10 ms·

Don’t Blame Silicon Valley for Theranos

106 points by hvo 10y ago

koolba 10y ago
If you're a Walgreen's investor, blame their management for not doing the proper due diligence. If you're a Theranos investor, blame yourself for not doing the proper due diligence.
- StavrosK 10y ago
  Both of those can be codified as "blame the person who's one step away from the scammer", though.
  - pron 10y ago
    Was it a scam, though, or is it just another example of "fake it till you make it"? Is there any reason to suspect that Holmes did not believe in her ability to deliver? I mean, it is quite likely that she was delusional, her delusion fueled by her lack of expertise, but delusion is not a scam, and one can argue that delusion is what drives the ecosystem. In addition to the delusion, there was operational mismanagement, but even that is not a scam.
    - Aelinsaar 10y ago
      I think I agree with your assessment more than the "Scam" idea. Granted, the difference between the two in terms of results could choke a mouse, but it is still very different. I think Theranos probably started off as something real, and evolved into something... scammy.
    - untog 10y ago
      "fake it till you make it" is one thing when it's Alexis Ohanian making fake Reddit users to have the site appear busy. It's quite another when you're talking about medical test results...
    - Alex3917 10y ago
      Even if it was a scam, what killed them was technical risk, which is the investors' job to assess. This isn't like if Enron had been starting wildfires to manipulate energy markets or whatever.
    - Spooky23 10y ago
      What Holmes believed is conpetely irrelevant. Science is not based in belief. John Kellogg (of Kellogg's cereal fame) believed that sex and masturbation created all sorts of health problems. Corn flakes and other cereals were bland tasting foods that would supposedly reduce desire and prevent all sorts of disease. He also practiced some more aggressive and harmful "cures". Kellogg was well-intentioned, but his theories were complete quackery. That's why you have the FDA and onerous regulatory process around health related devices, health claims, and medicine.
    - lmm 10y ago
      Does it matter if the person selling you a bridge really and truly believes that they own it? A scammer who believes their own hype is still a scammer, no?
      - pron 10y ago
        That's a good question, but in that case, what is the definition of a scam, and aren't many more SV companies -- even successful ones -- guilty of it? I mean, I don't think that the scaminess of a venture is defined by its outcome. So is it something that is known with certainty to not possibly work? Even then I'm not sure Theranos qualifies. From what I've read (I know nothing about blood tests), experts say that there are tremendous difficulties in performing a blood test on a very small quantity, but I haven't heard anyone say it's downright impossible.
    - st3v3r 10y ago
      How is "fake it til you make it", especially in the context of medical tech, not an outright scam?
- braythwayt 10y ago
  > If you're a Theranos investor, blame yourself for not doing the proper due diligence. Remember that blame is not a zero-sum game. You can accept your responsibility for making a bad investment, while simultaneously identifying the party or parties who set out to create an environment where unsafe medical practices and misleading PR would lead to bad outcomes for patients and investors.
  - wpietri 10y ago
    This is perhaps too far afield, but I think blame really is a zero-sum game, in that people work actively to shift it around, and only stop playing when allocations become set. It strikes me as a very primate thing. I think we can only get people into non-zero-sum behavior when we talk about things like, cause, power, and responsibility. For example, I'd accept no blame here. But I do feel responsibility in a couple ways. As a participant in the Silicon Valley ecosystem, this event will effect me. Even if I didn't make the mess, I'm going to have to help clean it up. And looking back, I think about the power I might have had to cause a different outcome. What if I had spoken up more against the hype cycle? What if I had said more clearly that this was a bubble? I'm only one person, but there were a lot of people who could have spoken up more. If we had done it together, could we have reduced the damage of the bubble? Hard to say, but next time I'll try harder and see what happens. If this sort of thing interests you, you might enjoy Dekker's "Field Guide to Understanding Human Error," which is a brilliant book about airplane safety investigations. I thought it had a lot of applicability in tech.
- deadowl 10y ago
  Placing blame in a business setting is overvalued. Let's all worry about blaming someone for a problem instead of fixing it. It's so much more productive.
  - onion2k 10y ago
    How do you fix a problem if you don't know what the cause was?
    - mbrutsch 10y ago
      Fixing begins at "someone screwed up". Blaming delves into who screwed up, which is usually not required to fix the problem (since there may actually be no one to blame).
      - onion2k 10y ago
        Sometimes that's true. If you have a team of people doing approximately the same thing then knowing which one of them broken something has little value. You just need a process to stop things braking again in the future. But in the case of a disparate group of people who all do different things, you need to know who caused the problem in order to know how to fix it - the "who" and the "what" are the essentially same question. In the case of Theranos the problem of "what went wrong?" and "who fucked up?" are effectively the same - either the investors didn't do proper due diligence or the founders misled them. You can't fix the problem without knowing the cause. It doesn't really matter whether you couch it in terms of "what" or "who"; knowing one automatically informs you of the other.
        deadowl 10y ago
        It's not hard for an organization to put a system in place to mitigate any particular individual from making a poor decision. Entering into any decision that is high-stakes inherently justifies the cost of the existence or creation of such a system. For example, RFP processes are often required for any spending over a particular threshold on external vendors. Hiring processes often include input from more than one person. If the investors didn't do their proper due diligence, then they can take steps to be more responsible in the future. If the founders misled them, then it becomes an economic and political issue of how to address and further prevent such problems.
Spooky23 10y ago
The media deserves some shame. The unabashed and unrelating stream of PR driven horseshit around Theranos was unbelievable.
Amir6 10y ago
So basically (assuming they can not prove to be viable), this means you can cheat your way up to billions of dollars in valuation and there will be many investors who are betting money on things they do not have a clue about, politicians who will be on your board without doubting their knowledge of the matter or your claims and somehow a big corp like Walgreen's follows the hype. Its more like people lean towards trusting others who put their trust again in others and this domino leads to catastrophe.
- fucking_tragedy 10y ago
  Welcome to the world.
- deadowl 10y ago
  Sounds like it could just as well be a case of a bunch of people overvalued perceived business sensibility and ignored technical sensibility, which is incredibly common.
CPLX 10y ago
This is unmitigated bullshit. The firm was launched into its ludicrous fundraising path via her relationship with Tim Draper, the consummate Silicon Valley insider, and even the article points out that the fundraising was pretty much all SV. Just not the right Silicon Valley, you know. This should be in a textbook as the archetypal "No True Scotsman" argument.
- leroy_masochist 10y ago
  I thought the author actually did a pretty good job at parsing the difference between the biotech teams at established VC firms and the people who invested in Theranos, explaining in measurable and falsifiable terms how the former differ from the latter (academic background, require peer-reviewed studies before investing, etc).
  - CPLX 10y ago
    Well yes, that's the fundamental trick of a No True Scotsman argument.[0] The headline reads "Don't Blame Silicon Valley" not "Don't Blame Top Tier Silicon Valley Experienced Life Science VC Teams" This is the article's thesis: "It is tempting to see Theranos as another example of Silicon Valley hype — a company based on a wisp of an unproven idea becomes a multibillion-dollar phenomenon with the backing of pump-and-dump venture capitalists. In fact, however, Silicon Valley’s most experienced investors in start-ups saw red flags at Theranos before anyone else. The Theranos saga shows just how well Silicon Valley does its homework" A corrected sentence could be something like "The Theranos saga, while showing how SV fundraising hype can incinerate billions of dollars, also has a small story involving a few specific guys who know life science who aren't as easily fooled." But they didn't write that. [0] https://en.wikipedia.org/wiki/No_true_Scotsman https://en.wikipedia.org/wiki/No_true_Scotsman Person A: You can't blame Silicon Valley for this Person B: But these people are all Silicon Valley players Person A: Ah yes, but they're not true Silcon Valley players
    - leroy_masochist 10y ago
      I'm familiar with what an NTS argument entails and I continue to disagree. I think the author's point could be restated as, "if you're going to say that what happened at Theranos discredits Silicon Valley, then let's define what we mean by 'Silicon Valley'". Specifically, the author is pointing out that "Silicon Valley", when used colloquially, might mean "Silicon Valley venture capital firms with a track record" or it might mean "any qualified investor calling themselves an 'angel' or a 'VC' who buys private company stock". The difference between the former and the latter is not purely rhetorical, as in the definition of the NTS fallacy; it is, as I mentioned in my previous comment, measurable and falsifiable. And the author is basically saying that people in the former group should not be stigmatized by the failings of certain people in the latter group.
atonse 10y ago
I think the media holds a big part of the blame here. I have never seen a company hyped as much as Theranos. And I fell for it. Now the same outlets that propped it up with astronomical levels of hype, are taking much glee in writing article after article about how fraudulent Theranos was. Is anyone taking these media outlets to task for never actually verifying if the crap they were writing was actually accurate?
- throwanem 10y ago
  Quis custodiet, et cetera.
puppetmaster3 10y ago
Investors don't do DD.
chrisgd 10y ago
Says the guy who has written books about venture capital as awe inspiring geniuses who never do wrong and is currently writing a book about Stanford (let me guess, it will be positive). Now Stanford and VCs want to distance themselves from Theranos so they call in this guy.
- dang 10y ago
  Your first sentence is on the borderline of snarky dismissal ("says the guy"). But your second sentence seems just made up: > Now Stanford and VCs want to distance themselves from Theranos so they call in this guy. Let's have substantive critique, please‚ not imagining what you think might have happened.
  - chrisgd 10y ago
    I think it was clear to most people that this was my opinion.
    - deleted 10y ago
      [deleted]
adrenalinelol 10y ago
It's funny that the times (along with many others) was essentially a PR mouthpiece for Theranos less than 6 months ago[0]. In the article I cited, Teranos is lumped in with other darling unicorns (which have proven products). The news media did just as much due diligence as the investors (next to none) with Thernaos; I find it somewhat hypocritical to be calling out VCs without admitting to some blame themselves. 0: http://www.nytimes.com/interactive/2015/10/12/t-magazine/elizabeth-holmes-tech-visionaries-brian-chesky.html http://www.nytimes.com/interactive/2015/10/12/t-magazine/eli...
- adevine 10y ago
  Thanks for posting that. That was a painful read, not just about Elizabeth Holmes, but for the almost-religious hyperbole heaped on all those people. I know it's "T Magazine", and not NYT "proper", but the New York Times should be embarrassed by that article.
  - albedoa 10y ago
    Notably, it was written by Laura Arrillaga-Andreessen. Probably not the best attempt at avoiding conflicts of interest.
    - bravo22 10y ago
      Nice catch!
- CptJamesCook 10y ago
  Randall Strauss is calling them out to some extent: "But while Silicon Valley Proper wasn’t interested, the media was. Ms. Holmes was on the covers of Fortune, Forbes, Inc., and T: The New York Times Style Magazine" Also, this is an opinion piece. I don't think Randall Strauss is an employee of the New York Times, although he once was.
deleted 10y ago
[deleted]
auggierose 10y ago
Whatever, the hype around this is unbelievable. Theranos might even still have a viable business. Let's revisit these comments here in 5 years again.
minimaxir 10y ago
There was a good quote after uBeam (wireless charging) was called out by engineers for their physics being highly dubious: http://techcrunch.com/2015/11/07/wireless-power-charger/ http://techcrunch.com/2015/11/07/wireless-power-charger/ > “People are saying that investing [$23.4 million] into uBeam is everything wrong with Silicon Valley” uBeam co-founder and CEO Meredith Perry tells me, referencing her startup’s big name investors. They include Andreessen Horowitz, Founders Fund, UpFront Ventures, Marissa Mayer, and Mark Cuban. “But everything else out there is apps and social photo sharing stuff” Perry contends. “We’re building something real. We’re building something that’s insanely difficult. So difficult people think that we’re frauds.” It's surprising that startups get less scrutiny for hitting hard problems. You'd think it would be the opposite.
josh_carterPDX 10y ago
The NY Times completely misses the point about all of this. What a shitty example of journalism. SV isn't to blame in any of this, we get it. But that's not the point. Theranos is failing because of the lack of due diligence needed in an industry so heavily regulated. The oversight needed for something as sensitive as blood tests is something I don't think anyone involved with Theranos took very seriously including the CEO. Now they're doing damage control that will ultimately derail their progress and possibly close the company. All of this could have been avoided by putting in place a team experienced, not only in the industry, but had close ties to some of these regulatory organizations to ensure nothing like this could have happened. I think the idea is a great one, but unless you put in place someone well intrenched in the medical industry you put yourself in a position to find these surprises. Sucks. I was pulling for them. I also think the media is making this bigger than it needs to be which is contributing to the accelerated downfall.

106 points by hvo 10y ago

If you're a Walgreen's investor, blame their management for not doing the proper due diligence. If you're a Theranos investor, blame yourself for not doing the proper due diligence.

StavrosK 10y ago
Both of those can be codified as "blame the person who's one step away from the scammer", though.
- pron 10y ago
  Was it a scam, though, or is it just another example of "fake it till you make it"? Is there any reason to suspect that Holmes did not believe in her ability to deliver? I mean, it is quite likely that she was delusional, her delusion fueled by her lack of expertise, but delusion is not a scam, and one can argue that delusion is what drives the ecosystem. In addition to the delusion, there was operational mismanagement, but even that is not a scam.
  - Aelinsaar 10y ago
    I think I agree with your assessment more than the "Scam" idea. Granted, the difference between the two in terms of results could choke a mouse, but it is still very different. I think Theranos probably started off as something real, and evolved into something... scammy.
  - untog 10y ago
    "fake it till you make it" is one thing when it's Alexis Ohanian making fake Reddit users to have the site appear busy. It's quite another when you're talking about medical test results...
  - Alex3917 10y ago
    Even if it was a scam, what killed them was technical risk, which is the investors' job to assess. This isn't like if Enron had been starting wildfires to manipulate energy markets or whatever.
  - Spooky23 10y ago
    What Holmes believed is conpetely irrelevant. Science is not based in belief. John Kellogg (of Kellogg's cereal fame) believed that sex and masturbation created all sorts of health problems. Corn flakes and other cereals were bland tasting foods that would supposedly reduce desire and prevent all sorts of disease. He also practiced some more aggressive and harmful "cures". Kellogg was well-intentioned, but his theories were complete quackery. That's why you have the FDA and onerous regulatory process around health related devices, health claims, and medicine.
  - lmm 10y ago
    Does it matter if the person selling you a bridge really and truly believes that they own it? A scammer who believes their own hype is still a scammer, no?
    - pron 10y ago
      That's a good question, but in that case, what is the definition of a scam, and aren't many more SV companies -- even successful ones -- guilty of it? I mean, I don't think that the scaminess of a venture is defined by its outcome. So is it something that is known with certainty to not possibly work? Even then I'm not sure Theranos qualifies. From what I've read (I know nothing about blood tests), experts say that there are tremendous difficulties in performing a blood test on a very small quantity, but I haven't heard anyone say it's downright impossible.
  - st3v3r 10y ago
    How is "fake it til you make it", especially in the context of medical tech, not an outright scam?
braythwayt 10y ago
> If you're a Theranos investor, blame yourself for not doing the proper due diligence. Remember that blame is not a zero-sum game. You can accept your responsibility for making a bad investment, while simultaneously identifying the party or parties who set out to create an environment where unsafe medical practices and misleading PR would lead to bad outcomes for patients and investors.
- wpietri 10y ago
  This is perhaps too far afield, but I think blame really is a zero-sum game, in that people work actively to shift it around, and only stop playing when allocations become set. It strikes me as a very primate thing. I think we can only get people into non-zero-sum behavior when we talk about things like, cause, power, and responsibility. For example, I'd accept no blame here. But I do feel responsibility in a couple ways. As a participant in the Silicon Valley ecosystem, this event will effect me. Even if I didn't make the mess, I'm going to have to help clean it up. And looking back, I think about the power I might have had to cause a different outcome. What if I had spoken up more against the hype cycle? What if I had said more clearly that this was a bubble? I'm only one person, but there were a lot of people who could have spoken up more. If we had done it together, could we have reduced the damage of the bubble? Hard to say, but next time I'll try harder and see what happens. If this sort of thing interests you, you might enjoy Dekker's "Field Guide to Understanding Human Error," which is a brilliant book about airplane safety investigations. I thought it had a lot of applicability in tech.
deadowl 10y ago
Placing blame in a business setting is overvalued. Let's all worry about blaming someone for a problem instead of fixing it. It's so much more productive.
- onion2k 10y ago
  How do you fix a problem if you don't know what the cause was?
  - mbrutsch 10y ago
    Fixing begins at "someone screwed up". Blaming delves into who screwed up, which is usually not required to fix the problem (since there may actually be no one to blame).
    - onion2k 10y ago
      Sometimes that's true. If you have a team of people doing approximately the same thing then knowing which one of them broken something has little value. You just need a process to stop things braking again in the future. But in the case of a disparate group of people who all do different things, you need to know who caused the problem in order to know how to fix it - the "who" and the "what" are the essentially same question. In the case of Theranos the problem of "what went wrong?" and "who fucked up?" are effectively the same - either the investors didn't do proper due diligence or the founders misled them. You can't fix the problem without knowing the cause. It doesn't really matter whether you couch it in terms of "what" or "who"; knowing one automatically informs you of the other.
      - deadowl 10y ago
        It's not hard for an organization to put a system in place to mitigate any particular individual from making a poor decision. Entering into any decision that is high-stakes inherently justifies the cost of the existence or creation of such a system. For example, RFP processes are often required for any spending over a particular threshold on external vendors. Hiring processes often include input from more than one person. If the investors didn't do their proper due diligence, then they can take steps to be more responsible in the future. If the founders misled them, then it becomes an economic and political issue of how to address and further prevent such problems.

Spooky23 10y ago

The media deserves some shame. The unabashed and unrelating stream of PR driven horseshit around Theranos was unbelievable.

Amir6 10y ago

So basically (assuming they can not prove to be viable), this means you can cheat your way up to billions of dollars in valuation and there will be many investors who are betting money on things they do not have a clue about, politicians who will be on your board without doubting their knowledge of the matter or your claims and somehow a big corp like Walgreen's follows the hype. Its more like people lean towards trusting others who put their trust again in others and this domino leads to catastrophe.

fucking_tragedy 10y ago
Welcome to the world.
deadowl 10y ago
Sounds like it could just as well be a case of a bunch of people overvalued perceived business sensibility and ignored technical sensibility, which is incredibly common.

CPLX 10y ago

This is unmitigated bullshit. The firm was launched into its ludicrous fundraising path via her relationship with Tim Draper, the consummate Silicon Valley insider, and even the article points out that the fundraising was pretty much all SV. Just not the right Silicon Valley, you know. This should be in a textbook as the archetypal "No True Scotsman" argument.

leroy_masochist 10y ago
I thought the author actually did a pretty good job at parsing the difference between the biotech teams at established VC firms and the people who invested in Theranos, explaining in measurable and falsifiable terms how the former differ from the latter (academic background, require peer-reviewed studies before investing, etc).
- CPLX 10y ago
  Well yes, that's the fundamental trick of a No True Scotsman argument.[0] The headline reads "Don't Blame Silicon Valley" not "Don't Blame Top Tier Silicon Valley Experienced Life Science VC Teams" This is the article's thesis: "It is tempting to see Theranos as another example of Silicon Valley hype — a company based on a wisp of an unproven idea becomes a multibillion-dollar phenomenon with the backing of pump-and-dump venture capitalists. In fact, however, Silicon Valley’s most experienced investors in start-ups saw red flags at Theranos before anyone else. The Theranos saga shows just how well Silicon Valley does its homework" A corrected sentence could be something like "The Theranos saga, while showing how SV fundraising hype can incinerate billions of dollars, also has a small story involving a few specific guys who know life science who aren't as easily fooled." But they didn't write that. [0] https://en.wikipedia.org/wiki/No_true_Scotsman https://en.wikipedia.org/wiki/No_true_Scotsman Person A: You can't blame Silicon Valley for this Person B: But these people are all Silicon Valley players Person A: Ah yes, but they're not true Silcon Valley players
  - leroy_masochist 10y ago
    I'm familiar with what an NTS argument entails and I continue to disagree. I think the author's point could be restated as, "if you're going to say that what happened at Theranos discredits Silicon Valley, then let's define what we mean by 'Silicon Valley'". Specifically, the author is pointing out that "Silicon Valley", when used colloquially, might mean "Silicon Valley venture capital firms with a track record" or it might mean "any qualified investor calling themselves an 'angel' or a 'VC' who buys private company stock". The difference between the former and the latter is not purely rhetorical, as in the definition of the NTS fallacy; it is, as I mentioned in my previous comment, measurable and falsifiable. And the author is basically saying that people in the former group should not be stigmatized by the failings of certain people in the latter group.

atonse 10y ago

I think the media holds a big part of the blame here. I have never seen a company hyped as much as Theranos. And I fell for it. Now the same outlets that propped it up with astronomical levels of hype, are taking much glee in writing article after article about how fraudulent Theranos was. Is anyone taking these media outlets to task for never actually verifying if the crap they were writing was actually accurate?

throwanem 10y ago
Quis custodiet, et cetera.

puppetmaster3 10y ago

Investors don't do DD.

chrisgd 10y ago

Says the guy who has written books about venture capital as awe inspiring geniuses who never do wrong and is currently writing a book about Stanford (let me guess, it will be positive). Now Stanford and VCs want to distance themselves from Theranos so they call in this guy.

dang 10y ago
Your first sentence is on the borderline of snarky dismissal ("says the guy"). But your second sentence seems just made up: > Now Stanford and VCs want to distance themselves from Theranos so they call in this guy. Let's have substantive critique, please‚ not imagining what you think might have happened.
- chrisgd 10y ago
  I think it was clear to most people that this was my opinion.
  - deleted 10y ago
    [deleted]

adrenalinelol 10y ago

It's funny that the times (along with many others) was essentially a PR mouthpiece for Theranos less than 6 months ago[0]. In the article I cited, Teranos is lumped in with other darling unicorns (which have proven products). The news media did just as much due diligence as the investors (next to none) with Thernaos; I find it somewhat hypocritical to be calling out VCs without admitting to some blame themselves. 0: http://www.nytimes.com/interactive/2015/10/12/t-magazine/elizabeth-holmes-tech-visionaries-brian-chesky.html http://www.nytimes.com/interactive/2015/10/12/t-magazine/eli...

adevine 10y ago
Thanks for posting that. That was a painful read, not just about Elizabeth Holmes, but for the almost-religious hyperbole heaped on all those people. I know it's "T Magazine", and not NYT "proper", but the New York Times should be embarrassed by that article.
- albedoa 10y ago
  Notably, it was written by Laura Arrillaga-Andreessen. Probably not the best attempt at avoiding conflicts of interest.
  - bravo22 10y ago
    Nice catch!
CptJamesCook 10y ago
Randall Strauss is calling them out to some extent: "But while Silicon Valley Proper wasn’t interested, the media was. Ms. Holmes was on the covers of Fortune, Forbes, Inc., and T: The New York Times Style Magazine" Also, this is an opinion piece. I don't think Randall Strauss is an employee of the New York Times, although he once was.

deleted 10y ago

[deleted]

auggierose 10y ago

Whatever, the hype around this is unbelievable. Theranos might even still have a viable business. Let's revisit these comments here in 5 years again.

minimaxir 10y ago

There was a good quote after uBeam (wireless charging) was called out by engineers for their physics being highly dubious: http://techcrunch.com/2015/11/07/wireless-power-charger/ http://techcrunch.com/2015/11/07/wireless-power-charger/ > “People are saying that investing [$23.4 million] into uBeam is everything wrong with Silicon Valley” uBeam co-founder and CEO Meredith Perry tells me, referencing her startup’s big name investors. They include Andreessen Horowitz, Founders Fund, UpFront Ventures, Marissa Mayer, and Mark Cuban. “But everything else out there is apps and social photo sharing stuff” Perry contends. “We’re building something real. We’re building something that’s insanely difficult. So difficult people think that we’re frauds.” It's surprising that startups get less scrutiny for hitting hard problems. You'd think it would be the opposite.

josh_carterPDX 10y ago

The NY Times completely misses the point about all of this. What a shitty example of journalism. SV isn't to blame in any of this, we get it. But that's not the point. Theranos is failing because of the lack of due diligence needed in an industry so heavily regulated. The oversight needed for something as sensitive as blood tests is something I don't think anyone involved with Theranos took very seriously including the CEO. Now they're doing damage control that will ultimately derail their progress and possibly close the company. All of this could have been avoided by putting in place a team experienced, not only in the industry, but had close ties to some of these regulatory organizations to ensure nothing like this could have happened. I think the idea is a great one, but unless you put in place someone well intrenched in the medical industry you put yourself in a position to find these surprises. Sucks. I was pulling for them. I also think the media is making this bigger than it needs to be which is contributing to the accelerated downfall.