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We Shouldn’t Be Surprised at the Theranos Fraud (nautil.us)
241 points by dnetesn on June 7, 2018 | hide | past | web | favorite | 244 comments

The most amazing thing about this whole situation is that there were experts in the field who were shouting out about the impossibility of Holmes' claims right from the beginning.

The media, though, never paid enough attention (or was possibly subverted by Theranos itself) to the naysayers.

These incidents ought to remind us the exponentially important role media plays in our lives and how important it is that we come up with a framework to penalize misleading journalism, while at the same time, preserving the independence of media.

Maybe that is the next social challenge for entrepreneurs in the coming decade.

The Wall Street Journal is the only reason the company was outed.

This same journal was also one of her early boosters.

We already have a framework that preserves independence of the media, the First Amendment. All of the NDAs and Boies style intimidation and legal abuse and harrasment of the whistleblowers and journalists was only stopped by the First Amendment.

We already have a framework that punishes journalists - it's people like Peter Thiel suing them out of existence because he doesn't like what they say. It's big funders buying a newspaper and destroying it like the Denver Post. It's the government putting sources on trial and in prison like happened with the NSA stories. Journalists are murdered constantly for reporting stories. And the industry itself is dying because of changing business models. They dont need a framework to punish them any more.

I am under the impression that it is rare for journalists in America to be murdered for their stories, is that not the case?

None of your examples are journalists being penalized for lack of due diligence or for being misleading. I think your instinct to protect journalists given their importance and the threats they face is a healthy and important one, and I share it, but I don’t think they’re above reproach. Ensuring the independence and safety of journalists is of paramount importance; ensuring journalists are appropriately incentivized to report accurate stories with healthy skepticism is of secondary importance after that (since most will innately desire that anyway), but it is still also important.

>None of your examples are journalists being penalized for lack of due diligence or for being misleading

Rolling Stone after the lacrosse rape case is one example. But more importantly, I think the point above is that journalism is in a vulnerable position where the carrot is more appropriate than the stick. Laws are crude tools for the most part, with lots of potential for collateral damage. It's like chemotherapy: you just hope the treatment kills the good cells slower than the bad.

Punishing bad journalism will have a chilling effect on all journalism, bad or good. It'll increase the costs of doing business by increasing liability insurance premiums. If the industry were thriving, maybe that would be acceptable overhead. But it's not thriving. It's teetering on the edge of collapse. So maybe we should find ways to identify and reward good journalism. Cultivate the flowers in the garden so they overshadow the weeds, rather than dousing the whole shebang in herbicide and hoping you kill what you intend to.

What undeserved penalty did Rolling Stone suffer for the lacrosse rape case?

Great-grandparent didn't suggest that laws are the only possible option to penalize misleading journalism, you're jumping to conclusions. Elsewhere in this thread, I even suggest:

> [Disincentivizing misleading journalism] doesn’t necessarily require an oppressive Orwellian governmental body to dictate truth and punish journalists who veer from the party line. It could be as simple as, after the fact now that we know how fraudulent it was, naming prominent journalists and outlets and pointing out red flags that they should have but failed to highlight, and other similar ways they should have expressed a healthy skepticism but didn’t.

Imagine if the phrase was "Software developers are not murdered for missing estimates in this country". I am pretty sure I would hit my estimates even in London.

Yes Journalists need high standards of professional integrity and the legal air cover to maintain that.

But really the ultimate defence is us - to reject the mountains of crap out there and seek out and subscribe to the worthwhile news sources.

As ever, it's down to us.

But journalists aren't murdered in those other countries for inaccuracy, at least not as far as I understand, and not in any of the examples brought up by GP. They're murdered for reporting awful truths more accurately than someone powerful and evil wanted.

I don't see how that obviates the need for journalists to be properly incentivized to report accurately and with healthy skepticism.

Can anyone give me a list of respectable independent media that I should be subscribing to?

The economist comes to mind. Any others HN recommends?

For general news, I find NPR.org [1] to be pretty good. I can tell they make an effort to avoid bias and sensationalism. It’s not perfect, but I have yet to find another online source that I prefer.

I also listen to my local station (WUNC) and if you’re in a decently populated area of the U.S., your local NPR affiliate is also likely high quality (plus it’s easy to listen online if you’re not into terrestrial radio.)

[1]: https://npr.org

Why hold yourself responsible for your actions when you can just say everything is corrupt and imagine that is an excuse? ;)

I'm sorry, but ruining people's lives for no reason other than the entertainment of your audience like Gawker was doing is not journalism. Peter Thiel did us all a service there.

I'm glad any random billionaire with cash to throw around gets to make these decisions for us.

Strange that you view it this way. I'm not extremely familiar with the case, but how I remember it is Gawker published a sex tape of Hulk Hogan and refused to take it down. While at the same time lampooning "society" about "the fappening". Hulk Hogan sued Gawker, which brings it to a court. Peter Thiel had a personal grudge against Gawker and used that case to take them down. Either way, it was still up to a court and all Thiel was doing was helping to fund Hogan's legal case. I'd hope that our courts have enough integrity to where if the evidence is against someone, no amount of money will change that verdict. Perhaps a bit idealistic, but I see no evidence that Thiel's money caused an inappropriate ruling in that case.

I'd characterize it as, "journalists" using their platform to go after specific people they don't like. Thiel helping one of their victims who couldn't afford to mount a case without running the risk of ruining themselves if they lost. Seems to me like a really noble thing to do.

>I'd characterize it as, "journalists" using their platform to go after specific people they don't like. Thiel helping one of their victims who couldn't afford to mount a case without running the risk of ruining themselves if they lost. Seems to me like a really noble thing to do.

And yet Breitbart is still up. So this idea that it's just about enforcing the law rings a bit hollow.

I don't read Breitbart, nor do I particularly care what they do. I'm not sure what was done by the company that was illegal?

The only reason he was able to do what he did was because Gawker broke the law.

> The Wall Street Journal is the only reason the company was outed.

No. The company was outed by people long before the wsj. The wsjalong with the rest of the media was the one that built theranos up because they wanted to push the feminism agenda.

The wsj stepped in and took the credit after the exposure/pressure on social media was going to break the story wide open.

It's similar to the nytimes taking credit and getting the pulitzer prize for breaking the weinstein story which they kept quiet for more than a decade. But once social media was exposing the story, the nytimes decided to release the story they kept quiet for so long.

It's like an arsonist who helped set a house on fire dousing the house with a glass of water after the firefighters put out the fire and pretending that they saved the house.

And lets not forget that if you criticized theranos or holmes, most of the media/journalists ( including those working for the wsj ) would attack you for being a sexist or a bigot.

I know what you mean. Often enough any minority is criticized at all it is initially brushed off as simple X-ism..

> The media, though, never paid enough attention (or was possibly subverted by Theranos itself) to the naysayers.

This is not the most amazing thing, at all. I'm not surprised that "the media" with their limited access, didn't get the full story.

Rather, I'm more surprised about the informed investors, who invested a lot of money, and had access or at least the ability to push for it. How did they invest so much money in something with seemingly so little backing?

> These incidents ought to remind us the exponentially important role media plays in our lives and how important it is that we come up with a framework to penalize misleading journalism, while at the same time, preserving the independence of media.

I don't disagree with the sentiment about the media, but I think this is a singularly bad example - who cares what the public thought about Theranos - the public didn't lose money here.

> who cares what the public thought about Theranos - the public didn't lose money here.

I beg to differ. Straight from the article:

> Some patients were rushed to a hospital on the basis of erroneous readings, only to be sent home when their blood was properly analyzed by the hospital. Even worse, Theranos was using brutal intimidation tactics against its own employees to stop the truth from coming out.

I don't know about your location but American citizens pay quite a premium for hospital care. Imagine the potential for crippling debt all because of a test result which should have been known to produce false positives.

That's definitely the public losing money here.

You're right - I stand corrected. I wasn't aware they'd gotten quite that far in actually deploying their product and (supposedly) testing people.

That's rather the whole point of the Theranos drama. They had faked tests on real people. That repercussions for third parties (CVS/Walgreens comes to mind, you can easily search for the fallout from that), and all sorts of very not-fun stuff.

My brother who is a pre-med student was able to figure out that Theranos was full of it without any special access way before the media broke the story.

When Stanford Professor John Ioannidis refuses to join your board because he refuses to give your product credibility that is a HUGE red flag.

It's unfortunate that your brother and others couldn't publicly trade on this knowledge. That simultaneously would have made a ton of money and disseminated through the market the valuable information that folks were betting megabucks that Theranos was full of it, limiting their fraudulent climb into the stratosphere.

This is a long way of saying that we may have created too many disincentives for large companies to IPO.

Even if you know that a company is a pure scam, the market can remain irrational longer then you can cover your short.

Or prediction markets that investors could use as a second opinion to get a corrective input on their own views.

If you invest 100M you might as well throw another 10k at a prediction market if you're confident in yours and there are naysayers who would bet against you.

These are called financial derivatives.

It is cute that you think investors are informed.

>The media, though, never paid enough attention (or was possibly subverted by Theranos itself) to the naysayers.

Rupert Murdoch put 125 million dollars into Theranos, so the press itself was invested.

This investment was only public after investors sued: https://www.smh.com.au/business/markets/rupert-murdoch-among...

But some credit is due to Rupert Murdoch: despite pressure from Elizabeth Holmes (and his investment in it), he decided to allow the reporter, John Carreyrou, to publish his critical pieces on Theranos in the WSJ [1]:

Several people who have worked at Murdoch papers have told me that he isn’t above interceding in editorial matters, but in this case, despite his personal interest, he didn’t. A source who has known Murdoch for years explained it, “He’s a newsman — and a good story is a good story no matter what or who the story is about.”

[1] http://nymag.com/daily/intelligencer/2018/05/john-carreyrous...

He gets credit for not doing something extremely unethical that would have been quite risky, probably stupidly so (because it would bring him into the controversy)?

I don't know if he gets credit for it (I'm disinclined to give him credit for anything, ever), but since a reporter in his employ came pretty close to singlehandedly ruining that investment, he makes a really bad example of how Theranos investors subverted the media.

As Carreyrou reports, Theranos definitely tried to pull strings with Murdoch, and apparently got nowhere with it. The WSJ timed the story to hit right before Holmes was set to appear at a major WSJ business conference.

Carreyrou wrote a book. This story was going to get out anyway.

Murdoch is a very skilled propagandist. He knew that trying to suppress this story would have backfired on him. Especially because the machines don’t work and because Walgreens would have soon learned the truth.

Nothing hurts a propagandist more than being really caught in an obvious lie. To protect his ability to slant the WSJ, Murdoch couldn’t have gotten caught suppressing this story. And he would have gotten caught if he tried.

Again, I'm not giving Murdoch any credit, but simply pointing out that Theranos clearly did not control News Corp.

Were his losses insured or recovered somehow after the collapse? Or was the investor money all gone by then?

Not publishing the story wouldn't have saved Murdoch's $125m. The story just reflected the truth of the matter, which was that the company had nothing and never did.

Speculating that he might have lost less than $125 million by publishing the story. How much of the investment was recovered or it's that still TBD?

Once the fraud was exposed and the company began winding down, spending would quickly slow down and that might have put investors in a better position to recover something, versus loosing everything.

If you don't give him credit for that, what would you give him credit for? If he stopped Carreyrou, you'd obviously blame him. Therefore in order for your judgement to be meaningful, you have to admit that him allowing Carreyrou to go ahead and topple the house of cards was a good action. Otherwise no matter what he does you judge him negatively - and in that case, your decision is predetermined and not of informational value for anyone.

Refraining from being horrible is not the same thing as doing something good.

No, but refraining from taking an action that's well within your power to take, possibly with minimal consequences, and which you have a strong incentive to take, is sign of integrity. I don't know if that's "getting credit", but having integrity is clearly a good thing.

On the other hand, it could simply be shrewd businessmanship. It's not like it was the reporting that made Theranos unviable. The tech would never work, it's just a question of time before the walls come crashing down. It's probably illegal for Murdoch to sit on this information while trying to sell his investment on to someone else (at the very least, inviting some nasty lawsuits).

Murdoch might very well have thought "Oh well, the investment is gone, I'll be damned if it isn't my newspaper to be the one to break this juicy news".

Murdoch had a short term incentive but a very large long term disincentive. If he tried to suppress this story he would have gotten caught because FDA and Walgreens care about facts. Not to mention that the story itself would drive readership.

Looks to me that Murdoch acted exactly according to his long term goals.

Look at all the people I have not murdered today. Yes yesterday was a bit of a bad day with that school and everything but I should get some credit for today.

It's almost like the nice guy thing. My times I respected women stamp card is almost full!

You don't give people credit for what should be normal. You give them credit for doing something over and beyond normal.

.... Uh. Yeah. That's why the poster did give him credit.

Since when has ethics ever stopped Rupert Murdoch?

Would controlling the media to influence an investment you hold stock in be considered illegal? Similar to insider trading?

I believe so: consider the City Slickers case[0].

Those guys were journos, not proprietors, but I'm pretty sure that if you could prove that a proprietor put heavy manners on the journos to do that, they would certainly be up for a criminal conspiracy charge, at least in Britain. Of course, that is typically a pretty big 'if'.

[0]: https://en.wikipedia.org/wiki/James_Hipwell

Unless you’re in the US Congress, where profiting from stock movements was made explicitly legal - by an act of Congress.

For a man like Murdoch, allowing Carreyrou seems to be more in the vein of "Let there be a public naysayer, lets discredit him, leading to more pseudo-credibility to my investment"

I seriously doubt he allowed Carreyrou to continue for the sake of good journalism.

A man like Murdoch cares whether a company he invested in is going to make him money. This means finding out how the company is actually doing, instead of simply trusting the documents presented to him. What better way to do this than to have a reporter snoop around?

By letting reporters in his hire just do their jobs, Murdoch probably gets privileged access to a great deal of secrets and speculations. Carreyrou's reporting could very well have persuaded Murdoch not to make further investments in Theranos, thereby saving him billions.

Also, Murdoch has a $5B investment in the WSJ. The value of that investment depends on the credibility of their business reporting. Spiking stories to protect a much smaller investment doesn't make a lot of sense.

Exactly. His long term incentives were aligned with letting the story run.

So, as I write this, there are what, 5 distinct possible negative motives for Murdoch?

As the rationalists say, if you can explain anything, you can explain nothing.

I'm not saying he did it for good reasons. I'm saying it's plain that nobody here knows why he did it, and lack of knowledge is lack of knowledge, not license to just fill in the blanks with whatever you like. (Our brains are very good at that, and the careful person must be in a constant fight against that tendency.)

But jerf, I already know he's a bad person.

You are justified in using past history to do a certain amount of broad concluding (nothing as specific as the 5+ hypotheses given), yes, but bear in mind you are not justified in "A: Murdoch is bad B: Here's a thing he did C: I bet he did B for a bad reason because A therefore D: Murdoch is even worse than I thought". You are "spending" confidence when you do this, not increasing it. (Another very common cognitive error. Not sure I've seen this on any fallacy lists. Probably needs to be, and given a name.)

I don't consider my explanation to be a negative one. He didn't spike the story because he's not stupid.

The alternative view is that Murdoch wrote off the investment and allowing Carreyrou the piece serves as a “this is what happens if you play games with me” warning for other prospective partners

Being a whistleblower sucks.

I was an election integrity activist. We were ridiculed, harassed, and in some cases jailed.

Of course, we were (mostly) right. But there's never a nod or h/t to acknowledge the pain and sacrifice.

And don't be fooled into thinking the sniffing salts are working. There's always another con, fraud, bubble. (In my case, all postal balloting, which is worse than the touchscreens.)

I think whistleblowers should maybe just bet on the short. https://en.wikipedia.org/wiki/The_Big_Short https://en.wikipedia.org/wiki/George_Soros#1992_pound_short

> In my case, all postal balloting, which is worse than the touchscreens.

Got any more info on this? I'm in a state where all voting is done through postal ballots.

Paper ballots are scanned upon receipt. So you might as well fax your ballot. They keep the paper for a while, sometimes used for manual recounts, under very narrow circumstances.

Because there's no second chance, admins have to adjudicate for voter intent. So they modify the votes in the database.

To protect the database, as part of the backup, the votes are tallied both at end and beginning of shift. That means a running vote count. Law is that votes can only be tabulated when the polls close. So admin's have the fiction of "summary reports" vs "tabulation".

Yes, admins peek at early results.

Another new threat to integrity is signature verification. But that's a whole topic onto itself.


The biggest mitigation would be to switch from brittle FPTP to robust approval voting and proportional representation (as appropriate).

I grew up in Oregon, which has been 100% vote-by-mail for years, and fraud is non-existent there.

This is FUD, to dust off an old chestnut, at least as far as Oregon is concerned.

Check it: https://www.google.com/search?newwindow=1&q=oregon+vote+by+m...

In the 2016 election, a potential 54 cases of voter fraud. Here's the breakdown of the kind of fraud (which amounts to .002% of ballots -- one in 38,000):

"Richardson said the suspicious ballots broke down into several categories: 46 voters appeared to vote in Oregon and another state; six individuals listed as deceased voted; and two voters registered in Oregon voted twice."

You’ve observed central count?

You’ve attended the canvassing board meetings?

You’ve audited an election?

You vetted the certification of the hardware, software, rules, procedures used by your jurisdiction?

You’ve collaborated with the nationwide network of admins, vendors, academics, and activists on these issues?

Can you refute anything I’ve stated?

Do you even know how your ballot is processed?

Did I say anything about fraud?

FUD indeed.

FWIW, you perfectly illustrate the challenges whistleblowers endure, so thanks for that.

This is such a ridiculous reply. "You've audited an election?"

It's on par with "you've inspected the rain clouds, you've watched the rain fall into the Bull run watershed, you've inspected the reservoirs, the pipes, done salinity and chlorination tests on your tap water?"

Voter fraud in Oregon is virtually non-existent, and all you can do is raise the spectre of I don't even know what. It'd be silly if it weren't so insulting, what you're suggesting.

I'm sorry you're offended by things I didn't say. I now feel silly and ridiculous. Thank you for setting me straight.

You're welcome.

have you ever audited an election... rolling eyes

Yes, I have.

Oh. You weren't asking.

You're mocking the notion that such a thing is knowable, that there's an objective reality.

I know. Facts, data, experience, critical analysis are all so unkewl. My bad.

You've been breaking the site guidelines a lot lately and getting into political flamewars. We ban accounts that do that, and have asked you more than once before to stop.

Would you please (re-)read https://news.ycombinator.com/newsguidelines.html and post civilly and substantively, or not at all?

Here's a story about media manipulation from a reporter who Theranos tried to sell on the story: https://khn.org/news/reporters-notebook-the-tale-of-theranos...

I don't want to go full Elon "the media is incentivized to penalize me in particular" Musk, but the ethical thing this reporter did was to was cancel the Theranos feature. A less scrupulous reporter might have been happy to run with it.

If they can prick a reporter, why not prick a patient and have them come back for a later follow-up where they do the real test. That way the reporter and theranos both get their soundbite.

I mean, it's not worse than setting off a fire alarm and cancel every body's blood test.

> how important it is that we come up with a framework to penalize misleading journalism

That would require the existence of a group of people empowered decide what is the truth and what is not. Such groups have a really, really bad history. No thanks.

(The history of it is so bad that protection from such groups is enshrined in the Bill of Rights.)

Woah, I think you’re reading too much into what GP is suggesting. I think all that GP is pointing out is that news sources that reported on Theranos’ claims credulously and without necessary skepticism have faced basically no criticism (this article doesn’t even bring it up), and therefore have virtually no disincentive from doing the exact same thing with the next Theranos.

Fixing that doesn’t necessarily require an oppressive Orwellian governmental body to dictate truth and punish journalists who veer from the party line. It could be as simple as, after the fact now that we know how fraudulent it was, naming prominent journalists and outlets and pointing out red flags that they should have but failed to highlight, and other similar ways they should have expressed a healthy skepticism but didn’t.

> come up with a framework to penalize misleading journalism, while at the same time, preserving the independence of media

Why this obsession with penalizing people? Journalists might not know better. At some point one needs to take some responsibility in determining whether what they are consuming are actually reputable data sources or just cheap/free entertainment and hearsay, and one needs to realize that news outlets have inherent biases towards telling stories that are extraordinary or otherwise appealing.

Ultimately, shouldn't everyone be applying critical thinking and the scientific method to come to their own conclusions about the world?

If anyone it’s the journalists who should uphold themselves to that responsibility. If they don’t, then their purpose in this world is moot. We might as well have 100% social media reporting.

> Journalists might not know better.

I don't understand why this would excuse anything. Journalism is almost literally their about to (get to) know better about things and explaining to the rest of us.

At least, that's what it should be -- these days it seems to be mostly about generating clickbait. (Sorry if that's cynical -- I've just read Trust Me, I'm Lying.)

> Ultimately, shouldn't everyone be applying critical thinking and the scientific method to come to their own conclusions about the world?

Of course, but there's limited time to investigate everything in ultimate skeptical detail, and so we rely on others we trust.

>these days it seems to be mostly about generating clickbait.

Yes it's a bastardization of their profession, but everyone needs to eat.

Who knows if we'll ever get back to the quality of journalism in the Woodward/Bernstein era, when the large majority of middle-class Americans paid a monthly subscription to have professionally composed news delivered to their doorstep every morning.

Subscribe to nonprofit, or family-run, journalism that cares about the truth. ProPublica, Guardian, WaPo, now maybe LA Times, NYT (but avoid their bothsidesist politics coverage), Mother Jones, Talking Points Memo, New Yorker, etc. As long as truth seeking journalists are in control, all good - but carefully watch for ownership changes.

> I don't understand why this would excuse anything

I don't see it as an excuse, just as an observation of reality. Journalists can be misled by their sources. They may misinterpret data or make mistakes. They can have ulterior motives, or they may see the world through different glasses than you/me (e.g. conservative/liberal oriented news outlets). They may be pressured by deadlines to put out subpar quality material. There's noise amplification and echo chambers due to the role of social media. There are many reasons average journalism today might not be up to some standards.

The way I tend to think of it is: trust but verify. Some things matter directly to my personal life and it's in my personal interest to verify that I have the correct information about them. Why then, should I trust the (possibly exaggerated) interpretation from some WSJ journalist on some recent research paper rather than doing my own homework?

News about Theranos at this point, for example, is not one of those things that directly affect me or my family, and the accuracy and outrage of this story is of only mild entertainment value to me. Recognizing that, I can choose to consume news about it with the implicit understanding that I'm probably getting sensationalized editorials with no more value to me than a random hollywood movie, and not some data source that I should be investigating.

I'm not sure. But as another commenter mentioned, carrot (incentivizing responsible journalism) seems like it would be a far more effective response than stick (punishing bad journalism) for this issue. In the current environment there is already plenty of stick and hardly any carrot, so to speak (or even perverse incentives).

I don’t know how any honest, intelligent person can hold this position post-JournoList.

Sure, there were skeptics. And there were also SV gurus shouting "Fake it till you make it!" "Impostor Syndrome!" "Ignore the haters!"

When you immediately equate all self-doubt with Impostor Syndrome -- rather than develop actionable heuristics to detect when said doubt is justified -- don't feign surprise when some people take it seriously. Maybe they were just fooled by your confidence.

("You" in the general sense, not you personally.)

I don’t know. That thinking might paper over a middling start-up with a mix of sincerity and hype but just a poor product or unsuccessful funding rounds.

Theranos, and other unicorn-scale hype, is a whole different thing. It doesn’t get this bad unless there is a seriously malevolent drive for the money, essentially saying that you deserve money just for an idea, just for being a made-up executive, regardless of all else, and you’re going to lie, cheat, intimidate, swindle, and unapologetically steamroll your way to the money no matter what.

It’s a technology narcissism problem.

Not mere overconfidence or being swept up in the hype while at least trying to genuinely build something even if it ends up not working.

> It’s a technology narcissism problem.

BINGO! What a great term. I've never heard it called that before (which now seems hard to believe), but have definitely seen it SO many times before (specifically in massive corporate IT programs - the domain I work in as an enterprise architect). Did you coin this phrase? I'm so using this! Thank you.

I doubt I am the first to call it that, but I haven’t seen it elsewhere that I am presently aware of. Having a taxonomy of this bad behavior, with useful names, does seem important, to make identifying it and discussing it more widespread.

I imagine young founders not wishing to be like Holmes could benefit from a rubric of sorts that helps classify this behavior. And for bad-faith founders who do want to behave like Holmes just without getting caught, talking more systematically about it would make it harder for them, limit their options.

What would be really cool is a modern version of Moral Mazes directed at startups.

Corey Pein’s recent book is a good take down of SV’s narcissistic mythology, and shows how it has some surprising and disturbing roots.

There was also a thread here recently about how business culture values those who operate politically far more than it values those who are practical creators - how if you’re skilled at politics you can appear to achieve almost anything, even if you have no true useful skills.

Holmes was a kooky idiot scientifically, but a combination of huckster hubris, nrcissistic self-absorption, and political genius - greased by a comfortable upper class background - created a lucrative illusion of Cool Stuff In Progress.

She crashed and burned because there was absolutely no substance there. But if there had been some substance - not much, but just enough - she’d still be riding the PR wave and raking in the investor cash.

If someone like Holmes can become a billionaire by peddling nothing except lies and hope, what’s the real value of the software and tech industries if you take away the hype and money machines that surround them?

> If someone like Holmes can become a billionaire by peddling nothing except lies and hope, what’s the real value of the software and tech industries if you take away the hype and money machines that surround them?

"Real value" is a tricky concept. What is and isn't real? Clearly societies have evolved (and are still evolving) to incorporate "dreams, future potential and hype inertia" into the equation, so anecdotally and tautologically, there's some value in that. Future considerations affect today's reality, so they're "real" in every sense of the word.

We don't know what exactly it is that captures the human imagination—a combination of history, ancestral stories, greed, a tangled mess of primal urges—but peddling improbable futures is definitely a well-established evolutionary pattern.

Dreams and ideologies are the rudder that helps civilizations steer away from local minima, overcome adversity and plod through suffering.

My point is that Holmes is a somewhat extreme example because her confrontation with reality was so head-on, so clearly falsifiable. But if you take away the "hype and money machines" en-masse, I suspect you'll end up with something that isn't human. It's all a house of cards. And it's nonsensical to discuss money, economy and value without humans, these are purely social constructs.

I think you missed the point of the parent comment. It wasn’t to debate relative value in a philosophical sense.

I think it was trying to say that if someone like Holmes (& board members) get rich this way (and it takes such effort to catch what they’re doing and bring actual consequences), then it in turn greatly devalues software labor.

Think of it this way: if people think this is a good strategy because it does work for various start-ups and even in this extreme case Holmes made over a billion dollars and it’s yet unclear what punishment, if any, it will be — why would start-ups care about actually building something, actually having engineers who produce things. This company made vast sums of money while not doing any of that.

It basically encourages a template for trying to print money with secretive refusal to explain the methods, and engineering hype. Which in turn makes being good at engineering worth far less to these people.

The more this looks like a viable option, the less valuable engineering skill is.

I agree with that. What I am contesting is that what you and OP describe is such a bad thing wholesale. Holmes should definitely be punished, and the engineering/dreaming trade-off corrected. No question about that, it seems she was outright lying, not just "chasing dreams".

My point is that hype and chasing (improbable, stupid, exploitative) dreams are a spectrum, not a binary. Calls for appreciating "real value" (WTH is that? who defines?) and "removing hype" bring painful memories — it's not just a philosophical point for me, coming from the Eastern block. These feedback cycles are shorter than you think.

The objective function of what we should optimize for is unknown, but I'm sure 100% "honest engineering labour" and "good at engineering" and 0% hype would be a terrible, short-sighted, deadly idea. We need dreams and inertia to escape local minima, we need the collective goal correction.

That's the silver lining in this Holmes case too: the public debate brings about such correction. I voice the dangers of over-correction.

My question is: where is the due diligence from investors? Nobody even bothers anymore. I’ve begun to think they don’t even care, because they truly believe that money makes success, not people, and certainly not technology.

Investors rarely do a crazy DD, especially technical DD.

First, it is expensive and second which is most important, it takes time.

When a company is fundraising and investor likes a pitch they prefer to move fast in fear of missing out.

Generally, all the dead bodies are found during the first board meeting.

It is not that much different from just buying stock. No one actually has an idea if any of public companies are cooking books etc. You just wake one day and it is a huge write down.

That's absolutely wrong.

Remember - the reason Theranos is news is exactly because this doesn't happen often, and one of the reasons this doesn't happen often is that investors are usually smarter about their investments.

Reminds me of the doomed OnLive. Anyone who knew anything about the internet and latency was speaking out about the impossibility of it ever being a suitable experience from a latency perspective. Concerns were just treated as alternative facts at the time.

What was impossible about OnLive? Using the app was an impressively responsive remote desktop experience, and cloud gaming is very much a viable reality as shown by PlayStation Now and GeForce NOW.

I agree. From what I read about OnLive's failure, they had major problems with founder Steve Perlman, which spiraled into lack of direction, a pivot, and a crash. The tech worked pretty well when I tried it.

Getting a comparable user experience. The technology is impressive but the video quality, FPS, and latency are not. Most people are just surprised it even works as well as it does, but once the honeymoon period is over the issues start to become apparent.

This is why you mostly hear stories like "Oh, I tried [service] out once and it was actually pretty good"; it's a novelty for most and not worth paying for.

I played a bit on OnLive, just to test it out and I thought the experience was decent enough on my (at the time) MacBook Air. Perhaps not good enough for twitch multiplayer gaming (I didn't try that), but I thought it was ok for the single player games that I tried.

There is a very powerful mythology surrounding the Independent American Inventor, a big part of which is that they overcome the mobs of naysayers shouting, "It can't be done!" by sheer force of personal will and brilliance. On this theory, the mere fact that there are people saying it can't be done tells you nothing (or, in fact, indicates that the target of the criticism is actually on to something really big!)

This happens pretty often actually. The same early investors own the media companies so they get to push stories to get companies huge valuations. The media is there to make money too! One thing America lacks is public radio/tv whose goal is to serve the public. People keep forgetting that the media is private. Whoever controls the media controls the people.

well that's not panacea neither, since budget comes from government/state, and so with change of government leading directors are often changed too for 'a more compatible view'.

just look at post-soviet/eastern block media, we all have those (tv/radio) but nobody expects anymore true objectivity there.

> The most amazing thing about this whole situation is that there were experts in the field who were shouting out about the impossibility of Holmes' claims right from the beginning.

Ummm, have you heard about Bitcoin? Hacker News recently removed a well-written article where Bill Gates and Warren Buffet explain, in very clear terms, why it's a bubble.

By the time I made it to the comments page, the page showed the article as flagged.

(Basically, anyone who understands distributed systems knows Bitcoin won't scale. Anyone know understands economics knows that a deflationary currency won't work.)

Look at Bitcoin for an example of where the experts are ignored.

Everyone who would dare to criticize Holmes would go against modern empowerment narrative and claimed as misogynist, so I'm not surprised.

You’re getting the usual downvotes for this, but there’s probably some truth here. Remember, the Theranos story started up right around when the whole “we need more women in tech” stuff started gaining steam. All the stories were coming out about how tech was run by men and full of bros. Lo and behold, here comes this young, seemimgly technical woman who dropped out of school and dressed/acted like the next Steve Jobs. It fit perfectly into the existing story! Like the X-Files poster, everyone Wanted To Believe! The Theranos story hit the tech press right in that blind spot, and people were willing to overlook their skepticism in order to believe that they were witnessing a real female Steve Jobs tech celebrity.

> The media, though, never paid enough attention (or was possibly subverted by Theranos itself) to the naysayers.

Part of the problem, I think, is that the public loves (and wants to believe) the narrative of the lone genius who solves a problem against all the odds, and against all the people who told them they could not do it.

This is where the problem is. Media should focus on facts. Not what the public loves.

> The most amazing thing about this whole situation is that there were experts in the field who were shouting out about the impossibility of Holmes' claims right from the beginning.

Links? Wasn't Holmes incredibly secretive about everything? It's not like she was promising overunity or anything, just a "radically new approach" type thing.

The reason why experts knew it was fraud right from the start is not even god can do the assays Holmes was claiming from a single drop of blood - the information is just not present and the variability is too high.

Where can I read the statements of these expert? Can't find anything before 2015.

What I find truly amazing is that both Kissinger and Mattis were board members, and were party to this grand pump-and-dump, and seem to have escaped any consequence or notice.

Holmes, while equally culpable, appears to be taking the entire fall.

I wonder what she’s getting in return - a cabinet position in a few years once the dust has settled, I’m wagering.

There might be numerous legitimate reasons to dislike Kissinger and Mattis going well beyond Theranos, but suggesting they're as culpable for being hired to promote something they didn't understand to the military as the person who conceived and masterminded the fraud is stretching it a little far. I imagine Kissinger and Mattis' reputation would have taken a bigger hit if it didn't already have much bigger black marks against it.

You're surprised that Kissinger has escaped consequences?

That was the case with the housing bubble, the tech bubble, etc. Everyone always gets wrapped up in the free money, that they just don't care. The media does, I think, pay attention, but they are in it for money too, so if the positive story is going to get more clicks, they run with that.

Sometime back, I remember reading about how impossible it was what they were proposing. Shocking that it had to take all these years and that huge amount for the truth to finally come out.

FOMO is a hell of a drug.

The real problem is that Walgreens didn't do enough due dilligence before signing a contract with Theranos, and that people didn't investigate where their blood was being analyzed

You won't get honest and really critical press without removing capitalist (i.e. non-democratic) ownership of the press. Making it so that the journalists own the company rather than some billionaire overlord would be a marked improvement.

I would add to that the need for more expert scientific input into journalism. Properly informed journalism on science issues seems like the exception rather than the norm. Even major news organisations seem to treat science like some mysterious cult at times. I can't help thinking that most journalists probably study social science etc. at undergrad level, leaving them ill equipped for gritty technical investigation, just as you might not expect to get the most well informed theatre criticism from a civil engineer..

> I can't help thinking that most journalists probably study social science etc. at undergrad level, leaving them ill equipped for gritty technical investigation

Social sciences are empirical sciences where knowledge of statistical controls and other tools needed to deal with the difficulty of laboratory research in the area of study are necessary as well as all those things necessary in any empirical science, so they don't have that effect.

OTOH, most journalists probably study journalism or other arts, not any kind of science, at the undergraduate level.

I take your point and my choice of words could have been better, though I'd note that valid methodologies in social science are far from limited to quantitative, which is what you seem to be suggesting, and plenty of students can get through a social science degree relying almost entirely on qualitative methodology.

"there were experts in the field who were shouting out about the impossibility of Holmes' claims right from the beginning"

Were there? I'm not doubting your claim, just wondering if anyone really spoke up.

Reading about the challenges they would have had to overcome to back up their claims, there were some serious fundamental problems, and those were challenges the industry had been wrangling with when it came to that type of automated testing for ages.... I always wondered how many of their competitors were thinking:

"No way they overcame all that all at once.... straight up not possible."

The Wall Street Journal was running investigative pieces seriously questioning Theranos' capabilities in 2015. Concerns and questions had been bubbling for a while before that.

Theranos' response included an all-company meeting where they chanted "Fuck you, Carreyrou"[1] (John Carreyrou, the WSJ reporter who wrote the critical articles), and developeing a video game for employees that involved shooting him[2].

Notice that second article is only a couple months old and reports that some people there still believe the problem was not Theranos' lack of ability to do what it claimed, but that the media reported Theranos couldn't do what it claimed.

This playbook of "the problem isn't that our company is in trouble, it's that the media reported truthfully on our trouble" is still being used today by other darlings of Silicon Valley and HN.

[1] https://www.vanityfair.com/news/2016/09/elizabeth-holmes-the...

[2] http://www.businessinsider.com/theranos-employees-made-space...

It's always funny when they blame the media.

Theranos in particular as if they had what they claimed, the media could poop on them forever and once they put out the product it would have changed the medical industry regardless of the media... but nope.

Yeah, obviously since the article of this very comment thread is an interview with Carreyrou. People are asking for links about fraud claim before 2015.

I remember there were immediately after the 2014 TED talk. Heck, I watched that talk and immediately thought it was a complete fraud. Turns out that's like 7 years into this company being around and a year after they'd been full-on defrauding investors.

I can't recall of hearing of Theranos before then though, but I'm not in the valley.

A lot of "I remember" in this thread but where are the links?

Google "Geoffrey Baird Theranos"

Geoff Baird plays in my regular poker game. He's probably one of the smartest people I know and has been regularly denouncing Theranos' methods for several years.

Comment from the oldest HN article I could find -


NO one refuted it.

The issue is not that smart people didn't know, it's so many people can't see the obvious.

Assuming the comment is ordered correctly it's the masses with the problem. Valid concerns were raised, no one could defend them, but the comment was left at the bottom.

HN, like the media has flaws that don't allow it to correct at even a snails pace.

But if you're smart it's not hard to see the truth, hard part is making money, it was fake from the beginning but who would have thought it'd take so many years to fail in RL. Knowing when to bet against it is the hard part.

IE. Magic Leap will fail, who knows when though.

> Magic Leap will fail, who knows when though.

Been saying this since the beginning and just want to go on record with this again now in case this comes up 5 years from now like Theranos did.

Also on the record in case Magic Leap becomes the biggest thing ever.

The book Bad Blood is amazing and extremely gripping. The question, however, why Holmes did this is still open. The critical point to remember is that Holmes never sold her shares and in fact she kept accumulating more. She didn't need IQ of 150 to figure out that going live with erroneous medical devices would get her slammed with lawsuits from patients. If she just wanted to dup investors to become rich, she could have done it real easy by stepping aside, let someone inherit the mess and then selling her stack. In fact her board asked her to do just that before WSJ found out and she refused it. I have seen her plenty of talks/interviews and its super hard to believe she was working with malicious plan all along. Part of me wants to feel that her desire was genuine to some extent and she just hoped things would work out if she pulled lies and deception long enough to keep raising funds. She had lots of top tier advisors who have done exactly that to establish their own companies. I'm not defending her by any measure, she was classic bad manager with Balwani topping even her. There was a very little chance she could have actually ran talented team longer term - but this is precisely the part book conveniently leaves out.

You start out with an idea you hope you can make work, you fudge a little and naively promise the moon, and soon enough (after a few big investments) you're in so deep there's no way out. Maybe you realize pretty quickly that the technology is a dud, but there's no exit without humiliation so you just keep digging.

I don't think she's a sympathetic figure in any way, but it's easy to see how someone could wind up in that situation without having started out as a scammer.

This makes sense to me, as I've asked myself was she bad or deluded? But perhaps instead she started out with the best intentions, only to be forced into gambling with ever greater stakes as each attempt at changing the world fell flat.

She probably believed in her project.

You can't know if you are going to succeed when you try to achieve a revolutionary feat. But you have to act like you are sure you will.

Imagine Jobs in an alternate universe, trying to get out the iPhone, but after years of failures and billions wasted, the world realize the product vision was unrealistic.

Basically him being the same asshole, but hitting a wall many predicted.

That would look the same as Theranos.

The difference is that Job didn't fail. But he couldn't know that before trying and commit many people and resource to it.

Imagine Elon failing as the Falcon X. Or worst, failing over and over until his company died because they lost control of one that went crashing into a school.

Imagine Zuckerberg called out about all the privacy issues on FB before it actually made benefit. I would have died.

When you try to achieve radical vision, you often either succeed as a hero or you fail as a vilain.

While there is some unknowable risk, Theranos was in a completely different realm in terms of the mismatch between her technological aspirations and the feasibility of current technology. From the interview, Holmes appears to lack the knowledge and even the curiosity to understand the existing technology, making her company essentially a blind bet. This is enormously more irresponsible than the technological bets that FB, Apple, Uber, etc make.

> lack the knowledge and even the curiosity to understand the existing technology

Honestly, this is what I understand least.

I can understand and even respect banking a company on "this isn't possible yet, but maybe we can develop new technology". That's a standard feature of legitimate biotech startups and drug research.

I can comprehend the snowballing risks, overstating a case because you think you're almost at something really impressive. I can't really understand the blatant, verifiable lies like "the DoD uses it", but it's not the first time we've seen those.

What feels new and totally baffling is to not even care what's being done and what's possible. There's no sign that Holmes or Balwani ever had any idea whether they were close to success. This wasn't just betting on horse races with borrowed money, it was betting on a dead horse because you hadn't bothered to check if it was still alive.

The difference is that Jobs wasn't putting people's life in danger as theranos did by releasing malfunctionning blood testing machines

Elon, with self driving car, high capacity batteries and powerful rockets had the ability to put people's life in danger.

has. And also people who are not his customers.

But in that alternate universe Apple would still have been a huge success, and the iPhone would have been another failed product like the Windows Phone. In addition to this pattern to success, Jobs was not a criminal. Theranos made VERY negligent statements such as the military using Theranos products(they did not).

> But in that alternate universe Apple would still have been a huge success

Replace iPhone with iPod and Apple never reaches this sky it's currently at. It the product that put it back on the map, open the itune cash valve and paved the road for the iphone flag ship product.

The situation is never _exactly_ the same. But you can see a pattern. And history is written by the victors.

> Theranos made VERY negligent statements such as the military using Theranos products(they did not).

Musk, Jobs and the rests lied as well, just on a different scale.

The scale does make it worse, but the mechanism is the same. If Theranos had delivered, nobody would recall this lie.

Your right about history written by victors, however if Theranos delivered would there be fraud? The issue at hand is that she said she delivered when she did not.

Of course, but failing show it as the fraud it is. Succeeding would have made it appear just like a "risky bet".

> Jobs was not a criminal

The options backdating scandal arguably involved criminal behavior, and the anti-poaching collusion between Apple and other companies was arguably illegal as well.

Not saying that Jobs was primarily a criminal, but he was involved in a fair amount of unethical behavior over the years.

It's not unique to Theranos.

It's all part of the perverse incentives involved with well-funded tech companies.

There is no real incentive to call out fraud. As an investor or a partner you might pass on a deal, but to go public with your concerns means risking a possible lawsuit, raising the ire of the people who are already on the bandwagon, being excluded from future deals, and being dismissed as someone who is out of touch and "not getting it."

Contrarians can short publicly-traded companies, so there is a financial incentive to call out BS, but for private companies there is very little upside in raising concerns publicly.

If you doubt this effect, contrast the number of articles talking about how blockchain is the future with those taking a hard look at blockchain's financial viability for specific applications. The former group are the ones being asked to speak at conferences and landing large consulting contracts.

Short traders and put option holders have to also get the timeline and technical factors right to get paid. See the debacle with LongFin. The right play was to go long and make money off borrow fees. The bears got hosed by a trading freeze that kept them from closing their shorts or from acquiring shares to sell for their expiring put options.

True. That's why so many of them try to "leak" the problem to journalists after they have taken their short positions.

I mean it's not a perfect system, but at least in the public markets, there is some financial incentive to expose deception.

I have a strong suspicion another example will be Magic Leap. Note: not as an intentionally-misleading or lying case, but just as another extremely well-funded startup whose launch is likely to fall short of the hype.

$2.3bn in funding adds an immense pressure for it to be successful and perceived as revolutionary.

Magic Leap could certainly fail, but I don't understand how they could be another Theranos.

Theranos had contracts-signed, money-spent deadlines for things they couldn't provide (the Walgreens deal), and was selling further investors by lying about having their product already in use by the government.

At least publicly, Magic Leap has promised virtually nothing. They said in December they'd ship something this year, but there's nothing binding in that. Even in the worst case - the tech is literally useless and they spent all the money - it'd be a bad investment rather than fraud and breach of contract.

Agreed. Somebody else mentioned it's more similar to Segway than to Theranos - overhyped to hell, but not a scam.

IMO selling vaporware is indeed a scam

It works both ways though, a lot of people said Tesla was a fraud and they couldn't build a "real" electric car with a range of 300 miles. And to the credit of the critics they weren't wrong, there was some serious integration of battery technology that had never been done before that made it possible for the Model S to exist.

Not that I'm defending Theranos, they should have come out and said "We're running into issues" waaaaaay before they did and way before they put kiosks into Walgreens. That their diagnostic technique seemed impossible to experts doesn't disqualify them, but once they had failed to get it to work themselves, and yet assert that it does. That is when it steps over the line into fraud as far as I am concerned.

I feel like the comparison would work better if Tesla had secretly put gasoline engines in their cars before presenting them to the DOT and EPA. People may have accused them of being a fraud, but that’s not the same thing as accusing them of committing fraud.

I think the differentiator vs. Tesla is that Theranos promised things that are/were physically impossible. Putting aside Tesla's long history of delays, I think it's fair to say that the company has delivered on some of its core technological promises. Battery pack cost per kWh is close to dipping below $100, Tesla has dramatically reduced their use of rare earth metals in their packs, they've helped alleviate concerns around thermal runaway in their packs, and various academic and anecdotal accounts have shown that Tesla batterypacks hold up well even after hundreds of thousands of miles of road use and thousands of recharge cycles. These are all meaningful advancements in basic science.

In the Carreyrou book, one clear example is the explanation of why Theranos couldn't possibly do "all blood tests" on a single drop of blood. On an individual test basis, finger pricked blood is different in chemical makeup from blood drawn from a vein. If you're testing for certain diseases, even assuming that you had equipment sensitive enough to find small concentrations of a target element or organism, the finger pricked blood may just not have those markers at all.

Secondly, blood testing is a destructive process. If a doctor orders an immunoassay and a pathogen test for a patient, it's close to physically impossible to run both tests on Theranos's much touted "single drop of blood". You would be using up portions of an already tiny sample to perform the reactions necessary for each test. The premise that you could do multiple tests on a single drop of blood was a false one from the start.

Third, the purported form factor of Theranos testing machines, a small Apple-esque box, created physics problems from the start. Proteins and cells in blood are hyper-sensitive to temperature. One of Elizabeth Holmes's subordinates literally repurposed a glue robot to perform the basic blood testing tasks that would normally be done by a human. Imagine trying to have a tiny robotic arm trying to pick up tubes of blood from a tray, and perform chemical reactions, all within a shoebox-sized machine. Trying to leave enough room for the robot to physically swing its arm, and maintaining an acceptable level of heat dissipation so as to not destroy the samples was a challenge that Theranos never solved. At a certain point, you're running up against basic laws of physics and the literal limitations of space.

The latter points in robotics are solvable with very clever design (not a glue robot). The sampling issue is not, though.

Well, Tesla started with a functional prototype. It's always been an economics game; and a game of scale.

Theranos didn't start with a functional prototype.

> there was some serious integration of battery technology that had never been done before that made it possible for the Model S to exist.

Where can I read about this?

While Theranos relied heavily on excessive optimism about technology's potential to solve a major problem, it also relied heavily on outright fraud. It's true that they had assembled a board of non-experts that were duped by unrealistic promises, but when the investors were lied to (as is being alleged in court) it seems difficult to say this is a symptom of some sort of cultural problem among investors.

I just finished reading the new book on Theranos.

I’ve seen very similar things at other science based/biotech startups. In particular, over-promising and misrepresenting the state of development. Quite often these companies are funded by traditional tech investors who don’t know how to do DD on science-based/biotech startups.

The difference with Theranos is that they messed with the FDA. They did consumer testing, and publicly raised their profile to the point where they couldn’t be ignored.

If they hadn’t started doing consumer testing with a device that essentially doesn’t work, I doubt we would have heard of them.

Most of the investors would be happy right-off the investment. Even with Theranos, I believe it’s only the smaller investors who are making a fuss now. Larger investors know the money is gone, and there’s not much point in suing.

I think most of what went wrong with the FDA happened after Carreyrou's first WSJ article came out, didn't it? That WSJ article basically killed the company.

The timeline/impact is a bit murkier.

Carreyou had two big revelations. One was that Theranos was not running blood tests on their proprietary machines, which were supposed to do finger prick draws. The other was that Theranos had submitted fraudulent validation data to the Center for Medicare and Medicaid Services (CMS) and state regulatory bodies.

They did a couple brazenly unethical and illegal things.

1) CMS subcontracts lab inspections to state regulatory bodies. When California lab inspectors visited Theranos, they physically blocked off the door leading to a floor that had the Siemens equipment, presumably to hide the fact that they were not conducting tests on their own proprietary machines. So, the inspectors never actually inspected the relevant labs.

2) Theranos violated "proficiency testing" guidelines. Proficiency testing is the practice of running tests on a sample with a known concentration/result, and comparing results. The spirit, if not the letter, of the guidelines is that you run the tests on the same equipment as would be commercially used. Thus, Theranos sent in fraudulent tests by testing using Siemens machines. This proficiency testing duping was what caused Tyler Schultz to send in an anonymous tip to the New York laboratory regulatory body, and led to his final decision to leave the company.

3) Theranos tried to claim with the FDA that its tests were "laboratory developed tests", i.e. they were unique tests that could not be compared to existing market tests. Carreyrou has a scoop in the book that Theranos benefited greatly from a bureaucratic power grab between the FDA and CMS. Both agencies claim some sort of regulatory oversight for the blood testing market.

At least initially, there were many in the FDA who were suspicious, and wanted to send inspectors. But, Theranos's seeming passing of CMS inspections allayed fears in the short term. It was after Carreyrou's first two articles (IIRC), that the FDA sent a surprise inspection.

EDIT: I also think that in the book Carreyrou mentions that a number of doctors in the Phoenix area, where Theranos was doing a test pilot of their finger prick tests, had filed complaints with the state or federal regulatory bodies. So, there were definitely people at CMS or FDA who were beginning to pay attention.

FDA may also have been tipped off by people within Walgreens’ safety division that vetoed the Theranos and were shocked when the CEO went ahead and signed the deal anyway.

Right, but doesn't the whole Tyler Schultz timeline feed right into Carreyrou's first article? Schultz was one of Carreyrou's star sources; the back quarter of the book basically documents Theranos' retaliation against Schultz.

I think we may be talking past each other here. I just wanted to say in the previous comment that Theranos was already on the radar of the FDA and other regulators prior to the publication of that first article. Early complaints of Phoenix-area doctors about bizarre Theranos test results had already reached regulators by the time Carreyrou went to press.

If what you meant was simply that the FDA launched enforcement action after the publication of the article, then my apologies. No argument from me there.

I doubt we disagree strongly. Also, all I know about this story I know from Carreyrou's book; you might know a lot more than me. Unsurprisingly given my source, I have the impression that Theranos might have survived the FDA stuff, had the WSJ debacle not occurred.

I think that’s possible.

But if it wasn’t consumer testing, then I don’t think it would have been news, and the fallout wouldn’t have been as big.

So, we possibly agree. The fact that they started doing consumer testing with a device that didn’t work made this news.

However, similar kinds of lies/misinformation gets told to investors in biotech startups all the time. That they actually did consumer testing is what made this news.

How does the start of consumer testing mesh with the investment timeline? Unless testing only started after the last investment was committed, the two are the opposite of unrelated.

I can’t quite parse this comment.

But I don’t believe it was quite clear that the consumer testing was a fraud until just before the last round of “investment”.

I put “investment” in quotes because the last 100MUSD was kind of a loan, based by their parent portfolio... so they’ve effectively sold what assets they have.

So yea, consumer testing appears to have been fraudulent, and after that became clear publicly there wasn’t much further investment.

> When California lab inspectors visited Theranos, they physically blocked off the door leading to a floor that had the Siemens equipment, presumably to hide the fact that they were not conducting tests on their own proprietary machines.

No, it was the other way around: the inspectors only got to see the STANDARD equipment, not the proprietary machines.

Cepth’s comment looks more in-depth. But I dug out the following quote, I think this was the first kind of consumer facing testing:

“AFTER ALL THE DELAYS, the partnership seemed to finally be getting off the ground in the early months of 2012: as a beta run before a full launch, the companies had agreed that Theranos would take over the blood testing at an employee health clinic Safeway had opened on its corporate campus in Pleasanton. The clinic was part of Burd’s strategy to curb the supermarket operator’s health-care costs by encouraging its workers to take better care of themselves.”

Carreyrou's first article was October 2015. I think the Walgreens stuff had kicked off by then too. The FDA probably took a while to deal with it. But by putting a non-working instrument in a consumer facing context they were clearly going to get involved at some point.

If they hadn’t done that, I don’t think it would have been a news story, or that legal action would have been taken.

This stuff happens relatively often, investors just right-off the investment (or otherwise try and dump it).

From the Carreyrou piece on Tyler Schultz (https://www.wsj.com/articles/theranos-whistleblower-shook-th...), it seems like Schultz was already complaining to Holmes about the ridiculous validation data they were submitting in April 2014, specifically sending in data from tests not performed on the machines used for consumer testing, and instead performing the proficiency testing on Siemens machines.

I think this alone would probably be illegal?

This is not to mention all the other shady stuff that Theranos did in pitching investors. E.g., falsely claiming that they had machines being used in the field with the US Army, and that Johns Hopkins had validated results from their finger prick blood tests. This would also seem to be outright securities fraud?

Carreyrou may have exposed Theranos, but the sheer amount of illegality at the company seemed to have been going on for years.

I mean lying to investors is certainly illegal. But usually the investors can’t do anything about it, or perhaps more accurately don’t want to after the fact.

It’s not like suing the company gives them a desirable outcome. In fact it probably makes them look slightly more risky to companies looking for investment. Usually they just write off the investment and move on. Just like Rupert Murdoch did (sold it back to Theranos for 1USD).

Either that or they look for someone else to pump more money in or cash them out. I feel like that was the subtext of a lot of the conversations with board members/investors in the book. There was nothing they could do, except make the play look as good as possible and hope more money gets poured in and it either works eventually, or they get to cash out... so.. why acknowledge any of the issues?

"but when the investors were lied to (as is being alleged in court) it seems difficult to say this is a symptom of some sort of cultural problem among investors."

i think it's much, much worse that customers, who relied on test results for important medical decisions were lied to.

Financial fraud is one thing, but potentially killing people for greed and profit should really land the folks, which are resonsible for such scandalous behavior in the slammer for an extended stay.

It's a cultural problem that has arisen across much of tech and is embedded within it - if you're going to have a science based business, then science says that while you may have picked your initial hypothesis because you love and believe in it, the only thing that matters after that first step is measurable and provable results. I see this a lot in the machine learning space "We've got this great ML solution all ready to go.... annnd we don't even know what linear regression is" Start your journey on a dream, but navigate by facts, you must.

Elizabeth Holmes did not happen in a vacuum of course. She is a by-product of a culture that idolizes youth, raw enthusiasm, and passion over experience and pragmatism.

Socially shaming and silencing her critics by branding them as old-fashioned, sexist and unsupportive of female CEOs in tech by the media did not help the situation either.

The book is really good, well-written and paced like a thriller. I never paid any attention to Theranos during its heyday, and it was especially interesting after reading it to go back to the old HN threads about it and see what the community here predicted about it.

I agree. I bought the audiobook and I was looking for every opportunity to listen to it and get to the end. It made me actually stay on the elliptical a little longer in the gym :)

This snippet is amazing:

"Theranos kept up the illusion that they were running a lot of the tests from finger-stick blood draws by hacking the Siemens machines to work with small samples"

No wonder they had so many inaccurate test results.

The full process as described in the book is even more shocking.

Theranos would dilute the finger stick draws, and then run them on the Siemens machines 5 times. In theory, you could then calculate the concentration, and adjust for the dilution. In reality, the diluted samples would have concentrations of the relevant cells and elements that were too low to pick up.

To “fix” this, they would do those 5 runs, then calculate the median. And, if you had 5 outliers in all different directions, they’d discard the run and do 5 again.

The fact that PhDs and doctors who swore the Hippocratic oath allowed this to go on for over a year is shocking.

I don't know much about Theranos, but I remember writing a proof in university. The TA in the class was a PhD student doing research in group theory. My proof relied on doing some manipulation of exponents and there was a point where I was doing "1 + (-1) = 0". The TA just could not understand that bit. He was absolutely sure that in some circumstances this wouldn't hold. No amount of discussion about how integers form a field under addition and multiplication would convince him. He eventually got his PhD and I can only assume he's working for a company like Theranos.

Cue someone replying and telling me why I was actually the one that was wrong ;-) But the point is that even well educated people make really, really stupid mistakes.

The road to correct intuition starts at wrong intuition and passes through no intuition - that's probably where the TA was in his professional journey. As for the statistical test, it goes beyond "mistake" and steps in to being something so unorthodox that any scientist who did it would have to be consciously wiggling. Even a group of children will complain if you're playing a board game and try to re-roll the dice unil you get to move forwards the number of squares that your investors would like.

Fair enough! The book is worth the read.

I think I may be being a bit unfair to the scientists. Basically, Theranos was a hot enough startup that Elizabeth Holmes and Sunny Balwani would fire, demote, or marginalize anyone who made a fuss. Lifelong academics may have never had to deal with that kind of bullying/pressure before.

On the other hand, they had some pretty incredible scientific talent on staff. You would think that people who are highly cited and have a reputation to protect would have spoke up sooner. Instead, the first two people to make any kind of sustained fuss were two fresh out of college hires.

Are we sure about this? My impression of this lately is that to be a lifelong academic is to constantly put up with bullying and pressure.

Such is the nature of competing in a status-economy.

There are definitely some labs I know people who have worked in that would give the most abusive startup a run for their money.

> On the other hand, they had some pretty incredible scientific talent on staff. You would think that people who are highly cited and have a reputation to protect would have spoke up sooner. Instead, the first two people to make any kind of sustained fuss were two fresh out of college hires.

Knowing how to work within the system is probably how they were afforded the chance to build this reputation int the first place. It's possible they were trying to do the same here but didn't realize the fundamental differences between the academic system and the commercial one.

Fresh college grads haven't yet learned how to "not make waves", which is a blessing and a curse.

Also alarming - the Siemens machines already dilute samples, and the amount of dilution is set (in part) by making sure every sample test will have a usable concentration. So Theranos didn't just dilute where others didn't, they took a system that already used up all of the 'safe' margin for dilution and knowingly added more!

But we can be very surprised at the disparity in treatment between Theranos execs, who got off scott free, and Pharma Bro, who made all his investors whole and still got prison.

Holmes and Balwani still under criminal investigation per last report. We don’t know they yet if they’re going to get off scot free.

Pharma Bro needs to go to prison to stop the next arrogant idiot who thinks he can dig himself out of a hole from attempting to do so.

That he actually managed to is great — for his investors — but it’s not a course of action society wants to promote.

It was pretty much the stock equivalent of check kiting. If you've got enough money coming in, you can often fill accounts before the checks clear and steal nothing; the reason it's illegal is that you're hiding risks by claiming to have the money in hand.

During a bubble assets are overvalued even when everyone has the known facts. If a valuation is based on fraud then it's not indicative of a bubble.

The difference between fraud and development is a very small one. As Telsa motors will show in the next 9 months.

The difference between truth and falsehood matters quite a lot to the people buying and selling securities. Whether you think it matters or not, it definitely determines price, and does so independently of a bubble.

The second you're dealing with someone more complicated than an electron true and false are irrelevant. What matters is how true and false something is. Theranos was more false than true, but then again so it Tesla.

How Musk will be treated after Telsa implodes will tell us a lot about how sexist our culture is.

I'd personally be going for the pitchforks but I don't see many others doing the same.

You are comparing apples to oranges.

I have not followed Theranos closely but from what I have read they had no product at all. This would make Theranos completely false.

Musk may be over promising as to what his company can deliver with regards to number of units but he has a working product. This is something that has happened time and time again in all industries, if he fails than he is just another run of the mill failure.

We will make a blood test unit that's the side of a thumb nail and we will build an electric sedan for $35k are both lies. Tesla has no product, they have an expensive prototype.

Why so much hate for Tesla?

Maybe Elon is over confident, over enthusiastic, short sighted, etc. but his vision is world class and world changing.

And he has delivered, consistently.

Substitute Elon Musk and Tesla (particularly back in 2017) with Elizabeth Holmes and Theranos back in 2014, before the big exposés started coming out. From the perspective of the lay investor, what distinguishes the two cases?

This goes to answer both your comment and (at present) the top comment of this post, which asks why people ignore a chorus of naysayers saying that what's being done is impossible. The entire mindset of the Silicon Valley disrupter--we're the plucky underdog fighting an established oligopoly by doing the impossible (at least for the established oligarchs)--is very ripe for an unethical fraudster to milk. Distinguishing between the two cases is not easy, especially given the tendency to believe your own hype and oversell your current capabilities.

> From the perspective of the lay investor, what distinguishes the two cases?

You can buy a Tesla car today, strip it down, and confirm it works and isn’t a giant Potemkin village?

>You can buy a Tesla car today, strip it down, and confirm it works and isn’t a giant Potemkin village?

What about "Full self driving hardware"? I am pretty sure you are not going to find it there.

And people have bought them thinking that it (full self driving functionality) is just one update away...

In fairness, Tesla has promised that at some point in the future. They have not claimed that they have full self driving currently. Theranos claimed to have their system working.

The claim is full self driving hardware right now, right?

Shrug. Maybe they do have everything they need for self-driving in terms of hardware. Given that no one has full self-driving, no one has an actual list of the necessary hardware.

I still see a claim about future functionality as a far different thing (even if they are wrong) than a false claim about existing functionality.

> Given that no one has full self-driving, no one has an actual list of the necessary hardware.

Exactly what makes this false claim. Imagine someone gave you a drug and claim that it can cure cancer. It would be a false claim, even though it is possible that in future, it might turn out to be capable of curing cancer, by some specific method of application. The only problem is that that method is unknown today and no indication that such method might actually exist..

So just because in theory, you can strap on two forward facing cameras and call it full "self driving hardware" (because that is what humans have). Would you consider it legit?

If I invite you over for dinner and tell you that I'm going to order Chinese food, but then I order Mexican food instead because the Chinese restaurant was closed, that's not a "false claim" and it's not fraud. It's simply incorrect (and annoying and perhaps shortsighted). Fraud requires bad faith. If you make a claim in good faith, then it is not fraud, even if it turns out that you are wrong.

If Tesla believes, in good faith, that their hardware is sufficient to enable full self-driving, them it is not fraud. They might be wrong. They might even be incompetent, but that's not the same as fraud. Obviously, if they do not believe their hardware is sufficient, then it is fraud.

Now, if Tesla sold you a car and told you that it is capable of fully self-driving right now, that would be indisputable fraud, because this claim cannot be made in good faith. This is what Theranos did. They did not claim that they had a potential solution. They claimed they had a completed product.

You are squinting too hard. Don't squint too hard. You ll miss out all the important details.

As you said earlier that "no one has an actual list of the necessary hardware". And if that is true, claiming that "our cars have full self driving hardware", is nothing but a big, fat lie.

That is like selling a computer by saying that it has "full stock prediction hardware".Oh, I am not a fraud because I sincerely believe that my computer can see into the future. It just needs the right software. Oh believe me, I make this claim in good faith.

What a crock of shit.

Again, shrug. I don’t know that Tesla is wrong. They already have AutoPilot. It is not entirely unreasonable that they believe the gap to full self driving will be filled entirely by software.

You insist on assuming that they are operating in bad faith by making a prediction and you keep giving bad faith examples as metaphors. If I sold you a car and told you that a future update would automatically dim and brighten the headlights based on whether the road was empty, would that be fraud? Assuming your car came with what I believed to be sufficient hardware capabilities to pull this off, this isn’t a bad faith claim unless I do not intend to deliver.

>Assuming your car came with what I believed to be sufficient hardware capabilities to pull this off...

You have said it yourself that no one know enough to make this assumption. How can Tesla then make this assumption?

Ok. From your standpoint literally every contract for work/production is fraud. Until you do the work, you can't be certain you can produce the contracted result, so it's fraud.

Your argument boils down to being unable to predict the future with 100% accuracy. Most people don't consider the constraints of reality to constitute fraud.

That is what you said. You said no one knows the full list of hardware requirements to make full self driving work. Tesla is claiming that their cars have this "full hardware for self driving".

In other words the company is as genuine as the quack around the corner who sell cancer cure...

And general contractors don’t know the full list of requirements when they take a job to remodel a house. And yet they will claim with full confidence that they have all the necessary expertise and equipment to do the job.

Complete quacks, right?

I applaud your mental gymnastics by which you put full self driving to be similar to that of remodeling of a house.

I have nothing else to add. Thanks for the laughs.

>self driving hardware

You mean, computer?

This same exact problem is happening in crypto today, but on a much larger scale and in a much more terrifying way. ICO after ICO, people with highly technical backgrounds are making huge claims, many of which are certainly impossible.

It is too difficult for a layman to figure out which ones, if any, are legitimate. It requires months of studying to have any idea. Even some of the brightest folks in Crypto (like Vitalik Buterin) seem to avoid talking about other groups (like Cardano), I'm guessing because it's just so damn hard to figure anything out with any certainty. And I think this is intentional on the part of the newer ICOs, because they are largely scamming everyone.

What is Vitalik going to say - "I don't understand Cardano"? That wouldn't go over well.

Tesla is in a "better late than never" situation with production bottlenecks.

An interesting side note about this story is the homogeneity and lack of relevant background among Theranos's board of directors. All the outside directors were white, prestigious (former generals, senators, cabinet secretaries, etc) and relatively old. Research shows that homogenous groups are less likely to challenge each other.

My coauthor and I wrote about this in our book Meltdown (Published by Penguin Press in in March). We drew on Carreyrou's excellent reporting and some pretty interesting research about how team diversity affects decision making.

> Lack of relevant background among Theranos' board of directors

Yeah, it's pretty clear that it was by design.

Moreover, Holmes seems to have known the impossibility of her claims, or perhaps, was over confident initially about the possibilities of technology and later came to the realization that current technology cannot fulfill her vision.

At that point, she should have come clean, but chose to continue the charades.

Those stupid scooters and e-bikes will be the Aeron chair of this cycle.

Kinda. The community of lower back pain sufferers continues to shop for ex-Dotcom-bust aeron, because the product actually works: its a damn fine chair.

E-Bikes coming into the 'cheap as chips' bucket because of a dotcom oversupply, thats good for any city which has 2-stroke fuel nightmares. I've been in China before and after the e-bike craze, and the difference is marked.

Its better with e-bikes.

But as signifiers of 'it was a craze' -sure, Tru dat.

I'm still shopping for a good Aeron chair... I had one years ago and it was the best thing I've every put my tooshie on. Joke aside, a damn fine office chair.

Aeron is the best damn chair I've ever sat in. It's pretty easy to find them used on craigslist.

Odd, I felt they are kinda heavy, too low to the ground, have an overcomplicated set of levers, and not super comfortable.

I prefer a $50 chair from office depot...

> too low to the ground

What does that mean? The height is adjustable. At full height you still find it too low?

“Only When The Tide Goes Out Do You Discover Who’s Been Swimming Naked.”

-Warren Buffett

What I don't get is their failure seemed to be very fundamental. Like anyone who did blood testing knew what their challenges were and they would have had to overcome several serious challenges all at once to make it work and...

There was zero indication that they had actually overcome any of those issues.

Weren't most of the investors not actually the "standard" Silicon Valley investors?

It shifted away from Silicon Valley investors as time went on.

A little bit controversial, but without taking into account the way the company was run, the only big mistake was using inaccurate machines for testing and putting the people health at risk.

Everything else is pretty standard SV startup stuff.

There is this popular Slicon Valley mantra: "Fake it till you make it" I'm wondering if she was trying to follow this mantra but she was stuck too deeply in the fake part.

What amazes me about things like this is that there are so many ways for relevant information to leak out but until revelations reach critical mass the fraud can continue unabated.

Im gonna be downvoted for this but whatever. This would never have happened if Holmes was a man. America is so obsessed by its desire to empower minorities and woman especially that they will allow them to take risks or do things that no man on earth would be allowed to do hence playing with lives and healthcare at silicon valley scale and with billionare investors.

The media is of course the first one to blame for this but also all the PC shit that people endure.

From a certain feminist perspective this behaviour would be seen as reassuring in that it demonstrates women are just as capable of bad behaviour as men, and thus are equal.

Who's surprised? I don't think most people are surprised, but rather frustrated and disenchanted about medical technology and medical innovation outside of university.


I don't know about you, but I pretty much breezed through school and for the first 20 years of my life pretty much got nothing but praise from adults for how smart I was.

Not once in that period did anyone really impart lessons of integrity and hard work. At best, I encountered adults (specifically, teachers) who went out of their way to impede my success, but I usually overcame that. Through that period of my life, I can count the number of people who had a positive influence on my personal development on one finger.

I came into my early 20s a combative, arrogant asshole who couldn't really achieve anything and it took almost a decade and significant hardship (including brief periods of homelessness) to undo that.

That's not to empathize with Holmes or her fraud, but if I have to be honest, a lot of the "intellectual elite" (in tech) that I encounter think that their shit doesn't stink.

Edit: Oh yeah, this feels appropriate. https://www.youtube.com/watch?v=xEUh4FZIf8E

It’s not that uncommon in my experience. I’ve met several people similar to those in Theranos management.

It’s partly “fake it until you make it”, “double think” and a certain lack of understanding of the basic technology.

And investors reward that behavior mostly investing in a persons connections and projected confidence. Theranos raised hundreds of millions of dollars, and they’re by no means the only company like this. In fact, many of them do manage to fake it until they make it and become successful.

"...when his livelihood depends on not understanding" apparently applies to startup founders as much as to everybody else, if not more. Very few people would have the willpower to actively pull the plug when it would be much easier to keep the charade running for another year or two by making the existing pile of lies just a little bit higher.

Don't be so quick to categorize as wrong and mentally ill. People make odd choices all the time. Once you get set down a path, it's hard to change.

>> There must be some mental illness there.

Or maybe it's just that a billion dollars can make a lot of people re-consider their values.

Please stop linking to this paywalled site. Thanks.

You've been here long enough to know --- apart from whether or not Nautilus counts as "paywalled" --- that paywalled sites are fine on HN as long as there is a straightforward way to get around the paywall. Complaints about paywalls are, according to the site guidelines, off topic.

Atleast on mobile, I experience no paywall.

What system are you using?

I don't believe nautil.us is paywalled? Wasn't for me, anyway.


Start a new thread, no need for the whataboutism.

Betteridge’s law.

All the ballyhoo stunk to high heaven to me -- a case of "doth protest too much". So, my guess is the tech actually worked (even if not as perfect as originally hoped). And the company was destroyed by industry players via government regulation and a massive smear campaign -- and it worked like a charm. Ultimately they even murdered the lead scientist, faking his suicide, to ensure the truth is never known. The tech was simply too disruptive to the hand-over-fist $$$ in the industry, so it had to be put down.

And if you think that's crazy, you haven't read enough history.

You sound like someone who immediately dismissed "all the ballyhoo" because it wasn't what you wanted to believe.

As someone who has followed the whole thing closely, Holmes and Balwani are snakes, and their fraud is undeniable. The tech is so "revolutionary" that they weren't even using it, they just hacked competitors machines to use smaller samples, accuracy rates be damned.

"And if you think that's crazy, you haven't read enough history. "

I know! Just read the history of cold fusion and perpetual motion machines:. The establishment and government didn't allow these either :-)

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