On Friday I caught a short segment on CNBC about a device that apparently kills blood borne viruses using light. The idea is that a patient infected by a serious disease (AIDS, Hepatitis, SARS), would have their blood drawn out and passed through this machine, and the machine would shine specific frequencies of light on the blood to kill the virus. All of this happens, apparently, without effecting anything else in the blood. I’m a bit skeptical, but the video still reminds me why health care costs eventually will start to subside.

While double digit increases in short-term health care costs seem inevitable, the likelihood is that we will hit a fulcrum point in the not-too-distant future, where advances in technology start to significantly reduce costs.

As Ray Kurzweil has so eloquently explained, technology is, by definition, deflationary. The cost of everything from TVs to iPhones, drops in price by 50% every 12-18 months. Ignoring inflation in any specific currency, this means that for every $1, we will get twice as much value (or the same value at half the cost) from a given technology in 12-18 months.

Health care is very technologically driven, and therefore should be bound by similar trends. The problem is that there are very definitive barriers that have obscured technology-driven deflation.

The first is that health care technology allows us to live longer. Technically, this means we are getting more “value” in the form of “longer life”. However, this “longer life”, is currently accompanied by greater total demand for health care. Since medicine is largely socialized for the sickest citizens, people living longer without paying more, simply translates into overall rising health care costs.

The other abstractions in health care are regulation and price controls (this comes in the form of direct regulations, patents, and government ownership of key pieces of the health care industry). This isn’t to say that regulation, redistribution of wealth, patents, or socialization of medicine don’t serve positive social purposes, but they do retard raw growth and innovation.

Despite these “negative” forces, health care technology continues to give us more for less. You used to have to have a surgery to fix an ulcer, now you take a pill. That pill may be expensive, but it’s a lot cheaper and more beneficial to the patient than a surgery.

The costs of AIDS medications and treatment today can range up to $30,000 per year. One day we will find a cure, whether it be a machine that uses light to kill the virus, a pill that selectively targets the virus, or a gene therapy that blocks the virus’ ability to replicate. In any case, the treatment and cure will be very expensive, but the relative cost of that treatment will be exponentially lower than the alternative today.

At some point our technology will hit an inflection point, where growth becomes even more exponential, and our technology starts solving significant and costly problems with simple, efficient, and ultimately cheaper solutions. As this happens, medecine will make us all healthier and less burdensome to the health care system. At the same time the declining costs of treatments will further reduce overall costs. Call it “peak health care costs”, there will be a day when technology solves the problem of healthcare costs.

The last couple days have seen big news in the iPhone app world. On Monday, Google officially announced its Speech To Search iPhone app. Yesterday Ocarina reached number one on the list of top paid iphone apps. While neither program is truly a killer app, both represent a glimpse of big things to come.

Google’s foray into internet searches powered by speech recognition is interesting because it pairs voice recognition with Internet data. The idea of retrieving important information by command has enormous potential.

The problem, beyond the technology not being accurate enough yet, is that voice recognition is not suited to the phones (or smartphones) we have today. There is not much value in offering spoken commands into a phone that you have to hold while speaking into it or seeing the results on it. In other words, for voice recognition like this to go mainstream, the system has to be able to either speak back to you, or display data to you in a hands free manner.

We’re several years away from seeing products capable of doing this in a useful manner, but you can get a glimpse of what this may eventually be like in a cutting edge new technology called Jarvis.

Ocarina, the second iPhone application from Silicon Valley based Smule, is far less practical or productive, but it’s also more impressive. Ocarina is perhaps the first significant new musical instrument for the iphone. While people have tinkered and played with creating new electronic instruments for years, the iPhone makes the cost of creating and distributing these instruments virtually zero. It is, in effect, the digitization of music instruments, and Ocarina will surely not be the last.

Looking forward, Ocarina (or an app just like it) will probably offer downloadable “karaoke” songs at some point, a la Guitar Hero. Having these cues as you listen and play along with songs would be an amazing tool for to help people learn to play it. This functionality will also undoubtedly accelerate adoption.

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After being mocked by the tech world before even launching, Hulu is now the toast of the Internet. In less than a year, the company convinced old-world media companies to play by Web 2.0 rules. In doing so, Hulu has created a fantastic entertainment experience for everyone. The company is now also saying that its revenue is coming in far ahead of expectations. But while CEO Jason Kilar deserves a lot of credit for what he’s done, the company as a business has a lot of challenges ahead.

Hulu’s long-term success depends on its competitive advantages. These currently fall in three key categories: its brand, its media partnerships, and its innovation. All three face stiff resistance ahead.

To start, while the name Hulu may be as prominent as the name Coke in the Internet world, it’s still very weak amongst the general population. This will change if Hulu continues its exponential growth, but Hulu has a long way to go before its a bankable household name.

More importantly, in order to continue to realize this growth, Hulu is dependant on its main asset, its distribution partnerships with major content producers. By some sheer force of god (and ownership stakes by NBC and Fox), Hulu has made deals with a number of major movie and TV studios. Since no other site has a library like that at their disposal, this represents an incredible competitive advantage

Unfortunately for Hulu, licensing this content also represents its biggest weakness. No matter how successful Hulu becomes, studios will likely always hold the power, and therefore the profits. If Hulu begins to make significant money, studios will almost certainly squeeze them for every bit of profit possible. If Hulu refuses, the studios will simply take their content elsewhere.

Unlike Apple, which wields significant power over the music studios because consumers have invested in their iPhone/iPod monopoly, Hulu’s web site may never be able to hold a similar lock on consumer attention. The cost of switching from iPod/iPhone/iTunes to another platform is significant. The cost of switching from Hulu to another web site is not. The truth is, as intelligent and well designed as is Hulu is, I don’t really care if i watch the latest episode on Hulu or NBC.com if they both offer a similar end user experience.

In fact if the studios get really smart, they will eventually license their content to everyone that wants to distribute it online. This will further squeeze Hulu on the profit end, while putting the company smack in the center of a very competitive marketplace.

So where does this leave the company as a long term business? As is usually the case, they will likely win or lose on their innovation. To win long term, Hulu will have to create unique value that no one else can match. This could come in the form of compelling and unique personalization technology, or perhaps highly effective ad serving technology.

No matter what Hulu does though, it has already created a great service, and raised the existing standards for online video. The question is, how much money can it make, and will it be able to create a fantastic business for the long term?

Feedback? Write a comment, or e-mail the author at lee(AT)squawkingtech.com

According to Macrumors, Apple just patented a virtual reality headset. While individual Apple patents are generally as predictive of future products as single stocktwits are of future market performance, Apple’s increasing focus on new computer interfaces may mean that we’re finally entering the era of immersive computing.

According to Ray Kurzweil, “By 2020, virtual reality will allow for a full-immersion sensual encounter involving all five senses.” Scary as it may sound, it’s coming closer to fruition day-by-day.

In fact, the last two years may be remembered as the birth of this new era. Nintendo’s Wii and Apple’s iPhone / new Macbooks are the first mainstream immersive computers. Before these two products, almost all of us interacted with PCs by using interfaces designed around the way the computers naturally work. The iPhone’s multitouch screen and the Wii’s motion controller are input devices designed around the way we work.

This is a logical step in the path toward an immersive experience. Forty years ago we interacted with computers using physical punch cards. Thirty years ago we began using keyboards and text commands. Twenty years ago we introduced the mouse. Now we have the MultiTouch and Motion Controllers.

Technology continues to evolve in order to make our lives easier and more efficient. The end result of this progression are computer interfaces that directly translate our thoughts into action. In fact, if you watched 60 Minutes a few weeks ago, you saw that we’re already starting to get there.

Of course, our input is only one piece of the immersive puzzle. Output from the computer will be equally important, and is trending in the same direction. Second Life and World of War Craft are crude representations of the appeal of virtual worlds. A lunch break to France, sitting beside Benjamin Franklin at the continental congress, or enjoying a romantic rendezvous with a celebrity, will all be possible in truly  immersive virtual worlds.

All of this is still some ways away. Our best immersive technologies today are only in their infancy. But thanks to companies like Apple and Nintendo, they are beginning to make their way out of the lab and into our lives.

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Michael Lewis just wrote an interesting article for Portfolio magazine detailing the “End” of Wall Street as we know it. In his typical style, Lewis details the crash of the market and the onset of the credit crisis by chronicling the path of Steve Eisman:

There’s a long list of people who now say they saw it coming all along but a far shorter one of people who actually did. Of those, even fewer had the nerve to bet on their vision. It’s not easy to stand apart from mass hysteria—to believe that most of what’s in the financial news is wrong or distorted, to believe that most important financial people are either lying or deluded—without actually being insane. A handful of people had been inside the black box, understood how it worked, and bet on it blowing up. Whitney rattled off a list with a half-dozen names on it. At the top was Steve Eisman.

If you’re a fan of Liar’s poker, or are just interested in a fun and interesting view of how this all happened, I highly recommend the article.

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The battle over next-generation home broadband service is well underway. While AT&T’s bet on existing copper lines is expected to cost 1/4th as much, the prevailing sentiment seems to be that Verizon’s technologically superior fiber-to-the-door will ultimately leave AT&T in the dust. The reality, however, is that AT&T may actually be the one betting on the more advanced technology.

In addition to its U-verse wired network, AT&T is also in the process of building out its 4G wireless network. Like Verizon’s, Sprint’s, and T-mobile’s, AT&T’s 4G network will be capable of delivering up to a super-fast 300Mbit of wireless bandwidth. With the FCC approving unlicensed use of white spaces, at least one, if not several, other major wireless super-broadband networks will likely make their way onto the scene as well. So whether consumers use AT&T, Verizon, Sprint, or someone new, we are quickly approaching a future where everyone will have a wireless connection faster than any wired connection available today.

No doubt Verizon’s wired Fios broadband will keep pace with the 4G wireless speeds. But while Verizon is spending $850 per subscriber just to run a strand of fiber to each home, AT&T will likely be spending most of that money to build 4G cell towers.

More importantly, Verizon won’t be finishing its fiber network until 2010. According to most road maps, 4G will be in wide roll out by 2012. The question is, if each of us has a 300Mbit personal wireless broadband connection wherever we go, will anyone bother to pay for Verizon’s wired broadband as well? Just as consumers have rapidly abandoned landline phone service, landline broadband may quickly become a superfluous expenditure.

Obviously, no transition is perfectly efficient, and certainly consumers will seek faster broadband connections between now and 2012. As a temporary stop gap, though, Verizon’s $23 billion wired strategy is an expensive bet compared to AT&T’s $6.5 billion. In an economy mired by recession and tight corporate credit markets, it makes you wonder who will really be left behind with the inferior technology.

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