Can a small health insurer be similar to a space company? The founder of Social Capital CEO Chamath Palihapitiya thinks so. Hierin Motley Fool Live video recorded on November 16, 2020, Bill Mann, director of small capitalization with The Motley Fool, talks to Palihapitiya about why he thinks Piano Health (NASDAQ: CLOV) is like Virgin Galactic (NYSE: SPCE).
Bill Mann: But the market on the day you announced the Clover Health deal dropped the price of IPOC, I assume it is assumed that you will at least not lose any money. What is it about this big problem that you think the market is missing?
Chamath Palihapitiya: The good analogy is Virgin in many ways. Virgin’s product market pass was also not well understood in the initial stages and they traded after after I think eight dollars or seven.
Bill Mann: Yes, spaceflight for rich people did not grip people.
Chamath Palihapitiya: I think we live in a world in which the media circulates, when I go on CNBC and say, “Download app by house.” It fits in the box of what people wanted to hear. People could really accept it.
When people initially heard spaceflights and point-to-point travel and hybrid rocket engines, they were like, “What are you talking about?” Instead, they put the spaceflights for rich people on top of each other. But over time, as people took the time to understand the business, to hear from Vivek and Andrew and myself, just as they heard at the time and myself from George Bitesize, they learned the truth and understood it. What I saw.
Product market fit was the beginning of scale and an economic model that I think was really exceptional, and they were willing to follow the path. Similarly, I think what they are showing here is that we have priced the deal very fairly. Not too hot or too cold using the Goldilocks analogy. I think it was right in the middle, and we traded right in the middle.
There is nothing wrong with that. Vivek got a good fair price, and I think what you will see in time is that we also got a very fair price. Again, there is so much built-in optionality in this business. The market is massive and growing. The incentives are massive and it is increasing.
These guys are actually the only ones who have found that your language is a sin, and that sin creates a very obvious innovator’s dilemma. It will be impossible for united and prosperous people to decide to reorient an entire economic model for lower costs and better results, because it will compensate for higher costs and inflation in health care. Not because they can not do it.