‘Bad Blood’, by far my preferred book of 2018 and probably of the last few years!
As a X-mass gift to my son I ordered the book ‘Bad Blood: Secrets and Lies in a Silicon Valley Startup’ from John Carreyrou, a two-time Prize-winning investigative reporter of the Wall Street Journal. A book describing the rise, the hype and fall of the blood-testing startup Theranos, its CEO/founder Elizabeth Holmes and COO/boyfriend Ramesh ‘Sunny’ Balwani. A true story masterly written by John Carreyrou.
As my son already started another book I ended up reading it first. What a roller-coaster, what a thriller, what an unbelievable story, what a journalism! I just couldn’t stop reading and couldn’t believe reading the details of a story I knew was a true business story. Even if you would try to invent it, you would fall short of this reality.
What’s the story?
Theranos was a unicorn (valuation >$1B) promising to disrupt the medical industry and revolutionize the laboratory testing world by producing multiple fast blood-testings just with a drop of blood. It was founded by Elizabeth Holmes in 2003 after leaving Stanford university as a 19-year-old. In 2015, Forbes named her the youngest and richest female entrepreneur billionaire with a $9B valuation but after revelations of fraud the same Forbes published her net worth to be zero dollars. Fortune named Holmes one of the “World’s Most Disappointing Leaders“. Theranos burned $900M investment money and 800 employees lost their job. Many are still in complete disillusionment.
The company had faked test results, hidden malfunctioning technology, played with people and manipulated their financial numbers. They were trying to run the company as a software company while being a healthcare company impacting people’s health. ‘Trial and error of people was not ok’, Maureen Glunz.
Why should you read it?
It is a must read for every entrepreneur, dreamer, venture capitalist, politician, business leader and board member. It is a tale from world hero to world zero.
It shows what happens when you mix an inspirational visionary/dreamer on a compulsive quest to change the world, a toxic COO, a lot of venture capital and public renowned ‘naive’ personalities with a poisonous cocktail of intimidation, pathological lying, massive fraud, dictatorial co-leadership, fire at will, conspiracy, broken careers, ruined family relationships, scams, fear, obsessive secrecy, fake labs, legal threats, non-disclosures, dysfunctional culture, blind faith, deception, over-promise, under-deliver and egos bigger than talents.
It falsely claimed to have revolutionary blood test technology using very small amounts of blood. Too good to be true. It misled investors, politicians, business partners, doctors, patients and the whole medical industry. This took place in one of the most regulated industries, namely medical and healthcare.
What lessons did I learn from reading it?
- Operational and Innovation Excellence goes hand in hand. A visionary needs a strong ethical COO and experts in the area you are trying to disrupt to execute any strategy or vision.
- Everyone can be manipulated by someone that combines intelligence, charisma, noble cause beliefs, unmatched sales-skills and pathological lying.
- Don’t be blindfolded by the Fear Of Missing Out – each player in the Theranos case was a ‘victim’ of FOMO on the next big thing. Former Wells Fargo CEO Richard Kovacevich, former Secretary of State Henry Kissinger, Robert Murdoch, General James Mattis to top executives at Safeway and Walgreen all were blindfolded by the promise and forget to check reality. To break through the facade you need some level of industry due diligence before investing blindly based on a promise and a person.
- Mindset drives behavior, behavior drives culture, culture drives business outcomes. A toxic culture will destroy any company and will destroy any purpose like ‘the most important thing humanity has ever produced’, as Holmes once told Theranos’ employees about the company’s miniLab.
- Hire people with the right mindset, competences, character and attitude from the start. Hire people that are better than you and complement gaps in your own talent. Make no compromise on people.
- If lies become your strategy, you’ll be buried under them. You start with some small lies and end-up with bigger lies covering other big lies. In the case of Theranos it resulted in an calculated and deliberate fraud.
- Learn from icons but don’t try to copy them. Holmes tried obsessively to become the female version of Steve jobs: the culture of secrecy, her purpose to change humanity, her clothing like the black turtleneck, management approaches and even her car. She even faked how she spoke by talking with a deeper baritone voice. Authentic leadership remains the way to inspire and deliver.
- Facts, proof, transparency and evidence have to be delivered to proof you are on the road to deliver the dream. Especially when it is too good to be true. Talk to customers, partners and the industry experts to verify.
- Any company needs regularly internal and/or external financial reporting delivered by a CFO-like person and if needed verified by an auditor.
- Despite this fraud and unethical case, the industry should continue to embrace innovation and re-imagine (iterate, innovate or disrupt) their business strategy and culture, ready for the digital age. Those that embrace technology will be able to solve big societal problems, create new jobs and drive economic growth. They will be able to create sustainable value in the customer, employee and ecosystem experience, while taking care of the planet. Embrace the learnings of cases like Theranos.
Theranos was shut down in September 2018 and both Balwani (COO) and Holmes (CEO) face a maximum of 20 years prison, multiple fines and new court cases.
The story is so unimaginable on all fronts that a movie with actress Jennifer Lawrence is going to see the light in 2019. You can start the new year by reading the book!
A true lesson for Silicon Valley and for every business person.