What was amazing about 2016 was that Theranos was not the biggest business disaster of the year. But it was close, and example of how a female-led company can still suffer from bro culture and flush hundreds of millions of dollars in investment (which, let's be honest, should have seen much better vetting) while landing Holmes in a trial next year.

But wait, argues author John Tamny, who thinks that everyone has been wrong about Holmes and her company. The problem was really skepticism--those doubting mud-bound minds of convention who couldn't see the vision. The same people who would have opposed such great innovators as ... well, let's just let the article make the case:

Entrepreneurs by their very descriptor are doing something that will be dismissed by many more than those who embrace them, and this understandably includes those closest to the entrepreneur. The Wright brothers were viewed as impossibly strange oddities, J.P. Morgan's father (Junius Spencer Morgan) thought his son was nuts for backing Thomas Edison and his outlandish light bulb idea, not to mention how roundly the iPhone was rejected as a niche product by top technology minds ("There's no chance that the iPhone is going to get any significant market share. No chance." - Steve Ballmer, CEO Microsoft, 2007) ahead of launch.

Aside from the first electric light having been invented in 1802 (so not such an outlandish idea) and commercial success needing an electric infrastructure; Microsoft being a competitor of Apple and so almost requiring Ballmer to dismiss the concept; and the Wrights being a couple of odd ducks, flying experiments aside, Tamny does have a central reasonable point. Doing something different can attract significant negative dismissal, instead of a more useful neutral skepticism, and that can have a negative effect.

But this important concept of not being discouraged--of developing the resilience to move forward--and also of welcoming new ideas can, like any desirable characteristic, go too far. The presumption that Theranos and Holmes faced a world that was against them is a gross misstatement of fact and does dishonor to the very characteristic the author claims to support.

It is true that often people who have been in an industry, or who are experts in a field, can resist a new idea. In medicine, this has happened throughout history. For example, doctors Barry Marshall and Robin Warren had a theory that the cause of stomach ulcers was bacteria, not stress, spicy foods, or other explanations given by the medical establishment, which, by and large, dismissed the two. Until they proved, by experiment, that their thesis was correct and ultimately were awarded the Nobel Prize.

But what they went through and the reported actions and fate of Holmes and others at Theranos were as night as day. The latter found skeptics in the medical community. Instead of producing evidence, some at the top of Theranos made claims that they could do blood tests with a finger prick rather than multiple vials drawn. They raised hundreds of millions from investors and pretended that they were doing tests using tiny amounts of blood on their own equipment when the vast majority of process happened on commercially available machines.

It doesn't matter whether many advances are made by people outside of an industry. Many are also made by people who are inside industries. Whatever the source, it has to work--if not today, then eventually. Pretending that an idea is valid because it sounded good and came from an outsider is fanciful and irrational.

Some ideas need sufficient development time. In that case, you spend the time getting them to work, not in trying to sell what in high tech used to be called vaporware, because not all ideas do, ultimately, work. Sometimes concepts are effective only in special circumstances or at small scale so they are theoretical possible but, for the time being, are not commercially viable.

The ultimately problem at Theranos is that people sold things, which didn't exist in a sustainable and trustworthy way, as being fully functional. This wasn't a case of a small companies getting money to continue its research (in which case it might have found other more traditional sources). It wanted to be in full-blown business, gain billions in valuation. As the author argues, it can be tempting to puff up the possibilities when seeking funding. Tamny wrote, "About the overpromising part, a more realistic way of looking at it is that stressing average doesn't work when raising funds for a technology company, or for that matter a company in any space." That doesn't make it acceptable--or, even, legal.

Published on: Oct 21, 2019
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