Why Elizabeth Holmes Matters

The Theranos founder awaits a decision in her federal fraud trial--but the case also points to some dangerous American myths about the nature of success

Today’s newsletter is the last post until the New Year: even I, compulsive scribbler though I am, need some time off, so you will not see me in your inbox again until January 3, 2022. But let me say what a pleasure it has been to share the last twelve months with all of you—your comments, shares, paid subscriptions, and general enthusiasm make this project completely worthwhile. Happy holidays, my friends! Let me also say that the holiday discount for paid annual subscriptions lasts until December 31—so consider:

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Elizabeth Holmes (center) met with Deputy Secretary of Defense Ashton Carter (right) in 2013. Holmes would later falsely represent such conversations to investors as an ongoing partnership with the military Photo credit: Glenn Fawcett/Wikimedia Commons

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I don’t know about you, but I am hooked on contemporary con artists. You may remember this story I did on the oh-so-very-predictable collapse of the WeWork scam. Charismatic CEO Adam Neumann’s meltdown was also a lesson in why we need regulations. When he had to produce the documents and data necessary to take public a company entirely fueled by venture capital, he couldn’t, thus preventing the circle of grift from growing any more extensive than it was already.

I also latched on to a story that was perhaps even more compelling: Elizabeth Holmes’ blood testing technology debacle, Theranos. Detailed in a 2019 ABC News podcast, The Dropout, it’s a tale about an ambitious young woman from Stanford who imagined a new technology that could run a battery of over 1000 blood tests from a single drop of blood. Holmes spent a year at Stanford and signed up for a program in China. She met a significantly older man, Ramesh “Sunny” Balwani, who had also attended, and dropped out of Stanford. The two partnered up to develop the idea in 2003, Holmes dropped out of Stanford herself, and she soon became both the youngest self-made billionaire and a national phenomenon. At its peak in 2014, Theranos had a market valuation of $10 billion.

The problem was that the technology didn’t work and never came close to working. While Holmes was going on national television and telling investors that her machine could run over a thousand tests accurately, in truth, it could only run a little more than a dozen—and those were routinely janky. Yet she and Balwani not only allegedly hid this fact from investors (including Walgreens, which temporarily made some of these machines available to actual patients), they (also allegedly) continued to make false claims that ranged from the machine’s capabilities to fake endorsements from established institutions. New investors were told, not just about the Walgreens contract (which was real), but that the machines were on military medevacs deployed in Afghanistan (not real.)

But you didn’t have to be a genius whistleblower to know that Theranos was a fraud because many people in the lab knew it didn’t work. Reports contained cherry-picked data, and when the company had to run actual tests, say for a visiting investor, they did them on third-party devices. Employees, many of whom had been excited to work on this game-changing project, were abused, hectored, and forced to sign non-disclosure agreements when they raised concerns. Customers who received bewildering and potentially fatal, false results from the machine were ignored.

In 2015, the grift began to crumble as investigative reporters uncovered and untangled the web of lies that had propped up the company. A year later, Holmes’s personal wealth had allegedly fallen to almost nothing, and she, Theranos, and Balwani were under federal investigation. Today, Holmes awaits a decision in her criminal trial: a jury will decide whether she deliberately defrauded investors or not.

It’s a sensational story with numerous twists and turns. One is Holmes’s intentional physical transformation from a teenage girl to a Steve Jobs clone, which included not just a wardrobe shift, but learning to lower her voice several octaves. A radical change in her appearance may or may not have been Homes’s idea: Balwani, with whom she had a long-term sexual affair that may or may not have been abusive, seems to have been a kind of Henry Higgins character. He coached Holmes on developing a distinctive, super-star persona that would woo high-profile investors.

And who were these investors? There is always a schadenfreude part! Out of $600 million lost, future Donald Trump allies kissed goodbye to almost half. The Walton family, Rupert Murdoch, and Betsy DeVos: collectively, these three alone lost $271 million on this Potemkin project.

OK, you have to admit that is satisfying. But what does all this mean, and what is at stake in this trial?

Holmes’s defense says that nothing is at stake but the freedom to try and fail. Their client, they argue, was herself fed false information by her incompetent employees. Her intense need to succeed was also exacerbated by psychological trauma induced by Balwani’s physical and emotional abuse. But when she was deposed by the Securities and Exchange Commission (SEC), Holmes also admitted falsifying investor documents. For example, she photoshopped a Pfizer logo on a report to falsely indicate that the company endorsed her product and lied about who had contracted to use the Theranos device. Here the defense wants the jury to believe that Holmes didn’t know the actual situation, was bullied by Balwani into making these claims, and that investors should have done due diligence and uncovered the fraud themselves.

Now, let me say from the get-go, I think this case raises interesting issues about the effects of abuse and how juries understand abused women’s responsibility for crimes they have subsequently committed or condoned. But, of course, we don’t know what is or is not true about Holmes’s claims, except that she wept on the stand while describing how Balwani belittled her, controlled her diet and clothes, and after particularly harrowing encounters, raped her to prove his “love.” I don’t disbelieve her account of the abuse, or at least not entirely. However, I do question whether she lost her will, as the defense implies.

There are three things we know about Elizabeth Holmes. The first is that she is white and still flush with cash despite her losses from Theranos. Thus, she is more likely to be believed when claiming intimate partner abuse from a much older man of color, born in Pakistan, who also appears to have drawn her into philosophies and religious practices based on his Muslim faith. But we also know that Holmes is an excellent actress. Such knowledge does not mean, necessarily, that she is lying about the abuse itself, but rather that her claims about what behaviors that abuse caused her to adopt—and whether she was a willful co-conspirator in the Theranos scam—may not be credible. She was no Liza Doolittle when she met Balwani, and she presented as a strong, self-confident woman. But which is the act and which is real?

There is, of course, a possibility that Holmes herself does not know what is true and not true. Then there is the possibility that Balwani mistreated her, but she understood that abuse as a steep learning curve that was a necessary foundation for business success.

This speculation leads us to Thing Two: that the American right has, for years, valorized dropping out of school as indicative of genius. Holmes’s lack of business experience (which her defense now claims is why she made mistakes and did not deliberately defraud investors) was seen by investors and the media who covered Theranos as an asset.

The fantasy that undereducated and untrained people are more intelligent and innovative than the rest is now official right-wing libertarian dogma. So far, this myth has promoted the presidential candidacy of Donald Trump, as well as countless Congressional Trumpettes: Marjorie Taylor Greene (CrossFit coach and franchise owner), Madison Cawthorne (Chick-Fil-A server and failed real estate investor), Paul Gosar (dentist), and Lauren Boebert (high school dropout and pipeline filler.)

It is no wonder that Elizabeth Holmes became an icon on the right. Charlie Kirk, a wildly successful fundraiser and founder of the right-wing youth activists organization Turning Point USA, promotes the idea that education is a left-wing plot and the young should avoid it and make money. Tech entrepreneur and venture capitalist Peter Thiel (who graduated from Stanford and Stanford Law) sponsors an annual competition in which he awards 100,000 to 20 college students. In return, they drop out of school and start a business.

Finally, the Theranos meltdown underlines the danger of unregulated venture capital, which creates the illusion of success without producing real success, not to mention upending markets that other companies and workers depend on by supercharging speculative new ventures with cash. WeWork radically destabilized the commercial real estate market by gobbling up leases, as well as co-working space competitors at a breakneck pace. Uber has been cited for numerous internal abuses and attacks on other companies. Still, its main impact was to proliferate cheap rides at the expense of traditional taxi drivers paying off loans on their medallions at rates set by local government. Airbnb has driven up the cost of urban rentals that working people depend on, created public nuisances, and takes no responsibility for transactions gone wrong.

But Theranos, in the end, is worse because it extended these unregulated practices into a medical marketplace—and a public culture—that is already suffering from a massive crisis of authority. Of course, Theranos is just the latest scam. But it is one that the government did not stop when it should have, that has brought us directly to a place where millions of Americans trust the medical and regulatory establishment so little that they are refusing a potentially life-saving vaccine.

In the end, this is the bigger story: that the retraction of regulation, and a love affair with entrepreneurship, made Elizabeth Holmes who she is today. And regardless of the outcome of her trial, these are the lies we need to address.

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In case you didn’t see my outdoor work:

“The pandemic didn’t break our schools — it exposed the crisis they’re already in,” AlterNet(December 16, 2021)

On Monday night, I was on the ReidOut, guest hosted by the Washington Post’s Jonathan Capehart, talking about Joe Biden’s judicial appointments (that link requires a sign-in: you can read the transcript here.)I’m in the E slot, which starts about 50 minutes into the reel.

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Short takes:

• Joe and Jill Biden have a new puppy. Yet another favorable comparison to He Who Will Not Be Named But Famously Disliked Puppies and Kittens. (December 20, 2021)

• Whinge about Joe Biden’s approval rating if you like, but according to Gallup, it is 43%—which is seven points higher than Donald Trump’s was at the end of 2017. And it’s up one point from November. (H/T, Cook Political Report with Amy Walter midweek newsletter, December 21, 2021)

• Santa visited New York’s City College early. When physics prof and chair Vinod Menon returned to his office for the first time, a large, heavy box had been waiting since the previous November. It turned out to contain $180,000 in cash, sent by an anonymous donor to fund scholarships! After a lengthy investigation to ensure that the gift wasn’t the product of a criminal enterprise, CCNY's Board of Trustees will now put it to work! “Dr. Menon said the money would have an outsize impact for the department,” writes New York Times reporter Corey Kilgannon, “which would put it toward funding two full-tuition scholarships each year for more than a decade. In the spirit of the donation, he said, the fellowship would require the students to `give back in some way,’ perhaps by peer mentoring.” (December 21, 2021)