One thing I find really weird is the choice of CEO photos in media reporting. If there is good news, they chose 'nice', attractive photos. If there is bad news, they look for worse ones. This is true for male and female founders.
In this case, everything about this photo is an 'outtake', from hands, choice of framing, facial expression, eyes - it's a photo a photographer would not keep in their image selection.
Alternately, it reflects the tenor of the story and the facts it contains. You could say this is inappropriate editorializing, but that makes the obviously absurd implication that fraud is a neutral thing, and that there are many good kinds of fraud in additional to the bad ones.
If you're reporting clear facts about something unambiguously bad, then it's entirely appropriate for the supporting photographs to support the article.
It's entirely appropriate for the supporting photographs to support the article, but that's not what the parent is questioning. If the news is based on facts, then the facts can speak for themselves. An unflattering photo does not support the article if the article is not related to how well the subject takes photos.
> If the news is based on facts, then the facts can speak for themselves
Photos, are not based on facts. There is no such thing as a 'neutral' photo - all photographs are editorialized. Timing, framing, composition, lighting, contrast are among the hundreds of variables that contribute to a photo. Most news organisation are well of this and they allow post-processing of photos (to different extents). I would say an unflattering photo goes well with an unflattering article.
If facts could speak for themselves you wouldn't need journalists to put them into words, photojournalists to render them in pictures, editors to package stories, and publishers to deliver them to millions.
Of course it's important for the people in that process to be judicious and scrupulous about their handling of the facts so they can deliver material that provides reliable impressions. But showing unflattering pictures of people found to have done seriously unflattering things isn't some egregious departure from these requirements. Indeed, to the extent that a picture can say a thousand words, it's a useful - and generally appreciated - bit of data compression.
I think it's equivalent to ad hominem, pushing in a direction that should be irrelevant. This example isn't egregious (I didn't have any particular reaction to the picture, personally), but it's unsavory to attempt to build a negative association by spotlighting someone's unflattering physical characteristics.
I'm not sure how you came to that conclusion. I just took issue with the suggestion that an unflattering picture somehow supports an article about shady business practices.
I don't see the unflattering aspect here, to we want her perfectly done up with makeup and hair? that too would insinuate a disconnect from common people. in the picture I saw my take away was she was trying to explain a situation and nicely at that.
is this all a male perception of a problem they fully do not understand and therefor think they know how its perceived by the opposite sex?
To be clear, I have no opinion about this photo (see my other comments on this thread). * Original commenter highlights their observation that the degree to which a photo is 'flattering' is correlated with the author's desired characterization of the story subject.
* Child commenter responds that it is reasonable to attempt to sway the reader's opinion by including an unflattering photo.
* I respond that I don't think this is fair.
The question related to gender seems to be somewhat out-of-left-field
The exact same argument applies to any photo: If the news is based on facts, then the facts can speak for themselves. A photo does not support the article if the article is not related to how well the subject takes photos.
My claim may have been somewhat unclear. More precisely... a photo that is intended to portray the subject's physical characteristics in a negative light has no place supporting an article about the subject's non-physical characteristics. Photos are great for adding informational content to new stories (e.g. http://cdn.abclocal.go.com/content/wabc/images/cms/1408319_1...).
No, but if all you really want to do is add some visuals and show what the CEO of the company looks like, why not just grab the default portrait photo from the company press pack?
And that photo isn't a manipulation? The press kit photos are designed specifically to portray executives in a competent, flattering light. THAT is manipulation of an even more devious sort -- if the company is doing something wrong, showing smiling, in-control executives when that isn't reality -- that's public relations, not Journalism; it misleads the public in drawing a conclusion of trustworthiness when that isn't warranted by the story.
As a journalist, I disagree. In this case the technique is used more to portray the way Holmes is perceived publicly (a "neurotic and delusional powerful woman out of control" -- not my opinion, just what the photo conveys), than to add a spin to a story that's already independently and factually spun in a very clear direction.
The use FoxNews does of this photo-picking with President Obama or liberal politicians is much worse. Or check the tabloids, they're masters at that.
This one? Just fine.
I also want to point out that the picture is all but an outtake. Photography agencies publish photos like this on their online collections all the time, they won't discard them. Exactly because they know outlets may pick them for a story where they would fit.
But it does. We (readers here, you, me, etc) are far outside of mainstream at this news site, HN, and journalistic standards are much higher. When you go from default subreddits to niche ones, the journalidtic integrity improves substantially. Yes, yes, once outside the mainstream, integrity suddenly improves, across the board.
I'm just going to go ahead and disagree. This is journalism and news in 2016. (I'm also including people's blog write-ups that they or others submit.) On tech and fundraising issues, I'd say HN and yhe niche blog posts submitted, do count for a kind of journalism.
Fair enough. there's no good word for people giving lots of facts in a blogpost that is meant to be informative, open to comments, includes updates and good-faith efforts to be informative and correct. it may not be journalism, but people read these blog posts and these posts have huge weight. I don't think there's historical precedent for this kind of self-publishing, so not sure the terminology has caught up, but I'll concede your point regarding the specific term 'journalism'.
Would you include in 'journalism' very badly-written articles that are done by a writer collecting or reporting on sources (example: reporting on a tweet and its responses), while using horrific grammar and being very low-quality? You know the kind of link-bait 'articles' I'm talking about - I wonder if you would consider that part of journalism or not.
You just argued that mainstream media has rules, that they problems they bring in are well-understood, and independent media is untrustworthy. You provided evidence for two of them. You did not in any way show mainstream media to be more trustworthy than independent media. If anything, they're clearly not due to all the times they've been caught manipulating their audiences, lying, or even justifying a right to lie. They're both untrustworthy and consistently subversive in how they do things.
So, the proper response is to do just what honest journalists or even agents in intelligence collection are taught to do: use diverse sources, rate their integrity, identify their biases, and merge them in a way that accounts for the two. It's what I have to do if I rely on the mainstream sources. It's been clear on a regular basis that their goal is to hold interest of specific demographics to keep them looking at ads rather than inform them. They're also very prone to self-censorship of anything that gets in the way of that due to cash flow.
> So, the proper response is to do just what honest journalists or even agents in intelligence collection are taught to do: use diverse sources, rate their integrity, identify their biases, and merge them in a way that accounts for the two.
That's pretty much what mainstream media does. That's why you see major investigative articles with lots and lots of cross-referenced sources.
You know about the Theranos fraud because mainstream media, The Wall Street Journal - the largest newspaper in the country - thoroughly exposed them.
"That's pretty much what mainstream media does. That's why you see major investigative articles with lots and lots of cross-referenced sources."
This is not what the mainstream media does. What it does is start with the biases and goals of the organization that targets the beliefs and wants of particular viewers. The journalists will have run into this trying to get things by editors in the past. Then, they'll begin on their peace which may use any combination of sources to support its claims with little presented for alternative opinions. They even like to cite "anonymous sources" to push total bullshit. They'll then present the story.
Sometimes I see well-researched stories that cover most odds and ends. Most of the time I see them reporting whatever they saw or heard from one source with their own slant. The funny thing about your comments is that even most viewers of these organizations I run into know they're extremely biased. They'll say "What else do you expect from (Huffington Post or Fox News here)? They always push that (liberal/conservative) BS!" They just think the bias of their preferred outlet is correct most of the time. Of course, that's all the info they see too. ;)
Because mainstream media's biases are beholden to the companies and government people causing us many problems. They also self-suppress critical stuff that could result in reform if it had people's attention. They also have this weird habit of running and heavily covering shock stories when critical legislation or business events are happening, making citizens miss the chance to act on it.
A media more independent from corporate and government interests would have less of these issues. Especially suppression. Then it's just a matter of gauging accuracy and bias of each.
I didnt say they do nothing of benefit. I use them since they're most of what we have. Your claim also doesnt counter mine in any way. Large, well-funded, independent media wouldve done the same thing if we had that instead. Further, it would be more likely as MSM continues to shift from journalism to just sharing anything that will get views. Most MSM just copies stories of relatively few journalists since that generates the most ad revenue at the lowest cost.
I agree on the independent-trustworthy fallacy. Many 'independent' journalists are highly dependent on foundation grants or other funding from some rather biased billionaires. NPR is listener (and taxpayer) funded. Since the majority of the listeners are of a certain political party, it follows that NPR won't challenge the orthodoxy of the hands that feed them.
Eh, I see where you're going. There's two ways to look at that, though. One is worrying about her sanity. The other is thinking she's an energetic, ambitious person pushing her product and company. You'll see a lot of what's in the photos if you ever delve into the world of sales teams and marketing execs. ;)
The profession is about enthusiasm and confidence. So, many people there are constantly smiling, wide-eyed, vigorously shaking your hand like you're their lost brother, telling you how happy you'll be with the product, and so on. Many of them. They're also usually successful to some degree.
Photo choice is one of the most effective editorial tools a publication has. For example, do they show a photo of the person as a child, wearing a suit, or casual clothes posed with a weapon? Each is technically the same person, but all will prejudice your view towards the subject.
I actually don't care about her appearance, and it's not being too clever. Editors pick specific photos for reasons often subconscious ones. You can look at a photo used in a story and see the basic prejudice of the editorial. Ignoring information provided is a poor way to evaluate the source. That the same photo is used often is a data point. Thinking everything is about a woman's appearance in a photo ignores a whole class of information. Your HN Challenge is a call for ignorance which I'll skip.
Editorializing (i.e. opinions) should stay in the opinion pieces, not be mixed in with reporting of facts. It calls the trustworthiness of the entire rest of the article in question. (Although i guess it's kinda nice if it's done blatantly so you already know in advance the article is particularly untrustworthy.)
> Editorializing (i.e. opinions) should stay in the opinion pieces, not be mixed in with reporting of facts.
preaching to the choir
> It calls the trustworthiness of the entire rest of the article in question. (Although i guess it's kinda nice if it's done blatantly so you already know in advance the article is particularly untrustworthy.)
In a lot of ways it is subconscious, but not always. If you take a objective view and look at US Presidential 2016 race articles, you get a pretty good feel for the base opinion of the editors from the picture they use of the candidates.
Every news outlet has a prejudice, and I find the choice of images to be one of the easy ways to communicate that to you. If you look for it, you can gear your reaction to the information provided.
> it's a photo a photographer would not keep in their image selection.
Yep. And I wonder what David Paul Morris [1] thinks of having his work used in this manner. It doesn't reflect well upon him as a photographer that's for sure.
You clearly don't know anything about the news photo business or photojournalism for that matter. It's not grip-and-grin posed ribbon cuttings and staged portraits for annual reports. It's photojournalism. An AP wire story written quickly about an explosion isn't going to have the literary gravitas of James Joyce. That doesn't mean that the AP writer is 'incompetent.' They're doing completely different work. Rarely you do get a Hemingway-level reporter or photojournalist that can elevate the mundane to high art, but those photographers aren't getting assigned to Theranos stories but stories of more value than some quick corporate headshot.
When I shot for Reuters (1996-2002) some of my most 'boring' images played all over the world and my favorite photos only occasionally made the wire. Did I look incompetent? I don't really care; My byline in The NY Times for a crap photo was much more valuable than the 'perfect' photo nobody sees.
Pro news photographers don't care; they aren't trying to audition to be your wedding photographer, they're chasing news and not giving a second thought to where some quick corporate headshot is running.
I'm not sure how Bloomberg News stores/sells their photos, but on a service like Getty Images, you'll find plenty of b-roll type images, because some clients will want "normal" photos, or alternate angles. Here's the Getty results for Elizabeth Holmes: http://www.gettyimages.com/photos/elizabeth-holmes?family=ed...
In any case, it's not the publication's job to make someone look good or glamorous. It's not the most flattering photo of Holmes but it's not terribly off from what she normally looks like (in general, photos of someone while they're talking/eating aren't going to be ideal, in terms of attractiveness).
No, the photo makes the subject look odd it does not make the photographer look incompetent. The fact that the picture was used by the WSJ shows the picture is good enough for publication.
I've been reading some US political news on a reddit app recently, and you can pinpoint the spin from the thumbnail photo better than the headline in most cases.
Would be an interesting art project to collect them all together get people to rate the images on some scale and display a visual political gradient.
It's not just founders, think about the pictures of Obama and O.J. where they were made blacker. Or the images of James Holmes or Saddam.
People will actually complain and threaten to kill the magazine editors if they don't make the 'bad guys' look evil enough; look at what happened with the Rolling Stone photo of the Boston Marathon bomber.
The problem with the Boston thing is that RS put them on the cover -- essentially giving them one of the most honored spots in music. That's what people were mad about -- elevating monsters and putting them at the same level as you might Bono.
They weren't complaining about the saturation or hue.
> elevating monsters and putting them at the same level as you might Bono.
I disagree with the dehumanization of people who do dispicable things (e.g. the Boston Bomber or Nazis) - they were not monsters but humans like you and I; only with very warped belief systems. There danger is that categorizing them as monsters will limit our understanding of how they come about and/or how to prevent this from recurring in the future.
On the issue of appearing on a magazine cover - I do not think the glamorizing was intentianal. Good-looking people dominate covers, and monster or not, the dude was good looking. Hitler was once Time magazine "Man of the Year" - they were not lionizing him, but only declaring he had made the greatest impact of the year.
The most hilarious example of this I've seen is a forbes article where they managed to dig up a picture of Warren Buffet with a psychopath-like expression on his face for some type of investigation a subsidiary company he invested in was under.
If one assumes Holmes didn't realize their product didn't work (questionable at best), imagine how it must be to work 7 days a week, forego friendships and intimate relationships, and not even watch TV, then after 12 years of that discover what you tried to make didn't/won't work. In too deep or something to just admit it's over and move on.
Sounds like a very undesirable number of years with little positive to show, although maybe there were some lessons in there. Maybe time for a workaholic recovery program for her, who knows. Sad to hear the prime of a life spent like this... though perhaps not any worse than other destructive paths one could travel.
Except the boatloads of money she's already extracted from the company. What about the hundreds of people who propped up her vision and fueled the hundreds of puff pieces by A-level publications that walk away with absolutely nothing? What will it mean to have been a lab tech at Theranos?
Hopefully those people weren't giving up everything in their life for a job... but I guess that's anyone's choice. Money is nice to have, though I've enjoyed time with friends, loved ones, and leisure more personally.
I'm definitely not a friend of Theranos, but: they failed to do due diligence before investing, the error is theirs. I wonder if they would sue as well if Theranos had scored big time.
If you treat investing as gambling don't sue if you lose a hundred million dollars of your customers money.
The investor's argument is that Theranos lied. The investor believes Theranos fraudulently produced evidence that their product worked in order to fake the responses to the investor's due diligence. If that's true, and the investor can prove it, then that's not simply part of the typical risk of investing, that makes the investor the victim of a serious crime.
That's a dumb argument then. See, when you do due diligence you should assume that the company lies. That's why you go there in the first place, if you believe everything they tell you then you're going to get fleeced if they lie.
Theranos did not comply with their duty to inform truthfully, but the investors did not comply with their duty to research. Asking the company is not research, the technology being complex is not an excuse, you're going to have to do your own homework, you can't rely on the company because they have an incentive to not be truthful.
It's not as if there is accounting with double bookkeeping that was withheld from you, it's a bunch of machinery that should perform in a certain way. Bring your own samples for which only you know the outcome, have them run those through the machinery in your presence and check the results.
That this will take more than some pencil pushing is where things went wrong, they simply didn't feel that on an investment this size they needed to actually look at the technology, they basically lapped up what the company told them and forked over the cash.
FWIW I do this sort of thing for a living and I'd take it quite personal if a company lied and got away with it because I failed to properly look at their technology.
Belief doesn't enter into it.
edit:
Downvoters are invited to discuss what they think is wrong with this comment or where the disagreement lies.
This is a valid comment. Theranos' claims for their technology should have been readily verifiable. The reason for this mess is they were given money without asking enough questions. It's actually not even that complicated as having to test the machines yourself, if they had just tried asking a few more questions, it would have become pretty obvious this was a bad investment. There were many smart VCs who kept their money because they did this.
eg see here:
http://www.vanityfair.com/news/2016/05/theranos-silicon-vall...
"When I’ve asked V.C.s why they didn’t pour millions of dollars into a company that appeared to be changing the world, I was told that it wasn’t for lack of trying on Holmes’s part. She met with most top venture firms. But when the V.C.s asked how the technology worked, I was told, Holmes replied that it was too secret to share, even to investors. When they asked if it had been peer-reviewed, she insisted once again it was too secret to share—even to other scientists."
Is this common among VCs and investors in general, or was it just that Theranos' supposed technology was more complicated than what they were used to, so they couldn't accurately assess it? Or both?
Investors will invest in all kinds of stuff they personally have no knowledge of. This is perfectly ok if it is their own money and they have no responsibility to others (especially to limited partners who have no say in the matter, or, for instance in the case of a pension fund).
The way it works with such parties is that they hire people who are versed in the technology to prepare a report on the subject at hand. This is called 'due diligence', specifically, technical due diligence.
So if you cross the t's and dot the i's there will be a nice report saying 'this technology is a-ok' by some party in a drawer somewhere. If so then that party shoulders a large part of the blame. Absent such a report (and I find it hard to believe the investors did not perform due diligence, but then again, so far none of them have stepped forward to point the finger at their technical advisors) the investors themselves are far more responsible.
See, when you do due diligence you should assume that the company lies
Really? I'm not naive enough to believe that everything you get to hear during due dilligence is 100% truth but I also don't think we live in a world where everyone can get away with deception and lies. After all the civilized world has developed a constitutional state with a law that offers some level of protection.
So there is a point where business between a company and an investor is conducted in good faith. If it comes out later that the company has forged technological results to defraud investors, to me that's a very good reason to sue. Saying the investors didn't look well enough is futile as a) you could use the same argument to justify pretty much any case case of fraud and b) it's impossible to do perfect due dilligence.
When there are millions of $ on the line 'good faith' doesn't cover it any more. You have to make sure that you are spending that money on something real. That doesn't mean there can't be risk involved, it doesn't mean that companies invested in won't fail. But you owe it to yourself, your partners and those who trusted you with their hard earned money that you do everything in your power to invest wisely.
The state will protect you if you have done your own homework.
I'm not saying the investors didn't look well enough, I'm saying that if they hired some party to look at the technology that party was asleep at the switch or they didn't do due diligence at all. There is no way that outside expert in the field would have been fooled if they came prepared to look at the technology in depth.
If the investment was done before the technology was realized then they probably would have raised some issues with respect to the fact that the core tech was unproven and might very well not work for a number of reasons.
Due diligence will never be perfect, that we agree on. But to get the core issue wrong is extremely rare, first and foremost you verify each and every claim the company made. It is not a discovery process, it is a verification process and given the fact that Theranos made some pretty strong and very verifiable claims is what makes me wonder how much DD was actually done.
From the outside looking in it looks as if a whole bunch of totally clueless investors couldn't wait to fork over their money to not miss the boat without so much as a shred of doubt about the miracle machine.
When someone lies in order to convince someone to invest -- that's called fraud.
The failure to conduct diligence does not idemnify Theranos. They weren't exaggerating-- they were making claims that just weren't true -- and the knew those claims weren't true and still went to investors with the lies. That shows criminal intent and not just incompetence.
The implication of what you're saying is that it's impossible to defraud an investor because the investor is always going to be partly to blame for not doing enough work to prove a business they're putting money in to isn't scamming them.
To an extent I actually agree, but I don't think that should preclude an investor from suing. If a business went to extraordinary lengths to fake some working tech then I think it's fair for the investor to get their money back, and it should be up to a court to decide whether or not that happened and what 'extraordinary lengths' means in any given case.
Yes, an investor is always partly to blame if they get scammed.
It's fair for them to sue but I think the court will ask them why they didn't do any independent verification of the technology to make sure it actually worked. That's pretty much the bar for anything that's labeled 'revolutionary' or that you perceive to be 'too good to be true'.
If it were a much more normal product with proven tech then I'd be more inclined to let them get away with 'belief', but in this case (and uBeam, to name another) you really want to see the technology for yourself and you want to verify that it works.
Short of stage magic they shouldn't be able to get away with this.
One of the most interesting DD's I ever did was a company that tried to rig a demo, they didn't get away with it because I went in assuming it was a rigged demo and I figured out how they did it. What makes it interesting is that today what was 'magic' in the 80's is actually quite normal... But back then you'd have to be doing something quite impossible with the technology available in the day to be able to give that demo unless you rigged it.
As far as I followed the story, there was basically double bookkeeping in the technology department. Like the fact that they used classic technology while pretending the results came from their own new tech.
There are lies, and there are illegal lies. If you go to the IRS and put in writing a different number, you go to jail. If you go to the bank and get a loan, but you use photoshop to prove your colateral is worth 1 million, you'll also go to jail, albeit the process will take longer.
Here I expect the process to take longer still, but for this degree of lying, jail is definitely on the table.
> As far as I followed the story, there was basically double bookkeeping in the technology department. Like the fact that they used classic technology while pretending the results came from their own new tech.
This is why I suspect that nobody of the DD team ever went to the lab to have an actual sample (or preferably several of them) tested in their own presence. Which in this case would seem to be the minimum level required for satisfaction given the radical departure from the standard of the time.
Given that Theranos claimed their tech was too secret to share or be peer reviewed anybody that lost money (theirs or others) should look in the mirror for the cause.
> That's a dumb argument then. See, when you do due diligence you should assume that the company lies.
I would agree that a certain amount of healthy...embellishment is to be expected from a company when talking to investors. Maybe I'm just naive since I don't play in the VC games, but if our first interaction as businesspeople is a lie, you aren't getting anything from me.
Bending the truth is one thing: evidence shows that Theranos at the direction of Holmes herself outright fabricated evidence to show their testing worked, knowing damn well it didn't.
I honestly don't understand what is taking so long. Everyone involved in this companies board should be behind bars for the remainder of their life. This wasn't some fucking ordering food app that went wrong, this was thousands of people's medical decisions. This shit matters but it gets the same kid gloves treatment that everyone worth more than a few million can count on from our pathetic justice system.
>See, when you do due diligence you should assume that the company lies. That's why you go there in the first place, if you believe everything they tell you then you're going to get fleeced if they lie.
Even doing due diligence, you rely on their information, expertise and record-keeping. Lying or misleading is unacceptable.
This whole story is messed up. I still detect a bit of apologism on these boards, even though it looks like fraud was committed. Assume everyone lies? Really? What sort of world are you doing business in?
Yes, lying or misleading is unacceptable. And this should lead to the deal being terminated before it is closed. There is no reason the company should get away with this prior to the deal being closed, assuming everybody plays their assumed role. But in this case I suspect that the investors did a slipshod job of their duty to inspect. After all, what the company said doesn't really matter, what matters is what the investors themselves determined to be the truth based on the evidence provided to their technical team and what the technical team did to ascertain this evidence was correct.
As for what world I'm doing business in: I work hard to keep the money of my clients safe by detecting mistakes/fraud/omissions/issues before the deal is consumed and I have a hard time believing anybody competent signed off on the Theranos deals from a technical point of view.
It's a fact of life that when you're an investor every now and then someone will attempt to take you for a ride, this is why investors perform due diligence to begin with, to make sure that they have covered their responsibility towards those whose money they manage.
That they are still picked by the company. That makes them suspect to begin with.
Let me give you one sample of what DD entails:
If you're going to buy a factory with a warehouse in another town you could believe they have a warehouse in another town, or you could go there to look at the warehouse, make sure it's up and running and that there is stock roughly in accordance with what you were told. You check the ownership of the lot and the building if the company claimed it is their property. You count the number of employees, how many trucks there coming and going during your visit and what got loaded / unloaded.
Of course 99% of the time you'll find that everything is in order and that any errors are accidental or immaterial. But that 1% (actually, probably more than 1% but never mind) of the time where things are not as they should be you realize what DD is for.
It's not a rubberstamp, it is a verification that the picture the company painted was error free and complete.
Asking the company what the address of the warehouse is would in my opinion not be enough, even though you could assume that all is as it should be.
I've had the weirdest stuff surface during DD's, and I've had a few eyebrows raised for stuff like 'ok, I'll visit your warehouse tomorrow please alert them' (or other stuff in that vein) but for real companies with actual products and honest management this is never any problem, at most an inconvenience. Whenever there is significant pushback to such a request you can bet there is trouble and it usually doesn't take long after that to find something really bad (which typically signals end-of-deal).
Letting the company pick the examples or the results in the case of a company that provides test equipment is not an option, you'd want to walk in with your samples have them analyzed on the spot and follow the whole chain from entry to results and then you'd compare those results to a control that you possess. Anything less would not do.
Otherwise, why do DD at all? If you're going to go on what the company provided then you may as well skip DD and become a true believer.
When I walk into the casinos, I know the odds of each game and know there is a possibility of losing my money. However if the casino rigs the machines to reduce my odds, then it isn't a fair game anymore and now goes into the realm of cheating.
When you're about to wire cash at this level to a company you have a real responsibility to make sure that the technology is real and you shouldn't by default believe everything they tell you. Independent verification is something no reputable/honest company would have a problem with, at least, I've never encountered it and if a company did have a problem with it then I'd see that as a huge red flag.
The whole Theranos affair interests me very much from a professional point of view, I could not imagine that none of those high flying investors and funds had not done actual due diligence, it is the biggest example of the herd mentality at work that I'm aware of involving only one company.
The really big question - and it is one that will inevitably be asked - is at what point in time did Theranos/Holmes realize that their tech wasn't going to work? If that is hard to establish (and they're probably trying very hard to make that even harder) then she may get away with the whole thing. If it can be established beyond doubt that they knew prior to accepting investment then it definitely is a case of fraud and the investors may be able to recoup some of their investment but it still isn't enough to get them off the hook completely for their own role in this.
There are many things that you are not a position to verify if you are an investor. On the top of that, there is a huge difference between misreporting your numbers versus stating that you are capable of doing something while you know it for sure that are not.
Investors routinely hire experts to do their verification for them, if your experts are not given full access then you should walk. If there is a huge difference in the numbers then it should have been found during the DD, this is one of the most frequently occurring reasons why deals do not go through after the terms sheet has been signed (another one is undeclared security breaches).
I haven't seen any proof that DD was done at all - to date, this may change - but if the scope didn't at least include a review of the core technology then it was too narrow.
It doesn't strike me as charitable to take your strong stance that the investors were incompetent based on speculation with the benefit of hindsight.
I agree that they would be negligent if they did not run DD with a scope that included a review of the Theranos platform technology and implemented devices, but it is entirely possible to do proper DD and be fooled by a skilled charlatan.
> It doesn't strike me as charitable to take your strong stance that the investors were incompetent based on speculation with the benefit of hindsight.
Then please provide some proof that proper DD was done. I haven't seen any, and funny enough, Theranos did not defend itself at all by saying the investors did their own proper DD, which would be the easiest way out for them.
> it is entirely possible to do proper DD and be fooled by a skilled charlatan.
Sorry, I do not subscribe to that. You don't get to cheat on physics, biology, math. This is not some kind of magical device, it is an ordinary, real world device with very specific inputs and very specific outputs. In fact, such devices already existed which gives you a control. The disruption came along one parameter only, the amount of blood required to do the test.
It is trivial to come up with a foolproof test to see whether or not Theranos has a working device.
If they did not at the time have a device then you are investing in a company that your DD partner will tell you may very well fail because a device as specified may fail to materialize. If they had a process but no device then that too could have been tested.
Yes, it is hindsight because it is after the fact, but this is how the job is normally done and that wouldn't change before or after. It's just that we happen to live after the fact that doesn't make everything automatically hindsight. Just like naming your variables properly in a piece of software can't be called hindsight if you find a project failed because of not naming variables properly. It is simply not good practice, irrespective of the timing.
> Then please provide some proof that proper DD was done.
If you are stating that "they [investors] failed to do due diligence", then the onus is on you to provide proof that the proper DD was done if you don't want your argument referred to as speculation. I am not drawing a conclusion one way or the other.
> The disruption came along one parameter only, the amount of blood required to do the test.
That wasn't the only disruption and I'm not sure that was the primary one: I would argue the primary disruption was regulatory (using/abusing the LDT framework and consumer-initiated testing).
> It is trivial to come up with a foolproof test to see whether or not Theranos has a working device.
I would never use the words trivial and foolproof for anything in medicine or laboratory testing: there is nothing simple about running a comparison between labs, especially for biological samples. Run an identical sample at Quest and Labcorp and the values will differ, perhaps in a statistically-significant way.
I agree in that I would expect that proper due diligence should have recommended against an investment in Theranos. Not participating in the scientific community is a giant red flag. I completely disagree that technical DD on the technology platform would necessarily reveal the flaws in Theranos.
So far not a single investor has claimed that their DD team did not have access, that their DD team was competent to do the job in the first place and that the technology as evaluated was sound. You'll note that this whole lawsuit is about claims by the company, not about what they actually had or what the DD team encountered in the lab.
> That wasn't the only disruption and I'm not sure that was the primary one: I would argue the primary disruption was regulatory (using/abusing the LDT framework and consumer-initiated testing).
The technology enabled that. Without the tech that failed to materialize and is not the core of the innovation that Theranos represents.
> I would never use the words trivial and foolproof for anything in medicine or laboratory testing: there is nothing simple about running a comparison between labs, especially for biological samples. Run an identical sample at Quest and Labcorp and the values will differ, perhaps in a statistically-significant way.
Yes, but if you run enough samples then you should converge at something amounting to statistical equivalence. If that doesn't happen then either one of the tests is invalid.
> I agree in that I would expect that proper due diligence should have recommended against an investment in Theranos.
ok. That's probably the most important point anyway.
> Not participating in the scientific community is a giant red flag.
As are secrecy, refusing access to labs, not providing full details on the technology under NDA, refusing to run a sufficient number of blind tests at the request of the DD team. Keep in mind that we're talking about a 100M investment, there isn't a whole lot that you won't be able to do when doing DD for a deal that size.
> I completely disagree that technical DD on the technology platform would necessarily reveal the flaws in Theranos.
If that were true that would mean they had working technology, which they did not have at all. Even for some of the most basic testing they had to fall back on equipment supplied by others and this would have definitely turned up in a real DD, barring magic I don't see how they could have gotten away with it in any realistic setting.
> So far not a single investor has claimed that their DD team did not have access, that their DD team was competent to do the job in the first place and that the technology as evaluated was sound.
This doesn't tell us one way or the other if DD took place and if so, the scope.
> The technology enabled that. Without the tech that failed to materialize and is not the core of the innovation that Theranos represents.
The technology is orthogonal to their regulatory machinations. They could have developed an in-house ELISA (or whatever, something more conventional) and made similar regulatory plays as they did with their microfluidics system.
> Yes, but if you run enough samples then you should converge at something amounting to statistical equivalence. If that doesn't happen then either one of the tests is invalid.
That handwaves over the complexity of the study, which goes to my point that your trivial and foolproof experiment is neither. A proper one probably needs a CRO. For a sizable investment it could be worthwhile, but I think you've underestimated the scope of your proposal.
> As are secrecy, refusing access to labs, not providing full details on the technology under NDA, refusing to run a sufficient number of blind tests at the request of the DD team.
Some of that in context isn't outside the behavior of other medical technology companies. It would be negligent to allow someone that wasn't with the government to walk through my lab without making some sort of arrangement ahead of time, and certainly under no circumstances unsupervised. I also have withheld key technical details to someone running DD despite having an NDA because NDAs cost money I didn't have to enforce if needed. The last item about testing is certainly a huge red flag, but [citation needed] if you're saying that Theranos did it (I find it possible to believe, but I haven't read that until your comment).
> If that were true that would mean they had working technology, which they did not have at all.
That might be an overstatement? I've followed this case closely, and I've had a very difficult time understanding what was claimed to work and did, what was claimed to work and didn't, what wasn't claimed by Theranos but is rumor transmuted into fact by the internet, etc. I've been operating under the assumption that the technology did work under controlled conditions and had problems when scaling up, but that is speculative on my part. I'm not aware of any scientific or medical reasons to believe that their platform cannot work, I am however aware of medical reasons to expect challenges to overcome (off-hand, sample volume, collection site), have violent disagreement as to the importance of consumer-intiated testing, etc. Unlike uBeam, there doesn't seem to be fundamental reasons to believe that Theranos' platform could not work and microfluidics being known to the art is supportive. If there are fundamental reasons that the technology cannot work, or if you have good hard sources for what Theranos had working and when, please do share!
> Even for some of the most basic testing they had to fall back on equipment supplied by others and this would have definitely turned up in a real DD, barring magic I don't see how they could have gotten away with it in any realistic setting.
"That's a great observation. It's true we do use conventional equipment for some basic tests and we are up front about that with our strategic partners, and it's simply because it's cheaper to run basic tests on the conventional equipment than on the Edison 1.0. Rather than waste money by insisting all testing run on Edison 1.0, we actually take the savings from running the basic tests on the conventional equipment, and roll that into the development budget for Edison 2.0 which we project will handle 98% of our full panel. Being intimately familiar with conventional equipment has other benefits: it's an important element of our development process to help us to better understand how we can deliver value-based differentiators on Edison 2.0." (or something like that) If they're willing to lie, they can spin a nice yarn and back it up with phony data. It won't fool everyone, but they don't need to fool everyone.
"Ok, let's run these samples I have here through your Edison 1.0 machine and see what the results are.".
At that point they could stall, pretend the machine isn't currently working (ok, I'll be back later), that processing samples and preparation takes a really long time (ok, I'll wait) (which would be dissonant with the turn around time for the results claimed in their publications, see 'breakthrough in instant diagnosis') and so on.
At some point the rubber will have to meet the road and they'll have to stick a sample into their machine and give up the results and that really is all you need.
As for unsupervised access to the labs, that wasn't what I intended to say with 'access', just access, to verify that what they claim their processes are are indeed the processes as practiced.
> Unlike uBeam, there doesn't seem to be fundamental reasons to believe that Theranos' platform could not work and microfluidics being known to the art is supportive.
Agreed, maybe it could work, but there is no proof that it ever did work, and the company has admitted the results were invalid:
And that's a huge difference. For uBeam the physics just isn't there, for Theranos there was a lot of skepticism about sample variability when you are using that little fluid drawn in that particular way.
But if any or all the components in that chain don't work then the chain won't work and the impression Theranos has made to the world is that it all worked.
> If there are fundamental reasons that the technology cannot work, or if you have good hard sources for what Theranos had working and when, please do share!
Yes, of course I have that, but you're going to just have to believe me, after all, why hold me to a higher standard than Theranos ;)? This is too secret to share, even with fellow participants on message boards and I'm not even asking for your money.
Kidding aside, what Theranos had working (if anything was working at all, my assumption based on their own admission is that it did not work at all beyond the simplest proof of concept) and when they had this on a timeline with their messaging to both investors, customers, employees and board members besides Holmes is a document that their investors would kill for right now. Some of that information is public or known to specific parties but it would take an insider leak or something to that effect to fill in the blanks.
Theranos has done a lot of damage to other companies trying to improve the world of medical diagnostics, that's an aspect that is far worse than any funds lost by investors.
of course they wouldn't have sued if theranos had scored, that doesn't make their lawsuit invalid. companies should be accountable for the statements they make (see Enron)
Don't forget people have invested in uBeam which was known to be peddling something scientifically impossible. The only possible explanation for that, and truth be told Theranos too is the investors are playing a Ponzi scheme where later rounds are the ones holding the bag. It's an excellent question who should be suing who.
Check out Energous (ticker: WATT). Like uBeam the company is focused on wireless charging, unlike uBeam it's a publicly traded company so you can short it for profit. The market does not seem to have caught on yet.
Not that I'm surprised that the firm sued but I wonder what their end goal is and how they're planning on getting any sort of meaningful settlement from a company that's currently on fire. This seems mostly a face-saving measure.
Theranos raised $348.5M Private Equity on March 1, 2015. There is probably still cash on the balance sheet. Maybe by filing a suit they hope that the company will be liquidated and to be at the front of the line when the proceeds get split.
Their other investors will be entitled to the balance sheets as is. They can't just say "and an undisclosed sum to [prior investor]" and redact their balance and liabilities.
Hah good point. So Theranos is literally fighting for their lives, because if one investor gets 25% of their money back, all the other investors will want the same.
Once the suit is filed it also forces the CEO to behave differently, legally in terms of financial responsibility. Away from company&employees to investors. So I've read. I'm not a lawyer.
That was about 18 months ago. I wouldn't be surprised if they were burning cash at a phenomenal rate (over $10m a month). They won't be able to do a big cash settlement without raising more money.
1. The lawsuit is calculated to bring Theranos to insolvency sooner while they still have money in the bank
2. It's a way for an investor to convert unsecured equity into a secured debt - pushing them up the seniority queue in bankruptcy (I think specifically that damages from a successful fraud lawsuit can't be discharged)
They probably want to recoup as much of the money they invested as possible. They invested almost 100M, I'm sure not all of it's gone. If they can force the company to shut down now (as opposed to trying to pivot) they might get 20 - 30 cents on the dollar, as opposed to zero.
I think they started off with a vision and assuredness that they would succeed, but they never stopped to consider the possibility they might not. At some point maybe they did, but Theranos and Holmes has decided it doesn't matter. Press ahead. Success is inevitable.
Theranos will have a hard time proving that they did not make the same or similar statements to the investors prior to making those claims elsewhere. They've now directly confessed they actually did make the claims at least once, which will make it more believable - not less - that they made those claims at different points in time as well.
'Staff writer' will have a busy time in the next coming weeks.
It costs $21.60 to "search" for this case at the Delaware Court of Chancery, even if you know the case number. And another $40.00 to download a single document. The complaint is marked as confidential and is not available.
Lexis-Nexis owns the site that maintains the court's entire docket.
If you read the interviews of a lot of investors, many of them mention they invested because they believed so strongly in the founder. Afterwards, when their crazy concept works (example: Musk with SpaceX), these founders are lauded a visionary. When their concept fails (as is the case with Homles and Theranos), these founders are branded a fraudster.
Isn't her activity like the textbook definition of fraud? Not to mention the dude who she basically pushed into committing suicide. I hope she gets at least as much time as Madoff.
What Madoff did was illegal and malicious from the outset.
Do you believe that when Holmes was handed the opportunity, at 19, to bring the Edison to market that she set out with the intent of defrauding investors?
The only thing she's provably guilty of thus far is believing in her company a little more than is sensible and being preternaturally competent as a fundraiser.
When Musk claims he can get people to Mars for $200k, do we say 'That's preposterous!', and slap him in cuffs? It's up to the investors of Spacex to decide whether or not they want to gamble on that proposition.
Would you put 100 million into Magic Leap because Rony Abovitz says 'it's rad', or would you insist on seeing a demo first? Because none of Theranos investors did that.
There's a difference between saying "I believe we can develop X" and "we currently have X." As I understand it, Holmes and Theranos did the latter. And that's fraud.
The answer is "extremely far, so it's not sensible to compare them."
It's perfectly fine to say "We are going to attempt to build something, here's our plan" and then fail. It's completely unacceptable to say "We have something" when you don't.
The only way Theranos could be analogous to Musk is if he had got up on that stage in Guadalajara and said "we have a Mars rocket ready to go, we've tested it extensively, it works, we'll begin commercial flight soon, the line for reservations is on your left, please bring your checkbooks."
> The only way Theranos could be analogous to Musk is if he had got up on that stage in Guadalajara and said "we have a Mars rocket ready to go, we've tested it extensively, it works, we'll begin commercial flight soon, the line for reservations is on your left, please bring your checkbooks."
Devils advocate but isn't that what SpaceX told facebook when launching their satellite? I would assume they asked for money to launch that thing and I would also assume facebook didn't want it blown up.
There's no comparison to be made between an accident occurring in an inherently risky field and peddling technology that you know doesn't work.
Nitpick mode: Facebook didn't own that satellite and their only involvement in it was a plan (now, obviously, altered) to lease a decent chunk (but by no means all) of its capacity from its owner once it was operational. I'm not sure why everyone decided it was Facebook's satellite.
If Spacecom wanted a demo to prove SpaceX could launch rockets, they only had to look at the previous 28 Falcon 9 launches that all (bar one) launched successfully.
Exactly. If Elon wants to spend his billions building spaceships, as long as they don't routinely fall and kill people, then everyone will cheer for him and that's fair. Screwing up people's blood tests and then seemingly lying about, is a whole different thing.
The fact that Madoff's intent was criminal from the outset and that Holmes' probably wasn't is irrelevant. The point is that it became criminal. And that's why she's in the firing line today.
At what point did she shift from being an optimistic entrepeneur to a criminal? Was it when she started getting magazine covers? Was it when Hwnry Kissinger joined the board of directors? She's still giving her company 110% in spite of everything that has transpired. Usually the correct time for a startup founder/CEO to call it quits is when they run out of capital, until then it's their job to try and make it work come hell or high water.
When diagnostic medicine was being conducted with technology she knew wasn't what it was claimed to be. We threw the Enron guys in prison and they only hurt people's wallets, not their health. I don't think she gets off the hook because she's a Sillicon Valley sweetheart.
> At what point did she shift from being an optimistic entrepeneur to a criminal?
Going out on a limb here, I would say when found out their machine didn't provide accurate results. Yet waited until threatened to be closed for two years before voiding results. This is not Uber for Dogs, and puppy doesn't get to the park to play with its friends, but potentially life or death situations. We are not talking just a 0.01% error rate, this is stuff like like 20-40% error rates in some tests.
> Was it when Hwnry Kissinger joined the board of directors?
Well, some would say it would be a warning sign, for sure ;-)
Basically, when she said "our machines, which we have already deployed in production and doctors are using them to make potentially life/death decisions, can do X". At that point.
The examples you are comparing are not similar at all.
Musk should be collecting money for the situation to be similar.
>being preternaturally competent as a fundraiser.
Why are you trying put a positive spin on this whole mess like a PR agency ? What would you describe Madoff as in that case ? A man of great persuasive ability ?
How do you know that Madoff was malicious from the outset, I wonder? The guy had a 30 year career, have you studied his beginnings? Maybe you did, but knowing nothing I'd find it more plausible that the guy started small fudging a couple of numbers hoping the next year would be better and eventually snowballed out of control.
My somewhat cursory read of Madoff was that he tarbabied himself. He had been running a successful investment company, but hit losses.
The good, and lawful, thing to do would have been to come clean at that point. He didn't, and his downfall began there.
Instead he did the bad, and illegal, thing: doubled down and paid off the small number of exiting investors with new investor's deposits, whilst lying about returns.
If you've read John Kenneth Galbraith's The Great Crash: 1929 (a short and highly readable account), you'll find a very familar story in Madoff. He fell prey to what JKG calls "the bezzle".
There is civil fraud and criminal fraud, which require proving the same things. But generally, the government will only pursue criminal fraud prosecutions when there is a public interest component. Madoff defrauded a large number of people, and his fraud affected little old ladies' pensions. The government will generally stay out of fraud directed at a handful of sophisticated investors.
It seems like clear fraud was directed at the general public and their health outcomes. I don't care much about the investors, they can take it. It was something like 6% of tests were fraudulently performed by their "technology", with potentially dangerous results.
On the other hand, so are some of her investors. And there I think it comes down to protecting their reputations; if they can point to criminal fraud, they can paint themselves as victims rather than fools. We'll see how it plays out.
I think they come off as fools either way; people aren't any prouder to have been conned by a criminal, than having made a stupid investment. If they're concerned about saving face, they'll lay low for a while.
there is a chance that the primary purpose of this lawsuit is for the fund to be able to address the concerns of their LPs. in other words, it could be more about optics and less about actually recouping losses.
As in -- "trust us investors, look we are going after a failed company to try to recoup the investment we convinced you to make in us and them" -- that doesn't seem like great optics unless they have some possible chance of recouping cash ...
Unfortunately the key skill in being an investor like this is to be able to make the right decisions in the face of being lied to. In other words, being lied to simply isn't an excuse.
The managers of this hedge fund handed over $100 million dollars in other people's money without so much as a whiff of due diligence.
There are 13 major life sciences venture capital firms and not one of then would touch Theranos with a ten foot pole. You'd think, in theory, that whomever it was at Partner Management LP who makes the big investment decisions would make a few phone calls first before deciding to pull the trigger.
Startups making bold promises about unproven technology are a dime a dozen.
>I think humanity is literally evolving to lie and cheat at a biological level.
It's naive to think we were not already born with these core qualities. "Survive at all costs" is a demonstrated maxim that all living beings possess. We didn't consider lying and cheating to be frowned upon until we decided we were a civilized society with rules based on [opinions | deities | etc.]. Having experienced multiple pathological liars firsthand, it makes more sense that rather than "evolving" these qualities, people are resorting to their core human nature as they feel more and more threatened.
> We didn't consider lying and cheating to be frowned upon until we decided we were a civilized society with rules based on
Eh, what? Where are you getting that from? Any organism with cooperative dynamics also has to contend with cheaters, and yet cooperation is extremely prevalent in nature. There's a reason parasitism isn't considered the norm in the animal kingdom.
I sincerely doubt that primitive human tribes widely tolerated healthy adults who contributed absolutely nothing to the group.
> I sincerely doubt that primitive human tribes widely tolerated healthy adults who contributed absolutely nothing to the group.
It's certainly not hard to imagine that no, they would not have tolerated such behavior. But does this mean that you are suggesting the members of this tribe convened and decided to put rules in place to define a member's behavior and potentially institute punishment if these rules were broken? That sounds suspiciously like a society. It's almost as if the larger population felt that attempting to hinder a particular perceived flaw in human nature was a net positive for the group as a whole.
The existence of cooperation or the desire to cooperate does not disprove that cheating and lying are embedded instincts in living beings. Cheating and cooperation are not mutually exclusive concepts. The parent comment was suggesting that we are somehow evolving to lie and cheat and I'm suggesting that we have been more than capable of this behavior all along. In fact, I've gone so far as to say that not only were we immediately capable since the dawn of humankind, but we have actively suppressed these "survival skills" because they are deemed bad qualities.
> But does this mean that you are suggesting the members of this tribe convened and decided to put rules in place to define a member's behavior and potentially institute punishment if these rules were broken?
No, although I could trivially say that any group of humans living together will be a society in some respect (and thus "natural" human behavior involves being in a society anyway).
Ignoring that, though, removing cheaters doesn't need to involve any sort of centralized group decision making. Your immune system doesn't convene and decide what kind of foreign bodies are unacceptable, and it's largely effective at what it does.
> ...does not disprove that cheating and lying are embedded instincts in living beings.
Sorry, the burden here is on you to prove that cheating and lying are embedded instincts (which I'm assuming means "typical in primitive humans" here). You're the one who made an affirmative statement.
My counterpoint is that cooperation is plentiful in nature (with many examples of cooperation in comparison to parasitism) and thus cheating is unlikely to be typical behavior in the wild.
You need to prove otherwise.
> Cheating and cooperation are not mutually exclusive concepts.
Are we defining cheating differently? What's your definition of cheating?
> The parent comment was suggesting that we are somehow evolving to lie and cheat and I'm suggesting that we have been more than capable of this behavior all along.
Humans are capable of any type of behavior. If your definition of "embedded behavior" is "humans are capable of doing that," then sure, it's trivially true because humans are numerous and any type of behavior can be found with such a large population.
> but we have actively suppressed these "survival skills" because they are deemed bad qualities.
Right, and my argument is that they're primarily suppressed because they're inferior survival skills in aggregate. Cheating and lying are classic "tragedy of the commons" behavior.
I wouldn't say that we've evolved in some way to lie and cheat more. The wikipedia page on the subject[1] covers the fact that such things exist in cooperative groups in nature and mitigation techniques exist.
Instead I would argue that 'cheating' behaviors are rewarded by some current economic and taxation models (tax loopholes that are created and used by already wealthy individuals to avoid taxation, rewards for destroying jobs only to increase profit, rather than avoid loss).
One can even look at American culture, and see how too often the value of a human is derived from the amount of wealth that they have. I'm not suggesting that all Americans do this, I'm simply suggesting that it's something that underlies so many arguments against taxing the rich and helping the poor; that the position that they are in is due to some kind of karmic result.
So, instead of saying that these are new, I'm arguing that we've just begun to reward behaviors that work against the cooperative goals of society.
Who pivots AFTER a $billion+ valuation? This chick is crazy and delusion. The sad part is that she will find someone dumb enough to be bullied by her and will keep founding companies with other people's money.
This is the first article on this news, so I couldn't find a non-paywalled source. For those who don't subscribe to WSJ, the tl;dr is as follows:
• SF-based hedge fund, Partner Fund Management LP, is suing "Theranos and its founder", alleging they lied to attract nearly $100M in funding.
• Sources are an internal "fund document" and "people familiar with the matter."
• The fund document was reviewed by WSJ and states:
"Through a series of lies, material misstatements, and omissions, the defendants engaged in securities fraud and other violations by fraudulently inducing PFM to invest and maintain its investment in the company"
• Suit was filed in Delaware Court of Chancery this afternoon.
• A Theranos spokesperson responded:
"The suit is without merit and Theranos will fight it vigorously. The company is very appreciative of its strong investor base that understands and continues to support the company¹s mission."
The rest of the article is catch-up background on Theranos' controversy.
FYI, the "web" link is exactly for this. Paywalled sources get penalized in Google's search results, so most of the time searching for the article's title and clicking the Google search results link gets you the full article.
Hedge funds frequently have charitable foundations and pension funds as limited partners. Unless the hedge fund is just a family office, there's a high probability that the "little guy" will be impacted, somewhere.
I can't tell you if your schadenfreude over hedge funds losing money is right or wrong, because that's based on normative values. But I'd encourage you to adjust your understanding of the financial dynamics involved.
> But if the Theranos deal panned out, who would have benefited from the investment by the hedgefund?
A hedge fund is an investment fund that pools money from investors and then invests it according to the hedge fund's strategy. So, the primary people who will benefit or lose are the people who invested their money with the hedge fund. Hedge funds also tend to take a percentage of profits as part of their compensation.
I don't see what connection there is to the notion that the system is rigged. No one is obligated to invest in hedge funds and the people who do are aware of the hedge fund's compensation structure. Anyone who invests money is aware that investments have risk and can fail. The purpose of a hedge fund is to invest money to generate (better-than-market) returns, and so the hedge fund will be compensated if that happens. The fact that they're compensated from profits acts as an incentive for them to actually generate profits.
This is easy to do if you doctor documents, indeed the only reason straight up forgery isn't done more often are the legal ramifications discussed here.
