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- American businessperson; a subject of an SEC investigation
Elizabeth Holmes' fraud trial has been the talk of the town (both in Silicon Valley and, you know, on Twitter). The four-month trial was so popular that the journalists who covered it had to wake up at 3 A.M. to make sure they could get a seat in the courtroom and do their jobs. Too many curious onlookers and fans of John Carreyrou's tell-all "Bad Blood" wanted to witness tech history for themselves.
One of those curious onlookers was Danielle Baskin, a San Francisco-based artist who often pokes fun at tech culture through elaborate pranks (like Blue Check Homes) that sometimes turn into actual companies (like Branded Fruit). She arrived at the courthouse in San Jose with a suitcase in tow, selling bootleg Holmes merch: blonde wigs, red lipstick, black turtlenecks and blood energy drinks.
In the long cold morning outside the San Jose courthouse, I vended Elizabeth Holmes costumes out of a suitcase for anyone in the trial line. pic.twitter.com/ITaneixBu0
— Danielle Baskin (@djbaskin) November 23, 2021
It was a joke, mocking the absurdity of the fact that someone on trial for fraud has "stans" who call themselves "Holmies." But as Baskin watched Holmes' third day of testimony, she shared a key insight about how Theranos got so out of control.
"Coming out of the Holmes trial, I think one of my biggest pieces of advice to startup founders is to have friends," Baskin tweeted after court adjourned. "You need people in your life you enjoy hanging out with that say things like 'lol what are you talking about' or 'that's a bad idea' when you say weird shit."
Smoke and mirrors
In his opening statement of the case, federal prosecutor Robert Leach described how Holmes constructed a company with a $10 billion valuation based on technology that was dangerously faulty, at best. He said that one of Holmes' techniques was to rely on "false and misleading" media coverage of Theranos to secure funding from investors. Holmes was on the cover of Fortune, Forbes and Inc. Magazine, and she was celebrated as one of TIME's 100 Most Influential People in 2015, lauded as a "tech visionary." It made sense that people believed her vision when so many powerful people and institutions said she was the next Steve Jobs.
"When I was introduced to Elizabeth by [former Secretary of State] George Shultz, her plan sounded like an undergraduate’s dream. I told her she had only two prospects: total failure or vast success. There would be no middle ground," Henry Kissinger wrote in the TIME 100 blurb about Holmes. "Elizabeth accepted only one option: making a difference."
Kissinger went on to call Holmes a "formidable advocate" who was "on the verge of achieving her vision." But already, a level of uncertainty bubbled around Theranos. "Others will judge the technical aspects of Theranos, but the social implications are vast," Kissinger wrote in the final line of the blurb.
Holmes was surrounded by hype -- investors like George Shultz treated her like another grandchild. So when his grandson Tyler Shultz, who worked at Theranos, told him that he suspected Holmes was lying about the efficacy of Theranos' technology, the senior Shultz didn't believe him.
"Elizabeth is a very, very charismatic person," Tyler Shultz said to CBS News this week. "When she speaks to you, she makes you feel like you are the most important person in her world in that moment. She almost has this reality distortion field around her that people can just get sucked into."
Isolation and abuse
Tyler Shultz became the first whistleblower for Theranos, but at great personal and financial cost -- in his audio-memoir "Thicker than Water," he discussed being threatened by high-profile lawyers like David Boies and being followed by private investigators. But Shultz told a brief, yet poignant anecdote in his memoir about attending family dinners with his grandfather, who always invited Holmes and even hosted her thirtieth birthday party.
"There was a weird situation where my parents kept telling [Holmes] to invite her parents, and they just kind of assumed that she did, and then my grandparents were talking to Elizabeth's parents on the phone, and Elizabeth's parents were completely unaware she was having a thirtieth birthday party, so it didn't seem she was very close with her parents at all," Shultz recalled. Throughout the trial, Holmes was usually seen clutching her mom's hand -- but per Shultz's memory, they weren't all that close at the time of her crimes.
Shultz goes on to describe the attendees of her birthday party: He says that he and Holmes' brother were the only people under 30, and the next youngest person was Theranos COO Sunny Balwani, who was almost 50 -- he met Holmes when she was 18 and he was 37. They dated in secret for more than 10 years, unbeknownst to most Theranos employees and investors. Holmes moved in with Balwani in 2005, soon after she dropped out of Stanford.
"He impacted everything about who I was and I don’t fully understand that," Holmes testified.
Holmes tearfully explained in court that Balwani sexually and emotionally abused her throughout their relationship. She said that he controlled what she ate, when she slept and how she behaved.
"He told me that I didn't know what I was doing in business, that my convictions were wrong, that he was astonished by my mediocrity, and that if I followed my instincts I was going to fail," Holmes said on the stand.
Elizabeth Holmes's daily schedule
Circa 2005–2009 pic.twitter.com/hhWUBHhpbe
— Internal Tech Emails (@TechEmails) November 30, 2021
Her defense submitted as evidence two documents that showed how Holmes was being controlled by Balwani: one was a schedule of her daily routine, while another set instructions for how she behaved. These guidelines would help her "become a new Elizabeth," Holmes said Balwani told her. One "non-negotiable" in her instructions declared that she would never meet with anyone -- especially direct reports -- for longer than five minutes unless she had written down a clear agenda for the meeting. According to the documents, her lifestyle was monastic: waking up at 4 A.M., praying, mediating, exercising, only eating certain foods and never doing anything for recreation.
Holmes' schedule became a bit of a meme, with some journalists even trying out her schedule for clicks -- but the reality is much darker than that. It may be difficult to take Holmes' account of abuse seriously, since she's famously a liar and was just convicted of criminal fraud -- but these documents, if legitimate, show a woman whose every action was being controlled by an older partner and business associate.
“He said I needed to spend all of my time on the business, and that I should only be spending time with people who could help the business to be successful, that I needed to be working seven days a week, and I needed to be only doing things that could contribute to making the company successful," Holmes testified.
In this context, Shultz's account of Holmes thirtieth birthday party makes more sense. She was so committed to building Theranos that she didn't seem to have any friends or hobbies, nor did she communicate enough with her parents to invite them to her birthday party.
“Sunny would get very upset if I was with my family, because he said it was a distraction to the business," Holmes said in trial. Her defense referenced a text from Balwani from Thanksgiving weekend in 2013, which said: "When ur family is here, I feel lonely bcz u spend a total of 10 seconds with me a day."
Maybe if Holmes had friends to confide in, someone would have told her that she was going too far by stretching the truth with investors, or that it wasn't a good idea to deliver unreliable blood test results to patients, even if her boyfriend-slash-COO said to do so. But by design, there was no one for the single-minded entrepreneur to talk to.
Founders need community
This is not to exonerate Holmes of her crimes. It can be true that she was abused by a controlling, manipulative, older partner, yet it can simultaneously be true that she committed fraud. Plus, even though she was not convicted of defrauding patients, her lies caused significant distress to Theranos customers who were given alarmingly false blood test results.
We talk a lot about what the tech industry learned from Theranos, but we gloss over something so simple: Startup founders need to have a life outside of their job.
We valorize founders like Elizabeth Holmes who are so dedicated to their vision that they will make huge sacrifices, abandoning their social lives to build their companies. But this isolating form of hustle culture doesn't usually breed success -- it breeds burnout at best, and millions of dollars of criminal fraud at worst.
If you're a startup founder, you're probably not the next Elizabeth Holmes. But if you just do normal things like, I don't know, see a gosh darn movie with some friends (COVID permitting), maybe you'll spare yourself from making some short-sighted mistakes.