Theranos, The Trial of Elizabeth Holmes closes, ch. 15: she believed! in the technology!

The defense returned to their closing arguments on Friday. According to lead defense attorney Kevin Downey, not only did Holmes appoint a stellar board, but also the evidence showed that she believed intensely in the Theranos technology changing the world.

  • Holmes stayed till the end trying to save the company–because she believed in improving healthcare
  • She continued to improve the company and the technology, but after all that she didn’t realize…
  • …that the labs had problems until March 2016, when her very last lab director, Kingshuk Das, MD, invalidated 60,000 lab tests made on Theranos labs in 2014-2015.
    • This happened only after CMS sent a deficiency report notice to Dr. Das’ predecessor with the subject line  “CONDITION LEVEL DEFICIENCIES – IMMEDIATE JEOPARDY.” And that lab directors and techs had already told Holmes about problems with the Edison labs.
  • The proof of her sincerity? If she committed fraud, she would have sold her stock while it still had value, and jumped ship like a scared rat!

Interestingly, Downey made no mention of Sunny Balwani, except that Holmes fired him in 2016. No mention of all the time spent in her testimony depicting Balwani as a mentally and physically abusive Svengali, which led Holmes-as-Trilby to not be in control of herself as CEO, even after he departed.

The prosecution returned for rebuttals. John Bostic countered the defense claim of Holmes’ belief with “the disease that plagued Theranos wasn’t a lack of effort, it was a lack of honesty.” “We see a CEO of a company who was so desperate for the company to succeed, so afraid of failure, that she was willing to do anything.” Bostic also reminded the jury that they needed to put Holmes’ claims of emotional abuse by Balwani aside since there was “no evidence connecting the allegations of abuse with the actual charged conduct.” 

Judge Edward Davila, in winding up 14 weeks of trial, then charged the jury to avoid consideration of or speculation on the abuse, and to disregard both public opinion and Holmes’ place in society. They could consider whether Holmes had a “good faith belief” in the truth of her statements. The jury will return Monday morning to start deliberations. The fraud charges include conspiracy between Holmes and Balwani against patients and investors. Two more charges are related to patients receiving erroneous test results on HIV infection and prostate cancer. One is on fraudulent marketing and advertising. Six more charges are about investor fraud. 

AP, Mercury News (paywall–refresh to read)

Because it’s the weekend, your Editor will include two extra articles. The Verge article reads something like a screed against our legal system valuing money fraud over patient medical fraud. The NY Times article is on the latest Holmes makeover. During the trial, she changed from hard-edged, black turtleneck, red-lipsticked Lady Steve Jobs to suburban-junior-manager-working mom in off the rack wrinkled skirts, peachy pink lip color with curled but messy hair, carrying an inexpensive baby bag. All calculated by her defense to create an illusion of innocence and, this Editor would add, incapability of any dastardly acts, such as financial and medical fraud.

To be continued…

TTA’s earlier coverage: Chapter 14, Chapter 13Chapter 12Chapter 11Chapter 10, (10-13 recap the Holmes testimony); Chapter 9Chapter 8Chapter 7Chapter 6Chapter 5Chapter 4 (w/comment from Malcolm Fisk)Chapter 3Chapter 2Chapter 1

Theranos, The Trial of Elizabeth Holmes closes, ch. 14: was it fraud over business failure–or building a company, not a criminal enterprise?

The flat spin starts as the trial winds up. On Thursday, the prosecution presented its closing argument to the jury, and the defense began its summary which will finish on Friday.

The key prosecution points made by Assistant US Attorney Jeffrey Schenk were:

  • Elizabeth Holmes’ decisions were all hers. She first defrauded investors, then deceived patients.
  • “She chose fraud over business failure. She chose to be dishonest with investors and with patients.”
  • Elizabeth Holmes was not a young, naive CEO. She had headed Theranos for nearly a decade. But it was ‘a house of cards.’
  • A decision about Sunny Balwani’s abuse is not pertinent to the case and does not have to be made to reach a verdict. 
  • That has to be made on whether this was deliberate investor and patient fraud.“Ms. Holmes knew these honest statements would not have led to any revenue,” Schenk said. “She chose a different path.”

Mr. Schenk reviewed the testimony of all 29 witnesses and statements made by Holmes herself, with the specific aim of refuting every defense point made about her not being aware that the technology didn’t work, or that she was not in charge of the marketing, advertising, business development, partnerships, and finances. He put a very fine and obvious point on it with a chart for the jury entitled “Knowledge of falsity,” which listed her false statements alongside exhibits.

Enter the defense, represented by Kevin Downey. He started by telling the jurors that they had a high burden of proof in finding Holmes guilty “beyond a reasonable doubt”and that crucial information was left out of the government’s case. It was ‘incomplete’ and that their opinion would change with his review of the evidence. Holmes acted ‘in good faith’. In that review, Downey provided illustrations of 11 successful partnerships Theranos had with drug companies. As to the board, he pointed out that they were not cronies who one would expect in a fraudulent enterprise; “She appointed these people, an incredibly illustrious group of people.”

The defense continues on Friday. The jury will be given instructions after the defense concludes, and it’s expected they will have over the holidays to deliberate. MercuryNews (paywalled but refresh repeatedly to view), CNBC, The Guardian

To be continued….

TTA’s earlier coverage: Chapter 13, Chapter 12Chapter 11Chapter 10, (10-13 recap the Holmes testimony); Chapter 9Chapter 8Chapter 7Chapter 6Chapter 5Chapter 4 (w/comment from Malcolm Fisk)Chapter 3Chapter 2Chapter 1

Theranos, The Trial of Elizabeth Holmes, ch. 11: Holmes’ widening gyre of diffusion of blame–and abuse

Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.

The Second Coming, William Butler Yeats 

Elizabeth Holmes’ defense continues its strategy of deflection, diffusion of blame, and now psychological abuse. Ms. Holmes and her defense hit its stride today with Holmes recounting, in this lurid Mercury News headline, “Theranos president Balwani forced sex on Holmes, she testifies” (PDF attached if paywalled). This is far more interesting and clickbaitable than, say, her fan dance around regretting tacking on Pfizer and Schering-Plough logos on falsified reports, or denying that she ever said to investors, repeatedly, that the Theranos labs were being used by the US military in medevacs and in the field. The jury, ground down to numbness by the prosecution’s mile-high-pile of false documents and claims, surely woke up with Holmes’ upset and tears on the stand.

It started with her meeting Sunny Balwani on a trip to China when she was 18 (and he was 38), entering and then departing Stanford because she had been raped, compensating by dedicating herself to developing her high school idea on blood testing, and moving in with him. There was more than a bit of Svengali dynamic here, with her quoting Balwani’s rough talk of transforming her into ‘the new Elizabeth’ who’d be savvy about business and successful, versus “I didn’t know what I was doing in business, that my convictions were wrong, that he was astonished at my mediocrity and that if I followed my instincts I was going to fail, and I needed to kill the person who I was in order to be what he called the new Elizabeth”. She needed to work seven days a week, eat prescribed crunchy vegetables and grains (reading like a trendy SF restaurant menu), and see her family less. He would guide her and tell her what to do.

Holmes looked up to Balwani as a successful entrepreneur; he had joined a reverse auction startup called CommerceBid, eventually becoming president, and cashed out with $40 million as part of its $200 million sale to Commerce One in 2002. Between that and Theranos a few years later, however, Balwani left nary a shadow on Silicon Valley. At Theranos, Holmes became the public founder/face and Balwani the behind-the-scenes business planner–plus a bare knucks ‘enforcer’ on the daily life of the company, according to John Carreyrou. Business Insider

The rest of the story is about Balwani’s getting rough with her when she ‘displeased’ him, rough enough to be hurt, swollen, and not able to get up, in her account from a 2015 incident. She moved out the following year and he left the company in May 2016. Not all Pygmalion stories end well and all too often, they end like this.  

Yet the prosecution has provided another pile–of texts between Holmes and Balwani which, in between the mundane, are effusive in pronouncements of eternal love and support. These continued after his departure. Business Insider and full texts here

The defense has its own pile of deflection going, with the aim of creating doubt that Holmes was really at the center of the fraud, and more of a pawn, in Holmes’ own words:

  • Balwani was in charge of the financial projections and operations. Holmes testified that Balwani’s financial modeling produced discrepancies in revenue projections in 2014 and 2015. The Walgreens relationship also cratered at that time. This reinforces the defense opening back in September that relying on Balwani as president was one of her mistakes.
  • Validation? Adam Rosendorff, a former lab director, was less than competent [TTA 6 Oct]
  • Not disclosing about using third-party devices? A ‘trade secret’ recommended by legal counsel.
  • And the marketing/PR claim about Theranos using only ‘a single drop of blood’? (And all that ‘passionate intensity’ Holmes exhibited at investor conferences and interviews?) Blame TBWA/Chiat/Day, the ad agency! And Patrick O’Neill, who went from executive creative director there to creative director of Theranos and prepped her for the press including her 2014 TED speech. (Take a trip back and watch a few Theranos spots, courtesy of Refinery29. High on image, low on reality.)

Diffusion of responsibility is common in fraud cases. Wired quoted David Alan Sklansky, a professor of criminal law at Stanford. “It’s probably the most common kind of defense mounted in cases involving allegations of large-scale financial fraud,” he says. “Whether it works depends on how credible it seems to the jury.”

The hazard is that it makes Holmes appear incompetent, but incompetence beats 11 counts and 20 years in Club Fed.

What is the jury to believe about her competence? From the Mercury News again: “Asked by Downey whether Balwani ever forced her to make statements to investors or journalists that the prosecution has focused on, or whether he controlled her interactions with board members or executives from companies Theranos sought to work with, she said no. Asked what impact her relationship with Balwani had on her work, she responded, “I don’t know. He impacted everything about who I was, and I don’t fully understand that.” Holmes made statements on her own, frequently and over many years. She stated she wasn’t controlled by Balwani when it came to the board or business partnerships–and continued running the company after his departure and attempting to fix a myriad of problems. But what will the jury take away from this day? This, or Sunny getting blue on her?

Also Fortune 23 Nov and 25 Nov

To be continued…

TTA’s earlier coverage: Chapter 10, Chapter 9Chapter 8Chapter 7Chapter 6Chapter 5Chapter 4 (w/comment from Malcolm Fisk)Chapter 3Chapter 2Chapter 1

Theranos, The Trial of Elizabeth Holmes, ch. 8: choosing investors with more money than sense a winning strategy

The prosecution continues to pile up defrauded investors–but this one may backfire on them. Alan Eisenman invested about $1.2 million in Theranos in 2006 on behalf of himself and his family–after a five-minute phone call with Elizabeth Holmes. As an early investor, he also believed he was entitled to special treatment, such as direct talks with Holmes, frequent enough to the point where she offered to buy out his shares for five times their value and cut off contact. 

Later, he had other opportunities to sell his shares up to nearly 20 times their purchase price, but held on stating he didn’t have enough information on what was apparently a ‘liquidity event’. Lack of information was a persistent red flag, with gaps in communication from 2010 to 2012 and a contentious relationship with Sunny Balwani. Despite this, when Theranos needed money in 2013, he then invested an additional $100,000 despite no audited statements since 2009. This last investment became one of the government’s counts of wire fraud.

In his testimony, Eisenman testified that like others, he was initially impressed that Oracle founder Larry Ellison was involved with the company and that Theranos had contracts with six international pharmaceutical companies including Pfizer and Novartis–which was blatantly false.

This incredible narrative becomes more understandable when you understand Holmes’ strategy of choosing only ‘high-quality investors’ of the family fund sort. She targeted funders who weren’t knowledgeable and meticulous in examining the company books and the technology. The funders were also oh-so-socially connected. According to The Verge, Eisenman was ‘wired’ into Theranos–“he was friends with the Holmes’ family’s financial advisor [David Harris], who had also invested. Plus, his wife’s father, who had also invested, was friendly with [Bill] Frist, who was on the board.” Eisenman contacted Frist as well when he was essentially cut off from Holmes about 2010. 

Surely Eisenman was entitled to be upset and more than a little embarrassed, as a former money manager and financial planner. But then his actions dealing with the prosecution left a Mack truck-sized opening for the defense on the cross-examination. He sent an email to the prosecution team perhaps 15 hours after he finished his direct examination last Wednesday, strictly against instructions. He did it again on Friday, ostensibly about travel plans. An assistant US attorney called him to remind him not to contact them again. The defense leveraged this into the compromising position of being biased against Holmes beyond his actual loss, for instance a purported statement he made “upon entering the courtroom” about wanting Holmes to go to prison.

Coming so late in the trial–the prosecution may rest this week–the abrasive impression that Alan Eisenman left may leave an opposite impression on the jury that favors the defense interpretation of naïve investors who didn’t do their due diligence homework, and by extension, deserved to lose their money. CNBC 15 Nov, 10 Nov

To be continued….

TTA’s earlier coverage: Chapter 7, Chapter 6Chapter 5Chapter 4 (w/comment from Malcolm Fisk)Chapter 3Chapter 2Chapter 1

The Theranos Story, ch. 72: a little lifestyle and celebrity is admissible at trial–but not too much. And no profanity, please!

The long-awaited update from the US District Court in San Jose. Judge Edward Davila ruled last Friday limiting the specifics on Elizabeth Holmes’ lifestyle that the prosecution wanted to present as evidence. Only general evidence of Elizabeth Holmes’ Silicon Valley CEO lifestyle would be admissible. The prosecution, in his words, “Each time Holmes made an extravagant purchase, it is reasonable to infer that she knew her fraudulent activity allowed her to pay for those items,” but that “Evidence of Holmes’s wealth can be construed as ‘appeals to class prejudice’ which are considered ‘highly improper’ because they ‘may so poison the minds of jurors even in a strong case that an accused may be deprived of a fair trial.” To the judge, evidence of Holmes’ wealth and fame are not even moderately related to the intent to defraud, the last of which is the heart of the charges.

The prosecution therefore has to walk a very fine line. It’s apparently fine to say that Holmes enjoyed a luxurious lifestyle equivalent to her Silicon Valley peers, with the usual perks. But details on brands of clothing, hotels, and other specifics “outside the general nature of her position as Theranos CEO,” is beyond the scope of the trial.

Judge Davila may be doing the prosecution a large favor by limiting this evidence. Too much reliance on lifestyle as the main motive to defraud is a crutch that could backfire with the jury, especially when they see in August a modestly dressed new mother Holmes. It could also open up an appeal on the basis of prejudicing the jury. To this Editor, there is abundant direct evidence of fraud of patients and investors in a technology that didn’t work, never could work, and the coverup. No need to overegg the pudding. Mercury News

And no profanity in the court! The jury will be spared the infamous employee meeting chants telling a rival testing company (Sonora Quest) and John Carreyrou of the Wall Street Journal to do something unprintable in a business article with themselves. The defense won the argument that these chants were the Silicon Valley Norm to motivate employees. Even the prosecution admitted that these might be “somewhat inflammatory”. Colorful, but inadmissible.  Mercury News

And lest we forget. Holmes is facing maximum penalties of 20 years in prison and a $2.75 million fine, plus possible restitution. The trial starts 31 August. Earlier chapters of this saga are here.

The Theranos Story, ch. 71: Holmes appears in court, lawyers argue celebrity, lavish lifestyle, Silicon Valley ethics

After 15 months, Elizabeth Holmes puts in her Day in Court. Last Tuesday’s and Wednesday’s hearings in US District Court in San Jose were not virtual, but in court–and with Ms. Holmes present. The arguments between counsel were about what would be admissible; the relevance of her lifestyle (fine dining, houses, private jets), her wealth, spending, and celebrity to the charges of criminal fraud, first of hundreds of millions of dollars by investors plus patients and doctors with false claims that the Theranos labs actually gave accurate readings.

The defense argued that admitting information on the lifestyle and spending behavior would be inflammatory and prejudicial to the jury. The travel, the perks, the company-paid-for services were there because she was traveling on company business. Her stock was never sold and her salary at $200,000 to $390,000 (per SEC) was actually low for her peer group. To a certain degree, Judge Edward Davila agreed with the defense. Being in Silicon Valley, home of tech high flyers and Sand Road investors, Judge Davila said to the prosecution, “It seems like that’s designed to engage a class conversation amongst the jurors which I think you’d agree would be a little dangerous. What’s the value of, ‘Did she stay at a Four Seasons versus a Motel 6?” The prosecution countered that information regarding the increasing value of the stock and Holmes’ billionaire lifestyle largely funded by the company, more so than her salary, is relevant to the continuing fraud. “The perks that she is enjoying greatly reduce the pressure on her to cash in, sell stock and make more money.” And, one could say, to come clean and end the fraud around their technology.

According to the Mercury News, Judge Davila said he would rule on the dispute over lifestyle and compensation evidence later. The trial is scheduled to start 31 August. CNBC video, 5 May, 6 May  

QuivvyTech: a ‘telehealth’ company, sued by Humana in telemarketing scheme (US)

It was inevitable–the first alleged fraud and lawsuit involving a ‘telehealth’ company. The interestingly named QuivvyTech, which has styled itself as a telehealth company with “virtual care in general medicine, mental health, and complex care”, has been sued by insurance giant Humana. The grounds are that QuivvyTech telemarketers cold-called Humana members, who are generally members of Medicare plans, asked them about common ailments, and claimed they were working with Humana. They then recorded information that was sent to QuivvyTech physicians who would prescribe the members pricey and unnecessary creams (content undisclosed) fulfilled by co-conspirator pharmacies with QuivvyTech. The physicians listed in the suit electronically signed prescriptions for the members without reviewing patient history or having a prior relationship with the patient.

Humana not only is alleging harm in the payer-member relationship, but also lost millions in fraudulent claim payments for visits and medications. 

The lawsuit by Humana seeks treble damages, plus interest and fees, from QuivvyTech. It was filed in the US Southern District of Florida as many of the scammed members lived in Florida. QuivvyTech is based in Boca Raton.

Defendants in the suit include Frank Michelin, associated with QuivvyTech; Reliable Medical Supplies and Reliable Document Solutions, a telemedicine company with about 200 physicians; and physicians Jeffrey Mahon, MD, Elie Hercule, MD, Samuel Teniola, MD, Louis Mojicar, MD, Ananda De Silva, MD, and Jeffrey Stern, MD.

One wonders where QuivvyTech obtained Humana members’ phone numbers and information. 

QuivvyTech is still recruiting for physicians on job boards such as ZipRecruiter and StaffPhysicians.com. Becker’s Hospital Review, Healthcare Finance, Fierce Healthcare

Outcome Health founders Shah, Agarwal plead not guilty in Federal court

As expected, the co-founders of in-office health information/advertising firm Outcome Health today (Monday) pleaded not guilty in the Northern District of Illinois Federal Court in Chicago. Of a total of 26 counts in the Federal indictment, Rishi Shah, the company’s former CEO, has been charged with six counts of mail fraud, 12 counts of wire fraud and two counts each of bank fraud and money laundering. Shradha Agarwal, the former president, has a somewhat lighter charge count of six counts of mail fraud, nine counts of wire fraud and two counts of bank fraud. Both were released on bond: $20 million for Mr. Shah, $10 million for Ms. Agarwal. Crain’s Chicago Business, may require free registration.

The charges relate to deception layered around company performance as detailed in our 3 December article–overstatement of advertising placement and delivery, manipulating third-party data on patient engagement on Outcome’s tablets, and fraudulently stating results to auditors. This was used to leverage nearly half a billion of a total $1 bn raise by major firms such as Goldman Sachs, Alphabet, and the Pritzker fund.

Last week, we covered the pleas of Ashik Desai, former EVP of business operations/chief growth officer (guilty) and Brad Purdy, former COO/CFO (not guilty). Mr. Desai, interrupted from his graduate studies at Wharton, is cooperating with the prosecutors; Mr. Purdy is blaming Mr. Desai.

A podcasted discussion on Crain’s Daily Gist has expressed the opinion that some in tech and healthcare, especially in Chicago, believe the list of charges and heavy penalties are ‘unusual’ and ‘extreme’ for a startup, considering that the revelations started four years ago, the accused stepped down two years ago. and restitution has been made to the defrauded companies. Moreover, the business and the model was not far fetched or pie-in-sky–it was a reasonable model, according to report John Pletz. The company continues in business, albeit scaled down. Mr. Pletz believes that the outcome of Outcome Health will be far more due diligence on investors’ part (accentuated by the WeWork/Softbank crash in the same car) on startups. “Failure is expected–fraud is not.” The resolution of the charges will also be far in the future, perhaps years, due to this being an extraordinarily complicated case. There will be further hearings in January, but do expect it to drag on. A mini-surprise in his commentary was stating that the analysts may turn their plea to guilty. 

The Theranos Story, ch. 54: cue up ‘Tainted Love’ in the courtroom

[grow_thumb image=”https://telecareaware.com/wp-content/uploads/2018/07/Rock-1-crop-2.jpg” thumb_width=”150″ /]Tainted Love, Labs, and Lucre Indeed. Drop the needle on the Gloria Jones version from 1964 or the Soft Cell version from 1981.

Consider that the very fates of Ms. Elizabeth Holmes, the now not-so-Sunny Balwani, and the formerly $9 bn Unicorn Theranos may hinge on the nature of their personal relationship and its influence on the governance of the company.

There are two legal actions against the company and the two principals, one by the DOJ for criminal fraud [TTA 16 June] and by the SEC on (civil) securities fraud [TTA 15 March].  Both are out on $500,000 bail on the DOJ charges. The possibilities on the latter can be up to 20 years in Club Fed, plus $250,000 in fines and clawing back of investor funds, if any can be found.

While Ms. Holmes settled with the SEC, paying a fine and exiting the company, Mr. Balwani did not and is fighting the charges, though this declaration was made before the DOJ charges.

Bloomberg Markets brings up an interesting set of dynamics which can play well with potential jurors and make the prosecution’s case far more convincing for a Northern California jury. To wit, in 2009 when she started running out of money, Ms. Holmes turned to Mr. Balwani, her boyfriend, for a $12 million line of credit. In return, he became president and COO. The nature of their relationship was kept strictly hush-hush to the board and investors. Secrecy was ratcheted up at the company and management started to break down. And the timing: a week after Mr. Balwani left, the news of bad patient test results and problems with their lab started to break big.

Jurors, even in Silicon Valley, love drama and personal intrigue–especially the type that underscores deception and $900 million in fraud perpetrated by a Stanford dropout who clumsily attempted to channel Saint Jobs and a somewhat schlubby dude who Should Have Known Better. Far more than gullible corporate suits at Walgreens and hedge funds….add to it the personal stories of patients harmed by bad Theranos tests and you get an emotional story worthy of Law & Order.

Do expect Ms. Holmes to bring up her Saint Joan if not a female Saint Sebastian analogy. Burning at the stake versus being shot full of arrows are too memorable images which she’ll try out. Add a #MeToo spin of a young woman coerced by an older man–a tale of at least tit-for-tat to get the $12 million. 

The rompin’ soap opera is likely to start next year. Stay tuned…. 

The Theranos Story, ch. 52: How Elizabeth Holmes became ‘healthcare’s most reviled’–HISTalk’s review of ‘Bad Blood’

[grow_thumb image=”https://telecareaware.com/wp-content/uploads/2018/07/holmes-barbie-doll-1.jpg” thumb_width=”125″ /]A Must Read, even if you don’t have time for the book. During the brief Independence Day holiday, this Editor caught up with HISTalk’s review of John Carreyrou’s ‘Bad Blood’, his evisceration of the Fraud That Was Theranos and The Utter Fraud That Is Elizabeth Holmes. Even if you’ve read the book, it’s both a lively recounting of how the scam developed and the willingness–nay, eagerness!–of supposedly savvy people and companies to be duped. The reviewer also reveals that Mr. Carreyrou wasn’t the first to raise questions about Theranos after raves in the press and kudos from the prestigious likes of Eric Topol. Mr. Carreyrou’s first article was in October 2015 [TTA 16 Oct 15] whereas Kevin Loria wrote the first exposé in Business Insider on 25 April 15 which raised all the fundamental questions which Theranos spun, hyped, or otherwise ignored–and Mr. Carreyrou eventually answered. (Our blow by blow, from him and other sources, is here.)

The review also picks out from the book the scabrous bits of Ms. Holmes’ delusions; her makeover to become the blond Aryan female Steve Jobs mit Margaret Keane-ish waif eyes–something she took far too literally; the affair between her and Sunny Balwani, certainly in violation of the usual ethics–and her Hitler in the Bunker, April ’45 behavior as Theranos collapsed around her. 

The review concludes by telling the healthcare community something we need said plainly, often, and written in 50-foot letters:

Theranos is a good reminder to healthcare dabblers. Your customer is the patient, not your investors or partners. You can’t just throw product at the wall and see what sticks when your technology is used to diagnose, treat, or manage disease. Your inevitable mistakes could kill someone. Your startup hubris isn’t welcome here and it will be recalled with great glee when you slink away with tail between legs. Have your self-proclaimed innovation and disruption reviewed by someone who knows what they’re talking about before trotting out your hockey-stick growth chart. And investors, company board members, and government officials, you might be the only thing standing between a patient in need and glitzy, profitable technology that might kill them even as a high-powered founder and an army of lawyers try to make you look the other way.

In other words, what you (the innovator, the investor) is holding is not a patient’s watch, it could be his heart, lungs, or pancreas. (Musical interlude: ‘Be Careful, It’s My Heart’)

The Theranos Effect is real in terms of investment in small companies out there on the ‘bleeding edge’. The cooling is mostly salutory, and we’ve been seeing it since late last year (see here). But…will we remember after it wears off, after the fines are collected, the prison time is served?

The Theranos Story, ch. 51: how Holmes wasn’t Steve Jobs despite the turtlenecks–a compare and contrast

[grow_thumb image=”https://telecareaware.com/wp-content/uploads/2016/11/jacobs-well-texas-woe1.jpg” thumb_width=”150″ /]Did Elizabeth Holmes ‘misunderstand’ Steve Jobs’ methods or was there something more deliberate at work? This article by tech entrepreneur Derek Lidow in Forbes gives her the benefit of the doubt but is still damning. His points in summary are:

  • Holmes ran Theranos with zero knowledge of how to run an organization, and ran Theranos like a dictator. Hiring people with real expertise came late in the day, and most of them left once they realized her style. Jobs knew he couldn’t run a company, generally hired the right people to do so, and then let them run it.
  • Jobs teamed with a genius engineer named Steve Wozniak in Apple’s formative years, and the Woz guided Jobs as much as anyone at numerous critical stages. Woz was the balance to Jobs, the behind the scenes versus the on-stage. Holmes did not work with anyone in that way, which is atypical for startup founders. Her co-founder was unqualified, she didn’t listen to her staff as problems came up, and her board was a waste of titles and people who were either wholly capable in other fields or superannuated.
  • Holmes’ goal of mini-blood assays was impossible, and she was unlike other visionary founders to pivot to what was possible. Jobs tempered his vision by using methods and technologies which already existed to leverage Apple into what he envisioned. (Jobs also had his fair number of stumbles, such as the Newton tablet where the vision exceeded the available technology. It was also too advanced, violating the Raymond Loewy maxim of ‘most advanced yet acceptable’.)
  • Delighting the customer? Where Jobs excelled in this not only with end users but also with developer partners, Holmes failed and more. With deceptive blood testing, she hurt sick patients and doctors who depended on accuracy. The vision and her self-promotion were far more important. She wasn’t doing this for people–she was doing this for herself.
  • Holmes was over the top on compartmentalizing Theranos’ technical development, straight to failure. Teams on the same project didn’t share knowledge or fundamentally communicate with each other. This led to bad testing of only parts of the system, not the whole system. While Jobs kept a tight lock on exposing Apple developments until they were ready, department teams on a given project intensively shared information. 

Wearing the black turtleneck, being a young female, blond, and with enhanced blue pop-eyes akin to a Bug-Eyed Austin-Healey Sprite can get you noticed, but then you have to deliver the goods for that $900 million you raised. Holmes was inexperienced and psychologically ill-equipped to be a tech founder. This Editor also wondered if she (literally) garbed herself in Jobs’ exterior trappings to deceive and gull everyone from the mighty and rich to the ordinary and often sick. (And now she tells people she is a marytr akin to Saint Joan?)

The Theranos Effect, for which Holmes is responsible, will sadly continue to hurt not only early-stage healthcare innovators but also the few women among them. The Theranos Scandal: What Happens When You Misunderstand Steve Jobs