“Be fearful when others are greedy, and greedy when others are fearful “
You are buying a company. Would you want to own that company if the market shut down for 5 years?
Don’t use leverage.
I owned Amazon, Google, Apple, etc at some point during my life.
I was forced to sell on margin calls during the tech crash.
I would have thought about investing a lot more differently.
Buffett doesn’t sell his gems during a recession. He doesn’t try to time Mr Market.
I was mostly in cash for the collapse of housing. My 2009 portfolio was worth simply holding until now and I would have been much better off than trading in and out of stocks.
I would also have paid attention to fundamentals: Income Statement, Balance sheet, Cash Flow Statement
I’d argue that it was largely dumb money that was scammed. Not Silicon Valley. Those so-called marquee investors named in the article were not even VCs. In fact you see a lot of this in enormous funding rounds. You didn’t see the premier firms in there like Sequoia, Khosla, Founders Fund, a16z, Benchmark, ... DFJ was the only notable firm there and it looks like they came in early with Draper seeding it when it was still idea-phase.
There are a million ways you could be screwed by an entrepreneur so due diligence is really about finding the 3-5 questions that will make or break a business. In the case of Theranos, the whole idea relied on an assumption that you could massively reduce the amount of blood needed to do an analysis. So that’s where your due diligence starts. But after 20 minutes of desk research you’ll find that small blood samples intrinsically heterogenous for many tests. VCs are trained and paid to ask the right questions. This was dumb money plain and simple.
>I’d argue that it was largely dumb money that was scammed. Not Silicon Valley.
Bubbles have normal air in them. Economic bubbles include plenty of normal economic activity that has not much to do with the fact that it's a bubble.
I would make the case that calling SV and "dumb VC money" one in the same is perfectly appropriate in the context of an article written for a general audience.
> I would make the case that calling SV and "dumb VC money" one in the same is perfectly appropriate in the context of an article written for a general audience
Please do make that case, because its much easier to make the case that it's deliberately misleading to get clicks and make a headline than actually informative or accurate.
The general audience is quite capable of understanding "dumb rich people" vs "experienced venture capitalists".
No but thanks for putting words in my mouth. They were dumb because they clearly didn’t even bother to do basic due diligence. The fact that there were no other marquee VCs in on a $10b valuation should have raised some flags. It did not. And they weren’t taking a $100k punt. These were investments of tens of millions of dollars so you think that there would have been some basic technical due diligence. This is what I call dumb money.
When a VC sees a huge valuation and the only other investors on the captable beyond the Seed/A rounds are celebrities, pension funds, SWFs, family offices and hedge funds they say: “we’re worried that this is the next theranos”
DFJ defended them to the very end though, even today I think. Hard to make the claim they fell for the Theranos lies when the project had nothing to audit or do due diligence on, because they're still falling for them now.
Those are all machining stations where CNC parts (likely for the instruments) would be cut. The guy in the front has a boring day ahead of him, watching the chip conveyor delivering waste material into the dumpster.
So Theranos actually got CNC machines in-house? Most companies would outsource it one of the dozens of CNC shops in the bay area (or elsewhere is large enough volume.)
They published a video of the manufacturing that showed those CNC machines, injection molding, and robotic assembly.
It's a lot faster to iterate if you have in-house machining and molding; you can get parts made or modified in <day vs weeks with an outside shop. You can also work closer with the machinists to iron out challenges.
My company recently interviewed a Theranos veteran - this person was a scientist working on a small part of the analytical pipeline. Apparently there were many, many smart people working at Theranos (including the candidate) who had no idea the company was a scam. This was in part due to intense secrecy and very rigid information silos within the company.
There’s probably a lesson to be learned there, of course - one too many “need to know basis” explanations and it’s time to start asking some hard questions.
The difference is that it is trivial to determine whether they’re selling something that works, which would be the thing to hide in the event of fraud.
Or the fraud is purely financial, in which case it wouldn’t be obvious to an engineer anyway because that level of siloing is normal.
No. For starters we have plenty of evidence that Apple is not a scam. Secondly "one too many “need to know basis” explanations and it’s time to start asking some hard questions" is a pretty clear qualifier. The difference between protecting legitimate secrets and keeping things secret that aren't really secrets anywhere else and have no value as secrets accept to deceive is pretty clear.
Not the OP, but I have also interviewed and hired ex-Theranos engineers. I don't think it damaged their career prospects. So long as they can talk about the normal things you talk about at an interview they'll be fine.
I feel like most people recognize that given the huge number of employees, most working there are genuinely good, competent people who got caught up in a bad situation. No reason to hold that against them.
"There is a larger moral here: The people in the trenches know best."
It seems obvious, and yet it is a truth so many leaders fail to grasp. Keeping a finger on the pulse of employee attitudes is a great way to nip issues in the bud before they become systemic.
Although I guess that doesn't really help if the leader is the issue.
The problem is that the grunt employees know where the bodies are buried. There's usually a body or two buried somewhere -- if you kept the pulse of grunt employees, you'd never invest in anything.
I'd expect that's only true for a particularly risk-averse investor.
If there's a metaphorical body buried in almost every company, then that's just risk, and knowing what it is would actually be better for an investor than not knowing.
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[ 2.6 ms ] story [ 27.0 ms ] threadhttps://en.m.wikipedia.org/wiki/Roger_Lowenstein
I just finished his book on Buffett, which I wish I’d read 20 years ago.
Find today’s equivalent then hold for 20 years.
“Be fearful when others are greedy, and greedy when others are fearful “
You are buying a company. Would you want to own that company if the market shut down for 5 years?
Don’t use leverage.
I owned Amazon, Google, Apple, etc at some point during my life.
I was forced to sell on margin calls during the tech crash.
I would have thought about investing a lot more differently.
Buffett doesn’t sell his gems during a recession. He doesn’t try to time Mr Market.
I was mostly in cash for the collapse of housing. My 2009 portfolio was worth simply holding until now and I would have been much better off than trading in and out of stocks.
I would also have paid attention to fundamentals: Income Statement, Balance sheet, Cash Flow Statement
In short, I would have been more of an investor.
Listen to Buffett.
The rest of the article was more or less just copying every other article about the subject, but this line is just beautiful.
Is this a joke? or was that intentional?
There are a million ways you could be screwed by an entrepreneur so due diligence is really about finding the 3-5 questions that will make or break a business. In the case of Theranos, the whole idea relied on an assumption that you could massively reduce the amount of blood needed to do an analysis. So that’s where your due diligence starts. But after 20 minutes of desk research you’ll find that small blood samples intrinsically heterogenous for many tests. VCs are trained and paid to ask the right questions. This was dumb money plain and simple.
Bubbles have normal air in them. Economic bubbles include plenty of normal economic activity that has not much to do with the fact that it's a bubble.
I would make the case that calling SV and "dumb VC money" one in the same is perfectly appropriate in the context of an article written for a general audience.
Please do make that case, because its much easier to make the case that it's deliberately misleading to get clicks and make a headline than actually informative or accurate.
The general audience is quite capable of understanding "dumb rich people" vs "experienced venture capitalists".
"Because they're dumb rich people."
"How do you know they're dumb rich people?"
"Because they got scammed."
When a VC sees a huge valuation and the only other investors on the captable beyond the Seed/A rounds are celebrities, pension funds, SWFs, family offices and hedge funds they say: “we’re worried that this is the next theranos”
It's a lot faster to iterate if you have in-house machining and molding; you can get parts made or modified in <day vs weeks with an outside shop. You can also work closer with the machinists to iron out challenges.
There’s probably a lesson to be learned there, of course - one too many “need to know basis” explanations and it’s time to start asking some hard questions.
Or the fraud is purely financial, in which case it wouldn’t be obvious to an engineer anyway because that level of siloing is normal.
I have Friends and Family at Symantec right now, and they are all very worried what the potential FCC violations could to their resumes.
They are specifically in Finance, but also weren't aware of any of the current news items.
I feel like most people recognize that given the huge number of employees, most working there are genuinely good, competent people who got caught up in a bad situation. No reason to hold that against them.
It seems obvious, and yet it is a truth so many leaders fail to grasp. Keeping a finger on the pulse of employee attitudes is a great way to nip issues in the bud before they become systemic.
Although I guess that doesn't really help if the leader is the issue.
If there's a metaphorical body buried in almost every company, then that's just risk, and knowing what it is would actually be better for an investor than not knowing.
Why would it be a dealbreaker?