Elizabeth Holmes, the founder of Theranos, was all of 19 when she founded her healthcare diagnostics company. The company’s machine, Edison, was going to revolutionize the healthcare industry. Theranos claimed that they could run over 200 tests with a single drop of blood. Goodbye, painful needles!
But as of May 2022, Elizabeth Holmes is awaiting sentencing in multiple cases of fraud and manipulation. Theranos does not even exist anymore. The young entrepreneur who regularly graced the covers of leading magazines, and hobnobbed with leaders and business tycoons like Bill Clinton and Jack Ma now runs away from any public attention.
How did all of this happen?
What lies behind this question is the story of a young woman who was ready to go to great lengths to amass attention and adulation of the business world. It is also a story of how some of the so-called smartest minds were taken for a ride. The truth about Theranos is that their machine never worked. While I am over-simplifying this, they faked tests using Siemens machines with diluted blood.
Yet, the company at one point was close to a USD 10 billion valuation. Some of the best in business were investors in the company. The board itself was star-studded including the former Secretaries of State of the United States, George Schultz and Henry Kissinger.
It might be a good idea to understand the timeline of events, before we get into how Holmes pulled of this heist. This timeline of events was published by Reuters on January 4, 2022. I have edited this for length:
2003 – Holmes founded Theranos, then called Real-Time Cures, after dropping out of Stanford University.
2004 – The nascent company raised more than $6 million in funding, reaching a valuation of $30 million.
2009 – Holmes’ then-boyfriend Ramesh “Sunny” Balwani joined Theranos as chief operating officer.
2010 – Theranos raises a further $45 million in funding, reaching a valuation of $1 billion.
2011 – Theranos begins attracting high-profile board members.
2013 – Theranos claims to be able to run a wide range of tests on a single drop of blood with its machine called The Edison, and enters into a partnership with Walgreens Boots Alliance.
2014 – Having raised more than $400 million, Theranos is valued at more than $9 billion. Holmes is recognized by Forbes as a billionaire, thanks to her stake in the company.
October 2015 – The Wall Street Journal reports that Theranos uses its technology for only a small number of its tests, and that employees doubt their accuracy. The FDA subsequently releases a finding that the company used unapproved devices for tests.
January 2016 – The U.S. Centers for Medicare & Medicaid Services (CMS) releases a report that one of the company’s facilities presents “jeopardy to patient health and safety.”
June 2016 – Walgreens ends its relationship with Theranos.
April 2017 – Theranos reached a deal with CMS(Centers for Medicare & Medicaid Services) barring it(Theranos) from the blood-testing business for two years.
March 2018 – The U.S. Securities and Exchange Commission charged Theranos, Holmes and Balwani with securities fraud. Holmes was stripped of her stake in and control of the company.
June 2018 – Holmes and Balwani were indicted on criminal fraud charges. Both plead not guilty.
September 2018 – Theranos announced that it will dissolve.
September 2021 – Trial began in San Jose, California.
January 3, 2022 – Holmes was convicted on charges of defrauding three other investors, as well as conspiring to do so. She faces up to 80 years in prison when sentenced by U.S. District Judge Edward Davila but would likely get a much lower sentence.
What was it about Holmes that fooled some of the smartest people on the planet?
She was a great story
Holmes was a great story. There is no doubt about that. Maybe she didn’t do it intuitively, but dropping out of Stanford turned her into an interesting proposition. Business greats like Steve Jobs, Bill Gates and others famously dropped out of college.
That was the making of a whiz-kid story that gave her a leg up. Even the web series on the rise and fall of Holmes on Hulu is called ‘The Dropout’. Btw – Amanda Seyfried is spectacular in the series, and you must give it a watch if you want to better understand Theranos’ saga. The series is available on Hotstar in India.
Not just that, she was young and a woman. Stereotypically, many things were stacked against her in the mission to revolutionize the healthcare industry. Like the rest of us, even smart people love an underdog story. And Elizabeth, made the most of that inherent need in all of us.
Suggested read: Storytelling the best skill to learn in 2022.
She had a great mission story
I remember watching one of the scenes in ‘The Dropout’ where Holmes(played by Seyfried) addresses her employees. She narrates the story of how she lost one of her favourite uncles when she was young(or something to that effect). She then goes on to say that his death could have been avoided if he had got the right diagnosis early on. And hence, she says, her mission with Theranos is that ‘So no one has to say good bye too soon’.
Now that is a difficult mission to not get behind, won’t you agree?
I am not sure if Holmes narrated that exact story, but she did seem to be on a great mission. In fact, many still believe that she was on the right mission, but lost the way.
When there is a mission that resonates with us, we all want to get behind it. And because we want the person on the mission to succeed so badly, we are okay to give the person a longer rope than we would in other cases. This is something that seems to have happened with Holmes as well. Many times through the journey, investors and others raised questions about the device and its efficacy. But that was that. Because, at the end of the day most of them wanted Holmes to succeed.
She had great stories to tell.
Bill Clinton asked Holmes at an event, ”How old were you when you started the company?”
“I was 19”, replies Holmes with a smile.
That’s a great story. But Holmes had many more up her sleeve. She herself was petrified of needles as a kid, so the mission was personal.
‘The Dropout’ also shares examples of her uncanny ability to share a great story about a key decision maker in high-stakes meetings. That tactic helped her build a connect with powerful people while getting a way out when she was asked difficult questions.
She played the victim.
When The Wall Street Journal published an article questioning the efficacy of Theranos’ devices and raising a question on the company’s integrity itself, Holmes came out crying wolf. Every time she was questioned, Holmes took the tried and tested route of playing the victim. For the audience(which included investors) it felt like the media were out to get her because she was a female founder.
She used a lot of psychological tactics.
Women generally have a higher pitched voice compared to men. Also people with low-pitch voices come across as more authoritative. There are reports that at some point in her journey with Theranos, Holmes switched to a fake lower pitch voice to command more respect.
Not just that. She dressed in black turtlenecks, said to be inspired by Apple’s Steve Jobs. Apart from paying a tribute to her role model, the attire was also meant to showcase that she meant business.
Media articles and Youtube videos talk about her big blue eyes and the hypnotic gaze. The Body Language Guy, Jesus Enrique Rosas, says that the gaze is the result of her not blinking her eyes. This was meant to intimidate the other person, while coming across as serious.
Lessons from the Theranos-Holmes story.
No matter how good you are at faking stuff, things always find a way to catch up with you. So rather than secretly admiring Holmes, we should realise that some of these were good tactics used by a person of questionable character.
The Theranos saga has also started a conversation on the Silicon Valley ‘fake-it-till-you-make-it’ culture. Whether you are a founder, business leader or a professional, it is advisable to stay authentic. If I were Holmes, I’d be regretting most of my decisions. Temporary fame is no substitute for having your character questioned for the rest of your life.
But as a business storytelling coach and trainer, here are the two lessons that matter the most to me.
- We all love good stories. And we love them so much that we want to be a part of them. That’s why investors and powerful folks wanted to be a part of Holmes’ story despite the red flags.
- Storytelling is a powerful weapon. And whether it is good or bad depends on the person yielding it. That’s why it is important that good folks like you and me, learn the art of storytelling in business. That way we can use our work to build a better world. That way we can ensure that folks of questionable character like Holmes don’t run away with all the limelight robbing the good ones of great opportunities.
Watch: This Indian has built a company through his storytelling abilities.
Stories mean success, let’s narrate the right ones.
