Be suspicious of unicorn start ups
The idea of a unicorn – a company valued by venture capitalists at over a billion dollars – is so seductive that some whole industries use it as a benchmark without understanding its irony. The mania of Silicon Valley is so great that the venture capital firms even got tired of “only” looking for unicorn companies, so they coined the painfully stupid word “decacorn”, which means “valued as 10 unicorns”.
When your aspirations are so disconnected from reality that even unicorns don’t do it for you anymore, this is a clear sign that you’ve been drinking the Kool Aid.
The company Theranos has been the darling of Silicon Valley for years because it promises to “disrupt” healthcare testing, with disruption defined as the classic trifecta: that it will be cheaper, faster and better than the traditional ways. Theranos’s breakthrough technology claims to use just pinpricks of blood to get the results you used to need whole vials for. Also the tests get results incredibly fast, and would be rolled out at chain pharmacies across America, changing the shape of medical testing forever. Did I mention that the tests would als be incredibly cheap?
It’s claims like this, and support from venture capital firms, that have driven Theranos to a $9bn valuation. It’s not intuitive that all this talk of valuation is simply calculated based on how much venture capital firms have invested. In other words, we say a company is “valued” at $9bn, and then act as though this is actual real money, but that number is based on nothing except what a VC firm felt the company was worth in a bet on the future.
What has been blown open, again, is how little we truly know. Even though Theranos received regulatory approval, it’s not clear at all if anyone truly knows how accurate their tests are. The company responded to the story by stating: “Theranos’ technology is reviewed by regulators, proven in the field, and praised by leaders in the industry and doctors and individuals that we serve”.
Despite all these well-worn warning signs, the allegations against Theranos still shocked its many defenders. A lot of the hype about Theranos is driven by its narrative: it has the young brilliant founder, Elizabeth Holmes, a Stanford dropout who founded the company at 19 and has a penchant for black turtlenecks. It has the cute origin story, too. You see, Holmes is afraid of needles, and it’s that fear drove her to develop the pin-prick technology. And of course, the special technology that runs the special tests is called Edison, because when you’re making a mythology, a dollop of American exceptionalism never hurts.
Ms Holmes has been on the cover of Fortune, profiled in the New Yorker, and covered in all the right places. The fact that on paper she’s worth billions causes her to be taken very seriously, because that’s how this culture functions: authority is created by money. From Ted talks to tech salons, she has been a prominent presence, and some have believed that her company could become the Google of healthcare testing.
And she fulfills all our personal checkmarks for the mythological quirks of genius. She doesn’t date, is a vegan, sleeps very little, quotes Jane Austen by heart, works nonstop, dresses like Steve Jobs and as the New Yorker helpfully informs us: “several times a day she drinks a pulverized concoction of cucumber, parsley, kale, spinach, romaine lettuce and celery.”
But unlike mythical creatures, the allegations against her company are very real, and very ugly. Healthcare is not a new iPhone; people’s lives are on the line. Employees allege in the Journal piece that some of the potassium levels seen in Theranos’s tests are so high that the person would have to be dead to give those results.
All this attention even caused Jean-Louis Gassee, a former Apple executive, to do a comparison test of his own with a blood test he’s required to take monthly. Over two days having his blood tested traditionally and by Theranos yielded wildly different readings.
Gassee’s results are anecdotal, but it bears noting that this isn’t a beta program. He could check it out because Theranos is in use at pharmacies right now, and people use it every day to get real test results. The company’s response has been to deny the allegations and to call the Wall Street Journal a tabloid. When that didn’t work, they published a rebuttal, but critics argue that they should publish their data in peer-reviewed journals if they want to address the questions raised by the Journal.
This is the standard model of rapacious capitalism, fueled and developed in the tech sector. If medical testing were treated differently, it would damage its ability to “disrupt”. How can Theranos be a decacorn if it doesn’t deliver world-changing tests immediately at incredibly low cost? There has to be unbearable pressure for the tests to work and work well, and if they don’t perform perfectly, bury any dissent.
In retrospect, so much about Theranos seems suspect – the secretiveness of the company, the choice to have a majority of men like Henry Kissinger and George Schultz on the board of directors instead of health professionals, and the idea that a college dropout could found a company that could be the fountainhead from which a new way of doing all our medical testing springs forth.
Also, it is never wise to trust people who drink kale several times a day.
The marketplace is as irrational as we are. It wants to believe the story that it wants to hear. And we all want unicorns to exist. That is why they are so lovely to us – because they exist only in the mind’s eye, in our dreams. We all want the world to be as simple as a coding an app. We want to believe it’s possible to codify all the variables, then address them one by one and then solve the equation.
Theranos is a perfect tech company name – it sounds mysterious, Greek and portentous. In Greek mythology Thanatos is Death. Could it be Death’s little-known brother, a minor Greek deity responsible for prescriptions and blood tests?
The reality is more prosaic. It has no larger mythology at all. It’s simply an amalgam of the words “therapy” and “diagnosis”. That’s it.
It sounds like it means a lot more than it actually does.
Written by Mike Daisey