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Theranos CEO Says 'I Don't Know' 600+ Times in Deposition (go.com)
83 points by kyleblarson 3 months ago | hide | past | web | favorite | 61 comments

George Shultz really comes off as a moron in all of this.

> 'They can try to convince me that you're wrong and in this case I do believe you’re wrong,'

Then he tricks his grandson into coming over to chat, and oh by the way there's two lawyers from the company sitting in the next room with NDA paperwork for you to sign.

Later, he manages to weasel out of ever saying "I was wrong".

> "Tyler’s handling of the troubling practices he identified at Theranos is an example. He did not shrink from what he saw as his responsibility to the truth and patient safety, even when he felt personally threatened and believed that I had placed allegiance to the company over allegiance to higher values and our family."

He didn't believe it, you jackass, he witnessed it. Your retroactive history lessons wherein you are actually the hero in all of this is astounding. I can only hope Tyler Shultz has learned to stay the hell away from his grandfather.

Everyone looks up to someone. I suggest that you look up to Tyler Schultz.

That guy stuck to his guns and faced a hell of a toll for it. He had his life destroyed. He knew that was going to happen. He went ahead anyway.

Why? Because it was the right thing to do. Tyler saved countless lives, real actual people's lives; Elizabeth and Sunny's greed and hubris undoubtedly would have killed many people, no question.

Tyler Shultz is a hero.

Never let anyone tell you that you don't matter. Do the right thing.

Be like Tyler.

"George Shultz really comes off as a moron in all of this."

This is a good lesson for how big decisions in politics and business are made. Leaders are very prone to being conned by charismatic people and often don't check the facts.

After reading Bad Blood, the entire board comes off sounding completely incompetent.

I doubt it's news to many here, but Bad Blood is an amazing book on Theranos. It doesn't follow as far as the deposition (I had no idea she was facing 20 years!) but I'd highly recommend it for anyone interested in this story. The audiobook is great too.

I was listening to an interview with the author and he made a somewhat valid point that it's part of the 'tech culture' to fake it until you make it.

However, at the same time apparently Larry Ellison was advising her. During the early phase of Oracle's history one of their chief criticisms is over-promising on timelines to keep existing customers on their product so that they assumed something was going to ship in 90 days only to ship 1.5 years later.

However, Theranos took this to the edge and just flat out lied about products that they didn't have.

They were promising revolutionary breakthoughs not evolutionary.

They fooled everyone. Idk if you read the book but they fooled EVERYONE. Their board: included William Perry (former Secretary of Defense), Henry Kissinger (former Secretary of State), Sam Nunn (former U.S. Senator), Bill Frist (former U.S. Senator and heart-transplant surgeon), Gary Roughead (Admiral, USN, retired), James Mattis (General, USMC), Richard Kovacevich (former Wells Fargo Chairman and CEO) and Riley Bechtel (chairman of the board and former CEO at Bechtel Group). Henry Kissinger was on their board!

Investors: by the Walton family ($150 million), Rupert Murdoch ($121 million), Betsy DeVos ($100 million), the Cox family (of Cox Media Group) ($100 million), and Robert Kraft (of the New England Patriots).

You would figure there was no faking these people out. How do you dupe former Secretary of States and Generals whom are supposed to be some of the most stringent, dotting all the i's and crossing all the t's. It's just an amazing story of how personality can change everything and cause people to have massive blindspots.

Part of the reason she was able to fool such highly prominent people is due to her coming from really old money in the US - with her Fleischmann's Yeast family lineage - her family was in the upper echelons of US monied families (think robber baron class-money).

Historically, yes, but her immediate family was not particularly wealthy, lived a middle-class lifestyle, and was even in difficult financial straits at times. I think they had the remnants of money on them, but not the actual capital.

An illustration of how wealth and power, inherited across generations, consists of far more than just liquid assets.

I haven't read the book. I would like to because I have a hard time believing a story where that list of people you mention are "fooled".

It seemed to me that they weren't actively "fooled", rather they didn't perform the due diligence you would expect a board member to perform before signing up. But I got the impression this might not be uncommon among startup boards.

Also if I recall, there was a lack of medical knowledge on the board as well which surely contributed to the failures in oversight.

> However, at the same time apparently Larry Ellison was advising her.

Interesting, considering Steve Jobs acknowledged Ellison as his best friend after his return to Apple, at a time when Oracle was considered the 2nd largest software company in the world. It makes sense that she would turn to Ellison for advice all in the name of trying to be like her idol, Steve Jobs.

Holmes underestimated the amount of technical risk she needed to overcome to succeed in the marketplace, as did the Google founders when Larry Page initially came up with PageRank but had no clue just how long it would take to download the entire web to disk. But the Google guys unlike Holmes had a lot of help from their advisors combined with Stanford university resources, which allowed them to stay immune to investor pressure to show results for invested capital.

For a technology like finger-prick based tests to succeed, you’ll need to expend millions of USD in a university research lab before you begin to see promising results that are repeatable. Essentially, Theranos should have started out as a science project (like BackRub which birthed Google) and not as a startup. She picked the wrong vehicle for her mission.

Ellison on the other hand piggy-backed on a seminal 1970 paper by IBM researcher: E.F. Codd to launch Oracle [0]. In those days, hierarchical and network databases were the competing database paradigms. Codd’s paper introduced the relational model as the third competing paradigm which turned out to be vastly simpler than the other models. The simplicity afforded by RDBMSes unlocked a lot of value and ultimately created wealth for the database industry.

0: https://www.ibm.com/ibm/history/exhibits/builders/builders_c...

Jennifer Lawrence is said to be playing Holmes in the film adaptation.

convenient when an actress who already really looks like the subject, also happens to be an academy award winning actress!

Lawrence does lack the sociopath gaze though. She'll have to work on perfecting that to really channel Holmes.

Are sociopaths like Holmes born or made?


> But rather than a follow-up from Holmes, Shultz received an email, obtained by "Nightline," from Sunny Balwani.

> In the email, Balwani wrote in part: "...The reckless comment... based on absolute ignorance is so insulting to me that had any other person made these statements, we would have held them accountable in the strongest way. The only reason I have taken so much time away from work to address this personally is because you are Mr. Shultz’s grandson ... the only email on this topic I want to see from you going forward is an apology."

I hope to have my belief in karma bolstered by the results of the criminal charges against Balwani. So often I've found at some point down the line this kind of stuff catches up with people (if not criminally or financially, at least in happiness).

If you read the book Bad Blood, Balwani makes Elizabeth look like a fumbling fool by comparison while he's the evil tyrant building a culture of yes-men and firing anyone with the least amount of dissent (and if you didnt work 12hrs/day). But I'm sure they were both nearly equally culpable. You never really get insight on who (of the two) were the main drivers to start the lying and eventual out-right fraud but it was very likely a mix of both.

There was a great story in the book about how the engineers would mess with Balwani by repeating a random technical word that didn't make sense in context, to see if he would start parroting it in his conversations. Which of course he started doing, more than once. He was a fraud who knew nothing about technology but thought he could manage an advanced technology project (which is not too uncommon in silicon valley - but he did it to fraudulent levels and like a dictator).

My intuition points to Elizabeth starting the snowball in motion - once she over-promised, built a huge personal image, was in over her head - before it turned into an avalanche from the work of Balwani. The person who had a history of getting rich flipping useless companies with no value during the dot-com boom. I hope he gets punished as much or more than Elizabeth.

And if I had to choose I'd 100x rather have worked for Elizabeth than Balwani.

Yet, somehow, we all know a “Balwani” from work. We’ve all been employed somewhere where he was in charge: a total phony, who knows little to nothing about technology, used his smooth tongue or connections to fake his way into Senior Director of This or VP of That. How do organizations keep falling for these people's shtick and promoting/recruiting them into positions of power?

For every Theranos where the phony is outed, there are hundreds of other companies where their “Balwani” is raking in millions in deferred comp and faking his way through to more and more power, seats on other companies’ boards and a lavish retirement. And nobody calls them out!

> Yet, somehow, we all know a “Balwani” from work

I've had more than one sadly.

Say what you want about Mark Zuckerberg but his idea of hiring engineers to fill every role, not just development but project/product management and other leading positions, is spot on.

And if she had visited reddit or HN or any one of numerous sites they would have repeated the meme that "no one knows what they're doing anyway, just fake it till you make it", and she would have shrugged and kept on trucking.

I don't believe this is true unless you are intentionally assuming all ventures are painted with the same brush. It's not true with self driving cars, med tech, or anything else having to do with human safety. Not only is there not one shared voice on these sites, even if you pretended there were it would not be in favor of faking it until you make it when human safety is involved.

I think this subscribes to the more-frequent meme of assuming people apply their mindset on some types of tech business to all types of tech business.

I'm not talking about advice given about ventures' viability, but to the people running them, who, like Holmes, might say, "gee, I'm in way over my head, I don't feel like I know what I'm doing" and are consistently told that everyone feels that way so it doesn't matter.

Yeah, about their little web service they are building. I don't think anyone, here or elsewhere much less the majority of them, would say that advice is globally applicable.

[citation needed]

I'd love to see examples of this idea being promoted here.

I personally remember Theranos being attacked on HN first for being full of shit, well before it became popular in the press. Not to mention the ~2yrs where 'lean' stuff that was endless parroted here which is all about not faking it but actually talking to customers.

I also highly doubt any YC type company would fit that criteria either.

Maybe you see that stuff on Reddit but HN is full of some of the most skeptical and critical people when it comes to reviewing startups.

That's cheating though: "Hey, I already know your idea doesn't work, so obviously I don't endorse it."

The problem is what to do when you personally don't know the viability of your own idea and have to take advice while not having access to the same knowledge. If you stripped off the specifics, in every other context, HNers would by-and-large repeat the tropes about "oh yeah, you feel like you don't know what you're doing, but so does everyone else! It doesn't matter!"

Obviously, you can come after the fact and say "See, now that the idea failed and I expressed skepticism before, I obviously don't mean the fake-it-till-you-make-it crap for that startup, just the good ones." That's not impressive.

What matters is whether you know whether self-confidence is justified being the person in that situation.

>Holmes forged ahead but was running out cash... This was in the midst of the Great Recession. ... Holmes found someone to help. In 2009, she got an enormous loan from a former software executive named Ramesh "Sunny" Balwani.

> "I think it was about $20 million." Holmes recalled to the SEC in a never-before-aired deposition obtained by "Nightline."

> there was another detail revealed that Holmes had been less forthcoming about: She admitted that she and Balwani had been living together and had engaged in a romantic relationship. It was something she admitted under oath but had kept from investors.

is the whole video available?

How do people think it will play out both tech-culturally and politically if she gets convicted / acquitted?

If convicted, justice would be had but would it send a negative message to entrepreneurs?

If acquitted, might it reinforce the "break things and move fast even if it harms people mentality"?

> If convicted, justice would be had but would it send a negative message to entrepreneurs

I would consider a message that entrepreneurs are not above the law to be a positive message.

Hear hear. This is exactly the type of message that I want to be sent to entrepreneurs. If you ruin people's lives and externalize your failures in order to perpetuate fraud, then you'll go to jail.

Additionally, someplace out there is somebody with an idea that could allow the single blood drop idea to actually work. That idea is going to get buried because after Theranos, nobody is going to want to risk getting involved with Theranos 2.0.

A conviction is the best possible thing for entrepreneurs who actually help society and is only a negative thing to entrepreneurs who want to get rich by stealing from others.

> If convicted, justice would be had but would it send a negative message to entrepreneurs?

It might send a cautionary message, but cautionary messages aren't inherently negative.

Having worked in tech for a few years now, it's pretty clear that Holmes is far from the only liar/sociopath/fraudster in the Valley. There's many just like her.

I suspect this wouldn't be as much of a problem in the valley if so many investors and VCs weren't so incapable of critical thinking. The Juicero debacle comes to mind.

edit: As someone coming into tech from physical science, I have never seen the Dunning-Krueger effect anywhere like I do in tech. It's mainly in the management, but folks do have a very serious problem accepting expertise from scientists or engineers outside of tech industry.

Juicero was more of gross incompetence than fraud. The outcomes were similar, but the root causes are not quite the same.

Investors should have consulted researchers in the biomedical field before investing. They would have told them that what Theranos was promising is impossible. Everyone who invested in this fraud did not do their due diligence.

I'm not sure why this is being downvoted when it is definitely true. Real biomed companies were approached, but universally turned Theranos down because they knew the limitations what what Theranos was attempting. In the face of that rejection, Holmes turned to military/gov't people and investors with big names, but no real healthcare clout.

Yeah, but it matters when you’re in healthcare

God I am really scared that she will not go to jail somehow. I hope justice is served.

Related, The Dropout is available on Spotify [1]

[1]: https://open.spotify.com/show/7lrJqILWfMuQhqDHJEFUK6

Wisdom is knowing when to say "I don't know".

It seems that she is very, very wise ..

Is it purgury to say "I dont know" when you actually do?

They would have to prove that you actually do. Also it might be the lesser charge regardless, so it's worth it to take the chance.

For example, if there's an email with Holmes talking about how she's about to lie by saying "I don't know" on the following issues that she totally knows about, then if that's discovered, she's going to get charged.

However, that probably doesn't exist, so it's unlikely to otherwise prove that she really does remember.

(Not a lawyer)

> Is it purgury to say "I dont know" when you actually do?

It is perjury, but often a particularly hard (though not impossible, as legal proof is not the same as logical proof) to prove form of it.

She comes off as a grade-A sociopath, even more so after learning some of what was done and her demeanor regarding it

I wonder if her investors ever had her psychiatrically evaluated.

Steve Job's legacy: the cult for sociopaths leaders

is this news? if anyone was in her place they would do no less. it's likely she's going to jail for at least a little while. who wants to go from potential billionaire to jailbird? how would that effect your mental health?

Hard to say because it seems like you need to be a bit of a psychopath to have done what she did in the first place.

Apparently Holmes is trying to raise money again [1]

[1]: https://www.businessinsider.com/theranos-founder-elizabeth-h...

This is reminiscent of the story for Billy McFarland, the founder of the Fyre Festival, who's currently serving a prison sentence for his acts. Even while he was under investigation for fraud related to the failed festival, he moved on to starting another scheme related to ticket scamming. There are two related documentaries that recently came out - one on Hulu and the other on Netflix - that are worth the watch if you're interested.

I bet in a few years she will be on top of the world again.

Whoever— (1) having taken an oath before a competent tribunal, officer, or person, in any case in which a law of the United States authorizes an oath to be administered, that he will testify, declare, depose, or certify truly, or that any written testimony, declaration, deposition, or certificate by him subscribed, is true, willfully and contrary to such oath states or subscribes any material matter which he does not believe to be true; or (2) in any declaration, certificate, verification, or statement under penalty of perjury as permitted under section 1746 of title 28, United States Code, willfully subscribes as true any material matter which he does not believe to be true; is guilty of perjury and shall, except as otherwise expressly provided by law, be fined under this title or imprisoned not more than five years, or both. This section is applicable whether the statement or subscription is made within or without the United States. (June 25, 1948, ch. 645, 62 Stat. 773; Pub. L. 88–619, § 1, Oct. 3, 1964, 78 Stat. 995; Pub. L. 94–550, § 2, Oct. 18, 1976, 90 Stat. 2534; Pub. L. 103–322, title XXXIII, § 330016(1)(I), Sept. 13, 1994, 108 Stat. 2147.)


You realize that since 2-3 years it is now standard legal practice to make sure deciders don't know the details of important decisions. They know the decision, of course, and what was chosen, and they decide.

But they don't know who the email was sent to to implement the decision. Or they don't know the law firm depositing it. Or they only generally know the numbers involved, and have since destroyed the exact numbers (email and any paper copies). This is done explicitly so they can truthfully answer "I don't know" to nearly every question.

Given how governments are going after companies, and how politicized everything, including testimonies at the police, have become, I can't say I blame them. Even if an answer is true, and not criminal, but somehow controversial, it will end up in the media. I can't say I blame them. We need to get back to the situation that it just doesn't happen that any statement leaks from investigations, at the very least unless the person is found guilty, and even then, only if strictly relevant to the crime.

For example the many times ceo's have been called to "testify" on tax minimization strategies, knowing full well the IRS (controlled and of course authorized by the government) has come to an agreement about those taxes, and that agreement has passed through the hands of elected politicians. The only purpose is to demonize these people without admitting that the government created half the controversies.

Anecdata: my sister proposed automated tire sensors for a trucking firm to the President of said firm. They asked "If a tire comes off a truck on the highway and causes an accident or fatality, will this sensor be able to show if the tire was incorrectly mounted or had bad pressure?" She replied, "Yes, exactly". They then said "Then we definitely don't want this on our trucks" This was 15 years ago.

That's because in the trucking industry, at least here in europe, there is fierce competition. This means that companies that don't use material and employees until their absolute limits are being filtered out by market forces. The only way to improve the situation is by government involvement, both through stricter laws and more regular controls. E.g. there are rules to prevent exhaustion of truck drivers by mandating pauses for certain lengths. Or in Germany there's a discussion now whether turning assistants should be made mandatory or not.

>You realize that since 2-3 years it is now standard legal practice to make sure deciders don't know the details of important decisions.

What leads you to believe this? You mention a specific time period as if there is some event that caused it to be the case, but I'm not sure what that event would be, nor have I seen this in action in my career.

Reading your comment, I'm having a hard time parsing it. I think you're saying that she had some sort of plausible deniability. That's not correct; it's clear she was deeply culpable with direct knowledge of large amounts of fraudulent activity.

Isn't it simply shifting the blame downwards ? Because someone from Legal will have sent the dubious request to the law firm, for example, and the law firm can clearly find it in its archive ?

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