How to fool people into giving you nearly a billion dollars (Bad Blood review)
This review first ran in the Jan. 5 edition of The Hamilton Spectator.
By John Carreyrou
Alfred A. Knopf
Let’s be thankful that investigative reporters aren’t among the people who can be fooled all or some of the time.
Lots of smart and successful people lost their minds and nearly a billion dollars to Elizabeth Holmes. More concerning were all the people who trusted her with their health and well-being.
The 20-something founder and CEO of Theranos was Silicon Valley’s first female billionaire tech founder. Holmes was heralded as the second coming of Steve Jobs and even dressed the part in black turtlenecks.
The college dropout with two semesters of chemical engineering courses was promising the iPod of health care with a revolutionary blood testing device.
With just a painless drop or two of blood, we could quickly, easily and cheaply test our blood from the comfort of our home or while buying groceries and picking up prescriptions. Drug companies saw the technology as a way to drive down the cost of clinical trials. The military saw life-saving battlefield applications.
Holmes graced the cover of Fortune magazine (“This CEO is out for blood”), appeared in the Wall Street Journal, Forbes, USA Today, Inc., Fast Company and Glamour and did star turns on NPR, Fox Business, CNN, CBS News, Charlie Rose and Jim Cramer’s Mad Money on CNBC.
She was named one of Time’s 100 most influential people. President Barack Obama appointed her a US ambassador for global entrepreneurship and Vice President Joe Biden toured the company and called it the laboratory of the future.
Holmes stacked the board of directors with former cabinet members, congressmen and military officials, including former secretaries of state Henry Kissinger and George Shultz and former Marine Corps general and secretary of defense James Mattis.
Rupert Murdoch, the media mogul who controlled the Wall Street Journal’s parent company, personally invested $125 million.
Walgreens and Safeway planned a nationwide rollout of the blood testing system in their grocery and drug stores.
But then a skeptical blogger tipped off the Wall Street Journal’s two-time Pulitzer Prize winning investigative reporter John Carreyrou.
The first in his series of stories ran in October 2014, revealing that Theranos couldn’t deliver reliable test results. The company was putting lives at risk and soaking investors.
“Holmes and her company had overpromised and then cut corners when they couldn’t deliver,” says Carreyrou. “It was one thing to do that with software or a smartphone app, but doing it with a medical product that people relied on to make important health decisions was unconscionable.”
To his credit, Murdoch personally rebuked Holmes when she wanted Carreyrou’s story spiked. The Journal’s editorial team also didn’t try to save face after running a favourable profile two years earlier that had served as Holmes’s coming out party.
“My newspaper had played a role in Holmes’s meteoric rise by being the first mainstream media organization to publicize her supposed achievements,” says Carreyrou. “It made for an awkward situation but I wasn’t too worried about it. There was a firewall between the Journal’s editorial and newsroom staffs.”
Despite a line-by-line bullet-proof review by editors and lawyers, Holmes, her lawyers and PR firm tried to discredit the reporting, smear Carreyrou as a misogynist and intimidate whistle-blowing ex-employees.
Carreyrou’s stories became the talk of Silicon Valley and opened the floodgates on critical coverage by other media outlets.
Theranos would be forced to void or correct nearly a million blood tests. The company agreed to pay $4.65 million into a fund to reimburse 76,000 people for their blood tests, settled a $43 million case with an investment firm and a $25 million Walgreens lawsuit. Back in March, Holmes and her company were charged by the Securities and Exchange Commission for conducting “an elaborate, years-long fraud.”
How did Holmes lose her way? “A sociopath is often described as someone with little or no conscience,” says Carreyrou. “I’ll leave it to the psychologists to decide whether Holmes fits the clinical profile but there’s no question that her moral compass was badly askew.
“I’m fairly certain she didn’t initially set out to defraud investors and put patients in harm’s way. But in her all-consuming quest to be the second coming of Steve Jobs amid the gold rush of the ‘unicorn’ boom, there came a point when she stopped listening to sound advice and began to cut corners. Her ambition was voracious and it brooked no interference.”
While Holmes’ Silicon Valley unicorn was all smoke and mirrors, Bad Blood shows why investigative journalism will always be a smart investment that pays life and money-saving dividends for us all.
Jay Robb serves as communications manager for McMaster University’s Faculty of Science, lives in Hamilton and has reviewed business books for the Hamilton Spectator since 1999.