The fascination with Elizabeth Holmes has never really been about blood tests, Silicon Valley or even fraud. It is about a far more unsettling question: How can someone become so committed to a version of reality that evidence, consequences and the judgment of others in her circle no longer seem capable of changing it? And perhaps more importantly, how do otherwise intelligent people become caught up in that same reality? Why did they not “ see “ everything ?
Many of the reviews of the documentary explore the unsettling possibility that Holmes believes what she says, even when the facts contradict her. The documentary becomes a “mind-bending examination of truth, perception and the boundaries between sincerity and manipulation”. Yet the fascination with whether Holmes believes her own story risks obscuring a more consequential question: What happens to human judgment when rationalization begins to replace reality?
This is where the psychology of fraud deserves far more attention than the sensational view the documentary takes . Virtually every one that has written about this film and Holmes has zero experience with what actually happens . I do . I am ashamed to say I do but it’s time to look on the other side of the microscope to talk about what really happens not a sensationalist story.
In our article, Viewing Fraud Through the Telescope Model of Rationalization, Timothy Hedley , (former Global Head of Fraud Risk Management for Big Four Accounting Firm) and I examine rationalization as a critical component of understanding fraud. The article was written from my firsthand experience . The central challenge we address is to look beyond the fraudulent act and understand the thinking errors that allow someone to justify behavior that would otherwise violate their own ethical boundaries.
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A telescope can bring a distant object into focus, but its optics also determine what we see. Rationalization works in a similar way. We interpret events through the lens of our ambitions, fears, beliefs and personal interests. When that lens becomes distorted, facts that should challenge our assumptions can instead be reinterpreted to reinforce them.
In the Holmes case, the distinction between what Theranos promised and what its technology could reliably deliver became central to the fraud. The danger was that a company made claims that could not be substantiated and became the narrative of revolutionary medical innovation. The story became powerful enough to compete with the evidence that should have constrained it and convinced so many investors and leaders that the story was true. So many people got hurt and that is not ok . The distorted psychology that underlies such horrific acts causes self destruction of the person who is at the center of it and every one in the vicinity goes down as well and this should not happen under any circumstance.
Ambition can become a justification for cutting corners and. Early success can be mistaken for proof of future success. This is not atypical in Silicon Valley with the “ fake until you make it” narrative that has been pervasive since the internet boom. Contradictory results can be dismissed as temporary technical problems.
Together, they can create a system of thinking in which almost any contrary evidence can be explained away. The delusion is that perception creates momentum, and momentum creates reality and this vortex pulls not only the founders but employees , investors, family members into the dangerous torrent. People can become so invested in the image we have created that they stop examining whether it corresponds to reality.
Fraud is often discussed as a question of character: Was the person greedy, dishonest, narcissistic or simply determined to succeed at any cost? These questions may be relevant, but they do not adequately explain how destructive decisions evolve or why other people become participants in them. At the root of criminal thinking are emotions that cloud rational thinking .
The thinking errors are in plain sight but even the documentary ignores shining a light on the importance of recognizing them .
As an example ,confirmation bias is what caused most investors to blindly believe what Holmes was telling them based on information that supports what they already believed. Similarly self-serving bias allowed them to interpret events in ways that protected their self-image. Holmes’ glaring stare and her deep voice modification were part of what is called power orientation to portray being invincible . She blamed most of the failures on her partner, another thinking error .
The most dangerous distortion occurs when these errors reinforce one another. A person makes a questionable decision, justifies it, and then uses the justification to support the next decision. As the consequences grow, admitting the original mistake becomes increasingly costly. The person must now defend not only the decision but also the identity, reputation and future built around it. Superoptimism is a common sign amongst entrepreneurs who feel everything will always “ work out” and blind to unreasonable risk.
One of the most troubling aspects of destructive decision-making is what happens to the people around the person making the mistakes. They do not necessarily begin with the same intentions or beliefs. Some may genuinely want to help. Others may be persuaded by confidence, authority, reputation or the promise of extraordinary achievement. Yet they can gradually become caught in the same vortex. The contagion of overconfidence is a process through which distorted beliefs spread socially and become increasingly resistant to correction.
A founder’s conviction can influence employees. Employees’ commitment can reassure investors. Investors’ confidence can attract more investors. Prestigious advisers can lend credibility to claims they have not independently verified. This is the vicious cycle that happened in Theranos and many other instances in Silicon Valley. Each person’s belief becomes evidence for the next person’s belief, even when none has independently established that the underlying claims are true.People look around the room and see others who appear equally convinced. Instead of asking whether the evidence supports the claim, they begin asking why they should be the only ones who doubt it.
Once people have defended a leader publicly, acknowledging a problem may mean admitting that they were mistaken. The psychological cost of changing one’s mind increases with every commitment. Silence becomes easier, and skepticism begins to feel like betrayal.
Understanding the social mechanisms that normalize distorted thinking helps explain why warning signs can persist even in environments filled with intelligent, experienced people.
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For most entrepreneurs emotional needs, identity, ambition and distorted thinking interact with ethical choices.Criminal conduct does not emerge in a psychological vacuum. Understanding the mechanisms that permit misconduct may help us recognize its development before the damage becomes irreversible.
The reviews of You Can See Everything understandably focus on the documentary’s unsettling portrayal of Holmes and its exploration of subjective truth. The fascination with this paradox should be the beginning of the discussion, not its conclusion. We need practical ways to interrupt rationalization before it becomes entrenched. So for all the sensation behind the theatrics it may be time to ask about why this happened and the issues of mental health that nobody is even talking about .
Organizations must create environments in which dissent is protected, claims are independently verified and evidence takes precedence over charisma. Leaders must be willing to acknowledge uncertainty. Employees and advisers must be encouraged to challenge assumptions without fear of retaliation. Most importantly, individuals must learn to recognize when they are defending a belief because the evidence supports it—and when they are defending it because abandoning it would threaten their identity.
The same discipline applies to each of us. We must ask what evidence would change our minds, whether we are selectively interpreting facts, and whether our commitment to a person or idea has compromised our judgment. The Telescope Model of Rationalization offers a way to examine these distortions rather than simply marvel at their consequences.
Holmes’s story is compelling because it challenges our assumptions about intelligence, sincerity, ambition and deception. But the most important lesson is not whether she believed her own narrative. It is how a narrative can become so powerful that reality is repeatedly reinterpreted to accommodate it—and how the people surrounding that narrative can lose sight of the distinction between conviction and evidence.
Instead of being fascinated at how she carried out the lie ,we should ask how rationalization changed what people around her were actually seeing, and why those distortions spread,
Because the real danger is not simply that someone distorts reality. It is that, through the telescope of rationalization, an entire circle of people may begin to see the distortion as the truth.