Blood Con

Now the outlines of the story are clearer, and we know that the Theranos saga didn’t follow the typical Silicon Valley story arc. Company executives didn’t just mislead the public about its technology; they lied, repeatedly and brazenly. They didn’t just fail to inform investors and business partners that the company’s revolutionary idea—testing for disease by a quick and simple pinprick blood test—didn’t work; they actively defrauded them.

If those sound like harsh judgments, they are the only possible conclusions that can be drawn from an engaging new book by John Carreyrou, the Wall Street Journal investigative reporter who first identified Theranos’s deceit in 2015. Since then, other media, federal regulators, and the Justice Department have largely validated Carreyrou’s reporting. In Bad Blood: Secrets and Lies in a Silicon Valley Startup, Carreyrou stays a step ahead, where he’s always been on this story. He quietly compiles detail after damning detail into a fascinating narrative that can appeal even to readers with no background in medicine, technology, or business. The result is a thorough and devastating piece of reporting that deserves a place alongside the masterworks of the inside-the-boardroom business genre. Theranos wasn’t an iconic company, like the RJR Nabisco depicted in Barbarians at the Gate. Its implosion didn’t have the wide-ranging effects of the Enron scandal chronicled in The Smartest Guys in the Room. Bad Blood isn’t remarkable because the downfall it describes is that of a large and well-known company, but rather because the tale it tells is really a sociological exposition that implicates much of our culture, from media adulation to the cult of celebrity to the triumph of hope over hard work.

At its core, Bad Blood is the story of Elizabeth Holmes, Theranos’s young founder with the fresh face, huge blue eyes, and affected deep voice. She did not speak to Carreyrou for the book, so her portrayal falls to family friends and former employees. As a Stanford undergraduate, Holmes had the idea of testing blood with a small device that gave quick results. It would dramatically lower lab costs and give doctors more regular information, improving medical care. As an idea, it was novel, even revolutionary. As a matter of science and engineering, it proved utterly unworkable. Yet Holmes pressed on. She declared successes and raked in cash from investors as the device repeatedly failed internal tests. She ignored warnings from employees and was quick to fire workers for perceived disloyalty. At one point, her company was valued at $9 billion, making the then-31-year-old, according to Forbes, “the youngest woman to become a self-made billionaire.”

Of course, Silicon Valley is filled with dreamers who break the rules, sometimes with success—nobody more so than Apple cofounder Steve Jobs. He famously pushed engineers to meet his demanding visions of how consumer electronics should work and look. Holmes clearly drew inspiration from Jobs, going so far as to wear black turtlenecks and black slacks—Jobs’s signature outfit. At one point, Carreyrou writes, Theranos’s engineering department “began to notice that Elizabeth was borrowing behaviors and management techniques described in Walter Isaacson’s biography of the late Apple founder. They were all reading the book too and could pinpoint which chapter she was on based on which period of Jobs’s career she was impersonating.”

As Isaacson’s biography points out, though, Jobs was not much of an inventor. His strength was in taking existing technology, like a clunky MP3 player, and making it sleek and cool, like an iPod. Holmes, just a few years into her first corporate job, was trying to create technology that did not exist. It’s one thing to push engineers to slim an iPhone by a whisker and design rounded edges and persuade people they can’t live without it. That makes you a visionary. But hyping a new medical device that doesn’t work? That makes you a con artist—and potentially a danger to patients’ health.

Carreyrou strives for a neutral tone, and his understated, journalistic writing style leaves the story open to many interpretations. You might delight in the schadenfreude of a kale-smoothie-drinking friend of the Clintons being exposed as a vain and callous fraud. You might find that her dysfunctional management approach—which includes pledges of loyalty, little sleep, high staff turnover, hypersensitivity to criticism, installing relatives in key positions—rings oddly familiar nowadays. Do you think the news media puff up figures that they consider sympathetic? That the business press fawns too much over its subjects? Do you believe government agencies are inept and can be easily outsmarted by the companies they’re supposed to regulate? Or that older men suspend their critical faculties in the presence of charismatic young women? Those are all fair conclusions to draw from Carreyrou’s merciless anecdotes based on interviews with sources, though he’s loath to connect those dots. He reports, you decide.

This detached storytelling becomes a challenge in the last third of the book, where the story of Theranos intersects with Carreyrou’s contemporaneous reporting. He shifts to more of a memoir style, in which Carreyrou himself becomes a main character. He details the heavy-handed attempts by Theranos and its lead lawyer, David Boies, to shut down his investigation and discredit him and his sources. While several sources clammed up, others withstood the harassment. Followed by private investigators and threatened with libel and defamation suits, these whistleblowers and Carreyrou emerge as heroes. In one amazing scene, Carreyrou describes the reaction from Holmes and her deputy/boyfriend Sunny Balwani in a company-wide Theranos meeting after his first exposé was published on the Journal’s front page in October 2015:

As it turned out, Carreyrou’s initial article unleashed a deluge of critical press and awakened regulators, and it was the beginning of the company’s downfall. Only in March 2018 did the Securities and Exchange Commission get around to charging Holmes and Balwani with civil securities fraud, and only in June did federal prosecutors charge the pair with wire fraud and conspiracy. Holmes agreed to settle the SEC charges and she and Balwani have proclaimed their innocence of the criminal charges, which could land them in jail for up to 20 years. Once mentioned in the same breath as Jobs and Bill Gates and Mark Zuckerberg, it’s now more likely Holmes will go down in history alongside Jeff Skilling, Dennis Kozlowski, and Bernie Madoff. It’s a satisfying victory for fact-based journalism.

As thorough and entertaining as Carreyrou’s account is, there remain several puzzling questions. One is how, exactly, an inexperienced business figure with minimal scientific and technical knowledge could raise more than $700 million in the total absence of proof of a functioning product. Investing in startups is by definition speculative, but a recurring theme of Bad Blood is how many people refused to demand evidence that the company was doing legitimate work—which raises the disquieting prospect that other hucksters are running other Silicon Valley enterprises. Yes, Holmes and her henchmen misled and exaggerated, but board members, investors, and business partners who should have known better wanted so badly to believe that they set skepticism aside. The list of enablers is long and prominent. The company’s board members included Gen. James Mattis, the current secretary of defense; George Shultz and Henry Kissinger, former secretaries of state; Bill Frist and Sam Nunn, former senators. Safeway and Walgreens were so eager to be part of the next big thing that their executives disregarded internal warnings and agreed to use Theranos’s error-prone technology in their stores, which could have been disastrous for patients who rely on accurate blood tests. The actual harm was minimized because, contrary to the company’s claims, it tended not to rely on the new pinprick technology and sent samples to traditional labs for analysis. Incredibly, one early investor still hangs onto the belief that Holmes is the victim. As recently as June, Tim Draper said that he still believes Theranos was doing “really good work” until the “media created such a frenzy.”

Another big question is “Why?” Because he couldn’t interview Holmes, Carreyrou reaches no firm conclusion on her motivation. Was she delusional? Did she lie to stall for time to make the technology work? Was she just a scammer who figured she wouldn’t get caught? Did she buy into her “change the world” mantra so much that she tuned out contrary information? Carreyrou doesn’t render a judgment, and he waits until the epilogue to float a theory that seems reasonable in light of the preceding 300 pages: Is she a sociopath? Once again, you make the call.

If you miss this go-round on Theranos, you will have another shot soon. Carreyrou’s book is being adapted into a movie starring Jennifer Lawrence as Holmes. It’s likely the film will be “based on a true story”—in other words, that it will take some liberty with the truth—which for a movie about Theranos sounds wholly justifiable.