Lifestyles of the Rich and Gullible: Theranos and Ozy Edition
Not so long ago we lived through the 1 percent vicariously when we saw “Lifestyles of the Rich and Famous” or “Cribs”. Now we are obsessed with the details of how they were fooled. In San Jose, California, where Ms. Holmes was tried last month, several book clubs reading Bad Blood, which chronicles the fall of Theranos, have made pilgrimages to glimpse her in the courtroom. One avid participant told me she was “a fan of white-collar crime”.
The bubbling zeal for Grift reflects the rise of the “Murderinos” or fans of true murder stories. We feel relieved that we are not the victim. Few of us are likely to lose millions – or hundreds of millions – on a seedy start-up bet.
“Mental distance enables us to laugh at things that we would be ashamed, embarrassed, or hurt about if they happened to us,” says Peter Atwater, associate professor at the College of William & Mary who studies trust in decision-making . “After all, some rich have been deceived just as much as we, the poor.”
For so-called fans of white-collar crime, the start-up scam can offer a growing bounty to feast on. There’s the latest revelation that an Ozy manager impersonated a YouTube representative when he called Goldman Sachs to try to secure an investment. There’s the fake bills Manish Lachwani used to inflate the revenue of HeadSpin, the software company he founded, to raise $ 60 million in funding, according to a recent indictment. (HeadSpin said it returned funds and worked with investigators.) There are the fraudulent claims for insurance reimbursement at uBiome, the poop testing start-up whose founders, officials said, misled investors about their business to raise $ 65 million, leading prosecutors to indict them with more than 40 fraud cases in February. There are the private investigators and legal bullying tactics that Theranos used to intimidate whistleblowers, according to recent court statements.
They follow a formula that is as old as “The Music Man”. A charismatic founder sees himself as a visionary disruptor. Ms. Holmes said Theranos blood analyzers could quickly and inexpensively provide hundreds of medical tests from a single drop of blood. That promise appealed to people like General James Mattis, who said he saw the potential to save lives on the battlefield, or Steve Burd, the former CEO of Safeway, who said the vending machines in stores are opening an exciting new line of products would shop for the grocery chain.
Once a wealthy person buys their way, the founder can use that benefactor’s credibility to garner a stall of increasingly powerful supporters. In the case of Theranos, George Shultz, the former Secretary of State, introduced Ms. Holmes to his friends at the Hoover Institution, including Henry Kissinger and Mr. Mattis. Everyone assumes that the first investor asked all the tough questions. Further explorations are dismissed as a trade secret.
The claims can be flimsy. Theranos expected 2015 sales of $ 990 million. The reality, as it became known in court, was closer to zero. Ozy Media claimed to have written the first stories about influential people like Trevor Noah and Alexandria Ocasio-Cortez. It didn’t have. Jessica Richman, a co-founder of uBiome, told reporters she qualified for the “under 30” and “under 40” lists. According to the charges, she was over 40 years old. According to “The Cult of We,” a book about the company, Mr. Neumann promised that WeLive, WeWork’s apartment side project, will generate $ 600 million in sales by 2018. It was never expanded beyond two buildings with a few hundred units.