The Theranos Lie: When Innovation Becomes Performance Art
Elizabeth Holmes was 19 when she founded Theranos. She wore a black turtleneck. She deepened her voice. She convinced Silicon Valley she could run 70 tests from a single drop of blood. It was all a lie. Here's how she got away with it for so long.
Classification: SOCIAL MEDIA CONTROL | Confidence: WHITE-COLLAR FRAUD — CONVICTED
Elizabeth Holmes was nineteen years old in 2003 when she founded Theranos. She dropped out of Stanford in her sophomore year. She wore a black turtleneck every day for the next fifteen years. She claimed her company’s blood-testing device could run 200+ diagnostic tests from a single finger-prick of blood. She raised $700 million from investors including Larry Ellison, the Walton family, and Rupert Murdoch. She was named the youngest self-made female billionaire by Forbes in 2014 at age 30, with a paper net worth of $4.5 billion. She was on the covers of Forbes, Fortune, T: The New York Times Style Magazine, and Inc.. She was compared to Steve Jobs. She sat on boards. She gave TED talks. She was, by every external measure, the most successful woman in American startups.
None of it worked. The Theranos blood-testing device never produced a single reliable diagnostic result. The device was, by the company’s own internal testing, less accurate than the conventional blood draws it claimed to replace. The 200+ tests it claimed to run could not actually be run. The few tests that could be run on the device returned results that were systematically wrong, often by factors of 10x or more. The company hid the bad results from patients, from doctors, from regulators, and from investors. The patients received diagnoses based on fabricated data. By the time the fraud was exposed in 2015-2016, more than 850,000 blood test results had been issued — the majority of which had been silently voided or modified by the company’s internal review process. Holmes and her co-conspirator Sunny Balwani were indicted on federal fraud charges in 2018. They were convicted in 2022. Holmes was sentenced to 11 years in federal prison in November 2022. Balwani received 13 years. The appeal is pending. The company is bankrupt.
The Myth of the Visionary
The story of Theranos has been told as a story about a visionary who overreached. The standard narrative is that Holmes had a real breakthrough idea, ran out of runway, lied about the science to keep the company alive, and ended up destroying what she had built. The narrative is wrong in one specific way: Holmes did not have a real breakthrough idea. The technology she claimed to have built did not exist when she founded Theranos. It did not exist after fifteen years of operation. It did not exist when the company was exposed. The technology was a claim that was never verified. The verification that should have happened during the company’s entire operating history was avoided, deferred, or falsified.
The visionary narrative is the narrative Holmes herself constructed. In her Wall Street Journal profile, her Fortune cover story, her TED talks, her appearances on the Today Show, the story she told was: I dropped out of Stanford, I had a vision, I built it, it works, it will change the world. The story was consistent. The story was also unfalsifiable. The device worked. You could not examine the device. You could not test the device. You could not publish the data. The non-disclosure agreements were airtight. The employees were silenced. The board members were barred from speaking. The partnerships with Walgreens and Safeway were not partnerships — they were purchases of the right to deploy the device under non-disclosure. Walgreens and Safeway did not have access to the underlying data. They were customers, not auditors. The story was controlled. The story was performance.
The John Carreyrou Investigation
The Theranos fraud was exposed, in the end, by a single investigative reporter. John Carreyrou of the Wall Street Journal published the first major piece on October 15, 2015, headlined “Hot Startup Theranos Has Struggled with Its Blood-Test Technology.” The piece was based on confidential interviews with former Theranos employees, confidential internal company documents, and confidential interviews with patients whose results had been altered. The piece documented that the device did not work, that the tests were inaccurate, that the company was hiding the failures. The piece ended Theranos.
Carreyrou’s reporting continued for another year. His second piece, in November 2015, revealed that Walgreens had suspended the use of Theranos devices in their stores. His third piece, in January 2016, revealed that federal regulators had found “deficient practices” at Theranos labs. His fourth piece, in March 2016, revealed that the device had never been independently validated. Each piece triggered a corresponding escalation: company denials, lawsuits, investor lawsuits, congressional inquiries. By mid-2016, Theranos was under federal investigation. By 2018, Holmes and Balwani were indicted. The investigation started with one reporter asking one employee one question: is the device accurate? The employee said no. The reporter published. The company collapsed.
Carreyrou’s book, Bad Blood: Secrets and Lies in a Silicon Valley Startup, published in 2018, became the definitive account. The book documents in detail how the fraud was maintained — the falsified test results, the doctored validation studies, the silenced employees, the intimidation of whistleblowers, the falsified board minutes, the fraudulent regulatory submissions. The book documents that the fraud was not a single act of deception but a fifteen-year systematic project of deception. The fraud was not a bug. The fraud was the business.
The Performance of Innovation
What made Theranos notable was not the fraud itself. White-collar fraud is common. What made Theranos notable was the performance of innovation. Holmes did not invent a technology. She invented the aesthetic of technology. The black turtleneck. The affected baritone voice. The dropped-out-of-Stanford narrative. The Jobs comparison. The board of former cabinet secretaries and admirals. The Steve Jobs-style product demos. The carefully curated walk-through videos. The TED talks. The 60 Minutes feature. The investor pitches that included dramatic pauses and eye contact. The aesthetic was not incidental to the fraud. The aesthetic was the product.
The aesthetic generated the $700 million. The aesthetic generated the partnerships with Walgreens and Safeway. The aesthetic generated the FDA filings, the clinical trials, the published papers, the academic collaborations. The aesthetic generated everything that made Theranos look like a real company with real technology. The aesthetic did not generate the technology. The technology did not exist. The aesthetic stood in for the technology. The aesthetic was good enough to generate the capital. The capital bought time. The time did not generate the technology. The technology never generated.
The Whistleblowers
The Theranos story is also a story about whistleblowers. Tyler Shultz, the grandson of former Secretary of State George Shultz and a Theranos employee, was the first to bring his concerns to Carreyrou. He had been working in the lab and had seen the test results. The results did not match the company’s claims. He had raised his concerns internally. He had been threatened with litigation. He had been told that his continued employment required silence. He chose to speak to a reporter anyway. He did so anonymously. His identity was not protected. He was threatened with lawsuits by Theranos, by his own family, by the company’s lawyers. He was sued personally. He spent several years defending himself against the company’s legal retaliation.
The other whistleblowers — Alan Beam, Rochelle Gibbons, and others — faced similar pressure. Some lost their careers in biotech. Some lost their marriages. Some lost their savings defending against Theranos lawsuits. The company’s response to internal whistleblowers was not to investigate the concerns. The company’s response was to silence the whistleblowers. The response was effective enough that the fraud lasted fifteen years. The response was not effective enough to outlast one reporter who would not be silenced.
The Pattern of Uncritical Belief
The question the Theranos story forces is: why did anyone believe her? The investors who gave her $700 million. The journalists who put her on their covers. The regulators who approved her labs. The board members who sat on her board. The pharmacies that deployed her devices. The patients who got their blood drawn. The venture capital firms that funded her rounds. The wealth managers who valued her company. The Stanford professors who mentored her. The list of institutions that extended credibility to Theranos without independent verification is essentially the list of the entire American institutional infrastructure for evaluating technology.
The pattern is not specific to Theranos. The pattern is the pattern of uncritical belief in aesthetic performance. The aesthetic of a black turtleneck. The aesthetic of a TED talk. The aesthetic of a board of former admirals. The aesthetic is enough for the capital. The capital is enough for the time. The time is enough for the fraud. The fraud collapses. The next fraud starts. The aesthetic remains. The pattern is the same pattern. The simulation has been running it for thirty years. The pattern has not changed. The aesthetic still works.
Elizabeth Holmes did not invent a technology. She invented the aesthetic of technology. The aesthetic generated $700 million in capital. The capital bought fifteen years of time. The time did not generate the technology. The technology never generated. The aesthetic stood in for the technology. The aesthetic was enough to generate the capital. The aesthetic was not enough to generate the device. The device never worked. The patients received diagnoses based on fabricated data. The investors received returns based on fabricated technology. The fraud was maintained for fifteen years by silencing the people who could have exposed it. The fraud collapsed when one reporter asked one employee one question. The fraud collapsed in a year. The fraud was built in fifteen. The aesthetic is still working. The pattern is still running.
SOURCES
- John Carreyrou (2015). “Hot Startup Theranos Has Struggled with Its Blood-Test Technology.” The Wall Street Journal, October 15, 2015.
- John Carreyrou (2018). Bad Blood: Secrets and Lies in a Silicon Valley Startup. Alfred A. Knopf.
- United States v. Elizabeth Holmes and Ramesh “Sunny” Balwani (2022). Verdict and sentencing documents, U.S. District Court for the Northern District of California. Sentencing November 18, 2022.
- Nick Bilton (2015). “The Secrets of Steve Jobs’ Black Turtleneck.” Vanity Fair, September 10, 2015. (Documents the Jobs-aesthetic Holmes modeled her public persona on.)
- Matthew Herper (2015). “Theranos’ Elizabeth Holmes: The Breakthrough Technology That Wasn’t.” Forbes correction, June 1, 2016. (Forbes revised her net worth from $4.5B to $0.)
- SEC Press Release (2018). “SEC Charges Theranos, CEO Elizabeth Holmes with Massive Fraud.” March 14, 2018.
Sources & Further Reading
