Tag: elizabeth-holmes

Books of Interest
 Website: chetyarbrough.blog

Bad Blood (Secrets and Lies in a Silicon Valley Startup)

By: John Carreyrou

Narrated By: Will Damron

Ambition is the strong desire or drive to achieve something. The public story of Theranos is examined by investigative reporter, John Carreyrou. His subject is Elizabeth Holmes, a bright young woman who drops out of Yale to pursue an idea. Her idea is to create a blood testing system intended to diagnose medical conditions with potential for measuring effectiveness of drug treatment for existing disease. Her ability to sell an idea exceeded her ability to organize a company to create a product that accomplished that end.

Most companies or organizations will either fail or stagnate when led by only one innovator. There are exceptions but it requires an extraordinary leader, like a Steve Jobs, Ginni Rometty, Mary Barra, or Elon Musk. Their leadership skills may rub people the wrong way, but they have a superior perception of reality that is not singularly based on loyalty. They have the innate ability to offer enough innovation to grow their companies. (At the risk of offending supporters, loyalty is the threat of Trump’s management style. Trump principally bases his organizational decisions on loyalty.)

The only consistent management criteria practiced by Holmes is loyalty. If an employee appears disloyal to her vision of the company, they are fired. Any organization that principally relies on loyalty discourages innovation and becomes entirely dependent on orders of its leadership. Particularly in the tech industry, innovation is critical.

Holmes’ ambition, in addition to her prison sentence, led to a $500,000 SEC’ fine and the return of 18.9 million shares of a company that no longer exists. Furthermore, the SEC ordered a ten-year ban on serving as an officer or director of a public company which, of course, becomes moot with her imprisonment. The irony of Carreyrou’s story is that Holme’s idea is presently being pursued by Babson Diagnostics, Stanford Researchers, and Becton Dickinson. Whether she will ever reap any reward from another company’s success seems remote, but it will presumably be based on patents filed, and licensing agreements based on former Theranos patents.

The 16th century phrase “birds of a feather flock together” comes to mind when Ramesh “Sunny” Balwani joins Theranos in 2009. He had loaned the company $13 million but he also knew Holmes from her days when she was learning Chinese in a Stanford summer program. At some point they became lovers despite a 19-year age difference. Carreyrou notes Balwani became a multi-millionaire with the sale of his tech company, Commerce One” in 2000. He was convicted of tax evasion for the sale but claimed the evasion was caused by his tax accountant which he sued for recovery for back taxes he had to pay. (There is a settlement amount between the tax accountant and Balwani, but it is not revealed.) Carreyrou explains Balwani was a martinet who brooked little disagreement when he became COO of Theranos in 2009. (Part of Holme’s defense was that Balwani was the principal behind Theranos misdeeds, but the court obviously disagreed.)

There are business management lessons in Carreyrou’s book about the misdeeds of Theranos. It takes more than ambition to build a successful organization or company. Unless one is a genius who can continually innovate, it takes management structure that encourages others to innovate and work for a common organizational purpose.