Thu, Oct 29, 2015 - Page 9 News List

Unicorns do not exist, even in Silicon Valley

Theranos, which was recently valued at US$7 billion, is a good example of why the public should not be too quick to believe claims of creative ‘disruption’

By Mike Daisey  /  The Guardian

Illustration: Mountain People

The idea of a “unicorn” — a company valued by venture capitalists at more than a billion dollars — is so seductive that some whole industries use it as a benchmark without understanding its irony. The mania of Silicon Valley is so great that the venture capital firms even got tired of “only” looking for unicorn companies, so they coined the painfully stupid word “decacorn,” which means “valued as 10 unicorns.”

When your aspirations are so disconnected from reality that even unicorns do not do it for you anymore, this is a clear sign that you’ve been drinking the Kool Aid.

The company Theranos has been the darling of Silicon Valley for years because it promises to “disrupt” healthcare testing, with disruption defined as the classic trifecta: that it will be cheaper, faster and better than the traditional ways.

Theranos’ breakthrough technology claims to use just pinpricks of blood to get the results you used to need whole vials for. Also the tests get results incredibly fast, and would be rolled out at chain pharmacies across the US, changing the shape of medical testing forever. Did I mention that the tests would also be incredibly cheap?

It is claims like this, and support from venture capital firms, that have driven Theranos to a US$9 billion valuation. It is not intuitive that all this talk of valuation is simply calculated based on how much venture capital firms have invested. In other words, we say a company is “valued” at US$9 billion, and then act as though this is actual real money, but that number is based on nothing except what a venture capital firm felt the company was worth in a bet on the future.

MYTHS EXPOSED

The Oct. 15 Wall Street Journal expose of Theranos explodes the mythology of the company. Insiders who spoke to the Journal allege that out of the 240 kinds of tests it currently performs, the “pinprick” technology lauded as the linchpin of their strategy was only used for a tiny fraction of its testing.

Worse yet, there have been complaints to regulators from inside the company that their revolutionary tests are not giving results that agree with traditional testing, and that Theranos has been burying those unwanted results.

What has been blown open, again, is how little we truly know. Even though Theranos received regulatory approval, it is not clear at all if anyone truly knows how accurate their tests are.

The company responded to the story by stating: “Theranos’ technology is reviewed by regulators, proven in the field, and praised by leaders in the industry and doctors and individuals that we serve.”

This is why it is so important for us to sniff out unicorns when they make their way into our lives, and view them with the suspicion a mythological beast deserves.

Yes, Uber connects people and drivers — but it also short-circuits labor protections. Yes, Airbnb connects people for short term stays — but it also upends hotel regulations.

There is no such thing as a free lunch, and tech companies need to stop pretending they have discovered a way to both have and eat their cake through “sharing.”

Despite all these well-worn warning signs, the allegations against Theranos still shocked its many defenders.

A lot of the hype about Theranos is driven by its narrative: It has the young brilliant founder, Elizabeth Holmes, a Stanford dropout who founded the company at 19 and has a penchant for black turtlenecks. It has the cute origin story, too. You see, Holmes is afraid of needles, and it is that fear drove her to develop the pin-prick technology. And of course, the special technology that runs the special tests is called Edison, because when you’re making a mythology, a dollop of US exceptionalism never hurts.

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