Incompetence and deception in business
“Instant gratification takes too long” might be a good way to summarize the current economy. Investors, and some customers, are anxious for any disruptive product, but are failing to do their due diligence. This, in turn, has led to the rise of incompetence within some businesses and yet some people still are in a hurry to give these imposters their hard earned money. Here are three people that are likely to either wind up in jail or out on their asses.
1ne: Tesla (Elan Musk)
Tesla’s shareholders, who are rarely put off by bad news, are jittery. Its shares have fallen by 16% since the end of February, most steeply after a Tesla using the firm’s Autopilot software crashed into a roadside barrier in California on March 23rd, killing the driver and raising questions about the safety of its system for semi-autonomous driving.
Mr Musk has bet the future of his firm on mass-producing cheaper cars. The new Model 3, a smaller saloon costing as little as $35,000 with a range still exceeding 220 miles, has attracted over 400,000 deposits of $1,000 each from eager customers. Tesla has repeatedly failed to meet its own targets. In July 2017 Mr Musk claimed that his firm would be cranking out 20,000 Model 3s per month by December of that year. In fact, it managed to produce fewer than 2,500 in the entire final quarter of 2017.
Tesla is struggling with bottlenecks in the production of battery packs at its “gigafactory” in Nevada as well as with assembly of the Model 3 at its car plant in Fremont, California. The central problem is that Mr Musk has overcomplicated the already difficult task of making a mass-market car. Rather than relying on the time-tested manufacturing methods used by established rivals, who still use people to do tasks that machines are as yet unsuited for, he wants his car factory to be a hyper-automated “machine that makes machines”, bristling with robots and keeping human involvement to a minimum.
On March 27th Moody’s, a credit-rating agency, downgraded Tesla’s debt, cautioning that the firm “will likely need to raise additional capital during the second half of 2019”. Jefferies, a bank, predicts that Tesla will need $2.5bn to $3bn this year.
A new securities class action lawsuit filed in late March 2018, which names Elon Musk as a defendant, alleges that the Tesla CEO knew that the Model 3 was not going to be able to be produced as the rates he claimed — and that the company was not going to be able to meet production goals due to — get this — the production lines not even being assembled. The lawsuit alleges that this didn’t prevent Elon Musk from going out and telling the investing public otherwise, hence the allegation of securities fraud.
The drumbeat of accountability for Elon Musk continues to pound louder and louder as each day progresses, with some analysts calling for the SEC to investigate him if the company doesn’t meet its stated cash flow positive and “no capital raise” guidance for the back end of 2018.
2wo: Theranos & CEO Elizabeth Holmes
Theranos this week laid off all but about two dozen of its remaining employees — the latest indignity for the once fabulously rich blood-testing company that’s become a parable for Silicon Valley hubris.
In an episode reported for the first time in a new book, the company’s first chief financial officer learned that Theranos had deceived Novartis executives in demonstrating its technology at a pitch meeting in Switzerland. The trick: Because the blood-testing system was inconsistent in generating results, Theranos staffers had recorded a result from one of the times it worked to display in the demonstration. And when the CFO raised concern about that with Holmes? He was fired on the spot.
Theranos’s shadowy former №2 executive, fired employees without explanation to the rest of the staff so frequently that surviving employees referred to dismissed colleagues with a memorable turn of phrase. “‘Sunny disappeared him,’ they would say, conjuring up the image of a Mafia hit in 1970s Brooklyn,” according to the book.
Holmes was the decision-maker. Scene after scene in the book shows her convincing people to do her bidding, often in the face of overwhelming reason to do otherwise. Holmes also comes off as supremely in control of her own image. In one memorable incident, she slipped out of her trademark baritone into a voice many octaves higher, leading one former employee to suspect that the deep voice may be affected to fit in in a corporate world dominated by men.
At the bottom of all this: a fundamental falsehood. Theranos’s blood-testing technology simply didn’t do what the company repeatedly told investors, clients, and the media it could, the SEC alleged and Theranos gave fake demonstrations when it was striking deals with one of its major clients.
Only a report by an investigate journalist at the Wall Street Journal told everyone that the emperor had no clothes. Until that report broke investors were still begging the company to take their money.
3hree: Sheryl Sandberg, Facebook
Sheryl Sandberg was brought on to Facebook to be the “adult in the room” among young, naive, Facebook developers. She has turned out to be anything but as she has collected millions in salaries and stock options. Amid the Facebook scandal around our privacy being violated she has said such stupid thing as “if you want privacy you have to pay for it” and “we made mistakes” (gee, ya think?).
Facebook has been known to launch things without thinking about the implications and hen fix them later when things go wrong . To this date can anyone really name one accomplishment that Ms Sandberg has brought to the table at Facebook other than a conference room where she posted a sign that says “good news only”?
In addition to al this Ms Sandberg admitted the possibility that additional breaches in personal information could be discovered by current company audits prompted by Cambridge Analytica’s misuse of user data. “We cared about privacy all along, but I think we got the balance wrong,” she said. Ha?
Sheryl Sandberg, Facebook’s second-in-command, said she personally made “mistakes” and that the company had been too slow to respond after the discovery of a massive data leak to Cambridge Analytica. These mistakes have caused Facebook to lose tens of millions of dollars in stock valuation. In any other company she would have been handed her walking papers, but with marketers and users still using Facebook in huge numbers that probably won’t happen.
Ms Sandberg should have been the person who raised red flags from the beginning. She should have brought accepted business practices to the social media site, but she failed while building a $10 million home in the Valley and writing books.
These are just three people that we know about. Imagine how many others could be out there because investors aren’t doing their due diligence or asking, good common sense business questions.
Originally published at www.newmediaandmarketing.com on April 15, 2018.