THE COMING BOND MELTDOWN MEET THE DRONE BILLIONAIRE

SPECIAL 2015 EDITION

THE GLOBAL

2000
BIGGEST
AND BEST
COMPANIES

ALPHA ACTIVIST
BILL ACKMAN
WERE BUILDING
SOMETHING WE WANT TO
OWN FOR YEARS.

CAN VISA
KILL OFF CASH?
HONDA
LEARNS TO FLY
HALL OF FAME
CEOs

BABY
BUFFETT

WALL STREETS LOUDMOUTH BANKED OVER $1 BILLION LAST YEAR.

NOW HES QUIETLY CREATING THE NEXT BERKSHIRE HATHAWAY.
(WANT IN?)

In the lead role: John Travolta, movie legend and aviation acionado. Guest star: the legendary North American X-15
that has smashed all speed and altitude records and opened the gateway to space. Production: Breitling, the privileged
partner of aviation thanks to its reliable, accurate and innovative instruments such as the famous Chronomat, the
ultimate chronograph. Welcome to a world of legends, feats and performance.

B R EIT L ING.COM

WELCOME TO MY WORLD

CHRONOMAT 44

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Contents // May 25, 2015

VOLUME 195 NUMBER 7

ON THE COVER
82 | BILL ACKMAN 2.0
Activism gets the headlines on Wall Street, but its boldest
practitioner, Bill Ackman, is quietly pivoting to a second act that
has more in common with Warren Buffett than Carl Icahn.
BY ANTOINE GARA

4 | FORBES

MAY 25, 2015

COVER PHOTOGRAPH BY JAMEL TOPPIN FOR FORBES

Ambition
knows no
time zone.

UPS for imports and exports. Youre not about to

let a little geography get in the way of growing your
business. Neither are we. Well help you with everything
from choosing the right services to filling out the international
forms you need. With a powerful network of nearly 80,000
employees outside the US and serving more than 220 countries
and territories, a world of opportunity awaits. From figuring it
out to getting it done, were here to help. ups.com/solvers
ups united problem solvers

Copyrigh
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May 25, 2015

22

13 | FACT & COMMENT // STEVE FORBES

Good news: You wont retire broke.

LEADERBOARD
18 | SEATING CHART: MAYWEATHER VS. PACQUIAO
The A+ list of Wall Street and Hollywood, sports and entrepreneurship
fought for the best seats in the house.

20 | RICHEST BY STATE: ALABAMA

The wealthiest man in Alabama is big in the Southand in
South America, too. Plus: the ve richest rappers.

22 | LUXURY LINEAGE: THE ARMANI SUIT

A history of the most elegant item a man can put on.

24 | FAREWELL TOAST
Victorias Secrets Les Wexner on the late A. Alfred Taubman.

26 | SEAL THE DEAL

A very brief briefcase for when you really mean business.
Plus: a $150,000 Titanic deck chair, suitable for rearranging.

30 | CONVERSATION
Reader hosannas greet the miraculous resurrection of the Twinkie.

THOUGHT LEADERS
32 | OPINION // AVIK ROY
Improving Marco Rubios tax reform plan.

34 | CURRENT EVENTS // AMITY SHLAES

The no bailout pledge.

36 | INNOVATION RULES // RICH KARLGAARD

48

Smart-city champions.

STRATEGIES
40 | MAGIC TOUCH
Ten years ago touchscreen pioneer David Caldwell narrowly missed a
chance to revolutionize consumer electronics. Can his latest
invention bring redemption?
BY JOANN MULLER

46 | BENTLEY ON A ROLL
Amid chaos at parent company Volkswagen, could the venerable
British automakers CEO get a second shot at the top?
BY MARK EWING

TECHNOLOGY
48 | THE GOOGLE FOR THE BROKEN WEB
If you could expose every aw on every website, all at once,
wouldnt that be a good thing? Not everyone agrees.
BY THOMAS FOX-BREWSTER

54 | NICE GUYS HIRE BETTER

High-ying tech companies face constant staffing challenges.
Airbnbs process kills the chaos.
BY GEORGE ANDERS

ENTREPRENEURS
56 | THE SIX-MINUTE LOAN
Banks still arent making enough small-business loans, so Kabbage is
quickly lling the voidat crazy high interest rates.

92
6 | FORBES

BY DARREN DAHL

MAY 25, 2015

One man, one engine.

One unrivaled drive.
Introducing the all-new 2016 Mercedes-AMG GT S.

Mercedes-Benz has reached a new era in performance, innovation and sportiness. Introducing the all-new 2016
Mercedes-AMG GT S. Handcrafted by a master engine builder, the 4.0-liter 503-hp bi-turbo V-8 engine is an
engineering masterpiece, and truly the embodiment of the one man, one engine AMG philosophy. This, along with its
ultra-light space frame and optimal weight distribution, makes for the most dynamic driving experience ever. The 2016
Mercedes-AMG GT S designed for the open road, engineered to dominate the racetrack. Visit MBUSA.com/GTS

2016 Mercedes-AMG GT S shown in Solar Beam Yellow metallic paint with optional equipment. 2015 Mercedes-Benz USA, LLC

For more information, call 1-800-FOR-MERCEDES, or visit MBUSA.com.

May 25, 2015

INVESTING
64 | AN IMMINENT DISASTER FOR BONDHOLDERS?
Loomis, Sayles Dan Fuss has almost $5 billion positioned
for a credit market tornado. Read this before
putting money into bonds.
BY WILLIAM BALDWIN

68 | PORTFOLIO STRATEGY // KEN FISHER

Five market trends you can count on.

70 | SMALL STOCKS // JIM OBERWEIS

Change agents for your portfolio.

79 | SCREEN TEST // MARC GERSTEIN

The soothing sound of return on equity.

FEATURES
BrandVoice
WITH ADP

The HR Guide To The Galaxy

(Or At Least Most Of The Earth) 90

92 | THE FLIGHT OF HIS LIFE

At a North Carolina aireld just 240 miles from aviations
birthplace, a revolutionary Honda engineer named
Michimasa Fujino is making his 29-year dream of a new kind
of business jet a reality.
BY JOANN MULLER

TIMOTHY ARCHIBALD FOR FORBES

GLOBAL 2000:

Biotech pioneer John Martin

helped Gilead Sciences climb
831 spots over the last decade
to No. 192 on our annual
ranking of the worlds largest
companies. See six more Hall
of Fame CEOs.

114

104 | MOVING AT THE SPEED OF MONEY

While overhyped cryptocurrencies like Bitcoin grab all the
attention, Visa CEO Charles Scharf has quietly put a $6.8 trillion
stranglehold on the worlds commercial transactions. The future
of payments? Surprise! Its already here.
BY DANIEL FISHER

114 | HALL OF FAME CEOS

These six CEOs have not only kept their jobs, theyve also presided
over some of the largest global growth stories of the last decade.
BY STEVE SCHAEFER

121 | OK ROBOT
Decades of science ction movies have trained us to fear robots.
In real life, robotics is evolving in a more interesting direction,
one where humans and machines collaborate to do more together
than they could do separately.
BY ALEX KNAPP

130 | DRONE WARS

At 34 Frank Wang has turned his dream of ying robots into the
worlds biggest drone companyand a $4.5 billion fortune.
Now, as the market for his devices explodes, his old colleague
is trying to take him down.
BY RYAN MAC, HENG SHAO AND FRANK BI

LIFE
140 | SPLENDOR IN THE GLASS
Can billionaire Alexander Vik produce a world-class wine at his
new luxury resort in Chile?
BY ANN ABEL

152 | THOUGHTS

121

8 | FORBES

On marriage.

MAY 25, 2015

ONLY ONE THING CHANGED TODAY:

EVERYTHING.
Sometimes the most challenging and rewarding jobs occur beyond
the hours of nine to five. ADP delivers benefits technology with
a human touch to help your employees make more informed and
confident decisions about the things that matter most.
Visit adp.com and see how we can provide a more human
resource for your business.

Talent Management | Benefits Administration | Workforce Optimization

FORBES

EDITOR-IN-CHIEF

Steve Forbes
CHIEF PRODUCT OFFICER
Lewis DVorkin
FORBES MAGAZINE
EDITOR
Randall Lane
EXECUTIVE EDITOR
Michael Noer

IN BRIEF

A New Level
Of Storytelling
BY LEWIS DVORKIN

ART & DESIGN DIRECTOR

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MANAGING EDITORS
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EXECUTIVE DIRECTOR, DIGITAL PROGRAMMING STRATEGY
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Kerry A. Dolan, Luisa Kroll Wealth
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FOUNDED IN 1917
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MAY 25, 2015 VOLUME 195 NUMBER 7

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10 | FORBES MAY 25, 2015

I have an unusual title in the world of traditional

mediachief product officer. It sounds right out of
Silicon Valley, but it fits what I do. Success in the news
business is no longer possible without a keen understanding of the technology behind the journalism. I
combine my interest in both to help develop, build,
market and sell what we makea digital platform,
magazines, apps and more. Each has distinct features
or functionality, or products within products. More
than ever, theyre aimed at marketers. BrandVoice, our
industry-leading native ad program, is one of them. Last
month I made ten sales calls in San Francisco and Los
Angeles. Native got all the attentionwith BrandVoice
in print on everyones mind as much as digital.
That marketplace reality makes perfect sense. Magazines never really had an audience problem. Readers love
them. They like the ease of use, the concise packaging, the
feeling of belonging to a larger community that supports a
publications mission. Magazines certainly have an advertiser problem. Blame the industry itself for that. It failed to
come up with exciting new ad products to make ad agencies think twice before chasing digital eyeballs, which are
easier to target, track and measure.
FORBES has developed a print ad product for the times.
Over the last four years weve run 50 two-column BrandVoice stories in our magazine. Each was written by a marketer, always clearly labeled as such, and placed alongside
related editorial content. In January we expanded the
effort. AT&T produced a BrandVoice cover and two-page
story for the 30 Under 30 issue that followed our editorial
cover. A month later Fidelity created a two-page BrandVoice graphic that was featured on the actual cover itself
as part of an editorial package on retirement. In this issue
ADP put together a two-page graphic as part of our Global
2000 package (see p. 90).
Ive always believed the mission of journalism is to
inform. In my life as a journalist that meant nding great
stories. In my role today it means developing products to
convey information. The business of journalism, the ip side
of the coin, is about coming up with innovative solutions for
marketers. That requires new product, too. My job as chief
product officer is to focus on bothand make sure it adds up
to a rewarding consumer experience. F

SHOPPING ROYAL IN PARIS

Paris-Charles de Gaulle: Enjoy a pleasant stopover and explore
the many luxury shops or relax in the comfort of our lounges.

AIRFRANCE.US

FACT & COMMENT STEVE FORBES

With all thy getting, get understanding

GOOD NEWS
YOU WONT RETIRE BROKE
BY STEVE FORBES, EDITOR-IN-CHIEF

THE MEDIA are full of stories that

all too many Americans are not saving
enough for retirement. Some alarmists declare that more than eight out
of ten are nancially unprepared for
their golden years. Accordingly, they
conclude this crisis requires major
government intervention, ranging from
sharply boosting Social Security benets to raising taxes on the rich and
then sharing that money with those
less rich. Wealth tax, anyone?
But it turns out that the situation isnt so dire after
all. A paper from the American Enterprise Institute,
Why Americans Dont Face a Retirement Crisis,
written by two expertsAndrew Biggs, a former
principal deputy commissioner of the Social Security
Administration, and Sylvester Schieber, a former chair
of the Social Security Advisory Boardlooks at the
facts instead of the politically motivated hype, cutting
through to the truly relevant data: what people have
actually saved for retirement, what theyll get from
Social Security and what theyll get from dened-benet plans (several million people are still covered by
those). The paper then goes on to compare all of that
information with what Americans will need to maintain the standard of living to which theyve become accustomed during their working lives. The vast majority of people are in decent shape.
Retirement savings as a percentage of household
earnings went up between 2007 and 2013, from 124%
to 128%. According to the Federal Reserve, in fact,
these savings as a percentage of personal incomes have
been on the upswing since the Fed began tracking this
data in 1981. Other surveys conrm that the combined
total of all personal retirement assets as a proportion
of personal incomes has been moving up nicely.
Moreover, the ongoing reforms of 401(k)s are helping, especially the advent of the employee default
option: Workers are automatically enrolled in com-

pany plans unless they specically

opt out. Companies are also boosting
matching contributions.
The real crisis involves retirement
assets managed by government: the
underfunding of Social Security and the
truly abysmal underfunding of many
state and local government pension
plans. As the AEI paper states, It took
401(k)-style plans just three years to
recover their nancial-crisis losses, and
today total assets are almost 37% above
2007 levels. Contrastingly, state and local government
pensions are currently less than 5% above their 2007
peak, despite benet liabilities that have grown by 36%.
Government is manifestly not the solution here.
Ronald Reagan was right: Government is the problem,
especially its antigrowth policies.

Unfounded Frankenfood Fears

Antiprogress extremists never let the truth stand in the
way of their goal to turn back the clock to a time when
malnutrition and outright famine were the norm. Their
relentless assault on genetically modied crops or organisms (GM crops or GMO), so-called Frankenfoods,
is an ongoing example of their destructive, fact-free approach. One shudders to think of the global misery that
would have ensued had these forces been around in the
1960s, when Norman Borlaug spearheaded the breakthroughs dubbed the Green Revolution, which enormously increased crop yields, particularly in India. There
and elsewhere more than a billion lives were saved,
people who would otherwise have been lost to hunger. Borlaug won the Nobel Peace Prize for his efforts.
Today hed be attacked as an antinature technomonster.
Another instance of this antitechnology mind-set is
the hullabaloo over honeybees. Extremist environmentalists have been making stinging statements that hon-

MAY 25, 2015

FORBES | 13

FORBES

FACT & COMMENT // STEVE FORBES

eybees, which pollinate our crops and
owers, are in dire danger; that hive
health is declining, as are honeybee
populations. This, shout the alarmists,
requires government action, specically, banning a class of agrochemicals
called neonicotinoids. As happens all
too often in this Luddite age, these
pesticides are actually a great advance
because they help increase agricultural
output, a necessity as world populations grow and people achieve higher
standards of living. Nor are they
harmful to humansor honeybees.
The sky-is-falling cry of Beepocalypse! is baloney. The greatest threat
to these critters is big government.
In a Forbes.com post, Rash Regulation Is Whats Really Threatening
Honeybees, based on a comprehensive study conducted by Angela Logomasini of the Competitive Enterprise
Institute, the record is set straight.
Bee populations. Over the past halfcentury honeybee populations have
increased nicely around the world.
American and European commercial
hives have decreased largely because
honey production moved to other
nations, where the number of hives
has grown substantially. There have
been health challenges in the U.S. and
Europe, which beekeepers have been
effectively battling. Survival rates, for
instance, have been improving and
are now near normal.
Neonicotinoids. A target of extremists, these insecticides are not villains
but heroes. They are a godsend, because they minimize the need to spray

plants, thereby nearly eliminating any

possible collateral damage to honeybees and other nontargets. There is
no pattern associated with neonicotinoid use and hive health issues, Logomasini notes. In many places where
these chemicals are used widely, such
as in Australia, hives are doing ne.
Nonetheless, regulators, including
no surprisethe EPA, are waging war
against neonicotinoids. The EU, a
bastion of this kind of deadly, knownothing mentality, has banned them
indenitely.
Meanwhile, the assault on GMOs
continues. The food chain Chipotle
recently announced that none of its
offerings will contain ingredients
from GMOs. Henry Miller devastates this piece of grandstanding in
the Forbes.com post Chipotle: The
Strangest Restaurant Menu Ever:
Farmers and plant breeders
have been selecting and hybridizing plants to enhance their
desirable characteristics for millennia. Corn has been drastically
modied by selective breeding.
Tomatoes and wheat and innumerable other food plants have
similar histories.
Another common technique
for creating new plant varieties,
which originated about a century
ago [my italics], is radiation mutagenesissubjecting seeds to
radiation to scramble their DNA
and create mutants. Thousands
of plant varietiesincluding lettuce, wheat, rice, oats and the

popular Rio-Sweet and Rio Star

pink grapefruitthat we consume
routinely were derived this way.
Some of the skeptics about
modern genetic engineering
would remonstrate that using
conventional, or pre-molecular,
techniques adds no foreign
genes to the genome of the resulting plant. Theyre wrong.
Since the 1930s plant breeders have performed wide cross
hybridizations, in which a large
numbers of foreign, or alien,
genes have been moved across
what used to be thought of as
natural breeding boundaries to
create plant varieties that cannot
and do not exist in nature....
Wide-cross hybridizations and
radiation-induced mutagenesis
represent far more drastic tinkering with Nature and create
far greater attendant uncertainty
about the results than the modern molecular techniques....
Where does [all this] leave Chipotles no genetic modication
promise? That should limit their
menu to wild berries, wild game,
wild mushrooms and wild-caught
sh and shellsh. Virtually all of
the other foods in our diets come
from organisms that have been genetically modied in some way.
What a weird world we live in
these days, where ignorant but inuential voices thwart the very things
that can make life better, especially
for the poor and undernourished. F

Restaurants: Go, Consider, Stop

Edible enlightenment from our eatery experts and colleagues Richard Nalley, Monie Begley, and Randall Lane
as well as brothers Bob, Kip and Tim.

z The Polo Bar

z King Bee

z Il Mulino Prime

Its more about the experience here than the

food. Every inch of interior beautifully reects the
Ralph Lauren look. The menu promises classics
but often delivers less-than-pleasing versions:
The crab cake is thin, the tuna tartare shows little
imagination, the veal chop is overly oiled. But the
plump cheeseburger, the corned beef sandwich
and the brownie la mode are denite winners.

This Acadian spot honors the Canadian roots of

the Cajuns, but too many dishes lack the avor
spark that blossomed on the bayou. The poutine
stuffs lamb into a bland, giant dumpling; the
salt pork cont lobster lacks harmony, its parts
greater than the whole. But the bar snack of
fried pork cracklings tossed with peanuts and
caramel deserves to be replicated everywhere.

Though it serves up delicious fare, this offspring

of Il Mulino isnt equal to its progenitors Stardom. The stark white interior with faux animal
heads painted white seems more cutting-edge
than the cuisine. The entres are all expensive,
with the lobster mac & cheese the only relative bargain. For desserts the cheesecake, the
limoncello and the chocolate cake are inspired.

14 |

FORBES

MAY 25, 2015

424 East 9th St. (Tel.: 646-755-8088)

331 West Broadway (Tel.: 212-226-0004)

GLEN DAVIS

1 East 55th St. (Tel.: 212-207-8562)

Why does a Smart Nation matter?

Singapore, a tech innovation hub, is tackling tomorrows big challenges today

All growing cities face challenges such as managing traffic, caring for ageing populations and creating sustainable
living environments. Singapore is no exception. What differentiates this small island-nation is its tenacity and
political will to change quickly and effectively for the better. Right now its putting those qualities to work as it
transforms into a tech innovation hub, generating big, scalable ideas that solve real-world problems.
Singapore is the worlds rst Smart Nation one thats small enough to be an exciting test-bed for new
innovations, yet big enough in vision and outlook to take a lead in using technology to tackle some of the worlds
most critical challenges. Even better, Singapore is now inviting innovators from around the world to join it in
finding breakthroughs, test-bedding them locally and eventually applying them globally.
What are the GLOBAL CHALLENGES?

Urban Density
Two-thirds of the world
will live in cities by 2050.1

Ageing Population
The world is ageing fast.
By 2050, more than 2
billion people will be
over 60.2

Healthcare
By 2025, there will be 8
billion people, 800 million
of whom will be over 65
with high health needs.3

Mobility
People are moving more
into congested centres,
with urban travel to
triple by 2050. Traffic
congestion could bring
cities to a standstill.4

Energy Sustainability
Global demand for
energy will rise by up
to 37% by 2035. 5

Why START UP in Singapore?

11,000 government data
sets open for innovation

Worlds most
tightly packed

US$22 billion
government
investment in R&D7

entrepreneurial
ecosystem6

US$24 billion

World-ranked

venture capital pool8

Universities

7,000 MNCs

Use Singapore as a
Living Lab for new
technologies

Enjoy the worlds easiest

place to do business9
register a company online in
15 minutes

Leverage the worlds fastest

broadband10 nationwide
ultra-high speed 1Gbps access

Access a skilled ICT

workforce, more than
146,000 strong

Reach 600 million

people in the rest
of S.E. Asia

Learn more at www.smartnation-forbes.com

United Nations 2World Health Organization 3World Health Organization 4Arthur D. Little/UITP 5BP 6The Economist 72006-2015 8Asian Venture Capital Journal Research 2013 9World Bank 10Ookla

LeaderBoard

May 25, 2015

SEATING CHART:
MAYWEATHER VS. PACQUIAO 18
RICHEST RAPPERS 20
LUXURY LINEAGE:
THE ARMANI SUIT 22
FAREWELL TOAST:
A. ALFRED TAUBMAN 24
TAKE A SEAT ON THE TITANIC 26

The briefcase gets even briefer. From top:

leather portfolio by Tods ($645);
carbon ber and leather Chassis portfolio by Dunhill ($790);
leather zip portfolio by Valextra ($1,720);
leather Damier portfolio by Louis Vuitton ($1,520);
carbon ber zip portfolio with leather trim
by Ralph Lauren ($1,950).
DAVID ARKY FOR FORBES

PAGE 26
MAY 25, 2015 FORBES | 17

LeaderBoard
SEATING CHART

Lords of the Ringside

The fight itself was a snooze.
At Mayweather vs. Pacquiao,
the real battle was for the
best seats in the house.

LEO DICAPRIO
ACTOR

RUPERT MURDOCH
$13.9 BILLION
MEDIA

WHEN FLOYD Mayweather

fought Manny Pacquiao at the
MGM Grand in Las Vegas on
May 2, it became the richest ght in history. FORBES
estimates that of $465 million
in revenue, the two men split
$300 million for their 36 minutes of work plus 11 minutes
of rest. True to his name, the
victorious Money Mayweather reaped an estimated
$180 million, while Pacman
took home a lovely consolation prize of $120 million or
so. But chump change for
many in the stands. Behold, a
whos who and whos where.

CHARLES BARKLEY
ATHLETE

BILLIONAIRE
TONY ROBBINS
MOTIVATIONAL
SPEAKER

BRADLEY
COOPER
ACTOR

JAMIE FOXX
ACTOR

JIMMY
KIMMEL
LATE-NIGHT
HOST

MARK
WAHLBERG
ACTOR

STANLEY
DRUCKENMILLER
$3.1 BILLION
HEDGE FUNDS

JAKE GYLLENHAAL
ACTOR

CLINT EASTWOOD
ACTOR

DENZEL
WASHINGTON
ACTOR

PETER GUBER
18 | FORBES MAY 25, 2015

MANDALAY
ENTERTAINMENT

STEVE WYNN
$3.4 BILLION
CASINOS, HOTELS

PHILIP GREEN
$5.1 BILLION
RETAIL

LEWIS
HAMILTON
F1 DRIVER

STEFFI GRAF
ATHLETE

PHILLIP
RUFFIN
$2 BILLION
CASINOS,
REAL ESTATE

BEYONC

PAUL
TUDOR
JONES

MUSICIAN

BOB ARUM

MARY J. BLIGE

BOXING PROMOTER

MUSICIAN

ANDREW
BEAL

$4.6 BILLION
HEDGE FUNDS

$11.7 BILLION
BANKS,
REAL ESTATE

ANDRE
AGASSI

LES MOONVES
CBS CEO

ATHLETE

JAY Z

MICHAEL JORDAN

MUSICIAN

$1 BILLION
SPORTS

ROBERT DE NIRO
ACTOR

JAMES PACKER
$5.2 BILLION
CASINOS

ROBERT
KRAFT

MIKE TYSON
ATHLETE

MICHAEL
KEATON
ACTOR

KEVIN PLANK
$3.1 BILLION
UNDER ARMOUR

DONALD
TRUMP
$4.1 BILLION
TV, REAL ESTATE

NICKI MINAJ
MUSICIAN

DIDDY
MUSICIAN

TOM BRADY
ATHLETE

MAY 25, 2015 FORBES | 19

BY MICHAEL SOLOMON

$4.3 BILLION
NEW ENGLAND
PATRIOTS

VINCENT VIOLA

+$330 MILLION

LeaderBoard

NET WORTH: $2 BILLION

Stock in his high-frequency-trading rm,
Virtu Financial, which made money 1,484 of its rst
1,485 days in business, jumps 17% on day of IPO.

RICHEST BY STATE

THE FORBES FIVE

Alabama

Richest Rappers

POPULATION:

4.83 MILLION
GROSS STATE PRODUCT:

$196.2 BILLION

TODAYS TOP hip-hop moguls keep dening success upward:

Despite selling his headphone line, Beats by Dre, to Apple for
$3 billion last year, Dr. Dre still isnt the richest man in rap.

(0.78% GROWTH YEAR-ON-YEAR)

GSP PER CAPITA:

$40,621
RICHEST:
GARRY DRUMMOND

$980 MILLION

1. DIDDY
NET WORTH:

$735 MILLION
Though Mr. Combs (right) hasnt yet had a
Beats-level exit, he might soon, thanks to
huge stakes in TV network Revolt, clothing line Sean John, alkaline water brand
Aquahydrate and new tequila DeLeon.

2. DR. DRE

RICHEST BY STATE BY CHASE PETERSON-WITHORN; RICHEST RAPPERS BY ZACK OMALLEY GREENBURG

ALL FIGURES AT THE TOP OF THIS AND SUBSEQUENT PAGES REPRESENT CHANGES IN WEALTH BETWEEN MAR. 17 AND APR. 7. SOURCES: INTERACTIVE DATA VIA FACTSET RESEARCH SYSTEMS;
CHRIS LYONS (LEFT); MIKE PONT/FILMMAGIC/GETTY IMAGES (RIGHT)

$700 MILLION
His Beats sale got him the
largest single-year payday of
any musician in historyand
a nine-gure tax bill that kept
him from the top of the list.

3. JAY Z

$550 MILLION
His diversied portfolio continues to grow, courtesy of assets
such as entertainment company
Roc Nation and Armand de
Brignac champagne. Streamingservice Tidals impact remains
to be seen.

GARRY DRUMMONDS coal-mining Drummond Co. was built on the backs of three
mules, which his father used as collateral on
the $300 bank loan that put him in business
in 1935. Drummond, who lives near Birmingham, joined the company in 1961 and led an
expansion into Colombia that has been both
protable and controversial: Drummond has
fought lawsuits alleging ties to paramilitary
forces that killed more than 100 peopleincluding three union leadersbetween 1996
and 2006.
Families of the victims say the company
abetted human rights violations by paying
the rebels for protection that included the
use of lethal force against civilians. A jury
ruled in favor of Drummond in 2007, and
most subsequent cases and appeals have
been dismissed. Drummond has countersued,
alleging defamation by lawyers, and another
suit alleges extortion on the part of lawyers,
advocacy groups and Llanos Oil, a Dutch
competitor.
20 | FORBES MAY 25, 2015

4. 50 CENT

$155 MILLION
After scoring $100 million on the
sale of Vitaminwater in 2007,
50 hopes to repeat the feat with
stakes in new ventures, including
SMS headphones, Effen vodka
and Frigo underwear.

5. BIRDMAN
$150 MILLION

His slight dip this year (down

from $160 million and the No. 4
slot in 2014) mirrors the value of
his label Cash Money, which has
been dogged by rumors of the
departure of big acts, including
superstar Lil Wayne.

MAY 4, 2015 FORBES | 20

The tools in the Business

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Portland, Oregon

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2015 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

JEFF BEZOS

+$4.6 BILLION

LeaderBoard

NET WORTH: $38.8 BILLION

For the rst time the Amazon boss breaks out his
cloud business, revealing a $5 billion giant that
has grown 50% in the last year.

LUXURY LINEAGE

The Armani Suit

ON MAY 1 Giorgio Armani began a yearlong celebration of his 40th anniversary in fashion with the opening of Armani/Silos, a Milan museum
dedicated to the 80-year-old billionaire designers most famous creations
and drawings. And when it comes to symbolizing success for the past four
decades, nothing has meant business like an Armani suit.

1984
Miami Vice may be
remembered for
its pastel T-shirts
and slouchy suits,
but that image
was mainly the
look of Don
Johnsons Sonny
Crockett. It was
his partner, Rico
Tubbs, who wore
impeccably tailored Armani suits
and ties. Neither
man, it should be
noted, dressed like
a vice cop.

1992
When Eric Clapton wanted to shed
his wild and woolly 70s rocker
image, he did it with the help of
Giorgio Armani. In 1990 the guitar
god attended his rst Armani
show, and the designer began
dressing him in understated threebutton suits and jackets in muted
colors. Seven years later Clapton
composed the music for an Armani
fashion show.
22 | FORBES MAY 25, 2015

2014
For years George Clooney
has walked red carpets in
clothes designed by Armani,
his Lake Como neighbor in
Italy. And when the Oscarwinning actor married Amal
Alamuddin in September
2014, he did so in an Armani
tuxedo. The following morning the groom appeared in
an elegant gray Armani suit,
but few noticedbecause
his bride wore a ower-print
dress by Giambattista Valli.

2013
A wolf of Wall Street
cant wear sheepish
clothing, so when
director Martin Scorsese
wanted to re-create
90s power dressing, he
had his longtime friend
Armani design suits
including the almighty
blue pinstripefor
Leonardo DiCaprio.

BY MICHAEL SOLOMON
COUNTERCLOCKWISE FROM TOP: ADRIANO ALECCHI/MONDADORI PORTFOLIO VIA GETTY IMAGES; PARAMOUNT/EVERETT COLLECTION; RON TOM/NBCU PHOTO BANK/GETTY IMAGES;
PHIL DENT/REDFERNS/GETTY IMAGES; JAMES DEVANEY/WIREIMAGE/GETTY IMAGES; PIERRE TEYSSOT/AFP/GETTY IMAGES

1980
The anointing of Armani
came in 1980, when the
designers clothes were
featured in American
Gigolo, the rst of many
Armani collaborations
with Hollywood. As worn
by Richard Geres title
character, the power suit
lost its inated shoulders
and gained a new power:
sex appeal.

1975
Founded in Milan by Armani
and Sergio Galeotti, the label
produced its rst mens collection in October 1975. Within
three years the designer had
softened the t of mens (and
womens) jackets and become
known as King of the Blazer.

Started my Camry.
Rescued a dog.
Searched for the owners.
Uncovered a plot.
Escaped with the evidence.
Took a leap of faith.
Left them all behind.
Kept the dog.

ONE BOLD CHOICE LEADS TO ANOTHER.

The 2015 Camry. Our boldest Camry ever.

toyota.com/camry
Prototype shown with options. Production model will vary. 2015 Toyota Motor Sales, U.S.A., Inc.

JACK DORSEY

$260 MILLION

LeaderBoard
30 UNDER 30

NET WORTH: $2.6 BILLION

All bad news for Dorseys Twitter,
which lowers revenue and prot projections
as losses mount; shares drop 20%.

FAREWELL
TOAST

Tastemakers
Smarter eats from the FORBES
30 Under 30, in 30 words or less.

A. Alfred Taubman (1924-2015)

Adam Belanich, Noah Belanich
The sibling pioneers of the iced coffee kegerator are
expanding their craft on draft operations to iced tea
and kombucha. Nearly 600 offices use their Joyride
machines, eliminating K-cup waste.

Laura Borel
JAWBONE | 26

Borel oversees the nutrition

component of Jawbones
app, which tracks not only
calorie consumption but also
assesses the wholesomeness
of your culinary choices.

Ali Bouzari
PILOT R+D | 27

The chefs and scientists at

Bouzaris consultancy help
budding entrepreneurs
improve the avor of new
edible products such as protein
substitutes and cricket our.

ASK 50 BILLIONAIRES

Whats the Most Youve Ever

Paid for a Bottle of Wine?
Under
$100

$100 to
$500

$500 to
$1,000

$1,000 to
$10,000

2% 22%

24%

28%

24 | FORBES MAY 25, 2015

More
than
$10,000

I dont
buy
wine

2% 22%

I rst got to know Alfred Taubman because I thought his company was ripping me off. It was about 1970, and I made a handshake deal with one of Als leasing agents to open The Limiteds seventh store in a Milwaukee mall. When I got
the official agreement, the rent was twice as expensive. I phoned Mr. Taubman,
as I called him back then. I think the guy made a mistake, Al told me. But if
somebody speaks on behalf of my company and you believed it, Ill stick with it.
A nice rst impression, but Al wasnt always so polite. Three years later he
summoned me to his office in Detroit. We hopped on a helicopter and walked
through a few of his malls. As I trailed him like a duck following a massive animal,
he did not acknowledge me. After lunch he broke his silence: You saw your
stores? he asked. Theyre the ugliest stores Ive ever seen. Youd better x them
or Im going to have them torn down. Then he walked out of the restaurant.
That was Al. Tough, honest and, most of the time, correct. My wood-and-brick
storefronts were horrible. We made them more stylish, and in 1982 he called me
up. Les, he said, I just saw your Beverly Center store. Here he goes again, I
thought. And I wanted to tell you its the best store Ive ever seen. Then he hung
up. At least one of my stores is now in every single shopping mall he owned.
Al had so many interests, such intense curiosity. At his house in Palm Beach
I saw excellent artwork in a home for the rst time. He talked about charter
schools 20 years ago. The same with stem cell research.
When he went to jail, he put me on the shortlist of people allowed to visit. My
wife, Abigail, and I went up there once a month. We brought a sleeve of quartersthe only thing you could bring insideto buy White Castle burgers at the
vending machine. In my opinion he was innocent. But Al didnt dwell on that. He
just counted the months until he could see his grandchildren again.
His giving to Michigan inspired me to give to Ohio State. He was just as generous with friends. About 25 years ago I found a big box in my garage and pulled
out a beautiful piece of artwork, one I had admired in Als house. I told him I
couldnt accept it. A deal is a deal, he told me. We never know what the future is, and I want you to have something to remember me by.
As I sit at my desk right now, that painting hangs above my head.

30 UNDER 30 BY KATHRYN DILL

JOYRIDE COFFEE | 28, 26

BLOOMBERG (TOP); ILLUSTRATIONS BY PATRICK WELCH (LEFT); NILS JORGENSEN/REX/NEWSCOM; WINE BOTTLE: GETTY IMAGES

On Apr. 17 Alfred Taubman, who made a $3.1 billion fortune building malls across
America, died of a heart attack at age 91. Taubman famously turned around the
auction house Sothebys but served ten months in prison after he was convicted in
a price-xing scheme. His friend, tenant and fellow billionaire LES WEXNER,
founder of Victorias Secret, reects on a life.

GEORGE LUCAS

+$170 MILLION

LeaderBoard

NET WORTH: $5.2 BILLION

Disney releases trailer for Star Wars VII; nerds
go nuts, and the franchise mastermind watches his
Disney shares hit an alltime high.

SEAL THE DEAL

The
New
Power
Bag

WHATS briefer
than a briefcase?
A sleek portfolio
meant to hold a
single documentthe
one thats about to be
signed. Made in leather
(or carbon ber), the new
bag has no handles, no
shoulder straps and would
start to bulge if you tried
to tuck in a mobile phone.
Carrying one sends a clear
message of ruthless efficiency:
Youre all business.

ON THE BLOCK

A Seat to Remember
REARRANGING deck chairs on the Titanic might be the quintessential exercise in futility, but collecting them isnt. In April a wooden
Nantucket recliner from the doomed ocean liner was auctioned at
Henry Aldridge & Son in England and sold for 100,000 (nearly
$150,000). The chair was on the promenade deck when the great ship
went down in 1912 and is one of a half-dozen retrieved by the cablerepair ship Mackay-Bennett, which was sent to recover bodies.
According to Aldridges records, the chair was then given to
Mackay captain Julien Lemarteleur by one of its crew, and for the past
15 years it has been owned by a Titanic collector in England, who kept
it by a large window in his home, overlooking the ocean. The anonymous winning bidder cant actually sit in the chair; its too fragile.
Given the furnitures tragic provenance, though, why even risk it?

26 | FORBES MAY 25, 2015

BY MICHAEL SOLOMON (2)

An unsinkable Titanic deck chair sells for $150,000.

PHOTOGRAPH: DAVID ARKY; CREATIVE STYLE DIRECTOR: JOSEPH DEACETIS; STYLE ASSOCIATE: JUAN BENSON; PROP STYLIST: TERRY LEWIS; HENRY ALDRIDGE AND SON (BOTTOM)

LEATHER DAMIER PORTFOLIO

by Louis Vuitton ($1,520)

W O R K

W E L C O M E

O F

T O

S M A R T

T H E

E D G E

2 0 1 5 Sa m sung Ele ct ronics A m e rica , Inc. S a m sung and G al axy S are trademark s of Samsu ng E l ectroni cs Co., Ltd.
S cre e n im a g e s sim ulated. Appearance of devi ce may var y.

PROMOTION | BUSINESS AVIATION

Raising the BarAgain

BY TONY VELOCCI

he voice of the customer can be a

powerful tool in the hands of a truly
innovative company.
A prime example is Gulfstream
Aerospace Corp., with its recent launch of the
G500 and G600 aircraft. Like so many other
Gulfstream products that have preceded
them, the new models appear certain to set a
higher standard in performance and comfort
in one of the worlds most discerning capital
goods markets: business jets.
The company started laying the groundwork for its clean-sheet designs in 2008,
taking into account feedback it received
f rom op er ators who were p ar t of it s
Advanced Technology Customer Advisory
Team. For example, they expressed a desire
for a larger fuselage, longer range and faster
cruise speedsand improved fuel economy.
Altogether, the consultations resulted in
more than 200 design changes, including
improved cockpit functionality, additional

storage space and cabin layout revisions.

What emerged from Gulfstreams productdevelopment centerone of the most robust
in all of civil aviationwere two aircraft whose
combination of speed, range and cabin comfort are unmatched by any other purpose-built
business jet in production or development.
Not only do they have longer and larger
cabins than the top-selling G450 and G550,
but they also fly higher, faster and farther,
on less fuel. High-speed cruise speed for
both aircraft is Mach 0.9, or about 595 mph.
At long-range cruise speedMach 0.85, or
about 561 mphthe G600 has a range of
6,200 nm. The G500 has a 5,000-nm range
when flying at Mach 0.85.

Cabin Comfort
Inside the cabin, the two aircraft provide 2
inches more headroom, 7 inches more cabin
width and 8 inches more floor width than
the G450 and G550. In addition, both models

have the same cabin windows as Gulfstreams

flagship, the G650, which are the largest in
the industry.
The G500 has six windows per side and three
seating areas, while the G600 cabin has seven
windows per side and room for three and a half
seating areas. The extra length accommodates
an optional crew-rest compartment.
Meanwhile, the jets pressurization system
of 10.7 psi provides a 3,000-foot cabin altitude
at 41,000 feet, and a cabin altitude of 4,850
feet at the aircrafts 51,000-foot maximum ceilingthe lowest cabin altitude in their classes.
Depending on their configuration, the G500
and G600 can seat 12 to 16 passengers.

Top-Notch Avionics
The jets cockpit is just as innovative. For
example, the G500 and G600 are the first
business jets to feature active sidestick
controls, which provide pilots with a classic
airplane feel of mechanically linked sticks,
as well as improved crew coordination and
situational awareness. An enhanced vision
system featuring higher resolution and an
increased field of view, along with synthetic vision for the primary flight display,
is standard.
FlexJet, a major provider of fractional aircraft
ownership services, is among the first customers of the G500. The company anticipates type
certification from the U.S. Federal Aviation
Agency and the European Aviation Safety
Agency in 2017, with deliveries of the G500 and
G600 to start in 2018 and 2019, respectively. Q

www.gulfstream.com

MAX SPEED: MACH 0.88

MAX RANGE: 4,350 NM
MAX ALTITUDE: 45,000 FT

PROVEN

L EADERSHIP

Growing an international business demands reliability and peak performance.

Thats what the Gulfstream G450 delivers. This aircraft is part of the top-performing
platform in business aviation and consistently earns NBAA reliability ratings above
99 percent. Take the guesswork out of success. Put yourself in a G450.

SCOT T NEAL | +1 912 965 6023 | scott.neal@gulfstream.com | GULFSTREAMG450.COM

Range shown is based on NBAA IFR theoretical range at Mach 0.80 with eight passengers. Actual range will be affected by ATC
routing, operating speed, weather, outfitting options and other factors.

KEN GRIFFIN

+BEN BERNANKE
NET WORTH: $6.5 BILLION
Hedge fund titan often criticized Bernanke
as Fed chairman. Now hes hired him as an
advisorand the revolving door spins anew.

LeaderBoard

Ken
Griffin

CONVERSATION
EVERYBODY LIKES a Twinkie, right? Steven
Bertonis May 4 cover story about the salvation of
Hostess by Dean Metropoulos and Apollo Globals
Andy Jhawar had tongues wagging (and drooling).
The tale is high dramastrikes, implementation of
efficiency measures and the rebirth of a snack-food
iconand reader opinions were well, as homogenous as Twinkies themselves. Love Hostess products, those preservative-packed calorie bombs with
ingredients that read like a chemistry textbook,
tweeted (in earnest!) Jennifer Gerholdt of the U.S.
Chamber of Commerce Foundation, quoting Bertoni. Breitbarts John Nolte gushed: Loved this story.
What unions destroyed, innovation & chemicals
saved. And in a gesture as sweet as vanilla lling,
Daren Metropoulos tweeted our cover image and
Proud of my Dad. Awww. Have a Twinkie on us!

THE INTEREST GRAPH

Judging by reader clicks, snack cakes and rock n roll have nothing
on the futuristic motorbike taking Taiwan by storm.
The Tesla of Scooters Is Driving Asias Two-Wheel Revolution

120,419 page views

MAPPING
IT OUT
FORBES Janet Novack and
Ashlea Ebeling took to Twitter
to advise anxious Millennials
about nancial planning. More
at storify.com/forbes.

@TEHRIFFIC What are the

most common mistakes
beginners to nancial planning make?

@ FORBES When it comes

to investing, beginners are
often too conservative (no
stock) or too risky (one
stock). One big mistake is
cashing out of a retirement
account because you didnt
build an emergency fund.
@SCHULTZZYRUN What
can current college students
do to get their nances on
track while being under
student loans?

Revenge of the Record Labels: How the Majors Renewed Their Grip on Music

Twinkies Miracle Comeback: The Untold Inside Story of a $2 Billion Feast

77,438

The Next Billion-Dollar Startups

69,493

Pharmacy Startup PillPack Could Change the Way America Takes Its Medicine
68,006

As the MP3 heads

the way of the eighttrack tape, it seems
the labels have
learned from their
mistakes.

The Billionaire Banker Ready to Bet on Oil

50,735

Innovation Factory: How Parker Hannin Pumps Out Breakthrough Products

30,992

The Great Getty Curse

THE BOMB
1,709 VIEWS

30 | FORBES MAY 25, 2015

Gogoros bike is
what youd get
if you mated a
Vespa and an
iPhone.

Medication overload
is a big problem.
Some 32 million
Americans are on at
least ve different
prescription drugs.

FORBES If youre living

on student loans, before
you buy anything, multiply
its price x 1.5. Its a mental
trick to remind you that it
will cost more by the time
you pay interest on your
loans.
@JAMESDOS3 Is it
worth it for a beginner
investor to work with an
algorithm-based system
like Wealthfront as opposed
to a human?

FORBES I like roboadvisors like Betterment and

Wealthfront. But you dont
really need algorithmsyou
can simply buy a balanced
fund that is 50% stocks/
50% bonds.

BY MEHRUNNISA WANI

101,124

7:05

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This is Four Points.

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Post-workout
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8:00

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Cab it to a meeting.
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2015 Starwood Hotels & Resorts Worldwide, Inc. All Rights Reserved. Preferred Guest, SPG, Four Points and their logos are the trademarks of Starwood Hotels & Resorts Worldwide, Inc., or its afliates.

THOUGHT LEADERS
AVIK ROY // THE APOTHECARY

THE FLAW IN MARCO RUBIOS

TAX REFORM PLAN
Now, Im a card-carrying reformocon, but
I see a ton of problems with the Lee-Rubio
child tax credit. First of all, theres no empirical evidence that the plan would actually
lead to the production of future taxpayers.
Most of the tax credits would go to parents
whove already borne children and have no
interest in bearing more. Furthermore, to
the degree that the credit incentivizes more
childbearing, it may increase out-of-wedlock
births. Numerous studies indicate that children born out of wedlock have a far higher
risk of living their lives in poverty: net recipients, not nanciers, of the entitlement state.
Second, we already have a democratic
imbalance, with two-fths of Americans
experiencing no income tax liabilities.
Lee-Rubio would worsen that problem by
eliminating payroll tax liabilities for a signicant portion of the population. The U.S.
tax code is already the most progressive in
the industrialized world; Lee-Rubio would
make that worse.
Third, because the credit is refundable
against payroll taxes, it would either accelerate the impending
bankruptcy of the proA COSTLYAND CLUMSYSUBSIDY FOR PARENTS
grams funded by payroll
MARS AN OTHERWISE ATTRACTIVE PROPOSAL
taxesSocial Security and
Medicareor count as new
mate that it would reduce federal tax revenue by more than $4 trillion federal spending, spending that Lee-Rubio
in its rst decade, if you exclude the effects of economic growth. But
doesnt offset with cuts elsewhere.
over the long run, they say, Lee-Rubio would pay for itself, by increasAnd fourth, as the Tax Foundation analysis
ing the size of the economy by 15% and by increasing employment by
points out, the child tax credit would increase
2.7 million jobs.
the decit by more than $1.7 trillion over a
The most controversial feature of the planand rightly sois its efdecade, while contributing nothing to ecofort to use the tax code to encourage more Americans to make babies.
nomic growth. Think about it this way: The
The plan includes a new child tax credit of $2,500, which would be
Lee-Rubio child tax credits are at least $700
refundable against income and, importantly, payroll taxes. Rubio and
billion costlier than the tax credits deployed
Lee worry that parents dont bear more children because they shoulby ObamaCare to offer health coverage to the
der the nancial burden of raising the next generation of taxpayers.
uninsured.
This has been a leading concern for a fraction of the reform conservaThat $1.7 trillion could have been used to
tive wing of the Republican Party, a group focused on expanding opraise living standards for every American by
portunity for lower-income Americans.
further reducing individual and corporate
tax rates. For Senator Rubio its a missed
AVIK ROY IS FORBES OPINION EDITOR AND A SENIOR FELLOW AT THE MANHATTAN INSTITUTE.
opportunity. F
32 | FORBES MAY 25, 2015

THOMAS KUHLENBECK FOR FORBES

IN MARCH two freshman Republican senatorsMike Lee (Utah) and

Marco Rubio (Fla.)released an ambitious plan for tax reform. Nonpartisan
experts believe the plan would turbocharge U.S. economic growth. But the
plan is marred by a multitrillion-dollar
effort at social engineering, one that
would increase the decit without expanding the economy.
Given that Senator Rubio is one of
the most attractive contenders in the
2016 presidential race, his views on tax reform warrant special attention. And there is a lot of good stuff in his proposal, entitled the Economic Growth and Family Fairness Tax Reform Plan. (Disclosure: Im
an advisor to former Texas governor Rick Perry.)
It would clean up loopholes in the corporate tax code, cut the federal corporate tax rate to 25%, move to a territorial tax system and
eliminate taxes on capital gains and dividends, among other things.
On the individual side, the plan would consolidate the code into two
brackets: 15% and 35%. It would eliminate all itemized deductions save
the mortgage and charitable deductions. It would abolish the alternative minimum tax.
Michael Schuyler and Will McBride of the Tax Foundation have
conducted the most thorough analysis to date of the plan. They esti-

THOUGHT LEADERS
AMITY SHLAES // CURRENT EVENTS

QUALITY TAX POLICY unites

America and prepares us for stronger
economic growth. Thats why Republican presidential candidates have
traditionally made taxes the central
plank in the GOP platform. Under an
optimal tax plan all people are treated
the same. Rates are low.
That, in turn, is why the at tax,
indeed, the sort favored by FORBES
editor-in-chief, Steve Forbes, has sustained its charm down the decades.
Voters tend to trust a plan they understand. Back during the Reagan
years activist Grover Norquist began daring Republican candidates to
sign The Pledge, a commitment to agree not to increase taxes.
Yet that logic doesnt seem to hold in this election round. The early tax
plansand some would even hesitate to call them plansare not optimal.
Candidates currently favor a disunied mishmash, singling out groups
for various preferences. The plan put forward by Senator Marco Rubio
(RFla.) is a good example of this. Its centerpiece is a $2,500 tax credit
for families. This is tax policy as consolation, for such credits score at
zero when we reckon how much they contribute to growth. Rubio, however, morphs from Santa to tiger when it comes to investors, slashing
corporate and capital gains taxes in a way that would promote growth.
Republicans are producing divided tax plans because theyre
addressing a genuine economic divide. Wall Streeters, the energy sector and a few others are faring well, but others are not. Middle-age
Americans observe that they owe more money, drive older cars and
hold less equity than they had imagined they would at this point in
their lives. For their part, young people sense that they are, to cite the
title of economist Diana Furchtgott-Roths new book, disinherited.
Only debt and subpar jobs lie ahead.

THE ROMNEY PROBLEM

The reason for this divide is bailout policy that dates back to the
2008 nancial crisis. In the summer of that year President George W.
Bush and presidential candidates Senators John McCain and Barack
Obama were spending more time on Scott McClellans Iraq tell-all,
Sarah Palins performance as Alaska governor or the Obama campaigns mastery of social media than on mortgage-backed securities.
The crisis surprised all three men. Uncertain, rst President Bush
and then President-elect Obama joined Congress in turning to bailouts
and subsidies as the answer. Those bailouts ultimately hurt the
economy because they picked losers, investing in rms whose dissolution might have made better sense. Companies didnt hire the way

they might have had there been no bailouts.

The corporate and bank bailouts ceased,
but the greater bailout, the Federal Reserves
monetary bailout, continues to this day. The
Feds easing represents a historic example
of what Ludwig von Mises labeled malinvestment. Mises and others in the Austrian
School, notably Friedrich von Hayek, argued
that failing to allow markets to clear impedes
recovery. Now we have textbook evidence. In
any case, voters young and old arent blind to
the hypocrisy of bailing out one group while
ignoring the other. This is why they react heatedly when candidates demonstrate even a hint
of condescension (Mitt Romneys problem).
Perhaps the Fed and the government should
have provided liquidity in the autumn of 2008
and stopped there. Perhaps even that liquidity shouldnt have been provided. And perhaps
monetary reform is the rst change needed.
These nontax questions warrant discussion.
Yet Republicans arent speaking much about
the 2008 record. Rubio has explicitly said that
he considers the past yesterday, i.e., irrelevant. Candidates would rather mumble something about liquidity or Lehman Bros. and
how complicated it all was than take a stand.
The 2008 crisis is the elephant in the
elephants room, the event that affects voter
trust in the GOP. Since voters arent sure
what happened in 2008and arent sure
what will happen in the next crisis, either
theyre in no mood to take the sort of leap of
faith tax reform requires. Understandably resentful, they prefer a tax handout. Politicians
sense this and deliver accordingly.
Suggestion: Postpone the tax talk, and, instead,
push the candidates on bailouts. Force them
to declare whether they consider themselves
to be Austrian or neo-Keynesian. Let them
say whether, come the next crisis, theyd wing
it, la Hank Paulson, or actually put forward a
plan. Clear the air on 2008, and there will be trust
enough for tax reform. But the best pledge for
this election round is a No Bailout pledge. F

AMITY SHLAES, PRESIDENTIAL SCHOLAR AT THE KINGS COLLEGE AND CHAIR OF THE COOLIDGE FOUNDATION BOARD; PAUL JOHNSON, EMINENT BRITISH HISTORIAN
AND AUTHOR; AND DAVID MALPASS, GLOBAL ECONOMIST, PRESIDENT OF ENCIMA GLOBAL LLC, ROTATE IN WRITING THIS COLUMN. TO SEE PAST CURRENT EVENTS COLUMNS, VISIT OUR
WEBSITE AT WWW.FORBES.COM/CURRENTEVENTS.

34 | FORBES MAY 25, 2015

THOMAS KUHLENBECK FOR FORBES

THE NO BAILOUT PLEDGE

THOUGHT LEADERS
RICH KARLGAARD // INNOVATION RULES

SMART-CITY CHAMPIONS

RICH KARLGAARD IS THE PUBLISHER AT FORBES. HIS NEW BOOK, TEAM GENIUS: THE NEW SCIENCE OF HIGHPERFORMING ORGANIZATIONS, COMES OUT IN JULY. FOR HIS PAST COLUMNS AND BLOGS VISIT OUR WEBSITE
AT WWW.FORBES.COM/KARLGAARD.

36 | FORBES MAY 25, 2015

to discourage ownership. So whats next? The

answer isnt more taxes. At some point the
goose will squawk and talent will stop coming
in. The answer is to use technology and data
to seek new efficiencies. (Singapores tropical climate makes increasing the number of
people walking and biking unfeasible.)
Improved health and transportation
obvious, right? Theyre on every citys and
countrys wish list.
The third category discussed by Prime
Minister Lee is rather unique.
*()'#(!',%.*& We want to
become a safe and secure data marketplace.
A place where companies can easily conduct testing and extract insights on market
research and consumer trends. A place where
data can be shared in order to unlock value
and innovation, and where the government
releases many data sets to the public to build
applications and services.
Thats a bit differentand brilliant. Singapore will be positioned as part Switzerland/
part Silicon Valley. Without saying so, the
prime minister was addressing some peoples
fears that Hong Kong has been compromised
as a secure data marketplace. Mr. Lee is too
much of a diplomat to say it directly, but the
implication is clear: Singapore wants to be
Asias top banking city.
The coming revolution in nancial technologyntech, as its calledis just starting.
Will the winners be disruptors from Silicon
Valley? Or, because banking is regulated in
every country in which it is practiced, will
the ntech winners be hybrids of disruptors
and traditional bankers? My conference
panel said the latter. In which case, partSwitzerland/part-Silicon-Valley Singapore is
ideally positioned.

AGS ROLE IN SMART CITIES

Lets not forget that most basic need: food.
How will an additional 2.5 billion city dwellers be fed? Join the Forbes AgTech Summit
on July 89 in Salinas, Calif. to nd out. Go to
Forbes.com/conferences to learn more. F

THOMAS KUHLENBECK FOR FORBES

THE UN SAYS the global population

will reach 9 billion by 2050. Six billion
of that population will live in urban
areas. Thats a jump of 2.5 billion city
dwellers over the next 35 years.
Argue the numbers all you wish
Im skeptical that world population will
grow as fast as the UN predicts. Still,
the effect on cities will be inescapable,
whether the jump in city dwellers is
1.5 billion or 2.5 billion. The stresses
on cities will be enormous: water, food,
energy, transportation, health care, security, crime, quality of life.
This is why we love capitalism: The opportunities will be huge,
too. The smart-city innovation race will generate tens of trillions of
dollars in the coming decades. Which countries and companies will
be the big winners?
I see three categories of winners. The rst will be suppliers of digital technology, from high-speed telecom, cloud services and digital
security to apps, for example, like Ubers and Airbnbs that use physical resources with greater efficiency. But these can get you only so far.
The second category will be traditional industry reborn. The trick
will be to nd breakthroughs in materials, construction and transportationupdates to the blood-and-sweat stuff that built the great cities
of the 20th century. Will the winners be known names, such as GE,
Mitsubishi, Tata and Samsung, or new players?
A third category will be the smart cities themselves. Leaders will
likely create services that can be used to teach other cities, so their
expertise will have value beyond the benets enjoyed inside the cities.
Smart cities will enjoy premium brands in a tough global economy,
and they will attract talent. A great example is Singapore.
Last month I attended a smart-nations conference in Singapore.
Prime Minister Lee Hsien Loong kicked off the event with a reception
at his residence. He spoke about his top three priorities.
Aging population. It is imperative that older Singaporeans lead
healthy and fullling lives. One out of nine today is over 65. In 15
years that number will be one in ve, almost as high as in Japan now.
Living in a small city-state, Singaporeans dont have the outsourcegranny-to-Arizona-or-Florida option. Citizens will have to age in
place, while not burdening the economy. This means big opportunities at the intersection of health care and technology.
Transportation. Land is scarce in Singapore. We cant keep on
building more and more roads indenitely, becoming like Los Angeles.
Singapore, like Denmark, taxes cars almost double the purchase price

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Verticals

May 25, 2015

STRATEGIES
A TOUCHIER TOUCHSCREEN 40
BENTLEY BULKS UP 46

TECHNOLOGY
EIGHT-LEGGED CYBERCOP 48

ENTREPRENEURS
EXPENSIVE LOANS, LIGHTNING FAST 56

INVESTING

SURVIVING THE COMING BOND STORM 64

At Airbnb theres
always an artist in the
house. Everything
starts with billionaire
cofounder Joe Gebbia,
a fellow handy
with a cartoonists
sketch padand
an expert in the art
of warmhearted
recruiting.
PAGE 54

MAY 25, 2015 FORBES | 39

STRATEGIES
REINVENTING AMERICA

Magic
Touch
A dozen years ago touchscreen pioneer David Caldwell
narrowly missed a chance to revolutionize consumer
electronics. Can his latest invention bring redemption?

n the early 2000s engineer David

Caldwell might have missed the
chance of a lifetime. While developing touch-sensitive switches for home
appliances, Caldwell was invited to
Cupertino, Calif. to demonstrate his patented
TouchSensor technology to Apple, which
was looking to replace the mechanical scroll
wheel in the original iPod. After peppering

40 | FORBES MAY 25, 2015

him with questions about how it worked, an

Apple engineer asked, Can you integrate it
into a round wheel?
Sure, replied Caldwell.
But nothing ever came of the discussion, partly because Illinois-based Gemtron, the glass company that controlled his
technology, wasnt interested in diversifying beyond its core expertise: selling $100

Looking for a
breakthrough: Unlike
todays touchscreens,
David Caldwell says, his
technology works even
with wet or gloved hands.

BRIAN KELLY FOR FORBES

BY JOANN MULLER

STRATEGIES

REINVENTING AMERICA

cooktops embedded BYE-BYE, BUTT DIALS?

CURRENT CAPACITIVE TOUCHSCREENS ARE TRIGGERED WHEN A FINGER CROSSES A THRESHOLD IN AN
with electronics to
companies like Gen- ELECTRIC FIELD ABOVE THE GLASS. BUT THEYRE PRONE TO FALSE TRIGGERS AND DONT WORK WITH
eral Electric, Whirl- WET HANDS OR GLOVES. INSTEAD, ALSENTIS HSS MEASURES DISRUPTIONS IN AN ELECTRIC FIELD CALLED
A TOUCH RECOGNITION ZONE TO INDICATE WHEN A TOUCH OCCURS. BY CAPTURING THAT DATA, IT CAN
pool and Electrolux. DISTINGUISH BETWEEN A FINGER AND A SPLASH OF WATER OR OTHER ACCIDENTAL TOUCH.
Apple, of course,
CURRENT CAPACITIVE TOUCHSCREENS
found another way
to make its touch
wheel. Some 400
Glove
million units and
$67.5 billion in sales
But gloved
Sensors
later, it is still in use
hands cant
interpret break
disrupt thin
on the iPod Classic.
in electric
threshold, and
Who knows
threshold as
go undetected.
what might have
a touch.
happened if the
talks continued?
Glass
Glass
Caldwell, now
58, his round face
framed by shaggy
CALDWELLS HEURISTIC SIGNATURE SENSING (HSS)
bangs and rectangular glasses, tries
Glove
not to dwell on the
Touch
missed opporturecognition
Even a gloved
nity. You cant look
zone collects
hand has
data from
back, he says, sita readable
movement and
electronic
ting in a nondescript
position.
touch signature.
office-park laboratory in Holland,
Mich. I did okay.
Glass
Glass
Caldwell holds
more than 30
Mich., an expert in automotive touch conpatents, many on touch technology. His
trols, theres nobody even close.
TouchSensor switches have been incorMost touch-sensitive products, like
porated into millions of control panels,
those used in the iPhone and other perfor everything from automobiles to washsonal computing devices, are known as
ing machines to beverage dispensers at
capacitive systems. They sense when and
fast-food joints. Still, when Gemtron sold
where an objecttypically a ngerbreaks
TouchSensor to another firm in 2007 for
an electric eld. To trigger a touch signal,
just $65 million, Caldwell opted to strike
engineers set a very thin threshold, just
out on his own. Less than a year later he
above the surface of the device, to measure
formed a new company, AlSentis, to reincapacitive change. Thats why a light touch
vent touch technology once again.
is all thats needed to operate a smartphone.
The result, eight years later, is a potenBut environmental factors can wreak
tial breakthrough that could transform
how people around the world interact with havoc with capacitive systems: Who hasnt
accidentally butt-dialed someone or strugtheir electronic devices. Called HSS (for
gled in vain to make a call with wet hands or
heuristic signature sensing), Caldwells
patented setup is far more reliable and uses with gloves on? During manufacturing, even
the slightest variance, like an uneven layer
far less energy than todays touch systems.
of paint or adhesive, or a change in humidIt even works when wet or dirty, and can
ity, can affect the circuitry and how a touch
be operated with gloves on.
panel feels or if it works at all.
From what Ive seen, says Bruce BanCaldwells breakthrough idea: Do away
ter, president of Tech-D-P in Plymouth,
42 | FORBES MAY 25, 2015

MEAN ON THE STREETS.

GENTLE ON YOUR BOTTOM LINE.

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STRATEGIES

REINVENTING AMERICA

with the arbitrary trigger point in a capacitive system and replace it with a smarter
electronic touch signature that can
detect an actual touch on a real surface.
HSS technology uses a larger area above
the surfacethe touch recognition zone
to capture and process more information
from the electric field. HSS measures not
only when an object (or finger) breaks the
field, but also the speed at which the object
is traveling, when it stops, and its final
position on x and y axes. By quickly processing all the extra data, it knows exactly
when a finger is a finger and when its a
drop of water or something else and, more
important, what data to ignore (no more
butt dials). And because its not dependent
on calibration of an arbitrary threshold, it
also works with gloves.
For now AlSentis is focused on licensing
its technology to replace buttons on cars,
industrial equipment and kitchen devices.
Touchscreen prototypes for consumer devices are coming later this year. On the new
Chevrolet Corvette and Camaro, General
Motors replaced the little blue OnStar button on the frame of its cars rearview mirror
with an HSS switch embedded directly into
the glass for a sleeker look. Bauer Products redesigned its keyless entry systems
for recreational vehicles using HSS sensors
because the old LED-backlit keypads were
prone to malfunction when it rained.
Think of all the controls, light switches,
machinery, dashboards in cars. Were really excited, says Amway heir Rick DeVos,
who is an AlSentis investor through Start
Garden, his early-stage venture rm (other
investors include Windquest Group and
Methode Electronics). The auto industry
alone produces 4.6 billion buttons a year.
Coca-Cola has millions of vending machines in the U.S., each with 8 to 12 buttons.
Caldwells aptitude for electronics was
evident even as a kid shooting off rockets in
Lapeer, Mich., about an hour north of Detroit. In high school he griped about taking
math and scienceuntil he got to physics,
because now I know what its all about.

After graduating in 1975, he joined the

STAT SHEET
Navy, where a recruiting test pegged him
to work on a nuclear-powered
vessel. He made the most of it,
LYING LOW
learning all he could about energy,
Skyscrapers? Yeah, height is cool.
electronics and microprocessors,
But in Silicon Valley, todays businessbuilding boom is largely horizontal
which were just emerging.
and packed with park space.
When he left the Navy in
1981, he married and resettled
in Michigan, working on rainsensing windshields for General
Motors. He later jumped to GM
supplier Donnelly, where his
interest in thin film sensors really took off. But Donnelly was
APPLE
CUPERTINO, CALIF.
less interested, so Caldwell left,
SQUARE FEET 2.8 million
determined to make the sensors
COMPLETION DATE 2016
FOUR-STORY, SPACESHIP-LIKE NEW HQ IS REPORTEDLY WAY
hed been working on obsolete.
OVER BUDGET. IF COSTS REACH A PROJECTED $5 BILLION, ITLL
BEAT ONE WORLD TRADE CENTER TO BECOME AMERICAS
He created a new company,
PRICIEST BUILDING. LETS HEAR IT FOR HOARDED CASH!
TouchSensor Technologies.
Finding capital was always
a struggle. His father provided
the original seed money, and
Caldwell had to scramble to find
out-of-state investors (he found
none in Michigan at the time),
GOOGLE
eventually selling control to
MOUNTAIN VIEW, CALIF.
Gemtron to stay afloat.
SQUARE FEET 3.2 million
AlSentis is his second chance.
COMPLETION DATE Undetermined
LARGE TRANSLUCENT CANOPIES WILL COVER EACH SITE,
The company says it broke even
CONTROLLING THE CLIMATE INSIDE YET LETTING IN LIGHT
AND
AIR, WROTE DAVID RADCLIFFE, GOOGLES VP OF REAL
last year as revenue exploded
ESTATE, ON THE COMPANY BLOG. WE AIM TO BLUR THE
DISTINCTION
BETWEEN OUR BUILDINGS AND NATURE.
from $123,000 in 2013 to more
than $2 million in 2014. With
only 15 employees (6 of them
engineers), the company wont
manufacture anything. Its business model is to license the technology and outsource manufacturing. It hopes to raise several
FACEBOOK
million dollars this year in a
MENLO PARK, CALIF.
SQUARE FEET 434,000
Series A financing round.
COMPLETION DATE Spring 2015
This is so much bigger than
DESIGNED BY FRANK GEHRY, FACEBOOKS NEW 22-ACRE
FACILITY BOASTS A 9-ACRE GREEN ROOF. TO GET APPROVAL
TouchSensor, says Caldwell.
FOR THE PROJECT, THE COMPANY AGREED TO BUILD 15
LOW-COST HOMES OR CONTRIBUTE $4.5 MILLION FOR LOCAL
There are so many applications
AFFORDABLE HOUSING.
that want touch. Where were
standing, the road is wide
open. And who knows? Maybe
someday it will lead back to
Cupertino.

FINAL THOUGHT

All we have to believe is our senses. If they lie to us, then nothing
can be trusted. NEIL GAIMAN
44 | FORBES MAY 25, 2015

SAMSUNG
SAN JOSE, CALIF.

1.1 million
Summer 2015

SQUARE FEET
COMPLETION DATE

SAMSUNGS NEW HOME BASE IS THREE GIANT GLASS RINGS

AROUND A CENTRAL COURTYARD. STAFFERS CAN LOOK
ACROSS IT AND SEE THEIR COLLEAGUES ON THE OTHER SIDE.

It takes a special kind of compass to understand

the present and navigate the future.
3DS.COM/HIGHTECH

STRATEGIES
LUXURY

Bentley
On a Roll
Amid chaos at parent company
Volkswagen, could the venerable
British automakers CEO get a
second shot at the top?
BY MARK EWING

WHEN LAST WE MET Wolfgang Drheimer

in 2012, FORBES called him the next king of
Volkswagen, a rising star at the worlds secondlargest automaker. Having led VWs Porsche
R&D to previously unimaginable heightshe
developed and launched that fountain of prot,
the Cayennehe was moved to sister company
Bentley in 2010 to redraw the business plan
in the midst of the Great Recession, after two
years of collapsing sales and over $400 million
in losses.
I joined Bentley at a great time where I
could really make my mark, the 56-year-old
CEO says now. Condent in future growth,
Drheimer had bold plans that included development of an extravagant new agship
the $300,000 Mulsanneand by 2011 Bentley
returned to prot, just barely.
For his efforts, Drheimer was named head
of Audi R&Din short, chief engineer. Then
Drheimers career went into a spinout. A
culture clash with Audi lifers and a proposed
recasting of Audis mission ended Drheimers tenure after nine months. Following a short
time in what the Japanese call a window job
watching over VW MotorsportDrheimer
was back at Bentley.
Such is life at VW these days. Drheimers
drama is just a bit part in the Wagnerian Ring
Cycle playing out at the automaker, where
Ferdinand Pich, the mercurial chairman
of Volkswagen, was recently ousted in a
showdown with his presumed successor,
Martin Winterkorn. When Pich publicly humiliated Winterkorn in March,
saying he wasnt up to the task of running
the company long term, Winterkorn went
46 | FORBES MAY 25, 2015

to the mattresses with his allies in labor, got the

backing of the automakers top-level committee
and beat his old boss for control of the company.
By late April Pich was gone.
Which takes us back to Drheimer. Despite
a 17% jump in rst-quarter operating prots,
sales at the Volkswagen Group are stagnant:
The number of vehicles sold was up just 1.8%
in the rst quarter over last year, with prots
eked out through cost-cutting. Winterkorns
push to grow in the hot U.S. market (where car
sales are up almost 6% so far this year) has been
a disaster, down 1.4% through the rst quarter, following a 2% decline in sales last year.
Increasingly, VWs stable of luxury brands has
become its prot center, especially Porsche and
Audi. To stay on top, Winterkorn will need to
keep it that way.
Thats good news for Drheimer. Under his
command Bentley sold just over 11,000 vehicles
in 2014, a new record, and turned a prot of $191
million. Next year hell launch Bentleys rst
SUV, the Bentayga, initially with a W12 engine
and then with a hybrid powertrain. By the end
of the decade 90% of our range will offer hybrid
capability, he says.
And more new models are on the way. Among
the most glamorous unveiled at the Geneva Auto
Show in March: the Bentley EXP 10 Speed 6,
a two-seat hybrid concept car named after the
1920s Bentley Speed 6
that won at Le Mans.
Coupled with his time
at Porsche, Drheimers
performance now makes
him the favorite to lead
all four sports-luxury
brands at VW: Bentley,
Bugatti, Lamborghini
and Porsche. Its a powerful throne in the postPich erabut for his
sake lets not call him the
next king of anything
just yet. F

Bavarian Bentley
Boy: CEO Wolfgang
Drheimer believes
the companys future
lies in hybrids, like the
Bentley EXP 10 Speed
6 concept (below) and
the forthcoming SUV,
the Bentayga.

July 8-9, 2015 | Salinas Valley, CA

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TECHNOLOGY
TRANSFORMATIONAL TECH
hackers out to make
a quick buck. Its
called PunkSPIDER,
a remarkably simple
search engine that
scans the whole Web
for vulnerabilities that
snoops and crooks
might exploit to steal
data, and makes these
exploits accessible to
anyonefor free. Call
it the Google for the
broken Web.
Because of the
time and cost constraints of running
constant scans,
Dont be evil:
PunkSPIDER has
Alejandro Caceres and
been limited to one
Amanda Towler are not
in this for the money.
scan a year (though
thats set to change
this year). During the
last scan in May 2014,
PunkSPIDERs code
ran for four days on
cloud servers to test,
or fuzz, more than
98 million websites
If you could expose every flaw on every website, all at once,
by ring junk data at
wouldnt that be a good thing? Not everyone agrees.
them to see if errors
occurred, the rst
BY THOMAS FOX-BREWSTER
sign of a potential
acker culture is dying. A scene
weakness. That rst fuzz, Caceres says, turned
that used to be replete with
up a large yet depressingly predictable numanticorporate sentiment and
ber of vulnerabilities, 3.4 million in total.
profreedom ideals is being sold
The next scan, which will run in late May,
out by cybersecurity capitalwill be bigger and badder than the last, coverists more concerned with making a quick buck
ing more sites and additional varieties of Web
selling ways to exploit websites and phones
vulnerabilities. It will even extend into sites
than actually protecting Web denizens. That, at hosted on the so-called dark Web, where
least, is how Alejandro Caceres sees it. Caceres
drug dealers and human rights activists alike
is the 30-year-old cofounder of a software rm
use the Tor network to anonymize their identicalled Hyperion Gray, which he started with
ties by routing them through layers of servers.
his girlfriend and business development partThere are plans to have the scanner running
ner, Amanda Towler, in their poky Arlington,
daily, too, which will keep the data up to date.
Va. apartment.
Spreading the knowledge that a vulnerabilCaceres opinion wouldnt be all that inity exists is leaps away from teaching people
uential but for the fact that he and Towler
how to use it to break into a Web app. (The
have unleashed an epic feat of revenge against
real cybercriminals are already using more

The Google For

The Broken Web

48 | FORBES MAY 25, 2015

JAMEL TOPPIN FOR FORBES

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value for JLLs clients. More than
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TECHNOLOGY TRANSFORMATIONAL TECH

Over the last two years Caceres and Towler
have worked to improve on PunkSPIDERs
rough, early appearance. The Web page,
punkspider.org, is now as clean-looking as
Googles search page, with a bar for whole
addresses or just part of the URL.
If you want to rene your results,
there are buttons to specify a range
of common Web vulnerabilities to
search for. Sites are given a ranking from 0 to 5. Caceres says you
shouldnt visit a site with a score of
2 and above. A search for ebay.com,
for instance, with all buttons clicked,
brings up two pages of results for
various apparent aws across the site. Prior to
PunkSPIDER, a business could get this kind of
security assessment only by paying tens of thousands of dollars to a professional rm as part of
a wider penetration test. Security should not
be just for the upper echelons. We really believe
this information should be made freely available, says Towler.
Even as some government and law enforcement agencies look askance at the duo behind
PunkSPIDER, others have been keen to avail
themselves of their skills. Caceres crew won
a role on the Memex program funded by the
Pentagons Defense Advanced Research Project
Agency (DARPA). Memex produces highly customizable search tools to better illuminate both
the dark and standard Web, and led to convictions last fall of human traffickers by studying
their activities online. Hyperion Gray has been
adding doses of articial intelligence to Memex
so it can mimic human interactions with websites, such as opening drop-down menus or
hovering over interactive elements. Memex
has been getting contracts from police forces,
though they cant say which, who want better
search tools to help catch the most heinous
criminals, says Caceres.
Towler and her partner, who now work
out of Concord, N.C., know they could make
a bundle in search. We just dont care. Wed
rather keep this project as something we
enjoy, something that isnt sleazy and provides
an important service for the community,
Caceres says.

FINAL THOUGHT

True computer hackers follow a certain set of ethics that forbids them to
profit or cause harm from their activities. KEVIN MITNICK
50 | FORBES MAY 25, 2015

GADGETS
WE LOVE
BUG WITH
A PLUG

DAVID BENARDO

sophisticated tech to scan for weaknesses,

albeit on a much smaller scale.) Nevertheless,
PunkSPIDER initially spooked the security
police. Just before their February 2013 $10,000
Kickstarter campaign to fund the search tools
development, Caceres and Towler presented
their baby at the SchmooCon security conference in Washington, D.C. Caceres opened the
oor to questions, and, halfway through, one
of the attendees told him to get a lawyer. Without proper authorization from website administrators, such scans can potentially breach
the U.S. Computer Fraud and Abuse Act, as
security researchers have frequently warned.
Just weeks after the SchmooCon unveiling,
Caceres was contacted via e-mail by a member of the U.K. government team responsible
for securing a number of its Web domains.
They warned of exposing yourself to a huge
amount of risk for a relatively minor reward. ...
Please be careful as there are some very legally
hostile sites you will be probing. One company that owns proxy servers through which
the PunkSPIDER crawler has traveled claimed
to have been contacted by federal authorities
about the suspicious activity.
Towler admits they were scared. We
ended up talking to the Electronic Frontier
Foundation about it, how best to manage this,
how not to get arrested, adds Caceres. The
EFF, an advocacy group for an open Web, offered some advice on how to stay within the
connes of the law. It appears to have worked,
as Caceres has had no serious legal threats
since launch.
PunkSPIDER is part of a broader massscanning movement that includes tools such as
Masscan, Shodan and Critical.io that use brute
force to peel away the facade of security across
the Web. Meanwhile, Google, Facebook and
others have set up sizable bug bounty programs,
with prizes as high as $33,000 at Facebook and
$20,000 at Google. Caceres is also hopeful that
PunkSPIDER, by turning these aws up for free,
will be an even better deterrent to the vulnerability black market, where researchers are
selling previously unknown exploits to the highest bidder (sometimes crooks, sometimes law
enforcement) at prices as high as $100,000.

Vintage-car enthusiast
but wary of sinking
money into a
midcentury tank that
gets, like, 6 miles to
the gallon? Salvation
is at hand in the form
of the ZelectricBug.
Zelectric, a San Diego
gearheads playland,
retrots classic
Volkswagen Beetles
(those made from 1958
to 1966) with electric
motors, producing by
hand a vehicle they
modestly call retrofuturistic experiential
art on wheels. With
85 horsepoweryou
laugh, but its double
the originalsitll
easily drive highway
speeds for 80 to 100
miles on a full charge.
Bring your own Beetle
in for a $37,000
upgrade or buy direct
from Zelectric starting
at $54,000exhaustpipe splutter and Joan
Baez LP no longer
included.

THE FUTURE

OF HEALTH CARE
BEGINS WITH HELPING TO

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Whats ahead for health care? Lots of people debate it, yet real
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optum.com

SMARTER, SHARPER
WORKPLACES WITH
VIDEO INTELLIGENCE
You do not normally hear the terms business intelligence and video surveillance
used in the same sentence. However, things have changed, and organizations are
starting to look at video data captured by surveillance systems as another source
of business insight. Why? The quality of surveillance video has become sharper.
Surveillance systems have become smarter. Total cost of ownership has decreased.
Today, the latest video surveillance systems can deliver outcomes that extend far
beyond security to the bottom line, and they are now poised to change the ways
organizations do business. Simply put, video surveillance has come to big data.
Jon Cropley, a video surveillance industry analyst at IHS, says the function
of video analytics has been primarily limited to security as a means to
constantly monitor footage and alert personnel when a suspicious event
occurs, thereby both predicting and preventing security incidents. However, its only recently that the industry has begun to modernize and leave
low-resolution analog cameras behind.
Analog systems were the norm until around 2007, mainly because highdefinition systems had high costs associated with storage and bandwidth,
and that kept the industry lagging, says Avigilons Bryan Schmode,
Chief Operating Officer at the Vancouver-based business intelligence and
security solutions company. When we introduced
our high-definition solutions, we changed all that.
ity solutions,
Avigilon provides end-to-end security
leading the industry in its innovativee use of
technology since its introduction of the industrys
first 11 MP camera in 2006. Its patented High
Definition Stream Management (HDSM) technology enables customers to enjoy the benefits of
HDsharpness and claritywhile shedding the
cost burden of storage and network bandwidth
that HD normally brings with it.

Analytics goes beyond that as well, says Avigilons Chief Technology

Officer, Dr. Mahesh Saptharishi. Intelligence through analytics converts
a sensor platform from being a passive observer of the physical world, into
a means of interacting with your physical environment in a very different
way. In the smart workplace of the future, he says, with cameras and
sensors dedicated to digitizing and understanding the physical world,
collaboration is a seamless experience. All meetings and interactions
can be recorded and indexed on-demand, and the physical and cyber
worlds are equally and jointly searchableso it will be a simple matter
to pull up last weeks strategy session and see exactly what was discussed
or written on the whiteboard. So with video analytics, the goal is
to make the physical environment a sensory and
computational extension of its occupants.

Video content analysis

brings information
from the physical world
into the realm of big data.

Avigilon combines the clarity of HD and the insight

from analytics to deliver an extremely powerful solution for security and business. Cropley agrees that
many of the algorithms developed for security can
serve a dual purpose: the algorithm that could be
Bryan Schmode
used to alert authorities to loitering vandals in a city
Chief Operating Officer,
Avigilon
also works to alert the sales staff to the lingering
customer in need of assistance.The challenge, he says,
is in getting organizations to understand that much
of their existing video security infrastructure can be applied to service
Video content analysis brings information from the physical world into
business objectives as well.
the realm of big data, says Schmode. Theres a tremendous opportunity
to impact business outcomes and enhance decision-making. Video
analytics, for example, could allow brick-and-mortar stores to measure
and monitor customer behavior in real timejust as their online counterparts already do. It could enable workplaces to analyze employee gait
and posture to provide an objective measure of morale and productivity.
We might see shipping facility managers, those responsible for keeping
loading times low, rerouting traffic when their video analytics alerts them
that queues are too high, or retail staffing reallocated to assist customers
whose location and behaviorcaptured by video surveillancepredicts
they will be important and significant buyers.

Analytics solutions can make use of existing camera infrastructure, even

bumping up images from analog cameras to a higher quality resolution.
Return on investment can be almost immediateas much as $800,000
within 90 days, in the experience of Chad Gordon, an integrator at Blue
Violet, an Avigilon partner.
The whole goal is to make an existing paradigm more efficient, solving
problems and creating a clearer ROI, says Saptharishi. All with the
intent of helping the customer make better, faster decisions, and putting
more money in their pocket.

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TECHNOLOGY
THE FUTURE OF WORK

Nice Guys
Hire Better
High-flying tech companies face
constant staffing challenges.
Airbnbs process kills the chaos.

AFTER GRADUATING from college in 2005,

graphic designer Joe Gebbia traversed the East
Coast, hunting for a job. Despite obvious talents,
nobody wanted him.
Now the cofounder of Airbnbthe sharing economy icon expected to raise money
soon at an astounding $20 billion valuationis a
34-year-old billionaire. Gebbia has been rethinking how his rm approaches hiring.
Last quarter Airbnb got 50,000 applications for just 300 jobs. Expand a business that
fast and its hard to keep the little stuff running well. (Dig back far enough on the career
site Glassdoor.com and theres a post by a
disappointed Airbnb job-seeker recounting a
series of disorganized Skype calls with recruiters, in which not a single one looked at
my rsum.) Big salaries and lavish perks are
required to mask the reputational damage.
Gebbia began feeling uneasy about the companys HR blind spot in 2011, when Airbnb
surged from 50 employees to 500. Job interviews werent happening on schedule. And
when they nally took place, strong prospects
were left in limbo for weeks. Candidates were so
irritated that when Airbnb nally did make job
offers only 50% to 60% said yes. (Most companies aim for rates of at least 75%.)
So Gebbia pushed the old-fashioned virtues
of timeliness, clarity and courtesy. Everything
at Airbnb is a continuation of what its like to be
a guest in somebodys house, he says. We think
about how each stage makes people feel.
Step into the recruiting quadrant of Airbnbs
big, open-plan workspace and the rst thing you
see is a 10-foot-long storyboard showing the ten
key stages of hiring. (Two of Airbnbs founders graduated from the Rhode Island School of
54 | FORBES MAY 25, 2015

Design, so they create Walt Disney-style storyboards with the same zeal that management
consultants have for PowerPoint.) Each stage
shows the steps to be taken and a few words
about candidates desired mood. Terms such as
prepared and feeling loved abound.
Its no longer tolerable for Airbnbs interviewers to postpone candidate reviews until
weeks after the in-person interviews. Wellthought-out decisions within two or three days
are mandated. A cheery tone helps, too. Airbnb
now pairs each candidate with a recruiting
coordinator: a well-paid, amiable staffer who
ensures that the small moments go well, such as
an e-mail heads-up about parking directions.
Something as simple as Airbnbs eagerness to
bring him a glass of water before a key interview
made a big impression on Matt Ziskie, a global
travel manager. He joined within the past six
months. But not every gesture pays off. Recruiter Laura Terheyden recalls sending one star
engineer a custom-designed Airbnb onesie for
his infant son. I got a lovely thank-you note, but
he chose to work somewhere else, Terheyden
ruefully recalls.
Overall, according to Jill Riopelle, Airbnbs
head of recruiting, the storyboarding exercise
underscored the importance of moving briskly.
Airbnbs job-offer acceptance rate for engineers
has climbed to 80%, the kind of gure that helps
the company win tussles with the likes of Twitter and Uber. F

Airbnb cofounder
Joe Gebbias
formula for wooing
recruits: custom
onesies and prompt
thank-yous.

TIMOTHY ARCHIBALD FOR FORBES

BY GEORGE ANDERS

ENTREPRENEURS
ALTERNATIVE FINANCE

Kabbage CEO Rob

Frohwein wont give you
a loan just because you
have a lot of Facebook
likes, but it helps.

The Six-Minute Loan

Banks still arent making enough small-business loans, so Kabbage is
quickly filling the voidat crazy high interest rates.

hen Jennifer Kirk, who

owns Posh Puppy Boutique, a pet grooming and
supply shop in Rocklin,
Calif., had an opportunity
to expand her business last year, she turned rst
to her bank, which made her wait three weeks
before rejecting her loan application. Then she
learned about Kabbage, which let her apply

56 | FORBES MAY 25, 2015

onlinelinking directly to her bank, PayPal

and QuickBooks accounts (as well as her social
media feeds)and then ran an automated program to assess her creditworthiness.
Six minutes later she had an answer: She
was approved to borrow up to $50,000 on a sixmonth loan, and she could transfer part or all of
those funds to her PayPal account whenever she
needed them. The money was instantly avail-

EVAN KAFKA FOR FORBES

BY DARREN DAHL

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ENTREPRENEURS ALTERNATIVE FINANCE

able to me, says Kirk. But at a pricean annual
percentage rate of about 27%.
Today Kabbage offers borrowers lines of
credit for as much as $100,000, with loans payable over six months. The average line of credit
is $25,000, and the average borrower takes seven
or eight loans a year, totaling $50,000. Since its
start in 2009, the company has lent more than
$750 million to small businesses, and it expects
to lend $1 billion in 2015. It also expects to be
protable this year, with revenue exceeding
$100 million, up some 200%.
Those numbers put Kabbage among the
leaders of the increasingly crowded eld of
alternative lenders, says Smittipon Srethapramote, a vice president at Morgan Stanley, who
researched the space prior to the initial public offering of OnDeck, a Kabbage competitor.
Its well-known that banks have pulled back
from making loans to small businesses since the
recession, Srethapramote says. Kabbage and
other lenders have lled the void. Not unlike
Uber and Airbnb, they have created a largely unregulated industry that is making a lot of money.
The seeds of Kabbage, founded in 2008 and
based in Atlanta, were sown by Rob Frohwein,
an intellectual property lawyer. Now CEO, Frohwein saw how much data were becoming accessible via the cloud and that companies like eBay
and PayPal were providing application programming interfaces, or APIs, that a lender could use
to get real-time access to a business customertransaction data. Kabbage, Frohwein says, put
the two concepts together.
Before starting the company, he called
Kathryn Petralia, who worked for a nancial
services rm and was an expert in credit and
payments, and Marc Gorlin, a serial entrepreneur with venture capital connections. In 2009
the three cofounders created a plan to nance
Kabbage with venture capital, but a road trip to
California proved fruitless. Instead, they raised
$500,000 by issuing a convertible note, and after
hiring employees and leasing office space, they
got $1.5 million from a group of 45 angel investors. They made their rst 100 small-business
loans in 2010. That December Kabbage closed
its rst venture round and has since developed
relationships with Silicon Valley Bank, Victory
Park Capital and now Guggenheim Partners to
provide the capital it loans out.
One reason Kabbage has been able to attract
capital is its loan default rate. Even though it can
assess applicants in minutes and never demands
58 | FORBES MAY 25, 2015

THE ALTERNATIVE BANKERS

The so-called alternative loan industry has exploded to take advantage of a
gap in small-business funding. These options tend to be more automated,
more convenient and more expensive.
CASH ADVANCE/SHORT-TERM ONLINE LOAN
A variety of rms lend or advance cash against a companys revenue or credit
card transactions. The money is repaid through incremental payments extracted
automatically from a companys bank account.
Benets: Fast turnaround, poor credit scores not a problem.
Drawbacks: Higher cost, shorter terms.
Examples: CAN Capital, Merchant Cash & Capital, OnDeck.
Typical cost: Fees can range from 30% to 200% APR.

LINE OF CREDIT
Unlike a term loan, a line of credit can be drawn against when the need arises.
Benets: Interest is paid only on the amount taken; cash can be available quickly.
Drawbacks: The line can be revoked or changed at the lenders discretion.
Examples: OnDeck, Kabbage, Headway Capital.
Typical cost: 7% to 80% APR.

TERM LOANS
Similar to bank loans.
Benets: Longer terms and larger amounts are available.
Drawbacks: More expensive than bank loans.
Examples: Funding Circle, Lending Club, Fundation.
Typical cost: 6% to 30% APR plus fees.

CROWDFUNDING
A way to raise money from lots of small contributors.
Benets: When it works, it can be straightforward.
Drawbacks: Can be as challenging as traditional channels.
Examples: Kickstarter, Indiegogo.
Typical cost: 4% to 5% plus processing fees.

MARKETPLACES
Small-business lending marketplaces gather multiple options in one place.
Benets: Easy comparisons, ability to pitch multiple lenders at once.
Drawbacks: Process can take longer because marketplaces dont lend their own capital.
Examples: Lendio, Fundera.
Typical cost: Lenders pay nders fee.

a personal guarantee, Kabbage says its loans

are as likely to be repaid as those of traditional
banks, which routinely take weeks to make a
decision. Frohwein says Kabbage targets established businesses rather than startups, with
its automated model assessing three factors:
capacity to repay, character, and the consistency
or stability of the business. We believe we get to
know a small business better by being connected
to their data sources electronically than any loan
officer can do by sitting down at a desk with the
borrower, says Frohwein.
He says Kabbage incorporates nontraditional
metrics, such as a companys Twitter or Facebook followers, as well as the online reviews
its customers post, as a way to round out an
applicants story. You wont get a loan because
you have 7,000 likes on your Facebook page, he
says. But we might increase the cash available
to you if you have an active social media follow-

ENTREPRENEURS ALTERNATIVE FINANCE

ing because it establishes the credibility of your
business with its customers.
Before she connected with Kabbage, Jennifer Kirk went to her local bank, where she
had a business checking account and a personal
savings account, and where it took her several
hours to ll out a loan application. She had to
apply in person, she had to supply three years
of tax returnswhich showed she had made a
prot every yearand she had to produce copies
of her husbands pay stubs. When the bank ran
a credit report, she says, her score topped 700.
Three weeks later the bank responded: denied.
They said I was too risky, Kirk says.
But its rarely just about risk. Brock Blake,
CEO of Lendio, an online marketplace that connects small businesses with an array of lenders,
says banks make more money with larger loans
to larger organizations over longer periods. The
result, Blake says, is a small-business funding
gapespecially for amounts in the $25,000 to
$55,000 range. And thats the void alternative
lenders like Kabbage target. This has led to a
booming industry, with new players arriving all
the time, from startup peer-to-peer lenders like
Prosper to spinoffs from companies like Amazon, PayPal and Square. We like to joke that the
Girl Scouts of America are about to give up on
cookies to get into the small-business lending
business, says Frohwein.
With all of that credit available, many businesses have gotten in over their heads because
they didnt realize the full price they were agreeing to pay. The fact that the loans are for short
terms can disguise how expensive they are.
Ami Kassar, CEO of MultiFunding, a loan
broker based near Philadelphia who helps businesses obtain alternative loans when he thinks
they represent the best option, says alternative
loans typically have an annual percentage rate
of 40% to 60%. Jay Goltz, an entrepreneur and
small-business advocate in Chicago, was recently asked to evaluate alternative lenders on behalf
of the city. He contacted several, posing hypothetical borrowing scenarios, and was shocked
by what he heard. Some of these guys make
used-car salesmen look good, says Goltz, who
calculated that one lender was charging as much
as 150%. I dont know how any business could

grow fast enough to pay off that kind of loan.

Still, Goltz says alternative loans can work.
If you have a big opportunity, and you need
to buy equipment or inventory that will help
your business grow and return a positive ROI,
he says, then a loan like that can make sense.
Srethapramote of Morgan Stanley says he was
surprised to learn that two of the top small-business groups that turn to OnDeck are doctors and
dentists. These are professionals who would
rather pay a premium for the convenience of applying for a loan online and getting funded in a
day or so, he says.
Frohwein says that Kabbage prides itself on
being transparent about the cost of its loans,
which carry an average annual percentage rate
of 40%. He said the rates range from 1.5% to
about 20% for the rst two months of the loan,
depending on a variety of risk factors and how
long the cash is kept, and then drop to 1% for
each subsequent month. He adds that Kabbage
doesnt charge hidden origination or maintenance fees and that customers pay interest only
on the money they borrow and can pay less if
they pay back their loans early.
After Jennifer Kirk was approved by Kabbage, she decided she needed about $30,000,
which she took with several withdrawals. She
used the money to open a pet-grooming salon to
supplement her retail operation, leasing space,
buying new equipment and hiring additional
employees. Kabbage typically charged her 2%
of the loan amount for each of the rst two
months, and then 1% for each of the additional
four months, for what Kabbage says is an annual percentage rate of about 27%. While APR
is a consideration, most of our small-business
customers are focused on the return theyll get
from a loan, says Frohwein. Also, over time we
drop the rates and increase line availability for
customers that demonstrate positive repayment
behavior.
Kirk acknowledges that getting credit was
expensive but says it was an easy decision given
that no bank would lend her money to expand.
In fact, she says, her revenue is up 21% so far
this yearwith the rst months boost in sales
enough to cover the cost of her capital. I needed
money to make money, she says.

FINAL THOUGHT

Credit comes from the Latin credere, to believe, for credit is the belief that
the money youre borrowing will someday be returned. ROBERT ROWLAND SMITH
60 | FORBES MAY 25, 2015

TRENDING
What the 70 million
Forbes.com users
are talking about.
For a deeper dive go to
FORBES.COM/
ENTREPRENEURS

PERSON

JOE WANG
The turnaround
vet has a new
challenge: Turn tiny
TreeHouse Interactive,
a relationshipmanagement company,
into a giant. Hes
sanguine: Ive grown
companies to over $100
million in revenue more
than once.
COMPANY

RISE ART
Its bringing a try
before you buy policy
to what you hang on
your walls. Whether
itll make even a
pointillist pinprick in the
$57 billion art industry
is an open question.
IDEA

THE ON-DEMAND
ECONOMY
Looking for extra
income? You might
be able to rake in
$200,000-plus with
Uber, but 56% of online,
on-demand workers
make $40,000 or less
annually.

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1 PROMOTION

THE LINDE GROUP

The Linde Group is the worlds largest gases and engineering company. Now it is also one of the top 500
companies on the 2015 Forbes Global 2000 list. Linde is renowned for its quality, innovative product solutions
and close ties with its customers. In an interview with Forbes Custom, CEO Dr. Wolfgang Buechele explains
how the company intends to sharpen its unique profile and further extend its market leadership.

We believe in talking to our customers

to find out exactly what they need, and
then turning those needs into solutions
that fit to perfection.
DR. WOLFGANG BUECHELE
CEO OF THE LINDE GROUP

Dr. Buechele, how would

you describe Linde in three
sentences?
The Linde Group is a world-leading technology company specializing in gases and engineering. Over its 135-year history, the group
has built up vast and proven experience in
the planning, procurement, construction
and operation of gas-generation and processing plants. In addition, Linde is a trusted

Linde technology in modern

food production. Today,
cryogenic cooling and
freezing is a proven process
that helps maintain quality.

supplier of gases to customers of all sizes

across almost all branches of industry, trade,
research, science and medicine.

As the market leader, you face stiff

competition from around the globe.
What makes a prospective customer
choose Linde?
Our employees show an exceptional level
of dedication, expertise and passion for our

company. Its this energy that has made us

a true global player in the gases and engineering business. This is something that our
customers also appreciate. In the future, we
want to harness our innovative drive even
more effectively to create customer-centric
solutions and applications. We believe in talking to our customers to find out exactly what
they need, and then turning those needs into
solutions that fit to perfection.

PROMOTION 2

Welding and cutting are

among Lindes top strengths.
Linde products, hardware and
services make manufacturing
processes more efficient and
environmentally friendly.

FAST FAC TS

The Linde Group

Active in more than 100
countries worldwide
r
3FWFOVF US$18.1 billion
r
0QFSBUJOH
QSPU US$4.1 billion
r
/VNCFS
PG
FNQMPZFFT 65,500
r

#VML
EFMJWFSJFT
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ZFBS
>2,000,000
r

1MBOUT
DPNQMFUFE
BSPVOE

UIF
HMPCF >4,000
r

1BUJFOUT
TVQQPSUFE
XPSMEXJEF

1.4 million

customerswhich products and services

deliver real added value, thus setting us apart
from the competition. That is ultimately what
it all comes down to, and therefore is the guiding force for our actions.

What can we expect from Linde

in the future?
Linde is working on a host of forward-looking
projects. We want to drive the expansion of
hydrogen infrastructure and make zeroemissions mobility a reality todaynot just
a dream for the future. On a different front,
we are already working closely with customers on the development of resource-efficient
applications: for example, in the steel and
chemical industries. In addition, our intelligent valve will enable us to improve our
logistics processes and further enhance convenience and safety levels for our customers.

In other words, the customer is critical

to everything you do. What exactly
does that entail?

Linde is also active in the medical

gases business. With the acquisition
of Lincare, you took on the U.S. market
leader in the homecare sector. What
are your plans in this market?

More than ever, we have to put ourselves in

our customers shoes and ask ourselves every
day what they actually want and how we
as a company can respond to those needs.
We need to find out what we can offer our

Healthcare is a global growth market that is

being shaped by changing demographics.
An aging population means the number of
patients with chronic respiratory conditions
in particular continues to riseand with it

the need for medical care and support services. Acquiring Lincare in 2012 put us in an
excellent position in the U.S. market. We can
use this as a springboard to further develop
our business model on a global scale. We are
firmly committed to innovating for the benefit of our customers. After all, our products
have the potential to improve quality of life
for millions of people.

What does Lindes listing as one of the

top 500 companies on the 2015 Forbes
Global 2000 mean for you?
Its certainly an honor and an accolade. But it
is also an incentive. Its easy to move up, but
we want to stay at the top in the long term
and be the undisputed number one in our
industry. We also want to leverage our position of strength to drive further growth. Q

For more information, visit

linde.com

INVESTING
FIXED INCOME

An Imminent Disaster For

Bondholders?
Loomis, Sayles Dan Fuss has almost $5 billion positioned for a
credit market tornado. Read this before putting money into bonds.
BY WILLIAM BALDWIN

hat insanity has overtaken bond buyers? Vainly

seeking safety in diversication, they gobble up
international bond funds
with dismal yields. They chase performance,
not realizing that momentum works in reverse
in xed income. Desperate for yield, they sit still
for rotten deals from junk bond issuers.
This is a disaster waiting to happen. Daniel
Fuss, comanager of the Loomis Sayles Bond
Fund, is ready for it. Hes got $4.8 billion of ultrashort bonds burning a hole in his pocket.
The fund is extraordinary in two ways. Since
Fuss opened it 24 years ago, this mix of junk
and high-quality bonds (with a sprinkling of
convertibles) has delivered a 9.7% compound
annual return. That means he turned a dollar
into $9. The return is ahead of the return on either a pure junk or a pure quality index and two
points a year ahead of a 50-50 blend.
The other noteworthy aspect of the fund is
how far it veers out of the baseline. Most bond
managers choose to (and, in the case of index
funds, have to) stay close to the market composite. Fuss and a changing cast of comanagers

IF HISTORY REPEATS
THE YIELD JUST RETOUCHED A 2% LOW. OMINOUS.
16%
14
12
10
8
6
4
2
0
1871

TREASURY YIELDS1

1900

1925

1950

1975

2000 2015

YIELD ON 10-YEAR U.S. TREASURY BONDS. SOURCE: ROBERT SHILLER, IRRATIONAL EXUBERANCE.

64 | FORBES MAY 25, 2015

(currently Matthew Eagan and Elaine Stokes)

arent afraid to stick out, at the moment with
an extremely defensive posture. That is costing
their investors money in the short term.
The funds 20% near-cash position earns
nothing. Another 36% is in bonds due in ve
years or less, and those bonds earn next to nothing. Result: Over the past year the $24 billion
fund has eked out a return of 1.8%, three points
behind the Barclays U.S. Aggregate Bond Index.
Why ght the tape? Because, Fuss gures, the
probability of an interest rate rise is 80%. A correction would allow him to make up lost ground
by acquiring cheap bonds from desperate sellers.
If the weather forecaster says conditions
exist for a tornado, Im going to be in the shelter, says this midwestern native. We have
built a buying reserve. Well be happy we have it
should a tornado land in the area.
Fuss has seen plenty of bad weather during
his 57 years in the credit business. But Im basically an optimist, he says, recalling the portfolios 18-year average maturity in its early days.
For this optimist the funds recent 6.6-year maturity represents a dramatic shift from risk-taking to preserving capital. (That capital belongs
primarily to institutions. In 1996 Loomis opened
the fund to retail buyers, at an expense ratio of
0.9%; among the latter are a lot of Fuss relatives,
including a teenage great-grandson.)
Around the globe savers are nonchalantly
absorbing debt issues that look absurd to people
old enough to remember what a bond bear
market looks like. Mexico just oated a security
due in 2115 and paying 4% in euros. A country
issuing a 100-year bond in another countrys
currency? Fuss asks. History has been unkind
to that kind of transaction.

Bond manager and

sometime optimist
Dan Fuss.

JASON GROW FOR FORBES

MAY 25, 2015 FORBES | 65

INVESTING FIXED INCOME

with such terms, Fuss says. They keep weak borrowers on a short leash.
Fuss says he learned a lot in his rst job out of
the Navy in 1958, working for Arthur B. Kohasky at the Wauwatosa State Bank in Wisconsin.
Kohasky ran the bank for three decades and,
well into his 90s, would haunt the loan department looking for signs of sloppy underwriting.
He made it his business not just to know his corporate customers but to help them make a sale if
that was necessary to collect on a loan.
Fuss takes risks on borrowers, but only after
nitpicking analysis of the sort that would have
made Kohasky happy. It helps that Loomis,
Sayles (a Natixis subsidiary of which Fuss is vice
chairman) has 49 credit analysts on staff. They
had Fuss buying bonds from Ford when the
market assumed that Ford would join General
Motors in bankruptcy court. He got Irish bonds
at fat yields during the meltdown. Not every
such speculation works out. Fuss admits to acquiring, before the nancial crisis, some of the
doomed preferreds from Fannie Mae.
Hes adding few junk credits to the collection
now. Are you getting paid fairly for the risk? Absolutely not. Credit standards have weakened,
he says.
After stints in money management and nancial research, Fuss joined Loomis as a portfolio
manager in 1976. It was in the middle of the worst
decade ever for bonds. Fuss saw a bottom too
early, acquiring long bonds for clients in 1979. But
he still had some buying power
two years later when the U.S.
Treasury slapped a 15% coupon on bonds going to auction.
Advice to bond buyers from Dan Fuss.
That auction, in SeptemDont trade. Even institutional buyers get killed by bid-ask spreads.
ber 1981, represented a historic
Only exception: coupon Treasurys.
turning point in interest rates.
Avoid junk. Especially the covenant-lite stuff that is coming out now.
This year, as the yield on 20-year
Buy TIPS direct. If you must own ination-protected bonds (yields
Treasurys dipped to 2%, there
are meager), buy at a Treasury auction to avoid the nasty spreads.
may have been an epochal turn
Stay in North America. Japanese and European yields are ridiculous.
in the other direction.
Beware ETFs. The liquidity of exchange-traded funds will evaporate
At 81 Fuss has 20 years to go
in a crash if they own junk or emerging market bonds.
to surpass his Wauwatosa idol in
Hold some cash. Put it aside to use in the next nancial crisis.
longevity. Hes patient. So what
Look for discounts. A corporate bond trading at 90 cents on the
if cash yields nothing? You grit
dollar wont be called away in the rebound.
your teeth and have lower income for a while, he says.

Then there is the avid buying of developedmarket government bonds, despite low (in some
cases negative) yields. Investors have plunked
$36 billion into the Vanguard International
Bond Index fund, which has three-fourths of
its assets in Japan and Europe. They may have
persuaded themselves that this kind of diversication gives them shelter from a bond crash. Or
worse, they may think that the hot performance
(total return over the past year: 7.5%) will go on.
Momentum in bonds? Banish the thought,
says Fuss. When bond prices go up, yields go
down. That doesnt raise your expected return,
it lowers it. The Vanguard fund yields 0.8%. This
pathetic number, not the past performance, is
the best gauge of future returns.
In the U.S. market irrational exuberance is
most visible in junk. Junk bonds can be rewarding during economic expansions. But even in the
best of times they are tricky because a corporate
borrower usually reserves the right to call in a
bond early. It will do that if its business improves
and it can renance at a lower rate. For the investor its a lopsided proposition. Tails you lose
(in a default), heads they call the whole thing off.
Add to call risk another problem that has
crept into junk of late: Exploiting the publics
thirst for yield, corporations are issuing bonds
with covenants that allow more debt to be added
atop the junk issue and/or give the borrower
free operating rein as it slides into insolvency.
Banks lending to corporations do not put up

SEVEN PILLARS OF WISDOM

FINAL THOUGHT

Why should we look to the past to prepare for the future? Because there is
nowhere else to look. JAMES BURKE
66 | FORBES MAY 25, 2015

GO
CONSIDER
STOP

TECHS
IN EFFECT
Pre-IPO bets on
Facebook, Twitter and
Yelp paid off for Kevin
Landis $190 million
Firsthand Technology
Value Fund. Much of
his focus is on private
companies, but here he
casts his gaze upon the
public markets.

NETFLIX
Stock goes for 145
times earnings, so you
cant make a valuation argument, but to
be on the right side
of cord-cutting and
streaming, its the
purest way to play.

ROCKET FUEL
Ad shift to digital and
mobile is powerful, but
investors have grown
skeptical. Rocket Fuel
shares have been cut
in half this year, but it
has good tech for those
who want in. Not for the
faint of heart.

1990S TECH STARS

Microsoft, Intel, HP and
their ilk had great success and make investors
comfortable. The risk
isnt that youll lose
everything; its that your
money will be stuck in a
holding pattern.

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INVESTING
KEN FISHER // PORTFOLIO STRATEGY

FIVE MARKET TRENDS

YOU CAN BANK ON
CONTINUING last months format,
here are common investor questions
from this month:

staples, 10% industrials, 8% energy and 11%

everything else. Here are ve fresh stocks I like
now to help you toward that end:

With this bull market now six years old,

isnt it time to be cautious? Its caution
time when few worry. Bull market length
says nothing, by itself, about the future.
See my Apr. 14, 2014 column online. Only
excess optimism or a gargantuan, unexpected economic problem can derail bull
markets. To date we have neither.

While long down on energy because of oils

oversupply, its still 8% of the world stock market.
You need to own some, just in case. You want
what does well in good and bad basic oil realities
implying a big market, yet governmental protectionwhich scream for CHINA PETROLEUM & CHEMICAL
(SNP, 94), also called Sinopec. Its huge, cheap and
should sport a 4% dividend yield this year.
Ive long loved good drug stocks for this bull
market. Irelands ACTAVIS (ACT, 283) is lesser known
but still a major, basic, second-tier branded
and generic player with a wide product portfolio, $23 billion in salesoperating in some 100
countries. It was put together via multiple acquisitions and has yet to hit real protabilitybut
it will. The stock is of ever more institutional
quality and is reasonably valued compared with
what it should earn in a few years. Buy it before
it soon changes its name to Allergan.
Higher end, with fatter gross margins (which
I love), glitzier proprietary products and higher
organic growth is AMGEN (AMGN, 158). It sells at 16
times my 2015 earnings estimate. With these
two druggies a small portfolio can largely emulate the broader drug-stock waterfront.
Also fat, gross-margined but German (and I
love the whole continent right now) with high
quality and moderate growth at a reasonable
price is enterprise software giant SAP SE (SAP, 76).
As this cycle lengthens and capital expenditures
increase, SAP should shine. It sells at 17
times my 2015 earnings estimate with a 1.8%
dividend yield.
Another cheap capital-expenditures opportunity? Below where it was 8 and 16 years ago, Swiss
ABB (ABB, 22) is a $40-billion-sales-size, classic latecycle stock, strong in robotics and industrially
oriented power transmission systems globally.
With a few breaks this could easily hit $40 this
bull market. It sells for 15 times my 2015 earnings
estimate with a 3.5% dividend yield. F

Could a summer Supreme Court voiding of the Affordable Care Act be a

huge disaster? Could! It would take the President trying to end-run the
court by executive order, which could create a constitutional crisis, which
would have bigger implications beyond health care. Shy of that, ACA is
likely a discounted stock market speed bump as it has been almost from its
beginning.

BY ITSELF, BULL MARKET LENGTH

SAYS NOTHING ABOUT THE FUTURE

THOMAS KUHLENBECK FOR FORBES

I read so much about the Fed raising rates this year. Is that a problem? No!
Two reasons: First, you read so much about itso its surely largely priced
in already. No surprise there. Second, we have a very long history of initial
Fed interest rate hikes, and they say simply nothing about future stock returns statistically looking out 30, 90, 180, 360, 1,080 or 1,800 days.
With foreign leading U.S. stocks now, should we dump our U.S. holdings?
Last year folks wanted to do exactly the reverse because the U.S. led. Same
logic! My Feb. 9, 2015 column detailed why that was stupid. Those who
dumped foreign are whipsawed now. Chasing heat gets you burned. Think
global always, and unless you think youre a lot smarter than everyone
else, in which case you wont take my advice anyway, never let yourself
vary too darned much from the worlds big weightscurrently 52% U.S.,
23% Europe and 25% everything else. The world is your friendmore
diversication.
Does that same advice apply to sectors? Absoposilutely! Sectors: 22%
nancials, 14% tech, 13% consumer discretionary, 12% health care, 10%
MONEY MANAGER KEN FISHERS LATEST BOOK IS BEAT THE CROWD
(WILEY, 2015). VISIT HIS HOME PAGE AT WWW.FORBES.COM/FISHER.

68

FORBES MAY 25, 2015

Its where
youll make pancakes at 2 in the morning.
Its where youll perform epic shower concerts.
Its where youll tell her shes gonna be a sister.
Its where youll long to be when youre anywhere else.
But first you have to find it...

Search millions of homes for sale and for rent

at zillow.com or on our family of apps.

2015 Zillow, Inc. All rights reserved.

INVESTING
JIM OBERWEIS // SMALL STOCKS

RADICAL CHANGE is a fact of life

of the analytics equation provided by Google
for anyone in the retailing and adverand Yahoo. In February ad giant WPP signed
tising sector these days. You can thank a strategic partnership with comScore and
technology, which has improved busiwill acquire as much as 20% of the company.
ness prospects and efficiency and, at
With sales and EPS growth of 17% and 32%,
the same time, made it intensely more
respectively, shares trade for 26 times my
competitive. This month I am focusing forward estimate of $2.
on small-cap companies in advertising
For retail brands my top pick is Manhatand retailing that are capitalizing on
tan Beach, Calif.-based SKECHERS USA (SKX, 90),
a maker of branded lifestyle footwear. The
these sweeping changes and seizing
company surprised analysts in its last two
opportunities for rapid growth here
quarterly reports with forecasted sales well
and abroad.
ahead of expectations and a backlog up midBased in Los Angeles, THE RUBICON PROJECT (RUBI, 17) developed
technology to automate the buying and selling of advertising. Rubidouble-digits over last year. Demand is parcon reduces the cut of intermediaries and simplies the exchange
ticularly robust abroad: International sales
of digital advertising through a proprietary platform that matches
are expected to grow from some 35% of rev700-plus premium digital publishers with more than 100,000 digienues today to 50% over the next few years.
tal buyers of advertising space, using a real-time bidding auction to
Skechers is a powerful brand with a signioptimize for price and advertiser return on investment. Although
cant global expansion under way, and its
the ad-tech space is fragmented and competitive, few are as tightly
shares understate the companys true value,
integrated with major publishers as Rubicon is. Additionally, Rubicon particularly after you factor in the $5.54 per
is viewed by some publishers as the non-Google option (competitor share in cash. The stock trades for 18 times
DoubleClick is owned by Google). With the real-time bidding market
my forward EPS estimate.
estimated to grow 50%
My last pick is Canadian
annually to $20 billion by
large-format movie compaIMAX SHOULD SEE
2017, Rubicon is strateginy IMAX (IMAX, 37), known for
BLOCKBUSTER
GROWTH
its immersive motion piccally positioned between
IN CHINA
ture technologies. IMAX
buyers and sellers to grab
theaters can be found in
some of this money. Shares
62 countries, with almost two-thirds of the
trade for 38 times my forward estimate of $0.47, for estimated growth
companys box office revenue derived from
of 48% in revenues and 161% in EPS.
international sales. IMAX has more than 900
The eyeball migration from TV to online media is also driving
theaters in operation and nearly 400 in backbusiness at digital-analytics rm COMSCORE (SCOR, 52). Headquartered
in Reston, Va., comScore is, at its core, a subscription-based research
log. China is a big driver for IMAX, where
company that tracks the online behavior of more than 2 million users. it is growing at a 40% rate. Within the U.S.
In 2012 comScore introduced a cutting-edge digital advertising anathe overall box office in 2015 should benet
lytic called vCE (validated Campaign Essentials), which competes
from the wealth effect of lower gas prices
directly with Nielsens Online Campaign Ratings (OCR). Last year
and a better lm slate compared with last
comScore announced that Google would test vCE technology in its
year, including features like Fast & Furious 7,
DoubleClick ad server and that Yahoo has agreed to a similar deal.
Mission: ImpossibleRogue Nation, Avengers
With vCE growing at an estimated 35% annual clip, expect the rms
2 and the latest Star Wars lm. IMAX trades
growth to accelerate if, as we expect, vCE becomes an integral part
for 30 times earnings. In the next 12 months I
expect 25% revenue growth and 60% growth
JIM OBERWEIS IS PRESIDENT OF OBERWEIS ASSET MANAGEMENT AND EDITOR OF THE OBERWEIS
in EPS. F
REPORT. FOR MORE INFORMATION VISIT WWW.FORBES.COM/OBERWEIS.
70 | FORBES MAY 25, 2015

THOMAS KUHLENBECK FOR FORBES

CHANGE AGENTS
FOR YOUR PORTFOLIO

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PROMOTION | BUSINESS AVIATION

Business
Aviation
Propelling Productivity

WRIT TE N BY

TONY VELOCCI

Numerous studies and surveys have revealed that mid-level

employees are more often passengers aboard business aircraft
than C-level executives.
The explanation for this is quite simple: Companies are
discovering that business aviation is an essential business tool
that provides a host of practical advantages, if not a clear-cut
competitive edge. For example, teams of managers can travel
from headquarters to distant facilities for on-site decisionmaking. Moreover, companies can adjust travel itineraries in real
time, optimizing their ability to service clients and customers, as
well as respond to opportunities.

3 PROMOTION | BUSINESS AVIATION

A New Legacy of Business Jets

A crowded field of highly capable, state-ofthe-art business jets can fill this vital role for
enlightened, enterprising companies, but
one of the most widely anticipated is the
Embraer Legacy 500, which recently entered
service as the worlds most technologically
advanced midsize model. The airplanes
clean-sheet design sets the standards for
capability, affordability, comfort and reliability. With its $20 million base price, the aircraft
actually straddles the gap between the $16
million to $18 million midsize jet category and
the $25 million to $27 million super-midsize
jet category, even though it shares more in
common with the latter.
The Legacy 500 can transport eight to 12
passengers approximately 3,000 nm at Mach
0.80, or about 609 mph. It offers the best cabin
pressurization in its class6,000 feet when flying at 45,000 feet, which means greater comfort on long flights. Its main stand-up cabin is
equal in height (6 feet) and just 3 inches shy of
the length and width of the cabin of the moreexpensive Challenger 300, one of the supersize
jets with which it competes.
An added feature that passengers will
welcome is that the Legacy 500s fuselage
is equipped with 14 of the largest windows
in the more-expensive super-midsize class,
flooding the cabin and the lavatory with
ambient light and making it appear larger
than its actual dimensions. Furthermore,
the aircrafts 150-cubic-foot overall baggage
capacity is far larger than that of any midsize
jetand it exceeds the storage space available in nearly all other super-midsize jets.
In the cockpit, the aircraft is the first jet
in its class to replace conventional controls
with fly-by-wire. This technology enables
a smoother, more natural-feeling flight by
translating manual inputs from the pilot
electronically rather than mechanically.
This reduces pilot workload and creates a
smoother flight for passengers. The Legacy
500 also features next-generation avionics,
with four 15.1-inch high-resolution displays,
advanced power management and highefficiency, fully automated engines, not to
mention the Enhanced Vision System and
Head-up Display.

Thinking AHEAD
The Legacy 500s many safety and reliability
systems arent the only features that will provide owner-operators with peace of mind.
Embraer Executive Care (EEC)a comprehensive maintenance programcomplemented

Embraer Legacy 500

Embraer Legacy 500 interior

The Embraer Legacy

500 recently entered
service as the worlds
most technologically
advanced midsize model.
by the AHEAD (aircraft health analysis and
diagnosis) monitoring system, and maintenance tracking, performance and flight
operations software, provide all of the tools
to keep the jet ready to fly on command.
AHEAD consolidates aircraft information from onboard systems and web-based
databases, providing owner-operators with
prompt support, aircraft usage information

and the ability to anticipate scheduled maintenance. It also allows owner-operators to

estimate aircraft utilization, increase their
aircrafts dispatch reliability, optimize fleet
operation with up-to-date aircraft positioning, and automatically transmit aircraft data
en route to destinations for efficient troubleshooting and maintenance planning. The net
result is predictability and a business tool that
allows owner-operators to get full utilization
of the aircraft.
Of course, not all business travelers need
to fly across the country or the equivalent
distance nonstop, as the Legacy 500 can do.
In fact, periodic surveys by the National Business Aviation Association have shown that
many companies use a purpose-built business airplane to fly mostly into small community airports that are underserved or have no
scheduled airline service at all. Between 2007

5 PROMOTION | BUSINESS AVIATION

The HondaJet design innovatively positions

the engines on over-the-wing pylons, which
reduces drag at high speed and improves fuel
efficiency. It also allows for more generous
cabin space and passenger legroom. Another
innovation is the application of natural laminar flow technology to the design of the main
wing airfoil and fuselage nose, as well as the
use of a composite fuselage. These innovations
combined enable the jet to achieve a higher
cruise speed and the best fuel efficiency in its
class compared to competing models, according to Honda Aircraft.
En route to their destination, passengers
have state-of-the-art audio and video on
demand and control of an interactive 3-D
moving map at their fingertips. Passengers
can control lighting and electrically dimmable window shades at each seat via their
personal electronic devices. The HondaJets
baggage capacity (66 cubic feet) also is the
largest in its class, and an externally serviceable private aft lavatory is available. In the
cockpit, the aircraft is equipped with the
most sophisticated flight deck available in
any light business jet. It includes a Hondacustomized Garmin G3000 next-generation,
all-glass avionics system composed of three
14-inch landscape-format displays and dual
touch-screen controllers.
HondaJet is close to receiving final type
certification; first deliveries and entry into
service will follow.

A HondaJet in the delivery hangar

HondaJet pilot seat

and 2014, U.S. airlines reduced the number

of scheduled domestic flights by nearly 20%,
with midsize and small airports the hardest
hit, according to a study by the Massachusetts Institute of Technology.
Under these circumstances, a smaller jet
may provide the ideal air transportation solution, as in the case of Honda Aircraft Co.s
HondaJet Model HA-420. The Federal Aviation Administration (FAA) recently granted
this newly designed airplane a provisional
type certification.

HondaJet Rings In a
New Era for Light Jets
HondaJet, which currently is on a world tour,
is the newest member of a family of business
aircraft known as light jets. They offer the flexibility, efficiency and performance that many
companies and individual owner-operators
can tailor to their specific needs, particularly
for shorter, nonstop flights. But this airplane is
like no other light jet currently on the market.

NetJets: The Expert in

Transition Assistance

In the cockpit, the

HondaJet is equipped with
the most sophisticated
flight deck available in any
light business jet.
Within the last 12 months, the chief designer,
Honda Aircraft Company President and CEO
Michimasa Fujino, and the company received
two of the worlds most prestigious awards
for the jets innovations.
The $4.5 million, four- to six-passenger jet
is certified for both single-pilot and two-pilot
operation. It has a range of 1,180 nm, and it is
the fastest airplane in its class, with a maximum cruise speed of 420 kts., or about 483
mph. Its maximum altitude is 43,000 feet.

As appealing as the Legacy 500 and HondaJet are, even with their best-in-class features,
owning any type of business aircraft outright
isnt the ideal transportation solution for all
organizations and individuals. A substantial
number of organizations and entrepreneurs
are turning to NetJets to help them sell a jet
they already own so they can take advantage
of several NetJets turnkey programsranging from shared ownership and leases to jet
card services, where fliers purchase blocks of
time tailored to their specific needs.
NetJets provides such assistance in the U.S.
and Europe through its Aircraft Transition Services program, which the company started in
2013. The impetus for the program was the
growing number of requests from aircraft
owners who recognized the value of business aviation, but no longer wanted to own
an airplane, not to mention several of them.
They saw NetJets as a logical alternative to a
brokerand for good reason.

 
  


   

    

 

  !
 "#!
 
$ $#
%!
 
 
    


7 PROMOTION | BUSINESS AVIATION

NetJets manages more

than 300,000 flights
annually to more than
170 countries.

NetJets

Berkshire Hathaway manages and operates

the worlds largest and most diverse fleet of
private aircraft. It includes about 700 jets comprised of no fewer than 40 types. They range
from light jets, such as the Embraer Phenom
300, to large-cabin, ultra-long-range airplanes
such as the Bombardier Global 6000. At any
given time, it has a significant number of new
aircraft on order.

For example, NetJets will take delivery of

the first of 25 Bombardier Challenger 650 jets
as part of the companys Signature Series aircraft, with the option of purchasing 50 more.
Signature Series airplanes are new jets that
manufacturers have customized from design
through production exclusively for NetJets.
Enhanced features include advanced inflight entertainment systems and custom
cabin designs, as well as advanced cockpit
and cabin technologies to ensure maximum
safety, reliability and operating efficiency.
Were in the market every day, so we have
the expertise to support all of the requests we
receive, says John Odegard, senior vice president of whole aircraft sales at NetJets. Sometimes its a matter of taking someones airplane
as a trade-in and moving them into the fractional share program. In other cases, its simply

a matter of helping clients dispose of their asset.

We do it on a case-by-case basis according to
what makes the most sense for our customers.
As knowledge of the transition service
spread through word of mouth, NetJets
became more proactive, letting customers know about the specialized assistance it
could provide. For the last 12 months or so,
NetJets has been doing an average of one
transaction per month, and it is in the process of laying what Odegard describes as the
right foundation for expanding the program.

An Illustrious History in
Aircraft Charter
NetJets roots stretch back to 1964, when it
established the nations first aircraft charter
company. In 1986, it pioneered the concept of
fractional aircraft ownership, offering individuals and businesses all the benefits of whole
airplane ownership at a fraction of the cost.
Its services also come with the guarantee that
fractional owners jets will be ready for them
in four to ten hours notice, depending on the
product owned.
NetJets manages more than 300,000
flights annually to more than 170 countries.
It has flown more hours than all other fractional aircraft companies combined, backed
by some of the most rigorous pilot training
and maintenance and operational procedures available anywhere. To Odegard, the
NetJets Aircraft Transitioning Services is one
more tool to help clients select the transportation solution that best suits them. We are
a one-stop shop for customers, no matter
where they are located or what their particular requirements, he says.

Taking Business Aviation to

New Heights
NetJets

Citation X

Bombardier Challenger 350

Like the HondaJet and Embraers Legacy 500,

NetJets transition program is a testament
to the innovation that the business aviation
community is continually spawning, not just
in the form of more-advanced airplanes, but
also in terms of a full gamut of services.
No matter what the approach, prospective
customers of business aviation will be well
served to do their homework and ask the
questions that will pinpoint the strengths
and weaknesses of providers they might be
considering. In the end, they they will reap
the rewards of a productivity toolbusiness
aviationthat will help their company grow,
compete and succeed in an increasingly
global marketplace.

INVESTING
MARC GERSTEIN // SCREEN TEST

THE 2000S MAY HAVE been a

lost decade in the stock market, with
the S&P 500 down 25%. The teens,
however, have been terric. The blue
chips have returned about 85% since
the start of 2010, and the index is now
almost 45% above where it ended the
1990s. So its understandable to wonder if the tide will turn, especially since
the next signicant move in interest
rates will likely be upward. If risk management isnt top of mind, it should be.
Unfortunately, conventional risk measurement concepts (beta
et al.) are just highfalutin statistical report cards derived from how
stock prices behaved in the past. They dont consider why the stocks
moved as they did. Instead we should assess risk based on factors
likely to inuence future share-price performance.
Research published recently in the Journal of Portfolio Management, by Russell J. Fuller, Raife Giovinazzo and Yining Tung of Fuller
& Thaler Asset Management, is a step in this direction. They start
with the widespread recognition of return on equity (ROE) as the
ultimate measure of company quality. This is common sense: A company that earns $20 of prot from $100 of capital is better than one

RISK MANAGEMENT SHOULD BE TOP

OF MIND, BUT FORGET BETA
that earns only $10. They also sought out consistent ROE generators.
The nancial establishment has long cherished maximization of
expected return and minimization of share-return volatility. Fuller,
Giovinazzo and Tung found they could achieve market-beating riskadjusted returns by starting with S&P 500 stocks with strong ROEs,
then optimizing expected return and low ROE volatility. I adapted this
by screening on Portfolio123 for stocks ranked in the top 25% in terms
of ve-year average ROE and in the lowest 20% in terms of ROE volatility. From among those stocks, I selected the ten best values (based
on enterprise value to sales). A back-test of this hypothetical portfolio
over ten years (assuming rebalancing every four weeks and 0.25% per
trade price slippage) produced an annual return of 15.6% versus 8.1%
for the SPDR S&P 500 ETF (SPY, 208). It outperformed SPY by an average of
0.24% during up months but was 1.11% better during down months.
MARC GERSTEIN IS EDITOR OF FORBES LOW PRICED STOCK REPORT, RESEARCH DIRECTOR AT
PORTFOLIO123 AND AUTHOR OF SCREENING THE MARKET (WILEY, 2002). FOR MORE FROM GERSTEIN
GO TO WWW.FORBES.COM/GERSTEIN.

Besides high and stable ROEs, several of

the rms enjoyed strong cash ow and have
paid generous dividends and engaged in
share buybacks. WAL-MART (WMT, 78) made the
list. In response to competition from smaller
dollar-discount stores, it has beefed up online
efforts and opened smaller box stores that
move into lower-volume neighborhoods while
still beneting from the companys powerful
operational scale. In the similarly competitive department store category, KOHLS (KSS, 72)
deemphasizes the less convenient malls that
usually house department stores in favor of
the strip centers it often anchors. Also, Kohls
offers more national brands than do comparably priced stores and private-label goods
of national brand quality. WHOLE FOODS MARKET
(WFM, 48) faces competition both small (local
organic-food stores) and large (as supermarket chains add more organic). Its ghting
back with even broader organic and highermargin private label offerings and enhancing customer service (home delivery, online
shopping and a loyalty program).
Meanwhile, ObamaCare has posed pricing
challenges for health insurers, but UNITEDHEALTH (UNH, 111), like its peers, is expanding its
customer base. As the industrys big gorilla,
UnitedHealth has scale that produces efciencies and pricing leverage via suppliers
and contributes to its consistently high ROEs.
Also, its pending acquisition of Catamaran
will enable UnitedHealth to also apply scale
advantages to pharmacy benet management.
Auto insurer PROGRESSIVE (PGR, 27) has
ourished with such novel ideas as online
quotes and pricing comparisons and use of
offbeat information such as credit scores to
determine premium prices. Rivals have been
imitating it, but Progressive stays out front
through other innovations, such as its Snapshot discounts, which use wireless technology to monitor drivers and, hence, offer savings to those with proven safe habits. F
MAY 25, 2015 FORBES | 79

THOMAS KUHLENBECK FOR FORBES

THE SOOTHING SOUND OF

RETURN ON EQUITY

THERES A LAUGH, AND YOU REALIZE

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ADP and the ADP logo are registered trademarks of ADP, LLC.
ADP A more human resource. is a service mark of ADP, LLC.
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Talent Management | Benefits Administration | Workforce Optimization

Features

May 25, 2015

ACKMAN WANTS TO BE LIKE BUFFETT 82

THE 2,000 BIGGEST COMPANIES IN THE WORLD 84
HONDAJET TAKES OFF 92
VISAS CASH GRAB 104
HALL OF FAME CEOS 114
WORKPLACE OF THE FUTURE: ME AND MY ROBOT 121
BrandVoice
WITH ADP

THE HR GUIDE TO THE GALAXY

(OR AT LEAST MOST OF THE EARTH) 90

Thirty-four-year-old
Frank Wang is the worlds
rst drone billionaire. His
DJI sells more than half of
all drones on the planet,
including this Phantom 3
model. I appreciate Steve
Jobs ideas, but there is no
one I truly admire.
PAGE 130
MAY 25, 2015
DAVID HARTUNG FOR FORBES

FORBES | 81

JAMEL TOPPIN FOR FORBES

82 | FORBES MAY 25, 2015

GLOBAL 2OOO

BILL ACKMAN
2.0
Activism gets the headlines on Wall Street, but its boldest
practitioner, Bill Ackman, is quietly pivoting to a second act that
has more in common with Warren Buffett than Carl Icahn.
BY ANTOINE GARA

From activist to active

manager: William Ackman
(right), chairman of Howard
Hughes Corp., with its chief
executive, David Weinreb.

MAY 25, 2015 FORBES | 83

GLOBAL 2OOO

FORBES

BILL ACKMAN
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ill Ackman bounds onto

the stage in the ballroom
of the Crowne Plaza Hotel
in midtown Manhattan in
front of hundreds of his peers: the
crme de la crme of hedge funds,
GENERAL
ELECTRIC
law rms, endowments and large
Jack who? CEO
Jeff Immelt bets
pension funds. Its early April, and
the company on
a return to its
Ackman is determined to give the
industrial roots.
Active-Passive Investor Summit a
preview of what he internally calls Pershing
Square 2.0: his rebirth as a kinder, gentler investor, more focused on building companies
that last than on making quick trading prots.
The ballroom responds with a yawn.
So, after a pause, the billionaire poster boy
for activist investingthe more polite name for
what used to be dubbed corporate raiding
pivots back to his comfort zone, unleashing a
barrage of accusations about one of his most
infamous and controversial positions, Herbalife, the supplements seller that hes bet $1 billion against and calls a pyramid scheme. We
know they have been or are
looking to hire criminal defense counsel, he says cryptically of Herbalifes top executives, as Twitter lights up like a
Christmas tree. (Herbalife denies Ackmans claims.)
ROSNEFT
What sanctions?
Headlines soon appear
Kremlins oil giant still
pumping more than
across
the Internet and on
4 million barrels a day.
CNBC: Ackman: HLF Execs
Hiring Own Lawyers an Ominous Sign. After-hours volume in Herbalife stock heats up,
but the shares fall only 0.3%.
What about Pershing Square 2.0? Not a
mention, even though the biggest move for last
years hottest money managerhis hedge fund
was up 37% (versus 2% for
the average hedge fund),
nearly doubling his net
worth to $2.5 billionhides
in plain sight, 10 miles west
of the Las Vegas Strip.
WALT DISNEY
Feel the Force: Star Wars
Take a trip out there via
lms could add more
than $1 billion a year to
U.S.
Highway 215, toward
revenuesevery year.
the breathtaking but desolate beauty of Red Rock Canyon National Conservation Area, and youll nd the largest retail development in the nation since the nancial crisis, rising up from the sagebrush. Some
1.4 million square feet of shops, offices and res-

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84 | FORBES MAY 25, 2015

taurants ranging from Macys to Apple, Traders Joes to Wolfgang Pucksthe kinds of offerings that hark back to the days before the great
mall die-off. From speakers submerged beneath
the sidewalks of the citys outdoor mall you can
hear Frank Sinatras The Best Is Yet to Come.
And it will: Potential customers are lling the thousands of McMansions and townhomes being thrown up around the mall by
the likes of Lennar, Pulte and Toll Brothers.
Water crisis? Apparently not in Summerlin,
Nev., a planned community where new golf
courses, swimming pools, bike trails, schools
and churches dot the palm-lined streets and
cul de sacs in neighborhoods with names like
Segovia, Aspenglen and Sterling Ridge that
spread across 35 square miles.
Summerlin is a key asset for a real estate
company with a legendary provenance and a
low prole: the Howard Hughes Corp., 26%
owned by its chairman, Ackman. But its far
from the only asset: Summerlin is one of four
planned communities and 30 real estate properties owned by Howard Hughes, which in
2014 reported $635 million in revenues and
$190 million in operating prots on $5.1 billion
in assets, with 45 million square feet of retail,
commercial and residential land in its development pipeline, from Houston to the exurbs of
Washington, D.C. Howard Hughes is rebuilding
New Yorks South Street Seaport and owns 60
acres of beachfront property in Honolulu that
should yield nearly two dozen luxury towers.
Howard Hughes is the only company that
I am, in effect, an executive of, says Ackman,
who has agreements that render him unable
to invest directly in real estate or any other
private companies through his hedge fund,
Pershing Square. It is the one we have the
most control and inuence over, and the most
amount of reputational equity invested.
Well, not much yet. The real estate community almost never talks about Howard
Hughes. Nor does Ackman. But that will
change, as he uses it as a holding company for
his Pershing Square reinvention. Just as Summerlin offers families, mostly refugees from
bustling big cities like L.A., Chicago and New
York, a chance for low taxes and a fresh, highly curated start, Howard Hughes offers Ackman a chance to change his reputation from
the modern-day corporate raider everyone
loves to hate into a corporate empire builder.

JEFFREY R. IMMELT: ANDY SHAW/BLOOMBERG; ROSNEFT: ANDREY RUDAKOV/BLOOMBERG

2015 RANK
RANK CHANGE
COMPANY
COUNTRY CODE
1 OICBC
2 OCHINA CONSTRUCTION BANK
3 OAGRICULTURAL BANK OF CHINA
BANK OF CHINA
4 S
5 OBERKSHIRE HATHAWAY
6 T
JPMORGAN CHASE
EXXON MOBIL
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8 S
PETROCHINA
GENERAL ELECTRIC
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WELLS FARGO
TOYOTA MOTOR
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APPLE
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ROYAL DUTCH SHELL
VOLKSWAGEN GROUP
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HSBC HOLDINGS
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CHEVRON
WAL-MART STORES
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SAMSUNG ELECTRONICS
CITIGROUP
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CHINA MOBILE
ALLIANZ
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VERIZON COMMUNICATIONS
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BANK OF AMERICA
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SINOPEC
MICROSOFT
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DAIMLER
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AT&T
GAZPROM
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AXA GROUP
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NESTLE
BANCO SANTANDER
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PING AN INSURANCE GROUP
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MITSUBISHI UFJ FINANCIAL
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JOHNSON & JOHNSON
TOTAL
35T
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PROCTER & GAMBLE
37S
CHINA LIFE INSURANCE
BANK OF COMMUNICATIONS
38S
GOOGLE
39S
40T
VODAFONE
BP
41T
42 OAMERICAN INTERNATIONAL
GROUP
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ITA UNIBANCO HOLDING
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IBM
BMW GROUP
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COMCAST
COMMONWEALTH BANK
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48T
PFIZER
GOLDMAN SACHS GROUP
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BHP BILLITON
METLIFE
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NOVARTIS
ROYAL BANK OF CANADA
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SIEMENS
CHINA MERCHANTS BANK
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PRUDENTIAL
ANHEUSER-BUSCH INBEV
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NIPPON TELEGRAPH & TEL
ROSNEFT
59T
60 OWESTPAC BANKING GROUP
61S
BANCO BRADESCO
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SOFTBANK
HONDA MOTOR
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64S
GENERAL MOTORS
UNITEDHEALTH GROUP
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66S
TD BANK GROUP
INTEL
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EDF
69T
FORD MOTOR
DEUTSCHE TELEKOM
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BASF
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BOEING
INDUSTRIAL BANK
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UBS
75 OANZ
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CISCO SYSTEMS
SUMITOMO MITSUI FINANCIAL
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ZURICH INSURANCE GROUP
CHINA MINSHENG BANKING
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MERCK & CO.
ROCHE HOLDING
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CITIC PACIFIC
NATIONAL AUSTRALIA BANK
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SHANGHAI PUDONG
DEVELOPMENT
WALT DISNEY
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CVS CAREMARK
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TELEFNICA
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ORACLE
CONOCOPHILLIPS
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SANOFI
UNITED TECHNOLOGIES
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ING GROUP
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COCA-COLA
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CHINA CITIC BANK
MORGAN STANLEY
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HEWLETT-PACKARD
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BAYER
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CHINA STATE
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DEUTSCHE BANK
114

GLOBAL 2OOO

THE MODEL, ULTIMATELY, IS WARREN BUFFETT.

ELLEN KULLMAN: SIMON DAWSON/BLOOMBERG

Despite the fact that hes the best known of a

new generation of activists, along with Daniel Loeb and Jeffrey Smith, the 49-year-old
Ackman bristles at the thought of such a legacy. After all, how many people under 40
have ever heard of Asher Edelman or Meshulam Riklis or Irwin Jacobs, the notorious and successful corporate raiders of another Wall Street era? Comparisons with the
most successful activist ever, his Herbalife
nemesis Carl Icahn, make Ackman especially
uncomfortable. We are very different from
Icahn, he sniffs, referring to Icahns penchant for nimble trades and quick xes. We
invest in very stable, predictable businesses.
Instead, hes taking a page from Buffett,
who focused on trades until he found a publicly traded textile company named Berkshire Hathaway and then began swallowing
businesses and stashing them under it.
Ackman has the holding company, courtesy of assets acquired in 2010; the legendary Howard Hughes name was a bonus
that came when he sucked up the Summerlin project. To build an enduring business,
though, he needs permanent capital.
Hedge funds like Ackmans are in no position to manage assets long term, since limited partners have the right to redeem interests
every quarter. Its why, by their nature, they
are trading vehicles. So last October Ackman
issued shares in a new entity publicly traded in Amsterdam, Pershing Square Holdings
Ltd., creating some $6.5 billion in new permanent capital from investors, mostly outside of
the United States. Add to this his own and his
employees money in Pershing Square hedge
funds and Ackman has boosted his permanent
capital to more than $8 billion (his total assets
under management are now $19.5 billion).
Pershing Square Holdings is recognition
that, given the rms investing style, sometimes there will be periods of intense pushback and ridicule, says Harvard Business
Schools Michael Porter, who taught Ackman
in the early 1990s and is a Pershing Square
advisor. If you are in a situation where capital can walk and you have investors that can
be rattled, having a good anchor of permanent capital is very important.
Redemptions have plagued Ackman in the
past. During the nancial crisis in 2008, and

then after 2013, when Pershing suffered embarrassing losses on J.C. Penney and Herbalife, redemptions amounted to 10% of net assets. Those last redemptions proved foolish,
given the massive 2014 that Ackman turned
in, driven most prominently by investment
gains in Botox-maker Allergan. They were
also cautionary, as more of them would have
undermined Ackmans turnaround. Imagine
if we had redemptions and were forced to
unwindwe couldnt do Allergan, he says.
This permanent war chest lets him take on
ever larger targets with less heartburnand
look more toward the long term. When I describe what we did in the early days of Pershing, we found undervalued companies, we
proposed changes that would unlock value,
and then after they took the various steps we
generally exited, he says. People described
them as more nancial engineering. He adds: If you look
at what we have done during the
last ve years, Canadian Pacific, Air Products, General Growth
even Allergan and Valeant was
about creating a company. They
both existed, but the combinaDUPONT
Activist Trian Mantion was building something we
agement has CEO
Ellen Kullman under
wanted to own for years.
the gun for growth.
FOR ACKMAN, HOLDING ASSETS MEANS A RE-

turn to his roots. For all his hedge fund bravado, his success is rooted in real estate.
Its in his blood. His father owned a successful New York real estate rm. After graduating from Harvard College in 1988, Ackman quickly became a top producer. Later, at
Harvard Business School, he plowed nearly
half of his savings into the stock
of Alexanders Stores, a retailer that fell into distress in the
early 1990s. Sensing that Alexanders real estate, such as
731 Lexington Avenue (current
headquarters of Bloomberg LP), MCDONALDS
new CEO Steve
was worth more than the claims Can
Easterbrook pull
McDs out of tailspin?
against the company, Ackman
Can anyone?
bought shares for a little over $8
apiece the day the company led for bankruptcy, and within a matter of months he sold
for $21.
A great trade for a kid, but the deal taught
him a lesson in shortsightedness. Soon after he

115S
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116
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HYUNDAI MOTOR
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CHINA RAILWAY GROUP
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TIME WARNER
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VINCI
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UNION PACIFIC
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CHINA RAILWAY CONSTRUCTION
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PNC FINANCIAL SERVICES
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KOREA ELECTRIC POWER
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MCKESSON
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LEGAL & GENERAL GROUP
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KDDI
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LORAL GROUP
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TRAVELERS COS
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CHRISTIAN DIOR
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VALERO ENERGY
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OIL & NATURAL GAS
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CHINA UNICOM
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UNITED PARCEL SERVICE
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MONDELEZ INTERNATIONAL
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SAP
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GILEAD SCIENCES
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COSTCO WHOLESALE
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SCHNEIDER ELECTRIC
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LOWES COS.
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AFLAC
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CONTINENTAL
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BT GROUP
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JAPAN TOBACCO
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JOHN DEERE
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ARCHER DANIELS MIDLAND
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CIGNA
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DENSO

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S UP T DOWN
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GLOBAL 2OOO

FORBES

BILL ACKMAN
cashed out, Alexanders was acquired by Steven
Roths Vornado, which converted it to a REIT. Alexanders now trades at more than $400 a share
and has paid rich dividends for years.
After business school Ackman partnered
with classmate David Berkowitz to form hedge
fund Gotham Partners, raising $3 million, largely from family and friends. He stuck with what
he knew. His rst major break was an audacious attempt to buy the distressed mortgage of
Rockefeller Center Properties in 1995. Guppysize Gotham took a 6% stake in the REIT that
owned Rockefeller Centers mortgage, and Ackman proposed a recapitalization to keep it from
would-be vultures, including Sam Zell, General
Electric and Disney. Ultimately Ackman lost to a
consortium that included Goldman Sachs, Tishman Speyer and David Rockefeller, but at 28 he
gained major Wall Street credand a 39% return for Gotham in 1995. David Rockefeller and
co-investor Leucadia National were impressed.
Rockefeller became a Gotham investor.
In 1996 Ackman turned to racetracks for
a new set of deals to swing with Wall Streets
power players. At the time, Starwood Capitals
Barry Sternlicht discovered so-called pairedshare REIT structures in hotels and racetracks
that allowed its owners to earn both lease revenue and operating income under a REIT tax
shield. The loophole set off a buying frenzy for
hotel chains like Sheraton, Westin and Wyndham. In classic greenmailer style Ackman got
involved by contesting the racetrack takeovers
that Sternlicht and other dealmakers, such as
Colony Capitals Thomas Barrack and Apollo
Global Managements Leon Black, were eyeing,
holding out for higher premiums.
Ackmans paired-share REIT obsession
eventually backred in 1998, after Gotham won
its proxy contest for REIT First Union. That
year, the IRS closed the loophole, and First
Union shares plummeted. Things continued to
get worse for Gotham as Ackman strayed into
golf courses, multilevel marketing rm PrePaid Legal Services and a privately held dotcom called Giftcerticates.com.
These deals eventually proved to be Gothams undoing after First Union shareholders
balked at his attempt to merge it with his moneylosing golf courses. Gotham investors began
to lose condence in him and withdrew capital, causing assets to fall over 40% between
1998 and 2002, as Ackman, as bold as ever, de86 | FORBES MAY 25, 2015

cided to try his hand at activist short-selling, eventually drawing an investigation from then New York attorney general Eliot Spitzer.
Ackman was pressured into
DALIAN WANDA
Chinas richest man, Wang
unwinding Gotham in 2003,
Jianlin, raised $3.7 billion
in an IPO despite countrys
and Berkowitz quit the busigloomy real estate market.
ness altogether.
Ackmans condence was
unshaken. Not for a moment did I sense any despair in Bill, says business school classmate Robert Jaffee, who invested in Gotham
and is a current hedge fund limited
partner. Pershing Square launched
in January 2004 with $4 million
of Ackmans savings and $50 million from Leucadia. But because of
ALIBABA
Gothams failures, Pershing Square
GROUP
pledged to its partners not to inWorlds largest IPO
in New York for
vest directly in private compae-commerce giant,
but relationship with
niesincluding real estate.
Chinese government
getting bumpy.
This created a dilemma because real estate has always been his sweet spot.
It is an asset class I understand, and we have made a
fortune in it, says Ackman,
who isnt known for modFIAT CHRYSLER
esty. I dont know that Ive
AUTOMOBILES
ever made a bad real estate
Sergio Marchionne in homestretch
as CEO, apparently
investment.
shing for a megamerger.
The nancial crisis of
2008 presented the solution that led to Howard
Hughes. As markets were descending into turmoil, Ackman bought up 25% of struggling mall
REIT General Growth Properties at a re sale,
helped steer it into a managed bankruptcy and
then cherry-picked certain undeveloped assets
from the carcass, an unwanted hodgepodge that
rivals dubbed Sh-tco. General Growth turned
out to be his greatest investing triumph, with a
130-fold gain on his stock, amounting to a $3.7
billion prot for his hedge fund. Sh-tco turned
into the Howard Hughes Corp., a $6 billion vehicle that has seen its stock climb 300% since
it was spun offand allowed Ackman back into
the real estate game unfettered.
ONE OF HOWARD HUGHES MOST VALUABLE AS-

sets is on Bill Ackmans home turf: Manhattans

South Street Seaport. Which explains why, on a
stormy, bone-cold March evening, he is staring

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S UP T DOWN
O UNCHANGED O NEW

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FORBES

BILL ACKMAN
at blue jeans, which have
been hand-painted with
acrylic blue, purple, magenta, teal and white splatters
that resemble the patterns
of a Jackson Pollock painting. The offerings at the RiLAS VEGAS SANDS
alto Jean Project, located at
LVS shares crap out,
losing 30% of value as
the Seaport, have Ackman
luck in Macau cools.
puzzled.
How do you check out the price? Nothings labeled. It has like a SKU, a sign and no
price! he exclaims to David Weinreb, the
Howard Hughes CEO, who accompanies him.
A young shopkeeper named Kandice quotes
the jeans at $245. Thats artwork, not jeans,
Ackman murmurs as he scans the denim
hanging on brick walls inside a refurbished
19th-century row house.
He begins to barrage the unknowing Kandice as if hes grilling a CEO:
What percentage of customers are male? How much trafc does the store get? Is it really more of a wholesale busiKRAFT FOODS
Buffett-backed Heinz
ness? Why open a store in this
merger will make it
worlds fth-largest
location? Is there anything
food company. Tasty.
other than denim and acrylic
for sale? How do the clothes wash?
Kandice meets every Ackman demand,
and he reciprocates with a parting thought:
When the theater opens you guys are going
to be booming! The theater hes referring to
is a high-end iPic cinema, where lmgoers can
take in 3-D movies while knocking back beer
and cocktails and munching overpriced burgers. Its slated to open in 2016 next door to Rialto in the Fulton Market Building, a piece of
the $1.5 billion plan to rebuild the Seaport. In
2017 Howard Hughes expects
to reopen the Seaports Pier 17
with 182,000 square feet of leasable space and a 1.5-acre rooftop
for concerts, ice skating, weddings and Rockefeller Centeresque tree lightings. Then come
the inevitable luxury residential
AMAZON.COM
No prots? No probskyscrapers.
lem. Investors (still)
keep faith with Jeff
Weinreb, as the Howard
Bezos pricey visions.
Hughes point man, is key. Ackman has real estate chops, but Weinreb lives
and breathes it. The two rst met in high
school in Chappaqua, N.Y. Weinreb, who grad88 | FORBES MAY 25, 2015

uated two years before Ackman, was a celebrity at school because he starred in TV commercials for Ronzoni pasta and Bubble Yum gum,
and used his earnings to buy an apartment
in Manhattan. He then dropped out of New
York University (and later show business) and
wound up in Texas, where he sold real estate
during the oil boom of the 1980s.
He eventually caught the eye of Chicago Bulls and White Sox owner Jerry Reinsdorf, who put him in charge of a few buildings.
Weinrebs Midas touch for turning around
busted real estate deals in the aftermath of the
savings-and-loan crisis quickly became legendary. David has taken some dog properties and really made winners out of them,
says Reinsdorf, terming him a smart guy who
doesnt tell people how smart he is. That
makes him a good pairing with the boastful
Ackman. By the mid-1990s Weinrebs company, TPMC Realty (for Turnaround Properties
Make Cash), was known as one of the preeminent distressed real estate rms in Texas.
Even in the worst of times, Weinreb says,
theres someone making money.
In 2002 he reconnected with Ackman via
a cold call. Seven years later, with the real estate market languishing, Weinreb began talking to Ackman about launching a fund to
buy up distressed properties. The discussion eventually morphed into Weinreb taking
charge of Ackmans plan for Howard Hughes.
Weinrebs background in turnarounds is
what made the Las Vegas project so enticing.
The mall was abandoned in 2007, as the real estate market began to sicken. Until a year ago it
was fallow, with concrete and rusting steel columns sitting atop wasteland purchased by reclusive business tycoon and aviator Howard
Hughes in the 1950s to avoid taxes (see box,
p. 89). Were the largest landholder in a constrained market, says Weinreb. It was self-evident that Downtown Summerlin would have a
bright future when the market recovered.
More tantalizingly, Howard Hughes owns
200 acres of barren desert to the east, which is
slated for 4,000 residential units and 1.4 million square feet of office space. And another
5,600 acres to the west and south, which will
become increasingly valuable if Ackmans projections, which call for Summerlins 100,000
population to double, come to fruition.
Control is important in all of the duos mas-

KRAFT: SCOTT OLSON/GETTY IMAGES; JEFF BEZOS: MIREYA ACIERTO/GETTY IMAGES

GLOBAL 2OOO
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ORIX

GLOBAL 2OOO

fact, was spending $118 million on a deal in

2011 to buy out the 48% interest Morgan Stanley held in the Woodlands. They also decided to retain the 25 million square feet of strategic development Howard Hughes owns on all
of its properties. Just as Buffett
counts on steady cash ow from
Berkshire Hathaways insurance holdings, Ackman is trying
to position Howard Hughes as
a real estate cash machine. Cash
ow is expected to triple by 2016 CK HUTCHISON
HOLDINGS
to over $500 million per year, ac- Hong Kongs Superman, Li Ka-shing,
cording to Compass Point anarestructures far-reaching empire; snags U.K.
lyst Wilkes Graham.
telecom giant O2.
Howard Hughes
management isnt concerned with
meeting a quarterly estimate, says
James Davolos, portfolio manager at
Horizon Kinetics, the rms largest
outside shareholder. Theyre concerned with compounding the
value of the investment over the
next ve, seven
or ten years.
TARGET
And real esBungled Lilly Pulitzer sale
came to own the 25,000
enrages
customers.
Strike one
tate will lead to
for new CEO Brian Cornell.
acres of land adjacent to the
other businessLas Vegas Strip, now called
es. In Vegas, for example, Howard
Summerlin in honor of Hughes
Hughes owns a minor league basegrandmother Jean Amelia
ball team (and plans to build a stadiSummerlin.
In 1972 Hughes put his
um for it in Summerlin). And dont be
Vegas real estate into Summa
surprised if Ackman becomes the latCorp., which nally began
est Wall Street titan to own a casino.
developing Summerlin in the
One of Howard Hughes most unusu1990s. Summa sold to mall
al and potentially valuable assets is the
developer Rouse in 1996, and in
air rights above the 1.9 million square
2004 General Growth bought
foot Fashion Show Mall on The Strip,
Rouse for $12.6 billion. During
across from the Wynn hotel and sandGeneral Growths bankruptcy,
wiched between Trump InternationAckman carved out a trove
al and Treasure Island. I took everyof unwanted assets plus the
thing where the market wouldnt asHoward Hughes name.
Fittingly, Howard Hughes
sign a value, says Ackman.
Corp. still retains about $250
Bill Ackman on the Las Vegas
million in crises-related taxStrip? The Howard Hughes Hotel &
loss carryforwards today, so
Casino?
it currently pays no taxes.
Ultimately, the best real estate
Eventually Ackman may turn
has a big entertainment component,
Howard Hughes into a REIT,
says Ackman, as cocky as ever. Never
dodging still more taxes.
again am I going to miss anything like
Hughes himself couldnt have
Rockefeller Center. F
done better. A.G.

ter plans. Besides its Las Vegas real estate

and planned community, Howard Hughes
also owns the Woodlands, a 28,400-acre
planned community on the outskirts of Houston conceived in the 1960s by shale gas pioneer George Mitchell, as well as parts of James
Rouses planned community in Columbia, Md.
It also owns Ward Village, a 60-acre plot of
coastal land in Honolulu, where the company
has already broken ground on two luxury towers that are more than 80% sold.
Instead of pawning off projects to joint venture investors, Ackman and Weinreb are doubling down. One of Weinrebs rst moves, in

THE
HOWARD
HUGHES
TAX DODGE
THE LATE BUSINESS TYCOON

LI KA SHING: OLI SCARFF/GETTY IMAGES; TARGET: DAMIAN DOVARGANES/AP

and billionaire Howard Hughes

may be best remembered for
producing the most expensive
Hollywood lm of its day (Hells
Angels, 1930), ying around the
world in record time (1938), his
affair with Katharine Hepburn
(1939) and building the largest
airplane in history, the H-4
Hercules Spruce Goose
(1947). Or for his nal decades,
when mental illness turned
him into a recluse who ran his
empire from a hotel suite.
But despite his rococo
extravagances, Howard Hughes
was a master businessman,
particularly skilled in the
art of avoiding taxes. In his
memoir, Hughes accountant
Noah Dietrich claims Hughes
paid only about $20,000 in
income taxes a year. Indeed
Howard Hughes Corp.s
circuitous journey into Bill
Ackmans portfolio began as
a tax scheme. In the 1930s the
IRS levied a 37.5% penalty tax
on unnecessary accumulated
surpluses. Hughes operations
never paid dividends, so
Dietrich began plowing prots
into undeveloped land. Thats
how subsidiary Hughes Aircraft

MAY 25, 2015 FORBES | 89

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T
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478
479
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479
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S
CHINA CINDA ASSET
481
MANAGEMENT
482
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T
CHESAPEAKE ENERGY
483
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T
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485
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HDFC
485
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TATA CONSULTANCY SERVICES
T
PACCAR
487
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T
T&D HOLDINGS
489
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BANK MANDIRI
T
COAL INDIA
490
492
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COMPASS GROUP
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INPEX
493
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PROGRESSIVE
494
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496
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KO HOLDING
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SYSCO
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499
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501
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503
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506
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507
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WASTE MANAGEMENT
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512
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513
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T
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515
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S
SWIRE PACIFIC
517
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T
GFNORTE
519
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521
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523
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525
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527
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FOSUN INTERNATIONAL
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MAZDA MOTOR
537
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LOEWS
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OMNICOM GROUP
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AEON
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FORBES

BrandVoice

WITH ADP

THE HR GUIDE TO THE GALAXY

(OR AT LEAST MOST OF EARTH)

In the universe of enterprise business, change is happening at warp speed, especially when it comes to Human
Capital Management. If youre not ahead of the game, youve already fallen behind. Here is an expert eld guide
to help you succeed as a global corporation and conquer the corporate cosmos.

THE WORLDS GOT TALENT

An overwhelming majority

While more than

93%

two-thirds
of multinational
companies see talent acquisition and
tracking as the workforce management
strategy with the greatest impact,

nearly half
identify talent
management as their top
business challenge.

of CEOs around the globe

admit they need to change their
talent strategy,

yet only a third

will actually attempt to do so.
Thats quite a disconnect, one that can
hurt a global companys ability to expand.

BRAVE NEW WORLD

Is your Human Capital Management (HCM) capable of recognizing
trends as they develop?
It should be. For example, the No. 1 global business
objective for many organizations is to continue
growing by expanding into new markets.
Grow + Expand

Increase Headcount

90 | FORBES MAY 25, 2015

How prevalent is this trend?

A majority of North American HR executives expect to
up headcount outside their headquarter country in the
next one to two years. This new market expansion is
representative of a rapidly changing global footprint, as the
number of international and foreign employees is on the rise.

THINK SIMPLE
On average, global companies are trying to manage

Thats a lot of systems! It also creates a lot of potential

challenges. For real global agility, a company should be trying
to simplify via system unication. This allows them to focus on
the outcomes instead of the process. After all, you cant see
where youre going if youre always staring at the steering wheel.

SECRET WEAPON
A recent study revealed that onl y

of companies have any

analytics capabilities in HR.
Knowing that, it should come as no
surprise that only

of senior
business leaders
say they changed a business decision in
response to an HR insight in the past year.
This is a major missed opportunity. By streamlining infrastructure, your HCM can
hone in on more important strategic contributions like predicting skill shortages,
managing global talent mobility and developing the next leadership team. In this
way, HR can become a resourcea kind of secret weaponthat supports overall
business initiatives by prioritizing areas of greatest impact, makes data-driven
workforce management decisions, and helps with risk mitigation and compliance.

ADP GLOBAL HUMAN CAPITAL MANAGEMENT DECISION MAKERS SURVEY (2014 & 2015), ADP RESEARCH INSTITUTE
HARNESSING BIG DATA: THE HUMAN CAPITAL MANAGEMENT JOURNEY TO ACHIEVING BUSINESS GROWTH, ADP RESEARCH INSTITUTE

MAY 25, 2015 FORBES | 91

GLOBAL 2OOO

THE
FLIGHT
OF HIS
LIFE
At a North Carolina aireld just
240 miles from aviations birthplace,
a revolutionary Honda engineer
named Michimasa Fujino is making
his 29-year dream of a new
kind of business jet a reality.

BY JOANN MULLER

ICHIMASA FUJINO, CHIEF EXECUTIVE OF

Honda Aircraft Co., clambers up a steep

ladder to a grated-metal platform to
check on his baby. At eye level he peers
inside the machinery where Hondas new
advanced light jet is choking in wires and sensors3,000
gauges in allan ugly cross between a spacecraft and a
Christmas tree. Hes collecting data on the planes structural integrity while its being buffeted with simulated
forces well above its maximum loads.
The planes composite fuselage holds up well, as expected, inside this sophisticated torture chamber in
Greensboro, N.C.a good sign. Next door, in a sparkling

92 | FORBES MAY 25, 2015

EVAN KAFKA FOR FOR FORBES

MAY 25, 2015 FORBES | 93

GLOBAL 2OOO

FORBES

JOSEPH DEAN/NEWSCOM (TOP)

HONDAJET
new factory with soaring ceilings and a oor so
glossy you can see your reection in it, workers dressed in bright white uniforms are handcrafting HondaJets for customers who have
been waiting more than eight years to take delivery. The wait is nearly over. On Mar. 27 the
plane received provisional type certication
from the U.S. Federal Aviation Administration, a critical milestone that means it is safe
for ight. Final FAA approval is expected in the
next few months.
When it comes, it will be a great relief for
Honda, the $117 billion (sales) Japanese industrial icon (No. 63 on the Global 2000) best
known for making cars, motorcycles and power
generators. The launch of HondaJet, three
decades in the making at an estimated cost of
$1.5 billion to $2 billion, is an opportunity to
shift the focus away from a string of crises that
knocked the company off its game in recent
years. It survived the Great Recession only to
be rocked by the Japanese tsunami and then a
ood of quality recalls that tarnished its reputation. Earlier this year U.S. regulators slapped
Honda with a record $70 million ne for failing
to report warranty claims and more than 1,700
incidents involving death or injury, as required
under the governments early-warning safety system. A few weeks later Honda said CEO
Takanobu Ito, 61, would step down in June
after six years at the helm. Honda officials disputed reports that Ito was pushed out, noting
that his tenure was in line with past CEOs and
that he handpicked his successor.
While the company is thrilled to showcase
its reviving industrial ingenuity, no one will be
happier than Fujino. The delivery of the rst
HondaJets in the next few months is the culmination of a 29-year obsession to create a breakthrough small jet aircraftquieter, roomier and
faster than any rival on the commercial market.
With a price tag of $4.5 million, the HondaJet is being marketed as a tool for business
owners who have assets of $20 million to $40
million and want to keep tabs on their operations. But theyre just as likely to use one for a
quick golf outing or weekend getaway. These
buyers, mostly in the U.S., were hit hard when
the economy tanked, and many wouldnt have
been able to get nancing anyway. But Hondas timing could be right, says aviation consultant Rolland Vincent. Worldwide sales of
business jets rose 6.5% in 2014, to 722 planes,
94 | FORBES MAY 25, 2015

worth $22 billion. Although very light jets (like

the 9,200-or-so-pound HondaJet) are still lagging, sales are perking up. Last year 87 light
jets (under 12,500 pounds) were delivered, up
from 77 in 2013 but still way down from the
371 delivered in 2008. The feeling that were
through this dark time is highest among smaller-jet owners,
Vincent said. Early demand is
promising. Honda already has
more than 100 orders. SucACTAVIS
cessful newcomers are rare in
CEO Brent Saunders did
about $100 billion in deals
the aviation industry, but Hon- last year. Time to digest?
das credibility in autos gives it
a better chance than most, says Vincent. Who
can question their engineering prowess, their
manufacturing expertise, their supply chains?
And who can question Fujinos determination to reinvent business jet travel?
My career objective was to create a concept
for an airplane, and design and sell it by myself, said the intense but soft-spoken Fujino, a
youthful-looking 54, with thick eyebrows and
large wire-rim glasses competing for attention.
I dont want to be [responsible for] just a portion of the product. I want to start by concept.
Its hardly the traditional deated-ego
kenkyo of a team-rst Tokyo salaryman, but
thats Fujino. In an age where engineering is
dominated by anonymous teams his HondaJet, with its long tapered nose and distinctive
engine placement on top of the wings, is a personal statement, the aluminum and carbonber embodiment of an extraordinary decadeslong journey that led him from
his birthplace in Japan to a
Mississippi college town, back
to the boardrooms of Japan
and, nally, to the helm of this
manufacturing plant in North
Carolina, 240 milesas the private jet iesfrom Kitty Hawk,
where the Wright brothers
FAST RETAILING
took ight in 1903.
Hows this for fast?
Japanese clothing
From time to time there are
giant Uniqlo hopes to
open 200 new stores
developments in aircraft that
this scal year.
break the mold of the past,
says Bruce Holmes, a former NASA research
engineer and aerodynamics expert. And I
think the HondaJet is one of them.
EVEN PARKED ON THE TARMAC, THE HONDAJET

is striking, with its sharp beak and bold palette

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MA

MCKINSEY & COMPANY CITES KNOWLEDGE-INTENSIVE MANUFACTURING

AS ONE OF THE EMERGING GAME CHANGERS OF THE 21ST CENTURY.
GET THE WHOLE STORY AT
JOBS-OHIO.COM/FORBES

OHIO IS EASY TO FIND.

JUST LOOK FOR THE MOST ADVANCED

MANUFACTURING IN THE WORLD.
With the broad shoulders of an enduring legacy of manufacturing to
stand on, Ohio is the epicenter of the additive manufacturing revolution.
We have galvanized the efforts of industry, universities, thought leaders
and government, an alignment that is producing breakthrough after
manufacturing breakthrough. From prototype to production, Ohio is
leading the way. The race is on. And the rst one to the future wins.

THE FUTURE IS HAPPENING IN OHIO. GET THERE FIRST.

FORBES

HONDAJET

READY FOR TAKEOFF

At $4.5 million the HondaJet isnt exactly the
Civic of the skies. But it is faster and more fuelefficient than rivals, and loaded with high-tech
features. Bonus: Its got a private bathroom.

TINY POWERHOUSES
Compact turbofan engines built
by GE Honda Aero Engines
weigh just 465 pounds each but
produce 2,095 pounds of thrust.

TOUCHSCREEN CONTROLS
Honda worked with Garmin to
create a state-of-the-art, computerpowered, at-panel, multiscreen
avionics system with dual
touchscreen controllers.

ROOMY CABIN
With the engines over the wings,
theres more space for passengers
and their cargo. Cabin features like
lighting are controlled with a tablet
computer instead of buttons. The
bathroom? Its in back.

HONDAJET

CESSNA
CITATION CJ4

EMBRAER
LEGACY 450

PRICE: $4.5 million

RANGE: 1,400 miles

PRICE: $9 million
RANGE: 2,500 miles

PRICE: $16.6 million

RANGE: 2,900 miles

(Can y nonstop from

New York to Miami)
MAX CRUISE ALT: 43,000'
CRUISE SPEED: 483MPH
PASSENGERS: 6

(Can y nonstop from

New York to Houston)
MAX CRUISE ALT: 45,000'
CRUISE SPEED: 519MPH
PASSENGERS: 89

(Can y nonstop from New

York to Los Angeles)
MAX CRUISE ALT: 45,000'
CRUISE SPEED: 624MPH
PASSENGERS: 79

RANGE

96 | FORBES MAY 25, 2015

1,000 mi

2,000 mi

3,000 mi

4,000 mi

GLOBAL 2OOO

ENGINE ON TOP
The HondaJets
engines are mounted
on the wings, in a
carefully selected
sweet spot, to
reduce shock waves
when ying at high
speeds.

COMPOSITE FUSELAGE
Instead of aluminum, the planes body is
molded from a combination of composite
honeycomb sandwich panels and stiffened
panels, making it strong and lightweight.

IN THE FLOW
To improve
aerodynamics, without
hurting lift, Honda
sculpted the wings and
nose to dramatically
reduce drag across the
surfaces.

COMFY COCKPIT
Fujino spent
years studying
ergonomics,
visibility and
human-machine
interfaces to keep
pilots happy for the
long haul.

DASSAULT
FALCON 5X

GULFSTREAM
G650

PRICE: $45 million

RANGE: 6,000 miles

PRICE: $64.5 million

RANGE: 8,100 miles

(Can y nonstop from New

York to Moscow)
MAX CRUISE ALT: 51,000'
CRUISE SPEED: 610MPH
PASSENGERS: 812

(Can y nonstop from

Shanghai to New York)
MAX CRUISE ALT: 51,000'
CRUISE SPEED: 562MPH
PASSENGERS: 18

5,000 mi

6,000 mi

7,000 mi

8,000 mi
MAY 25, 2015 FORBES | 97

710
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TATNEFT
711T
ISUZU MOTORS
T
INSURANCE AUSTRALIA GROUP
712
713
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YUM BRANDS
714
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BANCOLOMBIA
715
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CHINA TAIPING INSURANCE
716
T
SUMITOMO REALTY
T
CHUNGHWA TELECOM
717
718
T
RICOH
T
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719
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TYCO INTERNATIONAL
S
WEST JAPAN RAILWAY
721
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CHINA YANGTZE POWER
722
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NORTHERN TRUST
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VEOLIA ENVIRONNEMENT
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QUANTA COMPUTER
725
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SINOPHARM GROUP
T
METRO GROUP
727
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SEKISUI HOUSE
729
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LUXOTTICA GROUP
S
LG ELECTRONICS
731
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ESSILOR INTERNATIONAL
732
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MARKS & SPENCER
734
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ROYAL CARIBBEAN CRUISES
S
ALCOA
735
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736
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LAFARGE
738
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DENTSU
739
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741
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749
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S
STANLEY BLACK & DECKER
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GREAT WALL MOTOR
S
SHIMAO PROPERTY HOLDINGS
753
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S
VMWARE
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HYUNDAI STEEL
762
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S
ZHEJIANG ZHENENG ELECTRIC
765
POWER
766
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S
LONGFOR PROPERTIES
766
768
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BANGKOK BANK
S
PEARSON
769
770
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WEICHAI POWER
T
RIYAD BANK
771
772
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JAPAN AIRLINES
T
FIRSTENERGY
773
773
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NOBLE ENERGY
T
KAO CORP
775
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ITASA
S
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777
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PGE
779
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KEYCORP
T
NATIONAL BANK OF KUWAIT
780
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QINGDAO HAIER
781
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SAUDI BRITISH BANK
T
RESOLUTION
783
783
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TELEKOM INDONESIA
785OWH GROUP
785
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KANSAI ELECTRIC POWER
S
CARMAX
787
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MEDIATEK
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CREDICORP
789
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ERSTE GROUP BANK
S
LAND SECURITIES GROUP
790
792
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UPM-KYMMENE
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VALEO
793
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GRUPO INBURSA
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KRUNG THAI BANK
795
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BANK OF EAST ASIA
796
797
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MEGA FINANCIAL HOLDING
798
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AMERICAN TOWER
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SHERWIN-WILLIAMS
798
800
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BANK OF NINGBO
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HONG KONG EXCHANGES
801
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804
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T
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FORMOSA PETROCHEMICAL
808
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TEXTRON
REINSURANCE GROUP
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809
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CHUBU ELECTRIC POWER
810
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MARRIOTT INTERNATIONAL
S
WIPRO
811
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AUTOZONE
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MAHINDRA & MAHINDRA
814
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ALUMINUM CORP OF CHINA
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CHINA MERCHANTS SECURITIES
816
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UNUM
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INVESCO
819
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TCL CORP
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HK
SU
FR
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IN
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CN
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JA
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FR
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TH
UK
CN
SU
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US
US
JA
BR
US
PL
US
KU
CN
SU
UK
ID
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US
TA
PE
AS
UK
FI
FR
MX
TH
HK
TA
US
US
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US

GLOBAL 2OOO

FORBES

HONDAJET
choices: red, blue, green, yellow or silver. But
its most distinctive feature is the unusual location of the engineson top of the wings.
On most aircraft the engines are below
the wings or attached to the rear of the fuselage. Without those structural constraints
the HondaJet (which is about two and a half
times the size of a minivan) can provide more
room for passengers and their stuff. The cabin
is 20% larger than comparable business jets,
and the rear cargo area is spacious enough
for 16 pieces of luggage, including 2 golf bags.
Passengers dont have to play footsie the way
they do in most small business jets; the facing
seats are set farther apart, providing 14 inches
of extra legroom. It seats up to seven, including the pilot. And theres still enough space
for a bathroom, an important selling point,
says Fujino. With the engines out over the
wings, its also quieter.
Honda says its jet ies faster and higher
than any other jet in its class, such as Cessnas
Citation Mustang (391mph) and Embraers

Phenom 100E (448mph) jets. Its also about

15% more fuel-efficient. The top speed is
483mph, and the maximum cruise altitude is
43,000 feethigher than most commercial airliners. Its range is 1,358 miles, not enough to y
coast-to-coast but perfect for regional hops or
even a trip from New York to Miami.
Still, something looks off. Dont two bulky
engines sticking up from the wings kill the
planes aerodynamics? Thats what most aviation experts learned in school, supported
by a failed attempt in Germany years earlier.
When I showed people the sketch, everybody
laughed at me, recalled Fujino. They hated
the idea. Fujinos secret, discovered after years
of analysis and a chance encounter with an old
textbook, was nding the perfect spot to mount
the 465-pound engines. When he tested a scale
model of his plane at Boeings wind tunnel
facility, the results showed that his plane
produced less drag at high speeds than conventional clean wing designs.
As a child, Fujino was fascinated by air-

829
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RYANAIR HOLDINGS
830
S
SDIC POWER HOLDINGS
S
HAL TRUST
831
832
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ASSA ABLOY
832
T
BANK OF BARODA
834
S
SHANGHAI INTERNATIONAL PORT
835
T
LIBERTY INTERACTIVE
S
DATANG INTERNATIONAL POWER
836
837
S
CHONGQING RURAL BANK
S
KOREA GAS
838
839
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ITC
S
SCHINDLER HOLDING
840
T
ABU DHABI COMMERCIAL BANK
841
841
T
SK INNOVATION
843
S
CHINA SOUTHERN AIRLINES
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CONSTELLATION BRANDS
844
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VIMPELCOM
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CEMEX
846
847
S
NIDEC
S
LINK REIT
848
849
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BANQUE SAUDI FRANSI
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KWEICHOW MOUTAI
850
T
DAIICHI SANKYO
851
852
S
CHINA MERCHANTS PROPERTY
853
T
HYUNDAI HEAVY INDUSTRIES
S
GENERAL GROWTH PROPERTIES
854
855
T
GRUPA PZU
856
S
OSAKA GAS
S
KOBE STEEL
857
S
NISOURCE
857
857
T
SYMANTEC
T
EASTMAN CHEMICAL
860
T
OOREDOO TELECOM
861
862
S
HCP
863
T
ENBW-ENERGIE BADEN
S
NORDSTROM
864
864
T
SK HOLDINGS
866
S
CENTERPOINT ENERGY
867OBAIC MOTOR
T
BED BATH & BEYOND
868
869
S
ZTE
T
L-3 COMMUNICATIONS
870
871
S
VORNADO REALTY
S
TD AMERITRADE HOLDING
872
873
S
FIDELITY NATIONAL
INFORMATION
T
VIENNA INSURANCE GROUP
874
875
T
SKANSKA
S
GENUINE PARTS
876
877
T
WHOLE FOODS MARKET
S
CALPINE
878
879
S
EQUITY RESIDENTIAL
T
CHINA COAL ENERGY
880
881
S
CSL
S
CATHAY PACIFIC AIRWAYS
882

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IR
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KO
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US
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MX
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US
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AS
SW
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US
US
US
CN
AU
HK

CONTINENTAL
RESOURCES
Shares of
Harold Hamms
pioneering
fracker fell 60%
as oil prices
plunged.
Will a recent
rebound last?

OOREDOO
Qatari telecom with fun-to-say
name (ooo-ree-do) faces tumbling
prots amid currency swings and
emerging market weakness.

OD Global offers:


AU
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US
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US

938
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VOESTALPINE
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LEND LEASE GROUP
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WOLSELEY
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NRG ENERGY
US
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ADANI ENTERPRISES
IN
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SHAANXI COAL INDUSTRY
CN
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SOLVAY
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EVEREST RE GROUP
BU
947
948
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HERTZ GLOBAL HOLDINGS
US
T
SANDISK
US
949
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CONTINENTAL RESOURCES
US
950
950
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OREILLY AUTOMOTIVE
US
952
T
EIFFAGE
FR
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JIANGXI COPPER
CN
952
954
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KPN
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EMAAR PROPERTIES
AE
955
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SKF GROUP
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ST. JUDE MEDICAL
US
957
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AMEREN
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T
TECHNIP
FR
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HUNTINGTON BANCSHARES
US
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961
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BELGACOM
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LEUCADIA NATIONAL
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MILLICOM INTERNATIONAL
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SEADRILL
BU
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INDUSTRIES QATAR
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BANK OF YOKOHAMA
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968
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YAMAHA MOTOR
JA
969
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LEAR
US
970
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ARAB NATIONAL BANK
SU
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FIDELITY NATIONAL FINANCIAL US
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LORILLARD
US
972
974
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UK
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DP WORLD
AE
976
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BANQUE NATIONALE
977
DE BELGIQUE
BE
978
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SUNING APPLIANCE
CN
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FLEXTRONICS INTERNATIONAL
SI
979
980
S
POWER GRID OF INDIA
IN
S
GEMDALE
CN
981
982
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BANK OF INDIA
IN
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983OAENA
984
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IDGC HOLDING
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LENNAR
US
984
986OFINMECCANICA
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987
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INNER MONGOLIA YILI
CN
988
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AVALONBAY COMMUNITIES
US
989
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RANDSTAD HOLDING
NE
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AMCOR
AU
991

planes and studied aeronautical engineering at

Tokyo University. But in Japan there wasnt much
of an aerospace industry, so his education was
mostly theoretical. After graduating in 1984 at age
24, he joined Honda, where he worked on automobile research and development.
His background wasnt lost on Honda executives, however, who in 1986 launched a series of
secret R&D projects, in keeping with the companys culture for placing bets on innovations that
could pan out decades down the road. Fujino, then
26, was surprised and somewhat reluctant when
he was reassigned to a small team tasked with developing an experimental airplane. (Hondas famous humanoid robot, Asimo, grew out of another
of these secret R&D projects.)
Fujino was uprooted from his home in bustling
Tokyo and transplanted to tiny Starkville, Miss.,
home of Mississippi State University, a leading research center for advanced aeronautics. Working out of a drafty airplane hangar and living in
an apartment three times bigger than his home in
Japan, Fujino faced culture shock. He couldnt un-

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CONTINENTAL RESOURCES : JAMES MACPHERSON/AP OOREDOO: ANGEL NAVARRETE/BLOOMBERG

ALCATEL-LUCENT
Nokias $17 billion bid seems to offer
respite from onslaught of Chinese
competition. At least for now.

882
T
FORTESCUE METALS GROUP
884
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PROLOGIS
S
BOE TECHNOLOGY GROUP
885
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CHONGQING CHANGAN AUTO
885
887
S
PGNIG GROUP
888
S
VAKIFBANK
S
BANK OF NANJING
889
890
S
HERMS INTERNATIONAL
891
S
NEWMONT MINING
T
LG CORP
892
893
S
HANWHA CORP
894
S
BRITISH LAND
T
BARRICK GOLD
895
T
PUNJAB NATIONAL BANK
896
897ORECRUIT HOLDINGS
898OJD.COM
899OULTRAPAR PARTICIPACOES
900
S
PIONEER NATURAL RESOURCES
S
CAPITALAND
901
S
FINATIS
901
903
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TATA STEEL
904
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ALCATEL-LUCENT
S
CHINA OILFIELD SERVICES
905
S
PHOENIX GROUP HOLDINGS
906
907
T
CONAGRA FOODS
908
T
SECOM
S
CHARTER COMMUNICATIONS
909
910
S
HEALTH CARE REIT
911
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SM INVESTMENTS
T
FORMOSA CHEMICALS
912
913
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ANTARCHILE
914
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CIT GROUP
T
UNIPOL GRUPPO
915
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ALL NIPPON AIRWAYS
916
916
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QUINENCO
918
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HERSHEY
T
WW GRAINGER
919
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KAWASAKI HEAVY INDUSTRIES
920
921
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SUMITOMO METAL MINING
S
CGI GROUP
922
923
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CAMERON INTERNATIONAL
924
S
INTACT FINANCIAL
T
SAMSUNG C&T
925
T
BEIERSDORF
926
927
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BANK NEGARA INDONESIA
928OAERCAP HOLDINGS
S
ALLIANCE DATA SYSTEMS
929
930
T
FORMOSA PLASTICS
S
TOWNGAS
931
932
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AXIATA GROUP
T
DEUTSCHE LUFTHANSA
932
934
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SCHRODERS
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PEGATRON
935
936
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BANK HAPOALIM
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MOTOROLA SOLUTIONS
936

FORBES

HONDAJET
derstand the locals drawl and
longed for Japanese food in a
three-stoplight backwater.
ACTIVISION
BLIZZARD

FOR A DECADE FUJINO AND

the Honda aviation team

toiled in Starkville, challenging the limits of existing technology. Their rst
project was to modify an existing single-engine turboprop plane by making the wings
and tail section out of composite materials. For Fujino it was his rst hands-on
experience with a real airplane. Much of
the rst year was spent sanding molds and
fabricating parts. The second jet was built
from scratch. They gained practical experience in airplane design, but without breakthrough technologies that would bring new
value to the industry,
the company didnt
see much reason to get
into aviation. So in 1996
Honda pulled the plug.
Fujino and his heartbroken colleagues were
HARLEY-DAVIDSON
shunted back to Tokyo
Motorcycle monoliths shares
are down nearly 25% as it
and started looking for
recalls 46,000 bikes.
new jobs within
Honda R&D.
But Fujino wouldnt give up. During his
years in Mississippi he
came to understand American culture and lifestyles,
and recognized the need for
small planes and regionGRUPO BIMBO
al airports in a country as
The Mexican bakery powervast as the U.S. He was still
house still appears
hungry despite gobbling up
convinced there would be
a string of North American
companies.
a market for a plane that
was fast and fuel-efficient and didnt sacrice
cabin or luggage space. He kept looking for a
design breakthrough.
It came in 1997 as Fujino
was unpacking after moving to
a new home in Japan. He spotted a 1930s aeronautics textbook by Ludwig Prandtl, the
RALPH LAUREN German aeronautical engiThe clothes are looking
neer whose pioneering analgreat. The shares? Less
so, as a strong dolysis built the foundation for
lar drags on the fashion houses hopes for
modern aerodynamics. As he
global growth.
leafed through the dusty pages,

Attack! Revenue from

its digital operations
now over 40% of total
$4.4 billion for 2014.

100 | FORBES MAY 25, 2015

he was reminded that in the early 20th century there were no computers for numerical
simulation or computational uid dynamics.
Instead, Prandtl and his peers used complex
theoretical functionsold-fashioned math
to analyze aerodynamic ow.
This got Fujino thinking: Instead of trying to minimize interference between the air
ows around the wings and around the engines, why not combine the two air ows to
nd the ideal aerodynamics overall? That
would help him identify the sweet spot on the
wings for the engines. It was a very different
thought process, he said.
One night, not long after he found the
textbook, he was lying in the darkness when
a new design concept hit him. He jumped
out of bed, ipped on the light switch
and couldnt nd a piece of paper. So he
ripped a calendar off the wall and sketched
his inspiration on the back of it. It became
the engine-on-wing concept for the new
HondaJet.
In December 1997 Fujino pitched Hondas board of directors. He showed them his
sketch, told them about the need hed seen in
America for small jets and how it could transform mobility for customers there. It could
become the Honda Civic for the skies. Eventually he won their approval to develop his
concept.
FOR THE NEXT THREE YEARS FUJINO WORKED

on his ideas. The location of the engines

on the wings was critical, but there were
other important aerodynamic features that
made the plane more efficient. One was the
wing itself. Specially shaped to reduce drag,
with surface irregularitieslike rivetsreduced to a minimum, the wings contour allows air to ow smoothly across it, a concept called natural laminar ow. Another important design breakthrough was the planes
long, sloping nose with bulges and curves in
deliberate places: It, too, allows a ribbon of
smooth-owing air to hug the fuselage. By
cutting down on the drag that typically occurs
at high air speeds, these innovations provide
better aerodynamics without decreasing lift,
making the HondaJet more efficient.
He genuinely felt that Honda was making important technology breakthroughs,
but because the project was still top-secret,

GRUPO BIMBO: SUSANA GONZALEZ/BLOOMBERG

RALPH LAUREN: DANIEL ACKER/BLOOMBERG

GLOBAL 2OOO
991
S
LEVEL 3 COMMUNICATIONS
US
993
S
MEDIOBANCA
IT
S
HEBEI IRON & STEEL
CN
994
994
S
VENTAS
US
996
S
CAMPBELL SOUP
US
997
S
HELVETIA HOLDING
SZ
998
T
ORIGIN ENERGY
AU
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MITSUI OSK LINES
JA
999
1000
S
ADVANCED SEMICONDUCTOR
TA
S
JULIUS BAER GROUP
SZ
1000
1002
S
HORMEL FOODS
US
T
ASUSTEK COMPUTER
TA
1003
T
GRUPO TELEVISA
MX
1003
1005
T
CF INDUSTRIES HOLDINGS
US
1006OACTIVISION BLIZZARD
US
S
HCL TECHNOLOGIES
IN
1007
1008
T
JOHNSON MATTHEY
UK
T
KUWAIT FINANCE HOUSE
KU
1009
1010
S
CMS ENERGY
US
COMERICA
US
1011T
1012
S
DOLLAR TREE
US
T
WEATHERFORD INTERNATIONAL SZ
1013
UK
1014OST. JAMESS PLACE
1014
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KT CORP
KO
1016
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NOVOLIPETSK STEEL
RU
T
CHOW TAI FOOK JEWELLERY
HK
1017
1018
T
GAIL INDIA
IN
1019
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ROCKWELL AUTOMATION
US
US
1020OMACERICH
T
AVNET
US
1021
1022
S
XIAMEN C&D
CN
S
INNOLUX
TA
1023
T
BANK OF GREECE
GR
1024
1025
T
CANADIAN TIRE
CA
1026
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CANARA BANK
IN
S
DELHAIZE GROUP
BE
1027
1028
S
BEIJING ENTERPRISES
HK
1029
T
MGM RESORTS
US
S
CROWN CASTLE INTERNATIONAL US
1030
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LONDON STOCK EXCHANGE
UK
1031
1032
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MURPHY OIL
US
T
MEGAFON
RU
1033
1033
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PTT GLOBAL CHEMICAL
TH
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ASSURANT
US
1035
1036
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ALFA
MX
S
BYD
CN
1037
1038
S
SHANGHAI CONSTRUCTION
CN
T
GALP ENERGIA
PO
1039
1040
T
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CH
S
KEYENCE
JA
1040
1042
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BORGWARNER
US
T
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IT
1043
1044
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ADVANCED INFO SERVICE
TH
T
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US
1045
1046
T
CIELO
BR
S
BOSTON SCIENTIFIC
US
1047
1048OSHENGJING BANK
CN
T
GUANGZHOU R&F
CN
1049
1050
T
DOVER
US
T
NIELSEN HOLDINGS
US
1051
1052
T
ONEX
CA
S
DONGBU INSURANCE
KO
1053
1054
T
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BR
T
HARLEY-DAVIDSON
US
1054
1056
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PARTNERRE
BU
S
HUISHANG BANK
CN
1057
CN
1058
S
CHINA NATIONAL CHEMICAL
S
HOST HOTELS & RESORTS
US
1058
1058
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SHANGHAI PHARMACEUTICALS CN
S
AVAGO TECHNOLOGIES
SI
1061
1061
T
RAIFFEISEN BANK
INTERNATIONAL
AS
S
AJINOMOTO
JA
1063
1064
S
ALLEGHANY
US
S
CHINA COSCO HOLDINGS
CN
1065
1066
S
SUNTORY BEVERAGE & FOOD
JA
S
WR BERKLEY
US
1067
1068
T
GRUPO BIMBO
MX
S
ZIJIN MINING GROUP
CN
1069
1070
T
IDEMITSU KOSAN
JA
T
UBI BANCA
IT
1070
1072
T
AIR FRANCE-KLM
FR
T
TRW AUTOMOTIVE HOLDINGS US
1073
1074
S
CATAMARAN
US
T
ONEOK
US
1075
1076
S
FISERV
US
T
SES
LU
1076
1078
S
W&W-WSTENROT
GE
T
SINGAPORE AIRLINES
SI
1079
T
TOKYU
JA
1080
T
XL GROUP
IR
1081
1082
T
ARROW ELECTRONICS
US
FR
1082OKLEPIERRE
1084
T
SGS
SZ
T
UNI-PRESIDENT
TA
1084
1086
S
INTUIT
US
T
BOSTON PROPERTIES
US
1087
T
T ROWE PRICE
US
1087
1089
T
RALPH LAUREN
US
1089
T
TECK RESOURCES
CA
T
NORSK HYDRO
NO
1091
1092
S
COMMUNITY HEALTH SYS
US
S
DELTA ELECTRONICS
TA
1093
1094
T
ELETROBRS
BR
S
TURKISH AIRLINES
TU
1095
S
INDUSTRIAL ALLIANCE
1096
INSURANCE
CA
1097
T
KYUSHU ELECTRIC POWER
JA
1098
T
NOBLE GROUP
HK
S
MASCO
US
1099
1100
S
KOTAK MAHINDRA BANK
IN
DR HORTON
US
1101S
1102 OCHINA GALAXY SECURITIES
CN
S
BS FINANCIAL GROUP
KO
1103
1104
S
SMC CORP.
JA
T
SJM HOLDINGS
HK
1105
S
KINNEVIK
SW
1106
1107
T
DAITO TRUST CONSTRUCTION JA
1108
S
DR PEPPER SNAPPLE GROUP
US
S
C.H. ROBINSON WORLDWIDE
US
1109
1110S
CHINA GEZHOUBA
CN
AU OPTRONICS
TA
1111S

GLOBAL 2OOO

GANNETT: DANIEL ACKER/BLOOMBERG

he couldnt talk about it, not even with his

family (his wife, a son and two daughters).
Meanwhile, other companies were getting
credit for their work on lightweight jets.
He craved outside validation for his ideas.
I dont know how many times I wanted to
quit, he recalled.
In October 2000 Honda allowed him to
establish a research facility at the Greensboro airport to build a prototype, which took
another three years. Finally, in December
2003, the HondaJet was ready for its maiden ight. During its steering test the plane
turned as if a gure skater were making gure eights on the ice, Fujino recalled in a
Honda case study. I must admit I became
rather emotional, he wrote of the moment.
It looked like it was moving under its own
will. At last I felt as if my daughter would
become independent of me as she tried her
wings for the rst time.
Despite the successand two more years
and undisclosed additional millions of dollars spent testing the aircraftby 2005
Honda had still not committed to building
Fujinos jet on a commercial scale. To stoke
public interest and sway the board of directors, he arranged for the HondaJet to make
its debut at AirVenture Oshkosh, a show put
on by the Experimental Aircraft Association that draws 500,000 visitors a year from
more than 60 countries to tiny Wittman
Regional Airport in Oshkosh, Wis. On
July 28, 2005 a blue-and-white HondaJet
swooped down from the sky and was immediately swarmed by thousands of airplane
enthusiasts (one person gave him a $50,000
deposit).
Armed with so much positive feedback,
Fujino again went to the Honda board with
a proposal to commercialize the plane. After
several discussions the verdict was nally
delivered in March 2006. Then CEO Takeo
Fukui spoke after several minutes of silence.
He spoke as if he were convincing himself,
recalled Fujino. Honda is a mobility company. We should pursue the future through the
HondaJet. For a moment I could not even
believe what I had just heard.
Honda started taking orders in October
2006 at the National Business Aviation Association convention in Orlando, Fla. By the
end of the convention it had more than 100

orders. In June 2007 the newly created subsidiary, Honda Aircraft Co., broke ground on
a $120 million world headquarters, R&D center and production line at
the Greensboro airport. In
September 2012 it added a
$20 million customer-service facility, bringing the
GANNETT
total campus to more than
Continued print declines
threaten to choke green
600,000 square feet on a
shoots in digital.
130-acre plot, with 1,300
employees. Honda expects to build 40 to 50
planes in the next 12 months, ramping up to
75 the following year.
Ive never seen a company investing as
aggressively as this, said Vincent. Based
on the size of the Greensboro manufacturing facility and the cost of tooling, theyre
signaling they intend to
have more jets. No one
gets into this industry
and has just one model.
ALEXION
For now, at least, FuPHARMACEUTICALS
jino has nothing to say
Uber-pricey drug Soliris just
hit $2 billion in sales, but
about Hondas long-term
as founder Leonard Bell
retires, investors fret about
plans for aviation, other
long-term prospects.
than pointing out with a
shy smile that the hangar doors at his North
Carolina plant are almost twice the height of
the 15-foot-high HondaJets tail.
Instead, hed rather talk about the plane
hes just completed. Proudly poring over
every detail, its obvious it all spilled out
of his own mindthe curvature of the
ceiling lights, the electronically controlled
dimming shades, the panel that drops
down from the bathroom door for privacy. Even the paint scheme is important
to Fujino, who calls it my nal artwork
contribution.
Most business jets are white, with a
thin stripe. I wanted something different.
Standing next to his favoritedark blue on
a white background, with silver edges for vivid contrasts
he says his goal was to reect
the movement of air owing
over the fuselage. Airplane
design is like a painting, he
DANGOTE
says. While I am working on
CEMENT
it, I am already thinking about
Amid Nigerias turmoil, founder Aliko
the colors I will use. And the
Dangote remains
Africas richest man.
frame to display it. F
MAY 25, 2015 FORBES | 101

1112T
NIPPON YUSEN
JA
1113T
ZIMMER HOLDINGS
US
CHIBA BANK
JA
1114S
1115S
FIRST REPUBLIC BANK
US
1116S
AMPHENOL
US
1116S
BRASKEM
BR
1116S
KERRY GROUP
IR
GENWORTH FINANCIAL
US
1119T
1120
S
CHINA FORTUNE
LAND DEVELOPMENT
CN
T
MITSUBISHI MATERIALS
JA
1120
1122
T
GENTING
MA
T
LEGRAND
FR
1123
S
AGL ENERGY
AU
1124
1125
S
INFINEON TECHNOLOGIES
GE
1125
T
RSA INSURANCE GROUP
UK
S
EASYJET
UK
1127
1128
T
HINDALCO INDUSTRIES
IN
S
YANZHOU COAL MINING
CN
1128
1130
S
WISCONSIN ENERGY
US
NXP SEMICONDUCTORS
NE
1131S
1132
T
FINANCIRE DE LODET
FR
S
MOODYS
US
1133
T
COCA-COLA ENTERPRISES
US
1134
1134
S
NITTO DENKO
JA
1136
T
DOOSAN
KO
S
GANNETT
US
1136
1138
T
ATTIJARIWAFA BANK
MO
1139
S
CBRE GROUP
US
T
SHIN KONG FINANCIAL
TA
1140
T
SUN ART RETAIL GROUP
HK
1140
1142
T
UNIQA
AS
T
BIDVEST GROUP
SA
1143
S
HENRY SCHEIN
US
1144
1145
S
BANCA MPS
IT
1146
T
VEDANTA RESOURCES
UK
S
AMADEUS IT HOLDINGS
SP
1147
1147
S
EXPERIAN
IR
1147
S
SHENZHEN OVERSEAS
CN
T
LI & FUNG
HK
1150
ROCK-TENN
US
1151T
1152 OORIENT SECURITIES
CN
S
MOHAWK INDUSTRIES
US
1153
1154
T
BOMBARDIER
CA
S
SAPUTO
CA
1154
1156
T
NATIONAL BANK OF GREECE
GR
S
SEIKO EPSON
JA
1157
1158
S
ALEXION PHARMACEUTICALS
US
T
RED ELCTRICA
SP
1158
1160
T
HYUNDAI ENGINEERING
KO
WESTERN UNION
US
1161T
1162
T
STOREBRAND
NO
T
EL PUERTO DE LIVERPOOL
MX
1163
1164
T
ARCH CAPITAL GROUP
BU
S
UNIVERSAL HEALTH
US
1164
1166
T
BHARAT HEAVY ELECTRICALS
IN
T
NEW YORK COMMUNITY
US
1166
1168
T
BRENNTAG
GE
T
QUEST DIAGNOSTICS
US
1169
1170
T
SHAW COMMUNICATIONS
CA
STARWOOD HOTELS
US
1171T
1172
S
RENESAS ELECTRONICS
JA
S
POWER FINANCE
IN
1173
1174
S
ELECTROLUX GROUP
SW
T
TURKCELL
TU
1175
1176
T
YAMATO HOLDINGS
JA
S
SINO-OCEAN LAND HOLDINGS CN
1177
1178
S
INTERPUBLIC GROUP
US
DEUTSCHE ANNINGTON
S
1179
IMMOBILIEN
GE
1179
T
TINGYI HOLDING
CN
ADVANCE AUTO PARTS
US
1181S
1182
S
AMERICAN FINANCIAL GROUP US
T
CA
US
1182
1182
S
DUBAI ISLAMIC BANK
AE
S
ORIENTAL LAND
JA
1185
T
RHB CAPITAL
MA
1185
1187
S
MASRAF AL RAYAN
QA
1188
S
SHINSEI BANK
JA
S
RAYMOND JAMES FINANCIAL
US
1189
1189
S
SOUTHWESTERN ENERGY
US
DSM
NE
1191T
1192 ONUTRECO
NE
T
TURK TELEKOM
TU
1192
1192
T
WYNN RESORTS
US
US
1195 OELECTRONIC ARTS
T
HANG LUNG GROUP
HK
1196
1197
T
STAPLES
US
T
SISTEMA
RU
1198
1199
S
HOYA
JA
T
CHINA RESOURCES ENTERPRISE HK
1200
S
CINCINNATI FINANCIAL
US
1200
1202
T
RUSHYDRO
RU
S
MONDI
UK
1203
1204
S
AGILE PROPERTY HOLDINGS
HK
KO
1205OSAMSUNG SDS
S
BBMG
CN
1206
1207
S
ZOETIS
US
S
HAINAN AIRLINES
CN
1208
1209
T
HANKYU HANSHIN HOLDINGS
JA
1210
S
MEAD JOHNSON NUTRITION
US
SOJITZ
JA
1211T
1212
S
JYSKE BANK
DE
T
OI
BR
1213
T
FMC TECHNOLOGIES
US
1214
1215
S
RITE AID
US
T
DANGOTE CEMENT
NI
1216
1217
T
PKN ORLEN
PL
S
HIKVISION
CN
1218
JA
1218 ONIPPON PAINT
1220
T
STORA ENSO
FI
S
WUHAN IRON & STEEL
CN
1221
S
PERRIGO
IR
1222
1222
S
VESTAS WIND SYSTEMS
DE
S
STARWOOD PROPERTY TRUST US
1224
1225
S
SUN PHARMA INDUSTRIES
IN
T
AUTOLIV
SW
1226
1226
S
TAISEI
JA
T
METALURGICA GERDAU
BR
1228
T
JERONIMO MARTINS
PO
1229
CONTINUED PAGE 106
S UP T DOWN
O UNCHANGED O NEW

PROMOTION

SHINING
A LIGHT
ON DOING
BUSINESS IN
LAS VEGAS
BY BETH ELLYN ROSE NTHAL

Moving the Digital Signage

Expo to Las Vegas

Fast Facts

Angelo Varrone
Chairman and CEO
Exponation LLC

According to the
Las Vegas Convention
and Visitors Authority
(LVCVA)
)%((%+*+"0$!
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(/05!.3!.!%*0+3*
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+/0/)+.!0$*
$+0!(.++)/

Among those companies that have realized the

myriad business benefits of Vegas is Exponation
LLC, an Atlanta-based organization that specializes
in full-service trade shows and event production
and management. It owns four events in the digital
signage and commercial lighting industries, and its
landmark event is Digital Signage Expo (DSE).
Angelo Varrone, chairman and CEO, says the company launched DSE in San Francisco, later moving
it to Chicago and then to Vegas in 2008, where it
has remained ever since. It became obvious that
we needed to be in a city with world-class trade
show credentials and one that was more aligned
with digital signage technology, he explains. Las
Vegas is perfect because it has an amazing amount
of digital signage, with new installations happening
all the time. Industry members can come to Vegas
to explore what is being done firsthand as well as to
see whats new on our show floor.
As part of DSEs education program, we book
three tour buses and take registrants on a live tour
of Vegas newest and most exciting digital signage
installations. The live tour sells out every year,
Varrone says.

The Winning Draw of Las Vegas

Exponation had no qualms about moving its signature event to Vegas, and the LVCVA has guided it
every step of the way. Since Las Vegas is the number
one city for trade shows in the world, the LVCVA is
familiar with all aspects of the business. They make it
easier to stage a show here, Varrone explains.

LVCVA

Known as a hot spot for world-class

entertainment, outstanding cuisine
and amazing nightlife, Vegas also
means business.
In addition, he says, the LVCVA assigns a highly
professional event manager who serves as a partner
every step of the way. They help get the building
ready for the show and even provide assistance with
attendee marketing.
The fact that Vegas offers so much to do is, of
course, another huge plus for convention-goers. In
their free time, our attendees have more opportunities to do things they couldnt do in other cities,
Varrone points out. Exponation even produces a
weekly newsletter to keep attendees up to date on
whats happening during the show.

A Boost in Business
Moving the DSE to Vegas was, without a doubt, a
smart choice. According to Varrone, in its first year, the
Expos attendance increased by 25%a significant
portion of which comprised international visitors. Las
Vegas is very accessible from many worldwide destinations. That helps DSE attract visitors from over 60
countries. There is no doubt that international guests
tend to be more comfortable coming to Las Vegas.
In addition to noting an increase in attendees
since its move to Vegas, DSE has also seen a surge
in exhibitors, winning four Fastest 50 awards from
industry publications over the past seven years. The
award goes to the 50 fastest-growing trade shows in
a particular year. Exhibitors understand the benefits
of showing their products in Las Vegas, and that has
been a major factor in DSEs growth, Varrone notes.
For Exponation, hosting its main event in Vegas
turned out to be a wise business move. To plan
your next business meeting or trade show, visit
VegasMeansBusiness.com. Q

Vegas means business.

With world-class meeting facilities, an extensive range of hotel rooms, and a city unrivaled
in event and convention experience, here, business as usual is better than usual. In fact,
attendance increases an average of 8 percent when shows rotate into Las Vegas. Find out all
the reasons why so many FORTUNE 500 companies choose Las Vegas.

FORTUNE 500 is a registered trademark of Time Inc. Used with permission.

GLOBAL 2OOO

While overhyped
cryptocurrencies like Bitcoin
grab all the attention, Visa
CEO Charlie Scharf has
quietly put a $6.8 trillion
stranglehold on the worlds
commercial transactions.
The future of payments?
Surprise! Its already here.
BY DANIEL FISHER

104 | FORBES MAY 25, 2015

MOVING AT
THE SPEED
OF MONEY
MATT FURMAN FOR FORBES

MAY 25, 2015 FORBES | 105

GLOBAL 2OOO

FORBES

VISA

HANERGY: ROBERT NICKELSBERG/GETTY IMAGES; TENET: SUSAN GOLDMAN/BLOOMBERG

ITTING INCONSPICUOUSLY

among the Pentagon contractors and trade associations in a western suburb of Washington,
D.C. is a low-slung building protected by landscaped berms and a fence topped by razor wire.
The exterior walls are a patchwork of whites,
grays and greens to confuse passersby trying to
judge its size from a distance. A 24-foot-deep
moat provides a last line of defense against anybody trying to crash a vehicle through its walls.
But while this fortress could easily pass as
an outpost of some shadowy three-letter spy
agency, its actually home to something far
more mundaneand far more powerful. This is
the nerve center of Visa, the global credit card
company. Walk through a biometric security scanner into its data centeras I did recentlythrough a room dominated by huge video
screens and past ranks of EMC data storage
units holding petabytes of information ready
for instant recall, and youll nd a single IBM
Z-class mainframe, like the black monolith in
Stanley Kubricks science-ction classic 2001,
quietly crunching up to 100 billion computations every second. Almost every time somebody swipes a Visa card anywhere in the world,
the transaction ows through here or a sister facility in Colorado. The company instantly
checks 500 variables, from the customers location to his spending habits to the location of the
merchant, and spits out a thumbs-up or -down
on whether to allow the charge to go through.
Its the sort of centralized, Big Iron processing that Silicon Valley was supposed to obliterate years ago with peer-to-peer networks and
cheap Internet-connected devices.
Yet Visa endures. And grows. The credit processing company, which started 57 years ago as
a nonprot association of banks, went public on
the eve of the nancial crisis in 2008 and sailed
through it with a 390% total shareholder return
over the past six years, landing as No. 263 on
FORBES 2015 Global 2000 list of the worlds
largest companies.
It is also one of the planets most prodigious

cash machines. Visa had 60% operating prot

margins on revenues of $12.7 billion last year and
cash ow of more than $7 billion (dwarng capital expenditures of $500 million). Visa handled
100 billion purchases worth $6.8 trillion, according to The Nilson Report,
which tracks the credit card industry. Thats double the amount of rival
MasterCard and 14 times American
Express. For perspective, Visa thinks
there are another $11 trillion in cash
KEURIG
GREEN
and check transactions in the world
MOUNTAIN
each year that could go electronic.
Stream of new
ventures have
And Visas transaction volume has
revenues up
250%
over the
been growing steadily at 10% a year
last four years.
since the IPO.
Nonetheless, there are threats. Retailers have
won billions of dollars in antitrust suits accusing the company of helping banks keep fees
which can clip as much as 2.75% off a merchants revenuetoo high. Customers love the
easy credit but loathe interest rates that can top
20%. West Coast venture capitalists see Visa as
an oligopolistic dinosaur and are pouring hundreds of millions of dollars into rivals that use
Bitcoin. Meanwhile, banks, which collect the
bulk of the fees from merchants, are warily eyeing Visas efforts to bypass them and forge direct relationships with retailers by offering oneclick Internet transactions and providing data
on consumer behavior that
only Visa possesses.
None of which seems to
faze Visas chief executive,
Charlie Scharf. In time, he
says, would-be Visa disrupHANERGY THIN
FILM POWER
tors all discoverjust as InGROUP
ternet upstarts PayPal, Square
With shares up sixfold in
a year, is this a solar buband Uber didthat it is simply
ble in the making?
easier and more economical
to work with his leviathan than ght it. They
dont do what we do, says Scharf, 50, who was
a longtime lieutenant to JPMorgan Chase Chief
Jamie Dimon and took charge at Visa in 2012.
They dont have the network
we have.
Hes already rushing to embrace what comes next: proTENET
viding the back end for smartHEALTHCARE
Paying patients and
phone-based payment systems
admissions up, bad
debt from formersuch as Apple Pay and similar
ly uninsured down.
ObamaCare is worksetups for Samsung and other
ing for somebody!
mobile devices. Scharfs techni-

2015 RANK
RANK CHANGE
COMPANY
COUNTRY CODE
1230
S
UNICHARM
JA
S
HARBIN BANK
CN
1231
1232
T
NETAPP
US
1232
T
SHIZUOKA BANK
JA
1234
T
ESPIRITO SANTO FINANCIAL
LU
1235
T
ANNALY CAPITAL MANAGEMENT US
S
FIRST QUANTUM MINERALS
CA
1235
1237
S
OLAM INTERNATIONAL
SI
T
WM MORRISON SUPERMARKETS UK
1237
1239
S
AUTONATION
US
T
DIRECT LINE INSURANCE
UK
1240
CN
1241 OGUOSEN SECURITIES
1242
T
SHARP
JA
T
BPI
PH
1243
S
MARKEL
US
1244
1245
T
MOLSON COORS BREWING
US
S
OMRON
JA
1246
1247
T
HINDUSTAN PETROLEUM
IN
T
ASAHI GLASS
JA
1248
1249
S
MANPOWER
US
S
THAI BEVERAGE
TH
1250
S
PVH
US
1251
1252
T
BRAMBLES
AU
1253
T
AREVA
FR
T
UNITED UTILITIES
UK
1253
1255
S
KEURIG GREEN MOUNTAIN
US
1255
S
UC RUSAL
RU
1257OCJ CORP.
KO
CN
1258OEVERBRIGHT SECURITIES
1259
S
GIVAUDAN
SZ
T
JM SMUCKER
US
1259
T
PLDT
PH
1259
1262
T
LIBERTY MEDIA
US
1263
T
HYUNDAI GLOVIS
KO
GE
1264ODEUTSCHE WOHNEN
1265
S
BELLE INTERNATIONAL
HOLDINGS
HK
1266
T
WULIANGYE YIBIN
CN
T
BROWN-FORMAN
US
1267
T
GOLDCORP
CA
1268
1268
S
UNITED RENTALS
US
T
BANKINTER
SP
1270
1271
T
CLOROX
US
T
CP ALL
TH
1272
1272
S
NSK
JA
T
LIXIL GROUP
JA
1274
1275
S
TDK
JA
S
SALESFORCE.COM
US
1276
1277
T
ARAB BANK
JO
S
BALL
US
1278
1279
T
ANALOG DEVICES
US
S
GRIFOLS
SP
1280
1281
T
TERNA
IT
T
MOL HUNGARIAN OIL
HU
1282
1283
T
SEMBCORP INDUSTRIES
SI
S
EDWARDS LIFESCIENCES
US
1284
1285
S
ITV
UK
S
SCANA
US
1285
1287
T
BANK LEUMI
IS
T
HONG LEONG FINANCIAL
MA
1287
1289
S
SAVOLA GROUP
SU
S
SAUDI ARABIAN MINING
SU
1290
1291
T
ANTOFAGASTA
UK
S
ROCKWELL COLLINS
US
1292
1293
S
CONCHO RESOURCES
US
T
MELCO CROWN ENTERTAINMENT HK
1294
1294
S
TOKYO ELECTRON
JA
S
LABCORP
US
1296
1297
S
METROPOLITAN BANK & TRUST PH
1298
S
CHINA INTERNATIONAL MARINE CN
T
NEWS CORP.
US
1299
S
PAYCHEX
US
1300
1301
S
CERNER
US
1302OHANERGY THIN FILM
POWER GROUP
CN
1302
T
KGHM POLSKA MIEDZ
PL
T
BCI-BANCO CREDITO
CH
1304
T
FIRST FINANCIAL HOLDING
TA
1305
1306
T
CELANESE
US
1307
T
GJENSIDIGE FORSIKRING
NO
S
OBAYASHI
JA
1308
1309
S
NETEASE
CN
S
RURAL ELECTRIFICATION
IN
1310
1311T
SAUDI ARABIAN FERTILIZERS
SU
T
PRADA
IT
1312
1313
T
COLRUYT
BE
S
HAMMERSON PLC.
UK
1314
1314 ORESTAURANT BRANDS
INTERNATIONAL
CA
1316
T
MICHAEL KORS HOLDINGS
HK
1317
S
DARDEN RESTAURANTS
US
T
CHUGOKU ELECTRIC POWER
JA
1318
1318
T
MISC
MA
T
INGRAM MICRO
US
1320
S
ROPER INDUSTRIES
US
1321
1321
T
TRANSOCEAN
SZ
1323
S
HUA NAN FINANCIAL
TA
T
GLOBAL LOGISTIC PROPERTIES SI
1324
1325
S
JIANGSU YANGHE BREWERY
CN
1326
T
EMPIRE
CA
ROSTELECOM
RU
1327
T
T
ATOS
FR
1328
1329OLAM RESEARCH
US
S
WYNDHAM WORLDWIDE
US
1330
1331
T
AMBANK GROUP
MA
S
INTU PROPERTIES PLC.
UK
1331
T
KINTETSU
JA
1333
1333
S
YUANTA FINANCIAL HOLDING TA
1335
S
HYUNDAI MARINE & FIRE
KO
S
TENET HEALTHCARE
US
1335
1337
S
WESTERN REFINING
US
T
DSME
KO
1338
1339
S
CHINA HONGQIAO GROUP
CN
T
PETRONAS CHEMICALS
MA
1339
S
CHINA MERCHANTS HOLDINGS HK
1341
1341
T
COSMO OIL
JA
S
FORTIS (CANADA)
CA
1343

106 | FORBES MAY 25, 2015

S UP T DOWN
O UNCHANGED O NEW

GLOBAL 2OOO

FORBES

VISA
cal team spent more than a year working with
Apple before the launch of Apple Pay last October. The plan: Grab billions of dollars more
in fees each year by making Visa the payment
method of choice for everythingright down to
$1 hamburgers at McDonalds and three-block
taxi rides in Singaporewith the ultimate goal
of replacing cash itself.
It took us 50 years to get to 36 million merchants globally, says James McCarthy, executive vice president in charge of innovation and a
former IBM executive who joined Visa in 1999.
Now, he says, holding his iPhone in the air,
weve got 7 billion of these.
SCHARF HAS BEEN IMMERSED IN CAPITAL MAR-

kets since he was a teenager. He interned at

his fathers offices at Shearson Lehman Bros.
in New York from the age of 13 and landed a
job as Jamie Dimons personal assistant during his senior year at Johns Hopkins. Instead of
leaving for Wall Street after graduation in 1987
he joined Dimon at a Baltimore lending outt
known as Commercial Credit, run by an ambitious banker named Sanford I. Sandy Weill.
For the next two decades he accompanied Weill
and Dimon on a journey through the evolving
nancial marketplace as Weill bought Shearson,
Salomon Smith Barney, Travelers insurance and
ultimately, in 1998, Citigroup.
After Dimon and Weill fell out in the late
1990s, in 2000 Scharf followed Dimon to Bank

One in Chicago, where the two of them became

closer (Scharf and his boss even shared a guitar instructor). He was named chief nancial
officer at the age of 35 and then joined JPMorgan Chase as head of retail nancial services,
including mortgages, when it bought Bank One
in 2004. Scharf guided JPMorgans retail and
mortgage business through the nancial crisisthe big bank took federal bailout funds only
because we were asked, Dimon later saidbut
quit that job in 2011 to run JPMorgans $10 billion private equity arm in what some took as a
demotion. Dimon says Scharf came to him looking for a change after years in the
same retail job. What else could I
do? says Dimon, now JPMorgan
Chases chairman and CEO.
He described his longtime
lieutenant as very diligent, very
NINTENDO
bright, very honest, who has an
Can Mario nally go mobile? Betability to handle lots of complex
ter hope so after
three consecutive
things, relate to lots of people.
years of losses.
All of which is proving useful in
Visas C-suite. The company has roots in BankAmericard, which San Francisco-based Bank
of America rolled out in 1958 as the rst credit card available to middle-class consumers and
smaller merchants who lacked their own private charge cards.
Originally a simple paper card with a $300
credit limit, BankAmericard was vulnerable to
fraud. Merchants literally ipped through tele-

THE NEXT WAVE

1. Customers phone veries identity with a
thumbprint or facial recognition, and then a
secure element or tamper-proof chip inside
transmits a 16-digit token and unique cryptogram
to authorize the charge. It sends the information
wirelessly to the merchants point-of-sale terminal.

3. Visa swaps the token for the cardholders actual 16-digit number and
analyzes up to 500 variables before
authorizing or rejecting the charge
within milliseconds.

2. The POS sends the

4. The bank that issued the

token and cryptogram to

the merchants acquiring
bank and on to the Visa
network for verication.

card to the customer approves

payment and sends money to
the acquiring bank via Visas
settlement and clearing system.
ACQUIRING BANK

DANIEL HERTZBERG FOR FORBES

ISSUING BANK

THE TOKENIZATION TECHNOLOGY IN APPLE PAY ALLOWS CONSUMERS TO

BUY GOODS WITH A SIMPLE TAP OF THE CELLPHONE AT A STORE TERMINAL.

1344
S
AYALA CORP.
1344
T
EISAI
S
INNER MONGOLIA
1344
BAOTOU STEEL
1347
S
CHECK POINT SOFTWARE
1348
S
INOTERA MEMORIES
1349
T
ABENGOA
1349
S
SL GREEN REALTY
S
ANTERO RESOURCES
1351
1352
S
NRNBERGER
S
MONSTER BEVERAGE
1353
1354
S
MASHREQ BANK
T
SEARS HOLDINGS
1355
T
AEROPORTS DE PARIS
1356
1357OSKYWORKS SOLUTIONS
1358
T
CHICAGO BRIDGE & IRON
S
OLYMPUS
1359
1360
S
AAREAL BANK
S
SNC-LAVALIN GROUP
1361
1362
S
CRESCENT POINT ENERGY
T
COMPUTER SCIENCES
1363
1364
S
ANGANG STEEL
1365OCHEIL INDUSTRIES
S
FOOT LOCKER
1365
1367
S
E-TRADE FINANCIAL
1368
T
PIRELLI & C.
T
WANT WANT CHINA
1369
1370
S
BANK OF CHONGQING
1371
S
NIPPON EXPRESS
S
ADOBE SYSTEMS
1372
T
PIRAEUS BANK
1373
1374
S
CHINA LONGYUAN POWER
T
SMITH & NEPHEW
1375
T
AGILENT TECHNOLOGIES
1376
1376
S
SINOPAC FINANCIAL
1378
T
IHI
S
NVIDIA
1379
1380OSEKISUI CHEMICAL
1381
T
REGENERON PHARMACEUTICALS
S
ACCOR
1382
T
STEEL AUTHORITY OF INDIA
1383
1384
S
CHINA MENGNIU DAIRY
S
FUKUOKA FINANCIAL GROUP
1384
1386
T
ZIONS BANCORP
T
LATAM AIRLINES
1387
1388OKERRY PROPERTIES LTD.
T
ICA GRUPPEN
1389
1390
T
KOREAN AIR
S
CAPITA
1391
1392
S
AMERICAN WATER WORKS
T
TORCHMARK
1392
1394
T
NINTENDO
T
BUNZL
1395
1396
T
DAI NIPPON PRINTING
T
HOLLYFRONTIER
1396
1398
S
KT&G
T
AMERICAN CAPITAL AGENCY
1399
1400
S
ACTELION
T
KAJIMA
1401
1402
T
S-OIL
T
AXIS CAPITAL HOLDINGS
1403
1404OJB FINANCIAL GROUP
T
MEDIPAL HOLDINGS
1405
1406
T
GKN
S
BANCO OCCIDENTAL
1407
1407OEXPEDIA
S
WOLTERS KLUWER
1409
1410
S
ARM HOLDINGS
METRO INC.
1411T
1412
S
BRILLIANCE CHINA
AUTOMOTIVE HOLDINGS
1412
S
COMPAL ELECTRONICS
S
SAUDI HOLLANDI BANK
1412
S
CHIPOTLE MEXICAN GRILL
1415
1416
T
CPFL ENERGIA
S
TAIWAN COOPERATIVE
1417
FINANCIAL
1418 OTONENGENERAL SEKIYU
S
CROWN HOLDINGS
1419
1419
S
GRUPO ELEKTRA
T
AOZORA BANK
1421
1422
S
SIGMA-ALDRICH
S
TAQA
1423
1424
S
QATAR ISLAMIC BANK
T
COMMERCIAL BANK OF QATAR
1425
1426
T
OJI HOLDINGS
T
INDUSTRIVARDEN
1427
1428
T
REXEL
T
TOPPAN PRINTING
1428
S
WHITBREAD
1430
1431
T
AHLI UNITED BANK
1432
T
UNION BANK OF INDIA
T
BANCO DAVIVIENDA
1433
1434
S
ELECTRIC POWER DEVELOPMENT
O
WESTFIELD
1435
S
REMGRO
1436
1437
T
ALPHA BANK
1438OCENTENE
T
BANCO COMERCIAL PORTUGUES
1439
1440
S
GEBERIT
1441
T
MAXIS
1442
S
HANESBRANDS
S
ASSURED GUARANTY
1443
1444
S
BENDIGO & ADELAIDE BANK
S
SIKA
1445
1446
T
GRUPO CARSO
T
ARAMARK
1447
T
TRAVIS PERKINS
1447
1449
T
WRTSIL
1450OFOUNDER SECURITIES
T
COACH
1451
1451
T
DASSAULT AVIATION
T
ILIAD
1453
1454
T
CHAROEN POKPHAND FOODS
S
ASPEN PHARMACARE HOLDINGS
1455
1455OLARGAN PRECISION
1457
T
BANCO POPOLARE
S
CHANG HWA BANK
1457
T
AMETEK
1459
1460
S
JARDEN

108 | FORBES MAY 25, 2015

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CA
US
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US
US
IT
CN
CN
JA
US
GR
CN
UK
US
TA
JA
US
JA
US
FR
IN
CN
JA
US
CH
HK
SW
KO
UK
US
US
JA
UK
JA
US
KO
US
SZ
JA
KO
BU
KO
JA
UK
VZ
US
NE
UK
CA
CN
TA
SU
US
BR
TA
JA
US
MX
JA
US
AE
QA
QA
JA
SW
FR
JA
UK
BN
IN
CO
JA
AU
SA
GR
US
PO
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US
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FR
TH
SA
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US

SEARS: AMANDA GORDON/

BLOOMBERG

phone-book-size volumes to check the validity of card numbers. Bank of America spun
out what became Visa in 1970, and three years
later Visa unveiled the rst electronic authoSEARS
rization system, called BASE I. It followed
HOLDINGS
with BASE II in 1974, an electronic system for
CEO Eddie Lampert
spins real estate into
clearing and settling transactions among the
REIT as retailers collapse continues. How
banks that issue cards to consumers and acmany more tricks
does he have left?
quiring banks, which represent merchants.
Now Visa sits at the center of a global network of more
than 1,500 banks linked by 1.5 million miles of secure ber-optic lines, serving as a sort of intelligent switch for
deciding whether to move money to pay for each transaction. It also scouts for fraud and helps settle disputes over
charges. Visa doesnt reap the reward of those usurious
20% interest fees or even the vast majority of the 2.75%
charged to merchants. Instead it
has to be content collecting 8 to
20 basis points, or hundredths of a
percent, off of each transaction.
At the heart of the system is that
WARTSILA
annoying-to-type 16-digit number
Finnish enginemaker sees demand
fall due to lower prices for crude oil.
embossed on the plastic bulging

your wallet. When a customer swipes a card or cellphone

at a merchants point-of-sale terminal, that information
is transported to one of Visas data centers. Within milliseconds its computers use a constantly evolving set of algorithms to determine whether the purchase ts the customers buying proleor whether its likely to be fraudulent or exceed the banks credit limit.
BUT THERES A SOMEWHAT FATAL FLAW TO ALL OF THIS,

one Scharf knew hed have to contend with when he

joined the rm looking to expand more rapidly into mobile commerce and the multitrillion-dollar cash economy.
With access to a credit card number, plus a few other easily obtainable details, fraudsters gain full control of an accounts purchasing power and can encode magnetic strips
on blank plastic cards (Amazon.com will sell you a magnetic card reader/writer for $17). Worldwide, credit card
fraud is estimated to have topped $14 billion last year, according to The Nilson Report, with banks and merchants
bearing most of the cost.
To truly protect accounts, you need to keep those 16digit numbers private, restricting access to those within
Visas secure network. There are existing solutions: Eu-

Because
weekend warrior

Fast. Simple. Powerful. Try it free at gotomeeting.com.

2015 Citrix Systems, Inc. All rights reserved.

GLOBAL 2OOO

FORBES

VISA
including 1,000 in the U.S., to creropean card issuers have used difficult-to-copy
microchips and personal identication numbers ate software and tools for online
and mobile purchases this year,
to protect transactions for years, but U.S. meron top of the 6,000 employees
chants have resisted paying for the setup.
he now oversees. He also overSystems like Apple Pay, which operate with
sees the once unthinkable prosoftware-based encryption known as tokenizacess of opening up Visas network
tion, promise an alternative, one with more seto outside developers working
curity yet without the complication of punchNETFLIX
Netix hits 62 million
on the next generation of mobile
ing a PIN into a keyboard. Instead of using the
subscribers thanks
to slew of original
apps. The company has already
customers actual 16-digit credit card numcontent.
released a set of application prober, a phone equipped with Apple Pay transgram interfaces, or APIs, to simplify transactions
mits a dummy number, a software token, as
and speed the adoption of Visa Checkout, an enits known, which alerts the computer terminal
crypted, standardized version of Amazons oneat the retailers checkout counter to request anclick payment system for websites.
other vital piece of information from a chip in
Were telling [developers], Please dream,
the phone: a cryptogram, or a long string of randomly generated numbers, that only Visas com- please build new applications, says Taneja.
Scharf clearly recognizes the potential threat
puters can verify. Transactions can be further
from new electronic payment systems, most
protected by biometric security like thumbprint
famously Bitcoin, which rescanners and even facial recogniplaces Visas sprawling computtion. If a hacker somehow cloned
er network with a single registry
a customers phone, Visas comCREDIT CARDS HAVE ALREADY
OUTSTRIPPED ALL FORMS OF
maintained by many computers,
puters would detect that it was
PAYMENT IN THE U.S.EVEN CASH.
where payments are transferred
being used in two places at once
$4.11
2013
from one account to another
and shut down the account.
2018
with a simple journal entry. No
Coupling that kind of secu$3.14
one owns Bitcoin; its just a platrity with the ubiquity of mobile
($TRIL)
$2.49
form created by an anonymous
phones could allow Visa to attract
$2.17
$2.11
coding genius (or possibly a
millions more customers around
$1.56
$1.35
group of several geniuses) workthe globe and billions more trans$1.03 $1.05
$0.57
ing under the name Satoshi
actionsplus the fees. For a
Nakamoto. Venture capitalglimpse of where this leads, look
Cash
Checks
Credit
Debit Electronic
Cards
Cards Payments
ists, excited by the buzz around
at what happened when Visa lowSOURCE: THE NILSON REPORT.
the new currency, have poured
ered its fees and eliminated sigmore than $300 million into businesses that ennatures for fast-food and many other purchases
able Bitcoin transactions or use its underlying
under $25 (who steals a hamburger, anyway?).
currency. I dont stay awake at night worryMcDonalds quickly became the largest merchant
ing about Bitcoin, says Scharf, but Im also not
by number of transactions on the Visa network.
dismissive of it.
Tokenization is the enabler, says Scharf,
Under Scharf, Visa is experimenting with
who demanded weekly updates from his team
alternative payment sysduring the yearlong process of building Apple
tems. It was an early invesPay. Whether theyre big tickets or small ticktor in Square, which allows
ets, we like it all.
small merchants to process
SCHARF IS A TECHNOLOGY TRUE BELIEVER.
card transactions on their cellFAMILY DOLLAR
He joined Microsofts board last year, and hes
phones. Visa also reportedly
STORES
bingeing on talent like Rajat Taneja, 50, who
put a few million dollars into
An $8.5 billion takeover
by smaller rival Dollar Tree
once ran Microsofts e-commerce platform.
LoopPay, which developed an
expected to close in May.
Scharf recruited Taneja away from Electronic
ingenious method for generArts in 2013 to run Visas sprawling technology
ating a wireless version of a credit cards magdivision. Working out of Visas industrial-chic of- netic strip. Within six months Visas investment
ces overlooking San Francisco Bay, Taneja will
doubled in value, as Samsung scooped up Loophire 2,000 software engineers and developers,
Pay to install in its phones.

ROGELIO V. SOLIS/AP (BELOW)

HOW WE BUY

1461
S
HENGAN INTERNATIONAL
GROUP
1462
T
STOCKLAND AUSTRALIA
S
JTEKT
1463
1464
S
ABU DHABI ISLAMIC BANK
1464
T
CAESARS ENTERTAINMENT
1466
S
MEIJI HOLDINGS
1466
T
STRABAG
S
AGL RESOURCES
1468
1468
T
PENTAIR
T
NAVER
1470
1471
T
SHOPRITE HOLDINGS
T
XILINX
1472
T
ZODIAC AEROSPACE
1472
1474
T
INTUITIVE SURGICAL
1474
T
SHIMIZU
S
CATTOLICA ASSICURAZIONI
1476
1477
S
NETFLIX
T
GEA GROUP
1478
1479
S
FAR EASTERN NEW CENTURY
T
DELEK GROUP
1480
1481
T
MITSUBISHI UFJ LEASE
T
ENKA
1482
T
NMDC
1483
1484
S
UNION NATIONAL BANK
1485
T
PETRONAS GAS
S
SMURFIT KAPPA GROUP
1486
1487
S
WESTLAKE CHEMICAL
1488
T
EQT
T
DEXIA
1489
1490OBARRATT DEVELOPMENTS
1491
T
COLOPLAST
T
HEXAGON
1492
S
ILLUMINA
1493
1494
T
OTP BANK
1495
S
ALINMA BANK
T
MCGRAW-HILL COS.
1496
1497
S
SHIMANO
1498
T
ZENITH BANK
T
QANTAS AIRWAYS
1499
T
US STEEL
1500
1501 OSOCIEDADES BOLIVAR
S
FRANSHION
1502
PROPERTIES (CHINA)
1503
T
CITY DEVELOPMENTS
T
SAMSUNG HEAVY INDUSTRIES
1503
1505
S
NEW HOPE LIUHE
S
ALASKA AIR GROUP
1506
1507OTRANSURBAN GROUP
1508OOLEO E GAS PARTICIPACOES
1509OSHANGHAI COMMERCIAL
& SAVINGS BANK
T
CHINA LIFE INSURANCE
1510
(TAIWAN)
1510
S
E.SUN FINANCIAL
S
COMMERCIAL
1512
INTERNATIONAL BANK
1512 OIDEA CELLULAR
T
AMBAC FINANCIAL GROUP
1514
1515
T
NESTE OIL
T
ALFRESA HOLDINGS
1516
1517
S
PANDORA
T
SHOWA SHELL SEKIYU
1518
1519
S
NOVOZYMES
S
TRACTOR SUPPLY
1520
1521
T
MATTEL
T
ISETAN MITSUKOSHI HOLDINGS
1522
1523
S
SIGNET JEWELERS
T
SHANXI TAIGANG STAINLESS
1524
1525
T
IDBI BANK
1525OJG SUMMIT HOLDINGS
1527
T
KINGDOM HOLDING
S
HOKUHOKU FINANCIAL GROUP
1528
1528
S
LIG INSURANCE
1530
T
FONCIRE DES RGIONS
T
SEVERSTAL
1530
T
E-MART
1532
1533OCHIMERA INVESTMENT
S
CORPBANCA
1534
1535
T
YAMAGUCHI FINANCIAL
S
WORLD FUEL SERVICES
1536
T
PUBLIC POWER
1537
1538
T
ACCIONA
1539
S
AVIS BUDGET GROUP
S
CHENIERE ENERGY
1540
1541
T
TERNIUM
T
PGN
1542
1543
T
NEWELL RUBBERMAID
T
NIPPON PAPER INDUSTRIES
1544
1545
T
MITSUI CHEMICALS
S
BANCA POPOLARE DI MILANO
1546
T
PEMBINA PIPELINE
1547
1548
S
JB HUNT TRANSPORT
1548
T
TAIWAN MOBILE
T
DASSAULT SYSTEMES
1550
1551 OOFFSHORE OIL ENGINEERING
T
FAMILY DOLLAR STORES
1552
T
OIL & GAS DEVELOPMENT
1553
1554
S
ALMARAI
1555
T
FASTENAL
S
EXPEDITORS INTERNATIONAL
1556
1557
T
ARCA CONTINENTAL
1557
T
PULTEGROUP
1559
S
IOI GROUP
1560
S
EZDAN HOLDING GROUP
1561
S
BURBERRY GROUP
S
BANK AUDI
1562
1563
S
DIA
S
GUANGZHOU AUTOMOBILE
1564
GROUP CO. LTD.
T
OLD REPUBLIC INTERNATIONAL
1565
1566
T
ALTERA
1567
S
KANSAS CITY SOUTHERN
1568OEFG EUROBANK ERGASIAS
1568
T
SANY HEAVY INDUSTRY
T
LOTTE CHEMICAL
1570
1570
T
SINOPEC ENGINEERING (GROUP)
T
COCA-COLA HBC
1572
1573 O3I GROUP
1574 OKIMCO REALTY
T
WILLIS GROUP HOLDINGS
1575

110 | FORBES MAY 25, 2015

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CN
AU
JA
AE
US
JA
AS
US
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FR
US
JA
IT
US
GE
TA
IS
JA
TU
IN
AE
MA
IR
US
US
BE
UK
DE
SW
US
HU
SU
US
JA
NI
AU
US
CO
HK
SI
KO
CN
US
AU
BR
TA
TA
TA
EG
IN
US
FI
JA
DE
JA
DE
US
US
JA
BU
CN
IN
PH
SU
JA
KO
FR
RU
KO
US
CH
JA
US
GR
SP
US
US
LU
ID
US
JA
JA
IT
CA
US
TA
FR
CN
US
PK
SU
US
US
MX
US
MA
QA
UK
LE
SP
CN
US
US
US
GR
CN
KO
CN
SZ
UK
US
UK

1576
S
BANK MUSCAT
1577OTIFFANY & CO.
S
HUNTSMAN
1578
S
RANGE RESOURCES
1578
1580OLUPIN
1580ONINGBO PORT
T
MIZRAHI TEFAHOT BANK
1582
1583OUNITED INTERNET
1584
T
X5 RETAIL GROUP
T
KAWASAKI KISEN KAISHA
1585
1586OAMOREPACIFIC
1587
T
BCV GROUP
S
HARRIS
1587
T
YTL
1589
1590OREXAM
1590OSAMSUNG CARD
1592OBANCO CONTINENTAL
1592
T
INTER RAO
S
CHUGOKU BANK
1594
T
FBN HOLDINGS
1595
1595OMOSCOW EXCHANGE
1597
T
LINEAR TECHNOLOGY
1597ONORWEGIAN CRUISE LINE
HOLDINGS
S
TECH DATA
1599
1600
T
HRG GROUP
1601
T
JOYO BANK
T
CIMAREX ENERGY
1602
1603
S
AFFILIATED MANAGERS GROUP
1604
S
MERITZ FINANCIAL GROUP
S
TWITTER
1605
1606
T
BANCA POPOLARE DELLEMILIA
1607
S
TOSOH
S
HALYK BANK
1608
T
NISHI-NIPPON CITY BANK
1608
1610 OH&R BLOCK
1611 OAECOM TECHNOLOGY
1611 OGRAHAM HOLDINGS
T
SUNAC CHINA HOLDINGS
1613
1614
T
DONGFANG ELECTRIC
T
SUZUKEN
1614
1616
T
77 BANK
1617
T
WISTRON
1618 ORISESUN REAL ESTATE
DEVELOPMENT CO.
1618 OUNITED AIRCRAFT
CORP.
1620
T
FCC
1620
S
LINKEDIN
T
NORTH PACIFIC BANK
1620
1623OAMERICAN REALTY CAPITAL
PROPERTIES
T
HACHIJUNI BANK
1623
1625
T
HANKOOK TIRE
T
MMI HOLDINGS
1625
1627
T
BANK OF KYOTO

OM
US
US
US
IN
CN
IS
GE
RU
JA
KO
SZ
US
MA
UK
KO
PE
RU
JA
NI
RU
US
US
US
US
JA
US
US
KO
US
IT
JA
KZ
JA
US
US
US
CN
CN
JA
JA
TA
CN
RU
SP
US
JA
US
JA
KO
SA
JA

1628OSEAT-PAGINE GIALLE
1628
T
CCR
S
EAST WEST BANCORP
1630
1631
S
LKQ
1631
T
YAMADA DENKI
1633
T
WENDEL
1634
T
HIROSHIMA BANK
1635OMALLINCKRODT
1635
T
BAJAJ AUTO
S
CHINA NATIONAL MATERIALS
1635
1635OSAMSUNG SDI
T
SYNDICATE BANK
1635
S
SVB FINANCIAL GROUP
1640
1641
T
PETRO RABIGH
1641
T
UCB
T
SINO LAND
1643
1644
T
GUNMA BANK
T
HELMERICH & PAYNE
1644
1644OSBM OFFSHORE
S
MERCURIES & ASSOCIATES
1647
1648
S
CHINESE ESTATES
1648OINDUSTRIAL SECURITIES
T
JACOBS ENGINEERING
1650
1651
T
EVRAZ GROUP
1652OTRINITY INDUSTRIES
T
SUMITOMO RUBBER
1653
1654
S
PROSIEBENSAT1 MEDIA
1655
T
GS HOLDINGS
1656OHOSPIRA
T
HYOSUNG
1657
1658
T
GREENTOWN CHINA HOLDINGS
1658OMBIA
S
VERTEX PHARMACEUTICALS
1660
1661
S
SIGNATURE BANK
1662
T
MINMETALS DEVELOPMENT
T
CENTRAL BANK OF INDIA
1663
1663ORHOEN-KLINIKUM
1663
T
ZAIN
S
NASDAQ OMX GROUP
1666
T
NOMOS BANK
1667
1668
S
KAISA GROUP HOLDINGS
T
AGCO
1669
1669
T
SK NETWORKS
S
RMB HOLDINGS
1671
1672
S
SAUDI INVESTMENT BANK
S
SEALED AIR
1673
1674OFLEETCOR TECHNOLOGIES
S
SHISEIDO
1675
1676
T
BLOM BANK
T
IYO BANK
1676
1678
S
BAYWA
T
GUDANG GARAM
1679
1680OGOODMAN GROUP
T
ISRAEL DISCOUNT BANK
1680
1682OOSISKO GOLD ROYALTIES

IT
BR
US
US
JA
FR
JA
IR
IN
CN
KO
IN
US
SU
BE
HK
JA
US
NE
TA
HK
CN
US
UK
US
JA
GE
KO
US
KO
CN
US
US
US
CN
IN
GE
KU
US
RU
CN
US
KO
SA
SU
US
US
JA
LE
JA
GE
ID
AU
IS
CA

Now Visa is working with automakers to embed tokenization into cars,

turning them, in essence, into rolling credit cards. Consumers will be able
to query their onboard navigation system about the nearest pizza joint,
order a large pie with bacon and onions, and pay for it in the drive-through
via a secure Bluetooth connection linked to the cars unique vehicle identication number. Need a ll-up? Pull up to the pump, put the nozzle in your
car and let the software pay.
THERES ANOTHER HUGE OPPORTUNITY TO ALL THIS TECHNOLOGY, ONE THE

company is only starting to leverage: personal data. Every time you swipe
your card, Visa collects a tranche of informaVERTEX
tion deep enough to drown an NSA agent:
PHARMACEUTICALS
spending habits, travel history and, with the
Shares have more than
doubled on outlook for
addition of GPS-enabled devices, exact locapowerful new cystic brosis
drug Kalydeco.
tions. The company knows more about the
habits, hobbies, tastes and trends of the worlds
consumers than any organization on earth. Visa has the most dataits the
single-biggest advantage they have, says Matt Harris, a managing director
with Bain Ventures who invests in alternative payment systems.
Lately it has been tapping that vast trove of information to help member merchants. In 2011 Visa and clothing retailer Gap announced Mobile 4 U, for example, a service that allows Gap to re text messages to
consumers alerting them to deals when they are near a Gap store. Only

Because
Monday pitch meeting

Fast. Simple. Powerful. Try it free at gotomeeting.com.

2015 Citrix Systems, Inc. All rights reserved.

GLOBAL 2OOO

FORBES

VISA
sion of its processing network for the bank
Visa has all the data necessary to tell a retailer that a loyal, big-spending customer is nearby under a ten-year contract that reportedly includes lower fees. Scharf folded in this conand possibly open to a discount offer, a potentest against his former boss,
tial gold mine for marketersand potentially
Dimon. Neither would comtransformative for the way goods are marketment on the deal. Pressed to
ed. Of course, location-based marketing might
discuss Visas relationship
strike some people as creepy, so to assuage
with merchants and banks,
concerns Scharf says Visa will allow such proScharf says simply: We ungrams only on an opt-in basis.
TESLA MOTORS
New battery plans have
derstand who our clients are.
Visas urge to help retailers isnt totally alinvestors salivating.
For the time being Scharf
truistic: The companys relationship with merwill have to remain content to boost revenue
chants remains strained, and Visa is clearly
based on increasing the number of transactions
looking to do more than just gin up additional
transactions. Retailers have won billions of dol- it processes rather than increasing its cut. Visas
greatest growth, not surprisingly, is likely to come
lars in antitrust suits against Visa and MasterCard, accusing them of helping banks keep fees in emerging markets, where cash dominates (and
fees tend to be higher). China, so far, is off limits,
too high with rules that prohibited them from
with its $6.9 trillion credit card business held by
encouraging customers to use cash or less exthe state-controlled UnionPay system, but Chipensive debit cards. As part of the settlement
nese officials plan to open up the processing side
Visa and MasterCard dropped those rules, but
the two are still being sued by holdouts, includ- of the business to foreign companies.
Africa, too, represents a big opportunity. Deing Wal-Mart, which are seeking billions more.
Visa continues to have some market power velopers there came up with a clever way to
move money via prepaid cellphones, and Visa
to set fees higher than they should be, said
Craig Wildfang, the Minnesota lawyer who ne- adapted its existing mechanism for paying refunds into a worldwide
gotiated a $7.25 billion setcash-transfer system. Elsetlement of antitrust claims
where in the developwith Visa and MasterCard
SINCE GOING PUBLIC IN 2008, VISA SHARES HAVE
BEEN A STANDOUTEVEN IN A BULL MARKET.
ing world, Visa has used
that was approved in 2013.
500
its analytics to help retailThere is and there has
400
VISA INC. CLASS A - TOTAL RETURN
ers identify bottlenecks,
been price competition in
300
like the grocer in Indonethe business, says Scharf.
200
3/18/08=100
sia who increased sales by
People have choices.
accepting electronic payPerhaps the biggest
100
ments for small transacproblem for Visa is one
S&P 500 - TOTAL RETURN
tions and thus sped custhats been part of the
50
tomers through the checkcompany since it was
2008 2009
2010
2011
2012
2013
2014 2015
out line.
formed: Visa doesnt issue
Meanwhile, sales and earnings should climb
Visa cards, and thats unlikely to change anysteadily for some time. Deutsche Bank estimates
time soon. They dont have any direct relationships with cardholders or any direct physi- Visas revenue will grow another 11% next year
to $15.4 billion as earnings per share, buoyed by
cal relationships with merchants, says Harris.
a $5 billion stock buyback program, rise 15%.
Which means Visa cant charge higher fees for
At some point Scharf will have to negotiate the
providing rewards to consumers, say, or forge
purchase of Visas European operation, which
direct relationships with retailers unless it enis still owned by member banks, under a put oplists an acquiring bank as an ally. Despite all
tion that could cost $10 billion, but for now Visa
Scharfs ambitions he remains, ultimately, a
gets fee income from Europe anyway. Besides,
vassal of the banks.
thats just loose change to a company with amScharf was forced to confront this weakbitions as big as Visas. The Visa story is not a
ness shortly after taking charge at Visa when
two-year story or a ve-year story, Scharf says.
JPMorgan Chase, the largest issuer of Visa
We have the opportunity to grow this company
cards, threatened to move its business to Masfor decades to come. F
terCard unless Visa set up a private-label ver-

BIG PAYOFF

112 | FORBES MAY 25, 2015

1683
T
CSN
BR
1684
S
PENSKE AUTOMOTIVE
US
US
1685ONEWFIELD EXPLORATION
1686
T
LIBERBANK
SP
1687
S
LINDT & SPRUNGLI
SZ
1688
T
JGC
JA
1689ODIXONS CARPHONE
UK
T
BANCO BPI
PO
1690
1691
S
NIPPON STEEL TRADING
JA
GE
1692OAXEL SPRINGER
1692
T
FLOWSERVE
US
S
CJ CHEILJEDANG
KO
1694
T
GECINA
FR
1694
1694
S
PBF ENERGY
US
1697
T
JUROKU BANK
JA
US
1698OESSEX PROPERTY TRUST
1699
S
POLARIS INDUSTRIES
US
T
TESLA MOTORS
US
1700
1701
T
ASHIKAGA HOLDINGS
JA
T
CHINA COMMUNICATIONS
1702
SERVICES
CN
1703OCHINA DEVELOPMENT FINANCIAL TA
IR
1703OENDO
T
SCRIPPS NETWORKS
1705
INTERACTIVE
US
1706
T
AIRPORTS OF THAILAND
TH
1707
T
ALFA LAVAL
SW
TA
1707OCATCHER TECHNOLOGY
1709
S
JABIL CIRCUIT
US
1710
S
GUANGDONG INVESTMENT
HK
INDIAN OVERSEAS BANK
IN
1711S
S
DCC
IR
1712
1713
S
SBI HOLDINGS
JA
JA
1714 OTOKYU FUDOSAN
S
YUNNAN BAIYAO GROUP
CN
1715
1716
S
TAIHEIYO CEMENT
JA
1717
S
FRONTIER COMMUNICATIONS
US
T
K+S
GE
1717
1717 OMAHANAGAR TELEPHONE
NIGAM
IN
1720
T
BANCA CARIGE
IT
S
AMERICAN EQUITY INVESTMENT US
1721
T
RELIANCE STEEL
US
1722
1723
S
CHURCH & DWIGHT
US
T
SENSHU IKEDA HOLDINGS
JA
1724
1725
T
WATERS
US
S
GAMESTOP CORP.
US
1726
1727
T
NANTO BANK
JA
T
TALISMAN ENERGY
CA
1728
1729OCINTAS
US
TU
1729OERDEMIR
1729OTECH MAHINDRA
IN
UK
1732OTAYLOR WIMPEY
1733
T
HYAKUGO BANK
JA
S
TAIWAN BUSINESS BANK
TA
1734
1735
T
PERMANENT TSB GROUP
IR
1736OBEIJING XINWEI TELECOM
TECHNOLOGY GROUP
CN
1736OTOKYO TATEMONO
JA
JA
1738ONIPPON MEAT PACKERS
1738OSPIRIT AEROSYSTEMS
US
T
G4S
UK
1740
1740
T
SOHO CHINA
CN
S
VERISK ANALYTICS
US
1740
1743
S
SUPERVALU
US
T
SALZGITTER
GE
1744
1745
T
TAISHIN FINANCIAL HOLDINGS TA
UK
1746ODERWENT LONDON
1747 OLENS TECHNOLOGY
CN
T
MCCORMICK & CO.
US
1748
1748
T
PINNACLE WEST
US
S
DENBURY RESOURCES
US
1750
1751
S
INTERACTIVE BROKERS GROUP US
1751
T
ST ENGINEERING
SI
T
TOHO BANK
JA
1753
S
FIRST PACIFIC
HK
1754
1755
T
ABERDEEN ASSET MANAGEMENT UK
JA
1755OBROTHER INDUSTRIES
1755
S
CHINA AVIATION OIL
SI
T
BASLER KANTONALBANK
SZ
1758
1759
T
BANCA POPOLARE DI SONDRIO IT
T
OGAKI KYORITSU BANK
JA
1760
1760
T
ORICA
AU
TA
1762ONANYA TECHNOLOGY
1763
T
ISS
DE
T
SURUGA BANK
JA
1764
1765OCOPEL
BR
T
DAISHI BANK
JA
1765
1767
S
CATLIN GROUP
BU
T
CREDITO EMILIANO
IT
1768
1768OFOSHAN HAITIAN FLAVOURING
& FOOD CO.
CN
1768
T
STMICROELECTRONICS
SZ
1771
T
THOMAS COOK GROUP
UK
UK
1772OPERSIMMON PLC.
1773
T
MURPHY USA
US
T
JC PENNEY
US
1774
US
1775OHARMAN INTERNATIONAL
1775
T
TDC
DE
1777
S
HANWA
JA
UK
1778OVIRGIN MONEY HOLDINGS
1779
S
PACKAGING CORP. OF AMERICA US
1780
T
ASHLAND
US
SP
1780
T
BOLSAS & MERCADOS
1782OMIGDAL INSURANCE
IS
1783OCDW
US
T
SHIGA BANK
JA
1783
1785
T
ORIENT
JA
UK
1785OSEGRO PLC.
T
GUARANTY TRUST BANK
NI
1787
1788OGOLDIN FINANCIAL HOLDINGS HK
1788
S
JAPAN EXCHANGE GROUP
JA
US
1790OOFFICE DEPOT
1791
T
NELNET
US
T
TOP FRONTIER INVESTMENT
1792
HOLDINGS
PH
1793OIMI
UK
T
GANSU JIU STEEL GROUP
1794
HONGXING IRON & STEEL
CN
T
FIRST NIAGARA FINANCIAL
US
1795
S UP T DOWN
O UNCHANGED O NEW

SI
IN
CN
JA
US
CN
IN
JA
JA
AU
KO
CN
IS
PH
KO
KO
CN
QA
IN
TA
AU
KO
IN
GE
US
FI
KO
US
US
CN
SU
US
JA
CN
CN
US
CN
US
SP
US
UK
US
IT
US
US
TA
TA
NO
US
US
US
JA
GR

JA
1848OKIYO BANK
1850
T
GS ENGINEERING
KO
1851 OLG HOUSEHOLD & HEALTH CARE KO
1851 ORADIAN GROUP
US
1853
T
BOK FINANCIAL
US
1854
S
PANG DA AUTOMOBILE TRADE CN
1855
T
BANQUE CENTRALE POPULAIRE MO
US
1855OHEALTH NET
1855OSYNNEX
US
T
ALPIQ HOLDING
SZ
1858
1858
T
HUNAN VALIN STEEL
CN
T
MAANSHAN IRON & STEEL
CN
1858
S
ORIENTAL BANK OF COMMERCE IN
1858
1862OEP ENERGY
US
1862
T
KAGOSHIMA BANK
JA
T
HOPSON DEVELOPMENT
1864
HOLDINGS
HK
1865
T
HUGO BOSS
GE
T
CHENG SHIN RUBBER
1866
INDUSTRY CO.
TA
1867OUNDER ARMOUR
US
S
SYMETRA FINANCIAL
US
1868
1869
S
HYUNDAI WIA
KO
T
POPULAR
US
1870
S
ALLIANT ENERGY
US
1871
1872
T
HOKKOKU BANK
JA
1872OKB HOME
US
S
CITY NATIONAL
US
1874
1875OBANK OF CYPRUS
CY
1875
T
SARAS
IT
T
AIRGAS
US
1877
HK
1877OENN ENERGY HOLDINGS
1879OAPA GROUP
AU
T
CENTURY TOKYO LEASING
JA
1879
T
WORKDAY INC.
US
1881
1882
T
BABCOCK INTERNATIONAL
GROUP
UK
1882
T
VARIAN MEDICAL SYSTEMS
US
S
KUWAIT PROJECTS
KU
1884
1885OMITSUI ENGINEERING
& SHIPBUILDING
JA
1885
T
ZOOMLION HEAVY INDUSTRY
CN
T
AIR CANADA
CA
1887
UK
1888OASHTEAD GROUP
1888
T
LUNDBERGS
SW
S
STERICYCLE
US
1890
1891
T
INCHCAPE
UK
S
AMDOCS
US
1892
1893OQEP RESOURCES
US
T
INDIAN BANK
IN
1894
1895
T
A2A
IT
1896OSINOTEX INVESTMENT
& DEVELOPMENT
CN
1896
T
CNO FINANCIAL GROUP
US
US
1896OWELLCARE HEALTH PLANS
1899OGREAT PORTLAND ESTATES
UK

PEABODY ENERGY
With shares down 75%, can this mining
giant survive Americas War on Coal?

UNDER ARMOUR
Investing heavily in womens
workout-wear business, which
generated $600 million last year.

GAMESTOP
Now trading in retro game consoles like
Super Nintendo in hope that vintage sells.

T
THANACHART CAPITAL
TH
1899
1901 OOVERSEAS UNION ENTERPRISES SI
US
1902OREALTY INCOME
1902OSNAP-ON
US
1902
T
VIETIN BANK
VE
1905OSHANGHAI INDUSTRIAL HOLDINGSCN
T
SDZUCKER
GE
1905
T
ST GALLER KANTONALBANK
SZ
1907
1908OAMTRUST FINANCIAL SERVICES US
1909
T
HOKKAIDO ELECTRIC POWER
JA
1909
T
MICROCHIP TECHNOLOGY
US
1911 OSICHUAN CHUANTOU ENERGY CN
1912 OCULLEN/FROST BANKERS
US
1913 OCOMMERCIAL BANK FOR INVESTMENT
& DEVELOPMENT OF VIETNAM
VE
1913 OCYS INVESTMENTS
US
CN
1913 OKANGMEI PHARMACEUTICAL
T
IKB DEUTSCHE
GE
1916
1916 OPEPCO HOLDINGS
US
T
MECHEL
RU
1918
CN
1918 OOCEANWIDE HOLDINGS
1918
S
SHUI ON LAND
CN
T
FIBI HOLDINGS
IS
1921
1922
T
EMS-CHEMIE HOLDING
SZ
1922OFIRST CITIZENS BANCSHARES US
1922OSBA COMMUNICATIONS
US
SZ
1925OSONOVA HOLDING
S
YUNNAN YUNTIANHUA
CN
1925
1927
T
MAIL.RU GROUP LTD.
SPONSORED GDR REGS
RU
1927
T
SHANGHAI MATERIAL TRADING CN
T
JAPAN SECURITIES
JA
1929
1930
T
DVB BANK
GE
TH
1931 OTMB BANK
1932OCANTV
VZ
T
LUZERNER KANTONALBANK
SZ
1932
1932
T
METCASH
AU
T
INTERCONTINENTAL HOTELS
UK
1935
1935
T
SECURITAS
SW
JA
1935OSEIBU
1938
T
LAURENTIAN BANK
CA
T
ROYAL BOSKALIS
NE
1938
BANK OF NAGOYA
JA
1940
T
S
ARAB BANKING
BN
1941
1942OEMPRESAS CMPC
CH
AU
1943OOIL SEARCH
1943ORESMED
US
T
CST BRANDS
US
1945
1946ODR. REDDYS LABORATORIES
IN
SI
1946OFRASERS CENTREPOINT
1948OINCYTE
US
T
VALIANT HOLDING
SZ
1948
1950
S
TOYOTA BOSHOKU
JA
T
EMBRAER
BR
1951
1951 OFREESCALE
SEMICONDUCTOR INC.
US

Because
redemption

When life throws the occasional curveball, you can rely on GoToMeeting
to connect you and your ideas with anyone, anywhere, any time.

Fast. Simple. Powerful. Try it free at gotomeeting.com.

2015 Citrix Systems, Inc. All rights reserved.

1953
S
KONICA MINOLTA
JA
1953OTBEA
CN
S
ANDHRA BANK
IN
1955
T
KESKO
FI
1956
1956
T
SEVERN TRENT
UK
1958
S
CAIXA ECONOMICA
MONTEPIO GERAL
PO
T
THAI OIL
TH
1958
1960
T
MOTOR OIL
GR
1961 OALLIED WORLD ASSURANCE
SZ
SI
1962OCWT
1963ODAEWOO SECURITIES
KO
1964ONOK
JA
T
ALDAR PROPERTIES
AE
1965
T
HYSAN DEVELOPMENT
HK
1966
1967
T
LS CORP.
KO
1968OROHM
JA
HK
1969OKWG PROPERTY HOLDING
1970
T
PEABODY ENERGY
US
T
UMICORE
BE
1970
T
BANK OF IWATE
JA
1972
1972OCHINA POWER INTERNATIONAL
DEVELOPMENT
CN
1972
T
TPV TECHNOLOGY
HK
S
BMCE BANK
MO
1975
T
BEKB-BCBE
SZ
1976
1976
T
INTOUCH HOLDINGS
TH
S
SYNOVUS FINANCIAL
US
1978
T
YUEXIU PROPERTY CO.
CN
1978
1980OASSOCIATED BANC-CORP.
US
1980
T
SICHUAN CHANGHONG ELECTRIC CN
US
1982OCHEMTURA
1983ORR DONNELLEY & SONS
US
1983OXINHU ZHONGBAO
CN
1985OJOINT STOCK COMMERCIAL BANK
FOR FOREIGN TRADE OF VIETNAM VE
US
1986OHD SUPPLY HOLDINGS
1987OINDUSIND BANK
IN
HK
1988OBRIGHTOIL PETROLEUM
1989
T
BANRISUL
BR
T
BALFOUR BEATTY
UK
1990
1991 OBURGAN BANK
KU
T
IHEARTMEDIA
US
1992
1992
T
LANXESS
GE
T
OCI
NE
1992
1995
T
ALROSA
RU
QA
1996OBARWA REAL ESTATE
1996
T
YAMANASHI CHUO BANK
JA
1998OTRANSDIGM GROUP
US
T
WEG
BR
1998
2000OHASBRO
US
T
J. FRONT RETAILING
JA
2000
S UP T DOWN
O UNCHANGED O NEW

PEABODY ENERGY: SETH PERLMAN/AP; GAMESTOP: DANIEL ACKER/BLOOMBERG

T
GOLDEN AGRI-RESOURCES
1796
1796
S
JSW STEEL
1798OCHANGJIANG SECURITIES
T
HYAKUJUSHI BANK
1798
1798OPHARMACYCLICS
1801
T
CHINA AGRI-INDUSTRIES
1801
S
UCO BANK
T
SAN-IN GODO BANK
1803
1804
T
HIGO BANK
T
BANK OF QUEENSLAND
1805
1806OSAMSUNG ELECTRO-MECHANICS
1807OHEILAN HOME
T
ISRAEL CORP.
1808
1808
T
MANILA ELECTRIC
1810 ONH INVESTMENT & SECURITIES
DGB FINANCIAL GROUP
1811S
1811T
GUANGDONG ELECTRIC POWER
T
DOHA BANK
1813
1814
T
CORPORATION BANK
S
WPG HOLDINGS
1814
1816 ORAMSAY HEALTH CARE
T
LG UPLUS
1817
T
ALLAHABAD BANK
1818
1818
T
AURUBIS
1820OBIOMARIN PHARMACEUTICAL
1820OFISKARS
1820OKOREA ZINC
1820OQUINTILES TRANSNATIONAL
1824
T
DICKS SPORTING GOODS
S
SINOMACH AUTOMOBILE
1825
1826OJABAL OMAR DEVELOPMENT
T
KLA-TENCOR
1826
T
KEIYO BANK
1828
1829
S
FINANCIAL STREET HOLDINGS
1830OVIPSHOP HOLDINGS
T
HUDSON CITY BANCORP
1830
1830
S
TONGLING NONFERROUS
METALS
S
AKAMAI TECHNOLOGIES
1833
1834
T
ENAGAS
S
PEOPLES UNITED FINANCIAL
1834
1836
S
ICAP
S
PALL
1837
1838
T
CREDITO VALTELLINESE
T
ERIE INDEMNITY
1838
1838OHUNTINGTON INGALLS
INDUSTRIES
T
INVENTEC
1841
1842OPRESIDENT CHAIN STORE
1842
T
SPAREBANK 1 SR-BANK
1844OJONES LANG LASALLE INC.
S
EQUIFAX
1845
1845OINTERNATIONAL FLAVORS
& FRAGRANCES
T
MUSASHINO BANK
1845
1848
T
HELLENIC PETROLEUM

GLOBAL 2OOO

HALL
OF
FAME
Change has been
the only constant
for the companies of
the Global 2000 list
over the last decade.
But through all the
turmoilincluding
the most severe
nancial crisis since
the 1930sthese
six CEOs have not
only kept their
jobs, theyve also
presided over some
of the worlds best
growth stories.
BY STEVE SCHAEFER

AMERICAN TOWER

James Taiclet Jr.

Age 55. CEO since 2003
INDUSTRY: telecommunications towers
RANK: 798 (+556 spots since 2006)
SALES: $4.1 billion (+334%)
PROFITS: $824.9 million (N/A)
ASSETS: $21.3 billion (+143%)
MARKET CAP: $41.2 billion (+215%)

$5.1 billion

AMOUNT PAID TO VERIZON TO TAKE OVER 11,448 OF ITS TOWERS IN

2015, BY FAR THE BIGGEST DEAL IN AMERICAN TOWERS HISTORY.

114 | FORBES MAY 25, 2015

BOSTON

There might be ten factors

driving the growth of the
mobile Internet industry, but it all relies on
radio-based technology, and the physics are
unassailableif you want more people
to have broadband Internet, you
need more equipment in the field.

The most
transformative
technology of the next ten
years will be personalized
medicine. Driverless
cars will pale in
comparison.

FRESENIUS

BAD HOMBURG, GERMANY

Mark Schneider
WOLFGANG WILDE FOR FORBES; OPPOSITE: JAMEL TOPPIN FOR FORBES

Age 49. CEO since 2003

INDUSTRY: health care
RANK: 283 (+559 spots)
SALES: $30.8 billion (+212%)
PROFITS: $1.4 billion (+521%)
ASSETS: $48.3 billion (+341%)
MARKET CAP: $32.8 billion (+316%)

$4.6 billion
VALUE OF SEPTEMBER 2008 TAKEOVER
OF APP PHARMACEUTICALS, BASED IN
SCHAUMBURG, ILL., THE MAKER OF AN
INJECTABLE BLOOD-THINNING DRUG
USED IN DIALYSIS PATIENTS.

MAY 25, 2015 FORBES | 115

HENRY SCHEIN

MELVILLE, N.Y.

Stanley Bergman
Age 65. CEO since 1989
INDUSTRY: dental and medical supplies
RANK: 1144 (+633 spots)
SALES: $10.4 billion (+124%)
PROFITS: $466.1 million (+208%)
ASSETS: $6.1 billion (+138%)
MARKET CAP: $11.8 billion (189%)

40

NUMBER OF COMPANIES HENRY SCHEIN HAS ACQUIRED OVER THE LAST DECADE.

116 | FORBES MAY 25, 2015

JAMEL TOPPIN FOR FORBES; OPPOSITE: PHOTOGRAPH BY JONATHAN KOZOWYK FOR FORBES; GROOMING BY SUZANA HALLILI; REPORTING BY CHRISTOPHER HELMAN

Digitization is changing the way that dentistry is practiced, and there is

no doubt that over the next decade there will be exciting advancements
in this area that we cannot even dream of today. There is a tremendous opportunity
in countries with a rapidly expanding middle class, a political
environment conducive to business and a highly skilled workforce.

NRG ENERGY

PRINCETON, N.J.

GLOBAL 2OOO
HALL OF FAME

David Whipple Crane

Age 56. CEO since 2003
INDUSTRY: electric utilities
RANK: 943 (+1052 spots)
SALES: $15.3 billion (+546%)
PROFITS: $134 million (+28%)
ASSETS: $40.7 billion (+422%)
MARKET CAP: $8.3 billion (+119%)

2 million

NEW HOUSEHOLD CUSTOMERS NRG GAINED ACCESS TO WITH

ITS 2009 TAKEOVER OF RETAIL ENERGY PROVIDER RELIANT.

Two pieces
of advice
stand out in my mind:
Any time someone
comes to you seeking
to make a strategic
investment, substitute
the word stupid for
strategic and youll be
fine. And never defend
the indefensible, which
actually came from
my father. If you think
about the two bits of
advice, theyre
related.

MAY 25, 2015 FORBES | 117

GLOBAL 2OOO
HALL OF FAME

ECOLAB

ST. PAUL, MINN.

Douglas Baker Jr.

Age 56. CEO since 2004
INDUSTRY: cleaning chemicals
RANK: 498 (+642 spots)
SALES: $14.3 billion (+215%)
PROFITS: $1.2 billion (+277%)
ASSETS: $19.5 billion (+413%)
MARKET CAP: $34.1 billion (+268%)

$5.4 billion

VALUE OF THE 2011 MERGER WITH NAPERVILLE, ILL.-BASED WATER TREATMENT COMPANY NALCO.

Our focus is delivering clean water, safe food, abundant energy and healthy
environments. These needs are fundamental and transcend economic ups
and downs. Wherever water needs to be conserved, food needs to be safe, energy
is required and people seek healthier environments, we will find opportunity.
118 | FORBES MAY 25, 2015

RYANAIR

DUBLIN

Michael OLeary
Age 54. CEO since 1994
INDUSTRY: airlines
RANK: 829 (+547 spots)
SALES: $7.3 billion (+320%)
PROFITS: $1.1 billion (+207%)
ASSETS: $12.7 billion (+158%)
MARKET CAP: $16.5 billion (+135%)

150
million

PASSENGERS RYANAIR EXPECTS

TO SERVICE ANNUALLY IN 2024,
UP FROM 89 MILLION IN 2014.

WOLFGANG WILDE FOR FORBES; OPPOSITE: JAMEL TOPPIN FOR FORBES

In low-fare airlines Boeings new

737 MAX aircraft is a game changer with
4% more seats (allowing average fares to fall by up
to 5%) and a great new engine technology, which
will reduce fuel consumption, oil bills
and emissions by almost 20% per seat.
MAY 25, 2015 FORBES | 119

Quinnipiac National Poll - March 9, 2015

WORKPL ACE OF THE FUTURE

OK ROBOT
Decades of science ction
movies have trained us to fear
robots: They will enslave us.
Wipe us out. Take our jobs.
In real life, humans and
machines are teaching
each other how
to do more
together
than they
could do
alone. Here
are six companies
where robot
training is well
under way and
the humans are
getting valuable
tech skills in the
bargain.
BY ALEX KNAPP

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& HR SYSTEMS
TURNING YOU INTO A

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Workday is your strategic edge.

we are
Workday and the Workday logo are registered trademarks of Workday, Inc.
2015 Workday, Inc. All rights reserved.

RETHINK ROBOTICS

JAMEL TOPPIN FOR FORBES

PARL OR TRICKS ARE PRODUCTIVITY

Engineer NATE KOONTZ is a trainer for Rethink

Robotics versatile Baxter, and for each new customer
(John Deere and Kaiser Permanente among them)
he usually starts by studying photos or illustrating
the task that a customer would like to automate
long before rigging up Baxter to an assembly
line. Total training time can take anywhere
from a couple of hours to a month on-site,
depending on complexity. Rethink often
holds hackathons to teach Baxter new tricks,
such as bartending or playing Connect Four.
Games can unearth ideas for new software
features. One such solution came from an
employee whod trained Baxter to make
coffee with a Keurig brewer. The
process ended up being used by a
Baxter doing quality control for
a consumer beverage company. That particular Baxter
was trained to mix a
drink, examine it for
sediment and pour
it out in a manner similar to
the way it was
trained to
brew coffee.

AUTODESK
TEACHING A ROBOT TO PAINT

In the new short lm Artoo in Love, the famous Star Wars droid goes head-over-wheels for a similarly domeshaped U.S. mailbox. The lm, written and directed by Autodesk engineer Evan Atherton, called for a scene
in which the lovers pose for a sketch artist, also a robot. Not settling for fakery, Atherton asked his Autodesk
colleague DAVID THOMASSON if he could train a robot to sketch from life. Why not? They tutored the robot rst on line drawings, guiding its arm across the canvas, then moved on to curves and ourishes until its
algorithms could eventually take over. With the lm wrapped, the team is now teaching the robot to paint and
eventually will use motion-capture so it can mimic and adapt human actions to make more original works.
The hope, says Thomasson, is that robots will be not just a practical tool but also a creative partner.

RAYTHEON

TIM PANNELL FOR FORBES

LEARNING FAST AND IN UNISON

Raytheons 47,000-square-foot factory in

Tucson is chock-full of robots and humans
working together. Raytheon doesnt build
its bots: It buys them and installs a common software interface to make them
simpler to train and retask. When a robot
needs to learn something, the task is rst
simulated in Raytheons software and then
pushed to the robot for initial testing. The
whole process can take just a few hours
to a day, according to operator CHARLES
SCOTT. Once a bot is on the oor, the factory line simulation is updated and pushed
out to robots already in use. Theyre very
common robots, but these guys have made
them solution-oriented for our products,
which are very complex, said Kim Ernzen,
vice president of operations.

GENERAL MOTORS

JAMEL TOPPIN FOR FORBES

Some unlucky human at GMs Orion, Mich.

assembly plant has had the dull, backbreaking job of pulling spare tires off a conveyor and
stacking them based on their assigned vehicle.
No surprise: The factorys rst collaborative
robot, which arrived in January, was ordered to
stack tires. The hard part was teaching it how
to maneuver in a crowded workspace where
people are usually 2 feet away. Manufacturing is
a contact sport, says GM engineer Marty Linn.
GM turned up the sensitivity on the robots force
sensors and ran it through many dress rehearsals
using real props and people. The humans had to
learn to work with the robot, too, going through
an awareness week of demos and testing. The
robot is now considered part of the team.

JONATHAN KOZOWYK FOR FORBES

GET TING CL OSER TO THE MACHINE

A. ZAHNER CO.
WELDING LIKE HUMANS DO

Architects worldwide turn to Kansas Citys A. Zahner Co. for huge, custom metalwork and facades,
which adorn buildings such as New York Citys Guggenheim Museum, the Dallas Cowboys stadium
and the Art Wall at Doha. For years Zahners unionized workforce was reluctant to let robots in until
the employees and CEO BILL ZAHNER realized they would free up skilled craftsmen to do more intricate work on large-scale projects. If you do certain things faster, it enables the more artistic aspects
to expand, said Zahner. The rst robot arrived in 2007 and started learning by watching engineers as
they welded points along arcs up to 14 feet long. It would follow those points based on the movements
demonstrated by the engineers. The welds are done just as well as a master craftsman can do, Zahner
said, maybe even better because the robots dont get tired as they reach the end of a long day.

ABB ROBOTICS
EASY AS AN IPHONE

ABB Robotics newest robot, YuMi, is a two-armed collaborator aimed at companies that have not considered using robots before. Its user interface was inspired by the iPhone, a sophisticated product, but you
dont have to know a lot, says ABB engineer Bertil Thorvaldsson. YuMi can be programmed for basic tasks
with only a tablet app, but for now its more sophisticated customers are using its full set of software tools
for tasks such as electronics manufacturing. But of all the robots here, the YuMi is likely the easiest one for
your family to train once they get a chance.

Transforming
the rules of
Engagement
June 9-10 New York City

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DRONE W
BY RYAN MAC, HENG SHAO AND FRANK BI

130 | FORBES MAY 25, 2015

ARS

At 34 Frank Wang has turned his dream of

flying robots into the worlds biggest drone
companyand a $4.5 billion fortune. Now,
as the market for his devices explodes, his
old colleague is trying to take him down.
PHOTOGRAPH BY DAVID HARTUNG FOR FORBES
MAY 25, 2015 FORBES | 131

PROMOTION | ECONOMIC DEVELOPMENT

Glow Images

Bermuda
Sailing Into the Spotlight

ust 90 minutes by air from New York City, Bermuda is nearer than
you may think and close to many peoples idea of paradise. The
island is a riot of color: azure waters, pink sands, golfing greens
and pastel architecture. Thanks to the Gulf Stream, it enjoys subtropical sea and air temperatures. Last year, Bermuda welcomed nearly
585,000 visitors.
Capitalizing on its North Atlantic location, Bermuda will host the
35th Americas Cup in 2017, set to generate $300 million and showcase the islands attractions. When Bermuda won the bid, Premier
Michael Dunkley said: Being home to the Cup is an extraordinary
opportunity that fits the heritage, profile, culture and future of Bermuda and its people.
To maximize that opportunity, Bermuda is positioning itself as an
ideal destination for work and play. A public-private partnership, the
Bermuda Business Development Agency promotes the islands business advantages, while the independent Bermuda Tourism Authority
(BTA) spearheads tourism development, investment and marketing.
Their shared goal is to increase tourism numbers, improve infrastructure, create jobs and expand the economy. Says Minister of Tourism

Development and Transport Shawn Crockwell, The development of

the BTA has created a new sense of hope for the industry.
But, as the BTAs slogan says, Bermuda is so much more. It is also
a blue-chip financial services center and a leading insurance and reinsurance jurisdiction. With over 40 Tax Information Exchange Agreements in place, it was the first offshore hub placed on the OECDs
white list in 2009. As Patrick Tannock, chairman of the Association
of Bermuda International Companies, notes, This is an innovative,
solutions-oriented, dynamic and entrepreneurial marketplace that
continues to evolve.

The Americas Cup

Home to one of the worlds oldest yacht clubs
and the host of the 2017 Americas Cupone
of the worlds longest-running ocean races
Bermuda will leverage the event to diversify
its economy and revitalize its tourism sector.
Sailing is in our DNA, says Minister of Economic Development Grant Gibbons. The
government has created Americas Cup
Bermuda Ltd., under CEO Mike Winfield, to
ensure that Bermuda delivers, while official
sponsor Appleby Bermuda Ltd., an offshore
law firm, is also eagerly anticipating the Cup:
From an international business perspective,
its very valuable, says Managing Partner
Kiernan Bell.

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One of Archs latest ideas is to lease out its underwriters to companies that are willing to assume greater risk for potentially higher
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hedge fund, it is outsourcing services to another homegrown reinsurer, Watford Re (of which Arch owns 10%). Think of it as a company that has a head, but everything elsethe body, arms and
legsis rented, Iordanou explains.
Further proof of Bermudas uncanny ability to identify and
develop niche markets lies in its insurance-linked securities. Since
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global trade, with listings worth nearly $16 billion on the Bermuda
Stock Exchange (BSX) last year. In remarks to Insurance Journal this
past January, BSX President and CEO Greg Wojciechowski asserted:
Bermuda must continue to innovate to remain ahead of the curve
and retain its position as the premier ILS domicile.
Established in 1928, the international law firm of Conyers Dill
& Pearman has provided private and business clients with all the
advice they need on matters ranging from commercial and corporate regulation to litigation, insolvency and restructuring. Affiliated
with the Codan group of companies, which has dedicated management, services and trust divisions, it won the coveted Offshore
Law Firm of the Year title in the Chambers Global Awards 2014.
The firm employs 140 lawyers in eight jurisdictions worldwide
and specializes in Bermuda, the British Virgin Islands, the Cayman
Islands and Mauritius. According to Narinder Hargun, director of
the litigation department and co-chair, We very much consider
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here in Bermuda. We look at the requirements of the client and our
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www.archcapgroup.com

Not all insurance coverages or products are available in all jurisdictions.

Coverage is subject to actual policy language. 2015 Arch Capital Group Ltd.

Section Project Managers: Suzan Bahsoun and Matthew Dickert

For more information, contact: Gabriel Gutirrezg.gutierrez@forbes-cm.com

RESPONSIVENESS PROTECTION

rank Wang Tao has never been arrested.

He pays his taxes on time. And he rarely
drinks. But on the eve of a January sitdown with FORBEShis rst public interview this year with a Western publicationthe Chinese national who happens
to be the worlds rst drone billionaire
found himself on the wrong end of American authorities.
A U.S. government intelligence employee in Washington, D.C., some 8,000 miles away from Wangs perch
in Shenzhen, had had a little too much to drink and took
a friends four-propeller drone out for a spin in the wee
hours. Inexperienced, he lost the aircraft in the dark and,
after a brief search, called off his drunken hunt. By dawn
that 1-foot-by-1-foot whirlybird was a global news story
and subject of a Secret Service investigationafter crashlanding on the White House lawn.
Wang built that robot. He also created the one that a
protester used last month to land a bottle of radioactive
waste on the roof of the Japanese prime ministers office
and developed the one a smuggler used to sneak drugs, a
mobile phone and weapons into a prison courtyard outside
of London in March. The idea of people using your product to break laws and social boundaries would give most
CEOs nightmares, but the inconspicuous mastermind behind the worlds drone revolution just shakes it off.
I dont think its a big deal, shrugs the 34-year-old
founder of Dajiang Innovation Technology Co. (DJI),
which accounts for 70% of the consumer drone market, according to Frost & Sullivan. His company spent
the morning developing a software update it blasted out
to all its drones, prohibiting them from ying inside a
15.5-mile-radius centered on downtown Washington,
D.C. Its a benign thing.
Or maybe it only looks that way to Wang because success has inured him to controversy. Last year DJI sold
about 400,000 unitsmany of which were its signature
Phantom modeland is on track to do more than $1 billion
in sales this year, up from $500 million in 2014. Sources
close to the company say DJI netted about $120 million in
prot. Sales have either tripled or quadrupled every year
between 2009 to 2014, and investors are betting that Wang
can maintain that dominant position for years to come. In
April the company raised $75 million from Accel Partners
at a valuation of $10 billion. Wang, who owns about 45%, is
now worth more than $4.5 billion. DJIs chairman and two
early employees are also paper billionaires from the deal.
DJI started the hobby unmanned aerial vehicle [UAV]
market, and now everybody is trying to catch up, says
Frost & Sullivan analyst Michael Blades.
In the annals of technology its not often that one
company can grab a dominant position in a market as
it makes the leap from hobbyist to mainstream. Kodak
caught that rogue wave with cameras. Dell and Compaq

134 | FORBES MAY 25, 2015

caught it with PCs and GoPro with action cameras. Drone skeptics may have
laughed at Amazon CEO Jeff Bezos
vow to use UAVs to deliver packages,
but drones are becoming a big deal.
Widespread commercial use is already
well under way: Drones broadcast live
aerial footage at this years Golden
Globes; relief workers relied on them
to map the destruction left behind by
Nepals 7.8-magnitude earthquake in
April; farmers in Iowa are using them
to monitor cornelds. Facebook will be
using its own UAVs to provide wireless Internet to rural Africa. DJI drones
are being used on the sets of Game
of Thrones and the newest Star Wars
lm. Now DJI needs to keep stoking
the consumer market with better and
cheaper ying machines, just as it did
in January 2013 when its Phantom
drone debuted, ready to y out of the
box at a price of $679. Before then you
pretty much had to build your own
drone for well north of $1,000 if you
wanted a decent ier.
DJI faces the headwinds of cheaper
rivals and rearguard bureaucrats at
the Federal Aviation Administration,
which currently has a blanket ban on
the commercial use of small drones
without exemptions and has been slow
to enact meaningful policy. A formidable challenge is brewing in 3D Robotics, a Berkeley, Calif. company cofounded by former Wired
magazine editor Chris Anderson and staffed by laid-off
DJI employees. Among them is former DJI North America
head Colin Guinn, who accused the Chinese company of
screwing him over and called 3D Robotics the David to
DJIs Goliath. His new company, however, is ghting with
more than slingshotsit has raised nearly $100 million.
Theres also French manufacturer Parrot, which sold more
than $90 million worth of drones in 2014, and a plethora
of Chinese copycats eager to drive margins down for all.
This years Consumer Electronics Show in Las Vegas saw
dozens of barely hatched companies zipping their UAVs
across Sin Citys cavernous conference halls.
With his circular glasses, tuft of chin stubble and golf
cap that masks a receding hairline, Wang cuts an unlikely
front man for a new consumer tech powerhouse. Still, he
takes his role as seriously as when he launched DJI out of
his Hong Kong dorm room in 2006. Wang is on a warpathdiscarding former business partners, employees and
friendsas he seeks to turn DJI into a top-ranked Chinese

MATTHEW MAHON FOR FORBES

DRONE WARS

Cut out of DJI over control issues, Colin Guinn now heads up sales for 3D Robotics, the strongest challenger in the market.

brand akin to smartphone maker Xiaomi and e-commerce

powerhouse Alibaba. Unlike those two, however, DJI may
become the rst Chinese company to lead its industry. Its
dominance has earned it comparisons with Applenot
that Wang has much use for the implicit praise.
Dashing into his office, he passes a Chinese-language
sign on his door that reads Those with brains only and
Do not bring in emotions. The DJI CEO abides by those
rules and is a sharp-tongued, head-over-heart leader who
works more than 80 hours a week and keeps a twin-size
wooden bed near his desk. Wang says he was a no-show at
DJIs April launch of its new Phantom 3 in New York because the product was not as perfect as he expected.
I appreciate Steve Jobs ideas, but there is no one I
truly admire, he says in his native Mandarin. All you
need to do is to be smarter than othersthere needs to be
a distance from the masses. If you can create that distance,
you will be successful.

rank Wangs infatuation with the sky began in elementary school after he started devouring a comic
book about the adventures of a red helicopter. Born
in 1980, Wang grew up in Hangzhou, Alibabas home
city on Chinas central coast. The son of a teacher turned
small-business owner and an engineer father, Wang spent
most of his time reading about model airplanes, a pastime
that offered more comfort than his middling grades. He
dreamed of having his own fairy, a device that could
y and follow him with a camera. When he was 16 Wang
received high marks on an exam and was rewarded with a
long-coveted remote-controlled helicopter. He promptly
crashed the complicated device and waited for months for
replacement parts to arrive from Hong Kong.
Wangs less-than-stellar academic performance thwarted his dream of landing at an elite American university.
Rejected by his top choices, MIT and Stanford, he ended
up at the Hong Kong University of Science & Technology,
MAY 25, 2015 FORBES | 135

DRONE WARS

136 | FORBES MAY 25, 2015

HOWD YOU GET THAT SHOT?

Photographers and lmmakers are opening up new views of the world by

sending drones to places they couldnt reach any other way. Check out our
gallery of amazing drone images at forbes.com/drones.

A group of whales approached, and I tossed my drone in the air. I had about
15 seconds. Shot in Hawaii by Randy J. Braun with a Phantom 1 and GoPro.

designs toward four-propeller quadcopters, which were

cheaper and easier to program. DJIs started making more
advanced ight controllers with autopilot functions, which
Wang then marketed at niche trade shows like a radiocontrolled helicopter gathering in the 70,000-pop. town of
Muncie, Ind. in 2011.
It was in Muncie that Wang rst met Colin Guinn, a
well-built Texan, whose angular good looks once graced
reality TV show The Amazing Race. Guinn, who ran an
aerial cinematography startup, was looking for a way to
shoot stabilized video from a UAV and had reached out
to Wang by e-mail to see if the young Chinese company
had a solution. Wang was working on exactly what Guinn
needed, a new kind of gimbal that used onboard accelerometers to adjust its orientation on the y so the video
frame remained still despite a drones shaky ying. Wang
had gone through at least three gimbal prototypesand
one incapable internbefore he had a decent one. Wang
gured out how to connect the drones motor to the gimbal
so it wouldnt need its own motor, cutting down on parts
and weight. By 2011 the cost to make a ight controller had
dropped to less than $400 from $2,000 in 2006.
After initially meeting DJI executives in Muncie in
August 2011, Guinn ew out to Shenzhen and eventually formed DJI North America, an Austin, Tex. subsidiary aimed at delivering drones to the mass market, with
Wangs blessing. Guinn was given 48% ownership of the
entity, with DJI retaining the remaining 52%. Guinn was
put in charge of North American sales and much of its
English-language marketing, quickly developing a new
motto for the company: The Future of Possible. The re-

STACY GARLINGTON

where he studied electronic engineering. He didnt nd

his sense of purpose until his senior year, when he built a
helicopter ight-control system. Wang devoted everything
to his nal group project, skipping classes and staying up
until 5 a.m. While the hovering function for the onboard
computer he built failed the night before the class presentation, his effort did not go to waste. Robotics professor Li
Zexiang noticed Wangs group leadership and technical
understanding and brought the headstrong student into
the schools graduate program. I couldnt tell that [Frank]
was smarter than others, says Li, who served as an early
advisor and investor to DJI and now owns about 10% as its
chairman. But good performance [at work] was not necessarily comparable with good grades.
Wang built prototypes of ight controllers out of his
dorm room until 2006, when he and two classmates moved
to the manufacturing hub of Shenzhen. They worked out
of a three-bedroom apartment with Wang funding the
venture using what was left of his university scholarship.
DJI sold his $6,000 component to clients such as Chinese
universities and state-owned power companies, which soldered them onto the frames of DIY drones. Those sales allowed Wang to pay for a small staff, while he and the other
former HKUST students lived off what was left of their
university scholarships. I didnt know how big the market
could be, Wang remembers. Our idea was to just make
the product, feed 10 to 20 people and have a team.
The lack of an early vision and Wangs personality
would eventually cause strife within DJIs ranks. There
was constant churn among employees, with some feeling
spurned by a demanding boss they felt was stingy with
equity. By the end of two years almost all of the founding
team had departed. Wang admits he can be an abrasive
perfectionist and at the time managed to piss [employees] off.
Yet DJI chugged along, selling about 20 controllers a
month. It survived off capital from Wangs family friend
Lu Di. In late 2006 Lu had put in about $90,000the
only money DJI has ever needed says Wang. Endearingly called a penny-pincher by DJIs CEO, Lu managed
the nances and today remains one of the largest shareholders, with 16% worth $1.6 billion, based on FORBES
estimates. Also key to DJIs development was Wangs
best friend from high school, Swift Xie Jia, who, in 2010,
came in to run marketing and act as condante. The man
nicknamed fat-headed sh by Wang sold his apartment
to invest in DJI and today holds a 14% stake worth an estimated $1.4 billion.
With his inner circle in place, Wang continued to build
on product offerings and began selling to hobbyists abroad,
who were e-mailing him from places such as Germany
and New Zealand. In the U.S. Wired editor Chris Anderson
had started DIY Drones, a UAV-enthusiast message board,
where users advocated for the move from single-rotor

We were driving to Hana and happened on this random beach along the
way. Shot in Maui by Stacy Garlington with a Phantom 2 Vision+.

RANDY JAY BRAUN

lationship initially went well. Wang remembers Guinn as a

great salesman whose ideas sometimes inspired me.
By late 2012 DJI had put all the pieces together for a
complete drone package: software, propellers, frame, gimbal and remote control. The company unveiled the Phantom in January 2013, the rst ready-to-y, preassembled
quadcopter that could be up in the air within an hour of
its unboxing and wouldnt break apart with its rst crash.
Its simplicity and ease-of-use unlocked the market beyond
obsessed enthusiasts.
Yet things had already started falling apart between
Wang and Guinn. DJIs founder didnt like that Guinn was
taking credit for the development of the Phantom and was
calling himself CEO of DJI Innovations, a title that still
stands on his LinkedIn page. Sources also say that Guinn
would often rush into setting up partnership agreements,
particularly one with action-camera maker GoPro, which
would have been an exclusive camera provider for DJIs
drones. Wang got cold feet in that deal and went against
Guinns advice, subsequently angering GoPro, which is
now rumored to be developing its own drone.
Initially DJI was planning to only break even on the
Phantoms $679 retail price. We made an entry-level
product to prevent competitors from entering a price war,
says Wang. The Phantom, however, quickly became the
companys bestselling product, increasing revenue vefold
with little marketing. More important, it sold around the
world, a trend that holds today as the company derives
about 30% of revenue from the U.S., 30% from Europe and
30% from Asia, with the remainder from Latin America
and Africa. Thats a source of pride for Wang. Chinese

people think imported products are good and made-inChina products are inferior. Were always second class, he
says. Im unsatised with the overall environment, and I
want to do something to change it, he adds.
By May 2013 DJI attempted to buy out Guinns stake in
DJI North America, offering DJI Global shares that would
have given the American a paltry 0.3% stake, according
to court documents. Guinn demurred, pointing out that it
was his offices work that led to 30% of Phantoms being
sold in the U.S. DJI did not leave room for negotiation
and by December had locked all of DJI North Americas
employees out of their e-mails and redirected all customer
payments to China headquarters. By New Years Eve the
employees had been red and arrangements were being
made to liquidate the Austin offices equipment. DJI ended
that year with $130 million in revenue.
Guinn subsequently sued in early 2014, though the
parties eventually settled out of court in August for an undisclosed amount under $10 million, according to sources.
Thats slightly more than what the share-exchange deal
would have been worth at the time, given that Sequoia
Capital invested a little more than $30 million in mid-2014
at around a $1.6 billion valuation. To say I had nothing to
do with the Phantom would be hilarious, just as it would
be to say I was the inventor of the Phantom would be hilarious, says Guinn, who with many of his former colleagues
joined 3D Robotics to take on their past employer.

he greatest threat to Wangs dominance of the

consumer drone market emanates from a sundrenched fourth-story office patio across the bay
from Silicon Valley in Berkeley, where the engineers for
3D Robotics spent dozens of hours testing the latest code
tweaks in their Phantom-killer, the Solo. Unveiled in April,
the black drone whirs and buzzes around the roof with the
sound of a thousand angry bees as 3D Robotics CEO Chris
Anderson explains how his company is the Android to
DJIs Apple.
In admiring his quadcopters elegance and simplicity
which took cues from the Phantomthe affable Anderson explains that it is the software, not hardware, that is
the key. Unlike DJIs operating system, which is closed
to developers, 3D Robotics made its OS open source to
attract the interest of programmers and other companies
such as the dozens of Chinese copycats undercutting DJIs
margins with even cheaper drones. If everyone is using our
software, says 3D Robotics CEO, then we, not DJI, will
control the market. DJI started as a company back in the
days when it was just a hobby for me, and to their credit
they accelerated brilliantly, he says. Right now were
playing on their home eld, so were playing catch-up.
3D Robotics, which has funding from the likes of
Qualcomm and SanDisk, is well into its game of catch-up
and has moved most of its manufacturing capacity from
MAY 25, 2015 FORBES | 137

DRONE WARS

PROPELLERS ARE SPINNING UP

DJI came from out of nowhere (a Hong Kong dorm room, actually) to
become one of Chinas few global consumer technology brands.
$1,000

(Revenue $mil)

Phantom 3

900
800

DJI Flame
Wheel F330

700
600

500
400
300
200
100
0

Annual revenue
$500,000
North American
revenue
$310,000

Revenue
$1.1 million
North American
revenue
$560,000

Revenue
$4.2 million
North American
revenue
$1.26 million

Sales began in Asian,

European and North
American markets
that year.

Revenue
$26 million
North American
revenue
$5.6 million
July 2012: creation of
DJI North America.

2009

2010

2011

Tijuana, Mexico to Shenzhen. Guinn, who is the companys chief revenue officer, is also exploring the same retail
channels he built up with DJI and developed a partnership to put GoPros on 3D Robotics drones.
Wang dismisses their chances, sounding something like
the big kid on the kindergarten playground. Its easier for
them to fail, he says. They have money, but I have even
more money and am bigger and have more people. When
the market was small, they were small and I was small, too,
and I beat them.
For all the drama between 3D Robotics and DJI, they
face a common challenge in shaping public opinion and
softening regulators. For every breathtaking video of a
humpback whale migration or collapsing glacier taken
from a drone, theres a headline of a UAV being used by
ISIS or spying on a neighbors hot tub. Legitimate privacy
and safety concerns have limited society from welcoming
ying robots with open arms, and regulators, particularly
the United States FAA, have been slow to enact meaningful regulations as a result. There are no drones in
the sky right now, and that is so weird, says Anderson.
When you talk about a blue sky opportunity, we really
are looking at one.
Back in his office in Shenzhen, Wang is foretelling the future of the consumer drone industry, but his
explanation is hard to follow as he wields a 450-yearold Japanese samurai sword on a hapless business card.
Japanese craftsmen are constantly striving for perfection, he says, as the katana carves up the paper into
pieces. China has money, but its products are terrible,
138 | FORBES MAY 25, 2015

Revenue
More than $130 million
Phantom 1 debuts
in January.

Revenue
About
$500 million

Projected revenue
$1 billion
Phantom 3 debuts
in April.

O
2012

2013

2014

2015E

its service is terrible, and you have to pay a hefty price

for anything thats good.
DJI is a long way from reaching the level of perfection
in Wangs Japanese artifact. The CEO openly acknowledges that his Phantom is not a perfect product and
that some models have been known to y away from users
because of software malfunctions. We do have room for
improvement, concedes Wang, who says that hes adding
to DJIs 200-plus support staff.
Wang is also dealing with various levels of corporate espionage. Hes sure that a few of the Chinese drone startups
to pop up in the past two years have done so with illegally
obtained DJI designs. Wang has had to deal with at least
two instances of internal spies, including one where a departing employee took blueprints and sold them to a competitor. That certainly doesnt help in what Wang calls the
dog-eat-dog society of Shenzhen, where cheap manufacturing will certainly see drones go the commoditized way
of smartphones and laptops. Prices will certainly drop and
the boutiqueness of the market always gets driven out,
says Gartner analyst Gerald Van Hoy. But DJI will do
okay because theyve established themselves in the market
and they have recognition.
Wang doesnt want to share the skies with others,
intent on maintaining DJIs lead as drones expand into
commercial applications like agriculture, construction
and mapping. Our main bottleneck for growth right now
is the speed at which we come to realize answers to technical puzzles, he says. You cant be satised with the
present. F

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FORBES LIFE
TRAVEL

Splendor in
The Glass
Can billionaire Alexander Vik
produce a world-class wine at his
new luxury resort in Chile?
BY ANN ABEL

uring my tour of Via Vik,

Internet entrepreneur Alexander Viks latest glamorous South
American getaway, a manager
told me the Frank Gehry-esque
serpentine roof on the hotel was made of titanium rather than gold. Thats because titanium,
she explained, has a better thermal capacity to
withstand the climate of Chilean wine country.
I got the feeling that might have been the
only reason.
Because otherwise, Vik, the design-minded
billionaire whose rst three hotels put Uruguays
Jos Ignacio on the map, spared no expense in
developing his new wine resort. Viks aim isnt just
to produce a vintage every season but also to make
superlative wine. (Hotel staff regularly mentioned
a goal of 100 points from Robert Parker.)
Ive always been interested in the concept
of terroirwhat made one piece of land a great
producer and not its neighbor? the 60-year-old
Vik says. Wine has innite grades in quality
its not like growing wheat or raising cattle. I
thought it would be a good challenge to grow
the best wine in South America.
In 2004 Vik, whose mother was from Uruguay, convened a research team to study Argentina, Uruguay and Chile to nd the best place on
the continent to grow red grapes. Two years later
they found their answer: the Millahue Valley,
which means place of gold in the local Mapuche language. Im convinced the conditions
are as good as anywhere in the world, says Vik
about why he didnt look beyond the continent.
To be sure, researchers took more than 4,000
soil samples across the 11,000-acre plot of land
before Vik closed the deal. Then scientists,
led by esteemed French-Chilean oenologist
140 | FORBES MAY 25, 2015

Patrick Valette, installed weather stations and

researched all the elements of terroir to determine the best places among the propertys 12
valleys to plant each varietal for the Bordeauxstyle blend. Two-thirds of the harvest is sold to
other wineries, while the grapes that go into the
Vik blend are hand-harvested at night by a team
of about 400 workers.
We are using the diversity of grapes to make
something exceptional, says Vik. Maybe 15
Cabernet Sauvignons, 10 Carmenres and 7
Merlots. Its like a puzzle. There are plans to
eventually bottle second- and third-run wines.
But a portfolio isnt the point.
Asked how much he has invested in the
project, the famously cageyand his competitors would say dishonestVik tells me he truly
doesnt know. But he scoffs when I ask if he expects the venture to support itself. Absolutely.
[Making it in] the wine world is a slow process.
It takes years and years and years to grow, age,
market and distribute wines. (Vik wine retails
for $130 in the U.S.) Its a long-term investment.
But if you succeed, its very lasting.
For all the science on display in the wine-

Vineyard haven: Each of

the 22 rooms and suites
at Via Vik has a distinct
art theme and spectacular
views of Chiles Millahue
Valley.

to be oating over the countryside.

The communal living room includes works by
Chilean artist Roberto Matta and a diptych from
Anselm Kiefers The Secret Life of Plants. The
rooms and suites (which start at $1,200 a night,
including meals) vary wildly, but all have a strong
point of view. The Vik Suite features art by Antonio Sequi and James Turrell, and the bathroom
of the Azulejo Suite has hand-painted blue-andwhite tiles in the Portuguese tradition, depicting
a playful panorama of the vineyard.
Naturally, winery tours and tastings gure
prominently in the Via Vik experience, but
guests can arrange guided hikes, mountain biking and horseback riding through the vineyards
on short notice. There are also massage therapists at the ready in the spa, and yoga classes can
be arranged with some preplanning.
The main pastimes, though, seem to be eating
and drinking. Vik recruited chef Rodrigo Acua
Bravo, who made a name for himself at Casa
Lapostolle in the nearby Colchagua Valley, to
lead the kitchen. His cuisine is straightforward,

hearty and delicious, making the most of the hotels location in Chiles main growing region, the
breadbasket to the world.
As for wine pairings, theres just one: When
guests take their seats, servers appear with decanted Vik. (There are whites and a sparkling on
request.) The wine turns out to be food-friendly
and surprisingly versatile.
Were satised with how the wine is developing, says Vik. The vines are at a young age
but producing great wines. Were focused on
viniculture, on growing the best grapes, but also
on letting the grapes express themselves. Its
holistic, organic and very pure. You can drink it
with abandon without any consequences.

FINAL THOUGHT

One of the disadvantages of wine is that it makes a man mistake words for
thoughts. SAMUEL JOHNSON

What the 70 million

Forbes.com users
are talking about.
For a deeper dive go to
FORBESLIFE.COM
PERSON

SARAH JESSICA
PARKER
The Sex and the City
star has launched a new
venture with Zappos
Couture that Carrie
Bradshaw would have
loved: a luxury shoe
collection.

DENISE TRUSCELLO/GETTY

making operation, its art that rules the hotel,

which opened late last year. As with their
other properties, Vik and his wife, Carrie,
lled this one with contemporary art and
commissioned artists to create installations in
each of the 22 rooms. Its the kind of hotel that
only a deep-pocketed visionary could pull off,
without answering to investors caution.
While it shares DNA with his Uruguayan
outposts, Via Vik is a singular hotel. Estancia
Vik is a Spanish Colonial hotel on ranch land
thats all about Uruguayan art and culture, he
explains. Playa Vik is more contemporary, with
21st-century architecture, and Bahia Vik is more
beachy, with bungalows out on the dunes.
In Chile, he continues, its all about the
vineyard. The main building is perched on one
of the prettiest hilltops on the propertywith
staggering views from every roomas is the restaurant and a slate innity pool, which appears

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FORBES LEGAL BLACK BOOK

I N T E L L E C T U A L P R O P E RT Y L AW

ARE PATENTS LOSING PRESUMPTION

OF VALIDITY? Continued
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1.
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THOUGHTS

FINAL THOUGHT
One thing that previous practice
doesnt always make perfect: marriage.
MALCOLM FORBES

ON MARRIAGE
Happiness in marriage is entirely a matter
of chance. JANE AUSTEN

One was never married, and thats his

hell; another is, and thats his plague.
ROBERT BURTON

Marriage is the greatest earthly happiness

when founded on complete sympathy.
BENJAMIN DISRAELI

No time to marry, no time to settle downIm a

young woman, and I aint done runnin around.
BESSIE SMITH

He is dreadfully married. Hes the most

married man I ever saw in my life.
ARTEMUS WARD

Marriage is honorable among all, and the bed

undefiled, but the fornicators and adulterers God
will judge. HEBREWS 13:4

Who but the rich can afford to get married and set up housekeeping
anymore? The answer is nobody, but 2.4 million people got married
in the U.S. last year anyway. Thats more people saying I do than
ever before in the nations history, more even than in 1946, after
millions of men came home after nearly four years of world war to
marry their sweethearts. This year the number of people getting
married in the U.S. is expected to hold at the record 2.4 million.

Marriage may often be a stormy lake, but

celibacy is almost always a muddy horse pond.
THOMAS LOVE PEACOCK

Flesh of Flesh, Bone of my Bone thou art, and

from thy State mine shall never be parted, bliss
or woe. JOHN MILTON

FROM THE JUNE 22, 1981 ISSUE OF FORBES

OTHER THOUGHTS FROM THAT ISSUE:

BY GOSH The biggest thrill in Oshkosh, recalls Milton Berle, is

to go to the train station and smell the luggage. Oshkosh, Wis., has
been the butt of many a Vaudeville jokethe quintessential hick
town with the Indian chief s name. Today, as a manufacturer of
brightly colored overalls, Oshkosh BGosh Inc. is cashing in onand
somewhat living up tothat hick image.

PAN AINT Is there anything Chairman William T. Seawell can do to

pull Pan Am out of the power dive? Says he: Here and there you will
be unsuccessful, but history has said that if you work like hell, youll
be successful enough to pull through.
152 | FORBES MAY 25, 2015

Ive had so many wives

and so many children I
dont know whose house
to go to first on Christmas.
MICKEY ROONEY

The value of marriage

is not that adults
produce children but
that children produce
adults.
PETER DE VRIES

Husbands are like fires. They go out when

unattended. ZSA ZSA GABOR
SOURCES: THE TIMES BOOK OF QUOTATIONS; THE DICTIONARY OF
NATIONAL BIOGRAPHY; PRIDE AND PREJUDICE, BY JANE AUSTEN; ANATOMY
OF MELANCHOLY, BY ROBERT BURTON; THE TUNNEL OF LOVE, BY PETER DE
VRIES; LOTHAIR, BY BENJAMIN DISRAELI; PARADISE LOST, BY JOHN MILTON;
MELINCOURT, BY THOMAS LOVE PEACOCK.

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THE ULTIMATE FEAT IN FINE WATCHMAKING, THE POINON DE GENVE CERTIFIED
ROTONDE DE CARTIER GRANDE COMPLICATION SKELETON IS THE EMBODIMENT OF
THE EXCEPTIONAL EXPERTISE OF CARTIERS MASTER WATCHMAKERS. THE WATCH BLENDS
THE FLYING TOURBILLON, PERPETUAL CALENDAR AND MINUTE REPEATER COMPLICATIONS
IN AN EXTRA-FLAT MOVEMENT. ESTABLISHED IN 1847, CARTIER CREATES EXCEPTIONAL
WATCHES THAT COMBINE DARING DESIGN AND WATCHMAKING SAVOIR-FAIRE.
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