About a month ago, I read a fascinating true story about a dream that never materialized, turned into a lie, and eventually became a straight-out fraud. The book, Bad Blood: Secrets and Lies in a Silicon Valley Startup, is a fantastic read following Stanford dropout Elizabeth Holmes, who founded her infamous health-tech startup in 2003. The author, investigative journalist John Carreyrou, was one of the first to publicly question and reveal the unsafe, unethical, and illegal practices of Holmes’ company, Theranos. Created by Holmes at the age of just 19, Theranos was fueled by her dream that a single drop of blood from a tiny, painless finger prick could provide enough information for a full blood report. She hoped to create technology that would produce results more efficiently than a standard blood test while causing as little mental and physical stress to patients as possible.
Holmes quickly spread her contagious and visionary dream. Talk show after talk show, she confidently explained the benefits of this fast, easy, and accurate blood test that would change the face of medicine forever. Investors came flooding in! Not only were they excited for this new, disruptive technology, but the story of a young, ambitious, female college dropout who would do anything to follow a dream—think Bill Gates and Steve Jobs—was very appealing to investors. Overall, she was able to raise $700 million for the company that, at its peak, was valued at $9 billion. This made Holmes a very young billionaire with it all: accolades, stardom, press, interviews, speaking engagements, and access to influential people.
In reality, the technology developed by Theranos produced blood test results that were riddled with major errors. Understandably, this led to wasted money on extra tests, worried and confused patients and doctors, and in some cases, very serious (but largely unfounded) health concerns.
Despite the countless errors and lies, Theranos maintained its power and influence for years. Holmes convinced people like former Secretaries of State George Schultz and Henry Kissinger, General James Mattis, and many other A-list influencers to join her board of directors.
Scientists and doctors who had the knowledge and training to understand the product (and realize it was faulty and unpredictable at best) were purposefully left out of these powerful positions. Her charm and charisma were earning her fame and fortune where her technology could not.
The most fascinating part of the story is how long the lie was able to perpetuate itself. For 15 years, Holmes sidestepped legal obligations and claims against company practices while continuing to raise money for her obsession. To maintain the appearance of a thriving, successful enterprise, the company was run like a communist state, which led to insiders turning on each other. At the head, Holmes and her COO (and secret boyfriend), Sunny Balwani, ran a tight ship and told employees, “This is the most important thing humanity has ever built. If you don’t believe this is the case, you should leave now.”
Notice how the word “believe” was used. The company culture was built around having faith without scientific proof. If you didn’t fit within the tight constraints Holmes and Balwani put on their employees, you were immediately fired with your signature glued to a non-disclosure agreement. Although many employees were upset and confused about the unethical practices requested of them, Theranos’ lawyers would threaten and scare employees to the point that only a few brave souls took a stand against the company.
Holmes’ investors and board of directors were kept in the dark about the actual progress of the technology being produced. Employees within the company were so siloed from each other, employees weren’t allowed to talk to one other about their tasks, and get this: the research and development department wasn’t allowed to work with or even enter the same physical space as the engineers. All of this was in the name of “security,” ensuring their technology wouldn’t be stolen. No one could see behind the black curtain.
How do you develop a world class, “never been done before” product without those two groups working together? You don’t. You develop lies!
To me, that was what led to Holmes’ downfall in the end. She had lied so much and so often that the lies became her truths, and her identity became totally dependent upon the success of Theranos. She was highly driven by money which wouldn’t materialize without the company’s success. If that success wasn’t there (and it wasn’t), she was nothing but a fraud. And that’s exactly what she was in the end.