Ep 25: Less Sriracha and more Oracle. The panel talks value creation.

Panelists Dana Price and Sami Akbay join me in a discussion of value creation upsides and downsides of two recent news events.  First, what has happened to the Summer supply of sriracha, and how will we possibly cope?  Then we explore Oracle's acquisition of Cerner and what that could mean for value drivers in healthcare.  We round off the episode with advice to a CFO pondering the use of crypto currency.  Join us for this fun 16-minute investment in your skills as a Finance Business Partner.

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Matt

Transcript

UNKNOWN: 0:00

Thank you.

SPEAKER_00: 0:02

Hi, this is Matt Cooley, host of the podcast Upside Downside, where our panel explores the value creation angle of current news stories. And if you can pry their lips from their double macchiatos, they might also offer some sage advice at the end to business leaders wrestling with a value creation challenge. Our panelists are Dana Price and Sami Akbey. Dana is chief financial officer at Area 9 Lyceum Group. And although she works at an ed tech company, she's quite adept at breaking technology. In fact, I think she stepped in my iPhone last year at a conference. Welcome, Dana.

SPEAKER_01: 0:39

Thanks, Matt.

SPEAKER_00: 0:40

Sami Akbe is a technology executive and founder who bridges business and technology for a living. He's been in data, artificial intelligence, and analytics since before it was cool, way before. Welcome to you, Sami. Thanks for having me, Matt. All right. Great to have you both here. Well, today we're going to cover two articles that piqued our collective interest, the sriracha shortage and the announcement by Oracle that it intends to fix health care. First, the sriracha shortage. Haiphong Foods warned its customers recently that due to weather conditions affecting crop yields, they won't be able to fulfill orders until after Labor Day. Haiphong typically sells more than 20 million bottles of the hot sauce per year, but this year, a whole season's worth won't be produced. We like to explore the upsides and downsides on this podcast. So folks, just what possible upsides could there be to something as horrible as a sriracha shortage? Dana, do you want to take that first?

SPEAKER_01: 1:42

Sure. So sriracha sauce shortage, say that fast 10 times, right? From an opportunity perspective, there's other potentially folks who might enter the market. And in fact, there's, I believe, a woman, you know, much, much smaller scale. I believe there is a woman with a small company in Bangor, Maine, who apparently had a record crop of chilies. So she apparently has pretty high demand right now. So I think it's, you know, opportunity for other people to enter the market with potentially crops that they may not have thought putting to use in a certain way. I think that could be a definite opportunity, you know, maybe less reflux disease as well.

SPEAKER_00: 2:30

That's a nice add on, isn't it? Okay, great. Great. Sami, what do you think about upsides?

SPEAKER_02: 2:39

Well, obviously, there's opportunities for smaller vendors to get into the market. And there's also a shifting palette that population experiences. This has been a product that's been around for 40, 45 years. And it was invented in California. And of course, there's the Sriracha controversy that I don't know if you've been following. But the small town, Urbandale, about 1,500 people in California, when Srecha factory was built there, they contributed something like$250,000 a year to the town budget. And then they prepaid it right after they prepaid it, the town declared them a local nuisance because of the smell and all that. And of course, I think there might be a little bit more going on than just the whole chili shortage.

SPEAKER_00: 3:38

That's interesting. I have seen that before. And yeah, that's interesting. So basically the upsides are not upsides for high-fung foods, which makes sense, right? There's upside for other participants to do something here. Yeah, that's interesting. I

SPEAKER_02: 3:57

suppose from that, sorry to interrupt you, but the upside from that is like the neighboring households won't have their throats burning because of the chili and vinegar and garlic

SPEAKER_00: 4:11

in the factory. Well, at least for a season, the children can walk to school again in safety. Yeah, yeah. All right. So what about the downsides? Sami, do you want to go first on the downsides?

SPEAKER_02: 4:21

Well, I think the first downside there is the fact that it's an indication of a bigger problem, bigger systemic problem in the supply chain disruptions, right? When you have a brand like Sriracha, which has become wildly successful and you need to substitute one of your ingredients with something else, something critical like a chili pepper, which is one of their top three key ingredients, you don't necessarily have the luxury. And this is not the only industry that's experiencing such a disruption. So I think that's one of the major downsides. We don't have alternative products to replace, especially established tastes and established brands. As Dana mentioned, can find a lot of peppers and chilies from other sources, but are they a one-to-one substitute? And we're going to have to get used to changing tastes and changing consumption habits over time because of such

SPEAKER_00: 5:28

disruptions. That makes sense. Dana, what's your thought on this, downsides?

SPEAKER_01: 5:33

Yeah, so my thought went to a typical finance person thought was that just until inventory. I'm sorry, I can't help myself. But it made me think just sort of, you know, to step back and think, you know, everything is always just in time, right? And do we actually question that at this point? You know, do we go back to stocking up? You know, as we know, the supply chain disruptions have been pretty huge. And does that call into question just just in time?

SPEAKER_00: 6:07

Yeah, I think that's really interesting. You know, from my perspective, the downside is obviously huge for Haiphong Foods. An entire season is gone. So no sales, no cash flow. I think you both make really interesting points though about the broader supply chain impact. Makes total sense. All right. Interesting. Somehow we're going to get through this. I know over the next couple of months, my palate's going to cool off and I'll probably start tasting other things again. So maybe that's I don't know. Let's move to Oracle's announcement that it intends to fix healthcare. Pretty bold statement. Oracle has acquired Cerner, the electronic health records company, and intends to build a national health records database. I sense some deja vu here, a la Google Health. I don't know if you guys remember that from a few years ago. So let's talk about upsides. Sami, what kind of upsides are we talking about here?

SPEAKER_02: 7:09

Well, first of all, the system has a lot of shortcomings. I don't think anybody would argue against that. And the second thing is Oracle does have great products as a company. They have over the years introduced many of the products that power a lot of the mission critical infrastructures. And when you think about it right now, as I mentioned to you, I'm in Canada. And if I had to go to the doctor's office, I could pay with my credit card because is that payment system is integrated worldwide, but some doctor's office that I visit here would have no access to any of my medical information, which is crazy, by the way. I mean, if we can integrate payments, we can integrate other information as well. And Oracle is well-positioned to address this. And their acquisition of Cerner, I think, is a brilliant one. has been running on a lot of Oracle databases and Oracle software stack over the years. They are a leader in their space. And this also gives Oracle an opportunity to promote Oracle Cloud. Interestingly enough, from a financial perspective, the acquisition is going to be immediately accretive. It's not going to be three months, six months, a year. So however you look at it, I think this is a great move with a lot of upside for both Oracle Cerner, an overall healthcare system at large, in my opinion.

SPEAKER_00: 8:43

Very interesting. Dana, what about you?

SPEAKER_01: 8:45

Yeah, I think, you know, listen, they have the purchasing power, they have the technology know-how, they have the infrastructure standing behind it. I think it's a huge challenge. But I think if anyone, you know, has a shot at getting it done, it's definitely one of the big guys. But that's not to say that it's not without its challenges.

SPEAKER_00: 9:08

Yeah, interesting. So my assessment of this is this would put Oracle right in the center of aggregating data that we've not been able to aggregate thus far. And then all the things you can do with aggregated data puts them in a very, very nice place for value creation. If I'm wearing my cynical hat, it means we're going to get a lot more targeted advertising in the future if they are successful. because that's typically what happens with aggregated data. Okay, what about downsides? What are the downsides for Oracle and other parties in this? Dana, you want to take that?

SPEAKER_01: 9:53

Sure. You know, I mean, it's a proverbial question. Have they bitten off more than they can chew? I'm actually a little surprised. It's Oracle, quite honestly, that wants to solve this problem. Surprised it wouldn't be Amazon, to be perfectly honest. Amazon's, you know, tracking me, tracking my purchases and tracking everything else I do probably at that point. So isn't medical just an extension of that? They have all the data. They can put the purchasing behind the medical records. And, you know, maybe that's just a weird way my mind works, but I think, you know, There's a lot of people that are skeptical. There's a lot that has to be fixed. I mean, anyone who has ever been in the hospital can tell you how broken the EMR system is. But I think you also have to make sure that people are comfortable, that privacy is protected, people aren't hacking the records, and that all your doctors are out there. actually participating, you know, whether it's your GP, the person in the hospital, and then the specialist that you need to see. So all three tie together. I think, you know, they all operate on different lengths and timeframes and there's, you know, the doctor versus, you know, the practitioner, the nurse practitioner. So all of that has to be vetted. And who are you actually getting the records and the writing from is also just a fundamental medical question.

SPEAKER_00: 11:30

Yeah. The Those are very good points. Sami, downsides?

SPEAKER_02: 11:34

So, I mean, I agree with Dana's points, but just to revisit, I think Amazon and Google are already big participants in this effort, but at different layers of the problem. They're collecting a lot of anonymized data in order to positively impact clinical outcomes by correlating information about people's treatment patterns and things like that. So that is one side of it. Oracle kind of approach is more around, let me make your data available everywhere and ubiquitously, which is not anonymized. So it goes back to that privacy concern. And there is clear guidelines around how you should be handling healthcare data. However, if you consolidate so much of the information in a single entity, Even when you don't have all the details, you can look at the type of activity and start to infer things that would have been otherwise privileged. So let's say that your EMR records show a visit to a certain specialist more than a certain number of times at a certain pattern without having to know the diagnosis, you can infer, let's say a mental health problem or a other protected type of information. So privacy goes out the window when you have one entity holding so much of this information, which is obviously a big concern. But then it begs the question, does the benefit outweigh the privacy aspect of it? Do I want my information available whenever I go to a doctor seamlessly, or do I want it to be kept so well, you know, kept secretly, but it's just not accessible as easily. So it's a give and take.

SPEAKER_00: 13:44

Yeah. And honestly, I'm on the fence on that point because my input on this one is I'm not sure that data transferability is really the main problem, particularly from the consumer perspective. Cost of care, more prompt service, those kinds of things are value drivers you know, more from the consumer perspective. And I would love companies to figure that out, not just the data piece. But this is going to be an interesting one to follow. And I think you both make very good points. Let's squeeze in a question from Kevin, who's a mid-market CFO in New York City. And we'll end on this. This is the question. We're debating using cryptocurrency as part of our treasury strategy. What would you do upside downside panelists? Wow, this is a big one. Dana, what do you think? I

SPEAKER_01: 14:41

would say that's out of my wheelhouse and there's probably nothing intelligent that can come out of my mouth on cryptocurrency.

SPEAKER_00: 14:48

You may not be alone in that assessment. Sami, what do you think, sir?

SPEAKER_02: 14:52

Well, I mean, obviously, after a CFO, there is very little for me to say, but my personal opinion on this is you might as well kind of go to Las Vegas and gamble your treasury account. You know, it's just, there's so much unknown associated with, so much volatility associated with it that I don't know if any risk profiles or kind of strategies that can account for that level of volatility. And yeah, so that's my two cents, but it's not an expert opinion. It's just like... of gut feel.

SPEAKER_00: 15:35

Yeah. If I summarize both of those, I would say, Kevin, run, run, sir, run. Okay. Excellent. I think that's a wrap for today, my friends. Dana and Sami, I hope you had a good time.

SPEAKER_01: 15:46

Thank you, Matt. I appreciate being here. Yeah. Thank you for having me, Matt.

SPEAKER_00: 15:52

I appreciate both of you being here. And to our Upside Downside listeners, our panel will be back soon to pontificate on more value creation or value destruction. News of the day. Thank you for listening.

UNKNOWN: 16:04

Thank you.