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There’s one other REALLY important reason why Holmes was able to raise money. Remember venture firms with blood test knowledge like Google V were turning her down.

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...

That mid level DoD employee should get a bonus, a promotion, and a medal.

How about Tyler Shultz? The main whistleblower and grandson of George Shultz. He was working at Theranos and realized they were a giant fraud. He lost his job, was harassed by lawyers, he and his parents almost had to sell their house to pay legal fees, his grandfather wouldn't speak to him anymore, etc.

Basically the gov't employee, son, and likely others we don't know about lost their jobs and even blacklisted.

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.

I don't think those examples match very well. Theranos really didn't have anything that worked. Spacex has rockets that work and satisfied customers. They aren't going to Mars yet, but most of their current satellite launch customers probably really don't care.

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.

Holmes was not following the same playbook, there's a big difference. What you say holds true for the early investors who may have been sold the future expectations, however, long after that Holmes recruited investors by stating that they have a "working Mars rocket" that's being used right now, when in fact it was smoke&mirrors using altered Siemens machines instead of the claimed Theranos technology.

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.

> 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?

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.

The difference is that SpaceX realizes the goal is aspirational, and isn’t signing people up for doomed rides to Mars right now.

Exactly. If SpaceX started taking deposits for a Mars ride within the next two years there would be a problem.

Extremely brave what he did, especially when it means combatting his own (extremely wealthy and powerful) grandfather. The court of public opinion and the history books will see him as the hero in the end, at least. And he's since started his own medtech company.

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.

Agree on Tyler Schultz.

Instead, he was forced into retirement or reassignment, as 4-star Dickwad Mattis was head over heels for Theranos: https://www.washingtonpost.com/news/wonk/wp/2016/12/01/trump...

(Note that doesn't mention his retirement, I can't find a link for that, I read it in Carreyrou's book)

>> The short answer is her Jobs-like "reality distortion field" -- she was exceedingly good at convincing non-scientists that their science worked.

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.

> ...they have false confidence about areas they have zero expertise in, purely because they feel they can figure it out.

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.

An object as prosaic as say, a window

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.

> 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.

You might find this interesting: https://www.ted.com/talks/thomas_thwaites_how_i_built_a_toas...

What if I say making a window is a giant pain in the ass and I'm not set up for handling molten glass in that scale. I might could pull off a bottle or glass with the right equipment and a few hundred hours of training and practice. Is that reasonable? And yes I'd be buying tools and raw glass, not sourcing sand and blowing my own fire brick or making my own kanthal wire from scratch.

Dirty jobs man.

That's why, when you read the memoirs of conmen, they always say educated, intelligent people are the easiest to rip off.

I don't doubt that that's true, but it's also educated, intelligent people who are more likely to have the kind of money that makes them targets for con men.

Funny, the PhD taught me to keep what I say fairly limited. On the other hand, I find generalists will say all kinds of crap that "sounds true" but they have at best a weak theory and a couple of anecdotes.

You seem to be making an argument for a weak theory with a couple of anecdotes.

There is something kind of meta there, isn't there? ;)

Op is replying to anecdotes with anecdotes.

Can't find the cite at the moment, but I recall that cult members were also likely to be college grads and of above-average intelligence

They always say that because it sounds a lot better, and they have no problem with lying.

> People vastly overestimate how intelligent they are when they place value on their intelligence;

Even if they don't, intelligence does not replace domain knowledge.

>>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.

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?

Is there a name for this cognitive bias?

Subclass of Illusory superiority.

> The short answer is her Jobs-like "reality distortion field" -- she was exceedingly good at convincing ...

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.

One of the patterns that interests me a lot is supernormal stimulus. An organism is evolved to deal with a stimulus in a certain range, and something comes along that is so far outside it that things break.

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. [1]

[1] https://en.wikipedia.org/wiki/Jonestown#Deaths_in_Jonestown

Wow. That is by far the most realistic and rational hypothesis for this phenomenon I've heard. It's simple, elegant, and seems testable. Thanks!

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.

High profile sociopaths are extreme outliers, as most sociopaths burn through their social connections well before becoming competent enough at social manipulation and finding enough people that are well-off enough to maintain a parasitic life.

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.

> 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?

Esoteric religion as an intellectual Ponzi scheme...

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. ;-)

Sometimes I wonder if it's better for a religion to have strange beliefs:

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.

Yeah. If I were to cast it into this framework, you could look at fundamentalist systems of thought as delivering a supernormal sense of understanding. Which causes supernormal confidence, making their views easier to spread.

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.

> […] "drinking the kool-aid". Which is a metaphor Jobs used for how he wanted people to react to the Mac […]

Google is showing me nothing for this. Do you have a citation?

Quoted here: http://articles.latimes.com/2013/sep/01/business/la-fi-tn-ho...

Original source is listed as this book from Baylor University Press: http://www.baylorpress.com/Book/382/Appletopia.html

I don't know about Holmes (other than having read Carreyrou's book) but I've been around pathological, charismatic narcissists enough to be as fascinated as you at their ability to lie to the face of very accomplished people and be completely believed. It's almost like executives need a training course in spotting and dealing with them.

But not the actual specialists.

https://www.nytimes.com/2016/04/27/opinion/dont-blame-silico...

my outsiders view of management training is that they work so hard at cultivating confidence that they start thinking that confidence, not competence, is what they need to select for in roles outside of leadership.

As far as I can tell, "leader types" are far more vulnerable to confident people than the rest of us because of this.

I also think falling for this is implicit in the notion of the MBA. Previously, management was mainly company founders, founder families, and people who had come up through the ranks. That is, all people who spent years learning the specifics of the business. But the theory of the MBA is there's some universal set of "business skills" that makes actually understanding the business domain irrelevant.

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.

The MBA is the Western version of the Soviet "apparatchik." This term denoted a party functionary educated in party ideology who was promoted and transferred around to different posts where they would lead things they did not actually understand.

I personally think the MBA system is a big step up from just choosing leaders based on how closely related to a powerful person they are. (I mean, I understand there is a lot of overlap between the two... I'm just saying that the MBA system is a step forward, not that it's good)

Unfortunately I think the MBA enables a power-and-politics system. If people have to work their way up and learn an industry, competence and a long-term focus are more rewarded than if a credential makes you a supposedly universal expert.

The old quote “The hardest thing to fake is sincerity”.

Or - the easiest person to fool is yourself.

A lot of communication is non-verbal. A person evaluating a statement in context and expecting to find some physical and culturally-instilled signs of self-doubt in their interlocutor may unconsciously be strongly pushed to conclude that the person is telling the truth when not finding those signs, even if the reason that those aspects of communication are absent is because the person is incapable of producing them.

Psychopaths are parasites - one could make the argument that most of human culture, including our marriage traditions, religions, moral codes of conduct, sense of humor, and even fashion, are evolutionary attempts to thwart them.

How would that argument go? Is it just that setting up social rules makes it easy to spot when people don’t follow them?

Yeah, exactly. Psychopaths don't empathize, so they don't understand why social conventions exist, so they sometimes get it wrong and something seems "off". When someone seems "off" you don't trust them.

Unfortunately, what you described applies to people on the spectrum too.

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.

source:reddit

AFIAK sociopathy is now more or less regarded as just non violent psychopathy. Most psychopaths are not violent.

People with autism also sometimes seem "off" though.

Yeah, and that's a big part of why (high functioning)autism is such a serious disability in the first place. I'm really glad that society is starting to recognize and be aware of it so that autistic individuals can get a pass in this area.

Problem is that also ensnares sincere people on the autistic spectrum, recent immigrants, and anyone else different for any reason.

Yeah, and it's very much a moving target. It's a tough thing.

Yes. And using a community to contain them or alert you.

You make an interesting observation. I wonder if there are any doomsday stories of an AI that conquers humanity via psychopathic persuasion rather than conventional weapons.

This is by far the most likely scenario.

I remember reading that a lot of CEOs and generally people in leadership positions have psychopathic traits. This probably is an asset if it's balanced by other traits.

I'd take those articles with a huge grain of salt. How could you distinguish a CEO with the courage to make an unpopular choice (e.g. layoff 1/3 of the workforce to save the company) -vs- a psychopath who does it to inflict suffering on others or to just establish dominance? How do you even measure psychopathic traits without defining exactly what "psychopathy" means and a rational ethic by which to judge the non-psychopaths (i.e. the "control group" or standard of normal)? Moreover, motive is not irrelevant to the question and not only is it not measurable by researchers, most people don't even know their own subconscious motives.

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.

Huh? You just give the ceos a psychopath exam.

No. I reject the methodology of the psychologists who do these types of studies.

Why?

Because you can't define pathology (deviation from a norm) without defining the norm. Modern psychologists dodge this question and implicitly assume various generally accepted moral standards and tenents (a form of circular reasoning) by which they condemn those who don't follow it. It is not science and to make it a science the psychologists should be seeking a rational basis to define ethics. Nobody has done this and until they do psychology will remain a pre-science like alchemy.

In addition, it would also be supremely discriminating if the "Psychopath exam" would, for example, consistently score Asians lower.

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.

> Jobs-like "reality distortion field"

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".

I take the view that Ms Holmes deliberately used her "reality distortion field" to hide her deliberate criminal behaviour.

Except, unlike Jobs, she couldn’t actually execute. The Jobs distortion field wasn’t a parlor trick, he was able to actually create the reality. Holmes was unlike Jobs in every way other than in her own mind. Look at all of the products that came from Jobs’s distortion field. Look at the wasteland of false promises resulting from Theranos. She was selling lemonade and calling it vodka.

I wonder if medman77 was talking abut the glue dispenser here:

https://news.ycombinator.com/item?id=6349808

I am assuming they had some of the best people in the field working on these. Makes me wonder how much the employees were aware of the company's situation, and the infeasibility of some of these goals.

Very aware, but information was strictly compartmentalized inside the company so individual employees had to figure out that things were badly wrong in different ways, depending on what their roles were and when in the lifecycle of the company they were there. Overall, though, the employee turnover was insane.

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.

What I found most appalling about the behavior described in the book, and maybe among the most probative in the criminal case, is the heavy handed use of legal threats to stop employees from talking and negative reporting.

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.

I completely agree.

It probably helped that her mother was a congressional staffer and her father was a USAID exec.

According to the John Carreyrou book, not so much her parents, but an early and enthusiastic sponsorship from an influential Stanford professor, combined with a truly outlier ability to network with and impress powerful people. She accumulated an amazing amount of social proof, which she used to stockpile more social proof, ad infinitum.

Didn’t Carryrou’s WSJ stories say that her parents’ govt connections pulled in Schultz and got her connected to the military? I remember his reporting implying that a lot of the money Theranos raised seemed like it came in expecting military applications and thus military contracts. Which the military board (that her parents connected her with initially) would have helped with.

I believe that Carreyrou's book says Holmes built a relationship with George Shultz, then Henry Kissinger, William Perry, and Sam Nunn, through Stanford's Hoover Institution. They were all fellows at Hoover. I'm looking at page 181 in the hardcover edition. The book doesn't mention any family connections to Shultz. The military interest originally came from James Mattis, then head of US Central Command. The book says that Holmes met him "at the Marines' Memorial Club in San Francisco," but doesn't say more about that first meeting.