Silicon Valley- Over many years people tried to understand the evolution of silicon valley and the factors that shaped up this most successful tech sanctuary in the world to try and replicate this success story in many places. Paul Romer, a Nobel Laureate and growth economist, tried to answer this through his concept called 'Knowledge Spillovers'. When you put talented people together and when their skills build on each other, new ideas emerge and pass on to each other, thereby increasing productivity of the entire place. The concentration of talent in one place also helps the firms in hiring and replacing talent easily. This is why firms keep flocking to such hotspots inspite of high costs.
Behind this silicon valley backdrop there was Elizabeth Holmes, a young entrepreneur and a Stanford dropout and her startup 'Theranos'. Elizabeth had a simple yet revolutionary idea. She was set out to design a device that pharmaceutical companies can use for their vaccine trials. A small and sleek device that collects just a drop of blood, analyse and transfer the test results over internet back to the labs. Silicon Valley's most successful venture capitalists and investors were excited about this breakthrough technology. Theranos with it's sterling reputation hired the best talented staff there were in the valley and onboarded many influential board directors. Yet Theranos couldn't make the idea work in the practical world. At the end of 14 years, all Theranos had was a prototype and a failed product. Theranos raised $1.4 billion in 10 rounds and stood at $9 billion evaluation. Elizabeth was considered to be the next Steve Jobs in the valley.
Where did Theranos fail?
Lies: The employees were lied to, their customers were lied to, their partners were lied to, their board of directors were lied to, investors were lied to in the process of covering up it's failed product. Initially what appeared to be overselling and exaggeration of features soon became fraud, illegal, unethical and life danger.
Secrets: We all know why transparency is essential to foster successful relationships and culture in the workplace. Theranos was designed intentionally by Elizabeth to be a place of secrets. Employees were discouraged to ask questions and cross functional collaboration was made intentionally difficult. The led to high employee turnover, unreasonable firing of employees and blackmailing the whistleblowers.
Toxic Culture and Nepotism: At one point the startup was crawling with nepotism. Elizabeth's boyfriend Sunny took the number 2 position in the company, while her brother and his friends from college made major decisions in the day-to-day business.
In 2017, Theranos's wrongdoings were exposed to the world by the investigative journalist of the Wall Street Journal called John Carreyou with the help of Theranos's whistleblowers. John is also the author of this book. While Elizabeth and her boyfriend Sunny are awaiting criminal charges in the court, how the whole thing played out is nothing short of a movie.There are also talks of this book-to-film adaptation with Jennifer Lawrence playing Elizabeth Holmes.
A great idea is never just enough. We often overtrust in our ability to judge people and their characters quickly, get trapped by our own blind spots and miss potential red flags until its too late.This is a book on how not to run a startup, why you shouldn't invest in such startup and why you shouldn't work for such startup!