From Vanity Fair:
In a searing investigation into the once lauded biotech start-up Theranos, Nick Bilton discovers that its precocious founder defied medical experts—even her own chief scientist—about the veracity of its now discredited blood-testing technology. She built a corporation based on secrecy in the hope that she could still pull it off. Then, it all fell apart.
It was late morning on Friday, October 18, when Elizabeth Holmes realized that she had no other choice. She finally had to address her employees at Theranos, the blood-testing start-up that she had founded as a 19-year-old Stanford dropout, which was now valued at some $9 billion. Two days earlier, a damning report published in The Wall Street Journal had alleged that the company was, in effect, a sham—that its vaunted core technology was actually faulty and that Theranos administered almost all of its blood tests using competitors’ equipment.
The article created tremors throughout Silicon Valley, where Holmes, the world’s youngest self-made female billionaire, had become a near universally praised figure. Curiosity about the veracity of the Journal story was also bubbling throughout the company’s mustard-and-green Palo Alto headquarters, which was nearing the end of a $6.7 million renovation. Everyone at Theranos, from its scientists to its marketers, wondered what to make of it all.
For two days, according to insiders, Holmes, who is now 32, had refused to address these concerns. Instead, she remained largely holed up in a conference room, surrounded by her inner circle. Half-empty food containers and cups of stale coffee and green juice were strewn on the table as she strategized with a phalanx of trusted advisers, including Ramesh “Sunny” Balwani, then Theranos’s president and C.O.O.; Heather King, the company’s general counsel; lawyers from Boies, Schiller & Flexner, the intrepid law firm; and crisis-management consultants. Most of the people in the war room had been there for two days and nights straight, according to an insider, leaving mainly to shower or make a feeble attempt at a couple of hours of shut-eye. There was also an uncomfortable chill in the room. At Theranos, Holmes preferred that the temperature be maintained in the mid-60s, which facilitated her preferred daily uniform of a black turtleneck with a puffy black vest—a homogeneity that she had borrowed from her idol, the late Steve Jobs.
Holmes had learned a lot from Jobs. Like Apple, Theranos was secretive, even internally. Just as Jobs had famously insisted at 1 Infinite Loop, 10 minutes away, that departments were generally siloed, Holmes largely forbade her employees from communicating with one another about what they were working on—a culture that resulted in a rare form of executive omniscience. At Theranos, Holmes was founder, C.E.O., and chairwoman. There wasn’t a decision—from the number of American flags framed in the company’s hallway (they are ubiquitous) to the compensation of each new hire—that didn’t cross her desk.
And like Jobs, crucially, Holmes also paid indefatigable attention to her company’s story, its “narrative.” Theranos was not simply endeavoring to make a product that sold off the shelves and lined investors’ pockets; rather, it was attempting something far more poignant. In interviews, Holmes reiterated that Theranos’s proprietary technology could take a pinprick’s worth of blood, extracted from the tip of a finger, instead of intravenously, and test for hundreds of diseases—a remarkable innovation that was going to save millions of lives and, in a phrase she often repeated, “change the world.” In a technology sector populated by innumerable food-delivery apps, her quixotic ambition was applauded. Holmes adorned the covers of Fortune, Forbes, and Inc., among other publications. She was profiled in The New Yorker and featured on a segment of Charlie Rose. In the process, she amassed a net worth of around $4 billion.
One of the only journalists who seemed unimpressed by this narrative was John Carreyrou, a recalcitrant health-care reporter from The Wall Street Journal. Carreyrou came away from The New Yorker story surprised by Theranos’s secrecy—such behavior was to be expected at a tech company but not a medical operation. Moreover, he was also struck by Holmes’s limited ability to explain how it all worked. When The New Yorker reporter asked about Theranos’s technology, she responded, somewhat cryptically, “a chemistry is performed so that a chemical reaction occurs and generates a signal from the chemical interaction with the sample, which is translated into a result, which is then reviewed by certified laboratory personnel.”
Shortly after reading the article, Carreyrou started investigating Theranos’s medical practices. As it turned out, there was an underside to Theranos’s story that had not been told—one that involved questionable lab procedures and results, among other things. Soon after Carreyrou began his reporting, David Boies, the superstar lawyer—and Theranos board member—who had taken on Bill Gates in the 1990s and represented Al Gore during the 2000 Florida recount case, visited the Journal newsroom for a five-hour meeting. Boies subsequently returned to the Journal to meet with the paper’s editor in chief, Gerard Baker. Eventually, on October 16, 2015, the Journal published the article: HOT STARTUP THERANOS HAS STRUGGLED WITH ITS BLOOD-TEST TECHNOLOGY.
During the two days in the war room, according to numerous insiders, Holmes heard various response strategies. The most cogent suggestion advocated enlisting members of the scientific community to publicly defend Theranos—its name an amalgam of “therapy” and “diagnosis.” But no scientist could credibly vouch for Theranos. Under Holmes’s direction, the secretive company had barred other scientists from writing peer-review papers on its technology.
Absent a plan, Holmes embarked on a familiar course—she doubled down on her narrative. She left the war room for her car—she is often surrounded by her security detail, which sometimes numbers as many as four men, who (for safety reasons) refer to the young C.E.O. as “Eagle 1”—and headed to the airport. (She has been known to fly alone on a $6.5 million Gulfstream G150.) Holmes subsequently took off for Boston to attend a luncheon for a previously scheduled appearance at the Harvard Medical School Board of Fellows, where she would be honored as an inductee. During the trip, Holmes fielded calls from her advisers in the war room. She and her team decided on an interview with Jim Cramer, the host of CNBC’s Mad Money, with whom she had a friendship that dated from a previous interview. It was quickly arranged.
Cramer generously began the interview by asking Holmes what had happened. Holmes, who talks slowly and deliberately, and blinks with alarming irregularity, replied with a variation of a line from Jobs. “This is what happens when you work to change things,” she said, her long blond hair tousled, her smile amplified by red lipstick. “First they think you’re crazy, then they fight you, and then, all of a sudden, you change the world.” When Cramer asked Holmes for a terse true-or-false answer about an accusation in the article, she replied with a meandering 198-word retort.
By the time she returned to Palo Alto, the consensus was that it was time, at last, for Holmes to address her hundreds of employees. A company-wide e-mail instructed technicians in lab coats, programmers in T-shirts and jeans, and a slew of support staff to meet in the cafeteria. There, Holmes, with Balwani at her side, began an eloquent speech in her typical baritone, explaining to her loyal colleagues that they were changing the world. As she continued, Holmes grew more impassioned. The Journal, she said, had gotten the story wrong. Carreyrou, she insisted, with a tinge of fury, was simply picking a fight. She handed the stage to Balwani, who echoed her sentiments.
After he wrapped up, the leaders of Theranos stood before their employees and surveyed the room. Then a chant erupted. “Fuck you . . .,” employees began yelling in unison, “Carreyrou.” It began to grow louder still. “Fuck you, Carreyrou!” Soon men and women in lab coats, and programmers in T-shirts and jeans, joined in. They were chanting with fervor: “Fuck you, Carreyrou!,” they cried out. “Fuck you, Carreyrou! Fuck. You. Carrey-rou!”
The GameIn Silicon Valley, every company has an origin story—a fable, often slightly embellished, that humanizes its mission for the purpose of winning over investors, the press, and, if it ever gets to that point, customers, too. These origin stories can provide a unique, and uniquely powerful, lubricant in the Valley. After all, while Silicon Valley is responsible for some truly astounding companies, its business dealings can also replicate one big confidence game in which entrepreneurs, venture capitalists, and the tech media pretend to vet one another while, in reality, functioning as cogs in a machine that is designed to not question anything—and buoy one another all along the way.
It generally works like this: the venture capitalists (who are mostly white men) don’t really know what they’re doing with any certainty—it’s impossible, after all, to truly predict the next big thing—so they bet a little bit on every company that they can with the hope that one of them hits it big. The entrepreneurs (also mostly white men) often work on a lot of meaningless stuff, like using code to deliver frozen yogurt more expeditiously or apps that let you say “Yo!” (and only “Yo!”) to your friends. The entrepreneurs generally glorify their efforts by saying that their innovation could change the world, which tends to appease the venture capitalists, because they can also pretend they’re not there only to make money. And this also helps seduce the tech press (also largely comprised of white men), which is often ready to play a game of access in exchange for a few more page views of their story about the company that is trying to change the world by getting frozen yogurt to customers more expeditiously. The financial rewards speak for themselves. Silicon Valley, which is 50 square miles, has created more wealth than any place in human history. In the end, it isn’t in anyone’s interest to call bullshit.
When Elizabeth Holmes emerged on the tech scene, around 2003, she had a preternaturally good story. She was a woman. She was building a company that really aimed to change the world. And, as a then dark-haired 19-year-old first-year at Stanford University’s School of Chemical Engineering, she already comported herself in a distinctly Jobsian fashion. She adopted black turtlenecks, would boast of never taking a vacation, and would come to practice veganism. She quoted Jane Austen by heart and referred to a letter that she had written to her father when she was nine years old insisting, “What I really want out of life is to discover something new, something that mankind didn’t know was possible to do.” And it was this instinct, she said, coupled with a childhood fear of needles, that led her to come up with her revolutionary company.
Holmes had indeed mastered the Silicon Valley game. Revered venture capitalists, such as Tim Draper and Steve Jurvetson, invested in her; Marc Andreessen called her the next Steve Jobs. She was plastered on the covers of magazines, featured on TV shows, and offered keynote-speaker slots at tech conferences. (Holmes spoke at Vanity Fair’s 2015 New Establishment Summit less than two weeks before Carreyrou’s first story appeared in the Journal.) In some ways, the near-universal adoration of Holmes reflected her extraordinary comportment. In others, however, it reflected the Valley’s own narcissism. Finally, it seemed, there was a female innovator who was indeed able to personify the Valley’s vision of itself—someone who was endeavoring to make the world a better place....MUCH MORE