At a time when some people are looking to the business community to provide leadership in a world of growing political and economic uncertainty, a person obsessed with achieving a goal they deem to be noble in purpose can attract lots of attention and money to pursue their idea.
Such was the case with Elizabeth Holmes, founder of blood-testing firm Theranos, which took the world by storm with her claims of a fast and inexpensive way to test blood, which would allow for more testing and quicker detection of illnesses, all of which presumably would keep people alive longer.
The company raised nearly $1 billion in funding, signed partnerships with big supermarkets and drugstores to use its equipment, and enticed to serve on its board an impressive roster of business, political and military men to add stature to the mission.
One problem: Theranos lied about its products and their capabilities. Holmes and her ex-boyfriend, Sunny Bichwal, are facing criminal trial on federal fraud charges, and Theranos is no longer in existence.
The problems at Theranos were exposed by Wall Street Journal reporter John Carreyrou, first through his reporting, then later in his book, “Bad Blood.” Carreyrou sat down earlier this month with LRN Chief Executive Dov Seidman to discuss what lessons we all can learn from the story of Holmes and Theranos.
Speaking to the climate Holmes found herself in when she brought Theranos to the world, Seidman said Theranos had a noble purpose. “If you take all this, and then you put in the middle of it something that people felt is so good for humankind, that really makes quite a cocktail,” he said. “Because democratizing medical testing, creating a world where no one has to say goodbye to a loved one too soon, you take all of this, and then you put at the center such a noble purpose, it could be pretty intoxicating.”
Carreyrou said it was especially intoxicating for women who were yearning for a woman to break through and succeed on the scale men had in Silicon Valley. “Elizabeth was going to be that first person. She was going to be the first female tech billionaire,” he said. “She had a lot of young girls writing her letters and emails. A lot of mothers were discussing Elizabeth Holmes and her success with their daughters, and it was a really inspirational story.”
But people don’t like hypocrites, said Seidman. “So if you are going to proclaim to the world a moral imperative that you're not just about efficiency, or making something better, faster, cheaper, [but that] you're about health and well-being, if you're not, people get more [angry] at you because now you're not just somebody that failed to deliver, you're a hypocrite,” he said.
Funding all this was a flood of money, as people looked to Theranos as the next way to make big money, allowing Holmes to push her vision and further what became the biggest fraud in Silicon Valley history.
That desire to cash in is what fuels innovation and allows countries and people to advance. It also aids those with an ability to sell a vision, whether or not that vision is real or has a chance of becoming reality, and this is how fraudsters such as Holmes can flourish.
“During these Gold Rush moments in the history of American capitalism, people start to suspend disbelief, and they want to hitch themselves to the next rocket ship to riches, the next Facebook. Theranos for a while was going to be the next Facebook,” said Carreyrou.
That tale also hooked established companies such as Walgreens and Safeway, which partnered with Theranos, further boosting its fortunes and allowing the company to gain a valuation of around $9 billion. “What I really don't get is how venerated, established businesses were able to ascribe so much value to something that had zero revenue,” said Seidman.
Carreyrou said those companies “got caught up in the Gold Rush.” Also, in the case of Walgreens, the fear of missing out played a big role.
Walgreens sees the world through the prism of “‘We're in this arch rivalry with CVS, and CVS is bigger, and we need to beware of CVS doing something that's going to leave us in the dust, and if we don't do this deal with Theranos, they're going to turn around and do it with CVS, and then we're going to regret it for the next two decades,’” he said.