The rugged and revolutionary Olympus OM-D E-M1. No matter where life’s INTRODUCING A CAMERA adventures take you, the Olympus OM-D E-M1 can always be by your side. Its AS RUGGED magnesium alloy body is dustproof, splashproof, and freezeproof, so it’ll survive the harshest of conditions. And the super-fast and durable 1/8000s mechanical AS YOU ARE. shutter and 10 fps sequential shooting will capture your entire journey exactly the way you experienced it. www.getolympus.com/em1

Move into a New World

ÒThe OM-D lets me get great shots because itÕs rugged and durable. In this shot, I was shooting when the dust was the thickest because it enhanced the light. I even changed lenses and IÕve yet to have a dust problem with my OM-D system.Ó

-Jay Dickman, Olympus Visionary Shot with an OM-D, M.ZUIKO ED 75-300mm f4.8-6.7 II

• One of the smallest and lightest bodies in its class at 17.5 ounces* • Built-in Wi-Fi • Full system of premium, interchangeable lenses *E-M1 body only contents — JAnUARY 20, 2014 VoLUMe 193 nUMBeR 1

30 FORBES 30 UnDeR

88 | neXt-generation entrepreneurs Four hundred and f fty faces of the future. 11 | FAct & cOmmENt by steve forbes The lies continue. lEAdERBOARd

14 | ScOREcARd 2013: a very good year. 16 | BEiNG REEd hAStiNGS The man running the show at Netfl ix has a story that any screenwriter would be proud of. 18 | thE YEAR’S hOttESt StARtUpS A panel of VCs and entrepreneurs selected these businesses from more than 300 contenders. Plus: FORBES makeover. 20 | thE mOSt OvERpAid ActORS Adam Sandler tops the list. Plus: Up-And-Comers. 22 | ActivE cONvERSAtiON A CEO eggs on the haters. thOUGht lEAdERS

24 | cURRENt EvENtS by paul johnson Dealing with Iran: impossible? 78 | the and the reckless 26 | cApitAl FlOwS Is more than ’s by george leef next vanishing act? More college does not beget more economic prosperity. cover photograph by michael grecco for forbes

2 | FORBES JANUARY 20, 2014 IBM Cloud supports 24 of the top 25 Fortune 500 companies. When you’re among the highest-performing businesses in the world, you can’t afford to roll the dice on underperforming alternatives. That’s why more and more of the best companies are tapping into 100-plus Software as a Service (SaaS) business solutions in the IBM Cloud. Start powering your cloud at ibm.com/getstarted This is Cloud on a Smarter Planet.

IBM, ibm.com, Let’s Build a Smarter Planet, Smarter Planet and their logos are trademarks of IBM Corp., registered in many jurisdictions worldwide. See current list at ibm.com/trademark. ©International Business Machines Corp. 2013. contents — JAnUARY 20, 2014

28 | iNNOvAtiON RUlES by rich karlgaard Enduring success: soft-edge excellence. StRAtEGiES 30 | thE BiGGESt BEt EvER George Soros, John Paulson and Leon Cooperman are facing of against Sheldon Adelson over the future of gambling in America. by nathan vardi 34 | thE BiG EASY’S mOviE mONEY pit Louisiana politicians decided handouts would turn the state into a Tinseltown rival. Now they’re stuck with them. by dorothy pomerantz

30 | high rollers, tEchNOlOGY 34 | it’s a flop high stakes 38 | iNSidE A BEAtiNG Louisiana’s Hollywood A bevy of billionaires battle SilicON hEARt tax-break horror show. over online gambling. Designers have used computers for years to build elaborate machines. But what about model- ing complex experiences? Dassault Systèmes is 43 | the leading the charge. forbidden by joann muller coin China’s Bitcoin 43 | chiNA BitES iNtO BitcOiN crackdown is A speculative frenzy turned BTC China dashing the into the world’s biggest Bitcoin exchange. dreams of a Then Beijing dropped the boom. by kashmir hill cryptocurrency entrepreneur. ENtREpRENEURS 46 | SEcONd liFE Reggie Aggarwal almost lost his event platform to bad luck and overspending. Here’s how he clawed his way past $1 billion. by karsten strauss

50 | under the gun 50 | REAdY, FiRE, Aim Profting from a futuristic TrackingPoint makes a $27,500 rife frearm is a tricky shot. so smart that it can’t miss. So why has the company been misfring? by abram brown

46 | saving cvent iNvEStiNG In the event of emergency, reinvent. 54 | tURN dOctOR BillS iNtO REtiREmENt iNcOmE Creating super-IRAs out of health savings accounts. by william baldwin 56 | mONEY FROm NOthiNG Looking for high yields? Consider buying the funds that sell the call options on your stocks. by john dobosz 57 | pORtFOliO StRAtEGY by ken fisher A big (bull) surprise for 2014. 58 | iNvEStOR chEckUp by john buckingham Beating back the bubble babble.

4 | FORBES JANUARY 20, 2014 ©2013 movado group, inc.

SE ® PILOTSTAINLESSSTEELCHRONOGRAPH WITH 42MMCASE,BI-LEVELBLACKDIAL, SIGNATURE DOTMOTIFBRACELET. SELECT LOCATIONS BLOOMINGDALE’S MOVADO.COM contents — JAnUARY 20, 2014

60 | iNtRiNSic vAlUE by david pearl Cap ex comes out of the closet. FEAtURES 72 | REiNvENtiNG wAll StREEt Troubled UBS has been transformed into a wealth management juggernaut. by halah touryalai 30 UNdER 30 54 | it’s what the 78 | NOw YOU SEE thEm... 72 | the new doctor didn’t order Will Snapchat cofounders Evan Spiegel and Bobby Winning the war for the How to use an HSA to Murphy become the youngest self-made wallets of the world’s play the stock market billionaires ever—or will Snapchat fade wealthiest. triple tax free. into business infamy? by j.j. colao 88 | 30 UNdER 30 liSt Introducing the brightest stars under the age of 30 in 15 diferent felds. edited by caroline howard and michael noer liFE 104 | pARAdiSE 2.0 Can Larry Ellison model the future on the 104 | ellison’s eden Hawaiian Island of Lana’i? Is economic viability a by laurie werner forbidden fruit for the tech honcho’s Hawaiian hideaway? 112 | thOUGhtS On New Year’s diets.

ExclUSivE! 95 | super bowl mvp BRUNO mARS’ Bruno Mars’ halftime 30 UNdER 30 plAYliSt performance could be If you really do want to be a billionaire, start with an even bigger hit than these 22 songs, handpicked by our guest DJ, his latest album—if the Grammy-winner (and 30 Under 30 nominee) weather cooperates. Bruno Mars, to enjoy while reading this issue. to listen along, go to forbes.com/under30.

“Move On Up” - Curtis Mayfeld “Mirror in The Bathroom” - The English Beat “More Than a Woman” - Bee Gees “Devil’s Pie” - D’Angelo “Waters of Nazareth” - Justice “God Only Knows” - The Beach Boys “Shake a Lil’ Somethin’ ” - 2 Live Crew “Little Red Rooster” - Luther Allison “Am I High” - N.E.R.D “Butter” - “Da’ Dip” - Freak Nasty “Me Name Jr. Gong” - Damian Marley “Kung Fu Fighting” - Carl Douglas “All Me” - (feat. 2 Chainz & Big Sean) “Get On the Floor” - Michael Jackson “Animal” - Miike “Somebody to Love Me” - Mark Ronson & The Business Intl. “Won’t Fade Away” - Lewis Taylor “Salute To Kareem” - Red Hot Chili Peppers “Midnight Rider” - The Allman Brothers Band “Sweat (A La La La La Long)” - Inner Circle “Young Girls” - Bruno Mars

6 | FORBES JANUARY 20, 2014

INTRODUCING FEDEX ONE RATE.SM Simple, fl at rate shipping with the reliability of FedEx. Now you can fi ll a box and ship for a fl at rate. Find a location at fedex.com/onerate #onerate Terms, conditions and weight limits apply. Proper packing required. © 2013 FedEx. All rights reserved. FORBES

EDITOR-In-CHIEF IN BRIEF Steve Forbes

CHIEF PRODUCT OFFICER Lewis D’Vorkin The FORbEs MagazInE

EDITOR Randall Lane On Our New App ExECUTIvE EDITOR Michael Noer by lEWIs D’vORkIn aRT & DEsIgn DIRECTOR Robert Mansfeld What’s a magazine? At FORBES we think it’s an experi- FORbEs DIgITal ence, not sheets of paper. Increasingly, consumers do, too. vP, InvEsTIng EDITOR Matt Schifrin It’s about turning, clicking, tapping or fipping to discover, ManagIng EDITORs read, learn or be entertained. These actions seem natural. Dan Bigman – Business, Tom Post – Entrepreneurs, Bruce Upbin – Technology The magazine we’ve produced for 96 years has nearly sEnIOR vP, PRODUCT DEvElOPMEnT anD vIDEO 1 million subscribers. On Flipboard, only a few years old, Andrea Spiegel our attracted 1.8 million readers in October and ExECUTIvE DIRECTOR, DIgITal PROgRaMMIng sTRaTEgy Coates Bateman racked up 44.5 million fips. Still, magazine experiences

ExECUTIvE PRODUCER must evolve for new behaviors. In the age of social media Frederick E. Allen – Leadership they need to be far more social.

Tim W. Ferguson FORbEs asIa Most magazines remain solitary experiences. A reader’s Kerry A. Dolan, Connie Guglielmo, Kashmir Hill sIlICOn vallEy relationship is with the brand, the editors who pick the Janet Novack WasHIngTOn stories and the authors who write them. There’s never Michael K. Ozanian sPORTsMOnEy Mark Decker, John Dobosz, Luisa Kroll, Deborah Markson-Katz DEPaRTMEnT HEaDs been a way for readers to easily share, connect or be part of John Tamny OPInIOns a community. Kai Falkenberg EDITORIal COUnsEl We’re changing all that. Last January we launched an bUsInEss iPad app that made it easy to clip and share text, photos, Mark Howard CHIEF REvEnUE OFFICER charts or whatever. Pinch the screen with two fngers. Tom Davis CHIEF MaRkETIng OFFICER Charles Yardley PUblIsHER & ManagIng DIRECTOR FORbEs EUROPE Select and frame the content. Tap a or LinkedIn Nina La France sEnIOR vP, COnsUMER MaRkETIng & bUsInEss DEvElOPMEnT or button to share. With this issue we’re taking Miguel Forbes PREsIDEnT, WORlDWIDE DEvElOPMEnT a big leap forward. Now FORBES enthusiasts can be part Jack Laschever PREsIDEnT, FORbEs COnFEREnCEs Michael Dugan CHIEF TECHnOlOgy OFFICER of a frst-of-its-kind mini social network. Clippings are Elaine Fry sEnIOR vP, M&D, COnTInUUM included in an image stream for all app subscribers to see.

FORbEs MEDIa Tap any clip in the stream and go directly to the content— Michael S. Perlis PREsIDEnT & CEO or share it again. Editors select stories for each issue. The Michael Federle CHIEF OPERaTIng OFFICER community curates them for others. Tom Callahan CHIEF FInanCIal OFFICER Will Adamopoulos CEO/asIa FORbEs MEDIa “Stream,” as it’s called, was developed by MAZ, our app PREsIDEnT & PUblIsHER FORbEs asIa partner. A startup founded by ex-Apple and ex-Adobe de- Rich Karlgaard PUblIsHER signers and engineers, MAZ understands the challenges of Moira Forbes PREsIDEnT, FORbEsWOMan MariaRosa Cartolano gEnERal COUnsEl building new experiences with economic efciency. Most Margy Loftus sEnIOR vP, HUMan REsOURCEs media companies hire large, expensive stafs to re-create Mia Carbonell sEnIOR vP, CORPORaTE COMMUnICaTIOns their magazines for tablets and smartphones. The MAZ FOUnDED In 1917 solution repurposes PDFs used in print magazine produc- B.C. Forbes, Editor-in-Chief (1917-54) Malcolm S. Forbes, Editor-in-Chief (1954-90) tion by layering on actionable buttons. Last March our James W. Michaels, Editor (1961-99) Billionaires issue contained 2,000 links to Forbes.com posts. William Baldwin, Editor (1999-2010) “If you think about it,” says MAZ founder Paul Canetti, jaNuaRy 20, 2014 — volumE 193 NumBER 1 “we’ve been sharing content the same way for 20 years.

FORbEs (ISSN 0015 6914) is published biweekly, except monthly in February, April, June, July, September and December by Forbes LLC, Copy text, paste text, get text—words or links. ‘Stream’ is 60 Fifth Ave., , NY 10011. Periodicals postage paid at New York, NY and at additional mailing ofces. Canadian Agreement No. 40036469. Return undeliverable Canadian addresses to APC Postal Logistics, LLC, 140 E. Union Ave., East Rutherford, NJ 07073. Canada GST# 12576 9513 RT. POSTMASTER: Send address changes to Forbes Subscriber Service, P.O. Box 5471, Harlan, IA 51593-0971. part of the online world’s massive shift from text-based

COnTaCT InFORMaTIOn For subscriptions: visit www.forbesmagazine.com; write Forbes Subscriber Service, P.O. Box 5471, Harlan, IA 51593-0971; media to visual-based media.” or call 1-515-284-0693. Prices: U.S.A., one year $59.95. Canada, one year C$89.95 (includes GST). We may make a portion of our mailing list available to reputable frms. If you prefer that we not include your name, please write Forbes Subscriber Service. For this 30 Under 30 issue on iPads and iPhones, there’s For back Issues: visit www.forbesmagazine.com; e-mail [email protected]; or call 1-212-367-4141. For article Reprints or Permission to use Forbes content including text, photos, illustrations, logos, and video: visit www.forbesreprints.com; call PARS International at 1-212-221-9595; e-mail http://www.forbes.com/reprints; or e-mail audio, too. Bruno Mars has curated a 22-song playlist to [email protected]. Permission to copy or republish articles can also be obtained through the Copyright Clearance Center at www.copyright.com. Use of Forbes content without the express permission of Forbes or the copyright owner is expressly prohibited. accompany this special issue. Clip, share, join the stream— Copyright © 2014 Forbes LLC. All rights reserved. Title is protected through a trademark registered with the U.S. Patent & Trademark Ofce. Printed in the U.S.A. and listen in. It’s a special experience. F

8 | FORBES JANUARY 20, 2014

FORBES FACT & COMMENT — STEVE FORBES

“With all thy getting, get understanding” thE liES cONtiNUE

BY STEVE FORBES, EDITOR-IN-CHIEF

This year Democrats will soon changes that would have be wondering if ObamaCare covers changed the plans dramatically political shellackings. and led to large price increases. Nothing is more personal than health—for us, our children, parents, Fighting last War? grandchildren, friends. Messing with people’s medical care arouses If you had told any fnancial observ- worries and anger as no other er in 2008 that the Federal Reserve subject can. And this is where the would expand its balance sheet fve- Obama Administration made a fate- fold in fve years, you’d have encoun- ful miscalculation. We’ll tolerate tered astonished disbelief, followed some spin on taxes, spending, regu- by the assertion that if ever such a lation and scandals, but we have zero tolerance thing unfolded a Weimar Republic-like hyper- for lying or cynically twisting the truth regard- infation would ensue. After all, in the infation- ing issues that afect our access to health care beset 1970s and early 1980s, when the Consumer and the doctors we trust. Price Index was roaring ahead at a 13% annual It’s the White House’s brazen abuse of the clip and interest rates were headed for the moon— truth regarding ObamaCare that will lead to a short-term rates peaked at 21.5% and long-term Democrat debacle in November. We’re all too Treasurys at 15.75%—the monetary base (currency familiar with the President’s lies about our plus bank reserves on deposit at the Fed) had in- being able to keep our policies and doctors. creased 225% from 1970 to 1981, a 12-year period. But the contempt for the public continues. Contrast that to the 400% surge in the mon- Remember when millions of people and small etary base since 2008. While there are valid businesses received cancellation notices from arguments that Washington has been chang- their insurers and the President declared that, ing the CPI to understate the rise in the cost of okay, you could keep your insurance in 2014? everyday products and services, there’s no gain- Another lie. saying the fact that we are, thankfully, nowhere Here’s an astonishing excerpt from a letter near the horrors of the 1970s. sent to individual policyholders of Horizon What gives? Blue Cross Blue Shield of New Jersey: What gives is that we focused too much on the bloat of the monetary base and not nearly Horizon BCBSNJ wanted to let cus- enough on the unprecedented suppression of tomers keep their policies in 2014, based both short- and long-term interest rates. Never upon President Obama’s declaration that before had our central bank knocked down the he would allow cancelled plans to be re- overnight cost of money to near 0%. And never newed. The federal government, however, before had it attempted to beat the longer-term notifed the New Jersey Department of cost of money to a fraction of its real price. (In Banking and Insurance that current poli- the early 1960s the original Operation Twist— cies cannot be renewed without major named after the dance made famous by Chubby

JANUARY 20, 2014 FORBES | 11 FORBES FACT & COMMENT — STEVE FORBES

Checker—was mercifully short-lived. have been a housing bubble.) the practice in 2002, it was suspected It had been undertaken in a misbegot- Of course, since virtually no cen- that doctors and hospital administra- ten efort to strengthen the dollar.) tral banker today—not to mention tors were occasionally killing patients Only a handful of economists, political leaders or economists—un- to free up hospital beds. Procedures most notably FORBES columnist derstands monetary policy, an infation have (supposedly) been tightened. Bel- David Malpass, have pointed out disaster could still eventually unfold. gium also passed a euthanasia law in that this monetary version of price For now, though, credit suppression 2002, and Quebec is about to enact one. controls is a form of credit allocation. of a kind we’ve never seen before and Of course, advocates claim they only The federal government easily got growth-crushing levels of taxation want to end the misery of those writh- all the cash it wanted at ultracheap and regulation will keep us from en- ing in unspeakable pain. But this raises rates, i.e., defcits without tears. Big joying vigorous, sustainable growth. the question: Why don’t we do more companies had no trouble access- So don’t get too giddy over our medically to relieve such sufering? ing credit and putting their balance “improving” economy. We’re not The number of adults euthanized sheets in pristine order. But credit to sufering pneumonia, but we’re still in Belgium soared 25% between 2011 small and new businesses dried up, being worn down by a persistent fu. and 2012; the annual toll is now seven a drought magnifed enormously by times what it was when the law was bank regulators who told their charges hitlercare enacted and accounts for 2% of all to reduce risk and to document six deaths. A similar percentage in the ways to Sunday any loans to a nonbig Belgium is on its way to allowing U.S. would result in more than 50,000 borrower. Remember, small and new doctors, with parental consent, to kill killings. To put this in perspective, the businesses are the source of most children deemed to be aficted with total number of people murdered each new jobs. Through its quantitative “constant and unbearable physical year in the U.S. is about 16,000. In easings the Fed efectively sucked up sufering.” The kids must also sign of Holland euthanasia ofcially accounts much of the fnancial market’s short- on this, as if a child has the capacity for 3% of deaths (proportionately that term credit that normally would have to reason like an adult. would be 75,000 in the U.S.), but in gone to these businesses. We are on the malignantly slippery practice, the percentage is far higher. Malpass observes: “The U.S. pri- slope to becoming a society like that And now we’re on the way to killing vate sector has been facing one of the envisioned by Nazi Germany, one in children in the name of compassion. tightest money/regulatory policies in which “undesirables” are disposed of As euthanasia becomes more ac- history.” like used tissue. While the Nazis carried cepted—and we become more numb The fact that the Fed has started this ideology of death to its ghastly logi- to the horror of murdering people to taper, albeit at a tepid pace, is good cal conclusion, the belief that it would like this—we’ll descend to the next news. It will mean the beginning of be good for the human race to improve abomination: pressuring the sick to rebuilding our warped credit markets. itself—as breeders do with horses, dogs, discontinue treatment for a likely fatal There are two other, very obvious cows and other animals and plants— illness in the name of “saving scarce factors that explain why there has was also widespread in numerous other resources” for people who have more been no explosion in higher consum- countries, including the U.S., before years ahead of them. After all, an er prices. One is higher taxes and an WWII. It was called eugenics, and enormous percentage of medical costs ever more convoluted and corrupt tax under its banner countless hundreds of are wracked up by people who have code; the other is the chaotic uncer- thousands of people, particularly those less than six months to live. Britain tainty that Obama Care has visited on deemed mentally handicapped, were already has its own version of a death business and the American people. forcibly sterilized to prevent them from panel, which has a formula for deter- The suppression of interest rates fathering or birthing children. Before mining who gets expensive treatment has been mimicked by other coun- the war Nazi Germany killed upwards and who doesn’t. tries, with equally distressing results. of 8,000 children judged to be “men- Let’s be clear. We’re not talking about These have been magnifed by even tally defcient” or incurably ill. adults deciding they don’t want “heroic” stupider regulations and higher levels The Holocaust and other Nazi methods applied when they’re sufer- of taxation than those we sufer. atrocities sidetracked the eugenics ing a fatal illness; we’re talking about (Make no mistake, the Fed’s un- movement. But now it’s making a the conscious taking of a life by people dermining of the dollar since the early comeback in new garb—we want to who are trained to cure us of illness. part of the last decade has wrought kill only to reduce sufering. The true mark of a civilization immense havoc. For instance, with- Several countries already allow adult is in how it treats its most vulnerable out a weak dollar there would never euthanasia. In Holland, which legalized members. F

12 | FORBES JANUARY 20, 2014

FELDMAR • 310.274.8016 • FELDMARWATCH.COM HYDE PARK • CHERRY CREEK SHOPPING CENTER • 303.333.4446 • HPJEWELS.COM WEMPE • 700 FIFTH AVENUE & 55TH STREET • 212.397.9000 • WEMPE.COM

November 7 October 29 Twitter’s IPO confi rms that Evan Williams is a November 15 Michael Dell takes his November 4 billionaire and boosts Jack Dorsey’s fortune by E-tailer Zulily goes public, namesake computer Hedge fund billionaire Steven $450 million in one day. propelling founder Mark Vadon company private in a A. Cohen’s SAC Capital agrees into the billionaire ranks. $25 billion deal. to pay $1.8 billion in fi nes and penalties after pleading guilty to securities fraud. +200% +$4 BILLION YEAR-END NET WORTH: $6.6 BILLION RICHARD SCHULZE +166% TESLA MOTORS TAKES OFF IN 2013, DESPITE +160% A FEW SPEED BUMPS ELON MUSK +148% ALONG THE WAY.

WILLIAM ERBEY

WILLIAM ERBEY +$1.8 BILLION YEAR-END NET WORTH: $3.1 BILLION MARK ZUCKERBERG OCWEN FINANCIAL HAS MARK ZUCKERBERG +$11.3 BILLION +93% A BIG YEAR CATERING YEAR-END NET WORTH: TO UNDERWATER $23.5 BILLION HOMEOWNERS. FACEBOOK SHOOTS PAST ITS IPO PRICE IN JULY AND JOINS THE S&P 500 IN SHELDON ADELSON DECEMBER. +67%

JEFF BEZOS +51%

JEFF BEZOS +$12 BILLION YEAR-END NET WORTH: $35.6 BILLION AMAZON CEO’S FORTUNE HAS MORE THAN DOUBLED IN THE PAST TWO YEARS. November 12 Francis Bacon’s Three Studies of Lucian Freud sells for $142 million, the most ever for an artwork at auction. The next night Steven A. Cohen sells art for more than $80 million, including an Andy Warhol for $20.3 million.

August 3 Red Sox owner John Henry buys June 28 the Globe September 2 Jon Oringer becomes for $70 million; August 15 Eike Batista, the world’s seventh-richest a billionaire eight two days later Jef Private equity billionaire person in 2012, then worth $30 billion, months after Bezos pays $250 Josh Harris and a partner ceases to be a billionaire as stock in his Shutterstock’s IPO. million for the buy the New Jersey Devils oil and gas company, OGX, plummets. Washington Post. for $320 million.

7/2013 8/2013 9/2013 10/2013 11/2013 12/2013 SOURCES: INTERACTIVE DATA VIA FACTSET RESEARCH SYSTEMS; FORBES. NET WORTH DATA THROUGH DEC. 10, 2013.

JANUARY 20, 2014 FORBES | 15 LEADERBOARD 655 Netfix’s highest-ever price/earnings ratio, in March 2013, when its stock was at $192.

to success stock price being ReeD HASTingS $400

350 Netix’s subscriber base has doubled to 40 million since 2010, internet tV and its stock price quadrupled to $375 last year, making it the launches an original series, best-performing stock on the S&P 500. Its CEO’s long journey to 300 House of Cards, in February 2013—a huge hit. It wins three that triumph has been a tale any screenwriter would be proud of. emmys. now netfix plans to spend $3 billion on new content.

250

200

into AfricA cAtAstroPhe Graduates from Bowdoin col- Hastings tries to split netfix lege in 1983. Joins the Peace into two companies in 2011: corps and teaches math in Qwikster for dVds and netfix swaziland for two years. for streaming. loses 800,000 150 subscribers, share price plum- mets, and three weeks later he gives up the plan. rumors spread that he will be fred.

ceo in trAining obtains a master’s in computer 100 science at stanford in 1988 Source: InteractIve Data vIa streAming and starts Pure software to FactSet reSearch SyStemS. Unveils streaming service in 2007, make debugging tools. loses 90 confdence as ceo; tries to fre and within three years is sending himself. company sells for 12/31/12 6/21/13 12/18/13 movies to Xbox, apple tV and $750 million in 1997, giving him other devices. Joins the s&P 500 the cash to start netfix. in 2010. Profts from domestic growing PAins streaming surpass dVds in 2013. netfix settles a class- action lawsuit in 2006 over delayed mailings to expen- sive heavy users. Faces a tech crisis in 2008 when a software glitch keeps it from sending out dVds.

from Apollo 13 to iPo booby Prize beAting blockbuster netfix goes public in creates the netfix Prize for a In 2006 netfix ships its more cofounds netfix in 1997 to mail 2002—revealing how prof- better system to predict what than 42 million dVds to out dVd rentals for a monthly itable the business can be. people want to watch. Pays 6.3 million subscribers. - fee after getting hit with Blockbuster starts mailing out $1 million to the winner in buster falters and announces $40 in late charges on an dVds two years later. 2009 but decides implement- in 2013 that it’s closing its last Apollo 13 rental. by connie guglielmo connie by netfix gains its millionth IMaGes Hernandez / Getty Marcelo ing the solution wouldn’t be stores and shutting down its subscriber in 2003. proftable enough. mail-order service.

16 | FORBES januaRy 20, 2014 What could power tomorrow’s GLOBAL STOCK GROWTH?

More than 2 billion people will soon have disposable income for the fi rst time.

By 2025, 53% of the world’s population will have entered the middle class. The majority will be in the developing world, notably Asia.1

U.S. household net worth is at its all-time high

U.S. consumer spending — over 70% of GDP 2 — is likely to increase as rising employment and real estate prices further strengthen household fi nances.3 FSCPX FIDELITY® SELECT CONSUMER DISCRETIONARY PORTFOLIO These funds are looking for the companies poised to thrive. FSRPX FIDELITY® SELECT RETAILING PORTFOLIO At Fidelity, we use our global reach and research expertise to bring you smart investing ideas. Get our full perspective and fund details now. FDFAX FIDELITY® SELECT CONSUMER STAPLES PORTFOLIO

Fidelity.com/stockgrowth | 800.FIDELITY

Before investing in any mutual fund, consider the investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully. Keep in mind that investing involves risk. The value of your investment will fl uctuate over time, and you may gain or lose money. Stock markets are volatile and can decline signifi cantly in response to adverse issuer, political, regulatory, market, or economic developments. Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks, all of which are magnifi ed in emerging markets. 1 McKinsey Institute as of June 2012. 2 The World Bank. 3 Haver Analytics as of June 2013. Fidelity Brokerage Services LLC, Member NYSE, SIPC. © 2013 FMR LLC. All rights reserved. 666521.4.1 LEADERBOARD 44% Amount by which T-Mobile’s net subscriber growth in the third quarter of 2013 exceeded both AT&T’s and Sprint’s. forbes makeover T-MOBILE’S JOHN LEGERE Our fashion pros call up a new look for the telecom CEO.

JOsEPh AbbOuD: the award-winning designer and KAthy iRElAnD: the supermodel turned supermogul entrepreneur got his start at Louis boston before serving is the chief executive and chief designer of kathy ireland as director of menswear design for ralph Lauren. worldwide, a design and marketing frm she launched he launched his namesake brand in 1987 and is currently in 1993. Women’s Wear Daily has named her one of the the chief creative director for men’s wearhouse. 50 most infuential people in fashion.

Before After

thE VERDiCt JA: he’s so much more put together. he’s kind of casually cool, not trying too hard. JACKEt Ki: he keeps his youthful attitude Ki: accenting the blazer with a while enhancing his strong pres- windowpane plaid shirt gives an ence as a passionate ceo. exciting pop of pattern.

JA: it just feels like a more expensive shiRt jacket with a little more shape, and JA: i’m not sure when it happened he’s obviously a guy who can wear that if you’re a ceo and you want to a leaner cut. be cool you wear a t-shirt. that was a black date in fashion history. shOEs JA: the suede shoe with a sneaker shOEs bottom is a cool way to do some- Ki: his shoelaces are too long—a thing a little casual but not feel like safety problem and a style deterrent. he should be playing .

JA: matching his laces to his shirt is Ki: combining the crisp trousers trying too hard. i’m not buying that with the taupe suede shoes helps for a guy his age anyway. him stay fresh and hip.

the “after” image is a simuLated image of what John Legere wouLd Look Like if he had actuaLLy ParticiPated in the forbes makeoVer, which he did not. nor does he endorse any Products Pictured here.

eNTrePreNeUrs bluE APROn EstiMizE former venture capitalist matt crowdsourcing comes to salzberg and two partners began stock picking. estimize’s users delivering unusual ingredients estimate companies’ future THE YEAR’S and easy recipes to your door earnings, and its 18,000 for $9.99 in august 2012. with forecasters have beaten wall $8 million from investors they’ve street’s seers 69% of the time. it has won HOTTEST STARTUPS now reached 300,000 meals a month and a deal to get its data onto bloomberg’s can serve 80% of the u.s. population. 300,000 terminals. COinbAsE hOMEJOy A FORBES panel of venture capitalists and it’s the easiest way to buy and transfer mopping your home for $20 an hour may bitcoin. with $31 million in backing, it helps not sound lucrative, but brother and sister entrepreneurs picked these new U.S. businesses 17,000 merchants, including adora and aaron cheung already have their from more than 300 contenders, judging them okcupid and reddit, use the cleaning service operating in 31 on breakthrough ideas, fast growth, solid funding virtual money and has more than cities after raising $40 million 600,000 users. it takes a 1% cut in funding. they pay their and promise for the future. For more, go to forbes per transaction on the hyper- cleaners a fair $15 an hour and Jacket ($2,495), shirt ($350) and Jeans ($385) by Ports 1961; www.Ports1961.com. watch ($1,095) by ct scuderia; www.ctscuderia.com. shoes ($1,220) by Louis Vuitton; www.LouisVuitton.com. www.LouisVuitton.com. Vuitton; Louis shoes ($1,220) by www.ctscuderia.com. ct scuderia; by ($1,095) watch www.Ports1961.com. 1961; Ports and Jeans ($385) by ($350) shirt ($2,495), Jacket toP: aP; makeoVer image (Left): getty images. images. (Left): getty image aP; makeoVer toP: .com/hotteststartups. volatile currency. plan to scale up big in 2014. RObEhMED nAtAliE by ERiC AzEVEDO; stARtuPs AssistAnt: FAshiOn DEACEtis; JOsEPh DiRECtOR: stylE CAMEROn R. nEilsOn; PhOtOgRAPhER: MAKEOVER: CEO

18 | FORBES januaRy 20, 2014 NETJETS IS A BERKSHIRE HATHAWAY INC. COMPANY. ALL AIRCRAFT OFFERED BY NETJETS® IN THE OR USE UNDER THE MARQUIS JET CARD® FOR FRACTIONAL LEASE, AND PRIVATE SALE, JET TRAVEL CARD™ PROGRAMS ARE

Trust cannot be bought,

BUT IT CAN BE EARNED.

Relying on the integrity of another is something that evolves over time – when there’s a good reason to in the first place. That’s what only the highest investment in safety and the reputable backing of Berkshire Hathaway can do for you.

for business, for family, for life

FIND OUT WHAT CORNERS WE DO NOT CUT, EVER / 877 JET 2806 / NETJETS.COM LEADERBOARD 14 Number of Adam Sandler’s flms that have grossed more than $100 million domestically.

ASK 50 BILLIONAIRES HOLLyWOOD THin cATs THE mOsT OvERpAid AcTORs

How many days do you exercise each week? Adam Sandler is one of the few movie stars who can 0 11.1% still demand a paycheck 31.1% north of $15 million per 1 nearly flm. But is he worth it? Not every day 8.9% according to our calcula- tions, based on how much 28.9% an actor’s last three movies 20.0% 2 or 3 earned at the box ofce per around 5 dollar of pay. Jack and Jill, in which he played twins, grossed $150 million but respoNses to aN aNoNymous poll oF 50 members oF the Forbes world’s billioNaires list. cost so much to make that it lost money, and UP-AND-COMERS That’s My Boy was a major bomb. A consolation: 2012’s animated Hotel Transylva- TO YOUR HEALTH 1. adam sandLer returNs 1 $3.40 For every nia was the biggest hit of his Struggling to get t after your $1 paid career.

holiday binges? These entrepreneurs 2. KaTHerIne HeIGL $3.50 For every $1 paid want to help you. 27 Dresses in 2008 made her the new queen of romantic comedies … until fops like Killers and One Michael Horvath and for the Money. Mark Gainey STRAVA horvath, 48, and gainey, 45, created their app in 3. reese WITHerspoon $3.90 For every $1 paid she’s in the middle of reinventing her career to 2009 to let you track a run or a bike ride with your produce her own movies. expect her to give herself a smartphone; its biggest draw is that paying mem- big pay cut. bers get to compete with other local users, as well as set training goals. in 2013 they doubled their worldwide user base and tripled their revenue. they’ve raised $25 million in funding. 4. nIcoLas caGe $6.00 For every $1 paid we didn’t include animated movies; if we did, his dreamworks hit, The Croods, would make him Eric Carreel and Cédric Hutchings look better. WITHINGS Five years ago the two Frenchmen launched a wi-Fi- 5. KeVIn James $6.10 For every $1 paid enabled scale that sent weight, fat-to-lean ratio and he was one of the flm industry’s most bankable other data to your smartphone and coached you on actors until he fopped in 2012 with Here Comes improving your results. Now 54 and 37, they’ve added the Boom. other devices, including blood pressure monitors, and they raised $30 million in a funding round this past summer. 6. denZeL WasHInGTon $8.30 For every $1 paid as one of hollywood’s most respected actors he can Je Hyman RETROFIT demand a huge paycheck, but he doesn’t always win a visit to a weight-loss resort inspired hyman, 45, to start at the box ofce. a service that gives its users personalized programs to lose 10% to 15% of their weight in 12 months, interacting 7. sTeVe careLL $10.00 For every $1 paid with coaches through skype. he says more than 90% of he had a major misfre with The Incredible his clients have shed an average of 20 pounds within a Burt Wonderstone. it grossed just $22 million year, and half of them are men. retroft has raised $15.7 million, and it nearly worldwide. tripled its customer base in the past year. 1average proFit to the studio based oN the costs aNd reveNues oF each oF the actor’s last three movies iN the three years eNdiNg JuNe 2013. up-and-comers BY KaTHrYn dILL; acTors BY doroTHY pomeranTZ pomeranTZ doroTHY BY dILL; acTors KaTHrYn BY up-and-comers cage: alberto e. rodriguez / getty images; James: evaN agostiNi / iNvisioN / ap; washiNgtoN: moNica schipper / getty images; carell: todd williamsoN / iNvisioN ap williamsoN carell: todd images; / getty moNica schipper / iNvisioN ap; washiNgtoN: agostiNi evaN James: images; e. rodriguez / getty alberto cage: top: Newscom; saNdler: schulz / dpa / laNdov; heigl: astrid stawiarz / getty images; witherspooN: JohN sciulli / getty images; images; / getty witherspooN: JohN sciulli images; / getty stawiarz heigl: astrid / laNdov; / dpa schulz saNdler: Newscom; top:

20 | FORBES JANUARY 20, 2014 Stories of Innovation

I believe that GoToMeeting with HDFaces allows us to build much stronger relationships.

Investor’s Business Daily CMO John Becker

Try it free for 30 days Start your own innovation story with GoToMeeting. Download your free trial today at gotomeeting.com. LEADERBOARD $349 MILLION Total amount of venture capital invested in food tech companies like Hampton Creek in 2012, up 37% from the year before. active conversation

HOW SMART IS INVESTING IN ART? @TODDNEV Buy art that makes you happy. That’s the return.

@WINZONLINE Art has yielded me the high- est return of all investment classes. Own over 70 pieces from three continents … lack of liquidity, though.

@AMOURCOLETTE It’s about the art, not invest- MAKING THE EGG OBSOLETE NHL wOES ment. Whatever it may yield FORBES, DECEMBER 16, 2013 FORBES, DECEMBER 16, 2013 is simply a bonus. 37,172 VIEWS ON FORBES.COM 11,796 VIEWS ON FORBES.COM Josh Tetrick sees the future in mayonnaise, staf reporter Pro hockey is a great busi- 365 WAYS TO GET RICH ZA-ZAAM FLAH Ryan Mac reported. The CEO of the startup ness—in Canada. In the The problem is where do Hampton Creek is pushing an eggless version that he says is U.S., it’s mostly a money- you get the little money far healthier and cheaper than the usual slop and is a frst step loser, staf writer Tom Van that is required to get more to a new sustainable food industry. Investors, including Bill Riper revealed. When a money? Gates and , have agreed to the tune of $6 million. reader suggested that the When commenters started weighing in on the article online, U.S. is a growth market to KELVIN LASWAI Tetrick jumped right in. “Nothing against San Francisco be carefully tended, fel- 366: Shut down your or its food, but with everybody dieting, who eats mayon- low commenter K. Webb Facebook and get a job! naise anymore?” asked Bodo. Tetrick shot back, “Over $11B pounced: “For the U.S. to in sales last year—and growing.” Gear Mentation wrote, “An be considered [that] you PEDRO SOUSA egg substitute is great, as long as it has at least as much bal- would expect there to be Plenty of entrepreneurs use anced protein.” Tetrick’s response: “Plants contribute over a number of cities capable Facebook (and other social 60% of the per capita supply of protein around the world. of proftably sustaining an media) to make money. Just Closer to the Hampton Creek HQ (in North America), NHL team that currently saying. animals contribute about 70% of our protein. The plants don’t have one … . There we use have it.” Joseph Brunner: “News fash to liberals and aren’t any.” Ronald Pudzs LUCIEN HOOPER TURNED $1,000 INTO $42 MILLION tree huggers: God created eggs over billions of years. It’s added, “What I don’t un- @BILL_SPUR the perfect protein and lutein source. We don’t want your derstand is why the NHL As soon as I fnish my time- do-gooder plant goo substitute.” Tetrick: “God also created would expand … in the travel machine, I’ll go back plants, I think :).” Zan Shin commented, “Since the energy southern states before and make this investment. input to food energy output is so much lower, and billion- fully developing hockey aires like Gates are helping subsidize startup costs, the in the north. Teams in price should also be dramatically lower than real eggs. And Seattle or Portland would fAvOrITE yet nowhere in the article is this mentioned.” Tetrick didn’t create so much more ex- respond to that one. Meanwhile, drew citement.” Susie Crawfsh TwEET an almost 400-word article out of a single sentence in the knew just who to blame: @RosabethKanter (on new story. Under the headline AL GORE GOES VEGAN, WITH “NHL Commissioner GM CEO Mary Barra): LITTLE FANFARE it reported, “Gore’s recent decision to Bettman keeps blocking It’s official. Girls forgo animal products surfaced as an ofand reference in NHL expansion in Can- like cars. And car a FORBES magazine piece,” and added, “Gore’s ofce did ada. Could you forward companies like women not immediately respond to a request for comment.” him this article, please?” driving them.

22 | FORBES januaRy 20, 2014

thought leaders Paul JohNsoN — CurreNt eVeNts Dealing with iran ImpossIble?

Whether or not the agreement Qatar) are particularly vulnerable to reached with Iran in Geneva last a single, devastating blow. In terms November prevents Iran from creat- of practical realities it’s doubtful ing a nuclear weapon, the question that Iran could manage to explode a still remains—why did Iran want to single nuclear weapon in Israeli or make one in the frst place? Saudi airspace any time in the near Possessing a nuclear bomb isn’t the future. But Israeli and Saudi mili- same thing as having a nuclear capabil- tary planners can’t aford to make a ity. Pakistan has had nuclear weapons mistake that could jeopardize their for nearly 20 years but has failed to nations’ survival. Iran’s going nuclear create an efective means of delivering is as much a psychological problem them to anything beyond small local as it is a military problem. targets. Yet a quarter of the nation’s What would it take for the Israelis armed forces are permanently occu- delivery systems serve to enforce Vladi- and the Saudis to feel secure? Iran pied in protecting these weapons from Putin’s bullying and muscle-man would have to formally renounce theft by domestic and foreign terrorists. displays. Other than its wealth in natu- its basic foreign policy aims, which The chief consequence of Pakistan’s ral energy Russia’s economic power is include the destruction of the Jewish possessing nuclear weapons is that it unimpressive. The country would be state and the Sunni kingdom, and de- has intensifed hostile relations with better served by investing its resources molish all of its nuclear installations, India. Pakistan has the means to deliv- in its defective infrastructure instead including those relating to purely er one or two horrifc blows to India— of in the pretense of being a military peaceful energy. That’s a tall order— at the cost of its own existence. Having superpower. Sadly, such a revolution and one not likely to ever be met. an A-bomb is a kind of suicide pill for in global thinking is inconceivable to However, both the Israelis and the a second-rate power like Pakistan. the blinkered men currently in control. Saudis are realists and will likely settle Germany and Japan, two of the They prefer to retain the means of for something less than 100% security. world’s largest and most efcient destroying any country on the planet A major issue is the Geneva agreement, economies, have never sought to cre- than to create a truly modern econo- which is riddled with loopholes that ate nuclear weapons. Indeed, both my that would beneft their people. work in Iran’s favor and depends—to have made a of not doing so, Wishful thinking an unusual degree in international saving them a great deal of money protocols—on the good faith and per- and simplifying their foreign and Iran wants nuclear weapons for reasons sonal word of the signatories. defense policies enormously without that are closer to metaphysics or theol- Since the mullahs took over a signifcantly weakening their posi- ogy than strict military policy. Yet there’s generation ago, Iran has had a long tions as major powers. The universal one faw in this argument: If Iran stands record of wild threats and bloodthirsty political consensus in both countries to beneft so little from these weapons, menacings. It is in roughly the same is that the veto on nuclear weapons why are its two chief enemies, Israel and position Hitler’s Germany was in at the should remain fxed indefnitely. Saudi Arabia, so opposed to and horri- end of the 1930s. Nobody trusts Iran, Other than such active superpowers fed by the pact reached in Geneva? and striking a deal with its leaders as the U.S. and China, it’s hard to think The obvious answer is that because depends entirely on what you have at of any country that could be shown to of the geographic concentration of risk. If you are jeopardizing your entire beneft from having a nuclear capabil- their military, economic and demo- nation and people—as the Israelis and ity. A possible exception would be Rus- graphic resources both powers (as the Saudis are—then, short of a mira- sia. Its 8,500 or so atomic warheads and well as others in the region, notably cle, a deal is not going to happen. F

Paul Johnson, EmiNENt BRitiSh hiStORiAN ANd AUthOR; DaviD MalPass, glOBAl EcONOmiSt, pRESidENt OF ENcimA glOBAl llc; aMity shlaes, diREctOR, thE 4% gROwth pROJEct, gEORgE w. BUSh iNStitUtE; ANd lee Kuan yew, FORmER pRimE miNiStER OF SiNgApORE, ROtAtE iN wRitiNg thiS cOlUmN. tO SEE pASt cURRENt EvENtS cOlUmNS, viSit OUR wEBSitE At www.forbes.coM/currentevents.

24 | FORBES JANUARY 20, 2014 Startup to IPO.

Change for the better. Switch and you could save with GEICO.

geico.com | 1-800-947-AUTO | local offi ce

Some discounts, coverages, payment plans and features are not available in all states or all GEICO companies. GEICO is a registered service mark of Government Employees Insurance Company, Washington, D.C. 20076; a Berkshire Hathaway Inc. subsidiary. GEICO Gecko ©1999-2014. © 2014 GEICO thought leaders george leef — CaPItal floWs More College Does Not Beget More econoMic ProsPerity

In hIs fIrst address to Congress Wolf shows that when governments President Obama argued that the U.S. attempt to speed up economic progress needs to put far more people through by spending more on formal education, college so that our economy will remain they mostly squander resources. competitive with those of other nations. One example Wolf gives is Egypt, He set forth a goal of again having “the which “invested” heavily in higher edu- highest proportion of college graduates cation. That did not lead to rising eco- in the world.” nomic output, however, because little of Failure to raise our educational at- the students’ learning at their univer- tainment level, on the other hand, “is a sities coordinated with the skills and prescription for economic decline.” knowledge needed for entrepreneur- The President’s thinking is shared ship and improving efciency in the by many others. Economic success, Egyptian economy. Instead, it created a both individually and at the national that don’t call for anything more than mass of people with university degrees level, tends to correlate with educa- basic trainability. who expected high-paying jobs that did tion. People (and countries) with little Conclusion: Having a college educa- not and could not exist. education are mostly poor, while people tion is neither a necessary nor a suf- The key point is that formal educa- (and countries) with very advanced ed- fcient condition for personal success. tion doesn’t necessarily lead to knowl- ucation are mostly wealthy. Therefore, Many people prosper without college, edge and skills the individual can use it’s tempting to jump to the conclusion and many who have B.A. degrees or productively. that partaking of more education will higher nevertheless struggle in low- That was true in Egypt and is equally boost an individual’s income and that paying jobs, often saddled with high true with many American college grad- a country can increase prosperity by uates. Hordes of academically “investing” more in education. weak and disengaged kids have Resist that temptation, which is More seat tiMe, been lured into college with the based on fallacious reasoning. credits and degrees idea that getting a degree—any True, education correlates with don’t autoMatically degree, from anywhere—means prosperity and economic growth, but translate into More they’ll enjoy a hefty gain in one of the crucial lessons of logic is that Productive PeoPle earnings. Unfortunately, many correlation does not necessarily imply of them coast through without causation. We must apply it here. adding anything to their human People who have high intelligence student loan debts. capital. They may have a degree, but and ambition often earn college and What that means for nations is that that and $3 will get them a cofee at advanced degrees. Sometimes that it isn’t possible to generate economic Starbucks, where they’re apt to work. formal education is important in their progress just by “investing” in educa- People are good at fguring out later success, but many say that their tion. More seat time, credits and de- how to maximize their human capital, education had very little to do with it. grees don’t automatically translate into but government inducements to take Conversely, some extremely successful more productive people. certain kinds of approved education people dropped out of college or never Don’t take my word for it. I rec- leads many to waste time and money. attended at all. And as those ridiculous ommend reading the book by British Instead of boosting the nation’s pro- Occupy Wall Street protests taught us, education professor Alison Wolf, Does ductivity, that depresses it, just as huge numbers of college graduates are Education Matter? (Penguin Books, make-work jobs and needless govern- unemployed or employed only in jobs 2002). The American education estab- ment projects like the famous “bridge lishment ignores that book because it to nowhere” do. GeorGe Leef, A FORBES cONtRiBUtOR, iS thE DiREctOR exposes (and this is its subtitle) myths The best education policy: Leave it OF RESEARch At thE JOhN W. POPE cENtER FOR highER EDUcAtiON POlicY. about education and economic growth. to individual choice in a free market. F

26 | FORBES JANUARY 20, 2014 ©2013 JetSuite® All Rights Reserved. All fl ights operated by JetSuite Air, FAA Air Carrier Certifi cate #9SUA667M. REFRESHINGLY quotes online.WithJetSuite,youwillknow–tothepenny–what aregoingtopay JetSuite isstilltheonlyprivatejetcharteroperatortoinstantly provideandguaranteeall-in CJ3s pricedbestEastoftheMississippi; Phenom100spricedbestWest oftheMississippi. available online–forevenlowerratesonourfl eet ofWiFi-equippedjets.JetSuiteEdition airports inyourdesiredregion.Orsignoursimplefour-page SuiteKeyMembershipcontract– fl y. GenerateyourquotetodayatJetSuite.com,whereyoucanalsosearchthelowestcost JetSuite.com ARGUS PLATINUM RATED

866-779-7770 TRANSPARENT before you thought leaders rICh Karlgaard — INNoVatIoN rules Enduring succEss soft-EdgE ExcEllEncE

A existential debate exists within most companies and among Dell’s comeback most managers. It’s between the hard (fnancial rigor) and soft (sustaining Dell Computer (now just Dell) was cultural values) edges. Which side— the fastest-growing American stock in hard or soft—should command the the 1990s. An investment of $1,000 on CEO’s attention? There’s a right answer Jan. 1, 1990 was worth nearly $1 mil- for every company, and it will vary lion by decade’s end. During the 1990s from year to year. But from my obser- Dell blew past its competitors Gate- vational perch, it’s apparent that far way, Compaq and Hewlett-Packard. too many CEOs invest too little time Dell’s hard-edge excellence was an in their soft edge. In the long run their extension of founder Michael Dell’s companies will pay for this mistake. operational and supply-chain focus. There are three main reasons for proft margins, higher stock market Dell was legendary for its tight con- this error. multiples, more loyal customers and trol of costs, mastery of logistics and • The hard edge is easier to quantify. more committed employees. Soft- speed of delivery, among other faw- The metrics around hard-edge advan- edge excellence is the ticket out of lessly executed skills. No personal tages, such as speed, cost, supply chains, Commodityville. computer vendor could match Dell’s logistics and capital efciency, are well • Companies strong in the soft edge are oferings of choice, cheap prices, good understood. The data are relatively easy better prepared to survive a big strate- enough quality and fast delivery. to gather, search, analyze and manage. gic mistake or cataclysmic disruption Dell’s spotless execution was per- • Successful hard-edge investment that would sink companies without it. fect for an era in which IT departments yields a faster return. Spending Loyalty, passion and commitment are bought PCs and laptops for employees. money on technology that trims costs the dividends of a strong soft edge. But Dell’s advantages were trumped or cuts time in a supply chain seems • Hard-edge strength is absolutely by a sudden shift toward smartphones like a no-brainer. necessary to stay alive and compete, and tablets and by employees bring- • CEOs, CFOs, chief operating ofcers, but it provides a feeting advantage. ing their own technology to work. boards of directors and shareholders The hard edge is easier to clone Now Dell is a private company. As speak the language of fnance. These than soft-edge strength, especially such, it has a second shot at greatness, people, the company’s hard-edgers, as technology and software become without shareholders second-guessing are experienced and comfortable with cheaper and more accessible. Apple’s its every wiggle. The early signs are numbers. To these left-brain busi- great design and loyal fan base—soft- encouraging. Dell is paying of its loans ness titans, the soft edge looks like edge advantages—are the essence of ahead of schedule, and employee mo- the realm of artists, idealists, hippies, Apple’s enduring appeal more than rale is on the upswing. That’s a start. poets, shrinks and do-gooders. This its supply chain and capital ef- But Dell also needs to rediscover its sets up a Mars versus Venus dynamic. ciency, great as those are. What gives soft edge. It needs to enchant us with Does the hard edge, therefore, Starbucks its ultimate edge? The new products and services. It needs to have the more convincing case in the best cofee? No, say people who love make us care about the company and fght for time and money? No, just cofee. Cheaper locations? Quite the its mission and to cheer for its success, the easier case. Let me make the case opposite. It’s Starbucks’ soft-edge ex- as we once did. Steve Jobs recaptured for investing some time and money in cellence, which includes trust, brand Apple’s soft edge. Michael Eisner your company’s soft edge. and cheerful employees, that creates made Disney exciting again. Dell can • Soft-edge attributes, such as trust, a consistently satisfying experience. do the same, and I hope it does. f teamwork, taste and story, lead to Rich KaRlgaaRd iS thE pUBliShER At FORBES. hiS NExt BOOk, the soft edge: where great companies find lasting greater brand recognition, higher success, will BE OUt iN ApRil. FOR hiS pASt cOlUmNS ANd BlOgS viSit OUR wEBSitE At www.FORBES.cOm/kARlgAARd.

28 | FORBES JANUARY 20, 2014 THE NEW VISA® BLACK CARD

MADE OF STAINLESS STEELSM

Black Card Members Enjoy: An Industry-Leading Rewards Program § Exclusive 24-Hour Concierge Service VIP Treatment at over 3,000 Properties § Unlimited VIP Airport Lounge Visits Members Only - Black Card Magazine § Luxury Gifts from the World’s Top Brands

APPLY NOW AT BLACKCARD.COM OR CALL 866-BLACK CARD.

BLACKCARD is a registered trademark used under license. © 2007-2014 Black Card LLC. Patent Pending. Visa Black Card is issued by Barclays Bank Delaware. STRATEGIES GAMBLING

The Biggest Bet Ever George Soros, John Paulson and Leon Cooperman have secretly moved into battle mode against Sheldon Adelson. The stakes: the future of gambling in America. By NathaN Vardi

n November George Soros, John general to sign a petition against online gam- Paulson and Leon Cooperman, three bling. He’s hired former New York governor of the most successful hedge fund George Pataki, together with former Arkansas managers ever, quietly participated senator Blanche Lincoln and former in a rights ofering and became major mayor Wellington Webb to lead the lobbying Ishareholders in Caesars Acquisition Co., a efort. “There is no reason to put a casino on spinof from casino company Caesars En- everybody’s kitchen table, in the bed of every tertainment that has ownership in Caesars’ young person, whether they are underage or online gambling assets. of age, or on mobile phones,” says Adelson. “I Their stakes—previously unreported—are don’t want people to get addicted.” all part of an unprecedented bet on the future So far the markets are betting he’ll lose. of the $60 billion casino business in America, as states from New Jersey to Delaware and Nevada legalize a practice that the Depart- ment of Justice said was illegal just two years ago. They were joined by billionaire private equity managers Leon Black, David Bonder- man, Marc Rowan and Joshua Harris, whose two respective buyout frms are the biggest shareholders in Caesars Entertainment and doubled down by investing a combined $484 million in Caesars’ online gambling vehicle. Already a roster of billionaires, from brothers Lorenzo and Frank Fertitta, who control the Ultimate Fighting Champion- ship, to MGM Resorts’ biggest shareholder, billionaire Kirk Kerkorian, are betting big on online gambling’s comeback. There’s just one problem with all of this: Sheldon Adelson. The very week that Cae- sars’ online gambling play started trading on the Nasdaq, Adelson, the nation’s ffth- richest man—and one of the country’s biggest political donors—thanks to his vast casino holdings, unleashed an army of lawyers and lobbyists on Washington and state capitals, telling FORBES he will “spend whatever it takes” to stop online gambling in America. His advocacy group—the Coalition to Stop Internet Gambling—is already up and run-

, and is working to get state attorneys forBeS Brodner for Steve

30 | FORBES JanuaRy 20, 2014 Shares of Caesars’ online gambling spinof operations, leaving the then $1.4 billion U.S. are up more than 30% from their rights of- online poker market dominated by two of - fering price. But while Adelson’s moralistic shore companies, PokerStars and Full Tilt stance may be laughable to opponents, given Poker, which profi ted immensely because of the potential long-term threat a shift to on- the high-margin nature of the business. But line gambling poses to his industry, they still federal prosecutors and agents kept inves- EXECUTIVE take it seriously. His Las Vegas Sands, with a tigating the companies, seizing their funds SUMMARY recent stock market valuation of $60 billion, and eventually in 2011 shutting down the NET LOSSES is worth more than all the other U.S. casino websites of the major online poker compa- companies combined. Adelson spent some nies that cater to the U.S. and indicting their $100 million unsuccessfully trying to get a founders. In the weeks that followed Full Tilt Republican into the White House in 2012. collapsed amid accusations made by the U.S. “What I have heard Adelson say is, ‘I am Attorney in that it was operat- very rich, and I don’t like Internet gaming,’ ing a Ponzi scheme. PokerStars settled the and those things are true,” says Mitch Garber, civil charges the government fi led against it CEO of Caesars Acquisition Co. But “Shel- by paying $731 million, but its founder, Isai don’s eyes are closed to the fact that all goods Scheinberg, who is not a U.S. citizen (he’s and services are ultimately going to be pur- Israeli-Canadian), has not come to the U.S. to chased on the Internet.” face the criminal charges fi led against him. For years online The government also indicted Ayre, a Cana- gambling in America “Sheldon’s dian who has also not returned to the U.S. belonged to of shore eyes are Not long after shutting down the of shore companies willing to operators, the Department of Justice re- The New Jersey Nets’ closed to the move to Brooklyn was a take on the federal versed its long-held opinion that all forms of brilliant fi nancial maneuver, government, which fact that all online gambling are illegal, unleashing states boosting the team’s value declared all online goods and that wanted to regulate and tax online gam- 48% to $530 million, ninth highest in the NBA. In gambling to be il- services are bling except sports betting. Sensing profi ts, legal. In 2003 online the billionaires followed. Jake Appleman’s Brooklyn going to be Bounce: The Highs and Lows poker took of when Why the turnaround? Expensive lobbyists of Nets Basketball’s Historic Christopher Money- purchased on and lawyers are a big part of the answer. Since First Season in the Borough maker, an unknown the Internet.” 2007, for instance, former New York senator (Scribner) we see how the accountant from Alfonse D’Amato has been paid to be chair- Nets hoped to move away Tennessee, qualifi ed man of the Poker Players Alliance. That Wash- from “the idea of New Jersey” and toward making in an online tournament for the main event ington lobby group received funding from “Brooklyn” more a state of at the World Series of Poker and won poker’s the Interactive Gaming Council, a Vancouver mind than a mere spot on top prize, together with $2.5 million. Online group backed by fi rms including Full Tilt a map. Unfortunately, the poker companies became big sponsors of Poker. The American Gaming Association, the book doesn’t dig very deep. poker programming on cable outlets like the casino industry’s powerful lobby, is now back- Instead, Appleman of ers a game-by-game rehash of Travel Channel and ESPN. By 2005 the com- ing online gambling with everything it’s got. the season. It’s more than pany that ruled the U.S. online poker market, The stakes are huge: Private equity fi rms just box scores; the author Gibraltar-based PartyGaming, conducted Apollo Global Management and TPG are weaves in quotes and stories an IPO on the London Stock Exchange that still trying to salvage their 2006 LBO of the from his time reporting made its American founder, Ruth Parasol, company that left it saddled with $28 billion on the team—but it adds little to the up-and-down the nation’s richest self-made woman. A year in debt. They see online gambling as a way to narrative fans already know. later then billionaire Calvin Ayre, who ran a make up for Caesars’ missing out on Macau, Still, for Nets faithful dealing sports-betting website from Costa Rica, was the biggest casino revolution in decades. with the current dif cult featured on FORBES magazine’s cover with So while Adelson’s limitless money—and season, it’s at least a return the headline “Catch Me If You Can.” his willingness to spend it—may slow the to a more optimistic time. —Chris Smith But in the fall of 2006 Congress passed the momentum for online gambling by blocking Unlawful Internet Gambling Enforcement its spread into big states like California and Act (UIGEA), strengthening the Justice De- Florida, the odds of him stopping it or bully- partment’s tools to go after online gambling ing his rivals out of the game are slim. He’s fi rms operating in the U.S. Some companies, got lots of chips, but all the other players at like PartyGaming, quickly ceased their U.S. the table do, too. F

JANUARY 20, 2014 FORBES | 31 PROMOTION // ENERGY Today’s Green Data Center Good for the Bottom Line and the Planet

By Nancee Ruzicka

he explosion of online and cloud-based services CEO Jeff Monroe reports that since opening its first has propelled the data center from a back-offce data center facility module in January 2012, “capacity T data storage and retrieval facility to always-on doubled by September 2013, and we expect to see this critical infrastructure generating corporate revenue. same exponential growth in 2014, with no slowdown in Today, data centers are massive facilities that require up sight.” Verne Global provides the facility with the mechanical to 100 megawatts to operate on a 24/7 basis. Building and physical security and network connectivity required a greener data center is good for the planet, but when for businesses of any size that want to locate data center done right, it’s also good for business. servers and infrastructure on its campus. Yet cost is perhaps the most compelling reason to look to the North. Because of its renewable sources and unique location, Landsvirkjun, the National Power Company of Iceland, and Verne Global can offer 15-year visibility into energy pricing, something that is unheard of in today’s global energy markets. BMW recently relocated some of its high-performance computing applications to Verne’s campus, reducing the cost of running those applications by 82% and eliminating 3,570 metric tons from its carbon emissions. The electric grid in Iceland is optimized for power-intensive industries, and Landsvirkjun delivers around 1,400 mega- watts on a constant basis to international industries located Geothermal power valve there. According to Bjorgvin Sigurdsson, EVP of Marketing Footprints in Carbon and Business Development at Landsvirkjun, “As the size and Data centers are facing a number crunch. The industry complexity of data centers increase, the long-term security uses 2% of all electricity generated worldwide and data of the power supply offered in Iceland becomes even more centers inject 259 million metric tons of carbon into the compelling than the environmental qualities of the renewable atmosphere. The cost of power is unpredictably rising, power production.” accounting for 20% to 60% of operating expenses over Verne Global is poised to become a central location the life of a data center. Operators have recently been for hosting, disaster recovery and optimized data center challenged by the C-suite to get their arms around the cost operations. With plenty of power to spare, a geologically of power. To do this, many have implemented energy-effcient and physically secure location, natural outside cooling servers and have started to measure power consumption. and up to 30 terabytes in fber connectivity to Europe and These efforts have not gone unnoticed, but are they suffciently North America, the data center industry may eclipse the reducing the cost and carbon footprint of the data center? Northern Lights as Iceland’s brightest star. According to a study conducted by Nature Climate Change, in an article entitled “Characteristics of Low-Carbon Data Centers,” the optimal solution is a data center operating at low energy, in a low-carbon region.

Location, Location, Location Deciding where to establish a data center around low energy consumption and using renewable power sounds challenging. Verne Global has built a data center campus— on a decommissioned NATO base in Iceland—that is powered entirely by hydro, geothermal and onshore wind renewable sources and is 100% cooled by outside air. Companies across Europe and North America are start- ing to fnd this to be an optimal location. Verne Global Landsvirkjun hydropower station THE MOST INNOVATIVE DATA CENTER IN THE WORLD

The first zero-carbon footprint data center is here.

Connected to the world via multiple, reliable networks, chilled by the cool Icelandic air and powered by 100% renewable energy, Verne Global’s data center is the smart and sustainable choice for your biggest data challenges. Power you can rely on, future you can predict. www.verneglobal.com

Powering the Future

Iceland is one of the world's select few countries to produce all its energy from renewable sources – falling water, the heat of the earth and the force of the wind.

Landsvirkjun generates three quarters of all electricity in Iceland, primarily for clients in energy intensive industry and data services.

We offer Europe's most competitive energy contracts, with long‑term agreements, advantageous prices and exceptional security of supply. Te cool climate, plenty of power and room for development make Iceland an exciting location for the data industry.

www.landsvirkjun.com/datacenters StrategieS reinventing america

The Big Easy’s Movie Money Pit Louisiana politicians decided handouts would turn the state into a Tinseltown rival. Now they’re stuck with them. By Dorothy Pomerantz

t’s 86 degrees out in Garyville, La., says producer Ram Bergman, who is work- trailer king: andre and the crew of the new movie Self- ing on his fourth movie in Louisiana in eight Champagne worries is a sweaty mess. While star years. “The only advantage of L.A. is housing.” about the fate of the less taxpayer-fed movie Ryan Reynolds and director Tarsem Intended as a way to draw industry to Loui- boom in his home state. Singh perfect a shot inside an air- siana’s foundering economy, the result is a give- Iconditioned set, a small army of technicians away program that’s created a gold rush for dawdles outside, bitching about the humidity. producers and sharp locals, but probably won’t Not that anyone is listening. Producers are create permanent jobs like a real tax cut might. more than willing to trade crew discomfort Just outside New Orleans producer Herbert for buckets of money, and the lucrative 35% Gains turned part of a sprawling NASA com- tax credit Louisiana ofers on flm budgets is plex once used to build space shuttle fuel tanks catnip to them. “If we had flmed it in L.A., we into a 250,000-square-foot shooting facility

would have had to flm it in way fewer days,” where Summit Entertainment recently flmed forbes for MulCahy Craig

34 | FORBES JanuaRy 20, 2014

StrategieS reinventing america the sci-f f ick Ender’s Game. Producers who long line of Mardi Gras kings and queens, once would have needed to bring hundreds of built a business buying credits from f lmmak- crew members out from can now ers and selling them to locals. “The tax incen- bring just department heads and hire the tive program is like a gill net,” says French. rest of the crew locally. In 2012 f lm and TV “California is losing jobs. The industry is companies spent $717 million in the state, up moving away because it’s better elsewhere.” 85% since 2010. Movies like Twilight: Break- When Louisiana simplif ed the credit in trenDing ing Dawn, Green Lantern and 21 Jump Street 2009, making it still easier for producers, Hollywood arrived en masse. Here’s the way have been f lmed there, as were TV shows What the 53 million American Horror Story and Ravenswood. the credits work now. A producer brings a Forbes.com users are talking Louisiana has been a stand-in for New York, $35 million budget, for example, to someone about. For a deeper dive go Texas and Pennsylvania. like French and shows what portion will be to ForBeS.Com/BUSIneSS According to the Louisiana Department of spent in the state. French then buys the tax Economic Development, putting on this buf et credit for roughly 85% of the value the pro- cost the strapped state treasury $168 million ducer will eventually earn when his money in 2012. It’s not a break-the-bank number, but is spent. French then resells the tax credit it is the kind of price tag that has led a num- to someone with a liability, and the produc- ber of states, including , Wisconsin er gets his money up front. Louisiana has no and Connecticut, to slice programs amid ques- cap on its tax credits, so if you’re paying Will tions of whether they were Smith $20 million to ap- jump-starting an industry WHERE THE JOBS ARE pear in your f lm, you get or just fattening f lmmak- THERE’S LITTLE CORRELATION BETWEEN a tax credit on that ex- ers, with little long-term TAX BREAKS AND LONG-TERM ENTERTAIN- pense. (Smith then has a MENT-INDUSTRY EMPLOYMENT. gain. In November a new Louisiana tax liability.) entertaInment taX study called on New York State JoBS InCentIVeS It’s a juicy setup, and to rethink its program locals know it. Andre PERSON mary Barra after f nding that Albany CALIFORNIA 191,100 SMALL Champagne, owner of The Detroit auto show gave away $374 million in NEW YORK 91,600 LARGE Hollywood Trucks, is should be a memorable f lm tax credits in 2013— TEXAS 39,100 MEDIUM one of the biggest boost- coming-out party for gM’s 21.5% of all tax credits of- FLORIDA 27,500 MEDIUM ers. A local boy who fi rst female Ceo, who will fered by the state. GEORGIA 22,800 LARGE moved back to Louisi- have a slew of innovative new products to showcase. “In order for this to ILLINOIS 21,000 LARGE ana from Los Angeles in make sense, you have to PENNSYLVANIA 16,400 LARGE 2007 to help the produc- COMPANY BeSt BUy be building an industry MICHIGAN 14,300 LARGE ers of a small horror f lm VIRGINIA 13,700 SMALL left for dead not long ago, that will eventually stand navigate the state, he the electronics retailer got OHIO 12,900 LARGE on its own,” says Susan now has 400 trucks (in- up off the mat in surprising SOURCE: MPAA. Christopherson, a pro- cluding air-conditioned fashion last year, becoming fessor of city planning at Cornell University, “eco-friendly” trailers for Hollywood head- one of the best-performing stocks of 2013. Now to keep who has been studying what the folks in Los liners). It’s no surprise he has formed a trade the rally going. Angeles call “runaway production” since the group that lobbied the legislature to keep the 1980s. “Otherwise you’re just creating anoth- credits in place. “This f scal session was the FLASHPOINT aDIz er division of the public sector.” hardest,” says Champagne. “Like any cou- China’s new east China sea That’s exactly what’s happening in Loui- pon, you have to determine at what point do air Defense identifi cation siana. The state’s plan to bribe moviemak- you tighten it. But not now. It would have a Zone is turning into the ers dates back to 2002. The initial program catastrophic ef ect.” Earlier this year Cham- world’s most combustible of ered up to a 35% tax credit but was rid- pagne convinced Governor Bobby Jindal and hot spot, with repercussions for economies across asia. dled with caveats. Ray producer Stuart Ben- the legislature to retreat from proposed cuts jamin whined about the program in the press to the break. Jindal declined to comment to in 2003, saying he was lured to the state with FORBES. promises he could easily sell his credits to lo- No matter. He probably knows what Berg- cals, which proved diffi cult under the system man, the Selfl ess producer, will tell you about (though he was eventually able to sell them). the likely fate of Hollywood on the bayou. Clever money men like Will French saw “Movie people are nomads,” Bergman says. an opportunity. French, who comes from a “We go where the best deal is.” F

36 | FORBES JanuaRy 20, 2014

You have a vision for your company’s success. BMO Harris Commercial Bank can

help make it happen. More than just a financial resource, we can provide in-depth

research and analysis on a variety of financial topics, insights into business trends,

and the expertise to help make your vision a reality.

bmoharris.com/leadership

BMO Harris Bank N.A. Member FDIC TECHNOLOGY sOfTwarE

Inside a Beating Silicon Heart Designers have used computers for years to build elaborate machines. But what about modeling complex experiences? Dassault Systèmes is leading the charge. By Joann Muller

r. Julius Guccione, a 50-year- old cardiac researcher at the University of California, San Francisco, was mesmerized the frst time he saw a virtual Dimage of a beating heart. He’d been using math models to research the heart his entire career, but now Dassault Systèmes, a French design and simulation software company, had created a complete, three-dimensional view of the electrical impulses and muscle-fber contractions that enable the human heart to perform its magic. If it were a model of his own heart, Guc- cione would have seen it racing. “This is something doctors have been trying to get to since before the 1900s,” he said. The advent of technologies like magnetic resonance imaging and echocardiography, he said, have been a “dream come true” for measuring abnormal motion in a patient’s heart. But by modeling a beating heart in 3-D, the hope is that one day doctors will be able to diag- nose and treat patients based on the unique forces at work within each patient and even rehearse open-heart surgery on an individual before opening up his chest. “The heart isn’t just made of tissue; it also has an electrical current. I compare it to a machine,” says Dassault Systèmes Chief Ex- ecutive Bernard Charlès, whose company has been creating digital mock-ups of machines like airplanes and automobiles for more than 30 years. With $2.8 billion in revenue and 11,000 employees (3,000 in North America), it’s the leader in the $16 billion market for

38 | FORBES JanuaRy 20, 2014 product life-cycle management (PLM) soft- Dassault Systèmes ware, which engineers at companies such as and uCSF collaborated on this Boeing and Gap use to manage the develop- 3-D simulation of ment of everything from jumbo jets to jeans, a beating human saving both time and money. heart. one day they hope to model each As the Living Heart project suggests, individual patient’s Charlès, 56, is steering the company in new heart before surgery. directions as part of a plan to double its rev- enue in fve years. Instead of just peddling software for designers and manufacturers, Dassault Systèmes is recasting itself as a “3D experience company” whose simula- tion technology can be applied to just about anything. Last year it combined its nine software brands, including Catia, Simulia and Eno- via, into one 3D Experience Platform, which clients can use to model and simulate not only the way a product is designed or manu- factured but even how it is bought, feels or is used. Charlès’ favorite example: a woman with an armful of groceries who swings her leg under the bumper of her Ford SUV, caus- ing the liftgate to open automatically. Catia software helped realize that “experience.” Dassault Systèmes has already branched out beyond aerospace and automotive design to a total of 12 sectors, including life sciences, architecture and construction, energy and consumer packaged goods. Even some fash- ion designers are using Dassault Systèmes’ 3-D tools to design their collections (though they don’t like to admit it, Charlès says). SHoP Architects and its virtual con- struction arm, SHoP Construction, are known for pushing the limits of technology on projects like the new Barclays Center in Brooklyn, which features an undulat- ing latticework “wrapper” made of 12,000 unique prefabricated, preweathered steel panels. SHoP used Dassault Systèmes’ 3D Ex- perience software to transform the way designers and engineers worked together on the project, streamlining the process by creating a single model that all teams could work from, including plumbers, electri- cians and carpenters. The 3-D model logged changes made by any of the construction teams in real time, so every team, regardless of trade, was always working from the most current information. That helped reduce material costs by 25%. SHoP is now testing a cloud-based ver-

JanuaRy 20, 2014 FORBES | 39 TECHNOLOGY sOfTwarE sion of Dassault Systèmes’ technology to patient’s own heart as detected by an MRI manage its next project—modular, prefabri- or echocardiogram. If a portion of the heart cated houses to replace homes lost in Hur- was damaged after a heart attack, for in- ricane Sandy. By sharing 3-D design data stance, they would observe how the physics directly with the Long Island factory that had changed and simulate various treatment TrENDING will build the housing modules, SHoP says it options to ensure proper blood fl ow. will be able to erect a f nished home in just Dassault Systèmes was established in 1981 What the 53 million 48 hours, instead of the customary four to as a spinoff from France’s Dassault Aviation, Forbes.com users six months. the privately held manufacturer of Falcon are talking about. At the Museum of Fine Arts in Boston, jets founded in 1929 by Marcel Dassault. For a deeper dive go to ForBeS.CoM/TeCHnoloGy Harvard professor Peter Der Manuelian is At the time it was working on software for converting its impressive collection of pho- wind-tunnel testing, which naturally led to PERSON tos, diaries, drawings and documents from similar work for the auto industry. It sold its anDy ruBIn Egypt’s Giza pyramids into 3-D models so he software under the Catia brand, through a The co-inventor of Android can take students inside the tombs for a real- distribution agreement with IBM. has just been put in charge istic view of the Fourth Dynasty. Armed with Over the years Dassault Systèmes added of ’s new robotics that rich data and a 3-D printer, he’s even re- to its PLM software portfolio through a division. If we’re all enslaved by Skynet in 20 years, creating ancient Egyptian artifacts that had series of acquisitions, including Enovia and blame him. long since vanished. SolidWorks. The company went public in “If you can imagine it, you can simulate 1996, though 41.5% is still privately held by COMPANY FaCeBooK it,” says Steve Levine, chief strategy offi cer Dassault Group. In 2010 it acquired IBM’s Big tweaks to your feed: of Dassault Systèmes’ Simulia, who heads up PLM sales force, taking responsibility for its Video ads are now showing the Living Heart project. He admits there’s own growth. Revenue has been growing 10% up, and a new algorithm is a chicken-and-egg problem: You need to a year, outpacing competitors like Siemens supposed to chase away junk stories. Doth Zuck tweak start with good data in order to produce an PLM, Autodesk and PTC. And Dassault too much? accurate simulation. In the case of the Liv- Systèmes’ stock, like its rivals’, has been on IDEA ing Heart project, Dassault Systèmes lifted a tear, up 175% since 2009, as investors look WearaBleS geometric data about the electrical and to jump on the 3-D printing bandwagon. The gadget hype cycle is mechanical properties of the heart from Dassault Systèmes is ideally positioned. As peaking for smart watches, about a dozen diff erent sources—academic Charlès says, “If you want to print a letter, bracelets and glasses. researchers, cardiologists, medical device you have to write it f rst.” Gartner sees the market companies and regulators—then combined it Today almost 70% of Dassault Systèmes’ tripling to $7 billion by 2018; we don’t buy the buzz. into one massive database. “People had been $2.8 billion in revenue is recurring from soft- working on diff erent pieces of this in great ware licenses and maintenance, providing detail, but no one has attempted to work it a cushion to explore new markets. Despite together,” Levine said. a third-quarter slowdown attributed to a Matching up data about the heart’s weak economy, Charlès is expecting sales electrical impulses with its mechanical to bounce back in the fourth quarter and in ones—called coupled multiphysics—was a 2014. The launch of its cloud-based software, meticulous job. Using a standard 48-pro- Lighthouse, early next year should open new cessor workstation, Dassault Systèmes’ markets and spur companies to speed up scientists needed about four hours to their 3-D modeling eff orts, he believes. calculate the precise biomechanical forces of Years ago manufacturers and their ven- a single heartbeat, tracking how electricity dors were all located in the same village is conducted through every strand of muscle because they needed to be, says Charlès. But f ber to replicate the true motion of a human in an age of virtual design and cloud collabo- heart. Once they accurately described the ration, “the world of the making” is changing physics, the model operated on its own. rapidly, he says. “Innovation will still come / BLOOMBERG JEROME FAVRE “We do nothing more than pulse it the way from scientif c breakthroughs, yes, but also nature does,” said Levine. from social trends and virtualization, which The next step is personalized 3-D heart have opened us to ideas we never thought models. Doctors would start with the Das- were possible before. The frontiers of indus- sault Systèmes model of a normal heartbeat, try are changing because the nature of col- then modify it to refl ect the behavior of the laboration is changing.” F

40 | FORBES JanuaRy 20, 2014 For people with a higher risk of stroke due to Atrial Fibrillation (AFib) not caused by a heart valve problem

Ask your doctor if ELIQUIS is right for you. ELIQUIS is a prescription medicine used to reduce the risk of stroke and blood clots in people who have atrial fi brillation, a type of irregular heartbeat, not caused by a heart valve problem. IMPORTANT SAFETY INFORMATION: Tell your doctor if you are pregnant or breastfeeding, or plan to become pregnant or breastfeed. Do not stop taking ELIQUIS without talking to the doctor who prescribed it for you. Stopping ELIQUIS increases your Do not take ELIQUIS if you currently have certain types risk of having a stroke. ELIQUIS may need to be stopped, of abnormal bleeding or have had a serious allergic prior to surgery or a medical or dental procedure. Your reaction to ELIQUIS. A reaction to ELIQUIS can cause hives, doctor will tell you when you should stop taking ELIQUIS rash, itching, and possibly trouble breathing. Get medical and when you may start taking it again. If you have to help right away if you have sudden chest pain or chest stop taking ELIQUIS, your doctor may prescribe another tightness, have sudden swelling of your face or tongue, medicine to help prevent a blood clot from forming. have trouble breathing, wheezing, or feeling dizzy or faint. ELIQUIS can cause bleeding which can be serious, and You are encouraged to report negative side effects of rarely may lead to death. prescription drugs to the FDA. Visit www.fda.gov/medwatch, or call 1-800-FDA-1088. You may have a higher risk of bleeding if you take ELIQUIS and take other medicines that increase your risk of bleeding, Please see additional Important Product Information on the such as aspirin, NSAIDs, warfarin (COUMADIN®), heparin, adjacent page. SSRIs or SNRIs, and other blood thinners. Tell your doctor about all medicines, vitamins and supplements you take. Individual results may vary. While taking ELIQUIS, you may bruise more easily and it may take longer than usual for any bleeding to stop. Get medical help right away if you have any of these signs or symptoms of bleeding: - unexpected bleeding, or bleeding that lasts a long Visit ELIQUIS.COM time, such as unusual bleeding from the gums; or call 1-855-ELIQUIS nosebleeds that happen often, or menstrual or vaginal bleeding that is heavier than normal - bleeding that is severe or you cannot control - red, pink, or brown urine; red or black stools (looks like tar) - coughing up or vomiting blood or vomit that looks like coffee grounds - unexpected pain, swelling, or joint pain; headaches, ©2013 Bristol-Myers Squibb Company feeling dizzy or weak 432US13BR01723-02-01 09/13 ELIQUIS is not for patients with artifi cial heart valves. Before you take ELIQUIS, tell your doctor if you have: kidney or liver problems, any other medical condition, or ever had bleeding problems. IMPORTANT FACTS / The information below does not take the place of talking with your healthcare professional. Only your healthcare professional knows the specifics of your condition and how ELIQUIS® may fit into your overall therapy. Talk to your healthcare professional if you have any questions about ELIQUIS (pronounced ELL eh kwiss).

What is the most important information • vomit blood or your vomit looks like coffee How should I take ELIQUIS (apixaban)? I should know about ELIQUIS (apixaban)? grounds Take ELIQUIS exactly as prescribed by your Do not stop taking ELIQUIS without talking • unexpected pain, swelling, or joint pain doctor. Take ELIQUIS twice every day with or to the doctor who prescribed it for you. without food, and do not change your dose or • headaches, feeling dizzy or weak stop taking it unless your doctor tells you to. Stopping ELIQUIS increases your risk of having ELIQUIS (apixaban) is not for patients with a stroke. ELIQUIS may need to be stopped, prior If you miss a dose of ELIQUIS, take it as soon artificial heart valves. as you remember, and do not take more than to surgery or a medical or dental procedure. one dose at the same time. Do not run out of Your doctor will tell you when you should stop What is ELIQUIS? ELIQUIS. Refill your prescription before you taking ELIQUIS and when you may start taking ELIQUIS is a prescription medicine used to reduce run out. Stopping ELIQUIS may increase your it again. If you have to stop taking ELIQUIS, your the risk of stroke and blood clots in people who risk of having a stroke. doctor may prescribe another medicine to help have atrial fibrillation. prevent a blood clot from forming. What are the possible side effects of It is not known if ELIQUIS is safe and effective ELIQUIS? ELIQUIS can cause bleeding which can be in children. • See “What is the most important infor- serious, and rarely may lead to death. This is mation I should know about ELIQUIS?” because ELIQUIS is a blood thinner medicine Who should not take ELIQUIS? Do not take ELIQUIS if you: • ELIQUIS can cause a skin rash or severe that reduces blood clotting. allergic reaction. Call your doctor or get You may have a higher risk of bleeding if you • currently have certain types of abnormal medical help right away if you have any of take ELIQUIS and take other medicines that bleeding the following symptoms: increase your risk of bleeding, such as aspirin, • have had a serious allergic reaction to ELIQUIS. • chest pain or tightness nonsteroidal anti-inflammatory drugs (called Ask your doctor if you are not sure • swelling of your face or tongue ® NSAIDs), warfarin (COUMADIN ), heparin, What should I tell my doctor before taking • trouble breathing or wheezing selective serotonin reuptake inhibitors (SSRIs) or ELIQUIS? • feeling dizzy or faint serotonin norepinephrine reuptake inhibitors Tell your doctor if you have any side effect that (SNRIs), and other medicines to help prevent Before you take ELIQUIS, tell your doctor if bothers you or that does not go away. or treat blood clots. you: These are not all of the possible side effects of Tell your doctor if you take any of these • have kidney or liver problems ELIQUIS. For more information, ask your doctor medicines. Ask your doctor or pharmacist if you • have any other medical condition or pharmacist. are not sure if your medicine is one listed above. • have ever had bleeding problems Call your doctor for medical advice about side effects. You may report side effects to FDA at While taking ELIQUIS: • are pregnant or plan to become pregnant. It 1-800-FDA-1088. is not known if ELIQUIS will harm your • you may bruise more easily This is a brief summary of the most important unborn baby • it may take longer than usual for any bleeding information about ELIQUIS. For more infor- to stop • are breastfeeding or plan to breastfeed. It is mation, talk with your doctor or pharmacist, not known if ELIQUIS passes into your breast Call your doctor or get medical help right call 1-855-ELIQUIS (1-855-354-7847), or go to milk. You and your doctor should decide if www.ELIQUIS.com. away if you have any of these signs or you will take ELIQUIS or breastfeed. You symptoms of bleeding when taking ELIQUIS: Manufactured by: should not do both Bristol-Myers Squibb Company • unexpected bleeding, or bleeding that lasts Tell all of your doctors and dentists that you are Princeton, New Jersey 08543 USA a long time, such as: taking ELIQUIS. They should talk to the doctor Marketed by: Bristol-Myers Squibb Company • unusual bleeding from the gums who prescribed ELIQUIS for you, before you have Princeton, New Jersey 08543 USA • nosebleeds that happen often any surgery, medical or dental procedure. and • menstrual bleeding or vaginal bleeding Tell your doctor about all the medicines you Pfizer Inc take, including prescription and over-the- New York, New York 10017 USA that is heavier than normal COUMADIN® is a trademark of Bristol-Myers Squibb • bleeding that is severe or you cannot control counter medicines, vitamins, and herbal Pharma Company. supplements. Some of your other medicines • red, pink, or brown urine may affect the way ELIQUIS works. Certain • red or black stools (looks like tar) medicines may increase your risk of bleeding • cough up blood or blood clots or stroke when taken with ELIQUIS.

© 2013 Bristol-Myers Squibb Company ELIQUIS and the ELIQUIS logo are trademarks of Bristol-Myers Squibb Company. Based on 1289808 / 1298500 / 1289807 / 1295958 This independent, non-profit organization provides assistance to qualifying patients with financial hardship who December 2012 generally have no prescription insurance. Contact 1-800-736-0003 or visit www.bmspaf.org for more information. 432US13CBS03602 TECHNOLOGY CrYpTOCurrENCY

China Bites Into Bitcoin A speculative frenzy turned Bobby Lee’s BTC China into the world’s biggest Bitcoin exchange. Then Beijing dropped the boom. Easy come, easy go. By kashmir hill

itcoins were worth nothing in 2009, when the digital crypto- currency was frst minted on the computer of its mysterious cre- ator, Satoshi Nakamoto, who Bclaimed to live in Japan. Four years later the value of one Bitcoin his investors hope BTC surpassed $1,100, thanks in large part to a a global, peer-to-peer network of computers. China CEO Bobby lee surge in speculative interest from China. A Transactions are trackable, but the parties to has the gravitas to make little-known Shanghai company called BTC each transaction are not. Bitcoin has attracted the case for Bitcoin to China met the demand and quickly became entrepreneurs and investors excited about its Beijing regulators. the world’s largest Bitcoin exchange, with legitimate use: cutting out the middlemen in more than 100,000 of the virtual coins, or online payments. In December venture capital $100 million, traded on a single day, near- frm placed the biggest ly double the market share of its closest com- Bitcoin bet so far with a $25 million invest- petitor, Japan’s Mt. Gox. ment in San Francisco’s Coinbase, a platform BTC China attracted headlines and a for buying, selling and storing Bitcoins in the $5 million investment in the fall from Silicon U.S. “As the world becomes more digital, pay- Valley’s Lightspeed Venture Partners as well ing physically with bills, gold or credit cards as its China arm. But its rapid growth, and will seem archaic. Everyone will have Bit- that of Bitcoin, also attracted the attention of coins,” says BTC China CEO Bobby Lee. the Chinese government. But China’s actions over the past weeks Unwanted attention, as it turned out. In have put BTC China’s future in doubt. After December the People’s Bank of China de- Chinese regulators held a closed-door meet- creed that merchants may not accept Bitcoin ing to warn fnancial companies against and forbade banks and payment processors working with exchanges, BTC China was from converting Bitcoin into yuan. The price swiftly abandoned by two payment proces- of Bitcoin fell below $500 in response. sors. “There are 300 payment processors in Bitcoin is still widely embraced by tech- China. We’re going to go down the list and nophiles and libertarians (and porn and fnd one that will work with us,” says an opti-

Qilai Shen for forbeS pot-dealing websites) because the curren- mistic Lee. He doesn’t think the government cy is all digital, easily transported across bor- is trying to put him out of business but rather ders and resistant to state controls. A Bitcoin put the screws on Bitcoin to cut down on the is “mined” on privately owned, specialized rampant speculation. “They haven’t declared computing equipment and passed around by exchanges illegal. That gives us room to ma-

JANUARY 20, 2014 FORBES | 43 TECHNOLOGY CrYpTOCurrENCY neuver, so there’s still hope.” landed the round from Lightspeed in Septem- Lightspeed’s Jeremy Liew is keeping a dis- ber, they eliminated their fee. That kicked off tant focus. “Anyone investing in Bitcoin com- a bidding frenzy fueled also by the free Bit- panies and Bitcoin specif cally should be coin p.r. that came when the FBI took down doing so with the expectation that there will Bitcoin-only drug site Silk Road and Baidu an- be a lot of volatility driven by regulatory an- nounced it would accept Bitcoin for securi- nouncements. We invest over 5- to 10-year ty services, plus the positive buzz around U.S. horizons, not over two-week horizons,” says Senate hearings on the digital currency. Liew. “For Bitcoin to be credible, we need ex- But then the People’s Bank of China, re- GADGETS ecutives who have the gravitas to make its sponding to what it says was a wave of con- WE LOVE case to regulators. That’s Bobby.” sumer concerns, declared in December that Lee, 38, was born in the Ivory Coast to Bitcoin wasn’t a recognized currency and roaMinG eMPire parents who had moved there from China to shouldn’t be used in the market, prompting set up a fl ip-fl op factory. He was sent to an Baidu and other Chinese f rms to stop tak- elite boarding school in the States, graduat- ing it as payment. As the extent of the real- ed from Stanford and spent eight years as an world ban became clear, the price of a Bitcoin engineer at Yahoo in California. He moved dropped to $345 on BTC China. to China in 2006 to work as an engineer at Lee initially saw the declaration as just a EMC. In 2011 he became Wal-Mart’s chief speed bump. Chinese citizens were still free to technology offi cer in China, charged with trade Bitcoin. BTC China stayed on the good helping to build its commerce site. side of the government’s concerns about mon- Lee f rst heard about Bitcoin in the spring ey-laundering by asking customers for offi - of 2011 while visiting his family in Califor- cial identif cation. BTC also reinstated trading nia. Lee’s brother, Charles, was using some fees to cut down on the frenzy. But days later of his computer equipment to mine Bitcoin the government crushed hopes of a thriving at home. Lee thought he would do the same trading business when it unoffi cially barred back in China and bought a bunch of graph- payment processors from working with Bit- ics cards from his brother. He started mining coin exchanges. Suddenly BTC China and KnowRoaming (know roaming.com), a Toronto in July, the same month he started at Wal- others would no longer be able to move their startup, feels the pain of Mart. Neither lasted long. customers’ funds from yuan to Bitcoin and every business traveler “It was a hot summer, and the computers back—which is what exchanges exist to do. fumbling around with created a lot of heat,” says Lee. “My wife said “We’re reading the tea leaves,” says Shanghai SIMs and rented phones it was too noisy and hot, and so I turned it off Bitcoin entrepreneur Jack Wang. “But it looks while abroad. It developed a smart sticker to apply in October.” He mined 25 coins, which struck like they’re going to squeeze the exchanges to your SIM card that him as a “waste” because they were worth until they’re not able to operate.” automatically connects just $300 total at the time and he had spent China’s move is not without precedent. your phone to a local $1,000 on mining gear. Eleven years ago Chinese Web service network overseas, so you When Wal-Mart decided to partner with created a virtual currency called Q Coin for pay like a local instead of getting slammed an existing e-commerce site in 2012 rather use in games. It became increasingly valuable with roaming charges. than build its own, Lee found himself jobless. offl ine and started trading on exchanges along KnowRoaming has deals His mind returned to those Bitcoins gather- with renminbi and gold. The government de- in most countries and can ing digital dust on his computer. His broth- clared such use illegal in 2007, sending its real save you up to 85% on er had founded a competing cryptocurren- world value crashing to nothing. prepaid data and voice. Available soon for iOS and cy called Litecoin, but Lee wanted to focus China is still letting people play with Bit- Android. —Bruce Upbin on bringing Bitcoin to China. BTC China had coin in its country, but by cutting off ways to popped up two years earlier as the country’s convert it to real money, it is turning it into f rst site for Bitcoin trading. “It was just two the digital Monopoly money that skeptics guys working part-time on it,” says Lee. They have always dismissed it as being. “If neces- were charging a 0.3% trading fee, but seeing sary, we’ll go into other Bitcoin services,” says just a few hundred trades per day. Lee sought Lee. The company plans to launch a secure out its cofounders to convince them it could online Bitcoin wallet called Picasso at the be bigger. Lee became CEO in April. end of December. “This is not the end. It may They relaunched the site in June and went be the end of a chapter, but it’s not the end of out looking for venture capital. When they our company.” F

44 | FORBES JANUARY 20, 2014

EDUCATION FOR LIFE ENtrEprENEUrs digital platforms

Second Life Reggie Aggarwal almost lost his event platform to bad luck and overspending. Here’s how he clawed his way past $1 billion. BY KARSTEN STRAUSS is 15th high school reunion should have been a boastfest. Reggie Aggarwal had been class president and had gone on to become a lawyer and a Hhotshot entrepreneur. Instead, he had to admit to old acquaintances that his company was a joke in the industry—and that he was broke, owed money to investors and had moved back in with his parents. “I was kind of the Indian George Costanza,” he says. Eleven years on it’s a diferent story. Cvent, the McLean, Va. event registration and manage- ment company Aggarwal launched in 1999, has roared back from the dead. Last August it went public on the NYSE, raising $117 million; its recent market cap was nearly $1.6 billion. Over sending hundreds of individual e-mails, manag- “I was kind of the Indian George Costanza”: the most recent four quarters the company lost ing replies and organizing food preferences for Pride—and shame at $1.3 million on $104 million in revenue. Custom- meals—while trying to practice law at Coopers disappointing investors ers like Wal-Mart, Siemens and WellPoint use & Lybrand. —drove Aggarwal. the cloud-based platform to search, feld bids, Aggarwal raised $700,000-plus in seed fund- book reservations and register attendees for ing from angels and friends, his own pocket more than 200,000 venues in 90 countries. The and multiple credit cards. Linking up with platform is free; registration costs a small fee. Chuck Ghoorah, David Quattrone and Dwayne Cvent’s mobile app for managing and navigating Sye—Cvent’s executive vice president of sales conferences runs from $6,000 to $10,000. It also and marketing, CTO and CIO, a team still in charges venues to advertise on the platform’s place—he launched a simple event-registration search pages. company to help businesses send digital invites Second chances are the stuf of Steve Jobs and to conferences and meetings. Michael Dell. But Rajeev K. Aggarwal? As an en- It was late 1999, and the tech boom was near- trepreneur, he says, “you just don’t know how to ing its peak. Competitors like Evite.com and give up.” By all rights he probably should have. Mambo.com were getting funded big-time. “We Born in Kansas and raised in northern Vir- decided to jump in,” says Aggarwal, now 44. ginia by parents who’d emigrated from India, Cvent raised $17 million within a year, mostly Aggarwal majored in fnance at the University from Aggarwal’s Indian CEO contacts. He of Virginia and got a law degree from George- thought he’d take the industry by storm. town. Cvent grew out of his frustration trying Within eight months Cvent grew from 5 em- to organize gatherings for the Indian CEO High ployees to 125. “We blew through that $17 million

Tech Council, his networking group. He was and were down to $400,000 in the bank—and ForbeS For VoSS Stephen

46 | FORBES JanuaRy 20, 2014 You have a passion for your business. We have a passion for protecting it.

You live for the ideas, the independence, the feeling of making things happen. You have a passion for your business. Liberty Mutual Insurance has a passion for protecting it. For more than 100 years, we’ve helped all types of businesses thrive. With coverages like commercial auto, workers compensation, and business owner’s policy (BOP), we can help do the same for you. Talk to your independent agent or broker today about Liberty Mutual Insurance, or go to libertymutualgroup.com/business. @LibertyB2B

© 2013 Liberty Mutual Insurance. Insurance underwritten by Liberty Mutual Insurance Co., Boston, MA, or its affi liates or subsidiaries. ENtrEprENEUrs digital platforms then that perfect storm hit: Sept. 11, the dot-com sees sales, client services and product devel- meltdown and reality,” says Aggarwal. “We’d opment. An exchange program lets American only built a $1.5 million revenue company.” employees spend six weeks in Delhi and Indian Business stalled. Clients began canceling workers hang out in McLean. events, and new prospects felt solicitation in Another comeback lesson was learning to the wake of such a tragedy was in poor taste. focus more on its hires. After Cvent started The company was burning through $1.1 million turning a corner in 2003, it began recruit- a month. Cutting 100 staf ers, along with all ing new college grads—kids who are hungry, nonessential spending, served as a makeshift energetic, tech-savvy, cheap and relative blank foUNdErs’ tourniquet. Sanju Bansal, the company’s f rst in- slates. “What you tell them they’ll believe and toolBoX vestor and a director, says the board wondered think that’s the only way to do it,” Aggarwal ex- whether Aggarwal was f t to lead. His passion plains. New employees—like the 100 brought on eXIt SIGnS helped him keep his job. “The people that were last year from the likes of the University of Vir- left, they weren’t loyal to just the idea—they ginia, Virginia Tech, James Madison University, were loyal to Reggie,” Bansal recalls. Penn State and Duke—attend an eight-week Ghoorah was constantly cold-calling, while boot camp at Cvent University. CFO Thomas Kramer chased down invoices. With the business stabilized, Aggarwal start- Aggarwal took no salary and personally signed ed thinking big again. He bulked up the sales for Cvent’s offi ce lease for a lower rent—shack- and marketing team—600 of his current 1,400 ling his own credit rating to the survival of the employees—and pivoted beyond the middle company. “It was the toughest time in my life market, nabbing clients like Yahoo, Marriott, because I’d never been knocked of my horse Visa and AARP. Between 2008 and 2012, Cvent like that,” says Aggarwal, a prolif c hand-talker. claims, its revenue compounded at an annual He was ashamed of rate of 34%; $5 billion in transactions took place On the heels of a sizzling IPO letting down his inves- He took no via its system last year. Its closest (and larger) market, there’s more hope for tors, most of whom competitor? Active Network of San Diego, entrepreneurial paydays: a robust M&A market for U.S. deals under were friends and close salary and which lost $39 million on $450 million in rev- associates. personally enue over the latest four quarters—and recently $1 billion. As of Dec. 17 there were 2,410 deals, valued at $287 Worse, he says, was signed for the agreed to be acquired by a private equity f rm. billion—fl at compared with having to jettison his rent. “It was In 2011 Aggarwal went to investors again, the same period a year earlier dream of fast growth raising $136 million mostly to pay of his long- but higher prices for 9% fewer and market domi- the toughest suf ering original backers. Insight Venture Part- acquisitions and a larger portion nance. Cvent had to time in my ners provided half the capital in the round and of activity worldwide. Winners: energy and real estate. Next year refocus on scoring cli- life. I’d never declined to cash out in last summer’s IPO. “You looks even better, says Thomson ents in the midmarket been knocked had a big category, it was early in the category, analyst Matthew Toole, range, while remain- and they were the dominant player,” says Jef who compiled the numbers. ing cash-fl ow-positive. off my horse Lieberman, a managing director at Insight. “It’s Based on a recent survey, he “We knew we had like that.” like a sales and marketing machine.” adds, “Corporate dealmakers see an increase of 17% for M&A, something here; we With a lot of elbow room. “We estimate that driven by fi nancials/real estate, just went about it the $103 billion is spent at hotels from meetings media/telecom and technology.” wrong way,” says Ghoorah. and events,” says analyst Debbie Wong at Frost Why? The strong stock market, Cheap became the new religion—still widely & Sullivan. Cvent hopes to scoop up more busi- a pickup in the economy—and practiced today. All employees fl y coach and ness by acquiring mobile app developers Seed record amounts of cash on corporate balance sheets. share hotel rooms. The IT staf is skeletal. Ag- Labs and CrowdCompass, as well as ticketing —Emily Inverso garwal f nally got around to hiring an assistant company TicketMob. It opened a London offi ce two years ago—about when he took on a com- last July; a Frankfurt location is on the way. pany lawyer. The on-site cof ee barista came Expansion is certainly squeezing margins. aboard only after a test run in Cvent’s New Delhi “This is the f rst time in a very long time that offi ce reduced employees’ going out for java by we’re taking our prof tability down to go after over 80%. “It’s in our culture,” says Aggarwal. market share,” says Aggarwal. That’s okay; his Cvent planted a fl ag in India back in 2002, investors expect bigger things. First investor largely to cut costs and handle support services. Sanju Bansal has put in a total $2.3 million over th or It’s done much more than that, growing from the years and estimates he has seen a 30 times YF

fewer than 10 employees to 800; it now over- return. He’s letting his money ride. F hAL MA

48 | FORBES JanuaRy 20, 2014

Intuit® Payroll. Guaranteed accurate, so you can avoid penalties. Running payroll for your small business doesn’t have to be a pain. With Payroll, you can pay employees with just a few clicks. Or let Intuit take care of everything from setup to payroll taxes with our full-service solution. And, no matter which option you go with, if you have any questions, there’s free live expert support. Payroll

From the maker of 30-Day FREE Trial | Online Demo | Live Support | IntuitPayroll.com the target, pull the trigger and … nothing. I’ve enTRepReneURs fumbled and moved the weapon of-target. weapons One more try and the rife fres itself with- out warning the precise moment it has calcu- lated perfect alignment. A loud metallic clang registers a hit. “Once you get these guns into someone’s hands,” says Sutton, smiling wide- ly, “they really sell themselves.” Ready, Fire, Aim Not always. In its frst year of operation TrackingPoint was hit with quality snafus TrackingPoint makes a $27,500 rife so smart that it that set it back—and caused a ruckus in the can’t miss. So why has the company been misfring? C-suite. The Pfugerville, Tex. company says it’s fxed all the problems. “Reliability and ac- BY ABRAM BROWN curacy are what this company stands for,” says acting CEO John Lupher, 50, who had ustomers who want to test-drive to step into that role in November. As the guy TrackingPoint’s Precision Guid- who designed the gun, it was his game to win ed Firearm often come to an out- or lose. door fring range in Texas Hill Backed by $35 million in funding from Country with Chase Sutton. A founder John McHale, his buddies and Aus- Cbearded, 300-pound wildlife biologist and tin Ventures, TrackingPoint started 2013 with safari guide turned luxury-gun salesman, Sut- a bang. When it released its three versions of ton helps average Joes become G.I. Joes with the gun, priced from $22,500 to $27,500, vid- just a 20-minute lecture and a demo. Peer eos went viral online—four YouTube clips through the scope and line up a small white have a million or so views—pushed by rich dot (the center of the crosshairs) onto an or- fanboys who wanted one (Governor Rick Call of duty: Tech chief John Lupher had to step ange disc 1,000 yards away. Then push a red Perry is a big fan) and an angry outburst from in as acting CEO. button to lock the gun’s guidance system on the antigun crowd. Michael Thad carTer For Forbes For Michael Thad carTer

50 | FORBES JanuaRy 20, 2014

needed a CHANGE agent. HERE YOU GO.

EARN UNLIMITED 2% CASH BACK OR DOUBLE MILES ON EVERY PURCHASE, EVERY DAY. With the Spark BusinessSM Card from Capital One,® you’ll get more than unlimited rewards with fraud alerts, free employee cards and no foreign transaction fees.

Learn more at capitalone.com/smallbusiness.

Credit approval required. Offered by Capital One Bank (USA), N.A. © 2013 Capital One. enTRepReneURs weapons

But the launch was anything but smooth. Pentagon procurement, TrackingPoint decid- TrackingPoint had a tough time deciding its ed to look elsewhere—mainly to a population target customer—the military or the affl uent of 13.7 million hunters. enthusiast? That, coupled with the product Many discovered the gun through the videos, f aws, caused undisclosed losses last year on gun blogs and the mainstream press. To show estimated revenue of $7 million. of the line, TrackingPoint’s three salesmen TRenDInG TrackingPoint was created from a missed toured gun and safari clubs throughout Texas (half of whose 10 million households have f re- opportunity—a missed shot, actually. McHale, What the 53 million 58, was spending time hunting, having sold arms), as well as Las Vegas for the SHOT Show Forbes.com users four high-speed network and cybersecuri- and a charity gun event at the vineyard of Nas- are talking about. ty companies to the likes of Cisco and the old car tycoon Richard Childress. Other advertising For a deeper dive go to Compaq. On a trip f ve years ago to Tanzania venues weren’t an option: Google, for example, FORBES.COM/ENTREPRENEURS he had stalked a Thomson’s gazelle and got won’t put f rearms on its AdWords program. IDEA within 350 yards of it, close enough to shoot. An interested customer starts by f lling PATIENT SATISFACTION “My central nervous system just couldn’t out an online form. More than 2,000 have ap- here’s a novel thought for hold the gun steady enough,” he says. He plied, the tiniest fraction of the $4 billion hospitals and health care missed and spent the rest of the safari stew- commercial gun and ammo industry in the providers: Treat your patients ing about it. When he got home he looked up U.S. Roughly half of all applicants get con- as customers—with the same relentlessly focused attention a tech guy in Austin. sidered, once the sales guys do Google and as amazon. Lupher’s electronics-design f rm had de- Trulia searches on prospective customers PERSON signed software for early versions of Siemens’ and track them through public records. “If PHIL BOSUA cordless handsets and Motorola’s DVR box. someone has a $600,000 house and a BMW, The rock musician turned Assuming McHale wanted a supergun just for they’re a good bet,” says Sutton. Less affl uent electrician created liFX, a Wi- his own use, Lupher designed a prototype (a buyers get entered into a database for later Fi-enabled led bulb controlled Remington hunting rif e hooked into a lap- consideration, when TrackingPoint of ers with an app. in three days last year, he raised $1.3 million on top). But it came together so well that the two cheaper models. Once a buyer sends payment Kickstarter; the next batch of agreed there might be a business in it. Lupher the company runs a background check and bulbs ships this quarter. left his shop, took 11 employees with him and ships the gun to a licensed dealer for pickup. COMPANY threw in with McHale, f guring it would pay Problems with the rif es surfaced last fall, COINBASE of : “John’s sold over a billion dollars’ worth as customers sent in videos documenting one of the hottest startups of of companies he has personally founded.” their complaints. Most had to do with a fail- 2013, it helps 16,000 merchants What distinguishes the gun is its scope ure of accuracy in extreme hot and cold tem- accept bitcoin payments—and and trigger mechanism. TrackingPoint peratures. After just six months as CEO, Jason received $25 million in a series b round led by andreessen doesn’t make the actual .300 Winchester Schauble, a Remington vice president hand- horowitz. Magnum rif e; it comes from Surgeon Rif es picked by McHale, was out of a job, replaced of Prague, Okla. The scope has a laser range- by Lupher. He revamped the clean room and f nder that gauges distances; gyroscopes, an instructed designers to tweak the optical sys- accelerometer and a magnetometer measure tem by adding a dif erent prism that allows how much you’re moving the gun. Zoom in greater temperature stability. That seems to through a 14.6-megapixel camera, and once have solved it. Now one in 20 products is test- you select a target, f xed or otherwise (there’s ed before shipping, up from one in 100. a stationary mode and a mover mode), a What’s next? Vann Hasty, who oversees digital-signal processor calculates an equa- product development, is debuting a smart tion 54 times a second to f nd the best time to semiautomatic rif e at a lower price point in f re. Built-in, Linux-based Wi-Fi means you the f rst quarter. The ideal customer: deer can livestream a hunt onto your iPad. and varmint hunters. But Hasty, plucked from But who would buy such a sophisticat- Amazon’s top-secret design labs, has anoth- ed and expensive toy? “We didn’t know er pie-in-the-sky notion. A multiblade drone exactly where the market for this technolo- sits in his offi ce, the basis, perhaps, of an air- gy was,” says Lupher. A demo for troops at borne tool that can relay video of game on the Fort Benning brought some interest. The U.S. ground below to a hunter’s iPad. Army has an outstanding order for a few ri- All that futuristic stuf sounds cool. First, f es. (The military declined to comment.) But though, TrackingPoint needs to get past all given the endless stretch of time required for those misf res. F

52 | FORBES JanuaRy 20, 2014 Leading The Next Industrial Revolution March 26, 27 & 28, 2014 · Chicago, Illinois Driven by technological advances, innovative manufacturing tech- niques, the biggest domestic energy boom in a century and a new generation of pragmatic, tested leaders in industry, education and government, the nation’s industrial core is rebounding.

Employment in manufacturing hubs is rising. Foreign companies from Toyota to Airbus to Fiat are basing their most advanced facilities Steve Forbes Bill Ford Chicago Mayor in the U.S. The biggest, boldest American companies from Caterpillar, Forbes Media Ford Motor Company Rahm Emanuel Honeywell and GE, to John Deere, Ford and Walmart are showing the world that the heartland is every bit as much a high-technology hotbed as either coast. Together with thousands of small companies spread across the nation, they are truly Reinventing America and redefining its role in the Global Economy.

Join Forbes as we convene a first-of-its-kind summit of the industrial

David Cote Michelle Gloeckler Sam Zell executives, entrepreneurs, academics and elected officials leading Honeywell Walmart Equity Group Investments this revolution.

For more information on how to participate visit forbes.com/conferences

PARTNER ENTREPRENEURIAL PARTNER InvESTIng TAXES

Turn Doctor Bills Into Retirement Income Some clever customers are creating super-IRAs out of their health savings accounts. by William baldWin

Would you like a triple-tax-free form of retirement saving? By that we mean: (1) You get a deduction when you put the money in. (2) It compounds tax free. (3) It comes out tax free. The powerful tax-saving vehicle is a health savings account. An HSA is a kitty, funded by you and/or your employer, that you are supposed to use to cover deductibles and copays in a high-deductible health insur- both individuals and big employers, claims to ance policy. have seen one balance just shy of $1 million. Supposed to use, but don’t have to use. To get the most out of this tax shelter you That’s the starting point for this investment have to run up medical bills over the next sev- scheme. Amounts you don’t draw down carry eral decades that, cumulatively, exceed your over from one year to the next, and balances account balance. You also have to be aware of can build up. You can use the account to play a peculiar rule that says you can make retro- the stock market. active claims, explains Eric Remjeske, whose Most HSA users fnd themselves with Minneapolis frm, Devenir, helps HSA provid- plenty of medical bills to pay and spend the ers design investment menus. money almost as fast as it comes in. Let’s say you get a $1,000 doctor bill But a sliver of the 9 million Americans you owe because you haven’t met the steep with HSAs stuf their accounts and make no deductible in your insurance plan. Keep withdrawals. Even though HSAs have been your HSA debit card in your wallet, advis- around for only a decade and the ceiling on es Remjeske. Whip out another credit card, contributions has been in the neighborhood maybe one with reward points, whose bal- of $7,000 a year, some accounts have gotten ance you scrupulously pay in full every quite plump. month, for the doctor. HSA Administrators, an account custodian Now what? Put the doctor bill in a shoe in Richmond, Va. that caters to compulsive box until you’re retired. The $1,000 you savers, says it has many with more than didn’t withdraw from the HSA has grown to, $100,000. HSA Bank, a Wisconsin-based unit say, $3,000. Now you take the money out, and

of Connecticut’s Webster Bank that works with match it against the ancient bill plus $2,000 foRbes foR HesHka Ryan

54 | FORBES JanuaRy 20, 2014 of other medical costs incurred in the mean- $1,250 for an individual policy and $2,500 for time. In ef ect, you have created $3,000 of re- a family policy. HSA-compatible policies are tirement income with no tax on it. widely available on ObamaCare’s exchanges, That’s as good as a Roth IRA account— according to HSA Consulting Services. no, better, because the money was deducted Advice from Remjeske of Devenir and Pat- on the way in, a benef t not available on your rick Jarrett of HSA Administrators: Roth savings. HSA contributions from your MaxiMiZe tHe MatCH. If you can’t af- employer, and your own, if deducted from ford to top out both your HSA and your your paycheck, never appear in your income. 401(k), arrange your dollars so that you don’t If you are self-employed, the HSA contribu- miss an employer contribution in either place. CoNSider tHe HSa aN eMerGeNCy tion reduces your adjusted gross income, a TREnDIng powerful form of tax deduction. fuNd. If your shoe box is as big as the HSA, In justifying your HSA withdrawals you the entire amount can be tapped without tax What the 53 million can’t claim any medical expense you have al- or penalty. Once withdrawn, the money can’t Forbes.com users ready used as an itemized deduction on your be put back in, however. are talking about. tax return. But for most people the itemized CoNtriBute at Work. This way both For a deeper dive go to deduction is unobtainable anyway, because you and your employer save on payroll taxes. FORbES.COm/inVESTinG medical expenses count only to the extent (Self-employed participants lose this benef t.) COMPANY they exceed 10% of income. If you don’t like the investment choices in the JPmORGan CHaSE What if you are so healthy, or do so well employer plan, you can move the money later. bank takes fDIC to with your investments, that your HSA tops SHop for iNVeStMeNt optioNS. Your court over Washington your lifetime medical costs? That would be employer plan may of er only expensive mu- Mutual liabilities. a nice problem to have. If it affl icts you, the tual funds, aimed at recouping the overhead PERSON triple tax shelter turns into a mere double. on the $2,000 typical account balance. If you bEn bERnanKE HSA money withdrawn after age 65 and not have graduated to a higher level, consider In the departing matched against medical costs is taxed like a doing a trustee-to-trustee transfer of most of chairman’s last big move, the federal 401(k) payout, as ordinary income. your money. Reserve fi nally tapers. But there are a lot of unreimbursed medi- For $36 a year you can have an account at IDEA cal bills that can go into that shoe box after HSA Bank that gives you access in turn to a COmEbaCK KidS being paid with funds from outside your zero-fee account at TD Ameritrade. TD’s $10 stocks that were left out HSA. The main one that can’t is the premium trading commission goes to $0 for a long list of 2013’s rally—Rio Tinto, to buy the high-deductible plan. Almost any- of exchange-traded funds, including many Philip Morris, Cirrus thing else goes in, provided that the patient that rate as best buys on the FORBES ETF Logic—may emerge as 2014 winners. was covered at the time by a high-deductible scorecard. If you have a six-f gure sum you health insurance policy: copays, deductibles, want to put into a single open-end Vanguard doctor bills that you owe because the doctor fund, HSA Administrators is not a bad choice. is not in your network, braces for your kids, Its fee ($109 a year, in this case) gets you into nursing home insurance, eyeglasses. Vanguard’s cheapo Admiral share class. Once you are in Medicare, you can no lon- MayBe opeN tWo HSa’S. For 2014 the ger contribute to the HSA, but you can use maximum contribution for a couple with a the money on insurance premiums, including family policy is $6,550, plus $1,000 for each Medicare and Medigap policies. of them over 55. To land the second $1,000 Is the look-back feature a loophole? Con- catch-up allowance, the couple must have bRenDan sMIaLoWskI / GeTTy IMaGes / GeTTy sMIaLoWskI bRenDan sider it a feature, not a bug. Legislators set up two accounts. the system to reward patients for selecting doN’t Wait too loNG to CaSH iN. insurance that makes them cost-conscious. Amounts left behind in an HSA become tax- If they also persuade people to save for their able income on either the decedent’s f nal re- old age, they will defer the day when nursing turn or the tax return of nonspouse heirs. home costs send Medicaid into bankruptcy. But note that a surviving spouse can treat an To open an HSA, you have to be covered by inherited HSA as his or her own, and that a high-deductible plan. That’s one that infl icts HSAs can cover the expenses of spouses. If a certain minimum level of pain on patients: you are married, you can go to your grave The deductible (the amount you shell out clutching that shoe box, provided that your before insurance kicks in) has to be at least widow(er) knows to use it quickly. F

JanuaRy 20, 2014 FORBES | 55 calls gets you $400 (500 shares x $0.80) minus InvestIng transaction costs of about $10. If Intel is trading funds below $25 on the third Friday in February, the calls expire worthless; you keep the $400 plus your shares. Intel has a 3.7% dividend yield, with the 500 shares producing income of about $450 a year. The $400 from selling calls boosts your yield to 6.8%. Of course if Intel rises above Money From Nothing $25 before expiration, you have to sell at $25— but you keep the $400 and any dividends al- Looking for high yields? Consider buying funds that ready paid. A similar “expire worthless” strat- sell the call options on your stocks. egy can be employed selling puts, but you need to have enough cash to make good on your promise to buy stock at a certain price. By john doBosz Too complicated? A low-hassle alternative ImagIne someone handing you money is to invest in “buy-write” closed-end funds, for something you own in exchange for the which employ covered-call strategies on in- right to buy it at a certain price for a limited pe- dividual stocks or indexes or sectors. Ex- riod of time. It would be unusual to strike this penses run about 1% a year, and payouts are kind of deal for your car or watch, but in the typically 7% to 10% a year. Monthly cash dis- case of stocks it happens all the time. You can tributions come in the form of ordinary in- sell call options on stocks you already own and come, capital gains and return of capital, so simply pocket the option premium if the option these funds are best kept in an IRA. is never called. Indeed, your goal is for the op- In the sort of bull market we’ve had since tions to expire worthless and never be called. 2009, broad market buy-write funds will un- A growing number of investors are fnd- derperform, since selling call options caps up- ing conservative options selling (or “writing”) a side potential. But most of the funds sell for 9% great way to wring extra income out of portfolios. to 13% below their net asset value, making them “We’re boosting our returns by more than three a good buy, says Alex Reiss, closed-end fund percentage points per year. ... Who wouldn’t want analyst at Stifel Nicolaus. One fund he likes is to do that?” asks Alan Salzbank, 58, of Gargoyle Nuveen Equity Premium Opportunity, which Asset Management. The RiverPark/Gargoyle trades at a 9.7% discount to NAV. It is tilted to- Hedged Value Fund is up 25.7% in 12 months. ward technology, with 75% of stocks from the To sell a “covered” call on a stock (covered, S&P 500 and 25% from the Nasdaq 100. It sells because you already own the shares you’re calls on those indexes that are about 2% out of promising to deliver) you must have at least 100 the money, giving stocks room to appreciate. shares. Say you have 500 shares of Intel trad- Michael Jabara, an analyst at , ing at $25 and a February 2014 call to buy at likes AllianzGI NFJ Dividend Interest & Premi- $25 (the strike price) is going for $0.80. Selling um Strategy. Its portfolio is 75% value stocks and 25% convertible bonds, OptiOns incOme At A DiscOunt which “contribute ad- these buy-write funDs bOAst impressive perfOrmAnce AnD trADe belOw the vAlue Of whAt they Own. ToTal ditional yield and ofer naV 12-monTh reTurn2 reTurn2 upside in a rising mar- Fund / Ticker discounT yield1 1-year 5-year3 ket while providing first trust enhAnceD equity incOme / ffA –12.7% 6.9% 17.8% 14.2% downside support in blAckrOck GlObAl OppOrtunities equity trust / bOe –12.5 8.7 17.9 12.1 a falling market,” he blAckrOck enhAnceD cApitAl & incOme / cii –12.1 8.8 18.5 15.8 says, noting that the inG GlObAl ADvAntAGe & premium Opp / iGA –10.9 9.7 13.3 12.1 fund sells at a 3.6% dis- eAtOn vAnce tAx-mAnAGeD DiversifieD equity incOme / ety –10.6 9.5 18.1 12.0 count to its NAV. Dis- eAtOn vAnce enhAnceD equity incOme / eOi –10.3 8.2 22.5 12.4 counts tend to get nar- nuveen equity premium OppOrtunity / Jsn –9.7 9.2 12.4 11.9 rower when market eAtOn vAnce tAx-mAnAGeD buy-write Opp / etv –6.8 9.8 15.5 16.2 sentiment improves, DOw 30 enhAnceD premium & incOme / DpO –5.6 7.0 24.1 18.7 and widen as investors AlliAnzGi nfJ DiviDenD interest & premium strAteGy / nfJ –3.6 10.1 16.1 12.7 become more bearish. F

Data as of Dec. 13. 1at market price. 2at NaV. 3aNNualizeD. SourceS: BloomBerg; lipper.

56 | FORBES JANUARY 20, 2014 INVESTINg

KEN FISHER — PORTFOLIO STRATEgY A BIG (BULL) SURPRISE FOR 2014

Consensus sentiment, par- like Lipitor, Difucan and Zoloft, to ticularly among professionals (who its new leukemia drug, Bosulif, Pfz- as a group are almost always wrong), er’s A-to-Z product line will generate tightly clusters around a 6% S&P 500 moderate growth from aging baby return for this year. When sentiment boomers (and emerging markets). It clusters like that my research shows sells at 12 times my 2014 EPS esti- stocks almost always do much better mate with a 3.1% dividend yield. or much worse. Expect better! U.K.-based GLAXOSMITHKLINE (GSK, 52) Yes, this bull market has moved is a similar A-to-Z druggie, which well past pessimism. But residual should have a similarly good 2014 skeptics still temper the euphoria but with shorter average patent lives that classically death-knells stocks. and more nondrug consumer items More standard measures of optimism (like Aquafresh and Sensodyne). It’s tend to hit halfway through a bull— timate with a 3.8% dividend yield. trading at 16 times my 2014 earnings and that should be sometime in 2014. Glad I didn’t pick Brazil’s EMBRAER estimate with a 5% dividend yield. Happy times, indeed! Can things go (ERJ, 31), the world’s fourth-largest AFFILIATED MANAGERS GROUP (AMG, 208), a wrong? Of course. But don’t bet on it. aircraftmaker. It also lagged in 2013. capable owner of asset-management My biggest 2014 positive sur- That should reverse in 2014. Inves- frms (my industry), is grossly over- prise? How well the world will work tors hate it—I love that. Second, I like valued with overly positive investor when quantitative easing fnally dies. Brazil. Third, it’s got a stellar CEO in sentiment and a history exceeding its As I’ve detailed multiple times, virtu- Frederico Curado. And in emerging future. But selling short a strong stock ally everyone gets this wrong and markets, airlines (Embraer’s custom- in a bull market is a fool’s game—un- backward. QE isn’t expansive or bull- ers) grow (unlike developed nations). less you buy equal amounts of an ish—just the reverse. When it ends Fourth, Embraer is superstrong in even stronger one as a single stock the party fnally gets going good, as the corporate market and in smaller package. Expect LEGG MASON (LM, 43), a yield spreads widen and bank lend- planes. Fifth: In the long term im- slightly larger asset-manager-owner, ing, money supply and economic proving extractive technologies make to best AMG. Why? It’s cheap. Inves- growth fnally take of—the exact U.K. experience after they ended the wORld will wORk betteR than yOu their dismal version of this idiocy. America’s broad money supply has think aFteR mOnetaRy easing ends grown slower in this expansion than any you’ve lived through. That loos- fossil fuels ever cheaper, lending up- tors really hate it. It’s got a new, very ens soon. Enjoy the ride. side leverage to jet usage. Finally, fact: focused and success-oriented CEO Among my lousier 2013 picks: FORBES’ publisher, Rich Karlgaard, (Joe Sullivan). And it owns legendary CHINA MOBILE (CHL, 52) (from Jan. 21 at would give a lot to pilot a Phenom names (like Battery march, Brandy- $58), which missed earnings esti- 300, which tells me something. wine, Permal and Royce). Amazingly, mates. Expectations are lower now. I Embraer sells at 90% of revenue and 85% of analysts have a hold or sell like that. As China’s 8% growth keeps 17 times my 2014 earnings estimate. rating on it—a rare display of extreme rippling inland, so will mobile de- Regular readers know I like drug negative consensus. mand. Expect moderate growth and stocks as this bull market matures. Buck that with these two, a buy a stock that performs almost exactly I prescribe PFIZER (PFE, 31). From big and a short sale together, giving your the same because it didn’t in 2013. It brand names like Advil and Viagra to 2014 portfolio a parlay that should F sells at 11 times my 2014 earnings es- post-patent-protected blockbusters help keep the bulls running. forbes for KuhlenbecK Thomas

MONEY MANAGER KEN FISHER’S LATEST BOOK IS MARKETS NEVER FORGET (BUT PEOPLE DO) (JOHN WILEY, 2011). VISIT HIS HOME PAGE AT WWW.FORBES.COM/FISHER.

JANUARY 20, 2014 FORBES | 57 INVESTING JohN BuckINGham — INVESTor chEckup Beating Back the BuBBle BaBBle

With stocks at or near alltime companies in the S&P 500 is not only highs, fnancial publications and limited to the tech sector. I’m a fan of market pundits are providing plenty stocks in the capital goods sector like of hot air as they infate a bubble by agricultural equipment maker DEERE talking about a stock market bubble. & CO. (DE, 89) and construction equip- All of that chatter is a plus from ment concern CATERPILLAR (CAT, 88), two a contrarian perspective, even as names that also ofer low earnings valuations on the major U.S. equity multiples and rich dividend payouts. market averages are near the high And the commodities space has end of their historical ranges. The bargain stocks, including oil driller trailing-12-month P/E ratio of 25.5 on ENSCO (ESV, 56), which trades for less the S&P 600 Index (small caps) and than 11 times earnings and yields 4%, 23.3 on the S&P 400 Index (midcaps) and mining and energy conglomer- are well above median end-of-year same earnings multiple as Netfix, ate FREEPORT-MCMORAN COPPER & GOLD (FCX, P/E ratios dating back to 1995 of 21.9 the consumer electronics super- 35), which sports a P/E of 12 and a and 20.9. Compared with the relative star would change hands at nearly dividend payout of 3.6%. Rounding richness of smaller stocks’ valua- $12,000 per share. out my baker’s dozen of undervalued tions, large caps still look cheap. The Plump multiples also abound stocks are retailer KOHL’S (KSS, 55), util- S&P 500 now trades at 16.9 times among the various S&P 500 travel- ity operator ENTERGY (ETR, 62), medical earnings, which is actually below the booking websites. Expedia, Priceline device maker BAXTER INTERNATIONAL 19-year median of 18.3, while the cur- and TripAdvisor all trade for more (BAX, 67) and banking giant WELLS FARGO rent dividend yield of 1.93% is higher than 30 times earnings. Unlike many (WFC, 45), nearly all of which boast than the 1.80% median. tech startups that have recently gone below-average P/E ratios and above- Even at current prices, I’m still public, each of these companies ac- average dividend yields. fnding attractive stocks. There are tually makes a proft, but there are Keep in mind that even as the certainly many growth stocks trading much less expensive stocks in the Federal Reserve tapers its bond- for rich valuations, but the beauty of active portfolio management is If apple were awarded the same p/e as that you don’t need to own them. For instance, if you look at the S&P 500 netflIx, It would sell for nearly $12,000 you see that one of its most popular components is Netfix, the video sub- technology sector, especially among buying program, interest rates are scription service, which trades for its largest members. For example, still near historic lows, with more than 300 times earnings. networking equipment company money market funds yielding 0.01% Sometimes stocks do grow into CISCO SYSTEMS (CSCO, 21), software on average today, compared with their multiples, but I fnd Netfix king MICROSOFT (MSFT, 36), microchip 4.5% at prior market peaks in 2000 hard to justify at these levels. Some- titan INTEL (INTC, 25) and IT solutions and 2007. thing much easier to digest is the provider IBM (IBM, 180) all trade for This fact, along with the inex- modest valuation of a world-class about 4 times earnings while also pensive valuations of my holdings, franchise like APPLE (AAPL, 545), which providing dividend payouts well abates any worries that I may have trades for 14 times earnings and above that of the S&P 500. In the about a bubble in stocks. Don’t be also rewards shareholders with a case of Intel, you’re looking at a gen- dissuaded by the strong performance healthy 2.1% dividend yield. Believe erous 3.6% yield. of the past year. Cheap stocks are it or not, if Apple were awarded the The list of inexpensive large-cap still out there. f

JOHN BuCKINGHAM iS ChiEF invEStmEnt OFFiCER at al FRank invEStmEnt managEmEnt and EditOR OF the prudent speculator. FOR mORE inFORmatiOn viSit WWW.ALFRANK.COM. gO tO FORBES.COM/INVESTORCHECKuP FOR mORE yEaR-End taX adviCE.

58 | FORBES januaRy 20, 2014 Simply open and fund your IRA in minutes with Edge®.

You can open a no-minimum-balance Merrill Edge IRA quickly and fund it instantly online from your Bank of America bank account. Rolling over a 401(k)? A Merrill Edge specialist can help with the paperwork and contact the plan administrator for you. Merrill Edge. It’s investing, streamlined.

merrilledge.com/streamlined

Bank with Bank of America. Invest with Merrill Edge.

Certain banking and brokerage accounts may be ineligible for real-time money movement, including but not limited to transfers to/from bank IRAs (CD, Money Market), 529s and Credit Cards and transfers from IRAs, Loans (HELOC, LOC, Mortgage) and accounts held in the military bank. Merrill Edge is available through Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S), and consists of the Merrill Edge Advisory Center (investment guidance) and self-directed online investing. MLPF&S is a registered broker-dealer, Member SIPC and a wholly owned subsidiary of Bank of America Corporation. Banking products are provided by Bank of America, N.A. and affi liated banks, Members FDIC and wholly owned subsidiaries of Bank of America Corporation.

Investment products: Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value © 2013 Bank of America Corporation. All rights reserved. ARQ853KR/11ES45 INVESTING DAVID PEArl — INTrINSIC VAlUE Cap ex Comes Out Of the ClOset

Here’s a trend for 2014: Capital in Stamford, Conn., is one of a few expenditures, otherwise known as cap global suppliers of aerospace-grade ex, will come back with a vengeance. composite materials. It has spent It’s been in hibernation since the signifcant capital to support the fnancial crisis as skittish companies production ramp-up of the Boeing either hoarded cash or paid it out in 787, the Airbus A350 and the Airbus dividends. In fact the change is already A380. These aircraft use far more happening but not publicized. Accord- composite materials and are lighter ing to Ned Davis Research a record and more fuel-efcient than the air- $642 billion was spent on cap ex in the craft they replace. Boeing and Airbus 12 months ended June 30. have multiyear backlogs for the new But don’t expect cap ex companies aircraft, and Hexcel operates under to make a big deal of it just yet. Inves- long-term supply contracts with no tors continue to adore dividends, cap ex exceeds the cost of capital. risk of substitution. The stock ran and capital-spender stocks tend to Here are three low-profle cap ex up nearly 60% in 2013, but it’s still a sag. For example, from March 2011 companies, all based in New England good investment—even at 20 times through November 2013 the top de- towns, that I believe will produce forward earnings. cile of S&P 500 companies ranked by double-digit growth in free cash fow Just up the road from Hexcel, in cap-ex-to-sales underperformed the and outpace the broad market. Danbury, is PRAXAIR (PX, 127), one of four bottom decile by 15%. TERADYNE (TER, 17) of North Reading, global industrial gas suppliers. The Holding back on cap ex makes Mass. manufactures test equipment $37 billion (market cap) company sense in the short term when the for the semiconductor, wireless and spent signifcant capital on growth outlook for economic growth is poor. hard-disk-drive industries. With projects worldwide, like building air Even if the cost of capital is low, $1.7 billion in revenues it has used separation units for coal gasifcation why build a new plant if there’s no its cash fow primarily for capital projects in China. These projects demand? But that’s changing, and the expenditures and acquisitions. Cap are generally supported by favor- purse strings are loosening. Already we are seeing more mergers because the MARKet’s RuN hAs BeeN fueleD BY the market is starting to recognize eXPANDING MultIPles. thAt GAMe Is OVeR value in other uses of cash. In a slow growth environment, if you can’t grow organically, a well-planned ex has nearly tripled from the lows of able 15-year contracts that protect acquisition makes a ton of sense. So 2009 to $111 million per year, and the Praxair from swings in raw material does investing in your business. In company has gained market share prices and other input costs. If priced the long run most successful compa- in most areas while the number of correctly, these projects should real- nies have to reinvest—spend to grow. players in the semiconductor test ize long-term returns on capital at a The market’s recent run-up has industry has shrunk to three. healthy spread over Praxair’s cost of been fueled by expanding multiples. Teradyne’s acquisitions have also capital. The expected double-digit That game is over, especially with been successful. The most recent growth in free cash fow will come interest rates poised to rise. In 2014 one, LitePoint, generated an ROI of from a combination of these invest- companies that reinvest in an efort more than 16% in the frst year of ments and a cyclical recovery in to increase free cash fow will thrive. ownership. Today the stock sells for Praxair’s core businesses. Hedgies The key, of course, is fnding compa- 11 times forward earnings. have bid up the stock, but it’s still a nies where the ROI from incremental Similar in size, HEXCEL (HXL, 43), great long-term buy. f

DAvID PEARL iS CO-CHiEF inVESTMEnT OFFiCER aT nEW yORK’S EPOCH inVESTMEnT PaRTnERS.

60 | FORBES januaRy 20, 2014 JAPAN SPECIAL ADVERTISING SECTION JAPAN 2014 The Sky Is the Limit

apan’s economy has faced serious economic challenges in recent years, but the emergence of “Abenomics”—the expansionist economic policies of Japanese Prime Minister Shinzo Abe—has put Japan back in the global spotlight. Our report on Japan highlights several leading CEOs who are eager to seize the day and capitalize on opportunities that enable them to gain ground both at home andJ abroad. These CEOs are actively engaged in growing their businesses across various sectors around the world. Whether they are running longstanding family businesses or conglomerates with diverse interests, they are looking for new avenues of expansion. They are evaluating the potential of markets in both developed and emerging regions and adapting their strategies to operate effciently and invest wisely. Most of all, they are keeping an eye on meeting the needs of customers. From manufacturing high-quality, innovative goods such as cameras, printers, components for industrial machinery and food, to providing transportation services and conducting global marketing, investing and trading activities, the sky appears to be the limit. In spite of global economic uncertainties and ferce market competition, these companies exude a sense of confdence that they will continue to thrive in business in Japan and beyond. 2 // JAPAN SPECIAL ADVERTISING SECTION

Index

03 Tetsuro Tomita East Japan Railway Company www.jreast.co.jp/e

04 Fujio Mitarai Canon Inc. www.canon.com

07 Yuzaburo Mogi Kikkoman Corporation www.kikkoman.com

08 Masahiro Okafuji ITOCHU Corporation www.itochu.co.jp/en/ 10 Akihiro Teramachi THK CO., LTD. www.thk.com

Throughout this special section, yen figures have been converted to U.S. dollars at a rate of Y102/$1.

36th Annual Special Japan Section

Writers John Ashburne Julian Ryall Cecilia Ma Zecha

Photography Takashi Mochizuki

Design David Tan

Please visit the Japan Special Advertising Section online at www.forbescustom.com/ japan2014 JAPAN SPECIAL ADVERTISING SECTION // 3

On the Express to Success JR East Combines Homegrown Expertise With Global Ambition

n a clear day, from the top foor of the JR East Head centers will grow, and so Offce in Tokyo, you can see Mount Fuji, a World will the need for intercity Heritage Site. However, as company President and urban train systems. and CEO Tetsuro Tomita enthusiastically explains, We are willing to serve the company’s vision for the future stretches far those needs.” Tetsuro Tomita Obeyond the legendary peak. JR East also is expand- President and CEO, The East Japan Railway Company—or JR East, as it is ing railcar manufactur- East Japan Railway Company commonly known—was founded 27 years ago when the ing. It acquired the Tokyu nationally owned Japan National Railways (JNR) was privatized. Car Corporation to form the subsidiary Japan Transport Engi- From its original offce in the eastern part of Japan’s main island, neering Company, or J-TREC, as it is commonly known. J-TREC Honshu, the company has expanded to offces in New York, works in tandem with the Niitsu Rolling Stock Plant in Niigata , Brussels, Singapore and will do so in London. Prefecture to manufacture stainless-steel commuter railcars JR East’s primary business is developing and operating and the state-of-the-art E7 Shinkansen high-speed trains. By spectacularly fast, safe trains, and its maintenance record is early 2015, the E7 series are scheduled to run between Tokyo unimpeachable. Outside the realm of transportation, the com- and Kanazawa in two and a half hours. pany also is involved in a wide range of business enterprises, JR East is aggressively adopting new technologies from including travel agency services, shopping centers and offce abroad. “Our global outlook is anything but a one-way street,” buildings, hotels and restaurants management, and more. says Tomita. “We grow as a company when we bring in advanced “We have contributed to the entire region we serve,” refects external technologies and expertise.” For example, he cites the Tomita. “Yet we believe our view must be globalized, not only out implementation of a proven European communication-based of business necessity with the decreasing domestic population, train control (CBTC)—a wireless car-control system—on the com- but also for the needs of our employees. They must learn to adopt pany’s Joban Local Line, in Northeast Tokyo, and the German more open, wider views for their own personal development.” high-technology brakes on the latest Shinkansen trains, including Under the slogan “Nobiru”—the Japanese phrase for growth— the 320-kph (198-mph) E5 Hayabusa. “Because it is sometimes the company is tackling new business domains. more important to slow down than speed up,” Tomita adds. For example, it is actively participating in overseas railway Furthermore, JR East is determined to create attractive urban projects and developing an overseas railway consulting busi- centers by concentrating useful services and functions in and ness, Japan International Consultants for Transportation Co. around its stations. “Based on our current infrastructure, we will Ltd. (JIC). It is largely focusing on the Asia-Pacifc region, whose develop one-stop Smart Stations that will go beyond transport railway-related market is estimated to reach around ¥6.3 trillion and retail functions,” says Tomita. “Our future stations will have in 2020. In this growing market, JR East already has signed an everything from kindergartens to clinics and local government agreement with Thailand to provide equipment and know-how offces. It is our social mission.” for Bangkok’s new “Purple Line.” Though JR East has come a long way, for Tomita, there’s no end “We have far more to offer than just merely selling trains. We of the line in sight. “We Japanese have been building and operat- have massive expertise in running railway network systems too,” ing railroads for 140 years,” he says. “We love them. But we can’t explains Tomita, whose company conveys more than 6 billion pas- stand still. Innovation is essential. Globalization is essential.” sengers per year, safely and amazingly on time. “Asian population At home and abroad, JR East is on the fast track to the future.

After graduating from the University of Tokyo, Tetsuro Tomita joined the Japan National Railways (JNR) in 1974. When JNR was privatized in 1987, he joined the largest of the new offshoots, East Japan Railway Company. He rose to the position of Executive Vice President, successively heading two of the company’s major divisions. In April 2012 he was named President and CEO. www.jreast.co.jp/e 4 // JAPAN SPECIAL ADVERTISING SECTION

From Hollywood to the End of the Universe Thriving New Business Domains Drive Canon Toward 2016

hen we catch up with Fujio Mitarai, Chairman & ing Emmy® Award, prais- CEO of Canon Inc., one beautiful late autumn ing “Canon’s Work on afternoon at Canon’s Tokyo headquarters, Improvements to Large the CEO is in a bullish mood. “Ask me any Format CMOS Imagers questions you like,” he says with a smile. for Use in High-Defnition W“There’s nothing to hide here.” Broadcast Video Cam- Mitarai has just come from chairing a meeting of the small eras.” But Canon’s suc- camera maker turned corporate giant’s “global summit.” cess in this segment is At this annual event, Canon welcomes members from its not limited to the movie global marketing and manufacturing companies. Executives industry. In Japan, in Fujio Mitarai convene in Tokyo to exchange information and opinions, August of last year, a 4K Chairman and CEO, Canon Inc. see new products on display and learn the details of the capable high-resolution company’s midterm plan, which sets 2016 goals. Mitarai is Canon digital cinema camera was used by JAXA, the Japan more than willing to give Forbes an exclusive preview. Aerospace Exploration Agency, for a mission to record the “Looking at the three years ahead for Canon, I believe Comet ISON aboard the H-IIB Launch Vehicle No.4 with the the global economy has bottomed out,” says the CEO with H-II Transfer Vehicle “KOUNOTORI4” (HTV4) bound for the conviction. “And having hit rock bottom, the economy is now International Space Station. headed toward recovery. With that expectation in mind, I have prepared Canon’s new growth strategy.” Pushing the Boundaries of Knowledge The thrust of Mitarai’s approach is based on developing the Through Astronomy company’s core strengths. “I have laid emphasis on looking at “We are very proud of how we have applied innovative our current business—for example, our cameras—and based optics technology to the feld of astronomy,” says Mitarai. on what we currently have, we need to create new domains The Subaru Telescope, located 4,200m (13,780 feet) using that existing technology. Then we develop those areas above sea level at the summit of Mauna Kea in Hawaii, is into full-fedged business operations. capable of capturing light emitted from a galaxy located 13 “To give you an example, we launched our all-new billion light years from Earth. It couldn’t do that without cinematography product lineup two years ago, and in Canon technology. the three years to come, we hope to achieve a very large expansion of this business. We aim to be one of the top players in the flmmaking industry globally.”

Movie Mecca’s Seal of Approval Canon is off to a good start with the frm’s Cinema EOS System, a lineup of professional cinematography products that includes lenses and cameras, which has been wowing the theatrical motion picture, television programming and television commercial production industries. Several high- profle Hollywood directors are enthusiastically embracing these new products. Within a year of entering the industry, Canon won major Hol- lywood plaudits when the National Academy of Television Arts & Sciences honored the company with a Technology & Engineer- The Cinema EOS System is fast becoming a Hollywood directors’ favorite. JAPAN SPECIAL ADVERTISING SECTION // 5

At the heart of the fagship telescope operated by the images from any point of view. National Astronomical Observatory of Japan (NAOJ) is the “The potential applications for MR in the felds of design, Hyper Suprime-Cam, which sets a new standard for wide- manufacturing, education, exhibition, entertainment and angle optical devices. Using a custom-designed Canon lens medical care are boundless,” says Mitarai. “Some automotive system seven times wider than any built before, it can now manufacturers have already adopted and installed our MR capture in just a year images that once would have taken systems, which we launched in July 2012. During the product seven years. It captured the entire Andromeda galaxy in a design phase, our head-mounted and hand-held displays single shot. allow users to view full-scale CG images that are responsive Canon’s lucrative camera-based business is not all to their position and orientation, enabling speedy evaluation Hollywood and astronomical observation. Some of it has a of design and usability. Also, MR systems can contribute to particularly earthbound application. reducing development times and minimizing costs. “We are also developing high-image-quality, high- performance network cameras that transmit full HD images,” says Mitarai. “I believe there is great future potential growth in the network camera market as it meets the recent needs of security management, and as options for visual transmission become more multifaceted.”

Innovation Across Multiple Fields and Markets The world at large thinks of cameras and offce equipment when it thinks of Canon, but in reality the global corporation is developing hitherto unexplored technologies and business domains in other areas, most notably in the fields of commercial printing, medical diagnostics and mixed reality. “Thanks to our integration with the blue-ribbon Dutch The MR system enables industrial designers to rapidly develop and company Océ [acquired by Canon in 2010], we are beginning share virtual prototypes. to see exciting developments in the commercial high-speed printing domain and with wide-format printing systems,” “Based on the very foundation of our existing business and says Mitarai. “In the coming three years, we hope to tap adding on top of that our new business growth, I hope to attain into a large potential market in packaging, outdoor banners an annual growth rate of around 7% or 8%, though of course and billboards. that depends upon the global economic situation.” “In the retail photo printing market, our innovative DreamLabo commercial photo printer has allowed users to Three Regional Headquarters System create photo albums with high-speed, high-quality photos Mitarai’s enthusiasm and confidence is infectious, and and detailed text offerings via the Internet. his pride in Canon’s panoply of technological excellence is “In the medical diagnostics industry, Canon U.S. Life Sci- evident. Yet the CEO is only too aware that the company, with ences has developed a genetic analysis system and equip- assets measured at US$4,546 billion in 2012, must match its ment providing a variety of new diagnostic technologies. Once technical skills with organizational innovation. CLS products become viable, we will initiate production at His response is the Three Regional Headquarters Canon in Virginia,” adds the CEO. management system, a vision that he developed while “Another of our medical systems is near-painless, president of Canon U.S.A. (1979 to 1989), in which the Japan, stress-free photo-acoustic mammography that we are jointly U.S. and Europe HQs are given autonomous control. developing with Kyoto University. This technology visualizes the “Each region has its own unique qualities and strengths, state of angiogenesis associated with cancer using ultrasound and will naturally conduct its own research and design,” he and light, and we hope to launch it within a few years.” explains. “Océ and CLS are good examples. In this manner, MR (mixed reality) is another cutting-edge technology, our regional headquarters will create unique products, which one that seamlessly merges the real and virtual worlds in they will market worldwide.” real time, allowing users to interact with full-scale, realistic For Canon and Fujio Mitarai, the sky’s not even the limit.

A native of Kyushu, Japan, Mitarai decided not to follow his father and brothers into medical school, but instead joined Canon, where his uncle served as the frst president. Five years later he was posted to the U.S., where he stayed for 23 years, eventually becoming President of Canon U.S.A. Back in Japan, he was later appointed President, CEO and then Chairman of Canon. www.canon.com

JAPAN SPECIAL ADVERTISING SECTION // 7 A Taste for Success The Story of Kikkoman Corporation’s Rise to Global Eminence

uzaburo Mogi strides into the boardroom plant opened on June with a spring in his step and a sparkle in his 16, 1973, on the west- eye. At 78 years of age, the Honorary CEO ern shore of Lake and Chairman of the Board of Kikkoman Geneva in the American Corporation cuts a debonair figure. Mogi is Midwest. The dollar Ya revered elder statesman of Japan’s business world, was pegged at ¥360, and it is his personal vision that has seen Kikkoman so building an overseas Corporation blossom from a rural soy sauce manufacturer plant was a colossal into a global corporate group of 64 separate companies, investment. To build a capitalized at ¥11.6 billion (US$118.5 million), with a production factory in presence in more than 100 nations. the U.S., they had to Kikkoman’s history of manufacturing soy sauce invest more money than began in the Edo Period (1603-1867). Then, in 1917, Kikkoman’s capital at Yuzaburo Mogi eight families merged to create Noda Shoyu Co. Ltd., the time. Honorary CEO and Chairman of the forerunner to Kikkoman Corporation. Within months, dis- the Board, Kikkoman Corporation “In the mid-1950s, Japan was entering a period aster struck. “The Oil of high economic growth and many industries were Crisis that took hold in October of 1973 was a severe forecasting double-digit annual growth. However, our challenge,” Mogi explains. “This wreaked havoc all industry couldn’t grow at a comparable rate, since the over the world, and the U.S. was no exception. Our U.S. consumption of soy sauce, a daily necessity, could factory was affected by an increase in production and only be expected to increase relative to population transportation costs.” As a result, Kikkoman Foods, Inc. growth,” Mogi explains. plunged into the red. Yet Mogi never wavered. “I was “So, we adapted two key strategies. The first was young, you see, brave,” he laughs. “I knew prices would diversification to acquire new product categories and eventually stabilize. By the end of the third year, we were increase business. We started our venture with Del in the black. By August 1977, we had balanced out our Monte, producing tomato ketchup and juice, and began cumulative loss, a feat achieved within just four years Manns Wine, our domestic wine business. Our second of start-up.” strategy was internationalization, and we turned our The rest, as they say, is history. Last year the Wisconsin attention to the U.S., reaching out to general America, plant celebrated its 40th anniversary. With growing not just the Japanese American community.” markets in Europe, Asia and Oceania, Kikkoman Then came Mogi’s masterstroke. “We cannot achieve Corporation is a 21st-century global success story. Yet any real globalization of our business,” the young for Yuzaburo Mogi, it is far more than just a business executive told a colleague one day in 1965, “unless we triumph. “I really believe that taking Japan’s food culture build a factory in the U.S. to initiate local production.” to the world and bringing other nations’ foods to Japan Mogi made his proposal to the company board and creates understanding,” he says. “When we eat the same the president, Keizaburo Mogi, his father. After long things, we become friends.” And with that the legendary deliberation, they agreed. The die was cast. businessman takes his leave and strides off into the sunlit Mogi was 38 when Kikkoman Foods, Inc.’s Wisconsin Tokyo morning.

Yuzaburo Mogi is a descendant of one of the founding families of Kikkoman, which is one of the oldest continually running businesses in Japan. He became company President in 1995, was named Chairman in 2004 and assumed the title of Honorary CEO and Chairman of the in 2011. Mogi holds an MBA from Columbia University. www.kikkoman.com 8 // JAPAN SPECIAL ADVERTISING SECTION

Ambitious, Profitable ITOCHU Corporation Sets the Bar Ever Higher

e have turned our words into trading company in non- accomplishments,” says Masahiro resource businesses,” Okafuji, President and CEO of Okafuji boldly says. “I ITOCHU Corporation. believe all companies When he took up the position of must continually set “WCEO in 2010, Okafuji set about rebalancing ITOCHU’s profle goals and strive toward to emphasize the non-resource sector, which consists of them in deed as well as in businesses that are not dependent on natural resources. In a word.” Coming from the Masahiro Okafuji move that evokes the company’s roots in the textile business, CEO who unabashedly President and CEO, he aggressively set about focusing on the consumer-related talks about standing ITOCHU Corporation arena—business lines such as textiles, food and ICT—making shoulder-to-shoulder it the corporation’s basic earnings platform. It was a savvy with the two top-ranking trading companies in Japan, it almost move. ITOCHU has posted record-high net income for two sounds like a call to arms. consecutive years, and CEO Okafuji is still pushing ahead, How does Okafuji plan to achieve his ambitious goals? pedal to the metal, to boost proftability. “The non-resource sectors include machinery, chemical Going back to basics also applies to ITOCHU’s new products, construction and real estate and information, in addi- approach to working hours. tion to lifestyle and consumer arenas,” he explains. “Now we As 2013 neared its close, Okafuji issued a company-wide especially want to focus on the machinery area, and then on directive severely limiting late-night overtime work, a common information, construction and real estate, and chemical products.” practice at Japanese corporations. The new system was Nor is ITOCHU hesitant to take on the challenge of entering dubbed asagata kinmu, or “early work hours.” The aim is to new arenas. Automobiles and shipbuilding are among the many fnally end the habit of excessive overtime, allowing employees areas being targeted. “The current depreciation of the yen to concentrate on self-improvement and family life. Given seems to be bringing about a huge growth of the market in areas ITOCHU’s size and status, Japan’s news media and business where we have long been cultivating technology,” he explains. community soon took notice. For this workaholic nation, it “ITOCHU’s share in many areas will dramatically increase on was a radical move. the back of a weaker yen. It’s actually happening now.” ITOCHU is clearly not afraid of change. “Trading companies The emphasis ITOCHU puts on fully leveraging its diverse only exist where there are customers,” explains Okafuji, human resources may well become key to the company’s “and we operate across so many felds. We are like water; further growth. ITOCHU was the frst of Japan’s general we change our shape according to the container. Just as it trading companies to appoint a female executive offcer, and would be fundamentally wrong for us to narrow ourselves its current medium-term management plan clearly mandates down to one single kind of product, our sales organization further development of female role models. This is yet another and strategies and even our corporate personality must also example of how ITOCHU dares to challenge the conventional be fexible. This new system was prompted primarily by a Japanese corporate mind-set. consideration of our customers’ needs. Early-morning calls Okafuji admits that, historically, the amorphous nature of Japan’s will no longer go unanswered.” general trading companies has deterred investors, who fnd it ITOCHU’s customer-based, worker-friendly stance should hard to grasp the workings of the so-called invisible giants. This only help strengthen the global corporation’s competitive may soon change, given ITOCHU’s widely noted management edge. “We have set the goal to become the number-one innovations and its forecast for dynamic growth in 2014.

Masahiro Okafuji joined ITOCHU in 1974 after graduating from the University of Tokyo. He was appointed Executive Offcer in 2002, Managing Executive Offcer in 2004, Director and Executive Vice President in April 2009, and President and CEO in April 2010. www.itochu.co.jp/en/

10 // JAPAN SPECIAL ADVERTISING SECTION A Linear Path to Success THK Focuses on Forward Motion

s President and CEO of THK CO., LTD., Akihiro “The Chinese econ- Teramachi knows that Japan has faced serious omy may have come to economic challenges in recent years, but he the end of its period of frmly believes that trying times can bring out the high growth and may best in a company. He is confdent his frm will be moving into a period Akihiro Teramachi continueA to provide the technology, know-how and support of more stable, regular President and CEO, THK CO., LTD. that will keep its customers moving forward. growth,” he says. “There “THK is a company that’s focused on creation, on making have been predictions that China will surpass the U.S. as the new advances, and we will never ease off in our efforts to forge world’s preeminent economy. That may not happen, but when ahead with new research and development,” says Teramachi in you take into consideration China’s massive population and the an interview at the company’s Tokyo headquarters, the hub of a anticipated growth in per-capita GDP, it’s clearly reasonable to global organization that spans four major territories around the expect more growth. world. “We will continue to aggressively develop new felds in “I’m confdent that China will remain a promising and growing order to contribute to our clients’ progress and growth.” market, although it may undergo short-term fuctuations,” he adds. For all its expertise, THK is something of a behind-the-scenes Teramachi emphasizes the importance of situating THK’s player, producing vital technology for the industrial machinery manufacturing facilities in the same markets where the products used to manufacture a wide range of products, including are consumed. But THK’s most important challenge is to continue vehicles and electronics and appliances. to develop high-quality, innovative but affordable products. THK developed the world’s frst Linear Motion Guide, an “We have to keep striving to provide our products at reasonable essential component that enables industrial machines to prices,” he says. To do that, the company says it is necessary execute smooth and highly precise movements. LM Guides to scrutinize its activities from the perspective of its customers. help ensure rapid, high-precision manufacturing processes, “There are many factors that affect businesses in every market in and they also help conserve energy. In its feld, THK is the the world—differences in laws, cultures, customs, language and undisputed market leader. many other areas—but these are all issues from the standpoint As Japan’s economy picks up the pace—along with of the businesses supplying the products. interconnected economies throughout the rest of the world— “The other perspective is that of customers seeking high- Teramachi is confdent that THK will be able to both develop quality, reasonably priced products that are available when and new markets and expand operations in areas where it already where they need them. That’s a universal need,” Teramachi has a presence. emphasizes. “THK has set out to become the number-one “We will continue to help our clients all over the world by company in the world at identifying with the client’s point of view steadily and reliably meeting their needs, in every industrial feld and providing products and services that meet the customer’s that uses linear motion,” he says. “Not only in advanced markets, needs and desires.” but also in developing markets, thanks to our globalization The advent of “Abenomics”—the aggressively expansionist efforts and forays into new business areas.” economic policies of Japanese Prime Minister Shinzo Abe—has China has become a vitally important market for THK, which put Japan back in the global economic spotlight, Teramachi has 34 sales offces and fve production bases located all over says, adding that THK intends to preserve its forward momentum the country. Although some observers are voicing caution and use its pioneering spirit and commitment to excellence to about China’s future, Teramachi remains optimistic. solidify and enhance its vital role in the global economy.

Akihiro Teramachi attended Keio University and joined THK CO.,LTD., a company founded by his father, in 1971. He became a Director in 1982, was made Vice President in 1994 and took over as CEO in 1997.

www.thk.com

reinventing wall street

Thanks to some fortuitous timing Sergio Ermotti ended up with the top job at UBS, but he really hit the jackpot when he found that his former boss was already transforming the troubled bank into a wealth-management juggernaut. by halah Touryalai

There is an adage on Wall sTreeT: “iT’s beTTer To be lucky Than good.” And if ever there was a banker with luck on his side it’s Sergio Ermotti, the suave, im- peccably dressed global chief executive of Switzerland’s UBS. Less than six months after he joined the bank to run its European, Middle East and African businesses in April 2011, a rogue trader in UBS’ London ofce lost $2.3 billion on a series of derivatives trades. The scandal forced the bank’s 67-year-old chief exec- utive, Oswald Grübel, to resign. Suddenly, Ermotti was next in line to run the 152-year- old Zurich-based bank. By November he was CEO, and by 2012 he was the highest-paid member of the bank’s executive board. Good timing; great luck. But Ermotti, 53, is also good—very good. Born in the Italian-speaking canton of Tici- no in southern Switzerland, he has had a singular focus on banking since age 15 when he took an apprenticeship at Switzerland’s Corner Banca, where young Ermotti learned to sell stocks and trade them. Eventually he got a certifcate in Swiss banking and earned a master’s degree in management from Oxford. In 1987 Merrill Lynch hired him, and he spent the next 16 years climbing Merrill’s ladder in Europe and New York, eventual- ly becoming global equities boss. Charming and likable, with movie star looks, Ermotti parlayed the Merrill experience into the role of deputy group chief executive at Italy’s largest private bank, UniCredit. After being passed over for chief executive he took the job running Europe, Middle East and Africa at UBS. Given the state of global fnancial services in 2011, one might think that landing atop a European bank was as much a curse as a blessing. The fnancial crisis left Europe’s banks crippled, and most of them are still busy untangling and deleveraging their bal- ance sheets. But once again Ermotti got lucky. As chance would have it Robert McCann, Ermotti’s former boss and mentor at Mer- rill Lynch, was already busy revamping the Swiss bank’s U.S. operations. McCann, 55, had spent 26 years at Merrill, frst in trading and fnally running its 18,000-advisor

72 | FORBES JanuaRy 20, 2014

Gianluca colla / BloomBerG JanuaRy 20, 2014 FORBES | 73 cial servicestoday, reducing expo- perhaps thesmartest trade infnan- capital intensive investment bank.” “complemented by afocusedandless centered onwealth management,yet motti, describingthebank’s strategy as we have silencedourcritics,” says Er- shrink thebanktogreatness, but now its balancesheet. than $300billioninriskyassetsfrom ing, andithasalready culledmore 10,000 employees ininvestment bank- 2012 UBSannounceditwould fre through amassive downsizing. In agement business, thebankwas going ner were expanding thewealth man- his non-U.S. counterpartJurg Zelt- of 11.9%. has acommonequitytieroneratio already surpasseditstarget andnow gent capitalrequirements UBShas bank: IntermsofBasel III’s strin- nues of$31.6 billion.Andit’s astrong expected toearn$3.8 billiononreve- trillion inassets. In2013thebankis vate banker intheworld, with$1.7 ent money. It isnow thelargest pri- brought in$137 billioninnetnewcli- tire wealth management operation risky investment-banking assets. growth ashisteamfuriously shed around, givingErmottianengineof management businesswas turning luck meantUBS’Americanwealth for two fullyears. Thisstroke of ing upthebank’s brokerage force job atUBS, McCann hadbeenbuild- calls Ermotti. “He was a goodmentortome,” re- for McCann forthenext sixyears. atives trading. Ermottiwould work promoted himtoheadglobalderiv- tions, brought himtoNew York and scurity ofMerrill’s European opera- 36-year-old Ermottioutoftheob- been McCann whoplucked the each otherwell. Back in1996ithad brokerage arm.Thetwo menknew 74 |FORBES wall street FORBES Ermotti thetrader isexecuting “Many saiditwas impossibleto At thesametimeMcCann and In thelast three years UBS’ en- By thetimeErmottitooktop JanuaRy20, 2014 neck withGermany’s DeutscheBank, have seentheirshares fallabout50%. banks like UBSandBank ofAmerica are up79%,but large, diversifed ly 500%inthelast decade, Goldman’s 11. BlackRock’s shares are upnear- bank, GoldmanSachs, hasaP/E of the world’s preeminent investment price/earnings multipleof20 while est assetmanager, sellatatrailing of BlackRock, theworld’s larg- of income. provide smallerbutsteadier streams quickly intolessriskybusinessesthat and investment banking, andmoving latory-heavy businesseslike trading sure tocapital-intensive andregu- A decadeagoUBSwas neckand The mathisfairlysimple:Shares

of Switzerland haslong beenamajor oping economiesgrow rich. to take of asChinaandotherdevel- private wealth—a numberthatisset to control theworld’s $135 trillionin largely irrelevant: Thereal battleis $2.4 trillion. and DeutscheBank ranks eighth with ranks frst with$3trillioninassets, dustrial &Commercial Bank ofChina doesn’t even putitinthetop20. In- Today UBS’ $1.2 trillioninbankassets with about$1 trillioninassetseach. Mizuho ranked frst andsecond, $850 billion.Citigroup andJapan’s terms ofbalancesheetassets, with ranking third amongglobalbanksin robert Mccann gave upgolfto rescue Of course, theformerUnion Bank But inbankingtoday, sheersizeis swiss bankers onu.s. soil.

david Yellen For ForBes player in private cial advisors committed tax fraud by U.S., it was a lifeline for the worka- banking, also known helping their American clients hide holic banker. as wealth manage- money overseas. McCann’s frst move was to re- ment. In fact, today Like Merrill, UBS was waist-deep assemble his A-team of old Merrill most of the frm’s cli- in toxic subprime debt and was ul- Lynch buddies, including Merrill’s ent assets outside of timately required to repurchase $22 key private-client execs, Robert Mul- the U.S. still come billion in auction-rate securities holland and Brian Hull; marketing from its stronghold that had blown up during the cred- head Paula Polito; its general counsel, in Europe, current- it crunch. Then came the rogue-trad- Rosemary Berkery; and the former ly run by Zeltner, 46. er incident that cost Grübel his job, global securities lending chief, John McCann’s wealth and in 2012 the bank was nabbed in a Brown. To get the rank and fle to buy management unit global conspiracy to rig interest rates. in and thereby avoid “mini-Merrill” was acquired by UBS For that bit of malfeasance UBS paid criticism, he elevated several UBS ex- when it purchased a record $1.5 billion fne for a single ecutives, and retained Tom Naratil, PaineWebber in 2000. count of wire fraud. Most recently, who was CFO of the Americas. One of Ermot- UBS is facing a slew of lawsuits after “All of us had nothing more to ti’s smartest moves its brokers were revealed to be some prove in our careers and had already after taking over in of the biggest peddlers of overlever- accomplished a lot,” says Polito. “It 2011 was refusing to aged Puerto Rican municipal bond was more about reuniting as a team sell UBS’ U.S. busi- funds. under Bob one more time and doing ness—despite persis- Former Merrill lifer McCann something that could be extraordi- tent Wall Street chat- knows all too well how important nary if we could pull it of.” ter that it would be When the team arrived broker mo- wiser for the bank to “advisors couldn’t rale was terrible, partly because of the focus on its home turf. believe it when bad press but also because the advi- In fact, far from jetti- sors felt the home ofce in Switzer- soning it, Ermotti fur- i responded to land was both ignoring them and bur- ther empowered Mc- their calls. some dening them with crappy products. Cann to rally his as- hung up on me, One example: a UBS credit card set-gathering troops. that was foisted on brokers and their Says Ermotti, “If we thinking it was clients in 2005. The Visa card sport- call ourselves the pre- a goof.” ed such stringent antifraud restric- eminent wealth man- tions that it declined payment as agement frm globally, much as 50% of the time, according then it would be impossible not to be reputation is in the money business. to Berkery, who now heads up UBS a strong player in the biggest market His stellar 26-year career at Merrill Bank USA. One of UBS’ own advisors in the world, the Americas.” Lynch was capped by a shotgun mar- warned Berkery not to use the card. When McCann arrived at UBS in riage to Bank of America in 2009. It “That’s a bad sign,” she says. The 2009 as CEO of Wealth Management was heartbreaking for McCann, who credit card was so jittery that Mc- Americas, UBS was bleeding advi- rose from a trainee in 1982 to star Cann’s own wife was declined when sors and assets. In a three-year span trader to vice chairman of the com- she used it. the broker head count dropped from pany. “I had been committed to Mer- Within a month of McCann’s ar- 8,248 to 6,796, and $32 billion in cli- rill Lynch, and Merrill Lynch didn’t rival he decided to fy in UBS’ top ent assets fed. The division mounted exist anymore,” he says, seated on an 270 advisors for a lavish dinner at losses of nearly $900 million. olive microfber sofa in his corner of- ’s Gotham Hall. In his Even worse than the losses were fce on the 14th foor of UBS’ mid- postprandial speech he pledged to the constant blows to the bank’s rep- town Manhattan building. spend his frst 100 days at the bank utation, which scared away poten- McCann took eight months of. He listening to their problems, fxing tial customers and honest employees. did some soul searching, played golf them as quickly as possible and fg- In 2008 UBS had a run-in with the and took a flm class with his wife uring out a new strategy. And, in- feds for a tax-evasion scheme. The at . When Grü- deed, for the next three months Mc- bank was forced to pay $780 million bel came calling from Switzerland to Cann and his pals from Merrill— and essentially admit that its fnan- ask him to fx UBS’ operations in the known internally as the “renewal”

JanuaRy 20, 2014 FORBES | 75 FORBES wall street team—spent their days on the phone with their brokers, hearing out their risk oFF, WealTh on Risk-weighted assets deteRmine how much capital banks must hold. problems and immediately fxing the eRmotti’s stRategy has shRunk Risky assets by about 45%. ones they could easily address, so- called “Quick Wins.” $450 BIL Some 400 changes were made risk-WeighTed asseTs under Quick Wins. The paranoid WEALTH MANAGEMENT, 400 BANKING, CORPORATE, $88 credit card was terminated, approv- ASSET MANAGEMENT 350 al of marketing material was moved down the ranks and the limit for fast 300 NONCORE & $89 credit line approvals for high-net- LEGACY PORTFOLIO $96 worth clients was lifted from $4 mil- 250 lion to $5 million. 200 The renewal team also created $52 $100 a fnancial-advisor council that re- 150 layed advisor’s gripes directly to Mc- INVESTMENT BANK $245 Cann. Martin Halbfnger, an advi- $76 100 sor with $3 billion in assets, was one $172 of the frst to head the council. The 50 rule was that complaints would be $65 responded to within one day. “There 0 2011 3Q 2012 3Q 2013 3Q used to be a black hole to which we’d funnel our complaints, but suddenly we were all amazed how that turned cost-to-income ratio has dropped to gues that scale can be overcome by around,” Halbfnger says. 87% from nearly 100% in 2009. quality.” “People couldn’t believe it when In an efort to jump-start asset in- It’s working. In just the U.S. net in- I responded to their e-mails or calls fows, McCann aggressively recruited fows amounted to $36 billion in the about problems. Some of them hung top advisors with big sign-on bonuses. last two years, and in 2012 McCann’s up on me, thinking it was a goof,” In 2012 alone UBS spent $679 million division posted a record pretax prof- McCann recalls. bringing in new brokers. “That’s 10% it of $873 million, up 40%. Results Ninety-nine days after that crucial of the annual net income of McCann’s should be even better in 2013. At- Gotham Hall meeting McCann’s re- unit. It shows you how much empha- trition has been stanched, dropping newal team presented its grand strat- sis McCann is putting on the right from 15.3% in 2009 to 2.2% in 2013. egy: a strict focus on high- and ultra- producers,” says Alois Pirker, an ana- McCann’s success has been re- high-net-worth clients in the 25 largest lyst at Boston-based Aite Group. warded. He’s on UBS’ global exec- American cities. They would be client- It is also starkly diferent from utive board and is the second-high- oriented and focused on fnancial ad- the industry’s usual “amass the big- est-paid executive at the bank, earn- vice. “It was incredibly important that gest army” approach. McCann em- ing $9.4 million last year, just behind the message was clear,” says McCann. ploys 7,000 fnancial advisors. Bank Ermotti. Another thing would become clear. of America Merrill Lynch, Morgan He doesn’t just run UBS’ broker- McCann wouldn’t tolerate slackers. Stanley and Wells Fargo have be- age force in the Americas anymore; Anyone generating less than $250,000 tween 15,000 and 18,000 each. But Ermotti put him in charge of its U.S. in fees and commission annually saw McCann’s troops are higher-quality, investment-banking and asset-man- his or her pay reduced. McCann recent- with the average broker generating agement business. Still, no one thinks ly upped the threshold to $325,000. $1 million in annual revenue, versus a Pittsburgh native like McCann, He also went after institutional $848,000 for Morgan Stanley and who is two years older than Ermotti, bloat. McCann began shutting down $865,000 for Wells Fargo. Only Bank has any chance of nabbing the top job some branches, consolidating oth- of America Merrill Lynch, McCann’s at the giant Swiss bank. And given ers and eliminating layers of manage- old employer, has an average bro- how much UBS has riding on wealth ment, including 25 managing direc- ker production rivaling that of UBS. management and keeping its Ameri- tors. Nonfnancial advisor employ- Says Brad Hintz, an analyst at San- can growth engine chugging, Ermot- ees have been reduced from 11,200 in ford C. Bernstein: “UBS goes after ti needs to keep fnding new ways to early 2009 to 9,191 in 2013. The unit’s the best of the best advisors and ar- keep his lucky charm happy. F

76 | FORBES JanuaRy 20, 2014 Kristen Soltis Anderson, The Winston Group Janet Napolitano, Former Secretary, U.S. Department of Homeland Security

the ENTREPRENEURSHIP of

Kathryn Minshew, The Muse EVERYTHING Gayle King, CBS News, The Oprah Magazine MAY 14-15, 2014 NEW YORK CITY

Power does not come in a one-size-fits-all package, and at Forbes we are redefining what power means. Today, in order to effect meaningful change, one has to possess an entrepreneurial mindset, spirit, and approach. Whether it’s leading a multinational firm focused on innovation, launching a startup solving a decades-old challenge, or spearheading a social movement that will improve the lives of millions, it’s all entrepreneurship. And it defines every aspect of our lives. Hosted by Moira Forbes, this multi-generational gathering of

Tory Burch, Tory Burch LLC influencers will come together to forge partnerships, find solutions, Moira Forbes, ForbesWoman and take actions to make the world a better place.

Entrepreneurs don’t just come up with ideas. They make things happen.

Please join Moira Forbes for a revolutionary gathering. For more information and to request an invitation please visit forbes.com/conferences

Donna Karan, Urban Zen, DKNY 30 ForbeS under 30

noW you See theM...

78 | FOrBES january 20, 2014

Evan Spiegel, 23, and Bobby Murphy, 25, have turned Snapchat and its disappearing photos into the hottest app in America for teenagers. Hot enough, in fact, to spurn a $3 billion ofer from Facebook. Will they become two of the youngest billionaires ever— or fade quickly into business infamy? by j.j. colao photographs by michael grecco for forbes

january 20, 2014 FOrBES | 79 30 ForbeS under 30 thirteen months Ago Facebook’s Mark Zuckerberg, he enjoyed it. Spiegel, who had deactivated his Facebook the richest twentysomething in history, reached out to Snap- account, frantically called Murphy for his review. It was, chat’s Evan Spiegel, who oversees a revenue-less app that Murphy responded glumly, a near-exact copy. makes photos disappear, with an invitation, delivered to his But a funny thing happened on the way to obsolescence. personal e-mail account: Come to Menlo Park and let’s get The day after its launch Poke hit number one on the iPhone to know each other. Spiegel, now 23 and the brashest tech . But within three days, on Dec. 25, Snapchat had wunderkind since, well, Zuckerberg, complete with his own pulled ahead, boosted by the publicity, as the Facebook app legal battle against a college buddy who helped him start his disappeared from the top 30. Laughs Spiegel: “It was like, company, responded to his role model thusly: I’m happy to ‘Merry Christmas, Snapchat!’ ” meet you … if you come to me. Which helps explain what happened in the fall when And so, armed with the premise of meeting with archi- Zuckerberg reengaged Spiegel, basically ready to surrender tect Frank Gehry about designs for Facebook’s headquar- on terms so generous, on paper, they seemed preposterous: ters, Zuckerberg few to Spiegel’s hometown, Los Angeles, $3 billion in cash, according to people familiar with the ofer, arranging for a private apartment to host the secret sit- for a two-year-old app with no revenue and no timetable for down. When Spiegel showed up with his cofounder Bobby revenue. (Facebook refused to comment for this article.) Murphy, who serves as Snapchat’s chief technology ofcer, Even more preposterous, of course: Spiegel turned Zuck Zuckerberg had a specifc agenda ready. He tried to draw out down. It was the most scrutinized business decision of the past year, complete with head-spinning math. FORBES estimates that Spiegel and Murphy each still owned about 25% of When Spiegel Met zuckerberg, Snapchat at the time, which means they were both forgoing a $750 million windfall. “it WaS baSically like, “I can see why it’s strategically valuable,” one leading venture capitalist tells FORBES. ‘We’re going to cruSh you.’ ” “But is it worth $3 billion? Not in any uni- verse I’m aware of.” The roots of that decision, however, were the partners’ vision for Snapchat—and he described Face- obvious to anyone who knew about the primer that Spiegel book’s new product, Poke, a mobile app for sharing photos and Murphy had bought for their team. Chapter 6 in the Art and making them disappear. It would debut in a matter of of War specifcally addresses the need to attack an enemy days. And in case there was any nuance missed, Zuckerberg where and when he displays weakness. Spiegel and Murphy would soon change the large sign outside its Silicon Valley sense an opening and insist that rather than selling, they’re campus from its iconic thumbs-up “like” symbol to the Poke aiming to upend the social media hierarchy, armed with a icon. Remembers Spiegel: “It was basically like, ‘We’re going $50 million war chest raised in December at a lower (but to crush you.’ ” still heady) valuation of just under $2 billion. “There are very Spiegel and Murphy immediately returned to their ofce few people in the world who get to build a business like this,” and ordered a book for each of their six employees: Sun says Spiegel. “I think trading that for some short-term gain Tzu’s The Art of War. isn’t very interesting.” Snapchat represents the greatest existential threat yet to For those keeping score, a “short-term gain” for a 23-year- the Facebook juggernaut. Today’s teens have fnally learned old who still lives in his dad’s house now apparently equals the lesson their older siblings failed to grasp: What you post three-quarters of a billion dollars. In going for the long gain, on social media—the good, the bad, the inappropriate—stays Spiegel will either become the next great billionaire prodigy there forever. And so they’ve been signing up for Snapchat, or the ultimate cautionary tale of youthful hubris. with its Mission: Impossible-style detonation technology, in droves. FORBES estimates that 50 million people currently A lAnky 6-Foot-1, dressed in a button-down shirt, use Snapchat. Median age: 18. Facebook, meanwhile, has designer jeans and plain white sneakers, Evan Spiegel hasn’t admittedly has seen a decline among teenagers. Its average molted the carapace of an awkward teen. Sitting at Snap- user is closer to 40. chat’s new Venice Beach headquarters for his frst-ever Zuckerberg understood this, which might explain the in-depth media interview, he shifts abruptly from raucous gamesmanship. When Poke debuted, on Dec. 21, 2012, laughter to icy glares, constantly grabbing fstfuls of gummy Zuckerberg e-mailed Spiegel, telling him that he hoped bears and Goldfsh crackers. His conversation is pocked with

80 | FOrBES january 20, 2014 plenty of examples of “like” and “whatever.” And while Spie- response,” says Cook. “And Professor Wendell said, ‘Well, you gel proves extremely opinionated on subjects like politics, will be surprised to know he isn’t an M.B.A. student. He is an music and other techies, he’s reluctant to discuss even the undergraduate who is auditing this class.’ ” Cook quickly hired most basic CEO topics, like his ideal management team or Spiegel to work on an Intuit project that broadcasts Web- his long-term vision for Snapchat. based information via SMS texts in India. If you’re patient enough, however—one of my conversa- Spiegel, however, was in too much of a rush to remain tions with him lasted two and a half hours—you’ll get the full content as an apprentice. In the summer of 2010 he and Mur- backstory, one that shares an uncanny similarity to that of his phy developed Future Freshman, a suite of online software to frenemy, Zuckerberg. help parents, high schoolers and guidance counselors man- Like Zuck he was a child of relative privilege, the frst- age college admissions. “It ended up being this unbelievably born child of two successful lawyers (mom Melissa went full-featured website,” Murphy recalls. One problem: “We to Harvard Law and practiced tax law before Spiegel was got, like, maybe fve people on the service,” says Spiegel. born, while litigator dad John, a Yale Law grad, has repre- That’s when fate, in the form of another fraternity broth- sented the likes of Sergey Brin and Warner Bros.), living in er, Reggie Brown, stepped into Spiegel’s room to discuss a tony Pacifc Palisades, just east of Malibu. And like Zuck he photo he wished he hadn’t sent someone. The ensuing set of was a middle school nerd who found refuge in technology, events makes The Social Network look like C-Span2. building his frst computer in sixth grade, experimenting with Photoshop in his school’s computer lab and spending While oWnership of Snapchat remains hotly disputed, weekends at a local high school’s art lab. “My best friend was all sides seem to agree on the genesis: Brown said something the computer teacher, Dan,” Spiegel laughs. to the efect of “I wish there was an app to send disappear- In high school he began to display the moxie that Zuck- ing photos.” Brown refused to speak to FORBES, citing the erberg would later exhibit, promoting Red Bull at clubs and pending litigation, but his side of the story comes through via bars and using his parents’ divorce as a leverage tactic. He numerous court documents, including a leaked deposition. frst moved in with his dad when he gave him a free hand in According to Brown, Spiegel became “physically animated” outftting his room and who could come over. “I had some and repeatedly called Brown’s remark “a million dollar idea.” notorious parties,” he smirks. But when Pop reportedly (Spiegel acknowledges he was excited, but won’t comment refused to shell out for the lease on a BMW 550i, he moved in about the “million dollar idea” line.) That night they set out with Mom. Days later the BMW was his. Except for college, to fnd a developer. Brown claims two candidates declined; he’s been based in his dad’s home, a stone-faced mansion a regardless, they settled on Murphy, who had just graduated. half-mile north of the ocean, ever since. “A lot of things have The original roles were fairly defned: Murphy as CTO, changed very quickly, so it’s nice to have that one constant,” Brown as chief marketing ofcer, Spiegel as CEO, honing the he says by way of justifcation. “It’s also pretty grounding.” idea as part of a design class he was taking. The frst iteration He entered Stanford’s product-design program and in was a clunky website that required users to upload a photo 2010, during his sophomore year, moved into the Kappa and set a timer before sending. The eureka moment only Sigma fraternity house. Bobby Murphy, a senior major in came when the idea migrated to mobile. “At some point it mathematics and computational science, lived across the was like, ‘Hey, there’s a camera on your phone,’ ” Spiegel says. hall. “We weren’t cool,” Murphy says of the fraternity. “So we “ ‘Wouldn’t that be easier?’ ” tried to build things to be cool.” The class culminated in a presentation to a panel of While Spiegel speaks animatedly, albeit measuring what venture capitalists. Brown came up with a name for the app, he’s saying, Murphy, the Berkeley son of state employees Picaboo, and Murphy put in 18-hour days to get a working (his mother emigrated from the Philippines), sits placidly, prototype. “The feedback was basically, ‘Hmmmm. Well, one leg tucked under the other. “I’d describe him almost like thank you for showing us your project,’ ” recalls Spiegel. One a monk,” says David Kravitz, Snapchat’s frst hire. “I don’t investor suggested he partner with Best Buy. Many won- think I’ve ever seen him upset.” At Stanford it was Murphy dered why anyone would want to send a disappearing photo. who frst hired Spiegel, recruiting him to design an online The frst version debuted in the iOS App Store on July social network inspired by Google Circles. It went nowhere. 13, 2011 … to yawns. “The fairy tale”—the app had Still, Spiegel was getting noticed. Intuit’s Scott Cook was 25,000 downloads on the frst day—“that was not us unfor- impressed by an answer he gave while guest lecturing at Peter tunately,” Murphy laments. The team had worked around Wendell’s popular graduate level class, “Entrepreneurship a potentially fatal faw—the fact that recipients can take a and Venture Capital.” “After class concluded, I commented screenshot, rendering a disappearing image permanent—by on the intelligence and reasoning in this particular student’s building in a notifcation if your picture has been captured, a

january 20, 2014 FOrBES | 81 30 ForbeS under 30 Social MetricS How does Snapchat stack up against the established darlings of social media? Let us count the ways.

FACEBOOK $100,000 VALUATIONS ($MIL)

TWITTER 10,000 SNAPCHAT

1,000 INSTAGRAM

100

10

1 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 potent social deterrent. Still, by the end of the summer Pica- Murphy added photo caption capabilities, they seemed boo had only 127 users. Pathetic. Brown toyed with position- destined to replicate their Future Freshman experience: a ing the app as a sexting tool. (“Picaboo lets you and your boy- technically competent product that virtually no one wanted. friend send photos for peeks and not keeps!” reads a draft of Spiegel returned to Stanford for his senior year; Murphy a press release he wrote.) Murphy’s parents implored him to took a coding job at Revel Systems, an iPad point-of-sale get a real job. And Spiegel apparently began pushing to shake company in San Francisco. up the team. According to Brown’s deposition, he overheard But that fall Snapchat began to exhibit a pulse. As user Spiegel and Murphy plotting to replace him. numbers approached 1,000, an odd pattern emerged: App The breaking point came when equity was being fnal- usage peaked between 9 a.m. and 3 p.m.—school hours. ized. On Aug. 16 Brown, back home in South Carolina, called Spiegel’s mother had told her niece about the app, and the his two partners and laid out his case. He wanted around niece’s Orange County high school had quickly embraced 30%, according to Murphy’s deposition, and listed his contri- Snapchat on their school-distributed iPads, since Facebook butions: the initial idea, the Picaboo name and the now- was banned. It gave them all the ability to pass visual notes famous ghost logo. Spiegel and Murphy countered that he during class—except, even better, the evidence vanished. didn’t deserve anywhere close to that. When Brown claimed Usage doubled over the holidays as those students received that he had “directed [the] talents” of Spiegel and Murphy, new, faster iPhones, and users surged that December to Murphy remembers, an enraged Spiegel hung up. Spiegel 2,241. By January it was at 20,000; by April, 100,000. and Murphy changed administrative passwords for the app But with growth came server bills. While Spiegel helped and cut of contact except for a few tense e-mails about a cover some of it with money from his grandfather, Murphy pending patent. Brown was out, relegated to Snapchat’s ver- had to fork over half his paycheck. As monthly expenses ap- sion of a cross between the Winklevoss twins and Eduardo proached $5,000, the guys needed a bailout. Saverin. (Ironically, in their battle with Brown, Snapchat Lightspeed Venture Partners’ Jeremy Liew came to the has hired the legal team that pursued the Winklevoss claim rescue. His partner’s daughter relayed how Snapchat had against Facebook.) become as popular as Instagram and Angry Birds at her Sili- Now a two-man operation, Picaboo changed its name con Valley high school. But Spiegel and Murphy proved dif- to Snapchat after receiving a cease-and-desist letter from a cult to track down; their website had no contact information, photo-book company with the same name. “That was like and no one was listed on the company’s LinkedIn page. Liew the biggest blessing ever,” says Spiegel. But even as he and fnally did a “whois” lookup to fnd the owner of the Web

82 | FOrBES january 20, 2014 snapchat number of users $6.87 bil December 2013 (est.) 50 mil

revenue number of users LaSt four quarterS september 2011 tHrougH September 2013 instagram 127 number of users september 2013 150 mil

number of users october 2010 tWitter $534.5 mil 25,000 number of users october 2013 0 230 mil facebooK tWitter snapchat domain, linked the obscure LLC that it was registered under number of users to Spiegel and eventually tracked him down via Face- august 2006 book. “His profle picture was with Obama,” shrugs Spiegel. “So I thought he seemed legit.” 1,800 In April 2012 Lightspeed put in $485,000 facebooK at a valuation of $4.25 million. “That was number of users the greatest feeling of all time,” says Spie- october 2013 gel. “There is nothing that will replace bil that.” On the day the money went 1.2 through, he sat in a machine-shop class busily refreshing the Wells Fargo app on his iPhone. In a fnal homage to Zuckerberg, when the money appeared he walked up to the professor and dropped out of the class and Stanford, a few weeks from graduation.

snApChAt hAs moVeD three times since the initial in- vestment, as the company has grown to a still-lean 35 employees. The latest ofces, in a former art studio a block from the Venice boardwalk, are appro- priately anonymous, with just a small ghost number of users logo to identify it. Most of the development that December 2004 has made it a viral sensation, however, took place in 2012, when the company was headquartered at Spiegel’s 1 mil

january 20, 2014 FOrBES | 83 30 ForbeS under 30 dad’s house. “He convinced us to drop out of Stanford and Murphy, who have evolved Snapchat into something fun move down to L.A. over the course of a single conversation,” and easy. To view a snap users hold a fnger on their phone says Daniel Smith, who was hired along with Kravitz. screens, a feature designed to make it still more difcult The team worked around the clock, sleeping where they for people to photograph the image with another camera. worked. (Smith lived in Spiegel’s sister’s room, with enough Disappearing video is now an option. And while teens have girlish orange and pink polka dots, Spiegel remembers, “to embraced a medium unreachable by prying parents or fu- give you an anxiety attack.”) “Bobby had a habit of pushing ture employers, grownups are catching on. All told, Snapchat code changes and then going to sleep,” says Spiegel, who users send 400 million photos and videos each day, match- then found himself on debugging duty. “I’d wake up in the ing the daily uploads to Facebook and Instagram combined. morning and go, ‘Oh my God!’ ” Adds Murphy: “I still have “We certainly didn’t invest in this to fip it,” says Mitch nightmares about him stomping down the stairs.” Lasky, a Snapchat board member and partner at venture The arrangement proved oddly efective. Says Light- capital frm Benchmark Capital, which led Snapchat’s $13.5 speed’s Liew: “They can call ‘bulls--t’ on each other, which million fundraising round a year ago (they also raised $60 makes their ideas better.” What emerged was an app that, million in June from Institutional Venture Partners)—and rather than a tool for the likes of Facebook, can potentially invested in Twitter way back in 2009. challenge it. By both luck and design, Snapchat addresses three red fags for Facebook. First, it’s more intimate and ex- ALL THE ASTOUNDING GROWTH, valuations and clusive. Just as Facebook took the anonymous Internet and talk of an independent future misses one key ingredient: boiled it down to real people you knew, Snapchat narrows revenue. Asia ofers a possible blueprint (see box, oppo- your world from Facebook “friends,” which range from long- site). There, a handful of wildly popular mobile messaging forgotten schoolmates to nagging aunts, to your network of services that upsell users with “in-app purchases.” Spie- phone contacts. People, in other words, you actually talk to. gel’s party line, when discussing revenue, feels as if it’s read Second, it’s perceived as young and cool. Most teens from a script: “In-app transactions followed by advertising, can probably fnd a grandparent on Facebook. Snapchat’s that’s the plan we’re sticking to.” mobile-frst roots give it credibility with the app generation, Drilling down through some of the companies that which increasingly view PCs the way their parents viewed Spiegel cites raises more questions than answers. China’s black-and-white televisions. WeChat, a massive messaging app owned by the Chinese Internet behemoth Tencent, encourages users to subscribe to celebrity greetings and purchase physical goods. But it’s When the Money appeared, mostly a texting app, and the messages don’t disappear. Korea’s KakaoTalk and Spiegel Walked up to hiS Japan’s Line make most of their money proFeSSor—and dropped out. via mobile games, which don’t seem a natural ft with Snapchat. And, of course, digital goods, like premium sticker pack- ages, emoticons and animations, are also And in the age of Snowden, parental Facebook moni- moneymakers in Asia, though Spiegel seems to disapprove. toring and “revenge porn” (exes who publicly post nude “It’ll make sense in a Snapchat way,” he says. “But it will not pictures of former lovers), the self-destruction feature has be stickers.” become increasingly resonant. “This isn’t a silly little mes- Advertising is similarly tricky. Snapchat’s core strengths saging app,” insists Liew. “It allows people to revert back to a in gaining users (your privacy is protected and your images time when they never had to worry about self-censorship.” disappear!) cripple the targeted advertising that most social An entire subindustry—so-called ephemeral, or tem- media companies rely on (Snapchat knows little more than porary, social media—has emerged behind it. Besides Poke e-mail, age, phone number—plus your ads disappear!). (which has largely faded), there’s Clipchat (a Snapchat-Twit- But it has one advantage that virtually no other digital ter hybrid), Wickr (disappearing texts) and dozens of other advertiser can claim: guaranteed engagement. Users must apps pushing the boundaries of digital communication back keep their fngers on a photo or video to view it—and that toward what a telephone call used to be—a way to communi- applies to any ads thrown their way. Snapchat can tell ad- cate with little risk it will come back to bite you. vertisers with absolute certainty whether their ads were All of them, however, are stuck chasing Spiegel and viewed, a rare data point in the metric-driven world of

84 | FOrBES january 20, 2014 aSia calling evan Spiegel points to mobile-messaging apps popular in the far east as potential business models for Snapchat. Here are the leaders.

line. Social messaging platform is big on letting users share games and cute digital stickers, which to- gether made up 80% of its $154 million revenue in the third quarter. Created in 2011 by engineers at the Japanese arm of South Korea’s Naver Corp., it now claims 300 million registered users. monthly actives are a mystery, but one investor in a rival app suspects 27%. LINe is reportedly planning an Ipo in 2014 at a valuation of $8 billion and recently set up ofces in the u.S. to court celebrity ambassadors.

Wechat. China’s mega holding company tencent denied reports that it blocked some of its 270 million active WeChat users, a third of whom were said to be outside China, from sending words like “falun gong” earlier this year. It’s now targeting Italy, mexico and brazil for expansion and has experi- mented with deposits and payments, setting up 300 WeChat vending machines in beijing’s subway, where users could buy discounted snacks through the app.

KaKaotalK. Seven-year-old, game-focused messaging platform booked $65 million in sales in frst half of 2013 after splitting proceeds with game developers, apple and google. ofers 250 games and free group calls and is said to be on nearly every phone in South Korea, one of the most wired coun- tries on earth. Claims to have 110 million registered users.

KiK messenger. founded after former blackberry intern became frustrated that the devicemaker wouldn’t make its bbm messenger work with other phones, then left to create Waterloo, ont.-based Kik, which did. Now has more than 100 million registered users, half of whom are in the u.S. and many of whom are teens. unique in being a Web-based messenger with 30 “Cards,” or interactive mobile sites, like You- tube and games; 26-year-old founder says it’s evolving into a mobile browser with messaging as its core. With $27.5 million in VC funding, it plans to make money through ads and premium services.

Whatsapp. World’s most popular messaging app has 400 million monthly active users and was the frst messaging service to synch with the phone’s address book; is on almost all smartphones in Spain but largely unknown in the u.S. the proftable, subscription-based service—it costs $1 annually after the frst free year—took $8 million from Sequoia Capital in 2011 and has since shunned funding, media and advertising. No immediate plans to expand to games and stickers, but simply send messages, photos and video to any mobile phone. —Parmy Olson digital advertising. emerging platforms, also seem keen to not make that mistake Like Facebook the company can also charge busi nesses again. In September, for example, Snapchat debuted on the for setting up branded accounts. Acura, Taco Bell and the Samsung Galaxy Gear smartwatch. “People haven’t thought New Orleans Saints already use the app to debut new prod- about use cases on new computing platforms,” says Thom- ucts and show behind-the-scenes footage. The compa- as Lafont, managing director of Coatue, the hedge fund that ny’s Stories feature, which lets users display a compilation provided the latest $50 million infusion. “In one tap you take of snaps taken over the last 24 hours, is useful for brands a photo, one more and you can share it. Imagine [the difcul- looking to tell a longer story. Example: Online retailer Kar- ty] trying to post on Instagram from a Google Glass device.” maloop uses the feature to show clips of posing models Ah, Instagram. Zuckerberg’s Poke might be languish- sprinkled with discount codes and new items. Others, like ing, but he still has the last billion-dollar app to come out frozen yogurt chain 16 Handles, have experimented with of Stanford. Kevin Systrom’s $1 billion sale last year, in fact, “exploding coupons.” is often held up as the reason Snapchat was right to turn Spiegel and Murphy, slow in their college days to adapt to down Facebook’s preemptive billions. (Instagram would

january 20, 2014 FOrBES | 85 30 ForbeS under 30 30 uNder 30: teCH be worth as much as ten times more now.) Zuck is going after Snapchat amit avner | 28 again with a tweak to Instagram— Cofounder | Taykey Instagram Direct, a Snapchat knock- michael buckwald, David holz | 25, 25 of with a key diference: The imag- Cofounders | Leap Motion es don’t vanish unless users go in and eric butler | 26 Security expert delete them. tracy chou | 26 Spiegel and Murphy have an- Software engineer | other headache. Brown’s lawsuit, , | 25, 23 which asks for one-third of the com- Cofounders | pany plus punitive damages, might adam D’angelo | 29 go to trial this year. “It’s defnite- Cofounder | Quora greg Dufy | 27 ly over a billion dollars we’re seek- Cofounder | Dropcam ing,” says Luan Tran, one of Brown’s steven eidelman, ben jacobs | 28, 26 three lawyers. Insiders say Snapchat Cofounders | Whistle is eager to try the case, but videos Kelsey falter | 23 of depositions, presumably leaked Founder | Poptip lisa falzone | 28 by Brown’s team, show Spiegel and Cofounder | Revel Systems Murphy far more equivocal and for- ryan farris | 29 Engineering manager | Parker getful than their opponent. “I’m just Hannifn hoping it gets resolved so it doesn’t aj forsythe | 25 prove to be a distraction,” says Cofounder | iCracked adam ghetti | 27 Benchmark’s Lasky. Founder | Ionic Security The proverbial “adults” have meron gribetz | 28 been brought in, including Philippe Founder | michael heyward | 26 Browning, the vice president of Cofounder | monetization, nabbed from CBS, and alexa hirschfeld, james hirschfeld | 29, 27 COO Emily White, poached from Cofounders | Paperless Post the business division of, yes, Insta- morgan Knutson | 29 gram. But, tellingly, the company Designer | Dropbox sahil lavingia | 21 prevented FORBES from interview- Founder | Gumroad ing either of them. ted livingston | 26 So for now the doubters carry the Founder | Kik Messenger erie meyer, aminatou sow | 29, 28 day. “There’s an almost ritual incan- Cofounders | Tech LadyMafa tation when these things reach 50 eric migicovsky | 27 million daily active users and people Founder | Pebble sean rad | 27 say, ‘Well they’re not making any rev- Cofounder | enue,’ ” says Lasky. “It’s unfair to ex- christian reber | 27 pect these things to generate reve- Founder | Wunderlist David moinina sengeh | 26 nue while growing so quickly.” To his Biomechatronics researcher | MIT point, the same was said about Twit- Media Lab ter and Facebook. But it was also in- evan spiegel, bobby murphy | 23, 25 toned by the dot-com oracles on the Cofounders | Snapchat eve of catastrophe 15 years ago. Will robby stein | 28 Director of product | Yahoo Snapchat wilt like MySpace, get out ilya sukhar | 28 at a peak valuation the way Mark Cofounder | Parse Cuban sold Broadcast.com or prove amir taaki | 25 Cofounder | Dark Wallet the next great social media IPO? We David Wang | 28 juDges: should get our answer within two Hacker | Evad3rs miKe abbott General partner years, just in time for Spiegel to turn john Zimmer | 29 Cofounder | Lyft | Kleiner Perkins Caufeld & the ripe old age of 25. F Byers steve case CEO | Revolution caterina faKe Founder 86 | FOrBES january 20, 2014 | Findery I WANT TO LIVE HAPPILY EVER AFTER.

FAIR RETIREMENT GUIDANCE. No one can promise what the future holds, but planning helps you be ready for anything. Get objective guidance for your retirement plan from professionals who understand you. And be assured that their guidance is based on your needs.

877-TDAMERITRADE I tdameritrade.com/retire

Open a new account or roll over an old 401k, and get up to $600.

All investments involve risk, and successful results are not guaranteed. Offer valid through 4/30/14. Funding/rollover of $25,000–$99,999 receives $100; funding/rollover of $100,000–$249,999 receives $300; and funding/rollover of $250,000 or more receives $600. Cash bonus subject to nine-month funding-duration condition. See Web site for details and other restrictions/conditions. TD Ameritrade reserves the right to restrict or revoke this offer. This is not an offer or solicitation in any jurisdiction where we are not authorized to do business. TD Ameritrade, Inc., member FINRA/SIPC/NFA. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2014 TD Ameritrade IP Company, Inc. All rights reserved. Used with permission. 36 USC 220506 Introducing the brightest young stars in 15 dif erent f elds. These energy and innovations3O of the moment, UND much as Atari joysticks and

EDITED BY CAROLINE HOWARD AND MICHAEL NOER

FROM LEFT: Trip Adler, Nic Borg, Jamail Larkins, Meg Gill, Lucas Duplan, Shiza Shahid, Nate Levine, Palmer Luckey, Brian Wong, Divya Nag.

PHOTOGRAPHER: Jamel Toppin CREATIVE STYLE DIRECTOR: Joseph DeAcetis PRODUCER: Robyn Selman 88 | FORBES JANUARY 20, 2014 PRODUCTION ASSISTANT: Mehrunnisa Wani HAIR AND GROOMING: Mary Reid FASHION ASSISTANT: Alexa Rizk unders, brand-builders and do-gooders embody the ER e the 3Odecade that almost all of them were born in.

REPORTERS: ART & STYLE: Susan Adams, Hannah Elliott EDUCATION: Caroline Howard ENERGY & INDUSTRY: Christopher Helman, Joann Muller, Aaron Tilley FINANCE: Nathan Vardi, Agustino Fontevecchia, Halah Touryalai FOOD & DRINK: Randall Lane, Vanna Le GAMES: David M. Ewalt HOLLYWOOD & ENTERTAINMENT: Dorothy Pomerantz, Kate Pierce LAW & POLICY: Daniel Fisher, Miguel Morales MARKETING & ADVERTISING: Jennifer Rooney MEDIA: Jef Bercovici, Emily Inverso MUSIC: Zack O’Malley Greenburg SCIENCE & HEALTH CARE: Matthew Herper, Andrea Navarro SOCIAL ENTREPRENEURS: Erin Carlyle, Prerna Sinha SPORTS: Tom Van Riper, Alex Morrell TECH: Steven Bertoni, Andy Greenberg, Connie Guglielmo, Kashmir Hill, Alex Knapp, Alex Konrad, Ryan Mac, Parmy Olson, Bruce Upbin

30 FoRBeS under 30 hollywood & EntErtainmEnt Megan Amram | 26 Writer-comedian Oliver Bogner | 20 Executive producer | Bogner Entertainment, Relativity Television Bing Chen | 27 olivia wilde Global creator development & Actress- management lead | YouTube sociAl entrepreneur Ryan Coogler | 27 Director-writer 29 Lena Dunham | 27 Fundraising is the bane of every do- Actress-writer-producer gooder’s existence, often requiring Megan Ellison | 27 going back to the same rich donors Founder | Annapurna Pictures over and over again to convince Dave Franco | 28 them to keep giving. actress Actor-writer-producer olivia wilde thinks there’s a better Todrick Hall | 27 Actor-writer-director-singer way. that’s why she cofounded Conscious Commerce. the company Ian Hecox, Anthony Padilla | 26, 26 pairs brands with causes to help Founders | Smosh corporations become better global Grace Helbig | 28 citizens. So profts from a bestselling Actress-comedian dress at anthropologie might go to a Stephanie Herman | 29 girls’ school in india, while a limited- VP, casting | Twentieth Century Fox Television edition bag at alternative apparel Michael B. Jordan | 26 could fund a hospital in haiti. “i’ve Actor always been a huge proponent of Anna Kendrick | 28 voting with your dollars,” says wilde. Actress “i’m inspired by the movement of Jennifer Lawrence | 23 entrepreneurs from my generation Actress who are encouraging people to think Tom Leach | 28 VP, development & current about where their dollars are going.” programming | One Three Media this year Conscious Commerce Deborah McIntosh | 29 raised $100,000 for new light, a Agent | WME Global community-development project Mickey Meyer | 29 serving the women and children Cofounder | JASH of a red-light district in Kolkata, Kelly Osbourne | 29 india. Conscious Commerce now TV host shares time with wilde’s acting, but Tiler Peck | 24 Ballerina | New York City Ballet she’s getting raves for her recent Aubrey Plaza | 29 performance in Drinking Buddies. Actress Issa Rae | 28 JuDGES: Writer-producer-director MICHAEL EISNER Founder Heather Regnier | 28 | The Tornante Company Writer-comedian TODD LIEBERMAN Partner Simon Rich | 29 | Mandeville Films Writer DANA WALDEN CEO | Twentieth Jason Ruiz | 28 Century Fox Television Animator OLIvIA WILDE WEARS: SKirt by toCCa; top by rodartE; Taylor Schilling | 29 JEwElS by JEnniFEr mEyEr; bootS by Jimmy Choo. Actress Nev Schulman | 29 Filmmaker-producer Wilde (b. 1984) gets all wrapped Quvenzhané Wallis | 10 up in VHS tape, the central player Actress of the video-coming-of-age indie Andy Weil | 29 classic Sex, Lies, and Videotape. VP, comedy development | Universal Television Rebel Wilson | 27 Actress-writer-producer

JANUARY 20, 2014 FORBES | 91 30 ForBEs under 30 sports Muthu Alagappan | 23 Consultant | Ayasdi Jonathan Amoona | 29 Associate | Winston & Strawn Alana Blanchard | 23 Surfer Michael Bradley | 26 Midfelder | AS Roma maria sharapova Drew Cannon | 23 tennis player Basketball operations analyst 26 | this winter the world’s fourth- Sidney Crosby | 26 ranked tennis player heads back Center | Pittsburgh Penguins to her hometown, the resort of Andrew Daines | 27 Cofounder | Preplay Sports sochi, russia, to serve as an NBC Mike Disner | 28 correspondent for the 2014 Winter Director of football administration olympics. there’s a reason the | Arizona Cardinals network wants her face on the Kevin Durant | 25 games: sharapova sells. she was Forward | the world’s highest-paid female Brittney Griner | 23 Center | Phoenix Mercury athlete last year, earning $29 million, of which $23 million came from Rob Gronkowski | 24 Tight end | New England Patriots deals of the court. A four-time Bryce Harper | 21 grand-slam winner, she’s piled up Outfelder | Washington Nationals endorsements over the years from, LeBron James | 29 among others, porsche, Motorola, Forward | tifany and Nike, which created Alex Kline | 19 a Maria sharapova apparel line. Founder | The Recruit Scoop, Rivals Last year she launched her frst Shane Kupperman | 28 Director of basketball operations independent business, a candy line | called sugarpova, with 12 favors of Rory McIlroy | 24 premium candies (not to mention Golfer jewelry and accessories featuring Lionel Messi | 26 the sugarpova lips logo) and Forward | FC Barcelona estimated revenues of $6 million. Andy Murray | 26 “Business has always been a passion Tennis player of mine,” she says. “And I have Kei Nishikori | 24 Tennis player always had a sweet tooth. … A tennis Megha Parekh | 28 career is such a small part of life.” Vice president | Jacksonville Jaguars JuDGeS: Derrick Rose | 25 PeTeR GuBeR Co-owner | Golden Point guard | State Warriors Ronda Rousey | 26 JoSePH A. BAILey III Managing MMA fghter director | RSR Partners Maish Simon | 27 Cofounder | Pogoseat SHAWN MCBRIDe SVP | Ketchum Sports & Entertainment Jonathan Toews | 25 Center | Chicago Blackhawks MARIA SHARAPoVA WeARS: ALexANder MCQueeN, pALe BLue pIQuet top, sAks FIFth AveNue; Mike Trout | 22 doLCe & GABBANA, BLACk skIrt, sAks FIFth AveNue; JeNNIFer Meyer, JeWeLry. Outfelder | Los Angeles Angels of Anaheim Lindsey Vonn | 29 Sharapova (b. 1987) swings a vintage Skier racket from the era when female Darrell Wallace Jr. | 20 champs Martina Navratilova and Nascar driver Tracy Austin held court. Shaun White | 27 Snowboarder Caroline Wozniacki | 23 Tennis player

92 | FORBES JANUARY 20, 2014 30 FORBEs under 30 finance

Luis Alvarado | 29 Investment research analyst | Wells Fargo Private Bank George Bachiashvili | 28 Founder | Georgian Co-Investment Fund Lucy Baldwin | 29 Managing director | Goldman Sachs Sam Barnett | 24 Founder | SBB Research Group Ganesh Betanabhatla | 28 Managing director | Talara Capital Tracy Britt Cool | 29 Financial assistant to the chairman | Berkshire Hathaway Rushabh Doshi | 29 Trader | DW Investment Management Leigh Drogen | 27 lucas duplan Founder | Estimize founder, Clinkle Fred Ehrsam | 25 22 Cofounder | Coinbase Just over a year after receiving his Eric Eisner | 29 undergrad computer science degree Vice president | Bank of America Merrill Lynch Global Banking & Markets from Stanford, Duplan is running one Stephen Ensley | 29 of the most hyped and controversial Principal | Hellman & Friedman startups in the nation, clinkle, which Brian Feinstein | 28 seeks to disrupt the way fnancial Partner | Bessemer Venture Partners transactions are done—with a digital Eugene Gokhvat | 28 wallet used on mobile phones. He has Portfolio manager | BlueCrest Capital Management shocked Silicon Valley with his ability to Cameron Horwitz | 29 raise $30 million from the likes of Richard Research director | U.S. Capital Advisors Branson, Peter Thiel and andreessen Kevin Kaiser | 26 Horowitz for an unreleased secret Managing director | Hedgeye Risk product and attract talent like former Management netfix cfO Barry Mccarthy, who is now Katie Keenan | 29 Associate | Blackstone Group clinkle’s cOO. at the same time Duplan Eric Khrom | 28 has been slammed by tech bloggers, Founder | Khrom Capital Management who have pointed to the large number Maximilian Kuss | 27 of departing employees—one of whom Founder | European Media Holding AG anonymously posted a harsh criticism John Locke | 29 of Duplan—and made fun of some of his Principal | Partners decisions, like the over-the-top video ad Carryn McLaughlin | 29 clinkle produced. “at the end of the day Vice president | JPMorgan Chase only one thing will matter: Do people Chaitanya Mehra | 28 Portfolio manager | Och-Zif Capital like and use our product?” says Duplan. Management “Our focus is not on the press or who is Neil Mehta | 29 backing it. Our focus is on product.” Founder | Greenoaks Capital Vivek Ramaswamy | 28 JuDGES: Investment analyst | QVT Financial Partner | Accel Partners Adam Rodman | 29 Founder | Segra Capital Management ANTHoNY SCARAMuCCi Founder Matthew Schoenfeld | 26 | SkyBridge Capital Associate | Morgan Stanley ADAM ZoiA CEO | Glocap Sam Shikiar | 28 LuCAS DupLAN WEARS: SweaTeR ($556), SHiRT ($280) Vice president | Goldman Sachs anD PanTS ($327) By Paul anD SHaRk; PaulSHaRk.iT. SHOeS: HiS Own. Jefrey Sun | 29 Executive director | Morgan Stanley Andrew Silverman | 28 “Greed is good” and outsize mobile Vice president | Goldman Sachs phones are shorthand for 1980s-era Chris Yetter | 29 Head of Latin American Investments Wall Street for young fnanciers like | Falcon Edge Capital Duplan (b. 1991).

january 20, 2014 FOrBES | 93 30 FORBES under 30

TRIP ADLER media cofounder, scribd pete Cashmore | 28 29 Founder | Mashable an avid surfer and sometime street- Kelly evans | 28 busking saxophonist with a Harvard Anchor | CNBC degee in biophysics, adler is a man dan fletcher | 26 of many interests. He thinks readers Cofounder | Beacon ought to be able to indulge their own matt galligan | 29 Cofounder | Circa diverse curiosities as well—and be tavi gevinson | 17 able to “think about what to read, Cofounder | Rookie not what to buy,” as he says. Scribd, Axel Hansen, Jonah Varon | 22, 22 the digital content-sharing platform Cofounders | Newsle he cofounded in 2007, is betting big Jake Horowitz, Chris Altchek | 26, 26 on subscriptions: $8.99 a month for Cofounders | PolicyMic unlimited e-book downloads. it has david Karp | 27 already partnered with more than Founder | 100 publishers for a catalog of more ezra Klein | 29 Columnist | Washington Post than 100,000 titles and has ambitions dan Koh | 28 that extend well beyond books. “We General manager | HuPost Live want to be the world’s digital library,” Chris lavergne, Alex magnin | 25, 29 he says. Proftable, with revenues in Founder, COO | Thought Catalog the “tens of millions” and a user base libby lefer | 28 of 80 million, Scribd no longer has to Strategic partnerships manager | Facebook rely on VC funding. “Our challenge uzoamaka maduka | 26 now is how to take our profts and Cofounder | The American Reader reinvest them to continue to grow our Claire mazur | 29 Cofounder | Of a Kind revenue,” he says. Brit morin | 28 Founder | Brit + Co. Judges: matt mullenweg | 29 AriAnnA Huffington Cofounder Founder | Automattic | Hufngton Post Media Group Carolyn penner | 28 Ben sHerwood President | ABC VP of communications | Twitter News tifany pham | 27 sHAne smitH Cofounder | Vice Director of business development, strategic Media initiatives and partnerships | CBS trip Adler weArs: JaCket ($595), SHirt ($295) and SlaCkS olenka polak | 20 ($450) by CalVin klein COlleCtiOn; aVailable at CalVin Cofounder | MyLingo klein madiSOn aVenue StOre. belt ($40) by nautiCa; nautiCa.COm. SHOeS ($780) by Prada; Prada.COm. sterling profer | 27 Director of platform | Vice rachel rosenfelt | 28 Tom Wolfe’s hardcover The Bonfre Cofounder | The New Inquiry of the Vanities was fly in 1987. Now melissa rosenthal | 25 Adler (b. 1984) is busy disrupting Director of creative services | Buzzfeed the book business. Callie schweitzer | 25 Director of digital innovation | Time nikhil sethi, garrett ullom | 25, 24 Cofounders | Adapt.ly shane snow | 29 Cofounder | Contently Jason stein | 29 Founder | Laundry Service Brian stelter | 28 Host, Reliable Sources | CNN eric stromberg | 25 Cofounder | Oyster fernando Vila | 28 VP of programming | Fusion

94 | FORBES JANUARY 20, 2014 FORBES BRUNO MARS 30 Musician under 28 When halftime rolls around at super Bowl XLViii, 30 it’s safe to say Bruno mars won’t be worried about the score. “Hawaii doesn’t have a team, so i bounce around,” says the Honolulu native. “i go for the underdog.” That term hardly describes music mars, who will play the halftime show in the tradition of Paul mccartney, u2, michael Jackson Peter Asbill, Elliott Breece | 29, 29 Cofounders | Songza and other music legends. mars is the frst artist Avicii | 24 in ten years to headline before turning 30, but Musician he’s already got two platinum albums and 14 Justin Bieber | 19 past Grammy nominations (including one win), Musician with 4 new ones this year. His best preparation J. Cole | 28 for the upcoming performance at metLife Musician stadium may have been hosting Saturday Night Miley Cyrus | 21 Live in 2012, despite having about as much Musician experience with sketch comedy as Hawaii has Donnie Dinch | 29 Founder | WillCall with snow. says mars: “You gotta be fearless, Drake | 27 man. … if i’m ever gonna sing in a blizzard, it may Musician as well be at the super Bowl.” To listen to mars’ Derrick Fung | 26 curated playlist, created exclusively for FORBEs’ Founder | Tunezy 30 under 30, go to forbes.com/under30. Calvin Harris | 29 Musician JuDGES: Hunter Hayes | 22 KEvin LiLES Founder | KWL Enterprises Musician JOHn OATES Musician | Hall & Oates Kim Kaupe | 28 Cofounder | ‘ZinePak MiCHAEL RAPinO CEO | Live Nation Entertainment Lady Gaga | 27 Musician | 26 Musician Ryan Lewis | 25 Producer Lorde | 17 Musician Miguel | 28 Musician Janelle Monáe | 28 Musician One Direction | 19, 20, 20, 20, 22 Musicians Wilson Owens | 28 Cofounder | Royalty Exchange Jordan Passman | 27 Founder | ScoreAScore Katy Perry | 29 Musician Rihanna | 25 Musician James Sider | 29 Founder | BandPage Allen Stone | 26 Musician Taylor Swift | 24 Musician Sam Tarantino, Josh Greenberg | 27, 26 Cofounders | Grooveshark Alex White | 27 Cofounder | Next Big Sound Wiz Khalifa | 26 Musician Zedd | 24 Musician

Mars (b. 1985) sports a post-Saturday NIght Fever meets Prince look.

PHOTOGRaPH BY Kai Z. FEnG Kai BY PHOTOGRaPH JANUARY 20, 2014 FORBES | 95 30 FORBeS under 30

food & meg gill Cofounder, drink Golden road BrewinG 28 Elizabeth Alpern, Jefrey Yoskowitz | 29, 29 Beer, it’s clear, isn’t just for dudes. Co-owners | The Geflteria Women are drinking more of it. And Adam Altnether | 27 Co-owner | Craft Restaurants as Meg Gill proves, they’re making more of it, too. Amid America’s craft Matt Brockman, Ross Brockman, Tyler Mosher | 27, 25, 25 beer explosion—more than 2,000 at Founders | Downeast Cider House last count—forBES reckons that Gill, Borahm Cho | 29 28, is the youngest female brewery Cofounder | Kitchensurfng owner in the country. And her Los Emily Doubilet, Jessica Holsey | 29, 29 Angeles-based Golden road Brewing Cofounders | Susty Party is one of the fastest-growing; it Shore Gregory | 29 President | Island Creek Oysters produced 15,000 barrels last year Eden Grinshpan | 27 and expects to double that output Host, Eden Eats | Cooking Channel this year. “it’s all about fnding those Luke Holden | 29 relationships to help support the Founder | Luke’s Lobster story behind the beer, the beer itself Yuki Ieto | 29 and all the love that goes into getting Chef | Pubbelly Sushi the beer into the right vessel,” says Jesse Katz | 29 Gill, who spent her time at Yale in the Head winemaker | Lancaster Estate and Roth Winery decidedly beer-unfriendly realms of Joseph “JJ” Johnson | 29 classics study and varsity swimming. Chef de cuisine | The Cecil Yet she credits the former with her Vincent Kitirattragarn | 29 unique outlook on suds: “Latin is Founder | Dang Foods about putting pieces of the puzzle Oliver Kremer | 27 together, and the same thing is true Cofounder | Dos Toros Taqueria of getting beer on the shelf.” Gill, Adam Lowy | 28 Founder | Move for Hunger who sold beer from an r.V. before cofounding Golden road with an Aditi Malhotra | 28 Founder | Tache Artisan Chocolate industry veteran, Mohawk Bend Carlton McCoy | 29 owner Tony Yanow, reaches those Wine Director | The Little Nell Hotel shelves by putting her high-end Jack McGarry | 24 brews—$7.99 for a 16 oz. four-pack— Co-owner | The Dead Rabbit inside aluminum cans. revenues Leslie Pariseau | 28 exceeded $10 million in 2013, and Deputy editor | Punch Gill plans to expand her dozen- Thomas Pastuszak | 29 Wine director | The NoMad Restaurant plus oferings outside her southern California base in 2014. Alex Pemoulie | 28 Founder | Thirty Acres Jason Pfeifer | 29 JuDGES: Chef de cuisine | Maialino DAnnY MEYER CEO | Union Eric Railsback | 28 Square Hospitality Group Cofounder | Les Marchands Wine Bar & Merchant, LEE SCHRAGER Founder | South Lieu Dit Winery Beach and New York Wine & Ali Rosen | 28 Food festivals Founder | Potluck Video ALICE WATERS Founder | Chez Erica Shea, Stephen Valand | 29, 28 Panisse Cofounders | Brooklyn Brew Shop MEG GILL WEARS: JACkET ($950) BY STrEnESSE SS; Rob Spiro | 29 STrEnESSE.CoM. SkirT ($371) BY EkATErinA kukhArEVA; kukhArEVA.CoM. PuMPS ($148) BY CoLE hAAn; Cofounder | Good Eggs AVAiLABLE AT diLLArd’S; diLLArdS.CoM. Ben Towill, Philip Winser | 29, 29 Cofounders | Silkstone Group Christina Turley | 29 Two decades before Gill (b. 1985) Director of sales and marketing was legal to drink, Cheers made | Turley Wine Cellars suds safe for prime-time TV. Jason Wang | 25 CEO | Xi’an Famous Foods Catherine Zamoiski | 29 Director of marketing | Pret A Manger

96 | FORBES januaRy 20, 2014 30 FOrBeS under Palmer luckey CEO, OCulus VR 30 21 Virtual reality for the masses is no longer just science fction, thanks to this 21-year-old videogame fan. Engineering GAMES prodigy Palmer Luckey started developing his own head-mounted Maria Alegre | 28 virtual-reality displays when he was Cofounder | Chartboost still in high school and was in college Alexander Bruce | 27 Owner | Demruth when he created the frst prototype of a Anthony Burch | 25 consumer-priced VR headset called the Lead writer | Gearbox Software Oculus Rift. “You put it on,” says Luckey, Terry Cavanagh | 29 “and you feel like you’re inside of the Director | Distractionware Limited game, rather than looking at it Brian Cho | 28 on a screen.” Endorsements from Partner | Andreessen Horowitz game industry legends such as Valve’s Jessie Coombs | 28 Gabe Newell and id Software’s Senior producer | Microsoft Game Studios John Carmack helped Luckey raise Matthew Davis | 28 Cofounder | Subset Games $2.4 million in a 2012 Kickstarter Zach Gage | 28 campaign. (Carmack was so impressed Game designer he even left id to work for Luckey as Alexander Garfeld | 28 his CTO.) The year-old company has CEO | Evil Geniuses raised over $91 million from venture John Graham | 27 capitalists, employs 50 people and has Cofounder | Humble Bundle released an early version of the device Keith Guerrette | 28 to software developers, who are already Lead FX artist | Naughty Dog showing of some innovative VR games Stephanie Harvey | 27 Game designer | Ubisoft Montreal and applications. Consumers will be Justin Ignacio | 23 able to buy their own headsets—which Broadcast production manager | Twitch will initially work only with PC and Tom Jubert | 29 mobile games—for a goal price of $300 Narrative designer sometime later this year. Ludwig Kietzmann | 29 Editor-in-chief | Joystiq JuDGeS: Andrew Kim | 22 Industrial designer | Microsoft MARTIN RAe President | Academy of Interactive Arts & Sciences Jaedong Lee | 23 Professional gamer JoHN RoMeRo Cofounder | Loot Drop David Louche | 19 Game designer JuLIe uHRMAN Founder | OUYA

Justin Ma | 28 PALMeR LuCKeY WeARS: JACKET ($800) bY STONE Cofounder | Subset Games ISLANd; STONEISLANd.COM. SwEATER ($450) bY STONE ISLANd ShAdOw; STONEISLANd.COM. JEANS ($165) bY Matthew Malone | 29 JACK Of SPAdES; JACKOfSPAdES.COM. Designer | Branch Alexander Martin | 22 Founder | Droqen Matt Nava | 27 Creative director | Giant Squid John Nesky | 28 Feel engineer | thatgamecompany Sean Plott | 27 CEO | Day[9]TV Amir Rao | 29 Studio director | Supergiant Games Matt Thorson | 25 Game developer | Matt Makes Games Greg Wohlwend | 29 Founder | aeiowu Justin Wong | 28 Director of partnerships | Twitch Davey Wreden | 25 Creative mistress | Galactic Cafe Luckey (b. 1992) blasts this Atari 2600 joystick, the only way to play Space Invaders, the runaway hit of gaming’s “golden age.”

JANUARY 20, 2014 FORBES | 97 30 ForbES under 30 education nic borg cofounder, Eren Bali | 29 edmodo Cofounder | Udemy 27 Katie Beck | 27 COO | 4.0 Schools in the white-hot world of Catharine Bellinger, Alexis Morin | 23, 23 online educational startups, Cofounders | Students for Education Reform nic Borg’s edmodo is among Dan Berkowitz | 28 the hottest, raising $25 million Manager | Youth Orchestra LA in 2012 to total $57 million Tyler Bosmeny, Dan Carroll, Rafael Garcia since it was founded in 2008. | 27, 26, 26 Cofounders | Clever edmodo, a.k.a. “Facebook for the classroom,” targets K-12 Andrew Buher | 28 COO | NYC Department of Education kids, parents and teachers Sam Chaudhary, Liam Don | 27, 27 and has nearly 30 million Cofounders | ClassDojo users—over a million of Jennifer Chen, Joyce Meng | 27, 27 them teachers—in more than Cofounders | Givology 210,000 schools, including Sayamindu Dasgupta | 29 public schools in chicago Ph.D. | MIT Media Lab and denver. edmodo doesn’t Katelyn Donnelly, Saad Rizvi | 27, 28 SVPs | Pearson create “content” but rather is a free, privacy-protected Aaron Feuer, Xan Tanner, David Carel | 22, 22, 23 platform where teachers, Cofounders | Panorama Education students and administrators Alejandro Gac-Artigas | 25 can compare and share lesson Founder | Springboard Collaborative plans, homework and tests. Brad Hargreaves, Matt Brimer | 27, 27 it is also a showcase for app Cofounders | General Assembly developers, and edmodo Jeremy Johnson | 29 Cofounder | 2U currently ofers over 600 apps, Jeremiah Kittredge | 27 from which it takes a revenue Founder | Families for Excellent Schools share. Says Borg, “While the Garrett Neiman | 25 ed tech industry has evolved Cofounder | CollegeSpring rapidly over the past few Greg Rosenbaum | 25 years, we have only seen Producer | SXSWedu the tip of the iceberg. We’ll Alison Johnston Rue | 26 start to better understand Cofounder | InstaEDU how technology can be used Elliot Sanchez | 27 Founder | mSchool to improve student learning Kane Sarhan | 26 outcomes at scale.” Cofounder | Enstitute Beth Schmidt | 29 JuDGES: Founder | Wishbone MiCHAEL HoRN Cofounder Mandela Schumacher-Hodge | 28 and executive director, Director | Startup Weekend Education education program | The Clayton Christensen Elizabeth Ratner Slavitt | 27 Content scaling lead | Khan Academy Institute Zakiya Smith | 28 M. NiGHT SHyAMALAN Strategy director | Lumina Foundation Oscar-nominated director and screenwriter | author of Evan Stone, Sydney Morris | 29, 28 I Got Schooled Cofounders | Educators 4 Excellence LuyEN CHou SVP, global Andrew Sutherland | 24 Founder | Quizlet product strategy | Pearson David Tjaden | 26 NiC BoRG WEARS: JacKet ($795) and Shirt ($225) By todd Snyder; PantS ($260) Chair, student program | National Education By J Brand; all availaBle at WilKeS Association BaShFord; WilKeSBaShFord.com. Caryn Voskuil | 27 Manager, school model innovation | Rocketship Education Borg (b. 1986) puzzles over a Tony Wan | 28 Rubik’s Cube, which became Managing editor | EdSurge News a worldwide craze in the 1980s.

98 | FORBES JANUARY 20, 2014 30 FORBES science & under health care

30 Christina Agapakis | 29 Postdoctoral researcher | UCLA divya nag Ludmil Alexandrov | 27 Cofounder, Stem Cell Ph.D. candidate | University of Cambridge theranoStiCS and StartX med Genevera Allen | 28 Assistant professor of statistics 22 | Rice University Divya nag is attacking one of medicine’s biggest problems: Greg Alushin | 29 the fact that most types of human cells—like those in the Early independent scientist | National Heart, heart or liver—die when you keep them in a petri dish. this Lung, and Blood Institute makes testing new drugs a risky, costly and time-consuming Jocelyn Brown | 25 Senior program associate | Rice 360°: business: 90% of medicines that start clinical trials turn Institute for Global Health Technologies out to be too unsafe or inefective to market. But a new Raghu Chivukula | 29 technology, the induced pluripotent stem cell, may help. Resident physician | nag’s company, stem cell theranostics, was created General Hospital from technology funded by a $20 million grant from Paige Cramer | 29 Associate principal scientist | Merck the california institute of regenerative Medicine Sharp & Dohme and is closing a venture round. it turns cells— Adam de la Zerda | 29 usually from a piece of skin—into embryonic- Assistant professor of structural biology like stem cells, then uses them to create heart | School of Medicine cells. these cells can live in petri dishes and be Nicholas Downing | 28 Medical student | used to test new drugs. someday they might School of Medicine even replace heart tissue that dies during Richard Gaster | 29 a heart attack. three large pharmaceutical CEO | Gaster Hall Technologies companies are customers, though revenues Mitchell Guttman | 29 are small. nag, who was already publishing Assistant professor of biology | California Institute of Technology in prestigious scientifc journals when she Daniel Paul Hashim | 27 was an undergraduate, dropped Founder | Carbon Sponge Solutions out of stanford to pursue her Rachel Haurwitz | 28 dream. no regrets: “Our Cofounder | Caribou Biosciences technology was so Elaine Hsiao | 28 promising and i was Senior research fellow | California Institute of so passionate about Technology it that nothing else Cigall Kadoch | 28 made sense to Assistant professor of pediatric oncology me,” she says. “it | Dana-Farber Cancer Institute was very clear this Aleksandar Kostic | 29 Postdoctoral fellow | Broad Institute was what i wanted of MIT & Harvard to do.” Anna F. Lau | 29 Clinical microbiology fellow | National Institutes of Health Allison Lewko | 29 JuDGES: Assistant professor of computer science GEORGE M. CHuRCH | Columbia University Professor of genetics | Harvard Joshua Liu | 25 Medical School Cofounder | Seamless Mobile Health MiKAEL DOLStEN President Jonathan Ostrem | 29 of worldwide research and Consultant | Wellspring Biosciences development | Pfzer Michael Pesko | 29 DANiEL KRAFt Executive Assistant professor | Weill Cornell director | FutureMed Medical College Surbhi Sarna | 28 DiVYA NAG WEARS: Jacket ($909) By ekaterina Founder | nVision Medical kukhareva; kukhareva.cOM. tank tOp ($340) By Diesel; DieselBlackgOlD.cOM. pants ($240) By Josh Sommer | 26 nakeD anD FaMOus; Barneys.cOM. puMps ($148) By cOle haan; availaBle at DillarD’s; DillarDs.cOM. Executive director | Chordoma Foundation Zirui Song | 29 Medical student | Harvard Medical School Nag (b. 1991) looks Back to the Marc Succi | 25 Future, the hit mid-’80s fick that Cofounder | AugMI Labs separated science from fction and Livio Valenti | 28 put it into pop culture consciousness. Cofounder | Vaxess David Weinberg | 28 Faculty fellow | UCSF Daniela Witten | 29 Assistant professor of biostatistics | University of Washington Luhan Yang | 28 Cofounder | Egenesis

JANUARY 20, 2014 FORBES | 99 30 FORBEs under 30 social EntrEprEnEurs

Chase Adam | 27 Founder | Watsi Kamel Al-Asmar | 29 Founder | Nakhweh Esra’a Al Shafei | 27 Founder | MidEast Youth Mark Arnoldy | 27 Cofounder | Nyaya Health Christopher Ategeka | 29 Founder | CA Bikes Seth Bannon, Ben Lamothe | 29, 29 Cofounders | Amicus Bryan Baum | 24 Cofounder | Prizeo Clara Brenner | 28 Cofounder | Tumml Khalida Brohi | 25 shiza shahid Founder | Sughar Cofounder, Julie Carney | 27 Cofounder | Gardens for Health Malala fund Karan Chopra | 29 24 Cofounder | Gadco When Malala Yousafzai, the young Dan Friedman | 22 pakistani daring to advocate for Cofounder | Thinkful girls’ education, was shot by the Khalil Fuller | 21 taliban in 2012, shahid, who had CEO | Learn Fresh met Malala in 2009, got on a plane. Eric Glustrom, Boris Bulayev, she helped oversee Malala’s medical Angelica Towne | 29, 28, 27 Cofounders | Educate! care in london. “While i was there Isaac Holman, Josh Nesbit, Nadim by her side,” says shahid, “she woke Mahmud | 27, 26, 28 up and said, ‘i want to continue my Cofounders | Medic Mobile campaign.’ ” the stanford grad and Tevis Howard | 29 McKinsey consultant became the Founder | Komaza 16-year-old’s chief strategist on the Joel Jackson | 28 Founder | Mobius Motors spot. “How do we leverage her voice in a way that drives all this energy Lauren Bush Lauren | 29 Founder | Feed around Malala into meaningful Talia Leman | 18 action?” Her answer is the Malala Founder | RandomKid Fund, founded to turn her vision for Daniel Maree | 26 girls’ education into reality. Grants to Founder | Million Hoodies date: $400,000, half from the World Seth Maxwell | 25 Bank and half from angelina Jolie Founder | Thirst Project and Brad pitt. a documentary on Kennedy Odede | 29 Founder | Shining Hope for Malala’s work by Davis Guggenheim Communities is expected for release in 2014. Krishna Ramkumar | 28 Cofounder | Avanti JuDGES: David Schwartz | 27 RANDALL LANE Editor Cofounder | The Real Food | FORBES magazine Challenge CHERYL DORSEY President Ajaita Shah | 29 | Echoing Green Founder | Frontier Markets JEFF SKOLL Founder | Skoll Kavita Shukla | 29 Foundation Founder | Fenugreen SHIZA SHAHID WEARS: DrEss ($1,466) BY Yannick Sonnenberg | 25 EKatErina KuKHarEva; KuKHarEva.coM. Cofounder | elefunds JacKEt ($1,235) BY MonclEr; MonclEr.coM. Malala Yousafzai | 16 Cofounder | Malala Fund Mohamed Zaazoue | 26 Shahid (b. 1989) carries on the Founder | Healthy Egyptians spirit of 1985’s all-star Live Aid concert to aid the hungry and 100 | FORBES JANUARY 20, 2014 homeless in Africa. 30 FORBeS under nate levine founder, opengov 30 22 as a Stanford sophomore Nate levine saw opportunity where law & policy governments have historically been fat-footed. “Governments struggle Josh Blackman | 29 to access [their own] data, because Assistant professor of law | South Texas College of Law there aren’t good tools out there,” Amanda Brown | 28 levine says. with that in mind National political director | Rock the Vote he cofounded openGov in 2012 Adam Chandler | 29 Attorney | Department of Justice at age 20. openGov’s software Leif Dautch | 28 platform helps governments make Deputy attorney general | California Department of Justice intelligent, data-driven decisions David Demirbilek | 28 and exchange fnancial information Minority counsel | Senate Homeland Security & with their constituents. The Governmental Afairs Committee startup has raised over $7 million— Audrey Gelman | 26 Vice president | SKDKnickerbocker $4 million in 2013 alone—and works with more than 50 municipalities, Jake Heller | 29 Cofounder | Casetext school districts and other local Solomon Hsiang | 29 government organizations, Assistant professor of public policy involving over 7 million people | University of California, Berkeley nationwide. as openGov expands— Tim Hwang | 27 possibly into the for-proft sector— Partner | Robot Robot & Hwang levine is focused on building new Cristina Jimenez | 29 Managing director | United We Dream tools to revolutionize how cities Noorain Khan | 29 share data with one another and Associate | Wachtell, Lipton, Rosen & Katz how they approach the budgeting Derek Khanna | 25 process. Says levine, “Better access Tech-policy scholar, activist to information allows ofcials to Eric King | 24 focus on the hard problems of Head of research | Privacy International governing. it’s especially important Aaron Letzeiser | 24 now that governments are being Founder | Medical Amnesty Initiative asked to do more with less.” Yihong “Julie” Mao | 27 Attorney | New Orleans Workers’ Center for Racial Justice JuDGES: Blake Masters | 27 Cofounder | Judicata RONAN FARROW 30 Under 30 Jonathan Mayer | 26 alum and news anchor | MSNBC Cybersecurity fellow | Center for International GRETA VAN SuSTEREN Host, On Security & Cooperation the Record | Fox News Channel Teryn Norris | 25 WiLLiAM ESKRiDGE JR. John A. Commercialization and manufacturing specialist Garver Professor of Jurisprudence | Department of Energy | Yale Law School Corey Owens | 29 Head of public policy | Uber NATE LEViNE WEARS: JackeT ($129) By Tommy HilfiGer; availaBle aT Tommy HilfiGer fifTH aveNue STore. Jonathan Fantini Porter | 29 SweaTer ($395), SHirT ($295) aNd paNTS ($295) By BurBerry; BurBerry.com. loaferS ($130) By calviN kleiN; Chief of staf | Department of Homeland Security calviNkleiN.com. Jessica Schumer | 29 Chief of staf | Council of Economic Advisers, Executive Ofce of the President The Internet has transformed Amie Stepanovich | 28 Director, domestic surveillance project old-school campaigning: This 1984 | Electronic Privacy Information Center Reagan-Bush pin predates Levine Nabiha Syed | 28 (b. 1991) by nearly two elections. Attorney | Levine Sullivan Koch & Schulz Trevor Timm | 29 Executive director | Freedom of the Press Foundation Rebecca Vallas | 29 Deputy director of government afairs | National Organization of Social Security Claimants’ Representatives Heather West | 29 Policy analyst | Google Cody R. Wilson | 25 Founder | Defense Distributed Lauren Wilson | 26 Policy counsel | Free Press Daniel Zolnikov | 26 State representative | Montana House District 47

january 20, 2014 FOrBES | 101 30 FOrBeS under carter 30 cleveland founder, artsy 27 When Carter Cleveland was a art & Princeton computer science student back in 2008, he style went online searching for Ahmed Abdelrahman | 29 a picture to decorate his Fashion designer | Thamanyah dorm room. “I assumed there Jensen Adoni | 24 would be a website with Shoemaker | Modern Vice all the world’s art on it,” he Rosie Assoulin | 28 Fashion designer recalls. there wasn’t. so he Michelle Campbell | 28 set out to build one, with Jewelry designer a Pandora-like feature that Ian Collings | 28 recommends artists to users. Industrial designer | Fort Standard His company, artsy, displays Asher Dunn | 27 more than 85,000 pieces of Furniture designer | Studio Dunn art from 400 foundations Alan Eckstein | 28 and museums (including Design director | Timo Weiland the National Gallery of art Crystal Ellis, Stephanie Beamer | 29, 29 and the Getty) and 1,400 Furniture designers | Egg Collective galleries. though his frst Sarah Flint | 25 impulse was simply to create Shoe designer a repository of images, he Alex Gartenfeld | 27 quickly realized the site could Interim director | MOCA North Miami make a lot of money from Wes Gordon | 27 commissions (60% of the Fashion designer art on the site is for sale). Nikolai “Niki” Haas, Simon Haas Investors such as twitter’s | 29, 29 Jack Dorsey, Google’s eric Furniture designers | Haas Brothers schmidt and mega-art Colin P. Kelly | 29 Industrial designer | Redscout dealer larry Gagosian have pumped $14.5 million into Aimee Kestenberg | 27 Handbag designer the company. Cleveland says Jemima Kirke | 28 Jef Bezos is his inspiration: Painter-actress “We’re going to become Becca McCharen | 29 amazon for the art world.” Fashion designer | Chromat Leandra Medine | 25 JuDGES: Fashion blogger | The Man Repeller JEFFREy DEITCH Art advisor Shauna Miller | 27 Fashion blogger | Penny Chic PETER BRANT Art collector Oscar Murillo | 27 ISAAC MIzRAHI Fashion Artist designer

Victo Ngai | 25 CARTER CLEVELAND WEARS: suIt ($2,150) By Illustrator DuNHIll; DuNHIll.Com. sHIrt ($195) By tHomas PINk; us.tHomasPINk.Com. Belt Lotta Nieminen | 27 ($130) By torINo leatHer; torINoleatHer. Com. sHoes ($350) By Paul evaNs; Graphic designer PaulevaNs.Com. Aaron Poritz | 29 PRODuCTION ASSISTANT: aNastasIIa mIsHyNa GROOMING: suzaNa HallIlI for make uP Furniture designer for ever Eric Singer | 27 Eyewear designer | Shwood Travess Smalley | 27 Cleveland (b. 1986) hearts Digital artist Keith Haring, the iconic 1980s Lucien Smith | 24 Artist grafti artist and social activist Danielle Snyder | 28 who died of AIDS in 1990. Jewelry designer | Dannijo Tanya Taylor | 28 Fashion designer Torey Thornton | 23 Artist Jacob Willis | 27 Fashion designer | Second/Layer

102 | FORBES JANUARY 20, 2014 30 ForbES under marketing & 30 advertising brian wong Katrina Bekessy | 29 Cofounder, Kiip Director of technology & design | R/GA 22 Mallory Blair | 25 imagine you just posted a 5-mile run Cofounder | Small Girls PR to the runkeeper app when an ad on Derek Blais | 29 your iPhone pops up ofering you a Senior art director | BBDO Canada free liter of Propel Water. Or you just Raymond Braun | 23 LGBT marketing lead | Google/YouTube fnished a particularly fendish level Victor Cheng, Roger Lee | 27, 27 of Candy Crush and you are ofered Cofounders | PaperG free sour Patch kids as a reward. Katrina Craigwell | 28 these “moments of achievement” and Global manager of digital marketing | GE “serendipitous rewards” are a big part David Dinetz, Dylan Trussell, Colt Seman of the future of advertising, at least | 26, 26, 28 according to Wong, who cofounded Founders | Culprit Creative kiip in 2010, a year after graduating Andrew Dumont | 26 Director of business development | Moz from the University of British Columbia Whitney Fishman | 29 at age 17. “We track almost half a Tech and consumer insights director | MEC billion of these achievement moments Teddy Gof | 28 every month,” he says. “these are Cofounder | Precision Strategies moments that brands can be a part Rich Greco | 28 of and own.” in three years kiip has Head of design | Droga5 raised $15.4 million and is now used by Jack Hanlon | 29 more than 500 major brands to reach Cofounder | Kinetic Social 70 million users through 1,500 games Amy Karr | 26 Experience designer | Starcom MediaVest and apps. Procter & gamble, Pepsi and Group disney are clients. He expects to be Joanna Kennedy | 24 proftable next year. Senior social media specialist | RPA Greg Kimball | 26 JuDGES: Manager of digital strategy and communications | L’Oréal ADAM BAin President of global revenue | Twitter Jack Krawczyk | 29 Director of product management | Pandora JAMES D. FARLEY JR. Media Executive VP of global Michael Kuzmich | 28 marketing, sales and service Associate director of motion graphics | Lincoln, Ford Motor Co. | Firstborn HELAYnE SPiVAK Douglas Lusted | 21 Director | VCU Brandcenter Cofounder | WestonExpressions Jef MacDonald | 26 BRiAn WOnG WEARS: JaCket ($295) By miCHael kOrs; availaBle at dillard’s; dillards.COm. Creative technologist | The Martin Agency sWeater ($75) By Pv PatriCk assaraf; availaBle at Wilkes BasHfOrd; WilkesBasHfOrd.COm. Charles Merritt | 28 sHirt ($79) By vinCe CamUtO; vinCeCamUtO. Partner | 80amps COm. trOUsers ($348) By BrOOks BrOtHers; BrOOksBrOtHers.COm. Mitch Orkis | 27 Director of client development | Vizeum US Khoa Phan | 23 Wong (b. 1991) Freelance animator sees the light Matthew Rubinger | 25 behind Apple’s Director of luxury accessories | Heritage Auctions 1984 Super Bowl Maude Standish | 29 commercial, Cofounder | Tarot advertising’s frst Rachel Tipograph | 26 full-on cultural Global director of digital and social media phenom. | Gap Elliott Wiener | 28 Director of consumer insights | Razorfsh Farryn Weiner | 28 Global director of digital and social communications | Michael Kors Worldwide Elyse Winer | 28 Marketing and communications manager | MC10 Inc. Pranav Yadav | 28 CEO | Neuro-Insight

JANUARY 20, 2014 FORBES | 103 FOrBeS lIFe Travel

Bay and The Lodge at Koele, with a third luxury hotel under consideration. And that’s just the beginning. Also on the Paradise 2.0 to-do list: Expand compact, 1930s-era Lana’i City with its brightly colored, plantation- Can Larry Ellison model style cottages and develop a university cam- the future on the Hawaiian pus. Following Ellison’s purchase of Lana’i’s Island of Lana’i? main air carrier, Island Air, a new runway by Laurie Werner and airport facilities are in the works to allow the frst direct fights from the mainland. Oh, hen Oracle CEO Larry yes—and plans call for developing industrial Ellison bought 98% of areas, expanding solar power facilities, intro- the Hawaiian island ducing electric cars and ultimately doubling of Lana’i in June 2012 the population to around 6,000. (for a price estimated at Not surprisingly, residents regard the W$300 million to $500 million), shock waves planned rollouts warily. Many worry about rippled through the sleepy, picturesque preserving the character of the island. Says backwater. The island’s 3,100 residents were one resident, “A friend recently told me that long inured to the semifeudal ownership whenever she goes to the sacred places her structure—since the 1860s there had been a family showed her, she wonders how will succession of lords of the manor, including she feel when there are signs pointing them pineapple king James Dole and, in 1985, after out. The branding people have already been taking over Dole’s then foundering parent here asking how they should ‘sell’ the island. company, billionaire David Murdock. But El- That’s a very uncomfortable feeling for us.” lison came in with even deeper pockets and Still, the islanders knew something had to bigger plans, guaranteed to change the face change. In the last few years of the Murdock of the island, a place that proudly has no traf- regime the island’s economy was crumbling. fc lights, very few paved roads in 141 square In the early 1990s Murdock had moved the miles and, as one resident describes it, “not pineapple plantations overseas and shifted just a slow pace—no pace at all.” What a visitor will see now on Lana’i, 8 miles of the coast of Maui, is an old Hawaii that exists today only in patches on the larger islands. Locals still gather in the small, unas- suming cafes such as Blue Ginger that ring Dole Park in the main town, Lana’i City, to gossip or “talk story” in the mornings. The scenery is so lush that golfers often take breaks between shots to simply soak in the views. The powdery beaches, bordering wa- ters dotted with sea turtles, are often com- pletely deserted. That will undoubtedly change if the proj- ects now in discussion go forward. Ellison has researchers working on a desalination plant intended to increase the pumping ca- pacity of fresh water to 10 million gallons a day from its present 2.5 million, and there are ongoing renovations at the two Four Seasons- managed hotels, the Resort Lana’i at Manele

104 | FORBES JanuaRy 20, 2014 new Cl

oCk Sea change: clifs at the economic focus to tourism, opening a windmill farm that could sell power to the s C wise from t om; ron D Lana’i’s Sweetheart the beachfront Manele Bay and the English main island of Oahu. The resistance from rock; the island’s new landlord, Larry ellison; hunting-style The Lodge at Koele in the cool- many in the community was thunderous, evi- ahl

op: Jenna s the swimming pool at er, higher elevations of the island. A modest dent in the “No Windmills on Lana’i” signs quis Manele bay.

t / gett third hotel, the 11-room Hotel Lana’i, had still lingering in some front yards. But the

zerl been built for Dole managers in 1923. But all resistance wasn’t unanimous, and the clash y ima a

g / new of the properties were foundering and with between the pro- and anti-windmill factions ges them the livelihood of the island. tore apart the once close-knit community. s C

om; “In the beginning Murdock had incredible “We had the signs, protesters—it got very vision,” says Mary Charles, who leases the ugly,” explains Alberta de Jetley, publisher of Hotel Lana’i. “But in 2008 the world blew the monthly newspaper Lana’i Today. “The up; he was losing tons of money [reportedly argument was no longer rational. People $20 million to $30 million a year], and he lost couldn’t get their around the fact that interest. The population was dwindling, busi- the power was going to Oahu but that we nesses were closing, maintenance in the hotels would still have benefted.” and the community was deferred. Many of With that economic path blocked, Mur- us were ready to throw in the towel.” dock decided to sell. Rumors swirled about Murdock, who declined to be in- possible buyers. Bill Gates, who had rented terviewed for this article, had a plan out all of Lana’i’s hotel rooms and booked all to generate income for the island: of its airline seats for his wedding in 1994,

JanuaRy 20, 2014 FORBES | 105 FOrBeS lIFe Travel was often mentioned. So were groups of neutral colors and more open architecture, Chinese and Russian developers. Given the giving on to views of the bay and its spinner jitters over the prospect of foreign develop- dolphins and whales. The restaurants were ers, the announcement of Ellison as buyer also upgraded, as Ellison lured a branch of was met with euphoria. “Larry Ellison was Nobu to the island, which opened in Decem- a godsend,” says De Jetley. “He has enough ber 2012 in time for his Christmas visit. money to take us to another level and help us Those renovations at Manele Bay were the TreNDING become sustainable.” focus of a recent community meeting, one of The island’s introduction to Ellison has the regular gatherings with company represen- What the 53 million Forbes.com users are talking had some rocky moments, however. The f rst tatives instigated by Pulama Lana’i’s Matsumo- about. For a deeper dive go to news of his plans came from an interview to. In this one, with chairs grouped in a circle FOrbeS.COM/LiFeSTyLe on CNBC. “He was quoted as saying that he and the af able Lynn McCrory, Matsumoto’s would use the island as a laboratory,” explains senior vice president of government af airs, Robin Kaye of the community advocacy group leading the discussion, hugging community Friends of Lana’i. “Many people were of end- members and imploring them to eat or take ed by that. We live here. We’re not animals in home the prodigious supply of baked goods, a study. I understand what he meant. But still. the questions from the 40 attendees ranged … There was some sensitivity.” from where the construction workers would be What Ellison meant, apparently, was that living to which new retailers would come into IDEA DeLiVery DrOneS he wanted to create a world-class model of Manele Bay (among the names being bandied home-delivery copters sustainability on the island. “He saw Lana’i about were Burberry and Jimmy Choo). pique fantasies of amazon as an opportunity to engage in conversations Most residents I talked with heartily ap- shoppers, generate fresh that are happening around the world—food prove of the meetings and the selection of Mat- nightmares for post offi ce security, sustainable energy—rather than sit sumoto to head the Ellison ef ort. “Kurt knows and law enforcement. on the sidelines and create a fund,” explains how to communicate, how the local people EXPENDITURE Kurt Matsumoto, a Lana’i native who man- solve problems,” says Butch Gima, president of Green FOr Green Conservation and wildlife aged the hotels here for Murdock and was community advocacy group Lana’ians for Sen- advocates dodge major brought in as COO for Ellison’s management sible Growth. “It was refreshing to know that a proposed cuts in budget company, called Pulama (meaning “cher- multinational corporation had the foresight to battle, but will the fi nal ish”) Lana’i, a canny message to locals that he choose someone local.” version halt decades of hopes to enhance the island and not destroy it. But not everyone is mollif ed by the back- funding reductions? “He appreciates the natural beauty of the and-forth. Joelle Aoki, executive director of APP island,” says Matsumoto. “But I think his the Coalition for a Drug Free Lana’i, says that aPPLe’S ibeaCOn main motivation is the opportunity to come she’s grateful for the positive changes. “But your phone as tracking device: stores know when in and make a dif erence.” (The notoriously every time I come out of those meetings, I you walk in, stadiums press-shy Ellison declined to comment for feel anxious,” she says. “I’m very concerned electronically usher you to this article, but in the past he has described about the ability of the Lana’i community to your seat. sound appealing? his attachment to Lana’i, dating back to his keep their way of life. Then what if midway turn on iBeacon—it’s already 20s: He f ew a Cessna over Lana’i’s pineapple through he decides to sell it?” installed in some 200 million ios devices. f elds, admiring the area’s beauty, and even Kurt Matsumoto insists that Ellison’s then expressed a desire to buy the island.) interest is long term, that the population After the purchase Ellison immediately growth would be an organic, gradual progres- made goodwill gestures to the community: sion, explaining that just because they have reopening and improving the community access to signif cant funding doesn’t mean pool that Murdock had closed to save money, they would or could make all of these proj- introducing youth recreational and educa- ects instantly appear. tional programs, refurbishing buildings in So it will be years before it’s clear whether town and expanding one of the few grocery Lana’i will become the Pacif c Eden that El- stores, Richard’s Market. lison envisions. What is clear is that the com- Renovation work also began immediately munity will be watching every step. “I would on the hotels. Murdock’s Chinese furniture say that the mood right now is cautious op- and antiques in the Resort Lana’i at Manele timism,” states Robin Kaye. “And that is 180 Bay’s public areas were jettisoned in favor degrees from where it was. Previously it was

of a sleeker, more cosmopolitan style with despair.” F / ap amazon

106 | FORBES JanuaRy 20, 2014

FORBES // MARKETPLACE

ventional workouts for all three ftness goals: cardio, fat TECHNOLOGY burning, and maintaining muscle in only four minutes a day. HEALTH & FITNESS And when it comes to HIIT training, the best piece of equipment I found was the ROM XLR8 from OC Fitness Source. Te frst thing you notice when you mount the XLR8 is how solid it is. Total Fitness In Only Hand crafed in Pennsylvania, and made from high grade 304 solid Four Minutes a Day? stainless steel, it’s built to last and guaranteed for life. Preposterous, Right? But while the design, engineering, BY BRAD ANTIN ft, and fnish are sure to impress, what’s truly amazing is the intense workout you f you believe time is money, or get in only four minutes. you’d rather spend your time Yes, four minutes! doing something besides working out, you should probably drop the old aerobic routine and start an Tis next generation exercise machine represents the IHIIT (High Intensity Interval Training) program. ultimate expression of engineering married to research, to Studies by Professor Izumi Tabata of Ritsumeikan Uni- produce measurable benefts in both your health and pro- versity (creator of the world-renowned Tabata Protocol), ductivity. Tink about it; what would you do with an extra Professor Martin Gibala of McMaster University, and Jamie 249 hours a year? Tat’s over six full work-weeks! Timmons, professor of ageing biology at the University of Free Resource Birmingham all proved that short bursts of high intensi- Learn more about the research behind this amazing ft- ty training were actually much more efective than the long ness breakthrough. Read Perfect Fitness in 4 Minutes a Day steady-state cardio workouts of yesterday. available free from OC Fitness Source. Just call them at: Te best news is that certain HIIT programs beat con- 1-800-989-2941 and ask for it. SPEAK UP. Our language-learning method actually listens.

If expressing yourself in a new language is your goal, our state-of-the-art speech-recognition technology makes sure you’re doing it right. It’s always ready to give you the feedback you need to know your pronunciation measures up. And it’s proprietary, which means you won’t fi nd it in any other language-learning program.

LEVELS 1, 2 & 3 LEVELS 1, 2, 3, 4 & 5 $399 $499 FREE 2-DAY SHIPPING PROMO CODE: fbs024 Scan here for a FREE demo (866) 391-2729 | RosettaStone.com/voice

©2013 Rosetta Stone Ltd. All rights reserved. Free shipping for products shipped within the contiguous United States only. Offer limited to TOTALe® CD-ROM set purchases made from Rosetta Stone and cannot be combined with any other offer. Offer valid through August 31, 2014. TOTALe CD-ROM purchases include 3 months subscription access to online interactive services for one user. Subscription services require online access and must be activated within 6 months of purchase or are subject to forfeiture.

JANUARY 20, 2014 FOR MARKETPLACE ADVERTISING, CALL 212-206-5563 FORBES // MARKETPLACE

What Your Annuity Salesman Doesn’t Want You To Know

What You Might Not Know about Annuities Could Come Back to Haunt You Before you put your hard-earned money into an annuity, or if you already own one, please call 1-800-695-5929 for a special report, Annuity Insights: Your Guide to Better Understanding Annuities. It could help save you hundreds of thousands of dollars and untold fi nancial heartache. The vast majority of annuities are really complicated insurance policies that make it very diffi cult to fully understand the implications and unintended consequences. And once you buy into an annuity, it can be a very diffi cult and potentially very costly investment decision to reverse. That’s why it is vital you “look before you leap” and ensure that you have “your eyes wide open” before you purchase an annuity. And if you already own an annuity this free report is just as valuable as it can help you sort out the good, the bad and If you own an annuity or if the ugly aspects of annuities. someone is trying to sell you one, I urge you to call for What You’ll Learn from this Free Report your free report. Annuities • The different types of annuities and the advantages and disadvantages of each can lock you into low returns, • Why annuities can be complex to understand complicate your tax situation, • What you need to ask an annuity salesman when evaluating his product tie up your wealth and hit you with high fees. If you have an • The infl ation risk, tax implications, estate planning considerations and annuity, my team can help you typical annuity fees decide if it is right for you and if it isn’t, we might be able to Don’t be Lulled by the Soothing Sound of Guaranteed Income help you get out of it and even Sure, guaranteed income, free from market volatility, has a lot of appeal, especially for help you offset some of the people approaching or in retirement. But that guarantee can cost you big in commissions, surrender fees.* fees, surrender charges, taxes and other costs. Plus, locking in a guaranteed income stream that doesn’t take into account infl ation can seriously erode the value of your cash fl ow. In This free report could save our report, we’ll show you how buying or staying in the wrong annuity could literally cost you from making one of the you hundreds of thousands of dollars in fees and lost opportunities. biggest investment mistakes of your life. And for owners Stuck in an Annuity? of annuities, the free analysis Because people often regret their annuity decision, Fisher Investments has helped many could be a life saver. investors extract themselves from annuities. In fact, if you have a portfolio of $500,000 or more, we may rebate some or all of your annuity surrender penalties up to $12,000 and beyond.* Please call for details and to see if you might qualify. Ken Fisher – CEO and Co-Chief Investment About Fisher Investments Offi cer, Fisher Investments Fisher Investments is a specialized money management fi rm serving successful individuals – Forbes “Portfolio Strategy” as well as large institutional investors. With over $46 billion** in assets under management columnist for 29 years and with an over 25-year track record in bull and bear markets, Fisher Investments uses its – Author of 10 fi nancial proprietary research to manage money for prudent investors. books, including four New York Times bestsellers

Please hurry! This offer contains time-sensitive information. Call today for your FREE report! 1-800-695-5929 Ext. A194

©2013 Fisher Investments. 5525 NW Fisher Creek Drive, Camas, WA 98607. ® Investments in securities involve the risk of loss. *Subject to Terms and Conditions. See www.AnnuityAssist.com/Terms-and-Conditions for further information. **As of 6/30/2013.

JANUARY 20, 2014 FOR MARKETPLACE ADVERTISING, CALL 212-206-5563

FINAL THOUGHT THOUGHTS Wanna waste money? Buy diet books. Wanna make money? Write one. Wanna waist away? Eat less. —mALcOLm FOrbes ON New yeAr’s dIeTs

The two biggest sellers in any bookstore are the cookbooks and the diet books. The cookbooks tell you how to prepare the food and the diet books tell you how not to eat any of it. —andy roonEy

Seeing is deceiving. It’s eating that’s believing. —JamEs thurBEr

The diet book is one of those fool-and-money separation devices that seems, like roulette or slot machines, never to lose its power. —christophEr hitchEns

The one way to get thin is to reestablish a purpose in life. “The gap between what we would like to be and —cyril connolly what we are is widening. American advertising and the mass media portray a relentless urge for ftness. Think of weight gain as merely But the truth is that we are not a nation of joggers, a rounding error. iron-pumpers and whisper-thin fashion models. —richard hyflEr Rather, we are, increasingly, a nation of broad bottoms and bulging middles.” Gluttony is Before long it will —from thE nov. 17, 1986 issuE of forBEs an emotional be the animals who do the dieting so OTHer THOUGHTs FrOm THAT IssUe: escape, a sign that the ultimate bOONe bLAsTs “Boone Pickens is mad. After forcing Phillips Petro- that something consumer does leum and Unocal to load up on debilitating debt, the self-proclaimed is eating us. not have to. champion of shareholder rights is now blasting Enron Corp., the natural —pEtEr dE vriEs —mimi shEraton gas pipeline company, for buying back 16% of its shares from Irwin Jacobs and Leucadia National, the greenmail specialists.”

THe FrIeNdLy sKIes OF UsAIr? “Rumor is going around that deal- And be not drunk with wine, wherein is ster Carl Icahn has made merger overtures to USAir on behalf of his excess; but be flled with the Spirit. TWA. Yet another rumor has it that Icahn wouldn’t mind in the least if —EphEsians 5:18 USAir were to make a counterofer to take TWA of his hands.”

SOURCES: THE COLUMBIA DICTIONARY OF QUOTATIONS; THE INTERNATIONAL THESAURUS OF QUOTATIONS; THE 2,548 BEST THINGS ANYBODY EVER SAID; THE QUOTABLE HITCHENS: FROM ALCOHOL TO ZIONISM; SIMPSON’S CONTEMPORARY QUOTATIONS. 112 | FORBES JANUARY 20, 2014