PROFESSIONAL PRACTICES

ASSIGNMENT 1

Submitted To
ENGR. HUMAYUN SHAHID

Submitted By
SANAN AHMED (19-TE-96)

DEPARTMENT OF TELECOMMUNICATION ENGINEERING

UNIVERSITY OF ENGINEERING AND TECHNOLOGY, TAXILA
 Theranos’ Bad Blood
Q1. How did Elizabeth Holmes and Theranos demonstrate
overconfidence bias? What were the consequences of overconfidence
bias for Holmes and Theranos case?
Answer:
She didn't finish studying chemical engineering but started in a
technology company that focuses on biology and chemistry when she was
nineteen. She was brilliant student who worked in the lab with a Ph.D. student
and filed her first patent as a freshman year but did not have sufficient leadership
skills in research and development society since she left school so early. If she
had, it could have been a completely different outcome they should have stayed
in school, gained more knowledge and learned to become more versatile person.
People with overconfidence often take ethical issues lightly. They just they
assume they have good character and will therefore do the right thing even when
confronted with ethical challenges. Overconfident, Holmes believed it was the
only one temporary when they were experiencing slow progress in research and
development or malfunctions of their product that could lead to misdiagnosis.
She and her team decided to use the third party testing machines, cover up
failures and constantly lie to investors and the public, because she believed she
was just buying time to develop the final product. She took ethical issues too
lightly. The fact that she was comfortable using the overalls the public, even
children, to test her product is unnerving. The consequence of overconfidence
because Holmes and Theranos is strict. Holmes was charged with fraud and
awaited punishment up to 20 years in prison. Theranos was shut down.

Q2. Is it possible that someone who went to Stanford, who patterned

her dress after genius Steve Jobs, and who was constantly praised as
the young woman who was going to revolutionize health care in the
United States might naturally suffer from the overconfidence bias? If
so, how might it affect her judgments and actions?
Answer:
Holmes’ overconfidence bias is rooted in the way she was raised and
stemmed from the way people treated her in her young adulthood. Her family
members are very intelligent and successful people that have high social status.
This kind of family environment has given her opportunities to receive education
in the most prestigious schools, as well as privileges for Definitely her to succeed
later in life. In Blood, Simpler, she told the author that “the wonderful things
about the way I was raised is that no one ever told me that I couldn’t do those
things.” Though the family’s support for her is admirable, it could have enabled
her to take unethical actions to achieve her goal when she faced challenges.
Second, the way she portraited herself as Steve Jobs in biological technology was
very ambitious. It was another sign of her overconfidence bias. If she weren’t
confident enough and was just an admirer, she would not.

Q3. Why do you think investors would back a product that had not been
proven? Do you think investors—such as millionaires Rupert Mudoch,
Betsy DeVos, and the Walton family—were also susceptible to
overconfidence bias in their ability to pick and ride a winning start-
up? Why or why not?
Answer:
Investors would back a product that has the capability to bring
disruption in the market and create value for the target customers. Such products
often provide a higher return on the investment, as such for higher returns and
for first- mover advantage, investors back a product which has not been proven.
Investors are not susceptible to overconfidence bias in their ability to pick and
ride a winning start-up. Because investors are carefully study the business idea,
take expert opinions before making any investment. They will need to have
meetings with the board and hire a company to do the due diligence.

Q4. Behavioral economist Hersh Shefrin has suggested that Theranos

investors’ overconfidence caused them to let themselves be conned.
Is that plausible to you? How might that have worked?
Answer:
Holmes frequently talked about Theranos by telling the story of her
beloved uncle who was diagnosed with skin cancer, which quickly became brain
and bone cancer, according to “The Inventor.” He died too young, and Holmes
hoped that with the help of her blood- testing technology, “less people [will] have
to say goodbye too soon.” It was that kind of passion that hooked all kinds of
people on Theranos. For instance, many venture capitalists will tell you that they
invest in an entrepreneur and their vision, rather than a business plan. I think a
good story that conveys that vision can go a long way.

Q5. Often, the overconfidence bias is related to the overoptimism

bias, an unrealistic expectation that things will turn out well.
Sometimes, as Shefrin points out, people engage in wishful thinking.
How might the overoptimism bias have factored into the rise and fall
of Theranos?
Answer:
Elizabeth and Theranos had set a very ambitious plan to make a machine
which can do 200 body tests just by taking a few blood drops. She was extremely
ambitious about her projects. Without doing any feasibility tests, thinking about
such a revolutionary project is very delusional. It was her overconfident which
made her to think. And the consequence of such overconfidence is that she ended
up committing one of the biggest financial scams of Silicon Valley. At once the
company had a $ 10 billion valuation. But when finding the inaccuracies all the
investors lose their money. And Elisabeth was charged with wire fraud.

Q6. What harm was caused by Theranos and Holmes making false and
misleading statements? How can hype transform into overconfidence
or overoptimism?
Answer:
Overconfidence refers to one thinking of oneself and one’s abilities as
superior to others. This would make them decide on things that they would
decide things that are beyond their capability thus making errors in their decision
making. Over-optimism refers to expecting positive outcome every time without
having a back-up plan. Because they don’t prepare any back-up plan with an
expectation of
a positive outcome, they would get struck when they fail. Confirmation bias refers
to one choosing information and favoring them if they align with their previous
experience and exposure. They would avoid any contradictory ideas and thus
would fail to critically analyze their own beliefs and mistakes.

Q7. Why do you think Holmes would continue to push the same
narrative of personal and company success when faced with increased
scrutiny? Explain.
Answer:
Holmes continued to push her company's claims and her own narrative
of personal success. The company continued to show off its technology at
conferences. Building a fake blood-testing company that raises hundreds of
millions of dollars from investors is bad, certainly, but it's not really any worse
than any of the other securities fraud that we so often delight in around here.
Building a fake blood-testing company that performs fake blood tests on
thousands of people is much worse. Just imagine how the device could have save
many lives but due to the selfish and greedy, there were many people who killed
by this fraud. This has become a social issue caused by Theranos.

Q8. Can you think of an example of another company leader who

demonstrated overconfidence bias? How did this leader’s approach
affect the company?
Answer:
Chinese company Gaint was founded by Shi, Yuzhu. In 1989, Mr. Shi and
a friend took Rmb4,000 and set up his first company – also named Giant. It was a
software company that sold programs translating computer operating systems
from English into Chinese. The program was so popular that, by 1991, Giant had
mushroomed into a sprawling conglomerate with interests in garment
manufacturing, property development and health supplements, as well as its core
software business. This ownership structure created huge problems for Mr. Shi.
When he wanted to spend Rmb250m building an 18-storey building in Zhuhai
called the Giant Tower, Zhuhai officials saw the building as an opportunity to
create a landmark.