I just finished Bad Blood: Secrets and Lies in a Silicon Valley Startup, by John Carreyrou. It’s a wild story that slipped under my radar at the time it happened.
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Elizabeth Holmes, founder and CEO of Theranos, was exactly the sort of entrepreneur that Silicon Valley loves: a 19-year-old Stanford dropout with a dream. She was going to create a new machine that could perform multiple diagnostic tests on just a few drops of blood — maybe even a single drop. She got wealthy investors including Betsy DeVos, Rupert Murdoch and George Schultz, and partnered with Safeway and Walgreens to put mini-clinics in their stores. By 2014, Holmes (now age 30) was on the cover of Forbes, with an estimated net worth of $4.5 billion. There was just one little problem.
The machines didn’t work.
Holmes and her second-in-command (and boyfriend), Ramesh “Sunny” Balwani, managed to bluff their way along for years. At first, all they needed was an appealing sales pitch, and Holmes excelled at that. But eventually they had to come up with a product, and by 2011 they had the “minilab.” (See the defunct Theranos website for cool picture.) It did not, as promised, perform a hundred-plus different blood tests from a few drops of blood. It did a few tests, not very accurately.
So Theranos faked demos, misled FDA inspectors, and had staff sign non-disclosure agreements. Customers at their Walgreens clinics went in expecting instant results from a tiny finger prick. Instead, blood was taken from the arm with a conventional needle (which Holmes had derisively compared to a “medieval torture device”), then couriered to the Theranos lab, where most of the tests were done on other companies’ equipment. The ones done with Theranos devices raised alarms with a number of doctors, with results that ranged from wrong to “How is the person alive?”
In 2015, it all came crashing down. The Journal of the American Medical Association noted that no peer-reviewed research had substantiated any of Theranos’s claimed achievements. A professor at the University of Toronto analyzed their technology and found it lacking. And the Wall Street Journal’s John Carreyrou got a tip that snowballed into an investigation that exposed Theranos as all smoke and mirrors. Civil suits and criminal investigations followed.
In 2018, after multiple legal struggles, lawsuits, and undisclosed settlements, Theranos shut down for good. Holmes and Balwadi were criminally charged with wire fraud and conspiracy, and are currently awaiting trial.
I suspect that Holmes started out intending to deliver on her promises, believing that enough inspirational talk and long hours could accomplish anything. “Fake it till you make it” is normalized in the tech industry — but this wasn’t music streaming or video games, it was medical care. They put patients’ safety at risk. And when investigators got too close to the truth, Holmes and Balwadi threatened lawsuits and tried to intimidate witnesses.
Theranos turned out to be vaporware: lofty promises with nothing inside. Elizabeth Holmes’s story was similarly empty. Silicon Valley loves the narrative of the young genius whose success is proof of meritocracy. In reality, Holmes became a 19-year-old CEO because her wealthy family set her up with a company, and their connections found her rich investors. Her main talent was being a bullshit artist.
And somewhere out there, the next Elizabeth Holmes is probably taking notes.
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Frank Pedraza had a good one in SemDem’s diary Why do you do this to yourself, Doocy?
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