Bad Blood – An Intriguing and Appalling Account of Massive Corporate Fraud

“By positioning Theranos as a tech company in the heart of the Valley, Holmes channeled this fake-it-until-you-make-it culture, and she went to extreme lengths to hide the fakery.”

Blood analysis is one of the basic procedures, ordered by doctors, to check our health or to find any signs of disease and abnormalities. Some tests are done with a drop of blood, but some elaborate evaluations require drawing blood through syringes from people’s veins. It might be a painful and fearful procedure for some. A Silicon Valley startup called Theranos -- combining the words ‘therapy’ and ‘diagnostics’ – promised a compact machine that would make blood testing quicker, less painful, and faster. People could pinprick a drop of blood from their finger and do their own blood tests in the comfort of their home, and the results will be wirelessly sent to doctors for further diagnosis and interpretation. Elizabeth Holmes, who dropped out of Stanford at the age of 19 (in 2003), pitched that this idea would revolutionize health industry, bringing down the cost and distress associated to a basic blood test (cited as the ‘iPod of healthcare’).

Backed by a list of highly esteemed men, which includes venture capitalists Tim Draper and Donald Lucas, respected professor Channing Robertson, entrepreneur Larry Ellison (co-founder of Oracle), Thernaos rapidly raised its funding, putting the company value at $9 bn. The board members also included some popular figures such as Henry Kissinger and George Schultz, the former Secretary of State. The giant drugstore chains such as Walgreens and Safeway believed in Theranos’ ability to revolutionize the industry and became the company’s retail partners. Elizabeth Holmes, touted as the next Steve Jobs and Bill Gates, cozied up with the Obama administration and she even became Obama's Presidential Ambassador for Entrepreneurship (Holmes was also friends with Hilary Clinton's daughter, Chelsea). But what lead to Holmes’ downfall, who is now awaiting trial in a federal criminal indictment case for fraud? The reason is simple: the technology – Holmes’ brainchild – never worked.

John Carreyrou, the Pulitzer-Prize winning journalist of Wall Street Journal, tells the sumptuously detailed story of Theranos' unbelievable rise and shocking collapse in his book Bad Blood: Secrets and Lies in a Silicon Valley Startup (published May 2018). For more than a decade, Holmes had kept hidden from her investors that the technology  for blood analysis didn’t work the way she wanted to work. Moreover, she and her company president, Sunny Balwani fostered an atmosphere of secrecy and fear in the Theranos premises, firing and intimidating employees (also surveilling them) who dared to raise questions about the blood testing devices’ potentiality.

 

Elizabeth Holmes

“Hyping your product to get funding while concealing your true progress and hoping that reality will eventually catch up to the hype continues to be tolerated in the tech industry,” writes Carreyrou and later mentions that the fatal flaw of Theranos is seeing itself as just a tech company. Although, the company was engaged in designing a device that would evaluate a drop of blood and quickly send the relevant data wirelessly to the patient’s doctor, the incorrect results would put people’s lives at stake unlike a defective smart phone. The defect in Theranos' device will have real consequences for a person’s safety. Nevertheless, Holmes continued to dupe regulators, scientists, investors, and even introduced her faulty devices into the market. An apt analogy in the book goes like this: “It was as if Boeing built one plane and, without doing a single flight test, told airline passengers, “Hop aboard.””

John Carreyrou’s Bad Blood starts with the background on Holmes: her charismatic personality, the passion and creativity that impressed her mentors at Stanford and later her high-profile investors. Holmes didn’t have much of a scientific background apart from an internship in a medical testing lab. Before zeroing-in on the idea of designing a compact and easy-to-use blood-testing device, Holmes thought and patented ‘TheraPatch’. It’s a sort of band-aid that would painlessly draw blood with the help of tiny needles, test the sample, and eventually propose an appropriate drug dosage. The idea did fascinate many investors, allowing her to raise few million dollars, but by 2004 she abandoned the idea since it seemed so unfeasible.

John Carreyrou provides ample details about Holmes’ obsession with all-things-Steve Jobs, and her ability to instantly charm people and recruit them for her cause (“Like her idol Steve Jobs, she emitted a reality distortion field that forced people to momentarily suspend disbelief”, the author writes). Carreyrou also introduces other principal players in the first half of the book, particularly Sunny Balwani, a dot-com millionaire with zero science or health care experience. Theranos’ COO, Mr. Balwani was Holmes’ unofficial enforcer, tasked with menacing the employees and keeping dissenters in-line. Balwani, nearly 20 years older than Holmes, was in a romantic relationship with her (which was mostly kept under wraps from investors and board members). The second half of the book chronicles Theranos’ slow unraveling. Holmes briefly enjoyed media spotlight, her profile decorating magazine covers and providing ‘inspirational’ speeches. But the ethical quagmire Theranos increasingly got itself into raised concerns among the company’s employees (some fired, some were intimidated to leave) which led to a story tip off that brought in the journalist John Carreyrou.

Bad Blood remains as a testament to the power of true investigative journalism. Carreyrou’s reporting is based on extensive research. He was strongly backed by his editors despite facing numerous threats of lawsuits from the bullying and aggressive Theranos’ lawyers. Most importantly, Carreyrou’s detailed expose is written like an espionage thriller and it is unputdownable. Eventually, Bad Blood not only offers a vivid portrait of Theranos’ rise and fall, but also questions the ‘big picture’ peddling of Silicon Valley culture. Furthermore, Carreyrou indicts the charitable media coverage which failed to understand the basic difference between a startup in tech industry and a startup in life sciences.

Elizabeth Holmes and Theranos has already been the subject of a podcast titled The Drop Out (Hulu has ordered a limited series based on this podcast) and an Alex Gibney documentary – The Inventor: Out for Blood in Silicon Valley. A feature-film project involving director Adam McKay (The Big Short, Vice) and actress Jennifer Lawrence is already under development and will be released in 2020.