“The charges against Theranos, Holmes, and Balwani make clear that there is no exemption from the anti-fraud provisions of the federal securities laws simply because a company is non-public, development-stage, or the subject of exuberant media attention.”
For all those entrepreneurs are trying to "fake it until you make it" be aware that the SEC considers your strategy both fraudulent and they feel they have the jurisdiction to prosecute you. And while I doubt the SEC is going to go after every CEO that raised a Series A on a pitch deck that was pure fantasy, the people who participated in the round might bring them in if it served their purposes.
> claimed that Theranos’ products were deployed by the U.S. Department of Defense on the battlefield in Afghanistan and on medevac helicopters and that the company would generate more than $100 million in revenue in 2014. In truth, Theranos’ technology was never deployed by the U.S. Department of Defense and generated a little more than $100,000 in revenue from operations in 2014.
This was not even a forward-looking statement, it was an outright lie in the legal document.
One can do pretty much whatever they wish with accredited investors' money, but it has to be disclosed in the PPM.
Even if you have a line item where all the money will be spend on CEO's dog's private jet travel, accredited investors who have reviewed and signed the PPM have no legal recourse.
In Theranos case it looks like a straightforward misrepresentation of facts, which is a red flag for SEC.
I assure you, it is only possible to avoid risk if you're a small fish and extremely careful. For instance, you have a good chance of getting away with skimming a neighborhood stock fund you setup. If you are managing or receiving millions of dollars in investment, you can bet anything fishy will show up on the SECs radar at some point. Most people with large sums of money don't get where they are by being stupid with it, and if they are the victims of fraud, they know where to go. While the SEC can't bring criminal charges, they have top notch investigators. Once they smell the fish, they won't stop until the entire scheme is unraveled.
I can't speak directly to the observation you made, but I personally know a high up SEC investigator, and he obsesses about the most minute details of the cases he works on and lives to take on the toughest cases possible. My guess is distribution of cases the SEC prosecutes are very heavy tailed. There are many dumb cases that are very easy to find and prosecute that involve 10s to 100s of thousands of dollars. Think skimming, ponzi schemes etc. The more sophisticated and larger cases are also more risky (for the fraudster), harder to execute, and much more rare. That might explain your observations.
In 1999, financial analyst Harry Markopolos had informed the SEC that he believed it was legally and mathematically impossible to achieve the gains Madoff claimed to deliver. According to Markopolos, it took him four minutes to conclude that Madoff's numbers did not add up, and another minute to suspect they were likely fraudulent. After four hours of failed attempts to replicate Madoff's numbers, Markopolos believed he had mathematically proved Madoff was a fraud. He was ignored by the SEC's Boston office in 2000 and 2001, as well as by Meaghan Cheung at the SEC's New York office in 2005 and 2007 when he presented further evidence. He has since co-authored a book with Gaytri Kachroo (the leader of his legal team) titled No One Would Listen. The book details the frustrating efforts he and his legal team made over a ten-year period to alert the government, the industry, and the press about Madoff's fraud.
A sufficiently large enough example which failed to be stopped by investigators for a decade could easily outweigh thousands of outliers ultimately being a serious net-negative and outweighing such a dismissal of facts...
The fact such a blatantly wrong example proceed to scale up for a decade and encompass billions of dollars before being shutdown is quite a good example of how any one investigator's knack for detail in their own limited exposure to particular cases (as in your personal analogy) is hardly sufficient to dismiss the idea that all complex cases need not worry of SEC investigation. Quite the opposite.
If anything that means the SEC has smart people but only a limited capacity of attention as they tend to obsess over details in individual cases (as that is what is required in a significant percentage of them). So as long as you're not one of the easy cases (obvious ponzi schemes or involving large sums, significant amounts of people, or popular advertising) then it's not as worrying a threat as they'd like to make it appear.
2. Madoff was caught because his scheme fell apart, not due to any SEC or other government action.
>...avoiding the ire of the SEC is relatively easy if you set your mind to committing fraud without getting caught.
This statement is mostly what I was responding to. Here is a thought experiment. For the sake of this experiment lets say our economy is perfectly competitive. If all an entity had to do to get away with fraud was "set your mind to not getting caught," then every entity that participated in the economy would be committing fraud because it is in their best interest. That sounds wrong, probably because it is. White collar criminals don't plan on getting caught, they do everything they can to get away with their crimes. To me, that qualifies as setting their mind to not getting caught. Well, they get caught anyway.
The companies you bring up (enron, worldcom, madoff) are outliers in the world of securities fraud. they achieved unprecedented levels of success and then failure. Using these cases are counterpoints to an argument that financial crimes are hard to get away with seems silly to me. After all, none of these frauds were successful in the end, instead, people ended up in prison.
The experiment is a simple application of the economic theoretic framework to the statement above. Nothing more. There isn't all that much to argue about here, as long as you accept the framework upon which almost all of theoretical economics is based.
IMO that is naive. He is an outlier. Sort of like saying committing mass acts of terrorism is easy because 911.
I can't find it now, but I do recall the SEC itself putting the number of frauds they uncovered in the low single digits. I might ask my SEC friend himself what percentage of the iceberg he thinks is uncovered.
The point is, fraud is risky, and it isn't easy. You basically have to be willing to give up your life as you know it. Sometimes I wonder whether fraudsters have an internal dialogue about whether it is worth the risk. And for the fraudsters who aren't psychopaths the guilt of defrauding friends and people who trust you must be enormous. Sounds like a stressful day job that I won't ever be entertaining.
That wasn't illegal at all though :)
Just that he lied to his investors about the source of the returns.
> claimed that Theranos’ products were deployed by the U.S. Department of Defense on the battlefield in Afghanistan and on medevac helicopters
That is clearly a statement looking at past events, so if it was false it was clearly a lie
> the company would generate more than $100 million in revenue in 2014.
The important word there appears to be "would", in which case it was a forward-looking statement so easier to argue it was based on projections that just didn't pan out.
I wouldn't suggest lying about anything in the aviation sector either.
Not joking, I have heard this pitch.
Well, I'm sold!
Startups engage in all sorts of puffery, trying to project the appearance of success long before they have actual success. Fancy websites, fancy offices, sales and investment pitches that cherry pick stories, numbers, and milestones that give an enormously positive impression of what's generally a very bumpy reality.
I personally don't like that, but the game is the game. But it's very easy for that puffery to slide over into outright fraud when things get desperate. Which is why I'm so glad that the SEC is going after Theranos with great vigor. Hopefully these clowns will end up sharing a cell with Shkreli, giving every would-be startup CEO a clear example of what happens when they push it too far.
And it can even be fine when things are beyond the state of the art, as long as the CEO has the bravery to look reality in the face and either a) find another way, or b) say "sorry, startups are gambles, and this one's a busted flush".
And it's the liars and charlatans that really get to me. I figure it's at least 30% likely that I'll end up in jail because somebody says "blockchain" to me one too many times regarding some application which would be better off done with a MySQL database.
Of course, the benefit from the puffery might outweigh whatever legal risk exists. I’d call that a “calculated risk,” not “fine.”
If it's a significant factor in a buying decision, it's not immaterial. If it's not material, it's probably not worth lying about.
Yes there is. You're selling investors on capabilities you don't have, or at least intentionally misleading them about your abilities. Unless you're explicitly telling them that you WILL have "The best automated way to do X!" and are working hard on it, you're deceiving them.
If you can make the automated technology before I find out, well, maybe I won't sue you, but that sure doesn't make it right or acceptable.
> in actuality you have a horde of people doing the work
> There is nothing wrong with this
um in what universe does "technically legal in the US of A" equate to "nothing wrong with" ?
using legality as a shortcut for a moral compass is putting the cart before the horse at best, but very often argued out of laziness or pure self-interest at worst. it's a narrative that causes people to stop introspection and think about what is actually right or wrong, instead going for the much, much easier choice of what is legal and what is not. not easier because the legal system is simpler than ethics (it usually isn't), but easier because the choice is made for them.
and as your post demonstrates, once the choice is made, it's easy enough to conflate legality, lawfulness and judgement with morality, rightfulness and justice.
but once you poke at that distinction, the argument just falls apart.
there isn't "nothing wrong with this".
all you're really saying is that it's probably not illegal.
I have never heard of someone using "fake it until you make it," referring to Wizard of Oz or Concierge as William Pietri (gosu Lean practitioner) below has mentioned.
It is plain dishonesty.
For example you lie about how your marketing efforts are reaching customers who are signing up in droves while you use mechanical turk and other techniques to make the observable metrics go up. At some point your visibility reaches the point where you actually are reaching your customers and so you can stop doing the shady stuff. By doing this you avoid the inefficiency of the whole "we aren't sure you can do this" discussion which helps no one.
On the outside, one clean narrative, traction and growth from day 1, now a multi-million (or billion) dollar business. Or as my Grandfather would say, all yummy sausage and no discussion at all about what not-yummy things are in there too.
Everyone should believe in themselves. That is just a given, if you don't (or can't) then you won't reach your expectation. There isn't any "faking" there as far as I can see (unless it is suppressing your own doubts about the effort).
This is 100% correct. I also know a fair number entrepreneurs who engage (or have engaged) in exactly what you describe. Also, it's a short and murky step from many of the "naughty" stories that are lauded in entrepreneur lore, to outright fraud. Too often, we make post hoc rationalizations for unethical behavior, based on outcome.
It's a huge dilemma if you want to behave ethically, but you're competing with lots of people who don't have that limitation.
Staying vigilant against the normalization of deviance is difficult even in ideal situations. Choosing to normalize deviance as a business strategy is practically guaranteed to rapidly accelerate deviations from acceptable behavior.
In any system - including every business - resilience and safety means fixing small problems before they grow into bigger, more damaging problems.
> rationalizations for unethical behavior
Often, it doesn't even need to be rationalized. When deviant behavior is slowly normalized in small steps, the human mind tends to only see the "small, insignificant problems", and often skips over big changes that should be "obvious".
First you shade the truth slightly. You're uncomfortable at first, but the line seems to work, so you try it again. You use it another 10 times and you start to believe it.
And then you shade the truth a little more. After the hundredth pitch, you're a fabulist, and you barely noticed.
I was sympathetic to the Theranos side of things until I learned they actually submitted fraudulent test data. That was the point where it became clear to me they were not confused as to where to draw some line. They were being willfully deceptive. Deception like that doesn't grow out of confusion. It grows out of clarity that you are selling BS.
> By doing this you avoid the inefficiency of the whole "we aren't sure you can do this" discussion which helps no one.
Pretty sure that it would help investors differentiate between those who can actually make it, and those merely good at faking it and making observable metrics go up ... especially if the ones actually capable of making the <big thing> don't make the metrics go up quite as high as the ones putting their effort into faking it.
And like another commenter said, that difference might well be worth billions.
This thread is the first time I've heard it applied seriously as to encourage lying and fraud.
Another similar common saying is "dress for the job you want, not the job you have." But sayings imply that you should act as if you've made it even if you haven't. You aren't "what you want to be," but you can present yourself in that way.
Finally, while you may have met many people who have turned "fake it" into lying and fraud, they are not the majority.
> Everyone should believe in themselves.
At least you admit here admit I'm right.
It's essentially someone stating a vision they have as reality, which is fraud.
Every building is a blueprint at some point. Some jabroni pointing at the sky and describing what will be is part of the dilemma of innovation and construction.
Faking it implies you want to give others the impression you’re already a big shot, and it dilutes out the accomplishments of people who actually made it.
The downside should be that if you’re faking it and you don’t make it, your shame should be relentless and brutal, and no one should ever take you seriously again. Also, even if you make it you will feel alone and empty in your success, because everyone will have long thought you already “made it” and you have to continue hiding your true story. There is no one to celebrate with except those who are also in on it.
Where as if you would have just been humble and true to where you currently are, people have headroom to express sympathy and support should you encounter a setback.
I don't think so. Self-doubt is natural. Mandatory, really. Someone who never has moments of self-doubt is a bad investment risk; it means they probably aren't thinking hard enough about what could go wrong. But concealing those doubts is also mandatory: if you can't, it may be a sign that you have more problems than you know how to deal with.
If you choose to ignore it and fake your way up, you are not being brave, you are being delusional. I'm not sure if delusional people are good investments.
Almost like they're asserting a confidence in a belief that isn't really merited -- wish we had a term for that.
"Venture capitalist Tim Draper, an old family friend of Theranos founder and CEO Elizabeth Holmes, who led an early $1 million investment into the company (split between two investment firms).."
This is an incredibly defeatist/self pitying line of thinking that I'm seeing more of (the world is stacked against me, you have to be born into it, etc) and is related to a lot of other self-defeating thought patterns. It's not going to help you or anyone else who subscribes to it. Maybe it's just that bad news is much easier to see, thanks to the web, so people think bad behavior is more common now, and it's turning people cynical.
Anecdata, but: I left academic hard science because I realized it was too difficult to get ahead; moved to the bay since I can code and it was a way to create a runway and find myself, and pitch companies. Got a contract coding gig, because a professor on the board of my roommate's company was impressed that I had independently implemented his prototype as a personal side project. Applied to 10+ startups for "real programming jobs", including through triplebyte, rejected by all, finally got hired by a roommate's friend (on reputation only) whose company needed asses in seats for an investor meeting.
Meanwhile, I'd been pitching 3 biotech ideas and one tech idea (I had written verilog for a hardware prototype of a deep learning chip) and got no bites on any of my pitches.
Finally, a friend offered me a VP product position (because he needed someone he could trust) which I was about to jump ship for, and then my current CEO counter-offered by agreeing to put his personal money as a lead in one of the biotech startups I'd pitched (that was somewhat meritocratic because he has seen how I operate as a coder in the company and was impressed, and I think he figures, probably correctly that if I'm that good a coder then my biotech skills are even better because that's what I'm formally trained in)
Since getting here, I haven't once advanced through pure merit, and have always advanced through connections.
I got my first foot in the door via an internship on a referral from a friend who had interned there the year before. I had no formal credentials (just taking CS classes on the side of an Econ degree in college), but I had spent all of my math/CS classes studying with this kid. He knew I was smart and put his own ass on the line to get me an interview.
You can be successful purely by reading books in a room, writing code alone, and building some brilliant startup. (E.g. look at the CD Baby guy, what's his name). But it's SUPER unlikely. You're way better off being a social human being, building relationships/trust, and paying it back/forward to folks that do right by you when you know you deserve it.
A lot of the SV narratives circle around meritocracy (or other ways of 'hacking the signalling game' even. And when you say "it's SUPER unlikely", I think you're 100% correct. And so challenging the meritocracy myth is important.
That was 20 years ago. As much history as Larry Ellison's story in 1970s. Things have changed a lot, and the Silicon Valley today is a poster child for cronyism.
The VCs don't even bother opening "cold emails" (a ridiculous term for something that purports to be an open club). It's a herd of arrogant hipster bros who have no clue what they're doing and try to CYA by "warm introductions" (when their bet fails, they can shift the blame on a 3rd party).
The investment is not completely off-limits (my own story is a testament to that), but it's magnitudes harder to get if you're not connected, and oftentimes you have to pay through the nose to the "people who know people". I also know some rare cases when super-angels answer to complete strangers and subsequently invest, but these are exceptions rather than the rule.
Can you back up this statement? Why is it self-defeating? You put it in your post as if it somehow logically follows from the rest but it doesn't.
The claim is that people who were not born or just lucked into connections with the rich and powerful are going to have to work significantly harder or get lucky to get access to those opportunities. While the people that do, can put some work in and basically claim the opportunity or just simply try again without significant loss or even having to settle for less.
"Lots of counterexamples" don't mean anything unless you can show that there are in fact so many counterexamples that they outnumber them in a similar ratio as the people in the first group utterly outnumber the people in the latter group. Or even by a factor of ten.
But they don't and almost nobody would be having this discussion if they did.
> Maybe it's just that bad news is much easier to see, thanks to the web, so people think bad behavior is more common now, and it's turning people cynical.
And you're going to need more than those words to properly argue that this is a bad thing.
Because a lot of bad news wasn't visible enough. And people have been underestimating the magnitude of bad behaviour. And a lot of people in a lot of places in the world most definitely aren't being cynical enough.
Sure there are psychological downsides to being bombarded with bad news and negative information all day, and we need to find ways to handle that, for our collective mental health. Doesn't mean the bad news is somehow wrong or faulty.
Doubt it. I don't think In-Q-Tel/CIA will write you a check because you just happen to have this shiny new search engine that may or may not change the world.
"Close" does not mean part of the organisation. The founder Norman R. Augustine isn't even a CIA person. It is somewhat similar to a spinned-off company which runs independently but has tight connections (and a contract, in case of In-Q-Tel) with the organization that spinned it off.
* In-Q-Tel (theoretically) may have other contracts and major partnerships.
* In-Q-Tel gets to pick who they invest into; CIA may express interest in a particular area or a company but In-Q-Tel manage their portfolios.
* While In-Q-Tel is non-profit, the profits flow back and the employees may profit from it. Meaning, while part of the funds come from the CIA (taxpayers), part come from the past profits.
More detail to those interested in law: https://scholarlycommons.law.northwestern.edu/cgi/viewconten....
It's fairly unusual for the US, but similar structures exist in countries trying to nurture their startup ecosystem.
Think about the decision that he had to make in 2016. He had to choose between admiting his mistake and doubling down. The downside of admitting his mistake is that he's guaranteed to get negative points; the upside is that it will minimise futures downsides. By dubling down, he's guaranteed to reduce his negative points in 2016 but exposes himself to magnified upsides (if he's proven right) and downsides (if he's proven wrong) in the future.
Now think rationally how you'd choose. The second strategy is a lot riskier so it better have better return as well! But the second strategy can only have higher reward if you either believe high probability of future upsides (i.e. Theranos might be faking till you make it, but they'll make it) or low probability of future downsides (i.e. I'm not sure what's going on, but definitely not fraud). I submit that the only way that you could come to believe either is if you're hugely misinformed about the company.
I.e. that guy is just a bit incompetent.
Draper has no doubt had many chances in his life to provide negative but true and positive but false comments on his investments. If society punishes negative but true comments he's damn well going to notice and make fewer of them. If society further fails to punish positive but false comments about his investments, he's not going to invest the mental resources that would be required to avoid them.
A little experience substitutes for a lot of strategy.
Generally, "they're family" sounds like a sensible default attitude for a VC towards their investments.
Re a previous Holmes forfeiture:
"Warmenhoven added Ms. Holmes showed “a level of selflessness and grace reflecting her commitment to the company’s success.”
For example, you can say "We are building a tester that can run tests using only a drop of blood." and "We have test results from blood showing markers" and never mention that the "test results" came from an industry tester and not the "tester you are building". The implication is that your tester did that but you didn't actually say that. What I read from the press release was that this sort of messaging was going to be actionable. If you look at various full disclosure rules the SEC has for public companies, this felt like a shot across the bow to startups that they would do well to think about that instead of glossing over bad news.
The complaints further charge that Theranos, Holmes, and Balwani claimed that Theranos’ products were deployed by the U.S. Department of Defense on the battlefield in Afghanistan and on medevac helicopters...[i]n truth, Theranos’ technology was never deployed by the U.S. Department of Defense...
> Ms. Holmes and Balwani falsely claimed to investors [...] and that Theranos would generate more than $100 million in revenues in 2014, the SEC said in its complaints. In fact, the company’s revenues were a little more than $100,000 that year.
I couldn't figure out why investors were putting all that money in. Telling them you were making $100m makes the investments make a hell of a lot more sense.
What's 3 orders of magnitude between friends? She deserves prison time for this.
Sigh. The SEC is concerned with lying about actual numbers. Not about future projections. What a terrible comment on a startup forum. "Fake it until you make it" it as about having confidence -- not about lying to investors. Please downvote this parent comment.
Our experiences are different I suspect, Check this out
https://www.sec.gov/fast-answers/answers-regfdhtm.html. I sat in the courtroom once as one of the officers of a company was being prosecuted for violating this disclosure rule. There are a number of regulations that the SEC enforces that have nothing to do with "actual numbers" and everything to do with information asymmetry where the company knows something and the investors don't.
They have historically been all about that when non-accredited investors are involved (aka public companies). And reading their action with respect to Theranos suggested to me that they are going to bring that hammer into the startup space.
What this has to do with the parent comment? I'm asking these because I'm not sure I follow the reasoning.
Your concern is that the SEC has very strict reporting standards and regulations. These are intended to provide a fair field between all investors (accredited and non-accredited) in order for the market to function in a more efficient way. In exchange for this increased cost of regulation upfront, the transaction between investors on the company's shares have a much lower friction (and transaction costs).
Private companies have lower regulation because the assumption is that the investors willing to buy shares are open to assume higher transaction costs in terms of due diligence. Obviously, reporting the false could open the company to lawsuits, but that's also part of the potential cost for the investors.
The choice between being a public company and a private one, in the end, is a function also of this trade-off. If I understand your reasoning, you fear that the SEC forcing himself into the private market could increase the regulatory cost of all startup. Am I right?
If that is correct, my answer would be that the SEC is not imposing the full regulation but just a minimum level of accurate reporting on behalf of the investors. This is because there's an assumption that a well behaved private market is essential to make the economy more active (imagine if this level of lying was accepted, how many investors would be willing to invest?). On the other side, I see the risk of a slippery slope and having the SEC power to grow to large and kill the startup ecosystems. I don't have a clear answer for that.
So stylism aside, you have correctly surmised my concern that the SEC is looking to move into private markets more aggressively. I think the reason for that is nuanced but having lived through the dot.com bubble and watched how the government responded to that bubble (Sarbanes Oxley anyone?) And the huge losses that are being taken by the large banks as their Unicorns died in this the Unicorn bubble, basically accredited or not investors with lots of capital get mad when they are mislead, and their anger typically results in them getting their "friends" to do something about it. We currently have an integration between banking interest and the administration that is as deep as it has ever been. So there are many contacts both official and unofficial between Wall Street and DC.
There is also the perception of the disproportionate channeling of wealth creation to a smaller number of people through private company 'trading'. Add the antics of Uber and Theranos to the mix and it provides a convenient place for the powers that be to take "logical" and "needed" steps to curb the abuses. Generally resulting in more regulation and more risk on startups.
Holmes was, in many ways, embodying that HN mentality, acting on the basis:
- that an entire industry has been doing it wrong
- that it can be fixed by a low-bureaucracy, Angel-funded startup
- that once you have enough success you can just rewrite the laws that were slowing you down
- that no one knows what they're doing anyway, major projects are 100% guesswork, and you should just "fake it till you make it"
- that any skill is just a matter of 10,000 hours of practice
- that you can outsmart an industry before even passing or placing out of sophomore level classes
- that any self-doubt must be Impostor Syndrome, and so it's not worth your time to even check if that doubt has a factual basis
Yes, I've posted this twice before but I'm citing it and admitting to it, and it got heavily upvoted both times (thanks to Algolia for making comments so easily searchable btw):
There is no "HN mentality", just a large statistical cloud that people see what what they want in. Most of that cloud has been the opposite of what you're suggesting. Commenters here have been not just skeptical but cynical and outraged by Theranos for years, to the point that it became tedious. It looks to me like you're engaging in a bit of revisionism for the purpose of posturing above the community. That is a popular sport but a distasteful one.
Would you mind giving some guidance on what I should have done in the situation? I was doing the best I could against the constraints. The situation was that someone made point X, to which I have point Y as a reply. Both X and Y, in some form, have been posted numerous times.
1) Not reply?
2) Reply, but make sure to reword Y each time?
3) Link to a previous version of Y?
4) Copy-paste a previous Y but not admit to it so it's not clear I did anything wrong?
I chose 5) copy-paste the best previous version of Y and be transparent that I"m doing so, and why I thought the circumstances merited it. You think that's the wrong choice. 4) and 3) don't seem much better based on what you've said.
I'm guessing you want 2), but IMO that's even worse because it disconnects the discussion from previous ones and forces us to retread the same ground more clumsily.
>There is no "HN mentality", just a large statistical cloud that people see what what they want in. Most of that cloud has been the opposite of what you're suggesting. Commenters here have been not just skeptical but cynical and outraged by Theranos for years,
That's kind of my point. The typical comment is outraged at Theranos. But the typical comment is also endorsing the very kind of behavior that avoids and ignores those very same warning signs. "Well sure, I consistently said over the years to 'never listen to the haters'. But I didn't mean when they were right, of course!"
"HN [most often] tells everyone that no one knows what they're doing either" is not revisionism. Revisionism would be claiming outrage that someone would press ahead when they didn't know what they were doing.
I don't agree with you at all about what the typical HN commenter is endorsing; it seems to me you're adding a lot of interpretation to a lot of disparate information and constructing something of a straw man.
By the way, if anyone is interested, only a small minority (10% if that) of HN users are in Silicon Valley. And plenty of those identify more against it than with it.
What if some 20 year old business major drop out said they are going to make chipsets double the speed of the old and lumbering tech companies like Intel? Everyone here would say no way and never think that would be disrupted so easily. So yes it is a case of people with HN mentality thinking that well taking blood via a venous draw and giving me my results a day later is cumbersome and stupid, and rife for disruption. Someone thinking outside the box despite me or that person knowing next to nothing about clinical lab tech can easily make it better than Roche, Quest, Lab Corp, Abbot etc. because they can move quicker, and disregard the old paradigms. With no consideration for the physical impossibility with known scientific knowledge!
So yeah please by all means look at how smug a lot of us were on earlier Theranos postings about the Steve Jobs of med tech. It is a valuable lesson to learn. Not everything is inconvenient for no reason, and not everything can be disrupted without some serious demonstrable tech.
Arrogant, presumptive behavior is annoying -- but I think it's important to keep a bright line between that and dishonesty, because one self corrects and the other doesn't. And, a pinch of presumption is necessary for exploration.
Edit: If you have a good answer, then I would suggest we start posting that as the advice ("here's how you know if you're good enough") rather than immediately tell everyone they have they have Impostor Syndrome (as seems to be common practice).
Those folks exist, but I meet plenty of basically honest people who are arrogant before experience and humbled after. Far more than the raging narcissists who will do what Holmes is accused of, though those get attention.
As a recent dad, I think a lot about sending my guys into a world with 10B people in it, moving incredibly fast publicizing accomplishments (real and otherwise) in ways that make it seem like every niche is filled up. It's clear to me that irreverence for status quo and honesty with themselves are going to be equally important in them finding a niche for themselves.
That is, if you believe that you can't learn kernel hacking, that's (potentially) impostor syndrome. Lots of people have in fact learned kernel hacking, you can learn it too. Your self-doubt about it is based on (falsely) thinking that you are individually incapable of doing a thing plenty of others have done. But if you believe you can't build a perpetual motion machine, that's just thermodynamics. Nobody has built a perpetual motion machine, and doubt about your ability to do so (which isn't really self-doubt) will be quickly confirmed by a survey of the literature.
No, the fact that others have learned it is not (strong) evidence that you can learn it too; you would need to know how similar you are to those people, and whether those dimensions are relevant.
IOW, exactly the diagnostic criteria I suggest we search for rather than immediately skip to "so what, other people thought that too".
>Your self-doubt about it is based on (falsely) thinking that you are individually incapable of doing a thing plenty of others have done.
That's generally not what is happening in practice. People don't de novo say "I can't ever do this". Rather, they attempt (or otherwise survey) it, find difficulties ("I can't consistently understand how the stack is doing that"), see others that have no similar difficulties ("what? It would have taken me a day to work through that and it comes naturally to you"), and on that basis conclude that they're unlikely to succeed as well.
"You have Impostor Syndrome" doesn't make any headway on the core problem.
IDK, I feel like that's a sweet spot most people hit at the end of a PhD. Enough confidence in yourself that you can expend lots of resources trying hard things.
Enough humility to recognize that you'll probably fail at most of those things.
And most importantly, the project management, risk management, and communication skills to hedge your big bets.
Enough experience working with top-tier people to know that all of these things are learnable skills that other successful folks are using (including fields medalists and including high-school dropouts).
Maybe there's a difference between the "informed arrogance" of a researcher working on an open problem in their field (or a serial entrepreneur trying to disrupt a huge industry) and the "uninformed arrogance" of a charlatan, hack, or (in this case) fraudster?
Hopefully we're about to land in a cultural place where getting an education is seen as getting an education, rather than either a panacea for individual success or a complete waste of time/money for the docile masses.
Some of these things are correct sometimes. Many industries have been doing things wrong for very long, and massively productive changes disrupted the industry. Who knew that boiling water would change the coal industry forever? Some guy came up with the pump idea and changed everything. The mine owner that invested in him made a lot of money. The industry changed. Things like that happen.
I get that we sometimes have gut feelings that we can't explain. We have to be honest with ourselves though. "Is it just that I don't want to face reality, or is there truly something that I can't put into words drawing me in this direction?"
Is that the HN mentality? It might lean more that way now, I suppose, but I've always felt it was more in the "scratch your own itch" territory and less in the "complete industry outsider disrupts XYZ industry with revolutionary ideas" area
IBM's Watson comes immediately to mind.
The difference is whether or not you can come through with some percentage of your promises. The ones who can eek out some kind of repeatable traction long enough to exit are successes, the ones who never get to scale are frauds.
That isn't "We are on shaky ground with new, unproven tech." That's "We know it doesn't work. We are comfortable lying about it because money."
All of the industry AI labs follow the same pattern, even (perhaps especially) the en vogue ones (well, I guess depending on wtf "solve intelligence" is supposed to mean...). Watson is just old enough that it's now obvious the advertising agency was given too much leash.
Ditto for self-driving.
Ditto, in fact, for basically any basic or applied research happening in the research arm of any for-profit organization. And at a lot of universities besides! In fact, as far as I can tell, positive PR is some non-trivial aspect of the ROI for industry research labs.
BUT... there's a HUGE GAAP ( ;-) ) between marketing hype and lying in financial disclosures. One is eye-rolly and should be called out on internet message boards and during sales pitches. The other is criminal.
He is the main reason we know know what Theranos was doing.
He had his life destroyed, he knew it would happen, what Theranos would do to him, and he did the right thing all the same. Tyler Shultz is a hero.
Never let someone tell you that you don't matter. Try hard to do what is right. We need more people like him, be one of them too.
Be like Tyler Shultz.
Edit: Pic: http://www.dailymail.co.uk/news/article-3944392/Theranos-whi...
"With Theranos I learned that entrepreneurs have to sell their vision," he said. "But you have to have some line between having a vision and seeing something that’s just not there."
"[Flux Biosciences] is developing point-of-care medical tests on blood, urine or saliva. Right now the company is working on a test for testosterone in saliva which could give a consumer health information but wouldn't serve as a diagnostic test that would affect medical care, as Theranos' tests aimed to."
By going public Tyler Schultz very likely saved lives.
I can only wish him the best in his new endeavors. For certain, anyone doing business with him knows his handshake is worth something real.
He went on to start a biotech company (that seems to be doing alright) and was a Forbes 30 under 30 in 2017...
I don't see how his life was destroyed...
> He says he was told by his parents that Ms. Holmes called the elder Mr. Shultz in the summer of 2015 to complain that their son was being unreasonable. Tyler Shultz says he also got a tip that private investigators were watching him.
> In a conversation in his parents’ kitchen, they pleaded with him to agree to whatever Theranos wanted, he says. Even though his heart sank when they discussed selling their house to cover the costs of defending him against a potential Theranos lawsuit, Mr. Shultz didn’t make a deal with the company.
> His parents said in a statement: “Tyler has acted exactly like the man we raised him to be, and we are extraordinarily proud of him.”
"His parents said in a statement" -- I remember when reading this story when it was originally published (2016) thinking how odd it was that his parents didn't agree to be interviewed in person. Or at least were worried about speaking out of turn at that point in time.
This is exacerbated by the dynamic that the part of the press you'll feel most eager to speak to, is that which are making upsetting misrepresentations about you or something you care about -- ie., those who have something to gain by manipulating you to say something controversial or incriminating.
It's unlikely that $400k will drive the family to bankruptcy.
Also, Tyler opting to become a whistleblower on Theranos caused a strain between his grandfather, who is a Theranos board member, and his own family.
So unless they resolve the impasse, it is unlikely that the grandfather will offer a helping hand (financially) to his son and grandson after outing the fraud in a company associated with him.
The entitled thug...
> Tim Draper, the founding partner of Draper Associates and Draper Fisher Jurvetson, appeared on television on Tuesday—not for the first time—to defend Holmes and Theranos. In an interview on Closing Bell, the world’s most loyal V.C. said Holmes has been “totally attacked,” and that she is “a great example of maybe why the women are so frustrated.”
Same narrative that was invoked in defense of Ellen Pao in her game of thrones with billionaires.
There are people who are fighting for a noble cause, and then there are parasites that use it for their selfish gain.
I think a stronger case could be made that she was mistreated than that Elizabeth Holmes was. I don't know enough to have a position on whether that's right or wrong in Pao's case, but I can see the argument. I think Holmes was pretty clearly being attacked for all the right reasons however, and not for being a powerful woman CEO/founder.
Nowadays, you have many, many successful female tech entrepreneurs: stitch, bumble, ipsy, etc... and hopefully we are past the fawning phase and can apply critical thinking.
Someone help me out: Does this settlement really make the affected parties feel the pain? Does it discourage other companies from attempting the same thing? Given the scale of the fraud, shouldn't these two simply be in prison right now?
EDIT: Which part of this statement are the downvoters disagreeing with ?
... and a decision on when it is worth it to pursue a case. Unless the chance at conviction is zero, there is some politically determined risk threshold involved. Not only is the decision on the threshold political, but the risk itself is determined by the resources at the defendant's disposal. I am not saying that their decision is necessarily biased against poor people, but I am pointing out that there is a political stance involved no matter which way you come down on this issue.
There is no allegation of pulling strings and getting SEC lawyers to decide something based on her name, her connections. They act according to policy, based only on objective measures of the case.
But, it can be the policy of the SEC to objectively consider chances of winning (or getting a fraud conviction) and proceed to trial only if the chances are better than 90%, and it can be the policy of the SEC to go to trial on even 10% chances of winning, to generate as many fraud convictions as possible (at great expense to the tax payer).
Both policies are valid (I think), and the choice is political (subjective). A presidential candidate might get elected on a platform that includes going harder after well connected rich people doing white collar crimes, and then appoint a new head of the SEC to enact this new policy of being willing to spend more money to try to get people in jail for fraud.
But I think you're getting downvoted because you're arguing that white collar crime, even at scale, isn't worth prosecuting, and ignoring the perverse incentives that result from such decision-making.
She should be in jail. Kids have gone to prison for marijuana possession and this lady walks? Martha Stewart and that Martin guy went to prison for less.
The government still should go after them for endangering people’s lives. There should be long jail terms for that.
Will it though? Surely Holmes still has a few million stashed away somewhere that she can live comfortably off of? This settlement isn't going to leave her destitute.
Either that or I'm sure she set up some clever offshore accounting structure that has $10M stashed in the cook islands or some shit. As soon as you get some cash, I think "rich person 101" is you set up some complicated structure to hide rainy day money for this very reason. I would venture to guess she took home at least $50MM in all those rounds of investment (maybe more? i have no idea how that works.), I doubt she blew it all or was stupid enough to leave it in plain sight.
> Holmes was paid a salary of approximately $200,000 to $390,000 per year between 2013 and 2015. During the same period, she also exercised approximately 53.7 million stock options and received super-majority voting, Class B common shares, which granted her almost complete voting control over the company. Holmes has never sold any of her Theranos stock.
The big difference is for all the time invested, her current stock is worth zero.
But the SEC won't, because that's not what they do. And this is, I think, as it should be.
The job of the SEC is to protect investors so they are probably doing the right thing here.
I agree she got away lightly.
States vary in their impeachment proceedings and what burdens must be met.
As part of the settlement, there was no actual admission of wrongdoing or fraud, so it's quite possible that the insurance would pay the fine.
Changing that "likely to be" into a "may be" would make the statement true(r) without the if-clause.
Also if the if-clause stated "suspected of" rather than "convicted of", then the "is likely to be" part
would be true in general.
I think this sentence is accurate: If you are suspected of drug dealing, any asset that you can't prove you received through other legal means is likely to be subject to seizure.
I think this sentence is accurate: any asset that you can't prove you received through other legal means MAY be subject to seizure.
I think this one isn't accurate, though: any asset that you can't prove you received through other legal means is likely to be subject to seizure.
Maybe I'm just surrounded by extremely lucky people, but none of the people around me (all of whom aren't partaking in illegal behavior / have never been suspected of illegal behavior) have had the police show up and randomly take their stuff.
I'm going to hazard that location, socio-economic status and skin color each could have more to do with it than luck.
This “punishment” doesn’t seem like one. She should be in jail.
"I thought we could do it. It started with a single, tiny lie and then it snowballed. I get out of control. I took some time off and now I'm starting my own company. We will be the most transparent company in the world and we're innovating X!"
Something along those lines. It's not a life or career ender IMO.
I think most people would take a lifetime of "humiliation" if they got to live an unreasonably extravagant life for a while then return to an upper middle class lifestyle, occasionally having news articles written about them until it all fades away completely after 5-10 years. A sentence of "humiliation" would only make scams like Theranos a more appealing idea to many people. And frankly, if someone could go so deep with a scam like Theranos, I don't think they/Holmes have much of a sense of shame to begin with. They'll justify their fraud to the very end.
Compare and contrast with Shkreli sentencing. Some animals are more equal than others.
At a certain point you have to wonder why did a 21 year old
get paid 700 million dollars on good faith to start a pharmaceutical company with little oversight? I remember reading about the board a few years ago and just looked it up again. Several generals, Henry Kissinger...huh?
This is all seems pretty obvious in hindsight.
Until you said 'her', I actually thought you were referring to Shkreli. He ran a hedge fund starting at 23, and when he lost a lot of the money, he made bigger bets and tried to earn the money back rather than admitting his losses.
> I remember reading about the board a few years ago and just looked it up again. Several generals, Henry Kissinger...huh?
Shkreli raised money from Steven Cohen's SAC Capital, the family of Fred Hassan (former CEO of Schering-Plough), and Brent Saunders, the current CEO of Allergan.
Their stories, though they differ in industry, seem quite similar when compared in detail.
"These idiots aren't getting their money back, wait for my next play..."
"If I can hold them off for another year, we'll have a big breakthrough..."
Making larger bets to cover for an hide losses is a very common story for traders on wall street. Buying an AIDS drug to price gouge is not. In contrast, it seems like Holmes had an earnest desire to improve medical tech.
Again, I'm speculating, we'll see if this unfolds any further. Fun story to follow.
Most rich criminals know that when you scoff at the law, you should do it quietly.
Justice has been served.
Here Holmes not only doctored power point presentations to baloon numbers to investors, but put thousands of lives in danger (if some were lost, we will eventually find out) by providing wrong results for tests to many patients that lives relied on it, and she gets jail-free card and slap on the wrist.