I'm obsessed by the trials of Elizabeth Holmes and Sunny Balwani, and the rise and fall of Theranos. I’m riveted by the current Hulu series The Dropout. I can't wait to see the HBO documentary The Inventor. And I've read article after article about the extraordinary drama which Theranos begat.
You must know the story. As a Stanford undergrad, Holmes devised a method of blood testing. Uniquely, this type of testing required small amounts of blood. But the technology could never convert the concept into reality.
That didn’t stop Theranos ending up with a valuation of over $9 billion. Holmes had a magic touch for finding investors and famous board members. She recruited well known board members – George Schultz, Henry Kissinger, James Mattis, David Boies. Notably, none were scientists and most of them were – dare I say – snowed by Holmes.
The human drama alone is enough for even more dissection.
But at the end of this is a simple question. What lessons can we learn? Here are some of them:
1) Board Members have an obligation to critically look at the organization.
Whether you’re a member of your local synagogue, or your child’s school. Whether it's a private club or on a for-profit board, be there for a reason. Your role is to question. It may be an honor to be on a board, but unless you’re prepared to ask tough questions, you shouldn’t be there. It goes without saying that you should have something to contribute as well.
2) Transparency and candor are essential functions of leadership.
I wish I could tell you the number of major mistakes I’ve made in my career. But neither of us has that much time. But as I've gotten older, I've become much better at being candid about my mistakes, problems and weaknesses. This is true in my dealings with clients, business partners, and employees. I’ve found without exception people are willing to help – if only they know what the problem is.
3) Never Look Back. But don’t bury your head in the sand, either.
Holmes famously never looked back. But that either contributed to her downfall or exacerbated her problems. A better way to look at things is don’t dwell on the past, but acknowledge your mistakes and learn.
I have a good friend whom I respect and admire. He's also referred to me several key clients over the years. (He’s likely reading this post). Once, in a conference call with a mutual client, he tore me up one side and down the other. I had never been spoken to like that before (and I’m pretty sure it wasn’t my fault, but whatever). It was so bad that the CEO of the company called me on my cell right after that to make sure I was ok. I figured I’d lost both a friend and business associate.
But two days later we ran into each other and it was like nothing had happened. I was so surprised that I called him the next day. His response: “I don’t have a rear-view mirror.” I’ve learned from him not to hold grudges, and not to look back either.
4) Whatever you do, don't lie.
Part of our fascination with the Theranos story is the number of lies (allegedly) told and information withheld (definitely). Holmes and Balwani failed to disclose their romantic relationship to anyone at Theranos. (Their relationship spanned years). Theranos was obsessed with leaked information. They hired many law firms and security staff to stop employees from talking to the media. Here's a tip: no one will want to be a whistleblower if everything you do is above board.
I can't remember a lot of things – if I had to remember a bunch of lies I’d be sunk before lunchtime.
Another is that if you tell one lie, you’ll end up telling more to cover up the original lie. I’m not saying I’ve never lied; I’m saying it’s not worth it.
I encourage you to watch these shows. See what lessons you can learn. There were a massive number of leadership errors – most of them self-inflicted. It's a textbook lesson on how not to lead.