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Common Sense: The Narrative Frays for Theranos and Elizabeth Holmes

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Elizabeth Holmes is the founder and chief executive of Theranos. Credit Drew Kelly

Few people, let alone those just 31 years old, have amassed the accolades and riches bestowed on Elizabeth Holmes, founder and chief executive of the blood-testing start-up Theranos.

This year President Obama named her a United States ambassador for global entrepreneurship.She gave the commencement address at Pepperdine University. She was the youngest person ever to be awarded the Horatio Alger Award in recognition of “remarkable achievements accomplished through honesty, hard work, self-reliance and perseverance over adversity.” She is on the Board of Fellows of Harvard Medical School.

She has been showered with rapturous media attention. Time named her one of the 100 Most Influential People in the World this year. She was the subject of lengthy profiles in The New Yorker and Fortune. Over the last week, she appeared on the cover of T: The New York Times Style Magazine, and Glamour anointed her one of its eight Women of the Year. She has been on “Charlie Rose,” as well as on stage at the Clinton Global Initiative, the World Economic Forum at Davos and the Aspen Ideas Festival, among numerous other conferences.

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Theranos, which she started after dropping out of Stanford at age 19, has raised more than $ 400 million in venture capital and has been valued at $ 9 billion, which makes Ms. Holmes’s 50 percent stake worth $ 4.5 billion. Forbes put her on the cover of its Forbes 400 issue, ranking her No. 121 on the list of wealthiest Americans.

Her wealth and fame rest almost entirely on a simple but nonetheless “revolutionary” and “disruptive” technology: Theranos’s ability to run a wide range of lab tests from a tiny sample of blood from a finger prick, in that way eliminating the need for intravenous blood draws. (Ms. Holmes has said that her inspiration was a personal aversion to needles.)

Thanks to an investigative article in The Wall Street Journal this month by John Carreyrou, one of the company’s central claims, and the one most exciting to many investors and doctors, is being called into question. Theranos has acknowledged it was only running a limited number of tests on a microsample of blood using its finger-prick technology. Since then, it said it had stopped using its proprietary methods on all but one relatively simple test for herpes.

Theranos has denied many elements of the Journal article on its website.

Theranos said that for most of its tests it uses conventional equipment on samples drawn intravenously by needle, which makes its approach pretty much like that of its big competitors, Quest Diagnostics and Laboratory Corporation of America Holdings, whose stocks have gyrated on the start-up’s perceived threat.

This week the Food and Drug Administration released reports based on inspections of Theranos facilities this summer. It concluded that the company’s miniature blood containers — called “nanotainers” — were “unapproved” medical devices for tests beyond herpes .

“While we work with the F.D.A. on clearance of our nanotainer tubes,” said Tilden Katz, a Theranos spokesman, “we have chosen to conduct our tests through venous draws.” He added: “Our proprietary devices are making it possible to run finger-stick samples for tests that could never be run on finger-stick before.”

Amid the controversy, Walgreens said it would not open new Theranos blood testing centers while it sought answers about the company’s technology.

“This isn’t how you introduce technology that claims to be groundbreaking and revolutionary in the health care field,” said Michael Cherny, an analyst at the investment bank Evercore Partners who was an early and vocal skeptic about many of Theranos’s claims.

“Every other person goes through some level of peer review,” Mr. Cherny told me this week. Theranos “decided to shun that approach.”

“In my view,” he said, “that calls into question what’s under the hood of the platform.”

Others raised questions about Theranos and what now appear to have been some pretty bold claims, in some cases long before The Journal’s exposé. Kevin Loria, a reporter on the Business Insider science team, wrote several pointed articles and produced a number of prominent skeptics among clinical pathologists and the broader medical community. The New Yorker and Fortune articles also were skeptical about the lack of peer review for Theranos’s technology. And Eleftherios Diamandis, the head of clinical biochemistry at Mount Sinai Hospital in Toronto, raised numerous issues in a June medical journal article.

“The constant was that nobody had any idea how this works or even if it works,” Mr. Loria told me this week. “People in medicine couldn’t understand why the media and technology worlds were so in thrall to her.”

The attention lavished on Ms. Holmes has been effusive. Her goal of facilitating the early detection and prevention of disease by making blood testing easier and convenient is laudable. And the relatively young company may still work through its current difficulties.

But that so many eminent authorities — from Henry Kissinger, who had served on the company’s board; to prominent investors like the Oracle founder Larry Ellison; to the Cleveland Clinic — appear to have embraced Theranos with minimal scrutiny is a testament to the ageless power of a great story.

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“It all fit together perfectly: the college dropout, the fear of needles, the humanitarian mission,” Mr. Cherny said. “She checked all the boxes.”

Indeed, Ms. Holmes seems to have perfectly executed the current Silicon Valley playbook: Drop out of a prestigious college to pursue an entrepreneurial vision; adopt an iconic uniform; embrace an extreme diet; and champion a humanitarian mission, preferably one that can be summed up in one catchy phrase.

Like Bill Gates, Steve Jobs and Mark Zuckerberg, Ms. Holmes dropped out of college. Like Steve Jobs, she wears a uniform of black turtlenecks, suggesting she has loftier things to think about than what to wear. “I probably have 150 of these,” she told Glamour. Like Mr. Jobs, she’s picky about her diet. (She’s a vegan who shuns coffee and drinks green vegetable juices.)

And like Google’s co-founders, Larry Page and Sergey Brin (“Don’t Be Evil”), and Mark Zuckerberg (“Connect the World”), her mission is lofty. As she has repeatedly said, Ms. Holmes envisions “a world in which no one ever has to say goodbye too soon,” brought about through improved health care. Theranos also has a slogan: “One tiny drop changes everything.”

She 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.

The natural human tendency to fit complex facts into a simple, compelling narrative has grown stronger in the digital age of 24/7 news and social media, said Frank Partnoy, professor of law and finance at the University of San Diego, and author of “Wait: The Art and Science of Delay,” which explores the perils of hasty decision-making.

“We’re deluged with information even as pressure has grown to make snap decisions,” Professor Partnoy said. “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.”

Ms. Holmes’s story also fits into a broader narrative underway in medicine, in which new health care entrepreneurs are upending ossified hospital practices with the goal of delivering more effective and patient-oriented care.

Two proponents of the approach, Dr. Delos Cosgrove, chief executive of the Cleveland Clinic, and Mark R. Laret, chief executive of the UCSF Medical Center, have enthusiastically endorsed Theranos’s potential to upend conventional medicine.

A Cleveland Clinic spokeswoman, Eileen Sheil, told me that the clinic’s “strategic partnership” with Theranos had not really gotten off the ground and that the clinic had yet to employ any Theranos technology. She said that a statement on the clinic’s website — “Theranos offers a full spectrum of laboratory tests, from the most common panels to highly specialized tests, on blood samples as small as a few drops” — is “their language, not ours, and we can’t verify that.”

Mr. Laret said he had “no information” about Theranos’s technology, but had great respect for Ms. Holmes and the company’s board.

While hot Silicon Valley start-ups like Uber and Airbnb have run into regulatory hurdles, as a medical technology company, Theranos has bumped up against something else: the scientific method, which puts a premium on verification over narrative.

“I don’t know if she’s another Steve Jobs,” said Jerry Yeo, professor of pathology at the University of Chicago and director of the Clinical Chemistry Laboratories there. “You have to subject yourself to peer review. You can’t just go in a stealthy mode and then announce one day that you’ve got technology that’s going to disrupt the world.”

Professor Yeo said that he and his colleagues wanted to see data and testing in independent labs. “We have a small army of people ready and willing to test Theranos’s products if they’d ask us,” he said. “And that can be done without revealing any trade secrets.”

Ms. Holmes said this week that Theranos would disclose data on the reliability and accuracy of its tests. “Data is a powerful thing because it speaks for itself,” she said at a conference at the Cleveland Clinic. “We were never against that.”

Whether that will satisfy Theranos’s growing number of critics will depend on the nature and quality of the data.

“Every other company in this field has gone through peer review,” said Mr. Cherny of Evercore. “Why hold back so much of the platform if your goal is the greater good of humanity?”

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