<story><title>Elizabeth Holmes urged employees to hide Theranos’ lab equipment from inspectors</title><url>https://arstechnica.com/tech-policy/2021/09/elizabeth-holmes-urged-employees-to-hide-theranos-lab-equipment-from-inspectors/</url></story><parent_chain><item><author>munificent</author><text>&lt;i&gt;&amp;gt; What just amazed me is how gullible all the investors were, and how they didn&amp;#x27;t do due diligence, hire outside experts, or anything. Weird.&lt;/i&gt;&lt;p&gt;The thing is, the primary goal of an investor is not to invest in companies that are honest and actually do what they claim. The goal is to invest in a company that reaches a valuation high enough to let them recoup their investment at a profit.&lt;p&gt;If that valuation happens through fraud, hype, destroying the environment, whatever, that doesn&amp;#x27;t really factor in. It probably is the case that successfully doing what the company claims has a positive correlation with higher valuation, but it&amp;#x27;s not strictly necessary.&lt;p&gt;The failure mode for the investors in Theranos is not that it was fraudulent. It&amp;#x27;s that the fraud was discovered before they could cash out. They didn&amp;#x27;t need to believe that Theranos was honest, they just needed to believe that &lt;i&gt;other later investors would believe they were honest&lt;/i&gt;.</text></item><item><author>photochemsyn</author><text>The crazy thing about Theranos is that so many people with experience in microfluidics (developed mainly for DNA sequencing although there are other uses) knew that their claims were impossible, technologically speaking.&lt;p&gt;Working with such small volumes to obtain quantitive estimates of blood chemistry is so implausible, as you are introducing uncontrollable variability - micro-evaporation, even tissue localization issues, I mean all the trained blood chemistry specialists knew this.  I worked a little with DNA microfluidics, and it works because it&amp;#x27;s not quantitative.&lt;p&gt;Now, what they could have done is just stuck to pos&amp;#x2F;neg tests, i.e. &amp;#x27;are you infected with this virus or not&amp;#x27; which is a lot more plausible as you don&amp;#x27;t have to meet a quantitative goal, just a detection goal.  Also, one-stop STD screening for HIV &amp;#x2F; herpes &amp;#x2F; etc. is possible too (I suggested this and someone responded, &amp;#x27;new company name: ClapTrap&amp;quot;).&lt;p&gt;It&amp;#x27;s really kind of sad, as Theranos might have been able to pull that off (although new management would probably be required), and then they&amp;#x27;d have been positioned to do all the COVID testing (which was a major problem in the initial US response).&lt;p&gt;What just amazed me is how gullible all the investors were, and how they didn&amp;#x27;t do due diligence, hire outside experts, or anything.  Weird.</text></item></parent_chain><comment><author>avalys</author><text>Can you provide any examples of a high-profile company, ultimately shown to be dishonest, where the early investors were able to “cash out” before this dishonesty became known?</text></comment>
<story><title>Elizabeth Holmes urged employees to hide Theranos’ lab equipment from inspectors</title><url>https://arstechnica.com/tech-policy/2021/09/elizabeth-holmes-urged-employees-to-hide-theranos-lab-equipment-from-inspectors/</url></story><parent_chain><item><author>munificent</author><text>&lt;i&gt;&amp;gt; What just amazed me is how gullible all the investors were, and how they didn&amp;#x27;t do due diligence, hire outside experts, or anything. Weird.&lt;/i&gt;&lt;p&gt;The thing is, the primary goal of an investor is not to invest in companies that are honest and actually do what they claim. The goal is to invest in a company that reaches a valuation high enough to let them recoup their investment at a profit.&lt;p&gt;If that valuation happens through fraud, hype, destroying the environment, whatever, that doesn&amp;#x27;t really factor in. It probably is the case that successfully doing what the company claims has a positive correlation with higher valuation, but it&amp;#x27;s not strictly necessary.&lt;p&gt;The failure mode for the investors in Theranos is not that it was fraudulent. It&amp;#x27;s that the fraud was discovered before they could cash out. They didn&amp;#x27;t need to believe that Theranos was honest, they just needed to believe that &lt;i&gt;other later investors would believe they were honest&lt;/i&gt;.</text></item><item><author>photochemsyn</author><text>The crazy thing about Theranos is that so many people with experience in microfluidics (developed mainly for DNA sequencing although there are other uses) knew that their claims were impossible, technologically speaking.&lt;p&gt;Working with such small volumes to obtain quantitive estimates of blood chemistry is so implausible, as you are introducing uncontrollable variability - micro-evaporation, even tissue localization issues, I mean all the trained blood chemistry specialists knew this.  I worked a little with DNA microfluidics, and it works because it&amp;#x27;s not quantitative.&lt;p&gt;Now, what they could have done is just stuck to pos&amp;#x2F;neg tests, i.e. &amp;#x27;are you infected with this virus or not&amp;#x27; which is a lot more plausible as you don&amp;#x27;t have to meet a quantitative goal, just a detection goal.  Also, one-stop STD screening for HIV &amp;#x2F; herpes &amp;#x2F; etc. is possible too (I suggested this and someone responded, &amp;#x27;new company name: ClapTrap&amp;quot;).&lt;p&gt;It&amp;#x27;s really kind of sad, as Theranos might have been able to pull that off (although new management would probably be required), and then they&amp;#x27;d have been positioned to do all the COVID testing (which was a major problem in the initial US response).&lt;p&gt;What just amazed me is how gullible all the investors were, and how they didn&amp;#x27;t do due diligence, hire outside experts, or anything.  Weird.</text></item></parent_chain><comment><author>olalonde</author><text>But in the end, it&amp;#x27;s such a gamble that I&amp;#x27;m skeptical any of the investors knew or suspected fraud when they initially invested. I&amp;#x27;ve heard of exits for companies without a business model or revenue, but how many companies have an exit event (e.g. get acquired or IPO) with no product at all?</text></comment>