Saturday Night Science: Bad Blood

“Bad Blood” by John CarreyrouThe drawing of blood for laboratory tests is one of my least favourite parts of a routine visit to the doctor’s office. Now, I have no fear of needles and hardly notice the stick, but frequently the doctor’s assistant who draws the blood (whom I’ve nicknamed Vampira) has difficulty finding the vein to get a good flow and has to try several times. On one occasion she made an internal puncture which resulted in a huge, ugly bruise that looked like I’d slammed a car door on my arm. I wondered why they need so much blood, and why draw it into so many different containers? (Eventually, I researched this, having been intrigued by the issue during the O. J. Simpson trial; if you’re curious, here is the information.) Then, after the blood is drawn, it has to be sent off to the laboratory, which sends back the results days later. If something pops up in the test results, you have to go back for a second visit with the doctor to discuss it.

Wouldn’t it be great if they could just stick a fingertip and draw a drop or two of blood, as is done by diabetics to test blood sugar, then run all the tests on it? Further, imagine if, after taking the drop of blood, it could be put into a desktop machine right in the doctor’s office which would, in a matter of minutes, produce test results you could discuss immediately with the doctor. And if such a technology existed and followed the history of decline in price with increase in volume which has characterised other high technology products since the 1970s, it might be possible to deploy the machines into the homes of patients being treated with medications so their effects could be monitored and relayed directly to their physicians in case an anomaly was detected. It wouldn’t quite be a Star Trek medical tricorder, but it would be one step closer. With the cost of medical care rising steeply, automating diagnostic blood tests and bringing them to the mass market seemed an excellent candidate as the “next big thing” for Silicon Valley to revolutionise.

This was the vision that came to 19 year old Elizabeth Holmes after completing a summer internship at the Genome Institute of Singapore after her freshman year as a chemical engineering major at Stanford. Holmes had decided on a career in entrepreneurship from an early age and, after her first semester told her father, “No, Dad, I’m, not interested in getting a Ph.D. I want to make money.” And Stanford, in the heart of Silicon Valley, was surrounded by companies started by professors and graduates who had turned inventions into vast fortunes. With only one year of college behind her, she was sure she’d found her opportunity. She showed the patent application she’d drafted for an arm patch that would diagnose medical conditions to Channing Robertson, professor of chemical engineering at Stanford, and Shaunak Roy, the Ph.D. student in whose lab she had worked as an assistant during her freshman year. Robertson was enthusiastic, and when Holmes said she intended to leave Stanford and start a company to commercialise the idea, he encouraged her. When the company was incorporated in 2004, Roy, then a newly-minted Ph.D., became its first employee and Robertson joined the board.

From the outset, the company was funded by other people’s money. Holmes persuaded a family friend, Tim Draper, a second-generation venture capitalist who had backed, among other companies, Hotmail, to invest US$ 1 million in first round funding. Draper was soon joined by Victor Palmieri, a corporate turnaround artist and friend of Holmes’ father. The company was named Theranos, from “therapy” and “diagnosis”. Elizabeth, unlike this scribbler, had a lifelong aversion to needles, and the invention she described in the business plan pitched to investors was informed by this. A skin patch would draw tiny quantities of blood without pain by means of “micro-needles”, the blood would be analysed by micro-miniaturised sensors in the patch and, if needed, medication could be injected. A wireless data link would send results to the doctor.

This concept, and Elizabeth’s enthusiasm and high-energy pitch allowed her to recruit additional investors, raising almost US$ 6 million in 2004. But there were some who failed to be persuaded: MedVentures Associates, a firm that specialised in medical technology, turned her down after discovering she had no answers for the technical questions raised in a meeting with the partners, who had in-depth experience with diagnostic technology. This would be a harbinger of the company’s fund-raising in the future: in its entire history, not a single venture fund or investor with experience in medical or diagnostic technology would put money into the company.

Shaunak Roy, who, unlike Holmes, actually knew something about chemistry, quickly realised that Elizabeth’s concept, while appealing to the uninformed, was science fiction, not science, and no amount of arm-waving about nanotechnology, microfluidics, or laboratories on a chip would suffice to build something which was far beyond the state of the art. This led to a “de-scoping” of the company’s ambition—the first of many which would happen over succeeding years. Instead of Elizabeth’s magical patch, a small quantity of blood would be drawn from a finger stick and placed into a cartridge around the size of a credit card. The disposable cartridge would then be placed into a desktop “reader” machine, which would, using the blood and reagents stored in the cartridge, perform a series of analyses and report the results. This was originally called Theranos 1.0, but after a series of painful redesigns, was dubbed the “Edison”. This was the prototype Theranos ultimately showed to potential customers and prospective investors.

This was a far cry from the original ambitious concept. The hundreds of laboratory tests doctors can order are divided into four major categories: immunoassays, general chemistry, hæmatology, and DNA amplification. In immunoassay tests, blood plasma is exposed to an antibody that detects the presence of a substance in the plasma. The antibody contains a marker which can be detected by its effect on light passed through the sample. Immunoassays are used in a number of common blood tests, such the 25(OH)D assay used to test for vitamin D deficiency, but cannot perform other frequently ordered tests such as blood sugar and red and white blood cell counts. Edison could only perform what is called “chemiluminescent immunoassays”, and thus could only perform a fraction of the tests regularly ordered. The rationale for installing an Edison in the doctor’s office was dramatically reduced if it could only do some tests but still required a venous blood draw be sent off to the laboratory for the balance.

This didn’t deter Elizabeth, who combined her formidable salesmanship with arm-waving about the capabilities of the company’s products. She was working on a deal to sell four hundred Edisons to the Mexican government to cope with an outbreak of swine flu, which would generate immediate revenue. Money was much on the minds of Theranos’ senior management. By the end of 2009, the company had burned through the US$ 47 million raised in its first three rounds of funding and, without a viable product or prospects for sales, would have difficulty keeping the lights on.

But the real bonanza loomed on the horizon in 2010. Drugstore giant Walgreens was interested in expanding their retail business into the “wellness market”: providing in-store health services to their mass market clientèle. Theranos pitched them on offering in-store blood testing. Doctors could send their patients to the local Walgreens to have their blood tested from a simple finger stick and eliminate the need to draw blood in the office or deal with laboratories. With more than 8,000 locations in the U.S., if each were to be equipped with one Edison, the revenue to Theranos (including the single-use testing cartridges) would put them on the map as another Silicon Valley disruptor that went from zero to hundreds of millions in revenue overnight. But here, as well, the Elizabeth effect was in evidence. Of the 192 tests she told Walgreens Theranos could perform, fewer than half were immunoassays the Edisons could run. The rest could be done only on conventional laboratory equipment, and certainly not on a while-you-wait basis.

Walgreens wasn’t the only potential saviour on the horizon. Grocery godzilla Safeway, struggling with sales and earnings which seemed to have reached a peak, saw in-store blood testing with Theranos machines as a high-margin profit centre. They loaned Theranos US$ 30 million and began to plan for installation of blood testing clinics in their stores.

But there was a problem, and as the months wore on, this became increasingly apparent to people at both Walgreens and Safeway, although dismissed by those in senior management under the spell of Elizabeth’s reality distortion field. Deadlines were missed. Simple requests, such as A/B comparison tests run on the Theranos hardware and at conventional labs were first refused, then postponed, then run but results not disclosed. The list of tests which could be run, how blood for them would be drawn, and how they would be processed seemed to dissolve into fog whenever specific requests were made for this information, which was essential for planning the in-store clinics.

There was, indeed, a problem, and it was pretty severe, especially for a start-up which had burned through US$ 50 million and sold nothing. The product didn’t work. Not only could the Edison only run a fraction of the tests its prospective customers had been led by Theranos to believe it could, for those it did run the results were wildly unreliable. The small quantity of blood used in the test introduced random errors due to dilution of the sample; the small tubes in the cartridge were prone to clogging; and capillary blood collected from a finger stick was prone to errors due to “hemolysis”, the rupture of red blood cells, which is minimal in a venous blood draw but so prevalent in finger stick blood it could lead to some tests producing values which indicated the patient was dead.

Meanwhile, people who came to work at Theranos quickly became aware that it was not a normal company, even by the eccentric standards of Silicon Valley. There was an obsession with security, with doors opened by badge readers; logging of employee movement; information restricted to narrow silos prohibiting collaboration between, say, engineering and marketing which is the norm in technological start-ups; monitoring of employee Internet access, E-mail, and social media presence; a security detail of menacing-looking people in black suits and earpieces (which eventually reached a total of twenty); a propensity of people, even senior executives, to “vanish”, Stalin-era purge-like, overnight; and a climate of fear that anybody, employee or former employee, who spoke about the company or its products to an outsider, especially the media, would be pursued, harassed, and bankrupted by lawsuits. There aren’t many start-ups whose senior scientists are summarily demoted and subsequently commit suicide. That happened at Theranos. The company held no memorial for him.

Throughout all of this, a curious presence in the company was Ramesh (“Sunny”) Balwani, a Pakistani-born software engineer who had made a fortune of more than US$ 40 million in the dot-com boom and cashed out before the bust. He joined Theranos in late 2009 as Elizabeth’s second in command and rapidly became known as a hatchet man, domineering boss, and clueless when it came to the company’s key technologies (on one occasion, an engineer mentioned a robotic arm’s “end effector”, after which Sunny would frequently speak of its “endofactor”). Unbeknownst to employees and investors, Elizabeth and Sunny had been living together since 2005. Such an arrangement would be a major scandal in a public company, but even in a private firm, concealing such information from the board and investors is a serious breach of trust.

Let’s talk about the board, shall we? Elizabeth was not only persuasive, but well-connected. She would parley one connection into another, and before long had recruited many prominent figures including:

  • George Schultz (former U.S. Secretary of State)
  • Henry Kissinger (former U.S. Secretary of State)
  • Bill Frist (former U.S. Senator and medical doctor)
  • James Mattis (General, U.S. Marine Corps)
  • Riley Bechtel (Chairman and former CEO, Bechtel Group)
  • Sam Nunn (former U.S. Senator)
  • Richard Kobacevich (former Wells Fargo chairman and CEO)

Later, super-lawyer David Boies would join the board, and lead its attacks against the company’s detractors. It is notable that, as with its investors, not a single board member had experience in medical or diagnostic technology. Bill Frist was an M.D., but his speciality was heart and lung transplants, not laboratory tests.

By 2014, Elizabeth Holmes had come onto the media radar. Photogenic, articulate, and with a story of high-tech disruption of an industry much in the news, she began to be featured as the “female Steve Jobs”, which must have pleased her, since she affected black turtlenecks, kale shakes, and even a car with no license plates to emulate her role model. She appeared on the cover of Fortune in January 2014, made the Forbes list of 400 most wealthy shortly thereafter, was featured in puff pieces in business and general market media, and was named by Time as one of the hundred most influential people in the world. The year 2014 closed with another glowing profile in the New Yorker. This would be the beginning of the end, as it happened to be read by somebody who actually knew something about blood testing.

Adam Clapper, a pathologist in Missouri, spent his spare time writing Pathology Blawg, with a readership of practising pathologists. Clapper read what Elizabeth was claiming to do with a couple of drops of blood from a finger stick and it didn’t pass the sniff test. He wrote a sceptical piece on his blog and, as it passed from hand to hand, he became a lightning rod for others dubious of Theranos’ claims, including those with direct or indirect experience with the company. Earlier, he had helped a Wall Street Journal reporter comprehend the tangled web of medical laboratory billing, and he decided to pass on the tip to the author of this book.

Thus began the unravelling of one of the greatest scams and scandals in the history of high technology, Silicon Valley, and venture investing. At the peak, privately-held Theranos was valued at around US$ 9 billion, with Elizabeth Holmes holding around half of its common stock, and with one of those innovative capital structures of which Silicon Valley is so fond, 99.7% of the voting rights. Altogether, over its history, the company raised around US$ 900 million from investors (including US$ 125 million from Rupert Murdoch in the US$ 430 million final round of funding). Most of the investors’ money was ultimately spent on legal fees as the whole fairy castle crumbled.

The story of the decline and fall is gripping, involving the grandson of a Secretary of State, gumshoes following whistleblowers and reporters, what amounts to legal terrorism by the ever-slimy David Boies, courageous people who stood their ground in the interest of scientific integrity against enormous personal and financial pressure, and the saga of one of the most cunning and naturally talented confidence women ever, equipped with only two semesters of freshman chemical engineering, who managed to raise and blow through almost a billion dollars of other people’s money without checking off the first box on the conventional start-up check list: “Build the product”.

I have, in my career, met three world-class con men. Three times, I (just barely) managed to pick up the warning signs and beg my associates to walk away. Each time I was ignored. After reading this book, I am absolutely sure that had Elizabeth Holmes pitched me on Theranos (about which I never heard before the fraud began to be exposed), I would have been taken in. Walker’s law is “Absent evidence to the contrary, assume everything is a scam”. A corollary is “No matter how cautious you are, there’s always a confidence man (or woman) who can scam you if you don’t do your homework.”

Carreyrou, John. Bad Blood. New York: Alfred A. Knopf, 2018. ISBN 978-1-984833-63-1.

Here is Elizabeth Holmes at Stanford in 2013, when Theranos was riding high and she was doing her “female Steve Jobs” act.

This is a CNN piece, filmed after the Theranos scam had begun to collapse, in which you can still glimpse the Elizabeth Holmes reality distortion field at full intensity directed at CNN medical correspondent Sanjay Gupta. There are several curious things about this video. The machine that Gupta is shown is the “miniLab”, a prototype second-generation machine which never worked acceptably, not the Edison, which was actually used in the Walgreens and Safeway tests. Gupta’s blood is drawn and tested, but the process used to perform the test is never shown. The result reported is a cholesterol test, but the Edison cannot perform such tests. In the plans for the Walgreens and Safeway roll-outs, such tests were performed on purchased Siemens analysers which had been secretly hacked by Theranos to work with blood diluted well below their regulatory-approved specifications (the dilution was required due to the small volume of blood from the finger stick). Since the miniLab never really worked, the odds are that Gupta’s blood was tested on one of the Siemens machines, not a Theranos product at all.

In a June 2018 interview, author John Carreyrou recounts the story of Theranos and his part in revealing the truth.  There is substantial background information in the question and answer period which does not appear in the book.

If you are a connoisseur of the art of the con, here is a masterpiece. After the Wall Street Journal exposé had broken, after retracting tens of thousands of blood tests, and after Theranos had been banned from running a clinical laboratory by its regulators, Holmes got up before an audience of 2500 people at the meeting of the American Association of Clinical Chemistry and turned up the reality distortion field to eleven. Watch a master at work. She comes on the stage at the six minute mark.


Author: John Walker

Founder of, Autodesk, Inc., and Marinchip Systems. Author of The Hacker's Diet. Creator of

16 thoughts on “Saturday Night Science: Bad Blood

  1. I need to read this. It amazes me how people don’t do their homework. Also con people really know how to speak and say nothing. They fail to answer the question but most people don’t care because they say what people want to hear.

  2. 10 Cents:
    Also con people really know how to speak and say nothing. They fail to answer the question but most people don’t care because they say what people want to hear.

    There is an excellent example of this near the end of the last video.  Elizabeth Holmes is asked a question about how many analytes Theranos can process.  This is a question whose answer is a single number.  She filibusters with a great cloud of fuzzy words.  She is asked a follow-up question and back comes another filibuster in which she says that, depending on how you define it, the number may be one or “hundreds”.

  3. In the question and answer period at the end of the talk by John Carreyrou in the third video, he mentions the Space Invaders video game developed where a Theranos machine shoots at him.  Here is a video that shows the game.

  4. John Walker:

    10 Cents:
    Also con people really know how to speak and say nothing. They fail to answer the question but most people don’t care because they say what people want to hear.

    There is an excellent example of this near the end of the last video.  Elizabeth Holmes is asked a question about how many analytes Theranos can process.  This is an question whose answer is a single number.  She filibusters with a great cloud of fuzzy words.  She is asked a follow-up question and back comes another filibuster in which the says that, depending on how you define it, the number may be one or “hundreds”.

    I always look for the filibuster. I always look for the unnecessary demonizing of the critic. “That question is often asked by those who have a vested interest in killing babies.” (This is a parody but really close to the truth.) I also look for the avoidance of any standard practices. There is also the practice of “I have secret information that I can’t share right now. Trust me.”

    What cons excel at is telling a wonderful story that we all want to believe. That story often overcomes any logic.

  5. In movies often great actresses control their lighting. There is a key light that makes their eyes brighter. I notice this in some videos of Elizabeth Holmes. “If the image is too good to be true, it probably is.”

  6. I read with great interest the full series of articles in the Wall Street Journal.  Ms. Holmes should go down in history as a great con artist, and school children should study her rise and fall as a tale of hubris on her part, and total gullibility on the part of those who invested in her idea.

  7. This is one of those wonderful book reviews that is so thorough that it saves me the trouble of actually reading the book.


  8. MJBubba:
    This is one of those wonderful book reviews that is so thorough that it saves me the trouble of actually reading the book.

    There is a great deal of additional deceit, skulduggery, intrigue, and dysfunctional corporate culture in the book which I didn’t get to in this review.

  9. John Walker:

    This is one of those wonderful book reviews that is so thorough that it saves me the trouble of actually reading the book.

    There is a great deal of additional deceit, skulduggery, intrigue, and dysfunctional corporate culture in the book which I didn’t get to in this review.

    Oh, I don’t doubt that it is a good read.  It is just not my thing, so to speak.  Your review connected a number of dots for me, so that I feel adequately informed of the Theranos matter, at least in terms of walking-around sense.


  10. John Walker wrote,

    I have, in my career, met three world-class con men. Three times, I (just barely) managed to pick up the warning signs and beg my associates to walk away. Each time I was ignored.

    I am curious on how you were ignored, John. Were you considered a naysayer standing in the way of progress? Or unqualified to judged? Or someone with a personal issue that disliked the conman? (My guess is the first one.)

    I have found people really take issue with someone who tries to do due diligence or wants some transparency. It is like you are hurting the cause by asking questions. Openness and transparency never hurts a good cause.

  11. 10 Cents:
    I am curious on how you were ignored, John.

    The three cases were all very different.

    In the first, I was a middle-rank programmer who happened, before I took my current job, to have worked for a company which had been swindled by the con man on the east coast.  I warned my present employer on the west coast that everybody in the business on the other coast knew that the guy was a crook.  He was offering them a great deal on some hardware they needed.  As I’d warned, the deal was too good to be true.  This guy, at various times, swindled about five Univac mainframe sites.

    The second time, I was CEO of Autodesk.  My VP of sales wanted to do a distribution deal with a guy in southern California who was truly bizarre.  On one occasion he scheduled a meeting for midnight because he said he had to catch a flight to Asia to arrange a hardware deal the next morning.  He set off all of my subconscious con man alerts but, more importantly, said things and confirmed them when I questioned him about them which simply could not be true.  He said he had an inventory of 1000 IBM PC Jr., a product which IBM had not released.  IBM simply does not deliver products to anybody before release.  That was enough for me to state categorically that he was a pathological liar (which I define as saying things which can be easily independently verified as being false).  The VP decided to do the deal anyway, and we ended up being swindled out of around 200 copies of AutoCAD (with a dealer price of around US$ 500 each).  At one point our CFO was chasing one of his trucks trying to discover where he was keeping the inventory.  As CEO, I could have overridden the deal, but I delegated the judgement call to the VP for sales.

    In the third case, I wasn’t part of the target of the swindle.  As one of the first people to bring a tech company to Neuchâtel, I get invited to dinners with companies visiting to see whether they should move here or open a branch.  At one such dinner, at the height of the boom, the guest was an Australian who was setting up a social network to allow K-12 students to help one another learn and connect them to tutors in various subjects.  This sounded noble and all that, but the guy was just too slick and, in the course of the dinner, made a number of claims (such as having registered specific domain names) which could be checked.  When I got home, I checked them and all of his claims were bogus.  I immediately warned the Economic Promotion that they may be dealing with a con man.  They chose to ignore my information and, in the end, they ended up getting taken for around CHF 300,000.  After the dinner, the guy independently contacted me and visited to pitch me on the scheme.  He was willing to give me a substantial block of stock for nothing.  Clearly, what he was looking for was to use my name as an investor to persuade other marks.  I turned him down and also passed on this information to no avail.

    These circumstances were all so different, there’s no common thread that connects them.

  12. John Walker:
    Adam Clapper, a pathologist in Missouri, spent his spare time writing Pathology Blawg, with a readership of practising pathologists.

    Now there is the primo line in a terrific review. It’s almost Arthurian, the way the savior-hero arises from the hinterland of yeomen and “rude mechanicals”. Clapper pulled the sword from the stone all right. It’s the sort of thing that happens from time to time, and if we are fortunate, is memorialized in song and story.

    Thank you for the writeup.

  13. In New York we say “don’t b.s. me” when we think someone is lying to us. B.S. is short for bull sh**. Going forward, perhaps we should use the phrase “don’t Holmes me” !

    What amazes me is that she could pull the wool over the eyes of so many executive and scientific people that normally know better. I think the fact that she was a female, and the progressive elite and conservative elite would like to see a female CEOs on the level of Gates or Jobs, may have allowed for less diligent analysis of the product by investors and users.

    Holmes turned out to be the ANTI – Steve Jobs! All form, zero delivery.

    It is unbelievable how brazen Holmes was — if she had gone into politics, she could easily have become a “successful” governor of New York or California because in these states the people vote for the greater b.s.-er, and rarely have the capacity to understand the lack of real results!

  14. Bryan G. Stephens:
    Evil people are evil people.

    People are often lazy and fail to do the minimal due diligence. People have a propensity to believe in fairy tales. And in many cases till the bubble burst the fairy tale looks really good.


  15. If someone offers you something for nothing, the chances are that it’s worth exactly that: nothing.  I paid for my WheelTug stock, and I expect it to be worth something in the future.


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