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  • A Cool Startup Story, Revisited

    Posted by David Foster on October 18th, 2014 (All posts by )

    In 2005, I posted about a company called Theranos, as part of the “cool startup story” series at Photon Courier.  The company was founded by Elizabeth Holmes, who left Stanford at age 19 in order to pursue her idea for a quantum improvement in blood testing.  The original focus was on the detection of adverse drug reactions and the analysis of drug effectiveness on a more-individualized basis.

    My, how this little company has grown up.  Theranos now has 500 employees and a valuation of about $9 billion.  They can currently perform 200 of the most commonly-ordered blood diagnostic tests, and can do it without a syringe–only a few drops of blood are necessary, and these are obtained from a finger prick using “a patented method that minimizes even the minor discomfort involved with that procedure.” (The Fortune writer tried it, and said “to me, it felt more like a tap than a puncture.”)  Theranos now has a deal with Walgreens, initially making its service available in stores in California and Arizona and with plans to roll the service out to all 8200 Walgreens stores nationwide.

    Holmes:

    There are a billion tests done every year in the United States, but too many of them are done in the emergency room. If you were able to do some of those tests before a person gets checked into the ER, you’d start to see problems earlier; you’d have time to intervene before a patient needed to go to the hospital. If you remove the biggest barriers to these tests, you’ll see them used in smarter ways.

    and

    Phlebotomy is such a huge inhibitor to people getting tested. Some studies say that a substantive percentage of patients who get a lab requisition don’t follow through, because they’re scared of needles or they’re afraid of worrying, waiting to hear that something is wrong. We wanted to make this service convenient, to bring it to places close to people’s homes, and to offer rapid results.

    From a 2005 Daily Duck post about Theranos:

    …in how many nations of the world could A TEENAGE GIRL get a serious audience, and then MILLIONS OF DOLLARS in VC funding, to develop her idea ?!?

    There are many unpleasant consequences to American society being perpetually adolescent, a bit shallow and thrill-seeking, with an attention deficit and a naive optimism born of ignorance about the odds, but this type of thing is one of the UPSIDES of being that way.

    In America, if you can do, the odds are pretty good that you’ll be allowed to do, regardless of your shortcomings and quirks. We’re flexible and goal-driven, not so much wedded to process.

     

    15 Responses to “A Cool Startup Story, Revisited”

    1. Jonathan Says:

      A great and inspiring story.

    2. dearieme Says:

      “We’re flexible and goal-driven, not so much wedded to process.” Does “we” include the gubmint? Or Dallas Presbyterian?

    3. David Foster Says:

      The entire “Cool Startup Story” series can be read by starting here and following the links from post to post.

    4. Jonathan Says:

      Dearieme,

      This is code that most people who follow the American business world understand. It means: the competent parts of US society, including many businesses and the startup business/finance community generally, the remaining meritocratic govt institutions (e.g., parts of the military), and everyone else involved in competitive enterprises. It does not include much of govt, NGOs, big media, academic bureaucracies, badly run businesses or any other enterprise that is primarily political and/or subject to political correctness. The Dallas hospital does not seem to be competently run.

    5. MikeK Says:

      From a comment to the linked story: “Then, when I went to work for a big company after graduating and observed firsthand the inflexibility of the bureacracy, that I realized it was not only a possibility to start a company, but for someone with my temperment, the only possibility.”

      This struck me as applying to medicine today. When I was a medical student 50 years ago, I assumed that I would eventually be in a practice of my own unless I stayed in an academic setting. Even academics often branched out of academia to start companies. Craig Venter comes to mind. His book, a biography and the story of the discovery of the human genome is here.

      Today, more medical students expect to work for a “vertically integrated health care organization.” These are best known for “the inflexibility of the bureaucracy,” and for scandals becoming more common every day.

      For example, the medical device tax of Obamacare might kill off that startup before it got going. The tax is an excise tax on gross receipts, not profits.

    6. MikeK Says:

      “The Dallas hospital does not seem to be competently run.”

      It may be clumsy or it may be typical of hospitals in the Obamacare era, trying to adapt to a set of perverse incentives.

    7. David Foster Says:

      Dearieme…process orientation is not necessarily bad, indeed quite the contrary IF…(1) the processes are developed to reflect the “common thread” of work activites, rather than everything have to be considered as “one off”…..(2) the process is correctly followed…..(3) the process allows for deviation, and the people carrying it out WILL so deviate, in cases where it is necessary to do so becasue the real-life situation is different from that envisaged by the process, (4) the process is monitored and continually improved.

      Toyota, for example, owes its success at least as much to process excellence as to product excellence, probably more so.

      But this is a long way from what “process orientation” means in a “zero tolerance” public school district (government school, to translate for the Brits) or government bureaucracy or even a badly-managed private business….in which places it typically means blind and mindless rule-following.

      Peter Drucker has persuasively argued that every government MUST be a “government of paper forms,” ie, process oriented in the second sense, if it is not to become a mutual looting society or a tyranny.

      (Of course, a government CAN be “a government of paper forms” and STILL be a corrupt tyranny)

    8. MikeK Says:

      This is a pretty good analysis of the present state of government today.

      Over the past 14 years, we’ve endured a series of stunning institutional failures. Going backwards in time, we have:

      And he lists them. Both parties, by the way, which I agree with but it is mostly the bureaucracy.

      I studied Toyota at Dartmouth as the model for medical care improvement, but it is the opposite of what Obamacare is doing. Harvard and the other “elite” schools give me no confidence that it will get better. It is “credentialism” and that is corrupt all the way through.

      How about The Hunter Biden scandal which is another example of corruption. He was 44 and got a Navy commission in spite of a drug history when the Navy is discharging officers with good records. It took two waivers. Does anyone think a non-associated lawyer would have gotten those waivers ?

      The brief military career of 44-year-old Hunter Biden, Vice President Joseph Biden’s younger son, seems to have ended after one month in the naval reserve. Biden is reported to have tested positive for cocaine use, and was immediately discharged. It was “the honor of my life to serve in the U.S. Navy,” he has said in a statement, “and I deeply regret and am embarrassed that my actions led to my administrative discharge.”

      Everybody makes mistakes, of course, and the younger Biden’s humiliation must be profound. But it is worth noting that, while Biden’s summary discharge occurred last February, it did not become public until the Wall Street Journal revealed the story this week. Biden’s statement about “the honor of my life to serve in the U.S. Navy” — for one month! — was issued through his lawyer.

      God help us all ! They are following the John Kerry model.

    9. dearieme Says:

      Thanks, Jonathan, David. The story made me think (after metaphorically doffing my cap to Miss Holmes) of a point that Steve Sailer likes to make. In the name of diversity and whatnot, the American state (be it State, Federal or local) makes systematically laborious and inept hiring decisions for low level employees – firefighters and so on. Yet the state seems perfectly happy to turn a blind eye to tech companies that tend to hire on merit and thereby become overwhelmingly staffed by white and Asian men.

      I wonder how the bureaucrats of the state justify their hypocrisy in such matters. Maybe they just realise that the taxes they live off have to be generated by someone, and so reluctantly allow some part of the economy to be competent and competitive.

    10. MikeK Says:

      “reluctantly allow some part of the economy to be competent and competitive.”

      Bingo! That means you are correct. Remember the Ottomans allowed the Greek “converts” to run the empire. The Ottomans were good at fighting and eventually had Janissaries to do that for them.

      Most of the accomplishments of the Islamic Golden Age , especially the translations, were done by Greek “converts” who spoke Syriac and Aramaic. Even Wikipedia admits it.

      Christians (particularly Nestorian Christians) contributed to the Arab Islamic Civilization during the Ummayad and the Abbasid periods by translating works of Greek philosophers to Syriac and afterwards to Arabic.[8][9][10] During the 4th through the 7th centuries, scholarly work in the Syriac and Greek languages was either newly initiated, or carried on from the Hellenistic period.

      When I was in Istanbul a few years ago, in Hagia Sophia, they were dismantling the Arabic calligraphy panels that covered the mosaics of the Byzantine period. They were finding that the workmen, no doubt converts to Islam after the conquest, had carefully preserved the mosaics and used clay and straw to protect them as the panels were placed over them. They expected the Christians ro come back and throw out the Ottomans.

      I wonder if Erdogan has stopped the work on Hagia Sophia, which was to turn it into a secular museum ? I wonder what has happened to the army officers who showed us into Florence Nightingale’s quarters in Scutari Barracks?

      I’m not sure the Democrats are smart enough to allow the economy to work to feed them and their voters.

    11. Bill Brandt Says:

      Only in America could this company start and flourish

    12. IGotBupkis, "Si tacuisses, philosophus mansisses." Says:

      }}} I’m not sure the Democrats are smart enough to allow the economy to work to feed them and their voters.

      I have to say, even social orders seem to tap into elements of the Misean “Boom and Bust” cycles. I think we’re nearing the collapsing part of the Bust cycle for ours.

      It will not needfully be as bad as might be supposed. I believe America has enough vitality to survive the collapse, just not in its current form. The main boon of the USA is its microcosm-polyglot culture — the USA is the only such culture at this time, and it’s an important thing heading into an IP & Services Economy. There is no better crucible for new things than that microcosm-polyglot of world culture that holds sway in the US. So the new ideas, the new services, all the rest, which have the most success will originate here, first. But before that can happen, we need to pass through the bust cycle and get through to the other side.

      The USA has other benefits, too. But that McPg culture is one of the most significant.

    13. IGotBupkis, "Si tacuisses, philosophus mansisses." Says:

      Also, one of the key benefits of that bust cycle, in addition to killing off cultural boondoggles like political correctness and perpetual indignance, is to give all the pampered children of the last 80 years (yes, me included, no argument) a taste of what real non-wealth is like.

    14. Mike K Says:

      “to give all the pampered children of the last 80 years (yes, me included, no argument) a taste of what real non-wealth is like.”

      Unfortunately, there is now a significant sector of our population that will not deal with the bust cycle peacefully as the generation of the Depression (including my parents) did. We see a glimpse of this in Ferguson Mo and Detroit will show us more. When the money runs out and people must rely on their own initiative, about 25% of the population will revolt and “go postal.” The illegal immigrants (about 25% of Los Angeles) might go home. The rest of the “urban underclass” that we cannot name will go crazy.

    15. IGotBupkis, "Si tacuisses, philosophus mansisses." Says:

      }}} This is a pretty good analysis of the present state of government today.

      Sorry, Mike, I have to disagree with you there. The piece is clearly written by a liberal twit who has only an initial glimpse of the problem:

      And just in case that sounds like a set-up for a libertarian manifesto in favor of privatization, note that institutional failures haven’t been limited to government. From the banks and other financial institutions that nearly wrecked the global economy in 2008, to the sex-abuse scandals that have been rocking the Catholic Church for over a decade, to General Motors’ deadly ignition-switch cover-up, big organizations, whether private or public, have been behaving badly and ineptly.

      That’s troubling news, because the modern world needs big, bureaucratic institutions to function.

      No, it’s the big, bureaucratic institutions that are the problem. They need to be replaced by smaller, more nimble, more effectively directed networks that aren’t monoblocks of institutional inertia.

      To me, this is one of the challenges for the next generation — how do we transition from our hierarchical, mass institutions to smaller, networked groupings that perform similar functions, but far more effectively? The coming age is about IP & Services, and that’s a phase change from the previous Agricultural and Industrial economies. It is about smaller networked collections of individuals and small groups (call it a “kith”: people you know), not about giant hierarchical behemoths.

      And it seems to me few have really grasped this so far, on any level.