Theranos: how a medical fraud exposed Silicon Valleys cult of disruption

Elizabeth Holmes, who was once tipped to be the youngest self-made female billionaire, was said to never blink. Her invention was going to mean that “no one ever has to say goodbye too soon”: a tool that could analyse diseases from the prick of a fingertip and avoid the “torture” of needles. Where blood tests provide a snapshot of human health in time, micro-samples taken from a single drop of blood could screen a moving picture.

Holmess mythos has captivated reporters, film makers and podcasters. Just what makes her story so compelling? In The Inventor: Out for Blood in Silicon Valley, a documentary recently screened on HBO, the latest of two made about the saga, director Alex Gibney portrays Holmes rise, fall, and gratifying exposure. She quit Stanford University in 2004 at the age of 19 to start Theranos (a portmanteau of “therapy” and “diagnosis”), a biomedical company nestled in a leafy Palo Alto research park.

For ten years, Holmes shrouded Theranos in secrecy and non-disclosure agreements. She gained financial backing from Mexican billionaire Carlos Slim, US education secretary Betsy DeVos and Rupert Murdoch, who sunk $125m into the company (a stake the News Corp. head later sold for $1). “She didnt really want scientific input… she aligned herself with very powerful older men who seemed to succumb to a certain charm, and those powerful men could influence people”, Phyllis Gardner, one of Holmess early professors, reflects in Gibneys film.

Powerful, rich, older men, lacking in scientific knowledge, like Henry Kissinger, who sat on her board, and spoke of Holmes “as if she were Beethoven” – with an ethereal quality fitting of a “monastic order”. “I write a lot about disruption – and Theranos aimed to be a disruptor of the established ways of doing things,” explains Ken Auletta, a journalist who profiled Holmes for the New Yorker. Auletta, like many others, found the story of a female founder changing the world one thumb prick at a time too compelling to resist.

Holmes gradually began allowing reporters to see the companys machinery – black boxes with a disc-drive compartment for blood capsules that the company called its “Edisons”. In 2015, after persuading the state of Arizona to drop a law requiring doctors to order blood tests, Theranos signed a contract with Walgreens to introduce clinics (“Wellness Centres”) in its supermarkets. Americas healthcare system is a paradigm of market failure; the country spends 17 per cent of its annual GDP on healthcare to the “socialised” UKs nine per cent. The lab market is dominated by two behemoths, Quest and LabCorp. Prices are high and costs opaque. Theranos sold patients lab tests directly, with a menu of options akin to a beauty salon.

But every good story needs a fable or redemptive arc. A sentence in Aulettas profile roused the suspicions of a source, who later relayed them to investigative journalist John Carreyrou of the Murdoch-owned Wall Street Journal: “Holmess description of the [science] was comically vague: A chemistry is performed so that a chemical reaction occurs and generates a signal from the chemical interaction with the sample, which is translated into a result, which is then reviewed by certified laboratory personnel”. As Carreyrou would later find and document in his 2018 book Bad Blood, and as physicians had begun to suspect, Theranos was a fraud: the company was running its tests through standard commercial machines manufactured by Siemens, and the Edison was little more than a dysfunctional prototype.

Gibneys film portrays Holmes as an adept liar with a Calvinist work ethic. Yet what the story truly exposes is not an ingenious scammer, but the failures of a system that has come to prize the notion of disruption – where breaking the rules, or hacking the system, is thought an implicit moral good – at all costs. Its a parable not of individual brilliance, but of systemic stupidity.

Beyond the carpeted office suite where Holmes held court, accompanied by security and shielded by bullet-proof glass, was a messy underworld of tiled flooring and dysfunctional prototypes. Inside the Edison box were broken glass capsules and spilt blood. Rather than question how she did it, we may instead ask why regulators – the US Food and Drug Administration – and supposedly diligent investors didnt realise.

Its easier to chronicle the scammer than it is to expose the mysticism of venture capital, where people like Tim Draper, one of the companys seed investors, could bet on “a girl and a dog, or two guys and a cat”. Investors are supposedly in their jobs because they can tell what constitutes a worthwhile investment. Yet the idea that underpins much of the tech industry is that obstructive rules (often protecting peoples lives and livelihoods) are designed to be broken. Disruption is the neoliberal version of creative destruction, training its sights on taxis, personal finance, public services and transport.

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