Madison Phillips: “The Next Steve Jobs” Transcript
Hello. I am Madison Phillips, and this is my Honors Project. Last spring, I took my first law class and absolutely loved. During the ethics portion, we touched based on Elizabeth Holmes and Theranos. From just the little information we talked about in class, I was intrigued. So when it was time to sign up for classes for my senior year, I saw I could take another class with Professor Kauffman. I signed up as soon as I could. During this time, we talked more about Elizabeth and her company.
So what is this project for and about? This is extended research on a critical thinking assignment that I will show you in a minute. Elizabeth Holmes is an example at how smart people can be tricked by a scam artist. She tricked brilliant minds and pretty much the whole world.
These first slides are the assignment we had in class. The first question was what causes otherwise smart and successful people to fail for fraudulent schemes? To sum up the long answer, my group basically said successful people become successful because they take risks. To have a successful company, you need to take risks on who you hire and hope you will find a person who will love your company and will want to do their best.
The second question was assuming one of those people were to ask you, “Where did I go wrong?” My group would have asked why they would stay with a company or a person so long who has been very secretive and untrustworthy. From some of our sources, it talked about how much she lied about even the simple things about her company. For example, her company did not run the blood tests themselves. They shipped off the samples to a different location. One of the simplest things she lied about was her voice. In all of her interviews or discussions she had a low baritone voice. One of her workers actually heard her voice one time, and it was completely different.
The third and final question was, “Do you think capitalism itself bears any blame for this and other types of cooperate misbehavior?” We said we believe capitalism plays a role in cooperate-wide scandals. Corruption and fraud are usually not the intended outcome of people who commit it. For part B, we basically said some people just want to be the best and will do anything to accomplish that.
Next I will be talking about Elizabeth Holmes’ history and background. This slide is all about her history. Holmes was raised in Washington, DC. Her mom worked for members of congress, and her dad worked for the State Department. Her dad actually used to be the vice president of Enron. She dropped out of Stanford at age 19, but money was nothing new to her and her family. Her great great great grandfather was Charles Fleshman, who was an innovator who brought yeast from his home to the United States because he didn’t like the bread here.
When she was little, she wrote a letter to her dad that stated what I want out of life is to discover something new, something aht mankind didn’t know was possible. I also want to study about man and his ways; life is really interesting. She also said that when she was little she was terrified of needles. Next is her idea that created Theranos.
Her original idea was to place a sticker on the arm and constantly check blood levels and then to give yourself an injection of whatever you need. She filed her first patent at age 19 for her sticker. After a professor at Stanford told her that this wasn’t possible, she decided to think bigger. She decided to create a way to just prick a finger and it could run hundreds of tests on just that prick. No one at Stanford wanted to back her up on her idea, so she got a family friend to.
Next are her partnerships that she created. Holmes first secured a meeting with Walgreens in 2010 and told them that her technology had been comprehensively validated and that it was viable and consumer-ready. They figured out a compromise, and it was a $140 million deal. In 2013 she opened her first wellness center at a Walgreens.
These are the steps on how her product worked. First was that the puncture would be made. Second, the collection tube would be held up to the drop. Third, the blood would wick into the channels. Next the nanotainers would be removed. Next the sample would be processed immediately. Then the sample would be put onto the cartridge. Lastly, the cartridge would be put into the portable device, and you would get the results.
She created the name Theranos by combining the words Therapy and Diagnosis. She named the prototype of her machine “The Edison.” By 2005 her company was worth $6 million dollars. By 2014 her company was worth $9 billion dollars. She was the youngest self-made billionaire. Next shows all of Holmes’ board of directors.
Elizabeth had a tick for knowing what was right. This is a list of her board of directors: General James Mattis. He was the former Marine Corps general. Next is Henry Kissinger, former secretary of state. George Shultz, who was the former secretary of state who we will learn more about later. Next is Bill Frist, who is the former senator of Tennessee. Samuel Nunn, who is the former senator of Georgia. Gary Roughhead, who is the former chief to naval operator. Lastly, William Perry, who is the former secretary of defense. Not one of them has any medical degree background or anything related to medicine.
Next we will talk about her overall portrayal. It seemed like everyone believed her. People trusted her because she seemed like she was confident in her product. She was a blond haired, blue eyed girl who had a deep baritone voice that you couldn’t get out of your head. She wore black turtlenecks with her hair pulled back. This portrayal is very different from other women, so people believed she was different. Next is about her influences.
Her main infleucnes are Steve Jobs, Mark Zuckerberg, and Bill Gates. Her number one influence was Steve Jobs, which is where she got her idea for her black turtleneck. Like I said before, she named her first prototype the Edison, which is actually named after “Thomas Edison.”
From the inside of her company, people knew something was off. Everyting was secretive, there was a lack of communication, and they witnessed bad leadership. From the outside, it looked like Holmes and Theranos were winning. They were accelerating and unstoppable. Elizabeth actuallyhad her administrative staff become facebook friends with administrative employees so she knew exactly what they were saying during and after work hours.
Elizabethe was working with Chiat Day for her marketing and they needed more specific details about her company. They said they needed proof of her assertions and they sent her a matrix. When they asked her where the lab is located, she said that they hadn’t built one yet. He responded with the followup question about how do they do the tests then. She responded that they FedEx them up to Palo Alto. Chiat Day originally wanted to advertise that there were devices in Walgreens, but they couldn’t because they didn’t have FDA approval. She was also exploiting a legal loophole in sending blood samples to a central lab. Chiat Day was told that the devices had been field tested in Afghanistan. Theranos later pulled the plug on Chiat Day.
This is a picture of the inside of her company. As you can see, no one in the picture looks like they are communicating with each other. Next is all about her clients.
Sheri Ackert was told that she had a tumor growing when she got her sresults back form her Theranos test. She called her doctor, who told her to go to a non-Theranos lab, which resulted in no tumor. Pallav Sharda said that the blood tests were used with a normal needle and he thought it was false marketing. When he got the results, it said he was pre-diabetic. When he took a test somewhere else, it said he did not have pre-diabetes. A third example is Ian Gibbons. He was actually the chief scientist at Theranos, and when the results came back they said he had cancer. He tried to tell Holmes about the results, but he was ignored. He was a real obstacle for them, so they kept him around so that he would keep quit. Gibbons passed away shortly after committing suicide, and his wife called letting Holmes know. The first and only thing Holmes did was demand that she return any and all confidential Theranos property.
Next is about her employees.
Avie was a friend of Steve Jobs, and she got him to join her board. Nine months after joining the board is when he started seeing problems with Theranos. He said that the product never got any better from when it started. Elizabeth never wanted to be questioned or stood up to. Ana also worked for jobs, and she helped design the iPhone. In August 2007 Ana did a research study on testing Theranos’ technology on terminal cancer patients. She found out that light was seeping into and corrupting the blood, saying it was fauly. She was told the machines were fine. Tyler Shultz ended up being a whistleblower. George Shultz said that the Theranos machines were being used in operating rooms, and Tyler said that that wasn’t true because they machines didn’t actually work. A fourth employe was Erika Chung, and she was a scientist. She said she loved working at Theranos but there were problems with quality control. The tests just kept failing and failing. She went to talk to Sunny about it and basically threatened her about her job. Next are more important details.
Elizabeth was known for saying “in a world where you don’t have to say goodbye too soon.” Sunny and Holmes were actually dating, but every article said she was single. Three investigators from the FDA showed up unexpectedly, which sent Holmes into a full panic. She called her advisors to try to resolve the issue. John Carreyrou was an investigator for the Wall Street Journal and wrote his first article on Theranos on October 15, 2015. This is when Theranos started spiraling out of control. This whole article was the beginning of a real mess.
Carreyrou was contacted by Tyler on a burner phone so that they wouldn’t be traced. Google Ventures sent a VC to Theranos’ Walgreens Wellness Center to take the blood test. As the VC sat in a chair and had several large vials drawn from his arm, which is far more than a pinprick, it because appararent that something was amiss with the Theranos product.
Elizabeth Holmes appeared on Mad Money with Jim Cramer. This interview was a day after the john Carreyour released his first article. At the beginning of the article, cramer asked why this was happening. She replied with, “First they theynk you’re crazy. Then they fight you. Then all of a sudden you’ve changed the world.” She claims that theve sent the the journalist over a thousand pages of documentation saying the points in the article are not true. Her excuse was that since she was trying to make a difference, people are raising questions. She also stated during the interview that Walgreens and Cleveland Clinic have both seen the technology, and they offered to bring the technology to the journalist’s office but were denied. Both of these statements were obviously false because of the prove indicating that the machines did not even work. They used a third party to run all of their tests.
So what went wrong? Her whole company was a fraud. All of her investors in the company lost all of their millions of dollars. The tests were faulty, and the machines could perform only 12 out of 200 tests. Not only were the tests faulty, but they actually endangered lives. She ended up having to lay off 40% of her workforce. Next, talks about where she is now.
Elizabeth Holmes went to being worth $4.5 billion to zero. Her and Sunny were both charged with massive fraud. And given a $500,000 fine. While being interrogated, she said, “I don’t know” 6,060 times about her company. And was also accused of misleading the public and her investors. Elizabeth settled but Sunny did not. She has been seen back in Silicon Valley with a new idea and trying to get investors. She is now married to Evans, heir to the Evans Hotel Group. Her and her husband now live in San Francisco.
Elizabeth Holmse’ jury selection starts the week of July 28 of this year, and the trial is on August 4. Elizabeth Holmes and Sunny are each looking at 20 years in prison. They each are also looking at a 250,000 fine, plus restitution for each count of fraud. Restittuion is when an offender, Elizabeth, pays to the victim, the patient, for the harm caused by the wrongful acts. There were about 175,000 people that took the blood test from tharanos and are hoping to be compensated for the test plus other damages, like punitive damages. Punitive damaes are damages that are intended to punish someone for their outrageous conduct. Holmes will be representing herself because her previous lawyers withdrew because she hadn’t paid her dues to them for over a year. They did not expect her to ever pay.
Ther have been multiple documentaries, books, and movies made about Elizabeth Holmes and Theranos. One of them is a book which is called Bad Blood: Secrets and Lies in a Silicon Valley Startup. John Carreyrou is the author. Another type of medium is a movie. The release date is not said, but it is called Bad Blood. Jennifer Lawrence is set to play Holmes. Another type of media is a documentary. I actually used this source quite a bit for this project. It is from 20/20, and it is called Dropout.
Elizabeth Holmes is just a girl who wanted to become the next great thing, and she was for a long time. I still find this story interesting because how she could trick and convince people because of her confidence. She is a fraud and I hope she learned her lesson. I will continue to follow this story because it is an ongoing investigation. Thank you.
This is my first set of sources. This is my second set of sources.