Bad Blood: Secrets and Lies in a Silicon Valley Startup

“Elizabeth liked to keep information compartmentalized so that only she had the full picture of the system’s development.”

Departments at Theranos—chemists and engineers, for example—were discouraged from communicating. Secrecy is bad for the creative process, and the lack of information pass-through hobbled product development while extending the mistakes that led to the company’s downfall. 

“[Elizabeth] was so laser focused on achieving her goals that she seemed oblivious to the practical implications of her decisions.”

Intent on achieving her aims, Elizabeth neglects her health and that of her employees, pushing everyone relentlessly. At this rate, critical mistakes became inevitable, and, given Elizabeth’s iron determination to succeed, cover-ups weren’t out of the question. 

“We have lost sight of our business objective. Did this company set out to ‘put a bunch of people in a room and prevent them from doing illegal things,’ or did it set out to ‘do something amazing with the best people, as quickly as possible’?” 

Ex-Apple designer Justin Maxwell vented in an email to Ana Arriola, another Apple veteran, after both were hired by Theranos to develop the Edison blood reader but found themselves stymied by an overly restrictive company culture with tight restrictions on interdepartmental communications that put security above creativity.

“Elizabeth demanded absolute loyalty from her employees and if she sensed that she no longer had it from someone, she could turn on them in a flash.”

Theranos director of IT Matt Bissel, loyal to Elizabeth to the point of helping her spy on her own employees, finally tired of the paranoia and chaos surrounding her, and he resigned, whereupon Elizabeth shunned him and tried to dig up dirt on him. 

“She had this intense way of looking at you while she spoke that made you believe in her and want to follow her.” 

Witnesses repeatedly described Elizabeth’s intense stare when she talked; that, on top of her tremendous optimism, charm, and intelligence, got nearly everyone who encountered her to fall under her spell.

“Walgreens had brought him here to vet Theranos’ technology, but he hadn’t been allowed to do so. The only thing they had to show for their visit was an autographed flag. And yet, Dr. J and Miquelon didn’t seem to mind. As far as they were concerned, the visit had gone swimmingly.” 

Elizabeth had a way of getting sober-minded clients to throw caution to the wind. It wasn’t just her charm and enthusiasm, but her vision of medicine’s future, that so captivated her audiences. Her sales pitch was near-perfect; the device she promised, however, was not. 

“‘The miniLab is the most important thing humanity has ever built. If you don’t believe this is the case, you should leave now,’ she declared, scanning her audience with a dead serious look on her face. ‘Everyone needs to work as hard as humanly possible to deliver it.’” 

Elizabeth made clear to her employees, at a company Christmas party, the work ethic they were expected to follow, including working on weekends. Doubters were ostracized or fired; the rest were watched over carefully; all were expected to generate results despite having their intra-office communications severely restricted. 

“Part of the problem was that Elizabeth and Sunny seemed unable, or unwilling, to distinguish between a prototype and a finished product. The miniLab Greg was helping build was a prototype, nothing more. It needed to be tested thoroughly and fine-tuned, which would require time. A lot of time. Most companies went through three cycles of prototyping before they went to market with a product. But Sunny was already placing orders for components to build one hundred miniLabs, based on a first, untested prototype. It was as if Boeing built one plane and, without doing a single flight test, told airline passengers, ‘Hop aboard.’” 

Elizabeth and Sunny repeatedly pushed prototypes onto unsuspecting clients, overhyping and under-demonstrating them, making excuses when things went wrong, and lying about their products’ capabilities. They couldn’t tolerate the idea that they weren’t already on top of the tech world, instead pushing impatiently past delays as if they didn't exist and ignoring or punishing workers who warned them of problems. It was a recipe for disaster. 

“[Elizabeth] was so defensive and obstinate that Shoemaker quickly realized that prolonging the argument would be a waste of time. She clearly didn’t want to hear anything that contradicted her point of view.” 

With everyone—clients, employees, regulators—Elizabeth exhibited a persistence that her view was correct and final, and that any disagreement was simply wrong. Those who stood in her way or disagreed with her quickly became subject to her wrath, as did Shoemaker, who later had to scramble to protect his career from false charges hurled at him by the Theranos CEO. 

“Elizabeth’s loose relationship with the truth was another point of contention. Ian had heard her tell outright lies more than once and, after five years of working with her, he no longer trusted anything she said, especially when she made representations to employees or outsiders about the readiness of the company’s technology.”

Elizabeth insisted that her plans were workable despite all evidence to the contrary, and she promised results that simply weren’t forthcoming. Her relationship to reality continued to deteriorate until she seemed to believe her own lies. Whether Elizabeth was conning everyone else or merely herself is open to debate. 

“But the device remained very much a work in progress. The list of its problems was lengthy. The biggest problem of all was the dysfunctional corporate culture in which it was being developed. Elizabeth and Sunny regarded anyone who raised a concern or an objection as a cynic and a naysayer. Employees who persisted in doing so were usually marginalized or fired, while sycophants were promoted.” 

Cutting off all criticism or concerns creates a culture of silence, so that technical problems can’t be resolved properly, or else they take so long to ferret out that the project becomes hopelessly mired in delays. All the while, Elizabeth insisted that everything was fine.

“With time, some employees grew less afraid of him and devised ways to manage him, as it dawned on them that they were dealing with an erratic man-child of limited intellect and an even more limited attention span.”

As smart as she was, Elizabeth had huge blind spots, and one of them was Sunny, a man who managed to get rich in Silicon Valley but otherwise had no apparent talent other than a taste for bullying. Perhaps what she recognized was his complete agreement with her ideas and his willingness to use the whip, as it were, to enforce them. Though smarter than Sunny, his employees had only limited abilities to curb his worst tendencies; tricking him into staying out of their business was their best option. 

“To still be working out the kinks in the product was one thing when you were in R&D mode and testing blood volunteered by employees and their family members, but going live in Walgreens stores meant exposing the general population to what was essentially a big unauthorized research experiment.” 

Elizabeth insisted on pressing forward with what amounted to experimental machines. She kept pushing her scientists and engineers to meet impossible deadlines. The result was that Theranos was purporting to be ready to evaluate blood panels when its products and procedures were unreliable and still largely untested. To “work out the kinks” on the backs of unsuspecting patients was a form of fraud that put innocent lives at risk. 

“Elizabeth told the gathered employees that she was building a religion. If there were any among them who didn’t believe, they should leave. Sunny put it more bluntly: anyone not prepared to show complete devotion and unmitigated loyalty to the company should ‘get the fuck out.’” 

In a do-or-die final push, Elizabeth tried to rally the troops. Only the crazed or fearful would remain. A few among those who quit or were fired, however, were quietly taking whistleblower actions that would lead to the company’s downfall. 

“The data collected were used to calculate each Edison blood test’s coefficient of variation, or CV. A test is generally considered precise if its CV is less than 10 percent. To Tyler’s dismay, data runs that didn’t achieve low enough CVs were simply discarded and the experiments repeated until the desired number was reached. It was as if you flipped a coin enough times to get ten heads in a row and then declared that the coin always returned heads.”

The Theranos research system was founded on dishonesty. As in all other matters, the only reports Elizabeth wanted to receive were those with information that confirmed her beliefs. 

“As much as she courted the attention, Elizabeth’s sudden fame wasn’t entirely her doing. Her emergence tapped into the public’s hunger to see a female entrepreneur break through in a technology world dominated by men.” 

Elizabeth became an icon of empowerment, further fanning the flames of enthusiasm for her and her company. Unlike most startup CEOs, who tended to be less showy, Elizabeth thrived in the limelight, taking on the trappings of stardom. 

“Part of what made Elizabeth’s persona so compelling was her heartwarming message about using Theranos’ convenient blood tests to catch diseases early so that, as she put it in interview after interview, no one would have to say goodbye to loved ones too soon.” 

The Theranos story, with its wondrous promise of a revolution in medical diagnosis and the miracle of lives saved, made everyone want Elizabeth to succeed. Her staunch belief in an inspiring cause pushed any doubts aside. 

“Why wasn’t he being shown quality-control data anymore? How could a lab director, the person who was supposed to vouch for the accuracy of the test results delivered to doctors and patients, be denied that information?” 

Lab director Alan Beam, having warned Elizabeth and Sunny multiple times that their public claims of high accuracy in Theranos blood readers were unsupportable, found himself blocked from information he should have as the officer in charge of standards. He also realized the company was breaking the law on proficiency testing. Beam resigned and later became instrumental in Carreyrou’s investigation of Theranos.

“LIED TO CLIA people & cheated ROLL OUT DISASTER Finger stick not accurate—using venipuncture Transporting Arizona to Palo Alto Using Siemens equip. Ethical breaches False thyroid results K results all over map False pregnancy errors Told Eliz not ready but insisted proceed." 

Richard Fuisz’s notes, taken while talking on the phone to ex-Theranos lab director Alan Beam, were a litany of failures, lies, and cheating on the part of Theranos executives. Fuisz knew the company was a fraud, but their patent lawsuit against him proved exhausting and financially debilitating, so he settled out of court. Alan Beam’s revelations, however, were what Fuisz needed to prove Theranos was a fraud, and he convinced Alan to contact the medical blogger Adam Clapper, who tipped off reporter Carreyrou, and The Wall Street Journal investigation began. 

“It was all beginning to make sense: Holmes and her company had overpromised and then cut corners when they couldn’t deliver."

Reporter Carreyrou began to put the pieces together in February 2015, realizing that the Theranos promise remained unfulfilled and the company’s leaders were lying about it. The way they maintained the charade involved diluting finger-prick blood samples for use in conventional blood analyzers, which introduced critical errors in the process, errors that couldn’t be papered over and that risked the lives of patients. 

“The way Theranos is operating is like trying to build a bus while you’re driving the bus. Someone is going to get killed.”

One of Carreyrou’s deep sources from Theranos thus aptly confirmed what others were telling the reporter, that the company was trying to roll out a product that wasn’t working properly, a strategy that was risky at best and disastrous at worst. 

“Like her idol Steve Jobs, [Elizabeth] emitted a reality distortion field that forced people to momentarily suspend disbelief.” 

Elizabeth’s chief talent, and a powerful one, was sales. Unlike Steve Jobs, she wasn’t much of an inventor, couldn’t handle managerial problems and delays beyond shoving them under the rug, and resorted to threats and lies when doubted. 

“Other lab experts were quick to note that none of the miniLab’s various components were novel. All Theranos had done was make them smaller and pack them into one box, they said.” 

Elizabeth might well have been lauded for her genius, had the Edison or miniLab actually worked. The chief problem with those machines was that smart people couldn’t fix the technical snags, and neither could Elizabeth’s charm and persuasive powers.