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  #51  
Old 09-24-2019, 06:20 PM
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Commentary about Elizabeth Holmes and Theranos: it was not just venture capitalists who fell for her scam...

I work for the European Patent Office as a patent examiner. The E.P.O. gives every year a series of awards to important inventors.

Elizabeth Holmes was nominated for the 2015 “European Inventor Awards” (category “non-European inventors”) and was ==)(== this close to winning it (!!). This link takes you to the website of the awards, and her entry as finalist (under “non-European inventors”) is still there, although all the information about her is now missing; only her name appears.

What is really worrying is that, just to be nominated, you must have had a granted EPO patent in your name. This means that somehow she managed to bamboozle some fellow examiners into granting her a patent related to her bullshit (!!!) [or, alternatively, that she was lucky enough to have her patent application looked at by a bunch of incompetents], and that the jury of the contest (who, at least in part, is supposed to be made up of people who are competent in science and engineering) did not see her bullshit for what it was (!!!).

So... all in all, a sobering experience.
I don't know about the European Patent Office, but the American patent office doesn't even try to analyze the worth of patents any more. If it's vaguely plausible, with no obvious prior art, it gets stamped and the Patent office collects its money. In the old days they at least tried to reject them. I've got some patents that I'm not at all proud of, and which never got implemented.
So, them getting a patent doesn't impress me. They always talked a good talk.
  #52  
Old 09-25-2019, 04:16 AM
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I don't know about the European Patent Office, but the American patent office doesn't even try to analyze the worth of patents any more. If it's vaguely plausible, with no obvious prior art, it gets stamped and the Patent office collects its money. In the old days they at least tried to reject them. I've got some patents that I'm not at all proud of, and which never got implemented.
So, them getting a patent doesn't impress me. They always talked a good talk.
Apologies for the slight hijack - some weeks ago I had the opportunity to talk with a group of Patent Examiners from the USPTO who were here in an exchange program (we send senior examiners from one office to the other to learn about our respective search systems, procedures and databases, and if there is anything interesting, when they are back "home" they can teach it to others).

They told me that, officially, they are not even allowed to issue formal refusals. The procedure right now at the USPTO is basically, as I understood it, that they do the search and draft a communication explaining whatever problems there are with the application. Then the applicant sends back their arguments and (perhaps) new claims. At that point, if things are not acceptable, the examiner writes a "non-final rejection" communication with their reasons.

From then on, the ball is in the court of the applicant. It is up to them to send back the application with changes. That amended application may end up triggering another "non-final rejection" back...

...and on, and on. The only one who can end the process is the applicant; if they decide that it is not worth it to pursue the patent, they stop. But, in principle, so long as they pay the relevant fees, they can theoretically keep sending the same application basically forever.

At the EPO we have formal refusals, after what we call an "Oral Proceedings" (wherein the representative meets with the examining division, either in person or through videoconference, and a "final version" of the patent application is discussed). If, after an Oral Proceeding, it is deemed that the patent application as it stands there is not allowable, then a formal refusal is issued, that can only be overturned if it is successfully appealed in front of the Board of Appeals of the office.

(Also, after a patent is granted, there is a 9-month "grace period" here wherein others can challenge the validity of that patent in a procedure called "Opposition", which is carried out in front of a panel of experts from the E.P.O., not in front of a judge. But I digress...).

Again, sorry for the hijack! To put back the tread on its rails, all these tales of weirdo CEOs brings to my mind the example of the Spanish José María Ruiz Mateos, the big boss of a Spanish conglomerate called "RUMASA", who was really a weird guy, and who in 1983 had his holdings expropriated, divided and re-privatized piecemeal by the government because (according to the ministry of Economy) RUMASA was on the verge of bankruptcy. At the time that holding by itself represented something like 2% of Spain's GDP; a HUGE amount for a single holding to control. If it really was on the verge of crashing down, the intervention would have been justifed. Suffice it to say that opinions diverge on that respect.

Ruiz Mateos probably went ... a little unhinged after that. He is famous for stalking the Minister of Economy who signed off the expropriation and once jumping on him to hit him with his fist, screaming "¡que te pego, leche! ¡que te pego!" (="Fuck, I'm gonna beat you up!"). He also went out in public dressed as some kind of third-rate superman expy; I don't remember exactly why, but possibly at the time he thought it was a good idea. He also founded his own political party (which ended up disappearing). He was a member of the Opus Dei, but in 1986 he was expelled.

A rather colorful figure, it has to be said. I was but a teen at that time (1983), but the whole circus made quite an impression on me.
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Last edited by JoseB; 09-25-2019 at 04:17 AM.
  #53  
Old 09-25-2019, 06:43 AM
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However, most people that invest in these funds do so as part of an overall asset allocation strategy. An individual with $10mm net worth might only allocate a few percent of their portfolio to alternative assets like angel investing/VC.
Sounds like how us ordinary folk will shell out $5 a week buying lottery tickets -- a trivial amount spent that will not make a difference in someone's life being gone in exchange for a really small chance of a huge payoff.
  #54  
Old 09-25-2019, 09:33 AM
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I think what's being missed here is that people can be spectacularly good at certain things without their skills in other areas being similarly advanced. Lawyers, for example, are typically not very good businesspeople. It's not what we're trained for, and we're also typically risk-averse as a consequence of the profession. Selling is a genuine skill, but salespeople are typically not the smartest people in the room, nor do they generally have outstanding skills in managing finances. The same is true for people who hustle. But by and large, it's people with the ability to sell and hustle that Make It Big. Whether they stay big typically depends on how good their support networks are; a Jobs without a Woz would have failed miserably, for example.
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  #55  
Old 09-26-2019, 04:55 PM
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As a general counterpoint to the main thrust of the OP: Theranos is gone, and WeWork is rapidly descending into irrelevance, having pulled their IPO and ditched Neumann as CEO. I wouldn't be surprised to see, well, a lot of lawsuits targeting the $700m he pulled out of WeWork as he talked it up and tanked it from the investors.

And I imagine as a result people are going to be less likely to give SoftBank untold billions to pump into their next idiot scheme.

The fact that there are frauds out there doesn't mean that there's no meritocracy at all. It just means it's imperfect. The gears of capitalism grind slowly, but you can't fool people forever.
  #56  
Old 09-26-2019, 09:43 PM
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The gears of capitalism grind slowly, but you can't fool people forever.
Look at the history of fraud from tulips to Madoff and tell me again that people don't get fooled forever.

I bet there was a spearhead bubble in the cave days.
  #57  
Old 09-26-2019, 10:37 PM
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As a general counterpoint to the main thrust of the OP: Theranos is gone, and WeWork is rapidly descending into irrelevance, having pulled their IPO and ditched Neumann as CEO. I wouldn't be surprised to see, well, a lot of lawsuits targeting the $700m he pulled out of WeWork as he talked it up and tanked it from the investors.

And I imagine as a result people are going to be less likely to give SoftBank untold billions to pump into their next idiot scheme.

The fact that there are frauds out there doesn't mean that there's no meritocracy at all. It just means it's imperfect. The gears of capitalism grind slowly, but you can't fool people forever.
I'm not sure it's descending into irrelevance; as Alessan said, there's a product that people use. It's just that their governance was shit and needed correction before jumping to the big leagues.

To your point, though, they *will* have some sorting out to do with their IPO valuation mess, particularly where SoftBank is concerned. They are much less credible as a publicly-traded company, but there's still a product that people use, and if they can straighten out the leadership side of things, then they can go from there.

Meanwhile, how about Peloton? Good product, good valuation, no bullshit with governance (or so it would seem).
  #58  
Old 09-27-2019, 02:25 AM
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Meanwhile, how about Peloton? Good product, good valuation, no bullshit with governance (or so it would seem).
It appears to be very expensive, fashionable, exercies bike, is there much more beyond that?
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  #59  
Old 09-27-2019, 07:09 AM
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The Economist has an article on WeWork, and their view that the era of easy VC money for tech companies with a bit of buzz may be coming to an end.

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And can we please stop pretending that the ability to make billions of dollars proves that someone is a genius?
I think this kind of question is worthy of a thread in itself, as I think the degree to which it is true depends on where / when we are talking about.

While being rich of course affords you a great deal of respect everywhere, in Europe, it certainly matters how you got rich. Securing a lot of investment for a loss-making tech idea might not put you in a much higher bracket than someone who inherited wealth.

In China, while people hang on every word Jack Ma has to say about starting and running a successful startup, most are not particularly interested to hear his views on anything else. So it is more about aspiration than hero worship.

And in the US, I think people are increasingly aware of the weak legs of many unicorns, and of the bad decisions made by many of the mega rich. There is still a perception / assumption that it's somehow proportional to hard work though.
  #60  
Old 09-27-2019, 08:48 AM
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Meanwhile, how about Peloton? Good product, good valuation, no bullshit with governance (or so it would seem).
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It appears to be very expensive, fashionable, exercies bike, is there much more beyond that?
Oh, feh. Some $2,500? I remember seeing an ad about fifteen years ago for some sort of elliptical trainer that swore it could get you ripped by using it ten minutes a day. The price? $14,000!

It wasn't even an Sharper Image ad.
  #61  
Old 09-27-2019, 10:04 AM
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It appears to be very expensive, fashionable, exercies bike, is there much more beyond that?
From what I can see in the commercials, the gimmick is in the screen attached to the handlebars. It allows the user to see the spin class instructor and try to keep up with the lesson (and the other participants who are in the same room as the instructor. I assume the interactivity is why they charge so much for the exercise bike. And I assume they charge either a monthly subscription or a per-lesson charge, so unlike a conventional exercise bike, the company gets ongoing revenues.
  #62  
Old 09-27-2019, 10:26 AM
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From what I can see in the commercials, the gimmick is in the screen attached to the handlebars. It allows the user to see the spin class instructor and try to keep up with the lesson (and the other participants who are in the same room as the instructor. I assume the interactivity is why they charge so much for the exercise bike. And I assume they charge either a monthly subscription or a per-lesson charge, so unlike a conventional exercise bike, the company gets ongoing revenues.
yeah, I've looked into it and the cost is about $2500 for the bike and another $500 to actually keep access to the site every year.

Seems a hell of a lot to me and not something that's patentable or can't be copied.
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  #63  
Old 09-27-2019, 11:45 AM
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Look at the history of fraud from tulips to Madoff and tell me again that people don't get fooled forever.

I bet there was a spearhead bubble in the cave days.
I mean, I'm not saying that humanity has reached a great enlightenment moment and we'll no longer be taken in by charlatans.

Just that the existence of fraudsters doesn't mean that the entire mechanism by which businesses are formed and talent performs and so on is invalid. Sometimes you can keep a scheme going for a while. Very very few people can keep one going forever.
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Old 09-27-2019, 12:34 PM
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WeWork sounds crazy, but I do not see how's its anything like Theranos.

WeWork may be wildly overvalued, but that is not the same thing. WeWork actually sells things of value. It's not like they're lying about having workspaces you can rent. They really do, and they really rent them and charge money and collect that money. They're getting buzz by using fancy tech words and whatnot, but it is, at its core, a legitimate business that isn't engaging in deception about their core service offering being anything other than what it is. Perfectly legitimate companies headed up by saner people have been wildly, insanely overvalued at some point, including a lot of legit outfits in the tech bubble.

Theranos was NEVER what it claimed to be. At no point did they have the technology they claimed to, nor was there any chance whatever that they ever would.
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  #65  
Old 09-27-2019, 04:58 PM
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Just that the existence of fraudsters doesn't mean that the entire mechanism by which businesses are formed and talent performs and so on is invalid. Sometimes you can keep a scheme going for a while. Very very few people can keep one going forever.
Yeah, and three weeks after fraud one is exposed another conman is talking to chump #2 saying, "this is nothing like that. Trust me."
  #66  
Old 09-28-2019, 06:15 AM
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Yeah, and three weeks after fraud one is exposed another conman is talking to chump #2 saying, "this is nothing like that. Trust me."
Well quite. The same is true of booms and busts in economies. I'm sure after 2008 people were convinced they'll never make the same mistake again. They will. Seeing as the "smartest people in the room" refused to see it coming we shouldn't have any confidence that it'll be different next time, and there will be a next time.

As long as the possibility exists of making huge financial gains, the possibility exists of being conned or wanting to be the conman.
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  #67  
Old 09-28-2019, 06:42 AM
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It appears to be very expensive, fashionable, exercies bike, is there much more beyond that?
True, but it's something that affluent people who live in the burbs can stick in their basement rather than having to commit to gym memberships and making trips to said gyms when it's freezing cold outside. Of course exercise is only half the reason to go to the gym anyway; perving's another - a negative for Peloton in that regard.
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Old 09-28-2019, 07:29 AM
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True, but it's something that affluent people who live in the burbs can stick in their basement rather than having to commit to gym memberships and making trips to said gyms when it's freezing cold outside. Of course exercise is only half the reason to go to the gym anyway; perving's another - a negative for Peloton in that regard.
Of all the bright new ideas that I see getting marketed, I'd put it in the top 20%. Because most of them seem fuckdumb, even some of those that actually end up catching on.

I'd never use it myself but I can see a potential market.
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Old 10-01-2019, 11:51 AM
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For anyone interested in WeWork and the zaniness of the financial system in general, I highly recommend Matt Levine's 4-times-a-week Money Stuff article. He has been writing a lot about WeWork lately (and wrote a lot about Theranos when it was in the news).

It's basically... a financial news article and also a humor piece? I'm not sure quite how to describe it, but it's both edifying and regularly hilarious.
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Old 10-02-2019, 12:45 PM
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For anyone interested in WeWork and the zaniness of the financial system in general, I highly recommend Matt Levine's 4-times-a-week Money Stuff article. He has been writing a lot about WeWork lately (and wrote a lot about Theranos when it was in the news).

It's basically... a financial news article and also a humor piece? I'm not sure quite how to describe it, but it's both edifying and regularly hilarious.
I second the Matt Levine recommendation. It's probably my favorite thing in my inbox every day.

Today he linked to an interview with marketing professor Scott Galloway discussing the WeWork debacle.

Quote:
Originally Posted by Scott Galloway
...
You haven’t even begun to see the anger that will be unleashed on Adam Neumann. He has 15,000 people right now who are stuck cleaning up. They feel like circus clowns shoveling the shit behind the elephant of Adam Neumann. He has taken $750 million and left a toxic-waste cleanup.
...
If you want to talk about real toll here — the real toll is that there’s somewhere between 5,000 and 15,000 WeWork employees who took a job and a big part of their compensation — the reason they took these jobs was because of equity value. And it’s impossible not to count your money 30 days out from an IPO. It’s impossible to tell your husband to not start looking at houses. It’s impossible not to tell your parents, “Let’s think about going on a family cruise together.” It’s impossible not to start thinking that you can afford that new car. $47 billion? We’re probably talking about several thousand people who were going to be millionaires. Now most of them are probably thinking that in the next 30 days there’s a one-in-two chance I don’t have health insurance. You want to talk about the sheer human toll? The notion that Adam Neumann was fired? My God, he got on the last helicopter out of Saigon.

Last edited by Trom; 10-02-2019 at 12:47 PM.
  #71  
Old 10-03-2019, 05:04 PM
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Theranos at least had an appealing-sounding product. On the other hand, numerous Internet-based businesses made nothing tangible and yet were immensely profitable for their creators.
paging thunderf00t

Last edited by Saint Cad; 10-03-2019 at 05:05 PM.
  #72  
Old 10-04-2019, 10:55 AM
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So... the CEO of WeWork
How does this support the notion that merit is a myth?
  #73  
Old 10-04-2019, 11:19 AM
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Does that YouTube video have anything to say that you couldn't use your own words to say?
  #74  
Old 10-11-2019, 05:04 PM
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Today he linked to an interview with marketing professor Scott Galloway discussing the WeWork debacle.
That interview is great. And it
supports Little Nemo's point that WeWork is basically just as fraudulent as Theranos. Like, how much can you bullshit about a business before it's just fraud.
  #75  
Old 10-11-2019, 06:47 PM
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Regus is very different from WeWorks. Other than the basic (and admittedly essential) similarity that they're both leasing space in bulk and renting it out in small chunks, they serve entirely different markets.

WeWorks serves, basically, hipsters. Regus serves actual businesspeople who want turnkey office space, with internet connections and cleaning services and office furniture and all that stuff all there, ready to move in on a days' notice.

I mean, small law firms rent office space at Regus facilities. There is no possible way a law firm could work out of WeWorks and be taken seriously.
It seems to me that in some way WeWorks is hoping to be the Uber of office space. Their real business model is to price in risk. The pay for long term leases, and charge users for short term leases. Their factors are number of customers vs. vacancies. So, they have to price for the risk of vacancies.

Now, like Uber, they are probably actually operating at huge losses buffered by the investment money, hoping for that future inflection point where the become profitable. So, in that respect, they are basically a ponzi.
  #76  
Old 10-11-2019, 08:29 PM
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Not sure whether this should be its own GQ, but this thread is what's making me wonder so I'm asking it here: where does a privately held company's valuation come from?

I understand why a publicly traded company has a valuation because it has a share price, the price investors are currently willing to buy or sell one share of the company for, and you just multiply that price by the number of shares outstanding and that's the valuation. But if somebody says a privately held company that's owned by one person or a handful of people is "worth," say, $20 billion, what does that mean? Where does that number come from?
  #77  
Old 10-11-2019, 08:33 PM
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Many of these private companies still sell shares, just not to the general public. So if someone offers to give a company a billion dollars in exchange for ten percent of the shares, the company is valued at ten billion dollars.
  #78  
Old 10-13-2019, 06:52 PM
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Not sure whether this should be its own GQ, but this thread is what's making me wonder so I'm asking it here: where does a privately held company's valuation come from?

I understand why a publicly traded company has a valuation because it has a share price, the price investors are currently willing to buy or sell one share of the company for, and you just multiply that price by the number of shares outstanding and that's the valuation. But if somebody says a privately held company that's owned by one person or a handful of people is "worth," say, $20 billion, what does that mean? Where does that number come from?
Not exactly. A valuation can be made using several techniques, such as a Discounted Cash Flow analysis or comparing a company to similar companies. So a company might be valued at $20 billion because it is expected to generate $20 billion (discounted to current dollars) over its lifetime. Or, if it is highly speculative, it may share similar characteristics to companies that ended up being worth around $20 billion.

Whether or not the stock price is considered a "good deal" is largely a product of the valuation. For example, if I value a company at $20 billion and the market cap is $50 billion, that might be a pretty good indication that the stock is overvalued.
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