How Valeant had a bright idea but took it too far
There are three types of Valeant criticisms that often get lumped together:
- It attacked the traditional approach that corporate R&D was the only thing that mattered in pharmaceuticals, which upset a lot of entrenched stakeholders
- It did some things that were morally questionable but perfectly legal (e.g., price optimization, inversions)
- It did some things that were morally questionable and legally gray (e.g., the specialty pharmacy incident)
This article does a great job of pointing out that the outrage over #2 and #3 mask the success that Valeant had with #1. There’s no reason to believe that corporate R&D is inherently better for the world than biotechs, and you could certainly see a smart, talented scientist preferring the fast-paced startup culture of a biotech based in Boston to a large corporate based in New Jersey.
The benefits of brain drain
Fascinating article by Eric Bellman:
“Policy makers in emerging economies often believe that allowing citizens to study and work in developed markets results in brain drain and is thus to be discouraged,” said the paper which was co-authored by professors from Cambridge University’s Judge Business School, Warwick Business School and the London Business School. “Our findings, however, suggest that there can be benefits to allowing, and even encouraging, citizens from emerging economies to study and work in developed markets.”
Foreign Affairs interviews Sprint CEO Marcelo Claure
Incredible, inspiring story. Claure’s story of how he bought his first business is particularly great:
I saw very little opportunity in my country, so I came back here. I was dating the woman who became my first wife, and I wanted to be back in Boston, where I went to school. I went to apply for a job at Merrill Lynch, and I told the interviewer the whole story about the World Cup, and he said, “You have to meet my boss. Give me your cell-phone number.” I didn’t have one, so I said, “It’s in my car. I’ll call you on it from there.”
So then I went with a friend to find a cell-phone store. The first one we went to was closed, so we went to another one. We passed the store. You’re not allowed to reverse on a highway, but I told my friend, “Please reverse.” I met the owner, and he told me that he was tired of being in the business, and he invited me to buy in. I didn’t have much money, so I gave him all I had and got him to finance me for the rest. He had two stores, one on Route 9 and another on Newbury Street. He handed me the keys and said, “After your story with the World Cup team, you can probably do a better job than me running this.” So a few weeks after arriving back in the U.S., I was a proud owner of my own little business.
(yes, this is part of the issue that I just linked to – but you gotta read this one)
A disruption of corporate America
In another paper published last week, Decker and Haltiwanger, both at the University of Maryland, offered two categories of explanation, one more worrisome and one more benign. The more benign explanation is that something, perhaps improved technology, has made it easier for companies to become more efficient on their own. Imagine, for example, that a manager at a Home Depot in Dallas comes up with a better way of managing inventory. Thanks to better analytics software, someone at corporate headquarters is more likely to notice the improvement and be able to roll out the innovation to the rest of the chain. In that scenario, the hardware industry, and the economy more broadly, reaps the benefits of the new idea without the manager needing to take the risk of leaving Home Depot to launch a rival business.
The more pessimistic explanation is that government regulation or some other structural shift has made it harder for upstarts to take on established companies. Maybe the Dallas Home Depot manager wants to strike out on his own but can’t get a building permit, raise the startup capital, or afford to comply with federal environmental regulations. So either he tries and fails, or he never tries at all.