Elizabeth Holmes was once the youngest female billionaire in the history of Wall Street. In 2003, she founded and, as CEO, ran a corporation called Theranos. Her company claimed to be able to help diagnose health issues from merely a pinprick of blood. The company raised over 700 million dollars in pursuit of this dream. Ultimately, she was convicted of fraud and sentenced to 11 years in jail. Currently serving as a Professor of Leadership and Organization Studies at the University of Sussex Business School, Dr. Tourish offers a wealth of insights. He has published a blog on Theranos, which shows that it had much in common with organizations we usually consider to be cults.
Dr. Dennis Tourish, formerly involved in a left-wing political cult during the 70s and 80s, has been a frequent guest in my discussions about the perils of authoritarianism in political and corporate contexts. He has written numerous books and papers on dysfunctional leadership styles and political cults, including The Dark Side of Transformational Leadership: A Critical Perspective and Management Studies in Crisis: Fraud, Deception and Meaningless Research.
Dr. Tourish authored the influential book, On the Edge: Political Cults on the Right and Left, co-authored with Tim Wohlforth. This work is one of the earliest comprehensive studies documenting political cults from both ends of the political spectrum and exploring their significance in mainstream politics. Dr. Tourish cited reading my first book, Combating Cult Mind Control, as helping him to understand his experience better.
Dr. Tourish has joined me again to discuss his recent research on Elizabeth Holmes, the disgraced CEO of Theranos. His blog, The Leadership of Elizabeth Holmes: Lessons From the Dark Side of Silicon Valley, unveils disturbing parallels between Theranos’ operations and cult dynamics, emphasizing the urgent need for self-reflection within businesses to prevent such occurrences. He has also published a longer academic article, co-authored with Hugh Willmott. Our discussion centers around this topic and explores potential preventive strategies.
The Cult-Like Culture of Theranos
In 2003, Elizabeth Holmes, a 19-year-old dropout from Stanford University, established Theranos, a health technology corporation that promised to revolutionize the medical testing industry. The company claimed a technological breakthrough that could run numerous laboratory tests with a minuscule blood sample. Despite lacking biotechnological know-how, Holmes assembled a board filled with influential figures in American society like Henry Kissinger and the late George Shultz. Yet, no board member possessed expertise in the relevant field. This arrangement conveniently allowed Holmes to evade rigorous scrutiny. Nevertheless, with Holmes’ charismatic leadership and the promise of ground-breaking technology, Theranos secured hundreds of millions in venture capital, rocketing its value to a staggering $9 billion.
However, Theranos soon faced intense scrutiny. In 2015, The Wall Street Journal published an investigation questioning the efficacy of Theranos’ technology. The report revealed that traditional machines were being used for most of their tests, and their results were likely inaccurate. Further investigations into the company unearthed a corporate culture of secrecy and intimidation. Holmes enforced strict compliance within Theranos, creating a cult-like atmosphere. Dr. Tourish explained that employees endured grueling 12–14-hour shifts under constant surveillance from security guards and cameras. Any expression of dissent or concerns led to swift termination, harassment, and threats of legal action.
Holmes manipulated her staff into believing they were participating in a mission of monumental historical significance so she could elicit maximal commitment and dedication from them. Dr. Tourish said another sign that should have raised more eyebrows was Holmes’ grandiose and narcissistic behavior, traits commonly found in cult leaders. For instance, she modeled her room at Theranos on the Oval Office of the White House, installed bulletproof windows, and maintained a private jet, security detail, and chef.
Elizabeth Holmes held 99.7% of Theranos’ voting shares, granting her absolute power over the company’s direction. She was essentially the supreme ruler of her own corporate kingdom. As a result, Holmes made extravagant promises and increasingly lied about how close Theranos was to achieving them. This pattern of inflated promises eventually led to the company’s downfall. In January 2022, Holmes was convicted of defrauding investors and was sentenced to serve 11 years in prison, beginning on May 30, 2023.
Lessons from Theranos: Corporate Governance, Power Dynamics, and Unethical Influence
Dr. Tourish highlighted that the collapse of Theranos offers essential insights into corporate governance, power relations, and unethical influence. He drew attention to the contradiction in Western societies where democratic values are upheld, yet many businesses operate under near-dictatorial structures. The concentration of power in a single person, with employees expected to show near-cult-like dedication, often leads to disastrous results.
Reflecting on Milton Friedman’s principle that a corporation’s sole purpose is to boost shareholder value, Dr. Tourish explained that this philosophy has negatively impacted business conduct for decades. Moreover, such a singular focus on the prosperity of a company’s shareholders often overlooks employee welfare and benefits to society at large.
In our discussion, we explored how belief in the nobility of an organization’s mission, such as the purported medical innovations at Theranos, can often blind employees to internal unethical practices. This problem is exacerbated by fears of legal consequences or job termination if they dare to question its practices. Such a mindset, prevalent in cults, is based on the view that the ends justify the means. As a result, cult members may resort to deceit or other unethical actions to serve the group’s ‘noble’ goal. My liberation from the Moon cult gave me the valuable realization that the means actually shape the ends. If the foundation of an organization is built on deception, it only breeds further dishonesty, straying far from the envisaged utopia.
Healthy Corporations: Strategies to Counter Unethical Practice
In our conversation, we delved into the features of healthy corporations and strategies to counter unethical practices in business. Dr. Tourish emphasized the necessity to empower individuals to voice their opinions, facilitate dissent, and limit the power held by corporate leaders. Arguably, the impetus for this change won’t come from the CEOs themselves but from broader society and institutions capable of initiating legislative measures, reestablishing checks and balances, and overhauling corporate governance.
I believe establishing an ethical corporation demands a broad perspective, considering not just immediate financial gains but also long-term consequences. It involves asking if the organization benefits society, its employees, and, ultimately, the world. It’s crucial to balance short-term goals against enduring sustainability and global welfare. Maintaining alignment with our core values, moral compass, and sound judgment is vital. Regardless of potential losses, we must assert our voices against deception. The duty to speak against unethical practices is a responsibility we all bear.
The Dark Side of Transformational Leadership: A Critical Perspective by Dr. Dennis Tourish
The Leadership of Elizabeth Holmes: Lessons From the Dark Side of Silicon Valley by Dr. Dennis Tourish
Tourish, D. & Willmott, H. (2023) Despotic leadership and ideological manipulation at Theranos: Towards a theory of hegemonic totalism in the workplace, Organization Studies.
Bilton, N. (20 February, 2019). “She never looks back”: Inside Elizabeth Holmes’s chilling final months at Theranos. Vanity Fair.
Cold Fusion (March, 2019). Theranos: Silicon Valley’s Greatest Disaster – YouTube Video
Wall Street Journal October 16th, 2015 Hot Startup Theranos Has Struggled With Its Blood-Test Technology
Bad Blood: Secrets and Lies in a Silicon Valley Startup by John Carreyrou