Source: Tech Crunch
I watched the HBO documentary on Elizabeth Holmes and Theranos this past weekend and what struck me was the analysis the creators put into how small incremental decisions can lead to fraud on a massive scale.
The documentary is called The Inventor: Out for Blood in Silicon Valley and it chronicles the ride and fall of Ms. Holmes from a dreamy, idealist college student to one of the youngest self made billionaires based on a Fortune magazine estimate of the value of her company, Theranos, made in 2015. It then follows her precipitous fall from grace, the exposure of the alleged fraud and her indictment by the SEC for misleading investors.
In a nutshell, Holmes was a smart engineering student who dropped out of Stanford to pursue the idea of a company that would “democratize healthcare” by performing blood tests for hundreds of ailments all from a single drop of blood, thus avoiding the need for blood samples from syringes and claiming to be able to do this at a fraction of the cost of the current leading testing companies. The blood would be tested in an office printer looking device she ambitiously named the “Edison”.
However, the ambition was leaps and bounds ahead of the engineering and the tangible innovation could never really catch up to the dream. Being so passionate about bringing cheap, less invasive testing to the public, allowed Holmes to recruit some of the most powerful people in Silicon Valley and the US government to her cause. This acted as an influence snowball as these celebrities of politics and business bestowed their credibility onto her project. This credibility also produced a huge boost in funding and hence the perceived value of Theranos.
As time progressed though, the progress on the machine did not materialize and what started as small lies about the performance grew into bigger, bold faced deception to cover the fact that they could not deliver what they were promising. An investigation by the Wall Street Journal blew the door open and the spotlight shifted from Holmes as innovator to her deception. She now is awaiting trial in San Francisco for her case, in which she could face serious prison time for defrauding investors.
Taking the Right Approach to the Fraud Story
In the current state of the world, where anything can be shared and distributed around the world via the internet in a matter of seconds, there has been a resurgence of the very primal tendency to publicly shame people. That public shaming has recently been recognized by many as a form of bullying, but we have done little to discourage or curtail this habit online.
Public shaming has a long history throughout different cultures across the world, from the stocks and pillory of colonial America to crucifixion in Roman times, which combined the public shaming with the death penalty. Even as the judicial form of public shaming was deemed cruel and unusual punishment in the 19th century, the 20th century still saw it accepted in institutions such as education with things like the dunce cap and in social orders such as fraternities on college campuses.
The internet and social media has revived the urge to publicly shame and made it stronger than ever. You can see this manifest itself in the people that want their videos to be the next viral shaming sensation. We saw this happen last week when a man on the 2 train repeatedly kicked a 78 year old woman and no one came to her aid. The onlookers all took out their phones and just groaned as the man assaulted this woman.
The point of me mentioning all this is that public shaming tends to disassociate the very nuanced and real human desire and emotions that go into decisions that lead to massive fraud. Rather than just point the finger at Ms. Holmes, I was pleasantly surprised that the documentary interviewed a behavioral economist who discussed how internal conflicts can end up leading to decisions that produce massive fraud.
Many of those interviewed and some who joined the company, were moved by Ms. Holmes passion for helping people and desire to change healthcare as we know it. This tied in perfectly to a study by the behavioral economist involving rolling dice and payments, which showed that when participants knew the money was going to charity, they consistently lied more than if the money was going to themselves.
In that sense, this is really what set this documentary apart in that rather than shaming this woman, it took the time to maybe even see it from her perspective. At the end of the day though, everything that happened with Theranos really goes back to one thing, and that’s integrity.
Integrity Determines What Type of Leader You Will Be
Along those same lines, I was watching one of my favorite speakers Gary Vaynerchuck speak to a group on a YouTube video today and he mentioned that he was a great salesman when he was a kid and his dad wasn’t around, but his dad was an extremely straight laced guy who didn’t stand for any embellishment to make a sale, let alone lying. When Gary started to spend more time with his dad at 13, his dad helped him to completely change his outlook in the sense that Gary realized he had to be completely up front with people and not sugarcoat things for a sale in the least bit.
This relates back to the story of Holmes and Theranos in the sense that a strong moral compass in a leader will always steer them away from those small, grey, in-the-moment judgement calls that can be the start of the fraud snowball.
At some point, somewhere along the line, a point that maybe only Ms. Holmes knows, there was a decision made where she said to herself, this may not be true, but it’s not that big of a deal in the face of the greater good that I am going to create. As we have seen with Theranos though, it does matter. It matters because once the lie is small, it has the opportunity to grow. Once you’ve lied for small things they start to become commonplace and you no longer have the initial squeamishness towards them that you did when you made the decision to lie for the first time. When an even more serious issue comes to the fore, the build up of the small lies is justification for thinking you can take on this new big lie as well and it will all work out.
I saw a quote once that said there are bosses and there are leaders, bosses will tell you what to do while leaders will get people to follow them. Just because you are the boss does not mean people will want to follow you. Being a leader isn’t just about telling people what to do, it’s about having a core philosophy in the way you treat people and the way you integrate your moral compass into your actions day in and day out.
For a leader with a strong sense of ethical behavior and morality, the decisions Ms. Holmes made would have been easy ones…to say no to. Those small deceits would compromise a good leader’s integrity, even if they believe it’s for the greater good, they know it is not worth it.
You don’t have to be a billionaire to be faced with decisions like this everyday either. Whether it is throwing a co-worker under the bus to move up, lying to a client to get the sale that gets you to the next level or being abused by your boss to keep your job just to feed your kids, we are all faced with these internal conflicts between what we want and what is right. In the long run you have to ask yourself, which will you regret more? Getting that promotion, making that sale, keeping your job another day? Or will it be compromising yourself for the promotion, that sale or regretting not standing up for yourself and what type of example that was for your children.
Conclusion
If you want to see where compromising yourself leads just go spend a day at a retirement home. Talk to the residents there and listen to their regrets and the things they wished they could change. Do you think they would be talking about that promotion or that time they made that sale? Not likely. They would likely be regretting not spending more time with their family, pursuing their dreams or standing up for what they believe is right.
In that same light, there is a book by a former nurse named Bronnie Ware called Regrets of the Dying that inspired the author to completely change her life, quit her job and pursue her own dreams. I highly recommend everyone to look into sources like this to gain perspective and insight into what they think is important in the long run. Once you have that perspective firmly rooted, you will be on your way to becoming a leader who doesn’t make decisions like Elizabeth Holmes.
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