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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Woman who “exceeded expectations” by earning an engineering degree

by philg

The Art of Investing: Lessons from History’s Greatest Traders is a Teaching Company course by John M. Longo, a Rutgers professor who got a Bachelor’s in 1991 (so he should be 50 years old), has one lecture given over to “four women who moved financial markets” (the other 23 lectures cover investors who, at least at one time, identified as “men”).

One thing that struck me was Professor Longo’s praise of Leda Braga, born in 1967, as having “exceeded expectations.” One cited example of this was earning a Ph.D. in engineering from Imperial College London. But Professor Longo does not cite any reason for anyone to doubt this woman’s abilities other than her identifying as a woman.

(The rest of the course suggests that, except for the Renaissance folks such as James Simon, “nobody knows anything.” The successful investment strategies are all over the map. It is unclear if the folks who’ve been successful are examples of survivorship bias. They took some bold risks and succeeded. Okay, but what about the 100 other folks who took bold risks at the same time? Investor track records are presented without any adjustment for risk. So a monkey who threw darts at the WSJ in 1990 and picked Microsoft and Apple as the sole constituents of a portfolio would be celebrated as a genius investor.)

Readers: Does it actually advance the cause of gender equality to express surprise that a woman is able to do something that tens of thousands of men do annually?

Related:

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New York Times on the financial hardship of NASA employees

by philg

This is kind of interesting from a newspaper that prides itself on in-depth reporting… An article on furloughed NASA employees asserts without evidence that they could be making 2-3X more money in a private sector job:

No matter how vital high-skilled federal workers are to the functioning of government, there are usually companies willing to offer them much higher salaries — double or even triple in some cases — on top of the free lunches and stock options.

Are they doing any consulting work during their furlough? If they are valuable to private companies as employees, at least some should be worth $300 or $500/hour to consult, no?

The workers at Glenn are mostly waiting, drawing down savings, wondering about the state of their untended lab work, reading about Chinese spacecraft landing on the moon and pondering the appeal of the public good when a good chunk of the public seems to have little use for it.

They’re “mostly waiting” instead of doing consulting work for these private employers who are desperate for their services?

Yet more stranger (as we liked to say back in junior high): Drawing down savings.

A quick Google search reveals that NASA employees are eligible to borrow money at 0% from their own NASA Federal Credit Union:

Our special Furlough Relief Loan will allow you to access up to $10,000 for up to a 60-month term – interest free and payment free for 60 days.* This offer will be available through February 15, 2019.**

So these folks are geniuses who could get paid $400,000/year simply by walking into the HR department of a private employer, but they aren’t smart enough to go to the credit union web site and click “apply now” for their 0% loan?

How did the reporter and editors miss this? Neither the word “credit” nor “loan” appears in the article so they don’t address the question of how people who are able to borrow at 0% and whose entire annual salary is guaranteed to be paid (albeit with a delay for at least two paychecks) are being forced to deplete savings.

The unedited Web seems to be a lot more authoritative that the Paper of Record. Consider this 2014 exchange on bogleheads.org, “Any aerospace engineers? Pros v. cons of working for NASA v. private sector”:

This isn’t a NASA specific issue, but almost all federal employees are on the GS pay scale. That caps their pay at level IV of the executive schedule, which is now $164,200. … Most NASA employees are in the business of contract management. The real engineering gets outsourced to contractors. If he wants to do research and development, he should go work for a contractor. If he wants to become an expert in federal acquisition regulations, he should go work at NASA.

From a financial perspective, he will probably never make up the lost 4 years or so of income if he gets a PhD.

I worked at NASA for a while… NASA contains a huge amount of unmotivated government employees. They’re so expensive that they have to contract all the work out. Even then money is so badly mismanaged that there is no incentive to deliver a project on time. If you’re nearing retirement, it’s a great place to be as it’s virtually impossible to get fired. They’re just shift you from job to job.

I talked with a SpaceX recruiter. Was going to be a significant pay cut, and the recruiter kept mentioning long (70+) hour weeks. For the high cost of living area, it didn’t make much sense. It was clear they were banking on the “sexy” factor of SpaceX to make up for the hours and low pay.

I worked at Goddard Spaceflight Center… And while the raw salary was meaningfully lower than what the contractors were making at comparable position levels, the overall benefits package was WAAAAAAY better — much, much more paid time off, much better healthcare, and significantly better retirement benefits.

A message from the bogleheads exchange that STEM boosters probably won’t be sharing:

I have worked for a large aerospace company (think Boeing, Lockheed, Northrop) and currently work for a tier 1 aerospace supplier. All big companies are the same, with tons of bureaucracy, politics, mediocre raises, lots of old timers that are dead wood, etc, etc. Hopefully he is passionate about it because he probably will be living a normal middle class life and will make starting 75K/yr – 150K/yr (after 15-20+ years experience) throughout his career.

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Gillette versus Dorco Shaving Test 2

by philg

Continuing research in response to the controversy over Gillette’s recent “toxic masculinity” ad campaign … (see Test 1)

Test 2:

  • two days of growth
  • shaving in the shower
  • 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
  • second shave for each cartridge (first shave was Test 1)

Results: Indistinguishable feel and capability of the two blade cartridges. Equal resulting smoothness of face on both sides. No nicks from either system.

Winner: Gillette by a hair(!), due to the Flexball (introduced 2014), which seems to reduce workload slightly.

[Bizarre: in their zeal to be the wokest of U.S. consumer goods companies, Gillette has neglected to be orthographically consistent with their only potential advantage over Dorco. Parts of their web site use “FlexBall” while other pages include “Flexball”.]

Related:

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The going rate for sex with the boss

by philg

The New York Post reports a lot of stuff that would never make it into the New York Times. Within “Sarma Melngailis had a steamy affair with her married lawyer”:

“The past year I’ve gotten three insanely high settlements for consensual sex as sexual harassment,” he texted on May 4, 2017. “I think I may be some kind of savant. I get a case. And then I ask a set of lawyers who only do this kind of work what is the best settlement I could hope for. And then I triple it.”

“I made $2.9 million for a 24 year old girl who had a consensual sexual relationship with her boss,” he boasted the next day.

Assuming that the “sexual relationship” occurred in New York, the state’s child support formula would yield $2.9 million over a 21-year period if the boss earned at least $800,000 per year. If, in fact, the $2.9 million is triple the typical amount, the boss would have to earn roughly $270,000 per year to make collecting child support as lucrative as a sexual harassment lawsuit. If the lawyers are taking 40 percent, collecting child support becomes more lucrative when the boss earns at least $162,000 per year. On the third hand, there is nothing to stop a plaintiff from collecting a sexual harassment settlement on top of child support. If we assume that the boss earns $400,000 per year and the sexual harassment settlement is $1 million tax-free, revenue from sex at work would be approximately $2.4 million, completely tax-free. At New York City tax rates, a plaintiff would have to earn nearly $4.8 million pre-tax to have this kind of spending power, or $228,500 per year for 21 years.

Separately, the story shows the value of having good legal representation:

On May 10, 2017, she pleaded guilty to charges of grand larceny, criminal tax fraud and a scheme to defraud and was sentenced to only four months in prison.

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Why aren’t the payday loan companies getting rich off the shutdown?

by philg

There is turmoil in our land:

Where there is turmoil, however, there is often opportunity. Neither article includes the word “loan”. Yet the U.S. is packed with payday loan companies. Federal workers have been guaranteed to receive back pay, even for weeks or months in which they did no work, as soon as the government reopens (“Trump signs law guaranteeing back pay for federal workers”).

How much credit risk could there be in lending money to someone whose paycheck is guaranteed by an entity with a printing press for dollars?

Readers: What do you think? Shouldn’t it be possible to lend money to furloughed or working-but-not-yet-paid workers at a 1% per month interest rate (12%/year) and make a substantial profit? One-month LIBOR is roughly 0.2% (2.5%/year). That’s a slightly thinner profit margin than a bank gets on a typical credit card, I think, but federal workers should be a better-than-average risk, no?

Is the problem competition from existing credit unions to which federal workers belong? This credit union offers 0% interest for 60 days to furloughed workers. Tough to compete with 0%!

Related:

  • NASA employee credit union: “Our special Furlough Relief Loan will allow you to access up to $10,000 for up to a 60-month term – interest free and payment free for 60 days.”
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The art of victimhood

by philg

From the Boston Museum of Fine Arts: Rich American actors take on-camera speaking jobs from poor refugees.

Around the corner, Nan Goldin, who “immersed herself in urban subcultures and the LGBTQIA community” and is “a survivor of opioid addiction”:

On the other hand, the museum will save whales from victimhood via straw-denial:

(They’ve chosen to be “part of the solution” in this liquid context, so they can’t be accused of being part of the precipitate!)

How do things look down near the southern end of the East Coast? A few images from the Cummer Museum in Jacksonville:

How about in the center of our Great Nation (TM)? Our hotel in Arkansas featured a “Future is Female” art exhibit (T-shirt available for $38). The signs below discuss “the affirmation of the self” and the use of “Equal,” “Powerful,” and “Feminist” as “positive language” that will redefine viewers’ reflections by subverting the “typical narrative”.

The presumably well-meaning folks at the Crystal Bridges Museum of American Art demoted one of my personal favorites Louise Nevelson from “great artist” to “great female artist” by putting one of her sculptures into a female artist ghetto room placarded with a history timeline beginning in 1963. Nevelson was recognized with solo shows beginning in 1941 and was featured on the cover of Life in 1958; a 1971 NYT article describes her as a great sculptor, without limitation to her gender ID (also, that she divorced her husband and “refused any alimony, however, on the ground that to accept it would be immoral”). Right next to Nevelson, who was considered by NYT readers, at least, to be a “great artist” as of 1971, the curators have a sign in which Linda Nochlin, a non-artist academic, asks “Why have there been no great women artists?” (also from 1971)

The museum features a photo exhibit in which, to demonstrate their autonomy, women must comply with the photographer’s instruction to pick a book by a female author (but did anyone verify that the authors of all 70ish chosen books continue to identify as “female”?).

Note that Jean-Paul Sartre’s pet name for Simone de Beauvoir was “Beaver” (Guardian).

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Follow our ground school at MIT via the miracle of streaming video

by philg

If you’re not happy with the latest from Netflix and Amazon you’ll love our MIT Ground School course, streaming in real time and on-demand:

Experienced pilots: Start with “Day 1-PM” from the on-demand menu and then scroll to 2:13 for a lecture on F-22 flight controls.

Today was the end of Day 1. We’re also running tomorrow and Thursday.

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Bike infrastructure doesn’t make Americans happy…

by philg

…. or at least it doesn’t motivate them to use their bicycles.

My 2013 post: “Danish happiness: bicycle infrastructure”

From USA Today: “Fewer Americans bike to work despite new trails, lanes and bicycle share programs”

Uber and Lyft are blamed for part of the three-year decline. I wonder if it is the absurdly high price (compared to in China) of electric-assist bikes that is also limiting the popularity of this modality. The article notes that “electric scooters” have cut into bike commuting. If we could get a decent electric-boost bike for $300, would we still buy scooters? This industry report from 2014 says “By utilizing lead-acid batteries, the cost of e-bicycles in China averages about $167. In comparison, e-bikes in North America cost on average $815 and those in Western Europe average $1,546, reflecting the different choice in battery chemistry, according to Pike Research.”

Considering Americans’ propensity for thievery (how long does a bike last in San Francisco?), $167 is a more reasonable price to pay than $815!

The map in the USA Today article shows the sharpest declines in the hilly cities where an electric bike would be the most helpful.

Can we say that bike infrastructure, like socialism, hasn’t truly been given a fair chance in the U.S.? Our capital investments in bike lanes would pay off if e-bikes were available at Chinese prices?

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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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