The blood test that worked only in the pitch

Elizabeth Holmes founded Theranos in 2003, at 19, after leaving Stanford University. The promise was simple and appealing: dozens of blood tests from a finger-prick, quickly and cheaply, with a small machine. In 2013 the company began offering tests in some Walgreens pharmacies, and by 2014 investors valued it at about $9 billion.

In October 2015 The Wall Street Journal reporter John Carreyrou reported that Theranos ran only a small share of its tests on its own device, and used ordinary lab machines from other makers for most of them. Former employees had raised concerns about accuracy. US regulators inspected its lab and found serious problems.

In March 2018 the US Securities and Exchange Commission charged Holmes and former president Ramesh "Sunny" Balwani with a "massive fraud". The company closed later that year. In January 2022 a jury convicted Holmes on four counts of defrauding investors, and in November 2022 she was sentenced to 11 years and 3 months in prison. Balwani was also convicted.

Theranos kept its technology secret and asked people to trust the story, the famous board members and the founder's confidence. Few of its early backers had medical lab experience, and the company avoided the independent peer review that would normally test such claims. Staff who raised doubts were pushed aside or sued.

The AI angle: a smooth demo and a confident founder are easy to fake. With any new tool, including AI products, the useful question is what independent evidence shows it works on real cases like yours.

The idea behind this caseLesson: Check what AI tells you →

1. 1Ask for independent testing before you rely on a product for health, money or safety decisions.
2. 2Be careful when a company refuses to show how something works and points to famous backers instead.
3. 3Take seriously the staff and customers who raise doubts, and check their concerns before dismissing them.
4. 4Keep at least one adviser who knows the field well enough to ask awkward questions.