“Theranos rose quickly from being a college dropout’s idea
to revolutionize the blood analysis industry to a hot tech bet that accrued
$700 million in funding and many famous names for its board.”[1]
Elizabeth Holmes, the company’s founder, was stripped of her position at the
company in 2018 after the SEC discovered her deep involvement with the fraud at
the company. Her “smarts, fierce determination and Steve Jobs-inspired look . .
. were critical” to her being able to perpetuate the lie that the company had a
device that could do blood tests with just a scant amount of blood, obviating
the unpleasant experience of having blood drawn by needle.[2]
Although Jack Welsh, Bill Gates, and Steve Jobs accomplished enough to warrant
their fame, I submit that companies are too prone to create “champions”—even
strangely calling them “rock stars.” In other words, even though charismatic
vision is of value to a business, neither such a leader nor his or her vision
itself should be overplayed. Business, I submit, has a marked tendency to do
just that, and often with impunity.
At 19, Elizabeth Holmes dropped out of Stanford University
because she had an idea of how blood tests could be done without the need of so
much blood that a needle is required. She was “determined to create a company
that would help anyone who, like herself, was afraid of needles and dreaded
taking blood tests.”[3] Where
the school Northern Illinois University or the University of Arizona, her
decision to drop out for such a reason could be reasonable, but to give up a
Stanford education so people wouldn’t have to feel a needle for “blood work”
indicates a flawed judgment. Where were her parents? She was 19! Finish college then start your company.
That it took her a decade of work before she debuted her company—and even then
without the requisite technology—suggests that there was no rush. Simply out,
it is very odd that she dropped out
of Stanford. Yet this point was somehow missed by investors such as Rupert
Murdock, Cox Enterprises, and Walgreens, and board members including George
Schultz and Henry Kissinger, former U.S. Secretaries of State, former U.S. Senator Sam Nunn, former
Secretary of Defense William Perry, and the current Defense Secretary James
Mattis. Did they all show up drunk at board meetings? Was there even an audit
committee that reported directly to the board?
Clearly, we can be dazzled by celebrity, and the famous can
cash in on their reputations. That no flags were raised concerning the founder
raises larger questions in business related to the troublesome transfer of
power and position from charismatic founders to managers. Investors should not
rely on the charisma of founders; even the promises of Bill Gates and Steve
Jobs warranted being independently checked out. CPA firms should not have to
rely on founders, or even managers, for renewals. Business, in other words, can
easily get too cozy, leaving investors out in the dark.
In terms of leadership, charismatic vision should be
distinguished from the implementation of strategy. I’m not even sure “avoiding
needles” is big enough to warrant being reckoned as a vision. Founders and
managers alike may distend what are actually good ideas into charismatic vision.[4]
In conclusion, the background of Theranos, including that of
its founder, should have raised red flags. Likening her to Steve Jobs because
she wore black turtle-neck shirts borders on the ridiculous, and yet a
self-aggrandizing company can easily get on that band-wagon, ignoring the
hypertrophy. Leadership vision is valuable, but in a business context the
vision thing must be related to concrete strategies, with realizable
benchmarks. This is not to say that leadership vision should collapse into
strategic interests, for such reductionism rids the vision of its own integrity
and coherence.[5]
The point is not to get carried away with charismatic vision in business even
as such vision should not reduce to strategy.
[1]
Marco della Cava, “Behind the Scenes of Theranos’ Dramatic Rise, Fall,” USA Today, March 16, 2018.
[2]
Ibid.
[3]
Ibid.
[5] Skip
Worden, “The
Role of Integrity as a Mediator in Strategic Leadership: A Recipe for
Reputational Capital,” Journal of
Business Ethics, 48 (August, 2003) No. 1, 31-44.
