Bad Blood: Secrets and Lies in a Silicon Valley Startup
New York: Alfred A. Knopf, 2018
White advocates should take a look at a sordid tale that played out in Silicon Valley from 2006 until 2015. The mess centers around a start-up company called Theranos and its CEO, Elizabeth Holmes. Since a main goal of Counter-Currents is to impart wisdom to younger white men, this author felt it was important to write a review on Wall Street Journal investigative reporter John Carreyrou’s book about the matter. The story is a mixture of political correctness, logical fallacies, good and bad leadership styles, and above all, fraud.
All of this can be applied to “The Movement.” To be completely frank, there are plenty of frauds and con artists in our scene. In fact, there are probably more sociopaths and swindlers in an edgy sociopolitical set than in America’s business community. Unfortunately, there are very few books dedicated to dissecting and examining “The Movement”’s many dangerous people. However, an examination of a parallel social disaster can be extrapolated to match one’s own circumstances and serve to enlighten one in a way which might lead to progress.
The story of Theranos can also be applied to one’s career and life choices in general. Being aware of the “JQ” is but one facet of wisdom. Another facet is finding a worthy vocation. In lieu of that – simply making a living. On a personal note, this author did himself once work for a start-up company. Indeed, I was the first employee hired, and in addition to my regular duties, I recruited for the company. I did this while raising a young family. That company fell apart because the founding partners were looking to cheat each other from the get-go and then proceeded to actually cheat each other. After the company collapsed, I was left raising a family and looking for a new job while drawing a paltry unemployment check. Before being hired by a start-up, be aware that some eighty percent of most businesses fail in the first year. In Silicon Valley, a start-up company that begins to attract serious capital and solid publicity is called a “unicorn.”
The Story of Theranos & the Mary Sue of Silicon Valley
Carreyrou’s story of Theranos starts in November 2006 and ends in March 2018. His sources are mostly former employees. Central to the story is a Stanford dropout named Elizabeth Holmes. Holmes was from a prominent family that had been successful in business, as well as in military and government service. She grew up in a high-class neighborhood in Washington, D.C. Holmes’ vision was to create a medical device which was compact and only required a small blood sample from patients in order to run many types of medical tests.
Since the technology she was selling was proprietary and in various stages of the patenting process, Theranos had a culture of secrecy. Employees had to sign non-disclosure agreements. In some cases, the police were called during firings and other disputes. There were also a number of lawsuits. All of this could be justified because Theranos’ research and development very much needed to remain secret. Inventors are only as good as the timeliness of their patents and the lawyer who files it, but as events played out, the secrecy became more of a harbinger of things to come.
Holmes deliberately dressed like Steve Jobs. She also faked a deep voice when speaking (her voice can be heard changing in this video). Her leadership style was typical for a dynamic leader of a start-up company. She could inspire, frighten, console, and when necessary, pitilessly dismiss her employees. She even fended off a challenge by Theranos’ Board of Directors to replace her in 2008. Indeed, she was an excellent leader. Good leadership includes one’s ability to handle unpleasant duties such as disciplining and firing employees, as well as sniffing out and defeating conspiracies against one’s leadership. Holmes was also inspiring. Most of her employees and all of her investors believed in her vision.
From 2006 until 2015, Elizabeth Holmes had built a company valued at $9 billion. Holmes had entered into partnerships with Safeway and Walgreens. The US Army was looking to buy and field her blood-testing machines. Holmes enjoyed a flurry of good press and flattery . . . but the machines didn’t work, hadn’t worked, and weren’t about to start working. It was all an elaborately-constructed fraud. An October 2015 Wall Street Journal article exposed the company. Looking backwards, it is probable that Theranos was a fraud from the start, rather than simply a Silicon Valley company that overhyped its product. This is how the scam worked:
- If Elizabeth Holmes was in a science fiction movie, Holmes would be a “Mary Sue.” She carefully crafted an image of herself which matched what society craved. In this case, society wanted a self-made woman billionaire of the Thomas Edison/Steve Jobs type. This is the first politically correct aspect of this. All that talk about “girl power” and “strong, independent womynz” is a powerful metapolitical influence that led otherwise experienced men to fund the venture, and for a time stopped anyone from asking hard questions about her.
- As a result of Holmes’ respectable social background, her location in trendy Palo Alto, and ability to sell her vision, she raised capital from the Bay Area’s venture capitalists. Theranos made its money from the venture capitalists, not through sales of its product.
- After successfully getting the ball rolling, and with her ability to sell her vision, she recruited a top-notch team for her Board of Directors. This included former Secretaries of State George P. Shultz and Henry Kissinger, and the current US Secretary of Defense, Jim Mattis. Theranos’ illustrious Board kept critics silent or unable to voice their doubts. (There is no reason to believe that the Board members were in on the scam.) Holmes also wooed Hillary Clinton’s social set.
- Holmes’ company’s internal policies were designed to keep information compartmentalized. The company’s action officers and regular workers didn’t really know what was going on.
- The logistics of the fraud included several laboratories, the use of conventional machines to carry out the tests rather than Theranos’ own products, and sleight-of-hand maneuverings regarding testing data, among other things.
- Anyone in Theranos who questioned the reality of the situation was shown the door. There was also a culture of nepotism. Holmes made her brother and his fraternity pals members of her inner circle.
- Holmes put Indians in key positions. The Pajeet factor is the second politically correct aspect of this story. The Indian angle will be explored further below.
Eventually, the proprietor of an obscure Website called Pathology Blawg became skeptical of Theranos’ claims and published his doubts. Furthermore, former employees and victims of Holmes’ lawsuits started to pass information to investigative reporter John Carreyrou, who wrote the aforementioned WSJ article. For Elizabeth Holmes and Theranos, it all went downhill from there.
It’s All Fraud East of Suez
Again and again, in my experience, I must say, “If it ain’t white, it ain’t right.” If we ever meet face to face, gentle reader, I’ll tell you some tales as to why I think this is true. The most “ain’t white, ain’t right” part of this story is Theranos’ Chief Operating Officer, Ramesh “Sunny” Balwani. As this article is being written, Balwani has just been charged, but not convicted, by the Securities Exchange Commission for fraud, so his criminal wrongdoing as yet remains alleged. Balwani has probably had his information scrubbed off the Internet and he disappeared for a while after the scandal broke. Some employees thought he’d fled the US altogether.
As the legal drama regarding Theranos’ decline unfolds, there will likely be a cleft between Holmes and Balwani over who was responsible for what. Holmes can argue that her job was to find inventors and provide a vision for the company while Balwani was there to run the labs and get the blood-testing machines working. Holmes can thus say that Balwani is responsible for the lion’s share of the fraud. It is likely, however, that Holmes picked Balwani to help her carry out the alleged fraud. Holmes and Balwani were, for a time, in a romantic relationship. After seeing the situation for what it was, some of Theranos’ engineers called the situation a folie à deux – a delusion shared by two people, in this case Holmes and Balwani. This is what Balwani did:
- His leadership style was centered on bullying. While intimidation is effective to some degree, one must also make good judgements, adjudicate disputes between subordinates, provide effective direction, and so on. Balwani was the manager who called the cops and snooped on company e-mails while at the same time not providing an environment that could successfully invent testing machines.
- He set up rival departments within the company to do the same things, which resulted in Theranos’ internal inefficiency.
- He didn’t understand the basics of what he was doing. He failed to use terminology properly, as though he didn’t really understand its meaning. At one point he thought potassium’s atomic symbol was “P” rather than “K.” This is a mistake that a high-school chemistry student doesn’t make.
- He hired a group of Indians to run the lab. None were qualified, and they fed into the culture of incompetence described above. Because they came on H1-B visas, they couldn’t complain about their working conditions.
- He failed to define a real goal and find an effective strategy to reach it. An idea would have been to make a process map that lays out what must happen backwards from the patient’s and doctor’s understanding of the results of the blood tests.
Carreyrou’s description of Balwani’s actions match much of what I’ve seen dealing with Asians in my own career. In short, they all “ain’t right.” In this case, I am referring to Asians in the broad sense, not just Indians. A true grasp of cause and effect seems to elude them. The scientific method didn’t originate in India or China. Essentially, east of Suez, it’s all a fraud. Many Asian languages have words that emphasize this. Persian, for example, has zerangi and Hebrew has chutzpa. Once the Chinese learned the English expression “going through the motions,” they started using it all the time. Anthropologists call the basic cultural worldview in Asia amoral familism. Amoral familisim is a situation where a person only acts in the interests of their family. Companies operating in societies with this worldview can’t hire the best man or produce organized systems.
Learning How to Spot a Fraud
- Things that mesh with the PC narrative (or any narrative) too well are often frauds. Theranos was political correctness run amok. There was a “strong womyn” running the show. She was in an interracial relationship. Theranos was filled with “immigrant strivers.” In talks, Holmes invoked buzzwords as though they were part of a magical spell. She told audiences to “believe in yourself.” Others joined in on the spell-casting. General Mattis called the company a “game changer.”
- Imitating the form of a thing is not the same thing as the thing itself. Elizabeth Holmes’ look and back-story was a crude imitation of the outer forms of accomplished men. The truth is, it didn’t matter how Steve Jobs dressed. What he did was actually get results.
- Beware of promises to simplify that which is very complex. Experts in the field of medicine who had really undergone the complex process were the ones to call Theranos’ bluff. (A good example of an expert with great technical knowledge spotting a fraud can be found here.)
- “First they think you’re crazy; then they fight you; and then all of a sudden you change the world” is not a viable strategy for success, nor is it always an accurate assessment of where you are at when “they” are “fighting” you.
- Argument from Authority can be a logical fallacy. Theranos’ Board was made up of prominent men who assuaged doubts for a time. One of the whistleblowers in the case was the grandson of former Secretary of State George P. Shultz. The former Secretary didn’t believe his grandson until Theranos was proven to be a fraud in the WJS. The relationship between the two during the final stages of the Theranos saga became very strained, indeed.
Elizabeth Holmes left a trail of destruction in her wake. One of her engineers fell into a deep clinical depression and ultimately committed suicide. Patients were put at risk because of the bad readings from her machines. Actual wealth was squandered on her company. Scientists who could have been working on a more useful project were ensnared in Holmes’ web. In short, Theranos’ failure resulted in real costs.
On a final note, one must again emphasize the cliché that all that glitters is not gold. Things that are politically correct, i.e. “women and minorities,” always need a second, harder look. Do not enter into a transaction with any Asian that is any more difficult than bazaar levels of sophistication. For that which is complex, invest in experienced whites, and to get experienced whites, hire young whites.
 Another insight into the Theranos disaster is the idea that the government, in this case the Food and Drug Administration, can help get rid of quacks. It is clear that the libertarian ideological model of “small government” would have allowed Theranos to carry out its swindle longer than it should have.
 While writing this article, I asked a colleague about his experience in a start-up. He’d worked in two; both fell apart and he couldn’t even sell the stocks from his first company. Another colleague chimed in about a company that sold for $32 million, making its five original owners quite rich. Start-ups seem to attract people who are comfortable in moral shadows. White advocate Ben Klassen made his fortune in real estate. He described his business partner in his Silver Springs, Nevada venture as a semi-crook.
 Holmes was also descended from Charles L. Fleischmann (1835-1897), a wealthy manufacturer of yeast. Fleischmann was Jewish but married outside of the group. So while she had some Jewish ancestry, it is impossible to put Holmes in any ethnic category other than that of Wilmot Robertson’s American Majority.