Book Review: Bad Blood: Secrets and Lies in a Silicon Valley Startup

Bad Blood is a gripping account of the rise and fall of Elizabeth Holmes, founder of Theranos, a company that promised to revolutionize laboratory testing through the use of nanotechnology. Holmes faces trial in federal court on fraud charges later this year (August 2020). Underlying the basic tale of an entrepreneur who overpromised and underdelivered is as complicated and instructional a morality tale as modern life has to offer, one of good intentions gone awry, of the temptations of fame and self-deceit and of how those with power can influence can not only seduce others to their viewpoint but use their considerable strength to crush anyone who might have the temerity to challenge their carefully constructed fantasy—noble as that fantasy might be. It is also, in a sense, a story of what it can mean to shoulder the cross of pain and injustice in pursuit of truth, set in the context of modern healthcare systems.

John Carreyrou, an investigative reporter for the Wall Street Journal, has garnered awards from a variety of quarters, including two Pulitzer Prizes and the German Marshall Fund’s Junior and Senior Prizes. His investigation of Medicare, including an in depth investigation of secretive data management and recordkeeping won him the Gerald Loeb Award and set the stage for his investigation of Theranos.

That expose, which eventually gave rise to Bad Blood, was published as a series of articles in 2015—nine years into Theranos’ corporate existence, at a time when it was valued at $9 billion, with over $900 million in investment. How a college dropout with almost no training in laboratory medicine managed to convince and retain such high-flying supporters such as Safeway and Walgreens, The Walton and Cox families, and Rupert Murdoch, and board members like George Schultz, Henry Kissinger, and James Mattis makes for a fascinating analysis of what happens when someone manages to convince influential people that what is too good to be true is still possible.

Holmes wanted to revolutionize laboratory testing with a technology that would use a single drop of blood for multiple, rapid tests. The concept was alluring: eliminating the need for phlebotomy, especially in the young and the debilitated, could indeed be a boon to patient care, as could rapid testing in a small desktop unit. The possibilities for preventative care and for engaging patients in the management of their illnesses were intoxicating.

Unfortunately, it was all based on a lie. No such technology existed or was likely to exist; yet prototypes (which housed traditional technology in a fancy, modern shell) were created, demonstrations arranged, investment plans were created, and investors courted with slick presentations fueled by Holmes’ dynamic personality and engaging good looks. High-profile supporters, including then Vice President Joe Biden, praised Holmes’ vision and audacity in creating a new paradigm for the delivery of medical care. Journalist after journalist produced stories about the revolution in testing that Theranos’ motto One drop changes everything predicted.

Few of them, however, bothered to adopt a healthy skepticism about the bold claims of Holmes and Theranos. In the pathology community, there were rumblings about the impossibility of the Theranos’ model, based on available technology, almost as soon as it was known but little of this made its way into the general wisdom about Theranos. At the peak of Theranos’ rise to prominence, both Holmes and her company were the subjects of endless positive profiles. Holmes was hailed as another Silicon Valley superstar, not unlike Steve Jobs, whose life she both admired and imitated, down to such details as her wardrobe of black turtlenecks and her management practices.

Within the Theranos corporation itself, staff involved with the nitty-gritty of research and development repeatedly tried to warn Holmes that her model would not work; much more development was needed to make it feasible to deliver even a few lab tests, let alone the hundreds she promised investors. Different tests required a range of reagents, conditions, and methods so wide that there was no way to produce multiple results from such a small amount of blood, let alone in a single pass through even the most sophisticated machine. Nanotechnology was a start but not the solution.

They were ignored, fired, and sometimes harassed into silence by threats of legal action. The Theranos corporate model, a “silo” arrangement in which related areas worked with absolutely no knowledge of anyone else’s work and a fanatic emphasis on secrecy and security, made it easier for Holmes to perpetuate the myth that she was always on the verge of a breakthrough, though her explanations about the reasons for delays varied according to time and circumstance.

Holmes’ enthusiasm and compelling personality papered over the problems her fraudulent data and fraudulent demonstrations created; one work-around for the sham instrument she showed investors involved having engineers create a “waiting” icon that allowed her claim malfunction of her instrument was the result of difficulties in wireless connection and Internet connectivity. The smoke-and-mirrors presentations seemed to support Holmes’ potentially lucrative claims; corporate investors lined up.

If the technology really were revolutionary, failing to be in on the ground flood could be a devastating business decision in an especially competitive environment. Walgreens and Safeway invested millions of dollars to produce patient centers in their locations, based on what some commentators have dubbed “FOMO-fear of missing out.” That corporations are both able and willing to invest such vast sums of money in an ultimately worthless business enterprise that compromised the care of patients involved in the pilot programs, sometimes significantly, says something about problems in how corporations develop and deliver healthcare services.

Theranos continued this high-level, dazzling fraud for almost fifteen years. In the wake of its ultimate failure were left millions in lost investment and untold damage to human lives.

Employment conditions at Theranos were abusive: long hours, a culture of fear and reprisal (including monitoring e-mails and hiring private investigators to follow suspect employees), and an overall sense of paranoia. Employees who dared question the company line were harassed, and their lives and business reputations attacked. Cambridge Scientist Ian Gibbons, who was head scientist at Theranos, committed suicide, reportedly because of fears that he was about to be fired. When the pilot projects were actually launched in patient care centers, physicians or patients who left bad reviews were harassed and threatened.

It’s this that makes Carreyrou’s book so compelling and so relevant to anyone, whether in business or heath care of not. He manages to weave together, in a hard-to-put-down narrative, the stories of very real people who were caught up the Theranos’ net, and the deceptions, self and otherwise, and derelictions that led to a disaster that has been compared to Enron in its scale. The rise and fall of Theranos continues to have far reaching effects on corporations and on ordinary people, whose capacity for recovery is far less than a corporation that can write off a bad investment and move on.

Over and over, those in a position to raise doubts and change the course of Theranos failed in their basic responsibilities: the Board failed to question the extravagant claims Holmes made or engage outside experts to review either the technology or revenue projections. They seemed to have accepted, without question, the various and changing explanations for the delays in delivering a working instrument. Perhaps even more surprising, the Board was composed of luminaries with almost no expertise in laboratory medicine and health care. I found myself wondering whether the insurer responsible for errors and omissions insurance caught that and raised a question; it’s one mystery left unsolved.

Those responsible for internal corporate compliance accepted Holmes’ claim that their testing model was outside the usual regulatory processes, thus circumventing a process that might have uncovered the fraud much earlier. Government officials failed to intervene on their own until late in the game. There were no peer-reviewed studies to support the claims that Holmes was making and no one—Board, journalists, no one—seemed to care. Employees cooperated in creating false-front labs and false-front instruments to fool inspectors and investors. When challenged on any of this, Holmes would go on the offensive, within the company and outside, and Bad Blood paints a picture of a woman ruthless when crossed.

One tiny event from an unlikely source ultimately set in motion the events that would result in the demise of Theranos: a pathologist described the technology on his blog, concluding with the sentiment “I’ll believe it when I see it.” As Carreyrou exposed the fraud that was Theranos, Holmes countered with publicity of her own and assumed the mantle of persecuted innovator bravely warring against entrenched powers, who did not want such liberating technology made available to the masses. She even pressured Rupert Murdoch to kill the story; to his credit, Murdoch, a major investor, refused.

As a result of the Wall Street Journal expose, Theranos was sued out of existence, and Holmes faces twenty years in prison with millions in fines at stake. It’s the scale of this disaster and the audacity of the deceit that make this story so compelling. Theranos was a dubious prospect from the beginning, but all along the way, people were more enticed by a well-told story and attractive CEO than by the warning signs of an unsustainable project. Bad Blood is a cautionary tale of how secrecy and hubris make it easy for the powerful to exploit a system, whether it is regulation of medical devices, lab testing, or the settling of differences in court.

This latter particularly impressed me as I read how Theranos used lawsuits to silence legitimate questions and concerns about the feasibly of the product Holmes was marketing. The imbalance of power and resources was staggering; even a very-well-heeled person (and there were some who raised alarms) could not withstand the legal pressure a company with $900 million at its disposal could bring to bear. The level of fraud involved underscores that, in pursuit of a lawsuit, the actual merits of the case are often secondary to the client’s wishes. From the story told by Carreyrou, it appears that Elizabeth Holmes wished to silence naysayers and destroy them if need be. She found ample assistance in our legal system.

It is unlikely that there will be significant changes in much of anything despite the magnitude of this fraud. Start-up companies will remain risky places to work, with entrepreneurs depending on selling an unrealized idea to investors who often know little about the mechanics of the product, but are willing to assume big risks in pursuit of big profits. Boards will remain as useful to corporations for the profile they bring almost as much as for the oversight they provide. Regulatory agencies will always be overworked and subject to interference by those above them, and the regulated will try to skirt the system. Journalists will always pursue a good story that sells papers or magazines, and the bottom line will always be of major importance to all the players, regardless of their roles and relationships.

It is tempting to think of this as a story of villains and of those there are many. But Bad Blood is also a story of heroes, small and large. The uncomfortable questions reading it eventually raised in me, and perhaps the important ones for those in health care, go to the core of what it means to be a moral person working in an environment that is so often hostile to principled actions:

• Am I grounded enough to recognize a problem when it is right in front of me, despite hype and pressure?

• Do I have enough awareness to know how what I am doing is going to affect the lives of people I never met and do I care?

• Do I have the courage to risk my own comfort and security in order to do something about it? In short—will I be like lone blogger who points out that the Empress has no clothes or the engineer who created that deceptive “waiting” icon?

• Would I pursue the story like Carreyrou despite threats of lawsuits and ruination?

• Would I give the go-ahead to a story that might derail a company in which I had millions invested or on whose board I served?

The list goes on. We work in a system of health care too often complicated by greed, dishonesty, and disrespect for others. It is one that too often makes the patient’s interest secondary to profit, convenience, and agenda. Bad Blood paints both a frightening picture of what happens when that goes unchecked, yet it reassures us that the conviction and integrity of even a few of the folks along the way can make all the difference in the world.