How the world’s youngest self-made female billionaire was unmasked as a massive fraudster
by Peter Watt | April 01, 2019
The story of the rise and fall of Elizabeth Holmes has captivated the public imagination. Her story is now the basis of a bestselling book, a podcast series, an HBO documentary and a future film – with Jennifer Lawrence cast as Holmes.
For those not in the know, in 2004 at the age of 19, Holmes dropped out of her chemical engineering degree at Stanford University to found Theranos – a company which promised to revolutionise healthcare. Its technology was said to be able to diagnose a range of conditions from a single drop of blood. Holmes succeeded in convincing many to back her promises, acquiring millions of pounds of investment and leading to her company being valued at $10bn in 2014. But it transpired the claims were false. The testing didn’t work. There was no product.
In March 2018, the US Securities and Exchange Commission charged Elizabeth Holmes and Theranos with “a massive fraud”. It is claimed she and Theranos’s ex-president Ramesh “Sunny” Balwani had lied for years about the company’s technology, and fooled investors into giving Theranos hundreds of millions of dollars. Holmes, now 35, and Balwani, have both pleaded not guilty. And while a trial date has not yet been set, if convicted, they could both face decades in prison.
The scale of this scam has left many wondering how such high-profile investors were duped. People are blaming the “toxic”, “fake it till you make it”, “move fast, break things” culture of Silicon Valley.
This is perhaps inevitable for the story of a smart, ambitious woman who dropped out of university to change the world – quintessential to the ethos of Silicon Valley. But passing this off as just “toxic culture” risks missing something much more pertinent about the Holmes case – the myth of the “dropout entrepreneur”.
The ‘dropout entrepreneur’
From business heroes including Bill Gates, Steve Jobs and Mark Zuckerberg to pop-culture icons such as Kanye West, “dropout entrepreneurs” are the latest formation of an ideal that can be traced back to the US in the mid-19th century. This was a time when the US was transitioning from a largely agricultural economy to an emerging industrial and market-based one.
It was during this time that the notion of the “self-made” person became associated with material success rather than the concern for civil good or moral character. Central to this idea was a “rags-to-riches” story which measured an individual’s success against the ideals of self-reliance and hard work.
In recent years, this narrative has become central to the trend in bright students dropping out of college and foregoing the promise of secure employment to instead make their own way in the world. In this way, by dropping out of Stanford, Holmes was conforming to a mythical archetype of our age, of which the late Steve Jobs thought of as the embodiment.
‘The Apple of healthcare’
A key aspect of the Theranos story is the fact that as the world’s youngest female billionaire, Holmes was heralded as being “the next Steve Jobs”. This association was embraced by Holmes, who made concerted efforts to style herself on Jobs’ public persona. She wore black turtlenecks, recruited Apple employees and, crucially, aligned her own story to the fact that she dropped out from university to pursue her dream.
Her narrative from “dropout” to “self-made billionaire” is all the more fascinating in relation to the wider myth of entrepreneurial success, because the university she dropped out from was the one which Steve Jobs gave his inspiring Graduation Commencement Address in June 2005. The speech emphasised triumph over adversity and doing what you love:
Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. If you haven’t found it yet, keep looking. Don’t settle. As with all matters of the heart, you’ll know when you find it.“
When the suggestion of fraud was first reported in a Wall Street Journal article in 2015, Holmes responded publicly by paraphrasing Apple’s famous 1997 ”Think Different“ campaign, stating: "This is what happens when you work to change things. First they think you’re crazy, then they fight you, then you change the world.”
This response says as much about Holmes’ belief in the myth to which she was conforming as it does the culture in which she was operating. And, in this way, Holmes’ self-styled eccentricities can be seen as a desperate attempt to be “a round peg in a square hole”.
The risk of perpetuating the myth
Most reports on this story frame Holmes as disillusioned – a fraudster, or a calculated psychopath. But this simply runs the risk of mythologising Holmes and her narrative further. By calling her “crazy” we risk playing in to the very narrative on which her initial success and fraudulent claims were based. In 2015, Holmes’ self-belief and ambition were unwavering when she told the Forbes 30 Under 30 Summit:
You’ll get knocked down over and over and over again, and you get back up… I’ve been knocked down a lot, and it became really clear that this was what I wanted to do, and I would start this company over 10,000 times if I had to.
To say we must reject the “fake it till you make it” culture of which Holmes’ narrative has become so central a part, is simply too easy. Despite it going some way to explain the climate in which the fraud could take place, there will always be an element of speculation and risk in any entrepreneur’s pitch to acquire capital.
And with Silicon Valley’s culture being premised on a spirit of nonconformity and anti-regulation, calls for regulation and change will only perpetuate more of the aggressive self-belief and blind ambition that Holmes’ narrative represents.