Theranos 101 - One Tiny Drop Changes Everything

Theranos and Elizabeth Holmes have been discussed multiple times on this blog, and for those not familiar with them I thought I'd give a very quick summary of them and the controversy surrounding them.

Elizabeth Holmes was a chemical engineering student at Stanford when she dropped out at age 19 to start the company - the goal was to create accurate medical tests based on drops of blood rather than vials, so it can be from just a finger prick and not a full vial draw. If it can be achieved, it's a great simplification of the whole blood testing process, and the company hoped it would spur an increase in the number of tests given how easy it would be.

This is not an easy task, and there were significant questions over the ability to accurately do testing on small drops of blood - the drop itself may be so small that even with a perfect test the result may not be accurate or reproducible - but it's a worthy goal for research.

They received some initial seed funding from a regular VC and over the next 12 years developed tests for over 200 conditions, and inked a deal with Walgreens to use the tests in-store, with the PR machine claiming that a revolution in blood testing was coming. By mid-2015 they had raised nearly $700 million which valued the company at around $9 billion, with Elizabeth Holmes as the youngest self-made billionaire. (Note Theranos is a private company so it can be hard to gauge exactly the funds raised, this article estimates $750m)

Holmes was front and center with the company, synonymous with Theranos, and painted as a role model for others. To be compared to Elizabeth Holmes was a great compliment, and entrepreneurs everywhere vied to be 'the next Holmes' - such as this up-and-comer:

@DeanZ_Kellogg @ubeam @theranos @msuster @OurCrowd wow, what a compliment! Thank you so much!

— Meredith Perry (@meredithperry) June 24, 2015

It was something of an odd company, with a non-medical board full of former Senators, Admirals, Generals, Secretaries of State and Defense - but not a single person capable of understanding the technology - and going against the grain of almost all biomedical companies never published peer-reviewed results on their tests, simply instead saying (in effect) "trust us".

Now, there had been rumblings from inside the biotech community for sometime that something was not right at Theranos, but the press loved their story of the self-made founder/CEO, and everything was going wonderfully until October 2015 (Fun Fact: Same day I left uBeam!) and the Wall Street Journal released a bombshell story questioning the accuracy of these tests and whether Holmes had been exaggerating the capabilities of the tests. Wired released an article raising the questions that "exposes a deeper problem with the way Silicon Valley tries to spin hype into startup gold."

Startling among these revelations was that Theranos weren't even using their own technology for the tests, but standard off-the-shelf equipment other companies use, as their equipment gave highly variable results.

This was soon followed by other more detailed analysis by the press, along with apologies for prior poor reporting, but more importantly the FDA got involved and stated only one of their many tests was approved (a Herpes test, which is a simple yes/no), and then Centers for Medicare and Medicaid Services wrote to Theranos stating its tests "pose immediate jeopardy to patient health and safety." 

This Business Insider article gives a great timeline of events for Theranos. It has made Elizabeth Holmes, who rode the publicity all the way up and took more of the spotlight than the Company itself, a household name beyond just Silicon Valley and for all the worst reasons. She even has her own parody Twitter account 'NotLizHolmes'

It's been a rollercoaster of negative press for them since then, with damage control from Theranos in the forms of expressing surprise and lack of knowledge, of claiming that data on their tests will be released for public assessment (not happened to date), and that they are working with the authorities to deal with these issue. They added a well qualified medical board too ("look, big names with titles, stop asking questions!"). From an article in the NYTimes, there were some sections that stood out as very familiar to me:

"She (Holmes) stays relentlessly on message, as a review of her numerous conference and TV appearances make clear, while at the same time saying little of scientific substance."

As I've pointed out before - even when you are exposed, stick to the message is the best game plan. But this next section from Professor Frank Partnoy of University of San Diego School of Law was just a stunning quote, what I have been trying to put into words and say in this blog:

“We’re deluged with information even as pressure has grown to make snap decisions. People see a TED talk. They hear this amazing story of a 30-something-year-old woman with a wonder procedure. They see the Cleveland Clinic is on board. A switch goes off and they make an instant decision that everything is fine. You see this over and over: Really smart and wealthy people start to believe completely implausible things with 100 percent certainty.”

You can have experts in the field publish peer reviewed papers, or simple maths that demonstrates the engineering near impossibility of it all, but show a TED talk and an article in Marie Claire and the chequebooks still come out. To quote myself regarding Energous:

"We had, through the use of physics, mathematics, and reasoning, completely demolished their claims and proven that what they are saying is unachievable ... but it got complicated and so you just switched off, ... overall you just didn't care."

To be blunt - technology has gone beyond the capacity for most people to be able to comprehend, even some otherwise very intelligent and educated ones. That deluge of information 'overloads' most people and they fall back on the simplest of solutions - they look for authority figures who have already made decisions for them, or rely on the 'wisdom of crowds' and simply go along with the majority. Actual reasoning shuts down, and following that the idea that someone as smart and educated as you could have got it wrong just can't be entertained (or in the case of existing investors, ever acknowledged).

Something needs to change in how billions of dollars of funding, much originating from retirement funds, is distributed. The system is setup to reward certain behaviours, and good stewardship of this money, and the efficient application of efforts of thousands of workers to benefit our society, in my opinion are not among them. 

Theranos, and others like it, were simply inevitable and the symptom of a much deeper problem.