Bad Blood

by John Carreyrou

Non-Fiction
Startups

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Book in 1 paragraph

A history of Theranos and Elizabeth Holmes’ rise to becoming media darling (first self made Female Billionaire CEO, with Theranos at a $9B valuation), to the unveiling of massive fraud at Theranos, and the fact that its blood testing technologies simply didn’t work...


Key Ideas

  • The “Win at all costs” and “Fake it till you make it” Silicon Valley culture (massive rounds of funding to support product development with no profitability), may work out for some tech companies. But this iterative model isn’t suited to Medicine where people’s lives are on the line, and the bar for 1st version of product is very high
  • No doubt Elizabeth Holmes was a visionary. But she was also unethical, and was selling a product that didn’t work
  • Theranos’ downfall came from a non working product; a culture of paranoia, fear and secrecy; overspend on marketing vs. product; unethical / sociopath founders
  • Theranos may still be operating, if not for the courage and whistle blowing of a few Theranos employees + John Carreyou's dogged reporting that triggered regulator intervention. These courageous individuals braved against the constant harassment and threats of lawsuits by Theranos (a company with almost endless financial coffers, and little ethics)



What went wrong

  • Over promising On smoke and mirrors, under delivering on a product that was to complex - combining cutting edge innovations with in fluid dynamics, miniaturization, mechanical engineering - a few years wasn't enough even for a prototype. Let alone field use
  • In a field that is (rightly) well regulated and involve human lives. Startup ethos to fail fast, speedy iterations don't work well
  • "Holmes herself pointed out at the height of her fame: Doctors base 70% of their decision on lab results. They reply on lab equipment to work as advertised. Otherwise patient health is jeopardized."
  • Holmes & Suni’s obsession with secrecy fostered a culture of fear and mistrust in the company
  • Headed by a founder visionary who was a brilliant seller, with no respect or understanding for day to day running of the company or the actual product domain (experts who worked for her mentioned her limited understanding of Medical science and Blood Testing)
  • She was young and impressionable and negatively influenced by a man who lacked the intellect, management experience, or ethics to run a company in the medical Tech field - Suni
  • Silicon valley culture - too much money pulled into an idea with no concrete product or feasibility
  • Too much money spent on marketing. Not enough on product feasibility - eg $6m yearly retainer for TBWA/Chiat/Day - The ad agency that
  • Unreasonable expectation of form over factor - eg blood cartridges had to be a certain size. Even know the devices would not be used in people's homes
  • Too much focus put on Holmes personal fame, courting big investor over building a good product. It should always be about product, product, product
  • The Theranos Board served no purpose. They had no voting rights (Holmes had 90%+), which means no oversight on the CEO
  • Lack of consistent business strategy & what customers wanted - product strategy changed monthly as Holmes & Suni focused on pleased investors & media
  • We tell ourselves stories we want to hear. Investors on Sandhill road told themselves ridiculous: "she [Holmes] didn't just inherit entrepreneurship genes, but also  medical ones”. The Media wanted a “first female self-made Billionaire CEO”. The Public and Walgreens wanted a device that could do 200+ blood tests on a single drop of blood
  • FOMO (Fear of Missing Out) is very real. "his [Suni] arrogance was infuriating, but Safeway still refused to walk away, what if the Theranos technology really was game changing, it would spend the next decade referring missing out on it. The fear of missing out was a powerful deterrent"



Elizabeth Holmes Traits

Book was as much a study of Holmes history and motivations as the story of theranos

  • driven
  • petty
  • competitive
  • pathological lier (false sense of blind belief with no root in reality)
  • smart, but unethical
  • Charming
  • Megalomaniac
  • Obsessed with Apple culture and wanted emulate it - getting the same ad agency, same photographer, wearing Steve Jobs' black turtle neck every day
  • Visionary



Notes

  • Zero transparency from Theranos. Always quoting "trade secret"
  • Holmes was unethical, lacked integrity at her core. She was governed by paranoia and greed - eg using under handed tactics to limit people's stock options, or building dossier on former employees for leverage & blackmail.
  • Holmes obsession for secrecy alienated most employees. It hampered productivity, silo'ed teams, hurt moral and built mistrust. For example by not letting employees know that early Theranos test with terminal cancer patient is demonstrate data collection and analysis to FISIR and not to influence patient treatment. Employees would've felt more relaxed
  • Demonstrating smoke and mirrors for investors is crossing the line - "was a sham”. 3 years in. $32m raised. High profile leadership and management hired. But it was a sham from the start. "Fake it till you make it was strong”. Anyone that discovered the truth was fired.





Quotes


"... watching her confidently walk the audience through the slick slide show helped crystallize for me [Carreyrou] how she'd gotten this far. She was an amazing saleswoman. She never once stumbled or lost her train of thought. She wielded both engineering and laboratory lingo effortlessly and she showed heartfelt emotion when spoke about sparing babies from NYCU from blood transfusions.


“Like her idol Steve Jobs, she emitted a reality distortion field that forced people to momentarily suspend disbelief.”


“The way Sunny dressed was also meant to telegraph affluence, though not necessarily taste. He wore white designer shirts with puffy sleeves, acid-washed jeans, and blue Gucci loafers. His shirts’ top three buttons were always undone, causing his chest hair to spill out and revealing a thin gold chain around his neck. A pungent scent of cologne emanated from him at all times. Combined with the flashy cars,”


“Sunny, in fact, had the master-servant mentality common among an older generation of Indian businessmen. Employees were his minions. He expected them to be at his disposal at all hours of the day or night and on weekends.  He checked the security logs every morning to see when they badged in and out. Every evening around 7:30, he made a fly by of the engineering department to make sure people were still at their desks working..."


"As Ren did the [Edison] demonstration. Tyler and Iriner weren't sure what to think. The device seem to consist of a pipet fastened to a robotic arm that moved back and forth on a gantry. Both had envisioned a sophisticated micro fluidity system . But this seemed like something a middle schooler could build in his garage"


“the company was just a vehicle for Elizabeth and Sunny’s romance and that none of the work they did really mattered. Ian nodded. “It’s a folie à deux,” he said. Tony didn’t know any French, so he left to go look up the expression in the dictionary. The definition he found struck him as apt: “The presence of the same or similar delusional ideas in two persons closely associated with one another.”


"Elizabeth wanted the website and all marketing material to feature bold affirmative statements. One was to that Theranos could run 800 tests on a drop of blood. Another was that it's technology was more accurate than transitional lab testing. She also wanted to say Theranos test results were ready in 30 minutes. Approved by FDA and endorsed by…"


"A photo of the event showed Holmes holding a microphone,  speaking to the assembled guests, with Chelsea Clinton at her side. With the election 8 months away, and Clinton considered the front runner. It was a reminder how politically connected Holmes was. Enough to make her regulatory problems go away? Anything seemed possible!”


"Chelsey was worried about Elizabeth. In her relentless drive to be a successful startup founder. She had built a bubble around herself and the only person she was letting inside was a terrible influence. How could her friend not see that?"


“in comparisons runs using the same blood samples. The [Theranos] Edison produced results that differed from those by conventional machines by as much as 146%. And just as Tyler Schultz had contended the devices couldn't reproduce their own results"