I Have More Impact as a VC Than MD

At that point I worked incredibly hard. I tried to absorb as much medical knowledge as I possibly could. I used to do locums at weekends all over the country — I couldn't get enough of it.

And after two or three years of that, I started to wonder whether I could do this for a lifelong career, and whether it was going to be different enough to sustain me for what would be another forty-plus years. At that moment I more or less decided to leave medicine and read law. And Sir David Weatherall, who was my boss, called me in. He was annoyed and upset, and thought it was crazy. He said, "Why don't you go into the labs" — which were across the corridor from his office in Oxford — "and just do some molecular biology or something? Figure a programme out."

So I went down to the library and sat there in the comfortable armchairs, wondering what on earth I could do in science, having really no molecular genetics, no molecular biology. And on the table was a copy of Nature in which Jim Gusella — then, and I think now, at Mass General — had mapped the gene for Huntington's. And I thought, I wonder if I could do that. Having done most of my work in nephrology and seen a lot of patients with polycystic kidney disease, I decided, well, I'll just do polycystic kidney disease. I'll find the gene for it. It seems like a doable thing.

So I went back upstairs and told him I was going to do this. And remarkably, he said, go right ahead, and gave me a little space in the lab opposite. There were some extremely good people there — Doug Higgs, and Kay Davies, who was working on muscular dystrophy. They were very helpful. They didn't see it as at all unusual that someone with absolutely no skills in molecular biology, no experience, and frankly a bit poor with his hands, would be allowed to do this. And so I did. From there I moved into molecular genetics, got a bit lucky, and mapped the gene for polycystic kidney disease. And suddenly everyone wanted to talk to me.

Very soon after that I got a number of job offers in the US, and I thought it would be interesting to go. So I ended up at Yale and ran a fairly substantial lab on behalf of, and paid for by, Howard Hughes — which is the golden ticket in the US. If you get a Howard Hughes position, the money just comes flooding in. After a few months I started to think about forming companies, because it seemed obvious to me that this mapping of genes would someday result in the ability to make pharmaceuticals based on what you'd learned about the underlying mechanisms of disease — not just pure genetic diseases, but complex diseases. I worked on hypertension, on Alport syndrome, on polycystic kidney disease, a bunch of other things, and started to help set up companies to exploit the methods I was using in my lab. And again, in the US, then as now, people were very open to that. They introduced me to venture capitalists and business people, which enabled me to move into setting up companies and eventually a business career. So that's the early few years.

I think a lot of it is that within the population of doctors, there's quite a range of willingness to take risk. A lot of people — and I had many friends like this in medical school — got the job, they were the registrar in the Nuffield Department of Medicine, and they saw the pathway: you've got so far, you've got to be the senior registrar, then maybe you'll become a consultant. They're very averse to taking decisions that could cause them to fall off the ladder.

And there are other people — and I was one of them, I don't know why — who don't fear that risk. I never thought that if I couldn't be a successful consultant in internal medicine in the British system, it would be the end of the world. I'd just end up doing something else. I don't know what it is. But if you find yourself a person who's looking outside the tramlines, willing to make career decisions that are somewhat risky — because it could all have fallen apart, I could have arrived at Yale and nothing gone well — then I think you want to seize those opportunities. And what you have to do is look for opportunities to solve problems.

Looking back, one of the key things is to look at everything you touch — it doesn't matter if you're the lowly house surgeon in a provincial hospital — and ask, does this make sense? What could I do to change that? Everything you touch, you look at, and you'll come up with ideas. You may never solve those particular questions, but it will introduce you to people and ideas that lead you to other careers. Not everyone wants to do that. But a lot of people do.

I don't know what it's like today in the UK, but I do feel that in the US the classical medical career is not as attractive as it was in the 70s. It's a very interesting phenomenon. We used to think we had almost complete liberty to determine a patient's plan — and there was a price the patients paid for that, which was that it wasn't very systematic. Now a lot of medical care has become protocolised, and you're forced into very specific protocols based on the input criteria for each patient. I think that's detracted from some of the excitement in medicine for many people. Not all — some people enjoy the interaction with patients and colleagues and doing a good job very, very well. But for those of us always looking at the edges of it, I think it's changed. So I do meet a lot of people who really want to move out of medicine. And the way to do that is to look at everything you touch, every patient, and ask: everyone tells me this is how it's always done, but does it make sense? Is there another way? If you keep doing that, you'll get some questions — and then maybe you can try to answer them. So I think there's a lot of opportunity, actually.

I don't think it's ever got me in trouble. Maybe I've been very lucky — probably have been. To take the story forward: I was at Yale, and after three or four years I felt I could see the future in molecular genetics playing out. It was quite attractive, because I was doing well — I had a large lab, and everyone wanted to be me, because I had this Howard Hughes position in the Boyer Center for Molecular Medicine, a beautiful building. But I wasn't enjoying it as much. It wasn't as different day to day. When you start something, it's different every day, and then gradually the days get more and more similar. That was happening to me.

And then, bizarrely, I was invited to give a talk at Cold Spring Harbor by a geneticist at Baylor College of Medicine who couldn't make it — his plane was cancelled. He was much more important than I was, and he called me knowing I lived close enough to Cold Spring Harbor, which is on Long Island. He said, "Could you step in?" I said, "What is it?" He said, "Well, every year Jim Watson — of Watson and Crick — holds a meeting for the CEOs and chairmen of the world's top thirty pharmaceutical companies. They all come in their helicopters and spend a couple of days at Cold Spring Harbor talking DNA — at a time when most pharmaceutical companies didn't know what DNA was. Could you go down there and talk?"

I thought, do I have to do this? It's a long drive, I've got to get on the ferry, it's a bit of a mess. But I did it as a favour. And there I was, talking to all these great leaders of industry about the future of molecular genetics, and debunking some of the myths going around — propagated by scientists at the time — saying in five years you'll know all your DNA and everything will be sorted out and wonderful. I didn't think that was right at all. In fact, I said I'd be very careful, if I were them, about disclosing any of their DNA to anyone, until they knew there was a world where insurance doesn't depend on your pre-existing conditions.

So I gave that talk. And two bankers came up to me and said they had a job for me — would I like to go and work in New York, in a merchant bank, a private equity shop? I took that opportunity. And that could have gone very badly wrong, because I had no skill in business, no skill in finance. That was a huge leap — away from medicine and science into a different field. At that point I was 38 or 39, so I had an investment in what I was doing. But I took the chance. You do take a risk, and it's not always going to work well. Maybe I was just lucky, but that did work out.

Well, that's an interesting question. I didn't remember I'd ever given that interview — it's a bit scary to think it's out there and you found it. First of all, I'm not sure I quite knew the difference between investment banking and merchant banking. In the UK the words are often used interchangeably. But what I was really referring to were investment banks, which advise other people on their transactions. I distinguish that from venture capital or private equity, where you are a principal — you are managing money, and you succeed or otherwise by your success in doing that, as opposed to arranging for two other people to come together.

I do think venture capital is an extremely valuable activity. In fact, I think it's probably the most valuable activity — because what you're doing is looking at something like 600 companies a year across the team in Boston and London, in my little company, MVM. And we're trying to find those technologies that will make a difference to the point where we make money out of them, make no mistake. We have to make money out of the investments. It's not philanthropy. Why? Because the people who give us the money — the big banks, the large pension funds, foundations — they need that money; that's what they're there to do. So we've got to make money out of it. But we conclude that you can make money most easily by doing something that makes a difference — because if it makes a difference to patients and the system, then it will most likely be successful, and you'll make money and do some good.

The activity of selecting amongst those 600 companies and putting money where it's most useful is actually really valuable. Very, very few products come out of universities. I used to have all this data to hand — when I was asked this question six or seven years ago, the most valuable technology ever to come out of a university, in terms of the value it created for that university, was Gatorade, out of the University of Florida. Since then, the best-selling drug in the world — Humira, though it may not be today; maybe COVID vaccines have displaced it — came out of work done at the Medical Research Council, at the LMB, the Laboratory of Molecular Biology in Cambridge. But the development of the actual drug, making it safe and putting it into a bottle, was done by commercial companies. So the step of taking raw science and developing it, in many, many steps, into a real product you can actually use — a drug, a medical device, a diagnostic — that is very valuable work.

I think I make more difference per unit time than I would have if I'd stayed as a nephrologist working in a good hospital. Not to say a good nephrologist isn't doing fantastically good stuff — we all hope we'll never need one, but some of us will. But I do think doing venture capital is very valuable. Now, is working for a big investment bank, merging two pharmaceutical companies together, very valuable? Not so sure. I don't feel those mergers and transactions are often particularly valuable, or create value. Some may, some don't. But I don't think the work is as useful as what I do. That may be hubris, but that's how I think.

Taking a small company with a good idea and making something out of it — funding it, developing the product, hiring the people, navigating the regulatory system, and in the US particularly the reimbursement for the product, the manufacturing, the marketing. Those are very, very difficult steps. There is almost no job harder in the world than a startup CEO, who has to think about funding, taxes, accounts, manufacturing, personnel — all of it. It's a very difficult thing to do. And what we do is help in that process. It's not just about putting money to work, capitalising those companies. At MVM we do a lot of hands-on work helping management. Sometimes they're first-time CEOs and don't yet know the way of the world — how to position the business, how to sell it. They can't be everything to everyone.

We have a team of — I think now four MDs and four PhDs, trained in very good places. They've often got experience in consulting; several from Bain, several from McKinsey, and elsewhere. The skill they bring is the experience of having trained in medicine — that clinical sensibility — plus the analytical skills from a good consulting firm. You bring that together to help the company, and it adds a lot of value. Not every venture capitalist does that; some just write the cheque and stand back. But a lot of them do. They nurture the right people, keep the maverick CEOs on the tracks, and stop them from doing things that are value-destructive.

Let me ask you a question — this is maybe an overview. Leave medicine for a while and think about the companies that have really changed ordinary life in material ways and created trillions of dollars of value, and jobs, and wealth: Google, Facebook, Amazon, Apple, Microsoft, Salesforce. I could go on. Make a list of all of those. How many are in the US? How many in Europe? How many in China and Japan? There are some good ones in China, some in Japan, some in Europe. But where are most of them? The US. Why? Is it because Americans are smarter? I don't think so. Better educated? The statistical evidence is to the contrary. No — it's because of the entrepreneurial culture and access to capital.

I do think the UK is moving very fast towards the position the US has. There's a real entrepreneurial culture — even the fact that you're doing this interview today, you're much more likely to be doing it out of the UK than out of Germany. So the UK is in a great position. But the way capital is managed in high-risk investments, such as venture capital, was and is a US phenomenon over the last hundred years. In the previous hundred years it was the great European investment banks — the Warburgs, the Rothschilds. But in the last hundred years it's been a US phenomenon. And I think that's what's generating all these incredible developments, these new industries, these highly efficient, highly productive ways of doing things.

I think it's a belief that the future is going to be better. I don't know why Americans think that way, but they do. They believe the future is going to be better, and exciting, and that new things will happen — and you could be anything you want to be. To some extent that's a bit of a false promise. But that's what American parents tell their kids: you could be anything you want to be.

Whereas when I left the UK, the prevalent view was, you should live within your abilities, you should know your place. The UK has moved very far in the interim, but there was a sense of, don't get too big for your boots, don't start doing things you shouldn't be doing, do what you know how to do, be modest, be sensible. Americans don't think that way. They want to do something they shouldn't be able to do. And quite a lot fall over doing it. But of course you get people like Elon Musk. They're rare — not everyone's Elon Musk, but there are a lot of people trying to be. And I just get excited by that. I find it exciting to watch those people, to talk to them, to meet them.

Well, I start with an analysis of the product, and whether it's going to benefit the patient and the medical system. It's not sufficient just to benefit the patient — it must also help healthcare generally, because insurers and governments are paying for it. So an exotic, expensive treatment that delivered marginal value might be marginally beneficial to the patient, but if it's so expensive, it's not going to work.

I personally start by trying to understand: do I really feel that's improving medicine? That's my starting point, because that's where I came from. If I'd been a marketer, I might come at it from the market first. But I do believe medicine is such a specific industry — the way doctors behave, the way patients think, is so difficult to understand if you've never been in it. A lot of people don't understand how patients and doctors make decisions, how patients feel about it. So I look at a product and try to understand if it's going to make a significant benefit to healthcare. Should a patient want that? Should a doctor want to use it?

If it passes that test, then we look at the second-order questions. One: is anyone going to be prepared to pay for it? That depends on the system — it's different in the UK and the US, but we look principally at the US market. Is the US payer, the government through Medicare or the private insurer, going to be willing to pay? And there's another thing, which I think is less important in the UK: will doctors want to do it from an economic perspective? If we take a surgical product, and the rival procedure takes an hour and they get $3,000, and we've got a great new product but because of the way reimbursement works it takes two hours and they get $2,000 — they probably won't use it. So we have to worry about the commercial imperatives at the doctor level and the payer level.

Right now the US system is overburdened with costs, and I do believe it's finally woken up to the need to provide value for money — which of course we've known in Europe for a long time, this concept of quality-adjusted life years bought per dollar. So those are the second-order questions. First, does the patient benefit? Then, does the system benefit — is someone going to pay for it? And the last question is, can we market it? Is there a way to get it into the market? That's quite complicated and requires a lot of skill and experience. That's why on my team we have people who've worked on many different companies and been involved with marketing plans. Typically, when we look at a product, we might call 20, 30, 40, 50 doctors — we randomly select them, and we try to probe their understanding of it.

For example, we've got a company that does minimally invasive cervical fusion for cervical degeneration. When we made that investment, we had to call lots of doctors and say: imagine there's a new, minimally invasive product where, through a six-millimetre cannula, you can fuse the cervical spine, take away the pain and the neurological issues. What do you think? And we interview many of them and take a view. I took the view that if I were a patient with cervical degeneration, and someone said I could have two little holes made in the back of my neck, and through those small cannulae fuse the facet joints of the spine, and probably walk home in two days — how would I like that? I concluded that any right-minded person, if they thought it was a safe procedure, would go for it. So that's why we pursued that investment. That's how we think about it.

Well, both happen. We miss a lot of good things — you have to, because you've only got so many. If you're a good investor, you rely on the data: you get the data and then make an informed decision. But the hardest thing is management. It's well known in investing that a good manager can make a good business out of something quite mediocre — and conversely, and sadly, a bad manager can destroy a fantastic product. So one of the hardest things to judge is: does the management team know how to do it? And if they don't, are you willing to change them and replace them? Can you find someone who does? That's a very big and difficult thing.

So you do make mistakes, with products as well. The earlier investments are much harder — we used to do a lot more very early investments, and it's harder to predict whether a new biochemical pathway will result in a drug. That takes a different set of skills, more analysis of and intuition around the biology. As you move down the pathway towards a product, you worry more about: can you produce it at a reasonable price, will people buy it, will it pass clinical trials, will doctors use it in the marketplace? At any point you should use evidence to get the right answer. But there are so many risks that you will make mistakes — a lot of mistakes.

What you hope is that when you do make a mistake, it wasn't through failure to think about something you should have thought about — it was because of something unpredictable. The classic example: you have a drug, a fantastic concept with a great pathway and great chemistry, you make it, go through phase one and phase two, into phase three. And suddenly you get a call one day that five patients have raised liver enzymes and bilirubin, which is usually fatal. Could you have predicted that? Probably not. If that happens to you, you can sleep pretty well. But if you go back and find there were hints of liver issues you didn't notice, or brushed under the carpet, then you should feel bad.

A few things. When I started, I underappreciated the complexities of taking molecular biology ideas all the way through to a drug — the time it takes, the cost. That was just naivety. Of course, I don't think anyone knew the answer, because no one had really taken a gene and said, this gene is important in cystic fibrosis, let's find out what it codes for, how it works, sort out the physiology and the pathophysiology, then make a drug for it. No one had that all mapped out.

The other big category of mistakes is to underestimate the human factor — how important it is to have good people. You can't make a great company with a great product with people who aren't great. You'll never do it. The ability of humans to navigate issues, overcome them, and find ways around is incredible — but very few people can really do that. That is the ultimate skill. That's why — I'm not saying Elon Musk is worth, what, $130 billion or something ridiculous — but you've got to give him credit, however much you like him or don't like him as a person. He's a force of nature. He's driven those companies by willpower and smart decision-making, and created a whole new industry in electric cars, and maybe in space for all I know. That's extraordinary. People like him are very, very few and far between. So that skill — you have to be undaunted by failure, super energetic, have massive self-confidence, a lot of properties that enable you to overcome all the issues that taking new technologies to market involves.

Well, as a venture capitalist, owning the shares of the company, you want them to do what you say. And of course you have a view. But one of the challenges is that if you hire super-smart people — I shouldn't think Elon Musk has ever taken an instruction from anybody. So there's a dilemma: you want them to do what you think is the right thing, knowing that if you've got the right person, they probably know more than you do about what the right thing is. And you've got to give them a chance to use their skills. That's a genuine problem. And that's why evaluating people is so important in investing — you're trying to judge: they want to do this, I want to do that; is their idea better than mine? Is this the point where I try to interfere, or the point where I let them run with it? That's really hard.

I'm very often in meetings and I come out and can't really decide whether that individual is really, really good, or actually probably quite dangerous — potentially could lose all your money. It's very difficult. And there's a school of investing that says, don't tell me what the product is or the science, I'm not interested — I just need to know the people, and that's my skill. There are investors like this; they just pick the people. If you believe you can do that, and you can, it's extremely powerful. If you're able to discern those very rare people who have this entrepreneurial ability plus the stamina and endurance, that is a way to go — you don't necessarily need to get too much into the detail.

There was an investor called Frank Bonsal, a founder of NEA, who wrote a book called The Billion Dollar Molecule about the founding of Vertex. I don't know if it's still in print, but if any of your listeners want to hear an interesting story about the generation of new companies — Vertex got going maybe in the late 80s. Frank's modus operandi was to spend a lot of time with people and judge the people. He was very successful, involved in many successes, of which Vertex was just one. That's been written up as a book, and it's worth reading.

I'm not sure I'm a particularly good leader. In fact, I don't think I am — I'm not the person to answer. I watch it, and I can see people who are good leaders. I'm not particularly good at it. I tend to get in the way too much. Leading is a bit like parenting — you probably haven't had the pleasure of having teenage children yet. There's an element of that to it: you're trying to get them to do what you want, but they're resistant at every stage. Usually leading in a commercial sense isn't like that, because hopefully you've got an alignment — the people you work with want to do what you want to do. But that's another skill. Leadership becomes harder as the organisation gets bigger, because you're delegating all the time, so you need to impart your principles and objectives. Our team is, I don't know, fifteen people — so that's not a huge challenge of leadership. They're very smart and very independent. But I think you should find someone else to ask about leadership. I'm not sure I'm any good at it, to be honest.

Well, I've had three careers, if you like — medicine, science, and finance. There are different skills. But hard work, willingness to put the extra time in, is common to everything. There are very few good scientists in modern science who don't work absolutely flat out. I suspect there are very few successful doctors who don't work extremely hard, and I know there are very few investors who don't. So that's a given. Working hard is everything. I'm not sure I've worked as hard as I should have — but you make opportunities arise when you work very hard.

What I did when I was a junior doctor was work very, very hard, and that really paid off. When I chose my senior house officer jobs, I tried to find the hardest ones there were — on the grounds that if I did the hardest ones, I'd learn the fastest. At that time it was St Thomas' ITU, thought to be the hardest one; it was one-in-two for four months and one-in-one for two months, or something absolutely crazy. And you saw so much, so fast, that you became — I think that's the thing: if you really want a successful career, you want to work very, very hard.

Not really. When you change careers, you do have small regrets — because you see people who were at the equivalent stage to you doing very well by continuing on the path, and sometimes that's a bit annoying. You have slight twinges of envy when you see other people who — let's say you thought you were a bit better than somebody, a bit smarter — and then you go off into venture capital, completely retraining, more or less starting down at the beginning, and they've gone off and become chairman of medicine at Johns Hopkins or something. That gives you a sort of — because you could have been that. So there are always those, when you change a lot. But compare that with what I consider to be the much better life of having done different things and seen different things — I guess it's incomparable, really. So I don't really regret anything. I'd have liked to have done a bit better in everything I did — but who wouldn't? That's not a regret. It's just an acknowledgement that you can be better.

Thank you.