The Aftermath of Elizabeth Holmes

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S1: Honestly, Rebecca, how tired are you right now?

S2: I’ve slept about two hours over the last two to three days, so I’m pretty tired. Lizzie thank you for thank you for inquiring. Well, I

S1: Rebecca is Rebecca Jarvis. She’s the host of the Dropout Podcast and ABC News is Chief Business, technology and economics correspondent. And she’s now spent years covering Elizabeth Holmes. Her spectacular rise. Founding Theranos, a

S2: health care pioneer, is being compared to visionaries like Bill Gates and Steve Jobs this morning,

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S1: Elizabeth Holmes and her incredibly public fall.

S3: The verdict is in the disgraced Theranos founder and CEO found

S1: guilty that fall ended this week when Holmes was found guilty on four counts of fraud or conspiracy for misleading investors about Theranos technology. Does it feel strange at this point to have a verdict? So much went into this. You were following every single twist and turn of this trial. How do you feel now?

S2: It is. It’s a surreal thing to have spent so many years of my life following this story and to have something of a conclusion.

S1: The question now is what, if anything, Silicon Valley will take away from all of this. It’s easy for founders and investors to write Holmes off as a liar and an outlier, but she didn’t commit her crimes in a vacuum. Today on the show, Silicon Valley saw what it wanted to see in Elizabeth Holmes. So what does it do with the wreckage of her story? I’m Lizzie O’Leary and you’re listening to what next? TBD a show about technology, power and how the future will be determined. Stick around. The U.S. government had charged Elizabeth Holmes with 11 counts of fraud and conspiracy. It said she deceived both investors and patients about Theranos blood testing technology technology that she’d promised could run hundreds of lab tests. Just a few drops of blood for people who haven’t been paying close attention to this case, let’s lay out the verdict. There were 11 charges she was convicted on. Four. How would you characterize the verdict?

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S2: The simplest way to see this is on most of the investor accounts. They found her guilty on the patient counts. They found her not guilty. I would say that when it came to the investor counts, it was clear cut. And this is also based on conversations that we’ve now had with the jury. Two of them have spoken to us and their sense was Elizabeth Holmes was directly tied to the financial decision making inside of her company and directly tied to the conversations where she misled investors on four of those counts. And that’s where they found her guilty. Where it was a bridge too far was when it came to the patients. The the jurors didn’t see a link between intent as in Elizabeth Holmes went out and intended to defraud patients in the way that they saw it with investors.

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S1: You spoke to two jurors for your show and I was struck in in listening to you. Describe it that. The jurors, like believed that Holmes believed in what she was doing.

S2: Yes, yes. And that really stood out. None of them. And again, it’s two that we’ve spoken to at this point. So there might be another out there in the phone lines are open and we’re happy to hear from you. But but at this point, it does seem they believe that she believed in her technology. At the same time, there were elements of how she sold this vision to investors, which based on the four accounts where she was found guilty in their view, were predicated on lies untruths.

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S1: Then there were additional counts of fraud related to investors that the jury simply couldn’t reach a verdict on. Is that just because the government couldn’t quite close the deal? Not part of the case?

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S2: Well, what I think is really interesting in that question is coming into the jury room. In the first couple of days, they established what they thought on eight of the counts, but the three that were in question that they could never come to a conclusion about in order to try to answer those, and they were at a stalemate for the course of four days of deliberation. They put together the star system one to four stars. Do you believe this witness is credible? A lot of the witnesses they gave four stars to Adam Rosen Dorf, the lab director general James Mattis, former Theranos board member Elizabeth Holmes scored the lowest. She got two stars. That was the lowest star count, according to the jurors. We’ve now talked to you. That was the lowest star count of any of the witnesses. So it’s this interesting to me in my head. It’s this interesting dichotomy between you didn’t give her that much credibility, and yet you did buy into the idea that she was trying or believed that she could do the right thing eventually.

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S1: Where does this leave the the patients, the people like Sherri Acker, who someone you’ve talked to who someone who testified, who was a breast cancer survivor got a Theranos test, and when she got that test, it made it look for a week like her cancer might have been back. Well, what is someone like her do with this verdict?

S2: Yeah, I think that’s sort of the troubling part in all of this, especially when it comes to consumer rights. And another part of this, though, to keep in mind is that the patient counts were always sort of the harder obstacles they were, the higher legal obstacles because there were more steps between Elizabeth and the patients than there were between Elizabeth and the investor. She met with the investors directly, the patients, while a number of people took the stand. One woman thought that she was having a miscarriage. Another person thought she may have HIV. A man thought he had prostate cancer. These are really when this story, I think, became something that a lot of people were paying attention to. It was because of that because the stakes, yes, you have this incredibly intriguing woman at the heart of all of it. But at the end of the day, if you can walk into Walgreens and get this test and it’s not real, it’s not accurate. Wow. As a consumer, that’s a very scary thing.

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S1: Part of what makes Elizabeth Holmes a story and her trial so compelling is that she was more than just an entrepreneur. She was a symbol of a woman in a boys club of a certain kind of dream big swagger that celebrated in Silicon Valley and eventually of hubris, excess and capitalism without any guardrails from her cultivated Steve Jobs style black turtlenecks to her distinctive baritone. She was hard to ignore. I want to hear a little bit about what the trial was like. You were there a lot? There were like people dressed up like Elizabeth Holmes. It sounds like a circus.

S2: Yeah, it really was in many ways a circus. And it drew. I think it drew a lot of attention from a lot of different places. I mean, I spoke to people who were there. A musician who was living in the area who just wanted to come check it out. You had the artist, the woman who showed up and was selling the whole Elizabeth Holmes look for $100. And then you had you had people like doctor and cop seal, who is a retired biotech executive who at one point in time crossed paths with Elizabeth Holmes and was interested in this story because of the industry and what that says and what it means for the industry. So I just think this story it it I know for you and I and I, or from what you’ve said and for me as well, it’s always been very captivating because it’s a parable about our time, about who we are as people, about what we all sort of collectively buy into in group. Think about the ecosystem, about media and Silicon Valley and money and who gets funded and why they get funded. And this story just hits on all of those different themes.

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S1: She spoke in her own defense. What did her voice sound like?

S2: Oh, I mean, it’s the question, right? So I I would say in my own analysis, she sounded very much the way that we’ve heard her on stages with the low, deep voice, but I do think there was a lighter, almost airier quality to how she spoke.

S1: I’m asking this question because, you know, she had this sort of like part of her personal myth making was this baritone voice.

S2: Yeah. And look, I don’t think my own voice, I’m losing it right now from from a lack of sleep, and I apologize for that. But my impression being in the courtroom and of course, the charges were brought three plus years ago. So they had a lot of time. She had a lot of time to talk to her attorneys and anybody in that situation would about what the presentation was going to look like in the courtroom. And I would say the overall essence of what she provided in the courtroom was the deep baritone voice was there, but there was a lightness to it that. If you’re trying to declare your innocence, that perhaps would benefit one. To speak in that way. Mm-Hmm.

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S1: One thing that she said on the stand was that a lot of people, investors and others wanted to believe in Theranos in its future, in its promise. And it kind of makes me wonder like, doesn’t doesn’t she have a point that she couldn’t have done this on her own? People needed to buy in?

S2: That was, I mean, that was sort of the the crux in many ways of the defense’s argument throughout, which is. Mistakes were made, but there was this entire ecosystem in every step of the way. People in that ecosystem failed. And especially when it came to the investors, one of the big arguments the defense made was these were really sophisticated people. She was a 19 year old college dropout. They should have known better. They should have asked questions. They should have followed up when I talked to legal experts and this was obviously before the verdict and the verdict went the way we anticipated to some extent on this at some point. The buck does have to stop with you. And this idea, one of the things that the defense did throughout her testimony is they really framed her as a 19 year old Dropout. But she, of course, is a 37 year old woman now, and over the course of many years, this business was running and she pulled in a lot of money and a lot of very high profile people.

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S1: Do any of the people who helped prop her up, James Mattis, who testified, or, you know, any of these other luminaries who put their names behind her and arguably helped pump up the company? Is there any accountability for them?

S2: I think in terms of perhaps social accountability, perhaps there is. I mean, certainly to be associated with this isn’t the best look. And at the same time, if you buy into the theory that these people were overtly lied to and misled. It also becomes a little more complex, whether you hold them directly accountable. Now, something that you’re sort of touching on here is also just who the people are, who ultimately did invest with Elizabeth Holmes. You had Rupert Murdoch, you had the Walton family of Walmart Fortune, the Davos family. These were not the biotech venture capitalists of Silicon Valley that generally would would lend credibility to an idea like this. And they largely after the original rounds of funding, which did include people like Don Lucas and Larry Ellison and Tim Draper. After those early rounds of funding, most of the money was coming from these Moore family office and less sophisticated biotech investors. And so people in Silicon Valley will say, Well, that was a dead giveaway, that she didn’t have that other type of backing.

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S1: You are getting at something that I think is one of the most important things about this trial is like sort of what signal Silicon Valley receives from it. And what I have heard and what has been reported on your show and in other places is Silicon Valley saying exactly that? Well, the real money behind this wasn’t really, you know, prestigious venture capital firms. I guess I don’t know whether to believe that or not.

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S2: Yeah, I would say that it’s a nuanced question. But every person whom I’ve spoken to, who’s directly involved in Silicon Valley, for the most part, the investors and the founders, the entrepreneurs, they are very quick to distance themselves and call her an outlier. Here’s the thing I think yes, she largely did not obtain the funding of the biotech venture community. She did, though, gain the acceptance, at least on the surface of things from that group. I mean, she was at the parties and she was at all of the exclusive events, and the Hoover Institution at Stanford was a big reason. And her relationship to that, and to George Shultz, was a big reason why she was able to put together the board of directors. She was able to put together, and she was celebrated in all of these circles. And yes, by the way, she was celebrated by the media and the press, and I’ll never forget that it was. It’s a big part of the telling of our story as well. But you don’t have to be funded by Silicon Valley to look like you have been anointed by Silicon Valley and at least for a time, if there were people in Silicon Valley who truly thought this woman is outrageous and she’s selling a lie. They didn’t say it until more data started to come out.

S1: Well, she also did something that really works in Silicon Valley. She sold her founder myth. Yup. She, as you and I have discussed, she dressed like Steve Jobs. And, you know, she went to all the parties. She did all of that stuff. She sold the Dropout myth, right? Like, I’m a genius who figure this thing out at 19. Has the appetite in Silicon Valley for falling in love with the founder myth changed at all?

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S2: Look, I’m not the person who’s making these investments. Yeah, I know, I know, I know. I came on this podcast Lizzie, because I have billions of dollars that I put it into startups every day. But no, I think that. It’s hard to say, because when you look at who you know, the next set of 30 under 30 and 40 under 40s and whoever else it is, we’re kind of used to these archetypes. And I and I do think to some extent people are pushing for change in that area. I don’t know to what degree it’s truly, you know, in a real way, being successful. I do think that there is something. At least from the larger expanse of startups that I think that she did differently and that I do think is distinct versus what most startups are doing, and that is her. She wasn’t just selling a vision of a future, she was selling something as though it had already happened. That was a lie. And that is different. And bringing an investor and in particular a sophisticated investor along on a journey of I want to go to the Moon, let’s go do. This is very different than saying I’ve gone to the Moon. Can you give me some money so I can do it again?

S1: This is the difference between fake it till you make it and outright fraud.

S2: And yet, you know, Adam Grant is one of the people in our final episode, and he talks about how he, you know, he advises a lot of of of young startups. He has the Work Life podcast on TED and is a professor at Wharton, and he says he hates fake it till you make it like he just thinks that entire ethos, the fact that that that’s the advice that young people and startups are getting that you have to fake it till you make it is a terrible thing. And that maybe as a result of something like this story, investors will think twice and they want to really be sold on the facts. By the way, I don’t get the impression that in the long run, this will cut off investment in biotech or in new technologies.

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S1: Yeah, some investors are out there saying that like, Oh, this verdict is going to chill investment. It’s going to chill.

S2: Entrepreneur Yeah. I think that the verdict, when you look at it, you say, OK, well, the government actually is capable of making a case here where it’s nuanced. It takes time and jurors are capable of coming to a conclusion that there was fraud. And so if I was an investor, I would actually take a case like this and say, this gives me some degree of of certainty that not not to go out and be silly and just throw my money anywhere, but that if there was actual fraud taking place somewhere and I was actually lied to as an investor, there is recourse for that. And it’s not just in the civil suit.

S1: I just keep coming back to what Silicon Valley is going to take away from this, whether they’re doing any real soul searching. And I was reading the Wall Street Journal article that talked about how much money has gone into high risk early stage startups this past year and how much dealmaking is happening even before there’s like a staff or a product. I wonder if a guilty verdict even causes a blip or like a moment of pause in an environment that is so frothy?

S2: Well, I think when you have a zero percent interest rates are close to zero percent interest rates and the cost of money is almost nothing. And so many of these investments are parabolic and and that, especially if you’re an early investor, can have proven to to work out on that particular question. I’m not so sure. I just to me, I think the bigger question is, where does the money go? What are the things that really matter that we would hope to see more of? And that’s what I think is really shameful and hard about this one because we would all love to see a reliable blood test that requires less and that actually works and costs the consumer less money,

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S1: especially in a year like this one.

S2: Exactly. So, yeah, I mean, I don’t I just think that there are there are a lot of factors that go into how investments are made. And I think you look at the stock market all time highs, you look at zero percent interest rates, you look at, you know, crypto and everything else. And I know I’m lumping it all together and all get in trouble for that. But the reality is there’s just a lot of money out there. There’s a huge amount of liquidity. And it it for some to have that degree of access to capital. You can play around with it and not get burned.

S1: What should we expect from sentencing?

S2: Well, I’ve pulled a number of legal experts and she faces a maximum sentence of up to 20 years in prison on each of the four counts. Most do not believe she’ll see that she is. The legal experts I’ve talked to estimate it could be anywhere from three to 10 years. They do believe she’ll serve prison time at the same time. She’s going to appeal this very likely, and so it could be years before she actually goes to prison. She is not in the custody of the government right now. She is living her life, but she’s waiting.

S1: And then there’s the upcoming trial of sunny Bhiwani. Theranos is former CEO and Holmes’s former boyfriend. His trial for fraud and conspiracy will start next month.

S2: That’s a big question mark because for good behavior, for being a witness, a snitch, something as far as sunny is concerned. There’s points for that in the legal system, where Elizabeth could serve less time if she helps on that case.

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S1: Every time I have talked to you and I have listened to your work, you make it pretty clear that it is a mistake to underestimate Elizabeth Holmes even now. And I just wonder, like even with this guilty verdict, even if she’s sentenced, is this is this the last thing we hear from her? Is she going to be back in 20 years?

S2: She’s silent for now, but I don’t think she’ll be silent forever. And I do think we’ll hear more from Elizabeth Holmes at some point in the future.

S1: Rebecca Jarvis. Thank you very much.

S2: Lizzie Thank you so much. I appreciate this so much.

S1: Rebecca Jarvis is the host of the Dropout podcast and ABC News is chief business, technology and economics correspondent. And you can listen to the Dropout Elizabeth Holmes on trial wherever you get your podcasts. All right, that is our show for today. This episode of What Makes TBD is produced by Benjamin Frisch were edited by Tori Boche and Alison Benedict. Alicia Montgomery is the executive producer for Slate Podcasts. TBD is part of the larger What Next family? And it’s also part of Future Tense, a partnership with Slate, Arizona State University and New America. And I want to take a moment and recommend you go back and listen to Thursday’s episode of What Next? It’s about why we still don’t have enough rapid COVID tests in the U.S. and how things got this way. I’m Lizzie O’Leary. Thanks for listening.