WIRED — 24/05/2018 at 11:00

A New Look Inside Theranos’ Dysfunctional Corporate Culture

by
Elizabeth Holmes2

Elizabeth Holmes

When a chemist raised concerns about the blood testing machines’ high error rates, she was ignored. So she resigned.

ALAN BEAM WAS sitting in his office reviewing lab reports when Theranos CEO and founder Elizabeth Holmes poked her head in and asked him to follow her. She wanted to show him something. They stepped outside the lab into an area of open office space where other employees had gathered. At her signal, a technician pricked a volunteer’s finger, then applied a transparent plastic implement shaped like a miniature rocket to the blood oozing from it. This was the Theranos sample collection device. Its tip collected the blood and transferred it to two little engines at the rocket’s base. The engines weren’t really engines: They were nanotainers. To complete the transfer, you pushed the nanotainers into the belly of the plastic rocket like a plunger. The movement created a vacuum that sucked the blood into them.

Or at least that was the idea. But in this instance, things didn’t go quite as planned. When the technician pushed the tiny twin tubes into the device, there was a loud pop and blood splattered everywhere. One of the nanotainers had just exploded.

Holmes looked unfazed. “OK, let’s try that again,” she said calmly.

Beam wasn’t sure what to make of the scene. He’d only been working at Theranos, the Silicon Valley company that promised to offer fast, cheap blood tests from a single drop of blood, for a few weeks and was still trying to get his bearings.

He knew the nanotainer was part of the company’s proprietary blood-testing system, but he’d never seen one in action before. He hoped this was just a small mishap that didn’t portend bigger problems.

The lanky pathologist’s circuitous route to Silicon Valley had started in South Africa, where he grew up. After majoring in English at the University of the Witwatersrand in Johannesburg (“Wits” to South Africans), he’d moved to the United States to take premed classes at Columbia University in New York City. The choice was guided by his conservative Jewish parents, who considered only a few professions acceptable for their son: law, business, and medicine.

Beam had stayed in New York for medical school, enrolling at the Mount Sinai School of Medicine on Manhattan’s Upper East Side, but he quickly realized that some aspects of being a doctor didn’t suit his temperament. Put off by the crazy hours and the sights and smells of the hospital ward, he gravitated toward the more sedate specialty of laboratory science, which led to postdoctoral studies in virology and a residency in clinical pathology at Brigham and Women’s Hospital in Boston.

In the summer of 2012, Beam was running the lab of a children’s hospital in Pittsburgh when he noticed a job posting on LinkedIn that dovetailed perfectly with his budding fascination with Silicon Valley: laboratory director at a Palo Alto biotech firm. He had just finished reading Walter Isaacson’s biography of Steve Jobs. The book, which he’d found hugely inspiring, had cemented his desire to move out to the San Francisco Bay Area.

After he applied for the job, Beam was asked to fly out for an interview scheduled for 6 pm on a Friday. The timing seemed odd but he was happy to oblige. He met with COO Sunny Balwani first and then with Holmes. There was something about Balwani that he found vaguely creepy, but that impression was more than offset by Holmes, who came off as very earnest in her determination to transform health care. Like many people who met her for the first time, Beam was taken aback by her deep voice. It was unlike anything he’d heard before.

At the time, Theranos was on the cusp of becoming a tech darling. Founded by the charismatic Stanford dropout in 2003, its promises to revolutionize blood-testing—and by extension, the vast industry of medical diagnostics—would be swallowed whole by most of the technology press, which would lavish Holmes with glowing coverage. (WIRED was not exempt). Only later—in October 2015—would the truth come out: Theranos was a fraud built on secrecy, deliberate fabrication, and hype. After I revealed that fraud, the company would begin an implosion that continues to this day.

Beam had no way of knowing any of this when he accepted Theranos’ job offer in August 2012. The lab he inherited was divided into two parts: a room on the building’s second floor that was filled with commercial diagnostic equipment, and a second room beneath it where research was being conducted. The upstairs room was the federally certified part of the lab, the one Beam was responsible for. Balwani and Holmes viewed its conventional machines as dinosaurs that would soon be rendered extinct by Theranos’s revolutionary technology, so they called it “Jurassic Park.” They called the downstairs room “Normandy” in reference to the D-day landings during World War II. The proprietary Theranos devices it contained would take the lab industry by storm, like the Allied troops who braved hails of machine-gun fire on Normandy’s beaches to liberate Europe from Nazi occupation.

In his eagerness and excitement, Beam initially bought into the bravado. But a conversation he had with Paul Patel shortly after the botched nanotainer demonstration raised questions in his mind about how far along the Theranos technology really was. Patel was the biochemist who led the development of blood tests for Theranos’s new device, which Beam knew only by its code name—“4S.” Patel let slip that his team was still developing its assays on lab plates on the bench. That surprised Beam, who had assumed the assays were already integrated into the 4S. When he asked why that wasn’t the case, Patel replied that the new Theranos box wasn’t working.
BY THE SUMMER of 2013, as Chiat\Day scrambled to ready the Theranos website for the company’s commercial launch, the 4S, aka the miniLab, had been under development for more than two and a half years. But the device remained very much a work in progress. The list of its problems was lengthy.

The biggest problem of all was the dysfunctional corporate culture in which it was being developed. Holmes and Balwani regarded anyone who raised a concern or an objection as a cynic and a nay-sayer. Employees who persisted in doing so were usually marginalized or fired, while sycophants were promoted.

Employees were Balwani’s minions. He expected them to be at his disposal at all hours of the day or night and on weekends. He checked the security logs every morning to see when they badged in and out. Every evening, around 7:30, he made a flyby of the engineering department to make sure people were still at their desks working.

With time, some employees grew less afraid of him and devised ways to manage him, as it dawned on them that they were dealing with an erratic man-child of limited intellect and an even more limited attention span. Arnav Khannah1, a young mechanical engineer who worked on the miniLab, figured out a surefire way to get Balwani off his back: answer his emails with a reply longer than 500 words. That usually bought him several weeks of peace because Balwani simply didn’t have the patience to read long emails. Another strategy was to convene a biweekly meeting of his team and invite Balwani to attend. He might come to the first few, but he would eventually lose interest or forget to show up.

While Holmes was fast to catch on to engineering concepts, Balwani was often out of his depth during engineering discussions. To hide it, he had a habit of repeating technical terms he heard others using. During a meeting with Khannah’s team, he latched onto the term “end effector,” which signifies the claws at the end of a robotic arm. Except Balwani didn’t hear “end effector,” he heard “endofactor.” For the rest of the meeting, he kept referring to the fictional endofactors. At their next meeting with Balwani two weeks later, Khannah’s team brought a PowerPoint presentation titled “Endofactors Update.” As Khannah flashed it on a screen with a projector, the five members of his team stole furtive glances at one another, nervous that Balwani might become wise to the prank. But he didn’t bat an eye and the meeting proceeded without incident. After he left the room, they burst out laughing.


John Carreyrou – Read the full article on Wired.com


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