Bad Blood: The Saga of Elizabeth Holmes
It’s February 3rd 1984, somewhere in Washington D.C.
Elizabeth Holmes is blinking her first blinks as she breathes her first breaths. A baby girl come to make a difference. Come to change the world. Nine years later and at nine years old, Elizabeth pens a letter to her father, “What I really want out of life is to discover something new, something that mankind didn’t know was possible to do”. Poetic was her vision.
She excelled at St. John’s school in Houston, was particularly interested in computer programming, and attended 3 years of summer school at Stanford University, for college level Mandarin, before even graduating high school. She was brilliant.
In 2001 she applied for Stanford, as an undergraduate, was accepted and awarded the President’s scholarship. There she studied chemical engineering. One day in her freshman year, she asked her professor, Channing Robertson, if she could work in the same lab as the Ph.D students. He was unsure, she persisted, he hesitated, she persuaded, he gave in. Channing would later speak of Holmes:
“When I finally connected with what Elizabeth fundamentally is, I realised that I could have just as well been looking into the eyes of Steve Jobs or Bill Gates”.
Indeed she was not solely interested in academia for academia’s sake, but in applying her learnings to solve real world problems. In 2003, in her first year of Stanford, and at the age of 19, Elizabeth founded Theranos. She had never liked needles.
Blood testing has its shortcomings. Tests are expensive, available at inopportune times, in inconvenient places, and involve syringes. She told the New Yorker: “I really believe that if we were from a foreign planet and we were sitting here and said, ‘O.K., let’s brainstorm on torture experiments,’ the concept of sticking a needle into someone and sucking blood out slowly, while the person watches, probably qualifies”.
Theranos was here to fix these problems, to make blood testing much more affordable, widely available, and syringe-less. A pinprick on your finger, and a drop or two of blood was all that Theranos needed to conduct a whole host of diagnostic tests. Identifying dozens of medical conditions, from high cholesterol to cancer. This promised to revolutionise preventive testing. To catch diseases in their early stages. Elizabeth encapsulated this:
“We see a world in which no one ever has to say, ‘If only I’d known sooner.’ A world in which no one ever has to say goodbye too soon.”
In March of 2004, and now in her second year at Stanford, Theranos was taking up Elizabeth’s whole attention. Despite the discouragement of her professor, she dropped out and went full-time. By December of the same year she had raised 6 million dollars. Her vision was a beautiful one, her abilities exceptional, and the market for her product worth almost 100 billion dollars.
Okay, now fast forward a handful of years. In 2013 Theranos came out of stealth mode, released their pinprick blood test, and partnered with Walgreens, America’s second largest pharmaceutical chain, to offer blood sampling in stores. By 2015 Theranos was valued by investors at 9 billion dollars. Forbes recognised Holmes as the world’s youngest self made female billionaire.
And then… well, all of a sudden things weren’t so good. The New York Times did a profile on Elizabeth, a piece that marked the beginning of the end. A piece in which Elizabeth explained, or rather failed to explain, what happened in Theranos’ testing machines, and I quote, “A chemistry is performed so that a chemical reaction occurs and generates a signal from the chemical interaction with the sample, which is translated into a result, which is then reviewed by certified laboratory personnel.” Take a second to let that nonsense sink in. That is some high quality, high grade, nonsense. Holmes’ comic ambiguity drew the attention of The Wall Street Journal’s John Carreyrou. He went and spoke to ex-Theranos-employees. He dug deeply into the processes of the company and then published his findings under the title “Hot Startup Theranos Has Struggled with Its Blood-Test Technology”. A title which is sensational for its lack of sensationalism, for it was the article that prompted a federal investigation.
On Wednesday the Securities and Exchange Commission (SEC), announced that both Elizabeth and her co-founder Balwani, had been charged with “massive fraud” for systematically lying about the company’s technology, business, and financial performance. And these weren’t the sort of lies you pull out when you’ve forgotten to do your geography homework. These were devastating lies. When raising money in 2014 Elizabeth allegedly told investors that Theranos’ revenue would be over 100 million dollars for the year. In reality it was 100,000 dollars. Theranos said their tests were accurate, but in many cases they were wildly inaccurate. Theranos claimed that most of their testing was done with their proprietary technology, it simply wasn’t.
At the height of her powers Elizabeth was worth 4.5 billion dollars. Theranos was widely lauded as Silicon Valley’s brightest star, and Elizabeth, Silicon Valley’s queen. Now she is the newest persona non grata in the valley and her net worth revised down to 0 dollars.
While Balwani holds out to go to trial, Elizabeth has settled with the SEC out of court. Holmes will pay a $500,000 fine, give up control of her company, forfeit 18.9 million shares, and be banned from serving as an officer or director at a public company for the next 10 years. If Theranos is ever acquired she will not profit a cent until 750 million dollars is returned to defrauded shareholders. Elizabeth is our latest Icarus. Adorned for a brief moment by an expensively sourced set of waxen wings. The gift of bullish investors blindly grasping for the next unicorn.
I wonder whether the girl who was born in 1984, who blinked her first blinks and breathed her first breaths in Washington D.C., ever intended to cause harm, or ever considered her actions to be truly wrong, or fraudulent. Perhaps she did, but believed in her cause. Believed deception would save lives sooner. Perhaps she was all too confused by the nuances of Silicon valley, where its heroes are adept at posturing a company’s future to seem like its now. Where truths are often manipulated into something more attractive, something closer to fiction. The line is fine, and many entrepreneurs excuse themselves of it in their reaching for greatness. Elizabeth is now 34, but more than that she is a lesson to Silicon Valley. The bloodied head at its gates. An SEC warning: “Innovators who seek to revolutionise and disrupt an industry must tell investors the truth about what their technology can do today, not just what they hope it might do someday”.
This piece was transcribed from The Zip Files — an irreverent weekly 20–25 minute podcast that I produce to help the busy millennial catch up with all of the week’s most important tech news. Here’s the episode in which this piece was featured:
