Sublime

If we know the salaries of the staff members and their billing rates, we can construct the pro forma income statement of this firm at full utilization.

There’s another reason why the market test for medicine is not such an accurate one, namely the prevalence of third-party payment, whether through governments or insurance companies. The person who chooses the doctor and the care—the patient—doesn’t have to pay for most of it. That makes medicine one big step removed from a real market test.

This is the predictable outcome when a low-cost provider raises venture capital and needs to grow rapidly. It either finds more customers or finds a way to make more money from each customer.