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I think this exposes a great deal of how money and wealth concentrated at the top is flowing to people not based on merits but by their socioeconomic lineage.

I think this exposes a great deal of how money and wealth concentrated at the top is flowing to people not based on merits but by their socioeconomic lineage. Imagine that $15 million dollar invested in $50k USD increments into 300 startup ideas, the jobs that will be created, increased human capital and impact on their respective local economies, that are not there because of risk adversity (it still amazes me VCs would shun risk but still throw around "venture") towards people of lower class then them. For example, somebody coming straight out of university vs. the daughter of a CEO at a large company who also attends the same country_club/religious functions, suddenly looks like a safer bet. It looks like a pretty hopeless situation for Theranos but it also exposes the crony capitalism that you'd find in other parts of the world with ease, with heavy hitters like Henry Kissinger (wtf) sitting on the board. He will most likely never see that money again because he thought he was mitigating risk by piggybacking behind a powerful individual with powerful connections that's accessible by blood. It's hard to feel any sympathy.

jpeg_hero 10y ago
Great point. Presumably a good number of these "back room deals" work out and people never hear of them. This one blows up and then, to a certain extent, it exposes the cozy interconnections of "socioeconomic lineage"
neom 10y ago
To be fair, Theranos likely needed a large capital investment to bring its (described complex) product to market. The model you suggest is simply another/different model, but investing large amounts of money in a startup that in theory will need large amounts of money is a very smart thing to do if you believe the market you're addressing is long, and wide enough to one day sustain the returns needed.
- sigmar 10y ago
  If you reread his comment, it is clear his point is not that there shouldn't be large investments. His point was that this was a bad investment chosen due to who the CEO was, and that so much more good could have potentially been done with that money if it didn't flow "to people not based on merits but by their socioeconomic lineage."
  - neom 10y ago
    Seems like a lot of conflation going on there!
wnevets 10y ago
http://www.espn.com/30for30/film?page=bigshot http://www.espn.com/30for30/film?page=bigshot Is a great example of just how much you can get away with if the right person just assumes you're rich.
koolba 10y ago
> Imagine that $15 million dollar invested in $50k USD increments into 300 startup ideas, the jobs that will be created, increased human capital and impact on their respective local economies, that are not there because of risk adversity (it still amazes me VCs would shun risk but still throw around "venture") towards people of lower class then them. That comparison isn't apples to apples as there are 299 other seemingly viable ideas that you're including in the latter category. Assuming they're good enough to warrant someone investing $50K, they have an inherent value as well. > It's hard to feel any sympathy. I believe the emotion most feel in regards to all things Theranos is schadenfreude[1]. [1]: https://en.wikipedia.org/wiki/Schadenfreude https://en.wikipedia.org/wiki/Schadenfreude
- praneshp 10y ago
  Upvoted for schadenfreude. I feel HN shows this whenever I read something about Yahoo, Twitter or Theranos. With Facebook and Uber, it's hate.
jlarocco 10y ago
> Imagine that $15 million dollar invested in $50k USD increments into 300 startup ideas, the jobs that will be created... That sounds pretty naive. $15 million isn't a huge amount of money in business, and in most parts of the country $50k isn't a livable salary. I'm sure people can scrape by on that, but don't pretend it'd be doing them a huge favor. The more I think about it, the more exploitive it seems. Great for tricking recent college grads into wasting a few years to build a website, but not so great for actually developing new technology.
- CPLX 10y ago
  > That sounds pretty naive. $15 million isn't a huge amount of money in business, and in most parts of the country $50k isn't a livable salary. Who's being naive? The median net compensation last year in the U.S. was $29,930.13, meaning half of all wage earners earned less. Median income for an entire household (ie more than one person) in the US is about $51k. Meaning about half of all households make less than that. Assuming half the population of the country doesn't die suddenly in the next three weeks it's fair to say that $50k is "livable"
  - chillacy 10y ago
    It also depends where you live: http://www.seattletimes.com/seattle-news/data/80000-median-wage-income-gain-in-seattle-far-outpaces-other-cities/ http://www.seattletimes.com/seattle-news/data/80000-median-w... Consider that YC will throw you 200k but you're going to be moving to an area where the median income is $90k This of course wouldn't be an issue if people didn't insist on living in the bay area, but nobody takes you as seriously if you're remote.
    - paulddraper 10y ago
      > It also depends where you live Sure, but that doesn't change the actual...you know... averages the parent cited. For every household with over $51k, there was a household with under $51k. Pointing out that some corner of the US is expensive hardly changes the point.
zeveb 10y ago
> Imagine that $15 million dollar invested in $50k USD increments into 300 startup ideas, the jobs that will be created, increased human capital and impact on their respective local economies, that are not there because of risk adversity (it still amazes me VCs would shun risk but still throw around "venture") towards people of lower class then them. For example, somebody coming straight out of university vs. the daughter of a CEO at a large company who also attends the same country_club/religious functions, suddenly looks like a safer bet. This doesn't make sense. I'm fairly certain that a random person graduating college is a worse bet than a random person who is graduating college and is also socially well-connected. I imagine that 300 startups started by people who are both college graduates and socially well-connected have better odds of success than 300 startups started by randomly-chosen college graduates.
beaner 10y ago
"Crony capitalism" specifically refers to favors aided by government power.
- jonathankoren 10y ago
  Fine. Cronyism.
forgetsusername 10y ago
>Imagine that $15 million dollar invested in $50k USD increments into 300 startup ideas Startups aren't immune to fraud, stupidity and waste. In fact, regarding the latter two, startups are probably more prone. With hindsight it's easy to say throwing money at Theranos was a bad idea, but the same can be said for the vast majority of startups.

jpeg_hero 10y ago

Great point. Presumably a good number of these "back room deals" work out and people never hear of them. This one blows up and then, to a certain extent, it exposes the cozy interconnections of "socioeconomic lineage"

neom 10y ago

To be fair, Theranos likely needed a large capital investment to bring its (described complex) product to market. The model you suggest is simply another/different model, but investing large amounts of money in a startup that in theory will need large amounts of money is a very smart thing to do if you believe the market you're addressing is long, and wide enough to one day sustain the returns needed.

sigmar 10y ago
If you reread his comment, it is clear his point is not that there shouldn't be large investments. His point was that this was a bad investment chosen due to who the CEO was, and that so much more good could have potentially been done with that money if it didn't flow "to people not based on merits but by their socioeconomic lineage."
- neom 10y ago
  Seems like a lot of conflation going on there!

wnevets 10y ago

http://www.espn.com/30for30/film?page=bigshot http://www.espn.com/30for30/film?page=bigshot Is a great example of just how much you can get away with if the right person just assumes you're rich.

koolba 10y ago

> Imagine that $15 million dollar invested in $50k USD increments into 300 startup ideas, the jobs that will be created, increased human capital and impact on their respective local economies, that are not there because of risk adversity (it still amazes me VCs would shun risk but still throw around "venture") towards people of lower class then them. That comparison isn't apples to apples as there are 299 other seemingly viable ideas that you're including in the latter category. Assuming they're good enough to warrant someone investing $50K, they have an inherent value as well. > It's hard to feel any sympathy. I believe the emotion most feel in regards to all things Theranos is schadenfreude[1]. [1]: https://en.wikipedia.org/wiki/Schadenfreude https://en.wikipedia.org/wiki/Schadenfreude

praneshp 10y ago
Upvoted for schadenfreude. I feel HN shows this whenever I read something about Yahoo, Twitter or Theranos. With Facebook and Uber, it's hate.

jlarocco 10y ago

> Imagine that $15 million dollar invested in $50k USD increments into 300 startup ideas, the jobs that will be created... That sounds pretty naive. $15 million isn't a huge amount of money in business, and in most parts of the country $50k isn't a livable salary. I'm sure people can scrape by on that, but don't pretend it'd be doing them a huge favor. The more I think about it, the more exploitive it seems. Great for tricking recent college grads into wasting a few years to build a website, but not so great for actually developing new technology.

CPLX 10y ago
> That sounds pretty naive. $15 million isn't a huge amount of money in business, and in most parts of the country $50k isn't a livable salary. Who's being naive? The median net compensation last year in the U.S. was $29,930.13, meaning half of all wage earners earned less. Median income for an entire household (ie more than one person) in the US is about $51k. Meaning about half of all households make less than that. Assuming half the population of the country doesn't die suddenly in the next three weeks it's fair to say that $50k is "livable"
- chillacy 10y ago
  It also depends where you live: http://www.seattletimes.com/seattle-news/data/80000-median-wage-income-gain-in-seattle-far-outpaces-other-cities/ http://www.seattletimes.com/seattle-news/data/80000-median-w... Consider that YC will throw you 200k but you're going to be moving to an area where the median income is $90k This of course wouldn't be an issue if people didn't insist on living in the bay area, but nobody takes you as seriously if you're remote.
  - paulddraper 10y ago
    > It also depends where you live Sure, but that doesn't change the actual...you know... averages the parent cited. For every household with over $51k, there was a household with under $51k. Pointing out that some corner of the US is expensive hardly changes the point.

zeveb 10y ago

> Imagine that $15 million dollar invested in $50k USD increments into 300 startup ideas, the jobs that will be created, increased human capital and impact on their respective local economies, that are not there because of risk adversity (it still amazes me VCs would shun risk but still throw around "venture") towards people of lower class then them. For example, somebody coming straight out of university vs. the daughter of a CEO at a large company who also attends the same country_club/religious functions, suddenly looks like a safer bet. This doesn't make sense. I'm fairly certain that a random person graduating college is a worse bet than a random person who is graduating college and is also socially well-connected. I imagine that 300 startups started by people who are both college graduates and socially well-connected have better odds of success than 300 startups started by randomly-chosen college graduates.

beaner 10y ago

"Crony capitalism" specifically refers to favors aided by government power.

jonathankoren 10y ago
Fine. Cronyism.

forgetsusername 10y ago

>Imagine that $15 million dollar invested in $50k USD increments into 300 startup ideas Startups aren't immune to fraud, stupidity and waste. In fact, regarding the latter two, startups are probably more prone. With hindsight it's easy to say throwing money at Theranos was a bad idea, but the same can be said for the vast majority of startups.