Elizabeth Holmes’ guilty verdict isn’t an indictment of Silicon Valley
The long-awaited conviction of Theranos founder Elizabeth Holmes on fraud and conspiracy charges predictably produced grandiose declarations of a new day dawning in tech.
The New York Times’ David Streitfeld: “The verdict signaled the end of an era. In Silicon Valley, where the line between talk and achievement is often vague, there is finally a limit to faking it.”
Reuters’ Gina Chon: “If that verdict stands, the possibility of years in prison sends a strong message that even in Silicon Valley, there’s a limit to how flagrantly you can fake it until you make it.”
The Financial Times’ Brooke Masters: “This verdict will reverberate around the technology and investment communities, as well it should.”
All to which I say: come on.
At most, the Holmes verdict serves as a cautionary tale as old as time, reminding us about the fallibility of human nature and importance of proper checks-and-balances that guard against our inherent propensity to sin.
While the spectacular rise and fall of Holmes reads like a Shakespearean tragedy—an enticingly devious protagonist, an undercurrent of greed, a wake of swindled elites and deceived consumers—it’s much ado about nothing as far as making this verdict into a broad indictment of Silicon Valley.
Yes, today’s tech entrepreneurs are prone to bluster, hyperbole and immense ego—all of which Holmes capitalized on during her glorious ascent. But there’s a stark difference between unbridled confidence and outright fraud.
It’s a line that countless aspiring entrepreneurs successfully straddle on a daily basis. Consider this: about 50 private U.S. companies currently exceed Theranos’ peak valuation of $9 billion, according to CBInsights, without prosecutors banging down their glass doors.
Clearly, the investors powering Silicon Valley and putting their bank accounts on the line are comfortable with this culture.
In the same week that jurors convicted Holmes, The Wall Street Journal (which broke the Theranos scam wide open) reported that private-equity firms plowed more than $400 billion into technology-sector deals in 2021, the highest total on record. In addition, investment in seed-stage and early-stage startups reached $93 billion in 2021, nearly double the amount in the prior year, The Journal reported.
“I’ve heard zero people say, ‘Oh, this should make me look differently,’—zero,” Angela Lee, who teaches about venture capital at Columbia Business School and founded the investing network 37 Angels, told Bloomberg about the verdict. “It’s treated like salacious gossip or an entertaining story.”
Holmes’ downfall certainly offers a timely opportunity to reflect on the missed signs that led to Theranos’ famous collapse. Doubly so for healthcare startups, even if Holmes was acquitted on charges of defrauding patients.
But those suggesting that her fraudulent actions amount to an inherent flaw with Silicon Valley risk falling into the same trap as Holmes: making something big out of mostly nothing.
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A club all to itself. Apple on Monday became the first U.S. company with a market cap of $3 trillion, briefly reaching the milestone before retreating. The accomplishment, though largely symbolic, reflects the remarkable run on Apple stock over the past three years, during which its share price has increased five-fold. Apple also hit the $1 trillion and $2 trillion market cap summits before any other U.S. companies, in 2018 and 2020, respectively. The nation’s second-largest company, Microsoft, has a market valuation of roughly $2.6 trillion.
Friendlier skies ahead. Wireless providers AT&T and Verizon agreed Monday to a two-week delay on their debut of 5G service in dozens of metro areas, a concession sought by federal transportation officials concerned about the potential impact on airplane safety. The deal stems from a disagreement between the wireless companies and federal officials over whether the new 5G offering, which delivers higher-quality and faster service to customers, could interfere with flight safety systems. Federal Aviation Administration leaders warned that some flights could be canceled if the 5G service kicks into gear before additional safety precautions are taken.
An unwelcome ribbon-cutting. Tesla drew criticism Monday after announcing that it has opened a showroom in China’s Xinjiang region, where an estimated million-plus Uighurs and other Muslims are detained in re-education and forced labor camps. Some labor and religious advocacy groups, including the Alliance for American Manufacturing and Council on American-Islamic Relations, blasted the move in light of the well-documented human rights violations occurring in Xinjiang. Tesla’s move comes one month after President Joe Biden signed into law a ban on imports from Xinjiang. Tesla officials did not immediately respond to requests for comment from multiple media outlets.
Another Apple investigation in store. Indian antitrust officials have launched an investigation into whether Apple’s App Store practices violate the country’s competition laws, The Wall Street Journal reported Monday. The investigation, the latest foreign inquiry into a lucrative part of the company’s business, stems from a complaint that Apple’s developer fees, which can total up to 30% of a developer’s digital content sales, unfairly harm software makers and stifle competition. Lawmakers in the European Union, the Netherlands, and South Korea have sought to force changes to Apple’s App Store fees and rules, while domestic developer Epic Games is locked in litigation with Apple over a ban on alternative in-app payment options.
FOOD FOR THOUGHT
Tech policy’s state of play. As members of Congress do what members of Congress do best—pontificate, bicker, barely pass any legislation—state legislatures could be the primary battlegrounds for tech legislation in 2022, Axios reports. Several states took up bills in 2021 related to user privacy, app store rules, and content moderation—a trend that figures to expand in the new year. While the approach could lead to an unwieldy patchwork of laws, state legislatures have shown an increased willingness to wade into national issues that galvanize their respective political bases.
From the article:
States will ramp up the momentum they've built in tackling key tech policy priorities through 2022, speeding ahead of any potential federal legislation.
Why it matters: As Congress continues to make little tangible progress passing new rules for the tech industry, state legislatures have taken the lead in enacting new tech regulations.
Tech companies have a harder time lobbying individual states, and state legislatures are less receptive to it. Bitter partisan divisions are often less likely to plague state legislatures on tech policy issues.
IN CASE YOU MISSED IT
The latest Tesla shares rally pushes Elon Musk’s net worth above $300 billion, by Donald Moore and Bloomberg
What people are saying about Theranos founder Elizabeth Holmes’ fraud conviction, by Jonathan Vanian
Mercedes-Benz’s futuristic concept car underpins its plan to topple Tesla from the EV throne, by Christiaan Hetzner
Eminem drops $462,000 on an NFT, by Chris Morris
BEFORE YOU GO
RIP Blackberry, 1999-2021. Long, long ago, all the way back in the mid-2000s, Blackberry ruled the land. You could hardly pry that sleek, curved, QWERTY-enabled device from the hands of hip executives and a certain 44th president. But alas, the Blackberry is no more. The bygone relic goes out of commission Tuesday, with Blackberry formally shutting down the phone’s operating system and software. The Blackberry obituary was written long ago, authored by rivals Apple and Google. But consider this a final goodbye to a true trendsetter. We knew thee well—and then ditched you for something better.
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