Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.

In many ways, Elizabeth Holmes looked like a typical Silicon Valley entrepreneur, a Stanford dropout

claiming to have a new breakthrough technology, giving TED Talks, and

most importantly, wearing a Steve Job-style black turtleneck. Generating attention from the

press as one of the few young female founders, Holmes used the mentorship and connections

of tech industry giants like Larry Ellison to raise money from some of the biggest

names in VC. Living among Silicon Valley's elite, Elizabeth used the standard startup playbook

of hype, exclusivity and fear of missing out to win over investors. Terranos was a private

company so she couldn't blame shortsellers when

negative news came out, but she was able to dismiss those with difficult questions as

haters. The company collapsed more than five years ago before the term FUD had been coined,

so she didn't get to use that one either. While Elizabeth did pitch herself as a Steve

job-style tech founder, Terranos was not the standard Silicon Valley company. To start with,

it was a blood testing company where it's less reasonable to believe that you'll make the Moore's

law style leaps that you might make in the tech industry. One of the reasons Terranos was able

to raise so much money was that Holmes pitched to tech investors rather than experts in blood

testing. Medical experts would have quickly seen it as a red flag that she was claiming to use

a drop of capillary blood drawn from a finger prick for blood tests.

Blood drawn this way, unlike the blood drawn from a vein, is contaminated with tissue and

cells that make measurements less accurate. Additionally, blood is consumed in every test that's run

on it. So the claim that 200 tests could be run on a single drop of blood would

have stretched the imagination of the most optimistic healthcare expert. Terranos had a very

...