KEY TAKEAWAY: Theranos is a story of an idea that, to this day, is not feasible, but it’s also the story of a CEO who has an obsession with Steve Jobs and who was great at selling the story without a real story.
The Vanity Fair article on the demise of Theranos reads like a novel. “It was late morning on Friday, October 18, when Elizabeth Holmes realized that she had no other choice. She finally had to address her employees at Theranos, the blood-testing start-up that she had founded as a 19-year-old Stanford dropout, which was now valued at some $9 billion. Two days earlier, a damning report published in The Wall Street Journal had alleged that the company was, in effect, a sham — that its vaunted core technology was actually faulty and that Theranos administered almost all of its blood tests using competitors’ equipment.”
The article is a good summary of the downfall of Theranos but it also clearly shows how VC money flows into ideas with no substance. Here are some of the key points from the article;
- Theranos was secretive, even internally. Just as Jobs had famously insisted at 1 Infinite Loop, 10 minutes away, that departments were generally siloed, Holmes largely forbade her employees from communicating with one another about what they were working on — a culture that resulted in a rare form of executive omniscience.
- John Carreyrou, a recalcitrant health-care reporter from The Wall Street Journal came away from a story surprised by Theranos’s secrecy — such behavior was to be expected at a tech company but not a medical operation. Moreover, he was also struck by Holmes’s limited ability to explain how it all worked.
- Most cogent suggestion advocated enlisting members of the scientific community to publicly defend Theranos — its name an amalgam of “therapy” and “diagnosis.” But no scientist could credibly vouch for Theranos. Under Holmes’s direction, the secretive company had barred other scientists from writing peer- review papers on its technology.
- The venture capitalists (who are mostly white men) don’t really know what they’re doing with any certainty — it’s impossible, after all, to truly predict the next big thing — so they bet a little bit on every company that they can with the hope that one of them hits it big.
- Explained to the chemical-engineering major that it was virtually impossible to do so with any real efficacy. “I told her, I don’t think your idea is going to work,” Phyllis Gardner, a professor of medicine at Stanford, said to me, about Holmes’s seminal pitch for Theranos.
- Money often comes with strings attached in Silicon Valley, but even by its byzantine terms, Holmes’s were unusual. She took the money on the condition that she would not divulge to investors how her technology actually worked, and that she had final say and control over every aspect of her company.
- As Holmes started to assemble her board of directors, she chose a dozen older white men, almost none of whom had a background in anything related to health care.
- The tests they were performing were so inaccurate that they could leave patients at risk of internal bleeding, or of stroke among those prone to blood clots. The agency found that Theranos appeared to ignore erratic results from its own quality-control checks during a six-month period last year and supplied 81 patients with questionable test results.
This story should enrage people, but more importantly, it should be a warning about people whose big ideas have no substance. Ms Holmes should be barred permanently from healthcare and Theranos disbanded and assets sold off.
There are no shortcuts to good viable products and certainly Ms Holmes is not Steve Jobs.
Originally published at worldofdtcmarketing.com on September 7, 2016.