All posts by Rob Hassett

Rob Hassett is an attorney in technology, entertainment and corporate law with the law firm of Casey Gilson P.C. in Atlanta, GA. He is a co-author of a leading volume on internet and interactive media law and has taught many classes in the professional education program at Georgia Tech.

INTERVIEW OF BILL PULPITT

SOMETHING YOU MAY NOT ALREADY KNOW

Bill says that converting corn to ethanol useful for powering motor vehicles uses approximately ninety percent (90%) as much energy as it creates.   He goes on to say that  converting cellulose from pine trees to ethanol uses about thirty percent (30%) as much energy as it creates.

ROB:               This is Rob Hassett for btobmagazine.com.  Today, I’m going to be interviewing Bill Bulpitt who is the senior engineer with the Strategic Energy Institute at Georgia Tech.  Hey, Bill.

BILL:              Good morning, Rob.  How’re you?

ROB:               Doing good.  How are you doing?

BILL:              I’m all right.  A little cold today.  A little cold.  The energy meters will be spinning today.

ROB:               I appreciate your being on today.  Now Bill, you have a mechanical engineering degree from Georgia Tech.

BILL:              Right.

ROB:               And you were a co-op while at Tech.  You were a co-op in Florida somewhere, right?

BILL:              Yeah.  I worked for Pratt and Whitney Aircraft for two years in West Palm Beach when they were building rocket engines for the Saturn program and also the gas turbine engines that powered the SR71, so it was pretty exciting stuff.  And then I worked for an additional year as a co-op with Scientific Atlanta here in Atlanta.

ROB:               Well, great background there and in school.  And then you worked for the Georgia Research Institute.

BILL:              I worked for the Georgia Tech Research Institute when I got out of the military in the late ‘70s and early ‘80s.  And a lot of what we were doing at that point in time back then under the Carter administration was renewable energy research.  But funding for that kind of started drying up in the early ‘80s, and so I ended up leaving and eventually joining a subsidiary of the Southern Company and building power plants.

ROB:               And that became Mirant when it was spun out?

BILL:              Right, it started out as Southern Electric International and then we changed the name to Southern Energy Incorporated, and then that subsidiary was spun off from Southern Company and was then called Mirant, which is still in business in Atlanta.

ROB:               And then you went in to environmental consulting for a fairly short time, right?

BILL:              Right.  I had done environmental consulting for a time before I came to the Georgia Tech Research Institute down in Florida.  I was doing that back in the mid ‘70s.  I was doing air pollution control work for paper mills and power plants down there.  And then when I left Mirant, I did some environmental work again, related mostly again to industrial companies and the power industry before coming back to Georgia Tech four years ago.

ROB:               So you came back to Georgia Tech and joined the Strategic Energy Institute about four years ago?

BILL:              Correct.  Right.

ROB:               And what is the mission of the Strategic Energy Institute?

BILL:              Well, we have several missions.  But the overarching mission is to be a coordinator, an umbrella, for energy research programs at Georgia Tech, and also in cooperation with other universities.  We actually, believe it or not, do a lot of work with UGA and have a pretty cordial agreement with them, much more so than on the football field anyway.  And there are so many different schools at Tech and so many different research centers at Tech that all have an interest in energy.  And what we try and do is get people working together and get people chasing funding together from various sponsors in the hopes that overall, the final product will be better than if each school was trying to do it by themselves.

ROB:               So you have various initiatives at Georgia Tech and in cooperation with other schools to try and come up with solutions for the energy issues that we’re dealing with correct?

BILL:              Correct.  That’s correct.  For example, UGA and Georgia Tech are working quite closely together in the biofuels area, and we’re doing research programs in making cellulosic ethanol from the pine tree resource.  And that has a good future in the state, and hopefully, we’re going to be able to get more funding, certainly from the new administration, that’s what we’re looking for anyway.

ROB:               I have a list of sources of energy and what I’d like to do is go through each one and get your comments about whether you think it’s a long term solution or a dead end, etc.

BILL:              Okay, sure.  Now this is my opinion now.  You know, it’s not necessarily Georgia Tech’s opinion, but I guess I could say it’s based upon twenty years of experience in the utility business and additional years in the research business.

ROB:               First of all, let’s start with the obvious which is oil.  What do you think about the future with oil as a source of energy for us?

BILL:              Well, I think oil has its place.  Now 98% of transportation obviously in this country still comes from oil.  I think maybe 2-3% has been displaced by natural gas, the Boone Pickens Solution, which makes sense in certain applications, particularly for fleets.  For example, the buses in Atlanta, most of them are fueled with natural gas.  But for better or for worse, oil obviously is the fuel of choice for transportation.  Now what we’re trying to do with the cellulosic ethanol is make a contribution towards displacing some of that oil at least at a 10% level, which is the gasohol that is 10% ethanol, which virtually is available in most places now in this country.  And ultimately, we’d like to see the availability of E85, which is 85% ethanol and 15% gasoline.  A lot of people are driving vehicles they don’t even realize are capable of using this fuel.  It was started some years ago, let’s say ten years ago.  In particular with SUVs and things like Ford Explorers and so forth to where they were capable of burning this E85 because it got … And I don’t know all the details, but it got the auto manufacturers some break on their corporate average fuel economy numbers if they made so many cars that were compatible with this flex fuel.  But anyway, you know, there’s a lot of people that I work with at Tech and a lot of people that we keep up with, in particular people like Matt Simmons out of Houston, who have published a number of papers and books related to peak oil and the end of oil, and I believe there’s a lot of evidence that certainly production of oil probably peaked back in the ‘70s worldwide.  And that’s not to say that there aren’t undiscovered resources out there; I believe there are.  But at the end of the day, the competition for this very, very valuable resource is only going to get more intense.  Right now, we’ve got a bubble again where oil is $40 a barrel after being $140 six to nine months ago.  It will be back.  It will be back.  We’ve seen this before.  I mean I can remember very vividly the energy crisis of ’73 and ’79.  And we don’t need to be in a place where, and I’m talking about the United States, we’re totally manipulated by offshore resources.

ROB:               No doubt.  What about diesel?

BILL:              Well diesel, unfortunately, diesel has got a very bad reputation in this country.  And I have to lay that on some of the failed products that were sold as diesel automobiles back in the ‘80s.  And, you know, Americans in general got kind of a bad taste in their mouth about the use of diesel as a transportation fuel.  Now obviously the truckers have never changed, but I think as I was telling you another time, two times I’ve rented diesel cars, actually three times, diesel cars in Europe.  One time was an Audi A6 which was a beautiful car anyway, but it was a diesel, in France.  And another time it was a S40 Volvo in Ireland.  Now the S40 Volvo which is a relatively small sedan, it’s smaller than a Camry, or maybe almost as big as a Camry, but this was a six speed, a manual transmission six speed diesel, it had a lot of get up and go, it got an honest forty miles a gallon, it was quiet, it was a pleasure to drive and, you know what, if I could buy that car in America, I would consider it, but I can’t.  It was never brought to this country because for better or worse, a lot of offshore manufacturers perceive that diesels can’t be sold in this country, and a lot of it has to do with ancient history, but I don’t know how that’s going to get changed.  Now you know, as you’ve seen with the whole deal last year and even today, the price of diesel has been significantly higher most of the time than gasoline, and that’s to do with the so-called refinery split, and that’s because they don’t tune the refineries in this country towards diesel; they do it towards gasoline, and that makes the price of diesel higher.

ROB:               So diesel could be made to be competitive with oil on price and you’d get a lot more mileage anyway?

BILL:              Yes, that’s right.

ROB:               It still requires oil, but I guess if everybody was driving diesel, it would require less oil.

BILL:              That’s correct.  Sure.  You know, and that has to do with just the mechanics of the engine.  I mean I don’t consider myself an expert on diesel, you know.  Thermodynamic efficiency of a transportation engine has a lot to do with compression ratio, and diesel engines are twenty to one compression ratio.  They’re compression ignition; they don’t have spark plugs.  And that in itself improves the overall efficiency of the engine which allows it to get much better fuel economy than the same size gasoline engine.

ROB:               Now you had mentioned to me though that diesel does emit particulate matter as far as environmental issues?

BILL:              It’s always been a problem with particulate yes, and that’s unburned carbon particles.  And I think that they’ve gone a long way in improving fuel injection systems.  Again, I don’t consider myself an expert on diesel.  And there is evidence that some of the restrictions in this country on emission standards in some of the states, I mean California for example, are probably much stricter than what most of these European offerings have to meet.  I think as environmentally astute as the European Union is, I find it hard to believe that they’re really that lax, and I can’t tell you with certainty, but their standards may be the same as the worst in America at this point; I don’t know.  Anyway, there are some things in the diesel emissions that are not desirable compared to gasoline; let’s put it that way.

ROB:               What about nuclear, Bill?  Nuclear energy, do you think we have a future, that there is a future for that?

BILL:              Well, nuclear has a place for sure, I think.  Now you know … I mean I worked in the utility business for almost twenty years.  None of what we did had to do with nuclear energy.  Most of what we did, really most of it had to do with natural gas.  But we did do some coal and some other fuel oil as well in central station generating plants.  But in this country, what’s happened is obviously, you know, I can remember when Three Mile Island happened and how bizarre it was that that particular month in time when that happened, that movie came out with Jane Fonda in it about the meltdown of the nuclear plant.  I’m trying to remember what the name of it was, but it really set the whole country abuzz on the dangers of nuclear power.  The fact of the matter is that what happened at Three Mile Island was not all that bad in terms of what was actually released to the atmosphere and the danger that was there for the local residents near Harrisburg, Pennsylvania.  But Chernobyl obviously was just a mammoth event that even today … That was 1986, so 23 years later, I don’t think we fully understand what all of the effects of Chernobyl have been.  Obviously, there were thousands of people that died from the radiation poisoning, and those that were involved in the so-called immediate clean up, et cetera, and that was really one of the worst environmental events in history.  We only now are beginning to realize what the long term effects on people were and so forth.  But the fact of the matter is that the Chernobyl reactors were of a type that were inherently not nearly as safe as any of those that were built in the U.S., and now the new designs that are being put out there by Westinghouse and General Electric and other manufacturers, Arriba.  These nuclear plants are going to be inherently much more safe because of the failsafe mechanisms that in the event of any kind of failures of cooling water pumps, et cetera, et cetera, there will be orderly shutdowns of the reactors in a safe manner.  Now the problem with nuclear that people just have to realize is the cost.  And I’m talking about capital cost.  Capital costs that are being published right now for this new wave of nuclear plants that are being permitted are something in the order of between $6,500 to $8,000 a kilowatt.  Well, that’s two to two and half times more on a dollars per kilowatt basis of a coal plant that could be built today, and really five times more in terms of cost than the coal plant that was built only ten years ago.  So a lot of this is driven by commodity pricing of steel and concrete and copper for the generators, and exotic metals that are needed in the reactors themselves and so forth.  But the fact of the matter is that people just need to realize that the electricity coming out of these reactors when they go commercial, when they come online, is not going to be cheap.  It’s not going to be low cost power that we have been enjoying for the last twenty years.

ROB:               But it does reduce the use of natural gas, I guess which is the fuel of choice right now for power plants, right?

BILL:              Right.  Natural gas is the fuel of choice and a lot of it has to do with the fact that people like to beat up on the electric utilities, but the fact of the matter is that they don’t have much choice right now.  It’s at their peril that they would try and start the process for permitting a coal plant because there’s so much momentum against them right now related to global warming and the greenhouse gas issues, and emissions issues, and not-in-my-backyard issues, and the mountaintop mining issues, and all these other things.  And the ash bills like we saw in December up in Tennessee from when the TVA plants … There’s a lot of things working against coal right now.  So that’s why a utility executive that is forced to face the need for new generation, his obvious solution that can be done quite quickly, I’m talking about a plant that can be permitted and brought commercial in three years or less, probably, is to build a combined cycle gas turbine plant of the type of plants that I built when I was with Mirant.  They are quick to market, but the big unknown there is what’s the price of natural gas going forward?  I mean what’s the price going to be?  Georgia Power’s putting in a bunch of new gas-powered generation out here at Plant McDonough on the Chattahoochee River, and I think it’s going to go commercial about 2016.  Well, the price of the construction of the plant is going to be reasonable, but nobody knows what the fuel price is going to be in 2016.  They have projections, but who knows how good they’re going to be.

ROB:               Now France relies for their electricity mostly on nuclear power plants, right?

BILL:              I think about 80% of their generation comes from nuclear, and the remainder … They do have some hydro in their mountainous regions, and they probably have some natural gas.  I don’t know if they have any coal at all in France.  They may in some regions, but I’m not aware of it.

ROB:               You had told me that each of their plants is a lot less than our nuclear plants, and you told me why.  What was that reason?

BILL:              Well, when they decided to … When Electricite de France, which is a government agency really so they have the benefit for better or worse, I say the benefit, but they have an agency which is responsible really for the overall generation of electricity for the whole country.  And that cuts out a lot of the red tape and a lot of the blind alleys.  And once they make a decision they can move on it.  And they made a decision some years ago, and I’m going to say thirty or forty years ago, that nuclear was the way to go for France, and they felt like that was a good choice.  And so what they did is they standardized a reactor design.  And I don’t know the details of whether or not this was EDF’s own engineering that did some of this or if it was some of the big consultants that worked with them, or how exactly it came down.  But they standardized a reactor and they replicated it twenty times let’s say for this particular design, whereas in this country, in the U.S.,  virtually every reactor built in the ‘60s and ‘70s up in to the ‘80s was a custom design.  It was engineered to the nth degree, overseen to the nth degree by NRC.  And I’m not saying that was a bad thing.  I mean you’ve got to have the watchdog regulators in the nuclear business.  But as a result, each plant was like a fresh sheet of paper and when you do that, an awful lot of money gets spent on consulting fees and construction fees and so forth.  So the price of a plant goes up.

ROB:               Yeah.  I’d imagine so.  Alright, now let’s get in to ethanol.  What is your opinion of ethanol made from corn?

BILL:              Well ethanol made from corn it gets a pretty bad wrap from a lot of quarters, and the main thing being some people say well it takes more energy to make it than the value of the energy that’s in it.  I don’t believe that.  I believe it’s a net plus, but it’s not a huge net plus, whereas ethanol from cellulosic materials which we’ll talk about in a minute I assume, is a better energy balance.  But here’s what you have to think about.  This is in my way of thinking, okay.  Any ethanol that displaces petroleum fuels in a mixture in this country potentially represents that many, whatever many, fewer barrels of oil that we’re importing from people that don’t necessarily like us all that much, whether it’s coming from the Middle East or Nigeria or whatever.  Now this has been a boon for better or worse to a lot of farmers in the heartland, particularly in places like Iowa, Minnesota and the Dakotas for example.  There have been all of these corn ethanol plants built that have been huge moneymakers for the farmers, and the farmers are typically part owners.  There’s a lot of them that have been built by agricultural co-ops which the farmers actually own.  And so when gasoline got so high and the price of ethanol tracked behind it, these people made a lot of money over the last ten years.  Now was that at the expense of somebody else?  Well, you know, the whole food versus fuel debate will go on forever.  Obviously the price of corn got very high.  Did it affect the price of chicken feed?  Did it affect the price of tacos?  Did it affect the price of anything based on corn?  Sure it did.  Absolutely, I believe that happened.  But I don’t think it’s necessarily a bad thing.  People like to say the ethanol experiment in this country was an absolute disaster.  I don’t think that’s true.  I think it has at least focused the debate on what the avenues are that we can make renewable transportation fuels from.

ROB:               Now what is the advantage of making ethanol from pine trees, which I understand is one of your projects?

BILL:              Well, the energy balance on pine to ethanol can be as good as … Let’s say the total energy for the ethanol that’s produced, perhaps 30% of that energy goes to making it and the rest is a net plus.  So the energy balance is better than corn to ethanol.

ROB:               What is it for corn to ethanol?

BILL:              Pardon me?

ROB:               What is the balance for corn to ethanol?

BILL:              It’s probably about 10%.  In other words, it’s probably about 10-12%.

ROB:               Versus 70%.

BILL:              Versus what?

ROB:               Versus 70% for —

BILL:              Correct.  Correct.  And why is that?  Well, you’ve got to look at … Now when I talk about cellulosic ethanol, I’m talking about in the case we’re focused on, for example, pine trees, pine plantations, for example, that have been grown for pulp and paper in the Southeast for the last fifty years.  These plantations, a lot of them have been grown on land that was marginalized years ago, used to be tobacco land, used to be cotton land, a lot of it pretty low productivity compared to the beautiful soil that you see in places like Iowa and western Minnesota okay.  The black loam that is so productive for vegetables.  So you’ve got a lot of land in south Georgia that’s sandy and it really is not very productive for growing vegetables that had been used for cotton and what not in the past, and has been changed over for growing pine trees.  Well you’ve got an infrastructure in place too that has served the pulp paper industry.  And you don’t have the cultivation needs and the energy needs in terms of energy to make fertilizer, energy for tractor fuel, energy to run irrigation pumps that would make growing corn in these same regions so energy intensive relatively. So you go out there and you put out seedlings for pine trees and you let them grow for fifteen years, then you thin them.  Ten to fifteen years, then you do a thinning.  Then you let them grow another ten years, thin them again, and then if you … The whole thing about pine trees in this state or in the Southeast, you’ve got a lot of different ways to go in the past.  You go to saw timber which is very valuable material.  You go to pulpwood which is valuable, but less so.  And in the case that we’re talking about, the demand for pulpwood has waned in the past five to ten years because pulp and paper, the pulp and paper industry is not as robust as it once was.  90% of the commercial forest land in Georgia is owned by tree farmers now, whereas thirty years ago, 90% was owned by paper companies.  The tree farmers want a new outlet for their product which is their trees, and they’re all for the rise of the cellulosic ethanol market.  So that’ll give them a new place to sell their product.

ROB:               Is ethanol from pine trees, is it available now for cars?

BILL:              No, it’s not.  There have been some demonstrations on a small scale done here and there.  We’ve made some at the Georgia Tech laboratories here, okay.  And there’s a plant being built down in Soperton, Georgia by Range Fuels.  They use an entirely different process than we do.  But at the end of the day, they’re going towards a fully commercial plant to make cellulosic ethanol from pine.  I’m not sure, I think the first phase of that plant is slated to start making some fuel at the end of ’09 or early ’10, but I don’t know when they’re going to be fully commercial.

ROB:               Why has the ethanol from pine trees not progressed more quickly?

BILL:              Well, it’s kind of interesting.  Back when I was here at Georgia Tech back in the ‘70s, we actually had a pretty impressive program to make ethanol from trees.  Back then, it was funded by the Department of Energy, but then it was all hardwoods, okay?  And DOE sponsored various programs to make ethanol from hardwoods because hardwoods were readily available, and in a lot of places are considered junk trees.  Whereas certainly in the Southeast, pine timber was considered untouchable because it all belonged to the paper companies, and the paper companies knew where their pine trees were going.  They were going in to the paper mill or maybe to their satellite sawmill, but certainly not for any other use.  And they just weren’t available, so you weren’t going to be able to get that material.  Now, like I said, it’s changed.  It’s flipped the other way, and most trees out there are owned by private landowners in the Southeast, and also there’s just a slow down in some of the other markets and the owners want to be able to hedge their bets and go to a different place.

ROB:               Bill, we’re about at the end of the time we’ve got allotted.  If you were the Secretary of Energy right now or Barack Obama our president, what would you be trying to do on the energy end?

BILL:              Well, you know, there’s been a lot of talk in the past ten years that energy’s come back up as a point of discussion, of what the silver bullet is, and there really isn’t a silver bullet.  But this goes back … Unfortunately, if I wanted to be nostalgic and somewhat disappointed, we go back to the days of the Jimmy Carter era in the late ‘70s when we were coming off of the second energy crisis and we were going to have a solution, and we were going to get America off of oil and we were going to become more self sufficient.  There was an opportunity then to advance research in a lot of fronts.  There’s another opportunity now.  I hope it sticks this time.  I think renewables have a role.  They have a role in this country.  Now, it’s not a be all and an end all, because let’s face it, when I built a natural gas fired 550 megawatt power plant with gas turbine engines, the last project I did in Michigan for example, I could put 550 megawatts of generation on about four or five acres of land with a gas pipe coming and call it done, okay.  Very quick, very simple, very clean.  Now, the only unknown there is what’s the price of that natural gas going to be?  But we need to keep that on the table.  We need to keep coal on the table.  We need to clean up coal.  We need to continue to follow the clean coal route at some level.  Because we still have two hundred, two hundred fifty years worth of coal reserves in this country, but we’ve got to be smart about how we use it.  And the public sentiment is quite against it at the moment.  I think we do need to advance nuclear power.  We’ve got to figure out what the waste solution is on that.  We’ve got to get Yuka Mountain or an equivalent in operation to deal with that.  But renewables have a place.  And the point I was going to make with the gas turbine is a 500 megawatt natural gas fire plant on three acres … The equivalent to do that with a wind farm will take square miles, okay.  That’s just the reality of it.  A wind machine, for example, has only a 30% capacity factor, and you have to space them apart.  And you can only put them in places where the wind blows well.  And we did a study along with Southern Company off the coast of Georgia that shows there is a wind resource here.  We could put some substantial wind farms off the coast and use that as renewables.  There’s a lot of biomass in the Southeast that could be utilized.  We have to be smart about it.  We have to make sure that five plants aren’t built on top of each other and the price of wood becomes three hundred dollars a ton.  That’s not going to work.  So somebody’s got to be minding the store on smart growth in power plants, for example.  But anyway, I would say to the Obama administration — advance the ball on renewables.  Make it more of a factor in this country like it has become in Europe, but don’t turn your back on traditional technologies.  You’ve got to make sure you’ve got them advancing as well.  And if anything new comes down the line in terms of nuclear or what not, it can be utilized.

ROB:               Bill, if anyone wanted to follow up with you, how could they reach you?

BILL:              You can call me at the Strategic Energy Institute at Georgia Tech.  My number’s (404) 385-6939.  Or you can email me at bill.bulpitt@energy.gatech.edu, or you can go on the main Georgia Tech website and Google on the website “energy institute,” “strategic energy,” and our website will come up.

ROB:               Bill, thanks a lot for being on today.  It was very informative.

BILL:              Alright, you’re quite welcome anytime.

INTERVIEW OF VENTURE CAPITALIST – Said Mohammadioun

SOMETHING YOU MAY NOT ALREADY KNOW

Said says that the information that’s really important for a business plan is what helps somebody else understand the gist of your business: your market, why your customers would be interested, why would they want to pay what you think they would pay.  What is not useful is having a lot of pro forma information where stuff could be true or not be true about any company. A good business plan is more likely to be four, five, six or seven pages as opposed to forty or fifty pages.

ROB:            This is Rob Hassett for btobmagazine.com, and today I’m going to be interviewing Said Mohammadioun who is the managing partner of Tech Operators, LLC.  Tech Operators, LLC is a venture capital firm.  Said, good morning.

SAID:            Good morning, Rob.  How are you?

ROB:            I’m doing good.  How are you doing?

SAID:           Very well, thank you.

ROB:            Now Said, I know that you were previously an entrepreneur.  You were the CEO and founder of Samna Corporation which  developed one of the best word processing packages for the personal computer.  You ended up selling out to Lotus, right?

SAID:           That’s correct.

ROB:            Right, and you also were the CEO of Syncrologic, right?

SAID:           That’s correct.

ROB:            And that helped sync phone data on phones that were on the Verizon service to computers, right?

SAID:           That’s right.  We provided a service through Verizon to sync your calendar, contacts, and e-mail, so if you had a e-mail capable phone, other than Blackberry, and you wanted to have your e-mails pushed to you, that was through our service.

ROB:            And you sold that company to Nokia?

SAID:            Eventually, we combined with a company called Telesync and then sold the whole thing to Nokia.

ROB:            Said, who are the other partners of Tech Operators?

SAID:            My partners are Dave Gould, a former CEO of Witness Systems, Tom Newnan, a former CEO of Internet Security Systems, and Glenn McGonnigle, a former CEO of Vistascape.

ROB:            A strong group.  And how much have you guys raised approximately?

SAID:            We’re not finished yet.  We are hoping it will be somewhere around 30 million dollars.

ROB:            What size investments are you looking for?

SAID:            We’re looking for investments, companies that are early stage but past the concept period.  We’re looking for companies that have their product or service up and running, and have some number of customers, perhaps revenue of a million or two million dollars a year.  We think our money and our background will be helpful to businesses and that’s where we can make the most contribution.  Our investments initially may be one or two million dollars, but we expect that over a period of time, it’ll end up averaging about four millions dollars per portfolio

ROB:            And what industry are you targeting?

SAID:            Software.  Computer software, and specifically we’re looking for software as a service.  We like the small business market a lot, so we ideally are looking for software as a service to the small business market.

ROB:            And what is the advantage of software as a service to the small business market that you like?

SAID:            Well, software as a service in general is a good way of delivering an application to businesses because you can basically have a much, much higher effective rate of success.  The software is operated and run by the people who designed it, basically the people who are experts at it, and the businesses don’t have to go through a learning curve and they don’t have to spend their resources doing things that are not business critical to them.  The function of the software may be business critical, but running it and maintaining and so on, should not be.  This particularly applies to small businesses because small businesses don’t have IT departments, so they basically live vicariously through the services of part-time consultants or people who they know.  So they don’t end up spending a whole lot of time making sure that their computers and the data is well taken care of.  So for them, offering computing in general as a service is very, very important.

ROB:            And it’s provided over the internet; is that how it works?

SAID:            That’s right.  You’re connected through the internet, and basically all you need is the PC and a broadband connection.

ROB:            And you don’t need a server in your office?

SAID:            You specifically don’t need that server in your office; and therefore, you don’t need anybody to take care of it.

ROB:            It’s all taken care of at the site of the vendor, is that right?

SAID:            That’s correct.

ROB:            Said, I know you’ve mentioned this before and you alluded to it a minute ago, but what will you actually provide besides money?

SAID:            Our name is indicative of the strategy we’re trying to employ.  We’re all operators of companies; we’ve owned businesses in the technology market before, and what we want to offer to companies is money, but also the availability of us as experienced operators and our network.  We’ve worked with a lot of very good people, so we think we would be particularly useful in the stage of the company where the concept is proven and you know there’s a business, and the execution is the key point.  We can help them grow faster and maybe skip some of the mistakes that we’ve made, help them find the right people, help find distribution, help with strategy, you know to whatever help they feel they need, we are very likely to have had that experience before amongst the four of us.

ROB:            Will you guys actually visit your clients on a regular basis?  I said clients, the companies you are investing in on a regular basis?

SAID:            Yeah.  We expect to be quite available to our portfolio companies to the extent of,  if they wanted us to spend a day a week with them, we’d be happy to do it, as opposed to a typical venture investment where you tell them to show up for the Board meetings and maybe make a couple of calls in between.

ROB:            As far as the money you’re putting in, what form of investment do you expect to make?

SAID:            It will always be in equity form, preferred stock basically which is a normal easy type of instrument.

ROB:            And you’ve mentioned to me before that valuation as a criteria for a potential portfolio company is overrated.  What did you mean by that?

SAID:            Well, what I meant was that entrepreneurs, and sometimes venture capitalists as well, tend to focus on, you know, to put an inordinate amount of focus on evaluation of the investment process.  In my humble opinion, it’s a misguided focus.  You know, valuation has to be in the general ballpark, but whether it’s a little bit less or more is not all that important to either side.  What matters is whether there’s a good fit.  If you have the right investors and they help you, then you end up winning.  And if you win, everybody comes out okay.  And if you don’t win, it really doesn’t matter what the valuation is.  So it’s not the critical success factor.

ROB:            Said, in deciding whether to invest in a company that meets your general criteria as far as the one or two million a year in income and meeting the SAAS model, what are the factors that would make you choose one company over another?

SAID:            Well, there are some markets that we know a lot more about than others.  We know that two of my partners have strong security software backgrounds.  My background is enterprise software and mobile software.  Dave’s is primarily enterprise software, so those are areas that we know reasonably well, to the extent that some things in those areas are easier for us to evaluate. It’s more comfortable, as opposed to other software where we have to learn the space. Our experience still applies, but in a more general way.  We’re basically looking for software with viable markets.  We think there’s a lot of possibilities and services that would be good for small businesses.  We’d like to  have specialized apps for enterprises that are interesting and have a lot of growth potential.  Other than that, we’re hoping to look at all software services.

ROB:            How important is the business plan?

SAID:            You have to get the gist of what your business is across to your perspective investors, but it doesn’t have to be a big long document.  The information that’s really, really important is what helps somebody else understand the gist of your business, understand the gist of your market, why your customers are interested, why would they want to pay what you think they would pay, what is the competitive landscape, etc.  What is not useful is having a lot of pro forma information where stuff could be true or not be true about any company.  That really doesn’t serve a purpose being in your business plan.  It just adds bulk and hides the more germane factors that we really want to learn.  So I’m perfectly fine with a business plan that’s four, five, six or seven pages as opposed to something that’s forty or fifty pages.

ROB:             Do projections matter to you that are in a business plan?

SAID:            Having a model matters, but there has to be some substance behind it.  Projections that are just exercises, operating a spreadsheet, don’t add anything; we all know how to do that.  But the model that has some substance based on real data from the market is very smart.  And if they haven’t done one and we’re interested in the company, then we’ll help them do it.

ROB:            And it sounds like you really want the principals of your companies to understand their market.

SAID:            That’s the key to any business’s success.  Smart ideas, hard work and money, all of those help, but you’ve got to understand your market.  To be successful, you’ve got to figure out what it is that your customers are willing to pay for and other factors that are market related.

ROB:            Said, what do you think about these broker groups that tell entrepreneurs that they’ll try to find the money from venture capitalists? Do you believe they’re helpful?

SAID:            In most cases, I don’t believe that’s very helpful.  It depends on how much money you’re trying to raise.  At later stages where some company’s looking for tens of millions of dollars in a single capital raise, it makes some sense because your type of investors change and so you can have a banker who takes you to different kinds of institutional investors.  But for early stage companies, I think most venture capitalist are not predisposed to want to deal with a broker.  They want the money that they invest to go towards growth in the company.  They’re unwilling for that money to pay for intermediary fees and so on.  And generally, you know, if you’re an entrepreneur, and you understand your business, you’re supposed to be able to go out there and pitch it to people.  If you can’t do that and you have to have somebody else do it for you, then perhaps that’s a different problem.

ROB:            Are referrals helpful from lawyers or accountants or others?

SAID:            The referrals are helpful because … because depending on who’s referring you, then you know that the company’s already made it through their filter, so referrals are helpful.

ROB:            Said, if somebody is in a field other than what you’re targeting, other than software as a service, would you consider investing in them?

SAID:            It is unlikely.  If it is still software, we might because we understand the market.  If it is something other than software, then it’s very much not in our park.

ROB:            Said, if anyone believes they fit your criteria and they want to contact you, how would they reach you?

SAID:            Well, the best way would be through our website.  We have a website called techoperators.com.  There’s a way to contact us by e-mail there.  They could either send it to me directly at said@techoperators.com, or just send it directly to info@techoperators.com, which makes sure that two or three of us actually see it.

ROB:            Said, thanks a lot for being available today.  I think this is going to be very helpful to a lot of entrepreneurs.

SAID:            I hope so.  It was a pleasure talking with you Rob.

ROB:               Appreciate it.

 

INTERVIEW OF MARK BRAUNSTEIN, MD

SOMETHING YOU MAY NOT ALREADY KNOW

Mark Braunstein, an acknowledged authority on the health care industry, says that those who have objectively studied the issue, eventually realize that the economics of the healthcare industry are not the same as for other industries and that healthcare operations in which the doctors are paid a salary generally provide better medical care for the money than health insurers that pay doctors based on such factors as the number of procedures.

Q:           This is Rob Hassett with btobmagazine.com.  Today, I’m going to be interviewing Mark Braunstein who is a Professor of the Practice in the College of Computing at Georgia Tech, and who is also the associate director of the Health Systems Institute at Georgia Tech.  Mark has an undergraduate degree from MIT, and was always interested in technology and computers, and is also a medical doctor.  He attended medical school in Charleston, South Carolina near his home.  Today, we’re going to be talking about the current healthcare crisis and what can be done about it.  Mark, it’s a pleasure having you on today, and I understand that after you obtained your medical degree, you actually became a professor in that same medical school.

A:           Yeah, I was on the faculty there for three or four years.  I had actually gotten a grant while I was still a medical student, to develop an early electronic medical records system.  The idea was really to have a model of healthcare in the community. So we had pharmacists and dentists and social workers, and all sorts of people that you would run into in the healthcare system community.  The electronic medical record that we developed actually served all of those disciplines, so the idea being a unified record that everybody could use and see.  The pharmacy part of that attracted a lot of attention.  Most listeners to this probably recognize it when they take a prescription to the drugstore and they use a computer system to fill that prescription. What they probably don’t realize is that a computer keeps a record of all the medications they’re on and checks them to make sure that they’re safe when taken together and that the dose is appropriate, and so forth and so on.  We were actually the first people to do that.  And there was so much interest in that that, I approached the medical school with the idea of starting a company to commercialize the technology, which we did.  It attracted the attention of Kaiser Permanente and the U.S. military, both of which ran huge pharmacies back then.  And I actually thought I would remain an academic, so I went out looking for a company that would handle this thing commercially, and ended up finding National Data Corporation over here in Atlanta.  And we did an arrangement with them and, in retrospect, that was really the beginning of NDC Health, which many people will recognize as a company that got to be pretty large.  And two or three years later, they actually made me the proverbial offer you can’t refuse, to come over here and run that business for them, which I did.  And I ran it for eight years.  It grew to be a very successful business in the pharmacy automation field before I left and came over to Georgia Tech and started another company, this time developing handheld computer-based electronic medical records for the home healthcare industry.  And I got involved with Georgia Tech as a result of that and remain involved, and that company was acquired almost 3 years ago.  Several people over here wanted me to come and help them develop programs in the whole area of health information technology which, as again many listeners will probably know, is a major thrust now.  President Bush made a big commitment to health information technology back in 2004 in the State of the Union Address because he and his Administration saw it as part of the solution to improving the quality and reducing the cost of healthcare.  President Obama continued that.  Not a lot of people seem to realize this.  He actually pretty much continued President Bush’s programs, both in terms of the approach, and the dates.  But the Bush Administration never actually funded the program, and Obama saw the Stimulus as a way to do that.  And there’s $20 Billion in the Stimulus that is going to incent physicians and hospitals around the country, particularly those in rural areas, to adopt electronic technology and a more modern approach to practicing medicine, which those of us in the field believe, and hope, will lead to a more efficient and effective and safer healthcare system.  That’s kind of my career in a nutshell.

Q:           That’s quite a career, Mark.  Mark, we know that most medical providers have computerized their financial information, but that most health information has not been computerized.  I know you are a big proponent of that.  What have the obstacles been to having that done?  In other words, why has the health data not been saved on computer and available in databases as has the financial information?

A:           What we’ve never been able to do before is overcome the disincentives that exist within the healthcare system that have actually kept physicians and hospitals from fully embracing electronic medical record technology.  In the case of physicians, for example, studies would tend to indicate that most of the financial benefit, probably somewhere around 80% of it, accrues to payers because electronic medical records among other things can help eliminate duplicates of tests and procedures and they can also be used to alert physicians when the particular test or procedure they want to do might not be the best choice.  Well, that doesn’t financially benefit the physician.  In fact, it may reduce his or her revenue in that particular instance.  So it’s hard to get physicians excited about spending $50-100,000 of their own money to install something that won’t really have all that much direct benefit to them.  Now when you make healthcare more efficient, that saves money for whoever it is that’s paying for the healthcare, and in large part in our country, that is employers and the government.  So that’s really the rationale for the government for providing these financial incentives if it feels that it will benefit.  The cost of doing it is probably going to be about $50 Billion when all is said and done, which is a lot of money.  But I was at the conference in 2004 when the Bush Administration kicked this off, and Tommy Thompson, I think he’s the former Governor of Wisconsin, who was, at that time, the Secretary of Health and Human Services, gave a speech to our group.  It was all live in a big room.  And I’ll never forget that he said he felt that this investment, once made, would save the Medicare program as much as $130 Billion  a year.  Now I’ve seen numbers as low as $70 Billion a year, and as high as $200 Billion a year, but it doesn’t matter whether you’re the low number of the high number, that’s not a bad return on a $50 Billion investment.

Q:          Mark, how is the Bush Obama program going to work to incentivize healthcare providers to computerize their health information records?

A:          The program that the Obama Administration developed and funded under the stimulus has four elements.  First, that financial incentives will be provided so that doctors and hospitals implement electronic medical records that are capable of what the Administration is calling “meaningful use.”  Now “meaningful use” is not yet finally defined in detail, but in general, it’s going to be about what I mentioned earlier to you, systems that can look at the clinical situation of each patient and compare the proposed treatment against what is generally regarded as the best available treatment for that situation.  The second component is that these electronic medical records systems will be connected to a Health Information Exchange.  Now there won’t be a national Health Information Exchange.  There will be local exchanges that are connected to a national network, so it will really be a network of networks.  There might, for example, be one in the metro Atlanta area. And the reason that’s important is that no matter where a patient goes …  Let’s say you’re a patient of a doctor in Dunwoody, and you’re involved in an auto accident downtown, and they take you to the Grady Hospital Trauma Center, which is the best trauma center in this area, they would have instant electronic access to your information, and that could easily prevent a real mistake.  Let’s say you’re allergic to some medication, or have had some prior history that’s relevant to how you would best be treated for whatever your problems were.  Now there are obvious privacy issues in that.  I mean if you are conscious and you can give consent, then there’s no problem.  But even if you do that, there is the issue of who are you, exactly.  If you have a common name, in a city as big as Atlanta, there will likely be many people with that name.  So there are technologic solutions to all of this, but it isn’t simple.  But HIPAA requires that all of these problems be solved.  So that’s the second element, that the doctors have electronic medical records that can help them practice a more effective medicine, and that they be connected to an information exchange so that no matter where you go, your information is available.  That works in reverse too.  Let’s say that a doctor feels that you need an x-ray or a laboratory test, and you’ve actually already had it done recently, say when you were in the hospital.  These days because it can be very difficult for the doctor to get those results, even if his office is across the street from the hospital, they often just repeat the test.  If that information were available electronically, then presumably they wouldn’t do that.  They would just look at the tests.  I mean this stuff is already being done.  There are places around the country where this capability already exists.  The State of Indiana, for example, is quite advanced in this area.  So I mean it’s not speculative that this could be done.  The third requirement is that doctors will have to report on how well (really their systems will do it for them), they are delivering care according to the guideline that have been established.  So what am I talking about there?  Well, let’s take diabetes for example.  There is a blood test called Hemoglobin A1C that’s accepted I think pretty much everywhere as the best way to determine how well diabetes is being managed in a patient.  So it’s pretty likely that several guidelines are going to say that any diabetics should have that test done according to some regular period, annually or whatever they end up recommending.  So doctors are going to be judged on whether they do that for their diabetic patients.  The data today shows that it’s often not done, even though everybody agrees it should be done, and a big part of the reason is because physicians who are practicing in a manual paper environment, really don’t have an effective way to manage it.  And then the fourth element of the plan is that de-identified patient data, in other words patient data that can not be attributed to anyone in particular, will be aggregated into databases, and there will be research centers established, maybe one at Georgia Tech who knows, where we are going to look for patterns that represent clinical effectiveness, and those patterns will become tomorrow’s standards.  So what do I mean by that?  Well, there was an article in USA Today just earlier this week.  Kaiser Permanente already pretty much has a structure in place, so they can do it now.  They’ve been studying knee replacements.  It turns out (and I’m not a surgeon, so this is news to me too) that there are three approaches to gluing an artificial knee in place.  One involves no glue; one involves something they called regular glue in this article, and the third involves a hybrid glue that I assume is more expensive.  And what Kaiser was interested in is which approach actually works the best, because in Kaiser, if there is a need for the second knee, Kaiser’s going to have to pay for it.  Their contracts with employers don’t allow them to bill the employers.  They get paid a flat amount of money to provide care.  And it turned out by collecting this data and analyzing it over a period of time, that the regular glue was actually the most effective.  So you can be sure in Kaiser, there’s now a rule programmed into there computer system, or there will be one soon, that says you should use regular glue, and if a physician tries to do a knee replacement using another approach, he’s going to be alerted and they may report on it.  I don’t know exactly how Kaiser handles that.  But that’s an example of clinical effectiveness, or clinical effectiveness research.  It’s looking at data about a large number of patients to see what actually works best in the real world.  These are projects which might be extremely expensive or difficult to do, but if you have computerized data being collected about patients routinely, these research projects may become actually quite easy to do, or certainly much less expensive to do.  So that’s the plan, and it isn’t really very different from the plan that the Bush Administration put forth.  The major difference is the Bush Administration felt that by removing market obstacles, and I can’t really comment on exactly what those might be, that the industry would adopt this technology without federal incentives.  I personally never thought that would work because of all the reasons we already discussed, and in any event, it’s sort of a moot argument since the Obama Administration, under the Stimulus, is providing the incentives that they  hope will incent doctors to do this.

Q:          Mark, how does the U.S. health system overall compare to the health systems of other countries around the world?  Is it the best?  Is it the most expensive?

A:          How much time do we have?  Well, it is and it isn’t, I guess is the best answer.  When it comes to high technology care, for example, a heart attack or, to use the example I used earlier, major trauma in an auto accident on the downtown connector, the data would seem to indicate that we are the best in the world.  The survival rates for those sorts of things in the United States are better than they are anywhere else.  Now once you get beyond that, most of the rest of healthcare, and this tends to surprise people who are not close to healthcare, is the management of chronic diseases, things like diabetes, and hypertension, and chronic obstructive pulmonary  disease, arthritis, and so on.  The conditions that once you have them, you’re going to have them for the rest of your life because there is no cure.  Now they can be managed, but they can’t be cured.  The management is actually quite complex because people are quite mobile in our society, so they move around.  Medicine is highly specialized.  We have far too few primary care physicians.  So, for example, I saw a study just the other day that said a patient with five or more chronic diseases, and that may sound like a lot to our listeners, but people actually rarely have just one chronic disease; they tend to have several of them.  So a patient with five or more chronic diseases, over the course of a year, is going to have care provided by somewhere between fourteen and fifteen different organizations.  Many of those are going to be different physicians offices, but some of them might be a lab or something like that.  This data comes from analyzing claims, so any entity that can submit a claim gets counted.  That’s over a year!  Now you can imagine, if there is no organized system to assure the data is shared and exchanged among these fourteen or fifteen different entities, that there’s lots of room for mistakes and for duplicative care.  I mean I don’t know what was done before or I can’t get to it, I’ll just do it again.  This same group of patients, these patients with five or more chronic diseases, represent about 20% of the patients in the Medicare system, but they represent half of all the cost in Medicare, so it’s a group of people that people are quite interested in.  There is good evidence out of some other countries, Denmark being the example that most people point to, that if you had electronic medical records everywhere and you had free exchange of this data, you can actually substantially reduce the cost of caring for people with these sorts of chronic diseases.  I mean in the last study I saw, which is a period of I forget how many years, the cost of managing chronic disease in the United States rose by 54%.  In that same period of time, the cost of managing chronic disease in Denmark hardly changed, and actually the populational statistics in Denmark are quite similar to ours.  People are roughly the same age profiles and so on and so forth.  So they’re we’re clearly not the best in the world.  Now exactly how bad we are is a matter of debate.  There is data that is widely quoted, and I must confess I use it a lot too, that would say we’re at or near the bottom among the 36 or 37 industrialized countries that contribute data to a database that everybody looks at.

Q:          Mark, you’re saying that we’re near the bottom according to that data?

A:          Yeah, in the management of these chronic diseases and in general public health statistics, things like vaccination rates and maternal and child health, so on and so forth.  There was just an interesting study this week out of the University of Pennsylvania, however, which suggested that we’re not quite that bad; we may be more like in the middle.  And the difference is because of lifestyles in this country.  Another issue with chronic disease is that maybe half of it is due to lifestyles, due to poor diet, nutrition, lack of exercise, so on and so forth.  And the obesity rates in the U.S. are the highest in the world.  And this study suggested that the healthcare system is being unfairly credited or discredited by these lifestyle differences, and if you factor them out, then maybe we’re in the middle.  But whether we’re in the middle or near the bottom, the reality is we spend nearly twice as much per capita or based on our gross domestic product on healthcare, as anybody else.  So at least with respect to these chronic diseases, which are the things that are driving healthcare costs in the country, you can argue we’re not getting our money’s worth or we’re just spending too much money, because the results don’t align with the level of expenditure.  And that’s really what all of this is about.  I mean that’s what President Bush, and now President Obama, are so concerned with.  Can we use the combination of electronic records and health information exchange, and quality reporting, and clinical effectiveness research, to allow us to more effectively manage in a coordinated and continuous way the chronic diseases that so substantially burden our healthcare costs.  As a group, they represent 3/4 of all the spending in this country on healthcare.  That’s 3/4 of $2.5 Trillion!  From the federal government’s perspective, where they pay all the costs of Medicare, and where the trust fund is looking like it’s going to run out in a few years, we’re talking about 90% of the costs.  So it’s the right problem to focus on, and there is data from other countries that it’s possible to do better, and that computer technology can be a key strategy in doing better, so you know, it all seems like a reasonable thing to do to me.  But of course I’m prejudice.  I’ve been interested in this for a long time.

Q:          Now you mentioned that primary care physicians, that we have a lack of them in the U.S., and that effects our healthcare system in an adverse way.  What is it that primary care practitioners do for us?

A:          Well they’re the main line of treatment for these varied chronic diseases.  I mean if you think about it, if you go to a cardiac surgeon, he or she is very focused on “I’m going to fix that valve problem you’ve got,” or “I’m going to bypass your Atherosclerosis,” or whatever it is.  But who actually looks at you in total over time?  Well, that’s the job of a primary care physician, a family practitioner, a general internist, a pediatrician, or an OBGYN.  And the number of medical students that are going into primary care has dropped dramatically.  I was at a meeting earlier this week and talked to someone who said that at Duke, for example, their graduating class in this past June, of 175 students, only three went into primary care.  My own alma mater, I was there as well earlier this year, and only 8% of the class went into primary care.

Q:          What’s causing that in your opinion?

A:          Well, I think there’s general agreement on that.  The average primary care physician makes about 1/3 of what a specialist makes in this country.  So if you can imagine some young person who has gotten themselves into significant debt to go through college and medical school, and even though they might be motivated to go into primary care, they’re looking at a level of compensation that’s maybe 1/3 of what they can make by spending 3-4 years in training and becoming a specialist.  Many of them, in fact it sounds like most of them, make the decision to become a specialist.

Q:          Is that because insurance companies pay more to specialists or Medicare does, or both?

A:          Well, I think the real answer is that specialists, in many instances, do procedures.  And procedures are quite lucrative: surgical procedures, colonoscopies, and so on and so forth.  I think we as a country are going to have to look at that issue.  Or we’re going to have to do things that leverage the primary care physicians we do have, and there are interesting ideas along those lines, because there is a concept called the patient-centered medical home.  I actually don’t like the term because it makes you think we’re talking about something that takes place in the home, and it really means a home for the patient with respect to medicine.  The idea is for a primary care physician, instead of practicing medicine in the conventional way where they sort of do everything, for them to head up a team that would involve nurses and other practitioners to provide a level of access and continuous care, that would help achieve better results in the management of chronic disease. And there are physicians around the country doing this, and there is pretty convincing data that it actually works.  That you can manage chronic disease more effectively and more efficiently using this approach.  And, of course, the doctor leverages their time and effort.  The interesting problem here, and this is particularly relevant to a state like Georgia, which is so large and has such a large rural area, over 1/2 of the physicians in our country are in practices of four or fewer doctors.  And the kind of investment in people and technology, because everyone agrees the patient-center medical home requires electronic medical records to do the coordination and the record keeping and keep track of which patients need what done and so on and so forth, that level of investment is really beyond small medical practices.  There was a recent study that rather dramatically showed that the larger a medical practice is, the more likely it is to be successful in practicing this way.  So the government, as part of the Stimulus Program, has put a special emphasis on helping these small practices that tend to be in rural and underserved areas, adopt this technology.  So in addition to paying for the technology, the Stimulus Program is also going to pay organizations to work with those doctors and help them successfully implement the technology.  That’s actually something that Georgia Tech is going to be involved in, I think.  We have a proposal in, and actually we heard earlier today that our preliminary proposal, which we’re doing with others, it isn’t just us, was accepted and we’ve been invited to submit a final proposal.  So helping these small practices that are out there in rural and underserved areas adapt to modern technology is important.  And another idea that’s starting to gain some attention is that if doctors have electronic records and were connected to a health information exchange so the health data was much more accessible, that maybe they wouldn’t need to employ a nurse to help them manage chronic disease patients because maybe they’re too small to afford that.  But one nurse could actually work with several practices, from home or wherever, because the clinical data that’s needed suddenly becomes accessible.  So this idea of doing a patient-centered medical home more virtually is something that people are interested in.  One way or another, we’re going to have to get our arms around this.  We can’t afford as a country to have chronic disease continue to grow like it is, fueled in large part by growing rates of obesity, and lack of exercise, and poor diet and nutrition, and continue to manage it so inefficiently.  Because that really is the thing that’s driving the inexorable growth in healthcare costs to a great degree.  Most people think it’s because the population is getting older and that’s a factor.  But the lack of efficiency and effectiveness in managing chronic disease is a bigger factor, I think.

Q:          Mark, you had mentioned to me those being some of the reasons the U.S. has such a high cost in the medical field.  Also, you had mentioned that paying doctors by the procedure you thought was not the best way to efficiently provide medical care.

A:          Well, that’s yet another issue.  How should doctors be paid?  Now this is probably a more controversial issue than anything we’ve talked about.  But when people point to the real success stories in U.S. healthcare, they tend to point to organizations like the Mayo Clinic and the Geisinger Clinic.  And the Mayo Clinic, of course, is in Minnesota, although they have a clinic as well in Jacksonville, and I believe they have one over in Phoenix, too.  The Geisinger Clinic is in rural Pennsylvania, and there are others.  Kaiser Permanente in California is held up as an example.  These all actually have a very different economic system than we have in most of the country.  Doctors are on salary. Often there are incentives based on the quality of care that’s delivered.  In the rest of healthcare, the incentive system is really based on the quantity of care that’s delivered, not on the quality.  People listening to this who feel like they wait a long time to see their doctors, and they only get a few minutes with him, should recognize that the doctor is incentived to see as many patients as possible during the day because they’re paid based on quantity, not on quality.  And a lot of people, I’m certainly one of them, think we need to find a way to change that.  Now doing that without these same information systems is virtually impossible.  Because if you’re going to incent people, and reimburse people and pay people based on quality, you have to have a way of measuring quality, and to do that you have to have reliable data.  So I think that is probably the ultimate objective here, that that’s probably where the federal government would like to take Medicare in time.  But we’ve got a long way to go to get there.  But there are examples in our country.  If you look at the organizations I mentioned earlier, in general, they get better results for lower costs.  And part of it has to do with their investment in information technology, but part of it has to do with the way the incentives are set up.  And actually, I talk to more and more doctors, certainly I’m not saying this is a majority of doctors, but I talk to more and more doctors who say that they would actually be happy with such an approach.  They’re really tired of trying to manage an office as a business.  Dealing with all the various claims and insurance plans and everything is very tough.  I think if a fair system that fairly values everyone could be devised, that it would probably be pretty well accepted.  That’s not to say that there wouldn’t be physicians who would want to opt out of it, and I can’t imagine we’ll ever have a system where there isn’t private practice, and I can’t imagine we’ll ever have a system where people who want to have more care than whatever system we evolve to, feels is appropriate, won’t be able to buy it.  That’s true in every country I know of, even though they all have some form of a single-payer system.  I think virtually all of them also have some form of parallel private practice where people who want more and can afford to pay it can get it.

Q:          That’s interesting that at the Mayo Clinic and Kaiser Permanente, the doctors are paid on a salary.

A:          Right here in Atlanta, Piedmont Hospital has 400 physicians who are on salary.

Q:          And I’ve heard that Johns Hopkins and the Cleveland Clinic are on the same program.

A:          Right.  I mean it’s a notion that surprises many people, but running a medical practice, given the complexity of our healthcare system  …  I mean, keep in mind that everyone listening to this who works for a company that provides health insurance, actually has a unique health plan.  Every company that has health insurance sits down with whatever company it contracts with to administer that plan … and let me make sure that the people listening, understand that as well.  Virtually every business in America that has, let’s say 100 or more employees, the number is not that precise, actually self insures.  In other words, they’re not buying health insurance; they’re buying administration of a health plan that they’re funding.  Typically what they do is they buy a catastrophic policy from let’s say Blue Cross which insures that their total annual expenditure won’t exceed a certain amount, but everything below that is actually their money.  They are paying the insurance company to administer it.  And they can sit down every year with the insurance company and decide what they want the rules to be.  Do we want to pay for this drug?  Do we want to pay for mental health?  Do we want to pay for this, that and the other.  So now imagine you’re running a physician practice in a big city like Atlanta where you’re seeing people from lots and lots of different companies and lots and lots of different insurance plans.  Well, it’s pretty complicated to keep all of that straight.  And there are costs associated with that.  So it’s not totally clear that many physicians wouldn’t be just as well off on salary as they are trying to run a private practice in this complicated environment, particularly given that they were never trained to do that anyway and probably aren’t terribly interested in it.

Q:          Now, of course there’s a lot of talk that the possibility of medical malpractice lawsuits causes doctors to provide more procedures than are necessary.  What’s your feeling on that?  What’s your observation?

A:          Well, I don’t have a feeling, I’ve studied the matter.  I can only tell you what I’ve read.  And unfortunately, I’m not going to be able to give a terribly satisfactory answer here.  First of all, a study that I always cite, done by Price Waterhouse Coopers, suggests that as much as 1/2 of all the money spent on healthcare in this country is actually a waste.  Now they break it down into lots of different categories, but in a tie for first place among the largest categories, and I think its $120 Billion each but don’t quote me on that, is unnecessary tests and procedures.  And then the question becomes, well how much of that is done for fear of medical malpractice?  And I’ve done a good bit of research, looking at various studies, and they’re all over the place.  The biggest number I’ve ever seen is, of course it depends to some degree on what test you’re looking at, but the biggest range I’ve seen is that it varies from 20-30% of all unnecessary tests and procedures.  The problem was done by a medical group, so it was a survey.  So it’s not really clear how unbiased that is.  At the other extreme, there was a study done by the Harvard School of Public Health back in 1990, that concluded it really wasn’t a factor much at all.  And there’s a third study that I show my students that concluded it was about 9-10%.  So it’s kind of pick your money, and take your choice.  I don’t know which is right.  It’s clearly an issue that has a lot of attention, but it’s far from clear just how big a factor it really is.

Q:          Mark, this has been very interesting.  I understand your wife is co-author of a very popular book.  I saw great reviews on it.

A:          Well, my wife is a family physician and she’s a huge believer of patient empowerment.  She believes that people need to understand more about their own healthcare and they need to be responsible for doing the things that will keep them healthy.  So she co-authored a book called “Your Body, Your Health.”  It’s kind of an interesting scenario.  You have to know my wife to appreciate this, but she sort of goes chapter by chapter, and reviews the things that one of which is going to kill you, and one issue by another explains to you what you need to do to not get killed by that particular problem.

Q:          When you’re in the hospital or being treated?

A:          No, this is out in the world.  Remember we said earlier that you know while everybody watches. … You know, I don’t watch a lot of television, but they watch shows like ER which, of course, focus on dramatic high technology medicine because it’s a great story, and we are the world’s best in that.  But that isn’t really what kills most people.  Most people are killed by chronic disease, and chronic disease in large part, and there are genetic causes, in large part is a result of human behavior.  So there are things you can do to live a longer, healthier life, and that’s what her book is about.

Q:          And Mark, if anybody wanted to reach you, what’s the best way for them to do that?

A:          Well, the only way to reach me reliably is e-mail.  I do have a public webpage, so anybody can type in “Mark Braunstein” and “Georgia Tech” and they’ll find my page.  It’s the first thing that comes up on Google, and my e-mail address is on there.

Q:          Excellent.  And I do want to mention that Stephen Nagler is my good friend who was, at one time, the chief surgeon at Northside Hospital, and who did help on this.  Mark, is there anything else you’d like to say about the medical industry or anything?

A:          Well, you know, I hope people will not get focused on some of the stuff that gets tossed around in the media and the popular press.  This is a very complicated industry.  It doesn’t work the way the rest of our economy works.  It’s very difficult actually to understand any of these issues without a good bit of study.  But I hope people that are actually interested, will take the time to do that and to understand the dynamics as I indicated an issue like how significant is fear of medical malpractice, is not an easy issue.  And I think if we have a more informed public, hopefully we as a society in a rational way, can come to some consensus and do the things we need to do to fix our system, because the system can’t continue the way it is.  There just isn’t enough money to fund it.

Q:          Thanks, Mark.

A:          Thank you.

INTERVIEW OF HALL MARTIN

 SOMETHING YOU MAY NOT ALREADY KNOW

Among other things, Hall has taken a unique approach to encouraging angel investors to invest in video games.  He puts together panels of up to ten (10) investors who listen to pitches from up to ten (10) entrepreneurs.  This approach helps avoid investors being distracted, as they are at less focused events, by competing proposals from companies from outside the video games industry that have business models with which the investors  are much more familiar.

Q:           This is Rob Hassett with www.tellmesomethingidontalreadyknow.com.  Today I’m going to be interviewing Hall Martin, who is the director of the game funding forum in Austin, Texas.  Hall, I understand you got in to the gaming industry in Austin, Texas and you realized that there was a problem raising money in the industry.

A:            Well recently in the last four or five years, I’ve been watching the gaming industry grow, especially in Austin.  We’re now the third largest gaming community in the country for development, but have seen just very little attraction to investors for the gaming community for various reasons.

Q:           And you decided to try to do something about that, didn’t you?

A:            That’s right.  Well I noticed that gaming deals would come to our Angel network, the Central Texas Angel Network, but they would never really get traction, not even in to the follow up phase.  And I found that Angel investors just had a hard time understanding the business models and the technology, and the space in general  for gaming communities, and so I put together a funding form that’s dedicated just to gamers, and it’s only gaming companies that come and pitch.  And I find investors who are interested in funding the title as opposed to the studio, more the movie model of investing.  I find those people.  We bring them out and have them sit on the panel and listen to the deals that these gamers would pitch.  And it created a little bit more of an even playing field, because now they’re comparing one gamer against another as compared to comparing a gamer against a life-science company or a software product or a consumer product company.

Q:           I imagine one of the problems is the prospective investors are not themselves gamers.

A:            Most are not.  Most have family members or know people that use the games, buy the games.  And so they see it a lot, but they’re not immersed in it themselves, and that gives us another issue for bringing investors in to the gaming world is that they’re not that familiar with it from outside of the investment world.

Q:           So how many of these programs have you staged so far?

A:           Well so far one, but it went so well we’re about to stage another one in Dallas, and then a month later we’re going to be staging one in Atlanta.  And then we got calls from Boston and Seattle to stage them there.  So we’re seeing a circuit around the U.S. starting to form where there’s a strong contingent of gaming companies to bring this funding forum, because it doesn’t appear anybody else is doing this right now so it’s quite an opportunity.

Q:           We really appreciate your helping us here in Atlanta.  You’re going to be staging this forum in conjunction with our SIEGE Conference scheduled for October 7 thru 9, 2011.  The Forum will take place on October 6.   More info is available at http://www.siegecon.net/SIEGE2011/ .

A:           That’s right, yeah.  We’re looking forward to coming to Atlanta.  We’ve gotten some very good deals signing up so far to pitch, and investors who are also interested.  So the elements are there in the community; it’s just a matter of pulling them together I believe.

Q:           About how many people are you going to expect to have on the panel?

A:           We always look for ten analysts and ten entrepreneurs pitching, and we can have more panelists, but the ten entrepreneurs is really the limit because it takes about three hours to go through ten pitches, where each one gets ten minutes to pitch and a five minute Q&A, and that’s about as much as most investors can take.  And in addition to the investors on the panel, I sometimes put industry experts, people who can help ask the more detailed questions about the technology or about the market or about the strategy.  Because even with investors who are interested in the space, it’s a very fast moving space.  Things happen or change very quickly in this world, which is another reason why it’s been a challenge for investors to get their arms around it, because if you’re code base is more than 18 months old, you’re pretty well out of date, and that’s just too fast for the investors to keep up.

Q:           Now the Angels that are going to be on the panel, will most of them actually not have invested in games before and not necessarily be that familiar with games?

A:           Some have and some have not.  Some are new.  Like they say, it’s an interesting phase when you look at it from a distance because you see how much activity is going on and how many people are involved.  You know there’s good opportunities in there and so it does attract new investors from time to time who want to kind of be a part of that but don’t know quite where to begin.

Q:           Is there any charge for the investors to be involved?

A:           Oh, no.  There’s no charge for the investors to participate.  All we ask the investors and the panelists to do is if an entrepreneur asks for feedback on their presentation that they give them a good evaluation or a meaningful evaluation about what they can do to improve.  So we ask them to give feedback and that’s about it.  We’re mostly looking for people that are interested in writing checks, and so those who are interested and find a deal, they’ve got quite a bit of work in front of them doing their own due diligence before they write the checks, so we feel like that’s enough to do.

Q:           Understood.  And now with respect to entrepreneurs , there is a screening process as I understand it.

A:           That’s right.  Anybody can send in an application and send us their one page exec summary, but if we choose it to be one of the ten finalists, we have them sign up in a package called AngelSoft. That’s the standard packet that all Angel groups use and it’s a good way to capture all the information about a deal in to a one page exec summary.  And also having the deal with AngelSoft does a lot for us in that we can then later syndicate that deal on to formal Angel groups if we can find a lead investor and get some investor traction .  Whenever I send something to a formal Angel group, the first question they ask me is is there any interest in this deal; is there any lead investor in it?  If the answer is yes, well then it goes to their short list and it goes through very quickly.  So that’s kind of the function this serves is finding the lead investor, getting the pitch ready, and getting some traction behind it with the investment community.

Q:           One thing you mentioned to me was that certain game models are more interesting to investors right now, or more likely to do well in the market.  At least for entrepreneurs, they should be focused on certain areas, and one of them you mentioned to me was Facebook.

A:           That’s right.  Where you deploy a game changes very rapidly.  Four years ago, you deployed a game on  the Sony console or the X-Box.  And then two years ago, they were deploying games on the mobile phone, and they still do all of that.  But if you’re looking at the cutting edge business model, or go to market strategy, today they deploy it on social networks, in particular Facebook.  That’s where games are being deployed today.  And that’s another reason why investors have a little bit of a challenge with this space.

Q:           Now on Facebook, how is the money made?  I mean normally they don’t sell the games.  There’s nothing paid for the games on Facebook, or did I miss that?  From the ones I’ve seen there was no charge.

A:           Well typically there is the premium model.  What’s on Facebook is what brings people in to the game, and then there’s an upsell or a sell of virtual goods or avatars or what have you that come later.  So the deployment on Facebook is the channel in to the market or in to the product line, and once you’re inside, if you find engagement with that, later there’s an opportunity to charge the user for that interaction . So you’re right, most of them are free on Facebook, and it’s true of many games they’re free whether on the PC or on the mobile phone, or even on Facebook.  The initial entry is at no charge, and then once you’re inside, there’s an upsell.

Q:           I know that one of the popular games on Facebook …  I don’t know if it’s still popular, I imagine it is …  is Texas Hold’em, the poker game.  And as I recall, you get a certain small number of chips to start the play each day, but you can pay for more if you want.  I guess that’s the way to make some money on it.

A:           Yeah, that’s another upsell opportunity is to give people a little bit to get themselves going, but if they want to play more or play at higher dollar stakes then they have to start paying for that, and so it’s a way of starting them off easy but then moving up the curve if that’s what the user wants to do.

Q:           Now what about the iPhone?  Is that sort of passé now or is that still a very big opportunity for games?

A:           I think it’s still an opportunity for games.  I think there’s still quite a bit coming out on it.  The question is that there’s so many games on the iPhone.  If you go to iTunes and look, there’s hundreds or thousands, or by now tens of thousands, of games out there.  So how do you stand out is the big issue?  How do you get traction with the segment in the market place to get people using your game?

Q:           Exactly.  As I recall on the iPhone, at least the games I’ve seen that are popular, they charge about $0.99 for a copy of the game to download it.

A:           That’s right.  Yeah, $0.99 seems to be the magic number in the iPhone world, and then other games have other ways of monetizing it as far as selling avatars or selling chips like in Texas Hold’em, selling or being able to buy points in order to be able to play at higher levels in games.  You get a different experience.  These are all things that people use to try to monetize their games.

Q:           Hall, you know in Georgia we have an income tax credit for anyone who spends at least $500,000 producing a game, and it’s 20% if you don’t put in a logo for the State of Georgia, and 30% if you will put a logo in your game relating to the State of Georgia.

A:           I see.

Q:           Now I don’t know if these games would run that much money.  Do you have any idea what the general cost would be of a game for Facebook?

A:           They’re probably a little bit less than that.  The most common request for funding I get is someone who has put a little bit of their own time in to it, six months or a year, and have built the basics of the game, but it’s just not quite there.  So the most common request I get is a 150 to 250K raise in order to complete the product and get it in to the market place with marketing.  You can spend your time on the software and get it pretty far along, but eventually, you have to invest the dollars to get the marketing going and really move it in to the space.  And the sweet spot is about 150 to 250K to get that done.  So if you were to monetize all the efforts that go in to it, you could probably do a very substantial game for three to four hundred thousand dollars at this point.  And so $500,000, you could have a very nice game if you were able to put that much money in to it, of course.

Q:           So we need to try to get the legislature to drop that requirement, that threshold, a little bit or a lot.

A:           Well the interesting thing is that as business models evolve and business processes become more efficient, it costs less to start up a company.  Back in the 90s, people used to stand up and ask for $5,000,000 in Angels groups because they wanted to start a web company.  Well back then you had to go buy the computers and pay American salaries and code in HTML, and it was just very expensive to start something back then.  You had to build your own server farms in those times.  In the post-2000 era, those same people were standing up and asking for $500,000 because that’s what it costs to use bandwidth on demand and you are now outsourcing your product development, and the cost of starting a software company or web site have dropped dramatically, and that continues to devolve downwards.  What was $500,000 2, 3, 4 and 5, is now probably about 300, $250,000 to do the same thing because you’re able to get things at a much lower price, server farms and hosting systems, and you don’t buy computers anymore, you just lease them.  And therefore, it’s cheaper to start a company.  So I think it is a moving target as it devolves downward.

Q:           Hall, you mentioned to me, and you sort of alluded to it just now, but you mentioned to me on Friday when we talked earlier, that the entrepreneurs should develop a prototype of their game, or at least a working model of their game, before they even come to the program, before they even seek investors.

A:           That’s right.  Investors in this base are going to expect the entrepreneur to put their own time and effort in to creating the product.  It may not be final or complete or the full vision, but it’s working, it’s doing things, it’s able to show the experience and potentially monetize it a little bit.  And then they expect family and friends’ money to be used to do a little bit of marketing to try and get it out there.  And then Angel money is really for acceleration.  So those who stand to pitch in our funding panels, typically more than half of them have a product and a little bit of revenue and they stand a real good chance of getting follow up meetings and investments.  And three or four guys are very close to coming out with something, but they don’t have revenue but sometimes they get interest, and those who have just a PowerPoint slide and nothing developed really don’t get any interest at all.  You really have to show up something beyond just an idea, and a working product is really the next step after the idea, and then revenue is the next step after that.  And my recommendation is to have all three when you show up to an investor.  And it doesn’t have to be the final software and it doesn’t have to be great revenue, but to show that some people will pay for it and will be happy with it is a tremendous check mark to have on your list when you go to an investor.

Q:           Understood.  And you know you had explained to me, and you had alluded to it earlier today, how the revenue model works for investors in this space, and it’s different from what we normally see.  It’s not that they would own part of the company.  They’re going to get a percentage of the gross you mentioned as the normal model.

A:           There’s an evolution of the Angel model where Angels traditionally put money in and take a piece of equity, so when that company’s sold in the three to five year time frame out, well then they get their money back.  Well if you look at it over the last ten years, that three to five year payback has really turned in to more like an eight to ten year payback, given the way the economy and the markets have gone.  So some investors would like to have their money back a little bit faster, and so they’ve come up with what’s called revenue based funding that works very well in the gaming industry.  And in this scenario an entrepreneur takes an infusion of cash and the investor takes a percent of revenue, typically one to five per cent, in years two, three and four.  It doesn’t come right away, but there’s a time when it starts, and then you share the revenues with the investor, and then the investor gets paid back a lot faster.  And quite often that works well in the gaming industry because people are more funding the titles than the studio or the company, and there’s no intention of selling off a studio ever, and so the idea is you’re just going to sell off the title.  Well that sits better with the revenue-based funding model because we’re all aligned, both the investor and the entrepreneur on trying to grow the revenues of that title itself.  So revenue-based funding is a new trend that fits very well with the gaming model.

Q:           That’s one to five per cent of the revenue you said in years two, three and four?

A:           Typically yes, and it’s either capped on the maximum amount of return or on the duration of it.  And if you cap both of them then it’s just a straight loan, but if you cap one but leave the other open, then it starts to look a little bit more like equity where there’s a bit of a risk reward in there for the investor.  And so I’ve seen models on all three where it’s just a straight loan, and then some where you just get money from two to six, years two, three, four, five, and six.  And then there’s some that just say you’ll get money up to this percent and it’s over.  And therefore it’s a little bit more of a risk reward in that case and it looks more like equity in that.  But in any event, you’re getting the money back faster because it’s starting sooner and you’re not waiting for the final exit.  And in many gaming deals there really is no exit.  There’s no selling the studio; there’s no selling the title.  It’s just simply a revenue generator.  So revenue-based funding is the new model.  There’s even a group called the Revenue Capital Association that’s come out that people are joining to learn more about how this model works.

Q:           If someone is interested in participating in the program on October 6, what should they do?

A:           I’d be glad for them to contact me.  I’m actually taking the applications and running the screening process and will actually be at the event to run it.  So the best way is to have them contact me.  My e-mail is mailto:director@txenetworks.com.  Just send me an e-mail.  If you’re an entrepreneur, I’m looking for your executive summary.  If you’re an investor, I’m looking for your interests; what have you invested in before?  What might be a good fit here to make sure this is going to be a good experience for the investor as well.  But we’re looking for both.  We’ve got quite a few people already signing up as entrepreneurs, and the panel is shaping up very nicely.  We also look for some industry experts and we’ve got several people already signed up for that as well, but we’d love to have more.

Q:           Well, that sounds great Hall.  And what is your web site if people want to learn more about what you’re doing?

A:           It’s www.txenetworks.com.  And there’s a tab there called “Funding Forums” and you can click on that and read more about what the funding forum process is all about . And we’re basically a web-based portal that promotes networking, mentoring and funding of startup and early stage companies with an emphasis on the funding side.  Whenever we survey our readership, the number one thing that comes up is funding.  And so we wanted to focus on that by doing open funding forums to try to draw more people in to it, and get more entrepreneurs experience.  And the nice thing about a funding forum is that if you’re an entrepreneur but you’re not ready to pitch, well you just come in the back and you get to watch, so it’s a great place for mentorship as well.  You get to see other people pitch and you get to see how they pitch, and you can learn a lot through that experience to see if you’re ready for doing that on the next round.

Q:           Hall, thanks a lot for speaking with me today and thanks for helping us here in Atlanta to try to find a way to get funding for the video game industry.  It has been a pleasure talking to you.

A:           Thanks so much for having me, and I’m looking forward to seeing you in Atlanta on October 6.

INTERVIEW OF KEN LEEBOW

 SOMETHING YOU MAY NOT ALREADY KNOW    

Among other things, Ken says to try to eat only foods that taste very good and that contain either a lot of fiber or a lot of protein.  He says this approach works to  enable people to lose weight because these type of foods fill people up with far less calories than other foods.

Q:    This is Rob Hassett for tellmesomethingidontalreadyknow.com.  Today I am going to be interviewing Ken Leebow.  Before Ken became engrossed in the connection between diet and health, he wrote a series of very popular books about Internet websites.  More than 3 million of those books were sold.

Q.    Ken, what lead you to focus on diet and health?

A:    I became interested in diet and health about three years ago when I watched a video online about the American Food System.  And that inspired me to learn as much as I could about what we eat.  From that I became  aware of the dysfunctionality of the American Food System and sadly, ultimately, the tremendous amount of diseases that it causes.

Q:    You found that in the United States we have more of a weight problem than in other countries?

A:    Our overweight and obesity rate here in the United States is 66%, and that’s a CDC statistic.  And they know that by having that type of percentage, a lot of people will say we have an obesity epidemic.  But what we really have is a food epidemic, a food crisis, and it’s what we eat that causes the problem.  I mean what you actually end up seeing is overweight or obesity or disease, but really a tremendous amount of it relates to what we’re putting in our mouths today.

Q:    Is there any other nation that you know of that has this much of a problem?

A:    I don’t believe there’s any other nation that has the type of statistics that we have related to that.  However, and very unfortunately, the diet that we’re on is known as the Western Diet.  So as our Western Diet spreads to all of these other countries, which, in fact, it has done, the diseases that we see here in this country: heart disease, stroke, Type 2 Diabetes, tends to go to those locations.  So it could be a country that has a very healthy diet; however, when they start seeing all the fast food and all the sugary type items we consume here and it goes to their country, they, in fact, end up with the same types of diseases that we have.

Q:    Are there some countries that still have a better diet than we do by a long way?

A:    Well, diets that sometimes are in Japan or Europe are better.  But what’s happening again over time they tend to start eating like we’re eating.  And they get the diseases that we have.  So interestingly and, I guess, fortunately, there is a better way to eat, whether it’s in this country or other countries, and it’s very simple.  There’s a saying that I use “you can leave the Western diet without leaving civilization.”  And this is a guestimate percentage on my part.  I’d say about 5% of Americans have actually decided to eat in a very healthy way, and they don’t tend to get the diseases that most other people will get.  And the diseases I’m talking about are things like heart disease, stroke, Type 2 Diabetes, and all the arthritis, osteoporosis, things to that extent.  So a lot of people like to think that your genes, heredity, plays a huge role in this and it does, in fact, play a role.  Of course genes play a role.  However, it’s what we eat that contributes to a tremendous amount of the diseases.

Q:    Is weight the only thing to worry about when you’re eating, or are there other issues to focus on?

A:    Well I don’t even like to think about weight. I mean that’s obviously what sells. So we spend the statistics that they use for dollars spent for diet-related products in this country.  And I’ll give the wide range because I like to be a little conservative when I state statistics.  But they say we spend between 30-60 billion dollars a year on diet-related products.  So it’s somewhere in that range.  And that’s a tremendous amount of money.  So if you’re eating a healthy diet, the great news, the good news, is you really don’t have to worry about your weight per say because you can almost eat as much as you want.  You know, I like to bust myths, and one of the myths that I think is out there, and even all of the experts will say this, they’ll say “eat less, exercise more.”  And people have bought in to this myth.  And what I like to say is “eat more.”  Now exercise is very important; but I say eat more.  Well, if you’re eating the right types of foods, then you can almost eat as much as you want.  But unfortunately, I call the diet we’re on, I’ve labeled it the Main Street Diet.  And what I tell people just visualize the next time you go down your main street, whatever that is, look at the types of foods that are there.  On my main street, I have about thirteen fast food restaurants.  I’ve got seven gas stations, so when you walk in to the gas station to get a snack, really all that’s in there is junk food, high in sugar, high in fat, high in calories.  So the bottom line is in our main street diet, there’s very little to eat that is not in some way harmful.

Q:    So if somebody’s not necessarily obese but eating a poor diet, is that a concern?

A:    Absolutely.  One thing just as an example, this is just one example.  You know a lot of our products are in processed food.  Next time you go to the supermarket, pick up a bag of, you know, I don’t care if it’s crackers or some type of a snack, and flip the package over . And I want you to look for these key words: partially hydrogenated.  Now that is actually what’s called trans fats.  Think of trans fats in your mind as a little bit of poison.  Not a tremendous amount, a little bit!  But if you eat a lot of these processed foods and snacks and baked goods and cookies, and so on and so forth, a tremendous amount of them have trans fats in them, partially hydrogenated oils.  So day by day, we are putting a little bit of poison in our bodies.  We know that trans fats causes heart disease.  There are statistics for how many people die on an annual basis from eating trans fats.  Trans fats have been in our food supply for the last thirty years or so.  Slowly but surely, they are being taken out.  However, it’s still used in many processed foods.  So unbeknownst to any of us, if you’re eating all of these processed foods, these snacks and so forth, you might be putting poison in your body.  It’s not rat poison.  You know, it’s not going to kill you in one day.  But now do it for ten years or twenty years or thirty years and it’s an artery clogger/killer.  So these are the types of things that are in our food supply that people don’t even know about.  And what really gets me hopping mad is when I see on the front of a processed food, a snack, it says “zero trans fats” on the front of the package.  Guess what?  If you flip it over you see that there are partially hydrogenated oils in there, and if there are, that’s trans fat.  And they’re bragging on the front of the package that their product does not contain trans fat.  So this is our Western diet.  And the title of my newest book is Feed Your Head, and the reason for the title is because once you get a little bit of knowledge about this, you can make better decisions.  And that’s it!  Once you get some knowledge, you can make some better choices.

Q:    Is there another, in food, another substance in food other than trans fats that is very bad for people?

A:    Well, again, if you look, so many of us eat processed foods.  What I mean by processed food is if you again flip the label over, and you see that there are more than five ingredients in it, it’s heavily processed.  But so many of our foods, have like ten or twenty or thirty or forty or fifty ingredients in them!  And, when you start reading them, you can’t even pronounce their names.  So typically what I tell people is when you buy food in some type of package, I don’t care if it’s crackers or whatever it may be, look at the back of the package, read the ingredients.  If it’s got five or ten or more ingredients, I have one recommendation; put it back on the shelf.  Now a lot of people are probably thinking at this point “well wait a second, what in the world am I going to eat?  That cookie or candy bar or whatever it may be tastes great!  That’s what I live off of!”  So I like to simplify things.  That’s my whole claim to fame is I simplify things.  So what I’ve tried to do is really make this thing simple.  And I’ve boiled it down to two words.  As I said, I want to make this thing simple.  So here’s the thing, you love, whether it’s ice cream or cookies or whatever, you have to find …  Here’s Rule number one.  You have to find foods that have great flavor.  So flavor is the key word, or taste!  It tastes great in your mouth.  That’s word number one; flavor!  What’s word number two?  Everytime you eat, and this takes about 30-90 days to train yourself to do this, but everytime you eat, you should think of the word “satiety.”  Well what is satiety?  That means that you’re eating something and it gives you the feeling of being full, not stuffed like you’re having a Thanksgiving dinner, but you feel full; you feel comfortable.  So now that relates to breakfast, lunch and dinner, and that relates to any snack that you have during the day.  And this is one of the great things about eating more, so again “eat less, exercise more”, forget that!  Eat more!  So if you’re eating a healthy or health-oriented diet, you can eat more.  I encourage people to snack!  If you’re hungry, eat!  Now are you going to eat a candy bar?  No, you don’t eat a candy bar!  When you do the research, you find out that hey, you know what we really are?  We were intended to be hunters and gatherers.  Well obviously we don’t hunt and gather for our food today.  That would be somewhat unrealistic.  But here’s what I recommend, hunt and gather for foods that taste great and give you the feeling of satiety.  Now that may sound like a real challenge, but it’s not.  So next time you’re around a friend or acquaintance that you know eats in a healthful manner, ask them what are two items that they eat? And guess what, try it!  Now you’re not going to like everything that someone that eats as a healthy person eats, but you might find one or two or three or five recipes.  And that’s what I’ve done over the last three years or so.  When I’m online, I read people’s blogs and try and find a simple recipe.  I’m not a great cook.  So I try to find simple recipes that I can cook, and make things delicious!  So that’s the key.  Everytime you eat, think in terms of satiety, being full.  Now here’s the thing.  There’s only two things that give you the feeling of satiety, two things, and this is it!  One is fiber, and the other is protein.  So you have to look for foods that taste great and have protein and fiber in them.  It’s that simple.  So anything else, as far as any diet plan or whatever, is a misdirection.  Always think in terms of satiety and flavor.  So if I told you, you know, Rob, you could lose a lot of weight and be healthier if you eat cardboard, well what are you going to do if I tell you to eat cardboard?  You’d kick me out of your office, right?

Q:    Sure!

A:    So what you want to do is find foods that taste great and give you the feeling of satiety.  And if this was difficult to do, I wouldn’t even be having this conversation with you, because there’s no reason to talk about it.  But it’s simple!  It’s truly, truly simple!  And again, I think five percent of our population has figured this out.  The other …  Well, we know 66% of the population is either overweight or obese, so they haven’t figured it out.  And I think another large percentage of people haven’t figured it out.  The sad part of this is the following; we have become so used to being on drugs and medications, that we feel that being on them is normal.  For example,   I’m 56 and most of my peers take a variety of prescription drugs.  Some of them take a Staten to lower their Cholesterol and another to reduce their blood pressure.  I’ve read that the average person that’s 55 years or older is on eight different medications!

Q:    Is that right, eight?

A:    That’s an awful lot of medications.  But sadly we’ve become a drug culture.  We believe that you go to the doctor, and “give me the magic pill.  Give me the magic pill!  Give me the magic pill!”  Well if you go on a Staten, which again, I think the statistic is 25% of our population of age 40 and over is taking a cholesterol-lowering drug.  If you’re taking that, it doesn’t give you the ability to eat all this junk food.  I mean, of course you can!  But it gives you the false sense of security that you can go out and continue on this Western diet, this Main Street Diet, as I call it, and continue to eat junk.  Now you’re cholesterol may be a little bit lower, but you’re still putting garbage in your body!

Q:    Well Ken when you started this, you were trying to lose weight yourself, right?

A:    Well here’s what happened.  I started doing research about the American Food System, and quite candidly, Rob, I got … well, I felt like Howard Beal.   If you remember the movie Network “I’m mad as you-know-what, and I’m not gonna take it anymore.”  And that became me as it related to diet and health.   Because, to me, everyone has to have their own motivation, whether it’s losing weight or being healthy.  To me it became a health issue.  Now I was not on any medications; I was relatively healthy.  But real simply I lost thirty pounds.  In sixty days, I lost thirty pounds.  It was a no brainer.  Because once you find out the proper foods to eat, remember the key words, satiety and flavor, once you identify these foods …  It’s not a taste grade, because if they don’t taste good, you’re going to fall off the wagon.  You’re going to go back to eating the ice creams and the cakes and the candies and whatever else you eat.  So you have to identify foods that taste great.  So once I found out how horrible our food system was, in sixty days I lost thirty pounds.  All of my test results came out better from cholesterol to other things, and I felt better.  Now I was not fat, per say, but again I lost thirty pounds.  I’ve kept it off, because once you find these great foods to eat, and believe me, there’s a tremendous amount, and you can go to your local supermarket.  You know, I have my own vegetable garden.  I love growing my own tomatoes and so forth.  But you don’t have to do that.  You can go to your local supermarket.  You have to avoid a lot of the foods, the processed foods, typically they’re on the middle aisles.  So it’s not like you have to go out of your way to find these foods.  It’s relatively simple.  You just have to be motivated.  And what’s your motivation?  Well, mine was health.  Other people, you know, they may want to look good in a bathing suit, you know, whatever!  They’re going to their high school reunion.  You have to have the motivation whatever it may be!  The visual that I give is one I learned from one of my sort of heroes.  His name is Dr. David Katz.  And he gave a presentation, and his visual was the following.  It was a polar bear in the Sahara Desert.  So think of the Polar bear.  We know that the Polar bear should be in the frigid arctic.  That’s what they’re body is intended for.  So now you put a Polar Bear in the Sahara Desert.  Well, what’s going to happen to that Polar Bear?  It’s not in its natural environment.  It’ll get sick, and eventually it will die.  We have to think in terms of the following: we are not in our natural food environment.  It’s very unnatural.  So keep that in mind as you drive down your Main Street, and as you go to run your errands.  Here’s another thing.  On your Main Street, next time you go run your errands and you go to the pet store, and you go to the hardware store, you go to the office supply sore.  I don’t care what store you go to!  Guess what’s going to be at the checkout counter?  A tremendous amount of candy  A tremendous amount of junk food!  So this is our current environment.  The question I’m going to ask you is do you think that’s going to change?

Q:    Not likely.

A:    My answer is the following.  It’s not going to change.  It’s not going to change!  I don’t expect that these fast food restaurants will not continue.  There’s only going to be more of them.  I’ll give you a perfect example.  I went in to a store not too long ago on my main street.  And the M&M’s, the Kit Kats.  It’s bad enough like one package of M&M’s a normal package, is like 460 calories.  That’s a tremendous amount of calories for a snack.  Now they upsized the package, so instead of it being 460 calories, which is bad, it’s now 770 calories per package of M&M’s from one of these stores.  So the environment is actually getting worse, not better, worse!  And I’m not talking about global warming and climate changing, I’m talking about our food environment.  So again …  You know I’m not here to change public food policy.  A lot of people want to put an axe on soda and all types of things.  That’s not what I’m here for.  What I’m here for is in essence, to “feed your head,” give you a little bit of information, a little bit of knowledge, so that you can make better choices.  And the only thing that really matters is the question I raise rhetorically to anyone that’s listening; is your health important to you?  And if the answer’s yes, then you should make a change.  It’s so simple.  You know a lot of people think that it’s all about exercise.  And that’s where again the “eat less exercise more” kind of fails.  Yes, exercise is very, very important!  I would not want to minimize that at all, so I would instruct people or advise that find an exercise that you like and do it.  I don’t care if it’s walking or running, hiking, I don’t care what it is.  Just find an exercise that you like and stick with it.  Going to the gym, it doesn’t matter what it is!  But the eat less doesn’t work because then you’re distraught, then you’re using will power.  So find the foods that are good for you.  As an example, I mentioned the M&M’s earlier, they were 460 calories.  A healthy snack should be the following: between 100 to 200 calories.  So when you’re doing your hunting and gathering, identify snacks that are between 100 to 200 calories and give you the feeling of satiety.  So I keep using M&M’s as the example, because that used to be my snack of choice.  Now think in your mind, whatever your favorite snack is, I don’t care.  When you have that high calorie snack which is full of a lot of sugar, after you eat it, do you have that feeling of satiety?  Now I can tell you first hand from when I used to have these M&M’s.  It was absolutely not!  I could have had a second package!  Now I normally didn’t, but I easily could have because it didn’t even fill me up.  It didn’t give me that feeling of satiety.  So the two key buzz words, satiety and flavor.  Yes, the M&M’s tasted great, but it didn’t give me the feeling of satiety, so you have to find those snacks that give you the feeling of satiety and taste great.

Q:    So basically the number of calories you eat does matter, and you just have a method for trying to make you tend to eat less calories.

A:    Calories are important.  But the interesting thing is, and I give a lot of presentations to groups and corporations, and one of my slides is one doctor says it’s all about calories; calories in, calories out.  What you eat and what you burn by exercising.  Then there’s another guy who recently wrote a book.  I think the title is Why We Are Fat.  And he says he’s going to give you the reason why calories don’t matter.  So even on a simple thing like calories, we tend to not be able to agree on this thing.  But calories are important.  I’m going with the fact that calories are important.  And if you are trying to be in a weight loss mode, yes you probably should count calories.  As an example at this point with me, I eat as much as I want and I don’t count calories.  I don’t even know what they are.  I don’t care because I know what I’m putting in my mouth is one, it tastes good, and two, that it’s health-oriented food, so you could almost eat as much as you want.  And I really need to get this point across, because people in their minds are probably thinking well what are you eating, celery?  Well the answer to that question is absolutely not!  So you find foods that truly taste great and add a lot of flavor.

Q:    I want to ask you about a few different programs to see what you’re thoughts are on them.  What about the Atkins Diet, as I understand it’s mostly protein, avoiding starch.

A:    Well there’s an interesting thing when you start researching all kinds of different diets.  And I’m going to answer your questions specifically, but as well, I’m even going to widen the answer.  Because when I give my presentations, what I have is a spectrum of ways of eating.  I don’t like to call them diets, but just ways of eating.  On one side of the spectrum is a vegan way of eating.  Simply stated, if it has a mother or a face, you don’t eat it or any of its products.  So you wouldn’t eat eggs or things like that on a vegan diet.  The other side of the spectrum, and this is a hot new way of eating.  If you go on the internet and search it, you’ll see very passionate people about this.  It’s called the Palio Diet.  This is the way we ate ten thousand years ago and more.

Q:    That’s also the Caveman Diet, right?

A:    The Caveman Diet.  It goes by a number of different names.  But you asked about Atkins, and it kind of follows.  It’s not exactly Atkins, but it follows that kind of a concept, which basically means you can eat about as  much as meat as you want.  So they say eat as much bacon as you want!  Eat it till your heart’s content.  That’s the Palio Diet, because they say that we were intended to eat meats and, again, back to the hunting and gathering.  But here’s the thing, and again I have this on my slides, is the spectrum from Vega, that would be one end of the spectrum, and the other end is the Paleodiet.  But Rob here’s the great news.  You can eat anywhere on this spectrum, and eat a healthy diet.  So you can be a vegan, and have a healthy diet.  You can be on the Paleo side, and eat a healthy diet.  Here’s the interesting thing, and I call this the Circle of Disease.  Again, I told you I try to simplify things. It’s what they don’t eat that probably keeps them healthy.  So let me just read off a few things to you that none of them eat, whether it’s Paleo or vegan.  And I’m generalizing.  Not every single person, but I’m giving a generalization.  Here’s what they don’t eat, and I call this the Circle of Disease.  Here’s how you stay out of the Circle of Disease.  You omit fast food.  You omit junk food.  Well, what’s junk food?  Well, that’s all the candy and processed foods, things with five ingredients or more.  You stop at the processed foods.  You do not eliminate, but you reduce sugar consumption.  Sugar is fine in certain amounts.  If you’re a soda drinker, stop with the soda.  I know that sounds extreme, because if you’re drinking sugared soda, five cans a day, you’re addicted.  I drink a lot of coffee, so I’m addicted to coffee.  But if you’re drinking soda, and care about your health, you must eliminate it.  And I’ve come up with a way to eliminate soda out of your diet.  You drink seltzer water, carbonated water, so it doesn’t have all the chemicals and it doesn’t have all the sugar in it.  The other thing to eliminate is candy.  And you need to exercise.  So those are the things: fast food, junk food, processed food, sugar, soda, candy, and exercise.  And you have to exercise.  So if you follow those guidelines, I say you’ll be out of the Circle of Disease.  Does that assure you 100% that you’re not going to have any diseases?  Well, of course not!  But it’s certainly going to help.  And here’s the thing.  You started asking about the Atkins diet.  So again, vegans all the way to Paleo/Atkins, whatever you want to call it, these people stay away from what I just told you.  It’s that simple.  So if you’re a vegan, you’re eating a diet very high in fruits and vegetables, and you’re avoiding things I mentioned.  If you talk to a guy or lady that’s a Paleo follower, the things I just mentioned, the fast food, junk food, processed food, sugar, soda, candy?  Guess what?  They don’t eat that stuff.

Q:    What about Weight Watchers?

A:    Well interestingly, they’re on a point system which really, if you want to simplify it, points really equates to calories.  They just put some foods at zero points.  They just added this to their new system.  So if you eat fruits and vegetables, they say that’s zero points.  So any diet should lean towards more fruits and vegetables.  The U.S. government, the USDA, just came out with their new what we used to call the Food Pyramid.  Now there’s no more Food Pyramid, now it’s a Plate, and what they came out with is the Food Plate, if you look at it, 50% of it is fruits and vegetables.  So any diet should lean towards more fruits and vegetables.  And if you’re a meat eater, and this concept when I first heard it kind of sounded a little strange.  At this point in my life, I’m not a huge meat eater.  I do eat meat, but I’m not a huge meat eater.  But say you’re having a steak.  You think of a steak as the main part of your meal, and whatever’s on the side is a side dish.  Well, how about flipping it?  Eat your vegetables as the larger portion, and have a smaller portion of steak.  So you still get your meat if you’re a meat eater.  But you’re eating less of it.

Q:    Interesting.  Ken, I’m going to need to wrap it up, but if the listeners or readers of the transcript of this would like to learn more, what can they do to find out more from you?

A:    If they want to come to my web site, they can just go to http://www.leebow.com, and I have a lot of information.  I have a blog.  I also have a Twitter site.  So they can get a tremendous amount of information actually for free.  My book is also there for $8.95.  And one thing that I do is I offer 60 days of e-mail “consulting” with a purchase of the book.  Because I’m really on a road here.  If people are interested, we try to get them into a healthier way of eating and a lifestyle.  So I’m just trying to help people out as much as I possibly can.

Q:    Ken, thanks a lot.  I appreciate your being on.

A:    Thanks, Rob.  I enjoyed it.