Editor's note: This guest post was written by Dave Chase, the CEO of Avado.com, a health technology company that was a TechCrunch Disrupt finalist.  Previously he was a management consultant for Accenture's healthcare practice and was the founder of Microsoft's Health business. You can follow him on Twitter @chasedave.

As reported on TechCrunch, Google shut down its medical records and health data platform. Since then, there’s been a lot of bits spilled offering explanations, but they all missed the most critical item. Money. Or in the language of healthcare—Reimbursement. I explain more below regarding why Google Health was doomed to fail in light of the legacy reimbursement model.

First, let’s recap some of the explanations offered up so far. These are all valid but miss the biggest point.

Adam Bosworth, who originally ran Google Health gave one reason: It’s Not Social. That’s true if one wants to create a weight management program or is simply interested in fitness-minded folks. Clearly that is important given the obesity epidemic, however there’s vast swaths of healthcare where being “social” isn’t appropriate or applicable in a doctor-patient relationship. In other words, being social is necessary but not sufficient to transform healthcare.

In the comments of TechCrunch’s original article reporting the shutdown, I gave my immediate take…

1. It's tough, even for big companies, to focus on a bunch of different things. I'm sure they could have figured out how to be successful if it was as strategically important as Search or Chrome or Android or Social…but they have bigger fish to fry.
2. The Health space is a very difficult one. In many ways, it's counter-intuitive for those who haven't been in the arena from both the healthcare provider and consumer perspective.
3. As much as there's a massive consumer-empowerment movement, in order to get ongoing and broad adoption of something in healthcare, one needs to lead with the clinicians.

If you are interested in more, I’ve written about this here.

One of the better analyses was done by John Moore of Chilmark Research.

Few consumers are interested in a digital filing cabinet for their records. What they are interested in is what that data can do for them. Can it help them better manage their health and/or the health of a loved one? Will it help them make appointments? Will it save them money on their health insurance bill, their next doctor visit? Can it help them automatically get a prescription refill? These are the basics that the vast majority of consumers want addressed first and Google Health was unable to deliver on any of these.

As much as we’d like to think it isn’t the case, the fundamental driver of most (not all) behavior in healthcare is the reimbursement scheme. As I described in an earlier piece on the “Do it Yourself Health Reform” movement, I spent much of my time as a consultant in the Patient Accounting departments of heatlhcare providers. The legacy reimbursement scheme can only be described as a Gordian Knot designed by Rube Goldberg.

I expanded on the insidious effects of the reimbursement model in the U.S. in my overview of The Most Important Important Organization in Silicon Valley No One Has Heard About. For those who would like to be optimistic about the reimbursement model changing, read about Health Insurance’s Bunker Buster. In the meantime, it’s critical to understand the current reimbursement model to understand why Google Health failed to transform the landscape.

To understand the impact, I’ll exaggerate to make a point—your healthcare provider doesn’t care about you unless they can see the whites of your eyes. Why is that? Today’s flawed reimbursement scheme only compensates the healthcare provider for a face to face visit. It’s hard to fault the primary care physician who has been put on a hamster wheel of 30-40 appointments per day and can’t even give their practice away upon retirement (that was once their retirement plan) for not wanting to deal with their patients sending email or sharing information from their personal health record.

Interestingly, in the transformative models I describe below, doctors consistently tell me that half to two-thirds of their patient interaction time doesn’t need to be face-to-face. They can deliver high quality medicine without being in the same room as them. Yet, the fee-for-service model causes this country to waste mountains of time waiting to get appointments and then in the waiting room in order to facilitate the face-to-face appointment.

The problem for a company like Google or Microsoft is their success is measured in the tens of millions. Those kinds of numbers are only present in the legacy reimbursement model. Frankly, Google could have done all the right things, but if the reimbursement model doesn’t change Personal Health Records will remain irrelevant for most healthcare providers. At best, we’re seeing Electronic Health Record vendors release so-called Patient Portals that are often driven more by a marketing objective than a clinical objective. Further, they are flawed in that they are a one-way broadcast of the silo’ed information from only one healthcare provider.

Is there any hope for individuals to be more involved in the healthcare system as Personal Health Records promised? After all, it’s clear that healthcare works best and costs least when the patient/individual is a partner in their care with their healthcare provider. Fortunately, I believe that we’re seeing the first waves of a tsunami lapping the shore.

It’s what I call the P.A.C. Tsunami. Patient-centered, Accountability and Coordinated. Today’s flawed fee-for-service reimbursement system is essentially the opposite of those three elements creating all the wrong incentives. In its place, we’re seeing the first waves. Both the Do-it-Yourself Health Reform movement and the government-driven health reform are creating incentives for what are called a Patient Centered Medical Home (PCMH) and Accountable Care Organizations (ACO).

We are already seeing dramatic success with the first editions of PCMHs in the models such as MedLion that were highlighted in The Most Important Important Organization in Silicon Valley No One Has Heard About article. ACOs have the right goals in mind but remain like Unicorns—fantastical beings no one has seen yet and have been described as stupefyingly complex in their design. In contrast, one can’t help but be optimistic when studying the results of PCMHs such as 40-80% reductions in the most expensive facets of healthcare (surgical, specialist & ER visits) or a pilot program in Ohio with Medicaid diabetics that scaled could save Ohio $500 million annually.  Or consider the case of Denmark that was the first country to broadly adopt the PCMH model. It’s been so successful, they have reduced the number of hospitals in that country by over 50% as they simply don’t need that many hospitals anymore.

What does this mean for the tech community? I’d posit that as mobile technologies have fundamentally reshaped voice and data, there’ll be an equally radical transformation of healthcare. Just as legacy telcos had to fundamentally transform themselves or they’d be an artifact of history, so too will healthcare organizations transform (or die). With the transformed healthcare ecosystem, there are requirements for entirely new categories of software that a new generation of startups will develop. Exciting times indeed.

Image credit: Colin Dunn

I almost miss the bad old days. When I first started wandering around some of the more obscure nooks and crannies of this planet, lo these many years ago, Internet connections were rare and wonderful discoveries; now I just get annoyed when I can’t get online. The last decade-and-a-half of innovation has completely transformed the experience of travel. Right now I’m in the middle of a four-continents-in-six-weeks jaunt, from Canada to East Africa to Europe to India, and thanks to all my tech gear, life on the road is almost unrecognizably different from that of fifteen years ago.

The biggest change this trip has been my ebook reader. I have a Kobo. There is much about my Kobo that I really don’t like: its interface is clumsy and confusing; anything other than straight front-to-back reading is intensely frustrating; it can only use completely open wireless connections, so any wi-fi network with a login or click-to-agree-terms button is completely useless to me; and when I do connect, attempts to download new books fail approximately 50% of the time. But they do succeed the other 50%, meaning I’ve read nine books in the last month—and was able to buy and download books via ambient wi-fi in Kenya and Djibouti, which did feel like living in the future.

There are also subtler and more negative repercussions. I saw my own second novel for sale in a supermarket in Mombasa, and instead of the slight thrill of pride I usually get, my instinctive response was: "In paper! How quaint!" More worryingly, my e-book reader means the serendipity of finding and reading random books by new authors, because there’s nothing else to read while on the road, is dead. It’s like The Filter Bubble in miniature. But on the whole that’s a tradeoff I’m willing to make.

I still have some complaints. For instance, it’s still virtually impossible to add a stopover to an air itinerary without going to a travel agent. You can manage it directly with the Emirates and Icelandair web sites, but not with any of the aggregators. I’m very fond of Kayak, but if you have a complex many-city itinerary, their price optimization fails completely—it often works out cheaper to book all of the legs as individual one-way tickets—so I might soon defect to Hipmunk. And it irritates me that all of the various hotel-booking sites are apparently different skins on the same engine. Of them all, I prefer Booking.com, but I would like some actual competition.

And then there’s the guidebook problem. I used to be loyal to Lonely Planet (in fact, they play a major and laudable role in my debut novel) but then the BBC bought them out and watered them down. They do have a pretty good city-guide app selection, and they let you buy and download individual subsections of books, but their content isn’t as good as it used to be.

I think the future of travel guides is crowdsourced data on smartphone apps. In fact, I’ve taken a step in that direction myself: my app iTravelFree lets you download Wikitravel guides and OpenStreetMap maps to your Android or iOS device, and refer to them even while offline, to avoid roaming charges. Its 10,000-and-counting active users seem to like it, and it has come in awfully handy this trip: at one point I was hopelessly lost in Addis Ababa, until I realized I had the (surprisingly good) OpenStreetMap of the city on my phone, and my app saved the day. But while Wikitravel’s coverage of East Africa is better than I expected, it still isn’t near as thorough and detailed as its guidance for, say, Paris. It will improve over time, of course, but I still found myself flipping through my quaint paper copy of LP’s Ethiopia and Eritrea again and again.

It’s worth noting that half the tech I’m carrying is verging on obsolete, and yet I have no real desire to upgrade. I’m writing this on a three-year-old Linux netbook; my phone is a two-year-old HTC Magic running Android 2.1; my music lives on a second generation iPod touch; and the Kobo, as mentioned, isn’t exactly cutting edge. The last three devices can all charge from the three USB slots on the netbook, which means I only need one plug converter. Alas, I also have two cameras. One’s a Canon S90, which is a joy; the other is an Olympus E-PL1 Micro Four Thirds, which is mostly a royal pain, but does take great pictures. This means I also have to drag along their proprietary battery cradles. Dear camera manufacturers of the world; please enable USB charging, ideally as of yesterday.

This time next week I’ll be in India, which is something of an acid test for travel:

Follow @JPBarlow@JPBarlow
John Perry Barlow

India is like boot camp for patience.

June 20, 2011 12:02 am via TwittelatorReplyRetweetFavorite

…so we’ll see how everything holds up there. It’ll be interesting to see how Delhi and Mumbai have transformed in the eleven and seven years, respectively, since I last saw them. I expect the answer is “a lot”; but I also suspect that, almost invisibly, iteration by iteration, the changes wrought by technology on the experience of travel have been scarcely less profound.

Skype is being criticized for terminating employees immediately prior to the closing of the Microsoft acquisition, and people are assuming they’re doing this to keep the value of those employees stock options. Skype’s response boils down to saying that the employees were fired because they weren’t good employees, and that the value of the stock is negligible and didn’t affect the decision making process.

Ok. But it gets worse.

Employees aren’t even able to keep the vested portion of their stock options. The vast majority of stock options granted to startups have a vesting period, typically four years, with chunks of those options becoming vested during that four year (or whatever) period. If options are vested you can exercise them, pay for the stock and own that stock. At least that’s the way things have been done over the decades.

Skype did things differently. With Skype stock options the company has the right to not only terminate unvested options, but also vested ones. And any vested options that you’ve exercised (meaning you paid cash for them) that were turned into actual shares could simply be bought back by the company at the price you paid, regardless of their current value.

Here’s the relevant language in the stock option grant agreement. It refers to a Management Partnership agreement which isn’t public and it’s unclear if employees ever get to see it (my guess is not):

If, in connection with the termination of a Participant’s Employment, the Ordinary Shares issued to such Participant pursuant to the exercise of the Option or issuable to such Participant pursuant to any portion of the Option that is then vested are to be repurchased, the Participant shall be required to exercise his or her vested Option and any Ordinary Shares issued in connection with such exercise shall be subject to the repurchase and other provisions in the Management Partnership agreement.

And here’s the letter the employee received when he was terminated:

CNN calls the language “intentionally incomprehensible.” Reuters agrees, adding that Skype is “evil.”

Here’s What’s Going On

This isn’t the first time I’ve seen a stock option plan like this. I actually worked for a company once that used the same mechanism. I dug up the clause from that agreement, which I kept because it was so audacious. Here’s the relevant clause – it says much the same as the Skype documents but in slightly more understandable language:

Where, in the case of an Employee Participant, Executive Participant or a Consultant Participant, an Optionee's employment, term of office or consultant agreement is terminated for any reason, such Optionee shall immediately offer to sell to the Company all of the Common Shares owned by the Optionee which have been or may be issued to the Optionee upon the exercise of Options at a price equal to the Exercise Price of such Common Shares. Such offer will be irrevocable until the day that is 120 days from the Termination Date. The Company shall have the option (but not the obligation) to purchase such Common Shares. If the offer to sell Common Shares is accepted by the Company, the Company shall purchase such Common Shares for cash consideration.

Until now that company I worked for long ago was the only example of this type of clawback provision that I’d ever heard of. The reason that company added that clause is that they didn’t want any outside shareholders, including ex-employees. If there was a liquidity event, fine, employees got the stock upside. But if they left or were fired before a liquidity event, they got nothing.

There are only two real reasons for doing this. The first is that the company anticipates a long period of being privately held and doesn’t want to deal with outside shareholders. The second is that they don’t want to give away too much equity in stock options. Since they can take back the options of anyone who leaves, they can give equity more freely to employees coming on board.

There’s a tradeoff, of course. If employees understand what they’re signing they will want a lot more compensation to work there – either a higher cash salary or a ton more options. Because they know the likelihood of payout is so small.

If, for example, Facebook’s option plan was structured this way. all the early guys that left and founded companies like Quora and Asana would not have made any money at all (billions of dollars in value would have flowed back to Facebook). Multi-billionaire Shawn Parker, who was president of Facebook for a time, wouldn’t be a multi-billionaire. Or any other kind of billionaire.

The fact that Skype adopted this plan in the first place isn’t in itself “evil.” But they’ve done two things wrong from what I can tell.

First it appears that employees had no idea what they were signing and they probably expected it would be a normal stock option type deal that everyone in Silicon Valley has done for decades. If Skype wasn’t crystal clear with them, and explained it in normal human language that they understood, then these employees were intentionally misled. Skype had an incentive to make things unclear, because employees would demand far more compensation if they had understood. The fact that employees are so surprised that this is happening suggests that they didn’t understand the agreement. This is what lawyers call fraud.

The second thing Skype did wrong was not to waive this clause with the looming acquisition. The company can deny all day long that they fired these employees for cause, not to save a few dollars on stock options. But the appearance is the exact opposite.

These employees should simply hire a lawyer to sue Skype. There’s a valid fraud claim based on what I’m seeing, and the “atmospherics” (how lawyers describe the legally irrelevant facts surrounding the story that can nonetheless influence a judge and jury) are terrible for Skype. Also, Skype has to wrap up this deal. My guess is they’d just settle immediately and pay out on the vested part of the stock options.

Get Ready For More Of This

I bet that dozens of lawyers, venture capitalists and CEOs, now that they’re aware of this, are thinking “Hmmm, not a bad idea. We should do that.” And as long as they are crystal clear in their communications with new employees that these stock options, which are already a long shot, are likely to be extra-worthless, they’re probably in the clear legally. Then it’s up to the employees to take a stand. Or not.

Hacker group LulzSec has announced that after 50 days of hacking companies and organizations, it is finally done. Check out the message from LulzSec below, which was posted on Pastebin. Check out the video as well (embedded below).

LulzSec most recently released a torrent of data from Arizona law enforcement which included hundreds of classified documents including personal emails, names and phone numbers.

The group was also behind attacks on Sony, attacks on PBS, the US Senate, the CIA, and a slew of gaming sites popular with 4Chan users including EVE Online, Minecraft and League of Legends. LulzSec was thought to have been the source of hacks against Scotland Yards and the UK Census, but the group denied involvement.

As the post, says the group of six hackers has been “disrupting and exposing corporations, governments, often the general population itself, and quite possibly everything in between, just because we could.”

Friends around the globe,

We are Lulz Security, and this is our final release, as today marks something meaningful to us. 50 days ago, we set sail with our humble ship on an uneasy and brutal ocean: the Internet. The hate machine, the love machine, the machine powered by many machines. We are all part of it, helping it grow, and helping it grow on us.

For the past 50 days we’ve been disrupting and exposing corporations, governments, often the general population itself, and quite possibly everything in between, just because we could. All to selflessly entertain others – vanity, fame, recognition, all of these things are shadowed by our desire for that which we all love. The raw, uninterrupted, chaotic thrill of entertainment and anarchy. It’s what we all crave, even the seemingly lifeless politicians and emotionless, middle-aged self-titled failures. You are not failures. You have not blown away. You can get what you want and you are worth having it, believe in yourself.

While we are responsible for everything that The Lulz Boat is, we are not tied to this identity permanently. Behind this jolly visage of rainbows and top hats, we are people. People with a preference for music, a preference for food; we have varying taste in clothes and television, we are just like you. Even Hitler and Osama Bin Laden had these unique variations and style, and isn’t that interesting to know? The mediocre painter turned supervillain liked cats more than we did.

Again, behind the mask, behind the insanity and mayhem, we truly believe in the AntiSec movement. We believe in it so strongly that we brought it back, much to the dismay of those looking for more anarchic lulz. We hope, wish, even beg, that the movement manifests itself into a revolution that can continue on without us. The support we’ve gathered for it in such a short space of time is truly overwhelming, and not to mention humbling. Please don’t stop. Together, united, we can stomp down our common oppressors and imbue ourselves with the power and freedom we deserve.

So with those last thoughts, it’s time to say bon voyage. Our planned 50 day cruise has expired, and we must now sail into the distance, leaving behind – we hope – inspiration, fear, denial, happiness, approval, disapproval, mockery, embarrassment, thoughtfulness, jealousy, hate, even love. If anything, we hope we had a microscopic impact on someone, somewhere. Anywhere.

Thank you for sailing with us. The breeze is fresh and the sun is setting, so now we head for the horizon.

Lulz Security – our crew of six wishes you a happy 2011, and a shout-out to all of our battlefleet members and supporters across the globe

Let it flow…

Ever since Color launched its photo sharing app, the $41 million startup has been having a rough time. John Biggs and I reviewed it on Fly or Die back in March, when CEO Bill Nguyen joined us to defend the app ( you can watch that episode below, we both gave it a “die”). The company continues to struggle, so we decided to revisit our assessment in the new episode above.

Things don’t seem to be getting much better for the company. Nobody is using the app. Co-founder Peter Pham left, or was fired, according to CEO Bill Nguyen, who also told the New York Times that the company is going back to the drawing board. It might scrap its photo app altogether in favor of, well, something big and vague. According to the NYT article:

Mr. Nguyen outlined an ambitious plan to compete with Apple, Google and Facebook by tying together group messaging, recommendations and local search, all while making money through advertising.

Okay. Good luck with that.

Their first idea didn’t work. It happens. At least they still have a lot of money left to try something else. We’ve analyzed this from every angle by now. But how many do-overs do they get? Can they overcome such a spectacularly bad launch? Or is Color doomed to become the Ishtar of iPhone apps?

Watch more episodes of Fly or Die here.

“I’m CEO, Bitch.”

While the story of this title appearing on Mark Zuckerberg’s early Facebook business cards has been around outside the company since at least 2009, when Ben Mezrich’s The Accidental Billionaires was released, it really exploded into legendary status last year. That’s when the Acadmey Award-winning film, The Social Network (based on Mezrich’s book), launched the phrase into pop culture by having Justin Timberlake’s Sean Parker utter it as the exclamation point at the end of a key speech meant to inspire Jesse Einsenberg’s Zuckerberg.

“This time you’re gonna hand them a business card that says, ‘I’m CEO, bitch!’ — that’s what I want for you,” Parker says. Later in the film, Zuckerberg opens a box of business cards that have the title on them.

Of course, that’s Hollywood. That’s not what really happened. But the phrase, and the business cards were very real.

David Kirkpatrick’s book The Facebook Effect, confirmed the existence of the business cards last year. The key excerpt:

As the Facebook boys started dealing increasingly with real business professionals, a reputation for rambunctiousness spread throughout the valley. “It’s Lord of the Flies over there,” one executive told an executive recruiter. Zuckerberg had to be careful which business card he handed out at meetings. He had two sets. One simply identified him as “CEO.” The other: “I’m CEO…bitch!”

Early Facebooker Andrew Bosworth (“Boz”) later confirmed this even further when he answered a question about the card on Quora last summer. But Bosworth downplayed the card:

I believe it was intended as a joke for his friends and speaks to how unclear it was even in his own mind at the time that he would someday become such an important (and scrutinized) leader in our industry.

But yesterday, Bryan Veloso, a Facebook Designer from 2005 to 2006, gave a more more interesting and enlightening answer on Quora. And he should know — he designed the actual card. According to Veloso, the idea for the “I’m CEO, Bitch” card stems from the fact that Zuckerberg actually used to utter the phrase. And as Veloso tells is, he did so to be more “aggressive” and to emulate the style of one man: Steve Jobs.

The key part:

As for Mark’s, it’s no secret that Mark looked up to Steve Jobs at the time. When Aaron Sittig and I were the only designers in late 2005, he would hold his design meetings with us in that classic “aggressive” Steve Jobs-style. It was during one of those meetings where I remember him first uttering the phrase, “I’m CEO, bitch…”

Veloso goes on to note that the cards was in many ways a “happy accident” in that he felt comfortable making thanks to his relationship with Zuckerberg at the time. He also says that eventually the cards were pulled towards the end of his tenure at Facebook. “In this designer’s view, these retired cards were an excellent representation of the company culture at the time. Their replacement reflected the changes a young Facebook needed to go through in order to be where it is today,” he writes.

Indeed.

So, no, the card was not inspired by a drunken nightclub party with Victoria Secret models. But it was very real. And you can thank Steve Jobs for that.

Update: And as Dan Frommer reminds us on Twitter, the actual phrase itself sure seems like it may have been derived from comedian Dave Chappelle’s portrayal of singer Rick James on Chappelle’s Show. The phrase, “I’m Rick James, Bitch!” was pretty hard to avoid in the early-to-mid 2000s.

Over the last few days the TechCrunch tips box has seen a surge in complaints from Facebook developers who have had their applications disabled without warning. Facebook’s developer forum is filled with threads as developers cry foul, saying that Facebook is killing their businesses without warning or just cause. And developers in a thread on Hacker News are reporting similar problems. So what’s going on?

The sudden bans are the result of an automated Facebook bot, which automatically shuts down applications that it deems to be spammy. Obviously neither users nor Facebook want spammy applications on the platform, but there’s one problem: Facebook recently tweaked this bot to be much more aggressive, and it didn’t give developers any warning before it set it loose.

Facebook declined to share any data on how many applications have been affected — it would only give us the same statement that it gave to All Facebook, which reported on the issue last night:

“Over the past year, we’ve worked hard to improve our automated systems that catch spam and malicious behavior on the platform. These systems allowed us to cut spam on the platform by 95 percent in 2010, greatly increasing user satisfaction and trust with apps on Facebook. Recently, we started getting a lot of user feedback, spiking significantly over the past week, on the amount of application spam people are seeing in their feeds and on their walls. As a result, we turned on a new enforcement system yesterday that took user feedback much more heavily into account. This resulted in a number of applications with high negative user feedback being disabled or having certain features disabled. We’ve posted a link for developers where they can appeal if they feel they’ve been disabled in error. Also, we’re working on new analytics to help developers better monitor negative user feedback to prevent a spike like this in the future.”

To be clear, many of the applications that Facebook shut down probably are spammy. But others, like GoodReads, are perfectly legitimate. Facebook now seems to be actively reinstating applications that were wrongfully blocked — GoodReads was fixed last night, and we’ve received reports from another developer that their applications were recently reactivated without any additional explanation.

But it’s not as if Facebook can just wave its hand and suddenly put things back the way they were. Some of these developers are having to deal with an influx of user complaints. And some devs are losing faith in the platform entirely, as they fear having their business pulled out from under them without warning. As one developer, whose application was blocked and then reactivated upon appeal, put it:

“I will no longer be content to view Facebook as an environment to handle user traffic. They will be a mechanism for user acquisition alone.”

The Gillmor Gang — Robert Scoble, Phil Windley, Kevin Marks, and Steve Gillmor — celebrated the news that apps are moving past web sites as the default architecture of the planet. I say celebrate because I think the trend is one that will continue, and even accelerate, as iOS notifications make interoperation between apps more useful. In the process, as @windley notes, notifications and the processes that are triggered, become the focal point of what used to be known as the operating system.

What that means for Windows is cloudy at the moment, pun intended. Though many analysts suggest Windows Phone 7 will gain significant penetration alongside iOS and Android, it will only be possible should important apps drive that adoption. @scobleizer is dubious, and @kevinmarks suggests the locus of power in notification has moved away from OS to Facebook and Twitter. @stevegillmor has his money on @mentions, where social and Web meet in a native wrapper too tasty to ignore.