This woman is really amazing!

[rb]

http://www.theverge.com/2016/6/9/11896534/jennifer-lawrence-adam-mckay-theranos-movie-elizabeth-holmes

 

Now the story is complete ...

 

When does the Michael Lewis book come out?

After he's done with the one on Valeant. That would be a fun read.

[Graham Osborn]

I think one thing can be said with fair reliability - very few people have made and lost 4.5B of paper net worth so quickly in the US since the tech bubble.  Going from zero to hero and back to zero without leverage is no mean feat.  If you were Bill Gates in 1999-2000 perhaps 4.5B was just a turn and toss in bed, but for most millennials that's a lot of Netflix binges ;)

[dcollon]

U.S. Regulator Bans Theranos CEO Elizabeth Holmes From Operating Labs for Two Years

 

http://www.wsj.com/articles/u-s-regulator-bans-theranos-ceo-elizabeth-holmes-from-operating-labs-for-two-years-1467956064

 

[Picasso]

The title on this thread is just classic.  I crack up every time.

[rukawa]

I honestly think that the VRX, Ocwen and Theranos threads are the most educational threads on Berkshire and Fairfax. To me the bullish posters have all of us an enormous service. I don't get why they are being criticized.

 

On of my underlying themes in this thread is that we shouldn't have the mentality that you can get to better solutions simply by throwing more money at a problem.  Sometimes a company hiring one incremental employee will actually have the detremental result.

 

Most CEO's and managers are hugely ego driven. They have an unbelievable confidence in their own bullshit regardless of reality. And they push their delusion onto others. Often they are spectacularly successful. And sometimes they fail spectacularly. Most of the careers include both e.g. Henry Ford, Steve Jobs.

 

[LC]

I honestly think that the VRX, Ocwen and Theranos threads are the most educational threads on Berkshire and Fairfax. To me the bullish posters have all of us an enormous service. I don't get why they are being criticized.

 

 

I agree. I think the common theme is "If it sounds too good to be true..."

[muscleman]

U.S. Regulator Bans Theranos CEO Elizabeth Holmes From Operating Labs for Two Years

 

http://www.wsj.com/articles/u-s-regulator-bans-theranos-ceo-elizabeth-holmes-from-operating-labs-for-two-years-1467956064

 

Look at the face! So much alike with Hillary Clinton!  ;D

http://static4.businessinsider.com/image/55fad9869dd7cc15008bb1ba-480/hillary-clinton-thumbs-up.jpg

https://si.wsj.net/public/resources/images/BN-OU955_0708th_M_20160708012032.jpg

[rogermunibond]

Posted in a different thread - all the real VCs passed do don't blame them.

 

http://www.nytimes.com/2016/04/27/opinion/dont-blame-silicon-valley-for-theranos.html

[Graham Osborn]

Posted in a different thread - all the real VCs passed do don't blame them.

 

http://www.nytimes.com/2016/04/27/opinion/dont-blame-silicon-valley-for-theranos.html

 

Anyone who regards Silicon Valley as a bed of conservative startup investing clearly wasn't around in the late 90s.  If the VCs that are left are a bit smarter it's just because they watched so many other late entrants get wiped out.

[Spekulatius]

I honestly think that the VRX, Ocwen and Theranos threads are the most educational threads on Berkshire and Fairfax. To me the bullish posters have all of us an enormous service. I don't get why they are being criticized.

 

 

I agree. I think the common theme is "If it sounds too good to be true..."

 

It certainly is interesting to watch a number train wrecks  (SHLD, Biglari, Zinc were others ) that were so intensely scrutinized as an investment  to run aground. It certainly should teach a healthy dose of skepticism and humility ton aspiring investor. While I never invested in any of them (they mostly did not look cheap or Were too complex for me), some did look god even to me at some point, I have to admit.

 

I think more and more that defining one's circle of competence is the most important thing and should rule over almost anything else in investing. When in doubt or something even remotely smells iffy, just stay away on it - because from my experience, if you do put a lot ofwork into something, you inevitable think you understand it and put money in an idea that may be outside your circle, as it turns out later.

 

[gfp]

Why include Biglari with ZINC, SHLD, VRX etc?

 

 

I honestly think that the VRX, Ocwen and Theranos threads are the most educational threads on Berkshire and Fairfax. To me the bullish posters have all of us an enormous service. I don't get why they are being criticized.

 

 

I agree. I think the common theme is "If it sounds too good to be true..."

 

It certainly is interesting to watch a number train wrecks  (SHLD, Biglari, Zinc were others ) that were so intensely scrutinized as an investment  to run aground. It certainly should teach a healthy dose of skepticism and humility ton aspiring investor. While I never invested in any of them (they mostly did not look cheap or Were too complex for me), some did look god even to me at some point, I have to admit.

 

I think more and more that defining one's circle of competence is the most important thing and should rule over almost anything else in investing. When in doubt or something even remotely smells iffy, just stay away on it - because from my experience, if you do put a lot ofwork into something, you inevitable think you understand it and put money in an idea that may be outside your circle, as it turns out later.

[Graham Osborn]

I think more and more that defining one's circle of competence is the most important thing and should rule over almost anything else in investing. When in doubt or something even remotely smells iffy, just stay away on it - because from my experience, if you do put a lot ofwork into something, you inevitable think you understand it and put money in an idea that may be outside your circle, as it turns out later.

 

I agree with all your points except the last one.  While I have made as many mistakes as anyone (perhaps more), I have never made a decision I felt was poor on account of too much research or too deep an understanding of the security/ asset.  There have of course been times where I focused on the attractive current operating metrics at the exclusion of cyclicity, or the balance sheet at exclusion of ownership structure, etc.  But these were defects in research emphasis rather than an excess of research.

 

Research also has a benefit independent of its product: it forces you to move slower in your trading.  I believe very strongly that to get the best entry timing as a retail investor you need to act either faster (hard to do) or slower than the majority.

 

Naturally one is going to have some well-researched positions that are dogs.  That's where liquidity and portfolio management come in.  But if you weight the position according to the risk/ reward based on research and establish position limits, there's no reason for the dogs to bring you down unless your research quality is lacking.  When I refer to research, I mean all variables pertaining to a position including trade structure and macro factors.

 

"Circle of competence" is a somewhat self-defeating phrase in my view.  Certainly, one must be competent on a security to invest in it profitably (given enough trials).  But competence in an area can be acquired through research.  Correspondingly, competence does not ensure a profit and IMO exposes the investor to a risk of conducting inadequate research by trying to extrapolate knowledge from other companies or areas.  If you think about what happened with Valeant, part of the reason it was a darling for so long was because healthcare analysts were analyzing it using the traditional metrics rather than watered-stock analyses.  What they believed to be inside their circle of competence was actually just designed to look that way.  Lesson: start from square one on every company or asset.  And if you believe your own research abilities are lacking, please read all the outside research you can locate.  Back when I was getting started my rule was to read everything analysis I could find on the stock and throw it out if I found one cohesive bearish view.  I still do this.  This rule would have kept you clear of most of the aforementioned disasters.

 

So in summary, the problem is not too much research but rather inadequate or biased research, or poor trade structuring/ PM.

 

There is another aspect to research which may relate to your comment, which might be called the "law of diminishing returns for positive research." That is to say, if you are making an argument that a position should be taken, the probability-vs-research curve will level off (although not asymptotically) with additional research.  The shape of the curve encourages people to get lazy as they approach the more level portion of the curve.  This was why Graham focused on the protection-of-principle aspect, which is the probability of losing money on the investment.  This curve is simply 100% minus the previous curve.  Unlike the former curve, the latter curve falls by a significant percentage for each additional unit of incremental research.  Hence, if the defensive investor ("negative analyst") can reduce the probability of loss by 50% by doing an additional hour of research, his time is better spent than for the "positive analyst".  The corollary here is bearish analyses may have greater investment value for people selling than for people selling short, since the bearish trader is making a positive statement ("this stock will decline over time interval T") whereas the seller is making a negative statement ("this stock is risky and should be sold").  Broadly speaking, positive statements have a lower probability of being realized than negative statements.

 

One final point is the danger of overconfidence in the analyst.  This is akin to the 3 stages of driving:

 

1. The student driver is totally incompetent, and knows he is totally incompetent. (Middle risk)

2. The student driver is imperfectly competent but believes he is more competent than he actually is. (Maximum risk)

3. The student driver is imperfectly competent and (is aware of/ plans according to) his competency level. (Minimal risk)

 

The danger for many analysts (and certainly I have been victim to this) is that as one's competence grows one's confidence grows quicker, which encourages excessive and ultimately fatal risk-taking.  This is why car accident rates peak in the late 20s and why so many young people blow themselves up in the markets at around the same age.  However, risk remains elevated as people age in both groups due to people's difficulty in correlating risk-taking behavior with intermittent negative outcomes.  This leads to your argument that a stage 1 investor is actually better off than a stage 2 investor, since he will essentially rely on portfolio management, a generally uptrending market, and perhaps "red flag" analyses by others to protect his principal.  I agree - with the caveat that Graham's stage 3 investor can outperform him - at least theoretically.  As you know, Graham assumed most investors would fall into stage 1.

 

In summary, the greatest risk for an investor is believing that you know more than you do.  And owing to the diminishing returns of positive (speculative) research, the discrepancy between perceived and actual knowledge is likely to increase proportionately to the amount of research performed - just as a driver who has avoided accidents for a long time will tend to become more careless.  I do believe this bias can be counteracted by insight - which is where we differ.

[Spekulatius]

Why include Biglari with ZINC, SHLD, VRX etc?

.

 

 

True, Mr Big has not and probably never will blow up. He will just continue to underperform. In addition, his business acumen is overshadowed by his greediness and hubris. I never invest, if I don't like the leadership. I actually think it is easier T discount a lack of business  acumen in a CEO than a lack of integrity

[doughishere]

http://www.inc.com/larry-kim/21-surprising-facts-about-the-world-s-youngest-female-billionaire.html

 

 

Gio

 

What a year its been for this thread. The COBF giveth and the COBF taketh away.

[Greg]

Nobody likes to look up all the time. It makes the back of the neck stiff.

[John Hjorth]

http://www.inc.com/larry-kim/21-surprising-facts-about-the-world-s-youngest-female-billionaire.html

 

 

Gio

 

What a year its been for this thread. The COBF giveth and the COBF taketh away.

 

What matters isen't what happened to/at this topic, but what happened to/at Theranos.

 

Gio has explained him self earlier in this topic.

[bookie71]

http://www.npr.org/sections/health-shots/2016/07/18/486171949/rise-and-fall-of-theranos-in-a-biotech-cartoon?utm_medium=RSS&utm_campaign=news

I had truly hoped she was the real deal

[adesigar]

Theranos minilab

 

http://arstechnica.com/science/2016/08/with-chance-to-soothe-theranos-critics-with-data-holmes-gives-sales-pitch/

[whiterose]

Exclusive: How Elizabeth Holmes’s House of Cards Came Tumbling Down:

In a searing investigation into the once lauded biotech start-up Theranos, Nick Bilton discovers that its precocious founder defied medical experts—even her own chief scientist—about the veracity of its now discredited blood-testing technology. She built a corporation based on secrecy in the hope that she could still pull it off. Then, it all fell apart.

 

http://www.vanityfair.com/news/2016/09/elizabeth-holmes-theranos-exclusive

[Palantir]

This thread is brutally funny. She deserves to go to prison.

[ScottHall]

This thread is brutally funny. She deserves to go to prison.

 

Why? It's better to be optimistic about these things than pessimistic; even if you get a lot of zeroes you also hit crazy multibaggers part of the time. Obviously Theranos isn't public, but the same principle applies.

 

Doubters and minor-league thinkers don't really accomplish anything. People like Elizabeth Holmes are the ones who move the world forward, for better or worse.

[petec]

This thread is brutally funny. She deserves to go to prison.

 

Why? It's better to be optimistic about these things than pessimistic; even if you get a lot of zeroes you also hit crazy multibaggers part of the time. Obviously Theranos isn't public, but the same principle applies.

 

Doubters and minor-league thinkers don't really accomplish anything. People like Elizabeth Holmes are the ones who move the world forward, for better or worse.

 

she lied about how good her products were and allowed defective products to be used on real, live, people - with the potential for serious harm.  Dreamer - or psychopath?

[Palantir]

This thread is brutally funny. She deserves to go to prison.

 

Why? It's better to be optimistic about these things than pessimistic; even if you get a lot of zeroes you also hit crazy multibaggers part of the time. Obviously Theranos isn't public, but the same principle applies.

 

Doubters and minor-league thinkers don't really accomplish anything. People like Elizabeth Holmes are the ones who move the world forward, for better or worse.

 

These comments are why this thread is funny. Committing fraud, lying, and endangering people's health along is how we move the world forward? She is a psychopath with delusions of grandeur who fooled millions of people, and looks like she is still doing it. The Bernie Madoff of startups.

[ScottHall]

This thread is brutally funny. She deserves to go to prison.

 

Why? It's better to be optimistic about these things than pessimistic; even if you get a lot of zeroes you also hit crazy multibaggers part of the time. Obviously Theranos isn't public, but the same principle applies.

 

Doubters and minor-league thinkers don't really accomplish anything. People like Elizabeth Holmes are the ones who move the world forward, for better or worse.

 

These comments are why this thread is funny. Committing fraud, lying, and endangering people's health along is how we move the world forward? She is a psychopath with delusions of grandeur who fooled millions of people, and looks like she is still doing it. The Bernie Madoff of startups.

 

How did she endanger people's health? It sounds like she was using competitors tests for the vast majority of her company's results.

 

You're probably one of those guys who think of Martin Shkreli and Valeant as bad guys as opposed to the national heroes they are. Typical liberals!

[Palantir]

This thread is brutally funny. She deserves to go to prison.

 

Why? It's better to be optimistic about these things than pessimistic; even if you get a lot of zeroes you also hit crazy multibaggers part of the time. Obviously Theranos isn't public, but the same principle applies.

 

Doubters and minor-league thinkers don't really accomplish anything. People like Elizabeth Holmes are the ones who move the world forward, for better or worse.

 

These comments are why this thread is funny. Committing fraud, lying, and endangering people's health along is how we move the world forward? She is a psychopath with delusions of grandeur who fooled millions of people, and looks like she is still doing it. The Bernie Madoff of startups.

 

How did she endanger people's health? It sounds like she was using competitors tests for the vast majority of her company's results.

 

You're probably one of those guys who think of Martin Shkreli and Valeant as bad guys as opposed to the national heroes they are. Typical liberals!

 

Now I'm very confused.