From Fortune’s article: The Ugly Unethical Underside of Silicon Valley
A few quotes tell the story.
â€œWhat if Theranos is the canary in the coal mine?â€ says Roger McNamee, a 40-year VC veteran and managing director at Elevation Partners. â€œEveryone is looking at Theranos as an outlier. We may discover itâ€™s not an outlier at all.â€
So inexperienced people are handed giant piles of money and told to flout traditions, break rules, and employ magical thinking. What could possibly go wrong? â€œWe hope that entrepreneurs bend the rules but donâ€™t break them,â€ [Dave] McClure says. â€œYou know the saying â€˜Thereâ€™s a fine line between genius and insanityâ€™? Thereâ€™s probably a fine line between entrepreneurship and criminality.â€
And the oversight is minimal:
Last March, Securities and Exchange Commission chair Mary Jo White traveled to Stanford to deliver a message to Silicon Valley: Weâ€™re watching you. The SEC is increasingly concerned, she said, with â€œeye-popping valuations,â€ questionable governance, and the lack of transparency at high-risk tech startups.
But when I asked investors about Whiteâ€™s visit, few even remembered it. Thereâ€™s little reason to worry, the thinking goes, when startups can raise money with ease. Right now the supply of greater fools feels endless.
Which possibly means:
Recklessness with the financial truth is often a sign of an economic bubble about to deflateâ€”see the dot-bombs and Enron in late 2000 and the banks amid the 2007 subprime mortgage crisis. Scandals donâ€™t cause recessions, but they can help trigger one. As White warned her Stanford audience: â€œWho loses when the truth behind inflated valuations is revealed? I think we all do.â€
We all do.