Should Elizabeth Holmes get jail time?

In My Humble Opinion
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Blood glucose level is literally the easiest thing to measure in serologic testing because the level is relatively homogeneous and is tightly regulated. Performing a general host or serological tests, on the other hand, requires a significant amount of blood that has to be separated into hundreds of different test channels to be centrifuged, emulsified, electrophoresized, catalyzed, or otherwise processed. In some cases a significant amount of blood has to be processed to get a statistically meaningful result. And on top of all this, blood is a very difficult substance to flush and clean from instrumentation; because it is predominately proteins it tends to stick to everything and requires saturated steam under pressure to remove from medical instruments and devices, hence why so many medical devices are single use and all others have to be autoclaved before reuse. Test-on-a-chip devices like the mChip are disposable one use cartridges in which all of the chemical processing is done in cartridge. In contrast, the Edison took a tiny vial of blood and was supposed to deliver it through micofluidic channels to hundreds of instruments throughout the machine, which is just not physically plausible. No one who knew anything about blood assaying or fluid handling should have been fooled by this scam.

Stranger

82

I read the book Bad Blood a few months ago.

My impression was that Elizabeth Holmes was a completely unexceptional person of no more ( and probably less ) than ordinary intelligence. A person who had been told “you are exceptional, you can do anything you set out to accomplish”, many many times. A person surrounded by enablers since childhood, adults that praised every ordinary accomplishment as an act of exception brilliance. A person who was surrounded by people whose only goal was to boost her self-esteem.

A person that believed every dumbass motivational poster she had ever read. If she failed it was because of lack of faith. Because she could literally accomplish anything she set her mind do. Because if you can dream it, you can do it. Negativity is the only thing standing between you and greatness.

So she came up with an idea. An idea for a product that would transform society for the better. Let’s put an entire medical lab into a box the size of a toaster. Now some may disagree but I think that idea, in the absence of completely revolutionary technologies, was pretty worthless. And I doubt it was unique. It’s just that everyone else that thought of it realized it was not yet feasible. When I was in growing up in the 1960’s a lot of people had envisioned giant flat screen TV’s. It was not a lack of vision that kept one from being developed in 1965. It was a lack of technology.

I have many such ideas. For example, I think it would be awesomely cool if we could completely eliminate electrical wires and transmit power wirelessly. But because I am not stupid, I know that I’m not the first person to think of that and to realize would be really awesome and game-changing and really disrupt the electrical industry and make someone a lot of money. And because I am not stupid, I know that the reason that this has not yet happened is not because no one like me has “dreamed” it. I know that we are nowhere near developing the underlying technologies to allow that to happen.

And I think the Theranos black box is a similar idea. It may someday be possible. Maybe someone will develop an ultra-sensitive universal reagent that will revolutionize the field of blood testing. Or a computerized process that can digitize a blood sample on a molecule by molecule basis and analyze the results to test for pretty much anything. But it was not a workable idea given the current technologies.

But EH had her team of enablers that acted as cheerleaders for every idea that came into her vapid little brain. That doubled down on her idea that she was a genius of exceptional capabilities and promoted that idea to others. I think maybe she honestly believed that her exceptional brain had come up with this revolutionary idea that was beyond the reach of everyone else’s unexceptional brain.

So the people she tasked with the mission of developing this product, a task equivalent to handing someone a pile of rocks and telling them to transmute them into gold, failed only because of their negativity and their lack of commitment to fulfilling dreams. It was probably inevitable that, in this atmosphere, someone would just start painting the rocks so they could claim progress towards success.

In terms of explaining the success of her company, her sincere beliefs made possible only by her stupidity made this impossible invention seem real.

It always reminded me of the very first time I played poker, having little idea of what the cards meant. I got my first hand of cards. It looked like a fantastic grouping of cards to me. I smiled. I squealed. I bet a bunch of pennies. I didn’t throw in any cards ( mostly because I didn’t know how). Everyone else at the table folded. Then I, still smiling, turned over my absolutely worthless not even a pair of twos hand.
And was surprised at the reaction from the room. Those other Girl Scouts were pissed off.

Now, having typed it this whole theory, there is one piece of the puzzle that doesn’t fit. Sunny. The mysterious older Paki secret boyfriend / business partner. Who seems like a typical con artist to me. He may have seen her looks, her stupidity and her salesmanship skills as the perfect vehicle for a serious con game.

TL/DR. She’s not very smart. And she suffers from a serious excess of self-esteem.

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I was following you until your use of a racial slur. Was that really necessary?

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I’ve always used Paki as shorthand for Pakistani, my best friends husband is from Pakistan and they use it pretty consistently. I did not mean to offend and wasn’t aware it was used as a slur. If I had editing privileges I’d change it.

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Here is the Wikipedia article on the slur.

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It’s more frequently used as a derogatory term in Commonwealth countries, like the UK and Canada, and the derogatory nature isn’t as well known in the States. Still, a term to avoid.

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Ignorance fought. I will not use it in the future. I find the subject of this thread very interesting and don’t want to derail it.

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I’ve been following the Theranos story, I read Bad Blook, listened to the Dropout podcast, and I think Ann has pretty much nailed it, though I don’t think it’s a generational thing, just a extreme example of the power of positive thinking self-help mantra that’s been around forever. In the book, it’s mentioned that she had a plaque that said something like “what would you do if you knew failure was impossible?” And she tried to live by that mantra. It takes real bravery to do that, and unfortunately for her, there’s a fine line between brave and foolish.
In addition, her family was descended from money (long since dispersed), and her folks never let their kids forget it. Apparently they were expected to restore their lost greatness.

As for Sunny Balwani, he made his money in the dot-com bubble and mistook being in the right place at the right time for genius. He was nothing but a big mess of ego, arrogance, and paranoia.

89

We watched the documentary over the last two nights. It was incredibly poorly done and very disappointing. Mrs. FtG knows all about the lab business and was ready to jump up and scream thru the whole thing. This delusional nut job was putting the safety of lives below her fantasies.

I knew right away the doc was going to suck. The intro with a bunch of random images and sound bites that made little sense and went on too long. They dwelt over and over on her photo sessions. And they ignored Holmes’ other truth issues. E.g., she had a husky which she claimed to be a wolf. While there were some comments about her voice, they didn’t have anyone pointing out how fake it was. Not even the Stanford prof who has been on record as saying the Holmes didn’t use to talk like that. (This Standford prof is the main saving grace of the show.)

While these small points (and there were a lot of them) may seem trivial, they should have been giant red warning flags to employees, investors and partners.

As it got to near the end I realized that they were going to have only a couple minutes to cover the actual end of Theranos. And they still did a poor job squeezing that in.

And what about Sunny? He was in it just as deep. So little said about him.

Anyway, it’s clear (if you read about this vs. watching the documentary) that a lot of stuff was planned out early on. E.g., following the Enron model of developing close ties to politically connected people to later squash government investigations. This was not someone who didn’t realize until it was too late that her dream was a failure and then went off the rails. The rails got lost long before.

I don’t understand how someone who robs $50 from a QuickieMart can get 10 years but someone who steals hundreds of millions doesn’t get a life sentence.

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This was the HBO documentary? I haven’t seen it yet, but it’s on my DVR and plan to when I have time. As for the Enron model, I think I mentioned upthread that her father worked for them at one point. So she learned from the best.

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She should do 10 years. In an actual prison. No probation, no home confinement with an ankle monitor. 10 goddamned years.

I am still sick that white collar criminals walk where blue collar criminals do hard time, especially when the white collar criminals do so much more damage.

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That’s what I wonder. I don’t agree with **Ann Hedonia **that Holmes was “completely unexceptional”. Clearly she can’t be a complete dunce if she got into Stanford and was able to fool all these people into helping her create a billion dollar company out of nothing.

But I also don’t think people like Elizabeth Holmes are these brilliant masterminds who create these elaborate Machiavellian schemes from the beginning. Probably because I used to investigate this sort of stuff professionally. If they were so brilliant, why is there never an exit strategy?

What I suspect is that she legitimately had what she thought was a good idea. And because she’s smart, went to the right school, had the right parents with the right connections, she was able to convince a bunch of Silicon Valley VCs to give her funding. The VCs come from a world where people with too much money constantly throw it at every crazy idea just to see what sticks in the hopes that it will pay off. And these same people tend to believe no idea is too crazy to make someone a billionaire - selling books online, dropping out of Harvard to make a social media site, building electric cars and space planes, whatever.

So what probably happened, was as the company and her fame grew and the stakes increased, they just kept hiding all the problems in the hopes that they could solve them before they became public. A combination of her ego thinking that with enough effort they could just will this stuff to work with a sociopathic disposition to just keep taking people’s money until it does.
That, or she just hypnotized people with her weird unblinking eyes.

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Given that this is a concept she came up with as an undergraduate with little apparent knowledge of microfluidics, compact electromechanical packaging, of indeed, virtually anything about the complexities of laboratory cleanliness and contamination management, it is pretty clear that Holmes had a naive belief in the viability of her idea even as people with experience in microfluidics and medical instrumentation assessed it as being a practical impossibility, and she was able to convey her enthusiasm to people who were excited about the potential of such a device even as they were not versed in the knowledge or experience to assess the feasibility or risks.

And Holmes enshrouded Theranos in a veil of secrecy—in the twin guises of protecting intellectual property and getting the technology right before going to market—which gave it an appearance of Silicon Valley respectability even as they intentionally falsified results and doubled down on overpromising capabilities that physicians and laboratory technicians knew were impossible without some kind of radical innovations that Theranos was not pursing. That she managed to rack up a coterie of ‘respected authorities’ gave it more apparent legitimacy even though none of these supposed experts actually had the knowledge to assess technical validity. Holmes and Balwani no doubt expected that some innovation would occur that would make the tales they spun out to venture capitalists feasible even though they had no idea when or how it would occur, which ranks them up with a goodly number of tech startups.

In essence, they spun a “Music Man” tale and forgot that they needed a Marian and a bunch of rubes from Gary, Indiana to make it work. Even with all that, they strung it out for years past the pooint when whistleblowers were attempting to let the government and public know by a combination of intimidation and showmanship while raising more funding. Until the Wall Street Journal published the article in 2015, it probably looked as if the Theranos blood testing sham could continue indefinitely until a miracle happened.

The interesting thing was that as much as Holmes venerated Steve Jobs, she didn’t actually understand how he functioned or what made Apple a success. She saw the image and theatre of Jobs, but didn’t understand that the core technologies that made Apple’s innovations viable weren’t magical inventions farted out by wizards in some secret basement complex but were well established individual technologies that were stitched together in a stylish way, and also that Apple could get away with debuting products at an effective “beta” release level and improving later because they were luxury items that first adopters purchased understanding that it was at a supposed bleeding edge of technology and industrial design with no expectation that they be reliable enough for mission critical or life risking applications.

Watching that documentary, I got a distictive Lovecraftian ‘Deep Ones’ vibe from her. It isn’t just her appearance or vocal intonation but her entire manner is unsettling and evasive. I may have lost several points of SAN from just watching the documentary.

Stranger

94

Do you remember Jerry Lundegaard from “Fargo”? He’s the William H Macy doofus car salesman who wants his own wife kidnapped and starts the bloody fiasco rolling.

By the time the movie starts, Jerry has been funneling ill gotten gains to himself for YEARS. He didn’t steal $350,000 in one go. He stole a little, and a little more, and then he faked one car loan, then two, and it just grew from there. Every time he bought himself more time and gave himself hope some vague solution would present itself. The only reason he starts the kidnapping scheme is that it’s finally going to fall apart on him, because the auditors are a-calling.

Elizabeth Holmes probably thought, at first, that this machine was possible. She was determined and super positive. If you’re ignorant, you could believe it’s possible - blood testing is a technical process done by machines, and in Silicon Valley they do amazing things miniaturizing machines, right? Get the eggheads on that. But at some point she knew it wasn’t. The thing is, it probably wasn’t a light bulb moment; for awhile I am sure she really believed it could be done. Maybe not a long while, but awhile, a couple of years anyway. And even when it started not working and when the first people started telling her what Stranger has said, and what I’ve heard several experts say - that it’s physically impossible, or very close to it - she probably sort of believed it, because, well, it can be hard to accept you have massively failed, and harder still to admit you really never knew what you were doing.

But at some point, something else changed, too. Theranos stopped being a business that made a blood testing machine, and started being a business that raised money though force of personality and good cheer. At for awhile that was probably honest. Slowly, bit by bit, it became less honest. At the beginning of that transformation Holmes probably figured it was still on the level. No harm done. There is no clear line between “putting your best outfit on” and pulling the wool over someone’'s eyes, and eventually it’s not about the machine at all anymore, it’s about the survival of Theranos, for which there was only one elixir - more capital.

I really, truly believe that most people in these frauds never intended to defraud anyone. They started out generally honest, but as a few failures happened they allowed little deceptions, tiny lies, to keep it rolling. And then they needed two lies to support the last. Then four. Eight. And they started to lie to themselves. Now sixteen lies, and thirty-two. Panic sets in. They start to act like criminals, because now they are.

Jerry never wanted anyone to get hurt.

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Interesting point. Basically a “Cargo Cult” business model. If you make it look like a successful tech company, it will become a successful tech company. Which worked just as well as it did for the S. Pacific islanders.

Yet, there seems to be too much “planning” going in to fend off probes that it really does seem like it was known to be a fraud ahead of time.

As to “exit strategy”: maybe it’s like The Producers. Take in a lot of money, skim some money to safe places, go bankrupt, hope no one goes looking for all the money.

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This whole fiasco keeps getting more fascinating to me the more i think about it. But so far i’ve only seen the HBO doc, and not yet read the book or consumed the podcast. One thing puzzling me: According to the Wikipedia page on Theranos, a group called Fortress Investment Group loaned another $100 Million to Theranos in December 2017, more than 2 years AFTER the WSJ article exposing them! Does the book or podcast go into this at all? Was there still some thin hope that Theranos actually had any kind of viable product?

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The Wikipedia article mentions that the Fortress investment was secured by the patents, so perhaps they thought there was still some value there? Perhaps they thought this was a good way to secure the patents cheaply?

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Dewey Finn’s theory seems plausible. Wikipedia’s entry on Fortress shows that it previously invested in a German patent troll. This article from Marginal Revolution suggests that Theranos’s patents could be lucrative only to patent trolls.

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Thanks for the good posts, Stranger and RickJay! While noted as opinion, they make a lot of sense for what occurred.

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Last night, I watched “The Inventor”, the film by Alex Gibney. It was interesting to see all the footage from when Theranos was on top of the world.

That passage where they showed multiple instances of Holmes reciting the heart-rending anecdotes from her youth with the exact same words and cadences was a very convincing way of demonstrating that she was bullshitting people for a long time.

Stanford professor Dr. Phyllis Gardner is a voice of reason who knew Holmes early on, and figured her out long before most.

I was a little surprised to learn that Sunny Balwani was described as being deferential to Holmes. He had been portrayed as a kind of Svengali, but it sounds like she was calling the shots.

As an aside, I’d heard criticism that the filmmakers used re-creations to demonstrate how the Edison machines were not reliable: vials breaking and blood spilling over the floor. When these passages came on (narrated by former employees) it never for a moment occurred to me that the filmmakers were fraudulently portraying them as actual footage taken at Theranos. A company that key-logged its employees sure as hell wouldn’t have allowed filming of its malfunctioning equipment.

I was happy to learn that the family of George Shultz had reconciled. John Carreyrou’s book told the story of the rift Holmes created between them, and had apparently gone to press before Schulz realized that his grandson Tyler Shultz was right about Holmes, and that they had all been subjected to a level of deception he hadn’t imagined possible. The 94 year-old former Secretary of State appears remarkably alert.

If Holmes doesn’t deserve jail time, I can’t think of a white-collar criminal who does.