Sunday, October 30, 2016

Still busy

"Millstones of Justice turn exceedingly slow, but grind exceedingly fine."
~John Bannister Gibson (1780-1853), American jurist, Pennsylvania Supreme Court

Still ridiculously busy, making it hard to really write anything well - or at all for that matter. I'm going to try and do a few shorter posts just so I at least mention things that are going on in the startup world, and try to get back to them later if they merit it.

One of the big things was the Wall Street Journal story on the patients actually affected by Theranos, "Agony, Alarm and Anger for People Hurt by Theranos’s Botched Blood Tests". Check back in my previous posts to cover the history of Theranos, but the main story this comes from is here, where they admit their results were wrong and withdraw them. It was clear when that story came out this was going to be a major issue, but now we actually have accounts of healthcare and lives actually impacted by the company failure.

In summary of the above - Theranos claimed to be able to do a large number of tests on small amounts of blood, effectively much cheaper than conventional methods, with their "Edison" machine. It turns out that they were mostly using industry standard machines from other vendors, but not even using them correctly, which ultimately results in sanctions from Federal agencies. Their own Edison machines were used for a small number of tests (allowing them to say "less than 1% of tests" were affected, because they rarely used their unreliable proprietary technology - yet they were likely telling investors that is what was regularly used). 

These tests were used in the diagnosis of patient's conditions, and informed and changed treatments. In the WSJ story, one patient changed his blood thinner medication based on these false results, potentially increasing his chance for strokes. Another was led to believe that she potentially had a new tumor having just gone through major cancer treatments - it turns out, after many other tests and worry, that she did not. Theranos's test was wrong by a factor of over 150 (yes, 150 times too high). There will be many more out there.

While things can go wrong with any tests, Theranos simply didn't follow basic procedure and are absolutely liable for missing the basics. As the WSJ says:

While inaccurate tests can occur at any laboratory, Theranos failed to maintain basic safeguards to ensure consistent results, according to regulators, independent lab directors and quality-control experts.

If you have a culture that not just enables but encourages breaking the rules, when it moves into fields that cover our health and safety, you can be sure that there are disasters like this going to occur. The regulatory agencies like the FDA are there for a reason, and this type of thinking is going to be stamped out. I'll bet that it's going to be made clear that this behaviour will not be tolerated, and company officers will be held accountable.

It seems Theranos thought the rules didn't apply to them, that they could mislead investors, customers, and the FDA that they had technology they didn't, raise $700 million dollars, affect people's health, and that no-one would notice. It may have taken years, but right now I can imagine various Law Enforcement Agencies working their way up the hierarchy of Theranos, as each layer points to the one above, until it gets to the very top. As I've said before - In my opinion, someone's going to jail over this, and this time it's not going to be one of the minions.


6 comments:

  1. Paul,

    It's comforting to know that your worldview on "misbehaving" startups is identical to mine (uBeam, Theranos, Energous). I can't believe that folks believe that Energous will deliver anything close to what they promise without FCC or efficiency issues. BTW, when you were at uBeam, you briefly tried to recruit me -- let's just say that I was skeptical and it did not go anywhere.

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    1. It seems you are a person of intelligence and good judgement. If you feel like chatting, feel free to reach out to me via LinkedIn or my email from here.

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    2. I will connect with you via LI... Thanks.

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  2. You should check the emerging story on Palantir.. apparently it is also as shallow as zenefits or I-beam

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  3. Hi Paul, wanted to know if you had seen this new WSJ Carreyrou article about George Shultz selling out his own grandson who had worked at Theranos, and was persecuted after whistleblowing. Sad story.

    http://www.wsj.com/articles/theranos-whistleblower-shook-the-companyand-his-family-1479335963

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    1. I did notice that yesterday, thanks for pointing to it though. I made some brief comments on it in my latest update. Still insanely busy right now, I do really want to write a longer commentary on it. Overall, I feel this guys' pain - he did the right thing and has been punished for it. It's easy when you have millions of dollars of someone else's money with which to pay lawyers, not so easy when it's your own. Just as well his family had some money, otherwise he'd have had to fold. Sadly, he'll never get any of that $400,000 back, even if Theranos are found guilty in court of exactly what he said.

      I'm sure many of the Board, at that time, were saying things like "You have to question the motivation of people like this" partly to tarnish his name (the "disgruntled ex-employee") but also as they simply cannot understand someone who is doing something because it is right, not because they make money. There are people who truly can't fathom that.

      If you wonder why there are so few whistleblowers, this is exactly why. Round of applause for this guy and doing what was right, despite the huge cost, both financial and personal.

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