The rise and fall of Theranos founder Elizabeth Holmes finally came to an end Monday. A jury found the tech icon guilty of conspiracy to defraud investors, as well as guilty on three counts of wire fraud.
Few in history have risen faster — or fallen harder — than the 37-year-old entrepreneur who built her multi-billion dollar company after dropping out of Stanford University in 2003 when she was just 19.
Once widely hailed as the next Thomas Edison or Steve Jobs, Holmes, who was found not guilty on several related charges by a jury that failed to reach a verdict on some charges, now faces the real prospect of extended time behind bars.
CNN reports that Holmes, whose trial had dragged on for months, faces 20 years in prison for each count, as well as fines and restitution. Holmes’ fate now hangs with U.S. District Judge Edward Davila, who will preside over her sentencing.
A Meteoric Rise
Holmes’ rise was meteoric. Though she knew little about engineering and even less about medicine, she attracted to her venture some of the richest investors in the world on the promise of revolutionizing blood work — including Rupert Murdoch, Larry Ellison, Tim Draper, and Walgreens, the second largest pharmacy chain in America. Theranos’ board of directors was eminent. It included two former U.S. Secretaries of State (Henry Kissinger and George Shultz), a four-star general (Jim “Mad Dog” Mattis), and the attorney who represented Al Gore in Bush v. Gore (David Boies).
By the time Holmes moved Theranos to Stanford University’s research park in the fall of 2014, the company employed 800 people and was valued at nearly $10 billion. Holmes was chummy with some of the most prominent politicians in the world and was doing speaking engagements with Joe Biden and Bill Clinton.
Less than five years later, however, Theranos was bankrupt. The company was worth less than $0 and Holmes and Theranos president Sunny Balwani — her lover — were facing federal charges of fraud for allegedly “raising more than $700 million from investors through an elaborate, years-long fraud in which they exaggerated or made false statements about the company’s technology, business, and financial performance.”
Edison, Jobs, and … Beethoven?
During Holmes’ trial, my wife and I watched the HBO documentary The Inventor: Out for Blood in Silicon Valley, which details the stunning story.
There are many takeaways from the film, which I encourage readers to watch. One is struck by how easily Holmes was able to dupe some of the brightest and most successful people on the planet, especially older men. When a journalist asked “Mad Dog” Mattis what first came to mind with Holmes, he didn’t hesitate.
“Integrity,” Mattis answered.
Among the journalists conned by Holmes — and they were legion — was Roger Parloff, a respected writer educated at Harvard and Yale who wrote a glowing cover story of Holmes in Fortune magazine. Little did Parloff know that Holmes, when she couldn’t dodge the questions Parloff asked, simply lied to him. This tactic served her well until she ran up against Wall Street Journal reporter John Carreyrou who had the benefit of a Theranos whistleblower. With a credible source and a powerful newspaper behind him that refused to be intimidated by Holmes’ team of lawyers, Carreyrou quickly blew the Theranos story wide open.
One of the reasons Holmes was able to successfully dupe so many was her self-confidence and physical presence. Her piercing blue eyes, bright red lipstick, and mane of blonde hair made her striking in her own right, but the Jobsian black turtlenecks, baritone voice (an act), and cool demeanor seemed to give her a svengali-like quality over many people. For some, the comparisons to Jobs and Edison fell short; she was the next Beethoven.
Some simply could not believe Holmes was a liar. The late Secretary of State George Shultz believed Holmes over his own grandson, the very Theranos employee who became Carreyrou’s source.
Holmes may have had an additional benefit, however, in how she was able to fool so many people around her. She may not have been aware she was lying.
When the Lie Detector Stops Working
Dan Ariely, an Israeli-American behavioral economist at Duke University who appeared in Out for Blood, was one of several people interviewed who suggested Holmes may have rationalized her actions and convinced herself she was telling the truth. (As George Costanza slyly tells Jerry in a Seinfeld episode, ”It’s not a lie if you believe it.”)
Ariely cited an experiment he and his colleagues conducted involving a six-sided die.
In one experiment, they had participants roll for a monetary reward corresponding to the number on the die. If the die landed on the number 4, the individual was paid $4; if they rolled a 6, they’d receive $6. Before rolling, however, participants were asked to decide which side of the die — bottom or top — determined the dollar amount they’d receive. Participants were told to not tell the researchers their choice, but to mark this on a piece of paper. Essentially, participants could make more money by simply lying — and that’s what many did.