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CRAZY HIGH STOCK PRICES, THE SEQUEL đ BRAD PITT: FURNITURE MOGUL0$< (',7,21

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Social

learn more at microsoftcloud.com

The cloud thathelps win the race.

The winning edge can boil down to nanoseconds. Data can be as important as the driver.

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I n s i gh t s

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4 FORBES MAY 5, 2014

CONTENTS — MAY 5, 2014 VOLUME 193 NUMBER 6

72 | CRUDE CAPITALIST Harold Hamm’s vast North Dakota oilfields arethe grease in the Americaneconomy.

86 | FACTORY TOWN Does CEO still know

best in 21st-century America? Cummins

thinks so.

13 FACT & COMMENTBY STEVE FORBES

The U.S. Constitution: We can still save it.

LEADERBOARD

16 CASTLES OF KUKIOCarved into the lava of the Big Island’s Kona coast,

Kukio is Hawaii’s most exclusive community.

20 DEGREES OF HAPPINESSThe business schools with the most

contented M.B.A.s.

22 WELCOME TO THE CLUBMeet the 34-year-old founders of software maker

Atlassian, the world’s newest billionaires.

24 CHRIS BURCH’S RETAIL THERAPYCan he prove his C. Wonder is more than a

Tory Burch knockoff?

COVER PHOTOGRAPH BY DAVID YELLEN FOR FORBES

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Over 20 million kids in America lack access to healthy food. So, a company called

Revolution Foods came up with a solution: affordable, nutritious, kid-inspired meals,

available in schools and stores.

To make an impact, they needed capital, financial advice and guidance. With Citi’s

support, they went from a small kitchen to employing more than 1,000 people, serving

a million meals a week nationwide. Now Citi is helping the company expand, as they

continue their mission to make nourishing food accessible to all.

For over 200 years, Citi’s job has been to believe in people and to help make their ideas a reality.

#progressmakers

© 2014 Citigroup Inc. Citi and Citi with Arc Design are registered service marks of Citigroup Inc.

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CONTENTS — MAY 5, 2014

28 FROM RAP TO RICHESA decade ago a hip-hop trio released “I GetMoney: Forbes 1-2-3 Billion Dollar Remix.”

Now they really are nearing ten-digit fortunes.

30 FAIREST FOWLThe most expensive piece of Chinese

porcelain ever sold: a cup covered in chickens.

32 ACTIVE CONVERSATIONInvestors have recently body-slammed

WWE shares. Was it something we said?

THOUGHT LEADERS

34 CURRENT EVENTSBY PAUL JOHNSON

Is Vladimir Putin another Adolf Hitler?

36 CURRENT EVENTSBY DAVID MALPASS

Monetary policy relief: finally adding growth.

38 CAPITAL FLOWSBY BJORN LOMBORGFeeling green with other people’s money.

40 INNOVATION RULESBY RICH KARLGAARD

Your company’s health: the soft edge.

STRATEGIES

42 UNFINISHED BUSINESSAs John Chambers turns to go, time is runningout for Cisco to reverse a serious growth slump.

BY CONNIE GUGLIELMO

48 THE LUCKY DRUGSmarts and providence made Robert Duggan

a biotech billionaire. Long-term success?That’s another story.BY MATTHEW HERPER

TECHNOLOGY

52 BIG BROTHER INC.Smart gadgets’ real value may be in what

they say to your doctor, insurer and utilities.BY PARMY OLSON AND AARON TILLEY

56 THE SAMEDAY WARFast grocery delivery was a disaster for

Webvan. Why are so many trying it again?BY JEFF BERCOVICI

ENTREPRENEURS

58 THE CALCULUS OF COUCHESWayfair.com sells nearly $1 billion

worth of home furnishings.But its real business is data mining.

BY ABRAM BROWN

INVESTING

62 DALLAS BUYER’S FUNDMoney managers Don and Craig Hodgesprefer the sweet taste of home cooking.

BY STEVE SCHAEFER

42 | I SPY CISCO’S NEXT CEOSomewhere in this crowded room is John Chambers’successor—and they have their work cut out for them.

48 | ONCEYOU’RELUCKY ...

Biotech billionaire Robert Dugganis desperate to

prove he’s nota flash in the

petri dish.

52 | EYESON YOU

Wearables:singing the

body electricto save a

few bucks.

58 | SILVERWARE,SOFAS ... AND

SOFTWARE

Wayfair hadambitions to bethe Web’s Sears,

Roebuck but firstneeded algorithms

to get to know itscustomers.

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CONTENTS — MAY 5, 2014

98 | SKY-HIGHSTOCKSThey’rebaaack! Stockstrategist

James Montiersays you cankiss growth

good-bye.

106 | HOLLYWOODWOODWORK

Frank Pollaro, carpenter to the stars.

102 | PRIVILEGED POSITIONThe politically connectedGautam Adani hasextracted a $5.4 billion

fortune from India’sspecial economic zones.

62 | LITTLE IDEAS Not everybody thinks bigger in Texas. Proof:small-cap specialists Don and Craig Hodges.

BrandVoice

BY TD AMERITRADE

The Return of the (Virtual)Investment Club:

Retail Investors AreEmbracing Social Media 63

66 FINANCIAL STRATEGYBY A. GARY SHILLING

Bleating sheep and goats.

68 CAPITAL MARKETSBY MARILYN COHEN

Teasers that are pleasers.

70 INTRINSIC VALUEBY BONNIE BAHA

Apocalypse at the galleria.

REINVENTING AMERICA72 THE MAN FUELING AMERICA’S

RECOVERYHarold Hamm has transformed the U.S. oil

industry like no one since John D. Rockefeller.The great domestic energy boom, he says,

is just beginning.BY CHRISTOPHER HELMAN

86 WELCOME TO CUMMINS, U.S.A.The Indiana enginemaker believes deeply

in the anachronistic idea that investing in itscommunity is smart business.

BY JOANN MULLER

94 LEGO HIGHRISEThe future of affordable housing is being

snapped together in Brooklyn.BY ERIN CARLYLE

FEATURES98 IRRATIONAL EXUBERANCE:

THE SEQUELThe Shiller P/E signal is flashing warning signs.

What are you doing to defend yourself?BY WILLIAM BALDWIN

102 THE BILLIONAIRE AND THEPRIME MINISTER

The man likely to become India’snext leader gave one of the country’s

richest men a series of sweetheart deals.BY MEGHA BAHREE

LIFE106 THE WOOD WHISPERER

Frank Pollaro has designed furniture for LarryEllison, David Geffen and Jerry Seinfeld. He

also collaborates with his good friend Brad Pitt.BY RICHARD NALLEY

112 THOUGHTSOn reinvention.

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CHIEF PRODUCT OFFICERLewis D’Vorkin

FORBES MAGAZINE

EDITORRandall Lane

EXECUTIVE EDITORMichael Noer

ART & DESIGN DIRECTORRobert Mansfield

FORBES DIGITAL

VP, INVESTING EDITORMatt Schifrin

MANAGING EDITORSDan Bigman – Business, Tom Post – Entrepreneurs, Bruce Upbin – Technology

SENIOR VP, PRODUCT DEVELOPMENT AND VIDEOAndrea Spiegel

EXECUTIVE DIRECTOR, DIGITAL PROGRAMMING STRATEGYCoates Bateman

ASSISTANT MANAGING EDITORSKerry A. Dolan, Luisa Kroll – Wealth

EXECUTIVE PRODUCERFrederick E. Allen – Leadership

Tim W. Ferguson FORBES ASIA

Kashmir Hill SILICON VALLEY

Janet Novack WASHINGTON

Michael K. Ozanian SPORTSMONEY

Mark Decker, John Dobosz, Deborah Markson-Katz DEPARTMENT HEADS

Avik Roy OPINIONS

Kai Falkenberg EDITORIAL COUNSEL

BUSINESS

Mark Howard CHIEF REVENUE OFFICER

Tom Davis CHIEF MARKETING OFFICER

Charles Yardley PUBLISHER & MANAGING DIRECTOR FORBES EUROPE

Nina La France SENIOR VP, CONSUMER MARKETING & BUSINESS DEVELOPMENT

Jack Laschever PRESIDENT, FORBES CONFERENCES

Michael Dugan CHIEF TECHNOLOGY OFFICER

Elaine Fry SENIOR VP, M&D, CONTINUUM

FORBES MEDIA

Michael S. Perlis PRESIDENT & CEO

Michael Federle CHIEF OPERATING OFFICER

Tom Callahan CHIEF FINANCIAL OFFICER

Will Adamopoulos CEO/ASIA FORBES MEDIA

PRESIDENT & PUBLISHER FORBES ASIA

Rich Karlgaard PUBLISHER

Moira Forbes PRESIDENT, FORBESWOMAN

MariaRosa Cartolano GENERAL COUNSEL

Margy Loftus SENIOR VP, HUMAN RESOURCES

Mia Carbonell SENIOR VP, CORPORATE COMMUNICATIONS

FOUNDED IN 1917B.C. Forbes, Editor-in-Chief (191754)

Malcolm S. Forbes, Editor-in-Chief (195490)James W. Michaels, Editor (196199)William Baldwin, Editor (19992010)


FORBES

IN BRIEFEDITOR-IN-CHIEFSteve Forbes

FORBES (ISSN 0015 6914) is published semi-monthly, except monthly in January, February, April, July, August and October, by ForbesLLC, 60 Fifth Ave., New York, NY 10011. Periodicals postage paid at New York, NY and at additional mailing offices. Canadian AgreementNo. 40036469. Return undeliverable Canadian addresses to APC Postal Logistics, LLC, 140 E. Union Ave., East Rutherford, NJ 07073.Canada GST# 12576 9513 RT. POSTMASTER: Send address changes to Forbes Subscriber Service, P.O. Box 5471, Harlan, IA 51593-0971.

CONTACT INFORMATIONFor Subscriptions: visit www.forbesmagazine.com; write Forbes Subscriber Service, P.O. Box 5471, Harlan, IA 51593-0971;or call 1-515-284-0693. Prices: U.S.A., one year $59.95. Canada, one year C$89.95 (includes GST). We may make a portion ofour mailing list available to reputable firms. If you prefer that we not include your name, please write Forbes Subscriber Service.For Back Issues: visit www.forbesmagazine.com; e-mail [email protected]; or call 1-212-367-4141.For Article Reprints or Permission to use Forbes content including text, photos, illustrations, logos, and video: visit www.forbesreprints.com; call PARS International at 1-212-221-9595; e-mail http://www.forbes.com/reprints; or [email protected]. Permission to copy or republish articles can also be obtained through the Copyright Clearance Center atwww.copyright.com. Use of Forbes content without the express permission of Forbes or the copyright owner is expressly prohibited. Copyright © 2014 Forbes LLC. All rights reserved.Title is protected through a trademark registered with the U.S. Patent & Trademark Office. Printed in the U.S.A.

MAY 5, 2014 — VOLUME 193 NUMBER 6

An American

ReinventionBY DAN BIGMAN

IT WAS A STRANGE SIGHT. There, onstage, were

Steve Forbes and Chicago Mayor Rahm Emanuel, two

men on the absolute opposite ends of the political spec-

trum, doing something stunning. They were agreeing.

The occasion? In late March Forbes gathered more

than 300 innovative business leaders, entrepreneurs,

academics and growth-oriented policymakers in Chicago

for our first Reinventing America Summit to help foster a

budding industrial revolution in the United States.Forbes readers are well aware of the phenomenon.

For the past three years, in almost every issue of Forbes,

we’ve been telling unexpected stories of American re-

invention from places like GE’s new locomotive factory

in Fort Worth, and the city of Milwaukee, which is fast

becoming the world capital of water technology.

Fueled by breakthroughs in hydraulic fracturing and

horizontal drilling by men like Harold Hamm, the subject

of this issue’s cover story, the nation is undergoing the

biggest energy boom in generations. Networked com-

puter systems embedded in everything from rail systems

to roller bearings are forming an industrial Internet ofthings, creating unparalleled efficiencies. Companies

from around the world are looking to the U.S. as a loca-

tion for the kind of high-quality, high-value manufactur-

ing practiced by Indiana-based Cummins (see story on

p. 86)—an idea inconceivable just a short time ago.

There are, of course, challenges: Despite high unem-

ployment more than 600,000 U.S. manufacturing jobs (of

an estimated 17.4 million) are currently unfilled as em-

ployers struggle to find the kind of highly trained workers

necessary to operate in next-generation factories (many

now among the world’s most productive). Decaying

urban centers still seek new purpose and prosperity.But over two days in Chicago speakers such as

Bill Ford, Sam Zell, Honeywell’s David Cote, Michigan

Governor Rick Snyder and Indiana Governor Mike Pence

discussed the opportunities they saw springing up.

It was a hopeful gathering—one we plan to repeat

soon. It was also somewhat disorienting. “You might

make a good President,” Steve Forbes joked with Eman-

uel onstage, discussing the mayor’s education reforms.

“It’s not a partisan thing,” he explained. “As a Republi-

can, it pains but amazes me what the mayor of Chicago is

doing.” Strange days indeed. F

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15/116MAY 5, 2 014 FORBES | 13

FACT & COMMENT — STEVE FORBES

FORBES

THE U.S. CONSTITUTIONWE CAN STILL SAVE IT

BY STEVE FORBES, EDITOR-IN-CHIEF

“With all thy getting, get understanding”

GOOD NEWS for those who be-

lieve in the rule of law: There’s a

big court case coming up that could

deal a powerfully positive blow for

the Constitution and the idea thatPresidents cannot change laws—or

decree them—at their whim. The

Affordable Care Act’s language is

explicit: If a state doesn’t set up its

own insurance exchange and the

feds have to do it instead, then buy-

ers in that state cannot get subsidies

in purchasing health insurance. The delu-

sional White House was convinced that the

law would be so popular that virtually no state

would pass up the “opportunity” to build an

exchange. Lo and behold, 34 did.It’s no surprise the federal government is

ignoring the law and paying subsidies in those

states anyway. But there is a case, Halbig v.

Sebelius, that’s challenging this arrogant tram-

pling of the rule of law. It’s currently at the ap-

pellate level but will surely wend its way to the

Supreme Court, which will then have a unique

opportunity to save our battered Constitution

from becoming a dead letter.

Crucial Read For ExecsHow does a company stay ahead in an ever

more competitive world in which great new

products seem to attract cheaper imitators—

or, worse, better versions—faster than ever

before? The first critical element is to have the

right strategy. If you don’t know where you’re

going, any road, as the adage goes, will get you

there. As FedEx founder/CEO Fred Smith

told FORBES’ publisher, Rich Karlgaard, for

his breakthrough new book, The Soft Edge

(Jossey-Bass, $28): “You can have

the best operations. You can be the

most adept at whatever it is that

you’re doing. But if you have a bad

strategy, it’s all for naught. ThinkDigital Equipment. Think Wang.

Think Lockheed in the commercial

airplane business. There were forks

in the road where these companies

chose the wrong strategy. Absent a

viable strategy, you’re in the process

of going out of business.”

Another basic, of course, is execution—what

Rich labels the “hard edge.” This area includes

speed, cost controls, capital efficiency and

managing the supply chain and logistics well.

Karlgaard cites Apple boss Tim Cook, who suc-ceeded the legendary Steve Jobs upon his death

in 2011, as the ultimate hard-edge executive.

“Hard-edge execution is all about managing

exactly to the numbers. [These executives] are

good at making the trains run on time. They

focus on profit. Their language is time, money

and numbers. Every company in the world

needs these employees, these Tim Cook types.

Companies that fail to execute precisely on the

hard edge of business will ultimately fail.”

Countless tomes and articles have been penned

on strategy and execution. Karlgaard, however,homes in on the other, oft-neglected side of the

triangle of long-term success, the so-called soft

edge. And it’s here that he makes a crucial—and

delightfully written—contribution. Whether

you’re a manager or an investor, or both, you

must put this book on your read-right-away list.

The soft edge, argues Rich, is what truly

distinguishes great companies from all the oth-

ers, what enables them to continually innovate

better than current and new competitors and

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FORBES

FACT & COMMENT — STEVE FORBES

Smarts include studying areas

outside your own. Famed San Fran-

cisco 49ers coach Bill Walsh came

up with a revolutionary offense

that forever changed professional

football by watching a high school

basketball game.The chapters on teams and taste

are superb. SAP, the software giant,

remade itself into a nimble innova-

tor by setting up “highly autonomous

‘teams of ten’ ” to push software de-

velopment. Small teams are effective,

in part because “each team mem-

ber is more likely to care about the

others” and thus share information.

Karlgaard explains the dynamics of

picking members and combining au-

tonomy and accountability. “Taste,”Rich writes, “is more than design. It’s

a sensibility that appeals to the deep-

est part of ourselves.” Steve Jobs was

a true genius at this.

Not many people would think that

stories can be a critical corporate

tool, but they profoundly are. “Sto-

ries affirm who we are, that our lives

have meaning. ... Stories are a power-

ful leadership tool. They’re the key to

a strong [corporate] culture. Stories

can turn customers into apostles andadvocates.” These days stories are

molded not just by companies but also

by customers. One example of this

phenomenon is pilots who own Cirrus

planes interacting—often cantanker-

ously, and rightly so—with company

management over aircraft-safety issues.

The Soft Edge is a tour de force, an

original work that will be of inesti-

mable value for all enterprises.

of his clients, a young man. The man’s

8-year-old daughter said at the service

that she missed her daddy but that she

knew her family would be “okay.” “I

got tears hearing that from an 8-year-

old girl. I suddenly knew that what I

was doing was very important work.”

His productivity shot up fivefold.

Technology is coming up with

ways to help measure trust within a

company, as well as to build it.

Smarts encompass the ability “to

learn new things and solve novel prob-

lems.” Smarts really haven’t so much

to do with IQ as they have to do with

“grit, courage and persistence.” Karl-

gaard cites the illustrative example ofhow Tara VanDerveer developed “one

of the most successful coaching careers

in NCAA women’s basketball history.”

One thing she did was to spend a

season watching every practice and

home game of famous coach Bobby

Knight, when he was at Indiana Uni-

versity. She took copious notes during

practices, while taking care to sit out

of the volcanic Knight’s line of sight.

Restaurants: Go, Consider, Stop Edible enlightenment from our eatery experts and colleagues Richard Nalley, Monie Begley, Randall Lane and Chef Jeff Lamperti,

as well as brothers Bob, Kip and Tim.

z Cafe Luxembourg 200 West 70th St. (Tel.: 212-873-7411)This French brasserie still delivers the goods. Youcan’t go wrong with classic onion soup, mixedgreen salad or fried baby artichokes to start.You’ll still have room for the fabulous frites, whichaccompany everything from moules to steak tar-tare, but won’t miss them if you order the heartycassoulet of pork shoulder, duck confit and garlicsausage. Finish with the apple tarte tatin.

z OlivesW Hotel Union Square, 201 Park Ave.South, at 17th St. (Tel.: 212-353-8345)Poor service and mediocre food leave you feeling“had” at this trendy restaurant. Appetizers canarrive after the entrée. Most dishes are presentedon wooden planks—not practical for ravioli or rice.The price of the iceberg lettuce wedge (omittedon the menu) is $16; a cup of chamomile tea, $7.You wouldn’t mind if the meals were memorable.

z All’onda 22 East 13th St. (Tel.: 212-231-2236)The kitchen has hit its stride at this new and totallytransformed space with the bar downstairs andthe handsome dining room one flight up. Tryrazor clams with soppressata, diced sardines ormiso-dressed salad; then move on to bucatiniwith smoked uni, Hampshire pork with smokedapples and red cabbage, or skate. Don’t pass upthe chocolate cake.

also to better weather the inevitable

storms and mistakes that are part and

parcel of the real world of business.

The big problem is that up to

now the soft edge hasn’t lent itself to

spreadsheets and management met-

rics, such as return on investment.This is why executives, directors and

investors so often ignore it, particu-

larly given the unrelenting pressures

for fast returns. List Karlgaard’s five

pillars that constitute the soft edge

and you instantly see the challenge:

trust, smarts, teams, taste, story. Rich

makes it clear he’s not talking about

the illustrations that magazines use

for stories on companies that are

great to work for, such as pails of free

candy. The soft edge involves serious,substantive stuff that’s not easy to il-

lustrate or reduce to numbers.

To flesh out each of these catego-

ries, Rich uses real-world companies

he has studied and visited, and this is

what makes the book come compel-

lingly alive. We all love stories that

teach and inspire. In the chapter on

trust, for instance, Rich focuses on

“unhip” Northwestern Mutual, whose

primary product is life insurance. The

company has achieved internal trust—that is, its employees believe in the

company’s mission and in the integrity

of the people running it. Earlier in the

book Rich cites the case of a com-

pany salesman who, because of a near

deadly accident, had lost his restau-

rant and took up selling insurance. It

was a tough slog, and the man more

than once nearly threw in the towel.

One day he attended the funeral of one F

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Startup to IPO.

Change for the better.

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CARVED INTO THE LAVA of the Big Island’s Konacoast, Kukio is Hawaii’s most exclusive community.

Most of these spreads lie behind its gates. Just to the

north is the adjacent elite neighborhood of Hualalai,

which Michael Dell acquired part ownership of in

2006. Owners in both enclaves have banded together

to form the “Kona Shuttle,” a private flying club that

whisks them from the Bay Area on Thursdays and

back again on Sundays. Kukio keeps itself so isolated

that you can’t even enter without the express permis-

sion of a homeowner.

OWNER: MICHAEL DELL, DELL INC.

ASSESSED VALUE: $64.7 MILLION

The Dell founder and CEO’s 18,500-square-foot “Raptor Residence”

has seven bedrooms, seven full baths and five half-baths.

OWNER: PAUL HAZEN, KKR


Michael Dell’s next-door neighbor has shown off his Kukio home,

10,000 square feet of pavilions, in Architectural Digest .

OWNER: GEORGE ROBERTS, KKR


Commands panoramic ocean views unmarred by neighbors.

BIRD’S EYE

CASTLES OF KUKIO

LEADERBOARDKEEPING SCORE ON WEALTH & POWER

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B Y

E R I N

C A R L Y L E

OWNER: KEN GRIFFIN, CITADEL

PURCHASE PRICE: $30 MILLION (2010 AND 2011)

The hedge fund operator has both a $17 million Balinese-style

oceanfront home and a $13 million residence 318 feet away.

OWNER: DAVID ROUX, SILVER LAKE

PURCHASE PRICE: $20 MILLION (2007)

Roux’s private equity firm helped take Dell private last year.

OWNER: DAVID L. ANDERSON, SUTTER HILL VENTURES


The Silicon Valley tech investor’s place lies two lots down from Dell’s

and has five bedrooms and five and a half baths.

OWNER: BERTIE BUFFETT


Warren’s sister paid only $3.2 million in 1997 for her 6,815-square-foot

home, which overlooks the Jack Nicklaus-designed Hualalai Golf Course.

OWNER: HOWARD MARKS, OAKTREE CAPITAL MANAGEMENT

PURCHASE PRICE: $23.8 MILLION (2009)

The official owner is a business that shares the address of Marks’ company.

OWNER: BANDEL CARANO, OAK INVESTMENT PARTNERS


This venture capitalist’s 14,680-square-foot home has seven

bedrooms and 11 baths. He co-owns it with his wife, Paula.

MAY 5, 2014 FORBES | 17

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PROMOTION | LOGISTICS

Nearly 12 million fleet vehicles

transport essential goods

across the United States on

most days, according to the U.S.

Department of Transportation. These fleets

include everything from heavy-duty trucks

to passenger cars and vans powered by

alternative fuels, all of which operate in a

complex environment defined by thou-

sands of interrelated routes, schedules,

costs, regulations and safety consider-

ations. How efficiently these vehicles per-form directly impacts not only the fortunes

of their companies, but the national econ-

omy as a whole.

“There are so many challenges that fleet

managers have to consider,” says Mark Old-

enburg, Toyota’s national fleet marketing,

mobility and strategic planning manager.

“In addition to the cost and the profitabil-

ity pressures, they must address changing

regulations, insurance, maintenance and

management of the drivers—all in addition

to identifying and acquiring the vehicles

that will best serve their businesses on aday-to-day basis.”

Strategic Cost Control The most successful fleet managers look

beyond a vehicle’s purchase price to con-

sider its total cost of ownership ( TCO). A

large part of an effective TCO equation can

be “greening the fleet” with higher fuel

efficiency—moving from conventional

internal combustion engines to electric

and hybrid vehicles or those using alterna-

tive fuels such as compressed natural gas

(CNG), liquefied petroleum gas (LPG) and,soon, even hydrogen.

“We have over 6 million Prius models on

the roads globally, and we lead all other

manufacturers in high-efficiency fleet vehi-

cles. So we are uniquely positioned to help

any company that’s focused on develop-

ing green fleets,” says Oldenburg. Toyota’s

hydrogen-powered fuel-cell vehicle will

come to market in 2015, pushing “green” to

new heights, since it will eliminate green-

house gas emissions entirely, producing only

water as the byproduct of its combustion.

Oldenburg notes that today’s technolog-

ical advancements are really helping fleet

managers: “When you go green, you can

do so and actually save money,” he points

out. “We see a lot of commercial operatorsswitching to hybrid vehicles, and the sav-

ings in fuel alone more than offsets the

costs they were incurring with less-efficient

vehicles. That is a tremendous help to com-

mercial fleet managers.”

Assuring SuccessFor maximum fleet management success,

consider these best practices:

• Make sure everyone within your organi-

zation understands that the fleet is the

lifeblood of any company strategy.• Partner with world-class providers that

can align their services and products with

your strategy.

• Spec new vehicles strategically, accord-

ing to their TCO.

“Be one of those companies that adds up

all of the costs over the life cycle of the vehi-

cle, from acquisition price to operational

efficiencies and ultimately the resale value,”

Oldenburg advises. “Ask, ‘What will be the

advantages of building a fleet of higher-

mileage vehicles? Can I reduce my insur-

ance costs? Can I reduce my maintenanceexpenses?’ Toyota is very well positioned

for all of those companies that are look-

ing to green their fleets and manage them

from a TCO perspective.” Q

Fleet Management:Green Is the Color of Success

For more information, visit

www.fleet.toyota.com

BY MICHAEL RONEY

Toyota Highlander Hybrid

Prototype shown with options. Production model may vary.

“ When you go

green, you can do so

and actually save money.That is a tremendous

help to commercial fleet

managers.”

MARK OLDENBURGTOYOTA

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Prototype shown with options. Production model will vary. ©2014 Toyota Motor Sales, U.S.A., Inc.

· CUTTING-EDGE STYLING · CELEBRATED RELIABILITY · HISTORY OF LOW COST OF OWNERSHIP

LOOKS GRE

AT ON THE R

OAD.

EVEN BETTER ON YOU

R BOTTOM L

INE.

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20 | FORBES MAY 5, 2014

LEADERBOARD

ChristyWalton

+$1.6 BILLIONNET WORTH:

$38.5 BILLION

Her Wal-Mart shares climb

and a side investment

in First Solar takes off,

extending her lead in

wealth over the rest of the

Walton family.

ChipWilson

+120 MILLIONNET WORTH:

$2.4 BILLION

A parting gift: He promised

to resign as Lululemon’s

chairman after tumult in

2013; shares rebound on

strong sales two months

before his departure.

AlfredMann

+$110 MILLIONNET WORTH:

$1.2 BILLION

Stock in his pharmaceutical

company, MannKind,

jumps 83% in a day after

FDA advisors recommend

approval of its diabetes

drug Afrezza.

Mark

Zuckerberg-$4.2 BILLION

NET WORTH:

$25.9 BILLION

Facebook plunges as

investors question big

purchases. Jan Koum’s

shares are down 15% since

February acquisition of his

company, WhatsApp.

Micky

Arison-$150 MILLION

NET WORTH:

$6.2 BILLION

Carnival announces

a quarterly loss as it

discounts cruise prices and

increases ad spending in

the wake of high-profile

mishaps.

Vince

McMahon-$360 MILLION

NET WORTH:

$1.2 BILLION

WWE’s stock slides

after FORBES quotes an

analyst skeptical about the

company’s new streaming

network, which has only

667,000 subscribers.

WINNERS

SCORECARD

S C O R E C A R D

B Y D A N A

L E X A N D E R ; B U S I N E S S S C H O O L S B Y K U R T B A D E N H A U S E N

T O P : A L E X S L O B O D K I N / G E T T Y I M A G E S ; W I L S O N : G E T T Y I M A G E

S ; Z U C K E R B E R G : D A V I D P A U L M O R R I S / B L O O M B E R G ; M C M A H O N : D A V I D

Y E L L E N ; A R I S O N : A P P H O T O / N A M Y . H U H ; S T A N F O R D : G E R I L A V R O V / G

E T T Y I M A G E S

FIGURES REFLECT THE CHANGE IN NET WORTH FROM MAR. 19, 2014 TO APR. 9, 2014.

SOURCES: INTERACTIVE DATA VIA FACTSET RESEARCH SYSTEMS; FORBES.

50 Percentage of Stanford M.B.A. students who receive

financial aid to help pay for their degree.

BUSINESS SCHOOLS

DEGREES OFHAPPINESS

THE JOB MARKET for M.B.A.s has slowed

since the recession, but a diploma still pays

off. Graduates of the top 25 programs make

almost $160,000 a year after five years, two

and a half times what they earned pre-

M.B.A., according to our 2013 Best Business

Schools ranking. But are they happier, too?

We asked 3,500 grads five years out of the

top 50 schools to rate their satisfaction with

their education, with the preparation it gave

them and with their current job. Weighing

the scores they gave, we found that Stanford,the nation’s most selective school, also has

the most satisfied graduates.LOSERS

Stanford

SCHOOL / SATISFACTION

OVERALL JOB EDUCATION PREPARATION

STANFORD

UC BERKELEY (HAAS)

CARNEGIE MELLON (TEPPER)

MICHIGAN STATE (BROAD)

INDIANA (KELLEY)

DARTMOUTH (TUCK)

DUKE (FUQUA)

RICE (JONES)

WISCONSIN-MADISON

CHICAGO (BOOTH)

RANKS ARE BASED ON SATISFACTION SCORES FROM THE 50 SCHOOLS WITH

THE HIGHEST RESPONSE RATES.

SOURCE: FORBES SURVEY OF BUSINESS SCHOOL ALUMNI.

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create tailor-mademedicine, could we stay

healthier for longer?Personalized healthcare –a dream our software could bring to life.

It takes a special kind of compass to understandthe present and navigate the future.

3DS.COM/LIFE-SCIENCES

Innovative thinkers everywhere use

INDUSTRY SOLUTION EXPERIENCES

from Dassault Systèmes to explore

the true impact of their ideas. Insights

from the 3D virtual world allow

health professionals to gain a preciseunderstanding of their patients’ medical

SURÀOH DQG WR WDLORU KHDOWKFDUH WR PDWFK

them perfectly. How long before kite

VXUÀQJ FDQ EH GRQH DW DQ\ DJH"

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LEADERBOARD


9,522 Number of backers of Oculus’ Kickstarter

campaign, which raised nearly ten times

its initial $250,000 goal.

N A V Y / W H I T E G I N G H A M S P O R T J A C K E T ( $ 2 5 0 0 . 0 0 ) ; N A V Y S H O

R T S L E E V E P O L O S H I R T ( $ 3 1 0 . 5 0 ) ; T A N T W I L L P A N T ( $ 3 8 5 . 0 0 ) B Y A S C O T

T C H A N G . A V A I L A B L E A T A S C O T C H A N G ; L E A T H E R B E L T ( $ 5 4 0 . 0 0 ) B Y B R U N E L L O C U C I N E L L I , A V A I L A B L E A T W W W . B R U N E L L O C U C I N E L L I . C O M

C E O M A K E O V E R : P H O T O G R A P H E R : J E F F F R I E D ; S T Y L E D I R E C T O

R : J O S E P H D E A C E T I S ; F A S H I O N A S S I S T A N T S : T I M A R M I T A G E A N D T A N I E R A R E I D ; N E W B

I L L I O N A I R E S B Y A L E X M O R R E L L

FORBES MAKEOVER

OCULUS VR’S PALMER LUCKEYHe just sold to Facebook for $2 billion. We give him a new look for the big time.

JOSEPH ABBOUD: The award-winning designer and

entrepreneur got his start at Louis Boston before serving

as director of menswear design for Ralph Lauren.

He launched his namesake brand in 1987 and is currently

the chief creative director for Men’s Wearhouse.

KATHY IRELAND: The supermodel turned supermogul

is the chief executive and chief designer of kathy ireland

Worldwide, a design and marketing firm she launched

in 1993. Women’s Wear Daily has named her one of the

50 most influential people in fashion.

THE VERDICT

JA: We didn’t need him to be a

shirt-and-tie guy; we just needed

to clean him up a bit. It’s a neater,

fresher, younger look.

KI:The architecture of the

after look celebrates his powerful

posture beautifully.

Before After

ENSEMBLE

JA: The big baggy jacket

and wrinkled shirt feel

like he’s a college student

and someone told him to

put on a jacket. No shape

or form.

KI: The sleeves are clearly

too long. The shoulders are

misshapen.

THE “AFTER” IMAGE IS A SIMULATED IMAGE OF WHAT PALMER LUCKEY WOULD LOOK LIKE IF HE HAD ACTUALLY PARTICIPATED IN THE FORBES MAKEOVER, WHICH HE DID NOT. NOR DOES HE ENDORSE ANY PRODUCTS PICTURED HERE.

NEW BILLIONAIRES

MIKE CANNON-BROOKES AND SCOTT FARQUHAR

SHIRT

KI: His blue shirt missed its

appointment with an iron.

SHIRT

KI: The shirt tucked in

adds a structured but still

comfortably casual look.

PANTS

JA: Khaki pants are every

young guy’s uniform.

Wearing those with a belt,

he’s buttoned up a little,

but not too buttoned up.

JACKET

JA: The checked jacket looks

youthful and goes great

with khaki trousers. Not too

studied, not too perfect.

KI: The tailoring of the

jacket is gorgeous. The cut

of the sleeves and their

length frame his hands to

say: I am strong.

TWO 34-YEAR-OLD AUSTRALIANS join the ten-figure wealth club after an invest-

ment round valued their software company, Atlassian, at $3.3 billion, making them

worth about $1.1 billion apiece. They met while studying at the University of New

South Wales and began their business in 2002, financing it on a credit card good for

$10,000. Their project- and workflow-management software is now used by 35,000

companies worldwide, including heavyweights like Facebook, Cisco and Citigroup.

The duo has done little marketing. Rather, they’ve simply sold their products on their

website. “We felt if we could sell something at a reasonable price and sell it on the In-

ternet, then we’d be able to find a market,” Farquhar says. When an order came in from

American Airlines their first year, he says, “then we knew we could scale this.”

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LEADERBOARD $85,000Total prize money of the Business Idea

Competition at Ithaca College’s School of

Business, funded by Christopher Burch.

HE BECAME A BILLIONAIRE last year after selling most of his stake in the fashion empire

he built with his ex-wife. Now he’s making new investments around the world while working to

prove that his own women’s wear chain, C. Wonder, can be more than a Tory Burch knockoff.

B Y C L A R E O ’ C O N N O R

B U R C H ; T R A I N : G E T T Y I M A G E S ; S C O T T E E L L S / B L O O M B E R G ; T O R Y B U R C H : K E V I N M A Z U / G E T T Y I M A G E S ; S H O E S : S A M U E L G R A N A D O / M

C T / N E W S C O M ; C W O N D E R : D O N A L D B O W E R S / W I R E I M A G E / G E T T Y I M A G E ; F I D E L I T Y : B R E N T L E W I N / B L O O M B E R G

STARTUP

Born in 1953 on Philadel-

phia’s Main Line; his father

has a mining equipment

business. Suffers from de-

bilitating ADD but gets into

and graduates from Ithaca

College nonetheless.

BUILDUP AND BREAKUP

The Tory Burch brand hits

the big time in 2006, with

the launch of its best-known

product, Reva $195 leather

ballet flats. The next year the

pair divorces.

WELCOME TO THE CLUB

Sells most of that 28.3% stake

in 2013, putting an end to all the

lawsuits. The sale values Tory

Burch LLC at well over $3 billion

and makes both him and his

ex-wife billionaires, joining the

FORBES list at exactly $1 billion

apiece. Through the breakup and

all the litigation, he says, “I tried

to focus as much as I could on

building C. Wonder.”

ROUGH PATCH

Sinks millions into Internet Capital Group.

It loses almost all its value in the dot-com

bust in 2001. He also backs the develop-

ment of a $100 million-plus Buenos Aires

hotel just as Argentina’s economy collapses

in the early 2000s. “At one point I thought

I’d lose everything.” But he scores a win

getting in on Voss high-end bottled water

in 2002.

GOING GLOBAL

Today he has started buying

resorts in Asia and investing

widely in consumer tech,

with a portfolio that includes

trendy online office supplier

Poppin, Jawbone fitness

wearables and Ule, a Chinese

e-commerce platform he has

gone in on with Solina Chau,

longtime partner of billionaire

Li Ka-shing.

ON HIS OWN

In 2011 he launches C. Wonder,

a chain store with clothing that

looks like Tory’s but costs far

less. A volley of lawsuits follows

that the presiding judge calls

a “drunken WASP fest.” Chris

is forced off the board of Tory

Burch LLC in 2012 but hangs on

to a 28.3% stake in the company.

SPREADING WONDER

Also in 2013 he sells 10%

of C. Wonder to Fidelity

Investments for $35 million,

using the cash to get the store

into more upscale U.S. towns

and the Middle East.

PATH TO SUCCESS

CHRIS BURCH’S RETAIL THERAPY

SHARP EYE

In 1976 starts preppy sportswear line

Eagle’s Eye with only $2,000 and places

ads in the New Yorker and Glamour .

“Every piece of merch sold out,” he says.

“I learned a lot about inventory.” It grows

until by 1989 he can sell part of it to

Swire, a Hong Kong group, in a deal valu-

ing the company at $60 million. “I wasclose to 40, and it was a lot of money.”

(Swire buys the rest in 1998.)

HEEERE’S TORY ... !

In 1996, after a failed marriage, heweds fellow divorcé Tory Robinson.

Together they create women’s wear

brand Tory Burch. “I didn’t know

if it’d be a hit,” he says, “but she

was a visionary—just unbelievably

creative. And I had experience in

the industry.”


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Is your portfolio TOO LOCAL

for a GLOBAL ECONOMY?

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Past performance is no guarantee of future results.

Stock markets are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments.

Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks, all of which are magnified in emerging markets.

1Source: MSCI All Country benchmark returns 1983−2013.2Source: Gross domestic product based on purchasing-power-parity (PPP) share of world total. IMF, Haver Analytics.3 Source: FactSet as of 11/30/2013. Data presented for the MSCI AC World Index, which represents 44 countries and contains 2,436 stocks. Theindex is not intended to represent the entire global universe of tradable securities.

Fidelity Brokerage Services LLC, Member NYSE, SIPC. © 2014 FMR LLC. All rights reserved. 675573.1.0

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of global GDP comes

from non-U.S. countries.2

of the world’s publicly

traded companies arebased in the U.S.3

only26%

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breit l ing for bentley.com

British chic, Swiss excellence: Breitling for Bentley combines the best of both worlds. Style and performance. Luxury

and accomplishment. Class and audacity. Power and refinement. Perfectly epitomising this exceptional world, the

Bentley B05 Unitime houses a Manufacture Breitling calibre, chronometer-certified by the COSC (Swiss OfficialChronometer Testing Institute), the highest benchmark in terms of precision and reliability. It is distinguished by its

exclusive crown-adjusted worldtime system featuring revolutionary user friendliness. A proud alliance between the

grand art of British carmaking and the fine Swiss watchmaking tradition.

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BENTLEY B05

UNITIME

THE ESSENCE OF BRITAINMade in Switzerland by BREITLING

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LEADERBOARD 2 MILLION Number of cases ofCirocvodka

sold annually, up from just 50,000 before Diddy

joined the company in 2007.


BACK IN 2007 Sean “Diddy” Combs teamed with Jay Z and 50 Cent to create a song titled “I Get Money: Forbes 1-2-3

Billion Dollar Remix.” Less than a decade later rappers are closing in on ten-figure fortunes. Here’s how they made it,

and, at bottom, where it would go if they put their money where their mouths are, per the lyrics of their latest albums.

B Y Z A C K O ’ M A L L E Y G R E E N B U R G

A N D

N A T A L I E R O B E H M E D

A N G E L A W E I S S / G E T T Y I M A G E S F O R C I R O C V O D K A ( T O P ) ; A A R O N D A V I D S O N / W I R E I M A G E / G E T T Y I M A G E S ; M I N D Y S M A L L / F I L M M A G I C / G E T T Y I M A G E S ; M I N D Y S M A L L / F I L M M A G I C / G E T T Y I M A G E S ; E V E R E T T C O L L E C T I O N / N E W S C O M ; J A M I E M C C A R T H Y / G E T T Y I M A G E S F O R C A

N T O R F I T Z G E R A L D

1. DiddyNET WORTH:

$700 MILLION

2. Dr. DreNET WORTH:

$550 MILLION

3. Jay ZNET WORTH:

$520 MILLION

4. BirdmanNET WORTH:

$160 MILLION

5. 50 CentNET WORTH:

$140 MILLION

HIP-HOP HOLDINGS

FROM RAP TO RICHES

Diddy’s Ciroc vodka lineearns him tens of millionsa year, and his new RevoltTV music cable networkmay one day make him

hip-hop’s first billionaire.

The superproducerleapfrogs Jay Z this year,

fueled by the runawaysuccess of Beats by Dr. Dreheadphones, a business he

cofounded in 2008.

The bulk of his wealth’sgrowth comes from

Roc Nation entertainmentcompany, worth over

$100 million after the addi-tion of Roc Nation Sports.

Cash Money Records,which he co-owns with

his brother, continues toexpand, and he’s adding

a book imprint, a clothingline and GT Vodka.

He made $100 million ofhis fortune in the 2007sale of vitaminwater.

Now he’s building brandssuch as SMS Audio andSK Energy beverages.

CASH

CLOTHES

CARS

JEWELRY

REAL

ESTATE

WINE & SPIRITS

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LEADERBOARD


463,000Total square footage of Liu Yiqian’s two

Long Museum facilities in Shanghai.

U P - A N D - C O M E R S B Y K A T H R Y N

D I L L ; T R O P H I E S B Y D A N

A L E X A N D E R

C U P : A P P H O T O /

K I N C

H E U N G

Jesse Vollmar FARMLOGSHe grew up on a midwestern farm, but his passion was always for tech. Vollmar, 25, did a brief West Coast stint participating in

startup incubator Y Combinator before returning to Michigan in 2012 to found FarmLogs, a software platform that helps farm-

ers harness data to make crucial decisions, such as which fields, according to meteorological data, will be too wet to work on a

particular day. FarmLogs exploits the reach of high-speed Internet into remote rural communities to save farmers hours of labor

a day, he says. More than 5% of U.S. farms with row crops now use the technology, which has attracted $5 million in investment.

Naveen Sikka TERVIVADespite his M.B.A. from UC Berkeley, Sikka, 35, spends much of his time these days in the field, literally. He founded Ter-

Viva in 2010. It develops new crops to thrive on land no longer being productively farmed: for example, played out acre-

age in Florida and Hawaii that once grew citrus and sugarcane. Its first commercialized crop is pongamia, a tree whose

pods can be processed into biofuels, fertilizer or animal feed. It’s similar to soy but yields up to eight times the harvest

while requiring less water—an accomplishment that has drawn $5.5 million in private capital and grants to date.

Rob Leclerc AGFUNDERLeclerc, 41, had a Ph.D. in biology and a background in artificial intelligence when he went to work with an African agribusiness

company and became fascinated with the challenge of connecting a winning idea with willing investors. In 2013 he launched

AgFunder, an online investment platform for the global agriculture industry. Handling $1.3 billion worth of projects, AgFunder

connects private and institutional investors with ventures ranging from cattle ranches in Brazil to Hawaiian dairy farms to

cloud-based ag software. He says he wants to make it the “financial infrastructure” of farming.

SEEDMONEY

UP-AND-COMERS

These innovators are finding breakthrough ways to improve life on the farm.

Do billionaires pay enough in taxes?

ASK 50 BILLIONAIRES

RICH RETURNS

FAIREST FOWLONE OF CHINA’S RICHEST MEN, Liu Yiqian, just paid$36 million for this 3-inch-wide cup covered with chickens,

making it the most expensive piece of Chinese porcelain

ever. It dates back 500 years to the Ming dynasty; there are

fewer than 20 such chicken cups in the world and none in

better condition. “If you buy Chinese art, this is the holy

grail,” said Sotheby’s expert Nicolas Chow before the sale.

Liu built a $900 million fortune in real estate and pharma-

ceuticals and is expected to display the cup at Shanghai’s

Long Museum, which he founded.

62%

YES

22%

NO

16%

NO

RESPONSE

RESPONSES TO AN ANONYMOUS POLL OF

50 MEMBERS OF THE FORBES WORLD’S BILLIONAIRES LIST.

TROPHIES

8/9/2019 Forbes - May 5 2014 USA

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Invest in futures.

ey come from humble beginnings. But even in the faceof poverty, thousands of children across the country stil lhope for a better li fe. Which is why e Salvation Army’s

youth programs offer the physical, mental, and spiritualenrichment they need to break free. All thanks to yourdonations at 1-800-SAL-ARMY or salvationarmyusa.org.

Yout h S ervi ce s Soc ial Se rv ic es Re ha bilitation Utility Assistance Emergency Response Evangelism

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LEADERBOARD

POT STOCKSFORBES, APRIL 14, 201463,308 VIEWS ON FORBES.COM

Purported legal pot and

hemp businesses are boom-

ing on the over-the-counter

penny stock market, led by

CannaVest, which senior

writer Nathan Vardi called

“the perfect window on

a huge, emerging red flag

for mom-and-pop inves-

tors looking for a way tocash in on the legalization

of marijuana.” Commenter

William Turnage wrote

that he didn’t trust Can-

naVest, but Hemp Deposit

& Distribution “has more

going for it. CEO Bruce

Perlowin of Hemp, even

though he can be slated as

a felon. … What he did in

the past would be in the

near future considereda successful business. …

Granted it was done on

the black market.” Ken-

neth Robinson warned,

“Regardless of the insight-

ful analysis of this article,

the green rush is on for

the time being. Green pot

stocks will go much, much

higher.”

SILICON VALLEY’S

SEQUOIA CAPITAL

@KANCHANKUMAR Heartwarming @sequoia

story. Confirms my belief:

VCs who think and act

like startups have better

chances of success.

@CARLOSDOMINGO

Since when is a VC

an innovation factory?

They are investors.

@CYRILEHENRY

Testimony to the upside of aclear #immigrationreform

policy.

@PMARCA

(MARC ANDREESSEN)

Inside Sequoia Capital—we

are proud to be partners

with Sequoia in a number of

great companies.

HIGHEST-PAID

BASEBALL PLAYERS

@TYSPITSTRUTHS

Really funny considering

none of those people are

that good anymore.

THE MIDAS LIST OF TOP

TECH INVESTORS

@RONNIE_MATRIX

Peter Fenton coming in at

number three? Should be

ranked second in my view.

LORD OF THE RINGFORBES, APRIL 14, 201499,926 VIEWS ON FORBES.COM

Editors Michael Solomon and Daniel Fisher reported on bil-

lionaire Vince McMahon’s bet that he can remake his $500

million (sales) business, World Wrestling Entertainment, by

launching a paid streaming service on the Internet—despite

fears that it could cannibalize his traditional pay-per-view

TV audience. He’ll need a million subscribers just to break

even, the authors calculated, and two or three times that to

make real money. One analyst predicted he’d get 6 million to 8

million. Commenter Chris Harrington found that preposter-

ous: “No serious analyst can even pretend [that’s] a seriousnumber for a company that is averaging less than 4.3 mil-

lion domestic viewers for Monday Night Raw.” Tony Pet-

zold saw it differently: “Something approaching that should

prove possible in time as the ability to subscribe to the net-

work expands overseas.” The market apparently agreed with

Harrington: The website Wrestling Rumors reported that

“shortly after the article came out … WWE’s stock took a

dramatic fall … dropping 2.18, about a 7.34% decrease,” and

the stock had dropped another 22% by press time. A. Simon

foresaw trouble even if streaming takes off: “Just imagine

WWE is successful with this over-the-top expansion cam-

paign and manages to double and even triple the value ofits shares. Then what? Where to expand next? … Not much

left. They can start to raise dividends extremely, which in

turn (coupled with the lack of further really big growth op-

portunities) would greatly reduce the value of the shares

… quite a big problem ... depending on how much of a loan

they took out to finance their growth.” WWE has come a

long way already, though; it was a modest regional operation

when McMahon took it over in 1982. “Now who would have

thought you could grow WWE into a multi-billion-dollar

business,” said Pascal Terjanian.

FAVORITETWEET@pmarca (Andreessen on

two fictional companies

in HBO’s sitcom Silicon

Valley ):

I’m still kicking myself

for missing out on Hooli.

Luckily we managed to get

a little money into Aviato. T O P : G A R Y M O R R I S O N /

G E T T Y I M A G E S

ACTIVE CONVERSATION

$3.2 MILLION Amount of marijuana tax

(both sales and excise) collected

by Colorado in February.

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34 | FORBES MAY 5, 2014

THOUGHT LEADERS

PAUL JOHNSON — CURRENT EVENTS

AS Mein Kampf makes clear, Hitlersought to unite all the people of Ger-man speech and culture into one state,or Reich, preferably by peaceful nego-tiation, otherwise by war and conquest.

To do this Hitler needed to void theprovisions of the Treaty of Versailles,which Germany had signed after itsdefeat in the Great War of 1914–18.First he marched into the Rhineland,

which had been demilitarized underthe treaty, stationing regular armydivisions and tanks there. The Allies—Britain and France—did nothing.

Next Hitler marched into German-speaking Austria—an annexationknown as the Anschluss. Having beenstripped of their empire, the Austrianswere glad to become part of a mightyReich. Again, the Allies did nothing.

Hitler’s next claim was the Sude-tenland. This was a territory on the

border of Czechoslovakia inhabited by aGerman-speaking people who were ab-sorbed into the new state against theirwill. The Allies allowed this landgrab tostand in an agreement reached at a Sep-tember 1938 Munich summit meeting.British Prime Minister Neville Cham-berlain, who negotiated the agreement,argued that Hitler was merely assert-ing the rights of the Sudeten Germans,who wanted to belong to his Reich.

The falsity of Chamberlain’s position

and Hitler’s deceit were proved withinmonths. The Sudetenland’s annexationhad made the Czech frontier indefen-sible, and in March 1939 Hitler invaded.The Czechs put up no resistance, andthe rest of the country fell into Hitler’shands without a shot being fired.

Alarmed, the Allies signed a pro-tective treaty with Poland. But Hitler

also had claims against the Poles, inparticular the German-speaking port ofDanzig. When he invaded in September1939, the Allies reluctantly fought.

Had the Allies stopped Hitler atthe beginning, when he was remili-tarizing the Rhineland, he’d havebeen overthrown and World War IIavoided. But the only one pointing

this out was Winston Churchill—andhis was a lonely voice.

Today’s drift toward war with Russiaseems like a replay of the past. Putin isa Russian nationalist, whose goal is toreverse the events of 1989—the end ofthe Soviet state and dissolution of itsenormous empire. He seeks to do this byusing what remains of Russia’s Stalinistheritage: the military, a huge stockpileof nuclear weapons and immense re-sources of natural gas and other forms of

energy—powerful tools to wield againstthe various weak states that were part ofthe U.S.S.R. None has nuclear weapons,and most are dependent on the (rela-tively) cheap energy Russia supplies.All have ethnic Russian minorities, whospeak the language, boast of their supe-rior Russian culture and claim to havebeen relegated to second-class citizen-

ship. Putin can rely on these minori-ties to agitate for Russian interventionwhenever he wants—most importantlyin the Baltic states of Estonia, Latvia andLithuania. His successful annexationof Crimea is greatly encouraging to hislong-term plans, and it’s clear he’ll useeverything in his power, including mili-tary force, to reconstruct his empire.

SHADES OF MUNICHWhat’s to stop Putin? The West is ledby the modern equivalents of Cham-berlain: President François Hollandeof France is a political nonentity repu-diated by his own compatriots; PrimeMinister David Cameron of Britainand Chancellor Angela Merkel ofGermany have both ruled out the useof force to stop Putin from annexingUkraine; and worst of all, PresidentBarack Obama—the one man who has

the power to stop Putin in his tracks—does nothing. He makes Neville Cham-berlain seem like a bellicose activist.

The U.S., thanks to the fracking revo-lution, has the means to meet the energyneeds of all the former Soviet states.It could move troops and aircraft intoUkraine within 24 hours, and its fleetscould ensure protection to the Balticstates in a way that Putin would findunanswerable. Yet Obama makes nodecisive moves. What ails the man? Is it

cowardice? Indecision? A kind of exec-utive paralysis? Clearly there’s some-thing fundamentally wrong with theU.S. President. Meanwhile, Putin, whoruns what is, in essence, a second-ratenation, behaves as if he rules the Earth.

Sadly, there is no Churchillianvoice to sound the alarm and call thedemocratic world to action.

IS VLADIMIR PUTIN

ANOTHER ADOLF HITLER?

PAUL JOHNSON, EMINENT BRITISH HISTORIAN AND AUTHOR; DAVID MALPASS, GLOBAL ECONOMIST, PRESIDENT OF ENCIMA GLOBAL LLC; AMITY SHLAES, DIRECTOR, THE 4% GROWTHPROJECT, GEORGE W. BUSH INSTITUTE; AND LEE KUAN YEW, FORMER PRIME MINISTER OF SINGAPORE, ROTATE IN WRITING THIS COLUMN. TO SEE PAST CURRENT EVENTS COLUMNS,VISIT OUR WEBSITE AT WWW.FORBES.COM/CURRENTEVENTS.

F

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36 | FORBES MAY 5, 2014

THOUGHT LEADERS

DAVID MALPASS — CURRENT EVENTS

THE FEDERAL RESERVE is end-

ing its policy known as quantitative

easing by tapering its bond purchases

and the buildup of idle bank reserves.

This is already helping bank lending.

The prospect of a further gradual

normalization of Fed policy should

lift economic growth above its devas-

tating “new normal”—the slow GDP

growth and high unemployment that

have prevailed since 2008.The conventional view was that

the Fed could be stimulative by buying

bonds, setting interest rates near zero

and adding massive bank reserves. Fi-

nancial markets advertised the policy

as “easy money,” but none of the chan-

nels worked. Instead, growth in GDP,

wages, jobs, credit, the M2 money

supply, bank lending and bank depos-

its were all notably weak, causing a

grinding multiyear decline in middle-

class living standards.The Fed’s stated goal with QE was

to lower long-term interest rates, not

increase credit or bank lending. Since

the 2008 economic crisis the regu-

latory goal has been to reduce bank

leverage and risk, restraining growth

in total credit, even as the Fed guided

more credit to upscale bond and se-

curitization markets.

Well-established long-term bor-

rowers that didn’t need help got more

credit while riskier new borrowerssaw less credit and created fewer jobs.

The end result was contractionary.

The Fed began winding down

its QE program on Jan. 1, sparking a

surge in commercial and industrial

lending. This type of bank lending is a

critical, traditional source of credit for

small businesses and startups. Growth

was weak in 2009–13 but jumped to

a 16% annual rate in the first quarter,

when the taper started.

The 2014 change in the Fed’s di-

rection is dramatic and should help

growth. After increasing its bond

holdings and bank reserves by $1 tril-

lion in 2013, the Fed plans to limit the

increase to $500 billion in 2014 and

$0 in 2015. This will allow the privatesector to make a pro-growth mirror-

image change in the mix of its lend-

ing. Rather than creating new long-

term loans to replace the Fed’s huge

demand for long-term high-quality

debt, lenders are gearing up to provide

a more normal allocation of loans—by

adding short-term floating-rate loans

that help small and new businesses.

BANK RESERVES NOT LINKED

Once the Fed stops buying bonds, itsbank reserves—the IOUs the Fed uses

to pay banks for its bond purchases—

will peak at roughly $3 trillion in late

2014. In the past bank reserves were

considered high-powered money,

so changes affected bank lending.

Commercial banks were required to

hold sizable reserves to back their

depositors, so a peak in bank reserves

would have caused restraint on the

banking system’s ability to accept

more deposits and make more loans.

In recent decades U.S. regulators

have moved away from using bank

reserves to control bank lending, pre-

ferring direct regulation of banks. At

his Apr. 3 press conference European

Central Bank President Mario Draghi

delinked bank reserves from mon-etary policy, instead emphasizing the

importance of the euro exchange rate

in evaluating monetary policy.

In addition to its bond-buying, the

Fed has hoped that near-zero interest

rates would be stimulative. Rate cuts

may work when rates are close to nor-

mal and reductions encourage borrow-

ers, but for more than five years the

Fed has been imposing near-zero rates.

That’s a level suitable only for extreme

financial emergencies and is so farbelow a market-based rate that it acts

more like a price control on credit than

a stimulus policy. One of the clearest

precepts of economics is that price

controls distort markets and reduce

supply, thereby hurting new entrants,

while removing price controls repairs

the damage.

The next step in the policy recov-

ery may come if real GDP growth

pushes convincingly above 3.5% for

two quarters, as I expect it will. Thisshould force the Fed to relent on its

policy of near-zero interest rates. Wall

Street won’t like it, but small increases

in interest rates would allow interbank

markets to rebuild and market-driven

credit allocation to gradually reassert

itself, helping small businesses and the

middle class finally make progress.

MONETARY POLICY RELIEF

FINALLY ADDING GROWTH

DAVID MALPASS, GLOBAL ECONOMIST, PRESIDENT OF ENCIMA GLOBAL LLC; PAUL JOHNSON, EMINENT BRITISH HISTORIAN AND AUTHOR;AMITY SHLAES, DIRECTOR, THE 4% GROWTH PROJECT, GEORGE W. BUSH INSTITUTE; AND LEE KUAN YEW, FORMER PRIME MINISTER OF SINGAPORE,ROTATE IN WRITING THIS COLUMN. TO SEE PAST CURRENT EVENTS COLUMNS, VISIT OUR WEBSITE AT WWW.FORBES.COM/CURRENTEVENTS.

F

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THOUGHT LEADERS

BJØRN LOMBORG — CAPITAL FLOWS

A LOT OF well-meaning people

argue that to tackle global warming

we need to stop investing in fossil

fuels.

World Bank President Jim Yong

Kim tells us that because of global

warming, pension funds should drop

fossil fuels and instead invest in

“green assets” for the sake of future

pension holders.

Yes, global warming is a problem,caused by CO

2 emissions from fossil

fuels. But divestment puts the cart

in front of the horse and misses the

real solutions. In the meantime, it is

simply a great way to feel good with

other people’s money.

We don’t burn fossil fuels to

annoy environmentalists but be-

cause these fuels power almost ev-

erything we like about modern life:

They feed us, warm us, transport us

and keep the lights on while power-ing industry and the Internet.

Today we get 82% of our energy

from fossil fuels—and even in 2035

fossil fuels are expected to provide

80% of a much higher amount of en-

ergy consumption.

Cheap power is an amazing way

to improve living standards. Over

the past 35 years China has lifted

500 million people out of poverty—

not through inefficient wind tur-

bines but with lots of cheap (and

polluting) coal.

Since the 1970s we have beentold that soon, very soon, renew-

ables will be profitable. Yet they are

still not generally competitive and

won’t be anytime soon. We spent

$101 billion in green

subsidies in 2012, and

the International En-

ergy Agency estimates

that we’ll be spending

$220 billion per year

in 2035.

Wishful thinkingdoes not make these

realities go away.

Instead of campaign-

ing for unrealistic

divestment from fossil

fuels, we should focus

on increasing public

investment in green

R&D to ensure the

next generations of green technolo-

gies will eventually become so cheap

that everyone, including China and

India, will switch.

Take a look at how fossil-fuel

stocks have performed over the past

12 years, in comparison with renew-

able energy securities. The STOXX

Global 1800 Oil & Gas Index includes

traditional oil companies like Exxon

Mobil and Chevron. The RENIXXRenewable Energy Industrial Index,

created in 2002, is the world’s oldest

green energy stock index, includ-

ing electric car maker Tesla Motors

and wind turbine bellwether Vestas.

Based on these indexes, $100 invest-

ed in 2002 in fossil fuels would be

worth about $252 today, whereas the

same $100 invested in renewables

would be worth about $34.

Shrewd green campaigners claim

divestment can actually increaseyour returns. Invariably, they rely

on favorable dates of comparison

and include in the “green energy”

bucket conglomerates like Siemens,

Honeywell, ABB and Philips, which

allocate a minority of their efforts to

renewables.

Bottom line, as the graphs show:

Over most time periods you would

have lost money had you switched

out your fossil-fuel stocks for renew-

able energy ones. The difference isespecially striking during the cur-

rent bull market, which began in

March 2009.

So the real question for the

would-be divesters remains: When

you look at the performance of the

two stock indexes, where would

you rather have had your pension

money placed?

FEELING GREEN WITH

OTHER PEOPLE’S MONEY

BJØRN LOMBORG IS PRESIDENT OF THE COPENHAGEN CONSENSUS CENTER AND AUTHOR OF THE SKEPTICAL ENVIRONMENTALIST.

F

’ ’ ’ ’ ’ ’ ’

GREENS’ RETURNS ARE IN THE REDPerformance of fossil-fuel stocks has exceeded that of

renewable energy stocks.

STOXX Global Oil & Gas

RENIXX Renewable Energy

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40 | FORBES MAY 5, 2014

THOUGHT LEADERS

RICH KARLGAARD — INNOVATION RULES

plied when you read an annual report

in which the company brags about

the size of its R&D budget. (What

company doesn’t brag about this?)

But R&D, while vital to an innovative

response and future health, is not

sufficient by itself.

From an army of tech wizards

who apply the latest cutting-edge

advantages in big data, cloud, mobile,social and so forth? Ah, that must be

it! Think again. A technology advan-

tage doesn’t last as long as it once

did—consider weeks and months, not

years and decades.

A healthy innovative response

comes from a deeper place within

your company. But it begins some-

where, and that somewhere is what I

call the “Soft Edge.”

ƀ Trust. This may seem like a fuzzy

concept in terms of ROI. But with-out trust you’ll never create always-

on innovation. Employees who lack

trust will never share their best ideas.

Without trust customers will drop

you at the first chance and sharehold-

ers will sell or sue. Here’s another

thing to consider: Pollsters report that

trust is in tatters everywhere in the

YOUR COMPANY’S HEALTH

THE SOFT EDGE

RICH KARLGAARD IS THE PUBLISHER AT FORBES. HIS LATEST BOOK, THE SOFT EDGE: WHERE GREAT COMPANIES FIND LASTING SUCCESS , CAME OUT IN APRIL. FOR HIS PAST COLUMNS AND BLOGS VISIT OUR WEB SITE AT WWW.FORBES.COM/KARLGAARD.

ARE YOU healthy? People who

enjoy long-term health don’t have

episodic bursts of health. They’re

healthy nearly all the time. Their im-

mune systems fight off threats. Can

the same be true of companies?

Yes—innovation must be more

than episodic. Don’t confine it to a

laboratory, a hackathon, a TED talk

or a building with a pirate flag. Make

it systemic and automatic so that itoccurs always and everywhere inside

your company.

Why do some companies have a

better innovation response than oth-

ers? From where does such vitality

come? From the chief executive? This

might be true in a small percentage of

companies. But even for those rela-

tively few, it’s worth noting that CEOs

don’t stay on the job forever.

From clever strategy? If you think

so, then you must believe your strat-egy will always be the correct one.

But in all of history you’ll not find a

single company that has always had

great strategy. History is littered with

apparently solid companies that were

suddenly undone by wrong strategic

assumptions and bad bets. Eastman

Kodak, anyone?

From flawless management? “Ab-

bott Laboratories, Digital Equipment

Corp., H.J. Heinz Co., Masco Corp.

and J.P. Morgan & Co. have been cho-sen by Dun’s Business Month maga-

zine as the five best-managed com-

panies of 1986,” begins a Los Angeles

Times story on Dec. 1, 1986. Note that

Digital Equipment Corp. is on this

list. But beneath the headlines DEC’s

immune system was already begin-

ning to fail.

From large bets on research and

development? That’s certainly im-

economy: in the private, public and

nonprofit sectors. Trust, therefore, is

more valuable than ever.

ƀ Smarts. Silicon Valley and Wall

Street swoon at the sight of geeks who

score 800 on their math SATs. But

these are algorithmic businesses that

require having a few stars with water-

boiling IQs. For entire organizations

smarts come from a different place

than IQ. They come from grit, deter-mination, empathy and purpose.

ƀ Teams. The best teams are—and

always have been—small, made up

of 2 to 12 people who complement

one another’s skills. The 4 Beatles.

The 12 disciples. Team Alpha in the

U.S. Army’s Special Forces. Amazon’s

2-pizza rule. The real genius of Steve

Jobs wasn’t his own brilliance: It

was the way he sought out his perfect

complements, from Steve Wozniak

to Tim Cook.ƀ Taste. It’s the word Steve Jobs used

when he described Apple’s unique

but universal aesthetic appeal. The

chief designer of Specialized Bi-

cycles, Robert Egger, calls it “the elu-

sive sweet spot between data truth

and human truth.” If you d

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