Theranos: When Start-Up Hyperbole crosses over to the Big Lie

How the typical Silicon Valley start-up hyperbole necessary to secure various rounds of funding morphed into an operation to keep the illusion going just a bit longer till reality finally caught up to it.

May 19, 2016


In a bombshell article today by the relentless John Carreyrou of the Wall Street Journal, revealing “Theranos Voids Two Years of Edison Blood-Test Results”  gave a fuller picture of what was happening with Theranos than it’s own muted press release of March 31, 2015 vaguely stating the following. 

Carreyrou was the investigative journalist who first revealed to a wide audience substantiated doubts about the accuracy, reliability and usability of Theranos’ ultra-secretive proprietary technology – code named Edison – that was being touted as a key to “revolutionize” blood testing by being able to analyze hundreds of tests from a single drop of blood. 

This was done in a series of articles from October 15, 2015 after a nearly 10 months long investigation. (Kevin Loria writing for Business Insider on April 25, 2015 cited scientists who expressed doubts about Theranos’s claims but did not have the kind of access to insiders as Carreyrou did.)

Theranos’ same day response to Carreyrou was, especially in retrospect, very revealing.  

Instead of clarifying the report, Theranos and CEO/Founder Elizabeth Holmes launched a full on attack on Carreyrou in their response (still on-line as of date), CNBC appearance on October 16th and a Wall Street Journal Tech conference on October 21st doubling down on calling his work false and the insiders who spoke “very confused”.

This defiance continued in spite of further revelations from Carreyrou and others who picked up the story, all through the end of 2015, only stopping when news that the FDA, CMS and even the SEC was looking into Theranos.   Holmes, a prolific tweeter till then, made her last Tweet and “like” on December 17th.  

Theranos was actually aware of Carreyrou’s investigation.  As revealed earlier this month, a year ago in May 2015, Theranos sent a team of lawyers over to the Wall Street Journal offices in New York headed by a most feared litigator, David Boies – who controversially serves both as counsel to Theranos and as a Director, which some argue sets up a conflict of loyalties  – to essentially threaten the paper and journalist into silence.  (Indeed this tactic might have worked to mute some of the deeper questions, for example, as to why a key scientist at Theranos, Ian Gibbons, who had worked for 8 years on the core technology killed himself in 2013 while telling his wife despondently that “Nothing was working”, a point simply mentioned in Carreyrou’s original article without any commentary as to the linkage between his work and his suicide.)

So in May 2015, Theranos legally threatens the Wall Street Journal to no avail.  In June, it stops Edison testing (voluntarily it said later).  Between June and October 15, Holmes was feted both in a series of PR articles as well as in conferences in which she continued talking about the technology.  She met Biden, Clinton and other luminaries and carried on merrily. 

On the Theranos website the last self-congratulatory PR post on October 12, 2015, 3 days before Carreyrou put his first stake through the blood-sucking (or was it suck-at-bloodwork) company, states “Washington Post: This is what I was put on earth to do: Elizabeth Holmes and the importance of passion“.

In hindsight, it was truly astounding that Holmes could have that much bravado. Edison testing had stopped in June and her public denials anything was wrong all through the end of 2015 defies belief.  While the President and COO, Sunny Balwani – a mysterious figure whose photo is never published (Navy SEALS have less anonymity) – was offered up as the fall guy when he “resigned” in a press release on May 11, 2016. (though he’s still listed as COO on Theranos’s site even now), it is inconceivable that Holmes did not know that the various problems.  And what about the Board?  What did they know and when?

One explanation is that the Executive Leadership got caught up, Madoff-like, in the Big Lie.  They might have been hoping that Edison and the lab could get fixed before anyone found out so that they could then claim it was always this way.  Edison had always worked.  So the original lie would not be a lie anymore.

These actions don’t just remind one of how children think when they furiously try to undo a mistake before Mommy and Daddy find out, but the scale and context of it – healthcare and not another stupid tech toy – and the sheer brazeness and foolhardiness of doubling down on the lie even when exposed and threatening those who who exposed it is more akin to sociopathy than standard human guilt response (though given the presence of Henry Kissinger as an advisor on the Board, perhaps understandable.)

The Role of the Media in Propagating the Big Lie

The media played a huge role in hyping up Holmes as the next-Steve Jobs. A damning chronological list of media fawning shows that no media – including the Wall Street Journal who in a September 2013 article by a senior editor, Joseph Rago referred to Holmes as a “Chemical and Electrical Engineer” though she was neither  – escapes blame.

The technology media has come in for some criticism  for building up Theranos without any critical evaluation of its technology.   Roger Parloff of Fortune who was part of the Theranos PR effort hagiographically covering Holmes in a June 2014 article titled “This CEO is out for Blood” and who subsequently, post-Carreyrou penned an article on December 17, 2015 (coincidentally the same day Holmes stopped tweeting), titled “How Theranos Misled Me“, essentially confessing he didn’t have the technical chops to ask the right questions or understand the answers and basically took Holmes at her word.

So the media excuse seems to be “We told our readers the technology was secret, so how could we know it wasn’t as good as Theranos told us it was?”

A clue for the lack of more critical thinking here might be in another famous hagiographical article in the New Yorker in December 2014 by Ken Auletta

In it, Holmes gave the following answer when pressed to explain how Edison worked.

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…

This meaningless statement, that Auletta himself called “comically vague” was apparently one of the reasons why Carreyrou started to look at Theranos a month later.

The statement above is not just “comically vague” but it seems to show the person has no clue as to what they are talking about.  Even if she wanted to be vague she could have talked about “microfluidics” or “lab-on-a-chip” both buzzwords for technologies that must be involved, but her response sounds like something clever a high-school student (the only degree Holmes possesses) would blutter out when stumped for an answer in a chemistry pop quiz.  It’s technically true right?

What’s astounding is that Theranos in an official response to Carreyrou’s continued hammer blows about the unproven nature and doubts about various aspects of the technology, including the pre-analytics stage did not do much better:

Oh that’s it!  Wow -surely the scientific community will be convinced now. And so pithy and universally acceptable.  

Here’s a basic pitch:

 “I am making a teleporting device.  It works like this.

Step 1. Go into the Podtainer(TM). 

Step 2. Set the location 

Step 3. Teleport.   

Transport made Simple (TM).  Now fund me $700 million.” 

See?  Even simpler than the instructions in this Monty Python sketch on easy ways to rid the world of all known diseases and also, learn to play the flute.

The same New Yorker article has two very revealing anecdotes.  One is from her former Stanford University professor Channing Robertson – and later Theranos Director and employee  – who spoke elsewhere of teaching her like “teaching Beethoven music or Einstein science.” (For this incredibly ignorant hyperbole from a famed Professor Emeritus, Roberston – who should know better – deserves to be paraded around in a Game-of-Thrones-like-shaming). He talks about how when Holmes told him that she was going to intern in Singapore’s Genome Institute and he said she would need to know Mandarin, and she said she knew it, he was blown away.

A couple of questions come to mind: one is why knowing Mandarin should be regarded as a hallmark of genius? While not easy for English speakers to learn, to make Mandarin expertise out to be some sort of awe inspiring knock-myself-on-the-head-with-a-mallet feat like composing one of the most famous Western symphonies in existence when essentially deaf (Beethoven) or upending the world of Physics multiple times in a single year and human understanding of the Universe as an encore (Einstein) seems not just ridiculous, but a bit colonial.

The more interesting question though is why a research institution in Singapore which should be well known as a destination where English is freely spoken and is the lingua franca of academia, require Mandarin? A simple click shows a web page for the Genome Institute only available in English. And a call to the Institute shows that what’s needed is English proficiency.

And then there is a tale told by her father about how Holmes was accepted on the spot into the Mandarin college summer program at Stanford while still in high school, and thus apparently not eligible, by wowing the admission officer while on the phone.

Well yeah call the Stanford program.  High school students perfectly eligible to apply.

What’s fascinating here is not the triviality of these clearly tall tales – why is Mandarin proficiency relevant? – but that despite them being so trivial, they were highlighted as evidence of genius. And if that was not pathetic enough, they seem to have been what can kindly be called exaggerations to begin with. And yet not only did reporters not follow up with these fairly easily verifiable, non-technical claims, they repeated it in print as true giving Holmes the confidence that the media would eat anything out of her hands.

So Is Lying Big Necessary for a Successful Start-Up?

We all lie, exaggerate our accomplishments.  When faced with questions about a task with a deadline we will say we are close to finishing when we are not, hoping some coffee and a late night will do the trick or even hoping a deux ex machina event will happen.  It’s part of the human condition.

It’s no exaggeration to say that Marketing, Sales and PR are careers in more polished versions of lying: either making promises that are not yet true – but will be by the time the sale is done: Promise! – or more simply by not revealing the full picture.   Engineers who are sticklers for details usually don’t make good sales people precisely because they like to be precise about things. 

Copyright Scott Adams

In start-ups the pressures that are there even in an established company – with established products and revenue sources – is magnified to crushing levels.   Start-ups are dreams and visions requiring money to be realized.  Founders can see it, taste it, they have the drive, but they need the money.  And more money, just a bit more and we can turn the corner.  In this situation the hyperbole that accompanies any product – witness the much parodied solemn, measured British tones of Apple’s Jony Ives touting how the latest iPhone is the most amazing yet – crosses into a whole new territory.

All things being equal – that is to say the idea seems promising; the market analysis sound etc – the huge edge for a start-up is the investors’ absolute confidence in the founder’s iron self-belief, extreme resilience against adversity and ability to convince others against all odds that their vision can be productized. In Presence, author Amy Cuddy reveals that various real-world tests revealed these as key attributes that investors looked for in deciding whether to fund a start-up.

But at what point does self-belief become megalomania, resilience become delusional and ability to convince become the audacity to Lie Big?

It appears Theranos would be a good case study to explore that question.


Except for Carreyrou who is deservedly likely to add to his 2 Pulitzers, few come out of this looking good. 

1. Theranos appears to have been running a Mickey Mouse operation at its labs – even the ones using industry standard machines are having to correct many reports to avoid being shutdown by the CMS.

2. Holmes either willfully misrepresented the state of the core technology, or was shockingly ignorant of the true state of affairs.  Her attacks on Carreyrou for exposing what she must have known at the time was true, or incompetently unaware was true, was childish at best, criminal at worst. Either way it does not inspire confidence in her as a CEO. In a publicly traded company she’d be long gone.

3. The high powered Washington Insider Board seem to have given advice in the only relevant area they were experts in: when you lie, Lie Big and when they find out, threaten, attack back. And keep shuffling the deck to obfuscate, confuse and buy time. Good governance, medical expertise, not so much.

4. The VCs who funded Theranos; the Walgreen Executive team who approved the deal to offer Theranos testing at their Arizona locations (fired for an unrelated bad decision); the Cleveland Clinic who announced a partnership with them, apparently did little due diligence apart from looking at others who had invested and the big names on the Board.

5. The ENTIRE media including Carreyrou’s paper had indulged in the Holmes lovefest, essentially buying her PR as fact and hyping her as the next coming of Steve Jobs with little research to verify her claims.

6. The Harvard Medical School who made Holmes a Fellow; Pepperdyne who gave her an honorary doctorate; and the increasingly farcical TED talks – see TODD talks from Late Night with John Oliver – all legitimized an unproven high school graduate’s academic credentials.  (The corruption of academia by money is another story by itself).

Finally, one group does come out looking good: scientists and technologists who have been skeptical about Theranos’s claims from the beginning.  Science works best when done openly and collaboratively, with peer reviews and informed debates.  The scientific process cannot be substituted by secrecy about details, hype about the vision, and threats to those who question.

And the Theranos saga is a good opportunity to reinforce that point.

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