Elizabeth Holmes on Managing Product Strategy, Regulation, and the Media | Blitzscaling 14

This is session 14 of technology enabled Blitzscaling, a Stanford University class taught by Reid Hoffman, John Lilly, Allen Blue, and Chris Yeh. This class features Chris Yeh interviewing Elizabeth Holmes, the founder and CEO of Theranos. This podcast has been produced by Greylock Partners. For more podcasts, class notes, slides and videos, please visit greylock.com what I'd love to do today is have you guys Give a warm CS183C welcome to Elizabeth Holmes of Theranos. We're going to be exploring the concept of Blitzscaling. What's great about having Elizabeth here is because she is a healthcare entrepreneur as well as a technology entrepreneur, it opens up a whole bunch of different lines of discussion. But before we sort of get into all the details, maybe you can just tell us a little bit about what flow Theranos does. More specifically, how does it create value? How do you monetize it? Because it's very different from a lot of the companies we've seen.

Theranos is about the belief that access to actionable health information can make early detection and prevention a reality in health care. We spent a long time thinking about what does access mean and how do you make this information that is so inaccessible to people, something that becomes part of their daily life? And that started for us with figuring out how to build a lot of backend technology to totally change the way that lab tests, which are the primary driver for 80% of the clinical decisions in healthcare, are accessible. And trying to figure out, how do you take these services that are incredibly inaccessible and incredibly expensive and make them available to people for $2.99. We have developed an ecosystem in which we can make low cost, high quality tests accessible. We've built out a retail framework that allows people to get access to information in ways they haven't before. And we focused on making the testing experience wonderful, which includes changing the way that consumers engage with health information and making samples smaller.

Now, one of the things I think is very famous about Theranos is that you started Theranos while you were here at Stanford, and in fact, it was based in a basement, I believe. Can you talk a little about those early days and what you were really focused on back when you first started out?

I was focused on a dream, which was that what I've gone through in my own family and losing people that I love could be changed, and that it doesn't make any sense that we have this paradigm in healthcare today, which is that we determine someone is sick because they're already symptomatic. Right. You look the word diagnose up in the dictionary and it says to determine the presence of disease from symptoms, but by definition that means you're already sick. And so I was thinking, well, could I build something to change that? I was doing research here in a number of areas and trying to figure out, is there a product that we could create that would change that paradigm.

And so the idea would be, instead of me waiting to go to a doctor and ordering tests and everything like that, I might just say, well, every quarter it's cheap enough, I'll just go to Walgreens and go ahead and run a whole set of diagnostics.

And that you would begin to understand that information the same way you understand your credit card data. Right. Right now you know more about your credit card than you do about your body. And yet the data that's associated with your biochemical information is so powerful and so useful in the context of changing your daily life.

Now, I noticed that Chris has a question. Chris has always got a lot of questions.

Yeah.

I was just curious if you could.

Expand more in terms of when you.

Were at Stanford, basically what you were.

Doing and then how it ended up.

Coming out as a company. Sure. I was studying chemical and electrical engineering. This was before the whole biox evolved. And I was doing research in the chemical engineering department around the handling of very, very small volumes of fluid and sensor type systems. And was really interested in the confluence of technology and health care and was really interested in the concept that the way we do testing right now doesn't make any sense. I'd gone to Singapore to work in their genome Institute. This was at the time of the SARS outbreak. And the types of equipment and technology that they were using to measure effectively these, what's called protein microarrays, where you're looking at this protein detection system for trying to figure out whether someone is sick with something. Just really fundamentally from an architecture standpoint, hadn't changed since the 1960s in terms of the way these systems are developed. And so I was thinking about the fact that there were different ways that you could do this. You could apply technology towards solving these problems. And got so obsessed with it that was spending all of my time on it. And I think I had, I don't know, like 26 units per quarter kind of thing.

What year were you?

I started as a freshman and then ended up right before my sophomore year filing my first patents around these concepts for the types of systems that we were developing. And by sort of the end of the first quarter of my Sophomore year, this was all I was doing. And so Stanford makes it really easy. You can just go on leave and come back. Right. Anytime you want. And so I figured all this training and all this studying, this was what I wanted to do, and this was what I felt like I was born to do. And so I went to go spend all my time on it.

Now, I think that one of the things that comes out of your story is you actually went to your parents and said, hey, instead of all this money that you've saved up to send me to Stanford, how about if you let me use it to start my company? Which I think is pretty amazing. Can you talk about how you made the decision to do that and how on earth you persuaded them to go along with it?

Yeah. You know, I think we all ask ourselves this question about, you know, what is our calling? What is it that we love? What is it that we really want to do with our life? And I had thought a lot about that and grew up in a family that was very involved in public service. And I got to a point in time where I was really thinking about if I were going to build a product, if I was going to create something, what would make the biggest difference in people's lives? And at an emotional level, I couldn't think of anything that could be more meaningful than changing what we all go through when we say goodbye to people we love too soon, because we didn't find out in time to change that. And so when I sort of latched onto that, I mean, to me, the purpose of going to Stanford was to figure out how to get the skill sets to be able to go do that. And when I felt like I had the ability to sort of dive in, that was it. So it wasn't much of a discussion. It was kind of the, this is what I'm going to do now.

Your parents just said, all right, Elizabeth, sounds good.

And they were wonderful. Yeah, they could have made that very difficult, but they didn't, and I'm incredibly grateful for that, because the money that I used to start the company would have allowed them to retire.

Well, one of the things that's interesting about the process of starting the company is I think you mentioned you were doing research on sars, and I think that through Theranos, originally started off doing something very different than what it's doing today. And so you morphed and pivoted along the way. Can you talk about how you eventually figured out and settled on this particular product strategy?

The vision was always the same, and my first patents were around sort of elements of some of the exact same technology that we use today, but just in a different form. I knew that we wanted to do something very big in the context of setting out to change the way lab testing is done more broadly. And this is a complicated problem you mentioned. It's obviously a highly regulated space, but it's also a problem where if you develop an assay or a chemistry to measure one thing, like a glucose test or a cholesterol test, that does not mean that that methodology lends itself to being able to measure anything else. And there's such a huge parameter set in terms of all of these things that you have to develop that this was a very long term mission. And so we set out basically knowing that we were going to need to have a very long time horizon. And we began to build the business in such a way in which we could effectively grow the company and realize the mission as we executed on different products and services along the way. So we started sort of with a subset of, in our case, serving as a lab and certain tests and technologies that we could provide. And we had sort of initial implementations of the technology that don't have the same sort of capabilities that we have now with what we've built. And then as we were able to begin generating revenue and starting to build, the company around them just kept on expanding until we reached the point where we were ready to begin offering effectively a full service laboratory capability.

To people this class, we talk about the concept of blitzscaling, and one of the things that comes up is that oftentimes you go along for a while, maybe at a smaller scale, until you feel like you've got that product market fit, or you feel like you've figured out how you want to go to market, and then you begin to scale up. Now, where does Theranos stand today in terms of scale, the number of employees? I know you have a lot of lab space here in the Bay Area. Talk a little bit about the scale it is at today.

Yeah, we're about 1,000 people. And we started our work serving pharmaceutical companies as the lab for new drugs in the context of being able to better and faster measure whether a drug is working in a clinical trial. We've now built this capability around serving individuals and their physicians at retail and have spent the last year and a half building out a model for that in Arizona and done a lot of work to showcase how we can shift the paradigm in the context of access to health information. And now we're at a point where we're beginning to replicate that and starting to build out here in California and in Pennsylvania.

Now, the Arizona thing was very interesting because I think I read somewhere that you actually helped them write their laws or rewrite their laws. That's actually a very big thing for a company to talk about, the regulatory strategy in working with the government.

Yeah, well, this is a very, very regulated space and very, very regulated business. And it really means you build a different type of company because the stakes are so high and the decision making process is so long term. Right. I mean, the FDA approvals that we've worked on, they take about a couple of years per approval. And so. So for us, the government interactions in the regulatory are in many spaces, there's part of regulating the efficacy and safety of testing and there's a different part of it, which is this bill that we had the privilege of being involved in drafting and implementing in Arizona around. How do you enfranchise individuals to be able to play a role in health care? Our belief is that the only way to really change our healthcare system is to empower people to play a role. But this is a space in which people are told effectively, you're not intelligent enough to be able to handle your own information. I mean, I can go buy a weapon and kill myself, but I can't order an LLAB test because that's considered too dangerous for me to know if I'm pregnant. And we just could not disagree more strongly with that. So what we did in Arizona was write the first bill in the country that makes people allowed to go in and spend their own money on a lab test and to be able to engage with their health information, and that really changes a lot of things, because the minute that an individual has visibility into price, the minute the market begins to function in the context of individuals being able to demand lower cost, higher quality options, and this is a space where there is no visibility into pricing. And so breaking through an infrastructure that just has not changed for so many years. I mean, it's not a coincidence that there aren't many companies in healthcare technology that have broken through, because this is a space that doesn't want to change.

Now, to break through specifically, sir, how did you guys do that? So, for example, Theranos helped write the spill. Did you have a policy group that you brought in? Did you bring in people who are experienced at working with regulators and lawmakers? How did you sort of instantiate that? What was the people strategy there?

We have over time, but it's also, I mean, it's you know, I was in Arizona. I met with every person in the House, Arizona State House and Arizona state Senate committees that oversee, you know, the passage of this bill. And it's a very human thing because a lot of it is about, well, if this law takes effect, what are you going to do with it and what change is going to happen in our state and what does that mean? So there's no shortcuts there now.

You've now achieved a pretty significant scale, 1,000 employees, what we like to call in sort of blitzscaling, OS4 or the city level of scale. And one of the things about this is you've probably had to set up processes and tools in order to operate the company. So what kinds of processes and tools do you use to operate now that you're at this scale? And which ones do you wish you'd set up earlier?

I think about it in terms of people, and we're a very flat organization. But I mean, if we've learned anything, it's that we're only as good as the worst people on our team, and that everything that we've done is only because we've got the right people on our team. So, I mean, the ability to recruit and empower people and build people from within to win in terms of executing on these different areas really is fundamental to that type of ecosystem. And then there's a huge part of building the culture, and in our case, a culture that embraces failure and a team of people who want to do the really hard things that are going to challenge a lot of people and threaten a lot of people in this space because that change is needed in the world.

And in terms of the people, for example, you probably have different kinds of people. You have people who are doing engineering around the nanotainers. You have people who have a medical background, you have people who have a business background. What's kind of the breakdown of that group and how do you recruit those differently?

Well, they're very different. You know, I think it's pretty evenly split. I mean, we have as many software developers as we have people working on mechanical engineering, as we have people working in other areas within the company. I think the art is in getting those teams to speak the same language and work together. And that's something that I think over the 12 years now that we've been doing, this has really become a core competitive asset because. Because just the mindset and the work culture is so different in terms of people coming from a lot of these different types of companies.

And I have a quick Question. Sounds like a follow up.

Got one right there, too.

About the early days of how did you go from leaving Stanford with your patents to building a company? How did you surround yourself with the right people and how did you build a team?

Yeah, I mean, there's a great Martin Luther King quote that I love. And it says, it says, just take the first step in faith. It says, you don't have to see the whole staircase. Just take the first step. And all of these things, they start in baby steps, right? I mean, you don't start out saying, okay, I'm going to go hire 100 people and raise $50 million and start making millions of dollars in revenue. You start with. For me, the first part was, well, what are we building and what is this product? What is this system? How do we design it? And the beginning of it was very technical and it was about invention and it was about reduction to practice. And then it was about, well, is there someone who could work with me? So I had the opportunity to hire the person I was working for in the PhD program at Stanford, and he came and look at your professors in.

A very different way.

Yeah, exactly. It's an asset. And so then there was two of us and we were thinking about, how do we build this? And as we started getting into sort of the reduction to practice mode, then it was like, well, can we get access to a lab space? How do we do that? Where do we go? And we started to look at, okay, well, could we raise some money? We started talking to people about how would you get access to capital for what we do. This is highly capital intensive. You can't just be in a basement. You actually need fume hoods and these types of things to be able to do this. And it's one step in front of the other, just each step along the way. But I think it starts with a really, really clear understanding on why are you doing it. I mean, if you're going to start a company, why do you want to start a company? And what is this mission? And is it a mission that you want to fight for when it gets really, really hard? Because every single step along the way, I've always thought when you're failing and when bad stuff happens, it's a sign that if you're doing what you really, really love, you're onto something because you're being tested.

And one of the other interesting things about speaking of people, I think your brother works for you at Theranos. How do you balance personal, professional relationships? It's an interesting dynamic.

Well, he came in 2003 when it was me and the PhD student at Stanford and built our website, which was very useful. And then he went back and went to school, went to Duke and then worked in D.C. building a government practice for, for a consulting group. And when he had the experience in terms of management and the development of his skill sets, we convinced him to move back in. And I think anytime that you have people you're close to in business, whether it's family or whether it's people who you were really close friends with, those people really have to work even harder than everybody else in order to, to make that work. Because it has to be about business and it has to be about business first. And that means it's about the company first. And that means that they're held to about four times the standard as everybody else, because it has to be that they're there because of the contributions they can make.

There was a question over there.

Yeah.

How do you think about product market fit? I mean, it seems like you were standing in front of this sort of ten year plan realizing, I need a ton of money and we're going to do this for a really long time. You don't really give that in such a regulated space. You don't really have the opportunity to test small bits and bobs along the.

Way in terms of how we started building the business.

Just to repeat the question, how do you do product market fit when you can't just throw out a test onto the Internet? How do you actually get the feedback and figure out how to redirect things?

Well, we knew that ultimately we wanted to be doing what we're doing right now. Right. But you can't do what we're doing right now without having developed hundreds of chemistries and all this kind of stuff. So we started working for pharma companies who said, okay, we want you to measure one thing and we want you to do a program where because you can do this less expensively, because you can do it faster, because you can do it with less blood, you will allow us to get data faster on understanding the efficacy or safety of our drug. So we did that and then we had one test and we kept doing it in the context of building out this framework along the way. So same technology, same vision, but the ability to apply it toward a different market, a different application as we built what we're working to build now.

There's been a lot of press attention for Theranos recently, as you know. I've heard about it, I've heard about It. And we won't talk about how you respond to the public and pr. I'm more interested in how do you keep your. Your employees up to date. You have 1,000 employees now, and they're reading the papers as well. How do you keep them up to date? How do you maintain those lines of communication?

Yeah, you know, I gotta tell you, the most humbling experience that I have had in my life is seeing the way that our employees have reacted to this because they are so motivated to go prove these guys wrong. And that's been. I mean, our whole company and our whole culture has really changed around this because. Because it can be such an incredibly unifying experience when you know that you're fighting to change. In our case, a space that is so entrenched and so resistant to change and people are threatening you. So we, I mean, we have our space and our culture is open space. It's open floor plans and people are, you know, we have three meals a day with everybody in the same cafeteria. So it's very integrated. The process that we've taken to this is we get together right now, it's on Fridays, and we just talk about it and talk about people's ideas. Our team members have really great ideas on things that we can put out there to prove that this stuff is false and answer people's questions and keep the communication open because it's one team. And we tried so hard to hire people who were here for this mission, not because they have great resumes or great grades or anything, but because they know what this means. And therefore, when people try to threaten you, I mean, we knew going into this space that this would happen at some point once we sort of started to make an impact. And when you're doing it because of the mission, it just makes you want to fight that much harder.

There are two Chris's, so let's go with the second Chris first, because the first Chris asked the question just to dig in.

Like, if you have like 10 or.

20 people, it's really easy to get around over lunch and ask questions.

Yeah.

If you have a thousand, I'm assuming it's harder to get everybody in the same room. Like, how do you facilitate that? Is it more email questions?

Is it. No, we.

How do you deal with more people?

So how do you manage to do communications for a company of a thousand people when you can't just all gather in a single room?

We get everybody who is in our headquarters building in our cafeteria, and we get everybody else on the phone and that's it. And we talk, and it's open book. If people want to ask questions about anything, they can ask questions about anything they want. It's wonderful, too, to let people share their emotions or their ideas or their comments about some of this stuff. And it's a very unifying experience. As a company. We generally would do all hands meetings like this when there was something specific to talk about, like, we got FDA approval. And so, you know, there's a big discussion or a celebration about it. But this has created an opportunity for us to just. To just get together. Right. And that's a pretty special thing.

My question's with hiring. You were talking about, like, hiring permission.

You've been hiring executives. Are there any specific things you do to kind of pull that out, or.

Is it more just you're trying to get a gut feel of the person.

And what they care about? All of the above. I mean, I would be curious what these guys say. My experience, no matter how good you are at management, you're going to make mistakes when you're hiring people. I mean, you're meeting this person for not that much time, and they're coming in as part of your family, and you have to make a judgment call. What I spend time on now is really understanding why Theranos? Why do you want to be here? Why this company? Why not another company? How are you making your decision about where you're going to go? And if the root answer to that is not really that, this is their mission. For us right now, in this stage where you're building something where you've got a lot of big companies who would like you to disappear as fast as possible and are going to make it really hard, they're not going to be able to do it in this kind of environment, because it takes fighters. And so we try to sense that. And then, of course, there's the resume. And where have you worked before? Where did you go to school and what were your grades and all this kind of stuff. But if they're not doing this because they want to fight for this, so many of the people in our company have had family members who have cancer or have lost people that they love or have, you know, autistic kids who go through having their blood drawn every day, and they know what this means. Right. And we look for that because you work differently when you're trying to solve a problem. For that.

There was a question back there.

Yeah.

You are synonymous with Theranos in a very public way, which is not normal.

I'm trying to figure out what that means it's a really good thing in.

A lot of cases. But it must be personally tough when the spotlight's on you and there's negative press, et cetera. In hindsight, are you happy about how public of a figure you are? And if. Yes or no, why?

Okay, so the question is, as the founder, CEO of the company, you're unusually identified with it. And of course, company has been in the news a lot recently. How do you think about the upsides and downsides, the pressure that comes with it, and what you think about the decision that was made to feature you?

Yeah, I mean, I started this work in 2003. The first time we ever engaged with a press publication was in the end of 2013. We were totally in stealth mode for 10 years, which was wonderful. And the reason that we did it is because our work and what we're fighting for is changing our health care system in such a way in which early detection becomes a reality. But if you spend a lot of time in places like rural Arizona or in low income communities where people can't afford access to good health care, they don't know that they have a right to their own health information and they don't know how to use it. And part of what we need to do to realize this dream is educate people on the fact that you can do this and you can engage with this information and it can be accessible and you should demand it. And part of my work and my role in the context of the press that I've done over the course of the last year and a half has been changing state laws and advocating for changes at a federal level. And it's so central to our mission that that's what that is about. Now, if people put you on a magazine cover or say horrible things about you, that stuff doesn't matter. It's not real. What's real is every single day, are there more and more people who are getting access to health information that they wouldn't get access to were it not for something that you've built for us? Part of this whole media thing has been, as we spoke with national media publications, a huge part of it was around our work around advocating for changes in state laws, our work around trying to reduce Medicare reimbursement rates, which has been a very threatening thing to others in the industry. Our work around lobbying for FDA regulation, which has also been a very controversial thing to people in the industry. In Arizona, what we focused on is educating the people that we serve around the way we do our tests. Right. The ability to do tests on smaller samples, what technologies we use, why all that? We didn't realize until two weeks ago that that was national news, but it is. Right, and that's fine. And we, through the work that we've done and the data that we have and the technologies that we've built, will get that truth and those facts out there. But the media for us is a vehicle for being able to communicate with people around what it is that we're fighting for. And. And that's it.

One of the interesting things about getting a company to scale is you have different tools that you can use. And some of the tools we like to talk about are also boards of directors and investors. You've had a somewhat unusual board. There are more people with diplomatic experience, Dr. Kissinger and so on and so forth than would be typical of a Silicon Valley board. Can you talk about. Obviously you didn't just sort of say, well, they're the guys who applied, so we took them. Right. There's an intentional strategy here. Can you talk about that strategy and how that board helps you?

Sure. I mean, I've been incredibly privileged to be able to learn from and spend time with just incredibly brilliant strategists. And we are. People talk about our company inside of Theranos as a double bottom line company where we're a for profit business, but we make decisions based on realizing this mission. I mean, the reason that I work the way that I do and the reason that I want to do this for the rest of my life is because we want to see a change in the world, that the technologies that we build are a tool for realizing. So these people understand what it means to realize changes in policy, to realize effective strategies. When you're going into a space where a lot of people would like to get rid of you as fast as possible. And we've benefited from that in a wonderful way. And I've changed our board many times as I've built the company. And it will continue to evolve as we grow. But we've been really lucky to be able to learn from some of the smartest people.

So if I were to paraphrase, it sounds like what you're saying is it's not just about the technology development. Right. It's not typical venture capitalists. There's a lot of policy involved. There's a lot of, as you put it, the fight that's happened and what you've tried to do is bring in people who have experience with things that are outside Silicon Valley because you feel like that's where the decision's going to be made.

Well, for us in health care, I mean, this is a very. It's a very complicated space. And as I was saying earlier, as I have thought a lot about it, I really believe there's a reason that it hasn't changed for like 60 years. And so it's not just about making a box or making a test. It's about how do you change the system. And we spend a lot of time thinking about that.

Got it over there.

Yeah.

When you were doing everything in Arizona, was there any, I guess offset or was there any resistance to you specifically there? Were there any lobbyists or companies specifically within the Arizona legislation system that were going against you?

So when you went to Arizona, did you meet with resistance? Was there anybody there that was fighting against what you were doing?

We passed this legislation in every committee and in the House and the Senate and the governor signed it and it was completely bipartisan, which is awesome in Arizona. And it was almost unanimous, except for, I think it was one person who didn't vote because they didn't like the sponsor or something like that. But there was only one set of organizations that lobbied against it, and that was the traditional lab companies.

Another question. Yes.

Okay. So it seems like there are no sort of straddles like the high speed.

Tech startup space with also the biotech space.

How do you think about how you operate in terms of the two different worlds?

So given that you're straddling biotech and high tech, two different cadences generally apply. How do you manage that tension?

You know, I think first and foremost, we think about this in the context of the people that we serve. Right. Every single day we have people coming to our laboratories. And I mean, I think about it in the context all the time of my own family. Right. And my mom coming and doing her tests with us. And as a culture, as a company, when we think about our policies, when we think about our systems, when we think about the decisions that we make around quality, are we doing the right thing to make sure that every single time someone comes to us, we are serving them in the highest quality way and in the most wonderful way to try to shift this paradigm? Right now, lab testing is not something that people think about as being fun. Right. And it can be. And that's part of what we're proving through what we do. So we think about sort of the life science paradigm and the technology paradigm in the context of the individual we serve and the decisions that we make and the systems that we put in place are to Ensure the integrity of what we do, which means that as a company, we operate very, very differently than a traditional technology company. We've gone out and done something that is very controversial, which is we've proactively and voluntarily submitted ourselves to FDA regulation. Well, that means you run the company totally differently because you have to have systems in place and quality systems in place and good manufacturing practices in place that are very, very different than if you weren't FDA regulated. But that's the right thing to do because we're trying to build a space in which individuals have access to their own health information. And it's the way to ensure that the data is the highest quality.

Yes.

So a lot of people would say.

That start a company like therapy, be a doctor, or like have an mba or have a lot of this formal training. So when you were leaving as a sophomore, how did you develop the conviction to say, I actually don't get into this formal training. I know that this company 10 years after.

Got it. So the question is, what is the value of formal training, medical training, MBAs, that sort of thing, considering you left Stanford in your sophomore year to do this and have managed to come this far?

I think it depends on what you want to do. I mean, some of the most amazing stories in history are about people who didn't have formal training in a specific area or weren't recognized as sort of the elite people in an area. I mean, the. The creation of the polio vaccine is an amazing story like that, where the guy who figured it out was not sort of the one who would have been expected in the respected medical community to do that. But the whole point about innovation and invention is it's the people who think differently. And so for me, when I started, it was about what do I want to do? And it really, really for me goes back to mission, because I know that this is a problem that I want to spend my life trying to solve, period. And therefore, if people are going to tell me that I'm not good enough or I'm not smart enough, or I'm not trained enough or I'm doing it wrong, they can tell me that as much as they want. And I don't really care because this is what I want to do. And when you care that much about what it is that you're fighting for, I mean, people can try to beat the crap out of you, but you just keep on getting back up. That was my personal mindset. As we think about building the company, if we're hiring someone to be a medical Director or hiring someone to be a staff physician. We want to go find the best medical doctor or the best staff physician because that's their role in the company. But if we meet someone who's an undergrad, who has no training in any of these things, who wants to grow with this company for the long term, do we think that person has to go get a graduate degree to be able to do this? Absolutely not. Right.

Go with that side.

So building on top of that, how did you deal with being so young in an environment where almost everyone in the industry has a PhD, whereas 10, probably 20 years.

How did you deal with being a 19 year old seat, founder, CEO in an industry where most people were much older and had more degrees?

Yeah. You don't focus on it. Right. And you don't pay attention to it. And you know, it's kind of similar to being a woman in engineering and in math and in building a company like this and in this space. I've always told myself that you just don't pay attention to that because what matters is your actions. Right. And what you do, what you create, what you build and you focus on that. And I found that if we can keep our head down and focus on what it is that we're actually creating and the integrity of that, ultimately over time. Right. Everything else washes away. But I did learn, I think it was like the first seven years of the company, I wasn't technically allowed to rent a car by Enterprise. Now I guess you don't have that problem anymore. But.

Yeah, exactly. Thank you. Uber. Yes, over there.

Not revealing specifics about how the technology of the company actually works.

Got it. So the question is patents versus trade secret and keeping some of the secret sauce hidden away from public view. Talk about your thoughts on that because I think you have a lot of both.

Yeah, we do. I mean, we've been very aggressive in building our patent portfolio. It's something that's really important to us and we've done just a huge amount of that over the course of the last 12 years. And it's something we take really, really seriously. You know, I think the question you asked, the question about confidence, I think the question is who do we care about having confidence in this? Right. And the people who we've cared about having confidence in this are the physicians and the individuals, the people that we serve right now in the world of clinical laboratory testing. Theranos is in one city in the whole world. And we've focused on really briefing the physician community there and the people that we serve so that they can understand our test methods, our data, do comparisons between using us and using a traditional lab, and get hands on experience understanding how we work. And that's been very successful for us. And that's led us to this point. We knew at some point that because we're doing things differently because we're trying to lower Medicare rate, because we're lobbying for FDA regulation, because we're opening up this market to individuals, that this might be disruptive. And so we're at a point now where to demonstrate the integrity of what we've done and the technology that we've built and the data that we have, we're going to put it in the public domain because we have a core value which is that we really resonate with this concept of better transparency in lab testing. We thought that the way to do that was to be the first and only lab with the confidence to go into FDA and file all of our tests with them, which no other lab has done before. And we thought that if FDA came out with these decision summaries that that would really make a point about the integrity of what we do. But there's no reason that we can't additionally put that into the public domain. And so we will. And we're at a point now where this is so high visibility for so many people that it's the best way to respond to it. Because I can go around everywhere and be like, that's false. That never happened. But data speaks for itself.

A couple of other questions I want to make sure we hit and then we'll return to the students again. Another tool are investors. You have a couple of notable investors. I think Larry Ellison may very well be one of your largest investors. Can you talk about how you picked your investors and how you felt they could help you scale and help you grow the company?

Yeah, I think this is such a huge question because it really can make or break the company ultimately in terms of the influence on how you build it and the decisions that you make. And in our case, when you're working to build something long term, we looked for people who really understood what it means to build a great long term business and who really wanted to be part of building a business for the long term and who believed that we could realize the greatest impact in terms of our products as well as the greatest returns in terms of investment by executing on a long term plan. And that is different from sometimes you get the how fast can you realize a 10x return or what's your exit strategy? Type of conversation. And that was just not the right conversation for us in the context of how we built the company.

One of the other things I've watched a couple of your interviews, and one of the other things you've talked about is how you really hope. And I think it comes through when you're talking about Theranos and the people and the culture. You want this to be a place where people can go to have a career and where people are promoted from within. And we've had other guests who've talked about this. Maryam Nafisi of Minted talked about how many of her best people are folks she's promoted from within. Talk about some of the people you've grown from within and talk about also the times when you decided, you know what, I should go outside and bring in this expertise.

Yeah, absolutely. I mean, we will build from within and we will promote from within anywhere we can. And it's something that we believe in so strongly because it shapes our culture. And we like to have people in roles in which they can do the jobs of their direct reports. And we find that if the people who embody our values are the ones in leadership positions, then when we're growing at the rate that we're growing, where the majority of people are new at any given point in time, we can maintain our culture. And so that's something that I'm incredibly focused on in the context of how we scale the company. By definition, sometimes you just can't grow people fast enough. And so you have to supplement with outside talent. And we've worked really hard to try to do that in such a way in which we get to know people as well as we can before we bring them in so that we can try to have as high a success rate as possible in the context of how we build out the executive base.

And is that relatively even between the different types of folks, like the medical staff versus the engineering staff versus software development staff and business staff, or are there particular areas where it's more useful to go outside or better to stay inside?

It's a great question. I think in every area, anywhere that we have the opportunity to promote from within, we will. But when we're scaling an organization, I mean, for example, you decide you're going to expand to a new state, you really have no choice. And so you're putting a new ecosystem in place. But we're incredibly proud of. We've had people who've done just an incredible job in Arizona, and we've now relocated them, and they're starting to take on New roles in other areas.

You also are very famous. Like many people in Silicon Valley, you work very hard. I think you don't take vacations, you work at least six days a week. How do you end up allocating your time? For example, maybe the past couple of weeks have been abnormal, but how do you typically break up your time and think about well, this time I'm going to spend with my team, this time I'm going to spend thinking myself, this time I'm going to talk with customers. What's the division?

Part of the way I've always seen my role is that your job is to solve the toughest problems. So you're spending time in the areas that are most critical path and that are most critical to realizing sort of the next step along the way in the context of the mission. So that's generally where I spend most of my time. But my passions and as I work to build this organization are to be able to focus as much as I can on the product and on sort of the creative aspects of communication in the company and how we do that and how we connect with people around this mission.

And then do you in terms of the time though, I mean, for example, is it primarily spent with internal communications or external communications? What are some of those breakdowns?

It depends on what the priority is. I mean, when the priority was get this bill passed in Arizona, I was in Arizona doing that 24 7. Right. Otherwise where I can, I like to not travel as much as humanly possible now and be embedded in the company. And I mean the best is when I get to spend time with our teams there, but at different steps along the way. Whether it's we're working on an FDA approval or we're working on introducing a next generation technology, I'll generally focus on whatever that critical program or project is and then go really deep.

Great way in the back because the back people. Now coming back over to your side.

Yeah.

Hey, we had a question about product market fit earlier. Yeah, Elizabeth, I think one of the things that you've done that's totally unique is have this like huge systemic perspective about changing the world and also like literally have the patents for the product to do it. So can you talk about balancing like product innovation with systems innovation? Changing worlds.

Interesting question. So how do you balance system level innovation with product level innovation? Changing the world with specific products and businesses?

Yeah, I think, I mean I've always believed that business is a tool and a vehicle for making a change in the world. And so we've chosen to do this through business because we see it as a tool for realizing a change. And that means it's a company, it's a. It's a business. So therefore, we need to apply the way we develop technology, the way we build products, to realize that vision and that systemic change in such a way in which we know we're continuing to build the business and we've tried wherever we could to grow from cash, from operations, so that we're never dependent on external capital and these types of things. So we've taken elements of the technology or sort of subcomponents of it and said, okay, let's build this. Let's apply it in such a way in which we can contribute toward building the company, and then we can work toward these goals. And each of these actions that we take are little steps that ultimately will add up to and contribute to and we hope ignite a movement toward realizing some of these changes in the system that we want to fight for.

The patient gentleman back there in the glasses.

So I'm not sure if this is secret information, but I'm very curious to.

Know how fairless technology is different. Like what sort of innovations have happened on the back end to make the lab testing cheaper, I guess, and faster.

Got it. So given what you can actually reveal to the public, because this will be broadcast to the world. Again, just emphasizing that.

I appreciate that.

Just reminding you. Talk about what has really differentiated Theranos technology, what has enabled you to just dramatically lower the costs.

Yeah. So we've really looked at the end to end spectrum of the way that testing is done. And a huge part of it for us is in working to change the way that the actual tests are run. So we've developed new devices, we've developed new chemistries, we've developed new consumables, we've done new software that changes the way that the actual assay, the actual hardware processes these samples. Right. And automates it and allows it to be way lower cost through the application of that technology. So this summer when we got our first FDA approval, that was on our proprietary device and our proprietary software and our proprietary consumables and the first of our tests that allow this testing to be done on a new platform.

So what are consumables? Just because not everyone is a healthcare.

Yeah, it's what you put the chemistries into to be able to process a test. Physical things over there.

Yeah.

So in the biotech space, there are many barriers of entry like research, regulation, regulations, capital. How do you see this change in the future?

So There are barriers to entry in biotech. How do you see this changing in the future? Are the barriers decreasing, increasing, staying the same?

Yeah, I think this is a space in which time and regulation in the context of product development are really important because the stakes are so high. And when I did this work in Arizona around changing the law to say that it's a basic human right for people to be able to order their own health information, what happened with that is that these companies started popping up saying, come to our website and enter your credit card and we'll tell you if you have breast cancer. And I have a big problem with that because we fought so hard around this dream and this vision that individuals can begin to engage with their own health information. And we need to make sure that if we're going to fight for that and we're going to give people those rights that you're right when you tell them these things. And so that's why I started lobbying for FDA regulation, because at the end of the day, if we're going to democratize this space and we're going to empower people with this information, you better have run a clinical study that demonstrates that you're actually doing what you're saying you're going to do. And if you haven't, then it's highly questionable as to why you're making those claims. And it's also highly questionable as to why you have a problem with FDA regulation. Because the FDA regulation is saying, go run that study and demonstrate that you can actually do what you're saying you're going to do. So I think to go into this space, you've got to have a long term goal and you've got to have a lot of discipline and patience because it's really hard. And it's also a changing space. The regulations are changing. So you, effectively, going back to the previous question, have to be building something while you're working toward each of these longer term applications.

I did want to ask a couple more questions. Then we're going to go straight to the student questions and alternate between the people who were thoughtful and submitted them in advance as well as the people in the room. Not that I'm biased, but one of the interesting things I found fascinating about your biography is that you actually grew up and spent much of your time in China and you actually started your first business, I think, when you were in China.

Yeah.

Talk a little bit about how that has impacted your view of the world and to what extent that has gone into your current entrepreneurship.

I grew up learning Mandarin, and then had the chance to spend time in China and studied at Beijing University, which was amazing. And I mean, I loved being there. I thought it was just a phenomenal time and the intensity and passion of the students there. It's an incredibly intense environment and a very stimulating environment in the context of sort of the drive for excellence. I think one of the things I'm grateful for in the way that I grew up is that I moved a lot. And when that happens, nothing's really normal. And so you're not looking at a specific community or a specific way of living or a specific group of people as someone you necessarily identify with. And that has been a great thing because I've been able to identify with what I create and what I feel my calling is. So. So I went over there pretty young and by myself, and it was sort of one of those jump feet first into the water and figure it out kind of things. And that shapes you.

Got it. And one of the questions from your background, this is from Maxine Cunningham from the class. Just who was the first person that believed in you? Why did they believe in you? What did you do to convince them of that?

It's probably my parents. But, you know, I. You know, I think it's ultimately it's yourself, right? I mean, it's you. You make a decision that you're going to do something that you really, really believe in, and then it doesn't really matter who else believes in you because you're going to go fight for it because it's what you want to do.

This side, look all the way over. Why not?

I was wondering, with the aspect of, like, breakthrough products.

Right.

I think Theranos has been distinctly turning on products that are very different from the medical space. So I was wondering, what, like, creative or scientific processes have you put in to consistently think radically and create products that are 10 times better in a space that hasn't been changed?

Interesting question. So what have you done? What processes or tools have you put in place to develop breakthrough sort of 10x products to do things very differently than the way things had happened before?

I think we've asked different questions. We're trying to solve different problems. People say we're in the lab business or we're in the fingerstick business. We're not in the finger stick business. We're in the can we make early detection a reality business? And everything that we do is around how do you build systems, how do you build products? How do you create access so that person by person, people begin to engage with their health information in such a way in which they're not asking themselves the question, what if I had known sooner? Right. And that's a totally different way of approaching this. It's not I want to be a better lab or I want to make finger stick tests. It's how do we change that? And then everything that we do comes from that.

Jeffrey Clapp from the class asked the question, so why did you decide to launch Theranos in Silicon Valley? Obviously you were a student at Stanford at the time, but there are plenty of other places that are more experienced in terms of the FDA or the medical industry or what have you. Why Silicon Valley?

I'm highly biased. I think that this is one of the most amazing places in the world. And I think the people here are people who all come because they want to do something meaningful and they want to make a difference. And they come from all over the world. And one of the things that we love the most about our company is I look around the room in a meeting and there's people from India and Pakistan and China and Egypt and Brazil sitting in the same room on the same team and the same product. And they all came to Silicon Valley because they want to build something great. And it's with those type of people that you figure out how to solve really tough problems.

Just as an experiment. Those of you who are actually who were not born in the Bay Area, raise your hands. Right, There you go.

So, yeah, there you go.

All right, other question. So I think I did that side. Which side? I don't even know at this point. This side. Okay. Back there. Yes. The gentleman in the glasses.

You or me?

All right.

I didn't want to say with a short haircut, but there you go.

Let's jump ahead 10 years. So my background's in FDA products and home monitoring. So I think it was very smart to do the long retake. Clearly many clinics and then retail space is going to take off. What about the home? What about the next big thing? So screw LabCorp and crest of those guys. What about actually getting into the home? And that part of the process.

Forward looking question, are you thinking about getting into the home market?

No, no, I just want to.

Oh, what do you think? What do you think?

Oh, what do you think? But I think it's really interesting. You know, all of our belief systems are around get information to the individual, empower the individual at the time and place where it matters. And I think there is an incredible future there. And it's one of the reasons that I Think it's so important to try to break down these barriers. Like, I mean, the state law thing is important just because it says you have a right to your information. Well, what happens when you have a right? All of a sudden you become interested in it and all of a sudden you're interested in products and services that you could use to get access to this information. I think it's a whole frontier.

Yeah. Question from the audience here, Vijay Gayle, M.D. asks. Back in the early days, you were just. That's what he's listed as on his LinkedIn group. Back in the early days, before all this publicity started coming out, how did you manage to reach out and engage with regulators despite the fact nobody knew who you guys were? What did you do to actually reach out to them and get on their radar and engage with them?

We showed up. We've proactively done this for some time and we've tried to figure out what the right thing to do is in the context of how to build this company and what the right system is. And we've tried to look for really good advisors and really good people in the regulatory space to say, okay, no one's ever said that they're going to build a new lab and go make hundreds of tests and take them all through the FDA process. Normally what happens is people say, I'm going to take a product through the FDA. It's not. I'm going to go take 300 things through the FDA. And so how do you do that? How do you create a model for it? And. And we've spent a lot of time on that.

Got it over on this side. Yes, back there. Welcome back to you.

So why blood testing?

There's many different ways to disrupt healthcare.

Especially in terms of proactive diagnostics. Yeah.

Did you give any thoughts, other avenues?

So why blood testing in particular? And did you look at any other types of clinical avenues?

Yeah, yes, we have. And blood testing is really important because the blood testing data is really important. And the way that you get access to it, which is this traditional venipuncture in locations that are pretty horrible and really expensive and you don't know how much you're agreeing to pay when you go in to do a test, is such a huge barrier in people actually getting access to their own health information. So when you look at our country, 40 to 60% of people actually don't go get a lab test done when they're given a requisition by their physician to get it done. And the way our system is set Up. Those tests are generally only ordered if you're already symptomatic for something, right? If you go into your doctor and you say, hey, you know, my family has a history of heart disease. I just want to see how I'm doing. I'm worried about it. The doctor will say, well, you're not symptomatic. That's not a medically necessary test. Therefore, insurance won't pay for it. Therefore, you're going to pay $3,000 out of pocket. So people don't do it until they're sick. And this is a way to begin to get access to this information before you're really sick so that people can do something about it.

Back over to this side. Way in the back there. I like to give people in the back a chance. So obviously, one of the great ways.

To disrupt healthcare is through healthcare testing and directive diagnosis.

What else do you think the biotech.

Industry needs to do?

Because, I mean, that's such a whole novel approach. Instead of curing that disease, build the.

Infrastructure to cure all diseases, right?

What else?

What other kinds of infrastructure needs to be disrupted in the biochemistry?

So what else needs to be disrupted in the biotech industry?

I think one of the coolest things that's going on right now is the way that people are rethinking therapeutics. So this whole concept, for example, in cancer, that you can design therapeutics to target your own immune system to go fight a cancer, right, where it's totally different from the traditional days of chemo where you were thinking about, okay, I'm going to give you a poison, and hopefully that poison is going to kill as much stuff as possible and it'll get the bad stuff, too. But this concept that you can actually activate your own immune system to go fight something, I mean, it's a total game change. And it's incredibly promising because there's this hope that it's possible that that will work across a large system, series of different mutations of a cancer, for example. So I think that is a mind shift in terms of the way that people start thinking about therapy. That's a new frontier in and of itself.

Great question from the computer audience. Elena Maslova, how do you think about big pharma, big pharmaceutical companies? Obviously you've done work for them in terms of clinical testing and whatnot. Are they ultimately customers, partners, competitors, acquirers? How do you. What do you think about them?

Well, they were our customer for quite some time as we built out our framework. I think they play an incredibly important role in the health system and I think the more that we see these movements toward these whole new areas of thinking about how therapies can be developed and applied, I think they play an incredibly important role in changing how we think about health care. Chris so two questions.

The first one is two.

Over the last like 12 months, say.

On an average day, what percent of your time would you say you spend in meetings? And then other than meetings, what else do you do?

Got it.

So what percentage of your time do you typically spend in meetings? And what is the stuff that you do when you're not in meetings? So everyone knows CEOs are meetings aloft?

Yeah, I spend a pretty small percentage of my time in like formally scheduled meetings. It's more including all kinds of meetings. All kinds of meetings. Then it's a lot of time. Right. Because it's getting people coming into my office, going to their office, talking to them, just real time solving problems. Right. One of our core values as a culture is real time communication. So if we need to talk about something, we get people into my office right now and we talk about it, and then we go solve the problem and then we go talk about the next one. The rest of the time is spent focusing on executing or on solving problems, right? Yeah.

And the other thing was like, what.

Was the business you did in China?

Yeah, what was the business?

So I mentioned it. I should have specified it, but what was the business that you did in China?

So this was in my C days, and I was looking at the fact that universities in China didn't have access to the same type of compilers that schools in the US had access to at that time. And so I was distributing compilers basically to universities in China.

Never forget, this is a computer science course.

Did it make a lot of money?

No. Okay. Yes.

But I learned something.

I'm wondering, what results have you seen from your mission statement? In particular, I admire how easy you've made it for us to remember it, making health information accessible to people. You've also made some of your values very clear already. And I don't know if that's something that is just like internalized for you now that you repeat a lot to your employees, for example, like, how has that affected your business?

Got it. So how has really having a clear mission affected your business? How does it affect your employees, partners, et cetera?

I think it's a great question. I think being really clear on the mission, it's your ultimate statement of what you're trying to do and why you're doing it. And I think one of the most powerful things that I've learned is that if you set the right values, the values become the vehicle through which you make decisions. So when you're dealing with a decision that you don't know the answer to, reflecting on what those values are and why you believe in them ultimately becomes the tool for knowing what the right answer is.

And one of the ways to draw the connection back to prior in this course, I think Eric Schmidt came in and said, the reason you have values is so that when the decisions are made without you in the room, they're the same decisions that we made as if you were in the room.

Yeah, absolutely. Absolutely.

All right. My goodness. So many choices, but most of you have gone already. You haven't gone yet.

It seems like you always. You had a very strong passion since you start to solve a particular problem. And I'm wondering, what types of recommendations would you give to people who still want to solve world problems, but might not feel as emotional, as emotionally passionate?

Okay. What advice do you give to someone who has not got that calling that they want to do something, but they haven't got that one idea like you focused in on?

You know, I think you spend a lot of time thinking about what you really, really, really love doing, right? I mean, it's like, you know, the experiment that you just keep on going back to the lab for, you know, over and over and over again because you have to figure out how to solve it. Or, you know, I have friends who are. Who are in art, and they're just, you know, obsessed with, you know, figuring out how to paint a certain type of portrait. Because they love it, right? It's what, you know, if they didn't have to work for a job, that's what they would be doing. And when you find that thing that if you didn't have to work, if it wasn't about money, that is what you would want to be spending your time on, right? You have that passion to look at it and figure out how to do things differently because you love it. Right. Or how to do things better because you love it. And the thing that's so important about it is that because all these things are so hard, people are going to challenge you, they're going to fight you, they're going to try to destroy you. They're going to do all this stuff when you love it so much, you want to keep fighting for it. Otherwise, you'd be like, I don't have to put up with this. I'm going to go do something else. And it's that thing that you love. And I think every person finds it. Ultimately, it's what you. I know for me, I thought about it so much in the context of building this company because I asked myself the question, okay, if I were fired or I couldn't be CEO or we failed, what would I go do? And this is what I would go do because this is what I want to do. And I would do it as many times as I have to until I figured out how to get it to work. And that's different for every person. Which makes the opportunity to find that distinction or that unique difference in how you could do something or do something better.

Back there.

Hi, I'm Brandon. Given Theranosis long term ambitions for systems change, but immediately right now working on and commitment towards that with a highly technical specific product, how do you imagine, have you thought about imagining the internal identity of your company and the external brand such that it can evolve over time to encompass the larger aspirations that you want?

Got it. So how do you manage the internal identity and the external brand to be able to cover what you're doing today, but also your broader vision for where you want it to go?

I think they all have to be the same, right? I mean, your internal identity better be your external brand. Otherwise you're confused. For me, it's always been about, okay, we have this dream, we want to do these really big things. Things they're going to take a really long time to do. But today in Arizona, how many people were able to get lab tests that would never have been able to afford it before were it not for the products we build? If I can drive home at night and I know that even one person was able to get access to a test they would never have been able to get access to before because of something we did. We've realized that mission because person by person, we make that change in the world. All right.

My goodness, so many people. One last question over there on the end. How do you plan to scale global in the aspects of legal versus I'm coming from Brazil.

We have a lot of differences on the regulation.

Yeah, excellent question. How do you scale globally when you're in such a regulated industry?

Yeah, it's a great question. And as you said, it's completely different every place you go. I think a lot of it comes down to people and understanding the people who really know how to operate in a certain area and who have the relationships to be able to do that effectively. We're trying to be highly focused in working to build something great in an area or a city or a state and then repeating it one by one. And we're very clear that our success or failure there is completely dependent on how good the people are that are running it and how well they understand those ecosystems.

One of the questions we traditionally ask in CS183C and I'll end with it, and then we'll let folks want to come up and ask questions, ask questions. What would you do if you could pick up the phone and call your 19 year old self? What would you tell her to do differently, if anything? If you had that power?

You know, I would just do it even more intensely and harder and faster. I mean, fail fast, right? Fail hard and just keep going.

What did you do that you weren't intense enough? I'm having a hard time picturing this.

Well, I learned, right? I mean, I wasn't like this when I was at Stanford and I tried to build myself and train myself to work like this because I knew this is what it was going to take. But you go into it and you're thinking, can I do this? Is this going to work? And all of those doubts that go into trying to figure out if you could actually be successful with something, and I really believe it's true, that if you can imagine it, you can achieve it. And every time you do it, you get that confidence. But the first time you don't know. Yeah.

Elizabeth, thank you so much for coming in today. Really appreciate it.