So what do you think? Are you enthused, impressed, and a believer? Read
Here is an early interview of Eliz. Holmes: Could this finger prick blood test be the next “Game-Changer? Imagine if this company can change the cost and inconvenience of diagnostic care? Wow!
Why study this case of Theranos?
Whenever you study an investment, you should make notes on your thoughts at the time to go back and check your thinking and biases. How else can you improve as an analyst?
Now, unless you have been living in a cave, you know what happened. However, pretend that you didn’t know the outcome and you were reading the articles above for the first time and seeing the video. What RED FLAGS jump out at you. Or what would you need to prove in order to invest? And if you could not find the answer easily to the main question of the investment, what else would you scrutinize carefully? Think hard before reading on………..
I highly recommend the above book as a great read. You will also learn about investor manipulation, the will to believe and how it shuts off our critical thinking abilities, incompetent governance, employee abuse, EXTREMELY bad management, criminal actions, and a female sociopath. I could not put the book down–read it in a day.
Next, a few years later, when Theranos, a private company with an estimated $9 billion value (!), faced a barrage of critics over the lack of transparency and no verification of the technology (“The Edison”), Cramer gives her a chance to rebut her critics.
Cramer asks Holmes about her Technology. What do you think of the answers? If you were an investor, what would be the first area to investigate?) Did Cramer ever follow-up specifically? No.
By the way, did you notice her deep (affected?) voice and her black uniform. Creepy.
As a former employee said Theranos product was like building a bus while driving down the highway with passengers. The problem is that people could get killed. This fraud hit home since I have amyloidosis. Not only did she and her accomplices hurt employees, investors, and–most importantly–PATIENTS! She and her CEO deserve a minimum 25-year sentence.
Note how SOCIAL PROOF euthanized investors critical thinking. Look at the prestigious board: George Schultz, General , etc. But note the lack of specific product/industry expertise to vet Holmes’ claims. She brilliantly piggybacked on the prestige of others. Any investor could have visited the Walgreen stores to check on the accuracy and completeness of the tests. Red flags would fly.
The employee turnover and secretiveness would have been other flags. What relevant experience to this field did she have? I am not knocking outsiders, but she and her CEO lacked any background in biochemistry. That isn’t enough to suspect problems, but it would place more urgency on verifying the efficacy of the technology.