Bad Blood - John Carreyrou

This book is awesome! An ex-colleague recommended it, and I am so grateful. It's the story of Theranos and Elizabeth Holmes, and whatever you think about regular Silicon Valley, this is a tale from the goatee'd SV from a mirror universe.

Theranos were supposed be creating innovative blood tests, but the technology wasn't there, they hid the fact, and kept taking money and upping the company valuation until Holmes was a paper billionaire.

The story is excellent. From the start there are lots of horrible and/or foolish people, doing horrible and/or foolish things, and the whole thing looks really scammy. Later on there are reasonable people trapped in an insane machine, actually trying to develop the product, and you get the impression there was some attempt to deliver, but the book remains jaw-dropping throughout.

Perhaps the biggest question around Theranos is how far Silicon Valley's "fake it 'til you make it" attitude can go. Vapourware is a well-known thing, but at some level the vision needs to be practical and deliverable, and the leadership of Theranos had no interest in connecting to reality.

The red flags were beyond numerous, starting at the top with zero governance from the board. No-one on the board knew anything about blood science (SV's disdain for prior expertise is not always healthy!), and at no point did anyone actually hold Holmes to account - not that they could do much due to her control of the company. However, the figleaf of accountability was made impressive through high-profile figures like Henry Kissinger and Jim Mattis, who didn't ask tough questions and got shares for unwittingly putting their reputations on the line. Turns out a board should be made out of people who care and are active.

How did Holmes get these names on the board? Privilege and networking. This is shown in big and small ways throughout. For example it's mentioned in passing that when her brother was expelled from one school (hmmm), a family friend helped smooth his path into another, and they got their machines approved in Mexico because they knew someone who knew someone who fast-tracked the whole thing. The book is packed with stuff like this.

With those initial contacts, Holmes bootstrapped a bigger network. If these Great People are on-board, other people come in (no questions asked, as it's clearly legit!), ratcheting up the respectability until you find Rupert Murdoch investing many, many millions.

It's clear that Holmes was very charismatic, with a weirdly deep voice. She was a big fan of Steve Jobs, but whereas Steve's reality distortion field was able to inspire people to great things, Elizabeth used hers to just deny reality. That reality was very weird - she was incredibly young when she started the company, and the initial goal was a skin patch that would monitor and deliver drugs as needed. Once that was deemed infeasible, they moved to the idea of a tiny analysis device using just a few drops of blood from your finger, with microfluidics. That then turned into rather more conventional equipment, cobbled together.

At each stage, the "wouldn't it be nice if" moved a little closer to what's achievable, but no-one really questioned the gap between what cool technology it would be nice to have, and what was practical. After all, the existing companies in this space knew the limitations, yet Theranos investors seemed to think they could be wished away.

In short, Elizabeth Holmes was playing at running a Silicon Valley company by having an idea of a product it would be good to have, but nothing real behind it, nothing to deliver. The long, slow development cycle of medical equipment was well-known, but ignored.

Holmes's charisma made for a cult-like company, with an utterly atrocious corporate culture. You were either with them or against them. The slightest doubt converted friends to enemies, who were mercilessly burnt. Employee turnover was huge. The inability to doubt anything kept reality far away. The company was super-heavy on secrecy (another poor Steve Jobs impression?), keeping information silo'd and hiding the reality from employees. The positive spin on progress quickly descended into lies that became core to the corporate culture.

Despite all this secrecy, a family friend heard about the company, looked up their (publicly-available) patents, and created a bunch of landmine patents extending Theranos ideas in a way that made it hard for Theranos not to infringe, and then tried to take them for millions. Such nice people! Whatever Theranos's ideas of secrecy were, they were ill-founded. Indeed, there's no evidence that the competition that they thought were jealously spying on them actually cared.

Oh, and those patents? They were developed by an actual expert scientist in the area, but of course Holmes had to have her name on the patents despite not actually contributing to them.

Unsurprisingly, Holmes couldn't cook up this level of horror on her own. Sunny Balwani was president, COO and secret (obviously) boyfriend. He was horribly abusive to staff and seems like the poster child for bad management. His qualifications? Lucking out and minting it in the dot-com boom, and mistaking that for talent. This book will not give you the impression that SV is a just place.

So why would anyone partner with a company that kept missing its targets and only every delivered vapourware? The big names on the board and charismatic Holmes channeling Jobs seem to be enough to get them interested, but why did they not run away when no positive hard data or results were available over time? There were doubters at these companies, but they lost out largely due to FOMO. The fear that this stuff was real and if they walked away their competitors would use it to bury them was palpable, and it was used to discourage them from asking questions.

The ways in which Theranos tried to Silicon-Valley-ise blood science went beyond just trying to reinvent the field with no attention to history; they also tried the usual regulatory shenanigans. Moves that seemed distasteful in Uber were going to be downright dangerous in healthcare, and in the end their "if you're too sharp, you'll cut yourself" approach was what led to whistleblowing and regulatory intervention that shut them down. It's rare to find a book on innovation where the bureaucrats come across as the heroes!

The tail end of the book is where Carreyrou comes in, breaking the story in the Wall Street Journal. Holmes and co. try to shut the story down, claiming trade secrets are being revealed. By this point, it's difficult to tell if they're deliberately trying to keep a cap on their fraud, or if they're so deluded through their constant lies to themselves and others that they believe they're operating reasonably and people really are out to steal secrets!

A surprise to me was that Holmes asked Murdoch, who had invested huge amounts in Theranos, to kill the WSJ story - and he didn't! It's an utterly shocking story when Rupert Murdoch isn't the villain.

In the end, I can't help but feel that Theranos was before its time. Were this to happen now, I'm sure it could raise money through cryptocurrency coin offerings, or be supported as a meme stock. Rather than fleecing the ultra-rich, they could help bring fraud to the masses.

Anyway, I've gone on at length about Theranos, but what about the book? As I said, it's excellent. It's a fantastic story, and Carreyrou spins it masterfully, as someone who was deeply involved in the latter stages, and with a wealth of primary material at his disposal. I've really only skimmed the surface here, and I highly recommend you get it, read it, and let your jaw hit the floor.

Posted 2021-12-24.