2020 brought a number of topics and trends to light within the healthcare sector, in which many of our peers have faced significant challenges throughout the year. We have addressed many of the topics in our blog throughout the course of the year. Some of the recurring topics included: What goes into a SPAC process; Board Diversity; IPO’s in a COVID world; How to celebrate your IPO Virtually; How to re-engage with Investors after a setback; Maximizing Investors Meetings Virtually; amongst many others that can be found here.
Now that we have 2020 and the 2021 JPM Healthcare Conference in our rearview mirror, the Gilmartin team would like to shift our focus away from Investor Relations for a moment and share some of our favorite books that we read in 2020!
With 2020 validating the “history repeats itself” cliché, it was a great year to dive into historical non-fiction. With The Spendid and the Vile, which reads almost like a novel, Larson once again demonstrates his well-known knack for painting vivid pictures of the past through his incredibly thorough research.
The story follows Winston Churchill and his family, personal secretaries, and other close confidants as the protagonist of his time struggles to unite his countrymen and his reluctant allies across the Atlantic while his homeland is devastated by the relentless onslaught of the Nazi Luftwaffe. Larson provides readers with unique insight into how some of the most consequential decisions of the 20th century were made while also giving them a taste of how Churchill and his contemporaries operated under the immense stress of his first year as prime minister. If you enjoy history and want to see how one man can become a beacon of light through his nation’s darkest hour, this is the perfect book to pick up.
Book Review by Brian Johnston, Vice President
At the risk of being the perennial cynic…as we come out of 2020 with COVID impact at an all-time high, a gravity defying stock market, and unabated capital markets activity, it’s an interesting time to delve into previous market corrections and their commonalities.
A History of the United States in Five Crashes is a detailed description of the most notable U.S. financial crashes over the last 100 years. Nations explores the consequences of these crashes, but more interestingly, the drivers which in many cases have fascinating similarities. The book centers on five stock market meltdowns: (1) Panic of 1907, (2) Crash of 1929, (3) Black Monday in 1987, (4) Meltdown in 2008, (5) Flash Crash in 2010.
Read below for a brief description of these crashes.
- In 1907, over a multi-week period, the market fell 50% from previous highs as an ongoing recession was exacerbated by a liquidity crisis caused by a failed attempt to corner the market in the stock of United Copper company, which exposed the trust company.
- The crash of 1929 is perhaps the most studied and understood in modern finance. It followed nearly a decade of wealth expansion, increased speculation, and use of margin that was no longer supported as slowing production, rising unemployment, and interest rates catalyzed fear.
- Black Monday in 1987 was the first major crash in the modern financial markets and followed a multi-year period of significant stock market appreciation, which transitioned into a period of slower economic growth, higher trade deficit, and congressional action aimed at curbing corporate raiding made worse by the rising use of portfolio insurance.
- The 2008 meltdown was caused by ballooning issuance of low quality subprime mortgages and spiking default rate. This was made complicated by interlocking financial instruments around mortgage backed securities and subsequent liquidity crisis.
- The 2010 flash crash happened in the wake of fallout of the financial bailout of Greece and triggered by algorithmic trading failure driving material declines in the future markets in a matter of minutes.
The more things change, the more they stay the same. The most salient observation one makes from this book is the striking set of similarities across these meltdowns, including a combination of a change in the economic environment sparked by a catalyst, which in most cases, was bolstered by increased complexity in financial instruments and the lack of regulatory oversight. Notably, over the course of financial history, multiple instruments have been created to improve liquidity, but liquidity disappears when it’s needed the most – a theme witnessed in essentially every financial crash in the last century (1907, 1987, 2008, and 2010).
Exploring these themes in more detail is particularly interesting, especially relative to where we sit today.
- Change in the broader economic environment. Namely, underlying economic weakness (reflect back to the Lehman bankruptcy in 2008).
- A “spark” or catalyst. We saw this in an attempt to corner a stock (1907), Greece (2010), etc.
- Speed and complexity. Think about the dramatic increase in lay-investors that bought on margin without a full understanding of consequences; futures insurance offering a failed promise of liquidity; subprime securitization that obscured the quality of loans and sheer size of liabilities.
- Lax regulatory oversight which exacerbates the impact. This has been pervasive through the failure to manage interest rates in a timely manner and easy access to credit or margin, and it has in many cases resulted in regulatory reform.
The moral of the story is a cautionary tale. It’s important to remember key tenets when investing – specifically that investments are not without risk, vulnerability increases when overextended, and the importance of liquidity. Many times new products will solve one problem but create another. And in bull markets, too much greed/not enough fear plus complexity and speed will compromise overarching safety. When taken together, small lapses without regulatory oversight can lead to a catastrophe.
Through time, the speed of impact has dramatically increased – the 1907 crash played out over 18 months whereas the meltdown in 2010 took 10 minutes. Crashes are inevitable and have multifactorial drivers…the question is what and when will be the next catalyst sparking our next correction?
Book Review by Lynn Lewis, Founder & CEO
Red Notice: A True Story of High Finance, Murder, and One Man’s Fight for Justice, by Bill Browder
Published in 2015, this autobiography provides a thrilling account of investing in Russia following the breakup of the Soviet Union. The book recounts the wild growth of building a fortune, seeing it wiped out following the 1997 Asian Economic Crisis, and rebuilding to an even greater fortune. Things turn in 2005 when the author was barred from re-entering Russia and many of his colleagues and lawyers were arrested. Among those arrested was Serge Magnitsky, who would eventually die in prison. From here, the book turns from finance to politics and recounts the author’s efforts behind the eventual sanctions against Russia, including the Magnitsky Act signed by the US Government in 2012. Overall, this is a fascinating read with lessons for investing in any time or place and a view of world leaders who remain relevant today.
Book Review by Tom Brennan, CFO
Bad Blood: Secrets and Lies in a Silicon Valley Startup, by John Carreyrou
I would love to share this amazing tale of fraud and bluster in the world of a Bay Area start-up. John Carreyrou’s real-life tale of Elizabeth Holmes’ Theranos capital-raising and investor deception hit home to me in so many ways: 1) Theranos’ former Newark, CA location is right next door to a current biotech client of mine; 2) Holmes’ trial will begin on March 9, 2021 with jury selection – it’s been delayed because of COVID – i.e. the story continues to unfold in real time even as I write this; and 3) In 2015, someone called Joe Biden visited the aforementioned Theranos facility in Newark and, per his script, called it “the laboratory of the future.” I think he just won the Presidency, or something. Only the inclusion of my mother would have made this tale more relevant to my life.
According to the Wall St. Journal’s Carreyrou (and subject to confirmation by the courts), Theranos was a complete lie. Yet, at its height, the Silicon Valley medtech startup boasted a $9bn valuation. Countless investors were fooled based on a simple lack of basic due diligence. The book also contains other gems such as Holmes trying to imitate Steve Jobs as much as possible – she compared her blood analysis machines to the iPhone and employed the same PR company as Apple – and may have faked a baritone voice to make herself more credible with investors, Big Pharma, and employees.
Bad Blood is a must read for anyone involved in the life science industry – especially biotech and medtech entrepreneurs, the buyside, and sell side.
Book Review by Laurence Watts, Managing Director
Bryant’s plan isn’t a large-scale redistribution of wealth but rather a large-scale distribution of knowledge; financial literacy is the biggest problem facing America today and a key to economic, racial, and social equality in the US. From Robinhood to Square, technology has democratized historic financial services, but teaching financial literacy remains the last piece of the puzzle to create lasting change. Teaching financial literacy to underserved communities and working-class Americans can spur social reform and broad economic growth. As the saying goes, “a rising tide lifts all boats.”
Unfortunately, 76% of Americans are living paycheck-to-paycheck (pre-COVID), 7% don’t have a bank account, 22% don’t have a credit score (despite many employers requiring a credit report), and millions more don’t have good credit. This is described as “untapped potential” to drive economic growth and social reform. Bryant argues that “nothing stops a bullet like a job,” and the economic clout of Black Americans can drive social reform in America (again). The reader only needs a general idea of the American Civil Rights movement and basic economics to appreciate the message.
Book Review by Cartsen Beckwith, Analyst
Sapiens: A Brief History of Humankind, by Yuval Noah Harari
You’ll find plenty of food for thought in this book about the progression of humans. It starts at the very beginning of mankind’s evolution. I have a big interest in ancestral diet, health, and how we’ve evolved away from it. Naturally, the beginning was my favorite part. It explained our hunter gatherer ways and the story on why we steered away from it with an interesting take I’ve never heard before…
“The Agricultural Revolution was history’s biggest fraud. Who was responsible? Neither kings, nor priests, nor merchants. The culprits were a handful or plant species, including wheat, rice and potatoes. These plants domesticated Homo Sapiens, rather than vice versa.”
Harari raises many questions about human evolution, our impact on the world, and our species itself that provoked new trains of thought. A great and fast read, this book includes interesting ideas on all things human: society, religion, technology, relationships, etc. I highly recommended this book to anyone who wants to generally understand humans and our history better.
Book Review by Rachael Soares, Office Manager
The challenges that 2020 has presented to us have not been for the faint of heart. The isolation that one can feel has become ever too normal. The countless in person meetings and human interaction that we were so accustomed to has now gone digital, to faces on a screen over Zoom. Building a relationship with one another through a screen does take some getting used to, but you must be able to overcome these hurdles in order to move forward. Kate Murphy lays out the foundation on how we should approach conversations, not only for professional purposes but for our own personal relationships. Listening is a lost art; most are too quick thinking about the next question to ask one another rather than listening to what the other has to say. Every person would benefit from learning the principles that the author has developed throughout her career and getting the most out of her reporting. We all strive for a deeper connection, and listening to the person you are speaking with is the first and most overlooked step. You’re Not Listening is a book that I will be recommending to friends and family for years to come.
Book Review by Matt Picciano, Managing Director
We at Gimartin want to wish you a happy and healthy 2021. As always, If you have any questions, please feel free to contact the Gilmartin team today.
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