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The "Who" and "Why" of Elizabeth Holmes and Her Fraudulent Behavior

A Hulu series delves into the psychology behind the infamous Theranos fraud.

Key points

  • Despite widespread coverage of biotech company Theranos's fraud, CEO Elizabeth Holmes remains an enigma.
  • "The Dropout" offers a portrait of Holmes that accords with research on real-life business fraudsters.
  • Auditors looking for fraud should focus beyond economic incentives to include psychological risk factors shown by the people running companies.
A shot from "The Dropout."
Source: Hulu

At this point, the events that led to the downfall of the biotech company Theranos are well-documented. There’s a book, an HBO documentary, and a podcast series produced by ABC. The gist: Theranos, a company that purported to have created a revolutionary technology for cost-effective blood testing, never actually got the technology working and lied repeatedly about it to investors, all while running the tests anyway and sending faulty results to patients.

The company’s founder, Elizabeth Holmes, was convicted of fraud earlier this year, and her business partner and ex-boyfriend, Sunny Balwani, was recently convicted of similar charges.

Yet, despite all this public attention on the what happened at Theranos, Holmes herself has remained fairly enigmatic. What could drive someone to commit such a massive and harmful fraud for so long? What kind of person was she?

Attempting to Answer the “Who” of Elizabeth Holmes

Hulu’s "The Dropout," a dramatized adaptation of a 2019 podcast, takes a stab at answering that question. In doing so, the project goes from feeling unnecessary (after so much media already devoted to the saga) to revelatory and, partly due to its incredible cast (led by Amanda Seyfried as Holmes), it is easily one of this year’s best shows.

What I appreciated the most about "The Dropout"’s portrayal of Holmes was that she didn’t come across as some innately greedy psychopath or as a manipulated victim—as the real Holmes has claimed in court. Instead, we first meet her just before starting college at Stanford (which she eventually dropped out from to start Theranos—hence, the show’s name), when she’s ambitious and idealistic, but also noticeably insecure. It took time and a certain set of experiences before Holmes the student could become Holmes the CEO and mastermind of one of the greatest corporate frauds in Silicon Valley.

Of course, the show’s writers don’t really know what was going on in Holmes’s head. But they construct a believable and compelling enough psychological portrait that you come to understand, if not condone, her atrocious actions. The show even offers a plausible explanation for her strange voice affectation. (It’s worth pointing out that, despite the show’s generally serious subject matter, it’s also quite funny; the show’s creator, Elizabeth Meriwether, also created the sitcom "New Girl.")

Many Features in Common With Past Corporate Frauds

Despite whatever degree of speculation the writers may have taken in their portrayal of Holmes, it accords with research on perpetrators of business fraud. A 2011 study in Journal of Business Ethics led by Jeffrey Cohen reviewed public news articles on frauds committed by 39 U.S. companies between 1992 and 2005 to systematically look for causal factors that may have motivated the executives most responsible.

Many of the common features they found are also evident in the Elizabeth Holmes of "The Dropout":

  • Rationalization: Holmes frequently justified lying as necessary to keep the company afloat.
  • Self-efficacy: Holmes received frequent glowing praise in the press and from her own board, which may have helped convince her that she could achieve the impossible.
  • Reduced guilt: Holmes repeatedly asserted that Theranos was helping people. If she sincerely believed this, the “good” the company was doing may have helped to offset the “bad” of the fraud in her mind.

It’s clear that the public is fascinated by the Theranos debacle and with Holmes, specifically. And maybe with good reason. One main conclusion of the study is that auditors looking for fraud should expand their focus beyond economic incentives to include psychological risk factors exhibited by the people running the companies. Understanding why Holmes did what she did and learning to spot people like her in advance is one way to help prevent another Theranos from happening.

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