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Imagine what you can do with the right business credit and personal guidance. Letâ€™s work together to discover your business credit options and how they can directly fuel your business goals. With our online resources, Credit Finder Tool, and skilled bankers, together we can help sustain and grow your business responsibly. Explore your options and apply at wellsfargoworks.com/credit.
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An office wall isnâ€™t the only place to display your credentials. (QTQXGT[GCTUVJG%GTVKÆ‚GF/CPCIGOGPV#EEQWPVCPVETGFGPVKCNJCUDGGPVJG INQDCNDGPEJOCTMHQTOCPCIGOGPVCEEQWPVCPVU9J[!$GECWUGVJG%/#KUKPETGFKDN[ JCTFVQIGV1WTJQWTUQHVGUVKPIFGOCPFCOCUVGT[QHVJGOQUVETWEKCNRTCEVKEG CTGCU#OCUVGT[VJCVECPIKXG[QWCJKIJGTKPEQOGVJCP[QWTPQPEGTVKÆ‚GFRGGTU $WVDGYCTPGF+VoUCVGUVQPN[YKNNRCUU5QKH[QWoTGQPGQHVJGOHGGNHTGGVQDTCI ;QWoXGGCTPGFKV8KUKVWUCVEOCEGTVKÆ‚ECVKQPQTICPFUGGKH[QWJCXGYJCVKVVCMGU
Contents // JANUARY 24, 2017
ON THE COVER 68 | 30 UNDER 30 Meet the Class of 2017. These 600 young innovators—30 game changers in 20 industries, including YouTube star Tyler Oakley (at right)— are challenging the conventional wisdom and rewriting the rules for the next generation of entrepreneurs, educators and entertainers. EDITED BY CAROLINE HOWARD WITH NATALIE SPORTELLI
22 | 30 UNDER 30: WE KNEW THEM WHEN Our impressive track record of spotlighting young actors, athletes and musicians on our annual 30 Under 30 is showcased ably by these stars.
86 | THE BLACK SHEEP At 25, James Proud has a quarter-billion riding on reinventing how you sleep. And this original Thiel Fellow is determined to do it his way— or fail trying. BY BRIAN SOLOMON
100 | THE FLIP TURN By 30 he was the most decorated Olympian of all time. Now he seeks to translate his prodigious accomplishments into an everlasting brand. Can Michael Phelps be like that other Mike? BY MONTE BURKE
COVER PHOTOGRAPH BY JAMEL TOPPIN JASON DERULO WEARS A LEATHER JACKET ($3,795) AND A COTTON DRESS SHIRT ($795) BY DOLCE GABBANA AND COTTON PANTS BY PAL ZILERI ($395). HALSEY WEARS A LACE DRESS BY DOLCE & GABBANA ($8,995). MICHAEL PHELPS WEARS A LEATHER BOMBER JACKET BY PAL ZILERI ($1,995), A COTTON SHIRT BY CHARLES TYRWHITT ($69), TROUSERS BY KENZO ($305), AND A SEAMASTER AQUA TERRA 150M CO-AXIAL GMT CHRONOGRAPH BY OMEGA ($46,300). JAMES PROUD WEARS A MERCER CREWNECK T-SHIRT BY ZACHARY PRELL ($65) AND JEANS BY MARCELO BURLON ($378).
4 | FORBES JANUARY 24, 2017
VOLUME 199 NUMBER 1
JANUARY 24, 2017 24
15 | FACT & COMMENT // STEVE FORBES India’s sickening and immoral move.
LEADERBOARD 20 | THE SECOND ANNUAL 30 UNDER 30 EUROPE Is Europe fated to a future of economic sclerosis? Not if this group of top young entrepreneurs has any say in the matter.
24 | ROAD WARRIOR: PILOT’S WATCHES There’s no better way to keep track of a high-ﬂying, peripatetic career than with a ﬁne timepiece designed to be worn aloft.
26 | THE $4.5 BILLION CABINET Donald Trump might have run as a populist, but he has assembled the most plutocratic group of top advisors in recent American history.
28 | NEW BILLIONAIRE: ROCKY ROAD Trucking executive Jerry Moyes has built himself a ten-ﬁgure fortune over the years—but his journey has been anything but a smooth ride.
29 | ON THE BLOCK: HAMILTON, AN AMERICAN AUCTION Renewed interest in the ﬁrst U.S. treasury secretary means a Sotheby’s auction of his personal effects will be popular. Don’t throw away your shot.
30 | FORBES @ 100: ROCKET MEN In July 1958 Cold War considerations gave an economic boost to the country’s manufacturers of missiles, rockets, submarines and spacecraft.
31 | CONVERSATION Ready for takeoff: Navitimer 46 Blacksteel by Breitling ($9,225).
8 | FORBES JANUARY 24, 2017
Readers ride along for an in-depth look at what Uber’s Travis Kalanick is planning next; our annual Powerful People list exerts a powerful pull.
Each day at The Kahala we are grateful for the opportunity to make your stay unforgettable. The Spirit of Aloha has never been greater at The Kahala. We canâ€™t wait to share it with you.
Time is precious. Spend it graciously.
JANUARY 24, 2017
THOUGHT LEADERS 32 | CURRENT EVENTS // AMITY SHLAES Revolution at Labor.
33 | INNOVATION RULES // RICH KARLGAARD What Trump can do—and can’t.
STRATEGIES 36 | HARDENED TARGET Never mind Trump’s tweets. Lockheed Martin will continue to thrive, because for the Pentagon and politicians alike, the world’s biggest defense contractor is Silicon Valley and Detroit combined. BY DANIEL FISHER
40 | NEW HOUSE ON THE BLOCK Thanks to companies like Concierge Auctions, buying a luxury home can be done with the swipe of a ﬁnger on a smartphone. Is this where the future of real estate sales is going . . . going . . . ? BY SAMANTHA SHARF
42 | PET SMARTER Four years ago Chewy’s college-dropout founders couldn’t get a meeting in Silicon Valley. Now they’re running one of America’s biggest privately owned e-commerce sites. BY SUSAN ADAMS
TECHNOLOGY 46 | TRASH TECH Rubicon Global CEO Nate Morris is building the Uber of garbage collection, disrupting a $60 billion industry dominated by giants. BY ALEX KONRAD
INVESTING 58 | 401(K) INTERRUPTED Trump says he will cut tax rates. Should you pause your retirement plan contributions? BY ASHLEA EBELING
60 | THE TRUMP DISCOUNT Cartica Management is proving that when it comes to emerging markets, activism is probably more important than who’s living in the White House. BY STEVE SCHAEFER
62 | PROTECT YOURSELF FROM UGLY CURRENCIES For a modest fee, these funds will strip foreign exchange risk out of your international portfolio. BY WILLIAM BALDWIN
FEATURES 94 | A BOUNTIFUL MIND A successful career as a doctor, investor and inventor wasn’t enough for Philip Frost. In his 60s he earned his ﬁrst billion globalizing the generic-medicine business. Now, as he enters his ninth decade, Frost is tirelessly adding to his fortune—and giving it away—with Buffett-esque skill. BY MATT SCHIFRIN
112 | THOUGHTS
86 10 | FORBES JANUARY 24, 2017
INSIDE SCOOP EDITOR-IN-CHIEF
Steve Forbes CHIEF PRODUCT OFFICER Lewis D’Vorkin FORBES MAGAZINE EDITOR Randall Lane
New Opportunities In Our New Century BY LEWIS D’VORKIN
EXECUTIVE EDITOR Michael Noer ART & DESIGN DIRECTOR Robert Mansfield FORBES DIGITAL VP, INVESTING EDITOR Matt Schifrin VP, DIGITAL CONTENT STRATEGY Coates Bateman VP, PRODUCT DEVELOPMENT Salah Zalatimo VP, WOMEN’S DIGITAL NETWORK Christina Vuleta ASSISTANT MANAGING EDITORS Kerry A. Dolan, Luisa Kroll WEALTH Frederick E. Allen LEADERSHIP Loren Feldman ENTREPRENEURS Tim W. Ferguson FORBES ASIA Janet Novack WASHINGTON Michael K. Ozanian SPORTSMONEY Mark Decker, John Dobosz, Clay Thurmond DEPARTMENT HEADS Avik Roy OPINIONS Jessica Bohrer VP, EDITORIAL COUNSEL BUSINESS Mark Howard CHIEF REVENUE OFFICER Tom Davis CHIEF MARKETING OFFICER Jessica Sibley SENIOR VP, SALES EAST & EUROPE Janett Haas SENIOR VP, SALES, WESTERN & CENTRAL Ann Marinovich SENIOR VP, ADVERTISING PRODUCTS & STRATEGY Achir Kalra SENIOR VP, REVENUE OPERATIONS & STRATEGIC PARTNERSHIPS Alyson Papalia VP, DIGITAL ADVERTISING OPERATIONS & STRATEGY Penina Littman DIRECTOR OF SALES PLANNING & ANALYTICS Nina La France SENIOR VP, CONSUMER MARKETING & BUSINESS DEVELOPMENT Michael Dugan CHIEF TECHNOLOGY OFFICER FORBES MEDIA Michael S. Perlis CEO & EXECUTIVE CHAIRMAN Michael Federle PRESIDENT & COO Terrence O’Connor CHIEF ADMINISTRATIVE OFFICER Michael York CHIEF FINANCIAL OFFICER Will Adamopoulos CEO/ASIA FORBES MEDIA PRESIDENT & PUBLISHER, FORBES ASIA Rich Karlgaard EDITOR-AT-LARGE/GLOBAL FUTURIST Moira Forbes PRESIDENT, FORBESWOMAN MariaRosa Cartolano GENERAL COUNSEL Margy Loftus SENIOR VP, HUMAN RESOURCES Mia Carbonell SENIOR VP, GLOBAL CORPORATE COMMUNICATIONS FOUNDED IN 1917 B.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)
JANUARY 24, 2017 — VOLUME 199 NUMBER 1 FORBES (ISSN 0015 6914) is published Monthly, except Semi-monthly in June, September and December, by Forbes Media LLC, 499 Washington Blvd, Jersey City, NJ 07310, Periodicals postage paid at Jersey City, NJ 07302 and at additional mailings offices. Canadian Agreement No. 40036469. Return undeliverable Canadian addresses to APC Postal Logistics, LLC, 140 E. Union Ave, East Rutherford, NJ 07073. Canada GST# 12576 9513 RT. POSTMASTER: Send address changes to Forbes Subscriber Service, P.O. Box 5471, Harlan, IA 51593-0971. CONTACT INFORMATION For 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 $44.95. Canada, one year C$67.95 (includes GST). We may make a portion of our 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@example.com; or call 1-212-367-4141. For Article Reprints or Permission to use Forbes content including text, photos, illustrations, logos, and video: visit www.forbesreprints.com; call PARS International at 1-212-221-9595; e-mail http://www.forbes.com/reprints; or e-mail firstname.lastname@example.org. Permission to copy or republish articles can also be obtained through the Copyright Clearance Center at www.copyright.com. Use of Forbes content without the express permission of Forbes or the copyright owner is expressly prohibited. Copyright © 2016 Forbes Media LLC. All rights reserved. Title is protected through a trademark registered with the U.S. Patent & Trademark Office. Printed in the U.S.A.
12 | FORBES JANUARY 24, 2017
I JUST RETURNED FROM ASIA, my sixth or seventh trip there in the past two years, I can’t seem to keep track anymore. I always go to Hong Kong, where we’re building a digital editorial operation to cover the region. This time I also stopped in Shanghai. In November we relaunched a Chinese FORBES magazine. Each time I visit I come away with a new revelation, always revolving around a single word—BIG. On this trip, I was struck by the sheer magnitude of China’s digital landscape. The Chinese powerhouses Baidu, Alibaba and Tencent, called BAT, are well-known. During a daylong strategy meeting at our spanking new Shanghai office, which looks out over the city’s old train station (we’re atop a building mostly leased to WPP, the worldwide ad agency), I heard some startling statistics. Every 60 seconds in China Baidu racks up 4.2 billion search queries, Tencent’s QQ transmits 11 billion messages and the app Miaopai plays 500,000 short videos. It’s no wonder that Chinese social, video and digital-commerce companies few of us have ever heard of carry valuations of billions, if not tens of billions, of dollars. The Asian digital ad market is also growing in interesting ways. Inﬂuencer marketing is on the rise much like it is in the United States—except the numbers seem unimaginable, at least to me. Big brands in America now work with YouTube stars and others to get their messages out to young audiences. These inﬂuencers are building nice little careers. In China, a single inﬂuencer can reach tens of millions of consumers, commanding $100,000—and more— for a single post (yes, one post). In the U.S., cash like that translates into a multifaceted ad campaign. Asia is still in good part about aging tycoons and their children—in banking, property development and other industries. Increasingly, a new wave of entrepreneurs is making its mark—in terms of innovation, job creation and, of course, wealth generation. To say that Asia, and China in particular, is complicated for media companies like ours is a breathtaking understatement. Yet, as FORBES enters its centennial year, we’re determined to ﬁnd our way forward, extending our message of entrepreneurship and aspiration to the youth changing the face of China and so many other Asian nations. F
Can a simple sheet of paper renew your faith in humanity? Putting thoughts on paper can be a powerful way to express feelings, heal and inspire. We asked five people whose lives have been touched by violence or cruelty to write Letters of Peace that reflect their enduring faith in humanity. Meet the authors, read their letters and learn more about the power of paper. Visit howlifeunfolds.com/lettersofpeace | #lettersofpeace
A charitable donation was made on behalf of the author of this letter. ÂŠ 2016 Paper and Packaging Board.
From the Makers of Paper and Packaging
FACT & COMMENT “With all thy getting, get understanding”
INDIA’S SICKENING AND IMMORAL MOVE BY STEVE FORBES, EDITOR-IN-CHIEF
IN NOVEMBER India’s government perpetrated an unprecedented act that is not only damaging its economy and threatening destitution to countless millions of its already poor citizens but also breathtaking in its immorality. Without any warning India abruptly scrapped 85% of its currency. That’s right: Most of the country’s cash ceased to be legal tender. Shocked citizens were given only a few weeks’ notice to take their cash and turn it in at a bank for new bills. The economic turmoil has been compounded by the fact that the government didn’t print a sufficient amount of the new bills, lest word leak out as to what was about to take place. The new bills are also a different size than the old ones, creating a huge problem with ATMs. Even though India is a high-tech powerhouse, hundreds of millions of its people live in dire poverty. Many workers are leaving the cities to go back to their villages because so many businesses are closing. Countless companies are having difficulty meeting payroll, as they can’t get the cash to do so. The real estate market has tanked. India’s economy is based mostly on cash. Moreover, much of it operates informally because of excessive rules and taxes. The government bureaucracy is notorious for its red tape, lethargy and corruption, forcing people to get by on their wits. The World Bank’s annual survey, Doing Business, measures how difficult it is to start and manage a business in 190 countries, using such metrics as what it takes to set up a legal business, obtain construction permits and get electricity. India ranks among the worst in the world in these areas. Not since India’s short-lived forced-sterilization program in the 1970s—this bout of Nazi-like eugenics was instituted to deal with the country’s “overpopulation”—has the government engaged in something so
immoral. It claims the move will ﬁght corruption and tax evasion by allegedly ﬂushing out illegal cash, crippling criminal enterprises and terrorists and force-marching India into a digitized credit system. News ﬂash: Human nature hasn’t changed since we began roaming this planet. People will always ﬁnd ways to engage in wrongdoing. Terrorists aren’t about to quit their evil acts because of a currency change. As for the digitization of money, it will happen in its own good time if free markets are permitted. And the best cure for tax evasion is a ﬂat tax or, at the least, a simple, low-rate tax system that renders tax evasion hardly worth the effort. Make it easy to do business legally and most people will do just that. India is the most extreme and destructive example of the anticash fad currently sweeping governments and the economics profession. Countries are moving to ban high-denomination bills, citing the rationales trotted out by New Delhi. But there’s no misunderstanding what this is truly about: attacking your privacy and inﬂicting more government control over your life. India’s awful act underscores another piece of immorality. Money represents what people produce in the real world. It is a claim on products and services, just as a coat-check ticket is for a coat left at the coat check in a restaurant or a ticket is for a seat at an event. Governments don’t create resources, people do. What India has done is commit a massive theft of people’s property without even the pretense of due process—a shocking move for a democratically elected government. (One expects such things in places like Venezuela.) Not surprisingly, the government is downplaying the fact that this move will give India a onetime windfall of perhaps tens of billions of dollars. By stealing property, further impoverishing the
JANUARY 24, 2017
FORBES | 15
FACT & COMMENT
least fortunate among its population and undermining social trust, thereby poisoning politics and hurting future investment, India has immorally and unnecessarily harmed its people, while setting a dreadful example for the rest of the world. What India must do to fulﬁll its desire to become a global powerhouse is clear: slash income and business tax rates and simplify the whole tax structure; make the rupee as powerful as the Swiss franc; hack away at regulations, so that setting up a business can be done with no cost and in only a few minutes; and take a supersize buzz saw to all the rules that make each infrastructure project a 100-year undertaking.
Can the EU Survive? Is Italy on its way out of the EU? Italian voters’ rejection last month of a referendum on alleged governance reform led to the fall of the government and forced that question into play. Support is growing for an exit, but that option isn’t a solution for Italy’s woes. Italy’s problem—as is the case with many of the other EU countries—is structural. The ﬂaws will still be there if Italy goes out on its own. Its banking system is a mess; one way or another, bailouts are coming. Government debt is ballooning to Greecelike proportions. Internal reforms— big tax cuts and radical simpliﬁcation of the whole tax code, less rigid antigrowth labor laws, less suffocating regulations and a less bloated bureaucracy—have been minimal, which is why economic growth is virtually nonexistent. A breakup of the EU—and Italy’s pulling out would mean just that— would be a geopolitical disaster. All the demons that have been bottled up since WWII would be let loose. Combined with an increasingly belligerent China in the Paciﬁc, the situation would be too ugly to contemplate. 16 | FORBES JANUARY 24, 2017
Mismanaging The Debt In an era of epic economic malpractice, one operation that has received scant attention is the U.S. Treasury Department’s mismanagement of the national debt. With interest rates abnormally low—thanks to their suppression by the Federal Reserve—you’d think Uncle Sam would go heavy on the issuance of long-term bonds to lock in ultralow costs. It wasn’t so long ago that a 30-year Treasury bond would routinely yield more than 7% instead of what it has paid recently: less than 3%. But the geniuses at Treasury shortened the average duration of government debt to ﬁve years. This was a short-term expedient, artiﬁcially cutting the cost of ﬁnancing the debt and thereby freeing up more money for wasteful domestic programs. The move was all too typical of the Obama regime in all facets of its governance. (The most egregious example of this destructive myopia was Obama’s precipitous withdrawal of U.S. forces from Iraq in 2011 in order to bolster his reelection chances. Look, America, Obama proclaimed, the war on terror is winding down, and we’ve won. But the reality was that our painful victory over Islamic terrorism in Iraq was thrown away. In the ensuing vacuum ISIS emerged.) Interest rates are moving up. If the bulk of Donald Trump’s tax, health and regulatory proposals come to pass, the U.S. economy will genuinely expand again; demand for credit will grow, as will the cost of gaining access to it. Washington’s interest outlays will mushroom in the years ahead. Thankfully, there’s still time to issue signiﬁcant amounts of long-term bonds with historically low costs. In fact, we should follow the examples of other countries that have issued debt with really long maturities. Economic guru Larry Kudlow suggests that Uncle Sam auction off bonds
with 100-year maturities. If Mexico, Ireland and Belgium can pull this off—and they have—so can we. Austria issued one for 70 years, and Britain ﬂoated a number of issues with maturities of 40 to 50 years. When Donald Trump takes ofﬁce, the Treasury should announce that within the next 15 months or so Uncle Sam will be selling upwards of a trillion dollars in century bonds. Would such a long-maturity bond sell? There’d be a stampede for them. Thanks to the Federal Reserve’s disastrous buying of several trillion dollars’ worth of U.S. bonds and mortgage-backed securities, there is a shortage of bonds in nongovernment hands. This shortage, combined with superlow interest rates, has wreaked havoc with pension funds and insurance companies. These entities and others with long-term liabilities badly need safe bonds with “normal” interest rates in order to meet future obligations. The new administration should also prevent the Fed from purchasing any of these securities. In addition, the Fed should be instructed to wind down its $4 trillion-plus portfolio. When a bond matures, the principal should not be reinvested; instead, it should ﬂow back into the private credit markets, where it can be productively put to work to expand the economy. By the way, even though quantitative easing formally ended, our mistake-prone central bank has been extending the duration of its bonds. Monetary expert David Malpass has correctly emphasized that the end result of this perverse exercise has been not only a shortage of bonds but also a lack of credit for small and new businesses. In other words, both Uncle Sam and the Fed have been doing the opposite of what they should have been doing: The federal government has been shortening the maturity of its debt, and the Fed has been elongating the maturity of its bond holdings. F
LeaderBoard JANUARY 24, 2017
Think you’ve never heard a song by Jason Derulo? You’re probably wrong. He has sold 50 million singles, streamed 1 billion tracks on Spotify and racked up 2 billion YouTube views with earworms such as “Whatcha Say” and “Want to Want Me.” He also grosses $232,000 per tour stop— just one of our 30 Under 30 alumni (Class of 2016) cashing in on entertainment. PAGE 22
EUROPE’S TOP YOUNG ENTREPRENEURS 20 HIGH-FLYING PILOT’S WATCHES 24 THE $4.5 BILLION PRESIDENTIAL CABINET 26 HIS TRUCKS HAULED A BILLION BUCKS 28 HAMILTON UNDER THE HAMMER 29 FORBES @ 100, 1958: THE MISSILE ECONOMY 30
JASON DERULO WEARS A VELVET TUXEDO JACKET ($2,695), WOOL TROUSERS ($1,195) AND SILK BOW TIE ($185) BY DOLCE & GABBANA; COTTON SHIRT BY CHARLES TYRWHITT ($69). YACHT-MASTER II WATCH WITH DIAMONDS BY ROLEX.
PHOTOGRAPH BY JAMEL TOPPIN JANUARY 24, 2017 FORBES | 19
LeaderBoard SCIENCE AND HEALTH CARE ARANTXA UNDA 29, SPAIN CEO
SIGESA Unda abandoned a budding career in investment banking to pursue a more fulﬁlling one in health care. After earning a Harvard M.B.A., she acquired a 41% stake in Sigesa, a medical-software company founded by her father in the late 1990s, and took over as its CEO.
INDUSTRY JORDAN DAYKIN 21, U.K.
TECHNOLOGY EDWARD BOYES 27, U.K.
At 18 Daykin became the youngest person to secure an investment on Dragons’ Den—the U.K.’s version of Shark Tank—for GripIt, a small device that makes simple the usually maddening act of hanging art and ﬁxtures on plasterboard walls. Three years later his company is valued at $31 million.
A food-subscription business that sends pre-apportioned ingredients and cooking instructions to consumers’ doorsteps weekly, HelloFresh offers quick and healthy meals developed by chefs and nutritionists. Boyes is the company’s U.S. CEO, based in New York City for the time being and charged with expanding its American operations.
30 UNDER 30
Old World, Young Promise
RETAIL AND E-COMMERCE PHILIPP MAN 25, GERMANY Cofounder
IS EUROPE CONSIGNED to a grim future of economic sclerosis? Not if the members of our second annual 30 Under 30 Europe list are any indication. In addition to receiving thousands of nominations online, our reporters combed the Continent for leading innovators in all ﬁelds. They then handed over their winnowed short lists to panels of industry-leading judges, who made the ﬁnal selections: 300 of Europe’s boldest young entrepreneurs in ten categories that encompass the arts, ﬁnance, technology and more. The cross-section of that august group you see here gathered in London last month to talk shop and trade insights. They’re a welcome rebuke to anyone unduly bearish on Europe’s future.
CHRONEXT An online marketplace for new and pre-owned luxury watches, Chronext (which has landed $18 million in venture funding) makes the experience of buying a highend timepiece online more streamlined and secure. The son of Russian immigrants to Germany, Man launched his ﬁrst venture, a clothing retailer, at age 17.
MEDIA EMILIE TABOR 28, THE NETHERLANDS Cofounder
IMA (INFLUENCER MARKETING AGENCY) The company Tabor founded with her friend Maddie Raedts is helping an array of notable brands ﬁgure out their European youth-marketing strategy. Through its network of more than 6,000 bloggers, YouTubers and other socialmedia personalities, IMA gives such clients as Nike and Calvin Klein insight into Europe’s young consumers.
EDITED BY ALEXANDRA WILSON, KATHRYN DILL AND STEVEN BERTONI REPORTED BY MADELINE BERG, ANDRÉS CALA, STEFANIA D’IGNOTI, THOMAS FOX-BREWSTER, ALEX KNAPP, SHAENA MONTANARI, PARMY OLSON, NATALIE ROBEHMED, LEONARD SCHOENBERGER AND NATHANIA ZEVI
20 | FORBES JANUARY 24, 2017
FINANCE ABBAS KAZMI 24, U.K. Founder
COLLEGIATE CAPITAL Kazmi raised $100 million to seed Collegiate Capital, a venture ﬁrm that focuses on ﬁntech, cybersecurity, energy and gaming; he’s Europe’s youngest founder and managing partner of a VC fund of that size. He started his ﬁrst business, a game called U-Design, at age 16; he also now serves as CEO of the Oxford Accelerator, a business incubator hosted by the prestigious university.
SOCIAL ENTREPRENEURS FILIPPO YACOB 29, ITALY Cofounder
PRIMO TOYS Inspired by the birth of his son, Yacob invented Cubetto, a wooden robot that teaches children as young as 3 the rudiments of coding—the kids “program” symbols that govern the robot’s movement—without increasing screen time. Primo Toys pulled off the largest educationaltechnology crowdfund in Kickstarter’s history, raising nearly $1.6 million from backers in 96 countries.
ENTERTAINMENT MICHAELA COEL 29, U.K. Actress and writer The London-born Coel writes and stars in Chewing Gum, a comedy that premiered on U.K. television but has garnered global acclaim after its acquisition by Netﬂix. Her role as the pious virgin Tracey Gordon earned her a BAFTA (a British Oscar, essentially) for best female performance in a comedy. She also acts in theater and on the British television show Aliens.
LIFESTYLE DAVID ANDRÉS 29, SPAIN
POLICY GUILLAUME CAPELLE 29, FRANCE Cofounder
Chef and owner
ABAC RESTAURANT & HOTEL; RESTAURANT SOMIATRUITES
Capelle founded Singa in 2012 to help refugees acclimate to Europe. Last year it provided intercultural training for some 2,000 new arrivals in France. (It also has operations in Belgium, Germany and Switzerland.) Among its initiatives is a startup incubator for refugee entrepreneurs that accepts 30 applicants a year; one company it recently graduated was WelcomHere, an online platform whose network helps refugees ﬁnd homes and jobs in France.
In addition to his role as chef de cuisine for the two-Michelin-starred ABaC Restaurant & Hotel in Barcelona, Andrés runs his own place, Restaurant Somiatruites, a Catalan eatery just up the road in Igualada. For two years running, he has been named “best of the Spain/Portugal region” by the Europewide San Pellegrino Young Chef Competition.
ARANTXA UNDA: BLOUSE BY CAROLINA HERRERA; TROUSERS AND SHOES BY MASSIMO DUTTI. PHILIPP MAN: SUIT BY HACKETT; SHIRT BY ERMENEGILDO ZEGNA; SHOES BY CHURCH’S. JORDAN DAYKIN: SUIT BY HUGO BOSS; SHIRT BY STUDIO JEFF BANKS; SHOES BY LOUIS VUITTON. EDWARD BOYES: SHIRT BY J.CREW; TROUSERS AND SHOES BY TED BAKER. EMILIE TABOR: BLOUSE AND SKIRT BY SUI STUDIO; SHOES BY ZARA. MICHAELA COEL: CLOTHING BY TOPSHOP; SHOES BY OKI KUTSU. DAVID ANDRES WEARS HIS OWN CHEF’S JACKET. ABBAS KAZMI: JACKET BY ARMANI COLLEZIONE; SHIRT BY BURBERRY; TROUSERS BY J BRAND; SHOES BY FERRAGAMO. FILIPPO YACOB: JACKET BY BEN SHERMAN; TROUSERS BY LEVI’S; SHIRT BY MUJI; LOAFERS BY FRATELLI ROSSETTI. GUILLAUME CAPELLE: SUIT BY NOUVEAU ATELIER; TIE BY CELIO; SHIRT BY PINK; SHOES BY BEXLEY.
PHOTOGRAPHED IN LONDON BY LEVON BISS FOR FORBES. FORBES STYLE DIRECTOR: JOSEPH DEACETIS; STYLIST: LOUISE SYKES; STYLIST ASSISTANT: LOUISE COLLINS; HAIR & MAKEUP: MARK ENGLISH; HAIR & MAKEUP ASSISTANT: LYDIA JEFFCOAT; MICHAELA COEL’S HAIR: KEVIN FORTUNE. PRODUCTION: PHILLIPA COOPER.
JANUARY 24, 2017 FORBES | 21
LeaderBoard 30 UNDER 30
We Knew Them When ADELE. JENNIFER Lawrence. Halsey (shown here). On our annual 30 Under 30 lists—see page 68 for this year’s iteration—we’ve scored an impressive track record of spotlighting young actors, athletes and musicians who were on the cusp of achieving still greater fame and fortune.
ADELE 30 Under 30 debut: 2012 Then: 2 Grammys Now: 10 Grammys LEBRON JAMES 30 Under 30 debut: 2013 Then: 1 NBA championship ring Now: 3 rings, plus a budding Hollywood career
KENDRICK LAMAR 30 Under 30 debut: 2013 Then: 0 Grammys, 0 White House visits Now: 7 Grammys, 2 White House visits JASON DERULO 30 Under 30 debut: 2016 Then: Had played London’s 20,000-seat O2 as a co-bill Now: Played the O2 as a solo headliner HALSEY 30 Under 30 debut: 2016 Then: Top song (“New Americana”) peaked at No. 60 on Billboard Hot 100 Now: Top song (“Closer,” performed with the Chainsmokers) spent 12 weeks at No. 1
22 | FORBES JANUARY 24, 2017
HALSEY WEARS A JERSEY TOP BY GIVENCHY ($750), A LEATHER MINISKIRT BY LISA PERRY ($695), PATENT LEATHER BOOTIES BY GIUSEPPE ZANOTTI DESIGN ($995) AND A GOLD ROSARY NECKLACE ($975) AND TORTOISESHELL SUNGLASSES ($240) BY DOLCE & GABBANA.
BY ZACK O’MALLEY GREENBURG WITH MADELINE BERG AND NATALIE ROBEHMED JAMEL TOPPIN FOR FORBES
JENNIFER LAWRENCE 30 Under 30 debut: 2012 Then: 0 Hunger Games ﬁlms Now: 4 Hunger Games ﬁlms— and a new role as Hollywood’s top-earning actress
Slack is where work happens, for millions of people around the world, every day.
LeaderBoard ROAD WARRIOR
1. 1858 Automatic Small Second by Montblanc ($3,045). 2. BR03-93 GMT by Bell & Ross ($3,700). 3. Engineer Hydrocarbon AeroGMT by Ball ($3,499). 4. Pilot Type 20 Extra Special by Zenith ($6,700). 5. Big Pilot’s Watch by IWC ($12,900).
Flight Time WHAT BETTER WAY to keep track of a high-ﬂying career than with a pilot’s watch? The origin of the style dates back to the dawn of ﬂight itself—when Louis Cartier designed the Santos in 1904 for his friend Brazilian aviator Alberto SantosDumont—and the signature elements of the timepiece have remained relatively unchanged. A pilot’s watch typically has a big, clean dial with large, legible numbers. The most common complication is usually a GMT (for Greenwich Mean Time), which monitors two time zones. Because, as any good pilot knows, time ﬂies.
24 | FORBES JANUARY 24, 2017
PHOTOGRAPH BY DAVID ARKY; CREATIVE STYLE DIRECTOR: JOSEPH DEACETIS; STYLE ASSOCIATE: JUAN BENSON BY MICHAEL SOLOMON
Classroom. For 60 years, The Walt Disney Company has perfected the art of making people happy. And when it comes to understanding how we perfected that customer experience? Well, we think we offer you the most amazing classroom in the world. With courses offered by Disney Institute, youâ€™ll discover ways to positively impact your organization and the customers you serve as youâ€™re immersed in leadership, service and employee engagement. Visit DisneyInstitute.com and see how we can help transform the way you think about your customer experience, no matter your business.
The $4.5 Billion Cabinet A POPULIST WAVE may have propelled Donald Trump to the nation’s highest office, but he is proving to be no man of the people. Trump has already proposed what appears to be the wealthiest Cabinet in modern U.S. history, a collection of elites that includes a billionaire heiress, Exxon Mobil’s CEO, a former Goldman Sachs partner and an investor who made millions off underwater mortgages during the ﬁnancial crisis. All told, Trump’s Cabinet is worth an estimated $4.5 billion, 60% more than Barack Obama’s second-term Cabinet. That sum doesn’t include Trump’s own fortune or that of any billionaire officials outside the Cabinet, such as Army secretary pick Vincent Viola—and as of press time, Trump still has two picks (the secretaries of agriculture and veterans affairs) to make.
BETSY DEVOS $1.25 BIL
Secretary of Education
Secretary of the Interior
The Montana congressman owns a number of rental properties in Whiteﬁsh, Montana, his hometown (pop. 7,073); an art collection worth at least $100,000; and a garage full of automobiles that includes a 1938 Cadillac.
REX TILLERSON $325 MIL
Secretary of State
Tillerson started at Exxon Mobil straight out of the University of Texas. As chairman and CEO he accumulated more than 2.6 million shares of company stock and hefty pay packages (nearly $90 million over the past three years alone).
Daughter-in-law of Amway cofounder Richard DeVos, she’s married to Richard Jr., the eldest of DeVos’ four children; FORBES estimates that the couple has about one-fourth of the family fortune. She previously served as chair of the Michigan GOP.
WILBUR ROSS $2.5 BIL
Secretary of Commerce
Secretary of Homeland Security
For a quarter-century, Ross ran Rothschild’s bankruptcy advisory business before starting his private equity ﬁrm, WL Ross & Co., in 2000. He sold it to investment management ﬁrm Invesco in 2006 for some $375 million while staying as chairman and chief strategy ofﬁcer. He made millions servicing subprime mortgages during the ﬁnancial crisis.
Kelly spent over four decades in the military, rising to become a four-star general. He has two sons who’ve served, one of whom died in combat in Afghanistan. The bulk of his wealth comes from his government pension.
RICK PERRY $2 MIL
Secretary of Energy
JEFF SESSIONS $6 MIL
Sessions, a senator from Alabama, owns more than 1,500 acres in the western part of the state that are worth at least $2.5 million. The rest of his fortune is in Vanguard mutual funds and municipal bonds.
Since Perry left the Texas governor’s office in 2015, he has banked at least $100,000 from speeches and another $250,000 consulting for a Caterpillar heavy equipment dealer. About 20% of his portfolio is in oil-andgas partnerships and energy stocks.
SOURCE: TIM VOIT, CERTIFIED QDRO SPECIALIST WITH THE AMERICAN ASSOCIATION OF CERTIFIED QDRO PROFESSIONALS. ESTIMATES BASED ON MOST RECENTLY AVAILABLE FINANCIAL DISCLOSURE FORMS; INCLUDES SPOUSES’ ASSETS.
26 | FORBES JANUARY 24, 2017
OBAMA’S CABINET $2.75 BIL
Trump’s gilded Cabinet raises the bar, but Obama’s inner circle isn’t exactly full of paupers. All but three are millionaires; his commerce secretary, Penny Pritzker, is a Hyatt heiress and a billionaire.
America’s ﬁrst billionaire president brings to the Oval Office unprecedented potential for conﬂicts of interest just about everywhere from Chicago and Istanbul to Scotland and the Philippines. More than half of Trump’s fortune is tied up in Manhattan real estate.
MIKE PENCE $800,000
BEN CARSON $29 MIL
Secretary of Housing and Urban Development
The neurosurgeon earned millions from six bestselling books, media roles at Fox News and the Washington Times and numerous speaking gigs. He accumulated more than $6 million worth of stock serving as a director at Kellogg and Costco before leaving their boards in May 2015 to run for president.
The Indiana governor and former congressman lives modestly and has largely stayed away from commercial gigs. He gets most of his wealth from his state and federal pension accounts; the father of three also owes at least $95,000 in Parent Plus student loans.
ELAINE CHAO $24 MIL
Secretary of Transportation
TOM PRICE $10 MIL
STEVE MNUCHIN $300 MIL
Secretary of Treasury
Secretary of Labor
After buying subprime Secretary of Health and JAMES MATTIS mortgage lender IndyHuman Services Married to Senate $5 MIL Mac for $1.6 billion The orthopedic majority leader Mitch Secretary of Defense in 2009 with a group surgeon and Georgia McConnell, Chao is Most of his fortune of billionaire investors, congressman owns a the daughter of a comes from his miliMnuchin sold it to medical office building shipping magnate, tary salary and penCIT Group for in his home state, plus and the bulk of her sion (nicknamed the $3.4 billion six years and husband’s wealth rental apartments and “warrior monk,” Mattis later. A former Goldcondos in Virginia, comes from her family is a four-star general man Sachs partner, he Washington, D.C., (including an investwho retired in 2013). also dabbles in ﬁnancNorth Carolina, ment account worth The ex-Marine sat on ing movies (Avatar, South Carolina and at least $5 million the board of disgraced American Sniper). Tennessee. given to the couple). blood-testing unicorn The Harvard grad sits Theranos and is still on four corporate a director of General boards, including Dynamics. Wells Fargo’s.
After negotiating a deal to help Carl’s Jr. founder Carl Karcher escape ﬁnancial trouble in the early ’90s, Puzder eventually became CEO of CKE Restaurants, parent company of Carl’s Jr. and Hardee’s, and has earned at least $25 million in salary and bonuses since 2000.
REPORTING BY CHASE PETERSON-WITHORN AND JENNIFER WANG WITH KEREN BLANKFELD, DANIELA SIRTORI, CHLOE SORVINO, MICHELA TINDERA AND KATE VINTON. ILLUSTRATION BY JOE MCKENDRY
JANUARY 24, 2017 FORBES | 27
LeaderBoard NEW BILLIONAIRE
Rocky Road Jerry Moyes built one of America’s largest trucking concerns—and a three-comma fortune—but it’s been far from a smooth ride.
T O TA L W RIT
ID EXIT đ T đ SOL EN
28 | FORBES JANUARY 24, 2017
NET WORTH: $19 BILLION The SoftBank CEO—while standing in Trump Tower after meeting with the presidentelect—announces his ﬁrm will invest $50 billion in American startups. Company shares jump 14%; Son overtakes Uniqlo boss Tadashi Yanai as Japan’s richest man.
WHICH UNICORNS will become tomorrow’s blue chips? Our ongoing poll of the world’s top venture capitalists provides an exclusive take on the long-term prospects of these billion-dollar startups. The VCs couldn’t help but kick the shins of Kik, a messaging app.
NEW BILLIONAIRE BY DANIELA SIRTORI-CORTINA ILLUSTRATION BY AARON SACCO; TOMOHIRO OHSUMI/BLOOMBERG (BOTTOM)
IN 1966 Jerry Moyes founded Swift Transportation with his father and one truck, moving imported steel through Los Angeles to Arizona and then Arizona cotton back to California. In the ensuing decades he built it into a $4 billion (sales) business with 20,000 trucks, amassing a $1 billion fortune. He still owns about half of Swift’s stock—it went public in 1990—but has pledged 64% of his stake as collateral for personal loans. The road to this point has been bumpy. In the early 2000s Moyes came under ﬁre for arranging contracts between Swift and a truck-leasing ﬁrm he owned. He stepped down as Swift CEO in 2005 after an insider-trading case in which he admitted to no wrongdoing but paid $1.5 million to settle with the SEC. A year later a lawsuit, ultimately dismissed, sought to make him repay $110 million he borrowed from a trust set up for his children. After leading a buyout that took Swift private in 2007, he relisted it on NYSE in 2010 before announcing his retirement this past September—after investors questioned if a stock-buyback plan was intended primarily to shore up the value of his Swift stake. “Industry people believe Jerry Moyes could be one of the best trucking executives ever,” says Jeffrey Kauffman, an analyst at Aegis Capital. “But right or wrong, there was a discount attached to Swift shares because of some ﬁnancial decisions made while Jerry was running the company.”
ON THE BLOCK
Hamilton: An American Auction BRING PLENTY OF Benjamins when Sotheby’s auctions an archive of Alexander Hamilton’s letters and manuscripts in New York on January 18. Thanks to the smash Broadway musical, interest in documents and memorabilia from the “Founding Father without a father” is expected to be high. Included in the sale are love letters between Hamilton and his wife, Eliza, as well as the condolence note his father-in-law, Philip Schuyler, sent to his daughter after America’s ﬁrst secretary of the Treasury was killed by Aaron Burr in an 1804 duel (estimated to sell for $15,000 to $20,000). For those who want something even more personal, Sotheby’s is auctioning a lock of Hamilton’s hair with a letter from Eliza, estimated to bring $15,000 to $25,000. Don’t throw away your shot.
JOHN KAPOOR –$230 MILLION NET WORTH: $1.6 BILLION Two months after FORBES cast a critical eye on Kapoor’s company, Insys Therapeutics, federal prosecutors say six of its former executives conspired to bribe doctors to prescribe a powerful narcotic to patients who didn’t need it. Insys stock tumbles 29%.
RICHEST BY STATE
Massachusetts POPULATION: 6.8 MILLION 2015 GROSS STATE PRODUCT: $477 BILLION (2% GROWTH) GSP PER CAPITA: $70,167 (RANKS NO. 6 NATIONWIDE) RICHEST: ABIGAIL JOHNSON, $14.3 BILLION
ON THE BLOCK BY MICHAEL SOLOMON; RICHEST BY STATE BY MICHELA TINDERA ILLUSTRATION BY CHRIS LYONS; KAY NIETFELD/DPA/NEWSCOM (BOTTOM)
IN DECEMBER Abigail Johnson, 55, took full command of her family’s Boston-based Fidelity Investments, adding the chairman title her father held for nearly four decades to the CEO job she has done since 2014. With $2.1 trillion under management and $5.6 trillion under administration, Fidelity is the world’s fourth-largest asset manager and the U.S.’ top 401(k) administrator. But Johnson, a Harvard M.B.A. who joined Fidelity as an analyst in 1988, must execute a tricky balancing act to protect its margins and market share. The ﬁrm built its reputation with actively managed mutual funds (think Peter Lynch and Magellan). Yet investors have been moving to low-cost, market-tracking index funds. In July Johnson dropped fees on 27 index funds and ETFs, in some cases undercutting Vanguard, the indexing pioneer and leader. Fidelity’s 500 Index Fund, with an investor-class expense ratio of just 0.09%, has grown to $106 billion in assets, edging past its largest actively managed offering, Contrafund, which picks large-cap growth stocks and charges 0.71%.
JANUARY 24, 2017 FORBES | 29
LeaderBoard FORBES @ 100
As FORBES’ September 2017 centennial approaches, we’re unearthing our favorite covers.
1956: Wall Street is almost entirely a boys’ club, and it’s a breakthrough when Merchants Exchange in St. Louis begins to consider allowing women on its trading ﬂoor. 2016: Although ﬁnance has become far more diverse overall, women still occupy less than a third of the industry’s top jobs despite making up about half of its lower ranks.
July 1, 1958: Rocket Men “EVEN IN THE toy stores you see nothing but space helmets, rockets, satellites, space ships and guided missiles,” remarked George M. Bunker, CEO of Martin Co. Government officials had a similar ﬁxation on missiles and rockets. Those often nuclear-tipped projectiles made up more than 50% of Martin’s backlogged orders, up from virtually nothing ﬁve years earlier. Martin had struggled to ﬁnd its way once military-aircraft spending dried up after World War II—it didn’t have a strong consumer aviation business to fall back on—and Bunker had ambitiously pushed it into missiles. The company’s trajectory hadn’t been ﬂawless, however. One early Martin missile, a 10-ton, seven-story device, rose from its Cape Canaveral launching pad with America’s ﬁrst earth satellite—and exploded shortly after ignition. Still, Bunker looked ahead to lucrative government contracts, such as the $900 million Titan project (nearly $8 billion today), and vowed to stay the course: “The companies that went into consumer goods— as a lot of people said we should do—now are coming into defense work.” Martin would merge with American Marietta three years later—and then with Lockheed in 1995, creating one of the world’s largest defense contractors (see p. 36).
Smooth Sailing Power steering! In submarines! THE EDITOR’S DESK
Cold War Commentary
”The American people have spent and will continue to spend countless billions to insure our nation and the free world against military enslavement by Sovietled Communists.” —Malcolm S. Forbes 30 | FORBES JANUARY 24, 2017
BY ABRAM BROWN NY DAILY NEWS ARCHIVE VIA GETTY IMAGES; BETTMAN/GETTY IMAGES
Finance’s Iron Ceiling
THE ODD COUPLE MIGUEL HELFT’S December 30 cover story offered a glimpse into the “philosophy of rigorous experimentation” that animates Uber cofounder and CEO Travis Kalanick. But as the ﬁrm, valued at $68 billion but booking annual losses in the ten-ﬁgure range, moves to reinvent global transportation, many readers questioned its ﬁnancials. “How about trying to turn a proﬁt before expanding?” wrote Gurinder Chahal. “Paper billions don’t mean much.” Alex Candee offered a spot analysis of its business model: Its latest app update “has privacy advocates freaking out, but [it] showcases that Uber = a data company that does transport.” Peter Rieder, meanwhile, praised Kalanick’s intensity, for which he’s often derided: “Self-interest and obsessive dedication create the foundation for entrepreneurial success.”
THE INTEREST GRAPH
Fittingly, much of the chatter about our Powerful People list focused on Nos. 1 (Vladimir Putin) and 2 (Donald Trump). JOE SCARBOROUGH, MSNBC’S MORNING JOE: “Vladimir Putin stands alone as the dictator. Has there been anyone as powerful as this guy in recent history?”
MARK HALPERIN, MORNING JOE: “I’ll take issue with one, [No. 69] Mike Pence. I predict by April you’ll run an editor’s note saying that guy’s in the top 20. He’s going to be really, really powerful.”
AUSTIN KENNEDY, AT FORBES.COM: “Vlad’s streak is coming to an end. Next year Donald Trump will be No. 1!”
Power corrupts, but it also entices: By a huge margin, our annual list of the globe’s heaviest hitters was the most popular story in our ﬁnal issue of 2016. 764,072 views
The World’s Most Powerful People 2016
Stripe Investment Makes Cofounder the World’s Youngest Self-Made Billionaire 180,237
America’s Richest Celebrities 2016: George Lucas Leads Steven Spielberg and Oprah 119,865
The 2017 Investment Guide: Trumponomics 28,029
How Travis Kalanick Is Building the Ultimate Transportation Machine
“The tax roulette wheel is spinning. You have to place your bets now, before the marbles land.”
“Golf. Rhyming verse. Even fancy card tricks: There are innumerable ways to earn great fame and fortune by entertaining people.”
CHRIS SUMMERS, THE DAILY MAIL: “Facebook is widely perceived to have had a disastrous year, with a number of public-relations gaffes, but that hasn’t stopped Mark Zuckerberg from climbing from 16th place to 10th.”
The Largest U.S. Charities for 2016
“The ousted Chip Wilson retains a big enough stake to remain relevant—and is unable to let go of his baby.”
Original Bob Dylan Lyrics Sold at Auction for $300,000
THE BOMB 146 VIEWS
MIKE HUCKABEE, CNBC’S MORNINGS WITH MARIA: “I think the list is full of junk. It’s a terrible list. I’m not on the list, and I’m very offended.”
MARIA BARTIROMO, MORNINGS WITH MARIA: “I’m not surprised in terms of Putin. Most people believe he’s the richest person in the world because he takes a cut of everything.” JANUARY 24, 2017 FORBES
BY ALEXANDRA WILSON
Despite a Comeback, Lululemon Can’t Shake Its Gadﬂy Founder
AMITY SHLAES // CURRENT EVENTS
REVOLUTION AT LABOR
more than 100 years ago. First, consider Andrew Puzder. As the head of CKE Restaurants, a company that directly or through franchises employs 75,000 workers, Puzder has more involvement with labor regulations every day than many executives do in a lifetime. He’s worked with nonunionized labor, not the union establishment. Next, consider Puzder’s two-dozen-odd predecessors. The progressives who established the Department of Labor, Democratic or Republican, believed that government ought to support the unions and that wage increases were always beneﬁcial. These same progressives also took a top-down approach, reckoning that just a few establishment parties—Big Labor, Big Business, the government and maybe an academic or two—could and should determine whether unemployment was 3%, 5% or 10%. Nonunion workers, small-business employers, company owners and innovators—none of these were in the room. The ﬁrst labor secretary, William Bauchop Wilson, set the pattern. Wilson had served as secretary-treasurer of the United Mine Workers and then as a congressman representing the 15th district in Pennsylvania. Wilson applied his thumb not to someone’s eye but to the scales of government, tipping them toward organized labor and pushing hard to help coal strikers in Colorado and Michigan. James “Puddler Jim” Davis, Wilson’s successor, came out of the steel mills and also had a political bent, successfully running for the U.S. Senate after his service. (Davis became cosponsor of the Davis-Bacon Act, known for forcing wage hikes on small employer-contractors.) Franklin Roosevelt tapped Frances Perkins. She hadn’t led unions, but Perkins had experience in both academia and government. The New Deal’s labor secretary helped to elevate the Department of Labor from office to ediﬁce. It was during the Perkins era that the Wagner Act, wildly pro-union, became law and the National Labor Relations Board, an independent agency and court system for labor, was created. The New Deal also established the national minimum wage, the very device that Puzder challenges. Perkins didn’t merely side with union members—she led them. Dur-
ing strikes at the Homestead Steel Works in Pittsburgh, the labor secretary marched with workers to assemble at a government site, a U.S. post office, so that she might remind them of the merits of collective bargaining. The change that voters may have expected didn’t come when Republican Dwight Eisenhower took office. Ike, a conciliator by nature, selected a Democrat and former director of labor for the state of Illinois, Martin Durkin, to lead the department. Even George Shultz, a free-marketer, had more experience in academia than in business when he took office.
PERSECUTION OF DONOVAN Among all of the labor secretaries to date, one stands out: Raymond Donovan, whose main credential was running the business side of Schiavone Construction in New Jersey. Ronald Reagan’s selection of Donovan so irritated prolabor Democrats that even before his conﬁrmation they sought to prove he was some kind of Tony Soprano, operating corruptly. Once Donovan was conﬁrmed, the Democrats kept assailing him. It was Donovan, who, after a Bronx jury had acquitted him of both fraud and grand larceny, posed the poignant question: “Which office do I go to to get my reputation back?” Succeeding labor secretaries have sometimes fought harder for the private sector—the Bush Administration’s Elaine Chao comes to mind. It takes chutzpah to select for a cabinet post someone from the fast-food industry. Left-leaning periodicals vilify this fast-food executive for sport. But maybe chutzpah is necessary. The fact is that Democrats have long counted on Republican presidential winners’ being too timid to appoint a labor secretary who might challenge Big Labor. If conﬁrmed, Puzder is likely to do something that demonstrates that the economy expands better without government, powered by those shadowy ﬁgures who don’t usually win places at the top table. He’s likely, too, to remind us that a union-tilted Labor Department doesn’t necessarily serve the country best. F
AMITY SHLAES, PRESIDENTIAL SCHOLAR AT THE KING’S COLLEGE AND CHAIR OF THE COOLIDGE FOUNDATION BOARD; PAUL JOHNSON, EMINENT BRITISH HISTORIAN AND AUTHOR; AND DAVID MALPASS, GLOBAL ECONOMIST, PRESIDENT OF ENCIMA GLOBAL LLC, ROTATE IN WRITING THIS COLUMN. TO SEE PAST CURRENT EVENTS COLUMNS, VISIT OUR WEBSITE AT WWW.FORBES.COM/CURRENTEVENTS.
32 | FORBES JANUARY 24, 2017
THOMAS KUHLENBECK FOR FORBES
A THUMB in the eye to the minimumwage lobby is how most journalists depict the nomination by Presidentelect Donald Trump of Andrew Puzder to the post of labor secretary. But offering up a fast-food entrepreneur for the labor post does more than offend a particular interest group. The Puzder nomination represents a structural blow to the whole ediﬁce that we have called “labor relations” since the Department of Labor was created
RICH KARLGAARD // INNOVATION RULES
TRUMP SAYS he’s a winner. To be a winning president, Trump needs to ﬁx what investor Scott Grannis calls the Obama Gap. The gap is American growth that fell into the ditch. From 1966 to 2008 U.S. GDP averaged 3.1% a year in real growth. Since 2009 it’s been barely 2%. Grannis notes how the U.S. has bounced back after every recession except the last one: “Never before has the U.S. economy posted such a weak recovery and such a long period of subpar growth.” What went wrong? Grannis ticks off the reasons: weak business investment, low job growth, microscopic productivity gains and, despite record-setting proﬁts, a strange, depressive risk aversion. What’s been at fault? Writes Grannis: “Beginning in 2009, the economy has been burdened by (1) an unprecedented remaking of the entire health care industry (ObamaCare), which in turn has impacted the lives and health care costs of nearly everyone; (2) sweeping new regulatory burdens on the ﬁnancial industry (e.g., Dodd-Frank); (3) a massive increase in government spending and transfer payments (the American Recovery & Reinvestment Act); (4) higher marginal tax rates on income, dividends and capital gains; and (5) a huge increase in the federal debt burden. You don’t have to have a political bias to believe that these changes could go a long way to explaining why the economy has been so weak during the Obama years.” So weak, in fact, that about $3 trillion in economic activity that ought to have occurred during Obama’s eight years didn’t happen at all—as if it were stillborn. Three trillion dollars would have meant a lot of new jobs, bigger raises and higher hopes. But they never happened. Grannis says it would take eight years of 5% growth to get the U.S. back to its 3.1% trend line. What Trump and the Republicans can—and must!—do is ﬁx items 1–5. No, we won’t get 5% growth, but we can get a lot more than we have now.
PEDAL TO METAL—BUT DON’T MEDDLE Trump and the Republicans can set the table for higher growth. But they can’t direct the growth—and let’s hope they don’t try. Trump won’t have any impact at all on what KPMG calls the Great Rewrite. “How we interact, how we buy and sell, how we make things, how we get from place to place” is all being rewritten, says KPMG. The Great Rewrite is what you get when you combine accelerating technology with Millennial wants and needs. It’s a global phenomenon, and it’s unstoppable. This won’t go down well with some of Trump’s RICH KARLGAARD IS EDITOR-AT-LARGE / GLOBAL FUTURIST AT FORBES. HIS LATEST BOOK, TEAM GENIUS: THE NEW SCIENCE OF HIGH-PERFORMING ORGANIZATIONS, CAME OUT IN 2015. FOR HIS PAST COLUMNS AND BLOGS VISIT OUR WEBSITE AT WWW.FORBES.COM/KARLGAARD.
older voters, who want to return to an America they once knew. Who’s going to stop demographic change? The Millennials are the ﬁrst age cohort to exceed the Baby Boomers in population. Millennials are different, and they will have their way, as Boomers had theirs. U.S. population is headed to 440 million people by midcentury. If you want to stop that growth, then agree to give up your Social Security and Medicare. There aren’t going to be enough working people to pay for them. Global population will go from 7.3 billion to 9 billion, even as it becomes older, richer and more urban. Then there’s technology. It continues to ride the Moore’s Law rate of improvement, becoming twice as good every two years or so. On a logarithmic scale you can see a nice straight line, going up and to the right. But on the human scale the change is exponential. We tell ourselves that change is a continual progression. But it has sudden impact: robots that teach autistic children, cars that drive themselves, drones that deliver IKEA furniture, human organs that pop out of a replicating machine, jet engines that tell you when they need maintenance, metals that are “grown” and never fail, live concerts featuring new songs by long-dead artists, such as Elvis, Michael Jackson and Prince, rendered in holograms to audiences that can’t tell the difference. It’s all speculation, of course. In reality entrepreneurs will try stuff and try stuff again. They will be backed by hundreds of billions of dollars in risk capital. Markets will form and disappear, as will companies and professions. Sure, it’s speculative, but the distance between speculation and reality is fast closing. This time the old guard sees the next wave coming. Perhaps because it’s so big and powerful. At the Original Equipment Suppliers Association conference in Detroit a few weeks ago, I saw leaders in the automotive and parts industry with their eyes wide open to outside change and to partnerships with entrepreneurs. That’s a new mind-set—and it’s good. Donald Trump should step out of the way. F JANUARY 24, 2017 FORBES | 33
THOMAS KUHLENBECK FOR FORBES
WHAT TRUMP CAN DO—AND CAN’T
ENTREPRENEURS LUXURY REAL ESTATE, UP FOR BID 40 CATERING TO “PET PARENTS” 42
Verticals JANUARY 24, 2017
TECHNOLOGY TRASH PICKUP: THERE’S AN APP FOR THAT 46
MONEY & INVESTING A LESS TAXING RETIREMENT 58 RE-EMERGING EMERGING MARKETS 60 KEEP FOREX RISK AT BAY 62
Lockheed’s F-35A, shown here refueling during a test ﬂight over the Paciﬁc Ocean, ﬁrst rolled off the factory ﬂoor in Fort Worth, Texas, in early 2006. The stealthy multi-role ﬁghter is capable of speeds of up to Mach 1.6 (1,200 mph) and reportedly will soon be able to deliver nuclear weapons. Donald Trump has publicly lambasted Lockheed for F-35 cost overruns, but the company’s Washington-savvy CEO, Marillyn Hewson, is conﬁdent it can withstand politicians’ ﬁre. PAGE 36 JANUARY 24, 2017 FORBES | 35
Hardened Target Never mind Trump’s tweets. Lockheed Martin will continue to thrive, because for the Pentagon and politicians alike, the world’s biggest defense contractor is Silicon Valley and Detroit combined. BY DANIEL FISHER
ith a single tweet Donald cels the program—about as likely as his nomiTrump carved $4 billion off nating Hillary Clinton to the Supreme Court—it the market capitalization of would be painful but hardly fatal for Lockheed, Lockheed Martin, the world’s whose 2016 revenues will likely exceed $46 billargest defense contractor. “The F-35 program lion. The taxpayers have already covered some and cost is out of control,” Trump grumbled on $45 billion in development costs on the F-35, Twitter at 8:26 a.m. on December 12, attackand Lockheed sells billions of dollars’ worth of ing the F-35 Joint Strike Fighter, which at more other gear to the government, from Trident balthan $1 trillion is the biggest defense project in listic missiles to helicopters to highly classiﬁed history. Lockheed shares plunged 5% as invesspy satellites. Trump can tweet his displeasure, tors fretted Trump would kill or maim the effort. but Lockheed is one of a handful of companies Lockheed hopes to make more than 3,000 F-35s, on Earth that can both invent an entirely new at $100 million each, in the next 30 years. defense technology—say, radar-evading stealth— Investors needn’t have worried. That 5% and then mass-produce it on an assembly line. decline was a blip in comparison with the “Our business is not all around who is the 170% gain in Lockheed’s share price since president of the United States,” says Hewson, 62, chief executive Marillyn Hewson took over who’s the daughter of an Army hospital manager in January 2013. During that period the comand worked her way through the University of pany, based in Bethesda, Maryland, has deAlabama as a night telephone operator. “We’re livered consistently higher proﬁts and given managing a huge supply chain, we have internaback $12 billion to shareholders, despite tional partners around the world, and we expect declining defense budgets. a fair return for that.” Trump will soon learn that the bullying Hewson, who started at Lockheed in 1983 tactics he uses at real estate closings don’t work working on C-130 cargo turboprops in Marietta, so well with defense Georgia, has long since contractors. The F-35 mastered the vagaries was engineered not just of doing business with for stealth but for conthe government. For LOCKHEED’S TOP FIVE DEFENSE gressional support. Asinstance, Congress likes CONTRACTS—THAT WE KNOW OF. BLACKsembled at a 14,000-emto break contracts into BUDGET PROJECTS REMAIN CLASSIFIED. ployee complex in Fort bite-size annual chunks, ANNUAL COST OF PROGRAM/ Worth, Texas, the ﬁghter obscuring the total cost PROGRAM % REVENUE draws 300,000 parts of huge weapons profrom suppliers in 45 grams like the F-35, even F-35 LIGHTNING II $6.7 BIL / 20% states, with a total estithough that makes them C-130 $1.7 BIL / 5% mated economic impact more expensive and F-16 $1 BIL / 3% of almost 150,000 jobs. less efficient in the long PAC-3 MISSILE $1 BIL / 3% Even if Trump canrun. Lockheed’s internal TRIDENT BALLISTIC MISSILE $1 BIL / 3%
36 | FORBES JANUARY 24, 2017
FRANCO VOGT FOR FORBES
systems are optimized to deal with this sort of governmental nonsense. Hewson is all in on defense, which accounts for over 90% of sales. One of her boldest moves was the $9 billion purchase of the Sikorsky helicopter unit from United Technologies in 2015, securing the $3.9 billion contract for Marine One (the president’s personal ﬂeet of 23 heli-
copters), which Lockheed had lost a few years before. That program is ripe for an outraged Trump tweet, but Sikorsky also helps presidentproof the company: Sikorsky helicopters are popular with foreign governments as low-cost weapons platforms and should help push overseas sales to 30% from around 25% today. Sikorsky also allows Lockheed to dis-
Lockheed CEO Marillyn Hewson parlayed a master’s degree in economics at the University of Alabama into the top job at Bethesda.
JANUARY 24, 2017 FORBES | 37
FIGHTING TRIM The F-35 is one of the most complex machines ever built, a 1,200mph single-engine ﬁghter/bomber. Lockheed won’t conﬁrm, but according to GlobalSecurity.org stealth technology reduces its radar proﬁle to that of a golf ball. Assembled in a mile-long building, the plane is crammed with sensors that allow the pilot to “see” through the bottom of the cockpit via a helmet display. The outer skin is attached to the titanium-and-aluminum frame with a precision that Mercedes-Benz can only dream of. A variance of several ten-thousandths of an inch from spec is enough to produce radar reﬂections that degrade the plane’s stealth capability. Onboard computers running 9 million lines of code allow multiple F-35s to share encrypted communications to triangulate enemy positions. With an internal bomb load of 4,700 pounds in stealth mode and 18,000 pounds when carried on noisier underwing pylons, the plane is designed to sneak in and destroy enemy air defenses and return for full-scale bombing. —D.F.
and power a city of 100,000. “My job is to make sure that as our customers’ priorities change, as the environment changes, we shift that portfolio of products to meet them,” Hewson says. But Lockheed isn’t just a massive research lab; it’s also a manufacturing giant, producing not only sophisticated aircraft like the F-35 at scale but also robotic submarines and high-speed combat ships for HOW TO PLAY IT the Navy. It built the Patriot BY KEN FISHER missile, the Aegis antimissile Big defense contractors tanked the week after Trump won system and the Viking rovers the election. The Republicans won’t get blamed for being still cruising around Mars. too soft on defense, so they needn’t be strong on it. And as we’ve seen, Trump won’t like big ﬁrms charging him Trump will discover that if he big-ticket prices. If you’re doing defense, think smaller, wants programs like these, he cheaper and diversiﬁed, such as TEXTRON, led by its has few other options. smaller, cheaper Cessna line of planes, bought by defense and nondefense The Pentagon can buy customers alike. UNITED TECHNOLOGIES is bigger but has a similar proﬁle. Sidewinder missiles from Expect cheaper-ticket items to move—at least until the next election cycle. Raytheon and nuclear subs from General Dynamics, but Lockheed is probably the only contractor that heed’s helicopters could be pilot-optional. can pull together a project the size of the F-35. R&D is another defensive strategy. On averHewson’s biggest challenge is persuading Conage, Lockheed spends $700 million a year to gress—and the Donald—to place larger orders come up with technology the Pentagon can’t so Lockheed can wring costs out of its immense afford not to buy. The company’s Silicon Valley supply chain and bring the price down to bepresence dates to the 1950s, when its engineers tween $80 million and $85 million (less than the were pioneering the ballistic missile technology cost of Trump’s personal 757 jet). designed to deliver nuclear warheads. Now en“If you look at the global security environgineers in Palo Alto and elsewhere are working ment and how challenging and crazy that is, on hypersonic aircraft that could traverse the and it’s our products that are going to help country in less than an hour, as well as on directwith that, I think we’re a great growth story,” ed-energy weapons to blast incoming missiles Hewson says. “As I look at companies in our apart with laser beams and a compact fusion industry, I’d bet on us.” reactor that can ﬁt in the back of a pickup truck play some of its Skunk Works-bred technical prowess. Take autonomous ﬂight. Lockheed engineers are masters at the technology. The pilotless K-Max helicopter, for example, has hauled more than 4.5 million pounds of cargo to remote military posts in Afghanistan since it was deployed in 2011. In a few years most of Lock-
“Diplomacy is letting someone else have your way.” —LESTER B. PEARSON 38 | FORBES JANUARY 24, 2017
BY THE NUMBERS
YIELD TO ONCOMING TRAFFIC U.S. AUTO DEALERS ARE LOOKING WITH TREPIDATION AT A JAM OF LEASED CARS THAT WILL COME ONTO THE RESALE MARKET OVER THE NEXT FOUR YEARS. THAT WILL LIKELY LOWER USED-CAR PRICES AND HURT NEW-MODEL SALES AS WELL. SMART DEALERS WILL LIKELY RESPOND BY RESELLING MORE SUCH VEHICLES AS “CERTIFIED PRE-OWNED,” WHICH TYPICALLY FETCH HIGHER PRICES BECAUSE OF THE EXTRA CARE AND ATTENTION DEALERS GIVE THEM. A LOOK AT THE FIGURES DRIVING THEIR DECISIONS:
VEHICLES CERTIFIED COMING PRE-OWNED OFF LEASE SALES
2.9 MIL 2017 (forecast)
Source: Cox Automotive.
TYRONE TURNER/GETTY IMAGES
New House on the Block Thanks to companies like Concierge Auctions, buying a luxury home can be done with the swipe of a ﬁnger on a smartphone. Is this where the future of real estate sales is going. . .going. . . ? BY SAMANTHA SHARF
Over the years Concierge has worked with celebrities (including Michael Jordan and Cher) and billionaires (including GoDaddy founder Bob Parsons) who want to maintain privacy on their properties. “Our sellers want to make wise decisions,” says Laura Brady, Concierge’s 37-year-old founder and president. “Watching money leave to keep up an asset they are not using is not fun.” Brady began selling real estate in 2004 and quickly became one of the top-selling agents in Florida. By the next year the state’s housing stock was starting to balloon, a sign of trouble. Brady also had concerns about the way high-end properties were sold in this country. The standard list-offer-negotiate model is relatively efficient for homes under $250,000, because the buyer pool is large. For multimilliondollar properties, prospective buyers are harder to ﬁnd. (Only 2.3% of U.S. homes sold last year went for over $1 million.) Luxury properties tend to sell quickly near the asking price or languish for months before selling at a signiﬁcant discount. “The higher the price point and the more unique the property, the less the traditional method of selling worked,” Brady says. Auctions were a perfect solution. They’re quick and competitive, adding urgency to a transaction and establishing fair value HOW TO PLAY IT for a hard-to-price asset. BY NICHOLAS GALLUCCIO (In Australia many homes A housing recovery, steepening yield curve, easing of regulations are sold this way.) Brady and lower corporate taxes are like manna from heaven for ﬁnancial persuaded her boss, Chad ﬁrms, especially regional banks. Those exposed to dynamic economies and improving housing trends, like Bank United in Florida or Roffers, to test the theory. Legacy Texas in Texas, will continue to beneﬁt—Legacy doubly After a few successes, so with its mortgage warehouse lending line. Another, Glacier Brady started Concierge Bancorp, has a core lending base in Montana, home to a seasonal economy and luxury-home buyers. Similarly, Ethan Allen touches both fronts: a reand moved to New York freshed product line of high-end home furnishings and a sizable real estate portfolio. in 2008. Roffers, now chairman, soon followed. ful as Redekop’s—around 30% don’t result in Today many companies sell homes by auction, sales, and many bring in lower amounts than the particularly properties that have entered forecloseller had expected. Nevertheless, Concierge is sure, but few have succeeded at the price range a leader in a small but growing group of auction where Brady and Roffers operate. Concierge sold 85 houses selling homes like works of art. of the 133 homes it auctioned in 2016, up from 60 of 40 | FORBES JANUARY 24, 2017
Bidder up: Concierge Auctions founder Laura Brady and company chairman Chad Roffers in an Austin, Texas, estate that sold in 2016 for $2.68 million.
MATTHEW MAHON FOR FORBES
aren Redekop designed Casa Karen, a palatial hillside estate in Los Cabos, Mexico, to exacting speciﬁcations. She hired local artisans to paint ornate murals and imported pieces from India, Indonesia, Thailand, Europe and the Middle East. But after ﬁve years perfecting her creation it was time to move on. The 60-year-old Canadian was eager to start her next project, a 4-acre compound in nearby Palmillia, so she hired a local real estate agent, who listed the home for $2.7 million. A year later she hadn’t received a single offer. Enter Concierge Auctions, a New York-based real estate company that sells luxury homes to the highest bidder, promising clients premium marketing and immediate sales. Two months after Redekop listed on Concierge, the house sold for $2.6 million in a 30-minute mobile auction. Helping wealthy clients buy and sell homes in a timely fashion propelled Concierge Auctions to sell $270 million worth of real estate in 2016, bringing in more than $30 million in revenue and pushing the company above $1.2 billion in all-time sales. Not all auctions are as success-
80 in 2015. For 2017 it’s projecting 150 auctions. (By comparison, competitor Platinum Luxury Auctions holds about 25 auctions a year.) On both sides of the sale, Concierge works with local real estate agents, who receive the traditional 5% to 6% sales commission and gain national exposure for a property. On the buyer side, Concierge takes a hefty 12% premium—as an auction house does with art—but then many homes sell for less than their original (and often aspirational) list price. Auctions with Concierge typically have no reserve and range from $2 million to $40 million, with an average of about $4 million. The company says it has been proﬁtable since year one, but a new pricing program may test its model. To entice homeowners, Concierge began covering the seller commission in November. It also cut a $50,000 upfront fee that was refunded upon closing. In other words, sellers hire Concierge but now absorb none of the costs directly. To Jonathan Miller, CEO of real estate appraisal ﬁrm Miller Samuel, pushing the costs to the buyer is a bit of marketing magic, akin to person-
al-injury attorneys who gain client trust by taking a cut only after a settlement is reached. “It is not that the seller is going to net out more money,” he says, reasoning that buyers will factor in the cost. “It’s a stronger sales pitch.” These concessions may be an effective marketing ploy, but they do nothing to offset the staggering costs buyers face. Brady claims buyers haven’t complained about the high fees but says the solution for anyone offended by the price is simple: Bid less or not at all. “If they don’t want to pay the extra premium, then they don’t have to bid,” she says. “From a buyer’s perspective if they don’t want to lose a property, they have to come and abide by the rules.” That may seem like an unfriendly stance toward clientele, but agents who have worked with Concierge say auctions can provide better deals than purchases made on the open market. Sellers praise Concierge for generating more showings in the month before an auction than their homes received in years on the market. The company estimates that a seller unloading an $8 million property could be spending $40,000 a month on carry costs—taxes, insurance and maintenance—often to maintain a home the seller is not even living in. On average, properties spent six months on the market before Concierge was brought on. Technology is also changing the way Concierge services buyers and sellers. Watch a video on its site multiple times and a sales agent will be in touch. If you replay footage of, say, a pool, it’ll send a roundup of the best homes for swimmers. Currently 90% of auctions are conducted on Concierge’s Instant Gavel mobile app, rolled out a year ago. Matthew Magnotta, an agent with Berkshire Hathaway HomeServices Utah Properties, recalls staring at a client’s iPhone as he bid on a medieval-inspired “castle” in Park City, Utah. “In normal real estate there is a lot of discussion and investigation that makes it a real thing that the transaction is actually happening,” Magnotta says. “When you’re buying a $10 million house by clicking on an iPhone, like you’re buying something on eBay, it’s surreal.”
“To be happy at home is the ultimate result of all ambition.” —SAMUEL JOHNSON JANUARY 24, 2017 FORBES | 41
Pet Smarter Four years ago Chewy’s college-dropout founders couldn’t get a meeting in Silicon Valley. Now they’re running one of America’s biggest privately owned e-commerce sites. BY SUSAN ADAMS
42 | FORBES JANUARY 24, 2017
Chewy’s Facebook page into the wee hours. Positive reviews, he says, “give me goose bumps.” The son of a teacher and a glassware importer, Cohen ﬁxated early on becoming an entrepreneur. At 15 he discovered the dark art of affiliate marketing, collecting fees for referring customers to e-commerce sites. He got so good at it that he started banking thousands of dollars a month. While looking for a programmer to help build his affiliate sites, he met Michael Day in a Java chat room. Day dropped out of the University of Georgia to join forces with him, and in 2011 they sank $150,000 of their own money into an online jewelry startup in Florida. But after a visit to a Miami trade show, they felt intimidated by how much there was to learn about gems and precious metals and realized they had no passion for the business. Then Cohen had an “aha” moment while buying food for Tylee, his apricot-colored teacup poodle. “She’s my No. 1,” he says, “and I’m married.” Cohen, who shares his bed with Tylee and his pregnant wife, sees himself as a “pet parent.” Typically, pet parents spend freely on premium foods, often made with ingredients ﬁt for humans, like grass-fed, free-range, hormonefree New Zealand lamb, the main ingredient in K9 Natural Lamb Feast, available on Chewy. com at $190 for an 8-pound box. Pet parents who don’t sleep with their furry offspring can buy a Big Barker pillow-top orthopedic dog bed
Going to the dogs: Ryan Cohen says it was Tylee, his teacup poodle, who inspired the decision to sell pet food instead of jewelry. “For me, it was feeding my baby.”
JAMEL TOPPIN FOR FORBES
n December 2012, desperately needing money to expand Chewy, his year-old petsupply startup, Ryan Cohen traveled from Fort Lauderdale to Palo Alto and walked into a half-dozen venture capital ﬁrms on Sand Hill Road unannounced. He didn’t get past the receptionists. Three months later he tried the same tactic again. “I’m relentless,” says Cohen, a college dropout from Montreal. “It felt like it should work.” It did not. Yet four years later Chewy is one of the nation’s largest and fastest-growing privately owned e-commerce companies, on track to book revenue of $900 million in 2016 and more than $1.5 billion in 2017. Relying on a customerservice strategy Cohen calls “Zappos on steroids,” Chewy deploys 416 of its 3,400 staffers to answer phones and texts in round-the-clock shifts at the company’s 70,000-square-foot headquarters in Dania, Florida. To ensure speedy delivery to his 3 million patrons, he has built three fulﬁllment centers, each the size of ten football ﬁelds, and has plans to open three more by early 2018. Chewy has already grabbed 43% of the online sales of pet food and litter in the U.S., just behind Amazon’s 48%, according to market research ﬁrm 1010data. (Big-box retailers Petco and PetSmart are both in the single digits.) “We want to be the No. 1 pet retailer in the world,” Cohen says. He has a long way to go. Chewy has yet to turn a proﬁt, and the way it’s spending money to acquire customers, it’s not clear it ever will. Cohen, 31, is compulsive about executing, and about other things, too. “I have OCD,” he says— though he’s never been diagnosed—while digging into a lunch of steamed salmon and vegetables at Chewy HQ. His diet is primarily two meals: steamed vegetables with ﬁsh or chicken. He sleeps three hours a night, reading feedback on
on Chewy for $400. In 2016 the U.S. pet-product market was projected to hit $47 billion, according to market research ﬁrm Packaged Facts, with e-commerce accounting for as little as 5%. Betting that the population of big-spending pet parents would grow and that their buying would move online, Cohen and Day sold their jewelry inventory for 80 cents on the dollar, scraped up some more cash from their personal bank accounts, converted their jewelry site into Chewy.com and started buying products from distributors. They found a third-party fulﬁllment center in Easton, Pennsylvania, and launched
in late 2011 with 50 dog- and cat-food brands, matching online prices with competitors’ and offering discounts on ﬁrst-time orders. Even though Cohen and Day answered customer calls themselves, 24 hours a day, and didn’t take salaries, Chewy lost money. But sales grew, hitting $26 million by the end of 2012. Though Cohen had struck out in Silicon Valley, Chewy attracted interest from Boston’s Volition Capital. In late 2013 Volition invested $15 million after watching Chewy exceed its growth targets. “Ryan had crushed all his numbers,” says Volition partner Larry Cheng. JANUARY 24, 2017 FORBES | 43
ten holiday cards, which cost the company $940,000 in postage alone. One pet industry veteran, who says he knows three people who are familiar with Chewy’s ﬁnances, doubts the company will reach proﬁtability. He says Chewy’s average sale is $75, its average margin after discounts 30% and its average cost of delivery—which Chewy offers for free on orders of more than $49—around $12. A competitor estimates that Chewy’s customer-acquisition cost could run as high as $200 per ﬁrst sale, given that the company pays to appear at the top of Google searches for each of the hundreds of brands it carries. “The bottom line is that Chewy is incredibly predatory, and they’re willing to lose money to grow their volume,” says the industry veteran. Confronted with those numbers, Cohen merely smiles. He won’t specify his unit economics but says they’re positive. He says customer retention is high, as is the lifetime value of those customers. “They’re smart to be really aggressive and to push really hard right now,” says e-commerce analyst Mulpuru. “There’s HOW TO PLAY IT a window of opportuBY WILLIAM BALDWIN nity to be this darling Ransom E. Olds, James Cash Penney, Howard Johnson, BlackBerin the e-commerce ry and Netscape were pioneers in assembly lines, merchandising, space. But I do quesfranchising, messaging and browsing. But Henry Ford, Sam Waltion the lifetime value ton, Ray Kroc, Apple and Google made the big money. Investors captivated by the ﬁrst-mover advantage of Pets.com 17 years ago of their customers. In suffered a spectacular ﬂameout. The winner in online dog food is the age of the Internet going to be a latecomer. You can make a big score with the inventor of an industry it’s so easy to switch.” (Amazon, FedEx). But balance out any what-if bets in your portfolio with a good Starting with Amameasure of what-is. A place to start: Vanguard Small-Cap Value ETF. zon, the competition is formidable. Jet.com, the bulk e-commerce site acquired by Wal-Mart zon employees on LinkedIn and managed to last year for $3.3 billion, has moved into pet suphire 100 of them. By mid-2014 the company had opened a 600,000-square-foot fulﬁllment center plies and is undercutting Chewy’s prices on bulk sales of some products. And Petco and PetSmart, in Mechanicsburg, Pennsylvania. with revenue of Cohen also poured money into customer ser$4 billion and $7 billion, respectively, remain the vice. Your schnauzer doesn’t like the Blue Buffalo Wilderness Salmon Grain-Free dog food you biggest specialty players in pet retail. But Cohen says he is convinced that e-commerce will evenbought for $48? Chewy will issue a refund and tually take at least 50% of total pet product sales suggest you donate the food to a local shelter. and that Chewy will log more than $5 billion in Canceling your auto-ship order because your revenue by 2020. “We’ll be done growing,” he Siamese passed away? Chewy sends ﬂowers. says, “when we’re 6 feet under.” Last year Chewy mailed 2 million handwritWhen Cheng asked Cohen whom he’d most like to have as board chairman, Cohen named Mark Vadon, founder of jewelry site Blue Nile and ﬂash-sale site Zulilly. Cheng made the introduction, and Cohen ﬂew to Seattle to meet with Vadon, who was impressed by Cohen’s attention to detail. “He knew the speciﬁc economics of his transportation contracts with carriers,” says Vadon, who agreed to serve as Chewy’s chair and to invest $5 million of his own money. Five more investors followed, including T. Rowe Price and BlackRock, for a combined total of $236 million. Cohen won’t reveal Chewy’s valuation, but longtime ecommerce analyst Sucharita Mulpuru, who recently moved from Forrester Research to Shoptalk, a retail conference organizer, pegs it at $4 billion. The capital allowed Cohen to shift his plans into high gear. He decided to take fulﬁllment in-house, even though he and Day, now Chewy’s chief technology officer, knew nothing about warehouse operations. To ﬁnd experienced staff, Chewy sent out hundreds of invitations to Ama-
“Make your customers comfortable and they will give you their lives.” —PAUL ORFALEA
44 | FORBES JANUARY 24, 2017
MARGIN PROPHET GETTING BUZZED IN 2008 HIGH SCHOOL TEACHER MERRILEE KICK, NOW 53, GOT THE IDEA FOR BUZZBALLZ, SINGLE-SERVE COCKTAILS THAT COME IN BRIGHTLY COLORED CONTAINERS. TODAY HER CARROLLTON, TEXAS, COMPANY EMPLOYS 60 AND SELLS ITS DRINKS IN 40 STATES. ANNUAL REVENUE IS $20 MILLION.
How much cash did you need to get off the ground? I was trying to get $300,000. I was told, “You’re a woman, this is a male-dominated industry, and we don’t think you’re going to survive.” What about family money? My husband said, “I will not support this. Don’t use any of our 401(k) or savings.” I took $27,000 from an inheritance. I took out a home-equity line of credit for $69,000. A bank said if I put that amount down, it’d give me $178,000. Why didn’t your husband want to help? He’s a CFO, and he was terriﬁed I’d lose every penny. He changed his direct deposit from our checking account to a private bank. How did you get Buzzballz into retail outlets? I sent a letter to 17,000 convenience stores and 5,000 liquor stores. All of a sudden sales started taking off. —Susan Adams
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Trash Tech Rubicon Global CEO Nate Morris is building the Uber of garbage collection, disrupting a $60 billion industry dominated by giants.
CLAY COOK FOR FORBES
BY ALEX KONRAD
46 | FORBES JANUARY 24, 2017
ike other entrepreneurs who head blockbuster tech startups, Nate Morris these days ﬁnds his social calendar sprinkled with glitz and glamour: invitations from Leonardo DiCaprio to a premiere of The Revenant (he declined) and from billionaire Marc Benioff to a private dinner with Arianna Huffington and Billie Jean King (he accepted). But much of his business at Rubicon Global is a world away from Hollywood and Silicon Valley, in places like Jeffersonville, Indiana, a town of 45,000. On an unseasonably warm November day, he’s there meeting with local garbage boss Bob Lee, who has a plea for Morris: “We need your help.” Lee has been in the garbage business since he snagged a gig hauling trash for the local unemployment office as a young Army vet in 1971, and his company, Eco Tech Waste Logistics, based in Louisville, Kentucky, is the kind of mom-and-pop operation that has powered Rubicon’s ascent. With 96 employees and 69 haulers (trucks), Eco Tech is one of the area’s leaders. But like almost every other small hauler in the country, it faces a daily challenge from national players with resources that dwarf its own, and Rubicon’s tech offers a way to ﬁght back. Rubicon is the Uber of trash. Its software connects waste collectors (the guys with the trucks) with the waste creators (an office or business or perhaps even homes), then makes sure the pickup runs smoothly. For the haulers, Rubicon’s app helps detect when the collection happens without any input from or distractions for the driver. The dispatchers know where their trucks are and who’s working the most stops. The consumer gets a big-picture view that shows With a model straight out of Uber’s playbook, Rubicon Global CEO Nate how much waste they’re sending Morris is helping thousands of small to landﬁlls versus recycling and garbage haulers compete with industry how frequently they really need giants like Waste Management. service, helping to cut costs.
Rubicon charges both sides—the haulers and their customers—for access to its tech. Eight years after Morris launched the company with childhood friend Marc Spiegel in Louisville, where they grew up, Rubicon works with 5,000 small hauling businesses and with big customers like 7-11 and Wegmans. It snagged its ﬁrst municipal contract in October in Atlanta. Revenue has tripled to more than $200 million in the past year. Rubicon has lured top-tier investors such as Goldman Sachs and Wellington Management and is now poaching talent from Silicon Valley. And with a new partnership with Suez Environment, a $15 billion French multinational hungry to learn from Rubicon’s technical chops, Morris is gunning for a $60 billion industry in the U.S. that’s dominated by giants Waste Management (revenue: $13 billion) and Republic Services ($9 billion). Suez is leading a new $50 million investment in Rubicon, bringing its valuation to $800 million. Already the owner of Waste Management’s former assets overseas, Suez plans to reenter the U.S. market by working with Rubicon, which will share its best tech practices and what Morris considers its most valuable asset: its data. “The U.S. model is oldfashioned,” says Jean-Marc Boursier, CEO of Suez’s Recycling & Waste Recovery, Europe, who has kept his company’s plans with Rubicon secret until now. “We hope it will astonish and surprise—then they will need to evolve and evolve very fast.” For Rubicon, the Suez deal opens a clear route to markets overseas over time. For now, its Morris’ ace up his sleeve to take more share from the incumbents. “That’s when it gets fun,” he says. Morris, 36, was elected student-body president in ﬁfth grade, and by high school he had met Bill Clinton and hosted a morning news telecast. As a scholarship student at George Washington University, he woke up early on weekends for internships and began moonlighting for the state GOP to help reelect Senator Mitch McConnell. Morris went off to China to teach business management and work for Kentucky’s cabinet for economic development before heading to Princeton for graduate school in public and international affairs. Firsthand exposure to industrial sprawl in China had put sustainability on his mind, and with Spiegel, whose family had worked in the garbage hauling business JANUARY 24, 2017 FORBES | 47
year, according to the Solid Waste Association of North America. Rodoni also helped develop a software management suite, Caesar (later renamed Augustus), to track volume and routes, and an e-commerce program, Rubicon Pro, which offers customers a discount marketplace for supplies and loans. Much of Rubicon’s model is straight from Uber’s playbook. It keeps risk and capital costs down because it doesn’t own trucks or disposal centers itself. Former Uber CFO Brent Callinicos, who also joined Rubicon’s board, says the company’s growth potential rests in its ability to empower its small-business base. For all its success, Rubicon remains minuscule compared with its national rivals. Its deal with Atlanta was the company’s ﬁrst with any city. By comparison, Waste Management works with 3,500 municipalities and Republic with 2,700. Meanwhile, Waste Management has invested $150 million in IT in the past year and has been outﬁtting 16,500 trucks with mobile devices. “I don’t want to be the guy on the sidelines when it comes to HOW TO PLAY IT disruptive technolBY MARILYN COHEN ogy,” says James Fish One of the ways giant garbage haulers like Waste Management Jr., who was appointand Republic Services got so big was through acquisitions. If ed in November as Rubicon is really the Uber of the garbage business, it could be Waste Management’s a perfect future acquisition for one of the industry giants. With new CEO. “I want to Waste Management’s stock hitting all-time highs, think bonds. Steady businesses like garbage hauling are tailor-made for throwbe the disruptor.” ing off the income streams bondholders love. Waste Management bonds maturing But Morris isn’t on March 1, 2025, yield 3.2%. If disruptors like Rubicon can prompt an old industry to the only one who reboot itself, Waste Management could get upgraded from Baa2/A- to A+ or better. sees plenty of opportunity ahead. Analysts say incumbents are under pressure when Morris befriended Uber founding CTO to cut costs and provide steady dividends, not Oscar Salazar, who became an investor, board seek Uber-like hypergrowth. Still, Waste Manmember and pipeline to tech talent. Salazar agement and Republic combined are already helped recruit Phil Rodoni, the software chief worth nearly $50 billion. “Maybe it takes them at Esurance, who led the team that built Ru20 years, but if the other guys can get to $50 bicon’s Shake app, which measures proximity, billion, I don’t see why Rubicon can’t either,” speed and the shaking motion of an emptying says Salesforce’s Marc Benioff, who invested trash bin to conﬁrm service. That hands-free in Rubicon after meeting Morris in 2014. Take monitoring, which allows the driver to remain that with a grain of salt—it’s Benioff, tech’s focused on the street, helps to eliminate the hyperbole king, speaking. But even at a small top cause of fatal accidents involving garbage fraction of that, garbage could prove to be a trucks. Such accidents led to 21 employee famighty good business for Rubicon. talities and several dozen civilian injuries last for years, the two decided the industry was ripe for a tech-based disruptor. “They made all their money from landﬁlls,” Morris says. “We could be the brain for the industry.” To friends and family the move was a shock. “I asked, ‘Do you understand who is in this business?’ And he said, ‘I don’t mind ﬁghting,’” recalls Morris’ grandfather Lewis Sexton, a former president of the local union for the Ford plant in Louisville. The union liked Morris’ vision of empowering independent haulers, and when he proved he could save them 60% on their waste disposal, the union hall signed up as Rubicon’s second customer. Getting investors proved harder. To do business in several states, including New York, Rubicon had to ask every investor to get ﬁngerprinted. Eventually QuarterMoore Capital’s Lane Moore, who had cofounded Bagster, a company he sold to Waste Management, agreed to invest and join the board—but only if Rubicon moved to Atlanta, where he worked. The move attracted more high-proﬁle supporters, and Rubicon’s next big break came
“Ours is a culture and a time as immensely rich in trash as it is in treasures.” —RAY BRADBURY
48 | FORBES JANUARY 24, 2017
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Masahiro Okafuji ITOCHU Corporation www.itochu.co.jp/en/
Yuzaburo Mogi Kikkoman Corporation www.kikkoman.com
Fujio Mitarai Canon Inc. global.canon
Akihiro Teramachi THK CO., LTD. www.thk.com
39th Annual Special Japan Section Writers Martin Foster David W. Russell Photography Kentaro Ishibashi Mao Yamamoto
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Traditional Values Bring Tectonic Shift to Trading Sector When Masahiro Okafuji became President and CEO of one of Japan’s best-known general trading companies (sogo shosha) in 2010, he had his work cut out for him. Once-proud ITOCHU Corporation had fallen to fourth place in the shosha rankings. President Okafuji promised to help the ﬁrm at least regain its former third-place standing.
et even that promise looked difﬁcult to keep. Shosha are ranked by global sales, and the top two firms have held those positions seemingly forever. Moving up just one notch would require both brilliant strategy and a Herculean effort. Then came a tectonic shift that sent shock waves through the business. When the big shosha closed their books last year, ITOCHU had rocketed to number one. The common explanation was that, at Okafuji’s direction, the company had decreased its massive energy and resource investments just before those markets tanked. However, inside ITOCHU, people spoke of the “Okafuji Reforms,” a series of major internal policy changes that turned the company into a tiger almost overnight and stunned the competition. “I didn’t set out to be a reformer,” Okafuji explains. “I just wanted our staff to rediscover what it means to be a shonin.” He uses the traditional Japanese term for the hardworking merchants of old times, who met with their customers face-toface every day and placed their needs above everything else. “ITOCHU was born from shonin culture,” he continues, “and if we lose that, we have lost our soul. I wanted to remind everyone of why we are proud to be called shonin.” In short order, Okafuji instituted policy changes to refocus staff. For example, he ended ITOCHU’s f lextime system. “We had people coming in at 10:00 a.m.,
talking about working ‘core hours.’ Maybe that’s OK for other ﬁrms, but not for a shosha. We exist to serve our customers. The second we forget that, we start to go out of business. Our customers begin to work early in the morning; if they want information or need help with something, they won’t wait until 10 to call us. If our rep isn’t there to take their calls, the customers will ﬁnd someone who is.”
Get Out of the Ofﬁce! To boost efficiency, Okafuji slashed the number of meetings and the volume of paperwork being generated. “No one ever sold anything by sitting in a meeting,” Okafuji says, his voice rising slightly with characteristic passion. “You can’t serve your clients by designing a PowerPoint. You have to get out of the ofﬁce and go do real work. You have to meet with your customers every day. That’s what shonin do.” A sign on his ofﬁce wall sums up Okafuji’s management philosophy: “Earn, Cut, Prevent.” “Everyone is focused on earning; that’s natural because it feels good. Other shosha all focused on making money … strategically or not, that’s another story,” he says with a smile. “But everyone dislikes cutting off the fat—eliminating waste— because it can be very painful.” The shonin of old understood that, he explains, but too many of today’s executives lack the will to do what is necessary. As for “prevent,” Okafuji explains,
Masahiro Okafuji President and CEO, ITOCHU Corporation
“It’s essential to examine all our businesses and anticipate problems before they arise. We must look at our strategy and constantly adjust it to respond to changes in the global economy. Preventing losses is much cheaper than dealing with the consequences.” He concludes: “People ask if there will be a role for shosha in the future. I say, as long as we provide useful functions and serve our clients faithfully, there will always be a need for hardworking shonin.”
Masahiro Okafuji joined ITOCHU in 1974 after graduating from the University of Tokyo. He was appointed Executive Ofﬁcer in 2002, Managing Executive Ofﬁcer in 2004, Director and Executive Vice President in April 2009, and President and CEO in April 2010. www.itochu.co.jp/en/
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Healthy, Sustainable Growth on the Menu Many Japanese companies have long histories, so it’s not at all unusual for a ﬁrm to proudly remind customers that it’s been in business for 100 or 150 years. But very few companies can clearly trace the origins of their business back over 300 years. None is more famous for its longstanding tradition than Kikkoman Corporation.
onorary CEO and Chairman Yuzaburo Mogi is the living embodiment of t hat t ra d it ion. Hi s ancestors helped grow a small, village-based soy sauce business into a major Japanese corporation, and Mogi himself helped nurture it into a powerful international brand that produces reliable investor-friendly growth in sales and operating income year after year. In person, Mogi is a true old-school gentleman, always well dressed and articulate, and one of the few Japanese senior executives who speaks English ﬂuently. This is not surprising, considering the fact that he lived in the U.S. for years and earned an MBA from Columbia University. When asked about the goals outlined in Global Vision 2020—the company’s vision and basic strategy for the future—Mogi explains that while none have specific numerical targets, the most important one will continue well past 2020. This key goal is “to make Kikkoman Soy Sauce a truly global seasoning,” Mogi shares. “So many people around the world have still not tried shoyu (soy sauce) in their everyday recipes, and have not yet discovered it is an all-purpose seasoning that can enhance the ﬂavor of almost any food. That is what I most want to change in my lifetime.”
Kikkoman seems to be well on its way to achieving that goal. Sales in North America have been growing steadily for half a century, European sales are still growing in double digits on average, and Asian business, too, is expanding.
A World of Flavor Awaits Mogi notes that Asia is an especially challenging market for the company. “Unlike the U.S. or Europe, most Asians are already familiar with soy sauce,” he explains. “People there have grown accustomed to the f lavor of their own local varieties, so it is harder for us to convert users.” He points out that most of the local products are much cheaper because they do not use the slow fermentation process that Kikkoman has mastered over centuries. Still, the Asian economies are growing, tastes and incomes are changing, and Mogi is sure that Kikkoman has a prosperous future ahead in the region. “Then,” he says, smiling, “down the road there is South America, and eventually Africa as well.” True, there are plenty of new shoyu markets to conquer, but is Kikkoman a one-product company? “Certainly not!” Mogi replies with a laugh. “Our wholesale foods business— through one of our subsidiaries, the JFC Group—is growing tremendously. This
Yuzaburo Mogi Honorary CEO and Chairman of the Board Kikkoman Corporation
group is the world’s largest distributor of what we call Oriental foodstuffs. The popularity of Asian-style cooking and the demand for ‘Asian-fusion’ cuisines continues to grow. “In addition, our Del Monte business, which covers most of Asia, is doing well. We are also developing a promising soy milk business, and we have invested in the health foods and supplements business through companies such as Country Life in the U.S.” Mogi notes that the firm’s real goal for the coming years is to harmoniously blend many local and regional foods and ingredients with the essence of traditional washoku (Japanese cuisine) and, of course, with shoyu, to create exciting new varieties of local dishes. This international exchange of “food culture” is at the heart of Kikkoman’s thinking.
Yuzaburo Mogi is a descendant of one of the founding families of Kikkoman, which is one of the oldest continually running businesses in Japan. He became company President in 1995, was named Chairman in 2004, and assumed the title of Honorary CEO and Chairman of the Board of Directors in 2011. Mogi holds an MBA from Columbia University. www.kikkoman.com
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A Sharper Focus on Constant Transformation The ﬁrst time we visited Canon, back at the beginning of this century, the company was excited about the second ﬁve-year installment of its Excellent Global Corporation Plan. CEO Fujio Mitarai explained that the plan was designed to evolve Canon from a good company to a great one. We recently revisited Canon, and once again had the pleasure of speaking with Mitarai, now Chairman and CEO. are strengthening our manufacturing capabilities by reinforcing our commitments to robotics and automation; secondly, we are expanding all our current business lines while at the same time pursuing M&A in areas such as commercial printing, network cameras and advanced medical equipment. All of that is aimed at maximizing new growth opportunities.”
A Shift Toward B2B
Fujio Mitarai Chairman and CEO, Canon Inc.
e explains how the company’s various five-year plans, called Phases, have carried it and why the newest plan is the culmination of Canon’s strategy. “During Phase IV of the plan (2011–2015), a global recession impacted all areas of our business,” he says. “In response, we focused our energies on further strengthening our ﬁnancial structure so that we could emerge stronger and better positioned.” Mitarai says he is determined to see the company rise to even greater heights through Phase V, which began last year. “I want the Canon of 2020 to look completely different from the way it looks today,” he says. “Two key strategies are driving that transformation: First, we
Mitarai explains that Canon has three major business groupings—cameras, office equipment and industrial equipment—and all of them are currently working to boost their B2B offerings. “Cameras have always been a consumer business,” he says. “But now we are looking beyond the consumer market and developing more equipment for professionals, particularly for ﬁlmmaking. “Our Cinema EOS System lineup of digital cinema cameras and lenses is already a hit in the film industry. Cinematographers around the world like getting such exceptional image quality in a compact, lightweight system that is extremely durable and so maneuverable that they can shoot in incredibly tight locations and even in lowlight conditions. “Our of f ice equipment l i ne s—pr i nt er s , c opier s , projectors and more—are already well known, and we will continue striving to create state-of-the-art multifunction office-automation equipment. We are also moving into commercial printing,” Mitarai adds. “There is An Océ JetStream high-speed continuous-feed commercial printer
a strong and growing market for corporate in-house printing solutions that offer accurate color reproduction and highquality output. Thanks to our acquisition of Océ, a Dutch maker of printing equipment, our lineup now delivers all of this plus excellent productivity. “As for industrial products, IC (integrated circuit) chips keep getting smaller. Desktop PCs have given way to tablets and cell phones, which means increased demand for extremely high-precision ICs. Our excellent semiconductor lithography equipment can meet the challenge of ultraﬁne nanometer-level patterning,” he explains.
Network Video Systems Canon always has so many new technologies. What is the biggest story of the moment? Mitarai responds, “That would be network surveillance systems. They’re already becoming a hot grow th area worldwide, and we are confident they will keep on growing for the foreseeable future. One of the keys to that business is having outstanding cameras in place, and that is our specialty.
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“For example, our new ME20F-SH ultrahigh-sensitivity multipurpose camera makes use of Canon’s most advanced image-sensor technology. As a result, it can operate in extreme low-light situations, capturing clear color images with minimal noise in as little as 0.0005 lux of ambient light (roughly equivalent to an ISO of 4,000,000), which means it can use starlight to take photos that look as though they were shot in broad daylight. This is a truly amazing camera, and it is already beginning to revolutionize network video surveillance. “To grow this business, Canon has acquired some of the top players in the ﬁeld, such as Axis Communications of Sweden, which is the leading company in network video solutions and is well known for its outstanding image-processing technology. We also acquired a Danish company, Milestone Systems, which is the market leader in video-management software. Each of these companies is outstanding by itself, but combining them synergistically with Canon’s own technical expertise produces something greater than the sum of the parts. For one thing, Axis connects us to roughly 75,000 partner ﬁrms including system integrators. By combining our state-of-the-art imaging technology with Axis’s network image-processing technology and Milestone’s video-management technology, we can offer a broad spectrum of innovative network video solutions. “In the first quarter of this year Axis will release an interchangeable-lens network camera, the AXIS Q1659, that can use a range of standard Canon EF lenses. By combining our various areas of technical know-how, we can create new value for this growing ﬁeld. This will reinforce our position as the market leader for some time to come.” So, this technolog y is all aimed at security surveillance, crime prevention and the like? “Of course, security is a major concern around the world today. But these systems
are just as valuable for monitoring the manufacturing process in a factory, for example, or doing market research in a department store. Any situation that benefits from having high-definition color video and outstanding imagemanagement technology will showcase these new systems,” Mitarai explains.
“I want the Canon of 2020 to look completely different from the way it looks today.” —Fujio Mitarai, Chairman and CEO, Canon Inc.
The ME20F-SH is Canon’s ﬁrst-ever ultrahigh-sensitivity multipurpose camera.
The AXIS Q1659 interchangeable-lens network camera combines Canon imaging and Axis network technologies.
Imagining Better Health Care Is there any other area of which the Chairman is especially proud? “That’s a difficult question,” Mitarai says with a smile. “But the answer is yes: medical equipment. Canon has a very long history with medical equipment. We even made an X-ray camera back in 1940. Since then, we have developed many new technologies, from portable X-ray devices to retinal cameras and
optical coherence tomography (OCT) equipment that can scan high-resolution 3-D images inside the eyeball, such as the blood vessels in the retina, to help diagnose ophthalmic disorders. “We plan to continue making advances in the field of medical equipment and aim to be a major player worldwide. We have already begun a program of both internal development and M&A to achieve that goal.” Mitarai sits back for a moment, looking pleased with something. Perhaps his coming proﬁt forecasts? “To be honest,” he says, “nothing makes me happier than to see Canon products being used to support global health care and to save lives. That has long been one of our missions, and it is one we have never forgotten. Our health care operations are not yet the biggest contributors to our sales and proﬁt numbers, but they are among the operations of which we are most proud.” Mitarai’s dream of completely transforming the company now seems close to realization. Will Phase V be the ﬁnal step, the culmination of his efforts? “No, there is no such thing. There is always more to do,” says Mitarai. “Canon is all about undertaking challenges, not simply growing for the sake of getting bigger. We are happy that while both the parent company and the group are growing sustainably, we are also making a meaningful contribution to global society. That’s why Canon exists.”
A native of Kyushu, Japan, Mitarai decided not to follow his father and brothers into medical school, but instead joined Canon, where his uncle served as the ﬁrst President. Five years later, he was posted to the U.S., where he stayed for 23 years, eventually becoming President of Canon U.S.A. Back in Japan, he was later appointed President, CEO and then Chairman of Canon Inc. global.canon
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THK: Embarking on a New Era For Akihiro Teramachi, Chief Executive Ofﬁcer and President of THK CO., LTD., the future rests on the coexistence of humans and robots. The uptake of robotics and artiﬁcial intelligence (AI) is now proceeding at an accelerated pace, and THK has accordingly enacted a new business strategy. “New business opportunities have emerged, and we must aggressively promote robotics and AI,” he says.
he proliferat ion of robot ic s and AI is fundamentally altering the relationship between workers and the machines that were developed during the Industrial Revolution. “So far, humans have used machines, but now I am convinced that machines are beginning to move in an equal relationship with humans, as our partners,” Teramachi says. In some areas, AI is already outpacing human beings, and many expect that computers and AI will outpace the capacity of the human brain sooner than the original projection of 2045. Teramachi has also been surprised by the data-reﬁning capabilities of AI, and is concerned that humans may be losing out to machines. “We must reconsider the relationship of humans and machines, and make efforts to become aware of what our ideal situation should be, without turning away from the present reality,” he says.
An Evolving Business Strategy Traditionally, THK has focused its business on two main pillars: global market expansion and the increased adoption of linear motion technology in new business areas, beginning with its LM Guide core products. Over the past year, in an effort to keep pace with emerging technological advances, Teramachi has added a third directional pillar—the thorough application of robotics and AI, as well as IoTbased products—in order to promote dynamic change throughout the company.
Akihiro Teramachi Chief Executive Ofﬁcer and President, THK CO., LTD.
While THK continues to favor conducting business face-to-face—believing the personalized approach helps it better connect with clients—a new generation of potential clients prefers to interface with machines. “Amid expanding business opportunities, we must signiﬁcantly change the way we do business; and in order to put these efforts on ﬁrmer ground, we also need to change ourselves,” Teramachi says.
Standing at a Crossroads Japa n it self fa ces numerous major events in the lead-up to 2020, and it now stands at a major crossroads. Teramachi
believes the Japanese people should quickly adopt a new way of thinking in order to move forward. “Japan is an adaptable society. When people from other countries view us, they probably think we are unbelievably compliant! If we can understand and accept the necessary changes, I believe we will be capable of seizing the lead and aggressively changing.” Ultimately, Teramachi notes, “On a longer-term trajectory, if we can alter the direction of education, in line with this stance, then in 20 or 30 years’ time, I believe Japan will be a country capable of leading the world.”
Akihiro Teramachi graduated from Keio University in 1971 and joined THK CO., LTD. in 1975. He became a Director in 1982 and Vice President in 1994, before taking over as CEO in 1997. www.thk.com
401(k) Interrupted Trump says he will cut tax rates. Should you pause your retirement plan contributions? BY ASHLEA EBELING
ere’s a heretical idea: Suspend contributions to your 401(k) in early 2017 while you wait to see how much President Trump and the Republican-controlled Congress cut income tax rates and how they revamp the tax code. This advice is meant for high earners who max out their allowed 401(k) contributions, possibly early in the year. (In other words, it’s not for average workers struggling to save 5% of each paycheck.) Say you’re earning $500,000 and years ago elected to contribute 10% of your salary, pretax, to your 401(k). In 2017, as in 2016, the legal dollar maximum for employee pretax contributions is $18,000 for younger folks and $24,000 for those 50 or older. So you’ll reach that deferral limit in May or June. But depending on how deeply rates are cut and the state and local income taxes where you live and plan to retire, you might be better off using some or all of that $18,000/$24,000 allotment to fund a Roth 401(k)—an option now available in about 60% of larger plans, according to beneﬁts consultant Aon Hewitt. Or, if you aren’t offered a Roth, you might decide to put less in your 401(k) and more
58 | FORBES JANUARY 24, 2017
in a taxable brokerage account. “I’d hang back and wait and see what happens on tax rates,” says Robert Gordon, president of Twenty-First Securities in New York. “Until you know what the story is, you can’t make an informed decision on it.” Warning: Before you pause 401(k) contributions, make sure you won’t forfeit any of your employer’s match. A majority of companies allow you to stuff money into your 401(k) late in the year and capture the full match. But a third require you to contribute each paycheck to snag the full amount, Aon Hewitt reports. If the employer match isn’t a problem, here are three other issues to consider. First is your tax rate now versus what you guess it will be in retirement. You get no tax deduction for contributing to a Roth, but all withdrawals in retirement are tax-free and you aren’t forced to start taking money out when you turn 70½, as you must from a pretax account. If your overall tax rate will be the same or higher in retirement, a Roth has the edge. But if, for example, you live in high-tax California or New York City now and plan to retire to income-tax-free Florida or Nevada, your combined rate will likely go down. So you should grab your deductions now. The second factor: Congress is ﬁckle and future tax rates unknowable. Hedge your bets, building up separate pretax, Roth and regular taxable savings. “It’s tax diversiﬁcation,” explains Robert Keebler, a CPA in Green Bay, Wisconsin. The top federal income tax rate on salary is now 39.6%, and Trump wants to cut it to 33%. If he succeeds, consider it a window to build up your Roth stash, not a forever promise. The third consideration? Not all income is taxed equally. Under current law, withdrawals from pretax retirement accounts, including 401(k)s and IRAs, are taxed at high ordinary income rates. But if you invest through a taxable account, you pay a lower top rate on longterm capital gains and corporate dividends. That rate is now 23.8%, and Trump would drop it to 20%. Moreover, House Republicans want to chop the top rate on capital gains, dividends and even interest income to just 16.5%. If that happens, Gordon points out, those high-yield corporate bonds you’ve been stuffing in your pretax 401(k) might be better held in a regular brokerage account. Complicated? Yep. But 2017 could end up being the year to rethink how you save for retirement and which assets you hold where. F
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The Trump Discount Cartica Management is proving that when it comes to emerging markets, activism is probably more important than who’s living in the White House. BY STEVE SCHAEFER
s the aftershocks from Donald Trump’s stunning presidential victory keep investors guessing, few sectors have suffered more than emerging markets. That’s just ﬁne by Teresa Barger, chief executive of the $2.7 billion emerging-markets specialist Cartica Management, who gives little credence to Trump’s blustery rhetoric. “Being against globalization is like being against winter and refusing to buy a winter coat,” Barger says, paraphrasing Nelson Mandela. She launched Cartica in 2008 with three cofounders—Farida Khambata, Steven Quamme and Mike Lubrano—after 21 years largely spent funding businesses in developing countries. Riddled with corrupt government actors, empire-building families and outright fraud, emerging markets are viewed as the Wild West by most institutional investors. Many take a diversiﬁed-index-fund approach, but Cartica insists on activism, targeting unloved companies with good businesses. Take Cartica’s largest holding—Alsea, a Mexico City-based franchisee of Starbucks, Burger King and Chili’s. Before Cartica’s intervention in 2012, the company buried its results by brand. Cartica took a small stake, joined its board and began pounding the table for more disclosures. Alsea ultimately set up an investor day in New York, which it now holds annually. The stock is up more than 50% over the
60 | FORBES JANUARY 24, 2017
past three years. Trump’s election sent Alsea plummeting by 16%, but Barger, 61, is doubling down. Having nerves of steel in the face of volatility is a prerequisite for investing in developing markets. So far Cartica has annual returns of 9.9% since 2010, compared with an emergingmarkets benchmark that has fallen 1% annually over the same period. Cartica’s approach starts with a topdown analysis of economic data, currency movements and political developments to ﬁnd “green light” countries. The common traits: a strengthening local currency, improving credit proﬁles and a sense that the government is pursuing marketoriented reforms. Another favorite, more anecdotal measure is checking with local stockbrokers to see if well-heeled natives are bringing investment dollars back into the country. “By the time equity ﬂows show up, it’s too late,” says global strategist Khambata from Cartica’s Washington, D.C., office. From there Cartica screens stocks using 40odd ﬁnancial metrics. Its sweet spot is underfollowed companies with market caps between $1 billion and $5 billion. Another key is tapping local contacts—typically family members or controlling shareholders. What Trump-safe regions does Cartica like? The Philippines, despite belligerent rhetoric from President Duterte, is a favorite. Top holding: infrastructure conglomerate Metro Paciﬁc. “The Phillipines has self-sustaining growth because they’re generating a surplus—not living off capital ﬂows,” Khambata says. India, a “ﬂashing green light.” Equities aren’t cheap, but Prime Minister Modi is a “doer,” Barger says, and the rupee is appreciating. Mexico, Trump’s chief target, warrants caution, but according to Barger, tough talk on trade doesn’t have to equal Draconian tariffs. F
Cartica Management’s Teresa Barger is making emerging markets great again.
JAMEL TOPPIN FOR FORBES
THE HORATIO ALGER ASSOCIATION OF DISTINGUISHED AMERICANS PROUDLY PRESENTS THE
2017 HORATIO ALGER
Alain Bouchard (Canada)
Roger S. Penske
Richard J Stephenson
Founder and Executive Chairman of the Board Alimentation Couche-Tard Inc.
President Ariel Investments, LLC
Chairman and CEO Penske Corporation
Founder and Chairman Cancer Treatment Centers of America
Harold B. Matzner
Chairman CBA Industries Inc. CBA Insert Distribution Systems, Inc.
Chief National Correspondent ABC News
John A. Elway, Jr. Executive Vice President of Football Operations and General Manager Denver Broncos Football Club
Valerie Montgomery Rice President and Dean Morehouse School of Medicine
John H. Scully Co-founder and Managing Director SPO Partners & Co.
Marcia G. Taylor President and Chief Executive Officer Bennett International Group LLC
Lenard B. Tessler Vice Chairman Cerberus Capital Management, L.P.
Honoring Perseverance, Integrity and Excellence
Each year the Horatio Alger Association of Distinguished Americans presents the Horatio Alger Award to select individuals who have achieved success with hard work, perseverance and integrity in spite of facing personal and professional obstacles. Award winners become lifelong Members of the Association, which provides deserving young people with college scholarships. Our Members serve as role models and mentors, demonstrating what can be achieved through the free-enterprise system.
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ritish American Tobacco shares have had a nice run in the past year, rising from £37 to £46 in London. But American buyers did not enjoy the ride. Pounds lost value almost as fast as the shares gained it. Translated back into dollars, the stock went sideways. Stack currency risk on top of equity risk and it’s no surprise that venturing overseas makes some investors seasick. But there is the option to take Dramamine. When you invest, you can make a side bet against the currency you’re investing in. You could couple a purchase of BAT or AstraZeneca or Shell with a short position in sterling. You could marry Toyota to a yen short and Roche to a Swiss franc short. More realistically, unless you are investing a gigantic sum: Have a fund do the shorting for you. Eighty-nine exchange-traded funds have currency hedges built into their portfolios, and they account for $37 billion of the $456 billion in
62 | FORBES JANUARY 24, 2017
foreign-stock ETFs, according to a Morningstar tabulation. WisdomTree Investments was the ﬁrst in this business, with a hedged Japanese fund that dates to 2006. It’s now getting stiff competition from PowerShares, BlackRock’s iShares family and Deutsche Bank’s X-trackers line. Their sales pitch: Take some of the worry out of foreign portfolios by removing the hefty contribution to volatility (a fourth of it over the average ﬁve-year period) that comes from currency moves. Insurance against weak foreign currencies will cost you some money but not as much as you might think. Hedged ETFs run roughly a quarter of a percentage point more in annual fees than unhedged ones. If the hedge gives you the peace of mind to undertake global diversiﬁcation you would otherwise have shunned, it’s money well spent. What about the cost of the forex positions? In developed markets, currency hedges have a cost pretty close to zero; arbitrageurs see to that. Indeed, low interest rates in Europe mean that currencies there can be off-loaded in the futures market at a slight premium to spot prices. Currency hedging is a wonderful exception to the rule that reducing volatility reduces returns. Here’s the theory, as expounded by Jeremy Schwartz, director of research at WisdomTree. British investors in Shell are taking on volatility in the value of the business—from oil prices and so on. U.S. investors who buy Shell and do nothing more are taking on that risk plus additional volatility that comes from changes in the value of the pound. By shorting the pound when you buy Shell, you eliminate the second contribution to volatility. “You can’t expect currency to add to return,” Schwartz says. “It’s uncompensated risk.” So you should get rid of it. Note what is not part of the argument in
ROBERT BABBONI FOR FORBES
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What happens over the very long pull? favor of hedging. Schwartz is not predicting that the dollar will continue to steam ahead, which it Morningstar fund analyst Patricia Oey studied this question by comparing global portfolios that has been doing since the election. He is simply mix U.S. stocks with either hedged or unhedged arguing that stripping out currency exposure foreign stocks. Oey’s paper portwill make your foreign advenfolios were a 60/40 blend of the tures less scary. THE DOLLAR MOVES SIDEWAYS S&P 500 and the MSCI indexes, The past half-decade has A TUMULTUOUS RIDE HAS TAKEN rebalanced annually. There were been a good time for dollar THE DOLLAR BACK ALMOST TO years when the hedged portfolio patriots. Or, to put it equivaWHERE IT WAS 25 YEARS AGO. raced ahead, others when the lently, the period has been bad, 130 unhedged one did. But over 25 collectively, for the euro, yen FOREIGN EXCHANGE years the two approaches to and pound. That means U.S. 120 VALUE OF A going international had identiinvestors who bought stocks DOLLAR 110 cal risk-adjusted returns. overseas and did not hedge Oey’s comparison was on are full of regrets. They have 100 index returns; real-life perforlost in the currency markets mance will be lower by whathalf of the 11% a year they 90 ever fees you pay to the fund’s were gaining with their stocks. NOV 1991 = 100 manager. Whether these fees (This is the return on an MSCI 80 are worth paying is a matter of index of developed foreign TRADE-WEIGHTED INDEX OF DOLLAR AGAINST how much safety you seek. markets, which include EuMAJOR CURRENCIES. SOURCE: ST. LOUIS FED. WisdomTree’s oldest rope, Japan and Australia but 70 hedged ETFs levy 0.48% to not China or Brazil.) Those 11/91 12/00 12/08 12/16 0.58% in annual expenses. who hedged got something Newer offerings from both WisdomTree and its close to the full 11%. rivals are better buys (see table). One can hope There have been other stretches, though, that Vanguard gets into the fray, but for now when the dollar tumbled (see graph). There this mecca for cheapskates offers hedged stock weren’t any hedged ETFs around at the time to funds only in Canada and Australia. prove the point, but if one had opened for busiIt’s a scary world out there. But it’s getting ness in 2002 it would have looked like a clunker less scary. for the next ﬁve years. FINAL THOUGHT
“Risk is like fire: If controlled it will help you; if uncontrolled it will rise up and destroy you.” —THEODORE ROOSEVELT 64 | FORBES JANUARY 24, 2017
STEVE ELLS Founder of Chipotle takes back company reins; co-CEO Marty Moran heads for the exit in the wake of foodsafety mishaps. COMPANY
GOLDMAN SACHS The bank’s stock has been a standout since Election Day; meanwhile, Donald Trump names COO Gary Cohn to the White House’s top economic job. IDEA
MILLENNIAL MISERY A new study ﬁnds that just half of America’s 30-year-olds are making more (inﬂation-adjusted) than their parents did at their age, down from 92% in the 1970s.
A NEW ALLIANCE OF SCIENCE AND SPIRITUALITY A NEW FUTURE OF UNLIMITED POSSIBILITIES
YO U A R E A C O - C R E AT O R O F R E A L I T Y. New York Times bestselling author D E E PA K C H O P R A and leading physicist M E N A S K A FAT O S offer a bold understanding of who we are and how we can transform the world for the better while reaching our greatest potential. Visit discoveringyourcosmicself.com. S TA R T R E A D I N G AT P R H . C O M / YO U A R E T H E U N I V E R S E
EDUCATION FOR LIFE
Features JANUARY 24, 2017
SILICON VALLEY’S BLACK SHEEP 86 PHILLIP FROST: DOCTOR, INVENTOR, INVESTOR, BILLIONAIRE 94
Artist Eric Waugh started a design ﬁrm at 18 and taught himself to paint at 23. He’s now one of the world’s most famous “live” painters—his football-ﬁeld-size painting Hero, which depicts an adult embracing a child, made the Guinness Book of World Records—and he put those skills to work for our 30 Under 30 feature. PAGE 68
PHOTOGRAPH BY JAMEL TOPPIN
JANUARY 24, 2017 FORBES | 67
Music Jason Aron, 28; Anthony Li, 28 Managers, Halsey Sophie Ash, 28 Project manager, Parkwood Entertainment Kelsea Ballerini, 23 Musician Bibi Bourelly, 22 Musician Emma Burgess-Olson, 28; Frankie Decaiza Hutchinson, 29; Christine McCharrenTran, 28 Cofounders, Discwoman Alessia Cara, 20 Musician Patrick Corcoran, 26 Manager, Chance the Rapper Daesung, 27; G-Dragon, 28; Seungri, 26; Taeyang, 28; T.O.P., 29 Musicians, Bigbang Daya, 18 Musician
Desiigner, 19 Musician Derek Dolin, 28 Senior manager, Three Six Zero Josh Dun, 28; Tyler Joseph, 28 Musicians, Twenty One Pilots Taylor Dye, 21; Maddie Marlow, 21 Musicians, Maddie & Tae G-Eazy, 27 Musician Gallant, 25 Musician Michael George, 27 Artist manager, SB Projects Micah Hendler, 27 Founder, YMCA Jerusalem Youth Chorus Jeremih, 29 Musician Joe Kay, 27 Cofounder, Soulection Tory Lanez, 24 Musician
Logic, 26 Musician Julia Michaels, 23 Musician Jeffrey Ponchick, 29 Cofounder, Repost Network Charlie Puth, 25 Musician Troye Sivan, 21 Musician Justine Skye, 21 Musician Drew Taggart, 27 Musician, the Chainsmokers La Mar Taylor, 26 Creative director, the Weeknd Bryson Tiller, 23 Musician Lil Yachty, 19 Musician JUDGES Jason Derulo—musician Halsey—musician Anthony Saleh—cofounder, QueensBridge Venture Partners
Gallant, 25 MUSI CI A N
“When I hear his voice, I just lose it.” That’s what Elton John had to say about Gallant shortly before they performed the young singer’s breakout hit, “Weight in Gold,” together in London last September. Born Christopher Gallant III, he graduated from New York University in 2012 and moved to Los Angeles to build his own, unique sound, blending elements of R&B, alternative rock, soul and electronic music. His 2016 debut, Ology, is up for a Grammy for Best Urban Contemporary Album, and he averages 1.2 million listeners per month on Spotify alone. In 2016 he took his act on the road, doing 77 shows in eight countries. That’s just the beginning, as far as he’s concerned: “I honestly don’t think that I’ve necessarily had my big break yet.”
1941 WILD LILY WINDBREAKER BY COACH ($495); COTTON TROUSERS BY PT PANTALONI TORINO ($425); CLYDE SNEAKERS IN CORDOVAN PATENT LEATHER BY PUMA ($110).
68 | FORBES JANUARY 24, 2017
30 UNDER 30 Meet the Class of 2017. These 600 young innovators—30 game changers in 20 industries—are challenging the conventional wisdom and rewriting the rules for the next generation of entrepreneurs, educators and entertainers. Their individual passions have been interpreted by artist Eric Waugh, who created whimsical paintings of their claims to fame in less than ten minutes during photo sessions in New York and San Francisco. The result is a picture-perfect marriage of art and commerce. EDITED BY Caroline Howard with Natalie Sportelli ART & STYLE: Susan Adams, Keren Blankfeld, Michael Solomon, Glenda Toma. EDUCATION: Caroline Howard, Justin Conklin. ENERGY: Christopher Helman, Aaron Tilley. FINANCE: Nathan Vardi, Antoine Gara, Corinne Jurney. FOOD & DRINK: Maggie McGrath, Natalie Sportelli, Abram Brown. GAMES: David Ewalt, Matt Perez. HEALTH CARE: Sarah Hedgecock, Matthew Herper. HOLLYWOOD: Natalie Robehmed, Madeline Berg, Hayley Cuccinello. LAW & POLICY: Kathryn Dill, Christopher Denhart, Daniel Fisher, Avik Roy. MANUFACTURING & INDUSTRY: Amy Feldman, Joann Muller, Alex Knapp. MARKETING & ADVERTISING: Jennifer Rooney, Lilly Knoepp. MEDIA: Emily Inverso, Kate Vinton, Madeline Berg. MUSIC: Zack O’Malley Greenburg, Natalie Robehmed. RETAIL & E-COMMERCE: Clare O’Connor, Vicky Valet. SCIENCE: Alex Knapp, Matt Perez, Sarah Hedgecock. SOCIAL ENTREPRENEURS: Michela Tindera, Alexandra Wilson, Parul Guliani. SPORTS: Dan Kleinman, Jordan Lebeau, Chris Smith. TECH/CONSUMER: Ryan Mac, Brian Solomon. TECH/ENTERPRISE: Kathleen Chaykowski, James Plafke. VENTURE CAPITAL: Alex Konrad, Jordan Lebeau.
PHOTOGRAPHY: Jamel Toppin for FORBES. CREATIVE STYLE DIRECTOR: Joseph DeAcetis. STYLE ASSOCIATE: Juan Benson. HAIR & MAKEUP EAST: Suzannah Hallili. HAIR & MAKEUP WEST: Mary Reid. PRODUCTION ASSISTANCE: Janet Baus.
JANUARY 24, 2017 FORBES | 69
Food & Drink Lizzi Ackerman, 29 Cofounder, Birch Benders Micro-Pancakery Drew Anderson, 29 Cofounder, Cleveland Kraut Tatiana Birgisson, 27 Founder, Mati Energy Matt Bodnar, 29 Partner, Fresh Hospitality Ross Burack, 27 Cofounder, Choza Taqueria Andrew Chmielewski, 29 Founder, Dave’s Sweet Tooth Chloe Coscarelli, 29 Founder, By Chloe Simon Davies, 27 Chef de cuisine, Alinea Jake Dell, 29 Owner, Katz’s Delicatessen Zachary Engel, 28 Chef de cuisine, Shaya Miguel Garza, 29 Cofounder, Siete Family Foods Jorge Gaviria, 29 Founder, Masienda Andrew Gonzalez, 25 Founder, Night Owl Cookie Joey Grassia, 29 Founder, Kutoa Health Amir Hosseini, 29 Cofounder, Curry Up Now Kate Kavanaugh, 28 CEO, Western Daughters Butcher Shop Michael Kennedy, 29 Founder, Component Wine Company Michael Steven Levine, 25 CEO, Global Food Solutions Jen Martin, 28 Cofounder, Pipsnacks Kwame Onwuachi, 27 Chef/owner, the Shaw Bijou Ian Purkayastha, 24 Founder, Regalis Foods Maxim Razmakhin, 28 Cofounder, Thirstie Jourdan Samel, 28; Ari Sherman, 29 Cofounders, Hemp Health Michael Shoretz, 29 CEO, Enlightened Katlin Smith, 28 Founder, Simple Mills Daniela Soto-Innes, 26 Chef de cuisine, Cosme Dominik Stein, 29 Cofounder, Verts Mediterranean Grill Keeley Tillotson, 24; Erika Welsh, 25 Cofounders, Wild Friends Foods Tiffany Yam, 29 Partner, Salt Partners Molly Yeh, 27 Creator, My Name Is Yeh
30 UNDER 30
Jeremy Fiance, 25 MANAGING PA RTNER, T HE HOUSE FUN D
This UC Berkeley grad is delivering the message of school spirit, entrepreneurship and experiential education. His platform is the House Fund, which launched in April 2016, a $6 million pre-seed and seed-stage venture fund dedicated to entrepreneurs with Berkeley ties: students, faculty, university employees and its half a million alumni. To date the House Fund has funded more than 20 companies, spanning robotics, education and AI, with an average investment between $50,000 and $250,000. “Having seen thousands of companies come out of this community, we have a good sense of the big ideas when we see them. We have a sense of the passion and ﬁre in an entrepreneur when they really want to bring this company to life,” says Fiance, who was previously a managing partner at Dorm Room Fund SF, a venture fund run by students for student startups. “I have [Cal] shirts, hats, posters. I bleed blue and gold.”
JUDGES Alex Guarnaschelli—chef/ restaurateur, Butter Paul Ross—president and CEO, Edrington Americas Marcus Samuelsson—chef/ restaurateur, Red Rooster Harlem Lee Schrager—founder, South Beach and New York Wine & Food Festivals
Miguel Garza, 29 COFOUNDER, SIETE FAMILY FOODS
For years, when Miguel Garza sat down at the family dinner table in Laredo, Texas, the Mexican-American spread was missing a very key component: ﬂour tortillas. His older sister Veronica had an autoimmune disease that forced her to remove all grain from her diet, and for moral support the entire Garza clan also made do without, using lettuce leaves for their tacos. In 2014, Veronica started making tortillas from almond ﬂour. It was grain-free and, more importantly, abuela approved. When the choosy family matriarch gave the tortilla her blessing, Miguel knew the family was onto something. He began pitching the tortillas
70 | FORBES JANUARY 24, 2017
to local grocery stores and co-ops; lines of cassava-and-coconut (or chia) tortillas quickly followed. Today, the family dinner workaround has blossomed into Siete Family Foods, which is among the just 2% of Latino-owned businesses doing north of $1 million in revenue each year. “The customer wants clean labels, simple ingredients, real food. Grain-free, by proxy, stands for that,” says Miguel, who is Siete’s CEO. Next up for the company: a line of grain-free tortilla chips, which will roll out in Whole Foods nationwide in January. “We see ourselves as a healthy Mexican food company,” he says. “You know Annie’s Homegrown, which does organic traditional American cuisine? We see ourselves as that, but for Mexican food.” MIGUEL GARZA: WALLACE & BARNES SELVEDGE DENIM SHIRT BY J. CREW ($148); BYRON JEANS BY HUDSON JEANS ($189); NEW BALANCE 420 SNEAKERS BY NEW BALANCE($70). JEREMY FIANCE: BOMBER JACKET BY ZANONE ($975); COURAGE JEANS BY 34 HERITAGE ($190); SUEDE SNEAKER BY SUPRA ($80).
Hollywood & Entertainment
Jacob Allen, 28; Marie Dandie, 27 Cofounders, pilotED Schools Louise Baigelman, 29 Cofounder, Story Shares Blair Brettschneider, 27 Founder, GirlForward Gregory Brown, 28; Mitchell Moffit, 28 Creators, AsapSCIENCE Nicole Cardoza, 27 Founder, Yoga Foster Hardy Farrow, 26 Executive director, Let’s Innovate Through Education Jeremy Fiance, 25 Founder, the House Fund Jason Field, 27 Founder, BrainStation Jonathan Gottfried, 26; Mike Swift, 27 Cofounders, Major League Hacking Mendell Grinter, 25 Founder, Campaign for School Equity Luke Heine, 22; Cole Scanlon, 20 Codirectors, Fair Opportunity Project Ryan Hoch, 29 Cofounder, Overgrad Connie Hu, 27; Joseph Schlesinger, 27 Cofounders, ArcBotics Sieva Kozinsky, 26 Cofounder, StudySoup Jenna Leahy, 28 Co-CEO, CASA Academy Jordan Levy, 24; Andrew Pohle, 27; Jake Schaufeld, 24 Cofounders, Real Time Cases Denisse Rojas Marquez, 27; Jirayut New Latthivongskorn, 27 Cofounders, Pre-Health Dreamers Jeffrey Martín, 25; Dylan Stone-Miller, 26 Cofounders, honorCode Elijah Mayﬁeld, 27 Vice president of new technologies, Turnitin Sophia Parsa, 25; Shakib Zabihian, 25 Cofounders, toot Jacobi Petrucciani, 22; Prahasith Veluvolu, 21; Colton Voege, 21 Cofounders, Mimir Evin Floyd Robinson, 26; Jessica Santana, 27 Cofounders, New York on Tech Rachel Romer Carlson, 28; Brittany Stich, 28 Cofounders, Guild Education Shanyn Ronis, 29 Founder, Education Global Access Program Jeff Sorensen, 27 Founder, optiMize Leandra Tejedor, 25 Cofounder, Vidcode Joe Vasquez, 27 Codirector, Runway Incubator Cliff Weitzman, 22 Founder, Speechify Alec Whitters, 29 CEO, Higher Learning Technologies Tamara Wilkerson, 26 Executive director, African American Teaching Fellows
Denée Benton, 25 Actor Quinta Brunson, 27 Development partner, BuzzFeed Motion Pictures Jessica Chou, 26 Producer Kiersey Clemons, 23 Actor Emory Cohen, 26 Actor Tanya Cohen, 28 Motion picture literary and talent agent, WME-IMG RJ Cyler, 21 Actor Cameron Dallas, 22 Digital star Hilary Duff, 29 Actor Alden Ehrenreich, 27 Actor Elle Fanning, 18 Actor Elliot Fletcher, 20 Actor
JUDGES Stacey Childress—CEO, NewSchools Venture Fund Arne Duncan—managing partner, Emerson Collective Wendy Kopp—cofounder, Teach for All Marcus Noel—founder, Heart of Man Ventures
Laura Gordon, 29 Television literary agent, ICM Partners Lucas Hedges, 20 Actor Ryan Higa, 26 Digital star Jacquie Katz, 29 Television literary agent, Creative Artists Agency Tyler Oakley, 27 Digital star Lele Pons, 20 Digital star Trevante Rhodes, 26 Actor Margot Robbie, 26 Actor Charles Rogers, 29 Director/producer/writer Oren Rosenbaum, 27 Digital media agent, United Talent Agency Ashton Sanders, 21 Actor
Justice Smith, 21 Actor Lakeith Stanﬁeld, 25 Actor Melissa Villaseñor, 29 Comedian Mia Wasikowska, 27 Actor Samira Wiley, 29 Actor Krysty Wilson-Cairns, 29 Writer Evan Rachel Wood, 29 Actor JUDGES David Linde—CEO, Participant Media Issa Rae—actor/writer/ producer, Issa Rae Presents Jill Soloway—writer/ director, Topple Productions
Tyler Oakley, 27 DI GI TA L STA R
“YouTube provides a microphone for marginalized voices,” says comedian and LGBT activist Tyler Oakley. The platform has ampliﬁed his voice to reach nearly 8.1 million subscribers, who tune in to watch his talk-show-like videos, in which he muses on topics both light (celebrity crushes and viral videos) and heavy (politics and sexuality). “When I was younger and still in the closet, I couldn’t just Google ‘coming-out story’ to help me articulate what I was going through,” he says. With spiky bleached hair and signature geek-chic glasses, Tyler counts Michelle Obama, Kerry Washington and Ricky Martin among his fans, but his biggest proponent is Ellen DeGeneres, with whom he has a production deal. A 2015 book of personal essays, Binge, became a New York Times bestseller, and he has raised over $1 million for the suicide hotline the Trevor Project. “YouTube is a place for people from all over the world to feel less alone,” Oakley says.
JANUARY 24, 2017 FORBES | 71
Marketing & Advertising
30 UNDER 30
James Heller, 29 COFOUNDER, WRAPIFY
As a kid, James Heller would beg his father to take him to the Porsche dealership to sit in the cars. “I was completely obsessed with German sports cars,” said Heller, who bought his own Porsche when he was 26. Two years later he sold that car— and cashed out his 401(k) and savings—to launch Wrapify, a startup with $2.9 million in funding that pays everyday people an average of $350 a month to wrap their cars in advertisements and simply drive around. Sure, advertising on cars isn’t new, but Wrapify adds a digital twist. Its app automatically alerts drivers to new ad campaigns and provides brands with a dashboard that tracks how many people are seeing the ads in real time. Wrapify has 35,000 drivers in 27 cities and counts Anheuser-Busch, Petco and eBay as clients. In the next year Heller is looking to triple his current $3 million in sales. “I don’t take no for an answer. I just don’t.”
Daniel Altmann, 29; Eric Posen, 28 Cofounders, Naritiv Andy Bossley, 28 Senior manager of global marketing campaigns, IBM Vincent Cacace, 26 Founder, Vertebrae Eva Chan, 27; Daniel Rodic, 26; Elena Sahakyan, 29 Cofounders, Exact Media Eden Chen, 29 Founder, Fishermen Labs Tony Chen, 26 CEO, Channel Factory Marina Cockenberg, 29 Director of digital, The Tonight Show Starring Jimmy Fallon, NBC Gregory Constantine, 27 Global music strategy and cultural partnerships lead, Smirnoff, Diageo Alex Dahan, 24; Eric Dahan, 26; Felix LaHaye, 28 Cofounders, InstaBrand Bobak Emamian, 29 Cofounder, Proliﬁc Interactive Andrew Fabbri, 29; Shaun Sheikh, 25 Cofounders, Jump 450 Media Jared Feldman, 28 Founder, Canvs Laura Foti, 26 Head of paid media and analytics, GE Digital Lauren Gallo, 29 Senior digital marketing and communications lead, Apple Retail, Apple Devon Galloway, 29 Cofounder, Vidyard Daniel George, 25 Founder, Limitless Creative Julieanna Goddard, 26 Founder, YesJulz James Heller, 29 Cofounder, Wrapify Leyda Hernandez, 28 Director of marketing, iSpot.tv Mansi Jayakumar, 29 Global director of innovation, Y&R Salone Kapur, 27 Head of city marketing, Google Fiber, Google Jan-Niklas Kokott, 29 Head of product and customer insight, Glossier Jennifer Lo Chan, 26 Marketing campaign manager, Nvidia Shaun McBride, 29 Founder, Shonduras Eliana Murillo, 28 Head of multicultural marketing, Google Sean O’Brien, 27; Evan Wray, 27 Cofounders, Swyft Media Aniq Rahman, 29 President, Moat Justin Rezvani, 28 Founder, theAmplify James Shani, 28 Founder, Madison+Vine Kevin Yamazaki, 29 Founder, Sidebench JUDGES
COTTON SUIT BY RAVAZZOLO ($3,300); COTTON SHIRT ($50) AND TIE ($45) BY VAN HEUSEN; SILK POCKET SQUARE BY CHARLES TYRWHITT ($20); LEATHER AND ELKSKIN SHOES BY SANTONI ($920).
72 | FORBES JANUARY 24, 2017
Linda Boff—CMO, GE Bonin Bough—host of Cleveland Hustles, CNBC Rachel Tipograph—founder, MikMak Abby Wambach—2015 FIFA Women’s World Cup champion
Retail & E-commerce Alex Adelman, 27 Founder, Cosmic Ben Aneesh, 26; Natalie Gray, 29 Cofounders, Cover Andrew Brooks, 29 Founder, Vianel Allen Brouwer, 28 Cofounder, BestSelf Chloe Burch, 25; Neely Burch, 26 Cofounders, Neely & Chloe Jennifer Chong, 28 Cofounder, Linjer Nell Diamond, 28; Katherine Kapnick, 26 Cofounders, Hill House Home Ellie Dinh, 29 Cofounder, Girlfriend Collective Matt Dronkers, 27; Andrew Nilon, 27 Cofounders, Electric Family Laura Dweck, 27; Michael Dweck, 29 Cofounders, Basic Outﬁtters Muhga Eltigani, 25; Sam Roberts, 26 Cofounders, NaturAll Club Alex Fenkell, 27; Jordan Katzman, 27 Cofounders, SmileDirectClub Yakir Gola, 23; Rafael Ilishayev, 23 Cofounders, goPuff Molly Hayward, 28 Founder, Cora Meika Hollender, 29 Cofounder, Sustain Steven Izen, 26 Founder, Lokai Marta Jamrozik, 26; Misha Laskin, 26 Cofounders, Claire Kylie Jenner, 19 Founder, Kylie Cosmetics Erika Jensen, 27 Cofounder, the Flex Co. Lauren Kassan, 29 Cofounder, the Wing Furqan Khan, 28 Founder, Kixify Michelle Lin, 24; Wayne Lin, 28 Cofounders, Live Love Polish Emily Motayed, 28 Cofounder, Havenly Nicole Najaﬁ, 29 Founder, Industry Standard Steven Ng, 24 Founder, Elliot Havok Brett Podolsky, 28; Jonathan Regev, 29 Cofounders, the Farmer’s Dog Jon Richards, 29 Cofounder, Nomatic Cynthia Salim, 29 Founder, Citizen’s Mark Justin Schneider, 28 Founder, Wolf & Shepherd Amber Venz Box, 29 Cofounder, LikeToKnowIt JUDGES Tyler Haney—founder, Outdoor Voices Jennifer Hyman—cofounder, Rent the Runway Toni Ko—founder, NYX Cosmetics Alli Webb—founder, Drybar
Emily Motayed, 28 CO FOUNDER, HAVENLY
When she cofounded Havenly with her older sister Lee Mayer in 2013, Emily Motayed didn’t know much about interior design— other than that she couldn’t afford it. After moving into her ﬁrst “big-girl” apartment in New York, she discovered that traditional interior designers weren’t interested in working within her modest budget. “Everyone deserves to have a beautiful home, whether you have a $1,000 or a $50,000 budget,” she says.
Working with a roster of more than 200 freelance interior designers, Havenly charges a ﬂat fee of either $79 or $199 per room. Every interaction, from agreeing on a budget to assembling a shopping list, takes place online. The Denver-based company also sells furniture, allowing shoppers to buy a whole, Instagram-ready look. In three years Motayed and Mayer have increased Havenly’s team from 2 to 60 and raised $13.3 million in funding.
ANAA-JUXTAPOSE ROSE SLEEVELESS FIT AND FLARE MIDI DRESS BY TED BAKER ($369); LEATHER GODIVA PUMP BY SERGIO ROSSI ($630). PICTURE FRAMES COURTESY GILL & LAGODICH
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Media Libby Brittain, 27 Partner strategy lead, news, Facebook Kristina Budelis, 28 Cofounder, KitSplit Rhonesha Byng, 27 Founder, Her Agenda Emma Cline, 27 Author Leslye Davis, 26 Photo and video journalist, New York Times Anna Therese Day, 28 Journalist Brian Donohue, 27 CEO, Instapaper Clay Dumas, 28 Chief of staff and senior advisor, Office of Digital Strategy, the White House Brandon Feldman, 29 News & politics manager, YouTube Ashley Ford, 29 Development executive, Web series and video, Matter Studios Taylor Freeman, 26; Will Mason, 26 Cofounders, Upload Vinny Green, 25 Director, business development, Snopes Yaa Gyasi, 27 Author Isabelia Herrera, 25 Music editor, Remezcla John Herrman, 29 David Carr Fellow, New York Times Daniel Houghton, 28 CEO, Lonely Planet Greg Howard, 28 David Carr Fellow, New York Times Magazine Sarah Jeong, 28 Contributing editor, Motherboard, Vice Media Alexander Klokus, 25; Jordan Lejuwaan, 26 Cofounders, Futurism Amy Levin, 29 Founder, CollegeFashionista Wesley Lowery, 26 National reporter, Washington Post Adam Marshall, 28 Knight Foundation litigation attorney, Reporters Committee for Freedom of the Press Ashley McCollum, 29 General manager, Tasty, BuzzFeed Griffin McElroy, 29 Founding editor, Polygon John Meyer, 21 Founder, Fresco News Evan Puschak, 28 Creator, The Nerdwriter Hayden Rockwell, 26 Lead senior story editor, Snapchat Alex Schmider, 27 Senior strategist, Transgender Media, GLAAD Molly Swenson, 29 CMO, RYOT Jia Tolentino, 28 Contributing writer, NewYorker.com
30 UNDER 30
Daniel Houghton, 28 CEO, LONELY PLANET
In 2013, three years after graduating from Western Kentucky University, Daniel Houghton took the helm of the now 44-year-old travel brand Lonely Planet. One of his ﬁrst tasks? Laying off 75 people, one-ﬁfth of the company’s employees, many of whom worked on LP’s free-spirited print guidebooks. Industrywide, guidebook sales plummeted 40% from 2007 through 2012, so Houghton decided LP had to focus on digital to survive. One year after he took over, digital accounted for 30% of LP’s revenue, and print sales also rebounded, up 27% since 2013. After college Houghton started his own production company, Houghton Multimedia, which got the attention of tobacco billionaire Brad Kelley. The two created NC2 Media, through which Kelley acquired LP for $77 million. “You have to be respectful of [the] past while trying to plow into the future,” Houghton says. That future is ﬁlled with a ﬂagship Guides app (nearly a million downloads in the past year) and partnerships with companies like Samsung. LP is the largest guidebook player, according to Nielsen, owning 25% of the nearly $90 million guidebook market.
Matt Humphrey, 29 COFOUNDER, LENDINGHOME
Buying a home may be part of the American dream, but mortgages can be a nightmare. Matt Humphrey wants to change that. His three-year-old startup has raised more than $100 million and originated over $1 billion in loans. The platform cuts out banks by connecting borrowers directly with investors. The approach opens up credit to unconventional buyers like self-employed entrepreneurs, who often hit walls with traditional lenders. “The mortgage world today is mired by complexity, a lack of technology and inefficiency,” Humphrey says. “Not only can we beat the banks at their own game doing the standard products better, faster and cheaper, but we can expand access to credit.” Humphrey, who started college when he was 13, has been an entrepreneur since 2005. His ﬁrst big exit came when he sold a Groupon-like daily-deal site called HomeRun for over $100 million in 2011. This year LendingHome established an institutional channel, bundling $126 million in loans into tradable securities, fueling a near tripling of revenues.
JUDGES Jim Bankoff—CEO, Vox Media Pete Cashmore—founder, Mashable Kate Lee—head of content development, Medium Shane Smith—cofounder, Vice Media
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DANIEL HOUGHTON: 1905 WOOL SUIT ($598), 1905 COTTON SHIRT ($80) AND 1905 SILK TIE ($60) BY JOS. A. BANK; CALFSKIN WINGTIP BY BY JOHNSTON & MURPHY ($198). MATTHEW HUMPHREY: COTTON SHIRT BY CHARLES TYRWHITT ($69); BYRON JEANS BY HUDSON JEANS ($210); SUEDE AND LAMBSKIN SHOES BY ESQUIVEL ($875).
Anish Abuwala, 29 Portfolio manager, Caxton Associates Raja Bobbili, 29 Analyst, Abrams Capital Michael Buckley, 29 Analyst, Duquesne Capital Management Francis Chung, 29 Quantitative developer, IEX Group Kerri Cohen Saperstein, 29 Vice president, Goldman Sachs Richard Craib, 29 CEO, Numerai Ben Friedman, 29 Portfolio manager, CQS Akshay Goyal, 28 Vice president, Starwood Capital Zach Hamed, 23 Product manager, Goldman Sachs Matt Humphrey, 29 Cofounder, LendingHome Rachel Hunter, 27 Associate, Apollo Global Management David Knopf, 28 Partner, 3G Capital Dhruv Maheshwari, 28 Research analyst, Point72 Asset Management Eugene Marinelli, 29 Chief technology officer, Blend Anthony Massaro, 29 Partner, Pershing Square Capital Management Ann Mathews, 28 Vice president, Goldman Sachs Alissa Merar, 29 Vice president, Bank of America Alex Nomitch, 29 Portfolio manager, Viking Global Investors Guillaume Rabate, 28 Vice president, Morgan Stanley Daniel Rasmussen, 29 Founder, Verdad Fund Advisers Niraj Shah, 29 Senior associate, RedBird Capital Partners David Smalling, 29 Director, BlackRock Ben Solarz, 29 Principal, SPO Partners Andy Stafman, 29 Partner, Sachem Head Capital Management Colter Van Domelen, 29 Partner, Tiger Global Management Kelly Wannop, 29 Associate, Blackstone Group Brandon Watkins, 28 Vice president, Goldman Sachs Benjamin Wu, 28 Partner, Huntsman Family Investments Franklin Zhao, 29 Global macro trader, Commonwealth Opportunity Capital Katy Zhao, 29 Vice president, Morgan Stanley
Michelle Atallah, 26 Ph.D. candidate, Stanford University Michael Barron, 27 Senior scientist, AeroFarms Brandon Carpenter, 25 Cofounder, Feynman Nano Xi Chen, 29 Assistant professor, New York University Huanyu Cheng, 28 Assistant professor, Pennsylvania State University Timothy Downing, 29 Assistant professor, University of California, Irvine Davina Durgana, 28 Senior statistician, Walk Free Foundation Melissa Gymrek, 28 Assistant professor, University of California, San Diego Karan Jani, 28 Ph.D. candidate, Georgia Institute of Technology Michael Johnson, 27 Cofounder, Visikol Michelle Kunimoto, 23 Master’s candidate, University of British Columbia Matthew Lovett-Barron, 29 Postdoctoral fellow, Stanford University Luther McDonald, 28 Assistant professor, University of Utah Stefanie Mueller, 29 Assistant professor, Massachusetts Institute of Technology Jeff Nivala, 29 Postdoctoral fellow, Harvard Medical School Olivier Noel, 28 Cofounder, DNAsimple Korin Reid, 29 Senior data scientist, McKesson Daisy Robinton, 29 Postdoctoral fellow, Harvard University Monica Rosenberg, 28 Ph.D. candidate, Yale University Jacob Rubens, 29 Associate, Flagship Pioneering Phiala Shanahan, 26 Postdoctoral fellow, Massachusetts Institute of Technology Arun Sharma, 26 Postdoctoral fellow, Harvard Medical School Mark Smith, 29 Cofounder, OpenBiome Kenneth Smith, 27 Structural dynamics engineer, NASA Langley Research Center Justin Solomon, 29 Assistant professor, Massachusetts Institute of Technology Daniel Szaﬁr, 28 Assistant professor, University of Colorado, Boulder John Urschel, 25 Ph.D. candidate, Massachusetts Institute of Technology Katharina Volz, 29 Founder, Razor Diane Wu, 29 Cofounder, Trace Genomics Alice Zhang, 28 Cofounder, Verge Genomics
JUDGES Jennifer Fan—portfolio manager, Millennium Management Thomas H. Lee—founder, Lee Equity Partners Sonia Gardner—cofounder, Avenue Capital Group
Alice Zhang, 28 COFOUNDER, VERGE GENOMICS
While pursuing an M.D./Ph.D. at UCLA, Alice Zhang was shocked to learn a fact every drug researcher knows all too well: 90% of medicines that start human trials fail. “It’s still largely a guessing game,” she says. Her startup, Verge Genomics, is the latest in a long line of biotechs that think merging the latest in computer science with new technologies for decoding the human genetic code can provide a solution. What’s special: Verge has the guts to target Alzheimer’s and Parkinson’s, areas most drug companies have abandoned as hopeless. The seven-person startup raised $4 million from such ﬁrms as IA Ventures and Draper Associates, and assembled multiple advisors, including Alzheimer’s research luminary Paul Aisen, Harvard biotech guru George Church and the chief medical officer of the biotech ﬁrm Alkermes. Using machine-learning algorithms to understand networks of genes is an exploding scientiﬁc ﬁeld. Maybe this time it will work as a business.
JUDGES Cigall Kadoch—assistant professor, Dana-Farber Cancer Institute Robert Langer—institute professor, MIT John Scalzi—science ﬁction author LEATHER JACKET($798) AND BLACK AND PRINTED DRESS ($398) BY POLO RALPH LAUREN; LEATHER AND SUEDE GRACE GRAND SANDAL BY COLE HAAN ($270) BY COLE HAAN.
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Venture Capital Steve Anastos, 27 Principal, Bain Capital Ventures Lisa Barnett, 27 Partner, Sherpa Foundry Logan Bartlett, 29 Vice president, Battery Ventures Phil Brady, 23; Clancey Stahr, 23 Managing partners, GoAhead Ventures Mackey Craven, 28 Partner, OpenView Partners Jason Duboe, 28 Principal, Chicago Ventures Jerrod Engelberg, 28 Head of venture ops and data science, FundersClub Miles Grimshaw, 25 Investor, Thrive Capital TJ Hennessy, 27 Principal, Arena Ventures Mohammad Islam, 27 Senior associate, DFJ Nimi Katragadda, 28 Principal, BoxGroup Abie Katz, 26 Principal, August Capital Jocelyn Kinsey, 26 Senior associate, DFJ Alex Lim, 28 Senior associate, Institutional Venture Partners Michael Ma, 29 General partner, Liquid 2 Ventures Jake Medwell, 28; Drew Oetting, 26 Founding partners, 8VC Nimay Mehta, 28 Partner, Lead Edge Capital John Melas-Kyriazi, 27 Senior associate, Spark Capital Ryan Melohn, 28 Cofounder, Expansion Venture Capital Harley Miller, 27 Vice president, Insight Venture Partners
Bucky Moore, 29 Principal, Costanoa Ventures Joshua Nussbaum, 26 Principal, Compound Andrew Reed, 26 Partner, Sequoia Capital Caitlin Strandberg, 28 Vice president, FirstMark Adam Struck, 29 Managing partner and founder, Struck Capital Phil Toronto, 29 Partner, Vayner/RSE Anargha Vardhana, 28 Senior associate, Maveron Joanne Yuan, 28 Associate partner, Cowboy Ventures Lu Zhang, 28 Founding partner, NewGen Capital Toby Zhang, 28 Partner, CRCM Ventures JUDGES Alfred Lin—partner, Sequoia Capital Rebecca Lynn—partner, Canvas Ventures Megan Quinn—general partner, Spark Capital Naval Ravikant—cofounder, AngelList
30 UNDER 30
Lu Zhang, 28 FOUNDING PA RTNER, NEWGEN CAPITAL
As a materials science and engineering grad student at Stanford, Lu Zhang applied her work with nanothin biosensors to building a new medical device that tests for Type 2 diabetes—part of an on-campus entrepreneurship class. She eventually sold her resulting company, Acetone, to a private medical device company, which later sold it to a public one for more than $10 million. Looking to refresh, Zhang spent two years as a venture partner at Fenox Venture Capital. As a female VC from China, she was unusual in Silicon Valley and quickly became established as an expert on U.S. tech that could do well back home. In 2014 she decided to open her own shop. NewGen specializes in early-stage tech investments and has raised a $17 million ﬁrst fund and a $75 million second one. The ﬁrm has made 38 investments so far, including ones in Chat Sports (sports content and news that are personalized using AI algorithms), Grubmarket (an online farmers’ market) and Stratifyd (datadriven sentiment-analysis tools). “My personality is I wish for the best, I prepare for the worst,” Zhang says. “I may look like a petite Asian girl, but I don’t want anyone to tell me that I can’t do it.”
POLYESTER CREPE DRESS BY BCBG MAXAZRIA ($298) AND METALLIC PYTHON-STAMPED SANDAL BY GIUSEPPE ZANOTTI DESIGN ($845).
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Teju Ravilochan, 29 COFOUNDER, UNREASONABLE INSTITUTE
It’s unreasonable: Fresh out of college and without ever founding a company himself, Teju Ravilochan built an accelerator for social entrepreneurs tackling the world’s unsolved problems from poverty to clean-water access. The company draws its name from a George Bernard Shaw quote that claims “All progress depends on the unreasonable man.” For the Unreasonable Institute that means ﬁnding entrepreneurs who are willing to tackle complex problems at scale, even if on paper they’re unqualiﬁed. To make up for their inexperience, Ravilochan and his cofounders created a massive network of mentors, such as pioneering social entrepreneur Paul Polak and Google X cofounder Tom Chi, and capital partners, including the Rockefeller Foundation. To date the institute has graduated 148 startups who have raised over $155 million. “We admitted that we did not know what it took to solve these problems,” says Ravilochan. “We were our own customers.”
Aditya Agarwalla, 23 Cofounder, Kisan Network Noam Angrist, 25 Cofounder, Young 1ove Ricky Ashenfelter, 29 Cofounder, Spoiler Alert Robert Bergquist, 24; Brittany Bergquist, 26 Cofounders, Cell Phones for Soldiers Sixto Cancel, 24 CEO, Think of Us Corinne Clinch, 23; Uriel Eisen, 24 Cofounders, Rorus Emily Cunningham 26; Kwami Williams, 25 Cofounders, MoringaConnect Tsechu Dolma, 24 Founder, Mountain Resiliency Project Brit Gilmore, 29 President, The Giving Keys Jason Green, 27; Matt LaRosa, 23 Cofounders, Edenworks Sam Greenberg, 24; Sarah Rosenkrantz, 24 Cofounders, Y2Y Kristof Grina, 26; Kathleen O’Keefe, 26; Jeff Prost-Greene, 26 Cofounders, Up Top Acres Afzal Habib, 28; Sabrina-Natasha Habib, 28 Cofounders, Kidogo Tina Hovsepian, 29 Founder, Cardborigami John Lewandowski, 26 Founder, Disease Diagnostic Group Quardean Lewis-Allen, 29 Founder, Made in Brownsville Evan Lutz, 24 Cofounder, Hungry Harvest Sara Minkara, 27 Founder, Empowerment Through Integration Genevieve Nielsen, 24 Cofounder, mRelief Daquan Oliver, 24 Founder, WeThrive Liz Powers, 28 Cofounder, ArtLifting Sam Pressler, 24 Founder, Armed Services Arts Partnership Teju Ravilochan, 29 Cofounder, Unreasonable Institute Liana Rosenman, 25; Kristina Saffran, 24 Cofounders, Project HEAL Ryan Ross, 28 Program director, Halcyon Incubator Michael Roytman, 28 Cofounder, Dharma Platform Annie Ryu, 26 Founder, The Jackfruit Co. Mario Jovan Shaw, 27; Jason Terrell, 26 Cofounders, Profound Gentlemen Rachel Sumekh, 25 Founder, Swipe Out Hunger Galen Welsch, 29 Cofounder, Jibu JUDGES Jean Case—cofounder, Case Foundation Cheryl Dorsey—president, Echoing Green Randall Lane—editor, Forbes magazine Kiah Williams—cofounder, SIRUM
MORGAN RIPSTOP SPORT JACKET ($495), RIPSTOP TROUSERS ($265) AND COTTON DRESS SHIRT ($90) BY RALPH LAUREN; SILK EVENING POCKET SQUARE BY CHARLES TYRWHITT ($20); DOUBLE BUCKLE LEATHER SHOES BY FRATELLI ROSSETTI ($660).
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Enterprise Technology Jobert Abma, 26; Michiel Prins, 26 Cofounders, HackerOne Raphael Arar, 29 Designer and researcher, IBM Leore Avidar, 28; Harry Zhang, 27 Cofounders, Lob.com Payam Banazadeh, 25; William Woods, 28 Cofounders, Capella Space Shane Scranton, 26; Nate Beatty, 25 Cofounders, IrisVR Laura Behrens Wu, 25; Simon Kreuz, 27 Cofounders, Shippo Max Bennett, 26 Cofounder, Bluecore Scott Britton, 28 Cofounder, Troops.ai Mackenzie Burnett, 23; Dan Gillespie, 23 Cofounders, Redspread Nick Candito, 29 Cofounder, Progressly Mathilde Collin, 27 Cofounder, Front Brad Cordova, 27 Cofounder, TrueMotion Ryan Disraeli, 29 Cofounder, TeleSign Andrew First, 27 Cofounder, Leanplum Wade Foster, 29; Mike Knoop, 27 Cofounders, Zapier Larry Gadea, 29 Founder, Envoy Mitchell Hashimoto, 27; Armon Dadgar, 25 Cofounders, HashiCorp Steven Hong, 28 Cofounder, Kumu Networks Peter Johnston, 28 Founder, Lystable Charlotte Kiang, 25 Mission integration engineer, SpaceX Curtis Liu, 28; Spenser Skates, 28 Cofounders, Amplitude Beyang Liu, 27; Quinn Slack, 28 Cofounders, Sourcegraph Andrew Maas, 29 Cofounder, Roam Analytics Chris Maddern, 28 Cofounder, Button Jessica McKellar, 29 Director of engineering, Dropbox Kylan Nieh, 24 Senior product manager, LinkedIn Samantha Radocchia, 28 Cofounder, Chronicled Hany Rashwan, 26 Founder, Payout.com Cecilia Stallsmith, 27 Senior manager, platform and partner marketing, Slack Dmitriy Zaporozhets, 29 Cofounder, GitLab
30 UNDER 30
Mitchell Hashimoto, 27 CO FOUNDER, HASHICORP
When Mitchell Hashimoto worked for a consulting ﬁrm while an undergrad at the University of Washington in 2010, he was frustrated by how much time he spent priming clients’ computers with the right software setup. As a ﬁx, Hashimoto wrote code automating the process, cutting down setup time from about 15 hours to 15 minutes. He made his software, called Vagrant, open source, and within a few years millions of developers and IT professionals were die-hard users. HashiCorp now offers seven open-source tools that automatically install and conﬁgure software in computers, servers and databases. The 60-person startup has raised $34.7 million in venture funding and has a roster of blue-chip customers including eBay, Disney, PayPal, Stripe, Pinterest, Home Depot and nearly every U.S. bank. “Every company is realizing the traditional way of doing IT isn’t going to scale,” Hashimoto says. “Tractor companies or insurance companies want to focus on their business, not on building the delivery mechanism for their software.”
JUDGES Jeff Lawson—cofounder, Twilio Douglas Leone—managing partner, Sequoia Capital Maran Nelson—cofounder, Clara Labs
MITCHELL HASHIMOTO: WOOL AND SILK SPORT JACKET BY CANALI ($1,750); COTTON AND LINEN SHIRT BY TED BAKER ($165); LEATHER GRANDPRØ TENNIS SNEAKERS BY COLE HAAN ($130). SEAN PETTERSON; LEATHER BOMBER BY BRUNELLO CUCINELLI ($5,225); MERINO WOOL SHIRT ($164) AND MOTOR CITY PANTS ($348) BY JOHN VARVATOS; LEATHER AND FELT SNEAKERS BY GIUSEPPE ZANOTTI DESIGN ($695).
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Sean Petterson, 26 COFOUNDER, ST R ON GA R M T ECHN OLOGI ES
Safety is a major problem for blue-collar workers: More than 3% of manufacturing workers suffered a workplace injury in 2015, according to the Bureau of Labor Statistics. Brooklyn-based StrongArm Technologies makes wearable protective technology to help industrial workers avoid injury. Its exoskeletons, which retail for $275 to $630, align the body to reduce arm fatigue, avoid muscle strains and sprains, and prevent back injuries. Sean Petterson, whose father was a construction worker, studied product design at the Rochester Institute of Technology, where he came up with the idea for the company. StrongArm has raised $4.5 million from investors, including 3M, which helps with distribution, and customers include Con Edison and military shipbuilder Huntington Ingalls Industries. Revenue should approach $8 million in 2017. Says Petterson: “I really wanted to create products that would bring people like my family members home a little bit safer.”
Manufacturing & Industry Rhae Adams, 26 Director of energy and mining markets, Planetary Resources Will Ahmed, 27; John Capodilupo, 25; Aurelian Nicolae, 28 Cofounders, Whoop Chad Amonn, 29 Cofounder, Inova Drone Justin Barozie, 28 Associate manager of manufacturing engineering, battery, Tesla Motors Jeremy Blum, 26 Head of electrical engineering, Shaper Tools Zack Bomsta, 28; Jordan Monroe, 27; Kurt Workman, 27 Cofounders, Owlet Baby Care Kasey Catt, 28; Noah Snyder, 28 Cofounders, Interphase Materials Gaurab Chakrabarti, 28; Sean Hunt, 27 Cofounders, Solugen Ben Cogan, 26; Jesse Horwitz, 28 Cofounders, Hubble Contacts Tyler Collins, 28; Mike Radenbaugh, 27; Marimar White-Espin, 27 Cofounders, Rad Power Bikes Marine Couteau, 26; Ladislas de Toldi, 28 Cofounders, Leka Chase Feiger, 28 Cofounder, Parsable Anurag Garg, 29 Cofounder, Dattus Caroline Guenther, 29 Integrated business planning manager, Cisco Systems Neha Gupta, 28 Business operations, Daqri Cody James, 21 Robotics programmer, self-employed Coby Kabili, 28; Braydon Moreno, 29 Cofounders, Robo 3D Jake Kassan, 25; Kramer LaPlante, 25 Cofounders, MVMT Lane Konkel, 26 Lean leader, General Electric Curren Krasnoff, 24 Cofounder, Cortex Composites Hasier Larrea, 28 Founder, Ori Marco Mascorro, 29 Cofounder, Fellow Robots Alex Mathews, 22; Param Shah, 21 Cofounders, Fusiform Kayla McDonell, 26 Exterior lighting design release engineer, General Motors Cam Murphy, 29 Managing director, FEAM Aero Sean Petterson, 26 Cofounder, StrongArm Technologies Patrick Pittaluga, 25; Sean Warner, 25 Cofounders, Grubbly Farms Jonathan Saperstein, 29 CEO, Tree Town USA Drew Tolly, 26 Data scientist, Caterpillar Justin Wenning, 24 Welding engineer, Fabrisonic JUDGES Jewel Burks—cofounder, Partpic Jenny Lawton—COO, Techstars John Spirk—cofounder, Nottingham Spirk
Candice Galek, 29 FOUNDER, BIKINI LUXE
In March 2016 former fashion model Candice Galek decided to promote Bikini Luxe, her three-year-old online swimsuit retailer, on an unconventional platform: professional networking site LinkedIn. The series of sexy photos of models wearing her ﬂesh-baring products stirred a backlash from users who blasted her for treating the buttoned-up site like an Instagram feed. “It was very suit-and-tie, and here I was posting these beautiful women, sprawled out on a beach in Tahiti,” says Galek. Instead of backing down, she upped the ante with an ultrasexy shot of a neon green and lavender Montce bikini that exposed the mostly bare derriere of Miss Universe contestant Natalie Roser. In her caption Galek wrote, “Is this appropriate for LinkedIn?” The post soon had 50,000 views and 500 comments. The controversy boosted Bikini Luxe’s sales by 20%. In 2017 Galek is aiming to hit $5 million in revenue and produce her own house brand. The University of Miami grad says that her 18-hour workdays are worth the gratiﬁcation she gets from running her own business, which she far prefers to life in front of the camera: “I’ve never been that great at having someone else tell me what to do.”
Art & Style
Danielle Bernstein, 24 Blogger, WeWoreWhat James Charles, 17 Makeup artist Petra Collins, 24 Artist Morgan Curtis, 29 Lingerie designer, Morgan Lane Pablo Delcan, 27 Graphic designer, Delcan & Company Peche Di, 27 Model/founder, Trans Models Candice Galek, 29 Founder, Bikini Luxe Chloe Gordon, 29; Parris Gordon, 26 Fashion designers, Beauﬁlle Arun Gupta, 28; Julian Connor, 27 Cofounders, Grailed Skyler Grey, 16 Artist Michael Xufu Huang, 22 Collector/museum founder, M Woods Misha Kahn, 27 Artist Tahir Carl Karmali, 29 Artist Julia Gudish Krieger, 28 Founder, VillageLuxe Claudia Li, 28 Fashion designer, Claudia Li
Angela Luna, 22 Fashion designer, Adiff Sarah Meyohas, 25 Artist Jane Moseley, 29 Artist/model Bethany Mota, 21 YouTube personality Willa Nasatir, 26 Artist Jake Rosenberg, 29 Cofounder, Coveteur Rachel Rossin, 29 Artist Tschabalala Self, 26 Artist Amy Shepsman, 29 Jewelry designer, Flaca Jewelry Marieclaire St. John, 29 Fashion designer, Dresshirt Vanessa Stofenmacher, 29 Founder, Vrai & Oro Katie Stout, 27 Furniture designer/artist Paige Dellavalle Walker, 29 Jewelry designer, Stella Valle John Wise, 29 Cofounder, Lovepop Jamie Wolfond, 25 Industrial designer, Good Thing JUDGES Carter Cleveland—founder, Artsy Michelle Phan—founder, ipsy Christian Siriano—fashion designer
SILK DRESS BY SALVATORE FERRAGAMO ($4,900) AND SANDALS WITH CRYSTAL BROOCH BY GIUSEPPE ZANOTTI DESIGN ($1,150).
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30 UNDER 30
Noah Kraft, 29 COFOUNDER, DOPPLER LABS
Noah Kraft is a rookie in the world of hardware, but he’s building one of the most ambitious audio products in years. In June 2016 Kraft and his San Francisco team unveiled the Here One wireless earbuds, which, like all headphones, let you listen to music and take phone calls but also ﬁlter out specific noises from the outside world. Unlike normal noise-canceling headphones, which create a Cone of Silence effect, the Here One has multiple directional microphones that let you control which sounds—a baby crying or your boss’ voice—you can still hear. “Everyone’s talking about wearables. But most of the focus is on the eyes and the wrist. And we made a bet early on that the ears were actually a more elegant place.” The company has raised $50 million, has more than 65 employees and will start shipping Here One to consumers in early 2017.
Ben Anderson, 28 Cofounder, Amino Apps Matthew Bailey, 27; Aaron Grant, 27; Stephen Lake, 27 Cofounders, Thalmic Labs Colin Beighley, 28; Fergus Noble, 29 Cofounders, Swift Navigation Joseph Bernstein, 28; Kayvon Beykpour, 28 Cofounders, Periscope Christina Bognet, 29 Cofounder, PlateJoy Michael Brandt, 28; Geoffrey Woo, 28 Cofounders, Nootrobox Skinner Cheng, 29; Pieter Doevendans, 26; Thibault Duchemin, 25 Cofounders, Ava Ben Christensen, 24; Garrett Lord, 27; Scott Ringwelski, 24 Cofounders, Handshake Joshua Dziabiak, 29; Adam Lyons, 29 Cofounders, The Zebra Steve El-Hage, 27 Cofounder, Massdrop Mattieu Gamache-Asselin, 26; Jamie Karraker, 27 Cofounders, Scriptdash Sergey Gonchar, 24; Eugene Nevgen, 24 Cofounders of MSQRD, Facebook Yunha Kim, 27 Founder, Simple Habit Kai Kloepfer, 19 Founder, Bioﬁre Technologies Lexie Komisar, 29 Senior lead, IBM Digital Innovation Lab Noah Kraft, 29 Cofounder, Doppler Labs Jeremie Lasnier, 27; Andre Lorenceau, 27; Saswat Panda, 28 Cofounders, LiveLike VR Joseph Lau, 27; Nikil Viswanathan, 29 Cofounders, Down to Lunch Cory Levy, 25 Cofounder, One Inc. Alexey Moiseenkov, 26 Cofounder, Prisma Labs Keller Rinaudo, 29 Cofounder, Zipline Jonathan Rodriguez, 27 Spectacles architect, Snapchat JD Ross, 26 Cofounder, OpenDoor David Rust, 27 Director of operations strategy, Lyft Brian Tolkin, 26 Senior product manager, Shared Rides, Uber Evan Wallace, 27 Cofounder, Figma Justin Wetherill, 29 Cofounder, uBreakiFix Whitney Wolfe, 27 Founder, Bumble Ajay Yadav, 29 Founder, Roomi Alexandra Zatarain, 27 Cofounder, Eight JUDGES Steve Anderson—founder, Baseline Ventures John Collison—cofounder, Stripe Aileen Lee—founder, Cowboy Ventures
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Games Lishan AZ, 26 Game designer, University of Southern California Eric Barone, 29 Game developer, ConcernedApe Zaqueri Black, 24 Professional League of Legends player, Counter Logic Gaming Joe Brammer, 24 Senior producer, Bulkhead Interactive Kitty Calis, 26 Freelancer, Kitty Calis Fabiano Caruana, 24 Chess grandmaster, Fabiano Caruana James Earl Cox III, 26 Cofounder, Seemingly Pointless Juan DeBiedma, 23 Professional Super Smash Bros. Melee player, Team Liquid Andy Dinh, 24 Founder, Team SoloMid Natalie Gravier, 25 Visual designer, USC Institute for Creative Technologies Lisy Kane, 29 Producer, League of Geeks Gennadiy Korol, 29 Project manager, Moon Game Studios Jasmine Lawrence, 25 Program manager II, Microsoft Auguste Massonnat, 28 CEO, Room on Fire Daniel Mullins, 24 Indie game designer, Daniel Mullins Games Jenny Qian, 29 Director of business operations, Twitch Rachel Quirico, 28 eSports host, Cyber Solutions Agency Khaled Abdel Rahman, 25 Product manager, Google Matt Salsamendi, 19 Cofounder, Beam Alex Schwartz, 29 CEO, Owlchemy Labs Yuting Su, 28 Founder, Thinker-Tinker
Tomber Su, 25 Managing director, High School Starleague Max Temkin, 29 Cofounder, Cards Against Humanity Gabriel Toledo, 25 Professional Counter-Strike: Global Offensive player, SK Gaming Josh Watson, 29 eSports operation manager, Psyonix Noah Whinston, 22 CEO, Immortals Zach Wigal, 27 Founder, Gamers Outreach Liam Wong, 29 Graphic design director, Ubisoft Entertainment S.A. Andrey Yanyuk, 24 Founder, Tempo Storm Olga Zinoveva, 26 Producer, 343 Industries JUDGES Brandon Beck—cofounder, Riot Games Jade Raymond—founder, Motive Studios Bonnie Ross—corporate vice president, Microsoft
Andy Dinh, 24 FOUNDER, TEAM SOLOMID
In the world of competitive videogaming, Andy Dinh may be the next Michael Jordan or Nolan Ryan—a professional player turned team owner and sports icon. His Team SoloMid is North America’s top squad in the Tencent-owned game League of Legends, a hugely popular eSport that attracts 100 million players monthly, selling out arenas like Madison Square Garden for live competitions. “As I just competed more and more, eSports was taken a lot more seriously,” Dinh says. “[Now] you’re seeing billionaires buy teams in eSports.” After failing to persuade existing eSports organizations to pick up his team, Dinh formed TSM in 2009. He ran the organization while still serving as captain of the ﬁve-man team before stepping down in 2013 to focus solely on management. TSM’s YouTube channel has more than a half-million subscribers, and its star player, Søren “Bjergsen” Bjerg, boasts 1.2 million followers on Twitch. Dinh has been aggressive about monetizing the business, bringing in sponsors like Geico, HTC, Red Bull and Axe.
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David Freed, 28 PR OJECT MA N AGER , N ET POW ER DEMON ST RAT I ON PLA N T
30 UNDER 30
David Freed oversees a $140 million program to build a ﬁrst-of-its-kind power plant near Houston that will burn natural gas. The 50-megawatt plant is designed to emit no carbon dioxide or other pollutants. The trick is in the plant’s revolutionary design, using something called the Allam Cycle, which captures carbon dioxide so that it can be injected and sequestered in old oilﬁelds rather than released into the atmosphere. Exelon and Toshiba back the project. “I believe climate change is the challenge of our generation,” says Freed. “There’s a lot of really great things [being done] in renewables and solar and wind, but in order to limit the worst impacts of climate change, carbon capture has to be part of the solution. “My best day will be when this technology actually works and we know that we can make an impact on the energy world.”
Health Care Ankur Aggarwal, 27; Hareesh Ganesan, 25; Rahul Jain, 26; Nick Valilis, 27 Cofounders, TowerView Health Elizabeth Asai, 25; Elliot Swart, 25 Cofounders, 3Derm Adam Behrens, 28 Postdoctoral fellow, MIT Archit Bhise, 25; Vinayak Ramesh, 26 Cofounders, Wellframe Carrie Cowardin, 28 Postdoctoral fellow, Washington University Matthew De Silva, 29 Founder, Notable Labs Prarthna Desai, 27 Operations, Zipline Riley Ennis, 23; Gabriel Otte, 28 Cofounders, Freenome Jiang He, 28 Postdoctoral fellow, MIT David Hysong, 29 Founder, Shepherd Therapeutics Emilia Javorsky, 28 Cofounder, Arctic Fox Lydia Kisley, 28 Postdoctoral fellow, University of Illinois, Urbana-Champaign Vivek Kopparthi, 27 Cofounder, NeoLight Michael Martin, 29 Cofounder, RapidSOS Nicole Moskowitz, 26; Jessica Traver, 25 Cofounders, IntuiTap Medical Alaa Murabit, 27 High-level commissioner, UN Sudhakar Nuti, 25 M.D. candidate, Yale University Kevin O’Rourke, 29 M.D./Ph.D. student, Weill Cornell Medical College Shaun Patel, 28 Orthopedic surgery chief resident, Harvard Medical School Ashwin Pushpala, 28 Founder, Sano Srilakshmi Raj, 29 Postdoctoral fellow, Cornell University Matthew Sacchet, 29 Postdoctoral fellow, Stanford University Emily Schlichting, 27 Chief of staff, Office of the Assistant Secretary for Legislation, Department of Health and Human Services Tyler Shultz, 26 Visiting researcher, Stanford University Niko Skievaski, 29 Cofounder, Redox Rohan Suri, 17 Founder, Averia Health Solutions Gloria Tavera, 29 President of the board, Universities Allied for Essential Medicines Austin Walker, 28 Cofounder, Innovein Tim Wang, 28 Cofounder, KSQ Therapeutics Arsani William, 27 Investment professional, Farallon Capital Management JUDGES Ann Lamont—managing partner, Oak Investment Partners Nat Turner—cofounder, Flatiron Health Anne Wojcicki—cofounder, 23andMe
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Michael Martin, 29 CO FOUNDER, RAPIDSOS
Last year more than 10,000 people died when they could not relay fast and accurate information after calling 911. People in danger don’t always have the presence of mind to press the right numbers and explain where they are. But what if your smartphone could do that for you? That’s the idea behind RapidSOS’ smartphone app, Haven. With a single touch, it sends the 911 dispatcher your exact location.
“Despite all the ways that technology has transformed our lives,  calls are still going through a 1960s infrastructure,” says the company’s cofounder/CEO, Michael Martin. RapidSOS has raised $14 million and can now handle 911 calls nationwide. The service is being used just 25,000 times a month, about 0.1% of all 911 calls, so there is plenty of room to grow. “This technology will be preinstalled across your life, whether it’s on your wearable, already in your car, on your smartphone. So that whenever you need it, it is there for you.”
MICHAEL MARTIN: WOOL HAMPTON SUIT JACKET ($1,795) AND MOTOR CITY TROUSERS ($348) BY JOHN VARVATOS; COTTON SHIRT BY TED BAKER ($39); SILK POCKET SQUARE BY CHARLES TYRWHITT ($20); LEATHER GRANDPRØ SNEAKERS BY COLE HAAN ($130). DAVID FREED: LINEN SPORT JACKET ($1,895), WOOL-AND-CASHMERE CREWNECK SWEATER ($1,295) AND POPLIN ASTON SHIRT ($495) BY RALPH LAUREN; BYRON JEANS BY HUDSON JEANS ($189); JACOB MONKSTRAP BOOTS BY JOHN VARVATOS ($448).
Law & Policy
Michael Alfaro, 28 Head of exploration and production investing, Zimmer Partners Elizabeth Barno, 26 Community manager, Greentown Labs Kevin Barry, 23; Thaddeus Tarkington, 24 Cofounders, FilterEasy Charles Cai, 29 Cofounder, MG Fuels Keiana Cave, 18 Founder, Mare Anthony Diamond, 29; Amrit Robbins, 27 Cofounders, Axiom Exergy James Ellsmoor, 24 Director, Solar Head of State Giles Eperon, 29 Research fellow, University of Washington David Freed, 28; Mike McGroddy, 29 Project manager/principal, Net Power Demonstration Plant Nishant Garg, 29; Jimit Shah, 28 Cofounders, Flow Labs Thomas Healy, 24 CEO, Hyliion Christopher Hopper, 29 Cofounder, Aurora Solar Samir Ibrahim, 28 CEO, SunCulture Christina Karapataki, 29 Principal, Schlumberger Paige Kassalen, 23 Engineer, Solar Impulse Ravi Kurani, 29 Cofounder, Sutro Ann Makosinski, 19 Founder, Makotronics Enterprises Maanasa Mendu, 14 Student, Mason High School Gabriel Mesa, 15 Founder, Mesa Foundry Sam Slaughter, 29 Cofounder, PowerGen Renewable Energy Arthur Souritzidis, 28 CEO, Momentum Solar Travis Thompson, 29 Research fellow, University of Michigan Colin Touhey, 29 CEO, Pvilion Charlie Upshaw, 28 Cofounder, IdeaSmiths Augusta Uwamanzu, 18 Student, Harvard University Richard Walsh, 29 Program lead of clean energy solutions, WGL Energy Richard Wang, 27 CEO, Cuberg Raymond Weitekamp, 28 CEO, polySpectra Kendrick Worrell, 28 Cofounder, Accelerate Resources Sam (Yinglin) Xu, 29 Head of oil and gas investment banking, CohnReznick Capital Markets Securities
Kate Aitken, 29 Chief of staff for federal policy and federal affairs, Airbnb Jessica Anderson, 29 Grassroots director, Heritage Action for America Adina Appelbaum, 29 Equal Justice Works Fellow, Capital Area Immigrants’ Rights Coalition Andrew M.J. Arruda, 27; Pargles Dall`Oglio, 27; Jimoh Ovbiagele, 23 Cofounders, ROSS Intelligence Ryan Burke, 29 Special assistant to the president for economic policy, the White House Jamira Burley, 28 National deputy millennial vote director, Hillary for America Elizabeth Clark-Polner, 29 Associate research scholar in law, Yale University Matthew Denhart, 29 Executive director, Calvin Coolidge Presidential Foundation Johnetta Elzie, 27; Samuel Sinyangwe, 26 Cofounders, Campaign Zero Aaron Ginn, 28 Cofounder, the Lincoln Network Greg Glod, 29 Manager of state initiatives and senior policy analyst, Texas Public Policy Foundation Alex Harris, 28 Law clerk to Justice Anthony Kennedy, the Supreme Court of the United States Chelsea Harrison, 29 Senior policy communications manager, Lyft Jon Hartley, 27 Cofounder, Real Time Macroeconomics Hope Hicks, 28 Press secretary, Donald J. Trump for President Joshua House, 28 Attorney, Institute for Justice
JUDGES Matt Owens—cofounder, Extraction Oil & Gas T. Boone Pickens—founder, BP Capital Allison Lami Sawyer—cofounder, Rebellion Photonics
Hope Hicks, 28 P R E SS S EC R E TA RY, DONALD J. TRUMP FOR PRESIDENT
Hope Hicks rocketed to prominence last year as a one-woman press team for a candidate known for eschewing talking points and press conferences in favor of hurling curveballs via Twitter. She has reputation for being tight-lipped, but when your boss is Donald Trump, that’s hardly a problem. “Whether it’s Twitter or an arena or a TV show,” Hicks
Elizabeth Kelly, 29 Director of policy, United Income Sarah McBride, 26 National press secretary, Human Rights Campaign Svante Myrick, 29 Mayor, City of Ithaca Amanda Nguyen, 25 Founder, Rise Steven Olikara, 26 Founder, Millennial Action Project Sonya Passi, 28 Founder, FreeFrom Jonathan Perichon, 26; Daniel Yanisse, 28 Cofounders, Checkr Andrew Rausa, 29 Advertising and privacy counsel, Facebook Jordan Roberts, 29 Associate, Fenwick & West Varun Sivaram, 27 Acting director for energy security and climate change, Council on Foreign Relations Xiyin Tang, 29 Attorney, Mayer Brown Kendall Hope Tucker, 24 Founder, Polis Ryan Walsh, 29 Chief deputy solicitor general, Wisconsin Department of Justice Matt Watters, 28 Team lead, McKinsey & Company JUDGES Arthur C. Brooks—president, American Enterprise Institute William Eskridge Jr.—John A. Garver Professor of Jurisprudence, Yale Law School Nate Levine—cofounder, OpenGov Anne-Marie Slaughter—president, New America
says, “he’s magnetic. People are drawn to him.” She launched her PR career at New York City’s Hiltzik Strategies, whose clients included the Trump Organization, and then quit to work directly for the family’s business. In Washington she’s continuing to fend off the fourth estate for her “dream client,” and she hopes to parlay that into “even a small role” in the Trump Administration. The 24/7 life of a Beltway operative is a new experience for this Connecticut native, who used to go to bed at 9:30 p.m. “I don’t sleep much, but when I do, I sleep well.”
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30 UNDER 30
Von Miller, 27 LINEBACKER, DENVER BRONCOS
Since being selected second overall in the 2011 NFL Draft, Von Miller has snagged Defensive Rookie of the Year, Pro Bowl and Super Bowl 50 MVP honors. The All-Pro linebacker leveraged his on-ﬁeld performances into a six-year, $114.5 million contract with the Broncos, making him the highest-paid defensive player in the history of the NFL. That contract isn’t the only thing beeﬁng up his bank account. While it’s normally superstar QBs who are Madison Avenue favorites, Miller has endorsement deals with EA Sports, Old Spice, Adidas and Microsoft. He is also an investor, with a stake in Twitter-backed headphone company Muzik and a chunk of Chef’s Cut Real Jerky. The former Texas A&M poultry-science major also runs his own chicken farm in his hometown, Desoto, Texas. “The person I am on the football ﬁeld, that’s the person that you’ll get when I’m with my family. I try not to live double lives.”
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Alessandro Babini, 25 Cofounder, Humon Andrew Barge, 29 Content development manager, Twitter Odell Beckham Jr., 24 Wide receiver, New York Giants Martellus Bennett, 29 Tight end, New England Patriots Mookie Betts, 24 Right ﬁelder, Boston Red Sox Simone Biles, 19 Gymnast, Team USA Elena Delle Donne, 27 Shooting guard, Chicago Sky Draymond Green, 26 Forward, Golden State Warriors Javier Hernandez, 28 Forward, Bayer Leverkusen Kyrie Irving, 24 Point guard, Cleveland Cavaliers Patrick Kane, 28 Right wing, Chicago Blackhawks Akshay Khanna, 29 Vice president of strategy, Philadelphia 76ers Chloe Kim, 16 Snowboarder Julia Landauer, 25 Stock car driver, Nascar Sydney Leroux, 26 Forward, FC Kansas City Tatyana McFadden, 27 Wheelchair marathon athlete, Team USA Collin Meador, 29 Investment associate, San Francisco 49ers Von Miller, 27, Linebacker, Denver Broncos Katie Nolan, 29 TV host, Fox Sports Grant Norris-Jones, 27 Director of integrated partnerships, FanDuel Nneka Ogwumike, 26 Forward, Los Angeles Sparks Kate Pratt, 28 Director of marketing partnerships and team sales, Madison Square Garden Co. Carey Price, 29 Goalie, Montreal Canadiens Milos Raonic, 26 Tennis player Chris Sale, 27 Pitcher, Boston Red Sox Evan Shugerman, 27 Sports partnerships manager, Facebook Shakur Stevenson, 19 Boxer, Team USA Jake Stone, 26 Director of business development, Omnigon Nigel Sylvester, 29 BMX rider Justin Zayat, 24 Vice president, Zayat Stables JUDGES James Harden—shooting guard, Houston Rockets Phil Knight—chairman emeritus, Nike Casey Wasserman—chairman, Wasserman Media Group
Last year, Ben was too sick to dream. He has Primary ImmunodeďŹ ciency or PI. Thanks to the Jeffrey Modell Foundation, he has been properly diagnosed and treated. Now he can search for the cure.
helping children reach for their dreams
30 UNDER 30
The Black Sheep
At 25, James Proud has a quarter-billion riding on reinventing how you sleep. And this original Thiel Fellow is determined to do it his wayâ€”or fail trying.
CREDIT PINES ETHAN TK FOR FORBES
BY BRIAN SOLOMON
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30 UNDER 30 James Proud
This absolutism feels all the more jarring given that his short, bulldog frame and pudgy baby face make him look like the high school computer-lab nerd he once was, a persona buttressed by his wardrobe (a sweatshirt and sweatpants almost all the time, a black T-shirt if he’s feeling dressy) and diet (no vegetables, no ﬁsh). The latest in the 21st-century cavalcade of cocky prodigies in the mold of Sean Parker, Mark Zuckerberg and Evan Spiegel, Proud was born thumbing his nose at other people. “No one can make me do what I don’t want to do,” he says. He’s been professionally bred this way, too. James Proud was in the ﬁrst class of Thiel Fellows, the upstarts—122 and counting—who for the past seven years have taken $100,000 each from billionaire contrarian Peter Thiel on the condition they skip college. And he’s also the most successful. Over the past four years he’s raised roughly $40 million for his startup, Hello, mostly at a $250 million valuation. He’s recently been raising bridge ﬁnancing, at an even higher valuation, including a direct $2 million ante from 88 | FORBES JANUARY 24, 2017
the godfather himself, Thiel. It’s his ﬁrst personal investment in one of his fellows. “James stood out from the start as extremely tenacious and determined,” Thiel says. And now he’s rich, too. Proud still owns about half of Hello, pushing him well into centimillionaire territory. Proud’s chosen market is right up there with death and taxes in terms of universality: sleep, which has suddenly become a bit more sexy and a bit less sleepy than it has been for the past few millennia. “You’re starting to see a shift in conversation around sleep that happened in the ’80s around exercise and in the ’90s and 2000s with organic and healthy eating,” Proud says. Arianna Huffington has raised $7 million for Thrive Global, which offers a suite of products and services driven by the idea that more sleep translates to a better life, and Casper, the mattress-will-changeyour-life startup, has raised $70 million. Proud’s focus is on hardware, speciﬁcally an orb the size of a tennis ball that sits on your bedside table and uses a variety of hidden sensors to
ETHAN PINES FOR FORBES
t’s only six blocks from James Proud’s office, a brickwalled converted bakery in San Francisco’s Mission District, to Central Kitchen, a hip restaurant owned by fellow FORBES 30 Under 30 alum Thomas McNaughton, but that’s plenty of time for the 25-year-old to take on more or less all of Silicon Valley. People who complain about ﬁnding good talent just don’t know how to recruit. Traditional venture capital ﬁrms? Unnecessary. By the time we reach the host stand, he’s deriding the entire tech community for their “airy-fairy bullsh-t about changing the world.”
track your movements and the surrounding nighttime atmosphere. The $149 gadget, called Sense, grades your sleep on a scale from 0 to 100—and tries to help you improve that score over time. Proud claims that the Sense holiday rollout at Target is the biggest the retailer has ever done for a new electronics product (Target says that’s incorrect). Big orders won’t guarantee big success, at least not immediately. A source close to the company says the internal sales projection for 2017 is 250,000 Sense units, implying net revenues in the ballpark of $20 million. Tiny compared even to a ﬂagging competitor like Fitbit, which likely ﬁnished 2016 with sales of more than $2.3 billion—and even at that size, it’s barely proﬁtable.
Meanwhile, a triad of monoliths—Amazon, Apple and Google—stand determined to put connected devices on every conceivable surface of your body and in every space in your home. What does Proud think of his trillion-dollar competitors? Looking up from his lamb ribs and roast pork, he lifts both hands in a double-middle-ﬁnger salute. It’s the kind of brashness that a Peter Thiel could love. That tack surely worked for Zuckerberg and Spiegel. But youthful hubris goes back to Icarus, and that tale didn’t end with an IPO. Given his complicated market, dotted with pitfalls and entrenched enemies, Proud will ultimately demonstrate whether unswerving self-conﬁdence is a necessary entrepreneurial attribute or a potentially fatal ﬂaw. At the FORBES Under 30 Summit in Boston last October, Proud was asked backstage whether he’d ever met Richard Branson, whom he would soon join on a panel. “The real question,” Proud responded, “is whether Branson has ever met me.” less than an hour away from Branson’s childhood home south of London. His father worked for the British civil service, and his mother was a secretary who later stocked grocery-store shelves at night. Proud preferred haunting the computer lab to making friends on the playground. His ﬁrst Internet payday came at the age of 12, when he built a website for a scammer he had met through an online forum (he spent the money on a Sony Ericsson mobile phone and Creative Labs MP3 player). As a hired hand for Web projects, he began making hundreds of dollars per job. At one point his PayPal account was frozen because he was underage, so cash arrived in the mail, prompting questions from his parents. At 17 Proud started GigLocator, a website that aggregated concertticket information, and persuaded his parents to let him take a gap year to work on it. He fed himself by faking hole punches on loyalty cards from a British chicken chain, Nando’s, or else schmoozing venture capitalists and other European techies
PROUD GREW UP
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30 UNDER 30 James Proud over lunch, always letting them pick up the check. “Already back then, James had this laser-sharp focus about what he was going to do for the next ten years,” says Spotify founder Daniel Ek, who met Proud playing PingPong during that period. “It was incredibly rare to see that from someone who should have been more focused on girls and school.” Proud would have been the ﬁrst in his family to attend college, but when the day came to enroll, he refused to go, despite his parents’ pleas. Then, on a September day in 2010, Proud found his savior at 1 a.m. while watching a live stream of the TechCrunch Disrupt conference. There Thiel announced his eponymous fellowship: a $100,000 grant to each of 20 teenagers who wanted to skip college to pursue another dream. Proud decided to apply on the spot. When Thiel ﬂew the ﬁnalists out to hobnob in San Francisco, Proud was surrounded by preppy American kids with acceptances to Harvard they wanted to turn down. He returned to London, sure he wouldn’t make the cut. “I wished I didn’t even come,” Proud says. “I
What does Proud think of his trillion-dollar competitors? Looking up from his lamb ribs and roast pork, he lifts both hands in a doublemiddle-finger salute. was going to have to go back and hate my life because I’d seen that this would be so much better.” But in April 2011 Thiel’s organization called to give him the good news. They also told him to sit tight until July. Proud, of course, was in a hurry—and not listening to anyone who would stop him. He quickly emptied his savings to buy a plane ticket and then demanded the ﬁrst Thiel check be sent early, lest he end up sleeping on the street. They caved. The fellowship changed Proud’s life, turning him from an unknown programmer living with his parents to a member of an inaugural class of wunderkinds. While crashing on air mattresses and couches for most of the next year, he took advantage of every door the Thiel brand opened across Silicon Valley. For a time Proud worked out of PayPal cofounder Max Levchin’s incubator, and in June 2012 he offloaded GigLocator to the concert promoter Peter Shapiro, earning himself a cool six-ﬁgure payday. 90 | FORBES JANUARY 24, 2017
(“That’s one young, smart motherf—ker,” says Shapiro.) Soon after, Proud began raising money for a new stealth startup that would become Hello. “I said, ‘I’m in for whatever amount you’ll let me in for,’” says Shakil Khan, an early Spotify investor that Proud befriended in London. “He said, ‘I still haven’t ﬁnalized what it’s going to be.’ And I said, ‘That’s irrelevant.’” The original idea for Hello was to build a better version of the activity-tracker wristband pioneered by Fitbit and Jawbone. Proud recruited a handful of young hardware engineers and spent 18 months developing a prototype, which included a magnetic strap similar to one that would later appear on the Apple Watch. But over time Proud quietly soured on its potential. He noticed that no one on his team wore any existing product on his or her wrist for more than a few weeks. Consumer surveys show similar results, with estimates that about a third of wearables owners give up on their devices within the ﬁrst six months. Plus, competition was ﬁerce. Google would announce Android Wear in March 2014, and the Apple Watch debuted in September. Proud was already late to a category in which he no longer believed. “So what do you do? Do you give the money back to investors and send everyone home?” he asked. The epiphany came when Proud ﬂew out to New York City to attend a birthday party in March 2014. Distracted by his dilemma, he brainstormed about products that wouldn’t need to be worn at all times and suddenly arrived at sleep tracking. People enjoyed the feature on wristbands but hated wearing them overnight. He brought the team together when he returned and told them they would be scrapping a year and a half of work to start over. “I wore the wristband prototypes for a good two weeks after, holding on to the work we had done,” says Hello’s ﬁrst industrial designer, Rob Shook. Proud also had to sell his decision to an angry group of investors who had supported a $7 million Series A only months earlier. To placate them, he granted additional shares to everyone who participated in the round, including Khan, then-PayPal president David Marcus and Xiaomi vice president Hugo Barra. “Had the decision to pivot come three months later, I don’t think the company would have survived,” says Dan Rose, Facebook’s vice president of partnerships and Hello’s only board member other than Proud. PROUD’S MOVE AWAY FROM wearable devices took Hello out of a crowded but expanding market—an estimated 67 million smart watches will be sold this year—and made it the pioneer of a completely new one. “If it can work, it can end up being a consumer device on par with the iPod,” Thiel says. A huge if. Searching for scientiﬁc back-
Scorecard: How Have the Thiel Fellows Fared? In 2011 Peter Thiel embarked on an audacious plan: He’d give a group of teenagers $100,000 each to forgo college—and build their own startups from scratch. It quickly generated immense buzz as applications poured in. In the end, 24 young entrepreneurs became the ﬁrst Thiel Fellows. Over the next ﬁve years that freshman class followed a number of different paths. Some stuck with their initial idea, while others changed course completely. And only a handful completed a key Silicon Valley rite of passage: raising money for their startup. —Matt Drange
Raised Money Only four fellows, or about 16% of the original Thiel class, have raised more than $1 million since taking Thiel up on his offer. Paul Gu, cofounder of Upstart, leads the pack, having raised $53 million for the online-lending marketplace. Andrew Hsu, meanwhile, was the ﬁrst to get funding, scoring $1.5 million for his Airy Labs, a maker of educational games for kids.
Stuck With Their First Plan Roughly half have kept going on their original projects. Dale Stephens, for example, has stayed at the startup he founded, UnCollege, which puts together gap-year programs, while Laura Deming remains at her biotech-focused venture capital ﬁrm, the Longevity Fund.
There’s no rule that Thiel Fellows can’t eventually attend college. At least ﬁve fellows have done so, including David Luan, who graduated from Yale and has a new machine learning company, Dextro.
Intertwining Ties to Thiel At least three fellows besides James Proud have continued to stay connected in some way to Thiel: Eden Full Goh, who started a solar company before leaving for Palantir, the data-mining ﬁrm Thiel cofounded; Tom Currier, who joined Thiel’s Founders Fund as an entrepreneur-in-residence after starting Black Swan Solar; and Daniel Friedman, who received funding from FF Angel, one of Thiel’s VC ﬁrms, for Thinkful, his startup that offers online coding classes.
ILLUSTRATIONS BY PATRICK WELSH FOR FORBES
ing, Proud hired Matthew Walker, director of the Sleep & Neuroimaging Laboratory at the University of California, Berkeley, as Hello’s chief scientist. Walker believes that lack of sleep is an “epidemic” in First World countries and that Sense can help ﬁx that. After one year of use, 71% of Sense users slept longer on average than they had before, and 57% had more regular wake-up times, the company claims. Hello hopes to do even better as it tests more personalized sleep techniques. Proud proved there was a market for sleep-centered products, at least among early adopters, with a successful Kickstarter campaign in July 2014. After racing to build a basic hardware prototype and marketable software façade, Hello launched its campaign with a slick video and a goal of $100,000. It blew past the ﬁnish line, scoring $1 million in the ﬁrst four days and $2.4 million after one month, just a hair shy of VR phenomenon Ocu-
Went to School
A dozen or so fellows have moved on from their initial concepts. For his part, Sujay Tyle worked on founding Hired, a job-search website, then left to join one of Hired’s investors, Sherpa Ventures.
lus Rift’s crowdfunding haul. That summer proved an intoxicating high, but there was so much to do to make the marketing pitch a reality that four bottles of celebratory champagne sat in the office refrigerator unopened until this past Thanksgiving. Hello promised delivery by November 2014 but delayed the ﬁrst shipments until February as production challenges mounted. Sense is a two-part system that includes a bedside device—an amalgam of LEDs, circuits and sensors to detect light, sound, temperature and air quality, all stuffed into a small sphere—and an accompanying battery-powered, Bluetooth-enabled “Sleep Pill,” which clips to your pillow to track movement. The team had to design many of the manufacturing tools themselves. That following June Hello brought in a $30 million cash infusion at the $250 million valuation from the likes of Temasek Holdings, a government-owned investJANUARY 24, 2017 FORBES | 91
30 UNDER 30 James Proud can’t build and release them all right now,” Proud asserts. ment fund in Singapore, but the rest of the year was lost He’ll need to diversify his product line soon to avoid to ﬁxing bugs and rewriting core features. In 2016, as the fate of other hardware startups like fellow KickstartAmazon rolled out the Echo and Google revealed Google er darling Pebble, which shut down in December, and Home, both voice-enabled wireless speakers, Proud drone maker 3D Robotics, which crashed after burning pushed the team to add voice controls to the latest Sense, through $100 million in funding. Even public companies which went on sale this past November. like Fitbit (trading down 86% from its peak) and GoPro “The big challenge is always: Can you lock in the mar(down 90%) have struggled. “On one hand, it’s easier ket enough before people develop copycats that are cheapthan ever to build a hardware product,” says Jan Dawer and roughly equivalent?” Thiel says. “This is always son, analyst at Jackdaw Research. “But in some ways it’s something a little harder for hardware than software.” harder than ever to be competitive and build a sustainUnfortunately, even the new version feels like an unable business.” ﬁnished product searching for a market. After trying it In the meantime, Proud must mature as the leader of a for a week, I enjoyed Sense’s novelty as a smarter alarm 50-employee startup trying to go toe-to-toe with compaclock with limited voice commands and the ability to nies that outnumber and out-ﬁnance him. While friends turn off the alarm with a wave of your hand. But for my extol Proud as wise beyond his $149, the core functionality is too years, former Hello staffers deinconsistent. It’s supposed to describe him as a smart but invettect when you fall asleep and wake erate risk-taker who often unravup, and analyze your tossing and els in tense situations. “You could turning to see how many hours see the pressure got to him, and you’re in deep sleep. Yet the Sense sometimes I would think it’s beinterprets data gathered from the cause he’s young,” a former Hello clip on my pillow rather than a engineer says. “He would suddenband on my wrist, so it frequently ly rush in saying, ‘We need to do X fails to register when I get up from because people are complaining bed and often confuses my ﬁanabout it.’” Instead of patiently adcée’s movement for my own. Even hering to a long-term plan, Proud if it were accurate, neither the is prone to rash decisions. “The sleep results nor other measureability to take risks and be aggresments are groundbreaking. Everysive is the foundation of James’ deone already knows that blackout The sleep doctor is in: For $149, the Sense is designed cision making, and it may eventucurtains are good for beauty rest to track your sleep—and analyze how to make it better. ally come back to bite him,” says and a barking dog is bad. one ex-Hello employee who worked closely with Proud Other warning signs abound. Proud boasts about the for more than two years. “If that day never comes, he’s a new Hello displays in nearly 700 Target stores across genius. If it does, the warning signs were there.” the country, but the only inventory in Oakland was one Proud doesn’t deny he can be a capricious boss. In DeSense tucked in a side cabinet next to some Apple TVs cember 2014, on the morning an engineer was set to ﬂy and Linksys wireless routers. A survey of Best Buys to China to install the ﬁnal ﬁrmware for the Sense’s ﬁrst around New York found only one with the product in manufacturing run, Proud decided to add one more feastock; other stores indicated you needed to order it. And ture. His CTO, Tim Bart, told him it was insane to change when I brought a Sense home, I nearly abandoned the anything in the code at such a late hour, but Proud was set-up process after an hour of trying and failing to plug suddenly convinced that Sense should light up and play in the charging cable. Hello says a new manufacturer a sound when it was plugged in for the ﬁrst time—like a had constructed the USB port a millimeter off target in computer booting up. a few units. After a bruising argument, Proud got his way. The enWHILE PLENTY OF QUESTIONS REMAIN about Sense, gineer ﬁnished coding the change on the cross-PacifProud now treats his risky pivot as a thesis statement. ic ﬂight, and through skill and luck avoided introducing He trashes devices that need to be worn (like the Apple new bugs into the ﬁnal product. Watch) or require direct interaction (like the home assisWas that last minute intervention a Steve Jobs-like motants from Amazon and Google). His goal is to cover the ment of product genius or the power trip of an enabled, entire 24 hours of your day with a few “nonengagement” immature founder? Proud’s analysis of his behavior in health-tracking devices like Sense. “It’s a tragedy that we hindsight is simple and unapologetic: “Well, I was right.” F 92 | FORBES JANUARY 24, 2017
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A BOUNTIFUL MIND Forget the 30 Under 30. If there were an 8 Over 80, it would include Phillip Frost—doctor, investor, inventor—who globalized the generic-medicine business and continues to make and give away billions with Buffett-level efficiency. BY MATT SCHIFRIN
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SONYA REVELL FOR FORBES
or most Floridians, palm trees assume the same status that pigeons do in New York City. They are everywhere, but you barely notice them. Not for Dr. Phillip Frost. As we drive to his office in his white 7 series BMW, Miami’s second-richest man and a 50-year resident can’t help but lecture me on more than a dozen varieties of palms sprouting like weeds from the lapses in pavement. “See the fruit on that one hanging? It’s yellow. That’s a lady palm. Beautiful, isn’t it? And that’s a date palm in front. This is a Chinese fan palm—forms a fan like the elephant ear—and that is a sabal palm, ﬂowering. Isn’t that pretty?” Then Frost decides to test my retention. “And those crooked ones are what?” After a few seconds he answers his own question. “Coconut palms. Remember I told you coconut palms grow crooked? Royals tend to grow up—these are royals.” In this sweltering city of conspicuous consumption, where nearly everyone drives with windows rolled up and the air-conditioning and radio blasting, Frost, with his botanical obsession and insatiable appetite for learning, is an anomaly. He is a businessman and an investor, but he is also a scholar, inventor and fervent patron of the arts and sciences. And anyone spending time with the self-effacing octogenarian will readily testify that it is precisely his meticulous attention to seemingly mundane details—like those many varieties of palm trees—that underlies his uncanny ability to spot and capitalize on opportunities. Frost is a board-certiﬁed dermatologist and irrepressible entrepreneur who is also the chairman and CEO of Opko Health, a midsize pharmaceutical and medical-diagnostics company with promising remedies in numerous areas, including chronic kidney disease and prostate-cancer detection. Though his company has revenues of $1.2 billion and will lose about $50 million in 2016, he insists Opko will mean more to medicine than any of his previous endeavors, including drug-industry pioneers like Key Pharmaceuticals, Ivax and Teva Pharmaceuticals. It’s a bold statement from a man who played a major role in creating the
Dr. Phillip Frost: a Renaissance man and billionaire with a passion for palm trees and proďŹ ts.
THE FROST FOLIO Through Opko Health, Frost is building a health-care-focused Berkshire Hathaway, but like other great investors he ﬁnds values in a myriad of industries. OPKO HEALTH Frost owns 34% of therapeutics and diagnostics company with $1.2 billion in sales. TEVA PHARMACEUTICALS INDUSTRIES A $20 billion (revenue) Israel-based big pharma, specializing in generics. Frost owns 1.5% of the stock. VECTOR GROUP Founded by fellow Philadelphian Bennett LeBow; owns tobacco company Liggett Group and commercial realtor Douglas Elliman Realty. Frost is largest shareholder, with 15%.
LADENBURG THALMANN Regional investment bank and ﬁnancial advisory; 4,000 advisors and $132 billion in assets. Frost owns 36.5% and Vector Group owns 8.23%.
CASTLE BRANDS Maker of premium liquor, including Jefferson’s whiskey and Goslings rum. Frost owns 33.5% and Vector 8%. COCONUT GROVE BANKSHARES Miami-Dade’s oldest bank; Frost owns 24%. COGINT Formerly Tiger Media; a cloud-based data and analytics company focused on marketing and risk management. Frost owns 29%. BIOCARDIA Formed by Frost’s Sorbonne roommate, Dr. Simon Stertzer. A clinical-stage company using stem cells to repair cardiac muscle after a heart attack. Frost owns 32.7%. DRONE AVIATION Florida-based maker of drones for law enforcement and military. Frost owns 14%. ARNO THERAPEUTICS Developing antiprogestins for breast, endometrial and prostate cancers. Opko owns 9%. ZEBRA BIOLOGICS Attempting to make generic versions of antibody drugs—like the bestselling rheumatoid arthritis drug Humira—that could be better than the original. Opko owns 29%.
The WATT drone has an electric-tethered aerial platform (ETAP).
OAO PHARMSYNTHEZ Russian developer and marketer of new drugs in Eastern Europe. Opko owns a 17% equity interest. RXI PHARMACEUTICALS Ladenburg took it public in December. Developing an RNA interface to prevent skin scars. Opko has an 19% equity interest. COCRYSTAL PHARMA New antivirals (hepatitis C, ﬂu, Norovirus); Frost and Opko own 23%. SEVION THERAPEUTICS Developing antibodies against difficult targets; treating cancer and immunological diseases. Frost and Opko own 20%. NEOVASC Canadian maker of specialized cardiology devices. Frost owns 22%. CHROMADEX Maker of ingredients for nutritional supplements. Frost owns 14.6%.
The Tiara is a minimally invasive treatment for a common form of mitral-valve disease.
VBI VACCINES Developing a technology platform to design vaccines for hepatitis B, Zika and brain tumors. Opko has a 25% equity interest. MABVAX THERAPEUTICS Clinical-stage cancer immunotherapy. Frost and Opko have an estimated 5% interest. MUSCLEPHARM Nutritional supplements. Frost owns less than 5%.
modern generic-pharmaceutical business and—given that shares in Opko are down 39% in the last 18 months—more than a little self-interested. “What we are building here is a company that will have a half a dozen products, each capable of doing more than a billion dollars in sales and some several billion,” he says, pointing to a printout displaying overlapping circles that highlight ﬁve core Opko markets: urology, nephrology, genetics, bio-reference and aging/metabolic syndrome. “In the case of human growth hormone, where we are partnered with Pﬁzer, that is a $3.5 billion market.” Unlike most of his pharma peers, Frost has the mindset of a savvy value investor, only it’s enhanced by a deep 96 | FORBES
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understanding of molecular biology and a penchant for swiftly striking opportunistic deals. His office desk is stacked with pitchbooks and proposals, as well as dual ﬂat-panel Bloomberg screens, with dozens of stocks on his watch list blinking green and red. “Phil has an incredible vision of where to position himself within health care,” says Oracle Partners’ Larry Feinberg, a veteran hedge fund manager who has owned shares in Frost companies since the 1990s. “He views Opko as his holding company. It is his Berkshire Hathaway of health care.” Through Opko and other entities, Frost has strayed far from health care. He has big stakes in dozens of public and private companies, ranging from Vector Group, owner of tobacco company Liggett and commercial real estate broker Douglas Elliman, to Castle Brands premium spirits and investment ﬁrm Ladenburg Thalmann & Co. He has invested in a slew of promising startups, such as a data-fusion company, a drone surveillance provider and BioCardia, a biotech developed by his college roommate, renowned Stanford Medical School cardiologist Simon Stertzer, which is trying to ﬁnd a way to use stem cells to rejuvenate hearts damaged by heart attack. Tireless at age 80, Frost is working on his ﬁfth billion in net worth, but he is giving it away nearly as fast as he is making it. The Frosts have no children, but he and his wife, Patricia, through their hands-on approach to philanthropy and hundreds of millions in funding, are on a mission to transform Miami from a city best known for its beaches, golf courses and trendy Latin-Caribbean cuisine into a mecca for art and serious science.
rost’s Horatio Alger story contains a healthy dose of serendipity. He was born in 1936, in the midst of the Great Depression, the third son of a shoe-store owner from South Philadelphia. A stellar student from the start, he attended Philadelphia’s selective Central High School and the University of Pennsylvania, majoring in French literature. After his junior year in Paris studying at the Sorbonne, he had a chance meeting with a former schoolmate at Penn’s cafeteria, alerting him to a scholarship that was being offered to a new medical college in New York City called Albert Einstein and available to graduates of his high school. Frost applied and won a full scholarship. Einstein quickly established a reputation as one of the top med schools in the country. His decision to specialize in dermatology also contained an element of chance. As an undergrad he developed an unsightly wart on his elbow that prompted him to go to a Penn faculty member who happened to be doing research on cantharidin, otherwise known as Spanish ﬂy, for an application to remove warts. “I was interested in a specialty that would permit me the time to reﬂect and do [other] work. I knew that surgery could never be for me because you’re tied up in operating rooms most of the time. And I needed the freedom to do things,” Frost says. Fortuitously, the professor who cured his wart later
offered him a postgraduate residency in dermatology at the “I had heard that an important Czech pharmaceutical University of Pennsylvania. company was being privatized by the government,” Frost says. After his residency and two years as a lieutenant com“One of my friends from Colombia, South America, had an mander in the U.S. Public Health Service at the National Insti- apartment in Miami, and he had a Czech friend in Toronto.” tutes of Health, Frost landed a spot on the faculty of the UniSo Frost made some calls and found out that Novartis and versity of Miami’s dermatology department in 1966. Seeing two other European companies were interested in bidding, patients and teaching med school weren’t enough to satisfy his but Frost’s Miami-Toronto connection was able to arrange insatiable curiosity, so at night he invented a disposable tool a last-minute meeting with Vaclav Havel, then the president for taking skin biopsies (still used today). During negotiations of the Czech Republic. “I told him, ‘Look, if you do a deal to sell his invention to Miles Laboratories in 1969, Frost met a with us, we’ll guarantee you’ll keep at least 900 of the 1,200 young lawyer with a silver tongue named Michael Jaharis. employees,’ ” says Frost, who shrewdly noticed that the politiFrost’s friendship with Jaharis blossomed into a business cian’s primary goal was saving jobs, not getting top dollar for partnership after the lawyer decided to quit his corporate the assets. The Czech deal, which cost Ivax only $50 million, job to help Frost build a business around a novel ultrasound included prime real estate, subsidiaries in all the former Soviet device used to clean teeth that Frost had purchased. He had Republics and $20 million in the bank. a thriving dermatology practice, with patients that included “Phil turned Ivax from a domestic drug company to a Jackie Gleason, who once ﬁlled Frost’s mother’s hospital room global generics-pharmaceutical company,” Feinberg says. “It with roses after he discovered they were convalescing in the wasn’t subject to just the vagaries of the U.S. [market]. It really same hospital. By 1972 he had become the chairman of derma- had strong positions in both generic and proprietary pharmatology at Miami’s Mount Sinai Medical Center. ceuticals throughout the entire world. It became a very valuThat same year, another chance meeting: At Miami’s airable asset.” port, while waiting to board a plane to New York, Frost ran In 2005 Israel’s Teva Pharmaceuticals paid $7.6 billion for into a high school classmate who was a top executive at Key Ivax, making Frost a billionaire. For the ﬁrst time. Pharmaceuticals, then a struggling drugmaker focused on cold ommand central for Frost’s empire is a shimmering remedies. “By the time we got to New York, we agreed to put 15-story glass-and-steel building he owns at 4400 our little company, which had some cash and some inventions, Biscayne Boulevard in downtown Miami. Lining the together with Key, which was public,” Frost says in his apartwalls of the 15th-ﬂoor executive suite, below an electronic ment in New York’s Pierre hotel, overlooking Central Park. “They had great technology, but they didn’t have the people to ticker tracking Frost stocks, are beautifully framed photorecognize what they had. They had the ﬁrst controlled-release graphs of Art Deco Miami Beach circa World War II from negatives Frost rescued when the city’s Bayfront Park library technology for drugs.” Key Pharmaceuticals was Frost and Jaharis’ ticket to serious wealth. After reformulating its main asthma drug, “Phil’s a face guy. He doesn’t do meetings over the phone. which had initially been combined It’s part of his calculus to get a gut feeling about people.” with a cough suppressant, into an asthma-only remedy with a controlled release, Key’s Theo-Dur became the was being demolished in the mid-1980s. Just outside Frost’s nation’s best seller. Key followed up with the ﬁrst nitroglyceroffice is a glass-enclosed “atrium,” where he lunches daily in slow-release patch remedy (Nitro-Dur), used to treat heart with senior executives, including Dr. Jane Hsiao, a brilliant disease, also a big hit. Ultimately Schering-Plough purchased Key Pharmaceuticals in 1986 for $836 million. By then Jaharis chemist with an M.B.A., whose late husband, Charles, cofounded Ivax with Frost. Hsiao is a vice chairman of Opko and and Frost were on The Forbes 400. Frost, age 50, had a net ranks 46th on the Forbes list of Self-Made Women, with a net worth of at least $150 million ($330 million in current dollars) worth of $320 million. Another regular lunch mate is Steven and was Schering’s largest individual shareholder. Rubin, a former mergers-and-acquisitions lawyer who joined But instead of retiring to collect dividends, Frost blazed Frost in 1986 after Frost sold Key and started Ivax. Rubin is a trail in the nascent generic-drug business with another Frost’s deals guy, sitting on the boards of many of his comcompany he formed, called Ivax. In the early 1990s, when the panies. A newcomer to the inner circle is CFO Adam Logal, low-margin generic-drug business was getting bad press for Opko’s accountant and Frost’s liaison to Wall Street. The conproducts of questionable quality, Frost presciently bought up versation is almost always about deals, which ﬂow into Frost companies and expanded internationally. Again he used connections to get an edge. In 1994, for example, Frost bought one headquarters on a daily basis. Often company executives and others are invited to make presentations. of the Czech Republic’s largest pharmaceutical companies, “Phil is a face guy,” Rubin says. “He doesn’t do [meetings] known as Glaena.
JANUARY 24, 2017 FORBES | 97
FROST over the phone. He’ll be like, ‘I just read you have an idea. Why don’t you come down on Friday and see me?’ I think that’s part of his calculus to get a gut feeling about people.” One of Frost’s CEO’s is Richard Lampen, an ex-banker who worked for Salomon Brothers in the go-go ’80s and now runs regional broker Ladenburg Thalmann on the 12th ﬂoor. In the aftermath of the dot-com bubble in 2001, Frost bought into Ladenburg, then a tired 120-year-old investment bank known mostly for risky small-cap IPOs and cold-calling brokers. Frost has since ﬁnanced its impressive recent growth. In the last ten years revenues have climbed from $30 million to $1.1 billion, and a series of regional brokerage acquisitions has swelled the ﬁrm to 4,000 ﬁnancial advisors with client assets of $130 billion. “Thanks to Phil, we punch way above our weight,” Lampen says. One executive who spends a lot of time at Frost’s staff luncheons these days is Dr. Charles Bishop, the man in charge of Rayaldee, a newly approved drug that boosts vitamin D, which Opko is aiming squarely at a segment of the $12 billion market for treating chronic kidney disease. Opko acquired Bishop’s startup in 2013. Frost had heard about the promising remedy during a casual lunch with a Toronto pharma exec. Hours later Bishop had a voice mail from Frost. “I returned the call immediately,” Bishop recalls. “He says to me, in classic Phil fashion, ‘Can you get to Miami in three hours?’ ” Given that it was nearly Thanksgiving, Bishop persuaded Frost to wait a few days. “We had prepared to give him a full presentation. . . . I came with my slide deck. We got through four slides and Phil says, ‘That’s enough of the slide presentation. Can we talk about a deal?’ ” That sort of impatience is a Frost deal-making hallmark. He had done his homework and had decided that kidney disease was going to be a big business for Opko. Chronic kidney disease afflicts some 25 million people in the United States, including 9 million or so in stages 3 and 4. Opko’s Rayaldee, which analysts forecast could surpass $500 million in sales in the U.S. alone, has the ﬁrst product approved by the FDA to correct vitamin-D insufficiency through a one-a-day capsule with an extended-release formulation. Not all of Frost’s deals have been warmly received on Wall Street. In 2015 Frost announced he would pay $1.47 billion for Bio-Reference Labs, one of the largest full-service clinical laboratories in the U.S., known for its expertise in genomics and genetic sequencing. Opko’s stock plummeted by more than 50% within four months of the announcement and has begun to recover, by about 20%, only in the last few months, with Rayaldee’s launch. One promising Opko diagnostic that will leverage Bio-References network and marketing is Opko’s new 4Kscore blood test, which accurately assesses the risk of prostate cancer for men with elevated PSA (prostate-speciﬁc antigen) readings. Frost says, “If you have an elevated PSA, the tendency was to 98 | FORBES
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be biopsied, a painful procedure associated with infection and bleeding. And of the biopsy results, maybe 60% turn out to be to be negative.” He notes that there are an estimated 30 million PSA tests per year in U.S., and perhaps 25% of the results are elevated. Opko’s 4Kscore test costs $1,900. “I wasn’t a big fan of his purchase of BioReference labs,” money manager Feinberg admits. “But people always doubt Phil because they don’t understand what he is doing. They short his stock, but eventually he makes it work. He doesn’t give up. He has the tenacity and capital.”
avid Gibbes Miller, 23, has never met Phillip or Patricia Frost, but the elderly couple have opened doors for him that he never could have imagined a few years ago. A Tallahassee native, Miller was an Eagle Scout and straight-A student in high school, but his family couldn’t afford to send him to a prestigious private college without incurring signiﬁcant debt, so he took the scholarships he was offered to Florida State University, where he majored in religion with a premed focus. At FSU Miller excelled, graduating summa cum laude in 2015. During his senior year he organized and hosted an undergraduate conference on bioethics at Florida State. Upon graduation Miller was awarded Frost’s version of the Rhodes Scholarship. The program, called Frost Scholars, sends ten public-university students from Florida and four from Israel to Oxford each year to conduct research and earn a master’s degree in a STEM discipline. At Oxford Miller studied medical anthropology with an interest in epidemiology and public health, completing a dissertation in the process. Another Frost Scholar in his cohort was Kaitlin Deutsch, 23, a Gainesville native and graduate of the University of South Florida. Deutsch was recently awarded an NSF Graduate Research Fellowship and is at Cornell getting her Ph.D. in entomology, studying native bees in an effort to boost their ability to pollinate plants. During her year at Oxford, where she earned a master’s in biodiversity, conservation and management, she made an important discovery soon to be submitted to a science journal: The so-called deformed-wing virus, a scourge decimating honey bee colonies, may have jumped species to another pollinator insect, the hoverﬂy. “The [Frost] scholarship set me up in a way that allows me to shoot much higher,” says Miller, who is now a predoctoral fellow at the NIH and will soon apply to top medical schools. Ultimately Miller and Deutsch both hope to return to
The Frosts are on a mission to make Miami a science mecca. Their new Museum of Science will feature a 500,000-gallon aquarium and a planetarium.
Florida. Nothing could make Dr. and Mrs. Frost happier. “We are hoping that everyone is going to come back that graduated from Florida,” says Patricia Frost, a former teacher and current member of the board of governors of Florida’s State University System. “We want to make Miami more of a technological and science center. When we came here, people thought of Miami as anything but that,” Dr. Frost says, noting that the couple’s recent $100 million gift to the University of Miami was made with this in mind. “We feel that it begins with education. We need to start at the top with the universities and even the graduate students. The fastest way to achieve this is to attract a cadre of top-notch scientists, starting with chemistry and molecular biology.” According to Frost, part of that $100 million will go toward developing an institute of chemistry and related sciences. “There will be a new building and new professors,” he says. “We hope all this will encourage new startups.” The Frosts have signed Warren Buffett and Bill Gates’ Giving Pledge, but they are the opposite of so-called “checkbook philanthropists.” In fact, they are so hands-on that they have generally refused to hire consultants even for their world-class art collection, which has included American Abstract Expressionists, French Impressionists
and old masters like the Flemish painter Jean-Baptist de Saive. The couple have endowed the University of Miami’s School of Music and Florida International’s Art Museum, and Mrs. Frost is regularly in touch with their directors, even helping select architects for small remodeling jobs. “We are involved to the nth degree at the new science museum,” says Patricia, referring to the $45 million of the Frost’s generosity that has gone into the construction of Miami’s new 250,000-square-foot Patricia & Phillip Frost Museum of Science. After signiﬁcant delays, the new facility, which has a planetarium and a massive multilevel marine aquarium, will open in March 2017. In the elegant breakfast room of the Frosts’ grand Venetian palazzo built on Miami’s exclusive Star Island using imported Italian limestone, Mrs. Frost serves an assortment of homegrown tropical fruits, such as mamey, dragon fruit, papaya and longan, all freshly picked from their expansive gardens and greenhouse, which include more than 150 varieties of palms that Dr. Frost personally tends to. “The museum will try to emphasize basic science as illustrated by what is happening in this microclimate,” Frost says. “We want the young people to have an experience so that when they walk in they are awestruck. Then, as they spend more time there, it inspires them to work in the sciences.” F JANUARY 24, 2017 FORBES | 99
The Flip Turn By 30 he was the most decorated Olympian of all time. Now he seeks to translate his prodigious accomplishments into an everlasting brand. Can Michael Phelps be like that other Mike? BY MONTE BURKE
100 | FORBES JANUARY 24, 2017
sorships he earned an estimated $7 million a year. Many of the companies are longtime partners and plan to stay that way. “We hope he’s with us forever,” says Kevin Plank, CEO of Under Armour, which signed Phelps in 2010. But Phelps is not content simply to be the face of someone else’s brand. In 2013 he left his longtime sponsor Speedo, and the following year he started a swimwear line called MP. He found a partner in Aqua Sphere, a swimwear and swimming accessories company, which now sells Phelps-branded suits that range from $40 to $475. “I’d like to someday have the biggest and best brand in swimming,” he says. His business role model is, of course,
Making a splash: In addition to his MP line, Phelps has a program to teach children how to swim. “The goal,” he says, “is to get every kid in the world water-safe.” COTTON POLO BY VERSACE ($275), 5-POCKET BLUE JEANS BY PAL ZILERI ($295) AND SEAMASTER AQUA TERRA 150M CO-AXIAL GMT CHRONOGRAPH 44MM ROSE GOLD TIMEPIECE BY OMEGA ($46,300).
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ichael Phelps is sprawled on a couch in a Lower Manhattan hotel, sporting a beard, a gray beanie cap, a white T-shirt and Under Armour sweatpants and sneakers, an athlete in repose. He’s in New York to accept yet another lifetime achievement award for his triumphs in ﬁve Olympic Games, another chance for him and others to revel in his past glories. What Phelps wants to talk about now, however, is the future. “I’ve spent decades staring at that black line at the bottom of a pool,” he says. “I’m ready to do something new. I’m ready to channel my competitiveness into something else.” Phelps, 31, is four months removed from what he swears was his last Olympics. The second phase of his life has begun, he says, and it has two main parts: He wants to create a brand that burns brightly for decades to come, but he also wants to become a global champion for the causes that mean the most to him—swimming and the wellbeing of children. On the brand side Phelps is, of course, well established as a corporate pitchman. Under Armour, Omega, Intel, Activision and Beats by Dre are among his well-known sponsors. (Some of the lesser known: Master Spas, Krave and Sina Sports.) At the height of these spon-
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FORBES LIFE Michael Jordan, whose Nike Inc. Jordan Brand sold $2.8 billion worth of shoes and apparel last year. Swimming obviously isn’t as merchandisable as basketball, but Plank says Phelps’ ambitions shouldn’t be dismissed: “Michael has that special trait, the ability to be clutch and win when it counts, which he demonstrated over and over at the Olympics. I think he can be the king of all things water.” Phelps’ other main post-Olympics goal involves his foundation, which he started in 2008 with the $1 million bonus he earned from Speedo for his record-breaking eight gold medals in Beijing. His biggest initiative is the im program (“im” for “individual medley,” one of his strongest events, and for the affirmation “I am”). The program focuses on making children “water-safe.” (Drowning is the leading cause of injury-related deaths for kids ages 1 to 14 in the U.S. and the third leading cause worldwide.) Phelps’ mother made him take a water-safety course when he was a boy, and he says that’s the reason he became a competitive swimmer. The im program has 104 teams in all 50 U.S. states and another 176 in 33 other countries, and through it 16,000 kids have learned how to swim (for three-quarters of them, the program was their first time in a pool). “I’d like for that number to be 50,000 someday soon and then 100,000,” Phelps says. “The goal is to get every kid in the world water-safe.” To accomplish these dreams, Phelps will need to become a lasting global icon, no easy task for even the most successful Olympians. Jesse Owens, in the end, was more a powerful symbol than a brand. Muhammad Ali’s boxing career spanned two full decades after his Olympic gold in 1960. And Caitlyn Jenner remains famous four decades after decathlon heroics in Montreal but for reasons no one could have foreseen in 1976. Yet Phelps was no ordinary Olympian. He began as a 15-year-old prodigy in the 2000 Games and provided a glimpse of the greatness to come in the 2004 Athens Games. Then came the triumph in Beijing in 2008 and the weary wins in London in 2012, followed by the drinking and depression and the
stint in rehab. All of which culminated in the redemption in Rio in 2016. In the end Phelps had won an Olympic record 28 medals, all but 5 of which were gold. That level of longevity and excellence in the Olympics has given Phelps the kind of global proﬁle most American athletes lack. And with his longtime agent, Peter Carlisle, Phelps has been laying the groundwork for a global presence since the beginning of his career. He started visiting China and making deals there ﬁve years before the 2008 Games (the Chinese call him the Flying Fish). Phelps and Carlisle used the same playbook for Rio—he made four pre-Olympics visits to Brazil and has since signed a deal with the Brazilian media giant Grupo Globo. And he will soon embark on a tour of Vietnam, Ethiopia, South Africa and Latin America. Phelps, of course, has been through this before, when he retired for the ﬁrst time after the 2012 Games. “This time is different,” he says. “Back then I just wanted to dig the deepest black hole and be left alone.” Now “life is so different and so much better. I have Boomer [his 8-month-old son] and Nicole [his wife]. I have other things to worry about than just myself.” Phelps says he travels three weeks out of every month, and at meetings he doesn’t just show up for the grip-and-grin but really dives in. “I’m actually sitting at the table now during the discussions, asking questions,” he says. “Some of this is self-reinforcing. I want to be out there now. If I isolate myself as I’ve done before, I know the road I’ll go down, and I know it won’t be pretty.” A question remains: Is he really done competing? “Yes, deﬁnitely,” he says, while admitting that he said the same thing in 2012. The 2020 Olympics is out of the question, but Carlisle has been ﬂoating an intriguing scenario regarding the 2024 Games. “I think Michael is 100% sure he’s done right now,” he says. “But what if the 2024 Games are awarded to Los Angeles? And what if there was a spot open on a relay team?” Carlisle leaves the thought there, as any good agent would. Phelps just smiles when this idea is brought up. “I’m happy now,” he says. “And I’m excited for what’s ahead of me.”
“If your ship doesn’t come in, swim out to it.” —JONATHAN WINTERS 102 | FORBES JANUARY 24, 2017
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Tomorrow “THE PAST IS ALWAYS TENSE, THE FUTURE PERFECT.” —ZADIE SMITH
“We can only see a short distance ahead, but we can see plenty there that needs to be done.”
“The belief that tomorrow is a different place from today is certainly a unique hallmark of our species.” —DOUGLAS COUPLAND
“I’VE SEEN THE FUTURE, AND IT’S MUCH LIKE THE PRESENT—ONLY LONGER.” —DAN QUISENBERRY
“EVERY AGE HAS A KEYHOLE TO WHICH ITS EYE IS PASTED.” —MARY MCCARTHY
“Always remember that the future comes one day at a time.” —DEAN ACHESON
“AFTER ALL, TOMORROW IS ANOTHER DAY.”
“Someday we will try / To do as many things as are possible.”
“Yesterday is but today’s memory, and tomorrow is today’s dream.” —KAHLIL GIBRAN
“Ah! The clock is always slow. It is later than you think.”
“Often do the spirits / Of great events stride On before the events / And in today already walks tomorrow.” —SAMUEL TAYLOR COLERIDGE
—ROBERT W. SERVICE
“I think it has something to do with tomorrow: that there always is one, and that everything can change when it comes.”
“THEREFORE DO NOT WORRY ABOUT TOMORROW, FOR TOMORROW WILL WORRY ABOUT ITSELF.”
“Let us look forward, and let us go forward with confident, unhesitating tread.”
SOURCES: SKETCHES FROM LIFE, BY DEAN ACHESON; DEATH OF WALLENSTEIN, BY SAMUEL COLERIDGE TAYLOR; GONE WITH THE WIND, BY MARGARET MITCHELL; IT IS LATER THAN YOU THINK, BY ROBERT W. SERVICE; THE PROPHET, BY KAHLIL GIBRAN; MICROSERFS, BY DOUGLAS COUPLAND; THE TIMES BOOK OF QUOTATIONS; SELF-PORTRAIT IN A CONVEX MIRROR, BY JOHN ASHBERY; RUNNING WITH SCISSORS, BY AUGUSTEN BURROUGHS. 112 | FORBES JANUARY 24, 2017
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