Have we learned anything?
Elizabeth Holmes tried finding a workaround, but the disgraced Silicon Valley entrepreneur must finally report to prison. Silicon Valley, for its part, has barely paused to notice.
Federal prosecutors indicted Holmes five years ago on multiple counts of conspiracy and defrauding investors and patients through her failed Silicon Valley start-up, Theranos. Convicted early last year on four of those charges and sentenced to 11 years and three months in prison, Holmes is set to report to a minimum-security ‘‘prison camp’’ about 160km from Houston.
Holmes made multiple efforts to wiggle out of doing time, including repeated manoeuvres by a legal team estimated to have cost more than US$30 million. She allegedly contemplated fleeing to Mexico. And since her conviction, she and her partner, Billy Evans, conceived a second child; she gave birth in February. Holmes revealed in a fawning profile in The New York Times – which recast her as ‘‘Liz’’ – that she has been volunteering for a rape crisis hotline.
Holmes’ saga was always a Rorschach test for how to think about the valley, a cautionary tale that either exposed the ‘‘fake it till you make it’’ mentality of start-ups or served as a prime example of the deep-seated misogyny in the technology industry. How is it that a woman is going to jail while the valley, although chock-full of geniuses, still shields a remarkable number of entitled male grifters cashing in on all the ready money? More likely, Holmes will be remembered as a colourful executive who lied about what her company could do and suffered the consequences.
When her trial began in September 2021, much was made about what her case said about an industry that changed the world – and not always for the better. Yet despite her
black turtlenecks and Stanford dropout cred, neither Holmes nor Theranos was really of Silicon Valley. Her venture capital backers weren’t among the A-list investors who had funded the likes of Apple, Google and Facebook. Theranos was a medical device company, a totally distinct – and, truth to tell, junior varsity – subset of the information technology ecosystem.
But with a bit of hindsight, it’s already clear that Holmes’ conviction and Theranos’ failure have had zero impact on the hubristic culture of the start-up world, tut-tutting predictions to the contrary. As you read this, entrepreneurs and investors who run the gamut from charlatans to visionaries are setting aside business plans focused on vague cryptocurrencies and the blockchain and refocusing instead on generative artificial intelligence. VC investments in the technology behind the popular ChatGPT revolution grew more than tenfold to US$4.5 billion last year from 2018. A new gold rush has begun.
Despite widespread layoffs, tech companies large and small are humming along. Apple, Microsoft and Alphabet, Google’s parent company, are each worth well over US$1 trillion.
Nvidia, which supplies semiconductors to computers that host the ‘‘large language models’’ that power AI applications, has supplanted Intel as the dominant chip kingpin. Creative destruction continues to chew through companies of all kinds.
A self-serving argument has crept up of late that somehow Holmes was singled out for something other than defrauding investors. Holmes was acquitted on all counts related to patients, and the jury couldn’t agree on whether she defrauded early Theranos investors.
To some, that means Holmes is being incarcerated only for having hoodwinked the big-money likes of Rupert Murdoch and Betsy DeVos.
Tim Draper, a veteran VC who invested in Theranos, said recently that Holmes didn’t lie to him and that her prosecution would deter other entrepreneurs, especially women. Echoing that, the Times article that attempted to salvage some of Holmes’ reputation noted that her defenders believe ‘‘the feverish coverage of Ms Holmes’ downfall felt like a witch trial, less rooted in what happened at Theranos, and more of a message to ambitious women everywhere. Don’t girl boss too close to the sun, or this could happen to you . . .’’
That’s some snazzy writing, but it lands some distance from the truth. I attended day after day of her ennui-inducing nearly fourmonth trial in San Jose, and I saw just how fair a shake Holmes received. She was convicted by a diligent jury of her peers, responding to instructions by a judge who gave Holmes every opportunity to defend herself.
Having been there, I can confirm that the trial was very much about what Holmes did and didn’t do at Theranos.
Silicon Valley, in all its brilliance and arrogance, its paradigm-shifting moonshots and its spectacular failures, just keeps iterating, in most ways oblivious to its own shortcomings. The captivating rise and fall of Elizabeth Holmes did nothing to change that.