BN Confidential: Naspers-type opportunity beckons via Discovery

By Alec Hogg.It's nine years since we buried Flip Meyer, a doyen of Afrikaans financial journalism. I miss him, as one tends to with those who were more like brothers than friends..Flip spent his career at Naspers, a contentious bone between us that provided a rich seam for "debate". Based on ridiculous misguided loyalty many journalists have to their employers, it put us at opposite sides of a political divide in the runup to and after South Africa's 1994 election..___STEADY_PAYWALL___.Over the years, my opinions on the subject of Naspers hardened to the point of becoming blinkered. Very much to my own cost..For the ten years before he died, no matter how much my friend tried to explain how Naspers was doing amazing things in China, my mind was closed. I laughed when he explained how his few thousand shares would take care of his retirement..It was, after all, the company whose organs were steadfast supporters of apartheid. How could anything good possibly stem from that legacy?.Those biases caused me to miss participating in what has been accurately described as the greatest venture capital investment of all time – Naspers's $30m purchase two decades back of 50% of TenCent, what is now China's global internet giant (market cap: R5.4trn – about half the total market value of the JSE)..I fear that similar biases are at play with a company that is shaping up as South Africa's second exponential investment opportunity..As with most disruptors who have come to dominate their sectors, the way Discovery Health has transformed South Africa's health insurance sector has attracted its share of envious critics. It is natural for incumbents to attack an aggressive newcomer. More so if it has a business model that is incomparably better than the status quo..Just like my Naspers example, over the years such angry whispers tend to harden attitudes. With the bile erupting into the public domain whenever the opportunity arises..It would be naïve to think Discovery could always satisfy every client. And given that health is one of the most emotive areas around, every repudiated claim turns into a potential angry caller on SA's numerous phone-in radio shows..That antagonism found a new avenue in the recent debate over the restricting to blacks the public offer of shares in Discovery Bank. With allegations of racism and threats of boycott raging, few critics bothered that the 10% black shareholding is a legal requirement..I mention all this in the context of an extraordinary event I attended yesterday at Somerset House on the north bank of the Thames..Interest was so high that not only were there a couple dozen people standing at the back, but the organisers had to arrange a special room where a television relayed the event to an overflow – something one usually only sees at the Berkshire AGM in Omaha or, very occasionally in Davos..Hindsight may well show that this was the day that Discovery passed the tipping point from exciting to exponential. The event was to lift the wraps on an independent survey by RAND Europe of 400,000 people..The purpose of this massive study was to assess whether there was scientific proof that Discovery's approach of using financial incentives to get clients healthier worked..The findings were so spectacular that RAND Europe's President Hans Pung referred continuously to the uplift of 34% in health improving physical activity translating into 4.8 more active days per month. Pung says the results are so compelling they will be submitted to science journals..It was easy to gauge the relevance of all this by the esteem and support from keynote speakers..British Secretary for Health Matthew Hancock said the Discovery Way which promotes prevention over cure was a critical tool to be employed by his country's National Health Service..Apple Inc's chief operating officer Jeff Williams contributed a lengthy video gushing about the partnership with Discovery and its implications for global health. His in-attendance colleague, VP for Apple Watch Stan Ng, was equally enthusiastic..Ditto last year's Nobel Prize winning economist Richard Thaler who praised the model and urged Discovery to "keep going…keep experimenting and learning – we know that when you give people incentives and make it easy and fun, they get involved.".Modest and quietly eloquent Adrian Gore more than held his own in this elevated company. He pointed out that the introduction of "loss aversion" – costing new Apple Watch owners money if they don't exercise – is proving an even more powerful incentive than rewards..Gore said Discovery's shared value model is based on the company winning when those covered by its policies benefit. Once it takes hold, this virtuous cycle becomes irresistible. Its growth potential exponential..Discovery has partnerships with global heavyweights AIA, Generali, John Hancock, Manulife, Ping An and Sumitomo Life, the leaders in their geographies. Between them the alliance covers 300m lives..Helped by confidence bred through now proven science, the CEO of each partner took time out to record a video message for yesterday's event. Their contribution culminating in their joint pledge to get 100m people more active by 2025. All of that through the Discovery owned and built Vitality platform..Mind blowing numbers. And especially hard to get your head around when you're from a country with under half a percent of global GDP. Then again we do have the Naspers experience to draw on. Missing out once is a mishap. Twice is just sloppy.

BN Confidential: Naspers-type opportunity beckons via Discovery

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