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Vanity Fair Blames The Failure of Theranos On Silicon Valley (vanityfair.com)
"I was only a day or two behind FBI agents who were trying to put together a time line of what Elizabeh Holmes knew and when she knew it," writes Vanity Fair, in what Slashdot reader PvtVoid describes as "a compelling story of hubris, glamour and secrecy about the unicorn Silicon Valley company that turned out to be founded on bullshit." Another anonymous Slashdot reader writes:
Holmes raised $700 million "on the condition that she would not divulge to investors how her technology actually worked," according to an article detailing how Silicon Valley can "replicate one big confidence game in which entrepreneurs, venture capitalists, and the tech media pretend to vet one another while, in reality, functioning as cogs in a machine that is designed to not question anything -- and buoy one another all along the way... In the end, it isn't in anyone's interest to call bullshit."
Theranos employed "hundreds of marketers, salespeople, communications specialists, and even the Oscar-winning filmmaker Errol Morris," as well as a chief scientist who eventually became suicidal. But then the Centers for Medicare and Medicaid Services "discovered that some of the tests Theranos was performing were so inaccurate that they could leave patients at risk of internal bleeding, or of stroke among those prone to blood clots." A reporter at the Wall Street Journal says "It's O.K. if you've got a smartphone app or a social network, and you go live with it before it's ready; people aren't going to die. But with medicine, it's different."
He became suspicious after reading the answer that the company's CEO, a Stanford dropout, supplied for a question about their technology. "A chemistry is performed so that a chemical reaction occurs and generates a signal from the chemical interaction with the sample, which is translated into a result, which is then reviewed by certified laboratory personnel."
Theranos employed "hundreds of marketers, salespeople, communications specialists, and even the Oscar-winning filmmaker Errol Morris," as well as a chief scientist who eventually became suicidal. But then the Centers for Medicare and Medicaid Services "discovered that some of the tests Theranos was performing were so inaccurate that they could leave patients at risk of internal bleeding, or of stroke among those prone to blood clots." A reporter at the Wall Street Journal says "It's O.K. if you've got a smartphone app or a social network, and you go live with it before it's ready; people aren't going to die. But with medicine, it's different."
He became suspicious after reading the answer that the company's CEO, a Stanford dropout, supplied for a question about their technology. "A chemistry is performed so that a chemical reaction occurs and generates a signal from the chemical interaction with the sample, which is translated into a result, which is then reviewed by certified laboratory personnel."
the signal is to NOT invest in this company.
Scott Adams (of Dilbert) sent two samples for testing and they came back with different results. It seems the scam was very very easy to detect.
Venture capitalists are mostly scammers. They buy into a *plausible* startup, regardless of the reality. One of the other sister companies they invested in, then buys a stake in this new one. Usually a tiny stake at a hugely inflated price. This gives the new startup a super ridiculous valuation based on that tiny sliver of stock. They head for an IPO based on this fake valuation and the crap stock is dumped on the stock markets and sold to unsuspecting investors. VC exit at a big profit.
The company isn't the thing they're investing in, it's the scam IPO, and that has more to do with the designer clothes the CEO wears than technology it makes.
Do you remember Groupon? Or Zygna?
A groundbreaking woman! It's about time! A woman who is a CEO and doing something super smart that no one else can!
The only reason this scam worked is because there's plenty of social justice warriors who very badly wanted to believe it. It's a religion, and this is just a clever priestess who fleeced her flock.
If the area was full of people who believed the rapture was nigh, she could have fooled them in a different manner.
The title of this post has nothing to do with the article or even the summary. From the Slashdot summary She built a corporation based on secrecy in the hope that she could still pull it off. Then, it all fell apart. The company did not fail because of Silicon valley secrecy, it succeeded because of it. I'm used to Slashdot summaries not matching the article but the title not matching the summary? That's an amazing new low.
Another freshman takes Economics 101, and misunderstands everything. Thanks for sharing your inadequacies with us.
Definitely yet another case of GamerGate targeting a successful female CEO. They did exactly the same to Brianna Wu.
-- Using the preview button since 2005
Even though in the article should focus on how an individual managed to swindle so many and how to avoid it in the future, it can't help to mention without any reason and out of any context that tech people and venture capitalists in the Valley are "white man".
I suppose it depends on whether you consider Theranos a successful scam that could only happen in Silicon Valley, or a massive failure which could only happen at that magnitude in Silicon Valley.
I suppose it depends on whether you consider Theranos a successful scam that could only happen in Silicon Valley, or a massive failure which could only happen at that magnitude in Silicon Valley.
I think it is entirely possible it is both a failure and a scam. Wouldn't surprise me at all if it started as an honest effort that eventually failed and turned into a scam. Some of the nuances are unique to Silicon Valley but from a big picture perspective it's a story that has happened before and will happen again. Charismatic CEO builds company and raises lots of money based on product that either couldn't or didn't work and eventually resorted to fraud. Nothing new in that story and it could have happened almost anywhere.
The real failure is the investors who failed to do their due diligence before putting their money down. This is EXACTLY why we insist on patents and public disclosure of how medicines and therapies work before making them public. It's why we have government oversight in the form of the FDA. People want to believe in miracle cures and amazing technology and we have some remarkable achievements in medicine. But quackery is a real thing and there are people who are very willing to literally let credulous or innocent people die to make money.
I would blame what little success that Theranos enjoyed on Silicon Valley. But when it comes to the failure of Theranos, the culprit is simple: their business model was based on technology that doesn't exist.
I wonder if PT Barnum's family consider their infamous ancestor a failure...
not analogous at all really. lives weren't dependent on the result of the "thrill" people got from viewing Barnum's exhibits.
Lives were most certainly at risk from Holmes' bullshit
It should have been obvious to anyone with less than a high school education if someone is asking for hundreds of millions of dollars to NOT reveal how something is done, that is a red flag.
But nope, the VCs were more than willing to hand over money to an unknown person offering an unknown procedure without having to show how said product works.
From the day I heard about Theranos I knew it was a fraud for the simple fact they never revealed how their tests worked, never submitted to any government-approved testing and never allowed anyone else to try and replicate their work.
If that doesn't scream fraud, nothing does. With any luck Holmes will have to personally repay all the money she swindled from people, then go to jail.
To use an old D&D quote: Apparently they're letting anyone into the thieves guild these days.
We will bankrupt ourselves in the vain search for absolute security. -- Dwight D. Eisenhower
oh fuck off with that gamergate shit
Blaming the "Failure" is a bit misleading, the reason it failed is because it was allowed to exist with highly inflated or even non-existent prospects... failure was inevitable, existence was not.
I would blame what little success that Theranos enjoyed on Silicon Valley. But when it comes to the failure of Theranos, the culprit is simple: their business model was based on technology that doesn't exist.
I wonder if PT Barnum's family consider their infamous ancestor a failure...
not analogous at all really. lives weren't dependent on the result of the "thrill" people got from viewing Barnum's exhibits. Lives were most certainly at risk from Holmes' bullshit
The infamous "greater good" measure used across the entire spectrum of approved medicine in use today most certainly puts lives at risk. We gamble every single time we hope to not have a fatal or life-altering side-effect from a single drug, or a prescribed cocktail of them. Lawsuits are fought and won against bad medicine all the time.
Not saying Theranos wasn't grossly negligent here due to outright lying. They are. Just pointing out the fact that we assume risk all the time in medicine, which current law allows deaths to occur, as long as it can be measured within the acceptable spectrum.
But nope, the VCs were more than willing to hand over money to an unknown person offering an unknown procedure without having to show how said product works.
While it certainly is possible for a VC to make a mistake when evaluating a company this is kind of the most shocking thing to me. I have close friends who are VCs and when making an investment the first thing they do is to do a LOT of due diligence. If they aren't domain experts in the technology themselves they call in someone they trust who is a domain expert to review the technology. They certainly don't make investments in companies who refuse to disclose to them how their product actually works. That doesn't mean everything will work out but I've never seen a VC personally who would hand over a large check no questions asked.
So we're left with two options. Either the VCs in this instance were reckless fools who invested in something when they should have known better OR they were complicit in the fraud and didn't care. I've seen enough VCs investing in idiotic ideas to believe that it could have been greed/recklessness but it's hard to tell the difference without more information.
1. It (mostly likely outcome) would not have been created in the first place, making it neither a success nor a failure.
2. It might have given up on the scammy aspects, and adopted technologies that worked, self developed or just current industry standards. In that case, it would have had a fighting chance.
It is a failure by any reasonable definition of the term. It produced a product so bad it was shut down and the entire organization is facing both billions in civil penalties, and criminal charges.
If it's not a failure, then Enron and Bernie Madoff aren't either.
You are not alone. This is not normal. None of this is normal.
"Holmes raised $700 million "on the condition that she would not divulge to investors how her technology actually worked,"
Can you imagine how many perpetual motion machine creators would love to get some VC using this same "condition"?
Do you have ESP?
As it's likely the most succinct explanation of Libertarianism I've ever seen, I'll quote it at length, rather than even paraphrasing: "Hardcore libertarianism is a fantasy. It's a fantasy where the strongest and most self-reliant folks end up at the top of the heap, and a fair number of men share the fantasy that they are these folks. They believe they've been held back by rules and regulations designed to help the weak, and in a libertarian culture their talents would be obvious and they'd naturally rise to positions of power and influence." http://www.motherjones.com/kev...
The whole reason that the patent system replaced trade secrecy is that in return for a specified period of exclusive use an inventor has to reveal how his device works. Theranos treated its process as a trade secret, which should have been a red flag to any investor to not chuck his money into an unknown technology. The Silicon Valley VC culture just got pwned.
Silicon Valley went along for the ride. The person responsible for the whole thing is Ms. Holmes, who is nothing but a scammer.
Not at all. Libertarianism is concerned with whether people are "held back" or "rise to positions of power. Libertarianism isn't concerned with maximizing economic output, or making the economy work well, or any of that other crap.
Libertarianism is concerned with freedom, namely the freedom of deciding how you live your life, it's as simple as that. Progressives, fascists, and socialists believe that a bunch of politicians know better than yourself what you need to learn, how you need to live your life, and what jobs you need to take. That seems attractive to people because making those decisions yourself is hard, and experts often do know better. But if you hand over these responsibilities to government or to experts, you have ceased to live in a free society; furthermore, while the people you put in charge of yourself might in theory be able to tell you how to improve yourself, in practice, they simply don't care about what happens to you, they are driven by their own self interest.
Talking of Vanity Fair am I alone in finding it significant that it is a publication that largely concentrates on entertaining copy on celebrities and lifestyle issues which has recently repeatedly published fairly hard core investigative journalism. How come the so called heavyweight "broadsheet" publications sound like echo chambers for various vested business interests these days and could not publish a challenging piece of investigative journalism to save their lives?
Great job Vanity Fair! you are now on my must read list.
Facts are history now plebs have politics for religion on social media.
No need. When Henry "NWO" Kissenger is on your board, you know it's a CIA op to build a DNA database of all Americans (those who didn't give to 23andme before their records were siezed by the FDA). Nice that it failed though.
Silicon Valley went along for the ride. The person responsible for the whole thing is Ms. Holmes, who is nothing but a scammer.
You will rarely find a scam this size where just one person is responsible. What about the engineers who HAD to know that the whole thing was bullshit (or were incompetent if they didn't)? How about the investors who couldn't be bothered to do any due diligence before writing a large check? How about the customers for the product who didn't demand adequate demonstrations of effectiveness before deploying the technology? What about the company management who had to know about the problem but lacked a moral compass?
No, there is plenty of blame to go around. Ms Holmes might be the lead singer in this particular band but she's hardly the only one playing.
FBI: Keep hand away from button!
Holmes: Mwhahahahaha I perform a chemistry on you, make life signal react to chemical stuff! Go away!
Even when the experts all agree, they may well be mistaken. --- Bertrand Russell.
Are you reeeeeally, now?
How many big company execs have you seen that don't know that "when Microsoft Word underlines something in red, it means you probably spelled it wrong"?
As for silicon valley, it is what it is.
A 'startup' is what they call a company with people who have no experience, no real assets and no real product.
Old money stays far away. "Pump and dump" is not a viable long-term investment plan.
Similar to the V2 rockets in the final stages of World War II.
RE: they do say "fake it 'til you make it,"
And that is the whole problem right there in a nutshell.
Society is led and run by the business school marketing mindset of lie first, and keep on lying until your lies have brought you success. Just look at the two major presidential candidates.
And everyone wonders why things suck so much?
But it most certainly would not have received a presumed worth of 9 billion dollars. There are lots of small companies attempting to do ground breaking things. I suspect that the vast majority of them spend most of the time scrambling for capital because research is hard, game changing ideas are few and far between and even if the idea is correct the implementation is damned difficult.
A cute blond in a black turtleneck with Big Daddy Warbucks backing goes a long way.
Faster! Faster! Faster would be better!
You've confused Anarchy with libertarianism.
That's like confusing Hillary Clinton with Pol Pot.
Explaining the difference to you is an act of futility, because you're fully aware of the distinction. You're just indulging in strawman arguments to pretend like your position is superior.
What I like about libertarians is that they're the first to admit their position is imperfect, difficult, and nuanced.
You, on the other hand, could never admit to such a position, because yours requires authoritative control over non-thinking cogs.
It does. She got extra press time, leniency, and forgiveness because she's an attractive female CEO.
Any man would be in prison already.
I've watched investors and buyers do due diligence of technology, and its not particularly impressive.
So have I. Some are very good at it, others not so much. But it seems clear that essentially zero due diligence was performed in this case. If someone came to me with a piece of technology looking for investment, there isn't a way in hell I would fork over the money without full disclosure of how it worked. Most of the VCs I know personally are pretty thorough. Obviously this company knew how to find either patsies or accomplices.
I could easily see how with a few good presentations they could be tricked, especially since technologically-minded people aren't good at looking for scams.
This is true. Engineers and scientists can be among the easiest people to trick under the right circumstances because their minds (generally speaking) do not go naturally to looking for intentional falsehoods. You would think finance people would have clarity of mind to look for the scams but sometimes greed overwhelms clear thought even among the well intentioned. When a lot of people do it that what we call it a bubble. The financial crisis of 2008 was an object lesson in this. So was the dotcom bubble.
Unfortunately, actual people (even Libertarians) continue showing why we need laws and governments. Yes, some people are just too stupid and/or dangerous to manage themselves while not harming others, which is why we have these laws. Freedom is not an absolute value, unless you value above all else the freedom to die in a society that has no rules. Everything else is just a matter of where you put the dividing lines between too lax and strict. Libertarians seem to fail to understand this fundamental point in their arguments, which is why it is so simple to treat them as the bullshit they are. When you get to the bottom of their absolutist arguments, they're just babies crying because they can't get their own way all the time.
That is all.
The rule of law is one of the pillars of Libertarianism, much more than in other doctrines like socialism. The rule of law is the guarantor of individual freedoms or free market. Without it you have anarchy or tyranny.
No no no. People get that wrong ALL the time. Someone set UP US the bomb!
For every investor action there is an equal and opposite investor reaction. And before anyone knew it there were quite a few investors reactions adding up to around $700 million in a corporate bank account. Argueably the woman in charge of this outfit has done nothing illegal, but the jury is still out on her business ediquette. She should come clean now on who knew what and when they knew it to avoid jail time because what does not sit right here is the suicide of the lead scientist whose name and reputation were on the line.
Actually, Vanity Fair has a long history of this kind of article. It is why they have stayed in business so long.
Rolling Stone is similar in that they write a lot of entertainment articles but occasionally have some truly hard hitting articles.
"Someone needs to talk to the tree of liberty about its ghoulish drinking problem." by ohnocitizen
The rule of certain laws is important in libertarianism. Last I read a Libertarian platform, I couldn't even begin to estimate how much money we'd need to extend the court system to make it work.
Libertarians tend to want the government to decisively enforce contract law without paying any attention to any imbalance in negotiating power, meaning that the court system would become a tool of oppression of the poor and unlucky.
"When you have eliminated the unacceptable, whatever is left, however improbable, must be the truthiness" - Holmes
From what patents I've seen, there's the claims section, which is what the patent actually covers, and the description section. I believe the law says that a person ordinarily skilled in the art should be able to create the patented thing from the description, but that doesn't seem to be the case in all patents. I'd love to see patents denied or challenged in court for not including an adequate description.
"When you have eliminated the unacceptable, whatever is left, however improbable, must be the truthiness" - Holmes
Attractive?
APK likes to ask for responses to the same things over and over. Maybe he just likes the responses?
"A great undertaking, nobody to know what it is."
All the fun is in behavioral economics.