Image source @ Visual China
"Making Anna" just aired on Netflix not long ago, and "Dropout" has recently been released on Hulu.
Both stories are based on true events. "Making Anna" is about a small-town European girl named Anna Solokin who pretends to be a German celebrity in New York, falsely claims that she has a $60 million trust fund that can be inherited after the age of 25, tries to borrow $40 million to form the ADF Art Foundation, and fools one of the world's most seen East Coast celebrities and the most shrewd Wall Street bankers.
Anna Solokin herself and the actor who played her in Making Anna
"Dropout" was born out of "Bad Blood", the famous Theranos case, where Elizabeth Holmes tried to detect more than 200 diseases on a household instrument with a drop of blood. Elizabeth's dream deceived the richest Silicon Valley investors and the most powerful political elite. The once $9 billion biotech company is now penniless after being exposed as a fraud by WSJ reporter John Carreyrou.
Elizabeth Holmes and the actor who played her in Dropout
I couldn't help but find that Anna and Elizabeth have a lot of similarities, and sometimes these traits are common in entrepreneurs: they cheated on themselves first, so they were incredibly confident, as if they were really building a great business. They are adept at telling stories, manipulating people's minds, and making the most useful group of people pay for their dreams.
So, when the most money was nowhere to go on the East and West Coasts of the United States, they finally went to the man who pretended to be the most promising. Unfortunately, some people ignore the unrealistic side of those dreams and eventually fail to fake it until make it, and return on the road to success.
For investors, in the face of more and more beautiful stories, who has the potential to "pretend" to succeed, and who is just bluffing? Perhaps the events of Anna and Elizabeth have given us a little enlightenment.
Fool yourself first
Business scams are sometimes given another name – dreams.
Both Anna and Elizabeth are convinced that they are making the leap towards a great dream, as are all aspiring entrepreneurs.
Anna wanted to start an art foundation (ADF) that would rent 281 Park Avenue for $4 million a year to create the most stylish club in the city, first accepting artists and then attracting celebrities in the city. Someone asked, isn't that another SoHo House? Anna rolled her eyes, upgraded it. The man said that a new club was needed, after all, the conditions for SoHo membership have become more and more relaxed over the years, and some unqualified people have been accepted.
Elizabeth, who nearly upended the entire health care system, dropped out of Stanford at the age of 19 and founded Theranos, a home machine called "Edison", trying to test more than 200 diseases with a drop of blood at the fingertip, which normally requires a tube of blood to be drawn and tested at a hospital costing a lot of money. She always presents two stories in TED Talks, one is that her dear uncle died when she was a child because he did not detect cancer in time, and the other is that she is scared off by a large needle every time she draws blood. So she hopes Theranos will keep all families ready to detect early illnesses, avoid expensive medical bills, and avoid needle fear. What an infectious vision, and what investors wouldn't want to pay for it?
Elizabeth excels at telling stories for Theranos at TED Talks / Source: Video screenshots
Both of these dreams sound like the stories that capital is most willing to pay for at the moment, and even they are in line with the styles of the East and West Coasts of the United States. In New York, Anna's vision is never outdated, rich people always want to make their souls look interesting through culture and art, and as long as there is a circle, who doesn't want to go to a club like the ADF to show their difference and gain more connections? In Silicon Valley, Elizabeth conforms to the imagination of all investors, like Zuckerberg, Bill Gates, a famous school dropout, Theranos may become the apple of the medical world, and she wears a black turtleneck sweater for many years, and is even known as the female version of Jobs.
Only they themselves know how fragile the cornerstone of this dream is, shattering when touched. Anna, a Russian girl who grew up in a small town in Germany, is not a rich second generation, there is no penny trust fund to inherit, then without the trust fund, no bank will give her a loan, and she will never be able to get the first start-up capital of the ADF. It was almost impossible for Elizabeth to make a testing instrument like Edison, and the amount of blood taken from her fingertips was too small to measure hundreds of test results in a machine the size of a coffee machine. So when the investor came to Theranos to investigate, she first pretended to take blood from everyone's fingertips and put it into the testing instrument, falsely claimed to take them to visit the company while waiting for the test results, and then let people quickly exchange the blood samples to the laboratory with Siemens commercial blood sample test results.
But why do they know they are deceiving others, but they still pretend to be flawless? When you see the look of conviction they have when they are interviewed, they have deceived themselves in a trance. How can this act of rationalizing one's own lies be explained? The key is motivation.
In the "Blood Into Gold" documentary, behavioral economist Dan Ariely tries to analyze Elizabeth's motives. His team once did an experiment in which participants thought before rolling the dice whether they wanted to face up or down, and they could receive a prize. The results showed that the participants' luck was very good. Then the rules changed, and the money was donated to charity, and the results showed that they had better luck, and it became increasingly difficult for lie detectors to detect that they were lying. This proves that when people think their motivations are good, they rationalize their behavior.
It's not hard to understand Anna and Elizabeth, both of whom think their motivations are good, one wants to improve the taste of New York celebrities, and the other wants more people to easily do blood tests. Therefore, people who have deceived themselves can face the doubts of the outside world without guilt.
After Theranos' practices were exposed by reporters, Elizabeth continued to lie at the tech conference: "The quality of the tests we provide is the highest. We know what we're doing and are proud of it. ”
Anna once said calmly in an interview: "There is an infinite amount of money in this world, but smart people are limited." She must have thought she was smart, and she never felt guilty about her actions.
Anna was interviewed after she was released from prison and did not feel guilty about her fraud/ Source: Video screenshot
He actually endorsed you
The most puzzling of these two scams is why the richest and smartest people who seem to be fooled by little girls in their early 20s? I've found that the key is who endorses you.
Financing, loans, have to tell a good story, and once you've impressed the most important person, the next thing to convince others is the way to go. Without connections, you are a nobody, and you are no different from the rest of the entrepreneurs who take BP around the world to find investors. But if you have a senior person in the circle to endorse you, you will at least get a unimpeded ticket.
The people who endorsed Elizabeth are a dream team, and Theranos board is an old white man who has influenced or is influencing American political circles - Kissinger, Schultz, Biden... Countless former secretaries of state and former vice presidents were invariably impressed by Elizabeth's vision and passion. These dying souls seem to see in Elizabeth the shadow of their youth, and the ambition to change the world is the best drug. Unfortunately, these most knowledgeable political elites have looked away in their later years.
In October 2015, Clinton invited Elizabeth Holmes and Jack Ma to talk about "Equality and Opportunity in the Future" / Image Source: Video screenshot
If you say they don't understand business or medicine, why are the most savvy Silicon Valley investors crazy about the Theranos?
This is inseparable from Elizabeth's family lineage, Tesla, Skype, Baidu's first investor Tim Draper is to watch Elizabeth grow up, but Tim denied that this relationship let him invest in Theranos. He considers himself a professional venture capitalist, and Tim recalls the day Elizabeth dropped out of Stanford that she wanted to change the entire health care system, and Tim saw the perfect opportunity. These early followers of Elizabeth also included former Apple executive Avie Tevanian, Oracle founder Larry Ellison, and Oracle's founding investor Don Lucas. Although they don't have reference financial statements, they inject hundreds of millions of dollars into Theranos by vaguely believing that they have the ability to combine business and medicine.
It is often said that early investment is mostly investment. "Blood into Gold" points out that we tend to think of investing as a rational equation that calculates risk and reward. But in fact, investors are often guided by their intuition, and early investors are more like trying their luck than relying on facts, and the word Credit evolved from the Latin word Credo, meaning "I believe."
Even if you have doubts about Elizabeth, will you doubt Tim Draper, who has a good investment record? Or is it an old friend of the Chinese people, Kissinger? No, when seeing these people enter, with a fomo mentality, Silicon Valley investors will only be afraid to invest in Theranos not enough sooner or later. As for due diligence? What is that? When the world's strongest network is Elizabeth's platform, that is already the most "reliable" due diligence.
Similarly, breaking into Wall Street is based on connections and recommendations. Anna wanted to apply for a $40 million loan, and she targeted Andrew Lance (Alan Reed in the play), a partner at a law firm who has excellent connections in New York's financial and real estate circles. Andrew ignored Anna, who had come to the door with a pitchbook, but he was later struck by the youthful impulse of the other side. Paradoxically, Anna had convinced Andrew that the girl was indeed a trust fund baby based on forged documents, an overseas calling card and a voice changer app. With Andrew's endorsement and guarantee, City National Bank, Citibank, and Fortress Investment Group scrambled to issue loans to financier Anna.
Alan Reed got a ticket to Wall Street for Anna / Image source: Screenshot of Making Anna
In this way, before the circle and network, due diligence is simply a formality. After all, the art of early investing lies in the three words "I believe."
Fake it till you make it?
Fake it till you make it, "pretending" to success has been mentioned many times in both events, and both New York and Silicon Valley seem to appreciate this aggressiveness.
In the plot of "Making Anna", lawyer Todd tells the story of Frank Sinatra affectionately in front of the jury when he concludes the debate. In 1944, Sinatra sang at the Paramount Theater in Times Square, and the women were so fascinated by the old handsome men that it was the Sinatra effect for the public. But in fact, it was the meticulous planning of Sinatra PR, who paid female fans to faint. Todd continues to defend, and in today's social media age, everyone is a brand, Anna came to New York alone, she is like Sinatra, just want to pretend until success, pretend to be a new York high society like the persona. She fictionalizes the identity of the rich second generation in Germany, and then everyone wants to do business with her, will they want to do business with a middle-class foreigner? No, Anna had to pretend until she succeeded.
Similarly, Elizabeth believed in "pretending" to succeed. She lives in a two-fold world, a talkative female entrepreneur and a CEO who sees a mess in the lab. She named Theranos' home detector Edison because he had also "installed" it to success. According to Blood Into Gold, in 1878 the media published a statement by Edison claiming that he had unlocked the incandescent lamp mystery, but that was not true, that his filament always melted, that when journalists and investors asked him to demonstrate, he deceived them, he gave the reporters stock to make them friendly, and for four years Edison pretended that his invention was ready to sell, and the truth was that he had been trying to experiment, and just as the money and loans were running out, he solved the problem of how to keep the lights on.
It can be said that as an inventor and entrepreneur, Edison took the lead in practicing the art of "pretending" to success. Silicon Valley today is also rife with such stories. John Carreyrou, a journalist who wrote "Bad Blood," said that Unicorns in Silicon Valley are often valued at a billion dollars, and they remain unlisted for longer than the Internet startups of the 90s, and they are more opaque than public companies.
Behavioral economist Dan Ariely once heard a group of startup founders in Silicon Valley talking about how they cheated investors, such as putting real numbers into charts that create growth. Under myths like Musk's, where everyone is dreaming unrealistically, Silicon Valley rewards those who can come up with distant ambitions, even though no one knows if that will happen. When the surrounding companies are working hard and committed to the impossible, Elizabeth feels that she is no different from the rest of the people.
However, Anna and Elizabeth were doomed to fail even if they pretended. It seems that Anna is only one step away from getting a loan to start a business, but the bank is going to Germany to confirm the status of her family business and trust fund, and this last step she can't pretend to be able to cross. Elizabeth's problem is that she has only one vision that is difficult to achieve at the moment, a drop of blood, a detector the size of a coffee machine cannot detect several diseases, let alone replace blood tests. As a result, as of 2017, Theranos had nearly burned out the $900 million it had raised. From a valuation of $9 billion to worthless, Theranos became a void.
In Bill Gates's study is inscribed a sentence from the end of The Great Gatsby: We continue to struggle forward, sailing against the current, constantly pushing backwards, until we return to the old days.
Gates says he loves The Great Gatsby, and the last sentence of the book is engraved in the study/ source: A screenshot of Into Bill: Decoding Bill Gates
Sometimes it's hard to imagine Gates, who is passionate about technology, health care, climate change, and the words engraved in the study belong to literature, from Fitzgerald's novels, and perhaps Gatsby's story represents the essence of the business world — encouraging ambition, and then seeing through the prosperity into emptiness.
100 years after the Jazz Age, New York and Silicon Valley are still gushing hot money today, and they want a destination. Perhaps, as Anna said, there is an infinite amount of money in this world, but smart people are limited. It's just that there's a way for smart people to be as lucky as Edison and just happen to fulfill their dreams before they burn the money out?