Trust and Honesty are a Rare Commodity

General Finances
By JingCheng Woo,

Trust is like the air we breathe — when it’s present, nobody really notices; when it’s absent, everybody notices.
Warren Buffett

On 18 May 2018, Wall Street Journal(WSJ) published a video titled “Reporting on Theranos and Elizabeth Holmes”.

The summary of the book ‘Bad Blood’:

Investigative reporter, John Carreyrou, burst the bubble of  Silicon Valley blood-testing startup, Theranos. At its peak in 2013 and 2014, the company reached a valuation of $9 billion. The reality fell far short of what the company had promised; pin-prick blood test that would revolutionise the healthcare industry. The new technology would allow patients to get quick and easy blood test readings from home and this data would be sent remotely to their doctor.

Theranos “success” is attributed to the charismatic founder, Elizabeth Holmes. Founded in 2003 after dropping out of Stanford at age 19, she was able to attract big investors to pour millions of dollars into the start-up. Theranos seemed to be the new “Apple” in the Biotech scene and the media envisioned Holmes to be the next Steve Jobs.

However, Theranos struggled to develop its blood-testing technology and their idea constantly failed to materialize. Lawsuits started to pile up from angles — investors and patients. The hype-train has since crashed and burned.

 

Takeaway:

Everybody likes an exciting story. Silicon Valley is perceived to be the holy grail of all tech start-ups. Mainstream media tends to catch on and amplify the “next big thing”, or the next “cutting-edge technology”, and it has and always been this way.

It is important for investors to critically analyse and rigorously question new business ideas and assumptions. Novelty does not mean feasibility. Never buy into a company just because of the story. Fully understand and commit only when you understand the nature of the business.

At Hive Up, we always advocate to diversify and not put all your eggs in one basket. You cannot control the performance of the company, but you can control the risk allocation of your portfolio.


Be curious, always question and stay diversified.

Read a comprehensive timeline by Business Insider:

The rise and fall of Theranos, the blood-testing startup that went from a rising star in Silicon Valley to facing fraud charges over a wild 15-year span

 

 

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