Elizabeth Holmes Had A Motto: Fake It Till You Make It

Hi, I’m Rick Barron, your host, and welcome to That’s Life, I Swear

It all started with the idea of just a drop of blood and being the next Steve Jobs

On January 3, 2022, biotechnology founder Elizabeth Holmes was convicted of defrauding some of her blood-testing company’s biggest investors. 

The jury found Holmes, 37, guilty on four of 11 charges, including three counts of fraud and one count of conspiring to defraud private investors in the blood-testing startup. She remains free on a $500,000 bond while awaiting sentencing around September of 2022.

At its peak, her startup, Theranos, was valued at more than $9 billion and, by 2018, had raised over $1 billion. So, what happened?

Let’s jump into this.

Miss Holmes company’s claim to fame was that it devised blood tests that required minimal amounts of blood and could be tested rapidly, thanks to the small automated devices the company had developed.

Like other past entrepreneurs, Miss Holmes was chasing that American dream. To bring to market a product no one ever thought possible. The public questioned such innovators as Thomas Edison, Henry Ford, Steve Jobs and Elon Musk. Like them, she would defy the odd’s makers and prove her product would bring a huge change in the medical field.

All of the news outlets and magazines were charmed by Miss Holmes and the charisma she amplified. She had all the makings of the classic Silicon Valley startup story. She dropped out of Stanford at the age of 19 to focus full steam on her innovative dream to change the world, like Steve Jobs and Bill Gates. She had smarts and beauty. 

The story of Miss Holmes and her revolutionary blood test lab equipment had been shared by podcasters, technology events, journalists, Hollywood, and sadly, in the end, by prosecutors in federal court. 

Silicon Valley is full of stories of new startups where passionate founders that had the gift of persuasion. They were working on a new innovation, thought impossible, that would disrupt the status quo and willing to take large risks to pursue their vision. 

It wasn’t until Miss Holme's company's underpinnings were revealed to the world as a result of a Wall Street Journal investigative reporter that the shine began to dim.

Many people do not like needles. It was this problem that Miss Holmes sought to rectify with her invention. With a few drops of blood, Theranos promised that its Edison machines could detect conditions such as cancer and diabetes quickly without the hassle of needles. 

All that was required was for an individual to bypass the use of a needle and instead deliver multiple blood test results based on a few fingerpricks worth of blood

Wow, I’m on board!

However, witnesses provided testimony during the trial that the Edison machines were not what they were cracked up to be. Tests run on patient samples inside Theranos showed wide 

disparities between Edison test results and results from traditional, FDA-approved blood-testing machines made by third parties.

It was established during the trial, that Therano’s, fingerpicks blood-testing so call technology didn’t work. What made the company’s vision even more deflating was that the company was secretly using commercial machines for most of its blood tests.

In time, the company Miss Holmes touted was unraveling, and within a year, she was exposed as a fraud. Moreover, the technology she promoted, plain and straightforward, didn't work at all. In short, it was all smoke and mirrors. By 2018 the company she founded had collapsed.

Why would Miss Holmes have taken such a risk to try and fake a product that was proven not to be viable? Even when she took her idea to an expert in clinical pharmacology at Stanford, and was told flat out it wouldn’t work; she still pushed ahead to discover and bring her idea to market. An idea she was determined to show the world that was thought to be impossible really was possible. 

Why I admired Miss Holmes tenacity, I think she got caught up the spirit of entrepreneurship. To be an entrepreneur, one should have hard skin for risk tolerance. Not everything will be simple to achieve. One needs to have curiosity, passion and dedication to a high degree. I believe she had these attributes and more, but perhaps so much more that it dulled her thinking rationally about what she was up against. 

As time pressed on, Miss Holmes may have found that her innovation wasn’t going to be what it was intended. That said, she may have deluded herself into thinking she could ‘fake it until she made it.’ However, that thinking can only take you so far until you either change your vision such that it is achievable or close shop.  No harm, no foul.

As the story of how she operated her company unfolded, it became apparent she would side step querying type questions with little lies, and little deceptions. Eventually, she got trapped into telling bigger and bigger lies. An example of one of those big lies was when she said that Theranos equipment was already in use by the U.S. military on battlefields. She said this to would-be investors. The truth of the matter was that was not true.

When the verdict came down, I wasn’t surprised. I was surprised that she wasn’t found guilty on all charges. Hearing the outcome must have sent shock waves throughout Silicon Valley. Why would anyone, man or woman, now want to take a chance to bring a product to market, knowing it could take months or years to perfect to only potentially being accused of being fake. 

Have to admit I was amazed how Miss Holmes kept such a straight face when she walked out of the courthouse with her parents and husband. She was rather stoned-faced. I almost felt sorry for her. 

One wonders if current and future entrepreneurs will now be subject to being scrutinized on their ideas regardless of the proven viability of their innovation.

What happened to Miss Holmes shouldn’t derail future startups from bringing their innovations to market. But, now and then, there will be someone who takes advantage of people’s goodwill. There are individuals equivalent to being a P. T. Barnum who have the gift to sway you in believing the moon is made of cheese. They employ the skills of presentation and publicity to popularize anything. I think P. T. said it best, “there’s a sucker born every minute’.

Miss Holmes brought doubt on her company by her actions. During the early days of Theranos, she was asked for insight into how her company could achieve such an incredible innovation that no one else could accomplish. 

Her comeback always was that everything was a ‘trade secret’. Ok, I’ll give her a little slack on that answer.  However, as time progressed, it became clear in court proceedings that she was trying her best to cover up Therano’s problems and not intellectual property.  

Let’s be clear, while Miss Holmes may have had an earth-shattering idea that failed in the attempt to succeed, that is not a crime. Her downfall was while raising hundreds of millions of dollars from venture firms and wealthy investors; she misrepresented the prospects of what Therano’s product could deliver. Rich or not, no one wants to be deceived. 

I can only imagine that Miss Holmes gift of gab and polished persuasion won over many of her investors with the start-up hype of social media acronym, FOMO, fear of missing out.

Miss Holmes got so caught up with doing anything and everything to make her product believable, so got blind to doing what she should have done. 

She failed to conduct checks and balances in a constant comprehensive appraisal of a business undertaken to evaluate its true commercial potential.

Conducting due diligence would’ve also helped her investors understand the true nature of her product, the risks involved, and whether the company’s vision was on sound footing. 

She didn’t do this.

Many entrepreneurs are burning the midnight oil trying to make the world a better place. It’s that start-up mentality for some, where you ‘fake it till you make it’, but within reason. The verdict that Miss Holmes received should be a red flare fired into the sky. 

Don’t attempt to promise ambitious promises about your products, that will never be delivered. 

So, what's the lesson learned here? What's the takeaway from this story I just walked you through?

Come September of 2022, Miss Holmes will learn her fate. Will having a child influence the judge’s decision in the length of time she spends behind bars? Will her belief in coming up with a new painless method to draw blood for analysis give cause to consider she never really intended to deceive anyone? Who knows?

I’m sure Theranos and Miss Holmes will be case studies taught in business schools. Her story will become a benchmark on what future entrepreneurs should do and not do.  

With all startups, the founder or founders will hit brick walls along the way. However, when confronted with hurdles, those with the right ethics will avoid the devil’s temptation to fall into making up stories, let alone deceive big-time investors. I mean one false story leads to another, and the roller coaster of deception gets away. 

There’s also a few lessons here for investors. Trust, but verify.

I would think investors, and I’m sure some do, try the startup service before committing to funding. Find out if the product is what it really claims to be? I would think that’s the moment to poke holes in the marketing pitch. 

Investors must truly do their own homework on a business, and not be swayed by celebrity endorsements. Holmes was very astute to enlist well known celebrities such as George Shultz, Jim Mattis, Henry Kissinger and others. 

To recruit such well known leaders helped increase her standing along with her company. She created the illusion that her technology was validated by using the logos of pharmaceutical groups such as Pfizer on Theranos documents.

Another lesson here is insisting on seeing what the product can do. Don’t let the hype, which is innate with high tech company’s today, lure you into something that can be accepted at face value. It’s a show and tell presentation to visually see if what is being sold is truly viable, especially in the healthcare market. 

It’s easy to say that everyone past and present has twisted the truth to get to the ultimate goal. Delude yourself all you want, but the ends will never justify the means. Miss Holmes took the motto, ‘fake it till you make it’ all too far and eventually got caught. 

Will there be another Elizabeth Holmes to come? I’m sure they will be, and some may be out there right now, but they’ve not been caught…as yet.

As we await the final outcome of Miss Holmes punishment, Ramesh "Sunny" Balwani, started his own trial in early March of 2022. Sunny served as Theranos' chief operating officer and president, was first indicted alongside Holmes nearly four years ago on the same set of federal fraud charges. 

Balwani faces a dozen federal wire fraud and conspiracy charges over allegations he knowingly misrepresented the capabilities of Theranos' blood testing technology to investors, doctors and patients in order to take their money. Should Balwani be convicted, he faces up to 20 years in prison as well as a fine of $250,000 plus restitution for each count of wire fraud and each conspiracy count. He has pleaded not guilty. Of course, he would.

Well, there you go. That’s life, I swear.

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