Thursday, May 18, 2023

Bad Blood: The Theranos Story

If it seems too good to be true, dig a little deeper and you may find out that your instincts were well founded. I remember about two decades ago how a woman claiming to have solutions to the energy problem. I can't recall the details other than that it was clear this CEO had a very capable PR team. She was on the cover of several magazines, if I recall correctly. A year later, she was gone. 

Businesses work very hard to project a positive narrative and in a world as messy as ours, there are plenty of folk with money who are eager to invest in (and be part of) the next big thing. Who doesn't like stories that generate hope? We love the feeling of being amazed. 

Unfortunately, many of these stories are more mist than substance. Here's but one example: Theranos. The company's story is told in Bad Blood: Secrets and Lies in a Silicon Valley Startup by journalist John Carreyrou. Released in May 2018, Carreryou covers the rise and fall of the multibillion-dollar biotech startup headed by Elizabeth Holmes.

The company was founded in 2003 by then-19-year-old Stanford dropout Holmes. Bill Gates dropped out of Harvard to start Microsoft and Steve Jobs dropped out of college as well, so there's some glamor to these stories of dreamers who skip the formalities of a touted degree.

Holmes claimed that Theranos had developed a revolutionary new blood-testing technology that could run a wide range of tests from a single drop of blood. The story had legs, and Theranos quickly attracted the attention of investors, including a number of heavies like former Secretary of State George Shultz, former Senator Sam Nunn, and media mogul Rupert Murdoch. By 2014, Theranos was valued at $9 billion and Holmes was being hailed as the next Steve Jobs.

All this success drew attention to the company and with it came a skeptical WSJ journalist who began digging a little beneath the surface. When Carreyrou exposed the truth about the company's unfounded claims, Theranos collapsed and Holmes was eventually charged with fraud.

The problem here is that many of the people who invest in these "story companies" have no real understanding of the technology they're reading about, so they buy the yarn. Carreyrou's book is a story about ambition, hubris, and the lengths that people will go to in order to achieve success. Does the name Enron ring a bell? How about Bernie Madoff.

Ultimately, Holmes was convicted of wire fraud in January 2022 and sentenced to 11 years in a federal prison in November. Her attorneys put in an appeal, however, and the rest of the story is yet to be told.

Moral of the story: don't believe everything you read or hear.

Illustration is an AI-revised version of a painting by the author called The Student.

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