Elizabeth Holmes’ “Theranos” Scam Could Only Have Existed in Silicon Valley
Elizabeth Holmes, a name that may now live in infamy, was the “remarkable 19-year-old CEO Stanford drop-out” who created the company Theranos — a combination of “therapy” and “diagnosis” — that sold the revolutionary idea of performing hundreds of tests with a single drop of blood. Compared to the traditional venipuncture method of drawing blood, it was much less invasive and could be done more frequently. It was going to be a healthcare breakthrough, much like what fellow Silicon Valley companies Apple and Google did for phones and the internet.
She attracted prominent investors like the Walton family of Walmart fame, Rupert Murdoch, Henry Kissinger, and many others — to the point where her company was worth $9 billion. For perspective, that’s about as much as Pepsi is currently worth. A simple pinprick on your finger and a procedure that takes seconds, which would lead to potentially hundreds of answers about your health in a matter of hours — it was a promising idea. So promising, that its “too good to be true” nature led to countless botched test results for patients, millions of dollars scammed out, and a potential jail time of 20 years for Ms. Holmes.
When digging deeper, the scam seemed apparent. Former Theranos scientists became whistleblowers and revealed the clandestine nature of the whole operation, revealing that their tests were mainly being done on lab equipment by Siemens, their competitors. Their own equipment, the patented Edison machine that was sold as a lab-inside-of-a-machine to run the one-drop blood samples, never reliably worked. Nonetheless, Theranos still marketed their product and even had a deal with Walgreens. Over time, story after story came out about Theranos to unravel the growing fraud that it was. Books, documentaries, podcasts, an upcoming film — the story is exhaustive.
Now, whether or not Theranos initially started with the intent of becoming a scam is up for debate. However, the elements of it turning into one are all rooted strongly in the culture of Silicon Valley where the company bloomed.
Silicon Valley — “Fake It Till You Make It”
Apple. Facebook. Google. Twitter. YouTube. Yahoo.
Think of a tech company, and it’s bound to be headquartered in Silicon Valley — or for the very least, have a significant presence there.
The axiom of any company is that it starts with a promising idea. Likewise, the axiom of any tech company is that it starts with a risky idea that begins in a uniquely abstract phase — you know, like a phone that connects to the internet.
When a tech company starts, it has all the more reason to make vast claims to investors to begin launching off. Especially in a competitive world like Silicon Valley and an expensive world like the tech industry, everyone is competing for investors to dump millions of dollars on the good faith of their bold idea. Everyone wants to be the next Uber.
In his article “Silicon Valley’s Rule Number One: Fake It Till You Make It”, author Hans Peter Bech writes about “crossing the chasm.” Bech states that “most customers would rather wait to buy, until others have proven that the products are working”, leading tech companies to adopt the fake-it-till-you-make-it mentality. Look at all of the customers we have. Our product works — it’s already being used.
In comes Theranos.
Here’s Holmes, who dropped out of Stanford because she was building a company instead of going to classes. Her story roped in investors, and her wealthy upbringing connected her to some highly prestigious names.
Wow! A wunderkind 19-year-old female CEO who’s going to change the healthcare industry as we know it? I’ll put my money down!
The “Don’t Doubt Me” Mentality
The Edison machine was running faulty tests — but you’ll get fired if you keep bringing it up to management.
In R&D, the data was proving the product to not be market-ready — but Theranos changed the data and opened to the public anyway.
The company was working on actual patients. However, the company’s reputation mattered more than them.
This was the kind of culture that Theranos fostered. According to former lab assistant and famous whistleblower Erika Cheung, she was told by upper management to delete “data as outliers” and “just get the results out”.
This mentality of never doubting the results stems greatly from Silicon Valley’s prodigal son Steve Jobs. He would famously be hot-tempered, stubborn, and outright defiant to people who doubted him — which people credit to being the reason why we got the innovative Macintosh computer and iPhone. To say that Holmes emulated Steve Jobs would be an understatement. Naturally, she took to his same philosophy of never letting other people’s doubts give in.
Do or do not — there is no try. This is the Yoda quote that Elizabeth Holmes had plastered on the wall in Theranos’ headquarters. In its original context, Yoda was teaching Luke Skywalker the necessity of trusting yourself when using the Force. In the context of Theranos and Elizabeth Holmes, however, this quote seems to say “trust me”, not “trust yourself.”
Employees at Theranos — do everything you can to never give up on this weird lie. Don’t doubt me, don’t say no. Keep living the dream of revolutionizing healthcare — even if it means testing blood on our faulty machines.
Finally…The Scam Of It All
The overarching culture of Silicon Valley is never give up, revolutionize the world, work so hard that you’re sleeping at your desk and taking 5-minute lunch breaks, and peddle your idea so hard that you begin to believe your own lies. These are the basic tenets needed to float your head above water.
Could Elizabeth Holmes have succeeded if journalists and whistleblowers didn’t lift Theranos’ cover? Doubtfully — the company existed for over 15 years and never seemed to bother to fix their process. So much attention was spent on covering up and lying to the public, retaining this breakthrough-technology image. Still, Holmes is coming back trying to start a new company after the Theranos scandal, despite the fact that she’s facing serious criminal charges.
Theranos was the most famous scandal to come out of Silicon Valley. However, it’s far from being the last.
