Book Cover

What if Theranos technology did turn out to be game-changing? It might spend the next decade regretting passing up on it. The fear of missing out was a powerful deterrent.

# Review

John Carreyou is the journalist at Wall Street Journal who broke the story on Theranos, a fraudulent startup that tested a dysfunctional blood testing device on the unknowing public. Carreyou covers the main characters in the story, focusing on Elizabeth Holmes, the founder of Theranos, and also the supporting cast, such as Holme’s COO/lover Sunny Balwani, her backers (which included venerable names in government and influential business people), as well as the whistleblowers who ultimately exposed the fraud.

Bad Blood explored how Theranos was able to get to its size (peak valuation at $10 billion), how the Theranos team was able to manipulate both investors and regulators, and the Silicon Valley startup culture which set the backdrop for this fraud.

Few people come out of this looking good; the biggest losers (other than the cofounder Holmes and her partner Balwani) are probably the influential people whose reputations are ruined for backing Theranos. These people include George Shultz and Henry Kissinger who had illustrious careers in the US government but are now associated with this scandal. Other people include the executives at Safeway and Walgreens, such Jay Rosan and Steve Burd, as well as financial backers, namely Larry Ellison from Oracle and Donald Lucas, a well-known venture capitalist. Even Holmes’ Stanford professor, Channing Robertson, did not escape unharmed. If one does more digging, however, there are many other influential people who backed Theranos which were left out of the book, including William Foege (former director of the CDC) and Riley Bechtel (former CEO of the Bechtel Group, one of the largest American construction companies). Of course, no crime story involving journalists would not be complete without superlawyer David Boies and his law firm.

The few people who came out looking good were those who demonstrated integrity, such as the whistleblowers, who endured harassment by Theranos lawyers and goons. The whistleblowers include Tyler Shultz, who defied his own grandfather (George Shultz) to blow the story. I also especially liked the cartoonishly petty character of Richard Fuisz, who once worked with the CIA to get back at the Baxter International CEO. Surprisingly, Rupert Murdoch was a hero in the story, as although he owned the news outlets, he did not cater to pressure to kill the story and upheld journalistic integrity despite losing over a hundred million dollars in his investment in Theranos.

Carreyou’s writing is very engaging and he paints a very realistic picture of what life was like at Theranos as well as the culture in Silicon Valley. The writing felt journalistic but was still very entertaining.

There were many takeaways for me:

• FOMO as an investor is a race to the bottom:The Fear of Missing Out is a major theme throughout the book. There’s the obvious FOMO, such as investors and business partners ignoring red flags and forgoing due diligence in order to be included on the Theranos deals. In recent times, there appears to be a trend of VCs forgoing due diligence almost as an incentive for prospective companies; this is a clear race to the bottom and private company investors should have better standards. There were many red flags, such as not having any interest from biotech VCs and not having people on the board familiar with blood testing.

• Individuals lending out their names and reputations need to be more accountable: Another more subtle form of FOMO is from the people who willingly lent their names and reputations to Theranos without really understanding everything that goes on behind the scenes. Although these people largely fall into the same demographic (old White men), I don’t buy into the ageist, racist, and sexist portrayal that shields these people from individual responsibility. These people should have done more to perform their duties of corporate governance (if on the board, and at least basic due diligence if not) and their failure is individual and not a function of what demographic they fall under. The fact that these people fall into these demographics is most likely that people from this demographic are in positions of power and influence.

• Leaders should be more attentive to and trusting of their reports: Holmes and Balwani are great examples of what not to do when running an organization. The lack of trust and transparency greatly stifled innovation, especially when aggressively siloing different functions within the company. Their bullying and intimidation of employees also created an extremely toxic work environment, causing high employee turnover, further obstructing any progress that may have been possible. Homes and Balwani also commit many other poor management practices, such as mixing business with personal life by pursuing a romantic relationship with each other without disclosing it, and partaking in cronyism and nepotism by hiring Holmes' brother and his frat buddies. The poor management is not limited to just Holmes and Balwani, however; the book also demonstrates poor leadership from Theranos’ partners, which range from marketing agencies, business partners, and even the US Army; in many of these organizations, leaders did not listen to advice from their reports and thus were duped by Theranos.

• Don’t be driven largely by insecurity and have integrity: This book offered some interesting commentary on Silicon Valley and overall startup culture. To move fast and break things is often necessary for radical innovation; in light of this, should this attitude have been taken by a blood testing startup? In some cases, getting it right is more important than getting it done fast. Furthermore, there is a fine line between ambition and fraud; Holmes and Balwani definitely crossed the line when they started lying to investors, partners, and regulators. It’s interesting to speculate on the reasoning behind why they did so. The book portrays Holmes as someone who, while lacking technical knowledge about blood testing, is highly driven and probably wanted to actually create the Theranos technology initially. The book then portrays her transformation into someone who aggrandizes herself through media appearances and luxuries such as private jets. The book portrays a deep insecurity of Holmes, such as her using a fake voice and her copying her idol Steve Jobs (people could tell which chapter of the Jobs biography she was on by her mannerisms). Holmes’ obsession with image and wealth, in the void of ethics and integrity, the book implies, is emblematic of Silicon Valley culture. To a certain extent I do see that point; founders are incentivized to capture the upside as quickly as possible while disregarding the consequences of failing. Unfortunately, this playbook shouldn’t have been used in developing healthcare products and, devoid of integrity, the Theranos management team took advantage of the playbook to trick people about their insubstantial claims instead of actually learning and building a technology.

# Conclusion

A deep dive into a fraudulent startup and the culture of Silicon Valley which permitted it.

# Overall rating: 8.1

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