What physicians can learn from the Theranos saga… and the problem with ‘fake it till you make it’

Mar 4, 2019

I am eating up all media about the failed health technology corporation Theranos. This includes John Carreyrou’s jaw-dropping account Bad Blood, ABC’s podcast The Dropout, and the trailer for HBO’s documentary The Inventor.

Here’s a very brief summary of Theranos.

For those unfamiliar, Theranos was a blood testing company founded in the early 2000s by Stanford dropout Elizabeth Holmes, who was only 19 years old at the time. The vision was to perform diagnostic blood tests on extremely small amounts of blood, using finger sticks instead of venous draws.

Holmes managed to secure close to one billion dollars in venture capital over the next several years. This included some very well-known Silicon Valley investors. She assembled an extremely impressive board of directors. She secured partnerships and agreements with Walgreens, Cleveland Clinic, and other household name organizations. She received attention from big-name press that touted her as the next Steve Jobs.

By 2014, Theranos was valued at $9 billion. Holmes, as the major shareholder, was consequently the world’s youngest self-made female billionaire.

It turns out that the company’s technology never worked. The claims made by Holmes along the way were false. She was charged with fraud. The company dissolved in 2018. In his book, John Carreyrou calls Theranos “one of the most epic failures in corporate governance.”

I’m hooked on the Theranos story because, on one hand, it’s so unbelievably crazy. Yet on the other hand, as a woman in my 30s vying for success in the healthcare field, I feel a small, yet weird sense of relief that this didn’t happen to me.

Theranos lessons learned for the healthcare professional

I’ve learned a few things from the Theranos downfall. Any medical professionals with an entrepreneurial mindset who are striving to maximize their incomes or who simply want to do what’s best for their patients might benefit from these lessons, as well.

Here are five take-home messages from the dramatic implosion of Theranos.

Put a healthy limit on ‘fake it till you make it’

“Fake it till you make it” is a common expression suggesting that, by imitating competence and confidence in a given situation, you can actually realize these qualities. This mindset has done me a lot of good over the course of my training and career so far. It’s helped me overcome imposter syndrome and accept challenges that I thought I’d fail at tackling.

I encourage a health dose of “fake it till you make it” for any student or professional feeling uneasy about a career step, job task, or other opportunity. In most cases, rather than truly “faking it” or leading people astray about our capabilities, we’re actually pinpointing and accepting our knowledge gaps and then taking steps to fill them in.

But you can take the mindset too far, as Elizabeth Holmes did. Don’t convince others that that you’re proficient at something that you’re actually not. Don’t put patients, clients, or your company at risk by not admitting your limitations. Don’t miss out on valuable advising and mentoring due to misleading your advisors and mentors.

Thought leaders’ thoughts aren’t the end-all be-all

Thought leaders, influencers, key opinion leaders, subject matter experts. We hear these colloquial titles all the time. And often we’re compelled to admire them, approve of their messages, and adopt their opinions. But these titles have no standard definitions or criteria.

Theranos raised a huge amount of money from prominent investors. This was not because all of them fully vetted the investment opportunity. Rather, it was a snowball effect of renowned wealthy people blindly following what other illustrious rich investors were doing.

It’s fine to learn from thought leaders, and even let them impact our decision-making. But it’s up to us to ensure that the information they present and opinions they tout are trustworthy and are backed up by data. We need to have our own best interests in mind.

You can be fraudulent without setting out to be a fraud

Some readers will disagree, but I don’t believe that Elizabeth Holmes ever really intended to lead people astray. She started off with an idea that she truly believed she could bring to fruition, and she adamantly set out to make that happen. Then she dug herself into a hole.

We’ve all read stories about Medicare fraud schemes that leave us wondering how physicians could be so selfless, thoughtless, and stupid. Yet there are just as many cases of so-called “unintentional” Medicare fraud. In these situations, the physician at fault simply failed to understand the law, or took a position with a dishonest company without adequately researching them, or hired bad-apple billing and claims staff.

It’s hard to keep your mind right in a circumstance like this, and we risk digging ourselves into holes. Remember that it’s always easier to fill in a shallow hole than to keep digging and hoping that your hole will become a cave.

The risks of removing doctors from medicine

We’re in the midst of a massive push toward patient-directed care. And it’s easier than ever for patients to do their own research and shop around for services. To some extent, this removes the ‘doctor’ aspect of practicing medicine. The Theranos story is a good example of why this carries risk. Holmes’ blood testing device (which gave inaccurate results) was actually being used in clinical trials and by the public in Walgreens pharmacies.

Don’t overlook the worth of your extensive training as a physician. Do research before recommending a new technology or treatment to a patient – even if they’re asking for it. Take the time to discuss risks and alternatives. Always disclose any relevant financial interests.

Do due diligence when investing or making career decisions

Theranos had over 800 employees at its height. While some have merely had to find new jobs, others were much more deeply affected by the experience. Investors who contributed millions of dollars to the company essentially lost it all. As we contend for career advancement and seek out investment opportunities, we can’t be too careful in the due diligence that we perform.

When considering involvement with a company – whether it’s purely financial or any other type of agreement – don’t take a leap of faith, trust your gut, or follow the pack. Instead, find out the facts. Ensure the leaders of the company have expertise in the core area of the organizations. Look for transparency. Become familiar with the company culture.

4 Comments

  1. xrayvsn

    I too had been viewing this company from the get go. I remember reading about it when she first burst on the scene and claimed a revolution in lab work that would be quick, cheap, and accurate.

    Her intentions may have been good, but I think in the middle of it she became more enamored with the fame associated with it. She was widely doing interviews and public speakings and I think got caught up in her own lies.

    Lot of great financial points in this cautionary tale as you pointed out.

    • L4Z

      Enamored with the fame – yes! It seems like she completely stopped considering the science and engineering aspects, and started focuses on her own appearance, the company’s appearance, and even the appearance of the non-working device.

  2. Wealthy Doc

    I love this.

    I had followed the story from a distance, but these take-home messages really make it come alive.

    The herd mentality is very powerful. Social proof and peer-pressure are real and strong. I remember how much effort it took for me to not invest in tech stocks in 1999 like all my peers.

    Do you think that the attractiveness of Holmes was a factor? I tend to think it was. I’m sure she bedazzled some big-time investors who normally do more due diligence. She was bright and in silicon valley and talked about the intersection of tech and health care. And easy on the eyes too. Sign me up.

    I’m taking some risk even writing this since some will think I’m a chauvinist and others will think I’m a feminist. I don’t think I’m either I just remember that every single WSJ article about Theranos had a picture or sketch of her. I can’t think of any other company whose CEO I had seen more often. Some companies I have followed for decades and still don’t know what the founder or CEO looks like.

    Final comment on crowd psychology: People talk about the wisdom that comes from a group. Sometimes that is true. E.G. If you want to guess the weight of a heavy pig at the state fair, then get hundreds of people to independently guess and average the numbers. You likely will end up within a pound or two of the real value.

    But that only works if they make independent judgments. For this investment people weren’t looking at the 10-K in an isolated room the way Warren Buffett would. They were saying, “oh, since so-and-so with a great track record from this VC group is in, I should be in too.” Sign me up. That is how a big crowd can go off a cliff like lemmings.

    • L4Z

      Great insight. You know, yes.. I do think her attractiveness played a role. I can’t help but think that she would have been “called out” sooner if she’d been the stereotypical middle aged male CEO. And I admit that her attractive young female status is part of what initially caught my attention when she started popping up in the media.

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