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How a Company Scammed Silicon Valley and How It Got Caught
- jrs95 8y agoVCs Hate Her: This CEO got hundreds of millions with this one weird trick!
- aje403 8y agoSlant article of a topic that has been slaughtered to death by people with more industry knowledge than the author
- melling 8y agoInteresting that the review is by Roger Lowenstein: https://en.m.wikipedia.org/wiki/Roger_Lowenstein https://en.m.wikipedia.org/wiki/Roger_Lowenstein I just finished his book on Buffett, which I wish I’d read 20 years ago.
- pavel_lishin 8y agoWhy do you wish you'd read it 20 years ago?
- garmaine 8y agoProbably so that he’d have enjoyed the gains of investing in Berkshire Hathaway?
- melling 8y agoBecause I was investing in the Internet Bubble. “Be fearful when others are greedy, and greedy when others are fearful “ You are buying a company. Would you want to own that company if the market shut down for 5 years? Don’t use leverage. I owned Amazon, Google, Apple, etc at some point during my life. I was forced to sell on margin calls during the tech crash. I would have thought about investing a lot more differently. Buffett doesn’t sell his gems during a recession. He doesn’t try to time Mr Market. I was mostly in cash for the collapse of housing. My 2009 portfolio was worth simply holding until now and I would have been much better off than trading in and out of stocks. I would also have paid attention to fundamentals: Income Statement, Balance sheet, Cash Flow Statement In short, I would have been more of an investor. Listen to Buffett.
- hartator 8y agoWhat was your main takeaway?
- yesforwhat 8y agoalso curious
- tptacek 8y agoAlso the author of _When Genius Failed_, about the LTCM crash, which is a great book.
- Mononokay 8y ago> Based on Carreyrou’s dogged reporting, not even Enron lied so freely. The rest of the article was more or less just copying every other article about the subject, but this line is just beautiful.
- bigdubs 8y ago> marquee investors including Robert Kraft, Betsy DeVos Is this a joke? or was that intentional?
- rdlecler1 8y agoI’d argue that it was largely dumb money that was scammed. Not Silicon Valley. Those so-called marquee investors named in the article were not even VCs. In fact you see a lot of this in enormous funding rounds. You didn’t see the premier firms in there like Sequoia, Khosla, Founders Fund, a16z, Benchmark, ... DFJ was the only notable firm there and it looks like they came in early with Draper seeding it when it was still idea-phase. There are a million ways you could be screwed by an entrepreneur so due diligence is really about finding the 3-5 questions that will make or break a business. In the case of Theranos, the whole idea relied on an assumption that you could massively reduce the amount of blood needed to do an analysis. So that’s where your due diligence starts. But after 20 minutes of desk research you’ll find that small blood samples intrinsically heterogenous for many tests. VCs are trained and paid to ask the right questions. This was dumb money plain and simple.
- dsfyu404ed 8y ago>I’d argue that it was largely dumb money that was scammed. Not Silicon Valley. Bubbles have normal air in them. Economic bubbles include plenty of normal economic activity that has not much to do with the fact that it's a bubble. I would make the case that calling SV and "dumb VC money" one in the same is perfectly appropriate in the context of an article written for a general audience.
- abritinthebay 8y ago> I would make the case that calling SV and "dumb VC money" one in the same is perfectly appropriate in the context of an article written for a general audience Please do make that case, because its much easier to make the case that it's deliberately misleading to get clicks and make a headline than actually informative or accurate. The general audience is quite capable of understanding "dumb rich people" vs "experienced venture capitalists".
- mcguire 8y ago"How did they get scammed?" "Because they're dumb rich people." "How do you know they're dumb rich people?" "Because they got scammed."
- pkaye 8y agoEven that photo looks staged. All those technicians standing there looking at machines like they are trying to monitor something.
- danhorner 8y agoThose are all machining stations where CNC parts (likely for the instruments) would be cut. The guy in the front has a boring day ahead of him, watching the chip conveyor delivering waste material into the dumpster.
- pkaye 8y agoSo Theranos actually got CNC machines in-house? Most companies would outsource it one of the dozens of CNC shops in the bay area (or elsewhere is large enough volume.)
- 2YwaZHXV 8y agoThey published a video of the manufacturing that showed those CNC machines, injection molding, and robotic assembly. It's a lot faster to iterate if you have in-house machining and molding; you can get parts made or modified in <day vs weeks with an outside shop. You can also work closer with the machinists to iron out challenges.
- i_am_nomad 8y agoMy company recently interviewed a Theranos veteran - this person was a scientist working on a small part of the analytical pipeline. Apparently there were many, many smart people working at Theranos (including the candidate) who had no idea the company was a scam. This was in part due to intense secrecy and very rigid information silos within the company. There’s probably a lesson to be learned there, of course - one too many “need to know basis” explanations and it’s time to start asking some hard questions.
- SkyMarshal 8y agoBy that metric Apple could be a scam.
- cocacola1 8y agoExcept Apple delivers.
- drb91 8y agoThe difference is that it is trivial to determine whether they’re selling something that works, which would be the thing to hide in the event of fraud. Or the fraud is purely financial, in which case it wouldn’t be obvious to an engineer anyway because that level of siloing is normal.
- ggg9990 8y agoJust like wearing turtlenecks won’t make you Steve Jobs, maintaining a corporate culture of total secrecy will not make you Apple.
- Brockenstein 8y agoNo. For starters we have plenty of evidence that Apple is not a scam. Secondly "one too many “need to know basis” explanations and it’s time to start asking some hard questions" is a pretty clear qualifier. The difference between protecting legitimate secrets and keeping things secret that aren't really secrets anywhere else and have no value as secrets accept to deceive is pretty clear.
- 8y ago
- Nelkins 8y ago"There is a larger moral here: The people in the trenches know best." It seems obvious, and yet it is a truth so many leaders fail to grasp. Keeping a finger on the pulse of employee attitudes is a great way to nip issues in the bud before they become systemic. Although I guess that doesn't really help if the leader is the issue.
- busterarm 8y agoThe problem is that the grunt employees know where the bodies are buried. There's usually a body or two buried somewhere -- if you kept the pulse of grunt employees, you'd never invest in anything.
- mmt 8y agoI'd expect that's only true for a particularly risk-averse investor. If there's a metaphorical body buried in almost every company, then that's just risk, and knowing what it is would actually be better for an investor than not knowing. Why would it be a dealbreaker?
- busterarm 8y agoAt Theranos at least, they could have been very literal bodies.
- sonabinu 8y agoI think Murdoch did a great job by letting the editors decide what to publish. There is something that company boards can learn from editors ;)