Professionalism/Tyler Shultz, Elizabeth Holmes, and Theranos
Elizabeth Holmes and the Beginning of TheranosEdit
Elizabeth Holmes is the founder and CEO of Theranos. Holmes attended Stanford, but dropped out after her sophomore year to found Theranos in 2003 at the age of 19. Holmes wanted to revolutionize the world of medicine. She envisioned herself in the mold of Steve Jobs, an incredible innovator and entrepreneur. The idea behind Theranos was simple: the company would be able to run more tests using less blood and at a lower cost. Since Theranos would allow blood tests to be performed more quickly and less expensively, it would revolutionize healthcare. Doctors would be able to order multiple blood tests on the same small blood sample. And since doctors received the results quicker, they would be able to diagnose their patients quicker. Theranos would be able to bring affordable, personalized healthcare to millions of Americans who can not currently afford it.
Investors in Silicon Valley were swept off their feet by Holmes and Theranos. Venture capitalists wanted to join in the next big company, and Holmes, with her Jobs like demeanor, offered them that chance. Through 2014, Theranos raised $400 million in investments and was valued at over $9 billion. Since Holmes owned over half of the company, she became very rich. At the age of 30, Holmes became the youngest self-made female billionaire in America. Holmes was an industry darling. She was featured on the cover of Forbes and Fortune magazine, and did the rounds on television interviews.
The culture around Theranos revolved around secrecy. Sunny Balwani was hired in 2009 as the company's president and Chief Operating Officer but also acted as the company's enforcer. If employees would ever question the accuracy of the tests, it was Balwani who would approach them in person or via email. He made sure that the scientist and engineers of Theranos never interacted or shared information. People who managed to gain a job interview at Theranos had no idea what position they were applying for. Applicants only found out about the job description when they were hired. Any employee who spoke out against the company were met with legal threats immediately. Former employees who attempted to write job descriptions on their LinkedIn pages received letters from lawyers. The level of secrecy extended outside the company as well. Nobody knew how the technology even worked. In an interview with the New Yorker, Holmes was asked to describe how the technology worked. Her response: "a chemistry is performed so that a chemical reaction offcurs 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."
Aside from the high level of secrecy, the board of directors assembled for Theranos was unlike other companies in health care. Holmes hired dozen of older men who had little experience in health care but boasted impressive resumes. The board included Henry Kissinger, former secretary of state, William J. Perry, former defense secretary, and George Shultz, former Georgia senator and chairman of the Armed Services Committee. Even Balwani, the president and COO, had no experience in medicine as he worked previously at Lotus and Microsoft. This board seemed "better suited to decide if America should invade Iraq than vet a blood-testing company."
Theranos faced multiple encounters with whistleblowers. Due to the intimidating company culture, employees were heavily discouraged from talking about any potential problems. Two whistleblowers, Ian Gibbons and Tyler Shultz, spoke out with varying degrees of success.
In 2005, Holmes appointed Ian Gibbons Chief Scientist of Theranos. Gibbons was a British scientist with a background in diagnostic and therapeutic science. Quickly after being appointed Chief Scientist, Gibbons was diagnosed with cancer. Gibbons started to notice that the test results for Theranos technology were incorrect. He believed in Holmes' idea, although he did consider it more of an idea than a working product, and spent time trying to prove that the technology could be functional. Gibbons opposed Holmes' advancing marketing, and told her that he didn't think the technology was ready for mass adaptation, particularly in 2012 when Theranos was looking at a partnership with Walgreens. In 2012, Theranos sued Holmes' neighbor, Richard Fuisz, for allegedly stealing company secrets. Gibbons was subpoenaed but did not wish to testify. He realized that he either had to testify truthfully that Theranos technology didn't work, and ruin Holmes' reputation and the company, or lie under oath, breaking the law and potentially putting consumers at risk. He became vocal about his concerns, and it is rumored that the only reason he was still employed was to keep him from talking to the press. Gibbons' wife, Rochelle Gibbons, claims that Gibbons was terrified of losing his job if he went public with the truth. According to Rochelle, Gibbons was a large obstacle to Holmes' plans to move forward with commercial partnerships. Another source, Channing Robertson (who originally introduced Holmes and Gibbons) claims that Gibbons supported going public with the technology and that he had faith they had enough positive results to move forward. On May 16, 2013, Holmes' office called Gibbons at home. Holmes requested to see Gibbons the next day in her office. Gibbons assumed that he was going to be fired. That night, he attempted suicide. He went to the hospital and died a week later.
Tyler Shultz was working at Theranos in 2014. He was the grandson of a member of the Board of Supervisors, George Shultz. Tyler had been working at Theranos for eight months and was critical of the culture and test results. According to Tyler, Theranos was fabricating test results. He claims that employees were encouraged to throw out bad test results and ignore failures. They were instructed to use the Theranos testing technology, Edison, even though it had an accuracy level of approximately 65% (target accuracy is 95%). Tyler was incredulous that Theranos was knowingly sending false results to its customers. Tyler sent Holmes an email detailing his complaints with the company and quit the same day. In the months following, Tyler was threatened by his grandfather and Theranos lawyers. He claims he was followed by Theranos private investigators who were trying to prove he was breaking his nondisclosure agreement. Tyler did talk to a reporter, John Carreyrou, a writer for the Wall Street Journal, who had become skeptical of Holmes. With the insider information, Carreyrou wrote his first scathing article on Theranos "Hot Startup Theranos Has Struggled With Its Blood-Test Technology." Tyler is currently estranged from his grandfather and his parents have paid over $400,000 in legal fees.
Elizabeth Holmes and Theranos have faced incredible issues since it was revealed that they were faking their testing. Both Holmes individually and Theranos as a company have been banned from operating a blood testing company or facility for two years. Equity in Theranos is essentially worthless. Because of this, Forbes dropped Holmes' net worth from $4.5 billion to zero. In an effort to avoid lawsuits, Holmes offered her shares in the company to shareholders in exchange for a promise not to sue. However, this did not stop Theranos from being sued by multiple parties, from investors to government agencies. Theranos has been forced to settle some of these lawsuits. They reached a private settlement with Partner Fund Management, a hedge fund that invested $96.1 million in the company. Theranos agreed to pay Arizona $4.65 million to refund anyone who paid to take one of Theranos's blood tests, and also reached a settlement with Centers for Medicare and Medicaid Services, the government agency responsible for regulating blood-testing labs.
2003: Elizabeth Holmes founds Theranos.
2010: Holmes has raised $45 million in funding.
May 2013: Gibbons, Theranos' Chief Scientist, attempts suicide and later dies.
Sept 2013: Theranos partners with Walgreens to put their blood testing equipment in Walgreens stores.
June 2014: Theranos has raised $400 million in funding and is valued at $9 billion.
Oct. 2014: Shultz emails Holmes describing his complaints with the company.
Feb. 2015: Theranos receives secrecy critique from the American Medical Association.
July 2015: Theranos receives FDA approval for one test. This remains their only test to be approved.
Oct 2015: John Carreyrou of the Wall Street Journal publishes first scathing article claiming that Theranos' technology does not work as claimed.
Jan 2016: Theranos found to have violated clinical standards.
June 2016: Walgreens ends their relationship with Theranos.
July 2016: Holmes suspended from blood testing business for 2 years.
2017: Theranos facing investigations from FBI, SEC. Holmes offering shares to investors for promises not to sue. Theranos has been forced to settle multiple lawsuits.
There are many lessons that can learned from the rise and fall of Theranos. One can never assume the due diligence has been done by Board Members or high ranking employees, do your homework and trust your instincts. When something is the real deal, let the data and information convince you, not just fancy adjectives and buzzwords.