Start-ups founded in Silicon Valley aren’t famous for playing down the impacts of whatever they produce. The Californian Mecca, arrogant behavior, continues operation thanks to exaggerated claims, little falsehoods, and the established tradition of “fake it until you reach it” phenomena.
There are generally two sorts of the end for these braggadocious ventures: The start-up becomes highly successful and transforms the world for good – like Amazon, Google, and Apple – or one that fails big upon getting a decisive loss in a ruthless market.
However, occasionally it is possible to witness unusual twists.
One person who managed to do this was Elizabeth Holmes, an impressive, putting-on-turtleneck-clothes wunderkind who promised to bring about a revolution in medicine and got many investors ready to subsidize her idea: Theranos.
Should an idea seem too great to be valid, the idea generally is. Edison of Theranos had the same quality. A very small, slim and lightweight, affordable, and fast blood-testing tool that can test for 200 prevalent conditions, the device was praised by everyone as a “wonder machine.”
What was the sole issue? The device was dysfunctional. At this point, this incredible story of lies, artifice, chicanery, and fraud begins getting very eerie.
Chapter 1 – Holmes came up with a splendid idea of an instrument that would have the capacity to transform medical diagnoses.
Just like the same as most people, needles frightened Elizabeth Holmes, too.
Thanks to this fear, she created a splendid idea: a small device that could examine patients’ blood during a day by means of microneedles.
Create that device, Holmes imagined, and no one would ever have to use needles and everyone would own a machine that would enable actual-time data of blood analyses to help continuing diagnoses.
Until 2004, Holmes became poised for beginning realizing her idea. Holmes established Theranos and Shaunak Roy, who was among her Stanford University friends.
However, they met an obstacle. Shortly later, both became aware that microneedles couldn’t get sufficient blood. At this moment, the initial idea began to change its skin.
Subsequently, they developed the idea of a blood-testing device not bigger than a credit card that would get several blobs of blood by means of a pinprick. Then, that device would be connected with another, a bit bigger device to carry out identification examinations.
The other device that is as big as a toaster would carry out chemistry and conductibility examinations to screen for 240 general conditions. The conditions vary between the lack of vitamin D, herpes, HIV.
That was the device that guaranteed to bring a breakthrough transformation in medicine – were it to be constructed. Medical diagnostic devices could abruptly be within the reach of innumerable people.
The pair began conceiving a planet on which all people could possess a Theranos tool in their home. By virtue of early diagnoses, it would be possible to save many people’s lives.
The device would scrutinize the levels of hormones, then send the data to medical specialists on an every-hour or diurnal basis. Physicians would be able to give advice to patients like ”take some more pills” or ”you need an ambulance.”
Those who are badly off would abruptly be able to afford medical care. Well, the machine could help do away with the requirement for costly physicians and nannies!
A blood examination could begin to be something accessible to everyone who could carry them out when they were in a mall and shopping for and it would never even cost more than 20 dollars
Things that this device would offer appeared infinite.
How would it be, for example, were we to send the devices to areas in war or put them in place in regional medical centers after disasters? We would also be able to carry one of them in the baggage of a jeep.
Chapter 2 – They had only one obstacle in front of them: the devices were almost improbable to create.
Theranos began dealing with building this wonder machine, whose name became the Edison.
However, shortly later the device came across a problem.
The thought of employing a sole puncture could not be functional.
This constituted an issue – well, that was Edison’s principal marketing point. However, it became apparent that there was no way of testing for 240 conditions utilizing that much small blood exemplary.
The start-up’s engineers endeavored to make an outline of specific microchambers that could move blood. However many possible answers hit on, the engineers were unable to have the machine screen for over 80 prevalent conditions.
One other issue came up: the question regarding its precision. Blood that undergoes screening got ever thinner in the testing process, causing the feeling of uncertainty about the trustworthiness of the outcomes.
Other technical issues arose, too.
One other negative feature of Edison was its temperature sensitivity. How could the device work in other geographical locations that has extremely differing climates?
For example, the pipettes were inclined to be obstructed. In a month, the devices became almost completely dysfunctional. So, this indicated there would be a need for an engineer to be sent to get rid of the clog-up.
The device had issues regarding deciding on potassium and sodium grades as well. Red blood corpuscles divide asunder if they’re drawn by means of a pinprick, rendering the results questionable at greatest.
The director of Theranos’ lab, Alan Beams, got dubious over time.
Beams convinced the start-up’s command to postpone programs for any HIV examination. The results of coming down to a device that can lead to errors for a significant screening like this didn’t need a second thought.
The issues continued to accumulate, however, Theranos wasn’t allocating almost adequate sources for R&D.
Specialists watching from the outside began to be more and more suspicious of the machine.
The president of UC’s Laboratory Medicine Department, Timothy Hamill, in San Francisco, was particularly censorious.
Hamill officially stated that it wasn’t probable for them to manage to carry out 240 different examinations with one blob of blood however long they tried to come up with a solution!
Those who were kinder weren’t as harshly critical as Hamill, however, they still said that Theranos necessitated three more annum of research and development prior to making Edison public in the market.
Chapter 3 – Holmes went on, using her beauty and charm to continue her plan.
Holmes wasn’t disturbed. Actually, she was preoccupied with shouldering the buzz around Theranos; her position as its charming manager to fret about technical difficulties.
She’d promptly created a prominence like the female version of Steve Jobs – a quality Holmes developed by imitating his liking of turtlenecks in black and slightly intensifying her tone while giving speeches.
Holmes became the connoisseur of Silicon Valley. Investors paid attention to her, and cash began to fill the coffers of the start-up.
Holmes agreed with the advertising agency TBWA\Chiat\Day to stand for Theranos. This selection was a tribute to Jobs, as well: the organization had served Apple before.
Patrick O’Neill and Carisa Bianchi, the executive creative manager and the CEO of the organization, respectively, were in love with Elizabeth. Both of them were sure that Theranos would be the next explosion.
Seeing her, investors perceived her as a brand in production – the earliest billionaire woman entrepreneur who owed her success to herself alone and who made a lot of money thanks to a device that saved many people!
The fade increased more and more. In 2014, The value of Theranos was 9 billion USD and the company signed agreements to provide Edison to worldwide distribution huge corporations Walgreens and Safeway.
Both of these multinationals were aiming to increase their medicament and well-being assortment extent and saw blood identification as a significant development field for their companies.
Safeway also provided 350 million USD to start remodeling its retailers to store Edison at distinct on-site well-being centers. Walgreens consented to set up a stand in every one of the Walgreens 8,134 retail stores.
How something is seen without and actually is within seldom match each other in San Francisco. Having bizarre claims with regard to your business is only to be expected should you desire to draw investors.
So far so good as long as we talk about software upstarts, however, things change a bit if the topic is something as essential as blood examination.
However, Theranos kept going on. They employed Larry Ellison, he was the brain that created the tech company Oracle, which is worth billions of dollars, as a consultant and implemented his business model.
That indicated they would get rid of flawed software and go on optimizing that in the beta-testing stage.
As you’ll discover in the next chapters, this was the beginning of numerous acts of subterfuge that would aftermath render Theranos infamous.
Chapter 4 – Theranos concealed the machine’s errors to attract investors.
How would have things turned out had Theranos consumed more money and spent more time on research and development – would the start-up have been able to fully transform medical care as its creators had thought it would?
It’ll be a mystery forever since Theranos had a great hurry to sell its products onto the market.
The stress to start the sales of the machine was engulfing. Theranos began misleading not only its investors but also the media and the FDA regarding Edison.
Holmes started making bizarre claims. The machines, she said, were able to carry out 800 tests with merely a single blob of blood. People could find out their test outcomes in under half an hour, and everything was fully FDA-approved.
All these were nothing but scams. The huge percentage of examinations, for instance, wasn’t even run by the device!
It is no surprise that if they were lucky, the boxes could carry out one-twelfth of the most crucial tests.
Thus, though the device had the capacity to run an immunochemical assay – an examination that looks at proteins by means of antigens – Edison couldn’t carry out a hematology examination to decide white blood corpuscle and blood platelet numbers. The device even fell far short of performing standard chemical examinations.
Clients going to examination hubs would solely get the puncture test were they to ask for an immunochemical assay. Chemical and hematology examinations were carried out applying the conventional technique for taking out blood from veins.
The small cylindric bottle with the client’s blood would afterward be sent to the Palo Alto lab through express-courier and there, the sample was examined employing devices manufactured by other companies, most importantly Siemens.
Theranos could meet its objective, however, the entire operation was very much dishonest – well, their sole marketing mark was their “miraculous” Edison!
However, the trick deceived almost all people, even the principals who evaluated Theranos.
The regulators carried out proficiency tests created to decide on the normal of a lab’s blood examination facilities, which also covered PSA, thyroid, and vitamin D tests.
Then, how did Theranos manage to outwit the regulators? They covertly employed third-party devices to run the tests, being wholly cognizant that the principals could think these machines belonged to them.
Chapter 5 – Theranos forged statistics to maintain its deception in a systematic way.
Not only was the start-up misleading its funders and clients but also the whole healthcare establishment and media.
Until this moment, the company had achieved a virtuosity at directing and using data that bore positivity to clean its image.
So, solely the outcomes of accomplished examinations – usually run in labs using another company’s manufacturing machinery – were sent to interested individuals and companies.
The start-up loved to brag about the performance of their Edison that had been confirmed in quality-control journals.
But, it was discovered this was a lie.
The sole “peer-reviewed” paper written concerning Edison was in an unknown journal from Italy that publishes papers in return for money whose name is Hematology Reports. Data sets in the paper consisted of just six subjects.
The business regularly said as well that the serving had better accuracy when compared to orthodox blood tests.
After pushed to give proof for this daring claim, the company contended that more than nine-tenths of flawed outcomes in orthodox blood-testing followed from human error.
So, that meant it should have a more correct result rate. However, Theranos didn’t include one tiny fact: incorrect results of Edison exceeded its rivals’!
After regulators ultimately examined the machine, they found out that it gave accurate results approximately in just six-tenth of cases for each test. Some tests, such as for testosterone, were far from accurate with a surprising almost nine-tenth of any instance.
However, since many flawed results are the result of human error, the company was right in its claim.
Then, how did Theranos go on to draw investment considering that Edison was operating so terribly?
As you can understand, the company threw around other lies. The displays presented to angel funders were full of lies, too.
The extent of deceit we witness in Theranos was close to unreal. During the initial levels of product growth, the company even utilized mock machines that are unable to run genuine blood tests.
It was possible to watch Blood filtering through the Edison prior to the exhibition of false results in the eyes.
They excluded investors from full knowledge. After VIPs paid a visit to Palo Alto, their blood was drawn with puncture into the device for demonstration. After VIPs had exited the room, though, blood exemplars were immediately sent to the lab, and tests were run through a Siemens device!
Chapter 6 – The company made a lot of effort to evade FDA inspections and at the same time feigned to be FDA-supporting campaigners.
Until now, perhaps you are astonished to see the way the business was able to carry off its lies in a delicately regulated market like in the US.
It is very easy to understand: it made a lot of effort to evade FDA regulation.
What was an important part of Theranos’ ruse was to feign that the device was not the machine for medical purposes.
Since the samples were sent for tests to Palo Alto, Theranos said, the machine was nothing but a device for dispatching information. So, it didn’t undergo an FDA ruling.
Theranos grudgingly adopted a different strategy after Dr. Shoemaker, who was a commissioned officer of the American Army, was resolute in getting approval for the boxes from the FDA prior to planning their use in regional military medical centers.
They assured that the company would adhere to FDA measures, however, delayed simply for a sufficiently long time for Shoemaker going on retirement. Following this event, the entire project was noiselessly discarded.
Until this moment, a novel method had been secretly implemented – choosing the most suitable tests that were in line with the FDA rules.
The device yielded perfect test outcomes for herpes and HSV-1 examinations, for instance, thus Theranos asked – and obtained – FDA confirmation.
However, this wasn’t over for Theranos. Actually, they had the audacity to compose music and arrange a dance choreography on that and said the company was really a great supporter of FDA!
Naturally, the FDA had just provided its signature of confirmation for a few tests. However, what is the reason for allowing the truth to be an obstacle in the process of a great story?
Indeed, the story itself was great, producing a large quantity of free-of-charge publicity for the company.
Chapter 7 – Theranos guarded what they hid by firing dissidents and employing drones.
Not all employees at the company felt content with the business’ false information campaign.
The dissatisfaction of workers was huge, and Theranos replaced a lot of its personnel with new members. Most of its employees just quit after finding out how fraudulent their bosses are.
However, their opinions didn’t allow them to express what’s going on there. The company guarded what it hid through having employees sign non-disclosure clauses, precluding the discontented from disclosing settling particulars to the media.
However, there were unable to stop a chain of withdrawals. The whole management team and numerous others resigned.
But, the company had another ploy at hand: They started employing Indian workers that trusted their working visas to stay in the US.
Hiring Indian workers was simple. Holmes’s lover and number two, Sunny Balwani, had great connections in India’s tech industry.
Shortly later, Holmes’s lover was giving empty positions to Indian employees. Their strategy was very sly. Since the employees were in great need of keeping their positions and not being extradited, the employees were a lot more inclined to stay silent with regard to Theranos’ infinite problems. These employees made an excellent makeshift measure to continue the Theranos operations.
However, these tactics quickly ended up as a disaster.
Ian Gibbons, the biochemist from the UK having worked with much effort on Theranos’ immunochemical assays for so long, killed himself in 2013.
Before his death, Gibbons had been reduced to a lower rank for suspecting the Theranos’ honesty about the devices employed for tests.
Because of his doubts, Theranos substituted Gibbons with a newbie researcher who wasn’t even close to having as many qualifications as Gibbons. However, he had one essential quality: he wasn’t involved in anything that disturbs the bosses.
The company wasn’t happy to see their highly-qualified scientist leave, thus they gave him a lower graded job. Gibbons remained in Theranos hoping that he could be of assistance in improving the machine to the optimum.
Lowering his rank had an adverse effect, though, as Gibbons more and more became addicted to alcohol. About sixty days later this demotion, Gibbons committed suicide by swallowing wine with acetaminophen and killing his liver.
There are no fixed numbers with regard to the number of patients who passed away because of Theranos’ careless behavior. The thing that is known to us is that Theranos’ Edison stands employed 1,000,000 times just in Arizona prior to Walgreens’ cease of cooperation with Theranos.
The company was ordered to reimburse the four-point sixty-five billion USD given to them for running the blood examinations in Arizona.
Bad Blood: Secrets and Lies in a Silicon Valley Startup by John Carreyrou Book Review
The wunderkind in San Francisco, Silicon Valley, Holmes was going to achieve something big. Advertised as the female version of Steve Jobs, the charming wunderkind with black turtleneck gave her word to everyone that she would bring about a revolution in medicine: a small, very movable, affordable, and fast blood-testing machine that can test for 240 ailments. However, Theranos, the start-up she established by relying on this claim, transpired as a fraud. After the company’s executive team became aware the “miracle machine” was dysfunctional, the team began lying and deceiving investors, clients, and principals.