“The Chickenshit Club” by Eisinger recently explained why the lack of criminal charges had emboldened white collar crime.
Basically, individuals need to have the risk of criminal charges if they do something very egregious - they need to have skin in the game.
The US Justice Dept has in the past two decades largely only been fining corporations. And so companies estimate risk and budget for these numbers. So fines are not a completely effective deterrent. The book explains this and how the DOJ policy grew out of backlash to the Enron verdict.
Ps we talked about this in May, and @danso predicted criminal charges would come - and he was right. This is good news for the US DOJ. Too bad the US can’t retrospectively prosecute bankers for 2008 and claw back their size-subsidized, low risk premium profits.
Edit: book review here. It’s a really good book. https://mobile.nytimes.com/2017/07/05/books/review/the-chick...
The Theranos case clearly illustrates why. Fraud by the top executives of a company, who lied about what their technology can do to raise a bunch of money, and endangered patients in the process--that is a story you can explain to a jury. Even if you think there are "bankers" (curiously, you do not identify specific bankers) who broke the law, good luck explaining to a jury exactly what anyone did that was illegal.
I'd also posit that this is a very good thing. You shouldn't be able to put people in jail for a crime you can't explain to a group of a dozen ordinary people.
In a field like finance, once you make something illegal, doesn't the prosecution's argument pretty much come down to:
1. Under the US code, foo is illegal. That's the rule that everybody working in this field has to play by.
2. The defendant fooed, flagrantly and with relish, and in the process made umpteen zillion dollars.
3. At all times, the defendant made it clear that they knew fooing was wrong. For instance, when discussing fooing, they logged into each other's email accounts and wrote drafts rather than sending emails, and shredded their birth certificates after discussing foo.
4. As a result of all this reckless fooing, which we remind you is illegal in the US, 3,392 people lost their houses.
A jury can't follow this argument?
An argument I've read more frequently is that the laws around this stuff aren't clear enough, so that a defense attorney can hopelessly muddle up a case by arguing "we weren't fooing, we were clearly barring". We could make the laws a lot more clear! But in doing so, we'd potentially disrupt the economy, and so it's a tricky balancing act.
Prosecutors who investigated 2008 came away saying that there was no evidence of criminal intent, based on the fact that they didn't break or intend to break any laws in the process of making their really stupid bets. Preet Bharara, former US attorney in New York after the crisis, discussed this in his podcast fairly recently.
A second article mentions, "He argues the crimes themselves are simple matters such as embezzlement, merely with a complicated “wrapping” of financial jargon around them." https://www.ft.com/content/dcdb43d4-bd52-11e6-8b45-b8b81dd5d.... This shows that prosecutions and imprisonment are possible for bank actions related to the 2008 financial crisis. Iceland's special prosecutor also believes that similar crimes were carried out in many other countries so the opportunity for prosecution was therefore possible.
Perhaps we need better prosecutors who can credibly charge crimes that have broad networks of profiteers eagerly pushing dupes into committing crimes that are precisely arranged so that the profiting entity has no liability for the narrowly construed criminal act other than having engineered a situation where it was incredibly possible and only indirectly soliciting the act itself...
We could have such prosecutors were the system not already hopelessly captive to the interests of the criminals.
But what can you do when law is lawless.
It's massively unethical and it feels like people should be in jail, but proving actual crime took place during the lead-up to the recession would be a massive undertaking with little satisfaction as payout, and just as many run-of-the-mill home buyers going to jail as lender associates or executives.
No, you've committed the crime of solicitation at the moment you encouraged a particular person to commit a particular crime. And, if they agree and either of you takes any concrete step to implement the agreement (even short of completing the theft), you've both committed the crime of conspiracy.
If an expert tells you to break the law and insists it's fine, and you don't really know how all of this works, I don't think we can still call that merely "encouraging shady behavior".
I could be wrong here, so if you or anyone else with more legal background than I have can point to specific prosecutions related to this kind of situation I'd love to read more.
I'm not sure this is a hard case to make.
But is there explicit proof of this? I didn't think there was, but maybe I'm wrong. I thought at best the argument would be more like:
"Bank executives set up incentives for their employees that they knew would encourage fraudulent behaviour."
Which is part of the problem with bringing anyone to justice. The actual banks could pretend that they believed they were buying quality debt, which they diced up into CDO and whatnot.
This sounds so wrong. Why shouldn't people whose only virtue (related to the case) is being smart enough to come up with complex crimes go to jail? Are we forgetting just how, well, average the average person is?
There are several good analogies in both the book and the movie (ie. the chef and the fish) that greatly helped me understand the mechanics of it.
What the book and movie don't do (unless I'm forgetting something) is explain how anything involved with the 2008 crisis was illegal - the sole exception being that CDSs are very arguably insurance contracts and should be regulated by insurance laws.
Then again even people texting and driving are not swayed by fines. In my region of the world a $3,000 fine is not a deterrent to many people. I say jail time would change that attitude.
Putting people in jail costs money and is hence undesirable, so unless you're drag racing through a school zone or driving drunk/stoned, you're not going to jail.
The view of governments in the US toward traffic enforcement as revenue-source was made clear during the Great Recession. When a lot of folks were struggling with unemployemnt, pay cuts/freezes, etc., and morale was generally in the toilet, local governments began jacking up speeding fines in order to make up for lost tax revenue. And people wonder why the relationship between citizens and LEOs in this country has become so antagonistic.
It's the goal of the state policy authorizing them, even if it isn't the goal of the local government issuing them.
IANATaxLawyer, but I imagine gaming the system would require you to take out non-taxable loans using that company stock as collateral, and hope that your lawlessness is caught during the living-on-a-loan years rather than the liquidate-and-repay years.
Really though a ~0.1% speeding ticket fine is not going to be an issue even if the press is impressed by a very large number fine.
This leads down a very slippery slope.
Is there really an epidemic of rich people committing crimes at a higher rate than the non-rich? It doesn’t seem like criminality rates are higher among the rich, thus the premise that rich people should have a larger deterrent doesn’t seem to have much support in terms of evidence.
How much opportunity cost those days have, or how much money you lose as a result of your jail time, is irrelevant. The punishment is taking away your personal freedom.
Jail time is a fair punishment: Nobody likes having their freedom taken from them. There is no need to scale it.
But its different for fines. If you drive a 100k€ car, you're not going to give a shit about a 50€ fine for speeding. And my personal experience seems to suggest this is true: Drivers of expensive cars often ignore speed limits and "no parking" signs.
So one thing we could do is add a mandatory jail sentence for speeding. You drive to fast, you go to jail for a day. But that seems a bit harsh, so maybe we stick with the fine, but make it so that it also hurts people who make a lot of money.
In fact, the finnish fining above is a system of day-fine: the sentence is expressed in day-fine, each "day" of the fine is multiplied by the offender's day-fine factor (baseline is about half the daily disposable income — daily income after taxes & basic living allowance) and that yields the fine's actual amount.
For court-ordered fines of sufficient size they can also be converted to a prison sentence at a ratio of 3 day-fine to 1 day in prison (rounded down).
If the goal is deterrence, then we need care about how subjectively costly the punishment will be to each person. Having a high income doesn't make your time subjectively more valuable, but it does mean that you can trade it for more money. A rich and a poor person would likely value a day of their own time quite similarly, but they would each value $100 quite differently.
Jail has both the purpose of deterrence and rehabilitation. Since the method is essentially depriving criminals of their time and freedom then wealth has nothing to do with it. Either way it's probably equally painful for a CEO as a factory worker.
As for driving licenses, they are administrative expenses not fines. I assume you already know this so I'm not sure what your point is.
I'm not sure how it works in your country but in the UK too many speeding tickets and you will loose your license. The exact number depends on the severity of each offence, but we get max of 12 points over 3 years  so they stick with you - repeat offenders are given even stricter rules after getting their license back.
I get a sinister smile when observing rich people in those big shiny 4x4s on some stretches of motorway I know are littered with speed traps... It's a funny equaliser - I do the limit, but those types of people always gota be in front of someone with a shitter car - but the regret is apparent in their latent brake lights after the flash.
It's a shame this type of law that equalises wealth isn't more common, for instance in a related matter - I've heard plenty of stories about rich people basically using parking fines as parking tickets, there doesn't seem to be a limit or anything beyond a monetary disincentive. It's also more common to see expensive cars parked in places they shouldn't be, and i'm convinced this is the reason.
A rich man can just get a driver, take an Uber, etc., and is not likely to be fired for being late, assuming he works.
For a rich person, it just means they can't enjoy the pleasure of driving themselves around. You were talking about equalized impact to start with, I really don't see how this is a good example.
> If they don't care about driving and they were being a shit driver
These are also pretty big assumptions. I assume because of my demographic category, the times I was driving, and my car, several years ago, I received nearly two dozen tickets in a five-year period. None of the offenses were for speeding, but for various infractions like not coming to a complete stop (I was absolutely positive in every case that I did, especially after #3 or so I got paranoid about it), failure to yield, etc.
The only reason I have a license today is because I had a professional job, which allowed me the free time to go to court every single time without losing money and fight the ticket. I won every single time. Most people don't even know you can do that, they think you have to pay the fine.
If I had lost my license, I ultimately would have lost even that job. I would have to work remotely.
I am _not_ talking about equalised impact i'm talking about equalised results... the OP was suggesting that speed tickets don't stop rich people from speeding, but if you loose your license it does - that is the purpose of these laws, not to try to figure out how much punishment to deal out in relation to your personal wealth, punishment is a means to an end, not an end in itself - the end being to stop you from doing something damaging to society, in this case endangering other people's lives.
Taking away licences is an equaliser in this respect, because being rich doesn't give you more points to spend.
Licenses are for individuals, if some rich person wants to pay some _other_ individual who can actually keep their license that is fine, the law won because a safer person is driving.
What is stopping someone who loses their license from just driving anyway? They've already shown not to give a shit, so they'll continue driving without a license.
My dad lost his license many years ago and never stopped driving. He gets arrested once in a while, doesn't stop him.
You live in a very strange country, in the UK your dad would have had his car taken away from him and crushed... and if he repeatedly found other cars to drive without a license he would probably end up in prison.
I don't know how many they actually crushed, but it was some.
My dad has gone to jail for driving without a license before, but he'll go out driving when he gets out of jail. But usually his lawyer finds some sort of technically that gets him out of major trouble. I don't know the exact details, I try to ignore him as much as possible.
Other family members I know who have lost their license, it's stopped extractly zero people from driving. If you don't care about the other laws enough to get caught breaking them enough to lose your license you don't care about breaking "no driving without a license" law.
I knew a rich person once with a drinking problem: he kept losing his license but his solution would be to just hire a private driver the next day.
A casual partier though or even someone heading out and thinking they will take the chance of driving home and getting there ok, then yes I agree.
This one's mine: Because it's more fun than sex.
But if you are a model driver AND find it more fun than sex, damn you are lucky.
People still drive when they lose their license.
They have to.
So the fines are no big deal to the rich here, but the right to drive is incentive enough to stop being an asshat.
I believe that because of this, the fines were made significantly higher for companies that did not identify the driver.
He has an affair. They get a divorce. To get revenge, his ex-wife tells a journalist that he once cheated a speeding ticket. Investigation reveals she knows that because she helped him do it. They both go to prison.
This revenge idea was planned with a lawyer/judge friend of the ex-wife. When the plan backfired, the judge falsified documents to mislead investigators. The judge got the longest sentence of the three of them and was disbarred.
What a trainwreck.
I'm sure it'd come up if you get in an accident as well, but probably the bigger fine in that case is the insurance company will use it for fault.
The primary detterant of it is likely that, because its a fineable offense, its less accepted by the general public, and you'll do it less flagrantly.
Compare with white collar crime that involves defrauding minority home buyers, for example. Not only did the perpetrators there not get prosecuted, one of them is now our Treasury Secretary .
I don’t think she did it out personal greed (except perhaps greed for publicity) - I think she believed she would probably make the tech work and just never got there. But regardless of the reason, investors are out a ton of money as a direct result of material misrepresentations. You cannot “fake it ‘til you make it” at least where investors are concerned.
Because of the amount of money involved, these two defendants are looking at a stiff sentence. The federal sentencing guidelines would easily put them at the maximum (20 years), though they may get something like 10-12 years if they take a plea early in the process and don’t make prosecutors work too hard to prepare for trial. This will not be a Martha Stewart type of sentence.
It’s a sad day for everyone involved.
Regardless of what was going on in her head, she seems to have made provably false statements in order to induce massive investments in her company. That's fraud, and she'll pay a heavy price for it.
It doesn't seem that Holmes boyfriend is ready to plea, but even with 10-12 years, with all their fame and connections and financials behind, what do you think is final reality? Some 3-6 years for good behavior??
Edit: change of wording
At least 4 times I wrote about Holmes being charged by DOJ on HN -- now I predict within 3 months they will find victim(s) that are dead today because of improper results of Holmes' devices.
I don't think Shkreli was defrauding regarding his pharmaceutical practices. (though he has security charges). He was using shady practices that were totally legal. Completely different game.
Skherli said he gave the medicine free to those who have no insurance. I don't think by good heart but rather to avoid a major bad publicity from the inability of non-insured to pay.
AFAIK there were poor decisions and bad investments but not straight up fraud.
Nobody needed to be jailed; there were a few that needed to be allowed to fail.
Speaking morally, rather than legally, the packaging of loans into CDOs was clearly fraudulent, basically the equivalent of tampering with the mile meter in your car before selling it. The fact that there is apparently no law to prosecute people under is a failure of our various legislatures and judicial systems.
Using your sketchy rationale, one could claim that you are threatening Paulson and have you charged with a threat to kidnap Paulson to put him in Guantanamo Bay.
And in any legal dispute between you and Paulson, you would be incidental roadkill, in view of his deep pockets.
That is why the legal system has semi-reasonable heuristics that govern the range of interpretations that are acceptable.
"Wall of Text" ~= "Probably an incoherent rant"
It is slightly more credible than the Onion.
And Congress-persons are slightly less credible than the Onion.
Does anyone know? Did Holmes have any insight that caused her and the investors to believe she could do the blood tests?
Basically there were three iterations of the technology. The first one used microfluidics, which are basically the repurposing of the micro-fabrication techniques that the computer chip industry pioneered to move tiny volumes of liquid. Theranos tried to work on that for several years before Holmes lost patience in late fall 2007 and abandoned it. At that point she pivoted to what was essentially a converted glue-dispensing robot. One of the engineers ordered a glue-dispensing robot from a company called Fisnar in New Jersey, studied its components and rebuilt a smaller version of it. It was a robotic arm on a gantry with three degrees of motion and a pipette stuck to its end, and it replicated what the scientist does at the bench. That ended up being called the Edison and it could do only one class of test, known as immunoassays. It was also error-prone. The third iteration of the technology was the miniLab, which Holmes wanted to be able to do more than just immunoassays. The miniLab didn’t invent any new techniques to test blood with. It miniaturized existing laboratory instruments and packed them into one box. By the time Theranos went live with its tests, the miniLab was a malfunctioning prototype.
The interview also explains how Holmes was able to attract so many influential people on her board. The short answer is her Jobs-like "reality distortion field" -- she was exceedingly good at convincing non-scientists that their science worked.
Holmes was close family friends with George Schultz, and that allowed her to do two things. First, get a bunch of military and government guys on the board. And second, sell to the military.
That was Theranos’ real ace in the hole. Holmes knew top military brass and they were going to give her military contracts to test soldiers’ blood. We don’t know what she was telling investors, exactly, but that seems like a real source of revenue investors would care about.
Carreyrou describes how it was a mid level DoD employee that screwed up the plan - he looked at the data and scuttled the contract even though the generals wanted to award it to Theranos. Hat tip to hard working, honest govt employees.
Board and Schultz details: https://www.google.com/amp/s/www.forbes.com/sites/hershshefr...
I say 90% of VC back companies are blowing smoke to the endpoint investor, public and consumer. 100% of those companies have miracle products that scale forever and work... In 1 specific ise case: the demo booth. They oversell. I see 2 out of 10 startups bring a viable product to the global 2000 table.
Spacex: we can go to Mars, but haven't even launched a Mars rocket.
Google: AI is here, and the product? Waymo, logs millions of miles, is just sunny conditions?
The common strategy: lie(aka promise), sell the future, hopefully you get the solution and hit time to market. Holmes was following the same playbook, BUT just gave up, and that's got her investors and comsumers furious. If she apologized, AND stuck with it, investors would still back her, and the public flac would have subsided....VCs were sold on her future.
On the opposite end, aside from real mistakes is a company like Apple: they sell the future and deliver.
And of the various self-driving car efforts, Waymo seems one of the most careful, both in their engineering and PR. I don't recall them making any claims they can't back up, but I may have missed some.
The difference between saying "we expect to have X working within a year" and "we have had X for a year" is that if X doesn't work out, the second sentence is a crime of fraud. And Holmes was on the wrong end of this difference.
They're not prosecuting for the broken hopes of 2004-2006 investors (who were sold a future that didn't materialize, oh well), they're prosecuting for misleading the investors of, say, 2014 by lying about the achievements of their first 10 years.
I don't think that is their literal message and goal. SpaceX's real mission is to innovate space travel which they've been capable of doing and have demonstrated with clear achievements.
SpaceX's revenue is in the billions and is very close to profitable. It most likely would be profitable if it wasn't constantly spending money to expand like Amazon in its early years.
In the short-term, his life was a nightmare and Holmes and Balwani held all the cards, but in the long-term he'll probably be successful and considered honorable while Holmes and Balwani will be disgraced at best and convicted felons at worst.
(Note that doesn't mention his retirement, I can't find a link for that, I read it in Carreyrou's book)
This confuses a lot of people (not saying you are one of them), but this is really common in intelligent non-experts. People vastly overestimate how intelligent they are when they place value on their intelligence; in other words, they like thinking they are smart.
When they prize their own intelligence, they have false confidence about areas they have zero expertise in, purely because they feel they can figure it out.
So all it takes is someone with sociopathic tendencies and who has extreme confidence with a good CV, and bam, they're willing to go to the mat for that person. Holmes is one example but certainly not the only one.
The antidote to this effect: pick any object around you, and set out to make it yourself from scratch. Or just set out to make the precursors. An object as prosaic as say, a window. A lot of people who suffer from this effect dismissively wave away such a challenge, saying in more words that it's beneath them to attempt because it is so pedestrian, or of course they could do it, but they don't have the time to.
Those I know who are scary smart, are the ones who will more frequently pick up the challenge, and boy, are they fast at picking up what they need to know to meet the challenge.
Me, I just feel dumb every day, but have a heck of a lot of fun along the way. I also stick to far less lofty aims. A few months ago I had never owned a chainsaw before, and a few weeks ago I processed half a cord of firewood with a chainsaw, maul, wedge and sledgehammer into smaller chunks for my smoker. I respect the hell out of the woodsmen who walk into the mountain forest for a full day of work with nary but a milk crate of supplies and those machines, and the experience makes me appreciate just how vast an efficieny improvement they represent over hand sawing.
I think about this alot, starting from absolutely nothing I doubt I could even make a nail, let alone a screw, let alone a nut and bolt. I have no idea what iron ore looks like in the wild or where to find it. I could probably make charcoal and a furnace... if I had the tools, which I wouldn’t. It’s quite humbling.
I didn't want to get all management-consultant-preachy earlier, but you touched upon why I persistently perform that exercise. I believe there is a very valuable leadership lesson imparted by continuously performing that exercise first-hand. Too often leadership devolves into management, especially when people lose sight of just how fractally difficult many human endeavors are. The humility helps teach me perspective on problems and people.
That Australian aboriginal might live a dramatically different life than "developed world" citizens, but there is no way I can be convinced that on average, they aren't as smart.
Even if they don't, intelligence does not replace domain knowledge.
I wonder how this squares with the Dunning-Kruger effect. Are domain-stupid generally intelligent people more susceptible than domain-stupid generally stupid people if they are equally cocky?
Considering this and the lack of substance behind her claims, I would personally bet money that she is a clinical psychopath.
The most disturbing thing I have ever observed about human beings is our tendency to follow psychopaths. Psychopaths seem to have this gravity around them and people just fall into line. I've observed some spectacular examples. A psychopath can say the most questionable or even absurd things and people will just believe, whereas people will be skeptical of even very sane things that come out of the mouths of non-psychopaths. It's as if clinical psychopaths have some special instinctive ability to generate body language, vocal cues, and linguistic patterns that manipulate others very effectively.
I am not claiming that everyone with a "reality distortion field" must be a psychopath, but I've definitely observed a positive correlation.
The classic example is Niko Tinbergen, who created models of fish that were rounder and redder than the real fish, who would ignore other real fish and focus on the models. The human ability to refine things produces a lot of good examples. Like how refined sugar influences us so much that it ends up in most processed foods. Or how refining the coca leaf produces addicts.
My theory with sociopaths is that giving no fucks what others think allows them to be unnaturally confident. Since we often evaluate others by how confident they are, we are easily taken in by people with supernormal confidence. That gives us the reality distortion field (as social primates, our main reality is social) and "drinking the kool-aid". Which is a metaphor Jobs used for how he wanted people to react to the Mac, but the metaphor is about a cult whose charismatic leaders led them to mass suicide. 
I think this may also offer some explanation for the appeal of the utterly absurd, like flat Earth or galactic emperor Xenu. Its supernormally ridiculous, which invokes a sense of fascination.
In any case if this is true I think this effect is being weaponized today to an unprecedented degree.
Also as a side note, within Scientology you don't actually learn about the Xenu shit until you're way too deep, financially and/or time commitment-wise, to pull out.
It seems they’ve taken a page out of Masonry or mystery religions. Only higher level “initiates” receive the real wisdom.
The question is, are the high level initiates plain psychopaths?
Or are they just addicted to the free pussy (or dick), drugs, and money that comes with forcing others to join the cult?
Nice. Although I am beginning to suspect that everything is to a greater or lesser degree a Ponzi Scheme in the long run due to thermodynamics. ;-)
1a) It's a better show of commitment to the group if you are willing to stand up and say the absurd on behalf of the group. It's saying that membership in the group matters more to you than the potential loss of face. You could expect to be able to rely on such a person to be loyal to the group.
1b) It's also a better show of group commitment if someone is motivated enough to try to convince themselves of something very difficult to believe.
2) Groups espousing weird beliefs will face ostracism, and that will bind them more to each other. They will spend more time with each other away from outsiders, developing their belief system further with even less sanity checking from the outside.
An actual universe doesn't pack well into the 3 pounds of meat we use for thinking. A system of thought that lets us discard most natural ambiguity and nuance would be unnaturally comfortable. I think this is true both for obvious fundamentalism (e.g., Bible thumpers) and for single-explanation frameworks of thought. Freudianism, Marxism, and capitalism all have groups that are effectively fundamentalist adherents. And I think there's a species of Bitcoin fanatic that is also effectively fundamentalist.
I guess I shouldn't be surprised that this appears to be on the rise at the same time the Internet has brought us into contact with all the information and all the people.
Google is showing me nothing for this. Do you have a citation?
Original source is listed as this book from Baylor University Press: http://www.baylorpress.com/Book/382/Appletopia.html
As far as I can tell, "leader types" are far more vulnerable to confident people than the rest of us because of this.
In practice, I think this means falling back on a limited sort of finance understanding and some generic notions of top-down business process. There's not much there, so they make up for it by leaning hard into their human instincts and skills.
Unfortunately, that leads to many problems, including over-trusting people who present well and seem confident.
But I think the key is the difference between sociopaths and psychopaths. Sociopaths are usually really good at using their charisma to move up:
>Psychopaths are dangerous. They’re violent and cruel, and oftentimes downright sinister. They show no remorse for their actions, usually because of a lesion on a part of their brain responsible for fear and judgment, known as the amygdala. Psychopaths commit crimes in cold blood. They crave control and impulsivity, possess a predatory instinct, and attack proactively rather than as a reaction to confrontation: A 2002 study found that 93.3 percent of the psychopathic homicides were instrumental in nature (meaning they were more or less planned), compared with 48.4 percent of the homicides by people who weren’t psychopaths.
>Sociopaths are a different breed. They, too, may suffer from their mental illness as a result of lesioned brain regions. Upbringing may also play a larger role in a child becoming a sociopath versus those that are diagnosed as psychopaths, or the slide into dementia on the other end of the spectrum. Sociopathic behavior is manifested as conniving and deceitful, despite an outward appearance of trustworthiness or sincerity. Sociopaths are often pathological liars. They are manipulative and lack the ability to judge the morality of a situation, but not because they lack a moral compass; rather, their existing moral compass is greatly (yet not always dangerously) skewed. Pemment, for one, says this could point to both a social and neurological component.
I'd bet if you dug into the research what you'd find is the research really shows that psychologists who study such things do not have the character/psychology of those who become CEOs, not that they are psychopaths.
That is, a psychological or culturally acquired trait should not be used against an individual without a proof that it actually affects his behavior. You are in essence denying that the person has any agency and it's utterly incapable of learning and acting on society's moral code, which I bet is false for the vast majority of people with sociopathic tendencies.
There's salesmanship and then there's lying. It might feel like a thin line but I think it's important not to conflate the two. Criminal behavior is not just "reality distortion".
As someone who has spent a lot of time around startups, the amount of employee turnover was one of the craziest -- indicative in hindsight -- things in John Carreyrou's extremely well-reported book, "Bad Blood." Most startup boards would have looked at that level of employee turnover and realized that there was something much worse going on than a young founder without much management experience doing a poor job at hiring and retention. But the board apparently didn't get very much information about the actual operation of company, didn't push for more, and didn't question or dig into what they did get.
I'm willing to forgive quite a bit of "fake it till you make it" flim-flam, but anybody who uses such strong-arm tactics deserves having the book thrown at them.
She clearly had some knowledge and strategy about the technology and likely fully intended for it to be successful, but responded to delays and difficulties with deception rather than just admitting it was harder than they expected.
"If we just get over this hurdle, we'll revolutionize medical testing and become legends." Not unlike Ponzi schemes which start out as legitimate investment ventures, do very poorly, and then just make up the return numbers. Martin Shkreli arguably pulled that fraud off "successfully" and actually got over the hurdle, but of course it came back to bite him.
However, they could not get the technology to work and abandoned several development paths in favour of a less ambitious approach that, among other things, involved doing blood analysis the old-fashioned way (manually in the lab), and only pretending to be using new tech they'd invented. They knew it didn't work, but kept selling it anyway, which is where it went from just faking it to outright fraud.
Most of their money was raised after they failed to develop their blood analysis technology, but to the investors, to the press and to their clients (such as Walgreens), they were still claiming to be using their proprietary technology .
I'm playing Devil's advocate and not justifying or defending their fraud and the physical harm they caused, but if we were to look at Holmes' intentions, I'm suspecting it was something like "we just need to do this for a few months/years until our technology works", rather than "let's just run this scam forever and get rich". As for how close they actually were to developing that technology (and assuming most of their talent didn't leave) or if it was even possible for them, who knows. And of course, regardless, they still intended to commit fraud and should pay the price.
(Not making any real life connections here, I am absolutely not qualified to call anyone medical terms, but in the subthead about clinical psychopathy it seemed important to point out.)
Reddit is an interesting case, but I'd say there's a categorical difference between faking that you are able to do something you can't (Theranos) and pre-filling a functioning site with content (I assume that's what you are referring to?).
It's especially relevant if the difference actually matters for whom you are tricking: If the results had been accurate (which from what I understand they weren't) and absent any other specific claims of superiority Theranos end-users wouldn't care about what tech they use, but for investors relying on claims that they can do something others can't to establish their value it obviously does matter.
Which in the case of reddit I guess makes the question: does it make a material difference for users if the site they enjoy is entirely fed by an organic community, or is the most important thing that the site is enjoyable regardless of origin? I guess you could argue that faking a community is also "faking that you are able to do something you can't".
My understanding is reddit did this at the very start of the site's existence and stopped pretty early. They probably would've died quickly if they didn't seed some content.
Europe doesn't reward winners. So Europeans move to the US for their startups.
Do you know Europe is the largest buyer of the US securities? They surely feel compelled enough to benefit from the business scene in the US.
You can't really fake science.
This may have been faking too hard in a place where experimentation, or R&D, yielded nothing usable.
What does this mean? Thanks :)
Most Medical professionals believe that what they wanted to do was simply impossible from a biological perspective due to the natural variations of blood content. It would have been like trying to determine traffic on a freeway by taking a brief glance through a tiny slit in a piece of paper.(This is why they draw so much blood for testing, to try and get a fairly representative sample.)
taking 10 such brief glances may allow for some good enough probabilistic estimate though. Upon hearing first time about Theranos in 2013 i thought that they would do something like it, i.e. statistical approach based on some data mining as they would collect large number of samples, etc. - a typical SV tech based approach. One look at Holmes' black turtleneck photo and Glassdoors reviews mostly talking about Ballwani, and i remember immediately thinking - any even minimally advanced R&D is just not possible there.
Her fake voice is a lot more indicative than the black turtleneck though.
It is far more enlightening and satisfying for those people to develop their own sensibilities, find personal ways to express them, and through their force of will and drive, imbue their own meaning into their own habits.
So the original genesis of Theranos probably wasn't fraudulent, but when things didn't work out and they started faking it instead, that was outright fraud.
Not what I would call experience with microfluidics.
But the project she sold him on was based on her idea for some kind of wearable. From reading interviews I got the idea that he was more impressed with the wireless, wearable aspect (technologies he didn't have experience with presumably).
Point of interest: That director was Avie Tevanian, who designed Mach, NextStep, and OSX. Holmes wanted him on the board because of his connection to Jobs. He resigned from the Theranos board over this incident. (Carreyrou's book discusses this.)
The one really weird thing i noticed about her is she never blinks. Watch her give talks and it is like a robot never blinking
I guess that‘s HN still in full fanboy mode, before all those startups started to display their dark sides.
I wonder if he/she was from Nanomix (nano.com, another company working on similar technology since 2000)
We don't know that. You can only downvote comments for a day(?).. but you can upvote forever. Considering it's been 5 years, and people keep linking to his comment... it's hard to say if he gained those points that day or years later after theranos was found to be a fraud.
> What stops the skeptics from doing their own tests by walking into a service center and having their blood analyzed for all tests possible and doing the same with their blood for conventional tests? Or an even large scale test?
> If their concern is genuine (rather than a way to get a look under the hood of a competitor for the current sellers of such services) there are multiple ways in which they could get their verification without inside information on how Theranos does its thing.
Edit: For that reason, most of this "I told you so" sounds like hindsight bias if it comes from someone who would normally take the attitude of "fake it till you make it", "don't wait until you're sure you have a working product".
I was incredibly sceptical about a 19 year old with no experience starting a biotech company. All of my comments had a large number of upvotes (for 2015), while many of the people disagreeing with me were downvoted into the negatives.
The hard part is to do it in a way consistent with the rhetoric about “fake it till you make it”/“it’ll all work out”/“all self doubt is impostor syndrome”.
There's a sizeable contingent on HN that is sceptical of that mindset in general, which was my point.
I find the self-driving, or near-future Mars colony fanboyism here a little harder to take, because a much larger segment of the user base should know better.
“There are more soldiers in that board there than doctors” is one of the original comments!
It would make me feel somewhat better about the whole mess to know this was the case. A successful Theranos would have been the best thing to come out of SV since the Apple II. It was sad to see it fail because of executives' delusions.
There were numerous research papers on the topic, and some time spent with experts in the field would have also pointed her in the direction of the current research.
Almost too late she hired an expert from Abbott Diagnostics (who headed up a number of successful system projects for them), and he walked away after 6 months.
> In addition, the small volumes involved and the variability in sample quality based on puncture site and technique make capillary sampling particularly susceptible to errors during the pre-preanalytical phase, which are beyond the control of clinical laboratory personnel
It is well known to any diabetic, or to anyone who played for a few minutes with a blood glucose monitor.
Turns out in this case they were right.
I remember a ton of doubt, after launch, that it would be successful, but those people weren't really experts.
> RIM had a complete internal panic when Apple unveiled the iPhone in 2007, a former employee revealed this weekend. The BlackBerry maker is now known to have held multiple all-hands meetings on January 10 that year, a day after the iPhone was on stage, and to have made outlandish claims about its features. Apple was effectively accused of lying as it was supposedly impossible that a device could have such a large touchscreen but still get a usable lifespan away from a power outlet.
And her actions demonstrated she had done no such thing. Buying, hiding, deceiving around traditional venipuncture machines, etc.
This is someone who "had a dream", had connections, and was determined and stubborn, in a bad way. Even now she, and one or two of investors, still believe she has been robbed and wronged, and that the world is worse off without Theranos.
Back in 2015, it was the same story they told investors: We can do an expensive blood test for a fraction of the cost in a fraction of the time with better accuracy.
Unfortunately, it sounds like they defrauded investors with false claims, which is why they were able to get so much funding without a real, viable product.
So, just like most VC favorite startups?
It crossed over into serious fraud when they stopped taking money to develop an approach, and started taking money on the pretence that they had developed an approach, when in fact they were just lying and performing the tests on commercial equipment they'd quietly bought elsewhere and hacked to use smaller samples (with resulting extremely poor accuracy).
And then they really fucked up when they doubled-down on this fraud by showing FDA inspectors a sham microfluidics lab instead of the actual working lab that just used standard equipment they'd quietly bought through various shells.
Later they happily poured lots of millions into Magic Leap.
Yeah, I was referring to profitability, which, for a for profit company (and one that wants to attract investments), should be part of the core vision, and without which there's no product (just something akin to "selling" $10 bills for $5).
That said, wouldn't all the "pivoting" companies prove that nobody there knew how to achieve their core product vision?
UBeam might very well flameout but I think if you are evaluating a company for fraud potential, there’s no evidence of UBeam making up complete BS to raise investments. In that case, even if their tech doesn’t pan out, as long as they weren’t massively deceiving investors, it would be a failed startup, not a fraudulent one. They are not the same thing.
I can hardly put it down, I highly recommend it.
In America, it's perfectly legal to say "I'm going to make an antimatter drive; give me a million dollars." It's illegal to say "I have a working antimatter drive prototype; give me a million dollars." Holmes and Balwani did the latter.
They also made the technology very secretive. Not even their investors could have access to implementation details.
Not one that could do what they promised.
"The indictment alleges that the defendants used a combination of direct communications, marketing materials, statements to the media, financial statements, models, and other information to defraud potential investors. Specifically, the defendants claimed that Theranos developed a revolutionary and proprietary analyzer that the defendants referred to by various names, including as the TSPU, Edison, or minilab. The defendants claimed the analyzer was able to perform a full range of clinical tests using small blood samples drawn from a finger stick. The defendants also represented that the analyzer could produce results that were more accurate and reliable than those yielded by conventional methods—all at a faster speed than previously possible.
The indictment further alleges that Holmes and Balwani knew that many of their representations about the analyzer were false. For example, allegedly, Holmes and Balwani knew that the analyzer, in truth, had accuracy and reliability problems, performed a limited number of tests, was slower than some competing devices, and, in some respects, could not compete with existing, more conventional machines."
The Edison was intended to run a full panel of blood tests, both chemical and immunological assays, off a finger stick of blood. It was also intended to allow Theranos to function as its own lab.
The Minilab was intended to run a full panel of blood tests I believe off a larger venous sample, and was expected to be marketed to existing labs (at this point, Theranos had been forbidden from operating its own labs).
In its own labs, Theranos made minimal use of the Edison, which was unreliable and supported only a few tests. Rather, they're accused of taking finger-stick draws, diluting them, and then feeding them into hacked-up adapters for COTS lab machines.
So, I sort of doubt it.
The finger-prick-testing was always very likely to fail; the biology just doesn't work out in your favor. However, getting finger-pricks working was the entire basis of their strategy, not the "test using less blood" idea.
Blood sugar is a relatively high percentage of your blood stream, which is why strip-based glucose monitors work.
It's only illegal if you don't actually have one.