We continue our journey through Bad Blood, Secrets and Lies in a Silicon Valley Startup by John Carreyrou (published by Alfred A. Knopf, 2018).  Today based on the advice of Stephen Adams we tackle chapters three, four and five. The chapters  are titled, “Apple Envy”, “Goodbye East Paly” and “Childhood Neighbors.” The chapters we cover this week paint a picture of a toxic culture full of deceit, naiveté, and vindictiveness; this will be a blockbuster movie someday. While Theranos sounds extraordinary, it isn’t hard to find similar corporate train wrecks. Bad Blood needs to be read as a cautionary tale.

Chapter 3: Apple Envy

Holmes both envied and idolized Steve Jobs and Apple.  The book describes how Holmes courted and hired personnel from Apple and even went as far as to emulate Jobs style of dress.  Reading this part of the book I get the sense that appearance trumped substance. It was more important to appear Apple-like than to embrace the practices and processes that Apple pursues when developing a product.

Examples of what was really happening told a different story.  Chapter 2 described how information and groups were becoming silo’ed.  In Chapter 3, the author tells us that siloing information rubbed the new people brought in from Apple the wrong way and made them feel they were in a police state.  With anyone that wanted to see under the covers or what was happening outside of their specialty were forced out of the firm. Several of the key people brought over from Apple either left or were forced out.

Chapter 3 continues the accumulation of power and information to Holmes and her core believers.

Chapter 4 – Goodbye East Paly

The chapter begins with the story of Theranos moving out of “East Paly” to more upscale digs in Palo Alto.  This is a continuation of the pattern of appearance over substance. Late on the afternoon before the move, Holmes demanded that her team get the move done before midnight to avoid paying an extra month’s rent. As with many of the other events in the book, chaos ensued.  Even though Holmes was eventually talked out of changing the date, the damage was done to her relationships with key staff members. I would describe Holmes’ behavior as mercurial and erratic in this story, which building on her lack of transparency and power hoarding, portends more issues as the book progresses.

Other anecdotes in the chapter reinforce the premise that the Theranos culture was both paranoid and toxic.

One of the most important stories revolves around the general counsel and head of sales discovering that the sales and revenue forecasts were overstated (I am being nice) leading to a board rebellion.  The board actually voted to remove Holmes as CEO, but let her talk them out of the decision. There is a great line in this section, “when you strike the king, you must kill him.” (Ralph Waldo Emerson). In this case, the king survived. Todd Surdey, sales, and Michael Esquivel, general counsel, were both fired.

By the end of this chapter, the people coaxed away from Apple were gone, Holmes had put down a palace coup, and most of the power was under her direct control.  This chapter represents the continued evolution of a toxic environment.

Chapter 5 – Childhood Neighbors

Chapter 5 introduces a new antagonist, Ricard Fuisz.  A large part of this chapter is used to establish the relationship between the two families.  In a nutshell, the wives got along, while the two husbands did not due to envy on Holmes’ part and disdain on Fuisz’s part.

The problem as it pertains to Theranos occurs when Elizabeth’s mother tells the Fuisz’s about what Elizabeth is doing at Theranos.  Richard Fuisz patents a key piece of technology that will need to be part of the Theranos device. He believes that it will require Theranos buy or lease his patent in the future.  This is of course done in the most underhanded and secret manner leading to Elizabeth and her parents finding out nearly two years later.

Making the whole scenario even more fraught is that Fuisz is described as petty and vindictive.  The portion of the chapter describing just how vindictive Fuisz can be when he feels slighted would a good basis for the crime drama Criminal Minds.  The author draws a loose parallel to his relationship with the Holmes family and foreshadows more drama to come.

The chapter concludes with Elizabeth attempting to engage the law firm McDermott, Will and Emory to file a patent interference lawsuit.  While they felt the suit had merit, Fuisz’s son was a partner and they deferred due to the optics.

Links to the re-read!

Week 1 – Approach and Introduction – https://bit.ly/2J1pY2t

Week 2 — A Purposeful Life and Gluebot – https://bit.ly/2RZANGh