5 ms·

Maybe you are right, but what are we blaming silicon valley for? Being wrong on a venture investment? I don't really understand any of this. A well funded compa

by on_ 10y ago

Maybe you are right, but what are we blaming silicon valley for? Being wrong on a venture investment? I don't really understand any of this. A well funded company was unsuccessful in a spectacular fashion, and the people who thought it would be and are to "blame" lost money. Sounds like the system working. Clinkle also lost a ton of money for a lot of pretty smart people. I blame silicon valley because it was their fault they made a bad investment (as much as SV can be a collective group). I mean, I bet like 1/10 companies they fund fail. Some comitted fraud, some had shitty biz plans, some failed for no reason.

batbomb 10y ago
Fetishization of dropout geniuses. Origin myths. "Disruption". "Making the world a better place". Growth hacking. Do things that don't scale.
- mcguire 10y ago
  Failure (and perhaps inability) to follow the well known and well grounded regulatory system in the industry.
  - batbomb 10y ago
    That probably falls under "move fast and break things"
    - JustSomeNobody 10y ago
      Things == Theranos Regulations are in place for a reason.
      - afarrell 10y ago
        Many but not all regulations are in place for a reason that remains good.
        Joof 10y ago
        My university wouldn't try inverse classrooms (or record classes at all) because they have to be subtitled for the deaf (which costs money). However, deaf students don't have a similar requirement in normal classrooms. It's far more lax.
        batbomb 10y ago
        They don't have a similar requirement because they get a translator who can stand next to the professor and/or take notes, and due to the ADA, it's mandated that they provide those services. When it comes to video/communications, the regulations are a bit more murky because the FCC may be involved. (There was a deaf student in my upper division math courses and I worked for a communications company with deaf coworkers for a bit.)
      - st3v3r 10y ago
        Tell that to the rest of the Valley.
CPLX 10y ago
An unethical business culture that rewards hyperbole and fraudulent misrepresentation of business success.
- gshulegaard 10y ago
  Ok...I sort of saw reason to your first comment in regards to article after reading it, but I had to login and point out that this comment sounded hypocritical to me. First "business" has no concept of "ethics". This is one of the classic market externalities which leads to non-pareto-optimal outcomes. Second, the "culture" doesn't just reward "hyperbole and fraudulent misrepresentation of business success." If we take your statement at face value, there would be no venture capital firms because they would all be throwing away their money, without any return, until they ran out. The unfortunate truth is that there _is_ money to be made with Silicon Valley type investment. There _are_ economic inefficiencies which lead to undesirable market outcomes, but it's not because venture capitalists are just throwing money away for _no_ reason. And finally, Theranos appears (at least to me) to be an exception rather than a rule. And while I don't agree with everything the article says or the way it says it, I think there are a few important takeaways. Theranos was able to get funding because of who they knew...it calls into question whether or not they would have been able to get funding (or the amount they did) if they had been just another start up _without_ connections. It documents the times Theranos was _denied_ funding by Silicon Valley venture capital when they tried to obtain funding the traditional way. It also points out the disproportionate amount of media coverage they had and questions whether it had a contributory role to Theranos' rocket-like trajectory. Heck, I would bet many people who use/rely on our software have never heard of my start-up, we hardly get covered in the media. In general I think the start-ups that get large amounts of media coverage are exceptions to the general rule. Anyway, sorry for the long comment, and I don't want to take away from the fact that there ARE problems with Silicon Valley and business regulation in America in general.
  - chimeracoder 10y ago
    > First "business" has no concept of "ethics". This is one of the classic market externalities which leads to non-pareto-optimal outcomes. Ethics can be modeled as an externality, but they don't have to be. Hypothetically, let's say investors were taken to task publicly every time one of their investments blows up - not a simple company shutdown, mind you, but when the company is later proven to be doing really shady, unethical things. Ultimately, this would result in a tangible cost to the investment firm, because investment firms value their brand. In the long run, they would adapt, and take steps to guard against this risk before making investments. Is that ethics? Or is it just the market acting efficiently, by pricing in the risk-adjusted expected future costs? You can look at it either way, but at the end of the day, it doesn't really matter. Whether or not businesses have a concept of 'ethics', they can be forced to act as if they do, which amounts to essentially the same thing.
DanBC 10y ago
> Maybe you are right, but what are we blaming silicon valley for? A culture where regulation is a hinderance that can be ignored, rather than something that protects businesses and customers.
- Karunamon 10y ago
  Uber and the like has basically proven that case. Theranos didn't fail because they ignored regulation, they failed because their tech sucked. The difference is in outcome: Uber's ignoring regulation has led to a better outcome for the average person. Theranos.. hasn't. Careful not to conflate "following the rules" with anything but obedience.. the outcome is more important.
  - rfrank 10y ago
    Careful, not everyone agrees that the ends justify the means
  - vonmoltke 10y ago
    > Uber and the like has basically proven that case. No they haven't. Not all regulations are equal. Most of the regulations Uber has ignored are probably examples of regulatory capture and shouldn't exist in their current form. The regulations Theranos ignored are important, even critical, for patient safety and the integrity of medical testing.
    - JamilD 10y ago
      I agree with you completely, but is it really Silicon Valley's place to decide which regulations to abide by, and which to ignore?
      - Karunamon 10y ago
        Every single person or group of people decide which regulations to abide by every single day (download music? exceed the speed limit? hail a ride that the local taxi people don't like?). The idea that it's not the person's job to decide which regs to abide by implies that all laws are equal. As GP mentioned, that isn't the case.
wpietri 10y ago
I am blaming Silicon Valley for building a hype machine that valued appearance over substance, short-term paper gains over long-term value creation. Again. And I'm hardly the only one saying this. Bill Gurley, a partner at Benchmark, made it clear that we've been dealing with a bubble, and said that the best possible thing that could happen was "a return to an appreciation for sound business execution". [1] Nobody minds minds that we have companies that fail. That's the game. But when we create companies that burn ten million, a hundred million, maybe a billion dollars and never could have succeeded, then that is a major fuckup that is on us. Even if you don't care about wasting OPM at that scale, just think of the number of seed and A-round companies that Theranos's $686.3M could have funded. If our job is to make interesting mistakes, we should be maximizing the amount learned per venture dollar. [1] http://abovethecrowd.com/2016/04/21/on-the-road-to-recap/ http://abovethecrowd.com/2016/04/21/on-the-road-to-recap/
braythwayt 10y ago
> what are we blaming silicon valley for? Being wrong on a venture investment? An "investment" is a passive activity. Activities designed to increase the value of the investment by creating the illusion of value are a different matter, and regulated by law and informally by moral standards. I think the general feeling is that the investors did far more than merely throw a few bucks at Theranos.
- AndrewKemendo 10y ago
  I don't think this is correct, especially when considering the rights that Board members Directors and Officers have. They can go out and make deals, do press etc... all within their rights as board members - in fact that's what they are for. Investments are passive only for non-accredited shareholders.
  - braythwayt 10y ago
    If you are telling me that someone is a Director or Officer, they are no longer "just investing," and therefore we needn't just shrug and say, "They made a bad investment, so what?" Having made a bad investment, as a Director or Officer, they had a responsibility to blow the whistle on malpractices, enforce proper procedures, fire the CEO long before the CEO was in a position to be barred from the industry, &c. &c.
    - AndrewKemendo 10y ago
      we needn't just shrug and say, "They made a bad investment, so what?" Well I haven't made a statement on that either way - but I wouldn't advocate for that. It is however up to their own judgement how much to do in any case. They represent shareholders, so they do have fiduciary duty there to be sure (though I am unsure if that is true for the high profile members of the Theranos board as it seemed to be largely advisory). The fact that Holmes has 50+% of the company makes the point in this case pretty much moot. Aside from leaving the board en masse and abandoning whatever shares they have, they really are pretty powerless.
enraged_camel 10y ago
>>Maybe you are right, but what are we blaming silicon valley for? Being wrong on a venture investment? For failing to do due diligence before investing hundreds of millions of dollars in a company.
staticautomatic 10y ago
VC's have little incentive to openly and honestly talk about or own up to their mistakes, and indeed they rarely do so. Far too often they inappropriately pass off very real mistakes as simply being part of their spray-and-pray "portfolio strategy." That not all investments will be winners has nothing at all to do with an individual investment going south on account of poor or nonexistent due diligence, investing largely on the basis of lemming behavior and so-called "social proof", dramatically over-valuing companies, investing in companies that obviously have no feasible path to profitability, etc. What are we blaming Silicon Valley for (insofar as we're really talking about VC's)? I don't know about "we" but I'm blaming them for being dishonest. Do I go around being mad about it all the time? No. But I won't pass on an opportunity to rub a lemon on their noses.

by on_ 10y ago

batbomb 10y ago

Fetishization of dropout geniuses. Origin myths. "Disruption". "Making the world a better place". Growth hacking. Do things that don't scale.

mcguire 10y ago
Failure (and perhaps inability) to follow the well known and well grounded regulatory system in the industry.
- batbomb 10y ago
  That probably falls under "move fast and break things"
  - JustSomeNobody 10y ago
    Things == Theranos Regulations are in place for a reason.
    - afarrell 10y ago
      Many but not all regulations are in place for a reason that remains good.
      - Joof 10y ago
        My university wouldn't try inverse classrooms (or record classes at all) because they have to be subtitled for the deaf (which costs money). However, deaf students don't have a similar requirement in normal classrooms. It's far more lax.
        batbomb 10y ago
        They don't have a similar requirement because they get a translator who can stand next to the professor and/or take notes, and due to the ADA, it's mandated that they provide those services. When it comes to video/communications, the regulations are a bit more murky because the FCC may be involved. (There was a deaf student in my upper division math courses and I worked for a communications company with deaf coworkers for a bit.)
    - st3v3r 10y ago
      Tell that to the rest of the Valley.

CPLX 10y ago

An unethical business culture that rewards hyperbole and fraudulent misrepresentation of business success.

gshulegaard 10y ago
Ok...I sort of saw reason to your first comment in regards to article after reading it, but I had to login and point out that this comment sounded hypocritical to me. First "business" has no concept of "ethics". This is one of the classic market externalities which leads to non-pareto-optimal outcomes. Second, the "culture" doesn't just reward "hyperbole and fraudulent misrepresentation of business success." If we take your statement at face value, there would be no venture capital firms because they would all be throwing away their money, without any return, until they ran out. The unfortunate truth is that there _is_ money to be made with Silicon Valley type investment. There _are_ economic inefficiencies which lead to undesirable market outcomes, but it's not because venture capitalists are just throwing money away for _no_ reason. And finally, Theranos appears (at least to me) to be an exception rather than a rule. And while I don't agree with everything the article says or the way it says it, I think there are a few important takeaways. Theranos was able to get funding because of who they knew...it calls into question whether or not they would have been able to get funding (or the amount they did) if they had been just another start up _without_ connections. It documents the times Theranos was _denied_ funding by Silicon Valley venture capital when they tried to obtain funding the traditional way. It also points out the disproportionate amount of media coverage they had and questions whether it had a contributory role to Theranos' rocket-like trajectory. Heck, I would bet many people who use/rely on our software have never heard of my start-up, we hardly get covered in the media. In general I think the start-ups that get large amounts of media coverage are exceptions to the general rule. Anyway, sorry for the long comment, and I don't want to take away from the fact that there ARE problems with Silicon Valley and business regulation in America in general.
- chimeracoder 10y ago
  > First "business" has no concept of "ethics". This is one of the classic market externalities which leads to non-pareto-optimal outcomes. Ethics can be modeled as an externality, but they don't have to be. Hypothetically, let's say investors were taken to task publicly every time one of their investments blows up - not a simple company shutdown, mind you, but when the company is later proven to be doing really shady, unethical things. Ultimately, this would result in a tangible cost to the investment firm, because investment firms value their brand. In the long run, they would adapt, and take steps to guard against this risk before making investments. Is that ethics? Or is it just the market acting efficiently, by pricing in the risk-adjusted expected future costs? You can look at it either way, but at the end of the day, it doesn't really matter. Whether or not businesses have a concept of 'ethics', they can be forced to act as if they do, which amounts to essentially the same thing.

DanBC 10y ago

> Maybe you are right, but what are we blaming silicon valley for? A culture where regulation is a hinderance that can be ignored, rather than something that protects businesses and customers.

Karunamon 10y ago
Uber and the like has basically proven that case. Theranos didn't fail because they ignored regulation, they failed because their tech sucked. The difference is in outcome: Uber's ignoring regulation has led to a better outcome for the average person. Theranos.. hasn't. Careful not to conflate "following the rules" with anything but obedience.. the outcome is more important.
- rfrank 10y ago
  Careful, not everyone agrees that the ends justify the means
- vonmoltke 10y ago
  > Uber and the like has basically proven that case. No they haven't. Not all regulations are equal. Most of the regulations Uber has ignored are probably examples of regulatory capture and shouldn't exist in their current form. The regulations Theranos ignored are important, even critical, for patient safety and the integrity of medical testing.
  - JamilD 10y ago
    I agree with you completely, but is it really Silicon Valley's place to decide which regulations to abide by, and which to ignore?
    - Karunamon 10y ago
      Every single person or group of people decide which regulations to abide by every single day (download music? exceed the speed limit? hail a ride that the local taxi people don't like?). The idea that it's not the person's job to decide which regs to abide by implies that all laws are equal. As GP mentioned, that isn't the case.

wpietri 10y ago

I am blaming Silicon Valley for building a hype machine that valued appearance over substance, short-term paper gains over long-term value creation. Again. And I'm hardly the only one saying this. Bill Gurley, a partner at Benchmark, made it clear that we've been dealing with a bubble, and said that the best possible thing that could happen was "a return to an appreciation for sound business execution". [1] Nobody minds minds that we have companies that fail. That's the game. But when we create companies that burn ten million, a hundred million, maybe a billion dollars and never could have succeeded, then that is a major fuckup that is on us. Even if you don't care about wasting OPM at that scale, just think of the number of seed and A-round companies that Theranos's $686.3M could have funded. If our job is to make interesting mistakes, we should be maximizing the amount learned per venture dollar. [1] http://abovethecrowd.com/2016/04/21/on-the-road-to-recap/ http://abovethecrowd.com/2016/04/21/on-the-road-to-recap/

braythwayt 10y ago

> what are we blaming silicon valley for? Being wrong on a venture investment? An "investment" is a passive activity. Activities designed to increase the value of the investment by creating the illusion of value are a different matter, and regulated by law and informally by moral standards. I think the general feeling is that the investors did far more than merely throw a few bucks at Theranos.

AndrewKemendo 10y ago
I don't think this is correct, especially when considering the rights that Board members Directors and Officers have. They can go out and make deals, do press etc... all within their rights as board members - in fact that's what they are for. Investments are passive only for non-accredited shareholders.
- braythwayt 10y ago
  If you are telling me that someone is a Director or Officer, they are no longer "just investing," and therefore we needn't just shrug and say, "They made a bad investment, so what?" Having made a bad investment, as a Director or Officer, they had a responsibility to blow the whistle on malpractices, enforce proper procedures, fire the CEO long before the CEO was in a position to be barred from the industry, &c. &c.
  - AndrewKemendo 10y ago
    we needn't just shrug and say, "They made a bad investment, so what?" Well I haven't made a statement on that either way - but I wouldn't advocate for that. It is however up to their own judgement how much to do in any case. They represent shareholders, so they do have fiduciary duty there to be sure (though I am unsure if that is true for the high profile members of the Theranos board as it seemed to be largely advisory). The fact that Holmes has 50+% of the company makes the point in this case pretty much moot. Aside from leaving the board en masse and abandoning whatever shares they have, they really are pretty powerless.

enraged_camel 10y ago

>>Maybe you are right, but what are we blaming silicon valley for? Being wrong on a venture investment? For failing to do due diligence before investing hundreds of millions of dollars in a company.

staticautomatic 10y ago

VC's have little incentive to openly and honestly talk about or own up to their mistakes, and indeed they rarely do so. Far too often they inappropriately pass off very real mistakes as simply being part of their spray-and-pray "portfolio strategy." That not all investments will be winners has nothing at all to do with an individual investment going south on account of poor or nonexistent due diligence, investing largely on the basis of lemming behavior and so-called "social proof", dramatically over-valuing companies, investing in companies that obviously have no feasible path to profitability, etc. What are we blaming Silicon Valley for (insofar as we're really talking about VC's)? I don't know about "we" but I'm blaming them for being dishonest. Do I go around being mad about it all the time? No. But I won't pass on an opportunity to rub a lemon on their noses.