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It's not unique to Theranos. It's all part of the perverse incentives involved with well-funded tech companies. There is no real incentive to call out fraud.
by timoth3y 8y ago
It's not unique to Theranos.
It's all part of the perverse incentives involved with well-funded tech companies.
There is no real incentive to call out fraud. As an investor or a partner you might pass on a deal, but to go public with your concerns means risking a possible lawsuit, raising the ire of the people who are already on the bandwagon, being excluded from future deals, and being dismissed as someone who is out of touch and "not getting it."
Contrarians can short publicly-traded companies, so there is a financial incentive to call out BS, but for private companies there is very little upside in raising concerns publicly.
If you doubt this effect, contrast the number of articles talking about how blockchain is the future with those taking a hard look at blockchain's financial viability for specific applications. The former group are the ones being asked to speak at conferences and landing large consulting contracts.
- ThrustVectoring 8y agoShort traders and put option holders have to also get the timeline and technical factors right to get paid. See the debacle with LongFin. The right play was to go long and make money off borrow fees. The bears got hosed by a trading freeze that kept them from closing their shorts or from acquiring shares to sell for their expiring put options.
- timoth3y 8y agoTrue. That's why so many of them try to "leak" the problem to journalists after they have taken their short positions. I mean it's not a perfect system, but at least in the public markets, there is some financial incentive to expose deception.
- Torn 8y agoI have a strong suspicion another example will be Magic Leap. Note: not as an intentionally-misleading or lying case, but just as another extremely well-funded startup whose launch is likely to fall short of the hype. $2.3bn in funding adds an immense pressure for it to be successful and perceived as revolutionary.
- Bartweiss 8y agoMagic Leap could certainly fail, but I don't understand how they could be another Theranos. Theranos had contracts-signed, money-spent deadlines for things they couldn't provide (the Walgreens deal), and was selling further investors by lying about having their product already in use by the government. At least publicly, Magic Leap has promised virtually nothing. They said in December they'd ship something this year, but there's nothing binding in that. Even in the worst case - the tech is literally useless and they spent all the money - it'd be a bad investment rather than fraud and breach of contract.
- GFischer 8y agoAgreed. Somebody else mentioned it's more similar to Segway than to Theranos - overhyped to hell, but not a scam.
- mrguyorama 8y agoIMO selling vaporware is indeed a scam