Knopf Publishing Group, 2018, 352 pages
The full inside story of the breathtaking rise and shocking collapse of Theranos, the multibillion-dollar biotech startup, by the prize-winning journalist who first broke the story and pursued it to the end, despite pressure from its charismatic CEO and threats by her lawyers.
In 2014, Theranos founder and CEO Elizabeth Holmes was widely seen as the female Steve Jobs: a brilliant Stanford dropout whose startup "unicorn" promised to revolutionize the medical industry with a machine that would make blood testing significantly faster and easier. Backed by investors such as Larry Ellison and Tim Draper, Theranos sold shares in a fundraising round that valued the company at more than $9 billion, putting Holmes' worth at an estimated $4.7 billion. There was just one problem: The technology didn't work.
A riveting story of the biggest corporate fraud since Enron, a tale of ambition and hubris set amid the bold promises of Silicon Valley.
I love these kinds of books, which are actually more scary than books about global warming or war or other existential threats, because they point out a singularly terrifying fact: the people at the top, the powers and plenipotentiaries of the world, the masters of the universe who run countries and banking systems and the entire industrial infrastructure.... don't know what the fuck they're doing. There are no adults in charge. They're all just schmucks like the rest of us, except a screw-up by us means paying a late fee or a dinged credit score, while they get the opportunity to trash the global economy. Oopsie.
The last book in this genre I read was No One Would Listen, by Harry Markopolos, about Bernie Madoff. John Carreyrou's expose of Theranos, the Silicon Valley startup (which, by the way, is still inexplicably in business) lays bare Silicon Valley and shows that the tech moguls are no smarter, no wiser, and no less corrupt than the titans of Wall Street, and just as prone to making billions of dollars evaporate because they were too greedy and egotistical to take a closer look. Oopsie.
Wherever there are ridiculously rich people throwing ridiculous amounts of money around, there will be con-men as grasping and sleazy and as the three-card monte players on the corner. People who party with Presidents think they're too smart to be scammed by grifters, and they're wrong of course, but that's not the only reason they get taken in. There's an old adage that you can't con an honest man. While that's not entirely true, it is true that most cons rely on the greed of the mark — if you know something shady is going on but you think you're the beneficiary, then it probably means you're not.
(Or as poker players say, if you look around and you don't know who the fish is, you're the fish. And as I can attest from playing poker, everyone thinks the other guy is the fish.)
This is Elizabeth Holmes, and she's evil.
John Carreyrou never calls her that, of course. His profile of Theranos and its iconic, mediagenic founder Elizabeth Holmes is all over the news right now, and this book, launched by his investigative series in the Wall Street Journal, is meticulously sourced and documented. It had to be, because he details just how aggressively Theranos tried to shut him down once they found out he was writing about them. They had him followed. They threatened and intimidated his sources, or anyone who they thought might talk to him, and these weren't idle threats. 600-dollar-an-hour lawyers working for their lawsuit-happy employer were quite capable of ruining lives, such that even the rich and powerful were intimidated. In at least one case, they were arguably instrumental in causing someone's suicide. They even went straight to Rupert Murdoch, owner of the Wall Street Journal and incidentally, a major investor in Theranos, to try to get him to shut the story down. Say what you want about Rupert Murdoch, to his credit he refused to intervene. (Some months later, he sold back his shares of Theranos for a dollar and a tax write-off. Rupert Murdoch can afford to lose $600 million on a bad investment. Oopsie.)
What was Theranos doing? What they claimed they were doing was creating a blood testing machine that, with one tiny little pinprick, would perform a battery of blood tests that currently requires multiple blood draws with much bigger needles and an entire laboratory to analyze. If you've ever had to have blood tests and watched the nurse filling up vial after vial while your arm feels like someone punched you, just for a simple test, not even something exotic, imagine if all it took was a finger prick and a drop or two of blood and a few minutes later a machine would spit out whatever any doctor could want to know about your blood. This would obviously be huge - a game-changer in the health industry. And Theranos sold Safeway and Walgreens, among others, on this technology. Both those chains spent hundreds of millions putting Theranos machines in their stores.
Problem is, the machines didn't work. And as Carreyrou details, they never did. Every trial, every test, was plagued by malfunctions, bad results, and failures, and at every turn, Theranos, directed by Elizabeth Holmes and her carefully cultivated coterie, covered up, fabricated, and dissembled, to everyone. To their investors, to their board members, to federal regulators, and to their own employees. Anyone at Theranos who questioned what was going on or who had ethical qualms was let go, often in brutal and intimidating fashion.
It went well beyond a startup trying to puff itself up and exaggerating results a bit — the profile Carreyrou draws of Elizabeth Holmes and her on-again, off-again much older boyfriend and company hatchet-man is of a couple of egomaniacs who cannot stand to be questioned or to hear anything they don't want to hear, and frankly, everything I have seen and read of Elizabeth Holmes makes me believe that she is some combination of autistic and sociopathic.
Even her trademark disturbingly deep voice, Carreyrou at one point reveals is probably an affectation.
(In the above Ted Talk, her story about her dead uncle was also bullshit. Surprise!)
So how did they get away with it? As Carreyrou explains, it was a combination of things. Holmes, like many charismatic sociopaths, was really, really good at finding people who'd fall under her sway and wrapping them around her little finger. She got George Schultz, Secretary of State under President Reagan and Secretary of the Treasury under Nixon, on her board of directors, and had him so convinced that apparently to this day, Schultz is estranged from his grandson, who was involved with Theranos but became a whistleblower and one of Carreyrou's prime sources of information. Now you might be wondering, what is a nonagenarian former bureaucrat doing on the board of directors of a Silicon Valley startup? What does an elder statesman know about health care or blood tests? That's a very good question!
Avoiding, firing, and threatening people who'd ask good questions like that is how Elizabeth Holmes became the first female billionaire in Silicon Valley. (Oh yes, once the truth started coming out and people she couldn't shut up finally did start asking questions, she lost no time in claiming misogyny was one of the motives for her detractors.)
So basically, a lot of people thought Elizabeth Holmes was going to make them huge amounts of money and they weren't willing to look too closely when things didn't add up. The people who did start looking bailed out, but not before Holmes had taken in an awful lot of investors. Following Carreyrou's expose and now this book, federal regulators are circling, and charges may eventually be filed.
At yet, Theranos is still in business. Go their website and they are still advertising their devices. Reading Theranos's "newsroom" link after reading this book is surreal.
Bad Blood is really an incredible but easy to listen to book, and as a cautionary tale about Silicon Valley, will probably be about as instructive as every other cautionary tale, until the next big oopsie.
I admit, I am looking forward to the movie, which has already cast Jennifer Lawrence as Elizabeth Holmes.
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