Thursday, 19 September 2019

Book review: Bad Blood: Secrets and Lies in a Silicon Valley Startup, John Carreyrou (2018)

In relation to this engrossing book and the events it recounts, TechCrunch reported on 29 June this year:
Theranos, founded in 2003 by then 19-year-old Stanford dropout [Elizabeth] Holmes, raised more than $700 million from private market investors in what’s been referred to by the Securities and Exchange Commission as an “elaborate, years-long fraud in which they exaggerated or made false statements about the company’s technology, business, and financial performance.”
Carreyrou, who was working for the Wall Street Journal at the time (he has since left the company), started reporting on Theranos in October 2015. A number of official investigations resulted from the Journal’s coverage of the company, including a fraud case its two founders will have to defend in the Federal Court.  This book is much more, however, than just a case study in how not to run a technology startup, although that aspect of the book, in itself, makes it worth the time needed to read it.

It demonstrates the bad faith that can lie behind what, on the face of it, seem to be responsible companies. In this case, the executives of Theranos routinely and repeatedly misled a wide range of people – from potential customers to investors to employees – about the readiness of the equipment that it wanted to manufacture and sell.

Pharmaceutical companies would be able to purchase the machines it was trying to develop – named Edison and “4S” (the name borrowed from Apple’s usage; Holmes idolised Steve jobs) – and install them in the houses of their own customers. These customers, in turn, would be able to use the machines, after taking their medications, to assay their own blood, and the results of the tests would be communicated to the relevant chemical company. The problem was: the machines weren’t commercialised and even the mock-ups that were built would only work sometimes, or not at all.

But the deception went deeper than this (although this is bad enough). Companies like Theranos that have an idea and a business plan don’t just make up results to convince people that their ideas can work. They also often tell the world that they are operating in the interests of the broader community. This is how some mask the pure greed that underpins their activities. By packaging the message that what they’re doing has an altruistic purpose, they can bring people on-side who might baulk at what might otherwise appear to be either wishful thinking or a cynical grab for cash. It’s just another aspect of the PR operation such companies carry out.

Carreyrou is a good journalist but this is a complex story, so you might become disoriented from time to time as you proceed through the narrative. People who have been mentioned earlier might later be referred to by only their given names, and this can lead to feeling a bit lost. In the end, it doesn’t really matter though because the pattern of awful behaviour on the part of the company’s executives is consistent and you roll from one clash, one defection, one firing, to the next. It’s a crapshoot. Some people’s names have been changed to mask their identities and Carreyrou mentions the reasons for this at the outset.

About halfway through the book Carreyrou himself enters the story because he is contacted by a blogger with a specialisation in medical analysis who had been in touch with a former Theranos employee. This blogger wanted to get the Wall Street Journal involved because he was concerned about the lives of ordinary people. Carreyrou then started his investigations, contacting a number of former Theranos employees as well as doctors using Theranos services. When the company got wind of this, they sent in the lawyers to try and kill the story. They also monstered whistleblowers and others who had had relations with the company. Without the ethical position taken by such people, who had to put up with aggressive threats from Theranos and its lawyers, the story would never have got off the ground.

Holmes even went so far as to approach Rupert Murdoch, who controls the company that owns the Journal, and got him to invest in Theranos. But Murdoch, even though asked to do so, refused to kill the story. Murdoch’s principled stance in this story stands out because it is so much at odds with the greed and immorality of other prominent people who came into contact with Theranos. The mystique of internet companies is so widespread now that dodgy operations, like Theranos, are given money by investors keen to get in on a successful play on the ground floor.

The book also shows how the law can be twisted by the rich to protect their own financial interests ahead of the public good. It also shows how personal relationships can be gained through deception and constitute influence peddling. This rewards businesspeople who claim motivations manufactured purely to feed this system. When you drill down to the micro level, it is shown ruining people’s lives. This is just one element of the case described in this worthwhile book.

No comments: