The Dropout: ABC News Podcast about Theranos

I highly recommend listening to the new ABC News podcast, The Dropout.   Over the course of six enthralling episodes, reporter Rebecca Jarvis takes you through the story of the rise and fall of Theranos, the blood testing company founded by Stanford University dropout Elizabeth Holmes.  There are many lessons from this story, far too numerous to recount fully here.  However, here are three takeaways that I'd like to highlight. 

1. Most importantly, the Theranos story demonstrates the danger of seeing what you want to see, believing what you so desperately want to believe.  Many employees, analysts, directors, and investors wanted the Theranos story to be true.  They wanted this revolution in healthcare to take place.  They wanted badly for the story of a young female entrepreneur disrupting the healthcare industry to be true.  They loved the notion of discovering the "next Steve Jobs."  Unfortunately, this strong desire to want it to be true completely clouded their judgement.  

2. Cultures of fear and low psychological safety exist in all types of organizations, not just large, complex, and bureaucratic ones.  Small startups can also exhibit these problems.  The consequences can be dramatic.  In this case, not only did many investors lose large sums of money, but many patients received inaccurate blood test results.  The impact on patient care and well-being should concern anyone listening to this story. 

3.  Becoming a whistleblower is so very challenging for many reasons.  I find the efforts of Erika Cheung and Tyler Shultz to be incredibly courageous.  Many people with more formal authority and industry experience did not come forward in this case.  These two young people stood up for what they believed, even in the face of much skepticism.   Organizations need to find ways to handle these types of complaints more effectively.   Time and again, we see and hear stories of how badly organizations handle complaints from workers who genuinely are concerned about safety, product quality, and the like.  Organizations need to be very clear about the process by which they will handle these types of complaints. 

Lessons from the Theranos Debacle

Several years ago, journalists far and wide heralded college dropout Elizabeth Holmes for her bold vision, innovative strategy, and charismatic leadership at her well-funded startup, Theranos. Holmes proclaimed that she had invented an entirely new blood testing regimen for patients.  Journalists drew parallels to Steve Jobs, even noting that she dressed in a similar fashion. Holmes did not only fool journalists though.  She allegedly managed to deceive an array of investors and board members with extensive experience in industry and government.   Of course, the governnent now charges that the entire organization turned out to be a massive fraud. Last week, Elizabeth Holmes and her firm's former president, Ramesh Balwani (also her boyfriend at one point), were indicted for engaging in an elaborate scheme to defraud investors, patients, and doctors.   

What can we learn from this debacle?  Dr. Greg Licholai, a Yale faculty member and biotech entrepreneur offers the following advice regarding how to prevent another Theranos from occurring:  

So what can we do? First, investors should maintain a “trust but verify” attitude toward companies. We want to enable innovation by providing appropriate resources to creative people—but simultaneously scrutinize their claims, especially when it comes to technology that affects patient safety. Second, companies should foster open cultures and allow for feedback and safe environments for whistleblowers when necessary. Third, industry must continue to embrace transparency and recognize that in the long run, those companies that listen to their constituents achieve sustainable success.

These lessons are highly valuable.  I think there's a broader point though.  We have to be careful about becoming too enamored with a bold and highly appealing vision.  We fall in love with dreams.  We have to ask: Is this vision technically feasible and economically viable?  Sometimes, we find the vision and the desired end state so desirable, and the leader proclaiming that vision so appealing, that we begin to put too much faith in their ability to do the highly improbable.  We stop asking tough questions.  We want to believe that the vision will become reality, and that fervent belief erases some of the natural skepticism that would be healthy in scrutinizing the organization.   Does this make you think of any other visionary leaders these days pursuing what are perceived to be very socially beneficial outcomes?  Hmm...