There’s about to be a lot of AI capital incineration

I do believe there will be winners in the AI space. There will absolutely be platforms plays here that succeed. OpenAI has amassed billions of dollars in capital and some genuinely impressive technology. I remain bullish on Nvidia. Abridge seems cool. Some of these venture-backed companies in health care will return capital to investors in the next five to ten years.

But things have become borderline unhinged in VC land. I have been talking to a bunch of founders recently who have been telling me that investors will not meet with them if there’s no AI involved. Not even a first meeting! Venture capital firms are increasingly rebranding their thesis as AI-only, and companies are throwing AI into their pitch decks whether they’ve built it or not. It is AI, around the clock, all the time. And everyone needs to have a story about how their solution is powered by it. This dynamic reminds me of the Web3/crypto frenzy, but it’s arguably a lot worse.

Meanwhile, AI is still in its infancy when it comes to impact — especially in health care. Ironically, where I most often see it is baked into virtual clinics that are heavy on services revenue - but have a team of engineers. These companies have an edge because it’s relatively easy for them to incorporate AI into the workflow. Where I struggle to see (most) companies succeed is if they’re selling AI software, particularly if they’re targeting health systems with razor thin margins and enormous workforces.

Another problem is ROI. Some of these early AI applications seem most helpful in improving quality of life for clinicians, and making health workers feel more productive. And those are tremendous steps forward. But I’m not hearing from clinicians that everything has changed when it comes to their practice, or that they have many more to dedicate to their patients. If anything, many of them have only increased the volume of patients in their panel.

It’s also not clear to me that patients are desperately calling out for AI. I truly believe that most of us still want to talk to a human being when staring down the barrel of a massive medical bill that could bankrupt us. Or imagine seeing a scary looking lab value. Do you want a chatbot to tell you that you might have cancer? (If I’m wrong about this, I’m all ears!)

I’m not an AI skeptic. But I’m not ready to throw in my lot with it and stop investing in healthcare services. AI is not the only answer to all of our problems - and we should stop acting like it is.

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