he goes, what is it, and he goes well, its the ability to not take an x ray and send it through you and look for shadows and grey scales and stuff, but have probes go in and find you now cancer from the inside out and send signals out from inside your body to find these things. And it set me off on a journey that gives me a headache thinking about, but it was filled with so many, so many fun and bizarre stories and so I went up to the, the Fred Hutchinson Cancer Center up in Seattle where what they are doing, and this is happening in a lot of places, is there is almost a space race going on to identify unique proteins in cancer cells. So, you know, if you do that and you can create bio markers, you know basically anti bodies, or other things, but usually antibodies, that can then identify those unique proteins and so its not easy. There's these mass spectrometer machines. I always wonder what mass spectrometer machines were used for, rather than kind of funky pictures that chip companies use and sure enough, they take and they liquefy or atomize, if you will, these tissue and then they throw em up against the wall and which one doesn't fall away, you could figure out the molecular weight and its an involved process and it takes forever to do. Its meticulous. You know I look at it and I saw the number 80 on this machine. There was a print out or an LCD screen and I saw, its eighty. I go oh, is that 80 nanoseconds, right? And the guy looked at me and he goes, no, no. that's eighty seconds. In other words, that one little tiny test and they do zillions of them took eighty seconds. I go, well I'm used to seeing things that are in eighty nanoseconds in Silicon Valley. He