The biggest scam in Silicon Valley history ended, “Female Jobs” went from altar to annihilation

He was a clown, genius, leader, visionary, industrialist, performer, rogue; Edison (inventor), Barnum (father of modern PR), Carnegie (entrepreneur) and Dr. Manhattan (DC Comics) A crazy mix of superheroes, scientists).

This is how Time magazine described Elon Musk in its 2021 People of the Year selection. Go back in time a few years, and this assessment comes almost unchanged to another Silicon Valley entrepreneur.

She dropped out of Stanford University at the age of 19, turned an idea she sprouted in her dorm room into a product, and took charge of a technology company with a valuation of nearly 10 billion US dollars;

She always wears a high-neck black sweater to show people, is a workaholic and perfectionist, and was selected by Time magazine as one of the 100 most influential people in the world;

When she is questioned by the media, she will respond confidently and dismissively on TV shows: "When you want to change the world, some people will do this to you."

You should not be unfamiliar with these stories. They are simply a mixture of entrepreneurs such as Steve Jobs, Bill Gates, Zucker Berg, and Musk. If there is one person who can gather the souls of so many geniuses, what kind of extraordinary person would it be? genius?

But she is the protagonist of the biggest scam in the history of Silicon Valley – Elizabeth Holmes.

▲ Elizabeth Holmes

Elizabeth once launched a "revolutionary blood testing device", claiming to be able to complete more than 300 blood testing items just by drawing blood from her fingertips.

All of this was finally found to be a scam, and such a skyscraper held up by capital, media, and the public collapsed.

After years of trial, the U.S. District Court in California recently found Elizabeth guilty of four counts . Although the judge has not yet announced the final sentence, each count can be sentenced to a maximum of 20 years in prison, which means that the 37-year-old Elizabeth may spend the rest of her life. spent in jail. (A legal expert does not expect the maximum penalty to be imposed)

Editor's Note: This article was first published in 2019, with additions and deletions.

Becoming a "Female Steve Jobs"

It's not unreasonable that Elizabeth is called "the female version of Steve Jobs."

In middle school, Elizabeth showed her genius side, maintaining all A grades, and was admitted to Stanford University at the age of 17. She also received a monthly research fund of 3,000 US dollars and began to embark on the road of scientific research.

▲ Elizabeth speaking at Pepperdine University

Channing Robertson, dean of the Stanford School of Engineering, Elizabeth's Bole, made an exception for Elizabeth, a freshman, into the lab to work with doctoral students.

During her freshman year, Elizabeth entered the laboratory of the Singapore Genome Research Center. At that time, when SARS was raging, Elizabeth was responsible for detecting the SARS virus in blood samples.

After returning from Singapore, Elizabeth applied for the first patent in her life, a wearable drug injection patch, which surprised President Qian Ning. In the second year, Elizabeth decided to drop out of school to start her own business. Dean Channing not only supported her decision, but also personally served as an advisor to her company's board of directors.

The company founded by Elizabeth is called Theranos, which is a combination of the English words "therapy" and diagnosis (diagnosis).

At this point in the story, you may have seen the growth trajectory of Jobs and Bill Gates. In fact, Elizabeth was a loyal fan of Jobs, and used Jobs as a template almost everywhere in the entrepreneurial process.

Like Jobs, Elizabeth wears the same black turtleneck sweater and slacks in public. To match this outfit, Elizabeth requires the company's air conditioner to maintain a temperature of 15.5 degrees Celsius for many years.

She also deliberately imitated Jobs' deep baritone when speaking. In the HBO documentary, multiple former Theranos employees suspected that Elizabeth's voice was fake because she would be heard when she occasionally slipped and was drunk. sound.

Elizabeth seems to want to imitate Steve Jobs and establish a maverick image. Such people are very popular in Silicon Valley. Elon Musk, who claims to be immigrating to Mars, is one of them.

▲ Elon Musk

So it's no surprise that "changing the world" has become Elizabeth's mantra. When the Wall Street Journal ran a lengthy report questioning Theranos, she responded on TV:

This is what happens to a person who wants to change the world. They call you crazy, then they start hitting you, and you end up changing the world.

Although Elizabeth did not change the world in the end, the shaping of her personal brand image was successful, and she seemed to have the marketing ability comparable to Jobs and a strong storytelling ability.

She spoke emotionally on TED about her original intention of starting her own business , so that people like her who are afraid of needles can receive better treatment, and not let people like her uncle delay treatment because they can't afford the expensive testing costs, "Our loved ones It's going to change, the whole healthcare system, the world is going to change."

What is even more rare is that Elizabeth has also successfully attracted a vote of political and business giants to stand for her.

The then US President Barack Obama appointed her as the US Ambassador for Global Entrepreneurship. On Theranos' board of directors, there are two former US Secretary of State, former US Secretary of Defense, former Chairman of the Senate Armed Services Committee, former Admiral and former Marine Corps General, former Secretary of State George Shultz publicly stated:

This girl is the next Steve Jobs, the next Bill Gates.

At first glance, Theranos’ board looks like a small cabinet. Interestingly, as a medtech startup, the board doesn’t have a single person with a medical background.

When Theranos was questioned, Murdoch, a media tycoon known for his vicious investment vision, invested $125 million in Theranos. Theranos was once valued at $9 billion, and Elizabeth was worth more than $4 billion.

The influx of media began to bring Elizabeth to the altar, "Forbes" named her "the world's youngest self-made female billionaire", "Time Magazine" named her "2015 100 most influential people." Big Shot", Fortune named her "Businessman of the Year", and the cover title of "Inc" was "The Next Jobs"…

Why can receive so than Elizabeth's favor and the media, he has served as a laboratory assistant in Theranos of Erika Cheung in a documentary to tell his own answer:

It's hard to understand her, but I adore her. Because she's a woman who went into science and technology and started her own company and is a very desirable icon.

Cheung's answer is very representative. After all, in the male-dominated Silicon Valley, there are very few female founders who can use the technology developed by themselves to make the company a unicorn. Investors, the media and even the American public need such stories.

A drop of blood turns into gold, and a drop of blood burns $1.4 billion?

According to Elizabeth's vision, her product can immediately detect more than 200 physical indicators as long as one or two drops of blood are collected. She hopes that patients with needle phobia like her can complete the physical examination easily and quickly.

If this idea is realized, it will completely subvert the medical testing industry. It is necessary to know that a drop of blood is only one thousandth of the blood collected for routine examinations in hospitals, and it takes 1-2 days for the hospital to get the test results. Even more impressive, Elizabeth reduced the hospital's $50 blood test fee to $2.99.

This means that Theranos is expected to replace 70% of the business of the US medical testing industry, which has an annual revenue of about 73 billion yuan in 2017, which has also become a powerful data for Elizabeth to attract investors.

However, after burning through $1.4 billion in financing, Theranos finally built an instrument that could only detect a few indicators and had a very high error rate.

" Bad Blood – The Secrets and Lies of a Silicon Valley Giant " published by "Wall Street Journal" reporter John Carreyrou details Theranos' product development and counterfeiting details, and the original whistleblower was Theranos's experiments. room supervisor.

Perhaps the imitation of Jobs was too deep into the play, and Elizabeth was very stubborn about creating the "perfect product". Because the volume of a drop of blood is really difficult to meet the needs of the test, the team once suggested to increase the volume of blood collection, which was firmly opposed by Elizabeth, and the product person in charge was also fired.

Elizabeth doesn't feel bad about spending money. The $200 blood box is scrapped after one use, and hundreds of blood boxes can be used a week. But the product has not been up to the standard, and another competing product with 31 indicators has been detected in the market within 12 minutes. Elizabeth finally got the idea of ​​counterfeiting.

In order to win an order from Walgreen, the largest pharmacy chain in the United States, Elizabeth actually boasted that Haikou’s products can complete more than 300 tests and even screen for cancer. In fact, Edison, Theranos’ only product, can only detect a few indicators.

If you tell a lie, you must tell more lies to make up for it. In order to cope with the testing in the Walgreen store, Elizabeth spent a lot of money to buy a number of huge Siemens testing instruments, and express the blood drawn in the store back to the laboratory for testing with Siemens instruments.

▲The Siemens testing instrument weighs 1200 catties

However, Siemens' instruments could not solve the problem of insufficient blood collection. In addition, the blood was not kept fresh during the transportation process, and the test results were still unreliable.

In the face of substandard test results, the company's COO, Sunny Balwani, Elizabeth's boyfriend at the time, will directly ask employees to remove "abnormal data".

▲Theranos has set up blood collection sites in 40 Walgreen stores

In a later investigation by the U.S. Food and Drug Administration (FDA), only 12 of Theranos’ 250 tests were completed by its own product, Edison, and almost none of the only 12 test results were accurate.

As mentioned earlier, Theranos' board of directors has no medical background at all, and there is no venture capital firm focused on the biotech field to invest in Theranos, which actually explains the problem to some extent.

The book "Bad Blood" mentioned that many pharmaceutical institutions and industry insiders discovered early that Theranos' technology was not reliable. When Walgreen decided to cooperate with Theranos, its laboratory consultant Kevin Hunter raised doubts, and Theranos refused Kevin Hunter's request to inspect the laboratory on the grounds of confidentiality.

▲ Elizabeth even built a laboratory temporarily in order to invite then-Vice President Biden to visit.

It's a pity that Walgreen didn't listen to Kevin Hunt's advice in the end, signed a $50 million purchase order without verification, and renovated the store for the placement of Theranos equipment.

In fact, not much of the $1.4 billion Theranos received was actually used for product development, much of which was spent on Elizabeth's lavish life and expensive legal fees.

An article in "Vanity Fair" revealed that the monthly rent for Theranos headquarters is $1 million, and a conference table costs $100,000. Before 2017, Elizabeth's business trips were all by private jets, and it was also equipped with a special security team, Personal chefs, assistants, drivers, and PR can cost upwards of $25,000 a month in personal expenses.

After the scam was revealed, both Elizabeth and her boyfriend faced multiple lawsuits for the alleged fraud, and it is reported that the two men's legal fees are as high as millions of dollars a month, all of which are paid by Theranos.

▲ Elizabeth and lawyers arrive in federal court

In addition, there are as many as nine law firms litigating for Elizabeth and Theranos, including David Boies, the star lawyer who represented Microsoft in the antitrust case.

Investors' money was lost, and the slapped media turned their faces and refused to recognize them. "Forbes" zeroed Elizabeth's personal worth, and "Fortune" magazine called her "the world's most disappointing leader." , The character of "Female Jobs" completely collapsed.

Elizabeth falls off the altar, the end of an era

In fact, in September 2018, Theranos had announced the official cessation of operations, pending a series of lawsuits from various parties by Elizabeth. However, due to the large number of investors and users involved, it takes a lot of time just to sort out the information. According to the documents of the US Department of Justice in 2019, there are as many as 16 million to 17 million pages of files that need to be sorted out.

Elizabeth faced a total of 11 lawsuits. Later, the case was continuously postponed due to the new crown epidemic and Elizabeth's pregnancy and childbirth. It was only recently reopened. After a 7-day trial, the jury found Elizabeth guilty of 4 counts, including one count of conspiracy to defraud an investment. Investors and three counts of wire fraud against investors, 4 acquittals and 3 pending verdicts.

▲ Picture from: Associated Press

In the years when Theranos was in its prime, the device that was supposed to "subvert the medical system" almost became a tragedy.

A pregnant woman was diagnosed with a miscarriage when her fetus was healthy and started taking drugs that could harm her fetus. A healthy person is misdiagnosed with AIDS, and he is afraid that he will spend a lot of money. There are countless similar oolongs.

But Elizabeth, who doesn't seem to consider herself a liar, admitted in court that some of Theranos' operations were faulty, but insisted that it never knowingly deceived investors and patients.

Interestingly, even though Elizabeth's scam has basically been concluded, some fans who imitated Elizabeth's iconic dress have already attended the court hearing . To some extent, she may be a marketing genius.

The reason why Elizabeth's scam has not been discovered for more than ten years, in addition to her excellent marketing skills and the media's fueling, also depends on Theranos requiring every employee to sign a very strict non-disclosure agreement, because most of them are afraid of facing high compensation. The employees were tight-lipped about what they saw.

This has also increased the difficulty of interviews with the media. Alex Gibney, the director of the HBO documentary, also said that he was affected by the non-disclosure agreement during the filming process, and it was not easy to obtain the internal video material of Theranos and interviews with internal employees.

Another former executive close to Elizabeth, who sees herself as a victim, blames the incompetence of her lawyers for the status quo, saying she could have persuaded a Pulitzer Prize-winning journalist that despite the Theranos' technology is not yet mature, but it will eventually change the world.

Elizabeth's story seems to be full of chance, but such figures are not unfamiliar in today's Internet companies. Cases of financing abuse by founders due to the lack of strong and standardized internal control and management processes like Theranos are not uncommon in former star companies such as ofo and LeEco.

Alex Gibney, the director of HBO's documentary, expressed a similar view . He pointed out that many Silicon Valley people think Theranos is not the real side of Silicon Valley, but in fact the Silicon Valley giants are also lying to the public. Apple has concealed the truth of battery aging and frequency reduction. Facebook and Google are abusing users' private data.

The New York Times also commented after Elizabeth was convicted that the verdict marked the end of an era. break in.

Apple has previously announced that this ups and downs story will be made into a movie, and Hollywood actress "Big Cousin" Jennifer Lawrence will play Elizabeth.

Unfortunately, neither "Bad Blood" nor the HBO documentary interviewed Elizabeth herself. The director and producer of the HBO documentary spent 5 hours convincing Elizabeth to accept the interview, but was eventually rejected.

Elizabeth once left this sentence:

When we get back on our feet, you can see the successful Theranos.

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