CASE STUDY: When a Vision Goes Dark
Imagine a resume that reads: high school National Merit Scholar who learned Mandarin, studied engineering at Stanford, spent the summer of freshman year working in Singapore at the Genome Institute, acquired a patent, and became an entrepreneur who created a company once worth $9 billion and made the covers of Fortune, Forbes, and numerous others.
Behind these achievements is an intensely determined and competitive individual who at a very young age (twenties) was able to persuade internationally known politicians (former President Bill Clinton and former Chief of Staff and Secretary of State James Baker), and Silicon Valley titans, Larry Ellison (founder of Oracle), and Tim Draper (venture capital investor), to invest in and otherwise support the company. The association with and support from such notable others gave the founder and the company credibility.59 This was leveraged to attract over $700 million from investors. The vision of the company was to change the world of medicine, which in the process would help achieve the founder’s childhood goal of becoming a billionaire.6
It “Worked” Until It Didn’t
This same person ran the company like a despotic dictator. Investors were not allowed to learn how the technology worked or to have any influence regarding how the company was run. Departments were isolated from each other, and absolute loyalty was demanded from employees. Employees were monitored, such as when they arrived and left each day, which eventually morphed into the expectation that they would work incredibly long hours and take no vacations—just like the boss. Employees were intimidated from dis-agreeing and retaliated against or fired if they did. The president, and also the romantic partner of the founder, was eventually forced out of the company.61
The Reveal
If you haven’t guessed, this now infamous individual is Elizabeth Holmes, the founder and ex-CEO of defunct Theranos, the revolutionary blood-testing company that was revealed to be a massive fraud. Holmes, once personally worth over $4 billion, has been charged by the alphabet soup of federal agencies—Food and Drug Administration, Securities and Exchange Commission, and Centers for Medicare and Medicaid Services—for a range of illegal activities with potential penalties including millions of dollars in fines and twenty years in jail. She has already been banned from leading a public company for ten years.62 The idea behind Theranos was impressive, even intoxicating to investors, the pub-lic, and large partners such as Walgreens, Cleveland Clinic, and Capital Blue Cross Blue Shield. She was a celebrity. However, it turned out that Theranos’s equipment could not perform 240 tests on just drops of blood as hoped.63 Worse still, prototypes of the Theranos testing machine did not work, and demonstrations for various partners were shams. The results reported were generated using conventional testing equipment already on the market and then presented as if they came from the Theranos machine.
Who Knew Who Was Responsible? Holmes insisted on such privacy and total control that it seems only she and her romantic partner and President, Sunny Balwani, knew the whole truth.64 In fact, reporting (books, news articles, and an HBO documentary) shows that Holmes intensely resisted and even refused to reveal the operational and financial “truth” to the company’s board of directors, some of whom challenged her optimistic views and messages. All accounts indicate that Holmes would not allow oversight by anyone, not even the most determined and well-qualified individuals on the board, such as Avie Tevanian who was Apple’s former head of software engineering, and Don Lucas, venture capital investor and chair of the board.65
For Discussion:
1. What ethical decision-making perspective did Elizabeth Holmes seem to possess (recall from chapter 2?)
2. How would you describe the ethical decision-making perspectives of the investors?
3. Describe the level of social responsibility demonstrated by Holmes.
4. Describe Elizabeth Holmes in terms of the dark triad? 5. Imagine you worked at Theranos. Describe your ethical dilemma and what you would do?
6. What was Don Lucas’s responsibility as chairman of the board?
7. What was his responsibility, given his venture capital firm invested other people’s money in Theranos?
