The recent Disney+ Hotstar and Hulu series The Dropout chronicles the rise and fall of Theranos CEO Elizabeth Holmes. Starting at the tender age of 19, Holmes became the world’s youngest female billionaire before it all came crashing down.
So what is the story behind the biggest medical scandal that fooled several prominent investors, doctors and journalists into thinking that Theranos was going to revolutionise the healthcare industry forever?
Silicon Valley is known to have produced numerous prodigies like Holmes, however, the ruthless culture of achieving success no matter what it takes exposes its ugly interior.
The Holmes saga began in 2002 when she was pursuing a chemical engineering degree at Stanford University. It is here that she came up with an initial idea; a small patch which would be attached to an individual’s skin to detect the body for any infections and subsequently administer antibiotics.
Holmes’ Professor of Medicine, Dr. Phyllis Gardner informed Elizabeth regarding the impracticality of her invention, but Holmes seemingly disregarded the expertise of Dr. Gardner. Before entering her sophomore year, Holmes decided to drop out, and used her tuition money to fund her new venture, Theranos.
Theranos promised to provide fast, accessible and affordable blood testing with just a finger prick to obtain a few drops of blood. Offering more than 240 tests, ranging from cholesterol to cancer, it is no surprise that Theranos attracted investments of more than $400 million including investments from media mogul Rupert Murdoch, Executive Chairman and Founder of Oracle, Larry Ellison, former Education Secretary of US, Betsy DeVos, the Walton family and Walgreens – valuing it at $9 billion. The company’s board was made up of eminent statesmen and business luminaries including George Shultz and Henry Kissinger, two former Secretaries of State, Richard Kovacevich, the former CEO of Wells Fargo & Co, William Perry, former Defense Secretary and William Foege, the former director of the Centers for Disease Control and Prevention.
By 2014, Holmes was thriving. She was declared “the world’s youngest self-made female billionaire” by Forbes magazine and the “next Steve Jobs” by Inc. Theranos had provided more than 200 diagnostic tests, was licensed to operate in almost all 50 states and held a certification from the Centers for Medicare and Medicaid Services (CMS), the federal regulator overseeing medical laboratories.
There was only one problem. The technology didn’t work.
In 2015, John Carreyrou, twice Pulitzer prize-winning journalist of the Wall Street Journal, with the help of whistleblowers – Erika Cheung and Tyler Shultz, the grandson of Theranos’ most trusted board member George Shultz – exposed the grave inconsistencies with the Theranos technology and the company’s claims. His article revealed that the supposedly revolutionary Edison was incompetent at running the many tests – as Theranos claimed.
To make matters worse, machines from rival companies were being used in place of Edison to administer tests. The reliability of the technology was also deemed inaccurate and questionable, with cases including individuals receiving false-positive HIV tests, false cancer diagnoses and a pregnant woman receiving wrongly indicated miscarriage.
Other questions concerning the company and its secretive process soon started unravelling, ranging from Theranos’ substantial delays in giving federal authorities full access to its medical devices to problems with the company’s California based laboratory. In 2016, the CMS notified Theranos that owing to its failure to provide adequate documentation showing it had corrected its previous errors in line with the federal regulations, CMS banned Holmes from possessing or operating a medical laboratory for two years.
In March 2018, the US Securities and Exchange Commission (SEC) charged Holmes and Theranos’ former president, Ramesh Balwani, who was also involved in a 12 year-long secret relationship with Holmes, with fraud for taking more than $700 million from investors while advertising a false product.
Holmes settled with the SEC by agreeing to pay a fine of $500,000 and consenting to be barred from occupying the position of an officer or director of a public company for ten years. In June 2018, Holmes and Balwani were indicted by the federal authorities for wire fraud and Holmes was ousted as the CEO of Theranos, shortly after which the company’s operations ceased.
In January 2022, Holmes was convicted on four of 11 charges of fraud, with three counts of fraud and one count of conspiring to defraud private investors in the company. Her sentencing is to be decided in September, to give time for Balwani’s trial.
Similar to the Netflix series exposing the New York scammer, Anna Sorokin, who went by the alias Anna Delvey, a fake Germain heiress and fraudster, The Dropout exposes the culture of greed, secrecy and success at any cost that Silicon Valley glorifies and Elizabeth Holmes’ part in perpetuating this narrative. It humanises Holmes without downgrading or justifying her crimes and greed for power. It provides a divergent perspective on how villains are people too and explains what motivates someone to that level of greed.
“The Theranos story is an important lesson for Silicon Valley,” said the Director of the SEC’s San Francisco Regional Office, Jina Choi. “Innovators who seek to revolutionize 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.”
Theranos was the healthcare industry’s moonshot; moonshots are highly innovative projects that are extremely ambitious, exploratory and groundbreaking, but what happens when the vision is so compelling and the desire to believe is so strong that it begins to cloud our judgements about how this vision aligns with reality, particularly when these innovative projects start to be a detriment for the society. The Elizabeth Holmes story symbolises the pitfalls of blind ambition, self-indulgence and greed in the Silicon Valley, it highlights how investors in their quest to secure the best deals often overlook potential warning signs that could turn dangerous in the future.
The New York Times wrote that though the case of Theranos caught the attention of the public, however, “the constant flow of money towards charismatic founders spinning tales of business success” has not come to a halt. Once a beacon of hope and inspiration for young female entrepreneurs all around the world, Elizabeth Holmes went from Silicon Valley’s rising icon to now a disgraced CEO on trial.