Last week, while you were perhaps still lounging on a beach or, like me, begrudgingly back at your desk, a jury in California handed down a verdict in the case against Elizabeth Holmes, founder of now disgraced (and defunct) medtech start-up Theranos. On January 3, she was found guilty on four of the 11 charges and is awaiting sentencing, which may include jail time.
It was a sensational trial. Well, sometimes sensational, sometimes plodding and convoluted, as financial and fraud cases tend to be. Slow parts notwithstanding, people lined up around the block to have a chance to sit in on this trial, which — as the New York Times’s coverage put it — “came to symbolise the pitfalls of Silicon Valley’s culture of hustle, hype and greed”.
Theranos, which a then 19-year-old Holmes founded in 2003, amassed huge sums from investors by promising to revolutionise blood and medical testing. Holmes and her posse at the company promised that instead of the inconvenience and pain of having vials of blood drawn for traditional testing, a single pin prick was all that was needed to diagnose certain cancers and diabetes, among other things.
By 2014, Theranos was valued at $9bn and Holmes was Forbes’s “youngest self-made female billionaire”, who used the world’s stages and magazine covers to continue her dizzying rise and bring in new money.
It would soon all come crashing down though, as whistle-blowers took their concerns to investors and the media, and before long Holmes could no longer outmanoeuvre the questions. She’d been selling a lie, constructed on a promise — all built on the shaky ground of potential and possibility, something one could argue is the very foundation of start-up culture (more below).
As mentioned earlier, the jury found her guilty on four charges — conspiracy to commit wire fraud against investors, and three counts of defrauding investors — but it was not convinced on the counts of fraud against patients. Unlike the investors she wooed, wined and dined in person, it seems the jury felt there was insufficient evidence of a direct line between Holmes and the promises made to patients.
The jurors were seemingly unswayed by her lengthy testimony, which attempted to dilute and shift blame to her advisers and fellow Theranos staffers. Holmes also testified that she had been abused by Ramesh “Sunny” Balwani, Theranos’s COO and Holmes’s long-term secret boyfriend. Balwani stands accused of a similar set of charges and his trial is expected to start shortly.
So, what now for Holmes? There is to be a hearing for the three charges on which the jury remained hung, likely this week. Many are expecting a sentencing date for the four guilty findings to be set during that hearing. Holmes can still appeal too — both the conviction and/or her sentences. These appeals are likely to take years, and she may remain essentially free (or at least not in custody) during the appeals process if her lawyers get their way.
The sentencing may be an outstanding matter, but there are already lessons to be learnt from Holmes’s fall — especially for the Silicon Valley crowd and their investors. There are still companies chasing something like Theranos promised: multiple tests done autonomously by smaller and smaller machines using reduced blood samples, but none are anywhere near the fairy-tale she promised. The claims she was making (as the roller-coaster car of riches and fame inched higher and higher) were not only unachievable by her lauded “Edison” machines, they may not be achievable at all.
Numerous medical and medtech experts told Holmes this from the start — which is the factoid that keeps tripping me up, telling me she truly internalised the narrative of miracle and wonder (with apologies to Paul Simon) that is the bedrock of the current cult of start-ups. We’ve been betting on the promise of things to come for so long that we might have lost the ability to discern the fantastical from the fantastic.
We are living through an astonishing period of innovation, and of miniaturisation. You needn’t look for a more compelling example than the computing power we now pack into a slim, pocket-sized smartphone. The components used to store, analyse and communicate information have shrunk beyond our 1990s and ’00s imagining. In many cases the incredible is now credible, and concrete. Moreover, we don’t want our brightest and most starry-eyed thinkers to be dissuaded from their aspirations because something isn’t currently possible. In this one small aspect I sympathise with Holmes and her desire to defy expectations.
However, she didn’t merely dream of something shiny and new. She didn’t just want to test the limits. She faked demonstrations and chose to communicate in fluent doublespeak. As assistant US attorney John Bostic said in closing arguments: “At so many of the forks in the road she chose the dishonest path.”
Holmes didn’t claim to have founded a company aspiring to these promises; she scheduled their delivery and created a slide deck for those promises as if they were real. She wasn’t “faking it until making it”, as has been suggested; she and her innovations were simply fake. For that I have zero sympathy, and I hope the sentencing judge is similarly inclined.
• Thompson Davy, a freelance journalist, is an impactAFRICA fellow and WanaData member.
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