Navigating Black Swan Events in Volatile Markets

In many ways, in this market turmoil, healthcare services is feeling like a decent bet. Relative to other sectors, it’s highly domestic, and it’s less unpredictable in periods of economic uncertainty. People still get sick during recessions. And yet, the part of healthcare that most of the readers of this newsletter inhabit — startups, venture and PE firms, innovative care delivery businesses, and so on — are certainly going to be impacted. Just look at Hinge Health, the high-growth, venture-backed virtual MSK business that is now reportedly considering delaying its IPO because of the market.

I say healthcare services very deliberately, because biotech is getting absolutely crushed.

As someone who spends too much time on X and Reddit, the prevailing sentiment amongst investors seems to be this upcoming period will continue to be a “have and have nots” market. Those in the spaces considered hot - where follow-on funding will be theoretically less hard to come by or where traction is absolutely undeniable - will continue to do well. But companies that require a thoughtful, strategic investor willing to put the time into making them successful, typically through an injection of capital, and a new strategy and/or team, I’m worried. No one has a crystal ball but we do know that the VC market does not tend to thrive in periods of unpredictability. And LPs, at some point, want liquidity.

Given the economy is on everyone’s minds, I sat down this past week with two of my favorite humans, one a health investor and the other an economist. They also happen to be married. That’s Meghan Fitzgerald, an advisor at TowerBrook and Goldman — and a nurse! — as well as a board member at publicly-traded companies like Tenet. Meghan also teaches at Columbia as an Adjunct Professor. Her husband, Michael Darda, is a chief economist and macro strategist at Roth Capital Partners, and he’s also a frequent contributor to my former employer CNBC. He’s a busy man these days, but I fired off a “Four questions with” to get his sense of things, particularly from a healthcare POV (hot take: he’s actually seeing potential).

This post kicks off with a column from Meghan on why she thinks that our sector is caught up in a “turbulent migration” or black swans, and where we need to go from here, followed by Darda’s take on the macro issues at play. I hope you find their takes as useful in navigating the current moment as I have.

Healthcare is in a major “black swan” moment

By Meghan Fitzgerald

TL;DR: The healthcare sector is facing a wave of unpredictable, high-impact transformations—from GLP-1 disruption to AI acceleration. Leaders can thrive in unpredictable environments if they build resilience and flexibility into their organizational culture and financial plans.

But let’s be real: It is also very tough out there for healthcare startups. The sector we’re building in appears caught in a turbulent migration of “black swans” —market volatility, tariffs, cyberattacks, a sweeping reset at HHS, blue-chip bankruptcies, the GLP-1/GIP revolution, and the rapid proliferation of AI, just to name a few.

As a founder, investor, public health academic, and former public company executive, I have navigated several economic cycles with their own set of unique challenges. Even so, I’m uniquely worried today for the startup community. Capital is notoriously hard to come by, particularly for companies that aren’t in hype-driven areas like AI. Sales cycles are longer than ever before, given that the largest healthcare companies are more discerning about purchasing decisions in light of the current volatility. All of this makes it imperative for founders and other business leaders to understand the concept of Black Swans, and learn from those who have weathered the storms. We’ll get into a few examples throughout this piece.

Driven by a deep interest in the subject, I designed and taught a course this semester at Columbia University focusing on black swan events and crisis management. I brought in several industry leaders to speak on their experiences of down markets and earth-shattering challenges (natural disasters, product recalls and the 2008 recession) and opportunities with AI which is shaping up to be a positive swan. While I acknowledge that applying the black swan theory to healthcare involves some interpretative flexibility, I find it to be the most fitting framework to elucidate our current environment. Because we serve patients and continuity in care matters, it's important to distinguish between true black swan events and other significant but more foreseeable challenges or innovations within healthcare.

So what is the “black swan” theory and what can we learn from it?

This concept originates from Nassim Nicholas Taleb’s seminal work, which gained prominence during the 2008 financial crisis. I am married to an economist who has a black swan float in our pool reminding us of its continued relevance. Black swan events by nature are highly improbable events with three characteristics: unpredictability (rare, unforeseen); massive impact (significant disruption or transformation in a market); and yet in retrospect is often predictable. A swan can be catastrophic (financial crisis or pandemic) but also an opportunity or transformational (telehealth regulation, a novel technology breakthrough).

The most obvious black swan is the postmortem predictability of the COVID epidemic, which exposed gaps in preparedness and the power of politics that continues to reshape healthcare. Another, which may be an even more compelling example for founders, is the remarkable market transformation driven by the emergence of new weight-loss medications.

In terms of market, over 40% of the US population is considered obese (an absolutely massive impact) and this drug class was developed for type 2 diabetes with noted appetite- suppressing effects setting up an obvious investment play (in retrospect). Its massive market impact took many by surprise – especially those who discounted, missed and got side-swiped by it.

This market will likely bring us our first trillion-dollar healthcare company as analysts project GLP-1-related drugs to become a $130B+ annual market by 2030. At the same time, the disruption and transformation we are seeing across healthcare is tectonic. During this launch period, there was a 25 percent decrease in bariatric surgery for obesity. Weight Watchers, an American icon with 4 mm users and enviable brand, has seen its stock decline 70% this year and is in what I hope will be positive restructuring talks. And that’s just the beginning.

Beyond pharmaceuticals, numerous founders and investors have identified metabolic health as a burgeoning market ripe for innovation. This has spurred advancements in areas such as nutrition, dietitian services, benefit solutions, predictive analytics, and ancillary services like manufacturing scalability and direct to patient strategies (Catalent, Lilly Direct). Nutritionists and registered dieticians in healthcare are finally getting proper recognition. Over my 25-year tenure, healthcare has weathered multiple recessions, regulatory overhauls, scientific breakthroughs, supply chain disruptions, product recalls, and care delivery revolutions. From the rise of genomics to the digitization of health records, from blockbuster drug launches to public health crises—the only true constant has been our $4+ trillion annual GDP spend (containing cost with high quality likely requires another black swan).

Across this backdrop, a select few didn’t just survive the turbulence. They thrived. These organizations found clarity in chaos, moved decisively, and capitalized on moments when others paused or flatlined. Their stories offer founders powerful lessons in clarity of vision, strategic boldness, operational discipline, resilience under pressure and deploying a clear narrative for employees and customers.

Here are a few case-studies that I often share with founders today:

Coming out of the 2008 recession, Roche acquired Genentech, securing a generational asset at a relatively undervalued price. The deal combined scientific leadership, cultural fit, and market timing—a rare trifecta in M&A. This deal brought Roche blockbuster biologics like: Avastin, Herceptin and Rituxan which became cornerstones of Roche’s pharma revenue for over a decade. Genentech also largely remained a separate operating unit to preserve its culture. In 2010, while the ACA (Affordable Care Act) initially introduced uncertainty and risk, United Healthcare capitalized on the changing landscape, seeing the future in tech-enabled, vertically integrated care delivery and scaled Optum aggressively. UnitedHealth Group’s stock price soared after 2010, rising more than 10x over the next decade and revenue grew from ~$94B in 2010 to over $360B by 2023.

During the COVID-19 pandemic, U.S. hospitals and healthcare providers exhibited remarkable operational discipline and resilience, maintaining a clear focus on supporting frontline workers underscoring their dedication to patient care. While outpatient surgery center volume was halted, supply shortages ensued, and the daily barrage on front line talent was a hundred-year storm, history will show this industry, and the front line was responsible for reopening the US economy and getting us all back to work. Moderna during early COVID is another example: while others waited, they took their existing mRNA workstream focused on MERS, pivoted to Coronavirus and partnered with the government to accelerate their development.

These traits go beyond healthcare, as many legendary investors (e.g., Sequoia, Blackstone, Berkshire Hathaway) made career defining moves by investing in Airbnb, Stripe, Goldman, Hilton, or major financial institutions like BofA during the depths of the financial crisis, all when others pulled back. The greatest returns will likely come to those who can see clearly when others only see risk—and who move forward while others stand still. At the same time, investors want top line growth and a path to profitability. Today if you are not growing 30% plus and just burning, investors are not going to ascribe the same value they did a few years back. Taleb suggests building “antifragile” business models to not only weather black swans but adapt and get stronger during periods of volatility.

The Takeaway

There are a few different takeaways in each of these case studies, but an underlying message is operators and entrepreneurs must remain prepared to adjust to rapid shifts in their environment.

Founders should adopt proactive financial strategies that enhance resilience. This includes strengthening financial reserves to provide a buffer during unforeseen disruptions, diversifying revenue streams to reduce dependence on single points of risk (products or markets), implementing rigorous risk management frameworks, fostering an agile organizational culture that can swiftly adapt to unexpected challenges, and maintaining transparent communication with stakeholders to build trust and manage expectations during crises.

Despite the flock and heavy fog, we must continue. Funds, franchises, and founders are often built—and outsized returns delivered—when the majority retreats. The macro risk and political uncertainty will continue to give some investors and leaders pause so leadership isn’t about predicting the next black swan—it’s about building the muscle to move through them.

4 Questions on the Economy: A Chat with Economist Michael Darda

Interviewed by Christina Farr

Like many other Americans, I have been getting more than a little heart burn from the recent market turmoil as we all get a crash course in international trade and the economics of tariffs. I sent a few messages to my friend Michael Darda, renowned lead economist and market strategist at Roth Capital partners, for a quick Q&A on some of the most pressing questions readers have about the markets, biotech stocks, and the broader economy.

The current market turmoil

Q: Some of my friends are panicking right now. One even joked about sewing chocolate gelt into his mattress! Any words of wisdom for those who aren’t multimillionaires and are worried about their personal assets and net worth?”

Michael: My advice would be: “stay calm, stay diversified, and use dislocations (bear markets) as strategic opportunities.” The market will tend to discount bad news before we see it in earnings or macro data. One big mistake investors make is overreacting after large moves have already taken shape—for instance, selling everything at the lows in 2009 and 2020.

We may only be halfway through a wrenching correction if a recession is on the way, but there’s no way to know for sure. The best approach is to go slow and stay diversified.

Timing the business cycle

Q: You’ve been a strong prognosticator of the future—particularly regarding a possible recession. But the running joke is that economists have predicted 10 of the last 3 recessions? How do you feel the near term risks that a global recession is coming?

Michael: The U.S. was fortunate to experience nearly two years of a soft-landing period, which followed 500 basis points of Federal Reserve rate hikes and an inverted yield curve. That was a historical ‘black swan’ in a good way. However, some of the tailwinds that helped us avoid recession are now turning into headwinds.

One significant headwind is arguably the largest unforced policy error in a century: the Trump tariffs. The risk of recession has definitely increased, and we’re now seeing a re-inversion of yield curves in the U.S. plus widening credit risk spreads—both of which we also saw just before the economy weakened in 2007 and 2020.

Biotech

Q: Biotech stocks have taken a nose dive, even those with strong fundamentals and promising drugs in the pipeline. With all the chaos at the FDA and its new leadership, could this get worse?

Michael: This sector has been underperforming for quite some time and can’t seem to get out of its own way. The most bullish thing I can say is that this doesn’t look anything like the late 1990s for biotech, when valuations soared to insane levels and led to a multi-year bust. There’s probably opportunity in the space now, but it requires a deep company-level understanding—which, admittedly, I do not have.

General Healthcare investing

Q: Our readers largely work in healthcare—some are startup founders, others are in public companies. There’s fear about AI taking jobs, the general economy, etc. Any advice for them specifically, from your economist’s point of view? You’re also married to a healthcare expert, so I’d love your two cents!

Michael: I defer to my wife on healthcare matters since she’s the expert, but I can tell you that the sector ranks high in our model (using normalized valuations) because it has underperformed over the last several years. We recommended ‘defensive value,’ bonds, and energy coming into the year. Interestingly, healthcare is the second-best-performing sector in the S&P 500 year-to-date (including today’s sell-off), up 4.8%.