Review: Bad Blood, by John Carreyrou

Russ Allbery eagle at eyrie.org
Thu May 30 20:45:11 PDT 2019


Bad Blood
by John Carreyrou

Publisher: Alfred A. Knopf
Copyright: 2018
ISBN:      1-5247-3166-8
Format:    Kindle
Pages:     302

Theranos was a Silicon Valley biotech startup founded by Elizabeth
Holmes in 2003. She was a sophomore chemical engineering major at
Stanford University when she dropped out to start the company.
Theranos's promised innovation was a way to perform blood tests quickly
and easily with considerably less blood than was used by normal testing
methods. Their centerpiece product was supposed to be a sleek, compact,
modern-looking diagnostic device that could use a finger-stick and a
small ampule of blood to run multiple automated tests and provide
near-immediate results.

Today, Holmes and former Theranos president Ramesh "Sunny" Balwani are
facing federal charges of wire fraud. Theranos, despite never producing
a working product, burned through $700 million of venture capital
funding. Most, possibly all, public demonstrations of their device were
faked. Most of their partnerships and contracts fell through. For the
rare ones where Theranos actually did testing, they either used
industry-standard equipment (not their own products) or sent the
samples to other labs.

John Carreyrou is the Wall Street Journal reporter who first broke the
story of Theranos's fraud in October of 2015. This book is an expansion
of his original reporting. It's also, in the last third or so, the
story of that reporting itself, including Theranos's aggressive
attempts to quash his story, via both politics and targeted harassment,
which were orchestrated by Theranos legal counsel and board member
David Boies. (If you had any respect for David Boies due to his
association with the Microsoft anti-trust case or Bush v. Gore, this
book, along with the similar tactics his firm appears to have used in
support of Harvey Weinstein, should relieve you of it. It's depressing,
if predictable, that he's not facing criminal charges alongside Holmes
and Balwani.)

Long-form investigative journalism about corporate malfeasance is
unfortunately a very niche genre and deserves to be celebrated whenever
it appears, but even putting that aside, Bad Blood is an excellent
book. Carreyrou provides a magnificent and detailed account of the
company's growth, internal politics, goals, and strangely unstoppable
momentum even while their engineering faced setback after setback. This
is a thorough, detailed, and careful treatment that draws boundaries
between what Carreyrou has sources for and what he has tried to
reconstruct. Because the story of the reporting itself is included, the
reader can also draw their own conclusions about Carreyrou's sources
and their credibility. And, of course, all the subsequent legal cases
against the company have helped him considerably by making many
internal documents part of court records.

Silicon Valley is littered with failed startups with too-ambitious
product ideas that were not practical. The unusual thing about Theranos
is that they managed to stay ahead of the money curve and the failure
to build a working prototype for surprisingly long, clawing their way
to a $10 billion valuation and biotech unicorn status on the basis of
little more than charisma, fakery, and a compelling story. It's
astonishing, and rather scary, just how many high-profile people like
Boies they managed to attract to a product that never worked and is
probably scientifically impossible as described in their marketing, and
just how much effort it took to get government agencies like the CMS
and FDA to finally close them down.

But, at the same time, I found Bad Blood oddly optimistic because, in
the end, the system worked. Not as well as it should have, and not as
fast as it should have: Theranos did test actual patients (badly), and
probably caused at least some medical harm. But while the venture
capital money poured in and Holmes charmed executives and negotiated
partnerships, other companies kept testing Theranos's actual results
and then quietly backing away. Theranos was forced to send samples to
outside testing companies to receive proper testing, and to set up a
lab using traditional equipment. And they were eventually shut down by
federal regulatory agencies, albeit only after Carreyrou's story broke.

As someone who works in Silicon Valley, I also found the employment
dynamics at Theranos fascinating. Holmes, and particularly Balwani when
he later joined, ran the company in silos, kept secrets between
divisions, and made it very hard for employees to understand what was
happening. But, despite that, the history of the company is full of
people joining, working there for a year or two, realizing that
something wasn't right, and quietly leaving. Theranos management
succeeded in keeping enough secrets that no one was able to blow the
whistle, but the engineers they tried to hire showed a lot of caution
and willingness to cut their losses and walk away. It's not surprising
that the company seemed to shift, in its later years, towards new
college grads or workers on restrictive immigration visas who had less
experience and confidence or would find it harder to switch companies.
There's a story here about the benefits of a tight job market and
employees who feel empowered to walk off a job. (I should be clear
that, while a common theme, this was not universal, and Theranos
arguably caused one employee suicide from the stress.)

But if engineers, business partners, a reporter, and eventually
regulatory agencies saw through Theranos's fraud, if murkily and
slowly, this is also a story of the people who did not. If you are
inclined to believe that the prominent conservative Republican figures
of the military and foreign policy establishment are wise and
thoughtful people, Bad Blood is going to be uncomfortable reading.
James Mattis, who served as Trump's Secretary of Defense, was a
Theranos booster and board member, and tried to pressure the Department
of Defense into using the company's completely untested and fraudulent
product for field-testing blood samples from soldiers. One of
Carreyrou's main sources was George Shultz's grandson, who repeatedly
tried to warn his grandfather of what was going on at Theranos while
the elder Republican statesman was on Theranos's board and recruiting
other board members from the Hoover Institute, including Henry
Kissinger. Apparently the film documentary version of Bad Blood is
somewhat kinder to Shultz, but the book is methodically brutal. He
comes across as a blithering idiot who repeatedly believed Holmes and
Theranos management over his grandson on the basis of his supposed
ability to read and evaluate people.

If you are reading this book, I do recommend that you search for video
of Elizabeth Holmes speaking. Carreyrou mentions her personal charisma,
but it's worth seeing first-hand, and makes some of Theranos's story
more believable. She has a way of projecting sincerity directly into
the camera that's quite remarkable and is hard to describe in writing,
and she tells a very good story about the benefits of easier and less
painful (and less needle-filled) blood testing. I have nothing but
contempt for people like Boies, Mattis, and Shultz who abdicated their
ethical responsibility as board members to check the details and
specifics regardless of personal impressions. In a just world with
proper legal regulation of corporate boards they would be facing
criminal charges along with Holmes. But I can see how Holmes convinced
the media and the public that the company was on to something huge.
It's very hard to believe that someone who touts a great advancement in
human welfare with winning sincerity may be simply lying. Con artists
have been exploiting this for all of human history.

I've lived in or near Palo Alto for 25 years and work in Silicon
Valley, which made some of the local details of Carreyrou's account
fascinating, such as the mention of the Old Pro bar as a site for
after-work social meetings. There were a handful of places where
Carreyrou got some details wrong, such as his excessive emphasis on the
required non-disclosure agreements for visitors to Theranos's office.
(For better or ill, this is completely routine for Silicon Valley
companies and regularly recommended by corporate counsel, not a sign of
abnormal paranoia around secrecy.) But the vast majority of the account
rang true, including the odd relationship between Stanford faculty and
startups, and between Stanford and the denizens of the Hoover
Institute.

Bad Blood is my favorite piece of long-form journalism since Bethany
McLean and Peter Elkin's The Smartest Guys in the Room about Enron, and
it is very much in the same mold. I've barely touched on all the
nuances and surprising characters in this saga. This is excellent,
informative, and fascinating work. I'm still thinking about what went
wrong and what went right, how we as a society can do better, and the
ways in which our regulatory and business system largely worked to stop
the worst of the damage, no thanks to people like David Boies and
George Shultz.

Highly recommended.

Rating: 9 out of 10

Reviewed: 2019-05-30

URL: https://www.eyrie.org/~eagle/reviews/books/1-5247-3166-8.html

-- 
Russ Allbery (eagle at eyrie.org)              <http://www.eyrie.org/~eagle/>


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