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. [1]
[1] https://en.wikipedia.org/wiki/Jonestown#Deaths_in_Jonestown
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
https://www.nytimes.com/2016/04/27/opinion/dont-blame-silico...
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.
source:reddit
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.
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.
[1] http://m.nautil.us/issue/60/searches/does-theranos-mark-the-...