"Bad Blood: Secrets and Lies in a Silicon Valley Startup"

Issue #991

 

Book written by John Carreyrou; reviewed by Ralph Grabowski  When I was a pre-teen kid, I was bored enough in the northern Canadian community in which I grew up to invent stuff. On paper I designed things like a burglar alarm for a cubbyhole and best of all, a self-writing pen. When you spoke, the pen converted speech into text, writing it out on the paper; I included a gyroscope to keep it upright. How it actually moved along the paper or even converted sound to text -- well, those were things for which I was too young to consider. I designed it because I was lazy about writing by hand, and a few years later I learned to touch-type.   Nearly fifty years later, a 19-year-old university student mused about inventing a skin patch with microscopic needles that took and analyzed blood samples, painlessly. How the relatively large red blood cells would make their way through the microscopic needles' even-more-microscopic holes, or how the many needles would avoid piercing clusters of nerve endings -- well, those were things for which she had too little experience to consider. Elizabeth Holmes (see figure 1) imagined the patch, because she didn't like the pain she experienced when large blood samples were drawn from her arm. Figure 1: Elizabeth Holmes (image source Fortune) In my case, I spent seven years taking science and engineering in university to find success as a modestly-compensated technical writer. In her case, she quit after a year of university, and then went on to become the youngest female ceo of a unicorn company (valuation of at least a billion dollars). Now, she faces jail for a multi-year, multi-million dollar scam she perpetrated through a barely-working blood testing station the size of a desktop computer (see figure 2) -- not exactly the skin patch she had envisioned.   Figure 2: Blood analysis unit shown publicly by Theranos (image source Wired)   "Good-bye, Big Bad Needle" We each wanted to change the world, me through writing, she with a revolutionary blood testing system. The difference was that I wanted to be a self-employed writer, with the emphasis on self, while Ms Holmes' parents had friends among the elite to fund her idea and sit as directors on the board of her company, Theranos (taken from 'therapy' and 'diagnosis'). No one in charge, especially not Ms Holmes, understood cell biology.    Even with war-experienced men like general Jim Mattis and George Shultzon her board, she was still able to claim that her device was saving lives in Afghanistan. It wasn't. The blood that Theranos drew at sites in Arizona and California was analyzed primarily by dozens of testing machines the company purchased discretely from Siemens Healthcare, at $100,000 each. The analysis units Theranos eventually showed the public were much larger than the tiny unit envisioned by its founder. (See figure 2, earlier.)   Samples were couriered to the premises of Theranos and then tested there. Because the testing was on-premise, and because the company was privately owned, neither the FDA nor the FTC had jurisdiction over the test procedures. When government agencies did come by for a look, they were shown a fake lab. In the real lab, some workers were insufficiently trained and so they repeatedly contaminated samples, resulting in false results. Corporations like pharmacy chain Walgreens and grocery chain Safeway fell for her pitch, committing hundreds of millions of dollars to Theranos, and then spending more on remodeling hundreds of their stores to get ready for the device that was going to be amazing! (See figure 3.) Figure 3: Walgreens getting ready for the Theranos revolution that never came (image source Business Insider) The motivation for the ceo of Walgreens was his worry that larger competitor CVS would "get" the technology first. As for Safeway, food sales had begun to decline, and so the ceo was under pressure to find new ways of getting people into stores and spending there. Both ceos signed on using their feelings; neither performed due diligence before committing a half-billion dollars. No surprise, then, that the Safeway ceo lost his job over this. Equally, the technical and business media fell under the spell of the young, blond, blue-eyed, female founder who deliberately mimicked Steve Jobs' black turtleneck and spoke in an artificially low voice so as to be taken seriously by males. The media's bandwagon (for that is what it was) was accelerated into high gear by Fortune magazine's initial glowing cover story on her. (See figure 4.) Figure 4: The Fortune cover that launched the bandwagon The media bandwagon assisted in hyping the valuation of Theranos eventually to $10 billion, with Ms Holmes' net worth being nearly half that. Before the end arrived earlier this year, the company was claiming revenues of $100 million a year, but in fact were around $100 thousand.   The Scam That Should Not Have Lasted You probably know the details of how it all went down. If not, a Wikipedia page gives a sufficient overview at https://en.wikipedia.org/wiki/Theranos. The question John Carreyrou spends little time attempting to answer in his book Bad Blood is this: Why?    For me, though, the questions that fascinate are: How did the scam ever take off in the first place, and what was Ms Holmes thinking as the years went by and the failures piled up? How did it start? The blame could be placed with her professor, who, according to Mr Carreyrou's account, never lost faith in her dream, even when all was collapsing around her. The reason is simple: teachers take pride in students who succeed. Besides him, blame should be attached to the investors and advisors and media who didn't understand biology, yet supported the technology, hyped it, believed it -- until it was too late. What was she thinking? Mr Carreyrou was unable to interview Ms Holmes to learn what she was thinking, probably because he was the one who brought her down. Mr Carreyrou did suggest a form of psychosis. I instead suggest the human-only trait of rationalization. As the gravy train runs richer, it is becomes more impossible to say, "Oops. Sorry, everyone. Never mind." For outsiders, the facade must be kept up, while inside a fortress builds up among executives. Positive news is seen as neutral, neutral news as negative, and negative news as an attack that must be defended by any means possible. In our minds, defenses build nearly mindlessly. Perhaps the saddest stories were those of patients who received bad test results from Theranos, causing them to incur thousands of dollars of further testing at real hospitals, all needlessly. Former Apple ceo Jean-Louis Gassée was the first outsider of significance to report on his negative Theranos results contradicting positive results from proper test facilities; his email of concern to Ms Holmes went ignored.   Why a Patch Can Never Work The problem in withdrawing blood with a tiny needle is that the narrow diameter causes the relatively large red blood cells to burst. (See figure 5.) Burst blood cells release potassium to creates false results. Figure 5: The Theranos blood collection vial (image source Extreme Tech) The next problem is that the tiny amount of blood Theranos withdrew was insufficient for testing a half-dozen conditions, let alone the 50, 100, 200 tests that Theranos claimed to perform. The number of tests claimed possible by Theranos kept rising.  The next problem is that to perform more than a few tests, a small blood sample must be diluted to create a sufficient volume, which then further biases to the result.   - - - The bulk of the book Bad Blood follows individual employees, one per chapter, from initial exuberance of being involved in something insanely great, to questioning the company's actions, to being fired for doubting or quitting in disgust -- and, in some cases, being hounded mercilessly by David Boies' law firm. (Mr Boies represented Theranos and was a board member.) After getting the first hints that something was foul at the by-now-decade-old company, Mr Carreyrou's immediate challenge was to find a away around the NDAs [non-disclosure agreements] employees had signed. Slowly, he did. According to one report, his employer Wall Street Journal spent $1 million on his year-long investigation -- including defending itself from Mr Boies' law firm. The patch Ms Holmes dreamed of in her biology class would never, could never work. Big red blood cells do not cooperate with tiny technology. Tiny pinpricks do not avoid the pain from disturbed nerve endings, as this diabetic well knows.  - - - Bad Blood: Secrets and Lies in a Silicon Valley Startup by John Carreyrou 352 pages ISBN-13: 978-1524731656 Published by Knopf   ARES KUDO: MODERN DWG EDITING IN THE CLOUD   ARES Kudo is the only online CAD solution offering a full set of 2D features to read, create, modify, and share DWG and DXF drawings. Nothing to install. It runs in your Web browser and your files follow you on any device. ARES Kudo is integrated with cloud storage services like Google Drive, Dropbox, Box, OneDrive, OneDrive for Business -- and industry-specific solutions such as Onshape and Trimble Connect.  Visit www.graebert.com/areskudo to learn more and activate your own free trial at kudo.graebert.com The Rest of the News The annual Bricsys 2018 conference on the future of .dwg-based CAD will be held at the Brewery in London UK on Oct 23-24. More info at www.bricsys.com/en-intl/conference - - - VRgineers will be updating its XTAL VR [virtual reality] headset later this year. This is a headset that isn't even shipped yet (supposed to be in September). Planned updates include Inside-out tracking for 6DoF [degrees of freedom] movement without external trackers Advanced eye-tracking for foveated rendering, marketing analytics, and more  Pass-through camera module for mixed reality More details at vrgineers.com. - - - What happened when Siemens PLM Software quizzed 800 CAD users: - - - We are witnessing the CAD industry's slowest-moving acquisition process between Bentley Systems and Siemens PLM  Software, after Siemens invested another $50 million in Bentley and upped its share holdings to 9%. - - - Nemetschek acquired MCS Solutions for its facility management software. With this acquisition, Nemetschek says it becomes an "end-to end solution provider for the entire lifecycle of buildings." - - - Steve Johnson (@SteveJohnsonCAD): "Spoiler alert." UPFRONT.EZINE (@upFronteZine): "CAD system employed?" Steve Johnson: "CATIA and MSC, according to what random people say on the internet." (Image source Archillect) Thank You, Readers! Thank you to readers who donate towards the operation of upFront.eZine: Julian Miranda Donald Larson Should you wish to support upFront.eZine through PayPal, then the suggested amounts are like these: $25 for individuals > paypal.me/upfrontezine/25 $150 for small companies > paypal.me/upfrontezine/150 $750 for for large companies > paypal.me/upfrontezine/750 Should Paypal.me not operate in your country, then please use www.paypal.com and the account of [email protected]. Or mail a cheque (US$ or CDN$ only, please) to upFront.eZine Publishing, Ltd., 34486 Donlyn Avenue, Abbotsford BC, V2S 4W7, Canada.   Notable Quotable "I’m just choosing which truths we will go public with."     - Management Speak on Twitter (@managerspeak)

*5966