Bad Blood: Secrets and Lies in a Silicon Valley Startup by John Carreyrou
Alfred A. Knopf, 2018
Hardcover, 352 pagesBad Blood, the true story of the rise and collapse of a medical device start-up in Silicon Valley that blew through $900 million dollars on a product that never worked, was on many “Best Of” book lists for 2018, and for good reason. Told by John Carreyrou, The Wall Street Journal investigative reporter who broke the story of the company’s fraud, has the makings of a great fictional thriller…except it really happened. To quote Bill Gates, “This book has everything: elaborate scams, corporate intrigue, magazine cover stories, ruined family relationships and the demise of a company once valued at nearly $10 billion.” And it has more, including high-profile investors used to give the company legitimacy, dysfunctional people running a dysfunctional company, and scorched-earth tactics to block bad press.
The first two-thirds of the book covers the story of the meteoric growth of the start-up company Theranos and its young and charismatic CEO Elizabeth Holmes. Modeling herself after Steve Jobs, Homes sold a dream of quick, accurate blood tests from only a few drops of blood from the fingertip. She wrapped the dream in moving anecdotes, tapping into the desire to significantly improve health care.

There were many problems with her dream, though. Theranos didn’t have any breakthrough technology. They were simply trying to miniaturize existing technology, significantly compromising analyses and results. Skirting normal clinical rigor, Holmes tried to bring the product (such as it existed) to market without proper regulatory oversight. Bringing in the shady and arrogant Sunny Balwani as president and COO of the company was a guarantee for disaster. Bullying anyone inside or outside the company that didn’t believe in the smoke and mirrors provided by the company couldn’t help, either.

The biggest problem of all was the dysfunctional corporate culture in which it [the product] was being developed. Elizabeth and Sunny regarded anyone who raised a concern or an objection as a cynic and a naysayer. Employees who persisted in doing so were usually marginalized or fired, while sycophants were promoted. (164)

Despite bringing in impressive talent, the company had to engage in deceptive practices at every step in order to give the appearance of progress on their blood-test machines. It was a case of everyone wanting to believe in something so much they became blind to what was actually going on. “Elizabeth told the gathered employees that she was building a religion. If there were any among them who didn’t believe, they should leave. Sunny put it more bluntly: anyone not prepared to show complete devotion and unmitigated loyalty to the company should ‘get the fuck out.'” (173) Having overpromised on results, Holmes had to cut corners and deceive when it was time to deliver.

The last third of the book details how the cracks in the Theranos story eventually brought in Carreyrou and his arduous task in bringing the deceptions to light. It took enormous courage displayed by a handful of people, at great personal and monetary cost, to reveal the danger of the company’s product. If the story was fiction, it would almost read as a clichéd take on personal greed, revenge, evil intent, etc. from a thriller. What provides the force felt when reading the book, though, is knowing this actually happened. Regardless of any good intentions when starting the company, it quickly devolved into a nightmarish tale for many people.

Carreyrou does a good job of describing the problems faced in trying to provide tests from a few drops of blood that Theranos touted their device could provide. No wonder many in the industry doubted the veracity of their claims, but obviously it wasn’t enough to deter investors, who were kept as marginalized in the overall picture as were the company’s employees. Many notable people who should have known better end up looking worse for their part in corporate misgovernance.

Some of my experiences add to my enthusiasm for the book. One factor is that I work in Silicon Valley, so startup anecdotes are commonplace. It’s amazing how small the valley can be at times. Another factor is that I worked in the medical device field for over a decade and experienced a concern for clinical results and regulatory compliance that was blithely ignored by Holmes and Theranos management. Also, having worked for startups in several phases of development, I understand that credulity provides a huge factor in funding and other aspects of these companies, but at some point reality has to be faced. Those people that decided to blow the whistle on a fraud of this magnitude despite the firepower Theranos could line up against them have my respect. It’s difficult enough at times to leave employment at a company, whether it crosses ethical lines (sometimes blurred, sometimes clear) or not, but to knowingly set yourself up as a target for people that have the power and the motive to destroy you deserves special credit. Very highly recommended.

Update (2019 May 11):I just watched The Inventor: Out for Blood in Silicon Valley and wanted to recommend it, too. To me, the movie complements the book well, with the added benefit of seeing and hearing the people involved in the company and stories. The book goes into more detail on the science behind blood analysis and how tests are done, which I think is an important part of understanding the overall story of Theranos. Carreyou’s book also has more depth on how his story finally made it into print, highlighting additional people key in revealing the fraud. Even with those caveats, The Inventor: Out for Blood in Silicon Valley is a very good introduction to this remarkable story.

Link:
Author Q&A at the publisher’s site

Q: What does the Theranos saga say about Silicon Valley?
A: It tells us that, while there’s real innovation taking place in Silicon Valley, there’s also a huge amount of hubris and pretending going on there. The staggering amount of money that has poured into the Valley’s startup ecosystem over the past decade has given rise to arrogance, excess and outright fraud.
Moreover, these companies are staying private much longer than they used to, which makes it harder to pierce their veils of secrecy and expose their problems. As a capitalistic society, we tend to lionize tech entrepreneurs. This tale is a reminder that the reality is often more complicated and less glossy than the myths we’re fed by Silicon Valley’s PR machine.