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The Blood Test That Never Worked · Money, Trust and Deception

• 0:00
  Speaker 1: A pregnant woman walks into a pharmacy in Arizona. She
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  Speaker 1: holds out her finger. A needle pricks the skin. One
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  Speaker 1: small drop of blood. A few days later, the result
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  Speaker 1: comes back. It says she has lost the baby. She
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  Speaker 1: has not lost the baby. The number was simply wrong.
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  Speaker 1: That result came from a machine that was supposed to
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  Speaker 1: change medicine forever. A machine that, according to the people
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  Speaker 1: who built it, could run hundreds of blood tests from
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  Speaker 1: a single drop. It could not. And the people at
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  Speaker 1: the top knew it. Welcome to Money, Trust, and Deception.
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  Speaker 1: I am Laurent. This is the story of Theranos, the
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  Speaker 1: $ 9 billion blood test that never worked, and why some
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  Speaker 1: of the smartest people in the world believed it anyway.
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  Speaker 1: In 2003, a 19-year-old student named Elizabeth Holmes left Stanford University.
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  Speaker 1: She had an idea. Blood testing, she said, was slow, expensive,
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  Speaker 1: and frightening. A patient had to sit in a chair
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  Speaker 1: while a nurse drew vial after vial of blood from
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  Speaker 1: a vein in their arm. What if one drop from
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  Speaker 1: a fingertip was enough? The idea was beautiful. It was also,
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  Speaker 1: in the form Holmes promised it, impossible. But that did
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  Speaker 1: not stop anyone. She named her company Theranos, a blend
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  Speaker 1: of therapy and diagnosis. She built a machine called the Edison.
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  Speaker 1: She said it could run hundreds of tests from a
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  Speaker 1: single drop of blood, faster and cheaper than any laboratory
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  Speaker 1: on Earth. And then she did something extraordinary. She convinced
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  Speaker 1: the world to believe her without ever proving it. Look
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  Speaker 1: at the board she assembled. Henry Kissinger, the former Secretary
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  Speaker 1: of State, George Shultz, another former Secretary of State, James Mattis,
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  Speaker 1: a Marine Corps general who would later become Secretary of Defense,
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  Speaker 1: two former senators, a retired Navy admiral, Forbes magazine called it, quote,
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  Speaker 1: the most illustrious board in American corporate history. Notice who
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  Speaker 1: was not on it. No one who had ever run
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  Speaker 1: a medical laboratory. No one with expertise in blood diagnostics.
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  Speaker 1: The board was chosen for prestige, not for oversight. And prestige,
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  Speaker 1: it turns out, is a very effective substitute for evidence.
• 2:01
  Speaker 1: The money followed the prestige. Rupert Murdoch, the media mogul,
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  Speaker 1: invested $ 120 million. The family of Betsy DeVos, a future
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  Speaker 1: Secretary of Education, put in $ 100 million. The Walton family,
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  Speaker 1: founders of Walmart, invested tens of millions. In total, investors
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  Speaker 1: poured in more than $ 700 million. By 2014, Theranos was
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  Speaker 1: valued at $ 9 billion. Forbes named Holmes the youngest self-made
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  Speaker 1: female billionaire in the world. She wore black turtlenecks every day.
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  Speaker 1: She spoke in a low, measured voice. The press called
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  Speaker 1: her the next Steve Jobs. Walgreens, one of the largest
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  Speaker 1: pharmacy chains in America, signed a deal to put Theranos
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  Speaker 1: testing centers inside its stores. Forty wellness centers opened in Arizona.
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  Speaker 1: More than 176,000 people took Theranos tests. More than 1.5
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  Speaker 1: million tests were sold. Here is the question nobody in
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  Speaker 1: that long chain of believers thought to ask. If the
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  Speaker 1: machine worked, where was the proof? Theranos had never published
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  Speaker 1: a single peer-reviewed study of its technology. Not one. In 2015,
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  Speaker 1: a Stanford professor named John Ioannidis wrote that no peer-reviewed
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  Speaker 1: research from Theranos had ever appeared in any medical journal.
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  Speaker 1: For a company claiming to reinvent medicine, that silence was extraordinary.
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  Speaker 1: Inside the company, the truth was an open secret. The
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  Speaker 1: Edison machine could reliably run only a small handful of tests,
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  Speaker 1: not the hundreds it promised. Most patient tests were quietly
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  Speaker 1: run on modified commercial machines made by Siemens, the very
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  Speaker 1: kind of old-fashioned equipment Theranos claimed to be replacing. Blood
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  Speaker 1: drawn by finger prick had to be diluted to make
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  Speaker 1: it work on those machines, which made the results even
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  Speaker 1: less reliable. When pharmaceutical companies came to see demonstrations, employees
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  Speaker 1: staged them. When the Vice President of the United States
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  Speaker 1: came for a tour, The laboratory was dressed up to
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  Speaker 1: look ready. Investor presentations carried validation reports bearing the logos
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  Speaker 1: of drug companies. Prosecutors later said those reports had been
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  Speaker 1: put together by Theranos staff themselves. The company told investors
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  Speaker 1: it was working with the military, deploying its machines on battlefields.
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  Speaker 1: Prosecutors said that was false. It told investors its revenue
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  Speaker 1: would reach hundreds of millions of dollars. Prosecutors said those
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  Speaker 1: projections were fabricated. The chief scientist, a man named Ian Gibbons,
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  Speaker 1: warned that the technology did not work. He was pushed aside.
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  Speaker 1: He died in 2013, before the world learned what he
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  Speaker 1: had tried to say. So why did nobody stop it?
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  Speaker 1: That is the real question of this story. And the
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  Speaker 1: answer is not that Elizabeth Holmes was a genius liar.
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  Speaker 1: The answer is that everyone around her had a reason
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  Speaker 1: to believe. Start with authority bias. When Henry Kissinger sits
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  Speaker 1: on your board, your company borrows his credibility. Investors did
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  Speaker 1: not evaluate the science. They evaluated the room. And the
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  Speaker 1: room was full of the most respected names in America.
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  Speaker 1: Then social proof. Murdoch invested. The Waltons invested. Walgreens signed on.
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  Speaker 1: Each new believer made the next one easier. Nobody wanted
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  Speaker 1: to be the person who said no to the future
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  Speaker 1: of medicine. Then the fear of missing out. Theranos was private.
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  Speaker 1: Its shares were scarce. Investors were told the price would
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  Speaker 1: only go up. The scarcity was manufactured, but the urgency
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  Speaker 1: felt real. And then there was secrecy. Theranos operated behind
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  Speaker 1: a wall of trade secrets and non-disclosure agreements. Employees were
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  Speaker 1: told that secrecy protected the technology. In reality, secrecy protected
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  Speaker 1: the lie. A real medical breakthrough invites testing. A fake
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  Speaker 1: one forbids it. There was also a simple business problem
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  Speaker 1: that nobody checked. Running patient tests on borrowed Siemens machines
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  Speaker 1: was expensive. Theranos charged low prices. Every new patient, every
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  Speaker 1: new store, made the losses bigger. The business model only
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  Speaker 1: worked if the Edison worked. The Edison did not work.
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  Speaker 1: The crack came from inside. Adam Rosendorf, the laboratory director,
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  Speaker 1: left the company and told regulators what he had seen.
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  Speaker 1: Tyler Schultz, a young engineer and the grandson of board
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  Speaker 1: member George Schultz, raised concerns and was pressured to stay quiet.
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  Speaker 1: His grandfather, the statesman, sided with the company. Erica Chun,
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  Speaker 1: another young employee, documented failures in the laboratory and went
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  Speaker 1: to the authorities. In October of 2015, John Carreyrou, a
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  Speaker 1: reporter at the Wall Street Journal, published the first expose.
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  Speaker 1: He reported that Theranos was running most of its tests
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  Speaker 1: on outside machines and that its own devices were unreliable.
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  Speaker 1: Holmes called the reporting false. She hired lawyers. She threatened
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  Speaker 1: to sue. The company attacked the whistleblowers. For months, the
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  Speaker 1: story held. But regulators do not care about magazine covers.
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  Speaker 1: In 2016, The Centers for Medicare and Medicaid Services inspected
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  Speaker 1: the laboratory and sanctioned it. Walgreens ended the partnership. Forbes
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  Speaker 1: revised Holmes' net worth to zero. The state of Arizona
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  Speaker 1: refunded $ 4. 65 million to customers who had taken Theranos tests.
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  Speaker 1: Patients paid the highest price. In the Arizona case, the
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  Speaker 1: court heard about the woman told she had miscarried when
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  Speaker 1: she was still pregnant. Other patients received a false positive
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  Speaker 1: HIV test. One man was wrongly told to stop taking
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  Speaker 1: his blood-thinning medication. In March of 2018, the Securities and
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  Speaker 1: Exchange Commission charged Theranos, Holmes, and her deputy, Ramesh Balwani,
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  Speaker 1: with massive fraud. Holmes settled the civil case, paying a $ 500, 000 fine,
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  Speaker 1: returning almost 19 million shares, and accepting a 10-year ban
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  Speaker 1: from serving as an officer or director of a public company.
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  Speaker 1: Three months later, a federal grand jury indicted Holmes and
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  Speaker 1: Balwani on criminal charges. The company dissolved in September of 2018.
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  Speaker 1: The trial began in August of 2021. Holmes took the
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  Speaker 1: stand and said she believed her statements had been accurate.
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  Speaker 1: The jury disagreed, in part. On January 3, 2022, it
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  Speaker 1: found her guilty on four counts of wire fraud and conspiracy,
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  Speaker 1: all related to defrauding investors. It acquitted her on four
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  Speaker 1: counts related to defrauding patients and deadlocked on three more.
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  Speaker 1: On November 18, 2022, a judge sentenced her to 11
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  Speaker 1: years and three months in federal prison. Balwani was convicted
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  Speaker 1: separately on all 12 counts against him. and sentenced to
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  Speaker 1: 12 years and 11 months. Together, they were ordered to
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  Speaker 1: pay $ 452 million in restitution. Holmes reported to a federal
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  Speaker 1: prison camp in Texas on May 30, 2023. In February
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  Speaker 1: of 2025, an appeals court upheld her conviction. In May
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  Speaker 1: of that year, it refused to rehear the case. So
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  Speaker 1: what does this story actually teach us? Not that one
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  Speaker 1: woman lied. One person cannot sustain a $ 9 billion fiction alone.
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  Speaker 1: She needs a system that wants to believe. The lesson
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  Speaker 1: is about what to look for before you trust. A
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  Speaker 1: company that refuses independent testing is telling you something. A
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  Speaker 1: board chosen for fame instead of expertise is telling you something.
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  Speaker 1: A product that cannot survive a single outside examination is
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  Speaker 1: telling you something. The secrecy is not the protection. The
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  Speaker 1: secrecy is the signal. And the deepest lesson is about
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  Speaker 1: the cost of belief. The investors lost more than $ 700 million.
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  Speaker 1: That is a number. The patients lost something else. They
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  Speaker 1: trusted a result that decided whether they were pregnant, whether
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  Speaker 1: they carried a virus, whether they should stop the medicine
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  Speaker 1: keeping them alive. They never got to choose to take
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  Speaker 1: that risk. It was chosen for them, by people who
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  Speaker 1: had already decided the story was true. Behind every major
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  Speaker 1: fraud is more than a lie. There's a reason people
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  Speaker 1: believed it. In the case of Theranos, the reason was simple.
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  Speaker 1: The story was beautiful. The board was famous. The money
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  Speaker 1: was flowing. and nobody wanted to be the one to
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  Speaker 1: ask the rude question. The rude question was the only
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  Speaker 1: one that mattered. Show me the evidence. Next time on Money, Trust,
• 9:51
  Speaker 1: and Deception, a cryptocurrency exchange that treated customer money as
• 9:54
  Speaker 1: its own, and the balance sheet that was mostly made
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  Speaker 1: of its own token. I am Laurent. Thank you for listening.