For anyone reading “Bad Blood” by investigative journalist John Carreyrou of “The Wall Street Journal” or watching the comedy “Silicon Valley,” the recent Theranos trial has likely been at the forefront of your thoughts. Theranos founder Elizabeth Holmes is an enigma: the first person to have been named by Forbes as both the most influential young leader and the most disappointing.
Elizabeth Holmes was the main founder of a biomedical company named Theranos, which claimed to have developed blood tests that could test for a wide variety of illnesses with a very small amount of blood. There were hints early on that these claims were false, yet the company was able to last for nearly 15 years and had a peak valuation of over $10 billion. Part of the reason for Theranos’ success was the hype and media surrounding it; Holmes became a tech industry darling.
In 2018, the company, which was founded in 2003, was finally charged with fraud by the US Securities and Exchange Commission (SEC). Holmes went on trial on January 3, 2022 and the jury ruled her guilty on four counts of defrauding investors and, perhaps surprisingly, no counts of defrauding patients.
With so much venture capitalist (VC) money floating in company communities (like San Francisco’s Silicon Valley), it is hard to check what is a good idea to sponsor. Yet companies can receive money without even a proof of concept in mind. Theranos should have been a glaring red flag that the tech industry is prioritizing ideas with fame and hype over those with genuine merit. At a certain point, investors don’t think about the quality of the founder as much as they should. This might be because of confidence in the founders’ expertise given that they took the initiative to found a company, but that is a faulty assumption. Elizabeth Holmes exemplifies much of the misplaced confidence in many Silicon Valley founders today. With only a minimal background in the healthcare industry, why did investors, scientists, and employees not question her qualifications? Instead of considering the idea for its own quality, people lauded her ability to lead and fundraise. Investing in a company like Theranos is often praised as a “risky” and “bold” move, not looked down upon as a misguided one.
With a substantial portion of the Andover campus interested in investments and stocks, it is essential to consider the repercussions of the “move fast and break things” mindset so much of the world fixates on, however challenging escaping from this mindset may be. This is because this mindset inadvertently deemphasizes knowledge and efficacy, instead of romanticizing hasty risk-taking and fast gains.
In addition to Elizabeth Holmes, other members of the Theranos team were underqualified for their roles. Ramesh “Sunny” Balwani, Elizabeth’s Holmes’ second-in-command, once famously misinterpreted “end effector” as “endofactor” during a technical board meeting, even when that term was a fundamental part of Theranos’ supposed technology. Furthermore, according to Carreyrou, he believed the chemical symbol for potassium to be P, not K–a distinction even middle schoolers are usually aware of. Despite his under-qualification, he was the co-head of a multi-billion dollar company where it was nearly impossible to question his authority. There are many stories of his commandeering presence and how he responded to any and all criticism, found in Carreyrou’s book “Bad Blood.” Sunny fired anyone that dared speak up to him, many of whom were on H-1B visas and couldn’t afford to lose their jobs, and would constantly harass or threaten anyone who wasn’t completing tasks exactly as he liked or fast enough. Sunny also prevented dissent by placing people close to him in places of power. Investigators later found that those people “had very little industry experience, having joined the company not long after finishing their studies, and they had a habit of telling Elizabeth and Sunny what they wanted to hear, either out of fear or out of a desire to advance, or both” (Carreyrou, Bad Blood).
As Brad Auerbach of “The Guardian” wrote, “The titans of the digital age frequently behave like spoiled and ignorant brats with far, far more money than sense; and their victims include many of the artists who create things of real value and who can no longer earn a living from doing so.” We should reward the genuine talent behind authentic products that solve real problems and work and stop glamorizing the startup culture of today.
