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Opinion
Matt Levine

Theranos Was a Losing Lottery Ticket for Investors

Venture capitalists liked Elizabeth Holmes not for her truthfulness but for her faith in something crazy that nobody else believed in.

Elizabeth Holmes: Innocent Silicon Valley failure or a massive fraud?

Elizabeth Holmes: Innocent Silicon Valley failure or a massive fraud?

Photographer: Michael Short/Bloomberg

This post originally appeared in Money Stuff.

My main thesis about fraud is that it is very much defined by local social expectations. If you are playing poker and you bet like you have a big hand, trying to deceive people into folding, and it works and they fold and you take their money, and then you flip over your cards and show that you have nothing and say “hahaha I was bluffing, suckers,” they might be annoyed with themselves, for folding, or even with you, for gloating, but they won’t accuse you of fraud. They won’t call the police, or even stop playing with you. They are part of a social context in which they expect their counterparties to try to deceive them, and in which they sometimes try to deceive their counterparties, and their reaction to a bold and successful bluff will mostly be “wow, good one, you got me.”