Big Opportunity or Big Lie?

“She cast a hypnotic spell on even seasoned investors, honing an irresistible pitch about a little girl who was afraid of needles and who now wanted to improve the world by providing faster, better blood tests.” writes Roger Lowenstein in his New York Times review of John Carreyrou’s new book Bad Blood.

Subltitled Secrets and Lies in a Silicon Valley Startup the book tells the tale of the rapid rise and equally rapid fall of Theranos and its founder Elizabeth Holmes.

And a sorry tale of gullible marquee investors, executives, and government officials it is. In the short life of Theranos, at one point valued at $9 billion, Holmes raised $900 million from among others Rupert Murdoch (the largest investor) and brought such luminaries to the board as George Schultz and Henry Kissinger.

All of them so blinded by the vision Holmes peddled that they were willing to overlook the dubious scientific premise it was based on and the unsupported lies about, well, just about everything.

Even worse, they dismissed the warnings they heard from insiders and accepted completely unsupported business reports. George Schulz didn’t even believe his grandson who worked there when he reported that the place was rotten.

The blindness fed on itself as they convinced each other of how wonderful Holmes and Theranos were and completely ignored the lack of transparency and inability to validate the company’s claims.

And so the lies about performance multiplied and the gullible kept smiling and investing with visions of huge returns filling their heads.

Even Walgreens was taken in by the scam in spite of internal advice that they not go forward. “Like many executives”, Lowenstein writes, “they were looking over their shoulder and not at the evidence.”

And therein lies the heart of the problem. They were looking over their shoulder and thinking about what others were doing, how it might impact them, how they might fall behind. Here in front of them someone was offering a wonderful new way to leap forward. Their desire for it to be true blinded them to anything that didn’t support this belief.

We all are rightly motivated by looking over our shoulder and seeing bad things coming. It makes us nervous, we worry about being made irrelevant, we imagine our business failing as we fall behind. And these days our competitors are racing towards us faster and faster so the threat grows rapidly.

But trying to stay ahead in the race requires a clear-eyed evaluation of ideas placed before you…not a blind belief because a superb conperson weaves a spell over you. It requires you to listen to the people on the ground with first-hand knowledge of what’s going on and not dismiss them out of hand. And it requires you to remember that when something sounds too good to be true it usually is.

None of this means that you should ignore opportunities that seem unbelievable. It means that you need to be skeptical and verify. Verify with data and dig deep to validate it. Listen to those who offer differing views and inside experience.

Demand transparency and if you don’t get it, beware. What’s hidden behind the curtain they’re unwilling to open?

Don’t be taken in by a wonderful vision backed up by fantasy.