{"id":28383,"date":"2021-03-05T10:14:38","date_gmt":"2021-03-05T14:14:38","guid":{"rendered":"https:\/\/www.shortform.com\/blog\/?p=28383"},"modified":"2021-03-11T19:25:25","modified_gmt":"2021-03-11T23:25:25","slug":"theranos-investors","status":"publish","type":"post","link":"https:\/\/www.shortform.com\/blog\/theranos-investors\/","title":{"rendered":"Theranos Investors: How Bias Led to Fraud"},"content":{"rendered":"\n<p>Who were the Theranos investors? How did Theranos and Elizabeth Holmes use <a href=\"https:\/\/www.shortform.com\/blog\/cognitive-heuristics\/\">psychological biases<\/a> to convince investors to hand over their money?<\/p>\n\n\n\n<p>The Theranos investors included business powerhouses like Henry Kissinger and George Shultz. These people gave more legitimacy to the business, and psychological biases helped convince them that Elizabeth Holmes and Theranos were on their way to the top.<\/p>\n\n\n\n<p>Read more about the Theranos investors and how Holmes was able to deceive them. <\/p>\n\n\n\n<!--more-->\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Theranos Investors: Applying Psychological Biases<\/strong><\/h2>\n\n\n\n<p>Warren Buffett\u2019s partner Charlie Munger has a list of 25 <a href=\"https:\/\/www.shortform.com\/blog\/list-of-cognitive-biases\/\">cognitive biases<\/a> to be aware of in decisionmaking. As he says, when multiple biases are in play simultaneously, a \u201clollapalooza\u201d happens leading to extremely distorted results. This is as true in Theranos as it is in cults.<\/p>\n\n\n\n<p>Here\u2019s a rundown of major biases that played into perpetuating Theranos\u2019s fraud:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Reward tendency &#8211; anyone who had a financial stake in Theranos clearly wanted it to succeed. This included its advisory board, investors, and employees.<\/li><li><a href=\"https:\/\/www.shortform.com\/blog\/liking-bias\/\">Liking tendency<\/a> &#8211; Elizabeth Holmes was charismatic and seemed genuine. People wanted to follow her and execute her vision.<\/li><li>Disliking tendency &#8211; Its supporters disliked incumbents like Quest Diagnostics and wanted to depose them.<\/li><li>Influence from mere association &#8211; Holmes surrounded herself with powerful people, starting with Channing Robertson and going up to Rupert Murdoch and Henry Kissinger. Their prestige rubbed off on Theranos.<\/li><li><a href=\"https:\/\/www.shortform.com\/blog\/social-proof-examples-cialdini\/\">Social proof<\/a> tendency &#8211; Likewise, seeing other people support Theranos lowered the defenses of new supporters. How could so many people be wrong?<\/li><li>Overoptimism tendency &#8211; Holmes and Theranos supporters were overoptimistic about the technology, underestimating the amount of work needed to execute their vision.<\/li><li>Availability misweighting tendency &#8211; You use what little data you have available. For Theranos, little technical data was released, meaning supporters had to draw only on the positive press that Holmes carefully cultivated.<\/li><li>Inconsistency avoidance tendency &#8211; Once people publicly voted for Theranos, it was hard to backpedal. If they were wrong, they\u2019d look foolish.<\/li><li>Deprival superreaction tendency &#8211; Investors and partners couldn\u2019t imagine losing their entire investment if Theranos were fraudulent. So they avoided the painful truth and doubled down, <a href=\"https:\/\/www.shortform.com\/blog\/plan-for-the-worst-hope-for-the-best\/\">hoping for the best<\/a>.<\/li><li>Stress influence tendency &#8211; Employees who had a crisis of conscience were threatened by Theranos\u2019s legal team, preventing them from assessing the situation fully and choosing to adopt the less risky path of keeping quiet.<\/li><\/ul>\n\n\n\n<p>All these influences built on each other, preventing the fraud from unraveling for years, until the accumulation of fraud became too much. Even though they were skilled in their roles, the Theranos investors were still susceptible to their own psychological biases. <\/p>\n","protected":false},"excerpt":{"rendered":"<p>Who were the Theranos investors? How did Theranos and Elizabeth Holmes use psychological biases to convince investors to hand over their money? The Theranos investors included business powerhouses like Henry Kissinger and George Shultz. These people gave more legitimacy to the business, and psychological biases helped convince them that Elizabeth Holmes and Theranos were on their way to the top. Read more about the Theranos investors and how Holmes was able to deceive them.<\/p>\n","protected":false},"author":5,"featured_media":28452,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[45,20,31],"tags":[220],"class_list":["post-28383","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-ethics","category-money","tag-bad-blood","","tg-column-two"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v24.3 (Yoast SEO v24.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Theranos Investors: How Bias Led to Fraud - Shortform Books<\/title>\n<meta name=\"description\" content=\"Theranos investors included major business and political figures. Despite their experience, they were susceptible to psychological biases.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.shortform.com\/blog\/theranos-investors\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Theranos Investors: How Bias Led to Fraud\" \/>\n<meta property=\"og:description\" content=\"Theranos investors included major business and political figures. Despite their experience, they were susceptible to psychological biases.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.shortform.com\/blog\/theranos-investors\/\" \/>\n<meta property=\"og:site_name\" content=\"Shortform Books\" \/>\n<meta property=\"article:published_time\" content=\"2021-03-05T14:14:38+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2021-03-11T23:25:25+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/s3.amazonaws.com\/wordpress.shortform.com\/blog\/wp-content\/uploads\/2021\/03\/blood-test-medicine-medical-science.png\" \/>\n\t<meta property=\"og:image:width\" content=\"736\" \/>\n\t<meta property=\"og:image:height\" content=\"516\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/png\" \/>\n<meta name=\"author\" content=\"Carrie Cabral\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Carrie Cabral\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.shortform.com\/blog\/theranos-investors\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/theranos-investors\/\"},\"author\":{\"name\":\"Carrie Cabral\",\"@id\":\"https:\/\/www.shortform.com\/blog\/#\/schema\/person\/2ababb7c63a94ff5d2190f71dc417d56\"},\"headline\":\"Theranos Investors: How Bias Led to Fraud\",\"datePublished\":\"2021-03-05T14:14:38+00:00\",\"dateModified\":\"2021-03-11T23:25:25+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/theranos-investors\/\"},\"wordCount\":444,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/#organization\"},\"image\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/theranos-investors\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.shortform.com\/blog\/wp-content\/uploads\/2021\/03\/blood-test-medicine-medical-science.png\",\"keywords\":[\"Bad Blood\"],\"articleSection\":[\"Business\",\"Ethics\",\"Money\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.shortform.com\/blog\/theranos-investors\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.shortform.com\/blog\/theranos-investors\/\",\"url\":\"https:\/\/www.shortform.com\/blog\/theranos-investors\/\",\"name\":\"Theranos Investors: How Bias Led to Fraud - Shortform Books\",\"isPartOf\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/theranos-investors\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/theranos-investors\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.shortform.com\/blog\/wp-content\/uploads\/2021\/03\/blood-test-medicine-medical-science.png\",\"datePublished\":\"2021-03-05T14:14:38+00:00\",\"dateModified\":\"2021-03-11T23:25:25+00:00\",\"description\":\"Theranos investors included major business and political figures. 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