Alex Gibney on the Fall of Theranos and Elizabeth Holmes
theguardian.com
theguardian.com
I really don't know how to feel how to feel about that one. The final jury is out until we get to see the new series of course, but I hope he didn't portray her as too sympathetic.
I recently finished Carreyrou’s book and found it legitimately disturbing. Holmes and Balwani didn't just lie and cover up bad results, but actively crucified any of their employees who dared question what they were doing in a way that's hard to interpret as anything except sinister malice.
This might be best exemplified by Tyler Shultz, who ended up spending $400k in legal fees defending himself from Holmes and her lawyers [1]. Carreyrou was harassed by their legal team to suppress the stories that eventually led to Theranos' exposure, and you can't help but think throughout the book that the only way he could've done what he did was having the counter-legal team of the WSJ available, and deep pockets to fund it. Throughout the reveal process, anyone who was thought to be possibly leaking information was threatened with recriminatory lawsuits, and in America's shining light of a legal system any kind of company-on-individual action is a recipe for misery and bankruptcy.
Holmes is one of the least sympathetic people I can imagine, and it'd be unfortunate (and a disservice to any of the people whose life she either destroyed [2] or tried to destroy) if Gibney improperly represented that through some kind of misguided artistic notion, especially given that there's a non-zero chance that something as high profile as an HBO documentary could indirectly influence the results of the upcoming criminal trial.
[1] https://arstechnica.com/science/2016/11/the-personal-bloodba...
[2] https://en.wikipedia.org/wiki/Ian_Gibbons_(biochemist)#Death
Her motives may have been pure early on but once it became apparent that her product simply didn't work, any action taken beyond closing up shop or changing direction and investing in a new approach was unforgivable. In the sentencing to come, following the trial, I hope the judge throws the book at her with a substantial prison sentence and the loss of any ill-gotten gains.
Theranos, though, does have the added negative attribute that the product was a medical device and not just an individual's professional athletics career.
The comparison isn't even all that relevant -- one was people basing life-and-death medical decisions on a fraudulent device business built on fraudulent patents, on which the recently departed U.S. Defense Secretary Mattis sat on the board. And the other was... sports. Not that the culture of doping isn't bad for all the athletes in all sorts of ways, but there is a big difference when someone is making bad health decisions without your knowledge.
They can become millionaires/billionaires by dint of their privately traded stockholdings, and the NYT will write a puff piece on them, but all we're doing is applauding them because they managed to convince VCs to float them cash to try doing something.
Armstrong went just beyond drug offenses - he destroyed careers of people around him who wouldn't play along and attempted to call him out.
Betsy and Frankie Andreu, Emma O'Reilly, David Walsh, SCA Promotions, defrauding the USPS, lying under oath, etc.
Also, Lance Armstrong was actually good at something and he did comeback from cancer. While not the best excuse, every competitor was cheating too.
She undoubtedly felt what most people feel, she just took the SV advice too seriously and actually believed that no one knows what they're doing and it's all the same, so it's perfectly okay to forge ahead once you realize you're out of your depth and you raised all that funding without justified confidence.
My best version of the point from earlier discussions: https://news.ycombinator.com/item?id=19214749
Personally, I'll be pretty happy if the documentary calls more attention to SV's broader role in this. I loved Carreyrou's book, but I thought it, and the rest of the coverage of Theranos, falls quite short in exploring how Holmes and Balwani aren't the only bad people in this story. Holmes practically had an entire army of people enabling her (and even directly aiding her) through their fraud, from Dubois to Shultz to Mattis to Biden, to all of the SV investors and cheerleaders who didn't do their due diligence. Not all of those people necessarily deserve to be punished for their supporting of her, but it's also important to realize that Holmes didn't magically accomplish all of this fraud on her own.
That said, the response from Gibney in the last part of the article is kinda bizarre. The mention of Abu Ghraib is totally out of place, and he even attempts to draw a weird comparison between Holmes and Hitler, of all people.
It's because he made Taxi to the Dark Side. His point is that he's trying to be logically consistent in his ethical reasoning.
It doesn't matter what the actual legal situation is, the fact that the average person doesn't really have the ability to gauge what that situation is without paying an expensive lawyer, and the fact that even a lawsuit without merit can end up costing incredible amounts if time and money, means anyone except the very rich (or on the other side, the very poor) can be bullied into silence by aggressive lawyers waving around scary sounding cease and desist letters.
Genuinely not sure why people are downvoting you.
Because he is condescending and because having to create an LLC to protect your house from legal harassment is the sign that the US legal system is completely broken, not the sign that people don't know how to manage them-selves.
If it's a single member LLC, that actually doesn't work in a lot of states (the whole purpose of the way LLC reverse liability protection is to protect the integrity of corporate joint ventures, which are the motivating use case for LLCs), and has either been found by courts are expressly specified by legislatures not to apply to single member LLCs in many states. There are a handful of states where it does apply, though, and others where the rules are unclear.
And even when it does apply, they can't take your house directly, sure, but they can get a charging order against any distribution of funds from the LLC to you that hangs around until you do pay the judgement, so you can't ever extract funds from the LLC. And, sure, you can mitigate the effect of that by just running more of your life through the LLC, but the more you do that, the more you risk the LLC itself being liable, either alone or with you personally, in any legal trouble you get in, in which case the whole purpose is defeated.
Also, LLCs aren't free to set up and maintain, there are fees and additional compliance/tax prep/record-keeping costs. It makes sense if you are wealthy (especially in a particularly SMLLC-friendly jursidiction), but not for most people, even most well-paid workers.
There are much more conventional albeit expensive alternatives like umbrella insurance but that doesn't change the fact that the fear of a lawsuit doesn't have to be so scary. I mean that's what many companies are banking on because the only people that really win in litigation is the lawyers.
It doesn't, but in many states to own real property, just as to transactions business, you'll have to register your foreign LLC as a foreign LLC, which often involves paying a foreign LLC fee equivalent to the franchise fee you'd have to pay for a local LLC in the same state.
Also, bankruptcy (which a judgement you can't satisfy without the “protected” asset could force you into) will bypass he protection, so basically this doesn't do much protect your assets if you actually need it to (that is, if you can't satisfy the judgement without the “protected” assets.)
Are we letting the board off pretty easily? We expect wage earners to potentially out their corrupt company and take the risks associated with it, but if you sit on the board and the unicorn valuation is big enough then we just wave off the fact that they never asked those questions either. No CEO wants a board that get's in the way but we give them a pass just because the valuation was big? That doesn't seem quite right either.
I really think that she thought she could make the machines work. I think Holmes and Balwani thought that, given enough time and enough smart people they would eventually get a working version. I think they thought -- they may still think -- that it was a question of throwing more resources at the problem.
The whole thing would have lasted longer if they had not put a deadline on themselves by actually releasing it into the wild with the Walgreens deal.
What I got from the book was that they gave up pretty early on making real progress and instead decided to lie. By not allowing their people even to talk to each other they pretty much made it impossible to make progress. If you have a big, hairy, unsolved problem the first thing you have to do is to make sure that as many people as possible understand the extent of the problem.
They are just soulless liars and bullies and deserve no excuses.
What specifically in the book made you believe this? I'm halfway through and so far it sounds like nothing worse than any other megalomaniac start-up founder.
You cant short private capital though, at least not easily.
i am curious if he (gibney) was funded by someone who wanted the story to be softer such that the public doesn’t grow a negative opinion of silicon valley.
This is what they have in common with Lance Armstrong - they didn't just stop at cheating, they destroyed or attemped to destroy everybody around them who attempted to call them out
I suspect that had Holmes and Balwani just been a little bit nicer, Theranos would have quietly deflated, maybe turning into an entry-level lab automation equient supplier or something. Instead it seems like they went out of their way to make enemies and act suspiciously.
In the social sciences, they call this 'belief perseverance'. To take this to an extreme, think of how many generations of people were convinced of geocentrism.
Were I in the position George found himself in, I would start by asking deeper questions about how the process works, how it fails, and how one can test that it is working as expected. If people get evasive it lends credence to the dissonant information, if they are forthcoming and have answers to the questions, it tends to support the core belief. "Trust but verify" is often used in this sort of context.
Always listen for meta-data and probe it when it throws up red flags. When someone gets angry in response to what seems like a simple question, follow that anger to see where it originates.
If their product had worked, after a few years the return on investment could have been substantial. It would have been significant loss pulling money out before release to mass market.
George Shultz is 98 years old. It's not like you can take your money to the grave. I would like to imagine he was doing all this for his family. I would also like to imagine that if you have a 9 billion dollar valuation company, and you bring together the right talent, Holmes could have somehow pulled off at least some value added breakthrough.
The real issue was when they started to lie and put people's safety at risk. But theranos had significant social proof. Whatever fraud or risks could have been brushed off as non systemic
I'm sure there will be many books and case studies on this as time passes and more facts are revealed. Tangible evidence (e.g., taped conversations) would be interesting. I'd want to hear what people like George Shultz were saying, and how they were reasoning these things in the timeline. I think this is a historic case worth learning from.
I see that a lot. People just want to believe, they want to follow, to find someone to show them the way. Shine a bright light in the darkness and people will flock to you and sit at your feet and follow in your footsteps even if you don't know where you're going. And you don't; you never do. Your little light can only cut the darkness so far ahead of you.
Sometimes you genuinely want to find a way, sometimes you're just shining a light to attract suckers, like an angler fish. But people will always come to you if you promise them all the answers- and often stick around long after they know you have nothing, because there's nothing left for them to do. They can check out, but they can never leave.
I wonder if it has something to do with being in a world (i.e., a "system") that people are still trying to understand? Over time, science tools like microscopes and telescopes have helped individuals shift their thoughts on the way the world works. I wonder what the next breakthrough tools will be to help us advance our grasp of the world?
Elizabeth Holmes and her boyfriend Balwani are absolute psychopaths without remorse or conscience. We should not give them this much attention. I can't help but feel that we are doing something wrong by talking and writing about them, as if they are something special. They should be in jail, and the facts of the case should be made public, and that's it - end of story.
If we portray them in any other way, we are just doing disservice to everyone.
For further reading, Carreyrou's book is OK-ish (can be read in a day) but really - it's a bunch of stories about how psychopaths lie to stay in power. It's a nice book, but in the end we are talking about people that pathologically lie, and even dumber* investors that throw money based on signalling/stories and not facts/prototypes/verification of any kind of anything. That's pretty much it.
Much better literature would be 'Snakes in Suits' and 'Without Conscience', both by Robert Hare, the guy that has created the psychopath checklist (the tool used to clinically diagnose psychopaths, like a psychopath test). I highly recommend both of the books (especially 'Without Conscience'!)
* that's just my opinion: throwing millions without anything close to a prototype that works AT ALL is just something that an imbecile could only do. Goes to show what kind of people hold capital in the millions. Remarkable.
This seems completely be starkly in contrast with reality. She did not persue a noble goal and secondarily achieve power and wealth. If that was the case she would never had sent out bogus resulst for patients of hunted innoscent employees for presenting the truth.
All the facts on the table tell a tale of a person who wanted money, power and influence, and sat with a 2-7 off suit and decided to bluff on the off-chance that everyone else would fold.
It’s sad that Alex Gibney has decided to spin a story he wants to tell around a reality that doesn’t support it.
The only goal of Holmes was to make money. Just like everyone else. The "noble goal" is just BS PR she concocted for herself to more easily influence and trick investors. Like her Steve Jobs' turtleneck and her fake "manly" voice.
Almost everything about her was fake and her only goal was cold hard cash. But I guess it makes for a better story if we turn her into a fallen saint who failed to achieve her "noble goal".
[0]. https://www.huffingtonpost.com/2014/03/07/california-6-state...
If you've read Bad Blood and can honestly say that the behavior of Google, Tesla, et al reaches anywhere close to the level of deceit, malice and downright sociopathy exhibited by Holmes and Balwani, I question your moral compass.
Did she? The proof offered was that she didn't pay herself as much money as Madoff did, so consequently her mission must have been noble. People do things not just for money, especially if they are already well of. They want validation, power, fame, etc.
> Fake it ‘til you make it is something that’s imbued in the DNA of a lot of Silicon Valley companies.
Ok, well Google and FB are shady and play fast and loose with people's data. Why shouldn't Holmes play fast and loose with people's blood tests. Let's not judge her too much.
> Elizabeth exists on a spectrum of people who over-promise and sometimes way under-deliver and sometimes commit fraud.
The spectrum also extends to how much she was praised and touted as a great young entrepreneur. She wasn't just quietly running a scam, but basking in the lime-light dancing to "U Can't Touch This" (figuratively and literally https://www.cnn.com/2019/03/11/tech/the-inventor-theranos-do...).
> Because if she’s just the bad apple – you know that’s what they said about the people at Abu Ghraib.
Right, she is just like the people tortured at Abu Ghraib. Poor thing, how will she ever recover.
There is element here I think where the directory himself wants to stir controversy and one way to do it is to present her in a rather sympathetic way. Otherwise not sure how to interpret the "Abu Ghraib" and fraud is just "a spectrum" comments. It might pay off I suppose. But it's a bit too transparent.
I think he meant that she's like the torturers at Abu Ghraib. She may be guilty, but so is the system around her.
During that scandal, some people argued that the American war on terror wasn't corrupt, there were just a few bad apples that took it too far.
That said I don't agree with the comparison at all.
> Right, she is just like the people tortured at Abu Ghraib. Poor thing, how will she ever recover.
This refers to the torturers at Abu Ghraib being called "bad apples" (as opposed to the other viewpoint, which is that they were just the ones who got caught, and/or their actions reflected prevailing attitudes.)
You're right. But it's still a reaching argument and it doesn't work. It kind of strengthens the idea that the director is trying to stir controversy by saying "she wasn't as bad and was just a product of a bad context..."
1. Base rate insensitivity. Carreyrou argues that Theranos prototype(s) were abundant in Type 1 and Type 2 errors. Yet, as far as I recall, it was never specified what the acceptable error rate is for a blood testing machine, and precisely how deviant Theranos' machines were. If we found out, for example, that an acceptable Type 1 error rate for a blood machine was 1%, and that Theranos' machines were yielding 3% Type 1 errors, I wouldn't be as offended had they been yielding 20% error rates. So exactly how error prone were Theranos machines compared to base rate? It was never specified. This makes it really hard to quantify the level of harm they were (or might have) imposed on society.
2. Theranos might have had a legitimate path to product. No one seems to dispute that Theranos had actual prototypes that functioned to some degree. The issue is that they functioned (i) with unsuitably high error rates (see above) and that (ii) Theranos' machines were on their own only able to test for certain things.
But it's still unclear to me if they had an actual path to finishing their machines to spec. (The book concentrated on Holmes' misleading people on how much progress they had made, but this is distinct from whether or not Theranos had a secret plan to finish things). For sake of argument suppose Theranos needed another 3 years to finish their machines to spec. If Holmes had pulled it off, we might had called her a hero (at least I might have). So did Holmes have a path? It's unclear reading the book, from what I recall.
Of course, the history of SV is full of people pushing the edges. This leads us to point 3:
3. Carreyrou's anecdotes of harm were weak. Carreyrou was unable to find compelling cases of people being severely harmed by Theranos machines, or so one could argue. Here "severe harm" to me means: failure to identify life threatening diseases (Type 2) causing, i.e., death. If I recall Carreyrou did find one case of Theranos machines misdiagnosing severe diseases (Type 1 error causing someone thousands of dollars of further blood tests + serious anxiety along the way).
Of course, that's not a good thing. I wouldn't wish that upon anyone. But only one case? (Keep in mind that normal blood tests already can give people Type 1 errors [causing anxiety, further medical expenses, etc]; see point 1). And compare this harm to the amount of good Theranos would had been able to add to society had they succeeded in their engineering efforts (assuming they did have a path to victory).
4. Holmes had skin in the game. If I recall, Holmes fought tooth and nail to maximize her equity in Theranos, and when the (alleged) house of cards came down, she had less than $1M in net worth. This strikes me as consistent behavior with someone who genuinely believed in her plan (and hence the long-term value of Theranos). At worst Holmes was totally delusional, but it seems less likely to me that she was a legitimate con artist.
I just want to clarify: it's been a while since I've read Bad Blood (and actually, I quite enjoyed the book). And I don't condone misleading investors, fraudulent behavior, etc. I'm sure I'm missing some serious things Theranos did that could have been criminal. But Carreyrou (himself not an innovator) seemed at times to do a poor job considering the alternate viewpoint sincerely: that Holmes was just pushing the edges, and that it was at the end of the day worth it. His book no doubt set the dominoes in motion for Theranos to implode. So I felt compelled to explore this alternative viewpoint and to get it in writing. Cheers.
Not true. Not sure if people would call it the consensus view, but many (most?) scientists who study microfluidics believe blood is not homogeneous at the very small pin-prick volumes Theranos was sampling. Not only did their technology not work, it actually wasn't possible for it to work for quantitative assays.
The whole Theranos affair goes just against all medical ethics that people in the medical field in fact observe. But that's why it was enabled by Silicon Valley financiers and Washington politicians. They are trying to foist a new kind of ethics on us (meanwhile they themselves avail themselves of boutique physicians), and we must not let it happen.
To be fair 60B Mkt Cap is irresponsibly high on the part of investors. The same could be said about this situation.