The biggest scam in the history of Silicon Valley ends, and the “female version of Jobs” goes from altar to destruction

He is a clown, genius, leader, visionary, industrialist, performer, rogue; Edison (inventor), Barnum (father of modern public relations), Carnegie (entrepreneur) and Dr. Manhattan (DC Comics) Superheroes, scientists).

This is "Time" magazine's description of Elon Musk in the 2021 Man of the Year selection. Turning time back a few years, this kind of evaluation appeared almost intact on another Silicon Valley entrepreneur.

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

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

When she is questioned by the media, she will respond confidently and disdainfully in a TV show: "When you want to change the world, some people will target you like this."

You should be familiar with these stories, they are simply a mixture of entrepreneurs such as Jobs, Bill Gates, Zucker Berg, Musk, etc. If there is a person who can gather the souls of so many geniuses in one body, what an extinction would it be? Genius?

But she happened to be the protagonist of the biggest scam in Silicon Valley history-Elizabeth Holmes (Elizabeth Holmes).

▲Elizabeth Holmes

Elizabeth once launched a "revolutionary blood test equipment", claiming to be able to complete more than 300 blood test items with only fingertip blood sampling, dripping blood into gold, and becoming the most dazzling star in Silicon Valley in a blink of an eye.

All of this was eventually found to be a scam, and such a skyscraper, which was lifted by capital, the media, and the public, collapsed.

After several years of trial, the District Court of California recently found Elizabeth guilty on 4 counts . Although the judge has not announced the final sentence, each count can be sentenced to a maximum of 20 years in prison. Spent in prison. (Some legal experts are not expected to impose the highest penalty)

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

Become a "female version of Jobs"

It is not unreasonable that Elizabeth is called "Female Jobs".

In middle school, Elizabeth showed a genius, has maintained all A grades, and was admitted to the prestigious Stanford University at the age of 17, also received a monthly research funding of 3000 US dollars, began to embark on the road of scientific research.

▲Elizabeth gave a speech at Pepperdine University

Channing Robertson, the dean of the Stanford School of Engineering, is Elizabeth's Bole. She made an exception to let Elizabeth, a freshman, enter the laboratory to work with doctoral students.

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

After returning from Singapore, Elizabeth applied for the first patent in her life, a wearable drug injection patch. This patent surprised Dean Qian Ning. The next year Elizabeth decided to drop out of school and start her own business. Dean Qian Ning not only supported her decision, but also acted 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" (therapy) and diagnosis (diagnosis). The direction is to do micro blood testing, that is, to detect multiple indicators through only a drop of blood.

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

Like Jobs, Elizabeth wore the same black turtleneck sweater and slacks in public. In order to match this outfit, Elizabeth required the company's air-conditioning temperature to be maintained at 15.5 degrees Celsius throughout the year.

She also deliberately imitated Jobs’ deep baritone when she spoke. In the HBO documentary, many former Theranos employees suspected that Elizabeth’s voice was faked, because she would hear her real when she occasionally slipped and got drunk. sound.

Elizabeth seems to hope that by imitating Steve Jobs, he can establish an image of a maverick weirdo. Such a person is very popular in Silicon Valley. Elon Musk, who claims to be immigrating to Mars, is one of them.

▲Elon Musk

So it's not surprising that "change the world" has become Elizabeth's mantra. When the Wall Street Journal issued a long report questioning Theranos, she responded like this in the TV show:

This is what happens to someone who wants to change the world. They first said that you were crazy, then they started to beat you, and you changed the world in the end.

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

She talked emotionally on TED about her original intention to start a business , to make people who are afraid of needles like her better receive treatment, and to prevent her uncle from delaying treatment because she can’t afford the expensive testing costs. "Our loved ones Will change, the entire medical system, the world will change."

What's more rare is that Elizabeth also successfully won a vote of political and business predators to stand for her.

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

This girl is the next Jobs and the next Bill Gates.

At first glance, Theranos's board looks like a small cabinet. Interestingly, as a medical technology startup company, the board does not have a medical background.

When Theranos was questioned, Murdoch, a media tycoon known for his investment vision, invested US$125 million in Theranos. Theranos was valued at US$9 billion at one time, and Elizabeth's personal worth exceeded US$4 billion.

The rush of media began to promote Elizabeth to the altar, "Forbes" named her "the world's youngest self-made female billionaire", "Time" nominated her as the "2015 most influential 100 "Big Man", "Fortune" selected her as "Businessman of the Year", and the cover title of "Inc" is "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:

Although it is difficult to understand her, I admire her. Because she is a woman who has entered the field of science and technology, she also founded her own company and is a very ideal idol.

Cheung's answer is very representative. After all, in the male-dominated Silicon Valley, there are very few female founders who can make the company a unicorn with the technology they have developed. Investors, the media and the American people all need such stories.

A drop of blood becomes gold, and a drop of blood burns 1.4 billion dollars?

According to Elizabeth's vision, her product can detect more than 200 physical indicators immediately by collecting one or two drops of blood. 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 overturn the medical testing industry. It is important to know that a drop of blood is only one-thousandth of the amount of blood collected for routine examinations in hospitals, and it will take 1-2 days for the hospital to get the test results. Even more exciting is that Elizabeth reduced the hospital's $50 blood test cost to $2.99.

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

However, after burning out the $1.4 billion in financing before and after, Theranos finally built an instrument that can only detect a few indicators and has a very high error rate.

The Wall Street Journal reporter John Carreyrou published " Bad Blood-The Secrets and Lies of a Silicon Valley Giant " (Bad Blood), which exposed the details of Theranos' product development and counterfeiting in detail, and the original whistleblower was Theranos' previous experiments. Room supervisor.

Perhaps it is because of the imitation of Jobs too deeply, Elizabeth is very stubborn to create the "perfect product". Because the amount of a drop of blood is really difficult to meet the needs of the laboratory, the team once proposed to increase the amount of blood collected, but Elizabeth was firmly opposed to it, and the product manager was fired.

Elizabeth didn't feel distressed at all when she spent the money. The $200 blood box was scrapped after one use, and hundreds of them could be used a week. However, the product has not been up to the standard, and there are competing products that have detected 31 indicators within 12 minutes. Elizabeth finally has the idea of ​​counterfeiting.

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

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

▲Siemens testing equipment weighs 1200 catties

However, Siemens' instruments cannot solve the problem of insufficient blood collection. In addition to improper preservation of blood during transportation, the test results are still unreliable. The original promise of "a drop of blood to accurately and quickly detect more than 300 indicators" did not fulfill the promise.

In the face of substandard inspection results, the company's COO, and Elizabeth's boyfriend Sunny Balwani at the time, would directly ask employees to eliminate "abnormal data".

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

In the later investigation results released by the US Food and Drug Administration, only 12 of the 250 tests performed by Theranos were completed by its own product Edison, and almost none of the 12 inspection results were accurate.

As mentioned earlier, Theranos's board of directors has no medical background at all, and there is no venture capital company that focuses on the field of biotechnology to invest in Theranos. This has actually explained the problem to some extent.

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

▲ Elizabeth even set up a temporary laboratory in order to invite the then Vice President Biden to visit.

It's a pity that Walgreen didn't follow Kevin Hunter's advice. It signed a purchase order of US$50 million without verification, and refurbished the store for Theranos equipment. All of these investments were in vain in the end.

In fact, not much of the $1.4 billion that Theranos received was actually used in product development, and a lot of it was spent on Elizabeth's luxurious life and paying expensive legal fees.

An article in Vanity Fair revealed that the monthly rent for Theranos headquarters was US$1 million, and a conference table was US$100,000. Before 2017, Elizabeth rented business trips by private jet, and was also equipped with a dedicated security team. Personal chefs, assistants, drivers, and public relations can cost as much as $25,000 per month.

After the scam was revealed, both Elizabeth and her boyfriend faced multiple lawsuits for alleged fraud. It is reported that the lawyers' fees for the two are as high as millions of dollars a month, and these expenses are paid by Theranos.

▲ Elizabeth and her lawyer arrived at the Federal Court

And there are as many as nine law firms litigating Elizabeth and Theranos, including David Boies, the star attorney who represented Microsoft in antitrust cases that year. He is one of the most valuable lawyers in the field of intellectual property rights in the United States, and the cost is obvious.

Investors’ money was squandered, and the face-slapped media turned their faces to deny others. “Forbes” cleared Elizabeth’s personal worth to zero. “Fortune” magazine called her “the most disappointing leader in the world.” , The character design of "Female Jobs" completely collapsed.

Elizabeth fell off the altar, the end of an era

In fact, in September 2018, Theranos has announced that it has officially ceased operations, waiting for Elizabeth's series of litigation from all parties. 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 a file from the U.S. Department of Justice in 2019, there are about 16 to 17 million pages of files that need to be sorted out.

Elizabeth faces a total of 11 lawsuits. Later, the case continued to be postponed due to the new crown epidemic and Elizabeth’s pregnancy and childbirth. It was only recently that the court reopened. After 7 days of trial, the jury found Elizabeth guilty on 4 counts, including one conspiracy to defraud investment. And three telecom frauds against investors, another four were not guilty, and three more have yet to be ruled.

▲ Picture from: Associated Press

In the years when Theranos was in full swing, the device that was known as "subverting the medical system" almost caused a tragedy.

A pregnant woman detected a miscarriage when her fetus was healthy , so she started taking drugs that might harm the fetus. A healthy person was misdiagnosed as AIDS. For this reason, he was worried about being afraid and spent a lot of wrong money. There are countless similar oolongs.

But Elizabeth didn't seem to think she was a liar. She admitted in court that some of Theranos' operations were problematic, but insisted that she never deliberately deceived investors and patients.

What's interesting is that even though Elizabeth's scam has basically been concluded, some fans who imitated Elizabeth's iconic dress have come to the court to listen . 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 promotion of the media, also depends on Theranos requiring every employee to sign a very strict confidentiality agreement, because of fear of facing high compensation, most Employees are silent about everything they see.

This has also increased the difficulty of interviews by the media. Alex Gibney, the director of the HBO documentary, also said that it 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 said that Elizabeth believes that she is also a victim. She blames the status quo on the incompetence of the lawyer team. She said that she could have persuaded a Pulitzer Prize-winning journalist to convince him that despite Theranos technology is not yet mature, but it will eventually change the world.

Elizabeth's story seems to be full of accidents, but it is no stranger to such a figure in today's Internet companies. The lack of strong and standardized internal control and management processes like Theranos has led to the abuse of financing by the founders, which is not uncommon in former star companies such as Ofo and LeEco.

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

The New York Times also commented after Elizabeth was convicted, saying that this verdict marks the end of an era, and the unspoken rules of "Fake it till you make it" (pretend everything until you succeed) that Silicon Valley entrepreneurs once secreted will be lost. break in.

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

Regrettably, neither "Bad Blood" nor the HBO documentary interviewed Elizabeth herself. The director and producer of the HBO documentary had spent 5 hours persuading Elizabeth to accept an interview, but was ultimately rejected.

Elizabeth once left such a sentence:

When we stand up again, you can see the successful Theranos.

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