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Runaway Stories & Fairy Tale Endings: The Cautionary Tale Of Theranos
Looking back at the build up and the let down on the Theranos story, the recurring question that comes up is how the smart people that funded, promoted and wrote about this company never stopped and looked beyond the claim of “30 tests from one drop of blood” that seemed to be the mantra for the company. While we may never know the answer to the question, Aswath Damodaran offers three possible reasons that should operate as red flags on future young company narratives...
1. The Runaway Story: If Aaron Sorkin were writing a movie about a young start up, it would be almost impossible for him to come up with one as gripping as the Theranos story: a nineteen-year old woman (that already makes it different from the typical start up founder), drops out of Stanford (the new Harvard) and disrupts a business that makes us go through a health ritual that we all dislike. Who amongst us has not sat for hours at a lab for a blood test, subjected ourselves to multiple syringe shots as the technician draw large vials of blood, waited for days to get the test back and then blanched at the bill for $1,500 for the tests? To add to its allure, the story had a missionary component to it, of a product that would change health care around the world by bringing cheap and speedy blood testing to the vast multitudes that cannot afford the status quo.
The mix of exuberance, passion and missionary zeal that animated the company comes through in this interview that Ms. Holmes gave Wired magazine before the dam broke a few weeks ago. As you read the interview, you can perhaps see why there was so little questioning and skepticism along the way. With a story this good and a heroine this likeable, would you want to be the Grinch raising mundane questions about whether the product actually works?
2. The Black Turtleneck: I must confess that the one aspect of this story that has always bothered me (and I am probably being petty) is the black turtleneck that has become Ms. Holmes’s uniform. She has boasted of having dozens of black turtlenecks in her closet and while there is mention that her original model for the outfit was Sharon Stone, and that Ms. Holmes does this because it saves her time, she has never tamped down the predictable comparisons that people made to Steve Jobs.
If a central ingredient of a credible narrative is authenticity, and I think it is, trying to dress like someone else (Steve Jobs, Warren Buffett or the Dalai Lama) undercuts that quality.
3. Governance matters (even at private businesses): I have always been surprised by the absence of attention paid to corporate governance at young, start ups and private businesses, but I have attributed that to two factors. One is that these businesses are often run by their founders, who have their wealth (both financial and human capital) vested in these businesses, and are therefore as less likely to act like “managers” do in publicly traded companies where there is separation of ownership and management. The other is that the venture capitalists who invest in these firms often have a much more direct role to play in how they are run, and thus should be able to protect themselves. Theranos illustrates the limitations of these built in governance mechanisms, with a board of directors in August 2015 had twelve members:
I apologize if I am hurting anyone’s feelings, but my first reaction as I was reading through the list was “Really? He is still alive?”, followed by the suspicion that Theranos was in the process of developing a biological weapon of some sort. This is a board that may have made sense (twenty years ago) for a defense contractor, but not for a company whose primary task is working through the FDA approval process and getting customers in the health care business. (Theranos does some work for the US Military, though like almost everything else about the company, the work is so secret that no one seems to know what it involves.)The only two outside members that may have had the remotest link to the health care business were Bill Frist, a doctor and lead stockholder in Hospital Corporation of America, and William Foege, worthy for honor because of his role in eradicating small pox. My cynical reaction is that if you were Ms. Holmes and wanted to create a board of directors that had little idea what you were doing as a business and had no interest in asking, you could not have done much better than this group of septuagenarians.
Bottom Line
I would like to believe that I would have asked some fundamental questions about the science behind the product and how it was faring in the FDA approval process, if I had been a potential investor or journalist. However, it is entirely possible that listening to the story, I too would have been tempted to go along, wanting it so much to be true that I let hope override good sense. Some of my worst mistakes in investing (and life) have been when I have fallen in love with a story so much that I have willed a happy ending to it, facts notwithstanding.
The question of whether Theranos makes it back to being a valuable, going concern rests squarely on the science of its product(s).
- If the Nanotainer is a revolutionary breakthrough and what it needs is scientific fixes to become a reliable product, there is hope. But for that hope to become real, Theranos has to be restructured to make this the focus of the business and become much more transparent about the results of its tests, even if they are not favorable. Ms. Holmes has to scale back many of her high profile projects (virtuous and noble though they might be) and return to running the business.
- If the Nanotainer turns out to be an over hyped product that is unfixable, because it is scientifically flawed, Theranos has a bleak future and while it may survive, it will be as a smaller, low profile company. The investors who have put hundreds of millions in the company will lose much of that money but as I look at the list, I don’t see any of them entering the poor house as a consequence.
There is a chance that the lessons about not letting runaway stories stomp the facts, never trusting CEOs who wear only black turtlenecks and caring about governance and oversight at even private businesses may be learned, but I will not hold my breath expecting them to have staying power.
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She shud marry the tesla guy and have baby Eintsteins!
Ok,
I'll ask the question nobody else seems to be curious about.
How and why would a dumbass little girl need to assemble a board of directors that looks like the roll call at a nuclear weapons depot?
This is not a regular civilian board of directors, this is a pretty serious MIC board of directors. Nano-vials, my arse!
What is the real product line? What is their business with the US Govt, how much of their profits come from these "secret" dealings?
There is something suspicious, almost sinister about that lineup of people running a biotech company.
americans really are dumb.
a golden doodle is smarter
Theranos: clearly another CIA-Mossad-funded corporate start-up a la Facebook, Google and Tesla.
With a CIA "cut-out" founder, CEO type in this case a woman! a la Zuckerberg, Brin, and Musk. etc.
The black turtleneck is a bit cliche but the Langley-Hollywood-Tel Aviv axis is a prisoner to cliche and predictability.
If there is some value to the TPTB, it will survive and thrive.
That board of directors is kind of in your face. The mask is slipping as their greed and lust (she is cute & young) gets the best of them.
I'm waitin' for the Amazon version that sends a drone to yur backyard and jambs a needle in yur butt and sends it up to a spaceship to be analyzed and sent back down to 'ya all in 5 minutes along with an icy 6 pack, a family size bag of Cheetos and a carton of smokes! Sweeeeeeet!
Hilarious. And the goodies will be delivered by an electric vehicle (driven by robot).
Sounds like a DMT trip!
The Golden Football...
She coulda started a fairly decent war with that group of dymensia delayed board of directors!
If it ain't reel slide her into an orange turtleneck and throw the skank into the slammer for fraud!
I spoke with a guy who worked there. He says she is a college drop-out who lives in a bubblle and doesn't have a clue about much of anything technical, basically he said she is dumb a a post. Not unintelligent, just unedjucated and stupid about things. But when you go all around the country and world and everyone fawns over you then it is easy to become delusional and believe your own press. She jumped the shark long ago, the company will fail, perhaps a few more years, they just raised 200 more million, but the company is doomed.
Really how much could she know as a 19 year old? Even the grunts that work the labs have some education.
Really how much could she know as a 19 year old? end quote
She was 19 in the year 2003. Why does everyone keep talking about this person like she's a teenager? Oh, I get it - people can read, but do not continue to read the narrative to figure out the facts.
That the FDA had an issue with their stinking little blood vial and wrote them up for bad record keeping, now they're next on the witch hunt. Unpossible.
But when you go all around the country and world and everyone fawns over you then it is easy to become delusional and believe your own press...
At the end of the day, this "style stealin' clone ass" emperor wears no clothes.
My wife is in the BioTech industry, one of her friends had an interview with Theranos when they were building their initial staff. The bitch is a terrible micro manager and does all the interviewing herself. Actually had the balls to demand to know what our friend's class ranking was when she graduated. She played it perfect, sat back in her chair and said, "I don't recall, what was yours".
She didn't get the job, I guess being a sociopath probably precludes the possibility of you having a sense of humor, or irony.
All >$1bil "start-ups" are FRAUDs.
I've had direct and indirect involvement with a couple of major VC-funded startups (and a couple of minor VC-funded enterprises) and reality was never a factor in any of them ... until it bites.
Used to be, back in the 80s that you would take a startup to IPO and then run away with all the money.
Now, it is just a waiting game to be bought out by a bigger fish, I don't think going public is even a goal anymore.
She sounds like a man when she speaks. I hope she pulls off the mask one day and we find out it is really Barry Minkow.
Just watched her interview on YouTube. She actually sounds like Kat Von D. But more importantly, the words that come out of her mouth sound like total bullshit. Snake oil.
WHAT A FUCKING CUNT!!!!!!!!!!
I guess we know at least one who bought in ^.
What'll you bet that she did the nasty with all the codgers, and called them 'board members'?
Still, you're right. Would a cunt by any other name smell... fishy?
http://www.wsj.com/articles/safeway-theranos-split-after-350-million-deal-fizzles-1447205796
I would bet on this company making it. WSJ messed up royally, however technically correct in their reporting, it just misses how difficult it is to placate FDA.
My bet is that all these posts above are from people dumber than sh1te, as they show absolutely no analytical ability.
Durden does show pretty good detail. Durden, listening? Are you trying to create a potential short, or just a cheaper point to buy? Sincere question, I'd love to know where you think this firm will be in 2 yrs?
How does one short a private company you stupid cocksucker?
Your question is dumber than SH1TE. Ask Durden, he will explain how that works!
In any case you are missing the point. Placating the FDA has no beearing on whether your shit WORKS. Why do you think on Saturday night teevee there are ads for new drug ZYX interspersed with lawyer ads for suing the makers of old drug XYZ? It's a fuckin racket.
Attractive blonde women in black give me a boner, so yes, I would invest in Theranos.
losing money on attractive young women that gives you a boner - most common worst mistake made by men, many times over
'
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She had me with that husky voice!
I lost millions…
Doh!
Stupid pecker-brain!
•?-<
V-V
Real corporations have people involved that actually do work, not run around trying to get photo ops so they can pump their stock.
Sadly we no longer have real corporations because we have thoroughly destroyed private enterprise. There is no value in a corporation that isn't going to go public, because it can't make the tribe money. Well not until they sick the lawyers on you.
My favorite larged schnoz lawer friend told me with a straight face when the previous company I worked for got sued, "Well, you made your money. Now it's time for us to make ours."
Anyone with a brain could see that Miss Holmes was an idiot, but looked the other way because her story could be sold to generate billions for Wall Street. The goal was never to disrupt the medical industry, but to make the claim that Theranos could. That claim led to a private valuation in the billions and making this worthless woman a billionaire on paper.
At 37 I have put products in millions of homes that actually have made their lives better. I can say factually that I have saved lives with products I designed. I was credited by a nationally recognized surgeon for saving his life during a stroke because of a product I created. There are many people like me that have accomplished far more than Miss Holmes, but we aren't billionaires. We aren't because we are the people that actually make the world work. Sadly we aren't valued because real work to produce real items takes money and the returns are measured in dollars of profit. You can't sell a share of a real product for $10 and sell it for $100 milliseconds later.
I guess if you had the choice of making a couple bucks from hard work or a thousand percent return for doing nothing, you'd choose doing nothing. But if everyone chooses to do nothing, how does anything get made?
welcome to the real american economy......bread and circuses
what so many americans don't understand is that their major multinationals and their politicians that support their actions around the globe are the real terrorists. These companies terrorize entire sovereign economies and bend them to their will. They are strip mined and exploited and left for dead. The economic rape and capture of Hawaii is a great and prescient example of what USSA has been trying to do across the globe for decades. No wonder Iraq and the middle east in general has finally stood up and said "fuck you". If Bush invaded you under such bullshit propaganda and you knew it from the start you'd fight back too.
More like "welcome to the real American economy"; the monetization of bullshit..
x
She has pumped now can she dump ?
I'll invest $20 per song ... but only if she's wearin a black lacey bra, see-thru thong panties and stiletto heels!
She is kind of cute though. Any of those influential old codgers would crumble at her batted eyelid.
To borrow from an old war poster; "she's not so dumb!"
It's unbelievable!!!!! She holds her booger nuggets between her fingers the same way I do after I pick my nose!
Thats probably her excuse to show us the illuminati 666 symbol.
If she were not hot, there would not have been any media hype around her or the company.
I'm probably the rarity here, but I've actually used Theranos as I live in one of the test markets.
My doc was very eager to try them. I went to the drug store, got signed in and then the computers locked up. It took about 30 minutes to get that straigtened out. They did the blood draw, and then I went home. Two days later I get a phone call, the lab had a problem with the sample, so I had to go back, and they did it again. A day after that I had my results which were pretty consistent with my last labs. Cost me $30.
Now, that might sound like a nightmare, but the other lab that has a virtual monopoly in my area, the normal wait time for a draw is the same as it took me to drive to the Theranos location, both times, combined, along with the wait from the failure. And that lab would delivery results in a week -- e.g. more time than Theranos took with a fuckup and redo. And the most important thing, that lab costs more.
There is way more to the Theranos story than flakey equipment not ready for prime time, since Thernos uses conventional testing equipment as well. They are really fucking up the business models of these regional monopoly labs. Trust me, with the amount of money at stake, there is a whole slew of people on the profit side of the healthcare industry that want Theranos dead, really, really dead.
I'm not a cheerleader for the company, and they clearly have a lot of growing pains and issues to resolve, but they flat out have a better business model, even with the same equipment, as the monopoly labs, and I really hope they get their shit together and bring some actual competition to the market, god knows it needs it, badly.
So they're using their $200m in capital to do standard labwork at substandard prices. What a business model!
I'm a huge skeptic of much of the present health care system and would love to see it disrupted, but the science is the science and Theranos seems to be on the wrong side of it.
Hey, works for Amazon!
Corinthians 2:9New International Version (NIV)
9 However, as it is written:
“What no eye has seen,
what no ear has heard,
and what no human mind has conceived”[a]—
the things God has prepared for those who love him—
anyone here used SNAPP tests?
one drop and a result in brief time varying with issue sought.
50$ a test price to user ie vet or docs is 10 ea
they work
I would say the main issue here is the massive disruption her company would cause to HUGE ripoff labwork a lot of which IS automated and cents per test sold for 1,00%markups and delays to make you think what you get took time to do.
most times it doesnt.
for a few thousand you can buy multiple blood screen test machines
which is what small labs do already. pretty fast payoffs.
Its just SOOOO much bull sht
There are companies that need regulatory approval and insurance
these are hotels
or taxi drivers
or blood testing companies
but there is so much easy money ZIRP and SillyCon valley in love with black turtle necks that they turn
apps lke airbnb or uber or Tharanos into billion dollar valuations
meanwhile people get murdere by airbnb owners, or uber drivers or plunge to their death in unregulated swimming pools, and hey you need a bit more blood drawn by a needle to get a reading!!!
Its beyond a joke. ANother market waiting to tank. BIG CRASH a comin
LoL - You had me at "unregulated swimming pools" !
cheap and speedy blood testing means less accuracy
In some case it is ok (for day to day monitoring of known health issue) in others (first time new issue identification and evaluation of how serious the problem is) it is not
At some point Wall Street guy came to the developer and said "you know you should not talk about accuracy issues and then I will allure more investors to your cause".
This is very common not telling all the truth to the investor issue. it works until too many people start asking too many questions
wrg