Bad Blood

I didn't follow the Theranos story too closely over the years. It was a private company, unprofitable, new-ish and had a ridiculously high valuation, keeping it squarely outside of my investing sweet spot. And yet it was so famous that I still knew so much about it: the charismatic, young and attractive CEO, and a technology that was going to change the world. But it was a fraud: a fake it till you make it promotion which couldn't deliver that was eventually exposed thanks in large part to Wall Street Journal reporter John Carreyrou. In his fantastic book Bad Blood: Secrets and Lies in a Silicon Valley Startup, he details the rise and fall of this now disgraced company.

For me, the most alarming thing about this saga is how long it took for the company to be taken down. As early as 2006, there were some serious red flags that should have caused employees to revolt. But the company managed to intimidate and tie-up (e.g. confidentiality agreements) its former employees to keep the secrets from getting out. The system sure seems stacked against whistle-blowers, which makes this sort of thing possible I suppose. A well-financed company like Theranos can drag litigation on causing people to lose their jobs, get discredited in their fields, and have to take on huge legal bills.

This highlights the importance of a free press. Theranos tried to discredit the author, going above him at the Journal all the way to its owner, Rupert Murdoch, who then himself became a Theranos investor! When employees are intimidated, the company is screwed. But when the press is intimidated, society is screwed. Carreyrou and the brave whistle-blowers who provided their stories at great personal cost are heroes for saving the public from Theranos' abuses.

There was also a heck of a lot of confirmation bias within employees and board members that kept this thing afloat. The saying, "His bread I eat, his song I sing" comes to mind. Some guys who probably fancy themselves great thinkers (e.g. some former high-ranking US military members like George Schultz) could not come to terms with the fraud even when confronted with piles of evidence. Perhaps it's *because* they fancy themselves great thinkers that they had such trouble: they could not accept that they had been duped by this woman, so the evidence must be wrong.

I highly recommend the book!