From Fortune’s article: The Ugly Unethical Underside of Silicon Valley
A few quotes tell the story.
“What if Theranos is the canary in the coal mine?” says Roger McNamee, a 40-year VC veteran and managing director at Elevation Partners. “Everyone is looking at Theranos as an outlier. We may discover it’s not an outlier at all.”
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? “We hope that entrepreneurs bend the rules but don’t break them,” [Dave] McClure says. “You know the saying ‘There’s a fine line between genius and insanity’? There’s probably a fine line between entrepreneurship and criminality.”
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: We’re watching you. The SEC is increasingly concerned, she said, with “eye-popping valuations,” questionable governance, and the lack of transparency at high-risk tech startups.
But when I asked investors about White’s visit, few even remembered it. There’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 deflate—see the dot-bombs and Enron in late 2000 and the banks amid the 2007 subprime mortgage crisis. Scandals don’t cause recessions, but they can help trigger one. As White warned her Stanford audience: “Who loses when the truth behind inflated valuations is revealed? I think we all do.”
We all do.