Bad Blood

Theranos was once considered the darling of Silicon Valley (for an overview, see our past insight here). As a private technology company founded by Elizabeth Holmes in 2003, Theranos purported to have revolutionized blood testing by requiring only a fraction of the blood needed in traditional tests. The company was able to raise more than $700 million in private funding, that at its peak, valued the company at over $10 billion, on claims that its technology would save lives through more efficient blood analysis and quicker access to results. John Carreyrou of the Wall Street Journal began investing the validity of Theranos’ technology claims in 2015 after receiving a tip from an ex-laboratory manager. The investigative research by Carreyrou eventually culminated in medical authorities revoking Theranos’ laboratory licenses and the SEC charging Holmes with “massive fraud,” barring her from serving as an officer or director of any public company for at least ten years. While Holmes has settled with the SEC, she has also been indicted on wire fraud, with the trial set to begin in 2020. In the book “Bad Blood,” Carreyrou details the rise and fall of Theranos by piecing together the complicated and troubling history of an ambitious health technology company through interviews with former employees. There are many accounts of abhorrent corporate culture that will make the blood of readers boil, but the underlying message of the book seems to be that the “fake-it-till-you-make-it” mentality of certain entrepreneurs isn’t possible when you are in the business of providing health solutions. It’s interesting when you look at a book like “Shoe Dog” by Phil Knight that details some instances where the co-founder of Nike “stretched” the truth and how his unrelenting ambition turned the company into one of the most successful athleticwear brands; however, Knight was trying to sell shoes, not making promises to provide patients with accurate medical tests. The disregard for patient safety through the dogged pursuit of attempting to realize her vision not only paints the picture that Holmes’ moral compass is alarmingly askew, but it also illustrates the massive failure in corporate governance at the board level that was unable to provide adequate oversight into the operations of the company. At one point in 2013, Holmes tabled and passed a resolution that assigned 100 votes to every share she owned, giving her 99.7 percent of the voting rights. After 2013, the Theranos board was unable to reach a quorum without Holmes and there was no reason for the board to vote on any matters as the only vote that mattered was Holmes’. Although blind ambition with no regard for others is the catalyst for the eventual downfall of Theranos, the lack of corporate governance and board oversight allowed the house of cards to remain intact for a lot longer than it should have.