• Jun Park

Broken Business: Here is what Business Logic is broken

I want to walk you through some industry truths that we need to face.


Imagine this :


After 5 years of R&D, an independent lab has just invented to cure for "x" (let's say cancer). A passion project by a married couple of scientists in desperate search for a cure for their kid.


The "cure", 100% effective, a single pill took 5 years to develop and 6 million dollars, and a lot of unpaid overwork. But the best of all, the pill costs 6 dollars to make.


That's all great, except :


Now, you are looking at it from a traditional longstanding company in Healthcare. Today's treatments of cancer are complex combination of multiple different treatments that have a varied scale of risk and success, and require various medical expertise and supplies.


The introduction of this pill would collapse the industry, which produces billions of dollars in revenue. This would make billions of dollars in investment, equipment, shareholder value, company collapse. So, if you are the CEO, what do you do?


Go buy the rights to the "cure".


So you would meet them, knowing that this is potentially Billions of dollars in lost revenue.

What is the offer? Exactly what you think, a lot of money, and probably even more, attention and care to their kid forever, as is the whole reason behind driving this.


Money, no problem, you are a huge company that is looking at a potential industry changer, your livelihood is at stake.


Now, your company is in possession of this cure. It costs 6 dollars to make, how much are you going to sell it for?


That's the scenario, that's the question I would ask everyone to think about it. Logical, seems straight forward? Except, this has a catch.


If you look at the Cost-Benefit Analysis, there is one element that becomes the enemy. Time. The economics of treating cancer is that its treatment is a return over time, that is in somewhat sustained and dependent on the effectiveness of the treatment. The less time, the lower return over time.


So what's the answer? Buy it, own it, hide it. You make more money in the status quo.

And the people? Well, the CEO is not responsible for them.


This is what's broken.


The fast fashion, the obsolescence designed into devices, patent trolling, and yes, the retention of products, are all parts of the business practices that impede what should be the purpose of business ; provide a service to the market. Competition is what makes you provide a better service to the market.


So, doesn't the CEO have some sort of responsibility to share this information with the public that is spending billions of dollars in a treatment when there is a cure?


No, the CEO's legal responsibility is to the company's shareholders. In the scenario I have presented, the CEO's obligation would be to protect the bottom-line of his company, and not doing so would void him of the Business Judgement Rule (which holds CEOs not personally responsible for shareholders' losses).


So maybe, it's time to consider the following:


This quantity versus quality debate has to change, disposable products, business revenue models based on mass consumption over long-term services need to evolve.


There are industries that are primary needs, food, water, medical, and for such, they should not be structured with a Corporate profit driven responsibility.


Patent trolling, the idea of patents was to protect the interest of a creator for a certain period of time. In today's world, there are many technologies that have vectors changed in order to maintain and renew patents (and protection), not allowing for costs to drive down through competition.


As the plans for a 'new normal' are appearing, and banks warn about 'Green Swan' events, we need to tackle climate change, and we should tackle more than that, we need to tackle a lot of broken systems.


And for those who think that the Corporation need to do this to create wealth and finance R&D and etc etc, I remind you that there are billions of public money in R&D without receiving any profits / benefits from the products created.


Additionally, it's pretty clear that the profitable medical health services have pretty insane payouts to executives.





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