May 18, 2018 / 3:45 PM / a year ago

Breakingviews - Review: Silicon Valley gets a reality transfusion

NEW YORK (Reuters Breakingviews) - Silicon Valley is driven by economic power, and the ability to transmute hard science into fortunes. But its real fuel is stories, and the quintessential American desire to believe. Apple founder Steve Jobs showed that quixotic sounding ideas sometimes become reality thanks to capital, effort and acquired knowledge. Theranos founder Elizabeth Holmes, meanwhile, showed sometimes they don’t.

Elizabeth Holmes, CEO of Theranos, attends a panel discussion during the Clinton Global Initiative's annual meeting in New York, September 29, 2015. REUTERS/Brendan McDermid/File Photo

“Bad Blood” is the flipside of the Silicon Valley success story, telling how need, greed, ignorance and hubris constructed a true reality-distortion field around a company with a good, but flawed, idea. The power of a seductive fairy tale to outpunch scientific skepticism temporarily gave the health-diagnostics firm a $9 billion value. Theranos was “vaporware” – a company marketing a technology that doesn’t yet exist. Eventually it collapsed – a process hastened by author John Carreyrou, an investigative journalist at the Wall Street Journal.

Holmes’ story started like that of the prototypical Silicon Valley mogul. Interested in computers and biology, she dropped out of Stanford after a few semesters. She ostensibly wanted to improve people’s lives – first through a patch that would diagnose and deliver medicine to patients, and when that proved technologically naive, through a system that would be able to quickly, cheaply and accurately diagnose hundreds of conditions using just a small sample of blood. Holmes had a good foundation myth: she was scared of needles. Unfortunately, the technology didn’t work.

Undeterred, Holmes decided to take Steve Jobs’ claim that “good artists copy; great artists steal” and ran with it. She began only wearing black turtlenecks, in imitation of the late Apple boss. She talked of how she wanted to change the world like her hero, used the same expensive ad agency as the iPhone maker, and even drove a car without license plates, as Jobs had done.

Being someone else isn’t easy. Carreyrou tells the anecdote of a Theranos employee catching Holmes slipping from her distinctive baritone into a much higher, and more natural sounding pitch – a sign of how calculated her image was. Given the sexism in technology and many company boardrooms, that’s perhaps understandable. Holmes denied suggestions that she was having a relationship with second-in-command Sunny Balwani.

What’s clear is that the Theranos founder had a powerful ability to draw aging, powerful men into her orbit. The company’s board included two former senators, a retired admiral, a Marine general, a lawyer who had argued before the Supreme Court, and former Secretaries of State Henry Kissinger and George Shultz. Her board contained more people aged over 90 than it did people with relevant medical knowledge.

Carreyrou is at his best illustrating the compromises made by these men, especially Shultz and super-litigator David Boies, also a board member, once drawn into Holmes’ orbit. Shultz’s grandson Tyler Shultz, who worked at the company, tried to warn the former secretary of state that the machines didn’t work, and that Theranos was a house of cards. Tyler’s whistleblowing caused a deep rift with his grandfather. Boies led an aggressive legal effort to silence both Tyler and Carreyrou, even when it should have been clear that the company’s faulty tests endangered patients’ lives.

The constant gaps between what Holmes promised and reality make up much of the book, but the point is made quite heavily. While the sheer number of people who grew disillusioned with the company, and Holmes, helps make the author’s case airtight, it can be a bit of a slog to read through. Carreyrou’s contentious relationship with the company and Holmes limits him to offering insight mainly via second-hand observations.

One factor in the company’s downfall was that the more biology-savvy people were, the bigger the chasm Holmes’ stories had to bridge. It’s notable, for example, that venture-capital firms specializing in biotech avoided Theranos. Her age was an obvious red flag to those in the field, having founded the company when she was just 19. The median biotech chief executive is 54 years old at the time a company goes public, according to data-crunching by venture capitalist Bruce Booth.

While plenty of software companies are founded by nerds who teach themselves programming at a young age, that’s nearly impossible in the life sciences. Information technology is designed by people, using known concepts, and incremental design. It’s far harder to understand cells and make them do what you want. Biology is complex, messy, and full of poorly understood – or unknown – mechanisms. Holmes’ lack of a degree or peer-reviewed data made those in the field deeply suspicious. And her penchant for firing disillusioned employees created a rich bed of sources for the author.

Regulation proved the final problem. Healthcare companies must abide by rules because people’s lives are at stake. Holmes tried to slip through the cracks, but various whistleblowers and Carreyrou’s investigative articles drew government attention. Colorful stories could bring in capital, but they couldn’t cover up the fact Theranos’ technology didn’t work when put to the test. The company was forced to void test results, Holmes was banned from running a lab, and the U.S. markets regulator has charged her with running a “massive fraud.” Even in Silicon Valley, fanciful narratives have limits.


Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

Sign up for a free trial of our full service at and follow us on Twitter @Breakingviews and at All opinions expressed are those of the authors.

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below