By Rohan D. ’25

Elizabeth Holmes founded Theranos in 2003 on the premise that it could revolutionize blood testing technology by only using a few drops of blood. Holmes wore black turtlenecks like Steve Jobs, and Silicon Valley believed that she would be the next revolutionary entrepreneur, with a company valued at $9 billion. She was considered the world’s youngest female self-made billionaire. Unfortunately, Theranos is now valued at next to nothing and Ms. Holmes is presently on trial against the United States Federal Government for misleading investors by making false claims. The outcome of the trial has implications for the current culture in Silicon Valley; it will provide a precedent for white lies and leniency for new businesspeople.

The word “ethos” comes from Greek and is defined as “the guiding beliefs of a person, group, or organization” or more fully “the distinguishing character, sentiment, moral nature, or guiding beliefs of a person, group, or institution.” Originally used by Aristotle, the meaning refers to a person’s character, especially in its “balance between passion and caution” (Merriam-Webster).

Ms. Holmes was living that ethos with passion and vision. Ms. Holmes dropped out of Stanford University in her sophomore year after stating, “A few more chemistry classes wouldn’t be needed to determine what I want to do in life.” She then founded Theranos, a blood-testing company. She pitched her idea to many prominent men who had served in the government, including former Secretary of State Henry Kissinger, former Secretary of State George Shultz, and Former Secretary of Defense James Mattis. With this support, wealthy investors poured money into the company. By 2015, Theranos was valued at around $9 billion, with Ms. Holmes holding more than half of the shares. Dr. Phyllis Gardner, one of Ms. Holmes’ medicine professors at Stanford University, was skeptical and said to Ms. Holmes, “I don’t think your idea is going to work,” and then explained to Holmes that her idea was impossible, at least with present-day technology. However, Ms. Holmes persevered with her belief and eventually obtained the support of Dr. Channing Robertson, her advisor and dean at the Stanford University School of Engineering. In addition, Elizabeth Holmes had a vision to change the world of health care by making blood tests and its subsequent information available to nearly every American with easy access, minimal pain, and low cost. Hence, Silicon Valley and the wealthy donors invested in Theranos. After all, no one in Silicon Valley wanted to miss the next Facebook or Apple. 

Unfortunately, her claims were not supported by scientific data. In 2015, John Carreyrou wrote an exposé on Theranos in the Wall Street Journal entitled, “Hot Startup Theranos Has Struggled With Its Blood-Test Technology,” which raised the question of Theranos’ problems behind closed doors after Dr. Erika Cheung, a scientist who was hired by Ms. Holmes and worked at Theranos, blew the whistle to federal regulators regarding “how some of the processes the company used to conduct its blood tests were problematic” (New York Times). Dr. Cheung also stated in her testimony that Theranos’ priority was “to conduct tests as quickly as possible and that its machines often failed their quality-control checks” (New York Times). On the same day that Carreyrou’s “bombshell” article was published, Ms. Holmes responded, “This is what happens when you work to change things, first they think you’re crazy, then they fight you, and then all of a sudden you change the world.” Carreyrou’s article then led to additional articles unmasking Theranos’ unsolved issues as well as a book, written by Carreyrou, outlining the rise and fall of Theranos, titled Bad Blood: Secrets and Lies in a Silicon Valley Startup. Ms. Holmes and her former partner, Ramesh “Sunny” Balwani, are presently charged with two counts of conspiracy to commit wire fraud and nine counts of wire fraud. “According to the indictment, the charges stem from allegations that Holmes and Balwani engaged in a multi-million-dollar scheme to defraud investors, and a separate scheme to defraud doctors and patients” (US DoJ). 

The prosecution claims that Holmes manipulated defrauded investors by asserting that their state-of-the-art blood testing machine, the Edison, was capable of running hundreds of tests that Theranos offered with just a single drop of blood, when, apparently, they were aware that the Edison was not capable of running those tests reliably. In fact, most of the tests that Theranos offered were run on commercial blood testing machines, such as those offered by Siemens AG. What’s worse, Theranos diluted many samples to allow the commercial blood testing machines to run the tests. However, this produced false results, with many data points listed as abnormal or dangerous. This caused many patients to become concerned for their health when results returned with diagnoses of HIV, recurrent cancer, and diabetes. 

Furthermore, Ms. Holmes has admitted to false claims while under oath. For example, although she stated that the Edison was used on the battlefield in Afghanistan, she later admitted it wasn’t true. Additionally, she admitted to personally placing the Pfizer logo atop a Theranos document which implied Pfizer’s formal support, which Pfizer had not given. Because Silicon Valley “plays by different rules” in the tech industry, the debate regarding the leniency of false claims for new entrepreneurs has persisted for a long time.

However, the defense argues that Ms. Holmes and Theranos simply failed to execute her revolutionary idea of running many tests with just a drop of blood. The defense asserts that Holmes was completely invested in her idea and genuinely thought it would succeed and was unaware of laboratory issues because she didn’t run the lab.

The ethos, or culture, of Theranos was to continue to “sell their promise.” John Ioannidis, a Stanford professor of medicine and one of the first people to challenge Theranos, published a study in 2019 showing that “many medical tech companies still operate in ‘stealth mode,’ launching and raising funding for their products without offering legitimate proof the products work. […] Of the 18 ‘unicorns,’ or tech companies valued over $1bn, in the field, more than half had ‘no highly cited papers’ on their work, according to the study” (The Guardian). 

But the case of Ms. Holmes and Theranos is an outlier to the rest of Silicon Valley. The ethos of Silicon Valley is that courageous ideas, inventions, and technology take risks to move forward our health, and our quality of life, and our society. An example is Elon Musk and Tesla which have revolutionized the automobile industry and have led to more environmentally friendly cars which have positive benefits for our climate crisis. That is the beauty of the investment industry. For every company, investors choose whether or not to invest. Every decision requires thought and informed calculations, and there should be increased regulatory oversight of technologies similar to the Federal Drug Administration for medications, especially when it comes to the welfare of people as patients. Yes, that is not the purview of Silicon Valley which will take risks to find the next successful company. There will always be successful companies that fail, but rarely outright frauds.

Many people think Silicon Valley must change because of this trial. Some say that this fraud case could have, would have, and should have been prevented. However, even though “hindsight is 20/20,” investors cannot predict the future, and, therefore, could not have predicted this fraud. When Apple first went public, there were many skeptics; yet, Apple is one of the most prominent and powerful Silicon Valley companies. Furthermore, some people believe that Silicon Valley investments should be regulated. Nonetheless, investors, working with their own money, will make the best decisions they can with available data and research. 

Therefore, Silicon Valley should not change its ethos. This is because Theranos is a case that does not apply as an umbrella of Silicon Valley culture, and the beauty of investing is the unpredictability that each company brings. If Silicon Valley were to change, there would probably not be another successful company like Apple, or Facebook, or Tesla. Nobody wants the ethos of Silicon Valley or any revolutionary, successful technologic innovations to be suppressed by an isolated fraud case.