Theranos: A rare guilty verdict in Silicon Valley
In Silicon Valley “there is finally a limit to faking it,” said David Streitfeld in The New York Times. Elizabeth Holmes, the founder and CEO of blood-testing startup Theranos, modeled herself (right down to the black turtlenecks) after Steve Jobs, but she was more reminiscent of Jay Gatsby, the “mysterious, alluring, handsome millionaire” at the center of F. Scott Fitzgerald’s classic novel. She projected the image of a workaholic machine—“I show no excitement,” was one of the rules she wrote down for herself—devoted to the betterment of humanity. Her promise was a customized medical tool that could offer real-time analysis from just a single drop of blood. Whenever anyone wanted to know more about how Theranos worked, the company just cried “trade secrets.” Holmes’ conviction on four fraud charges last week after a 15-week trial showed conclusively that the real secret was that everything about Theranos was a lie.
“We like to think our frauds teach us deep lessons,” said Ashlee Vance in Bloomberg Businessweek. The lesson from Holmes’ conviction may be that “you can still fake it, but now there’s a chance that you might get into real trouble, so maybe limit yourself to faking it a little less than she did.” There is more venture-capital money sloshing around Silicon Valley today than ever. “The current incarnation of special-purpose acquisition companies (SPACs) was engineered” to take riskier companies public sooner. Some of the “new flavors of finance” are outright Ponzi schemes. Holmes at least “put some artistry and effort into her fraud.” Some of the chicanery in Silicon Valley now is more transparent and brazen.
Tech-startup founders are also more powerful than ever, said Christopher Mims in The Wall Street Journal. Giving founder-CEOs “near-total control of their companies” with dual-class stock structures “has become the norm.” Investors are romanced by the notion of molding the next Steve Jobs or Elon Musk. But the leeway they extend to young founders “allows for companies like Theranos to grow in an environment where the only checks on power arrive” too late.
The verdict still brings no justice to the patients Theranos misled, said Noam Cohen in Wired. Investors got their win in court, but the jury voted not guilty on the four counts involving actual patients. Let us not forget that Holmes—and her enablers— “entered the marketplace with a ‘miracle’ blood-testing device she knew didn’t work.” Theranos wasn’t a financial vehicle. It was a “change agent in the field of medicine.” The law may protect investors, but it “has yet to prove very useful” at punishing the real-world damage unleashed by tech companies run amok.