CAMBRIDGE – The conviction of Elizabeth Holmes for fraud perpetrated as founder and CEO of Theranos has triggered intense debate about what the episode means for the innovation economy.
Did Holmes, aggressively implementing Silicon Valley’s “fake it until you make it” credo, simply run out of runway? Is the venture capitalist and Theranos investor Tim Draper right to worry that her conviction will reduce the “willingness to bet on” the type of entrepreneurs who “made Silicon Valley the innovation engine of the world”?
Or is the situation more complicated? In fact, Holmes’s trial and conviction illuminate two trends at the heart of the American political and financial economy. The first is the broad retreat from prosecuting financial manipulators as criminals, a development evident since the incarceration of Enron and WorldCom senior executives following the collapse of the 1998-2000 dot-com bubble.
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