How the logic of the Nobel in Economics lights the way

Read excerpts from an article by physician Gustavo Meirelles, written with Gustavo Pedreira, showing that the technological revolution will only thrive when the healthcare sector breaks with its past incentives and takes the path of creative destruction.

Continuous innovation requires a delicate balance. There must be competition (to force companies to innovate), but also reward (profits, patents, market leadership) to justify the enormous risk and cost of R&D.

We can apply this powerful framework to one of the sectors most battered by the gale of creative destruction: healthcare.

The healthcare sector is the perfect example of path dependence. Our systems, all over the world, were not designed logically; they evolved over the last century. This trajectory created a set of old ideas that are incredibly hard to escape.

What is the trajectory we depend on? Healthcare, at the moment, is a system built around episodic, reactive care. The dominant revenue model is fee-for-service (payment per procedure). The center of economic and cultural power is the hospital. Regulation and incentives were designed for an analog era, focused on approving molecules and physical equipment (hardware), not on validating algorithms and software.

This trajectory was successful for many years, but it now collides head-on with innovation. Today’s technology — generative AI, digital health, telemedicine, genomics, wearable devices — is not designed to optimize fee-for-service; it is designed for a radically different model: predictive, preventive, continuous and personalized care, based on data and focused on value (outcomes) rather than volume (procedures).

That is why innovation in healthcare sometimes seems stuck.

Telemedicine does not meet resistance because it is a bad technology; it runs into barriers because it threatens the business model of the in-person visit and the way it is paid. Data interoperability — the ability to share a patient’s medical record seamlessly between systems — does not fail because it is technically impossible, but because in the current model data is used as a strategic retention asset, a silo that works as a barrier to entry to protect the status quo of the hospital or the laboratory.

We are living, in real time, the conflict defined by economic historian Joel Mokyr, one of the 2025 Nobel laureates in Economics. The answer lies not only in machines but in culture and institutions, he says.

Modern Luddites do not break machines; they use political lobbying, regulatory capture and control of data to keep new technology-based business models from threatening their position. The logic of the Nobel shows us that if institutions (regulatory agencies, ministries and professional associations) protect the incumbent instead of facilitating the transition, they will condemn the sector to stagnation.

Build in-house or bring in from outside? Answer: both

Faced with this landscape, many leaders’ instinctive reaction is to fall into a false dilemma: “Should we focus on creating our own cutting-edge technology or on adopting what comes from outside?”

The Nobel laureate’s logic suggests that this is a flawed binary choice. A mature innovation strategy, whether for a nation or for a sector, must operate on two simultaneous and complementary fronts: the creation of technology and the agile adoption of new products or solutions.

1. The creation front:no country can lead in everything. Creating foundational technology, such as large language models (LLMs) or developing new chips, is astronomically expensive and concentrated in a few places. However, every sector has niches of excellence. In Brazil, we have world-class R&D centers in areas such as agtech, fintech and, in healthcare, in lines such as cell therapy, tropical genomics and management software. Fostering this front means investing in basic and applied research where we have a clear competitive advantage, generating high-value intellectual property.

2. The adoption front: at the same time, for the vast majority of technologies (such as cloud computing, generative AI tools, SaaS platforms), the competitive advantage does not lie in reinventing the wheel. The advantage lies in being the best and fastest integrator.

Agile adoption is a crucial form of innovation (process innovation). In a complex sector such as healthcare, being able to validate, integrate and scale a new AI algorithm across an entire hospital network, safely and ethically, in six months (instead of six years), is a more powerful competitive advantage than trying to build that algorithm from scratch.

The two fronts feed each other. By swiftly adopting global AI platforms, we free our developers to create specific, niche applications on top of these platforms, solving local problems that Silicon Valley would never see.

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The full article by Gustavo Meirelles and Gustavo Pedreira for MIT Sloan Management Review Brasil can be read at https://mitsloanreview.com.br/inovacao-em-saude-como-a-logica-do-nobel-de-economia-ilumina-o-caminho/

Gustavo Meirelles is Vice President of Medicine at Afya, founder of Comunidade Inovação em Saúde, an investor and a startup board member. A radiologist with specialization, a doctorate and postdoctoral training in Brazil and abroad, he is an advisor to Rivio.

Gustavo Pedreira is an executive and researcher focused on transforming the healthcare sector, a specialist in strategic and financial management and an Ambassador of Comunidade Inovação em Saúde.