Bad Blood

by John Carreyrou

Troy Shu
Troy Shu
Updated at: April 28, 2024
Bad Blood
Bad Blood

Explore the key insights from "Bad Blood" - the gripping exposé on Theranos's downfall. Learn about the dangers of hype in tech startups, the importance of ethical business practices, and the power of whistleblowers. Discover actionable lessons to apply in your own ventures.

What are the big ideas?

Promises vs. Reality

The book highlights the stark contrast between Theranos's public promises of revolutionary technology and the actual underperformance and unreliability of their devices. It sheds light on the dangers of hype in tech startups and the importance of substantiating claims with solid, peer-reviewed scientific evidence.

Aggressive Corporate Culture

Theranos's corporate culture was marked by secrecy, intimidation, and a lack of transparency, leading to a toxic work environment. This culture stifled dissent and critical feedback which could have corrected course early on.

Legal and Ethical Missteps

The book details the extensive legal and ethical missteps made by Theranos, including the misuse of trade secrets, aggressive litigation against dissenters, and unethical business practices, highlighting the importance of ethical foundations in business operations.

Impact of Media and Public Image

Theranos leveraged media coverage and the charisma of its founder, Elizabeth Holmes, to enhance its public image and secure investments, underscoring the power of media in shaping public perception and business fortunes.

The Role of Regulatory Oversight

The narrative demonstrates the complexities and challenges of navigating regulatory environments in healthcare technology, and how Theranos maneuvered through gaps in regulatory oversight to delay detection of its operational deficiencies.

Whistleblowing and Accountability

The book emphasizes the crucial role of whistleblowers in uncovering the truth about Theranos’s practices, showcasing the challenges they faced from legal threats and surveillance, and the ultimate impact of their courage on the company’s downfall.

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Promises vs. Reality

The book highlights the stark contrast between Theranos's bold public promises of revolutionary technology and the actual underperformance and unreliability of their devices. This sheds light on the dangers of hype and exaggeration in the tech startup world, where companies may make grandiose claims to attract investors and customers, without the scientific evidence to back them up.

The story of Theranos demonstrates the importance of substantiating claims with rigorous, peer-reviewed data. Rather than transparently sharing their technology and validation studies, the company obfuscated and misled, creating an illusion of innovation that ultimately crumbled under scrutiny. This cautionary tale underscores the need for startups, especially in sensitive domains like healthcare, to prioritize substance over style, and to build their reputations on facts, not fiction.

Here are specific examples from the context that illustrate the key insight about the contrast between Theranos's promises and the reality of their technology:

  • The 2007 Pfizer validation study was meant to prove Theranos could accurately measure cancer patients' blood protein levels, but the devices often malfunctioned and the results were inconsistent, threatening to end Pfizer's partnership.

  • During a demo at Novartis in 2008, all three of Theranos's Edison readers produced error messages in front of Swiss executives, despite Elizabeth and Susan spending hours the night before trying to get consistent results.

  • Elizabeth made bold claims that Theranos could run "over 800 tests" on a drop of blood and that its technology was "more accurate than traditional lab testing." However, the Chiat\Day employees learned these claims were not substantiated - the "800 tests" claim was exaggerated, and the "more accurate" claim was based on a flawed logic leap from a study on human error.

  • Theranos refused to provide the full 300-page report they claimed supported their scientific claims, instead only sharing a 2-page summary that misrepresented a meeting with Johns Hopkins as an independent evaluation of their technology.

  • The Chiat\Day employees grew increasingly skeptical of Theranos's ability to actually deliver on the rapid test results and accuracy they were promising in their marketing materials.

The context highlights how Theranos made grandiose public claims about their revolutionary blood testing technology, but the reality was that the devices were unreliable, the science was unproven, and the company struggled to back up its bold promises. This disconnect between hype and reality is a key insight into the dangers of unchecked startup exaggeration.

Aggressive Corporate Culture

Theranos fostered an aggressive corporate culture marked by secrecy, intimidation, and a lack of transparency. This toxic environment stifled dissent and critical feedback that could have helped the company correct course early on.

Theranos employees were expected to maintain strict confidentiality and were threatened by the company's lawyers if they spoke out. For example, when former employee Erika Cheung tried to report concerns to regulators, she was terrified of retaliation and initially hesitated to do so. The aggressive response from Theranos's lawyers, including high-profile attorney David Boies, further reinforced the culture of fear and suppression.

This culture of intimidation extended to the company's leadership as well. Theranos founder Elizabeth Holmes and president Sunny Balwani would publicly berate and humiliate employees who expressed doubts about the company's technology or timeline. This discouraged open dialogue and prevented critical issues from being addressed. Theranos prioritized an illusion of progress over substantive product development and testing.

Here are specific examples from the context that support the key insight about Theranos's aggressive corporate culture:

  • Secrecy and Intimidation:

    • Elizabeth Homes required not just employees, but anyone doing business with Theranos, to sign non-disclosure agreements, indicating a tight control over information flow.
    • After a lawsuit was filed against former employees, the "atmosphere at the office became oppressive" with "document retention emails" and increased surveillance, making employees feel "under surveillance."
    • When an employee was caught using a USB drive, they were immediately fired, demonstrating a culture of harsh punishment for minor infractions.
  • Lack of Transparency:

    • When a CMS inspector visited Theranos, Elizabeth Holmes and Sunny Balwani were evasive about the company's plans, contradicting what had been communicated to the FDA.
    • Theranos hid the fact that it was outsourcing some tests to a third-party lab, rather than performing all tests in-house as it had implied.
  • Stifling Dissent and Feedback:

    • When engineer Greg Banik expressed skepticism about the company's rushed approach, Elizabeth Holmes called him into her office and told him to stop being "cynical", indicating she did not welcome critical feedback.
    • Sunny Balwani was described as a "tyrant" who "fired people so often" that it became a routine in the office, suggesting a culture of fear that discouraged employees from voicing concerns.

The aggressive, secretive, and intimidating corporate culture at Theranos prevented the company from receiving the critical feedback and transparency it needed to course-correct early on, ultimately contributing to its downfall.

The book reveals the extensive legal and ethical missteps made by Theranos. The company misused trade secrets, engaging in aggressive litigation against dissenters who tried to expose its unethical practices. This highlights the critical importance of strong ethical foundations in business operations.

Theranos threatened and intimidated former employees like Erika Cheung and Alan Beam, who had tried to share information about the company's problems. The company's lawyers, led by the high-profile David Boies, sent aggressive cease-and-desist letters and pursued legal action to silence critics. This unethical suppression of information prevented the public from learning about Theranos's issues earlier.

Additionally, the book describes how Theranos leadership, particularly Elizabeth Holmes, misled the board of directors about the company's finances and technology capabilities. They exaggerated revenue projections and hid the unfinished state of their products. This deception of key stakeholders is a serious ethical breach that undermines trust in a company.

The Theranos case underscores how ethical conduct must be a core part of a company's operations, not an afterthought. Businesses that prioritize profits over principles often end up causing harm and damaging their own long-term success. Ethical foundations are crucial for maintaining credibility and building sustainable growth.

Here are specific examples from the context that support the key insight about Theranos's legal and ethical missteps:

  • Aggressive Litigation Against Dissenters: When former Theranos employees Todd O'Connell and Howard formed a competing company called Avidnostics, Theranos quickly filed a 14-page lawsuit against them requesting a temporary restraining order and monetary damages. This aggressive legal action was driven by Elizabeth Holmes' "worst suspicions" about proprietary information leaking out.

  • Unethical Business Practices: Theranos required not just employees, but anyone who entered their offices or did business with them, to sign non-disclosure agreements. This tight control over information flow created an "oppressive" atmosphere at the company. One employee was even fired for trying to use a USB drive, demonstrating Theranos' extreme measures to prevent information from getting out.

  • Misuse of Trade Secrets: When the Wall Street Journal was preparing to publish an article with information from former Theranos employee Tyler Shultz, the company sent two aggressive lawyers to confront him. They accused him of violating his confidentiality obligations and threatened legal action, despite Tyler's denials. This shows Theranos was willing to misuse trade secret claims to intimidate and silence critics.

  • Ethical Foundations in Business: The context highlights how Theranos' legal and ethical missteps, like the aggressive litigation and unethical information control, created an unhealthy work environment and damaged the company's credibility. This underscores the importance of having strong ethical foundations in business operations.

Impact of Media and Public Image

Theranos expertly leveraged media coverage and the charismatic persona of its founder, Elizabeth Holmes, to enhance its public image and secure lucrative investments. This underscores the immense power of media in shaping public perception and driving business fortunes.

Through a coordinated marketing blitz, Theranos positioned Holmes as a young, visionary female entrepreneur breaking new ground in the male-dominated tech industry. Fawning media coverage in prestigious outlets like Forbes, Fortune, and the Wall Street Journal helped cement this narrative, despite the company's questionable technology and practices.

The relentless media exposure transformed Holmes into a celebrity figure, complete with bodyguards, a private jet, and other trappings of fame. This public persona, carefully crafted by Theranos's marketing team, proved instrumental in attracting high-profile investors and partners, even in the absence of substantive evidence about the company's capabilities.

Ultimately, Theranos's success in leveraging media and public image to its advantage, despite the underlying realities, underscores the outsized influence that perception can have on business outcomes in the modern era. This cautionary tale highlights the need for critical scrutiny of claims and narratives, rather than uncritical acceptance of media-driven hype.

Here are specific examples from the context that support the key insight about Theranos leveraging media coverage and Elizabeth Holmes' charisma to enhance its public image and secure investments:

  • Elizabeth Holmes' performance at the TEDMED conference was described as "mesmerizing" - she strode solemnly around the stage, pulled out a "nanotainer" to illustrate Theranos' technology, and told touching anecdotes that resonated with the audience of 1,000 spectators.

  • Patrick O'Neill, Theranos' chief creative officer, helped hone Elizabeth Holmes' image and raise her profile, including by working with Fortune magazine on a cover shoot.

  • The media coverage of Elizabeth Holmes and Theranos exploded after the Fortune article, with fawning stories appearing in numerous publications like Forbes, USA Today, Inc., and Glamour. This coverage helped cement Elizabeth Holmes' status as the "youngest woman to become a self-made billionaire."

  • Elizabeth Holmes embraced the limelight, giving frequent media interviews and public appearances, in contrast to other startup founders. This ubiquitous celebrity presence further amplified Theranos' public image.

  • Elizabeth Holmes used personal anecdotes, like the story of her uncle's death from cancer, to make Theranos' mission more poignant and compelling during her public speeches.

  • Theranos' marketing push in Arizona, including TV commercials featuring Elizabeth Holmes, helped raise the company's profile and attract customers to its Walgreens wellness centers.

  • The positive media coverage and Elizabeth Holmes' charisma were key factors that convinced investors like Rupert Murdoch to invest in Theranos, despite a lack of rigorous due diligence on their part.

The Role of Regulatory Oversight

The narrative highlights the critical role of regulatory oversight in the healthcare technology industry. It reveals how Theranos exploited gaps and ambiguities in the regulatory framework to delay the detection of its operational deficiencies.

The story illustrates how Theranos attempted to circumvent the oversight of the Food and Drug Administration (FDA) by claiming its proprietary blood testing devices did not require FDA approval. Instead, the company sought to operate under a single Clinical Laboratory Improvement Amendments (CLIA) certificate, which would have allowed it to deploy the devices widely without proper regulatory review.

However, FDA officials recognized this approach as a "regulatory end run" that they were determined to prevent. The narrative demonstrates how the FDA and the Centers for Medicare and Medicaid Services (CMS) collaborated to scrutinize Theranos's practices and identify potential violations, underscoring the importance of inter-agency coordination in effective regulatory oversight.

The story also highlights the challenges posed by underfunded and understaffed state-level laboratory inspection programs, which allowed Theranos to obtain a CLIA certificate despite operational deficiencies in its laboratory. This reveals the need for robust and well-resourced regulatory frameworks to ensure the safety and reliability of healthcare technologies.

Here are examples from the context that illustrate the key insight about the role of regulatory oversight in the Theranos story:

  • The Theranos lab in Palo Alto obtained a CLIA certificate, which attests to compliance with federal lab regulations, but these certificates were not difficult to obtain as the regulatory oversight by the California Department of Health was underfunded and struggling.
  • When CMS inspector Gary Yamamoto visited the Theranos lab, he found no clear violations in how Theranos was operating at the time, despite concerns raised by the FDA about Theranos' plans to deploy its uncleared devices. This highlights gaps in regulatory oversight.
  • CLIA certificates are required for clinical labs, but Yamamoto emphasized that if Theranos wanted to deploy its devices to other locations, those locations would also need CLIA certificates, or the devices themselves would need FDA approval - indicating regulatory requirements Theranos was trying to circumvent.
  • The narrative describes how the FDA's "regulatory end run" approach, as described in the email from Shoemaker, was exactly the type of practice that the FDA's Alberto Gutierrez wanted to put a stop to, demonstrating Theranos' attempts to bypass proper regulatory channels.

These examples illustrate how Theranos leveraged gaps and limitations in the regulatory environment, particularly between the FDA and CMS, to delay detection of its operational and technological deficiencies.

Whistleblowing and Accountability

Whistleblowers played a vital role in exposing the truth about Theranos. They risked their careers and faced intense legal pressure and surveillance from the company in order to share information with journalists. Their courageous actions ultimately contributed to the downfall of Theranos.

Whistleblowers are individuals who come forward to reveal wrongdoing or unethical practices within an organization. In the case of Theranos, former employees like Alan Beam and Tyler Shultz chose to speak out about the company's questionable blood testing practices and misleading claims, despite facing threats of legal action.

The book highlights the challenges these whistleblowers encountered. Theranos responded aggressively, sending lawyers to intimidate them and demand they cease all communication with journalists. The whistleblowers faced the prospect of ruined careers and even lawsuits if they continued to share information.

Despite the risks, the whistleblowers persisted. Their revelations, combined with investigative journalism, were instrumental in uncovering the truth about Theranos's faulty technology and deceptive business practices. This ultimately led to the company's downfall, demonstrating the vital role whistleblowers can play in holding organizations accountable.

The Theranos story underscores the importance of accountability and the need for individuals to be willing to speak up, even in the face of significant pressure and threats. Whistleblowers play a crucial part in ensuring transparency and exposing wrongdoing, which is essential for maintaining the integrity of businesses and institutions.

Here are specific examples from the context that support the key insight about the crucial role of whistleblowers in uncovering the truth about Theranos:

  • Todd Surdey and Michael Esquivel, two Theranos employees, became convinced the board was being misled about the company's finances and technology. They approached Tom Brodeen, a Theranos board member, to share their concerns about Elizabeth Holmes' exaggerated revenue projections.

  • Tyler Shultz, a former Theranos employee, was extremely worried about the company's inaccurate blood test results and wanted to hasten the exposure of Theranos to protect his grandfather George Shultz's reputation. Tyler smuggled out emails documenting the issues at Theranos.

  • Carmen Washington, a Walgreens employee, lost faith in Theranos's finger-stick tests after experiencing issues with the accuracy of the results. Her story helped the journalist uncover problems with Theranos.

  • Nicole Sundene, a family practitioner in Phoenix, was very unhappy with Theranos after sending a patient to the ER due to a concerning lab report from the company that turned out to be a false alarm.

These whistleblowers faced significant challenges, including legal threats and surveillance from Theranos, but their courage in coming forward was crucial in ultimately exposing the truth about the company's practices and contributing to its downfall.


Let's take a look at some key quotes from "Bad Blood" that resonated with readers.

When the officer asked what he’d taken, Sunny blurted out in his accented English, “He stole property in his mind.

The accused is denying any physical theft, instead suggesting that the alleged thief had only taken an idea or concept. This response implies that the accused believes the stolen property is intangible and exists only in the mind of the perpetrator. The tone is defensive, with a hint of confusion and possibly even innocence.

A sociopath is often described as someone with little or no conscience. I’ll leave it to the psychologists to decide whether Holmes fits the clinical profile, but there’s no question that her moral compass was badly askew. I’m fairly certain she didn’t initially set out to defraud investors and put patients in harm’s way when she dropped out of Stanford fifteen years ago. By all accounts, she had a vision that she genuinely believed in and threw herself into realizing. But in her all-consuming quest to be the second coming of Steve Jobs amid the gold rush of the “unicorn” boom, there came a point when she stopped listening to sound advice and began to cut corners. Her ambition was voracious and it brooked no interference. If there was collateral damage on her way to riches and fame, so be it.

A driven individual, consumed by ambition, may initially have good intentions but eventually compromise their values to achieve success. As they become more focused on their goal, they start to disregard sound advice and take shortcuts, even if it means harming others. Their relentless pursuit of power and recognition leads them to prioritize their own interests over the well-being of those around them. Ultimately, their moral principles are overshadowed by their insatiable desire for success.

Hyping your product to get funding while concealing your true progress and hoping that reality will eventually catch up to the hype continues to be tolerated in the tech industry.

In the tech industry, it's a common practice to exaggerate the capabilities of a product to secure investments. This involves hiding the actual progress and hoping that the reality will eventually match the inflated claims. Unfortunately, this deceptive behavior is often accepted and even encouraged, leading to unrealistic expectations and potential disasters.

Comprehension Questions

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How well do you understand the key insights in "Bad Blood"? Find out by answering the questions below. Try to answer the question yourself before revealing the answer! Mark the questions as done once you've answered them.

1. What are the risks associated with startups making unsubstantiated technological claims?
2. Why is it crucial for technologies, especially in healthcare, to be backed by rigorous, peer-reviewed data?
3. How can the disconnect between a company's public promises and the actual performance of its technology affect its relationship with partners and stakeholders?
4. What are the characteristics of an aggressive corporate culture that stifles dissent?
5. How can insufficient transparency impact a company's development and testing processes?
6. What effects can a culture of intimidation have on employee behavior and company progress?
7. What are the consequences of a business prioritizing profit over ethical practices?
8. How can aggressive litigation against dissenters impact a company?
9. Why is it important for businesses to have a strong ethical foundation?
10. What does the misuse of trade secrets indicate about a company's ethical practices?
11. How did media coverage influence the success of a company despite questionable technologies and practices?
12. Why is it important for investors and the public to apply critical scrutiny to media narratives around companies?
13. What role did the founder's public persona play in attracting investments?
14. How can the portrayal of a company in prestigious media outlets affect its business prospects?
15. How did Theranos attempt to circumvent FDA oversight?
16. What were the consequences of understaffed state-level laboratory inspection programs for Theranos?
17. Why is inter-agency coordination essential in regulatory oversight of healthcare technologies?
18. What role do whistleblowers play in maintaining organizational integrity?
19. Why might whistleblowers face significant challenges after revealing information about wrongdoing?
20. What impact can the actions of whistleblowers have on a company engaged in unethical practices?

Action Questions

0 / 8

"Knowledge without application is useless," Bruce Lee said. Answer the questions below to practice applying the key insights from "Bad Blood". Mark the questions as done once you've answered them.

1. How can you verify the credibility of a company's claims before investing in or using their products?
2. How can you foster a company culture that encourages transparency and the free exchange of ideas?
3. How can organizations establish and uphold strong ethical standards to prevent misconduct and deception in their operations?
4. How can organizations ensure ethical use of media publicity to positively influence their reputation without misleading stakeholders?
5. What strategies can individuals adopt to critically assess the credibility of media-reported stories about new businesses and entrepreneurs?
6. How can consumers and professionals actively ensure that healthcare technologies they rely on are adequately regulated?
7. What steps can you take to promote the enhancement of regulatory oversight in your community or professional realm?
8. What actions can you take to foster a culture of transparency and support for whistleblowers in your workplace or community?

Chapter Notes

1. A Purposeful Life

  • Elizabeth Holmes' Ambition and Entrepreneurial Drive: From a young age, Elizabeth Holmes exhibited a strong desire to become a successful entrepreneur and billionaire. She was determined to make her mark on the world and saw entrepreneurship as a means to achieve this goal.

  • Family Background and Influence: Elizabeth's family background, particularly her father's side, instilled in her a sense of purpose and the importance of accomplishing something meaningful. Her family's history of entrepreneurship and success in business and medicine inspired her to pursue a similar path.

  • Early Life and Education: Elizabeth spent her early years in Washington, D.C. and Houston, where she attended a prestigious private school. She excelled academically, particularly in science and technology, and developed a strong interest in biotechnology and entrepreneurship. Her connections to Stanford University and the Silicon Valley ecosystem further fueled her ambitions.

  • Dropping Out of Stanford and Founding Theranos: During her freshman year at Stanford, Elizabeth decided to drop out and start her own company, Theranos, which aimed to revolutionize the diagnostic industry. She leveraged her family connections to secure early funding and assemble a team, including a Ph.D. student named Shaunak Roy.

  • Theranos' Initial Concept and Challenges: Theranos' initial concept was an adhesive patch that could diagnose and treat medical conditions. However, this idea proved to be technologically challenging, and the company pivoted to a cartridge-and-reader system that aimed to provide a more feasible solution for blood testing.

  • Securing Funding and Early Growth: Despite facing skepticism from some venture capital firms, Elizabeth was able to raise nearly $6 million in funding from a diverse group of investors, including family members, a venture capitalist, and a real estate and private equity investor. This allowed Theranos to grow to around two dozen employees by late 2005 and begin developing its prototype device.

  • Emerging Buzz and Optimism: As Theranos progressed, the company started to attract some positive attention, with Elizabeth referring to it as "the hottest start-up in the valley" in a holiday email to employees. This early success and recognition fueled the team's optimism and drive to continue developing their innovative technology.

2. The Gluebot

Here are the key takeaways from the chapter:

  • Theranos's Ambitious Vision: Theranos aimed to develop a revolutionary blood-monitoring technology that could tailor drugs to individuals and eliminate adverse drug reactions, which were estimated to cause 100,000 deaths per year in the US.

  • Engineering Challenges: Theranos faced significant engineering challenges in developing a functional prototype that could reliably perform blood tests using only a tiny drop of blood, as Elizabeth Holmes insisted. The small blood volume, complex microfluidics, and need for precise fluid flow and chemical reactions made this an extremely difficult engineering problem.

  • Conflict Between Engineering Teams: Elizabeth Holmes pitted two competing engineering teams against each other, with Ed Ku's team working on the original microfluidic design and Tony Nugent's team developing a new "gluebot" system based on a commercial robotic arm. This created tension and an unproductive work environment.

  • Lawsuit Against Former Employees: Theranos filed a lawsuit against three former employees who had started a competing company, Avidnostics, which was similar to Theranos. This led to a tense and oppressive atmosphere at the company, with increased security measures and employee surveillance.

  • Abandonment of Microfluidics: Despite the lawsuit to protect the microfluidic technology, Theranos ultimately decided to abandon that approach in favor of Tony Nugent's "gluebot" system, which used a commercial robotic arm to automate the blood testing process. This was a significant shift away from the original vision.

  • Rushed Deployment and Lack of Safety Review: Theranos rushed to deploy the new "Edison" system, which was based on the "gluebot" prototype, without a thorough safety review. The system was labeled as "for research use only," indicating it was not a finished product ready for clinical use.

  • High Employee Turnover: Theranos experienced high turnover among both rank-and-file employees and top executives, with little explanation provided for their departures. This created an unnerving work environment.

3. Apple Envy

Here are the key takeaways from the chapter:

  • Apple Envy: Elizabeth Holmes, the founder of Theranos, was deeply inspired by Apple and its iconic founder Steve Jobs. She tried to emulate Apple's design and branding in building Theranos, even going so far as to recruit several Apple employees to join her company.

  • Ethical Concerns: There were growing concerns among Theranos employees about the company's practices, particularly around the Tennessee cancer study. Employees felt the technology was not ready for real-world testing on patients, but Elizabeth pushed ahead with the study anyway.

  • Dysfunctional Culture: Theranos had a very secretive and controlling culture, with strict information silos, employee monitoring, and a general lack of transparency. This created a stressful work environment and hampered communication and collaboration.

  • Board Conflicts: Avie Tevanian, a Theranos board member and former Apple executive, began to have serious doubts about the company's financial projections, product development, and overall management. When he raised these concerns, he faced pushback and even threats of legal action from the board and Elizabeth.

  • Shaunak Roy's Departure: Shaunak Roy, Theranos' first employee and a de facto co-founder, was leaving the company and selling most of his shares back to Elizabeth at a significant discount. Avie tried to exercise his rights to buy some of these shares, but was met with hostility and threats of legal action.

  • Lack of Accountability: The Theranos board, led by the influential venture capitalist Don Lucas, seemed unwilling to provide proper oversight and challenge Elizabeth's leadership, even in the face of growing concerns raised by Avie and others.

Key terms:

  • Apple Envy: Elizabeth Holmes' strong admiration and desire to emulate the success of Apple and Steve Jobs.
  • Ethical Concerns: Worries about the company's practices, particularly around testing unproven technology on real patients.
  • Dysfunctional Culture: The secretive, controlling, and stressful work environment at Theranos.
  • Board Conflicts: The tensions and disagreements between Avie Tevanian and the Theranos board, particularly around financial and product development issues.
  • Shaunak Roy's Departure: The departure of Theranos' first employee and the controversy around the sale of his shares.
  • Lack of Accountability: The Theranos board's apparent unwillingness to provide proper oversight and challenge Elizabeth Holmes' leadership.

4. Goodbye East Paly

  • Theranos' Move to Palo Alto: Theranos moved its office from East Palo Alto, a less affluent area, to Palo Alto, a more prestigious and affluent location in Silicon Valley. This move was seen as a sign of the company's growth and ambition.

  • Chaos and Unpredictability at Theranos: The chapter describes several instances of chaos and unpredictability at Theranos, such as Elizabeth Holmes' last-minute demand to move the office overnight and her tendency to fire employees abruptly.

  • Matt Bissel's Departure: Matt Bissel, the head of IT, decided to leave Theranos due to the company's chaotic culture and Elizabeth Holmes' demands for absolute loyalty, including asking him to build dossiers on terminated employees.

  • Issues with the Edison Prototypes: Aaron Moore and Mike Bauerly conducted informal user testing of the Edison prototypes and found that the process of drawing blood and transferring it to the cartridge was much more difficult than Theranos had anticipated.

  • Concerns about Theranos' Finances and Technology: Todd Surdey and Michael Esquivel raised concerns with the board about Theranos' inflated revenue projections and the unfinished state of the company's technology, leading to a board meeting where they attempted to remove Elizabeth Holmes as CEO.

  • Elizabeth Holmes' Survival of the Board Coup: Despite the board's initial decision to remove her as CEO, Elizabeth Holmes was able to convince the board members to change their minds and keep her in power.

  • Departure of the Apple Contingent: Several employees who had previously worked at Apple, including Justin Maxwell, Aaron Moore, and Mike Bauerly, left Theranos due to the company's chaotic culture and lack of transparency.

5. The Childhood Neighbor

Here are the key takeaways from the chapter:

  • Childhood Neighbors: The Holmes and Fuisz families were neighbors in Washington, D.C. in the 1980s, and their mothers, Noel and Lorraine, became close friends. The fathers, Chris Holmes and Richard Fuisz, had a more strained relationship due to differences in their financial situations.

  • Fuisz's Background: Richard Fuisz was a successful medical inventor and entrepreneur who had sold a company for over $50 million. He was known for his big ego and tendency to hold grudges, as evidenced by his long-running feud with the CEO of Baxter International.

  • Fuisz's Patent Filing: After learning about Theranos and Elizabeth Holmes' work from Noel, Fuisz decided to file a patent application for a technology that would alert doctors if a patient's at-home blood test results deviated from their normal parameters. This was seen as a potential threat to Theranos.

  • Deteriorating Relationship: The relationship between the Holmes and Fuisz families deteriorated after Fuisz's patent filing, with the two couples having tense interactions and Noel and Lorraine's friendship fraying.

  • Chris Holmes Seeks Legal Advice: Concerned about Fuisz's patent, Chris Holmes sought legal advice from his friend Chuck Work, a partner at the law firm McDermott Will & Emery. This led to a meeting between Elizabeth Holmes and the firm, where she raised the possibility that Fuisz's son John, who worked at the firm, may have leaked confidential information.

  • McDermott's Decision: Despite Elizabeth's concerns, McDermott decided not to represent Theranos against Fuisz, citing the potential conflict of interest due to John Fuisz's position at the firm.

6. Sunny

  • Chelsea's Disillusionment with Theranos: Chelsea, one of Elizabeth's best friends from Stanford, joined Theranos in 2009 to work in the client solutions group. However, she quickly became disillusioned with the company's practices, particularly the erratic performance of the Edison blood-testing devices and the aggressive, demeaning management style of Sunny Balwani, Elizabeth's boyfriend and a senior Theranos executive.

  • Sunny Balwani's Problematic Behavior: Sunny Balwani, who was nearly two decades older than Elizabeth, exhibited a range of concerning behaviors at Theranos. He was boastful, patronizing, and aggressive towards employees, frequently berating and "disappearing" them. He also had a questionable legal history, including a tax evasion settlement with the IRS.

  • Theranos' Questionable Validation Studies: Chelsea was sent to Belgium and Mexico to oversee validation studies of the Edison device, but she encountered numerous technical issues, including mechanical failures and problems with wireless data transmission. These issues raised doubts about the reliability of the Theranos technology.

  • Theranos' Reckless Expansion and Disregard for Regulations: Theranos expanded its operations to Mexico and Thailand, often in questionable ways, such as potentially paying bribes to obtain blood samples. The company also encouraged a Stanford student's father to use Theranos' unproven technology to test for cancer, despite the lack of scientific validation.

  • Chelsea's Resignation and Concerns for Elizabeth: Ultimately, Chelsea decided to resign from Theranos, citing the commute and her boyfriend's location in Los Angeles. However, she was also deeply concerned about Elizabeth's unwavering trust in Sunny and the company's disregard for ethical and regulatory considerations.

7. Dr. J

Here are the key takeaways from the chapter:

  • Silicon Valley's Technology Boom: As the rest of the country struggled with the economic recession, a new technology boom was taking place in Silicon Valley, fueled by the success of companies like Facebook and Twitter, the rise of mobile computing, and low interest rates that drove investors to seek higher returns in the startup world.

  • Walgreens' Interest in Theranos: Walgreens, a 109-year-old drugstore chain, was looking to innovate and saw Theranos's technology as a potential game-changer. Theranos claimed to have developed small devices capable of running any blood test from a few drops of blood, at a lower cost than traditional laboratories.

  • Concerns Raised by Walgreens Consultant: Kevin Hunter, a lab consulting expert hired by Walgreens, raised several red flags during his interactions with Theranos. These included being denied access to Theranos's lab, the company's refusal to demonstrate its technology, and inconsistencies in its regulatory strategy and claims about validation by pharmaceutical companies and Johns Hopkins University.

  • Walgreens Executives' Enthusiasm: Despite Hunter's concerns, Walgreens executives like Dr. J and Wade Miquelon were enthusiastic about the Theranos partnership, with Dr. J even comparing it to a "game-changer" that could detect diseases like breast cancer early. This enthusiasm seemed to override their willingness to thoroughly vet the technology.

  • Safeway's Deal with Theranos: Theranos also struck a deal with Safeway, another major retailer, to install its blood-testing clinics in Safeway stores. Safeway CEO Steve Burd was impressed by Elizabeth Holmes and saw the partnership as a way to improve the company's health and wellness offerings.

  • Walgreens' Rivalry with CVS: Walgreens's fear of missing out on a potentially transformative technology like Theranos, driven by its rivalry with CVS, appeared to be a factor in its decision-making process, despite the concerns raised by its consultant.

8. The miniLab

Here are the key takeaways from the chapter:

  • Miniaturization of Existing Lab Technology: The miniLab was designed to miniaturize existing laboratory instruments like spectrophotometers, cytometers, and isothermal amplifiers, in order to bring blood testing out of central labs and into more accessible locations like drugstores and homes. This was not a groundbreaking scientific innovation, but rather an engineering challenge of integrating and shrinking these established technologies.

  • Conflict Between Prototype and Finished Product: Elizabeth and Sunny struggled to distinguish between a prototype and a finished product, rushing to build and deploy the miniLab before it was thoroughly tested and refined. This led to issues like thermal problems that required extensive testing to resolve, but Sunny was impatient and pushed for rapid deployment.

  • Nepotism and Favoritism: Elizabeth hired her brother Christian and several of his fraternity brothers from Duke, giving them preferential treatment and access over other employees, despite their lack of relevant experience. This created a divide between the "Frat Pack" and other employees.

  • Obsession with Steve Jobs: Elizabeth was fascinated by Steve Jobs and tried to emulate his management style and behaviors, even going so far as to give the miniLab a Jobs-inspired code name ("4S").

  • Toxic Work Culture: Theranos had a highly dysfunctional and toxic work culture, with Sunny as a tyrannical manager who frequently fired employees, and Elizabeth expecting total dedication and loyalty from her staff, even to the point of punishing them for pursuing outside interests.

  • Disillusionment of Employees: As Greg and other employees became disillusioned with the company's practices and the disconnect between Elizabeth's claims and the reality of the miniLab's development, they began to question the integrity of the leadership and the company's overall direction.

Key terms:

  • Miniaturization: The process of making something smaller, in this case, shrinking existing laboratory instruments to fit into the compact miniLab device.
  • Prototype: An early, unfinished version of a product that is used for testing and refinement before the final version is developed.
  • Nepotism: The practice of favoring relatives or friends, especially by giving them jobs.
  • Favoritism: The practice of giving unfair preferential treatment to certain individuals or groups.

9. The Wellness Play

Here are the key takeaways from the chapter:

  • Safeway's Partnership with Theranos: Safeway had a secret partnership with Theranos, code-named "Project T-Rex", where Theranos was supposed to provide its novel blood testing technology to Safeway's wellness centers in their stores. Safeway invested $350 million to remodel over half of its 1,700 stores to accommodate these wellness centers.

  • Delays and Issues with the Partnership: The partnership faced numerous delays, with Theranos repeatedly pushing back the launch date. Safeway executives grew increasingly frustrated as the wellness centers sat idle, occupying valuable real estate in their stores.

  • Concerns Raised by Safeway's Chief Medical Officer: Safeway's Chief Medical Officer, Kent Bradley, raised several concerns about the accuracy and reliability of Theranos' blood testing services. He found discrepancies between Theranos' test results and those from other labs, and some employees received abnormal results that were later found to be inaccurate.

  • Issues with Theranos' Lab Operations: The Theranos lab in Palo Alto was found to have significant issues, including poorly trained staff, use of expired reagents, and improper handling of blood samples. An employee, Diana Dupuy, was fired for raising these concerns.

  • Departure of Safeway's CEO: Safeway's long-time CEO, Steve Burd, who was a strong proponent of the Theranos partnership, was forced to retire. After his departure, communication with Theranos became more difficult, and Safeway executives were hesitant to walk away from the partnership due to the fear of missing out on a potentially game-changing technology.

  • Burd's Post-Retirement Efforts: After retiring from Safeway, Burd founded a consulting firm called Burd Health to advise companies on reducing healthcare costs. He tried to reconnect with Elizabeth Holmes, but she no longer returned his calls.

10. “Who Is LTC Shoemaker?”

  • Lieutenant Colonel David Shoemaker: Shoemaker was a senior army officer with a Ph.D. in microbiology and extensive experience in medical research and regulatory affairs. He was the army's resident expert on FDA regulations and was responsible for ensuring the army's compliance with all laws and regulations when experimenting with medical devices.

  • Theranos's Regulatory Strategy: Theranos had a novel regulatory strategy that involved bypassing the FDA's review process. The company claimed that its blood-testing devices were merely "remote sample-processing units" and that the real work of blood analysis would take place in its CLIA-certified lab in Palo Alto. Theranos also argued that the blood tests its devices performed were laboratory-developed tests (LDTs) and therefore beyond the FDA's purview.

  • Shoemaker's Objections: Shoemaker strongly disagreed with Theranos's regulatory approach, which he believed was not going to "fly" with the FDA. He insisted that Theranos would need to go through the FDA's review process and obtain the agency's approval before deploying its devices, especially for use on military personnel.

  • CMS Inspection: After Shoemaker reached out to the FDA for guidance, the Centers for Medicare and Medicaid Services (CMS) sent an inspector to Theranos's offices in Palo Alto. The inspector found no clear violations in Theranos's current operations, but reiterated that the company's proposed regulatory strategy was not compliant with federal regulations.

  • Mattis and the Proposed Field Test: General James Mattis, the head of the U.S. Central Command, was eager to deploy Theranos's technology on the battlefield in Afghanistan, believing it could be a "game-changer" for his troops. However, Shoemaker and FDA official Alberto Gutierrez were able to convince Mattis that a live field test would not be possible without going through the proper regulatory channels, including obtaining informed consent from the soldiers.

  • Compromise Solution: Shoemaker and Gutierrez proposed a "limited objective experiment" using leftover, de-identified blood samples from soldiers, which would not require informed consent. This compromise solution allowed for some testing of the Theranos technology without violating regulations.

  • Theranos's Inaction: Despite the compromise solution, Theranos failed to take advantage of the opportunity and did not initiate the proposed study using the leftover blood samples. This inaction continued even after General Mattis retired and the army officer who had been overseeing the project, Colonel Erin Edgar, took on a new assignment.

11. Lighting a Fuisz

Here are the key takeaways from the chapter:

  • Theranos Sues the Fuisz Family: Theranos filed a lawsuit against Richard Fuisz and his sons, Joe and John, alleging that they conspired to steal confidential patent information from Theranos and used it to file their own rival patent. The lawsuit was led by the famous lawyer David Boies.

  • Surveillance and Intimidation Tactics: After the lawsuit was filed, the Fuisz family noticed they were under surveillance, with private investigators hired by Boies following them and taking pictures of their homes. This unnerved the family, particularly Richard's wife, Lorraine, who became convinced the Holmeses were trying to bankrupt them.

  • Boies's Aggressive Litigation Strategy: Boies was known for his aggressive litigation tactics, and he planned to use aspects of John Fuisz's past, such as his involvement in a document-related dispute at his former law firm, to sow doubts about him in the minds of a judge or jury.

  • Dismissal of Claims Against John Fuisz: The judge in the case dismissed all claims against John Fuisz, ruling that the statute of limitations had expired. However, Boies was still able to use the narrative of collusion between father and son to argue his case against Richard and Joe Fuisz.

  • John Fuisz's Anger and Threat of Revenge: John Fuisz became increasingly angry about the case, which had cost him several clients. During his deposition, he made a threat to seek revenge against Elizabeth Holmes and "fuck with her till she dies," which played into Boies's hands.

  • Expensive Litigation and Boies's Alternative Fee Arrangement: The Fuisz family was concerned about the high cost of the litigation, which was costing them around $150,000 per month. Meanwhile, Boies had accepted stock in Theranos as payment for his services, giving him a vested financial interest in the company.

  • Suspicion Surrounding Ian Gibbons: Richard Fuisz and his son Joe noticed that some of the patents credited to Ian Gibbons, a scientist who was a co-inventor on many of Theranos's patents, were similar to Theranos's patents. They wanted to depose Gibbons, but Boies's team kept ignoring their requests, raising the Fuiszes' suspicions.

12. Ian Gibbons

Here are the key takeaways from the chapter:

  • Ian Gibbons was an experienced scientist hired by Elizabeth Holmes to lead Theranos's chemistry work: He was recommended by Elizabeth's Stanford mentor, Channing Robertson, and had previously worked with Robertson at Biotrack. Ian and Gary Frenzel, another scientist at Theranos, had a good working relationship despite their contrasting personalities.

  • Ian was meticulous and passionate about his work, but had issues with Elizabeth's management style and the company's technology: He insisted that the blood tests performed as accurately in Theranos's devices as they did in the lab, which caused tensions with the engineers. He also disagreed with Elizabeth's practice of siloing different teams and discouraging communication.

  • Ian's frustrations with the company led to his temporary firing and demotion: After complaining to his old friend Channing Robertson, who then informed Elizabeth, Ian was fired but later offered his job back in a reduced role. This demotion and the subsequent loss of his private office were humiliating for him.

  • Ian's mental health deteriorated as he became increasingly marginalized at Theranos: He grew sullen and despondent, and confided in his colleague Tom Brumett that the company felt like a "folie à deux" (a shared delusion) between Elizabeth and Sunny Balwani. Ian stopped coming into the office regularly and was eventually subpoenaed to testify in the Fuisz patent lawsuit.

  • Ian's declining mental state led to his suicide: Overwhelmed by the prospect of the deposition and his diminished role at the company, Ian took his own life by overdosing on acetaminophen. His death was handled coldly by Theranos, with no memorial service held and his colleagues left unaware of the circumstances.

  • Tony Nugent, another Theranos employee, tried to honor Ian's memory: Upset by the lack of empathy shown by the company, Tony sent an email to his colleagues listing Ian's patents and including a photo of him, in an effort to ensure he was remembered.

13. Chiat\Day

  • Chiat\Day's Involvement with Theranos: Chiat\Day, a prominent advertising agency, was hired by Theranos to create a brand identity, build a new website, and develop a smartphone app for the company's upcoming commercial launch of its blood-testing services. The agency's creative director, Patrick O'Neill, was particularly drawn to Elizabeth Holmes and the Theranos mission.

  • Secrecy and Confidentiality Measures: Theranos insisted on absolute secrecy and confidentiality measures for the project, similar to Apple's approach. This included numbered and logged materials, a locked room for storage, dedicated printers, and strict restrictions on sharing information with anyone outside the core team.

  • Concerns Raised by Chiat\Day Employees: As the project progressed, Chiat\Day employees Kate Wolff and Mike Peditto began to develop concerns about Theranos's claims and the lack of substantiation provided. They questioned the accuracy of statements about the company's technology and the logistical system for transporting blood samples.

  • Last-Minute Website Revisions: In the final hours before the website launch, Theranos made numerous last-minute revisions to the content, systematically dialing back the bold, affirmative statements that Elizabeth Holmes had initially wanted. This further reinforced the Chiat\Day team's doubts about the company's capabilities.

  • Diverging Perspectives within Chiat\Day: While Kate and Mike expressed growing skepticism, the agency's higher-ups, Carisa and Patrick, remained smitten with Elizabeth Holmes and the Theranos project. Patrick, in particular, saw it as a potential legacy moment, dismissing the concerns raised by his team.

  • Tension with Sunny Balwani: Stan Fiorito, the account supervisor, also developed concerns about Sunny Balwani's behavior, finding him evasive and difficult to work with, especially when it came to justifying the agency's bills.

14. Going Live

  • Dysfunctional Corporate Culture at Theranos: The chapter describes a toxic work environment at Theranos, where employees who raised concerns or objections were marginalized or fired, while sycophants were promoted. This created a culture of fear, especially among the many Indian employees on H-1B visas who were dependent on their jobs to remain in the country.

  • Technical Challenges with the miniLab: The miniLab, Theranos's next-generation blood testing device, faced numerous technical challenges, including issues with the cartridges, pipettes, temperature control, and overall reliability. The device remained in a very early prototype stage, and Theranos was still several years away from having a viable product.

  • Desperate Measures to Meet Deadlines: Despite the miniLab's technical issues, Theranos was under pressure to launch its blood testing services in Walgreens stores by September 2013. To meet this deadline, the company decided to use its older Edison device and resort to hacking a commercial blood analyzer (the ADVIA 1800) to make it compatible with smaller blood samples.

  • Ethical Concerns Raised by Employees: Employees like Anjali Laghari and Tina Noyes raised concerns about the high error rate of the Edison device and the risks of launching an essentially untested product on the general public. However, their concerns were dismissed by Elizabeth Holmes and Sunny Balwani, who were determined to deliver on their promises to customers.

  • Intimidation and Threats from Leadership: When Anjali Laghari and Tina Noyes resigned due to their ethical concerns, Elizabeth Holmes and Sunny Balwani reacted with anger, summoning all employees and telling them to show "complete devotion and unmitigated loyalty" to the company or "get the fuck out."

15. Unicorn

  • Elizabeth's Carefully Orchestrated Media Coverage: Elizabeth engineered a flattering article about Theranos in the Wall Street Journal to coincide with the commercial launch of Theranos's blood-testing services. She leveraged her close relationship with former Secretary of State George Shultz, who was on Theranos's board, to secure this favorable coverage.

  • Theranos's Rapid Valuation Growth: Theranos was part of the "unicorn" phenomenon in Silicon Valley, where startups were able to raise large amounts of private funding and achieve multi-billion dollar valuations without going public. Theranos's valuation grew from around $40 million in 2006 to $6 billion in 2013 and then $9 billion in 2014.

  • Misleading Claims about Theranos's Capabilities: Theranos made bold claims about its ability to perform a large number of blood tests using only a tiny finger-prick sample. However, much of the data they showed to investors was from other commercial blood analyzers, not Theranos's own technology.

  • Theranos's Inflated Financial Projections: Theranos provided Partner Fund Management with financial projections that were significantly higher than the company's internal projections, which were fabricated by Sunny Balwani. This suggests Theranos was misrepresenting its financial performance to investors.

  • Theranos's Tight Security and Prestigious Board: Theranos had tight security measures in place, which suggested to investors that the company had valuable intellectual property to protect. The presence of high-profile former government officials on Theranos's board also lent the company credibility in the eyes of investors.

  • Lack of Investor Scrutiny: Despite the red flags, investors like Partner Fund Management did not scrutinize Theranos's claims and financial projections closely enough. They were swayed by the company's prestigious board and the narrative of Theranos disrupting the blood-testing industry.

16. The Grandson

Here are the key takeaways from the chapter:

  • Tyler Shultz's Concerns about Theranos's Practices: Tyler, a new employee at Theranos, had several concerns about the company's practices, including:

    • The Edison device seemed much simpler than he had expected, consisting of just a pipette and robotic arm.
    • Theranos was discarding data that did not meet their desired coefficient of variation (CV) targets, rather than reporting the actual results.
    • Theranos's claims about the accuracy and sensitivity of their blood tests, such as the syphilis test, were exaggerated or misleading.
    • Theranos was not properly reporting the results of their proficiency testing, which is required by regulations, and was instead only reporting the results from their commercial analyzers rather than their Edison devices.
  • Erika Cheung's Experiences in the Clinical Lab: Erika, another new Theranos employee, had similar concerns about the company's practices in the clinical lab, including:

    • The process Theranos used to generate results from the Edison devices was highly unorthodox, involving diluting samples, testing on multiple devices, and discarding "outlier" results.
    • The Edison devices frequently failed quality control checks, but Theranos lab personnel were pressured to ignore these failures and report results anyway.
    • Theranos was using the Edison devices for a wider range of tests than just the four they had initially claimed, including tests for infectious diseases like hepatitis C.
  • Confronting Elizabeth Holmes and Sunny Balwani: Both Tyler and Erika attempted to raise their concerns directly with Elizabeth Holmes and Sunny Balwani, the company's leadership. However:

    • Elizabeth acted surprised by Tyler's claims about exaggerated test accuracy and suggested he speak with Daniel Young, who provided unconvincing explanations.
    • Sunny responded to Tyler's email with a scathing rebuttal, belittling Tyler's knowledge and accusing him of making "reckless" and "insulting" comments.
    • Sunny also threatened Erika, summoning her to his office and asking if she wanted to continue working at Theranos.
  • Interactions with George Shultz: As Tyler's grandfather and a Theranos board member, George Shultz played a key role in the events:

    • Tyler tried to explain his concerns to George, but George seemed unwilling to accept that Theranos was engaging in problematic practices.
    • George urged Tyler and Erika to put the company behind them and move on with their lives, suggesting he remained loyal to Elizabeth and Theranos's vision.
    • Elizabeth reportedly threatened Tyler through George, warning that he would "lose" if he continued to pursue his "vendetta" against her.
  • Resignations and Aftermath: Ultimately, both Tyler and Erika decided to resign from Theranos:

    • Tyler was abruptly fired the same day he submitted his resignation, with Theranos citing his "vendetta" against the company.
    • Erika also resigned, but was warned against posting anything about Theranos on social media or other forums, as the company claimed it could track such activity.

17. Fame

Here are the key takeaways from the chapter:

  • Richard and Joe Fuisz Settle with Theranos: After a disastrous performance in court, the Fuiszes decide to settle their patent lawsuit with Theranos. They agree to withdraw their patent in exchange for Theranos withdrawing its suit, with each party responsible for their own legal costs. This represents a complete capitulation by the Fuiszes.

  • John Fuisz Threatens to Sue: After the settlement, John Fuisz, the son of Richard and brother of Joe, is angry that he didn't get to testify in court. He threatens to sue Boies and Theranos, claiming they tried to bribe him. This leads to an angry exchange of emails between John and Boies' team.

  • Roger Parloff Writes a Glowing Fortune Profile on Elizabeth Holmes: Parloff, a legal correspondent for Fortune, is intrigued by the Fuisz case and decides to write a profile on Elizabeth Holmes and Theranos. He interviews Elizabeth and the prominent members of Theranos' board, who all vouch for her integrity and the company's innovative technology. Parloff is convinced of Elizabeth's sincerity and does not reach out to the Fuiszes.

  • Elizabeth Holmes Becomes a Media Sensation: The Fortune profile vaults Elizabeth Holmes to instant stardom, with a flurry of media coverage in the following months. She is portrayed as a young, female tech billionaire founder, tapping into the public's desire to see a woman break through in the male-dominated tech world.

  • Elizabeth Embraces the Trappings of Fame: As her fame grows, Elizabeth embraces the trappings of celebrity, including a security team, bodyguards, a private jet, and a personal chef. She also becomes ubiquitous in the media, giving frequent interviews and public appearances.

  • Elizabeth Leverages Emotional Narratives: Elizabeth uses personal stories, such as the death of her uncle from cancer, to promote Theranos's mission and the convenience of its blood tests. This resonates with the audience and contributes to her compelling public persona.

  • Theranos's Workplace Culture and Branding: Theranos's new office space is designed with a focus on circular motifs and replicating the Oval Office, reflecting Elizabeth's desire to cultivate a sense of importance and power. The company also ramps up its marketing efforts in Arizona, including TV commercials directed by an acclaimed filmmaker.

18. The Hippocratic Oath

Here are the key takeaways from the chapter:

  • Alan Beam's Ethical Concerns at Theranos: Alan Beam, the laboratory director at Theranos, had serious ethical concerns about the company's practices. He witnessed issues such as the company attempting to run unreliable finger-stick blood tests, providing false test results, and cheating on proficiency testing, which is required by law. Beam tried to raise these concerns with the company's leadership, but they were dismissed.

  • Beam's Attempts to Whistleblow: Beam took steps to document his concerns, forwarding dozens of work emails to his personal account and contacting a law firm that specializes in representing whistleblowers. However, he faced significant pressure from Theranos to delete the emails and sign a non-disclosure agreement, which ultimately led him to comply.

  • Theranos' Aggressive Legal Tactics: When Beam refused to comply with Theranos' demands, the company took an aggressive legal stance, threatening to sue him if he did not allow them to access his personal email account and delete the emails. Theranos' lawyers were able to intimidate Beam's own lawyer, who advised him to delete the emails and sign the affidavit to avoid a costly legal battle.

  • The Theranos Skeptics Network: Richard Fuisz, a former Theranos patent holder, had become skeptical of the company's claims and had connected with others, such as Phyllis Gardner and Rochelle Gibbons (the widow of a former Theranos employee), who also harbored doubts about Theranos' technology and practices. They formed a network of Theranos skeptics.

  • The Role of the Media in Exposing Theranos: The publication of a profile on Elizabeth Holmes and Theranos in The New Yorker magazine caught the attention of a pathologist named Adam Clapper, who was skeptical of the company's claims based on the limited scientific evidence presented. Clapper's blog post on the topic brought him to the attention of the Theranos skeptics network.

  • Beam's Outreach to Fuisz: Beam, in a desperate attempt to find someone who would listen to his concerns, reached out to Richard Fuisz on LinkedIn. Fuisz then connected Beam with the other Theranos skeptics and provided the proof they had been seeking to take the story to the media.

19. The Tip

Here are the key takeaways from the chapter:

  • Anonymous Whistleblower Allegations: The author speaks to an anonymous whistleblower named Alan Beam, who was the former laboratory director at Theranos. Beam alleges that Theranos's blood-testing devices, called Edisons, were error-prone and failed quality control, and that the company used them for only a small number of tests, while performing most tests on commercially available instruments and diluting the blood samples to make up for the Edisons' limitations.

  • Proficiency Testing Violations: Beam alleges that Theranos was breaking federal proficiency-testing rules, which require laboratories to demonstrate their ability to produce accurate and reliable test results. He provided the author with email exchanges showing Theranos's attempts to conceal these issues.

  • Questionable Corporate Governance: The author discovers that Theranos's CEO, Elizabeth Holmes, was romantically involved with the company's president and COO, Sunny Balwani, a fact that was being hidden from the company's board of directors.

  • Inaccurate Test Results and Patient Harm: The author interviews several doctors who had received questionable or inaccurate blood test results from Theranos, leading to unnecessary medical procedures, false alarms, and potential harm to patients.

  • Additional Whistleblowers: The author speaks to other former Theranos employees, including Tyler Shultz (the grandson of board member George Shultz) and Erika Cheung, who corroborate the allegations made by Beam and provide further details about the company's practices.

  • Lack of Scientific Rigor: The author's research and interviews suggest that Theranos's technology and scientific claims were not backed by rigorous peer-reviewed data, contrary to the company's public portrayal.

  • Theranos's Defensive Tactics: The author encounters Theranos's attempts to intimidate and silence former employees through legal threats and confidentiality agreements, making it difficult to gather further evidence and corroboration.

20. The Ambush

Here are the key takeaways from the chapter:

  • Tyler Shultz's Confrontation with Theranos Lawyers: Tyler's grandfather, George Shultz, informed him that Theranos was aware he had been speaking to a Wall Street Journal reporter. Theranos sent two lawyers, Mike Brille and Meredith Dearborn, to confront Tyler and demand that he sign an affidavit stating he had not spoken to any reporters and provide the names of other Theranos employees who had spoken to the media. Tyler refused to sign the affidavit or provide the names of other sources.

  • Theranos's Intimidation Tactics: Theranos employed aggressive tactics to try to get Tyler to comply, including threatening to bankrupt his entire family if he did not sign the affidavit. They also allegedly had Tyler under surveillance by private investigators.

  • Tyler's Legal Representation: Tyler initially met with his grandfather's estate attorney, Bob Anders, who advised him not to sign the affidavit. Anders then referred Tyler to another lawyer, Stephen Taylor, to handle the negotiations with Theranos.

  • Negotiations with Theranos: Over the following weeks, Theranos and Tyler's lawyer exchanged several drafts of the affidavit. Tyler was willing to acknowledge that he had spoken to the Journal reporter, but he refused to name other sources or agree to a litigation release that did not include his parents and heirs.

  • Impact on Tyler's Family: The confrontation with Theranos put a significant strain on Tyler's family. His parents pleaded with him to sign whatever Theranos wanted, fearing they would have to sell their house to pay for his legal costs.

  • The Author's Perspective: The author, John Carreyrou, was unaware of the details of Tyler's confrontation with Theranos and his subsequent legal battles. He continued to try to reach Tyler, but Tyler had gone "dark" and was no longer responding to the author's attempts to communicate.

21. Trade Secrets

Here are the key takeaways from the chapter:

  • Theranos Delegation Attempts to Intimidate the Wall Street Journal: The Theranos delegation, led by David Boies, came to the Wall Street Journal's offices with the goal of intimidating the journalists and preventing the publication of the story. They brought lawyers, used aggressive tactics like recording the meeting, and tried to force the journalists to reveal their confidential sources.

  • Theranos Invokes Trade Secrets to Avoid Answering Questions: Theranos representatives, particularly Daniel Young, repeatedly invoked "trade secrets" to avoid answering key questions about their technology and operations, such as the number of tests performed on the Edison device versus commercial analyzers. This evasiveness suggested Theranos had something to hide.

  • Theranos Threatens Former Employees: Theranos took aggressive actions against former employees who were sources for the Wall Street Journal story, including sending a threatening letter to Erika Cheung and pressuring Alan Beam and Dr. Adrienne Stewart to recant or withhold information.

  • Theranos Attempts to Discredit the Journalist: David Boies sent a lengthy letter to the Wall Street Journal accusing the journalist, John Carreyrou, of being biased and producing a "predetermined (and false) narrative." Boies cited signed statements from two doctors claiming Carreyrou had mischaracterized their statements, though Carreyrou believed these doctors had caved to Theranos's pressure.

  • Theranos Escalates Intimidation Tactics: As the story progressed, Theranos's tactics became increasingly aggressive, including sending a 23-page letter threatening a lawsuit, having representatives confront doctors who spoke to Carreyrou, and attempting to force them to sign statements recanting their statements.

  • Journalist Fears for Safety of Sources: Carreyrou became increasingly concerned for the safety and wellbeing of his confidential sources, such as Erika Cheung, who he believed were being surveilled and threatened by Theranos.

22. La Mattanza

  • FDA Approval of Theranos's Herpes Test: Theranos celebrated the FDA's approval of its proprietary finger-stick test for HSV-1 (one of the two strains of herpes virus) as proof that its technology worked. However, the author remained skeptical, as the herpes test was a qualitative test, which is technically much easier to get right than the quantitative tests used for most routine blood tests.

  • Theranos's Regulatory Avoidance: Theranos was able to operate in a regulatory "no-man's-land" by using its proprietary devices only within its own laboratory and not seeking to commercialize them, thereby avoiding close FDA scrutiny. The company portrayed itself as an advocate of FDA regulation, which made it difficult for the agency to take any adverse action against it.

  • Theranos's Political Connections: The author's source at the FDA expressed concern about Theranos's close ties to the Obama administration, including the company's founder, Elizabeth Holmes, making several appearances at White House events, which the source believed might be helping the company avoid closer regulatory oversight.

  • Fake Ebola and Potassium Tests: During a demonstration for journalist Roger Parloff, Theranos used subterfuge to create the illusion of a working Ebola test and potassium test, including a software application that masked test malfunctions and a practice of running samples on modified commercial analyzers instead of the company's own devices.

  • Theranos's Fake Automated Lab: In preparation for a visit by Vice President Joe Biden, Theranos created a fake automated laboratory by having the microbiology team vacate a room, repainting it, and lining the walls with rows of miniLabs, even though most of the actual miniLabs were in Palo Alto.

  • Theranos's Hostile Work Environment: The company's COO, Sunny Balwani, had created a hostile work environment in the Newark laboratory, including firing a respected employee for pushing for standard environmental health and safety protections, and launching a "witch hunt" to find the author of a negative Glassdoor review.

  • The Author's Investigative Approach: The author's editor, Mike Siconolfi, used the metaphor of "la mattanza" (an ancient Sicilian ritual of fishermen patiently waiting to strike their unsuspecting prey) to describe the author's investigative approach, emphasizing the need to be patient and ensure the story is "bulletproof" before publication.

23. Damage Control

Here are the key takeaways from the chapter:

  • Rupert Murdoch's Investment in Theranos: Rupert Murdoch, the owner of the Wall Street Journal's parent company, invested $125 million in Theranos, making him the company's largest investor. Murdoch met with Holmes several times and was impressed by her charisma and financial projections, despite doing little due diligence on the company.

  • Theranos' Attempts to Suppress the Story: Theranos engaged in a "scorched-earth campaign" to intimidate and silence the Journal's sources, including threatening to sue Rochelle Gibbons and convincing Dr. Sundene's practice to accept Theranos' services. However, other sources remained cooperative, and the company was unable to make Tyler Shultz recant his emails.

  • The Journal's Meetings with Boies and Theranos: In meetings with the Journal, Boies and Theranos made two key admissions: 1) Theranos did not run all of its tests on its proprietary devices, and 2) the company had changed the wording on its website for "marketing accuracy." Boies also offered to arrange a demonstration of Theranos' device, but the Journal declined, wanting to publish before Holmes' appearance at the Journal's tech conference.

  • The Journal's Initial Story and Aftermath: The Journal's initial story, published on October 15, 2015, revealed that Theranos ran most of its tests on conventional machines, engaged in proficiency testing shenanigans, and diluted finger-stick samples. This sparked a firestorm, with Holmes appearing on CNBC to defend the company and deny the allegations, while also revealing that the FDA had forced Theranos to stop using its nanotainer.

  • Holmes' Appearance at the Journal's Tech Conference: At the Journal's WSJ D.Live conference, Holmes made several false claims, including denying that Theranos diluted finger-stick samples and that it used commercial lab equipment. The Journal stood by its reporting, and Theranos responded with more retraction demands and threats of a defamation lawsuit.

  • Theranos' Regulatory Troubles: The chapter hints at regulatory issues for Theranos, with the author mentioning an FDA inspection that declared the nanotainer an unapproved medical device and a Centers for Medicare and Medicaid Services inspection that was expected to bring more trouble for the company. The author indicates that the outcome of these regulatory actions would be crucial in determining the fate of Theranos.

24. The Empress Has No Clothes

  • Erika Cheung's Complaint to CMS: Erika Cheung, a former Theranos employee, filed a complaint with the Centers for Medicare and Medicaid Services (CMS) alleging scientific misconduct, sloppy lab practices, and unreliable proprietary devices at Theranos. This triggered a surprise inspection of Theranos's laboratory by CMS inspectors.

  • CMS Inspection Findings: The CMS inspection found numerous serious deficiencies at Theranos's Newark laboratory, including the use of unreliable "Edison" devices that produced wildly erratic results, unqualified personnel handling patient samples, improper storage of blood samples, and failure to inform patients of flawed test results. CMS deemed these problems as posing "immediate jeopardy to patient health and safety."

  • Theranos's Attempts to Suppress Inspection Findings: Theranos tried to prevent the release of the CMS inspection report, invoking trade secrets and demanding extensive redactions. The company also attempted to minimize the seriousness of the findings, claiming they were confined to the lab's operations and did not reflect the soundness of its proprietary technology.

  • Tyler Shultz's Ordeal: Tyler Shultz, a former Theranos employee and the grandson of George Shultz, faced intense legal pressure and surveillance from Theranos after he raised concerns about the company's practices. Despite the threats, he refused to sign any documents or retract his statements, which were crucial in enabling the author's initial reporting.

  • Theranos's Attempts to Rehabilitate its Image: In a last-ditch effort, Theranos arranged for Elizabeth Holmes to present the company's "miniLab" device at the American Association for Clinical Chemistry (AACC) annual meeting. However, the presentation was widely criticized for lacking substantive data and failing to address the company's past issues.

  • Consequences for Theranos: The CMS inspection findings and the author's reporting led to a series of consequences for Theranos, including the voiding of tens of thousands of blood test results, the termination of its partnership with Walgreens, and the banning of Elizabeth Holmes from the blood-testing business for two years. The company also faced lawsuits from investors and patients, as well as criminal and civil investigations.


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