Lessons learned from 21st century scammers 

lessons

Haven’t you learned your lesson? By now you’ve watched one of the shows, Inventing Anna on Netflix, The Dropout on Hulu, or We Crashed on Apple TV. Each show is about our favorite con artists of recent history.

Anna “Delvey” Sorokin pretended to be a wealthy German heiress and left hundreds of thousands of dollars in unpaid personal expenses while attempting to build her social club, ADF, the Anna Delvey Foundation.

Elizabeth Holmes dropped out of Stanford University and founded Theranos which claimed to have revolutionized blood testing with as small volume as a finger prick. The company soared to a $9 billion valuation before the Wall Street Journal investigated a potential fraud. 

Adam Neumann founded WeWork and brought it to a global footprint with a $47 billion valuation before its failed IPO and crash. Neumann was notorious for interesting choices such as smoking marijuana on a company jet (and then stashing the joint in a cereal box), the company’s annual drunken retreat (Summer Camp), off shoot investments like WeGrow and WeLive, and double dealing, such as leasing the trademark “We” back to his own company.

What can we learn from these real life characters? Why do they carry so much intrigue that different streaming services compete for the rights to their life stories?

Lesson 1: Know the right people

Adam Neumann’s chutzpah got him into the same room as Brooklyn real estate developer Joel Schreiber who provided Adam and Miguel $15 million for a 33% interest in the company at its 2010 founding. It didn’t hurt that his wife is Gwyneth Paltrow’s cousin and his younger sister was Miss Teen Israel and a model.

Anna Sorokin was able to charm her way into the graces of art collector Michael Huang, artist Daniel Arsham, entrepreneur Roo Rogers, and somehow got to know “pharma bro” Martin Shkreli and Fyre Festival founder Billy McFarland.

Elizabeth Holmes’ childhood friend Jesse Draper’s father Tim Draper is a well known Silicon Valley venture capitalist and wrote Holmes a check for $1 million upon hearing her pitch. She was then able to get George Shultz onto her board and attracted investment from Henry Kissinger, Rupert Murdoch, Betsy DeVos, Carlos Slim, the Walton family, and other high profile celebrities. She has a child with hotel heir Billy Evans.

Elizabeth Holmes 2014 cropped

Lesson 2: Be Charismatic 

Each of the above characters were able to get people to like or admire them whether they surrounded themselves with the right people (see above) or people felt like they were truly missing out. 

Adam Neumann used his charm and confidence to start Green Desk, the precursor to WeWork. Many likened WeWork, especially during Summer Camp, to a cult, with Neumann as the charismatic cult leader. 

Anna made people want to know her. She brought other “high profile” names into the room, and associated herself with them, confusingly putting her into that same stratosphere. She used her attitude, such as spite to service workers, absent mindedness about debts, carefree last minute world trips, to mean that her status as German heiress was true.

Holmes wore her a trademark black turtleneck like that of her hero Steve Jobs and spoke in a deep voice. Her charismatic attitude led her to build a world class board and top level investors. People did not want to experience FOMO in this potential rocketship investment, possibly mirroring that of Apple.

adam neumann and rebekah paltrow attend the another news photo 1647553747 1

Lesson 3: Go big or go home

Neumann pitched WeWork as changing and touching all of our lives. He tried to implement that vision with offshoots, WeGrow and WeLive. Neumann also had aspirations to live forever, become the first trillionaire, take WeWork to Mars, become Israel’s prime minister, and become “president of the world”.  In addition, it was reported that Neumann convinced Rahm Emanuel to run for President, used JPMorgan‘s CEO Jamie Dimon as his personal banker, convinced Saudi prince Mohammed bin Salman to improve the standing of women in Saudi Arabia, and claimed to be working with Jared Kushner on the Trump administration’s peace plan for the Israeli–Palestinian conflict.

Anna tried to get a loan for $22 million from City National Bank to rent the building on Park Avenue now occupied by Fotografiska. Even after she was almost stuck in Morocco and had to approach her trainer Kacy Duke to pay for a flight back to New York, Anna asked to travel first class. Before she left, she drank the most expensive champagne and took a helicopter to the airport in Casablanca.

Holmes grew the company to a $9 billion valuation, had a team of world class advisors, and an envious cap table with all of the world’s top investors. She had deals with the country’s largest pharmacy chain, Walgreens as well as Cleveland Clinic, Capital BlueCross, and AmeriHealth. 

Lesson 4: Keep it real

But in the end, some of Neumann’s grandiose claims fell apart. The numbers for WeWork were that of a real estate company, not an infinitely scalable technology platform, which the valuation reflected. The pre IPO document, S-1, read like Neumann’s cult initiation as opposed to that of a public company. Unfortunately, investors didn’t buy the vision and saw the reality.

Eventually Anna’s lifestyle caught up to her and with the failed loan application her world crumbled. The Anna Delvey Foundation would not become a reality and her piling debts, bad checks, and wire fraud landed her in jail.

The Wall Street Journal discovered that Theranos technology did not work as advertised. In fact, the company was using other commercially available equipment to run its tests. Theranos technology provided inaccurate results and Elizabeth Holmes was found guilty of defrauding investors. 

Well there you have it, the three biggest scandals of the last five years and what we can learn from them. Most importantly if you are going to talk big, hopefully you have something big that can back that up. Are you working on something big? Let us know if these three have inspired or discouraged you from your endeavor.

Lessons learned from 21st century scammers  via @famecastmedia

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