We are re-reading Bad Blood, Secrets and Lies in a Silicon Valley Startup by John Carreyrou (published by Alfred A. Knopf, 2018 – Buy a copy and read along). This week we move through three chapters. These three chapters continue to show the same pattern of abuse of the truth and employees that we have seen in other chapters. Arguably, conflating Theranos’s mission with a religion (chapter 14 – below) might take the story to a new level of crazy but it is only that, a new level.  

Chapter 13 Chiat\Day
Chiat\Day is the marketing firm hired to plan and execute Theranos’s secret marketing campaign. The campaign included not only marketing material but a revamping company’s website. Elizabeth’s attraction to Chiat\Day can be traced back to Steve Job’s hero worship discussed in earlier chapters. Chiat\Day is known for developing the iconic original Macintosh ad and much of the early marketing campaigns for Apple. As you would expect, Chiat\Day is expensive and had been placed on a $6 million retainer. This raised flags with some of the account personnel — where was the money coming from? As with nearly every Theranos relationship, the upper echelons were smitten with Elizabeth but those who had to work with Sunny or other Theranos personnel were troubled by what they saw as a rotten underbelly.  Much of the chapter is devoted to a developing concern by Chait\Day personnel that the claims being made by Theranos were fabrications and outright lies. Despite Chait\Day asking for a legal review and their escalating concerns, Theranos pressed forward with the problematic text until the last second. However, just before the site went live Chait\Day’s legal team (an outside firm) required much of the text be toned down. I have worked on projects where claims seemed to get a bit ahead of reality but only briefly, when the passion waned a bit cooler heads prevailed. Theranos does not seem to have many cooler heads inside Elizabeth’s bubble.

Chapter 14 Going Live
Central to this chapter is the story of a botched demo of the nano-container which was one the critical technologies in the miniLab. When Alan Beam, Theranos’s in-house pathologist observed the failure he began to suspect that all was not right. Mr. Beam came to the conclusion that the miniLab (codenamed 4s) didn’t work and was years from completion.  Another theme in this chapter is the continued reminder that anyone that brought up issues was considered a nay-sayer and was attacked and driven from the company. One of the tactics used was hiring Indian developers on H1-B visas to man critical positions. The H1-B visa creates a power mismatch if a visa holder is let go or fired the visa is canceled and they would have to leave the US. I have had this game played on a number of friends – keep your mouth shut and work or be deported. The push to go-live at Walgreens highlighted that the miniLab was not complete and could not do the tests that were promised.  In the end, Sunny and Elizabeth decided to use the Edison (the original machine). The Edison only did one type of analysis and to hide the fact, Theranos jailbroke a Siemens blood testing machine to do the rest of the required analyses. In simple terms more lies and cheating. On top of the cheat, the Edison always had a high error rate and nothing was done to correct the problems causing those errors. The push to go live lead to even more shortcuts. At the end of the chapter, two events highlighted the problems Theranos faced. The head of the Immunoassay group along with her deputy quit due to ethical concerns.  Secondly, Elizabeth began conflating Theranos’s mission with that of a religion.

Chapter 15 Unicorn
Going live coincided with a front-page article in the Wall Street Journal parroting Elizabeth’s claims (which we know are false) that Theranos would revolutionize medicine. The article and the go-live event were a platform to acquire a new round of funding based on a proposed six billion dollar valuation. In today’s parlance, Theranos is a unicorn (a start-up with a valuation of more than a billion dollars). The combination of heavyweights from the Hoover Institute on the board, lies, exaggerations of the capabilities of the Theranos equipment, and fabricated financial projections drew investors like bees to flowers. By the end of the chapter, the frenzy of check writing by venture capital firms pushes the valuation to nine billion dollars.  Elizabeth personally had a net worth of around five billion dollars. As an outside observer, it is easy to recognize a bubble. In the frenzy to get in before the round of funding closes causes people to stop doing basic due diligence. Everyone involved was being played.

Steve Adams, in an email, pointed out that in hindsight it easy to see the crazy and SLEAZY behavior but, in the moment, Elizabeth’s charm would have attracted many of us. The question is when would you recognize the problems and when would you have quit?  I have never been a scenario (that I recognized) that was as stark. In the scenarios where I saw H1-B visas being used as a weapon (which is not uncommon) to shut people up, I have been able to provide some support by voicing the issue but nothing rises to the same level we are seeing in Theranos.

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

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

Week 3 — Apple Envy, Goodbye East Paly and Childhood Neighbors – https://bit.ly/2zbOTeO

Week 4 — A Reflection -https://bit.ly/2RA6AfT

Week 5 — Sunny – https://bit.ly/2AZ5tRq

Week 6 – The miniLab –  https://bit.ly/2rfmwJh

Week 7 – Wellness Play – https://bit.ly/2rqUYk6

Week 8 – Who is LTC Shoemaker – https://bit.ly/2GkbWv0

Week 9 – Lightning a Fuisz and Ian Gibbons – https://bit.ly/2QR7poR