I’ve been reading a few articles that cross my LinkedIn feed, and this one, on Theranos founder Elizabeth Holmes and her presentation today on the future of the company and who-knows-what-else, struck me as a huge wrong to the industry, startups, and just about everything that the business community is supposed to stand for.
First off, if you’ve not already, read the article. As always, I’ll quote relevant bits from it, but getting it first-hand is useful to understand the context in which it is written.
The piece certainly starts with a bit of a grounded air, when the author (Paul Reynolds) says:
I started blogging … with a focus on the way the startup ecosystem actually works, and how it encourages the appearance of success to raise future funding or sell, rather than on actual technology and business progress. I … pointed out a strong similarity with another media darling CEO, Elizabeth Holmes of Theranos.
Elizabeth Holmes has certainly gathered a great deal of press and VC funding; which one drove the other is wide open to debate. And she’s certainly been the target of much speculation and praise; more than once she’s been anointed the crown as the sucessor to His Holiness Steve Jobs.
Reynolds goes on to quote himself:
I’ve watched all the recent publicity surrounding Theranos, about a young, media-darling, Steve Jobs idolizing female CEO, who defies the skeptics and without any training in the field apparently makes strides that promise to change the world. Who raises millions on promises of ground-breaking technology that’s just around the corner, yet never makes public demonstrations or subjects their technology to third party audit. A CEO of a company that never answers substantial questions raised by veterans in that field, or criticism that they are doing nothing but playing a smoke and mirrors game to fleece the next round of investors, but is more than willing to speak to the press on their ‘vision’ (and nothing more).
Unfortunately, the whole thing came to something of a crashing close with the reveal that Theranos not only couldn’t do what it was claiming to do, it hasn’t been able to for its entire existence, and in fact was lying to medical patients. (You may want to quibble with my paraphrasing there, but you’ll have to be an MD and explain to me how that’s not an accurate statement if you do.)
He goes on to hit the head on the nail of the biggest problem on the technical industry today:
But this is Elizabeth Holmes and Theranos, and the mentality here is one that mere mortals cannot comprehend. To Holmes, she is not the CEO of Theranos - she is Theranos. There is no company without her, there is no considering anything else. No matter the consequences she will not waiver, she would rather the company die with her at the helm than live under the guidance of another. It’s the perseverance VC’s say they look for in founders, that’s more important than technical or business skills, to stay the course no matter the consequences, that’s backfiring on them in the hands of a founder who has a plurality of stock and a majority of board seats. No matter what they think, what they say, their money is now tied up in the hands of someone who they have no control over, and who has decided they don’t have to play by the normal rules.
This is borderline (if not outright) sociopathic behavior on her part—and somehow, this is the thing that VCs are looking for. Somebody whose willingness, drive and chutzpah is so strong, they are willing to ignore anything and everything in their quest for success.
If normal people’s jobs and pension fund returns didn’t depend on it, it would be hilarious watching the VC’s deal with that monster of their own creation. And understand that people of this mentality care only for their ‘vision’, and the jobs or savings of others are simply tools for them in what is often considered their ‘destiny’.
Theranos is entitlement at its best: Holmes is ‘destined’ to be great, and it doesn’t matter what damage she does along the way. There is no remorse for the medical tests she handed out that were, bluntly put, nothing more than a fiction. There is no willinness to admit a mistake and do the socially-beneficial “right thing”. There is only the willingess—the “drive”—to succeed.
Founders with this type of thinking do not need facts or evidence to know what the truth is - their belief in what they are doing is so strong that they have convinced themselves it is fact, and that the engineers and scientists they employ are simply there to uncover that truth for others. Failure for systems to work or results to show them right are not evidence of their belief being wrong, but rather that their staff are not working hard enough, or aren’t smart enough, or are even out to sabotage them.
This is well beyond the story arc of the “plucky startup founders”; this is way deep into complete-lack-of-human-empathy territory. And these people are revered for their ‘sacrifices’, they are celebrated when they win, and sympathized when there’s a setback, like basic realities of physics or human standards.
They will fail to meet standards typically expected of peer reviewed papers - insufficient information to allow reproduction by another, no statistical data on all tests run and whether they are showing the cherry picked best results, showing results from the easiest tests, deliberately poor labeling of data or systems used to prevent direct comparisons, results from blood drawn in the normal manner and not finger-prick tests, changing the meaning of standard terminology to their benefit, and hiding behind ‘company confidentiality’ to name a few. Throughout this, the thread that will tie it all together will be an arrogance from the presenter that she is right and the 30,000 years of combined experience in the room are wrong.
If only the founder can summon more moral fortitude, a deeper level of courage, just “stick to it”, “follow your passion”, “continue pushing for your dreams”, it will all just work out. Ignore the collateral damage done along the way; you can mention it in your biography later, but nobody really counts the millions lost when it’s not your money to begin with. It’s all bank money! It’s all VC money! (And the VCs always have clauses that protect them against bad investments in the first place, anyway, so it’s not like it really matters.) Stick to your guns, plucky startup founder, and it will all turn out well in the end for you.
I don’t expect to see Holmes change one little bit. After all, these experts are just trained so much they can’t “think outside the box” like she can. It’ll just be another hurdle for her to overcome, and that history will prove her right, she just needs to persevere. … Sounds crazy? Yes, it does, but remember, CEOs like that don’t live by the same rules as you or I. And then remember that the money that lets them act this way, might have come from your pension fund.
This is like rooting for Stalin.
Can we please start to realize that this, far more than anything else we ever saw in the run-up to the utter collapse of the startup world in 2000, is the bubble? Billions, if not trillions, are on the line here, and most of these companies aren’t even manufacturing software—they’re often selling on a premise that is itself unsustainable.
Case in point: Uber is effectively just a taxi service before regulations designed to fix the egregious flaws in pre-regulated taxi services were applied. When enough terrible stuff happens to Uber passengers—as has been happening—then Uber will have no viability, the company will shut down, and while Uber’s founders and executives and investors will still walk away with millions, the investors that make up the bulk of that money will be out everything.
Another case: AirBnB, similarly trying to duck regulations around high-velocity hoteling. Great idea on the small scale, but lacking serious execution success at the large scale. (Ask anyone who lives next to an AirBnB full-time rental, and you’ll hear some horror stories.)
First surprise: regulations exist for a reason.
Second surprise: startups are not for the little guy; they’re a self-serving industry for people with money who want to make more money.
Holmes is the first, but not the last, of these mythological “startup unicorn founders” that will demonstrate that there is nothing behind the curtain, and if we don’t start to call them on their bullshit sooner, rather than later, we are all going to watch money simply disappear into the ether.
All for a promise that was never (and could never) be true.