[startupfounder]

Healthcare startups are like Cleantech startups were.

There is large amounts of capital being deployed, there are going to be high profile failures like Theranos, but at the end of the day the world will be better because of the few that succeeded beyond our wildest imaginations.

This is how innovation works.

[smt88]

This wouldn't be that big of a story if Theranos just failed. The story here is that they lied repeatedly to the press and possibly to investors.

Elizabeth Holmes' ability to raise money also seemed to be based entirely on nepotism, rather than the meritocracy that people want to believe SV has accomplished.

[kami8845]

>Elizabeth Holmes' ability to raise money also seemed to be based entirely on nepotism.

Right, she should've rejected that money, it would only be fair if it was as hard for her as it is for us.

Why is it important that she has connections? Does being upset about that help you in any way?

Sorry, I'm really jaded about this kind of victim mentality. Ignore what advantages others have and build your tower as high as you can.

[mikeash]

It's important because it means that capital is not being allocated optimally.

From an individual point of view, sure, you really can't control stuff like that, and you're better off concentrating on making your own stuff better.

But that's not the conversation here. This discussion is about the whole system, and particularly the statement that "this is how innovation works."

[kami8845]

Who would you personally feel more comfortable lending money to, a complete stranger (who might very well need it more -- aka optimal distribution of resources) or someone within your family or close circle of friends, where you have some level of confidence that they will simply run off with your money or squander it?

[mikeash]

Virtually everyone finds the stranger more comfortable. They may not say so, but a quick look at their finances will reveal most of their assets in bank accounts, stocks, bonds, etc., and almost none in the form of loans to family members.

[kami8845]

Quite a perverse strawman from someone who just a second ago asserted what "this discussion is about".

[smt88]

That's a big (and incorrect) assumption about my mentality. This isn't about trying to claim someone is a victim, least of all myself!

It is, however, a cautionary tale about how inefficient and risky nepotism is. It didn't hurt me at all, but it hurt the investors who failed to examine Theranos' merit.

It's also separately interesting because SV's meritocracy is a fairly prevalent myth, and it's what people believe (or believed) was special about SV in the first place.

[HarryHirsch]

The problem with innovation in the sciences is that R & D is so capital-intensive and requires deep subject knowledge. Back then, innovation happened at industry research laboratories, the CEO used to be a scientist or engineer, and most important, CEO salaries were lower. When you ran your company into the ground you'd be without a golden parachute. I'm not convinced at all that Elizabeth Holmes or Carly Fiorina are an improvement over Roy Vagelos or Dave & Bill. I'd say that the current system stifles innovation.

[mikeash]

Innovation requires failures, but it does not require shysters and fraud. Theranos is not just the system working as it's supposed to.

[HarryHirsch]

The system works quite nicely - it funnels money from investors to entrepreneurs, just as it always did. It's just that it's running with all safeguards removed. When you see cases of fraud, in general it isn't that that person woke up one day, saying "Today I'm going to commit fraud." It's rather that something didn't work out quite right, and instead of looking back, that person ploughed forward and eventually got caught in a mess that they can't extricate themselves from any longer.

I think that's what happened with Theranos. Why shut the company down saying the underlying science did not work, when you can muddle on for a year longer, cash out, and then shut down and say the science did not work? Except that it's now a year later, and there's an army procurement contract in the works. This is how people turn frauds. The system that overpays CEOs, no matter how unsuccessful, is what's at fault.

[murphysbooks]

> ...failures like Theranos...

I thought Theranos was still operating.

They shut down the draw center in PA, but they still have a lab running and draw centers in AZ aren't they?

It seems like the Wall Street Journal is writing a piece about a small adjustment by Theranos because of the understandably bad optics for their partner in PA.

Theranos is trying to innovate in a space where you cannot even ask how much a service costs.

Personally, I would go to Theranos if they just ran all the same tests as everyone else because they post their prices.

Searches on http://www.sunriselab.com/ and http://questdiagnostics.com/home.html show no prices at all.

Yes, Theranos was supposed to be based on a new technology (which may still work out in the long run), but just being customer focused would be disruptive in this industry.