Book Review: Bad Blood

The story of Theranos is a cautionary tale of deceit, stupidity, and greed. The company that Elizabeth Holmes started, shot up into the sun, and proceeded to run back into the ground is an incredible example for all investors, entrepreneurs, and medical professionals to pay heed. But even if you aren’t a venture capitalist or a hematologist, you should still spend some time learning about the greatest occurrence of corporate fraud since Enron.  The best place to get all of the best information on this story is John Carreyrou’s “Bad Blood”.

Bad Blood starts out by detailing the childhood and upbringing of Elizabeth Holmes, the nefarious founder of Theranos. Like many great literary villains, the background of Holmes is mired by a dark family history and an incredible pressure to succeed. Holmes is the descendant of wealthy entrepreneurs, but a couple of generations prior to hers saw that money squandered by people in her direct line. I was mildly surprised to find that she was related to a group of very well known Cincinnatians, including Charles Louis Fleischman, Julius Fleischman (former Mayor of Cincinnati), and Dr Christian Holmes.

There are plenty of thoroughly researched anecdotes that help you better understand the kind of person that Elizabeth Holmes is. She knew from a very early age that she wanted to be a billionaire. She had a mandate from her family to make sure she lived a purposeful life – it wasn’t enough to just be rich, she had to do it in an incredibly profound way. Like most teenagers, she struggled with her own issues that arose from not being able to fit in. Elizabeth didn’t start out as a bad person, just an ambitious one who was trying to change the world (and make herself look great in the process).

During this brief introduction of Elizabeth in Bad Blood, it is easy to feel sympathetic for the central character, knowing what is going to come of her. However, once the details of the fraud that she committed start getting revealed, it is clear she is far past receiving any sympathy. Theranos was a blood testing company that claimed it could test for hundreds of ailments with just a tiny prick of the finger. The implications were massive - millions of people could potentially catch ailments like cancer and liver disease much sooner and thus treat them more effectively. The only problem was that the technology didn’t work. As a result, Theranos could provide false positives and negatives to ailing patient, severely affecting how they went about treatment and potentially causing loss of life.

From the very start of her company, there are some very clear examples of mistakes made by Elizabeth and the folks around her. The red flags are so obvious in hindsight that it is alarming no one picked up on them. There are a handful of causes for concern, however, that seem so atrocious that I need to address them.

The first, and to me what seems the most obvious, is the initial decision for Elizabeth to start her own biotechnology company after receiving barely a year of undergraduate education. I understand that the age of college-dropout entrepreneurs was at it’s zenith back then with the semi-recent successes of Jobs, Gates, and others, but biotechnology seems like a field that requires extreme academic background. This decision alone seems to alert everyone in its vicinity that Holmes was reckless and arrogant. Not only was she starting a biotech company, she was solving a problem that had befuddled the entire life-sciences industry for decades. At 19, she felt she knew more than generations of scientists who had devoted their lives to studying the subject.

Another issue should have caused worry for an investor was the ridiculously high employee turnover rate at Theranos. Although the Company’s human capital grew exponentially, it didn’t do a great job of hanging on to employees for very long. There were entire teams that got wiped out because they didn’t live up to ridiculous expectations set by Holmes and her cronies. There was a general theme in the book that anybody who started at Theranos with a legitimately important position that could drive the Company forward probably left within their first two years of employment.  Holmes also fired people for trivial reasons and treated very few people with respect.

The stories about how Elizabeth would react to negative criticism or any sort of inkling of disloyalty perfectly explain why someone wouldn’t want to work there for an extended period of time. She would monitor employee activity without their knowledge and she would give the cold shoulder to anyone she felt wronged her (mostly for petty reasons). She was at times terrible interpersonal communicator and frequently used her “muscle”, Sunny Balwani, to intimidate all sorts of people who crossed her path. It was clear that Holmes had an awful leadership style and she was being motivated by all of the wrong reasons.

A cause for worry was also Holmes’ lack of authenticity. She was doing her best Steve Jobs impression during most of her tenure as CEO. The only problem was that Theranos didn’t need a Steve Jobs; it needed a Steve Wozniak. A company of this nature didn’t need a great salesperson (which Holmes clearly was), it needed a visionary technical mind (which Holmes clearly wasn’t). But Thernaos never really had anyone like that. The technology was based on a pipe-dream that never came to fruition, and when that didn’t work out, Holmes and those she had surrounded herself with, just bullshitted their way to unicorn status. There’s a point in the book where is seems as though Theranos is less concerned with innovating and making a good product and more concerned with keeping up the charade.

However, despite all of these huge glaring issues, it is easy to see why investors and everyone else fell for the ruse. As I mentioned, she was an incredible salesperson. Carreyrou himself wrote that when he finally got a chance to hear her speak at a conference, toward the end of her Theranos reign, he was nervous for the first time about the story he was writing because her presentation had been so convincing that he doubted himself briefly. There are plenty of extremely respectable men, like George Schultz, who fell for her act because she was so good at playing the part. She knew what people wanted and had a captivating way of giving it to them.

Other investors were probably also duped because of how grand the promises were that Holmes made. Everyone wanted technology like this to exist so badly that they probably didn’t want to question it too much. It would also be too big of a thing to lie about – how could anyone conceivably lie about something so incredible? 

After finishing this book, I tweeted out that there were several key lessons we should all take away from Bad Blood. The one that sticks out to me the most is that tech heroes are overrated. The idea that someone is going to change the world and be the only reason your invested capital will compound so incredibly, is a bit of a myth. There are always dozens, it not hundreds or thousands of people that are responsible for a company going from zero to one. Theranos didn’t have anybody it could really rely upon.

It’s impossible to tell if I would have been wise enough as an investor to turn away an opportunity like Theranos had I been given the chance in the moment. However, what I do know now is that after reading Bad Blood, I am better equipped to defend myself against greed, stupidity, and fraud in the future.



Peter G Schmidt