Theranos: Stay away from hype-II

Theranos: five investor lessons from the downfall of Elizabeth Holmes | Financial Times

Fourth, investors must make their own minds up on a business, discounting celebrity endorsements. Holmes cosied up to establishment titans such as George Shultz, Jim Mattis and Henry Kissinger. She created the illusion that her technology was validated using the logos of pharmaceutical groups such as Pfizer on Theranos documents.

The bigwigs gulled by Holmes avoid a portion of hindsight blame by virtue of her penchant for fraud. But there was also a glaring illogicality in their mistake. It was to assume big breakthroughs are as likely in the intractable physical world — in this case, blood testing — as they are in manipulable cyber space.

Hype cycles are bad for the innovation matrix. It takes away the sheen from real progress. End users should understand that valuations are the game. There are smart people gaming the system and placing “bets” – much like horse race gambling, except that it has a more respectable sheen on this. The most successful “start-ups” are the ones who get acquired or have the hype cycle machinery behind them. Generally, more successful companies (either in terms of business moats or possibly revenues) usually have a more expensive PR machinery at work.

In the hindsight its easier to blame Holmes for her lapses. However, those who appeared to give her respectability, why aren’t they held culpable? Unless the PR appearances involve back room dealings.

Making news for all the wrong reasons.

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