How One Company Scammed Silicon Valley. And How It Got Caught. - The New York Times

Movie version starring Jennifer Lawrence expected in 2018; also see Theranos Could Have Been Stopped (Monday Note)

"The question of how it got so far — more than 800 employees and a paper valuation of $9 billion — will fascinate business school classes for years. The first line of defense should have been the board, and its failure was shocking. Some of the directors displayed a fawning devotion to Holmes — in effect becoming cheerleaders rather than overseers. Shultz helped his grandson land a job; when the kid reported back that the place was rotten, Grandpa didn’t believe him. There is a larger moral here: The people in the trenches know best. The V.I.P. directors were nectar for investor bees, but they had no relevant expertise. 

Even outsiders could have spotted red flags, but averted their eyes as if they wanted to believe. Fishy excuses — Holmes blamed a production delay on an earthquake in Japan — were blithely accepted. When a Walgreens team visited Theranos it pointedly asked for — and was denied — permission to see the lab. A company consultant pleaded that the chain not go ahead with in-store clinics. “Someday this is going to be a black eye,” he predicted. But Walgreens was plagued by a “fear of missing out.” Like many executives, they were looking over their shoulder and not at the evidence."

How One Company Scammed Silicon Valley. And How It Got Caught. - The New York Times