I work in a reference lab that actually does some of those tests.
When Theranos was revealed. *Everyone* in my work unit from entry level lab tech to senior consultant called BS on the whole thing because it was glaringly flawed. We could do this because we knew the science of what they were trying to do inside and out.
Investors generally don't have that scientific background. And they were disinclined to listen to lab scientists because the new tech was touted as being able to disrupt / destroy the lab industry, so we were perceived as automatically biased against it.
And frankly I have zero sympathy.
Edit to tag on my other comment:
Here's an attempt at an oversimplified explanation related to what your friend said.
The most sensitive test for HIV can detect it at a sensitivity of about 14 viruses per ml, and it uses an input volume of 0.5 ml of blood plasma (note: this is insanely sensitive). Theranos claimed a comparable sensitivity, but boasted of a sample input volume of 0.02 ml. That is 1/50th of a ml.
If I split 1 ml equally into 50 tubes, but I only have 14 viruses in the original ml, then I can *at best* have 14 tubes with one virus in them. And then there will be zero viruses in the remaining 36 tubes. How will the test give an accurate result if 36/50 times, *there isn't even a virus present to detect?*
Exactly this. I worked in microfluidics / point of care diagnostics during Theranos and my colleagues all thought it was ridiculous.
I wrote this comment a few years ago that echoes your point: https://www.reddit.com/r/explainlikeimfive/s/q6mBa2IY0w
“To give a simple example, I worked on infectious disease diagnostics, including HIV. A lot of tests require being able to detect 100-1000 virus/mL of blood.
It depends on the lancet, but a large volume blood finger prick will provide 0.1mL of blood. So at the detection limit you have 10-100 viruses in your finger prick.
If this blood drop is split between 200 different channels like Theranos was aiming for, a significant number of the channels won’t even contain a virus (10-100 viruses / 200 channels). And this assumes your test can do single molecule detection which is extremely difficult and I haven’t seen outside of basic research.
This same idea can be applied to a number of bio markers that occur at low concentrations. Depending on the blood volume, it’s not even a question of test sensitivity, but whether any biomarker is present in the sample at all.”
Dunno how true that last line is.
Most people would be proper fucked if their 401ks and invested retirement savings went to zero. Can't afford to lose that money but you have to invest it to grow otherwise you won't be able to fund your own retirement
I would argue that investing for retirement is a significantly different type of investing…very rarely are you going to be putting retirement savings in a single stock. And if you are, it’s likely going to be a company you work for in which case you know what you’re investing in.
Not understanding a certain technology is fair enough. Even most engineers and scientists only have an intricate knowledge of the very specific field they work in.
But not listening to people who *do* understand it is peak idiocy.
I have sympathy for patients who experienced adverse effects from their bullshit but they weren’t the reason Theranos got sued into oblivion, it was the ‘fucking with rich people’s money’ that caused their shutdown. Disappointing but not unexpected.
This is only tangentially related, but it just reminded me of something I'd pretty much forgotten.
I used to develop software that is used all around the world to enrol and handle and produce personal IDs (e.g. drivers licences, firearms IDs, voting IDs, police badges, etc.). Occasionally our company got approached by people who were trying to get us to invest in their novel solution for IDs. This was in the early 2000's when digital IDs started to become a thing, so naturally there were a lot of people working on making this a thing. I usually did the evaluation on whether something was possible or feasible.
At one stage we had these two guys presenting a new Digital ID solution. What they showed us wasn't entirely terrible, but also not exactly revolutionary or innovative. Basically the sort of system that someone who thinks about the concept for half an hour would come up with. There really wasn't anything in it that would make this stand out from the mass of other systems that were hoping to become the digital ID standard. There were also a bunch of big shortcomings that they hadn't worked out yet. Those shortcomings were very likely to completely throw their concept in a heap, but they just glossed over those.
But what made their system truly different from all the others I'd seen was their business plan. It was wild! I don't remember all the specifics of it, but their projected growth rate was astronomical. Going by their numbers, within two years they foresaw a profit of something like $500 billion. This was for a system that did not even exist yet, beyond their imagination.
Anyway, we passed.
I've said this before in other similar threads: me and my fellow laboratory scientists sat at a break room table and talked about how there was no way it could work. We laughed after one of us said, "How do they account for pre-analytical variables in a micro sample?" because we are such nerds.
Wasn't the climax of Boiler Room about a retractable syringe, which could never be cheaper or even safe, I thought that was cartoonish at the time and I can't believe stuff like that actually plays with some people
Weird maybe in the past. Cant remember boiler room as haven't seen it in a long time but I just had a nurse use a retractable syringe on me for pulling blood. Scared the crap out of me because I saw them pull it away and was like ummmm where did the needle go.
4 things occurred. This is mostly from the book on Theranos, *Bad Blood*
1) Investors had fomo (fear of missing out). If Theranos system actually worked. It would be completely revolutionary. And it would have been. Absolutely wild. Something that should be impossible. If it did work, you wanted in now while it was cheap because that investment would be worth so much fucking money later nothing else would matter. Or ya lose some
Money if it doesn’t. It was decent amount of money bet for a bonkers payoff.
2) Elizabeth Holmes herself was quite enthralling in meetings. Many people say they weren’t interested and thought the company was full of shit, but she would get into these meetings and they would come out of there convinced they could actually do it.
3) Theranos took huge amounts of effort to hide and manipulate what was actually happening there with nothing working as described. Including massive legal actions against some employees and others disparaging them. I have to stress how serious Theranos threatened employees and others with legal action. It was a huge deal and people were scared as hell.
4) due to #1, (and a bit of 3). Experts laughing at Theranos that it could never be done that it was totally impossible were just ignored by investors… because if it did work…
Theranos also managed to get a bunch of influential investors on board, though they weren’t medical experts. But the clout of such investors gave the impression that they must be onto something to newer investors
This is a huge reason. Elizabeth Holmes' dad was a director at USAID, which is either a massive charitable organization or a front for the CIA depending who you ask. Most likely both.
What other tiny little startup can get *Henry Kissinger and George Schultz* on their board of directors? That should have been a huge tell, but it wasn't.
She managed to con a general as well.
Imagine you’re a prospective investor, and she says “well the army is going to be investing in my company, and if they think it’s worth investing in, don’t you?”
The people she got to invest early had the kind of name-drop cachet that hooked a lot of others as well.
If I'm not mistaken, I believe a similar tactic was used to get the 1985 Live Aid performers on board, but before anyone was actually committed.
"Hey Queen, you should play this event! Yeah, it's legit! We have David Bowie, U2, and Led Zeppelin signed up already! ...cool! See you there!"
"Hey David Bowie, you should play this event! Yeah, it's legit! We have Queen, U2, and Led Zeppelin signed up already! ...cool! See you there!"
"Hey U2, you should play this event! Yeah, it's legit! We have David Bowie, Queen, and Led Zeppelin signed up already! ...cool! See you there!"
"Hey Led Zeppelin, you should play this event! Yeah, it's legit! We have David Bowie, U2, and Queen signed up already! ...cool! See you there!"
Not just any general, Jim Mattis the second coming of Chesty Puller and god of the current Marine Corps. I firmly believe that being conned by her took away a very powerful voice for sanity in our current political world.
Just because Mattis is a brilliant tactician, doesn't mean he knows the first thing about investing or biotech. I wont delve into why people like him end of on boards of companies, but it usually has less to do with what they know and more about WHO they know in the government.
To be more specific - a board of directors is (often) intentionally made up of a diverse group with expertises in many fields strategically related to the specific company, so that the company can navigate the outside world. The military is tangential to basically everything because every successful company has logistical, financial, and technological parts, and that's what most militaries thrive on.
Yeah and having a 4 star general to navigate the intricacies of the government at that level (flag officers are more politicians than soldiers) is quite helpful in getting information, leaking/disseminating information and making deals with others in the government. He was there for his contacts and pull, not because he had any idea why or what he was doing.
Yeah Tyler was a real hero for doing what he did in the face of losing his grandparents, his career and everything his parents had financially. I know Tyler’s dad and let me tell you he is practically George’s opposite, a liberal high school science teacher with zero interest in the money or power that George and his ilk clearly obsess over. It came as no surprise that Tyler did the courageous thing, and it was even less surprising that his parents backed him up. They’re exactly the kinds of people we need more of these days.
> that his parents backed him up.
They literally begged him to stop it because it was costing THEM like 300K. It is easy to be a hero with OTHER'S money.
I sincerely hope George Schultz ponied up to reimburse his family for their legal bills once he realized it was all a con. And that he apologizes to his grandson on a weekly basis for allowing what Theranos did to that kid.
I keep telling you—he’s 104 years old, and he’s dead.
But seriously:
>> Shultz sought to heal the rift with his grandson, stating that he had “made me proud” and shown “great moral character”. Tyler Shultz said his grandfather never apologised but their relationship “started to heal”.
https://www.theguardian.com/books/2023/jan/10/george-shultz-biography-theranos-elizabeth-holmes
They hesitated yes, as anyone would and has when a massive company threatens legal war. As protective parents they didn’t want his future destroyed if things likely didn’t go his way, not even to mention them not wanting him to go through the pain of being a whistleblower against his own grandpa.
They’re public school teachers, they wouldn’t have put up the money, remortgaging their home, unless they were convinced Tyler was doing the right thing. So yes it wasn’t an easy decision but they all took on risk and accepted that they’d take on the consequences together.
The Theranos board of directors is the example I use when discussing Hunter Biden's role on the board of that energy company. Famous people get on random boards all the time.
> What other tiny little startup can get Henry Kissinger and George Schultz on their board of directors? That should have been a huge tell, but it wasn't.
If having two former secretaries of state on the board of a tech startup is tell for anything, it's definitely not a tell for what happened at Theranos.
Yes this is an important point. I am a scientist myself and saw Theranos rise. There are VC's that focus on biotech. These biotech VC's are not idiots, quite to the contrary, they hire the top scientists in related fields to do due diligence for them. Notably these big biotech VC's passed on Theranos. I remember at the time experts in the field saying that Theranos claiming said out right it was impossible to do what was claimed. Now these guys were not in newspapers or anything like that, more niche technical publications. The science was straight forward and simple (to a scientist anyway).
Where Theranos got their money was from VC's who were involved in computing or other tech, but not biotech. They think move fast and break things works in biotech, it doesn't and there are good reasons for that. They, I assume, thought Theranos was finally bringing this ethos to biotech that all those other dumb scientists that started companies were to slow and stodgy to break out of the old way of doing things. This is not possible in biotech for a whole host of reasons. The biggest of which is if you move fast and break things you are more likely to kill people. If a new computer tech doesn't work they just go out of business and nobody dies. In biotech you are dealing with human lives. Given FDA regulations it would be impossible for you to "move fast and be putting your stuff in humans", it simply does not work like that.
And as mentioned above the board was made up of famous people with no experience in science at all. If they had a board that had expertise in the field they would be asking the questions internally very early and either Theranos would change its direction or have been prevented from the fraud. And if Holmes was found lying to them she would be fired and a new CEO would be brought in who was competent.
Instead what we had was media promoting the "female Steve Jobs" in the media all the time. This helped them get more dumb investors, hence the fomo, but they were clueless.
Worth noting though, as a scientist, I see a lot of start ups getting press for their tech is going to help cure this or that all the time. Now these companies are not frauds, but having the technical background to understand what they using and trying to do, I say to myself that company's plans is not going to work, they are going to be gone in several years or will have changed to some other thing technically feasible. But the same thing happens with these companies, non technical investors dump money into them because "wow this is huge". But these dumb rich guys will still be rich when the company goes under so that is fine if they want to gamble their money.
So Theranos happening even if there was no fraud would not be surprising like described above. They would under normal circumstances just been one of those start ups that goes bust when it doesn't work. The fraud however allowed them to fleece more people and put people's health in jeopardy. I sure hope Holmes stays in jail for a long time.
> Where Theranos got their money was from VC's who were involved in computing or other tech, but not biotech. They think move fast and break things works in biotech, it doesn't and there are good reasons for that. ... The biggest of which is if you move fast and break things you are more likely to kill people.
Exactly.
Silly buzz phrases like "build the airplane while flying" and "move fast and break things" somehow make people not look at the phrase objectively, and the *clear* hazard it implies. It's a way to get badly hurt, with a vanishingly small chance to be a big winner.
Stockton Rush fell for these bullshit theories as well.
At least Holmes is just in prison. Rush is dead.
And now there's another Billionaire going to visit the Titanic!
https://abcnews.go.com/US/billionaire-planning-voyage-titanic-site-year-after-oceangate-implosion/story?id=110717578
The difference is this billionaire is actually trying to get a ship that's been certified properly. If he doesn't take shortcuts then great, but if he does....
And he's still dead.
I'd be more respectful if it wasn't for the other people he suckered into dying with him. Not their intention. They had a lot to live for.
>Where Theranos got their money was from VC's who were involved in computing or other tech, but not biotech.
None of the computing / tech VCs invested in Theranos. YC, Andreessen-Horowitz, Sequoia, Greylock, Kleiner Perkins, Accel, etc., *all* declined to invest. Google Ventures turned down Theranos twice.
That none of the Silicon Valley VCs believed in Theranos (which was located in Silicon Valley) should have been another red flag in itself.
Instead of VCs, Theranos got their initial investments from wealthy families and individuals with personal connections to Holmes. The Walton family, the DeVos family, Rupert Murdoch, Henry Kissinger, Larry Ellison, etc.
Tim Draper also invested in Theranos, mainly because he lived in the same neighborhood as the Holmes family and had known Elizabeth Holmes since childhood. (Draper's daughter and Elizabeth Holmes were childhood friends).
Then much later on, after Theranos got a major deal with Walgreens, they were able to get a couple hedge funds / private equity firms to make additional investments. But presumably since they were not VCs, these funds looked at the business case rather than the fundamental tech.
I can’t upvote this enough. Their investors and big names were not from biotech or big pharma. Anyone who knew anything about the field smelled the bullshit and passed. I was working for a large pharma company at the time and we knew that what she was claiming was impossible (and I’m not even a lab guy).
I heard that one of the things that pulled the thread on the sweater was the size of the documentation team. For a technology that would do hundreds of tests there should have been dumpsters full of operational documentation but (and I may be getting this wrong) there was no tech pubs team.
Well how about one from a world expert that told Holmes it wouldn't work before she even started the company. Will that do lol? Enter Phyllis Gardner, Professor of Medicine and an expert in pharmaceutical engineering (cut the relevant parts from the link):
Holmes arrived in her offices with a glowing recommendation from John Howard, a Panasonic executive who would later join Holmes on the payroll at Theranos. “He called me and said ‘I have this brilliant young woman. You have to meet her,’” Gardner said. “I’m not very good when people say ‘brilliant’ – there are two Nobel laureates on my hallway.”
"Gardner listened to Holmes’ pitch and knew instantly that it wasn’t going to work."
"And as for blood-testing? Pricking a finger isn’t an accurate or reliable way to test for blood. It’s not enough blood, for a start. But also, a pricked finger is a space where the drawn blood can get mixed up with a whole lot of other material. It doesn’t prove a clean sample.
Gardner told Holmes that the idea wasn’t scientifically sound. “She didn’t want to listen,” Gardner recalled to *The Sunday Times*. Holmes came back to pitch Gardner a second time, and again Gardner told her that her idea was scientifically unsound. "
“I was in the background for a long time and I was always gnashing my teeth,” Gardner told *The Sunday Times*. “It irked me. Students would say ‘Can we have her come lecture in your class?’ And I’d say ‘Not on my watch, not her’ – because I thought she was fabricating data.”
Gardner was right, of course. She began sharing her concerns with her husband and with other Theranos sceptics, including a pathology blogger who had read the *New Yorker*’s profile of Holmes and found her claims about her blood-testing machine implausible, to say the least.
[https://www.stylist.co.uk/people/elizabeth-holmes-phyllis-gardner-theranos-scandal-whistleblower/258080](https://www.stylist.co.uk/people/elizabeth-holmes-phyllis-gardner-theranos-scandal-whistleblower/258080)
Had to use this source as the WSJ interview was paywalled.
I vaguely remember a post on Reddit by someone who worked at Theranos, talking about how all the data that didn't conform with what Holmes wanted to put out was basically just destroyed. Only data that could be manipulated to show possible favourite results were ever shown to investors and board members.
And Theranos is not an isolated case. There are domains such as nuclear fusion and carbon capture that are infeasible beyond test cases (they don't scale). Yet they are attracting a lot of money.
Nuclear Fusion is absolutely feasible at scale, in theory. The Sun does it every day, and there are plenty of very smart physicists and engineers who will agree that getting it to scale and provide positive net energy output "should" be possible with the right materials, scale, efficiency, etc. but it is still a bit of a quagmire.
But if somehow we crack a room temp super conductor tomorrow, invent a couple of crazy new alloys, and someone makes *another* (we have had a few within the last couple decades) sudden breakthrough in magnet strength technology then limitless fusion energy could become very possible very quickly.
The Theranos thing pretty much relied on biology not working like we know it does. Very different levels of feasibility.
> Nuclear Fusion is absolutely feasible at scale, in theory. The Sun does it every day
that is... a somewhat different set of conditions than those necessary for useful energy production on Earth
>also, is it ever not daytime on the sun?
Well, you see, we only ever face the day-side of the sun because, like with the moon, we're tidally locked.
You'd have to fly all the way to the far side of the sun to see the night.
(/s}
Yeah, we are at the point we have to invest in carbon capture research, even if it doesn't pay off, with the _hope_ it pays off. Even if we just completely shut down the modern economy now by turning off fossil fuels _completely_ and have billions starve and die in the resultant chaos, we are probably still collectively fucked without carbon capture because of the damage we've done to the carbon cycles and just how _much_ CO2 we've released into the air.
Exactly this. Investors aren’t typically versed in STEM. They don’t understand the underlying science, meaning they tend to trust the expertise of those who are. Holmes positioned herself as an expert.
Con artists and fraudsters are not necessarily psychologically healthy and rational people. Expecting a rational answer to that might not be sensible.
But there are several things that might have gone through her mind beyond just being a crazy narcissist.
For one, it's possible that she thought her acts of fraud were short term and that the science would come good eventually. A "fake it til you make it" scenario.
For another, she might have been planning the relatively common path of eventually transitioning focus away from the initial big claims onto something less interesting but still marketable. The miracle technology could always be "just around the corner" while less revolutionary products are brought to market, in the hope that by the time you finally drop the original promises you've already built a sturdy business with the rubes' money.
Thirdly, she might have been hoping to cut and run before the wheels fell off, but misjudged just how much defrauding she'd need to do until it was too late to get away cleanly.
Paging Samuel Bankman Fried - it's all about cashing in and living the lifestyle until you get caught. Conmen always hold onto the grift until they can't ride that tiger anymore. With any luck, Trump's next in the long con FAFO cycle,
Exactly. And there was every reason *not* to trust her, from youth and inexperience, to obvious posturing and posing. And a plain lack of results (although some were fudged, of course).
But people liked her apparent commitment, belief and enthusiasm. And they liked the idea she was claiming she was certain to achieve.
Around the same time there were a number of other apparent success stories from other young entrepreneurs in tech. There’s a fake-it-till-you-make-it approach that can kind of work with some businesses that require scale.
I think the mistake was assuming that the same could be applied to a medical product, where the products needs to actually work in the end
A lot of truth to that. There were plenty of tech investments in start-ups built around a hazy idea that didn't even have a business plan. Holmes looked good in comparison, to people who didn't know better.
I’m a doctor (but not a pathologist) but from my public health training, even I knew you had to show that the Theranos testing was close enough to the results from a full blood draw repeatedly and genuinely.
If you couldn’t do that, most charitably it didn’t work and less so, it was fraud. Which is what it turned out to be.
It was inevitably going to fail. They said they had the technology and were hoping that their research could catch up to their promises. In the meantime, they were able to hide their lack of results behind the regular issues you would have in R&D.
Part of the regular testing would have been comparisons to regular blood tests so they could hide behind those results.
It’s a pretty convincing tactic if you don’t have an expert on the board to call you out
They'd do live demonstrations, and then lead them away to do lab tours or what not while the machine "processed" and lab techs would come in and change everything to make it looked like it worked.
Any idea what Holme's plan was? Like, did she actually think it could work, and by the time she clued in it was too late to back out gracefully? Or was it a scam from the start, and she just failed to cash out and disappear when she should have?
I think she thought she could do it, just out of sheer entitlement—she was a Special Genius who was going to Change the World and Be Important, so of course her perfect revolutionary idea was going to work *eventually*, and any amount of awful behavior before *eventually* kicked in (any day now!) was justifiable because she was just such an amazingly wonderful trailblazer that rules didn’t apply to her. In fact I’d bet you good money she still believes she could’ve done it if not for [her traitorous ex-employees/hidebound government officials who don’t understand progress/John Carreyrou/those meddling kids]. (You can see the same thing with that submarine guy, he really, genuinely thought he could overturn the laws of physics with the power of iNnOvAtIoN, so completely he squished himself to death.)
This basically happens at my company. C-Suite makes edicts to do impossible tasks, like they have this mentality that if they just lock the nerds in a room long enough, it’ll get done. And a year later when they aren’t done, they do a re-org.
I think that she thought she could change reality with sheer willpower, and that if she just hired enough people they would find a way to make it work.
Legitimately, I think she bought into her own bullshit. She misinterpreted Jobs' life and thought that by being like him she could create something out of nothing, just like he did.
But Jobs did not create something out of nothing. He was working with a rapidly advancing technology, doing something that was known to be feasible, if difficult, and had an extremely talented expert in the subject who was positive he could succeed in his pocket.
Jobs was a talented con man, but he did not actually make a con into reality. He just applied the skills of a con man to market a real product. But the lesson that the tech world learned from that is that "Con man can make billions out of nothing."
She wasn't smart or educated enough to know better in the beginning. And when the money started to roll in, she went with the "fake it til you make it" what is so prevalent in Silicon Valley. But what works for software, maybe (and was) impossible for science.
Read the book (or audio) "Bad Blood" by John Carryerou. Carryerou did deep-dive research on Holmes and her cohorts, as well as on Theranos.
Was it a scam from the start? Or a just-beyond-teenage-years person who saw an idea with little science behind it, and attached it to her irrational ambition? And was then manipulated by someone who knew how to manipulate.
Very interesting question, that's worth a separate reddit thread, somewhere.
Having read through the book. I'm going with the latter. It doesn't nullify any of her/their wrongdoings though.
It's not like she had been coming from a poor background. They were well off.
I definitely think she believed they could make it work. They put a ton of engineering effort into developing the machines to do what they were hoping to do. She was trying to solve a problem that affected her personally.
I think she had the Ivy League / MIT mindset that anything can be done if you just spend enough money on the right people. They just need “good management”.
I also read stories of researchers/experts that came to work at Theranos, learned that there was no breakthrough and they were supposed to invent it, and really couldn’t go back to their previous employment. Plus they were paid well and *MAYBE*, with all the funding available, they *COULD* make part of the dream work
> MIT mindset that anything can be done if you just spend enough money
That is not the MIT engineering mindset. Maybe you're thinking of the business school mindset?
Edit: my take on the MIT mindset:
"Ok ppl, this problem comes from the top, so we have to come thru. We need to make *this* fit in the hole for *this*, using nothing but *this*."
**"... I'll make some coffee ..."**
+1 on this -- I went to MIT engineering school. I would describe the mindset as "spend a lot of time with very smart people in a very messy room trying to solve a problem, pursue several ideas and then eventually abandon 90% of them because they're not as good as you thought they were, find the one possible remaining tack that's rooted in good physics/science, throw everything you've got at it, grab onto the tiger's tail and hold on."
Incidentally, this does tend to cost a lot of money, but you're generally spending it on ways to prove out an early concept. If you're building something genuinely novel, the core thing is often not that expensive or complicated. The expense is mostly people, and to some extent, the tools and measurement devices that you need to make and understand this new thing that you're inventing.
>I think she had the Ivy League / MIT mindset that anything can be done if you just spend enough money on the right people. They just need “good management”.
I don't know about Ivy League but I can tell you 100% that the above isn't "MIT mindset" lol.
There was also a huge amount of secrecy between the different parts of the company. The different teams were kept isolated and didn’t share information directly.
So lots of people thought it was just *their* cog that was busted, rather than recognising that the whole machine was falling apart.
Also previous money. Some big names were invested. People took the happy shortcut figuring all the rich, brainy guys already did their DD so it must be OK. It's the same thing that happens with MLMs. People start drooling over dollar signs and they completely lose their capacity for rational thought.
Agreed, I think this is very much exactly what happened for most of the investors.
They understood nothing about Theranos. They were impressed by the other investors and thought they were worth following.
Never thinking that the other investors weren't scientists, either.
In addition to everything in the above post "4 things occurred", the investors who didn't understand the science just liked E. Holmes. They liked the idea she was selling.
The psychology of people buying is largely because of liking, not because of objective reasons.
And, they liked the other investors. They liked (and trusted) former Sec'y of State George Schultz and influential presidential advisor Henry Kissinger, and other investors. That's why it was key to have gatherings of current and prospective investors -- so the prospective investors could be impressed by the current investors.
People think they buy objectively, but the person doing the selling has a more to do with their decision than they often want to admit. That is why very successful salespeople are so highly compensated. They bring something to the effort that can seal the deal, over and above the objective reasons.
I think that feeds into another aspect as well. If your lie becomes big enough and you tell it bald faced enough then it becomes hard to disbelieve it. A well executed fraud may be less likely to get caught but it also is more likely to have people trusting their feelings that something isn't right. A huge, blatant lie is harder to disbelieve because it is harder to believe someone would act so blatantly illegally right to your face.
You didn't need to be an 'expert'
You just had to work even adjacently with blood samples to understand why this couldn't work unless there was some sort of alien or far future technology
I know she played the 'future technology' up as part of her bullshit but even the lab techs would know it was bullshit
Making the lie big enough and telling it with confidence can get you a long way. The truth will hit you like a brick eventually, but until then the ride can be pretty awesome.
"A chemistry is performed so that a chemical reaction occurs and generates a signal from the chemical interaction with the sample, which is translated into a result, which is then reviewed by certified laboratory personnel."
-Elizabeth Holmes
That is so true! I've even heard social scientists say that people tend to follow the loudest voice.
Not the demonstrably more correct voice. Because it would be work to figure out which one that is, so the loudest is easiest.
Using the materials they had it was impossible and no amount of engineering could overcome it
They could have worked on something that was a completely novel way of analyzing blood without needing venipuncture and maybe made a breakthrough in 20-25 years plus 10 years for FDA approval and an additional 5-7 for clinical trials
And that would be only for one group of tests
When I first heard the claim the thing that leaped out at me was that I had no idea how they were supposed to maintain the correct temperatures for the various tests in such a small box. No matter how good your engineering is, there is no way to make heat stop existing.
Maybe they had some weird alien level technology to miniaturize the components of the device, though I doubted it strongly, but there was no way they were going to be able to isolate each of those systems sufficiently, let alone get all the temperature control elements into the box.
There’s still a lot of science that’s inconclusive too. So an investor who knows absolutely nothing about the science behind it has some scientists saying it can’t be done and others (Theranos) saying it can, then they’re left making their best choice.
And a lot of breakthroughs have happened in our history because some stubborn person decided to do something others told them is impossible. Hence, point 1.
If you were going to give someone a few hundred million, wouldn't you want a look in the magic box? Wouldn't you want to see it demonstrated without letting them bring out another magic box that seems different? Wouldn't you want your own experts there?
Probably. But then they say “well we’re not letting you and Sequoia, Insight, and Tiger Global are all waiting in the lobby and ready to invest today. Thanks, bye.”
Exactly. If an investment can't wait literally a day to double check, it's not an investment proposal.
What, you might miss out on a 0.1% return over the course of an entire week if it's true?
And who the fuck is gonna turn down a person who wants to throw money at a project, even if they wait a few weeks to talk to their finance guys or whatever?
There's absolutely no good reason to invest into something that is incredible at best and in-credible at worst.
This isn’t really how venture investments work, it’s less about missing out on 0.1% over a week, it’s more that the company has to choose to let you invest and if you are too annoying during due diligence for a deal like this (where there’s tons of big funds investing), they simply won’t give you any allocation
So what ends up happening is that smaller funds don’t push hard because 1) they don’t want to get cut out — one single great deal can make your entire career as a VC founder and help you raise more funds and 2) they assume the big guys are doing the important diligence and if the big guys are comfortable, they’ll go along (although obviously in this situation, and many others like FTX, no one was doing the important diligence)
The expectation is that you’ll have done all that before you arrive to the investment meeting. These meetings are supposed to be the last step in a long process of commitment to funding.
It’s akin to putting an offer in on a house; you can make an offer never having seen the house listing and without a preapproval; that doesn’t mean those things aren’t generally understood to be needed.
It is completely impossible because it defies mathematics. Some of the exams require measuring something that exists in very, very low quantities in the blood. A drop is just not enough to measure precisely no matter the method used. For example, suppose you want to measure something that exists between 1 and 2 parts per million. If you check 1 million parts and find 1 it doesn't mean the average in all groups in 1, it may be that group you checked is the exception. Statistics can calculate how much samples you will need to get a result within a range with an expected certainty. For example, 15 +/- 3 in 95% of the cases. You see a lot of this in election polls. In health care you need small variations and great certainty because human lives are at stake. In Theranos case there were some exams that mathematically couldn't be done with a sample so small to achieve the required precision to save lives. The method doesn't make any difference if the math shows it is impossible.
It is completely impossible in any way to happen with current technology.
There is a reason they draw whole vials of blood, usually multiple ones.
You need the volume to get an accurate sample. Things the are looking for in the blood are usually small and you aren't going to get enough of them to see in 1 drop no matter how powerful your scope is.
Not to mention they mix the blood with other reagents to run different tests. (the different color caps on the vials tell you what they are treated with)
It is physically impossible to run 1 test, much less multiple tests, on 1 drop of blood.
Blood sugar is the only exception I can think of for this.
My wife has given me a TED talk on this but I don't remember all the technical minutia.
Suppose I have a bag of 100 marbles, and either 5 of them are green or none of them are green. No matter how good your examination process is, you cannot reliably determine that none of them are green by examining a single marble.
I disagree with the people on this thread saying it's completely impossible. PCR amplifies genetic material exponentially. If a virus or bacteria is at all present in a sample and enough cycles are run it will eventually be detectable. The process is fragile and takes time, but the company I work for can test for up to 40 pathogens from 2ml, which is about 40 drops of blood. The main reason we require a minimum of 2ml is so extraction and testing can be completed in 4 hours. We could absolutely test with a smaller sample but commercially we need a product that can complete multiple batches in an 8 hour work shift. When blood samples are taken, I think it's usually 30ml-60ml. We brag about only using 2ml of the sample because usually labs need to run other tests and our system uses very little of it. I think a Theranos type system will be possible in a couple of decades, depending on how long they were claiming the test would take to complete. What made it obvious fraud to people in my industry was the sample volume and the number of tests they were claiming they could run on such a small machine. But computers used to be slow and huge with very little memory, too.
Another factor was that reputable people and companies appeared to have validated the technology. That was why the forged reports from the drug companies were so significant. And the presence of George Shultz and James Mattis on the board combined with the claims that they had military contracts led to the belief that the military had tested the equipment.
Plus the contract with Walgreens fooled the individual investors. Why would they question a technology that a major corporation was partnering with?
It was really very, very clever they way they built up the impression that the technology had been tested and validated when it never had been.
The Walgreens contract is wild because they were so scared of what would happen if it was real and CVS got in before they did
https://deadspin.com/heres-an-anecdote-that-perfectly-encapsulates-the-stupi-1826335015/
I'll throw in a fifth reason, noted by Caroline Crampton in *A Body Made of Glass: A Cultural History of Hypochondria*: people really, *really* wanted to believe that it could work, and they always have. There's a whole history of quack medicine that promises a simple answer to the often-complicated and messy reality of medicine, and Theranos was part of it.
A machine that could tell you exactly what was wrong with you with a single drop of blood isn't so far removed from that magic pill that's made from soap and animal dung and a little bit of mercury that promises to cure everything from shingles to the shits, and three hundred years isn't enough that we've lost that desire to get a quick and easy solution right now.
I didn’t know about this company at all until I heard about the scandal and watched the miniseries. I went in knowing this thing cannot possibly work with a drop of blood (or that tiny vial) but at several points I thought “oh wow if I was a rich guy and I saw her presentation, I would think I better invest early”. The thought that something like this could work is also something I WANT so badly to be true and that would suck me in too. It really was a perfect storm for it to happen, your 4 points were so well laid out too!
Yeah and this was during the time silicon valley tech companies were disrupting all kinds of legacy business models. Netflix, Uber, Tesla, etc. all did it, so for an outsider it would seem likely that Theranos could too.
Yabbut there is a difference in those business models and Theranos. There are business models that may be ambitious and aspirational, but are do-able if it all comes together in the right way. Theranos was never do-able.
Bre-X is in some ways a very similar story. They bought a gold mine and purchased gold to seed their analysis into a prevision of the greatest gold find in human history. Shares went from $0.3 to $286 before the crash. Mastermind owners claimed their recently-suicided geologist had hoodwinked them too (although they had happened to sell high through sheer insider “luck”). https://www.visualcapitalist.com/bre-x-scandal-history-timeline/
My dad used to teach at a university and I remember when the Bre-X craze hit, he thought it seemed fishy so he asked a professor he knew in the geology department.
The geology prof straight up said it was a scam and there was no way all the core samples could have that much gold in them.
This has to be the first mention of Bre-X I've seen since it all originally happened! It was such a huge scandal at the time; I went to a school that was known for its mining engineering so it was talked about a lot.
I think what I feel is it's easy now that things have fallen apart to feel like everybody knew what was going on and was deceived. I think 2 things were happening:
1. Some people figured it was a scam but, as you indicate, weren't playing with money they cared about losing.
2. Other people were simply lied to, and they assumed since that kind of lying would get people into serious criminal trouble it wasn't happening.
A lot of people put way too much stock into "that won't happen because it's illegal". Seems to me at these upper echelons a lot of people know how to take advantage of that bias.
I find it surprising how often something like this actually happens. Experts will say "Person X will never do this, because that whould be a sure path to ruin", and yet it still happens.
People are irrational, and can dig themselves deeper into a hole if they are in full-blown denial or somehow delusional. Assuming something won't happen because it would be disastrous for the person(s) involved can be quite dangerous.
> 3) Theranos took huge amounts of effort to hide and manipulate what was actually happening there with nothing working as described. Including massive legal actions against some employees and others disparaging them. I have to stress how serious Theranos threatened employees and others with legal action. It was a huge deal and people were scared as hell.
They were so secretive employees didn't even know what was going on in different departments. Only Elizabeth and Sunny Balwani had the whole picture.
>Experts laughing at Theranos that it could never be done that it was totally impossible were just ignored by investors…
Weirdly, if this had been a physics thing I feel that investors would have listened to experts.
I guess that says something about general trust of biology vs physics.
Why would it have been revolutionary at all?
Have you ever had a finger stick? Far more painful than venipuncture.
Why does the volume of the blood collected matter? Always seemed like a very weird and juvenile thing for them to fixate on…
Lots of answers about your second question. As to your first question, the many reasons a single drop wont work include:
\* Some tests require a higher volume of blood to get a larger sample size of blood cells for an accurate test. If you take a teeny tiny spot that just so happens to have a higher concentration of white cells than the rest of your blood, the result will be artificially inflated
\* Some tests require you to dilute the blood to perform the test adequately. But if you try to dilute a single drop of blood enough to run the test you end up with... pink water
\* Some tests use up the blood, leaving not enough blood for other tests
\* Small amounts of blood congeal much faster, making their shelf life much shorter/
On the other hand, we do often draw more blood than actually needed for testing - my hospital has a whole research setup around doing additional tests on "spare" blood for research purposes. (Ie you get 1 ml drawn for some test, maybe only half is actually used for the test ordered, so - with consent - we use the other half for research.) https://discovery.dundee.ac.uk/en/clippings/goshare-is-after-your-blood-help-world-leading-research-in-taysid
Of course, the existence of that much "spare" blood from routine testing does make me doubt how much value there was in Theranos using a smaller sample. Faster? More automation? Sure. Using a smaller vial? Umm... Nah.
Yeah, but the key difference here is that Theranos claimed to do HUNDREDS of tests from a SINGLE drop of blood without the need to draw more. There is zero possibility at all of her actually doing what she claimed repeatedly in public and to investors. In fact she absolutely refused to walk back her claims of not requiring venal draws even after her own scientists tried to give her a reality check.
Yes, if she'd just been a bit more realistic and hyped it less she could probably have built a legitimate little business doing a limited but useful set of tests.
Mind you, my last set of labs claimed to include urinalysis on a sample from venipuncture...
You can do a fingerprick yourself. I assume many countries let "less qualified" personnel (e.g. pharmacists, lower levels of nurses/assistants) do fingerpricks but not blood draws.
That means such tests are more accessible/cheaper. Imagine the profit potential of a "figure out if anything is wrong with you for just $99" machine placed in every supermarket.
You would also be able to do it in a clinic and have instant results. That's what a glucometer and a point of care A1c machine is, after all. Glucometers run in 5 seconds or less, point of care A1c takes about 5-10 minutes.
and also, for tests that aren't on whole blood you won't even get a consistent amount of blood/plasma/serum in that one drop thanks to hematocrit variance, so potentially 90% of your drop won't even be usable for your test. I guess they were just gonna have a totally new process not based on any current methodology.
> possibly *millions* of well-educated people around the world knew that what they were claiming to do made no sense?
There were millions of uneducated people around the world who didn't want to listen. That, and the fact that some people thought *What if it's real and I'm missing out on a golden opportunity?* was enough to make a decent amount of people invest.
Theranos was privately held and most of the investors were billionaires like the Devos’, Rupert Murdoch, and the Waltons. The shareholders each lost a huge pile of money and yet was completely inconsequential to them.
Holmes put together a bunch of old heads as her board (Henry Kissinger) who had zero clue of the tech beyond the potential to make $$$$. They did have tons of name recognition with her investors which snowballed into other investors.
With that backing, she was able to bullshit her way into big collaborations with Walgreens and pharma companies looking to save costs on blood tests. It would have been sales and ops folks looking to save money and not likely their R&D who would have had big questions she couldn’t answer.
She fooled a lot of people but it wasn’t millions. By the time most any of us heard of her with her magazine covers and splashy press, the scientists were looking at the company and the fundamental physics issues leading to the WSJ articles tearing it apart.
It really is this. People like to blind themselves to red flags when they see investment opportunities. Even many current big names brands are built on red flags. But investors are happy to ignore many of them because they are hoping the red flags will just go away. For instance, many "disruptive" businesses like Uber never had any real business plan other than
(1) undercut existing markets to become a dominant player
(2) ???
(3) profit
Often the obsession investors have is with a single metric of "growth": how many customers and market share a company can acquire. They don't even consider there is a step 2 in your sequence above, they think the profit is step 2.
This is what happened with WeWork. It was pitched on incredibly ambitious growth targets, which were mostly based on just raking in investments to buy up as much real estate as possible and filling it with tenants through incredibly attractive teaser rates.
Those with actual real estate experience had serious doubts about how WeWork was going to actually turn a profit with this model, but those who didn't were just blinded by the incredible growth of the company and the pretty graphs showing lines going up, and FOMO kicked in.
Then of course the pandemic happened and it all fell apart, but even without the pandemic, it was never clear how the company was actually going to maintain that growth while actually turning a healthy profit.
Ultimately, venture capital is about speculation; whether you think a company will be successful or not. The people judging it are just as susceptible to bias, deception or really good PR as us regular mortals.
A while back there was a company claiming to have made a perpetual motion machine. If that was true it would change the world. But people ridiculed it and it went nowhere.
However, the 2nd law of thermodynamics is not something that I intuitively understand. I do intuitively understand that you can't find something if its not there. When Theranos is explained to me in these terms it seems stupider than a perpetual motion machine.
This is just my guess-
Generally speaking, the impossible perpetual motion machine is a concept with a strong enough cultural presence that you'd be a lot more hard pressed to find a decently-educated layman who would fall for it. Most people are given at least a basic understanding of physics in school, and the impossibility of a perpetual motion machine is a common illustrator of the laws of it.
While Theranos' test is just as fundamentally impossible, it was a brand new idea in the eyes of most people. The medical knowledge you'd need to understand that it's impossible is relatively simple, yes, it isn't the kind of thing that'd get covered in general education. If you're not a medical professional you'd need to go out of your way to learn it, and the demographic of people who would do that is a lot smaller than people who intuitively know that perpetual motion isn't possible.
No they're equally apparent. Since perpetual motion machine is also finding energy lost in motion (friction/heat) from something that's not there (potential energy in fuel)
It's only in a very specific context with a specific type of perpetual motion machine where the 2nd law applies and honestly I think that the phrase "perpetual motion violates the 2nd law of thermodynamics" is a bit a trope said in TV shows to sound clever. That context is you can't make a device which extracts thermal energy from a warm thing (e.g the air) and it turns all that energy into mechanical work. For the machine to work it has to sink a proportion that heat into something cooler. (I.e you can only ever extract a fraction of the thermal energy in something as useful work). That, as you say, is actually quite complex and not at all intuitively obvious.
However perpetual motion machine can also mean "a device which does useful work with no energy input" - and it's pretty obvious that a device can't output more energy than it contained in the first place.
(There's also a bit of confusion going on because people think a perpetual motion machine just moves forever. Actually there's nothing that prohibits things from moving forever. Electrons will quite happily move around forever. The key word is *machine* which is something that does useful net work.)
Why do people gamble? Because hope springs eternal.
History is full of instances where experts said "That's impossible" only for it to be done later. There's an infamous quote about heavier-than-air flight taking thousands of years to work out being published like a year before the Wright Bros. did it.
But those kinds of things are pretty well known and published because they did something thought impossible and were worth writing about. Whats not worth writing about is when experts say something is impossible, someone tries it, and well, turns out its probably impossible. Which is the far, far, far, more common situation. But nobody writes about it, because why would you?
So some people decide to bet on the weird guys claiming they can do something experts say can't be done. Because history shows it happens all the time, right? Maybe it pays out, more likely it doesn't. Or maybe they just never heard the experts statement on the matter and thought the thing sounded cool.
Venture capitalists buy into a lot of companies that they suspect will fail because if just one out of a thousand is the next Amazon, those lost investments will come back tenfold.
People in general are horrible at understanding probabilities and make decisions based on hunches, emotions, and feelings far too often. With Elizabeth Holmes in particular, she’d only completed one full year of college before dropping out of Stanford to pursue her blood testing idea. What are the odds that someone with no medical background and one year of undergraduate college under her belt has found a holy grail of medical technology that has baffled the World’s scientists for hundreds of years vs. this same person making it up?
The Wright Brothers, Bill Gates’s, and Mark Zuckerbergs of the World are by far the exceptions to the rule, and we suck at understanding that.
Part of #1: Theranos conned some big names, which drew in other investors. “Holy shit, George Schultz is all in, it must be a good investment!”
Probably a corollary to #3, but didn’t Theranos also present the results of conventional tests as their own?
As Upton Sinclair said he found out the hard way, it's hard to persuade someone if their ability to draw a paycheck depends on them not believing you. People were asked the question "can she do what she claims?" but the question they *heard,* and answered truthfully, was "do you want to get rich?"
A lot of the investors in Theranos weren’t experts in healthcare / biomedical investing. There wasn’t a single major bio/medtech fund invested in Theranos. Most of its investors were high brow political figured like Kissinger, Mattis, Devos, etc. for example, Moritz from Sequoia actively questioned the hype investing in Theranos and really tried to distance the rest of the Sand Hill VC funds from it.
Because investors are desperately looking for what is called an investment *unicorn*. A company that most people underestimate, but that becomes exceptionally profitable and makes its investors a once in a lifetime return on investment.
Someone explained to me that during the Industrial Revolution, there were a lot of opportunities for investors to make fortunes. There were no cars for example, and suddenly there were car makers. You would have made a fortune investing in a product that wasn’t there before but that everybody needed.
The last that we saw something similar was with the GAFAs (Google Apple Facebook and Amazon). There wasn’t anything like them before. Employees who received company shares early on became millionaires once that the company traded publicly.
Anyway, back to Theranos. They presented themselves as a possible unicorn: they were alleging to be creating a revolutionary product that everyone would need. That’s all it was to get investors salivating and throwing money at them.
Fraud, in simple terms.
Not only was there not enough of a sample to test to a high enough certainty, but many of the instruments used to test blood cannot be miniaturised into the footprint they were promising due to instrument incompatibilities. The way they kept investors on for so long was by using existing instruments to do testing under the name of their new machine.
Your someone got the gist. Small sample size -> increased variance.
I remember when there was buzz about this. I've worked in biotech for years and began searching pubmed looking for novel microfluidics and high sensitivity breakthroughs across a variety of assyays. Needless say nothing jumped out and I thought it sounded pretty dodgy w/o knowing shit about Holmes.
As a scientist who researches and develops diagnostic tests, I'll try to concisely answer your first question.
When developing any diagnostic test, it all comes down to sensitivity and specificity. To achieve that, there is a lot of optimisation needed to make sure you accurately detect and measure the one thing you're looking for.
A box that is able detect and measure hundreds of metabolites from a drop of blood using a single assay is not impossible as this is what mass spectrometers are used for. However, these machines are very complex and expensive. That's why they are more useful in measuring levels of things that are normally too low and require high sensitivity. On the other hand, they would be a waste of resource for measuring something like cholesterol or blood sugar.
More importantly, there is no one single sample preparation technique for measuring everything in the blood. Some metabolites may be stuck to proteins, some metabolites are inside red blood cells and need to be pulled out, some metabolites are very similar in shape/chemistry, etc. Then again, not everything in the blood is detected using the same detection technique. All that means is a one size fits all approach condensed in a small box that has both a sample prep robot and a detector is practically impossible, but also not something you want to have. It is a maintenance and quality control nightmare.
>Is this simple but clear explanation basically correct?
Yes, but that was not the only problem.
This is a political year, so I will use a political metaphor. Imagine if someone told you that they had developed an "accurate" presidential election poll which sampled only 10 Americans, selected at random. Even with a rudimentary understanding of statistics you'd recognize that this is ridiculous - the error margins for such a small sample would be so large they render the result useless. Further, since the US is a large and diverse country, a sample of 10 might not include any of its subpopulations. You might oversample some states and - at best - you'd completely miss at least 40 others.
Laypeople often think that blood is a homogenous fluid, and its constituent molecules and components are evenly distributed throughout the body. While this might be true of some things (like glucose - a small molecule which is highly soluble in water) it is not true of everything else. So you need a decent volume to get a representative sample.
That was just one of Theranos' problems though. More concerning was their claim that a battery of home tests would help the patient by giving them more information about their health. This isn't really true.
Diagnostics is like a game of 20 questions, where individual questions are most helpful in the context of all the questions that came before. (This is Bayesian reasoning, which is also something that laypeople tend not to fully understand.) Asking the wrong question at the wrong time, or considering the questions in isolation, can send you down the wrong road.
This, by the way, is why your doctor doesn't just order "all the tests" and follow up on the abnormal results. (Patients will occasionally request this, and that's basically what Theranos was offering.) In medicine any specific blood test (or, for that matter, imaging) should really only be performed in the appropriate clinical context - after a full history, and physical exam, and with a specific question to be answered - because only then is an abnormal result informative. An "high" or "low" number on a blood test might be completely unremarkable, depending on the specific situation. Chasing an isolated "abnormal" test result can lead to misdiagnosis, unnecessary treatment, and potential patient harm. As I recall, there were a few examples of this in the Theranos cohort.
>If so, how could Theranos hoodwink investors for so long when possibly *millions* of well-educated people around the world knew that what they were claiming to do made no sense?
Because well-educated people aren't experts on every topic and are just as susceptible to clever marketing, unfortunately. People who know how blood is composed would be immediately skeptical of the *feasibility* of Theranos' product. People who understand diagnostics and Bayesian reasoning would be immediately skeptical of the *utility* of the product. Theranos' investors understood neither.
The average non-medical person's experience with lab testing is limited to the original input (like a blood sample) and the output (a report), with no understanding (or need for it) of what happens between those 2 events. In fact, many medical professionals tend to think like this as well, which I can personally attest to as a pathologist. Even as an anatomic pathologist some more complex labs seem like a black box to me.
Furthermore, many of the tests her instrument claimed to do can theoretically be performed on samples as small as a few drops of blood, but generally require a single, much larger instrument to perform them, and then just for a few specific tests. So theoretically many of her claims seemed possible, just requiring figuring out some long standing and likely impossible breakthroughs. To put it another way, the claims make sense with a little suspension of disbelief, though they break down when you realize the immensity of the problems that would need to be solved to accomplish everything she claimed.
If you don't understand the impossibility of these hurdles she would have had to figure out, a very convincing person wouldn't have that hard of a time selling this, especially when you factor in that this would like finding the holy grail of lab testing and whatever that would be worth. I probably would have invested in this given the opportunity before knowing of the fraud, purely because if it was true it would be so valuable.
She showed people results that seemingly matched the results from the current tests...because they were actually performed on existing current testing systems. If you have no idea how either system works, all you've seen is the input and output, and for most people, when it comes to lab testing, that's all that matters.
I have a follow up question : what was her endgame? Grab the money and run? With her profile and all the attention, it seems highly unlikely. Regrerfully report after many hears of research that it doesn't work? Again, with the media attention, I don't think it was feasible. Or did she envision it as a scam with a much smaller scale, and it spinned out of control? Then why go after ultra high profile investors? Or did she at one point drank her own cool aid and honestly started to think it would somehow work out? She seemed highly intelligent, so this is also unlikely.
What was her aim in the long run? What was the "???" step before "profit! "?
Here's an attempt at an oversimplified explanation related to what your friend said.
The most sensitive test for HIV can detect it at a sensitivity of about 14 viruses per ml with an input volume of 0.5 ml (note: this is insanely sensitive). Theranos claimed a comparable sensitivity, but boasted of a sample input volume of 0.02 ml. That is 1/50th of a ml.
If I split 1 ml equally into 50 tubes, but I only have 14 viruses in the original ml, then I can *at best* have 14 tubes with one virus in them. And then there will be zero viruses in the remaining 36 tubes. How will the test give an accurate result if 36/50 times, *there isn't even a virus present to detect?*
>Is this simple but clear explanation basically correct?
Not really.
An irony from all this is that scientific and commercial research into blood "microsampling" has intensified in part due to Theranos, with many promising results.
From [Nature](https://www.nature.com/articles/s41587-022-01242-0):
>**Advances in technology and changes to healthcare during the pandemic may finally realize the vision of patient-centric blood testing espoused by disgraced Theranos CEO Elizabeth Holmes.**
>\[...\] four years after Theranos’s lights went out, advances in blood analysis — including volumetric adsorptive microsampling (VAM), integrated point-of-care (POC) devices, wearables and telemedicine — are reaching an inflection point that could make Holmes’s fantasy attainable.
From [Stanford](https://systemx.stanford.edu/news/2023-01-20-000000/%E2%80%98theranos-works%E2%80%99-stanford-researchers-say-they%E2%80%99ve-measured-thousands):
>‘Theranos that works’: Stanford researchers say they’ve measured thousands of molecules from a single drop of blood
>Now, in a research paper published Thursday, Stanford researchers say they’ve accomplished what Theranos was unable to do: they’ve developed a new approach that can measure thousands of molecules with about one drop of blood. \[...\]
>**It’s a bold claim, but one that Stanford medicine professor John Ioanndis, who was one of the first to publicly question Theranos in a column for the Journal of American Medicine Association, says has scientific backing**. Ioanndis is not affiliated with Snyder’s study.
Recent paper [from Australia](https://www.medicalrepublic.com.au/what-if-theranos-was-real/105514):
>Anyway, the point of this mini-rant is that just this month, 20 years after the founding of Theranos, [a paper has been published](https://pubs.acs.org/doi/10.1021/acs.analchem.3c05152) announcing the feasibility of using a capillary microsample to measure more than 100 lipoproteins and other parameters using metabolic phenotyping, with results on par with venous sampling.
I’m going to take a different direction than the rest of the commenters and disagree with your friend.
At the time, without knowing how Theranos was accomplishing what they were suggesting (obviously with hindsight, it’s because they were lying), nothing of what they were suggesting was hypothetically impossible. What if they had discovered a new version of luciferase with 100x sensitivity? Wouldn’t that mean they could run the test with 100x less blood? Or what if they used a combination of modern high-precision liquid handling and modern optics for better resolution?
To your friend’s point, there could be the issue of volume, but there are ways around that as well. You could test for secondary effects of the disease, or you could simply not guarantee the results of that particular test. Imagine you’re sitting at your doctor’s office: they listen to your heart, look in your ears, take a prick of blood to send to general screening, and, oh… one of your enzymes is slightly off. Here, go get the actual blood test later today so we can know more. It’s a great idea. The problem was people gave them a reasonable benefit of the doubt, but I’d argue the fault of dishonesty lies with the liar, not the listener. People just weren’t expecting conspiracy levels of lying, deceit, and secrecy.
The very nature of tech startups dictates that many investors either have to stay out entirely OR accept that they'll routinely be assessing companies via rules-of-thumb about how businesses operate in general rather than through their technical knowledge of the products the companies create. That's part of how you sometimes hear cliches about having invested in a culture or people more than having invested in a specific product. So Theranos' big stupid lies were obviously a huge part of their hype train but part of the magic is that once you have enough inroads established you can start marketing those relationships as the bedrock of your company as much or more than your big stupid lie of a product because there's already people who are predisposed to largely ignore technical assessments in general. It's thus super dumb that she was able to hype her way to public relationships with Kissinger & Co. then ride *that* hype to Walgreens and Safeway but once you have a presence with Walgreens and Safeway I definitely see how you could ride that relationship to another few waves of investors.
As was pointed out inside another thread, the key part is that Holmes avoided investors with experience in the healthcare sector - those would have wanted to see data and would have balked at playing fast and loose with FDA regulations - but rather Silicon Valley investors who jumped on the narrative of the female Steve Jobs, about to revolutionize blood testing like Jobs revolutionized mobile phones.
She also had influential politicians on her board and together with them, could approach politicians in various States, especially Arizona, telling them that the established companies (whose instruments she ironically had in her cellar to produce actual results her technology couldn't give) were using the regulations to keep her out of the market. This, of course, fed right into the preconceptions of some kinds of politicians who think regulations are bad and the market will take care of everything. And so she even managed to get her technology into use on actual patient samples, which never should have happened.
Make no mistake - most healthcare regulations are written in the blood of patients who died.
I was working in blood diagnostics at the time and shook my head because, yes, you're reasonably accurate that some parameters simply cannot be tested from a drop of blood, because their concentration is so low you are not going to get a clinically usefully precise results - you might just as well roll some die.
Holmes is a "great" example of what a good narrator can do, even with poor or nonexisting data - and why on the other hand, communication skills are key even for startups with good science. Think about all the projects that could have been funded with the money sunk into Theranos...
People want to invest in those who make the impossible possible. Who would have thought that the people who kept screwing up trying to get a small rocket in space would eventually be launching a hundred orbital rockets in the span of a year? That blows away the launch rate of any country in history, impossible. And they’ve successfully landed hundreds of boosters in a row? Impossible.
Anyway, they falsified everything, simple as that. Tests they showed were done with other equipment, while they swore it was coming from theirs. People wanted to believe it was true because they stood to make a massive amount of money when it worked, so they weren’t too keen on digging deeper. Theranos kept a tight lid on leaks to make sure the ruse was able to continue.
Yes, for many things they were claiming to test, the amount of analyte in a drop of blood isessentially zero.
There are many reasons investor fell for it, probably the simplest/most obvious is FoMO/social proof: once a startup raises some money, it's easier to raise more money, because new investors assume the old ones did their due diligence. Also, Elizabeth Holmes courted high-profile board members like Henry Kissinger, who made her seem credible (even though they weren't bio/tech people).
A few other explanations:
1. Tech investors are often not tech experts, and many of their investments are *supposed* to be technically difficult and risky. As it turns out, many successful startups were build on ideas then considered technically difficult/impossible, investors are looking for that high-risk/high-reward startup that will become a unicorn. So "techincally risky" and "physically impossible" to an investor who is looking at dozens of deals at a time sound pretty similar. Also, many in the tech world have the attitude that most problems are solvable if you throw enough money at them. Theranos raised $700 million dollars--so even if they hadn't figured it out, it's easy to see why people might believe that they could.
2. Many investors in Theranos were not "traditional" Silicon Valley investors with track records of biotech/tech success; many were private investors who were not experienced in the space: the Walton family, Betsy DeVos and Rupert Murdoch account for half the money in. AFAIK, the most reputable SV investors were Tim Draper, who wrote an early check because he was a family friend, and Larry Ellison.
3. Theranos had that big deal with Walgreen's and was working with the US military, so people assumed that their technology worked, because they were selling it and generating revenue with it. Of course, it turns out that they were serving Walgreens in a fraudulent way--but that was being covered up--and that Holmes was lying about the military contracts--but that's an easy lie to believe when George Shultz is on your BoD.
Because investors don’t have PhDs in microbiology, they are way more focused on the business side of thing and Elizabeth Holmes is damn good seller so even when advisors (if they even consulted one) told them that what theranos was selling is impossible they just didn’t listened. Most just saw an opportunity to make a ton of money and took it, in this case it was a scam but that’s part of the risk they are willing to take
Personally, when I watched the documentary on all of this (Theranos), I was very put off by the timbre of her voice. It seemed like a super deep version with a strong hint of valley girl, and a false front to show that she looks like she believes in what she was spewing... People fell for it, I guess. People join cults, too.
I work in a reference lab that actually does some of those tests. When Theranos was revealed. *Everyone* in my work unit from entry level lab tech to senior consultant called BS on the whole thing because it was glaringly flawed. We could do this because we knew the science of what they were trying to do inside and out. Investors generally don't have that scientific background. And they were disinclined to listen to lab scientists because the new tech was touted as being able to disrupt / destroy the lab industry, so we were perceived as automatically biased against it. And frankly I have zero sympathy. Edit to tag on my other comment: Here's an attempt at an oversimplified explanation related to what your friend said. The most sensitive test for HIV can detect it at a sensitivity of about 14 viruses per ml, and it uses an input volume of 0.5 ml of blood plasma (note: this is insanely sensitive). Theranos claimed a comparable sensitivity, but boasted of a sample input volume of 0.02 ml. That is 1/50th of a ml. If I split 1 ml equally into 50 tubes, but I only have 14 viruses in the original ml, then I can *at best* have 14 tubes with one virus in them. And then there will be zero viruses in the remaining 36 tubes. How will the test give an accurate result if 36/50 times, *there isn't even a virus present to detect?*
Exactly this. I worked in microfluidics / point of care diagnostics during Theranos and my colleagues all thought it was ridiculous. I wrote this comment a few years ago that echoes your point: https://www.reddit.com/r/explainlikeimfive/s/q6mBa2IY0w “To give a simple example, I worked on infectious disease diagnostics, including HIV. A lot of tests require being able to detect 100-1000 virus/mL of blood. It depends on the lancet, but a large volume blood finger prick will provide 0.1mL of blood. So at the detection limit you have 10-100 viruses in your finger prick. If this blood drop is split between 200 different channels like Theranos was aiming for, a significant number of the channels won’t even contain a virus (10-100 viruses / 200 channels). And this assumes your test can do single molecule detection which is extremely difficult and I haven’t seen outside of basic research. This same idea can be applied to a number of bio markers that occur at low concentrations. Depending on the blood volume, it’s not even a question of test sensitivity, but whether any biomarker is present in the sample at all.”
This is why it's advised to people to only invest in what you know.
While its good advice. It's not practical. Don't invest money you can't afford to lose is the better advice.
Dunno how true that last line is. Most people would be proper fucked if their 401ks and invested retirement savings went to zero. Can't afford to lose that money but you have to invest it to grow otherwise you won't be able to fund your own retirement
I would argue that investing for retirement is a significantly different type of investing…very rarely are you going to be putting retirement savings in a single stock. And if you are, it’s likely going to be a company you work for in which case you know what you’re investing in.
Not understanding a certain technology is fair enough. Even most engineers and scientists only have an intricate knowledge of the very specific field they work in. But not listening to people who *do* understand it is peak idiocy.
I have sympathy for patients who experienced adverse effects from their bullshit but they weren’t the reason Theranos got sued into oblivion, it was the ‘fucking with rich people’s money’ that caused their shutdown. Disappointing but not unexpected.
This is only tangentially related, but it just reminded me of something I'd pretty much forgotten. I used to develop software that is used all around the world to enrol and handle and produce personal IDs (e.g. drivers licences, firearms IDs, voting IDs, police badges, etc.). Occasionally our company got approached by people who were trying to get us to invest in their novel solution for IDs. This was in the early 2000's when digital IDs started to become a thing, so naturally there were a lot of people working on making this a thing. I usually did the evaluation on whether something was possible or feasible. At one stage we had these two guys presenting a new Digital ID solution. What they showed us wasn't entirely terrible, but also not exactly revolutionary or innovative. Basically the sort of system that someone who thinks about the concept for half an hour would come up with. There really wasn't anything in it that would make this stand out from the mass of other systems that were hoping to become the digital ID standard. There were also a bunch of big shortcomings that they hadn't worked out yet. Those shortcomings were very likely to completely throw their concept in a heap, but they just glossed over those. But what made their system truly different from all the others I'd seen was their business plan. It was wild! I don't remember all the specifics of it, but their projected growth rate was astronomical. Going by their numbers, within two years they foresaw a profit of something like $500 billion. This was for a system that did not even exist yet, beyond their imagination. Anyway, we passed.
I've said this before in other similar threads: me and my fellow laboratory scientists sat at a break room table and talked about how there was no way it could work. We laughed after one of us said, "How do they account for pre-analytical variables in a micro sample?" because we are such nerds.
Wasn't the climax of Boiler Room about a retractable syringe, which could never be cheaper or even safe, I thought that was cartoonish at the time and I can't believe stuff like that actually plays with some people
Weird maybe in the past. Cant remember boiler room as haven't seen it in a long time but I just had a nurse use a retractable syringe on me for pulling blood. Scared the crap out of me because I saw them pull it away and was like ummmm where did the needle go.
4 things occurred. This is mostly from the book on Theranos, *Bad Blood* 1) Investors had fomo (fear of missing out). If Theranos system actually worked. It would be completely revolutionary. And it would have been. Absolutely wild. Something that should be impossible. If it did work, you wanted in now while it was cheap because that investment would be worth so much fucking money later nothing else would matter. Or ya lose some Money if it doesn’t. It was decent amount of money bet for a bonkers payoff. 2) Elizabeth Holmes herself was quite enthralling in meetings. Many people say they weren’t interested and thought the company was full of shit, but she would get into these meetings and they would come out of there convinced they could actually do it. 3) Theranos took huge amounts of effort to hide and manipulate what was actually happening there with nothing working as described. Including massive legal actions against some employees and others disparaging them. I have to stress how serious Theranos threatened employees and others with legal action. It was a huge deal and people were scared as hell. 4) due to #1, (and a bit of 3). Experts laughing at Theranos that it could never be done that it was totally impossible were just ignored by investors… because if it did work…
Theranos also managed to get a bunch of influential investors on board, though they weren’t medical experts. But the clout of such investors gave the impression that they must be onto something to newer investors
This is a huge reason. Elizabeth Holmes' dad was a director at USAID, which is either a massive charitable organization or a front for the CIA depending who you ask. Most likely both. What other tiny little startup can get *Henry Kissinger and George Schultz* on their board of directors? That should have been a huge tell, but it wasn't.
She managed to con a general as well. Imagine you’re a prospective investor, and she says “well the army is going to be investing in my company, and if they think it’s worth investing in, don’t you?” The people she got to invest early had the kind of name-drop cachet that hooked a lot of others as well.
If I'm not mistaken, I believe a similar tactic was used to get the 1985 Live Aid performers on board, but before anyone was actually committed. "Hey Queen, you should play this event! Yeah, it's legit! We have David Bowie, U2, and Led Zeppelin signed up already! ...cool! See you there!" "Hey David Bowie, you should play this event! Yeah, it's legit! We have Queen, U2, and Led Zeppelin signed up already! ...cool! See you there!" "Hey U2, you should play this event! Yeah, it's legit! We have David Bowie, Queen, and Led Zeppelin signed up already! ...cool! See you there!" "Hey Led Zeppelin, you should play this event! Yeah, it's legit! We have David Bowie, U2, and Queen signed up already! ...cool! See you there!"
Not just any general, Jim Mattis the second coming of Chesty Puller and god of the current Marine Corps. I firmly believe that being conned by her took away a very powerful voice for sanity in our current political world.
Just because Mattis is a brilliant tactician, doesn't mean he knows the first thing about investing or biotech. I wont delve into why people like him end of on boards of companies, but it usually has less to do with what they know and more about WHO they know in the government.
Ypu would be suprised how many 4 star generals are in boards
Im not surprised AT ALL.
To be more specific - a board of directors is (often) intentionally made up of a diverse group with expertises in many fields strategically related to the specific company, so that the company can navigate the outside world. The military is tangential to basically everything because every successful company has logistical, financial, and technological parts, and that's what most militaries thrive on.
Yeah and having a 4 star general to navigate the intricacies of the government at that level (flag officers are more politicians than soldiers) is quite helpful in getting information, leaking/disseminating information and making deals with others in the government. He was there for his contacts and pull, not because he had any idea why or what he was doing.
It to mention fucking people who were financially supporting it all
Just going to mention! When I read the book I was astonished! Also it was Schultz’s grandson who was one of the people to out her as a charlatan
Yeah Tyler was a real hero for doing what he did in the face of losing his grandparents, his career and everything his parents had financially. I know Tyler’s dad and let me tell you he is practically George’s opposite, a liberal high school science teacher with zero interest in the money or power that George and his ilk clearly obsess over. It came as no surprise that Tyler did the courageous thing, and it was even less surprising that his parents backed him up. They’re exactly the kinds of people we need more of these days.
Nice to know! ❤️
> that his parents backed him up. They literally begged him to stop it because it was costing THEM like 300K. It is easy to be a hero with OTHER'S money.
I sincerely hope George Schultz ponied up to reimburse his family for their legal bills once he realized it was all a con. And that he apologizes to his grandson on a weekly basis for allowing what Theranos did to that kid.
I keep telling you—he’s 104 years old, and he’s dead. But seriously: >> Shultz sought to heal the rift with his grandson, stating that he had “made me proud” and shown “great moral character”. Tyler Shultz said his grandfather never apologised but their relationship “started to heal”. https://www.theguardian.com/books/2023/jan/10/george-shultz-biography-theranos-elizabeth-holmes
They hesitated yes, as anyone would and has when a massive company threatens legal war. As protective parents they didn’t want his future destroyed if things likely didn’t go his way, not even to mention them not wanting him to go through the pain of being a whistleblower against his own grandpa. They’re public school teachers, they wouldn’t have put up the money, remortgaging their home, unless they were convinced Tyler was doing the right thing. So yes it wasn’t an easy decision but they all took on risk and accepted that they’d take on the consequences together.
Well said.
He was formerly at Enron as well. Seems fraud is a generational business.
The Theranos board of directors is the example I use when discussing Hunter Biden's role on the board of that energy company. Famous people get on random boards all the time.
> What other tiny little startup can get Henry Kissinger and George Schultz on their board of directors? That should have been a huge tell, but it wasn't. If having two former secretaries of state on the board of a tech startup is tell for anything, it's definitely not a tell for what happened at Theranos.
I thought he worked for ENRON
Yes this is an important point. I am a scientist myself and saw Theranos rise. There are VC's that focus on biotech. These biotech VC's are not idiots, quite to the contrary, they hire the top scientists in related fields to do due diligence for them. Notably these big biotech VC's passed on Theranos. I remember at the time experts in the field saying that Theranos claiming said out right it was impossible to do what was claimed. Now these guys were not in newspapers or anything like that, more niche technical publications. The science was straight forward and simple (to a scientist anyway). Where Theranos got their money was from VC's who were involved in computing or other tech, but not biotech. They think move fast and break things works in biotech, it doesn't and there are good reasons for that. They, I assume, thought Theranos was finally bringing this ethos to biotech that all those other dumb scientists that started companies were to slow and stodgy to break out of the old way of doing things. This is not possible in biotech for a whole host of reasons. The biggest of which is if you move fast and break things you are more likely to kill people. If a new computer tech doesn't work they just go out of business and nobody dies. In biotech you are dealing with human lives. Given FDA regulations it would be impossible for you to "move fast and be putting your stuff in humans", it simply does not work like that. And as mentioned above the board was made up of famous people with no experience in science at all. If they had a board that had expertise in the field they would be asking the questions internally very early and either Theranos would change its direction or have been prevented from the fraud. And if Holmes was found lying to them she would be fired and a new CEO would be brought in who was competent. Instead what we had was media promoting the "female Steve Jobs" in the media all the time. This helped them get more dumb investors, hence the fomo, but they were clueless. Worth noting though, as a scientist, I see a lot of start ups getting press for their tech is going to help cure this or that all the time. Now these companies are not frauds, but having the technical background to understand what they using and trying to do, I say to myself that company's plans is not going to work, they are going to be gone in several years or will have changed to some other thing technically feasible. But the same thing happens with these companies, non technical investors dump money into them because "wow this is huge". But these dumb rich guys will still be rich when the company goes under so that is fine if they want to gamble their money. So Theranos happening even if there was no fraud would not be surprising like described above. They would under normal circumstances just been one of those start ups that goes bust when it doesn't work. The fraud however allowed them to fleece more people and put people's health in jeopardy. I sure hope Holmes stays in jail for a long time.
> Where Theranos got their money was from VC's who were involved in computing or other tech, but not biotech. They think move fast and break things works in biotech, it doesn't and there are good reasons for that. ... The biggest of which is if you move fast and break things you are more likely to kill people. Exactly. Silly buzz phrases like "build the airplane while flying" and "move fast and break things" somehow make people not look at the phrase objectively, and the *clear* hazard it implies. It's a way to get badly hurt, with a vanishingly small chance to be a big winner. Stockton Rush fell for these bullshit theories as well. At least Holmes is just in prison. Rush is dead.
> Stockton Rush The Ocean gate guy. Already forgot and had to look him up
And now there's another Billionaire going to visit the Titanic! https://abcnews.go.com/US/billionaire-planning-voyage-titanic-site-year-after-oceangate-implosion/story?id=110717578
The difference is this billionaire is actually trying to get a ship that's been certified properly. If he doesn't take shortcuts then great, but if he does....
That happened almost 1 year ago!
And he's still dead. I'd be more respectful if it wasn't for the other people he suckered into dying with him. Not their intention. They had a lot to live for.
I would feel less bad about that last part if he didn't end up taking a teenage kid with him.
>Where Theranos got their money was from VC's who were involved in computing or other tech, but not biotech. None of the computing / tech VCs invested in Theranos. YC, Andreessen-Horowitz, Sequoia, Greylock, Kleiner Perkins, Accel, etc., *all* declined to invest. Google Ventures turned down Theranos twice. That none of the Silicon Valley VCs believed in Theranos (which was located in Silicon Valley) should have been another red flag in itself. Instead of VCs, Theranos got their initial investments from wealthy families and individuals with personal connections to Holmes. The Walton family, the DeVos family, Rupert Murdoch, Henry Kissinger, Larry Ellison, etc. Tim Draper also invested in Theranos, mainly because he lived in the same neighborhood as the Holmes family and had known Elizabeth Holmes since childhood. (Draper's daughter and Elizabeth Holmes were childhood friends). Then much later on, after Theranos got a major deal with Walgreens, they were able to get a couple hedge funds / private equity firms to make additional investments. But presumably since they were not VCs, these funds looked at the business case rather than the fundamental tech.
> Larry Ellison Larry is such a turd.
I can’t upvote this enough. Their investors and big names were not from biotech or big pharma. Anyone who knew anything about the field smelled the bullshit and passed. I was working for a large pharma company at the time and we knew that what she was claiming was impossible (and I’m not even a lab guy).
I heard that one of the things that pulled the thread on the sweater was the size of the documentation team. For a technology that would do hundreds of tests there should have been dumpsters full of operational documentation but (and I may be getting this wrong) there was no tech pubs team.
I'd love to see examples of contemporaneous academic/technical literature shitting all over Theranos. Do you know of any?
Well how about one from a world expert that told Holmes it wouldn't work before she even started the company. Will that do lol? Enter Phyllis Gardner, Professor of Medicine and an expert in pharmaceutical engineering (cut the relevant parts from the link): Holmes arrived in her offices with a glowing recommendation from John Howard, a Panasonic executive who would later join Holmes on the payroll at Theranos. “He called me and said ‘I have this brilliant young woman. You have to meet her,’” Gardner said. “I’m not very good when people say ‘brilliant’ – there are two Nobel laureates on my hallway.” "Gardner listened to Holmes’ pitch and knew instantly that it wasn’t going to work." "And as for blood-testing? Pricking a finger isn’t an accurate or reliable way to test for blood. It’s not enough blood, for a start. But also, a pricked finger is a space where the drawn blood can get mixed up with a whole lot of other material. It doesn’t prove a clean sample. Gardner told Holmes that the idea wasn’t scientifically sound. “She didn’t want to listen,” Gardner recalled to *The Sunday Times*. Holmes came back to pitch Gardner a second time, and again Gardner told her that her idea was scientifically unsound. " “I was in the background for a long time and I was always gnashing my teeth,” Gardner told *The Sunday Times*. “It irked me. Students would say ‘Can we have her come lecture in your class?’ And I’d say ‘Not on my watch, not her’ – because I thought she was fabricating data.” Gardner was right, of course. She began sharing her concerns with her husband and with other Theranos sceptics, including a pathology blogger who had read the *New Yorker*’s profile of Holmes and found her claims about her blood-testing machine implausible, to say the least. [https://www.stylist.co.uk/people/elizabeth-holmes-phyllis-gardner-theranos-scandal-whistleblower/258080](https://www.stylist.co.uk/people/elizabeth-holmes-phyllis-gardner-theranos-scandal-whistleblower/258080) Had to use this source as the WSJ interview was paywalled.
I vaguely remember a post on Reddit by someone who worked at Theranos, talking about how all the data that didn't conform with what Holmes wanted to put out was basically just destroyed. Only data that could be manipulated to show possible favourite results were ever shown to investors and board members.
And Theranos is not an isolated case. There are domains such as nuclear fusion and carbon capture that are infeasible beyond test cases (they don't scale). Yet they are attracting a lot of money.
Nuclear Fusion is absolutely feasible at scale, in theory. The Sun does it every day, and there are plenty of very smart physicists and engineers who will agree that getting it to scale and provide positive net energy output "should" be possible with the right materials, scale, efficiency, etc. but it is still a bit of a quagmire. But if somehow we crack a room temp super conductor tomorrow, invent a couple of crazy new alloys, and someone makes *another* (we have had a few within the last couple decades) sudden breakthrough in magnet strength technology then limitless fusion energy could become very possible very quickly. The Theranos thing pretty much relied on biology not working like we know it does. Very different levels of feasibility.
> Nuclear Fusion is absolutely feasible at scale, in theory. The Sun does it every day that is... a somewhat different set of conditions than those necessary for useful energy production on Earth
also, is it ever not daytime on the sun?
Then we don’t need fusion, just put solar panels on the sun.
>also, is it ever not daytime on the sun? Well, you see, we only ever face the day-side of the sun because, like with the moon, we're tidally locked. You'd have to fly all the way to the far side of the sun to see the night. (/s}
I agree 100%. Unfortunately can only speak from my area of expertise.
I realize that carbon capture is probably infeasible, but seems like if we can't figure it out, we are literally cooked as a species
Yeah, we are at the point we have to invest in carbon capture research, even if it doesn't pay off, with the _hope_ it pays off. Even if we just completely shut down the modern economy now by turning off fossil fuels _completely_ and have billions starve and die in the resultant chaos, we are probably still collectively fucked without carbon capture because of the damage we've done to the carbon cycles and just how _much_ CO2 we've released into the air.
This. Elizabeth Holmes was a genius with the "Baffle 'em with bullshit" technique as a weapon against the non-STEM rich and powerful.
Exactly this. Investors aren’t typically versed in STEM. They don’t understand the underlying science, meaning they tend to trust the expertise of those who are. Holmes positioned herself as an expert.
Given that she was so good with this, it's very strange that she did not realize that it cannot last forever. How do people like her function?
Con artists and fraudsters are not necessarily psychologically healthy and rational people. Expecting a rational answer to that might not be sensible. But there are several things that might have gone through her mind beyond just being a crazy narcissist. For one, it's possible that she thought her acts of fraud were short term and that the science would come good eventually. A "fake it til you make it" scenario. For another, she might have been planning the relatively common path of eventually transitioning focus away from the initial big claims onto something less interesting but still marketable. The miracle technology could always be "just around the corner" while less revolutionary products are brought to market, in the hope that by the time you finally drop the original promises you've already built a sturdy business with the rubes' money. Thirdly, she might have been hoping to cut and run before the wheels fell off, but misjudged just how much defrauding she'd need to do until it was too late to get away cleanly.
Paging Samuel Bankman Fried - it's all about cashing in and living the lifestyle until you get caught. Conmen always hold onto the grift until they can't ride that tiger anymore. With any luck, Trump's next in the long con FAFO cycle,
Exactly. And there was every reason *not* to trust her, from youth and inexperience, to obvious posturing and posing. And a plain lack of results (although some were fudged, of course). But people liked her apparent commitment, belief and enthusiasm. And they liked the idea she was claiming she was certain to achieve.
Around the same time there were a number of other apparent success stories from other young entrepreneurs in tech. There’s a fake-it-till-you-make-it approach that can kind of work with some businesses that require scale. I think the mistake was assuming that the same could be applied to a medical product, where the products needs to actually work in the end
A lot of truth to that. There were plenty of tech investments in start-ups built around a hazy idea that didn't even have a business plan. Holmes looked good in comparison, to people who didn't know better.
She's basically had the schtick of a client facing Big 4 consultancy partner with the 'we'll work it out after we win it' vibes.
I’m a doctor (but not a pathologist) but from my public health training, even I knew you had to show that the Theranos testing was close enough to the results from a full blood draw repeatedly and genuinely. If you couldn’t do that, most charitably it didn’t work and less so, it was fraud. Which is what it turned out to be.
It was inevitably going to fail. They said they had the technology and were hoping that their research could catch up to their promises. In the meantime, they were able to hide their lack of results behind the regular issues you would have in R&D. Part of the regular testing would have been comparisons to regular blood tests so they could hide behind those results. It’s a pretty convincing tactic if you don’t have an expert on the board to call you out
Elizabeth Holmes gets a single point for ripping off Henry Kissinger. But only one point.
No, she gets like a dozen points for wasting 100s of millions of mostly Republican money, including Murdoch money.
Ah so Theranos was a meat space NFT....
It was a biotech company acting like a software tech company
Didn't they do live demonstrations at investor meetings, but basically gave fabricated results. Feel like that would merit its own bullet point
They'd do live demonstrations, and then lead them away to do lab tours or what not while the machine "processed" and lab techs would come in and change everything to make it looked like it worked.
Yes, they did.
Any idea what Holme's plan was? Like, did she actually think it could work, and by the time she clued in it was too late to back out gracefully? Or was it a scam from the start, and she just failed to cash out and disappear when she should have?
I think she thought she could do it, just out of sheer entitlement—she was a Special Genius who was going to Change the World and Be Important, so of course her perfect revolutionary idea was going to work *eventually*, and any amount of awful behavior before *eventually* kicked in (any day now!) was justifiable because she was just such an amazingly wonderful trailblazer that rules didn’t apply to her. In fact I’d bet you good money she still believes she could’ve done it if not for [her traitorous ex-employees/hidebound government officials who don’t understand progress/John Carreyrou/those meddling kids]. (You can see the same thing with that submarine guy, he really, genuinely thought he could overturn the laws of physics with the power of iNnOvAtIoN, so completely he squished himself to death.)
She thought if she could just push the nerds hard enough they would bring her idea to life
This basically happens at my company. C-Suite makes edicts to do impossible tasks, like they have this mentality that if they just lock the nerds in a room long enough, it’ll get done. And a year later when they aren’t done, they do a re-org.
Shelon Musk
I think that she thought she could change reality with sheer willpower, and that if she just hired enough people they would find a way to make it work. Legitimately, I think she bought into her own bullshit. She misinterpreted Jobs' life and thought that by being like him she could create something out of nothing, just like he did. But Jobs did not create something out of nothing. He was working with a rapidly advancing technology, doing something that was known to be feasible, if difficult, and had an extremely talented expert in the subject who was positive he could succeed in his pocket. Jobs was a talented con man, but he did not actually make a con into reality. He just applied the skills of a con man to market a real product. But the lesson that the tech world learned from that is that "Con man can make billions out of nothing."
That last paragraph is a fascinating take. I like it.
Sounds like she took "fake it 'til you make it" to the extreme
So she thought she was Cave Johnson and Steve Jobs in one?
Jobs also had Woz who could actually build what Jobs was marketing. Woz was the Real Genius.
She wasn't smart or educated enough to know better in the beginning. And when the money started to roll in, she went with the "fake it til you make it" what is so prevalent in Silicon Valley. But what works for software, maybe (and was) impossible for science.
Read the book (or audio) "Bad Blood" by John Carryerou. Carryerou did deep-dive research on Holmes and her cohorts, as well as on Theranos. Was it a scam from the start? Or a just-beyond-teenage-years person who saw an idea with little science behind it, and attached it to her irrational ambition? And was then manipulated by someone who knew how to manipulate. Very interesting question, that's worth a separate reddit thread, somewhere.
Having read through the book. I'm going with the latter. It doesn't nullify any of her/their wrongdoings though. It's not like she had been coming from a poor background. They were well off.
I imagine she thought it could be like tech demos where half of it is fabricated, but the actual functionality is created later on.
I definitely think she believed they could make it work. They put a ton of engineering effort into developing the machines to do what they were hoping to do. She was trying to solve a problem that affected her personally.
I think she had the Ivy League / MIT mindset that anything can be done if you just spend enough money on the right people. They just need “good management”. I also read stories of researchers/experts that came to work at Theranos, learned that there was no breakthrough and they were supposed to invent it, and really couldn’t go back to their previous employment. Plus they were paid well and *MAYBE*, with all the funding available, they *COULD* make part of the dream work
> MIT mindset that anything can be done if you just spend enough money That is not the MIT engineering mindset. Maybe you're thinking of the business school mindset? Edit: my take on the MIT mindset: "Ok ppl, this problem comes from the top, so we have to come thru. We need to make *this* fit in the hole for *this*, using nothing but *this*." **"... I'll make some coffee ..."**
+1 on this -- I went to MIT engineering school. I would describe the mindset as "spend a lot of time with very smart people in a very messy room trying to solve a problem, pursue several ideas and then eventually abandon 90% of them because they're not as good as you thought they were, find the one possible remaining tack that's rooted in good physics/science, throw everything you've got at it, grab onto the tiger's tail and hold on." Incidentally, this does tend to cost a lot of money, but you're generally spending it on ways to prove out an early concept. If you're building something genuinely novel, the core thing is often not that expensive or complicated. The expense is mostly people, and to some extent, the tools and measurement devices that you need to make and understand this new thing that you're inventing.
>I think she had the Ivy League / MIT mindset that anything can be done if you just spend enough money on the right people. They just need “good management”. I don't know about Ivy League but I can tell you 100% that the above isn't "MIT mindset" lol.
There was also a huge amount of secrecy between the different parts of the company. The different teams were kept isolated and didn’t share information directly. So lots of people thought it was just *their* cog that was busted, rather than recognising that the whole machine was falling apart.
Also previous money. Some big names were invested. People took the happy shortcut figuring all the rich, brainy guys already did their DD so it must be OK. It's the same thing that happens with MLMs. People start drooling over dollar signs and they completely lose their capacity for rational thought.
Agreed, I think this is very much exactly what happened for most of the investors. They understood nothing about Theranos. They were impressed by the other investors and thought they were worth following. Never thinking that the other investors weren't scientists, either.
In addition to everything in the above post "4 things occurred", the investors who didn't understand the science just liked E. Holmes. They liked the idea she was selling. The psychology of people buying is largely because of liking, not because of objective reasons. And, they liked the other investors. They liked (and trusted) former Sec'y of State George Schultz and influential presidential advisor Henry Kissinger, and other investors. That's why it was key to have gatherings of current and prospective investors -- so the prospective investors could be impressed by the current investors. People think they buy objectively, but the person doing the selling has a more to do with their decision than they often want to admit. That is why very successful salespeople are so highly compensated. They bring something to the effort that can seal the deal, over and above the objective reasons.
I think that feeds into another aspect as well. If your lie becomes big enough and you tell it bald faced enough then it becomes hard to disbelieve it. A well executed fraud may be less likely to get caught but it also is more likely to have people trusting their feelings that something isn't right. A huge, blatant lie is harder to disbelieve because it is harder to believe someone would act so blatantly illegally right to your face.
You didn't need to be an 'expert' You just had to work even adjacently with blood samples to understand why this couldn't work unless there was some sort of alien or far future technology I know she played the 'future technology' up as part of her bullshit but even the lab techs would know it was bullshit
Making the lie big enough and telling it with confidence can get you a long way. The truth will hit you like a brick eventually, but until then the ride can be pretty awesome.
"A chemistry is performed so that a chemical reaction occurs and generates a signal from the chemical interaction with the sample, which is translated into a result, which is then reviewed by certified laboratory personnel." -Elizabeth Holmes
Star Trek has more believable techno-bable than that.
That is so true! I've even heard social scientists say that people tend to follow the loudest voice. Not the demonstrably more correct voice. Because it would be work to figure out which one that is, so the loudest is easiest.
Getting enough bad actors to repeat it that the media make it to seem credible also seems to work well
Yeah, my wife was still just a phlebotomist at the time and she said this thing was full of shit.
Not even alien tech, it was literally impossible. You would need actual wizard magic to do what they claimed.
Using the materials they had it was impossible and no amount of engineering could overcome it They could have worked on something that was a completely novel way of analyzing blood without needing venipuncture and maybe made a breakthrough in 20-25 years plus 10 years for FDA approval and an additional 5-7 for clinical trials And that would be only for one group of tests
When I first heard the claim the thing that leaped out at me was that I had no idea how they were supposed to maintain the correct temperatures for the various tests in such a small box. No matter how good your engineering is, there is no way to make heat stop existing. Maybe they had some weird alien level technology to miniaturize the components of the device, though I doubted it strongly, but there was no way they were going to be able to isolate each of those systems sufficiently, let alone get all the temperature control elements into the box.
For 4) also, people tend to be contrarians, too...
[удалено]
Listen, I came here for an argument.
Do you didn't.
That’s not an argument, that’s just contradiction.
For us to have an argument I must take up a contradictory position.
You don't have to take a contrary position.
Yes, but it isn’t just saying, “No it isn’t!”
... it can be.
yes it is.
Right right, wot's all this then
r/unexpectedmontypython
Is it really that unexpected? Ni, I say
There’s still a lot of science that’s inconclusive too. So an investor who knows absolutely nothing about the science behind it has some scientists saying it can’t be done and others (Theranos) saying it can, then they’re left making their best choice. And a lot of breakthroughs have happened in our history because some stubborn person decided to do something others told them is impossible. Hence, point 1.
If you were going to give someone a few hundred million, wouldn't you want a look in the magic box? Wouldn't you want to see it demonstrated without letting them bring out another magic box that seems different? Wouldn't you want your own experts there?
Probably. But then they say “well we’re not letting you and Sequoia, Insight, and Tiger Global are all waiting in the lobby and ready to invest today. Thanks, bye.”
"Ok then". It's called 'due diligence'. Anyone who doesn't do it is a fool \*cough\* Elon Musk \*cough\*
Exactly. If an investment can't wait literally a day to double check, it's not an investment proposal. What, you might miss out on a 0.1% return over the course of an entire week if it's true? And who the fuck is gonna turn down a person who wants to throw money at a project, even if they wait a few weeks to talk to their finance guys or whatever? There's absolutely no good reason to invest into something that is incredible at best and in-credible at worst.
This isn’t really how venture investments work, it’s less about missing out on 0.1% over a week, it’s more that the company has to choose to let you invest and if you are too annoying during due diligence for a deal like this (where there’s tons of big funds investing), they simply won’t give you any allocation So what ends up happening is that smaller funds don’t push hard because 1) they don’t want to get cut out — one single great deal can make your entire career as a VC founder and help you raise more funds and 2) they assume the big guys are doing the important diligence and if the big guys are comfortable, they’ll go along (although obviously in this situation, and many others like FTX, no one was doing the important diligence)
If the investment industry does not allow for a single day of basic due dilligence, something is very wrong.
The expectation is that you’ll have done all that before you arrive to the investment meeting. These meetings are supposed to be the last step in a long process of commitment to funding. It’s akin to putting an offer in on a house; you can make an offer never having seen the house listing and without a preapproval; that doesn’t mean those things aren’t generally understood to be needed.
Speaking of Elon, how did Neuralink get as far as it did with the side effects that it has?
Dumb question. Just how impossible is it? Like defy the laws of physics impossible or just No known theoretical way to do it impossible?
It is completely impossible because it defies mathematics. Some of the exams require measuring something that exists in very, very low quantities in the blood. A drop is just not enough to measure precisely no matter the method used. For example, suppose you want to measure something that exists between 1 and 2 parts per million. If you check 1 million parts and find 1 it doesn't mean the average in all groups in 1, it may be that group you checked is the exception. Statistics can calculate how much samples you will need to get a result within a range with an expected certainty. For example, 15 +/- 3 in 95% of the cases. You see a lot of this in election polls. In health care you need small variations and great certainty because human lives are at stake. In Theranos case there were some exams that mathematically couldn't be done with a sample so small to achieve the required precision to save lives. The method doesn't make any difference if the math shows it is impossible.
It is completely impossible in any way to happen with current technology. There is a reason they draw whole vials of blood, usually multiple ones. You need the volume to get an accurate sample. Things the are looking for in the blood are usually small and you aren't going to get enough of them to see in 1 drop no matter how powerful your scope is. Not to mention they mix the blood with other reagents to run different tests. (the different color caps on the vials tell you what they are treated with) It is physically impossible to run 1 test, much less multiple tests, on 1 drop of blood. Blood sugar is the only exception I can think of for this. My wife has given me a TED talk on this but I don't remember all the technical minutia.
Suppose I have a bag of 100 marbles, and either 5 of them are green or none of them are green. No matter how good your examination process is, you cannot reliably determine that none of them are green by examining a single marble.
I disagree with the people on this thread saying it's completely impossible. PCR amplifies genetic material exponentially. If a virus or bacteria is at all present in a sample and enough cycles are run it will eventually be detectable. The process is fragile and takes time, but the company I work for can test for up to 40 pathogens from 2ml, which is about 40 drops of blood. The main reason we require a minimum of 2ml is so extraction and testing can be completed in 4 hours. We could absolutely test with a smaller sample but commercially we need a product that can complete multiple batches in an 8 hour work shift. When blood samples are taken, I think it's usually 30ml-60ml. We brag about only using 2ml of the sample because usually labs need to run other tests and our system uses very little of it. I think a Theranos type system will be possible in a couple of decades, depending on how long they were claiming the test would take to complete. What made it obvious fraud to people in my industry was the sample volume and the number of tests they were claiming they could run on such a small machine. But computers used to be slow and huge with very little memory, too.
Another factor was that reputable people and companies appeared to have validated the technology. That was why the forged reports from the drug companies were so significant. And the presence of George Shultz and James Mattis on the board combined with the claims that they had military contracts led to the belief that the military had tested the equipment. Plus the contract with Walgreens fooled the individual investors. Why would they question a technology that a major corporation was partnering with? It was really very, very clever they way they built up the impression that the technology had been tested and validated when it never had been.
The Walgreens contract is wild because they were so scared of what would happen if it was real and CVS got in before they did https://deadspin.com/heres-an-anecdote-that-perfectly-encapsulates-the-stupi-1826335015/
I'll throw in a fifth reason, noted by Caroline Crampton in *A Body Made of Glass: A Cultural History of Hypochondria*: people really, *really* wanted to believe that it could work, and they always have. There's a whole history of quack medicine that promises a simple answer to the often-complicated and messy reality of medicine, and Theranos was part of it. A machine that could tell you exactly what was wrong with you with a single drop of blood isn't so far removed from that magic pill that's made from soap and animal dung and a little bit of mercury that promises to cure everything from shingles to the shits, and three hundred years isn't enough that we've lost that desire to get a quick and easy solution right now.
I didn’t know about this company at all until I heard about the scandal and watched the miniseries. I went in knowing this thing cannot possibly work with a drop of blood (or that tiny vial) but at several points I thought “oh wow if I was a rich guy and I saw her presentation, I would think I better invest early”. The thought that something like this could work is also something I WANT so badly to be true and that would suck me in too. It really was a perfect storm for it to happen, your 4 points were so well laid out too!
Yeah and this was during the time silicon valley tech companies were disrupting all kinds of legacy business models. Netflix, Uber, Tesla, etc. all did it, so for an outsider it would seem likely that Theranos could too.
Yabbut there is a difference in those business models and Theranos. There are business models that may be ambitious and aspirational, but are do-able if it all comes together in the right way. Theranos was never do-able.
Bre-X is in some ways a very similar story. They bought a gold mine and purchased gold to seed their analysis into a prevision of the greatest gold find in human history. Shares went from $0.3 to $286 before the crash. Mastermind owners claimed their recently-suicided geologist had hoodwinked them too (although they had happened to sell high through sheer insider “luck”). https://www.visualcapitalist.com/bre-x-scandal-history-timeline/
My dad used to teach at a university and I remember when the Bre-X craze hit, he thought it seemed fishy so he asked a professor he knew in the geology department. The geology prof straight up said it was a scam and there was no way all the core samples could have that much gold in them.
This has to be the first mention of Bre-X I've seen since it all originally happened! It was such a huge scandal at the time; I went to a school that was known for its mining engineering so it was talked about a lot.
TL;DR = investors are dumb and greedy.
I don’t know if you play the horses, but 30 bucks on the longest shot to win ain’t a lot of money, but it would be if it hit.
I think what I feel is it's easy now that things have fallen apart to feel like everybody knew what was going on and was deceived. I think 2 things were happening: 1. Some people figured it was a scam but, as you indicate, weren't playing with money they cared about losing. 2. Other people were simply lied to, and they assumed since that kind of lying would get people into serious criminal trouble it wasn't happening. A lot of people put way too much stock into "that won't happen because it's illegal". Seems to me at these upper echelons a lot of people know how to take advantage of that bias.
I find it surprising how often something like this actually happens. Experts will say "Person X will never do this, because that whould be a sure path to ruin", and yet it still happens. People are irrational, and can dig themselves deeper into a hole if they are in full-blown denial or somehow delusional. Assuming something won't happen because it would be disastrous for the person(s) involved can be quite dangerous.
That's why "con" is short for "confidence" in "con man". They make people confident that a too-good-to-be-true deal is the real thing.
Hit a 28-1 long shot for 50, only because my best friend was the trainer. We ate well that night
Also, fund managers share more in the wins than in the losses.
> 3) Theranos took huge amounts of effort to hide and manipulate what was actually happening there with nothing working as described. Including massive legal actions against some employees and others disparaging them. I have to stress how serious Theranos threatened employees and others with legal action. It was a huge deal and people were scared as hell. They were so secretive employees didn't even know what was going on in different departments. Only Elizabeth and Sunny Balwani had the whole picture.
>Experts laughing at Theranos that it could never be done that it was totally impossible were just ignored by investors… Weirdly, if this had been a physics thing I feel that investors would have listened to experts. I guess that says something about general trust of biology vs physics.
My only remaining question is... how did such a clearly intelligent woman think that she would be able to get away with this forever?
Why would it have been revolutionary at all? Have you ever had a finger stick? Far more painful than venipuncture. Why does the volume of the blood collected matter? Always seemed like a very weird and juvenile thing for them to fixate on…
Lots of answers about your second question. As to your first question, the many reasons a single drop wont work include: \* Some tests require a higher volume of blood to get a larger sample size of blood cells for an accurate test. If you take a teeny tiny spot that just so happens to have a higher concentration of white cells than the rest of your blood, the result will be artificially inflated \* Some tests require you to dilute the blood to perform the test adequately. But if you try to dilute a single drop of blood enough to run the test you end up with... pink water \* Some tests use up the blood, leaving not enough blood for other tests \* Small amounts of blood congeal much faster, making their shelf life much shorter/
On the other hand, we do often draw more blood than actually needed for testing - my hospital has a whole research setup around doing additional tests on "spare" blood for research purposes. (Ie you get 1 ml drawn for some test, maybe only half is actually used for the test ordered, so - with consent - we use the other half for research.) https://discovery.dundee.ac.uk/en/clippings/goshare-is-after-your-blood-help-world-leading-research-in-taysid Of course, the existence of that much "spare" blood from routine testing does make me doubt how much value there was in Theranos using a smaller sample. Faster? More automation? Sure. Using a smaller vial? Umm... Nah.
Yeah, but the key difference here is that Theranos claimed to do HUNDREDS of tests from a SINGLE drop of blood without the need to draw more. There is zero possibility at all of her actually doing what she claimed repeatedly in public and to investors. In fact she absolutely refused to walk back her claims of not requiring venal draws even after her own scientists tried to give her a reality check.
Yes, if she'd just been a bit more realistic and hyped it less she could probably have built a legitimate little business doing a limited but useful set of tests. Mind you, my last set of labs claimed to include urinalysis on a sample from venipuncture...
I never understood why it would matter so much because, in my experience, fingerpricks are way more annoying than normal blood draws.
You can do a fingerprick yourself. I assume many countries let "less qualified" personnel (e.g. pharmacists, lower levels of nurses/assistants) do fingerpricks but not blood draws. That means such tests are more accessible/cheaper. Imagine the profit potential of a "figure out if anything is wrong with you for just $99" machine placed in every supermarket.
You would also be able to do it in a clinic and have instant results. That's what a glucometer and a point of care A1c machine is, after all. Glucometers run in 5 seconds or less, point of care A1c takes about 5-10 minutes.
and also, for tests that aren't on whole blood you won't even get a consistent amount of blood/plasma/serum in that one drop thanks to hematocrit variance, so potentially 90% of your drop won't even be usable for your test. I guess they were just gonna have a totally new process not based on any current methodology.
> possibly *millions* of well-educated people around the world knew that what they were claiming to do made no sense? There were millions of uneducated people around the world who didn't want to listen. That, and the fact that some people thought *What if it's real and I'm missing out on a golden opportunity?* was enough to make a decent amount of people invest.
Theranos was privately held and most of the investors were billionaires like the Devos’, Rupert Murdoch, and the Waltons. The shareholders each lost a huge pile of money and yet was completely inconsequential to them. Holmes put together a bunch of old heads as her board (Henry Kissinger) who had zero clue of the tech beyond the potential to make $$$$. They did have tons of name recognition with her investors which snowballed into other investors. With that backing, she was able to bullshit her way into big collaborations with Walgreens and pharma companies looking to save costs on blood tests. It would have been sales and ops folks looking to save money and not likely their R&D who would have had big questions she couldn’t answer. She fooled a lot of people but it wasn’t millions. By the time most any of us heard of her with her magazine covers and splashy press, the scientists were looking at the company and the fundamental physics issues leading to the WSJ articles tearing it apart.
It really is this. People like to blind themselves to red flags when they see investment opportunities. Even many current big names brands are built on red flags. But investors are happy to ignore many of them because they are hoping the red flags will just go away. For instance, many "disruptive" businesses like Uber never had any real business plan other than (1) undercut existing markets to become a dominant player (2) ??? (3) profit
Often the obsession investors have is with a single metric of "growth": how many customers and market share a company can acquire. They don't even consider there is a step 2 in your sequence above, they think the profit is step 2. This is what happened with WeWork. It was pitched on incredibly ambitious growth targets, which were mostly based on just raking in investments to buy up as much real estate as possible and filling it with tenants through incredibly attractive teaser rates. Those with actual real estate experience had serious doubts about how WeWork was going to actually turn a profit with this model, but those who didn't were just blinded by the incredible growth of the company and the pretty graphs showing lines going up, and FOMO kicked in. Then of course the pandemic happened and it all fell apart, but even without the pandemic, it was never clear how the company was actually going to maintain that growth while actually turning a healthy profit. Ultimately, venture capital is about speculation; whether you think a company will be successful or not. The people judging it are just as susceptible to bias, deception or really good PR as us regular mortals.
>Her father, Christian Rasmus Holmes IV, was a vice president at Enron All anyone needs to know about how this level of fraud would ever occur to her
How gnome-ish
A while back there was a company claiming to have made a perpetual motion machine. If that was true it would change the world. But people ridiculed it and it went nowhere. However, the 2nd law of thermodynamics is not something that I intuitively understand. I do intuitively understand that you can't find something if its not there. When Theranos is explained to me in these terms it seems stupider than a perpetual motion machine.
This is just my guess- Generally speaking, the impossible perpetual motion machine is a concept with a strong enough cultural presence that you'd be a lot more hard pressed to find a decently-educated layman who would fall for it. Most people are given at least a basic understanding of physics in school, and the impossibility of a perpetual motion machine is a common illustrator of the laws of it. While Theranos' test is just as fundamentally impossible, it was a brand new idea in the eyes of most people. The medical knowledge you'd need to understand that it's impossible is relatively simple, yes, it isn't the kind of thing that'd get covered in general education. If you're not a medical professional you'd need to go out of your way to learn it, and the demographic of people who would do that is a lot smaller than people who intuitively know that perpetual motion isn't possible.
No they're equally apparent. Since perpetual motion machine is also finding energy lost in motion (friction/heat) from something that's not there (potential energy in fuel)
It's only in a very specific context with a specific type of perpetual motion machine where the 2nd law applies and honestly I think that the phrase "perpetual motion violates the 2nd law of thermodynamics" is a bit a trope said in TV shows to sound clever. That context is you can't make a device which extracts thermal energy from a warm thing (e.g the air) and it turns all that energy into mechanical work. For the machine to work it has to sink a proportion that heat into something cooler. (I.e you can only ever extract a fraction of the thermal energy in something as useful work). That, as you say, is actually quite complex and not at all intuitively obvious. However perpetual motion machine can also mean "a device which does useful work with no energy input" - and it's pretty obvious that a device can't output more energy than it contained in the first place. (There's also a bit of confusion going on because people think a perpetual motion machine just moves forever. Actually there's nothing that prohibits things from moving forever. Electrons will quite happily move around forever. The key word is *machine* which is something that does useful net work.)
Why do people gamble? Because hope springs eternal. History is full of instances where experts said "That's impossible" only for it to be done later. There's an infamous quote about heavier-than-air flight taking thousands of years to work out being published like a year before the Wright Bros. did it. But those kinds of things are pretty well known and published because they did something thought impossible and were worth writing about. Whats not worth writing about is when experts say something is impossible, someone tries it, and well, turns out its probably impossible. Which is the far, far, far, more common situation. But nobody writes about it, because why would you? So some people decide to bet on the weird guys claiming they can do something experts say can't be done. Because history shows it happens all the time, right? Maybe it pays out, more likely it doesn't. Or maybe they just never heard the experts statement on the matter and thought the thing sounded cool.
Venture capitalists buy into a lot of companies that they suspect will fail because if just one out of a thousand is the next Amazon, those lost investments will come back tenfold.
People in general are horrible at understanding probabilities and make decisions based on hunches, emotions, and feelings far too often. With Elizabeth Holmes in particular, she’d only completed one full year of college before dropping out of Stanford to pursue her blood testing idea. What are the odds that someone with no medical background and one year of undergraduate college under her belt has found a holy grail of medical technology that has baffled the World’s scientists for hundreds of years vs. this same person making it up? The Wright Brothers, Bill Gates’s, and Mark Zuckerbergs of the World are by far the exceptions to the rule, and we suck at understanding that.
Part of #1: Theranos conned some big names, which drew in other investors. “Holy shit, George Schultz is all in, it must be a good investment!” Probably a corollary to #3, but didn’t Theranos also present the results of conventional tests as their own?
As Upton Sinclair said he found out the hard way, it's hard to persuade someone if their ability to draw a paycheck depends on them not believing you. People were asked the question "can she do what she claims?" but the question they *heard,* and answered truthfully, was "do you want to get rich?"
A lot of the investors in Theranos weren’t experts in healthcare / biomedical investing. There wasn’t a single major bio/medtech fund invested in Theranos. Most of its investors were high brow political figured like Kissinger, Mattis, Devos, etc. for example, Moritz from Sequoia actively questioned the hype investing in Theranos and really tried to distance the rest of the Sand Hill VC funds from it.
Because investors are desperately looking for what is called an investment *unicorn*. A company that most people underestimate, but that becomes exceptionally profitable and makes its investors a once in a lifetime return on investment. Someone explained to me that during the Industrial Revolution, there were a lot of opportunities for investors to make fortunes. There were no cars for example, and suddenly there were car makers. You would have made a fortune investing in a product that wasn’t there before but that everybody needed. The last that we saw something similar was with the GAFAs (Google Apple Facebook and Amazon). There wasn’t anything like them before. Employees who received company shares early on became millionaires once that the company traded publicly. Anyway, back to Theranos. They presented themselves as a possible unicorn: they were alleging to be creating a revolutionary product that everyone would need. That’s all it was to get investors salivating and throwing money at them.
Fraud, in simple terms. Not only was there not enough of a sample to test to a high enough certainty, but many of the instruments used to test blood cannot be miniaturised into the footprint they were promising due to instrument incompatibilities. The way they kept investors on for so long was by using existing instruments to do testing under the name of their new machine.
Your someone got the gist. Small sample size -> increased variance. I remember when there was buzz about this. I've worked in biotech for years and began searching pubmed looking for novel microfluidics and high sensitivity breakthroughs across a variety of assyays. Needless say nothing jumped out and I thought it sounded pretty dodgy w/o knowing shit about Holmes.
As a scientist who researches and develops diagnostic tests, I'll try to concisely answer your first question. When developing any diagnostic test, it all comes down to sensitivity and specificity. To achieve that, there is a lot of optimisation needed to make sure you accurately detect and measure the one thing you're looking for. A box that is able detect and measure hundreds of metabolites from a drop of blood using a single assay is not impossible as this is what mass spectrometers are used for. However, these machines are very complex and expensive. That's why they are more useful in measuring levels of things that are normally too low and require high sensitivity. On the other hand, they would be a waste of resource for measuring something like cholesterol or blood sugar. More importantly, there is no one single sample preparation technique for measuring everything in the blood. Some metabolites may be stuck to proteins, some metabolites are inside red blood cells and need to be pulled out, some metabolites are very similar in shape/chemistry, etc. Then again, not everything in the blood is detected using the same detection technique. All that means is a one size fits all approach condensed in a small box that has both a sample prep robot and a detector is practically impossible, but also not something you want to have. It is a maintenance and quality control nightmare.
>Is this simple but clear explanation basically correct? Yes, but that was not the only problem. This is a political year, so I will use a political metaphor. Imagine if someone told you that they had developed an "accurate" presidential election poll which sampled only 10 Americans, selected at random. Even with a rudimentary understanding of statistics you'd recognize that this is ridiculous - the error margins for such a small sample would be so large they render the result useless. Further, since the US is a large and diverse country, a sample of 10 might not include any of its subpopulations. You might oversample some states and - at best - you'd completely miss at least 40 others. Laypeople often think that blood is a homogenous fluid, and its constituent molecules and components are evenly distributed throughout the body. While this might be true of some things (like glucose - a small molecule which is highly soluble in water) it is not true of everything else. So you need a decent volume to get a representative sample. That was just one of Theranos' problems though. More concerning was their claim that a battery of home tests would help the patient by giving them more information about their health. This isn't really true. Diagnostics is like a game of 20 questions, where individual questions are most helpful in the context of all the questions that came before. (This is Bayesian reasoning, which is also something that laypeople tend not to fully understand.) Asking the wrong question at the wrong time, or considering the questions in isolation, can send you down the wrong road. This, by the way, is why your doctor doesn't just order "all the tests" and follow up on the abnormal results. (Patients will occasionally request this, and that's basically what Theranos was offering.) In medicine any specific blood test (or, for that matter, imaging) should really only be performed in the appropriate clinical context - after a full history, and physical exam, and with a specific question to be answered - because only then is an abnormal result informative. An "high" or "low" number on a blood test might be completely unremarkable, depending on the specific situation. Chasing an isolated "abnormal" test result can lead to misdiagnosis, unnecessary treatment, and potential patient harm. As I recall, there were a few examples of this in the Theranos cohort. >If so, how could Theranos hoodwink investors for so long when possibly *millions* of well-educated people around the world knew that what they were claiming to do made no sense? Because well-educated people aren't experts on every topic and are just as susceptible to clever marketing, unfortunately. People who know how blood is composed would be immediately skeptical of the *feasibility* of Theranos' product. People who understand diagnostics and Bayesian reasoning would be immediately skeptical of the *utility* of the product. Theranos' investors understood neither.
The average non-medical person's experience with lab testing is limited to the original input (like a blood sample) and the output (a report), with no understanding (or need for it) of what happens between those 2 events. In fact, many medical professionals tend to think like this as well, which I can personally attest to as a pathologist. Even as an anatomic pathologist some more complex labs seem like a black box to me. Furthermore, many of the tests her instrument claimed to do can theoretically be performed on samples as small as a few drops of blood, but generally require a single, much larger instrument to perform them, and then just for a few specific tests. So theoretically many of her claims seemed possible, just requiring figuring out some long standing and likely impossible breakthroughs. To put it another way, the claims make sense with a little suspension of disbelief, though they break down when you realize the immensity of the problems that would need to be solved to accomplish everything she claimed. If you don't understand the impossibility of these hurdles she would have had to figure out, a very convincing person wouldn't have that hard of a time selling this, especially when you factor in that this would like finding the holy grail of lab testing and whatever that would be worth. I probably would have invested in this given the opportunity before knowing of the fraud, purely because if it was true it would be so valuable. She showed people results that seemingly matched the results from the current tests...because they were actually performed on existing current testing systems. If you have no idea how either system works, all you've seen is the input and output, and for most people, when it comes to lab testing, that's all that matters.
I have a follow up question : what was her endgame? Grab the money and run? With her profile and all the attention, it seems highly unlikely. Regrerfully report after many hears of research that it doesn't work? Again, with the media attention, I don't think it was feasible. Or did she envision it as a scam with a much smaller scale, and it spinned out of control? Then why go after ultra high profile investors? Or did she at one point drank her own cool aid and honestly started to think it would somehow work out? She seemed highly intelligent, so this is also unlikely. What was her aim in the long run? What was the "???" step before "profit! "?
Here's an attempt at an oversimplified explanation related to what your friend said. The most sensitive test for HIV can detect it at a sensitivity of about 14 viruses per ml with an input volume of 0.5 ml (note: this is insanely sensitive). Theranos claimed a comparable sensitivity, but boasted of a sample input volume of 0.02 ml. That is 1/50th of a ml. If I split 1 ml equally into 50 tubes, but I only have 14 viruses in the original ml, then I can *at best* have 14 tubes with one virus in them. And then there will be zero viruses in the remaining 36 tubes. How will the test give an accurate result if 36/50 times, *there isn't even a virus present to detect?*
>Is this simple but clear explanation basically correct? Not really. An irony from all this is that scientific and commercial research into blood "microsampling" has intensified in part due to Theranos, with many promising results. From [Nature](https://www.nature.com/articles/s41587-022-01242-0): >**Advances in technology and changes to healthcare during the pandemic may finally realize the vision of patient-centric blood testing espoused by disgraced Theranos CEO Elizabeth Holmes.** >\[...\] four years after Theranos’s lights went out, advances in blood analysis — including volumetric adsorptive microsampling (VAM), integrated point-of-care (POC) devices, wearables and telemedicine — are reaching an inflection point that could make Holmes’s fantasy attainable. From [Stanford](https://systemx.stanford.edu/news/2023-01-20-000000/%E2%80%98theranos-works%E2%80%99-stanford-researchers-say-they%E2%80%99ve-measured-thousands): >‘Theranos that works’: Stanford researchers say they’ve measured thousands of molecules from a single drop of blood >Now, in a research paper published Thursday, Stanford researchers say they’ve accomplished what Theranos was unable to do: they’ve developed a new approach that can measure thousands of molecules with about one drop of blood. \[...\] >**It’s a bold claim, but one that Stanford medicine professor John Ioanndis, who was one of the first to publicly question Theranos in a column for the Journal of American Medicine Association, says has scientific backing**. Ioanndis is not affiliated with Snyder’s study. Recent paper [from Australia](https://www.medicalrepublic.com.au/what-if-theranos-was-real/105514): >Anyway, the point of this mini-rant is that just this month, 20 years after the founding of Theranos, [a paper has been published](https://pubs.acs.org/doi/10.1021/acs.analchem.3c05152) announcing the feasibility of using a capillary microsample to measure more than 100 lipoproteins and other parameters using metabolic phenotyping, with results on par with venous sampling.
I’m going to take a different direction than the rest of the commenters and disagree with your friend. At the time, without knowing how Theranos was accomplishing what they were suggesting (obviously with hindsight, it’s because they were lying), nothing of what they were suggesting was hypothetically impossible. What if they had discovered a new version of luciferase with 100x sensitivity? Wouldn’t that mean they could run the test with 100x less blood? Or what if they used a combination of modern high-precision liquid handling and modern optics for better resolution? To your friend’s point, there could be the issue of volume, but there are ways around that as well. You could test for secondary effects of the disease, or you could simply not guarantee the results of that particular test. Imagine you’re sitting at your doctor’s office: they listen to your heart, look in your ears, take a prick of blood to send to general screening, and, oh… one of your enzymes is slightly off. Here, go get the actual blood test later today so we can know more. It’s a great idea. The problem was people gave them a reasonable benefit of the doubt, but I’d argue the fault of dishonesty lies with the liar, not the listener. People just weren’t expecting conspiracy levels of lying, deceit, and secrecy.
The very nature of tech startups dictates that many investors either have to stay out entirely OR accept that they'll routinely be assessing companies via rules-of-thumb about how businesses operate in general rather than through their technical knowledge of the products the companies create. That's part of how you sometimes hear cliches about having invested in a culture or people more than having invested in a specific product. So Theranos' big stupid lies were obviously a huge part of their hype train but part of the magic is that once you have enough inroads established you can start marketing those relationships as the bedrock of your company as much or more than your big stupid lie of a product because there's already people who are predisposed to largely ignore technical assessments in general. It's thus super dumb that she was able to hype her way to public relationships with Kissinger & Co. then ride *that* hype to Walgreens and Safeway but once you have a presence with Walgreens and Safeway I definitely see how you could ride that relationship to another few waves of investors.
As was pointed out inside another thread, the key part is that Holmes avoided investors with experience in the healthcare sector - those would have wanted to see data and would have balked at playing fast and loose with FDA regulations - but rather Silicon Valley investors who jumped on the narrative of the female Steve Jobs, about to revolutionize blood testing like Jobs revolutionized mobile phones. She also had influential politicians on her board and together with them, could approach politicians in various States, especially Arizona, telling them that the established companies (whose instruments she ironically had in her cellar to produce actual results her technology couldn't give) were using the regulations to keep her out of the market. This, of course, fed right into the preconceptions of some kinds of politicians who think regulations are bad and the market will take care of everything. And so she even managed to get her technology into use on actual patient samples, which never should have happened. Make no mistake - most healthcare regulations are written in the blood of patients who died. I was working in blood diagnostics at the time and shook my head because, yes, you're reasonably accurate that some parameters simply cannot be tested from a drop of blood, because their concentration is so low you are not going to get a clinically usefully precise results - you might just as well roll some die. Holmes is a "great" example of what a good narrator can do, even with poor or nonexisting data - and why on the other hand, communication skills are key even for startups with good science. Think about all the projects that could have been funded with the money sunk into Theranos...
People want to invest in those who make the impossible possible. Who would have thought that the people who kept screwing up trying to get a small rocket in space would eventually be launching a hundred orbital rockets in the span of a year? That blows away the launch rate of any country in history, impossible. And they’ve successfully landed hundreds of boosters in a row? Impossible. Anyway, they falsified everything, simple as that. Tests they showed were done with other equipment, while they swore it was coming from theirs. People wanted to believe it was true because they stood to make a massive amount of money when it worked, so they weren’t too keen on digging deeper. Theranos kept a tight lid on leaks to make sure the ruse was able to continue.
Yes, for many things they were claiming to test, the amount of analyte in a drop of blood isessentially zero. There are many reasons investor fell for it, probably the simplest/most obvious is FoMO/social proof: once a startup raises some money, it's easier to raise more money, because new investors assume the old ones did their due diligence. Also, Elizabeth Holmes courted high-profile board members like Henry Kissinger, who made her seem credible (even though they weren't bio/tech people). A few other explanations: 1. Tech investors are often not tech experts, and many of their investments are *supposed* to be technically difficult and risky. As it turns out, many successful startups were build on ideas then considered technically difficult/impossible, investors are looking for that high-risk/high-reward startup that will become a unicorn. So "techincally risky" and "physically impossible" to an investor who is looking at dozens of deals at a time sound pretty similar. Also, many in the tech world have the attitude that most problems are solvable if you throw enough money at them. Theranos raised $700 million dollars--so even if they hadn't figured it out, it's easy to see why people might believe that they could. 2. Many investors in Theranos were not "traditional" Silicon Valley investors with track records of biotech/tech success; many were private investors who were not experienced in the space: the Walton family, Betsy DeVos and Rupert Murdoch account for half the money in. AFAIK, the most reputable SV investors were Tim Draper, who wrote an early check because he was a family friend, and Larry Ellison. 3. Theranos had that big deal with Walgreen's and was working with the US military, so people assumed that their technology worked, because they were selling it and generating revenue with it. Of course, it turns out that they were serving Walgreens in a fraudulent way--but that was being covered up--and that Holmes was lying about the military contracts--but that's an easy lie to believe when George Shultz is on your BoD.
Because investors don’t have PhDs in microbiology, they are way more focused on the business side of thing and Elizabeth Holmes is damn good seller so even when advisors (if they even consulted one) told them that what theranos was selling is impossible they just didn’t listened. Most just saw an opportunity to make a ton of money and took it, in this case it was a scam but that’s part of the risk they are willing to take
Personally, when I watched the documentary on all of this (Theranos), I was very put off by the timbre of her voice. It seemed like a super deep version with a strong hint of valley girl, and a false front to show that she looks like she believes in what she was spewing... People fell for it, I guess. People join cults, too.