What Elizabeth Holmes' conviction means for tech entrepreneurs, startups

Feelings Drama

Watch What Elizabeth Holmes' conviction means for tech entrepreneurs, startups - Feelings Drama on Dailymotion

Transcript

00:00JUDY WOODRUFF

00:01Elizabeth Holmes, founder of the blood testing company Theranos and a one-time darling of

00:05Silicon Valley, has been convicted of fraud.

00:08The verdict came down last night in the closely-watched trial that rippled beyond the tech world.

00:14Stephanie Sy has more.

00:16STEPHANIE SY, The New York Times, The New York Times, The New York Times, The New York Times,

00:17Judy, Elizabeth Holmes was found guilty on four charges of fraud for lying to investors

00:22about the effectiveness of her blood testing device.

00:25She was acquitted on four other counts related to defrauding patients who used the test.

00:30The jury could not reach a verdict on three other fraud charges.

00:34For more on the wider implications, I'm joined by Margaret O'Mara.

00:37She is a professor of history at the University of Washington, an author of the book, The

00:42Code, Silicon Valley and the Remaking of America.

00:47Professor O'Mara, thank you for joining the NewsHour.

00:50I want to remind viewers that Elizabeth Holmes was a media sensation when she first pitched

00:55Theranos as a disrupter in the blood testing space.

00:58And then she had this remarkable fall from grace that culminated in the prosecution yesterday.

01:04Yet this was a mixed verdict.

01:06What was your big takeaway on the jury's decision?

01:09ati Zahelman 21 Toni Billie Creighton 21

01:09Yeah, this was Silicon Valley's trial of the century.

01:13You know, my takeaway was I was surprised that a guilty verdict came in.

01:18This is unusual to have these white-collar prosecutions of CEOs, much less a Silicon

01:23Valley CEO, is rare.

01:25That's a first for Elizabeth Holmes.

01:28But I think the counts on which she was, the verdict ruled guilty, were ones where there

01:33was the strongest body of evidence that was really tying her to telling investors one

01:38thing and the reality being quite different.

01:41And her accountability as a CEO, that doesn't mean that the other charges weren't substantial.

01:46But in terms of the evidence presented to the jury and what was being shown to them at

01:51the trial, that those charges are the ones that seem most clear-cut.

01:56Help us put the importance of this case into context.

01:59The plaintiffs were multimillion-dollar investors and companies like Walgreens.

02:04They lost hundreds of millions of dollars.

02:07Was any greater harm done?

02:08I think the bigger lesson here is a bigger lesson about finance and investment.

02:14We have so much money flowing into the system that some people and families have so much

02:19money that investing a few million dollars here and there in a startup like Theranos, particularly

02:24one that is promising such huge returns and has such illustrious people associated with

02:30it, like Henry Kissinger and George Shultz.

02:32It was not that much of a stretch.

02:35What is remarkable that the trial showed was kind of how little diligence and investigation

02:41some of these companies and investors made before they put their money in and formed alliances

02:47with Theranos.

02:48I cannot think of the last time a Silicon Valley executive this high up was found guilty of

02:53criminal fraud.

02:54Why, Holmes?

02:55Was this really a one-off, or does this case open a window into a wider problem within tech

03:01startups?

03:02Elizabeth Holmes and Theranos were quite different than most tech startups.

03:05They weren't tech, really.

03:06It was a medical device company, a highly regulated space.

03:10They were building things, a physical device.

03:13All those things made the value proposition quite different and made the evidence of fraud much

03:20easier to accumulate and to prove.

03:22That doesn't mean that there aren't some really important lessons here for the startup world

03:27in terms of the enthusiasm about young college dropouts, relatively inexperienced, giving them

03:33a lot of money and power and credibility when perhaps what they are building is not something

03:39that they're going to be able to deliver.

03:41Do you think that Holmes' prosecution will affect how startup entrepreneurs behave?

03:48I'm doubtful.

03:49I think in part because Silicon Valley insiders have fairly enough distanced themselves and

03:53shown that Theranos was a quite different sort of company.

03:58What really changes behavior, Silicon Valley is a boom and bust economy.

04:02It always has been.

04:03I study its history.

04:04There's always a big up and a big down.

04:06And really what changes the status quo is when there is a larger market correction, when there

04:11are investors as a class kind of back away from tech.

04:15Right now, tech stocks are going up and up.

04:18I think we shall see what the next year or two brings in that direction.

04:22Well, Professor, many have observed that Elizabeth Holmes' persona, starting a biotech company,

04:27as you said, as a 19-year-old Stanford dropout, made her sort of the ultimate Silicon Valley fairy

04:33tale and may have blinded investors to performing due diligence.

04:37As egregious as the jury may have deemed her fraud was, do you have concerns that the first

04:42big Silicon Valley prosecution is of a young woman?

04:46It is a challenge.

04:47I don't think her gender was why she was on trial.

04:51I think it had to do with the substance of the company and the fact that there was a

04:55very clear evidence presented and aired about what Theranos was not doing.

05:04That being said, I think one of the reasons that Elizabeth Holmes became so prominent was

05:09because of her gender.

05:10She's a rising star in 2013, 2014, right around the same time that questions are beginning to

05:17be raised publicly about the stark gender imbalance in Silicon Valley leadership, and also criticisms

05:22about the Valley's focus on apps and social media platforms instead of important things

05:27that were truly going to change the world.

05:29Here was Elizabeth Holmes kind of giving a counter argument to that critique, saying, here's a

05:35female Steve Jobs, just as good as any guy.

05:37Here's someone who's truly changing the world with blood testing technology.

05:41It was a really compelling story, and a lot of people bought into it.

05:45Margaret O'Mara, author of The Code, Silicon Valley and the Remaking of America, thank you

05:51so much for joining us with your insights.

05:53Great to be here.

Category

Transcript

Be the first to comment

Recommended