forbes usa - 5 may 2014.bak
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Economic MagazineTRANSCRIPT
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CRAZY HIGH STOCK PRICES, THE SEQUEL BRAD PITT: FURNITURE MOGULMAY 5 2014 EDITION
THE MOST DISRUPTIVE OILMAN SINCE ROCKEFELLER, HAROLD HAMM
HAS MADE $17 BILLION FROM THE DOMESTIC ENERGY BOOM
AND HES JUST GETTING STARTED.
THE MAN FUELINGAMERICAS FUTURE
SPECIAL
REINVENTING
AMERICA
BUILDING A SKYSCRAPER, LEGO-STYLE
SAM ZELL, BILL FORD AND OTHERS ON THE
LESSONS OF THE GREAT RECESSION
THE FACTORY TOWN OF
TOMORROW
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4 | FORBES MAY 5, 2014
contents may 5, 2014 VoLUme 193 nUmBeR 6
72 | crude capitalistHarold Hamms vast North Dakota oilf elds are the grease in the American economy.
86 | factory town Does CEO still know best in 21st-century America? Cummins
thinks so.
13 | FAct & cOMMEnt by steve forbes
The U.S. Constitution: We can still save it.
lEADERBOARD
16 | cAStlES OF kUkiOCarved into the lava of the Big Islands Kona coast,
Kukio is Hawaiis most exclusive community.
20 | DEGREES OF hAppinESSThe business schools with the most
contented M.B.A.s.
22 | wElcOME tO thE clUBMeet the 34-year-old founders of software maker
Atlassian, the worlds newest billionaires.
24 | chRiS BURchS REtAil thERApYCan he prove his C. Wonder is more than a
Tory Burch knocko ?
cover photograph by david yellen for forbes
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Over 20 million kids in America lack access to healthy food. So, a company called
Revolution Foods came up with a solution: affordable, nutritious, kid-inspired meals,
available in schools and stores.
To make an impact, they needed capital, nancial advice and guidance. With Citis
support, they went from a small kitchen to employing more than 1,000 people, serving
a million meals a week nationwide. Now Citi is helping the company expand, as they
continue their mission to make nourishing food accessible to all.
For over 200 years, Citis job has been to believe in people and to help make their ideas a reality.
#progressmakers
2014 Citigroup Inc. Citi and Citi with Arc Design are registered service marks of Citigroup Inc.
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6 | FORBES MAY 5, 2014
contents may 5, 2014
28 | FROM RAp tO RichESA decade ago a hip-hop trio released I Get Money: Forbes 1-2-3 Billion Dollar Remix.
Now they really are nearing ten-digit fortunes.
30 | FAiRESt FOwlThe most expensive piece of Chinese
porcelain ever sold: a cup covered in chickens.
32 | ActivE cOnvERSAtiOnInvestors have recently body-slammed WWE shares. Was it something we said?
thOUGht lEADERS
34 | cURREnt EvEntS by paul johnson
Is Vladimir Putin another Adolf Hitler?
36 | cURREnt EvEntS by david malpass
Monetary policy relief: fnally adding growth.
38 | cApitAl FlOwSby bjorn lomborg
Feeling green with other peoples money.
40 | innOvAtiOn RUlESby rich karlgaard
Your companys health: the soft edge.
StRAtEGiES
42 | UnFiniShED BUSinESSAs John Chambers turns to go, time is running out for Cisco to reverse a serious growth slump.
by connie guglielmo
48 | thE lUckY DRUGSmarts and providence made Robert Duggan a biotech billionaire. Long-term success?
Thats another story.by matthew herper
tEchnOlOGY
52 | BiG BROthER inc.Smart gadgets real value may be in what
they say to your doctor, insurer and utilities.by parmy olson and aaron tilley
56 | thE SAME-DAY wARFast grocery delivery was a disaster for
Webvan. Why are so many trying it again?by jeff bercovici
EntREpREnEURS
58 | thE cAlcUlUS OF cOUchESWayfair.com sells nearly $1 billion
worth of home furnishings. But its real business is data mining.
by abram brown
invEStinG
62 | DAllAS BUYERS FUnDMoney managers Don and Craig Hodges prefer the sweet taste of home cooking.
by steve schaefer
42 | i spy ciscos next ceoSomewhere in this crowded room is John Chambers successorand they have their work cut out for them.
48 | once youre lucky ...Biotech billionaire Robert Duggan is desperate to prove hes not a fash in the petri dish.
52 | eyes on you
Wearables: singing the
body electric to save a
few bucks.
58 | silverware, sofas ... and softwareWayfair had
ambitions to be the Webs Sears, Roebuck but frst
needed algorithms to get to know its
customers.
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8 | FORBES MAY 5, 2014
contents may 5, 2014
98 | sky-high stocksTheyre baaack! Stock strategist James Montier says you can kiss growth good-bye.
106 | hollywood woodworkFrank Pollaro, carpenter to the stars.
102 | privileged positionThe politically connected Gautam Adani has extracted a $5.4 billion fortune from Indias special economic zones.
62 | little ideasNot everybody thinks bigger in Texas. Proof: small-cap specialists Don and Craig Hodges.
BrandVoice
by td ameritrade
the Return of the (virtual) investment club: Retail investors Are
Embracing Social Media 63
66 | FinAnciAl StRAtEGYby a. gary shilling
Bleating sheep and goats.
68 | cApitAl MARkEtSby marilyn cohen
Teasers that are pleasers.
70 | intRinSic vAlUEby bonnie baha
Apocalypse at the galleria.
REinvEntinG AMERicA72 | thE MAn FUElinG AMERicAS
REcOvERYHarold Hamm has transformed the U.S. oil
industry like no one since John D. Rockefeller. The great domestic energy boom, he says,
is just beginning.by christopher helman
86 | wElcOME tO cUMMinS, U.S.A.The Indiana enginemaker believes deeply in the anachronistic idea that investing in its
community is smart business. by joann muller
94 | lEGO hiGh-RiSEThe future of afordable housing is being
snapped together in Brooklyn.by erin carlyle
FEAtURES98 | iRRAtiOnAl ExUBERAncE:
thE SEqUElThe Shiller P/E signal is fashing warning signs.
What are you doing to defend yourself?by william baldwin
102 | thE BilliOnAiRE AnD thE pRiME MiniStER
The man likely to become Indias next leader gave one of the countrys
richest men a series of sweetheart deals. by megha bahree
liFE106 | thE wOOD whiSpERER
Frank Pollaro has designed furniture for Larry Ellison, David Gefen and Jerry Seinfeld. He
also collaborates with his good friend Brad Pitt.by richard nalley
112 | thOUGhtSOn reinvention.
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CHIEF PRODUCT OFFICERLewis DVorkin
FORbEs MagazInE
EDITORRandall Lane
ExECUTIvE EDITORMichael Noer
aRT & DEsIgn DIRECTORRobert Mansfeld
FORbEs DIgITal
vP, InvEsTIng EDITORMatt Schifrin
ManagIng EDITORsDan Bigman Business, Tom Post Entrepreneurs, Bruce Upbin Technology
sEnIOR vP, PRODUCT DEvElOPMEnT anD vIDEOAndrea Spiegel
ExECUTIvE DIRECTOR, DIgITal PROgRaMMIng sTRaTEgyCoates Bateman
assIsTanT ManagIng EDITORsKerry A. Dolan, Luisa Kroll Wealth
ExECUTIvE PRODUCERFrederick E. Allen Leadership
Tim W. Ferguson FORbEs asIa
Kashmir Hill sIlICOn vallEy
Janet Novack WasHIngTOn
Michael K. Ozanian sPORTsMOnEy
Mark Decker, John Dobosz, Deborah Markson-Katz DEPaRTMEnT HEaDs
Avik Roy OPInIOns
Kai Falkenberg EDITORIal COUnsEl
bUsInEss
Mark Howard CHIEF REvEnUE OFFICER
Tom Davis CHIEF MaRkETIng OFFICER
Charles Yardley PUblIsHER & ManagIng DIRECTOR FORbEs EUROPE
Nina La France sEnIOR vP, COnsUMER MaRkETIng & bUsInEss DEvElOPMEnT
Jack Laschever PREsIDEnT, FORbEs COnFEREnCEs
Michael Dugan CHIEF TECHnOlOgy OFFICER
Elaine Fry sEnIOR vP, M&D, COnTInUUM
FORbEs MEDIa
Michael S. Perlis PREsIDEnT & CEO
Michael Federle CHIEF OPERaTIng OFFICER
Tom Callahan CHIEF FInanCIal OFFICER
Will Adamopoulos CEO/asIa FORbEs MEDIa
PREsIDEnT & PUblIsHER FORbEs asIa
Rich Karlgaard PUblIsHER
Moira Forbes PREsIDEnT, FORbEsWOMan
MariaRosa Cartolano gEnERal COUnsEl
Margy Loftus sEnIOR vP, HUMan REsOURCEs
Mia Carbonell sEnIOR vP, CORPORaTE COMMUnICaTIOns
FOUnDED In 1917B.C. Forbes, Editor-in-Chief (1917-54)
Malcolm S. Forbes, Editor-in-Chief (1954-90)James W. Michaels, Editor (1961-99)William Baldwin, Editor (1999-2010)
10 | FORBES MAY 5, 2014
FORBES
IN BRIEFEDITOR-In-CHIEFSteve Forbes
FORbEs (ISSN 0015 6914) is published semi-monthly, except monthly in January, February, April, July, August and October, by Forbes LLC, 60 Fifth Ave., New York, 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.
COnTaCT InFORMaTIOnFor subscriptions: visit www.forbesmagazine.com; write Forbes Subscriber Service, P.O. Box 5471, Harlan, IA 51593-0971; 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 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 [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. 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.
MAY 5, 2014 voluME 193 NuMBER 6
An American
Reinventionby Dan bIgMan
It was a strange sIght. There, onstage, were
Steve Forbes and Chicago Mayor Rahm Emanuel, two
men on the absolute opposite ends of the political spec-
trum, doing something stunning. They were agreeing.
The occasion? In late March Forbes gathered more
than 300 innovative business leaders, entrepreneurs,
academics and growth-oriented policymakers in Chicago
for our frst Reinventing America Summit to help foster a
budding industrial revolution in the United States.
Forbes readers are well aware of the phenomenon.
For the past three years, in almost every issue of Forbes,
weve been telling unexpected stories of American re-
invention from places like GEs new locomotive factory
in Fort Worth, and the city of Milwaukee, which is fast
becoming the world capital of water technology.
Fueled by breakthroughs in hydraulic fracturing and
horizontal drilling by men like Harold Hamm, the subject
of this issues cover story, the nation is undergoing the
biggest energy boom in generations. Networked com-
puter systems embedded in everything from rail systems
to roller bearings are forming an industrial Internet of
things, creating unparalleled efciencies. Companies
from around the world are looking to the U.S. as a loca-
tion for the kind of high-quality, high-value manufactur-
ing practiced by Indiana-based Cummins (see story on
p. 86)an idea inconceivable just a short time ago.
There are, of course, challenges: Despite high unem-
ployment more than 600,000 U.S. manufacturing jobs (of
an estimated 17.4 million) are currently unflled as em-
ployers struggle to fnd the kind of highly trained workers
necessary to operate in next-generation factories (many
now among the worlds most productive). Decaying
urban centers still seek new purpose and prosperity.
But over two days in Chicago speakers such as
Bill Ford, Sam Zell, Honeywells David Cote, Michigan
Governor Rick Snyder and Indiana Governor Mike Pence
discussed the opportunities they saw springing up.
It was a hopeful gatheringone we plan to repeat
soon. It was also somewhat disorienting. You might
make a good President, Steve Forbes joked with Eman-
uel onstage, discussing the mayors education reforms.
Its not a partisan thing, he explained. As a Republi-
can, it pains but amazes me what the mayor of Chicago is
doing. Strange days indeed. F
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MAY 5, 2014 FORBES | 13
FACT & COMMENT STEVE FORBES
FORBES
thE u.S. cOnStitutiOnwE cAn Still SAvE it
BY STEVE FORBES, EDITOR-IN-CHIEF
With all thy getting, get understanding
Good news for those who be-
lieve in the rule of law: Theres a
big court case coming up that could
deal a powerfully positive blow for
the Constitution and the idea that
Presidents cannot change lawsor
decree themat their whim. The
Afordable Care Acts language is
explicit: If a state doesnt set up its
own insurance exchange and the
feds have to do it instead, then buy-
ers in that state cannot get subsidies
in purchasing health insurance. The delu-
sional White House was convinced that the
law would be so popular that virtually no state
would pass up the opportunity to build an
exchange. Lo and behold, 34 did.
Its no surprise the federal government is
ignoring the law and paying subsidies in those
states anyway. But there is a case, Halbig v.
Sebelius, thats challenging this arrogant tram-
pling of the rule of law. Its currently at the ap-
pellate level but will surely wend its way to the
Supreme Court, which will then have a unique
opportunity to save our battered Constitution
from becoming a dead letter.
crucial Read For Execs
How does a company stay ahead in an ever
more competitive world in which great new
products seem to attract cheaper imitators
or, worse, better versionsfaster than ever
before? The frst critical element is to have the
right strategy. If you dont know where youre
going, any road, as the adage goes, will get you
there. As FedEx founder/CEO Fred Smith
told FORBES publisher, Rich Karlgaard, for
his breakthrough new book, The Soft Edge
(Jossey-Bass, $28): You can have
the best operations. You can be the
most adept at whatever it is that
youre doing. But if you have a bad
strategy, its all for naught. Think
Digital Equipment. Think Wang.
Think Lockheed in the commercial
airplane business. There were forks
in the road where these companies
chose the wrong strategy. Absent a
viable strategy, youre in the process
of going out of business.
Another basic, of course, is executionwhat
Rich labels the hard edge. This area includes
speed, cost controls, capital efciency and
managing the supply chain and logistics well.
Karlgaard cites Apple boss Tim Cook, who suc-
ceeded the legendary Steve Jobs upon his death
in 2011, as the ultimate hard-edge executive.
Hard-edge execution is all about managing
exactly to the numbers. [These executives] are
good at making the trains run on time. They
focus on proft. Their language is time, money
and numbers. Every company in the world
needs these employees, these Tim Cook types.
Companies that fail to execute precisely on the
hard edge of business will ultimately fail.
Countless tomes and articles have been penned
on strategy and execution. Karlgaard, however,
homes in on the other, oft-neglected side of the
triangle of long-term success, the so-called soft
edge. And its here that he makes a crucialand
delightfully writtencontribution. Whether
youre a manager or an investor, or both, you
must put this book on your read-right-away list.
The soft edge, argues Rich, is what truly
distinguishes great companies from all the oth-
ers, what enables them to continually innovate
better than current and new competitors and
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14 | FORBES MAY 5, 2014
FORBES
FACT & COMMENT STEvE FOrbES
Smarts include studying areas
outside your own. Famed San Fran-
cisco 49ers coach Bill Walsh came
up with a revolutionary ofense
that forever changed professional
football by watching a high school
basketball game.
The chapters on teams and taste
are superb. SAP, the software giant,
remade itself into a nimble innova-
tor by setting up highly autonomous
teams of ten to push software de-
velopment. Small teams are efective,
in part because each team mem-
ber is more likely to care about the
others and thus share information.
Karlgaard explains the dynamics of
picking members and combining au-
tonomy and accountability. Taste,
Rich writes, is more than design. Its
a sensibility that appeals to the deep-
est part of ourselves. Steve Jobs was
a true genius at this.
Not many people would think that
stories can be a critical corporate
tool, but they profoundly are. Sto-
ries afrm who we are, that our lives
have meaning.... Stories are a power-
ful leadership tool. Theyre the key to
a strong [corporate] culture. Stories
can turn customers into apostles and
advocates. These days stories are
molded not just by companies but also
by customers. One example of this
phenomenon ispilots who own Cirrus
planes interactingoften cantanker-
ously, and rightly sowith company
management over aircraft-safety issues.
The Soft Edge is a tour de force, an
original work that will be of inesti-
mable value for all enterprises.
of his clients, a young man. The mans
8-year-old daughter said at the service
that she missed her daddy but that she
knew her family would be okay. I
got tears hearing that from an 8-year-
old girl. I suddenly knew that what I
was doing was very important work.
His productivity shot up fvefold.
Technology is coming up with
ways to help measure trust within a
company, as well as to build it.
Smarts encompass the ability to
learn new things and solve novel prob-
lems. Smarts really havent so much
to do with IQ as they have to do with
grit, courage and persistence. Karl-
gaard cites the illustrative example of
how Tara VanDerveer developed one
of the most successful coaching careers
in NCAA womens basketball history.
One thing she did was to spend a
season watching every practice and
home game of famous coach Bobby
Knight, when he was at Indiana Uni-
versity. She took copious notes during
practices, while taking care to sit out
of the volcanic Knights line of sight.
Restaurants: Go, Consider, StopEdible enlightenment from our eatery experts and colleagues Richard Nalley, Monie Begley, Randall Lane and Chef Jef Lamperti,
as well as brothers Bob, Kip and Tim.
l Cafe Luxembourg200 West 70th St. (Tel.: 212-873-7411)This French brasserie still delivers the goods. You cant go wrong with classic onion soup, mixed green salad or fried baby artichokes to start. Youll still have room for the fabulous frites, which accompany everything from moules to steak tar-tare, but wont miss them if you order the hearty cassoulet of pork shoulder, duck conft and garlic sausage. Finish with the apple tarte tatin.
l OlivesW Hotel Union Square, 201 Park Ave. South, at 17th St. (Tel.: 212-353-8345)Poor service and mediocre food leave you feeling had at this trendy restaurant. Appetizers can arrive after the entre. Most dishes are presented on wooden planksnot practical for ravioli or rice. The price of the iceberg lettuce wedge (omitted on the menu) is $16; a cup of chamomile tea, $7. You wouldnt mind if the meals were memorable.
l Allonda22 East 13th St. (Tel.: 212-231-2236)The kitchen has hit its stride at this new and totally transformed space with the bar downstairs and the handsome dining room one fight up. Try razor clams with soppressata, diced sardines or miso-dressed salad; then move on to bucatini with smoked uni, Hampshire pork with smoked apples and red cabbage, or skate. Dont pass up the chocolate cake.
also to better weather the inevitable
storms and mistakes that are part and
parcel of the real world of business.
The big problem is that up to
now the soft edge hasnt lent itself to
spreadsheets and management met-
rics, such as return on investment.
This is why executives, directors and
investors so often ignore it, particu-
larly given the unrelenting pressures
for fast returns. List Karlgaards fve
pillars that constitute the soft edge
and you instantly see the challenge:
trust, smarts, teams, taste, story. Rich
makes it clear hes not talking about
the illustrations that magazines use
for stories on companies that are
great to work for, such as pails of free
candy. The soft edge involves serious,
substantive stuf thats not easy to il-
lustrate or reduce to numbers.
To fesh out each of these catego-
ries, Rich uses real-world companies
he has studied and visited, and this is
what makes the book come compel-
lingly alive. We all love stories that
teach and inspire. In the chapter on
trust, for instance, Rich focuses on
unhip Northwestern Mutual, whose
primary product is life insurance. The
company has achieved internal trust
that is, its employees believe in the
companys mission and in the integrity
of the people running it. Earlier in the
book Rich cites the case of a com-
pany salesman who, because of a near
deadly accident, had lost his restau-
rant and took up selling insurance. It
was a tough slog, and the man more
than once nearly threw in the towel.
One day he attended the funeral of one F
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16 | FORBES may 5, 2014
Carved into the lava of the Big Islands Kona
coast, Kukio is Hawaiis most exclusive community.
Most of these spreads lie behind its gates. Just to the
north is the adjacent elite neighborhood of Hualalai,
which Michael Dell acquired part ownership of in
2006. Owners in both enclaves have banded together
to form the Kona Shuttle, a private fying club that
whisks them from the Bay Area on Thursdays and
back again on Sundays. Kukio keeps itself so isolated
that you cant even enter without the express permis-
sion of a homeowner.
OWNER: Michael Dell, Dell inc.
ASSESSED VALUE: $64.7 MilliOn
The Dell founder and CEOs 18,500-square-foot Raptor Residence
has seven bedrooms, seven full baths and fve half-baths.
OWNER: Paul hazen, KKR
ASSESSED VALUE: $26.7 MilliOn
Michael Dells next-door neighbor has shown of his Kukio home,
10,000 square feet of pavilions, in Architectural Digest.
OWNER: GeORGe RObeRts, KKR
ASSESSED VALUE: $22.1 MilliOn
Commands panoramic ocean views unmarred by neighbors.
Birds EYE
Castles of KuKio
LEADERBOARDKeeping Score on Wealth & poWer
-
by erin carlyle
OWNER: Ken Griffin, citadel
PURCHASE PRICE: $30 million (2010 and 2011)
The hedge fund operator has both a $17 million Balinese-style
oceanfront home and a $13 million residence 318 feet away.
OWNER: david roux, Silver laKe
PURCHASE PRICE: $20 million (2007)
Rouxs private equity frm helped take Dell private last year.
OWNER: david l. anderSon, Sutter Hill ventureS
ASSESSED VALUE: $24.2 million
The Silicon Valley tech investors place lies two lots down from Dells
and has fve bedrooms and fve and a half baths.
OWNER: bertie buffett
ASSESSED VALUE: $17.3 million
Warrens sister paid only $3.2 million in 1997 for her 6,815-square-foot
home, which overlooks the Jack Nicklaus-designed Hualalai Golf Course.
OWNER: Howard marKS, oaKtree capital manaGement
PURCHASE PRICE: $23.8 million (2009)
The ofcial owner is a business that shares the address of Marks company.
OWNER: bandel carano, oaK inveStment partnerS
ASSESSED VALUE: $19.7 million
This venture capitalists 14,680-square-foot home has seven
bedrooms and 11 baths. He co-owns it with his wife, Paula.
MAY 5, 2014 FORBES | 17
BRiaN PoWeRS foR foRBeS
-
Promotion | LoGiStiCS
Nearly 12 million fleet vehicles
t ranspor t essent ia l goods
across the United States on
most days, according to the U.S.
Department of Transportation. These feets
include everything from heavy-duty trucks
to passenger cars and vans powered by
alternative fuels, all of which operate in a
complex environment defined by thou-
sands of interrelated routes, schedules,
costs, regulations and safety consider-
ations. How efciently these vehicles per-
form directly impacts not only the fortunes
of their companies, but the national econ-
omy as a whole.
There are so many challenges that feet
managers have to consider, says Mark Old-
enburg, Toyotas national feet marketing,
mobility and strategic planning manager.
In addition to the cost and the proftabil-
ity pressures, they must address changing
regulations, insurance, maintenance and
management of the driversall in addition
to identifying and acquiring the vehicles
that will best serve their businesses on a
day-to-day basis.
Strategic Cost Control The most successful fleet managers look
beyond a vehicles purchase price to con-
sider its total cost of ownership (TCO). A
large part of an efective TCO equation can
be greening the fleet with higher fuel
efficiencymoving from conventional
internal combustion engines to electric
and hybrid vehicles or those using alterna-
tive fuels such as compressed natural gas
(CNG), liquefed petroleum gas (LPG) and,
soon, even hydrogen.
We have over 6 million Prius models on
the roads globally, and we lead all other
manufacturers in high-efciency feet vehi-
cles. So we are uniquely positioned to help
any company thats focused on develop-
ing green feets, says Oldenburg. Toyotas
hydrogen-powered fuel-cell vehicle will
come to market in 2015, pushing green to
new heights, since it will eliminate green-
house gas emissions entirely, producing only
water as the byproduct of its combustion.
Oldenburg notes that todays technolog-
ical advancements are really helping feet
managers: When you go green, you can
do so and actually save money, he points
out. We see a lot of commercial operators
switching to hybrid vehicles, and the sav-
ings in fuel alone more than offsets the
costs they were incurring with less-efcient
vehicles. That is a tremendous help to com-
mercial feet managers.
Assuring Success For maximum feet management success,
consider these best practices:
Make sure everyone within your organi-
zation understands that the feet is the
lifeblood of any company strategy.
Partner with world-class providers that
can align their services and products with
your strategy.
Spec new vehicles strategically, accord-
ing to their TCO.
Be one of those companies that adds up
all of the costs over the life cycle of the vehi-
cle, from acquisition price to operational
efciencies and ultimately the resale value,
Oldenburg advises. Ask, What will be the
advantages of building a fleet of higher-
mileage vehicles? Can I reduce my insur-
ance costs? Can I reduce my maintenance
expenses? Toyota is very well positioned
for all of those companies that are look-
ing to green their feets and manage them
from a TCO perspective. n
Fleet Management: Green Is the Color of Success
For more information, visit
www.feet.toyota.com
By MICHAEL RONEy
Toyota Highlander Hybrid
Prototype shown with options. Production model may vary.
When you go
green, you can do so
and actually save money.
That is a tremendous
help to commercial feet
managers.
MaRK OLDENBURG TOyOTA
-
Prototype shown with options. Production model will vary. 2014 Toyota Motor Sales, U.S.A., Inc.
CUTTING-EDGE STYLING CELEBRATED RELIABILITY HISTORY OF LOW COST OF OWNERSHIP
LOOKS GRE
AT ON THE
ROAD.
EVEN BETT
ER ON YOUR
BOTTOM L
INE.
-
20 | FORBES MAY 5, 2014
LEADERBOARD
Christy Walton
+$1.6 billion
Net worth:
$38.5 billioN
her wal-Mart shares climb
and a side investment
in First Solar takes of,
extending her lead in
wealth over the rest of the
walton family.
Chip Wilson
+120 million
Net worth:
$2.4 billioN
A parting gift: he promised
to resign as lululemons
chairman after tumult in
2013; shares rebound on
strong sales two months
before his departure.
Alfred Mann
+$110 million
Net worth:
$1.2 billioN
Stock in his pharmaceutical
company, MannKind,
jumps 83% in a day after
FDA advisors recommend
approval of its diabetes
drug Afrezza.
Mark Zuckerberg
-$4.2 billion
Net worth:
$25.9 billioN
Facebook plunges as
investors question big
purchases. Jan Koums
shares are down 15% since
February acquisition of his
company, whatsApp.
Micky Arison
-$150 million
Net worth:
$6.2 billioN
Carnival announces
a quarterly loss as it
discounts cruise prices and
increases ad spending in
the wake of high-profle
mishaps.
Vince McMahon
-$360 million
Net worth:
$1.2 billioN
wwes stock slides
after ForbeS quotes an
analyst skeptical about the
companys new streaming
network, which has only
667,000 subscribers.
winners
SCoRECARD
scorecard by daN aLeXaNder; busiNess schooLs by kurt badeNhauseN
top: Alex SloboDKiN / Getty iMAGeS; wilSoN: Getty iMAGeS; ZuCKerberG: DAviD pAul MorriS / blooMberG; MCMAhoN: DAviD yelleN; AriSoN: Ap photo / NAM y. huh; StA
NForD: Geri lAvrov/G
etty iMAGeS
FiGureS reFleCt the ChANGe iN Net worth FroM MAr. 19, 2014 to Apr. 9, 2014.
SourceS: InteractIve Data vIa FactSet reSearch SyStemS; ForbeS.
50 Percentage of Stanford M.B.A. students who receive
fnancial aid to help pay for their degree.
buSinESS SChoolS
DeGrees OF
HAPPiness
The job markeT for M.B.A.s has slowed
since the recession, but a diploma still pays
of. Graduates of the top 25 programs make
almost $160,000 a year after fve years, two
and a half times what they earned pre-
M.B.A., according to our 2013 Best Business
Schools ranking. But are they happier, too?
We asked 3,500 grads fve years out of the
top 50 schools to rate their satisfaction with
their education, with the preparation it gave
them and with their current job. Weighing
the scores they gave, we found that Stanford,
the nations most selective school, also has
the most satisfed graduates.
LOsers
Stanford
schooL / SatiSfaction
oVERaLL JoB EDUcation pREpaRation
StanfoRD
1 1 4 1
Uc BERkELEy (HaaS)
2 9 1 19
caRnEgiE MELLon (tEppER)
3 8 15 6
MicHigan StatE (BRoaD)
4 3 6 22
inDiana (kELLEy)
5 4 36 2
DaRtMoUtH (tUck)
6 2 38 4
DUkE (fUqUa)
7 5 18 9
RicE (JonES)
8 23 3 21
WiSconSin-MaDiSon
9 13 10 12
cHicago (BootH)
10 6 40 3
rANKS Are bASeD oN SAtiSFACtioN SCoreS FroM the 50 SChoolS with
the hiGheSt reSpoNSe rAteS.
Source: ForbeS Survey oF buSIneSS School alumnI.
-
create tailor-made medicine, could we stay
healthier for longer? Personalized healthcare a dream our software could bring to life.
It takes a special kind of compass to understand the present and navigate the future.
3DS.COM/LIFE-SCIENCES
Innovative thinkers everywhere use
INDUSTRY SOLUTION EXPERIENCES
from Dassault Systmes to explore
the true impact of their ideas. Insights
from the 3D virtual world allow
health professionals to gain a precise
understanding of their patients medical
pro le and to tailor healthcare to match
them perfectly. How long before kite
sur ng can be done at any age?
-
LEADERBOARD
22 | FORBES may 5, 2014
9,522 Number of backers of Oculus Kickstarter
campaign, which raised nearly ten times
its initial $250,000 goal.
Navy / W
hite GiNGham Sport Jacket ($2500.00); Navy Short Sleeve polo Shirt ($310.50); taN tWill paNt ($385.00) by aScott chaNG. available at aScot chaNG; leather belt ($540.00) by bruNello cuciNelli, available at W
WW.bruNellocuciNelli.c
om
top: ap photo / Jeff chiu; luckey (before): Getty imaGeS
CEO MAKEOVER: PhOtOgRAPhER: JEff fRiEd; StylE diRECtOR: JOSEPh dEACEtiS; fAShiOn ASSiStAntS: tiM ARMitAgE And tAniERA REid; nEw billiOnAiRES by AlEx MORREll
forbes makeover
OCULUS VRS PALMER LUCKEYHe just sold to Facebook for $2 billion. We give him a new look for the big time.
JOSEPh AbbOud: the award-winning designer and
entrepreneur got his start at louis boston before serving
as director of menswear design for ralph lauren.
he launched his namesake brand in 1987 and is currently
the chief creative director for mens Wearhouse.
KAthy iRElAnd: the supermodel turned supermogul
is the chief executive and chief designer of kathy ireland
Worldwide, a design and marketing frm she launched
in 1993. Womens Wear Daily has named her one of the
50 most infuential people in fashion.
thE VERdiCt
JA: We didnt need him to be a
shirt-and-tie guy; we just needed
to clean him up a bit. its a neater,
fresher, younger look.
Ki: the architecture of the
after look celebrates his powerful
posture beautifully.
Before After
EnSEMblE
JA: the big baggy jacket
and wrinkled shirt feel
like hes a college student
and someone told him to
put on a jacket. No shape
or form.
Ki: the sleeves are clearly
too long. the shoulders are
misshapen.
the after imaGe iS a Simulated imaGe of What palmer luckey Would look like if he had actually participated iN the forbeS makeover, Which he did Not. Nor doeS he eNdorSe aNy productS pictured here.
new billionaires
MIKE CANNON-BROOKES AND SCOTT FARQUHAR
ShiRt
Ki: his blue shirt missed its
appointment with an iron.
ShiRt
Ki: the shirt tucked in
adds a structured but still
comfortably casual look.
PAntS
JA: khaki pants are every
young guys uniform.
Wearing those with a belt,
hes buttoned up a little,
but not too buttoned up.
JACKEt
JA: the checked jacket looks
youthful and goes great
with khaki trousers. Not too
studied, not too perfect.
Ki: the tailoring of the
jacket is gorgeous. the cut
of the sleeves and their
length frame his hands to
say: i am strong.
Two 34-year-old ausTralians join the ten-fgure wealth club after an invest-
ment round valued their software company, Atlassian, at $3.3 billion, making them
worth about $1.1 billion apiece. They met while studying at the University of New
South Wales and began their business in 2002, fnancing it on a credit card good for
$10,000. Their project- and workfow-management software is now used by 35,000
companies worldwide, including heavyweights like Facebook, Cisco and Citigroup.
The duo has done little marketing. Rather, theyve simply sold their products on their
website. We felt if we could sell something at a reasonable price and sell it on the In-
ternet, then wed be able to fnd a market, Farquhar says. When an order came in from
American Airlines their frst year, he says, then we knew we could scale this.
-
LEADERBOARD $85,000 Total prize money of the Business Idea
Competition at Ithaca Colleges School of
Business, funded by Christopher Burch.
He became a billionaire last year after selling most of his stake in the fashion empire
he built with his ex-wife. Now hes making new investments around the world while working to
prove that his own womens wear chain, C. Wonder, can be more than a Tory Burch knockof.
BY clare OcOnnOr
Burch; train: getty images; scott eells / BloomBerg; tory Burch: Kevin mazu / getty images; shoes: samuel granado / mct / newscom; cwonder: donald Bowers / w
ireimage / getty image; fidelity: Brent lewin / BloomBerg
startup
Born in 1953 on Philadel-
phias main line; his father
has a mining equipment
business. sufers from de-
bilitating add but gets into
and graduates from ithaca
college nonetheless.
BuIlDup anD BreaKup
the tory Burch brand hits
the big time in 2006, with
the launch of its best-known
product, reva $195 leather
ballet fats. the next year the
pair divorces.
WelcOMe tO tHe cluB
sells most of that 28.3% stake
in 2013, putting an end to all the
lawsuits. the sale values tory
Burch llc at well over $3 billion
and makes both him and his
ex-wife billionaires, joining the
forBes list at exactly $1 billion
apiece. through the breakup and
all the litigation, he says, i tried
to focus as much as i could on
building c. wonder.
rOugH patcH
sinks millions into internet capital group.
it loses almost all its value in the dot-com
bust in 2001. he also backs the develop-
ment of a $100 million-plus Buenos aires
hotel just as argentinas economy collapses
in the early 2000s. at one point i thought
id lose everything. But he scores a win
getting in on voss high-end bottled water
in 2002.
gOIng glOBal
today he has started buying
resorts in asia and investing
widely in consumer tech,
with a portfolio that includes
trendy online ofce supplier
Poppin, Jawbone ftness
wearables and ule, a chinese
e-commerce platform he has
gone in on with solina chau,
longtime partner of billionaire
li Ka-shing.
On HIs OWn
in 2011 he launches c. wonder,
a chain store with clothing that
looks like torys but costs far
less. a volley of lawsuits follows
that the presiding judge calls
a drunken wasP fest. chris
is forced of the board of tory
Burch llc in 2012 but hangs on
to a 28.3% stake in the company.
spreaDIng WOnDer
also in 2013 he sells 10%
of c. wonder to fidelity
investments for $35 million,
using the cash to get the store
into more upscale u.s. towns
and the middle east.
path to success
Chris BurChs retail therapy
sHarp eYe
in 1976 starts preppy sportswear line
eagles eye with only $2,000 and places
ads in the New Yorker and Glamour.
every piece of merch sold out, he says.
i learned a lot about inventory. it grows
until by 1989 he can sell part of it to
swire, a hong Kong group, in a deal valu-
ing the company at $60 million. i was
close to 40, and it was a lot of money.
(swire buys the rest in 1998.)
Heeeres tOrY ... !
in 1996, after a failed marriage, he
weds fellow divorc tory robinson.
together they create womens wear
brand tory Burch. i didnt know
if itd be a hit, he says, but she
was a visionaryjust unbelievably
creative. and i had experience in
the industry.
24 | FORBES may 5, 2014
-
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Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks, all of which are magni ed in emerging markets.
1Source: MSCI All Country benchmark returns 19832013.2Source: Gross domestic product based on purchasing-power-parity (PPP) share of world total. IMF, Haver Analytics.3 Source: FactSet as of 11/30/2013. Data presented for the MSCI AC World Index, which represents 44 countries and contains 2,436 stocks. The index is not intended to represent the entire global universe of tradable securities.
Fidelity Brokerage Services LLC, Member NYSE, SIPC. 2014 FMR LLC. All rights reserved. 675573.1.0
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of global GDP comes
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and accomplishment. Class and audacity. Power and re nement. Perfectly epitomising this exceptional world, the
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LEADERBOARD 2 MILLION Number of cases of Ciroc vodka
sold annually, up from just 50,000 before Diddy
joined the company in 2007.
28 | FORBES may 5, 2014
Back in 2007 Sean Diddy Combs teamed with Jay Z and 50 Cent to create a song titled I Get Money: Forbes 1-2-3
Billion Dollar Remix. Less than a decade later rappers are closing in on ten-fgure fortunes. Heres how they made it,
and, at bottom, where it would go if they put their money where their mouths are, per the lyrics of their latest albums.
by zack omalley greenburg and natalie robehmed
AngelA W
eiss / getty imAges for CiroC VodkA (top); AAron dAVidson / W
ireimAge / getty imAges; mindy smAll / filmmAgiC / getty imAges; mindy smAll / filmmAgiC / getty imAges; eVerett ColleCtion / neWsCom; JA
mie mCCArthy / getty imAges for CAntor fitzgerAld
1. Diddynet worth:
$700 million
2. Dr. Drenet worth:
$550 million
3. Jay Znet worth:
$520 million
4. Birdmannet worth:
$160 million
5. 50 Centnet worth:
$140 million
hip-hop holdings
frOM rap tO rIches
diddys Ciroc vodka line earns him tens of millions a year, and his new revolt tV music cable network may one day make him hip-hops frst billionaire.
the superproducer leapfrogs Jay z this year, fueled by the runaway
success of Beats by dr. dre headphones, a business he
cofounded in 2008.
the bulk of his wealths growth comes from
roc nation entertainment company, worth over
$100 million after the addi-tion of roc nation sports.
Cash money records, which he co-owns with his brother, continues to expand, and hes adding a book imprint, a clothing
line and gt Vodka.
he made $100 million of his fortune in the 2007 sale of vitaminwater.
now hes building brands such as sms Audio and sk energy beverages.
32%
18%
18%
4%
21%
7%
35%
12%
35%
6%
12%
41%
25%
17%
7%
6%
4%
CASH
CLOTHES
CARS
JEWELRY
REAL
ESTATE
WINE & SPIRITS
67%
8%
15%
8%
2%
46%
12%
21%
8%
4%
9%
-
LEADERBOARD
30 | FORBES may 5, 2014
463,000Total square footage of Liu Yiqians two
Long Museum facilities in Shanghai.
up-and-comers BY KaTHrYn dILL; TropHIes BY dan aLexander
cup: Ap photo / Kin cheung
Jesse Vollmar FARMLOGShe grew up on a midwestern farm, but his passion was always for tech. Vollmar, 25, did a brief West coast stint participating in
startup incubator Y combinator before returning to Michigan in 2012 to found FarmLogs, a software platform that helps farm-
ers harness data to make crucial decisions, such as which felds, according to meteorological data, will be too wet to work on a
particular day. FarmLogs exploits the reach of high-speed internet into remote rural communities to save farmers hours of labor
a day, he says. More than 5% of u.S. farms with row crops now use the technology, which has attracted $5 million in investment.
Naveen Sikka TERVIVADespite his M.B.A. from uc Berkeley, Sikka, 35, spends much of his time these days in the feld, literally. he founded ter-
Viva in 2010. it develops new crops to thrive on land no longer being productively farmed: for example, played out acre-
age in Florida and hawaii that once grew citrus and sugarcane. its frst commercialized crop is pongamia, a tree whose
pods can be processed into biofuels, fertilizer or animal feed. its similar to soy but yields up to eight times the harvest
while requiring less wateran accomplishment that has drawn $5.5 million in private capital and grants to date.
Rob Leclerc AGFUNDERLeclerc, 41, had a ph.D. in biology and a background in artifcial intelligence when he went to work with an African agribusiness
company and became fascinated with the challenge of connecting a winning idea with willing investors. in 2013 he launched
AgFunder, an online investment platform for the global agriculture industry. handling $1.3 billion worth of projects, AgFunder
connects private and institutional investors with ventures ranging from cattle ranches in Brazil to hawaiian dairy farms to
cloud-based ag software. he says he wants to make it the fnancial infrastructure of farming.
seed money
UP-AND-COMERS
These innovators are fnding breakthrough ways to improve life on the farm.
Do billionaires pay enough in taxes?
ASK 50 BILLIONAIRES
rich returns
fairest fowlOne Of Chinas riChest men, Liu Yiqian, just paid
$36 million for this 3-inch-wide cup covered with chickens,
making it the most expensive piece of Chinese porcelain
ever. It dates back 500 years to the Ming dynasty; there are
fewer than 20 such chicken cups in the world and none in
better condition. If you buy Chinese art, this is the holy
grail, said Sothebys expert Nicolas Chow before the sale.
Liu built a $900 million fortune in real estate and pharma-
ceuticals and is expected to display the cup at Shanghais
Long Museum, which he founded.
62%yes
22%no
16%no
response
ReSponSeS to An AnonYMouS poLL oF
50 MeMBeRS oF the FoRBeS WoRLDS BiLLionAiReS LiSt.
TROPhIES
-
Invest in futures.
T ey come from humble beginnings. But even in the faceof poverty, thousands of children across the country stillhope for a better life. Which is why T e Salvation Armys
youth programs o er the physical, mental, and spiritualenrichment they need to break free. All thanks to yourdonations at 1-800-SAL-ARMY or salvationarmyusa.org.
Youth Services Social Services Rehabilitation Utility Assistance Emergency Response Evangelism
-
32 | FORBES may 5, 2014
LEADERBOARD
POT sTOcksFORBES, APRIL 14, 2014
63,308 VIEWS ON FORBES.COM
Purported legal pot and
hemp businesses are boom-
ing on the over-the-counter
penny stock market, led by
CannaVest, which senior
writer Nathan Vardi called
the perfect window on
a huge, emerging red fag
for mom-and-pop inves-
tors looking for a way to
cash in on the legalization
of marijuana. Commenter
William Turnage wrote
that he didnt trust Can-
naVest, but Hemp Deposit
& Distribution has more
going for it. CEO Bruce
Perlowin of Hemp, even
though he can be slated as
a felon. What he did in
the past would be in the
near future considered
a successful business.
Granted it was done on
the black market. Ken-
neth Robinson warned,
Regardless of the insight-
ful analysis of this article,
the green rush is on for
the time being. Green pot
stocks will go much, much
higher.
SILICON VALLEYS
SEQUOIA CAPITAL
@KANCHANKUMAR
Heartwarming @sequoia
story. Confrms my belief:
VCs who think and act
like startups have better
chances of success.
@CARLOSDOMINGO
Since when is a VC
an i nnovation factory?
They are investors.
@CYRILEHENRY
Testimony to the upside of a
clear #immigrationreform
policy.
@PMARCA
(MARC ANDREESSEN)
Inside Sequoia Capitalwe
are proud to be partners
with Sequoia in a number of
great companies.
HIGHEST-PAID
BASEBALL PLAYERS
@TYSPITSTRUTHS
Really funny considering
none of those people are
that good anymore.
THE MIDAS LIST OF TOP
TECH INVESTORS
@RONNIE_MATRIX
Peter Fenton coming in at
number three? Should be
ranked second in my view.
lOrd Of The rING FORBES, APRIL 14, 2014
99,926 VIEWS ON FORBES.COM
Editors Michael Solomon and Daniel Fisher reported on bil-
lionaire Vince McMahons bet that he can remake his $500
million (sales) business, World Wrestling Entertainment, by
launching a paid streaming service on the Internet despite
fears that it could cannibalize his traditional pay-per-view
TV audience. Hell need a million subscribers just to break
even, the authors calculated, and two or three times that to
make real money. One analyst predicted hed get 6 million to 8
million. Commenter Chris Harrington found that preposter-
ous: No serious analyst can even pretend [thats] a serious
number for a company that is averaging less than 4.3 mil-
lion domestic viewers for Monday Night Raw. Tony Pet-
zold saw it diferently: Something approaching that should
prove possible in time as the ability to subscribe to the net-
work expands overseas. The market apparently agreed with
Harrington: The website Wrestling Rumors reported that
shortly after the article came out WWEs stock took a
dramatic fall dropping 2.18, about a 7.34% decrease, and
the stock had dropped another 22% by press time. A. Simon
foresaw trouble even if streaming takes of: Just imagine
WWE is successful with this over-the-top expansion cam-
paign and manages to double and even triple the value of
its shares. Then what? Where to expand next? Not much
left. They can start to raise dividends extremely, which in
turn (coupled with the lack of further really big growth op-
portunities) would greatly reduce the value of the shares
quite a big problem ... depending on how much of a loan
they took out to fnance their growth. WWE has come a
long way already, though; it was a modest regional operation
when McMahon took it over in 1982. Now who would have
thought you could grow WWE into a multi-billion-dollar
business, said Pascal Terjanian.
favOrITe TweeT@pmarca (Andreessen on
two fctional companies
in HBOs sitcom Silicon
Valley):
Im still kicking myself
for missing out on Hooli.
Luckily we managed to get
a little money into Aviato. top: Gary Morrison / Getty iMaGes
active conversation
$3.2 MIllIONAmount of marijuana tax
(both sales and excise) collected
by Colorado in February.
-
F I N D O U T W H A T C O R N E R S W E D O N O T C U T , E V E R / 8 7 7 J E T 2 8 0 6 / N E T J E T S . C O M
Tr u s t c a n n o t b e b o u g h t ,
B U T I T C A N B E E A R N E D .
NETJETS IN
C. IS
A BERKSHIRE HATHAWAY COMPANY. A
LL AIRCRAFT O
FFERED BY NETJETS IN
THE UNITED STATES FOR FRACTIONAL SALE, LEASE, O
R USE UNDER THE M
ARQUIS JET CARD AND PRIVATE JET TRAVEL CARD PROGRAMS ARE
MANAGED AND OPERATED BY NETJETS AVIATION, IN
C., A
WHOLLY OWNED SUBSIDIARY OF NETJETS IN
C. N
ETJETS, EXECUTIVEJET AND THE M
ARQUIS JET CARD ARE REGISTERED SERVICE M
ARKS.
2013 NETJETS IP, LLC. A
LL RIGHTS RESERVED.
Relying on the integrity of
another is something that evolves
over time when theres a good
reason to in the first place. Thats
what only the highest investment
in safety and the reputable
backing of Berkshire Hathaway
can do for you.
f o r b u s i n e s s , f o r f a m i l y, f o r l i f e
-
34 | FORBES MAY 5, 2014
thought leaders
Paul JohNsoN CurreNt eVeNts
as Mein Kampf makes clear, Hitler sought to unite all the people of Ger-man speech and culture into one state, or Reich, preferably by peaceful nego-tiation, otherwise by war and conquest.
To do this Hitler needed to void the provisions of the Treaty of Versailles, which Germany had signed after its defeat in the Great War of 191418. First he marched into the Rhineland, which had been demilitarized under the treaty, stationing regular army divisions and tanks there. The AlliesBritain and Francedid nothing.
Next Hitler marched into German-speaking Austriaan annexation known as the Anschluss. Having been stripped of their empire, the Austrians were glad to become part of a mighty Reich. Again, the Allies did nothing.
Hitlers next claim was the Sude-tenland. This was a territory on the border of Czechoslovakia inhabited by a German-speaking people who were ab-sorbed into the new state against their will. The Allies allowed this landgrab to stand in an agreement reached at a Sep-tember 1938 Munich summit meeting. British Prime Minister Neville Cham-berlain, who negotiated the agreement, argued that Hitler was merely assert-ing the rights of the Sudeten Germans, who wanted to belong to his Reich.
The falsity of Chamberlains position and Hitlers deceit were proved within months. The Sudetenlands annexation had made the Czech frontier indefen-sible, and in March 1939 Hitler invaded. The Czechs put up no resistance, and the rest of the country fell into Hitlers hands without a shot being fred.
Alarmed, the Allies signed a pro-tective treaty with Poland. But Hitler
also had claims against the Poles, in particular the German-speaking port of Danzig. When he invaded in September 1939, the Allies reluctantly fought.
Had the Allies stopped Hitler at the beginning, when he was remili-tarizing the Rhineland, hed have been overthrown and World War II avoided. But the only one pointing this out was Winston Churchilland his was a lonely voice.
Todays drift toward war with Russia seems like a replay of the past. Putin is a Russian nationalist, whose goal is to reverse the events of 1989the end of the Soviet state and dissolution of its enormous empire. He seeks to do this by using what remains of Russias Stalinist heritage: the military, a huge stockpile of nuclear weapons and immense re-sources of natural gas and other forms of energypowerful tools to wield against the various weak states that were part of the U.S.S.R. None has nuclear weapons, and most are dependent on the (rela-tively) cheap energy Russia supplies. All have ethnic Russian minorities, who speak the language, boast of their supe-rior Russian culture and claim to have been relegated to second-class citizen-
ship. Putin can rely on these minori-ties to agitate for Russian intervention whenever he wantsmost importantly in the Baltic states of Estonia, Latvia and Lithuania. His successful annexation of Crimea is greatly encouraging to his long-term plans, and its clear hell use everything in his power, including mili-tary force, to reconstruct his empire.
ShadeS of Munich
Whats to stop Putin? The West is led by the modern equivalents of Cham-berlain: President Franois Hollande of France is a political nonentity repu-diated by his own compatriots; Prime Minister David Cameron of Britain and Chancellor Angela Merkel of Germany have both ruled out the use of force to stop Putin from annexing Ukraine; and worst of all, President Barack Obamathe one man who has the power to stop Putin in his tracksdoes nothing. He makes Neville Cham-berlain seem like a bellicose activist.
The U.S., thanks to the fracking revo-lution, has the means to meet the energy needs of all the former Soviet states. It could move troops and aircraft into Ukraine within 24 hours, and its feets could ensure protection to the Baltic states in a way that Putin would fnd unanswerable. Yet Obama makes no decisive moves. What ails the man? Is it cowardice? Indecision? A kind of exec-utive paralysis? Clearly theres some-thing fundamentally wrong with the U.S. President. Meanwhile, Putin, who runs what is, in essence, a second-rate nation, behaves as if he rules the Earth.
Sadly, there is no Churchillian voice to sound the alarm and call the democratic world to action.
Is vladImIr PutIn
another adolf hitler?
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 Sing ApORE, ROtAtE in wRiting thiS cOluMn. tO SEE pASt cuRREnt EvEntS cOluMnS, viSit OuR wEBSitE At www.forbes.coM/currentevents.
f
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Tom Peters
Ive never read a management book that was so much funand so relevant to the future.
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Bold, timely, and compelling.
Stephen M. R. Covey
Rich Karlgaard is a navigator for the rest of us.
Clayton M. Christensen
Jossey-Bass is a trademark of John Wiley & Sons, Inc.www.richkarlgaard.com
-
36 | FORBES MAY 5, 2014
thought leaders
david malpass current events
The Federal reserve is end-
ing its policy known as quantitative
easing by tapering its bond purchases
and the buildup of idle bank reserves.
This is already helping bank lending.
The prospect of a further gradual
normalization of Fed policy should
lift economic growth above its devas-
tating new normalthe slow GDP
growth and high unemployment that
have prevailed since 2008.
The conventional view was that
the Fed could be stimulative by buying
bonds, setting interest rates near zero
and adding massive bank reserves. Fi-
nancial markets advertised the policy
as easy money, but none of the chan-
nels worked. Instead, growth in GDP,
wages, jobs, credit, the M2 money
supply, bank lending and bank depos-
its were all notably weak, causing a
grinding multiyear decline in middle-
class living standards.
The Feds stated goal with QE was
to lower long-term interest rates, not
increase credit or bank lending. Since
the 2008 economic crisis the regu-
latory goal has been to reduce bank
leverage and risk, restraining growth
in total credit, even as the Fed guided
more credit to upscale bond and se-
curitization markets.
Well-established long-term bor-
rowers that didnt need help got more
credit while riskier new borrowers
saw less credit and created fewer jobs.
The end result was contractionary.
The Fed began winding down
its QE program on Jan. 1, sparking a
surge in commercial and industrial
lending. This type of bank lending is a
critical, traditional source of credit for
small businesses and startups. Growth
was weak in 200913 but jumped to
a 16% annual rate in the frst quarter,
when the taper started.
The 2014 change in the Feds di-
rection is dramatic and should help
growth. After increasing its bond
holdings and bank reserves by $1 tril-
lion in 2013, the Fed plans to limit the
increase to $500 billion in 2014 and
$0 in 2015. This will allow the private
sector to make a pro-growth mirror-
image change in the mix of its lend-
ing. Rather than creating new long-
term loans to replace the Feds huge
demand for long-term high-quality
debt, lenders are gearing up to provide
a more normal allocation of loansby
adding short-term foating-rate loans
that help small and new businesses.
Bank ReseRves not Linked
Once the Fed stops buying bonds, its
bank reservesthe IOUs the Fed uses
to pay banks for its bond purchases
will peak at roughly $3 trillion in late
2014. In the past bank reserves were
considered high-powered money,
so changes afected bank lending.
Commercial banks were required to
hold sizable reserves to back their
depositors, so a peak in bank reserves
would have caused restraint on the
banking systems ability to accept
more deposits and make more loans.
In recent decades U.S. regulators
have moved away from using bank
reserves to control bank lending, pre-
ferring direct regulation of banks. At
his Apr. 3 press conference European
Central Bank President Mario Draghi
delinked bank reserves from mon-
etary policy, instead emphasizing the
importance of the euro exchange rate
in evaluating monetary policy.
In addition to its bond-buying, the
Fed has hoped that near-zero interest
rates would be stimulative. Rate cuts
may work when rates are close to nor-
mal and reductions encourage borrow-
ers, but for more than fve years the
Fed has been imposing near-zero rates.
Thats a level suitable only for extreme
fnancial emergencies and is so far
below a market-based rate that it acts
more like a price control on credit than
a stimulus policy. One of the clearest
precepts of economics is that price
controls distort markets andreduce
supply, thereby hurting new entrants,
while removing price controls repairs
the damage.
The next step in the policy recov-
ery may come if real GDP growth
pushes convincingly above 3.5% for
two quarters, as I expect it will.This
should force the Fed to relent on its
policy of near-zero interest rates.Wall
Street wont like it, but small increases
in interest rates would allow interbank
markets to rebuild and market-driven
credit allocation to gradually reassert
itself, helping small businesses and the
middle class fnally make progress.
monetary policy relief
finally adding growth
DaviD Malpass, glOBAl EcOnOMiSt, pRESidEnt OF EnciMA glOBAl llc; paul Johnson, EMinEnt BRitiSh hiStORiAn And AuthOR; aMity shlaes, diREctOR, thE 4% gROwth pROjEct, gEORgE w. BuSh inStitutE; And lee Kuan yew, FORMER pRiME MiniStER OF Sing ApORE, ROtAtE in wRiting thiS cOluMn. tO SEE pASt cuRREnt EvEntS cOluMnS, viSit OuR wEBSitE At www.forbes.coM/currentevents.
f
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38 | FORBES may 5, 2014
thought leaders
Bjrn lomBorg CaPItal FloWs
A lot of well-meaning people
argue that to tackle global warming
we need to stop investing in fossil
fuels.
World Bank President Jim Yong
Kim tells us that because of global
warming, pension funds should drop
fossil fuels and instead invest in
green assets for the sake of future
pension holders.
Yes, global warming is a problem,
caused by CO2 emissions from fossil
fuels. But divestment puts the cart
in front of the horse and misses the
real solutions. In the meantime, it is
simply a great way to feel good with
other peoples money.
We dont burn fossil fuels to
annoy environmentalists but be-
cause these fuels power almost ev-
erything we like about modern life:
They feed us, warm us, transport us
and keep the lights on while power-
ing industry and the Internet.
Today we get 82% of our energy
from fossil fuelsand even in 2035
fossil fuels are expected to provide
80% of a much higher amount of en-
ergy consumption.
Cheap power is an amazing way
to improve living standards. Over
the past 35 years China has lifted
500 million people out of poverty
not through inefcient wind tur-
bines but with lots of cheap (and
polluting) coal.
Since the 1970s we have been
told that soon, very soon, renew-
ables will be proftable. Yet they are
still not generally competitive and
wont be anytime soon. We spent
$101 billion in green
subsidies in 2012, and
the International En-
ergy Agency estimates
that well be spending
$220 billion per year
in 2035.
Wishful thinking
does not make these
realities go away.
Instead of campaign-
ing for unrealistic
divestment from fossil
fuels, we should focus
on increasing public
investment in green
R&D to ensure the
next generations of green technolo-
gies will eventually become so cheap
that everyone, including China and
India, will switch.
Take a look at how fossil-fuel
stocks have performed over the past
12 years, in comparison with renew-
able energy securities. The STOXX
Global 1800 Oil & Gas Index includes
traditional oil companies like Exxon
Mobil and Chevron. The RENIXX
Renewable Energy Industrial Index,
created in 2002, is the worlds oldest
green energy stock index, includ-
ing electric car maker Tesla Motors
and wind turbine bellwether Vestas.
Based on these indexes, $100 invest-
ed in 2002 in fossil fuels would be
worth about $252 today, whereas the
same $100 invested in renewables
would be worth about $34.
Shrewd green campaigners claim
divestment can actually increase
your returns. Invariably, they rely
on favorable dates of comparison
and include in the green energy
bucket conglomerates like Siemens,
Honeywell, ABB and Philips, which
allocate a minority of their eforts to
renewables.
Bottom line, as the graphs show:
Over most time periods you would
have lost money had you switched
out your fossil-fuel stocks for renew-
able energy ones. The diference is
especially striking during the cur-
rent bull market, which began in
March 2009.
So the real question for the
would-be divesters remains: When
you look at the performance of the
two stock indexes, where would
you rather have had your pension
money placed?
Feeling green With
Other PeOPles MOney
Bjrn LomBorg iS PRESidEnt OF thE COPEnhagEn COnSEnSuS CEntER and authOR OF The SkepTical environmenTaliST.
F
10
02 04 06 08 10 12 14
20
30
40
50
100
200
300
Greens returns Are In the redPerformance of fossil-fuel stocks has exceeded that of
renewable energy stocks.
1/1/02=100
SToXX global oil & gas
rEnIXX renewable Energy
-
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40 | FORBES MAY 5, 2014
thought leaders
rICh Karlgaard INNoVatIoN rules
plied when you read an annual report
in which the company brags about
the size of its R&D budget. (What
company doesnt brag about this?)
But R&D, while vital to an innovative
response and future health, is not
sufcient by itself.
From an army of tech wizards
who apply the latest cutting-edge
advantages in big data, cloud, mobile,
social and so forth? Ah, that must be
it! Think again. A technology advan-
tage doesnt last as long as it once
didconsider weeks and months, not
years and decades.
A healthy innovative response
comes from a deeper place within
your company. But it begins some-
where, and that somewhere is what I
call the Soft Edge.
Trust. This may seem like a fuzzy
concept in terms of ROI. But with-
out trust youll never create always-
on innovation. Employees who lack
trust will never share their best ideas.
Without trust customers will drop
you at the frst chance and sharehold-
ers will sell or sue. Heres another
thing to consider: Pollsters report that
trust is in tatters everywhere in the
your companys health
the soft edge
Rich KaRlgaaRd iS thE puBliShER At FORBES. hiS lAtESt BOOk, the soft edge: where great companies find lasting success, cAME Out in ApRil. FOR hiS pASt cOluMnS And BlOgS viSit OuR wEBSitE At www.foRbes.com/KaRlgaaRd.
Are you healthy? People who
enjoy long-term health dont have
episodic bursts of health. Theyre
healthy nearly all the time. Their im-
mune systems fght of threats. Can
the same be true of companies?
Yesinnovation must be more
than episodic. Dont confne it to a
laboratory, a hackathon, a TED talk
or a building with a pirate fag. Make
it systemic and automatic so that it
occurs always and everywhere inside
your company.
Why do some companies have a
better innovation response than oth-
ers? From where does such vitality
come? From the chief executive? This
might be true in a small percentage of
companies. But even for those rela-
tively few, its worth noting that CEOs
dont stay on the job forever.
From clever strategy? If you think
so, then you must believe your strat-
egy will always be the correct one.
But in all of history youll not fnd a
single company that has always had
great strategy. History is littered with
apparently solid companies that were
suddenly undone by wrong strategic
assumptions and bad bets. Eastman
Kodak, anyone?
From fawless management? Ab-
bott Laboratories, Digital Equipment
Corp., H.J. Heinz Co., Masco Corp.
and J.P. Morgan & Co. have been cho-
sen by Duns Business Month maga-
zine as the fve best-managed com-
panies of 1986, begins a Los Angeles
Times story on Dec. 1, 1986. Note that
Digital Equipment Corp. is on this
list. But beneath the headlines DECs
immune system was already begin-
ning to fail.
From large bets on research and
development? Thats certainly im-
economy: in the private, public and
nonproft sectors. Trust, therefore, is
more valuable than ever.
Smarts. Silicon Valley and Wall
Street swoon at the sight of geeks who
score 800 on their math SATs. But
these are algorithmic businesses that
require having a few stars with water-
boiling IQs. For entire organizations
smarts come from a diferent place
than IQ. They come from grit, deter-
mination, empathy and purpose.
Teams. The best teams areand
always have beensmall, made up
of 2 to 12 people who complement
one anothers skills. The 4 Beatles.
The 12 disciples. Team Alpha in the
U.S. Armys Special Forces. Amazons
2-pizza rule. The real genius of Steve
Jobs wasnt his own brilliance: It
was the way he sought out his perfect
complements, from Steve Wozniak
to Tim Cook.
Taste. Its the word Steve Jobs used
when he described Apples unique
but universal aesthetic appeal. The
chief designer of Specialized Bi-
cycles, Robert Egger, calls it the elu-
sive sweet spot between data truth
and human truth. If you dont want
to sell at the commodity levelwho
does?you need taste. Hint: Taste
doesnt come from market surveys
and predictive analytics.
Story. Durably great companies
tell an enduringly appealing story.
What hasnt changed: The best sto-
ries are of fawed people who meet
huge challenges. (Dont hide all your
faws!) What has changed: Custom-
ers can talk back on social media.
What to do? Make customers part of
your heros journey. f
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Cherie BlairChair, Omnia Strategy, LLP
Bobbi Brown Founder and Chief Creative Ofcer, Bobbi Brown Cosmetics
Tory Burch Founder & Chief Executive Ofcer, Tory Burch
Dr. Faraz Farzin Research Scientist, Lumosity
Theresia Gouw Founding Partner, Aspect Ventures
Felicity Huffman Founder,WhatTeFlicka.com
Kathy Ireland Founder,Kathy Ireland Worldwide
Stephanie Hill Vice President & General Manager,Lockheed Martin
Lyndsey Scott Model & App Developer
Debbie Sterling Founder,GoldieBox
Dr. Cori Bargmann HHMI Investigator & Professsor,Te Rockafeller University
Diane von Furstenberg Designer,DVF
Vice Admiral Michelle Howard Deputy Chief of Naval Operations for Operations, Plans and Strategy, U.S. Navy
Padmasree Warrior Chief Technology & Strategy Ofcer, Cisco Systems
Goldie HawnFounder,Te Hawn Foundation
the ENTREPRENEURSHIP of
MAY 14-15, 2014 NEW YORK CITYEVERYTHING
PARTNERSPRESENTED BY
EDUCATIONAL PARTNER Supporting sponsors
-
next two to four years. Chambers is the ffth-
longest-serving CEO in tech. Its remarkable
hes held on to the job given that Ciscos shares
havent broken $35 since 2001.
In November Chambers, known for his
knack for forecasting fuctuations, ofered a
disappointing forecast and said it was hard to
read the economic environment. In Decem-
ber Cisco cut the low end of its sales growth
estimates for the next three to fve years from
5% to 3%. The last time it cut its long-term
outlook was in 2011, when it projected growth
of 12% to 15%. In February the company re-
ported a 7.8% drop in quarterly sales and a
product gross margin of 58.8%, the lowest in
more than a decade.
Were not a perfect company, nor am I the
Popping open a can of Diet Coke,
John Chambers sits down to talk
in his tiny, windowless confer-
ence room just of his rather mod-
est ofce. Behind him on the wall
are 13 framed posters signed by the engineers
who created some of Ciscos billion-dollar busi-
nesses (a litany of three-letter acronyms that
only a geek could love). Its been 19 years that
hes been running Cisco Systems, the worlds
largest maker of data networking gear. Cham-
bers would like nothing more than to add a few
more posters to the wall before hes gone.
Time is running out. The consummate
salesman with a rapid-fre West Virginia
twang fnally announced in November a fuzzy
timetable for his retirement: sometime in the
Unfnished Business
By Connie GuGlielmo
As John Chambers turns to go, time is running out for Cisco to reverse a serious growth slump.
Whos Got Next?
Someone in this photo
will succeed Cisco CEO
John Chambers.
From left: Rebecca
Jacoby, Cio; Pankaj Patel,
head of engineering; Wim
elfrink, eVP, industry
solutions; Gary moore,
president and Coo;
Padmasree Warrior, chief
technology and strategy
ofcer; Chuck Robbins,
head of sales; Chambers;
edzard overbeek, SVP,
services; Rob lloyd,
president, development
and sales; Blair Christie,
SVP, Cmo. not shown:
Frank Calderoni, CFo.
STRATEGIES
42 | FORBES May 5, 2014
TuRnARoundS
eric Millette for forbes
-
IMPORTANT SAFETY INFORMATION: Do not stop taking ELIQUIS without talking to the doctor who prescribed it for you. Stopping ELIQUIS increases your risk of having a stroke. ELIQUIS may need to be stopped, prior to surgery or a medical or dental procedure. Your doctor will tell you when you should stop taking ELIQUIS and when you may start taking it again. If you have to stop taking ELIQUIS, your doctor may prescribe another medicine to help prevent a blood clot from forming.
ELIQUIS can cause bleeding which can be serious, and rarely may lead to death.
You may have a higher risk of bleeding if you take ELIQUIS and take other medicines that increase your risk of bleeding, such as aspirin, NSAIDs, warfarin (COUMADIN), heparin, SSRIs or SNRIs, and other blood thinners. Tell your doctor about all medicines, vitamins and supplements you take. 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 time, such as unusual bleeding from the gums; 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, feeling dizzy or weak
ELIQUIS is not for patients with arti 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.
Tell your doctor if you are pregnant or breastfeeding, or plan to become pregnant or breastfeed.
Do not take ELIQUIS if you currently have certain types of abnormal bleeding or have had a serious allergic reaction to ELIQUIS. A reaction to ELIQUIS can cause hives, rash, itching, and possibly trouble breathing. Get medical help right away if you have sudden chest pain or chest tightness, have sudden swelling of your face or tongue, have trouble breathing, wheezing, or feeling dizzy or faint.
You are encouraged to report negative side effects of prescription drugs to the FDA. Visit www.fda.gov/medwatch, or call 1-800-FDA-1088.
Please see additional Important Product Information on the adjacent page.
Individual results may vary.
Visit ELIQUIS.COM or call 1-855-ELIQUIS
ELIQUIS is a prescription medicine used to reduce the risk of stroke and blood clots in people who have atrial brillation, a type of irregular heartbeat, not caused by a heart valve problem.
Ask your doctor if ELIQUIS is right for you.
I focused on finding something betterthan warfarin. NOW I TAKE ELIQUIS (apixaban) FOR 3 GOOD REASONS:
1 ELIQUIS reduced the risk of stroke better than warfarin.
2 ELIQUIS had less major bleeding than warfarin.
3 Unlike warfarin, theres no routine blood testing.
ELIQUIS and other blood thinners increase the risk of bleeding which can be serious,
and rarely may lead to death.
2014 Bristol-Myers Squibb Company
432US14BR00220-01-01 02/14
For people with a higher risk of stroke due to Atrial Fibrillation (AFib) not caused by a heart valve problem
-
What is the most important information I should know about ELIQUIS (apixaban)?
Do not stop taking ELIQUIS without talking to the doctor who prescribed it for you. Stopping ELIQUIS increases your risk of having a stroke. ELIQUIS may need to be stopped, prior to surgery or a medical or dental procedure. Your doctor will tell you when you should stop taking ELIQUIS and when you may start taking it again. If you have to stop taking ELIQUIS, your doctor may prescribe another medicine to help prevent a blood clot from forming.
ELIQUIS can cause bleeding which can be serious, and rarely may lead to death. This is because ELIQUIS is a blood thinner medicine that reduces blood clotting.
You may have a higher risk of bleeding if you take ELIQUIS and take other medicines that increase your risk of bleeding, such as aspirin, nonsteroidal anti-infammatory drugs (called NSAIDs), warfarin (COUMADIN), heparin, selective serotonin reuptake inhibitors (SSRIs) or serotonin norepinephrine reuptake inhibitors (SNRIs), and other medicines to help prevent or treat blood clots.
Tell your doctor if you take any of these medicines. Ask your doctor or pharmacist if you are not sure if your medicine is one listed above.
While taking ELIQUIS:
you may bruise more easily
it may take longer than usual for any bleeding to stop
Call your doctor or get medical help right away if you have any of these signs or symptoms of bleeding when taking ELIQUIS:
unexpected bleeding, or bleeding that lasts a long time, such as: