You are not Equivalent

The concept in economics known as Bertrand Competition goes like this:

Two or more firms are producing equivalent products or services.
The various firms do not cooperate in any way.
The various firms compete by setting prices simultaneously.
There is often a geographic restriction; in other words, the various firms are localite. Dentistry is like this. While I can very well go on Amazon and order an exotic product that's made three continents away, my dentist has to be within reasonable travel range of my home and my business. Thus, dentistry is, for the most part, geographically limited.

Then, the key assumption of Bertrand Competition is that consumers will buy from the firm with the lowest price. And why wouldn't they? It's only logical.

When firms engage in Bertrand Competition, they engage in a race to the bottom on price. And thus, on cost. The firm with the lowest unit cost of production can offer the lowest price per product or service sold, and thus will, theoretically and often practically, totally win on volume.

This, as you will have concluded already, is corporate dentistry.

More than that, many dentists in private practice also engage in a race to the bottom because they see others doing it; and further, they observe so many large corporations racing to the bottom in all sectors of the economy that they start to believe this is the normal state of capitalism.
They see Walmart ruthlessly kill their local Al's Hardware, and they start to race to the bottom themselves. After watching what happened to good ol' Al, they can't help it. It feels like the only way to avoid the same horrible fate.

Of course, the problem with a race to the bottom is: you might win.

It's actually surprisingly unlikely, though. There's always someone more merciless, more brutal, more willing to abuse employees and over-treat patients and cut costs with cheap labs and do a thousand other beastly things that are quite simply unacceptable to you. That's the brutal person, or the brutal faceless corporate business entity, who wins the race to the bottom--not you.

(Hint: Coming in second in the race to the bottom is probably the absolute worst outcome we can achieve.)

We know that industrialists seek to squeeze every penny out of every market. We know that corporate dentistry wants to drive their costs as near to zero as they can get so that they will be the obvious commodity choice. We also know that corporate dentistry aims to over-treat in the pursuit of maximum profit.

Should you be afraid of all this? Should a young dentist give up on their dreams of independent business ownership because, in essence, they see the game as one of Bertrand Competition, which is one they cannot win?

The answer is a resounding NO.

The answer is NO because, as I reviewed at the beginning of this post, a race to the bottom assumes that:
"Two or more firms are producing equivalent products or services."
That's the part you probably missed.

My colleagues, each one of you here is *NOT EQUIVALENT*.

You are unique.

You are a highly trained professional, each with your own special, unique, irreproducible, bespoke contributions to make to your community and to our profession.

You are not equivalent. We need your contribution. We need your innovation. We need your generosity. Go forth and be confident.

Race to the top.

 

Nuk, good question.
To clarify, I do not mean top in terms of money, or profit, or size of practice.
I mean top in the sense of the opposite of a race to the bottom on cost and volume.
Top in the sense of excellence, personal honor, accurate diagnoses, great treatment outcomes, solving oral health problems for the human being who stands (or sits!) before us, impact on the community in which the practice resides, and generosity of spirit.
That kind of top.

 

2TH MVR, being a general dentist, I've always wondered about "Patients can SEE their crooked front teeth." It does seem to lead to increased transparency in diagnosis and treatment. And patients who are in an orthodontic office--they generally want ortho treatment before they even appoint, no? So the whole dynamic feels more transparent than general dentistry, and less prone to over-treatment.

I, too, wonder about the pie. Perhaps it is only so large. And yet ... perhaps not. There are certainly a vast number of Americans--some assert as high as 50%--that do not see a dentist regularly. As we know, caries, perio, misaligned teeth--all of these conditions get only worse with time. None are static, and certainly none spontaneously heal. It is probable that if all these folks decided to seek care at the same moment, that pie would explode to the point we'd never be able to keep up with the demand. Maybe I'm too optimistic, but I choose to see the dental pie as expandable.

There's one other thing that nags at me. To paraphrase the legendary Dr. McCoy, "I'm a dentist, not an economist." Still, I have slowly become convinced that there are two distinct branches of capitalism. Corporate capitalism is the first. Corporations build world-changing products and services, of course, and for that I am profoundly grateful. The computer I'm typing on; cars and roads; life-saving drugs and medical devices; the list is endless. Corporations have shaped our modern world.

Yet the capitalism of the corporation obeys a bizarre set of rules, and corporate behavior is often spectacularly harmful to the human beings in the landscape around them. Enron, Big Pharma fines that run into the multi-millions, Volkswagen's emissions scandal, the shenanigans at Wells Fargo, continued pollution with carcinogens ... really damaging stuff. Why do they behave so awfully? Corporations are obligated by their charters to maximize profits for their shareholders, and no other consideration is allowed to trump that one. If, for example, an oil company CEO decides not to drill in a sensitive environment in Alaska, which would also displace an indigenous people, that CEO will be summarily fired and another one found who will get the job done. The goal of maximizing profit for shareholders overwhelms all else.

There's no commonly used term for the other form of capitalism that I've come to believe exists, so I call it bespoke. This word, used less than it should be, means custom-made, personal, non-anonymous; all things bespoke carry the indelible stamp of the maker.

Bespoke capitalism, to me, is the pure capitalism of the Adam Smithian world of the village. The localite network, where people build relationships that often last a long time. Bespoke capitalism rewards transparency, generosity and ethical business behavior, and often violently punishes opacity, selfishness and poor ethics.

In other words--have you ever been on the wrong end of a bad Yelp review? Nowadays, everyone in the village suddenly owns a newspaper of their own ....

But this is precisely why I remain optimistic. Above all else, I'm mighty glad I chose a profession where we can remain, if we so choose, in the realm of the bespoke. Many of us in dentistry have a rebellious spirit, and the corporate world is tough on a rebellious spirit.

Somewhere in all his writings, and I regret that I forget where, Seth Godin asserted that a small business (which I take to be a bespoke one) has only two choices if it seeks success:
(1) Delight people, and
(2) Solve their problems. The more interesting the problem, the better.

In dentistry, we can certainly do (1). With a well-trained staff, good people skills, a supportive atmosphere in the face of the stress patients feel about dental treatment--this is a vast area for growth. And (2) occurs every time we solve physical or esthetic pain, and probably a lot of other times too.

At the moment, in my practice I'm actually experiencing great hygiene busyness but rather severe doctor un-busyness. We seem to have treated people to the point where, on average, their needs have decreased. One of the ethical solutions of course is to figure out how to meet more people who need us. Facing the trauma of not being busy, I plan to seek more folks who need what we do and then (1) delight them and (2) solve their interesting problems. That always works in the end.

 

Thanks, Pookatooth.
Actually, I practice in Philly.
Philly, though, is famously a city of neighborhoods. ;}

 

Thanks, 2TH MVR. For my midlife crisis, I wrote a novel. I actually wrote a novel that explores the tension between corporate and bespoke capitalism. That's where these thoughts all come from. And what I learned in the process is--writing a novel definitely has the effect of improving one's communication skills.

I've always thought that geography and the socioeconomic status of the human beings within a certain geography determines a lot about the form of a dental practice. So what you assert above really resonates with me. I also always figured that urban practice (like mine) has the advantage of high density of population, and that rural practice has the advantage of low density of dentists. I always wondered how a suburban dentist could get on, since there might be quite a few practices nearby and just not as many new people moving into the area. I wondered, wouldn't a suburban dentist have the hardest time meeting new patients to make up for the ones who become very healthy, the ones who move away, and those patients who pass away? And yet many suburban colleagues seem to do just fine.

And then there are speakers like Dr. Dick Barnes, who always talks about how he built an extremely successful practice in the most downtrodden town. I mean, there were no jobs, a chronic drought and tumbleweeds were blowing through deserted streets, and the man was doing full arch crown and bridge.

Sigh. Geography is all probably a lot more complicated that I realize ....

 

It might very well be useful to share some thoughts on the various ways in which patients view dentistry, and for the general case, the various ways in which consumers see ... everything.

First, though, let me acknowledge that dental insurance has the potential to skew every assertion I make, in ways that, even after all these years, I do not fully comprehend. So before we start--yes, dental insurance can skew and alter and negate and invalidate the conclusions I've drawn. Even so, we need to understand how things work in a totally free market before we layer in the effects of the many forces that restrict that market. It's like learning physiology before pathology.

So. Careful observation over long periods of time has led me to conclude that each and every product and service devised by the artifices of mankind can be viewed by consumers along a spectrum, that runs from a pure commodity on the one end to purely bespoke on the other end. Recall that bespoke means custom-made, personal, non-anonymous; all things bespoke carry the indelible stamp of the maker.

Paper towels are a good example of a commodity. Oh, Bounty may indeed absorb more water and be softer than generic paper towels, and I do tend to buy that brand, but really, disposable absorbent paper is disposable absorbent paper. Many view gasoline as a commodity as well. There may be brand loyalty here and there, but mostly, motorists buy gas at the cheapest price they can. There are even apps for this. We can go even further with our examples. Bulk containers of grain or oil or chemicals are, literally, commodities. Economists actually call them that.

Now consider the couch.

-One guy buys a couch totally on the criterion of cost. He's rather bohemian, doesn't plan ahead in life, makes a low salary and simply wants a couch at the lowest price to be had.

-A newly married couple buys a couch and coffee table from Ikea. Now, we could assert that, since an Ikea couch and coffee table are mass-produced and fairly simple, that they are a commodity. And yet. This newly married couple brings their couch and coffee table home, downs a bottle of wine, has a grand old time assembling their swag, laughing all the way through the process, and then they invite their friends over to break in their new couch and watch the big game--and memories are made. The form of the couch may be that of a commodity, and the function is still that of a couch--but this couple layered their own meaning onto their couch that transformed it in some indefinable way. To them, it was no longer a commodity.

-A middle-aged couple who has been doing pretty well engages a local skilled artisan and pays ten thousand dollars for a custom-made couch and coffee table. It's bloody amazing. Heck, there's even a built-in joystick that controls a robotic cart that fetches the single-malt scotch from their liquor cabinet. This little beastie is a Couch, capital C.

-A venture capitalist searches high and low and finally finds, and pays twenty-five thousand dollars for, a vintage Paul Frankl couch and coffee table. It's a work of art, and no sane person would deny that Frankl's masterpiece from the 1920s is fully bespoke, and not in any way shape or form a commodity.

Services count as well as products. You can get an oil change from Jiffy Lube, who has scaled the process of an oil change so that it's as cheap (and anonymous) as possible. And yet somewhere out there, there's another venture capitalist of a certain age who has struck a deal for fifty thousand dollars with 70s pop icon Barry Manilow, to custom-write a song for his daughter's wedding. And another fifty grand to perform it on the happy day. We may question this chap's judgment, and perhaps his very sanity--but we all can agree that this contract for a custom-written song is as bespoke as it gets.

Do you see how this works? Everything--everything--made by human artifice exists along a spectrum. Some products and services, most people approach as a commodity. Other products and services, most people approach as bespoke--and, often, they are expensive. Yet other products and services engender complex mixed reactions, and folks layer their own meanings onto them, which leads to the complexity.

When it comes to complex, mixed reactions, cars and the iPhone come to mind. Technically, a car is a commodity--it's mass-produced on a vast scale. Yet we spend a lot of time in our cars, and some of us grow extremely attached to them. You may have seen someone wistfully talk about their first ride; some people actually get tears in their eyes when they reminisce over the car they drove in their youth. Others, though, just view their car as a means to get from A to B. And the iPhone may, again, technically be a commodity. Apple makes hundreds of millions of them. For many of us, though, our smart phone is our primary connection to the wider world. We can reach any friend in an instant, order anything from anywhere, read reviews of things before we try them, and employ any of millions of apps to accomplish things we could never accomplish so easily before. With these two examples, I want to show again that we place our own meaning onto what are technically commodities, and in doing so, we transform them and we view them as at least somewhat bespoke.

Also, it is worth noting that none of us, unless we are exceedingly rich, can treat everything in our lives as custom and bespoke. We have to make a choice due to the limits of our resources, so we pick and choose. We all end up having our own personal ideas of what should be a commodity and what should be bespoke.

Dentistry, which is a complex mix of products and services, is no different than anything else in this regard.

Now, many of us are surprised to find that some percentage of patients purchase dentistry solely on the basis of cost. That's their over-riding criterion. We are gobsmacked, flummoxed and insulted even, that some moron would blatantly ignore our superb crown margins, our flawless endo post-op films and our engaging bedside manner. How dare they! Plus, it's illogical--this is the human body we're talking about! How can someone take risks with their own body just for a few bucks?

A branch of social science called Diffusion of Innovations has incredible insights for us into the characteristics of the people who think in this way. I can post on it later if there is interest. For now, I have some advice for those dentists whose goal is to own their own practice--

Don't worry about those patients who view dentistry as a commodity. Treat them when they let you treat them, of course. But don't fret when they walk away for something cheaper.

When you meet the many other people who want the best for themselves, who view dentistry as something personal and to be valued, then knock their socks off with an amazing patient experience and rest assured in the knowledge that such people are far more likely to talk about your practice than those who view you as a commodity. Every person who you listen to and treat as the most important person in your professional life at that moment of diagnosis or treatment is a person who is ready and willing to be your megaphone. Let them do much of your marketing for you.

The other, even darker thing about dentistry and this spectrum we've been talking about is that dental management corporations are perfectly capable of commoditizing what should not be commoditized--you.

What I mean by this is, a human being who has completed eight, nine or more years of extraordinarily complex education and who now has the capability to be a vital part of a community and its health is not a commodity, not for any reason, not under any circumstances.

I personally am moderately annoyed when a patient views us as a commodity. But I'm positively outraged that a corporation could view me, and you, and you as interchangeable, disposable and temporary.

How dare they?

I'm not sure what to do about all this. I do know this though--there will always be a place, a significant place, for the private practice of dentistry in America, and each young doctor who strives for it weakens those corporations who aim to turn us into interchangeable, anonymous parts in a vast industrialized profit machine.

 

2THMVR, we remain on the same page. My practice has a very significant percentage of patients who carry PPO benefits. This goes back to before I was even there, and in all the years, I never wanted to stress so many patients by 'dropping out.' We've successfully negotiated reimbursement rates a bit, which blows to frakking smithereens this beastly assertion that flies about, that only big DMOs can negotiate anything. We all can. And we dabbled in an HMO, USHealthcare, years ago, just in case the whole dental world went that way. But it kinda faded away in my area and so I'm left with a mix of FFS and open dental insurance and PPOs. I'm definitely not a hoity-toity pinky-in-the-air-as-I-sip-my-martini spa type practice! ;} As evidenced by the appalling writeoffs in each month's Dentrix report. ;{

Like you, 2THMVR, I don't pay any attention to who has what when they're in the office for treatment. I just ethically diagnose, explain and treat. Let the credit adjustments fall where they may--every patient is one to be grateful for.

And not to be maudlin--but that's why you and I are two of the good guys.