Theranos — A Cautionary Tale for All of Us

Derek Yan
6 min readMay 11, 2020

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In October 2015, the Wall Street Journal published a scathing article on Elizabeth Holmes and Theranos, a Silicon Valley fingerprick blood testing company that promised to give rapid results on over 200 diagnosis without the need of venipuncture for phlebotomy. Theranos’ blood test results were vastly inaccurate and many were performed by diluting patient blood samples and then run on commercially available medical devices. It was advertised to be completed on a laser-printer-like apparatus but instead fabricated the results through other means.This very company that was worth 9 billion dollars with around 800 employees in Palo Alto became worth 0 dollars in the span of a couple years, and finally dissolved in 2018. Elizabeth Holmes was charged with fraud and conspiracy, when the trials are set to begin in August of this year.

Elizabeth Holmes and Theranos manufactured false data for their blood test apparatus and raised $1.4 billion dollars from investors before dissolving in 2018

What happened to Elizabeth Holmes and Theranos was very much a function of the values of Silicon Valley. The notion that impossible is nothing and ingenuity was the process of setting a grandiose vision and constantly hacking on it until it became a reality runs through the veins of every entrepreneur. On the very campus where Elizabeth Holmes was once enrolled and later dropped out — Stanford University, also my alma mater, legends of past maverick success stories of entrepreneurs are preached in the CS and EE classes, they are taught in the very buildings named after these billionaires, where students aspire to be the next Bill Gates, Paul Allen, Gordon Moore, Jensen Huang, Bill Hewlett, David Packard, and etc.

Stanford University, at the center of Silicon Valley where alums had gone on to create Google, Snapchat, NVIDIA, etc.

It was told that when Gates and Allen first saw an ad on the Popular Electronics in January 1975 about Altair 8800, they pitched to the company that they already had a BASIC interpreter for the platform where users were able to write computer programs using this language. Altair executives agreed to meet with the duo and see a demo of the interpreter in March. At the time, neither Gates or Allen actually had a BASIC interpreter, they didn’t even have a Altair system to develop the interpreter. In the span of a couple months, the two used Harvard’s academic timesharing computer to hack together a demo. It was in fact right before the plane landed in Albuquerque for the meeting with Altair that Allen put in the final touches to program the bootstrap for the system. Gates recalled that at the demo Allen typed the instruction “PRINT 2+2”, and the computer returned “4”. The rest became history and a software behemoth was born.

Microsoft started by Gates and Allen via the contract they had with MITS, whom asked the duo to build a BASIC interpreter for the Altair 8800

Story like this is not uncommon in the valley, where entrepreneurs walked into a pitch meeting sometimes with just an idea on a slide deck and were able to raise millions upon millions of dollars. Startups that had not made a single dollar of revenue or had a single paying customer could be worth billions of dollars. All the worth of the company was based on a strong vision, a capable team, and perhaps a product prototype that may or may not be working. These companies stay private so that the financials do not need to be released to the public. The technologies are considered trade secrets, and often cannot be vetted properly by private investors who are not tech savvy enough to call bs on the intricacies and defensibility of the underlying technology. The stake is also high that not promising something revolutionary or demoing a sensationalized prototype could mean running out of cash or not being able to attract the best talents. Such an environment breeds unrealistic goals, embellishments in results, eventually sometimes fraudulent behaviors. What happened to Elizabeth Holmes is a cautionary tale for all of us.

In the Starbucks on University Avenue in Palo Alto, CA, it’s not uncommon to see or hear coffee chats between aspiring entrepreneurs with investors

It is important to step back and callout that in any business, the fundamental core values are integrity and ethics. There is no grey area between what has been achieved vs. what may be achieved. We need to treat our customers the way we want to be treated. That means providing excellent service, accurate information, and at the same time delivering on all promises. Integrity and business ethics are absolutely the minimum standard that cannot be crossed when finding cofounders, interviewing employees, and finally working with business partners and investors. The story goes that one small lie can snowball into a large lie, soon before it seeps through the company values and makes the entire workplace toxic, immoral, and law-breaking.

Our communication latency is limited by the speed of light, which is around 3.0e8 m/s.

With this being said, I like to share two piece of wisdom I learned from Ray Dalio in dealing with achieving unattainable goals and excelling in our business on top of valuing integrity and ethics above all else. Firstly, be in line with reality. We need to both understand and operate within the physical limits of the world. The speed of light is 2.998e8 m/s in vacuum, there is no perpetual motion machine, all elements in the universe all made up of atoms,… These are fundamental physical laws that cannot be bent or negotiated. Depending on which line of business you are in, find out what those limits are, and operate within them. Having a false belief of reality will only cause you to stray away from the truth further and further, an ultimately leads to destruction. Secondly, be an independent critical thinker and surround yourself with independent critical thinkers. The difference between a cult and religion is that a cult enforces for complete obedience and do not tolerate any independent thoughts or criticisms. On the other hand, some of my heroes, Martin Luther, Reverend King, were those who were not afraid to speak up against oppression, they did not follow but instead led, and fought against the so-called conventional belief. For a truth to be considered truthful, it can and should be tested, it needs to withstand the criticisms of others who are experts in the field, and finally it must pass the test of time. Surround yourself with capable, smart, and driven individuals who are also independent thinkers. Cultivate a culture of thoughtful disagreement, encourage idea meritocracies, and don’t drink the Kool-Aid.

Let’s all do our parts in calling out the disinformation, liars and cheats around us

Finally, we are accountable for our own actions. No excuses. That’s why it breaks my heart to see what is happening around the world right now in light of the disinformation that is spread by various outlets, administrations and people of power. Nothing can upend the truth. It’s almost comical right now on what type of disinformation gets spread and shared by supposedly highly educated and sophisticated organizations and individuals. Instead of listening to doctors and researchers who are well qualified to discuss and debate on the guidelines, politicians and business leaders take center stage in setting the rules. Are we at a point now that we are so ignorant that we ignore science, data, and facts? There is zero tolerance for liars and cheats in our society. Let’s all step up and call out bs when we see them and hold ourselves to the highest standards.

// Derek Z. H. Yan is the Co-founder & CTO of Polarr, Inc., a Series-A stage tech startup in the photography and artificial intelligence space based in Downtown San Jose. Please visit polarr.co/careers for job postings or email directly to stay in touch.

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