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U.S. Bans Theranos CEO Elizabeth Holmes from Operating Labs for Two Years (wsj.com)
418 points by kevinnk on July 8, 2016 | hide | past | web | favorite | 269 comments



I hope that Holmes' bizarre behavior as the issues went public keep her from ever running anything even remotely close to things that matter for people's lives and well being.

Even as the questions were building and the noose was tightening, she would announce a public talk to reveal and openly share information on the company's tech, then mysteriously cancel a short while later -- she did this over and over.

I'm still not convinced that Theranos was meant to be a scam, or at least not a scam in the way most people are thinking about it. But it has definitely produced a similar output, and that makes it functionally equivalent.

I hope, really hope, that someday the true story about all the WTF-ness around Holmes and Theranos comes out.

I've been on the inside of a company like this once and I ran away as soon as I realized the place was up to no good. What still bothers me about my personal experience is that I, even as a person on the inside, still don't know the truth about that company due to all the same weird kind of cult of secrecy things we've seen at Theranos. The truth in these kinds of things, I suspect, lives only inside the heads of the people who run these kinds of organizations and it may not ever be possible to get at what the truth actually is depending on how far down the delusion hole they've fallen.

Real kudos to the press who broke and made very public the stories. This was the media at its finest. Those journalists may have helped save many lives.


> Real kudos to the press who broke and made very public the stories. This was the media at its finest.

On the other hand, most of the press was more than happy to play along with this charade. Those in the media who ran with lazy profiles enabling this fraud should be remembered.


The Wall Street Journal, and in particular, reporter John Carreyrou, deserve a special callout for launching an investigation while the rest of the press was idle. I was struck by this ProPublica podcast with Carreyrou in which the interviewer, a Pulitzer Prize winner himself, said he and other health reporters had heard grumblings and rumors but don't enough to pursue a closer look. Carreyrou, on the other hand, said he acted on a New Yorker profile (which, IMHO, was fairly well balanced) in which he was curious how the company could keep its technology so obscured.

https://www.propublica.org/podcast/item/how-a-reporter-pierc...

http://www.newyorker.com/magazine/2014/12/15/blood-simpler


yeah, absolutely true. The tech press was (as typical) atrocious, not much more than the caricature of tech blogs in Silicon Valley. The mainstream press was slightly better in at least raising the questions. It was obvious for more than a year that something was up with them.

Holmes' complete inability to answer simple direct questions was a huge flag to me, and when I saw it in interviews I was really waiting for the press to pounce and it just never seemed to come.

"So you say you aren't approved to do any testing?" wink wink

"<typical long winded Holmesian answer>"

"moving on, what's it like being a woman running a startup?"


Not sure if scam is the right word. Everyone is capable of deluding themselves into believing their current, morally questionable actions will be seen as justified in the future (when everything works, out of course). I'm sure even Bernie Madoff believed at some point he would win it all back and no one would ever know or be harmed.


I don't agree with your characterization of Bernie Madoff. He knew he was running a scam. He was clearly lying in his marketing materials, saying his fund performed certain trades that they never did. (See Harry Markopolos' book, "No One Would Listen"; that's how Markopolos figured out it was a scam.) I think Madoff is, at the least, a borderline sociopath. (If not an outright one.) A sociopath may think they can get away with it, and no one will know, but they probably don't think no one will be harmed - a sociopath does not care about harming others.

I think it's possible Holmes fits your description - she was in over her head, never set out to scam anyone, and slid down a very bad path without ever intending to. I don't know this is the case, but I believe it's possible. That, however, is not Madoff.


I never paid much attention to the details of the Madoff case but I think people on the internet throw out the "sociopath" label way too freely.

Not much is gained from that label, in my opinion. And I certainly wouldn't apply it to Bernie Madoff or Holmes based on what I know of their situations.


I use the word because, based on his actions, I think he does not have empathy for other people. He knowingly defrauded thousands of people, often depleting all of their savings. The scale of his fraud, and the length of time he perpetuated it, is staggering.


Brains don't handle scale well. Defrauding a thousand people can be easier empathy-wise than defrauding a single person, because it's a statistic rather than an individual. You cannot use the total scale in trying to judge whether someone has empathy.

The impulse to associate 'bad actions' with 'inherently bad people' can make it harder for people to realize when they are acting badly and to pull out.

http://www.npr.org/2012/05/01/151764534/psychology-of-fraud-...


Madoff was quite unusual because he was very actively involved in the upperclass Jewish philanthropic community. It's also where most of his victims came from.

That's one of the reasons he was able to get away with it for so long. People assumed that he wouldn't steal from members of his own community like that. So most observers assumed he found a way to front run trades on his other funds without getting caught, and were looking for evidence of that.


Right, empathy or sympathy would have meant that among other options, in his continued lies to investors, "We made a very bad trade, got into Company X, who went bankrupt / were delisted". He could have shut it down. He chose not to.


I don't know, his investors were mostly rich people wanting to get richer. I don't feel empathy for those people either.


> but I think people on the internet throw out the "sociopath" label way too freely.

Not an argument.

> And I certainly wouldn't apply it to Bernie Madoff or Holmes based on what I know of their situations.

Not an argument.

If you're going to disagree with someone, generally, some logic as to why is useful, not just "I don't agree". Madoff certainly deserves that label, he ruined lives by running the biggest investment scam in history: he clearly didn't in any way care about what happened to those other people, completely lacking in empathy, they were used and discarded.


What definition of "sociopath" are you using here? How do you third-hand diagnose a man as completely lacking in empathy? Can we somehow use this skill for good instead of boring internet commentary?


I'm not third hand diagnosing anyone, I'm not diagnosing anyone, and I'm not the one who even brought up the term sociopath as I'm not the OP; I simply said he deserves the label given what he's done. So if you're bored, feel free to go somewhere else.


I would stay away from the term sociopath because whether or not someone is a sociopath depends entirely on their feelings. And it's quite clearly impossible to know the emotions of another person and whether they experienced guilt/remorse/regret/empathy for their actions, regardless of their facial expressions.

I've also read the Nuremberg Diary. That book, and Hannah Arendt's famous phrase "banality of evil" have influenced my thinking in this area. People who do very bad things are not necessarily "less than human" or "exceptionally inhuman," although it's easy to make that assumption.

Anyway, I think the concept of a sociopath is entirely theoretical. Until we can scientifically determine what someone is feeling by hooking them up to a machine and reading their emotions as we present them with various scenarios (i.e. a Voigt-Kampff device) then why even bother throwing around such a sensationalized word?

As far as Madoff goes, I never understood the obsession with branding him as notably evil. He stole a lot of money from a lot of people and lied to a lot of people. But the notoriety of that case has more to do with him being an upstanding member of society i.e. "the last person you would expect" (also the scale of the fraud). I don't believe his theft is morally more egregious than millions of other thefts that are committed every day.


Psychopaths actually have reduced activity in the orbital cortex of the brain, which can be objectively measured. Not sure if it's a feature of all true psychopaths, but it's apparently quite common.

http://www.businessinsider.com/what-a-psychopath-brain-looks...


Declaring that someone must clearly have no empathy because they hurt people they didn't even know is also not an argument.


Actually it is an argument as that's one of the defining characteristics of the condition, it's not a great argument because I don't know how he feels, but it's more than just "I disagree" which is no argument at all. In any case, I'm not the OP, I didn't call him a sociopath, I merely said he deserved the label.


How much empathy do you have for the hundreds of people dying in car crashes each day? Not much, or you'd be crippled. It is ridiculous to look at low empathy for strangers and declare no empathy for anyone. So you don't even reach the prerequisite that would let you start to talk about the manifestations of sociopathy.


Bernies victims weren't strangers to him, your point is a strawman.


Do you have some info to back that up? A quote like "worked the so-called 'Jewish circuit' of well-heeled Jews he met at country clubs on Long Island and in Palm Beach." doesn't make it sound like these were people he knew well.

(And taking a loan from a friend while it was collapsing is a sign of desperation, something anyone could do, so don't quote me that particular interaction.)


You're moving the goal post, having empathy for people you've met and conned is in no way comparable to empathizing over countless victims of car crashes of people you've never met; car crash victims are a statistic, his marks were people he met and conned into investing. Google for five minutes, plenty of his victims met him, these weren't statistics, they were people he stole from using his charm. If you want to sit here and try to defend Madoff, be my guest because clearly, you just want to argue, so I'm done listening.


Not every sleezy salesperson in the world is a sociopath. You can meet someone in a business context without caring much about them, while not being a sociopath.

It's not 'defending' someone's actions to say that there is no proof of an extreme lack of empathy.


> Not every sleezy salesperson in the world is a sociopath.

Strawman, never said they were. You're arguing with yourself now.


> He was clearly lying in his marketing materials, saying his fund performed certain trades that they never did.

Theranos marketing materials lied. Only difference is they changed the marketing materials after they got caught.

> never set out to scam anyone

How do you know? Maybe that's been part of her scam...to operate it under the guise of a venture funded startup. The difference between Madoff and Holmes is that Madoff's scam is purely financial, so it's easy to understand motive. It's slightly harder to understand for Holmes' case and the verdict is still out.


Your quote removed the qualifiers from what I said. What I said, in full: "I think it's possible Holmes fits your description - she was in over her head, never set out to scam anyone, and slid down a very bad path without ever intending to. I don't know this is the case, but I believe it's possible."

So, to answer your question, I don't know, which I clearly said. However, I think it is possible that Holmes was not intentionally running a scam, but allowed herself to be deluded by her own story. Again, to be clear, I do not know this is the case. I think it is possibly true. To me, this is different from Madoff, where we know he knowingly ran a scam.


Why do you think you have such powerful psychiatric skills that you can third-hand diagnose a man?


He very clearly expressed it as an opinion. HN as a community seems more aware and mindful of mental health and illness issues (which is good!), but we need to be careful to not let over-sensitivity prevent rational discourse.

Is using the sociopath label premature or unsubstantiated? Possibly, I know I'm not qualified to assess that, but he does support his reasoning, even if it's wrong. If he had said, "Based on my understanding of what a sociopath is, and the facts as I understand them from Harry Markopolos' book, "No One Would Listen", I think Madoff is a borderline sociopath at least, and possibly an outright sociopath." would you have taken as much offense? Does that sentence not express a useful point of view with respect to the argument that Madoff is different than Holmes?

It's tricky, because our good-intentioned attempts to improve discourse can actually have the effect of stifling discourse when this tendency progresses farther. There are many topics that fall under race and sex that it's hard to rationally discuss because people view the asking of the question itself as insensitive. For example, try posing a question about advantages of a population (race, sex, insular group) based on genetics in a submission here that's related in some way, and you might find you've been down voted and possibly called racist or sexist (likely in more words but to the same effect) prior to anyone actually paying attention to the question you're really trying to ask, and whether it has merit. It's hard for people to stay rational when someone questions the foundations upon which we build a lot of our beliefs (such as people are born equal).

I find a good rule-of-thumb for me in situations where I feel the need to call out the method in which someone raised a point, but not necessarily the point itself, is to pose it as a question and ask whether the method they chose really helped or hindered their point, and to try to do so in a way that's not condescending (which I hope you don't take this comment as, it's surely not intended that way). For example:

"Is the label sociopath really appropriate, and do you think it was needed to make your point?"

In this case, I think scott_s does think it's appropriate (that was made clear), and because of that is was his point. Now, if the original comment was something like "You can't compare Madoff to Holmes, he's in a different category because he's a sociopath." then I would think differently, as there's little useful substance to that comment and it's not really substantiated.

Okay, got that off my chest. Feel free to ignore as you see fit... :)


It was part of my point, but not the main part. My main point is that Holmes and Madoff are potentially different - that I think Madoff is probably a sociopath is only part of that. That is hard to objectively establish. But what is objectively established is that Madoff knew what he was doing. I am unsure if Holmes is knowingly scamming people. My main concern with the comment I replied to is that, based on my reading, they implied Madoff may have unknowingly defrauded people, which is not the case. He knew what he was doing. Unfortunately, is-or-is-not-a-sociopath became the most commented on part.

Thanks for applying the principle of charity! (In case the tone of my text is unclear, that is a genuine sentiment.)


Sure, I got that. I misspoke a bit when I saw "that was his point". You used the sociopath statement not as the main point, but to drive that point. Not knowing (even possibly), is much different than definitely knowing and not caring. It's a double edged sword, in that the label quickly illustrates the difference you are pointing out, but then you have to deal with people focusing on the word and not the point. That makes it appropriate to use IMO, though sometimes self-defeating. :/


Oh, I wasn't correcting you! Just re-iterating in my own words what my intentions were. And, agreed.


Isn't this just a combination of generally admired startup behavior (fake it til you make it) combined with a business on which people's health might depend? When I read that they were using regular lab test machines to perform the majority of tests, it struck me as pretty much what my YC friends reported as received wisdom- that it's legit to start out doing it "by hand" before you get your tech working.


Startups aren't about "fake it til you make it". At its core a startup (and its founders and investors) are typically making a contrarian bet that must be right. Theranos bet that it could use a small amount of blood could be used to the same effect of much larger blood draws. It has turned out that this was not right at this point in time. If its technology worked we would not be reading this news story.

Of course while every company wants to paint itself in the best light it is probably best not to engage in outright deception. If discovered that can be fatal.


> Startups aren't about "fake it til you make it".

Unfortunately, many of them start that way, especially those that reap the benefits of network effects. Anecdote: http://venturebeat.com/2012/06/22/reddit-fake-users/


I don't think so. As I understood, their core value proposition was that they could deliver detailed, accurate blood test results with just a few drops of blood and their proprietary analysis technology. In reality, they used traditional venous draws (way more than a few drops), and competitors' systems to deliver test results of lower accuracy than their competitors. If they were really 'doing it by hand,' they would have still delivered on their core value prop of detailed results with only a few drops of blood.


Not so (if I understand your point). They were using the competitor systems on a few drops of blood. I read they were diluting the blood and then correcting the results. This is doing the same thing without the tech in the hopes that they would eventually make their tech work


Interesting, didn't realize they were using finger pricks (few drops of blood) on machines designed for venous draws. I guess the important point is that whatever they tried didn't deliver real value to their users (i.e. they did not 'make something people want').


I think you're absolutely right here -- and I would add the other meme common in that headspace: "No one knows what they're doing", a meme I also hate with a passion.

For all we know, Holmes could have harbored grave doubts about the viability of the tech, based on doing all the right sanity checks. But if she took the meme seriously, "hey, no one else knows what they're doing, no one knows why anything works, they just meander through life and things eventually fall into place. Once you have enough status, you're bulletproof, right?"


Yes, but the internal justifications of a scam artists are just that. It's still a scam to everyone else!


I think that parent is classifying a "true" scam as one where the scammer knows that they are scamming and just doesn't care. 419 scammers take money away from people and have no intention to ever "make things right." They may have internal justifications that "rich Westerners" can afford it, but that's slightly different than justifying that your tech will work out (or that our pyramid scheme will work out) in the end.


> Everyone is capable of deluding themselves into believing their current, morally questionable actions will be seen as justified in the future

This is dissonance, defined. Seeing one's actions as maybe being justified later is just rationalizing using other's feelings or thoughts. It's not cool to speak for others and if one is not careful, they can burn their entire life down around themselves.


That's a very convenient excuse: "I thought I was right". Doesn't make a scam any less so.

My bigger grudge with Theranos' founder and the likes is their hoax seriously hurts the startup industry culture. Some people get really confused, some start following in these footsteps, some even lose direction with so much mis-information flying around. The chest thumping hotshots suck up too much energy and resources from the ecosystem.


I'm curious. I have not heard a single thing about Theranos's downfall outside of the comments here on HN. Since you mention "press who broke ... stories", are there any articles out there that would also make me join the "Theranos is a fraud" crowd?


Issues with Theranos and the company's claims have been widely reported. One of the reasons there were discussions here on HN was that the news and articles that brought up these issues were submitted, voted up and then we all had a discussion on those articles and videos.

The WSJ reporting in particular has been deeply investigative where most of the rest of the media has just sniffed around at what appears to be a problem. Holmes' interviews in particular are some of the weirdest things I've ever seen, here's a fairly typical example: https://www.youtube.com/watch?v=A8qgmGtRMsY

Here's some examples of the media coverage of the company:

https://www.google.com/search?hl=en&gl=us&tbm=nws&authuser=0...

and here on HN

https://hn.algolia.com/?query=theranos&sort=byPopularity&pre...

and specificially about Holmes

https://hn.algolia.com/?query=elizabeth%20holmes&sort=byPopu...


Much of the initial reporting was by John Careyrou, writing for the Wall Street Journal. This article is representative: http://www.wsj.com/articles/theranos-has-struggled-with-bloo...


Kevin Loria and the Business Insider folks were on it before WSJ and deserve a shout-out (not to take away from WSJ who busted it wide open)

http://www.businessinsider.com/science-of-elizabeth-holmes-t...

http://www.businessinsider.com.au/scientist-skeptical-thrano...


The Wall Street Journal has had the most to say about Thernanos from what I've seen. The most active Theranos threads on HN look like they are from WSJ artciles. Here is the thread for the first WSJ articles where I started seeing this story pick up steam if you are interested. https://news.ycombinator.com/item?id=10391313


wow thats some bubble you live in! here: https://hn.algolia.com/?query=theranos&sort=byPopularity&pre...


p.s. this one was particularly insightful, as it was a scientific clinical review. https://news.ycombinator.com/item?id=11727529


I've talked to over 100 hematologists.

This business, didn't pass a basic litmus test of objective criticism from people who work in the space.

There seems to be this bravado among founders who believe they're sticking it to all the people who say something's amiss. I think if there's an elephant in the room though, it probably should be assassinated with a huge body of transparent evidence.


There appear to be two different sorts of "disruption":

1) There's disruption that's seen as impractical or insanely difficult (e.g. Tesla, SpaceX). Or technically feasible but with significant social or legal obstables (e.g. AirBnB, Uber).

2) Then there's another category, disruption that defies laws of physics. Kickstarter is replete with examples. This includes things like pocket-size underwater rebreaters, self-filling water bottles, and solar-powered motorcycles.

I'm no expert in the subject matter but Theranos tech seems to be in the latter.


What law of physics makes what Theranos attempted to achieve impossible? They were still drawing blood from the patient. Thus, it seems theoretically possible for technology to overcome the challenges the approach presents.


Quoting from a comment on one of Derek Lowe's posts on the subject (http://blogs.sciencemag.org/pipeline/archives/2015/10/15/the...) (note that a large fraction of commenters are active chemistry, medical, or biology researchers):

> The blood you get from a prick will be a mixture of blood from small venules, small arterioles, capillaries and lymph vessels, mixed with whatever loose tissue and cells have been cut by the prick and carried over into the blood. No way you could ever get a reliable CBC from such a sample. Since the kind of general blood tests that this company is targeting are usually CBC + chem panel, even if you could get your chem results from the prick, you still need a normal blood draw for the CBC, so the competitive advantage that they are trying to push (quick sampling by patient at pharmacy, without need for phlebotomist) is lost. On top of that, the variability inherent in chem results from prick blood will be significant for several analytes, like CK and AST (present in muscle so could be raised from prick injury), glucose and lipids (different levels in venous or arterial blood or lymph), etc…

In short, while it might be possible to reliably use only µL of blood for tests, using µL of blood for dozens of tests seems questionable, and the chosen blood source is likely to be mostly worthless.


That is evidence of the problem being difficult, not a rigorous "perpetual motion"-level impossibility proof. I could write something similar about a proposal to have computers play chess, based on the absurd blowup in elementary operations (think 1940s) and logic gate resets needed to compute a good move.


> That is evidence of the problem being difficult, not a rigorous "perpetual motion"-level impossibility proof.

That the uncertainty produced by the source chosen exceeds the acceptable variability in the results is an impossibility proof for a testing method relying exclusively on a single sample from that source having acceptable accuracy, since the accuracy of the test result cannot exceed the accuracy of the source used in representing the underlying measure.


Only if you could know in advance that there was no way to filter the input to the point that there is a correlation between the the filtered input and the blood state, which is exactly the point under contention.

For comparison, there is tremendous variation in the sound waves that humans recognize as the word "apple", but there are still systems that can filter out the relevant noise and identify the critical dimensions of variation.


Unless their test involves technology that can lower the uncertainty to acceptable levels, e.g. being able to isolate the blood from certain vessels despite using a prick method.

Simply saying that the source is messy is not a proof that it's impossible to work around that.


The source is not merely messy. It's a tiny sample of a fluid which is not absolutely consistent throughout.

This is a fundamental problem. You might luck into roughly correct results most of the time, but the basic nature of statistics is against you.


Oh I don't disagree with you at all. But even based on what you said, it's not hard to imagine that it's possible to identify and test some previously unidentified component of said fluid that is consistent throughout.

My point is only that there is no hard theory decrying this to be impossible in the same way that, say, computer scientists can prove that a problem is NP-complete.


You underestimate the magic of machine learning! :0...kidding. Sort of. I suspect they thought there was a software solution to this problem (and for all I know there might be)


What? Please elaborate! I can't think of how software overcomes this problem.


I doubt it can but if you did a large number of blood tests with finger stick and a large number at the same time with a regular blood draw you could put that data into some machine learning and see if you could figure out an algorithm to correct the results. You'd probably need more data than just the final counts. Maybe some kind of imaging data? Maybe ions? It's tough to speculate. Machine learning learning is all about finding patterns. Maybe some pattern could be used to do the correction?


Concentration is a global property which cannot be assessed locally in a fluid.


So all blood tests are useless?


Blood tests use a relatively large amount of blood to counter the problem. Also many blood tests are repeated multiple times before the doctor produces the final diagnosis. So multiple units of blood from a vein distributed over days vs a pinprick's worth of blood from a finger.


Also, blood found in a relatively large vein is much closer to the body average than that found in a capillary area, where much of the liquid is from extracellular space and not even coming from within blood vessels. Of course, extracellular space is filled from blood serum, but a lot of stuff has different concentrations in ECF.


The law of sample sizes? If I ask one person who they are going to vote for I can't tell you who is going to win the election.


Solar panel roadways for latter


That falls clearly into the former category.

Extreme to the point of being nonsensical in its impracticality (cost of installation, cost of replacement, current PV efficiencies, etc), but not fundamentally impossible.


Well none of the examples for latter aren't technically impossible. Impossibility is ie. Perpetual machine.


To be fair, that is how innovation occurs. There are many examples of "ridiculous" ideas that ended being wildly successful. Where would Elon Musk be if he listened to all of the incumbents who said that his ideas would never work? Obviously, the putative innovators massively failed in this case, but I don't think that the outcome proves that their original idea was fatally flawed, or at least that it wasn't worth attempting.


I think the difference is that Musk basically wanted to make a mass produced electric car.

While it is difficult I would say much of this is due to the infrastructure and capital requirements to get to this point. No one doubted that an electric supercar could be made, rather that it would be very difficult to achieve scale.

Had Theranos opted for a mass produced microfluidics chip and instrument based on existing chemistries people would have said it would be difficult to compete with the large industry players (Bio-Rad, Roche, Thermo Fisher etc). This would be deemed difficult or "ridiculous" for reasons relating to capital, infrastructure and potential market share rather than the actual science and functionality of the system.

This is where Theranos differs from Tesla, not only trying to achieve scale but do so with a unproven scientific method.

It's a shame that Theranos has played out like this because a system that uses a small amount of blood is a great end goal but should have been a 10-15-20 year goal; just as Musk didn't intend to produce a $30,000 mass market car from the beginning. If Theranos built their own instrument based on existing qPCR research/design and used existing chemistry they could get "in the door" and begin really understanding the market. They would need to differentiate but could do so by attempting build a single benchtop automated unit that removed the need for manual sample preparation. While their solution may be a premium offering and a smaller market this would lead them towards their ultimate goal. Over time they could begin to look into chemistries, chip designs and instruments that would bring them closer to their ultimate goal of low cost and low blood requirement testing.


> the incumbents who said that his ideas would never work

which ideas? Is there really that much innovative stuff by elon musk?

My impression is, that it was always more about economic feasibility than technical feasibility. Competitors to Tesla and SpaceX existed before those were founded but they lacked the investment.


I would say at the very least, the construction of the Model S and the supercharger network are hugely innovative.


But Tesla cars are just that - cars. Nor were they even the first electric cars.

Don't get me wrong, they're fantastic and innovative, but the basic technological underpinnings have been long established.


I'd say Tesla's main innovation was on the business end: they realized that batteries are expensive, so EVs must be expensive, and trying to cut corners everywhere else to bring the price down just results in a crappy car people don't want to buy. Instead, make it a great car that's really expensive, but so good that it justifies the high price. Any incumbent could have done this, they just... didn't.


> I would say at the very least, the construction of the Model S and the supercharger network are hugely innovative.

Sure, but not something that critics said was technically impossible (not likely to be viable as a business model, sure, but that's a different class of complaint.)


Depends on what you consider innovation. It's not straight invention when you put useful pieces together, but then again, that describes a lot of useful engineering these days. The inventive parts are already coming, though.


> Where would Elon Musk be if he listened to all of the incumbents who said that his ideas would never work?

There were no scientific and few engineering objections to most of Musk's projects, mostly social/business objections that the time window was uncertain, the risks were high, and it would be difficult to build a viable business to bridge the gap it would take to get to the objectives.

There's a difference between projects not making sense to the risk tolerances of current incumbents and projects operating in an area where the science is well-established and demonstrates clear reasons why what is proposed cannot work.


..and when characterizing Musk's projects, don't forget that there were (and are) _plenty_ of naysayers. Likely even a majority, given that even Musk himself e.g. thought that SpaceX was unlikely to succeed.


Tesla can be looked at as a play against battery cost and energy density, both of which have vaguely predictable trajectories:

http://i.imgur.com/NjvUGXh.png

Deciding to build a company that aggressively rides the edges of those curves is a lot different than building a company around a completely new technology that aims to beat anything in existence by a huge multiple (which is the claim for Theranos, that they would do accurate tests with vastly smaller amounts of blood).


Innovation is not the point; there's nothing wrong in building early stage prototypes, even incomplete or mostly non working ones. But you should not sell them as production ready, nor employ them in providing a service sold as production ready. For instance, Elon Musk hasn't yet opened a travel agency selling hyperloop tickets.


Elon Musk is an Nth mover (where N is high) in almost everything he's done. Electric cars are not a new concept (they actually predate ICE cars in some ways). Rockets are not a new concept. Paypal was kind of innovative conceptually at the time but in a boring way.


Theranos promised a faster, cheaper way of doing something.

Tesla built a very expensive sports-car, before they advanced towards cheaper products for the masses.


They had to raise significant sums of money to advance. Starting a car company is no joke. I would argue that Tesla is still not out of the woods. The most trying times still lay ahead for Tesla. This is why people have laughed for decades at anyone who says, "I want to start a car company." Tesla is still an absurd and absolutely crazy idea that I hope pans out.


I was actually thinking more about SpaceX. They promised technology that was faster (in terms of development speed) and cheaper.


Isn't that because they could work outside many bureaucratic regulations and Musk's focus on the essential?


Regulations don't prevent you from inventing new things, only from inflicting them onto the whole of the society. But they didn't invent anything useful in the first place, so arguing that regulations were what stopped them is silly.


Regulation was a wrong word.

Disclaimer: I don't know much about how SpaceX or NASA's finances work. But I assumed that, due to their tighter coupling with a government, NASA has less leeway in their decisions of which technologies to research compared to SpaceX.


The original idea was flawed. The reason so much blood needs to be drawn is because small samples too heterogeneous. Unless you change the properties of blood no test will fix that. Many many people knew this which shows that investors failed to perform some fairly basic due diligence and instead invested in gut and founder charisma. That may be okay when you're betting on a social network, but charisma can't overcome intrinsic empirical limitation.


Elon Musk wasn't playing with people's lives. The FDA exists for a reason.


That's not the point. I'm claiming that it was reasonable to attempt to develop the technology in a lab. Obviously they shouldn't have launched it in the state that it was in.


You sure? The two autopilot deaths say otherwise. There has and will always be risk in starting a company. Your products might have flaws and they might kill. Some companies make it through these events...some don't. Innovation is embracing a crazy idea to move humanity forward. However, it also means embracing all the unknowns.


There have been two highly-publicized Autopilot accidents, recently but only one death. And the second one didn't actually involve Autopilot, that was just the driver either being confused or scammy.


two autopilot deaths? afaik autopilot failed to react properly to already dangerous situation where it is in no way certain that human would have succeeded. do you know of an event where autopilot deliberately chose to drive into a tree and killed the passengers?


> do you know of an event where autopilot deliberately chose to drive into a tree and killed the passengers?

There are videos of the Autopilot feature attempting to swerve into oncoming traffic. It does have the potential to kill people, it likely will in wide usage just by raw statistics, and it's likely to eventually fall under regulation of some sort. That doesn't mean it's necessarily a bad feature, but pushing self-driving car functionality as a "beta" to the public is, by at least some definitions and to some extent, "Elon Musk playing with people's lives".


people swerve all the time because coffee and phones falling out of their hands, because their "cpu" is bug-ridden and decides to show them fiction instead of reality at will. so the connotation that goes with the phrase "playing with people's lives" is completely dishonest when faced with the fact that statistically autopilot is safer than human.


> statistically autopilot is safer than human

This is not born out by the currently available facts.

Tesla quoted deaths-per-autopilot-mile versus overall deaths-per-mile for all cars on the road. This is very misleading information, for a number of reasons.

1. Teslas are high-end luxury cars and thus have better safety features than the lower end of the market.

2. Teslas are likely to be newer and better maintained than the average car on the road. The average age of a car on the road is 11.4 years (https://www.google.com/search?q=average+age+of+cars+on+the+r...) - there are ZERO Tesla cars that old.

3. Autopilot is disabled on residential streets and those with no center divider (http://www.newsmax.com/TheWire/tesla-autopilot-videos-restri...), which means it's driving in more predictable situations than average. You're also unlikely to have it on when there are things like icy/snowy conditions.

4. Autopilot will hand over control when it can't handle something. If it does this suddenly, the subsequent crash may not count in Musk's "autopilot miles" statistic.


Autopilot doesn't just give up when it can't handle something. It sounds an urgent alarm telling the driver to take over, and if the driver doesn't, it stops the car and turns on the hazard lights.

Most drivers will take over and disengage Autopilot in doing so, so your point remains, but I wanted to make it clear that the car isn't just doing a "Jesus^H^H^H^H^HDriver take the wheel!" thing.


My resulting question for Musk would be "at what point does a subsequent accident not count in the deaths-per-mile stat?"

Is it when the alarm sounds? When it begins to slow? When it turns on the hazards? When it has come to a complete stop? How would being rear-rended during this process be counted?


Yes, that would be really good to know. I think it's safe to say that they're using reasonable criteria here, but I can totally understand why others would not be so trusting.


1 and 2 are irrelevant. tesla is a product, it's safety features, autopilot and build quality are part of that product. this product delivers certain deaths-per-mile characteristic. this characteristic in it's direct form can be compared to national average or to any other product.

3 this is valid point, but it's significance is diminishing as autopilot is accumulating death-free miles. also does tesla not deal with icy/snowy conditions in Norway?

4 is pure speculation.


> 1 and 2 are irrelevant.

#1 and #2 are not at all irrelevant. This sort of technology will make its way into lower-end cars in time. Having actual data on how safe it is, with other variables accounted for, is going to be extremely critical.

It's like claiming racecar driving is really safe because not many people die doing it. That's not actually because it's safe - it's because the drivers are very well trained, with very good safety equipment so they survive crashes.

Teslas are safer than average cars. The autopilot may not be.

> 3 this is valid point, but it's significance is diminishing as autopilot is accumulating death-free miles.

It is certain statistically to have more fatal accidents as it accrues more miles. The underlying issue - that "autopilot miles" are safer miles than "all miles" - will remain. Its accident tallies need to be compared statistically with miles with human drivers in similar road conditions. This will likely require a research study.

> also does tesla not deal with icy/snowy conditions in Norway?

I couldn't say for certain, but it apparently will shut down in moderate rain (http://www.teslarati.com/tesla-autopilot-limitations-heavy-r...) so I'd guess snow would have similar impact on its visibility and functionality.

> 4 is pure speculation.

#4 is an important question.


On sidenote it's shame that media (and internet hate crowd) is spinning what happened into proof that Tesla's autopilot is dangerous for you and those dear to you and was constructed to kill you on first opportunity.


Their cars were reviewed by agencies and given the highest safety ratings out there. That can't be said for Theranos.


Actually, they weren't. For a few reasons, Tesla has actually made a "point" of _not_ submitting vehicles for testing, which is why you won't see it here:

http://www.iihs.org/iihs/ratings/TSP-List

Per http://www.torquenews.com/1083/why-tesla-s-2014-model-s-cann... - has some interesting comments, too.


I'd note that the safety ratings currently have no ranking that'd be relevant for stuff like autopilot.


What two autopilot deaths? I thought there was only one (courtesy of a formerly certified Darwin Award nominee to boot).


> To be fair, that is how innovation occurs. There are many examples of "ridiculous" ideas that ended being wildly successful.

I don't mean to draw parallels, but I remember when Jobs announced the iPhone, everyone was very skeptical. Some called it the "Jesus Phone". I heard that when the iPhone was finally launched, Blackberry engineers went out and bought a few to see how he had done it.

Of course, just because there are skeptics it does not mean that the product is good. E.g., all the "perpetual motion" machines out there...


The bulk of criticism of Theranos is not for seeking a hugely ambitious goal and failing.

It's for hiding the failure and pushing the failed technology to patients outside the scope of an experiment.


Innovation requires fraud?


That's not at all what I said. My claim is that innovation often involves ignoring all of the incumbents who say that a new way will never work. Obviously you shouldn't inflate the results of your attempt.


What if incumbents provide valid reasons why something wouldn't work?


There was no doubt his electric cars would work - electric cars had long existed - there was doubt he could make a successful business out of it.


Elon Musk had pedigree


Elon Musk is himself an expert who knew rocketry. He knew his shit.

Even then, he almost failed.


No, he wasn't an expert when he started down this path.

http://www.businessinsider.com/how-elon-musk-learned-rocket-...


Nobody is. That's why you go to school when you decide to be a physician/programmer/actor. You're not born any of those things.


It doesn't contradict my argument at all.


What is your argument? Mine is that both Holmes and Musk were not initially experts in their respective fields.


Musk lives to learn. Holmes apparently - doesn't.

In an engineering culture, there's solid respect for reality.

In a political culture there's respect for caste, status, and power, but not so much for reality.

Political people believe their own PR. They believe all they have to do is throw money at something and bang the table enough and they can get whatever they want.

Engineers know it doesn't work like that. Sometimes they throw money at things and bang the table too, but ultimately if reality says "No" - or "Not yet" - they accept that and move on.


Absolutely. The difference is that Musk actually operate companies that build real things that actually work.

If the product don't actually work in the first place, you can't call that innovation and it appears that Holmes failed to do her due diligence.


Can someone explain me how Theranos' claim is anything else than me claiming that I can do a representative study with 5 participants and have the same statistical significance as others doing a study with 10000 participants?

Isn't this just elementary statistics and completely independent from the domain?


If it is known beforehand that all the participants will answer in the same way, testing 5 will produce as much information as testing 10000, so the question is whether any beforehand assertion like that applies.

One reason that assertion might not hold is if the 5 being tested come from a special interest group, knowing if that could be the case or not depends on domain knowledge.

http://www.bd.com/vacutainer/labnotes/Volume17Number1/compos...

So, it is known that small samples of blood taken from capillaries will have a different composition than large samples taken from veins. Is it possible to write a test that compensates for the known differences? Or is it just known that they are so different that one can't be inferred from the other? Hard to tell, needs cutting edge domain knowledge.


You're confusing random variation (which is helped by sample size) and bias (which isn't)


My example in the first paragraph has no random variation to explain how a test of 5 people could provide the same information as a test of 10000.

The second example includes bias as a lead-in to the actual problems that tests of capillary blood need to handle.


One sees the the same thing in nuclear fusion. All these companies popping up that aren't bothering to consult experts and will have to learn lessons the hard way.


Most of the fusion companies I've seen founded lately are led by people who have been scientists in this field for decades.

To which companies of you refer?


I guess I'm thinking about Lockheed Martin and EMC2. They're both taking taxpayer money for discredited approaches (mirror and cusp confinement, respectively).


What are your thoughts on Helion?


Don't know much about it I'm afraid.


I think Tharanos is a scam and misreported its results and capabilities.

That said, your "litmus test" is dangerous and should not be used. If you had talked to 100 cab drivers about Uber, how many would have said it's a viable idea?

Uber is actually WAY less viable than Theranos, because there are legal frameworks that made it literally illegal. Meanwhile Theranos is in a high-profit part of the medical industry, that is also (as you can see) regulated.

The issue is that Theranos is a scam. That's the only issue, not any of the stuff you mention.

Founder bravado exists because lots of parts of the world are stupid and wrong and done out of habit. Theranos isn't a scam due to bravado. It's a scam because it's not real.

If it "happened to be" real and not a scam, your comment could read exactly the same, except it would happen to be wrong instead of right. Your generalization about startups is entirely unjustified, and makes it that much harder for people who are not running scams to actually change the world.

Could I also venture a guess that you're not living in Silicon Valley? Your comment and others like it are the reason people don't change the world from the city you're living in, by creating a startup from scratch, but go and move to Silicon Valley to do it. If you have any examples of an Uber, an Airbnb, or a Tesla made in the city you're living in, go ahead and say it. These three companies have upended their respective markets (taxis, hotels, cars). You would have knifed them in their infancy, citing "founder bravado".

This literally impedes progress. People shouldn't have to move to Silicon Valley to be able to change the world.

None of this has ANYTHING to do with the fact that Theranos (and, to cite another example, that ultrasound charging company) are scams. They are scams ONLY because they're not real: not due to the opinions of the industries they're disrupting, and not because of bravado.

Don't conflate the two.


Theranos was not viable because it was a scam and people in the industry thought exactly that. Unless you believe taxi drivers are all arguing that Uber doesn't actually provide rides, I don't think your argument makes sense.


I'm arguing with the post that I replied to.

This person wrote:

>There seems to be this bravado among founders who believe they're sticking it to all the people who say something's amiss

which is a completely unfair generalization and hurts all founders, of all companies.

You raise irrelevant points. But to answer you, yes, there was a time in the past when taxi drivers would have argued that Uber is a scam, yes. I did a date-range Google search, and look at this:

http://observer.com/2012/10/uber-lawsuit-chicago-taxi-limous...

"Uber Sued for Consumer Fraud and Unlawful Practices by Chicago Taxi and Limo Companies". (2012)

Consumer fraud means scam.

So, please, jacalata, I would like you to say:

-> "All right, Taxi cab companies did accuse Uber of being a scam, i.e. of consumer fraud, in 2012. The only difference between this an Theranos is that Uber was real and Theranos is not real."

I want to hear you say this, because of the part of the comment that I quoted, stating "There seems to be this bravado among founders who believe they're sticking it to all the people who say something's amiss".

I'd love for you to agree that that signal or litmus test is irrelevant, and the only thing that matters is whether it's actually a scam.

Theranos was actually a scam - it didn't really do what it claimed at all, for which it is under criminal (criminal!) investigation. It has nothing, zip, zero, zilch, to do with Silicon Valley or founders, or bravado, or what the industry insiders were saying.


It should probably be noted that nearly all founder bravado is misplaced, just from a mathematical standpoint, as nearly all startup founders are helming failing businesses.

Whether that is a feature or a bug I suppose is a different question.


>Your comment and others like it are the reason people don't change the world from the city you're living in, by creating a startup from scratch, but go and move to Silicon Valley to do it

SV has advantages for startups, yes, but there is a world outside of your little pond, you know. Ola, Alibaba, Amazon, Tencent, Baidu. Even VW and Ford have excellent EV alternatives to Tesla. If change could only happen in SV, it would also be limited to SV.


I was addressing specifically Kumarski, it was not a generic "you". I was talking about the attitude he discusses. If he has an Uber, Airbnb, Tesla, etc, example, from the city he's living in, he's welcome to share. These companies are all guilty of the "bravado" he calls out. (Which has nothing to do with Theranos.)


Hear that? That's the sound of $9B in valuation disappearing :| There is really a thin line between delusion and brilliance.


It looks like a thin line in one plane but 1AU in a different plane.


If you pull a string that has the length of 1au, would it take 8 minutes for the other side to react to the tug, or would it move as soon as you pull the string?


It would take 1 au / speed of sound in string. The 8 minutes comes from the (much faster) speed of light.

Based on some googling it seems it would take roughly 1.8 years.


What if the string is completely non-elastic?


At those sizes there is no such thing as "completely non-elastic" (aka "rigid").


This. Diamond is one of the stiffest materials in existence. It has a sound speed of 12 000 m/s. Lightspeed is 300 000 000 m/s.


At any size, there is no such thing as "completely non-elastic", but at those sizes, pretending that some things are completely non-elastic is no longer a tolerable approximation.


How about observing a quantum-entangled particle 1AU away from its partner? Can the speed of information surpass the speed of light? I'm a physics noob so I wouldn't know about research in the field.


As far as we can tell, the effect of measuring an entangled particle is at least 10000 faster than the speed of light. According to theory, it's instant. You can't use it to transfer any information, though.


I assume that complete non-elasticity of something would violate the (presumed) light speed limit on causality.


What if the string isn't actually made of matter but is made up of some hypothetical substance that doesn't follow any laws of physics?

Same question.


If you can persuade people that you can make that hypothetical substance, there are a few pissed off investors around at the moment who will throw money at you.


> What if the string isn't actually made of matter but is made up of some hypothetical substance that doesn't follow any laws of physics?

If it doesn't follow any laws of physics, then there is no predictable relationship between any input and its action (since if there was such a predictable relationship, it would be a law of physics that the string was obeying.)


Since it doesn't follow any laws of physics: it actually moves the opposite way than the way you tugged it ;-)


Even rarefaction obeys the speed of light. :)


Speed of sound in the respective medium, actually. EM interactions obey speed of light, mechanical interactions obey the speed of sound.


But does hype?


If it doesn't, we could use it to send messages back in time. Isn't that exiting?


I used to think so.


Beautifully put.


I'm beginning to wonder if at any point they will pack their bags, return what's left to investors and close up shop...or maybe they'll just keep going until it's completely dead? Hell maybe they pivot to be a traditional lab with traditional equipment?


As a general rule that will serve everyone well on hacker news throughout their lives:

Don't ever expect someone who has gotten their hands on your money to voluntarily close up shop and give it back :p

They'll take it to the casino and bet it all on black, or siphon it off somewhere else before that ever happens...because all your money gone and them giving it back to you is the same thing to the person who no longer has it.


> Don't ever expect someone who has gotten their hands on your money to voluntarily close up shop and give it back :p

Maybe you shouldn't expect it, but I have seen a start-up or two that failed and that did exactly that.

And start-ups that fail have a whole pile of clauses triggered in the various shareholder agreements that count towards a 'liquidation event'. That's what liq-prefs are for and the immediate consequence usually is that the latest investors stand the best chance of getting some or all of their money back.


Yep. There's always some events that restore faith in humanity and make you go "wow, I'll remember that/them, full respect/kudos".

But just don't expect it...


I think it seriously increases your chances of getting funded with a new project later on.

On the other hand, if you're scamming consumers of course it is only a very small step to scam investors (and easier to get away with).


Theirs a few reasons at play that motivate people to NOT return the money.

* Sunken cost fallacy (we can still make a come back!)

* Failure is unacceptable (returning money is accepting utter failure)

* Returning money means you no longer possess it or the power / reputation it yields (you will no longer get a generous salary for example)

* Returning hundreds of millions of dollars with a multi-billion dollar loss is a joke to begin with


> * Returning hundreds of millions of dollars with a multi-billion dollar loss is a joke to begin with.

That's the definition of sunk cost fallacy isn't it? It's seeing yourself as someone who lost $9B not someone who has $200M :) that was a good life lesson for me personally.


> I'm beginning to wonder if at any point they will pack their bags, return what's left to investors and close up shop...

They may do so if forced by legal action; otherwise, its unlikely. If management can continue to spend other people's money pretending to try to run a viable business and paying themselves and their associates until there's nothing left to pay with, they'd probably rather do that that hand money back to investors.


Already doing that, right? They used traditional equipment while developing their new system, which never worked.


It's quite strange, how easy it is to build a valuation


Most of the time you just need to show up at TED and pretend your stuff is going to change the world, despite all you have for proof is close to nothing.


"We've already completed step 1. We're half way there." applause

https://www.youtube.com/watch?v=DkGMY63FF3Q


just grow up with a sliver spoon in your mouth and have daddy/mommy sell all their incredibly wealthy and powerful friends/contacts on the genius of their daughter and boom this is what you get.


I think it's yet another nail in the coffin of the term "valuation" having any useful meaning.


its not that thin. brilliance holds up to basic scrutiny. delusion doesn't.


Sometimes company leaders have severe problems with ethics. As mentioned in other comments, even YC has had companies that have bundled adware/malware with software, practiced dark patterns, hidden news of security breaches, etc.

I tend to see YC as being more "evolved" than other VC's, but I also think that these problems are more ingrained into the human condition.

YC could consider making funding contingent on all high level company officers attend or participate in some kind of ethics course. It could even be remote.

There could also be penalties built into VC agreements. If a company violates contracted ethical rules, then penalties could include replacement of staff, more shares being given to the VC, low share buyback prices for the VC, etc.

It could also be a two-way street. If YC violates some kind of ethical rule, then they could be punished by having to do something for the companies they represent.

Ethics are important but so far they have just been "best practices" in our industry and not something contracted and enforced.


Hacking sometimes puts you in a grey area :)

Airbnb: The Growth Story You Didn't Know https://growthhackers.com/growth-studies/airbnb

Airbnb Cofounder Was One Of The Worst Spammers In The World, Says His Freshman Roommate

http://www.businessinsider.com/airbnb-co-founders-freshman-r...


What's interesting about the spammer link is that the YC narrative and everyone thinks about Obama O's and Brian Chesky's hustle making this business. Whereas its clear that mass emailing in the spirit of all publicity is good publicity is what created huge awareness amongst potential customers.


Yeah I don't really mind the spam so much, but I really hate when people pollute others' senses of reality with misinformation. If the AirBnB story is all about cereal and photographers walking around NYC, then you teach others to have a less accurate view of reality and you destroy their ability to make good decisions. They will start companies with an unearned sense of optimism, etc.

Go ahead and spam if you're a spammer, but be honest about it.


I wonder if I am too cynical, but at the root of it the main purpose of building a company is to make money. You might genuinely want to change the world but that is emotionally secondary to gaining wealth. To be a successful entrepreneur, it helps to be ambitious and generally this is a trait that is unlikely (though not unheard of) to be paired with a significant degree of concern for others.

Most companies, and many large tech companies have shady practices, usually in the form of misleading advertising.


> Sometimes company leaders have severe problems with ethics.

> YC could consider making funding contingent on all high level company officers attend or participate in some kind of ethics course.

Do you think those company leaders simply didn't know that what they were doing was unethical? I doubt it was a case of "whoops, who knew!"


In large defense contracting firms it works like this:

A high-level executive gets caught bribing government officials (cash, jobs for relatives, etc.) in exchange for favorable treatment/contracts.

Company gets sanctioned, and ALL employees get to have regular ethics and conflict-of-interest training. Because obviously the rank-and-file employees are part of the problem. And I wouldn't be surprised if the executives don't actually receive/attend the training.


I have no sympathy for her. It's incredibly irresponsible to do what she did- play marketing games with medical technology. Theranos' unethical behaviour has made it much more difficult for future innovation in the medical field, and has potentially cost lives. This sanction is appropriate.

My fiancee works as a laboratory scientist in a hospital conducting patient sample testing, and her and her co-workers take their work incredibly seriously- checking, and re-checking their work, with complex protocols to guarantee the accuracy of their testing. It's disappointing to see that same attitude lacking in Theranos.


Trying to imagine myself willfully misleading her investors and the public for as long as she did, and at that scale extends beyond my capacity for empathy. I suspect she's genuinely delusional. I don't know how else someone could do something like that.


I honestly think most entrepreneurs are capable of it. The hype level of Theranos is present at MOST start-ups.

I.E.

A Large software company that allowed user data to be stolen because of known security issues. Software company does not inform the public of the breach until forced to.

A large medical company that allowed a very large failure rate of testing devices from known issues. Medical company does not inform the public of the breach until forced to.


What scares me most is that the failure are always seen as morally acceptable loss to the founders : "it's that or we have to fire half the company", "it's that or we can't pay salaries", "it's that or closing the company", "it's that or we're in even bigger legal troubles". It basically boils down to "I know I'm doing something wrong but I have no choice". I've personally met one these people. Very smart guy, but unable to say "I'm doing something wrong, so it's better to stop now".

Ethics should be hammered in some people's head...


"I know it's wrong but those are my orders..."


Agreed. This should be a case study for the importance of following best practices and adhering to appropriate safety protocols. Such protocols should exist in any organization that designs products for other people to use.


There's a lot of precedent for it, whether historical or in out curgent world. Some people are just cynical and devoid of much empathy. If they happen to have charisma and a lot of cunning, it creates really dangerous individuals that can cause a lot of suffering. Once people like that understand that they can bend others to their will there's almost no stopping them.

In Theranos' case, I don't believe the founder was necessarily this type of person, and she was probably delusional, but I don't find it surprising that they would be capable of lying to people's faces over a large period of time.


I agree with the sentiment, this stuff's important.

But when does "playing marketing games" become OK? Maybe for mobile games, but even then you have kids taking their parent's credit cards out of wallets and spending 100s... everything's important to somebody.

Clearly medical tech is extra important, and the consequences even more grave, but I hope this is a lesson to everyone that trying to dupe all of society sometimes has consequences.

And hopefully convince more people to do ... nicer things? Better things? Well, at least taking things seriously.


> But when does "playing marketing games" become OK?

When it comes to anything that can affect your health in medical related capacities it's tough to say it's ever okay. But duping a 9 year old into buying $200 worth of bullshit in-app purchases? Also very unethical, in my opinion, but at least it doesn't directly result in inaccurate medical care which could easily lead to serious injury or death.

So ultimately I'm not sure it's ever ethically okay but that's probably going to depend on each person's definition of "playing marketing games".


It's only ever OK. That's just a societal agreement. It's never good. It seems like an extremely conservative application of innocent until proven guilty. Advertising has been deemed necessary despite the ways it can be abused. We should likely be more critical in "serious" markets. It's insane that we let Coke/Pepsi regularly subject us all to babes in bikinis sensually consuming fizzy sugar water. That or whatever other psychologically invasive scene they've contrived. But even then, we still require that you not tell outright lies about your product. This ruling was definitely fair. If not lenient. It would be nice to see fewer marketing games it's just hard to find a good place to draw the line. Not lying is a very low bar.


I mean, advertising can also just be about brand awareness, or talking about a product. How many psychological tricks are ads in the sidebar of Stack Overflow? The concept of advertising isn't inherently evil.

To be clear, I agree 10000% with the action taken here. I would like for us to start applying this strict standard more often.


I'm talking about "playing marketing games" and not advertising in general. Then I'm talking about how hard it is to tell the two apart and the lousy compromises we've made in doing so. That being said I think brand awareness is mostly manipulative. Consumers need product awareness. It's definitely on the safer side of games though. I suspect it's fairly intrinsic/necessary. I don't want to advertise for my competitors.

The sidebar on StackOverflow is great.


Maybe it's never "OK" but sometimes it threatens life and limb.


It's a cold fusion moment for all medical innovation perceived as coming from a 'start-up.'

Funding for real fusion research is still difficult to come by because of the shadow of the cold fusion debacle...


You're absolutely right. And it continues to this day (cough... Lockheed... cough).

There is a huge credibility gap in fusion research, due to no fault in the mainstream research community.


Agreed - she should be imprisoned. You don't get to play with lives.


I think that's the problem. It hasn't been linked to deaths yet. I fear it might be impossible to link a ~year of invalidated blood testing as the cause of death.

Did Theranos test for fatal diseases? Did they just test for mundane stuff?


> I fear it might be impossible to link a ~year of invalidated blood testing as the cause of death.

I can only see one way this happened. Someone got a false negative. They would have gone to another lab but chose Theranos based on marketing claims. They get tested now and see their positive result for a terminal condition they can no longer treat.


Ouch. Sanctions mean "shutting down and subsequently rebuilding the Newark lab from the ground up, rebuilding quality systems, adding highly experienced leadership, personnel and experts, and implementing enhanced quality and training procedures". There is a chance to appeal, but "such appeals have rarely succeeded in the past". Couple that with an "unspecified monetary penalty" and this looks like a very big nail in the Theranos coffin.

Side note: Anyone else have trouble viewing the WSJ article? I had to read the full text through a private news outlet, even though I tried signing in to WSJ with Facebook :/

Edit: Added a sentence of detail to the last paragraph, for those who still can't see the article.


Whenever you can't view a WSJ article due to paywall, copy/paste the article headline into google search then click the article out of the google results. Paywall will vanish.

If you're talking about a different problem, sorry, no idea.


I just use this chrome extension which does it automatically:

https://chrome.google.com/webstore/detail/bypass/ekfnpmbmfml...


You can also click the 'web' button under the headline here


And she went to Stanford? What a joke. Seriously, I am tired and sick of government and regulators not sending people to trials at all. I was watching Elizabeth Warren's hearing in the Senate on finance issues, and she brings up a good point. Wall Street banks have not been punished hard enough. In case of evident and deliberated fraud and cover up, no one was sent to trial. This is stupid.

FYI, I am not the kind of guy goes around and preach about reform. But this shit is stupid as hell. I think major offense like these should be sent to trial or even requires congressional hearing and congressional punishment.


The WSJ article and the Theranos press release [1] don't agree. There's no mention of the 2-year ban in the press release. The press release indicates it's business as usual for Theranos at their Arizona lab. Supposedly only their Newark (CA) lab is being shut down.

[1] http://www.businesswire.com/news/home/20160707006570/en/Ther...


First bullet point in the list of sanctions in the Theranos press release you linked:

"Revocation of the laboratory’s CLIA certificate which, as dictated by the regulations, includes a prohibition on owners and operators of the lab from owning, operating or directing a lab for at least two years from the date of revocation" (emphasis mine)


Wouldn't Theranos be the owner and operator of the lab?


Can't they work around this by renting the lab?


Your comment is a bit unclear, but the answer is the same.

If they rent the lab out to someone else, they're still the owner.

If they rent the lab from some third party owner, they're the operator.

Either way they're violating the terms of the ban.


If they rent the lab, then someone else needs to own it, run it and get it certified. I'm sure the FDA would be OK with that.


The press release doesn't mention Holmes ban, that does not mean that it doesn't exist.

I don't know the laws regarding this, but the title of the article states that Holmes can't operate a lab, not that Theranos is unable to. So it sounds like they are taking her to task rather than the entire company.


It's the first point in the sidebar:

Revocation of the laboratory’s CLIA certificate which, as dictated by the regulations, includes a prohibition on owners and operators of the lab from owning, operating or directing a lab for at least two years from the date of revocation

But yes.. they really didn't care to expand on that at all... or explain how it would impact their business.


Yes, I missed that. But does this mean Holmes has to be fired to keep the Arizona lab open?


Who will fire her though, she has an absolute majority.

This does open the door to immediate shareholder lawsuits if she does not step down voluntarily.


Err.. "Revocation of the laboratory’s CLIA certificate which, as dictated by the regulations, includes a prohibition on owners and operators of the lab from owning, operating or directing a lab for at least two years from the date of revocation "


I wonder how long she will be able to hold the CEO position?


On the one hand, hopefully not long, as she can't provide any effective leadership with this in place.

However, my understanding is that Theranos has an unusual corporate structure that gives Holmes control of most of the votes, so if she doesn't want to leave, I don't know if anyone can force her.


Seems like an odd arrangement for investors to agree to, one I am sure they are currently regretting...


Ms Holmes is a close personal family friend of Venture Capitalist Tim Draper, who continues to support her and say that everybody else in the world is a big meanie who is out to get her. He hasn't repented and I don't expect him to.


Yup. I'm pretty bearish on tricky corporate structure. I think a lot of the existing norms evolved for a reason, and exist to prevent people pulling these sorts of shenanigans. Board oversight isn't always a bad thing.


well the bar is "owning, operating, or directing" a lab. She can appeal and that would delay it.. but when this takes effect, it sounds like she's out.


But does "operating a lab" mean the same thing as being the CEO of Theranos?


Ditto 'owning'.

Effectively this says 'Theranos as a company will not go anywhere until Holmes steps down, and after that the chances of it remaining in business are still extremely slim'.


Since "owning" and "directing" are there, and Holmes is not only CEO but also majority shareholder (and owning stock that gives her disproportionate control for her stock ownership), wouldn't she have to not only step down but also divest at least enough to no longer be either majority owner or have majority voting power?


Yes.


The difference between a startup like Theranos/uBeam and a product based "soft"ware company is that in one case you can make outrageous claims and then use sheer determination, will power and lots of money to make it happen retroactively but you cannot change the fundamental laws of nature.


little more text than wsj (unsubscribed): http://medcitynews.com/2016/07/cms-fines-theranos/


The trajectory of this company is just terrible. They surmounted the most difficult obstacle in healthcare - breaking into existing strongholds (e.g. Walgreens). At that point if there was any doubt that their technology worked they should've used existing tools to run their lab tests. Yes they would've lost money, but they could have used the time to build out their rapid technology or pivoted to a different business model. Getting a contract with Walgreens or any major vendor in the healthcare space is an incredible accomplishment, but such unethical behaviour will make it even harder for future startups to secure such partnerships.


They did switch to using existing tools to run their lab tests. That's exactly what they did. That's why they started doing venous draws instead of just nanoliter draws from pinpricks. This was documented repeatedly in the media.

They also invalidated all their Edison (their specific nano device) results for two years, and it turns out they weren't even running other people's devices correctly and had to invalidate results for that too!


The article mentions that the company's current governance structure may prevent the board from terminating Holmes. Does that mean she is the majority shareholder?


She is a majority shareholder, but also her shares are of a class that gives her 100 votes/share.


She really did a great job with that negotiation, if only her company had actually had any value.


This is a great example of needing to do more due diligence. Walgreens and all of the investors were swept up by the whole "disruption" rhetoric. They should have spent more time understanding how Holmes and her team were going to handle compliance. It's clear none of that was done. This is what happens when disruption pushes back.


If they're going to ban her from operating labs for two years, does that mean they think she'll be, in some way, rehabilitated and capable of soundly running labs after that?

Maybe there is little precedent, but that length of time seems a bit arbitrary (and too short?).


Revocation of the laboratory’s CLIA certificate which, as dictated by the regulations, includes a prohibition on owners and operators of the lab from owning, operating or directing a lab for at least two years from the date of revocation

I think it's a case where the company had a certificate revoked as part of that process is a direct ban on the person in charge of said lab, which bubbled up to Holmes. I would've supported a direct levy on her but this just seems to be aimed at the company.


That was my first reaction to the headline. Banning her from running a lab for two years feels like banning a murderer from owning a gun for two years, or banning a corrupt politician from holding office for two years. Seems like it ought to be a lot longer!


Doubt she'll have much impact if she decides to return after two years. Her reputation is beyond repair at this point.


It's a time out in the corner , with two years of lost revenue, to think about what she did wrong and make a plan to build a proper lab


The article says it isn't clear what the monetary penalty would be.. but the letter CMS sent to theranos in March (re the newark lab) proposes a 10000$/day penalty for noncompliance that would continue until the lab is brought into compliance.

http://online.wsj.com/public/resources/documents/cms20160412...


That's only 3.65M (or 2.4M if they only count business days) per year. Having no idea of the US system here, could they just continue in noncompliance mode?

It wouldn't be the first time a valley business powers on and pays for noncompliance. I understand that Uber pays the fines it's drivers receive where it's service is illegal...


That fine could be increased if they continue to not be compliant, it could also be supplemented with different charges.


I'm usually a huge fan of pg, but in his essay about founders, there was one section which I wasn't very comfortable with: http://www.paulgraham.com/founders.html

Specifically, when he talks about naughtiness, he says:

Morally, they care about getting the big questions right, but not about observing proprieties. That's why I'd use the word naughty rather than evil. They delight in breaking rules, but not rules that matter.

I have absolutely no interest in trying to play language games - and maybe I'm misunderstanding what pg is saying, but it has always seemed to me that the judgement of whether the rule that was broken was consequential or not is post-hoc. For example: had airbnb gotten in serious trouble and floundered in the aftermath of when they started scraping craigslist for listings, they wouldn't be clever and naughty, but reckless and foolish. Had zenefits managed to grow even more or hire some key lobbyists and get the law changed in time, their CEO would be hailed as a visionary genius that cut through pointless red tape.

Anyway: the reason I brought that up is that a lot of the ethically dubious things that Elizabeth Homes did are very similar to things which a lot of tech companies did at one time or another. Trying to push ambitious young men and women to look at rules and regulations as something they should take pride in hacking and bypassing is a dangerous game - even more so in fields that are highly regulated.

Addendum: part of the original hacker ethic was to ignore stupid rules. For example, we take delight in Feynmann cracking safes at Los Alamos, or finding some clever hack to bypass a pointless procedure. However: I think it's one thing to hack a system to make a point about how stupid it is, but it's completely different if you add a monetary incentive, and suddenly the rules that get broken are those that stand in the way of you making money. The two sets have a fairly small overlap.

Addendum two: in a complex society like the one we live in, we have a lot of dumb rules. I'm not trying to defend them - we should obviously get rid of them, even in healthcare. A lot of economists have written intelligently about how to make the approval process of the FDA more agile.


A good post, even as one given over to naturally ignoring stupid rules.

Many start-ups are engaged in the "flout the law and make abnormal profits by hoping society evolves/decides in our favour" gamble.

Uber and Airbnb are two obvious examples, where I'm sure if a couple of people had died in transit, or a house burnt down and killed its occupants, and resulting cases went to court and they were found to have gone against transport/hotelier laws in a jurisdiction, then I imagine the course of such companies would be very different.

I'm sure we'll have more interesting case studies that I'm just not as familiar with as we have startups move into other heavily regulated but emergent/disruption ready/ambiguously policed sectors: see drug legalisation, communications/cryptography/security, financial services, legal services, health/pharmacy, etc as logical places where you'd expect to see these gambles starting to show up...


I agree strongly with you, which is why I was quite happy when YC published this:

http://www.ycombinator.com/ethics/

A relatively large number of YC companies had an ethics issue and (unfortunately) the 'naughty' bits have been used to explain these away. So YC evolved and put up a fairly clear-cut set of rules that they expect YC founders to live by.


I'm not sure how you would get that "don't sell faulty medical devices as legit ones" would be pg's "rules that don't matter".

Now, they were certainly exposed and shut down by regulators who are (often) more concerned about the rules that don't matter, but it's really uncharitable to imply he things that accuracy of medical devices is something that "doesn't matter".

>Had zenefits managed to grow even more or hire some key lobbyists and get the law changed in time, their CEO would be hailed as a visionary genius that cut through pointless red tape.

Not sure that's the best example to make your point -- I think that the Zenefits fiasco exposed something I didn't realize before, that we make brokers go through pointless training that doesn't teach them anything, and doesn't make them better at navigating ethical dilemmas, all because we tolerated fraudulent salesmen giving the defense that, "but no one gave me a training video that told me not to defraud customers!"


Evidence A: How Paul defended shady AirBnB tactics here on hackernews.


Evidence B: His defence of the Y Combinator-funded startup that was paying companies to bundle unwanted software into their installers and tricking users into installing it.


I just did a quick google search, are you referring to InstallMonetizer?

https://www.techdirt.com/articles/20130115/17343321692/why-a...


Yes, when you're invested, it's "naughtiness". The only possible crime in that case is failing to produce an acceptable exit with acceptable upside.



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