Category: Business

Theranos was an immigration and H-1B story

by philg

Bad Blood, the authoritative book on the rise and fall of Theranos, describes American- and British-born engineers and scientists being fired for saying “the goal is too ambitious” or quitting when realizing this. Who replaced them? According to the book, almost all immigrants from India, either folks who’d recently completed a degree in the U.S. or coming over on H-1B visas, all managed by Ramesh Balwani, Elizabeth Holmes’s boyfriend.

During the “grand fraud” stage of Theranos, therefore, it was a primarily immigrant show except for the young impresaria.

[I’m going to guess that neither Mr. Balwani nor any of these engineers and scientists make it into the children’s book First Generation: 36 Trailblazing Immigrants and Refugees Who Make America Great…]

The money to fuel the craziness of Theranos seems to have been all domestic. Walgreen’s kicked in $100 million(!) as an “innovation fee” and then loaned the company another $40 million, according to the book. The credulous yet imperial CEO Steve Burd (Wikipedia shows him hanging out with Barack Obama) drained huge amounts of Safeway shareholder cash to help Theranos. The idea in both cases was that Theranos devices were supposed to be placed in these retailers’ stores.

If the end result is a tech staff that is mostly Indian, I wonder if the Silicon Valley location makes sense. Why not have all of the engineers and scientists work from Bangalore or Delhi? Instead of 8 people sharing a two-bedroom apartment in Menlo Park, each of those 8 workers can enjoy his or her own comfortable house (rent for a 3BR apartment in the center of Bangalore is about $570/month (source), 1/10th the price of Menlo Park (source)). What’s the advantage of bringing H-1B slaves over to toil on a Silicon Valley plantation compared to running the tech farm in India?

(Another interesting aspect of the book is learning just how much room there is for human error in traditional medical lab tests, e.g., in the handling of reagents. Elizabeth Holmes was not wrong in thinking that a fully automated process could potentially be more reliable.)

Related:

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Slide Rule by Nevil Shute

by philg

A reader was kind enough to give me a hardcopy(!) version of Slide Rule by Nevil Shute. It turns out that the popular novelist was an aeronautical engineer during the golden age of aviation. One of the luxuries of getting in on the early days was working with two of the greats: Geoffrey de Havilland and Barnes Wallis, of Dambusters fame.

Shute says that “the halcyon period … died with the second world war when aeroplanes had grown too costly and too complicated for individuals to build or even to operate.” Those are fighting words at Oshkosh and I think that Game Composites refutes this gloomy perspective to some extent (albeit one of the “individuals” had to be a Walmart heir!).

Shute was an airship designer at a time when a government-run operation was building the R101 (crashed and burned due to incompetence, according to Shute) in competition with the R100, a private effort. I still can’t figure out how airships ever worked. The R100 made it to Canada and back, but got kicked up 4,000 fpm in a light thunderstorm. The British airship industry was doomed by the crash of the R101 and improvements in heavier-than-air planes, but I don’t know why anyone thought that it would ever be practical given the power of Nature and the inability of an airship to outrun a storm.

Social norms were different between the Wars. Shute describes a “married woman living apart from her husband, who established herself in the village while her divorce matured.” Her sexual relationship with one of his bachelor test pilots results in an uprising by the “Wives Trades Union of Yorkshire,” upset that they might have to encounter “that woman.” (see Real World Divorce for how things have changed for the better, from a plaintiff’s perspective, in England!) Shute says that he prefers a married-with-children test pilot who will bring back a prototype at the first sign of trouble.

Airship aviation is an indoor/outdoor experience. Crew members are able to walk on top of the ship, move around outside to make repairs while the airship is flying, go to sleep in a cabin, etc. The weather has to be crazy bad before there is anything that could be called “turbulence” to disturb passengers.

The book covers topics that would be familiar today to anyone involved in startups: raising money and growing a business despite a shortage of capital. Shute co-founded an airplane manufacturer called Airspeed Ltd. in 1931 (i.e., during the Great Depression). Despite an industry that grew as fast as hoped, a war that resulted in huge demand from governments around the world, and thousands of airplanes produced and flown away by customers, the company never thrived financially and was eventually absorbed into de Havilland. A cautionary tale for those who today would try to make money on self-driving cars, electric cars, solar power, or any other obviously booming technology. Shute’s Airspeed simply couldn’t make a significant profit in the face of competition from higher-volume manufacturers that kept reducing their unit costs. The Royal Family bought an Airspeed Envoy, but that still wasn’t enough to stave off the competition.

Shute is eventually pushed out (1938), which he says in retrospect was a smart decision: “I would divide the senior executives of the engineering world into two categories, the starters and the runners, the men with a creative instinct who can start a new venture and the men who can run it to make it show a profit. They are very seldom combined in the same person. … I was a starter and useless as a runner…”

So… to Wes: thanks! to everyone else: read Slide Rule if you’re interested in aviation, engineering, or entrepreneurship.

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Management lessons from Theranos

by philg

I’m digging into Bad Blood, the authoritative book on the rise and fall of Theranos.

I would have thought that there were no lessons to be learned for those who toil in ordinary enterprises, but there are some!

Background: Theranos was not all-fraud, all-the-time. The founder’s vision was far too advanced for Silicon Valley engineers to achieve, at least on a non-Apple budget, but the team did try. There were some reasonably competent people from Apple, Logitech, et al., and they did doggedly build devices. Maybe the combined efforts of the best people at Siemens and Agilent (formerly HP) would have sufficed to deliver most of the vision.

One lesson for managers is that firing the disloyal is a good technique for preserving one’s job. Elizabeth Holmes wouldn’t have lasted past 2005 or 2006 if not for the fact that she axed everyone who disagreed with her. A rebellion in 2008 nearly led to a Board vote to remove her as CEO, but she survived via “contrition and charm” and then fired everyone who had exposed her overoptimism and outright lies to the Board.

Another lesson is that incompetence plus sucking up = long-term job. The head of software would reliably say “yes, we can do it” and that enabled him to survive despite a long track record of failure. Folks who were more capable and who pushed back on unrealistic goals were routinely fired.

[Sort of a “management” lesson: the book describes that Holmes had a boyfriend, Ramesh Balwani, who was two decades her senior and provided her with a roadmap to garnering personal cash without necessarily building a real business. Wikipedia says that he made $40 million personally on a company whose investors were wiped out. He used some of this money to guarantee a loan to Theranos when the company had burned through its first three rounds of seed/VC money. The company might not have lasted past about 2010 without Elizabeth Holmes’s personal connection to the rich guy.]

One weakness of the book so far is that it doesn’t explain how the company was able to hire anyone in the face of competition from Apple, Google, Facebook, et al. The author makes it sound as though many of the people had skills to get jobs at the unsinkable behemoths. How did they end up at Theranos in the first place? The magnetic personality of the founder is one explanation.

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Gillette ad shows the changing standards for being a male hero?

by philg

I recounted my Costco conversation (see yesterday’s post) about the Gillette ad on Facebook. A cousin in her 20s responded

As someone with a daughter you should be happy about this. The whole purpose of this ad is to show men they can be kind and loving. Which I know you want for Greta. It’s shedding the awful stigmas that have been pushed onto men.

To me the ad was absurd. The situations in which the men found themselves entailed no personal risk and no consequences for action versus inaction. One young man says “not cool” to a same-age friend who is considering pursuing an attractive young woman on the street (maybe “it might be expensive” would be more effective?). A full-sized adult male separates two young boys who are wrestling/fighting on the grass. Shoveling the front walk after the weekend’s snowstorm is more challenging than what any of the guys in the video are doing.

What kind of conduct was valorized when I was this cousin’s age? Roger Olian and Lenny Skutnik were warm and dry prior to deciding to dive into the icy Potomac River to save people from Air Florida 90. They took a huge risk that was in no way related to their jobs or responsibilities. Nobody would have criticized Olian from staying in his warm truck or Skutnik for staying in his warm coat and boots on the shore. That’s not “the best a man can be” anymore, though!

The Thai cave rescue presented a similar situation in 2018. The “over 100 divers” (were they all men?) who went in would not have been criticized for staying home, right? Saman Kunan, a former Thai Navy SEAL who died, was “working in security at the Suvarnabhumi Airport when he volunteered to assist the cave rescue.” Surely at least one of those 100+ divers identifies as a man and is (or “identifies as”?) a Gillette customer. Yet to resonate with young consumers, Gillette decided that men dealing with children on grass was more powerful than men leaving their cozy homes, flying to Thailand, and pulling children out of miles of flooded cave.

I wonder if the debate about the Gillette ad is actually a debate between generations. My young cousin had a completely different impression than I did. So Gillette wasn’t clueless. They just don’t care about older customers who are stuck with a 1970s/1980s concept of achievement.

Related:

  • Dorco Pace 7, the Korean-made shaving system for the non-woke and/or elderly
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Gillette versus Dorco Shaving Test 1

by philg

The controversy over Gillette’s recent “toxic masculinity” ad campaign got me curious about the state of the art in razor blades.

Test 1:

  • three days of growth
  • no shower beforehand
  • warm water applied with cloth
  • Edge shaving gel
  • Dorco Pace 7 on right side of face
  • latest and greatest Gillette Fusion 5 ProShield with FlexBall on left side of face
  • brand new cartridges in both handles

Results:

  • Dorco: slight pulling/grabbing sensation at times, no trouble shaving under nose despite lack of single blade in the back, no nicks
  • Gillette: less resistance, one nick

Winner: Draw. Equal smoothness of face on both sides.

[Separately, from Friday:

Costco cashier assistant (looking at roses in cart): “What’d you do?”

Me: “If you’ve seen the Gillette ads, then you know that simply existing as a man is reason enough for apologizing.”

Assistant (in her 60s): “Aw. That’s not true. We need men.”

Cashier (in her 30s): “I’m doing fine without. The only thing that I miss is the dual income.”

]

Readers: How much better could Dorco do in the U.S. if they didn’t market their flagship under the name “Dorco”?

See also: Test 2 (in-shower shaving).

Related:

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You didn’t build that, Jeff Bezos edition

by philg

“MACKENZIE BEZOS AND THE MYTH OF THE LONE GENIUS FOUNDER” (WIRED):

Admittedly, MacKenzie’s role in the history of Amazon may not be as crucial as the existence of the World Wide Web. Then again, it’s hard to say for sure.

See also, my review of The Everything Store.

(The book describes Mrs. Bezos as providing some assistance, such as bookkeeping or getting shipments out the door, during the first years of Amazon, but then exiting the workforce. She is mentioned on page 22 as having a degree in English and “targeting” Jeff Bezos for marriage, on page 27 as “supporting” Jeff Bezos in moving from NY to Seattle, on page 39 as driving boxes to UPS, on page 40 as depositing checks, and on page 60 as attending a 1997 post-IPO party. There is no mention of MacKenzie Bezos as having had any role in the management or operation of Amazon after 1997.)

Related:

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Amazon settles into low-tax New York City

by philg

“Amazon Announces New York and Virginia as HQ2 Picks” (nytimes):

Amazon could receive more than $2 billion in tax incentives across the two top locations, the company said in its announcement. Up to $1.2 billion of that will come from New York state’s Excelsior program, a discretionary tax credit. In Virginia, the company could receive up to $550 million in cash incentives from the state.

Plainly both New York and Virginia will be low-tax environments for Amazon (not for small competitors, though! The Tax Foundation ranks New York almost dead last in business tax climate; only California and New Jersey are more punishing places to have a company), but how exactly are the “tax incentives” ladled out?

Amazon will pay less in state income tax? In payroll taxes? In property taxes? A combination of these taxes? 

“The mystery tax breaks bringing Amazon to LIC; New York has an incentives package for Amazon, but taxpayers may never know what’s in it” talks about “tax credits,” but doesn’t say if these are credits against state income tax or local property tax or what.

[Separately, anyone planning to sue an Amazon employee for child support or alimony should probably wait for the lawsuit target to be transferred from Washington (capped child support and limited alimony) to New York ($100,000 per year in tax-free child support readily obtainable and far longer taxable alimony duration). New York enables child support profits to be collected through age 21, while Washington cuts them off at age 18. New York is also more favorable for plaintiffs seeking to obtain sole custody of a child (see TMZ for why it was smart for Katie Holmes to sue Tom Cruise in New York rather than in California). For plaintiffs suing the very highest Amazon earners, the Virginia location offers unlimited child support by formula, but a child stops yielding cash at age 18.]

I wonder if the Amazon New York location will end up presenting the nation’s largest contrast in leisure time. “Amazon’s New Neighbor: The Nation’s Largest Housing Project” (nytimes) says that 6,000 people who have no financial incentive to work (they may actually suffer reduced spending power by working due to the welfare system structure) will live right next to people that the same newspaper says are essentially slaves (see “Inside Amazon: Wrestling Big Ideas in a Bruising Workplace; The company is conducting an experiment in how far it can push white-collar workers to get them to achieve its ever-expanding ambitions.”: “When you’re not able to give your absolute all, 80 hours a week, they see it as a major weakness,” she said.)

Readers: What do you think of New York residents paying the nation’s highest tax rates (tied with California?) so that Amazon can be in NYC but be taxed more like a business in Florida or Nevada?

Also, does this mean that the New York transportation system will melt down? How can it handle 25,000 more commutes per day via subway, Uber, private car, train, etc.? Every mode of transit in NYC (even walking in Midtown!) seems to be gridlocked and/or overburdened currently.

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Social justice = replacing a slate of white male directors with white female directors?

by philg

A reader sent me these amusing portrait galleries:

I wonder if everyone will view these all-white (plus one token) groups as progress…

[Related: During the 2008 Presidential race, a (short) Massachusetts female friend said, regarding my primary vote for Obama, in a disgusted tone of voice, “What a surprise. You voted for another tall man.”]

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How long would it take a Nike worker to earn as much as an American welfare family?

by philg

Nike has hired Colin Kaepernick for an ad campaign, presumably to show that the company virtuously opposes the “wrongdoings against African Americans and minorities in the United States” (Sports Illustrated, 2016): “I am not going to stand up to show pride in a flag for a country that oppresses black people and people of color,”

If we assume that the most oppressed Americans are those on welfare, let’s look at the economics of this. The typical welfare household in 2011 consumed roughly $60,000 in tax dollars (“America Spent Enough On Federal Welfare Last Year To Send $60,000 To Each Household In Poverty”, from budget.senate.gov). That’s roughly $68,000 today.

Also in 2011, it was reported that the folks in Indonesia making Nike shoes were being paid 50 cents per hour (Mercury News).

Assuming that inflation in Indonesia has been comparable to the U.S. rate, a Nike worker would have to work 120,000 hours per year to enjoy the same spending power as the American welfare family whose oppression Nike is now concerned about. (We wouldn’t want to question whether the $68,000 per year of tax money translates into $68,000 of spending power; if it did not, it would mean that our central planners were inefficient somehow.)

Using a standard 2,000 hour/year working rate, a Nike worker is getting only 1/60th as much as an oppressed American welfare family.

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A new film camera system introduced in 2001

by philg

Digging through some old content I found this article on the Contax N1 system, a film SLR system to compete with Canon EOS and Nikon. It was introduced in 2001! (The Kodak (/Nikon) DCS digital SLR came out in 1991. The Canon D30 came out in May 2000; the professional EOS 1D in 2001)

There were a lot of bright people at Kyocera and Zeiss behind this. Let’s forgive ourselves next time we miss a trend that seems obvious in retrospect!

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