فصل 08

The miniLab

With Walgreens and Safeway on board as retail partners, Elizabeth suddenly faced a problem of her own making: she had told both companies her technology could perform hundreds of tests on small blood samples. The truth was that the Edison system could only do immunoassays, a type of test that uses antibodies to measure substances in the blood. Immunoassays included some commonly ordered lab tests such as tests to measure vitamin D or to detect prostate cancer. But many other routine blood tests, ranging from cholesterol to blood sugar, required completely different laboratory techniques.

Elizabeth needed a new device, one that could perform more than just one class of test. In November 2010, she hired a young engineer named Kent Frankovich and put him in charge of designing it. Kent had just obtained a master’s degree in mechanical engineering from Stanford. Before that, he’d spent two years working for NASA’s Jet Propulsion Laboratory in Pasadena where he’d helped build Curiosity, the Mars rover. Kent in turn recruited Greg Baney, a friend he’d met at NASA who’d gone on to work for SpaceX, Elon Musk’s Los Angeles–based rocket company. At six feet five and 260 pounds, Greg was built like an NFL lineman, but his physique belied a sharp intellect and a keen sense of observation.

For a period of several months, Kent and Greg became Elizabeth’s favorite employees. She sat in on their brainstorming sessions and made suggestions about what robotics systems they should consider using. She gave them company credit cards and let them charge whatever equipment and supplies they wanted.

Elizabeth christened the machine she assigned them to build the “miniLab.” As its name suggested, her overarching concern was its size: she still nurtured the vision of someday putting it in people’s homes and wanted something that could fit on a desk or a shelf. This posed engineering challenges because, in order to run all the tests she wanted, the miniLab would need to have many more components than the Edison. In addition to the Edison’s photomultiplier tube, the new device would need to cram three other laboratory instruments in one small space: a spectrophotometer, a cytometer, and an isothermal amplifier.

None of these were new inventions. The first commercial spectrophotometer was developed in 1941 by the American chemist Arnold Beckman, founder of the lab equipment maker Beckman Coulter. It works by beaming rays of colored light through a blood sample and measuring how much of the light the sample absorbs. The concentration of a molecule in the blood is then inferred from the level of light absorption. Spectrophotometers are used to measure substances like cholesterol, glucose, and hemoglobin. Cytometry, a way of counting blood cells, was invented in the nineteenth century. It’s used to diagnose anemia and blood cancers, among other disorders.

Laboratories all over the world had been using these instruments for decades. In other words, Theranos wasn’t pioneering any new ways to test blood. Rather, the miniLab’s value would lie in the miniaturization of existing lab technology. While that might not amount to groundbreaking science, it made sense in the context of Elizabeth’s vision of taking blood testing out of central laboratories and bringing it to drugstores, supermarkets, and, eventually, people’s homes.

To be sure, there were already portable blood analyzers on the market. One of them, a device that looked like a small ATM called the Piccolo Xpress, could perform thirty-one different blood tests and produce results in as little as twelve minutes. It required only three or four drops of blood for a panel of a half dozen commonly ordered tests. However, neither the Piccolo nor other existing portable analyzers could do the entire range of laboratory tests. In Elizabeth’s mind, that was going to be the miniLab’s selling point.

Greg spent a lot of time studying commercial instruments made by diagnostics equipment makers to reverse engineer them and make them smaller. He ordered a spectrophotometer from a company called Ocean Optics and broke it apart to understand how it worked. It turned into an interesting project, but it made him question their approach.

Instead of building new instruments from scratch to fit the arbitrary dimensions Elizabeth had laid out, Greg felt they would do better to take the off-the-shelf components they were laboring to miniaturize and integrate them together to test how the overall system worked. Once they had a working prototype, they could then worry about shrinking it. Emphasizing the system’s size first and how it worked later was putting the cart before the horse. But Elizabeth wouldn’t budge.

Greg was in the midst of a breakup with the girl he’d dated in L.A., so he came to the office on Saturdays to get his mind off it. He could see that Elizabeth really appreciated that. She saw it as a sign of loyalty and dedication. She told Greg she wanted to see Kent come in on weekends too; it bothered her that his friend didn’t. Keeping a work-life balance seemed a foreign concept to her. She was at work all the time.

Like most people, Greg had been taken aback by Elizabeth’s deep voice when he’d first met her. He soon began to suspect it was affected. One evening, as they wrapped up a meeting in her office shortly after he joined the company, she lapsed into a more natural-sounding young woman’s voice. “I’m really glad you’re here,” she told him as she got up from her chair, her pitch several octaves higher than usual. In her excitement, she seemed to have momentarily forgotten to turn on the baritone. When Greg thought about it, there was a certain logic to her act: Silicon Valley was overwhelmingly a man’s world. The VCs were all male and he couldn’t think of any prominent female startup founder. At some point, she must have decided the deep voice was necessary to get people’s attention and be taken seriously.

A few weeks after the voice incident, Greg picked up another clue that Theranos wasn’t your usual workplace. He had become friendly with Gary Frenzel. Although Gary looked like a slob—he weighed three hundred pounds and walked around the office in baggy jeans, an oversized T-shirt, and Crocs—Greg found him to be one of the smartest people at the company. Gary had a bad case of sleep apnea and, more than once during meetings, Greg had watched him doze off only to suddenly snap awake to refute a dumb idea someone had put forward and suggest a brilliant alternative.

As they walked out of the office together one day, Gary lowered his voice and in a conspiratorial tone told Greg something that startled the younger man: Elizabeth and Sunny were in a romantic relationship. Greg felt blindsided. He thought it was inappropriate for the CEO of a company and its number-two executive to be sleeping together, but what bothered him more was the fact they were hiding it. This was a crucial piece of information that he felt should have been disclosed to new recruits. For Greg, the revelation cast everything about Theranos in a new light: If Elizabeth wasn’t being forthright about that, what else might she be lying about?

—

NEPOTISM AT THERANOS took on a new dimension in the spring of 2011 when Elizabeth hired her younger brother, Christian, as associate director of product management. Christian Holmes was two years out of college and had no clear qualifications to work at a blood diagnostics company, but that mattered little to Elizabeth. What mattered far more was that her brother was someone she could trust.

Christian was a handsome young man with eyes the same deep shade of blue as his sister’s, but that was where the similarities between them began and ended. Christian had none of his sister’s ambition and drive; he was a regular guy who liked to watch sports, chase girls, and party with friends. After graduating from Duke University in 2009, he’d worked as an analyst at a Washington, D.C., firm that advised corporations about best practices.

When he first arrived at the company, Christian didn’t have much to do, so he spent part of his days reading about sports. He hid it by cutting and pasting articles from the ESPN website into empty emails so that, from afar, it looked like he was absorbed in work-related correspondence. Christian soon recruited four of his fraternity brothers from Duke: Jeff Blickman, Nick Menchel, Dan Edlin, and Sani Hadziahmetovic. They were later joined by a fifth Duke friend, Max Fosque. They rented a house together near the Palo Alto country club and became known inside Theranos as “the Frat Pack.” Like Christian, none of the other Duke boys had any experience or training relevant to blood testing or medical devices, but their friendship with Elizabeth’s brother vaulted them above most other employees in the company hierarchy.

By then, Greg had convinced several of his own friends to join Theranos. Two of them were buddies from his undergraduate days at Georgia Tech, Jordan Carr and Ted Pasco. The third was a friend he’d made in Pasadena while working for NASA named Trey Howard. Trey happened to have gone to college at Duke a few years before the Frat Pack.

Jordan, Trey, and Ted were all assigned to the product management group with Christian and his friends, but they weren’t granted the same level of access to sensitive information. Many of the hush-hush meetings Elizabeth and Sunny held to strategize about the Walgreens and Safeway partnerships were off limits to them, whereas Christian and his fraternity brothers were invited in.

The Frat Pack endeared itself to Sunny and Elizabeth by working long days. Sunny was constantly questioning employees’ commitment to the company—the number of hours a person put in at the office, whether he or she was doing productive work or not, was his ultimate gauge of that commitment. At times, he would sit in the big glass conference room and stare out at the rows of cubicles trying to identify who was slacking off.

The numerous late nights they spent at the office left no time for exercise, so Christian and his friends snuck workouts in during the day. To elude Sunny’s watchful gaze, they ducked out of the building at different times using different exits. They were also careful never to return at the same time or together. Ted Pasco, who had left a career on Wall Street to try his luck in Silicon Valley but didn’t have any clear duties during his first few months at Theranos, amused himself by timing their exits and entries.

Several members of the Frat Pack joined Greg and two of his colleagues from the engineering department for lunch on the big terrace overlooking the parking lot one day. A discussion about the low IQs of some of the world’s top soccer players led them to debate the question, Would you rather be smart and poor or dumb and rich? The three engineers all chose smart and poor, while the Frat Pack voted unanimously for dumb and rich. Greg was struck by how clearly the line was drawn between the two groups. They were all in their mid- to late twenties with good educations, but they valued different things.

Christian and his friends were always ready and willing to do Elizabeth and Sunny’s bidding. Their eagerness to please was on display when news broke that Steve Jobs had died on the evening of October 5, 2011. Elizabeth and Sunny wanted to pay Jobs a tribute by flying an Apple flag at half-mast on the grounds of the Hillview Avenue building. The next morning, Jeff Blickman, a tall redhead who’d played varsity baseball at Duke, volunteered for the mission. He couldn’t locate any suitable Apple flag for sale, so Blickman had one custom made out of vinyl. It featured the famous Apple logo in white against a black background. The store he went to took a while to make it. Blickman didn’t return with it until late in the day. In the meantime, work at the company came to a standstill as Elizabeth and Sunny moped around the office, consumed by the hunt for the Apple flag.

Greg had been aware of Elizabeth’s fascination with Jobs. She referred to him as “Steve” as if they were close friends. At one point, she’d told him that a documentary espousing a 9/11 conspiracy theory wouldn’t have been available on iTunes if “Steve” hadn’t believed there was something to it. Greg thought that was silly. He was pretty sure Jobs hadn’t personally screened all the movies for rent or sale on iTunes. Elizabeth seemed to have this exaggerated image of him as an all-seeing and all-knowing being.

A month or two after Jobs’s death, some of Greg’s colleagues in the engineering department began to notice that Elizabeth was borrowing behaviors and management techniques described in Walter Isaacson’s biography of the late Apple founder. They were all reading the book too and could pinpoint which chapter she was on based on which period of Jobs’s career she was impersonating. Elizabeth even gave the miniLab a Jobs-inspired code name: the 4S. It was a reference to the iPhone 4S, which Apple had coincidentally unveiled the day before Jobs passed away.

—

GREG’S HONEYMOON PERIOD at Theranos ended when his sister applied for a job at the company. After interviewing with both Elizabeth and Sunny in April 2011, she received an offer to join the product management team the following month but decided to turn it down and stay with her employer, the accounting firm PwC. The next day, a Saturday, Greg was at the office working. Elizabeth was there too but wouldn’t acknowledge his presence, which he found odd since she usually made a point to, especially on weekends. The following week, Greg stopped being invited to her brainstorming sessions with Kent. It dawned on him that she’d taken his sister’s decision personally and that he was now paying the price for it.

Not long after, a chill descended on Kent’s own relationship with Elizabeth. For all intents and purposes, Kent was the chief architect of the miniLab. A talented engineer who loved to build stuff, he was also dabbling with a side project in his spare time: bicycle lights that lit up both wheels and the road, providing improved visibility and safety for the rider at night. He’d pitched the concept on Kickstarter and, much to his surprise, was able to raise $215,000 in forty-five days. It was the seventh-largest sum raised on the crowdfunding platform that year. What had been a hobby suddenly looked like it could become a viable business.

Kent told Elizabeth about his successful Kickstarter campaign, thinking she wouldn’t mind. But he badly miscalculated: she and Sunny were furious. They viewed it as a major conflict of interest and asked him to transfer his bike-lights patent to Theranos. The paperwork Kent had signed when he joined the company entitled them to any intellectual property he produced while employed there, they contended. Kent disagreed. He’d worked on his little venture during his free time and felt he had done nothing wrong. He also failed to see how a new type of bicycle light posed a threat to a maker of blood-testing equipment. But Elizabeth and Sunny wouldn’t let it go. In meeting after meeting, they tried to get him to turn over the patent. They ratcheted up the pressure by bringing Theranos’s new senior counsel, David Doyle, to some of the meetings.

As he watched the standoff unfold, Greg became convinced that it wasn’t so much about the patent as it was about punishing Kent for his perceived disloyalty. Elizabeth expected her employees to give their all to Theranos, especially ones like Kent whom she entrusted with big responsibilities. Not only had Kent not given his all, he’d devoted part of his time and energy to another engineering project. It explained why he hadn’t been coming in on weekends like she wanted him to. As she saw it, Kent had betrayed her. In the end, a fragile compromise was reached: Kent would go on a leave of absence to give his bicycle-light venture a shot. When he was done indulging his pet project, they’d have a conversation about whether, and under what conditions, he could return.

Kent’s departure put Elizabeth in a foul mood. She now looked to Greg and others to pick up the slack. Greg also sensed a growing urgency in Elizabeth and Sunny’s behavior. They seemed to be squeezing the engineering team to meet some sort of deadline without communicating to them what that deadline was. They must have promised someone something, he thought.

As Elizabeth grew impatient with the pace of the miniLab’s development, Greg bore the brunt of her frustration. When the engineering team gathered for weekly status updates, she opened the meetings by staring at him silently without blinking until he broke the ice with a polite “Hello Elizabeth, how are you today?” He began keeping detailed notes of what was discussed and agreed to at each meeting that he could refer back to the following week to keep emotions out of it.

Several times, Elizabeth came downstairs to the engineers’ workshop and hovered over Greg while he worked. He politely acknowledged her, then resumed working in silence. It was some sort of strange power play and he was determined not to get rattled by it.

One afternoon, Elizabeth called him into her office and told him she sensed cynicism emanating from him. After a long silence in which he debated telling her she was right, Greg decided to keep his growing disenchantment to himself and told a fib: he was upset because Sunny had rejected several job applicants that he thought were well qualified and hoped the company would hire.

Elizabeth must have believed him because she relaxed noticeably. “You need to tell us about these things,” she said.

—

ON A WEEKDAY EVENING in December 2011, Theranos chartered several buses to transport its employees, which now numbered more than one hundred, to the Thomas Fogarty Winery in Woodside. It was Elizabeth’s favorite place to hold corporate events. The winery’s main building and its adjacent events facility were built on stilts into the hillside and offered panoramic views of the estate’s rolling vineyards and of the Valley beyond.

The occasion was the company’s annual Christmas party. As employees sipped drinks from an open bar inside the winery’s main building before sitting down to dinner, Elizabeth gave a speech.

“The miniLab is the most important thing humanity has ever built. If you don’t believe this is the case, you should leave now,” she declared, scanning her audience with a dead serious look on her face. “Everyone needs to work as hard as humanly possible to deliver it.”

Trey, the friend Greg had met while living in Pasadena and recruited to Theranos, tapped Greg’s foot. They glanced at each other knowingly. What Elizabeth had just said confirmed their armchair psychoanalysis of their boss: she saw herself as a world historical figure. A modern-day Marie Curie.

Six weeks later, they were back at the Fogarty Winery, this time to celebrate the Safeway alliance. Standing on the deck of the open-air events house, Elizabeth harangued employees for forty-five minutes as the fog rolled in, like General Patton addressing his troops before the Allied landings. The sweeping view before them was appropriate, she said, because Theranos was about to become Silicon Valley’s dominant company. Toward the end she boasted, “I’m not afraid of anything,” adding after a brief pause, “except needles.”

By this point, Greg had become fully disillusioned and resolved to stick around only two more months until his stock options vested on the first anniversary of his hiring. He’d recently gone to a job fair at his alma mater, Georgia Tech, and had found himself unable to talk the company up to students who stopped by the Theranos booth. Instead, he’d focused his advice on the merits of a career in Silicon Valley.

Part of the problem was that Elizabeth and Sunny seemed unable, or unwilling, to distinguish between a prototype and a finished product. The miniLab Greg was helping build was a prototype, nothing more. It needed to be tested thoroughly and fine-tuned, which would require time. A lot of time. Most companies went through three cycles of prototyping before they went to market with a product. But Sunny was already placing orders for components to build one hundred miniLabs, based on a first, untested prototype. It was as if Boeing built one plane and, without doing a single flight test, told airline passengers, “Hop aboard.”

One of the difficulties that would need to be resolved through extensive testing was thermal. When you packed that many instruments into a small, enclosed space, you introduced unanticipated variations in temperature that could interfere with the chemistry and throw off the performance of the overall system. Sunny seemed to think that if you just put all the parts in a box and turned it on, it would work. If only it were that easy.

At one point, he pulled Greg and an older engineer named Tom Brumett into the big glass conference room and questioned their passion. Greg prided himself on never losing his cool, but this time he did. He leaned menacingly over the conference table. His huge, muscular frame towered over Sunny.

“God damn it, we are working our asses off,” he growled.

Sunny backed off and apologized.

—

SUNNY WAS a tyrant. He fired people so often that it gave rise to a little routine in the warehouse downstairs. John Fanzio, the affable supply-chain manager, worked down there, and it had become the trusted place where employees came to vent or gossip. Every few days, Edgar Paz, the head of Theranos’s security team, would come down with a mischievous look on his face, a badge hidden in his hand. At the sight of him, John and the logistics team would gather in excitement, knowing what was coming. As Paz drew closer, he would slowly spin the badge from its necklace and reveal the face on the front, eliciting gasps of surprise. It was Sunny’s latest victim.

John had become good friends with Greg, Jordan, Trey, and Ted. Together, the five of them formed a little island of sanity at the company. John was probably the only strategic supply-chain manager in the Bay Area who worked just feet away from the cold roll-up door of the loading dock, but he liked it because it kept him away from Sunny’s scrutiny and his obsessive focus on the number of hours people worked.

Unfortunately, working in the warehouse is what eventually brought about John’s own demise. One morning in February 2012, one of the receiving guys who worked there with him arrived at work in a shiny new Acura. He proudly showed it to John, who complimented him on it. The next day, though, the car had a big dent in it. Someone had hit it in the office parking lot. John found the culprit by checking all the other cars in the lot for signs of a collision. It belonged to one of the Indian consultants Sunny had brought in to help with software development.

John confronted the owner when he came outside for a smoke break with his friends. He denied it even though John had used a tape measure to match the size of the dent on the Acura to the scrape on his car, a trick he’d learned from watching cops do it. John advised his warehouse colleague to report the accident to the police and show them the evidence. That’s when the situation escalated. The Indian software consultants went upstairs to complain to Sunny, who came down in such a fury that his hands were visibly shaking.

“Oh really, you want to be a cop?” Sunny yelled at John, his voice dripping with sarcasm. “Go be a cop!”

He then turned to one of the security guards who was standing nearby and, motioning toward John, told him, “Get him out of here.” After watching Edgar Paz playfully reveal the identity of scores of employees Sunny had fired over the previous year, it was John’s turn to get the boot.

His friend’s firing didn’t sit well with Greg, and solidified his resolve to leave the company. A month later, a young engineer he worked with inadvertently fried some miniLab electrical boards. Sunny summoned Greg and Tom Brumett to his office and angrily demanded that they tell him who was to blame. They refused, knowing full well that Sunny would fire the young man if they gave him his name.

As it happened, Greg’s stock options had just vested. Later in the day, he returned to Sunny’s office and handed him his letter of resignation. Sunny calmly accepted it but, as soon as Greg left, he summoned Trey, Jordan, and Ted one after the other to gauge their intentions. All three assured him that Greg’s decision didn’t affect them and that they remained committed to working at Theranos for the long haul, knowing that was what Sunny wanted to hear.

Greg worked one last Saturday during his notice period. Sunny was grateful and invited him to a meeting Elizabeth was holding the following Monday in Newark, a small city directly across San Francisco Bay from Palo Alto. Theranos had just leased a huge manufacturing facility there to produce the miniLab in large quantities. Elizabeth was unveiling the cavernous, empty space to employees. She caught sight of Greg in the audience as she spoke and locked her gaze on him.

“If anyone here believes you are not working on the best thing humans have ever built or if you’re cynical, then you should leave,” she said, reprising the themes of her Christmas speech. Then, while continuing to look directly at Greg, she singled out Trey, Jordan, and Ted for special praise. There were some 150 employees assembled and she could have called out the names of any one of them, but she chose to commend the three people she knew were his friends. It was a final public rebuke.

—

IN THE MONTHS after Greg left, the revolving door at Theranos continued to swing at a furious pace. One of the more surreal incidents involved a burly software engineer named Del Barnwell. Big Del, as people called him, was a former Marine helicopter pilot. Sunny was on his case about not working long-enough hours. He’d gone as far as to review security footage to track Big Del’s comings and goings and confronted him in a meeting in his office, claiming the tapes showed he worked only eight hours a day. “I’m going to fix you,” Sunny told him, as if Del were a broken toy.

But Big Del didn’t want to be fixed. Shortly after the meeting, he emailed his resignation notice to Elizabeth’s assistant. He heard nothing back and dutifully worked the last two weeks of his notice period. Then, at four p.m. on a Friday, Big Del picked up his belongings and walked toward the building’s exit. Sunny and Elizabeth suddenly came running down the stairs behind him. He couldn’t leave without signing a nondisclosure agreement, they said.

Big Del refused. He’d already signed a confidentiality agreement when he was hired and, besides, they’d had two weeks to schedule an exit interview with him. Now he was free to go as he pleased and he damn well intended to. As he pulled out of the parking lot in his yellow Toyota FJ Cruiser, Sunny sent a security guard after him to try to stop him. Big Del ignored the guard and drove off.

Sunny called the cops. Twenty minutes later, a police cruiser quietly pulled up to the building with its lights off. A highly agitated Sunny told the officer that an employee had quit and departed with company property. When the officer asked what he’d taken, Sunny blurted out in his accented English, “He stole property in his mind.”