Elizabeth Holmes and the Power of Imagination

 

Theranos founder, chairwoman, and C.E.O. Elizabeth Holmes, in Palo Alto, California, September 2014.A 19-year-old college student had a revolutionary idea that she imagined would make her rich and famous. She quit college and founded a start-up, attracting incredible attention, investors like Lawrence Ellison of Oracle, and a board of directors that included Henry Kissinger and George Schultz. She dressed just like Steve Jobs, in black turtlenecks. She had huge, mesmerizing blue eyes and a very deep voice for a woman. She was sought after for interviews, TED talks, and hailed as a pioneer in medical advances. She claimed that the cost savings using her technology would be in the billions.

Her technology concept was cheap, reliable blood testing done with only a fingerprick, using a device that could test for up to 240 different things. She claimed that she was driven by integrity and the desire to help others.

. . . [T]here’s a tremendous responsibility. I think about it all the time in the context of my mom. And the information that we’re generating, she does all of her tests through us, knowing that we’re right, every single time, and knowing that we’re not compromising on quality, and knowing that we’re, in every action that we take, approaching this with a seriousness that it deserves, in the context of what it means to say to someone, “You don’t have breast cancer” or “You do have breast cancer,” has driven our culture in a huge way.

At one point, her company Theranos was valued at more than $9 billion, more than Quest Diagnostics, the well-known and well-established medical lab company. She claimed that her technology was like a smart phone, where the old lab testing methods were clunky old mainframes.

Initially, she foretold a future in which pharmaceutical drug trials could be given constantly updated, non-invasive information about the real-time affect of their drugs on real live patients, and sought to partner with drug companies. When that failed to pan out, she foretold a future in which every home contained its own minilab for easy, non-invasive blood testing.

As a person with chronic illness, I’d love to be able to get blood tests without a prescription. Theranos championed this cause, getting a law passed in Arizona to allow people to order blood tests on their own.

Many people claimed that Elizabeth Holmes, the woman about whom I am writing, had imagination and vision, and that she was a prophet, a visionary. She did, and she was, but the vision she had was not the one they imagined she was sharing with them. She was a serial, bald-faced, unrepentant liar. She constantly spoke of Theranos’ developmental technology that did not yet exist as though it was up and running and fully tested.

She actively cultivated the Steve Jobs thing with the turtleneck. She is suspected by many (including me) of deliberately lowering the pitch of her voice to sound more commanding and powerful. Margaret Thatcher did that too, and I don’t necessarily criticize her for it. Holmes wanted to be seen as the type of woman who can succeed in the man’s world of the tech industry.

However, clearly she was engaging in this type of theater to the betterment of her company. Zero Hedge has an interesting summary of the laudatory, adulatory paens to Holmes that were written in 2013 to 2015 here.

The first cracks in Holmes’ facade came with a Wall Street Journal piece in 2015. Holmes fought back aggressively, but somehow the spell she had been able to cast was broken.

Although her company, Theranos, was able in 2014 to contract with a major drugstore chain, Walgreen’s, to do blood testing in its stores (here’s an account from 2015 of one person’s experience), Walgreen’s sued Theranos in 2016 for $140 million in damages after two years’ worth of blood testing was voided and corrections were issued. Theranos claimed that no one was harmed by the inaccurate tests, and insisted that their standards were the highest and that their methods would be vindicated.

The journalist John Carreyrou of the WSJ piece went on to write more than two dozen articles about Holmes and Theranos, and recently published a book on the subject which is being made into a movie with Jennifer Lawrence.

Forbes, which once claimed Holmes had a personal worth of $4.5 billion, now claims she is worth “nothing.” Imagine that.

*Photo credit here.

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  1. Mendel Inactive
    Mendel
    @Mendel

    For me as a biologist, a big take-home from this saga is that the world of biomedical science works much differently than the world of computers/software, and that most attempts to force the thinking and financing of the latter onto the former will go south.

    One obvious difference is that most of the computer “mavericks” had a chance to prove themselves (or their ideas) in a small-scale real world setting before they started garnishing attention and money: Apple produced (or stole) some groundbreaking technology back when it was still operating out of Woz’ garage, the Google guys put together an algorithm that blew everyone away while they were still at Stanford, and Facebook was already a cult smash at college campuses around the country before Zuckerberg ever left Cambridge for Palo Alto. So in all cases, there was real-world proof that these guys and their products could work.

    In the biomedical world, it usually takes years (and millions, if not billions) before any finished product can actually be tested under anything like real-world conditions. Up until that point, all investors can go on is hope, trust, and incomplete data that might be predictive, or it might not.

    But both rich investors and the public at large apparently feel the need to force the biotech world into the computer paradigm, and Theranos is one obvious result.

    • #1
  2. CB Toder aka Mama Toad Member
    CB Toder aka Mama Toad
    @CBToderakaMamaToad

    Don’t you think it is fascinating how hyped she became?

    Maria Shriver actually dressed like her in order to interview her!

    I think the big take home could possibly be: Get a cute CEO with big blue eyes and a mesmerizing way of speaking, and rational scrutiny can fly out the window.

    • #2
  3. Tex929rr Coolidge
    Tex929rr
    @Tex929rr

    CB Toder aka Mama Toad (View Comment):

    I think the big take home could possibly be: Get a cute CEO with big blue eyes and a mesmerizing way of speaking, and rational scrutiny can fly out the window.

    We recently replaced a two term president of manifestly limited leadership skills and a track record of failure who was elected (twice!) for analogous reasons. 

    No surprises here.

    • #3
  4. Mendel Inactive
    Mendel
    @Mendel

    CB Toder aka Mama Toad (View Comment):
    Don’t you think it is fascinating how hyped she became?

    Honestly, not really.

    The media (and the public at large) is always on the prowl for some feel-good story that sounds more like Hollywood than reality, and having the right character always helps. Marissa Mayer was also incredibly hyped up – but unfortunately for Marissa she was running a company that was actually interacting with the market (and losing).

    Plus, as a biologist, you quickly learn how easy it is to enthrall the public with healthcare research. It’s truly breathtaking how the “I’m on a mission to cure this disease!” motto and some technical-sounding mumbo jumbo can draw television cameras and attract an audience. Heck, I’m the farthest thing from a looker and my research on the flu virus was pretty uninspiring, yet I still managed to briefly get on national TV for it!

    One lesson every biomedical researcher learns at some point is that the research that actually does lead to big breathroughs is typically incredibly dry, boring, slow, and not suitable for a TV audience in the least. The corollary is that when somebody has a research story that plays great on TV, it’s usually a dead-end or just handwaving. I was always suspicious of Theranos for that very reason.

    • #4
  5. Danny Alexander Member
    Danny Alexander
    @DannyAlexander

    Jennifer Lawrence cast as Elizabeth Holmes?!…

    OK, so what’s the over/under on Shia Labeouf being cast as Clark Rockefeller?…

    • #5
  6. Richard Easton Coolidge
    Richard Easton
    @RichardEaston

    CB Toder aka Mama Toad (View Comment):

    Don’t you think it is fascinating how hyped she became?

    Maria Shriver actually dressed like her in order to interview her!

    I think the big take home could possibly be: Get a cute CEO with big blue eyes and a mesmerizing way of speaking, and rational scrutiny can fly out the window.

    Gee, that reminds me of Obama.  One Ricochet contributor still thinks he’s a moderate.

    • #6
  7. iWe Coolidge
    iWe
    @iWe

    Wow. I had never heard her speak before now – her pitch is the same as mine!

    The funny thing is that I don’t think there is any underlying technical reason Theranos’ mission cannot be accomplished by someone, soon. It is a good idea.

    I do not believe she set out to run a scam – it was more of a Breaking Bad kind of descent from good intentions to evil.

    In any case, she certainly ended up evil. Almost as bad as some of our politicians. The difference is that politicians are backed by the power of the state – she only had her powers of persuasion.

    • #7
  8. CB Toder aka Mama Toad Member
    CB Toder aka Mama Toad
    @CBToderakaMamaToad

    Papa Toad mentioned that the name Theranos always makes him think of Thanatos, the Greek personification of death. 

    Has anyone read Walker Percy’s Thanatos Syndrome

    • #8
  9. CB Toder aka Mama Toad Member
    CB Toder aka Mama Toad
    @CBToderakaMamaToad

    Richard Easton (View Comment):
    Gee, that reminds me of Obama.

    Barack’s eyes are brown… a warm, deep brown that makes me think about the pleat in his pants…

    • #9
  10. Mike LaRoche Inactive
    Mike LaRoche
    @MikeLaRoche

    CB Toder aka Mama Toad (View Comment):

    Papa Toad mentioned that the name Theranos always makes him think of Thanatos, the Greek personification of death.

    Has anyone read Walker Percy’s Thanatos Syndrome?

    Yes, a brilliant novel.

    • #10
  11. Mendel Inactive
    Mendel
    @Mendel

    iWe (View Comment):
    The funny thing is that I don’t think there is any underlying technical reason Theranos’ mission cannot be accomplished by someone, soon. It is a good idea.

    It’s absolutely feasible, and I think it would already be a reality today if we lived in a world in which most people paid the full cost of their own blood tests.

    And it most likely would have been developed without much fanfare or the need for a beautiful blue-eyed blond in a black blouse.

    • #11
  12. CB Toder aka Mama Toad Member
    CB Toder aka Mama Toad
    @CBToderakaMamaToad

    iWe (View Comment):
    I do not believe she set out to run a scam – it was more of a Breaking Bad kind of descent from good intentions to evil.

    I believe that she set out to make herself wealthy and influential and that she was willing to say or do anything to make that happen, and that she found that playing sincere do-gooder was her best role and won for her hearts and minds. 

    • #12
  13. Spin Coolidge
    Spin
    @Spin

    CB Toder aka Mama Toad (View Comment):
    Get a cute CEO with big blue eyes and a mesmerizing way of speaking, and rational scrutiny can fly out the window.

    She could talk me in to anything…

    • #13
  14. Mike LaRoche Inactive
    Mike LaRoche
    @MikeLaRoche

    Mike LaRoche (View Comment):

    CB Toder aka Mama Toad (View Comment):

    Papa Toad mentioned that the name Theranos always makes him think of Thanatos, the Greek personification of death.

    Has anyone read Walker Percy’s Thanatos Syndrome?

    Yes, a brilliant novel.

    By the way, that was my 13,000th comment at Ricochet.

    Rather fitting it should be in reference to the great Walker Percy. My favorite of his novels is Love in the Ruins, to which The Thanatos Syndrome is a sequel.

    • #14
  15. CB Toder aka Mama Toad Member
    CB Toder aka Mama Toad
    @CBToderakaMamaToad

    Mike LaRoche (View Comment):

    By the way, that was my 13,000th comment at Ricochet.

     

    Yip yip!

    • #15
  16. Stad Coolidge
    Stad
    @Stad

    I was actually sad to find out she was a fraud.  Her story was typical American – an individual who comes up with an idea that makes life better for millions and ultimately makes her a billionaire.  Also, the fact she was female set an example for other women entrepreneurs.

    Too bad . . .

    • #16
  17. CB Toder aka Mama Toad Member
    CB Toder aka Mama Toad
    @CBToderakaMamaToad

    Stad (View Comment):

    I was actually sad to find out she was a fraud. Her story was typical American – an individual who comes up with an idea that makes life better for millions and ultimately makes her a billionaire. Also, the fact she was female set an example for other women entrepreneurs.

    Too bad . . .

    She created that whole story. She herself is clearly highly intelligent, highly driven, highly charismatic. Those things are really truly true.

    Holmes was aware of people’s ability to lose their sense when it comes to trendy sounding names. Holmes called her machine the “Edison” (obvious appeal), decked out her corporate offices in American flags, talked about the Girl Scouts and girls women in tech and STEM, and had the company’s aesthetic designed by an Apple designer.

    • #17
  18. EJHill Podcaster
    EJHill
    @EJHill

    “I always think there’s a band, kid…”

    We believe what we want to believe. Hollywood and the media have been enthralled in this idea of the “kick ass woman” for 20 years. There is a purity to their fantasies and they latch on to stories and personalities that reinforce that. Then they discover that women are just as bad as men. They lie (Elizabeth Warren), they’re corrupt (Hillary Clinton) and they can be just as incompetent (Loretta Lynch) as any man. Of course, it’s largely filtered by politics. They can attack a conservative woman with no problems whatsoever.

     

    • #18
  19. WillowSpring Member
    WillowSpring
    @WillowSpring

    I big red flag for me is when a company starts bringing board members who have no relationship to the company product or technology, but have a lot of name recognition, such as Kissinger and Schultz.  

    • #19
  20. ctlaw Coolidge
    ctlaw
    @ctlaw

    Mendel (View Comment):
    In the biomedical world, it usually takes years (and millions, if not billions) before any finished product can actually be tested under anything like real-world conditions. Up until that point, all investors can go on is hope, trust, and incomplete data that might be predictive, or it might not.

    That dynamic also allows some big red flags. When Theranos first became a media sensation, there was a huge disconnect between their alleged commercialization status (about to revolutionize the industry) and their lack of intellectual property footprint.

    For a company in their alleged status one would have seen a long trail of patents and publications ranging from rough concepts a decade before to fully functional lab-scale prototypes 5+ years before to commercial prototypes 3+ years before… Those are conservative numbers. One of the big problems with US drug and medical device law is that you often hit the market just as your patents would otherwise start to expire and you can quickly get knocked off (partially addressed by patent term extensions due to regulatory delay).

    Only the earliest investors have an excuse for not appreciating this.

    • #20
  21. RightAngles Member
    RightAngles
    @RightAngles

    Welp, when they make a movie about your downfall starring Jennifer Lawrence, the party is over.

    • #21
  22. David Foster Member
    David Foster
    @DavidFoster

    I thought that the company looked interesting, but was somewhat put off by the Board membership.  There may be value in having 1 or 2 people on a board mainly because of their fame and name-recognition, but Theranos went way over the top with the Kissingers and Schultzs, and a Board for such a company really needs a few people with real industry background and expertise.

    That said, the performance of the Board was IMO disgraceful, especially George Schultz, who if reports are correct refused to listen to concerns from **his own grandson** about problems with the company.

    • #22
  23. ctlaw Coolidge
    ctlaw
    @ctlaw

    iWe (View Comment):
    The funny thing is that I don’t think there is any underlying technical reason Theranos’ mission cannot be accomplished by someone, soon. It is a good idea.

    The problem is there are millions of “good ideas” that are easy to conceive of. But workable implementations are harder to come up with,

    The “good idea” of being able to easily conduct multiple tests with a single finger prick test is nothing new. Sort of like a commercially practical battery-powered car. Actually making it is the hard part. The main thing new with Theranos is that it had a young blonde as a founder.

    • #23
  24. ctlaw Coolidge
    ctlaw
    @ctlaw

    RightAngles (View Comment):

    Welp, when they make a movie about your downfall starring Jennifer Lawrence, the party is over.

    Could be worse. It could be starring Melissa McCarthy.

    • #24
  25. Gumby Mark Thatcher
    Gumby Mark
    @GumbyMark

    I just finished reading the John Carreyrou book (Bad Blood) and recommend it.  It’s compelling – I read it on one very long plane flight.

    What was striking is how effectively manipulative Holmes was for over a decade.  She managed the company by keeping everyone in silos and trying to prevent communication between different working groups.  She also stacked her board with GOP and Dem establishment figures and worked effectively the politics both with the GOP and particularly with the Dems, who loved the idea of a women entrepeneurial CEO – Biden came to celebrate the company and the general counsel she brought in just before everything blew up was a long-time former Hillary staffer.  As Carreyrou notes it should have been a tipoff that there was no one with biomedical expertise on the board and none of her venture capital came from the VC firms in the healthcare field.

    It also turns out that Rupert Murdoch, owner of the WS Journal where Carreyrou works, was captivated by Holmes and made a $125 million investment in Theranos, the largest non-media investment he’d ever made.  When Holmes got wind of the story Carreyrou was working on she made several attempts to get Murdoch to intervene to kill the story.  Carreyrou heard about it and was worried but Murdoch refused to get involved.

    • #25
  26. Gumby Mark Thatcher
    Gumby Mark
    @GumbyMark

    David Foster (View Comment):

    I thought that the company looked interesting, but was somewhat put off by the Board membership. There may be value in having 1 or 2 people on a board mainly because of their fame and name-recognition, but Theranos went way over the top with the Kissingers and Schultzs, and a Board for such a company really needs a few people with real industry background and expertise.

    That said, the performance of the Board was IMO disgraceful, especially George Schultz, who if reports are correct refused to listen to concerns from **his own grandson** about problems with the company.

    According to the Carreyrou book, Schultz’s grandson showed great courage in becoming a whistleblower, and unfortunately George Schultz sided with Holmes.  Of course, Schultz was in his early 90s at the time and it is unclear how much he really understood about Theranos other than, as many other were, being charmed by Holmes.

    • #26
  27. RightAngles Member
    RightAngles
    @RightAngles

    ctlaw (View Comment):

    The problem is there are millions of “good ideas” that are easy to conceive of. But workable implementations are harder to come up with,

    I know, right? I mean I have a good idea for a pen that, when you write a check with it, whatever amount you write appears in your account. Ta-Da!

    • #27
  28. ctlaw Coolidge
    ctlaw
    @ctlaw

    Gumby Mark (View Comment):
    but Murdoch refused to get involved.

    Gumby Mark (View Comment):
    Schultz’s grandson showed great courage

    Good for them. More on Tyler Schultz’s ordeal.

    • #28
  29. MarciN Member
    MarciN
    @MarciN

    I’ve come across many stories in business books about companies that marketed ultimately successful products before they were fully developed. The classic example is of FedEx. The company pretended it had real-time package-tracking capability before it was actually available. That’s probably why so many people went along with this scam.

    Holmes sounds like a sociopath. I can’t believe that she remains employed in any way, but she does according to Wikipedia:

    In June 2018, a federal grand jury indicted Holmes and former Theranos COO Ramesh Balwani on nine counts of wire fraud and two counts of conspiracy to commit wire fraud. Prosecutors allege that Holmes and Balwani engaged in two criminal schemes, one to defraud investors, the other to defraud doctors and patients. After the indictment, Theranos announced that Holmes would resign as CEO; she retains her position as chairwoman of the board.

    • #29
  30. Mark Camp Member
    Mark Camp
    @MarkCamp

    Tex929rr (View Comment):

    CB Toder aka Mama Toad (View Comment):

    I think the big take home could possibly be: Get a cute CEO with big blue eyes and a mesmerizing way of speaking, and rational scrutiny can fly out the window.

    We recently replaced a two term president of manifestly limited leadership skills and a track record of failure who was elected (twice!) for analogous reasons.

    No surprises here.

    Nominated for Best Comment by a Time Traveler.

    (I’m just kidding. Sheesh. Don’t be so sensitive.)

    • #30

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