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Some kind of madness ... What’s behind the failure of Theranos

Monday, January 11, 2021

It seems that no Silicon Valley project had such a chance of success.

It had everything, the unicorn gold standard: idea and mission, motivation and charisma, important connections and good market conditions. But instead of the expected takeoff, there was an unexpected failure. Who Elizabeth Holmes really was: a genius con artist or a crazy fanatic? How did she manage to outwit more than a dozen experienced investors, wise politicians, and even one Nobel laureate? What role do emotions and pathological traits play in management and leadership? Is it possible to understand that your potential partner has a mental health problem? What is the threat and how to prevent potential risks?

Startup Jedi

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Scandal in Paradise

Silicon Valley residents will remember 2017 for the loudest scandal ever to happen in the place that has earned a reputation as a real paradise for the young and daring, dreaming of changing the world. Unfortunately, this time something went wrong.

A biotech startup led by its founder, Elizabeth Holmes, failed with a deafening crash, dragging down not only Liz herself, but also a huge number of people nearby. It should be noted that, according to various estimates, not only prominent figures of eminent venture capital funds were involved in the project. Those were also former and current senators in large numbers, former Secretary of State Henry Kissinger, one former President Bill Clinton and even a Nobel laureate who advised Elizabeth on motivation issues, Dan Ariely. As it will become clear later, eminent professors and experienced investors and politicians failed not just to prevent the collapse of the project, but also to recognize one of the biggest scams of the startup industry.

Elizabeth is charged with falsification of blood test results. Despite the fact that Liz’s idea could not be implemented in practice, she continued to persist in her own way, plunging herself into endless accusations of her employees and competitors. Besides, Elizabeth is accused of falsifying financial statements. She lied to literally everyone from investors to potential partners. By the start of the trial, the cost of the project had dropped from $ 9 billion to zero. Elizabeth herself was placed under house arrest during the trial. If convicted, Holmes faces up to 20 years in prison.

An attempt to rationally explain what happened was unsuccessful, because numerous experts on economics, technology and management could not shed light on the situation. Only irrational motives have not yet been considered. Let’s look at the history of Theranos through the prism of the personality of Elizabeth Holmes, and at the same time figure out what role the founder’s psychology plays in the implementation of the project and how to assess potential risks?


 the failure of Elizabeth Holmes and the Theranos company

Introduction to the psychodynamics of organization

The study of the personal aspects of a business founder and the influence that their personal psychic has on the development of the business is primarily associated with the search for effective management methods, as well as the general interest in the study of emotions and their impact on our daily life. Interest in emotions has to do with the development of neurosciences and technologies that allow the study of emotions as part of an experiment.

The thing is that the study of emotions used to remain the practice of psychologists and psychotherapists, who observed emotional-affective disorders in direct contact with patients. For a long time, academic science preferred to take no notice of emotions and their pathological development only because it did not have the necessary tools to study them. There is no subject and therefore there is no problem.

This attitude has its own backstory, originating in the idealistic ideas of scientists of the Age of Enlightenment about the divine nature of people and their rational principle. The first to criticize this claim was Sigmund Freud, a heretic and apostate of the psychiatric mainstream. Not many people know that Freud was originally a neurologist and was engaged in brain research. In his works, he tried to substantiate mental processes and find their analogs in the brain. Having suffered a fiasco, Freud abandoned further attempts to seek connections between the physical and the mental and focused on the creation of metapsychology, which was called psychoanalysis.

Working with his patients, Freud soon realized that emotions are the cause of numerous mental and physical illnesses. Freud was also the first to talk about instincts and their influence on human development, revealing this unsightly part of human nature. In general, for his contemporaries, Freud was like a bur in the throat, and along with his fame, hostility and criticism of his ideas grew.

Throughout the twentieth century, Freud’s followers developed psychodynamic psychology while continuing to oppose the biological approach. The lack of empirical research and confirmation of the ideas of psychoanalysis increasingly pushed it to the margins of psychiatry, replacing psychotherapeutic assistance with the use of pharmacology. However, after a while it became clear that the biological paradigm also turned out to be unviable, the study of the brain did not provide an explanation of the nature of mental disorders, and the use of psychopharmacology was unable to cure any mental illness.

It was only at the turn of the century that minimally invasive methods of studying the brain were developed, which made it possible to look into the brain of a living person, and the era of affective neurobiology began. The new scientific direction has become a kind of bridge between academic science and practical psychology, proving the primary role of emotions in human activity. A hundred years later, Sigmund Freud and the psychodynamic school he created were rehabilitated, and most of his ideas were proved experimentally. Emotions have not only returned to our daily life, but have also been integrated into the sciences that were hitherto considered exclusively rational. This is how behavioral economics and its applied directions, behavioral marketing and psychodynamic approach to management appeared.

The psychodynamic or clinical approach to management was formed at the junction of psychodynamic psychology and management theory. The essence of the approach boils down to the fact that irrational aspects have a critical impact on business processes, determining the trajectory and nature of the company’s development. The company is a kind of reflection of the psychic reality of its founder and the people in key positions. Internal personal conflicts of the management team determine the dynamics of the organization. We can say that the leader is acting out their conflict within the organization they created. In other words, the organization becomes the stage for the inner theater of the founder, on which their personal drama is played out like clockwork.

Research methods and evaluation criteria are used to diagnose the organization, as in working with clients. So, the criterion for diagnosing a mental disorder and the degree of its severity is contact with reality.

It is the key to human survival and adaptation. As in everyday life, contact with reality is a necessary condition for survival in business. Reality contact provides adequate feedback through which we are able to understand the true motivations and needs of our customers, form a value proposition, develop a product and manage a team. We can make efforts where it is necessary and retreat in time if it is impossible to realize the plan.

It seems that Elizabeth Holmes had everything — except for this very contact with reality. More specifically, Liz lived in her own psychic reality.


 the failure of Elizabeth Holmes and the Theranos company

Elizabeth Holmes — genius or insane?

Warning signs could have been noticed since childhood, but as is usually the case, parents and immediate circle saw this as an omen of exclusivity and a special path. The girl was obsessed with the strive for superiority and, at the age of seven, declared that she would definitely become a billionaire. This is not surprising given the context she grew up in. The family lived with memories of their financial status and former greatness, which was whittled away by close relatives on father’s side. Due to the past, the Holmes family belonged to the aristocratic class and was well-known to the American establishment, but unlike others, did not have the financial ability to maintain an adequate standard of living. The family, no less, entrusted Elizabeth with the mission of returning to former glory. We can say that a special path and exclusivity have become something like an overvalued idea that Liz herself was nurturing and that people around her supported in every possible way.

The girl was obsessed with achieving her goals. For example, as her mother recalls, Liz once worked for about five days in a row without a break, even for sleeping and eating. And when she decided to go to Stanford, she abruptly cut off all social ties, including romantic relationships, explaining that she should focus on her academic performance. After entering Stanford and studying there for two semesters, she decided that the knowledge she’d gained was enough to start her own business.

By this time, the ideas of a special path and destiny had acquired a material basis: Elizabeth decided to save humanity, forever weaning it off passing painful tests. This is how the idea of ​​a biotech startup was born. Liz couldn’t care less that the idea was technically impossible, and all those who dared to assert the opposite were ruthlessly driven out of her life. After some time, Elizabeth’s network was made up of people who fell to the magic of her manic charm and unconditionally believed in the power of her talent. Thus began the creation of an alternate reality called Theranos.

According to the clinical approach, the atmosphere and corporate culture of the company is a reflection of the unconscious of its founder, the embodiment of their fears and ambitions. Based on what was happening in Theranos, Elizabeth’s unconscious is a permanent state of paranoia and procrastination, filled with fear of persecution and exposure.

According to her former employees, there was an atmosphere of mistrust, suspicion and fear in the company. Employees were constantly monitored: everything from software to email was subject to verification and control. According to the financial statements, a third of the money was spent on the services of lawyers and attorneys. Former employees were sued and threatened physically. One of the former employees, unable to withstand the pressure, committed suicide. Such is the lust for blood in Silicon Valley.

Like any evil genius, Elizabeth possessed a truly magnetic charisma, everything in this girl seemed unusual: a frozen gaze, unnatural movements, desynchronization of actions and emotional reactions, unnatural facial expressions. Uninitiated people found this magically attractive. But a mental health specialist would see a mentally immature person with affective disorder.

A low level of empathy, lack of compassion towards others also testify in favor of the assumption of an affective disorder. According to former colleagues, in personal communication, Elizabeth was harsh, cruel and merciless, and her image was in sharp contrast to how she was presented in public space.

One cannot but pay attention to the manifestations of Liz’s personality traits, or rather their complete absence. It seems that there is nothing alive and real in this girl, belonging to her personally — even the black turtleneck is borrowed from Jobs, and she herself is completely made up of cliches and stereotypes designed to impress. Where are you yourself, Elizabeth, who are you really? I’m afraid that even she herself will not answer this question.

Any illusion sooner or later has to face objective reality. This collision brings to life anyone who is able to distinguish facts from fiction. There remains only the bitter disappointment of those who became involved in someone else’s psychotic fantasy, becoming a victim of the manipulation of a psychopath.


 the failure of Elizabeth Holmes and the Theranos company

We will all be cured,or maybe not

Psychiatry and clinical psychology are in sharp contrast to other areas of medicine, because mental disorders do not have pathological changes in organs and cannot be diagnosed by analysis. Any changes in the brain, with the exception of organic lesions, are a consequence of the disease, but not the cause. Moreover, in addition to mental illnesses such as schizophrenia or epilepsy, there is a whole spectrum of borderline states, on the verge between norm and pathology. What the average person defines as a character difficulty may well turn out to be a mental personality disorder.

Personality disorders have their own classification and severity. The range of disorders is quite large: from mild neurotic forms to severe psychosis, and between them there is a zone of borderline states, which also have different forms and severity. And if psychiatrists deal with severe psychoses, because people in this state can be dangerous both for themselves and for society, then borderline states do not fall under the criteria of a disease, but such states cannot be called mental health either.

It is very important to carry out differential diagnosis and identify the scale of the problem. In this way, potential risks can be prevented to some extent, because the requirements for conventionally normal people do not apply to people with mental disorders. Is it possible to independently determine that something is wrong with a potential partner or colleague? It is quite difficult, requires special education and clinical thinking skills, but still some signs can be identified.


First of all, you should pay attention to how a person speaks, to the pace of speech. Speaking too fast, like speaking too slowly, is a sign of emotional disorder. In the first case, the person seems to be flooded with their own emotions, in the second, emotions, on the contrary, are suppressed, repressed.

It is important to understand that emotions affect all thought processes. So for example, in the first case, thinking will be spasmodic, superficial, a person with such an emotional background cannot concentrate, be consistent, logical connections and conclusions will be rather superficial than deep and balanced. In the second case, thinking is rigid, detailed. Such people cannot think strategically, getting stuck on minor details and missing the most important thing.

Bodily manifestations

You should pay attention to bodily manifestations. The thing is that motor acts and reactions are outside of conscious control and reflect the inner picture of the world, as well as ways of reacting to stress and tension. So, people with a high motor reaction during excitement seem to move faster. They need to do something all the time in order to reduce the level of stress. Such a motor form of response indicates that the leading reaction to stress takes the form of a response, a person cannot concentrate on solving a problem, cannot control their emotional state, such an aimless movement for the sake of movement.


Excessive confidence, ignorance of the social framework and boundaries of objective reality should be alarming, as well as excessive caution or avoidance of social contacts. The desire to change the world, the desire for control and submission are signs of personality disorder, as well as the desire to save the entire planet.


A good diagnostic criterion is how one responds to criticism. Coping with negativity is a sign of emotional maturity and resilience. So, emotionally stable and mature people will always be able to distinguish criticism of a project from criticism of themselves. They can also distinguish the general goal of criticism and tell if it’s a potential problem or a desire to elevate themselves by belittling the merits of the person who is being criticized.

Of course, various tests and questionnaires can be used for assessment, but it should be borne in mind that tests record rational answers, excluding the influence of the irrational. Moreover, many questionnaires that are now widely used in personnel assessment have long lost their relevance, as well as the theories that served as the basis for the development of these very tests, we can use horoscopes equally well. And given the risks and potential losses, it is best to contact a specialist with the appropriate training.

11 Jan 2021


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