The conviction of Elizabeth Holmes, the founder of failed blood testing start-up firm Theranos, exposes some of the greed and lying at the heart of capitalism.
A jury in California this week found Holmes guilty of conspiring to defraud her investors. Her downfall is all the sharper because of the heights she had scaled, which were remarkable even among the hype and exaggeration of Silicon Valley.
In 2003 Holmes founded the firm after dropping out of Stanford University. At its peak, the company was valued at £6.6 billion and Holmes was featured on multiple magazine covers as the radiant symbol of capitalist entrepreneurship.
But it was all based on lies.
Theranos claimed that its path-breaking technology could perform a range of diagnostic tests using just a few drops of blood. In fact the company—when it produced any results at all—mainly relied on machines that were already commercially available.
It hoodwinked its investors and, more importantly, gave patients false results.
But the prospect of easy wealth attracted top speculators including Rupert Murdoch who stumped up over £100 million—now amusingly worth nothing.
And a host of great “names” eagerly stepped up to serve on Holmes’ board.
One was leading US war criminal Henry Kissinger, the former US secretary of state who played such a key role in the savage war against Vietnam.
There was also James Mattis, a retired US Marine Corps general who went on to serve as Donald Trump’s secretary of defence.
They were joined by former US secretary of state George Shultz, retired US Navy admiral Gary Roughead and former US defense secretary William Perry. William Frist, a heart and lung transplant surgeon and former US senator, and several other well-known business figures also served Holmes.
They stayed on the board, vainly hoping for further payouts, even after the Wall Street Journal began to expose Theranos’ failures.
When asked by a documentary maker about the first words that came to mind when he thought of Holmes, Mattis replied, “integrity” and “competence”. “Both technical and scientific but also focused on human rights in the most classical sense of what human rights are about,” he said.
“She is really a revolutionary in the truest sense.”
Kissinger said Holmes had an “ethereal quality”. “She is like a member of a monastic order,” he added.
Holmes’ defence at the trial was that she was behaving like every start-up firm does, following the culture of “fake it till you make it”. And despite her undoubted crimes, she does have a point.
In the years since the financial crash, central banks and governments have kept corporations afloat by handing them huge funds at very low interest rates.
Unsurprisingly, some people thought this was a ticket to a fortune whether their products worked or not.
Theranos is the symbol of a section of capital today—just as the 2009 collapse of Bernie Madoff’s Ponzi scheme and the collapse of Enron in 2001.
Just before its collapse, the Economist magazine called Enron the “most successful” company “in any industry anywhere”. The firm helped bankroll the political careers of George Bush Sr and of his son George W Bush.
It also helped to fund Tony Blair’s Labour. Three weeks after the 1998 Labour Party conference the government decided not to refer the company’s £1.5 billion takeover of Wessex Water to the Monopolies Commission.
Enron had spent £15,000 sponsoring a “gala dinner” at the Labour conference.
But the problem is not “rogue” business people but capitalism itself. Even the most respectable of giant companies has secrecy, bribery and ruthless methods at its heart.
Picking off Theranos doesn’t change that.
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