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  1. Business
5 January 2022

Elizabeth Holmes didn’t exist, so it was necessary to invent her

The Theranos founder and convicted fraudster sold wealthy investors a compelling story of genius, determination and success.

By Will Dunn

When Steve Jobs revealed the first iPhone to the world 15 years ago this week, he had several handsets on stage with him. He wasn’t sure they would work: they crashed unless used in a very specific way. They couldn’t connect to wi-fi or a mobile network properly, so they trailed long wire aerials and their displays were doctored to show full mobile signal. None of the handsets could play a song or a video all the way through. It was a huge gamble, but a necessary one: Nokia, Sony, Palm and others were already selling phones as touchscreen computers, music players and cameras. The opportunity Jobs saw was that these devices would be transformative, and that he could be first to sell the story of a company changing the world.

Elizabeth Holmes, who was convicted on 4 January for wire fraud and conspiring to commit fraud against investors, was such a committed disciple of Jobs that she impersonated him, wearing the same clothes, decorating her office in the same way, following the same diet and adopting a deeper voice. Like Jobs, she dropped out of university and set up a company. Ten years after she founded her blood-testing start-up, Theranos, she was described by Inc. magazine as “the next Steve Jobs”.

Silicon Valley needed a new Steve Jobs, partly because Jobs had been dead since 2011, but also because he had been the archetype of one of Silicon Valley’s most valuable commodities: the visionary CEO, whom only the most visionary venture capitalist can find, whom only the most visionary investor has chosen to find.

Better yet, Holmes was a female Steve Jobs. By the late 2000s, it had become painfully obvious that the visionary-industrial complex was almost exclusively male. To change the culture of tech – an industry that continued using “booth babes” at its largest trade show, CES, until 2019 – would have been very difficult; to change the systemic imbalances that mean female-founded companies receive just 2 per cent of venture capital would have been next to impossible. To a group primed to accept the Steve Jobs archetype, and in search of a less sexist public image, a woman who literally dressed up as Steve Jobs was strangely perfect.

The culture of Silicon Valley was also primed to accept products that didn’t work, or didn’t even exist. The long tech boom of the last 40 years was built partly on vapourware – devices and software that take years to arrive, or are never built. In a secretive industry that trades in huge promises, the temptation to sell the story and let the product wait has been a business model since at least 1983, when Ovation Technologies unveiled a suite of office software that could have been world-changing, had it existed.

For venture capitalists and other early investors, this isn’t exactly a problem. Such people make lots of bets on companies that are only at the storytelling stage. They expect most of these bets to lose money, and hope that one or two will be the next Apple, the next Facebook. If it becomes the next Uber and raises tens of billions at IPO, it doesn’t even need to make any money (from anything so old-fashioned as a customer). 

A biotech company led by an odd young woman was exactly the right kind of story for a culture in which every product claims to be world-changing. Aged nine, Holmes wrote to her father (or so she later claimed) that she planned “to discover something new, something that mankind didn’t know was possible to do”.

It helped, too, that Theranos and its enigmatic founder were deliberately obscure: the company spent its first ten years without so much as a website. The less that was known about its product, the more compelling the story it suggested when Holmes trained her notoriously intense stare on Rupert Murdoch, Betsy DeVos and Henry Kissinger. Whether she intended to defraud them, or whether she thought her Edison device would really work, she told some of the world’s biggest individual investors exactly what they wanted to hear.

John Carreyrou of the Wall Street Journal first reported the truth about Theranos and its machines in 2015, but what might have been a cautionary tale for the technology industry has proved to be the exact opposite. The cartoon-character CEO making wild, unfulfillable promises is no longer a risk but a recipe for success. Elon Musk, who has made this approach a kind of art form, has repeatedly claimed that he plans to build a city on Mars, which has no breathable atmosphere, no ozone layer to absorb lethal radiation, and is 350 million kilometres away. To deliver a robot the size of a small car to Mars costs hundreds of millions of dollars. It is obviously not true that this city will be built, but the story that buying a Tesla is a step in this direction helps sell Tesla’s cars and, more importantly, its stock.

For each of these exceptional characters there is a common destiny: the great man (and very occasionally, the great woman) must be seen not only to change the world, but to save it.

Against such hyperbole, the idea that cheap, no-fuss blood tests could one day be available in supermarkets – an idea on which a number of other start-ups are still working – seems almost quaint. Had Theranos been founded a decade later, it might have been a very different story.

The mistake made by Elizabeth Holmes was arguably not that her machine was a fake, but that she tried to sell it in the real world long before it became real. Perhaps her downfall was that after so many years creating a story about herself and her company, she came to believe it.

[See also: The goodness business: how woke capitalism turned virtue into profit]

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