An investigative reporter documents the meteoric rise and equally rapid downfall of a Silicon Valley startup. The appropriate subtitle is Secrets and Lies in a Silicon Valley Startup. Elizabeth Holmes, from early childhood, professed a desire to become a billionaire, and dropped out of Stanford after two semesters of chemical engineering to found Theranos, achieving her monetary goal in her early twenties.
The basis of the promise to investors was to use minuscule blood samples obtained from finger pricks to measure many components related to hematology, biochemistry, microbiology, toxicology, and endocrinology, with rapid reporting. The vision included using the revolutionary technology in the military, doctor’s offices and even making it available to anyone willing to pay for tests with stations in public spaces such as retail pharmacies. Holmes succeeded in pitching this new technology to pharmaceutical giants Pfizer and Novartis, the retail pharmacy giant Walgreens and the Safeway grocery chain. Venture capitalists piled in with billions of dollars, driving Holmes’s net worth to over four billion dollars. The company attracted praise and investment from George Schultz, Henry Kissinger, Sam Nunn, General James Mattis, the Waltons of Walmart fame, The DeVos family of Amway fame, Bill Frist, Robert Murdock, and Carlos Slim, among other household names. Holmes was featured on the cover of Fortune magazine, and was flattered in The New York Times, Time magazine, The Wall Street Journal and The New Yorker. She dressed, talked and acted like a female Steve Jobs, and befriended the Clinton and Obama families with several visits to the White House.
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The problem was the technology simply didn’t work much of the time or was unreliable and could not provide consistent results, as could have been predicted by anyone expert in laboratory medicine. But the lab was staffed by bright chemists, computer scientists and engineers with no training in medicine. The coverups included using venipuncture samples run on conventional laboratory analyzers, diluting samples to run though those machines (predictably decreasing accuracy), and even faking results. No one seemed to be familiar with the elaborate regulations applicable to running a medical laboratory; many patients got alarming results requiring extra tests and expenses.
The president, Ramesh ‘Sunny’ Balwani, who was also Elizabeth Holmes lover and roommate, is portrayed as a paranoid ruthless ruler who isolated parts of the company from each other, enforced secrecy and fired anyone who raised concerns about anything at all. Turnover was always high and morale low. Lawsuits abounded with threats to anyone who expressed concerns and private detectives hounded deserters.
The author, employed by the Wall Street Journal, between assignments, received a tip about the problems from a lab medicine blogger and began a rigorous investigation in 2015. Robert Murdock was heavily invested in Theranos, and owns News Corp, the parent company of The Wall Street Journal. To his credit, despite threats from Theranos lawyers, he refused to break the firewall between the editorial and reporting arms of The Wall Street Journal to prohibit, delay, or alter the publication of Carreyrou’s bombshell front page report; that story and others that rapidly followed was largely responsible for the crumbling of the castle built on quicksand that was Theranos.
It is probably too much to expect that a Wall Street Journal reporter would expand on this frightening story to speculate about what it says about the greed inherent in unbridled capitalism that drives people to lie, cheat, and swindle investors, and flaunt the law, and he does not do so. But his investigative reporting was daring and the story is told in a fair and balanced way. However there probably are many other companies, whether in Silicon Valley or not, with equally corrupt practices- they just haven’t been exposed yet.
Besides an HBO documentary this year, the Netflix movie adaptation of this story, in the planning stages, is to star Jennifer Lawrence as Elizabeth Holmes. I may have to watch it.
This is a timely read as the trial of Elizabeth Holmes and Sunny Balwani on multiple counts of fraud is set to start next week, with possible twenty year prison sentences. But it seems to me that the most lenient sentence should at least include restitution charges sufficient to keep them in poverty for the rest of their lives.
At the very least, this tale should be seen as a powerful argument for better protections in law for brave corporate whistle-blowers.
The Passionate Reader 