Elizabeth Holmes, Theranos and the entrepreneur as criminal

In his praise of Bertolt Brecht’s Threepenny Opera, Walter Benjamin notes that Brecht ‘makes visible the element of crime hidden in all business.’ For Brecht’s characters, crime is the logical route to success, and no more risky since it is just as punishable as poverty, especially in the era of what legal scholars, activists and sociologists call ‘the criminalisation of poverty.’ For theorists of neoliberalism, this relationship has become much closer. It more openly resembles what Benjamin calls ‘the actual relation between bourgeois legality and crime … The latter is shown to be a special case of exploitation sanctioned by the former.’

The conventional conception of crime is as the exception to a regime of peaceful legality. But, in business, moral injustice and violence are the order of the day, and especially so in the increasingly ferocious world of financial capitalism. This is exemplified less by the conviction of Elizabeth Holmes, the former CEO of Theranos, than by its presentation as a salacious scandal.

Businesses like Theranos—a Silicon Valley medical technology startup—are routinely celebrated for their disruptive destruction of the ordinary order. As the company began to attract investment, up to almost US$10 billion before it was closed, the financial press cheered it on. The Financial Times opined that ‘the US healthcare market is ripe for disruption’ even as questions were being raised by journalists at the Wall Street Journal. Even as the full extent of Theranos’ mismanagement was being exposed, Holmes defended herself against critics she cast ‘as part of the old-fashioned medical elite, scared of the changes she promises.’

The company claimed that the device upon which it built its reputation, the ‘Edison’, was able to run 250 medical tests from a single drop of blood, without the need for a needle. In 2015, the company was revealed to be running most of its tests elsewhere, while the ‘Edison machines had inconsistent and often inaccurate results.’

By the time it was shut down, Theranos had attracted a range of high-profile, often military-linked investors, including Henry Kissinger, retired general James Mattis, various former administration ghouls like George Schultz and Sam Nunn, and such shining examples of investment ‘intuition’ as crypto-mogul Tim Draper, as well as Rupert Murdoch.

This cast-list is unsurprising if we take Jonathan Shapira’s comment in the Australian Financial Review that ‘Hucksters are and will forever be part of the capital markets.’ More revealingly, according to Shapira, ‘some can be forgiven for selling their vision aggressively in the hope of raising more money at a better rate to make it a reality.’ As Brecht identified, morality has no place in business, and ‘the current climate is emboldening them if not outright encouraging them to push the limits of truth.’ Even the authors of The Ethics of Capitalism write, in celebrating its ‘dynamism’: ‘Capitalism is not sentimental …’

Such forgiveness is characteristic of the new discourse about criminality pioneered by neoliberals like Gary Becker, who— as Michel Foucault put in his famous lectures on neoliberalism published as The Birth of Biopolitics—re-defined a crime as ‘any action that makes the individual run the risk of being condemned to a penalty.’ Neoliberalism, in other words, effected an ‘anthropological erasure of the criminal’ as a figure. Rather, what is now defined as ‘criminal’ is that which incurs the risk of you being punished.

Foucault recognises not only that does the redefinition begin to erode the liberal obsession with disciplining a class of ‘criminals’, who are separate from law-abiding people; he also identifies the shift of perspective. In defining the criminal, no longer do we take the position of the judge administering the law: ‘we now adopt the point of view of the person who commits the crime, or who will commit the crime’. Criminal behaviour for neoliberals is not a moral wrong, nor a political problem, but on a continuum with the new normal of the constant, cut-throat entrepreneurialism of everyday life.

Hannah Forsyth identifies a similar phenomenon in the shift from professional, moralising managers to entrepreneurial managers in the second half of the twentieth century. In her essay in Jessica Gerrard and Steven Threadgold’s Class in Australia, Forsyth writes that the new managers ‘flagrantly broke the rules: being unethical and entrepreneurial became somehow correlated’, citing the example of Geoffrey Edelsten, the disgraced medical practitioner whose early business Preventicare involved, like Theranos, new diagnostic tests. Managers increasingly identified not with professional codes, which contained a sincere if punitive morality, but with the growth of capital itself, which demanded the unsentimental pursuit of profit.

Such a perspective-shift was evident in the courtroom and in the reporting of the Theranos case. We are meant to identify with the plucky entrepreneur skating the borders of legality and regulation to ‘disrupt’ old markets, as well as kind of service down to the most basic, like housing. One of the jurors said of Holmes: ‘It’s tough to convict somebody, especially somebody so likeable, with such a positive dream.’ Another, an Apple employee, said: ‘We all believed that she set out with the best of intentions on changing the world and doing a great thing.’

Speaking to the Guardian, historian Margaret O’Mara seemed disappointed:

Here was a photogenic, telegenic young woman posing as the female Steve Jobs … It was an incredibly alluring narrative that everyone wanted to believe.

The allure is another part of the criminal as entrepreneur image, which we might link to the fact that a number of ‘golden age’ TV dramas feature anti-heroic yet glorified criminal protagonists—mostly white, as sociologist Zuleyka Zevallos points out.

Breaking Bad, for instance, became an ‘entrepreneurial case’ study for George Deeb in Forbes, providing ‘some interesting lessons for entrepreneurs worth sharing.’ In a classic case of re-skilling, so favoured by punitive workfare neoliberals, Walter White ‘pivoted’ from teaching chemistry at school to ‘building an $80M net profit business in two years.’ White, Deeb continues, identified market demand for high-quality crystal meth, and in tried-and-true business fashion, filled the niche.

I know, a bad example because he broke the law and endangered many people in the process. But, the point here for entrepreneurs is: are you best using your assets or skills?


Attractive allocations

In the show Silicon Valley neoliberal entrepreneurialism is also on display. A prospective investor asks one of the developers, ‘Who said anything about respectable?’ As Christina Stead wrote in ‘The Puzzleheaded Girl’ half a century ago, ‘crooked money seemer gayer and cleverer.’ As the philosopher Michel Feher writes in Rated Agency, Silicon Valley represents a

neo-Schumpeterian business model based on the daring of the entrepreneur and the flair of the investor of venture capital. However, unlike the enterprise’s head of the heroic age, but like firms made to pursue shareholder value, it is not the enterprises income that seals the success of the adventure but precisely its capital value – that is, its estimated price of the start-up’s shares should its creators decide to make it an incorporated company.

He cites another scene from the show in which the investor stops a conventional business pitch, incredulously demanding: ‘Why would you go after revenue?! … It’s not about how much you earn, it’s about what you’re worth.’

In an interview, Feher argues that neoliberal reforms meant to incentivise ‘business people looking for a profitable deal’ mutated into financial markets pursuing instead

projects looking for investors and trying to generate bullish speculations about themselves. Successful entrepreneurs are expected to maximize the income generated by the sale of the commodities in their possession, whereas speculative projects are expected to increase the attractiveness of their (material and human) capital in the eyes of potential sponsors.

As Hanneman, the Silicon Valley investor, declares: ‘I don’t want to make a little bit of money every day. I want to make a fuck ton of money all at once.’

Yet, despite Feher’s claim that neoliberal reforms exceeded their intentions, business advice in the heady days of early neoliberal ascendancy clearly laid out the program. Gary Hamel advised companies in the Harvard Business Review that ‘Silicon Valley is based not on resource allocation but on resource attraction – a crucial distinction.’ Hamel exhorted companies to ‘ignite the entrepreneurial passions of their own people,’ holding up Royal Dutch Shell as an exemplar. The line between climate criminal and inspirational entrepreneur is whether or not you get away with it.

As late as the court case, Elizabeth Holmes was described as having ‘an extraordinary high tolerance for risk, because to pull off what she pulled off… that takes chutzpah.’ This from John Carreyrou, one of the journalists who first investigated Theranos. Yashar Ali, interviewing Carreyrou, feels compelled to add that, having met Holmes, ‘I can attest to how charming and captivating she was in person.’

The captivation with Holmes as a figure, including the gendered fascination with her ‘attractiveness’ to a suite of male investors with big reputations, seems to relate to her performance of conviction, and her tale of Stanford dropout turned co-founder of a ‘unicorn’ start-up. Her story is what every budding entrepreneur dreams of, right up until Theranos was exposed. Foucault remarks that, for the neoliberal,

the criminal is nothing other than absolutely anyone … who invests in an action, expects a profit from it, and who accepts the risk of a loss.

In the financial reporting on its trial and downfall, there is not only a tone of scandal and the fervid effort to make Theranos seem like an exception rather than the rule of financial markets, there is also an identification with and of Holmes as the ‘anyone’ who was just trying to make it in the big business world of Silicon Valley. Don’t we all, like Holmes, just ‘want to be a billionaire’?


Forgive them, for they know not what they do

The story and reporting of Holmes’ trial also illustrates another phenomenon at the heart of the link between the everyday functioning financial capitalism and crime: strategic ignorance. The jury in the trial were divided on the question of whether Holmes was guilty of fraud ‘involving investors who put money in even after Holmes rebuffed their requests for additional information.’

Litigiously secretive, Theranos pursued whistle-blowers and journalists and refused to give information on the Edison device to journalists or medical journals. But the bar of excusable ignorance is quite low. Holmes’ lawyers suggested that it was investors who should have been more discerning, and the AFR that the conviction ‘is a timely warning that there is a crucial difference between rosy optimism and outright fraud.’ Namely, being caught.

Linsey McGoey, in her book The Unknowers, notes the ‘long standing ability of CEOs to ‘know what not to know’ when it comes to illegal and immoral practices.’ By exercising strategic ignorance, the entrepreneur is able to ‘avoid the repercussions of inconvenient evidence.’ What convicted Holmes was not the clearly inflated financial promise, which is simply taken for granted as the very substance of investment hypes (especially those in tech, such as crypto-currency), but the fact that other companies’ were misrepresented as supporting Theranos.

McGoey cites Theranos investor Rupert Murdoch as one such ‘ignorant’ culprit in the News of the World phone-hacking scandal. According to McGoey, the Murdoch strategy was not only a combination of outsourcing the criminal element of the business, delegating blame downwards—it was also a result of regulators refusing to pursue costly investigations. There is a fear that asking too many questions might ‘make visible the element of crime hidden in all business,’ as Benjamin wrote.

Another of McGoey’s examples, as she has elaborated further in academic work, is (unsurprisingly) in healthcare and pharmaceuticals, where company executives deploy ‘scientific uncertainty’ as a strategy to exonerate themselves from actively marketing and selling harmful products. Similarly, banking and the financial sector use ‘plausible deniability excuses all the time,’ despite many management scholars and economists treating them as exceptions.

There are endless reports of malpractice in the Australian banking sector, from AMP to Westpac, but also across the board of what Labour senator Chris Schacht called ‘unconscionable greed.’ Schacht told the NAB board, ‘you are the unacceptable face of capitalism because you have failed to obey the law’—implying that the acceptable face stays within the law. Yet the Hayne royal commission offered only ‘modest’ reforms, according to Corporate Power in Australia author Lindy Edwards.

The current Coalition government shows no sign of seeking to rein in the business of despite the culture being ‘worse than ever’. Indeed, in response to the Westpac money laundering and child exploitation scandal, a spokesperson for the Home Affairs ministry commented that they were ‘working with industry to ensure that Australia’s financial system is hardened against criminals and terrorists without placing undue burden on industry.’ Some business just is crime, and to outlaw it would be to place an ‘undue burden’ on the frantic pursuit of profit.

What is remarkable is that the federal government’s business-friendly strategy is so brazen in creating the conditions for strategic ignorance. Not only did they amend continuous disclosure laws in August 2021 to water down what companies must reveal to investors (apparently in order to ‘mitigate the risk of companies and their officers being subject to opportunistic class actions’—in other words, in order to prevent the risky action from being punished and so becoming criminal): they also increased the regulation of ‘proxy advice’ services, which companies and investors use to gather information and advice on voting at shareholder meetings.

While Treasurer Josh Frydenberg is very enthusiastic about the ‘transparency and accountability’ for proxy advisors, when it comes to the actual criminals at the top of major companies, he wants to provide cover. As McGoey writes, ‘Excessive trust when it’s not warranted is a type of strategic ignorance.’


Standard operating procedure

The point, as Brecht sought to highlight, was that the scandals that make the financial press hot under its starched white collar are simply business as usual for neoliberal financial capital. Despite the ongoing Theranos headlines, according to Ellen Hunt in Bloomberg, US$305 billion was invested in startups in 2021 up to the end of November, which almost doubles the amount of 2020.

Investors are particularly eager for cryptocurrency, Hunt reports. The crypto wave is in part a response to (ironically inflated) fears of inflation and in part an understandable, if reactionary or libertarian response to the loss of trust in banks and the state to manage monetary policy, as Stefan Eich notes. Nathan Tankus, incidentally, associates the narrative about inflation as ‘out of control’ with the response to ‘how crime is talked about in a racialized way …’

As Edward Ongweso Jr points out, however, some cryptocurrency startups that are clearly scams, like ‘Monkey Jizz’, while others sound like they could be, like ‘Bubble’, and possibly are, but are still attracting hundreds of millions of dollars on the promise of ‘a 100x market opportunity’. Like Theranos, many cryptocurrencies use celebrity endorsements to generate hype in ‘pump and dump schemes’ that rich ‘whales’ use to attract buyers to inflate the value of the currency, then selling it at a profit (of ‘actual’ money) before the price plummets.

As Ben McKenzie and Jacob Silverman argue in Slate, crypto ‘is a moral disaster’, ‘95% fraud, hype, noise and confusion.’ As with Elizabeth Holmes’ story, celebrity endorsements of crypto appeal to the idea that you too could be rich by having visionary access to a market or asset, or, as Foucault might put it, you too could be the ‘anyone… who invests in an action, expects a profit from it, and who accepts the risk of a loss.’ For neoliberals, this puts everyone on a continuum not between the unconscionably greedy and the merely surviving, but between those who lose and are punished, and those who don’t and aren’t.

The continuum is sustained also by a certain amount of forgetfulness, or rather wilful ignorance about the extent of exploitation, expropriation and sheer crime in businesses. Carlyn Y Johnson noted in the Washington Post in 2015 before Theranos had been exposed that other companies had tried the same trick, including Quest Diagnostics’ ‘QuesTest’, which operated from 2002-2006 and partnering, like Theranos, with major pharmacy chains. Nick Bilton writes in Vanity Fair that major investors in tech companies ‘often look the other way so long as they can draw a profit.’ Bilton suggests that ‘the Elizabeth Holmes saga ended the way it began: as a spectacle.’

The problem with spectacles is that we tend to assume they are (like crime) the exception, and that, like moral scandals, they rarely lead to comprehensive political critique or change. As Rahel Jaeggi points out in her book with Nancy Fraser, Capitalism, ‘my fear is that simply pointing out moral wrongs is, in its own way, insufficient for the kind of critique we want.’ Moral critique, she suggests,

amounts to a kind of ‘black box’ approach. It is oriented to the effects of a system or social structure, but it does not immediately engage with the particular dynamics and constitution of economic and social institutions that bring about these effects.

In order to genuinely, rather than emptily, condemn the fraud and harm of Theranos and similar investment scams, we need a comprehensive critique of financial capitalism. As Walter Benjamin proposes, Brecht’s striking portrayal of crime as a business in The Threepenny Opera might be a place to start. Arguing that Brecht’s play makes a ‘structural rhyme’ with Marx’s Capital, Devin Fore quotes ‘the entrepreneur Macheath’ (Mac the Knife) in nonsite:

Why not just say straight out: Your money or your life! … All of this hiding behind judges and bailiffs is undignified! … Clearly one can’t get anywhere today with the simple, straightforward and natural methods of street robbery. The latter have the same relationship to today’s business practices as sailing ships do to steam ships.


Image: William Pitkin, Scene design for Old Bailey Jail, Acts II and III, in The Threepenny Opera

Scott Robinson

Scott Robinson is a casual academic, unionist and writer, published in Overland, MeMo Review, Arena and demos journal.

Overland is a not-for-profit magazine with a proud history of supporting writers, and publishing ideas and voices often excluded from other places.

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