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The Truth Behind Theranos: A Conversation with Whistleblower Tyler Shultz — Transcript

by Mark Haney · 3,386 words · 469 segments · language en · Watch on YouTube

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0:00and now from the Marquee media Studio
0:03inside Mark tank it's the Mark Haney
0:08show now I'm here with Tyler Schultz he
0:12is here with me at gfx he is our keynote
0:14speaker today at lunch and he has a
0:16story that is uh that I haven't heard
0:20personally so I'm really looking forward
0:22to it he was in uh involved in a uh uh
0:27an interesting story that endend turned
0:29into a book I don't know was a movie but
0:30why don't Tyler why don't we get your
0:33background and what's uh kind of making
0:35you what's putting you on the map what's
0:37making you famous yeah so I guess what
0:38put me on the map is being a
0:40whistleblower for this company called
0:41Theros and what they promised to do was
0:43to revolutionize Healthcare by and
0:47essentially inventing this technology
0:48that could do anything a central
0:49laboratory could do but with just a
0:51single drop of blood and supposedly
0:53anywhere where you had access to power
0:55so you could do these tests in metac
0:57helicopters and battlefields and
0:58Walgreens and Safeways in operating
1:00rooms in patients homes um so it sounded
1:03like this technology just really had no
1:06limitations unfortunately it simply
1:09didn't exist but Elizabeth by by selling
1:12this Vision was able to raise almost a
1:14billion dollars in funding it obtained
1:16like a a $9 billion valuation and then
1:19once myself and a couple other
1:21whistleblowers kind of exposed them to
1:23the Wall Street Journal but the company
1:25entirely collaps so this was Elizabeth
1:27Holmes she became famous she was a
1:29blonde attractive great presenter and
1:33she was able to just sort of spin the
1:34story with things that weren't true in
1:37order to raise all that money right and
1:39she had this very compelling personal
1:41story as well so she modeled her story
1:43in very much intentionally after Steve
1:45Jobs so she dropped out of Stanford when
1:48she was 19 years old she wore black
1:50turtlenecks modeled after Steve Jobs she
1:53constantly compared herself to Steve
1:55Jobs and got got other people to compare
1:56her to Steve Jobs as well she ultimately
1:59became the Young a self-made female
2:01billionaire she was on the cover of
2:02Forbes and Fortune and Inc she uh would
2:06say things like I'm doing well by doing
2:09good so she be she just positioned
2:11herself as kind of this darling of
2:13Silicon Valley and that was at a time
2:15when we were really craving a female
2:18Steve Jobs and perhaps we still are yeah
2:20um and so she saw that and kind of
2:22served herself up on a platter for the
2:24media to kind of indulge okay so let's
2:26talk about where you were in your life
2:28during this time because you're a young
2:30guy uh maybe give it a little bit of
2:32your background at that point I believe
2:35you're related to George Schultz are uh
2:38former Secretary of State under the reag
2:41uh White House and so you have you come
2:43from a really good family and you're a
2:46young guy and then you go to work for a
2:48startup right yeah so when I joined I
2:51felt like you know this is a company
2:52where I could work my entire career this
2:54was my first job out of college and I
2:56thought it might also be my last job and
2:59it turns out how valuable it is and
3:01early employees have a pretty good stake
3:03in the company and when I when I joined
3:05on that first day it did feel like you
3:06were joining Apple in the early earliest
3:09days there was so much hype there was so
3:11much enthusiasm frankly there was just a
3:13lot of Kool-Aid drinking where you just
3:15felt like you were part of something
3:16huge but it did not take long to realize
3:19like uh oh were you a a business guy or
3:22a technologist more around the
3:24technology side okay at Stanford I was a
3:26mechanical engineering major but then
3:28actually Elizabeth kind of became like
3:29one of my mentors and she kind of urged
3:32me to change my major to biology so in
3:35my senior year the last two quarters I I
3:37switched to a biology major somehow
3:39managed to graduate but I was definitely
3:41uh on the tech side okay so walking
3:44through the story when did you first
3:45start noticing that stuff was not right
3:48so the first thing the first time I
3:50noticed things were not right was
3:51actually on my very first day so it did
3:53not take long because my first date
3:55happened to be the day that we quote
3:57unquote launched the products and we had
4:00been in stealth mode for over 10 years
4:02at that point they were incredibly
4:03secretive so it was an amazing day to
4:05join the company when we finally told
4:06the world about what we were doing
4:08patients could go into Walgreens and get
4:10these tests done but on that day I came
4:13to learn that even though we quote
4:14unquote launched this product that there
4:16were zero tests that our technology was
4:20actually capable of running so if a
4:22patient walked into Walgreens and to do
4:23one of these tests first of all they
4:25would not get the finger prick they were
4:26promised they would get a Venus draw and
4:28then on top of that we wouldn't even run
4:30that sample on Thanos equipment we would
4:32just send it to other labs or we would
4:34run it on third party equipment and
4:36essentially just dilute their blood well
4:38okay so you knew that early on and then
4:42your first day on the job you're not uh
4:44are you what did you do were you able to
4:46say anything to other employees or to
4:48Elizabeth herself yeah well I I quickly
4:50started talking to other employees
4:52because once I started working with the
4:53technology itself the red flags became
4:55even more apparent because it became
4:57clear that this was never going to be
4:58able to do good thing that Elizabeth
5:00claimed um so I I tried to prove myself
5:03wrong as best I could I talked to my
5:05colleagues I talked to my managers I
5:07ultimately talked to a vice president
5:09the COO and president the CEO a board
5:13member because my grandfather actually
5:14joined um the board around that same
5:17time and then I even reached out to a
5:18regulator who said that this is what
5:20they were doing was a violation of their
5:22regulations um but then pretty much at
5:25every turn I was either I was ignored
5:27and then ultimately I was bullied I was
5:29gaslit I was threatened and it wasn't
5:31until I actually spoke to a Wall Street
5:33Journal reporter and they started
5:34digging in and asking really tough
5:36questions that kind of the whole thing
5:38started to unwrap what did your
5:39grandfather
5:40say well he really just didn't believe
5:43me um it's in his
5:46perspective I could see how it would be
5:48hard to believe you know you have people
5:52that he trusted for a long long time who
5:54are very very smart people telling him
5:56that thos was the greatest thing ever
5:58and that he just has his one point of
6:00information his grandson telling him
6:02that it's all fraud it's all fake um so
6:05he he just simply didn't believe me he
6:07said like these are currently in
6:10operating rooms these are operational in
6:12Medevac helicopters in Afghanistan and I
6:15just told him there's no way that can be
6:16true he was just being told these
6:19elaborate and just lies that were so big
6:22that you could possibly think like this
6:24can't be true it's like so big that you
6:26just can't believe that anyone would
6:28have the audacity
6:30to make it up and how many employees
6:31were with the company at that time when
6:33you went to the Wall Street Journal at
6:35that time I think there were probably
6:36around
6:37400 okay so it's a small enough company
6:40where you know what's going on I mean
6:42it's pretty good siiz company because
6:44it's raised so much money but the
6:46revenues are not uh strong I assume if
6:49it doesn't provide the service it's
6:50supposed to no and that's actually I
6:52didn't even realize how big of a fraud
6:54it really was until much later and so
6:56the SEC launched this big investigation
6:58eventually and actually found instances
7:00where Elizabeth was pitching prospective
7:02investors that their revenue the
7:04previous year was $100 million and in
7:07reality their revenue the previous year
7:08was
7:09$100,000 no way she was lying by orders
7:13of magnitude and and practically every
7:16way that you could about the technology
7:18and also about the business and about
7:20the revenues they were generating do you
7:21think she was delusional and thought she
7:24would just get away with it because
7:25eventually things like that are going to
7:28catch up to you I I don't know what she
7:30thought like there was no way that this
7:32was going to end well for her and she
7:34honestly knew like the lies were so
7:36intentional and so elaborate that they
7:40that there's no way she didn't know she
7:42absolutely knew this was fake and was
7:44continuing to build out this web app
7:46wise but I I don't know what the endgame
7:49was she knew she wouldn't be able to IPO
7:52because she knew once your public
7:53company there's just way too much
7:54scrutiny so anytime an investor invested
7:56she told them upfront we will never IPO
7:59because there's so many advantages to
8:00being a private company we will never IP
8:02IPO so she got ahead of that
8:04conversation before it even became a
8:05discussion with those investors did she
8:07line her own Pockets with some of the
8:09funds that were raised did she pay
8:10herself a great salary or anything she
8:13paid herself a a decent salary not not
8:16an exorbitant amount but what she did do
8:19was she loaned herself $25 million from
8:22the company and then she used some of
8:25that money to then buy back stock uh so
8:28she owned more than 50% out of the
8:29company it was also Tak and driving up
8:31to the stock price by buying yeah so
8:34it's like there was some shady stuff
8:36going on but she pretended to live a
8:39very austere life like if you read
8:41articles from the time when the company
8:43launched they describe her as like one
8:46actually a board member Henry Kissinger
8:48described her as being almost like part
8:50of the monastic order because of how she
8:53had this monk like Devotion to toos like
8:55she said she would never have a
8:57boyfriend she would never get married
8:58she would never have have kids she
9:00didn't have friends she lived in a like
9:02a one or two-bedroom apartment in palto
9:05and she showed this apartment to a
9:07reporter who kind of described it as
9:10just you know a simple closet full of
9:12that turtlenecks and a refrigerator with
9:14water bottles but her whole life was
9:15devoted to Theos but in reality she was
9:18living in a mansion in Atherton with her
9:20boyfriend who was also happened to be
9:22the CEO of the company so uh everything
9:26she did was just put on for show so you
9:28go to the Wall Street stre journal what
9:30happens after that is that when
9:31everything started to unravel yeah so
9:33once I go to the Wall Street Journal
9:35Theos discovers that I'm a source here
9:37pretty quickly based on the things that
9:38the Wall Street Journal is asking them
9:41and so they come after me with all the
9:42legal power they have they hired some of
9:44the most powerful attorneys in the
9:46country to come after me they hired
9:49private investigators were you still an
9:50employee of the company no I left theany
9:52okay you left the company did you uh
9:54before you went to the Wall Street
9:56Journal you left the company right I was
9:58wondering about that because I mean stay
10:00with the company because would they did
10:02they fire you or did you quit I
10:03ultimately quit so I started raising
10:05concerns and they essentially created a
10:07hostile work environment and kicked me
10:09out so the the president of the company
10:11Sunny called me arrogant ignorant
10:14patronizing Reckless he said I had no
10:16understanding of math science or
10:17statistics and he only wanted an apology
10:20from me moving forward so then I said
10:22yeah consider this my two weeks notice
10:24if you want me to leave today that's
10:25fine with me as well and unsurprisingly
10:28they wanted me to leave that day okay so
10:30you leave uh you go to the Wall Street
10:32Journal starts unraveling for them how
10:35did it uh how did it play out so again
10:37they come after me with all this legal
10:39Firepower with private investigators I
10:41end up getting lawyers myself so I got
10:43like a very specialized IP attorney I
10:45got a criminal defense lawyer I got a
10:47defamation lawyer I got a litigator I
10:49got whistleblowing attorneys I ended up
10:51spending between $4 and $500,000 in
10:53legal fees defending myself uh but
10:56ultimately The Wall Street Journal
10:58finally started publishing these
10:59articles which then led to a plethora
11:03they call like an alphabet soup of
11:04Investigations we're talking like CMS
11:07FDA SEC doj
11:12FBI all those organizations started
11:14investigating Theos and I think they
11:17ended up the company ended up SP
11:19spending like hundreds of millions of
11:20dollars either settling lawsuits and on
11:22their legal fees and then ultimately the
11:24company just went bankrupt and then uh
11:27Elizabeth and sunny had their trial just
11:30about wrapped up a little more than a
11:31year ago and they're currently in prison
11:34for sunny got a 14-year sentence and
11:37Elizabeth got an 11-year sentence is
11:39there anything that you would do
11:42different uh looking back at it yes I
11:44would pretty much do everything
11:46differently so luckily I can look back
11:48on this experience and I don't have any
11:50major regrets like I don't look back and
11:52said man that really hurt me that really
11:55killed me that really like that wasn't
11:57me that wasn't in line with my character
11:59everything I did I can stand behind but
12:02there is tons that I could have done
12:03better for sure um one of those things
12:06is I wish while I worked at the company
12:08I had spoken to a lawyer and and I was
12:11at the time I was too afraid to talk to
12:12a lawyer I had never interacted with the
12:14legal system you know I didn't I don't
12:15think I fully understood what the role
12:17of the lawyer was I didn't know uh you
12:20know how much they would cost I didn't
12:21even know how to go about finding a
12:23lawyer really but I wish I had spoken to
12:25a lawyer while I worked at the company
12:26and they could have helped me take the
12:29information I needed to take out of the
12:30company and safely deliver it to
12:33government um channels where I could be
12:36a protected whistleblower okay so now I
12:38do a little bit of venture capital and
12:40so we making Investments you know I I I
12:43typically bet on the founder yeah what
12:45could have get tipped me off so I didn't
12:46make you investment there yeah well
12:49there's a lot so I think with Angel
12:51Investors there's a lot of lessons here
12:53because I consider what Elizabeth did to
12:55be the biggest Angel round of all time
12:58like when you're an angel investor
12:59typically you meet with a Founder over
13:01coffee and then you if you're a wealthy
13:03individual you can cut them like a a
13:05$50,000 check based on that coffee
13:07interaction and you're placing a bet on
13:09the person she took that model and got
13:12individuals to invest over $100 million
13:15which is just outrageous at that point
13:17you need to have a process and people
13:20who had processes did not invest in the
13:22company and I've spoken to some of the
13:24top Metro capitalists in Silicon Valley
13:26like venot kosla for instance who said
13:29like yes she pitched me I went and I
13:31visited the company I ran a process the
13:34process said don't invest and we didn't
13:36and in a lot of ways I actually think
13:38that Silicon Valley venture capital
13:40doesn't get enough credit for not
13:41investing in theodos because they had
13:44smart people on their teams that had
13:45processes in place and they actually
13:47listened to the outcome of that process
13:49so vure capitalist uh by by term they
13:54did not invest it was only angel
13:56investors it was mostly a lot of Angel
13:58Investing it's a lot of Angel invest
14:00investing but like she had investors
14:02like rbert murbach from The Wall Street
14:04Journal Betsy DeVos Larry Ellison Robert
14:08Craft even some like Hall of Fame NFL
14:10player um Larry Fitzgerald oh yeah and
14:13so what she was able to do is pray on
14:15people who did not really understand
14:18what they were investing in and only
14:19invested in her and she prayed on these
14:23individual decision makers and I think
14:25one of the biggest lessons for investors
14:27here is that individuals individual
14:29decision makers make really bad
14:31decisions so even if you are an angel
14:33investor investing your own money I
14:35would highly recommend that you have a
14:37group of people who you're allow who who
14:40you can go Source deals with whether you
14:41can do that you know through some kind
14:43of you know shared NDA or CDA that you
14:46agree with that company but like having
14:48a way to um get more people to look at
14:52it because everyone has their own blind
14:53spots and so you want people with a
14:55different background than you maybe a
14:57different age um maybe a different
14:59gender get people with all kinds of
15:01perspectives to look at these deals to
15:02help fill in each other's blind spots
15:04okay so what did I not ask you that
15:06would be interesting for our audience
15:07and maybe any closing
15:09thoughts
15:11um well there's I mean there's so so
15:13much to talk about here so um my closing
15:15thoughts are after after Theos I went
15:18and I actually started two Diagnostics
15:19companies myself um I left the last one
15:22about a year ago to focus on being a d
15:24and being a a good husband for a little
15:26while and you know take a breath and
15:28leave all that stress behind me and at
15:30this point in time I'm really focused on
15:32actually telling um speaking about my
15:35experience at Theos because I do think
15:37that there are tons of lessons here like
15:39when you look at everyone who had to
15:41fail to enable a Theos to happen it was
15:43the executives it was the employees to
15:46an extent it was the board it was
15:48investors it was the media it was
15:50Regulators so I think that there are
15:51tons of lessons for all of those various
15:54stakeholders and so what I want to do
15:56now is just tell my story more
15:58intentionally and help all those
16:00stakeholders you know learn some lessons
16:02and hopefully avoid these big failures
16:04in the future um and then also I think
16:07that there are just ways that companies
16:10can can almost use these lessons as like
16:13they're superpower like using ethics as
16:15actually a competitive Advantage well
16:18Tyler I appreciate you coming on the
16:19show and coming to speak at gfx and it's
16:22I'm proud to know you so thank you you
16:24so much for what you believe and that's
16:25not easy so appreciate great job thanks
16:28for watching watching Today's show my
16:30goal for every episode is that you find
16:32a takeaway something tangible you can
16:34use in your business today and if you
16:37have a comment about a favorite takeaway
16:39feel free to put it in the in the box
16:41below and if you have a a topic that
16:44you'd like me to bring up on the show
16:46don't forget to let me know and also
16:49don't forget to subscribe to our YouTube
16:51channel if you want to learn more about
16:53entrepreneurship because at Haney Biz we
16:55are always by your side

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