Photo: Andrew McGee, Manova

Erika Cheung and Tyler Shultz were the whistleblowers who helped to expose corruption at Theranos. They spoke at the Manova Summit in Minneapolis this week.

Theranos whistleblowers Erika Cheung and Tyler Shultz shared some of the lessons they learned from working in a culture of fear and secrecy at the Manova Global Summit on the Future of Health in Minneapolis.

“There were words we couldn’t say at Theranos, like ‘biology,’ ‘pipette,’ ‘research,’” Shultz recalled. “And we weren’t supposed to talk to other people at Theranos about what you were doing.”

Still, the two didn’t have any other career experience, so it took a while for the red flags to add up, Cheung said.

Now, with the former leadership of Theranos waiting for a 2020 trial, Cheung and Shultz have established an organization they call Ethics in Entrepreneurship, hoping to prevent other tech and health startups and employees from going through what they did.

“We’re all here because we want to make an impact and we want to do good and we have good intentions, but making sure you have that strong vision and figuring out how to maintain that” is challenging, Cheung said. “You have to figure out how to stick to those morals and standards and values despite the chaos.”

Though they’re far from having all the answers at this point, they pointed to some basics that can be applied to almost any company:

  • Discretion from investors: “If the average age of the board is 80, maybe insist on a board seat,” Shultz said. “Or insist on younger blood.”

So-called vanity boards are popular in Silicon Valley, Cheung agreed, but especially in a highly regulated space like health care, “you need the right people asking the right questions.”

  • Be proactive: Think about the impacts a startup will have on customers, investors, employees and society. It’s better to think about these ethical issues early on in the process, Cheung said, rather than reactively.
  • Consider realigning incentives: Shultz and Cheung agree that there should be a way within the investment landscape to prevent an unethical situation from going too far. For example, if someone was personally profiteering or committing egregious actions, there could be a system in place for investors to pull back money. “There need to be ways to keep people accountable, to nudge them to good behavior,” Cheung said.
  • Think before investing: When people were investing in Theranos, Cheung pointed out, it was during a time when investors were scared of losing the next opportunity to buy into an Amazon. “There was not a lot of deep thinking about how to invest in tech companies,” she said. Theranos should serve as a warning to potential investors that they need to ask the questions before signing the check.
  • Create a culture of healthy disagreement: Shultz has started a new company, and while it only has three employees so far, one of his primary missions is to establish a culture in which people are allowed to disagree — even with the boss. “My lab bench scientist and I get into some arguments that are pretty intense, but I tell him it’s really healthy — and we can move on,” he says. How do you scale that for a bigger company? “That’s the hard question,” Cheung said. “But the biggest one is, do you have a way for employees to report problems? Are the right mechanisms in place to compile evidence, and is there investigation and followup?” An ethics hotline, she said, is one way to do that.

Despite spending most of his 20s wrapped up in the Theranos scandal, Shultz maintains a sense of optimism.

“So many things had to go wrong [in the Theranos case] that I think it’s unlikely something like this would happen again,” he said. “Though maybe I’m naive.”

Moderator Rebecca Jarvis of ABC asked the pair whether they thought former Theranos CEO Elizabeth Holmes should go to jail.

“There has to be some justice,” Cheung said, to great applause from the audience. “There has to.”

Source: What the Theranos whistleblowers learned about ethics in health startups