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Technology / Theranos

The Chronicles of an Evil Genius: Elizabeth Holmes and Theranos


To many, the words “Silicon Valley” might conjure up an image of a utopian society light years ahead of the rest of the world, where robotic technology controls daily life and the lavish campuses at Google and Facebook are the industry norm. The techie enclave — a conglomeration of cities mainly in San Mateo and Santa Clara counties — admittedly seems quite perfect. The Valley, however, knows scandal all too well.

Lies. Suspicion. Fraud. These are some of the first words that come to mind if you asked me to describe Elizabeth Holmes, whose now-defunct healthcare innovation company, Theranos, by June of this year had publicized her insanity and successfully ruined her life. I grew up in Los Altos Hills, CA, a small, woodsy area about an hour south of San Francisco, and coincidentally, the same place in which Elizabeth Holmes currently resides. I use the word “area” intentionally, for it is really not a town at all. It lacks sidewalks, shops, public facilities; it is, in many ways, a perfect hideaway. It goes without saying I have never seen Elizabeth Holmes wandering around town. A liar hated and shamed by so many that at this point, Holmes hides out, while the media and tech worlds rip her reputation apart.

At home in California, the Theranos conversation is inescapable — it’s everywhere. In New England at Bowdoin College, the matter seems distant, and largely insignificant. While I do not believe there is a compelling nexus between the failure of one Silicon Valley startup and myself, the Theranos scandal represents a much larger issue about regulation and the often dirty truth behind the seemingly ideal Valley. By effectively slipping under the radar through perpetual and audacious lies to investors and consumers, Holmes led Theranos to failure, crafting a picture-perfect corporate scandal.

The idea behind Theranos, a privately held health-technology company that promised to revolutionarily test extremely small samples of blood in order to diagnose, treat, and prevent diseases, had the potential to turn the healthcare world on its axis. However, its execution failed miserably through a series of detrimental missteps, including using devices built by other corporations, not receiving FDA approval, and lying about pharmaceutical and grocery endorsements, their true amount of revenue, and the number of tests they could perform. This collection of lies led to suspicion and ultimately, a full exposé and investigation which destroyed the corporation entirely. Elizabeth Holmes, as founder and CEO, was the ringleader of the Theranos scandal.

Holmes wears many hats; she has certainly demonstrated a plethora of disturbing characteristics over the course of her Theranos experiment, but her persona can be easily divided into three distinct categories. She is, incontestably, a genius. She is a genius in many capacities; conventionally, as proven by her career at Stanford and her fabrication of the Theranos’ idea. Unconventionally, her wit staved off the public and allowed her to continue running a detrimental experiment. Pulling off that scheme required significant intelligence.

Holmes is also a sociopath. Simply put, she has no conscience. As evidenced by her repetitive pathological lies, she exerts no concern for others, and as John Carreyrou described, she “got used to telling lies so often, and the lies got so much bigger, that eventually, the line between the lies and reality blurred.” Her sociopathic tendencies blocked her recognition or admission of any professional wrongdoings.

There is no debate that her actions over the last fifteen years have effectively made her a criminal. In fact, in June, Holmes and her significant other, Sunny Balwani, who served as Theranos’ president and COO, were charged with two counts of conspiracy to commit wire fraud and nine counts of wire fraud, and she faced 20 years in prison. The most recent update on Holmes’ and Theranos’ legal proceedings was an October 12, 2018 hearing in which the Justice Department was granted access to “more than 200,000 company documents.”

Holmes, the genius, could have, theoretically, won a Nobel prize for her accomplishments in science. Holmes, the sociopath, could have won an Oscar for her performance in corporate lies. Holmes, the criminal, could have faced 20 years behind bars.

The Genius

In September 2001, a 17-year old girl from Houston enrolled at Stanford University, situated in the heart of the then-on-the-rise Valley just south of San Francisco. That girl was Elizabeth Holmes, and shortly after arriving at Stanford, she fabricated an idea she believed was revolutionary (and in theory, it was). In March 2004, a freshly-20-year old Holmes dropped out of Stanford in hopes of realizing her business plan for a healthcare innovation company originally called Real Time Cures. In September of last year, 15 years after her initial launch into the strange world of corporate Silicon Valley, Holmes faced an indictment on wire fraud and conspiracy charges, and Theranos now ceases to exist. The events that took place throughout those 17 years piece together one of the most unbelievable scandals to ever penetrate the Valley and shake the healthcare innovation world-at-large.

Once a Stanford student, Holmes was gifted in the classroom, but she believed her own ideas would get her further in the world than would a college degree. To an extent, she was correct in that belief. Her idea for Theranos was actual genius. When it first came to fruition in the basement of a college house in Palo Alto, Holmes’ company – that would eventually destroy everything in its path – was actually quite smart.

According to the June 2018 indictment filed by United States District Court in the San Jose Division of the Northern District of California, regarding defendants Elizabeth Holmes and Ramesh “Sunny” Balwani, Holmes’ partner in crime, Theranos’ “stated mission was to revolutionize medical testing through allegedly innovative methods for drawing blood, testing blood, and interpreting the resulting patient data—all for the purpose of improving outcomes and lowering health costs.”

The Business Insider provides a comprehensive rundown of the methodology that Theranos claimed to employ in executing their idea. Essentially, Theranos promised that its technology could draw an incredibly small amount of blood, just a couple of drops from just a pinprick of a finger, to be used for testing in order to prevent and treat diseases. In fact, the company promised that the Edison device would only require 1/100 to 1/1,000 of the amount of blood that would ordinarily be necessary for blood testing in conventional labs – taken by a mere finger prick – and would be far more cost effective. For patients with small veins or aversions to needles, or for those with financial concerns, this technology was something of a godsend…if only it had worked.

The problems were endless. First, the volume of blood that Theranos claimed the Edison could process was simply too small. In some cases, the sample had to be diluted so much there was no way to effectively test the blood and left substantial room for error. Second, Theranos allegedly used third-party devices to conduct its lab work and did so in unregulated (and sometimes third-party) laboratories.

A successful execution of the Theranos idea would have added blood-testing to the growing list of industries that Silicon Valley had already disrupted. The problem lay in the reality that Holmes was simply unable to execute. And debatably, nobody would have been able to execute her plan; science has not yet caught up to the complexities of the Theranos mission. That fact exemplifies Holmes’ ingenuity.

The Sociopath

Psychology Today describes sociopaths as people who “are manipulative, often lie, lack empathy, and have a weak conscience that allows them to act recklessly or aggressively, even when they know their behavior is wrong.” Holmes herself perfectly encapsulates that definition.

From a young age, Holmes showed sociopathic tendencies. In Bad Blood, Carreyrou writes that, as a child, she had an “intense competitive streak” which manifested itself in simple things like Monopoly games with her family; “she would insist on playing until the end, collecting the houses and hotels until she won…” and if she was losing, “she would often storm off. More than once, she ran directly through a screen on the door.” She showed no regard for the people with whom she was playing, and acted egregiously given the circumstances.

Throughout her career, Holmes has proved herself to be unexpectedly compelling though lacking conventional charisma. She possesses an eerie ability to carry on a minutes-long conversation — staring down whoever she is talking to — without blinking once. Her voice is unsettling, yet impossibly convincing, and in fact, has an entire backstory of its own. She has faked a deeper voice for the majority of her career, in an attempt to seem more masculine and gain legitimacy in a male-dominated tech world. One particularly poignant anecdote in Carreyrou’s book describes a moment when Holmes’ voice “slipped,” in which she stopped faking the baritone she had employed for so long.

Her Steve Jobs imitation was just one element of the façade she put on. Carreyrou also wrote extensively about Holmes’ absolute idolization of Apple Founder Steve Jobs. Holmes’ life is essentially the same old college-dropout-teenage-self-made-CEO-on-Sand-Hill-Road story that Jobs lived. She was rarely seen sporting anything besides a black turtleneck, a nod to his daily uniform, and supposedly kept a framed picture of the tech mogul on her desk. Holmes’ obsession with Jobs is so widely-recognized and blatantly obvious, Business Insider actually coined the term “Jobsian” to describe Holmes’ imitation of his persona.

Holmes’ interviews are strikingly similar to those of a politician. She will respond to a posed question for sometimes many minutes, emphatically speaking with not just her mouth, but her hands and her eyes, too. Her demeanor is eerie, captivating, and almost hypnotizing. And yet, she never really answers the question. She likes to beat around the bush; she takes questions an opportunity to highlight all the good she’s doing without actually answering, for the truth would reveal all the crimes she is committing. One of her most famous interview moments comes from an October 2015 interview with Jim Cramer on CNBC (yet repeated many times during her time explaining and defending Theranos in the media), in which she says, “When you try to change things, people react to it.” Holmes strategically explains Theranos’ backlash as simple ‘reactions’ to ‘change.’ Throughout her media appearances, she mastered downplaying the extent to which Theranos was failing, and masked the realities of the company’s relationships with pharmacies, investors, and patients.

The Criminal

Theoretically, Theranos was genius. The idea behind the company was revolutionary, and in a perfect world, its execution would have helped millions. In practice, the company did just the opposite. Many patients were depending on the success of the Theranos technology, called the “Edison” device, yet were manipulated by Holmes’ promises and ultimately schemed by the device’s failure to function.

In April of 2004, Holmes incorporated the company as ‘Theranos,’ and by December of that year had raised over $6 million from investors. By 2010, that initial investment had risen to $92 million, and by May of 2018, it sat at a hefty $600 million. In fourteen years, thanks to high-profile individuals such as Betsy DeVos and Rupert Murdoch, Theranos’ funding had increased by a hundredfold from its founding. Behind closed doors, the seemingly impressive Theranos was carrying out one of the most unbelievable scams in Silicon Valley history. The indictment described Holmes’ and Balwani’s criminal actions as “The Scheme to Defraud Investors.” The pair made “materially false and misleading statements to investors and failed to disclose facts…” Above all, Theranos was built on lies; the company reported false statistics about its revenue, investments, and abilities. Matthew Herper for Forbes reported that “at a time when Theranos claimed it had annual sales of $100 million, sales were just $100,000.”

Theranos numbers were immensely skewed. Under Holmes’ leadership, the company’s valuation, sales, and investments were all falsely reported. Disturbingly, the company also lied about its technology’s ability and utilization and continued implementing the Edison device even when it was unable to execute. Theranos maintained a close relationship with Walgreens, which was labeled ‘Pharmacy A’ on company documents. Beginning in 2013, Theranos opened over 40 ‘wellness centers’ mainly in the Phoenix, Arizona area, and primarily in Walgreens drugstores. The technology that was supposed to be in Walgreens Pharmacies was called the ‘miniLab,’ and was a derivative of the original Edison device, just smaller and more refined. Holmes said that the minilab was “the size of a computer printer and will be able to run a battery of tests on just 160 microliters of blood taken from a pricked finger.” Holmes also said the device could run up to 40 different tests, although she only reported clinical data for 11 of those. The issue, however, was that the minilab was not ready for use come the commencement of Theranos’ appearance in Walgreens stores. Forbes said it was at this point that Balwani and Holmes “told their engineers to start using other companies’ machines in unapproved ways to analyze finger-prick samples,” and withheld this information from pharmacy authorities. In addition to blatantly lying about the company’s technology and scamming the Walgreens partner pharmacies, Holmes continuously made statements to journalists about the wonders of the miniLab, while the device did not even yet exist. When the device was actually ready for use come 2016, The U.S. Securities and Exchange Commission (SEC) reported that it could only process 12 tests, not 40 as Holmes had claimed.

In March of last year, the SEC compiled a complaint that detailed the wrongdoings of Theranos and Holmes, which reported that throughout Theranos’ corporate life, investors received binders of printed information that included reports that appeared to be written by pharmaceutical companies that had worked with Theranos, but in fact were written by Theranos. The complaint also noted that “when presenting to investors, Holmes knew, or was reckless in not knowing, that the miniLab was not presently capable of processing a full range of laboratory tests.” In 2013, these lies had not yet been unveiled, and the Walgreens partnership seemingly put Theranos on an impressive trajectory.

Shortly after the finalization of the partnership, Theranos’ investors valued the company at $9 billion and Holmes appeared on the Forbes list of the 400 wealthiest Americans. Holmes and Theranos were gaining ground, practically printing money, and stunning the world…but not for long. Due in large part to Wall Street Journal investigative journalist John Carreyrou’s exposé series, beginning in October of 2015, that questioned Theranos’ technology, Theranos’ success was short-lived. The day after the Wall Street Journal published the exposé, Theranos, scared, said it would halt using its proprietary “nanotainers” to collect blood. The company’s response to Carreyou’s articles ended with a defensive, fiery claim: “Stories like this come along when you threaten to change things, seeded by entrenched interests that will do anything to prevent change, but in the end nothing will deter us from making our tests the best and of the highest integrity for the people we serve, and continuing to fight for transformative change in health care.” The following nine months would prove sticky for Holmes; as skepticism and investigation intensified, by June of 2016, she saw her net worth fall from $4.5 billion to zero.  

Throughout this incredibly complex story of corporate scandal, some of the most powerful information comes from the stories of Theranos’ employees. The majority of them are anonymous employee statements provide haunting details of Holmes’ lies. “The recent WSJ allegation is 100% true. I worked on the device before…it is complete junk. The poor design is even worse than my grad school project,” one employee said. “Coming here with the hopes and dreams that you were really part of something bigger. Possibly changing health care. Only to find out it was a big scam. Nothing worked. It was all a bunch of overhyped lies and deceptions,” said another. One employee simply remarked, “What a wild ride.” Theranos employees were remarkably tuned in to the scams and fraud and did not idolize Holmes as their fearless leader (her 50% Glassdoor rating may be enough to show that). Carreyrou notes that when he initially began writing Bad Blood, employees were reluctant to work with him because they were still afraid of the company. The company, he says, “had a culture of intimidation and fear that they had lived through… it was a company full of bright young and older people who were not committing fraud. They were not in the mindset of pulling a con.”

Arguably the most upsetting part of the entire scandal is the ways it hurt the very patients it was supposedly designed to help. One striking anecdote comes from a California man named Jean-Louis Gassée, whose “errant” JAK2 gene makes bone marrow become polycythemia vera (PCV), a condition characterized by too many blood cells which can cause potential clots. Gassée writes, in this article, that he decided to try Theranos for a routine blood test, which only required him to give a “few drops” of blood, compared to the 500mL that was normally drawn at his doctor. Undoubtedly, Theranos would have been a preferable alternative for patients like Gassée who were otherwise required to give large amounts of blood. After using the Edison technology and receiving his results, Gassée notes that Theranos’ numbers are “an alarming 34% and 7% higher, respectively” than his results from his doctor at Stanford. The next day, he went back to both the Walgreens location where he had previously performed his Theranos blood test, and to his Stanford doctor. He compared results again, and again, they were “alarmingly” different. Gassée says he was left with the question, “Whom should I believe?” Gassée is just one of many whose Theranos test results left them confused. For a technology supposedly so revolutionary, its unreliable execution was a massive red flag for patients.

Lessons from Lies

Holmes is not a human representation of all the shortcomings of Silicon Valley. However, the Theranos case has something to offer in the way of regulation. Theranos is living (or, dying) proof that corporations need to employ a higher degree of caution, especially those in the medical field. Theranos successfully slid under the radar for years, avoiding any legitimate regulation and continuously staving off the curiosities and supervision of investors, politicians, and pharmaceutical corporations. Corporations we depend on for our health must be regulated to an exponentially greater degree than they are at the moment. Holmes proved that.

Dictatorships tend to fail. In crafting and “leading” Theranos, Holmes, without question, acted as a dictator. She led her corporation blindly, steering her employees into the dark and forcing them to lie for her, maintaining a dysfunctional company culture with the policy: “spill our secrets and you’re out.” Holmes perpetually lied to the very investors who were funding her madness, and ultimately let their $600 million go down the drain. And yet, it took a long time for Holmes to be stopped.

Nobody asked the hard questions. The world let her and her lies slip by. In 2003, an on-the-rise dictator brought an idea to life and ran with it mercilessly. She began to pay the price of her actions this year, but not without 17 years of manipulation and deceit to show for it. Holmes’ dictatorship ended in significant damage, both financial and personal, and hopefully, will teach corporate America to be a little more stringent and a lot more skeptical. If something seems too good to be true, maybe something such as curing the world with the prick of a finger, it probably is.