‘People wanted to believe’: reporter who exposed Theranos on Elizabeth Holmes’ trial

·9 min read

The unraveling of Theranos began with a 2015 article in the Wall Street Journal that revealed how the revolutionary technology promoted by the blood testing startup wasn’t exactly what it seemed.

Over the proceeding months, the reporter John Carreyrou exposed how the testing devices the Silicon Valley darling said could perform a variety of medical tests with just a drop of blood were not actually being used to perform most of the analyses. Investors and consumers, Carreyrou found, were being fooled.

Theranos dissolved in 2018 and its star founder, Elizabeth Holmes, will face trial in a San Jose courtroom next week.

Carreyrou’s book about the rise and fall of Theranos, meanwhile, became a bestseller and the author is hosting a new podcast, Bad Blood: the Final Chapter, as the trial begins.

He spoke with the Guardian about the lies Holmes pulled off and the larger questions about Silicon Valley culture that Theranos raised.

What do readers need to know about the particular moment in Silicon Valley culture when Theranos rose to prominence?

Theranos rose to prominence between 2013 and 2015, during the beginning of what I call the “unicorn boom” – Silicon Valley’s second enormous boom after the dotcom boom of the late 90s.

This boom started with the emergence of Facebook and Twitter and then metastasized with the appearance of these other big unicorns like Uber and Airbnb. Theranos at one point was worth even more and was the most valuable private startup in Silicon Valley back in 2014.

Related: Elizabeth Holmes: from Silicon Valley’s female icon to disgraced CEO on trial

This was all before the backlash against big tech. People did not come down hard on Facebook until the 2016 election, when they realized the roles that Facebook and Twitter had played and the way those platforms were manipulated by Russian hackers. The disposition of the country and of the press towards Silicon Valley was still positive. When I broke the Theranos scandal, in a small way, it contributed to the backlash against tech that began to transpire.

Why do you think it was able to go unchecked for so long?

As Holmes herself has said, Theranos was in stealth mode in its first 10 years, so the company was not on anyone’s radar. It was really only in the limelight for two years before I wrote my first story on the scandal. You could argue that even that was too long because these unreliable and inaccurate blood tests were already available in Walgreens.

There is still a willingness to worship geniuses in Silicon Valley

Sunny [Ramesh Balwani, former president of Theranos, who was also charged with fraud] and Elizabeth were very secretive – they managed that company like it was the CIA. The threat of litigation was always in the air, so employees were worried about speaking out.

It seems like the collection of high-profile people on the board, many of whom did not actually have scientific expertise, played into the hype. How was Holmes able to secure such supporters?

She very much did that in a calculated way. Early on, she started associating with these older men who could give her more credibility. It started out with Channing Robertson, the well-regarded Stanford engineering professor who would join her board, encouraging her and putting her in touch with people he knew around the Valley.

Then George Schultz was key in terms of being able to put together the last iteration of the board. He introduced her to all those luminaries; many of them were fellows at the Hoover Institution. And so she milked it. She was able to meet Gen Mattis, ex-cabinet members like Kissinger, and on and on.

The [Securities and Exchange Commission] has a term for this, and it’s affinity fraud. It’s associating yourself with people who are credible and well regarded by society to give yourself credibility. And that is a big part of the Theranos story.

Could you talk a little bit about the mythos surrounding Elizabeth Holmes and why people were attracted to that?

There are two parts to it. One is a myth that survives to this day, popularized by the incredible success of Steve Jobs, that Silicon Valley every few years can produce these young genius startup founders and that they can do no wrong.

[Holmes] served that myth, but there was also a gender component to it. She was going to be the first woman who reached billionaire status and join the pantheon of these tech leaders. People were really rooting for her – young girls were writing her letters.

A lot of people wanted to believe this fairytale, because it would have represented real progress in this very male-dominated world of Silicon Valley. Unfortunately, it was a fairytale that wasn’t true.

Ramesh ‘Sunny’ Balwani leaves court in San Jose, California, in 2019.
Ramesh ‘Sunny’ Balwani leaves court in San Jose, California, in 2019. Photograph: Justin Sullivan/Getty Images

Do you think that those myths around people or those personas still play a big role and who gets funding in Silicon Valley?

Yes, absolutely. To this day there is a willingness to worship geniuses in Silicon Valley. It is a very American phenomenon – I am half French and I think Europeans tend to be a little bit more cynical, but Americans are eternally optimistic, eternally willing to worship new heroes.

That is especially true in Silicon Valley, where there’s this magical thinking that some people are geniuses and just can’t be wrong. It may have been tempered in the past years because of Theranos, but I believe it still very much exists.

When you broke the story you were also based on the east coast – do you think coming from outside the bubble of Silicon Valley helped in your reporting?

That is part of it, but it’s also the fact that I’d been doing investigative reporting about healthcare for a decade before I stumbled on Theranos. Holmes framed herself as being part of a tech lineage when in fact her company was a healthcare company. So I had just the right background to see through it.

Given that the media played such a large role in building up the company, do you think tech media is doing any better now?

Especially after we learned the way Facebook and Twitter were exploited during the 2016 election and how these companies have become virtual monopolies, there’s a lot more skeptical and critical coverage nowadays than there was back then.

In terms of the culture of Silicon Valley itself changing, I still think it’s going to take a guilty verdict.

How do you think the outcome of the case will impact Silicon Valley and startup culture more broadly?

If she’s convicted and does significant prison time, it’s going to be a shot across the bow to venture capitalists and startup founders in the Valley that there are limits to how much bullshitting you can do, to how much exaggerating and hyping you can do and how many rules you can break.

There has long been a culture of faking it until you make it in Silicon Valley, and she is a product of that culture. To reform that, it is going to take a conviction and people realizing if you cross too many lines, you will end up in prison.

The flip side of that is that if she’s acquitted you’ll have young entrepreneurs running around Silicon Valley saying: “Yeah, I push the envelope but look at what Elizabeth Holmes got away with – she did worse than what I am doing and didn’t do a day in prison.”

Scams are compelling in general, and US capitalism is really good at producing them

Do you think she will testify?

If I had to bet, I think she will testify. Not just because of what I have said about her tolerance for risk and her confidence, but because it looks like her strategy is going to be to blame Sunny and say he was abusive.

If that is the strategy, I don’t think it will be enough to put psychologists on the stand. To convince the jurors, they will want to hear from her how Sunny abused her, what effect that had on her, and how it affected her judgment.

Maybe I will be proven wrong. In most criminal cases defense lawyers advise their clients not to testify because it is a huge gamble. It opens you up to cross-examination from the prosecution, which can backfire in a huge way. If she does testify, it will certainly go against the grain of what usually happens.

Given the defense that we’re kind of anticipating , what is your take on her relationship with Balwani?

He definitely was a bad influence - but the notion that he controlled her, to me, is laughable. They were in this together in a partnership of equals. If anything, when they disagreed, she had the final say.

Related: 'Americans have a fascination with fraudsters': Alex Gibney on the fall of Theranos and Elizabeth Holmes

I know this not only from the six years of reporting I have done on this, and all the people I have interviewed who saw them operate together up close, but I have perused five years of text messages between them that were exhibits in the SEC case [against Theranos].

You also have to remember the fact that she had 99.7% of the voting rights of this company. She was in full control. Was she living with him and were they consulting each other all the time? Yes. But I do not buy this notion that he was the puppeteer and she was the puppet.

This story has inspired a lot of movies, books and other media. Why do you think that it’s so compelling to people?

Scams are compelling in general, and US capitalism is really good at producing them.

In this case, people are fascinated with the psychology of Holmes. How did she rationalize behaving the way she did? How was she able to pull off these lies for so long? How was she able to manipulate people for so long? The way she deepened her voice at times, the clothes she wore – she is a real chameleon.

She’s also got this extraordinary tolerance for risk, because to pull off what she pulled off – going live with a blood testing device that didn’t work – that takes chutzpah. Even how she is handling the case now – most people would have pled out four years ago. She has chosen to take this trial to court, to roll the dice.