How the Theranos story demonstrates the danger of a compelling narrative.

I hadn’t been following the Theranos story particularly closely but did get sucked into it when the news was full of Elizabeth Holmes’ conviction for fraud a few weeks ago. Although I was aware of the scandal when it broke, it was only recently that I really found out more about Holmes herself and how the fraud charges came about.

What is the Theranos scandal?

I’m not going to go into great amounts of detail here – John Carreyrou’s book Bad Blood: Secrets and Lies in a Silicon Valley Startup covers it in great detail. But as a summary: Elizabeth Holmes founded Theranos when she was just 19. The company was based around a supposedly revolutionary way to carry out blood tests without the need for taking standard blood samples: just a small prick on the finger. By 2006, Theranos was worth several million dollars through investments, had a board of highly respected and experienced directors and had attracted key contracts with pharmaceutical companies. At its highest point – just before the crash – Theranos was worth $9 billion and Holmes was lauded as the world’s youngest self-made female billionaire.  

The problem was the tech didn’t work. The success of the company was based around fraudulent claims.

Narrative formed the basis of Theranos’ success

But that’s not what I found fascinating about the story. To me, the story is not about fraud, but the sheer power of narrative to shape both expectations and outcomes.

From the start, all the components of the story could have been scripted for cinema. From Holmes’ back story to her carefully crafted persona right down to her defence in court we are presented with a series of narratives or stories that seem to have been selected to resonate with the current zeitgeist and popular media preoccupations.

These centre around Holmes herself. Not only was she an entrepreneur from a family with a long (but lapsed) history of entrepreneurship, she was young, attractive and female. This at a time when the lack of female leadership in tech was (rightly) being challenged. Her invention was going to help to bring better healthcare to more people – levelling the playing field for the poor.

Holmes used narrative to shape her public persona

Homes was also very charismatic with a deep voice, large blue eyes and a seemingly boundless optimism. For the media and investors, she was a dream come true.

However, I think it was also obvious in hindsight that she was deliberately playing into the narrative. As much as I dislike coupling of women in business to their wardrobe choices, I have to say – look at her clothes! In hindsight, they were really a costume.

Many people have a ‘personal uniform’ that becomes a part of their persona (Steve Jobs, Mark Zuckerberg for example). Holmes became famous for wearing black polo neck tops – was this a personal uniform, a practical clothing choice – or was it more like a costume? Dressing up to match the public persona she was building for herself.

The core of the business itself centred around a revolutionary, disruptive technology that was going to revolutionise the way medical testing was carried out. Once again, this is a narrative that fits perfectly with the current trend for both disruption and for the increasing use of tech to drive medicine.

So, on a personal and business perspective, Holmes and her company fitted the pattern of current narratives.

And this is where the investors became sucked in: who doesn’t want to be included in something that that’s revolutionary? Who doesn’t want to be seen to support the young, charismatic leader?

Narrative drove Holmes’ defence

Even after the truth about Theranos came out, the use of narratives didn’t stop – although possibly less compelling. Was her claim of coercive control by Sunny Balwani a true description of a young impressionable woman being preyed on by an older, more powerful man? Or was it simply a cry of ‘me too!’ in an attempt to draw on the power of that movement? It will be interesting to see how the trial of Balwani plays out.

Her trial was also delayed due to the announcement that she was pregnant. Holmes has every right to become a mother, of course. But is this also another attempt to control the narrative? As Caroline Polisi, a criminal defence lawyer said, ‘”The fact that she is a young, new mother is going to play into any potential sentence.”

What lessons should marketers learn from Theranos?

To me, this is not so much a story about the rise and fall of an entrepreneur nor even a story about a fraudster. What I take away from Holmes and Theranos is how dangerous a compelling narrative can be.

Go to any discussion about marketing and branding and at some point ‘storytelling’ will come up. To build an effective brand, you need a ‘compelling brand narrative’, and ‘constructing’ a good story for a company and its products is key to success.

I am not disagreeing. It is true that having a good story will help win the hearts and minds of people: that is exactly what the success of Theranos demonstrated. But when you tell a story, you are creating something – bringing together elements to form a pattern (usually with a beginning, a middle and an end). It is not reality – reality is usually far too messy to be counted as a narrative and too convoluted to quickly draw the attention of an audience.

For this reason, I don’t especially trust compelling narratives when they are being used to sell me something. What has been rearranged to fit a neat pattern? What is being swept aside to keep it simple?

Brand stories are so powerful today because it’s easy to reach many people through social media and other digital platforms. What makes it even more dangerous is that people don’t always have the time, education or emotional bandwidth to question what they are being told. And the ease of sharing content means that good stories can easily spread, based purely on the merit of the constructed narrative with no thought to substance.

It’s now a cliché, but ‘with great power comes great responsibility’. Now more than ever, marketers need to consider the truth behind their stories.