Several posts have referenced convicted fraudster Elizabeth Holmes recently because the Theranos scandal is a good example of how the power of persuasion can lead to innocent investors losing substantial amounts.
Many of those who invested in Theranos were shrewd and experienced. And yet, they were completely unaware of the fraud taking place under their noses. So why did they buy into Holmes’ lies?
Holmes successfully created a persona that compelled investors to take her seriously. Heavily inspired by Steve Jobs, and armed with an education, black turtleneck, and (fake) signature deep voice, she sold her “revolutionary” idea with confidence. The motto “fake it ‘til you make it” has never been more appropriate.
Selling the Theranos brand with such conviction gained Holmes the admiration of many high-profile investors. Even former and current US Presidents Bill Clinton and Joe Biden were supporters.
However, there were some who suspected that something wasn’t adding up. E.g. Holmes abruptly left a meeting with healthcare specialists Medventure when the company’s executives started asking difficult questions.
Holmes persuaded powerful men
Most of those who invested in Theranos were tech outsiders, some of richest and most powerful men on the planet. According to neuroscientist Dr Margaret McCarthy, Holmes’ ability to mimic the behaviour of these men was crucial to her success.
In 2019, McCarthy told Psychology Today magazine: “The combination of dress, voice, and posture adopted by Holmes suggests she was intentionally trying to project a masculine image. But why would this make powerful men believe her? It is plausible that Holmes was so effective at persuading powerful men because she projected male power back at them, creating a sense of camaraderie based on mutual trust.
“But it is equally plausible that the aura of masculinity combined with feminine beauty created a beguiling brew that these silverback males couldn’t resist. The perfect combination of a respected equal and a fragile underling needing protection and support.”
Psychologist, scam expert, and author of The Confidence Game: Why We Fall for It Every Time Maria Konnikova believes an appeal to some higher calling is a common way victims are persuaded to overlook red flags.
This is a key point because often these prospects are sold as:
- Benefitting the greater good
- Changing humanity as a whole
- Improving your life in some way
Some entrepreneurs use dubious methods to attract investors. But it would be unfair to describe every failed investment scheme as a con. The average person is lured into an investment due to its glowing prospects. We’ve all heard someone say “But it looked / sounded so good at the time.”
While that was probably true for Theranos investors, hardly any of them bothered to look into the finer details. Further investigation would’ve revealed the company’s technology did not actually work. Theranos stands as a cautionary tale demonstrating how when abused, the powers of persuasion can leave a trial of destruction.
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