It's amazing how quickly the winds of the internet shift to absolutely condemn a person/company before all (or any) of the facts are in. The world is a better place when we all extend a benefit of doubt to our fellow humans and there creations.
A journalist might have become interested in a story early, and his immediate collegues then followed once it started picking up steam, for example. It's a bit like why a university might develop expertise in a new field faster than others.
It's possible that that initial interest came from outside influence of a competitor, but it's also reasonable to suspect that it was an honest skepticism from a journalist. After all, it's not hard to be skeptical of the many startups popping up these days.
"If it bleeds, it leads." True life drama and gossip (for lack of a better word) has always sold papers.
Overvaluation effects us all, these hundreds of millions drive up my rent, your rent and could be better allocated to other startup ventures.
Sensationalism sells. There are both good and bad reasons behind that truism. At the moment, the publishing industry is in crisis. I see no reason to look any further than a dire need to increase sales as "motive" for a particular publication apparently revisiting this particular on-going drama repeatedly.
My sister was a journalism major in college. She was significantly involved in the school paper in high school and was awarded a journalism scholarship that helped pay for her college education. She went on to do other things and is not a journalist, though an early job of hers did involve working on a publication. I also had a class in journalism in high school (where I was disliked by the teacher for failing to be enough like my older sister, whom he had adored as a student and contributor to the school paper) and I was State Alternate for the Governor's Honors Program in Georgia in the subject of Journalism when I was 15. So, I got my toes ever so slightly wet in journalism in my teens, then, I also went down some other path instead of becoming a journalist.
I assure you, my remarks are in no way intended to be an attack on journalists.
What is baffling to me is unless the data was doctored why didn't any one of the medical consultants or partners bring this up sooner? Why did it take a deposition to reveal this? I'm sure whistleblower protections would have been provided to anyone working there with this knowledge who chose to make it public.
Outside of direct "I physically see this patient", people can forget they work in medicine where their answers can mean life or death decisions.
In that situation people end up not wanting to bite the hand that feeds.
When you have automated stuff that has high throughput with little or no human interaction, you seriously limit the opportunity for humans to raise questions.
Between taking a pay cheque and whistle blowing, the large majority of people will always not rock the boat and take the money.
From the Vanity Fair piece which brought a lot of this house of cards into the public light, it's mentioned that the teams were hyper-segmented and the secrecy even pervaded the organization. Nobody really knew what anyone else was working on.
There are those who want to be part of the team and there are those who can really play on that feeling. Then there are those who just want that buck.
in medicine, you need to be reviewed and mostly provide proof of your methods and results etc, just to publish a single paper.
Are you saying that investors are willing to not only be fooled, but give millions to the one who is fooling them without even checking if their claims are real? Sounds less like investors and more like gamblers tbh.
I don't understand why investors should be absolved from responsibility.
Edit: Also, how can people be that stupid? You have to know the truth will eventually come out? Right? Or, no?
I don't get it.
This is a one-sided filing by one party to litigation, and we will respond at the appropriate time in the appropriate forum. We disagree with much of what PFM alleges in its complaint. This is not, however, the time or place to contest their mischaracterizations of the record. We will litigate this case in court, where it belongs. What we will say now is that the items on which PFM focuses have nothing to do with why PFM invested, and they amount to a repackaging of allegations the media have already reported for nearly two years.
As for the tender offer: As previously disclosed, Theranos is in the midst of a tender offer involving its most significant shareholders. Elizabeth Holmes’ use of her own shares to recapitalize our C-2 and C-1 investors—and thereby prevent dilution to our other shareholders—is consistent with her longstanding, personal commitment to doing the right thing for the Theranos shareholder base. This tender offer has been in discussion between Theranos and its shareholders since July 2016. To date, more than 99% of C-2 and C-1 investors other than PFM have chosen to participate.
PFM, a multi-billion dollar hedge fund, opposes the transaction, and is asking the Court to stop the tender offer because it is “unfair” specifically and only to PFM. In response to PFM’s suit, the Court suspended the tender offer for a month in order to permit sufficient time for the court to review the transaction. PFM’s effort to enjoin the tender offer is meritless; their legal theories are self-serving and would harm the rest of the Theranos shareholders. The Company is vigorously opposing PFM’s new suit and looks forward to completing the transaction with its shareholders.
From: https://techcrunch.com/2017/04/21/theranos-says-it-has-been-...
There will never be enough popcorn for the Theranos saga.
Uh huh. That's why the offer comes with a "you agree not to sue us" clause, I'm sure.
One of Silicon Valley's problems continues to be that there is so little pressure to build a profitable business from early on. It's the exact opposite, they overwhelmingly encourage reckless behavior to chase growth over profit, resulting in almost exclusively extreme binary outcomes (as desired by the VCs).
It's pretty damn easy to create a fictious $100 million transaction with other insiders, then gloss over the details on the balance sheet.
Also, some reviews here are amusing and frightening:
https://www.glassdoor.com/Reviews/Theranos-Reviews-E248889.h...
Just the law of nature ... :)
I predict the next one will be Hampton Creek, given the criminal probe into their fraudulent buy-back scheme.
Neither Zenefits nor Uber meet that definition. Uber particularly isn't even remotely close to it. Unless you consider a company still holding a ~$50 billion valuation, with $9 billion in cash + credit line, chasing down $10 billion in sales for 2017, a total collapse.
[1] http://nymag.com/selectall/2017/04/theranos-staged-fake-bloo...
Holmes?
Several people -- her professor? I forget -- warned her the blood test wouldn't work, even before she dropped out.
http://facebook.com/l.php?u=https://www.wsj.com/articles/the...
Theranos running fake tests is just another example of the type of charlatans enabled by socioeconomic lineage.
> Theranos plans to offer investors shares in the company in exchange for them not filing lawsuits against the embattled blood-testing company.
How far removed can you be from reality to even think like this?
Theranos,Enron,Volkswagen scandals are just some of the way too many to count scandals that damage citizens.
To get a contract, Bob Noyce claimed for a buyer that Fairchild could produce & deliver a new type of transistor, in a large quantity, without having any production capability for it yet, as it had never been built.
Excite bid on getting a place on Netscape's browser, before having the money to actually pay for it (they figured they'd get it afterward):
http://bnoopy.typepad.com/bnoopy/2004/09/persistence_pay_1.h...
Microsoft on multiple occasions said or implied they had something they didn't have at the time, in dealing with MITS and IBM.
There is value in that philosophy in some respects, but claiming that your medical tests are real and reliable when they are not most certainly does not fall under that particular umbrella.
I am a little fascinated with Theranos because it seems like more employees (vs just leadership) seemed to be aware of, or participating in, the deception.
Almost makes more sense in the Enron case, as the people committing the fraud all had so much more to gain.
You have to know, but psychopaths usually don't.
In an equities market defined by quarterly profit statements, "eventually" is far enough away to be irrelevant. The reason this sort of thing happens again and again is because it works -- as the company disintegrates in a blizzard of accusations, the principals safely descend on golden parachutes.
People quite often think they can get away with things that, it turns out, they can't. The fact that something is true does not mean that people must believe it.
This guy got 6.5yrs in prison for defrauding investors by making it appear the company had value it actually didn't: https://www.law360.com/articles/892055/broker-gets-6-5-years...
It's difficult to find other examples as most investor fraud is based on directly milking investors with obviously false claims.
For example, this SF startup founder lied about being close to acquisition and never handed over shares in the company in return for money: http://www.mercurynews.com/2014/02/20/san-francisco-startup-... that's more directly fraudulent.
The Theranos thing might be more difficult to prove as it's possible the technology was somewhat legitimate but clearly if sharing the fake test data was a critical part of them investing, then it might be much the same.
The early investors who bought into just the idea may not have any claim. But any later investors who invested based solely on claims made with falsified test data may have a claim against the company/her.
Seems like there sure should be.
https://www.washingtonpost.com/news/post-nation/wp/2017/02/1...
What an abomination. 8 years in prison. They should really pat themselves on the back.
I bet $1000 if this lady committed the same crime in NJ, she wouldn't have faced any prison time.
That certainly sounds like a miscarriage of justice, but not really a sensible point of comparison. It's an entirely different domain of law. And even if it were apples to apples, a random green card holder vs an American tech billionaire will get vastly different treatments and outcomes in the American justice system (which is bad, but simply he reality).
> So will Holmes go to prison?
I would bet heavily against it. Holmes maintained panoptic control over all of Theranos's operations (until she was barred from operating labs, presumably), so it seems very unlikely that definitive evidence of fraud will surface from within.
Also, I imagine that the US regulatory bodies that started actions against Theranos in the past two years are or will soon be... significantly less disposed to vigorously pursuing criminal charges, especially of the kind that would assign personal culpability to corporate management.
But when Elizabeth Holmes burst upon the scene, she just seemed too good to be true - gee, you're an original, off-the-wall thinker and innovator and you're a goody-two-shoes workaholic of the kind MBAs and investors fantasize about? Nah.
My sister is very much that hard worker/high achiever personality but she's intellectually very conservative and compartmentalized. There's absolutely nothing wrong with this - indeed it's part of what makes her good at her medical profession - but innovators usually also demonstrate a playful streak and a tolerance for failure rather than needing to be perceived as perfect.
I wonder if this apparent fraud will result in criminal prosecution. It would be a sad end for la Holmes to matriculate at San Quentin.
Silly little things like "truth" or "integrity" are just distractions. . .
Holmes is the MBA part of the team.
With software there very much more tends to be a direct map between requirements and the solution. It's definitely 'work' which should have some protection but not to the extent of copyright or patents.
Point to make. With a software company if you have a half decent marketable idea, money, and competent people to execute, you have a business. Because the engineers can make the software work. Maybe it's profitable, maybe not so much, but the result is real.
Biotech? Nope. High high chance that your engineers will hit a wall and not be able to make the idea work. And then you have nothing. It sounds like Theranos built a biotech company like as if it were software company and lied when they hit the wall.
I am willing to bet she wouldn't be charged jail time for more than six months. She would have enough contacts and money to may be totally avoid it.
- that an entire industry has been doing it wrong
- that it can be fixed by a low-bureaucracy, Angel-funded startup
- that once you have enough success you can just rewrite the laws that were slowing you down
- that no one knows what they're doing anyway, major projects are 100% guesswork, and you should just "fake it till you make it"
- that any skill is just a matter of 10,000 hours of practice
- that you can outsmart an industry before even passing or placing out of sophomore level classes
- that any self-doubt must be Impostor Syndrome, and so it's not worth your time to even check if that doubt has a factual basis
That's why I'm somewhat more irritated about reading about an apparently very worthy electrical VTOL aircraft project featured on here boast of an apparently purely-hypothetical "300km range" on its website as if other engineers are just idiots for thinking battery weight might prevent that than I am about actually writing marketing material for people that have a lot more ability to solve problems than customers.
What does that have to do with Silicon Valley VCs intentionally forcing extreme binary outcomes because they are willing to burn down 98 companies to get 2 huge homeruns? There's no debate to be had, we have a lot of actual data in regards to the industry, which numerous prominent VC firms routinely publish. We also have multiple bubbles worth of history in regards to VC behavior and the general day to day crunchbase or VC funding news type information. There's a non-stop 20+ year history of Silicon Valley VCs doing exactly what I've described, leaving a vast parade of thousands of dead formerly multi-million dollar start-ups in their wake.
> It's pretty damn easy to create a fictious $100 million transaction with other insiders, then gloss over the details on the balance sheet.
I have no idea what you're talking about or how that pertains to what I said.
I'm just pointing out that in addition to that, insider dealing and cooked books play a greater role in the funny money economy than anyone likes to talk about.
Just because VC have money doesn't necessarily imply they are more rational or better thinking. Everyone involved here wanted this to be real and true. So while on paper due diligence was done, unconsciously nobody wanted to lift the curtain too much and peek what's behind.
This is also very common with software testing. Often when developers are testing their own software, they are not very good at discovering bugs and so they end up in production. This happens because even though rationally they want to ship a better product, irrationally it is hard to get into a mentality of proving that the product you just sweated months on is broken, or bug ridden or unstable and so on. So tests are written but they are written to show make them pass and show that stuff and unconsciously avoiding the trick or edge cases that would reveal brokenness.
But it bothers me that many of the questions that end up being unanswered are typically some of the more fundamental questions I ask.
They don't, especially in SV. Several of them have written about this. Beyond some cursory checks, they don't do much since it's often too expensive and time consuming to investigate every possible deal. A strong team with good connections and referrals is usually enough.
> In the past year and a half, the grandson and grandfather have rarely spoken or seen one another, communicating mainly through lawyers, says Tyler Shultz. He and his parents have spent more than $400,000 on legal fees, he says. He didn’t attend his grandfather’s 95th birthday celebration in December. Ms. Holmes did.
> “Fraud is not a trade secret,” says Mr. Shultz, who hoped his grandfather would cut ties with Theranos once the company’s practices became known. “I refuse to allow bullying, intimidation and threat of legal action to take away my First Amendment right to speak out against wrongdoing.”
https://www.techdirt.com/articles/20161117/15475936076/thera...
The problem is unfixable because it's a complete fraud. There is nothing. They're holding the fort for as long as possible, and it's amazing they've been able to hold it for so long.
a legit company will only go to certain extent to defend. They can still survive.
An illegit company will go all / full lengths to attack and defend. illegit company life depends on this !
https://www.techdirt.com/articles/20161117/15475936076/thera...
One might imagine what they'd attempt if he wasn't related to a boardmember, or if his parents didn't have $400K for legal fees...
Stanford students are generally sheep that know one thing for certain: That they are smart enough to get into Stanford and that they now have pretty much zero excuse to not be successful.
They assume that other things (vision, relentless lifelong obsession) are means to ends. It is a fertile breeding ground for what Trungpa Rinpoche most accurately describes a "Spiritual Materialism"
Their logical conclusion is that the key to success is not relentless pursuit of practice, but rather playing tricks like the ones you describe.
Bob Noyce, Bill Gates, Marc Andressen all succeeded as a result of their passion and relentless dedication to a narrow problem space over years of effort. They saw "the truth" and thus were able to make those leaps. "Truths" are always present in every society ... and are hidden. Unfortunately it requires dedication to uncover such truths and most stanford students would rather re-use the same hammer that got them into Stanford on real life than to truly seek "truth".
That's my 2 cents.
EDIT: I can see how this was condescendingly phrased and discriminatory towards a large group of people. We should all note that the person who outed Ms. Holmes was also a Stanford student and did something very brave. I was just annoyed with seeing this pattern everywhere and even partaking in it myself -- something that impacted me very negatively.
Let's also not forget that she pursued a vision that was severely flawed, no different than many college students today even. She made a lot of mistakes that many of her peers made at the same age. She's just really unlucky at this point.
She did not graduate. She dropped out.
I also dropped out of college at a young age, but not to defraud the world in an effort to become a billionaire. So, this is not intended to suggest being a drop out is inherently bad.
#JustTheFacts
minorities sell 5 oz of weed: '25 years in prison'
Colleges need to hold learning to the highest regard ... Holmes was constantly invited as a speaker to campus before she became disowned.
Look into Clinkle if you want another example. Kids are obsessed with getting rich quick and glamorizing that behavior and spoon feeding it back to them is a recipe for disaster. Snapchat is another example!
Institutions of learning and knowledge need to emphasize and glamorize that. Often times Professors themselves go to work for these companies ... the intellectual elite should feel that way about themselves: elite in their knowledge. A snobbish dismissal of material wealth might be exactly what the institution needs.
Arguably, it is not even fraud when Theranos took samples and used a different method of testing (as long as the testing was just as accurate).
Therano's fraud was then telling investors and potential partners/clients that it had been testing using their test, when they really weren't. That is a lie designed to get additional funding or contracts.
It can be a fine line. Theranos didn't know where that line was.
I've seen lots of misery because of this, both with the inventors themselves, their families and employees. In one case a suicide.
It's very sad and one of the downsides of being in the business I'm in because I have come to recognize the signs of this particular ailment fairly quickly and it is a huge balancing act in both convincing my client not to invest while at the same time not pulling the rug out from under a quite possibly already unstable person.
Fraud can be intentional, or it can be the consequence of someone genuinely believing their own misguided version of reality, usually powered by some form of 'wouldn't it be great if' and associated lines of thinking.
Even so, Theranos - to me at least - seems to have crossed over into outright fraud from very early on in their lifetime. There were significant questions about the tech early on and without a good answer to those the project should have never moved as far as it did without some serious caveats about what they believed to be possible and total transparency about what had actually been achieved.
For a nice example of how gullible people are check out the Ilium thread on the homepage right now, it's a great example of how wishful thinking can cause investors to part with their money:
https://news.ycombinator.com/item?id=14167870
uBeam is another, so far they produce roughly two ecstatic press releases per year but there is no product in sight.
Did Excite sign a contract saying that they had the funds to pay in the case of winning the bid? I don't know the answer to that, it wouldn't be an uncommon requirement when bidding on a contract like that however.
Microsoft almost certainly lied on multiple occasions about what they already had, in trying to get MITS and IBM to take them seriously. The common historical story goes that they did lie - just how the wording went, who knows, they were clearly being intentionally deceptive regardless to capture the opportunity.
The former is a gamble, but it may be an informed gamble where you already have some idea of how to make it happen. The latter is a lie.
Startups absolutely should be operating in the realm of "It has not been done, but we think we can pull it off. In fact, we are pretty confident of that." They should not be operating in the realm of outright con artistry and fraud.
If you have the right experience, skills, education, personal assets of various sorts and solid mental models, predicting your expected success in a specific domain does not guarantee you will succeed. But it isn't necessarily just BS either.
The challenge is for other people to know which category you fall in. But you should know whether you are genuinely confident or straight up conning people -- barring serious delusion of some sort.
Even if they were part if a very very small minority that did (if any exist), it would be hard to test for legally I'd imagine.
We judge people by their pasts, in extreme old age this is no longer applicable.
I do think it's a little sad the obvious has to be pointed out.
If not now, in the future you will have to deal with people getting old, hard truths will have to be dealt with at some point.
It's quite true that testing their mental faculty would be a challenge. Therefore the decision could simply lie with other board members based on their observations of his behaviour and the direct contributions he makes to the company.
But if I looked at Theranos, I wouldn't have any idea what I'm looking at. We all have our own brain structures that set up our respective abilities to call BS: part of this is understanding the psychology, as you (jacquesm) do. This gives the background to not take claims at face value.
The other part of BS-calling is that structure of experience telling us things like 'center of mass for the object will be here' or 'adding 20 more people to this dev team will have this effect on their ability to coordinate development'. These are heuristics that might be more difficult to explain than to be directed by, but in practice they'll tend to function like iron laws: if an exception is ever found it's a huge deal. The trick is getting people to accept the iron law without the structure of experience to support it.
For public companies, this is what results in "forward-looking statements" boilerplate. But it happens all the time in technical presentations.
I try to call people on it, but sometimes it's a losing battle.
We need better ways to talk about and think about and measure the difference between those two things. The difference can be the difference between brinkmanship and outright fraud.
Of course poor students are less likely to get accepted because of less access to private tutors and other support.
I'm willing to bet the poor students on financial aid aren't such entitled misogynistic douchebags as the rich ones [1] who go on to found companies that are "only for rich people".
Many capable high school students are not even aware that schools like Stanford exist, and cannot even begin to conceive what acceptance into such a radically different world would even mean. I surely didn't. It is also possible that those students who are aware, and do aspire to receive this aid, have family members who actively sabotage their efforts.
This is a real problem not only for the rural youth essentially cheated of opportunity, it is also a problem for a nation missing out on untapped talent.