The story of Elizabeth Holmes and Theranos is a story of a big idea that got overshadowed by even bigger lies. Here’s why the idea was actually kinda great, why it failed, and how it could still be a reality. (Sort-of.)
By now you’ve most likely heard the story of Elizabeth Holmes, once considered the next Steve Jobs and one of the youngest billionaires in history… And who now is a disgraced fraud with a felony conviction.
And you thought your pandemic was bad.
The story is crazy and Elizabeth Holmes is fascinating for all the wrong reasons but what gets missed in the whole thing is the idea itself. The thing she was selling. I mean she made billions of dollars selling it, so it was valuable to someone.
The idea was a desktop device that with just a few drops of blood could diagnose up to 200 diseases in a matter of minutes. Think about that for just a second.
While other countless tech startups are building new apps and cryptocurrencies and gadgets, this would democratize healthcare, this would change the world. In theory.
I mean going to the doctor is basically like taking your car to the mechanic, but with the hood welded shut. Doctors have to figure out from clues what’s going on in your body because you’re sealed up pretty tight.
With the exception of a couple of places. And the long, swirly tube that connects them.
The history of medicine is really just a history of trying to figure out what’s going on in this black box we call a body in the least invasive way possible.
In the past, this often meant, you know, just opening a guy up. With no anesthetic. And dirty instruments that give the guy sepsis and he’s dead in a week.
Today we have comprehensive blood panels but they take several vials of blood that get tested on different machines, sometimes in different places, and it takes days or even weeks to get results.
But imagine with just a few drops of blood from a pinprick, a doctor could feed it into a machine right there in their room and know what’s wrong, right on the spot.
You’d be out the door in 10 minutes with the medicine in hand.
Not only would it free up busy doctors offices but imagine what it could do in developing nations and underserved communities.
It’s actually a brilliant idea… In theory.
The problem with it it’s just not really possible. We’ll get to why in a minute but first let’s refresh our memories about what happened to Theranos.
Elizabeth Holmes got her start in much the same way as some other tech billionaires – as a college dropout.
Yes, much like Bill Gates and Steve Jobs – whose name will pop up a lot in this video – Holmes dropped out of Stanford in 2003 to start her own tech company. She was only 19 at the time.
She named this company Theranos, which by the way is a portmanteau of “therapy” and “diagnosis.”
In 2005, she partnered with entrepreneur Ramesh “Sunny” Balwani; he’d had a successful software industry career and sold an e-commerce startup. So she could be the vision guy and he would be the guy who gets it done.
He didn’t come on in an official role until 2009, when he loaned $10 million to Theranos, but one of the more scandalous things that came out later was that they had actually been in a relationship and living together and they hid that from the rest of the company and the investors… This story doesn’t need a sex scandal in it, but it’s there.
Theranos operated in stealth mode for nearly 10 years, nobody really knew what they were working on but finally, around 2014, they went public.
They announced that they could run up to 200 tests from a single drop of blood using a technology they named Edison.
And people kinda lost their shiiiiiiiit.
Walgreens especially was on board, they imagined testing centers in all their stores, where instead of having to make appointments with doctors, people could just come to Walgreens and take a quick test for a few Hamiltons and walk out the door with the medicine, which might cost a few Benjamins.
So they partnered with Theranos. Investors saw an opportunity and flooded the company with cash. By 2014, Holmes is named one of the richest women in America by Forbes, with a net worth of $4.5 billion.
In summer 2015, the FDA approved Theranos’ technology for testing herpes simplex 1 virus. Just 199 more to go.
But then, cracks began to form. In October, The Wall Street Journal published a report claiming that most of their tests were being done on traditional machines, with vials of blood from patients’ arms.
Apparently… The thing never worked at all, they were just sending blood off to labs like everyone else.
Walgreens backed out of their partnership in January 2016, and the Centers for Medicare and Medicaid Services took legal action, banning Holmes and Balwani from the lab business for two years.
Balwani left Theranos in May 2016. Right about that time, Forbes revised her net worth from $4.5 billion… to zero.
Jump ahead to March 2018, and the U.S. Securities and Exchange Commission (SEC) charges Holmes and Balwani with fraud.
The SEC claims Holmes and Balwani defrauded investors of more than $700 million, creating “an elaborate, years-long fraud in which they exaggerated or made false statements about the company’s technology, business, and financial performance.”
They had insider documents that showed that they knew that their machine could only perform 12 of the 200 tests it claimed on its patient testing menu.
It’s then that Holmes gives up company control and most of her stake in it.
Earlier this year, she was found guilty on four of 11 federal charges, and he was found guilty of 10 counts of federal wire fraud and two counts of conspiracy to commit wire fraud.
They’re both scheduled to be sentenced later this fall.
Yeah, this story is crazy pants. It’s crazy in the pants.
Like, I don’t know if it’s a thing where she was running a scam all along or if she really believed – in her young naïveté – that if you sell the idea well enough and raise enough money and throw enough money at the problem, that smart people would figure it out.
She saw herself as bold, visionary leader, she wasn’t there to solve the problem, she was there to galvanize resources around it and facilitate the solving of the problem.
So what she focused on, very obsessively, was her image.
She… really studied Steve Jobs.
From quoting him in interviews to maintaining super strict diets and schedules, to straight up stealing his black turtleneck look.
Like it’s so obsessive I kinda wonder if the only reason she dropped out of college was because that’s what he did.
But she cultivated this image of herself as a tech prodigy, this unicorn, this next-level genius that’s just about to change the world before she even turned 30. And then there was the voice.
Yeah somewhere in the pile of leadership books she read along the way, she found out about a study saying that people with more masculine voices are taken more seriously in business settings.
Hence the Barry White impression.
And some have come to her defense a bit because there is sexism in Silicon Valley, but it does highlight how much effort was put into the facade. To the point that the word sociopath has been used quite a bit.
Or as John Carreyrou, the journalist behind that Wall Street Journal piece said, “I’ll leave it to the psychologists to decide whether Holmes fits the clinical profile, but there’s no question that her moral compass was badly askew.”
By the way, when I suggest that maybe her original intentions were good… I might be going a little too easy on Elizabeth Holmes here.
Like I think the word “scam” gets thrown around way too much these days, pretty much any time someone takes money from other people, somebody will label it as a scam, when most of the time… It’s really just capitalism.
Especially in the startup space, if you’re developing a new technology or pushing the limits of an existing technology, that requires money. So there’s no getting around it, you have to raise money for something that doesn’t exist yet.
So as long as your science and engineering is solid, as long as you are working in good faith to solve the problem, as far as I’m concerned, that’s not a scam, that’s just the development process.
But in the case of Theranos, I do think the word scam applies because regardless of her original intentions, it became clear at a certain point that their science and engineering was not solid. And they kept selling it anyway.
They kept selling it and tried to cover up the fact that their machines didn’t work. So yeah. It definitely became a scam.
All right, so why didn’t their machines work? What in their science and engineering was so flawed?
The biggest reason is that there isn’t enough data from a drop of blood to test for all the conditions they claimed.
There are a finite amount of molecules in any collection of blood.
While some condition markers have a high presence of molecules, others are less prominent and would need more blood to get an accurate reading.
According to Dr. George Yaghmour, a hematologist at USC’s Keck School of Medicine, “It depends what kind of test you are running,” “Platelet count, kidney function, liver function, sodium level, electrolytes —basic stuff. It would be doable, you don’t need much blood. But if you talk about culture and infection, then you need a specific amount of blood.”
Now, there are devices that run multiple blood tests. Like the Siemens Advia 1800. It’s about the size of a minifridge, and it can run dozens of tests at the same time.
And since COVID, there have been efforts to improve on this, you know, developing devices that could check multiple things like the flu and COVID at the same time.
But designing something the size of a desktop computer that can run hundreds of tests at once is way more difficult. And to do it with only one drop of blood? Practically physically impossible.
Or, according to Dr. Mike White from Washington University in St. Louis, “There’s no magic bullet, and that was the weird thing about Theranos’ claims… They seemed to claim that they had one key trick that made a whole bunch of different things easy, and that turned out not to be true.”
So, yeah, there were problems all around the idea, from the science behind it to the technology to the people running it.
But… the dream isn’t dead. There have been some advancements in microfluidic testing that might get us a little bit closer to this vision.
It’s possible now to run multiple diagnostic tests on just a few drops of blood, but not hundreds as Theranos promised.
For example, Abbott Laboratory’s i-STAT 1 is a handheld blood analyzer with single-use cartridges for specific tests that offers multiple results from a finger-prick sample.
Their Chem 8+ cartridge can deliver results for nine metabolic measures with just a few drops of blood.
The tests include blood gases, cardiac markers, coagulation, chemistries, electrolytes, glucose, and hematology.
Abbott representatives say that results are available in two minutes.
And then there are some tabletop blood chemistry analyzers.
For example, the Piccolo Xpress is around the size of a shoebox. It can perform 14 tests on a finger-prick sample and offer results in 12 minutes.
There’s also the Maverick Diagnostic System from Genalyte. It uses a silicon chip-based photonic ring resonator to perform multiple, rapid tests on a small volume of blood or serum.
In fact, the company says its Maverick Immunoassay Analyzer can run up to 26 tests on a single drop of blood.
Genalyte’s FDA-approved system is cloud-connected for assay protocol retrieval and clinical oversight.
And don’t get me started on their retroencabulator. I know that’s what I’m starting to sound like right now.
So we may not ever be able to reach the lofty heights that Elizabeth Holmes was shooting for, but we are getting closer, and the fact of the matter is, blood testing in general is central to the future of healthcare.
As people are getting proactive with extending healthspans and lifespans, regular blood tests are essential to catching problems early and maintaining healthy biomarkers.
Many companies like BioIntelliSense are working on creating health dashboards that basically work the same way as a car dashboard, giving you a real-time status on your health.
Some of these use devices like wearable glucose monitors which obviously is great for diabetics but also used by non-diabetics just to monitor how various foods spike their blood sugar.
Hamish Grierson, the co-founder of a blood test startup called Thriva described it by saying, “This is mission critical for society and it doesn’t require giant leaps in medical science,” Grierson says. “Increasing healthspan is reliant on proactive health interventions and lifestyle medicine and will increasingly be driven by our use of data and technology, powered with diagnostics tools like blood testing.”
We might soon be living in a world where simple, accurate, and fast blood testing just becomes a regular part of life, and Elizabeth Holmes will finally see her big idea come to fruition. From the comfort of her jail cell.