The Future of Wearable Tech Is Called a Hearing Aid

(Bloomberg Businessweek) -- When Brandon Sawalich started at Starkey Hearing Technologies in suburban Minneapolis, he was 19 and there were about 70 companies worldwide making hearing aids. That was 1994. His job was to clean the ones mailed in for repair or, occasionally, as returns, because the user was dead and no longer required them. Today, Sawalich is 43, there are five companies, and he’s president of Starkey, which employs 6,000 people and sold $800 million in hearing aids last year. “We’ve been right here in Eden Prairie since 1974,” Sawalich says as he walks me through company headquarters, then corrects himself. “Technically, it started a few years before that, in the basement of Mr. Austin’s home. It’s one of those great entrepreneurial American success stories.”.Sawalich moved from waxy buildup to events to sales to, finally, president, the company’s top position, which he assumed in 2016 in the wake of a fraud scandal that rocked Starkey. He’s also stepson of the aforementioned Mr. Austin—William Austin, the billionaire company founder who built Starkey into a privately held Goliath and has made hearing aids for seemingly every famous person who requires them, including four U.S. presidents, two popes, Nelson Mandela, and Mother Teresa..Starkey is now the only one of the surviving Big Five manufacturers based in the U.S. What’s thinned the herd of competitors, Sawalich says, is technology. Hearing aids used to be relatively simple, inexpensive to make, and not hugely different from brand to brand. Today they’re an increasingly complex digital product, requiring teams of engineers and robust investment in research and development..A thin, barely visible wire curls over the top of each of Sawalich’s ears and vanishes into the canals, where an earpiece the size of a marker tip delivers sound. “These are real,” he says. “I do have some minor hearing loss.” (It’s from loud music and shooting guns in his youth.) He’s also wearing these tiny, barely visible aids because they’re the company’s latest and greatest development—the reason 300 of America’s top audiologists will arrive in two days’ time at this building, the William F. Austin Education Center, via red carpet while running a gantlet of whooping and clapping Starkey employees..Sawalich is fond of saying that Starkey makes a product nobody wants. Almost two-thirds of the people in America who need hearing aids don’t have them, and those who do accept their fate wait an average of seven years from the first symptom before seeking help. “With these, hearing aids are going to evolve,” he says, “so that you don’t have to have hearing loss to want a hearing aid.”.You heard—correction, read—that correctly. Starkey is now pitching the world a hearing aid for people who don’t need hearing aids..Sawalich pulls an iPhone out of his jacket pocket and opens an app called Thrive, built to accompany this paradigm shift of a product. The Livio AI, as the new device is called, uses tiny sensors plus, as its name suggests, artificial intelligence to selectively filter noise and focus on specific sound sources—for instance, the person across the table in a busy restaurant—while also tracking various health metrics, including steps walked, stairs climbed, and cognitive activity, such as how much the wearer is talking and engaging with other humans. It also does near-instantaneous translation of 27 languages and will, after a forthcoming update, measure heart rate. The cost is next-level, too: $2,500 to $3,000 per hearing aid or more, depending on the doctor and his or her services..“In the next five to seven years, your hearing aids are going to be like Jarvis from Iron Man,” Sawalich says. “It’s going to be your personal assistant. It’s going to know more about what’s going on with your body that you want to know—your heart rate, blood pressure, glucose. The ear is the new wrist.”.This is the kind of ridiculous slogan that only someone inside the bubble of wearable med tech could use unironically. But it’s not an insane idea. The ear is where pediatricians get your kid’s temperature. It’s an ideal spot to measure heart rate and equilibrium, which is how the Livio also provides fall detection for wobbly seniors. If a user doesn’t tell the Thrive app that he or she is fine within seconds after a fall, it will call for help..Starkey is a company reborn, Sawalich says. And not only because it had to be, what with the former president and former chief financial officer getting indicted and later convicted for conspiring to steal more than $20 million in an elaborate corporate fraud case. The case, which reached court in early 2018, captivated the local media and caused great embarrassment for Austin, who testified in the trial, and Sawalich, who didn’t and hasn’t talked about it before. “I just hate going back and thinking about it,” he says, “because it makes me ill.”.The defense strategy in court, I observe, seemed to be to drag Starkey’s two principals through the mud, to try to make them unsympathetic victims for a jury. “I don’t think they tried,” Sawalich says. “They did.”.We pass a large corner office. Inside are 12 desks crammed in fairly tight quarters. “This was our former administration’s president’s office,” Sawalich says. That man, Jerome Ruzicka, was at one time Sawalich’s mentor. “I named my son after him. Not many people know that. William George Jerome Sawalich.” He sighs. “A lot of these guys had been here for decades. They were family. I admired them. I wanted to be them.”.Sawalich waves a hand at the office. “Everybody thought that I couldn’t wait to get in there,” he says. “I don’t want anything to do with it.” Instead, he had the space gutted and handed it over to engineers doing advanced technology projects..He notes that much of what’s around in the offices is new. Software systems have been replaced, departments realigned, the org chart overhauled. An engineering center was opened in Tel Aviv, and the existing list of 600 projects was winnowed by two-thirds. There’s a new chief counsel from Sun Country Airlines, a new chief operating officer from General Electric, and a new chief technology officer from Intel..“Over the last two years, we’ve made Starkey a lot healthier and stronger, and we’ve narrowed our focus,” Sawalich says. “I wish what happened didn’t happen. But one door shuts and another one opens, right?”.Bill Austin tends to be in one of three places: in a makeshift clinic, fitting people for hearing aids under a tent in a developing nation; on a Gulfstream jet in transit between developing nations; or standing over a detailing machine nicknamed Bill’s Wheel across the hall from the office he never uses at Starkey HQ. This week, it’s the latter. A few days earlier he arrived back in Minneapolis from a nine-country, three-week run through Africa—during which a team from the Starkey Hearing Foundation, led by Austin and his wife, Tani, fit 12,000 people with hearing aids—and proceeded directly to the office, which is where we find him, working on orders in his uniform of black sneakers, black pants, black shirt, and white lab coat..Austin has ice-blue eyes, the deep creases of an enthusiastic smiler, and a sculpted poof of white hair that comes to a Dracula point on his forehead. He says there’s nothing he’d rather do than tinker with hearing aids. When I ask his wife why a 77-year-old billionaire isn’t out enjoying his twilight years, she replies that he’s “having a ball” and that she has to remind him to turn on his cellphone so that she can call and force him to turn off the lights and come home. “I’ve got to say, ‘Bill, put your toys up,’ ” she says. “ ‘Your back is going to be out.’ I did that at 10:30 last night.”.“I enjoy working,” Austin says. “It gives me meaning to help other people. That’s why I started this endeavor in the first place.”.Famous people with failing ears flock here, to “the Mayo Clinic of hearing,” as Sawalich calls it. Rows of framed headshots display the universe of celebrities who’ve come for Bill Austin’s Midas touch. He’s fit Frank Sinatra, Elton John, Steve Martin, Paul Newman, Chuck Norris, Chuck Yeager, Walter Cronkite, Bob Woodward, and a bunch of astronauts. Not long ago, Gene Simmons and the Dalai Lama came on the same day. Another time, it was Hugh Hefner and megachurch pastor Roger Schuller. “I didn’t tell Roger, of course,” Austin says. “He’d think these hands had touched the devil.”.Austin and I are scheduled to talk more formally the next day—this is only a brief stop to say hello. But once Starkey’s founder winds up, it’s hard to slow him down. “I’ve done more ears than anyone—no one is close,” he says. “No one has done one-tenth as many, not a fraction. But it’s OK. No one else wants to. Lots of people want to be good golfers. Lots of people want to be good skiers. Not many people want to eat dust.”.“OK, Bill,” Sawalich says. “We’ll catch up with you—”.“I wanted to do something else,” Austin says, launching into his origin story. “I was gonna save lives with these hands and be a missionary doctor like Albert Schweitzer.” He was repairing hearing aids at night to save money for medical school when an old man came in for help. “I was able to help him hear when no one else could,” Austin says. “And I saw in his face what it meant to him.”.On his way home that night, Austin interpreted a quote on the side of a bus as a message urging him toward a higher calling, and before going to bed he sat down and talked to himself out loud. “I said, ‘Bill, the reason you want to be a doctor is so you can help people.’ ” But patients can’t always be fixed, and even on his best day he’d be lucky to help 25 people. “All of a sudden, my personal limitations dawned on me,” he says. “And I had a fast-forward vision in living color—like I was in a trance. I saw myself in the bottom of a grave. And people were standing around. And one guy said, ‘He was a nice old doc, and he helped our community.’ ”.Here, as Sawalich makes some final let’s-move-this-along gestures, Austin smacks his hands together. “I was out of the grave like that. I knew what I was gonna do. I dropped out of school and started the business. ... It was our destiny to become the leading provider in this field, because we were doing it not for money but to serve people better. And that was the goal every day. And I got a little derailed with foundation work because I thought poor people needed a chance. So I was traveling the world for years.”.At this point, he’s no longer just going through his bio. He’s talking about the troubles—the events that nearly destroyed his company..“Now we’re back on it,” he says. “The whole thing got distorted from my vision into a different vision. Now we’re back having fun, doing what we like to do.”.Starkey was already famous in Minneapolis for its annual gala, a glamorous party that attracts A-list celebrities to the Twin Cities every summer to raise money for the foundation. But the indictments announced by U.S. Attorney Andrew Luger on Sept. 21, 2016, raised the company’s profile even higher. Five perps, including Ruzicka and CFO Scott Nelson, were charged with conspiring to steal more than $20 million from the company and its owner. Ruzicka and W. Jeff Taylor, former president of a supplier to Starkey, were found guilty. Ruzicka was sentenced to seven years in prison, Taylor to 18 months, and Nelson, who cooperated, to 24 months. Ruzicka and Taylor are expected to appeal..He stared at his longtime president and asked how much he’d taken. “Jerry ducked his head and said, ‘About $10 million,’ ” Austin told the court.Austin honestly seems madder about time lost than about close friends stealing from him. He says he sometimes wondered why innovation wasn’t happening at the rate he expected, but he trusted the people running the company while he was traveling 200-plus days a year for the foundation. In retrospect, there were signs of trouble. “It was hard to get things done,” he says. “I’d tell people, ‘We can do this.’ They’d say, ‘We can’t do that now. We’ve got too much software backlog,’ or, ‘It’ll take a year.’ I thought, Well, that’s just the way life is.”.In July 2015, Austin got word that Ruzicka had been approaching employees about joining him in a hearing aid company he was planning to start upon leaving Starkey in 2016. “I just thought, That isn’t right,” Austin says. Austin doesn’t do email or even know how to use a computer, but he asked a few trusted employees to take a peek into Ruzicka’s corporate email, and this quiet investigation revealed more skulduggery. Ruzicka wasn’t just recruiting employees to join a company that would compete with Starkey; he seemed to have been stealing. “It was like pulling on a string and unraveling this unbelievable chain of things that I had no idea I was going to find,” Austin says. Among those things were bonuses disguised as insurance premium payments, evidence of payments Austin knew he hadn’t authorized—including one for $2 million to the guy running the company’s small, unprofitable retail operation—and even the theft of a company car..By Sept. 8, Austin had seen enough. He summoned Ruzicka for a meeting. There’s audio of this. Austin secretly recorded it, and it was played in court. “You know how much time I’ve spent studying you, Jerry,” Austin says on the recording. “I tried to dismiss all of this. ... Well, it wasn’t very brilliant.”.Later that day, Austin met Ruzicka again, for dinner. He stared at his longtime president and asked how much he’d taken. “Jerry ducked his head and said, ‘About $10 million,’ ” Austin told the court. In fact, it was almost $19 million..Austin fired Ruzicka, Nelson, and several other key executives, then referred the matter to the authorities. “I couldn’t really investigate any further. I couldn’t get bank records. So I just turned it over to the FBI, forgot about it, and went back to work,” he says..Austin claims to hold no grudges. He feels sorry for Ruzicka, he says, but happy for the company. “Because of this, we had to make a lot of changes to get to where we wanted to go,” he says. “We brought in new people that we needed to go to the level that we’re going to. I’m not complaining about what happened.”.He says he’s not even angry about the ugly trial. “I’m not running for political office. I’m not running for sainthood. They can say anything they want. I knew they had to do anything they could to save themselves from going to jail. I probably would have gone along with it, too.”.Starting on Feb. 9, 2018, Austin spent three days on the stand, much of that time helping the prosecution lay out a complicated and often boring fraud case. But when the defense took over for cross-examination, things took a turn..The defense attorneys hammered away at his character. They accused him of establishing residency in Texas to avoid taxes. They introduced a $66 million settlement he’d reached with his second wife in 1988. They asked him about “lick ’em and stick ’em,” audiologist shorthand for using saliva to lubricate a hearing aid before inserting it—something Austin did regularly, Miller’s attorney suggested, including on his client..“It’s not a frequent habit,” Austin replied..“Well, it’s a grotesque thing for you to do anytime, wasn’t it?”.“That’s your opinion you’re entitled to,” Austin said..Another attorney asked if it was true, as Austin claimed in an interview, that the archangel Michael took over his body and spoke to a young boy in Toluca, Mexico, in 2011..“I do make that claim,” he replied, calmly..Austin talks openly of receiving visions through the years, as well as receiving directives in answer to his prayers, such as one he got in 1980. “I was told it was not about hearing aids,” he told the courtroom. “It was about reflecting [God’s] love for his people, and hearing aids were the vehicle that I could use.”.Sawalich was also a major focus of the defense attorneys’ cross-examination. Some of it was salacious, especially the assertions by the former CFO, Nelson, that Sawalich had multiple affairs with underlings, which he denies. But a good portion of the defamation focused on Sawalich’s qualifications to lead Starkey, which is a peculiar line of inquiry in a fraud trial where he was neither victim nor accused..“He was made president because he was the stepson, the son of his wife,” the attorney said. “Isn’t that true?”.“I believe that to be true, yes,” Nelson replied..When I ask Sawalich about this assertion, he bristles. “You can either do this job or you can’t,” he says. “And Starkey is Bill’s baby. He’s not going to hand it off to just anyone.”.For Austin, it was just another thing to take in stride. There was never a master plan to install his stepson, he says, but a situation arose, and he rolled with it. “Brandon’s done one hell of a lot better than I would have thought he could,” Austin says. “I really applaud him for not being the genius himself, but putting together a team, knowing that he needed all of these different attributes to make this thing go. ... Jerry was running it like a dictator. Everything funneled back to him.” Sawalich, on the other hand, “just coordinates the team. He’s like a coach.”.Everyone at Starkey seems to agree that the most important thing Sawalich has done as president is hire Achin Bhowmik as chief technology officer. Bhowmik’s previous job was in Silicon Valley, running Intel Corp.’s Perceptual Computing Group, a vaunted unit of 1,400 engineers working on autonomous intelligent systems—such things as self-navigating robots, drones that can fly themselves without hitting trees or wires, and facial recognition cameras..When Starkey was courting him, Bhowmik flew to Minneapolis for a full day of interviews. He was in the first meeting when Austin barged into the room and commenced conversing with the new prospect. They didn’t stop talking for hours..“Mr. Austin said, ‘I looked up your work—perceptual computing, that’s pretty interesting,’ ” Bhowmik recalls. “ ‘Do you realize there might be an opportunity to use the same advance technologies to help humans?’ ”.Bhowmik hadn’t been thinking about AI in quite this way. At Intel he’d been examining human systems to see how they could be replicated in, say, a car, in the hope that someday that car could drive itself as well as a human could drive it. “Intel’s spending billions on that, and Mr. Austin’s take was completely different,” he says. “He said, ‘Rather than using sensors and AI to make smart machines, why don’t you use them to help people understand the world better?’ ”.On a subsequent visit, over pizza in the basement of Sawalich’s home, Bhowmik and Austin mind-melded again. Austin, he recalls, asked him to “look at the work from two angles.” The first was, “Don’t look at this as just a hearing aid. It’s a platform—a device that could be used to help humans improve their communications.” That’s the deeper meaning of the translation function: It empowers people to talk to one another despite language barriers..“The second part was helping people live better,” Bhowmik says. “His challenge was, could you tap into the most advanced sensor technologies and artificial intelligence to have this device help people live better in ways more than just helping them hear? Of course you could. The ear is the best place for having sensors.”.For the past couple of months, Bhowmik has been wearing a set of Livio AIs even though he has perfectly good hearing. The result, he says, is that he feels a little superhuman. “I can turn up the volume on the world,” he explains. “How cool is that?”.Today, the audiologists visit, and Bhowmik excuses himself to get ready for his presentation to them. Twenty minutes later he’s standing backstage while Sawalich warms up a large crowd of mostly white men. He calls out a few by name. “This is like a family reunion,” he says, shouting out a Scott and then a Bob. “Everyone in this room practically raised me!”.This, he tells them, is a “new and improved, stronger Starkey.” He’s back on script now. “You’ve been with Starkey through thick and thin, through ups and downs. We’re about ready to go on a rocket ride. You don’t ask what seat. You just get on.”.The applause is rousing. There’s even a holler or two. Then Sawalich cedes the stage to Bhowmik, who leads with the meat and potatoes. He describes the artificial intelligence, the state-of-the-art sensors, the 45 hours of battery life. It’s so light and small that the wearer will forget about it entirely..And that’s just the first point..“No. 2: It’s a groundbreaking wearable,” tracking body and brain fitness..“No. 3: It’s an incredible ear-worn language translator.” Here he pauses to acknowledge the murmuring. “Can you believe it? It’s supposed to be science fiction!.“No. 4: It’s a revolutionary in-ear fall detector and alert system.”.Each of these features is enough to move product. Fitness trackers are huge. Who wouldn’t like to hear the words for “I need more wine” in French whispered in her ear? And every 11 seconds, an older adult is treated in the ER for a fall, according to the National Council on Aging. Fifty percent of them die within a year. “Do you think you can sell that value to your patients?”.Around the room, audiologists stir..The next day, they’ll go back to their practices to begin selling the Livio AI to patients. Which isn’t hard. Within just four months, the device will account for 50 percent of all product sales worldwide at Starkey. For 2019, the projection is 80 percent. It will greatly increase the sales of a company that was already very profitable, while proving that not all of Bill Austin’s visions are wacky..Starkey’s founder was watching from a control room as Bhowmik described the thing Austin swears he sketched out at a 1998 engineering summit in Germany. “This is our future,” he told his people then, and 20 years later—with just a few speed bumps and one failed palace coup—the future finally arrived..To contact the editor responsible for this story: Daniel Ferrara at dferrara5@bloomberg.net.©2019 Bloomberg L.P.

The Future of Wearable Tech Is Called a Hearing Aid

Starkey Hearing is now pitching the world a hearing aid for people who don’t need hearing aids.

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