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2 | FORBES JUNE 16, 2014
CONTENTS — JUNE 16, 2014 VOLUME 193 NUMBER 8
64 | MS. FIX-IT
Mary Barra just became
the most powerful woman
in corporate America.
First order of business:
Refurbish General Motors.
11 | FACT & COMMENT
BY STEVE FORBES
Sino-Russian gas pact! Yawn.
LEADERBOARD
14 | MICHAEL’S IMMORTAL
MONEY MACHINE
The King of Pop can’t be stopped. A third of his
$2.8 billion career earnings have come in the five
years since his death.
16 | SUMMER READS
Too persnickety for Thomas Piketty?
Brave enough to read The Confidence Code?
20 | TELL US EVERYTHING:
JESSICA SIMPSON
22 | BIZ QUIZ
Can you ace our plutocrat photo puzzle?
24 | EYE-POPPING POPEYES
Steve Wynn’s $28 million Popeye isn’t the most
expensive art world Gazookus.
24 | THE $4.8 BILLION BREAKUP
Elena Rybolovleva was just awarded the largest
divorce settlement in history. But can she collect?
26 | ACTIVE CONVERSATION:
CAN NOVARTIS KILL CANCER?
THOUGHT LEADERS
28 | THE APOTHECARY
BY JONATHAN BUSH
Health care reform: Disruptors need not apply.
30 | INNOVATION RULES
BY RICH KARLGAARD
Buys and sells: if colleges were stocks.
STRATEGIES
32 | COAL CASE
Share prices have plunged as draconian
regulations and falling natural gas prices cripple
miners. Sounds like a good time to buy.
BY CHRISTOPHER HELMAN
COVER PHOTOGRAPH BY JAMEL TOPPIN FOR FORBES

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4 | FORBES JUNE 16, 2014
CONTENTS — JUNE 16, 2014
38 | MAT IN AMERICA
By wrapping $150 car floor liners in the flag,
WeatherTech’s David MacNeil is creating one
of the world’s more unlikely luxury brands.
BY DALE BUSS
TECHNOLOGY
42 | FIRE-BREATHING CATS
FOR SALE
Young Asians spend millions on cute images
they text one another. Entrepreneurs are
betting the craze won’t get lost in translation
to the West.
BY PARMY OLSON
48 | HWANG’S WORLD
Tim Hwang plants ideas all over the
Internet, even if he has to scam a little
bit to make them stick.
BY KASHMIR HILL
ENTREPRENEURS
50 | BRING YOUR OWN DEVICE
Sunny Bajaj turned the mundane job
of managing a mobile workforce into
a raucous success.
BY ALEXANDER KONRAD
INVESTING
54 | THE LAST LONG BULLS
Are Van Hoisington and Lacy Hunt just
stubborn? Or do they know something all
the other fixed-income pros don’t about
30-year Treasurys?
BY DANIEL FISHER
58 | FIXED-INCOME WATCH
BY RICHARD LEHMANN
Income without growth.
60 | INTRINSIC VALUE
BY JOHN BUCKINGHAM
Priced for imperfection.
62 | THE CONTRARIAN
BY DAVID DREMAN
Double your money in an index fund.
THE WORLD’S MOST
POWERFUL WOMEN
64 | POWER SHIFT
Mary Barra made history by working her way
into Detroit’s car-guy club and becoming the
first female CEO of General Motors. Now can
she fix the company?
Plus: The World’s Most Powerful Women
BY JOANN MULLER
76 | GEEK CHIC
These six e-tailer entrepreneurs ofer
a stylish retort to the oft-heard lament:
“Where are all the women in tech?”
BY CAROLINE HOWARD
42 | CUTE ATTACKS!
Jeanie Han hopes your kids
will start blowing their cash on
imported digital doodads.
14 | EARNINGS
FROM THE CRYPT
Death becomes him.
38 | HEARTLAND HERO
David MacNeil believes
in clean car floors and
homegrown jobs.
50 | DMI’S SUNNY BAJAJ
“I’ve drunk tequila
with Samsung, with
Good Technology.
You can be serious
but have a little fun.”

I
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Platform
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Social
The cloud that is
helping cure cancer.
Research that once took years now happens in hours. Using
Microsoft Azure and HDInsight, scientists and engineers at Virginia Tech
harness supercomputing power to analyze vast amounts of DNA
sequencing information and help deliver lifesaving treatments.
Now the next big breakthrough might not be found in a test tube,
but in big data.
This cloud makes data make a difference. This is the Microsoft Cloud.
learn more at microsoftcloud.com

6 | FORBES JUNE 16, 2014
CONTENTS — JUNE 16, 2014
100 | BANKING FOR
DUMMIES
Brian Moynihan’s strategy
for Bank of America: Keep
it simple.
108 | HOT MUKUL
Nicaragua’s first ultraluxury
resort boasts a private beach club, a
walk-in humidor and a David McLay
Kidd golf course.
96 | SLIM CHANCE
Fitness franchise Curves
needs all the help it can get.
84 | NEXT-GEN CIGARETTE
PMI’s André Calantzopoulos
has a new smoke to sell.
FEATURES
84 | THE FUTURE OF SMOKING
Philip Morris International is quietly
developing a new cigarette that could replicate
the traditional smoking experience, while
killing fewer customers.
BY DANIEL FISHER
100 | UTILITY PLAYER
Other than cutting costs and strengthening
capital, Brian Moynihan has no grand plans for
Bank of America. Amen to that.
BY HALAH TOURYALAI
FRANCHISE
SCORECARD
92 | HOUSE CALLS
As more of the population ages and tries to
avoid nursing homes and hospitals,
fast-growing Right at Home ofers help
with basic chores or medical care.
Plus: America’s best and worst franchises.
BY CAROL TICE
96 | CRASH DIET
Once the largest fitness franchise,
Curves has been shedding thousands of units
and enraging many franchisees.
Can the new owners turn it around?
BY KARSTEN STRAUSS
LIFE
108 | NEXT STOP, NICARAGUA
Will sophisticated travelers make it the next
elite destination?
BY ANN ABEL
112 | THOUGHTS
On women.

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8 | FORBES JUNE 16, 2014
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JUNE 16, 2014 — VOLUME 193 NUMBER 8
Smart Moves
On Smartphones
BY LEWIS D’VORKIN
I got a digital wake-up call a few weeks ago when my
obsession with data turned to mobile trafc. In April we
had the same number of readers visit our home page via
smartphone as we did the desktop. The same was pretty
much true for our popular Billionaires list. Briefly, we even
crossed the newest digital divide. During the first weekend
of May 51% of visits were mobile—39% smartphone, 11.5%
tablet. What’s it all mean? Making money in the media
business increasingly means finding ways to tap consumer
interest in online streams.
I’ve been focused on the flow of content for some time,
at my startup and now FORBES. I’ve watched readers
move across our magazine, its app and Forbes.com via
desktop, tablet and now smartphones. I see the flow—
mainly on phones—as a new opportunity to serve both
consumers and marketers. If done right, editorial, native
ads, marketing messages and promotions can live together,
even serve one another, all within the flow.
In some ways Facebook and Twitter paved the way.
They buried the adage ad agencies recited like lemmings:
Readers don’t scroll. The trick for news outlets is to con-
struct a mobile flow that appeals to visitors but also sup-
ports video, sponsorships, interstitials, galleries and more.
It takes the right publishing tools, collaboration with the
sales and marketing teams, and integration with an ad
server. Maybe most challenging: getting editors to think
like marketers of content, not simply creators.
The task fits nicely with the newest trend. Text-based
social feeds, a popular kind of flow, are becoming more
visual (think Facebook’s Paper app and TwitPics). We laid
the groundwork with headline text modules within mobile
streams. In the last months we’ve supplemented these
headlines with visual modules promoting our ebooks.
Smartphones present news organizations with interlock-
ing challenges. On computer ad exchanges, mobile rates go
for less than $1 CPM. Desktop rates are $3. Each is a far cry
from premium digital ads sold by humans—$15 to $30 on
desktops—and $40 to $50 for print ads. That means the cost
of quality content in the flow must come down.
Print to digital. Narrowband to broadband. Desktop
to mobile. Journalists need to pay attention to the smart-
phone flow. It might help save their jobs—maybe even jolt
their metastasized culture into change. F

Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company, Milwaukee, WI (NM) and its subsidiaries. Securities ofered through Northwestern Mutual
Investment Services, LLC, broker-dealer, registered investment adviser, subsidiary of NM, member FINRA and SIPC. NCAA is a trademark of the National Collegiate Athletic Association.
Follow financial principles, not fads or trends.
Create your financial plan with a Northwestern Mutual
Financial Advisor. Together, we’ll design a disciplined and
balanced approach to protecting, accumulating and managing
your wealth, so you can take advantage of life’s opportunities.
Who’s helping you build your financial future?
northwesternmutual.com

Together, we’ll create a
blueprint to guide your financial life.
Get the guidance you need to navigate the financial world.
At Northwestern Mutual, we take a disciplined and balanced
approach to financial planning. Together, we’ll help build your
financial future on time-tested principles, not market trends.
Who’s helping you build your financial future?
Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company, Milwaukee, WI (NM) and its subsidiaries. NCAA is a trademark of the National
Collegiate Athletic Association.
northwesternmutual.com

JUNE 16, 2014 FORBES | 11
FACT & COMMENT — STEVE FORBES
FORBES
SINO-RUSSIAN GAS PACT!
YAWN
BY STEVE FORBES, EDITOR-IN-CHIEF
“With all thy getting, get understanding”
weakened themselves with idiotic
economic policies of excessive
taxation, unstable money, stifling
regulations and bloated public sec-
tors. The U.S. will deal with those
artificial obstacles decisively after
the 2016 elections. The 2014 mid-
term elections will start the process
of regeneration. Europe, or at least
parts of it, will reluctantly follow
suit, just as it did in the 1980s, after
Ronald Reagan slashed taxes, con-
quered inflation and pushed deregulation.
As for China’s obsession with securing natu-
ral resources, its ofcials should read Adam
Smith to understand that trade is the source of
wealth. A large, fast-growing economy, barring
times of war, guarantees that resource compa-
nies will beat a path to your door to sell their
wares. They want your money.
AFTER A DECADE of negotia-
tions Russia and China announced
a 30-year, $400 billion natural gas
deal. Vladimir Putin is portraying
the agreement as another brilliant
coup: Russia gets a large, long-term
customer and demonstrates that,
despite its aggression against Ukraine,
it’s not only not isolated diplomati-
cally but also has a new and powerful
strategic ally, which has the second-
largest economy in the world.
Save all the breathless hype. Putin is natu-
rally spinning the pact as an “epochal event,”
but in truth it’s really no big deal. Divide that
$400 billion by 30 years and you get an annual
average of $13 billion. The size of the global
economy today is almost $80 trillion. Seen in
that context the contract rates barely a foot-
note. AT&T’s proposed acquisition of DirecTV
merits more attention.
Strategic alliance? The deal with China un-
derscores Russia’s core weakness. Despite its
immense resources and highly educated popu-
lation, which includes a considerable num-
ber of capable scientists and mathematicians,
Russia has a shockingly small economy that is
amazingly dependent on the export of oil, gas
and a few other natural resources.
This state of afairs is testimony to bad gov-
ernance. In our high-tech era Russia should be
a powerhouse instead of a cipher. The country
can cause considerable mischief, but if the EU
and the U.S. ever get their economic, military
and diplomatic acts together, they’ll easily be
able to checkmate Moscow. Russia’s neighbors
are all too aware that alignment with Putin
means stagnation and oppression.
The U.S. and Europe have gratuitously
An unheralded hero in the fight against Soviet
communism during the Cold War, Ken Tomlinson
died on May 1, at age 69, from cancer. Ken played
critical roles in two underappreciated organiza-
tions, Voice of America and Radio Free Europe/
Radio Liberty, that were crucial in undermining
what Ronald Reagan rightly called the Evil Empire.
Totalitarian regimes like the Soviet Union and
Maoist China need to have a monopoly on infor-
mation to maintain absolute control. If people
have no way of getting the truth and are denied
accurate news about the world and what’s hap-
pening in their own country, efective opposi-
tion becomes well nigh impossible.
That’s why Moscow regarded VOA and RFE/
Good Man Gone

12 | FORBES JUNE 16, 2014
FORBES
FACT & COMMENT — STEVE FORBES
G
L
E
N

D
A
V
I
S
RL as lethal foes. They provided a
critical lifeline of information to the
people of the Soviet Union and the
puppet regimes in Eastern Europe.
The Soviet government spent consid-
erable resources jamming these radio
broadcasts and engaged in major pro-
paganda eforts to undermine support
for them in the West. It understood
that the battle of ideas is fought each
and every day and that communism
couldn’t survive such a confrontation.
Amazingly, most diplomats, for-
eign policy gurus and politicians
grossly underestimated the impact
the allegedly “soft power” of
radio broadcasting had in bat-
tling the U.S.S.R.
One notable exception was
a former radio broadcaster,
Ronald Reagan. When he be-
came President, Reagan moved
to beef up and revitalize these
neglected, rundown and—in
the halls of Congress—politi-
cally unpopular institutions.
To this end, he persuaded Ken
Tomlinson, a superb journalist rap-
idly ascending the editorial ladder
at Reader’s Digest, to head the VOA.
Ken did so for two years, achieving
great success in updating equipment
and improving programming. The
Soviets were not pleased.
Not long after Ken returned to the
Digest, Reagan prevailed upon him to
join the Board for International Broad-
casting (BIB), the oversight agency for
RFE/RL. Moscow hated these entities
even more than it did the VOA because
they were “surrogate” broadcasters,
i.e., the programs were tailored to
each country, as if they were broad-
cast from inside the borders.
I was privileged to chair the BIB
at this time, which is how I came to
know Ken well. RFE/RL were under
constant attack from the American
and European left, as well as from
the U.S. State Department, which
continuously tried to sabotage our
budgets and our mission. Ken was
absolutely critical to fending of
these attacks and, indeed, to going on
the political ofense. He had superb
political instincts and a keen sense of
how to fight the endless bureaucratic
battles with State and other govern-
ment agencies. He also possessed
practiced insights in dealing with the
eye-rolling challenges, especially per-
sonnel issues, of managing the Radios
themselves. He was fun to work with:
Like Reagan, he had an ample store of
good political stories and anecdotes.
Ken’s tireless eforts during these
years, along with those of others,
were not for naught. In 1989 the Evil
Empire collapsed, and in 1991 the
Soviet Union itself broke up into 15
diferent countries (which Putin is
now working to reunite). The unrav-
eling started in Poland, thanks to the
brave work of Solidarity, which was
led by a shipyard worker named Lech
Walesa. When asked what role Radio
Free Europe had played in these ex-
traordinary events, Walesa answered
with a question: “What is the Earth
without the Sun?”
Ken left the BIB in 1994, but Presi-
dent Bill Clinton brought him back
into public service in 2000, naming
him to the board of the Corporation
for Public Broadcasting.
All of the U.S. government’s overseas
broadcasting eforts had been united
into a single agency, the Broadcasting
Board of Governors. In 2002 President
George W. Bush named Ken chairman, a
position he held into 2007. Despite scant
political help, Ken started a TV broad-
casting station aimed at the Middle East.
He also managed to add more broad-
casting to Iran and other trouble spots in
the region. But Washington’s obtuseness
over the importance of these eforts was
pervasive, as it always has been. If Ken
had had czar-like powers he would have
accomplished much more—and civili-
zation today would be a lot safer. As it
is, the Iranian popular uprising in 2009,
which could have grown into a Solidari-
ty-like movement had Obama not made
clear he didn’t want that to happen, had
some of its roots in the work Ken did.
In 2003 Ken was elected chairman
of the board of the Corporation for
Public Broadcasting, which oversees
the money Washington spends
on public television and radio.
Ken courageously attempted to
introduce some political balance
into the programming and ran
into vicious opposition. He was
hit with numerous—and base-
less—attacks on his policies and
his integrity. Shamefully, neither
the White House nor congres-
sional Republicans efectively
covered his back politically dur-
ing these fights.
Ken was a constant friend. When
I sought the presidency in 1996, he
and his beautiful and gracious wife,
Rebecca, were unstinting in their ef-
forts to help out.
Ken’s life is an inspiring model for
young people. He was hardworking
and ambitious (his father died at a
young age, and Ken knew he’d have to
make it on his own), courageous (he
never shirked a battle because of the
odds), principled (his love of country
and the values that make it great were
unshakably deep), tenacious (when
hit with a setback, he never stayed
down), shrewd (he had good tactical
sense when pursuing a goal or fight-
ing a political battle, knowing when
to be indirect and when to make a
frontal assault), religious (his moral
compass never wavered), devoted
to family (Will and Lucas reflect the
superparenting skills of Ken and
Rebecca) and, best of all—well, not
quite—a lover of baseball.
Ken and SF with Poland’s president Lech Walesa.
F

PROMOTION
Inspire Change
By Thinking
Like an Entrepreneur
A
fter attending the Forbes Women’s
Summit: Power Redefned in
New York, I’ve returned to my
offce energized and inspired. It was an
honor to share ideas with some of the
most savvy, forward-thinking women
in leadership today.
During the summit, it was my pleasure
to present the frst Northwestern Mutual
Excellence in Entrepreneurship award to
Ingrid Vanderveldt. A lifelong entrepreneur,
Ingrid is the frst ever Entrepreneur-
in-Residence at Dell Inc., where she
oversees Dell’s entrepreneurial initiatives
globally, including the Dell Center for
Entrepreneurs and the $130 million Dell
Innovators Credit Fund, which she created.
Her vision is to empower a billion women
by 2020. That effort includes giving them
tools; she envisions a world where every
woman has a mobile device. It also
includes giving them knowledge. Ingrid
works to facilitate opportunities for
girls and women for learning, growth
and entrepreneurship.
I believe that each of us—in our own
way and in our own world—can effect
positive change by embracing the kind
of entrepreneurial spirit Ingrid demon-
strates. At Northwestern Mutual, we
encourage employees to act like owners.
We embrace change, celebrate our
successes and promote experimenta-
tion. Whether you own a small business
or work for a large company, a key
component of success is to think like
an entrepreneur by applying new and
creative thinking to solve problems.
I love Ingrid’s story because it shows
the signifcant impact we can have when
we embrace our power and help those
around us do the same. Women in lead-
ership roles can be uncomfortable with
power, and may resist using the power
of their position for fear that others
will view them as autocratic or bossy.
I studied this topic for my doctoral dis-
sertation, and came to realize that the
appropriate use of power—including the
power afforded by leadership positions
like mine and Ingrid’s—is essential for
success. Ideally, people will follow your
lead not only because of your position,
but also because they respect you and
feel empowered to carry out your vision.
There’s much we can learn from Ingrid
Vanderveldt, whether we’re leading a
team of thousands or a household of
four. To be successful, you have to think
like an entrepreneur. Decide what’s
important and fnd a way to make it hap-
pen. Lift the limitations you may have
imposed on yourself. Welcome new
approaches and ideas. And, perhaps
most important, don’t be afraid to use
power—and to empower others—to
make your world a better place.
Ingrid Vanderveldt, Entrepreneur-
in-Residence, Dell Inc., winner of
the Northwestern Mutual Excellence
in Entrepreneurship Award
“ Don’t be afraid to
use power—and to
empower others—
to make your world
a better place.”
JOANN M. EISENHART, PH.D.
Senior Vice President, Human
Resources, Facilities and
Philanthropy, Northwestern Mutual
Learn more about leadership develop-
ment and thinking like an entrepreneur
at northwesternmutual.com/inspire360
BY JOANN M. EISENHART, PH.D.
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NORTHWESTERN MUTUAL PRESENTS INSPIRING LEADERS

14 | FORBES JUNE 16, 2014
LEADERBOARD
KEEPING SCORE ON WEALTH & POWER
1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
0
50
100
150
200
250
$300
The King of Pop’s posthumous
album Xscape sold 157,000
U.S. copies in its opening week.
Not bad, but it’s barely a blip
in his $2.8 billion infation-
adjusted career earnings, one-
third of which has come in the
fve years since his death.
DEAD CELEBRITIES
1988 EARNINGS
ANNUAL EARNINGS ($MIL)
1
MICHAEL’S
IMMORTAL
MONEY
MACHINE
$247,000,000
1
1979 Jackson’s first solo
efort, Of the Wall, sells
7 million copies in the U.S. by
1982—at the time, the most
ever by an African-American
artist.
1983 There were
9.1 million cars sold in
America in 1983—and
more than 10 MILLION
copies of Thriller.
The album has sold an
estimated 100 MILLION
copies worldwide since
its release.
1989 The Bad Tour grosses $125 MILLION on sales of
4.4 MILLION tickets. If he had gotten the $220 per head
Jay Z and Beyoncé are charging for their upcoming
summer concerts, Jackson would have grossed
$942 MILLION, more than any tour in history.
1985 Jackson buys the Beatles’ publishing catalog for
$47.5 MILLION. His investment is now worth about
$1 BILLION—more than twice what he would have made if
he’d bought General Electric stock instead.
1988 Jackson purchases Neverland
ranch for $17.5 MILLION; insiders
say it could now fetch $100
MILLION on the open market, nearly
twice what David Gefen paid for his
new Hamptons mansion.
1984 After his hair catches fire during a Pepsi commercial
shoot, he parlays the cola company’s lawsuit fears into a
$5.2 MILLION endorsement deal plus $1.5 MILLION to
establish the Michael Jackson Burn Unit in Los Angeles.
1
Career earnings adjusted for inflation;
other figures in nominal dollars.

JUNE 16, 2014 FORBES | 15
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
TOTAL EARNINGS OVER CAREER
$2,800,000,000
1
1993 The ultimate
showman stands still for
72 SECONDS at the start
of his Super Bowl XXVII
halftime gig. That’s more
than $8 MILLION of silence,
judging by recent ad rates.
2001 Jackson’s last studio
album, Invincible, costs as
much as $40 MILLION to
record, more than the current
GDP of island nation Tuvalu.
2009 Jackson dies on June 25, dramatically boosting his
popularity. By the end of the year 8.3 MILLION of his albums
are sold in the U.S., more than any artist and nearly twice as
many as runner-up Taylor Swift.
1995 Receives a $115 MILLION advance payment for
merging his ATV publishing catalog, which contains the
bulk of the Beatles’ biggest hits, with Sony’s catalog.
The deal represents a fivefold increase in value over
Jackson’s purchase price a decade earlier.
1993 Thirteen-year-old Jordan Chandler
accuses Jackson of molestation and
eventually settles out of court for $20
MILLION; the collateral damage to the
Dangerous Tour proves equally costly.
1994 Jackson marries Lisa
Marie Presley in a secret
ceremony; the duo divorce
two years later. Jackson
consistently outearns her
father from beyond the grave.
Based on research
from senior editor
Zack O’Malley
Greenburg’s Michael
Jackson, Inc., which
was published by
Simon & Schuster/
Atria on June 3.
2014 Five years after his
death Jackson dances to life
as a hologram at the Billboard
Music Awards, boosting his
“new” album, Xscape, to
number two on the charts.
2010 Jackson’s estate
releases posthumous album
Michael after signing a new,
ten-year $250 MILLION deal
with Sony— the biggest pact
in music history.
2013 The King of Pop easily
outearns Madonna, the world’s
highest-paid living musician,
thanks in part to Cirque du
Soleil’s shows One and Immortal.
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1990 LA Gear signs Jackson
to a sneaker deal worth
$20 MILLION —$2 million
more than Nike’s initial
payment to Michael Jordan.

LEADERBOARD
16 | FORBES JUNE 16, 2014
1
Sales rank of Thomas Piketty’s
Capital in the Twenty-First Century among all books
ever published by Harvard University Press. 
FLOW CHART
WHICH BUSINESS BOOK
SHOULD YOU READ THIS SUMMER?
Too persnickety for Thomas
Piketty? Brave enough to read The
Confdence Code? Or should you
just chill out with Stress Test?
Are you a
capitalist?
Are you
reasonable?
The Divide
by Matt Taibbi
Thrive
by Arianna
Huf ngton
Lean In
by Sheryl
Sandberg
The Confidence
Code
by Katty Kay
and Claire
Shipman
Think Like a Freak
by Steven D. Levitt and
Stephen J. Dubner
David and Goliath
by Malcolm Gladwell
Flash Boys
by Michael Lewis
The Wolf of
Wall Street
by Jordan
Belfort
Capital in the Twenty-
First Century
by Thomas Piketty
Creativity, Inc.
by Ed Catmull
Stress Test
by Timothy
Geithner
Do you like
books by
former traders?
Hell
no!
Sure
Female
Male
Left In I’m not sure.
Totally!
Hmm
Not
really
Yes
Yes
Yes
Yes
Oui!
What else do
you have?
Which way do
you lean?
Do you like the
French?
Economists
Is financial
inequality a
good thing?
Big Thinkers
Not so much
Are you
a freak?
If by “freak” you
mean that I’m
obsessed with Karl
Marx, then yes.
With big
hair?
Likable ones?
Obviously
No
No
Nah
Non
May we suggest
Mother Jones?
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18 | FORBES JUNE 16, 2014
LEADERBOARD
Mukesh
Ambani
+$3.2 BILLION
NET WORTH:
$25.5 BILLION
No one makes more from
the election of business-
friendly Prime Minister
Narendra Modi than oil
tycoon Mukesh Ambani,
India’s richest man.
Jimmy
Iovine
+$170 MILLION
NET WORTH:
$970 MILLION
Apple’s likely $3.2 billion
buyout of Beats looks
certain to boost the value
of the stakes of record
executive Iovine and his
rapper cofounder, Dr. Dre.
Rupert
Murdoch
+$600 MILLION
NET WORTH:
$13.9 BILLION
The NFL charges Fox
about $1 billion annually
to broadcast games, but
Murdoch’s Fox Network’s
quarterly revenue is up 12%
thanks to the Super Bowl.
Evan
Williams
–$400 MILLION
NET WORTH:
$2.1 BILLION
Twitter announces it is still
not turning a profit, and
the free fall continues for
cofounder Evan Williams,
who has lost $1.8 billion this
year, nearly half his fortune.
Elon
Musk
–$460 MILLION
NET WORTH:
$7.9 BILLION
Tesla is burning cash
building a $5 billion
battery factory, expanding
production to China and
designing a minivan that
goes sports-car speed.
Darrell
Cavens
–$170 MILLION
NET WORTH:
$750 MILLION
Shares of online retailer
Zulily soared in February,
but the CEO’s 40-day stint
as a billionaire ended after
the company announced a
quarterly loss.
WINNERS
LOSERS
SCORECARD
S
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FIGURES REFLECT THE CHANGE IN VALUE OF PUBLICLY TRADED HOLDINGS FROM APR. 30 TO MAY 20.
SOURCES: INTERACTIVE DATA VIA FACTSET RESEARCH SYSTEMS; FORBES.
$50
Maximum amount of cash most Americans regularly
carry in their wallet, according to Bankrate.com.
FOLLOW-THROUGH
ON THE MAT
SINCE OUR feature
story on the WWE’s
Vince McMahon
came out he has lost
more than $750
million, including a
pile-driving
$350 million in one day as shares in his
WWE took a beating in the wake of a TV
deal WWE had signed with NBCUniversal.
That brutal day in May knocked McMahon
out of the billionaire ranks. WWE’s shares
were up 89% in the first three months of
2014, and McMahon’s net worth peaked in
mid-March at $1.6 billion.
POCKET CHANGE
How much cash is usually
in your wallet?
ASK 50 BILLIONAIRES
Less than $20 2.2%
Less than $100 8.9%
Around $100 13.3%
Around $500 40%
Around $1,000 26.7%
Around $5,000 4.4%
More than $5,000 4.4%

World’s Most Ethical Companies, Ethisphere Magazine, Quarter 1, 2014. From FORTUNE Magazine, February 3, 2014 & February 27, 2014 © 2014 Time Inc. FORTUNE 100
Best Companies to Work For and World’s Most Admired Companies are registered trademarks of Time Inc. and are used under license. FORTUNE and Time Inc. are not
affiliated with, and do not endorse products or services of, Aflac. Aflac’s family of insurers includes American Family Life Assurance Company of Columbus, American Family Life
Assurance Company of New York, Continental American Insurance Company and Continental American Life Insurance Company.
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do, and it feels good to be recognized for just
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Learn more at afac.com/business

LEADERBOARD
$188
The most expensive item of clothing in
Macy’s Jessica Simpson Collection—a
sleeveless Sequin Panel Sheath dress. 
20 | FORBES JUNE 16, 2014
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REAL ESTATE
TELL US EVERYTHING
JESSICA SIMPSON
She sold $1 billion worth of Jessica Simpson Collection
shoes, sunglasses and dresses last year. We polled our
followers on social media for questions to ask the pop star
turned retail mogul.
FACEBOOK / KRISTI MARCY
How do you handle bad business decisions?
Being in the public eye for so long, I’ve made a ton of mistakes. And
everybody knows about them. But I don’t look at my mistakes as any
sort of failure but as a lesson to be learned.
TWITTER / @TREYSTAFFORDYPR:
What drove you toward entrepreneurship?
My business is the heart of who I am. I want to make every woman
feel confident in what she’s wearing and in her shoes. And, I mean, I
have been every size on the planet. I understand women and I know
how to dress them.
TUMBLR / @BRAVEGIRL18
Is your celebrity your biggest selling point?
My brand has surpassed my name and my celebrity. I want every
woman to feel comfortable and trust what she’s buying. She knows
when she buys a Jessica Simpson shoe that she’s going to be able
to dance all night long. We try to stick with trends that we think will
last throughout the years. We don’t want to be too fashion-forward.
If we’re relatable, accessible and afordable, who needs a trend?
O
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HIGH-END HOUSING didn’t
crash as hard as the low-end stuf,
and now it’s roaring back—at least
on the gold coasts of California and
Florida. Less zippy: luxe homes in
the Northeast and Northwest. The
map at right shows the increase in
sales prices for the top third of the
residential real estate market from
the bottom in November 2011 to
March of this year for America’s
500 largest metros.
HOME EQUITY
BOMB SHELTERS
O INCREASED MORE THAN 15%
O INCREASED 0%–14.9%
O FALLEN 0.1%–17.7%
SOURCE: ZILLOW.

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again redefined the segment. That pioneering spirit is alive and well in the  Sprinter.
Its industry-leading safety features, superior fuel efficiency and extraordinary durability
will change your perception of what a commercial van can do for you—and how far your
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LEADERBOARD
22 | FORBES JUNE 16, 2014
30
Age of Alexander the Great at the peak of his empire’s
size and influence. (He was, however, dead by 32.) 
Jessica Matthews, 26
UNCHARTED PLAY
Kicking around
her $99 Soccket
soccer ball for
30 minutes
creates enough
kinetic energy
to power an
LED lamp for
hours: the
perfect game
for the less de-
veloped world.
Miles Barr, 30
UBIQUITOUS ENERGY
Invented
invisible solar
coating for
screens that
uses the sun to
charge devices.
In the long run
coated windows
could generate
half your home’s
energy. Raised
$7.2 million.
Daniel Maren, Andrew
Ponec, Darren Hau, 20, 21, 20
DRAGONFLY SYSTEMS
Their revamped
junction boxes,
which prevent
waste after the
sun sets, make
solar panels
cheaper to
install and more
ef cient. Poten-
tial industrywide
savings? $3.2
billion a year.
BURNING
BRIGHT
BIZ QUIZ
Electric innovations from
young disruptors, in 30
words or less.
In honor of Mark Zuckerberg’s 30th
birthday we’ve scoured the archives for
images of other billionaires near that
age. Match the plutocrat with the photo.
30 UNDER 30
THE WAY THEY WERE
A 6 ; B 4 ; C 7 ; D 2 ; E 3 ; F 1 ; G 5
1. Steven Spielberg
2. David Gefen
3. Ralph Lauren
4. Rupert Murdoch
5. Oprah Winfrey
6. Warren Bufett
7. Ross Perot
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LEADERBOARD
77
Number of years a large statue of Popeye has
stood in front of City Hall in Crystal City, Tex.,
which hosts a Spinach Festival every year. 
24 | FORBES JUNE 16, 2014
LAS VEGAS CASINO
magnate Steve Wynn just
paid $28.2 million for a
6-foot-5-inch Jef Koons
sculpture of Popeye. That’s
a lot of spinach, but it’s not
the most valuable piece of
art featuring the tough Ga-
zookus. These two pieces—
one in a German museum—
would likely fetch more if
they ever came up at auction.
P
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TROPHIES
STATUS UPDATE
EYE-POPPING
POPEYES
$4.8 BILLION BREAKUP?
THE NASTY DIVORCE between Russian billionaire Dmitry Rybolovlev and his
wife of 27 years, Elena, reached a crescendo in May, when a Swiss court ruled that
Rybolovlev owed her $4.8 billion in cash, real estate, art, child support and alimony.
Her lawyer was quick to label it the “most expensive divorce in history.” Maybe, but
only if she can collect: Not only have the couple been battling in various jurisdic-
tions for nearly six years already—and Dmitry’s lawyers vow to fight for another
ten—but since selling his fertilizer business for $6.5 billion in 2010, a bunch of
his $8.8 billion fortune has been sunk into ultraluxe real estate owned by legally
opaque LLCs and trusts. These three are currently being contested in U.S. courts.
Maison de L’Amitie
Rybolovlev bought Donald Trump’s Palm Beach
home for $95 million in 2008 through a limited
liability company. After Elena filed for divorce in
2008, she sued him in Palm Beach for ownership
of the property. He countered, saying it didn’t be-
long to him. Her lawyers deposed him in London
and claim he admitted to providing the money
for the purchase and its maintenance.
15 Central Park West
A company that Dmitry’s camp says is tied to his
daughter Ekaterina paid $88 million in February
2012 for former Citi chairman Sandy Weill’s Manhat-
tan apartment. Elena then filed a complaint alleging
her ex had paid for it using assets acquired during
their marriage, in violation of a 2010 Swiss Court
Order. He made a motion to dismiss, saying he’s not
subject to jurisdiction in New York. No ruling yet.
Kilauea, Hawaii
Another LLC paid $20 million in August 2013 for
actor Will Smith’s three-bedroom home on the
Hawaiian island of Kauai and then transferred it
to a trust. Elena sued, claiming Dmitry was hiding
the money. The court dismissed the action, saying
that it would not enforce a temporary order; she
appealed and will now ask it again to reconsider
based on final judgment from the Swiss court.
Elena
Rybolovleva
“Saturday’s Popeye” (1961)
ANDY WARHOL
LUDWIG FORUM FÜR
INTERNATIONALE KUNST
ESTIMATED VALUE: $50 MILLION
This painting was one of five
Warhols—Superman appeared in
another—displayed in New York
City’s Bonwit Teller department store
windows. Few paid attention to the
pop artist’s pop-up gallery on the
corner of 5th Avenue and 57th Street. Warhol switched to screen
printing a year later.
“Popeye” (1961)
ROY LICHTENSTEIN
PRIVATE COLLECTION
ESTIMATED VALUE: $47 MILLION
The bold primary colors and
restyled comic images in this early
Lichtenstein signaled the beginning
of his signature style. The Manhattan-
born artist was still far from a household name and identified
with the scrappy sailor man’s fight against the bigger Bluto.

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26 | FORBES JUNE 16, 2014
LEADERBOARD
KILLING CANCER
FORBES, MAY 26, 2014
The social networks were abuzz in
response to senior editor Matthew
Herper’s cover story about Novar-
tis’ new cancer treatment.
T
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P
:

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S
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S
ACTIVE CONVERSATION
1.7 MILLION
Estimated number of new cancer
diagnoses in the U.S. in 2014, according
to the American Cancer Society. 
HEARD ON THE WEB
194,010
VIEWS ON FORBES.COM
1,002
TOTAL COMMENTS
FACEBOOK
2,410 SHARES
4,547 LIKES
TWITTER
3,255 TWEETS
350 RETWEETS
213 FAVORITES
LINKEDIN
1,395 SHARES
53,655 IMPRESSIONS
55 LIKES
@JANEAKRAMER
What small companies
are leaders in
immunotherapies?
@STEVEMCGHIE
hi Matt, with the
Novartis GSK deal what
do u think this will
mean for cancer thera-
pies going forward?
@EMBEEDUB
V much appreciated that
piece on Emma. Im-
mune system treatments
are saving & curing so
many—like me.
@MATTHEWHERPER
Juno is a big one. I sus-
pect some have yet to be
started. Kite Pharma is
worth watching.
I think $NVS-$GSK is a
big deal. What we’re see-
ing is oncology becoming
a big pharma space.
Not saving and curing
so many yet. Let’s hope
they do.
TWITTER CLOUD The most-used words here appear larger:
“ The treatment will probably cure many cases
of a few cancers. But in the field of oncology,
that’s enough to make a lot of money.”
—The Genetic Literacy Project
“It’s too early to declare a
‘cure’—nature remains more
complex and crafty than we
realize—but this is undeniably
an unprecedented break-
through in the field.””
—Rick Wobbe
“Thanks for your in-depth review
of this novel therapy that could
change the paradigm in cancer
treatment.”
—David Hughes
“Remission does not
equal cure.”
—Jim Kress
READER’S COMMENT
READER’S COMMENT
OTHER COMMENTS
READER’S COMMENT

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28 | FORBES JUNE 16, 2014
THOUGHT LEADERS
JONATHAN BUSH — THE APOTHECARY
HEALTH CARE REFORM:
DISRUPTORS NEED NOT APPLY
JONATHAN BUSH IS CEO OF ATHENAHEALTH AND AUTHOR OF WHERE DOES IT HURT? AN ENTREPRENEUR’S GUIDE TO
FIXING HEALTH CARE.
F
For example, as they stand now,
rules require that ACOs be at least 75%
provider-controlled, so physicians
must do the heavy lifting when starting
one. The reality is that, once formed, an
ACO requires extensive management,
technical resources and granular in-
sight into, and analysis of, patient data.
Many of these requirements are be-
yond the realm (or interest) of your av-
erage physician. That’s made some in-
dependent physicians flee to hospitals
and large health systems for employ-
ment, an avenue they see as their only
way into shared savings models. This
rampant physician employment trend
is not only reducing patient choice in
health care, it is also driving up cost—
the very opposite of the intended efect
of ACOs.
The ACO model, if meant to survive
and thrive at mass scale, is ripe for
disruption. Most independent physi-
cians want to focus on what motivated
them to attend medical school in the
first place: caring for patients. They
are not interested in jumping through
administrative hoops to form an ACO,
only to then analyze steady streams of
data on thousands of patients, to then
track and submit data to satisfy dozens
of quality measures, to then process
and divide group bonus payments.
And no one wants them doing this
work, either. Especially when there are
operational experts and technology in-
novators at the ready to do these tasks
more efciently and at scale.
Our nation’s care providers are
being squeezed at every angle as they
navigate through the very narrow re-
quirements set up by the government
to participate in new care models. If
the government truly wants to define
the ACO model as an innovative care
delivery mechanism, it must let inno-
vators swirl around it to tackle and im-
prove upon the concept’s early phases.
Yes, at the core of an ACO is the work
of the physician, but any nonclinical
work that a physician can’t or doesn’t
want to do, including formation of an
ACO in the first place, should be al-
lowed to be managed, processed and
completed elsewhere.
Unfortunately, ideas like these
are too often met with skepticism
in Washington, D.C. One of the few
points of agreement in that town is
that health care is barreling down an
unsustainable-cost path. This is a real-
ity that cannot be addressed by main-
taining the status quo. We need to let
innovative solutions and efciency in
the door. Can we persuade our policy-
makers to let the disruptors swirl?
THE ACO MODEL, IF MEANT TO SURVIVE
AND THRIVE, IS RIPE FOR DISRUPTION
IT IS AXIOMATIC in the technol-
ogy sector that disruptors fuel the
breakneck pace of innovation. These
are thinkers and dreamers who look at
the established players and the status
quo and see, clear as day, that there is
a better way. They see a better way of
programming thermostats, controlling
light switches, listening to music and
doing a million other daily tasks, and
our lives are infinitely better for it.
For reasons that keep me up at
night and make me want to bang my
head against a wall, it seems similarly
obvious that disruption in health care
might as well not exist. Sure, our expe-
riences with health care are horrible
expressions of our humanity and it
seems that there must be a better way,
but the message from all sides is loud
and clear: Disruptors need not apply.
The Afordable Care Act includes
a program that creates Accountable
Care Organizations, or ACOs, where
this antidisruptor sentiment could not
be stronger. ACOs, purported to be an
innovative care delivery and payment
model where physicians better coor-
dinate, are more accountable for care
management and can even profit from
savings they create, are inadvertently
too closed and inefcient.
Owing to their complex nature it
is very hard for ACOs to be financially
and clinically successful. In part this is
because the program is largely closed
of from the types of innovation and
work flows that could hardwire ACOs
to bud, evolve and improve. Rather
than introducing a good model and
letting industry iterate around it in a
hundred diferent ways, the govern-
ment too tightly defined exactly how
an ACO must form and operate.

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30 | FORBES JUNE 16, 2014
THOUGHT LEADERS
RICH KARLGAARD — INNOVATION RULES
versities and colleges appeared on the
verge of French-like suicide. Student
hissy fits at Brandeis, Haverford, Rut-
gers and Smith caused either an invita-
tion for an honorary-degree candidate
to be withdrawn or the invited com-
mencement speaker at those schools
to bow out. In the case of Smith the
irony was thick. Smith, a women’s col-
lege, had invited IMF Chief Christine
Lagarde, who ranks fifth on the 2014
FORBES Most Powerful Women list,
to speak. The Smith students accused
Lagarde of patriarchy. Go figure.
Make no mistake: The expensive
liberal arts colleges in America are
going down—fast and hard. Schools
like Haverford and Smith are ex-
tremely vulnerable. The return on
a four-year $250,000 investment in
such colleges will be poor in future
years. Their brands have become
laughingstocks. Harvard, Stanford,
Berkeley and Princeton are protected
because they are true universities.
Their engineering departments and
graduate schools for medicine and
business are (for the most part) iso-
lated from the ideological nonsense
found in liberal arts schools. Caltech
BUYS AND SELLS
IF COLLEGES WERE STOCKS
RICH KARLGAARD IS THE PUBLISHER AT FORBES. HIS LATEST BOOK, THE SOFT EDGE: WHERE GREAT COMPANIES FIND LASTING
SUCCESS, CAME OUT IN APRIL. FOR HIS PAST COLUMNS AND BLOGS VISIT OUR WEBSITE AT WWW.FORBES.COM/KARLGAARD.
COLLEGES RISE. Colleges fall.
Let’s look at France and the U.S. to
see how they fare.
In May 1968 student riots broke out
in universities across France. What
followed was a general strike of 11 mil-
lion workers. The government of
Charles de Gaulle nearly fell, and the
French economy slid into recession.
At first the rioting students en-
joyed the support of the French
population. More liberty, more equal-
ity, more fraternity—who could argue
with that? French higher education
had always been a bit stufy, hier-
archical and pompous. Maybe the
students were correct.
Then the facts emerged. The stu-
dent uprisings had not been, as the
French people were led to believe,
spontaneous afairs. They had been
organized by French communists and
student anarchists months before. The
student organizers made a huge public
relations mistake by going on televi-
sion. They “behaved liked irresponsible
utopianists who wanted to destroy the
‘consumer society,’ ” wrote historian
Mattei Dogan. The students quickly
lost the support of the French people.
A silly spring fling? Kids being
kids? French higher education was
permanently damaged by the 1968
riots. In the 2013 Academic Rank-
ing of World Universities by the
Center for World-Class Universities
of Shanghai Jiao Tong University,
France had no schools in the top 35
and only 4 in the top 100.
Which were the ten top-ranked
universities? In order: Harvard, Stan-
ford, UC Berkeley, MIT, Cambridge,
Caltech, Princeton, Columbia, Chi-
cago and Oxford.
In May 2014 several American uni-
and MIT are pure plays in science and
engineering and thus are protected.
THREE CHEERS FOR STATE U.
If colleges were a stock market, I’d
short the heck out of Haverford,
Brandeis, Smith and their ilk. I’d want
to own those American universities
in the Global Top Ten. I’d also buy
America’s great public universities
known for their strength in science and
engineering: Michigan, Texas, UCLA
and the like. And I’d be biased toward
universities with a land-grant history.
These often have the word “State”
before “University.” Most were started
in the latter half of the 19th century to
provide educations in agricultural and
other practical sciences. I’d buy Iowa
State for ag science, Oklahoma State
for oil and gas engineering, and Mon-
tana State for its tech hub in Bozeman.
I’d also buy community colleges.
They’re the great untapped resource
in the U.S. today. There are two kinds
of community colleges: One is a
low-cost feeder system to four-year
universities; the other is a high-tech
trade school. Both kinds are wonder-
ful American assets.
Lastly, I’d buy some for-profit
online universities. The University of
Phoenix is reinventing itself as a cor-
porate-employee trainer. Solid idea:
Employers know what they want.
Ashford University has a Forbes
M.B.A. program, so I vouch for that!
Northcentral University, where I’m
giving a commencement speech, is an
impressive up-and-comer.
Don’t despair for American higher
education: The fools will perish, and
the golden age will burn brighter. F

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32 | FORBES JUNE 16, 2014
T
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C
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C
O
X
minous coal from a 6-foot-thick seam. We
step where no human has ever been before:
into the midst of compressed and fossilized
plant life that last saw the sun 300 million
years ago. As conveyor belts haul the chunks
of coal to the surface, another team mans the
“roof bolter,” which drills 6-foot-deep holes
into the ceiling and inserts epoxy-covered
rods that hold the rock together, prevent-
ing cave-ins. The average worker down here
makes $80,000, roof bolters $100,000. These
T
here have been more people
who have stood on the moon
than where you’re going,” says
Dave Dillon, safety representa-
tive at Deep Mine 41, operated
by Alpha Natural Resources in the south-
western corner of Virginia. Dillon is a third-
generation miner, but he still gets excited
showing of the coal face, where a thunder-
ing “continuous miner” with hundreds of
tungsten-carbide-tipped teeth claws bitu-
MINING
Coal Case
BY CHRISTOPHER HELMAN
Share prices have plunged as draconian regulations and falling natural
gas prices cripple U.S. miners. Looks like a perfect time to buy.
Human relations: Alpha
CEO Kevin Crutchfield
addresses miners
at Deep Mine 26 in
Clintwood, Va.
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34 | FORBES JUNE 16, 2014
eration market, coal’s biggest customer. The
price of Appalachian coal burned for electric-
ity is down 25%; metallurgical coal is of 44%,
thanks to a drop in Chinese demand. U.S.
usage slumped in recent years from 1.1 billion
tons a year to about 900 million. No surprise
that shares of coal companies have fallen
faster than canaries in an unventilated shaft.
Since last year Patriot Coal and James River
Coal have gone bankrupt. Since peaking in
early 2011 Peabody Energy is down 75% and
Arch Coal of 89%. Alpha has plunged 94%—
the whole company now worth a small frac-
tion of the Massey acquisition.
It would be all too easy to assume that
Alpha, and coal, is on its deathbed. But de-
spite fears of global warming coal remains
the fastest-growing fossil fuel worldwide,
thanks to China’s sprawling economy and
fears of nuclear disasters in places like Ger-
many and Japan, which mothballed nuke
plants after Fukushima. Coal’s share of the
domestic power-generation pie has bounced
back to 42%, from a low of 36% in 2012,
amid a rebound in natural gas prices over
the past two years. Solar and wind energy
may grab headlines and taxpayer subsidies,
but coal’s share of U.S. electrical genera-
tion remains nine times greater than that of
those two combined. “Declaring the death
of coal is premature,” says Bob Yu, analyst at
are increasingly important jobs in a region
that has seen thousands of layofs and the
closure of dozens of mines. “If the price isn’t
right, we’ll leave it in the ground for another
day,” says Kevin Crutchfield, CEO of Alpha.
Investors have been saying the same thing
about shares of Alpha and its fellow miners
lately. Based in Bristol, Va., the company has
endured a nightmarish few years. In 2010
Crutchfield looked on as 29 miners of Appala-
chian rival Massey Energy died in an explosion
at the Upper Big Branch mine in Montcoal, W.
Va. He had coveted Massey’s high-quality re-
serves of metallurgical coal, used in steelmak-
ing, and in 2011 (amid record-high metallurgi-
cal coal prices) he led Alpha to double down,
acquiring Massey for $8.5 billion. He should
have waited.
Since 2011 coal
companies have
found themselves
crushed between
draconian new envi-
ronmental regulation
from Washington
fed by fears of global
warming and a plen-
tiful supply of clean-
er-burning natural
gas that’s stolen share
in the electrical gen-
MINING STRATEGIES
“I see coal
making a
comeback.
The best
thing for
coal will be
when we start
exporting
natural gas.”
Miners earning $80,000 to $100,000 have been laid of by the thousands amid the industry’s implosion.
FOLLOW
THE MONEY
BUSINESS
LEADERS TO
TRACK—AND
TO IGNORE—ON
TWITTER.
z
Vinod Khosla
(@vkhosla) A peek inside
the cranium of one of Silicon
Valley’s sharpest VCs. Long
on ed tech and health care
startups.
z
Rupert Murdoch
(@rupertmurdoch) Smart,
provocative, funny. Recent
nuggets: stock market
(overpriced), Google vs.
NSA (NSA), Kentucky
Derby (supports), vegans
(opposes).
z
Kim Dotcom
(@KimDotcom) Sure, he’s
a bit of a clown, but New
Zealand’s own Dr. Evil now
has his own political party
(the Internet Party) and
compelling thoughts on
privacy and prosecutorial
overreach.
z
George Soros
(@georgesoros) Interested in
platitudes about democracy
and civil society? You’ve
come to the right place!
R
O
B
B

S
C
H
A
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36 | FORBES JUNE 16, 2014
Redinger, managing director at KeyBanc Capi-
tal Markets, who has done investment bank-
ing work for coal utilities and solar developers
alike. “The best thing for coal will be when we
start exporting natural gas.”
And the outlook for Alpha? It’s improving.
Despite his horrid market misread with the
Massey deal, Crutchfield remains convinced
that he can create value and that the tough
part is behind him. Massey was a “reputa-
tionally challenged entity,” he says. “But we
felt that given our management structure and
moral compass that we could take that on
and we could change it.”
That’s been true, but it has not come
cheap. Alpha spent more than $500 million
to settle Massey’s legacy—everything from
federal fines to shareholder suits. Crutchfield
permanently closed Upper Big Branch and
added new safety measures at other Massey
mines, like sensors that monitor air flow
and methane buildup. After the acquisition
Alpha had 14,000 employees. Having closed
64 out of 150 combined mines, it’s now down
to 10,400. Alpha sufered a net loss of $2.4
billion in 2012 and $1.1 billion in 2013, but in
the past quarter operating income (excluding
costly depreciation and depletion charges)
has finally turned positive again. A
dim light at the end of a long tunnel,
but a light nonetheless.
Bentek Energy, a division of Platts.
Last winter’s polar vortex demonstrated
coal’s continued importance in the U.S. As
fierce cold gripped the Northeast, natural gas
ran short, and prices spiked from $4.50 per
1,000 cubic feet to more than $70 in some
areas. Had coal-fired plants slated for clo-
sure in the area already been shut down, the
result would have been blackouts in subzero
weather. By the time winter was over, coal in-
ventories had fallen to ten-year lows. Back in
2012 it cost $10 more to generate a megawatt
hour of electricity from coal than it did from
gas. Now, according to Bentek, that’s flipped,
and coal is $12 per MWh cheaper.
That doesn’t mean the industry will roar
back to life. While coal prices have likely bot-
tomed out, the road to recovery will be slow.
To ensure long-term success the industry will
need to meet proposed EPA regulations re-
quiring coal-fired power plants to install mul-
timillion-dollar scrubbers to clear emissions
of sulfur dioxide and nitrogen oxide. Con-
struction of new coal plants will be banned
unless they can match the lower emissions of
plants burning natural gas.
A turning point should arrive in 2016.
That’s when the U.S. is likely to begin export-
ing natural gas, which will raise its current
price and give coal a chance to compete. “I
see coal making a comeback,” says Andrew
MINING STRATEGIES
“The industrial age emerged literally in a haze of coal smoke, and in that
smoke we can read much of the history of the modern world.” —BARBARA FREESE
FINAL THOUGHT
ROCK BOTTOM?
THEY’RE ALL RISKY BETS, BUT GIVEN HOW FAR SOME COAL STOCKS HAVE FALLEN, 
EVEN SMALL REBOUNDS WOULD PAY NICELY AT THIS POINT. HERE ARE SIX TO WATCH:
STOCK COAL PRODUCTION
PERFORMANCE (SHORT TONS
1-YEAR 3-YEAR PER YEAR)
WESTMORELAND COAL  131%  63%  22 MIL  GROWING COAL PRODUCER PAYING OFF DEBT AND ROLLING UP RIVALS
CONSOL ENERGY  26  –6  56  HAS MADE GAINS FROM INCREASING ITS NATURAL GAS BUSINESS
ALLIANCE RESOURCE PARTNERS  21  31  35  A BRIGHT SPOT, ALLIANCE BENEFITS FROM LOW-COST ILLINOIS MINES
PEABODY ENERGY  –14  –68  193  THE BIGGEST MINER, WITH HUGE DEPOSITS OF LOW-SULFUR WYOMING COAL
ARCH COAL  –28  –87  137  NO. 2 MINER STRUGGLING TO SURVIVE AFTER BIG 2011 ACQUISITION
ALPHA NATURAL RESOURCES  –43  –92  104  OVERPAID FOR MASSEY ENERGY AT THE TOP OF THE MARKET
COAL PRODUCTION REFLECTS 2012 RESULTS, ACCORDING TO U.S. ENERGY INFORMATION ADMINISTRATION.

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38 | FORBES JUNE 16, 2014
REINVENTING AMERICA
STRATEGIES
S
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F
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Tech, a Chicago-area maker of car
floor mats. Really expensive car floor
mats. All of which are made in the
U.S.A.
“It was an evolutionary step and an
investment in our future in branding
the WeatherTech name and getting it
out to all of America,” says Weather-
Tech CEO and founder David Mac-
Neil, 55, when asked why he shelled
out $4 million to put the ad, which
was based on his own experience,
on TV. “And it helped us get across
a message that is near and dear to
me: the importance of U.S. manufac-
turing, our industrial infrastructure,
using American raw materials and
hiring American workers.”
Not that MacNeil is some jingo-
istic super patriot. While there are
sound operational reasons for keep-
ing his manufacturing local, for him
a big draw for making his $150 (on average)
floor mats in America is that in an age of out-
sourcing, “Made in the U.S.A.” sells. And
MacNeil has bet big on that approach. He
employs 1,000 workers at six factories and
400,000 square feet of factory space in subur-
ban Chicago. He forges all of his own tooling
for 18,000 diferent parts, including pickup-
bed liners, mud flaps and other auto accesso-
ries. WeatherTech designs its packaging and
prints all of its materials in-house, right down
to a tiny product catalog the size of a pocket
map with one of MacNeil’s American-manu-
facturing screeds on the inside cover. They ex-
port to 21 foreign markets around the world.
The company is the largest consumer of sheet
plastic in America. After nearly a decade of
double-digit annual growth, sales were about
$400 million last year, with estimated pretax
T
hree minutes into the second
quarter of the Super Bowl, soon
after a Bank of America ad fea-
turing a new song by U2 and Tim
Tebow shilling for T-Mobile, a
curious 30-second spot broke the slick run of
corporate pitchmen. It looked like a local cable
ad: A banker, a lawyer and a guy in a hard hat
stare straight into the camera and tell an en-
trepreneur aiming to manufacture products,
hire workers and build facilities in the U.S. that
“You can’t do that.” Too expensive. Too risky.
He defies them, and wins.
There’s nothing odd, of course, about
wrapping yourself in the flag to sell products.
Next to sex, it’s the most obvious play in ad-
vertising. But in this case the ad happened to
tell the true story of one of the stranger lux-
ury goods companies in the world: Weather-
Mat in America
BY DALE BUSS
By wrapping $150 car foor liners in the fag, WeatherTech’s David MacNeil
is creating one of the world’s more unlikely luxury brands.
Insourcer:
CEO MacNeil’s factories
in Bolingbrook, Ill.
employ 1,000 workers.

siemens.com/answers
Siemens technology is helping to give families the answers they need, when they need them.
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When someone becomes seriously ill, the story of his or her
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day creating answers that will last for years to come.
©
S
i
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m
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n
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$
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The fight
against cancer
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Pass it on.
Visit facebook.com/
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R
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/

G
E
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T
Y

I
M
A
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E
S
40 | FORBES JUNE 16, 2014
REINVENTING AMERICA STRATEGIES
mats one week, we can deliver to all five right
away. It’s like extra engines on a jet.”
Keeping such close control helps, because
most aftermarket aficionados order accesso-
ries within months of buying their cars. So re-
tailers demand suppliers that can stay ahead
of the game. “We stock $170 million worth of
inventory, with 300,000 part numbers across
800 lines,” says Ed Orzetti, CEO of Keystone
Automotive Operations, a huge aftermarket
distributor based in Exeter, Pa. “And when it
comes to making sure the right part shows up
at the right time, WeatherTech gets it right
every time. They’re in a diferent league.”
WeatherTech prospers in high-tax Illi-
nois even though MacNeil spurns ofers of
local abatements and other incentives be-
cause, he says, they come with too many
strings attached. And with wages as high as
$20 an hour for semiskilled positions, Weath-
erTech is generous in an area where plastic-
extrusion jobs average $16 an hour; turnover
is nearly nonexistent. “If I had to report to
a board, there are some decisions I couldn’t
justify,” MacNeil says.
WeatherTech has expanded by boost-
ing private-label business with German and
Korean carmakers, which now account for
about 30% of the company’s overall sales, and
is hoping to eventually do deals with Detroit,
too. Though it’s lower-margin than Weather-
Tech brand sales, the private-label business
ofers some big economies of scale. Beyond
that MacNeil keeps trying to figure out new
markets for formed-plastic products. Last
year WeatherTech introduced TechFloor
tiles for garage and trade show floors. Anoth-
er of MacNeil’s inventions: a men’s belt made
of WeatherTech plastics that airline passen-
gers can wear through TSA checkpoints.
And if those ideas don’t take of, Mac-
Neil has plenty more. “It’s pretty simple. If
you deliver a technologically advanced, high-
quality product, your business will grow—
if the customer is happy with the product,”
he says. Compared with that, “those
extra manufacturing costs mean
nothing.”
profits of more than $100 million.
“His belief in his product is bone-deep,
and he puts a lot of money behind it,” says
Chris Kersting, president and CEO of the Spe-
cial Equipment Market Association, the trade
group for a $31 billion auto-aftermarket in-
dustry. “WeatherTech has been very aggres-
sive, so they’ve gone to the very forefront of
the made-in-America trend in our business.”
In 1988 MacNeil was vice president of U.S.
sales for the automotive high-performance
outfit AMG, now a unit of Daimler AG, when
he noticed the poor quality of car floor mats,
even for luxury vehicles. So at the age of 30
MacNeil took out a $50,000 second mortgage
and began importing expensive mats from
the United Kingdom. Soon he shortened sup-
ply lines by finding an American contract
manufacturer.
Then MacNeil came up with the idea of
digitally measuring each vehicle for a preci-
sion-fit liner to replace standard mats that flop
around on the floor. His product features deep
channels to trap water, road salt, mud and
sand, and edges that ride all the way up to the
top of each foot well—a sine qua non for picky
car owners trying to protect their investments.
Its thermoplastic elastomers don’t turn brittle
in midwestern subzero temperatures or break
down in summer heat. Then MacNeil decid-
ed—against the advice of bankers and lawyers,
as portrayed in the ad—to bring production
in-house in 2007. Backed by a new made-in-
America marketing campaign in national pub-
lications such as the New York Times, sales
soared, despite the Great Recession.
Pumping out mats in China would cost
considerably less (they’ve never actually re-
searched the possibility), but MacNeil be-
lieves there’s a competitive edge to having his
factory next to his of ce and not half a world
away. He insists, for example, on taking his
own digital-laser measurements of each pro-
duction vehicle rather than borrowing specs
from the carmaker. “That way I’m sure my
data is accurate,” MacNeil explains. “We also
have redundant [manufacturing] equipment
so that if, say, five customers all want more
“When you’re manufacturing anything, even if the work is done by
robots and machines, there’s an incredible value chain involved.
Manufacturing is simply this huge engine of job creation.” —SUSAN HOCKFIELD
FINAL THOUGHT
What the 55 million
Forbes.com users are talking
about. For a deeper dive go
to FORBES.COM/BUSINESS
TRENDING
PERSON
ED RENSI
Investors like what the
former McDonald’s CEO
is cooking at BBQ chain
Famous Dave’s; shares are
up nearly 60% since he
took over in February.
COMPANY
ALLERGAN
Activist investor Bill
Ackman and Valeant
Pharmaceuticals make a
run at the maker of Botox.
Expect Wall Street’s
summer marquee-media
scrum.
PLACE
BEAUFORT SEA
The Arctic oil rush speeds
up: An Exxon Mobil
subsidiary explores drill-
ing more than 24,000
feet down in a site of
Canada’s northern coast. 


42 | FORBES JUNE 16, 2014
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ranky Aguilar was tired of draw-
ing family-friendly cartoons. The
young designer was pulling down
$90,000 a year at gaming giant
Zynga when, in early 2012, he
started hanging out at a Starbucks in Walnut
Creek, Calif. with his cracked MacBook and
a $100 Wacom tablet. He began scribbling
fire-spewing cat heads and flying squadrons
of fuchsia donuts, odder visions that harkened
back to his high school grafti days.
Aguilar, who had taught himself program-
ing, cobbled his drawings into a photo editing
app called Catwang and released it for free in
April 2012. A month later the app had more
TECHNOLOGY
DIGITAL STICKERS
99-Cent Fire-Breathing Cats for Sale
BY PARMY OLSON
Young Asians spend millions on cute images they obsessively text one another.
Entrepreneurs are betting the craze won’t get lost in translation to the West.
Jeanie Han, an
executive at Asian
messaging app LINE,
is hunting for the
next Brown and Cony
(shown here).
than 130,000 downloads by people pasting
his cartoons on photos they would share on
Instagram. Within two months the app was
bringing in $400 a day. In two years Catwang
alone has sold $250,000 worth of stickers.
“It was more money than I’d ever seen in my
life,” says Aguilar, who quit the Zynga job a
few months after Catwang hit the market.
Soon after, Aguilar and street-apparel
maker Upper Playground sold rapper Snoop
Dogg on an app called Snoopify, which ofers
$1.99 packs of cartoon pimp hats and dread-
locks. On a whim he made a $99.99 mari-
juana joint called the Golden Jay. Incredibly,
1,000 people have bought it to garnish their

This laptop got lost and nothing happened.
When almost a quarter of security breaches are caused by lost or stolen devices,
choosing the right technology partners becomes a critical business decision. When you
have Dell laptops with Intel
®
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vPro
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©2014 Dell Inc. All rights reserved. Dell, the Dell logo, and the Dell badge are trademarks of Dell Inc.
Dell.com/betterbusiness

44 | FORBES JUNE 16, 2014
The bullish estimates assume that stickers
will be that rare Asian pop culture phenom-
enon that breaks through the translation
barrier in the West. Jeanie Han, LINE’s U.S.
chief, has already seen this happen in Spain,
where more than 10 million people have
reportedly downloaded it. Han was setting up
sticker-creature content deals in Spain before
she even moved to America. The Spanish, she
says, are fast at adopting new technology. It’s
also a cheap thrill in an emotionally expres-
sive country with 54% youth unemployment.
South Korean messaging app KakaoTalk
got a single-digit proportion of its $200
million in 2013 revenue from digital stick-
ers. That percentage would be higher, says
KakaoTalk’s CEO, Sirgoo Lee, if payment for
stickers was easier on Android, on which
Google Wallet and carrier billing still trail
Apple with its 800 million iTunes account
holders. Wray, 24, says 75% of his sticker
sales happen on iPhones, where it’s easier to
make in-app payments. Another challenge:
WhatsApp and Instagram, two of Facebook’s
biggest mobile services, look unlikely to
accommodate stickerlike graphics this year,
according to people close to the companies.
To break into the U.S., sticker tycoons are
targeting familiar brands. Wray, the sticker
broker behind TextPride, has produced stick-
ers for British soccer clubs like Tottenham
Hotspur and movies like Kill Bill for Miramax
Films, and sells them on to messaging apps,
taking a double-digit cut of revenue. He has
partnerships with half a dozen recognizable
media and messaging names in the pipeline.
Some U.S. startups will continue to
pursue Asian-style whimsy. Former rock
musician Bobby Schubenski and partner Jim
Somers started goth-skater clothing com-
pany Blackcraft Cult. In April they started
selling a $1.99 Black Craft sticker pack with
variations of their trademark Lucipurr the
cat, skulls, beer glasses and emojis, such as
a middle finger. They think stickers could
help double last year’s sales of $1.3 mil-
lion, which were mostly in apparel.
“Everybody needs a middle-finger
emoji,” Schubenski says.
Instagram selfies.
This desire to spend $100 on a digital splif
is the same basic human craving Aguilar saw
at Zynga, which has a thriving virtual goods
business in tricked-out FarmVille tractors.
At Zynga they called it “invest and express.”
Stickers and smaller emoji symbols are a way
to cope with the never-ending teen angst over
being liked and are accelerating a broader so-
cial trend away from communicating with text.
Bertrand Schmitt, the 37-year-old founder of
app analytics firm App Annie, says that when
his Beijing staf text each other after hours on
WeChat “there will be seven or eight messages
without anyone having said anything [with
words]. People are moving towards a more
graphical version of communicating.”
A crowd of artists, brokers and publish-
ers are building a market for digital stick-
ers that may be way bigger than the one for
the tiny emojis that now dress up chats and
Instagram. There are already 600 sticker
apps in the iTunes and Play stores, but most
of the action is on messaging apps such as
LINE, backed by South Korean search giant
Naver. LINE has 420 million registered users
worldwide, who send 1.8 billion stickers each
day picked from a vault of 10,000 that LINE
produces in house. Some, like the troubled
bear-and-rabbit romance of Brown and Cony,
have become so popular that they’ve spun of
into books and TV shows.
Most people would never dream of paying
for a fire-breathing cat. Nearly all sticker
users on the messaging app Kik use its free
stickers. Facebook doesn’t even bother
charging—its Lego- and Minion-branded
stickers are all gratis. Over in Asia, though,
LINE does a brisk business. It sold nearly
$70 million worth of stickers in 2013, or
20% of its $338 million in total revenue last
year. Stickers could rake in another $140
million this year. That’s enough cash flow,
says sticker broker Evan Wray, to make a $2
billion market by the end of this year, as the
trend migrates westward and users of mes-
saging apps like LINE and WeChat double
to 2 billion by the end of 2014, according to
Wray’s estimates.
DIGITAL STICKERS TECHNOLOGY
“My imagination functions much better when
I don’t have to speak to people.” —PATRICIA HIGHSMITH
FINAL THOUGHT
GADGETS
WE LOVE
The wireless revolution is
about to reconfigure your
relationship with one of
the earliest mobile devices:
your bike. Designers from
Boeing and Jawbone have
gone tandem to develop
Skylock ($159 limited
preorder, $249 retail;
skylock.cc), a solar-
powered bicycle lock
that works via Bluetooth
connectivity to your
phone—and the phones of
friends you select. Instant
ride sharing! One hour of
sunshine will give you a
week of power, and if you
leave your phone at home
by mistake, you can key in
the code manually. Should
your bike be noticeably
jarred in your absence,
Skylock will send you an
alert. (Not that you need
worry; the lock is military-
grade, so thieves would
need a mortar to get it of.)
And if you get doored by a
careless driver or lose your
balance on rain-slicked
streets, Skylock will notify
friends and family so they
can meet you in the ER.
Very thoughtful. Begins
shipping early 2015.
—Brian Dawson 
LOCK OF AGES





48 | FORBES JUNE 16, 2014
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TECHNOLOGY
WEB CULTURE
Hwang’s World
BY KASHMIR HILL
Tim Hwang plants ideas all over the Internet, even
if he has to scam a little bit to make them stick.
His specialty?
Concocting far-out
ideas, bringing them
down to earth and
making them work.
T
im Hwang was gaming the sys-
tem as far back as high school,
which was only 11 years ago. As
a sophomore at the posh New-
ark Academy in New Jersey he
started a group called the Strategic Gaming
Forum Syndicate. Fancy name, but “it was just
a nerdy, board-gaming club,” says Hwang. To
raise money Hwang held bake sales, buy-
ing packaged Entenmann’s cookies and cakes
and selling them as homemade “at a ridicu-
lous markup.” The kids didn’t mind. Hwang
had earned their respect earlier selling them
George Orwell parody T-shirts of a smiling Tim
in braces with the words Big Tim Is Watching
You. “My parents were concerned, but they
played along,” says Hwang. “They resigned
themselves to doing 100 iron-ons all weekend
with me. I made a profit on that one, too.”
Thin and excitable, with spiky black hair
and black glasses, the 28-year-old Hwang
represents a new kind of Web entrepreneur
who is equal parts huckster and activist.
Rather than seek riches, Hwang seeks le-
gitimacy for digital concepts such as crowd-
funding (done), social bots that interact with
humans on Twitter (done) and software to
automate rote but expensive human func-
tions such as the law (not done yet).
He has yet to hold a full-time job for longer
than two years, but Hwang gets more done in
a week than most people do in a month.
“I have a list of ideas in two columns—
Someday and Maybe— that I’ve been keep-
ing since college,” says Hwang. “It’s now 200
items long.” During his junior year at Har-
vard Hwang started working at the college’s
Berkman Center for
Internet & Society but
grew frustrated with
academics who merely
theorized about Inter-
net culture. Hwang de-
cided to bring Internet
culture to the campus.
In 2008, during his se-
nior year, he created a
rudimentary Web page
for an event he dubbed
ROFLcon (ROFL =
Rolling On the Floor
Laughing) and started
inviting “memes” to
attend. The first year
brought 600 people.
It’s now a biennial
event attended by 900
people to meet lumi-
naries such as Internet
law expert Jonathan
Zittrain, 4Chan’s
Christopher Poole and
the “Double Rainbow”
viral video guy. But

JUNE 16, 2014 FORBES | 49
Hwang lost interest once things went pro. “By
2012 I was on the phone with GrumpyCat’s
agent. It just didn’t seem fun anymore,” says
Hwang. The conference is currently on hiatus.
Hwang stayed on at the Berkman Center
after graduation. He and his friends would
sit around and complain about the lack
of cool things to do in Boston. So Hwang
launched the Awesome Foundation. They
each threw in $100 to make a $1,000 grant
for the creation of something “awesome.”
The first grant went to a Rhode Island School
of Design professor who applied to make a
33-foot-long hammock that sat in Boston’s
Rose Fitzgerald Kennedy Greenway.
Crowdfunding over the Web was a new
concept at the time (Kickstarter launched
in April 2009), and the idea, once online,
became a meme of its own. The Awesome
Foundation—Hwang loves overblown titles—
now has 94 chapters in 19 countries and has
given out more than $1 million in grants to
more than 1,000 projects, putting Hwang on
lists, alongside Bono and Bill Gates, of the
world’s most innovative philanthropists. “He
uses the power of faceless organizations to
disguise the fact that it’s just him working
on it,” says Christina Xu, Hwang’s partner
on ROFLcon and the Awesome Foundation,
where her title is Chancellor at the Institute
on Higher Awesome Studies.
Internet marketing outfit The Barbarian
Group recognized Hwang’s branding savvy
and hired him away. But mapping the social
influence of cereal maker Kashi didn’t hold
Hwang’s attention for long. So he secretly
applied to and got accepted at the University
of California, Berkeley law school. For six
months he held down the marketing job from
California without his bosses knowing he
was in law school. “I did a lot of studying on
airplanes flying to clients’ of ces,” he says.
Meanwhile, he kept churning out more In-
ternet projects and groups: He named himself
chief scientist for the Pacific Social Architect-
ing Corp., which creates “social bots”—swarms
of automated, credible identities on social
media platforms that interact with unsus-
pecting humans. Pacific Social has spun out a
startup that charges hedge funds and retailers
up to “six figures” to use its human-imitating
bots to conduct market research on Twitter
among people who don’t realize they’re being
polled (or that it’s being done by algorithms).
Pacific Social’s research was cited in an NSA
PowerPoint leaked by Edward Snowden.
Last summer Hwang tried again to go
mainstream, joining prestigious law firm
Davis Polk after graduation. He had wowed
them with his ef ciency as a summer associ-
ate the year before. Little did they know that
he had written software to handle simple
tasks he’d been assigned. He stayed at Davis
Polk for only seven months, all the time he
needed to lay the groundwork for his own
firm, Robot, Robot & Hwang. It’s a joke name,
and the firm isn’t real, but Hwang has as-
sembled a group of programmers that this
summer will release a free software package
to automate the document review and IPO-
form-filling work that’s assigned to a first-year
law firm associate. “I was in it to kill it. I want
to replace lawyers with code,” says Hwang.
Hwang’s latest full-time job, as of March,
is head of special initiatives at Imgur, an im-
age-sharing and meme-generation site that
recently scooped up $40 million in venture
funding from Andreessen Horowitz. Re-
sponsible for promoting of ine networking
among Imgur’s thriving 130-million-member
online community, Hwang recently spent a
week visiting summer camps to find one for
a company-hosted meet-up. Imgur CEO Alan
Schaaf knows about Hwang’s many hats and
doesn’t mind them. “He concocts these far-
out ideas and then brings them down to earth
and actually does them. We’re lucky to have
him,” says Schaf.
How does he manage to get it all done?
Hwang as a teenager had to make the transi-
tion from an unstructured Montessori to a
regimented prep school. So he started plan-
ning his days carefully, something he still
does, meticulously blocking out each hour of
each day. When I met with him one Sun-
day afternoon in his San Francisco
apartment, I was crunched between
Brunch and Netrunner Card Game.
“Capital isn’t so important in business. Experience isn’t that important. You
can get both of these things. What is important is ideas.” —HARVEY S. FIRESTONE
FINAL THOUGHT
TRENDING
What the 55 million
Forbes.com users
are talking about.
For a deeper dive go to
FORBES.COM/TECHNOLOGY
IDEA
TABLET FATIGUE
A once hot category has
cooled. Apple sold 3 million
fewer iPads than expected in
the second quarter, and the
category overall is up a mere
3.9% from a year ago. That’s
so PC.
PERSON
MARIO GONZALEZ
The Spaniard sued Google
to have pages related to him
removed from search results.
A European court ruled in his
favor, establishing the new
“right to be forgotten.”
COMPANY
GOPRO
The action-camera maker files
for an IPO, with big plans to
become a media powerhouse
for selfie surfers. 

50 | FORBES JUNE 16, 2014
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AT&T. The customer tells Bajaj that, unlike
the telco’s half-promises, DMI’s manager
makes him feel like she’s “sitting right there.”
Bajaj, who can’t sit down himself after hurt-
ing his back on a client visit two days before,
flashes a grin. “If they weren’t happy, I’d be
on a plane right now.”
DMI (short for Digital Management Inc.)
is a jack-of-all-trades service shop for com-
panies migrating toward a mobile workforce
(i.e., all companies). The big trend in IT is
BYOD, or “bring your own device,” in which
employees are allowed or forced to use their
personal iPhone or Android at work. But the
devices have to be locked down for corpo-
rate use. This has created a gold rush among
service and software companies that handle
activations, software updates, security, app
development and support.
Bajaj, 37, started DMI 12 years ago with a
desk, a computer and $25,000 from friends
and family. It helped that his father, Ken Bajaj,
is a major player in Beltway tech circles, hav-
ing sold his software and advisory firm App-
Net to Commerce One for $2.1 billion back
in 2000. But the son has moved out of the
father’s shadow. DMI now has 1,800 employ-
ees in seven ofces and contracts with all 15
cabinet-level departments of the U.S. govern-
ment and corporate customers such as Toyota,
Pfizer and the Royal Bank of Scotland. DMI
recently built a cocktail app for Bacardi and
a World Cup app for Anheuser-Busch InBev.
“One of my team was in a huge retail chain the
other day wearing their DMI lanyard,” Bajaj
says. “The floor manager said, ‘I know DMI—
you manage our mobile devices.’ ”
DMI has far bigger rivals all around it.
Telcos and BlackBerry bid against it for device
management deals, a market worth $1.6 bil-
lion this year, according to Gartner. In app de-
velopment DMI goes up against Pivotal Labs
and AKQA. And it battles Accenture, Hewlett-
Packard and Deloitte for consulting deals.
But DMI’s 100% annual growth over the
last five years is faster than nearly all of them,
thanks to acquisitions and a raucous atmo-
sphere Bajaj has created around himself. DMI
sells at least six diferent services, and Bajaj
trains his staf to get in the door by ofering
L
eaning over a high-backed chair
toward the phone in his corner
ofce, DMI Inc. CEO Jay Sunny
Bajaj is calling Irish cement com-
pany James Hardie Industries
for the first time. It’s a $1.5 billion (sales) firm
that uses 1,700 mobile devices, all managed
by DMI, a contract Bajaj has won against
MOBILE
Bring Your
Own Device
BY ALEX KONRAD
Sunny Bajaj turned the mundane job of managing
a mobile workforce into a raucous success.
DMI CEO Sunny Bajaj
has a three-point
plan: Get big, IPO (or
sell) and then buy the
Washington Redskins.
Step one is well
under way.
ENTREPRENEURS

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MOBILE
52 | FORBES JUNE 16, 2014
story. Both his parents started and sold tech
companies valued in the hundreds of millions.
Born in Detroit and of Indian heritage, Bajaj
grew up not far from DMI and got his first job
in Mom’s mail room at 12. After a brief try at
investment banking Bajaj joined his father’s
company to learn the tech services trade.
In 2002 he decided to break out on his
own, eyeing the complacency of government
tech contracts. But he struggled to get his
foot in the door. Selling PC hardware made
him some cash that first year; Bajaj then tried
his hand at “staf aug mentation,” matching
techies to growing contractors.
Bajaj broke through as a contractor himself
when he scored a $40,000 job to document
the Small Business Administration’s standard
operating procedures in 2004. But to score
bigger contracts DMI had to seem bigger, too.
That meant filling his of ce with family and
friends on mornings when prospective clients
were visiting. On some pitches he would bring
a knowledgeable friend along as a pretend
employee, right down to the business cards
printed that morning at Kinko’s. “Every small
company does stuf like that,” he says.
By 2004 DMI was winning seven-figure
contracts from big agencies, but the 2008
recession and new competition were driv-
ing margins down, and Bajaj decided they
weren’t coming back. He started diversify-
ing in 2010, investing $25 million to build a
commercial practice, which is now 40% of
sales and growing. Much of DMI’s growth
has come through five acquisitions, such as
Golden Gekko, an app developer in Barce-
lona, and the Pappas Group, a marketing
agency that built the website for the NFL
Players Association.
Bajaj claims he gets regular investment
or buyout ofers. He says if he sells, it has to
be for more than $2.1 billion—the price at
which his father, who now serves as DMI’s
COO, sold AppNet years ago. Dad’s eyes
twinkle when he hears this. “He wants to
show he’s better than me,” he says. “But this
business is all about people, and
Sunny’s a far better people person
than I ever was.”
to manage a firm’s smartphones and tablets
or build its apps, and then look for openings
to handle security, strategy and support. A
sports nut, Bajaj serves as part coach, part
cheerleader for his staf. Of ce rooms bear
names like “the End Zone,” and company
bonding often involves events such as an all-
hands Top Chef-themed grill competition on
the of ce patio. He has been known to end a
big afternoon client meeting with a shot of te-
quila. Bajaj loves the stuf, with DMI-branded
shot glasses and even a conveyor belt to pass
them out at the annual company bash. He’s
close to finalizing a private-label DMI brand
of tequila that he wants made before he’s a
public company CEO. “I drank tequila with
[partners] Samsung, with Good Technology.
It’s boring if you’re always talking business.
You can be serious but have a little fun. And
no one turns it down.”
Bajaj is always smiling, always selling. In
his back-injuring trip to New York he met
with the CIO at an investment bank where
they started out discussing the bank’s phones
and tablets but quickly got to talking about
its need for new employee apps. And how
DMI could deploy them. And test them. And
why not maintain them, too? “Eventually the
CIO has four or five ways to work with us in
his mind, and they want to take the conver-
sation to giving us all of it,” Bajaj says. “I do
mobile apps for Novartis for $1.5 million a
year. That could be a $10 million account.”
The founder could someday become a
billionaire if an IPO goes of in early 2015 as
planned—or a buyer comes along before that.
The privately held firm has already rejected
a $600 million ofer, and Bajaj owns more
than 65%. DMI has been cash-flow positive
since 2008 and will gross about $350 million
this year, up from about $100 million in 2011.
That’s more than the device management
firms acquired by IBM and Google recently,
and even more than the revenue at AirWatch,
for which VMWare paid $1.5 billion in January
at roughly 15 times revenue. DMI would fetch
a slightly lower multiple because of its lower-
margin government and services-related work.
Bajaj’s tale is far from a rags-to-riches
ENTREPRENEURS
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TRENDING
What the 55 million
Forbes.com users
are talking about.
For a deeper dive go to
FORBES.COM/ENTREPRENEURS
IDEA
MOTIVATORS
What drives entrepreneurs:
Seeking happiness? Being their
own boss? Pursuing a dream?
For some it’s trying to make a
diference by doing something
better than anyone, one small
efort at a time.
PERSON
DEVO HARRIS
After helping his cousin Kanye
West build GOOD Music
and winning a Grammy, he’s
launching Adventr, an extremely
easy-to-use interactive video
platform.
INNOVATION
SNOOP-FREE E-MAIL
Six guys at CERN, the Swiss
particle physics lab, have created
a system called ProtonMail that
uses end-to-end encryption,
supposedly rendering messages
impervious to NSA (and any
other) surveillance. 
“If you live your life with imagination and verve, God will play along just
to see what outrageously entertaining thing you’ll do next.” —DEAN KOONTZ
FINAL THOUGHT


54 | FORBES JUNE 16, 2014
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Now Hoisington plans to keep clients in long
bonds a while longer.
Inertia? Stubbornness? “We’re not wed-
ded to these long-term Treasurys,” insists
Lacy Hunt, 71, Hoisington’s chief economist
and executive vice president. “We’re in them
as long as the fundamentals merit,’’ adds the
Texas-born economist, who made his name
at Philadelphia’s Fidelity Bank in the 1970s by
accurately predicting the rise of stagflation.
Indeed, Hoisington and Hunt back their
maverick view with detailed monetary and
economic analysis.
Most fixed-income managers these days
worry that the Fed’s $3 trillion quantitative-
easing program is priming the pumps for ris-
ing inflation and interest rates—making the
30-year bond “return-free risk,” in the words
of perennial inflation hawk James Grant.
But that, Hoisington and Hunt say, over-
looks the collapse in the “money multiplier.”
For many years that multiplier hovered
above eight, meaning if the Fed injected $1
billion into the banking system by purchasing
bonds, it could expect an $8 billion-plus ex-
pansion in the money supply. Since the finan-
cial crisis the multiplier has collapsed below
three and has yet to start recovering. Why
not? Probably a combination of low interest
rates, high capital requirements and tighter
regulation. Nearly half the excess reserves
are credited to foreign banks that may want a
ready supply of dollars in the next crisis.
Whatever the cause, the collapsing
money multiplier means the Fed’s efforts
have had “zero effect on the growth of the
money supply, and people just can’t believe
it,” Hoisington says.
F
rom the inaptly named trading
floor of Van Hoisington’s invest-
ment company in Austin, there’s
a commanding view of the Texas
Hill Country. It’s a nice diver-
sion, since not much trading takes place at
$5 billion-in-assets Hoisington Investment
Management.
Hoisington, 73, has kept his clients almost
entirely in long-term bonds, specifically 25- to
30-year Treasurys, since the Bush Adminis-
tration. The first one. For a quarter-century
he’s been the Henry Ford of bond investing,
ofering customers anything they want as long
as it’s long-term Treasurys, and in the process
has earned enough to buy himself a couple of
Austin mansions and ranch land.
In the early summer of 2007, when
FORBES last spoke with Hoisington, he was
predicting a severe recession and urging
investors to load up on long-term zero-
coupon Treasurys. As the stock market fell
more than 30%, his clients made a quick 15%.
Later in 2008, when “the Fed started ramp-
ing up its balance sheet by a trillion dollars
at a whack and everybody assumed inflation
would go up,” he got nervous about his posi-
tion, he now admits. Nevertheless, he stayed
the course, and by the end of 2011 his clients
were up 66%.
True, last year Hoisington clients lost
16.7% after fees. But they’re up almost 12% so
far this year, bringing their three-year annual
compound return to 10.5%, compared with
14.7% for the Standard & Poor’s 500. And
over 20 years they’ve done even better com-
paratively, with a compound return of 8.2%,
only slightly less than the 9.5% for the S&P.
FIXED INCOME
The Last Long Bond Bulls
BY DANIEL FISHER
Are Van Hoisington and Lacy Hunt just stubborn? Or do they know
something all the other fxed-income pros don’t about 30-year Treasurys?
Money-multiplier men:
Van Hoisington and
Lacy Hunt say others are
overlooking an obscure
but crucial ratio.
INVESTING


FIXED INCOME
56 | FORBES JUNE 16, 2014
fools not to keep a close eye on the money
supply, which the Fed discloses every Thurs-
day. “If it started taking of like a shot, we’d
start to get worried,” Hoisington says. “But if
things change, a bond guy’s got all the time in
the world to get out of Dodge.”
Really? Pimco’s Bill Gross and others have
been avoiding long bonds partly because
they fall fast if rates rise. The duration, or
measure of how much a bond will vary with
a change in rates, rises with its maturity. To-
day’s lower-interest bonds also have higher
duration risk than higher-rate bonds in the
past. If rates go up one percentage point, the
price of a 30-year zero-coupon bond is ex-
pected to lose 30%.
Duration works both ways, though, and if
long-term rates fall another 50 to 100 basis
points, that translates into a 15% to 30%
increase in the value of their bonds. Not bad
for paper bearing a 100% guarantee from
Uncle Sam.
Hoisington says his firm’s research sug-
gests the low point in interest rates won’t
come until 14 years after the crisis, or some-
time in the next decade. And having lived
through the 1970s, just as Gross did, the
septuagenarian pair of Hoisington and Hunt
can tick of the diferences between then and
now. Among them: In the 1970s money veloc-
ity was stable, not slowing.
So what would worry these bond bulls?
“If the world got cut in two,” answers
Hunt, a history buf who collects rare books
and has visited every significant battle-
field from the Civil War and American
Revolution. If one half of the world stopped
trading with the other, he says, as it did
when the Soviet Union and China retreated
behind their respective curtains, the econo-
mies of scale from global commodity and
production markets would shrink and infla-
tion might return, as it did in the postwar
period until Paul Volcker snapped the cycle
in 1980. With Vladimir Putin threatening
Ukraine, that seems to be more of a risk
now than it has been in decades. “But
China’s got to go along,” Hoisington
is quick to add.
Okay, not exactly zero. The money supply
is growing at a 6% annual rate. But veloc-
ity—the speed with which those dollars are
moving through the economy—has also been
dropping, by 3% a year. The result, Hunt says,
is 3% GDP growth and no prospect for more.
Yet another factor in the Hoisington/Hunt
analysis is the overhang of public and pri-
vate debt, which, despite talk of deleverag-
ing, remains at 350% of GDP in the U.S. and
even more in places like the U.K., at 520%,
and Japan, at 650%. “When the economy
gets overindebted, economic growth tends
to slow, and fiscal and monetary policies be-
come impotent,” says Hoisington, who man-
aged investments for a bank’s trust depart-
ment before starting his own firm in 1980.
Even if the economy doesn’t ignite, what
about that stagflation risk Hunt knows so
well from his Philadelphia days? Didn’t
Milton Friedman famously consider infla-
tion an ever-present risk and a monetary
phenomenon? Inflation, Hunt answers, also
requires tight supplies of commodities and
manufactured goods. “We have the ability to
produce ten cars for a world that demands
six,” he says. “So if the demand for cars rises
to seven, it’s not going to increase prices.”
Of course, Hoisington and Hunt would be
INVESTING
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TRENDING
What the 55 million
Forbes.com users
are talking about.
For a deeper dive go to
FORBES.COM/INVESTING
PERSON
VLADIMIR PUTIN
Massive, long-term Sino-
Russian nat-gas accord
might be an alliance of
convenience, but it’s an
alliance all the same.
West watches warily.
COMPANY
CREDIT SUISSE
Feds hit the bank with
criminal charges, but top
executives hang on to
their jobs.
IDEA
PRIVATE TAX
COLLECTIONS
Congress mulls turning
over delinquent tax bills
(again) to collection
agencies. Dread an IRS
audit? Just wait till an ill-
tempered bounty hunter
shows up at your door.  
“Plan specifcally so you can implement fexibly.” —DALLIN OAKS
FINAL THOUGHT
LOWER MULTIPLICATION
THE COLLAPSE OF THE MONEY MULTIPLIER MEANS
THE FEDERAL RESERVE’S EFFORTS HAVE HAD
LITTLE EFFECT ON THE MONEY SUPPLY.
SOURCES: FEDERAL RESERVE; ST. LOUIS FEDERAL RESERVE; THE AMERICAN BUSINESS CYCLE BY
ROBERT GORDON.
0
2
4
6
8
10
03/04 03/09 03/14
MONEY MULTIPLIER

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Company, Washington, D.C. 20076; a Berkshire Hathaway Inc. subsidiary. GEICO Gecko ©1999-2014. © 2014 GEICO
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58 | FORBES JUNE 16, 2014
INVESTING
RICHARD LEHMANN — FIXED-INCOME WATCH
earnings ratios an attractive option.
It’s also a way to use overseas cash for
foreign buyouts without first having
it taxed in the U.S. Upwards of $600
billion in deals so far this year testifies
to the popularity of this trend.
While the growth outlook in the
U.S. is poor, it’s even worse for the
rest of the world. This usually leads
to a stronger dollar, which translates
into lower costs for foreign-sourced
materials. It also means lower earn-
ings from currency translation losses,
but these can be partially hedged.
Income investors interested in
dividends benefit from rising cor-
porate payouts that also buttress
stock prices, but investors who hold
corporate debt face increased risk
from ratings declines due to higher
borrowings used to retire stock. Also
fear of rate increases due to infla-
tion will continue to haunt us despite
Fed reassurances. I believe locking in
investments paying 6% or more today
should prove immune to inflation-
borne value erosion, if not volatility.
Further protection can be built into a
portfolio by the right choice of instru-
ment and industry. Uncertainties and
uneven growth in diferent sectors
argue for staying diversified.
Two areas where you can find
yields of 6% or more with some built-
in appreciation potential are master
limited partnerships (MLPs) and
closed-end funds. As for industry, look
to utilities and pipeline companies.
In MLPs I like WILLIAMS PARTNERS LP
(WPZ, 51), yielding 7%. The company
has extensive gas and oil pipelines.
This is a business that has a brighter
future than the overall economy for
many years to come. Another MLP
is NORTHERN TIER ENERGY LP (NTI, 27), a
refining and pipeline company based
in Minnesota, near its source of raw
materials. It also owns a chain of con-
venience stores. Northern Tier yields
9%, albeit with higher risk. Both of
these yields are tax-sheltered income.
For closed-end funds look to
BLACKROCK UTILITY & INFRASTRUCTURE TRUST
(BUI, 19). This trust invests in electric,
water, natural resources and tele-
com companies here and abroad. It
sports a 7.4% yield, uses no leverage
and sells at a 10.9% discount to book
value. FLAHERTY & CRUMRINE PREFERRED
SECURITIES INCOME FUND (FFC, 20) uses
leverage to deliver an 8.1% yield. It’s
higher risk, but it has a good long-
term track record.
INCOME WITHOUT GROWTH
RICHARD LEHMANN IS EDITOR OF THE FORBES/LEHMANN INCOME SECURITIES INVESTOR NEWSLETTER AND PRESIDENT OF LEHMANN LIVIAN FRIDSON ADVISORS.
FOR MORE INFORMATION FOLLOW HIM AT FORBES.COM/LEHMANN.
INCOME INVESTORS DON’T NEED GROWTH
TO PROSPER, SO THE NEXT FEW YEARS
SHOULD BE GOOD
F
NEVER UNDERESTIMATE the
ingenuity of corporate America or the
optimism of its citizens. While the
media obsess over multiple economic
crisis scenarios and reinforce the
message that the economy promises
little growth, corporations just keep
on grinding out higher earnings.
Much is made of Federal Reserve
Bank intervention and its various
programs to pump up economic
growth, but our central bank’s ef-
forts are merely pump-priming at
best. It’s the resilience of business
that is propelling growth. This is
glowing testimony to the system we
have today and a powerful argu-
ment for how corporations grow in
a no-growth world.
Pressured on the top line, corpora-
tions have been cutting costs, down-
sizing and increasing worker produc-
tivity since 2008. This obviously has
its limits and becomes less efective
over time, but greater efciency is a
mind-set that takes years to instill in
large organizations before measurable
savings occur.
Since markets care more about
earnings per share than total earn-
ings, financial engineering is an efec-
tive tool that can work wonders. With
interest rates so low, and shrinking
sales requiring less working capital,
corporations can borrow cheaply and
leverage their balance sheets to use
the increased cash flow to buy back
outstanding shares. Some 20% of all
U.S. corporate stock has thus been
bought back since 2005. Another tool
is growth through mergers and ac-
quisitions. Resurgent stock prices and
huge buildups of cash make buying
other companies with lower price/

The Main Advantages of Municipal Bonds
Investors are attracted to municipal bonds for three
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Many investors, particularly those nearing retirement
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investing in rated investment-grade municipal bonds
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Potential Regular Predictable Income
Municipal bonds typically pay interest every six
months unless they get called or default. Tat means
that you can count on a regular, predictable income
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grade bonds favored by Hennion & Walsh.
Potential Triple Tax-Free Income
Income from municipal bonds is not subject to federal
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© 2013 Hennion and Walsh. Securities offered through Hennion & Walsh Inc. Member of FINRA, SIPC. Investing in bonds involves risk
including possible loss of principal. Income may be subject to state, local or federal alternative minimum tax. When interest rates rise, bond prices
fall, and when interest rates fall, prices rise. *Source: Moody’s Investor Service, March 7, 2012 “U.S. Municipal Bond Defaults and Recoveries,
1970-2011.” Past performance is no guarantee of future results.
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for your free Bond Guide.

60 | FORBES JUNE 16, 2014
INVESTING
JOHN BUCKINGHAM — INTRINSIC VALUE
HIGH-FLYING tech stocks like
Amazon.com, LinkedIn, Twitter,
3-D printer maker Stratasys and
data-security provider FireEye have
a few things in common. They’re
all down more than 25% in price
this year, and they still trade for
rich multiples of earnings, sales and
book value. Book value is the key
factor in determining whether a
stock is in the growth or value cat-
egory of the Russell 3000 Index.
The five stocks mentioned above
are all members of the Russell 3000
Growth Index. In 2013 growth was
king. It trumped value 34.2% to
32.7%. But that was an anomaly. In
2014 so far growth has struggled
relative to the value index, trailing by
some two percentage points. Indeed,
since December 1978 the Russell
3000 Value Index has enjoyed an
annualized rate of return of 12.4%,
compared with 10.7% for the Russell
3000 Growth Index. These figures
echo the 13.7% versus 9.4% outper-
formance for growth reported by
professors Eugene Fama and Ken-
neth French, whose data on value
and growth stocks go all the way
back to 1926.
I'm happy that the historical evi-
dence validates the commonsense,
value-based approach to investing
that I have used for more than 25
years to analyze stocks and build
portfolios of low price-to-book and
low price-to-earnings stocks. While
most of us like to hunt for bargains in
our everyday life, investors seem per-
fectly willing to pay up for growth,
hoping that an exciting story will
attract even greater interest and/or
that a company will grow into its pre-
mium valuation. Many of these hot
stocks are priced for perfection, with
even a minor disappointment proving
disastrous to the share price. FireEye
is a good example: It’s down 50% this
quarter, punished after expectations
were not exceeded wildly enough.
Inexpensively priced stocks,
many of which pay generous divi-
dends, ofer several avenues for
appreciation. For example, the exist-
ing relatively low price multiples of
various income-oriented fundamen-
tal metrics like revenue and earn-
ings do not have to change if growth
in the underlying fundamental data
series keeps pace. Also, an existing,
relatively pessimistic view on a par-
ticular financial health metric—say,
debt-to-equity or interest coverage—
could improve as the business works
through near-term difculties and
the perceived imperfection becomes
less worrisome. Finally, simple mean
reversion, whereby already relatively
low price multiples return to more
normal levels, might occur.
So which stocks are priced for
imperfection these days? There are
several, but here are two names that I
currently favor.
ENSCO PLC (ESV, 50) is the world’s
second-largest ofshore driller,
with one of the newest jack-up and
deepwater fleets in the contract
drilling industry. It’s especially ac-
tive in the North Sea. Shares now
change hands at less than nine times
earnings while yielding a particu-
larly fat 6%. Though folks are wor-
ried about recent declines in the
rates the company and its competi-
tors charge for using their rigs, I
believe that the long-term outlook
for global energy demand is positive
and those who provide the prover-
bial picks and shovels to the explo-
ration and production companies
are poised to continue delivering
handsome profits.
SYMANTEC (SYMC, 22), the provider
of information security, storage and
data-management solutions for con-
sumers and businesses, should ben-
efit from the depth and severity of
the recent high-profile data breaches
and the relative insecurity of mobile
devices. Alas, the recent departure of
the CEO and disappointing earnings
comparisons have caused short-
sighted investors to abandon its
shares, but the stock can now be had
for only 11 times estimated earnings,
while ofering a 3% dividend yield
to boot.
PRICED FOR
IMPERFECTION
JOHN BUCKINGHAMISCHIEFINVESTMENTOFFICERATALFRANKASSETMANAGEMENTANDISEDITOROFTHE PRUDENT SPECULATOR. FORMOREINFORMATIONVISITWWW.ALFRANK.COM.
HISTORICAL EVIDENCE VALIDATES THE
COMMONSENSE, VALUE-BASED APPROACH
F

“This is an important book.”
—JOHN A. ALLISON
President and CEO, Cato Institute
“Forbes and Ames deliver a gripping read and
an intriguing viewpoint on how to get our
economy back on track.”
—GRETA VAN SUSTEREN
host of On the Record, Fox News Channel
“Forbes gives us sensible and time-tested
recommendations for stopping future
financial meltdowns.”
—LAWRENCE KUDLOW
CNBC Senior Contributor
New York Times
Bestselling Author
STEVE FORBES
Reveals How the
Fed’s Weak Dollar
Hurts Every American
Read the book and join the conversation. @SteveForbesCEO www.Forbes.com/money

INVESTING
DAVID DREMAN — THE CONTRARIAN
THE MARKET IS UP over 150%
since April 2009 and continues to
hit alltime highs. Will this aging bull,
which has now stomped bears for
more than five years, keep moving
higher? A lot of experts say it won’t
and warn of a correction of 10% to
15% or more within a few months.
After all, there have been only three
short-lived corrections of 10% to 16%
since it began; unemployment still
remains elevated, while GDP has
crept higher since the stock surge
began. Many think a bear market
is lurking around every corner and
are limiting their stock holdings and
moving out as far as 50 years in bond
maturity, just to get more yield. Oth-
ers simply take on more risk, buying
junk bonds despite the recent mem-
ory of 2007 and 2008, when liquidity
evaporated along with the market for
high-yield credits.
I’m in the other camp and have
been so for some time. This bull
market has years ahead of it, despite
some significant corrections and
panics along the way. In a best-case
scenario we might see the major
averages double over the next six
or seven years. Why? Because U.S.
economic growth is finally accel-
erating. Industrial production, for
example, is showing a better picture
quarter by quarter, and employment
is increasing.
More important, banks are flush
again and have funds to lend. Al-
though the Fed poured trillions of
dollars into the banking system,
much of it is being hoarded as excess
reserves. Given the zeal of the Trea-
sury’s bank examiners and the costs
of covering subprime losses and liti-
gation from foreclosures, that’s un-
derstandable. But all of this is largely
behind the banks now, and it’s time
to put the reserves to productive use
in the economy.
The bottom line here was that
small businesses, the largest produc-
ers of jobs, could not get loans to
expand, but now money is abundant
again. That means more growth and
more jobs, and these are the main in-
gredients of a robust bull market.
Current valuations are another
reason to be cheerful. With the S&P
500 trading at 16 times current year
estimates, it is close to the average of
the past 100 years. No question there
are micro bubbles out there. Social
media and biotech are examples,
but this is a very diferent market
from the Tech Bubble of 1997–2000,
which rocketed the pricing of major
indexes into outer space.
Yes, this is a good time to buy
stocks, but not just anything. If I’m
right and we see a general market
advance, you are far better of buying
sectors of the market or index funds
than you are throwing the dice on a
small handful of favorites.
Large-cap domestic index funds
have outperformed managed funds
about 90% of the time for decades.
THE VANGUARD 500 INDEX FUND (VFINX, 175)
replicates the S&P 500 very close-
ly and has a fee of $17 a year for a
$10,000 investment. This is less than
a quarter of the average mutual fund
cost, which tends to run above 1%, or
$100 per $10,000. Even cheaper is the
popular exchange-traded fund SPDR
S&P 500 (SPY, 190), with an expense ratio
of .09%, or $9 per $10,000.
You can also buy a small-cap ETF,
which owns stocks with market
capitalizations under $3 billion. I like
the iSHARES RUSSELL 2000 VALUE ETF (IWN,
97), which buys stocks with lower
price-book value ratios and has out-
performed the S&P 500 by nearly 1%
annually for the last decade.
I am also a sector-ETF buyer, par-
ticularly in energy. Companies in oil
and gas production and development
have excellent potential. Despite the
slow recovery to date, oil prices are
not far of their highs, while natural
gas has the potential of much faster
price increases because of its increas-
ing use as a substitute for coal and
other fuels. A good candidate here is
SPDR S&P OIL & GAS EXPLORATION & PRODUC-
TION ETF (XOP, 75).
DOUBLE YOUR MONEY
IN AN INDEX FUND
DAVID DREMAN IS CHAIRMAN AND FOUNDER OF DREMAN VALUE MANAGEMENT. VISIT HIS HOME PAGE AT WWW.FORBES.COM/DREMAN.
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62 | FORBES JUNE 16, 2014
REASONS TO BE CHEERFUL ABOUT STOCKS:
MORE MONEY, MORE GROWTH, MORE JOBS
AND ATTRACTIVE STOCK VALUATIONS

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HOPE is in the bag.

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64 | FORBES JUNE 16, 2014
1. ANGELA MERKEL 59
Chancellor Germany
2. JANET YELLEN 67
Chair, Federal Reserve U.S.
3. MELINDA GATES 49
Cochair, Bill & Melinda Gates
Foundation U.S.
4. DILMA ROUSSEFF 66
President Brazil
5. CHRISTINE LAGARDE 58
Managing director, International
Monetary Fund France
6. HILLARY CLINTON 66
Former Secretary of State U.S.
7. MARY BARRA 52
CEO, General Motors U.S.
8. MICHELLE OBAMA 50
First Lady U.S.
9. SHERYL SANDBERG 44
COO, Facebook U.S.
10. VIRGINIA ROMETTY 56
CEO, IBM U.S.
11. PARK GEUN-HYE 62
President South Korea
12. SUSAN WOJCICKI 45
CEO, YouTube U.S.
13. INDRA NOOYI 58
CEO, PepsiCo U.S.
14. OPRAH
WINFREY 60
Media mogul U.S.
15. IRENE ROSENFELD 61
CEO, Mondelez U.S.
Our definitive annual
guide to the extraordinary
icons, game changers and
ceiling crashers who are
asserting themselves on
the world stage. Eighteen
newcomers join the list
this year, which is based
on dollars and impact.
EDITED BY CAROLINE HOWARD
1OO MOST POWERFUL WOMEN
MARY BARRA

JUNE 16, 2014 FORBES | 65
JAMEL TOPPIN FOR FORBES
POWER
SHIFT
Mary Barra made history
by working her way into
Detroit’s car-guy club and
becoming the frst female
CEO of General Motors. Now
can she fx the company?
BY JOANN MULLER

66 | FORBES JUNE 16, 2014
M
ary Barra, mother of two and the first female
CEO of General Motors, sat silently while the
parents of ten dead children unloaded their
grief and anger on her. Some read prepared
statements; others spoke of the cuf. One fa-
ther unbuttoned his dress shirt to reveal his daughter’s face on
the T-shirt underneath. All were strangers but shared a tragic
bond: Their loved ones died in a GM vehicle.
Renee Trautwein’s daughter, Sarah, 19, completed only one
semester at her dream college before her 2005 Chevrolet Co-
balt hit a tree. The air bag didn’t deploy. Doug Weigel’s daugh-
ter, Natasha, 18, died in Wisconsin after the 2005 Cobalt she
was riding in crashed into a ditch. Randal Rademaker’s 15-year-
old daughter, Amy, perished in the same crash. Susan Hayes’
son, Ryan Quigley, 23, died in upstate New York when his 2007
Cobalt landed upside down in a shallow stream.
The similarities were eerie: Young drivers lost control; air
bags failed to deploy; keys were in the “accessory” position; all
were driving 2005 to 2007 Chevrolet Cobalts.
“I’m truly sorry for your loss,” Barra, a dark-haired woman
who bears more than a passing resemblance to actress Sally
Field, said again and again, wiping her eye at one point during
the nearly two-hour meeting at GM’s Washington, D.C. ofce.
The following day, Apr. 1, Barra would appear before a congres-
sional subcommittee investigating why GM waited years to re-
call Cobalts and other vehicles that could lose power because of
a faulty ignition switch; she met with the families at the request
of their attorney, Robert Hilliard.
“I put myself in their shoes and thought they deserved to
be heard,” Barra told FORBES in late May, just days before the
company was set to issue a report on what caused the ignition
disaster—and what they planned to do to stop it from happen-
ing again. “It was very difcult for them, and I think they need-
ed to know that General Motors cared and that we listened.”
Much as the families wanted to put a face on the statistics—
at least 13 killed in 31 accidents—Barra, too, hoped to put a face
on what she calls “the new General Motors,” a company that
has spent much of
the past five years
shedding a reputa-
tion for poor qual-
ity and mismanage-
ment, not to men-
tion the taint of
a $50 billion tax-
payer-financed
bankruptcy.
Being the face of
GM is not easy right
now. Instead of cel-
1OO MOST POWERFUL WOMEN MARY BARRA
She runs the
chemical giant
famous for
nonstick frying
pans and paints,
but Kullman
thinks the future
is in genetically
modified seeds
and solar energy.
She’s spent over
$100 million on 21
companies, largely
for acqui-hires.
Plus another $1.1
billion for Tumblr.
We want to see our gender
represented proportionately
in positions of leadership.
In our country women face
intolerance, ignorance, racism,
sexism. We all experience those things. But
in other countries women are facing per-
secution. We have to look out for our
sisters around the world who really
need us and are risking their lives.
KATHY IRELAND
CEO, Kathy Ireland Worldwide
TALKI NG POI NTS FORBES WOMEN SUMMI T
16. MARIA DAS GRACAS
SILVA FOSTER 60
CEO, Petrobras Brazil
17. BEYONCE
KNOWLES-CARTER 32
Entertainer-entrepreneur U.S.
18. MARISSA MAYER 39
CEO, Yahoo U.S.
19. CRISTINA FERNANDEZ
DE KIRCHNER 61
President Argentina
20. MEG WHITMAN 57
CEO, HP U.S.
21. MARILLYN HEWSON 60
CEO, Lockheed Martin U.S.
22. URSULA BURNS 55
CEO, Xerox U.S.
23. HELEN CLARK 64
Administrator, UN Development
Programme New Zealand
24. SAFRA CATZ 52
CFO-president, Oracle U.S.
25. MICHELLE BACHELET 62
President Chile
26. NANCY PELOSI 74
Minority leader, House
of Representatives U.S.
27. GINA RINEHART 60
Billionaire-activist Australia
28. AMY PASCAL 56
Cochair, Sony Pictures
Entertainment U.S.
29. LAURENE POWELL JOBS 50
Billionaire-philanthropist U.S.
30. MARGARET CHAN 66
Director-general, World Health
Organization China
31. ELLEN KULLMAN 58
CEO, DuPont U.S.
32. SOFIA VERGARA 41
Entertainer-entrepreneur U.S.
33. DREW GILPIN FAUST 66
President, Harvard University U.S.
34. ABIGAIL JOHNSON 52
President, Financial Services,
Fidelity Investments U.S.
35. QUEEN ELIZABETH II 88
Monarch U.K.
36. ARUNDHATI
BHATTACHARYA 58
Chair, State Bank of India India
“
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68 | FORBES JUNE 16, 2014
reports on its safety review process-
es for the next year. Results of the in-
ternal investigation and Feinberg’s
recommendations are due soon. So
far GM’s board is happy with Barra.
“The confidence has grown over a pe-
riod of time, given the way that Mary
has handled all the situations: testify-
ing before Congress, meeting with the
media,” GM Chairman Tim Solso tells
FORBES. “She’s done a superb job,
and the board recognizes that.”
Through it all, Barra has tried to
keep some semblance of normal-
cy. She wears a Fitbit but doesn’t al-
ways get her 10,000 steps in. She ad-
mits she’s not athletically inclined
(“It would be an afront to sports,”
she says) and spends most of her free
time sitting in the bleachers, watch-
ing her daughter play lacrosse, her
son soccer. And yes, she felt horri-
ble when she missed her son’s Junior
Prom because she was out of town,
though she has seen lots of pictures.
“My kids told me the one job they are
going to hold me accountable for is
mom,” she says.
Mostly, though, she’s focused on
running America’s largest car com-
pany, which—despite the recall and
all the negative headlines—has a lot
going for it right now. GM is currently
producing the best vehicles in its his-
tory, winning a string of awards from
Consumer Reports, the Insurance In-
stitute for Highway Safety and oth-
ebrating her historic
achievement as the first
female CEO in a tradi-
tionally male-dominat-
ed industry, a feat that
landed her at No. 7 on
FORBES’ 2014 list of
the world’s Most Pow-
erful Women, Barra,
52, learned of the igni-
tion recall on Jan. 31,
just two weeks into her
new job, and has been
wrestling with it since.
The original recall of
700,000 vehicles was
announced on Feb. 7, and twice ex-
panded, to a total of 2.4 million
vehicles. Since then GM has
stepped up its safety reviews
and recalled some 13.6 million
vehicles for everything from
faulty tail lamps to potential
seat belt malfunctions.
The crisis is an early, unex-
pected test of Barra’s leadership
and has raised questions about
whether the 33-year company
veteran—or anyone—can really
change the culture in an orga-
nization as vast as General Mo-
tors, a company that has run through
five CEOs in the last six years. Since
the recall was announced Barra has
scrambled to stay ahead of the cri-
sis, hiring an independent attorney,
Anton Valukas, to lead an internal in-
vestigation and naming a new vice
president of global vehicle safety, Jef
Boyer. Acknowledging that GM
has both “civic and legal obli-
gations” to victims, she tapped
Kenneth Feinberg, who over-
saw claims for victims of 9/11
and Hurricane Katrina, to help
GM assess its options for deal-
ing with families’ compensa-
tion claims. And, in surprising-
ly quick fashion, she reached an
agreement with federal regula-
tors on May 16 to pay a record
$35 million fine—the maximum al-
lowed by law—and to submit monthly R
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1OO MOST POWERFUL WOMEN MARY BARRA
At 55 she’s the
average age of the
Power Woman. The
youngest is Lady
Gaga at 28. The
oldest is Queen
Elizabeth II at 88.
At the helm of
world’s largest
hunger-fighting
organization,
which has helped
feed millions in
80 countries, she
brought in $4.2
billion in contribu-
tions last year.
37. RENEE JAMES 50
President, Intel U.S.
38. SRI MULYANI INDRAWATI 51
Managing director, World Bank
Indonesia
39. ANNA WINTOUR 64
Artistic director, Condé Nast U.S.
40. JOYCE BANDA 64
President Malawi
41. WU YAJUN 50
Cofounder-chair, Longfor
Properties China
42. BONNIE HAMMER 63
Chair, NBCUniversal Cable
Entertainment U.S.
43. CHANDA KOCHHAR 52
CEO-managing director, ICICI Bank India
44. NGOZI OKONJO-IWEALA 60
Finance minister Nigeria
45. ERTHARIN COUSIN 57
Executive director, UN World
Food Programme U.S.
46. ELLEN DEGENERES 56
Entertainer-advocate U.S.
47. SHEIKH HASINA WAJED 66
Prime minister Bangladesh
48. AMY HOOD 42
CFO, Microsoft U.S.
49. ANGELA AHRENDTS 54
Senior VP, Apple U.S.
50. ANGELINA JOLIE 39
Actress-philanthropist U.S.
51. MARGARET HAMBURG 58
Commissioner, Food & Drug
Administration U.S.
52. ARIANNA HUFFINGTON 63
Editor-in-chief, Hufngton Post U.S.
53. LUCY PENG 41
CEO, Small & Micro Financial
Services Group, Alibaba China
54. CHER WANG 55
Cofounder-chair, HTC Taiwan
55. SHEIKHA LUBNA
AL QASIMI 52
Minister of International
Cooperation & Development UAE
56. GAIL KELLY 58
CEO, Westpac Group Australia
57. PENG LIYUAN 51
First Lady China
I come from a place where
power is very well defined.
We in the military will use it as
a destructive force. But while
risk-taking is generally thought of as
the male domain, they have no idea of
what women are capable of. We have the
same intellectual capacity and can make the
same judicious decisions. We bring a complete-
ly diferent perspective to the mission and way
to channel that energy.
MICHELLE HOWARD
Navy Vice Admiral
TALKI NG POI NTS FORBES WOMEN SUMMI T

JUNE 16, 2014 FORBES | 69
dent was working at a Pontiac metal-
stamping facility, a harsh, noisy
plant where huge industrial press-
es smashed flat sheets of steel into
car parts. “It was the kind of environ-
ment that could frighten of a lot of
people, including men,” says Clarke,
who also worked there early in his
career.
Far from frightened, Barra loved
it and became hooked on manufac-
turing. After graduation in 1985 she
went to work full-time at GM as a
quality inspector in a Pontiac plant,
helping churn out the midengine
Fiero sports car. In 1988 GM paid for
Barra to get her M.B.A. at Stanford.
Her roommate there, Catherine Mal-
colm-Brickman, recalls Barra’s proud
parents and new husband, Tony—
who also worked for GM—dropping
her of at the dorm. One of her most
vivid memories of Barra was the
night an earthquake struck during
the 1989 Giants-Oakland A’s cham-
pionship. Huddled in the dark, ter-
rified, with a bunch of friends, Barra
chuckled. “Well, I guess there’s no
World Series tonight,” she said, trig-
gering a wave of laughter. “She was
able to steel herself,” says Malcolm-
Brickman. “At the end of night we
held together.”
That duality—the cool, analyti-
cal engineer who could also keep her
warmth and wits in a crisis—bur-
nished a growing reputation as she
rose in the company. In 1999 GM
group vice president for labor rela-
tions Gary Cowger assigned her to
improve communications with plant-
level employees amid tense nation-
al labor negotiations. Under Barra
memos went from “talking about
birth announcements, retirements
and bowling scores,” as one former
employee put it, to honest talk about
which plants were making money,
which were not and why they had to
work the weekend to keep the com-
pany going. “Until then people didn’t
believe it.”
Four years later she was running
ers. GM’s four U.S. brands—Chevro-
let, Buick, GMC and Cadillac—now
rank highest in customer satisfaction
with dealers. GM sold 9.7 million ve-
hicles globally last year, earning a net
$3.8 billion on revenue of $155.4 bil-
lion. Earnings before taxes and inter-
est were $8.6 billion, or 5.5% EBIT
margin, up from 5.2% in 2012. New
product launches like the 2015 Cadil-
lac Escalade and the Chevy Colorado
pickup should bolster Barra’s arsenal
even more. And while there are prob-
lems—a slowed Chinese market, the
stalled European economy—Barra is
optimistic.
“I think from the product per-
spective we’re there, but we still have
work to do” to restore the company’s
reputation, Barra says. “Rebuilding
takes time.”
But as the costs of the ignition-
switch debacle mount—recalls, suits
and potential fines could wipe out
most of 2014’s projected $5 billion
profits—the risk is obvious. To sur-
vive, and thrive, Barra must get her
“new” GM to finally—finally—emerge
from the shadow of the old. And she
needs to do it soon.
THE MOST POWERFUL WOMAN
in the history of the auto indus-
try came to the business the way so
many others of her generation did
in the mid-1980s: through osmo-
sis. Born Mary Makela, Barra grew
up in Waterford Town-
ship, Mich., a middle-
class suburb north of
Detroit, where local car
dealers turned the ar-
rival of new vehicles
into small holidays, cov-
ering the windows to
make a big production
out of unveilings. Her
father worked as a die-
maker at GM’s former
Pontiac division, wear-
ing the same ubiquitous
blue GM uniform as all
the other Scout leaders,
coaches and fathers in the neighbor-
hood. Her dad tooled around in a red
Pontiac Firebird convertible, which
she loved. “All of our dads worked
at the Pontiac Motors division,” said
Navistar CEO Troy Clarke, a former
GM executive who lived in Barra’s
neighborhood and graduated from
the same high school. “We basical-
ly grew up in an area where the peo-
ple you were supposed to work with
lived.”
As kids both Barra and her broth-
er Paul (now a doctor) excelled in
math and science, and after she grad-
uated high school in 1979 she landed
a slot at the General Motors Institute
(now Kettering University) in Flint,
Mich., a cooperative trade school
founded in 1919 and run by GM from
1926 to 1982. She was sponsored by
Pontiac, which meant the compa-
ny paid for her education while giv-
ing her real-world experience. One of
her first assignments as a co-op stu-
“IT WAS THE KIND
OF ENVIRONMENT
THAT COULD
FRIGHTEN OFF A
LOT OF PEOPLE,
INCLUDING MEN.”
We still haven’t worked
out how we get women
entrepreneurs—whether it’s
in America, the U.K. or Liberia—access
to capital. If you want $100, there’s probably
a microfinance institution for you. If you want
$100 million, those big banks will flood you with
ofers. But if you want $50,000 or $100,000 to
take your business to the next stage, it’s really
difcult. And that’s not good enough in the 21st
century.
CHERIE BLAIR
Founder, Cherie Blair
Foundation for Women
TALKI NG POI NTS FORBES WOMEN SUMMI T


Joan Uronis
Diagnosed at age 62.

72 | FORBES JUNE 16, 2014
tled, she never heard about it, Barra
insists—D-ham made Cadillacs,
Buicks and Pontiacs, not Cobalts.
Over the next few years, as Barra
rose in the company—promoted to
executive director of manufacturing
engineering, developing factory pro-
cesses and machinery—the switch
problem was festering. In 2005 prod-
uct engineers twice considered po-
tential fixes to the switch but took
no action, instead issuing a “service
bulletin” in December 2005 advising
dealers to tell customers who com-
plain about unexpected shutofs to
remove heavy items from their key
chains. In 2006 the ignition was qui-
etly redesigned, without a corre-
sponding change in the part number,
a crucial error that escaped notice for
years and likely delayed the issuance
of a recall.
So should Barra have known about
the switch? “You’re a really impor-
tant person in this company,” Senator
Barbara Boxer said after reading por-
tions of Barra’s résumé at a congres-
sional hearing in April. “Something is
very strange that such a top employ-
ee would know nothing.”
Actually, Barra says it isn’t all that
strange. With 219,000 employees
today (326,000 a decade ago, when
the switch problem surfaced), GM is
a huge, complex organization. There
are 30,000 people in product devel-
opment alone. As she noted during
her testimony, it’s also not very good
at communicating. “There were silos,
her own factory, GM’s Detroit-Ham-
tramck assembly plant. D-ham, as it’s
called in GM-speak, opened in 1985
as a showcase for a new era of
automation to combat Japa-
nese competition. But the tech-
nology was so unreliable that
GM spent as much time try-
ing to get robots to behave as it
did building cars. By the time
Barra arrived, D-ham was reel-
ing from reorganizations. For
the first month Barra roamed
the sprawling complex, talking
to everyone. “When she walked
the plant floor, she knew most
people by name,” says her
boss at the time, manufactur-
ing manager Larry Zahner. It
wasn’t all friendly. Shortly after she
arrived Barra was preparing her bud-
get and decided to eliminate
Christmas lights in the trees
along the plant’s driveway. “I
remember sitting across from
her,” says Frank Moultrie, then
the union’s shop chairman,
“and saying, ‘Are you kidding
me? We’re in that bad of shape
that we can’t have the lights on
for Christmas?’ ” They agreed
to split the electric bill.
“It was never kumbaya,”
adds Moultrie. “But it’s how you
work on those diferences that makes
it work or not.” Within two years
D-ham saw double-digit improve-
ments in quality and safety, and won
a J.D. Power quality award.
WHILE BARRA WAS
FIXING D-ham, else-
where in the company
GM readied the launch
of the 2005 Chevro-
let Cobalt, the car that
would haunt it a dec-
ade later. When a small
group of engineers
began investigating re-
ports that the Cobalt’s
key could slip out of the
“run” position when jos-
1OO MOST POWERFUL WOMEN MARY BARRA
The Brussels-born
designer this year
celebrates the
40th anniver-
sary of her classic
body-hugging
wrap dress.
Described as
“wicked smart,”
last year she
became the
youngest-
ever American UN
ambassador. She
won the general
nonfiction Pulitzer
Prize in 2003 for A
Problem from Hell:
America and the
Age of Genocide.
58. SHAKIRA MEBARAK 37
Entertainer-philanthropist Colombia
59. HO CHING 61
CEO, Temasek Singapore
60. GULER SABANCI 59
Chair, Sabanci Holding Turkey
61. AUNG SAN SUU KYI 68
Secretary general, National
League for Democracy Burma
62. ZHANG XIN 48
Cofounder-CEO, SOHO China China
63. SAMANTHA POWER 43
Ambassador, United Nations U.S.
64. ROSALIND BREWER 51
CEO, Sam’s Club U.S.
65. PHEBE NOVAKOVIC 56
CEO, General Dynamics U.S.
66. MARY CALLAHAN
ERDOES 46
CEO, Asset Management, JPMorgan U.S.
67. LADY GAGA 28
Entertainer-advocate U.S.
68. DIANE VON
FURSTENBERG 67
Owner-designer, DVF U.S.
69. ADENA FRIEDMAN 44
Co-president, Nasdaq U.S.
70. ELLEN JOHNSON
SIRLEAF 75
President Liberia
71. PADMASREE WARRIOR 53
Chief technology-strategy ofcer, Cisco U.S.
72. ELVIRA NABIULLINA 50
Governor, Bank of Russia Russia
73. MARY JO WHITE 66
Chair, SEC U.S.
74. CHUA SOCK KOONG 57
Group CEO, SingTel Group Singapore
75. MIUCCIA PRADA 65
Co-CEO, Prada Italy
76. CAROL MEYROWITZ 60
CEO, TJX Companies U.S.
77. MARY MEEKER 54
Partner, Kleiner Perkins
Caufield & Byers U.S.
78. HELENE GAYLE 58
CEO, CARE USA U.S.
79. TORY BURCH 47
CEO, Tory Burch U.S.
Women’s networks are powerful
because most of us do not find
ourselves in a room full of other
women. My advice is to talk to
other entrepreneurial women because they’ll
invest in your company or refer you to
people who will invest. It’s the new old
girl’s club—or the young girl’s network.
TORY BURCH
CEO, Tory Burch
TALKI NG POI NTS FORBES WOMEN SUMMI T
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JUNE 16, 2014 FORBES | 73
lion rebuilding its IT department,
which had been outsourced, giving
the company a better handle on the
data it needs to make smarter deci-
sions. For the first time, for instance,
GM can track how much money it
is earning on every car sold in every
market around the world.
In 2013, as GM’s board prepared
for Akerson’s eventual departure,
Barra became one of four candidates
quietly considered for the top job.
“I wanted to make sure she was ab-
solutely the right choice,” he says.
“The fact that Mary is a woman is
great. But she earned this job on the
merits of her performance and her
potential.”
The leadership change came un-
expectedly on Dec. 10, 2013 after
Akerson’s wife, Karin, was diag-
nosed with cancer and he decided to
step down to care for her. He made
her appointment as new CEO ofcial
outside a meeting room at Washing-
ton’s Mandarin Oriental hotel, where
GM’s board was convened.
Given what was about to hap-
pen with the ignition recall, was she
thrown under the bus? “Of course
not,” says Akerson. “Mary has said
it: The moment she became aware of
the problem, as I would expect, she
confronted it. She didn’t know about
it. I bet my life on it.”
and as information was known in one
part of the business, for instance the
legal team,” she told the committee,
“it didn’t necessarily get communi-
cated as efectively as it should have
been to other parts, for instance the
engineering team.”
Beyond that, all automakers have
a process for evaluating safety issues
that deliberately doesn’t involve se-
nior management because they don’t
want undue cost influence. “I can’t
intervene,” says Sergio Marchionne,
CEO of GM rival Fiat Chrysler. “My
technical people will decide.”
When the company implod-
ed in 2009, saved only by President
Obama’s justifiable fears of what
closing the doors at GM (and implic-
itly the thousands of suppliers who
depend on it) might do to the fragile
economy, Washington dumped CEO
Rick Wagoner and picked Frederick
“Fritz” Henderson to steer the com-
pany through bankruptcy.
Henderson named Barra to head
human resources. She not only fo-
cused on putting the right people in
the right positions to get through the
restructuring but also worked with
Kenneth Feinberg, who was appoint-
ed by the Obama Administration to
set pay restrictions for GM’s top 25
executives while under government
ownership. “She was a very efective
negotiator,” says Feinberg. “She knew
everything about the 25 people. But
she was also very flexible. She didn’t
come in with one rigid stance.”
After yet another short-term CEO
(former AT&T chief Ed Whitacre)
came and went, Barra’s predecessor
Dan Akerson began the hard work of
repairing the business. The two liked
each other right away, and he merged
product development and purchasing
under her to streamline costs, where
“she brought order to chaos,” he says,
cutting a layer of management and giv-
ing chief engineers more responsibility.
Freed from billions in debt thanks
to the bankruptcy, Akerson accelerat-
ed plans for GM to design more cars
with fewer basic platforms, like Ford
Motor and Volkswagen do. GM built
a new finance arm and spent $1 bil-
SIX YEARS, FIVE CEOS
SINCE BANKRUPTCY GM HAS ENDURED MORE LEADERSHIP TURNOVER THAN ANY U.S. COMPANY ITS SIZE.
“SHE EARNED THIS JOB ON THE MERITS OF
HER PERFORMANCE AND HER POTENTIAL.”
RICK WAGONER
2000–09
Longtime chief got
dumped by Washington
during bailout.
FREDERICK “FRITZ”
HENDERSON
March–December 2009
Obama’s pick to lead GM
through bankruptcy.
ED WHITACRE
2009–10
Former AT&T
chief stabilized
the automaker.
DAN AKERSON
2010–14
Led GM’s rebirth
as a public
company.
MARY BARRA
2014
Steep mid-decade
growth goals
now fall to her.
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ucts and expertise. At the same time,
GM’s executive vice president for in-
ternational operations, Stefan Jacoby,
is tailoring GM’s product portfolio by
country to meet consumer demand,
rather than trying to compete on the
fringes with irrelevant products.
In Europe, where GM’s fresh start
in the U.S. coincided with an eco-
nomic collapse, the company is in the
midst of restructuring, including a
plant closing in Germany under new
president Karl-Thomas Neumann, a
former Volkswagen executive. GM
toyed with selling its Opel division to
concentrate on expanding Chevrolet
in Europe, then thought better of it,
and is now beefing up Opel’s lineup
again. After $18 billion in losses since
1999, GM is now trying to break even
in Europe by mid-decade.
Barra will also need to negotiate a
new national contract with the Unit-
ed Auto Workers in the U.S., which
will be looking to restore some of the
benefits it lost when GM was in bad
shape. Fortunately, the recall head-
lines haven’t hurt sales at home. In
April, GM outperformed expecta-
tions, with sales up 7% from a year
ago, and increased its retail market
share from March. Analysts like J.P.
Morgan’s Ryan Brinkman think—per-
versely perhaps—that the current
spate of recalls might actually help
sales of new GM models by driving
more customers to dealerships to get
their old cars fixed.
IN THE FIVE YEARS SINCE GM
exited bankruptcy, the company has
gone a long way toward righting it-
self, which gives Barra room to ma-
neuver. Its retail market share
(excluding sales to fleet cus-
tomers) has improved, while
average transaction prices are
up $2,000 compared with a
year ago. On Wall Street GM’s
credit rating improved to in-
vestment grade, lowering its
cost of borrowing. Chevrolet,
the carmaker’s largest brand,
sold a record 5 million vehi-
cles last year, while GM also
set a sales record in China, the
world’s largest market. Since
2009, GM has invested $10 billion
back into the U.S. economy.
While 2014 will see only mod-
est growth, Barra is sticking with
Akerson’s mid-decade targets to
achieve a 10% operating margin in
North America, boost annual sales
in China from 3.2 million to 5 mil-
lion vehicles and restore profits to
mid-single digits in South America
and China, despite currency head-
winds and economic turmoil, along
with GM’s own inefciencies. To
get it done, she’s begun flying in her
global leadership team for month-
ly meetings—not only to hash out
important strategic decisions, but
to also make sure they get to
know one another better.
GM continues to perform
well in the U.S. and
China, its two larg-
est markets. Her
plan is to use prof-
its from those mar-
kets to restructure
and make the in-
vestments neces-
sary to grow profit-
ably in other parts of
the world. That task
falls to President Dan Am-
mann, who is crisscross-
ing the globe, trying to find
ways to share more prod-
1OO MOST POWERFUL WOMEN MARY BARRA
With a net worth
$2.6 billion, she is
one of 9 self-made
billionaires on the
list. Including heir-
esses and widows,
there are 13 in
total, with an ag-
gregate net worth
of $80 billion.
The award-winning
actress debuts
this year thanks to
48 million Weibo
followers and her
new appointment
as the first Chinese
UN Refugee
Agency Goodwill
Ambassador.
80. PATRICIA HARRIS 57
CEO, Bloomberg Philanthropies U.S.
81. SUN YAFANG 58
Chair, Huawei China
82. SOLINA CHAU HOI SHUEN 52
Director, Li Ka Shing Foundation
Hong Kong
83. YAO CHEN 34
Entertainer-philanthropist China
84. JUDY FAULKNER 71
Billionaire-entrepreneur,
Epic Healthcare U.S.
85. PATRICIA WOERTZ 61
CEO, Archer Daniels Midland U.S.
86. LUBNA OLAYAN 58
CEO, Olayan Financing Saudi Arabia
87. HU SHULI 61
Founder-editor, Caixin Media China
88. RISA LAVIZZO-MOUREY 59
CEO, Robert Wood Johnson
Foundation U.S.
89. GISELE BUNDCHEN 33
Model-entrepreneur U.S.
90. GWYNNE SHOTWELL 50
COO, SpaceX U.S.
91. SHEIKHA AL-MAYASSA
BINT HAMAD AL-THANI 31
Art collector Qatar
92. KIRAN MAZUMDAR-SHAW 61
Chair-managing director, Biocon India
93. SARA BLAKELY 43
Founder, Spanx U.S.
94. FATIMA AL JABER 44
COO, Al Jaber Group U.A.E.
95. JENNIFER LI 46
CFO, Baidu China
96. FOLORUNSHO ALAKIJA 63
Business tycoon Nigeria
97. WEILI DAI 52
Cofounder-president ,
Marvell Technology Group U.S.
98. BETH BROOKE-
MARCINIAK 55
Global vice chair, EY U.S.
99. LILA TRETIKOV 36
Executive director,
Wikimedia Foundation U.S.
100. GRETA VAN SUSTEREN 59
Anchor, Fox News U.S.
It’s not always about
making money but also
making change. How
many people can you impact?
How many programs can you fund? How
many services can you deliver? As an inves-
tor, those are the things that draw me and
draw philanthropists in general. Many of us
think about an investment not only in terms
of money but also time.
THERESIA GOUW
Cofounder, Aspect Ventures
TALKI NG POI NTS FORBES WOMEN SUMMI T
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Counsel Michael Millikin. Already
GM has assigned one of the com-
pany’s top lawyers to advise glob-
al safety chief Jef Boyer on legal
matters in the hopes of accelerating
data collection and decision-making
around potential recalls.
GM also expects a recommen-
dation from Feinberg about wheth-
er there should be compensation for
accident victims’ families and how
much they should be paid. Then
Barra will probably return to Wash-
ington to share an update on the in-
vestigation with lawmakers.
But that won’t nearly be the end
of the controversy. GM is still fac-
ing an investigation by the U.S. Jus-
tice Department and could face a fine
similar to the $1.2 billion settlement
Toyota paid recently for its histo-
ry of tardy recalls. The company also
faces five separate investigations and
scores of lawsuits from customers
who claim their cars lost value after
the recalls were announced. The
bankruptcy judge will decide if those
claims have any merit, since GM
shed most of its legal liabilities in
bankruptcy court. And through all of
it, she’ll need to force change at the
company and steer it to long-stand-
ing profitability and growth.
It won’t be easy, but Barra seems
up to it. After GM set of a furor
among parts suppliers in 2013 for
changing terms and conditions
without their input, senior execu-
tives fretted over how to resolve the
controversy. “Mary’s feedback was,
‘If we made a mistake, let’s say we
made a mistake and move on,’ ” said
Grace Lieb lein, GM’s vice presi-
dent for global purchasing and sup-
ply chain. So that’s exactly what
the company did in February. The
reaction, says Lieblein, was stun-
ning. “Suppliers came up to me and
said, ‘This is the culture change
you’ve been talking about.’ It’s about
doing the right thing. In the old GM
I don’t think we ever would have
done that.”
One thing Barra knows
for sure: Painful as the re-
call has been, the crisis is
an opportunity to finally
break through the vestiges
of the “old GM” that have
hindered its performance
in the past. “I really feel—
obviously we want to do
the right thing and serve
the customer well through
this—but it’s also an oppor-
tunity to accelerate cultur-
al change.”
A WEEK AFTER HER
grilling on Capitol Hill, Barra spoke
to a much friendlier audience of
several hundred engineers at a
Town Hall-style meeting in the caf-
eteria at the GM Technical Cen-
ter in suburban Detroit, 18 miles
from GM’s headquarters. The Apr.
10 meeting was beamed across the
world to all employees. “At this
point you’re probably town-halled-
out and probably just want to get
back to work,” she joked.
Her message would be famil-
iar to anyone on the assembly line
at D-ham a decade ago. “If we think
there’s some information that an-
other group would benefit from, pick
up the phone,” she said. “Walk to the
desk, send an e-mail.”
In the next week or so GM will
release details of the Valukas inves-
tigation, which Barra promises will
provide a transparent summary of
what went wrong. She’ll also outline
further actions, which could include
a shake-up of GM’s legal depart-
ment, headed by longtime General
We need to reclaim the
word “feminist.” I’m a little
loath to say I’m a femi-
nist because I feel it’s
been co-opted by a group of people
whose values I don’t share. We have
to reclaim the word, and that’s very easy.
We have to make the younger generation
say, “It’s okay to say you’re a feminist.”
And if we say it, they’ll say it.
FELICITY HUFFMAN
Actress-founder, WhatTheFlicka.com
TALKI NG POI NTS FORBES WOMEN SUMMI T
STUMBLING FROM THE GATE
IT TOOK A WHILE, BUT INVESTORS FINALLY WARMED UP TO GM SHARES AFTER ITS POST-
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SOURCES: INTERACTIVE DATA VIA FACTSET RESEARCH SYSTEMS.
’11 ’10 ’12 ’13 ’14
$44
40
36
32
28
24
20
16
STOCK PRICE
F

76 | FORBES JUNE 16, 2014
1OO MOST POWERFUL WOMEN PORTFOLIO
Geek
Chic
THEY DON’T CODE.
THEY’RE NOT DESIGNERS.
AND THEY DEFINITELY
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SIX E-TAILER
ENTREPRENEURS
OFFER A STYLISH
RETORT TO THE
OFT HEARD
LAMENT:
“WHERE ARE
ALL THE
WOMEN IN
TECH?”
BY CAROLINE HOWARD
PHOTOGRAPHS BY JAMEL TOPPIN FOR FORBES

Jenny Fleiss, 30 (left)
Jenn Hyman, 33
RENT THE RUNWAY
QUICK PITCH: Borrow, don’t buy.
FOUNDED: 2009. FUNDING: $54
million. EMPLOYEES: 250. MEMBERS:
4 million. RENTALS IN 2014: $250
million in retail value. CUSTOMER
FAVES: Marchesa, Narciso Rodriguez,
Vera Wang. BRAND EXTENSION: New
York and Las Vegas retail stores.
“The idea that I had
gone to Harvard twice
and my cofounder had
gone to Yale and then
Harvard Business School
credentialed us in a way
that created a bond with
the male VCs who had
also gone to Harvard
Business School or had
gone to Stanford Business
School. At least in that
capacity, we were similar.”
—Jenn Hyman

Natalie Massenet, 49
NET-A-PORTER
QUICK PITCH: Online magazine that
sells the spreads. FOUNDED: 2000.
EMPLOYEES: Over 2,500. MONTHLY
VISITORS: 6 million. ACQUIRED: Luxury
group Richemont bought majority stake
in 2010. ESTIMATED VALUATION: $3.4
billion. AVERAGE ORDER: $900-plus.
PEDIGREE: Mother was a Chanel model.
BRAND EXTENSION: Print magazine Por-
ter, social shopping platform Netbook.
“Technolog is at the heart
of what we do. If you come
to our of ces, we look like
Google. We have hackathons.
It’s what we talk about. But
we’re also obsessed with
fashion, service logistics,
operations, automation and
content.”
1OO MOST POWERFUL WOMEN PORTFOLIO

Sukhinder Singh
Cassidy, 44
JOYUS
QUICK PITCH: Watch a video, find
the perfect anything. FOUNDED:
2011. EMPLOYEES: 35. FUNDING:
$20 million. PATH TO SUCCESS:
Born in Tanzania, grew up in St.
Catherine’s, Canada, and an original
Silicon Valley girl. Her résumé
includes Amazon, Google, Accel
Partners and Polyvore.
“My best lesson [from
Jef Bezos] was that
e-commerce begins in
the search box. The best
customer experience
isn’t about exclusive
rights to every product
on your platform. It’s
about satisfying every
customer query.”

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1OO MOST POWERFUL WOMEN PORTFOLIO
Deena
Varshavskaya, 34
WANELO
QUICK PITCH: Social
shopping. FOUNDED: 2011.
FUNDING: $14 million.
VALUATION: $100 million-
plus. EMPLOYEES: 33. REG-
ISTERED USERS: 11 million.
TRAFFIC FROM MOBILE:
85%. TRENDING NOW:
Lululemon Energy Bra,
MoMA Interactive Speaker,
Anthropologie Fringe
Hammock. SIGNATURE
LOOK: Bold print dress,
leather jacket. PATH TO
SUCCESS: Moved from
Siberia to New Jersey at
16. “Malls were a really
frustrating experience. “
“In April 2011
I shut my design
agency, ended
a ten-year
relationship and
moved from L.A. to
S.F. to get funding.
But I was a solo
nontech female
founder without
a team. I didn’t ft
the pattern. Forty
rejections later
I closed my frst
round. I still get
regret notes from
VCs who said no.”

Lauren Santo Domingo, 38
MODA OPERANDI
QUICK PITCH: Couture before it hits retail.
FOUNDED: 2010. FUNDING: $71 million. AVER-
AGE ORDER: $1,600-plus. TOP DESIGNERS:
Isabel Marant, Valentino, Prabal Gurung.
PEDIGREE: Vogue contributing editor. OTHER
HALF: Andres Santo Domingo, heir to Colom-
bia’s richest beer family.
“The one thing that kept
happening is that after we
pitched to VCs we would get
a call back, without fail,
saying, ‘Well, I went home
and I spoke to my wife,’ or
‘I talked about this with my
daughter. And they told me this
is incredible.’ And that’s when
we’d get a second meeting.”

84 | FORBES JUNE 16, 2014
THE FUTURE OF SMO
LIES SOMEWHERE IN

JUNE 16, 2014 FORBES | 85
KING
HERE
For decades the cigarette business was as predictable as death
and taxes—and it produced plenty of both, as well as tens of
billions in profts. Now, facing ever tougher regulations and an
invasion of cheap Chinese e-cigarettes, Philip Morris Interna-
tional is quietly developing a next-generation cancer stick that
could replicate the traditional smoking experience, while killing
fewer customers. An exclusive peak inside. BY DANIEL FISHER

86 | FORBES JUNE 16, 2014
PHILIP MORRIS INTERNATIONAL
A
s hubs of innovation go,
the area around Switzer-
land’s Lake Geneva histor-
ically trumps pretty much
any region in the world,
save the 30-mile radius
around Dave Packard’s old
garage. It’s where pharmacist Henri
Nestlé perfected the concoction of
milk, flour and sugar that spawned the
world’s largest food conglomerate, the
first quartz wristwatch was developed
and Tim Berners-Lee invented the
World Wide Web. Expand an hour or so
further and you’ll find the birthplace of
everything from the theory of relativity
to LSD.
Which brings us today to the shore
of Lake Neuchatel, where I watch
hundreds of scientists and techni-
cians, recruited from pharmaceutical
giants like Novartis and Roche, scurry
around a $150 million glass cube that
could easily be mistaken for Google’s
European headquarters. Research-
ers sit in the center atrium, swapping
ideas, while in the buildings on either
side robotic machines churn out proto-
types for a product that could have the
biggest impact on human health since
the introduction of antibiotics: a safer
cigarette.
Cigarette smoking kills an estimated
5.4 million people a year worldwide, a
figure that’s risen 30% over the past 20
years. You can plaster pictures of skull-
and-crossbones or dying cancer victims
on the wrappers and tax them until a
pack costs more than dinner for two,
but recent history has demonstrated
that people, especially in Eastern Eu-
rope and Asia, still figure out a way to
get their fix.
So what Philip Morris International
(PMI) is doing from its Swiss head-
quarters is trying to help the world’s
smokers get that fix in a way that a)
doesn’t eventually kill half of them,
and b) replicates the aspects of smok-
ing that got a lot of them hooked in the
first place.
It’s an ambitious plan that PMI has
put $650 million into so far, with the
current expenditure ramping up past
$200 million a year. While many of the
technical details of its products remain
secret, PMI is sharing the results of its
clinical research with the public and
in academic journals—posters at the
Lake Neuchatel lab testify to the regular
tours ofered visiting scientists—in an
efort to reverse the well-deserved rep-
utation for evasion and duplicity that
the cigarette industry earned through
most of its history. It opened its doors to
FORBES and made its chief executive
available for a rare interview in order to
explain the strategy that may save the
company in an industry that’s changing
along with the smoking habits of most
of the industrialized world.
The first new model is an electronic
device that looks like an old-fashioned
cigarette holder, which heats tobacco to
just below the burning point to release
the nicotine and flavor of tobacco with
fewer harmful combustion by-products
like benzene and tar. It will hit the mar-
ket in an undisclosed country sometime
next year. Three more prototypes are in
the works, including one that can be lit
like a conventional cig.
Tobacco-based prototypes sit in
direct contrast to the biggest disruptor
in the cigarette business: e-cigarettes.
Simple devices that combine a tiny
lithium battery with a heating element to
vaporize pure nicotine fluid, they deliver
the drug that hooks cigarette smok-
ers but without the taste. Competitor
Lorillard is all-in on e-cigarettes, having
purchased Blu, now one of the largest
U.S. brands, for $135 million in 2012, and
PMI’s former U.S. parent, Altria, is test-
marketing its MarkTen e-cigs.
As with almost everything in the
nicotine delivery business, there’s a
moral quandary to all this innovation:
If PMI proves successful, the new
products will surely save the lives of
tens of thousands of their customers.
But they could also make smoking less
scary to those who don’t smoke, creat-
ing new nicotine addicts. PMI is shep-
herding the new products through the
Food & Drug Administration approval
process on behalf of its former parent,
which spun it out in 2008. Altria would
then market the product here—assum-
ing the FDA plays ball, which, given its
reticence to green-light any product
that could encourage cigarette use, is
far from a sure thing.
Financially, the stakes are huge. Six
trillion cigarettes are sold globally each
year; if PMI’s tobacco heater attracts
even a 5% share, that would boost prof-
its, already a hefty $8.6 billion, by more
than $1 billion a year—and still more if
a kinder, gentler cigarette is taxed less
aggressively. And that’s just the start-
ing point: Bonnie Herzog, the tobacco
analyst at Wells Fargo, believes that
consumption of e-cigs and other deliv-
ery devices deemed safer could eclipse
conventional cigarettes by 2030. “We
believe the market continues to under-
estimate the growth opportunities for
the tobacco industry,” she says.
PMI’s pack-a-day chief, André Calantzopoulos:
Where there’s no smoke, there’s profits.
S
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FORBES

JUNE 16, 2014 FORBES | 87
I
n Greek mythology it was Pro-
metheus who reintroduced fire to
the world after an angry Zeus had
snatched it away. At PMI it’s another
Greek, André Calantzopoulos, 56, who
is spearheading the quest to reintro-
duce fire, in the form of new cigarettes.
The urbane Calantzopoulos acknowl-
edges the pressure he’s under. “We’re
fully cognizant, because we started
this journey,” says Calantzopoulos, the
vapor from a black plastic prototype
cigarette trailing out of his nostrils, as
he sits in his ofce at PMI’s operational
headquarters in Lausanne. “These
products can bring the biggest single
benefit in a short period of time, in
terms of public health.”
A pack-a-day smoker since he was
25, Calantzopoulos was born near
Olympia, raised in Athens and has an
engineer’s approach to the cigarette
business. He studied electrical engi-
neering at the Swiss Federal Institute of
Technology in Lausanne (his father, a
banker, had given him an appreciation
for Switzerland), and after several years
in the electronics industry working on
robotics he went back for a master’s in
business administration from INSEAD
in Paris.
Upon graduation he returned to
Lausanne to work at Philip Morris’
European headquarters and rapidly
advanced to high-level jobs, including
helping to oversee the company’s $800
million campaign to buy former state
tobacco monopolies in countries like
Czechoslovakia and Poland. He was
chief operating ofcer of PMI when it
was spun out of Altria in 2008 and be-
came chief executive in 2013.
While tobacco companies have
worked on safer alternatives for years—
and have been accused of duplicity and
worse by marketing “light” smokes that
proved just as deadly as their “heavy”
counterparts—Calantzopoulos says
the current efort began in 2002, when
Philip Morris gave up on develop-
ing a safer version of the combustible
cigarette. Filters, he says, simply can’t
remove the dangerous by-products of
burning tobacco that cause lung cancer,
emphysema and heart disease.
PMI took a close look at e-ciga-
rettes developed in the early 2000s
and even considered buying the tech-
nology. The battery-powered ciga-
rette substitutes have rapidly grown
to more than $2 billion in global sales,
although reliable statistics are dif-
ficult to obtain given the profusion of
small companies selling them.
The price was too high when PMI
first looked at the technology, and
Calantzopoulos says subsequent his-
tory has shown PMI was right to pass
(although an Altria-developed e-cig
is among the alternatives it is test-
ing now). Studies in various countries
show that e-cigs have close to 100%
consumer recognition among smok-
ers and 20% to 50% have tried them at
least once—but less than 10% use them
regularly.
While they satisfy the oral crav-
ings (industry executives prefer the
term “ritual”) and nicotine addiction
of smokers, e-cigs vaporize flavored
nicotine instead of tobacco and lack the
rich taste and thick smoke of traditional
cigarettes.
“In any marketing definition, you’d
say, ‘I have a product problem,’ ” Calan-
tzopoulos says of e-cigs.
PMI is betting that smokers prefer
the taste of real tobacco. The product
that consumers will try later this year
is a thin black device that holds a paper
tube containing tobacco and a white
filter. The smoker draws on the paper
tube, while a software-controlled, re-
chargeable heating element raises the
temperature to almost 400 degrees,
creating a vapor from the tobacco to re-
lease nicotine and flavors. The smoker
exhales vapor that quickly dissipates in
the air.
Calantzopoulos says he switched
entirely to the new device after two
weeks and won’t go back to traditional
cigarettes. “Now I have great difculty
smoking combustible products,” he
says, which he still must do when ap-
proving new blends.
So consider him hooked on his prod-
uct. But not so much that the cancer-
stick stigma has faded. Despite running
the company, Calantzopoulos refused
to have his picture taken while smoking
the prototype he so gleefully espouses.
T
he argument for safer cigarettes
seems as simple as the argument
for installing air bags in cars. And
some public health experts, including
Boston University’s Dr. Michael Siegel
and Charles Connor, past president
of the American Lung Association,
support e-cigarettes as a way to wean
smokers of their favorite smokes.
But others oppose anything that
might perpetuate nicotine addiction,
even if it theoretically saves lives.
Anti-tobacco activist Stanton Glantz
of the University of California, San
Francisco thinks the FDA should block
new tobacco products until cigarette

ARGENTINA
1,042
UNITED STATES 1,028
CHILE 860
CANADA 809
URUGUAY 770
PARAGUAY 619
COSTA RICA 529
BRAZIL 504
VENEZUELA
496
COLOMBIA 412
NICARAGUA 377
MEXICO 371
BELIZE 367
GUATEMALA 235
ECUADOR 227
HONDURAS 217
EL SALVADOR 209 PANAMA 197
BOLIVIA 179
PERU 137
SURINAME 57
GUYANA 49
KIRIBATI 22
CUBA
1,261
TRINIDAD AND TOBAGO 1,106
ANTIGUA AND BARBUDA 375
SAINT VINCENT AND
THE GRENADINES 351
BARBADOS 344
THE BAHAMAS 288
SAINT KITTS
AND NEVIS
287
JAMAICA 283
DOMINICA 339
SAINT LUCIA 249
DOMINICAN
REPUBLIC
234
GRENADA 229
HAITI
100
PHILIP MORRIS INTERNATIONAL
manufacturers remove traditional cigs
from the market: “If it were any other
product, and if it were any other busi-
ness that doesn’t have the complete
lack of ethics combined with maxi-
mum chutzpah of the cigarette indus-
try, they would stop selling the more
dangerous product.”
“They’ve been trying to say they
only want to attract existing smokers,
but the evidence does not bear that
out,” adds Erika Sward of the American
Lung Association. “The most heavily
marketed brands by the major tobacco
companies are the most heavily used
ones by kids.”
And PMI is heading down a well-
worn path with its new heat-driven
devices. Reynolds American introduced
Premier, a heated-tobacco device, in
1988 but withdrew it months later after
the American Medical Association and
other groups urged the FDA to ban it or
at least regulate it as a drug. Reynolds,
which makes Winston and Camel ciga-
rettes, tried again with Eclipse, another
heated-tobacco device. Its reward was
being sued by the attorney general of
Vermont for violating consumer protec-
tion laws by describing the new device
as safer than smoking. A judge ordered
Reynolds to pay $8.3 million in 2010
after determining the company’s exten-
sive scientific research was inadequate
because it didn’t include long-term
human studies.
PMI could be heading into a similar
morass, although not for lack of spend-
ing money. Inside the glass cube on
Lake Neuchatel researchers work-
ing under former Novartis executive
Manuel Peitsch are conducting tests in
petri dishes and on human cells using
the cutting-edge technique known as
systems biology to try to assess how the
new devices afect known pathways
to cancer and other smoking-related
diseases. It’s a shortcut compared with
running years-long human trials, but
PMI hopes it can persuade the FDA
and health authorities in the EU by the
results. PMI is also testing a device de-
veloped by Duke University researchers
including Jed Rose, coinventor of the
nicotine patch, which uses a chemical
reaction to deliver nicotine. All of the
PMI devices are designed to prevent
users from inhaling dangerous fumes
from the heating element, a knock
against the Reynolds products.
At the same time the company is
using scores of outside researchers to
study how consumers use the prod-
ucts and whether they will attract new
smokers. This is critical, because the
public health impact of reduced-risk
products is a numbers game: If they
88 | FORBES JUNE 16, 2014
TAR NATIONS
Where are the smoking sections of the planet? Serbia and other Eastern European
nations outsmoke the competition despite having cigarette tax rates over 50%.
CIGARETTE CONSUMPTION PER CAPITA/
EXCISE TAX AS A PERCENTAGE OF CIGARETTE PRICE
Number of cigarettes per adult per year indicated by bubble size.
Excise tax as percentage of price indicated by color (right).
Over 70%
50-69.9%
30-49.9%
Under 30%
NA
SOURCE: THE TOBACCO ATLAS.
FORBES
CIGARETTE PRODUCTION
AMERICAS
648.3 BILLION CIGARETTES

SERBIA
2,869
BULGARIA
2,822
GREECE
2,795
RUSSIA
2,786
MOLDOVA
2,479
UKRAINE
2,401
SLOVENIA
2,369
BOSNIA AND
HERZEGOVINA
2,278
BELARUS
2,266
MONTENEGRO
2,157
CZECH REPUBLIC
2,125
SOUTH
KOREA
1,958
REPUBLIC OF
MACEDONIA
1,934
KAZAKHSTAN
1,934
AZERBAIJAN
1,877
JAPAN
1,841
SPAIN
1,757
SWITZERLAND
1,722
CHINA
1,711
AUSTRIA
1,650
CROATIA
1,621 ARMENIA
1,620
POLAND
1,586
ESTONIA
1,523
HUNGARY
1,518
ITALY
1,475
BELGIUM
1,455
DENMARK
1413
ROMANIA
1,404
SLOVAKIA
1,403
TURKEY
1,399
MALTA
1,378
ALBANIA
1,116
PORTUGAL
1,114
INDONESIA
1,085
TAJIKISTAN
1,046
GERMANY
1,045
GEORGIA
1,039
MONACO
1,038
AUSTRALIA
1,034
IRELAND
1,006
VIETNAM
1,001
KYRGYZSTAN
942
LUXEMBOURG
928
FRANCE
854
PHILIPPINES
838
LITHUANIA 804
NETHERLANDS
801
LATVIA
785
ANDORRA
784
BRUNEI
751
UNITED
KINGDOM
750
SWEDEN
715
FINLAND 671
PAPUA NEW GUINEA
670
NORTH
KOREA
650
NAURU
626
NEW ZEALAND
579
THAILAND 560
MONGOLIA
555
SINGAPORE 547
MALAYSIA 539
NORWAY
534
FIJI
530
ICELAND
477
CAMBODIA 452
UZBEKISTAN
449
LAOS
435
NEPAL 420
SRI LANKA 195
MYANMAR 189
MALDIVES 170
BANGLADESH 154
TURKMENISTAN
135
BHUTAN 120
INDIA 96
TONGA
48
VANUATU
43
SAMOA
34
TUVALU
29
SOLOMON
ISLANDS
18
MAURITIUS 787
ALGERIA
775
COMOROS 583
SEYCHELLES 565
NAMIBIA 534
MOROCCO
500
SOUTH AFRICA 459
GABON
501
ANGOLA 414
SENEGAL
398
EQUATORIAL
GUINEA
391
CAPE
VERDE
339
DJIBOUTI 309
TOGO
307
SWAZILAND 303
BOTSWANA 336
MADAGASCAR
260
MOZAMBIQUE
200
ZIMBABWE
189
SIERRA
LEONE
177
IVORY
COAST
148
KENYA 144
BURUNDI 137
TANZANIA
132
MALI
127
NIGERIA 116
LIBERIA
113
BURKINA
FASO
109
DEMOCRATIC
REPUBLIC OF
THE CONGO
105
CENTRAL
AFRICAN
REPUBLIC
102
GUINEA-BISSAU 97
RWANDA
94
CAMEROON
93
CHAD 86
MAURITANIA
86
GAMBIA 85
SUDAN 75
ERITREA 74
ZAMBIA 74
BENIN 71
SÃO TOMÉ
AND PRÍNCIPE
69
SOMALIA 67
LESOTHO 62
NIGER 52
MALAWI 48
GHANA 44
ETHIOPIA 42
UGANDA 24
GUINEA 9
TUNISIA
1,628
LEBANON
2,138
KUWAIT
1,812
CYPRUS
1,620
JORDAN
1,372
EGYPT
1,104
ISRAEL
1,037
SYRIA
1013
IRAQ
864
OMAN
852
LIBYA
818
SAUDI
ARABIA
809
BAHRAIN
661
IRAN
657
UNITED ARAB
EMIRATES
583
PAKISTAN
468
YEMEN
402
QATAR
281
AFGHANISTAN
61
JUNE 16, 2014 FORBES | 89
are 80% safer and used by the 20% of
U.S. adults who smoke, that’s a public
health win. If they create a bunch of
new nicotine addicts, not so much.
PMI, in other words, is trying to
prove to regulators that its great new
product won’t actually attract new
customers. Such is life in the perverse
cigarette business.
“Any product we commercialize
with any claim must be based on the
most robust scientific evidence, given
the sensitivities,” says Calantzopou-
los. “Because anything we do, it will
be scrutinized ten times more than
anybody else.”
S
afer cigarettes promise a path out
of the dismal long-term outlook
for traditional smokes, where
even PMI, with its dominant Marl-
SOUTHEAST ASIA
400.2 BILLION CIGARETTES
WESTERN PACIFIC
2.28 TRILLION CIGARETTES
EUROPE
1.6 TRILLION CIGARETTES
AFRICA
88.8 BILLION CIGARETTES
EASTERN
MEDITERRANEAN
400.2 BILLION CIGARETTES

90 | FORBES JUNE 16, 2014
FORBES
PHILIP MORRIS INTERNATIONAL
“When I joined Philip Morris 30
years ago my friends asked me exactly
the same question,” he says. “ ‘What
are you going to do in an industry that
has no future?’ ”
The answer, until now, has been
raising prices and stealing market
share from competitors, and Calan-
tzopoulos maintains the new prod-
ucts present mainly a “market share
opportunity.”
While he’s spending $680 mil-
lion on a factory in northern Italy
that can produce tens of billions
tobacco cartridges a year for the first
generation of these safer cigarettes,
Calantzopoulos says he has no way
of knowing which product will suc-
ceed. The equipment in the plant
will cost about double the equivalent
for producing conventional ciga-
rettes, and earnings will sufer unless
PMI can keep some of the revenue it
now pays out in taxes for itself.
He’s similarly evasive about
whether PMI will exploit the Marl-
boro brand, one of the best-known
brand names on earth. While that
would make it much easier to con-
vince existing customers to switch,
it also could be seen as an end run
around marketing restrictions on con-
ventional cigs.
“We’ll do a parallel development
based on both” brand-name strate-
gies, he says. “And that’s all I can say
today.”
“You have to try rather than test,”
he adds, stubbing out the third butt
of his next-generation cigarettes in
an elegant ceramic ashtray. “The best
research on earth will never tell you
what success is.”
That’s especially true in the ciga-
rette trade, where success comes with
all sorts of dubious and unexpected
by-products. Even the story of Pro-
metheus ended poorly. His reward for
restoring fire to the earth was a box
delivered by the alluring Pandora. It
unleashed plague and misfortune that
would torment mankind for genera-
tions to come.
boro brand, saw unit sales fall by 5%
last year. But they also introduce un-
certainty to a business that for most
of Calantzopoulos’ 29-year career has
been as predictable as the deaths it
generated.
Disruptive innovations like e-
cigarettes are going to arrive more fre-
quently, the chief executive says, and
PMI has yet to work things out with
the most important partner in its busi-
ness: the taxman. Cigarettes deliver
tax revenue as efciently as nicotine.
Of PMI’s $80 billion in revenue last
year, $48.8 billion went to the taxing
authorities. It’s as if 12 out of the 20
cigarettes in every pack are sold by
some form of government.
In PMI’s ideal world there’d be
little or no tax on the new products,
assuming they prove to have reduced
risk. That would encourage current
smokers to switch. But Calantzopou-
los is a realist: He assumes full, cig-
arette-level taxation in his financial
models, knowing that governments
will loathe losing revenue, especially
since the new products continue to
deliver nicotine.
The worst tax, from PMI’s per-
spective, is a simple sales tax based on
the wholesale price. That encourages
manufacturers to engage in price wars,
since most of the cost is borne by tax
authorities, hurting premium brands.
If there is to be a tax—and so far only
Italy has announced a policy on these
new products—Calantzopoulos pre-
fers a per-cigarette excise tax. Since
they contain tobacco, if they make it
to the U.S. they’ll also be subject to the
massive 1998 settlement with state at-
torneys general in the U.S., which still
generates billions of dollars in revenue
(and hundreds of millions of dollars in
legal fees each year for the private law-
yers who helped negotiate it).
Tobacco also remains an incred-
ibly efective profit-delivery device.
PMI has been doubling earnings
every ten years since Calantzopoulos
joined the firm in 1985, and investors
have earned 122% since the spinof
in 2008, compared with 67% for the
S&P 500 index. That includes a 4.4%
dividend yield, compared with less
than 2% for the S&P. The company
operates in 180 markets outside
the U.S. and holds a 16% share of
the international cigarette mar-
ket—28% outside of China, where a
government monopoly controls the
business (and might be interested
in the new products from PMI if
they could trim that country’s rising
death toll from cigarettes).
Calantzopoulos is diplomatically
obtuse when asked if PMI is trying
to reverse its shrinking unit vol-
umes with these new products. Isn’t
it strange, he is asked, to forswear
growth in a consumer business, as
hinted by the consumer research he’s
commissioned to assuage regulators?
YOU’VE COME
A LONG WAY, BABY
The evolution of cancer sticks: Old-school
butts deliver thick smoke, rich tobacco flavor
plus deadly side efects. Tasteless e-cigs ofer
nicotine and vapor but no smoke. PMI’s new
smokeless cigarette promises tobacco flavor
and a nicotine fix.
F
+
-
TOBACCO
L.E.D. TIP
BATTERY
BATTERY
HEAT SOURCE
PAPER CARTRIDGE
CONTAINING
TOBACCO AND FILTER
MICROPROCESSOR
NICOTINE SOURCE
HEATER/
VAPORIZER
FILTER
CONVENTIONAL
CIGARETTE
E–CIG
PMI VERSION

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92 | FORBES JUNE 16, 2014
House Calls
As more of the population ages and tries to avoid
nursing homes and hospitals, fast-growing Right at
Home ofers help with basic chores or medical care.
BY CAROL TICE
A
mong Allen Hager’s
first clients after he
opened his Right at
Home senior care busi-
ness in Omaha, Nebr.
was an elderly farmer named Art. His
Navy-nurse daughter traveled a lot
and needed someone to look after her
dad. Besides help with dressing and
shopping, Art wanted to be driven
around his farm in his three-speed,
column-shift 1958 Chevy truck. “I
thought I’d never get someone who
was qualified to handle the aide work
and could drive that truck,” recalls
Hager, Right at Home’s founder and
executive chairman. “But I called and
called around, and I finally did. And
we took care of him for many years.”
Nineteen years on, that’s proved
to be a winning formula for Hager, 57.
A former hospital administrator, he
trained and worked as a certified nurs-
ing aide before launching his startup,
to better understand the concerns of
the aides he employed. Today Right at
Home ofers services ranging from help
with chores to in-home nursing. The
company has nearly 400 locations in
eight countries and hit $265 million in
2013 systemwide revenue. Corporate’s
cut approached $17 million last year.
(It’s No. 2 on our list of the Best Fran-
chises for up to $150,000 in entry costs.)
Right at Home stands apart from
rivals with its emphasis on training
and support, its use of nurses where
many competitors ofer only personal
aides and its sector-leading move into
international markets, beginning with
the U.K. in 2009. Recently it became the
first U.S.-based home care franchise in
China and an early entrant in Brazil.
It’s all prelude to a worldwide
explosion in senior care in the com-
ing dec ades—and it plays to Right at
Home’s strengths.
In the U.S. families are often far-
flung, with working moms less avail-
able to care for parents. More recently
there’s been rising pressure to cut
medical costs to help pay for expanded
coverage under the Afordable Care
Act, which has more hospitals and in-
surers looking to home health care as a
cheaper means to shorten hospital stays
and reduce rehospitalization. Then
there’s the graying of institution-resis-
tant baby boomers. The UN projects the
number of people over age 60 will triple
to 2 billion by 2050. Industry research
firm Home Care Pulse estimates the
in-home care industry grew more than
70% in the past five years to $30 billion.
“The first baby boomers turned 65
a few years ago,” says Aaron Marcum,
Home Care Pulse’s CEO. “In ten years
the demand is going to be exponential.”
Key to Right at Home’s growth is
FRANCHISE SCORECARD: THE BEST
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JUNE 16, 2014 FORBES | 93
that it doesn’t rely on government or in-
surer reimbursement. The vast majority
of customers pay cash for services not
covered by Medicare or many long-
term-care insurance plans, explains
Right at Home Seattle-area franchisee
Ben Solomon, who bought his first two
territories in 2004. Today startup costs
include a $45,000 franchise fee, with a
total of roughly $125,000 needed in all
to lease an ofce and hire recruiting,
marketing and scheduling staf.
Solomon had worked in organic
foods and nutraceuticals. But he was
drawn to senior care after seeing an
elderly neighbor outdoors crawling on
hands and knees, having fallen on the
way to mail a letter. After vetting several
franchises, he chose Right at Home be-
cause it was then the only one ofering
two weeks of training, compared with
three or four days for most rivals. This
spring, after being approached by Right
at Home about a failed local franchise,
he agreed to purchase his third location,
in nearby Tacoma.
He is also helping to overcome the
region’s shortage of long-term-care
aides. Solomon has opened his own
school at his North Seattle ofces,
Good training and higher wages: Right at
Home’s caregiver of the year, Mary Hartsock,
and client Lloyd Diggs in Frederick, Md.
building loyalty with grads by ofering
a low-cost certification course and run-
ning a discount work-to-hire program
for select candidates he thinks are good
potential hires.
Hiring good people gives Right at
Home an edge. It pays substantially
above minimum wage—$10 to $14 an
hour routinely and as much as $50, de-
pending on the services needed. “We’re
hard-pressed to provide a great care ex-
perience with angry, mistrustful staf,”

94 | FORBES JUNE 16, 2014
FORBES
FRANCHISE SCORECARD — THE BEST
2
RIGHT AT HOME
Ofers in-home care, including
nonmedical, for seniors and
disabled adults in 44 states in
the U.S.
GROWTH RATE: 11%
CONTINUITY: 86%
FRANCHISOR SUPPORT: B
10
REAL PROPERTY
MANAGEMENT
Helps residential and
commercial building owners
manage properties.
GROWTH RATE: 49%
CONTINUITY: 90%
FRANCHISOR SUPPORT: C
5
SYNERGY HOMECARE
Provides nonmedical help,
from housekeeping to
live-in care, for people of
all ages.
GROWTH RATE: 29%
CONTINUITY: 77%
FRANCHISOR SUPPORT: C
7
MAIDPRO
Provides housecleaning
services nationwide,
utilizing a signature 49-point
checklist.
GROWTH RATE: 11%
CONTINUITY: 91%
FRANCHISOR SUPPORT: C
3
OXI FRESH
CARPET CLEANING
Treats and cleans rugs,
upholstery and tiles using
kid-safe products.
GROWTH RATE: 13%
CONTINUITY: 83%
FRANCHISOR SUPPORT: C
9
BRIGHTWAY INSURANCE
Ofers auto, home, business
and personal insurance
coverage in 115 locations across
the U.S.
GROWTH RATE: 37%
CONTINUITY: 90%
FRANCHISOR SUPPORT: C
4
MATHNASIUM
Uses global classrooms to teach
all levels of math; goes from
preschool up through high
school age.
GROWTH RATE: 22%
CONTINUITY: 82%
FRANCHISOR SUPPORT: C
8
JUST BETWEEN
FRIENDS
Hosts local consignment sales
for children’s and maternity
clothing.
GROWTH RATE: 16%
CONTINUITY: 90%
FRANCHISOR SUPPORT: B
6
DRYER VENT WIZARD
Inspects, installs and repairs
dryer vents to help prevent fires,
increase ef ciency and save
energy.
GROWTH RATE: 10%
CONTINUITY: 84%
FRANCHISOR SUPPORT: C
Provides medical and
nonmedical home care to
children and adults.
GROWTH RATE
1
: 33%
CONTINUITY
1
: 82%
FRANCHISOR SUPPORT
2
: A
1
“Franchising has been the savior of free enterprise in this country,” Art
Bartlett, the founder of the real estate chain Century 21, once told a
reporter. “It has given the small businessman a way to survive.” That’s not
as hyperbolic as you might think. For more than 150 years franchising—
from the Middle French word franchir, “to free”—has given countless
thousands a turnkey chance to become their own bosses.
There’s no denying its extraordinary impact. This year an estimated
770,000 franchise establishments will employ 8.5 million Americans
and create $840 billion in output, according to IHS Global Insight, which
prepared a report for the International Franchise Association. That’s 3.5%
of the total U.S. GDP.
And a vital part of the entrepreneurial economy. Suppose you’re in the
market to buy a franchise. What are your first steps?
To help you focus FORBES has created the first-ever critical list of the
best and worst franchises in America. With invaluable intel and statistics
from FRANdata of Arlington, Va., we’ve divided the sheep from the goats
in three categories: entry costs of up to $150,000; $150,001 to $500,000;
and over $500,000. To learn more visit forbes.com/franchises.
A BUYER’S GUIDE
Hager says. There are other benefits.
Most of the 150 workers in Solomon’s
employ work part-time and love the
flexibility of doing in-home care rather
than 12-hour hospital shifts, he says. All
Right at Home employees are bonded,
insured and background-checked.
Franchisees like Solomon, who
come with experience and a willingness
to invest and innovate, are the chain’s
secret weapon, says John Bowling of
Sustainable Leadership Consultants
in Jacksonville, Ore. Bowling, who
once managed a home care company
and knows Hager through an industry
leadership group, says Right at Home is
picky about franchisees, preferring suc-
cessful managers with proven people
skills. “It’s a dif cult industry that takes
knowledge and commitment, not just
the ability to write a check,” he adds.
Hager will need all that know-how,
as he confronts a growing lineup of
competitors. From 13 franchise brands
in 2000, the specialty care services
sector has grown to 56, says industry re-
search firm FRANdata—many launched
in the past few years. Some are push-
ing into new businesses. BrightStar
(No. 1 on our list for franchises up to
$150,000) is opening its first assisted-
living facility, a big-money gamble that,
at least for now, Hager says isn’t in the
cards for his chain.
There should be no shortage of
franchisees, given the chance to make
money. For an initial ante of $100,000,
median annual revenue for a franchised
home care business was nearly $2 mil-
lion last year, Home Care Pulse found—
more than 13% higher than revenue for
independent operators.
Margins are nice, too. Franchisees
reported $95,264 in average pretax
income in market research firm Fran-
chise Business Review’s 2014 sector
report. That’s 20% higher than a typical
franchisee sees across all industries,
says FBR’s CEO, Eric Stites. Added plus:
a much lower startup cost than buying a
fast-food franchise, he notes, which can
The Top-Ranked Chains in America
ENTRY COST: UP TO $150,000
1
BASED ON 5-YEAR COMPOUNDED ANNUAL GROWTH RATE
. 2
BASED ON A FRANCHISOR’S FINANCING SUPPORT, MARKETING PROGRAMS, AND INITIAL AND ONGOING OPERATIONAL SUPPORT.

JUNE 16, 2014 FORBES | 95
F
run $500,000 or more. Right at Home’s
Hager uses FBR to survey its franchi-
sees and make sure the corporate of ce
is meeting their needs; another firm
conducts client-satisfaction surveys,
which recently were 96% positive.
Those surveys get shipped to Hager
at the Omaha headquarters—even the
ones by folks in assisted-living facilities,
roughly 20% of the client base, accord-
ing to franchisee Solomon. They pay
for nursing and personal care services
privately to avoid having to move to a
nursing home.
They’re people like 101-year-old Lois
Dusenbery, a longtime Hawaii native
who now lives in assisted living on Seat-
tle’s Mercer Island. Impeccably dressed
and made up, she explains how her
Right at Home caregiver, Atetegeb “Ati”
Emiru, cheerfully dresses and toilets
her and accompanies her on her daily
walk down to nearby Lake Washing-
ton. “She’s very good,” Dusenbery says
of Emiru, an émigré from Ethiopia. “I
probably found the best sort of retire-
ment situation you could find.”
ENTRY COST: $150,001–$500,000
ENTRY COST: $500,001 AND UP
2
SPORT CLIPS
Ofers walk-in haircuts for men
and boys in its sports-themed
shops with flat screens on full
blast.
2
RETRO FITNESS
Provides personal trainers,
group fitness and 1980s
throwback movies at
24/7 gym locations.
GROWTH RATE: 12%
CONTINUITY: 95%
FRANCHISOR SUPPORT: A
GROWTH RATE: 24%
CONTINUITY: 94%
FRANCHISOR SUPPORT: B
10
DUTCH BROS. COFFEE
Serves cofee and drinks
at drive-through locations
and ofers apparel and
cups online.
10
TOWNEPLACE SUITES
Provides long-term stays
with full-size kitchens
and hotel amenities; a Marriott
property.
GROWTH RATE: 9%
CONTINUITY: 96%
FRANCHISOR SUPPORT: C
GROWTH RATE: 10%
CONTINUITY: 99%
FRANCHISOR SUPPORT: C
5
ANYTIME FITNESS
Provides 24/7 gym, tanning
and training services with an
online community to keep you
on track.
5
JACK IN THE BOX
The old classic, founded in 1951,
still focuses on the West Coast
and runs the Qdoba Mexican
Grill chain.
GROWTH RATE: 16%
CONTINUITY: 91%
FRANCHISOR SUPPORT: C
GROWTH RATE: 20%
CONTINUITY: 98%
FRANCHISOR SUPPORT: A
7
CHESTER’S
Fries up double-breaded
chicken for every meal,
sold at more than
2,000 locations.
7
FIREHOUSE SUBS
Steams meats and cheeses
for hot sandwiches and
ofers a free sub on your
birthday.
GROWTH RATE: 78%
CONTINUITY: 88%
FRANCHISOR SUPPORT: B
GROWTH RATE: 15%
CONTINUITY: 92%
FRANCHISOR SUPPORT: A
3
JIMMY JOHN’S
Serves and delivers
sandwiches from 1,800-plus
locations, with bread baked
in-house.
3
PLANET FITNESS
Bulks up muscles
and memberships
at its “judgment free”
health clubs.
GROWTH RATE: 18%
CONTINUITY: 98%
FRANCHISOR SUPPORT: A
GROWTH RATE: 26%
CONTINUITY: 93%
FRANCHISOR SUPPORT: A
9
JAMBA JUICE
Prepares light bites, fresh-
blended smoothies and juices
squeezed to order from 800-
plus locations.
9
SPRINGHILL SUITES
Ofers hotel suites and work
spaces to its guests in 46
states and Quebec; it’s owned
by Marriott.
GROWTH RATE: 21%
CONTINUITY: 90%
FRANCHISOR SUPPORT: A
GROWTH RATE: 11%
CONTINUITY: 100%
FRANCHISOR SUPPORT: B
4
BATTERIES PLUS BULBS
Recycles and sells batteries
and bulbs, and ofers in-store
installation for phones, laptops
and so on.
4
QUAKER STEAK & LUBE
Grills red meat, sells sauces
and displays “rescued”
vintage cars in a casual
dining setting.
GROWTH RATE: 12%
CONTINUITY: 96%
FRANCHISOR SUPPORT: A
GROWTH RATE: 14%
CONTINUITY: 89%
FRANCHISOR SUPPORT: A
8
CAPRIOTTI’S
SANDWICH SHOP
Roasts whole turkeys each day
and ofers a lineup of
many sandwiches.
8
NOODLES & COMPANY
Specializes in pasta as
well as noodles, with dishes
from Asia, North America and
the Mediterranean.
GROWTH RATE: 14%
CONTINUITY: 93%
FRANCHISOR SUPPORT: A
GROWTH RATE: 8%
CONTINUITY: 100%
FRANCHISOR SUPPORT: B
6
WHICH WICH
Builds your sandwich from
a list of ingredients you
Sharpie-check of a brown
paper bag.
6
VALUE PLACE
Provides extended-stay
hotels in 32 states, ofering
studio and
double-size rooms.
GROWTH RATE: 32%
CONTINUITY: 95%
FRANCHISOR SUPPORT: B
GROWTH RATE: 12%
CONTINUITY: 99%
FRANCHISOR SUPPORT: B
Buys and sells clothing, shoes
and accessories for young
adults in its stores.
Ofers spa services 7 days a
week and a mobile app to
customize appointments.
GROWTH RATE: 10%
CONTINUITY: 98%
FRANCHISOR SUPPORT: A
GROWTH RATE: 12%
CONTINUITY: 99%
FRANCHISOR SUPPORT: B
1
1

96 | FORBES JUNE 16, 2014
Crash Diet
Once the largest ftness franchise, Curves has been
shedding thousands of units and enraging many
franchisees. Can the new owners turn it around?
BY KARSTEN STRAUSS
T
wo years and $120,000-
plus later, Spring Kamp of
Sheldon, Iowa has experi-
enced radical weight loss
while running her Curves
fitness franchise—but it has all come
from her bank account. “I work 54 to
62 hours a week in my club,” says the
40-year-old former flight attendant. “I
have never made a penny.” After rack-
ing up $60,000 in debt, she shuttered
the business this month.
Long billed as a 30-minute strength-
training, weight-loss miracle for
women, Curves International has been
shedding franchise locations faster than
it can sell them. The Waco, Tex. chain
was founded in 1992 by the husband-
and-wife team Gary and Diane Heavin,
and was once heralded by Guinness
World Records as the planet’s largest fit-
ness franchise. In 2006 it boasted more
than 10,000 global locations, each kick-
ing back royalties—5% of the monthly
gross—to headquarters.
Today it oversees 6,000 units in 88
countries. Since 2007 its North Ameri-
can locations have dropped by 65%,
to 2,500—a poor enough showing to
rank seventh worst among franchises
with initial investments up to $150,000.
Last year, when Curves lost 10% of its
locations, the home ofce still pulled
in a FORBES estimated $52 million in
revenue.
Curves’ new owners blame … the
franchisees. Those who bought mul-
tiple units failed and bailed. “They were
the wrong owners for Curves,” says Jon
Canarick, managing director of North
Castle Partners, a private equity firm
in Greenwich, Conn. that acquired the
chain in 2012 for a tightly held sum. “If
you aren’t there working it and working
in the community to try to bring new
people in and providing great service to
your members … often those locations
are not going to do very well.” Adds his
handpicked CEO, Monty Sharma: “The
growth came very quickly”—so quickly,
he concedes, that there was little over-
sight. Some owners, he claims, sold or
transferred their locations to unquali-
fied buyers.
Sharma and Canarick have a
turnaround plan they’re hatching. It
involves strengthening existing circuit-
training and weight-loss programs,
as well as pushing nutrition bars and
apparel. (Members pay $99 up front to
join, though the fee is often discounted,
and then $44 a month.) They hope to
get a lift from new spokeswoman Jillian
Michaels, whose star rose on NBC’s
The Biggest Loser. There may also be
some cross-initiatives with Jenny Craig,
which North Castle Partners acquired
last November.
Too late for a lot of franchisees.
Like the woman who in 2009 bought a
Pacific Northwest location with some
300 members, half of whom never
showed. When she contacted them, the
no-shows just stopped paying. She has
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JUNE 16, 2014 FORBES | 97
never recovered. Or the Florida franchi-
see who was promised a database of 236
active members, nearly a third of whom
turned out to be inactive. “The weird
thing was that I was in the database—
and I’d never been a member,” says the
woman, who bought in 2010. Or the
suburban St. Louis operator who had
been assured of her great location—only
to discover that within a month of her
opening she had competition from three
new Curves franchisees within three
miles in a territory of 9,000 people. “I
couldn’t draw from any other area be-
cause I was boxed in,” she laments.
What seems to irk most franchisees
who are still trying to make a go of it?
The constant royalties and advertising
fees to the home ofce—up to $1,200 a
month when they prosper, $300 even if
they don’t. Then there are the man-
dated purchases like exercise mats ($55
apiece) and the TV and sound system
($550), as well as “important” products,
like founder Gary Heavin’s book on di-
eting ($150 per case), snack bars ($28),
meal bars ($36), quarterly clothing and
towel bundles ($425 to $795). Decline
No pain, no gain: Franchisees say they’re
forced to buy products from the home ofce,
which denies it makes money this way.
to buy compulsory items and franchi-
sees may be erased from the website.
“This is the dirty secret of franchis-
ing,” says Ron Gardner, an attorney
with Dady & Gardner in Minneapolis,
who represented the now defunct inde-
pendent Curves franchisee association.
“Franchisors do not make their money
selling franchises and getting royalties,”
he says, but “by requiring franchisees to
buy products and services from either

98 | FORBES JUNE 16, 2014
FORBES
FRANCHISE SCORECARD — THE WORST
2
REALTY WORLD
Sells residential properties
and ofers online tools
and mortgage options to
home buyers.
GROWTH RATE: –21%
CONTINUITY: 30%
FRANCHISOR SUPPORT: D
10
FASTFRAME
Builds custom frames
and mats for your photos,
artwork, mirrors and
flat-screen TVs.
GROWTH RATE: -15%
CONTINUITY: 46%
FRANCHISOR SUPPORT: C
5
AERO COLOURS
Ofers paint, bumper and
bedliner repair for cars and
trucks, with a traveling unit that
makes house calls.
GROWTH RATE: –19%
CONTINUITY: 33%
FRANCHISOR SUPPORT: C
7
CURVES
Ofers strength-training and
weight-loss sessions for women,
as well as meal plans and
apparel.
GROWTH RATE: –18%
CONTINUITY: 39%
FRANCHISOR SUPPORT: C
3
PARABLE
Operates online and in-store
to sell Christian-themed
merchandise like books and
music.
GROWTH RATE: –20%
CONTINUITY: 36%
FRANCHISOR SUPPORT: C
9
ERA REAL ESTATE
Walks clients through
buying or selling a home,
finding an agent and
a mortgage.
GROWTH RATE: –12%
CONTINUITY: 41%
FRANCHISOR SUPPORT: D
4
UBUILDIT
Helps you manage a
remodeling job or new
construction with its own
team on-site.
GROWTH RATE: –25%
CONTINUITY: 23%
FRANCHISOR SUPPORT: C
8
HOUSE DOCTORS
Delivers handyman
services, from small-scale
fixes to full-blown home
remodeling.
GROWTH RATE: –16%
CONTINUITY: 33%
FRANCHISOR SUPPORT: B
6
ALL TUNE & LUBE
Provides tire, engine,
transmission and general
auto maintenance at its
locations.
GROWTH RATE: –17%
CONTINUITY: 25%
FRANCHISOR SUPPORT: B
Sends coupons to consumers,
direct-mails ads for small
businesses.
GROWTH RATE
1
: –22%
CONTINUITY
1
: 20%
FRANCHISOR SUPPORT
2
: C
1
To generate the list of the best and worst franchises, FORBES relied on
stats from FRANdata of Arlington, Va., which sifted through 3,000-plus
chains. A brand with fewer than 20 franchised locations in 2008 couldn’t
qualify for the “best” category; neither could those that notched a year
of negative growth from the beginning of 2008 until the end of 2012
(2013 numbers are not all in yet). While there’s no predictor of franchisee
success, FRANdata did screen for two key criteria over those years
that give some indication of market demand for the brand and overall
support for its franchisees: growth rate and the so-called continuity rate.
Continuity gives some indication of the ongoing success of the stores.
If a franchise had, say, 80 units at the start of the period and added 30
through the end, it should have a total of 110 locations. But suppose, for
whatever reasons, 10 units dropped by the end of 2012. The continuity
rate for the period is 100/(80+30) = 91%. Other factors that afected the
ranking: a franchisor’s transparency in reporting historical performance,
which lets prospective franchisees evaluate the opportunity; support for
franchisees (financing and the like); and recurring revenue self-suf ciency
(does the franchisor depend on revenues from selling additional
franchises to sustain ongoing operations?). For a more detailed look at
the methodology, go to forbes.com/franchises.
METHODOLOGY
the franchisor directly or from franchi-
sor-designated suppliers.” The practice
is legal as long as the company discloses
to its franchisees that it accepts vendor
rebates and reveals the take.
CEO Sharma insists that Curves
hasn’t made a dime on those products
in the last 12 months. It makes most of
its money, he says, on royalties, hasn’t
seen an increase in 2012 and 2013 prof-
its—which he won’t disclose—and prob-
ably won’t this year, either. Franchisees
have to buy those products to guarantee
uniformity of service: “We didn’t want
members to come in and have a large
variation of experience.”
Curves has plenty of happy franchi-
sees, too. Kristen Winter netted more
than $110,000 on $345,000 in revenue
last year from her location in Aloha,
Ore. Success, she says, comes from
toeing the line: “We take the tools and
resources provided to us, and we put
those in place, without questioning or
trying to redesign.” After losing weight
at her local Curves, Alice Nagy bought a
new franchise in Monroe, N.Y. 12 years
ago. She serves nearly 300 members and
has seen a jump in new customers and
a drop in age. “We’re getting a younger
crowd—more 30- and 40-year-olds.”
Still, there are enough malcontents
for one attorney, Jonathan Fortman of
Florissant, Mo., to consider a group ac-
tion against Curves. Last year he won
an $11.6 million judgment against a
Curves clone, Contours Express. That
suit alleged fraud, claiming, among
other things, that the chain understated
the costs of building and operating a
franchise, ofered false earnings claims
and hid conflicts of interest with con-
tractors. “Contour failed after about
seven years because the system just col-
lapsed,” says Fortman. He’s pondering a
similar action against Curves.
“It is highly disheartening to hear
this because we are focused on trying to
The Lowest-Ranked Chains in America
ENTRY COST: UP TO $150,000
1
BASED ON 5-YEAR COMPOUNDED ANNUAL GROWTH RATE
. 2
BASED ON A FRANCHISOR’S FINANCING SUPPORT, MARKETING PROGRAMS AND INITIAL AND ONGOING OPERATIONAL SUPPORT.

JUNE 16, 2014 FORBES | 99
F
collectively build a system that is suc-
cessful,” says Curves’ Sharma. “If this
suit is filed, naturally we will defend it. I
don’t worry about these things.”
Since acquiring Curves, North Castle
has invested over $15 million, much
of that in marketing, hiring and new-
product development. Canarick has
his hands full trying to integrate Jenny
Craig, the private equity firm’s latest
hefty purchase (a sum reckoned to be
less than the $600 million Nestlé paid
for it in 2006). There are no immedi-
ate plans to combine the two brands.
Sharma is focused on winching the
company out of the ditch and finding
new franchisees who resemble the more
successful Curves owners—motivated
and experienced businesspeople.
Meantime, veterans continue to bail.
That Pacific Northwest franchisee who
bought in five years ago and has never
made a dime is desperately looking for a
way out. She feels guilty at the prospect
of selling to another hopeful entrepre-
neur: “I don’t know that I could do that
to someone.”
ENTRY COST: $150,001–$500,000
ENTRY COST: $500,001 AND UP
2
STEAK ESCAPE
Serves cheesesteaks, sandwiches
and fresh-cut fries at units
mostly found in food courts and
airports.
2
IT’S A GRIND
COFFEE HOUSE
Sells tea and smoothies, as well
as microroasted arabica bean
cofee.
GROWTH RATE: –16%
CONTINUITY: 37%
FRANCHISOR SUPPORT: C
GROWTH RATE: –16%
CONTINUITY: 34%
FRANCHISOR SUPPORT: C
10
GREAT STEAK &
POTATO COMPANY
Grills to order classic cheese-
steaks; serves chili, baked
potatoes and other fare.
10
GROUND ROUND
GRILL & BAR
Serves up lunch, dinner and
drinks; founded by Howard
Johnson’s in 1969.
GROWTH RATE: –14%
CONTINUITY: 47%
FRANCHISOR SUPPORT: B
GROWTH RATE: –9%
CONTINUITY: 50%
FRANCHISOR SUPPORT: B
5
DREAM DINNERS
Teaches in-person meal
prep and sells measured
ingredients for consumers to
take home.
5
BENNIGAN’S
Ofers pub food in an Irish
tavern setting, with
specialty drinks and beer
on tap.
GROWTH RATE: –15%
CONTINUITY: 37%
FRANCHISOR SUPPORT: C
GROWTH RATE: –17%
CONTINUITY: 33%
FRANCHISOR SUPPORT: B
7
DREAMMAKER BATH
& KITCHEN
Ofers remodeling plans and
provides financing in some
locations.
7
BONANZA STEAKHOUSE
Serves chicken, seafood
and sandwiches, as well
as steaks, for dining in or taking
out.
GROWTH RATE: –17%
CONTINUITY: 37%
FRANCHISOR SUPPORT: B
GROWTH RATE: –13%
CONTINUITY: 53%
FRANCHISOR SUPPORT: C
3
COMMISSION EXPRESS
Works as a pay
advance for Realtors, turning
unpaid commissions
into cash.
3
TASTEE FREEZE
Ofers the same soft-serve ice
cream it’s been selling since
1950 at walk-up and fast-food
locations.
GROWTH RATE: –15%
CONTINUITY: 41%
FRANCHISOR SUPPORT: C
GROWTH RATE: –11%
CONTINUITY: 56%
FRANCHISOR SUPPORT: B
9
SAMURAI SAM’S
TERIYAKI GRILL
Prepares Japanese meals at
more than 35 locations across
the U.S.
9
LA SALSA
Ofers counter-service Mexican
food with a bufet-style salsa
bar, club deals and catering
service.
GROWTH RATE: –14%
CONTINUITY: 39%
FRANCHISOR SUPPORT: C
GROWTH RATE: –8%
CONTINUITY: 32%
FRANCHISOR SUPPORT: B
4
COOKIES BY DESIGN
Turns dough into
cookie bouquets and
baskets for holidays and various
occasions.
4
ATLANTA BREAD
COMPANY
Prepares soups, sandwiches
and baked goods, with online
ordering available.
GROWTH RATE: –14%
CONTINUITY: 48%
FRANCHISOR SUPPORT: C
GROWTH RATE: –15%
CONTINUITY: 43%
FRANCHISOR SUPPORT: B
8
GOLF ETC.
Sells and repairs gear;
studies your swing to
find the best equipment for
your game.
8
DESERT SUNS
TANNING SALONS
Has sunbeds and spray-tan
options; sells moisturizers and
lotions.
GROWTH RATE: –13%
CONTINUITY: 32%
FRANCHISOR SUPPORT: C
GROWTH RATE: –9%
CONTINUITY: 50%
FRANCHISOR SUPPORT: B
6
AVALAR
Provides training and HR
support for expanding
real estate and mortgage
businesses.
6
SHONEY’S
Started out as a West
Virginia drive-in; now a chain
whose president used to lead
Church’s Chicken.
GROWTH RATE: –13%
CONTINUITY: 34%
FRANCHISOR SUPPORT: D
GROWTH RATE: –10%
CONTINUITY: 75%
FRANCHISOR SUPPORT: C
Sells flash-frozen beads of ice
cream, yogurt, sherbet and
flavored ice.
Specializes in comfort food
like meat loaf, fried steaks and
apple pie.
GROWTH RATE: –16%
CONTINUITY: 44%
FRANCHISOR SUPPORT: D
GROWTH RATE: –13%
CONTINUITY: 54%
FRANCHISOR SUPPORT: C
1
1

100 | FORBES JUNE 16, 2014
UTILITY
PLAYER
Other than cutting costs and
strengthening capital,
Brian Moynihan has no grand
plans for Bank of America.
Amen to that.
BY HALAH TOURYALAI
PHOTOGRAPHED BY DAVID YELLEN FOR FORBES
Brian Moynihan sits at a large polished wood table
in a windowless conference room clad in his banker-
blue pinstriped suit and standard red tie. This isn’t
Bank of America’s headquarters, but it may just as
well be Moynihan’s home away from home. He is
on the tenth floor of BofA’s Washington, D.C. ofce
tower, which, by no coincidence at all, is directly
across Pennsylvania Avenue from the United States
Department of the Treasury.
Just three days prior Moynihan sheepishly re-
vealed to federal regulators that there was an account-
ing error on his bank’s balance sheet that would result
in a $4 billion hit to its regulatory capital. The bank


BANK OF AMERICA
was forced to suspend its plan for a dividend increase and
a $4 billion share repurchase. After making an impressive
comeback over the last two years, its stock fell precipitously
and now sits about 20% lower than its recent high of $18.
Though less troubling than JPMorgan Chase’s London
Whale fiasco, it is yet another setback in Bank of America’s
rehabilitation and redemption among stockholders. Their
concern, of course, is that Bank of America has merely gone
from “too big to fail” to “too big to manage.”
“We were right on the edge of starting the next step
in healing, which is to return common equity dividends,”
says Moynihan. “Now [investors are] saying, ‘How could
you have gotten so close and have it stopped?’ We’re just
disappointed.”
For Moynihan, 54, the last four and a half years as the
bank’s chief executive have been exhausting. Damage
control, cost-cutting and extinguishing legal fires have
consumed his tenure. He is tasked with running one of the
world’s largest financial institutions, yet at the same time he
must wear a government-imposed straitjacket that in many
ways turns the role of megabank chief executive into little
more than a conservatorship.
It’s not without good reason. Like other giant financial
firms, Bank of America went from being awash in profits in
the early 2000s to being the recipient of two federal bailouts
that totaled $45 billion during the crisis. The hangover from
the mortgage-fueled party is still being felt. Through March
2014 Moynihan has settled and reserved $55 billion related
mostly to troubled mort gages, including some $23 billion for
Fannie Mae and Freddie Mac and $2.4 billion for bond insur-
er MBIA. Much of BofA’s stock market value has evaporated.
Precrisis, shareholders enjoyed a stock price of $54 and a
$245 billion market capitalization. BofA shares sank to as low
as $3 in early 2009, and today, after massive equity dilution,
they trade at $14.71.
For Moynihan, who took over in January 2010, the low
point may have been August 2011, when he faced an inquisi-
tion of questions from 6,000 investors on a conference call
orchestrated by Bruce Berkowitz, the activist value investor
of $8.5 billion mutual fund Fairholme Fund.
At the time, the bank’s share price had fallen more than
30% in a little more than a week and was hovering around
$7.50. Countrywide, its toxic mortgage-flogger subsidiary
famous for liar loans, no-doc mortgages and a chief execu-
tive who epitomized the ugliness of corporate greed, was
imploding and making headlines daily. Normally passive in-
stitutional investors like Pimco and Blackrock were pound-
ing on Bank of America’s door, demanding it buy back bil-
lions of dollars’ worth of faulty mortgage-backed securities.
The Federal Reserve had flat out denied the bank’s request
for a dividend increase, and shareholders were suing over its
arranged marriage to Merrill Lynch, claiming that Bank of
America was agreeing to billions in obscene bonuses for ex-
ecutives and other employees while it was hiding crucial in-
formation about the troubled investment bank’s health prior
to the deal. Likewise inside the company,
Merrill Lynch brokers and bankers har-
bored deep resentment for their new,
seemingly rudderless bank parent.
At one point in 2011 Senator Dick
Durbin of Illinois took to the Senate
floor with a Bank of America debit card
in his hand and urged the public to “get the heck out of that
bank.” Bank of America’s shares fell below $5 later that year,
down 58% in 2011 compared to a flat S&P 500.
In the midst of the storm, Moynihan and chief finan-
MOYNIHAN TOLD HIM THE BANK DIDN’T NEED
BERKSHIRE’S MONEY. BUFFETT’S RESPONSE:
I WOULDN’T BE CALLING YOU IF YOU DID.
102 | FORBES JUNE 16, 2014
BINGE BANKERS
Inspired by Walter Wriston, who transformed Citibank into a global
juggernaut between 1967 and 1984, a generation of lesser banking geniuses
spent their careers building today’s megabanks. A field guide to the egos
behind “too big to fail” finance.
WALTER SHIPLEY
Chemical Bank/
Chase Bank
1981–2000
Shipley jumped on to
the interstate banking
bandwagon by grabbing
Texas Commerce Bank in
1987 and then New York’s
Manufacturer’s Hanover
in 1991 and finally Chase
Manhattan. Chase was
the nation’s largest bank
in 1996.
HUGH MCCOLL
NCNB/NationsBank/
Bank of America
1983–2001
The hard-charging
ex-Marine gobbled up
Southeastern super-
regional banks and built
a headquarters that is
still the tallest building
in Charlotte, N.C., known
by locals as “Taj McColl.”
Capped his career
in 1998 by acquiring
San Francisco’s Bank
of America, creating
America’s first coast-to-
coast bank.
JOHN B. MCCOY
Bank One
1984–99
A third-generation banker
who grew his Columbus,
Ohio bank from $9.1
billion in assets to $269.4
billion. His big appetite
ultimately got the better
of him as giant deals,
including First Chicago-
NBD and credit card
pusher First USA, proved
hard to digest; he was
forced to resign.

JUNE 16, 2014 FORBES | 103
cial ofcer Bruce Thompson manned up to the Berkowitz
conference call, facing an angry mob of institutional and
retail investors. But what Moynihan had to ofer during the
90-minute phone call was no magic bullet. What lay ahead
for the $2 trillion bank was a straightforward, even boring
strategy of cutting costs, selling of noncore assets, building
capital and serving its existing customers better. It was the
banking equivalent of a Keep-It-Simple-Stupid strategy.
That was just fine by Ber ko witz, who already owned
some 100 million Bank of America shares, which repre-
sented 6% of Fairholme’s portfolio. Accustomed to playing
turnarounds, he was clearly betting that the giant institu-
tion’s stock had nowhere to go but up.
Berkowitz would find himself in good company. Two
weeks after the conference call Warren Bufett telephoned
Moynihan’s New York City ofce. The two had never met,
but Bufett had done his research and was about to make a
$5 billion investment in Bank of America. Moynihan, still
insisting the bank didn’t have a severe capital problem, told
him the bank didn’t need Berkshire’s money.
Moynihan recalls Bufett’s response: “He said, ‘I know.
I wouldn’t be calling you if you did.’ ” What Moynihan did
need was the surge of confidence that comes with any War-
ren Bufett investment. “We did the deal over the next 24
hours,” he says.
For Bufett the Bank of America deal had little downside
risk. He was buying preferred shares in what was essentially
a government-backed entity that, unlike Treasury bonds,
would pay a 6% annual dividend. He also would get an eq-
uity kicker in the form of warrants for 700 million shares.
(Bank of America shares are up a whopping 110% since Buf-
fett’s investment.)
Of course, shrewd and cautious Bufett (his first rule of
investing: don’t lose money) may not have been counting on
any miraculous turnaround at Bank of America but rather
was buying a cheap long-term call option on the future of
banking. Like other too-big-to-fail banks, Bank of America
is transforming itself into a somewhat boring utility, not
unlike AT&T of old. Indeed, deleveraging, or shedding as-
sets, has become a global obsession in the industry. Propri-
etary trading is gone, investment banking departments have
shrunk, mortgage servicing is not worth the capital and
far-flung operations are being sold of. In short, the fun has
been taken out of commercial banking. The best strategic
move a big bank can make these days is to hike its dividend
or announce a share buyback.
Brian Moynihan inherited Bank of America from gen-
erations of empire builders. In the 1980s and 1990s Hugh
McColl turned Charlotte’s North Carolina National Bank
into NationsBank by consolidating superregionals in the
Southeast and then capping of his career by merging with
West Coast giant BankAmerica in 1998. Then his under-
study, chief executive Ken Lewis, upped the game by buying
FleetBoston Financial, Chicago’s LaSalle Bank, Country-
wide Financial and finally Merrill Lynch, in an acquisition
that would contribute to his downfall but ultimately give
BofA 302,000 global employees and hundreds of ofces.
But Moynihan arrived at the top after banking’s 2008
“Come to Jesus” moment. The new banker is a throwback
to a bygone era when banking was a profession for prin-
cipled and well-born Ivy Leaguers, and for hardworking ac-
countants and lawyers. Moynihan, who fits the bill in many
ways, needs to be the antithesis of an empire builder.
Born and raised in Marietta, Ohio, a small town in the
southeast corner of the state near West Virginia, Moynihan
is the sixth son of eight children in an Irish Catholic fam-
ily. His father was a research chemist at DuPont and his
mother a homemaker. He went to public schools and was an
honor student who played football and ran track. At Brown
University in Providence, Rhode Island, Moynihan studied
history and was co-captain of the rugby club. From there he
went to Notre Dame Law School and then worked on bank
mergers for the Providence ofce of law firm Edwards &
RICHARD
KOVACEVICH
Norwest Bank/
Wells Fargo
1993–2008
Trained under Wriston
at Citi, then left in 1986
to build up Minneapolis’
Norwest Bank. In a
keeping-up-with-the-
Joneses move purchased
Wells Fargo in 1998, the
same year Citi merged
with Travelers and
BofA with NationsBank.
Others saw the worst
financial crisis in 80
years; Kovacevich saw
opportunity: purchased a
failing Wachovia in 2008.
SANFORD WEILL
Citigroup
1998–2003
Built Commercial
Credit, a midsize credit
finance company, into
the biggest financial
services company in the
world after acquiring
Travelers and Citigroup.
Weill pushed the Clinton
Administration into
repealing the Glass
Steagall Act, the 1933 law
preventing government-
insured banks from
playing in Wall Street’s
riskiest games. Zero
shame: now publicly
advocating for megabank
breakups.
KEN LEWIS
Bank of America
2001–9
Led the acquisitions of
Chicago’s LaSalle Bank,
Fleet, U.S. Trust, Merrill
Lynch and finally the deal
that would ruin his legacy
and crush BofA’s stock,
Countrywide Financial, in
January 2008.

BANK OF AMERICA
Angell. At age 34 he pivoted from law to banking when he
was hired away by FleetBoston CEO Terrence Murray in
1993. Colleagues describe Moynihan as a hard worker who
is smart but unassuming and has a tendency to speak too
fast. (Says Moynihan, “People ask, ‘Why do you eat quickly
and speak quickly?’ and I say, ‘If you have ten people at the
table every night, you start to learn if you don’t do those two
things, then you starve and you’ll never get a word in.’ ”)
Says Anne Finucane, global strategy and marketing of-
ficer for Bank of America, “I think Brian is a diferent kind
of chief executive. His sport is rugby. Have you ever seen
rugby? You can’t tell one player from another, and they’re in
a scrum, but somebody is running the show. That’s kind of
Brian. He doesn’t need to be in the spotlight.”
But inside Bank of America’s scrum, which at times
has been brutal if not bloody, Moynihan is slowly getting
things done, selling assets, settling lawsuits and attempting
to rewire the place so that it is less focused on product and
footprint growth and more focused on servicing existing
customers.
After three years of consecutive declines, revenue finally
increased in 2013 to $90 billion, up 7% from the prior year.
Profits nearly tripled in 2013 to $11 billion from $4 bil-
lion. And despite its recent embarrassing accounting error
the bank’s revised Basel III Tier 1 common ratio still looks
healthy at 9%, exceeding the proposed minimum of 8.5% re-
quired of the bank by 2019. Since 2012 BofA stock is up 164%
while JPMorgan is up 64%, Citi 79% and Wells Fargo 72%.
“Moynihan has surprised a lot of people by hanging in
there and slugging it out,” says independent bank analyst
Nancy Bush. “He was dealt a bad hand of cards right up
front.”
Perhaps the biggest challenge of Moynihan’s career
has been cleaning up Countrywide. To fix it, or at least
stanch the bleeding, Moynihan brought in Terry Laughlin,
a trusted colleague from his days at FleetBoston Financial.
Laughlin was just of a stint working for hedge fund billion-
aires like John Paulson and George Soros, who had bought
IndyMac, another troubled subprime-mortgage company.
Laughlin waded through the mess and created from it a
healthy community bank in southern California. Moynihan
needed Laughlin to repeat his performance at Countrywide,
so Laughlin set up a bad bank known as Legacy Assets &
Servicing. Laughlin also built a new mortgage-servicing
platform, because the existing one wasn’t able to handle the
large volume of loan modifications, short sales and foreclo-
sures. LAS has worked through 3 million delinquent loans it
has faced, and it has 275,000 more to go.
With Laughlin “handling” Countrywide, Moynihan
focused on another core competency of postcrisis banking—
downsizing. At the end of 2011 he unveiled Project New
BAC, a program designed to save an estimated $8 billion
annually by mid-2015. Much of the savings will come from
firings and eliminating things like unnecessary data centers
and other noncore assets.
Today Bank of America employs 239,000 people, down
from 284,000 in 2010, giving it a smaller head count than
JPMorgan Chase, Citigroup and Wells Fargo.
Of course, in order to reduce payroll, Moynihan has been
selling of assets: its Canadian credit card, its Spain card
104 | FORBES JUNE 16, 2014
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
3
4
5
10
20
30
40
$50
O
O
O
O
O
O
O
O
O
BAC FROM THE BRINK
Gut-wrenching volatility has plagued BofA’s stock, but under Moynihan’s
watch the shares were recovering nicely—until the most recent scandal.
SOURCE: INTERACTIVE DATA VIA FACTSET RESEARCH SYSTEMS.
STOCK PRICE
BofA invades New
England when CEO
Kenneth D. Lewis nabs
FleetBoston to create
a $166 billion bank,
the world’s second
largest.
Lewis buys Countrywide
Financial, the toxic
mortgage house that
will ultimately cost BofA
over $50 billion in legal
and settlements costs.
Merrill Lynch’s shot-
gun wedding with
BofA.
Lewis is out,
and Brian
Moynihan takes
over as BofA’s
CEO—a job
many execu-
tives did not
want.
Pimco and
Blackrock
demand BofA
repurchase
some $47 billion
in shoddy mort-
gage securities.
Warren Bufett invests
$5 billion in the bank.
Weeks later Moynihan
announces a manage-
ment overhaul.
BofA bears the
brunt of a $25 bil-
lion national mort-
gage settlement.
Moynihan’s eforts
are on display in 2013
as BofA reports its
most profitable year
since 2007, and shares
trounce the S&P 500,
rising 180% in two years.
Yet another unexpected
setback for BofA
shareholders when a
$4 billion accounting
mistake costs bank
investors their expected
dividend increase.

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BANK OF AMERICA
and its Virgin Money Partnership, as well as LaSalle Global
Trust, Columbia Management and Merrill’s overseas wealth
management business. In total, the bank has shrunk its legal
entities from over 2,000 to 1,300 and has sold more than
$70 billion in noncore assets. Its risky proprietary trading
operation, now prohibited by the Volcker Rule, was among
the first to go. As a result its capital markets balance sheet is
down to about $600 billion from $1 trillion in 2009.
A smaller and in some ways simpler Bank of America
will give Moynihan more time to focus on what could be his
most important legacy: changing the bank’s culture.
“We’ve fined-tuned the business around basic prin-
ciples: Who are our customers? What do they need from us?
And what can we be good at?,” Moynihan explains. “Chang-
ing the mind-set requires getting people to stop thinking
about the market share, and start thinking more about the
value of a product for the customer.”
Putting consumers’
needs first instead of push-
ing products may sound
like an obvious thing to do,
but those who have worked
under previous Bank of
America CEOs say this has
never been a top priority.
Even former chief exec-
utive Hugh McColl admits
that his get-big-or-go-home
approach created problems
for Bank of America.
“One of the problems I
had running the bank was
marketing would come up
with some idea to sell a
product, but we’d never sell
enough of it. The problem
would be we’d have to keep
the damn product and sup-
port it even though it didn’t
make any money,” McColl
says. “What Brian has done
is get rid of a lot of that.”
Under Lewis, who
succeeded McColl and
left the bank at the end of
2009, Bank of America be-
came even more product-
driven, including the goal
of having as many credit
card and checking ac-
counts opened as possible.
Today, the bank isn’t
focused on new custom-
ers. It’s all about getting to know existing ones better and
wringing more profits out of the relationship. In other
words, providing a jumbo mortgage to a Merrill Lynch
client, opening a Merrill Edge investment account for a
retail banking customer or transferring a middle-market
company’s retirement plan to Merrill Lynch. It’s a return
of the old synergy strategy combined with a heavy dose of
cross-selling.
“Brian has really broken a lot of traditionally held be-
liefs and, quite frankly, sacrificed some earnings to do the
right thing for the customer,” says Laughlin.
For example, Moynihan had the bank change an over-
draft policy that allowed customers to swipe their debit
cards and buy items despite insufcient funds. This earned
BofA lucrative fees amounting to an estimated $2 bil-
lion per year, but pissed of customers, who were being
charged what amounted to usurious interest rates. Moyni-
han also assigned Laughlin, now president of strategic ini-
tiatives, the task of simplifying bank processes. Example:
reduce BofA’s checking account options from 70 to 3.
Says Laughlin, “It’s not about stretching for every last
dollar from a client. That’s a big change.”
To be sure, Moynihan’s back-to-basics approach is
not without potential. The bank currently has 50 million
customers, but its share of their wallets is only 20%. The
story is similar in its credit card business, where Bank of
America has $95 billion in balances but says its customers
have another $90 billion with competitors.
On Merrill Edge, the largely digital brokerage service
for customers who have between $50,000 and $250,000,
assets stand at $100 billion, up from $40 billion two years
ago. But the opportunity is in the trillions, BofA executives
say. In all, the bank estimates it has the potential to win
more than $8 trillion from its existing customer base.
The changes Moynihan is trying to make will not be
easy. It’s one thing to dole out $200 bonuses to bank
tellers who open checking accounts tied to active direct
deposits; it’s another thing to keep the bankers and bro-
kers of Merrill Lynch happy in the new era of low-cost,
low-risk banking.
Perhaps to prove a point to the bank’s 239,000 employ-
ees and to investors, Moynihan is among the lowest paid
of all bank chief executives. Last year he made $14 million,
compared with $20 million for JPMorgan’s Jamie Dimon
and $23 million for Goldman Sachs’ Lloyd Blankfein. Even
Bank of America’s chief operating ofcer, former Goldman
banker Thomas Montag, who runs Merrill Lynch, earned
more than Moynihan in 2013, with a total compensation of
$15.5 million. Says Moynihan, “This is not about me. I have
this job for a short time. What we have to do is build a last-
ing capability. The other thing is that you always have to
have a healthy fear of what could happen if you don’t get
this right.”
106 | FORBES JUNE 16, 2014
F
THE BIG FOUR
BY THE NUMBERS
BANK OF AMERICA
Total Assets $2.1T
Employees 239K
ROA 0.53%
ROE 4.6%
1-Year Stock Change 9.5%
CITIGROUP
Assets $1.9T
Employees 251K
ROA .73%
ROE 7%
1-Year Stock Change -8.8%
JPMORGAN CHASE
Assets $2.4T
Employees 251K
ROA .75%
ROE 9%
1-Year Stock Change 2.9%
WELLS FARGO
Assets $1.5T
Employees 265K
ROA 1.5%
ROE 13.87%
1-Year Stock Change 22.9%

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THE COURAGE OF ONE

108 | FORBES JUNE 16, 2014
TRAVEL
Agua de Nicaragua:
Each of Mukul’s 23
bohios comes with an
ocean view and its own
private plunge pool.
FORBES LIFE
virtually all of Central America—in 1985 and
selling it in 2010 (in what’s regarded as the larg-
est financial transaction in Central American
history), he now heads a family business that
employs more than 18,000 people in sectors in-
cluding transportation, computers, sugar, etha-
nol, rum and the Vivian Pellas Hospital, which
together total sales of more than $1.2 billion
per year.
As the Stanford-educated president of Grupo
Pellas, he oversees a conglomerate with more
than $5 billion in assets. But his influence in
Nicaragua isn’t limited to his corporate life. He’s
president of the board of INCAE, which was
founded by Harvard University and ranked by
América Economía as the top business school in
Latin America. He also serves on the board of
the nonprofit American Nicaraguan Foundation,
which promotes development in Nicaragua’s
poorest communities and helps feed more than
100,000 people a day. And he is a cofounder
with his wife, Vivian, of the Nicaraguan Burned
Children Care Foundation, which has helped
treat more than 128,000 children since its estab-
lishment in 1991, two years after the two were
severely burned in a small plane crash.
Pellas sees the $130 million he’s invested so
far in Mukul, the golf course and the residen-
tial development as being in line with his eforts
to improve the lives of Nicaraguans. “We see
Mukul and Guacalito, the resort development
where Mukul is situated, as a long-term proj-
ect—built out over 10 to 15 years. We’re in for
the long haul.”
In the meantime, he’s proud to have made
the local community part of the development
since the beginning. The current staf, as well
as most of the 1,500 workers who spent three
years building the resort, are from the surround-
ing communities. “When we started, there was
practically no real employment in the area. Most
people had only informal jobs,” he recalls. So he
set up a hotel school in a village nearby. “The
training still goes on daily. We support the local
schools, built parks and an infirmary, and we
ofer small loans and training for local business-
es.” He also has an airport in the works 4 miles
away, to increase visitor numbers when it opens
to private jets and commuter flights from Ma-
nagua and Liberia, Costa Rica next year. (Right
now it’s about a two-hour drive from Managua,
though helicopter transfers can be arranged.)
“Mukul and Guacalito are true examples of
sustainability,” Pellas says, “as the development
of the local communities are very much a part
M
y biggest motivation to build
Mukul was not a return on
investment,” says Nicaraguan
entrepreneur Carlos Pel-
las, the spiritual and finan-
cial force behind the country’s first true luxu-
ry beach resort. “It was to create a family legacy
that would help pull my country out of poverty.”
Mukul, which opened last year on the coun-
try’s Emerald Coast—a mecca for surfers and
a site of spectacular Pacific sunsets—is the re-
sult of what will eventually be Pellas’ $250 mil-
lion dream, a private beach community that
will comprise a 37-key resort (where beach vil-
las and smaller hillside bohios start at $500 a
night), a residential development, a lavish spa
(or “spas,” as the marketing director refers to
each of the six fully tricked-out treatment
casitas), a private beach club, a walk-in humi-
dor, a David McLay Kidd golf course and a tast-
ing room for Flor de Caña rum, which has been
owned by the Pellas family for five generations
and is one of the most highly regarded Latin
American rums.
Pellas intended Mukul (Mayan for “secret”)
to be a showplace for Nicaragua’s treasures:
rum, cigars, cofee, grass-fed beef and art—90%
of the furnishings throughout the resort were
made by local artists and artisans. Pellas, one of
Nicaragua’s wealthiest men, has reason to be a
booster for his country. After founding the BAC
Credomatic financial network—which serves
A Hidden
Gem On
The Emerald
Coast
BY ANN ABEL
With the opening of Mukul,
Nicaragua’s frst luxury resort,
entrepreneur Carlos Pellas has
invested in his country’s future.

JUNE 16, 2014 FORBES | 109
C
R
E
D
I
T

R
I
G
H
T
What the 55 million
Forbes.com users are talking
about. For a deeper dive go to
FORBES.COM/LIFESTYLE
TRENDING
of the growth and success of the
resort.”
That doesn’t mean anything that
the mostly American guests expe-
rience at Mukul feels like a charity
project. The architecture and ser-
vice rival what you find at top re-
sorts in Mexico or Costa Rica. The
extensive “Cocina NiKul” menus,
which meld local ingredients with
Latin and Mediterranean accents,
are delicious. Activities range from
private surf lessons and hiking with
on-site rangers to fishing charters
and helicopter day-trips to Grana-
da, the Cerro Negro volcano and
the Flor de Caña distillery.
The smaller accommoda-
tions, the hillside bohios, are larg-
er than 600 square feet, with a
tree-house-like feel, stunning sea
views through huge windows and
smart details like built-in icemakers
(so guests don’t have to call room
service for ice to chill their compli-
mentary Flor de Caña). The larg-
er one- and two-bedroom beach
villas are residential in scale, with
private pools, gardens and out-
door showers. And the six-bed-
room, 20,000-square-foot Casona
Don Carlos—where the Pellas fam-
ily stays when they’re in residence,
which is often—is positively pala-
tial, crowned by 80-foot-high pala-
pa ceilings and rambling in its in-
door-outdoor design.
Pellas doesn’t hole up when he
stays, though, preferring to meet
guests and share those Nicaraguan treasures
in person. “The creation of this magical beach
community is motivated by my desire to leave a
legacy that triggers the transformation of
Nicaragua into the kind of tourist destination
that will make our children and our children’s
children proud,” he says. “Through this authen-
tic and responsible tourism development we are
taking the first step in transforming a
country that has given so much to our
family for the last 140 years.”
“I haven’t been everywhere, but
it’s on my list.” —SUSAN SONTAG
FINAL THOUGHT
PERSON
IGGY AZALEA
Hip-hop’s unlikely new
star: a blonde Australian
woman. Her first album,
The New Classic, landed at
No. 3 on the U.S. charts,
the highest debut spot
by a female rapper since
Nicki Minaj in 2010.
COMPANY
PORSCHE
The 2015 Macan, which hit
the U.S. this spring, might
be a compact SUV, but
analysts expect big sales.
Some predict the Turbo
($72,300 base price)
could become Porsche’s
bestselling vehicle.
IDEA
STUDY ABROAD
Remember that magical
Prague semester? Recap-
ture the experience with
Road Scholar, a nonprofit
specializing in adult edu-
cational travel. First up:
six-week language classes
in Paris and Florence. 

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What You Might Not Know About Annuities
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112 | FORBES JUNE 16, 2014
THOUGHTS
On Seventh Avenue in New York City, frenzy is a
way of life, for Seventh Avenue is the never-never
land of U.S. industry where the risks are big, the
potential profts bigger still, and where nothing, but
nothing, appears to make sense. Even the fact that
Seventh Avenue is the center of the nation’s
$8 billion garment business—the “rag business,” as
its denizens call it—appears to defy all logic.”
—FROM THE JULY 1, 1964 ISSUE OF FORBES
“There’s
a special
place in hell
for women
who don’t
help other
women.”
—MADELEINE ALBRIGHT
“No one has ever asked an actor, ‘You’re playing a
strong-minded man. …’ We assume that men are
strong-minded or have opinions. But a strong-
minded woman is a diferent animal.”
—MERYL STREEP
“You don’t know a woman
until you’ve met her in court.”
—NORMAN MAILER
“She openeth her mouth with wisdom;
and in her tongue is the law of kindness.”
—PROVERBS 31:26
“In the future, there will be
no female leaders.
There will just be leaders.”
—SHERYL SANDBERG
“Some guy said
to me, ‘Don’t
you think
you’re too old
to sing rock
‘n’ roll?’ I said,
‘You’d better
check with
Mick Jagger.’ ”
—CHER
“A woman’s guess is much more
accurate than a man’s certainty.”
—RUDYARD KIPLING
“For most of history,
Anonymous was a woman.”
—VIRGINIA WOOLF
FINAL THOUGHT
“Women’s taste in neckties is as bad as men’s in chintz.”
—MALCOLM FORBES
ON WOMEN
FORBES’ NEW PRESIDENT Malcolm S. Forbes has been elected to succeed
his late brother, Bruce C. Forbes, as president of Forbes Inc. Now 44, Malcolm
Forbes has spent his entire working life in the publishing business. Since 1954 he
has been publisher and editor-in-chief of FORBES magazine.
DOGS ARE MORE RELIABLE THAN PEOPLE It’s dog-eat-dog in the
dog-food business today; and so far that frisky terrier, the Ralston Purina Co.
of St. Louis, has more than held its own with giant General Foods.
OTHER THOUGHTS FROM THAT ISSUE:


a
THE ECONOMY’ S
B A C K B O N E.
CONSI DER OUR
LITTLE SUPPORT.
a
r
e
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