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Theranos’ unraveling began with a 2015 Wall Street Journal article revealing how the breakthrough technology promoted by the blood testing startup was not exactly what it seemed.
In the months that followed, reporter John Carreyrou laid out how the testing devices, according to the Silicon Valley darling, could perform a variety of medical tests with just a drop of blood were not actually used to perform the test. most analyzes. Investors and consumers, Carreyrou found, were fooled.
Theranos disbanded in 2018 and its star founder, Elizabeth Holmes, will be tried in a San José courtroom next week.
Carreyrou’s book on the rise and fall of Theranos, meanwhile, has become a bestseller, and the author is hosting a new podcast, Bad Blood: the Final Chapter, as the trial begins.
He spoke with the Guardian about Holmes’ lies and the broader questions about Silicon Valley culture that Theranos has raised.
What should readers know about this particular moment in Silicon Valley culture when Theranos rose to prominence?
Theranos rose to prominence between 2013 and 2015, at the start of what I call the ‘unicorn boom’ – the second huge boom in Silicon Valley after the dotcom boom of the late ’90s.
This boom started with the emergence of Facebook and Twitter and then metastasized with the appearance of these other big unicorns like Uber and Airbnb. Theranos at one point was worth even more and was Silicon Valley’s most valuable private startup in 2014.
This was all before the big tech backlash. People weren’t tough on Facebook until the 2016 election, when they realized the role Facebook and Twitter played and how these platforms were being manipulated by Russian hackers. The disposition of the country and the press towards Silicon Valley was always positive. When I first broke the Theranos scandal, to a small extent it contributed to the backlash against technology that started to happen.
Why do you think he was able to go unchecked for so long?
As Holmes herself put it, Theranos was in stealth mode for its first 10 years, so the company wasn’t on anyone’s radar. It was only really in the limelight for two years before I wrote my first story about the scandal. You could argue that even that was too long as these unreliable and inaccurate blood tests were already available at Walgreens.
Sunny [Ramesh Balwani, former president of Theranos, who was also charged with fraud] and Elizabeth were very secretive – they ran this business like it was the CIA. The threat of litigation was still in the air, so employees were afraid to speak out.
It seems the collection of prominent people on the board, many of whom lacked actual scientific expertise, played in the hype. How was Holmes able to secure such supporters?
She did it in a very calculated way. Very early on, she started dating these older men who might give her more credibility. It all started with Channing Robertson, the renowned Stanford engineering professor who would join her board, encourage her and put her in touch with people he knew in the valley.
Then George Schultz played a key role in terms of being able to put together the latest iteration of the board. He presented it to all these luminaries; many of them were Hoover Institution Fellows. And so she milked it. She was able to meet General Mattis, former cabinet members like Kissinger, and so on.
The [Securities and Exchange Commission] has a term for it, and that is affinity fraud. It means associating with credible people who are well regarded by society to give yourself credibility. And that’s a big part of Theranos’ story.
Could you talk a bit about the myth surrounding Elizabeth Holmes and why people were drawn to it?
There are two parts. One is a myth that survives to this day, popularized by the incredible success of Steve Jobs, that Silicon Valley can produce these young genius startup founders every few years and that they can’t do anything wrong. .
[Holmes] served this myth, but there was also a gender component. She would be the first woman to achieve billionaire status and join the pantheon of these tech leaders. People really rooted him – young girls wrote his letters.
Many people wanted to believe this fairy tale, because it would have represented real progress in this very masculine world of Silicon Valley. Unfortunately, it was a fairy tale that was not true.
Do you think these myths around people or these characters still play a big role and who gets funding in Silicon Valley?
Absolutely yes. To this day, there is a will to worship the geniuses of Silicon Valley. It’s a very American phenomenon – I’m half French and I think Europeans tend to be a little more cynical, but Americans are eternally optimistic, always ready to worship new heroes.
This is especially true in Silicon Valley, where there is this magical thought that some people are geniuses and just can’t be wrong. It may have been tempered in recent years because of Theranos, but I believe he still exists.
When you told the story, you were also based on the East Coast – do you think coming from outside the Silicon Valley bubble helped you in your reporting?
That’s part of it, but it’s also the fact that I did investigative healthcare reporting for a decade before I stumbled upon Theranos. Holmes presented himself as part of a technological lineage when in fact his company was a healthcare company. So I just had the right background to see through.
Since the media has played such an important role in building the business, do you think tech media is doing better now?
Especially after learning about how Facebook and Twitter were exploited in the 2016 election and how these companies became virtual monopolies, there is much more skeptical and critical coverage today than there was then.
When it comes to the changing culture of Silicon Valley itself, I still think it will take a guilty verdict.
How do you think the outcome of the case will impact Silicon Valley and startup culture in general?
If she gets convicted and serves a significant jail time, Valley venture capitalists and startup founders will have limits on how much bullshit you can do, how much hype and hype. you can do and how many rules you can break.
There has been a culture of pretending until you do it in Silicon Valley for a long time, and it’s a product of that culture. Reforming that is going to take a conviction and people realize that if you cross too many lines you will end up in jail.
The flip side is if she gets acquitted, you’ll have young entrepreneurs running around Silicon Valley saying, I don’t do a day in jail.
Do you think she will testify?
If I had to bet, I think she will testify. Not just because of what I said about his risk tolerance and his confidence, but because it looks like his strategy is going to be to blame Sunny and say he was abusive.
If this is the strategy, I don’t think it will be enough to put psychologists on the bar. To convince jurors, they will want to hear from her how Sunny mistreated her, what effect it had on her, and how it affected her judgment.
Maybe I will be wrong. In most criminal cases, defense lawyers advise their clients not to testify as it is a huge gamble. This opens the door for you to cross-examination from the prosecution, which can backfire on you in a huge way. If she testifies, it will certainly go against the grain of what usually happens.
Considering the defense we’re sort of planning, what’s your take on his relationship with Why?
He was definitely a bad influence – but the idea that he controlled her, to me, is laughable. They were together in a partnership of equals. On the contrary, when they disagreed, she had the last word.
I have known this not only from the six years of reporting on this, and everyone I interviewed who saw them working together closely, but I have gone through five years texting each other. which were exhibits in the SEC case. [against Theranos].
It should not be forgotten either that it held 99.7% of the voting rights of this company. She was in full control. Did she live with him and do they consult with each other all the time? Yes. But I don’t accept this notion that he was the puppeteer and she was the puppet.
This story has inspired many movies, books and other media. Why do you think this is so convincing to people?
Scams are generally convincing, and American capitalism is really good at producing them.
In this case, people are fascinated by the psychology of Holmes. How did she rationalize her behavior? How could she remove these lies for so long? How could she have manipulated people for so long? The way she deepened her voice sometimes, the clothes she wore – she’s a real chameleon.
She also has this extraordinary tolerance for risk, because to be successful in what she has achieved – living with a failed blood test machine – it takes courage. Same how she’s handling the case now – most people would have argued four years ago. She chose to take this lawsuit to court, to roll the dice.
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