Last Updated on February 12, 2021, by eNotes Editorial. Word Count: 1228
Published in 2018, John Carreyrou's Bad Blood: Secrets and Lies in a Silicon Valley Startup tells the true story of Theranos, a startup that promised to revolutionize the lab testing industry with a small machine that could run thousands of diagnostic lab tests from a single drop of blood....
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Published in 2018, John Carreyrou's Bad Blood: Secrets and Lies in a Silicon Valley Startup tells the true story of Theranos, a startup that promised to revolutionize the lab testing industry with a small machine that could run thousands of diagnostic lab tests from a single drop of blood. The founder of the company was Elizabeth Holmes, who first came up with the idea for Theranos when she was only nineteen. In a matter of years, Holmes secured the backing of major investors in Silicon Valley, and Theranos achieved coveted "unicorn" status (referring to a company with a valuation of over one billion dollars). Theranos made national headlines in 2018, however, when John Carreyrou—the author of Bad Blood and an investigative journalist for The Wall Street Journal—broke the story that Theranos was perpetrating a massive fraud.
The opening chapters of Bad Blood offer some background on Elizabeth Holmes, the young, ambitious Stanford dropout who founded Theranos. Even from a young age, Holmes possessed a strong desire to be successful and make money, and she idolized Silicon Valley legends, like Steve Jobs, whose innovative tech startups had brought them wealth and fame. Growing up, Holmes was a diligent student and worked hard to gain entrance to Stanford University. Once there, she came up with the idea for a machine that could run a wide range of diagnostic tests from a single drop of blood. Such a device would revolutionize the medical industry, Holmes believed, making blood testing faster, more accessible, and less invasive. She would later cite her personal fear of needles as the inspiration for her idea.
Having only taken a few science courses in college, Holmes had a limited science and medical background, yet she remained unfazed when her idea was dismissed as impossible by some of her professors. Holmes finally found support for her dream in Channing Robertson, a member of the Stanford Chemical Engineering Department, who was impressed by the young Holmes's ambitious idea. When Holmes dropped out to found her company, Robertson became the first member of her board. He also helped Holmes recruit Theranos’s chief scientist, Ian Gibbons. The actual machine that would run the tests was developed by Theranos engineer Tony Nugent, whom Holmes recruited to turn her vision into a reality. When choosing a name for her company, Holmes came up with "Theranos" by combining "therapy" and "diagnosis," and she chose to name her revolutionary prototype "the Edison," a reference to the famous inventor Thomas Edison.
Despite recruiting top-tier talent in science, medicine, and engineering, Theranos was plagued with problems from the start. The engineers working on the project were frustrated by Holmes’s focus on miniaturization. Creating a machine that could automatically run thousands of blood tests was a tall order and would require the development of novel technology. Theranos engineers repeatedly tried to persuade Holmes to allow them to first develop a larger working prototype before they attempted to miniaturize it. Obsessed with the idea of a portable blood testing machine, however, Holmes insisted that the technology be miniaturized from the start.
The lab team at Theranos also struggled with Holmes’s unrealistic expectations. While the concept of running multiple blood tests from a single drop of blood was an exciting one, it proved to be nearly impossible to execute in practice (as some of Elizabeth's old professors had warned). Blood from a finger stick was more likely to be contaminated than blood from a venous draw, and for many tests, a single drop of blood was simply not enough blood to produce conclusive results. Further complicating matters was the fact that most blood tests involve the dilution and contamination of the blood sample, meaning a single sample cannot be reused for multiple tests.
The continual problems with the development of the Edison were masked by the intense culture of secrecy Holmes cultivated at Theranos. Different parts of the company were siloed, which not only prevented them effectively working together, but also prevented different teams from communicating about their respective difficulties. The teams responsible for marketing and advertising the Edison, for example, were kept in the dark about the continued problems with the prototype. To outsiders, Theranos appeared to be a massive success, attracting the interest of investors and prominent government officials and landing deals with major corporations like Walgreens and Safeway. In reality, the Edison prototype was unreliable—often breaking down or producing inaccurate results—and only capable of running a fraction of the tests Holmes claimed it could perform.
To conceal the problems with the Edison, Holmes took to staging fake “demonstrations” for potential partners and investors. During these demonstrations, her team would collect finger stick blood samples and make a show of putting them in the Edison for processing. Once everyone had left the room, the Theranos employees would return, retrieve the samples from the Edison, and test them using conventional lab equipment. When they called to report the results of the tests later, Theranos never disclosed that the tests weren’t actually performed using the Edison.
When Sunny Balwani joined Theranos as COO, the culture of the company grew more toxic. Balwani carefully monitored employees’ communications with one another and routinely fired employees who displeased him or asked too many questions. He and Holmes eventually began a romantic relationship, which they kept secret from others at Theranos. Even as Holmes grew increasingly eager to bring the Edison to market, many scientists at Theranos were alarmed at the prospect of releasing the product so soon and felt that the Edison was nowhere near reliable enough to be used on real patients. Two young employees in particular—Tyler Shultz and Erika Cheung—attempted to raise their concerns about the Edison's accuracy but were promptly shut down by Holmes and Balwani.
In 2014, when Theranos was featured in an article in The New Yorker, a pathologist named Adam Clapper was skeptical of the company's claims and the studies they had cited as proof of the accuracy of their machines. After doing some research, Clapper published his suspicions on a personal blog and then reached out to John Carreyrou, an investigative journalist at The Wall Street Journal, urging him to look into Theranos further. After receiving the tip, Carreyrou began tracking down and interviewing former Theranos employees, doctors, and patients.
As more and more disgruntled employees left Theranos (or were fired), Holmes and Balwani employed a fierce, famous lawyer named David Boies to deter and silence potential whistleblowers. The tactics of Boies’s team made Carreyrou’s investigation difficult, and he quickly realized many ex-Theranos employees—including Erika and Tyler—were reluctant to speak on the record for fear of the legal repercussions. Carreyrou notes that some ex-employees, including Erika, were almost certainly put under some sort of surveillance as an intimidation technique. Once Theranos became aware of Carreyrou's investigation, their legal team turned its attention to him, putting pressure on his sources to recant and urging The Wall Street Journal to kill the story. Nevertheless, the findings of Carreyrou’s investigation were eventually published in an explosive article that shocked Silicon Valley and the business world. The article was devastating to Theranos, prompting backlash from investors and major investigations from federal agencies. After nearly falling into bankruptcy, Theranos ultimately ceased operations in 2018, with Elizabeth Holmes and Sunny Balwani each facing multiple lawsuits and federal fraud charges.