What can Silicon Valley learn from Holmes’ conviction?

AN JOSE (Calif.) -- The fraud conviction against Elizabeth Holmes, former CEO of Theranos, could teach Silicon Valley's culture based on hubris and hype valuable lessons.

What can Silicon Valley learn from Holmes’ conviction?

Is anyone in tech going to take this seriously? It is unlikely.

Holmes was found guilty Monday of deceiving investors by believing that Theranos had created a medical device that could detect many diseases and conditions using just a few drops blood. Although she could be sentenced to up to 20 years for each of these charges, legal experts believe that Holmes is unlikely to get the maximum sentence.

Federal prosecutors described Holmes as a charlatan, obsessed with fame and money. She presented herself in seven days as a witness and claimed that she was a visionary and trailblazer in Silicon Valley, which is male-dominated. Sunny Balwani, her ex-lover and business partner, was sexually and emotionally abusive to her.

The trial exposed the pitfalls of another of Silicon Valley's go-to moves -- conveying an unrestrained optimism, regardless of its validity, which is known as "fake IT 'til it makes sense." This ethos was instrumental in the creation of groundbreaking companies like Google, Netflix and Facebook -- which were co-founded by Steve Jobs, one of Holmes' heroes.

Few people expect her conviction to reduce the heat on the bold exaggerations and brazen promises that have become part of the tech industry’s innovation hustle.

Ellen Kreitzberg, a Santa Clara University professor of law, suggested that Holmes' conviction would send a message "to CEOs that overstepping the bounds can have serious consequences." Kreitzberg was present at the trial. She said that investors will still want to make more on a promising idea, but she disagreed. They will always seek the golden ring.

Holmes sat still and did not show any emotion during the reading of the verdicts. Before U.S. District Judge Edward Davila surveyed the jury, Holmes bowed several times. Holmes hugged her partner, Billy Evans and her parents after the judge had left the courtroom for individual meetings with jurors. She then left with her lawyers.

The bold dream Holmes had when she founded Theranos at 19 years old was turned into a nightmare when she was arrested in 2018 on felony charges.

Holmes, who was a Silicon Valley star and had amassed $4.5 billion in paper wealth, became a public figure. Her fall from grace was documented in books, podcasts, and documentaries. It will be retold in "The Dropout," a Hulu TV series starring Amanda Seyfried as the main role.

Holmes wanted to make it easier, quicker, and more affordable to test for hundreds of illnesses and other problems. Holmes used a finger prick to take a few drops from blood instead of inserting needles into veins. Her goal was to disrupt an industry that is dominated by large testing companies like Quest Diagnostics or Labcorp. She started with "mini-labs" at Walgreens and Safeway across the U.S., which would use a small Theranos device called Edison to run faster and more intrusive blood tests.

The idea and Holmes' presentation enticed wealthy investors who wanted to purchase an early stake in this game-changing company. It enabled Theranos to raise over $900 million from smart billionaires like Rupert Murdoch, software magnate Larry Ellison and well-to-do families like the Waltons of Walmart or the DeVos clan behind Amway.

Holmes was also attracted to a highly connected board, which included Henry Kissinger, the late U.S. secretary of state, and Richard Kovacevich, former CEO of Wells Fargo. In an on-stage presentation, she charmed former President Bill Clinton and impressed Joe Biden who extolled her during a 2015 visit to a Theranos laboratory.

Theranos' blood testing technology was producing false results, something that most people didn't know. Patients were forced to have regular blood draws, instead of the promised fingersticks. This led to Theranos secretly testing those samples with conventional machines in a traditional laboratory setting. The trial evidence also revealed that Holmes lied about alleged deals Theranos had made with large drug companies like Pfizer, and the U.S. Military.

After a series of explosive articles in The Wall Street Journal, and a regulatory audit by Theranos, the deception led to Theranos' eventual collapse.

Holmes admitted that she sometimes regretted her handling of certain issues. However, she frequently claimed that she had forgotten about key events. She maintained that she believed Theranos was at the point of improving its technology and never gave up on it.

Instead, she blamed Balwani who she had secretly lived with from 2009 to 2016 as Theranos chief operating officer.

Holmes testified that Balwani failed to address laboratory problems he promised to correct. In the most dramatic testimony of trial, Holmes claimed that he had made her his pawn by a long-running pattern and abuse, while also controlling her diet, sleeping patterns, and friendships. She claimed that she was raped by an unknown assailant while still at Stanford.

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