THE COMING BOND MELTDOWN đƫMEET THE DRONE BILLIONAIRE

SPECIAL 2015 EDITION

THE GLOBAL
2000
BIGGEST
AND BEST
COMPANIES
CAN VISA
KILL OFF CASH?
ALPHA ACTIVIST HONDA
BILL ACKMAN LEARNS TO FLY
“WE’RE BUILDING HALL OF FAME
SOMETHING WE WANT TO
OWN FOR YEARS.” CEOs

BABY
BUFFETT
WALL STREET’S LOUDMOUTH BANKED OVER $1 BILLION LAST YEAR.
NOW HE’S QUIETLY CREATING THE NEXT BERKSHIRE HATHAWAY.
(WANT IN?)
In the lead role: John Travolta, movie legend and aviation aficionado. 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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Using Microsoft Azure and HDInsight, scientists and
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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
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May 25, 2015

22 13 | FACT & COMMENT // STEVE FORBES

Good news: You won’t 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 South—and in
South America, too. Plus: the five richest rappers.
22 | LUXURY LINEAGE: THE ARMANI SUIT
A history of the most elegant item a man can put on.
24 | FAREWELL TOAST
Victoria’s Secret’s 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 Rubio’s 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 automaker’s CEO get a second shot at the top?
BY MARK EWING

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

54 | NICE GUYS HIRE BETTER

High-flying tech companies face constant staffing challenges.
Airbnb’s process kills the chaos.
BY GEORGE ANDERS

ENTREPRENEURS
56 | THE SIX-MINUTE LOAN
Banks still aren’t making enough small-business loans, so Kabbage is
quickly filling the void—at crazy high interest rates.
92 BY DARREN DAHL

6 | FORBES 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
GLOBAL 2000:
Biotech pioneer John Martin
helped Gilead Sciences climb
831 spots over the last decade
TIMOTHY ARCHIBALD FOR FORBES
to No. 192 on our annual
ranking of the world’s largest
companies. See six more Hall
of Fame CEOs.
114
121
8 | FORBES 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 airfield just 240 miles from aviation’s
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
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 world’s commercial transactions. The future
of payments? Surprise! It’s already here.
BY DANIEL FISHER
114 | HALL OF FAME CEOS
These six CEOs have not only kept their jobs, they’ve also presided
over some of the largest global growth stories of the last decade.
BY STEVE SCHAEFER
121 | OK ROBOT
Decades of science fiction 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 flying robots into the
world’s biggest drone company—and 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
On marriage.
ONLY ONE THING CHANGED TODAY:
EVERYTHING.

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the hours of nine to five. ADP delivers benefits technology with
a human touch to help your employees make more informed and
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 FORBES

EDITOR-IN-CHIEF
Steve Forbes
IN BRIEF

A New Level
CHIEF PRODUCT OFFICER
Lewis D’Vorkin

FORBES MAGAZINE

EDITOR
Randall Lane
EXECUTIVE EDITOR
Of Storytelling
Michael Noer BY LEWIS D’VORKIN
ART & DESIGN DIRECTOR
Robert Mansfield

FORBES DIGITAL
I have an unusual title in the world of traditional
media—chief product officer. It sounds right out of
VP, INVESTING EDITOR
Matt Schifrin Silicon Valley, but it fits what I do. Success in the news
MANAGING EDITORS business is no longer possible without a keen under-
Dan Bigman – Business, Bruce Upbin – Technology
SENIOR VP, PRODUCT DEVELOPMENT AND VIDEO
standing of the technology behind the journalism. I
Andrea Spiegel combine my interest in both to help develop, build,
EXECUTIVE DIRECTOR, DIGITAL PROGRAMMING STRATEGY
Coates Bateman
market and sell what we make—a digital platform,
ASSISTANT MANAGING EDITORS magazines, apps and more. Each has distinct features
Kerry A. Dolan, Luisa Kroll – Wealth or functionality, or products within products. More
Frederick E. Allen – LEADERSHIP
Loren Feldman –ENTREPRENEURS
than ever, they’re aimed at marketers. BrandVoice, our
industry-leading native ad program, is one of them. Last
Tim W. Ferguson FORBES ASIA
Janet Novack WASHINGTON month I made ten sales calls in San Francisco and Los
Michael K. Ozanian SPORTSMONEY Angeles. Native got all the attention—with BrandVoice
Mark Decker, John Dobosz, Deborah Markson-Katz DEPARTMENT HEADS
Avik Roy OPINIONS
in print on everyone’s mind as much as digital.
Jessica Bohrer EDITORIAL COUNSEL That marketplace reality makes perfect sense. Maga-
BUSINESS zines never really had an audience problem. Readers love
Mark Howard CHIEF REVENUE OFFICER them. They like the ease of use, the concise packaging, the
Tom Davis CHIEF MARKETING OFFICER
Charles Yardley PUBLISHER & MANAGING DIRECTOR FORBES EUROPE
feeling of belonging to a larger community that supports a
Nina La France SENIOR VP, CONSUMER MARKETING & BUSINESS DEVELOPMENT publication’s mission. Magazines certainly have an adver-
Fred Poust SENIOR VP, CONFERENCES & BUSINESS DEVELOPMENT tiser problem. Blame the industry itself for that. It failed to
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come up with exciting new ad products to make ad agen-
cies think twice before chasing digital eyeballs, which are
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easier to target, track and measure.
Michael Federle CHIEF OPERATING OFFICER FORBES has developed a print ad product for the times.
Tom Callahan CHIEF FINANCIAL OFFICER Over the last four years we’ve run 50 two-column Brand-
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Will Adamopoulos CEO/ASIA FORBES MEDIA
Voice stories in our magazine. Each was written by a mar-
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effort. AT&T produced a BrandVoice cover and two-page
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Mia Carbonell SENIOR VP, CORPORATE COMMUNICATIONS cover. A month later Fidelity created a two-page Brand-
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B.C. Forbes, Editor-in-Chief (1917-54)
Malcolm S. Forbes, Editor-in-Chief (1954-90) as part of an editorial package on retirement. In this issue
James W. Michaels, Editor (1961-99) ADP put together a two-page graphic as part of our Global
William Baldwin, Editor (1999-2010)
2000 package (see p. 90).
MAY 25, 2015 — VOLUME 195 NUMBER 7 I’ve always believed the mission of journalism is to
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10 | FORBES MAY 25, 2015

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 WON’T 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 alarm-
ists declare that more than eight out
of ten are financially unprepared for
their “golden years.” Accordingly, they
conclude this crisis requires major
government intervention, ranging from
sharply boosting Social Security ben-
efits 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 isn’t so dire after
all. A paper from the American Enterprise Institute,
“Why Americans Don’t Face a Retirement Crisis,”
written by two experts—Andrew Biggs, a former
principal deputy commissioner of the Social Security
Administration, and Sylvester Schieber, a former chair
of the Social Security Advisory Board—looks at the
facts instead of the politically motivated hype, cutting
through to the truly relevant data: what people have
actually saved for retirement, what they’ll get from
Social Security and what they’ll get from defined-ben-
efit 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 main-
tain the standard of living to which they’ve become ac-
customed during their working lives. The vast major-
ity 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 confirm 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 help-
ing, especially the advent of the employee default
option: Workers are automatically enrolled in com-
pany plans unless they specifically
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 financial-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 benefit 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 modified crops or or-
ganisms (GM crops or GMO), so-called Frankenfoods,
is an ongoing example of their destructive, fact-free ap-
proach. 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 break-
throughs dubbed the Green Revolution, which enor-
mously increased crop yields, particularly in India. There
and elsewhere more than a billion lives were saved,
people who would otherwise have been lost to hun-
ger. Borlaug won the Nobel Peace Prize for his efforts.
Today he’d be attacked as an antinature technomonster.
Another instance of this antitechnology mind-set is
the hullabaloo over honeybees. Extremist environmen-
talists have been making stinging statements that hon-
MAY 25, 2015 FORBES | 13
FORBES
FACT & COMMENT // STEVE FORBES
eybees, which pollinate our crops and
flowers, are in dire danger; that hive
health is declining, as are honeybee
populations. This, shout the alarmists,
requires government action, specifi-
cally, 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 popula-
tions grow and people achieve higher
standards of living. Nor are they
harmful to humans—or honeybees.
The sky-is-falling cry of “Beepoca-
lypse!” is baloney. The greatest threat
to these critters is big government.
In a Forbes.com post, “Rash Regu-
lation Is What’s Really Threatening
Honeybees,” based on a comprehen-
sive study conducted by Angela Logo-
masini of the Competitive Enterprise
Institute, the record is set straight.
ƀLJBee populations. Over the past half-
century 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.
ƀLJNeonicotinoids. A target of extrem-
ists, these insecticides are not villains
but heroes. They are a godsend, be-
cause they minimize the need to spray
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
1 East 55th St. (Tel.: 212-207-8562)
It’s more about the experience here than the
food. Every inch of interior beautifully reflects 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 à la mode are definite winners.
14 | FORBES MAY 25, 2015
plants, thereby nearly eliminating any
possible collateral damage to honey-
bees and other nontargets. “There is
no pattern associated with neonicoti-
noid use and hive health issues,” Logo-
masini notes. “In many places where
these chemicals are used widely, such
as in Australia, hives are doing fine.”
Nonetheless, regulators, including—
no surprise—the EPA, are waging war
against neonicotinoids. The EU, a
bastion of this kind of deadly, know-
nothing mentality, has banned them
indefinitely.
Meanwhile, the assault on GMOs
continues. The food chain Chipotle
recently announced that none of its
offerings will contain ingredients
from GMOs. Henry Miller devas-
tates this piece of grandstanding in
the Forbes.com post “Chipotle: The
Strangest Restaurant Menu Ever:”
Farmers and plant breeders
have been selecting and hybrid-
izing plants to enhance their
desirable characteristics for mil-
lennia. Corn has been drastically
modified by selective breeding.
Tomatoes and wheat and innu-
merable other food plants have
similar histories.
Another common technique
for creating new plant varieties,
which originated about a century
ago [my italics], is radiation mu-
tagenesis—subjecting seeds to
radiation to scramble their DNA
and create mutants. Thousands
of plant varieties—including let-
tuce, wheat, rice, oats and the
z King Bee
424 East 9th St. (Tel.: 646-755-8088)
This Acadian spot honors the Canadian roots of
the Cajuns, but too many dishes lack the flavor
spark that blossomed on the bayou. The poutine
stuffs lamb into a bland, giant dumpling; the
salt pork confit 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.
popular Rio-Sweet and Rio Star
pink grapefruit—that 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 re-
sulting plant. They’re wrong.
Since the 1930s plant breed-
ers 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 “tin-
kering with Nature” and create
far greater attendant uncertainty
about the results than the mod-
ern molecular techniques....
Where does [all this] leave Chi-
potle’s “no genetic modification”
promise? That should limit their
menu to wild berries, wild game,
wild mushrooms and wild-caught
fish and shellfish. Virtually all of
the other foods in our diets come
from organisms that have been ge-
netically modified in some way.
What a weird world we live in
these days, where ignorant but influ-
ential voices thwart the very things
that can make life better, especially
for the poor and undernourished. F
z Il Mulino Prime
331 West Broadway (Tel.: 212-226-0004)
Though it serves up delicious fare, this offspring
of Il Mulino isn’t equal to its progenitor’s Star-
dom. The stark white interior with faux animal
heads painted white seems more cutting-edge
than the cuisine. The entrées are all expensive,
with the lobster mac & cheese the only rela-
GLEN DAVIS
tive bargain. For desserts the cheesecake, the
limoncello and the chocolate cake are inspired.
Why does a Smart Nation matter?
Singapore, a tech innovation hub, is tackling tomorrow’s 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 it’s 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 world’s first Smart Nation – one that’s 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 world’s
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 Ageing Population Healthcare Energy Sustainability

Two-thirds of the world
will live in cities by 2050.1
Why START UP in Singapore?
Mobility
The world is ageing fast. By 2025, there will be 8 Global demand for
People are moving more
By 2050, more than 2 billion people, 800 million energy will rise by up
into congested centres,
billion people will be of whom will be over 65 to 37% by 2035. 5
with urban travel to
over 60.2 with high health needs.3 triple by 2050. Traffic
congestion could bring
cities to a standstill.4
11,000 government data
sets open for innovation

World’s most
tightly packed US$22 billion
entrepreneurial government
ecosystem6 investment in R&D7

US$24 billion
World-ranked venture capital pool8
Universities

7,000 MNCs

Enjoy the world’s easiest Leverage the world’s fastest Access a skilled ICT Reach 600 million
Use Singapore as a
place to do business9 – broadband10 – nationwide workforce, more than people in the rest
Living Lab for new
register a company online in ultra-high speed 1Gbps access 146,000 strong of S.E. Asia
technologies
15 minutes

Learn more at www.smartnation-forbes.com

1
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 Tod’s ($645);
carbon fiber and leather Chassis portfolio by Dunhill ($790);
leather zip portfolio by Valextra ($1,720);
leather Damier portfolio by Louis Vuitton ($1,520);
carbon fiber 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 LEO DICAPRIO

ACTOR
The fight itself was a snooze.
At Mayweather vs. Pacquiao,
the real battle was for the
best seats in the house. RUPERT MURDOCH
$13.9 BILLION
MEDIA
WHEN FLOYD Mayweather CHARLES BARKLEY
fought Manny Pacquiao at the ATHLETE
MGM Grand in Las Vegas on BILLIONAIRE
May 2, it became the rich- TONY ROBBINS
MOTIVATIONAL
est fight in history. FORBES SPEAKER
estimates that of $465 million
in revenue, the two men split
$300 million for their 36 min-
utes of work plus 11 minutes
of rest. True to his name, the
victorious “Money” May-
weather reaped an estimated BRADLEY
COOPER
$180 million, while Pacman ACTOR
took home a lovely consola-
tion prize of $120 million or
so. But chump change for
many in the stands. Behold, a
who’s who and who’s where.
JAMIE FOXX
ACTOR

JIMMY
KIMMEL
LATE-NIGHT
MARK HOST
WAHLBERG
ACTOR

JAKE GYLLENHAAL
STANLEY ACTOR
DRUCKENMILLER
$3.1 BILLION CLINT EASTWOOD
ACTOR
HEDGE FUNDS

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
BOB ARUM
BEYONCÉ
PAUL MUSICIAN MARY J. BLIGE BOXING PROMOTER
TUDOR MUSICIAN
JONES ANDREW
$4.6 BILLION BEAL
HEDGE FUNDS $11.7 BILLION
BANKS,
REAL ESTATE ANDRE LES MOONVES
AGASSI CBS CEO
ATHLETE

JAY Z MICHAEL JORDAN

MUSICIAN $1 BILLION
SPORTS

ROBERT DE NIRO
ACTOR

JAMES PACKER
$5.2 BILLION
CASINOS

ROBERT
KRAFT
$4.3 BILLION
NEW ENGLAND
PATRIOTS
BY MICHAEL SOLOMON

MICHAEL
MIKE TYSON KEATON KEVIN PLANK
ATHLETE ACTOR $3.1 BILLION
DONALD UNDER ARMOUR
TRUMP
$4.1 BILLION
NICKI MINAJ TV, REAL ESTATE
MUSICIAN
DIDDY TOM BRADY MAY 25, 2015 FORBES | 19
MUSICIAN ATHLETE

LeaderBoard
RICHEST BY STATE
Alabama
POPULATION:
4.83 MILLION
GROSS STATE PRODUCT:
$196.2 BILLION
(0.78% GROWTH YEAR-ON-YEAR)
GSP PER CAPITA:
$40,621
RICHEST:
GARRY DRUMMOND
$980 MILLION
GARRY DRUMMOND’S coal-mining Drum-
mond 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 Birming-
ham, joined the company in 1961 and led an
expansion into Colombia that has been both
profitable and controversial: Drummond has
fought lawsuits alleging ties to paramilitary
forces that killed more than 100 people—in-
cluding three union leaders—between 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
VINCENT VIOLA
+$330 MILLION
NET WORTH: $2 BILLION
Stock in his high-frequency-trading firm,
Virtu Financial, which made money 1,484 of its first
1,485 days in business, jumps 17% on day of IPO.
THE FORBES FIVE
Richest Rappers
TODAY’S TOP hip-hop moguls keep defining success upward:
Despite selling his headphone line, Beats by Dre, to Apple for
$3 billion last year, Dr. Dre still isn’t the richest man in rap.
1. DIDDY
NET WORTH:
$735 MILLION
Though Mr. Combs (right) hasn’t yet had a
Beats-level exit, he might soon, thanks to
huge stakes in TV network Revolt, cloth-
ing line Sean John, alkaline water brand
Aquahydrate and new tequila DeLeon.
2. DR. DRE
$700 MILLION
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;
His Beats sale got him the
largest single-year payday of
any musician in history—and
a nine-figure tax bill that kept
him from the top of the list.
3. JAY Z
$550 MILLION
His diversified portfolio contin-
ues to grow, courtesy of assets
such as entertainment company
Roc Nation and Armand de
Brignac champagne. Streaming-
service Tidal’s impact remains
to be seen.
RICHEST BY STATE BY CHASE PETERSON-WITHORN; RICHEST RAPPERS BY ZACK O’MALLEY GREENBURG
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.
CHRIS LYONS (LEFT); MIKE PONT/FILMMAGIC/GETTY IMAGES (RIGHT)
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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Carolyn Miye
Oodles 4 Kids, est. 2012
Portland, Oregon

Our complimentary Business Plan Tool can help you

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*Wells Fargo rewarded Carolyn Miye $10,000 to help with her marketing plans.

© 2015 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.
 JEFF BEZOS
+$4.6 BILLION
NET WORTH: $38.8 BILLION
For the first time the Amazon boss breaks out his

LeaderBoard 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 an-
niversary in fashion with the opening of Armani/Silos, a Milan museum
dedicated to the 80-year-old billionaire designer’s 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.

1980
The anointing of Armani
came in 1980, when the
designer’s clothes were
featured in American
Gigolo, the first of many
Armani collaborations
1975
Founded in Milan by Armani
and Sergio Galeotti, the label
produced its first men’s col-
lection in October 1975. Within
three years the designer had
softened the fit of men’s (and
women’s) jackets and become
known as “King of the Blazer.”

COUNTERCLOCKWISE FROM TOP: ADRIANO ALECCHI/MONDADORI PORTFOLIO VIA GETTY IMAGES; PARAMOUNT/EVERETT COLLECTION; RON TOM/NBCU PHOTO BANK/GETTY IMAGES;
with Hollywood. As worn 2014
by Richard Gere’s title For years George Clooney
character, the power suit has walked red carpets in
lost its inflated shoulders clothes designed by Armani,
and gained a new power: his Lake Como neighbor in
sex appeal. Italy. And when the Oscar-
winning actor married Amal
Alamuddin in September
1984 2014, he did so in an Armani
Miami Vice may be tuxedo. The following morn-
remembered for ing the groom appeared in
its pastel T-shirts an elegant gray Armani suit,
and slouchy suits, but few noticed—because
but that image

PHIL DENT/REDFERNS/GETTY IMAGES; JAMES DEVANEY/WIREIMAGE/GETTY IMAGES; PIERRE TEYSSOT/AFP/GETTY IMAGES

his bride wore a flower-print
was mainly the dress by Giambattista Valli.
look of Don
Johnson’s Sonny
Crockett. It was
his partner, Rico
Tubbs, who wore
impeccably tai-
lored Armani suits
and ties. Neither 2013
man, it should be A wolf of Wall Street
noted, dressed like can’t wear sheepish
a vice cop. clothing, so when
director Martin Scorsese
wanted to re-create
’90s power dressing, he
had his longtime friend
Armani design suits—
1992 including the almighty
When Eric Clapton wanted to shed blue pinstripe—for
his wild and woolly ’70s rocker Leonardo DiCaprio.
image, he did it with the help of
Giorgio Armani. In 1990 the guitar
BY MICHAEL SOLOMON

god attended his first Armani

show, and the designer began
dressing him in understated three-
button suits and jackets in muted
colors. Seven years later Clapton
composed the music for an Armani
fashion show.

22 | FORBES MAY 25, 2015

 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
NET WORTH: $2.6 BILLION
All bad news for Dorsey’s Twitter,

LeaderBoard which lowers revenue and profit projections

as losses mount; shares drop 20%.

30 UNDER 30 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
JOYRIDE COFFEE | 28, 26
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 Jawbone’s
app, which tracks not only
calorie consumption but also
assesses the wholesomeness
of your culinary choices.
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 Sotheby’s but served ten months in prison after he was convicted in
a price-fixing scheme. His friend, tenant and fellow billionaire LES WEXNER,
founder of Victoria’s Secret, reflects on a life.
I first got to know Alfred Taubman because I thought his company was rip-
ping me off. It was about 1970, and I made a handshake deal with one of Al’s leas-
ing agents to open The Limited’s 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, I’ll stick with it.”
A nice first impression, but Al wasn’t 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,

Ali Bouzari
PILOT R+D | 27
The chefs and scientists at
Bouzari’s consultancy help
budding entrepreneurs
improve the flavor of new
edible products such as protein
substitutes and cricket flour.
ASK 50 BILLIONAIRES
What’s the Most You’ve Ever
Paid for a Bottle of Wine?
Under $100 to $500 to
$100 $500 $1,000
BLOOMBERG (TOP); ILLUSTRATIONS BY PATRICK WELCH (LEFT); NILS JORGENSEN/REX/NEWSCOM; WINE BOTTLE: GETTY IMAGES
he did not acknowledge me. After lunch he broke his silence: “You saw your
stores?” he asked. “They’re the ugliest stores I’ve ever seen. You’d better fix them
or I’m 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 it’s the best store I’ve 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 first 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 quar-
ters—the only thing you could bring inside—to buy White Castle burgers at the
vending machine. In my opinion he was innocent. But Al didn’t dwell on that. He
just counted the months until he could see his grandchildren again.
$1,000 to More I don’t His giving to Michigan inspired me to give to Ohio State. He was just as gener-
$10,000 than buy
$10,000 wine ous with friends. About 25 years ago I found a big box in my garage and pulled
30 UNDER 30 BY KATHRYN DILL

out a beautiful piece of artwork, one I had admired in Al’s house. I told him I
couldn’t accept it. “A deal is a deal,” he told me. “We never know what the fu-
2% 22% 24% 28% 2% 22% ture 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.

24 | FORBES MAY 25, 2015

 GEORGE LUCAS
+$170 MILLION
NET WORTH: $5.2 BILLION
Disney releases trailer for Star Wars VII; nerds

LeaderBoard go nuts, and the franchise mastermind watches his

Disney shares hit an alltime high.

SEAL THE DEAL

LEATHER DAMIER PORTFOLIO

by Louis Vuitton ($1,520)

The
New
Power WHAT’S briefer

Bag than a briefcase?

A sleek portfolio
meant to hold a
single document—the
one that’s about to be
signed. Made in leather
(or carbon fiber), the new

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

ON THE BLOCK
A Seat to Remember
An unsinkable Titanic deck chair sells for $150,000.
REARRANGING deck chairs on the Titanic might be the quintes-
sential exercise in futility, but collecting them isn’t. 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 cable-
repair ship Mackay-Bennett, which was sent to recover bodies.
According to Aldridge’s records, the chair was then given to
Mackay captain Julien Lemarteleur by one of its crew, and for the past
BY MICHAEL SOLOMON (2)

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 anony-
mous winning bidder can’t actually sit in the chair; it’s too fragile.
Given the furniture’s tragic provenance, though, why even risk it?

26 | FORBES MAY 25, 2015

 A W O R K O F S M A R T

W E L C O M E T O 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.

Raising the Bar—Again
BY TONY VELOCCI
T
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 world’s most discerning capital
goods markets: business jets.
The company started laying the ground-
work 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 speeds—and improved fuel economy.
Altogether, the consultations resulted in
more than 200 design changes, including
improved cockpit functionality, additional
PROMOTION | BUSINESS AVIATION
storage space and cabin layout revisions.
What emerged from Gulfstream’s product-
development center—one of the most robust
in all of civil aviation—were two aircraft whose
combination of speed, range and cabin com-
fort 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 speed—Mach 0.85, or
about 561 mph—the 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 Gulfstream’s
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 aircraft’s 51,000-foot maximum ceil-
ing—the 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 syn-
thetic vision for the primary flight display,
is standard.
FlexJet, a major provider of fractional aircraft
ownership services, is among the first custom-
ers 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.
That’s 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

LeaderBoard as Fed chairman. Now he’s hired him as an

advisor—and the revolving door spins anew.
Ken
Griffin

CONVERSATION
EVERYBODY LIKES a Twinkie, right? Steven
Bertoni’s May 4 cover story about the salvation of MAPPING
Hostess by Dean Metropoulos and Apollo Global’s
Andy Jhawar had tongues wagging (and drooling).
IT OUT
FORBES’ Janet Novack and
The tale is high drama—strikes, implementation of
Ashlea Ebeling took to Twitter
efficiency measures and the rebirth of a snack-food to advise anxious Millennials
icon—and reader opinions were … well, as homog- about financial planning. More
enous as Twinkies themselves. “Love Hostess prod- at storify.com/forbes.
ucts, those ‘preservative-packed calorie bombs with
ingredients that read like a chemistry textbook,’” @TEHRIFFIC What are the
most common mistakes
tweeted (in earnest!) Jennifer Gerholdt of the U.S. beginners to financial plan-
Chamber of Commerce Foundation, quoting Berto- ning make?
ni. Breitbart’s John Nolte gushed: “Loved this story.
What unions destroyed, innovation & chemicals
saved.” And in a gesture as sweet as vanilla filling, @ FORBES When it comes
Daren Metropoulos tweeted our cover image and to investing, beginners are
“Proud of my Dad.” Awww. Have a Twinkie on us! often too conservative (no
stock) or too risky (one
stock). One big mistake is
cashing out of a retirement
account because you didn’t
THE INTEREST GRAPH build an emergency fund.
Judging by reader clicks, snack cakes and rock ’n’ roll have nothing
on the futuristic motorbike taking Taiwan by storm. @SCHULTZZYRUN What
The Tesla of Scooters Is Driving Asia’s Two-Wheel Revolution 120,419 page views can current college students
do to get their finances on
track while being under
student loans?
Revenge of the Record Labels: How the Majors Renewed Their Grip on Music

101,124
FORBES If you’re living
on student loans, before
Twinkie’s Miracle Comeback: The Untold Inside Story of a $2 Billion Feast you buy anything, multiply
its price x 1.5. It’s a mental
77,438 trick to remind you that it
“Gogoro’s bike is
what you’d get will cost more by the time
The Next Billion-Dollar Startups if you mated a you pay interest on your
Vespa and an loans.
69,493 iPhone.”
“As the MP3 heads
the way of the eight-
Pharmacy Startup PillPack Could Change the Way America Takes Its Medicine @JAMESDOS3 Is it
track tape, it seems
the labels have
worth it for a beginner
68,006
learned from their investor to work with an
mistakes.” algorithm-based system
The Billionaire Banker Ready to Bet on Oil like Wealthfront as opposed
“Medication overload to a human?
50,735 is a big problem.
Some 32 million
Americans are on at
Innovation Factory: How Parker Hannifin Pumps Out Breakthrough Products least five different FORBES I like roboadvi-
prescription drugs.” sors like Betterment and
30,992
Wealthfront. But you don’t
BY MEHRUNNISA WANI

really need algorithms—you

The Great Getty Curse can simply buy a balanced
THE BOMB fund that is 50% stocks/
50% bonds.
1,709 VIEWS

30 | FORBES MAY 25, 2015

 7:05 am
Post-workout

TRAVEL
breakfast in
the room.

RE- 8:00 am

INVENTED
Cab it to a meeting.
Take a conference
call on the way.

With 200+ hotels, we’re everywhere

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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 affiliates.
 THOUGHT LEADERS
AVIK ROY // THE APOTHECARY
THE FLAW IN MARCO RUBIO’S
TAX REFORM PLAN
IN MARCH two freshman Republi-
can senators—Mike Lee (Utah) and
Marco Rubio (Fla.)—released an ambi-
tious plan for tax reform. Nonpartisan
experts believe the plan would turbo-
charge U.S. economic growth. But the
plan is marred by a multitrillion-dollar
effort at social engineering, one that
would increase the deficit without ex-
panding 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 atten-
tion. And there is a lot of good stuff in his proposal, entitled the “Eco-
nomic Growth and Family Fairness Tax Reform Plan.” (Disclosure: I’m
an advisor to former Texas governor Rick Perry.)
It would clean up loopholes in the corporate tax code, cut the fed-
eral 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 alterna-
tive minimum tax.
Michael Schuyler and Will McBride of the Tax Foundation have
conducted the most thorough analysis to date of the plan. They esti-
A COSTLY—AND CLUMSY—SUBSIDY FOR PARENTS
MARS AN OTHERWISE ATTRACTIVE PROPOSAL
mate that it would reduce federal tax revenue by more than $4 trillion federal spending, spending that Lee-Rubio
in its first decade, if you exclude the effects of economic growth. But
over the long run, they say, Lee-Rubio would pay for itself, by increas-
ing the size of the economy by 15% and by increasing employment by
2.7 million jobs.
The most controversial feature of the plan—and rightly so—is its ef-
fort to use the tax code to encourage more Americans to make babies.
The plan includes a new child tax credit of $2,500, which would be
refundable against income and, importantly, payroll taxes. Rubio and
Lee worry that parents don’t bear more children because they “shoul-
der the financial burden of raising the next generation of taxpayers.”
This has been a leading concern for a fraction of the “reform conserva-
tive” wing of the Republican Party, a group focused on expanding op-
portunity for lower-income Americans.
AVIK ROY IS FORBES’ OPINION EDITOR AND A SENIOR FELLOW AT THE MANHATTAN INSTITUTE.
32 | FORBES MAY 25, 2015
Now, I’m a card-carrying reformocon, but
I see a ton of problems with the Lee-Rubio
child tax credit. First of all, there’s no empiri-
cal evidence that the plan would actually
lead to the production of future taxpayers.
Most of the tax credits would go to parents
who’ve 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 chil-
dren born out of wedlock have a far higher
risk of living their lives in poverty: net recipi-
ents, not financiers, of the entitlement state.
Second, we already have a democratic
imbalance, with two-fifths of Americans
experiencing no income tax liabilities.
Lee-Rubio would worsen that problem by
eliminating payroll tax liabilities for a sig-
nificant 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 ac-
celerate the impending
bankruptcy of the pro-
grams funded by payroll
taxes—Social Security and
Medicare—or count as new
doesn’t offset with cuts elsewhere.
And fourth, as the Tax Foundation analysis
points out, the child tax credit would increase
the deficit by more than $1.7 trillion over a
decade, while contributing nothing to eco-
nomic growth. Think about it this way: The
Lee-Rubio child tax credits are at least $700
billion costlier than the tax credits deployed
by ObamaCare to offer health coverage to the
THOMAS KUHLENBECK FOR FORBES
uninsured.
That $1.7 trillion could have been used to
raise living standards for every American by
further reducing individual and corporate
tax rates. For Senator Rubio it’s a missed
opportunity. F
 THOUGHT LEADERS
AMITY SHLAES // CURRENT EVENTS

THE “NO BAILOUT” PLEDGE

QUALITY TAX POLICY unites they might have had there been no bailouts.
America and prepares us for stronger The corporate and bank bailouts ceased,
economic growth. That’s why Repub- but the greater bailout, the Federal Reserve’s
lican presidential candidates have monetary bailout, continues to this day. The
traditionally made taxes the central Fed’s easing represents a historic example
plank in the GOP platform. Under an of what Ludwig von Mises labeled “mal-
optimal tax plan all people are treated investment.” Mises and others in the Austrian
the same. Rates are low. School, notably Friedrich von Hayek, argued
That, in turn, is why the flat tax, that failing to allow markets to clear impedes
indeed, the sort favored by FORBES’ recovery. Now we have textbook evidence. In
editor-in-chief, Steve Forbes, has sus- any case, voters young and old aren’t blind to
tained its charm down the decades. the hypocrisy of bailing out one group while
Voters tend to trust a plan they understand. Back during the Reagan ignoring the other. This is why they react heat-
years activist Grover Norquist began daring Republican candidates to edly when candidates demonstrate even a hint
sign “The Pledge,” a commitment to agree not to increase taxes. of condescension (Mitt Romney’s problem).
Yet that logic doesn’t seem to hold in this election round. The early tax Perhaps the Fed and the government should
plans—and some would even hesitate to call them plans—are not optimal. have provided liquidity in the autumn of 2008
Candidates currently favor a disunified mishmash, singling out groups and stopped there. Perhaps even that liquid-
for various preferences. The plan put forward by Senator Marco Rubio ity shouldn’t have been provided. And perhaps
(R–Fla.) is a good example of this. Its centerpiece is a $2,500 tax credit monetary reform is the first change needed.
for families. This is tax policy as consolation, for such credits “score” at These nontax questions warrant discussion.
zero when we reckon how much they contribute to growth. Rubio, how- Yet Republicans aren’t speaking much about
ever, morphs from Santa to tiger when it comes to investors, slashing the 2008 record. Rubio has explicitly said that
corporate and capital gains taxes in a way that would promote growth. he considers the past “yesterday,” i.e., irrele-
Republicans are producing divided tax plans because they’re vant. Candidates would rather mumble some-
addressing a genuine economic divide. Wall Streeters, the energy sec- thing about “liquidity” or Lehman Bros. and
tor and a few others are faring well, but others are not. Middle-age how complicated it all was than take a stand.
Americans observe that they owe more money, drive older cars and The 2008 crisis is the elephant in the
hold less equity than they had imagined they would at this point in elephants’ room, the event that affects voter
their lives. For their part, young people sense that they are, to cite the trust in the GOP. Since voters aren’t sure
title of economist Diana Furchtgott-Roth’s new book, “disinherited.” what happened in 2008—and aren’t sure
Only debt and subpar jobs lie ahead. what will happen in the next crisis, either—
they’re in no mood to take the sort of leap of
THE ROMNEY PROBLEM faith tax reform requires. Understandably re-
The reason for this divide is bailout policy that dates back to the sentful, they prefer a tax handout. Politicians
2008 financial crisis. In the summer of that year President George W. sense this and deliver accordingly.
Bush and presidential candidates Senators John McCain and Barack Suggestion: Postpone the tax talk, and, instead,
Obama were spending more time on Scott McClellan’s Iraq tell-all, push the candidates on bailouts. Force them
Sarah Palin’s performance as Alaska governor or the Obama cam- to declare whether they consider themselves
paign’s mastery of social media than on mortgage-backed securities. to be “Austrian” or neo-Keynesian.” Let them
THOMAS KUHLENBECK FOR FORBES

The crisis surprised all three men. Uncertain, first President Bush say whether, come the next crisis, they’d wing
and then President-elect Obama joined Congress in turning to bailouts it, à la Hank Paulson, or actually put forward a
and subsidies as the answer. Those bailouts ultimately hurt the plan. Clear the air on 2008, and there will be trust
economy because they “picked losers,” investing in firms whose dis- enough for tax reform. But the best pledge for
solution might have made better sense. Companies didn’t hire the way 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

 THOUGHT LEADERS
RICH KARLGAARD // INNOVATION RULES

SMART-CITY CHAMPIONS
THE UN SAYS the global population to discourage ownership. So what’s next? The
will reach 9 billion by 2050. Six billion answer isn’t more taxes. At some point the
of that population will live in urban goose will squawk and talent will stop coming
areas. That’s a jump of 2.5 billion city in. The answer is to use technology and data
dwellers over the next 35 years. to seek new efficiencies. (Singapore’s tropi-
Argue the numbers all you wish— cal climate makes increasing the number of
I’m skeptical that world population will people walking and biking unfeasible.)
grow as fast as the UN predicts. Still, Improved health and transportation—
the effect on cities will be inescapable, obvious, right? They’re on every city’s and
whether the jump in city dwellers is country’s wish list.
1.5 billion or 2.5 billion. The stresses The third category discussed by Prime
on cities will be enormous: water, food, Minister Lee is rather unique.
energy, transportation, health care, security, crime, quality of life. ƀLJ*Ɛ(Ɛ)'#(!LJ',%.*&ź “We want to
This is why we love capitalism: The opportunities will be huge, become a safe and secure data marketplace.
too. The smart-city innovation race will generate tens of trillions of A place where companies can easily con-
dollars in the coming decades. Which countries and companies will duct testing and extract insights on market
be the big winners? research and consumer trends. A place where
I see three categories of winners. The first will be suppliers of digi- data can be shared in order to unlock value
tal technology, from high-speed telecom, cloud services and digital and innovation, and where the government
security to apps, for example, like Uber’s and Airbnb’s that use physi- releases many data sets to the public to build
cal resources with greater efficiency. But these can get you only so far. applications and services.”
The second category will be traditional industry reborn. The trick That’s a bit different—and brilliant. Singa-
will be to find breakthroughs in materials, construction and transpor- pore will be positioned as part Switzerland/
tation—updates to the blood-and-sweat stuff that built the great cities part Silicon Valley. Without saying so, the
of the 20th century. Will the winners be known names, such as GE, prime minister was addressing some people’s
Mitsubishi, Tata and Samsung, or new players? fears that Hong Kong has been compromised
A third category will be the smart cities themselves. Leaders will as a “secure data marketplace.” Mr. Lee is too
likely create services that can be used to teach other cities, so their much of a diplomat to say it directly, but the
expertise will have value beyond the benefits enjoyed inside the cities. implication is clear: Singapore wants to be
Smart cities will enjoy premium brands in a tough global economy, Asia’s top banking city.
and they will attract talent. A great example is Singapore. The coming revolution in financial tech-
Last month I attended a smart-nations conference in Singapore. nology—fintech, as it’s called—is just starting.
Prime Minister Lee Hsien Loong kicked off the event with a reception Will the winners be disruptors from Silicon
at his residence. He spoke about his top three priorities. Valley? Or, because banking is regulated in
ƀLJAging population. It is imperative that older Singaporeans lead every country in which it is practiced, will
healthy and fulfilling lives. One out of nine today is over 65. In 15 the fintech winners be hybrids of disruptors
years that number will be one in five, almost as high as in Japan now. and traditional bankers? My conference
Living in a small city-state, Singaporeans don’t have the outsource- panel said the latter. In which case, part-
granny-to-Arizona-or-Florida option. Citizens will have to “age in Switzerland/part-Silicon-Valley Singapore is
place,” while not burdening the economy. This means big opportuni- ideally positioned.
ties at the intersection of health care and technology.
AG’S ROLE IN SMART CITIES
THOMAS KUHLENBECK FOR FORBES

ƀLJTransportation. Land is scarce in Singapore. “We can’t keep on

building more and more roads indefinitely, becoming like Los Angeles.” Let’s not forget that most basic need: food.
Singapore, like Denmark, taxes cars almost double the purchase price How will an additional 2.5 billion city dwell-
ers be fed? Join the Forbes AgTech Summit
RICH KARLGAARD IS THE PUBLISHER AT FORBES. HIS NEW BOOK, TEAM GENIUS: THE NEW SCIENCE OF HIGH-
PERFORMING ORGANIZATIONS, COMES OUT IN JULY. FOR HIS PAST COLUMNS AND BLOGS VISIT OUR WEBSITE on July 8–9 in Salinas, Calif. to find out. Go to
AT WWW.FORBES.COM/KARLGAARD.
Forbes.com/conferences to learn more. F
36 | FORBES MAY 25, 2015
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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 At Airbnb there’s
INVESTING
always an artist in the
SURVIVING THE COMING BOND STORM 64 house. Everything
starts with billionaire
cofounder Joe Gebbia,
a fellow handy
with a cartoonist’s
sketch pad—and
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?
BY JOANN MULLER

I
n the early 2000s engineer David
Caldwell might have missed the
chance of a lifetime. While develop-
ing touch-sensitive switches for home
appliances, Caldwell was invited to
him with questions about how it worked, an Looking for a
breakthrough: Unlike
Apple engineer asked, “Can you integrate it today’s touchscreens,
into a round wheel?” David Caldwell says, his
Sure, replied Caldwell. technology works even
with wet or gloved hands.
But nothing ever came of the discus-
BRIAN KELLY FOR FORBES

Cupertino, Calif. to demonstrate his patented sion, partly because Illinois-based Gem-
TouchSensor technology to Apple, which tron, the glass company that controlled his
was looking to replace the mechanical scroll technology, wasn’t interested in diversify-
wheel in the original iPod. After peppering ing beyond its core expertise: selling $100

40 | FORBES MAY 25, 2015

 STRATEGIES REINVENTING AMERICA

cooktops embedded BYE-BYE, BUTT DIALS?

with electronics to CURRENT “CAPACITIVE” TOUCHSCREENS ARE TRIGGERED WHEN A FINGER CROSSES A THRESHOLD IN AN
companies like Gen- ELECTRIC FIELD ABOVE THE GLASS. BUT THEY’RE PRONE TO FALSE TRIGGERS AND DON’T 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,
found another way CURRENT “CAPACITIVE” TOUCHSCREENS
to make its touch
wheel. Some 400 Glove
million units and
$67.5 billion in sales But gloved
later, it is still in use Sensors
hands can’t
interpret break
on the iPod Classic. in electric
disrupt thin
Who knows threshold, and
threshold as
go undetected.
what might have a touch.
happened if the
talks continued?
Caldwell, now Glass Glass
58, his round face
framed by shaggy CALDWELL’S HEURISTIC SIGNATURE SENSING (HSS)
bangs and rectan-
gular glasses, tries
not to dwell on the Glove
“Touch
missed opportu- recognition Even a gloved
nity. “You can’t look zone” collects hand has
back,” he says, sit- data from a readable
ting in a nondescript movement and “electronic
position. touch signature.”
office-park labora-
tory in Holland,
Mich. “I did okay.”
Caldwell holds Glass Glass
more than 30
patents, many on touch technology. His Mich., an expert in automotive touch con-
TouchSensor switches have been incor- trols, “there’s nobody even close.”
porated into millions of control panels, Most touch-sensitive products, like
for everything from automobiles to wash- those used in the iPhone and other per-
ing machines to beverage dispensers at sonal computing devices, are known as
fast-food joints. Still, when Gemtron sold “capacitive” systems. They sense when and
TouchSensor to another firm in 2007 for where an object—typically a finger—breaks
just $65 million, Caldwell opted to strike an electric field. To trigger a touch signal,
out on his own. Less than a year later he engineers set a very thin threshold, just
formed a new company, AlSentis, to rein- above the surface of the device, to measure
vent touch technology once again. capacitive change. That’s why a light touch
The result, eight years later, is a poten- is all that’s needed to operate a smartphone.
tial breakthrough that could transform But environmental factors can wreak
how people around the world interact with havoc with capacitive systems: Who hasn’t
their electronic devices. Called HSS (for accidentally butt-dialed someone or strug-
“heuristic signature sensing”), Caldwell’s gled in vain to make a call with wet hands or
patented setup is far more reliable and uses with gloves on? During manufacturing, even
far less energy than today’s touch systems. the slightest variance, like an uneven layer
It even works when wet or dirty, and can of paint or adhesive, or a change in humid-
be operated with gloves on. ity, can affect the circuitry and how a touch
“From what I’ve seen,” says Bruce Ban- panel feels or if it works at all.
ter, president of Tech-D-P in Plymouth, Caldwell’s breakthrough idea: Do away

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 capaci-
tive 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 surface—the 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 pro-
cessing all the extra data, it knows exactly
when a finger is a finger and when it’s a
drop of water or something else and, more
important, what data to ignore (no more
butt dials). And because it’s 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 de-
vices are coming later this year. On the new
Chevrolet Corvette and Camaro, General
Motors replaced the little blue OnStar but-
ton on the frame of its cars’ rearview mirror
with an HSS switch embedded directly into
the glass for a sleeker look. Bauer Prod-
ucts 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. We’re re-
ally excited,” says Amway heir Rick DeVos,
who is an AlSentis investor through Start
Garden, his early-stage venture firm (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 ma-
chines in the U.S., each with 8 to 12 buttons.
Caldwell’s aptitude for electronics was
evident even as a kid shooting off rockets in
Lapeer, Mich., about an hour north of De-
troit. In high school he griped about taking
math and science—until he got to physics,
“because now I know what it’s all about.”
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
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, today’s business-
which were just emerging. building boom is largely horizontal—
When he left the Navy in and packed with park space.
1981, he married and resettled
in Michigan, working on rain-
sensing windshields for General
Motors. He later jumped to GM
supplier Donnelly, where his
interest in thin film sensors re-
ally took off. But Donnelly was APPLE
less interested, so Caldwell left, CUPERTINO, CALIF.
SQUARE FEET 2.8 million
determined to make the sensors COMPLETION DATE 2016
he’d been working on obsolete. FOUR-STORY, SPACESHIP-LIKE NEW HQ IS REPORTEDLY WAY
OVER BUDGET. IF COSTS REACH A PROJECTED $5 BILLION, IT’LL
He created a new company, BEAT ONE WORLD TRADE CENTER TO BECOME AMERICA’S
PRICIEST BUILDING. LET’S 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),
eventually selling control to GOOGLE
MOUNTAIN VIEW, CALIF.
Gemtron to stay afloat. SQUARE FEET 3.2 million
AlSentis is his second chance. COMPLETION DATE Undetermined
The company says it broke even “LARGE TRANSLUCENT CANOPIES WILL COVER EACH SITE,
CONTROLLING THE CLIMATE INSIDE YET LETTING IN LIGHT
last year as revenue exploded AND AIR,” WROTE DAVID RADCLIFFE, GOOGLE’S VP OF REAL
ESTATE, ON THE COMPANY BLOG. “WE AIM TO BLUR THE
from $123,000 in 2013 to more DISTINCTION BETWEEN OUR BUILDINGS AND NATURE.”
than $2 million in 2014. With
only 15 employees (6 of them
engineers), the company won’t
manufacture anything. Its busi-
ness model is to license the tech-
nology and outsource manufac-
turing. 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, FACEBOOK’S 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 we’re
standing, the road is wide
open.” And who knows? Maybe
someday it will lead back to
Cupertino.
SAMSUNG
SAN JOSE, CALIF.
SQUARE FEET 1.1 million
COMPLETION DATE Summer 2015
SAMSUNG’S 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
 to the mattresses with his allies in labor, got the
STRATEGIES backing of the automaker’s top-level committee
and beat his old boss for control of the company.
LUXURY By late April Piëch was gone.
Which takes us back to Dürheimer. Despite
a 17% jump in first-quarter operating profits,
Bentley sales at the Volkswagen Group are stagnant:
The number of vehicles sold was up just 1.8%

On a Roll in the first quarter over last year, with profits

eked out through cost-cutting. Winterkorn’s
push to grow in the hot U.S. market (where car
Amid chaos at parent company sales are up almost 6% so far this year) has been
Volkswagen, could the venerable a disaster, down 1.4% through the first quar-
British automaker’s CEO get a ter, following a 2% decline in sales last year.
second shot at the top? Increasingly, VW’s stable of luxury brands has
become its profit center, especially Porsche and
BY MARK EWING Audi. To stay on top, Winterkorn will need to
keep it that way.
WHEN LAST WE MET Wolfgang Dürheimer That’s good news for Dürheimer. Under his
in 2012, FORBES called him the “next king of command Bentley sold just over 11,000 vehicles
Volkswagen,” a rising star at the world’s second- in 2014, a new record, and turned a profit of $191
largest automaker. Having led VW’s Porsche million. Next year he’ll launch Bentley’s first
R&D to previously unimaginable heights—he SUV, the Bentayga, initially with a W12 engine
developed and launched that fountain of profit, and then with a hybrid powertrain. “By the end Bavarian Bentley
the Cayenne—he was moved to sister company of the decade 90% of our range will offer hybrid Boy: CEO Wolfgang
Dürheimer believes
Bentley in 2010 to redraw the business plan capability,” he says. the company’s future
in the midst of the Great Recession, after two And more new models are on the way. Among lies in hybrids, like the
years of collapsing sales and over $400 million the most glamorous unveiled at the Geneva Auto Bentley EXP 10 Speed
6 concept (below) and
in losses. Show in March: the Bentley EXP 10 Speed 6, the forthcoming SUV,
“I joined Bentley at a great time where I a two-seat hybrid concept car named after the the Bentayga.
could really make my mark,” the 56-year-old 1920s Bentley Speed 6
CEO says now. Confident in future growth, that won at Le Mans.
Dürheimer had bold plans that included de- Coupled with his time
velopment of an extravagant new flagship— at Porsche, Dürheimer’s
the $300,000 Mulsanne—and by 2011 Bentley performance now makes
returned to profit, just barely. him the favorite to lead
For his efforts, Dürheimer was named head all four sports-luxury
of Audi R&D—in short, “chief engineer.” Then brands at VW: Bentley,
Dürheimer’s career went into a spinout. A Bugatti, Lamborghini
culture clash with Audi lifers and a proposed and Porsche. It’s a pow-
recasting of Audi’s mission ended Dürheim- erful throne in the post-
er’s tenure after nine months. Following a short Piëch era—but for his
time in what the Japanese call a “window job”— sake let’s not call him the
watching over VW Motorsport—Dürheimer next king of anything
was back at Bentley. just yet. F
Such is life at VW these days. Dürheimer’s
drama is just a bit part in the Wagnerian Ring
Cycle playing out at the automaker, where
Ferdinand Piëch, the mercurial chairman
of Volkswagen, was recently ousted in a
showdown with his presumed successor,
Martin Winterkorn. When Piëch pub-
licly humiliated Winterkorn in March,
saying he wasn’t up to the task of running
the company long term, Winterkorn went

46 | FORBES MAY 25, 2015

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 TECHNOLOGY
TRANSFORMATIONAL TECH

hackers out to make

a quick buck. It’s
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
anyone—for free. Call
it the Google for the
broken Web.
Because of the
time and cost con-
straints of running
constant scans,
Don’t be evil:
Alejandro Caceres and PunkSPIDER has
Amanda Towler are not been limited to one
in this for the money. scan a year (though
that’s set to change
this year). During the
last scan in May 2014,
The Google For PunkSPIDER’s code
ran for four days on

The Broken Web cloud servers to test,

or “fuzz,” more than
98 million websites
If you could expose every flaw on every website, all at once, by firing junk data at
wouldn’t that be a good thing? Not everyone agrees. them to see if errors
BY THOMAS FOX-BREWSTER occurred, the first
sign of a potential

H
acker culture is dying. A scene weakness. That first fuzz, Caceres says, turned
that used to be replete with up a large yet “depressingly predictable” num-
anticorporate 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 capital- will be bigger and badder than the last, cover-
ists 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 firm use the Tor network to anonymize their identi-
called Hyperion Gray, which he started with ties by routing them through layers of servers.
his girlfriend and business development part- There are plans to have the scanner running
JAMEL TOPPIN FOR FORBES

ner, Amanda Towler, in their poky Arlington,
Va. apartment.
Caceres’ opinion wouldn’t be all that in-
fluential but for the fact that he and Towler
have unleashed an epic feat of revenge against
daily, too, which will keep the data up to date.
Spreading the knowledge that a vulnerabil-
ity exists is leaps away from teaching people
how to use it to break into a Web app. (The
real cybercriminals are already using more

48 | FORBES MAY 25, 2015

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 TECHNOLOGY TRANSFORMATIONAL TECH
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 tool’s
development, Caceres and Towler presented
their baby at the SchmooCon security confer-
ence in Washington, D.C. Caceres opened the
floor to questions, and, halfway through, one
of the attendees told him to get a lawyer. With-
out proper authorization from website admin-
istrators, 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 mem-
ber 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 com-
pany 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, of-
fered some advice on how to stay within the
confines of the law. It appears to have worked,
as Caceres has had no serious legal threats
since launch.
PunkSPIDER is part of a broader “mass-
scanning” 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 flaws up for free,
will be an even better deterrent to the vulner-
ability black market, where researchers are
selling previously unknown exploits to the high-
est bidder (sometimes crooks, sometimes law
enforcement) at prices as high as $100,000.
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
Over the last two years Caceres and Towler
WE LOVE
have worked to improve on PunkSPIDER’s
rough, early appearance. The Web page,
punkspider.org, is now as clean-looking as BUG WITH
Google’s search page, with a bar for whole A PLUG
addresses or just part of the URL.
If you want to refine your results,
there are buttons to specify a range
of common Web vulnerabilities to
search for. Sites are given a rank-
ing from 0 to 5. Caceres says you
shouldn’t 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 flaws across the site. Prior to
DAVID BENARDO
Vintage-car enthusiast
PunkSPIDER, a business could get this kind of but wary of sinking
money into a
security assessment only by paying tens of thou- midcentury tank that
sands of dollars to a professional firm as part of gets, like, 6 miles to
a wider penetration test. “Security should not the gallon? Salvation
be just for the upper echelons. We really believe is at hand in the form
this information should be made freely avail- of the ZelectricBug.
Zelectric, a San Diego
able,” says Towler. gearhead’s playland,
Even as some government and law enforce- retrofits classic
ment agencies look askance at the duo behind Volkswagen Beetles
PunkSPIDER, others have been keen to avail (those made from 1958
themselves of their skills. Caceres’ crew won to 1966) with electric
motors, producing by
a role on the Memex program funded by the hand a vehicle they
Pentagon’s Defense Advanced Research Project modestly call “retro-
Agency (DARPA). Memex produces highly cus- futuristic experiential
tomizable search tools to better illuminate both art on wheels.” With
the dark and standard Web, and led to convic- 85 horsepower—you
laugh, but it’s double
tions last fall of human traffickers by studying the original’s—it’ll
their activities online. Hyperion Gray has been easily drive highway
adding doses of artificial intelligence to Memex speeds for 80 to 100
so it can mimic human interactions with web- miles on a full charge.
sites, such as opening drop-down menus or Bring your own Beetle
in for a $37,000
hovering over interactive elements. Memex upgrade or buy direct
has been getting contracts from police forces, from Zelectric starting
though they can’t say which, who want better at $54,000—exhaust-
search tools to help catch “the most heinous” pipe splutter and Joan
criminals, says Caceres. Baez LP no longer
included.
Towler and her partner, who now work
out of Concord, N.C., know they could make
a bundle in search. “We just don’t care. We’d
rather keep this project as something we
enjoy, something that isn’t sleazy and provides
an important service for the community,”
Caceres says.
 
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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. How-
ever, it’s 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 high-
definition systems had high costs associated with storage and bandwidth,
and that kept the industry lagging,” says Avigilon’s 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.””
Avigilon provides end-to-end securityity solutions, “Video content analysis
leading the industry in its innovativee use of brings information
technology since its introduction of the industry’s from the physical world
first 11 MP camera in 2006. Its patented High
into the realm of big data.”
Definition Stream Management (HDSM)™ tech-
Bryan Schmode
nology enables customers to enjoy the benefits of
Chief Operating Officer,
HD—sharpness and clarity—while shedding the Avigilon
cost burden of storage and network bandwidth
that HD normally brings with it.
“Video content analysis brings information from the physical world into
the realm of big data,” says Schmode. “There’s 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 time—just as their online counter-
parts 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 behavior—captured by video surveillance—“predicts”
they will be important and significant buyers.
“Analytics goes beyond that as well,” says Avigilon’s 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 searchable—so it will be a simple matter
to pull up last week’s 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.”
Avigilon combines the clarity of HD and the insight
from analytics to deliver an extremely powerful solu-
tion for security and business. Cropley agrees that
many of the algorithms developed for security can
serve a dual purpose: the algorithm that could be
used to alert authorities to loitering vandals in a city
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
business objectives as well.
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 immediate—as 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.
Airbnb’s process kills the chaos.
BY GEORGE ANDERS
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 Airbnb—the “shar-
ing economy” icon expected to raise money
soon at an astounding $20 billion valuation—is a
34-year-old billionaire. Gebbia has been rethink-
ing how his firm approaches hiring.
Last quarter Airbnb got 50,000 applica-
tions for just 300 jobs. Expand a business that
fast and it’s hard to keep the little stuff run-
ning well. (Dig back far enough on the career
site Glassdoor.com and there’s a post by a
disappointed Airbnb job-seeker recounting a
series of “disorganized” Skype calls with re-
cruiters, in which “not a single one looked at
my résumé.”) Big salaries and lavish perks are
required to mask the reputational damage.
Gebbia began feeling uneasy about the com-
pany’s HR “blind spot” in 2011, when Airbnb
surged from 50 employees to 500. Job inter-
views weren’t happening on schedule. And
when they finally took place, strong prospects
were left in limbo for weeks. Candidates were so
irritated that when Airbnb finally did make job
offers only 50% to 60% said yes. (Most compa-
nies 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 it’s like to be
a guest in somebody’s house,” he says. “We think
about how each stage makes people feel.”
Step into the recruiting quadrant of Airbnb’s
big, open-plan workspace and the first thing you
see is a 10-foot-long storyboard showing the ten
key stages of hiring. (Two of Airbnb’s found-
ers graduated from the Rhode Island School of
54 | FORBES MAY 25, 2015
Design, so they create Walt Disney-style story-
boards 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.
It’s no longer tolerable for Airbnb’s inter-
viewers to postpone candidate reviews until
weeks after the in-person interviews. Well-
thought-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 Airbnb’s 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. Re-
cruiter 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, Airbnb’s
TIMOTHY ARCHIBALD FOR FORBES
head of recruiting, the storyboarding exercise
underscored the importance of moving briskly. Airbnb cofounder
Airbnb’s job-offer acceptance rate for engineers Joe Gebbia’s
has climbed to 80%, the kind of figure that helps formula for wooing
recruits: custom
the company win tussles with the likes of Twit- onesies and prompt
ter and Uber. F thank-yous.
 ENTREPRENEURS
ALTERNATIVE FINANCE

The Six-Minute Loan

Kabbage CEO Rob
Frohwein won’t give you
a loan just because you
have a lot of Facebook
likes, but it helps. Banks still aren’t making enough small-business loans, so Kabbage is
quickly filling the void—at crazy high interest rates.
BY DARREN DAHL

W
hen Jennifer Kirk, who online—linking directly to her bank, PayPal
owns Posh Puppy Bou- and QuickBooks accounts (as well as her social
tique, a pet grooming and media feeds)—and then ran an automated pro-
supply shop in Rocklin, gram to assess her creditworthiness.
Calif., had an opportunity Six minutes later she had an answer: She
EVAN KAFKA FOR FORBES

to expand her business last year, she turned first was approved to borrow up to $50,000 on a six-
to her bank, which made her wait three weeks month loan, and she could transfer part or all of
before rejecting her loan application. Then she those funds to her PayPal account whenever she
learned about Kabbage, which let her apply needed them. “The money was instantly avail-

56 | FORBES MAY 25, 2015

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 ENTREPRENEURS ALTERNATIVE FINANCE
able to me,” says Kirk. But at a price—an annual
percentage rate of about 27%.
Today Kabbage offers borrowers lines of
credit for as much as $100,000, with loans pay-
able 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
profitable this year, with revenue exceeding
$100 million, up some 200%.
Those numbers put Kabbage among the
leaders of the increasingly crowded field of
alternative lenders, says Smittipon Srethapra-
mote, a vice president at Morgan Stanley, who
researched the space prior to the initial pub-
lic offering of OnDeck, a Kabbage competitor.
“It’s well-known that banks have pulled back
from making loans to small businesses since the
recession,” Srethapramote says. “Kabbage and
other lenders have filled the void.” Not unlike
Uber and Airbnb, they have created a largely un-
regulated 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, Froh-
wein saw how much data were becoming acces-
sible via the cloud and that companies like eBay
and PayPal were providing application program-
ming interfaces, or APIs, that a lender could use
to get real-time access to a business’ customer-
transaction data. Kabbage, Frohwein says, put
the two concepts together.
Before starting the company, he called
Kathryn Petralia, who worked for a financial
services firm and was an expert in credit and
payments, and Marc Gorlin, a serial entrepre-
neur with venture capital connections. In 2009
the three cofounders created a plan to finance
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 inves-
tors. They made their first 100 small-business
loans in 2010. That December Kabbage closed
its first 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 firms lend or advance cash against a company’s revenue or credit
card transactions. The money is repaid through incremental payments extracted
automatically from a company’s bank account.
Benefits: 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.
Benefits: Interest is paid only on the amount taken; cash can be available quickly.
Drawbacks: The line can be revoked or changed at the lender’s discretion.
Examples: OnDeck, Kabbage, Headway Capital.
Typical cost: 7% to 80% APR.
TERM LOANS
Similar to bank loans.
Benefits: 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.
Benefits: 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.
Benefits: Easy comparisons, ability to pitch multiple lenders at once.
Drawbacks: Process can take longer because marketplaces don’t lend their own capital.
Examples: Lendio, Fundera.
Typical cost: Lenders pay finder’s 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 es-
tablished 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 company’s Twitter or Face-
book followers, as well as the online reviews
its customers post, as a way to round out an
applicant’s story. “You won’t 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, Jen-
nifer 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 fill out a loan application. She had to
apply in person, she had to supply three years
of tax returns—which showed she had made a
profit every year—and she had to produce copies
of her husband’s 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 it’s rarely just about risk. Brock Blake,
CEO of Lendio, an online marketplace that con-
nects 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
gap—especially for amounts in the $25,000 to
$55,000 range. And that’s 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 Ama-
zon, 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 busi-
nesses have gotten in over their heads because
they didn’t realize the full price they were agree-
ing 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 busi-
nesses 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 recent-
ly asked to evaluate alternative lenders on behalf
of the city. He contacted several, posing hypo-
thetical 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 don’t know how any business could
FINAL THOUGHT
“ ‘Credit’ comes from the Latin ‘credere,’ ‘to believe,’ for credit is the belief that
the money you’re borrowing will someday be returned.” —ROBERT ROWLAND SMITH
60 | FORBES MAY 25, 2015
grow fast enough to pay off that kind of loan.” TRENDING
Still, Goltz says alternative loans can work.
“If you have a big opportunity, and you need What the 70 million
Forbes.com users
to buy equipment or inventory that will help
are talking about.
your business grow and return a positive ROI,” For a deeper dive go to
he says, “then a loan like that can make sense.” FORBES.COM/
Srethapramote of Morgan Stanley says he was ENTREPRENEURS
surprised to learn that two of the top small-busi-
ness groups that turn to OnDeck are doctors and
dentists. “These are professionals who would
rather pay a premium for the convenience of ap-
plying 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 first 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 PERSON
doesn’t charge hidden origination or mainte- JOE WANG
The turnaround
nance fees and that customers pay interest only
vet has a new
on the money they borrow and can pay less if challenge: Turn tiny
they pay back their loans early. TreeHouse Interactive,
After Jennifer Kirk was approved by Kab- a relationship-
bage, she decided she needed about $30,000, management company,
into a giant. He’s
which she took with several withdrawals. She
sanguine: “I’ve grown
used the money to open a pet-grooming salon to companies to over $100
supplement her retail operation, leasing space, million in revenue more
buying new equipment and hiring additional than once.”
employees. Kabbage typically charged her 2%
COMPANY
of the loan amount for each of the first two RISE ART
months, and then 1% for each of the additional It’s bringing a “try
four months, for what Kabbage says is an an- before you buy” policy
nual percentage rate of about 27%. “While APR to what you hang on
your walls. Whether
is a consideration, most of our small-business it’ll make even a
customers are focused on the return they’ll get pointillist pinprick in the
from a loan,” says Frohwein. “Also, over time we $57 billion art industry
drop the rates and increase line availability for is an open question.
customers that demonstrate positive repayment IDEA
behavior.” THE ON-DEMAND
Kirk acknowledges that getting credit was ECONOMY
expensive but says it was an easy decision given Looking for extra
income? You might
that no bank would lend her money to expand. be able to rake in
In fact, she says, her revenue is up 21% so far $200,000-plus with
this year—with the first month’s boost in sales Uber, but 56% of online,
enough to cover the cost of her capital. “I needed on-demand workers
money to make money,” she says. make $40,000 or less
annually.
 
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1 PROMOTION

THE LINDE GROUP

The Linde Group is the world’s 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 technol-
ogy company specializing in gases and engi-
neering. 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 pro-
cessing plants. In addition, Linde is a trusted
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. It’s this energy that has made us
a true global player in the gases and engi-
neering 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 talk-
ing to our customers to find out exactly what
they need, and then turning those needs into
solutions that fit to perfection.

Linde technology in modern

food production. Today,
cryogenic cooling and
freezing is a proven process
that helps maintain quality.

FAST FAC TS
The Linde Group
Active in more than 100
countries worldwide
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1.4 million
In other words, the customer is critical
to everything you do. What exactly
does that entail?
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
customers—which 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 guid-
ing 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 zero-
emissions mobility a reality today—not just
a dream for the future. On a different front,
we are already working closely with custom-
ers on the development of resource-efficient
applications: for example, in the steel and
chemical industries. In addition, our intel-
ligent valve will enable us to improve our
logistics processes and further enhance con-
venience and safety levels for our customers.
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?
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 rise—and with it
PROMOTION 2
Welding and cutting are
among Linde’s top strengths.
Linde products, hardware and
services make manufacturing
processes more efficient and
environmentally friendly.
the need for medical care and support ser-
vices. 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 ben-
efit of our customers. After all, our products
have the potential to improve quality of life
for millions of people.
What does Linde’s listing as one of the
top 500 companies on the 2015 Forbes
Global 2000 mean for you?
It’s certainly an honor and an accolade. But it
is also an incentive. It’s 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 posi-
tion 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

W
hat insanity has overtak- (currently Matthew Eagan and Elaine Stokes)
en bond buyers? Vainly aren’t afraid to stick out, at the moment with
seeking safety in diversi- an extremely defensive posture. That is costing
fication, they gobble up their investors money in the short term.
international bond funds The fund’s 20% near-cash position earns
with dismal yields. They chase performance, nothing. Another 36% is in bonds due in five
not realizing that momentum works in reverse years or less, and those bonds earn next to noth-
in fixed income. Desperate for yield, they sit still ing. Result: Over the past year the $24 billion
for rotten deals from junk bond issuers. fund has eked out a return of 1.8%, three points
This is a disaster waiting to happen. Daniel behind the Barclays U.S. Aggregate Bond Index.
Fuss, comanager of the Loomis Sayles Bond Why fight the tape? Because, Fuss figures, the
Fund, is ready for it. He’s got $4.8 billion of ultra- probability of an interest rate rise is 80%. A cor-
short bonds burning a hole in his pocket. rection would allow him to make up lost ground
The fund is extraordinary in two ways. Since by acquiring cheap bonds from desperate sellers.
Fuss opened it 24 years ago, this mix of junk “If the weather forecaster says conditions
and high-quality bonds (with a sprinkling of exist for a tornado, I’m going to be in the shel-
convertibles) has delivered a 9.7% compound ter,” says this midwestern native. “We have
annual return. That means he turned a dollar built a buying reserve. We’ll be happy we have it
into $9. The return is ahead of the return on ei- should a tornado land in the area.”
ther a pure junk or a pure quality index and two Fuss has seen plenty of bad weather during
points a year ahead of a 50-50 blend. his 57 years in the credit business. But “I’m basi-
The other noteworthy aspect of the fund is cally an optimist,” he says, recalling the portfo-
how far it veers out of the baseline. Most bond lio’s 18-year average maturity in its early days.
managers choose to (and, in the case of index For this optimist the fund’s recent 6.6-year ma-
funds, have to) stay close to the market com- turity represents a dramatic shift from risk-tak-
posite. Fuss and a changing cast of comanagers ing to preserving capital. (That capital belongs
primarily to institutions. In 1996 Loomis opened
IF HISTORY REPEATS
THE YIELD JUST RETOUCHED A 2% LOW. OMINOUS.
the fund to retail buyers, at an expense ratio of
0.9%; among the latter are a lot of Fuss’ relatives,
16% including a teenage great-grandson.)
14 Around the globe savers are nonchalantly
12 absorbing debt issues that look absurd to people
TREASURY YIELDS1
10
8
old enough to remember what a bond bear
6 market looks like. Mexico just floated a security
4 due in 2115 and paying 4% in euros. “A country
2 issuing a 100-year bond in another country’s
0 Bond manager and
currency?” Fuss asks. “History has been unkind sometime optimist
1871 1900 1925 1950 1975 2000 2015
1
YIELD ON 10-YEAR U.S. TREASURY BONDS. SOURCE: ROBERT SHILLER, “IRRATIONAL EXUBERANCE.” to that kind of transaction.” Dan Fuss.

64 | FORBES MAY 25, 2015

JASON GROW FOR FORBES

MAY 25, 2015 FORBES | 65

 INVESTING FIXED INCOME
GO
Then there is the avid buying of developed- with such terms, Fuss says. They keep weak bor- CONSIDER
market government bonds, despite low (in some rowers on a short leash.
Fuss says he learned a lot in his first job out of
STOP
cases negative) yields. Investors have plunked
$36 billion into the Vanguard International the Navy in 1958, working for Arthur B. Kohas-
Bond Index fund, which has three-fourths of ky at the Wauwatosa State Bank in Wisconsin.
its assets in Japan and Europe. They may have Kohasky ran the bank for three decades and,
persuaded themselves that this kind of diversifi- well into his 90s, would haunt the loan depart-
cation gives them shelter from a bond crash. Or ment looking for signs of sloppy underwriting.
worse, they may think that the hot performance He made it his business not just to know his cor-
(total return over the past year: 7.5%) will go on. porate customers but to help them make a sale if
Momentum in bonds? Banish the thought, that was necessary to collect on a loan.
says Fuss. When bond prices go up, yields go Fuss takes risks on borrowers, but only after
down. That doesn’t raise your expected return, nitpicking analysis of the sort that would have TECH’S
it lowers it. The Vanguard fund yields 0.8%. This made Kohasky happy. It helps that Loomis, IN EFFECT
pathetic number, not the past performance, is Sayles (a Natixis subsidiary of which Fuss is vice Pre-IPO bets on
the best gauge of future returns. chairman) has 49 credit analysts on staff. They Facebook, Twitter and
In the U.S. market irrational exuberance is had Fuss buying bonds from Ford when the Yelp paid off for Kevin
most visible in junk. Junk bonds can be reward- market assumed that Ford would join General Landis’ $190 million
Firsthand Technology
ing during economic expansions. But even in the Motors in bankruptcy court. He got Irish bonds Value Fund. Much of
best of times they are tricky because a corporate at fat yields during the meltdown. Not every his focus is on private
borrower usually reserves the right to call in a such speculation works out. Fuss admits to ac- companies, but here he
bond early. It will do that if its business improves quiring, before the financial crisis, some of the casts his gaze upon the
and it can refinance at a lower rate. For the in- doomed preferreds from Fannie Mae. public markets.
vestor it’s a lopsided proposition. Tails you lose He’s adding few junk credits to the collection
(in a default), heads they call the whole thing off. now. “Are you getting paid fairly for the risk? Ab- NETFLIX
Add to call risk another problem that has solutely not. Credit standards have weakened,” Stock goes for 145
crept into junk of late: Exploiting the public’s he says. times earnings, so you
thirst for yield, corporations are issuing bonds After stints in money management and finan- can’t make a valua-
tion argument, but to
with covenants that allow more debt to be added cial research, Fuss joined Loomis as a portfolio
be on the right side
atop the junk issue and/or give the borrower manager in 1976. It was in the middle of the worst of cord-cutting and
free operating rein as it slides into insolvency. decade ever for bonds. Fuss saw a bottom too streaming, it’s the
Banks lending to corporations do not put up early, acquiring long bonds for clients in 1979. But purest way to play.
he still had some buying power
two years later when the U.S.
SEVEN PILLARS OF WISDOM
ROCKET FUEL
Treasury slapped a 15¾% cou- Ad shift to digital and
Advice to bond buyers from Dan Fuss. pon on bonds going to auction. mobile is powerful, but
That auction, in Septem- investors have grown
Don’t trade. Even institutional buyers get killed by bid-ask spreads. ber 1981, represented a historic skeptical. Rocket Fuel
shares have been cut
Only exception: coupon Treasurys. turning point in interest rates. in half this year, but it
Avoid junk. Especially the covenant-lite stuff that is coming out now. This year, as the yield on 20-year has good tech for those
Buy TIPS direct. If you must own inflation-protected bonds (yields Treasurys dipped to 2%, there who want in. Not for the
are meager), buy at a Treasury auction to avoid the nasty spreads. may have been an epochal turn faint of heart.
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 1990S TECH STARS
in a crash if they own junk or emerging market bonds. to surpass his Wauwatosa idol in Microsoft, Intel, HP and
Hold some cash. Put it aside to use in the next financial crisis. longevity. He’s patient. So what their ilk had great suc-
Look for discounts. A corporate bond trading at 90 cents on the if cash yields nothing? “You grit cess and make investors
comfortable. The risk
dollar won’t be called away in the rebound. your teeth and have lower in-
isn’t that you’ll lose
come for a while,” he says. everything; it’s that your
money will be stuck in a
holding pattern. 
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

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 INVESTING
KEN FISHER // PORTFOLIO STRATEGY
FIVE MARKET TRENDS
YOU CAN BANK ON
CONTINUING last month’s format,
here are common investor questions
from this month:
“With this bull market now six years old,
isn’t it time to be cautious?” It’s 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, unex-
pected economic problem can derail bull
markets. To date we have neither.
“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
“I read so much about the Fed raising rates this year. Is that a problem?” No!
Two reasons: First, you read so much about it—so it’s 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 re-
turns 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 you’re a lot smarter than everyone
else, in which case you won’t take my advice anyway, never let yourself
vary too darned much from the world’s big weights—currently 52% U.S.,
23% Europe and 25% everything else. The world is your friend—more
THOMAS KUHLENBECK FOR FORBES
diversification.
“Does that same advice apply to sectors?” Absoposilutely! Sectors: 22%
financials, 14% tech, 13% consumer discretionary, 12% health care, 10%
MONEY MANAGER KEN FISHER’S LATEST BOOK IS BEAT THE CROWD
(WILEY, 2015). VISIT HIS HOME PAGE AT WWW.FORBES.COM/FISHER.
68 | FORBES MAY 25, 2015
staples, 10% industrials, 8% energy and 11%
everything else. Here are five fresh stocks I like
now to help you toward that end:
While long down on energy because of oil’s
oversupply, it’s 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 protec-
tion—which scream for CHINA PETROLEUM & CHEMICAL
(SNP, 94), also called Sinopec. It’s huge, cheap and
should sport a 4% dividend yield this year.
I’ve long loved good drug stocks for this bull
market. Ireland’s ACTAVIS (ACT, 283) is lesser known
but still a major, basic, second-tier branded
and generic player with a wide product portfo-
lio, $23 billion in sales—operating in some 100
countries. It was put together via multiple acqui-
sitions and has yet to hit real profitability—but
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 emu-
late 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 opportu-
nity? Below where it was 8 and 16 years ago, Swiss
ABB (ABB, 22) is a $40-billion-sales-size, classic late-
cycle 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
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It’s where you’ll long to be when you’re anywhere else.

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 INVESTING
JIM OBERWEIS // SMALL STOCKS

CHANGE AGENTS
FOR YOUR PORTFOLIO
RADICAL CHANGE is a fact of life of the analytics equation provided by Google
for anyone in the retailing and adver- and Yahoo. In February ad giant WPP signed
tising sector these days. You can thank a strategic partnership with comScore and
technology, which has improved busi- will 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 Manhat-
and retailing that are capitalizing on tan Beach, Calif.-based SKECHERS USA (SKX, 90),
these sweeping changes and seizing a maker of branded lifestyle footwear. The
opportunities for rapid growth here company surprised analysts in its last two
and abroad. quarterly reports with forecasted sales well
Based in Los Angeles, THE RUBICON PROJECT (RUBI, 17) developed ahead of expectations and a backlog up mid-
technology to automate the buying and selling of advertising. Rubi- double-digits over last year. Demand is par-
con reduces the cut of intermediaries and simplifies the exchange ticularly robust abroad: International sales
of digital advertising through a proprietary platform that matches are expected to grow from some 35% of rev-
700-plus premium digital publishers with more than 100,000 digi- enues 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 signifi-
optimize 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 company’s 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 compa-
2017, Rubicon is strategi- IMAX SHOULD SEE ny IMAX (IMAX, 37), known for
cally positioned between BLOCKBUSTER GROWTH its immersive motion pic-
buyers and sellers to grab IN CHINA ture technologies. IMAX
some of this money. Shares theaters can be found in
trade for 38 times my forward estimate of $0.47, for estimated growth 62 countries, with almost two-thirds of the
of 48% in revenues and 161% in EPS. company’s box office revenue derived from
The eyeball migration from TV to online media is also driving international sales. IMAX has more than 900
business at digital-analytics firm COMSCORE (SCOR, 52). Headquartered theaters in operation and nearly 400 in back-
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 ana- the overall box office in 2015 should benefit
lytic called vCE (validated Campaign Essentials), which competes from the wealth effect of lower gas prices
directly with Nielsen’s Online Campaign Ratings (OCR). Last year and a better film slate compared with last
THOMAS KUHLENBECK FOR FORBES

comScore announced that Google would test vCE technology in its
DoubleClick ad server and that Yahoo has agreed to a similar deal.
With vCE growing at an estimated 35% annual clip, expect the firm’s
growth to accelerate if, as we expect, vCE becomes an integral part
JIM OBERWEIS IS PRESIDENT OF OBERWEIS ASSET MANAGEMENT AND EDITOR OF THE OBERWEIS
REPORT. FOR MORE INFORMATION VISIT WWW.FORBES.COM/OBERWEIS.
year, including features like Fast & Furious 7,
Mission: Impossible—Rogue Nation, Avengers
2 and the latest Star Wars film. IMAX trades
for 30 times earnings. In the next 12 months I
expect 25% revenue growth and 60% growth
in EPS. F

70 | FORBES MAY 25, 2015

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 PROMOTION | BUSINESS AVIATION

Business
Aviation
Propelling Productivity
WRIT TE N BY Numerous studies and surveys have revealed that mid-level
employees are more often passengers aboard business aircraft
TONY VELOCCI 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 decision-
making. 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-of-
the-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 world’s most technologically
advanced midsize model. The airplane’s
clean-sheet design sets the standards for
capability, affordability, comfort and reliabil-
ity. 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 Embraer Legacy 500
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 class—6,000 feet when fly-
ing at 45,000 feet, which means greater com-
fort 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 more-
expensive Challenger 300, one of the supersize
jets with which it competes.
An added feature that passengers will
welcome is that the Legacy 500’s 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 aircraft’s 150-cubic-foot overall baggage
capacity is far larger than that of any midsize
jet—and it exceeds the storage space avail- Embraer Legacy 500 interior
able in nearly all other super-midsize jets.
In the cockpit, the aircraft is the first jet
in its class to replace conventional controls and the ability to anticipate scheduled main-
with fly-by-wire. This technology enables tenance. It also allows owner-operators to
a smoother, more natural-feeling flight by The Embraer Legacy estimate aircraft utilization, increase their
translating manual inputs from the pilot 500 recently entered aircraft’s dispatch reliability, optimize fleet
electronically rather than mechanically. operation with up-to-date aircraft position-
This reduces pilot workload and creates a service as the world’s ing, and automatically transmit aircraft data
smoother flight for passengers. The Legacy most technologically en route to destinations for efficient trouble-
500 also features next-generation avionics, shooting and maintenance planning. The net
with four 15.1-inch high-resolution displays,
advanced midsize model. result is predictability and a business tool that
advanced power management and high- allows owner-operators to get full utilization
efficiency, fully automated engines, not to of the aircraft.
mention the Enhanced Vision System and by the AHEAD (aircraft health analysis and Of course, not all business travelers need
Head-up Display. diagnosis) monitoring system, and main- to fly across the country or the equivalent
tenance tracking, performance and flight distance nonstop, as the Legacy 500 can do.
Thinking AHEAD operations software, provide all of the tools In fact, periodic surveys by the National Busi-
The Legacy 500’s many safety and reliability to keep the jet ready to fly on command. ness Aviation Association have shown that
systems aren’t the only features that will pro- AHEAD consolidates aircraft informa- many companies use a purpose-built busi-
vide owner-operators with peace of mind. tion from onboard systems and web-based ness airplane to fly mostly into small commu-
Embraer Executive Care (EEC)—a comprehen- databases, providing owner-operators with nity airports that are underserved or have no
sive maintenance program—complemented prompt support, aircraft usage information scheduled airline service at all. Between 2007
5 PROMOTION | BUSINESS AVIATION
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 Massachu-
setts Institute of Technology.
Under these circumstances, a smaller jet
may provide the ideal air transportation solu-
tion, as in the case of Honda Aircraft Co.’s
HondaJet Model HA-420. The Federal Avia-
tion 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 flex-
ibility, 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.
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 world’s most prestigious awards
for the jet’s 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 maxi-
mum cruise speed of 420 kts., or about 483
mph. Its maximum altitude is 43,000 feet.
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 lami-
nar 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, accord-
ing 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 dim-
mable window shades at each seat via their
personal electronic devices. The HondaJet’s
baggage capacity (66 cubic feet) also is the
largest in its class, and an externally service-
able 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 Honda-
customized 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.
NetJets: The Expert in
Transition Assistance
As appealing as the Legacy 500 and Honda-
Jet are, even with their best-in-class features,
owning any type of business aircraft outright
isn’t 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 programs—rang-
ing 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 Ser-
vices 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 busi-
ness aviation, but no longer wanted to own
an airplane, not to mention several of them.
They saw NetJets as a logical alternative to a
broker—and for good reason.
 

 


 
 

    

 


 !

"#!
 
$
$#
%!
 
 

   

 7 PROMOTION | BUSINESS AVIATION
NetJets manages more
than 300,000 flights
annually to more than
170 countries.
Berkshire Hathaway manages and operates
the world’s largest and most diverse fleet of
private aircraft. It includes about 700 jets com-
prised 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.
©NetJets
Citation X
©NetJets
Bombardier Challenger 350
For example, NetJets will take delivery of
the first of 25 Bombardier Challenger 650 jets
as part of the company’s Signature Series air-
craft, 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 in-
flight entertainment systems and custom
cabin designs, as well as advanced cockpit
and cabin technologies to ensure maximum
safety, reliability and operating efficiency.
“We’re in the market every day, so we have
the expertise to support all of the requests we
receive,” says John Odegard, senior vice presi-
dent of whole aircraft sales at NetJets. “Some-
times it’s a matter of taking someone’s airplane
as a trade-in and moving them into the frac-
tional share program. In other cases, it’s 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 custom-
ers 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 pro-
cess 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 nation’s first aircraft charter
company. In 1986, it pioneered the concept of
fractional aircraft ownership, offering individ-
uals 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 frac-
tional aircraft companies combined, backed
by some of the most rigorous pilot training
and maintenance and operational proce-
dures available anywhere. To Odegard, the
NetJets’ Aircraft Transitioning Services is one
more tool to help clients select the transpor-
tation solution that best suits them. “We are
a one-stop shop for customers, no matter
where they are located or what their particu-
lar requirements,” he says.
Taking Business Aviation to
New Heights
Like the HondaJet and Embraer’s 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 tool—business
aviation—that will help their company grow,
compete and succeed in an increasingly
global marketplace.
 INVESTING
MARC GERSTEIN // SCREEN TEST

THE SOOTHING SOUND OF

RETURN ON EQUITY
THE 2000S MAY HAVE been a Besides high and stable ROEs, several of
lost decade in the stock market, with the firms enjoyed strong cash flow and have
the S&P 500 down 25%. The teens, paid generous dividends and engaged in
however, have been terrific. The blue share buybacks. WAL-MART (WMT, 78) made the
chips have returned about 85% since list. In response to competition from smaller
the start of 2010, and the index is now dollar-discount stores, it has beefed up online
almost 45% above where it ended the efforts and opened smaller box stores that
1990s. So it’s understandable to won- move into lower-volume neighborhoods while
der if the tide will turn, especially since still benefiting from the company’s powerful
the next significant move in interest operational scale. In the similarly competi-
rates will likely be upward. If risk man- tive department store category, KOHL’S (KSS, 72)
agement isn’t top of mind, it should be. deemphasizes the less convenient malls that
Unfortunately, conventional risk measurement concepts (beta usually house department stores in favor of
et al.) are just highfalutin statistical report cards derived from how the strip centers it often anchors. Also, Kohl’s
stock prices behaved in the past. They don’t consider why the stocks offers more national brands than do compa-
moved as they did. Instead we should assess risk based on factors rably priced stores and private-label goods
likely to influence future share-price performance. of national brand quality. WHOLE FOODS MARKET
Research published recently in the Journal of Portfolio Manage- (WFM, 48) faces competition both small (local
ment, by Russell J. Fuller, Raife Giovinazzo and Yining Tung of Fuller organic-food stores) and large (as supermar-
& Thaler Asset Management, is a step in this direction. They start ket chains add more organic). It’s fighting
with the widespread recognition of return on equity (ROE) as the back with even broader organic and higher-
ultimate measure of company quality. This is common sense: A com- margin private label offerings and enhanc-
pany that earns $20 of profit from $100 of capital is “better” than one ing customer service (home delivery, online
shopping and a loyalty program).
Meanwhile, ObamaCare has posed pricing
RISK MANAGEMENT SHOULD BE TOP challenges for health insurers, but UNITED-
OF MIND, BUT FORGET BETA HEALTH (UNH, 111), like its peers, is expanding its
customer base. As the industry’s big gorilla,
that earns only $10. They also sought out consistent ROE generators. UnitedHealth has scale that produces ef-
The financial establishment has long cherished maximization of ficiencies and pricing leverage via suppliers
expected return and minimization of share-return volatility. Fuller, and contributes to its consistently high ROEs.
Giovinazzo and Tung found they could achieve market-beating risk- Also, its pending acquisition of Catamaran
adjusted returns by starting with S&P 500 stocks with strong ROEs, will enable UnitedHealth to also apply scale
then optimizing expected return and low ROE volatility. I adapted this advantages to pharmacy benefit management.
by screening on Portfolio123 for stocks ranked in the top 25% in terms Auto insurer PROGRESSIVE (PGR, 27) has
of five-year average ROE and in the lowest 20% in terms of ROE vola- flourished with such novel ideas as online
tility. From among those stocks, I selected the ten best values (based quotes and pricing comparisons and use of
on enterprise value to sales). A back-test of this hypothetical portfolio offbeat information such as credit scores to
THOMAS KUHLENBECK FOR FORBES

over ten years (assuming rebalancing every four weeks and 0.25% per determine premium prices. Rivals have been
trade price slippage) produced an annual return of 15.6% versus 8.1% imitating it, but Progressive stays out front
for the SPDR S&P 500 ETF (SPY, 208). It outperformed SPY by an average of through other innovations, such as its Snap-
0.24% during up months but was 1.11% better during down months. shot discounts, which use wireless technol-
MARC GERSTEIN IS EDITOR OF FORBES LOW PRICED STOCK REPORT, RESEARCH DIRECTOR AT ogy to monitor drivers and, hence, offer sav-
PORTFOLIO123 AND AUTHOR OF SCREENING THE MARKET (WILEY, 2002). FOR MORE FROM GERSTEIN
GO TO WWW.FORBES.COM/GERSTEIN. ings to those with proven safe habits. F

MAY 25, 2015 FORBES | 79

THERE’S A LAUGH, AND YOU REALIZE
YOU’RE SPEAKING THE SAME LANGUAGE.

Creating a global workforce that maintains a local touch isn’t easy.

ADP utilizes data-driven insights that help prepare you for the future
of work, no matter where it’s being done. That allows you to focus
on what really matters and better connect with your employees
regardless of the language.

Visit adp.com and see how we can provide a more human

resource for your business.

ADP and the ADP logo are registered trademarks of ADP, LLC.
ADP – A more human resource. is a service mark of ADP, LLC.
Copyright © 2015 ADP, LLC. 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

VISA’S 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 world’s
first 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 FORBES | 81

DAVID HARTUNG FOR FORBES
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
2015 RANK
RANK CHANGE
COMPANY
COUNTRY CODE
BILL ACKMAN
1 OICBC CN
2 OCHINA CONSTRUCTION BANK CN

B
3 OAGRICULTURAL BANK OF CHINA CN
4 S BANK OF CHINA CN
5 OBERKSHIRE HATHAWAY
6 T JPMORGAN CHASE
US
US ill Ackman bounds onto taurants ranging from Macy’s to Apple, Trad-
7 T EXXON MOBIL US
8 S PETROCHINA CN the stage in the ballroom ers Joe’s to Wolfgang Puck’s—the kinds of offer-
9 T GENERAL ELECTRIC US
10T WELLS FARGO US of the Crowne Plaza Hotel ings that hark back to the days before the great
11S TOYOTA MOTOR JA
12S APPLE US in midtown Manhattan in mall die-off. From speakers submerged beneath
13T ROYAL DUTCH SHELL NE
14S VOLKSWAGEN GROUP GE front of hundreds of his peers: the the sidewalks of the city’s outdoor mall you can
15T HSBC HOLDINGS UK
16S CHEVRON US GENERAL crème de la crème of hedge funds, hear Frank Sinatra’s “The Best Is Yet to Come.”
16S WAL-MART STORES US
18S SAMSUNG ELECTRONICS KO
ELECTRIC law firms, endowments and large And it will: Potential customers are fill-
19T CITIGROUP US Jack who? CEO
20S CHINA MOBILE CN Jeff Immelt bets pension funds. It’s early April, and ing the thousands of McMansions and town-
21S ALLIANZ GE the company on
22S
23T
VERIZON COMMUNICATIONS US a return to its Ackman is determined to give the homes being thrown up around the mall by
BANK OF AMERICA US industrial roots.
24S
25S
SINOPEC
MICROSOFT
CN
US
Active-Passive Investor Summit a the likes of Lennar, Pulte and Toll Brothers.
26S
27T
DAIMLER
AT&T
GE
US
preview of what he internally calls “Pershing Water crisis? Apparently not in Summerlin,
27T
29S
GAZPROM
AXA GROUP
RU
FR
Square 2.0”: his rebirth as a kinder, gentler in- Nev., a planned community where new golf
30S
31S
NESTLE
BANCO SANTANDER
SZ
SP
vestor, more focused on building companies courses, swimming pools, bike trails, schools
32S
33S
PING AN INSURANCE GROUP
MITSUBISHI UFJ FINANCIAL
CN
JA
that last than on making quick trading profits. and churches dot the palm-lined streets and
34S
35T
JOHNSON & JOHNSON
TOTAL
US
FR The ballroom responds with a yawn. cul de sacs in neighborhoods with names like
36S PROCTER & GAMBLE US
37S CHINA LIFE INSURANCE CN So, after a pause, the billionaire poster boy Segovia, Aspenglen and Sterling Ridge that
38S BANK OF COMMUNICATIONS CN
39S GOOGLE US for activist investing—the more polite name for spread across 35 square miles.
40T VODAFONE UK
41T BP UK what used to be dubbed corporate raiding— Summerlin is a key asset for a real estate
42 OAMERICAN INTERNATIONAL
GROUP US pivots back to his comfort zone, unleashing a company with a legendary provenance and a
42S ITAÚ UNIBANCO HOLDING BR
44T
45S
IBM
BMW GROUP
US
GE
barrage of accusations about one of his most low profile: the Howard Hughes Corp., 26%
46S
47S
COMCAST
COMMONWEALTH BANK
US
AU
infamous and controversial positions, Herba- owned by its chairman, Ackman. But it’s far
48T
49S
PFIZER
GOLDMAN SACHS GROUP
US
US
life, the supplements seller that he’s bet $1 bil- from the only asset: Summerlin is one of four
50T
50S
BHP BILLITON
METLIFE
AU
US
lion against and calls a pyramid scheme. “We planned communities and 30 real estate prop-
52S
53S
NOVARTIS
ROYAL BANK OF CANADA
SZ
CA
know they have been or are erties owned by Howard Hughes, which in
54T
55S
SIEMENS
CHINA MERCHANTS BANK
GE
CN
looking to hire criminal de- 2014 reported $635 million in revenues and
56S
57S
PRUDENTIAL
ANHEUSER-BUSCH INBEV
UK
BE fense counsel,” he says crypti- $190 million in operating profits on $5.1 billion
58S NIPPON TELEGRAPH & TEL JA
59T ROSNEFT RU cally of Herbalife’s top execu- in assets, with 45 million square feet of retail,
60 OWESTPAC BANKING GROUP AU
61S BANCO BRADESCO BR tives, as Twitter lights up like a commercial and residential land in its develop-
62S SOFTBANK JA
63S HONDA MOTOR JA Christmas tree. (Herbalife de- ment pipeline, from Houston to the exurbs of
64S GENERAL MOTORS US
65S UNITEDHEALTH GROUP US
ROSNEFT nies Ackman’s claims.) Washington, D.C. Howard Hughes is rebuilding
66S TD BANK GROUP CA
67S INTEL US What sanctions?
Kremlin’s oil giant still
Headlines soon appear New York’s South Street Seaport and owns 60
68T EDF FR
69T FORD MOTOR US pumping more than
4 million barrels a day.
across the Internet and on acres of beachfront property in Honolulu that
70S DEUTSCHE TELEKOM GE
71S BASF GE CNBC: “Ackman: HLF Execs should yield nearly two dozen luxury towers.
72S BOEING US
73S
73S
INDUSTRIAL BANK
UBS
CN
SZ
Hiring Own Lawyers an Ominous Sign.” Af- “Howard Hughes is the only company that
75 OANZ
76S CISCO SYSTEMS
AU
US
ter-hours volume in Herbalife stock heats up, I am, in effect, an executive of,” says Ackman,
77T
78S
SUMITOMO MITSUI FINANCIAL
ZURICH INSURANCE GROUP
JA
SZ
but the shares fall only 0.3%. who has agreements that render him unable
What about Pershing Square 2.0? Not a to invest directly in real estate or any other

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

79S CHINA MINSHENG BANKING CN
80S MERCK & CO. US
81S
82S
ROCHE HOLDING
CITIC PACIFIC
SZ
HK
mention, even though the biggest move for last private companies through his hedge fund,
83T
84S
NATIONAL AUSTRALIA BANK
SHANGHAI PUDONG
AU
year’s hottest money manager—his hedge fund Pershing Square. “It is the one we have the
DEVELOPMENT CN
84S WALT DISNEY US was up 37% (versus 2% for most control and influence over, and the most
86S CVS CAREMARK US
86T TELEFÓNICA SP the average hedge fund), amount of reputational equity invested.”
88S ORACLE US
89T CONOCOPHILLIPS US nearly doubling his net Well, not much yet. The real estate com-
89T SANOFI FR
91T UNITED TECHNOLOGIES US worth to $2.5 billion—hides munity almost never talks about Howard
92S ING GROUP NE
93T COCA-COLA US in plain sight, 10 miles west Hughes. Nor does Ackman. But that will
94S CHINA CITIC BANK CN
95S
96T
MORGAN STANLEY
HEWLETT-PACKARD
US
US
WALT DISNEY of the Las Vegas Strip. change, as he uses it as a holding company for
96S
98S
NISSAN MOTOR
GDF SUEZ
JA
FR
Feel the Force: Star Wars
films could add more
Take a trip out there via his Pershing Square reinvention. Just as Sum-
99T
100S
PEPSICO
LLOYDS BANKING GROUP
US
UK
than $1 billion a year to
revenues—every year.
U.S. Highway 215, toward merlin offers families, mostly refugees from
101
101
T
S
MUNICH RE
SOCIÉTÉ GÉNÉRALE
GE
FR
the breathtaking but deso- bustling big cities like L.A., Chicago and New
103
103
S
T
CNOOC
STATOIL
CN
NO
late beauty of Red Rock Canyon National Con- York, a chance for low taxes and a fresh, high-
T
105
105S
AMERICAN EXPRESS
RIO TINTO
US
UK
servation Area, and you’ll find the largest re- ly curated start, Howard Hughes offers Ack-
T
107
108S
BANK OF NOVA SCOTIA
BAYER
CA
GE
tail development in the nation since the finan- man a chance to change his reputation from
T
109
110S
LUKOIL
GLENCORE INTERNATIONAL
RU
SZ cial crisis, rising up from the sagebrush. Some the modern-day corporate raider everyone
111TCREDIT AGRICOLE FR
112SCHINA STATE 1.4 million square feet of shops, offices and res- loves to hate into a corporate empire builder.
CONSTRUCTION ENGINEERING CN
113TUNILEVER NE
114SDEUTSCHE BANK GE

84 | FORBES MAY 25, 2015

 GLOBAL 2OOO
115S BBVA-BANCO BILBAO VIZCAYA SP
116 TSAUDI BASIC INDUSTRIES SU
117T HYUNDAI MOTOR KO
118 SHUTCHISON WHAMPOA HK
119 TMIZUHO FINANCIAL JA
120 SEADS FR
121T ENI IT
122 SHON HAI PRECISION TA
THE MODEL, ULTIMATELY, IS WARREN BUFFETT. then after 2013, when Pershing suffered em- 123 TSCHLUMBERGER US
124 TSBERBANK RU
Despite the fact that he’s the best known of a barrassing losses on J.C. Penney and Herba- 125 TAMÉRICA MÓVIL MX
126 TUS BANCORP US
new generation of activists, along with Dan- life, redemptions amounted to 10% of net as- 127 TCHINA SHENHUA ENERGY CN
128 SMANULIFE FINANCIAL CA
iel Loeb and Jeffrey Smith, the 49-year-old sets. Those last redemptions proved foolish, 129
130
T
S
GENERALI GROUP
SAIC MOTOR
IT
CN
Ackman bristles at the thought of such a leg- given the massive 2014 that Ackman turned 131T
132 T
MITSUBISHI CORP
NORDEA BANK
JA
SW
acy. After all, how many people under 40 in, driven most prominently by investment 133
134
T
S
BANCO DO BRASIL
HOME DEPOT
BR
US
have ever heard of Asher Edelman or Me- gains in Botox-maker Allergan. They were 135
136
T
S
GLAXOSMITHKLINE
AIA GROUP
UK
HK
shulam Riklis or Irwin Jacobs, the notori- also cautionary, as more of them would have 136
138
T
S
CATERPILLAR
UNICREDIT GROUP
US
IT
T
ous and successful corporate raiders of an- undermined Ackman’s turnaround. “Imagine 139
139 T
CREDIT SUISSE GROUP
DOW CHEMICAL
SZ
US
141 OCAPITAL ONE FINANCIAL
other Wall Street era? Comparisons with the if we had redemptions and were forced to 142 SINTESA SANPAOLO
US
IT
142 TRELIANCE INDUSTRIES IN
most successful activist ever, his Herbalife unwind—we couldn’t do Allergan,” he says. 144 SCHINA TELECOM CN
145 SCHINA EVERBRIGHT BANK CN
nemesis Carl Icahn, make Ackman especially This permanent war chest lets him take on 146 TSWISS RE SZ
147 TPHILLIPS 66 US
uncomfortable. “We are very different from ever larger targets with less heartburn—and 148 THITACHI JA
148 TMØLLER-MAERSK EG
Icahn,” he sniffs, referring to Icahn’s pen- look more toward the long term. “When I de- 150 STWENTY-FIRST CENTURY FOX US
151T IBERDROLA SP
chant for nimble trades and quick fixes. “We scribe what we did in the early days of Per- 152 SSTATE BANK OF INDIA IN
153 TSTANDARD CHARTERED UK
invest in very stable, predictable businesses.” shing, we found undervalued companies, we 154 TBANK OF MONTREAL CA
155 SCHINA COMMUNICATIONS
Instead, he’s taking a page from Buffett, proposed changes that would unlock value, 156 T
CONSTRUCTION
QUALCOMM
CN
US
who focused on trades until he found a pub- and then after they took the various steps we 157
158
S
S
PRUDENTIAL FINANCIAL
TAIWAN SEMICONDUCTOR
US
TA
licly traded textile company named Berk- generally exited,” he says. “People described 159
160
T
S
HONEYWELL INTERNATIONAL
CHINA RAILWAY GROUP
US
CN
S
shire Hathaway and then began swallowing them as more financial engi- 161
162 T
AMGEN
AVIVA
US
UK
T
businesses and stashing them under it. neering.” He adds: “If you look 163
163 T
EXPRESS SCRIPTS
TIME WARNER
US
US
165 OWALGREENS BOOTS ALLIANCE
Ackman has the holding company, cour- at what we have done during the 165 TVINCI
US
FR
167 SANTHEM US
tesy of assets acquired in 2010; the legend- last five years, Canadian Pacif- 168 SUNION PACIFIC US
169 SCHINA RAILWAY CONSTRUCTION CN
ary Howard Hughes name was a bonus ic, Air Products, General Growth 169 TPNC FINANCIAL SERVICES US
171S KOREA ELECTRIC POWER KO
that came when he sucked up the Summer- … even Allergan and Valeant was 172 SMCKESSON US
173 SCHINA PACIFIC INSURANCE CN
lin project. To build an enduring business, about creating a company. They 174 TEI DU PONT DE NEMOURS US
175 SLEGAL & GENERAL GROUP UK
though, he needs permanent capital. both existed, but the combina- DUPONT 176 SKDDI JA
177 TNATIONAL GRID UK
Activist Trian Man-
Hedge funds like Ackman’s are in no posi- tion was building something we agement has CEO 178 TL’ORÉAL GROUP FR
179 STRAVELERS COS US
Ellen Kullman under
tion to manage assets long term, since limit- wanted to own for years.” the gun for growth.
180
181
S
S
CHRISTIAN DIOR
TOKIO MARINE HOLDINGS
FR
JA
ed partners have the right to redeem interests 182
183
T
T
VALERO ENERGY
OIL & NATURAL GAS
US
IN
every quarter. It’s why, by their nature, they FOR ACKMAN, HOLDING ASSETS MEANS A RE- 184
185
T
S
MITSUI & CO.
CHINA UNICOM
JA
CN
are trading vehicles. So last October Ackman turn to his roots. For all his hedge fund bra- 186
187
T
T
PHILIP MORRIS INTERNATIONAL
UNITED PARCEL SERVICE
US
US
issued shares in a new entity publicly trad- vado, his success is rooted in real estate. 188
188
T
T
MONDELEZ INTERNATIONAL
SUNCOR ENERGY
US
CA
ed in Amsterdam, Pershing Square Holdings It’s in his blood. His father owned a suc- 190
191
S
T
SAP
DUKE ENERGY
GE
US
S
Ltd., creating some $6.5 billion in new perma- cessful New York real estate firm. After grad- 192
193 S
GILEAD SCIENCES
RENAULT
US
FR
S
nent capital from investors, mostly outside of uating from Harvard College in 1988, Ack- 194
195 T
ALLSTATE
DEUTSCHE POST
US
GE
196 TORANGE FR
the United States. Add to this his own and his man quickly became a top producer. Later, at 196 SLOCKHEED MARTIN US
198 TECOPETROL CZ
employees’ money in Pershing Square hedge Harvard Business School, he plowed nearly 199 TBRITISH AMERICAN TOBACCO UK
200 SCOSTCO WHOLESALE US
funds and Ackman has boosted his permanent half of his savings into the stock 201 TABB SZ
202 SBANK OF NEW YORK MELLON US
capital to more than $8 billion (his total assets of Alexander’s Stores, a retail- 203 SAETNA US
204 SBROOKFIELD ASSET
under management are now $19.5 billion). er that fell into distress in the 205 T
MANAGEMENT
3M
CA
US
“Pershing Square Holdings is recognition early 1990s. Sensing that Al- 206
207
T
T
SCHNEIDER ELECTRIC
MCDONALD’S
FR
US
that, given the firm’s investing style, some- exander’s real estate, such as 208
209
S
T
PEOPLE’S INSURANCE COMPANY
SURGUTNEFTEGAS
CN
RU
times there will be periods of intense push- 731 Lexington Avenue (current 210 S
211T
LOWE’S COS.
JARDINE MATHESON
US
HK
ELLEN KULLMAN: SIMON DAWSON/BLOOMBERG

back and ridicule,” says Harvard Business headquarters of Bloomberg LP), MCDONALD’S 212
213
T
S
AFLAC
CONTINENTAL
US
GE
S
School’s Michael Porter, who taught Ackman was worth more than the claims Can new CEO Steve
Easterbrook pull
214
214 T
BT GROUP
JAPAN TOBACCO
UK
JA
McD’s out of tailspin? T
in the early 1990s and is a Pershing Square against the company, Ackman Can anyone?
216
217 T
ACE
SABMILLER
SZ
UK
218 SREPSOL YPF SP
advisor. “If you are in a situation where capi- bought shares for a little over $8 219 TJOHN DEERE US
220 SARCHER DANIELS MIDLAND US
tal can walk and you have investors that can apiece the day the company filed for bank- 221 SAMERICAN AIRLINES GROUP US
222 TEMC US
be rattled, having a good anchor of perma- ruptcy, and within a matter of months he sold 223 SBLACKROCK US
223 SFEDEX US
nent capital is very important.” for $21. 225 TPTT PCL TH
226 SNEXTERA ENERGY US
Redemptions have plagued Ackman in the A great trade for a kid, but the deal taught 227 SCIGNA US
228 STEVA PHARMACEUTICAL INDS IS
past. During the financial crisis in 2008, and him a lesson in shortsightedness. Soon after he 229 TENEL IT
230 SAEGON NE
231 TCANADIAN IMPERIAL BANK CA
232 TDENSO JA

MAY 25, 2015 FORBES | 85

S UP T DOWN
O UNCHANGED O NEW
 GLOBAL 2OOO
FORBES
233SNATIXIS FR

BILL ACKMAN 234ODALIAN WANDA

COMMERCIAL PROPERTIES CN
235TCANON JA
236TCARREFOUR FR
237SALTRIA GROUP US
238TSEVEN & I HOLDINGS JA
239TASTRAZENECA UK
cashed out, Alexander’s was acquired by Steven cided to try his hand at ac- 239
241
S
T
DAI-ICHI LIFE INSURANCE
ITOCHU
JA
JA
Roth’s Vornado, which converted it to a REIT. Al- tivist short-selling, eventu- 242
243
S
T
RWE GROUP
WESFARMERS
GE
AU
exander’s now trades at more than $400 a share ally drawing an investiga- 244
245
T
T
TELSTRA
DIAGEO
AU
UK
and has paid rich dividends for years. tion from then New York at- 245
245
S
T
ENBRIDGE
NIPPON STEEL
CA

& SUMITOMO METAL JA

After business school Ackman partnered torney general Eliot Spitzer. 248TABBOTT LABORATORIES US
249SMEDTRONIC US
with classmate David Berkowitz to form hedge Ackman was pressured into DALIAN WANDA 250SSOUTHERN CO. US
251SCHINA VANKE CN
fund Gotham Partners, raising $3 million, large- unwinding Gotham in 2003, China’s richest man, Wang
Jianlin, raised $3.7 billion
252TEAST JAPAN RAILWAY JA
253OGENERAL DYNAMICS US
ly from family and friends. He stuck with what and Berkowitz quit the busi- in an IPO despite country’s
gloomy real estate market.
254SHALLIBURTON US
255TEXELON US
he knew. His first major break was an auda- ness altogether. 256TTIME WARNER CABLE US
257SCANADIAN NATURAL RESOURCES CA
cious attempt to buy the distressed mortgage of Ackman’s confidence was 258TDNB NO
259SIMPERIAL TOBACCO GROUP UK
Rockefeller Center Properties in 1995. Guppy- unshaken. “Not for a moment did I sense any de- 260OKBC GROUP BE
261SKROGER US
size Gotham took a 6% stake in the REIT that spair in Bill,” says business school classmate Rob- 262
263
T
S
LYONDELLBASELL INDUSTRIES
TATA MOTORS
NE
IN
owned Rockefeller Center’s mortgage, and Ack- ert Jaffee, who invested in Gotham 263
265
S
T
VISA
ELI LILLY & CO.
US
US
man proposed a recapitalization to keep it from and is a current hedge fund limited 266
267
T
S
NOMURA HOLDINGS
DANAHER
JA
US
would-be vultures, including Sam Zell, General partner. Pershing Square launched 268SDBS GROUP
269OALIBABA
SI
CN
Electric and Disney. Ultimately Ackman lost to a in January 2004 with $4 million 269
271
S
T
BRIDGESTONE
MS&AD INSURANCE
JA
JA
S
consortium that included Goldman Sachs, Tish- of Ackman’s savings and $50 mil- 272
273S
TELECOM ITALIA
HUAXIA BANK
IT
CN
T
man Speyer and David Rockefeller, but at 28 he lion from Leucadia. But because of 273
275T
MARATHON PETROLEUM
GAS NATURAL FENOSA
US
SP

gained major Wall Street cred—and a 39% re- Gotham’s failures, Pershing Square ALIBABA 276TERICSSON SW
276TSUN LIFE FINANCIAL CA
GROUP 278TSAINT-GOBAIN FR
turn for Gotham in 1995. David Rockefeller and pledged to its partners not to in- World’s largest IPO 279TSHINHAN FINANCIAL GROUP KO
in New York for 280SFACEBOOK US
co-investor Leucadia National were impressed. vest directly in private compa- e-commerce giant, 281TSEB SW
but relationship with 282SVIVENDI FR
Rockefeller became a Gotham investor. nies—including real estate. Chinese government 283SFRESENIUS GE
getting bumpy. 283SICICI BANK IN
In 1996 Ackman turned to racetracks for This created a dilemma be- 285TDANONE FR
286TCNP ASSURANCES FR
a new set of deals to swing with Wall Street’s cause real estate has al- 287SKINDER MORGAN US
288SDIRECTV US
power players. At the time, Starwood Capital’s ways been his sweet spot. 289OFIAT CHRYSLER AUTOMOBILES US
289SNIKE US
Barry Sternlicht discovered so-called paired- “It is an asset class I under- 291
292
S
S
CENTRAL JAPAN RAILWAY
EOG RESOURCES
JA
US
share REIT structures in hotels and racetracks stand, and we have made a 293
294
S
T
THERMO FISHER SCIENTIFIC
LINDE
US
GE
that allowed its owners to earn both lease rev- fortune in it,” says Ackman, 295
296
T
S
BCE
SUN HUNG KAI PROPERTIES
CA
HK
enue and operating income under a REIT tax who isn’t known for mod- 297
298
T
T
AIR LIQUIDE
HYUNDAI MOBIS
FR
KO
shield. The loophole set off a buying frenzy for esty. “I don’t know that I’ve FIAT CHRYSLER 299
300
T
S
BRISTOL-MYERS SQUIBB
SAMSUNG LIFE INSURANCE
US
KO
AUTOMOBILES S
hotel chains like Sheraton, Westin and Wynd- ever made a bad real estate Sergio Marchionne in home-
301
302T
HCA HOLDINGS
OVERSEA-CHINESE BANKING
US
SI
T
ham. In classic greenmailer style Ackman got investment.” stretch as CEO, apparently
fishing for a megamerger.
303
304S
ABBVIE
TENCENT HOLDINGS
US
CN
S
involved by contesting the racetrack takeovers The financial crisis of 305
306S
MITSUBISHI ELECTRIC
STATE STREET
JA
US
307SRECKITT BENCKISER GROUP UK
that Sternlicht and other dealmakers, such as 2008 presented the solution that led to Howard 308SNEW CHINA LIFE INSURANCE CN
309SBANK OF BEIJING CN
Colony Capital’s Thomas Barrack and Apollo Hughes. As markets were descending into tur- 310TKIA MOTORS KO
311SAMERICAN ELECTRIC US
Global Management’s Leon Black, were eyeing, moil, Ackman bought up 25% of struggling mall 312TJOHNSON CONTROLS US
313TSVENSKA HANDELSBANKEN SW
holding out for higher premiums. REIT General Growth Properties at a fire sale, 314THENKEL GE
315SWPP UK
Ackman’s paired-share REIT obsession helped steer it into a managed bankruptcy and 316SRAYTHEON US
317TINDITEX SP
eventually backfired in 1998, after Gotham won then cherry-picked certain undeveloped assets 318TEATON IR
319SFUBON FINANCIAL TA
its proxy contest for REIT First Union. That from the carcass, an unwanted hodgepodge that 319SPOWER CORP. OF CANADA CA
319TSWEDBANK SW
year, the IRS closed the loophole, and First rivals dubbed “Sh-tco.” General Growth turned 322
323
S
T
ACCENTURE
BB&T
IR
US
Union shares plummeted. Things continued to out to be his greatest investing triumph, with a 324
325
S
T
CATHAY FINANCIAL
SINGTEL
TA
SI
get worse for Gotham as Ackman strayed into 130-fold gain on his stock, amounting to a $3.7 326
327
S
S
PG&E
CARDINAL HEALTH
US
US
golf courses, multilevel marketing firm Pre- billion profit for his hedge fund. “Sh-tco” turned 328
329
T
T
OLD MUTUAL
STANDARD BANK GROUP
UK
SA
Paid Legal Services and a privately held dot- into the Howard Hughes Corp., a $6 billion ve- 330
331
T
S
CAIXABANK
DEVON ENERGY
SP
US
S
com called Giftcertificates.com. hicle that has seen its stock climb 300% since 332
333T
POLY REAL ESTATE
EMERSON ELECTRIC
CN
US
S
These deals eventually proved to be Go- it was spun off—and allowed Ackman back into 334
335S
MITSUBISHI HEAVY INDUSTRIES
AMERIPRISE FINANCIAL
JA
US
336SNORTHROP GRUMMAN US
tham’s undoing after First Union shareholders the real estate game unfettered. 337SINVESTOR AB SW
338TDELTA AIR LINES US
balked at his attempt to merge it with his mon- 339TWOOLWORTHS AU
340TDOMINION RESOURCES US
eylosing golf courses. Gotham investors began ONE OF HOWARD HUGHES’ MOST VALUABLE AS- 341TNATIONAL OILWELL VARCO US
342SBAKER HUGHES US
to lose confidence in him and withdrew cap- sets is on Bill Ackman’s home turf: Manhattan’s 343TCHUBB US
344SMERCK GE
ital, causing assets to fall over 40% between South Street Seaport. Which explains why, on a 345SUNITED CONTINENTAL HOLDINGS US
346SBAXTER INTERNATIONAL US
1998 and 2002, as Ackman, as bold as ever, de- stormy, bone-cold March evening, he is staring 347SNOKIA FI
348SUNITED OVERSEAS BANK SI
349SINDIAN OIL IN
350THOLCIM SZ
351SCARNIVAL US
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351SFANNIE MAE US
353SHUANENG POWER
INTERNATIONAL CN BILL ACKMAN
354SSK HYNIX KO
355SMICRON TECHNOLOGY US
356TTAKEDA PHARMACEUTICAL JA
356STOSHIBA JA
358TDISCOVER FINANCIAL SERVICES US
359
360
T
T
STANDARD LIFE
MONSANTO
UK
US
at blue jeans, which have uated two years before Ackman, was a celebri-
361
362
S
T
LINCOLN NATIONAL
TELIASONERA
US
SW
been hand-painted with ty at school because he starred in TV commer-
363
364
T
T
LAS VEGAS SANDS
OCCIDENTAL PETROLEUM
US
US
acrylic blue, purple, magen- cials for Ronzoni pasta and Bubble Yum gum,
365
366
S
T
CANADIAN NATIONAL RAILWAY
SASOL
CA
SA
ta, teal and white splatters and used his earnings to buy an apartment
367
368
S
T
KB FINANCIAL GROUP
BNP PARIBAS
KO
FR
that resemble the patterns in Manhattan. He then dropped out of New
T
369
370S
WILMAR INTERNATIONAL
AUTOMATIC DATA
SI
US
of a Jackson Pollock paint- York University (and later show business) and
T
371
372S
MAYBANK
HARTFORD FINANCIAL SERVICES
MA
US ing. The offerings at the Ri- wound up in Texas, where he sold real estate
373TDANSKE BANK DE LAS VEGAS SANDS
374TRICHEMONT SZ LVS shares crap out, alto Jean Project, located at during the oil boom of the 1980s.
375SHUMANA US losing 30% of value as
376SHDFC BANK IN luck in Macau cools. the Seaport, have Ackman He eventually caught the eye of Chica-
377OFREDDIE MAC US
378SBAE SYSTEMS UK puzzled. go Bulls and White Sox owner Jerry Reins-
379TFEMSA MX
380THEINEKEN HOLDING NE “How do you check out the price? Noth- dorf, who put him in charge of a few buildings.
381SQATAR NATIONAL BANK QA
382SEDISON INTERNATIONAL US ing’s labeled. It has like a SKU, a sign and no Weinreb’s Midas touch for turning around
383SETISALAT AE
384SCSX US price!” he exclaims to David Weinreb, the busted real estate deals in the aftermath of the
385SGREE ELECTRIC APPLIANCES CN
386TTELENOR NO Howard Hughes CEO, who accompanies him. savings-and-loan crisis quickly became leg-
387TMARUBENI JA
388
389
T
T
POSCO
EXOR
KO
IT
A young shopkeeper named Kandice quotes endary. “David has taken some dog proper-
389
391
S
T
MACQUARIE GROUP
EDP-ENERGIAS DE PORTUGAL
AU
PO
the jeans at $245. “That’s artwork, not jeans,” ties and really made winners out of them,”
392
393
T
T
CBS
HESS
US
US
Ackman murmurs as he scans the denim says Reinsdorf, terming him “a smart guy who
394
395
S
T
THOMSON REUTERS
MTN GROUP
US
SA
hanging on brick walls inside a refurbished doesn’t tell people how smart he is.” That
396
397
S
S
SUNTRUST BANKS
FIRSTRAND
US
SA
19th-century row house. makes him a good pairing with the boastful
T
397
399T
NORFOLK SOUTHERN
HUSKY ENERGY
US
CA
He begins to barrage the unknowing Kan- Ackman. By the mid-1990s Weinreb’s compa-
S
399
401S
PPL
BOUYGUES
US
FR
dice as if he’s grilling a CEO: ny, TPMC Realty (for “Turnaround Properties
S
402
402T
BAOSHAN IRON & STEEL
MAPFRE
CN
SP What percentage of custom- Make Cash”), was known as one of the pre-
404TBARCLAYS UK
405TSAUDI TELECOM SU ers are male? How much traf- eminent distressed real estate firms in Texas.
406TTRANSCANADA CA
407TGENERAL MILLS US fic does the store get? Is it re- “Even in the worst of times,” Weinreb says,
408STENAGA NASIONAL MA
409SWILLIAMS COS. US
KRAFT FOODS ally more of a wholesale busi- “there’s someone making money.”
410TKRAFT FOODS US
411SJFE HOLDINGS JA Buffett-backed Heinz ness? Why open a store in this In 2002 he reconnected with Ackman via
411TMACY’S US merger will make it
413SVALE BR world’s fifth-largest location? Is there anything a cold call. Seven years later, with the real es-
414TNOVO NORDISK DE food company. Tasty.
415TMICHELIN GROUP FR other than denim and acrylic tate market languishing, Weinreb began talk-
416TPETROBRAS BR
417
418
T
S
MAGNA INTERNATIONAL
TEXAS INSTRUMENTS
CA
US
for sale? How do the clothes wash? ing to Ackman about launching a fund to
419
420
S
S
INTERNATIONAL AIRLINES
TOYOTA INDUSTRIES
UK
JA
Kandice meets every Ackman demand, buy up distressed properties. The discus-
421
422
T
T
SUMITOMO MITSUI TRUST
MARATHON OIL
JA
US
and he reciprocates with a parting thought: sion eventually morphed into Weinreb taking
423
424
T
T
FUJI HEAVY INDUSTRIES
ILLINOIS TOOL WORKS
JA
US
“When the theater opens you guys are going charge of Ackman’s plan for Howard Hughes.
424
426
T
S
VIACOM
BRITISH SKY BROADCASTING
US
UK
to be booming!” The theater he’s referring to Weinreb’s background in turnarounds is
S
427
427T
ALLIED IRISH BANKS
SAMPO
IR
FI
is a high-end iPic cinema, where filmgoers can what made the Las Vegas project so enticing.
S
429
430T
CHARLES SCHWAB
ROYAL BANK OF SCOTLAND
US
UK
take in 3-D movies while knocking back beer The mall was abandoned in 2007, as the real es-
T
431
432S
NTPC
CITIC SECURITIES
IN
CN and cocktails and munching overpriced bur- tate market began to sicken. Until a year ago it
433TMITSUI FUDOSAN JA
434SCHINA RESOURCES LAND HK gers. It’s slated to open in 2016 next door to Ri- was fallow, with concrete and rusting steel col-
435TGRUPO ACS SP
alto in the Fulton Market Building, a piece of umns sitting atop wasteland purchased by re-
KRAFT: SCOTT OLSON/GETTY IMAGES; JEFF BEZOS: MIREYA ACIERTO/GETTY IMAGES
436SMIDEA GROUP CO. LTD. CN
437SPRINCIPAL FINANCIAL GROUP US
438SCENTURYLINK US the $1.5 billion plan to rebuild the Seaport. In clusive business tycoon and aviator Howard
439SFUJIFILM HOLDINGS JA
439TPERNOD RICARD FR 2017 Howard Hughes expects Hughes in the 1950s to avoid taxes (see box,
441SCORNING US
442OVOYA FINANCIAL US to reopen the Seaport’s Pier 17 p. 89). “We’re the largest landholder in a con-
443SCSR CN
444TTALANX GE with 182,000 square feet of leas- strained market,” says Weinreb. “It was self-ev-
445TCOLGATE-PALMOLIVE US
446TKIMBERLY-CLARK US able space and a 1.5-acre rooftop ident that Downtown Summerlin would have a
447SLENOVO GROUP CN
448
449
T
T
AMP
GARANTI BANK
AU
TU
for concerts, ice skating, wed- bright future when the market recovered.”
450TSYNGENTA
451OCNH INDUSTRIAL
SZ
US
dings and Rockefeller Center- More tantalizingly, Howard Hughes owns
451
453
S
S
METALLURGICAL CORP. OF CHINA
JBS
CN
BR
esque tree lightings. Then come 200 acres of barren desert to the east, which is
454
455
T
S
KOMATSU
SEMPRA ENERGY
JA
US
AMAZON.COM the inevitable luxury residential slated for 4,000 residential units and 1.4 mil-
No profits? No prob-
456
457
S
S
SK TELECOM
BANK RAKYAT INDONESIA
KO
ID lem. Investors (still) skyscrapers. lion square feet of office space. And another
T keep faith with Jeff
458
458S
AMAZON.COM
TJX COS.
US
US Bezos’ pricey visions. Weinreb, as the Howard 5,600 acres to the west and south, which will
S
460
461T
STARBUCKS
AON
US
UK Hughes point man, is key. Ack- become increasingly valuable if Ackman’s pro-
462SASSOCIATED BRITISH FOODS UK
463TPPG INDUSTRIES US man has real estate chops, but Weinreb lives jections, which call for Summerlin’s 100,000
464SPUBLIC SERVICE
ENTERPRISE GROUP US and breathes it. The two first met in high population to double, come to fruition.
465SSINOHYDRO GROUP CN
466STE CONNECTIVITY SZ school in Chappaqua, N.Y. Weinreb, who grad- Control is important in all of the duo’s mas-
467SYAHOO US
468TE.ON GE
469TMITSUBISHI ESTATE JA
470TSWISSCOM SZ
471TORIX JA 88 | FORBES MAY 25, 2015
 GLOBAL 2OOO
472TPHILIPS NE
473TH&M SW
474SCONSOLIDATED EDISON US
474SSAUDI ELECTRICITY SU
476SCHINA CNR CN
476SFUJITSU JA
478TSONY JA
479SMASTERCARD US
ter plans. Besides its Las Vegas real estate fact, was spending $118 million on a deal in 479TSUZUKI MOTOR JA
481SCHINA CINDA ASSET
and planned community, Howard Hughes 2011 to buy out the 48% interest Morgan Stan- 482S
MANAGEMENT
SOUTHWEST AIRLINES
CN
US
also owns the Woodlands, a 28,400-acre ley held in the Woodlands. They also decid- 483
484
T
T
CHESAPEAKE ENERGY
PRAXAIR
US
US
planned community on the outskirts of Hous- ed to retain the 25 million square feet of strate- 485
485
S
S
HDFC
TATA CONSULTANCY SERVICES
IN
IN
ton conceived in the 1960s by shale gas pio- gic development Howard Hughes owns on all 487TPACCAR
488ONATIONAL COMMERCIAL BANK
US
SU
T
neer George Mitchell, as well as parts of James of its properties. Just as Buffett 489
490T
T&D HOLDINGS
BANK MANDIRI
JA
ID
T
Rouse’s planned community in Columbia, Md. counts on steady cash flow from 490
492S
COAL INDIA
COMPASS GROUP
IN
UK
493TINPEX JA
It also owns Ward Village, a 60-acre plot of Berkshire Hathaway’s insur- 494TPROGRESSIVE US
495SCRH IR
coastal land in Honolulu, where the company ance holdings, Ackman is trying 496TKOÇ HOLDING TU
496SSYSCO US
has already broken ground on two luxury tow- to position Howard Hughes as 498SECOLAB US
499STYSON FOODS US
ers that are more than 80% sold. a real estate cash machine. Cash 500SEVERGRANDE REAL ESTATE CN
T
flow is expected to triple by 2016 CK HUTCHISON
501 ISBANK TU
Instead of pawning off projects to joint ven- 502OCK HUTCHISON HK
HOLDINGS 503TRESONA HOLDINGS JA
ture investors, Ackman and Weinreb are dou- to over $500 million per year, ac- Hong Kong’s “Super- 504SCLP HOLDINGS HK
man,” Li Ka-shing, 504SDISH NETWORK US
bling down. One of Weinreb’s first moves, in cording to Compass Point ana- restructures far-reach- 506SBHARTI AIRTEL IN
ing empire; snags U.K. 507SBIOGEN IDEC US
lyst Wilkes Graham. telecom giant O2. 508
509
T
S
CUMMINS
CIC GROUP
US
FR
“Howard Hughes 510TTESCO UK

THE management isn’t concerned with

511S
512
513
T
T
WASTE MANAGEMENT
SWISS LIFE HOLDING
ROYAL AHOLD
US
SZ
NE

HOWARD meeting a quarterly estimate,” says 514

515
S
T
DAIWA HOUSE INDUSTRY
LARSEN & TOUBRO
JA
IN
James Davolos, portfolio manager at S
HUGHES Horizon Kinetics, the firm’s largest
516
517
518
S
S
SUNCORP GROUP
SWIRE PACIFIC
MARSH & MCLENNAN
AU
HK
US

TAX DODGE outside shareholder. “They’re con-

519
520
521
T
S
T
GFNORTE
KASIKORNBANK
XEROX
MX
TH
US
T
THE LATE BUSINESS TYCOON cerned with com- 522
523T
AKBANK
PRECISION CASTPARTS
TU
US
524TTOYOTA TSUSHO JA
and billionaire Howard Hughes pounding the 525TATLAS COPCO SW
525STHYSSENKRUPP GROUP GE
may be best remembered for value of the in- 527TINTERNATIONAL PAPER US
528OYPF AG
producing the most expensive vestment over the 529SCOMMERZBANK GE
Hollywood film of its day (Hell’s 529SENTERGY US
next five, seven 531SXCEL ENERGY US
Angels, 1930), flying around the 532SVALEANT PHARMACEUTICALS CA
or ten years.” 533SKUBOTA JA
world in record time (1938), his TARGET 534TTARGET US
And real es- Bungled Lilly Pulitzer sale
535SCELGENE US
affair with Katharine Hepburn came to own the 25,000 536SFOSUN INTERNATIONAL CN

(1939) and building the largest acres of land adjacent to the

tate will lead to enrages customers. Strike one
for new CEO Brian Cornell.
537
538
S
T
MAZDA MOTOR
LOEWS
JA
US

airplane in history, the H-4 Las Vegas Strip, now called other business- 539TOMNICOM GROUP
540OALLY FINANCIAL
US
US

Hercules “Spruce Goose” Summerlin in honor of Hughes’ es. In Vegas, for example, Howard 541
542
T
S
AEON
DONGFENG MOTOR GROUP
JA
CN

(1947). Or for his final decades, grandmother Jean Amelia Hughes owns a minor league base- 543
544
S
S
SAMSUNG FIRE & MARINE
DAIKIN INDUSTRIES
KO
JA
when mental illness turned Summerlin. ball team (and plans to build a stadi- 545
546
T
S
FIFTH THIRD BANCORP
BAIDU
US
CN
him into a recluse who ran his In 1972 Hughes put his um for it in Summerlin). And don’t be 547
548
S
S
KERING
QBE INSURANCE GROUP
FR
AU
Vegas real estate into Summa S
empire from a hotel suite. surprised if Ackman becomes the lat- 549
550S
THE PRICELINE GROUP
BANKIA
US
SP
But despite his rococo Corp., which finally began est Wall Street titan to own a casino. 551TOTSUKA HOLDING JA
552TKYOCERA JA
extravagances, Howard Hughes developing Summerlin in the 553TPANASONIC JA
One of Howard Hughes’ most unusu- 554SRELX GROUP UK
was a master businessman, 1990s. Summa sold to mall 555TTRANSNEFT RU
al and potentially valuable assets is the 556TGRUPO MEXICO MX
particularly skilled in the developer Rouse in 1996, and in 556TSHIN-ETSU CHEMICAL JA
air rights above the 1.9 million square 558SAXIS BANK IN
LI KA SHING: OLI SCARFF/GETTY IMAGES; TARGET: DAMIAN DOVARGANES/AP

art of avoiding taxes. In his 2004 General Growth bought 559TVOLVO GROUP SW

memoir, Hughes’ accountant Rouse for $12.6 billion. During

foot Fashion Show Mall on The Strip, 560TDAIWA SECURITIES JA
560TNATIONAL BANK OF CANADA CA

Noah Dietrich claims Hughes General Growth’s bankruptcy, across from the Wynn hotel and sand- 562SWESTERN DIGITAL US
563SDAQIN RAILWAY CN
paid only about $20,000 in Ackman carved out a trove wiched between Trump Internation- 564TSIAM COMMERCIAL BANK TH
565SBEST BUY US
income taxes a year. Indeed of unwanted assets plus the al and Treasure Island. “I took every- 566TFRANKLIN RESOURCES US
567SFAIRFAX FINANCIAL CA
Howard Hughes Corp.’s Howard Hughes name. thing where the market wouldn’t as- 568
569
S
T
WOODSIDE PETROLEUM
ROGERS COMMUNICATIONS
AU
CA
circuitous journey into Bill Fittingly, Howard Hughes sign a value,” says Ackman. 570
571
S
S
COUNTRY GARDEN HOLDINGS
SUMITOMO ELECTRIC
CN
JA
Ackman’s portfolio began as Corp. still retains about $250 Bill Ackman on the Las Vegas 572SLIBERTY GLOBAL UK
573THEIDELBERGCEMENT GE
a tax scheme. In the 1930s the million in crises-related tax- Strip? The Howard Hughes Hotel & 574TCIMB GROUP HOLDINGS MA
575TNKSJ HOLDINGS JA
IRS levied a 37.5% penalty tax loss carryforwards today, so
Casino? 576TNORILSK NICKEL
577OTOKYO GAS
RU
JA
on unnecessary accumulated it currently pays no taxes. S
“Ultimately, the best real estate 578
579T
PUBLIC BANK
ARCELORMITTAL
MA
LU
surpluses. Hughes operations Eventually Ackman may turn T
has a big entertainment component,” 580
580T
HANA FINANCIAL GROUP
TELUS
KO
CA
never paid dividends, so Howard Hughes into a REIT, 582TBG GROUP UK
Dietrich began plowing profits dodging still more taxes.
says Ackman, as cocky as ever. “Never 583SGD POWER DEVELOPMENT CN
584SCHINATRUST FINANCIAL TA
into undeveloped land. That’s Hughes himself couldn’t have again am I going to miss anything like 585TAKZO NOBEL NE
585TFORTUM FI
how subsidiary Hughes Aircraft done better. —A.G. Rockefeller Center.” F 587OAIR PRODUCTS & CHEMICALS US
588TSIMON PROPERTY GROUP US
589SHILTON WORLDWIDE HOLDINGS US
590TSCA SW

MAY 25, 2015 FORBES | 89 CONTINUED ON PAGE 94

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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 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.
Increase Headcount

90 | FORBES MAY 25, 2015

 THINK SIMPLE
On average, global companies are trying to manage

That’s 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 unification. This allows them to focus on
the outcomes instead of the process. After all, you can’t see
where you’re going if you’re 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 resource—a kind of secret weapon—that 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® MAY 25, 2015 FORBES | 91
HARNESSING BIG DATA: THE HUMAN CAPITAL MANAGEMENT JOURNEY TO ACHIEVING BUSINESS GROWTH, ADP RESEARCH INSTITUTE®
 GLOBAL 2OOO

THE
FLIGHT
OF HIS
LIFE
At a North Carolina airfield just
240 miles from aviation’s 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

M
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 Honda’s new
advanced light jet is choking in wires and sensors—3,000
gauges in all—an ugly cross between a spacecraft and a
Christmas tree. He’s collecting data on the plane’s struc-
tural integrity while it’s being buffeted with simulated
forces well above its maximum loads.
The plane’s composite fuselage holds up well, as ex-
pected, 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
590TSCA SW

HONDAJET 591
592
T
T
SSE
AGEAS
UK
NE
593TASML HOLDING NE
593TEBAY US
595SDTE ENERGY US
596SATLANTIA IT
597TAL RAJHI BANK SU
new factory with soaring ceilings and a floor so worth $22 billion. Although very light jets (like 598SASAHI KASEI JA
599TTHALES FR
glossy you can see your reflection in it, work- the 9,200-or-so-pound HondaJet) are still lag- 600SMITSUBISHI CHEMICAL JA
600TREYNOLDS AMERICAN US
ers dressed in bright white uniforms are hand- ging, sales are perking up. Last year 87 light 602SASTELLAS PHARMA JA
602SSANLAM SA
crafting HondaJets for customers who have jets (under 12,500 pounds) were delivered, up 604
604
T
T
ANADARKO PETROLEUM
EVONIK
US
GE
been waiting more than eight years to take de- from 77 in 2013 but still way down from the 606
607
S
S
HAITONG SECURITIES
SODEXO
CN
FR
livery. The wait is nearly over. On Mar. 27 the 371 delivered in 2008. “The feeling that we’re 608
609
S
S
AES
MTR
US
HK
plane received provisional type certification through this dark time is high- 610
611
S
T
BECTON DICKINSON
SABANCI HOLDING
US
TU
from the U.S. Federal Aviation Administra- est among smaller-jet owners,” 612
613
T
S
ANHUI CONCH CEMENT
ACTAVIS
CN
IR
S
tion, a critical milestone that means it is safe Vincent said. Early demand is 614
615T
STEINHOFF INTERNATIONAL
VTB BANK
SA
RU
T
for flight. Final FAA approval is expected in the promising. Honda already has 616
617T
OMV GROUP
PUBLICIS GROUPE
AS
FR
618TDELPHI AUTOMOTIVE UK
next few months. more than 100 orders. Suc- ACTAVIS 619SBANK OF IRELAND IR
620TANGLO AMERICAN UK
When it comes, it will be a great relief for cessful newcomers are rare in CEO Brent Saunders did 621SCME GROUP US
about $100 billion in deals 622SBANCO DE SABADELL SP
Honda, the $117 billion (sales) Japanese in- the aviation industry, but Hon- last year. Time to digest? 622TGRUPO AVAL CO
624TSUMITOMO CORP. JA
dustrial icon (No. 63 on the Global 2000) best da’s credibility in autos gives it 625SWHIRLPOOL US
626TUNIBAIL-RODAMCO FR
known for making cars, motorcycles and power a better chance than most, says Vincent. “Who 627TFALABELLA CH
628TAISIN SEIKI JA
generators. The launch of HondaJet, three can question their engineering prowess, their 628TREGIONS FINANCIAL US
630SBANK CENTRAL ASIA ID
decades in the making at an estimated cost of manufacturing expertise, their supply chains?” 631SLG DISPLAY KO
632TCEZ GROUP CZ
$1.5 billion to $2 billion, is an opportunity to And who can question Fujino’s determina- 633
633
S
T
SHIRE
SPECTRA ENERGY
IR
US
shift the focus away from a string of crises that tion to reinvent business jet travel? 635
636
S
S
PEUGEOT
DOLLAR GENERAL
FR
US
knocked the company off its game in recent “My career objective was to create a concept 637
637
T
S
CENOVUS ENERGY
COGNIZANT TECHNOLOGY
CA
US
years. It survived the Great Recession only to for an airplane, and design and sell it by my- 639
640
T
S
KEPPEL CORP.
BUNGE
SI
US
be rocked by the Japanese tsunami and then a self,” said the intense but soft-spoken Fujino, a 641
642
T
T
SIAM CEMENT
POTASHCORP
TH
CA
S
flood of quality recalls that tarnished its repu- youthful-looking 54, with thick eyebrows and 642
644T
TESORO
ALSTOM
US
FR
S
tation. Earlier this year U.S. regulators slapped large wire-rim glasses competing for attention. 644
646T
INGERSOLL-RAND
CHINA RESOURCES POWER
IR
CN
S
Honda with a record $70 million fine for failing “I don’t want to be [responsible for] just a por- 647
648S
NEW WORLD DEVELOPMENT
MERCANTIL SERVICIOS
HK
VZ
649TLG CHEM KO
to report warranty claims and more than 1,700 tion of the product. I want to start by concept.” 650SWHEELOCK & CO. HK
651SYARA INTERNATIONAL NO
incidents involving death or injury, as required It’s hardly the traditional deflated-ego 652OKOHL’S US
653SAMERISOURCEBERGEN US
under the government’s early-warning safe- kenkyo of a “team-first” Tokyo salaryman, but 653TTENARIS LU
655TNATIONAL BANK OF ABU DHABI AE
ty system. A few weeks later Honda said CEO that’s Fujino. In an age where engineering is 656TCOUCHE TARD CA
657SINTERCONTINENTALEXCHANGE US
Takanobu Ito, 61, would step down in June dominated by anonymous teams his Honda- 658TM&T BANK US
659TFREEPORT US
after six years at the helm. Honda officials dis- Jet, with its long tapered nose and distinctive 660SSEAGATE TECHNOLOGY IR
661STORAY INDUSTRIES JA
puted reports that Ito was pushed out, noting engine placement on top of the wings, is a per- 662SNAN YA PLASTICS TA
663SHENDERSON LAND HK
that his tenure was in line with past CEOs and sonal statement, the aluminum and carbon- 664
665
S
T
NUCOR
SWATCH GROUP
US
SZ
that he handpicked his successor. fiber embodiment of an extraordinary decades- 666
667
S
T
EMIRATES NBD
CENTRICA
AE
UK
While the company is thrilled to showcase long journey that led him from 668
668
S
S
DEUTSCHE BOERSE
INDUSTRIAL BANK OF KOREA
GE
KO
its reviving industrial ingenuity, no one will be his birthplace in Japan to a 670
671
T
S
KINGFISHER
MURATA MANUFACTURING
UK
JA
happier than Fujino. The delivery of the first Mississippi college town, back 672
673
S
T
INFOSYS
FERROVIAL
IN
SP
S
HondaJets in the next few months is the culmi- to the boardrooms of Japan 674
675T
FIRST GULF BANK
ADECCO
AE
SZ
S
nation of a 29-year obsession to create a break- and, finally, to the helm of this 675
677S
GOODYEAR
ENCANA
US
CA
678OWOORI BANK KO
through small jet aircraft—quieter, roomier and manufacturing plant in North 679OEVERSOURCE ENERGY US
679SDAVITA US
faster than any rival on the commercial market. Carolina, 240 miles—as the pri- 681SBRF BR
682SAPPLIED MATERIALS US
With a price tag of $4.5 million, the Hon- vate jet flies—from Kitty Hawk, 682TKELLOGG US
684TADIDAS GE
daJet is being marketed as a tool for business where the Wright brothers 685TAGRIUM CA
FAST RETAILING 686TROLLS-ROYCE HOLDINGS UK
owners who have assets of $20 million to $40 took flight in 1903. How’s this for fast? 687SHUADIAN POWER
INTERNATIONAL CN
Japanese clothing
million and want to keep tabs on their opera- “From time to time there are giant Uniqlo hopes to
688OBANCO DE VENEZUELA
688SFANUC
VZ
JA
open 200 new stores
tions. But they’re just as likely to use one for a developments in aircraft that this fiscal year.
690
691
T
S
FAST RETAILING
NASPERS
JA
SA
quick golf outing or weekend getaway. These break the mold of the past,” 691
693
T
T
SAFRAN
MOSAIC
FR
US
buyers, mostly in the U.S., were hit hard when says Bruce Holmes, a former NASA research 694SCHINA SHIPBUILDING INDUSTRY CN
JOSEPH DEAN/NEWSCOM (TOP)

695TPORSCHE AUTOMOBIL HOLDING GE

T
the economy tanked, and many wouldn’t have engineer and aerodynamics expert. “And I 696
697T
ABERTIS
CARLSBERG
SP
DE
T
been able to get financing anyway. But Hon- think the HondaJet is one of them.” 698
699T
ASAHI GROUP HOLDINGS
PARKER-HANNIFIN
JA
US
699TVF US
da’s timing could be right, says aviation con- 701TCHINA NATIONAL BUILDING CN
701TMAGNIT RU
sultant Rolland Vincent. Worldwide sales of EVEN PARKED ON THE TARMAC, THE HONDAJET 703SCHINA EASTERN AIRLINES CN
703SMYLAN US
business jets rose 6.5% in 2014, to 722 planes, is striking, with its sharp beak and bold palette 705OSNAM IT
706TAPACHE US
707TJX HOLDINGS JA
708TCHINA STEEL TA
709TSIME DARBY MA
94 | FORBES MAY 25, 2015
S UP T DOWN
O UNCHANGED O NEW
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 first 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 isn’t exactly the
Civic of the skies. But it is faster and more fuel-
TINY POWERHOUSES
efficient than rivals, and loaded with high-tech Compact turbofan engines built
by GE Honda Aero Engines
features. Bonus: It’s got a private bathroom. 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, computer-
powered, flat-panel, multiscreen
avionics system with dual
touchscreen controllers.

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

CESSNA EMBRAER
HONDAJET CITATION CJ4 LEGACY 450
PRICE: $4.5 million PRICE: $9 million PRICE: $16.6 million
RANGE: 1,400 miles RANGE: 2,500 miles RANGE: 2,900 miles
(Can fly nonstop from (Can fly nonstop from (Can fly nonstop from New
New York to Miami) New York to Houston) York to Los Angeles)
MAX CRUISE ALT: 43,000' MAX CRUISE ALT: 45,000' MAX CRUISE ALT: 45,000'
CRUISE SPEED: 483MPH CRUISE SPEED: 519MPH CRUISE SPEED: 624MPH
PASSENGERS: 6 PASSENGERS: 8–9 PASSENGERS: 7–9

RANGE 1,000 mi 2,000 mi 3,000 mi 4,000 mi

96 | FORBES MAY 25, 2015

 GLOBAL 2OOO
710TTATNEFT RU
711TISUZU MOTORS JA
712TINSURANCE AUSTRALIA GROUP AU
713TYUM BRANDS US
714TBANCOLOMBIA CO
715SCHINA TAIPING INSURANCE HK
716TSUMITOMO REALTY JA
717TCHUNGHWA TELECOM TA
ENGINE ON TOP 718
719
T
T
RICOH
STRYKER
JA
US
The HondaJet’s 720STYCO INTERNATIONAL SZ
721SWEST JAPAN RAILWAY JA
engines are mounted 722SCHINA YANGTZE POWER CN
on the wings, in a 723SNORTHERN TRUST US
723TVEOLIA ENVIRONNEMENT FR
carefully selected 725TQUANTA COMPUTER TA
“sweet spot,” to 726SSINOPHARM GROUP CN
727TMETRO GROUP GE
reduce shock waves COMPOSITE FUSELAGE 728ONAVIENT US
when flying at high 729TSEKISUI HOUSE JA
Instead of aluminum, the plane’s body is 730SLUXOTTICA GROUP IT
speeds. molded from a combination of composite 731SLG ELECTRONICS KO
732SESSILOR INTERNATIONAL FR
honeycomb sandwich panels and stiffened 732TMARKS & SPENCER UK
panels, making it strong and lightweight. 734SROYAL CARIBBEAN CRUISES US
735SALCOA US
736OSCENTRE GROUP AU
736SRAKUTEN JA
738TLAFARGE FR
739TDENTSU JA
740SSHANGHAI ELECTRIC GROUP CN
741SCANADIAN PACIFIC RAILWAY CA
742SWEYERHAEUSER US
743TPKO BANK POLSKI PL
744SSUMITOMO CHEMICAL JA
745TGAP US
746TBANCO POPULAR ESPANOL SP
747SNEC JA
748TNOVATEK RU
749SPOWER ASSETS HOLDINGS HK
750SESTÉE LAUDER COS US
750SSTANLEY BLACK & DECKER US
752SGREAT WALL MOTOR CN
753SSHIMAO PROPERTY HOLDINGS HK
754TSAMBA FINANCIAL GROUP SU
755TSCOR FR
756TMITSUBISHI MOTORS JA
757SBHARAT PETROLEUM IN
758SGF SECURITIES CN
S
IN THE FLOW 759
760T
BÂLOISE GROUP
SANDVIK
SZ
SW
To improve 761SVMWARE US
762SHUATAI SECURITIES CN
aerodynamics, without 762SHYUNDAI STEEL KO
hurting lift, Honda 764STOHOKU ELECTRIC POWER JA
765SZHEJIANG ZHENENG ELECTRIC
sculpted the wings and POWER CN
766SCAPGEMINI FR
nose to dramatically 766SLONGFOR PROPERTIES CN
reduce drag across the 768TBANGKOK BANK TH
769SPEARSON UK
surfaces. 770SWEICHAI POWER CN
771TRIYAD BANK SU
772TJAPAN AIRLINES JA
773TFIRSTENERGY US
773TNOBLE ENERGY US
775TKAO CORP JA
776TITAÚSA BR
COMFY COCKPIT 777SL BRANDS US
778TPGE PL
Fujino spent 779TKEYCORP US
780TNATIONAL BANK OF KUWAIT KU
years studying 781SQINGDAO HAIER CN
782SSAUDI BRITISH BANK SU
ergonomics, 783TRESOLUTION UK
visibility and 783TTELEKOM INDONESIA ID
785OWH GROUP HK
human-machine 785TKANSAI ELECTRIC POWER JA
787SCARMAX US
interfaces to keep 788SMEDIATEK TA
S
pilots happy for the 789
790T
CREDICORP
ERSTE GROUP BANK
PE
AS
long haul. 790SLAND SECURITIES GROUP UK
792SUPM-KYMMENE FI
793SVALEO FR
794TGRUPO INBURSA MX
795SKRUNG THAI BANK TH
796SBANK OF EAST ASIA HK
797SMEGA FINANCIAL HOLDING TA
798SAMERICAN TOWER US
798SSHERWIN-WILLIAMS US
800SBANK OF NINGBO CN
801SHONG KONG EXCHANGES HK
802TKUEHNE + NAGEL SZ
803TLOTTE SHOPPING KO
804TGEORGE WESTON CA
804THALKBANK TU
806TCBD BR
807TFORMOSA PETROCHEMICAL TA
808STEXTRON US
809SREINSURANCE GROUP
OF AMERICA US
DASSAULT GULFSTREAM 810
811
T
S
CHUBU ELECTRIC POWER
MARRIOTT INTERNATIONAL
JA
US
FALCON 5X G650 811SWIPRO IN
813SAUTOZONE US
PRICE: $45 million PRICE: $64.5 million
814TMAHINDRA & MAHINDRA IN
RANGE: 6,000 miles RANGE: 8,100 miles 815SALUMINUM CORP OF CHINA CN
(Can fly nonstop from New (Can fly nonstop from 816SCHINA MERCHANTS SECURITIES CN
817TUNUM US
York to Moscow) Shanghai to New York) 818SINVESCO US
MAX CRUISE ALT: 51,000' MAX CRUISE ALT: 51,000' 819SKONE FI
CRUISE SPEED: 610MPH CRUISE SPEED: 562MPH 820TGALAXY ENTERTAINMENT HK
820STCL CORP CN
PASSENGERS: 8–12 PASSENGERS: 18 822TDISCOVERY COMMUNICATIONS US
822TTOKYO ELECTRIC POWER JA
824SROSS STORES US
5,000 mi 6,000 mi 7,000 mi 8,000 mi 825TKIRIN HOLDINGS JA
826SBROADCOM US
827OCGN POWER CN
828TREPUBLIC SERVICES US
MAY 25, 2015 FORBES | 97
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O UNCHANGED O NEW
 GLOBAL 2OOO
FORBES
S
829 RYANAIR HOLDINGS IR

HONDAJET S
830
S
831
SDIC POWER HOLDINGS
HAL TRUST
CN
NE
S
832 ASSA ABLOY SW
T
832 BANK OF BARODA IN
S
834 SHANGHAI INTERNATIONAL PORT CN
T
835 LIBERTY INTERACTIVE US
S
836 DATANG INTERNATIONAL POWER CN
choices: red, blue, green, yellow or silver. But Phenom 100E (448mph) jets. It’s also about S
837 CHONGQING RURAL BANK CN
S
838 KOREA GAS KO
its most distinctive feature is the unusual loca- 15% more fuel-efficient. The top speed is T
839 ITC IN
840SSCHINDLER HOLDING SZ
tion of the engines—on top of the wings. 483mph, and the maximum cruise altitude is T
841 ABU DHABI COMMERCIAL BANK AE
T
841 SK INNOVATION KO
On most aircraft the engines are below 43,000 feet—higher than most commercial air- S
843
844S
CHINA SOUTHERN AIRLINES
CONSTELLATION BRANDS
CN
US
the wings or attached to the rear of the fu- liners. Its range is 1,358 miles, not enough to fly T
845
T
846
VIMPELCOM
CEMEX
NE
MX
selage. Without those structural constraints coast-to-coast but perfect for regional hops or S
847
S
848
NIDEC
LINK REIT
JA
HK
the HondaJet (which is about two and a half even a trip from New York to Miami. S
849
S
850
BANQUE SAUDI FRANSI
KWEICHOW MOUTAI
SU
CN
times the size of a minivan) can provide more Still, something looks off. Don’t two bulky T
851
S
852
DAIICHI SANKYO
CHINA MERCHANTS PROPERTY
JA
CN
T
room for passengers and their stuff. The cabin engines sticking up from the wings kill the 853
S
854
HYUNDAI HEAVY INDUSTRIES
GENERAL GROWTH PROPERTIES
KO
US
T
is 20% larger than comparable business jets, plane’s aerodynamics? That’s what most avi- 855
S
856
GRUPA PZU
OSAKA GAS
PL
JA
S
857 KOBE STEEL JA
and the rear cargo area is spacious enough ation experts learned in school, supported S
857 NISOURCE US
T
857 SYMANTEC US
for 16 pieces of luggage, including 2 golf bags. by a failed attempt in Germany years earlier. 860TEASTMAN CHEMICAL US
T
861 OOREDOO TELECOM QA
Passengers don’t have to play footsie the way “When I showed people the sketch, everybody S
862 HCP US
T
863 ENBW-ENERGIE BADEN GE
they do in most small business jets; the facing laughed at me,” recalled Fujino. “They hated S
864 NORDSTROM US
T
864 SK HOLDINGS KO
seats are set farther apart, providing 14 inches the idea.” Fujino’s secret, discovered after years S
866 CENTERPOINT ENERGY US
867OBAIC MOTOR CN
of extra legroom. It seats up to seven, includ- of analysis and a chance encounter with an old T
868 BED BATH & BEYOND US
S
869 ZTE HK
ing the pilot. And there’s still enough space textbook, was finding the perfect spot to mount T
870 L-3 COMMUNICATIONS US
S
871 VORNADO REALTY US
for a bathroom, an important selling point, the 465-pound engines. When he tested a scale S
872
S
873
TD AMERITRADE HOLDING
FIDELITY NATIONAL
US

says Fujino. With the engines out over the model of his plane at Boeing’s wind tunnel T
874
INFORMATION
VIENNA INSURANCE GROUP
US
AS
T
wings, it’s also quieter. facility, the results showed that his plane 875
S
876
SKANSKA
GENUINE PARTS
SW
US
T
Honda says its jet flies faster and higher produced less drag at high speeds than conven- 877
S
878
WHOLE FOODS MARKET
CALPINE
US
US
S
than any other jet in its class, such as Cessna’s tional “clean wing” designs. 879
880T
EQUITY RESIDENTIAL
CHINA COAL ENERGY
US
CN
S
881 CSL AU
Citation Mustang (391mph) and Embraer’s As a child, Fujino was fascinated by air- S
882 CATHAY PACIFIC AIRWAYS HK

Old Dominion simplifies global shipping by doing more than delivering freight. Our focus
on premium service means every shipment arrives with one of the lowest claims ratios
and one of the best on-time records in the industry.

Old Dominion Freight Line, the Old Dominion logo, OD Household Services and Helping The World Keep Promises are service marks or registered service marks of
Old Dominion Freight Line, Inc. All other trademarks and service marks identified herein are the intellectual property of their respective owners.
© 2015 Old Dominion Freight Line, Inc., Thomasville, N.C. All rights reserved.
 T
882 FORTESCUE METALS GROUP AU T
938 VOESTALPINE AS
S
884 PROLOGIS US T
939 J SAINSBURY UK
CONTINENTAL S
885 BOE TECHNOLOGY GROUP CN 940OALTICE LU
S
885 CHONGQING CHANGAN AUTO CN 940SLEND LEASE GROUP AU
RESOURCES S
887 PGNIG GROUP PL T
942 WOLSELEY SZ
Shares of S
888 VAKIFBANK TU T
943 NRG ENERGY US
Harold Hamm’s S
889 BANK OF NANJING CN 944SADANI ENTERPRISES IN
pioneering 890SHERMÈS INTERNATIONAL FR S
945 SHAANXI COAL INDUSTRY CN
fracker fell 60% S
891 NEWMONT MINING US T
946 SOLVAY BE planes and studied aeronautical engineering at
as oil prices T
892 LG CORP KO T
947 EVEREST RE GROUP BU
plunged. S
893 HANWHA CORP KO T
948 HERTZ GLOBAL HOLDINGS US Tokyo University. But in Japan there wasn’t much
S
894 BRITISH LAND UK T
949 SANDISK US
Will a recent
rebound last? T
895 BARRICK GOLD CA S
950 CONTINENTAL RESOURCES US of an aerospace industry, so his education was
T
896 PUNJAB NATIONAL BANK IN S
950 O’REILLY AUTOMOTIVE US
897ORECRUIT HOLDINGS
898OJD.COM
JA
CN
T
952
T
952
EIFFAGE
JIANGXI COPPER
FR
CN
mostly theoretical. After graduating in 1984 at age
899OULTRAPAR PARTICIPACOES
900SPIONEER NATURAL RESOURCES
BR
US
T
954
T
955
KPN
EMAAR PROPERTIES
NE
AE
24, he joined Honda, where he worked on auto-
S
901
S
901
CAPITALAND
FINATIS
SI
FR
S
956
S
957
SKF GROUP
ST. JUDE MEDICAL
SW
US
mobile research and development.

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

S
903
904T
TATA STEEL
ALCATEL-LUCENT
IN
FR
S
958
T
959
AMEREN
TECHNIP
US
FR
His background wasn’t lost on Honda execu-
905
906
S
S
CHINA OILFIELD SERVICES
PHOENIX GROUP HOLDINGS
CN
UK
960T
T
961
HUNTINGTON BANCSHARES
BELGACOM
US
BE
tives, however, who in 1986 launched a series of
T T
ALCATEL-LUCENT 907
908T
CONAGRA FOODS
SECOM
US
JA
962
S
962
LEUCADIA NATIONAL
MILLICOM INTERNATIONAL
US
LU
secret R&D projects, in keeping with the compa-
Nokia’s $17 billion bid seems to offer S T
respite from onslaught of Chinese
909
S
910
CHARTER COMMUNICATIONS
HEALTH CARE REIT
US
US
964
S
965
SEADRILL
PUBLIC STORAGE
BU
US ny’s culture for placing bets on innovations that
competition. At least for now. S
911 SM INVESTMENTS PH T
966 INDUSTRIES QATAR QA
T
912 FORMOSA CHEMICALS TA S
967 BANK OF YOKOHAMA JA could pan out decades down the road. Fujino, then
T
913 ANTARCHILE CH S
968 DELTA LLOYD NE
T
914 CIT GROUP US S
969 YAMAHA MOTOR JA 26, was surprised and somewhat reluctant when
T
915 UNIPOL GRUPPO IT S
970 LEAR US
S
916 ALL NIPPON AIRWAYS JA S
971 ARAB NATIONAL BANK SU he was reassigned to a small team tasked with de-
S
916 QUINENCO CH S
972 FIDELITY NATIONAL FINANCIAL US
T
918 HERSHEY US S
972 LORILLARD US veloping an experimental airplane. (Honda’s fa-
T
919 WW GRAINGER US T
974 INVESTEC UK
S
920 KAWASAKI HEAVY INDUSTRIES JA S
975 NEXT UK mous humanoid robot, Asimo, grew out of another
S
921 SUMITOMO METAL MINING JA S
976 DP WORLD AE
S
922 CGI GROUP CA T
977 BANQUE NATIONALE
DE BELGIQUE BE
of these secret R&D projects.)
T
923 CAMERON INTERNATIONAL US
S
924 INTACT FINANCIAL CA S
978
S
979
SUNING APPLIANCE
FLEXTRONICS INTERNATIONAL
CN
SI
Fujino was uprooted from his home in bustling
T
925 SAMSUNG C&T KO
T
926
S
927
BEIERSDORF
BANK NEGARA INDONESIA
GE
ID
980S
S
981
POWER GRID OF INDIA
GEMDALE
IN
CN
Tokyo and transplanted to tiny Starkville, Miss.,
928OAERCAP HOLDINGS
S
929 ALLIANCE DATA SYSTEMS
NE
US
T
982 BANK OF INDIA
983OAENA
IN
SP
home of Mississippi State University, a leading re-
OOREDOO T
930 FORMOSA PLASTICS TA T
984 IDGC HOLDING RU
search center for advanced aeronautics. Work-
S
931 TOWNGAS HK S
984 LENNAR US
Qatari telecom with fun-to-say
name (ooo-ree-do) faces tumbling T
932
T
932
AXIATA GROUP
DEUTSCHE LUFTHANSA
MA
GE
986OFINMECCANICA
S
987 INNER MONGOLIA YILI
IT
CN
ing out of a drafty airplane hangar and living in
profits amid currency swings and S
emerging market weakness. S
934
S
935
SCHRODERS
PEGATRON
UK
TA
988
S
989
TUI
AVALONBAY COMMUNITIES
GE
US an apartment three times bigger than his home in
T S
989 RANDSTAD HOLDING NE
936
T
936
BANK HAPOALIM
MOTOROLA SOLUTIONS
IS
US S
991 AMCOR AU Japan, Fujino faced culture shock. He couldn’t un-

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GLOBAL 2OOO
FORBES
991S LEVEL 3 COMMUNICATIONS US
993
994
S
S
MEDIOBANCA
HEBEI IRON & STEEL
IT
CN HONDAJET
994S VENTAS US
996S CAMPBELL SOUP US
997S HELVETIA HOLDING SZ
998T ORIGIN ENERGY AU
999S MITSUI OSK LINES JA
1000 SADVANCED SEMICONDUCTOR TA derstand the locals’ drawl and he was reminded that in the early 20th cen-
1000 SJULIUS BAER GROUP SZ
1002 SHORMEL FOODS US longed for Japanese food in a tury there were no computers for numerical
1003 TASUSTEK COMPUTER TA
1003 TGRUPO TELEVISA MX three-stoplight backwater. simulation or computational fluid dynamics.
1005 TCF INDUSTRIES HOLDINGS US
1006OACTIVISION BLIZZARD
1007 SHCL TECHNOLOGIES
US
IN
Instead, Prandtl and his peers used complex
1008
1009
T
T
JOHNSON MATTHEY
KUWAIT FINANCE HOUSE
UK
KU ACTIVISION FOR A DECADE FUJINO AND theoretical functions—old-fashioned math—
1010 S
1011T
CMS ENERGY
COMERICA
US
US
BLIZZARD the Honda aviation team to analyze aerodynamic flow.
Attack! Revenue from
1012
1013
S
T
DOLLAR TREE US
WEATHERFORD INTERNATIONAL SZ its digital operations toiled in Starkville, chal- This got Fujino thinking: Instead of try-
now over 40% of total
1014OST. JAMES’S PLACE
1014 TKT CORP
UK
KO $4.4 billion for 2014. lenging the limits of exist- ing to minimize interference between the air
S
1016
1017 T
NOVOLIPETSK STEEL
CHOW TAI FOOK JEWELLERY
RU
HK
ing technology. Their first flows around the wings and around the en-
T
1018
1019 T
GAIL INDIA
ROCKWELL AUTOMATION
IN
US project was to modify an existing single-en- gines, why not combine the two air flows to
1020OMACERICH US
1021T AVNET US gine turboprop plane by making the wings find the ideal aerodynamics overall? That
1022S XIAMEN C&D CN
1023S INNOLUX TA and tail section out of composite mate- would help him identify the sweet spot on the
1024T BANK OF GREECE GR
1025T CANADIAN TIRE CA rials. For Fujino it was his first hands-on wings for the engines. “It was a very different
1026T CANARA BANK IN
1027S DELHAIZE GROUP BE experience with a real airplane. Much of thought process,” he said.
1028S BEIJING ENTERPRISES HK
1029T MGM RESORTS US the first year was spent sanding molds and One night, not long after he found the
1030S CROWN CASTLE INTERNATIONAL US
1031S LONDON STOCK EXCHANGE UK fabricating parts. The second jet was built textbook, he was lying in the darkness when
1032T MURPHY OIL US
1033T MEGAFON RU from scratch. They gained practical experi- a new design concept hit him. He jumped
1033T PTT GLOBAL CHEMICAL TH
1035
1036
S
T
ASSURANT
ALFA
US
MX
ence in airplane design, but without break- out of bed, flipped on the light switch—
1037
1038
S
S
BYD
SHANGHAI CONSTRUCTION
CN
CN
through technologies that would bring new and couldn’t find a piece of paper. So he
1039
1040
T
T
GALP ENERGIA
CENCOSUD
PO
CH
value to the industry, ripped a calendar off the wall and sketched
1040
1042
S
S
KEYENCE
BORGWARNER
JA
US
the company didn’t his inspiration on the back of it. It became
1043
1044
T
T
MEDIOLANUM
ADVANCED INFO SERVICE
IT
TH
see much reason to get the engine-on-wing concept for the new
T
1045
1046T
FLUOR
CIELO
US
BR
into aviation. So in 1996 HondaJet.
S
1047 BOSTON SCIENTIFIC
1048OSHENGJING BANK
US
CN
Honda pulled the plug. In December 1997 Fujino pitched Hon-
T
1049
1050T
GUANGZHOU R&F
DOVER
CN
US Fujino and his heart- da’s board of directors. He showed them his
1051T NIELSEN HOLDINGS US
1052T ONEX CA broken colleagues were sketch, told them about the need he’d seen in
1053S DONGBU INSURANCE KO HARLEY-DAVIDSON
1054T CEMIG BR
Motorcycle monolith’s shares
shunted back to Tokyo America for small jets and how it could trans-
1054T HARLEY-DAVIDSON US
1056S PARTNERRE BU
are down nearly 25% as it
recalls 46,000 bikes.
and started looking for form mobility for customers there. It could
1057S HUISHANG BANK CN
1058S CHINA NATIONAL CHEMICAL CN new jobs within become the Honda Civic for the skies. Even-
1058 SHOST HOTELS & RESORTS US
1058 SSHANGHAI PHARMACEUTICALS CN Honda R&D. tually he won their approval to develop his
1061 SAVAGO TECHNOLOGIES SI
1061 TRAIFFEISEN BANK
INTERNATIONAL AS
But Fujino wouldn’t give up. During his concept.
1063
1064
S
S
AJINOMOTO
ALLEGHANY
JA
US
years in Mississippi he
1065
1066
S
S
CHINA COSCO HOLDINGS
SUNTORY BEVERAGE & FOOD
CN
JA
came to understand Amer- FOR THE NEXT THREE YEARS FUJINO WORKED
1067
1068
S
T
WR BERKLEY
GRUPO BIMBO
US
MX
ican culture and lifestyles, on his ideas. The location of the engines
S
1069
1070 T
ZIJIN MINING GROUP
IDEMITSU KOSAN
CN
JA
and recognized the need for on the wings was critical, but there were
T
1070
1072 T
UBI BANCA
AIR FRANCE-KLM
IT
FR small planes and region- other important aerodynamic features that
1073 TTRW AUTOMOTIVE HOLDINGS US GRUPO BIMBO al airports in a country as made the plane more efficient. One was the
1074 SCATAMARAN US
1075T ONEOK US The Mexican bakery power-
1076S FISERV US house still appears vast as the U.S. He was still wing itself. Specially shaped to reduce drag,
1076T SES LU hungry despite gobbling up
1078S W&W-WÜSTENROT GE a string of North American convinced there would be with surface irregularities—like rivets—re-
1079T SINGAPORE AIRLINES SI companies.
1080T TOKYU JA a market for a plane that duced to a minimum, the wing’s contour al-
1081T XL GROUP IR
1082T ARROW ELECTRONICS US was fast and fuel-efficient and didn’t sacrifice lows air to flow smoothly across it, a con-
1082OKLEPIERRE FR
1084T SGS SZ cabin or luggage space. He kept looking for a cept called natural laminar flow. Another im-
1084T UNI-PRESIDENT TA
1086S INTUIT US design breakthrough. portant design breakthrough was the plane’s
1087T BOSTON PROPERTIES US
1087
1089
T
T
T ROWE PRICE
RALPH LAUREN
US
US
It came in 1997 as Fujino long, sloping nose with bulges and curves in
1089T TECK RESOURCES CA was unpacking after moving to deliberate places: It, too, allows a ribbon of
GRUPO BIMBO: SUSANA GONZALEZ/BLOOMBERG

1091T NORSK HYDRO NO

S a new home in Japan. He spot- smooth-flowing air to hug the fuselage. By
RALPH LAUREN: DANIEL ACKER/BLOOMBERG

1092 COMMUNITY HEALTH SYS US

1093S DELTA ELECTRONICS
1094
1095
T
S
ELETROBRÁS
TURKISH AIRLINES
1096S INDUSTRIAL ALLIANCE
INSURANCE
1097T KYUSHU ELECTRIC POWER
1098T NOBLE GROUP
1099S MASCO
1100S KOTAK MAHINDRA BANK
1101S DR HORTON
1102 OCHINA GALAXY SECURITIES
1103S BS FINANCIAL GROUP
1104S SMC CORP.
1105T SJM HOLDINGS
1106S KINNEVIK
1107T DAITO TRUST CONSTRUCTION JA
1108S DR PEPPER SNAPPLE GROUP
1109S C.H. ROBINSON WORLDWIDE
1110S CHINA GEZHOUBA
1111S AU OPTRONICS
TA
BR
TU
ted a 1930s aeronautics text- cutting down on the drag that typically occurs
CA book by Ludwig Prandtl, the at high air speeds, these innovations provide
JA
HK
RALPH LAUREN German aeronautical engi- better aerodynamics without decreasing lift,
US The clothes are looking
IN great. The shares? Less neer whose pioneering anal- making the HondaJet more efficient.
US so, as a strong dol-
CN lar drags on the fash- ysis built the foundation for He genuinely felt that Honda was mak-
KO ion house’s hopes for
JA global growth. modern aerodynamics. As he ing important technology breakthroughs,
HK
SW leafed through the dusty pages, but because the project was still top-secret,
US
US
CN
TA 100 | FORBES MAY 25, 2015
 GLOBAL 2OOO
1112T NIPPON YUSEN JA
1113T ZIMMER HOLDINGS US
1114S CHIBA BANK JA
1115S FIRST REPUBLIC BANK US
1116S AMPHENOL US
1116S BRASKEM BR
1116S KERRY GROUP IR
1119T GENWORTH FINANCIAL US
he couldn’t talk about it, not even with his orders. In June 2007 the newly created sub- 1120 SCHINA FORTUNE
LAND DEVELOPMENT CN
family (his wife, a son and two daughters). sidiary, Honda Aircraft Co., broke ground on 1120
1122
T
T
MITSUBISHI MATERIALS
GENTING
JA
MA
Meanwhile, other companies were getting a $120 million world headquarters, R&D cen- 1123
1124
T
S
LEGRAND
AGL ENERGY
FR
AU
credit for their work on lightweight jets. ter and production line at 1125
1125
S
T
INFINEON TECHNOLOGIES
RSA INSURANCE GROUP
GE
UK
He craved outside validation for his ideas. the Greensboro airport. In 1127
1128
S
T
EASYJET
HINDALCO INDUSTRIES
UK
IN
S
“I don’t know how many times I wanted to September 2012 it added a 1128
1130 S
YANZHOU COAL MINING
WISCONSIN ENERGY
CN
US
1131S
quit,” he recalled. $20 million customer-ser- 1132 T
NXP SEMICONDUCTORS
FINANCIÈRE DE L’ODET
NE
FR
1133 SMOODY’S US
In October 2000 Honda allowed him to vice facility, bringing the 1134 TCOCA-COLA ENTERPRISES US
GANNETT 1134 SNITTO DENKO JA
establish a research facility at the Greens- total campus to more than Continued print declines 1136 TDOOSAN KO
threaten to choke green 1136 SGANNETT US
boro airport to build a prototype, which took 600,000 square feet on a shoots in digital. 1138 TATTIJARIWAFA BANK MO
1139 SCBRE GROUP US
another three years. Finally, in December 130-acre plot, with 1,300 1140 TSHIN KONG FINANCIAL TA
1140 TSUN ART RETAIL GROUP HK
2003, the HondaJet was ready for its maid- employees. Honda expects to build 40 to 50 1142 TUNIQA AS
1143 TBIDVEST GROUP SA
en flight. During its steering test the plane planes in the next 12 months, ramping up to 1144 SHENRY SCHEIN US
1145 SBANCA MPS IT
turned “as if a figure skater were making fig- 75 the following year. 1146 TVEDANTA RESOURCES UK
1147 SAMADEUS IT HOLDINGS SP
ure eights on the ice,” Fujino recalled in a “I’ve never seen a company investing as 1147
1147
S
S
EXPERIAN
SHENZHEN OVERSEAS
IR
CN
Honda case study. “I must admit I became aggressively as this,” said Vincent. Based 1150 T
1151T
LI & FUNG
ROCK-TENN
HK
US
rather emotional,” he wrote of the moment. on the size of the Greensboro manufactur- 1152 OORIENT SECURITIES
1153 SMOHAWK INDUSTRIES
CN
US
“It looked like it was moving under its own ing facility and the cost of tooling, “they’re 1154
1154
T
S
BOMBARDIER
SAPUTO
CA
CA
will. At last I felt as if my ‘daughter’ would signaling they intend to 1156
1157
T
S
NATIONAL BANK OF GREECE
SEIKO EPSON
GR
JA
S
become independent of me as she tried her have more jets. No one 1158
1158 T
ALEXION PHARMACEUTICALS
RED ELÉCTRICA
US
SP
T
wings for the first time.” gets into this industry 1160
1161T
HYUNDAI ENGINEERING
WESTERN UNION
KO
US
T
Despite the success—and two more years and has just one model.” 1162
1163 T
STOREBRAND
EL PUERTO DE LIVERPOOL
NO
MX
ALEXION 1164 TARCH CAPITAL GROUP BU
and undisclosed additional millions of dol- For now, at least, Fu- PHARMACEUTICALS 1164 SUNIVERSAL HEALTH US
1166 TBHARAT HEAVY ELECTRICALS IN
lars spent testing the aircraft—by 2005 jino has nothing to say Uber-pricey drug Soliris just 1166 TNEW YORK COMMUNITY US
hit $2 billion in sales, but 1168 TBRENNTAG GE
Honda had still not committed to building about Honda’s long-term as founder Leonard Bell 1169 TQUEST DIAGNOSTICS US
retires, investors fret about 1170 TSHAW COMMUNICATIONS CA
Fujino’s jet on a commercial scale. To stoke plans for aviation, other long-term prospects. 1171T STARWOOD HOTELS US
1172 SRENESAS ELECTRONICS JA
public interest and sway the board of direc- than pointing out with a 1173 SPOWER FINANCE IN
1174 SELECTROLUX GROUP SW
tors, he arranged for the HondaJet to make shy smile that the hangar doors at his North 1175 TTURKCELL TU
1176 TYAMATO HOLDINGS JA
its debut at AirVenture Oshkosh, a show put Carolina plant are almost twice the height of 1177
1178
S
S
SINO-OCEAN LAND HOLDINGS CN
INTERPUBLIC GROUP US
on by the Experimental Aircraft Associa- the 15-foot-high HondaJet’s tail. 1179 SDEUTSCHE ANNINGTON
IMMOBILIEN GE
T
tion that draws 500,000 visitors a year from Instead, he’d rather talk about the plane 1179
1181S
TINGYI HOLDING
ADVANCE AUTO PARTS
CN
US
S
more than 60 countries to tiny Wittman he’s just completed. Proudly poring over 1182
1182 T
AMERICAN FINANCIAL GROUP US
CA US
S
Regional Airport in Oshkosh, Wis. On every detail, it’s obvious it all spilled out 1182
1185 S
DUBAI ISLAMIC BANK
ORIENTAL LAND
AE
JA
1185 TRHB CAPITAL MA
July 28, 2005 a blue-and-white HondaJet of his own mind—the curvature of the 1187 SMASRAF AL RAYAN QA
1188 SSHINSEI BANK JA
swooped down from the sky and was imme- ceiling lights, the electronically controlled 1189 SRAYMOND JAMES FINANCIAL US
1189 SSOUTHWESTERN ENERGY US
diately swarmed by thousands of airplane dimming shades, the panel that drops 1191T DSM NE
1192 ONUTRECO NE
enthusiasts (one person gave him a $50,000 down from the bathroom door for priva- 1192 TTURK TELEKOM TU
1192 TWYNN RESORTS US
deposit). cy. Even the paint scheme is important 1195 OELECTRONIC ARTS US
1196 THANG LUNG GROUP HK
Armed with so much positive feedback, to Fujino, who calls it “my final ‘artwork’ 1197 TSTAPLES US
1198 TSISTEMA RU
Fujino again went to the Honda board with contribution.” 1199 SHOYA JA
1200 TCHINA RESOURCES ENTERPRISE HK
a proposal to commercialize the plane. After “Most business jets are white, with a 1200
1202
S
T
CINCINNATI FINANCIAL
RUSHYDRO
US
RU
several discussions the verdict was finally thin stripe. I wanted something different.” 1203
1204
S
S
MONDI
AGILE PROPERTY HOLDINGS
UK
HK
delivered in March 2006. Then CEO Takeo Standing next to his favorite—dark blue on 1205OSAMSUNG SDS
1206 SBBMG
KO
CN
Fukui spoke after several minutes of silence. a white background, with sil- 1207
1208
S
S
ZOETIS
HAINAN AIRLINES
US
CN
“He spoke as if he were convincing himself,” ver edges for vivid contrasts— 1209
1210
T
S
HANKYU HANSHIN HOLDINGS
MEAD JOHNSON NUTRITION
JA
US
1211T
recalled Fujino. “‘Honda is a mobility compa- he says his goal was to reflect 1212 S
SOJITZ
JYSKE BANK
JA
DE
T
GANNETT: DANIEL ACKER/BLOOMBERG

ny. We should pursue the future through the the movement of air flowing 1213
1214 T
OI
FMC TECHNOLOGIES
BR
US
1215 SRITE AID US
HondaJet.’ For a moment I could not even over the fuselage. “Airplane 1216 TDANGOTE CEMENT NI
1217 TPKN ORLEN PL
believe what I had just heard.” design is like a painting,” he 1218 SHIKVISION CN
DANGOTE 1218 ONIPPON PAINT JA
Honda started taking orders in October says. “While I am working on CEMENT 1220 TSTORA ENSO FI
1221 SWUHAN IRON & STEEL CN
2006 at the National Business Aviation As- it, I am already thinking about Amid Nigeria’s tur- 1222 SPERRIGO IR
moil, founder Aliko 1222 SVESTAS WIND SYSTEMS DE
sociation convention in Orlando, Fla. By the the colors I will use. And the Dangote remains 1224 SSTARWOOD PROPERTY TRUST US
Africa’s richest man. 1225 SSUN PHARMA INDUSTRIES IN
end of the convention it had more than 100 frame to display it.” F 1226 TAUTOLIV SW
1226 STAISEI JA
1228 TMETALURGICA GERDAU BR
1229 TJERONIMO MARTINS PO

MAY 25, 2015 FORBES | 101 CONTINUED PAGE 106

S UP T DOWN
O UNCHANGED O NEW

SHINING
A LIGHT
ON DOING
BUSINESS IN
LAS VEGAS
BY BETH ELLYN ROSE NTHAL
Known as a hot spot for world-class
entertainment, outstanding cuisine
and amazing nightlife, Vegas also
means business.
Angelo Varrone
Chairman and CEO
Exponation LLC
According to the
Fast Facts
Las Vegas Convention
and Visitors Authority
(LVCVA)…
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PROMOTION
Moving the Digital Signage
Expo to Las Vegas
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 com-
pany 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 what’s new on our show floor.
“As part of DSE’s 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 sig-
nature 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
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 opportu-
nities to do things they couldn’t do in other cities,”
Varrone points out. Exponation even produces a
weekly newsletter to keep attendees up to date on
what’s 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
Expo’s attendance increased by 25%—a significant
portion of which comprised international visitors. “Las
Vegas is very accessible from many worldwide desti-
nations. 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 DSE’s 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 world’s
commercial transactions.
The future of payments?
Surprise! It’s 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
2015 RANK

VISA RANK CHANGE

COMPANY
COUNTRY CODE
1230 SUNICHARM JA
1231 SHARBIN BANK CN
1232 TNETAPP US
1232 TSHIZUOKA BANK JA
T
cash machines. Visa had 60% operating profit 1234
1235 T
ESPIRITO SANTO FINANCIAL LU
ANNALY CAPITAL MANAGEMENT US
1235 SFIRST QUANTUM MINERALS CA
margins on revenues of $12.7 billion last year and 1237 SOLAM INTERNATIONAL SI
1237 TWM MORRISON SUPERMARKETS UK
cash flow of more than $7 billion (dwarfing capi- 1239 SAUTONATION US
T

S
1240 DIRECT LINE INSURANCE UK
tal expenditures of $500 million). Visa handled 1241 OGUOSEN SECURITIES CN
1242 TSHARP JA
100 billion purchases worth $6.8 tril- 1243 TBPI PH
1244 SMARKEL US
lion, according to The Nilson Report, 1245 TMOLSON COORS BREWING US
1246 SOMRON JA
which tracks the credit card indus- 1247 THINDUSTAN PETROLEUM IN
1248 TASAHI GLASS JA
try. That’s double the amount of rival 1249 SMANPOWER US
1250 STHAI BEVERAGE TH
ITTING INCONSPICUOUSLY MasterCard and 14 times American 1251
1252
S
T
PVH
BRAMBLES
US
AU
among the Pentagon contractors and trade as- Express. For perspective, Visa thinks 1253
1253
T
T
AREVA
UNITED UTILITIES
FR
UK
sociations in a western suburb of Washington, there are another $11 trillion in cash KEURIG
1255
1255
S
S
KEURIG GREEN MOUNTAIN
UC RUSAL
US
RU
D.C. is a low-slung building protected by land- and check transactions in the world GREEN 1257OCJ CORP.
1258OEVERBRIGHT SECURITIES
KO
CN
scaped berms and a fence topped by razor wire. each year that could go electronic. MOUNTAIN 1259 SGIVAUDAN SZ
Stream of new 1259 TJM SMUCKER US
T
The exterior walls are a patchwork of whites, And Visa’s transaction volume has ventures have
revenues up
1259
1262 T
PLDT
LIBERTY MEDIA
PH
US
T
grays and greens to confuse passersby trying to been growing steadily at 10% a year 250% over the
last four years.
1263 HYUNDAI GLOVIS
1264ODEUTSCHE WOHNEN
KO
GE
1265 SBELLE INTERNATIONAL
judge its size from a distance. A 24-foot-deep since the IPO. HOLDINGS HK
1266 TWULIANGYE YIBIN CN
moat provides a last line of defense against any- Nonetheless, there are threats. Retailers have 1267 TBROWN-FORMAN US
1268 TGOLDCORP CA
body trying to crash a vehicle through its walls. won billions of dollars in antitrust suits accus- 1268 SUNITED RENTALS US
1270 TBANKINTER SP
But while this fortress could easily pass as ing the company of helping banks keep fees— 1271 TCLOROX US
1272 TCP ALL TH
an outpost of some shadowy three-letter spy which can clip as much as 2.75% off a mer- 1272
1274
S
T
NSK
LIXIL GROUP
JA
JA
agency, it’s actually home to something far chant’s revenue—too high. Customers love the 1275
1276
S
S
TDK
SALESFORCE.COM
JA
US
more mundane—and far more powerful. This is easy credit but loathe interest rates that can top 1277
1278
T
S
ARAB BANK
BALL
JO
US
the nerve center of Visa, the global credit card 20%. West Coast venture capitalists see Visa as 1279
1280
T
S
ANALOG DEVICES
GRIFOLS
US
SP
company. Walk through a biometric securi- an oligopolistic dinosaur and are pouring hun- 1281
1282
T
T
TERNA
MOL HUNGARIAN OIL
IT
HU
T
ty scanner into its data center—as I did recent- dreds of millions of dollars into rivals that use 1283
1284 S
SEMBCORP INDUSTRIES
EDWARDS LIFESCIENCES
SI
US
S
ly—through a room dominated by huge video Bitcoin. Meanwhile, banks, which collect the 1285
1285 S
ITV
SCANA
UK
US
1287 TBANK LEUMI IS
screens and past ranks of EMC data storage bulk of the fees from merchants, are warily eye- 1287 THONG LEONG FINANCIAL MA
1289 SSAVOLA GROUP SU
units holding petabytes of information ready ing Visa’s efforts to bypass them and forge di- 1290 SSAUDI ARABIAN MINING SU
1291 TANTOFAGASTA UK
for instant recall, and you’ll find a single IBM rect relationships with retailers by offering one- 1292 SROCKWELL COLLINS US
1293 SCONCHO RESOURCES US
Z-class mainframe, like the black monolith in click Internet transactions and providing data 1294 TMELCO CROWN ENTERTAINMENT HK
1294 STOKYO ELECTRON JA
Stanley Kubrick’s science-fiction classic 2001, on consumer behavior that 1296 SLABCORP US
1297 SMETROPOLITAN BANK & TRUST PH
quietly crunching up to 100 billion computa- only Visa possesses. 1298 SCHINA INTERNATIONAL MARINE CN
1299 TNEWS CORP. US
tions every second. Almost every time some- None of which seems to 1300 SPAYCHEX US
1301 SCERNER US
body swipes a Visa card anywhere in the world, faze Visa’s chief executive, 1302OHANERGY THIN FILM
POWER GROUP CN
the transaction flows through here or a sis- Charlie Scharf. In time, he 1302
1304
T
T
KGHM POLSKA MIEDZ
BCI-BANCO CREDITO
PL
CH
T
ter facility in Colorado. The company instantly says, would-be Visa disrup- HANERGY THIN
1305
1306 T
FIRST FINANCIAL HOLDING
CELANESE
TA
US

checks 500 variables, from the customer’s loca- tors all discover—just as In- FILM POWER 1307 TGJENSIDIGE FORSIKRING NO
HANERGY: ROBERT NICKELSBERG/GETTY IMAGES; TENET: SUSAN GOLDMAN/BLOOMBERG

1308 SOBAYASHI JA
GROUP S
tion to his spending habits to the location of the ternet upstarts PayPal, Square With shares up sixfold in
1309
1310 S
NETEASE
RURAL ELECTRIFICATION
CN
IN
a year, is this a solar bub- 1311T SAUDI ARABIAN FERTILIZERS SU
merchant, and spits out a thumbs-up or -down and Uber did—that it is simply ble in the making? 1312 TPRADA IT
1313 TCOLRUYT BE
on whether to allow the charge to go through. easier and more economical 1314 SHAMMERSON PLC. UK
1314 ORESTAURANT BRANDS
It’s the sort of centralized, Big Iron process- to work with his leviathan than fight it. “They INTERNATIONAL CA
1316 TMICHAEL KORS HOLDINGS HK
ing that Silicon Valley was supposed to obliter- don’t do what we do,” says Scharf, 50, who was 1317
1318
S
T
DARDEN RESTAURANTS
CHUGOKU ELECTRIC POWER
US
JA
ate years ago with peer-to-peer networks and a longtime lieutenant to JPMorgan Chase Chief 1318
1320
T
T
MISC
INGRAM MICRO
MA
US
cheap Internet-connected devices. Jamie Dimon and took charge at Visa in 2012. 1321
1321
S
T
ROPER INDUSTRIES
TRANSOCEAN
US
SZ
Yet Visa endures. And grows. The credit pro- “They don’t have the network 1323
1324
S
T
HUA NAN FINANCIAL TA
GLOBAL LOGISTIC PROPERTIES SI
cessing company, which started 57 years ago as we have.” 1325
1326
S
T
JIANGSU YANGHE BREWERY
EMPIRE
CN
CA
T
a nonprofit association of banks, went public on He’s already rushing to em- 1327
1328 T
ROSTELECOM
ATOS
RU
FR

the eve of the financial crisis in 2008 and sailed brace what comes next: pro- 1329OLAM RESEARCH
1330 SWYNDHAM WORLDWIDE
US
US
TENET T
through it with a 390% total shareholder return viding the back end for smart- HEALTHCARE
1331
1331 S
AMBANK GROUP
INTU PROPERTIES PLC.
MA
UK
1333 TKINTETSU JA
over the past six years, landing as No. 263 on phone-based payment systems Paying patients and 1333 SYUANTA FINANCIAL HOLDING TA
admissions up, bad 1335 SHYUNDAI MARINE & FIRE KO
FORBES’ 2015 Global 2000 list of the world’s such as Apple Pay and similar debt from former- 1335 STENET HEALTHCARE US
ly uninsured down. 1337 SWESTERN REFINING US
largest companies. setups for Samsung and other ObamaCare is work- 1338 TDSME KO
ing for somebody! 1339 SCHINA HONGQIAO GROUP CN
It is also one of the planet’s most prodigious mobile devices. Scharf’s techni- 1339 TPETRONAS CHEMICALS MA
1341 SCHINA MERCHANTS HOLDINGS HK
1341 TCOSMO OIL JA
1343 SFORTIS (CANADA) CA

106 | FORBES MAY 25, 2015

S UP T DOWN
O UNCHANGED O NEW
 GLOBAL 2OOO
FORBES
1344 SAYALA CORP. PH

VISA 1344
1344
T
S
EISAI
INNER MONGOLIA
JA

BAOTOU STEEL CN
1347 SCHECK POINT SOFTWARE IS
1348 SINOTERA MEMORIES TA
1349 TABENGOA SP
1349 SSL GREEN REALTY US
cal team spent more than a year working with One in Chicago, where the two of them became 1351
1352
S
S
ANTERO RESOURCES
NÜRNBERGER
US
GE
Apple before the launch of Apple Pay last Oc- closer (Scharf and his boss even shared a gui- 1353
1354
S
S
MONSTER BEVERAGE
MASHREQ BANK
US
AE
tober. The plan: Grab billions of dollars more tar instructor). He was named chief financial 1355
1356
T
T
SEARS HOLDINGS
AEROPORTS DE PARIS
US
FR
in fees each year by making Visa the payment officer at the age of 35 and then joined JPMor- 1357OSKYWORKS SOLUTIONS
1358 TCHICAGO BRIDGE & IRON
US
NE
method of choice for everything—right down to gan Chase as head of retail financial services, 1359
1360
S
S
OLYMPUS
AAREAL BANK
JA
GE
S
$1 hamburgers at McDonald’s and three-block including mortgages, when it bought Bank One 1361
1362 S
SNC-LAVALIN GROUP
CRESCENT POINT ENERGY
CA
CA
T
taxi rides in Singapore—with the ultimate goal in 2004. Scharf guided JPMorgan’s retail and 1363
1364 S
COMPUTER SCIENCES
ANGANG STEEL
US
CN
1365OCHEIL INDUSTRIES KO
of replacing cash itself. mortgage business through the financial cri- 1365 SFOOT LOCKER US
1367 SE-TRADE FINANCIAL US
“It took us 50 years to get to 36 million mer- sis—the big bank took federal bailout funds only 1368 TPIRELLI & C. IT
1369 TWANT WANT CHINA CN
chants globally,” says James McCarthy, execu- “because we were asked,” Dimon later said—but 1370 SBANK OF CHONGQING CN
1371 SNIPPON EXPRESS JA
tive vice president in charge of innovation and a quit that job in 2011 to run JPMorgan’s $10 bil- 1372 SADOBE SYSTEMS US
1373 TPIRAEUS BANK GR
former IBM executive who joined Visa in 1999. lion private equity arm in what some took as a 1374 SCHINA LONGYUAN POWER CN
1375 TSMITH & NEPHEW UK
“Now,” he says, holding his iPhone in the air, demotion. Dimon says Scharf came to him look- 1376 TAGILENT TECHNOLOGIES US
1376 SSINOPAC FINANCIAL TA
“we’ve got 7 billion of these.” ing for a change after years in the 1378 TIHI JA
1379 SNVIDIA US
same retail job. “What else could I 1380OSEKISUI CHEMICAL
1381 TREGENERON PHARMACEUTICALS
JA
US
SCHARF HAS BEEN IMMERSED IN CAPITAL MAR- do?” says Dimon, now JPMorgan 1382
1383
S
T
ACCOR
STEEL AUTHORITY OF INDIA
FR
IN
kets since he was a teenager. He interned at Chase’s chairman and CEO. 1384
1384
S
S
CHINA MENGNIU DAIRY
FUKUOKA FINANCIAL GROUP
CN
JA
his father’s offices at Shearson Lehman Bros. He described his longtime 1386
1387
T
T
ZIONS BANCORP
LATAM AIRLINES
US
CH
in New York from the age of 13 and landed a lieutenant as “very diligent, very 1388OKERRY PROPERTIES LTD.
1389 TICA GRUPPEN
HK
SW
job as Jamie Dimon’s personal assistant dur- bright, very honest,” who has “an NINTENDO 1390 TKOREAN AIR KO
1391 SCAPITA UK
Can Mario final- S
ing his senior year at Johns Hopkins. Instead of ability to handle lots of complex ly go mobile? Bet-
1392
1392 T
AMERICAN WATER WORKS
TORCHMARK
US
US
ter hope so after T
leaving for Wall Street after graduation in 1987 things, relate to lots of people.” three consecutive
1394
1395 T
NINTENDO
BUNZL
JA
UK
years of losses. 1396 TDAI NIPPON PRINTING JA
he joined Dimon at a Baltimore lending outfit All of which is proving useful in 1396 THOLLYFRONTIER US
1398 SKT&G KO
known as Commercial Credit, run by an ambi- Visa’s C-suite. The company has roots in Bank- 1399 TAMERICAN CAPITAL AGENCY US
1400 SACTELION SZ
tious banker named Sanford I. “Sandy” Weill. Americard, which San Francisco-based Bank 1401 TKAJIMA JA
1402 TS-OIL KO
For the next two decades he accompanied Weill of America rolled out in 1958 as the first cred- 1403 TAXIS CAPITAL HOLDINGS BU
1404OJB FINANCIAL GROUP KO
and Dimon on a journey through the evolving it card available to middle-class consumers and 1405 TMEDIPAL HOLDINGS JA
1406 TGKN UK
financial marketplace as Weill bought Shearson, smaller merchants who lacked their own pri- 1407 SBANCO OCCIDENTAL VZ
1407OEXPEDIA US
Salomon Smith Barney, Travelers insurance and vate charge cards. 1409 SWOLTERS KLUWER NE
1410 SARM HOLDINGS UK
ultimately, in 1998, Citigroup. Originally a simple paper card with a $300 1411T
1412 S
METRO INC.
BRILLIANCE CHINA
CA

After Dimon and Weill fell out in the late credit limit, BankAmericard was vulnerable to 1412 S
AUTOMOTIVE HOLDINGS
COMPAL ELECTRONICS
CN
TA
S
1990s, in 2000 Scharf followed Dimon to Bank fraud. Merchants literally flipped through tele- 1412
1415S
SAUDI HOLLANDI BANK
CHIPOTLE MEXICAN GRILL
SU
US
1416T CPFL ENERGIA BR
1417S TAIWAN COOPERATIVE
FINANCIAL TA
1418 OTONENGENERAL SEKIYU JA

THE NEXT WAVE ISSUING BANK

1419
1419
1421
S
S
T
CROWN HOLDINGS
GRUPO ELEKTRA
AOZORA BANK
US
MX
JA
THE “TOKENIZATION” TECHNOLOGY IN APPLE PAY ALLOWS CONSUMERS TO 1422S SIGMA-ALDRICH US
BUY GOODS WITH A SIMPLE TAP OF THE CELLPHONE AT A STORE TERMINAL. S
DANIEL HERTZBERG FOR FORBES

1423 TAQA AE
1424S QATAR ISLAMIC BANK QA
1425T COMMERCIAL BANK OF QATAR QA

1. Customer’s phone verifies identity with a 3. Visa swaps the token for the card- 1426
1427
T
T
OJI HOLDINGS
INDUSTRIVARDEN
JA
SW
thumbprint or facial recognition, and then a holder’s actual 16-digit number and 1428T REXEL FR
1428T TOPPAN PRINTING JA
“secure element” or tamper-proof chip inside analyzes up to 500 variables before 1430S WHITBREAD UK
transmits a 16-digit token and unique cryptogram authorizing or rejecting the charge 1431T AHLI UNITED BANK BN
1432T UNION BANK OF INDIA IN
to authorize the charge. It sends the information within milliseconds. 1433T BANCO DAVIVIENDA CO
1434S ELECTRIC POWER DEVELOPMENT JA
wirelessly to the merchant’s point-of-sale terminal. 1435 OWESTFIELD AU
1436S REMGRO SA
1437T ALPHA BANK GR
1438OCENTENE US
1439T BANCO COMERCIAL PORTUGUES PO
1440S GEBERIT SZ
1441T MAXIS MA
? ? 1442
1443
S
S
HANESBRANDS
ASSURED GUARANTY
US
BU
1444 SBENDIGO & ADELAIDE BANK AU
1445 SSIKA SZ
1446 TGRUPO CARSO MX
1447 TARAMARK US
T
2. The POS sends the 4. The bank that issued the
1447 TRAVIS PERKINS UK
1449 TWÄRTSILÄ FI
1450OFOUNDER SECURITIES CN
token and cryptogram to card to the customer approves 1451 TCOACH US
the merchant’s acquiring payment and sends money to 1451 TDASSAULT AVIATION FR
1453 TILIAD FR
bank and on to the Visa the acquiring bank via Visa’s 1454 TCHAROEN POKPHAND FOODS TH
network for verification. settlement and clearing system. 1455 SASPEN PHARMACARE HOLDINGS SA
1455OLARGAN PRECISION TA
1457 TBANCO POPOLARE IT
1457 SCHANG HWA BANK TA
ACQUIRING BANK 1459 TAMETEK US
1460 SJARDEN US

108 | FORBES MAY 25, 2015

S UP T DOWN
O UNCHANGED O NEW
 phone-book-size volumes to check the valid-
ity of card numbers. Bank of America spun
out what became Visa in 1970, and three years
later Visa unveiled the first electronic autho-
SEARS rization system, called BASE I. It followed
HOLDINGS
CEO Eddie Lampert with BASE II in 1974, an electronic system for
spins real estate into
REIT as retailer’s col- clearing and settling transactions among the
lapse continues. How
many more tricks banks that issue cards to consumers and “ac-
does he have left?
quiring banks,” which represent merchants.
Now Visa sits at the center of a global network of more
SEARS: AMANDA GORDON/
than 1,500 banks linked by 1.5 million miles of secure fi-
ber-optic lines, serving as a sort of intelligent switch for
BLOOMBERG
deciding whether to move money to pay for each transac-
tion. It also scouts for fraud and helps settle disputes over
charges. Visa doesn’t 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.
WARTSILA
At the heart of the system is that
Finnish enginemaker sees demand annoying-to-type 16-digit number
fall due to lower prices for crude oil.
embossed on the plastic bulging
Fast. Simple. Powerful. Try it free at gotomeeting.com.
© 2015 Citrix Systems, Inc. All rights reserved.
your wallet. When a customer swipes a card or cellphone
at a merchant’s point-of-sale terminal, that information
is transported to one of Visa’s data centers. Within milli-
seconds its computers use a constantly evolving set of al-
gorithms to determine whether the purchase fits the cus-
tomer’s buying profile—or whether it’s likely to be fraudu-
lent or exceed the bank’s credit limit.
BUT THERE’S A SOMEWHAT FATAL FLAW TO ALL OF THIS,
one Scharf knew he’d have to contend with when he
joined the firm looking to expand more rapidly into mo-
bile commerce and the multitrillion-dollar cash economy.
With access to a credit card number, plus a few other eas-
ily obtainable details, fraudsters gain full control of an ac-
count’s purchasing power and can encode magnetic strips
on blank plastic cards (Amazon.com will sell you a mag-
netic card reader/writer for $17). Worldwide, credit card
fraud is estimated to have topped $14 billion last year, ac-
cording to The Nilson Report, with banks and merchants
bearing most of the cost.
To truly protect accounts, you need to keep those 16-
digit numbers private, restricting access to those within
Visa’s secure network. There are existing solutions: Eu-
Because
weekend warrior
 GLOBAL 2OOO
FORBES
1461 SHENGAN INTERNATIONAL

VISA 1462 T
GROUP
STOCKLAND AUSTRALIA
CN
AU
1463 SJTEKT JA
1464 SABU DHABI ISLAMIC BANK AE
1464 TCAESARS ENTERTAINMENT US
1466 SMEIJI HOLDINGS JA
1466 TSTRABAG AS
ropean card issuers have used difficult-to-copy including 1,000 in the U.S., to cre- 1468
1468
S
T
AGL RESOURCES
PENTAIR
US
SZ
microchips and personal identification numbers ate software and tools for online 1470
1471
T
T
NAVER
SHOPRITE HOLDINGS
KO
SA
to protect transactions for years, but U.S. mer- and mobile purchases this year, 1472
1472
T
T
XILINX
ZODIAC AEROSPACE
US
FR
chants have resisted paying for the setup. on top of the 6,000 employees 1474
1474
T
T
INTUITIVE SURGICAL
SHIMIZU
US
JA
Systems like Apple Pay, which operate with he now oversees. He also over- 1476
1477
S
S
CATTOLICA ASSICURAZIONI
NETFLIX
IT
US
T
software-based encryption known as “tokeniza- sees the once unthinkable pro- 1478
1479 S
GEA GROUP
FAR EASTERN NEW CENTURY
GE
TA
T
tion,” promise an alternative, one with more se- cess of opening up Visa’s network 1480
1481 T
DELEK GROUP
MITSUBISHI UFJ LEASE
IS
JA
1482 TENKA TU
curity yet without the complication of punch- to outside developers working NETFLIX 1483 TNMDC IN
1484 SUNION NATIONAL BANK AE
ing a PIN into a keyboard. Instead of using the on the next generation of mobile Netflix hits 62 million
subscribers thanks 1485 TPETRONAS GAS MA
1486 SSMURFIT KAPPA GROUP IR
customer’s actual 16-digit credit card num- apps. The company has already to slew of original
content.
1487 SWESTLAKE CHEMICAL US
1488 TEQT US
ber, a phone equipped with Apple Pay trans- released a set of application pro- 1489 TDEXIA BE
1490OBARRATT DEVELOPMENTS UK
mits a dummy number, a software “token,” as gram interfaces, or APIs, to simplify transactions 1491 TCOLOPLAST DE
1492 THEXAGON SW
it’s known, which alerts the computer terminal and speed the adoption of Visa Checkout, an en- 1493 SILLUMINA US
1494 TOTP BANK HU
at the retailer’s checkout counter to request an- crypted, standardized version of Amazon’s one- 1495 SALINMA BANK SU
1496 TMCGRAW-HILL COS. US
other vital piece of information from a chip in click payment system for websites. 1497
1498
S
T
SHIMANO
ZENITH BANK
JA
NI
the phone: a cryptogram, or a long string of ran- “We’re telling [developers], ‘Please dream, 1499
1500
T
T
QANTAS AIRWAYS
US STEEL
AU
US
domly generated numbers, that only Visa’s com- please build new applications,’ ” says Taneja. 1501 OSOCIEDADES BOLIVAR
1502 SFRANSHION
CO

puters can verify. Transactions can be further Scharf clearly recognizes the potential threat 1503 T
PROPERTIES (CHINA)
CITY DEVELOPMENTS
HK
SI
1503 TSAMSUNG HEAVY INDUSTRIES KO
protected by biometric security like thumbprint from new electronic payment systems, most 1505 SNEW HOPE LIUHE CN
1506 SALASKA AIR GROUP US
scanners and even facial recogni- famously Bitcoin, which re- 1507OTRANSURBAN GROUP AU
1508OOLEO E GAS PARTICIPACOES BR
tion. If a hacker somehow cloned places Visa’s sprawling comput-
a customer’s phone, Visa’s com-
HOW WE BUY er network with a single registry
1509OSHANGHAI COMMERCIAL

1510 T
& SAVINGS BANK
CHINA LIFE INSURANCE
TA

CREDIT CARDS HAVE ALREADY (TAIWAN) TA

puters would detect that it was OUTSTRIPPED ALL FORMS OF maintained by many computers, 1510
1512
S
S
E.SUN FINANCIAL
COMMERCIAL
TA

PAYMENT IN THE U.S.—EVEN CASH. INTERNATIONAL BANK EG

being used in two places at once where payments are transferred 1512 OIDEA CELLULAR IN
1514 TAMBAC FINANCIAL GROUP US
and shut down the account. $4.11 2013 from one account to another 1515 TNESTE OIL FI
2018 1516 TALFRESA HOLDINGS JA
Coupling that kind of secu- with a simple journal entry. No 1517 SPANDORA DE
$3.14 1518 TSHOWA SHELL SEKIYU JA
rity with the ubiquity of mobile ($TRIL)
one owns Bitcoin; it’s just a plat- 1519 SNOVOZYMES DE
$2.49 1520 STRACTOR SUPPLY US
phones could allow Visa to attract $2.11 $2.17 form created by an anonymous 1521 TMATTEL US
1522 TISETAN MITSUKOSHI HOLDINGS JA
millions more customers around $1.56 coding genius (or possibly a 1523 SSIGNET JEWELERS BU
$1.35 1524 TSHANXI TAIGANG STAINLESS CN
the globe and billions more trans- $1.03 $1.05 group of several geniuses) work- 1525 TIDBI BANK IN
1525OJG SUMMIT HOLDINGS PH
actions—plus the fees. For a $0.57 ing under the name “Satoshi 1527
1528
T
S
KINGDOM HOLDING
HOKUHOKU FINANCIAL GROUP
SU
JA
glimpse of where this leads, look Nakamoto.” Venture capital- 1528
1530
S
T
LIG INSURANCE
FONCIÈRE DES RÉGIONS
KO
FR
Cash Checks Credit Debit Electronic
at what happened when Visa low- Cards Cards Payments ists, excited by the buzz around 1530
1532
T
T
SEVERSTAL
E-MART
RU
KO
ered its fees and eliminated sig- SOURCE: THE NILSON REPORT.
the new currency, have poured 1533OCHIMERA INVESTMENT
1534 SCORPBANCA
US
CH
natures for fast-food and many other purchases more than $300 million into businesses that en- 1535
1536
T
S
YAMAGUCHI FINANCIAL
WORLD FUEL SERVICES
JA
US
T
under $25 (who steals a hamburger, anyway?). able Bitcoin transactions or use its underlying 1537
1538 T
PUBLIC POWER
ACCIONA
GR
SP
S
McDonald’s quickly became the largest merchant currency. “I don’t stay awake at night worry- 1539
1540 S
AVIS BUDGET GROUP
CHENIERE ENERGY
US
US
T
by number of transactions on the Visa network. ing about Bitcoin,” says Scharf, “but I’m also not 1541
1542 T
TERNIUM
PGN
LU
ID
1543 TNEWELL RUBBERMAID US
“Tokenization is the enabler,” says Scharf, dismissive of it.” 1544 TNIPPON PAPER INDUSTRIES JA
1545 TMITSUI CHEMICALS JA
who demanded weekly updates from his team Under Scharf, Visa is experimenting with 1546 SBANCA POPOLARE DI MILANO IT
1547 TPEMBINA PIPELINE CA
during the yearlong process of building Apple alternative payment sys- 1548 SJB HUNT TRANSPORT US
1548 TTAIWAN MOBILE TA
Pay. “Whether they’re big tickets or small tick- tems. It was an early inves- 1550 TDASSAULT SYSTEMES FR
1551 OOFFSHORE OIL ENGINEERING CN
ets, we like it all.” tor in Square, which allows 1552 TFAMILY DOLLAR STORES US
1553 TOIL & GAS DEVELOPMENT PK
small merchants to process 1554 SALMARAI SU
1555 TFASTENAL US
SCHARF IS A TECHNOLOGY TRUE BELIEVER. card transactions on their cell- 1556
1557
S
T
EXPEDITORS INTERNATIONAL
ARCA CONTINENTAL
US
MX
He joined Microsoft’s board last year, and he’s phones. Visa also reportedly FAMILY DOLLAR 1557 TPULTEGROUP US
STORES 1559 SIOI GROUP MA
bingeing on talent like Rajat Taneja, 50, who put a few million dollars into An $8.5 billion takeover
1560
1561
S
S
EZDAN HOLDING GROUP
BURBERRY GROUP
QA
UK
by smaller rival Dollar Tree
ROGELIO V. SOLIS/AP (BELOW)

once ran Microsoft’s e-commerce platform. LoopPay, which developed an expected to close in May.
1562
1563
S
S
BANK AUDI
DIA
LE
SP
Scharf recruited Taneja away from Electronic ingenious method for gener- 1564 SGUANGZHOU AUTOMOBILE
GROUP CO. LTD. CN
1565 TOLD REPUBLIC INTERNATIONAL US
Arts in 2013 to run Visa’s sprawling technology ating a wireless version of a credit card’s mag- 1566 TALTERA US
1567 SKANSAS CITY SOUTHERN US
division. Working out of Visa’s industrial-chic of- netic strip. Within six months Visa’s investment 1568OEFG EUROBANK ERGASIAS GR
1568 TSANY HEAVY INDUSTRY CN
fices overlooking San Francisco Bay, Taneja will doubled in value, as Samsung scooped up Loop- 1570 TLOTTE CHEMICAL KO
1570 TSINOPEC ENGINEERING (GROUP) CN
hire 2,000 software engineers and developers, Pay to install in its phones. 1572 TCOCA-COLA HBC SZ
1573 O3I GROUP UK
1574 OKIMCO REALTY US
1575 TWILLIS GROUP HOLDINGS UK

110 | FORBES MAY 25, 2015

S UP T DOWN
O UNCHANGED O NEW
1576 SBANK MUSCAT OM 1628OSEAT-PAGINE GIALLE IT
1577OTIFFANY & CO. US 1628TCCR BR
1578 SHUNTSMAN US 1630SEAST WEST BANCORP US
1578 SRANGE RESOURCES US 1631SLKQ US
1580OLUPIN IN 1631TYAMADA DENKI JA
1580ONINGBO PORT CN 1633TWENDEL FR
1582 TMIZRAHI TEFAHOT BANK IS 1634THIROSHIMA BANK JA
1583OUNITED INTERNET GE 1635OMALLINCKRODT IR
1584 TX5 RETAIL GROUP RU 1635TBAJAJ AUTO IN Now Visa is working with automakers to embed tokenization into cars,
1585 TKAWASAKI KISEN KAISHA JA 1635SCHINA NATIONAL MATERIALS CN
1586OAMOREPACIFIC KO 1635OSAMSUNG SDI KO turning them, in essence, into rolling credit cards. Consumers will be able
1587 TBCV GROUP SZ 1635TSYNDICATE BANK IN
1587 SHARRIS US 1640SSVB FINANCIAL GROUP US to query their onboard navigation system about the nearest pizza joint,
1589 TYTL MA 1641TPETRO RABIGH SU
1590OREXAM
1590OSAMSUNG CARD
UK
KO
1641
1643
T
T
UCB
SINO LAND
BE
HK
order a large pie with bacon and onions, and pay for it in the drive-through
1592OBANCO CONTINENTAL
1592 TINTER RAO
PE
RU
1644
1644
T
T
GUNMA BANK
HELMERICH & PAYNE
JA
US
via a secure Bluetooth connection linked to the car’s unique vehicle identi-
1594
1595
S
T
CHUGOKU BANK
FBN HOLDINGS
JA
NI
1644OSBM OFFSHORE
1647SMERCURIES & ASSOCIATES
NE
TA
fication number. Need a fill-up? Pull up to the pump, put the nozzle in your
1595OMOSCOW EXCHANGE
1597 TLINEAR TECHNOLOGY
RU
US
1648SCHINESE ESTATES
1648OINDUSTRIAL SECURITIES
HK
CN
car and let the software pay.
1597ONORWEGIAN CRUISE LINE 1650TJACOBS ENGINEERING US
HOLDINGS US 1651TEVRAZ GROUP UK
1599 STECH DATA US 1652OTRINITY INDUSTRIES US
1600 THRG GROUP US 1653TSUMITOMO RUBBER JA
THERE’S ANOTHER HUGE OPPORTUNITY TO ALL THIS TECHNOLOGY, ONE THE
1601 TJOYO BANK JA S
1602 TCIMAREX ENERGY US
1654
1655T
PROSIEBENSAT1 MEDIA
GS HOLDINGS
GE
KO company is only starting to leverage: personal data. Every time you swipe
1603 SAFFILIATED MANAGERS GROUP US 1656OHOSPIRA US
1604 SMERITZ FINANCIAL GROUP KO 1657THYOSUNG KO your card, Visa collects a tranche of informa-
1605 STWITTER US
1606 TBANCA POPOLARE DELL’EMILIA IT
1658TGREENTOWN CHINA HOLDINGS
1658OMBIA
CN
US
VERTEX tion deep enough to drown an NSA agent:
1607 STOSOH JA 1660SVERTEX PHARMACEUTICALS US PHARMACEUTICALS
1608 SHALYK BANK KZ 1661SSIGNATURE BANK US Shares have more than spending habits, travel history and, with the
1608 TNISHI-NIPPON CITY BANK JA 1662TMINMETALS DEVELOPMENT CN doubled on outlook for
1610 OH&R BLOCK US 1663TCENTRAL BANK OF INDIA IN powerful new cystic fibrosis addition of GPS-enabled devices, exact loca-
1611 OAECOM TECHNOLOGY US 1663ORHOEN-KLINIKUM GE drug Kalydeco.
1611 OGRAHAM HOLDINGS
1613 TSUNAC CHINA HOLDINGS
US
CN
1663TZAIN KU tions. The company knows more about the
1666SNASDAQ OMX GROUP US
1614
1614
T
T
DONGFANG ELECTRIC
SUZUKEN
CN
JA
1667TNOMOS BANK RU habits, hobbies, tastes and trends of the world’s
1668SKAISA GROUP HOLDINGS CN
1616
1617
T
T
77 BANK
WISTRON
JA
TA
1669TAGCO US consumers than any organization on earth. “Visa has the most data—it’s the
1669TSK NETWORKS KO
1618 ORISESUN REAL ESTATE
DEVELOPMENT CO. CN
1671
1672
S
S
RMB HOLDINGS
SAUDI INVESTMENT BANK
SA
SU
single-biggest advantage they have,” says Matt Harris, a managing director
1618 OUNITED AIRCRAFT
CORP. RU 1673SSEALED AIR
1674OFLEETCOR TECHNOLOGIES
US
US
with Bain Ventures who invests in alternative payment systems.
1620 TFCC SP
1620 SLINKEDIN US 1675
1676
S
T
SHISEIDO
BLOM BANK
JA
LE
Lately it has been tapping that vast trove of information to help mem-
1620 TNORTH PACIFIC BANK JA
1623OAMERICAN REALTY CAPITAL
PROPERTIES US
1676
1678
T
S
IYO BANK
BAYWA
JA
GE
ber merchants. In 2011 Visa and clothing retailer Gap announced Mo-
1623
1625
T
T
HACHIJUNI BANK
HANKOOK TIRE
JA
KO
1679TGUDANG GARAM
1680OGOODMAN GROUP
ID
AU
bile 4 U, for example, a service that allows Gap to fire text messages to
T
1625
1627
T
T
MMI HOLDINGS
BANK OF KYOTO
SA
JA
1680 ISRAEL DISCOUNT BANK
1682OOSISKO GOLD ROYALTIES
IS
CA
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
1683 TCSN BR

VISA 1684 SPENSKE AUTOMOTIVE

1685ONEWFIELD EXPLORATION
US
US
1686 TLIBERBANK SP
1687 SLINDT & SPRUNGLI SZ
1688 TJGC JA
1689ODIXONS CARPHONE UK
1690 TBANCO BPI PO
Visa has all the data necessary to tell a retail- sion of its processing network for the bank 1691 SNIPPON STEEL TRADING JA
1692OAXEL SPRINGER GE
er that a loyal, big-spending customer is nearby under a ten-year contract that reportedly in- 1692 TFLOWSERVE US
1694 SCJ CHEILJEDANG KO
and possibly open to a discount offer, a poten- cludes lower fees. Scharf folded in this con- 1694 TGECINA FR
1694 SPBF ENERGY US
tial gold mine for marketers—and potentially test against his former boss, 1697 TJUROKU BANK
1698OESSEX PROPERTY TRUST
JA
US
transformative for the way goods are market- Dimon. Neither would com- 1699
1700
S
T
POLARIS INDUSTRIES
TESLA MOTORS
US
US
ed. Of course, location-based marketing might ment on the deal. Pressed to 1701
1702
T
T
ASHIKAGA HOLDINGS
CHINA COMMUNICATIONS
JA

strike some people as creepy, so to assuage discuss Visa’s relationship SERVICES CN

1703OCHINA DEVELOPMENT FINANCIAL TA
1703OENDO IR
concerns Scharf says Visa will allow such pro- with merchants and banks, 1705 TSCRIPPS NETWORKS
INTERACTIVE US
grams only on an opt-in basis. Scharf says simply: “We un- TESLA MOTORS 1706 TAIRPORTS OF THAILAND TH
1707 TALFA LAVAL SW
New battery plans have
Visa’s urge to help retailers isn’t totally al- derstand who our clients are.” investors salivating. 1707OCATCHER TECHNOLOGY TA
1709 SJABIL CIRCUIT US
truistic: The company’s relationship with mer- For the time being Scharf 1710 SGUANGDONG INVESTMENT HK
1711S INDIAN OVERSEAS BANK IN
chants remains strained, and Visa is clearly will have to remain content to boost revenue 1712
1713
S
S
DCC
SBI HOLDINGS
IR
JA
looking to do more than just gin up additional based on increasing the number of transactions 1714 OTOKYU FUDOSAN
1715 SYUNNAN BAIYAO GROUP
JA
CN
transactions. Retailers have won billions of dol- it processes rather than increasing its cut. Visa’s 1716
1717
S
S
TAIHEIYO CEMENT
FRONTIER COMMUNICATIONS
JA
US
lars in antitrust suits against Visa and Master- greatest growth, not surprisingly, is likely to come 1717 TK+S
1717 OMAHANAGAR TELEPHONE
GE

NIGAM IN
Card, accusing them of helping banks keep fees in emerging markets, where cash dominates (and 1720 TBANCA CARIGE IT
1721 SAMERICAN EQUITY INVESTMENT US
too high with rules that prohibited them from fees tend to be higher). China, so far, is off limits, 1722 TRELIANCE STEEL US
1723 SCHURCH & DWIGHT US
encouraging customers to use cash or less ex- with its $6.9 trillion credit card business held by 1724 TSENSHU IKEDA HOLDINGS JA
1725 TWATERS US
pensive debit cards. As part of the settlement the state-controlled UnionPay system, but Chi- 1726 SGAMESTOP CORP. US
1727 TNANTO BANK JA
Visa and MasterCard dropped those rules, but nese officials plan to open up the processing side 1728 TTALISMAN ENERGY CA
1729OCINTAS US
the two are still being sued by holdouts, includ- of the business to foreign companies. 1729OERDEMIR TU
1729OTECH MAHINDRA IN
ing Wal-Mart, which are seeking billions more. Africa, too, represents a big opportunity. De- 1732OTAYLOR WIMPEY UK
1733 THYAKUGO BANK JA
“Visa continues to have some market power velopers there came up with a clever way to 1734
1735
S
T
TAIWAN BUSINESS BANK
PERMANENT TSB GROUP
TA
IR
to set fees higher than they should be,” said move money via prepaid cellphones, and Visa 1736OBEIJING XINWEI TELECOM
TECHNOLOGY GROUP CN

Craig Wildfang, the Minnesota lawyer who ne- adapted its existing mechanism for paying re- 1736OTOKYO TATEMONO
1738ONIPPON MEAT PACKERS
JA
JA

gotiated a $7.25 billion set- funds into a worldwide 1738OSPIRIT AEROSYSTEMS

1740 TG4S
US
UK

tlement of antitrust claims BIG PAYOFF cash-transfer system. Else- 1740

1740
1743
T
S
S
SOHO CHINA
VERISK ANALYTICS
SUPERVALU
CN
US
US
with Visa and MasterCard SINCE GOING PUBLIC IN 2008, VISA SHARES HAVE where in the develop- 1744 TSALZGITTER GE
BEEN A STANDOUT—EVEN IN A BULL MARKET. 1745 TTAISHIN FINANCIAL HOLDINGS TA
that was approved in 2013. ing world, Visa has used 1746ODERWENT LONDON UK
1747 OLENS TECHNOLOGY CN
“There is and there has 500
its analytics to help retail- 1748 TMCCORMICK & CO. US
400 1748 TPINNACLE WEST US
been price competition in 300
VISA INC. CLASS A - TOTAL RETURN ers identify bottlenecks, 1750 SDENBURY RESOURCES US
1751 SINTERACTIVE BROKERS GROUP US
the business,” says Scharf. like the grocer in Indone- 1751 TST ENGINEERING SI
1753 TTOHO BANK JA
200
“People have choices.” 3/18/08=100 sia who increased sales by 1754 SFIRST PACIFIC HK
1755 TABERDEEN ASSET MANAGEMENT UK
Perhaps the biggest accepting electronic pay- 1755OBROTHER INDUSTRIES
1755 SCHINA AVIATION OIL
JA
SI
100
problem for Visa is one ments for small transac- 1758
1759
T
T
BASLER KANTONALBANK SZ
BANCA POPOLARE DI SONDRIO IT
S&P 500 - TOTAL RETURN
that’s been part of the tions and thus sped cus- 1760
1760
T
T
OGAKI KYORITSU BANK
ORICA
JA
AU
company since it was 50
2008 2009 2010 2011 2012 2013 2014 2015
tomers through the check- 1762ONANYA TECHNOLOGY
1763T ISS
TA
DE
formed: Visa doesn’t issue out line. 1764T SURUGA BANK
1765OCOPEL
JA
BR
T
Visa cards, and that’s unlikely to change any- Meanwhile, sales and earnings should climb 1765
1767S
DAISHI BANK
CATLIN GROUP
JA
BU
T
time soon. “They don’t have any direct rela- steadily for some time. Deutsche Bank estimates 1768 CREDITO EMILIANO
1768OFOSHAN HAITIAN FLAVOURING
IT

& FOOD CO. CN

tionships with cardholders or any direct physi- Visa’s revenue will grow another 11% next year 1768T STMICROELECTRONICS SZ
1771T THOMAS COOK GROUP UK
cal relationships with merchants,” says Harris. to $15.4 billion as earnings per share, buoyed by 1772OPERSIMMON PLC. UK
1773T MURPHY USA US
Which means Visa can’t charge higher fees for a $5 billion stock buyback program, rise 15%. 1774T JC PENNEY US
1775OHARMAN INTERNATIONAL US
providing rewards to consumers, say, or forge At some point Scharf will have to negotiate the 1775T TDC DE
1777S HANWA JA
direct relationships with retailers unless it en- purchase of Visa’s European operation, which 1778OVIRGIN MONEY HOLDINGS
1779S
UK
PACKAGING CORP. OF AMERICA US
lists an acquiring bank as an ally. Despite all is still owned by member banks, under a put op- 1780
1780
T
T
ASHLAND
BOLSAS & MERCADOS
US
SP
Scharf’s ambitions he remains, ultimately, a tion that could cost $10 billion, but for now Visa 1782OMIGDAL INSURANCE
1783OCDW
IS
US
vassal of the banks. gets fee income from Europe anyway. Besides, 1783
1785
T
T
SHIGA BANK
ORIENT
JA
JA
Scharf was forced to confront this weak- that’s just loose change to a company with am- 1785OSEGRO PLC.
1787 TGUARANTY TRUST BANK
UK
NI
ness shortly after taking charge at Visa when bitions as big as Visa’s. “The Visa story is not a 1788OGOLDIN FINANCIAL HOLDINGS HK
1788 SJAPAN EXCHANGE GROUP JA

JPMorgan Chase, the largest issuer of Visa two-year story or a five-year story,” Scharf says. 1790OOFFICE DEPOT
1791 TNELNET
US
US
T
cards, threatened to move its business to Mas- “We have the opportunity to grow this company 1792 TOP FRONTIER INVESTMENT
HOLDINGS PH
1793OIMI UK
terCard unless Visa set up a private-label ver- for decades to come.” F 1794 TGANSU JIU STEEL GROUP
HONGXING IRON & STEEL CN
1795 TFIRST NIAGARA FINANCIAL US

S UP T DOWN
112 | FORBES MAY 25, 2015 O UNCHANGED O NEW
1796 TGOLDEN AGRI-RESOURCES SI 1848OKIYO BANK JA 1899 TTHANACHART CAPITAL TH 1953 SKONICA MINOLTA JA
1796 SJSW STEEL IN 1850 TGS ENGINEERING KO 1901 OOVERSEAS UNION ENTERPRISES SI 1953OTBEA CN
1798OCHANGJIANG SECURITIES CN 1851 OLG HOUSEHOLD & HEALTH CARE KO 1902OREALTY INCOME US 1955 SANDHRA BANK IN
1798 THYAKUJUSHI BANK JA 1851 ORADIAN GROUP US 1902OSNAP-ON US 1956 TKESKO FI
1798OPHARMACYCLICS US 1853 TBOK FINANCIAL US 1902 TVIETIN BANK VE 1956 TSEVERN TRENT UK
1801 TCHINA AGRI-INDUSTRIES CN 1854 SPANG DA AUTOMOBILE TRADE CN 1905OSHANGHAI INDUSTRIAL HOLDINGSCN 1958 SCAIXA ECONOMICA
1801 SUCO BANK IN 1855 TBANQUE CENTRALE POPULAIRE MO 1905 TSÜDZUCKER GE MONTEPIO GERAL PO
1803 TSAN-IN GODO BANK JA 1855OHEALTH NET US 1907 TST GALLER KANTONALBANK SZ 1958 TTHAI OIL TH
1804 THIGO BANK JA 1855OSYNNEX US 1908OAMTRUST FINANCIAL SERVICES US 1960 TMOTOR OIL GR
1805 TBANK OF QUEENSLAND AU 1858 TALPIQ HOLDING SZ 1909 THOKKAIDO ELECTRIC POWER JA 1961 OALLIED WORLD ASSURANCE SZ
1806OSAMSUNG ELECTRO-MECHANICS KO 1858 THUNAN VALIN STEEL CN 1909 TMICROCHIP TECHNOLOGY US 1962OCWT SI
1807OHEILAN HOME CN 1858 TMAANSHAN IRON & STEEL CN 1911 OSICHUAN CHUANTOU ENERGY CN 1963ODAEWOO SECURITIES KO
1808 TISRAEL CORP. IS 1858 SORIENTAL BANK OF COMMERCE IN 1912 OCULLEN/FROST BANKERS US 1964ONOK JA
1808 TMANILA ELECTRIC PH 1862OEP ENERGY US 1913 OCOMMERCIAL BANK FOR INVESTMENT 1965 TALDAR PROPERTIES AE
1810 ONH INVESTMENT & SECURITIES KO 1862 TKAGOSHIMA BANK JA PEABODY ENERGY & DEVELOPMENT OF VIETNAM VE 1966 THYSAN DEVELOPMENT HK
1811S DGB FINANCIAL GROUP KO 1864 THOPSON DEVELOPMENT With shares down 75%, can this mining 1913 OCYS INVESTMENTS US 1967 TLS CORP. KO
1811T GUANGDONG ELECTRIC POWER CN HOLDINGS HK giant survive America’s War on Coal? 1913 OKANGMEI PHARMACEUTICAL CN 1968OROHM JA
1813T DOHA BANK QA 1865 THUGO BOSS GE 1916 TIKB DEUTSCHE GE 1969OKWG PROPERTY HOLDING HK
1814 TCORPORATION BANK IN 1866 TCHENG SHIN RUBBER 1916 OPEPCO HOLDINGS US 1970 TPEABODY ENERGY US
INDUSTRY CO. TA 1918 TMECHEL RU 1970 TUMICORE BE
1814S WPG HOLDINGS TA
1867OUNDER ARMOUR US 1918 OOCEANWIDE HOLDINGS CN 1972 TBANK OF IWATE JA
1816 ORAMSAY HEALTH CARE AU
1868 SSYMETRA FINANCIAL US 1918 SSHUI ON LAND CN 1972OCHINA POWER INTERNATIONAL
1817T LG UPLUS KO
1869 SHYUNDAI WIA KO 1921 TFIBI HOLDINGS IS DEVELOPMENT CN
1818T ALLAHABAD BANK IN
1870 TPOPULAR US 1922 TEMS-CHEMIE HOLDING SZ 1972 TTPV TECHNOLOGY HK
1818T AURUBIS GE
1871 SALLIANT ENERGY US 1922OFIRST CITIZENS BANCSHARES US 1975 SBMCE BANK MO
1820OBIOMARIN PHARMACEUTICAL US
1872 THOKKOKU BANK JA 1922OSBA COMMUNICATIONS US 1976 TBEKB-BCBE SZ
1820OFISKARS FI
1872OKB HOME US 1925OSONOVA HOLDING SZ 1976 TINTOUCH HOLDINGS TH
1820OKOREA ZINC KO
1874S CITY NATIONAL US S 1978 SSYNOVUS FINANCIAL US

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

1820OQUINTILES TRANSNATIONAL US 1925 YUNNAN YUNTIANHUA CN
1875OBANK OF CYPRUS CY 1927 TMAIL.RU GROUP LTD. 1978 TYUEXIU PROPERTY CO. CN
1824T DICK’S SPORTING GOODS US
1875T SARAS IT SPONSORED GDR REGS RU 1980OASSOCIATED BANC-CORP. US
1825S SINOMACH AUTOMOBILE CN
1877T AIRGAS US 1927 TSHANGHAI MATERIAL TRADING CN 1980T SICHUAN CHANGHONG ELECTRIC CN
1826OJABAL OMAR DEVELOPMENT SU
1877OENN ENERGY HOLDINGS HK 1929 TJAPAN SECURITIES JA 1982OCHEMTURA US
1826T KLA-TENCOR US
1879OAPA GROUP AU
UNDER ARMOUR 1930 TDVB BANK GE 1983ORR DONNELLEY & SONS US
1828T KEIYO BANK JA
1829S FINANCIAL STREET HOLDINGS CN
1879T CENTURY TOKYO LEASING JA Investing heavily in women’s 1931 OTMB BANK TH 1983OXINHU ZHONGBAO CN
1881T WORKDAY INC. US workout-wear business, which 1932OCANTV VZ 1985OJOINT STOCK COMMERCIAL BANK
1830OVIPSHOP HOLDINGS CN FOR FOREIGN TRADE OF VIETNAM VE
1882T BABCOCK INTERNATIONAL generated $600 million last year. 1932 TLUZERNER KANTONALBANK SZ
1830T HUDSON CITY BANCORP US GROUP UK 1986OHD SUPPLY HOLDINGS US
1932 TMETCASH AU
1830S TONGLING NONFERROUS 1882T VARIAN MEDICAL SYSTEMS US 1987OINDUSIND BANK IN
METALS CN 1935 TINTERCONTINENTAL HOTELS UK
1884S KUWAIT PROJECTS KU 1935 TSECURITAS SW 1988OBRIGHTOIL PETROLEUM HK
1833S AKAMAI TECHNOLOGIES US
1885OMITSUI ENGINEERING 1935OSEIBU JA 1989T BANRISUL BR
1834T ENAGAS SP & SHIPBUILDING JA
1938 TLAURENTIAN BANK CA 1990T BALFOUR BEATTY UK
1834S PEOPLE’S UNITED FINANCIAL US 1885T ZOOMLION HEAVY INDUSTRY CN
1938 TROYAL BOSKALIS NE 1991 OBURGAN BANK KU
1836S ICAP UK 1887T AIR CANADA CA
1940 TBANK OF NAGOYA JA 1992T IHEARTMEDIA US
1837S PALL US 1888OASHTEAD GROUP UK
1941 SARAB BANKING BN 1992T LANXESS GE
1838T CREDITO VALTELLINESE IT 1888T LUNDBERGS SW
1942OEMPRESAS CMPC CH 1992T OCI NE
1838T ERIE INDEMNITY US 1890S STERICYCLE US
1943OOIL SEARCH AU 1995T ALROSA RU
1838OHUNTINGTON INGALLS 1891T INCHCAPE UK
INDUSTRIES US 1943ORESMED US 1996OBARWA REAL ESTATE QA
1892S AMDOCS US 1996T YAMANASHI CHUO BANK JA
1841T INVENTEC TA 1945 TCST BRANDS US
1893OQEP RESOURCES US 1998OTRANSDIGM GROUP US
1842OPRESIDENT CHAIN STORE TA 1946ODR. REDDY’S LABORATORIES IN
1894T INDIAN BANK IN 1998 TWEG BR
1842T SPAREBANK 1 SR-BANK NO 1946OFRASERS CENTREPOINT SI
1895T A2A IT 2000OHASBRO US
1844OJONES LANG LASALLE INC. US 1948OINCYTE US
1845S EQUIFAX US
1896OSINOTEX INVESTMENT
& DEVELOPMENT CN
GAMESTOP 1948 TVALIANT HOLDING SZ 2000 T J. FRONT RETAILING JA
1845OINTERNATIONAL FLAVORS 1896T CNO FINANCIAL GROUP US Now trading in retro game consoles like 1950 STOYOTA BOSHOKU JA
& FRAGRANCES US Super Nintendo in hope that vintage sells. 1951 TEMBRAER BR
1896OWELLCARE HEALTH PLANS US S UP T DOWN
1845T MUSASHINO BANK JA 1951 OFREESCALE
1899OGREAT PORTLAND ESTATES UK O UNCHANGED O NEW
1848T HELLENIC PETROLEUM GR SEMICONDUCTOR INC. US

Because
redemption

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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.

 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
turmoil—including
the most severe
financial crisis since
the 1930s—these
six CEOs have not
only kept their
jobs, they’ve also
presided over some
of the world’s best
growth stories.
BY STEVE SCHAEFER

AMERICAN TOWER
BOSTON

James Taiclet Jr. “

“
Age 55. CEO since 2003
There might be ten factors
driving the growth of the
INDUSTRY: telecommunications towers
RANK: 798 (+556 spots since 2006)
mobile Internet industry, but it all relies on
SALES: $4.1 billion (+334%) radio-based technology, and the physics are
PROFITS: $824.9 million (N/A)
ASSETS: $21.3 billion (+143%) unassailable—if you want more people
MARKET CAP: $41.2 billion (+215%)
to have broadband Internet, you
need more equipment in the field.
$5.1 billion
AMOUNT PAID TO VERIZON TO TAKE OVER 11,448 OF ITS TOWERS IN
2015, BY FAR THE BIGGEST DEAL IN AMERICAN TOWER’S HISTORY.

114 | FORBES MAY 25, 2015

 “
“
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

 “
“
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.

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

 NRG ENERGY
PRINCETON, N.J.

GLOBAL 2OOO David Whipple Crane

Age 56. CEO since 2003
HALL OF FAME
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 you’ll be
fine.’ And ‘never defend
the indefensible,’ which
actually came from
my father. If you think
about the two bits of
advice, they’re
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 O’Leary
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 Boeing’s 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 fiction
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
 ARE YOUR FINANCE
& HR SYSTEMS
TURNING YOU INTO A

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©2015 Workday, Inc. All rights reserved.
 RETHINK ROBOTICS
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 who’d 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 compa-
ny. That particular Baxter
was trained to mix a
drink, examine it for
sediment and pour
it out in a man-
ner similar to
the way it was
trained to
brew coffee.
JAMEL TOPPIN FOR FORBES
AUTODESK
TEACHING A ROBOT TO PAINT

In the new short film Artoo in Love, the famous Star Wars droid goes head-over-wheels for a similarly dome-
shaped U.S. mailbox. The film, 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 ro-
bot first on line drawings, guiding its arm across the canvas, then moved on to curves and flourishes until its
algorithms could eventually take over. With the film 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
LEARNING FAST AND IN UNISON

Raytheon’s 47,000-square-foot factory in

Tucson is chock-full of robots and humans
working together. Raytheon doesn’t build
its bots: It buys them and installs a com-
mon software interface to make them
simpler to train and retask. When a robot
needs to learn something, the task is first
simulated in Raytheon’s 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 floor, the fac-
tory line simulation is updated and pushed
TIM PANNELL FOR FORBES

out to robots already in use. “They’re 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
GET TING CL OSER TO THE MACHINE

Some unlucky human at GM’s Orion, Mich.

assembly plant has had the dull, backbreak-
ing job of pulling spare tires off a conveyor and
stacking them based on their assigned vehicle.
No surprise: The factory’s first 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.

JONATHAN KOZOWYK FOR FORBES

GM turned up the sensitivity on the robot’s 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.

JAMEL TOPPIN FOR FORBES

A. ZAHNER CO.
WELDING LIKE HUMANS DO

Architects worldwide turn to Kansas City’s A. Zahner Co. for huge, custom metalwork and facades,
which adorn buildings such as New York City’s Guggenheim Museum, the Dallas Cowboys’ stadium
and the Art Wall at Doha. For years Zahner’s 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 intri-
cate work on large-scale projects. “If you do certain things faster, it enables the more artistic aspects
to expand,” said Zahner. The first 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 don’t 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 consid-
ered using robots before. Its user interface was inspired by the iPhone, “a sophisticated product, but you
don’t 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 world’s biggest drone
company—and 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

J
ust 90 minutes by air from New York City, Bermuda is nearer than
you may think and close to many people’s 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 subtropi-
cal sea and air temperatures. Last year, Bermuda welcomed nearly
585,000 visitors.
Capitalizing on its North Atlantic location, Bermuda will host the
35th America’s Cup in 2017, set to generate $300 million and show-
case the island’s attractions. When Bermuda won the bid, Premier
Michael Dunkley said: “Being home to the Cup is an extraordinary Development and Transport Shawn Crockwell, “The development of
opportunity that fits the heritage, profile, culture and future of Ber- the BTA has created a new sense of hope for the industry.”
muda and its people.” But, as the BTA’s slogan says, Bermuda is “so much more.” It is also
To maximize that opportunity, Bermuda is positioning itself as an a blue-chip financial services center and a leading insurance and rein-
ideal destination for work and play. A public-private partnership, the surance jurisdiction. With over 40 Tax Information Exchange Agree-
Bermuda Business Development Agency promotes the island’s busi- ments in place, it was the first offshore hub placed on the OECD’s
ness advantages, while the independent Bermuda Tourism Authority white list in 2009. As Patrick Tannock, chairman of the Association
(BTA) spearheads tourism development, investment and marketing. of Bermuda International Companies, notes, “This is an innovative,
Their shared goal is to increase tourism numbers, improve infrastruc- solutions-oriented, dynamic and entrepreneurial marketplace that
ture, create jobs and expand the economy. Says Minister of Tourism continues to evolve.”

The America’s Cup

Home to one of the world’s oldest yacht clubs
and the host of the 2017 America’s Cup—one
of the world’s 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 Eco-
nomic Development Grant Gibbons. The
government has created America’s 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,
it’s very valuable,” says Managing Partner
Kiernan Bell.

OFFSHORE
LAW FIRM
OF THE YEAR
CLIENTS ARE SAYING

Conyers has the “expertise to provide cutting-edge advice

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BERMUDA BRITISH VIRGIN ISLANDS CAYMAN ISLANDS DUBAI HONG KONG LONDON MAURITIUS SINGAPORE conyersdill.com
 ECONOMIC DEVELOPMENT | PROMOTION

Bermuda has developed a highly competitive fiscal system

over the last century. It taxes consumption and imports instead of
income and corporations, levying payroll tax and customs duties
on goods and services. Backed by strong rule of law due to its sta-
tus as a British Overseas Territory, it boasts an enviable environ-
ment for international business companies—with over 18,000
registered today—that complies fully with the strictest global
standards regarding transparency and the prevention of money
laundering and financing of other illegal activities.
Bermuda’s public sector is committed to creating an ideal busi-
ness climate, and the private sector supports that commitment
with its creative approach to devising and delivering solutions to
suit the needs of clients worldwide. Formed in 2001, Arch Capital
Group is a Bermudan insurance and reinsurance company that pro-
vides innovative products not only on the island, but also in the
United States, Canada, Europe, Australia and South Africa.
“Bermuda is our home; we were one of the first insurance com-
panies here,” notes Arch Chairman, President and CEO Constantine
Iordanou. “The beauty of Arch is that we have operations through-
out the world, and we scan the globe to see where there are oppor-
tunities. Worldwide, we now have 49 offices in different locations.” SU PPORT STABILIT Y K NOW LED GE AGILIT Y RESPONSIVENESS PROTECTION
Under Iordanou’s leadership, Arch has rapidly grown to become
one of the industry’s most innovative players. Today, it has a mar-
ket capitalization of $7 billion and has expanded the reach of its
mortgage insurance and catastrophe reinsurance through strategic
mergers and acquisitions. At the same time, the group has worked
closely with successive governments to help refine regulations that
enable Bermuda to compete in the changing financial landscape.
One of Arch’s latest ideas is to lease out its underwriters to com-
panies that are willing to assume greater risk for potentially higher
returns. Working in cooperation with J.P. Morgan’s Highbridge
hedge fund, it is outsourcing services to another homegrown rein-
surer, Watford Re (of which Arch owns 10%). “Think of it as a com-
pany that has a head, but everything else—the body, arms and
legs—is rented,” Iordanou explains.
Further proof of Bermuda’s uncanny ability to identify and
develop niche markets lies in its insurance-linked securities. Since
2009, the island has cornered the ILS market, handling 57% of
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:
THE STRENGTH OF ARCH
®
“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 corpo-
rate regulation to litigation, insolvency and restructuring. Affiliated
with the Codan group of companies, which has dedicated man-
agement, 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 www.archcapgroup.com
Islands and Mauritius. According to Narinder Hargun, director of
the litigation department and co-chair, “We very much consider
it part of our duty to develop and promote international business
here in Bermuda. We look at the requirements of the client and our
marketplace, and we provide for those.” Q
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 Gutiérrez—g.gutierrez@forbes-cm.com
 DRONE WARS
F
rank Wang Tao has never been arrested.
He pays his taxes on time. And he rarely
drinks. But on the eve of a January sit-
down with FORBES—his first public in-
terview this year with a Western publica-
tion—the Chinese national who happens
to be the world’s first drone billionaire
found himself on the wrong end of American authorities.
A U.S. government intelligence employee in Wash-
ington, D.C., some 8,000 miles away from Wang’s perch
in Shenzhen, had had a little too much to drink and took
a friend’s 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 investigation—after crash-
landing 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 minister’s 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 prod-
uct to break laws and social boundaries would give most
CEOs nightmares, but the inconspicuous mastermind be-
hind the world’s drone revolution just shakes it off.
“I don’t think it’s a big deal,” shrugs the 34-year-old
founder of Dajiang Innovation Technology Co. (DJI),
which accounts for 70% of the consumer drone mar-
ket, according to Frost & Sullivan. His company spent
the morning developing a software update it blasted out
to all its drones, prohibiting them from flying inside a
15.5-mile-radius centered on downtown Washington,
D.C. “It’s a benign thing.”
Or maybe it only looks that way to Wang because suc-
cess has inured him to controversy. Last year DJI sold
about 400,000 units—many of which were its signature
Phantom model—and 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
profit. 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. DJI’s 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 it’s 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 ac-
tion 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 year’s Golden
Globes; relief workers relied on them
to map the destruction left behind by
Nepal’s 7.8-magnitude earthquake in
April; farmers in Iowa are using them
to monitor cornfields. Facebook will be
using its own UAVs to provide wire-
less Internet to rural Africa. DJI drones
are being used on the sets of Game
of Thrones and the newest Star Wars
film. Now DJI needs to keep stoking
the consumer market with better and
cheaper flying machines, just as it did
in January 2013 when its Phantom
drone debuted, ready to fly 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 flier.
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 formida-
ble challenge is brewing in 3D Robot-
ics, 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
DJI’s Goliath.” His new company, however, is fighting with
more than slingshots—it has raised nearly $100 million.
There’s 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 year’s Consumer Electronics Show in Las Vegas saw
dozens of barely hatched companies zipping their UAVs
across Sin City’s cavernous conference halls.
With his circular glasses, tuft of chin stubble and golf
cap that masks a receding hairline, Wang cuts an unlikely
MATTHEW MAHON FOR FORBES
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 war-
path—discarding former business partners, employees and
friends—as he seeks to turn DJI into a top-ranked Chinese
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 first Chinese company to lead its industry. Its
dominance has earned it comparisons with Apple—not
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
DJI’s April launch of its new Phantom 3 in New York be-
cause “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 others—there needs to be
a distance from the masses. If you can create that distance,
you will be successful.”
F
rank Wang’s infatuation with the sky began in el-
ementary school after he started devouring a comic
book about the adventures of a red helicopter. Born
in 1980, Wang grew up in Hangzhou, Alibaba’s home
city on China’s 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
fly 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.
Wang’s less-than-stellar academic performance thwart-
ed 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
where he studied electronic engineering. He didn’t find
his sense of purpose until his senior year, when he built a
helicopter flight-control system. Wang devoted everything
to his final 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 presen-
tation, his effort did not go to waste. Robotics professor Li
Zexiang noticed Wang’s group leadership and technical
understanding and brought the headstrong student into
the school’s graduate program. “I couldn’t 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 neces-
sarily comparable with good grades.”
Wang built prototypes of flight 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 sol-
dered them onto the frames of DIY drones. Those sales al-
lowed 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 didn’t 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 Wang’s personality
would eventually cause strife within DJI’s 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 [employ-
ees] off.”
Yet DJI chugged along, selling about 20 controllers a
month. It survived off capital from Wang’s family friend
Lu Di. In late 2006 Lu had put in about $90,000—the
only money DJI has ever needed says Wang. Endear-
ingly called a “penny-pincher” by DJI’s CEO, Lu managed
the finances and today remains one of the largest share-
holders, with 16% worth $1.6 billion, based on FORBES
estimates. Also key to DJI’s development was Wang’s
best friend from high school, Swift Xie Jia, who, in 2010,
came in to run marketing and act as confidante. The man
nicknamed “fat-headed fish” by Wang sold his apartment
to invest in DJI and today holds a 14% stake worth an es-
timated $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
136 | FORBES MAY 25, 2015
HOW’D YOU GET THAT SHOT?
Photographers and filmmakers are opening up new views of the world by
sending drones to places they couldn’t 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. DJI’s started making more
advanced flight controllers with autopilot functions, which
Wang then marketed at niche trade shows like a radio-
controlled helicopter gathering in the 70,000-pop. town of
Muncie, Ind. in 2011.
It was in Muncie that Wang first 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 acceler-
ometers to adjust its orientation on the fly so the video
frame remained still despite a drone’s shaky flying. Wang
had gone through at least three gimbal prototypes—and
one incapable intern—before he had a decent one. Wang
figured out how to connect the drone’s motor to the gimbal
so it wouldn’t need its own motor, cutting down on parts
and weight. By 2011 the cost to make a flight controller had
dropped to less than $400 from $2,000 in 2006.
After initially meeting DJI executives in Muncie in
August 2011, Guinn flew out to Shenzhen and eventu-
ally formed DJI North America, an Austin, Tex. subsid-
iary aimed at delivering drones to the mass market, with
Wang’s blessing. Guinn was given 48% ownership of the
entity, with DJI retaining the remaining 52%. Guinn was
STACY GARLINGTON
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-

“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+.
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, gim-
bal and remote control. The company unveiled the Phan-
tom in January 2013, the first ready-to-fly, preassembled
quadcopter that could be up in the air within an hour of
its unboxing and wouldn’t break apart with its first crash.
Its simplicity and ease-of-use unlocked the market beyond
obsessed enthusiasts.
Yet things had already started falling apart between
Wang and Guinn. DJI’s founder didn’t 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 DJI’s
drones. Wang got cold feet in that deal and went against
Guinn’s advice, subsequently angering GoPro, which is
now rumored to be developing its own drone.
Initially DJI was planning to only break even on the
Phantom’s $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
company’s bestselling product, increasing revenue fivefold
with little marketing. More important, it sold around the
world, a trend that holds today as the company derives
RANDY JAY BRAUN
about 30% of revenue from the U.S., 30% from Europe and
30% from Asia, with the remainder from Latin America
and Africa. That’s a source of pride for Wang. “Chinese
people think imported products are good and made-in-
China products are inferior. We’re always second class,” he
says. “I’m unsatisfied with the overall environment, and I
want to do something to change it,” he adds.
By May 2013 DJI attempted to buy out Guinn’s 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 office’s 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 America’s
employees out of their e-mails and redirected all customer
payments to China headquarters. By New Year’s Eve the
employees had been fired and arrangements were being
made to liquidate the Austin office’s 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 un-
disclosed amount under $10 million, according to sources.
That’s 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 hilar-
ious,” says Guinn, who with many of his former colleagues
joined 3D Robotics to take on their past employer.
T
he greatest threat to Wang’s dominance of the
consumer drone market emanates from a sun-
drenched 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
DJI’s Apple.
In admiring his quadcopter’s elegance and simplicity—
which took cues from the Phantom—the affable Ander-
son explains that it is the software, not hardware, that is
the key. Unlike DJI’s 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 DJI’s
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 we’re
playing on their home field, so we’re 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 China’s few global consumer technology brands.

$1,000 (Revenue $mil) Phantom 3 O

900

800
DJI Flame
Wheel F330
700

600

500 O

400
Annual revenue Revenue Revenue Revenue Revenue Revenue Projected revenue
$500,000 $1.1 million $4.2 million $26 million More than $130 million About $1 billion
300 North American North American North American North American Phantom 1 debuts $500 million
Phantom 3 debuts
revenue revenue revenue revenue in January. in April.
$310,000 $560,000 $1.26 million $5.6 million
200
Sales began in Asian, July 2012: creation of
European and North DJI North America. O
100 American markets
that year.
O
0 O O O
2009 2010 2011 2012 2013 2014 2015E

Tijuana, Mexico to Shenzhen. Guinn, who is the compa-
ny’s chief revenue officer, is also exploring the same retail
channels he built up with DJI and developed a partner-
ship to put GoPros on 3D Robotics’ drones.
Wang dismisses their chances, sounding something like
the big kid on the kindergarten playground. “It’s 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, there’s a headline of a UAV being used by
ISIS or spying on a neighbor’s hot tub. Legitimate privacy
and safety concerns have limited society from welcoming
flying robots with open arms, and regulators, particularly
the United States’ FAA, have been slow to enact mean-
ingful 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 foretell-
ing the future of the consumer drone industry, but his
explanation is hard to follow as he wields a 450-year-
old Japanese samurai sword on a hapless business card.
“Japanese craftsmen are constantly striving for perfec-
tion,” he says, as the katana carves up the paper into
pieces. “China has money, but its products are terrible,
its service is terrible, and you have to pay a hefty price
for anything that’s good.”
DJI is a long way from reaching the level of perfection
in Wang’s Japanese artifact. The CEO openly acknowl-
edges that his Phantom is “not a perfect product” and
that some models have been known to fly away from users
because of software malfunctions. “We do have room for
improvement,” concedes Wang, who says that he’s adding
to DJI’s 200-plus support staff.
Wang is also dealing with various levels of corporate es-
pionage. He’s 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 de-
parting employee took blueprints and sold them to a com-
petitor. That certainly doesn’t help in what Wang calls the
“dog-eat-dog society” of Shenzhen, where cheap manufac-
turing 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 they’ve established themselves in the market
and they have recognition.”
Wang doesn’t want to share the skies with others,
intent on maintaining DJI’s 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 tech-
nical puzzles,” he says. “You can’t be satisfied with the
present.” F

138 | FORBES MAY 25, 2015

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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

D
uring my tour of Viña Vik,
Internet entrepreneur Alexan-
der Vik’s latest glamorous South
American getaway, a manager
told me the Frank Gehry-esque
serpentine roof on the hotel was made of tita-
nium rather than gold. That’s 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 first three hotels put Uruguay’s
José Ignacio on the map, spared no expense in
developing his new wine resort. Vik’s aim isn’t 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.)
“I’ve always been interested in the concept
of terroir—what made one piece of land a great
producer and not its neighbor?” the 60-year-old
Vik says. “Wine has infinite grades in quality—
it’s 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 Uru-
guay, convened a research team to study Argen-
tina, Uruguay and Chile to find 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 Ma-
puche language. “I’m convinced the conditions
are as good as anywhere in the world,” says Vik
about why he didn’t 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
Vineyard haven: Each of
Patrick Valette, installed weather stations and the 22 rooms and suites
researched “all the elements of terroir” to de- at Viña Vik has a distinct
termine the best places among the property’s 12 art theme and spectacular
views of Chile’s Millahue
valleys to plant each varietal for the Bordeaux- Valley.
style 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 Carmenères and 7
Merlots. It’s like a puzzle.” There are plans to
eventually bottle second- and third-run wines.
But a portfolio isn’t the point.
Asked how much he has invested in the
project, the famously cagey—and his competi-
tors would say dishonest—Vik tells me he truly
doesn’t know. But he scoffs when I ask if he ex-
pects 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.) “It’s a long-term investment.
But if you succeed, it’s very lasting.”
For all the science on display in the wine-

140 | FORBES MAY 25, 2015

 to be floating over the countryside. TRENDING
The communal living room includes works by
Chilean artist Roberto Matta and a diptych from
What the 70 million
Anselm Kiefer’s “The Secret Life of Plants.” The
Forbes.com users
rooms and suites (which start at $1,200 a night, are talking about.
including meals) vary wildly, but all have a strong For a deeper dive go to
point of view. The Vik Suite features art by Anto- FORBESLIFE.COM
nio Sequi and James Turrell, and the bathroom
of the Azulejo Suite has hand-painted blue-and- PERSON
white tiles in the Portuguese tradition, depicting SARAH JESSICA
PARKER
a playful panorama of the vineyard. The Sex and the City
Naturally, winery tours and tastings figure star has launched a new
prominently in the Viña Vik experience, but venture with Zappos
guests can arrange guided hikes, mountain bik- Couture that Carrie
ing and horseback riding through the vineyards Bradshaw would have
loved: a luxury shoe
on short notice. There are also massage thera- collection.
pists 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 Acuña
Bravo, who made a name for himself at Casa
Lapostolle in the nearby Colchagua Valley, to
lead the kitchen. His cuisine is straightforward,

making operation, it’s art that rules the hotel,

which opened late last year. As with their
other properties, Vik and his wife, Carrie,
filled this one with contemporary art and
commissioned artists to create installations in
DENISE TRUSCELLO/GETTY

each of the 22 rooms. It’s the kind of hotel that hearty and delicious, making the most of the ho-
only a deep-pocketed visionary could pull off, tel’s location in Chile’s main growing region, the
without answering to investors’ caution. breadbasket to the world.
While it shares DNA with his Uruguayan As for wine pairings, there’s just one: When
outposts, Viña Vik is a singular hotel. “Estancia guests take their seats, servers appear with de-
Vik is a Spanish Colonial hotel on ranch land canted Vik. (There are whites and a sparkling on COMPANY
LA COMPAGNIE
that’s all about Uruguayan art and culture,” he request.) The wine turns out to be food-friendly The all-business-class
explains. “Playa Vik is more contemporary, with and surprisingly versatile. airline (for premium
21st-century architecture, and Bahia Vik is more “We’re satisfied with how the wine is devel- economy fares) with
beachy, with bungalows out on the dunes. oping,” says Vik. “The vines are at a young age direct flights from
Newark to Paris added
“In Chile,” he continues, “it’s all about the but producing great wines. We’re focused on
a new route in April:
vineyard.” The main building is perched on one viniculture, on growing the best grapes, but also Newark to London.
of the prettiest hilltops on the property—with on letting the grapes express themselves. It’s
staggering views from every room—as is the res- holistic, organic and very pure. You can drink it IDEA
RECORD-BREAKING
taurant and a slate infinity pool, which appears with abandon without any consequences.” SKYSCRAPERS
Move over, clouds.
FINAL THOUGHT As massive new
buildings rise around
“One of the disadvantages of wine is that it makes a man mistake words for the world—including
a futuristic 114-story
thoughts.” —SAMUEL JOHNSON tower in Morocco—
height records will
soon start falling. 
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 FINAL THOUGHT
THOUGHTS “One thing that previous practice
doesn’t always make perfect: marriage.”
—MALCOLM FORBES

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

“One was never married, and that’s his

hell; another is, and that’s 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 down—I’m a

young woman, and I ain’t done runnin’ around.”
—BESSIE SMITH

“He is dreadfully married. He’s 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 “Marriage may often be a stormy lake, but
celibacy is almost always a muddy horse pond.”
in the U.S. last year anyway. That’s more people saying ‘I do’ than
—THOMAS LOVE PEACOCK
ever before in the nation’s 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 “Flesh of Flesh, Bone of my Bone thou art, and
from thy State mine shall never be parted, bliss
married in the U.S. is expected to hold at the record 2.4 million.”
or woe.” —JOHN MILTON
—FROM THE JUNE 22, 1981 ISSUE OF FORBES

OTHER THOUGHTS FROM THAT ISSUE: “I’ve had so many wives “The value of marriage
is not that adults
BY GOSH “‘The biggest thrill in Oshkosh,’ recalls Milton Berle, ‘is and so many children I
produce children but
to go to the train station and smell the luggage.’ Oshkosh, Wis., has don’t know whose house
that children produce
been the butt of many a Vaudeville joke—the quintessential hick to go to first on Christmas.” adults.”
town with the Indian chief ’s name. Today, as a manufacturer of —MICKEY ROONEY —PETER DE VRIES
brightly colored overalls, Oshkosh B’Gosh Inc. is cashing in on—and
somewhat living up to—that hick image.”
“Husbands are like fires. They go out when
PAN AIN’T “Is there anything Chairman William T. Seawell can do to unattended.” —ZSA ZSA GABOR
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, you’ll
be successful enough to pull through.’”
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
152 | FORBES MAY 25, 2015 VRIES; LOTHAIR, BY BENJAMIN DISRAELI; PARADISE LOST, BY JOHN MILTON;
MELINCOURT, BY THOMAS LOVE PEACOCK.
©2015 Cartier

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