The knives are out for Elizabeth Holmes. If my social media feeds are any indication, the young entrepreneur, who recently settled charges of massive fraud by the SEC, should already be in jail. It’s a kind of crowd-sourced Schadenfreude directed at the one-time, youngest-in-the-world, self-made female billionaire whose company is today one secured-loan away from bankruptcy.
In the world of virtual knives, it’s a Twitter melee. And in the world of razors, the SEC action suggests Holmes and her company are best described by Occam’s advice: The simplest explanation is usually the best. In other words, Theranos was nothing less than one giant scam.
But there’s another razor, Hanlon’s, that shaves in a different direction, advising never to ascribe to maliciousness what can be explained by ineptitude. In other words, assume stupidity before assuming evil. This explanation doesn’t excuse fraud, and Holmes (despite not admitting wrongdoing in her SEC settlement) probably won’t ever squirm off that hook. But there’s a reading of the Theranos saga that might be more satisfying if we couple charges of massive fraud with an equally massive dose of incompetence. And not just by Holmes, but by the entire entrepreneurial ecosystem that’s designed to support and protect young entrepreneurs whom we encourage to be bold, take chances, and put a dent in the universe.
In Outliers, Malcolm Gladwell describes a typical plane crash as the result not of a single, catastrophic event, but of seven factors, most of them small and benign in themselves: slightly poor weather, the plane being a bit behind schedule, a pilot being tired, two pilots never having flown together, and the like. The conventional commercial jetliner, Gladwell writes, “is about as dependable as a toaster. Plane crashes are much more likely to be the result of an accumulation of minor difficulties and seemingly trivial malfunctions.”
So let’s tell the tale of Theranos with Hanlon and Gladwell in mind.