Fifteen years ago, Elizabeth Holmes was on her way, having already raised millions of dollars for Theranos, the medical device company she founded in 2003, despite having little experience in the field. Fifteen years from now, the picture may be rather different. Holmes could potentially be out of jail if US prosecutors get their way. On Friday, the US Department of Justice recommended that Holmes serve 15 years in prison and pay $800 million to investors for defrauding them.
What a twist to a story that basically started with a sting. Theranos became something when Holmes began claiming that her company had developed technology that could use just a few drops of blood from a finger prick to test for all kinds of medical conditions. Normally, much more blood is needed. Medical experts who really understand this area have long been skeptical of Holmes’ spiky claims. But many investors, TED Talk and other conference organizers, boards of directors, political figures and others didn’t seem to listen to such medical experts before saying hello, Holmes, and joining her team. After all, why listen to real scientists and experts, right?
Things began to unravel in 2015 after John Carreyrou published an exposé about Theranos and Holmes in The Wall Street Journal. Holmes and her lawyer reportedly tried to block the publication of the article through legal threats and other means. Once the article came out, it became clear why Holmes wouldn’t want Carreiro’s piece out there. It wasn’t exactly an exhibition because he wears a black turtleneck. Instead, the article revealed how the company’s Edison device did not do what Theranos had claimed it could do, and that Theranos was actually using other companies’ machines to provide its testing services. Both were little more than “Oops, I did it again” claims. They suggested that Holmes was not straightforward about her claims. After the article was published, Holmes’s response to of CNBC “Mad Money” was in her trademark baritone voice, “That’s what happens when you work to change things, first they think you’re crazy, then they argue with you, and then suddenly you’re changing the world.”
Well, Holmes hasn’t exactly changed the world, at least not in the way she intended, but her world could soon change. In January, he was convicted of four counts of wire fraud and conspiracy, each count carrying a maximum sentence of 20 years in prison. If you were waiting for Holmes to apologize, as that Rolling Stones song says, you can’t always get what you want. Holmes continued to fight all of these charges, deny wrongdoing and request a new trial. U.S. District Judge Edward Davila essentially said it wasn’t going to happen to Holmes’ request for a new trial. Holmes is due to be sentenced next week. Prosecutors said: “Given the extent of Holmes’ fraud … a sentence of 180 months’ imprisonment would reflect the seriousness of the offences, provide just punishment for the offenses and deter Holmes and others.”
Holmes’ meteoric rise showed how many people fail to do true due diligence, to look at, you know, the science and carefully examine the facts themselves before making major decisions. Instead, they will often rely on what some other people say. It’s like high school where personal relationships and popularity drive impressions and decisions rather than facts.
Holmes had many supporters. For example, he had assembled an impressive board of directors for the company, impressive if Thiranos wanted to invade a small country. The Board was largely made up of former military and civilian leaders, such as retired four-star US Marine Corps General Jim Mattis, former US Secretary of State George Shultz and former US Secretary of Defense William Perry, and several relevant scientific advisors.
Many of Theranos’ investors have also been high-profile, high-profile more on a red carpet than a laboratory, scientific point of view. That high profile likely helped other investors overlook the company’s obvious flaws and jump in too, because if high school has taught us anything, it’s that people tend to follow popular people. After all, you know how deals are made, with conversations on the golf course, in the club room or at the dinner where you have to pay too much for cold soup away from most ordinary people. For example, in February 2005, media mogul Rupert Murdoch, whose name might not exactly scream science, led a $5.8 million Series A for Theranos. Oracle executive chairman and founder Larry Ellison was also an investor. And Tim Draper, a partner at the venture capital firm Draper Fisher Jurvetson, continued to actively defend Theranos until around 2018, when it became painfully obvious that something was wrong. Oh well.
In retrospect, the whole situation seemed somewhat absurd. Imagine someone with little experience in medicine making a medical claim without providing any real concrete scientific evidence. And the people who believe that person. That would never happen these days during a national emergency like a pandemic or something, right?