Elizabeth Holmes and Sam Bankman-Fried are two former prodigies whose names will be remembered by scandal. How did they go from rising stars to faded stars?
One executive coach says the fluid nature of tech startups, along with the inexperience of young entrepreneurs, increases the risk of making bad decisions.
“It’s lonely at the top, especially for today’s leaders who are faced with meeting challenges in a rapidly changing environment. It leaves young leaders who are learning in real time little time to really step back and reflect on their decisions,” says Reinventing, founder of EZRA, a virtual leadership coaching firm, and says CEO Nick Goldberg.
Goldberg told FOX Business that the startup landscape has long been “like the Wild West,” allowing some people to take advantage of the situation.
Holmes was 19 when he dropped out of Stanford University to found Theranos, a blood-testing company. He turned his idea of using a few drops of blood to diagnose medical conditions into a $9 billion business.
Bankman-Fried was 26 years old when he founded FTX. He previously worked on Wall Street before founding Alameda Research and then starting FTX. Investors valued the cryptocurrency at $8 billion in January 2022 after the firm raised $400 million in its first funding round.
FTX’S SAM BANKMAN-RED RISE COMPARED TO ENRON, MADOFF
‘It’s actually power’
Both cases caused a great public outcry. However, Goldberg says business leaders do not have a monopoly on unethical behavior.
“It’s actually a power,” Goldberg said. “The reality is that anyone in any profession has the ability to bend or break the rules. The difference is that when you’re talking about someone in a position of power or leadership in the public eye, the impact of bad actors is broader and more devastating.”
Power was an issue at both Theranos and FTX.
For example, in a 2019 show, Vanity Fair reported that Holmes flew cross-country in first class and then drove to a breeder to pick up a 9-week-old puppy. He also had security and personal assistants to accompany the drivers and publicist.
In a court filing, FTX Trading CEO John Ray said he had never seen such a complete failure of corporate control as he saw at FTX after taking over Bankman-Fried.
“From broken systems integrity and flawed regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this is unprecedented.”
To lead ethically and compassionately
WHAT IS THERANOS?
Executive coaching gives business leaders a place to step back and reflect on the decisions they make, Goldberg said. His company has helped more than 30,000 leaders and teams in 91 countries to quantitatively improve performance, employee retention and promotion rates.
He explained that executive coaching is as focused on personal development as it is on business results.
“By connecting leaders with coaches early, they learn not only how to lead, but how to lead ethically and compassionately,” he told FOX Business.
Holmes was sentenced in January to 135 months in prison after being convicted of four counts of wire fraud and conspiracy. Prosecutors said he lied to investors between 2010 and 2015 by promising Theranos technology could perform multiple tests on a drop of blood from a finger prick.
Bankman-Fried is accused of secretly using $10 billion in client funds to prop up his trading business. At least $1 billion in customer funds are thought to be missing.
Goldberg said the worst players in the startup space will disappear as the industry matures and regulation adjusts to what’s happening now.
CEO, BAD BEHAVIOR OF EXECUTIVES
Goldberg also believes that society needs to change.
“For a long time, our society has rewarded being ruthless or putting profits above all else, but I think that’s starting to change, and that’s a very good thing for everyone,” he said.
He believes this can be done without undermining the flexibility and innovation that make young tech entrepreneurs so great.
“This is where we can really use training to develop the core skills and integrity leaders need to minimize bad behavior or leadership choices,” he said.
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EZRA was launched in 2019 as an incubator in the LHH ecosystem. Talent solutions provider LHH is a global business unit of the Adecco Group.