Theranos – Drew First Blood
A friend recently posted a question on a NODD community group about Theranos and Elizabeth Holmes. He wondered if the investor community would be more cautious about the healthtech, and if there would be stringent methods of due diligence on healthtech and a cloud of suspicion.
While I didn’t answer the whole question, here’s what I replied, and the rest of the answer. Hers was close to an ideal crime.
An audacious goal,
an unusual personality,
early big name believers, which created a ripple effect and big clout, combined with
suspended investor/supporter alertness.
It probably follows a triangular curve on a graph… Those before a tipping point (without big name college/mentor/ board, etc.) receive disproportionately high scrutiny by investors; those with, receive disproportionately less.
It was less her fault, more of those who gave in to their biases or kept silent.
Of course, it did prove bloody expensive to that one employee whistle-blower who said it cost his family some USD 400-500k in legal expenses to defend him from Theranos.
But we do this all the time. Thinking is a high-resistance exercise for us humans. And so wherever we get a chance to reduce that effort, we often take it. Be it using a student’s big brand university name-tag to transfer a lot of the goodwill and traits the university enjoys, to the student. Whether or not he or she has them.
If this is an area of interest, I urge you to read the book ‘Thinking: Fast and Slow by Nobel Memorial Prize laureate, Daniel Kahneman. It is a heavy read, and you probably won’t get it all in one read. I sure haven’t.
But he explains how we think. And why we tend to be susceptible to biases. Why we take the shortcut and assume, instead of taking the effort to verify or reason.
So coming to the question of whether the investor community will be more cautious… A few almost always are. Many will always be off/on, and a few will learn the hard way.
While they might be more cautious in health tech, they might be lax in other upcoming sectors. Besides, there’s no way of being a 100% sure because these are uncharted waters. But there always are signs that we need to keep looking for.
Amusingly, another recent headline in an old sector that is seeing new tech, didn’t seem surprising in this context. Tesla Motors is far from a stable company. And yet in 2018, its board decided to pay Elon Musk more than the combined packages of the next the next 65 highest-paid CEOs! An astronomical USD 2.3 billion!! While a lot of it was in stock, it still leaves many of us questioning the rationale of the board.
Unrelated, Theranos is a really fawesome name.
Guess Holmes took the “emergency response” (‘er’) with her, leaving ‘Thanos’ to deal with investors.
Guess we can’t say she didn’t warn the world about her intentions with Theranos. But all of us were probably distracted by the nanotainer.
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