The Morning Jolt

Politics & Policy

The Con Woman of Silicon Valley

Elizabeth Holmes, CEO of Theranos, attends a panel discussion during the Clinton Global Initiative’s annual meeting in New York, September 29, 2015. (Brendan McDermid/Reuters)

Yesterday’s Jolt dealt with family separation and a growing trade dispute with China. Much of the big news of the day again pertains to none other than family separation and a growing trade dispute with China. President Trump has announced 10 percent tariffs on $200 billion of Chinese goods; China has vowed to retaliate; Trump has vowed to retaliate if they retaliate. Look for equity markets to slide today. Later, we’ll take a look at Theranos’s Elizabeth Holmes and her fall from grace in Silicon Valley.

Will Congress Put an End to Family Separation?

Some background, in case you haven’t been following the story: The Trump administration has been prosecuting all who are found illegally crossing the border. Many of these people are Central American asylum seekers who enter the country as family units. Because of a Bush-era consent decree, when they claim asylum the parents are detained separately from their children, who are being taken into the custody of HHS in makeshift shelters. Right now, thousands of kids, separated from their parents, are being held in such facilities. It’s grim.

Enter Congress. Senator Dianne Feinstein (D., Calif.) took a first pass at an anti-family-separation bill that would generally cripple the administration’s “zero tolerance” policy toward those crossing the border illegally. It won the support of all Democrats, but no Republicans have signed onto it. Last night, Ted Cruz (R., Texas) proposed a bill that looks as if it has a real chance at passing. The bill is narrowly tailored to solve the family separation problem, directing that the resources currently going toward child shelters go toward family shelters, doubling the number of immigration-court judges and ordering them to handle the asylum claims expeditiously, and forbidding the practice of family separation. Rumblings out of D.C. indicate that a House bill could be on the way as well.

Elizabeth Holmes’s Fall from Grace

Theranos was among the hottest startups just three years ago. Now its founder Elizabeth Holmes and former COO Ramesh “Sunny” Balwani have been charged with felony counts of wire fraud. It’s a precipitous fall from grace for the woman who had been hailed as the next Steve Jobs — she had a habit of wearing black turtlenecks and insisting she would change the world — and once had a net worth of $4.5 billion. But the charges are no surprise to anyone who has been following the story.

Dogged work by Wall Street Journal reporter John Carreyrou cast light on Theranos’s issues with its blood-testing technology in October 2015. The company had said it was using groundbreaking, proprietary technology to test people’s blood with just a pinprick — marking a revolution in the medical-device world. But, Carreyrou reported, it had been struggling with its proprietary devices. Put simply, they didn’t work. Theranos had resorted to using other companies’ devices to test patients’ blood samples, but since those devices required a larger amount of blood to conduct the tests, it had to dilute the samples. All of this led to accuracy problems, and Theranos, then under contract with Walgreens, was conducting unreliable tests on the pharmacy’s behalf.

Is it fair to extrapolate the case of Theranos to the rest of Silicon Valley? Certainly the negative consequences of the move-fast-and-break-things ethos have become clear over the last few months, and dispatches from within Theranos’s doors evoke other Silicon Valley horror stories. But Matt Levine — to my mind the best morning-newsletter writer in the business outside of Brother Geraghty — identifies the salient distinction between Theranos and, say, a certain “disruptive” juicer company that wound up not having the goods:

It seems right to me that, of all the startups to charge with wire fraud, prosecutors went with the one whose allegedly fake blood tests allegedly endangered patient lives. You really can’t prosecute every little startup exaggeration as wire fraud. A lot of those exaggerations — quite possibly even a lot of Theranos’s — are motivated by CEO overconfidence and delusion, and it is hard to distinguish among the CEO who promises the impossible because she is committing fraud, the CEO who promises the impossible because she is deluded, and the CEO who promises the impossible and then goes and does it. All three types flourish in Silicon Valley.

And Silicon Valley is basically a good ecosystem. It produces a lot of good stuff and makes a lot of venture capitalists rich. And sometimes startups fail, and sometimes it turns out that they were lying to their investors, but the investors — in aggregate, in expectation — are okay with that. The investors want to be lied to! They want to look into the eyes of entrepreneurs, and see the abyss staring back at them, and say “well okay this is weird, let’s see where this goes.” Move fast and break etc. etc. etc., you know the drill; you put your money on weird rebels pursuing high-variance outcomes, and when the variance is high—in either direction—you congratulate yourself for your boldness.

Not everyone in Silicon Valley is a delusional con woman hell-bent on making herself rich off the diluted blood of patients who just wanted to find out if they had a disease; it’s just Elizabeth Holmes.

The Harvard Admissions-Discrimination Case

Harvard University almost certainly discriminates against Asian Americans in its admissions process. Documents were released last week in the course of a lawsuit by Students for Fair Admissions against the university that shed light on the process. The National Review editorial explains:

Evidence shows the discrimination happens along two lines. First, Harvard evaluates applicants according to a “holistic” process that considers, in addition to their academic, extracurricular, and athletic achievements, “personal” qualities: whether they have demonstrated “humor, sensitivity, grit, leadership,” etc. Asian Americans consistently rank below others on the personality metric, despite the fact that admissions officials never meet most applicants. The internal review showed that Asian Americans were the only demographic group to suffer negative effects from the subjective portion of the evaluation. Second, even after the subjective criteria are taken into account, the university tips the scales further by adjusting for “demographics.” The specifics of this adjustment have been redacted by the university, but the review found that the share of admitted Asian students fell from 26 percent to 18 percent after it was made.

Having skimmed over the relevant documents, I’m struck first by how overtly the university trafficked in racial stereotypes against Asian Americans. It frequently referred to them as “busy but bright” and was significantly more likely to give them “standard strong” ratings in the personality portion of the admissions evaluation, a rating that denotes a strong academic profile with little else to round it out. Yet Asian American students consistently piled up better-than-average ratings on the extracurricular portion of the evaluation. It was the personality metric on which they faltered. Harvard admissions officials were guilty of trafficking in some of the most well-trod stereotypes against Asian Americans without ever having met them: According to Harvard, they are undifferentiated drones who don’t have social skills, aren’t natural leaders, and can’t contribute to a vibrant community in meaningful ways. It is despicable that Harvard has been getting away with this for so long. One silver lining is that the political damage the university has been taking might encourage it to reform its admissions system, win or lose in court.

One issue that didn’t make it into the editorial that deserves some consideration was raised by Michael Brendan Dougherty in a Corner post last Friday. A better college-admissions system, he suggests, might allow universities to choose what their mission is and tailor their admissions criteria from there. This follows from the general principle that civil society ought to allow institutions to choose what type of institution they want to be. If Harvard thinks it is better off balancing its demographic in a certain way to cultivate a racially representative group of people for membership in the American elite, then it ought to make that case (though this would probably be illegal). We might benefit from a frank conversation about the potentially manifold roles that universities ought to play in our country. But Harvard’s deception certainly doesn’t help. Nor does its blatant racist stereotyping.

ADDENDA: Vladimir Putin will be hosting former FIFA president Sepp Blatter at the World Cup, a meeting between two of the worst people on the planet. Here are three essays you should try and read this week:

1) “David Lynch Keeps His Head,” by David Foster Wallace, Premiere, 1996

2) “The Face of Seung-Hui Cho,” by Wesley Yang, n+1, 2008

3) “The Killa in Manila,” by Christopher Caldwell, The Weekly Standard, 2018