forbes - november 3 2014 usa

8/9/2019 Forbes - November 3 2014 USA

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HOW BUFFETT SAVED DOW NEW TRICK TO RETIRE RICH129(0%(5 ( ' ,7 ,21

EVAN SHARP,BEN SILBERMANN

SOCIAL MEDIASMAD MEN

PINTEREST HAS A $5 BILLION VALUATION AND A REVENUE MODELTHAT PUTS FACEBOOK AND TWITTER TO SHAME.

MOVE OVER,ZUCK

S P

E C IA L I S S U

E

B E S T

E N T R E P R E N E

U R S

50HOTTESTGROWTHSTOCKS


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FEATURES70 SOCIAL MEDIAS NEW MAD MEN

Facebook monetizes the past. Twitter the present. Pinterest,by organizing your wishes and dreams, can identify whatyou might do or buy in the future. Thats a model worth

$5 billion for the social network with almighty Google in itssights.

BY JEFF BERCOVICI

84 RETAILS NEW POWER COUPLENot many billionaire startups are run by a wife and husband

with three little kids. In fact, theres only one. Inside theexhausting but successful balancing act at Houzz.

Plus: Americas 50 Best Small Companies.BY GEORGE ANDERS

92 FACTORY OF THE FUTURE Vicki Holt is turning the manufacturing process

on its headand makingProto Labs a pure tech play.

BY HOLLIE SLADE

98 THE MONEY IN MUNCHIESOnce a tiny kettle chip company, Inventure has branched

out into healthier snacks with higher margins.Where does it go from here?

BY KARSTEN STRAUSS

106 SHALE ELUJAH!Bad timing and the nancial meltdown almost killed

Dow Chemical. And then Daniel Loeb put a bulls-eye onCEO Andrew Liveris. Two saviors have now arrived:Warren Buffett and shale gas.

BY DANIEL FISHER

Contents // NOVEMBER 3, 2014 VOLUME 194 NUMBER 6

Jamel Toppin Photographer

Forbes Feature

Jamel Toppin Photo

Forbes Cover


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6 FORBES NOVEMBER 3, 2014

NOVEMBER 3, 2014

13 FACT & COMMENT STEVE FORBESWhy stocks are wobbling.

LEADERBOARD18 WHICH ZIP CODE ARE YOU?

90210 grabs the glamour, but theres much to be said for

historic 10011 (Greenwich Village) and sky-high81656 (Woody Creek).

20 SOMETHING TO TALK ABOUTBrian Kim Bum-Soo chats his way into the ranks of

the worlds richest.

22 KILLING ITThe highest-earning dead celebrities.

24 THE SUM OF OUR FEARSDisease data through the decades.

26 THE $2 BILLION HOTELA century between the sheets at the Waldorf.

28 SOCIAL SESSIONCharles Schwab answers your questions.

30 ACTIVE CONVERSATIONJerry Yangs Alibaba jackpot.

THOUGHT LEADERS32 INNOVATION RULES RICH KARLGAARD

Are you maneuverable?

18

40 50

22


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34 CURRENT EVENTS LEE KWAN YEWTragedy at sea and on land.

36 CURRENT EVENTS PAUL JOHNSONFrances disastrous example.

STRATEGIES40 THE OIL PATCH PRINCE

Six years ago Bryan Sheffield had no energy industryexperience. Today hes on track to become a billionairebefore his 40th birthday. How it happened is one of the

greatest Texas oil stories of all time.BY CHRISTOPHER HELMAN

46 BIOTECHS BUILDERAs the tech industry falls back in love with urban

America, Joel Marcus, landlord to the booming biotechbusiness, is perfectly positioned to strike it rich.

BY MATTHEW HERPER

TECHNOLOGY50 DINNER TAKE ALL

Munchery hopes stone-cold logistics will help it win thewar over the evening meal.

BY ELLEN HUET

54 HIDDEN TREASUREMiners are developing new techniques to nd deposits of

ore deep underground.BY DANIEL FISHER

INVESTING56 ROTH ROAD TO RICHES

If you make over $200,000 a year, you have two choices:Read this article and cut your taxes, or needlessly fatten

Uncle Sam.BY ASHLEA EBELING

62 PORTFOLIO STRATEGY KEN FISHERThe secret indicator that bulls will love.

64 INVESTMENT STRATEGIES WILLIAM BALDWINDont worry, be wealthy.

66 BOND SENSE BONNIE BAHADiscordant principles of debt.

LIFE

112 THE TAO OF TAOSBillionaire Louis Bacon purchased the soulful NewMexico ski valley with one goal in mindto make it

Americas next great downhill mecca.BY EVERETT POTTER

120 THOUGHTSOn art and design.

84

98

106

NOVEMBER 3, 2014


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Achieve nancial securitywith a plan that addresses risk rst.

Create your nancial plan with a Northwestern Mutual

Financial Advisor. Together, well design a disciplined andbalanced approach to protecting, accumulating and managing

your wealth, so you can take advantage of lifes opportunities.

Whos helping you build your nancial future?

northwesternmutual.com

Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company, Milwaukee, WI (NM) and its subsidiaries. Securities offered through Northwestern Mutual Investment ServicesLLC, broker-dealer, registered investment adviser, subsidiary of NM, member FINRA and SIPC. NCAA is a trademark of the National Collegiate Athletic Association.


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Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company, Milwaukee, WI (NM) and its subsidiaries. Securities offered throughNorthwestern MutualInvestment Services, LLC, broker-dealer, registered investment adviser, subsidiary of NM, member FINRA and SIPC. NCAA is a trademark of the National Collegiate Athleti

Follow nancial principles, not fads or trends.

Create your nancial plan with a Northwestern Mutual

Financial Advisor. Together, well design a disciplined andbalanced approach to protecting, accumulating and managing

your wealth, so you can take advantage of lifes opportunities.




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NOVEMBER 3, 2014 FORBES | 11

CHIEF PRODUCT OFFICERLewis DVorkin

FORBES MAGAZINE

EDITORRandall Lane

EXECUTIVE EDITORMichael Noer

ART & DESIGN DIRECTORRobert Mans eld

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 ASIAKashmir Hill SILICON VALLEY

Janet Novack WASHINGTONMichael K. Ozanian SPORTSMONEY

Mark Decker, John Dobosz, Deborah Markson-Katz DEPARTMENT HEADSAvik Roy OPINIONS

BUSINESSMark Howard CHIEF REVENUE OFFICER

Tom Davis CHIEF MARKETING OFFICERCharles Yardley PUBLISHER & MANAGING DIRECTOR FORBES EUROPE

Nina La France SENIOR VP, CONSUMER MARKETING & BUSINESS DEVELOPMENTJack Laschever PRESIDENT, FORBES CONFERENCES

Michael Dugan CHIEF TECHNOLOGY OFFICERElaine Fry SENIOR VP, M&D, CONTINUUM

FORBES MEDIA

Michael S. Perlis PRESIDENT & CEOMichael Federle CHIEF OPERATING OFFICER

Tom Callahan CHIEF FINANCIAL OFFICERWill Adamopoulos CEO/ASIA FORBES MEDIA

PRESIDENT & PUBLISHER FORBES ASIARich Karlgaard PUBLISHER

Moira Forbes PRESIDENT, FORBESWOMANMariaRosa Cartolano GENERAL COUNSEL

Margy Loftus SENIOR VP, HUMAN RESOURCESMia Carbonell SENIOR VP, CORPORATE COMMUNICATIONS

FOUNDED IN 1917B.C. Forbes, Editor-in-Chief (1917 54)

Malcolm S. Forbes, Editor-in-Chief (1954 90)James W. Michaels, Editor (1961 99)William Baldwin, Editor (1999 2010)

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 rms. 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.

NOVEMBER 3, 2014 VOLUME 194 NUMBER 6

The Ad Worlds

New RealityBY LEWIS DVORKIN

Journalists prefer to think about their stories. Its their job,after all. Its also a nice escape from reality. I once heard ArthurSulzberger, the publisher of the New York Times , recommendthat his reporters sit down with an engineer to learn about thedigital world. I would suggest journalists have lunch with an adguy, too (perish the thought). If they did, heres a bit of what theywould learn about the changing online advertising business:

Ad Viewability: Only 5 out of 10,000 readers click on a displayad, but at best only 70% of Web ads are seen in the rst place,as dened by an industry requirement gaining momentum that50% of an ad must be in view for one second for the marketer topay up.

Fraudulent Traffic: The Wall Street Journal reported that 36%of Internet traffic is fake, generated by phony websites thathijack traffic to collect ad dollars from campaigns bought oncomputer exchanges. Thats a scary number to marketers whoalready question the efficacy of digital marketing.

Advertising Metrics: The new wrinkle (related to ad view-ability) is selling advertising based on time and attention, or

engaged time. One nancial magazine is promising 250 hoursof in-view time for a marketers ad.

Programmatic Buying: Money continues to pour into com-puter exchanges that match marketers and audience segmentswith increasing precision. Its a world of microseconds andalgorithmshumans need not apply.

Native Advertising: Once the death of journalism, everyimportant journalistic enterprise is now in the mix with a pro-fessed differentiated offering. FORBES led the way in 2010, andnow 50 marketing partners publish content on Forbes.com or inour magazine.

John Wanamaker, the marketing pioneer, once said: Halfthe money I spend on advertising is wasted; the trouble is Idont know which half. The print business prospered underthose conditions for decades. The Internet promised detailedknowledge about which half worked. For the longest time theWanamaker adage played out much the same way on the Web,too. Now ad technology makes it impossible to hide from theeffectiveness of a digital ad.

FORBES saw all this coming years ago, confronting theseand other disruptions head-on with innovative solutions. Werecontinuing to do that, knowing our transformation means betterproducts for loyal readers and a stronger business for us. F


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Together, well create ablueprint to guide your nancial life.

Get the guidance you need to navigate the nancial world.

At Northwestern Mutual, we take a disciplined and balancedapproach to nancial planning. Together, well help build your

nancial future on time-tested principles, not market trends.


Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company, Milwaukee, WI (NM) and its subsidiaries. NCAA is a trademark of the NaCollegiate Athletic Association.



17/126NOVEMBER 3, 2014 FORBES 13

WHY STOCKS AREWOBBLINGBY STEVE FORBES, EDITOR-IN-CHIEF

With all thy getting, get understanding

unleash a torrent of new investment.Following the elections look for intensepressure on the White Housefromboth partiesfor it to do more overseas,such as arming beleaguered Ukraine.

At any rate, trying to time the marketis a fools game. Ride the storm. After2016 the U.S. will experience a Reagan-esque revival. Markets will go up beforethen in anticipation of a better era ahead.

HERE ARE FIVE basic reasons whystocks are shaky.

The U.S. Senate. Despite PresidentObamas abysmal approval ratingson all fronts, Republican capture ofthe Senateif some polls are to bebelievedis suddenly in doubt. ThatSouth Dakota, once a surere GOPpickup, is in play is the latest shock toRepublican hopes. A GOP-dominatedupper house would severely limitObamas ability to do more harm,which would be great for equities.

Misbehavior by the Fed. Fed hints that it will con-tinue to muck up credit markets (see below) is a set-back to job-creating new and small businesses.

The prot picture is getting blurry. Reported prof-its are, overall, still moving up, but the more realisticmeasure of earningsthe Bureau of Economic Analysisnational income and product accountsis less cheery.NIPA numbers come from tax returns; thus, theres noincentive for companies to inate their bottom lines. ),& )()'# - , ' -- Germanys economicgrowth is coming to a stop, and the rest of the Euro-pean continent is either in recession or barely showinga pulse. Brazil is slumping, as is Japan. Chinas eco-nomic growth is problematical. Indias new reformgovernment has been overly cautious, so far. The U.S.economy is still stuck in a 2.5% growth rut.

The world security situation is worsening. OurPresidentwho, in comparison, makes Jimmy Carterlook like a Ronald Reaganresolutely sticks to hisadolescent far-left worldview, that the U.S. is a globalmenace and must therefore take an isolationist stance.The bungling of the Ebola outbreak only underscoresthe sense that things are drifting dangerously.

Not all is gloom and doom, however. The GOP, inspite of itself, will do well next month. While earningsarent surging, corporate balance sheets are in excel-lent shape. Any positive change in business taxes nextyeartheres a congressional consensus on thiswould

FACT & COMMENT STEVE FORBES

More MalpracticeFrom the Fed

The Federal Reserve is reportedly upset about the dol-lars recent strength, fearing this will foil its desire tocreate a certain amount of ination and thereby retardeconomic growth. In the Feds mind a more musculargreenback will also hurt exports, which will be anothergrowth dampener. The result, the central bank is mut-tering, may be the postponement of previously hinted-at increases in interest rates, starting in mid-2015.

The Feds new fears are bad news, because actingon them will bring about that which Janet Yellen & Co.is purportedly worrying about: a weaker economy. Itnever occurs to the central bank that its actions afterthe 200809 panic have been the biggest barrier to avigorous economic rebound.

Credit is critical for commerce, from nancing inven-tories and purchases to expanding existing businessesand starting new ones. The depth and breadth of U.S.capital markets has been a huge advantage in our abilityto nurture new companies and provide the lubrication forbusiness everyday needs. The Feds unending schemesfor stimulating the economyfrom Operation Twistto all the variations on quantitative easinghave hadthe unintended consequences of seriously distortingand hindering the functioning of our credit marketsand, hence, our economys ability to expand.

Interest rates are the cost of credit. Suppress-


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FORBES

FACT & COMMENT // STEVE FORBES

ing these prices clogs the arteriesof commerce. The federal govern-ment has had easy and cheap accessto money (decits without tears),as have most large companies. Forother commercial enterprises, how-ever, the situation has been a lotmore difficult and uncertain. Forexample, the size of credit lines isreduced, the conditions under whichmoney is loaned more stringent andpersonal guarantees far more fre-quently demanded.

Perversely, bank regulators stillcast a gimlet eye over most loans tomost nonbig businesses. Strengthenyour capital position is an ongoingregulatory admonishment to banks,which has the effect of suppressingvibrant lending.

The Federal Reserve has suckedup vast amounts of cash to nance itspurchases of long-term governmentbonds and mortgage-backed securi-ties. The private sector has been hurtcorrespondingly.

The Fed publicly frets over thethreat of deation. But its actions aredeating the economy, not to men-tion commodity markets. Speculatorslong in gold and oil, take note.

Our central banks obese balancesheet has blinded observers to thecontractionary effects of the Feds ac-tions. Yes, bank reserves have prolif-erated faster than horny rabbits. Butthanks to regulatory restraints andthe pressure to load up on more capi-tal, as well as the addictive nature ofreceiving interest on those excess re-serves, a corresponding expansion inlending hasnt occurred. The growthin the M2 money-supply numberhas been anemic, a stunning contrastwith the 1970s, when a bulge in re-serves far smaller than todays led toan explosion in the cost of living. Inthose days the Fed bought only short-term Treasurys, regulatory barriersto lending were comparatively mild,and there was no across-the-boardsuppression of the price of credit.

The Federal Reserve did immense

harm in the 1970s. Its doing so againnow, albeit in a far different manner.

Astonishingly, then and now, criti-cism of the Fed is mostly muted. Thisever more powerful and disruptiveentity is the ultimate Teon-coatedinstitution.

F

The Virus ofBad MoneyThe Wall Street Journal recently rana story entitled Devaluation GainsCurrency, which began with this sen-tence: The worlds export engines aresputtering, putting new pressure onmany nations to weaken their curren-cies to jump-start their economies.

That tactic worked so wellnotin the early 1930s, when slumpingnations desperately engaged inwholesale devaluations, a phenom-enon dubbed beggar thy neighbor atthe time. That miserable experienceled to new post-WWII institutionsthat were created to prevent such acalamity from happening again.

Were not about to experienceanything on the scale of the GreatDepression, but what is unfoldingdemonstrates the poverty in econom-ic understanding these days.

The reason for disappointingsales, whether overseas or domestic,is bad government policies: excessivetaxation, job-killing labor regula-tions, obscene levels of governmentspending (governments dont createresources; they seize them from theproducers of products and services),an expanding scale of government/ corporate cronyism, a never-endingblizzard of bewildering rules andedicts and, of course, misbegot-ten monetary policies. If countriesfocused on slashing tax rates andstabilizing their currencies, thepulse of commercial activity wouldquicken overnight, thereby creatingconditionsread: pressurefor othergrowth-creating reforms.

Adam Smith in The Wealth of Na-

tions demolished the mercantilistdogma that erecting barriers to im-ports and subsidizing exports was theway to wealth creation. Trade is notzero-sum; both parties benet froma transaction. A merchandise tradedecit is not the equivalent of a com-panys losing money; its an account-ing artifact (with brief exceptions, wehave had a merchandise trade decitfor more than 400 years, ever sinceJamestown was settled in 1607).

For the Federal Reserve to belly-ache about countries weakening theircurrencies is a hoot, considering theU.S. has been a chronic currencymanipulator since it blew up thegold-based Bretton Woods systemin 1971. The latest bout of monetarypolicy wrongdoing was created inthe early part of the last decade byPresident George W. Bushs TreasuryDepartment, with the connivanceof the Fed. It was decided to gradu-ally weaken the greenback in orderto combat our trade shortfall. Theresult has been catastrophic. Whena crucial currency is undermined,money races to such hard assets ascommodities and houses. Productiveinvestment withers. The price of oil,which had averaged little more than$21 a barrel since the mid-1980s, shotoff like a rocket. That surge led manyto believe we were running out ofthe stuff, which was a catalyst (alongwith the unfounded fear the Earthwas about to be fried by the sun) forhundreds of billions of dollars in sub-sidies for alternative energies.

When monetary policy straysfrom maintaining a sound currencyand dealing decisively with the oc-casional nancial panic, mischiefalways results.

The sobering danger in this is notthe lost economic growth but the po-litical consequences that arise whendemocracies appear to be ounder-ing and the days of progress areperceived to be largely over. Thesecircumstances are a breeding groundfor tyrannies.


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PROMOTION

Enterprise EntrepreneurshipHow to Unleash Great Ideas in a Big Company

If someone had asked me 10 years ago todefine an entrepreneur, I probably would

have described a person alone in a garage,inventing the next thing that will revolutionizethe world. Or a business owner working sevendays a week to make his or her dream a real-ity. Today, I have a broader view.

An entrepreneur is defined by how he orshe thinks. And you dont have to own yourown business to think like one. I believe orga-nizations of all sizes can foster a culture ofentrepreneurship if they are willing to loosenthe chains and allow the people who work forthe organization to challenge the way thingshave always been done. Employees who are

empowered to make decisions and drivechange will be more engaged and productive.Thats the kind of culture were working to cre-ate at Northwestern Mutual.

So how do you build a culture of entrepre-neurship? Three things:

Support from the top. Any plan to movetoward a more entrepreneurial culture willnot be successful without executive spon-sorship. From the top down, the messagingmust be consistent about the value to the

marketplace, to clients and to the internalaudiences that have to embrace and drive thechange. When there is a clear directive fromleadership, the people on the front lines willbe more likely to engage.

A tested approach. Its not enough to calla meeting and say, Lets think differently.There are widely used methods of continuousimprovement, such as Design Thinking, Lean

Six Sigma and Theory of Constraints, that canbe helpful in facilitating change.

A culture of trust. Organizations have togive employees the freedom to experiment,take risks and make decisions. And for peopleto take on the added responsibility of actinglike owners, they need to know that they havespace to experiment, and that their bossesunderstand some experiments will fail. Employ-ees who trust that experiments will be seen aslearning opportunities will be more likely to trynew things.

Heres one example of how this is playing

out at Northwestern Mutual. One of our goalsis to eliminate unnecessary work, so wevebeen pulling together groups of employees totake a critical look at how we work. In onecase, we were able to remove nearly two-thirdsof the steps from a process. In another, wecut a nine-step process to one. And along theway, we are changing how people feel abouttheir role in the company. After participatingin one of the sessions, one of our employeestook it upon herself to independently gather ateam to review and recommend improvementsfor six other processes. She knew she had the

power to make an impact, and she acted onit. Thats entrepreneurial thinking, and whenit takes hold, everyone wins. Employees feellike valued contributors, and our business isbetter for it.

Dont limit yourself by thinking that you haveto own a business or dream up a big idea tobe an entrepreneur. When big organizationsempower individuals to think differently anddrive change from the bottom up, were allentrepreneurs.

When bigorganizationsempowerindividuals tothink differentlyand drive changefrom the bottomup, were all

entrepreneurs.

SARAH SCHOTTVICE PRESIDENT AND CHIEF COMPLIANCE OFFICERNORTHWESTERN MUTUAL

SARAH SCHOTT

Sarah Schott believes in engaging employees by encouraging them to challengethe status quo and try new things.

Northwestern Mutual is the marketing name forThe Northwestern Mutual Life Insurance Company, Milwaukee, WI.


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Based on App Annie Rankings Airline, July 2

Our app was designed to be as efficient as possible. No muss, no fuss . Just thethings you need, when you need themfrom checking in to purchasing an upgradeto eBoarding passes. Making the Fly Delta app #1 in the industry. No wonder morepeople choose Delta than any other airline.

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NOVEMBER 3, 2014 FORBES 17

LeaderBoard November 3, 2014

THE M OST EXPENSIVE ZIP CODES 18

BY THE NUMBERS : INFECTIOUS DISEASE IN AMERICA 24

121 YEARS AT THE W ALDORF -ASTORIA 26

CHARLES SCHWAB ANSWERS YOUR QUESTIONS 28

This Steve McQueenopen-faced motorcyclehelmet retails for $425.McQueen earned $9million last year, goodenough for ninth placeon our annual rankingof the top-earningdead celebrities. PAGE 22


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90210 grabs the glamour, but theres much to be said for historic 10011 (Greenwich Village)and sky-high 81656 (Woody Creek). The 50 most expensive U.S. neighborhoods by home prices areto the right. Still lost? The complete ranking of all 500 appears atforbes.com/zipcodes.

FLOWCHART


B Y A B R A M B R O W N

T O P : G E T T Y I M A G E S

Which Zip Code Are You?

Are you a RedSox fan?

Are you ahedgie witha strange artcollection?

OK. Drugof choice?

Hip-hopstar?

Now, whatabout pink

pants?

Viagra.

No

No

Nah

California New York

Somewhereelse

81656Woody Creek, CO

84060Park City, UT

07620Alpine, NJ

06831Greenwich, CT

02445Brookline, MA

90210Beverly Hills

90402Santa Monica, CA

94027Atherton, CA

94301Palo Alto, CA

02554Nantucket

WhateverHunter S.

Thompsonwas on.

Nope. Justwent there.

Nope. Busydodging thepaparazzi.

Yeah. We wentto high school

together.

You andTori

Spelling?

Teach atStanford?

Theres a Hirst inmy bathroom.

Im not a businessman.Im a business, man.

Where do yousee yourself?

We just IPOed!

Member of thetechnorati?

Yep. I walkto class.

LeaderBoard

Too tweeeven for me.

No, theSnapchatbros and

me.

Yup, I still hateJee-tah.

Robert Redford.

Those areNantucket

reds .


23/126

NOVEMBER 3, 2014 FORBES | 19

Theyrewhats

wrong withpolitics.

Sure.

Nothanks.

No

Yes

34102

Naples, FL

10075Upper East Side

11968Southampton, NY

10022Midtown East

10013

Tribeca

11962Sagaponack, NY

10577

Purchase, NY

10011eenwich Village

Pops knewFDR. Inks still

drying.

Theyre a voiceof authoritative

reason.

Perhapsnot.

Gatsby is mymiddle name.

Really.

On second thought...

Old money ornew?

How do youfeel about theKochs?

How do youfeel about

DonaldTrump?

Above 14thStreet?

Really?

How do you feelabout Patrick

Bateman?But you

belong onLong Island?

Oh,hell no.

more into Warholsthan warrants.

Im also in murdersmergers!andacquisitions.

Manhattan?

Hes mylandlord.

1 94027 ATHERTON CA2 11962 SAGAPONACK NY3 10013 NEW YORK NY4 10065 NEW YORK NY

5 10075 NEW YORK NY6 07620 ALPINE NJ7 81656 WOODY CREEK CO8 10011 NEW YORK NY

9 10014 NEW YORK NY10 10012 NEW YORK NY

11 90210 BEVERLY HILLS CA12 90274 ROLLING HILLS CA

13 11932 BRIDGEHAMPTON NY14 93108 MONTECITO CA15 81611 ASPEN CO16 119 7 6 WATER MILL NY

17 94062 WOODSIDE CA18 94010 HILLSBOROUGH CA19 10024 NEW YORK NY20 92661 NEWPORT BEACH CA

21 92657 NEWPORT COAST CA22 33156 CORAL GABLES FL23 10028 NEW YORK NY24 94301 PALO ALTO CA

25 10021 NEW YORK NY26 90265 MALIBU CA27 92067 RANCHO SANTA FE CA28 98039 MEDINA WA29 90077 LOS ANGELES CA

30 10128 NEW YORK NY31 89413 GLENBROOK NV32 94028 PORTOLA VALLEY CA33 90402 SANTA MONICA CA

34 33109 MIAMI BEACH FL35 10002 NEW YORK NY36 94920 BELVEDERE CA37 94957 ROSS CA

38 91302 HIDDEN HILLS CA

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LeaderBoard

ON KAKAOTALK, South Koreas largest mobile messaging service,users spend hours crushing candy, sharing photos and sending emoti-cons and digital stickers. Kakao Corp. cofounder Brian Kim Bum-Soolaunched the service in 2010, and his mobile universe is now inhabitedby nearly three-fourths of the countrys 50 million people.

Kakao merged with South Koreas second-largest Web portal, Daum,in October, on its way to a reverse listing on the South Korean StockExchange. Kim owns 40% of the combined company, giving him anestimated net worth of $2.9 billion. (In April, a month before the dealwas announced, FORBES pegged his wealth at just $960 million.)

Kim, 48, was born in Damyang, in the countrys south, and grewup sharing one bedroom with his family of eight. He attended SeoulNational UniversityKoreas Harvardpaying his own way by work-ing as a tutor. He sometimes skipped meals to save money. After col-lege he worked at Samsung then started an online-gaming company in1998, which eventually became part of NHN, once South Koreas larg-est Web portal. KakaoTalk was initially envisioned as a messaging appto replace clunky SMS texting. Its now a mobile superpower offeringshopping, payment, chat and games.

NEW BILLIONAIRES INTELLECTUAL PROPERTY

Something to Talk About


Brian Kim Bum-Soo chats his wayinto the ranks of the worlds richest.

N E W

B I L L I O N A I R E S B Y R Y A N M A C ; I N T E L L E C T U A L P R O P E R T Y B Y

M A T T H E W

H E R P E R

D A V I D P A U L M O R R I S

/ B L O O M B E R G

Whats in a Name?For these biotech companies,an awful lot of similarities.

MAPP BIOPHARMACEUTICAL madenews for all the right reasons in Augustwhen its experimental Ebola drug,ZMapp, helped save the lives of twoAmerican missionaries infected inLiberia. But Map Pharmaceuticals, anunrelated maker of headache meds, musthave elded quite a few misplaced pressinquiries. Those two arent alone: Thefollowing pairs of biotech rms displaya certain well, lack of imaginationatleast when it comes to the sign out front.

MAP P BIOPHARMACEUTICALMAP PHARMACEUTICALS

In addition to ZMapp, Mapp develops a range ofantibodies to ght infectious diseases worldwide.

Maker of migraine meds, bought last year byAllergan for a heady $958 million.

SANTAR IS

SANTAR U S Danish specialist in RNA therapeutics beingacquired by Roche for up to $450 million.

San Diego specialist in gastrointestinaland diabetes drugs acquired bySalix for $2.6 billion in January.

IN VITAE VITAE PHARMACEUTICALS

Bay Area developer of inexpensive genetic tests.

Philadelphia-area developer of medications totreat diabetes and other ailments.

ROSETTA INPHARMICSROSETTA GENOMICS

Genomics outt bought by Merckfor $620 million in 2001.

Genomics outt developing microRNA-basedpersonalized medicine diagnostic tests.

MERCK MERCK KGAA

$44 billion (2013 sales) U.S. drug titan foundedwith assets conscated from German companyof the same name during World War I.

$14 billion German drug titan whose Americansubsidiary was conscated by the U.S. during

World War I and well, you know.

NICHOLAS WOODMAN

+$710 MILLION NET WORTH: $4.6 BILLION

GoPro founder donates $530 million to a Silicon Valleyfoundation; still $3.3 billion richer than before GoPro IPO.

ALL FIGURES AT THE TOP OF THIS AND SUBSEQUENT PAGES REPRESENT CHANGES IN WEALTH BETWEENSEPT. 12 AND OCT. 7. SOURCES: INTERACTIVE DATA VIA FACTSET RESEARCH SYSTEMS; FORBES.


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des ign a n d te c hn olo gy.

Download the Layar App to d iscover new conten ts .

Exclusively at Panerai boutiques and select authorized watch specialists.

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22 | FORBES NOVEMBER 3, 2014

DEAD CELEBRITIES

Killing ItTHESE 13 STARS have long since assumedroom temperaturebut that inconvenientfact hasnt put a dent in their ability to keepthe registers ringing. Whether theyre shillingclothing, perfume or videogames, the deadcelebs below are denitely not resting in peace.

Heinz-Horst Deichmann,1926 2014

A GERMAN SHOE -RETAILINGmagnate whose companys 3,500stores include the Off Broadway andRack Room Shoes chains in the U.S.,Heinz-Horst Deichmann died Oct. 2at age 88.

The son of cobblers, Deichmann joined his familys footwear businessfull-time in 1956; last year it gener-ated sales of an estimated $6 billion,selling 167 million pairs of shoes. Hisson, Heinrich, has run the companysince 1999.

In March Deichmann had a networth of $4.9 billion, which madehim the 295th-wealthiest person onthe planet.

LeaderBoard

JACK MA

+$8.8 BILLION NET WORTH: $19.8 BILLION

Alibaba founder becomes Chinas richest man afterhis e-commerce giants $25 billion IPO.

DEAD CELEBRITIES

IN MEMORIAM

1. MICHAEL JACKSON $140 MILLIONDont stop till you get enough: His income dropped$20 million from a year earlier, but Jacko remains, farand away, the undead king.

2. ELVIS PRESLEY$55 MILLION

Authentic Brands Group bought his intellectual propertyrights for a reported $125 million in 2013, putting himunder the same management roof as Marilyn Monroe.

3. CHARLES SCHULZ $40 MILLION Good grief! Fox is hoping to make Peanuts hip again with anew feature lm scheduled to hit theaters in November 2015.

4. ELIZABETH TAYLOR $25 MILLION The last lioness of Old Hollywood glamour, Taylor rakes it infrom her perfumes and lm library.

5. BOB MARLEY $20 MILLION The reggae legends mellow mug now smiles out fromsatchels, apparel, even a line of fruit-avored drinks.

6. MARILYN MONROE $17 MILLION This year Norma Jeane added lingerie to her successfulclothing line, available at department stores such as Macys.

7. JOHN LENNON $12 MILLION Tops fellow late Beatle George Harrison in annual earningsthanks to his more lucrative catalog of solo work.

8. ALBERT EINSTEIN $11.5 MILLION The latest product from the genius estate: a line of brandedtablets designed for students to use in the science lab.

9. THEODOR GEISEL (TIE) $9 MILLION Will you buy them for your kids? / You will, or you already did! /Seuss might have died in 91 / But still he sells books by the ton.

9. BRUCE LEE (TIE) $9 MILLION Fans of the original martial-arts master can now inhabit him:Hes one of the ghters in the newest version of EA SportsUltimate Fighting Championship game.

9. STEVE MCQUEEN (TIE) $9 MILLIONA new line of pricey clothing via a partnership with Porschemeans the actor still embodies cool 34 years after his death.

13. JAMES DEAN $7 MILLION An increasingly popular gure in Europe, the brooding rebelstill sells big for Dolce & Gabbana.

Estimated pretax earnings, Oct. 2013Oct. 2014.

9. BETTIE PAGE (TIE) $9 MILLIONPages severe bangs, pitch-black hair and ability to llskimpy outts made her theecht 1950s pinup girl. Six yearsafter her death at age 85 herclassic look is selling strong.

A legal dispute that closeda majority of stores devotedexclusively to selling BettiePagebrand clothing dingedher earnings a bit this year,but retailers such as ModClothand Unique Vintage still offerher dresses, lingerie andaccessories. A Las Vegas show,set to debut next year, willfeature a hologram Page doinga striptease.

HowHardDo YouWork?

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PEOPLE8%

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76%

D E A D C E L E B R I T I E S B Y D O R O T H Y P O M E R A N T Z ; I N M E M O R I A M B Y C H A S E P E T E R S O N - W

I T H O R N

G E T T Y I M A G E S ; M I C H A E L S O H N

/ A P ; T O P : B R E N T L E W I N

/ B L O O M

B E R G

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Over 4,500 daily flights to the most destinations.

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I N V A S I V E P N E U M O C O C C A L D I S E A

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F E V E R

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A S E

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B A B E S I O S I S

E H R L I C

H I O S I S / A

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G I A R D I A S I S

C O C C I D I O I D O M Y C O S I S

S T R E P P N E U M O N I A E

G R O U P A S T R E P L I S T E R I O S I S

S A LM O N E LLO S I S S H I G E LLO S I S C R Y P T O S P O R I D I O S I S

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SOURCE: DR. WILBERT VAN PANHUIS, PROJECT TYCHO,

UNIVERSITY OF PITTSBURGH: WWW.TYCHO.PITT.EDU.

TOP PHOTO: ANDREW HARRER/BLOOMBERG

BY THE NUMBERS

The Sum of Our Fears

LeaderBoard

PHIL KNIGHT

+$1.1 BILLIONNET WORTH: $21.1 BILLION

The Swoosh cant lose: Prots at Nike jump 23%,and sales increase in every region of the world.

EBOLA IS grabbing all the headlines, but through-out American history plenty of other diseases havebeen just as alarming. For more than 125 years U.S.public health officials have reported on a weeklybasis any cases of serious infectious disease,creating a rich data diary of medical worrygoing back to 1888.

The chart at right shows the yearsmedical professionals were legallyrequired to report incidents of58 different diseasesand, in-triguingly, when the mandatestopped. Of particular note:AIDS, a terrifying plague justa generation ago, no longerneeds to be reported.

Todays two mostworrisome killers,Ebola and en-terovirus D68,which infectsyoung children, aretoo new to be reectedin the data.

B Y D A N B I G M A N


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I invested half of my protson an employee whos two timessmarter than I am.Hiscox Business Insurance.The courage to do more and be more.

Learn more at encouragecourage.com

2014 Hiscox Inc. All rights reserved.


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B Y E R I N

C A R L Y L E

C O N R A D H I L T O N : H U L T O N

A R C H I V E

/ G E T T Y I M A G E S ; C O L E P O R T E R : A P ; Q U E E N

E L I Z A B E T H & P R I N C E : A P

OCT. 1, 1931New 47-story Waldorf-

Astoria opens onPark Avenueat

the time the largest,tallest hotel in theworld. Herbert Hoover

becomes the rstpresidential guest (he

would reside therefrom 1932 until his

death in 1964). Everysubsequent American

leader has stayedat the Waldorf: ThePresidential Suite

features JFKs favoriterocking chair and

Jimmy Carters eagledesk set.

1934In Youre the

Top Cole Portersings about theWaldorf Salad,

which wascreated by matre

dhotel OscarTschirky.

1938General John J. Pershing is the rst to use Track 61, theWaldorfs secret underground train station. The private

elevator to the track is later used to transport FDRsarmor-plated Pierce-Arrow during WWII.

DEC. 11, 2013Hilton Worldwide Holdingsgoes public at $20 a share,generating an $8.5 billion

prot for Blackstone.

OCT. 12, 1949Conrad Hilton buys a

68% stake for $3 million,fullling a lifelong

aspiration. From then onhe would date events as

before the Waldorfor after the Waldorf.

OCTOBER 1945Week-End at theWaldorf, starringGinger Rogers,

premieres. Filmedat the hotel, its saidto be the rst major

U.S. lm shot outsideHollywood.

OCTOBER 1957Hotel creates The

Royal Suite for QueenElizabeth II and PrincePhilip after royals arebooted from planned

stay in PresidentialSuite due to lingering

Saudi prince. Today the

$10,000-a-night suitehas master-bedroompillows that look like

the Duchess ofWindsors pugs.

1893William Waldorf Astor tears downfamily brownstone at Fifth Avenueand 33rd Street to build 13-story

Waldorf Hotel. Four years later hiscousin John Jacob Astor IV erects17-story Astoria Hotel next door.

The joint Waldorf-Astoriaknownas the Hyphenbecomes the

favorite of New Yorks elite.

1928Bethlehem Engineering

spends $20 million($280 million in 2014dollars) to buy thehotel, then tears itdown to make way

for the Empire StateBuilding. FormerWaldorf-Astoria

president pushes planto build new one and

raises $28 million ($390million today) from areananciers and railroads.

OCT. 6, 2014Beijings Anbang Insurance, which is run by

Deng Xiaopings (himself a hotel guest in 1974)grandson-in-law, buys the Waldorf. Hilton signs a

contract to manage the property for the next

100 years.

REAL ESTATE

The Waldorf-AstoriaNew York Citys home away from home for presidents, royals androckers was just sold to a Chinese insurance conglomerate fornearly $2 billion. The hotels rst 121 years constitute a guest bookof the American century.

LeaderBoard

DU PONT FAMILY

+$420 MILLION NET WORTH: $15.2 BILLION

Activist Nelson Peltz argues DuPont shouldbreak itself up, boosting shares of 3,500 heirs

to U.S. oldest fortune.

1996The Rock & Roll Hall

of Fame inductsseven legendary

artistsDavid Bowie,Gladys Knight &

the Pips, JeffersonAirplane, Little

Willie John, PinkFloyd, the Shirelles

and the VelvetUndergroundin theWaldorfs ballroom.

2007Blackstone buys HiltonHotels for $26 billion,

including $7.5 billion debt.


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Douglas Emmett is a focused long-term holder of Class A offi ce andluxury apartment communities. Because Wells Fargo offers focusedexpertise across the entire spectrum of commercial real estateservices, along with an unwavering commitment to the industry,weve been able to help Douglas Emmett succeed through all

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S C H W A B B Y S T E V E S C H A E F E R ; 3 0 U N D E R 3 0 B Y K A T H R Y N D I L L

C H A R L E S S C H W A B : S A R A H A

. F R I E D M A N

/ C O N T O U R

/ G E T T Y I M

A G E S ; T O P : R I C K M A I M A N

/ B L O O M B E R G


LeaderBoard

Charles MerrittKNOX PAYMENTS | 29

The veteran of80amps, whichprovides busi-ness services toentrepreneurs in

exchange for equity,recently emergedas CMO of Knox,a stealthy ntechstartup.

John LockeACCEL PARTNERS | 30

The new partnerat the powerhouseVC rm focuseson online market-places and mobilecommerce, leadinginvestments in eventticket site SeatGeekand stock photostartup pond5.

Sahil LavingiaGUMROAD | 22

Gumroad simplies the process of sellingdigital products online. A new partnershipwith Twitter that launched in Septemberenables the purchase of a download directlyfrom a tweet.

Support StaffEntrepreneurial enablersfrom the Forbes 30 Under30, in 30 words or less.

30 UNDER 30

LEN BLAVATNIK

$1.2 BILLIONNET WORTH: $20.7 BILLION

His bet on LyondellBasell is one of WallStreets greatest deals, but its CEO is

retiring, sending shares down 12%.

TWITTER / ANDREEA @DREEA_55WHAT BOOKS DO YOU RECOMMEND FOR YOUNGPEOPLE WHO WANT TO GET INTO INVESTING?There was a guy by the name of Charles Schwab,actuallyCharles M. Schwab. I read a lot about himand always hoped I was related, but I wasnt. Heworked for J.P. Morgan and then started BethlehemSteel. I tried to read all the biographies of thefamous men of the last 100 years or so; that gaveme inspiration. One book that shows the crazinessof the human mind is a classic: ExtraordinaryPopular Delusions and the Madness of Crowds [byCharles Mackay], and that was written in the 1840s.

TWITTER / JAMES HOARE @HOAREBURGWHATS THE BEST WAY TO START INVESTINGWHEN YOU HAVE ONLY POCKET LINT AND AHALF-STICK OF GUM?Just get started. Thats the most difficult thing: topull the trigger to put the rst hundred or thousand

bucks in. Try to be disciplined; give up a latte oncea week or something. Put that money aside, and bythe end of the month youll have an extra 25 bucksto put in the till.

Janet Yellen wants to have ination of at least2%. Well, even at 2%, every ten years you lose 20%of the value of your money. How do you preventthat? Invest your money in equities to stay aheadof ination, and hopefully above that youll get5, 6, 7% growth. TWITTER / FERNANDO MIRANDA@HABANERODECUBAIF YOU HAD TO PUT MONEY IN PLAY RIGHT

NOW FOR THE NEXT DECADE, WHERE WOULD YOU PUT IT?Id buy something like the Schwab 1000 [a large-company index fund] or the S&P 500. Broad-based indices. Id buy twoone more global, onedomestic, probably 50/50. I think the U.S. is goingto grow reasonably well over the next 40 years,and some parts of the rest of the world will growenormously, so you want to participate there, too.

Charles R. SchwabTHE 77-YEAR-OLD brokerage titan recentlytook time to offer some investing advice toour followers on social media, particularlythose with a long time horizon and the desireto start putting their money to work.

SOCIAL SESSION


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Convert Big Data Into Data-Driven Insights

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B Y M E H R U N N I S A W A N I

T O P : B O B L E V E Y

/ G E T T Y I M A G E S

RICH LIST REPARTEE

THE INTEREST GRAPH

Excerpts from our #Forbes400Twitter chat.

Technology, cockroaches and lingerie: The three most-viewed stories online from The Forbes 400 issuecovered a lot of ground.

PARMY OLSONS Oct. 20 story about Yahoocofounder Jerry Yangs prescient investment in Chi-nese Web giant Alibaba and emergence as a powerbroker between the tech-startup scenes in Asia andSilicon Valley drew plenty of chatter. Yahoos partownership of Alibaba is a big part of what has kept[it] aoat, wrote SiliconBeat s Levi Sumagaysay.Those interested in techs backroom dealings willnd the FORBES piece fascinating. Praise for Yangsperspicacity abounded. Tweeted @savkhetan: Hemight not have taken Yahoo as high as Google, butJerry Yang has amazing vision and made some greatbets. On the topic of amazing vision: Rankings of therich have proliferated of late, but as the Wall Street

Journal noted, FORBES remains the granddaddy ofthis cottage industry. Granddaddy? Well, surebutevery bit as spry as the 45-year-old Yang, thank you.

81,094

72,874

120,944 views

20,003

47,438

10,856

10,746

10,392

These NBA owners can still play ball, tooif w ere being generous

Forbes 400 shopping list: Living the 1% life is more costly than ever

Long-ago twist yields Ballmer a fortune in Microsoft stock

Americas missing wealth: How federal regulations crimp economic growth

Gone from Microsoft, Steve Ballmer begins a surprising second act

Billionaire Dan Gilberts drive to rebuild Detroit

The low-key billionaire behind lingerie giant Victorias Secret

Inside an $8 billion family feud: Who poisoned the Orkin fortune?

How Jerry Yang made the most lucrative bet in Silicon Valley history on Alibaba

Linking everythingis Ballmers long-

simmering need toestablish himself ashis own man after

living in the shadowof Bill Gates.

Orkin remainsthe leading

company in pestcontrol. But for theRollins family, the

party is over.

Leslie Wexnerreimagined lingerie

as a wholesomebusiness that could

thrive next to the food

court rather than thepeep show.

1,005 VIEWS

THE BOMB

LeaderBoardCONVERSATION

LARRY ELLISON

$2.1 BILLION NET WORTH: $48.8 BILLION

Oracles largest shareholder loses billions after abruptlystepping down as CEO of the company he founded in 1977 .

@ANONYMOOOOOOOOAre there any billionaireswho dont want to beon the list?

@BROGANLIAM2 of the top 3 #Forbes400are college dropouts!

@GINOQUEBillionaires CharlesMunger, Sheryl Sandberg,Tory Burch and SaraBlakely failed to make thecut? The bar is that high!

@FORBES Of course.There are some who notonly dont want to be on itbut threaten legal actionif we put them on it. Theydont actually sue in theend, but they make noisein hopes we might not putthem on. The only way toopt out, though, is to proveyou dont have the networth we estimate.

@FORBES One inter-esting fact: 112 of the#Forbes400 went toIvy League schools, in-cluding those 2 dropouts,Bill Gates and Larry Elli-son. Other famous drop-outs: Mark Zuckerberg,Dustin Moskovitz.

@FORBES 113 U.S. bil-lionaires didnt make the

cut. Entry was $1.55 bil-lion, the highest its beensince we started trackingAmerican wealth in 1982.Other notables missingfrom the #Forbes400:Steve Case of AOL fame,Red Sox owner JohnHenry and the Airbnband Snapchat founders.


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2500 Cargo Van 144", Low Roof, 4-Cylinder35,995*Starting At:

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*Excludes all options, taxes, title, registration, transportation charge and dealer prep fee.Options show n. Not all opt ions are avai lable in th e U.S. 1. Fuel savings estimate of up to 18%according to FTP75 testing of engine OM651 (4-Cylinder) versus MY13 OM642 (V6). Individualmileage will vary, based on factors including vehicle load, driving style, road conditions andfuel quality. 2. Driver is responsible for monitoring fluid levels and tire pressure betweenservice visits. 3. Crosswind Assist engages automatically when sensing dangerous wind gustsat highway speeds exceeding 50 mph.Performance is limited by wind severity and available

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I ONCE ASKED the great footballcoach Bill Walsh why he drafted JerryRice, a little-known wide receiverout of tiny Mississippi Valley State.Rice went on to become the NFLsalltime-best wide receiver. The NFLalso ranked him the best player in anyposition. But in 1985 Walsh was aloneamong scouts and coaches in perceiv-ing Rices potential as a future Hall ofFamer.

Rice was considered to be tooslow for NFL greatness, explained Walsh. His time in the 40-yarddash was only 4.6. Most great NFL receivers run 4.4 or faster. Butwhen you studied the lm from Rices college games, you saw twothings different about Rice. One: He could turn on a dime. He couldrun sideways faster than anyone Id seen. His maneuverability leftdefenders wondering what happened. Two: Rice always nished hispass route within one foot of where he needed to be, like he had aGPS in his head. Quarterbacks Joe Montana and Steve Young couldcount on him.

Rices abilities give us a clue to success in todays economy. Scale,reach and speed are fundamental. But you also need maneuverability,even though you know exactly where you want to go.

SMALL TEAMS ARE THE KEY

Mass scaleand, with it, global reachis a huge advantage, one thatsincreasingly available to anyone. One of the digital revolutions by-products is that it creates excess capacityand not just in all thingsdigital. For example, what has caused the totally unexpected oil boom?Wasnt the world supposed to be entering a period of peak oil, to befollowed by oil shortages? The answer is found in technology. Ex-tremely precise horizontal drilling far beneath the Earths surface hasmade it possible to tap new oil sources trapped in shale. This level ofprecision is made possible by advanced electronics, which was madepossible by Moores Law. As oil billionaire T. Boone Pickens told me,You can drill 2 miles down, take a right turn, drill another 2 miles andpick the lock to someones front door. Thats how precise it is.

The digital revolution has a tendency to create excess capacity ineverything it touchesenergy, factories, shipping, etc.

As for global reach, you might wish you had an advertising budgetof a billion dollars to tap the global marketplace. But no budget couldcover it all because of the trillions of connections that exist among

the billions of digitally connected custom-ers. Fast-moving small companies can ndmore niches and customers than ever before.The same is true of technologys power: Thecloud is rapidly commoditizing the availabil-ity of top-class technology. You can rent it bythe minute from Amazon, Google and others.

Mass scale, global reach and powerfultechnology are, in sum, being commoditized.As a poker player would say, theyre becom-ing mere table stakes in economic competi-tion. Maneuverability will be the bellwetherof rising value. Such maneuverability willcome from the combination of global reach,great technology and highly tuned and opti-mized teams of people.

This is the irony of our day: In an age ofrapidly accelerating technology the differencebetween a perpetually successful enterpriseand a struggling, dysfunctional also-rancomes down to the people who make up thosecompanies. Even more, its how those peopleinteract as they form and reform into teams tostay maneuverable. Pat Gelsinger, the CEO of VMware, says liquid organization is the onlyorganization that will work. Hes right.

Two executive roles within companiesare sure to change: the chief information of-cer (CIO) and the chief marketing officer(CMO). The CIO must gure out how tokeep the companyand its vast numbers ofmaneuverable small teamsinformed andexible. CIO consultant Peter High writesabout the weak link in most companies inhis new book, Implementing World Class IT Strategy (Wiley). Its a lack of coherencebetween corporate and divisional strategiesand, worse, among divisions. Maneuverabil-ity is chaos without such coherence. CIOswill need to x that.

The CMO will spend less time communi-cating to the outside world and more timeshaping the inside story, for employees andcontractors. What else can hold a liquid or-ganization together but purpose, values andstory?

ARE YOU MANEUVERABLE?

T H O M A S K U H L E N B E C K F O R F O R B E S

F


RICH KARLGAARD // INNOVATION RULES

THOUGHT LEADERS

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 WEBSITEAT WWW.FORBES.COM/KARLGAARD .


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CLIFTONSTEEL, 43 MM

SELF-WINDING

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SOUTHEAST ASIA WAS HIT withtwo tragic aviation incidents in 2014,both involving Malaysias state car-rier, Malaysia Airlines (MAS). FlightMH370 went missing on Mar. 8, enroute to Beijing from Kuala Lumpur,less than two hours after it was askedto contact the Ho Chi Minh Air Traf-c Control Center. MAS subsequentlyconrmed that MH370 lost contactwith Subang ATC at 2:40 a.m.

A complex search operation involving more than 26 countries inan extensive land and sea search ensued over several weeks, to noavail. On Mar. 24 Prime Minister Najib Razak announced that, ac-cording to new data, Flight MH370 ended in the southern IndianOcean. Search and rescue operations were narrowed to the south-ern part of the Indian Ocean, southwest of Australia. In April searchvessels picked up signals matching those of the aircrafts underwaterlocator beacon, but no plane was found. Visual searches have beensuspended, but the underwater search continues.

In addition to a transponder the plane was equipped with an au-tomatic dependent surveillance-broadcast (ADS-B) tracking system.Unfortunately, both the transponder and the ADS-B can be manuallyswitched off in the cockpit.

Most modern aircraft also carry the Aircraft CommunicationsAddressing & Reporting System (ACARS), but the data types andtransmission frequencies are based on a contractual arrangement.ACARS can also be disabled in the cockpit.

We obviously need to improve the robustness of aircraft trackingsystems in use today. Although ADS-B tracks aircraft in real time andhas existed for years, only 60% of commercial planes are so equipped.ACARS is also in limited use. Why? Because of the additional cost toan already nancially burdened industry. Regardless, its critical thatairlines address the fact that the tracking systems and black boxescan be manually shut down in the cockpit.

MAS second tragedy happened four months after the rst. FlightMH17 crashed over the rebel-controlled Donetsk region of easternUkraine on July 17, presumably hit by a missile. All 298 people onboard died.

AVOIDABLE DISASTER

There was also bad news this spring from South Korea, where theMV Sewol , a cargo ferry carrying 476 passengers, capsized and sank.

The vessel departed Inchon at 9 p.m. onApr. 15, but about 12 hours later, near thesouthwestern tip of the Korean Peninsula, itstarted to list, and distress calls were sent bythe crew. The ferry rst tilted onto its portside, then turned hull-up, before completelysinking. The accidents toll: 294 dead, with 10passengers still unaccounted for.

An examination of the incident revealedthat its cause was human error and negli-gence. Although it was quickly determinedthat the ships master didnt take decisiveaction to prepare the passengers or deploythe ships lifeboats and life rafts for immedi-ate evacuation, there were more fundamentalissues. The ferry was bought secondhand in2012 by the Chonghaejin Marine Co., whichmodied the vessel, adding passenger capac-ity beyond the allowance of safety regula-tions. Compounding this, on the fateful daythe ferry operator reduced the ballast waterin order to load more cargo. When the ferrymade a sudden sharp turn, the cargo shifted,and the ballast was insufficient to right andstabilize the ship.

How did the Sewol, with such unsafemodications, ever pass inspection? Thegovernment had delegated the regulatory andoversight functions of such vessels to privateoperators and industry associations. This,in effect, left the task of ensuring passengersafety to the shipping industry, whose mainpriority isnt safety. In addition, the relevantemergency response agencies failed to re-spond in a timely mannera reminder thatgood contingency planning and emergencypreparedness are of the utmost importance.

Sadly, these three transportation tragedieshold many rich lessons for governments, reg-ulatory agencies and the industries involved.We would do well to learn from them andmake corrections before another deadly inci-dent occurs.

TRAGEDY

AT SEA AND ON LAND

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

LEE KUAN YEW // CURRENT EVENTS

THOUGHT LEADERS

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AT PRESENT FRANCE is a good exam-ple of how not to run a country. PresidentFranois Hollande says hes a socialist,but he has an upper-class lifestyle andrefers to the working class as the tooth-less ones, by which he means peoplewho cannot afford to go to a dentist.

Hollande has raised Frances in-come tax to 75%, and the result isan exodus of the hardworking andefficient. There are at present some300,000 French young people living

in London, where they can escape their nations horrifying levels ofunemployment11% overall, about 25% in their age group.

The great majority of French people who are employed work 35hours a week and enjoy six weeks of paid holiday. The bureaucraticobstacles to starting a new business there are pretty well insuperable.Frances decit is enormous and growing, and half of those employedwork for the state and cannot be red. Economic growth is nil or nega-tive, and investment is at its lowest level in a generation.

France, in fact, is in danger of joining the southern tier of the eurozoneGreece, Italy, Portugal and Spaincountries that are chronicallyunable to pull their economic weight and teeter on the edge of nationalbankruptcy. Indeed, Germany is the only major economy in the eurozone that is still expanding, though its doing so at only 1% a year.

Frances appalling state should act as a dire cautionary example, espe-cially to parties on the Left. Yet the British Labour Partywhich, if pollsare to be believed, will oust the Tories from government at next yearselectionsseems bent on following in Frances footsteps. Its leader, EdMiliband, leads an impeccable private life, so England would be spared asimilar embarrassment to Hollandes constant public rows with his mis-tresses. But Labours electoral platform shows that in other respects theparty has learned nothing from the French socialists glaring errors.

In particular, Miliband hasnt grasped that high and punitive taxesare counterproductive and hugely destructive. He proposes to impose amansion tax to nance improvements in the National Health Service.This foolish idea is designed to stomp on what is seen as a scandal: thefact that many high-priced houses in central London are kept unoccupiedby their rich (often foreign) owners. Deplorable, perhaps, but its part ofthe price of being one of the worlds most desirable capitals in which therich can invest. Their investment, in turn, drives Britains prosperity as awhole and means its economic growth rate is among the highest of themajor Western economiesa small price to pay, you might think.

Unfortunately, Miliband seems determined to discourage the very

rich, especially foreigners, from buying prop-erty in London. He wants to impose his man-sion tax on all houses worth more than 2million, thus raising 1.2 billion a year, whichwould mean an annual tax of about 12,000on such properties. In practice it would forcemiddle-class taxes up to 60%almost withinreach of Frances dreadful level.

The inevitable result would be to kill Brit-ish economic growth stone dead and provokean exodus from London of the entrepreneursand business founders who are responsiblefor Britains prosperity. It would also causewidespread hardship and unhappiness.

MISGUIDED TAX

Take my own case. I bought my house in Lon-don 30 years ago for 550,000, a sum I raisedwith great difficulty. It is now, thanks to therise in house prices, worth much more thanthe proposed mansion-tax threshold. But myincome has not expanded accordingly. On thecontrary, I am now a pensioner and nd it hardto pay my taxes at their present high level.An extra tax of 12,000 a year would forceme to sell the house and move to the suburbs.Dislocation at my agenearly 86would behorric. And my case is typical of perhaps100,000 people living in the London areawho would also be forced to sell their homes.

On the other hand, I doubt the rich for-eigners who have houses in London would beindisposed. Therefore, the social implicationsof empty houses would remain, and the taxwould fail in its primary purpose.

Nothing is a surer vote-loser than a com-pletely new tax, whose impact is unknown andwhose effects may be devastating. The man-sion tax has already spread the seeds of doubtabout Milibands judgment and his adminis-trative ability to run the country. It could bethe millstone round his neck that drowns him.Lets hope so. One European country sinkinginto a morass of socialist folly is enough.

FRANCES DISASTROUS EXAMPLE

T H O M A S K U H L E N B E C K F O R F O R B E S


PAUL JOHNSON // CURRENT EVENTS

THOUGHT LEADERS

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 SING APORE, ROTATE IN WRITING THIS COLUMN. TO SEE PAST CURRENT EVENTS COLUMNS,VISIT OUR WEBSITE AT WWW.FORBES.COM/CURRENTEVENTS .

F


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2014 PRUDENTIAL INVESTMENT MANAGEMENT SERVICES, LLC,

NEWARK, NJ, USA. ALL RIGHTS RESERVED.0266044-00001-00

RETIREMENT | INVESTMENTS | INSURANCE

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NOVEMBER 3, 2014 FORBES 39

STRATEGIES

T HE M IDLAND K ID 40S CIENTISTS T AKE M ANHATTAN 46

TECHNOLOGY

H IGH -T ECH T AKEOUT 50H UNTING FOR G OLD W ITH D RONES 54

INVESTING

T HE N EW T RICK FOR R ETIRING R ICH 56

Verticals November 3, 2014

Pump jacks work TexasPermian Basin: I see the eldnow becoming the largest inNorth America and one of thelargest in the world.SCOTT SHEFFIELD, CEO OF PIONEER NATURAL RESOURCES

WA L T E R B I B I K O

W /

G E T T Y I MA G E S


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S C O G I N

M A Y O

F O R F O R B E S

Dakota and amassed a $19 billion fortune atContinental Resources. Trevor Rees-Jones hasbuilt a $5.4 billion fortune exploring for shalegas under Texas and Pennsylvania.

But when it comes to pure wealth whip-lash, its tough to top the tale of 36-year-oldBryan Sheffield, who in just six years has par-layed family connections and a traders tastefor risk into 120,000 acres of Texas oil-richPermian Basin and a personal fortune thatcould soon top $1 billion. What Bryan hasT

he Great American Energy Boomis responsible for some of themost incredible roughneck-to-riches stories in business history.Aubrey McClendon built Chesa-

peake Energy into a land-grabbing juggernaut,lost his shirt (and his spot on The Forbes 400)from too much borrowing and is now clawinghis way back. Harold Hamm envisioned usinghorizontal drilling and hydraulic fracturingtechnology to bring up oil from under North

REINVENTING AMERICA

The Oil Patch Prince

BY CHRISTOPHER HELMAN

Six years ago Bryan Sheffield had no energy industry experience.Today hes on track to become a billionaire before his 40th birthday.How it happened is one of the greatest Texas oil stories of all time.

STRATEGIES

Like father: Bryan andScott Sheffield arethe closest thing oil-obsessed Midland, Tex.has to royalty.


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than Bryan and the father of three teenagers,was a patient teacher. I love to teach people.And hes got a great memory, says Treadwell.

It didnt take long for Bryan to catch oilfever. Prices were surging, hitting a recordhigh of $147 per barrel in mid-2008. Armedwith new knowledge and a new partner(Treadwell left Pioneerwith Dads bless-ingto join him), he decided to do somedrilling of his own. He named his new com-pany Parsley Energy, in honor of his grandpa.The only problem: Oil leases were so expen-sive that he couldnt afford to start drilling.

But, as anyone in boom-to-bust Midlandcan tell you, good times dont last. In early2009 oil fell to $35 per barrel as the GreatRecession sank the global economy. Ratherthan pour precious capital into what wouldbe uneconomic wells, many Permian opera-tors just let leases expire.

Sheffi elds trading instincts kicked in. He

accomplished in such a short time is incred-ible, and it just highlights the amazing wealthcreation occurring in Texas right now, saysCameron Horwitz, managing director at U.S.Capital Advisors in Houston.

Havent heard of him? If youre not fromMidland, the dusty heart of the boom-and-bust West Texas oil patch, thats not surpris-ing. But here, amid the thousands of bobbingpump jacks and endless dirt access roadsthat service them, hes royalty, the son ofScott Sheffi eld, CEO of Pioneer Natural Re-sources (the largest operator in the region),and grandson of Joe Parsley, a West Texas oillegend. Despite being born into the industry,Bryan Sheffi eld kept his distanceat rst. Iwas searching for my destiny in the Chicagocommodities pits, he says. Then he movedto Europe to trade interest rates. But I was abreak-even trader, barely getting by.

At 29, with a new wife, he came home togive the family business a whirl. At his grand-fathers suggestion Sheffi eld agreed to takeover operatorship of the 109 original wellsGrandpa Parsley and partner Howard Parkerhad drilled near Midland back in the 1960sand 1970s. They had long since sold off most oftheir assets in the region but held on to thesewells and could choose who managed them.

I didnt even know what that meant,says Sheffi eld, who quickly learned that thissilver spoon had a fair amount of grit in it.The operation requires driving hundredsof miles of back roads a month, checkinggauges and valves, making sure pumps areworking and nothing is leaking. The job paidabout $500 per well per month, or some$600,000 a year. Sheffi eld could hire peopleto do the work (Im a nance guy. If I triedturning a wrench, a pressure valve wouldgo out and kill someone) and have cash leftover to build something bigger. Do whatyou want, said his grandpa. Just take careof the properties.

Hoping to learn something about the busi-ness before taking it over, Bryan asked hisdad to let him take a six-month crash courseat Pioneer, which owns some 7,000 wellsspread over 900,000 acres in the region. Hismost important tutor was Paul Treadwell, anoperations foreman who had been with thecompany since 1992. They spent days drivingthe elds. Bryan was green, but he knew whatquestions to ask. And Treadwell, 11 years older

REINVENTING AMERICASTRATEGIES

SWEET SPOTSWHEN OIL PRICES FELL IN 2009, SHEFFIELD LEASED SOME OF TEXASBEST DRILL SITES FOR $500 AN ACREAND MADE THE MOST OF THEM.

Lea

Andrews

Borden

Coke

Crane

C kett

Dawson

Ector

FisherGaines

Glasscock

Howard

Irion

Loving

Martin

Midland

Mitchell Nolan

Pecos

ReaganReeves

Schleicher

Scurry

Sterling

TomGreenUpton

Ward

Winkler

MIDLANDBASIN

MIDLAND

PERMIANBASIN AREA

NEWMEXICO

OKLAHOMA

TEXAS

PARSLEYS ACREAGE = Q

E

PARSLEY ENERGYNET PRODUCTION

BARRELS OF OIL PER DAY


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Old Dominion Freight Line, the Old Dominion logo 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 identied herein are the intellectual property of their respective owners. 2014 Old Dominion Freight Line, Inc., Thomasville, N.C. All rights reserved.

If youre in the seed and feed business, so are we.We may be in shipping, but your business is our business. With over 224 service centers nationwide, premiumservice like best-in-class on-time delivery and one of the lowest claims ratios in the industry, OD handles all yourDomestic LTL needs. We deliver promises to help your business grow. od.com/domestic

OD DOMESTIC OD EXPEDITED OD PEOPLE OD TECHNOLOGYOD GLOBAL HELPING THE WORLDKEEP PROMISES.


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has known Scott Sheffi eld or 25 years andwas impressed with Bryan. Chambers loanedParsley $200 million to ramp up drilling.Theres lots o engineers and geologists bet-ter trained than Bryan, says Pace. Bryan gotthe right acres and drilled good wells. At theright time. Soon Parsley was in a position topay off Chambers loans.

The new Permian boom really took holdin 2012, when geoscientists, including thoseat Scott Sheffi elds Pioneer Energy, ullyevaluated how much oil could be recoveredin the region. The layers extend rom 8,500eet deep down to about 13,000 eet. I seethe eld now becoming the largest in NorthAmerica and one o the largest in the world,says Scott Sheffi eld, with the potential, hesays, to produce 100 billion barrels.

The gold rush has been stunning. InSeptember Encana Corp. agreed to acquireanother Permian upstart, Athlon Energy, or$6 billion, or about $37,000 an acre.

In May 2014 Sheffi eld listed Parsley Ener-gy on the New York Stock Exchange, raising$1 billion. In June shares popped enough tomake his 34

forbes - november 3 2014 usa

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