The Theranos Scandal - A Simple Overview

[Music] do you know the company theranose i feel like more people should know about them i've seen a lot of suggestions from people saying i should talk about them but i haven't heard too much outside of that without seeking it out not as much as i would expect anyway which makes me think that it's not reaching a lot of people but the people that it does reach it tends to have an impact it did for me anyway i don't often use this word unless the situation really calls for it but this is ridiculous they were this 11 year old technology company out of silicon valley valued at about 9 billion the reasoning behind the valuation was that theranose had created this piece of medical technology that was going to revolutionize parts of the industry it was this seemingly magic little box where you put in a single drop of blood and it'll quickly test it for cancer diabetes and about 200 other common illnesses no need to take that large vial of blood send it into the lab wait to get the results and it was all contained in this cool looking portable box they called it the edison and just imagine the practical uses for it ambulances military use this box would make it possible for you to go to your local walgreens and give them a single drop of blood and then have them deliver you the same day test results i'm sure that sounds like a dream to anyone who routinely gets their blood tested and that's what was starting to happen they teamed up with walgreens to have these theranos testing centers in their stores at one point there were dozens of these centers all around arizona here comes the ridiculous part that was all in 2014 and in october of 2015 it came out that the entire company was a complete sham those edison boxes and the technology behind them that was responsible for the 9 billion valuation were pretty much nonsense they simply didn't work i know it sounds unreal like it's the plot of a poorly written movie so i'd like to talk about how they pulled it off just how were they able to make this happen the first way is a little abstract but i'd argue that it's the most important single factor elizabeth holmes she may be one of the most ambitious people that the world has ever seen meaning having or showing a strong desire and determination to succeed she was the one who started the company in 2003 when she was 19 years old and in 2014 she still owned half of it the fact that she owned one half of a 9 billion company meant she herself was a billionaire in fact she was the world's youngest female billionaire going all the way back to grade school she would talk about becoming a billionaire one day in high school she got straight a's all the time she had the small coding related business she was even learning mandarin for college she went to stanford to major in chemical engineering before dropping out to start this company not surprisingly steve jobs was the person she most looked up to another person with a tremendous work ethic she was recruiting key people from apple to work at theranos early on and even went as far as to wear the signature black turtleneck can we agree that this was an ambitious person i think of the phrase you can do anything you set your mind to because if you ever had any doubt about it here's the ultimate example she literally made billions of dollars from a box that didn't work to go along with the ambition there was also a tremendous amount of lying quite honestly this whole subject just makes me a little angry the idea of lying to people to advance yourself in your own interest to a point where you're actually harming others remember the promise was one drop of blood can deliver timely on-site results for a variety of illnesses that's how it was advertised and really that was the idea behind the whole company well here's the reality and again i want to point out how ridiculous this is when a patient would take the test at walgreens most of the time they were simply performing a traditional blood test instead of taking the drop of blood they would take the whole vial instead of doing it in the store they would send it to the lab instead of using their edison box they would use other equipment that they simply bought from a different company meaning the entire process was identical to your typical blood test and in the end theranose wasn't doing anything unique everyone that they did business with was under the impression that they were doing something unique they had to be very selective when finding investors because anyone who demanded to see it in action or the science behind it well obviously that wasn't going to happen but they were very sneaky about it they would say uh no it's a trade secret we can't reveal that and the investor would just say oh that's fair enough they built up to some pretty big investors too rupert murdoch walmart walgreens obviously were all investing millions of dollars with them now the majority of the time they wouldn't use the edison at all but sometimes they did and that's where things got really dangerous it was not uncommon for a test to come back with false results pretty much because they weren't capable of being accurate just think about that the customer has no real reason to think otherwise they took the test at their local walgreens and now they're looking into medical treatments medications lifestyle changes for something that they don't even have they were messing with people's health and that's i don't even know what to say let's move on to the next reason it goes along with the lies but you have to admit this was a great story if it were true of course as it stands it's a terrible story and i think that's why the public was willing to put aside their doubts a 19 year old college dropout creates a multi-billion dollar company that changes the medical industry for the better now there's the inspirational feel-good story that we all want to hear the next one is compartmentalizing and that's a long word that means elizabeth and the leadership of the company were sure to keep the employees focused on their own separate things that way they wouldn't figure it all out it's like one of those paintings where it just looks like dots when you stand close but as you back up you start to see the whole picture each department was working on their own little section of the dots without knowing how they really tied together into the big picture because if they had stepped back and looked at it they would have learned that the picture was not coming together they would even block off certain parts of the lab and lay everything out in a way that made it hard to converse pretty manipulative stuff there was bullying let's be realistic here people who work there were starting to figure it out and their nose was doing really well at keeping them quiet they would have them sign non-disclosure agreements because remember their technology was a trade secret after all so those agreements made people afraid to come forward with anything or if someone did start asking too many questions they would be threatened with lawsuits they would essentially bully everyone into staying quiet and out of their business that's not a full list of how they did it obviously but there you have some pretty effective ways of how to build a multi-billion dollar company without actually having any value not that i recommend anyone does it in 2015 everything was exposed and it all started crumbling down the man that we have to thank here is tyler schultz he was the theranos employee brave enough to stand up to the threats and come forward to a wall street journal reporter about everything that was happening the article about it was published in october of 2015 and that was the beginning of the end walgreens cut their ties with them soon after the company lost most of its value as did elizabeth holmes the sec started a fraud investigation that was settled with a 500 000 fine which could have been much worse as of 2018 theranose no longer exists elizabeth holmes basically maintains that she never did anything wrong she didn't know that this deception was happening but it really really looks like she did almost anyone involved in the situation will tell you that she knew and i think common sense can almost tell you that she was the founder and the ceo of theranose so what else are we supposed to think there is a criminal trial set to start in july of 2021 and i am very curious to see how it goes the charges are wire fraud which is defined as a crime in which a person concocts a scheme to defraud or obtain money based on false representation or promises you also have to do it using electronic communications but this does sound like something that she may have committed a few other things about this scandal that i found important or interesting sonny balwani is worth mentioning because he's possibly the second most involved behind only elizabeth holmes he became part of the company around 2009 when he provided a multi-million dollar loan and then ended up becoming president of theranos despite not knowing anything about the industry it's all very odd he's also going to be part of that trial with the wire fraud charges and to add to that he was also confirmed to be romantically involved with elizabeth holmes going back to 2003 so there's a whole situation that i don't want to dive deeper into and then this is odd elizabeth holmes is known to speak with a very uniquely deep voice that many people around her have accused of being fake every person should have the ability to get that type of test because i don't exactly understand her motivation behind it i suppose it may make her more charismatic or likable somehow memorable maybe i don't know but i feel maybe we could add this to the list of lies and then we have this tyler schultz the whistleblower who blew the lid off the whole thing he was the grandson of george schultz who was on the board of directors and happened to be the u.s secretary of state during the reagan administration and there's more family involvement not to read too much into this but elizabeth holmes is the daughter of a former vice president from enron which is a much larger more publicized scandal when looking at this i think some of the lessons here are obvious business ethics overall honesty i mean the deception here was out of control and as people we have to be able to have some trust in the world around us and i take a less obvious lesson from this in earning something being honest with yourself would you be happy with that level of success knowing what you did to get there the lack of morals and respect for just about everyone around you putting them in financial or even in some cases physical harm all i'm trying to say is maybe the journey is more important than the destination and how you get something is more important than what you have it's all stuff we already know but maybe sometimes hearing something like this can help you appreciate the value behind it well all right moving on from that that was my overview but this is a deep topic if you want to learn more about it i recommend this book called bad blood secrets and lies in a silicon valley startup the author of it is actually the reporter from the wall street journal that communicated with tyler schultz the whistleblower and essentially broke the story if you're not a reader there's also an hbo documentary called the inventor out for blood in silicon valley in a story in 2020 called the dropout let me know in the comments what are your thoughts on theranos and elizabeth holmes they're so closely tied together i think i've made my feelings pretty clear like many others i want it to be true i want it to all be a legitimate success but sadly it's not the case this has been a very depressing video it's scary to think that they went unchecked for so long it makes you wonder what's going on right now that we don't know about it's like when i find a spider on the wall and then i'm freaked out that they might be all over the place all right i'd like to hear what you have to say does it work yes you're confident in that i am confident in that thank you for watching [Music] you

Channel: Company Man

Views: 493,695

Keywords: Theranos, Scandal, Fraud, Business

Id: gtAg9Z_3cgw

Length: 11min 36sec (696 seconds)

Published: Wed Mar 17 2021