On starting and scaling healthcare startup 23andMe

I got very my parents I went to a job fair right out of college. My parents made me go. And I got this job offer to go on Wall Street. And it's one thing I always tell young people, like, never really know what's gonna come your way. Yeah. Just take every opportunity. So I very randomly got this job on Wall Street.

I had no idea what it was, but I kinda figured, like, I actually only took the interview because they gave me free frequent flyer miles. Or I won the flight. I won the frequent flyer miles. So They just they you had to fly there, but you got to keep the frequent flyer miles. Yeah. Yeah. No. I was just excited.

I was like, it's a free trip. Like, it will be 5,000 miles. Like, that's pretty awesome. So so I was on Wall Street for ten years, and I loved it. Like, for me, it was because it wasn't just about, like, trading and making money and doing these things, but it was like, I gotta learn about companies.

And the thing the one thing that is amazing on Wall Street is that you get to go like, you get to go deep on certain companies when you're really interested in them and then really broad knowing a whole sector. So I got to know small cap biotechs and pharma companies and hospital systems and insurance companies. And I got to have, like, a really broad landscape of health care.

And, you know, in the beginning, I had this eternal optimism. Like, health care is gonna, you know, totally change. There's antibodies. There's all this, like, new you know, there's, like, technology. Like, there's all these new discoveries coming. It's gonna be so different.

And then when the bubble burst in February, a lot of innovation dried up and I started to see more what healthcare really is. At the end of the day, healthcare is an amazing business that really effectively monetizes illness. And I used to always say, know, if I successfully get you to never be diabetic, no one makes money. But if you do become diabetic, there's all kinds of ways I can make money.

And at the end of the day, when I think about what I care about, what's in the best interest of me, like, I'd rather just never be diabetic. I'd rather never be sick. And there's no one in the system today that really thinks about how to keep me healthy.

So after ten years of investing, I felt like I really understood the system, and I also understood that you had this all these people with the right intentions who really care, but the ship's just pointing in the wrong direction, and that no one's actually focused on keeping people healthy, and that I wanted to have a company that was frankly somewhat rebellious and was going to inspire people to try to really be healthier.

And, you know, and I felt like it was you know, again, it had sort of that, you know, a little bit of a Robin Hood kind of mentality in the beginning of, you know, we have to you can't change the system from within. Yeah. So we gotta do something more radical from outside.

One of my favorite Charlie Munger quotes is incentives are a superpower, and I always believe this, and I think this is the clear problem you just identified. So how do you think about how you how you design a system or a company that incentivizes.

that is incented to keep people healthy? Well, I realize, like, the main thing in health care is that you don't actually ever have a voice. Like, you don't like, you don't actually because you're not the payer in health care. Like, you, the individual, you don't actually make decisions. It's, you know, your insurance company, your doctor, the pharmacy benefit manager.

There's all kinds of people in the back who actually make decisions. And I think there's all this data now about, you know, you go in for surgery and there's doctors coming into the surgery that you've never even met. So for me, what was transformative, like what we did to change the incentives, is to put you in the power seat.

Because I feel like, like, you make retail decisions that are in your best interest because, like, you're actually the one paying the bill. So for us, like, what we decided to do that wasn't frankly, like, seen as disruptive is we are direct to consumer.

I remember when you launched doctors were just, or healthcare professionals in general were saying, patients, this is irresponsible, you you need a medical professional to do this. Like we can't I remember one quote that really stuck with me, Something like, we can't have people making their own health care decisions. They don't know how to interpret the data.

There was all kinds of interest it's like a whole there's all kinds of interesting things because people would publish stuff on Facebook, and then doctors say, do you have the right? We'd remind people like, yeah, it's their own Yeah. Information. So there's always been, I'd say attention a little bit with the medical system.

In the medical system, historically, there's tests like the pregnancy test. The pregnancy test, when it came out, was seen as radical. Like how could women ever possibly learn at home that they're pregnant? And if you look at the literature of, you know, that era, it like we look at that today and we'd say it's crazy.

So one of my favorite papers is there's this, JAMA paper the Journal of American Medical Association from 1969, I think, where they asked doctors, would you tell your patients that they have cancer if they had a cancer diagnosis? And over ninety percent of them said no. So, I always put that in context of like it helps people understand like physicians were trained in such a way.

And so, I don't blame the system or the individuals. It's just like that was the culture that was thought of like what was actually in your best interest. And And I think what we do is, like, as we empower consumers, we are showing that people actually can be like, people wanna be in charge of their health. They want the information,.

and they actually wanna be in control. I I always like the sort of model of thinking about the world fifty or a hundred years from now and looking back, what will we think was just totally ridiculous?

Yeah. And this sure seems like I think health care is a type because health care is, like, really as much as it's science and it's data driven, it's also not. Like part of what people don't necessarily always understand is that the practice of medicine is an art.

Like you can go the reason why you can go to five different physicians and get five different ways of, you know, treating cancer is because there's the practice of medicine.

Can get different And one of the things that we're specifically trying to change is exactly that, is exactly to say that we're trying to get data so that it's no longer a question of like, hey, Sam, what's in your best interest? That there's actually data to say exactly what.

you should be doing. How do you think the medical system or the health care system overall will will eventually get to a place where we don't have this misalignment of incentives you talked about? And we have data, and we have people in control of their own health care. Like, if you could wave a magic wand and say, I'm gonna fix the health care system, what needs to happen?

I think the reality is what needs to happen is never gonna happen, which is like you have a universal payment system, so single coverage. The reality is like who cares about keeping you healthy today? Because you could be overweight and you could eat poorly and you can never exercise and you won't see the consequences of that for the next, let's say, twenty years.

So the reality is, like, who's going to benefit from that? And the reality is, like, it's society, and it's it's you personally, and it's, like, you know, somebody who's willing to invest in you in the long run. And I think for a single payer health care system or, like, a country, they care about actually trying to keep you healthy for as long as possible.

I think second, people like, we don't want we saw that communism doesn't Yeah. Support the the the system that we all want, people have to be willing to spend money and they have to step up. And I think the same way you see people stepping up with yoga and vitamins and weight loss studies and, you know, all kinds of different alternative cares.

People at the end people at some point have to step and say, like, your health is also your responsibility. And I think the more that we can give people personalized information about themselves, the more that they are gonna be willing to execute on taking care of themselves. Speaking of that, you could have started any so many different companies in the health care space.

How did you decide this was what's this was not an obvious choice at the time? For me, it was totally obvious. So for me, there's a couple of things that were happening. One, I always loved genetics. It was my first investment in 1996. And so in some ways, it was my first, and it was my last. So the genetic revolution was happening, like, right in when I started investing.

There was the race of, like, you know, getting the the cost of the genome down. It was super exciting. And I started looking at those investments again and realizing that you're going to be able to buy essentially a scan of your entire genome pretty inexpensively. And so that was the first nugget of like, okay, wow, you can actually start to get huge amounts of genetic information.

And second was seeing this world of, you know, social networking. That social networking was happening and you don't actually need the old guard to get things to happen. I could crowdsource. So it gave me this idea that, wow, if I just empowered everyone with their genetic information and I crowdsourced all this information, like if I have the world's health information, what could I do?

And people are like, well, you could, you know, cure you could save it. You could you know a lot. So, the idea really was we should do that. We should, like, instead of relying on Stanford or Harvard or Pfizer to go and solve a disease or, like, how to be healthy, we, the people, we can do it.

So in some ways, like, having grown up in this Google environment and, knowing, you know, the social networking world that was coming up, it was piecing those things together that was, like, combine the technology and and science with the platform that is really emerging.

I've noticed that many of the most transformative companies come because the founder sees some like, an intersection of two pretty different but really important trends a few years before everybody else does. Mhmm. And this is clearly one of those. It's like the fact that crowdsourcing works is still amazing to me. Just Totally.

What's also I think when a founder really wants something personally. Like for me Did really want this person? Oh, yeah. To me, was like like the whole beauty for me of genes, of genetics is like you've gene by environment. And I always love like people debating, but is it your genes or is it your environment? I'm like, no. The whole beauty of it is that it's both.

So, like, you might be genetically high risk for diabetes, but, like, there's your environment. Do things about it. What can I do? So very few, you know, genetic ailments are are a % deterministic, meaning a hundred percent likelihood that you're gonna get it. So that means there's an environmental component where you can potentially do something.

So let's go figure out what you can do and then tell people.

What was the reaction when you first announced that you were going to do this? Like, what what was I mean, I read the news. What was it like inside the building?

I think there was you know, it's always like startups are so fun. You know, because you get a bunch of people who really who are really passionate. And I think people were excited, and people knew that there would be controversy. And in some ways, I think we attract we attract people who have all experienced the health care system in their own way and realize it has its limitations.

And so there's people who are excited about 23andMe because of the mission, and they're looking to contribute in some way to helping change the system. So, there was enthusiasm, and we had, like, videos. I'm like, we were, you know, we were also we were super excited, like, to launch, and we thought Yeah. There was gonna be, like, this big coming, like, everyone and we had tons.

Like, we had spit parties. We're the cover of the style. Know. We had to cover the style section. We had the spit party in the building. But I have to say, like, we sold a lot the first day, and then it was slow. That happens. And we were probably selling 20 to you know, 15 to 25 kits a day, which is not a lot.

How do you.

well, I guess two questions. One, how did you eventually fix that? And how did you how do you as a leader keep momentum in the building when, you know, you have this great launch, everyone the first day is always awesome, and then you have what we call the trough of sorrow. Yeah. And people get pretty demotivated.

The trough so that's actually a good like, there's a there's always a trough of sorrow, sorrow and.

I think it's important to not let people be totally, you know, to not like not be hoping for immediate success and then to be overly distracted by the trough of sorrow. And I think that that actually happens not just in launches but every time you come up with a product, you have no idea how how well it's gonna go.

Like I remember when my sister first launched launched AdSense and she's like, I don't know, you know, we'll see how it goes. Like it's kind of, you know, it's an experiment. We have no idea. And and then clearly it went on, but part of it because you'd like you work hard at it. And I feel like for us in that trough of start, like, we we recognize like more we folk we focus on the long term.

Like, what do we need to do to get to this point? And I think as a leader for me, one of the most important things is not to wallow on today, but to wallow on like, okay, in two years, this is what it's gonna look like, and these are the steps I need to do to get there. People love a vision and people love a plan. You just need to outline. Like, this is where we're going.

So when we saw that sales were slow, we're like, people don't understand genetics. Some basic market research could have told us that. But like people don't know why they want their genetics. And then it was like, okay, great. Now we actually need to like educate the population about why like, why would you want your genetic information? And how did you do that? So I started changing my talks.

Like, I get I would speak a ton. In the early days, like, like, you gave me a conference invite and I took it. I remember. Any I remember that for myself. Yeah. Exactly. Well, like, any any talk because part of it is that, like, it's constant feedback. So, again, for the people who wanna be entrepreneurs, like, you just like, you're constantly learning, constantly getting the feedback.

So I would change my talks. I never gave the same talk twice. Like when I look at my inventory of all my talks, it's like there's like a 500 of them because each one was slightly different. So I remember specifically getting the feedback. People question what is there a value proposition in what you're doing? And I was like, great. I can answer that question.

Over fifty percent of my customers get a medically meaningful result. And then I start like I started shifting the conversation. So part of it was like getting like real time feedback. And part of it was helping us like define what is it that we have to do to show the value and it was clear people need to understand genetics. They didn't understand the basics.

They need to know what is the medical utility of this. And then also people people need to know that they're not the only one, like that's not weird. Like, oh, this is like weird. Did that. We need to drive social like acceptance. And, you know, and part of also is medical acceptance.

So we did a ton it's one thing I always advise science companies is you can't speak like, I can't just tell you like, oh, we're great. We have great science. Like, one like, no one believes that. So what you need to do is you need to publish. Like, you put like, I never even argue with scientists. I just hand over my publications. Like, here you go. Because that's the reality.

It's like, you you speak with your data. So, like, I can make all kinds of claims, but, like, here's my data to to actually support it. Can you talk about the best decisions you made in the early days? I people always ask about the worst, which we can talk about if you want, but I'm curious if you look back,.

things like that where you learn, like, I need to interact with the scientific community in this way. Are there a few decisions you made that looking back have been critical to success? I think my two the first two hires, the two founding scientists.

are were just like Brian and Serge were amazing. And so in some ways, like, hiring the right for me, like, it was such a critical part of the company. It was a scientific integrity of what we're gonna do, and it set a bar of the talent that we are going to hire going forward.

So I think in some ways, like, having the right people. We we've noticed that it is almost impossible to you can make a lot of mistakes as a company, but if you screw up the first Yes. Five, seven hires.

Yes. It's almost impossible to figure out. Of like, when I look at the first fifteen people, there's a good there's like, a number of them are still here. And, you know, the others who have left,.

we're still very close too. How did you find those first two scientists?

We found them through a friend of a friend of a friend who and they had a similar idea, and so it was a good it it worked as a partnership. But it's it's hard. I mean, I would say hiring is one of the hardest things.

And I think one of the things that we've tried really hard here in the company is we there's a lot of smart people who have humility, and there's a lot of smart people who, like, wanna tell you how smart smart they are. And we have opted for the humility.

And I think it's really important to have people who are constantly open to feedback and constantly open to, you know, constructive criticism and learning about other areas. And I think that's actually one of the things that did make us successful Yeah.

Or, you know, make allow us to grow and attract other people because it's a group of people who are really eager to learn from others and to keep learning.

I've noticed in my own looking back on my own career that the big hiring mistakes that I've made are people who are really smart but just awful to work with because they wanna tell you how smart they are. And and and and the framework that I finally figured out is it's you have to look at the net the net output that a person has on the organization as a whole. Correct.

And even if they do a lot themselves, if they make everybody else miserable.

I think it's one of the things hiring is always really hard. And I think especially in leadership roles, if you have the wrong person I think I just recently watched one of the old documentaries about Steve Jobs and Bill Gates and and Jobs talking about, you know, how disastrous it was when Scully came. Like, I kinda forgotten about some of these stories, and I realized I was like, yeah.

If you hire the wrong senior leadership.

And you don't fix it very quickly, it can sink you. You can it can sink you. Yeah. What's it like being in a regulated industry? I I think one thing that a lot of people say when they think about they they have they wanna do this really ambitious start up Yeah. Like genetic testing, but they are afraid because it's regulated.

So I think regulation in some ways, there's, like so there's pros and cons. In some ways, like, when you're regulated, it means that there's rules. Like, there's, like, there's, like, guidelines, and you can figure out exactly what that means. So in some ways, like, there's more of a path about actually how you have to execute. It definitely also means that it's more expensive.

Like, there are there's rules, and you don't always agree with all those rules. And when we went from an unregulated company to a regulated company, there was definitely a pretty major transition for us because we were used to, you know, you hire smart people. What do smart people like to do? They like to question and they like to argue.

And so we would question all the time like, ah, well, why would you need like why do you need that test? Or why do you need this study? Why do you need that number of samples? And so we would question all the time. And one of the things I think in a regulated environment, again, like it's like the DMV. There's rules, like you just and you follow. Like, there's a level of obedience.

So I'd like to encourage people. It's not it's not so overwhelming to be regulated. That said, it requires a lot of communication. And in some ways, requires a communication style that's not prevalent in Silicon Valley. Right. Yes. That is hard. I think that there's a lot People people there is an impedance mismatch there.

There is. And I think, you know, we always said, like, we we thought we were like, I look at some of my old communication and I'm like, oh, wow. That's embarrassing now. My the way we thought we were, know, communicating appropriately and how it really wasn't. So, there's a style.

Like there's a style and there's a form and there's like ways, you know, there's actually like there's a path and there's a rule. It's not terribly clear. You know, I think the regulatory world can do a better job of helping outline. And one thing I do appreciate from now having been regulated for a number of years is that there is a bigger picture that they see.

So people who work at the FDA or people who work in government, like, it's a public servant job. Like, they care. They care about public safety. Like, at the FDA, like, they care about public safety. There are so many companies, like, we can all see them. There are so many companies trying to dupe the consumer. Yes. And their job, like, they are there to keep us safe.

So I have a lot of respect for what they do, and the onus is on us as the as like this startup and the new company. All these people wanting to do things in a new way. The onus is on us a little bit to explain how we're doing it, how that works, and the way they speak just like I mentioned about scientists is they speak in data. Like You can't just say like, oh, no. No. No. Like trust me.

I'm the good guy. Right. You have to show with data and you have to show with data in lots of ways. So, in that capacity, I don't really mind because it's like they do know. They know a bigger picture story. You know, some of the people we worked with there, you know, have been there for, you know, twenty years and were amazing.

And they have a depth, a breadth of knowledge that I'm never gonna have. And so learning, there's input to genuinely take. As you look back,.

you know, from the day you signed the your vision on the day you signed the incorporation paperwork to now Mhmm. How much has this all played out like you thought it would?

Oh, it was remarkable. I like so I actually because I have this picture of the day we signed, and I always look at it, and I'm like, one, like, I really dressed in a very different way than I do today. But two, our series a documents and our OKRs from 02/2007 are remarkably similar to what they are today. That's always So I think we're unusual.

So, like, when like, one of our investors, like, we he has said he's like, what's amazing? He's like, I look back on everything. Like, he's like, you're a broken record. In some ways, that's why it's also so easy to do speaking engagements, like, because I've said the same thing now for a decade. We like, we're we have a mission. We have a drive.

Like, I know where we're going, and it's it's been we've been we're continuously executing on it. The best companies are remarkably steadfast in that. I think it's hard to do because entrepreneurs sort of by definition like to start doing new things. Right.

So I think one of hardest things for entrepreneur, like and, again, we're going back to sort of that, like, the, you know, the era of I forgot we called it the era of sorrow. Like Trough of sorrow. The trough of sorrow. I think it's important to to stick with it.

Like, one of the things I think like the one of the most important things I think I've learned at this like doing this now is the importance of persistence. Like, you have to stick with it. And when you stick with it, you really see a benefit. And there's things that I see now now they've done it for over a decade, and I try like, one of our missions is to tell people anyone can be a scientist.

Anyone, any age level, like, it's part of the whole reason we're directing Zoom. Like, I believe anyone, you can be eighth grade level, like, and you have the the ability. I love it now when kids come to me and they're like, oh, I saw you speak and because of you, like, I really I was like, yeah.

Like, even though I, like, I you know, my parents didn't know anything and I didn't really have that degree, like, I'm now in a PhD program at MIT. Like, I get amazing stories, and you never, in some ways, it takes a long time to see the consequences of your actions. Yeah.

So it's one of the things I emphasize to people, like, if you really care about something, like, you're really passionate, it takes a decade to really see the impact.

Yeah. I mean, it's like compound growth. It's always misunderstood. It always takes longer, and then the magnitude in the the final the out years is always bigger than you think. And I think what happens is that people.

comp they, like, hear the WhatsApp story. They hear other stories. And and and I say it like you the real story is like the companies that continue to persist even if there's challenges. Yeah. And everyone usually like the WhatsApps are are the rare, but like you can be super consistent. And that's one thing like when I see the press about us now, it's overwhelming. Like, we just persisted.

Yeah. That's it. We don't go away. That is the secret to overnight success is ten years of persistence. Yes. The overnight success is that ten years of persistence.

So you've done all these remarkable things as a company, and and the one that I think is most remarkable or sort of most important to the future of the world is that, I think in the last eleven years, genetic testing, because of you, has gone from something that people are afraid of to something that is now accepted as a really important part of putting people in charge of their lives and their health.

But I'd love to hear what the next eleven years look like. And, you know, if we had this conversation in 2029,.

what we would be talking about and then your proudest accomplishments then? So I said, like, my my original mission, like, if you think back to my Wall Street days was, like, I think the system is broken. Like, how am I gonna be healthy? So success for me is, like, I would like to be healthy at a hundred. So I now know I have my genetic information. I can learn about things.

And I have set up this research machine where I can collect data from all my customers. We can make discoveries. We give those discoveries back to our customers. I have this amazing machine for discovery. Now I want to execute on the vision of, like, I would like to be healthy at a hundred. So, like, success for me is how do I now I just empowered you.

I have 5,000,000 people empowered to learn about themselves, and they could keep coming back. We collectively as a 5,000,000, you know, person community and growing.

Is that the biggest genetic dataset in the world? By far. Yeah.

That's awesome. With health information. Yeah. Yeah. Yeah. But, like, to me, that's where, like, there's a power in what we can do now to make discoveries about prevention. So we have the drug discovery arm. To me, I look at it as, we have two aspects.

Like, you're, like, you're healthy today. You wanna keep staying healthy, you have a condition that like you just have this like so we wanna have drug discovery for that. Now we'd like to keep you healthy. And I think about who like what are the partnerships I can do? What's like what's the community I can form to actually help you make behavior changes?

So one thing I I I see all the time when I meet people, like, again, all economic levels, all socioeconomic groups, people want to be healthier. They don't necessarily know how. And I see this like, you know, people don't necessarily know like, oh, were the Doritos really bad? Is soda really bad?

Like, it's remarkable how much like there's a disconnect between like, you hear things, but you don't really know what are the ways that we're gonna be able to help people healthier. Discovered anything that is I mean, obviously, the whole point of this is it's personalized, but any generally accept.

any any general trends that you've discovered that apply to a lot of people they might not already be aware of? Like, I think most people know they probably shouldn't drink so much soda.

No. But there's probably people like, some people who could absorb more sugar than others. I think those are the types of things. Like, we're all pretty different. Like Yeah. The beauty of humanity is that you're meant to survive. Like, you just look at you can look at it from the perception of viruses. Like, you have the 1918 flu.

Lots of people died. Some people survived. Some people are immune. The same thing with, you know, foods. Like, some people just can eat a lot of sugar. Some people can't. And that's why, like, we are still around on the planet today. So I think the main thing that I would say I take away is that there's a there's a lot of variability.

A %, like, shouldn't smoke, you should exercise more, you should eat better. But the reality is, like, there's some people who can smoke and never get cancer. There's some people who can eat a lot and they never get overweight. Like, some people don't exercise doesn't really matter.

How far away are we from someone be able to spit in a tube and you tell them like, here's what you need to do to have a good shot of living to a hundred. So that's one of the things that's most exciting is like what we can do by having a community of people who are all engaged. We're starting to do what we call these intervention studies. So we did our first one on weight loss.

So we had 70,000 people doing, you know, a six arm weight loss study. So that's the first time we're doing it in that kind of scale, specifically to see based on your DNA, are there differences in weight loss? I'm also I'm personally obviously motivated in the Parkinson's space of people who are genetically high risk. Are there behaviors that can lower your risk?

And how much then can you lower your risk? So, we're starting to do those types of studies specifically because like that's what our customers want. Like, our customers specifically want to know Yeah. Exactly what you just asked. Tell what to do. Yep. So, like, my like, when you say, again, success for me is, like, at the end of this decade, I will tell you what to do. At the end of, like, by 2020?

Well, I I look at it as, like, I look at it 2020. No. I look yeah. End of yeah. The next ten years of the company. So I'm already ten. I'm twelve years in. So, like, give me another eight years.

That's pretty exciting. I'm on it. I'm on it, Sam.

I will follow the instructions for the letter. Thank you very much for taking the time. Oh, you're welcome. Anytime. It was really fun. Super fun.