DocGo CEO's comments on migrant contracts appear inaccurate

 DocGo CEO Anthony Capone made apparent misstatements to investors about the publicly traded company’s business dealings, including inflating the amount of a federal contract that it’s pursuing to provide services for migrants at the southern border.

And as part of the work, Capone said his publicly traded company is signing up migrants in its care for Medicaid plans. Becoming their primary care provider, he said, can yield monthly member reimbursement for the company.

Capone detailed how his for-profit company stands to benefit financially from the shelter contract during a one-on-one interview last month at the Canaccord Genuity 43rd annual growth conference, which is held by an investment banking and financial services company.

“We did this, in large part, because it gave us all of the credibility to win the Border Patrol” contract, Capone said. “Now that we are one of the largest care providers for asylum seekers in the country, it gives us enormous credibility. And we have references from the city who handles the largest amount.”

Capone expects the federal contract to be awarded this month. The five-year contract is for providing medical services at the southern border. DocGo recently submitted its application, Capone said, after working on it for about eight months.

The federal government previously awarded the contract, but a company formally protested the award, restarting the bid process and, as a byproduct, giving DocGo a second chance with the New York City migrant work to cite at the top of its resume. 

“We have all this expectation now,” Capone said. “Our application is a lot stronger.”

https://www.timesunion.com/state/article/docgo-looks-toward-4-billion-migrant-contract-18340462.php

California Misinfo Law Is Destined for the Dustbin

 California's attempt to pave a path for its physician licensing boards to discipline doctors who give false COVID information to patients appears to be headed for the dustbin of failed ideas.

Inserted two-thirds of the way down in a billopens in a new tab or window on September 5, a Senate committee amendment would repeal state law authorized by the controversial AB 2098opens in a new tab or window. That law had specifically defined the dissemination of COVID-19 misinformation or disinformation by a licensee as unprofessional conduct, subject to board disciplinary action.

A vote on the bill is expected this week.

During the heaviest days of the pandemic, some board members as well as physicians fed up with misinformation -- especially about the value and safety of COVID vaccines -- said they wanted such guidance in the belief they needed a clear mandate to rein in contrarians to prevent hospitalizations and save lives.

Signed into law by Gov. Gavin Newsom on September 30, 2022 with a statement of cautionopens in a new tab or window, AB 2098 said that a doctor who spread false or misleading information about COVID prevention and treatment or questioned the effectiveness of COVID-19 vaccines could have his or her license suspended, placed on probation, or revoked.

Newsom wrote at the time that he believed the new law "is narrowly tailored to apply only to those egregious instances in which a licensee is acting with malicious intent or clearly deviating from the required standard of care while interacting directly with a patient under their care."

But there was confusion about the bill from the start. Initially, the idea behind it was to discipline doctors who spread false information about COVID anywhere, including on social media or at public eventsopens in a new tab or window. Authors of the bill had in mind curtailing activities such as that of California licensee Simone Gold, MD, JD, who breached the U.S. Capitol during the January 6, 2021 insurrection and gave a speechopens in a new tab or window opposing COVID-19 vaccine mandates and government-imposed lockdowns, and who publicly advocated unproven COVID treatments such as hydroxychloroquine.

But concerns about the First Amendment prompted lawmakers to narrow the scope, applying the language only to those physicians who convey such misinformation to a patient under the licensee's care, which is much harder to prove.

Further, the law specified that the misinformation conveyed had to be "contradicted by contemporary scientific consensus contrary to the standard of care," which many argued was up for broad interpretation, especially given that knowledge about some aspects of the virus, its mutations, prevention, and treatment regimens were scientifically unclear and evolving.

The law immediately provoked outcries from some physicians who claimed it violated their First Amendment rights, and prompted several lawsuits challenging its constitutionality. The American Civil Liberties Union filed briefs in support of several of the legal challenges.

Opposing physicians argued that the science behind effective treatment, especially during COVID, could rapidly change, as could "contemporary scientific consensus" at any point in time.

On January 25, Sacramento U.S. District Judge William Shubb granted a temporary injunctionopens in a new tab or window prohibiting anyone from enforcing the law against plaintiffs, saying that the law's language was "unconstitutionally vague."

Jenin Younes, an attorney with the New Civil Liberties Alliance and lead counsel in that case, said she's pleased that requirements set forth by 2098 are likely being repealed. The state legislature, she said, is "apparently recognizing that the law is unlikely to survive court challenges," including the one she filed on behalf of California licensees Tracey Hoeg, MD, Ram Duriseti, MD, Aaron Kheriaty, MD, Pete Mazolewski, MD, and Azadeh Khatibi, MD.

"It's a shame that these doctors had to take the state to court to see their First Amendment and Due Process rights vindicated. The clearly unconstitutional law never should have been passed in the first place," she said.

Chessie Thacher, senior attorney with the Northern California ACLU, also was glad the repeal seemed to be moving forward. "As we argued in court, that bill was dangerously overbroad and confusing. It chilled doctor speech and risked compromising the medical advice patients receive," she said. "AB 2098 was also unnecessary because the state had -- and continues to have -- numerous ways to handle doctors that practice below the standard of care."

Indeed, several members of the Medical Board of California, as well as speakers at last year's legislative hearings, said they believed the board already had the power to discipline doctors for disseminating false COVID-19 information.

As an example, the MBC filed an accusationopens in a new tab or window on June 23 against Ana Rebecca Reyna, MD, a Tehachapi-based internal medicine doctor who, the board document alleges, made a number of false statements to a patient in her care in April 2021 -- nearly 18 months before the bill was signed into law.

State documents said that Reyna told her patient that available COVID vaccines "contained fetal tissue, would alter his DNA irreparably, and were linked to a significant increase in miscarriages." She also allegedly "indicated that masks do not stop COVID."

Reyna, the accusation continued, also told the same patient that "when dealing with patients who exhibited COVID symptoms she directed them to purchase veterinary ivermectin, intended for horses."

She also told her patient that his girlfriend should "avoid the COVID vaccines if she wants to get pregnant" because the vaccines "were responsible for a 366% increase in miscarriages."

"By making one or more of the statements set forth, Respondent [Reyna] committed an extreme departure from the standard of care by providing advice about COVID-19 that was not accurate, and did not clearly relay to Patient A that the advice did not comport with the standard of care in the community," the board accusation said. The law resulting from 2098 was not mentioned.

The allegations against Reyna await a final determination by the board, and Reyna will have a chance to defend herself.

Nick Sawyer, MD, a Sacramento-area emergency physician who has been outspoken against COVID misinformation, also agreed that the legislature didn't need to pass AB 2098 to stop doctors from potentially harming patients with false medical advice.

"The Medical Board of California already had the mandate and means to address these doctors even before the pandemic," he said.

However, he said he's perplexed to see so much celebration of its repeal. "I trust that the MBC will prioritize public safety by ensuring doctors base prescriptions and their medical opinions on science, not ideology," he said.

Asked what he thought of the amendment that appears destined to repeal the law he fought hard to pass, Assemblyman Evan Low (D-Campbell), seemed to be on board.

Through a spokesman, he said, "fortunately, with this update, the Medical Board of California will continue to maintain the authority to hold medical licensees accountable for deviating from the standard of care and misinforming their patients about COVID-19 treatments."

https://www.medpagetoday.com/special-reports/features/106316

Early Oophorectomy May Accelerate Onset of Chronic Health Problems

 The removal of both ovaries before menopause was associated with a higher likelihood of chronic health conditions and worse physical function years later, especially for women who underwent the procedure early, a cross-sectional study found.

Compared with an age-matched group, women under age 46 years who underwent premenopausal bilateral oophorectomy (PBO) for a non-malignant condition -- either with or without hysterectomy -- had worse performance on the 6-minute walk test at a clinic visit two decades later and were more likely to have chronic medical conditions:

• Asthma: OR 1.74 (95% CI 1.03-2.93)
• Arthritis: OR 1.64 (95% CI 1.06-2.55)
• Obstructive sleep apnea: OR 2.00 (95% CI 1.23-3.26)
• Bone fractures: OR 2.86 (95% CI 1.17-6.98)

"These results, highlighting potential negative long-term effects of PBO, are important for women with benign or no ovarian indications at average genetic risk of ovarian cancer to weigh in their consideration of a PBO with or without hysterectomy," concluded researchers led by Michelle Mielke, PhD, of Wake Forest University School of Medicine in Winston-Salem, North Carolina in Menopause

opens in a new tab or window.

The findings, which relied on the Mayo Clinic Cohort Study of Oophorectomy and Aging-2 (MOA-2), confirms that clinicians need to change practice, said Stephanie Faubion, MD, MBA, the medical director for the Menopause Society.

"This just adds to the existing literature that having your ovaries out at a younger age, particularly under the age of 46, is associated with adverse health outcomes," Faubion told MedPage Today. "At this point, I think we just need to take action."

Faubion, who is also the director of the Mayo Clinic's Center for Women's Health in Rochester, Minnesota, but was not involved in the current research, said that later PBO (in women ages 46 to 49 years) was also "not a good idea," based on the study findings. In this group, an increased odds of arthritis and sleep apnea was observed compared with their age-matched counterparts, and a higher odds of chronic obstructive pulmonary disease was seen with PBO in the full cohort.

About 90% of the PBO group underwent concurrent hysterectomy and 6% had undergone hysterectomy beforehand; in the age-matched reference group without PBO, 9% had undergone hysterectomy.

It's common practice for women to have their ovaries removed during a hysterectomy, the second most common surgery in women, in part because it can eliminate the risk for ovarian cancer, Mielke told MedPage Today.

"It has historically been thought that once your uterus is removed, you're no longer going to be reproducing anymore, and so there's no need to also have the ovaries," Mielke explained. "However, over time, more studies have been coming out that suggest that the removal of both ovaries prior to natural menopause may provide long-term consequences or long-term risk of other diseases."

If the ovaries are removed prior to natural menopause, it's "strongly suggested" that women go on estrogen therapy until about the age of 50, Mielke said.

The current study included a comprehensive in-person physical assessment of women with a documented history of PBO, whereas other studies on PBO and heath outcomes have primarily relied on the passive collection of outcomes from medical records, which cannot capture "specific domains of physical function or other aging-related measures," the researchers noted.

Study Details

Mielke and colleagues used the Rochester Epidemiology Project (REP) medical records-linkage system and data from the MOA-2 study, which identified women from Olmsted County, Minnesota who underwent PBO for a non-malignant condition from 1988 to 2007 and were not at high risk for ovarian cancer. MOA-2 participants were matched with a reference group of women without PBO.

As of 2018, when the in-person study began, a majority of the PBO and reference groups were still alive (91.6% and 93.1%, respectively).

The team enrolled 274 English-speaking women from MOA-2 who underwent PBO for an in-person follow-up visit a median 22 years later -- including 161 patients (59%) who underwent the procedure early (before age 46) and 113 patients (41%) who underwent the procedure later (46 to 49 years).

Participants needed to be 55 or older at enrollment and were excluded if a malignancy turned up on pathology for their PBO, or if they had no clinic visits in REP over the prior 5 years. They were age-matched with 240 participants without PBO from the reference group.

Overall, women had a median age of 67 years, 97-99% were white, and about 60% were never smokers.

Chronic conditions were assessed by medical records. Aside from the associations previously noted, the researchers found no link between PBO and cancer; diabetes; dementia; hypertension; hyperlipidemia; irregular heart rhythm; kidney, thyroid, or liver disease; osteoporosis, or transient ischemic attack.

The physical exam included measures of strength and mobility. Women who underwent PBO had a higher android/gynoid fat ratio compared with the age-matched reference group and performed worse on the 6-minute walk test (-14 m), which was driven by those who underwent early PBO (-18 m). In the late PBO group, women had a higher mean percent fat mass, appendicular lean mass, and spine bone mineral density compared with the reference group.

Mielke and colleagues noted that because the study was cross-sectional, causality cannot be inferred and recommend longitudinal studies. They also pointed out that the women who participated in the study may be healthier than the general population and cited the largely white population as a study limitation.

Disclosures

Mielke disclosed relationships with Biogen, LabCorp, Lilly, Merck, PeerView Institute, Roche, Siemens Healthineers, and Sunbird Bio. Co-authors disclosed relationships with Astellas, Mithra Pharmaceuticals, Scynexis, Womaness, SWAN-Aging Study Observational Study Monitoring, American Society of Biomechanics, Pfizer, Takeda, Biogen, and Eli Lilly.

Faubion disclosed no relationships with industry, but is related to a study author.

Primary Source

Menopause

Source Reference: opens in a new tab or windowMielke MM, et al "Long-term effects of premenopausal bilateral oophorectomy with or without hysterectomy on physical aging and chronic medical conditions" Menopause 2023; DOI: 10.1097/GME.0000000000002254.

https://www.medpagetoday.com/obgyn/generalobgyn/106321

Water Beads a Health Hazard for Kids

 Are colorful round balls sold as sensory toys for kids potentially a health hazard?

Amid ongoing warningsopens in a new tab or window from parents and physicians, MedPage Today asked Neha Patel, MD, a pediatric otolaryngologist at Cohen Children's Medical Center at Northwell Health in New Hyde Park, New York, to weigh in on the safety of water beads.

Made of superabsorbent polymer chemicalsopens in a new tab or window, water beads expand and become squishy when placed in water. In addition to their use as sensory toys -- often used for children with autism and developmental disorders -- the small orbs can also be found as decor in gardens and vases.

But what are the possible risks?

"A lot of these beads are very common to find," Patel told MedPage Today. "And they look so good."

When kids see "colorful, spongy, and fun-to-touch objects," they're likely to feel them, and even put them in their mouths, Patel said. As kids investigate, some will swallow them.

Of particular concern is the beads' ability to expand, particularly after contact with fluids in the body, she said.

For instance, if a child swallows something small, there may not be terrible concern that it won't pass, she explained. However, as these beads move through the gastrointestinal (GI) tract, they can absorb water and double or triple in size.

"They can actually get stuck in the bowels and cause an obstruction," Patel said.

Water beads can also expand -- and thereby be more difficult to remove -- if they become lodged in a child's ears or nose, she said. This can lead to pressure-related injuries to the ear or bleeding with removal.

There's also the risk of a water bead getting stuck in a child's airway -- a life-threatening emergency, she noted.

Indeed, there are numerous reports of water bead-related injuries in young kids that can be found in a search of the Consumer Product Safety Commission's (CPSC) website

opens in a new tab or window. A representative from the agency recently told Fox News Digitalopens in a new tab or window that it is "looking into" an incident involving the "tragic death" of a 10-month-old girl after she reportedly swallowed a water bead.

On Thursday, the CPSC and Buffalo Games announced the recall of some 52,000 Chuckle & Roar Ultimate Water Beads Activity Kits due to ingestion, choking, and obstruction hazardsopens in a new tab or window.

Buffalo Games received a report of a 10-month-old Wisconsin child's death from swallowing the beads in July 2023, according to the announcement. It also received a report that, in November 2022 in Maine, a 9-month-old child was seriously injured from swallowing the beads, which caused an intestinal obstruction requiring surgery.

Parents continue to speak out regarding the potential hazards of the beads. As reported by Paradeopens in a new tab or window, a mom known as That Water Bead Ladyopens in a new tab or window on social media has become an advocate on the dangers of water beads, "hoping that her family's personal story will help protect others."

"The problem is that because water beads look like candy, young children may be tempted to swallow them," according to a post from the American Academy of Pediatrics (AAP)

opens in a new tab or window. "Kids also have put them in their ears, and even inhaled them. The beads can continue to grow once inside the body, causing blockages and life-threatening damage. And the beads may not be visible on x-rays."

Being radiolucent, water beads are likely to evade detection via x-ray. "They can be missed unless there is a very high degree of suspicion," Patel said.

The AAP post also states that "while the beads are labeled as 'non-toxic,' concerns [have] also been raised about the safety of the chemical acrylamide used to make them."

For Patel, awareness is key. Any time there is concern for foreign body ingestion, it warrants a trip to the emergency department, she said.

Symptoms in children may include sudden-onset change in behavior, refusal to eat, and noisy breathing and wheezing, she added. However, many signs or symptoms, such as abdominal pain, vomiting, irritability and fever, "can also happen with GI bugs," making diagnosis a challenge.

Overall, when it comes to dangers from foreign body ingestion, other culprits may be top of mind.

"Button batteries, there's a lot more awareness about those," Patel said.

Though water beads may be biodegradable, it's important to "make sure that, if parents do encounter them, dispose of them in the trash," Patel added. "Don't leave them around."

https://www.medpagetoday.com/popmedicine/cultureclinic/106322

Nemaura Update on Nasdaq Compliance Status and Process

  Nemaura Medical, Inc.(Nasdaq: NMRD) (“Nemaura” or the “Company”), a medical technology company focused on developing and commercialising non-invasive wearable diagnostic devices and supporting personalized lifestyle coaching programs, today provided an update regarding the status of its compliance with Nasdaq continued listed standards and anticipated next steps to maintain its listing on The Nasdaq Capital Market.

As previously disclosed by the Company, the Nasdaq Listing Qualifications Staff (the “Staff”) notified the Company by letters dated April 3, 2023, and April 7, 2023, that the Company no longer satisfied the minimum market value of listed securities and bid price requirements for continued listing on The Nasdaq Capital Market and, accordingly, granted the Company 180-day grace periods to regain compliance with those requirements, through October 2, 2023, and October 3, 2023, respectively.

The Company currently does not expect to regain compliance with the above-referenced Nasdaq listing criteria prior to the expiration of the applicable grace periods and, as such, anticipates receipt of a delisting determination from the Staff promptly following the expiration of the grace periods. Importantly, however, upon receipt of such determination, the Company may request a hearing before a Nasdaq Hearings Panel (the “Panel”) to address the listing deficiencies, which request will stay any suspension or delisting action by Nasdaq at least until a hearing is held and any extension that may be granted by the Panel to the Company following the hearing has expired. In that regard, pursuant to the Nasdaq Listing Rules, the Panel has the discretion to grant the Company an additional extension period not to exceed 180 calendar days from the date of the forthcoming delist determination. The Company plans to timely request such hearing and is considering all options available to it to regain compliance and maintain its listing on The Nasdaq Capital Market.

https://finance.yahoo.com/news/nemaura-medical-provides-nasdaq-compliance-120000163.html

FTC Wades Into Drug Pricing, Patent Listings With Policy Vote

The Federal Trade Commission on Thursday will consider issuing a policy statement regarding the “improper” listing of patents in the FDA’s Orange Book, a publication that lists drug products the agency approved and deems safe and effective.

The FTC’s discussion comes as Congress recently highlighted the anti-competitive business practices in the pharmaceutical industry and soaring drug prices for consumers.

The Orange Book, also known as the gateway for generic brand drugmakers, allows generic manufacturers to determine which drugs can be substituted for particular name-brand drugs.

Generic drugmakers have long been concerned about the way name-brand drugmakers enter their products into the book, which often results in patent infringement lawsuits and rival drugs barred from joining the list.

The FTC will discuss whether improper listing of patents increases the cost of essential prescription drugs and reduces drug access, and if the naming of patents that don’t meet listing requirements constitutes an unfair method of competition.

“As a branded pharmaceutical company, you traditionally want to maintain your exclusivity on your marketing of your branded drug for as long as possible,” said Shashank Upadhye, a patent attorney at Upadhye Tang LLP.

“People take the view that the listings in the Orange Book were improper—there were too many patents, they were the wrong kinds, maybe say, the wrong flavors,” Upadhye added.

The FTC declined to comment before it votes on an official statement at its open meeting Sept. 14.

Legal Wars for Drug Patents

Manufacturers that apply for FDA approval of a generic version of a name-brand drug must inform the agency they won’t infringe enforceable patents already listed in the Orange Book. Competing drug companies use the information in the book to determine whether they will seek FDA approval for a generic drug they want to market.

Generic drugmakers usually wait until the branded companies’ patent nears expiration, but tensions can arise during the FDA application process that triggers patent infringement suits.

The challenges come when a listing can apply to “various extents by putting patents on the Orange Book that may not actually cover the drug product for which the generic is seeking generic approval,” said Arti Rai, a law professor at Duke University.

Name-brand drugmakers can list patents that might keep generic drugs off the market for longer than expected, which complicates moves for competitors bringing in cheaper versions of drugs.

“Brand companies will be assertive and aggressive in what patents they list in the Orange Book, erring on the side of listing more, if there’s a gap, or there’s an uncertainty, or maybe lack of clarity,” Upadhye said.

“It’s very important that we have a patent system that protects branded companies for their development, because if they don’t do development, there’s no new medicines that come along,” Upadhye added.

The FDA can’t approve potential rivals for the next two and half years once a patent is listed in the book. Branded drug companies that sue generic competitors for infringing on an Orange Book-listed patent automatically trigger a 30-month bar on the FDA’s ability to approve the competitor’s drug.

Litigation between brand drug and generic companies regarding patents is nothing new to the FTC.

The commission late last year filed a brief in support of Avadel CNS Pharmaceuticals against Jazz Pharmaceuticals, alleging that Jazz violated Orange Book standards and doesn’t qualify for listing in the publication.

“The FTC has long been concerned about Orange Book listing abuses,” the counsel for the FTC said in the brief.

“Although this case involves a dispute between private parties, it may have much broader implications for the Commission’s competition mission and for consumers,” the counsel said.

Congress Chimes In

FTC Chair Lina Khan has used her tenure to police consumer and competition issues that critics argue are beyond the agency’s authority. Some Republicans in Congress have criticized the commission for probing pharmacy benefit managers. Sen. Ted Cruz (R-Texas) sent a letter Sept. 12 to Khan raising concerns about the FTC’s oversight of artificial intelligence.

Changes for actions in the Orange Book are also being pushed by some members of Congress.

Rep. Pramila Jayapal (D-Wash.) and Sen. Elizabeth Warren (D-Mass.) sent a letter in late August to FDA Commissioner Robert Califf, urging him to address the agency’s responsibility on anti-competitive business practices in the pharmaceutical industry.

“Pharmaceutical companies, especially brand-name companies, have routinely abused the Orange Book system by improperly listing patents to block the introduction of lower-cost generics,” Warren and Jayapal said in the letter.

The two Congress members say the 30-month wait after a patent is listed creates an incentive for companies to list “sham” patents in the publication and “hold off generic competition for at least 2.5 years, regardless of the outcome of any litigation.”

Despite Warren and Jayapal asking the FDA to “close loopholes” in the pharmaceutical patent system, the request might not immediately yield results because the FDA doesn’t interpret or determine the patents in the Orange Book.

The “FDA has taken the position that they’re not in the business of evaluating patents, and that’s maybe an area where there is a lack of a gatekeeping function, there’s a lack of policing,” said Neal Seth, a partner at Wiley Rein LLP.

The “FDA has been open for a long time about saying, ‘Well, we were not really equipped to play that role,’” Seth added.

Action after exploring ways to reform patent listings in the Orange Book would most likely need to come from lawmakers, Rai said.

“At the end of the day, Congress has to act,” Rai said.

“The FTC is just trying to draw attention to the issue and perhaps get some momentum in Congress to do something about this so that agencies like the FDA can just delist if they’re told that a patent doesn’t cover the generic,” she said.

https://news.bloomberglaw.com/health-law-and-business/ftc-wades-into-drug-pricing-patent-listings-with-policy-vote

See More Clearly With These Two Mental Models

 I am a big fan of mental models. Mental models are explanations of how things work. They allow you to think through analogy, often folding complex concepts into simple ones and transporting them from one discipline to another. Mental models are thinking shortcuts. I am wired to think through mental models – my brain doesn’t handle complex well and constantly tries to simplify things. If you arm yourself with mental models, you’ll often see what others don’t. 

Another beauty of mental models is that you can combine them. I am about to share with you two mental models. I used both in our seasonal letter to explain one of the companies we bought for our portfolio. I am going to stop short of sharing our analysis of the company or its name. It is a small, $600-million market cap company, and I don’t want my writeup to influence its stock price. But I really hope you find value in these two mental models. 

Myopic circles

I don’t smoke. This was not always the case with me. I smoked in my teens. I quit when I was 21. I was one of the first people in my circle of friends to quit smoking, then gradually all my friends quit smoking, too.

Today I don’t have a single close friend who smokes. I didn’t look for this outcome intentionally; I didn’t stop being friends with smokers. Nor do I choose friends based on their (harmless, at least to me) vices. So this was not a conscious or even a subconscious decision. Very simply, people in my social demographic circles have a set of values, and a healthy lifestyle is one of them. It’s very hard to have a healthy lifestyle and smoke.

Humans are tribal, and we try to conform to the values and behavior of our tribe. At some point in the late 1990s or early 2000s smoking stopped being cool and became uncool in my tribe. (For me, a girl I was dating was the impetus for my quitting).

On the other hand, I have a relative who smokes. This is where it gets interesting. He has a few dozen friends who smoke. His friends know a lot of people who smoke. The overlap between his circles of friends and acquaintances and mine is very small (near zero).

Why is this important? In my daily life I encounter very few people who smoke, and thus it is easy (if I am not careful) to form a belief that nobody smokes. When we started doing research on tobacco stocks, I was shocked to discover that 35 million Americans – 14% of the adult population – still smoke. The numbers are much greater in Asia and Eastern Europe.

Another example: vaccinations. If you are vaccinated, then it’s likely that most of the people you know are vaccinated. Now, if you have a friend or a relative who is not vaccinated (other than for a unique medical reason), most likely that person knows a lot more unvaccinated people than you do. And his/her circle of unvaccinated friends and your circle of friends have little overlap.

This myopic circle framework applies to many parts of our lives. Here are more examples: What we watch on TV is influenced by our values and our willingness to share our experience with others; how we watch TV – over the internet or over cable; our political beliefs – we tend to surround ourselves with people we agree with; our shopping habits (our preferences for shopping at malls, on QVC, or online); even the type of cars we drive (electric vs ICE).

When we live in our micro circle we forget about the existence of other circles. If we are not careful, the lens through which we look at the world may get strongly tinted with our perspective and turn myopic.

You’d think that as you venture out on the world wide web this would change. It does a little, but not much. Maybe a guy you went to third grade with, who is now your Facebook “friend,” has different political views from yours. You argue with him over the occupant of the White House and then de-friend or unfollow him. But mainly, your social networks will feed you content that agrees with your biases.

For an analyst (and, I’d argue, for a human being, too) myopic vision is dangerous. It leads to missing both opportunities and potential threats.

David vs. Goliath

A book that has had a profound impact on me not just as an investor but as a businessperson is Malcom Gladwell’s David and Goliath. It reexamines one of the oldest biblical stories. Three thousand years ago in the Elah Valley of the Judean Mountains, an army of Philistines and an army of Israelites, led by King Saul, faced each other.

The armies were stalemated. To attack, either army would have to go down into the valley and then climb up the enemy’s ridge. The Philistines ran out of patience first and sent their greatest warrior, Goliath, to resolve the deadlock in one-on-one combat. Goliath was a 6-foot 9-inch giant, protected from head to toe by body armor and a bronze helmet.

He yelled, “Choose you a man and let him come down to me! If he prevails in battle against me and strike me down, we shall be slaves to you. But if I prevail and strike him down, you will be slaves to us and serve us.”

There were no volunteers in the Israelites’ camp. Who could win a fight against this giant? Then an ordinary-looking shepherd boy stepped forward. His name was David.

To me, David vs. Goliath was always just an inspirational story about a young boy defeating an evil giant. Or as Gladwell puts it, for most people David vs. Goliath is a story of “when ordinary people confront giants.”

But Gladwell presents the story in a very different light. When David goes to face Goliath, King Saul offers him his sword. David refuses. Instead, he picks up a few polished stones and throws them in his pouch. Gladwell explains that, as a shepherd protecting his flock, David was a skilled rock slinger.

When Goliath saw David, he yelled something along the lines of “Come here; I’ll have a piece of you!” Instead, David kept his distance, then put a stone in the leather pouch of his sling, fired it at Goliath’s exposed forehead, and struck him down.

Had David taken Saul’s sword and gone to fight one-on-one, he wouldn’t have had a chance. But where everyone saw strength in Goliath’s physical might, David saw weakness. David was a craftsman rock slinger; he could knock a bird down in mid-flight with a stone – Goliath was a sitting duck.

Suddenly we see a very different story. Goliath’s size, physical strength and armor are only competitive advantages if his opponent chooses to fight him in a conventional way, on Goliath’s terms. But his strength can quickly be turned into serious weakness, as Goliath was immobile, slow and had no defense against a skillful rock slinger. In other words, Goliath brought a sword to a gunfight. Or in financial parlance, David turned Goliath’s assets into liabilities.

I keep this framework in the back of my mind when I run IMA – the investment industry is full of Goliaths. Twenty years ago they would have had a competitive advantage over IMA – they would have had access to better tools and more information (before Regulation FD management would have whispered in their ear information it would not share with the public.) The internet and new regulations have changed all that. We don’t have a large research department staffed with twenty analysts. Thank God!

We don’t have the bureaucracy or the politics that comes with that sort of department. We chose to compete with Goliaths on our terms – we deliberately created a large network of investors we respect. We share our ideas with them, and in exchange they do the same. It’s a two-way street. We have our industry or country experts to whom we reach out when we need to get constructive feedback on the idea we are pursuing. We even organize a conference, VALUEx Vail, open only to our network to foster this exchange. Large firms are also constrained by their size – we are not; we can buy a company of almost any size in the US or overseas. If our size becomes a constraint for us, we’ll put the brakes on our growth.

The lesson of this story is to always look for asymmetry. When you face a formidable competitor, don’t settle for symmetrical one-on-one combat; understand the competitor’s strengths and see if you can turn them into weaknesses by changing the domain of the fight

Vitaliy N. Katsenelson, CFA - Student of Life, Value Investor, Writer, Author, CEO of IMA

https://vitaliy.substack.com/p/see-more-clearly-with-these-two-mental-a68