“We may have been too generous with the term genius,” the news site wrote Morning Brew recently a mea culpa. It followed the fall of Sam Bankman-Fried, the American who had built a crypto air castle with FTX that recently collapsed.
Morning Brew previously also called Mark Zuckerberg, Elon Musk and Masayoshi Son geniuses. The first laid off 11,000 employees at Meta after dubious investments, the second threw out half of Twitter’s staff and seems to be driving the social network to bankruptcy and the third posted a quarterly loss of $ 10 billion with its Vision Fund.
Each of them does not seem to know exactly how to proceed. Not so with Elizabeth Holmes, another supposed child prodigy who definitely knows where she’s going. The founder of the hyped but fraudulent blood test company Theranos was told on Friday that she will be jailed for 11 years for defrauding investors.
Lying about technology
The heavily pregnant Holmes is not the only founder of a fraudulent start-up who has to pay for cheating. For example, Trevor Milton was convicted last month of lying about his company Nikola’s technology, which would disrupt the truck market as Tesla had done to the electric car market. Like Holmes, Milton went big with breakthroughs that didn’t exist at all in reality.
The myth of the brilliant tech entrepreneur gets a serious blow. Men and women who made nothing more than something because they are so smart and capable. Blessed with a confidence in one’s own abilities that is nothing mediocre about it, with an urge to prove it too. Theranos would revolutionize healthcare. Office space lessor WeWork wanted to go public ‘to save the planet’. Bankman-Fried promised that crypto would put people back in control of their money.
Such stories float on the charisma of the entrepreneur. Holmes borrowed from Steve Jobs by copying the clothing style of the ‘Apple genius’ with her black turtleneck. Others have it naturally, like WeWork founder Adam Neumann. There was no rocket science behind his business model: renting large buildings, converting them into trendy locations with small workplaces, and renting them out at a higher price.
But Neumann could sell visions and vistas like no other. For example, WeWork would be a tech platform that would earn its money from data. No one believed in Neumann more than Japanese investor Masayoshi Son, a self-made multibillionaire who, in his own words, invests not in companies, ‘but in founders’. For example, when he met Jack Ma, the founder of e-commerce company Alibaba, he saw a look that was “as sparkling as the eyes of Bill Gates and Steve Jobs.” Son knew enough. He invested about $20 million in Alibaba in 2000, a stake that eventually became worth more than $100 billion.
Balloon pierced
Something similar happened with Neumann. Son spent twelve minutes in a WeWork office in 2016, after which he told Neumann in the taxi that he would invest $ 4 billion in his company. An amount that would rise to more than 10 billion, most of which went up in smoke when critical investors burst Neumann’s bubble.
Son’s strategy to bet on brilliant entrepreneurs failed several times, including at Uber. It does lead to some introspection. “I’m ashamed that I allowed myself to be so fired up by big profits in the past,” Son said in August. “Our losses would not have been so dramatic if we had invested more selectively and decently.”
Truly brilliant entrepreneurs can tell more than a nice story. They link vision to execution and results. James Dyson invented a hugely successful vacuum cleaner after making 5,156 prototypes. And Thomas Edison invented the light bulb, but so did about 22 others at the same time. Edison searched and found the materials to make the best light bulb.
The ‘wizard of Menlo Park’ also knew the power of good advertising. Edison bribed journalists to rave about inventions that didn’t work until months or even years later. “Edison has a vacuum where his conscience should be,” one contemporary cynically remarked. It nevertheless illustrates a striking difference between Edison and Holmes (who had named her blood-testing device after its inventor): in the former it was fake it till you make itthe second kept track fake it, never make it.