Big Technology Podcast - Inside The Theranos Trial — With Erin Griffith of The New York Times

Episode Date: September 15, 2021

Erin Griffith is the New York Times reporter at the trial for Theranos founder Elizabeth Holmes. She joins Big Technology Podcast to bring us inside the courtroom, explaining why Holmes is on trial and whether she'll be a rare founder to face consequences for misleading investors. We also discuss whether Holmes is emblematic of the venture capital world's downsides, or an outlier. You can find Erin on Twitter, @eringriffith

Hello and welcome to the big technology podcast, a show for cool-headed, nuanced conversation of the tech world and beyond. And this week we're going to talk about the trial that Elizabeth Holmes is currently on. She's the founder of Throne of us. She's not institute. But joining us today is someone who's been at the trial, And on top of this story, from the beginning, Aaron Griffith from the New York Times, welcome to the show. Hi. Thanks for having me.

Thanks for being here. So you've been showing up to the courtroom bright and early. Yeah. So unlike other trials, I mean, I guess I don't have a great sense of how every trial goes. But this one, it's kind of first come first serve. It's a very small courtroom. And there's a huge interest in getting in there. And so, yeah, I've been showing up with the courthouse, like, in the dark at 5 a.m., you know, and not even being the first person there in line and waiting for, you know, roughly five hours to start hearing the proceedings on the days that we've been in session so far. So it's, even though the days are ending at two and it's, the trial's only three days a week, the judge set that schedule to make it maybe a little bit less of a burden on the jurors who are. going to be doing this for three or more months. It's still a long days. Right. And the trial is just beginning. And one of the interesting things about it is we don't see, I don't even even know if we can call Elizabeth Holmes a tech executive, but we don't see executives who've been funded by venture

capital who make grand promises end up in court so often. Yeah. And they definitely don't go to jail. They don't go to jail. And there's an argument to be. made that, you know, this is just sort of how it goes where people make big promises. Sometimes they follow through with them and succeed. Sometimes they don't. But if you send everyone who didn't follow through in their promises to jail, you'd have a lot of, you know, startup founders, you know, currently in prison. So what's your view of this trial and its justness and how might it differ from what we typically see? Yeah, I mean, and to what you said, if we sent everyone who didn't in Silicon Valley who made grand, you know, proclamations about what their company might do or could do and didn't to jail, we probably, you know, wouldn't have some of the biggest, most successful, most powerful companies in our industry now because it's pretty much widely accepted in Silicon Valley that this is part of how you, how you do it.

I mean, these are companies that are trying to manifest the future. They're coming up with something that has never been done before. They're disruptive. This is not a matter of saying, you know, my Coke tastes better than your Pepsi. When they're trying to raise money and marketing their products to the world, they're trying to create a new vision of how the world can be. That's part of the promise and magic of Silicon Valley. but it's also extremely problematic when it gets taken too far.

And in Theranos's case, particularly because it, you know, put people's health at risk. And you're messing with people's livelihoods. It's sort of easier to forgive a startup founder when they say, oh, our product is going to revolutionize the way you, you know, share photos with your friends. and then maybe they don't. Okay, fine, good try. It's a lot different when, you know, you're doing something in health care. And I guess the thing that I'll say about that is Silicon Valley now is over the last decade in

particular has become so much more entrenched in every other industry. It's not just media communications and internet toys. You know, their software is supposed to be eating the world. And so every single industry is being affected by. this. And so it does create a lot more opportunities for questionable ethics that have actually real consequences. Right. And the promise here, just to set the stage of what Thernos was trying to do, the promise here was with just a single prick of your finger and one drop of blood, they could run dozens of different diagnostic tests. Yeah. The idea was even bigger than that was the product. They

created this like kind of machine that looked like a printer called mini lab or edison that was supposed to take a finger prick or finger stick of blood be able to do almost any test you wanted cheap and very quickly but the bigger idea that that they really were selling the world on is that you can take control of your health information you can order up any diagnostic test you want like it's on a menu and you then are now kind of in the driver's seat deciding you make all your own health care decisions. So that was a really disruptive and exciting idea that a lot of people bought into. Unfortunately, the technology did not work.

Right. And they ended up rolling it out. Just to put it very bluntly. Yeah. Right. They gave bad diagnostics to people who had serious health issues. And is that the core of the case here that the U.S. attorney is now saying you put people's health at risk by lying or lying to them about your product, which in turn led them to make decisions that could have harmed them? Not exactly, actually. It's a little bit more complicated than that. This, so Theranos collapsed very famously in 2018. And around that time, there were settlements with lawsuits with patients, with investors, with the SEC.

Elizabeth Holmes, you know, agreed to not run a lab or be a public director for a certain amount of time. They're, they voided two years of their test results. But this particular, this indictment, which came in 2018, is, um, is just about the fraud itself. And it's, so it's not about, and it's only about the investors. So it is focused on misleading and false statements that Elizabeth Holmes made in, order to raise money. And so in the opening arguments, we saw a lot of examples of that from the prosecution. There were documents that she or somebody at their nose had apparently falsified from pharmaceutical companies endorsing the technology when in fact the pharmaceutical companies

had said, we do not endorse this technology. And she had shown that to investors as a way to raise money. So that's one example. There were like tons and tons of examples of basically things that she lied. She exaggerated their revenue. There were years when she said they were making hundreds of millions of dollars and they had none or very little. She claimed that they were, that Theranos mini labs were being used on battlefields and had, you know, Department of Defense contracts and they didn't. And so this case is all about. Yeah. Yeah. And so this case is very focused on defrauding the investors, which is actually kind of a hard case to make because there was a private company and everyone public. So there's not like these mom and pop

investors who poured their retirements into it. These are the richest, most powerful people in the world, Rupert Murdoch, Betsy DeVos, the Walton family. It's, you know, a little bit challenging to make a jury sympathetic to these people who were clearly seeking out a risky investment. and have plenty of money to lose. So that is one sort of challenge in the case, but we will also be hearing from patients talking about the real world effects of this. And one thing that the prosecutors repeated

in their opening arguments was basically, it doesn't really matter who the victims are. She lied in order to get money, and that is a crime. It doesn't matter if it's on Wall Street, on Silicon Valley or in Silicon Valley or, you know, anywhere, it's fraud is fraud and, and that was the case that prosecutors made. So it is kind of narrowly focused. Is it weird to you that the thing that could send Elizabeth Holmes to prison is defrauding

investors versus like telling sick patients that one part of their, you know, health results were actually, you know, looking good or bad. In case, in that case, it was an error. Like, it's strange, right? that it's investors that were, that the legal system is looking after here and not patients or maybe I'm missing something. It's true. I mean, this is essentially a white color crime case. So they're focused on the financial piece of it. The case initially included patients and doctors, but they were actually removed from it in the many

years leading up to this trial because they didn't suffer any financial losses because their health insurance or malpractice insurance covered them. And so this is, yeah, this case is focused on the financial fraud piece of it. The, the boating the test results and all of that was, I guess, addressed when she paid fees and agreed to settlements with CMS and the FDA and some of the lawsuits that happened earlier. I see. So this is going to be a long case, like you mentioned, at the top three months. maybe three or four so it yeah last week when it said uh the judge's calendar said three months maybe longer and then i noticed this week that it just they had just quietly changed it to four which is a little upsetting um the yeah it's gonna and we already had our first delay which is just so this this case

was supposed to start in early 2020 and it was after plenty of delays already and then they kept pushing for more and more delays because of the pandemic. And then most recently it was delayed because Elizabeth Holmes had a baby. And so she... Right. The baby's like one month old, right? Yes. Yeah. And so there have been so many delays. And then now we've we've had so far one day of actual trial, a week of jury duty and one day of actual trial with like half a witness testimony. And we have a juror already who says they may have been. exposed to someone with COVID. And so we're waiting on test results. So we canceled today, which is Friday, and picking up again next week. But I'm a little nervous that we are going to

burn through these juror alternates so fast. This is such a long case. And there's already, like, one juror brought up that she didn't realize that KPMG, she had some, she had some connection to an auditing firm that was involved in the case. Another one now is saying that she can't, like, take off work for three months. And so it's, uh, it was already hard enough for them to find a jury with that had never heard of Elizabeth Holmes before because of the media attention. Um, and so, and that could actually be there for three full months. But the pandemic is just, you know, another twist on that. Um, so it's, yeah, it's, I'm a little nervous about that. And this is the judge. He expressed as much. Right. And so it will be a long running media

circus, but it will also be a case. So what's going to happen in these three months? Just from a, like, what are they, what are they going to do? Is it going to be something where we hear a lot about it in the beginning and then it's going to go away and come back with a verdict or is there going to be tension throughout? You know, that's a great question. I mean, I think as a journalist covering it, I don't necessarily want to be driving all the way down to San Jose and waiting in line at five in the morning, like every day for three months. But we don't write. right now have a great insight into who's testifying when.

And there are some really, like, bold-faced names that are on the witness list. I mean, Rupert Murnock's on there. Henry Kissinger's on there. David Boyes. The defense has John Kerry Rue on there. Wait, wait. The defense, so Elizabeth Holmes, is going to have the Wall Street Journal reporter who sort of brought the whole company down to testify as one of their witnesses.

That's crazy. They could, they also, the defense actually also put all of the U.S. attorneys who are prosecuting the case on their list. And so it could be, what's going on? It could be an intimidation strategy that they're, you know, hinting that they might try to like make the case that this was a witch hunt and that all these people were unfairly out to get her. I heard one theory that maybe they put Carrie Rue on there to keep him out of the courtroom because some judges don't allow. witnesses to be in the proceedings, but they didn't, they didn't, they didn't do that. And it could just be, I mean, so the witness list is over 200 people between the two sides. And so I don't think we could possibly get through that many, even in a trial this long. Um, so many of them, you know, might be red herrings or they might be, you know, just leaving the door open. Um, you know, so much can change over the course of, I mean, Elizabeth Holmes herself is listed as a potential witness, and that is hugely risky to have her go on the stand.

I mean, the cross-examination could just be brutal. Yeah. And so the fact that they are even, like, leaving that as a possibility is quite surprising. And that is going to be the biggest day of the trial, if that happens. So, and so I don't, yeah, I don't have a sense that, like, we don't, we're not getting much in the way of updates or heads up on who's testifying when. And so it might be a thing where the media just has to go every day. And if that, and if they're going every day, then they're going to be writing stories every day. And some days are going to be very boring. I mean, you know, there's a lot of like, there's a lot of account, there's a lot of accountants who are going to be getting into very arcane details. There's a lot of scientists, doctors, medical testimonies. So, yeah. Yeah, this is an interesting thing because we know so much about. there and also ready. It's very rare to get such a deep glimpse inside a company, but the carry root book, Bad Blood and all the reporting has, you know, been so illuminating. So do we need to learn more? Are we going to learn more about this company? I mean, we already have this like pretty

interesting revelation that Holmes made herself where she said she was in an abusive relationship with Sonny Balwani, who was one of the people leading the companies with her and she's going to use that as a defense. So I guess like this is a long way of saying likely like this we don't know for sure. Yeah. Do you expect this to be, to get even weirder than it already has been? Um, yes, because this story just has never ceased. I think that's a very good point. Um, but this story has never ceased to amaze me with just the strange quirks that come out about it. I mean, even just the fact that at the trial, there were like three women that were dressed as her that showed up on the on the first day and they turned out to be like her friends or

some relation to her that was just a bizarre thing like like sort of so so wait hold on let's let's pause on that for a minute so at the trial there were three women who showed up dressed up exactly like Elizabeth Holmes you really couldn't tell the difference if you were one looked exactly like her like they might be related and these were her friends I mean that's really weird as a way to show support to dress like her Afterward, they were, like, hugging her boyfriend, Billy Evans and, like, chatting afterwards. So they clearly are, there's a connection there. It wasn't just, like, people from the internet.

But anyway, so, yeah, there's weird stuff like that happening. And so, I mean, her father-in-law, the hotel air Billy Evans is her boyfriend. Her, his father was at the trial during the jury selection, sitting amongst the media the entire time. And he told us that he was just there because he always thought going to a trial was on his bucket. list. And he lied about who he was. So there's like all kinds of crazy things happening. But I mean, one thing I'll say that's interesting just about all the information that's out there about there. And I was like, I had mentioned that that made jury selection really hard because so many people have followed the story. It's been one of the biggest kind of business and tech

stories of the last decade is we're starting from scratch. We have to assume that the jurors don't know anything about this. And there's a lot of information that it's out there. in the public world that is either not permitted to be used as evidence or won't be because it's not relevant. And the two signs have spent the last four years fighting over what can be used in this, what can be argued in this trial. They fought over whether or not you could say that all Silicon Valley companies lie. And so there are notes was singled out. They fought over whether or not Elizabeth Holmes' like flashy lifestyle, like her private jets and all of her like purchases and things like that could be used. And so there's all this stuff that, you know, it's been litigated

already and some will be litigated as the trial goes on. But it's just, it's just the funny thing that I've observed in my story is like a lot of the commenters are just like Elizabeth Holmes like scholars where they're weighing in with all these details. And I'm kind of like, well, that is, that hasn't been introduced yet or that is not part of this case or like that is irrelevant. And so, you know, as observers of the trial, it's going to be a, a little bit weird for us to look at it just including just the facts that are actually being in the trial and are being, you know, weighed in the trial and introduced and taking out all of the other kind of extemporaneous stuff that we know about the company, but is not a part of the

trial. So that's like, that's one strange piece of it. And, and yet, I do think that there's going to be stuff that comes out that we don't know or that we've never heard before. I mean, I've read the book. It's been a little bit, a little while. I've listened to the podcast, watch the documentary, all that stuff. And there were still some details in the prosecution's opening arguments that I didn't remember or wasn't, it felt new to me. And then the exhibits, as they all come out, I mean, last week, we got six pages of text messages between Elizabeth Holmes and Sunny Bolwani. And that was just like, yeah, yeah. Before we go to break, I want to talk about this relationship between Elizabeth Holmes and Sonny Balwani. So she was the CEO of Theranos.

He was an executive high up. They eventually started a romantic relationship. What is happening or what is new now about that relationship that's made its way into the case? So the full chronology is she meets him on a college trip. You know, she drops out, starts Theranos. they kind of reconnect a few years later. In 2009, Theranos is almost out of money, and their strategy, which was a B-to-B strategy,

is not working. And she goes to him, and he decides to make a personal loan to keep the company afloat. And that's when he joins as C-O. And I believe around that time was when they started their romantic relationship or maybe previously they had been dating.

I'm a little unclear on that. But that's when... What's that? Sorry, go ahead. That's when the fraud That's when the fraud starts, basically. And that's when this case, or the fraud accusation starts. Basically, they span 2009 to 2016.

And so he was her number two at the company. And like they are accused together of conspiracy to commit wire fraud. And last year, I believe it was, they got the cases separated, or maybe it was two years ago. The other cases separated. The judge didn't say why at the time. But then just very recently, because Dow Jones basically sued to make some of these filings public, we learned that Elizabeth Holmes' lawyers said that she is likely to use

a mental health defense. She will be testifying and she will have expert witnesses testifying that Sunny Bowman. Walwani emotionally and physically abused her and that that negated her ability to intend to deceive because she was relying on him, taking cues from him, he was controlling her. They're calling this this Bengali defense after that movie. It has been used before in other crimes, but I don't think ever or at least maybe never in a white color crime. It's extremely, extremely rare and very risky.

And so I think there's a 50-50 chance they actually do that because even though we've talked about this and there's a bunch of filings about it that sort of detail it. And I should also note that Balwani's lawyers have, you know, in filings vociferously denied all of those accusations. It's really risky. And so maybe if things are going good, they decide to kill that part of it and just not do it and not risk putting her on the stand. and taking that risk. Or maybe if things are going really bad, they just, I don't know. So I think this strategy will definitely, there's a lot of things that could come and go and change. One thing, there's a Bloomberg reporter who wrote a really smart story about how even just introducing the possibility of this has it in the juror's mind because all throughout the

jury proceedings, they had to ask everyone, have you ever had an experience with domestic abuse or domestic violence? And they all had to think and they had to share their experiences. And like, So it got them all like imagining her as a victim without even saying or doing anything. And then in the, which is something I had never even considered as a legal strategy. In the opening arguments of the defense, they hinted that her reliance on Balwani was a mistake. And they kind of said that you'll learn more about this relationship later, but they didn't go for it at all. it was very sort of vaguely alluded to, which makes me think they're leaving the door open for deciding later if they want to use that strategy or not.

Yeah, fascinating strategy. Fastening stuff, what a case. Okay, I want to talk a little bit about what this means for the tech world. So why don't we do that right after the break? It'll be a fun discussion going into whether this is normal for Silicon Valley to do what Theranos did or whether it's an outlier. So why don't we do that right after the break? with us. We'll be back right after this.

Hey, everyone. Let me tell you about The Hustle Daily Show, a podcast filled with business, tech news, and original stories to keep you in the loop on what's trending. More than two million professionals read The Hustle's daily email for its irreverent and informative takes on business and tech news. Now, they have a daily podcast called The Hustle Daily Show, where their team of writers break down the biggest business headlines in 15 minutes or less and explain why you should care about them. So, search for The Hustle Daily show and your favorite podcast app, like the one you're using right now. And we're back here on the Big Technology podcast with Aaron Griffith.

Oh, that was best. Sorry. It's the wonders of dynamic ad insertion. Anyway, we're back here for the second half. It's great to be back with you, Aaron. And so we teased a little bit up before the break about the implications for the tech world. And the big notion inside the tech world that a lot of people who are in venture capital have been trying to get across is no, no, there is isn't a tech company. It's not emblematic of the way that startups work. I mean, they fudge things, but they don't fudge this. So, and it's interesting, again, we talked about in the first half that this is actually a financial crime or something that's about the fraud duping investors, which, you know, investors are saying, yeah, it happens to us every day.

this is different. So I want to ask you a two-parter. The first is, is there a tech company? I mean, it seems like a medical device company. And the second is, what do you think about these claims and this movement among VCs to try to say, no, no, this is different? Yeah. I mean, I think it depends on how you're framing what is a tech company. I mean, like we were talking about earlier, Silicon Valley for the last decade has wanted to say every company that has an element of software is a tech company. And they give it a SaaS valuation. You know, software is creeping into ed tech and, you know, all medical and taxi. We were talking here last week, I had Jonathan Neon, who's a Columbia business professor. And he's like railing against

the fact that Sweet Green calls itself like a platform and wants those 30 next valuations where it does salad. So yeah, I wonder it's there. No, so they salad or are they? more of the past platform. Well, here's the thing, yeah. So if you want to say everything's, every company is a tech company. I'm calling it a Silicon Valley company. And I don't want to quibble on, I don't want to quibble over like tech, biotech, medical, whatever, because there are lots of classic Silicon Valley firms

that invest in biotech and medical devices and life sciences. But at the end of the day, they were building a machine that had a software element. So it's a Silicon Valley company. they're based in Palo Alto. She went to Stanford and she had deep ties to Stanford. Channing Robertson, you know, one of her top execs, she recruited from Stanford. She actually met George Schultz through Stanford and he helped. Yes, which was one of her board members and one of her biggest advocates.

And he was the one who sort of helped her recruit all these other like dignitaries, senators, generals, all these older men to her board through the Hoover Institute, which kind of has a little connection to Stanford. She raised venture capital from some Silicon Valley investors, including DFJ, Tim Draper. Larry Ellison is about as Silicon Valley as it gets, you know. So, yes, lots of traditional Silicon Valley VCs took a little of the company and passed. But I don't think that it is fair for the entire industry to disown this company just because it doesn't make an app, which is, I think, what some of the people are trying to argue.

Is that their argument in particular? I mean, I guess another part of the argument is like, look at the board. You know, this was, like you mentioned, we talk about Schultz, right? We talk about, you know, people who had been in the Defense Department and other forms of government. And the traditional core VC industry is saying this isn't representative of us. Do they have a point there? I mean, yes, yes and no.

Like, when you, I mean, how do you? you feel when there's a journalist that does something extremely unethical and bad? And then everybody's like, see, this is an endemic in the journalism industry. We hate that. And I get it. So I get that you want to distance yourself and say, I'm ethical. We're not all like this. Yeah. I know the VCs that are currently saying we're not representative of what was happening with there. And those would definitely see the nuance with journalists and a bad thing, a journalist. Right. Yeah. Yeah. Exactly. Exactly. No. So I'm trying to be emphetic here. I got that. But like this, she did follow a playbook that is, that everyone is encouraged to follow. Like everyone's encouraged to like grow, you know, mark up your Tam 10x. Like just make these wild projections because that's how you raise the money. She, you know, she, she, she modeled herself after Steve Jobs down to the wardrobe. She and down to the, you know, the ad agency that he hired. and the branding and the way she talked about it,

like she was very much a student of the Silicon Valley playbook. And so she obviously took it way too far and like crossed a million ethical lines that I think, you know, most companies following this playbook would have drawn, would have stopped short of. But I don't think that you, that you can disown this company entirely and be like, no, no, no.

were above that because there are tingees of that all over and I mean I remember writing about this in 2016 like there was the Theranos thing and it was like whoa okay well this is not the same as all the other tech companies which are very good and and then the Zenefits thing blew up and you know we learned that they had been cheating on these like these HR stuff yeah it was that It was an, yeah, it was this insurance test that they were cheating on. They had a macro program that would just take it for the people. Yeah, exactly. And there were lots of other kind of shady things that they had been doing.

And then Hampton Creek happened and we learned that this like mayonnaise company had been buying their own mayonnaise off the shelves at retail in order to make the retailers think it was more popular than it was. And then I started doing it. Yeah. Well, Jucero was less of a fraud or an ethics problem and just a dumb idea, but, or, you know, a bad idea. So I wouldn't necessarily lump that. They weren't, I don't know that they were nefarious so much as they believed their own, their own hype. They believed they were making it.

They weren't purposely faking it. But there were so many other smaller examples of that we never, like, or that never quite, like, made the headlines or, I mean, even if you, even if you sort of look at magically, was kind of in that in that bucket too there were just so many and i realized it was like very endemic to the industry and lots of them are small and harmless and and most investors are willing to look the other way because that's the nature of this business you're going to lose out a lot of the investments are going to fail or flame out in some way and most of them are not putting people's lives at risk right was so is their argument that just like basically some fudging of the numbers and your projections is fine as long as it doesn't go across this imaginary line that they

I mean, I don't want to speak for VCs. Everyone has different opinions and I don't think that's necessarily, I don't think anyone's really going to admit like, oh yeah, lying's okay. But at least not to a journalist on the record. It does seem, I don't know, I'm watching some of their comments on Twitter, David Sachs in particular, and it does seem like that is what they're saying. But maybe I'm putting words in their mouth. But sorry, go ahead. Well, yeah, I don't follow him. So that is probably true.

Yeah, I am sure. I mean, and right after the Wall Street Journal article came out about Therunus, like, I don't know if you remember, but there were a lot of VCs that jumped to her defense. Yes. And there are people there saying, hey, the Wall Street Journal tried to destroy this company. They would have given it some more time. It would have worked out.

Yeah. And that's what leads me to my next question, which is like, is the environment that created, there are no part of the environment we need to have companies create new important things. I mean, can, like, I guess like should, should this, you know, potentially just be tolerated as a side effect of a very constructive part of the economy? I mean, I think that's a really interesting debate to have. And I would, I would say no, but maybe that's just because I,

I'm a hater and I don't get it and I'll never build anything because I'm not a builder I don't you know I like I think that's that's absolutely to be that's being being had or that people fall onto different sides of

and if you're a part of the ecosystem you might believe one thing and if you're on the outside you might maybe agree more with me I mean I think it's very obvious to look at what Theranos did and all of the people that she hurt, that the company hurt and lives that were damaged, not just patients, but people who worked

with her, interacted with her, had their reputations ruined. One of her top scientists committed suicide. It's like, it's an extremely tragic story with a lot of victims. And so I think it's really hard to say, oh, this is just necessary for the sake of capitalism and human progress. Right. This is just the starkest example. of that side of the argument yeah i think so often uh it's very clear that we live in a world not without consequences but with few consequences and people get away with a lot of different stuff and uh i don't know maybe someone pulling off a fraud of of this level uh i mean innocent till proof and guilty but let's be real about it maybe it's good for for there to be some consequences what

happens if there are? I mean, what happens if she does go to prison after this? Yeah, so she, her, she faces up to 20 years, but oh, sorry, I think we're speaking less literal. Right. No, the main thing I just want to know is, does it have a impact on people's willingness to start and fund companies? No, because like you said, there's that, there's that separation. Like, you know, people in order to be involved in this ecosystem and believe in it, you have to, you You don't, you have to believe that you're better than that, you know, because that's basically the worst version of failure that you can do. So I don't think it's going to encourage people or discourage people because the flipside is there's just so much money right now. Just so much money available for startups being poured into companies, money that people are making value that's being.

created regardless of whether or not you believe that it that their valuation are justified and so that's always going to attract people building things and it's always going to attract grifters um so i do think it'll be interesting to see if there are more uh cases like this like we just saw i think it was was it called headspin um there was a company that just was indicted last week or two weeks ago for defrauding investors on their financials. And, you know, it's a pretty small company. I wasn't really very familiar with them. And so it's interesting, but they're still worth like a billion or $2 billion. So it's going to be really interesting to see if the U.S. actually starts going after these situations a lot more, particularly as the private investing and

venture capital investing is opening itself up to more and more. people. It's starting to look a lot more like the regular stock market. I mean, it's still very limited, but a lot of companies are working to open up their cap tables to just regular old people. And so that could also drive some of the interest in prosecuting more of these cases. Yeah. And it's also really interesting. Like where does optimism like, you know, turn into fraud? I mean, we talk in Silicon Valley about the reality distortion field, like harking back to Steve Jobs. people need to say the thing that everybody says can't be done, I can do it. And sometimes that turns into world-changing companies. And obviously, that's what Elizabeth Holmes said. But it turns

out that everybody was right because she was taking that blood and instead of running it through her machine, sending it out to, you know, other processors, existing processors, and passing it off as her own. Yeah. I mean, that's, that's definitely the case. She, like, I think you're absolutely right. Like that is a part of the game is being able to have that vision for the future. She took it too far. Yeah. Okay.

I want to talk about some of the consequences we can already see in Silicon Valley. You've written about this in the past. Why don't we do that again right after this break? And we're back here for one final segment on the big technology. podcast. Joining us is Aaron Griffith, reporter for the New York Times. Aaron, you wrote a story about how female founders are already starting to see some blowback from what happened with Elizabeth Holmes. Can you expand upon that a little bit and tell us what happened there and how this is already starting to resonate even though, you know,

she's just started to be on trial? Well, I guess it's actually less of an already started, but have been for the past five years. I mean, you remember the Wall Street Journal article came out in 2015, and then it still took another two or three years for the company to fully collapse. And now we're here in 2021. So it's been going on for a really long time. It was always hard. It has always been difficult for women to raise money, especially in life sciences, biotech, any kind of hard science field where they're even fewer of them. A lot of most prominent female founders are kind of clustered in the consumer tech side of things. And so they already don't fit the part. And the fact that Elizabeth Holmes became such a

famous, prominent example of a successful woman breaking down those barriers when she, her downfall happened when she became the most disgraced example of a successful woman breaking down those barriers, it's doubly bad for all the women who are actually trying to build legitimate companies. And it's sort of this double-edged sword because one reason why Elizabeth Holmes became so famous and was such held up as just put on magazine covers, you know, meeting with Bill Clinton, like, getting, flying around a jet all the time is because everybody wanted the next Steve jobs to be a woman. And so people were willing to kind of overlook maybe obvious red flags, like how is a 19-year-old with no education on this topic running a company with doing these

critical health tests? And so it worked to her advantage. And that ended up hurting a lot of women founders, particularly those that are working on any kind of diagnostics, but even just those that are more generally in hard sciences, have just been kind of battling these comparisons, particularly in 2008 or so, but anytime she's back in the news, which she is now, you know, it's going to kind of flare up again. And what I found in talking to female founders who are dealing with this is that it's most prominent when they're just starting out, when you have an idea for a company and you're trying to get it off the ground and you need somebody to believe in you and your idea and just

you're based, just you as a person, you don't have anything else to show. And that's really what is the kind of value of venture capital is backing these founders and hopes that they're and telling them, okay, go off and build something great. And that has been when most of them have gotten those comparisons. Once they have something to show for themselves, they have published and peer-reviewed journals or they have clinical tests or results, then it's a little bit easier. More people are willing to give them the benefit of the doubt. But I mean, the stories that I heard were kind of crazy.

I mean, one of the founders, Julia Cheek of somebody called Everly Well, people were telling her that she should dye her hair a different color so she wouldn't get the comparisons to Elizabeth Holmes, who was also blonde like her. I mean, this is crazy. And when you're a female founder who's pitching male, mostly probably mostly male investors on your idea or your company that you're planning to build, and the first thing they say is like, oh, well, are you like there or no some Elizabeth Holmes? Like, what does to say to that?

You're already on the defensive and you're saying, oh, okay, so you're comparing me to someone who has been accused of criminal fraud. And so it has created this sort of shadow and a form of bias that's really crappy. So, yeah. And has there been a downturn in diagnostic or biotech or heart science funding altogether? or is this something that women in particular are facing after this? And they're actually name checking with Holmes in the pitch meeting. That's sort of, I mean, I don't know.

I guess I'm not surprised by VC anymore, but that is somewhat astounding. Yeah, it's just kind of lame. I mean, I will say I also heard this a lot more from people who are pitching VCs that were not deeply immersed in hard science or life sciences. They get it because those are the ones that also passed on their nose because they saw it and they were like, this is not real. And so, but it's more just like the broader zeitgeist and some of the big firms that are more generalists that you want to have that brand name firm or, and their huge checkbooks.

I mean, I would say in general, no, the funding to those kinds of companies has not slowed down at all. There's just, like I said before, so much money available, period. and interest rates stay low, stock market stays high, investors are chasing risk, they're dumping money into the private markets, and so, you know, that wave is just going up. There's no real quantifiable way to say that fairness, like, brought a hit to that category. Do you think that there, do you think the difficulty that some of the women founders are seeing, you know, trying to raise in the shadow of homes. Is that going to dissipate over time?

Or do you think, you know, I mean, this happened recently. These firms are in business for a while. Do you think it's going to be something that follows them for a long time? I mean, there just needs to be more examples of prominent women CEOs in this field. And that was partly what I was trying to do with my article a little bit is say, like, okay, here's a handful of other women that are building really interesting companies. Yeah. And I do think their profiles are raising and it's not a media problem. I did get that feedback from some people being like, it's just a matter of like you guys

are framing the narrative wrong and you need to just tell more stories. It's like, no, I can tell positive stories about women founders all day, every day. It doesn't change the fact that this like massive fraud happened and it's everyone's touch point here. What needs to change the fact is that they need to raise more money and they need to raise more money and they need to like, you know, ascend to higher heights and more power and more success. And like we're starting to see that happen at least with, in general, with like, you know, female CEOs taking their companies public. That's that's definitely on the rise.

BC funding to women founders is is not super encouraging when you look at the data. It actually kind of fell a little bit in the pandemic. So, yeah, it's a, I, I. I don't think it'll really change until we get more female founders with a lot more backing and a lot more success and a lot more big exits. Yeah. Okay, so where do you think the case goes from here? Is she going to settle or what's going to happen?

Is she going to, yeah. That's anyone's guess, obviously. I don't expect her to settle given how many chances that she has had to do that over many, many years. I mean, she is, she has shown that she is willing to take huge risks. Testifying will be a huge risk if she does that. Going to trial is a huge risk. Having a baby right before you're about to go on trial for potentially, potential sentence of 20 years is a huge risk.

So, yeah, it's. going to be crazy. I don't know. I have no idea what's going to happen. So far, the defense seems to have just thrown everything against the wall. Their two-hour opening statements, they just pulled out every possible defense you could imagine. And I imagine that as the trial goes on, we'll see which ones they really try to focus on. I don't know. It's going to be a long one. And then after it's done, we have another three months of Balwani. Because his starts in January. Wild. So I guess a question I want to end on is whenever we write a lot about someone, we try to kind of put ourselves in their minds at a time, or at least I do. What do you

think's going on in there with Elizabeth Holmes? I mean, do you think that, do you think she earnestly tried to do this and it fell apart or was this, you know, you had actually a story where the headline was basically like was she someone who was a visionary or conniving or something like that. So what's your answer to that? Yeah. Is she like this naive person who just didn't quite make it, which is what the defense presented. A big part of their defense was just like she had the best intention. She failed, but that's not a crime. Or was she a schemer who intended to defraud people, which is the prosecution's case? And they have already pointed to some pretty damning evidence that shows that she knew about the problems and still misrepresented what Therness was doing.

I mean, I will say to her defense, not that I'm defending what she did at all, but like through the end, she was fighting and like thinking that she could save it and that it could, and that might be a product of the fact that it worked for so long and that so many people. believed all of it yeah um but she like did go down fighting to some degree but then afterwards she kind of just like moved on with her life and everyone else is dealing with this fallout but she's a burning man um and you know like posting all these very happy photos it's like it's it's very strange behavior given what happened you know so i it's all that all of that is to say I cannot even fathom. I cannot begin to fathom what is going on in her mind. I will say the first, the days of jury selection,

she was very just like kind of stone cold. Like she's a mask on, so it's really hard to read her expression, but she was very like just expressionless, looking around, not really making a lot of emotions. And then on the first day when her family, her mom was there,

boyfriend's there, her friends are there. She didn't seem very like upbeat and positive. She was smiling at them, reaching out, taking their hand, interacting, and, like, more energetic. So it seems hopeful. Yeah. Well, it's definitely one of the wildest stories of our time.

Thank you for covering it. You're reporting on us, but it's so good, and I appreciate you waking up so early to be able to make it into the court. And thank you for joining us. So it was such a good conversation in the middle of all this. So I appreciate you making the time. Thanks for having me. Awesome.

No problem. Awesome. Well, thank you to Nate Gwattany for editing this. And thank you to Red Circle for hosting and selling the ads. Much appreciated. Thanks to you all, the listeners, for showing up here with us every Wednesday. It's great to have you back. And if it's your first time, hit subscribe.

You might enjoy our subsequent conversations. If you've been here for a while, want to give us a rating, we could definitely use them. So please do that. And thank you again to Aaron for. joining. I'll definitely look forward to reading your reporting as, as this goes on. And maybe we have you back when the verdict comes out. So really appreciate it. Thanks again. Yeah, thanks for having all right, everybody. Well, that will do it for us here on Big Technology Podcasts. Once again, thank you for listening. And we will see you next Wednesday.