The Theranos story is an epic tale of folly with lots of twists and turns, but it’s by no means unique. At the very same moment the play-by-play of the Elizabeth Holmes trial sprawls across the drama section of your daily paper, the pages of the business section are filled with adulatory copy regarding other science-techy startups. Inevitably, some of them will end up with financial losses that are even bigger, thanks to technology that is even shakier, business models that are more delusional, and exaggerations that are nearly as bold as anything associated with Holmes’ fiction-enhanced blood-testing company. These “startups” all promise limitless clean energy: power from nuclear fusion and a rapid transformation of our energy supply away from fossil fuels.
At this point, nobody’s claiming that there’s fraud in the fusion sector, though the exaggerated claims coming from the companies and the media are rapidly becoming as detached from reality as a Tucker Carlson monologue. Read the papers and it seems like a fusion power plant is imminent—we’re just a few years away from our first fusion generator and then to widespread commercialization. After all, that’s what the fusion companies themselves are saying. Tokamak Energy: A working power plant connected to the grid by 2030. General Fusion: Demonstration power plant beginning operations in 2025. Helion Energy: We’ll do it in 2024. First Light Fusion: Yeah, 2024. Zap Energy: 2023—so there! But if we’ve learned anything from the Theranos debacle, it’s that we can’t take any company’s claim at face value when “fake it till you make it” is a standard corporate motto.
There’s one key distinction, though. The fusioneers don’t really even have to fake anything. Unlike Theranos, which built (terribly flawed) hardware that was used to analyze patient samples, not a single one of the nuclear fusion “startups” has produced a prototype machine that they propose to base their business upon. Nobody has demonstrated that they’re even close to building a fusion device that produces—rather than consumes—energy. Luckily for them, assurances of honorable intentions have been sufficient for investors. These companies are able to trade on promises, not products. Yet despite the short history of purely commercial fusion, those promises already have a history of being broken. In 2016, Tokamak Energy promised energy production in five years. General Fusion: prototype plant within a decade—and that was in 2009. Most recently, the press went gaga in November over Helion Energy’s raising $2.2 billion in venture capital to build a working reactor by 2024. Almost none of that coverage mentioned Helion Energy’s business plan of building “a useful reactor in the next three years” way back in 2015, when it had only raised some $10 million. It’s the exact same promise, resold six years later at 200 times the price.
That’s the one real, concrete success of the fusion startups that you can point to: not extracting energy from seawater, but extracting money from speculators. If you measure scientific progress by venture capital raised, then, yes, the industry has been making huge strides. In just the past few weeks, Helion’s $2.2 billion and Commonwealth Fusion Systems’ $1.8 billion each surpassed Theranos’ estimated $1.3 billion capitalization at its peak. (And Theranos had a deal with Walgreens to show investors.) Speculators can now lose far more money chasing after fusion than they ever could by falling in thrall to Elizabeth Holmes.
Of course, fundraising isn’t a valid measure of scientific progress; however, you wouldn’t be able to tell that by reading press coverage. We now realize that media credulity helped build Theranos’ fortunes. A good, hard look at Theranos’ claims should have brought the house of cards tumbling down far earlier. Oddly, none of that seems to motivate journalists to cast a skeptical eye at the viability of the fusioneers’ technology (which ranges from the moderately plausible to the ridiculous) or their business models for making money if they are eventually able to prove their technology works (which range from the nonexistent to the nearly nonexistent).
Imagine that, against the odds, one of these startups succeeds. It manages to achieve fusion “breakeven” and get more energy out of a reaction than it puts in. Say that the excess energy is so great that all the inefficiencies of getting the reaction going (which haven’t been overcome) or capturing the energy and turning it into electricity (which most companies haven’t started to address seriously) are not a problem. Imagine, too, that the startup somehow has a patent on a key MacGuffin in the reactor that other companies with expertise in high-tech and power plant manufacturing can’t match. Then, and only then, can the company be reasonably assured of making money from energy production—if its plants bring energy to the market at a competitive price.
This last bit is far from easy. Given the overhead of building a high-tech plant that produces low-level nuclear waste that needs to be disposed of (yes, fusion produces nuclear waste!), it’s a good guess that the cost per megawatt will be at least as great as the cost of traditional fission nuclear power plants—which is quite a bit more expensive than gas- or coal-fired plant power. This isn’t to say that it won’t contribute to the nation’s energy-generating portfolio, but it’s not likely to be a game-changer or the stuff of an energy unicorn.
Yet if you listen to the rhetoric coming out of some of those fusion startups, you’re led to believe that it will be much cheaper to build, maintain, run, and decommission super-high-tech fusion plants than an equivalent coal plant. That is, it’s easier to set up a nuclear magnetic bottle and mimic the inner workings of the sun than it is to throw a rock into a raging fire. That, my friends, is bat-guano insane. As the Theranos trial is making clear, it’s not so easy to tell the difference between puffery and outright fraud. In my opinion, anyone telling investors that they’re going to produce energy at a third of the price of coal should brush up on the George Costanza defense: “It’s not a lie if you believe it.”
One of the strangest distortions about the whole fusion-energy-sector brouhaha is the way funders and business journalists treat all these fusion companies as startups. Some of them, such as Commonwealth Fusion Systems (founded 2018), aren’t too far off the mark. But others like Tokamak Energy (2009), General Fusion (2002), and TAE—the company formerly known as Tri Alpha Energy (1998)—are startups in the same sense that Cher is fresh new talent. After five, or 10, or 20 years of riding on potential, it’s time to admit that the potential wasn’t really there in the first place—at the very least, not in the way that the “startup” envisioned.
So who cares if a company sponges off VC and pretends to be a pre-IPO ingenue until it’s old enough to be drafted? Not long ago, it wouldn’t matter at all to your average investor. Only venture capitalists, angel investors, and other folks with very big wallets and a high tolerance for risk would lose money by putting cash down on a decade-old pseudo-startup without even a fully developed product to put on the market. After all, they’re supposed to be sophisticated investors who know the risks that they’re taking, and if they didn’t do due diligence, well, that’s the downside of capitalism. But the rules have changed, and now we’re all targets.
For years, only “accredited” investors—people who have high incomes or net worth, and are presumed to have a decent understanding of securities trading—were allowed to invest in unregistered securities, such as stocks in a pre-IPO company. But that changed about a decade ago, when Congress decided to allow ordinary citizens to invest in these companies via crowdfunding. There were some protections built into the law: Companies could only raise a certain amount of money through crowdfunding, limiting the public’s exposure to risk. (Of course, those protections are steadily dissolving.) So it’s no surprise that the naïve investor has become a target for fusion boosters. Lawrenceville Plasma Physics (founded in 2003 by a big-bang denialist) has been living crowdfund-to-mouth since 2014 when it raised about $200,000 with the promise of a working fusion machine by the year 2020. Its latest “stock” sale, which happened a few months ago, raised more than $2.2 million, while suggesting to investors that it would have a functional prototype within three years.
Fusion companies are giving Theranos a run for its money, yet the news coverage of them seems to be almost universally uncritical. Huge sums of money have flowed into their coffers—making Theranos’ mere billion and change look like small potatoes—in return for vague, often obviously broken promises of prototypes that fail to appear despite decades of trying. Despite the total void where a product should be, these companies are successfully convincing investors both big and small to part with their money.