ELIZABETH HOLMES

2015 CME Melamed-Arditti Innovation Award
Introduction by Leo Melamed
Global Financial Leadership Conference
Naples Florida, November 17, 2015

I stand here, representing the Competitive Markets Advisory Council, (CMAC):

Jack Gould, Former Dean of the U/C Business School.
Andrew Lo, Professor of Finance, MIT.
Robert C. Merton, Nobel Laureate in Economics, Professor of Finance, MIT.
Michael Moskow, Vice Chairman of Chicago Council on Global Affairs, and Former President, Federal Reserve Bank of Chicago.
Myron Scholes, Nobel Laureate in Economics, Professor of Finance, Stanford.
Robert Shiller, Nobel Laureate in Economics, Professor of Economics, Yale.

Much of the following history is well known.

In 1514, Nicolaus Copernicus formulated a model that placed the Earth in rotation around the Sun. That was contrary to accepted dogma. The discovery was scorned and he was named a heretic. Fortunately, he died before the church could mete out punishment.

Galileo Galilei embraced the Copernicus thesis.  Galileo was tried by the Roman Inquisition who found him guilty of heresy.  He spent the rest of his life under house arrest.

Similar examples can be found throughout the history of mankind.  

Louis Pasteur thought disease was spread by germs.  When he put his theory forward in the 1850s he was met with violent resistance from the medical community.

Milton Friedman, in the early 1950s, advocated floating or flexible exchange rates.  He was but a lone voice considered by many as a monetary outcast.  

Today, nearly the whole world operates on a floating or flexible exchange rate system.

In 1972, I introduced currency futures at the IMM.  A prominent New York banker set the tone for the derision that followed.  “It is ludicrous,” he said, “to think that foreign exchange can be entrusted to a bunch of pork belly crapshooters.”  

A decade later, I introduced the concept of electronic trade in futures. The Chairman of the Board of Trade said that I unleashed an H-bomb which would destroy the futures industry.

At the time, the CME had trouble reaching several million trades a year. Today, the Globex transaction system does 15 million trades a day.  

Arthur Schopenhauer, the great philosopher of the 19th Century, believed that an important idea must endure a hostile reception before it is accepted.  

First, he said, “It is ridiculed; second, it is violently opposed; third, it is accepted as self-evident.”

Elizabeth Anne Holmes, the 2015 winner of the CME Innovation Prize, is the CEO of Theranos, a blood testing company which she founded in 2003 at the age of 19.  

It made her a trail blazer, an innovator, a pioneer.

Said a review in the New York Times magazine, “It’s hard to overestimate the potential benefit of what Elizabeth Holmes has developed with her tech company Theranos.”

So please forgive her.  In her youthful innocence Elizabeth Holmes believed that she could revolutionize an established multi-billion diagnostic-testing industry without resistance.  That somehow Schopenhauer’s law did not apply to her.  

On October 16, 2015, The Wall Street Journal dropped a bomb shell.  It revealed significant issues with Theranos.  Some of the tests, allegedly, did not produce results equivalent to results in standard testing.  

Theranos was based on Ms. Holmes’s invention and patent for a new way to run common lab tests on blood obtained via a finger-prick.  This “lab-on-a-chip technology,” represented a revolutionary departure from the accepted norm of vein-puncture-testing requiring a syringe and much more than a few drops of blood.  The NYT article placed her on the list of five great world “Transformers.”    

In truth, Theranos scientists produced 189 patents.  Elizabeth Holmes is a co-inventor on 29 U.S. patents and 125 foreign patents. The patents show how Ms. Holmes’s original idea morphed into the company’s business model.  A business model that will make the diagnostic testing industry more accessible, more efficient, and at lower cost.  

Directly after this luncheon, Elizabeth Holmes and Professor Nancy Snyderman, School of Global Health, at Stanford University, will provide our conference with a full review of Theranos.

In truth, Theranos sought FDA clearance for more than 120 of its tests. That is yet to happen. However, in July, Theranos announced the first FDA clearance on one of those tests which detects Herpes.  

That’s big. Once an idea is unleashed it has no bounds. That is the essence of innovation, the soul of trail-blazing, the core of pioneering.  

Elizabeth Holmes’s innovation was first to popularize her idea.  It advanced the merger of health-care technology. As the NYT review stated, “It’s hard to overestimate the potential benefit of what Elizabeth Holmes has developed.” Nothing can change that truth.  

Nor did the WSJ article change the view of the CMAC Council members that Elizabeth Holmes’s deserves the 2015 CME Innovation Prize.

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