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| Brian Castellani, CC BY-SA 4.0 <https://creativecommons.org/licenses/by-sa/4.0>, via Wikimedia Commons |
Like Enron, WorldCom, and other juicy corporate scandals, Theranos is fast becoming its own cottage industry of business wisdom.[1]
Some of the lessons are obvious. Don’t lie, for example. You may have learned not to lie in kindergarten, but Theranos is still a good reminder. Don’t lie to investors. Don’t lie to your board or customers. Don’t lie to a jury.[2]
This caution isn't about being optimistic or forward-thinking. There are few investors I know unable to distinguish a bald-faced lie from aggressive forecasting or leaning into the future, the stuff investors know to expect. (For a great discussion on this topic, see Dan Isenberg's oldie but goodie, "Should Entrepreneurs Lie?")
But if someone hands you a Pop-Tart and says it’s health food, you don’t need to call a meeting to assess the matter. A lie is kind of like that.
Here’s another
lesson from Theranos: If you take a board position, do the work.
Think about
the members of the Theranos board. Former Secretary of State George Shultz. Henry Kissinger.
U.S. Marine Corps Gen. James Mattis. And on and on. Fortune described Theranos’ directors as “the single most
accomplished board in U.S. corporate history.”[3]
Accomplished,
maybe. But engaged? Mattis saw the strength of Theranos CEO Elizabeth Holmes’s
vision as the sort of exceptional leadership he had witnessed in the military. Kissinger
was unable to compare her to anyone else “because I haven’t seen anyone with
her special attributes.” Ninety-three-year-old Shultz was struck by Holmes’s
“purity of motivation.”[4]
Obviously,
these gentlemen were recruited as trophy directors, not for their deep
knowledge of blood testing.
Which is all
good. Big-name directors can enhance the standing of a company.
But if you
take a director’s job, do the work. Be engaged. It’s easy to see how old men can be charmed, but silly to think that
experienced leaders like Mattis, Shultz, and Kissinger--if they invest the time--could be hoodwinked by a
college dropout.
For example,
this is how Holmes explained her fundamental technology: “A chemistry is
performed so that a chemical reaction occurs and generates a signal from the
chemical interaction with the sample, which is translated into a result, which
is then reviewed by certified laboratory personnel.”[5]
If you were
sitting on the board of Theranos and heard that answer, wouldn’t your head have
exploded? All Shultz or Mattis had to do was utter two words: “Show me.”
“Let’s walk
to the lab, take my blood, and show me how our machine spits out results. I’ve
got time. Show me.”
Learning if
a product or service works, or even exists, would seem to be the minimum responsibility
of a board member. A single, truly engaged Theranos director might have preserved
a half-billion in capital and kept an immoral, feckless, and reckless CEO from
facing a twenty-year prison term.
Which
brings me to the third, related lesson, and the one that interests me most: Attributing
the Theranos catastrophe to Elizabeth Holmes, or any single “root cause,”
reflects a fundamental misunderstanding of how complex systems fail.
Adapted from science to social science, the theory of complex systems emerged
about a generation ago. It asks good questions, such as: Why do airplanes
crash, or nuclear power plants melt down? How do space shuttles suddenly explode?
Why do oil tankers break apart and ruin our environment?
Let’s begin
with that last question, about oil tankers, because it’s relevant to Theranos.
 |
| Wikipedia |
The Exxon Valdez
In March 1989,
the Exxon Valdez oil tanker ran
aground in the pristine waters off Prince William Sound, Alaska.
Over the
next two months, the ruptured ship released eleven million gallons of crude oil,
degrading nearly 1,300 miles of shoreline. This event still ranks among the
most devastating environmental disasters in US history.
The captain
of the ship, Joseph Hazelwood, was absent from the bridge at the time of the
accident and was soon accused of drinking before the tanker set sail. He immediately
became the scapegoat and an object of national scorn.
Exxon
subsequently fired him, the obvious “root cause” of the catastrophe.
Not
everyone was convinced that things were that simple, however. The “Fable of the
Drunken Skipper” that emerged, The Guardian
concluded, transformed “the most destructive oil spill in history into a tale
of human frailty—a terrible, but one-time, accident.”[6]
It was like
blaming Elizabeth Holmes for the Theranos catastrophe. Both Holmes and
Hazelwood contributed to disaster, no question. But to be this bad at
something, to create one of the worst environmental disasters in US history or to
destroy a billion dollars in capital, is the doings of an entire community.
If you want
to really mess something up, complex theory says, it takes a village.
++++++++++++++++++++++++++++++++++++++
Bad Blood
In May
2018, readers got their first look at Bad
Blood, a gripping account by Pulitzer-prize-winning journalist John
Carreyrou of Holmes and Theranos. Carreyrou’s reporting was courageous and
brilliant.
The bottom
line, we learned at the time, was that Theranos consumed nearly a billion
dollars in capital but was unable to commercialize a safe, accurate blood test,
much less one capable of delivering on the CEO’s promise of reinventing
consumer medicine.
On the way
to this disaster, Holmes lied to investors and partners, bullied the press and
her employees, and gambled with the lives of patients. “Her ambition was
voracious and it brooked no interference,” Carreyrou writes. “If there was
collateral damage on her way to riches and fame, so be it.”[7]
The rise
and fall was dramatic.
In 2014, Holmes was declared the world’s youngest self-made female billionaire. Four years later, her wealth had evaporated. She had resigned from the company and was facing lawsuits from Theranos customers who believed they had been harmed by inaccurate test results. The Securities and Exchange Commission accused the disgraced CEO of massive fraud. (For a recent update, see here.)
Elizabeth
Holmes had become the drunken skipper of the Theranos saga, an object of
national scorn, and the person identified as the root cause of a disaster that
never should have occurred. It was, like the fable of Joseph Hazelwood and the Exxon Valdez, an undeniable story of
human error, a terrible but one-off tragedy.
++++++++++++++++++++++++++++++++
Complex Systems, Complex Failures
In the last
generation, social scientists have adapted and expanded upon the older scientific
concept of “complex systems.” These systems are defined as networks where a
large number of components interact with each other, often in unusual and
unanticipated ways.
Where
scientists explore systems such as the internet, the human brain, and the
universe, social scientists study systems whose components include people,
technologies, resources, processes, rules, constraints, incentives, and goals, all
constantly in motion.
Complex
systems that are people-centered tend to be dynamic, collaborative, and asked
to perform demanding tasks under time pressure. These include data centers, oil
rigs, commercial aircraft, air traffic control centers, nuclear power plants, ocean
vessels, and operating rooms.
The modern American
entrepreneurial ecosystem possesses all the properties of a people-centered complex
system, including investors, entrepreneurs, employees, boards, universities, accelerators,
lawyers, regulators, and journalists. It features countless processes, each
with stated or unstated rules, goals, incentives, and myths, as well as complicated
technologies, both established and untested.
These
components are interconnected and fluid. To succeed, they must be responsive to
unpredictable factors such as economic conditions, the supply of investment
capital, and the needs and desires of consumers.
Researchers
find complex systems to be robust, capable of recovering from single errors and
establishing safeguards to protect from recurrences. Because they are
continually stressed by change, however, such systems run in what observers
call a perpetually “degraded mode”—that is, close to the critical failure
point.
Single
errors are always seeking new ways to combine with other single errors,
threatening to cascade in spectacular ways.
++++++++++++++++++++++++++++++
The Exxon
Valdez Disaster as a Complex System
The
grounding of the Exxon Valdez is the
result of the failure of a complex system.
Captain
Hazelwood, in his bunk and possibly impaired, was an easy target of blame. But
subsequent analysis revealed a more complicated chain of events.
To begin, local
government had ceded emergency response preparedness to the energy industry
which, in trying to save money, failed to fund the equipment required for rapid
clean-up of a spill in Prince William Sound.
Exxon was
accused of inconsistently supervising the captain, who was known to have a
substance abuse issue. To increase profits, the energy giant had reduced the
crew on the Exxon Valdez from
twenty-four to fourteen people, resulting in undermanned operations and insufficient
rest breaks.
At the time
of the accident, the Third Mate was the only officer on the bridge, a violation
of company policy. In addition, he was not rated to navigate Prince William
Sound, a weakness magnified by a helmsman who failed to follow direct steering
orders.
The oil
tanker’s sophisticated radar was broken and had been inactive for the prior
year, judged too expensive to repair.
The ship
had traveled outside normal shipping lanes to avoid icebergs. The US Coast
Guard had failed to provide an effective vessel traffic system, and both the Coast
Guard and Alaska Department of Environmental Conservation were blamed for lax
enforcement of the shipping process.
The Alaska
Oil Spill Commission concluded that the Exxon
Valdez oil spill was no fable of a drunken skipper, but “the result of the gradual
degradation of oversight and safety practices that had been intended . . . to
safeguard and backstop the inevitable mistakes of human beings.”[8]
The complex
system for shipping oil from Prince William Sound provides a tragic example of
a process that seemed to run flawlessly time after time but was full of
ever-shifting risk and perpetually close to a critical failure.
+++++++++++++++++++++++++++++++++++++
Sharp and Blunt Ends
British
psychologist James Reason has studied the way people and processes contribute
to the breakdown of complex systems. Dr. Reason describes two opposing
explanations.
The “Person
approach” focuses on people at what he calls the sharp end of a system—those who are on the front lines, interacting
in risky situations. These sharp-end players include surgeons (and their
scalpels, hence the name), pilots, ship captains, air traffic controllers,
power plant operators—and, in the case of the entrepreneurial ecosystem,
investors and entrepreneurs.
Hazelton
and Holmes were both sharp-end players, responsible for decision-making in real-time. This “Person approach” attributes errors to factors such as carelessness,
negligence, and recklessness. “Blaming individuals is emotionally more
satisfying than targeting institutions,” Reason writes.[9]
Compare
this explanation to a “Systems approach” which says that humans are fallible. Errors
are a normal and often defensible part of a complex system. The so-called blunt end of such a system can more
effectively control the conditions under which errors occur, rather than trying
to fix human imperfection.
The blunt
end is comprised of many layers of policies, guidelines, regulations, and
incentives. Because individuals at the blunt end are rarely on the firing line,
they are apt to set rules that may overemphasize efficiency, profit, hierarchy,
or are ambiguous in other ways that create dilemmas for people at the sharp end.[10]
Sociologist
Charles Perrow, credited with revolutionizing the science of catastrophic
failure, describes one kind of blunt-end dilemma felt by sharp-end commercial
pilots.
These
professionals can be pressured, Perrow writes, to avoid declaring the existence
of an icy runaway, which could close an airport and disrupt flights throughout
the entire system.[11]
Like many
players at the sharp end, these pilots are responsible for both “production”
(passenger revenue, on-time delivery) and “defense” (assessing runway
conditions, flying safely in extreme weather). This ambiguity illustrates the
nature of a complex system where one part creates conflicting procedures that
another part must resolve under pressure, in real-time.
Actions
taken at the sharp end almost always involve some sort of gamble.
In 1998,
Dr. Richard Cook published a now-iconic summary of how complex systems fail,[12] concluding
the following:
·
Complex
systems are inherently and unavoidably hazardous. The latent
risks within a system continually shift because people, technology,
organization, and goals are all dynamic. Changes that introduce improvements
also introduce new ways to fail. “Catastrophe is always just around the corner,”
Cook writes.
·
Attributing
catastrophe to a single “root cause” reflects a misunderstanding of failure. Small
failures are almost always mitigated by system defenses. Catastrophe requires
the cascading of small, sometimes innocuous failures.
In his book
Outliers, for example, Malcolm
Gladwell describes a typical plane crash as the result of seven factors, most
of them small and benign: slightly poor weather, the plane being a bit behind
schedule, a pilot being tired, two pilots never having flown together, and the
like. The conventional commercial jetliner, Gladwell writes, “is about as dependable
as a toaster. Plane crashes are much more likely to be the result of an
accumulation of minor difficulties and seemingly trivial malfunctions.”[13]
·
Hindsight
is biased. Knowledge of the outcome poisons the ability of observers to recreate
the view of practitioners. After-accident reviews that suggest a catastrophe
should have been recognized in advance are usually naïve.
·
Activities at
the sharp end are gambles full of demands, dilemmas, conflicts, and
uncertainty. The same people responsible in a complex system
for producing desired results are also responsible for defending against
failure. In good times, the emphasis is on production. After an accident, the
focus shifts to defense.
While the
blunt end can afford to be ambiguous, Cook writes, “actions at the sharp end resolve
all ambiguity.”
Dr. Cook’s
rules highlight one of the fundamental themes in entrepreneurship as it has
played out over the last 300 years in America: If the success of an entrepreneur is dependent on his ability to
build and leverage community, then entrepreneurial failure is also shared with community.
Elizabeth
Holmes unquestionably performed poorly as CEO, lying repeatedly and putting her
own interests above those of her investors and customers. But a complex system
is designed to defend against such aberrant players and flush them out long
before a catastrophe occurs.
What made
Theranos different from a thousand other flawed technology startups that have
died quiet deaths was the unforeseeable combination of single failures that were
linked together in unanticipated ways: an inexperienced CEO who lied and
deceived, an “adult” Chief Operating Officer that only magnified the CEO’s
shortcomings, a lack of appropriate due diligence by investors and partners, and
the absence of financial auditors.
Throughout
the research and development phase, Holmes forbid transparency with the
scientific community and, for too long, with regulators.
She was
able to create a siloed organization where the right hand was blind to what the
left hand was doing.
She
operated a medical device company making a life-changing product with the abandon
of a software technology company making a consumer app.
And,
observers point out, she kept excessive control as CEO, due to an unhealthy
imbalance between Theranos’s board and management team, both entities that she
controlled.
Despite
these many sharp-end failings, however, the theory of complex systems suggests
that Elizabeth Holmes and Theranos should
also be measured against the incentives that made up the blunt end of the
entrepreneurial ecosystem.
In the opening decades of the twenty-first century,
there were five compelling, unwritten, and highly ambiguous norms that influenced
the actions of Holmes and other Millennial-era CEOs. These included:
· a belief that superior entrepreneurs should “dream big”
· an allowance for CEOs to “distort reality” when needed
· a bias toward taking risk by practicing “permissionless innovation,”
· a willingness of investors to place big bets and “swing for the fences” and,
· a preference for “jockey over horse,” or backing an entrepreneur despite flaws in technology, markets, or business models.
These norms operated within the context of a long and
optimistic bull market, an abundance of venture and corporate cash, low interest
rates, and the success of Facebook and subsequent rise of billion-dollar-valued
startups, or unicorns. Among investors, a “fear of missing out” on the next big
deal was so pervasive that it earned its own acronym, FOMO.
Measured in
the context of a complex system, the Theranos saga is a reminder that a single
CEO can raise a round of capital under false pretense, but it takes a village
to lose $900 million over fifteen years and put thousands of consumers at risk.
+++++++++++++++++++++++++++++++++++++
Blunt End 1: Dream Big
Steve Jobs died in 2011, the
same year that Walter Isaacson’s best-selling biography of the entrepreneur
came to market, a book that seemed to immediately influence the way in which countless
CEOs behaved.
There is no question that
Holmes was one of those impressionable CEOs, an admirer so besotted with the
Apple CEO that his story dictated the way she dressed and spoke, the selection
of the company’s vehicles and advertising agency, and the siloed organization and
culture of secrecy upon which she insisted.
There came a point, John
Carreyrou writes, when employees at Theranos could pinpoint the chapter Holmes
was reading in the Jobs biography based on her behavior. She even referred to
Jobs as if they were friends.[14]
There was good reason that venture
capitalist Marc Andreesen, Inc. magazine,
and Holmes’s Stanford mentor Channing Robertson all saw in the young CEO “the
next Steve Jobs.”
Devotees of
Jobs’s leadership style shared other traits. They emphasized beautiful design
in their pursuit of technological solutions. They believed that customers could
not always articulate what they wanted and often had to be shown the future. They
micromanaged the process of product development. They refused to suffer fools
and could place results over civility.
But Steve
Jobs’s true mark on the entrepreneurial ecosystem—on shaping the ambiguities of
the blunt end—came down to two elements, both ingrained in Elizabeth Holmes’s
style. The first was this: True entrepreneurs needed to think big and pursue gigantic,
game-changing innovation.
One of Jobs’s most famous
quotes, appearing regularly on social media long after his death, is “I want to
put a ding in the universe.” In other words, an entrepreneur who wanted to be
like Steve Jobs should seek dramatic, world-changing disruption.
Holmes’s personal creation
myth had evolved to include the note she wrote her father when she was 9 years
old, saying she wanted to find “something mankind didn’t know was possible to
do.”[15] She often told investors
that Theranos would reinvent consumer medicine, changing the world just as
Apple had changed consumer electronics.
Answering
charges by the Wall Street Journal,
she had gone on Jim Cramer’s CNBC television show to say, “First they think you’re crazy, then they fight you, and then,
all of a sudden, you change the world.”[16] It was a page taken directly from the playbook
of Steve Jobs, whose own history included being fired by Apple before returning
as a conquering hero to build the world’s most valuable company.
The problem with putting a
“ding in the universe” is not that it can’t happen—and, in the case of Jobs,
does occasionally. However, the overwhelming number of stories of successful entrepreneurs
suggest that revolutionary innovation tends to be the unintended, unforeseen
result of a novel solution focused on some pressing, present need.
In other words, entrepreneurs
who end up changing the future usually begin by focusing on changing the
present.
My own experience in writing
about Willis Carrier is provides an excellent example. A recent Cornell grad, Carrier
attempted to solve the specific humidity problem of a printer in Brooklyn
trying to meet circulation deadlines. This would one day result in the founding
of a global, multibillion dollar HVAC industry and rise of America’s Sunbelt.
I can assure you that these dings
in the universe were not part of Carrier’s initial plan.
The modern entrepreneurial narrative
has concocted “big dream” creation myths around its marquee companies and
entrepreneurs in a way that can negatively impact naïve CEOs such as Elizabeth
Holmes.
“Books
about technology start-ups have a pattern,” writes author Kate Crawford. “First,
there’s a grand vision of the founders, then the heroic journey of producing
new worlds from all-night coding and caffeine abuse, and finally the grand
finale, immense wealth and secular sainthood . . . The trouble,” Crawford
continues, “is that Silicon Valley now believes its own press.”[17]
Sheryl Sandberg’s address to Barnard graduates in 2011
laid out this toxic, blunt-end myth: “The one thing I’ve learned working with
great entrepreneurs—Mark Zuckerberg at Facebook, Larry Page and Sergey Brin at
Google,” she said, “is that if you want to make a difference, you better think big and dream big, right
from day one.”[18]
Mark Zuckerberg’s original vision for Facebook was to
create an online directory for college students. It was more “Yellow Pages”
than ding in the universe. Zuckerberg’s lofty goal in 2005 was to move from
serving 800 schools to 2,000 U.S. colleges. “There doesn’t necessarily have to
be more,” Zuckerberg said.[19] Only
later as Zuckerberg breathed the rarefied air of Silicon Valley did his big-dream
creation myth emerge.
As grad students at Stanford, Larry Page and Sergey
Brin were fascinated with the mathematics of the Web, but Page recalled that it
was never his intention to create a search engine. He wanted his work to be
useful and “figured if I ended up building something that was going to
potentially benefit a lot of people . . . then I would be open to
commercializing it.”[20]
By 1998, Google was outgrowing Stanford’s computing
resources. The reluctant entrepreneurs were forced to either launch a company
or scale back their work. They decided to incorporate, though observers recall how
sad Page and Brin were the day they were forced to leave Stanford and begin
operating a company full-time. By mid-1999, there was still no viable business
model; both founders were suspicious of mixing advertising and search, or of
putting the interests of advertisers ahead of users.
By early 2001 the company still had no plan for making
money. While Google would eventually ding the universe, the idea that its
founders set out with a big dream is a myth of the ecosystem.
If Elizabeth Holmes had not
been convinced that the only good idea was an enormous, game-changing idea, she
might have scaled back her claims for Theranos. She might have put science and
transparency ahead of hype.
The company might have
focused on perfecting a handful of tests and a simpler business model, one that
would have achieved success in stages, consumed capital in smaller bites, and
scaled in a way that respected the well-being of employees, the health of
patients—and the truth.
The traditional cautionary tale
around Holmes is about lying and deception at the sharp end when it might just
as well be about her embracing the myth of the big dream perpetrated at the
blunt end of the entrepreneurial ecosystem.
+++++++++++++++++++++++++++++++++
Blunt End #2: Distort Reality
A second lethal blunt-end
myth, also sourced back to Steve Jobs, would prove equally detrimental to
Holmes’s efforts to build Theranos.
Jobs was famous for his ability
to project what observers came to call a “reality distortion field.” One of
Apple’s software developers, Bud Tribble, coined the term when Jobs informed
his product team that they would ship the Macintosh computer in ten months, at
the time an impossibility. In Jobs’s presence, Tribble said, “reality is
malleable. He can convince anyone of practically anything. It [the effect of
the reality distortion field] wears off when he’s not around, but it makes it
hard to have realistic schedules.”[21]
When Elizabeth Holmes was in
the presence of others, she threw an especially potent reality distortion
field. Even in the face of intense pressure, she could be calm, assured, and
command ideas before an audience.
“Like her idol Steve Jobs,”
Carreyrou writes, “she emitted a reality distortion field that forced people to
momentarily suspend belief.”[22]
If there was a turning point
in the Theranos saga, a single error which allowed the chain reaction of other
errors to multiply, it probably occurred in March 2008.
By then, Holmes had raised
less than $50 million of the $900 million she would eventually consume. No
patients had been hurt. Theranos looked like most any other start-up,
struggling to make its promise a reality.
However, about that time,
the company’s head of sales and marketing, and its general counsel approached a
board member to say that Holmes was presenting financial projections detached
from reality. Her budgets went beyond aggressive forecasting, common to
successful entrepreneurs.
Instead, Holmes was
promising numbers that were impossible to make even if the Edison product
worked, which it did not. In short, she was lying to her own board of
directors.
The complaint made its way
to the chairman of the board, Don Lucas, a seasoned investor who convened an
emergency meeting of directors. Holmes waited outside as the board talked.
“After some discussion,”
Carreyrou writes, “the four men reached a consensus: they would remove
Elizabeth as CEO. She had proven herself too young and inexperienced for the
job.”
Another director, Tom
Brodeen, would lead the company while the search for a new, permanent CEO was
conducted.
This move was the kind of normal
leadership change made on by startup boards which find their founder
overwhelmed by her creation. Yet, when Holmes was informed of the decision, Carreyrou
writes, something unexpected occurred:
Over the course of the next two hours, Elizabeth convinced them to
change their minds. She told them she recognized there were issues with her
management and promised to change. She would be more transparent and responsive
going forward. It wouldn’t happen again. Brodeen . . . watched as Elizabeth
used just the right mix of contrition and charm to gradually win back his three
board colleagues. It was an impressive performance, he thought. A much older
and more experienced CEO skilled in the art of corporate infighting would have
been hard-pressed to turn the situation around like she had. He was reminded of
an old saying: “When you strike at the king, you must kill him.”[23]
The king, or queen survived,
however, and a few weeks later the managers who had complained about her were
fired. (These dismissals alone might have brought another board back for an emergency
session, a second sharp-end failure of Theranos directors.)
The impossible projections
never stopped, however. The lying grew. The Edison product never caught up with
its hype. Holmes’s reality distortion field had worked so effectively at a
pivotal moment in the history of the company that, in retrospect, she seems to
have made it a primary component of her management style.
An impartial observer might
define the reality distortion field as some combination of wishful thinking,
self-deception, and bold-faced lying. Regardless of these negative attributes,
in Silicon Valley it was a virtue. The blunt end of the entrepreneurial
ecosystem endorsed a skill that, used unambiguously at the sharp end, could
create a Steve Jobs and the most valuable company in the world, or could land a
CEO in jail.
The month after the Wall Street Journal’s October
2015 takedown of Theranos, entrepreneur Micah Rosenbloom endorsed Theranos’s
“misleading story” because “start-ups by definition should evangelize a future
vision.” Rosenbloom concluded that
nobody had been hurt, except the media, adding that he’d rather have the
Theranos and the Ubers of the world seeking breakthroughs, “even if we stub our
toes, or prick our fingers, in the process.”[24]
The advantage of perfecting a reality distortion
field and practicing this “fake it till you make it” attitude, Ryan told
entrepreneurs, is that if you do it long enough, “You basically start to
believe your own bullshit . . . and that’s a good thing.”[25]
Or, as it turned out at Theranos, maybe not.
+++++++++++++++++++++++++++++++++++++++++++++++++
Blunt End #3: Practice Permissionless Innovation
A third
pervasive belief at the blunt end of the modern entrepreneurial ecosystem, a
belief that can also be wielded destructively at the sharp end, involves the
concept of permissionless technology.
That’s the
belief that experimentation with new technologies in a society should be
permitted by default.
This
principle contrasts with a “precautionary approach” that dictates entrepreneurs
should prove that their innovation will not cause harm or break laws before
they unleash it on the public.[26]
Today’s enthusiasm
for technology implied in permissionless innovation came as a result of
America’s experience with the Web, computers, and software—a digital troika
that grew spectacularly with little regulation or government oversight. Elizabeth
Holmes built her blood-testing company in that free-wheeling environment.
For many
consumer products, permissionless innovation is acceptable. A first release can
be thrown today and “good enough” to get feedback and lead to improvement. This
so-called “minimally viable product” becomes the toehold necessary to gather
data and buy time to complete a more robust, fully-featured product.
As CEO
Zuckerberg told his development teams, "Unless you are breaking stuff, you
are not moving fast enough."[27]
Theranos
was competing in a different arena, however, one that directly impacted
consumer health. Breaking stuff on the way to creating a reliable consumer
blood test was bound to have real consequences.
The company
was attempting to combine hardware, software, and biochemistry, a complex blend
well beyond a consumer software product. And there was a nagging concern that
the human finger itself might need a redesign in order for Theranos to have a
dependable sample quality. These hurdles were substantial, and Theranos would
have benefited immeasurably from regular feedback by scientists and regulators,
and careful patient testing.
Theranos’s
desire to protect its competitive position, however, encouraged the company to initially
bypass the traditional FDA and peer-review process. Both could have provided an
early check-and-balance on the company’s faith in its own technology.
Reporter
Joe Rago understood this rationale, writing that the company, if it went public,
would invite “a hell of a battle with the health care industry, where the
incentives are rigged against start-ups and the empire usually finds a way of
striking back.”[28] Uber has faced similar
issues with the taxi industry, and Airbnb with the hotel industry, pitting
innovation that could benefit millions against the threat to a handful of
entrenched competitors.
All three
companies would engage in a “don’t ask for permission, beg for forgiveness”
product development and delivery strategy. This permissionless innovation was epitomized
by one of the heroes of the modern ecosystem, author Ayn Rand’s, who is often
quoted as having written, “The question isn’t who is going to let me; it’s who
is going to stop me.”
In
America’s entrepreneurial ecosystem, the assumption is that technology will ultimately
prevail, and that innovation is so important to society that entrepreneurs
should be unconstrained by rules and regulations.
“Will
innovators be forced to seek the blessing of public officials before they
develop and deploy new devices and services,” the home page of the free-market
think tank Mercatus Center of George Mason University asks, “or will they be
generally left free to experiment with new technologies and business models?”[29]
Venture
capitalist Balaji Srinivasan has extended this idea into what he calls “Silicon
Valley’s Ultimate Exit,” suggesting that the San Francisco tech community
should separate from the United States—“whether to the cloud for purely digital
technologies, or to a Special Innovation Zone or ultimately a startup
nation”—as a way to test new technologies “among a self-selected, opt-in group
of risk-tolerant early adopters.”[30] His idea is of a society of
“Inverse Amish” who live peacefully in the future, “a place where Google Glass
wearers are normal, where self-driving cars and delivery drones aren't
restricted by law, and where we can experiment with new technologies without
causing undue disruption to others.”[31]
Srinivasan
is not alone in his libertarian, separatist vision. Google’s Larry Page has
talked about setting aside a part of the world for unregulated experimentation.
Peter Thiel invested in sea steading (an island nation set on concrete stilts
in the open sea). And Tim Draper made a proposal to divide Silicon Valley into
its own state.
The
Mercatus website offered several position papers on the role of the FDA in the
development of medical devices. None of them reflect favorably on that
regulatory agency. One paper, published just as Theranos was gaining market
visibility in 2014, argues that a “Fortress”-like mentality with “an excessive
aversion to risk and deference to medical insiders” has held back innovation in
health care. Consumers would be better served by a “Frontier” approach that
tolerates risk and stresses better health care for more people at lower cost on
a continuous basis.”[32]
Conversely,
MIT professor Edward B. Roberts argues that successful innovation of medical
devices depends on extensive interplay between the entrepreneur, clinical
users, and the FDA. “It is nearly impossible for a biomedically oriented
company to perform effectively independent of that clinical environment,”
Roberts writes.[33]
From the
moment an innovation process begins, the impact of regulation must be factored
in, making impossible the likelihood of keeping invention secret.
Theranos met
this challenge by sidestepping regulators, shielding intellectual capital, and
practicing permissionless innovation. Holmes endorsed an extreme, questionable,
and ambiguous blunt-end concept wholeheartedly, helping to sink her company.
++++++++++++++++++++++++++++++++++++++++++++++++++++
Blunt End #4: Swing for the Fences
It was 1983
and Hollywood had suffered a series of flops including Heaven’s Gate, a $44 million debacle that sunk the United Artists
movie studio. William Goldman looked across more than fifty years of film
production experience, legions of talented executives, artists, and movie
stars, and reams of audience research to determine that “Nobody knows
anything.”
Producing a
new movie, Goldman had concluded, involved as much luck in 1984 as it had in
1910, and anyone who believed they could pick the next hit was delusional.
The modern
entrepreneurial ecosystem is just as uncertain. Despite the bravado, nobody
knows anything—or at least not much.
Antonio
Garcia Martinez, who spent time on Wall Street with Goldman Sachs and in
Silicon Valley with Facebook, describes the entrepreneurial journey as
something that appears to be an organized process but is really an
underinformed, hit-or-miss proposition, a “sort of flailing thing in which
really nobody knows where the future lies.”
It
is the difference, in philosopher Karl Popper’s terms, between the clock that
many want it to be, and the cloud that it really is.
You try ten things; two sort of work
out, and then one succeeds beyond all expectations. You really only understand
why in retrospect, and nobody would have guessed it. Which is what happened to
Facebook, by the way. . . . And the weird part of it is . . . it’s a complete
winner take-all society, where the guy who combines a little bit of technical
skill, with good timing, with happenstance, with two or three other things
going on in that industry landscape—he cashes out to the tune of potentially
billions . . . and then the other guy who maybe didn’t quite have the right
winds in his sails, who didn’t quite get the right breaks, gets literally zero.[34]
Betting on
the future is difficult. Investors recognize the steep odds against picking the
next big idea. Incentives for entrepreneurs change. Technology creates new
opportunities and new risks. Half of all carefully chosen, well-vetted, fully
supported deals will wash out.
The result
of this uncertainty in the modern entrepreneurial ecosystem is not to be less
bold, however, but to be bolder—to swing for the fences. It is an essential
feature of the ecosystem, a counterintuitive blunt-end dictate that almost
certainly shaped the activities of Theranos’s investors.
Venture
capital returns are skewed, Peter Thiel explains, creating a “power law” where
“a small handful of companies radically outperform all others.” Thiel instructs
would-be investors to “Only invest in companies that have the potential to
return the value of the entire fund.”[35]
Since this
is such a restrictive rule, Thiel concludes, there are no other rules.
Thiel’s
advice is sometimes known as the “Babe Ruth Effect,” since Ruth was famously
quoted as saying, “I swing big, with everything I’ve got. I hit big or I miss
big.”[36]
Measured by
venture capital returns, 4.5 percent of dollars invested generate about 60
percent of total returns. In fact, most venture firms lose money on about half
their deals as a matter of course.
However,
the best firms had more deals that did not return the original investment,
suggesting that the way to achieve superior returns is to take more risk rather
than less.[37] “Great funds,” venture
investor Chris Dixon writes, “not only have more home runs, they have home runs
of greater magnitude,” prompting VC Bill Gurley to call his industry “a grand
slam business.”[38]
The “Babe
Ruth Effect” creates an incentive among competing venture capitalists to
identify and double-down on start-ups they believe will deliver outsized
returns, even at the risk of greater losses.
“Some VCs
are truly bold,” writes venture capitalist Lisa Suennen, expressing an
admiration common in the entrepreneurial ecosystem. “They back ideas that others
say are impossible. Like firemen, when everybody runs away they run towards.”
Suennen
concludes by saying “These are the good ones.”[39]
Theranos had
a big idea that made investors want to run toward the fire, despite the risk of
being consumed.
None of
this pressure excuses inadequate due diligence or lackadaisical management
oversight, but it does explain a myths-driven, blunt-end concept that, translated at the sharp end, helped to destroy investor value at Theranos. The
company’s vision was so grand, many investors believed, that a successful
investment in Elizabeth Holmes and her narrative of disruption could secure the
return of an entire venture fund.
This incentive
was especially powerful for investors who might have passed on a company like Facebook
or missed out on investing in Uber or Airbnb.
A
successful grand-slam investment delivers intangible rewards beyond financial
return. A single marquee win can become an imprimatur on an investor’s resume,
imparting lifetime bragging rights.
When Forbes ranked the hundred best venture
capitalists in the world in 2017, twenty of them made the list because of their
investments in Twitter (founded 2006) or Facebook (founded 2004). The failed
investments made by these leading venture capitalists, which must number in the
thousands collectively and represent perhaps 60 percent of their lifetime work,[40] are simply not a factor in
the formation of their reputations.
This
willingness to be bold on both the part of the entrepreneur and the investor
has warped the modern ecosystem. Bill Gurley of Benchmark Partners described
this phenomenon in mid-2015, the peak of the Theranos story, saying, “There is
no fear in Silicon Valley right now. . . . Everyone is trying to become the
next billion-dollar company, the next unicorn.”[41]
Theranos might
have been a risky medical device start-up with an untested CEO and unproven
product, but it was also a potential financial windfall and source of lifetime
bragging rights.
+++++++++++++++++++++++++++++++++++++++
Blunt End Ambiguity #5: Choose Jockey over Horse
A final and
well-accepted blunt-end precept of the modern entrepreneurial ecosystem is
described as “jockey over horse.” It says, given a choice between a strong
entrepreneur with a questionable business concept, and a questionable
entrepreneur with a strong business concept, bet on the strong entrepreneur.
A 2016
study of 885 institutional venture capitalists at 681 firms determined that the
management team of a start-up was more important than any business-related
characteristic. In fact, business-related factors such as product, market, and
industry were rated as “most important” by only 37 percent of venture firms.[42]
All eyes
are on the defining qualities of the jockey; one with experience is valued, but
one with a big, passionate story is cherished.
Renowned
venture capitalist Ron Conway attributes his success to zeroing in on the
founders “and what makes them tick.” His key questions are, “Do they have good
vision? Are they focused on the product?” He characterizes himself as someone
who “can hardly get the phone to work,” and, when it comes to evaluating
start-ups, as someone who does not “get into how many lines of code it takes.”
Instead, he
cares about the personal characteristics of the founder. “And the fact that I’m
successful,” he says, “proves that you don’t have to be an engineer to invest
in engineers.”[43]
Sam Altman, the co-founder of Y Combinator, wrote
similarly, “The most important thing we do . . . is pick great founders.”[44]
In this
regard, Elizabeth Holmes passed with flying colors. Her origin story resonated.
Her celebrity board functioned not as a check on her ambition, but as a
reinforcing element of her charisma.
Reporters
for Bloomberg characterize Holmes as
“the bright-eyed woman the media clambered over themselves to mythologize.”[45] And Theranos employee Tyler
Shultz could sense the power of her reality distortion field, saying that she
“is extremely convincing, really makes you feel she cares so much about you,
about helping the world, selling her vision all the time.”[46]
Personal
stories like that of Holmes, Nick Bilton writes, act as a “lubricant in the
Valley,” helping to advance “one big confidence game in which entrepreneurs,
venture capitalists, and the tech media pretend to vet one another while, in
reality, functioning as cogs in a machine that is designed to not question
anything.”
The horse
is important, but the Millennial-era jockey with courage, ambition, and vision
is dominant in the modern ecosystem. And in this world of great uncertainty, a
good story can occasionally overwhelm the truth.
What
happens in an ecosystem that already favors the entrepreneur when cash is so
plentiful and venture competition so stiff that it becomes a sellers’ market?
That’s the
situation Holmes found herself in as she built Theranos: a raging bull market,
record-low interest rates, American corporations sitting on mountains of case,
venture capital firms raising record amounts of funding, and the rise of
billion-dollar unicorns.
Facebook
paid $19 billion for WhatsApp and $2 billion for virtual reality headset maker
Oculus VR. Microsoft acquired Minecraft for
$2.5 billion. Apple paid $3 billion for headphone maker Beats.
Meanwhile,
a new class of investors, including mutual funds and sovereign wealth funds,
began to compete with venture firms. Rivalry and returns placed enormous
pressure on investors not to miss the next big win—FOMO—while encouraging venture
firms to handle entrepreneurs with kid gloves for fear any slight transgression
might damage their reputation and shut them out of the next big opportunity.
For an
entrepreneur like Elizabeth Holmes, it was too much of a good thing.
In his
article, “When Founders Go Too Far,” professor and entrepreneur Steve Blank
makes the case that founders are now able to lead their companies “long past
the point when VCs [venture capitalists] would traditionally have brought in
‘professional’ CEOs.”[47] This permissive practice has allowed
founders, Blank adds, to create two classes of stock designed to maintain
control.
In the case
of Theranos, Elizabeth Holmes raised nearly $700 million in venture capital
funding but was able to retain 98.3 percent of voting shares.[48] Her board
gradually evolved into a set of directors without any substantial financial
stake in the company. And even if directors had “skin in the game,” under
Theranos’s governance rules, the board could not make a decision unless Holmes
was present.[49]
Consequently,
as she raised the lion’s share of her funding, she was in little danger of
being challenged much less replaced, no matter how erratic the performance of
Theranos was. “The board is just a placeholder,” she said. “I make all the
decisions here.”[50]
A jockey-over-horse
mentality combined with a frothy sellers’ market created blunt-end expectations
that hurt Elizabeth Holmes. Her grip on the company was so strong that she was
able to raise funds and operate her business for a decade without revealing to
investors how, and how poorly, the technology worked.[51]
A novice
CEO with a rudimentary science background intent on designing a life-altering
consumer medical device was, nonetheless, a jockey worth backing. “Given the
extraordinary power imbalance that’s now the norm in Silicon Valley,” Blank
writes, “it should be of no surprise that many founder-CEOs are behaving badly.
In fact,” he adds, “the real surprise may be that so many of them still behave
well.”[52]
+++++++++++++++++++++++++++++++++
Complex System, Complex Explanations
Theranos stumbled repeatedly
and visibly at the sharp end of the complex entrepreneurial ecosystem. The CEO
failed to perform, as did the board, partners, and investors.
The “Person
approach” of complex systems explains the demise of the company by placing
blame on individuals such as Holmes, Lucas, Balwani, and Robertson. The ripple
effect of their individual errors proved to be catastrophic.
James
Reason reminds us, however, that there is a better way to understand the
failure of a complex system. “When an adverse event occurs,” he writes, “the
important issue is not who blundered, but how and why the defenses failed.”[53]
In the case
of Theranos, its CEO, and its investors, the dictates of the ecosystem were
clear: Dream big or don’t bother dreaming at all. Bend the truth to meet your
needs. Innovate without permission and fail fast, knowing that collateral
damage is acceptable because innovation trumps all. Swing fearlessly for the
fences, recognizing that the best investors may fail more, but also win the
marquee deals. And favor jockey over horse, betting on an entrepreneur despite flawed
technology and a questionable business model.
While
individuals like Elizabeth Holmes often take the rap for the collapse of a
complex system, modern theory suggests that catastrophic failure is the combination
of individual failure powered by the incentives, myths, and ambiguities of the
village where the individual resides.
[1] Gabrielle Oya, “Enron and the 24 Other Most Epic Corporate
Downfalls of All Time,” Yahoo!, August 18, 2020, Web January 9, 2022, https://www.yahoo.com/now/enron-24-other-most-epic-184839865.html.
[2]
Hannah Towey, “Juror from Elizabeth Holmes Trial Says the Jury Scored Each
Witness on Their Trustworthiness—and the Theranos Founder Ranked the Lowest,” Insider
Inc., January 5, 2022, Web, January 9, 2022, https://www.businessinsider.com/elizabeth-holmes-ranked-low-on-trustworthiness-jury-trial-report-2022-1#:~:text=Elizabeth%20Holmes%20was%20found%20guilty,stars%20%E2%80%94%20Holmes%20scored%20a%20two.
[3]
Roger Parloff, “This CEO is Out for Blood,” Fortune,
June 12, 2014, Web November 21, 2017, http://fortune.com/2014/06/12/theranos-blood-holmes/.
The board changed from time to time, and also included in 2014 William H.
Foege, the former director of the Centers for Disease Control and Prevention.
[4]
All three references from Roger Parloff, “A Singular Board at Theranos,” Fortune, June 12, 2014, Web November 22,
2017, http://fortune.com/2014/06/12/theranos-board-directors/.
[5]
Ken Auletta, “Blood, Simpler,” The New
Yorker, December 15, 2014, Web November 22, 2017,
https://www.newyorker.com/magazine/2014/12/15/blood-simpler.
[6]
“Ten Years After But Who Was to Blame?”, The
Guardian, March 21, 1999, Web June 25, 2018, https://www.theguardian.com/business/1999/mar/21/observerbusiness.bp.
In 2010, the Deepwater Horizon oil spill became the largest in US history.
[7]
John Carreyrou, Bad Blood: Secrets and
Lies in a Silicon Valley Startup, New York: Borzoi (Alfred A. Knopf), 2018,
p. 299.
[8]
“Details About the Accident,” Final
Report, Alaska Oil Spill Commission, February 1990, State of Alaska, Web
June 25, 2018, http://www.evostc.state.ak.us/index.cfm?FA=facts.details.
See also James Liszka, “Lessons from the Exxon Valdez Oil Spill: A Case Study
in Retributive and Corrective Justice for Harm to the Environment,” Ethics & the Environment, Indiana
University Press, Volume 15, Number 2, Fall 2010, pp. 1-30.
[9]
James Reason, “Human Error: Models and Management,” British Medical Journal, March 18, 2000, Web June 14, 2018,
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1117770/.
[10]
Richard I. Cook and David D. Woods, “Operating at the Sharp End: The Complexity
of Human Error,” MS Bogner, ed., Human
Error in Medicine, Hillsdale, NJ: Erlbaum and Associates, 1994, 257.
[11]
Charles Perrow, Normal Accidents: Living
with High Risk Technologies, Princeton: Princeton University Press, 1999,
loc. 2503.
[12]
Richard I Cook, MD, “How Complex Systems Fail,” Cognitive Technologies
Laboratory, University of Chicago, 1998, 1999, 2000, Revision D, Web June 14,
2018, http://web.mit.edu/2.75/resources/random/How%20Complex%20Systems%20Fail.pdf.
The author has combined and adapted Dr. Cook’s summary for purposes of this
chapter.
[13]
Malcolm Gladwell, Outliers: The Story of
Success, New York: Little, Brown and Company, 2008, 184.
[14]
John Carreyrou, Bad Blood: Secrets and
Lies in a Silicon Valley Startup, New York: Borzoi (Alfred A. Knopf), 2018,
p. 100.
[15]
Roger Parloff, “This CEO is Out for Blood,” Fortune,
June 12, 2014, Web November 21, 2017, http://fortune.com/2014/06/12/theranos-blood-holmes/.
[16]
Matthew Herper, “Bad Blood: The Decline and Fall of Elizabeth Holmes and
Theranos,” Forbes, October 8, 2016,
Web December 6, 2017,
https://www.forbes.com/sites/matthewherper/2016/10/08/bad-blood-the-decline-and-fall-of-elizabeth-holmes-and-theranos/#2b5e8bb5c335.
[17]
Kate Crawford, “Social Net Worth,” The
New York Times Book Review, November 16, 2014, 13.
[18]
Emphasis by the author. “Transcript and Video of Speech by Sheryl Sandberg,
Chief Operating Officer, Facebook,” Barnard College Commencement, May 17, 2011,
New York City,
http://barnard.edu/headlines/transcript-and-video-speech-sheryl-sandberg-chief-operating-officer-facebook.
[19]
Alexia Tsotsis, “2005 Zuckerberg Didn’t Want to Take Over the World,” August
13, 2011,
http://techcrunch.com/2011/08/13/2005-zuckerberg-didnt-want-to-take-over-the-world/.
[20]
John Battelle, “The Search: How Google and Its Rivals Rewrote the Rules of
Business and Transformed Our Culture,” New York: Penguin Group, 2005, Kindle
edition, Loc. 1135.
[21]
Sir John Hargrave, “How Steve Jobs Created the Reality Distortion Field (and
You Can, Too),” Medium, January 25,
2016, Web July 12, 2018, https://medium.com/@jhargrave/how-steve-jobs-created-the-reality-distortion-field-and-you-can-too-4ba87781adba.
[22]
John Carreyrou, Bad Blood: Secrets and
Lies in a Silicon Valley Startup, New York: Borzoi (Alfred A. Knopf), 2018,
p. 290.
[23]
John Carreyrou, Bad Blood: Secrets and
Lies in a Silicon Valley Startup, New York: Borzoi (Alfred A. Knopf), 2018,
p. 50.
[24]
Micah Rosenbloom, “In Defense of Theranos,” TechCrunch,
November 21, 2015, Web December 6, 2017,
https://techcrunch.com/2015/11/21/in-defense-of-theranos/.
[25]
“Step-by-Step Fundraising Tactics from the NYC Legend Who Raised $750M,” First Round Review, Web December 16,
2017, http://firstround.com/review/step-by-step-fundraising-tactics-from-the-nyc-legend-who-raised-750m/.
[26]
“What is Permissionless Innovation?”, Mercatus Center at George Mason
University, 2017, Web December 5, 2017,
http://permissionlessinnovation.org/what-is-permissionless-innovation/.
[27]
“Mark Zuckerberg, Moving Fast and Breaking Things,” Business Insider, October 14, 2010, Web December 21, 2017,
http://www.businessinsider.com/mark-zuckerberg-2010-10.
[28]
Joseph Rago, “Elizabeth Holmes: The Breakthrough of Instant Diagnosis,” The Wall Street Journal, September 8,
2013, Web November 21, 2017,
https://www.wsj.com/articles/elizabeth-holmes-the-breakthrough-of-instant-diagnosis-1378526813.
[29]
“What is Permissionless Innovation?”, Mercatus Center at George Mason
University, 2017, Web December 5, 2017,
http://permissionlessinnovation.org/what-is-permissionless-innovation/.
[30]
Balaji Srinivasan, TwitLonger,
January 3, 2014, Web December 1, 2017, http://www.twitlonger.com/show/n_1rvcjrg.
[31]
Balaji Srinivasan, TwitLonger,
January 3, 2014, http://www.twitlonger.com/show/n_1rvcjrg.
[32]
Robert Graboyes, “Fortress and Frontier in American Health Care,” Mercatus
Center of George Mason University,” October 20, 2014, Web December 5, 2017,
https://www.mercatus.org/publication/fortress-and-frontier-american-health-care.
[33]
Edward B. Roberts, “Technological Innovation and Medical Devices,” National
Academy of Engineering/Institute of Medicine, Symposium on New Medical Devices:
Factors Influencing Invention, Development, and Use, Washington, DC, March
9-10, 1987, Web December 1, 2017,
https://dspace.mit.edu/bitstream/handle/1721.1/2183/SWP-1930-18388674.pdf;sequence=1.
[34]
Interview with Antonio Garcia Martinez, “You’ll Grow Out of It," Inside
the New York Times Book Review podcast, July 10, 2016.
[35]
Peter Thiel with Blake Masters, Zero to
One: Notes On Startups, Or How to Build the Future, New York: Crown
Business, 2014, 85.
[36]
C. Dixon, “The Babe Ruth Effect in Venture Capital,” CDixon blog, July 6, 2015,
Web December 5, 2017, http://cdixon.org/category/venture-capital/.
[37]
Benedict Evans, “In Praise of Failure,” April 28, 2016, Benedict Evans, Web
December 4, 2017,
https://www.ben-evans.com/benedictevans/2016/4/28/winning-and-losing.
[38]
C. Dixon, “The Babe Ruth Effect in Venture Capital,” CDixon blog, July 6, 2015,
Web December 5, 2017, http://cdixon.org/category/venture-capital/.
[39]
Lisa Suennen, “Lessons from the Dark Side (of Venture Capital),” Venture
Valkyrie, September 7, 2015,
https://venturevalkyrie.com/lessons-from-the-dark-side-of-venture-capital/.
[40]
Cambridge Associates tracked 27,259 startups between 1990 and 2010 and found
that those companies providing a 1X return or less was below 60 percent between
2001 and 2010, topping out at 79 percent in the dot.com bust of 2000. See Erin
Griffith, “Conventional Wisdom Says 90% of Startups Fail. Data Says
Otherwise.,” Fortune, June 27, 2017,
Web December 21, 2017,
http://fortune.com/2017/06/27/startup-advice-data-failure/.
[41]
Chris Myers, “Could Theranos Go from Unicorn to Unicorpse,” Forbes, January 28, 2016, Web December 5,
2017,
https://www.forbes.com/sites/chrismyers/2016/01/28/could-theranos-go-from-unicorn-to-unicorpse/#575322844ef9.
[42]
Paul Gompers, Will Gornall, Steven N. Kaplan, Ilya A. Strebulaev, “How Do
Venture Capitalists Make Decisions?”, National Bureau of Economic Research, Working Paper No. 22587, September 2016, Web
December 7, 2017, http://faculty.chicagobooth.edu/workshops/finance/pdf/GompGornKapStreb%20Aug%2016.pdf, 1, 6.
[43]
James Watkins and Leslie Nguyen-Okwu, “Silicon Valley’s Mega Investor Tells
All,” OZY, March 10, 2017, Web December 19, 2017,
http://www.ozy.com/opinion/silicon-valleys-mega-investor-tells-all/75900.
[44]
John Kelly, “Silicon Valley’s Bet on the Future and War on the Present”, Vanity Fair, December 1, 2015, Web
November 25, 2017,
https://www.vanityfair.com/news/2015/12/unicorns-sacrifice-future-for-past.
[45]
Sheelah Kolhatkar and Caroline Chan, “Can Elizabeth Holmes Save Her Unicorn?,” Bloomberg, December 10, 2015, Web
November 27, 2017, https://www.bloomberg.com/news/articles/2015-12-10/can-theranos-ceo-elizabeth-holmes-fend-off-her-critics-.
[46]
Ellie Kincaid, “After Blowing the Whistle on Theranos, Tyler Shultz is Going
Back Into Medical Testing,” Forbes,
October 3, 2017, Web November 21, 2017, https://www.forbes.com/forbes/welcome/?toURL=https://www.forbes.com/sites/elliekincaid/2017/10/03/after-blowing-the-whistle-on-theranos-tyler-shultz-is-going-back-into-diagnostic-testing/&refURL=https://www.google.com/&referrer=https://www.google.com/.
[47]
Steve Blank, “When Founders Go Too Far,” Harvard
Business Review, November-December 2017, Web December 5, 2017,
https://hbr.org/2017/11/when-founders-go-too-far.
[48]
Steve Blank, “When Founders Go Too Far,” Harvard
Business Review, November-December 2017, Web December 5, 2017, https://hbr.org/2017/11/when-founders-go-too-far.
[49]
Christopher Weaver, “Court Documents Shed Light on Theranos Board’s Response to
Crisis,” Wall Street Journal, May 30,
2017, Web December 6, 2017,
https://www.wsj.com/articles/court-documents-shed-light-on-theranos-boards-response-to-crisis-1496136600.
[50]
John Carreyrou, Bad Blood: Secrets and
Lies in a Silicon Valley Startup, New York: Borzoi (Alfred A. Knopf), 2018,
p. 298.
[51]
Nick Bilton, “Exclusive: How Elizabeth Holmes’s House of Cards Came Tumbling
Down,” Vanity Fair, October 2016, Web
November 28, 2017,
https://www.vanityfair.com/news/2016/09/elizabeth-holmes-theranos-exclusive.
[52]
Steve Blank, “When Founders Go Too Far,” Harvard
Business Review, November-December 2017, Web December 5, 2017, https://hbr.org/2017/11/when-founders-go-too-far.
[53]
James Reason, “Human Error: Models and Management,” British Medical Journal, March 18, 2000, Web June 14, 2018, https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1117770/.
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