Bad Blood: Secrets and Lies in a Silicon Valley Startup 

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5 stars
How to burn hundreds of millions of dollars, hurt thousands of people, and not get away with it

At its peak, blood testing company Theranos was valued at US$10B, a staggering amount for a privately held start-up. It had raised $700M in investments by venture capitalists and private investors. Theranos founder Elizabeth Holmes was featured on the covers of business magazines sporting a black turtleneck, echoing Steve Jobs’ trademark style. Holmes hobnobbed with the powerful and was celebrated as a brilliant entrepreneur who would revolutionize health-care.

As John Carreyrou recounts in Bad Blood, there was only one problem: Theranos didn’t help people—it hurt them. The company had not created a working product and had systematically deceived the public and investors about this fact, running most tests on recklessly modified commercial analyzers. Worse, Holmes and company president Ramesh “Sunny” Balwani (who was also Holmes’ boyfriend during their time at Theranos) had pushed the company’s flaky blood tests into Walgreens stores.

To minimize regulatory risks, much of this experimentation on human beings took place in the “pro-business” city of Phoenix, Arizona. It had the predictable results: many patients received utterly nonsensical reports that endangered their health and caused them to incur medical debt to pay for expensive follow-up tests.

Climate of Fear

Carreyrou, a Pulitzer-winning investigative writer for the Wall Street Journal whose reporting was instrumental to bringing about the fall of Theranos, tries to explain what happened. Was Theranos a scam from the start? How did things get off the rails?

Holmes, a Stanford dropout, did not understand how the product she wanted could be built—she only knew what she wanted: a slick, compact device that could produce a vast number of different types of blood tests from a tiny sample of blood. Unsurprisingly, her team was not able to deliver what leading scientists and engineers said was an incredibly challenging problem, perhaps unsolvable with today’s technology.

When a normal company fails to achieve an over-ambitious vision, it pivots to a less ambitious one: a larger device, fewer tests, larger quantities of blood. But Theranos was not a normal company. Instead of reasoning through the problem, it fired its internal dissenters, fudged and misrepresented data for investors, and pushed towards the real-world use of extremely flawed, extremely flaky prototype devices.

According to Carreyrou, through much of its existence, Theranos experienced extremely high turnover with frequent and vindictive firings—and resignations in response to dysfunction, intimidation, and ethical transgressions. Employees were first and foremost seen as a threat that had to be monitored (emails and even social media use were heavily policed) and controlled.

An Ineffective, Infatuated Board

The Theranos board included former Secretary of State George P. Shultz, former Secretary of State and war criminal Henry Kissinger, former Secretary of Defense William Perry, and current Secretary of Defense James Mattis. It included no members with substantial relevant expertise and lacked any ability to evaluate the merits of Theranos’ work.

Indeed, the board was infatuated with the Theranos founder and neither able nor willing to hold her to account. Employees who tried to warn the board were ignored or threatened.

George Shultz’s grandson Tyler was exposed to some of the company’s egregious and unethical practices through his own work there. He ultimately blew the whistle on Theranos. However, his attempts to persuade his grandfather that all was not well with the company fell on deaf ears.

The desire to believe that Holmes really was the brilliant and world-changing inventor she presented herself as was all too powerful—and a lot of money was on the line. And it wasn’t just the board that was infatuated; media and investors were all too ready to embrace the Theranos hype without asking too many questions.

Irrational Self-Interest

It took the Wall Street Journal to finally bring down the house of cards. That’s not without its irony; it was the Journal that had granted Elizabeth Holmes an op-ed to promote its company only months earlier, and its owner, Rupert Murdoch, invested $121M in the company just before its downfall. (To his credit, Murdoch never attempted to shut down the Journal’s investigation.)

Problems like the ones Theranos sought to solve—and indeed all problems of similar ambition and scope—require collaboration, transparency, openness. Instead, they were dealt with paranoia and secrecy, under cult-like, authoritarian leadership. According to Carreyrou, Elizabeth Holmes told her employees that she was creating a religion.

There is some redemption in Theranos’ ultimate failure, but it’s not the Invisible Hand of the free market that is redeemed, but the role of regulatory bodies (which forced Theranos to discontinue its dangerous tests), of investigative journalists like Carreyrou, of courageous whistleblowers like Tyler Shultz. How much longer could Theranos have survived under slightly different circumstances? How many more people would have been hurt?

The Verdict

Bad Blood does not examine the systemic questions the Theranos case raises, but it is one hell of a story, told by the man who broke it. Carreyrou’s book is based on countless interviews with former employees, partners, consultants, acquaintances; on documents revealed in lawsuits or by whistleblowers; on the scientific papers the company cited, and the opinions of experts.

It reads, for the most part, as if the author had been a fly on the wall during every dramatic turn of the Theranos saga. There is a little bit of repetition as we hear one particular story over and over again—new employee is excited by Holmes’ vision, new employee experiences insane levels of dysfunction, new employee quits or gets fired. There is also a bit more gossip than is necessary to tell the story (Did Elizabeth Holmes fake her deep voice? One former employee thinks so!).

Those are minor criticisms, however. As a story of a fall from grace, of self-delusion, sociopathic behavior and blind ambition, this book is about as good as it gets. Don’t turn here to find out what to learn from the Theranos story. But to begin asking the right questions, it’s a must-read. 4.5 of 5 stars, rounded up.