In a world where thousands and thousands of startups are started in the Bay Area each year, becoming a name that everybody recognizes is no small feat.
Theranos reached that summit, and it all came crashing down.
The story of the fraudulent rise and precipitous autumn of the company and its entrepreneur, Elizabeth Holmes, is also the singular story of the journalist who chronicled the company. John Carreyrou’s tenacious and intrepid reporting at the Wall Street Journal would ultimately expose one of the largest frauds ever perpetrated in Silicon Valley.
Bad Blood is the culmination of that investigative reporting. The swift deterioration of Theranos and its protective legal apparatus has done this story a lot of good: many of the anonymous sources that underpinned Carreyrou’s WSJ coverage are now public and visible, allowing the author to weave together the various articles he published into a holistic and complete story.
And yet, what I found in the book was not all that thrilling or shocking, but instead astonishingly pedestrian.
Part of the new challenges is Carreyrou’s laconic WSJ tone, with its “just the facts” posture that is punctuated only occasionally by brief interludes on the motivations and psychology of its characters. That style is appreciated by this subscriber of the paper daily, but the book-length treatment suffers a bit from a lack of charisma.
The real challenge though is that the raw tale — for all of its scam — lacks the sort of verve that attains business thrillers like Barbarians at the Gate or Red Notice so engaging. The characters that Carreyrou has to work with merely aren’t all that interesting. One could argue that perhaps the book is too early — with criminal charges filed and court trials coming, we may well learn much more about the conspiracy and its participants. But I don’t think so, mostly because the hoax seems so simple in its premise.
At the heart of this story is the use of heuristics by investors and customers to make their largest decisions. Theranos is a narrative of the snowball consequence blown up to an avalanche: a retired and successful venture capitalist seeds the company, leading to other investors to see that name and invest, and onwards and upwards for more than a decade, eventually collecting a cast of characters around the table that includes James Mattis, the current Secretary of Defense, and Henry Kissinger.
Take Rupert Murdoch, the billionaire owned of News Corporation( and by extension the Wall Street Journal ), who invested $125 million into Theranos near the end of the company’s narrative. He satisfied Holmes at a dinner in Silicon Valley 😛 TAGEND
During the dinner, Holmes came over to Murdoch’s table, introduced herself, and chatted him up. The strong first impression she made on him was bolstered by[ Yuri] Milner, who sang her kudoes when Murdoch subsequently asked him what he thought of the young woman.
But unlike the big venture capital firms, he did no due diligence to speak of. The eighty-four-year-old mogul tended to merely follow his intestine, an approach that had served him well …
He built one call before investing $125 million.
To some readers, that might be a breathtaking sum, but it really is something of a pittance for Murdoch, whose reported net worth today is approximately $17 billion. In the denouement of the Theranos story, Carreyrou notes that, “The media mogul sold his stock back to Theranos for one dollar so he could assert a big tax write-off on his other earnings. With a fortune estimated at $12 billion, Murdoch could afford to lose more than $100 million on a bad investment.”
For Murdoch, a bad heuristic around the company cost him approximately 1% of his net wealth, and with the tax loss, may not have expensed him much of anything at all.
That’s the challenge of the book: for all the hoax committed by Theranos and its founder, its financial losses were ultimately borne by the ultra-rich. This is not the 2008 Financial Crisis, where millions of people are thrown out of their homes due to the chicanery of Wall Street fat cats.
If there is a lesson in all of this, it is that the right heuristics would have helped these investors to an extraordinarily degree. Take for example the rapid turnover of Theranos’ workforce, which could have been checked on LinkedIn in minutes and would have signaled something deeply wrong with the company’s culture and leadership. It doesn’t take many questions to discover the hoax here if they are the right questions.
Beyond potential investors and workers though, the harm is even hard to track to patients. There are perhaps no more serious consequences around Theranos’ fraud than for patients, who took exams on the company’s proprietary Edison machines and received inaccurate and at times faked outcomes. Yet, Carreyrou strangely hasn’t compiled a compelling situate of patients for whom Theranos caused morbidity. If any industry “re coming out” positively in this volume, it is the doctors of patients who reorder tests and ask additional questions when results didn’t make sense.
Ultimately, Bad Blood is a complete volume about an important story. I’m reminded a bit of the 2012 documentary The Act of Killing , in which the filmmakers travel to Indonesia to have the killers of the 1965 communist genocide recreate the murders they perpetrated. The director’s cut is long and at times remarkably tedious, and yet, that is in many ways precisely the phase. As a viewer, you become inured to the murder, bereft of feeling while awaiting the ending credits to roll.
Bad Blood is the same: its direct, to the point, and comparatively sparing in any deep thrills. And that is its point. The book dedicates us a pinprick in our faith that Silicon Valley’s vaunted investors and founders are immune to stupidity. If you didn’t already know that before, you surely now have a one-word household name of a startup to reference.