Elizabeth Holmes And The Problem Of Withholding Information

Since the inception of the Internet era and the dot-com boom of the late nineties, startups have taken their place as a major economic trend. This is especially true in the youthful, tech-centered environment of San Francisco, where a culture has developed around the startup ethos--reflected in aesthetics, in behavior, and even  in the diets that have come to dominate. This shimmer of the life and business surrounding startups is dulled on the edges by the reality that many startups will expire in utero having never seen the light of day.

Here's the thing about startups in Silicon Valley: the majority of them exist in a haze of obscurity to the general public. It’s only until the potential for a startup’s product or service to become integrated into the fabric of life for a sizable group that the business world becomes aware that these small businesses exist at all. In most cases, invisibility is not conducive to success.

And then there's  Theranos. Although it's called a startup, Theranos is regarded by investors as a “unicorn company,” a term they use to describe a company that's valued at over 1 billion dollars. Theranos is actually valued at 9 billion dollars, a figure that is undeniably impressive for what is essentially a small business. Its financial success owes to the ambition of its founder, Elizabeth Holmes. Holmes herself raised about $400 million to start her business. She came into the spotlight about  a year ago  when she launched the startup she had been incubating on for the 10 years since she dropped out of Stanford University. The goal of Theranos is to revolutionize blood testing to make it both easier and cheaper. Holmes and her company have developed instruments and software that test for, among other things, high cholesterol, cancer, herpes, and vitamin deficiency based a single drop of blood, thus avoiding the use of the large needles, tubes, and syringes that make people squeamish enough to avoid blood tests.

This particular startup is unlikely to fade into oblivion, especially given the reputation of Holmes, who is the world’s youngest female self-made billionaire. Since entering the public sphere, Holmes has received a slew of recognition that includes several profiles by major publications, being named one of Time's 100 Most Influential People, and being appointed by President Obama  as US Ambassador of Global Entrepreneurship . She has been likened to Steve Jobs for her conviction that she is meant to impact the world in a big way as well as the reminiscent black turtleneck she wears as a uniform.

Holmes’ background presents an exceptional story: Born in Texas, she displayed an early potential and drive to accomplish great things, becoming fluent in Chinese and matriculating as the only female undergraduate student in the chemical engineering program at Stanford. Her motivation in starting Theranos came from a personal fear of needles--which she shares with her mother and grandmother--the death of her uncle, who lost a battle to cancer, and the sheer desire to improve the process of blood testing as a benefit to humanity. Holmes is devoted fully to her work. She spends most of her time in her office, doesn't date, and rarely goes out.

Her singular drive and focus, as admirable as it is, makes all the more distressing the scandal she and her company are currently facing.

A few weeks ago, The Wall Street Journal published an article written by John Carreyrou, claiming Theranos had fabricated and manipulated test results. The report cites complaints that instead of using their own machine, Edison, which Theranos has claimed to be capable of testing for a variety of health conditions, the company has actually been using the same equipment that traditional laboratories use. And while Theranos managed to squash that claim, Holmes has not actually revealed how any of its machines work or what the innovation in its process is. Neither has she been forthcoming about what exactly goes on behind its doors. This doesn't sit well with doctors, reporters, and Theranos' potential clients.

This secrecy has only drawn more scrutiny. Her board is made up of corporate and governmental figures, lacking anyone with an actual medical background. Based on  a letter she sent to Theranos shareholders, she also seems to demand total control over her company. Further, the "nanotainer" used to hold the drops of blood for testing was declared as an  "unapproved medical device" by the FDA. Most ominously, this web of trouble has resulted in Walgreens, the major partner with Theranos, halting its program with the company. To call this a "rough patch" for Theranos might be an understatement

At the core of these problems is Holmes’ seeming belief that her startup can operate in obscurity and that, admittedly out of the reasonable fear that competitors will one-up what Theranos is doing, she can withhold information. For CEOs of companies to make grand claims and promises about the significance of the work they're doing is par for the course. But Theranos functions under slightly different parameters that make all the difference. For starters, Theranos is trying to change our approach to healthcare, but the field of medicine is extremely sensitive for the obvious reason that lives could be at stake. Theranos is only now starting to submit work for peer review, which is the conventional procedure for the introduction of medical breakthroughs. If Holmes wants to improve healthcare, she needs to be more open with the medical experts who are being asked to rely on Theranos. Secondly,  Holmes should've been more prepared for close scrutiny, an inevitable result of her insistence on being secretive while maintaining that Theranos is going to have a huge impact  somehow. Despite the comparisons, she is mistaken if she likens herself to Steve Jobs in the wisdom of keeping product development under wraps, the difference being that her products have the potential to affect something as fundamental as healthcare.

While Elizabeth Holmes is not being overtly deceitful, she is withholding information that is crucial to the perceived legitimacy of her startup. She's not unlike any other CEO in that she is holding out bold claims and promises, and she is not mistaken that Theranos will eventually contend with competitors. But her company is no longer an obscure startup, and the scrutiny is justified. If Theranos aims to be a part of the medical field, the need for clear communication is paramount.