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Bad Blood

2023/03/04 16:00:13瀏覽843｜回應0｜推薦15

About the Writer

John Carreyrou is a French American journalist and writer who worked for The Wall Street Journal for 20 years between 1999 and 2019 and has been based in Brussels, Paris, and New York City. He won the Pulitzer Prize twice and is well known for having exposed the fraudulent practices of the multibillion-dollar blood-testing company Theranos in a series of articles published in The Wall Street Journal.

Elizabeth Holmes

Elizabeth Holmes, who is a convicted American fraudster and former biotechnology entrepreneur. In 2003, Holmes founded and was the chief executive officer (CEO) of Theranos, a now-defunct health technology company. It soared in valuation after the company claimed to have revolutionized blood testing by developing methods that could use surprisingly small volumes of blood, such as from a fingerprick. By 2015, Forbes had named Holmes the youngest and wealthiest self-made female billionaire in America on the basis of a $9-billion valuation of her company. In the following year, as revelations of potential fraud about Theranoss claims began to surface, Forbes revised its estimate of Holmess net worth to zero, and Fortune named her in its feature article on "The Worlds 19 Most Disappointing Leaders."

Summary

The book reveals how Elizabeth Holmes, a 19-year-old Stanford University drop-out wanted to disrupt the traditional $75 billion blood-testing business. People would no longer need to fear a long needle going into their arm vein to draw a vial or more of blood. Instead, Elizabeth Holmes’ idea was that only one drop from a finger prick would revolutionize the process. Theranos, the name a combination of therapy and diagnosis, was founded in 2003 and raised more than USD 700 million from venture capitalists and private investors, resulting in a USD 10 billion valuation at its peak in 2013 & 2014. By June 2016, it’s estimated that Holmes’s personal net worth had dropped from USD 4.5 billion to virtually nothing and the co. dissolved and liquidated on Sep 4, 2018. Theranos, Holmes and former co. president Sunny Balwani were charged with fraud and conspiracy.

The tantalizing claim of the founder was to have invented a groundbreaking new technology that allowed a full range of laboratory tests from a tiny blood sample. Goodbye to the standard syringe-full of blood and established laboratory chains. Holmes promised a simple home blood test would become the model in which “we’re determining the onset of disease in time for therapy to be effective—we will change outcomes.” The charismatic and ambitious founder of Theranos, Elizabeth H. was able to convince investors, such as Larry Edison, the owner of Oracle, Devos family and the well-known conglomerates such as Walgreens and Safeway that her technology was groundbreaking, even though it was plagued with problems and did not work as advertised. The book also sheds light on the culture of secrecy, paranoia, fear, and intimidation that prevailed at Theranos by the fraud case and how it silenced employees who tried to expose the companys flaws.

The health technology company crashed from unicorn status leaving questions about what factors silenced doubters and enticed high-profile investors such as Walgreen invested at 140 million, DeVos family at $100 million, Safeway at $30 million, Rupert Murdoch, Fox News owner at $125 million. Holmes dreamed blood testing could be less painful, less expensive, and even done at home with a “mini lab” in a box named Edison after inventor the Thomas Edison. The mission to change outcomes plus key connections attracted the rich and famous. The board of directors included prominent men such as former Secretaries of State George Shultz and Henry Kissinger, former Secretaries of Defense Gen. James Mattis and William Perry and former U.S. Senators Bill Frist and Sam Nunn.

The news media shone the spotlight on Theranos placing Holmes on the cover of Forbes, Fortune, Inc., and Bloomberg Businessweek. She gave a talk at TED MED in 2014 and was introduced by former president Bill Clinton at a panel of health care disrupters. In the seven years of its research and development phase, however, Theranos made numerous iterations without finding a reliable solution to deliver on its promise. Theranos claimed to be able to perform 240 tests on the Edison. Yet, several employees said only 15 were actually performed on the company’s machine with the rest done on competitors’ machines purchased by Theranos. “I grew up with those stories about greatness.” said Holmes about her family conversation about entrepreneurial drive and the negative impact of not choosing a purposerful life. Its outrageous & out of imagination to see the fraud goes on and could last 15 years.

There was no doubt that the reliability of Theranos’s blood testing had under the scrutiny by the U.S. Attorney’s Office and the Securities and Exchange Commission. In 2016, Walgreens had ended for working with Theranos by closing 40 Theranos Wellness Centers in stores in Arizona, which had caused Walgreens to lose for about $50 million, because of the paranoid executive couldn’t risk a scenario where CVS might have a deal with Theranos under Holmes lie to start with.

Employees observed physical security measures such as body guards for Holmes and Balwani and bullet-proof glass. A variety of Theranos employees saw red flags and raised concerns through the years. However, the company’s non-disclosure agreement told employees not to tell their families what they did for a living or to list their position on LinkedIn. Employees said measures such as these made employees paranoid of each other and created silos. Also, the frequent firings gave new meaning to the word “disappear.”

The story culminates in a series of investigative reports by journalist John Carreyrou, with the input from the whistleblowers, such as Erika Cheung, Henry Mosley, and Tyler Shultz, etc, which expose the truth about Theranos and lead to the downfall of the company. The writer reveals how Elizabeth Holmes and her partner, Sunny Balwani, were charged with multiple counts of fraud, and how their actions led to the loss of billions of dollars in investment, as well as the potential harm to patients who relied on their inaccurate test results.

Overall, "Bad Blood" is a gripping and cautionary tale that sheds light on the dark side of Silicon Valley and the importance of ethical behavior in the tech industry. In June 2018, a federal grand jury indicted Holmes and former Theranos chief operating officer (COO) Ramesh "Sunny" Balwani on fraud charges and following the collapse of Theranos, she started dating hotel heir Billy Evans, with whom she had a son in 2021. Her trial in the case of Elizabeth Holmes ended in January 2022 when Holmes was convicted of defrauding investors and acquitted of defrauding patients. In November 2022, she was sentenced to serve 11+1⁄4 years in prison.

Questions

"Bad Blood" by John Carreyrou is a fascinating book that raises many ethical and moral questions about the actions of Theranos and its founder, Elizabeth Holmes. Here are some discussion questions:

1. What are some of the warning signs that were present early on in the development of Theranos that should have alerted investors and regulators to potential problems? Were these signs ignored, and if so, why?

It’s important to understand the ethical dimensions of the case to be able to spot red flags indicative of potential fraud and know how to react, including the decision on whether to blow the whistle.

(1)Absence of a CFO: If we look closely at the hierarchy of the company, we can spot the absence of a CFO except for about eight months between the time that Mosley was hired and subsequently fired by Holmes. This lack of a CFO is unusual. A big part of a CFO’s job, besides managing the finances of a company, is to be involved in strategic planning and making decisions to fuel sustainable growth. Also, CFOs are investors’ financial guardians who must be skeptical in their work since they’re managing the finance function of a company that other people invest in.

(2)Absence of an auditor’s opinion report: The absence of an official auditor’s opinion is a serious red flag. An external auditor’s reports are supposed to grant financial statements credibility based on which investors and financial institutions make their decisions. It shows how much investors trusted Holmes because they invested in her company without even requesting an auditor’s opinion report.

(3)Culture of extreme secrecy: Employees should respect the ethical standard of confidentiality. But imposing extreme secrecy on employees raises a red flag. Employees should feel free to ask any question or raise their concerns, which wasn’t allowed at Theranos.

Former employees claimed that they were fired after raising an ethical issue. What are the options available to an employee to report wrongdoing or unethical conduct while protecting themselves to the extent possible?

(4)people like a dictator; teams at Theranos were forbidden to talk to each other; men in SUVs stalked whistleblowers

Option 1: Tell senior management about the wrongdoing and be prepared to get ignored or fired. Usually when unethical conduct happens at a mid- or entry level, management will resolve the situation properly. But when the witness is at a lower position than the individual committing the wrongdoing, the situation can get messy, and, in far too many instances, ethical employees who speak up get terminated or retaliated against in other ways.

Option 2: Stay silent and consider this beyond your responsibility. Depending on the witnessed infraction, this could be considered a dereliction of your ethical duty.

Option 3: Research whistleblower programs, such as the

U.S. Securities & Exchange Commission’s Office of the Whistleblower

, and seek an attorney’s advice before saying anything to make sure that you’re protected, especially when dealing with financial frauds. Mosley and Shultz chose to confront Theranos’s leaders and got terminated and pushed to resign, respectively.(r.1)

2. What ethical dilemmas did employees of Theranos face? Were they complicit in the deception, or were they simply following orders?

Holmes told her employees that the results wouldn’t impact the patients but there a few who knew that it was a lie.

The employees were concerned about the false results that would be given to the oncology patients in this trial and wanted to cancel the plan. All Holmes said to them was to follow suit with the company or resign, they both resigned in 2008.

the technology was estimated to be have been used on over 176,000 people (8). Their testing would misdiagnose patients by diagnosing them with an illness they did not actually have or not actually diagnose them at all. This would prompt the patients to completely change their lifestyles or would possibly not even be aware that they needed a lifestyle change in the first place.

3. How did the media and the public react to the revelations about Theranos? Were they complicit in perpetuating the myth of Elizabeth Holmes as a brilliant entrepreneur, or did they play a role in exposing the truth?

Media create the legend of Holms also can kill it.

Too many executives still believe that they can take a ‘don’t call us, we’ll call you’ approach with journalists – shutting up shop when the going gets tough. That’s a mistake. Offering access and responding to sceptical questions will always be the surest way to deal with media curiosity.(r.4)

4. How did the actions of Elizabeth Holmes and Theranos impact the public perception of Silicon Valley and the tech industry as a whole?

Fake it until you make it! The problem in Silicon Valley is that the line between fake fraud and a true dream is very thin. Ambition can be good. Promising a brighter future, and then trying to realise that vision, brought about computers and smartphones.(r.5)

5. If you were an investor or board member of Theranos, what actions would you have taken in response to the information presented in the book

Believe what you see is more important than what you hear.

Elizabeth Holmes founded her company Theranos at the age of 19 and it set out to revolutionise laboratories through blood tests that could be performed rapidly while using very small amounts of blood. A year later, Holmes had dropped out of her studies at California’s elite Stanford University so she could focus entirely on Theranos. By age 31 she was a celebrated young entrepreneur in male-dominated Silicon Valley. By then she was worth $9 billion – the youngest self-made billionaire in the United States.

Theranos derived from a combination of the words "therapy" and "diagnosis".

it will require founders to be more careful in the future about how they advertise the promises of their companies. In the future, executives found to have misled investors will have to face real consequences.

We learn that we need to be more careful to believe all the theory but also the diagnosis,too.

6. How did the experience of whistleblowers at Theranos impact their lives and careers? Were their actions heroic, or were they simply doing their jobs?

The whistleblower Tyler Shultz recounts his experience as a recent college graduate in 2014, at Theranos, a medical technology start-up. After starting his job as a research engineer on the assay validation team, which was responsible for verifying the blood tests run on Theranos’ Edison machine, Tyler noticed significant quality control failures. In the video, Tyler explains the issues he encountered and how he decided to blow the whistle on the company. He first expressed his concerns internally, but faced such hostility that he resigned from the company after eight months of employment. After Tyler left Theranos, a Wall Street Journal reporter, John Carreyrou, reached out to him and asked him about his time at Theranos. Initially,Tyler did not want to share his story, as his grandfather, George Shultz, was a board member of Theranos and did not support Tyler’s claims. Ultimately, Tyler became an anonymous source for Carreyrou, despite hefty personal and financial costs.

Hefty personal and financial costs bring him back to the truehearted life and save more than 176,000 people’s wrong data from the blood-testing. It’s worthy and meaningful!

7. What role did Elizabeth Holmes play in the downfall of Theranos? Was she a victim of her own ambition or a master manipulator who intentionally deceived investors and the public?

Elizabeth Holmes’s father was the vice president at Enron, an energy company that later went bankrupt after an accounting fraud scandal. From her life, she just learned “fake it until make it”. She is the victim of the family education.

8. What lessons can we learn from the Theranos scandal? How can we prevent similar situations from occurring in the future?

Talented prodigy is useless if you are not honest.

Transparency is the best key to the strongest business partnership.

Raising capital isn’t a cure-all, it will be gone with the wind if you are a fraudster.

The greatest leader is willing to take the most heavy responsibility.

Better fail fast, or you will fail bigger

What you say to the media can have legal consequences. Media can bring your uphill but also downhill if you are not honest.

Tyler Shultz

The grandson of George Shultz and whistleblower employee filed the first-known regulatory complaint, even though he said, “you want it to be true so badly.” At times, Shultz doubted himself, calling Holmes extremely convincing. “She really makes you feel she cares so much about you, about helping the world.” But Shultz was alarmed to learn that an Edison test of 100 people with sexually-transmitted infectious could show falsely that one-third had no disease. Holmes and others tried to show why his analysis was incorrect. Balwani responded by belittling Shultz’ grasp of laboratory science. His high-profile grandfather didn’t believe his discovery.