Duncan Davidson talks COVID response: what we we did right and wrong, and what needs to happen next

Davidson will be a part of Vator's Healthcare in Politics salon on October 7

With the election right around the corner Vator and HP will be hosting their latest salon on October 7, called Healthcare in Politics (register for the event here!) where multiple panels of experts, policy makers and lawmakers who will be on hand to discuss topics related to healthcare policy and decision making. 

One of the panels will center specifically around the U.S. response to COVID, including how to balance saving lives with saving livelihood, and how we should think about the problem going forward. 

I spoke to one of our panelists, Duncan Davidson, partner at Bullpen Capital, to get his thoughts on what we did right, what we did wrong and what he thinks is most important for us to be able to reopen our economy going forward.  

VatorNews: Tell me a bit about yourself, your background and your work at Bullpen Capital.

Duncan Davidson: I've done four startups, two of them in the 90s both went public, so I thought it was easy. I was the pitch guy in one of the public offerings and did a secondary, so I was pitching at the height of the bubble. After that, I joined a big venture fund called Vantage Point, which is one of the big three in cleantech. I was then at a startup that was bought, after which I helped start Bullpen Capital.

We fashion ourselves as a post-seed fund. Our observation was there was a need for a round after early seed funding, before you get to a big A round. The rationale is, you go to one of the top tier Series A venture funds, they want to put in $10 or $15 million; they don't want to put in $2 or $3 million. So, if you try to go from a seed funding right away to the big ones, it's too hard, it's too big a leap. So, we created a round in the middle we call post seed. You could call it a small A. So we call the it the post-seed to set up a bigger A round. In general, it's been very successful. We have maybe 70 percent, of our investments that get the follow-on, big A round. For those rounds, it used to average $15 million for a $45 million pre-money valuation, now it's more like $20 million on $60 million pre-money valuation; it’s gone up a little bit. So, the model is working. We get the right deal, and we do our post-seed round, we get a high percentage of getting a big A round. We don't have investment theses, we don't say, 'We just do X, we just do Y.' We focus on the stage and companies that fit it, as opposed to categories. 

VN: What kind of work do you do around healthcare?

DD: We've done a number of digital health deals. There are certain types of health deals that wouldn't fit Bullpen. For example, drugs; that's too capital intensive, it takes too long. Medtech equipment tends to be the same thing; it's usually just too expensive, too capital intensive. But digital health has been an incredibly interesting area to invest in. It's like a software company, in effect, with health in the marketplace. 

One of our first investments that we really love is Carbon Health. The founder also started Udemy, so he's a good founder. Carbon Health is trying to reinvent the clinic process. Basically, you have an app at the front end, you've got a diagnostic machine learning system to try to figure out what care you need, and then you can use it to get an appointment, either at their clinic or partner's clinic. It runs you through a much quicker, more efficient process so you go to the doctor's office, you get in right away, get in and get out. They are reinventing this part of the healthcare system. I think his thing's going to be a unicorn. It's done very well since it got everything figured out; it's raising money, and I have this concept of a centaur, which is a mythical horse-like animal: $100 million, instead of a billion dollar unicorn. So, it's a centaur, it's over $100 million. Centaurs are a great indication of a company that really is going somewhere. 

There's one called Brightside, which is kind of like a mental health system. That's a marketplace to tie people into, not severe, but modest to moderate mental health problems and get an online doctor. So, you can think of it as telehealth for a shrink. It's doing really well. We have another one called Honeybee Health, which is an online pharmacy. So, unlike people who deliver your drugs from a real pharmacy, these guys are a real pharmacy and they can send it to you in the mail. And they're also doing pretty well.

VN: Great. Let's get to the meat of what we'll be talking about on the panel: what is your view on the U.S. response to COVID? What did we do right, what did we do wrong?

DD: When history judges our response, they'll find it disorganized, and that's probably the biggest problem with it. They'll find that misinformation got amplified, both ways. So, it became a difficult environment to wind your way through because of all the noise. In a bit of a generic term, it's noisy; does this work, does that work? So, what do we do right? Certainly stopping flights from Wuhan or China early on was a good move. Next thing we did, right was when there was a need for ventilators, we had a lot of ventilators, more than we needed. So, we worked on that really quickly. In retrospect, we should have stopped Europe earlier too, soon after China. [The US banned flights to 26 European countries in March]. At the time, nobody was quite sure that the Italian situation was exploding as badly as it did. If you continue on that theme, what we probably should have done is restricted flights in the US. The New York Times wrote a great article about the European strain which came to New York, and spread around the country as people bailed out in New York, so it might have been nice to keep that a little bit constrained.  

What did we do wrong? One of the shocking things was China sort of sucked back all the PPE they could when they had a problem and we were bereft of having much stock in PPE when we needed it. When we went into the emergency stores, they were not properly maintained; the masks were old and didn't work. There were three mistakes made there: one, offshoring the PPE manufacturing, so we had no capacity to generate it back. Number two, not properly maintaining the reserve stock that we had and checking and inspecting it. Number three is we should have taken note when China was sucking them all out. That's easy in retrospect. I think the mistake made in the bad stock in maintenance is a huge unforced error. You have all this stuff in stock and nobody bothers to inspect it.

Here's the next thing I find that we can fix: we have a data process for people to report data into the CDC and then publicly report it. It’s turned out to be a fairly arcane system, using fax machines. It's not a modern system. We should have had a much better reporting system that was immediate and electronic. Compounding that, we had all kinds of weird guidance of what was to be reported with COVID. We've seen a lot of news stories on that. So, the data we were getting was not good data and, sometimes, the data would be two weeks delayed, and they’d say, ‘Oh my god, on this day we have so many new cases.’ Well, no, the cases are three weeks old, the reporting was just botched. So, there's a lot of bad data, where they didn't have the dates of infection or the dates of death, etc. They would just do it on the date of reporting. That was probably an error we weren't aware of but we certainly can fix that. We were talking about digital health, we should have a superior information flow from, not just hospitals, but other places that might be doing testing, into a public record system.

Here’s another problem that we have, and it’s kind of a weird problem to people not steeped in epidemiology: false positives and negatives. When your level of infection in a group is maybe 2 percent, and 98 percent are not affected, and you have a test that has a significant error rate, the false positives of the 98 percent who don't have it could overwhelm the actual positives. We see this play out in MLB testing, where players show positive then negative across multiple tests. It could be the initial positive was a false positive, but the second test could have been a false negative. Some estimates say the number of cases has been inflated by 30 percent due to false positives and testing errors.

If both false positives and the real positives get thrown into a positive bucket, we could be reporting a lot of false positive cases. That's actually a problem if you do widespread testing with a test that has an error rate that's significant and you have a very low population base that actually has the infection. What I'm basically saying is we need to really focus on fixing the data problem. Reporting immediacy, the proper consistency of what's been reporting, the date of actual test or death, not the date of reporting, and figuring out what to do with false positives because they can skew the data. You might have seen the governor of Ohio was considered infected, and then they took the test twice more and he wasn’t infected. Now they believe the first test was a false positive. Well, that gets reported as a positive case.  

VN: That seems like it's an infrastructure problem. What do we have to do to make sure that’s not a problem next time?

DD: There's two levels of it: the technical level and the metadata level. The technical level is, you have real-time reporting from either testing facilities or hospitals or other intermediaries who are in the works. Like, if people die in a nursing home, they should be reporting it. It’s not a hospital, but they should be reporting it.

The metadata problem is to make sure the data they report is consistently given. Date of infection, the type of tests given. If they die, was it with COVID or from COVID or both? What were the comorbidities? Etcetera. You have enough data around the actual event that somebody else can analyze it to come up with statistically significant patterns or numbers. You don't just have raw numbers. We can fix that and we should fix it but, again, it's both the data pipeline, and the metadata that goes with the event so we can properly sort it, analyze it and report it.

VN: You mentioned that we should have shut down flights in the US. Should we have done a nationwide shutdown instead of the piecemeal approach we took? Or do you think the way we did it was the right way? 

DD: There’s three questions here: should we follow more of the Swedish model, should we do the piecemeal shut down, or should we have a nationally consistent policy?

Let's start with a nationally consistent policy. If we had done a two-week lockdown, and if we had restricted airplane travel, we might have been able to cauterize the wound, in effect, isolated it in certain pockets and not have it spread any further. We would have done serious damage to the economy, but two weeks of damage is much, much less than the six months we’ve had now. So, it is plausible to think that we've done a nationwide shutdown, stopped travel in and out of the country, stopped travel between states except very essential personnel, and done the lockdowns, it might have worked.

I think we lacked two things to pull that off; I mean, outside of whether people would have obey a lockdown. One thing is, we have no contact tracing to speak of, we were not prepared for contact tracing. What they did in Korea is they traced everybody, they would trace back to the people infected and the source of the infection. The second issue is no testing. One of the big problems early on was testing. WHO had given us a test that we didn't use, it was a bad test. The CDC produced a quick test that was itself infected. They sent out test kits that already had infection in it so the results were completely spurious, and we had to go throw out the government and get into private testing to get some tests out. And so, if you do the two-week shut down and you don't have contact tracing and testing, it's not clear you would have bought yourself anything but huge disruption.

Here's what the problem is: how do you know when to open up? The original idea of the lockdown was to flatten the curve. Flattening the curve was to protect hospitals. It's a worthy thing to do. The problem is people misunderstood that flattening the curve never meant reducing infections. Both the unflattened curve and the flat curve had the same area under them, the same number of people affected, you’re just trying to protect the hospitals. If we had a two-week shutdown to flatten the curve, we would have protected hospitals. But look what happened politically: California is still shut down pretty much. The curve was flattened months ago, but the people shifted the political goal from protecting hospitals to avoiding infection. So, if we had the two week shutdown to protect hospitals, I'm down for that, even though we didn't have contact tracing or good tests. But if we did it, and then decided to flip over to prevent the infection spreading, I'm not in favor of that. I think that'll look in history as a huge mistake. 

Now the thing about this is it's different at the time you make the decision than I'm looking back five months later. So, at the time of the decision, there's a lot we didn't know about the virus and so, therefore, a hard shutdown may have made sense. It's just I'm afraid we would have been stuck on it, four months later, and the economy would have collapsed. If you collapse the economy, who delivers food? There are certain essential items that don't get made because nobody goes out in the fields. You can't really do a hard lockdown unless it's a very short period and then you unlock. But if you get caught up in this, 'stop the infection' thing, you're dead as an economy. Just dead. Things will grind to a halt. And it's really hard to restart supply chains that dry up. They don't start quickly.

My office shut down before California went on lockdown. We were not going to wait for California to tell us; we thought it was too risky, and we didn’t want to take the risk. And so, I'm in favor of mitigation techniques, I'm in favor of remote work, I'm in favor of wearing a mask. When we did a voluntary shutdown, the CDC was saying, ‘You don't need to wear a mask.’ They were giving bad advice, but we bought masks anyway and we got rubber gloves. I think everybody should do mitigation. So, in between the hard shutdown and the random shutdown, there was another policy that would have made a lot of sense, which was mitigation. 

There's another model called the Swedish model; maybe we could have done a modified Swedish model. You keep the economy going, you protect at-risk people like old people, people with morbidities. You isolate them, you don't let them out in public, you put them in special facilities, you don't put infected people back in nursing home, which is a stupid mistake that people like Cuomo made, but then you do mitigation techniques: everybody wears a mask, everybody's social distances. You do that stuff, and you have a normal economy. So, I would have probably followed the modified Swedish model with mitigation and isolation of at-risk people. 

VN: Since you believe that the risk-reward ratio is low to open the economy, could Trump be more definitive about a national open-up policy with a goal to achieve herd immunity and not zero infections? Should he be more direct about that? Or maybe he already is being direct but no one is listening?

DD: I think Trump is following our proper Constitutional path, which is federalism. States are the primary line of health and need to make a call on their own particular circumstances. The President can deal with flights both overseas and inter-State, but he isn’t suppose to mess with inside the States. In our hyper partisan climate, the irony is that everyone wants to both blame Trump and also expect him to be more authoritarian. 

In an emergency he can claim more power and for a while the polity would allow him – we saw this with Lincoln during a Civil War. He has declared a national emergency and he did call for the initial lockdown after the panic from the spurious model out of England. The law behind it gives him more power than he has exercised. But should he? The balance here is two fold: lockdown versus economy, and risk of deaths vs normal risk. In many States the death rate was below normal (due to less driving mostly), but now we see the problems of excessive lockdown, like drugs, suicide, other causes of death. If the economy is locked down too long, supply chains break. Already the “high frequency” economic signals hare flagging a warning that many states are too locked down.

The problem of a national policy then would have been, too many low risk States shut down, supply chains break faster. The problem of a national policy now is the reverse, the uneven risks means some States should stay more locked down than others.

I think the Federal structure would have proven to be a strength if we hadn’t have had serious institutional failure. Our experts failed us: bad advice, poorly maintained stockpiles of PPE, bad data (and bad advice on data), bad tests early on, bad models that panicked everyone, really insane policy of putting infected patients back into nursing homes. And of course the hyper partisan amplification by politicians and media.

Looking back, we should have followed a mitigation approach, isolating the at-risk sectors like elderly, practicing soft methods of slowing the spread, like social distance, masks, partial lock-down. National policy would have focused on reducing incoming flights, reducing spreading around country, and of emergency materials like tests, PPE and ventilators. 

VN: How do you balance out those two things: keeping people alive, while also keeping the economy going? 

DD: It's kind of funny because we now have 2020 hindsight. At the time we didn't have 2020 hindsight. But, Sweden, and some other other states, Florida as an example, followed this mitigation model. So, what we could have done is the following: we already know in the first month of COVID that it really kills old people; the average age of death is like 85. So, we isolate old people, we make sure we doubly protect nursing homes. Florida actually created separate facilities for infected nursing home people to get them out of the normal nursing home and take care of them. We know that certain morbidities, like asthma or maybe being overweight, are a problem too. So, if you define these morbidities, and you do an isolation of these people, it wouldn't work hundred percent but it doesn't have to. It just has to, in effect, reduce the infection spread rapidly enough. It turns out the risk right now of death of somebody under 50 from COVID is less than the risk of death from normal life. People track what are the excess deaths over normal, normal death being car accidents, flu bug and heart attacks, all kinds of stuff. They find that the under 50s have now a lower death rate than the normal death rate. Why? Because you're not driving cars and not getting the flu. So, your risk of death, if you're not one of the classes that are at risk, is really low. It’s not that it's good to get the disease. It's a weird disease with long haulers, but it means you can run a normal economy, even taking the risk of you getting infected. You isolate the ones that are infected and let them run through the infection course.

VN: It’s not only about deaths, though. Deaths are obviously terrible, but they’re studying some of the long-term consequences of even getting the disease. You might not die from it but you might have long-term lung damage or heart disease. You might live but your quality of life might be much lower going forward. 

DD: Yes, so, in my view, you consider the long haulers and the deaths to be a casualties. You want to reduce casualties. We don't know enough to really know what's going on, which is part of the problem with the disease, which is why I'm in favor of mitigation. But, Sweden now claims to have achieved herd immunity. The problem there is they define herd immunity as something like 1-1/R0, where that's the reinfection rate. [R-zero means the average number of new people that a person can infect. For coronavirus, that number is between 2 and 3, compared to 1.3 for the flu] They backwards calculated around 65 or 70 percent had to be infected to make the spread of it die out. I think maybe 17 to 20 percent of the people in Stockholm are infected, or have been infected, and they seem to have herd immunity. 

So, now people believe in T-cell immunity. You have several levels of being immune; just having antibodies to COVID is only one level and another level is called a T-cell immunity. It turns out the coronavirus of COVID is very similar to several coronaviruses that cause common cold. And, so, they now believe that people who catch colds frequently might have T-cell immunity to a similar coronavirus, but they believe that about half the people that get COVID never have any symptoms, and they believe that's because they have T-cell immunity. So, if half the country has T-cell, and 17 percent get infected, you're at 67 percent and you're at the herd immunity level in a society. So, Stockholm right now, you can look at the chart, it's down to like almost zero deaths, maybe one death. It’s down to the level of deaths where if it was a flu bug nobody would talk about it. New York may be similar: their death rates are a little higher, but New York may have achieved inadvertent herd immunity because they got smashed so much, and they did a really poor job of dealing. They didn't sanitize the subway and it kept them running. They did everything wrong. They put old people back into nursing homes and killed off swaths of nursing home people, they did a really stupid job, but the outcome of it is they may be close to herd immunity. Florida may be approaching herd immunity. So, if you get herd immunity, then you don't worry about it. The Spanish flu is the H1N1 virus, so every year, people catch the Spanish flu. In some years it's worse than others. It's been around since 1918, but it doesn't have this huge impact anymore, it's just in the weeds now, we’ve come to live with it. COVID’s not gonna go away. It's not like smallpox. We might get a vaccine, who knows, because we're not sure it would be that effective, but the point is once you get herd immunity, it goes into the noise, you don't worry about it, you go back to normal life.

We don't know for sure. We probably won't really know until Christmas if the herd immunity model was a smarter model, but it looks like the US death rate is going to be quite comparable to the Swedish death rate over time, as a percent of population. If you go back to what I said about flattening the curve, it protected the hospitals, it didn't avoid infection. The virus will find a way to infect everybody, somehow. And, if you get herd immunity, it doesn't matter. If you don't get herd immunity, you just prolong the agony. Think about states like California, which did a good job of locking down, but now it's gone way up again. We've been spiking badly in cases. Why? Because the virus finds a way. You can always say, ‘Somebody violated this, somebody didn't follow this rule,’ and that's true. But that always happens. People are the biggest variable in this whole thing. 

VN: What would you like to see the government do going forward, which it might not be doing right now, that would help us get to a place where we could do both of those things?

DD: Well, we are where we are, meaning that a bunch of decisions have been made and people have a certain psychology about them. So, I wouldn't relax the psychology. Whether masks are really effective or not doesn't matter, we should be pushing masks and social distancing. Those are the mitigation techniques. We should certainly be continuing to isolate high risk people, so that doesn't go away. 

Kids going to school is probably the biggest issue. I think a lot of people misunderstand the depth of the issue, but part of it is that, if you're a working family, one of your parents has to stay home if the kids stay home. So, somebody's got to give up the job. A lot of jobs with working families are not remote work tech people; they have a real job where they have to be out in front of people. So, opening the schools is probably the fault line we should focus on. If we do open a school, there's no question COVID will begin to spread. If you view the problem as stopping any spread of COVID whatsoever, we won't open the schools. If you view the problem as people who are at risk is really small, and if they catch COVID they go away for two weeks and go back to school, It's a manageable problem.

What I would suggest is that we sit down and think about this as a risk-reward ratio, not 100 hundred percent safety, no infection. We're never going to get there, and if we continue with these extreme measures it’s just going to prolong the COVID infection curve, we're not going to reduce it. So, I would start going back to normal with process. Would I open up college football? I'm not sure I would. We’d all miss the entertainment on TV, but it's not easy to isolate people well enough to make that a safe thing to do. If you look at the Major League Baseball outbreaks, they’ve got COVID here and there. The NBA’s done a much better job at keeping people in the bubble. 

So, there's a process of normalization, as opposed to a bright line: ‘today, we're normal.’ And you go step-by-step forward. But your goal should not be zero infection. I think some people believe a vaccine or monoclonal antibody will come out in time to save our ass, and it might, but then again it might not. At some point you got to go out and take the risk in the real world. So, I would slowly unwind these things, like New York. New York's already probably at herd immunity, so why not open the schools? That’s what they’re thinking of doing.

VN: I think part of the reason people don't want to open the schools is because kids are disease vectors. Children are going to spread the virus, and if they live with their grandparents, for example, they're going to kill their grandparents. I think that's really what people are worried about.

DD: Okay, but that goes back to the mitigation. For example, my wife has a suppressed immune system. So, we as a personal group, have been extremely cautious about who we let in the house. My daughter has two grandkids and she had a nanny who exposed herself, no evidence she's got COVID, but we told them to stay away for two weeks. Do your own little isolation period. Mitigation techniques mean you really got to do it. You can't just have somebody else do it, you have a personal responsibility to follow these rules. So, we're living the dream doing that.

That may not be 100 percent successful, but they don't have to be, you’re just trying to help out right. 

VN: Is there anything else that you would like me to know? 

DD: Matt Taibbi wrote a really good article recently, where he blames the media for causing hysteria and bad decision making around COVID. And Alex Berenson, who used to be a New York Times guy, has said the same thing. Scott Atlas, who’s now showing up on the task force, has been saying the same thing. Taibbi’s point is, take any of the big controversies: Trump mentions hydroxychloroquine, and a whole industry gets developed to prove him wrong. And yet, evidence after evidence has come in that, properly applied in early onset, it cuts the rate of death in half. Henry Ford Medical Center in Detroit did a whole study on this that’s scientifically valid and they said, ‘Yeah, it cuts the death rate in half.’ Okay, if we had not scared people away from hydroxychloroquine and applied it correctly, might we have only 80,000 deaths today, not 180,000? Could we have saved many, many lives. That's number one. 

Number two, there was a treatment that came out of Spanish flu that people are starting to use in New Mexico, which is basically, like when you go deep diving you come up and you get the bends and they put in this pressure chamber. They're doing that for COVID patients who get past the early stages who are no having a hard time breathing. They put them in a chamber with a higher 1.6, 1.7 atmosphere. They breathe easier.

I guess my point is this: rather than waiting for a vaccine, there are some treatments that appear to work pretty effectively. There's a great chart that shows that Switzerland suspended use of hydroxychloroquine. Two weeks later, death spikes. After about two days, they restarted it, and two weeks later deaths fell down again. It's almost a perfect example that it cut the death rate. I'll talk about data metadata and how you have fix this whole system, but the other side of health is, what are the treatments? You have people are talking about monoclonal antibodies and vaccines and or some other sort of more random treatments, but you do have these treatments, like hyperbaric chambers and having your malaria drugs, to help you out.

Disinformation is so profound. For example, Bill Gates was yapping about how hydroxychloroquine had some bad side effects in some cases on the heart. Okay. It takes 10 seconds, maybe a minute, of research, to find out that since hydroxychloroquine has been used for over 50 years by hundreds of millions of people we have very good stats on the rate of heart problems from use of it. The rate is one in 10 million. So, in the US, maybe we have 20 million people who've gotten infected and that means one or two would have statistically had a heart problem. You have the death rate at 180,000. We might have saved 80,000 or 90,000 lives and one or two people would have had a heart problem. Would you make that choice, is that a choice you think we should make? Of course. 

I’m not the guy that should talk about it because I'm not an expert on this, I'm just an amateur and one of the problems we have today, is that a lot of people become amateur experts very quickly, reading a few things and pontificating as if they know that. I don't want to be one of those people. I'm just telling them you that when you select one in 10 million, and Bill Gates is yapping about how dangerous side effects, it's  outrageous. Shut up, man. You're trying to be one of these experts and you're not. What you said is statistically unsound anyway. I like Bill Gates, I’m not trying to make fun of him or trying to go after him but that was a stupid and uninformed remark. So, it's the amplification of uninformed opinion. It's the politicalization of this, pro or con Trump or something, that I find just ridiculous. Let the scientists do what they do.

Another huge mistake I should have mentioned: Trump shouldn't have been on the panel. Let the experts run the daily panel to talk about what’s going on. Trump is not a scientist, he's not an epidemiologist, he's not the guy that should have put himself up in front there, he's not the guy we want to listen to. That was a huge mistake. His comments engender this media amplification  complex, which threw us off big time. Going back, I would have had an expert panel and not a Trump panel.

VN: I agree with you there. That was a mistake. Instead of putting Fauci out there, someone who would go by the science, it became politicized. And a lot of things, like wearing masks, also became politized. And now we see where we are right now. 

DD: Fauci made some mistakes, but everybody in that position is not going to be perfect, but a scientist talking can correct themselves. A politician talking can’t. He should have kept his mouth shut. Trump caused a reaction that probably killed tens of thousands of people. 

(Image source: securitymagazine.com)