Theranos, CEO Holmes, and Former President Balwani Charged with Fraud

Post by zaphos » Thu, Mar 15, 2018, 7:36 PM UTC

kahnjw wrote: post #538

zaphos wrote: post #517

Earlier quoted context omitted.

Even if it's relatively easy to not get caught, you can't be sure exactly how easy it is, and the downside is catastrophic. So no, I don't think every entity in your thought experiment would be committing fraud. Only ones that knew for sure exactly how easy it is and that they would not get caught for sure. And those ones, by definition, would never be caught so the public would never know ...

You can be sure exactly how easy it is because in a perfectly competitive economy everyone has perfect information, and the experiment's key assumption is getting away with fraud is a endogenous variable in the utility function. The fraudster can manipulate this variable to optimize their utility. This means that every actor knows exactly what they must do to avoid getting caught. It's a simplification so we can cons…

Post by iopuy » Thu, Mar 15, 2018, 9:15 PM UTC

sulam wrote: post #241

fwdpropaganda wrote: post #137

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That's extremely interesting, thanks for sharing. Think about the decision that he had to make in 2016. He had to choose between admiting his mistake and doubling down. The downside of admitting his mistake is that he's guaranteed to get negative points; the upside is that it will minimise futures downsides. By dubling down, he's guaranteed to reduce his negative points in 2016 but exposes himself to magnified upside…

I think you're ignoring the iterated nature of the game he plays. He is looking for founders to fund -- deal flow is the lifeblood of any VC. This is a signal like many other, and what it says is "As an early stage investor I absolutely have your back."

Post by vl » Fri, Mar 16, 2018, 12:57 AM UTC

lghh wrote: post #377

vl wrote: post #200

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>Is Holmes still rich after this? But why it matters at all? Penalty should be proportional to the deed, not to the person's finances.

> But why it matters at all? Penalty should be proportional to the deed, not to the person's finances. I would argue the opposite, why do you think this is the case?

Post by nradov » Fri, Mar 16, 2018, 2:38 AM UTC

fwdpropaganda wrote: post #403

nradov wrote: post #174

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Those kind of decisions are made on a purely emotional, reactive basis without going through the rational game theory analysis you laid out. Most wealthy investors are no more rational than the rest of us.

What do you mean, "than the rest of us". That's how I think, so I have no reason to believe that other people can't do the same.

Post by zaphos » Fri, Mar 16, 2018, 4:32 AM UTC

kahnjw wrote: post #542

zaphos wrote: post #541

Earlier quoted context omitted.

Oh, okay ... but everyone having perfect information AND fraud being possible to get away with are fundamentally contradictory assumptions; fraud is based on exploiting some people not having perfect information.

They are not fundamentally contradictory, everyone would know they are victims, still if it is in their net benefit to participate, they will. Again, this is an experiment with unrealistic assumptions (getting caught is an endogenous variable), it is intended to bring to bear the the absurdity of the statement that one can control their own fate if they commit fraud.