Wow. What a story.
I can’t even imagine the stress that the younger Schultz and his parents must have dealt with—elder statesman grandpa sitting on the board of this miracle tech company, probably pulled some strings to get his grandson a job, and then said grandson finds out it is all a multi-million dollar sham. Grandpa doesn’t want to hear it and turns on the grandson. Man, talk about a Shakespearean tragedy...
What's our policy on copy & pasting the text here for those of us blocked by a paywall?
Ryan GrovePlease don't (and thanks for asking). Copying significant portions of copyrighted text for the purposes of circumventing a paywall could be considered copyright infringement. But if you can find an alternate source without a paywall, feel free to link to it here.
The facts per the SEC:
https://www.sec.gov/news/press-release/2018-41
company culture:
http://money.cnn.com/2018/05/21/technology/theranos-bad-blood/index.html
the players:
Chris MacAskillI followed this story as it unfolded and haven't been able to understand how otherwise smart people, like Tim Draper, the venture capitalist I respect, hasn't been able to bring himself to see the fraud. To this day he's still appearing on CNBC to defend it. Maybe it's just too hard to believe when you put so much of yourself and your reputation into it.
Anyway, two years ago I listened to this interview with the Wall Street Journal reporter who by that time had spent a year investigating. It seemed to me he already had damning evidence.
So... hmmm. Big blockbuster Hollywood movie starring Jennifer Lawrence and directed by the guy who did “The Big Short” is apparently in the works...
Chris MacAskillI thought you were kidding! That was a great clip.
Channing Robertson, my old chemical engineering professor, was one of the earliest investors in Theranos. When I learned Channing was with Theranos, I automatically dismissed the rumors. It gets worse. One of my co-founders knows almost the entire board and he vouches for their reputation. I guess nobody is immune to deception. Perhaps it was the generational gap. Channing is very charismatic and perhaps in his old age his romanticism blinded him.
Chris MacAskillKiko, honestly I wondered the same thing. It seemed like the board was filled with older, mostly non-technical, idealistic and busy people. The story made a lot of sense and sounded revolutionary. You had to spend a lot of time digging in like the reporter did to understand what was really going on.
I said board, I meant scientific advisory board.
I wonder how many biotech startups with hokey science get funded just because VC's are enamored with their "investment thesis" and founders put up a good show. The vast majority try to turn bad ideas into good ones. Only rarely do we see a bad idea turning into massive fraud.
Chris MacAskillI forgot about this conversation! I listened to Kara Swisher's interview of John Carreyrou, the Author of Bad Blood, which has become a New York Times best seller. One of the storylines is that George Schultz, former Secretary of State, got his grandson Tyler Schultz a job there. He figured out that they were faking the tests and he got disillusioned and left. He didn't seem to be able to talk to his grandfather about it because George was in denial.
John got a tip to talk to Tyler, so he connected over LinkedIn. Unfortunately, the company's counsel was watching and threatened Tyler, so he backed off for an agonizing while. But eventually, his conscience won out. He had anonymously filed a complaint with the government. Here's what he said in an interview:
"Companies and the government ultimately respond to the collective consciousness of the people, aent. Here's what he said in an interview:
"Companies and the government ultimately respond to the collective consciousness of the people, and the best way to communicate with people is through the press," Shultz said he learned. "Talking to the Wall Street Journal was way more effective than talking to [government regulators] or the company itself."nd the best way to communicate with people is through the press," Shultz said he learned. "Talking to the Wall Street Journal was way more effective than talking to [government regulators] or the company itself."
Damn. No wonder they're making a major feature film.
Chris MacAskillVirginia Heffernan of Wired has an interesting story about Elizabeth Holmes:
ELIZABETH HOLMES’ DOWNFALL HAS BEEN EXPLAINED DEEPLY—BY MEN
What I got from the story was the thing that bothers me about some people: answering specific questions with emotional generalizations that don't mean anything.
Does this writer think Holmes was simply incapable of differentiating between platitudes and reality?
Chris MacAskillNot sure what the writer thought, but I have a few. I am drawn to people who can talk specifics, which I perceive that Jeff Bezos, Elon Musk and Sara Blakely can do. When they don't talk specifics, I'm suspicious they are trying to sound smart but they've got nothing.
But there is a whole other group of people who are drawn to general statements. In my opinion, they are the ones who don't have specific knowledge, so a specific answer would lose them.
And I think those are who the late-stage investors in Theranos were: people who didn't know any specifics about blood testing so they relied on smart-sounding aspirational general statements.
I worked in the non-profit arena for many years. It is a haven for do-gooders who do not have specific knowledge.
I am astounded at how many wealthy people invest in non-profits for reasons other than measurably successful outcomes. If they will do that for non-profits, undoubtedly some of them will also do that for profit-oriented companies, and Holmes found some big names that fit the bill.
I am curious about the Stanford connection—was she there for a year and then could not handle the challenges and dropped out? Or there for a year and then lost a scholarship due to poor performance? Or there for a year and felt she was superior to her classmates and needed to stop wasting her time and get busy creating this miracle medical device? I know she has tried to parlay that chapter into something like a Jobs or a Gates or a Zuckerberg drop-out story, but what really happened there?
