What can two modern trojan horses teach investors about human nature?
“Timeo Danaos et dona ferentes,” were the immortal words spoken by an ordinary Trojan priest in Virgil’s ancient epic, the Aeneid, at the first dread sight of a certain wooden horse effigy.
“I fear the Greeks, even when they bear gifts,” is an admonition for the ages: Gifts aren’t always what they seem.
Of course, the priest’s sage advice, “torch that suspicious horse,” went unheeded and a fortified city let its mortal enemy in through the front gate, as fortified cities often do.
All these many thousand years later, two Trojan Horses were recently received with equal credulity by those who should have known better.
Elizabeth Holmes — once heralded as the second coming of Steve Jobs, the next Madame Curie — is finally facing sentencing for her role in bilking investors out of billions. Hers was a confidence scam for the record books, a veritable sacking by the standards of Virgil.
From Silicon Valley to the fields of advanced medicine, Wall Street to Washington, investors lined up for Holmes’ revolutionary medical device based on little more than smoke and mirrors.
Why? How did they fall for it?
Holmes offered investors a gift: Their heart’s desire.
Theranos, she claimed, had invented a medical device that could analyze and diagnose a sick patient using a single drop of their blood.
Of course investors saw dollar signs; who wouldn’t? Of course the medical profession was enamored with the applications of such a device.
Medical professionals often have their work cut out for them when diagnosing patients. Many human diseases, viruses, and syndromes present with similar symptoms and aren’t always easy to pinpoint, especially in the early stages.
Many symptoms, even serious ones, require self-reporting by the patient, which can be unreliable. Symptoms, and their severity, can vary greatly from person to person. One patient’s 10/10 on the pain scale may barely register as a 2 for someone else. Given the distractions of the average day, patients sometimes have trouble assessing accurately how often symptoms present.
A radically advanced, AI-driven, supercomputing medical device that takes the guesswork out of medical diagnoses? Cash registers were ringing.
Until everything came crashing down.
Theranos had been faking the results all along, using a slew of conventional diagnostic methods to make it seem as if the proprietary tech was guessing correctly.
Eventually, oversight caught up, exposing the fraud. Scientists wanted to peer review the Theranos machine. When they finally did, Holmes’ scheme ended ignominiously.
These days, Elizabeth Holmes divides her time between legal battles and trying to talk her way out of going to prison.
But already, Holmes has become yesterday’s news.
There’s a new kid on the block, a too-good-to-be-true crypto-whizkid who took investors on a wild ride to nowhere that ended suddenly this week with a thud.
FTX CEO Sam Bankman-Fried seemed a crypto investor’s dream — on the surface. Like Holmes, he attracted investors using a combination of personal charm, chameleon-esque fakery, and pop psychology.
Bankman-Fried talked the talk; well. During the recent mid-term election, he was a major Democratic Party donor. Openly promising to, “make a splash” in the election endeared him to many a progressive investor.
He never believed a word of it. Ethics, he admits now, are for suckers.
“The crypto exchange he founded, FTX, had become an industry-dominating business in just three years, valued at $32 billion as recently as January,” continued the Post. “He amassed political clout in an even bigger hurry, emerging from obscurity to become the second-biggest Democratic donor in the midterm elections.”
What a difference a week makes.
“By Friday, the money and the clout had disappeared: Bankman-Fried resigned from FTX, which then filed for bankruptcy,” reported the Washington Post. “On Saturday, the company revealed it was investigating “unauthorized transactions” worth more than $400 million and that it had moved all funds into offline storage. And Bankman-Fried was left facing harrowing questions about his role in the most catastrophic collapse the notoriously volatile crypto industry has so far seen.”
“FTX’s Collapse Leaves Employees Sick With Anger,” reported the Wall Street Journal this morning. “Many say they learned of crypto exchange’s deteriorating situation through media and lost access to their funds.”
These days, Bankman-Fried, whose very name sounds like a financier’s death knell, divides his time between fighting extradition from his in-foreclosure Bahamas enclave and blaming the entire debacle on his ex-girlfriend — who spends her time trying to buy a one-way ticket to some nice non-extradition country like Dubai.
After the news broke, conservatives pounced.