If possible, you should find a way to watch the recent documentary “The Inventor: Out for Blood in Silicon Valley” on HBO. It is a fantastic look inside the rise and fall of a Valley darling company (unicorn, even) and CEO. There are so many lessons to be learned from the story.
I do want to call out that this documentary clearly wants to call out the “dark side” of the valley. And while I think this is important, I do want to call out that this is not new, nor unique to the valley. As they show, there are many similarities between Elizabeth Holme’s story and Thomas Edison’s. The concerns raised by this film go back to the beginning of technology. And quite frankly, go back to the beginning of humanity. So much of this story is about our optimism, humanitarianism, greed, idealism, you name the emotion or driving force, whether it for the greater good or selfish interest, leading to blind faith, turning a blind eye, and layers of lies.
That’s what is so interesting about this story. If you have worked at a company that pushes culture, doing things for the greater good, family, etc then this film will hit home. If you’ve been frustrated by unrealistic stubbornness, leading to impossible demands of employees this film will hit home. Especially, if you have witnessed the experienced employees, often cast as the “critical ones”, that get pushed aside for younger folks that likely don’t have the experience, nor leverage, to push back, this film is for you. If you’ve witnessed company meetings that felt more like church sermons, this film is for you.
Basically, this film is the documentary version of another HBO show, the satire of Silicon Valley that is “Silicon Valley”. But here’s the thing, all of what I posted above is so common. As we watched the film my wife (who also works in tech) and I would look at each and say “does that seem familiar”. That’s what makes this complex. All of these tactics can be used for good. Nearly every company I interact with is using similar tactics as Theranos. How many startups do you know of that start in “stealth mode”? How many company meetings have you witnessed where they turned competition or criticism into an enemy that we need to attack? How many companies are being led by cults of personality?
Every time someone was questioned as to why they worked at Theranos, or invested, or did positive reporting, they would respond with the stories of Steve Jobs, Bill Gates, etc who all went through similar processes. The Theranos story started like so many successful stories start. All of the doubters, skeptics losing out to the true believers that never lost faith. True innovation looks crazy until it isn’t. Highly collaborative and passionate companies look like and even behave like cults. But that doesn’t mean these companies are bad. It just means that they are susceptible to bad. Even when full of well-meaning, intelligent people. By the way, this is why executives should be held to much higher standards than non-executives. Yet, unfortunately, it’s often the opposite. They are protected by company attorneys and apparently even bodyguards. They can get away with real crimes and harassment while we can get booted out for having a beer on a flight.
Many non-tech (and even tech) folks are confused as to how so many of these rich folks could be duped and give Theranos so much money. Many have said it’s old dudes being attracted to a young woman. And I’m not going to deny that. But I will say, this story is common no matter the sex of the founder(s). Remember, just because somebody is rich, does not mean they are smart. More than anything, it likely means they think they know more than they really do. Damn those biases! And now they have a smaller risk profile. More money to make more mistakes without risking livelihood. So if anything, they’re going to be more susceptible to being duped and making bad decisions.
Honestly, welcome to investing (especially early-stage). And Holmes was no fool. She played the role perfectly. When making a decision to invest or even work for an early stage startup you are working with very little information. Much of your decision to invest or work with these companies will be based on what you think of the founder(s). Well, Holmes did the smart thing, she copied other’s playbook. She dressed just like Jobs. She speaks like Zuckerberg. She attended and dropped out (even better!) of Standford. She learned how to promote and market. And most importantly, who to market to. She surrounded herself with known entities. Successful people. From the outside, why would you question what was happening?
Unfortunately, I have no solution to avoiding what happened with Theranos. The best I can say is we should spend more time attempting to find where the incentives are. And I know this seems obvious, yet is more difficult than you realize, but listen to the people that know you, like close friends and family. You are being sucked in by tactics that appeal to your selfish and tribalistic human nature. Those around you will know best when you’re being manipulated. Or at least, provide some much-needed skepticism. Do not ignore them. It’s amazing but we will give more credence to the voice of a person that won’t share in your losses and can gain so much from you over folks that just want what’s best for you. I have made this mistake. I have been sucked in and burned bridges that I regret. And my story doesn’t even end in fraud and many folks being put a risk, even death.
Also, as much as I have been a fan of Elon Musk’s innovations and ideas, we have to ask ourselves is Musk just an even larger than life Holmes. Are we letting this happen again with Tesla?
