Book Review: Bad Blood by John Carreyrou

Bad Blood: Secrets and Lies in a Silicon Valley StartupBad Blood: Secrets and Lies in a Silicon Valley Startup by John Carreyrou

My rating: 5 of 5 stars

“Fake it ’till you make it” should probably only be allowed for artists, not scientists, engineers, and medical companies.

Bad Blood is the full expose John Carreyrou started with his Wall Street Journal articles in 2015 on Theranos. For a decade, Theranos founder and CEO Elizabeth Holmes had managed to attract huge amounts of investment, respected board members, and media attention. But in that decade the company had been putting the cart before the horse, promising big whilst still being in the early development phases. The CEO and president (also COO) kept this all under wraps by keeping its own staff in the dark, often resorting to bullying and intimidation.

I first heard about Theranos via a couple of friends who work in medical research. Obviously, I surround myself with other science nerds, so they were dubious of the claims the company and the media were making about their tech. To be honest, I didn’t really pay much attention, nor remember my friends’ pronouncements until I picked up this book from the library.

In many ways, this tale is worse than the “Biggest Corporate Fraud Since Enron” would have you believe. And that tale isn’t necessarily on the page. The author and many of this book’s readers will be shaking their heads at how terrible Theranos was with all its lying, fraud, and bullying of staff. Amazing. Hard to believe. But the thing is that a lot of what was described was just close enough to normal, within standard business practices*, that the fraud managed to run for so long. Using the example of the frequent firings of staff who raised concerns, that would seem just normal enough to not raise a red flag. It doesn’t appear like a CEO and COO trying to cover anything up.

Just close enough to a normal business.

The other thing I noted was the lack of accountability. Sure, the closing chapters cover the lawsuits being brought against Elizabeth Holmes and “Sunny” Balwani, and since Bad Blood was written 9 counts of wire fraud and 2 counts of conspiracy to commit wire fraud have been brought against them. But that is just two of the culpable players in this tale. David Boies and his team of lawyers** spring to mind as having some responsibility here. No charges. Of course.

And wire fraud??? What about the danger patients were put in? What about all the underhanded tactics used against staff and former staff? Why isn’t this behaviour being held accountable in this instance so as to set some sort of precedent across the corporate world?***

There needs to be way more accountability for all involved. Not just for those who lost people money.

If it isn’t clear by now, this is an interesting read and one that will fascinate and annoy you. Carreyrou does a great job expanding on his reporting with an engaging book.

* As other reviewers have pointed out, this story isn’t really that different from a lot of Silicon Valley business tales. Wrapping staff up in non-disclosure agreements, working them for long hours, spying on them, firing them at the drop of a hat (in a country that ties health insurance to employment, and doesn’t believe in a social safety net), that’s all standard practice. Had Theranos been operating in tech rather than medicine, they’d have probably gotten away with it, as medicine has some regulations, unlike a lot of other fields.

** Same lawyers who covered up and intimidated Harvey Weinstein’s victims. They are well known for their nastiness, as mentioned in the book.

*** Not much was made of it in the book, but Holmes was mentored by Silicon Valley’s “best,” including Larry Ellison, who is a textbook example of the amoral, at-all-cost “entrepreneur” the area is so famous for. Which is why I don’t see this as exceptional.

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Economics of medicine

Recently I was reading an article in Aeon Magazine about the challenges faced by the medicine industry – commonly referred to as Big Pharma or Big Pharma written in one of those fonts with blood dripping from it and a syringe being stabbed into a baby. One of the big changes in medicine development discussed was the patent period that allowed monopolies on new drugs, which in turn saw orphan drugs – not drugs for Oliver “please sir, can I have some more” Twist, but drugs for rarer conditions and illnesses – become more popular/profitable to develop.

It’s an interesting issue and the article is worth reading. But it got me to thinking about something a little tangential. No, not whether Oliver Twist needs a remake set in south-east Asian sweatshops. I wondered how much money is actually spent on things.

Take for example this:

screen-shot-2015-02-11-at-9-03-17-am
Source.

Drug development appears to take a backseat to marketing. But this depends on what section of the market, how big the company is, and other factors. Clearly, medicine development is still a big expense, but how much is spent on research and development overall?

Worldwide pharma R&D $
Total global pharmaceutical research and development spending from 2008 to 2022 (in billions of U.S. dollars) Source.

That global pharmaceutical research spending is quite large at $165 billion. Or is it?

Rank Country Spending
($ Bn.)
% of GDP % of World share
World total 1,739 2.2
1 United States United States 610.0 3.1 35.0
2 China People’s Republic of China 228.0 1.9 13.0
3 Saudi Arabia Saudi Arabia 69.4 10 4.0
4 Russia Russia 66.3 4.3 3.8
5 India India 63.9 2.5 3.7
6 France France 57.8 2.3 3.3
7 United Kingdom United Kingdom 47.2 1.8 2.7
8 Japan Japan 45.4 0.9 2.6
9 Germany Germany 44.3 1.2 2.5
10 South Korea South Korea 39.2 2.6 2.3
11 Brazil Brazil 29.3 1.4 1.7
12 Italy Italy 29.2 1.7 1.7
13 Australia Australia 27.5 2.0 1.6
14 Canada Canada 20.6 1.3 1.2
15 Turkey Turkey 18.2 2.2 1.0  sourceoriginal

Suddenly the amount spent on medicine research and development seems rather small. The USA government alone could easily cover the expense of medicine research if it decided to change priorities, since it spends 3.7 times that much on defence.*

Would it be a good idea for governments to have a Department of Pharmaceuticals that researched, developed, and sold medicines? Would that be money better spent than stockpiling tanks in a desert? Certainly, it would address several of the issues raised in the Aeon Magazine article around how the profitability of drugs, rather than the consumer needs, drives research and development.

This sort of thinking could be applied to many industries. The reality is that there isn’t actually a shortage of money but a lack of incentive to invest money in some areas in favour of others. The solution doesn’t have to be the government taking over, nor does it have to be about private companies not being profitable. But maybe it does have to be about rethinking what we spend money on.

Richard Denniss made similar arguments in his Quarterly Essay Dead Right about the Australian economy.

So maybe it is time to stop accepting the argument “we can’t afford X” and start having the discussion about how we spend for the most good. Or not, I’m not your boss.

*To be clear, I’m not suggesting we stop all spending on something like defense, or that there aren’t reasons for spending money on things like tanks. But as Richard’s video suggests, we are making value judgments and assumptions without really questioning them.