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I don't see any massive red flags in the stuff reported. I'm convinced based on what I know that Theranos engaged in deliberate fraud. But fraud is more than t

I don't see any massive red flags in the stuff reported. I'm convinced based on what I know that Theranos engaged in deliberate fraud. But fraud is more than the sum of promotional practices that can be taken retrospectively or without context as sign of wrongdoing. Having scripted demos that hide error messages is not really sketchy. It could be part of a fraud, or it could not, but it's not really telling. I say this because we often see popular ethical judgements where it's made out that there is a clear line between good and bad and that because the key players were unethical, they just did a bunch of bad things. I don't see it that way. There are lots of individual small judgements, most of which could be completely benign, but that add up to a fraud in the bigger picture. It probably makes sense as part of a body of evidence in a trial, but it's not really as sensational as the tabloids would like it to be. Incidentally, I think that Theranos and Enron are basically the same story (at least Bad Blood and The Smartest Guys in the Room are the same book). And the root cause in both is not direct lack of scruples, but believing that ideas are what's important and execution doesn't matter. The lesson to me, is that a good way to get into trouble you cant get out of (and both of these stories resulted in real people taking their lives) is to think that details don't matter and a good idea is all you need.

spaetzleesser 5y ago
You may do scripted demos or avoiding problematic errors. But usually you will have some kind of path to get where you want to be. From what I have read Theranos had nothing. They had no idea how they could make their machines work. There was no new technology or new insight. They just lied blatantly. That’s on a different level from the usual cheating people do at demos.
- adolph 5y ago
  Theranos has better than nothing. They have patents! https://patents.justia.com/assignee/theranos-inc https://patents.justia.com/assignee/theranos-inc
tialaramex 5y ago
So, fraud is a set of crimes which require intent. Specifically, they require intent to either gain from dishonesty or to cause another to lose through your dishonesty. Thus, dishonesty means you're skating on thin ice because a prosecutor only needs to show intent to gain (or for another to lose) and you're done. Much better to be honest and eliminate this whole thrust altogether. Intent to gain without dishonesty isn't a crime and would be generally seen as admirable.
dgreensp 5y ago
I try to be less judgmental and reactive than the norm about evaluating others’ actions, too, but I question whether the logic you are using to distance them from wrongdoing is really sound or necessary. If they did a bunch of unethical stuff that adds up to fraud, as you agree, what does it matter if some individual actions, if you completely take them out of context, look at them through the right lens, and create a distinction between “unethical” and “bad,” aren’t necessarily bad? Maybe the reason no one is saying that is because no one is doing that, because it’s not relevant. The individual actions are certainly sketchy, IMO. And red flags. Is there a definite semantic difference? It seems like splitting hairs. No single action by itself implies fraud, though significant acts of lying make a case. Theranos’s level of deception is not the norm. Nor is it legal or ok. You conclude by sort of saying you just aren’t going to focus on the misconduct aspect of things. But it is still there.
outworlder 5y ago
Hiding error messages is one thing. What about showcasing devices that pretended to work but then shipping the tests to be run in normal labs?
- dfsegoat 5y ago
  > What about showcasing devices that pretended to work but then shipping the tests to be run in normal labs? They didn't even have any basic systems validation / quality management documentation, which is how they racked up their first FDA inspection violations. This really should have been obvious to anyone doing due diligence in a regulated space (devices, pharma, etc.).
  - Breza 5y ago
    After reading Bad Blood, I can't help but wonder if CVS spotted the scam and stayed away.
- wolverine876 5y ago
  While the behavior is atrocious IMHO, the article doesn't say the tests were run in 'normal labs': > the actual test would be run in a lab away from prying eyes That lab could have been using a Theranos machine, but with errors displayed, etc.
goldcd 5y ago
I think having scripted demos that hide error messages is sketchy, if you're representing the demo as "being your product". You're saying "this is my product" and you're showing something that "isn't your product". Doesn't mean I'm against demos - but normally you can come up with a slice (or two if you're lucky) through it that genuinely works and shows for a representative scenario (and if your arm's twisted you just say that with more money, you can support more scenarios).
rtkwe 5y ago
They were telling investors the tests were actually running on machines though which is factually untrue and were lying in materials sent to investors about the testing done on devices and the validation of those tests. This is far more than just having a narrow slice demo and saying "this is a demo of what X will be like." What they were doing was directly lying about what the machines were doing and what they were capable of doing, beyond just lying to investors they pushed it out to the public using shoddy validation techniques which gave people incorrect test results.
PragmaticPulp 5y ago
> Having scripted demos that hide error messages is not really sketchy. It could be part of a fraud, or it could not, but it's not really telling. They pricked investors fingers and implied that a Theranos machine would process the sample, but then they secretly ran the sample on a competitor's machine in another room: > In demos of the company’s technology, investors would have their fingers pricked for testing alongside one of Theranos’ proprietary devices, but the actual test would be run in a lab away from prying eyes. This would be the equivalent of a SaaS company setting up an API that just passed the calls through to a competitor's API, but then telling investors that their own platform was operational. You can run the pass-through API long enough to fake demos and raise money, but it's still fraud if you mislead investors to believe that you have the platform operational. They weren't just hiding error messages or smoothing over rough edges. They were architecting fraudulent claims to investors.
- eli 5y ago
  Pretty sure a non-zero number of AI/ML startups were actually just feeding data to humans, at least at the start.
  - AndyNemmity 5y ago
    can confirm a few examples. the key is at the start though, they all made it there over some time.
  - spaetzleesser 5y ago
    “At least at the start” is possibly ok if you have a path forward to get to your goal. Theranos had no path.
    - spiffytech 5y ago
      > “At least at the start” is possibly ok if you have a path forward to get to your goal. Only if you're not misrepresenting your capabilities to investors or customers.
hn_throwaway_99 5y ago
These kinds of responses infuriate me. I also get so frustrated by so much of the media taking the line of "This was just Silicon Valley's 'Fake it til you make it' culture taken to the extreme." Nonsense. I've worked in startups my entire 20+ year career, and while we've certainly spun or promoted things to the extreme, the line of "outright lying" was never gray. Take for example the initial iPhone demo by Steve Jobs. It's been mentioned many times before that the demo had to be run in a specific, exact order, or else the OS would crash. That's fine, but nothing in those demos were faked. It all did exactly what he demoed, live. It would have been a much different story, if, for example, Jobs just demoed a video with surreptitious pause and play buttons. That would have been fraud, and that's much less than what Theranos faked here.
- 908B64B197 5y ago
  > It would have been a much different story, if, for example, Jobs just demoed a video with surreptitious pause and play buttons. That would have been fraud Not really. I mean the iPhone did hit the shelves not long after that demo. So anyone on the street could try one out (they had physical demo units in store). Theranos wouldn't let anyone just play with their machine. But we're talking about a company that has a track record at shipping OSes (Apple). Even if they faked the iPhone demo, it would still have been believable that Apple could write an OS for a portable device.
- torgoguys 5y ago
  >These kinds of responses infuriate me. I also get so frustrated by so much of the media taking the line of "This was just Silicon Valley's 'Fake it til you make it' culture taken to the extreme." Yeah, me too. In this case, Theranos was saying they were going to demo their revolutionary lab testing process. They would take the blood sample from the participants being demoed to, put them in a cartridge that then went into the machine, and the machine would light up and start making noises. They would lead the people out of the room and other employees would secretly grab the blood from the machine and process it with a very labor intensive manual process (normally taking a couple of hours). When the participants were given their results, the implication was that Theranos' revolutionary machine did all the work.
- 5y ago
Barrin92 5y ago
>I don't see any massive red flags in the stuff reported. did you see the part where they ran fraudulent tests on actual cancer patients? https://www.wsj.com/articles/the-patients-hurt-by-theranos-1476973026 https://www.wsj.com/articles/the-patients-hurt-by-theranos-1...
HWR_14 5y ago
You brought up Enron, so you should be very aware that " But fraud is more than the sum of promotional practices that can be taken retrospectively or without context as sign of wrongdoing." is the exact opposite of the legal strategy they used in Enron's prosecution. Specifically, they never tried to say any specific act was illegal, just the sum of all the acts.
FireBeyond 5y ago
They literally HID the lab that had the actual devices from FDA inspectors. In a B-movie style "slide a cabinet in front of the door" style deception. Don't try to handwave that away as "the sum of promotional practices". That's abject fraud, not "faking it til you make it".

spaetzleesser 5y ago

You may do scripted demos or avoiding problematic errors. But usually you will have some kind of path to get where you want to be. From what I have read Theranos had nothing. They had no idea how they could make their machines work. There was no new technology or new insight. They just lied blatantly. That’s on a different level from the usual cheating people do at demos.

adolph 5y ago
Theranos has better than nothing. They have patents! https://patents.justia.com/assignee/theranos-inc https://patents.justia.com/assignee/theranos-inc

tialaramex 5y ago

So, fraud is a set of crimes which require intent. Specifically, they require intent to either gain from dishonesty or to cause another to lose through your dishonesty. Thus, dishonesty means you're skating on thin ice because a prosecutor only needs to show intent to gain (or for another to lose) and you're done. Much better to be honest and eliminate this whole thrust altogether. Intent to gain without dishonesty isn't a crime and would be generally seen as admirable.

dgreensp 5y ago

I try to be less judgmental and reactive than the norm about evaluating others’ actions, too, but I question whether the logic you are using to distance them from wrongdoing is really sound or necessary. If they did a bunch of unethical stuff that adds up to fraud, as you agree, what does it matter if some individual actions, if you completely take them out of context, look at them through the right lens, and create a distinction between “unethical” and “bad,” aren’t necessarily bad? Maybe the reason no one is saying that is because no one is doing that, because it’s not relevant. The individual actions are certainly sketchy, IMO. And red flags. Is there a definite semantic difference? It seems like splitting hairs. No single action by itself implies fraud, though significant acts of lying make a case. Theranos’s level of deception is not the norm. Nor is it legal or ok. You conclude by sort of saying you just aren’t going to focus on the misconduct aspect of things. But it is still there.

outworlder 5y ago

Hiding error messages is one thing. What about showcasing devices that pretended to work but then shipping the tests to be run in normal labs?

dfsegoat 5y ago
> What about showcasing devices that pretended to work but then shipping the tests to be run in normal labs? They didn't even have any basic systems validation / quality management documentation, which is how they racked up their first FDA inspection violations. This really should have been obvious to anyone doing due diligence in a regulated space (devices, pharma, etc.).
- Breza 5y ago
  After reading Bad Blood, I can't help but wonder if CVS spotted the scam and stayed away.
wolverine876 5y ago
While the behavior is atrocious IMHO, the article doesn't say the tests were run in 'normal labs': > the actual test would be run in a lab away from prying eyes That lab could have been using a Theranos machine, but with errors displayed, etc.

goldcd 5y ago

I think having scripted demos that hide error messages is sketchy, if you're representing the demo as "being your product". You're saying "this is my product" and you're showing something that "isn't your product". Doesn't mean I'm against demos - but normally you can come up with a slice (or two if you're lucky) through it that genuinely works and shows for a representative scenario (and if your arm's twisted you just say that with more money, you can support more scenarios).

rtkwe 5y ago

They were telling investors the tests were actually running on machines though which is factually untrue and were lying in materials sent to investors about the testing done on devices and the validation of those tests. This is far more than just having a narrow slice demo and saying "this is a demo of what X will be like." What they were doing was directly lying about what the machines were doing and what they were capable of doing, beyond just lying to investors they pushed it out to the public using shoddy validation techniques which gave people incorrect test results.

PragmaticPulp 5y ago

> Having scripted demos that hide error messages is not really sketchy. It could be part of a fraud, or it could not, but it's not really telling. They pricked investors fingers and implied that a Theranos machine would process the sample, but then they secretly ran the sample on a competitor's machine in another room: > In demos of the company’s technology, investors would have their fingers pricked for testing alongside one of Theranos’ proprietary devices, but the actual test would be run in a lab away from prying eyes. This would be the equivalent of a SaaS company setting up an API that just passed the calls through to a competitor's API, but then telling investors that their own platform was operational. You can run the pass-through API long enough to fake demos and raise money, but it's still fraud if you mislead investors to believe that you have the platform operational. They weren't just hiding error messages or smoothing over rough edges. They were architecting fraudulent claims to investors.

eli 5y ago
Pretty sure a non-zero number of AI/ML startups were actually just feeding data to humans, at least at the start.
- AndyNemmity 5y ago
  can confirm a few examples. the key is at the start though, they all made it there over some time.
- spaetzleesser 5y ago
  “At least at the start” is possibly ok if you have a path forward to get to your goal. Theranos had no path.
  - spiffytech 5y ago
    > “At least at the start” is possibly ok if you have a path forward to get to your goal. Only if you're not misrepresenting your capabilities to investors or customers.

hn_throwaway_99 5y ago

These kinds of responses infuriate me. I also get so frustrated by so much of the media taking the line of "This was just Silicon Valley's 'Fake it til you make it' culture taken to the extreme." Nonsense. I've worked in startups my entire 20+ year career, and while we've certainly spun or promoted things to the extreme, the line of "outright lying" was never gray. Take for example the initial iPhone demo by Steve Jobs. It's been mentioned many times before that the demo had to be run in a specific, exact order, or else the OS would crash. That's fine, but nothing in those demos were faked. It all did exactly what he demoed, live. It would have been a much different story, if, for example, Jobs just demoed a video with surreptitious pause and play buttons. That would have been fraud, and that's much less than what Theranos faked here.

908B64B197 5y ago
> It would have been a much different story, if, for example, Jobs just demoed a video with surreptitious pause and play buttons. That would have been fraud Not really. I mean the iPhone did hit the shelves not long after that demo. So anyone on the street could try one out (they had physical demo units in store). Theranos wouldn't let anyone just play with their machine. But we're talking about a company that has a track record at shipping OSes (Apple). Even if they faked the iPhone demo, it would still have been believable that Apple could write an OS for a portable device.
torgoguys 5y ago
>These kinds of responses infuriate me. I also get so frustrated by so much of the media taking the line of "This was just Silicon Valley's 'Fake it til you make it' culture taken to the extreme." Yeah, me too. In this case, Theranos was saying they were going to demo their revolutionary lab testing process. They would take the blood sample from the participants being demoed to, put them in a cartridge that then went into the machine, and the machine would light up and start making noises. They would lead the people out of the room and other employees would secretly grab the blood from the machine and process it with a very labor intensive manual process (normally taking a couple of hours). When the participants were given their results, the implication was that Theranos' revolutionary machine did all the work.
5y ago

Barrin92 5y ago

>I don't see any massive red flags in the stuff reported. did you see the part where they ran fraudulent tests on actual cancer patients? https://www.wsj.com/articles/the-patients-hurt-by-theranos-1476973026 https://www.wsj.com/articles/the-patients-hurt-by-theranos-1...

HWR_14 5y ago

You brought up Enron, so you should be very aware that " But fraud is more than the sum of promotional practices that can be taken retrospectively or without context as sign of wrongdoing." is the exact opposite of the legal strategy they used in Enron's prosecution. Specifically, they never tried to say any specific act was illegal, just the sum of all the acts.

FireBeyond 5y ago

They literally HID the lab that had the actual devices from FDA inspectors. In a B-movie style "slide a cabinet in front of the door" style deception. Don't try to handwave that away as "the sum of promotional practices". That's abject fraud, not "faking it til you make it".