Noblesse Oblige: Thicker than Water

A useful postscript to my reading of Bad Blood and my blog posts about the podcast The Dropout, both of which examined the Elizabeth Holmes/Theranos story, is Tyler Shultz’s new Audible podcast, Thicker Than Water


Shultz is, of course, the grandson of George Shultz and the whistleblower who began the process of exposing the lies and misrepresentations behind Holmes and Theranos.


In much the same way that my most pressing question about Holmes and her company was “How could anyone do this?” my most pressing question about Tyler Shultz when I encountered him in Carreyrou’s book and The Dropout was, “How did he do this?” Among the many people who knew, should have known, or seem to have known how badly Theranos’s technology was failing and how boldly Holmes was lying about it, how is it that Tyler Shultz was the one who decided he had to do something?


Shultz’s podcast, I think, provides some helpful answers. He’s clearly a smart and charming young man, who has led a life as protected by as much privilege as any American can hope for. I don’t mean that he’s part of some incredibly wealthy, hard-partying jet-set. I just mean that he’s the youngest generation of a famous family, who attended good schools, got good internships, and was brought up with the understanding that his opinions matter and that what happens to him is worthy of note.


He could be annoying if he weren’t clearly such a good guy (and I do confess to eye rolling over a few self-indulgent moments in the podcast). But one of the things we don’t talk about when we talk about the problems caused by inherited privilege is that, sometimes, it can have a good side.


Tyler Shultz is fairly clear that he got his internship with Theranos because his grandfather is George Shultz. But it’s equally apparent that the sense of his own significance and the assumption that he would be listened to and taken seriously are part of what allowed him to turn Theranos in. 


The heart-breaking part of the podcast is hearing Shultz talk about his realization that, somehow, his grandfather’s loyalties had switched to Holmes and to Theranos, and away from his grandson. He still sounds baffled when he mentions she was invited to family parties from which he was excluded. And the pain in his voice is unforgettable when he discusses the ways his grandfather pressured him to retract his statements about Theranos despite mounting evidence that he was right about the company’s lies. Shultz’s decision to do the right thing was clearly agonizing, yet he stuck to it.


It’s easy to be dismissive of young white men who have easy roads to travel in their lives. There are probably some good reasons for it, too. But the Thicker Than Water podcast will remind you that there is always more to people that we initially think. Just as the world’s first impressions of Elizabeth Holmes’s as a technological wunderkind turned out to be hopelessly, painfully, mistaken, my first impression of Tyler Shultz as “just another one of those kids who wanders into class late, unprepared, and hungover, wearing Nike slides and a ball cap” was mistaken.


Underneath the soft sheen of his privilege, Tyler Shultz is a man to respect, and one whose insistence on sticking to his principles has done more for market tested innovation than Elizabeth Holmes and her former company ever did.


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The Bloodbath:The Dropout, Episodes 5 and 6

Part 3 of a #ReadWithMe Series

Read the earlier posts here and here.

By 2016, Holmes and Balwani had broken up, and he was leaving the company. Carreyrou’s series of articles about Theranos’s unreliable technology had been published in the Wall Street Journal. And yet, many of Elizabeth’s early investors, like Tim Draper, still defended her unreservedly as someone who is “doing a great thing for humanity” and “changing healthcare as we know it.” Channing Robertson, her early supporter at Stanford, also remained a strong supporter, though the podcast notes that there may be pecuniary reasons for that, as Robertson was paid about $500,000 annually by Theranos.


In June, 2016, the deal with Walgreens fell apart and Walgreens sued for $140 million. The suit was settled, but more suits seemed to crop up every day. And regulators were now saying that Theranos’s technology was so unreliable it posed an “immediate risk” to patient health and safety. Theranos now came under investigation by the SEC.


The Dropout does an amazing job of highlighting the contrast between Holmes’s confident, in-control, and authoritative demeanor in interviews, with her answers in her deposition to the SEC, where she responded to their questions with “I don’t know” and “I don’t remember” more than 600 times. Again, the podcast lets us hear the shakiness of her answers as she tries to evade and avoid. 


There’s enormous satisfaction in this fifth episode of The Dropout. Finally, someone is asking the right questions, and not letting Holmes’s standard answers pass without scrutiny. Finally, we hear Holmes faced with her claims and with the pile of evidence against them. The podcast notes that it seems that for Holmes “There was no distance between aspiration and reality.” Because she wanted the machines to work, she claimed that they did.


It’s a good way to get charged with fraud by the SEC. And that’s exactly what happened. Balwani pled not guilty. Holmes settled. And then the Department of Justice brought criminal charges.


As of now, the trial of Elizabeth Holmes–who pled not guilty to these charges as well–is still pending. It has been rescheduled several times, and on August 12, 2020, the trial date was set for March 9, 2021.


The last half of episode 5 and most of episode 6 of The Dropout are dedicated to trying to humanize Holmes and Balwani. I found this fairly unpersuasive, though I do understand the need to present something like an unbiased account. But details of Balwani’s father’s early death, or Holmes’s struggles as a dedicated but completely unsuccessful high school track athlete seem like so much weak tea in response to the collapse of their claims and their misleading of the public and the medical community for years.


And at the end of The Dropout we are still left without answers to our most important questions. Was Theranos a failure or was it a fraud? Is Elizabeth Holmes an innovator and entrepreneur whose idea just didn’t pan out, or is she a con artist? And how can we ever really know?

Her upcoming court case may give us some answers, but given the many difficulties of establishing intent to defraud in the ever-churning world of startups, I don’t hold out much hope for a definitive answer.


One more iteration of the story of what happened at Theranos, however, did give me a few answers to some other questions I had. Stay tuned for a final, quick post on Tyler Shultz’s podcast, Thicker Than Water.



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The Big Store:The Dropout, Episodes 3 and 4

A #ReadWithMe series. Read Part 1.


As Theranos’s profile as a company, and Elizabeth Holmes’s profile as a startup star, began to rise, Holmes began a publicity push unlike anything seen before.

She worked with Errol Morris, director of The Thin Blue Line, on a set of promotional videos that focused on patients’ fears about blood tests, and Theranos’s promise to provide a better patient care experience. Holmes appeared at Glamour’s Women of the Year awards. Forbes 30 under 30. She was interviewed on CNN and CBS This Morning. She was on the covers of Forbes, Inc., Fortune, and Bloomberg Businessweek. She even got a feature in the Style section of the New York Times.


By 2014, Theranos was valued at almost 10 billion dollars. Holmes personally was worth 4.5 billion. 


And the technology still didn’t work. 


More shockingly than that, perhaps, is that none of the media coverage of Holmes and Theranos seemed particularly interested in how, or if, the Theranos machines functioned. Her unsupported claims were simply repeated.


How unsupported were those claims? When Vice President Joe Biden came to visit Theranos he was shown a fake lab, with machines rigged to play video of tests being run. It was at this point that I paused the podcast, by the way, and googled “con games” to see if I could find the technical term for what Theranos reminded me of. I was hard pressed to see much distinction between the show put on for Biden’s visit and what con artists call the “Big Store”–where elaborate props and sets and a team of confederates are used to build a false front to persuade marks that real business is happening. (See The Sting, Leverage, or Hustle for examples).


Audio clips from the deposition of Holmes make it clear that she was more or less indifferent to the fact that the Theranos machines weren’t working. Instead, she and Balwani bought commercial blood testing machines from Siemens and used them to run the tests instead.


Rather than pouring her vast amount of investment funding into trying to get the machines to work, Holmes hired Chiat/Day the advertising firm that produced Apple’s most iconic ads to publicize Theranos–and herself–with an 11 million dollar campaign. Employees at Chiat/Day who worked on the account report that they were stonewalled when seeking information about how the technology worked. This made it almost impossible to verify the claims that Holmes and Balwani wanted to see in the advertising, and meant that copy had to be constantly altered to avoid illegal claims.

The Chiat/Day team also discovered, while working on the account, that Theranos did not have a lab in Phoenix. Instead, all the blood from all the tests done at all the Theranos wellness centers in all the Arizona Walgreens was FedExed to Palo Alto for testing. The issues with security, biohazard safety, and the potential deterioration of blood samples were immediately apparent. And as Balwani casually admits in his deposition, it was all done to avoid the need for FDA approval. 


But Theranos’s board, including Henry Kissinger, General James Mattus, George Shultz, Senator Bill Frist, and Admiral Gary Roughead, were still solidly on board with Holmes and her claims. And with names like those on the board, combined with all the press coverage and the Walgreens deal, investors kept coming. The Walton family, the De Vos family, Rupert Murdoch, everyone wanted in.


The Dropout” leans on its strength of bringing us the voices attached to the stories again in this episode. Eileen Lepera, a retired executive assistant, who invested $150,000 in Theranos, seems grimly resigned to the loss of her investment, made based on the “knowledge and advice” of the people who sold her on it. But it is the voices of those who got test results from Theranos that stay with me from episode three. There is Sheri Ackert, a breast cancer survivor and double mastectomy patient, whose Theranos test results indicated she had a new tumor. But the test was wildly wrong, and Ms Ackert was fine. Dr. Pallav Sharda got a test result indicating that he was pre-diabetic.He retook the test at another lab. The Theranos test was wildly wrong, and Dr. Sharda was fine. 


But the human costs of Theranos were rising.


In episode four, finally, someone speaks out.


One of the great questions raised by the Theranos scandal is why it took so long for someone to point out that the emperor had no clothes. Throughout the first three episodes of the podcast, employee after employee mentions that they were essentially, just waiting for the news to break. Why didn’t any of them speak up?


Part of the reason seems to be that Holmes and Balwani’s response to any questioning or criticism of Theranos policies or technology was to accuse and harass the people who brought it up. Turnover was high, even for a startup, and constant. When tests failed or were unreliable data was massaged and cherry-picked in order to provide acceptable results. But the tech problems that caused the bad results were never fixed.


And then Holmes hired Tyler Shultz, George Shultz’s grandson. Tyler Shultz seems to have bounced into Theranos like a ball cap wearing lacrosse player sliding into the back row of class ten minutes late. He cheerfully notes that he got his internship because Holmes wanted to charm his grandfather.


But Shultz almost immediately noticed that the Theranos machines didn’t work and that the information his grandfather was getting was entirely different from what he saw in the lab every day. George Shultz heard about cutting edge blood testing. Tyler Shultz saw machines that got caught in their own gears, needed their doors taped shut, and–as I keep saying–just didn’t work. But thought Tyler Shultz and his friends at Theranos thought it was funny to joke about the wild inaccuracy of, for example, Theranos tests for STDs, he was increasingly concerned about people like his grandfather, getting their blood tested by Theranos.


He anonymously contacted Board of Health regulators, who asked him to file an anonymous report. He also sent an email to Holmes, detailing the issues he had noticed. Holmes promised to look into it, but Balwani responded with a threatening demand for an apology. So Tyler Shultz quit.


Tyler Shultz’s full story is available in his podcast “Thicker Than Water,” and I may visit that in my final post. What is important here is that, at the same time that he was filing his reports and leaving Theranos, others were beginning to dig as well. Dr. Jon Ionnides started to look into Theranos and found that there were no scientific publications about Theranos’s research. (Ordinarily, one would expect a startup with such a radical new technology to produce hundreds or thousands of papers about their work.) John Carreyrou, author of Bad Blood and investigative reporter, was also beginning to be suspicious. Holmes’s credentials just didn’t seem to add up to someone who would be likely to produce world-altering research.


But Theranos was well protected. The big names on its board and the intimidating reputation of its outside council, David Boies, served to keep a lot of employees quiet. Even Tyler Shultz, protected by about as much privilege as one can have in America, was terrified to talk with Carreyrou. He was right to be. He and other anonymous sources were followed, handed threatening letters by strangers, and threatened with lawsuits. Shultz’s grandfather was enlisted to get him to sign a confidentiality agreement to “make everything go away.” When he showed up to discuss the situation with his grandfather, he found two Theranos lawyers there waiting for him.


Soon the FDA was showing up to do a surprise inspection of the Theranos labs.Tyler Shultz was hiring lawyers, and he and another source, Erika Cheung were talking to Jon Carreyrou. And on October 15, 2015, the Wall Street Journal began to run Carreyrou’s work, and Theranos began to get the kind of publicity that no fancy documentaries and no iconic advertising firms could hope to counteract.       


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Sounds Suspicious: The Dropout, Episodes 1 and 2

John Carreyrou’s book about the rise and fall of Elizabeth Holmes and Theranos is so comprehensive, it’s hard to imagine what a podcast covering the same material could add. (You can read my first post on Carreyrou’s book here.) But the first thing we hear in the first episode of the ABC News podcast, The Dropout, is an audio clip from Holmes’s deposition. 

And that means we hear Elizabeth Holmes’s voice.


Holmes’s voice is a consistent theme in Carreyrou’s book, significant enough to have its own entry in the index. In public interviews and in her deposition, Holmes’s voice is a startlingly deep baritone. Carreyrou, and others who have worked and spoken with her, say that this is a pretense. Holmes’s natural speaking voice is more traditionally feminine and higher-pitched. The baritone is something she adopted to sound more authoritative and more powerful.


Any woman in the business world can sympathize with the difficulty of being taken seriously–particularly when one has a quiet, high, “girlish” voice. But Holmes’s baritone and the long pauses she uses either for emphasis or in order to keep her voice in this lower register combine with what we now know about the level of deception practiced by Holmes and her company to emphasize just how deeply her duplicity ran.


It is a voice we hear a lot over the six episodes of The Dropout. 


The first episode is dedicated to the young Elizabeth Holmes who, from childhood, had wanted to invent something big and to change the world. Everyone’s favorite childhood anecdote about Holmes involves her drawing involved plans for a time machine at age 7. It sets the stage for her as a person with big dreams and a sense she could accomplish anything. But the second anecdote everyone tells about Holmes. A relative asks her what she wants to be when she grows up, and she says: “A billionaire.”


It would be unkind to base our understanding of anyone’s character on their childhood answers to questions like this. (I wanted to be a ballerina, after all.) But since we know how the stories of Holmes and Theranos have evolved, it is hard to remember that, and hard not to read her ferocious ambition directed towards nothing more specific than the accumulation of wealth, as the source of so many problems.


Episode one interviews some of Holmes’s high school teachers and her professors at Stanford. When Holmes was introduced to Phyllis Gardner, a professor of medicine. Gardner found her unimpressive, “It was just a 19 year old talking, who had taken one course in microfluidics, and she thought she was going to make something out of it.” With a chilly reception from Gardner, Holmes sought a mentor in the engineering department–Channing Robertson. Robertson became very involved in Holmes’s goals, introducing her to venture capitalists, and becoming a director of her nascent company. He compared her to Mozart, Beethoven, Newton, and Einstein. 


While Holmes had trouble getting funding from those with medical and pharmaceutical experience, venture capitalists with more generalized interests were excited by her dream of radically changing the world of blood testing. Donald Lucas Sr., who originally backed Oracle, is another voice we hear in the first episode of the podcast. He notes his initial skepticism about this 19 year old Stanford dropout with a big idea, but then notes that her great grandfather was an entrepreneur and the hospital in her area was named after her great uncle, “so she came by the two things that were necessary here–one medicine, and the other entrepreneur–quite naturally. And she was attractive, too.” Hearing Holmes’s staged baritone helps cement her dishonesty for podcast listeners. In much the same way, hearing Lucas marveling at Holmes’s mystic bloodline of medical innovation as well as her blonde beauty helps us understand how Holmes got so much money so early with so little to go on. 


She had a great story. 


But great stories don’t make great companies. Neither does hiring designers from Apple to make an impressive looking case, nor does redesigning Holmes’s own personal style to mimic that of her idol, Steve Jobs. 


At the end of episode one, we learn that Holmes had arranged for Theranos to be allowed to test its technology on 3rd and 4th stage cancer patients. The machines didn’t work, and the data was corrupted. The tests were just for research purposes, and were not used for diagnostic and treatment purposes. But Theranos employees did not know that. We also learn that Avie Tevanian, Steve Jobs’s right hand man who had left Apple to serve on the board of Theranos had been invited to resign for “asking too many complicated questions.” 


The ever growing level of secrecy and dissimulation at Theranos is the focus of episode two.


In this episode, Sunny Balwani enters the story. With Theranos rapidly running through its initial investment capital, and having trouble getting funding, Holmes sought loans from other sources. Balwani, who had known her since the summer before she went to college, gave her a 13 million dollar interest free loan. And he came on board to Theranos as the president and CEO. With no background in science, and with an abrasive and threatening personality, Balwani seems to have been immediately a source of tension and fear among Theranos employees.


What employees and investors did not know, however, was that Holmes and Balwani were romantically involved. The relationship may have been kept under wraps because Sunny originally met Elizabeth when she was 18 and he was 37, or because investors would have disapproved of Sunny’s involvement in the company if the relationship had been public, or to try to burnish Elizabeth’s mystique as the driven founder with no passions other than her start up. Whatever the reasons, it was never disclosed. 


Holmes and Balwani worked closely together to persuade Walgreens to adopt Theranos technology for lab testing. They told executives that the technology was “viable and consumer ready” and had been validated by the FDA, and was used by the US military. None of this was true.  When Walgreens brought outside experts into Theranos headquarters to review the technology, Balwani’s extensive security was on display, but nothing else was. Experts were not allowed to see the lab or speak with anyone but Holmes and Balwani. And when they asked to run blood tests on the Theranos tech and at an outside lab in order to compare results, Holmes and Balwani refused. In the podcast one expert comments. “I never saw anything that would indicate that the machine would do anything at all…I never got it to do anything.”


Theranos’s claim to be able to perform more than 250 lab tests on a single drop of blood was nothing but fiction.


Yet, Walgreens agreed to a deal with Theranos. By 2015 there were 41 Theranos wellness centers in California and Arizona, and they seemed poised to roll out across America.


The increasing prominence of Theranos, and the prospect of Theranos and its non-existent technology becoming a major–perhaps the major–source of lab test results in the nation, began to horrify and frighten employees. Ian Gibbons, a biochemist at Theranos, worked in the labs, trying to make Holmes’s and Balwani’s outsized promises come true. Unable to make the technology work (and as the podcast proceeds, one wonders if anyone could), he spoke in confidence with Channing Robertson–that supportive Stanford professor who compared her to Beethoven–and was fired the next day. He was rapidly hired back but demoted to HR work. At the same time, Ian Gibbons had been subpoenaed to appear in support of Theranos in a patent dispute. He did not want to testify because it would have required either perjuring himself or revealing that the Theranos tech didn’t work.


Ian Gibbons committed suicide before the court date.


Beginning episode one with the voice of Elizabeth Holmes allows listeners access to the vocal change that is a part of her extensive deceptions. Closing episode two with the voice of Rochelle Gibbons, telling her husband’s story and dissolving into anger and anguish when discussing his death makes very real the very human costs of the games being played by Holmes, Balwani, and Theranos.


And yet, there seemed to be no end to their rise.


Next time: Episodes 3 and 4


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Bad Blood

Innovation requires big dreams. Changing the world isn’t for the faint of heart, the unadventurous, or those who aren’t willing to take chances. But those big dreams have to be backed up by hard work, integrity, and endless research and analysis. John Carreyrou’s book, Bad Blood: Secrets and Lies in a Silicon Valley Startup looks at a startup founder and company who may have had the first, but who certainly lacked all the rest.


I still remember the first time I heard about Elizabeth Holmes’s company Theranos. It was this new medical tech company that was going to revolutionize lab tests for blood. Instead of painful  blood draws from veins, Theranos had technology that was going to allow hundreds of lab tests to be run from the drop of blood drawn from a single finger stick. With aging parents who seemed to need tube after tube of blood drawn whenever something was amiss, and with a husband who was decidedly needle-phobic, I instantly saw that what Theranos promised was revolutionary. It could improve the quality of life for millions. Russ Roberts was excited, too, and back in 2015 had enthusiastic conversations with Eric Topol and with a panel of economists about Theranos and its probable impact on American health care. 


Was I also a little inspired by the fact that the founder of Theranos, Elizabeth Holmes, was a young woman? Yes, I was. It seemed about time to have an exciting new tech story with a woman at the head. 


The collapse of Theranos is now a story as familiar as the South Sea Bubble and the subprime mortgage crisis. Carreyrou’s gripping investigative report takes readers through every grim step of the company’s sky-high goals and its underground lies, double dealings, and secrets.


You may think you know how deeply the misrepresentations ran. I thought I did. But I read Carreyrou’s book in sickened gulps, scarcely able to believe how bad it really was. Theranos’s machines didn’t work. They never worked. Even at their very best, they were only able to run about a dozen of the 250 tests they said they could run. For some of those tests, they failed quality control checks 87% of the time. They couldn’t even reproduce their own woefully inaccurate results.


Worse than that, Theranos knew how bad their machines were. When Holmes demonstrated them for potential investors or for companies–like Walgreen’s–with whom she hoped to build long and lucrative relationships, she didn’t run real tests as part of her demo. Instead, she previously recorded tests, presented as if they were happening in the moment. Carreyrou explains:

There was a reason [the Theranos 1.0 machine] always seemed to work….The image on the computer screen showing the blood flowing through the cartridge and settling into the little wells was real. But you never knew whether you were going to get a result or not. So they’d recorded a result from one of the times it worked. It was that recorded result was displayed at the end of each demo.


That revelation hits the reader on page 6 of Carreyrou’s book. The almost 300 pages that follow record lie after lie, in a constantly escalating spiral, until, at one point, Holmes is buying blood testing machines from other companies, testing patient blood with them, and claiming that the tests were done by Theranos machines.


The truth is that Elizabeth Holmes and Theranos were never able to do what they claimed. They risked the lives of every patient whose blood they tested. 


I’m still shaken by Carreyrou’s book, and I recommend it to everyone with an interest in startup culture or healthcare. I recommend it most strongly, however, to people who are (like me) a big fan of market tested innovation. It’s a cautionary tale that will stay with you. 


The Theranos story is so interesting to me, in fact, that I’ll be following this review with a series of 3 posts about the podcast, The Dropout, which also considers Holmes and Theranos. Carreyrou’s book told me everything but “Why.” And I’m hoping the podcast might have some answers.


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