Clayton Christensen's Free-market Solution to Healthcare

Professor of Business Administration
The Harvard Business School professor has an alternative to socialized medicine.
  • Transcript


Christensen:    It will be very much up to the free market, or the Veteran’s Health Administration, it’s part of the government but it’s actually a very disruptively innovative healthcare system.  But, in general, when disruption occurs, there always are people who are profiting handsomely from businesses the way it has always been done, and when you attempt to disrupt them, they very frequently will then lobby the government for protection so that they don’t suffer the consequences of disruption.  So, when…  It’s a good example.  Toyota disrupted General Motors and Ford.  In the 1960s, Toyota did not enter the market with Lexuses.  They came in at the bottom of the market with a very cheap, simple sub-compact car called a Corona, and they went then from a Corona to Tercel to Corolla to Camry to an Avalon to a 4Runner, and then to a Lexus.  And as they were coming up, General Motors and Ford saw them just eating away at the lowest profit part of the GM and Ford product line, and so GM and Ford went to the government and said you got to keep these guys out of our country because we’re going to need to lay our people off.  And so, they set up import quotas to keep Toyota at bay.  And almost every disruptive innovation in some way has suffered that.  You set up regulations to protect the incumbents, and if the government tries to create, nationalize the healthcare system in one way or the other, the problem is that in a democracy, the people who have the most at stake are the incumbents, not the disruptors, and the way they influence how voting occurs, honestly or dishonestly, creates tremendous barriers and inabilities to change a national system.