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THE NEXT BILLION-DOLLAR STARTUPS

OCTOBER 24, 2017

AMERICA’S
TOP 100
100
YEARS
WEALTH
ADVISORS
EST. 1917
2018
LUXURY
CAR GUIDE
NFL’S MOST
VALUABLE
TEAMS

WEWORK
COFOUNDER
ADAM
NEUMANN
“WE’RE DOING
AMAZING THINGS
THAT NO ONE ELSE
IS DOING.”

THE $20 BILLION


OFFICE PARTY
WEWORK MADE CO-WORKING COOL.
THE NEW BIG BET: CHANGING WHERE AND
HOW THE WORLD DOES BUSINESS.
Contents // OCTOBER 24, 2017 VOLUME 200 NUMBER 4

ON THE COVER
64 | THE WAY WE WORK
At $20 billion, WeWork is the most
valuable startup in America outside of
Uber and Airbnb. The bet: Rather than
just building co-working spaces, it’s
going to change everyone’s
office experience.
BY STEVEN BERTONI

COVER PHOTOGRAPH BY JAMEL TOPPIN

2 | FORBES OCTOBER 24, 2017


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October 24, 2017
11 | FACT & COMMENT // STEVE FORBES
Why is the key to prosperity ignored?

LEADERBOARD
15 | MOST VALUABLE NFL FRANCHISES
Which team is worth the most?
Plus: Highest-earning players and Russell Wilson’s new app.

20 | LUXURY LINEAGE: THE CARTIER TANK


From the wrist of General John Pershing to Kim Kardashian.

24 | BILLIONAIRE-TO-BE
Meet the Angry Birds investor whose net worth
has taken flight.
15 Plus: The In Search of Excellence co-author
Tom Peters on reputation.

26 | THE 10-Q: STANLEY MCCHRYSTAL


The ex-general on arguing with your team and getting to
the gym every day.
Plus: Charles Koch—the richest person in Kansas.

28 | LIVE LIKE A ROCKEFELLER


Three of the family’s estates are up for sale.
Plus: Three waste wunderkinds.

30 | FORBES @ 100: NOVEMBER 15, 1947:


THE POSTWAR DREAM
Snapshots of a boomtown, now a bust.

32 | CONVERSATION
The lucrative magic of J.K. Rowling, the world’s
highest-paid author.

STRATEGIES
35 | THE RIGHT CHEMISTRY
Incyte has one cancer blockbuster, and it’s got Wall Street
banking on another. Its secret: embracing an older
age of pharma.
BY MATTHEW HERPER

TECHNOLOGY
40 | BRICKS AND CLICKS
Model turned entrepreneur Yael Aflalo is betting physical
“tech stores” and data can turn her eco-friendly It-girl brand
40 Reformation into a fast-fashion empire.
BY KATHLEEN CHAYKOWSKI

ENTREPRENEURS
46 | WARNING SIGNS
Four dads built an infant health monitor, Owlet, that is winning
over investors and parents. Doctors are another matter.
BY NATALIE SPORTELLI

INVESTING
52 | AMAZON WOMAN
From her Seattle perch, Nancy Zevenbergen has beaten the
market for three decades by spotting disruptors early and
sticking with them. Now she’s inviting public investors along for
the sometimes wild ride.
BY ANTOINE GARA

52

4 | FORBES OCTOBER 24, 2017


ON A CLEAR DAY,
YOU CAN SEE THE
FUTURE.
The U.S. needs more renewable energy, a problem felt on Block Island, RI, where residents
paid some of the highest electricity prices in the country while burning a million gallons
of harmful diesel fuel each year.

Citi provided long-term financing to help Deepwater Wind build the first offshore wind farm
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For over 200 years, Citi’s job has been to believe in people and help
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citi.com/progressmakers

© 2017 Citigroup Inc. All rights reserved. Citi, Citi and Arc Design and other marks used herein are service marks of Citigroup Inc. or its affiliates, used and registered throughout the world.
October 24, 2017

57

FORBES LIFE:
2018 LUXURY CAR GUIDE
58 | HOW DJ KHALED ROLLS
For hip-hop’s biggest hitmaker, living extra large is a major key—from
his beats to his boasts to his bodacious car collection.
BY ZACK O’MALLEY GREENBURG

60 | THE FAST AND THE LUXURIOUS


A guide to the best high-performance sports cars,
game-changing SUVs and sophisticated sedans for 2018.
Plus: The year’s most outrageous extras.
BY JIM GORZELANY
75

FEATURES
75 | THE POINT OF ALL RETURNS
How Optoro is building a billion-dollar business helping companies
cope with America’s mountain of rejected merchandise.
BY SUSAN ADAMS
PLUS: THE NEXT BILLION-DOLLAR STARTUPS

WITH INFINITI
SMART MOTION:
THE NEW BODY LANGUAGE 78

92 | A CUT ABOVE
Henry Davis made a billion-dollar fortune by carefully building his
family’s small-scale slaughterhouse into one of the country’s top
suppliers of high-quality beef. It’s always been quality over quantity,
and Greater Omaha’s customers like it that way—even when they can’t
get all the meat they want.
BY CHLOE SORVINO

104 | MONEY THERAPISTS


92 Trillions in wealth will pass to the next generation in the coming
decades. America’s Top Wealth Advisors are finding that sound
investment and tax advice often takes a backseat to family therapy.
BY ANTOINE GARA, ASHLEA EBELING AND LAUREN GENSLER
PLUS: AMERICA’S TOP 100 WEALTH ADVISORS

100
YEARS
110 | THOUGHTS
On work.

EST. 1917

The vintage Forbes logo on the cover dates from 1948.

6 | FORBES OCTOBER 24, 2017


Hugh Jackman and
the new TimeWalker
Chronograph
The new TimeWalker Chronograph is inspired
by performance and the spirit of racing.
montblanc.com/timewalker
Crafted for New Heights.
INSIDE SCOOP
EDITOR-IN-CHIEF
Steve Forbes

CHIEF PRODUCT OFFICER


Lewis D’Vorkin
Why We Welcome
FORBES MAGAZINE
EDITOR
Randall Lane
the Seven-Year Itch
EXECUTIVE EDITOR BY LEWIS D’VORKIN
Michael Noer
ART & DESIGN DIRECTOR
Robert Mansfield I’VE BEEN UNUSUALLY restless
FORBES DIGITAL lately about our two core products:
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Forbes.com and this magazine. That is
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Matt Schifrin fully built since I rejoined the company
SVP, PRODUCT AND TECHNOLOGY in 2010. As I shared my professional fer-
Salah Zalatimo
ment with a sage colleague, he replied,
VP, WOMEN’S DIGITAL NETWORK
Christina Vuleta “You know, there is science behind all
VP, VIDEO this. It’s called the seven-year itch.” My
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mind quickly raced to Marilyn Monroe—and, of course, the
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Kerry A. Dolan, Luisa Kroll WEALTH dress—in the now legendary 1955 movie. Then I hit the Web to
Frederick E. Allen LEADERSHIP
Loren Feldman ENTREPRENEURS dig into both the biology and the psychology behind the urge.
Tim W. Ferguson FORBES ASIA Science (or lore) aside, here are the itches I’m scratching.
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FORBES MEDIA
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8 | FORBES OCTOBER 24, 2017


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FACT & COMMENT
“With all thy getting, get understanding”

WHY IS THE KEY TO PROSPERITY


IGNORED? BY STEVE FORBES, EDITOR-IN-CHIEF

HERE’S A BOOK for the ages. With Gold: Everyone understands the basic need
The Final Standard (CreateSpace Pub- for fixed weights and measures in daily
lishing, $14.99)—and his two previous life: the amount of liquid in a gallon, the
volumes1—Nathan Lewis has established number of ounces in a pound, the num-
himself as one of history’s most formidable ber of minutes in an hour. None of these
and correct-thinking economic writers, amounts fluctuate; they are unchanging.
joining the ranks of Friedrich von Hayek, Just as we use a scale to measure some-
Ludwig von Mises, Henry Hazlitt and a thing’s weight, we use money to measure
handful of others. Lewis understands the the value of products and services. If the
subject of money better than almost any measuring rod itself becomes unstable,
other observer today, demolishing one the smooth functioning of an economy is
harmful myth after another that plagues disrupted, just as our lives would be if the
economic policy and has shackled the U.S. and most of the number of minutes in an hour constantly fluctuated.
rest of the world with subpar growth. What’s the best way to achieve a stable currency? By
The key to unlocking a great boom (along with a low- linking the currency to gold. Obviously, with gold we’re not
tax regime) is stable currencies. Without sound money we going to get a precise measurement, but as Lewis demon-
will be hurt by more dangerous and unnecessary crises à la strates in his concise and deeply learned history, gold has
2008–2009 and subsequent limp recoveries, which are slowly maintained its intrinsic monetary value better than anything
eating away at the legitimacy of our liberal democracies. else for 5,000 years. Silver did the same until the mid-1800s,
Why is correct monetary policy so fundamentally impor- but for several reasons it then drifted decisively away from
tant? As Lewis writes, a modern economy is ultimately “a vast paralleling the value of gold, which is why most of the ma-
network of cooperation . . . in which hardly anything is created jor countries of the world moved solely to a gold standard.
without combining goods, services, labor and capital from all The fluctuating price of gold today doesn’t reflect the
over the world. . . . The network of cooperation is organized real value of the yellow metal but, rather, the fluctuating
through the use of money, with information transmitted via value of various currencies.
prices, interest rates, profit and loss. These seemingly simple Lewis strips away all the mumbo jumbo about an effective
bits of information direct all economic activity.” monetary policy and the mountainous misunderstandings
Unstable currencies are like viruses in your computer—they about a gold standard. You tie your currency to gold at
corrupt those “bits” of information. Destructive bubbles result, a fixed weight. (For decades the U.S. dollar was fixed at
such as the housing frenzy preceding the 2008–2009 crisis. In 1/35th or $35 an ounce.) The mission of monetary policy is
2001, a barrel of oil cost little more than $20. Then the U.S. Trea- to keep the currency at that ratio. Period. (A central bank
sury Department and the Federal Reserve deliberately began might engage as a “lender of last resort” to sound banks
weakening the dollar in the mistaken belief that this would during a panic, but the loans would be quickly repaid.)
stimulate more exports and economic growth. Petroleum rock- Lewis chronicles how from time immemorial there
eted to more than $100 a barrel. Other commodities behaved in has been a contest between advocates of stable money and
similar fashion. These surges didn’t come about because of natu- those who, for a variety of reasons, want to toy with it. For
ral demand but because of a declining dollar. Nevertheless, most centuries there have been writers advocating the virtues of
people took to heart the message that the rising prices seemed to juggling with currency values as a means of promoting
convey: All these things were becoming dearer. The misinforma- more prosperity and power for the state. Adam Smith and
tion conveyed by prices resulted in hundreds of billions of dol- others blew up this nonsensical notion (as well as other self-
lars being misinvested, particularly in the building of houses. destructive ideas, such as restricting trade across borders). The

OCTOBER 24, 2017 FORBES | 11


FORBES

FACT & COMMENT STEVE FORBES

belief that a currency should have a fixed deepened the slump. Then, led by Britain, employed all sorts of nostrums, such as
gold value (the pound/gold ratio remained, countries engaged in competitive devalu- restricting the amount of money one
£3.89 per ounce, for more than two centu- ations that ended up retarding recovery could take out of the country, to preserve
ries) became widely accepted, thanks to and poisoning international relations. a currency’s official value and then would
the roaring economic success of Britain, Lewis gives searing insight into the mas- capitulate with a devaluation.
starting in the 1700s, and then of the U.S. sive blinders that hobble economists to this Amazingly, policymakers didn’t
after Alexander Hamilton’s sound-money day. They see the world through the lenses grasp—and still don’t—that a stable cur-
reforms under George Washington. of PIM—prices, interest rates and money. rency meant focusing monetary policy to
By the time of the First World War, just Astonishingly, when analyzing the causes do just that and nothing else.
about every self-respecting country was of economic events such other critical fac- Until the 1970s, the U.S. wanted to
on the gold standard—or knew it should tors as taxes, regulations and culture escape keep the dollar fixed to gold but never
be. Thanks largely to money being a stable their attention. This blindness to reality is realized this was easy to do if you con-
and thereby nondisruptive why so many governments to ducted monetary policy correctly: If
tool, the world economy ex- this day rely on central banks the dollar weakened against gold, you
panded on a scale that had to rev up their economies. reduced the basic money supply, and vice
never before happened. The Depression gave new versa if the greenback went up against
It seemed all those fun- life in modern garb (mainly gold. Instead we resorted to capital con-
ny-money ideas had been useless, mind-numbing but trols, browbeating the Germans to pay
thoroughly discredited, the impressive-looking mathemat- more for the upkeep of U.S. troops sta-
latest instance being the ical formulas) to the ancient tioned there and taking other actions to
several defeats of Demo- idea of governments changing “shore up” our balance of payments.
cratic candidate William currency values to artificially The U.S. needlessly and heedlessly blew
Jennings Bryan, who ran boost growth. John Maynard up the gold standard in the early 1970s
for the U.S. presidency on a Keynes added the additional without really intending to do so. This
pro-inflation, anti-gold platform. tools of controlling interest rates, govern- despite the fact that during the Bretton
Then came the Great War and the gar- ment spending, taxes, tariffs and capital Woods era the growth in American in-
gantuan growth of government to wage controls to keep economies on track. dustrial production was just about the
what countries felt were life-and-death At a conference held by Allied nations best in U.S. history. The result was a decade
struggles. But as Lewis shrewdly notes, in 1944 at Bretton Woods, New Hamp- of rampant inflation, economic stagnation
even before that conflict, people—includ- shire, to design a postwar monetary and and political strife. In the 1980s, Ronald
ing the Brits—were beginning to lose sight trade system, despite Keynes’ initial op- Reagan allowed the Federal Reserve to
of what made the gold standard work. The position members opted at the behest of end the terrible inflation, but his desire
seeds of confusion were being sown. the U.S. to go with a new gold standard to restore a gold standard was blocked by
After the war, the gold standard eventu- once hostilities ended. All currencies Milton Friedman and other eminences.
ally reemerged (which Lewis, in a brilliant would be tied to the dollar at fixed rates, The 1980s and most of the 1990s saw
bout of research, demonstrates was remark- and the dollar would be tied to gold at the U.S. pursuing a semi-sensible mon-
ably similar to the prewar version) but was $35 an ounce. etary policy. This, combined with Rea-
then blown away by the Great Depression. Lewis perceptively pinpoints a fatal gan’s tax cuts and his Cold War-winning
In laying out what really happened during contradiction in play that would even- policies, allowed the U.S. and the world
these controversial years, Lewis disproves tually destroy the Bretton Woods gold to enjoy an economic boom. Alas, with
a number of misconceptions, among them standard and then burden the world economists and government officials
that the gold standard was a cause of the with subpar economic growth. After woefully ignorant of the necessity of a
terrible global downturn, when in fact it the horrors and chaos of the Depression sound dollar, the U.S. gave in to the siren
was a victim of it, and that the Federal Re- years, countries yearned for currencies song of a cheap dollar in the early 2000s.
serve brought on or deepened the crisis. with fixed values, which is what Bret- Post 2008–2009 the Fed compounded
The causes of the Depression were ton Woods was designed to provide. But this felony with all sorts of destructively
basic: The U.S. instigated a calamitous most governments also wanted to engage distorting actions that have given us a
global trade war with the Smoot-Hawley in Keynesian currency and economic decade of punk economic performance.
Tariff Act, which imposed massive taxes (mis)management. This usually meant a Policymakers here and everywhere
on countless imports that triggered “loose” monetary policy to create extra still adhere to the fallacy that central
similarly destructive retaliations from money in the belief that it would boost banks can give us lasting prosperity. A
other nations. Incredibly, governments economic growth, especially before an read of this book would cure them of
responded to the resulting contraction election. Of course, easy money meant that fakery forever. F
with major tax increases (the U.S. even the country’s currency would wobble 1Gold: The Once and Future Money (Wiley, $40),
imposed a tax on writing checks) that against the dollar and gold. Nations Gold: The Monetary Polaris (CreateSpace Publishing, $11.99)

12 | FORBES OCTOBER 24, 2017


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LeaderBoard
20
LUXURY LINEAGE:
24
ANGRY BIRDS,
26
COMBANT
28
LIVE LIKE A
30
TARNISHED
THE CARTIER TANK HAPPY INVESTOR CONSULTANT ROCKEFELLER POSTWAR DREAMS

SPORTSMONEY

INSIDE
THE
HUDDLE
NFL star Russell Wilson
has $9 million in funding
from the likes of Jeff
Bezos and a game plan
to change how close fans
TIM PANNELL FOR FORBES; MADDIE MEYER/GETTY IMAGES

get to their favorite stars.

THE SEATTLE SEAHAWKS drafted


Russell Wilson in 2012 in the third
round as the sixth quarterback selected.
Scouts doubted Wilson, who stood 5
foot 11 in a sea of giants. They doubt
him no more. Wilson racked up more
wins (64) in his first five seasons than EXCLUSIVE NFL TEAM VALUES
any QB in NFL history. His career pass-

OCTOBER 24, 2017 FORBES | 15


LeaderBoard
SPORTSMONEY
FRANCHISE VALUES 0 500 1,000
er rate is the second highest of all time.
His performance on Sundays has at- DALLAS COWBOYS

tracted immense off-the-field interest— NEW ENGLAND PATRIOTS


Wilson, 28, has one of the largest social- NEW YORK GIANTS
media followings among NFL players,
WASHINGTON REDSKINS
with nearly 10 million fans across Face-
SAN FRANCISCO 49ERS
book, Instagram and Twitter getting an
inside look at his life as an athlete, father LOS ANGELES RAMS
and husband to singer Ciara. CHICAGO BEARS
But why stop there? Wilson’s new HOUSTON TEXANS
startup, TraceMe, launched a mobile Those Stetsons are gilt-edged:
The Dallas Cowboys generate NEW YORK JETS
app last month that aims to turn celebs
more than $100 million annu-
into media moguls. Its game plan: Let PHILADELPHIA EAGLES
ally from luxury suites at AT&T
celebrities create and post content on Stadium, the most in the NFL. DENVER BRONCOS
TraceMe profiles rather than rely on MIAMI DOLPHINS
traditional media to burnish their im-
GREEN BAY PACKERS
ages. So far Wilson is the only famous
face on TraceMe, but he’ll soon be joined BALTIMORE RAVENS
by other celebs; his wife and her 40 ATLANTA FALCONS
million-strong social following would be PITTSBURGH STEELERS
a natural fit. Wilson has debuted videos
SEATTLE SEAHAWKS
with his trainer, cook and mental coach,
as well as sit-downs with sports greats MINNESOTA VIKINGS
like NFL icon Jim Brown and basketball’s Amazon paid $50 million OAKLAND RAIDERS
to stream Thursday Night
Bill Russell in a series called Legends. Football this season, five INDIANAPOLIS COLTS
“TraceMe breaks down the boundaries times more than Twitter CAROLINA PANTHERS
between celebrities and the fans. They paid in 2016.
can take a front-row seat into our every- LOS ANGELES CHARGERS
day lives,” says Wilson, who has brought ARIZONA CARDINALS
on a former Hulu executive, Jason Lee- KANSAS CITY CHIEFS
Keenan, as its CEO.
JACKSONVILLE JAGUARS
Wilson got a glimpse at the publishing
playbook in 2014, when he became an in- TENNESSEE TITANS

augural “senior editor” for former Yankee NEW ORLEANS SAINTS


Derek Jeter’s digital publication, the Play- TAMPA BAY BUCCANEERS
ers’ Tribune, which also offers unfiltered
When the Los Angeles Rams open CLEVELAND BROWNS
takes from the famous. (NBA superstar
their new stadium in 2020, they CINCINNATI BENGALS
LeBron James has something similar, too: hope to sell $700 million worth
Uninterrupted, a maker of Web videos of personal seat licenses, onetime DETROIT LIONS
and podcasts, which has raised nearly fees that entitle the purchasers to BUFFALO BILLS
$16 million.) Wilson remains a contribu- buy season tickets.

tor to and shareholder of the Players’ Tri-


bune, which has accumulated $58 million THE NFL’S HIGHEST-EARNING PLAYERS
in funding.
TraceMe goes directly to where fans
live—i.e., their phones—and scored a $9
million Series A round this spring from
investors such as Jeff Bezos, YouTube
cofounder Chad Hurley and Alibaba co-
founder Joseph Tsai. It’s free to download
and will later presumably layer on ads à
la Instagram and Twitter. Even more than
Jeter’s or James’ media outfit, though, 1. MATTHEW STAFFORD 2. CAM NEWTON 3. ANDREW LUCK 4. DEREK CARR
TraceMe is looking for an audience that’s DETROIT LIONS CAROLINA PANTHERS INDIANAPOLIS COLTS OAKLAND RAIDERS
TOTAL EARNINGS: $52.5 MIL TOTAL EARNINGS: $34.7 MIL TOTAL EARNINGS: $30 MIL TOTAL EARNINGS: $27.2 MIL
as eager to get as up close and personal as SALARY/BONUS: $51 MIL SALARY/BONUS: $23.7 MIL SALARY/BONUS: $27 MIL SALARY/BONUS: $25.2 MIL
a blitzing linebacker. “Superfans,” Wilson ENDORSEMENTS: $1.5 MIL ENDORSEMENTS: $11 MIL ENDORSEMENTS: $3 MIL ENDORSEMENTS: $2 MIL

calls them. “I want to give my superfans a


detailed, visual, VIP experience.” Enterprise value (equity plus net debt) of team based on current stadium deal (unless new stadium is pending).

16 | FORBES OCTOBER 24, 2017


5,000
1,500 2,000 2,500 3,000 3,500 4,000 4,500 ($millions)

129%
5 year % change in value
126
125
current value (2017)
94
160 value 2012
285
139
115
114
110
No team had a
130

MICHAEL AINSWORTH; AP PHOTO/MARK TENALLY; RONALD C. MODRA/SPORTS IMAGERY/ GETTY IMAGES; WINSLOW TOWNSON/AP IMAGES FOR PANINI
PHOTO/DENIS POROY; DAVID ALLIO/ICON SPORTSWIRE 951/DAVID ALLIO/ICON SPORTSWIRE/NEWSCOM; SEAN GARDNER/GETTY IMAGES; AP PHOTO/
cheaper average ticket

ILLUSTRATIONS BY DAVID URBAN; GREGORY SHAMUS/GETTY IMAGES; THEARON W. HENDERSON/GETTY IMAGES; AP PHOTO/DARRON CUMMINGS; AP
143 last year than the
Jaguars ($62), who
120 won just three games
116 overall—only one of
them at home.
196
123 Last season, the NFL raked in
$5.1 billion from its broadcast
133 deals, more than twice the
146 NBA’s broadcast haul.

203
106 Holy fish! New naming rights
for the Dolphins’ home field,
119 Hard Rock Stadium, are the
143 third most valuable in foot- In Kansas City the Chiefs

BY KURT BADENHAUSEN, MICHAEL K. OZANIAN AND CHRISTINA SETTIMI


ball at $14 million per year. introduced a new mobile-only
133
ticket this season. The Bud
108 Light Game Day Pass guaran-
tees admission to the upper
169 level for all home games.
103 It costs $200.

106
91
98
107
99 Three teams (the Falcons, Rams
99 and Vikings) have the NFL’s per-
mission to exceed the league’s
$250 million debt limit because
they’re financing new stadiums.

5. KAWANN SHORT 6. DREW BREES 7. JOSH NORMAN 8. KIRK COUSINS 9. DEANDRE HOPKINS 10. STEPHON GILMORE
CAROLINA PANTHERS NEW ORLEANS SAINTS WASHINGTON REDSKINS WASHINGTON REDSKINS HOUSTON TEXANS NEW ENGLAND PATRIOTS
TOTAL EARNINGS: $26.1 MIL TOTAL EARNINGS: $26 MIL TOTAL EARNINGS: $25.7 MIL TOTAL EARNINGS: $25.4 MIL TOTAL EARNINGS: $25 MIL TOTAL EARNINGS: $23.2 MIL
SALARY/BONUS: $26 MIL SALARY/BONUS: $13 MIL SALARY/BONUS: $24.5 MIL SALARY/BONUS: $23.9 MIL SALARY/BONUS: $24 MIL SALARY/BONUS: $23 MIL
ENDORSEMENTS: $75,000 ENDORSEMENTS: $13 MIL ENDORSEMENTS: $1.2 MIL ENDORSEMENTS: $1.5 MIL ENDORSEMENTS: $1 MIL ENDORSEMENTS: $200,000

OCTOBER 24, 2017 FORBES | 17


PROMOTION

CDW And Dell Team Up To Offer


Optimal Windows 10 Migration
BY MICHAEL RONEY

IT managers from around the world are migrating to Microsoft charging, high-resolution displays, extended battery life and
Windows 10, which is projected to have 1 billion users by 2018. other advantages. 
Why the popularity? Windows 7 and 8 both are facing end-of- “Dell 2-in-1’s touch functionality and tablet form factors allow
support horizons in the next few years, but there’s more: “Win- you to use a stylus and take notes immediately on a PDF, or mark
dows 10 represents a leap in security, management and produc- up a PowerPoint presentation,” says Hodges. “Being able to pre–
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leading technology solutions provider to business, government, ing the boundaries of ease and impact.”
education and healthcare. CDW sees a particularly valuable
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“Windows 10’s embedded security enhancements make it the cloud-based services like Office 365, Microsoft Intune and the
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deeper features such as secure booting, advanced encryption you’re even adding your internal apps — a big management
and an underlying architecture addition known as virtualization- advantage with generally lower deployment costs,” says Hodges.
based security have boosted security deep into the OS,” he adds.
Dell 2-in-1 leverages this advantage with removable solid-state AMPLIFYING VALUE WITH IT ORCHESTRATION
hard drives, ControlVault (isolated credential authentication), a CDW sees numerous customers migrating to Windows 10
Trusted Platform Module (TPM) cryptographic controller, and via Dell’s 2-in-1 products, avoiding separate OS and hardware
other built-in features that can be augmented with a broad range upgrades while immediately gaining productivity and lower total
of Dell and CDW security solutions. cost of ownership.
“Windows 10 is optimized for these devices running with
BOOSTING PRODUCTIVITY newer processors, higher RAM, solid-state hard drives and touch
In addition to bringing back the user-friendly Start menu, Win- screens — all of which come together in the Dell 2-in-1 line,” says
dows 10 now includes Cortana, a digital assistant dedicated to Arado. “I think that from a performance, productivity, reliability
streamlining searches; the faster, sleeker Microsoft Edge browser; and collaboration standpoint, these units are as good as it gets.
Windows Hello; and more. Dell 2-in-1 models augment produc- Plus, you get CDW’s end-to-end service and expertise. Put all of
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CDW.com/dell

© 2017 CDW®, CDW•G® and PEOPLE WHO GET IT® are registered trademarks of CDW LLC.
LeaderBoard
LUXURY LINEAGE

THE CARTIER TANK AT 100


LIKE ITS NAMESAKE, the Cartier Tank is unstoppable. The elegant unisex watch, which celebrates
its centennial this fall, has been a favorite of movie stars (Clark Gable, Fred Astaire), First Ladies (Jackie
Kennedy, Michelle Obama), even royalty (Princess Diana). Andy Warhol proudly owned one but not for its
intended purpose. “I don’t wear a Tank to tell the time,” said the man who invented the concept of 15 minutes
of fame. “In fact, I never wind it. I wear a Tank because it’s the watch to wear.”

1921
Cartier threw the Tank a curve when it introduced the first
variation on the Normale—the Tank Cintrée, an elongated
watch with a curved case that hugged the wrist. Because
each new Cintrée has been produced in limited editions,
it has remained one of the most collectible 20th-century
watches, routinely selling for between $25,000 and $50,000,
1917 and as much as $250,000 for exceptional platinum versions.
According to company lore,
the Tank was designed by
Louis Cartier, the founder’s
grandson, after being
inspired by the tread of a
1926
Renault FT-17 light tank,
The watch made its movie debut when
a mechanical hero of the
Rudolph Valentino insisted on wearing
Great War. More likely, the
his Tank during his final film, The Son
design was an elegant
of the Sheik. Call it an anachronism—or
update of the square Cartier
proof of the Tank’s timelessness.
Santos watch. But the
military connection made 1919
for good marketing—the The watch, with its Roman numerals,
first Cartier Tank was railroad-track minute markers and
1963
presented as a victory watch signature sapphire cabochon crown,
First Lady Jackie Kennedy was
to American general John was offered for sale in Paris. Six
given a 1962 Tank Ordinaire by her
Pershing in 1918. were sold in 1920, and it was given a
brother-in-law Prince Stanislaw
name—the Tank Normale.
“Stas” Radziwill. In June 2017, the
watch broke the record for the
1976 most expensive Cartier Tank ever
More than a decade after the Cartier family sold the business, the auctioned, selling for $379,500—
new owners created a lower-priced line, Les Must de Cartier. In to Kim Kardashian.
1976, the Cartier Must de Tank, with colorful lacquered dials and no
numbers, debuted. The gold-plated quartz watch, which retailed
for about $150, tarnished the prestige of the brand, but sales were
extraordinary, and they remain collectible, often selling for more
than $1,000.

1996
Having released the Tank
Américaine in 1989, a curved
cousin of the Cintrée, Cartier
introduced the sportier
Tank Française, which had
a chain-link bracelet. A
THREE LIONS/GETTY IMAGES; THE ANDY WARHOL FOUNDATION FOR THE VISUAL

JOYCE N. BOGHOSIAN/GETTY IMAGES; DAVID CAIRNS/EXPRESS/GETTY IMAGES

postdivorce Princess Diana


ARTS, INC.; WORLD HISTORY ARCHIVE/ALAMY; TIM GRAHAM/GETTY IMAGES;

was often photographed in


a gold version, and Michelle
Obama wore a stainless-
steel Tank Française in her
official portrait as First Lady
in 2009.

2017
2012 For the watch’s centennial, Cartier has
Cartier put another country on the introduced a battalion of Tanks in some of
Tank map with the Tank Anglaise. its most iconic models, including a Tank
A variation on the Française, the Américaine that’s finally available in stainless
BY MICHAEL SOLOMON

Anglaise came in three types of gold steel (beginning at $5,750); a tribute to the
and housed the crown in the watch’s man who got it all ticking, a Tank Louis Cartier
brancard, a reminder that a Tank (beginning at $9,750); and skeletonized
should always protect. versions of the Tank Cintrée, limited to editions
of—what else?—100.

20 | FORBES OCTOBER 24, 2017


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advisor and investor.

“INVESTORS NEED HELP


FROM A TRUSTED
ADVISOR. TRUST 2008 The Great Recession

MEANS INTEGRITY AND 7KHSRZHURIPDUNHWSODFHIRUFHVWRRYHUZKHOPFDXWLRQ


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BEST INTEREST.” economic crisis since the Great Depression. The recession
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<21+((* was in need of retooling.
REGISTERED INVESTMENT ADVISOR

For more, visit: 2017 The present day


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and advisors can help investors make those decisions. As part of
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LeaderBoard
FORBES @ 1OO BILLIONAIRE-TO-BE
Lessons and ideas from the greatest living business minds

BIRDMAN
An unlikely rebirth has the Finnish
gaming company behind Angry Birds
(and majority shareholder Kaj Hed)
flying high anew.

KAJ HED WAS ALREADY a successful entrepre-


neur in Finland when, around 2005, he gambled on
an idea from his son, Mikael: investing in a gaming
studio. Mikael and his partners called the company
Rovio, Finnish for “bonfire,” and its first 51 titles—
well, they crashed and burned. During that period,
Mikael had departed after an apparent feud with his
father, but he returned in time to develop No. 52:
Angry Birds, a physics-oriented slingshot mobile
game featuring a flock of fowl and their adversaries,
an army of menacing green pigs. A viral hit, Angry
Birds soared to the top of the charts in 2010 with the
velocity of one of its far-flung characters.
But before the Heds could take Rovio public,
the company’s net profit plunged from $73 million
in 2012 to $37 million in 2013, the result of an
expansion spree that included developing a cartoon
series and theme parks. A year later, Mikael left as
CEO, and by 2015, the business was in the red and
going through two rounds of layoffs.
Kaj, 62, stayed on as a director—serving as
chairman until last June, when he became vice
chairman—and helped guide Rovio out of its free
fall. IPO plans are back on after The Angry Birds
Movie, a surprise hit last year, grossed $350 million.
The announced preliminary price range for the list-
ing will give Rovio a market capitalization between
$960 million and $1.1 billion, making Kaj’s 69%
stake worth at least $650 million.

PHOTOGRAPH BY MARTIN SCHOELLER; PHOTOILLUSTRATION BY JOHN WEBER

REPUTATION BY . . .
TOM PETERS
BUSINESS STRATEGIST; CO-AUTHOR OF IN SEARCH OF EXCELLENCE
BILLIONAIRE-TO-BE BY JENNIFER WANG

GUARDING YOUR REPUTATION IS EASY. To build it, though, you must


invest insane amounts of time in developing and maintaining relationships
from the bottom to the top of every organization with which you come in
contact. You need a bit of self-deprecation. You need to shoot straight. And
you need to say more, rather than less. The press will cut you an incredible
amount of slack if it is clear to them that you are a straight shooter.

24 | FORBES OCTOBER 24, 2017


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LeaderBoard
THE 10-Q RICHEST BY STATE
information, how it was controlled, where
decisions were made. That was against al
Qaeda in Iraq. If you think about ISIS now,
ISIS is Uber.
I don’t think Uber would like the comparison.
But like Uber, ISIS has little capital invest-
ment in what they’re doing. They’re creat- KANSAS
ing franchises, and those franchises are POPULATION: 2.9 MILLION
very well suited to the conditions on the 2016 GROSS STATE PRODUCT:
ground because they formed themselves. $153 BILLION (0.2% GROWTH)
How do you encourage people to share power GSP PER CAPITA: $52,715
within an organization? It can seem like no one (RANKS NO. 27 NATIONWIDE)
wants to. NUMBER OF BILLIONAIRES: 2
It’s just not our nature. The trick is to RICHEST: CHARLES KOCH
convince people at different parts in the $53.2 BILLION
organization that it’s in their interest. You
incentivize them to be connected to the NO MATTER HOW you feel about Charles
larger goals. Koch’s politics, you’re probably helping him
Can you create a flexible group without lots of grow richer. His Koch Industries makes the
debate and argument? paper towels (Brawny) sitting on your coun-
No. In all healthy organizations, argument ter, next to Koch napkins (Vanity Fair) and
tissues (Angel Soft). You likely have Koch
happens face-to-face. You debate, argue
in other rooms, too, whether toilet paper
and move on. (Quilted Northern) or carpet (Stainmaster).
By the way, there’s a pile of argument in Koch Industries is a manufacturing and
the military. It just takes different forms. energy conglomerate with an estimated

COMBAT But when the landing-craft ramp drops and


hits the beach, that’s not a time to argue
$100 billion in annual sales and 120,000-
plus employees. The wonkish Charles, 81,

CONSULTANT the plan.


Do you seek diversity or uniformity in teams?
runs this workforce via so-called Market
Based Management, an incentive system
that allows, say, middle managers to earn
Ex-general Stanley McChrystal Diversity is better. The challenge is creating
more bonuses by turning around a failing
diversity that communicates well. If you
on the importance of flexible take a SEAL or a Ranger organization, they
business than by gently steering one that’s
performing adequately.
teams, disagreement and eating look homogenous. But they have a range Still, Charles is unquestionably better
just one meal a day. of thinking styles. Good commanders known for his politics than for his man-
encourage diverse thinking and use that to agement philosophy, and he and brother
What kind of companies seek out your
consulting firm, the McChrystal Group? test their thinking in various directions. David, 77, have become the aged poster
Switching subjects, how do you keep so boys for wealth’s undue influence in U.S.
It’s not a failing company, but they’ll say,
damned fit? governance. They’ve found success fund-
“We are too slow making decisions. We are ing groups that today form the core of
ineffective at implementing decisions.” I get up and run for at least an hour and
conservative thinking in America, such as
then stretch. On alternate days, I will get
Your own epiphany about speed and flexibility George Mason University’s Mercatus Cen-
came during your career in the military. up and I’ll do about an hour of abs and
ter. But they’ve had less luck as kingmakers:
We had purposely built this counterter- core workouts in the house, and then I’ll Mitt Romney lost the presidency in 2012,
rorist force, JSOC, as a beautifully crafted go to the gym. and Charles once likened the Republican
bullet that would fly straight and true. That Then you go to the gym? now in the White House to a fatal disease.
was fine if you were facing a somewhat For another hour or 40 minutes of weights
RICHEST BY STATE BY ABRAM BROWN AND CHASE PETERSON-WITHORN

predictable enemy. Then we got into this and pull-ups. I almost never take a day off.
constantly changing environment in Iraq And somehow you eat just one meal a day.
against a different kind of enemy. So we I’ve been doing it for about 40 years, just
LEFT: DAVID YELLEN FOR FORBES; RIGHT: JAMIE KRIPKE

stopped being able to be the bullet. We because I thought I was getting fat. Every-
had to become the gun. We had to literally body told me how stupid I was, how it’s bad
change daily. for my body. Now they’re starting to say it’s
Did you have to upend the classic military okay, even good. In a few years, they’ll say
hierarchy? it’s bad again. I’m 63. If I change suddenly
Not formally. But it changed who got what now, it might kill me.

GENERAL STANLEY MCCHRYSTAL SPOKE WITH RICH KARLGAARD, OUR EDITOR-AT-LARGE


AND GLOBAL FUTURIST. THIS INTERVIEW HAS BEEN EDITED AND CONDENSED.
FOR THE EXTENDED CONVERSATION, VISIT FORBES.COM/SITES/RICHKARLGAARD.

26 | FORBES OCTOBER 24, 2017


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LeaderBoard
REAL ESTATE

LIVE LIKE A ROCKEFELLER


Six months after David Rockefeller’s death at 101, his family is selling three of his homes—
most recently listing his former Westchester estate in September for $22 million.

LOCATION: 146 E. 65th St., Manhattan LOCATION: 180 Bedford Road, Sleepy Hollow, LOCATION: Ringing Point, Seal Harbor, Maine
LISTED PRICE: $32.5 million New York LISTED PRICE: $19 million
YEAR BUILT: 1924 LISTED PRICE: $22 million YEAR BUILT: 1972
VITAL STATISTICS: 9,777 square feet, 8 beds, 8 baths YEAR BUILT: 1938 VITAL STATISTICS: 5,034 square feet, 7 beds,
AMENITIES: Temperature-controlled wine vault, VITAL STATISTICS: 11,343 square feet, 11 beds, 5.5 baths, 14.5-acre lot
6 staff bedrooms, library, elevator 12 baths, 75-acre lot AMENITIES: Granite swimming pool, rose garden, or-
NOTABLE NEIGHBORS: Billionaire Chase Coleman; AMENITIES: Hudson River views, extensive gardens, chard, guest cottage, nearby Acadia National Park
Loews Corp. cochairman Jonathan Tisch 3-bedroom gatehouse, 6-stall barn, 3 greenhouses, NEIGHBORS: Billionaire shoe heiress Susan Alfond,
LORE: David and his wife, Peggy, purchased the apple orchard and helipad Martha Stewart
Upper East Side residence in 1948 (as he began his NEIGHBORS: Investors George Soros, Daniel Och LORE: Like many turn-of-the-century elite, David’s
career at Chase Manhattan Bank). They raised their and Michael Steinhardt parents summered near Bar Harbor, and his father
six children in the double-wide town house and LORE: Mott Schmidt, an architect favored among the would donate 45 miles of rustic carriage roads
displayed much of their 2,000-item art collection New York elite, designed the place, which lies less to Acadia National Park in 1913. In Maine, David
(Picasso, Matisse, Gauguin) on its walls. than 2 miles from Kykuit, the estate once belonging “learned to sail and developed a deep interest
RECOLLECTIONS: “While I was at Columbia, I would to David’s progenitor grandfather, John D. Rock- in nature,” he noted in his 2002 Memoirs,
often go for dinner and spend the night at 65th efeller Sr. David would later found the nearby Stone much of which he wrote from the home’s study
Street with Grandpa,” recalls David’s granddaughter, Barns Center for Food & Agriculture to honor his overlooking the harbor.
Ariana Rockefeller, a Forbes.com contributor. “We wife after her death. RECOLLECTIONS: “Christmas was spent in Maine.
would talk about my studies, and he would tell me RECOLLECTIONS: “Grandpa and I would sit together We would all gather for Christmas morning to
about his time at Chase—how he would leave in the and look out over the lawn watching the fireflies. open presents by the fire and then have
morning and take the subway to lower Manhattan [David was a noted expert on insects.] He would ex- Christmas lunch together.”
with his newspaper folded in half lengthwise so he plain to me that they are insects in the Lampyridae
could read in the crowded cars.” family, in the beetle order of Coleoptera.”

30 UNDER 30

WASTE MANAGERS
Finding treasure in others’ trash (and worse) with the Forbes 30 Under 30, in 30 words or less.
ANOOP JAIN EMILY WOODS
Sanitation & Health CASEY MCNEIL Sanivation | 30
30 UNDER 30 BY DAN SPINELLI; ROCKEFELLER BY SAMANTHA SHARF

Rights in India | 30 REEcycle | 27 Dried human feces—yes,


Northwestern grad Secured $1 million that stuff; it’s endlessly
brought in more in grants from the renewable—makes an excel-
than $300,000 and National Science lent charcoal substitute after
engineered a water- Foundation, treatment. Woods has raised
filtration system Caltech, Baylor $600,000 to bring Saniva-
ILLUSTRATIONS BY AARON SACCO

powered by the and MIT to use his tion’s solid-fuel program to


methane gas generat- proprietary solvent towns across Kenya.
ed by human waste. to extract valuable
The water costs In- rare-earth metals Forbes Under 30
dian customers just from electronics in Listen to young innovators,
disruptors and entrepreneurs
$0.008 a liter. U.S. landfills.

28 | FORBES OCTOBER 24, 2017


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are trademarks of RingCentral, Inc. Other third-party marks and logos displayed in this October 23–25 | San Francisco
document are the trademarks of their respective owners.
LeaderBoard
FORBES @ 1OO
During our centennial year, we’re unearthing our favorite covers.

THE POSTWAR DREAM:


NOV. 15, 1947
AS AMERICANS RETURNED home from
war, the suburbs were born.
Published the same year the first 350 homes
were sold in Levittown, New York, Forbes’
30th anniversary issue spotlighted Lancaster,
Ohio, a “progressive American” city of 24,000
people 30 miles southeast of the state capital. It
had “all the advantages of a rural as well as an
urban life.” Small-town commerce thrived at
the intersection of Main and Broad Streets. Ex-
G.I.’s such as the “conscientious, unassuming”
Jack Fisher filled jobs at local manufacturers.
Fisher, a brawny six-foot-three, had once ex-
celled on the local high-school basketball team;
now he tended machinery at Anchor Hocking,
a glassware maker that was the biggest business
in town, with annual sales of $64 million
(some $700 million today).
Just as the Lancaster of 1947 offered a snap-
shot of postwar success, the Lancaster of 2017
is a picture of the drastic change of fortune
suffered by parts of industrial America ever
since. More than 20% of Lancaster sits below
the poverty line today, compared with 14% in
Ohio overall. Anchor Hocking has recently
been through bankruptcy and traded hands
from one private-equity owner to another. And
earlier this year, Lancaster’s local newspaper,
the Lancaster Eagle-Gazette, published an
investigation titled “Seven Days of Heroin: This

LEFT TO RIGHT: AP; AFP/GETTY IMAGES; TODD WILLIAMSON/GETTY IMAGES; PLANET NEWS ARCHIVE/GETTY IMAGES
Is What an Epidemic Looks Like.” It featured
two numbers uglier than any from even the AMAZING ADS
most indebted balance sheet: In just one week, For the Long Haul
in greater Cincinnati, 180 overdoses and 18 By encouraging truck driving as a
deaths. profession—you too could become
a “Gentleman of the Highway”—
International Harvester, a maker of
truck parts, primed the pump for
future generations of customers.

CRYSTAL-BALL CALLS
FAST-FORWARD Forecast: Cloudy
Kings of Capitalism Some of Forbes’ predictions for
1947: A package of stories on America’s “50 Foremost” business leaders listed the 30 years following 1947 were a
such luminaries as Henry Ford II, David Sarnoff, Samuel Goldwyn, Thomas J. little wide of the mark. Among our
Watson and Nelson Rockefeller. botched prophecies: widespread
2017: Our recently published centennial issue featured a similar concept—essays
BY ABRAM BROWN

helicopter use, outright bans on


from the “100 Greatest Living Business Minds”—but centered on a much different monopolies and the ability to
group of people: almost no heirs and very few hired hands, mostly investors and regulate the weather.
entrepreneurs like Warren Buffett, Bill Gates, Oprah Winfrey and Elon Musk.

30 | FORBES OCTOBER 24, 2017


“No matter where I am in the world, I know that my
First Republic personal banker is just a phone call away.”
P OW H E R F U L F O U N DAT I O N
Soledad O’Brien, Co-Founder and Chairman, PowHERful Foundation; Journalist/Producer
Pictured with Scholars (standing left to right): Vanesa Cruz; Ariana Quiñones; Tassion Minor; Rochelle Ballantyne

(855) 886-4824 | Ŕrstrepublic.com | New York Stock Exchange symbol: FRC


MEMBER FDIC AND EQUAL HOUSING LENDER
LeaderBoard
CONVERSATION

NEW BILLIONAIRE David Zalik, co-


founder of GreenSky—which provides
fast financing for home renovations—
landed on the cover of our September
5 issue of the world’s most innova-
tive companies. Lend Academy’s Peter
Renton called Lauren Gensler’s piece
“a must-read,” and our look at fintech’s ROWLING FOR
prime players prompted online digest
DOLLARS
FinanceTnT to note that while the “pay-
ments sector gets the most press, digital Harry Potter’s creator is the world’s
loans and credit services are making a highest-paid novelist. Readers
(mostly) lauded her wizardly ways.
major splash.” Overall plaudits went to
cloud-tech giant Salesforce, our No. 1 ALISON FLOOD, THE GUARDIAN: “J.K.
innovator for the fifth time, returning Rowling will need to reserve a particularly large
vault at Gringotts bank after a bumper year.”
after two years further down the list. “Fi-
nally back on top!” tweeted Nick Post, its
head of strategic innovation. Some won-
dered how we could rank it ahead of the SADAF AHSAN, NATIONAL POST:
“Conspicuously absent from the list? Game of
two firms nipping at its heels. “Salesforce Thrones’ George R.R. Martin and [young-adult]
ahead of Tesla and Amazon?” tweeted king John Green.”

@Rocohibo. “Wow. Might need a recount!”

REINA-FLOR OKORI
THE INTEREST GRAPH MAKENDENGUE: “For
women, building an empire while
Top, most, highest, largest: Our September 5 issue was a celebration of the superlative. raising a family is a great challenge.
Very inspiring.”
The best readers on Earth clicked accordingly.
America’s Top Colleges 2,788,643 page views

The Most Innovative Companies


DEMETRIA BRIDGES: “Looking
320,613 beyond ‘highest-paid,’ I see people
who are insanely passionate about what
they do, and the dollar figure is simply
The World’s Highest-Paid DJs commensurate with that passion.”

251,221
“For the first time
in nearly a decade,
The World’s Highest-Paid Authors J.K. Rowling tops our KATHLEEN HANSEN:
ranking, displacing “Brilliant fiction writer.
However, her obsession with
190,666 the freakishly prolific American politics is quite annoying.”
James Patterson.”
America’s Largest Private Companies
“You can get a lot
123,146
of people to pull off ISCAH SONGA: “Such a huge
fan—she makes writing look cool.”
the highway and
How Two Texans Made Buc-ee’s Convenience Stores a Phenomenon spend money if you
guarantee them an
53,513 immaculate place in
which to heed the @DANNIESSA_: “When you really
put effort into making quality work, the
Handyman’s Helper: How GreenSky’s David Zalik Skipped call of nature.” benefits will keep rolling in for years.”
High School on His Way to Becoming a Billionaire

39,174
“Ownership, but
SPLASH NEWS/NEWSCOM
BY ALEXANDRA WILSON

without any of the


When America Almost Lost
responsibilities— DR. CHRIS DONEGAN:
the Space Race “Most authors are poor. It’s
GreenSky is a wonderful to see such success, but
THE BOMB classic digital-era it’s very, very rare in an industry with
middleman.” many talented people.”
147 VIEWS

32 | FORBES OCTOBER 24, 2017


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ASPEN • BAL HARBOUR • BEVERLY HILLS • BUENOS AIRES • LAS VEGAS • MIAMI • ST. BARTH • TORONTO
Verticals
35
STRATEGIES
40
TECH
46
ENTREPRENEURS
52
INVESTING

P RESCRIP T IO N FO R IN N OVATION

The Right
Chemistry
Incyte has one cancer
blockbuster, and it’s got
Wall Street banking on
another. Its secret: embracing
an older age of pharma.
BY MATTHEW HERPER

S
usan Waite, 48, still remem-
bers hearing her disease’s
name, myelofibrosis, for the
first time five years ago. “You
Google,” she says. “I know you’re not
supposed to, but everybody does.
And at the time the average life ex-
pectancy was two and a half years.”
This rare cancer was turning her
bone marrow, which produces blood
cells, into scar tissue, leaving her ane-
mic. She had one child in high school
and two more in college, and was so
tired she’d gone from being a social
butterfly to a person who goes to bed
right after dinner. Her spleen was so
enlarged with blood cells that it hurt
and prevented her from eating. Then
her doctor offered her a pill called
Jakafi, manufactured by a Wilming-
ton, Delaware, company called In-
cyte. She felt better in days. After din-
ner at a restaurant, she insisted her
husband stay out with her to hear a
band play. Her spleen shrank. “I was
able to eat full meals again,” she says.
“It was very exciting.” Now? She’s still
JAMEL TOPPIN FOR FORBES

Incyte CEO Hervé


Hoppenot counts
on bleeding-edge a bit anemic, but she’s doing well. “I
tech like this NMR feel almost normal,” she says.
spectrometer, used
to see individual
Jakafi has transformed Incyte
molecules, to help into one of Wall Street’s favorite
his company invent
new medicines.

OCTOBER 24, 2017 FORBES | 35


Verticals STRATEGIES

stocks and a perennial subject of takeover spec- take over as Incyte’s CEO but would build his re-
ulation—in part because of Jakafi’s efficacy and search lab not near Incyte’s Palo Alto, California,
in part because of its list price ($11,587 a month, headquarters but in Wilmington, where DuPont
indefinitely, usually covered by insurance). Last was based.
year Incyte had a net income of $104 million on Friedman immediately began poaching Du-
sales of $1.1 billion, up 1,496% and 47% from Pont’s best scientists. “People didn’t want to go
the prior year. Its shares have sextupled over the to work at Bristol-Myers Squibb,” says Friedman,
past five years, and it has a $25 billion market who is now chief executive of Madrigal Pharma-
capitalization. ceuticals in West Conshohocken, Pennsylvania,
Incyte’s secret has been to stick to the tradition- but still serves on Incyte’s board. “They wanted to
al work of large pharmaceutical companies even find a new venue to work.” Swamy Yeleswaram,
as other firms have chased bright, shiny new tech- one of Incyte’s researchers, remembers getting the
nologies. Incyte’s 1,000 employees still work most- call. Friedman opened with: “So, Swamy, are you
ly in Delaware, a stick-in-the mud stance at a time coming to Incyte?” Yeleswaram recalls that Fried-
when companies from drug giant Merck to bio- man was annoyed that he didn’t immediately say
tech firm Alexion are setting up shop in Boston yes. Much of Incyte’s core team, including current
to be closer to the hot zones of biology research. chief scientist Reid Huber and key inventors of all
But more than that, Incyte is focused on the basic of Incyte’s drugs, were recruited from DuPont.
chemistry of making drug molecules, a part of the Incyte’s gene database was supposed to help
drug-discovery process that many larger compa- this team invent new drugs. It didn’t work out
nies increasingly outsource. that way. But one gene patent (which later turned
Incyte already has two follow-ups: an arthritis out to be invalid) did point them in the right di-
medicine being developed with Eli Lilly that is ap-
proved in Europe and will be filed by early 2018
with the U.S. Food & Drug Administration, and The Two-Drug Club
a second cancer drug, for which investor excite-
IN THE 41-YEAR HISTORY OF THE BIOTECH INDUSTRY,
ment is reaching a fever pitch. Hervé Hoppenot, 41 COMPANIES HAVE GOTTEN MORE THAN ONE DRUG
the 57-year-old Big Pharma veteran who took over APPROVED. HERE ARE SOME SUCCESS STORIES.
as Incyte’s chief executive in 2014, says he sees the
COMPANY NUMBER 2016 MARKET TOTAL
company playing a role in a transformation of the OF DRUGS SALES CAP RETURN
APPROVED ($BIL) ($BIL) (%, 5-YEAR)
way the health care system treats cancer.
“If we are successful, the entire cost of treat- Celgene 5 $10.9 $111.1 273%
ing cancer should be drugs,” Hoppenot says. “That Regeneron 3 4.9 45.6 190
is my hope, not from a business standpoint but
Vertex 3 1.7 38.7 165
from a medical standpoint. What you would like is
being able to replace palliative treatment and hos- Alexion 3 3.0 32.7 33
pital treatment for patients who are a few months BioMarin 5 1.1 16.1 141
from dying with medicines that are very effective Tesaro 2 0.04 6.3 765
against cancer.” United Therapeutics 2 1.6 5.2 111
Incyte was born out of one of the great names
SOURCES: InnoThink Center for Research in Biomedical Innovation; Factset Systems.
of American business: DuPont. In June 2001, the
chemicals giant decided to sell its pharma division
to Bristol-Myers Squibb for $7.8 billion. During rection, toward a protein involved in the im-
the four months it took to close the deal, the divi- mune system called Janus kinase 2 (JAK2). Initial-
sion’s chief executive, Paul Friedman, started look- ly they hoped a drug targeting it would be effective
ing for another job. against the blood cancer multiple myeloma.
Friedman connected with Julian Baker, a well- In 2005, as Incyte was preparing the drug for
known biotech hedge-fund investor. Baker had a clinical trials, three papers were published, in Na-
stake in a company called Incyte, which sold ge- ture, Blood and the New England Journal of Medi-
netic information to drug companies. At the turn cine, showing that mutations in the gene for JAK2
of the century, there was a tulip bubble around were a central cause in both myelofibrosis and a
gene data, allowing companies like Incyte, Celera related disorder, polycythemia vera, which causes
Genomics and Millennium Pharmaceuticals to a thickening of the blood. Within a day, the team
raise huge amounts of money. At the end of 2001, had changed their plans, deciding to explore the
Incyte had $508 million in cash. The deal Baker efficacy of their new drug on these diseases.
and Friedman struck was this: Friedman would Then came another speed bump. There were

36 | FORBES OCTOBER 24, 2017


Verticals STRATEGIES

issues with both the side-effect profile and the in- Many of investors’ hopes for Incyte are riding
tellectual property surrounding Incyte’s original on a new medicine, epacadostat, invented by In- FOLLOW-
JAK2 inhibitor. Friedman gave his team a week cyte’s in-house team. The medicine is the brain- THROUGH
to come up with an alternative, and they used an- child of biologist Peggy Scherle, another recruit
other JAK2 drug they’d originally planned to de- from DuPont. She became fascinated by a chem-
velop as a topical cream. By 2007, the drug was in ical pathway used by the developing fetus to pro-
clinical trials. In 2010, results published in NEJM tect itself from its mother’s immune system. Tu-
showed half the patients who took the drug saw mors apparently hijack the pathway to protect
their spleen volume reduced by 50%. The FDA themselves. Incyte’s chemists tested 10,000 poten-
demanded more data that proved patients felt tial drugs to find one that could hit Scherle’s pro-
better, too. The drug, now named Jakafi, was ap- posed target. Even then, it didn’t shrink tumor
proved in November 2011. In its first full year it cells in the lab; it merely kept them from growing.
generated $136 million in sales. But epacadostat seems to amplify the potency
Friedman decided to step down when the drug of two drugs made by Bristol-Myers Squibb and
hit the market. (Incyte’s main building in Dela- Merck: Opdivo (2016 sales: $3.8 billion) and Key-
ware is now named after him.) Hoppenot, who truda (2016 sales: $1.4 billion), both of which re-
grew up in Champagne, France, and rose through lease the immune system to attack tumors. In THE KINDEST
clinical studies of the advanced CUT
form of the deadly skin cancer mel-
HOW TO PLAY IT BY KEN KAM anoma, patients seem to be more Five years ago, Forbes
got a shampoo, trim
Year-to-date, Nasdaq’s Biotechnology Index is up likely to see their tumors disappear and (aaahhh) hot-
over 25%, testament to a strong pipeline of promising with a combination of epacadostat towel treatment at the
remedies and a real health care revolution for patients and one of these drugs. A big Gents Place, a luxe
and investors. Last September, our top analyst Merck trial comparing the combi- barbershop heavy on
recommended three oncology companies that Gilead the pampering, with two
Sciences might acquire: Incyte, then at $94; Kite at
nation of Keytruda and epacadostat franchises (in Texas and
$55; and Puma at $68. In August, Gilead said it would buy Kite for for melanoma will be completed in Kansas) and $2 million
the first half of 2018. Even Roger in annual revenue.
$180 a share, or $11.9 billion. Incyte and Puma now trade at $123 and
Today, thousands of
$103, respectively. Perlmutter, Merck’s head of R&D, is lathered mugs later,
Another stock investors should consider is Colorado’s Clovis a little nervous. He thinks the trial both those figures have
Oncology, our current top pick in cancer treatments. Clovis is will be successful but notes that no doubled, and—as with a
working on PARP inhibitor, a promising new technology for treat- hipster’s beard—further
study has compared the combina-
ing prostate and ovarian cancers. We think Clovis’ $3.4 billion growth is on the agenda.
market cap and impressive technology portfolio make it a great
tion of Keytruda and epacadostat The San Antonio-based
acquisition candidate. with Keytruda and a placebo. “All Gents Place, which calls
the arguments now are from single- itself a “grooming and
Ken Kam is founder and chief executive officer of lifestyle club,” plans
Marketocracy.
arm data with historical reference,” to open another 10
he warns. “That could turn out to locations within a year
be very wrong.” and 150 by 2022. Clubs
the ranks at French pharma Rhône-Poulenc Incyte’s executives note that the epacadostat now offer shoeshines,
massages and hand-
Rorer, was selected to replace him. At the time, he results have been consistent across studies in mel- and-foot care; clients
was the head of oncology at the Swiss drug giant anoma and lung cancer. If it does work, it will include Dallas Cowboys
Novartis, which had snapped up the right to sell make Incyte one of the lucky few companies sell- Hall of Fame running
backs Tony Dorsett and
Jakafi outside the U.S. Hoppenot says he couldn’t ing multiple blockbuster cancer drugs (see table,
Emmitt Smith. (Smith is
resist the opportunity to build a company around p. 36), which fetch a high price on the U.S. mar- also a Gents investor.)
this cancer drug. ket. Hoppenot says that the U.S. system can be “il- “We’re capitalizing on
In 2016, Hoppenot purchased the European di- logical and cruel,” forcing huge co-payments on a trend in men thinking
about grooming not
vision of Ariad Pharmaceuticals of Cambridge, patients for the drugs most likely to save lives, but as an expense,” says
Massachusetts, including the rights to another insists that his drugs will be good for the health founder and president
FOLLOW-THROUGH BY MADELINE BERG. CREDIT HERE

blood cancer drug, to build out a European sales care system. He compares the revolution in can- Ben Davis (above),
operation for Incyte’s future drugs. This past April, cer to the one that happened with HIV two de- “but an investment in
themselves.”
a rheumatoid arthritis drug Incyte had licensed to cades ago, saying that drugs like the ones he has
Eli Lilly was rejected by the FDA; in a surprise to worked on at Incyte and Novartis will cost a lot
investors, Lilly said in August it would be able to but will justify themselves by emptying hospital
resubmit the drug by January 2018. wards. That would be a wonderful thing.

FINAL THOUGHT
“Declare the past, diagnose the present, foretell the future.” —HIPPOCRATES

38 | FORBES OCTOBER 24, 2017


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HEALTH COSTS
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Verticals TECHNOLOGY

ETHAN PINES FOR FORBES


B USI NESS OF LUXU RY

Bricks and Clicks


Model turned entrepreneur Yael Aflalo is betting physical “tech stores” and data can
turn her eco-friendly It-girl brand Reformation into a fast-fashion empire.
BY KATHLEEN CHAYKOWSKI

O
n an early-September morning, Yael to a dressing room and, when all is ready, no- Reformation makes
most of its clothes at
Aflalo, 40, glides through the tech- tify her by text. In the dressing room, she can a Los Angeles factory
heavy West Hollywood store of Ref- charge her phone, play her favorite music and where CEO Yael Aflalo
can keep tabs on
ormation, her eco-friendly fashion choose from a set of mood-lighting options like quality and promises of
brand. Wearing frayed cigarette jeans, a dark Ref- “sexy time” and “golden,” which are perhaps more sustainability.
ormation tee reading, “I went to Mars and all I pleasing for trying on a swimsuit or an evening
got was this stupid T-shirt” and Chanel flats, the dress. From the dressing-room screen, she can
founder and CEO mimics the path of a shopper. ping “wizards” in the back to call in new items.
She holds up a Reformation bestseller, a flowing “This is how people shop now, standing next to
flowered dress, then walks over to one of a hand- each other at a screen in a store,” Aflalo says.
ful of large touchscreens along the wall to browse Flattering silhouettes, quality and that ever-so-
everything from blazers to crop tops. trendy trait—sustainability—have made Reforma-
With a few taps, Aflalo can choose what she tion wildly popular among Millennial women of
wants to try on, then go grab a coffee or flip certain means, who are willing to drop anywhere
through the racks, while behind the scenes store from $60 to $250 per item. It doesn’t hurt that the
employees assemble her selections, deliver them label is regularly seen on celebrities like Taylor

40 | FORBES OCTOBER 24, 2017


Verticals TECHNOLOGY

Swift, Rihanna and model Karlie Kloss. The turnaround time limits the number of units
With a growing number of “tech stores” like of each style and color and creates a sense of ex-
the one in West Hollywood, Aflalo is now build- clusivity without designer prices.
ing on that success and putting Reformation on While Aflalo started with Millennial women,
a path to $140 million in sales next year, up from her vision is to bring her collections to the mass-
just $25 million in 2015. The incessant hustle and es, adding product lines that span gender and age
bustle at the company’s four tech-infused stores brackets. She is betting that a focus on quality and
suggests Aflalo has cracked the code on a “bricks rising environmental awareness will help Reforma-
and clicks” strategy, a seamless meshing of offline tion take on not only standard fast fashion but also
tangibility and online convenience that seems es- higher-end Goliaths like Urban Outfitter’s Anthro-
sential to success in the age of Amazon. pologie and Free People brands.
While e-commerce makes up 80% of Reforma- “Yael has created that opportunity to be a
tion’s revenue, the stores help attract customers
and boost sales. Reformation’s stores are doing so
well—customers are twice as valuable to the label
when they discover it through brick and mor-
tar—that the company, which also has a handful
of more traditional outlets, plans to add between
five and eight tech stores next year in the U.S. at a
time when many retailers are retrenching. Paris,
London and Scandinavia are in Aflalo’s sights for
the following year. “Although retail e-commerce
is growing by leaps and bounds, the store experi-
ence is becoming more important,” says Ananda
Chakravarty, an analyst at the research firm For-
rester. “Companies that capture the customer’s
heart and mind are going to win.”
Reformation’s stores don’t just remove pain
points for shoppers—they also collect data that
traditional retailers lack, everything from how
long customers spend trying on particular items next-generation Zara,” says Ken Fox, the founder Blending tech and modern
design, Reformation’s
to which pieces convert best from dressing rooms of Stripes Group and a Reformation board mem- stores have attracted new
to cash registers and which pieces shoppers ber. “She merges a merchant’s view with state-of- buyers and generated a
browsed. Reformation merges customers’ on- the-art data technology to serve the customer.” trove of valuable customer
data.
line and in-store activity to improve recommen- For all its early success and potential, Reforma-
dations. Most retailers know how many people tion has a long way to go before it can stake a
walked in and how many bought something, but claim as a real competitor among the fast-fashion
not much else. “We created a store where all the giants: Zara had revenue of $18.3 billion last year,
interactions are tracked,” says Aflalo, who is also and H&M Group, the parent company of H&M,
Reformation’s product mastermind. (Her hus- had $27.7 billion. Meanwhile, fashion consumers
band, Ludvig Frössén, is creative director.) are notoriously fickle. What’s hot today may not
Aflalo started Reformation in 2009 as a side be around tomorrow. Witness Nasty Gal, a once-
gig and took no outside funding. By 2013, she trendy online fashion brand that did nearly $100
turned her attention to it full-time. The company million in revenue in 2014 only to file for bank-
has since become profitable and grown to nearly ruptcy two years later, or Gilt Groupe, an early e-
550 employees. In 2015, it raised $12 million from commerce unicorn that sold last year for a quar-
a group of venture investors led by Stripes Group ter of its peak valuation.
and 14W, at an estimated valuation of $87 million. To move fast and ensure it can live up to its
Aflalo says surveys show product design is green promises, Reformation manufactures 60%
the main driver of Reformation’s sales, with the of its clothing in its Los Angeles factory, where
promise of sustainability a close second. Like the nearly 280 employees cut, sew and press dress-
fast-fashion giants H&M and Forever 21, Refor- es and attach zippers. There’s an on-site masseuse,
mation operates on a rapid design-to-rack cycle and employees have health benefits and access to
of 42 days. But unlike cheaper fast fashion, Refor- classes in career counseling, English and citizen-
mation spares its customers the notorious lines, ship, which are popular with the company’s heav-
piles of sizes and uncomfortable dressing rooms. ily Latino workforce. The factory is also the hub

42 | FORBES OCTOBER 24, 2017


Verticals TECHNOLOGY

for photo shoots, fittings, shipments and returns, but didn’t get serious until her late 20s. “I was just
and engineering. Most remaining items are made partying, being 27,” Aflalo says. In 2005, revenue PROTOTYPE
in other local factories, with a few imports round- peaked at $20 million. When the Great Reces-
ing out the collections. sion hit, excess inventory bankrupted the compa-
To back up the sustainability claims, Reforma- ny, leaving Aflalo with millions in debt. She took
tion says it compensates for 100% of its waste, car- a year off, then made clothes for Urban Outfit-
bon dioxide emissions and water use by purchas- ters to pay the bills. On the side she bought and
ing “offsets” that help pay for clean water, planting freshened vintage dresses, selling them in a Los
forests, capturing landfill gas emissions and wind Angeles storefront in 2009 called Reformation.
power. It uses eco-friendly and recycled fabrics, The dresses made money, so she opened a second
and it screens suppliers to protect against unsafe store in New York. It sold out on its first day.
or unfair labor practices. Its labels include a “Ref- A 2010 business trip to China changed her tra-
Scale,” which shows customers the environmental jectory. Aflalo witnessed firsthand the wasteful- ELECTRIC
benefit of each piece through a breakdown of how ness and pollution caused by manufacturing and
AVENUE
much CO2, waste and water they helped to save. learned that fashion is among the world’s most
Small changes add up: The making of a pair of Ref- polluting industries. She was appalled that it took Tired of wheezing up
200 to 500 gallons of water to make one basic cot- hills or trying in vain
ormation “seamed” jeans, for example, consumes
to escape rabid street
196 gallons of water, compared with an indus- ton T-shirt and hundreds of years for synthet- dogs but blanch at
try average of 1,656 gallons, and emits 5 pounds of ic fabrics such as polyester to biodegrade. She left electric bicycles’ hefty
CO2, far less than the average of 36 pounds. China with a mission: to create sustainable cloth- price? With an UrbaNext
Wheel ($319), you
ing at an attainable price with- need look no further
out sacrificing style.
HOW TO PLAY IT BY GEORGE PUTNAM than your own trusty
She paid off her debts and Schwinn. In just 60
“Brick and clicks” and “eco-friendly” are great buzz- began to focus solely on Refor- seconds, with only a
phrases for retailing startups, but don’t count out the wrench and screwdriver,
mation. Eco-fashion was still you can replace your
ability of incumbent giants to adapt to the new Millennial-
seen as shapeless and “granola,” front wheel with
focused era. Gap Inc. has struggled to find the right mix
but watching industries like au- UrbaNext whether you
of products and pricing as its customers move toward have a road or mountain
digital shopping, but recent improvements are beginning tomotive go green without sac-
bike, BMX or beach
to take hold. Same-store sales have increased and gross margins have rificing product quality con- cruiser. The aluminum
expanded, and sales at Gap’s Old Navy division are particularly strong. vinced Aflalo that fashion was device comes in seven
Turnaround investors can take comfort in Gap’s solid $1.8 billion cash primed to change. She was right. sizes and weighs just 15
balance compared to $1.3 billion in debt and positive cash flow. The stock pounds, with a range
“Yael challenged the misconcep- of 30 miles and a top
has a 3.3% dividend yield. Another beleaguered retailer with an even
tion in the fashion industry that speed of 15 to 20 mph.
higher dividend yield, at nearly 5%, is Kohl’s, which is seeing improving
traffic to its stores. Its digital sales are growing at a 20% rate. anything tied to being sustain- Squeeze the throttle
to toggle among zippy
able means that it can’t be cool,”
George Putnam is editor of The Turnaround Letter and president of all-electric, old-school
says Miroslava Duma, a Rus- pokey or somewhere in
New Generation Advisors LLC.
sian fashion entrepreneur who between. Backers have
has invested in Reformation. “It’s forked over $900,000
to UrbaNext’s Indiegogo
While Aflalo drives a Tesla and geeks out over the perfect example of where the industry should campaign, and wheels
sustainability, eco-friendliness wasn’t always part be moving. Reformation is for a new generation of are shipping—so pony
of her mission. The Beverly Hills native start- customers who want to consume with purpose.” up and start showing
ed her first fashion company, Ya-Ya, as a 21-year- What’s next? Aflalo is designing a series of new those ill-tempered road
puppies who’s boss.
old model turned entrepreneur, after growing product lines to broaden Reformation’s appeal.
up watching her parents run a clothing shop. This year the company launched eco-friendly
She briefly enrolled at the University of Califor- denim and swim lines, and additions to its bridal
nia, Berkeley, and then at the Fashion Institute and petite collections. Aflalo aims to launch chil-
of Design & Merchandising in Los Angeles, sold dren’s clothing, handbags and shoes by the end
her first designs to Fred Segal and dropped out. of 2018, and she’s eyeing men’s clothing for 2020.
“Every time I took the clothes I had designed to a “Our goal is to bring sustainable fashion to every-
store, they bought it,” Aflalo says. “I was like, ‘This one,” Aflalo says. To do that, she knows she’ll need
PROTOTYPE BY KATHLEEN CHAYKOWSKI

feels right.’ ” to keep expanding her collection of tech-chic out-


She spent the next decade working on Ya-Ya lets. “I want to do 100 cool stores,” she adds.

FINAL THOUGHT
“Examine each question in terms of what is ethically and aesthetically
right, as well as what is economically expedient.” —ALDO LEOPOLD

44 | FORBES OCTOBER 24, 2017


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Verticals ENTREPRENEURS

30 UNDER 30

Administration, but Owlet shared Brandon’s story


Warning on the company blog and in Facebook ads. It also
suggested that Forbes speak with Brandon, who

Signs volunteered that without Owlet, she’d be “planning


a funeral.” That, says CEO Kurt Workman, doesn’t
mean Owlet is claiming to have saved the baby’s
Four dads built an infant health life: “The mom went to save the baby’s life, and the
monitor, Owlet, that is winning over mom is the hero.”
Targeting anxious, tech-savvy Millennial par-
investors and parents. Doctors are
ents, Owlet has sold almost 150,000 Smart Socks,
another matter. now priced at $299, producing $19 million in reve-
BY NATALIE SPORTELLI nue last year, and it’s projecting as much as $30 mil-
lion this year. The company has raised $25 million

T
hirty minutes after Sara Brandon put her in funding and plans to expand internationally.
newborn to sleep one night last Decem- Workman, 28, says he got the idea in 2012
ber, she received a notification on her when he and his wife, Shea, made the rounds of
cellphone. The red alert indicated that her doctors’ offices as they planned for a family. Shea
son had stopped breathing. Brandon found him had been born with a heart defect, and the couple,
lifeless in his crib and called 911—in time for para- then students at Brigham Young University, feared
medics to revive him. their children might inherit the condition. “We
Brandon’s son had been wearing Owlet’s Smart have monitoring on our cars and pets and homes,”
Sock, a device that tracks heart rate and oxy- he says, “but parents wake up in the middle of
gen levels. “The doctors and nurses all agreed that the night and wonder if their baby has stopped
TIM PANNELL FOR FORBES

the Owlet alarm helped, because I wouldn’t have breathing.”


Focus group: It’s not hard for
the four founders, pictured checked on him otherwise,” says the mom of four. Workman started researching pulse oximetry,
here with their kids, to relate Doctors and nurses won’t endorse the product be- a medical technology used in hospitals to monitor
to the concerns of young
parents. cause it hasn’t been approved by the Food & Drug vital signs. Three BYU classmates—Jordan Mon-

46 | FORBES OCTOBER 24, 2017


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Learn how digital tools are used in farming at ModernAg.org
Verticals ENTREPRENEURS

roe, Zack Bomsta and Jake Colvin—soon joined Smart Sock 2. Bolstered by distribution through
MARGIN
him to found Owlet, so named to suggest watch- Buybuy Baby and Amazon, sales exceeded projec- PROPHET
fulness. They all had newborns or babies on the tions. The founders also toned down the promo-
way, and by May 2013 they had all quit their jobs or tion, switching “alert” to “notification” and swap-
dropped out of school to build Owlet. ping “breathing” for “heart rate and oxygen levels.”
That December, after Owlet was accepted by The company’s disclaimer notes that the product is
startup accelerator Techstars, the founders moved not intended to “cure, treat, or prevent any disease
their families to New York City. Publicity from or health condition, including, but not limited to,
pitch competitions helped bring $290,000 in fund- Sudden Infant Death Syndrome (SIDS).”
ing and more than 2,000 preorders. During the But Owlet does amplify the voices of parents
Techstars program, Workman pitched Owlet as who say they bought the device to ease that fear. CANINE
“the next infant car seat,” a safety device that would The company recently shared a post on Facebook CALMER
save thousands of lives. But they soon burned by mommy blogger Ashley Wilson, who wrote that To soothe his
through their cash developing a prototype that Owlet allowed her to sleep at night: “Very recent- goldendoodle, Dosi, dur-
ing storms, Phil Blizzard
didn’t work. ly a friend tragically lost her baby to SIDS. … I feel
devised the ThunderShirt,
With a bank account nearing zero, the found- compelled to help spread the word about the Owlet which Velcros tightly
ers met at a diner in Queens in February 2014 to Smart Sock.” around a dog’s torso. Now
his company, Thunder-
determine how long they could go without pay- Such endorsements—the company gave Wil- Works, founded in 2009
checks. Two months later, they were saved by a son a sock in exchange for the post—are sup- and based in Durham,
$1.8 million seed round led by Azimuth Ventures. posed to comply with Federal Trade Commission North Carolina, has sold
millions of the shirts for
After Techstars, the Owlet team flew back to Utah guides. “If a company is reposting claims from $39.95 and up.
someone else,” says FTC staff
How did you come up
HOW TO PLAY IT BY JOHN BUCKINGHAM attorney Michael Ostheimer, with this, exactly?
“it’s adopting those person’s One drawback of seda-
Smart Socks may be baby lifesavers, but smart diapers— claims as their own ads, and tives is that you have to
with innovations such as “leak-locks” and wetness indica- anticipate a storm by an
tors—are indispensable savers of time and work. Global
they are liable for those claims.” hour. Wake up with a dog
diaper, personal-care and consumer-tissue products giant “Th e FTC rules are that standing on your chest and
you’re not lying about your you’ve missed the window.
Kimberly-Clark is the maker of Huggies and Pull-Ups. It is
A friend suggested we try
well positioned to benefit from higher birth rates, middle- product,” Workman responds, a tight wrap. It sounded
class expansion and increased frequency of use in emerging economies like “and we’re making sure we’re not idiotic. But then a storm
India, China, eastern Europe and Brazil. Kimberly-Clark has increased its divi- lying about the product.” came in, and my wife said,
dend for 45 straight years, and after a recent pullback, this steady grower “We’re going to try this.”
Because it does not sell its
yields 3.2%. The company also makes the Depends brand of adult diapers, What was your next step?
so it’s an excellent cradle-to-grave buy.
Smart Sock as a medical device
I approached a couple
or claim that it saves lives, Owlet friends who were entre-
John Buckingham is editor of The Prudent Speculator investment newsletter.
says it isn’t subject to regulation preneurs. When I first pro-
by the FDA and isn’t endorsed posed it, they fell on the
floor and laughed at me.
to continue product development, setting up in by the American Association of Pediatricians. In
Was there much awareness
suburban Lehi, south of Salt Lake City. fact, the association’s 2016 safe infant sleep report of pet anxiety at the time?
In October 2015, Owlet rolled out its Smart advises against the use of such devices “to reduce Pet stores said, “We’re
Sock. In the months that followed, their Face- the risk of SIDS.” going to put it in the
book video ads—proclaiming that Owlet is #There- Owlet says it’s applying for FDA clearance on apparel section.” We were
like, “No, that’s not where
WhenItMatters—went viral, producing millions a medical version of the sock, and it’s planning to it needs to be.” Most stores
of views and hundreds of thousands of likes and raise more capital this spring. Many of its investors, now have a section filled
with calming solutions.
shares as parents bought the sock and spread the like Toms Shoes founder Blake Mycoskie, are par-
word. There were also some negative reviews (most ents themselves. “I loved the fact that the cofound- What size is the market?

citing the then-$249 price tag), including reports ers are young dads,” Mycoskie says. In the U.S., 90 million dogs
and 94 million cats.
of frequent false alarms and even some burn marks With or without doctors’ blessings, Owlet is
How well-known is the brand?
created by the sensor. forging ahead. In September, it released Connected
We’ve become part of the
Owlet subsequently raised $22 million to rede- Care, software that tracks oxygen levels, heart rate vernacular. There’s a whole
sign the sock to mitigate the burn risk and improve and sleep performance over time for $7.99 a month Dilbert strip based on it.
the fit. It extended the base station’s Bluetooth and that it says will have the ability to warn par- And in Oh, Hello on Broad-
MARGIN PROPHET BY AMY FELDMAN

way, one of the guys says


range and reworked the algorithm to reduce false ents of looming health issues. Whether parents will that if he had money, there
alarms. This past March, the company released heed the warnings is unclear. are two things he’d want.
One is a ThunderShirt.
FINAL THOUGHT

“To suffering there is a limit; to fearing, none.” —FRANCIS BACON

48 | FORBES OCTOBER 24, 2017


EDUCATION FOR LIFE

LEARN MORE. CALL 866.467.7651 OR VISIT WWW.OUTWARDBOUND.ORG


PROMOTION

Less Pain, More Gain


Muscle-Sparing Knee Replacement Surgery
Empowers Faster Recovery
BY K.H. QUEEN

Above: Penny Pitou (far right) hiking Standkopf (Sagtaler Spitze) in Alpbach, Austria,
five months post-surgery; Right: Penny snowshoeing six and a half weeks post-surgery

Penny Pitou has repeatedly made history by overcoming


obstacles. No girls were allowed on her high school ski
team, so Penny skied as “Tommy.”

Leaving Pain In The Dust

W
hen, at 16, she began hav- she was back to work part time just six
ing issues with her left Pitou’s friend — a fellow skier and former days after surgery.
knee, necessitating the joint replacement patient himself — strongly In only 12 days, she was walking on local
removal of some carti- recommended Dr. Richard A. Berger of trails. After three weeks, she regularly
lage, the surgeon told her Rush University Medical Center in Chicago. walked along cross-country trails and up
she’d never ski in the Olympics. Despite that Pitou decided that traveling to Chicago lower hills. Dr. Berger’s staff had told her
prediction, she went on to become the first from her home in New Hampshire would be that at six weeks she’d be at 90 percent,
American to medal in downhill skiing, win- worth it to get the results she sought. “I was and she took them at their word. Six weeks
ning two silvers in the 1960 Olympics. Now a little nervous about the whole thing,” Pitou post-surgery, she went cross-country ski-
nearly 80 years old, Pitou owns Penny Pitou says. “But it was very easy. Once I made the ing and started hiking regularly — first for
Travel and leads skiing and hiking tours in first phone call, all I had to do was follow the 90 minutes to three hours, and then for up
the Alps. instructions of Dr. Berger and his staff. They to five hours.
Last year, she realized it was time to are very organized.” “The first time I did a major hike after
address the left knee that had been trou- Pitou up walking just a few hours after surgery, I thought I’d forgotten something
bling her for years, and she knew she surgery and climbing steps soon after. or something was missing,” Pitou says. “It
needed to find a doctor who could get Friends had warned her about excruciat- occurred to me that what was missing was
her back on her feet in the short window ing pain, but the discomfort was consider- my knee pain. After being on the moun-
between skiing and hiking seasons. ably less than she had anticipated. In fact, tain for four or five hours, I was pain free.

1 HEALTHCARE
PROMOTION

It was unbelievable. Even when I got in and eventually regain range of motion. “A lot Besides pain, the other issue that wor-
out of the car, I could do it without feeling of them will fall short and end up with a ries patients is the need to take weeks
any pain.” knee that doesn’t bend and perform the or months away from work, Dr. Berger
The prospect of excruciating pain and way they want,” Dr. Berger says. “It’s still says. “They worry about the downtime,”
a long recovery is what prevents many hard to get up and down out of a low chair he says. “They just can’t take the time off.
patients from getting a bad knee replaced or low toilet seat. They still take stairs one Many people can’t afford to take three or
as soon as they should, according to step at a time. They have to use the arm- four months off from work.”
Dr. Berger. “People are afraid of pain from rests to get off a chair.” With Dr. Berger’s approach, people can
surgery,” he says. “So they endure their In comparison, Dr. Berger’s patients return to a desk job in a week or two, and
arthritic pain for months or years. For my breeze through physical therapy in two return to a more active job in three or four
patients, there’s only a little discomfort or three weeks. They ultimately regain 95 weeks, he says. He does knee replace-
involved. Once your motion comes back, percent of range of motion, compared ments on people of all ages — some in their
your pain goes away. My patients get their to about 80 percent for traditional knee 20s and 30s. “This isn’t just ‘Grandma’s Dis-
motion back extremely quickly, and there- replacements. ease,’” he says.
fore their pain goes away extremely quickly.”
Pitou And Other Patients
Innovative Surgery Speeds Get Their Lives Back
Recovery For years, Pitou had babied her left leg
The key differentiating factor is the way in but put off doing anything about it. “When
which Dr. Berger performs knee replace- hiking uphill and downhill, I’d always favor
ment surgery. The traditional surgery is my left leg,” she says. “When skiing, I could
performed with the knee bent and involves ski on one leg just fine. So I ignored it.”
tearing or cutting the quadriceps muscle. By the time they have surgery, most
This creates a conflict after surgery: The patients have made numerous conces-
muscle needs to heal and therefore doesn’t sions — giving up the activities they love
want to move, but the new knee needs to because they’re in pain, Dr. Berger says.
move so it doesn’t become stiff. “They don’t go for long walks. They don’t
“In traditional knee replacement, the play golf. Gradually, they pull away from
physical therapist is telling you, ‘Move your the life they’ve enjoyed. Normal life is
knee or it’s never going to move again,’” Dr. slowly taken away from them. Some of
Berger says. “Meantime the muscle is say- them are housebound, imprisoned sitting
ing, ‘I don’t want to move.’ That’s why tradi- in an easy chair or even in bed,” he says.
tional knee replacement is so painful. With After surgery, most patients tell him:
traditional surgery, patients struggle for “‘Thank you for giving me my life back.’”
months with their physical therapy because Five months after surgery, Pitou led
their muscle doesn’t want to move.” eight days of hiking in Europe with huge
Dr. Berger’s technique goes beyond ascents and descents of up to 4,600 feet
minimally invasive to a true muscle-sparing “For my patients, there’s in one day. “I thought, ‘I will die,’” she
procedure. Dr. Berger, who also earned a recalls. “And you know what? I was fine.
only a little discomfort
mechanical engineering degree from MIT, The knee was terrific.”
designed special tools to enable the sur- involved. Once your motion Seven months later, her knee is great,
gery to be done with the knee extended comes back, your pain goes and she’s looking forward to ski season. “I
so that the quadriceps muscle is relaxed don’t even know I have a new knee,” she
and can be pushed aside without tearing away. My patients get their says. “It’s fabulous. I feel like I have a differ-
or cutting. He is one of only a few surgeons motion back extremely ent body from the waist down. I’m ready
in the world who does the surgery this way. to ski.”
Since 2002, he has performed about 1,000 quickly, and therefore their Getting your life back will require about
knee replacements per year, and a major- pain goes away extremely the same time investment as a vacation.
ity of these patients leave the hospital the “Instead of going to Disney World this
same day. quickly.” year, have your knee replaced,” Dr. Berger
says. “Get your life back.”
Less Downtime Makes Dr. Richard A. Berger Then when you take the next vacation,
A Difference Rush University Medical Center, you’ll be ready for golfing, chasing
Post-surgery results reveal the biggest Chicago grandkids — even skiing or hiking with an
benefits of Dr. Berger’s method. The other Olympic champion.
difference is his special high-flex designed
knee engineered to provide more range of
motion after surgery. For more information and
After months of pain and physical ther- additional patient stories, visit
apy following traditional surgery, patients outpatienthipandknee.com.

HEALTHCARE 2
Verticals INVESTING

corkboards holding newspaper and magazine clip-


pings relating to long-held winners, such as Am-
azon, Tesla and Netflix. There’s even an unframed
“Frank Underwood for President” poster—a nod to
Netflix’s House of Cards hit.
The team listens via speaker to the earnings
calls of the disruptive, entrepreneur-run business-
es Zevenbergen favors. Together, she figures, they
have a better chance of catching nuances beyond
the numbers. Is a CEO excited about a new revenue
stream? Losing faith in his strategy? Such cues are
crucial because Zevenbergen is a “high conviction”
investor who discounts value measures like price-to-
earnings ratios in her hunt for “dreamers with way
bigger brain capacity than I have” and the skill to ex-
ecute. “My job,’’ she says, “is maybe without full in-
formation to make an investment alongside these
folks and then track how they are doing.”
It’s a job that Zevenbergen, 58, has excelled at
since setting up her own investment shop at the age
of 28. To pay for college, she worked part-time as a
teller at Seattle’s Rainier Bancorp. After graduation,
she was hired by the bank’s trust department and
began managing money. In 1986 she was assigned
to vet the initial public offering of local phenom
Microsoft. When the IPO shares popped, the trust
department quickly sold its allotment to lock in cli-
ents’ gains—a tad shortsighted considering Micro-
soft’s 43,000% return since 1987.
The experience was formative; Zevenbergen saw
the huge opportunities created by PCs and the wis-
dom of holding growth stocks for the long haul.
She left to start her own firm with one client and
$500,000 in assets and worked from her living room
while her husband, mother and a nanny watched
GROWT H STOC KS her infant and toddler.
By 1992, Zevenbergen had an office, 51 clients

Amazon Woman and $212 million under management. She needed


help and recruited Brooke de Boutray, whom she’d
befriended a decade before when both were study-
From her Seattle perch, Nancy Zevenbergen has beaten
ing for their CFA designations. Now 62, De Boutray
the market for three decades by spotting disruptors had also been in the right place at the right time.
early and sticking with them. Now she’s inviting public After the 1984 breakup of AT&T, she was assigned
investors along for the sometimes wild ride. by a regional bank to cover sleepy telecoms—just
BY ANTOINE GARA before cellular service and local entrepreneur Craig
McCaw made the beat exciting. In 1994, Zevenber-

N
ancy Zevenbergen operates her market- gen added Leslie Tubbs, now 58, a banker-turned-
beating $2.4 billion-in-assets investment analyst who specializes in financial and biotechnolo-
firm from a canned-sardine-tight corner gy stocks. The three women still form the core of the
office overlooking Seattle’s Space Needle stock-picking operation, with two younger male an-
and the Olympic mountains. Inside this 400-square- alysts added in 2011.
TIM PANNELL FOR FORBES

foot “war room” is a pentagonal desk where she and Despite dramatic losses during the dot-com bust
Locally sourced: Some of the four other members of her stock-picking team use and the financial crisis, Zevenbergen’s aggressive
Zevenbergen’s big winners 15 computer screens displaying stock market and fi- strategy has produced impressive long-term results.
have been nearby companies
such as Starbucks, Costco nancial data. On the walls hang dry-erase boards Her flagship growth equity fund has returned 11.5%
and Amazon. with Zevenbergen Capital Investments’ positions and annually, net of fees, since 1987, beating the Rus-

52 | FORBES OCTOBER 24, 2017


Verticals INVESTING

sell 3000 Growth Index’s 9.8% return. A smaller, even gen added to her holdings; Netflix now trades at $185. RETIREMENT
more growth-focused ZTech fund has returned 12.9% Note that Zevenbergen bets on entrepreneurs and CHECKUP
annually net of fees since 1994, trouncing the Russell not just ideas. She shuns companies run by “rent-a-
3000 Growth’s 8.8% return during that period. CEOs” in favor of founders who are ready to make
In August 2015, Zevenbergen launched two mu- “outrageous investment” decisions that may take years
tual funds. The growth-heavy Zevenbergen Genea to pay off. And she can be forgiving. She bought Am-
Fund—with an expense ratio of 1.4% and minimum azon in 1997 when it was newly public but sold when
investment of $2,500—ranks in the top 1% of its cat- it tanked in 2000. She bought again in 2007 and today
egory with a one-year return of 50%. The slightly less has a $157 million position in Amazon with a $60-a-
aggressive Zevenbergen Growth Fund is up 30% over share average basis, meaning her bet on Jeff Bezos has
the past year, ranking in the top decile of its catego- risen sixteenfold.
ry. In addition to proven winners like Amazon, the High conviction? She bought Facebook’s initial
Genea Fund holds concentrated bets in Shopify and public offering at $38 and added to the stake after the
South American e-commerce giant MercadoLibre. social-networking company fell by half after its debut.
The mutual funds have attracted just $10 million Her $138 million position is up sevenfold. Then
and are not for the faint of heart—or the impatient. “If there’s Tesla, which trades at 16 times what Zevenber- SWEAT
you just want to maintain wealth, go for diversifica- gen paid. Skeptics abound: $10 billion in short money THE BIG STUFF
tion and go passive,’’ Zevenbergen says. “If you want is betting against it. Zevenbergen is unfazed. She says Michael Kitces, 39,
she worries more about finding is director of wealth
the next great entrepreneur. management at Pinnacle
HOW TO PLAY IT BY WILLIAM BALDWIN That search takes Zevenber-
Advisory Group, which
oversees $1.8 billion,
gen well beyond tech and be- and also the author of
Found a hotshot fund manager? Take such flings with yond her Seattle base (though Nerd’s Eye View, a blog
no more than 10% of your retirement money. There are
she was early into local winners delivering data-rich
three reasons to curb your enthusiasm.
One is that active management is expensive. The Starbucks and Costco). In 2013, advice to financial
while screening for transporta- advisors. Here’s our
next is that past performance is an extremely feeble
translation of his
indicator of future performance. You can see that in a tion companies that might ben-
retirement theories:
recent report card by Morningstar on its own rating system. As care- efit from Amazon’s growth, her
fully crafted as that system is, it doesn’t make you rich. Subsequent MILLENNIALS
team came upon Greenwich,
five-year returns for top-rated stock funds were scarcely better than Beware lifestyle creep.
Connecticut-based XPO Logis- Plan on saving half of
average returns of their peers.
The third reason to be modest in your quest for market-beating
tics, which was growing rapid- your raises. If you don’t,
results has to do with the failings not of stock pickers but of their ly through acquisitions. CEO you’ll wind up at age 66
customers. Investors have a bad habit of getting in after a winning Bradley Jacobs had already done with expensive tastes and
streak and departing after a down stretch. That is, they buy high and successful roll-ups in construc- meager assets.
sell low. The Columbia Global Technology Growth Fund is well-run, tion equipment and waste man- PRE-RETIREES
garnering four out of five stars from Morningstar. Over the past de- agement. She started buying and Your big danger is
cade, it has earned 10.7% a year. Its investors have averaged a return a market crash just
added to her position after XPO’s
exactly half that. before or just after you
September 2015 acquisition of
William Baldwin is Forbes’ investment strategies columnist. quit working. Lower it
trucker Con-way hammered its by lightening equity
stock, bringing her average cost exposure in the years
to create wealth, own growth companies and concen- down to $32 a share. It now trades at $63. leading up to retirement.
trated portfolios. But recognize that they cannot per- That’s not to say Zevenbergen never bets wrong or If you’re still in good
form every day or every week or every month or even loses patience. She has recently liquidated positions in shape a decade later,
every quarter.” She calls investing with a less than five- Pandora Media, LendingClub and Under Armour at move some money back
into stocks.
year time frame “truly speculative.” a loss and has Snap and Blue Apron on watch.
Zevenbergen herself shows extraordinary pa- Jim Martin, the former chief investment officer for RETIREES
When stocks are richly
tience—if she believes in an entrepreneur. She ac- the $1.1 billion-in-assets Murdock Trust, put $5 mil-
priced, as they are now,
quired the firm’s $167 million Netflix stake at an aver- lion with Zevenbergen in 1994 and stuck with her it’s okay to increase the
age split-adjusted cost of $6, mostly prior to 2010. The through the bad years. The trust now has $94 million bond ballast in your
RETIREMENT CHECKUP BY WILLIAM BALDWIN

stock rose to $43, then plunged to $9 in 2011 after co- under her management. “For investors who can stand portfolio. Reducing
founder Reed Hastings attempted to spin off Netflix’s that volatility, we’ve been rewarded,” Martin says, add- volatility can kick up
cash-cow DVD-rental business to hasten its stream- ing that with Zevenbergen’s high conviction you get your safe withdrawal rate
(even if it reduces your
ing growth. Hastings reversed course, and Zevenber- “as much manager skill as possible to the bottom line.”
likely return).

FINAL THOUGHT
“Steward for the long term. It’s not always easy, but you do it.” —GINNI ROMETTY

54 | FORBES OCTOBER 24, 2017


NINETY FIVE
The Fidelity Retirement Score.
Another way we’re making retirement planning clearer.
We introduced the Fidelity Retirement Score to make it easy to know where you stand — like
a credit score for your retirement. But getting your score is just the beginning. When you save
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IMPORTANT: The projections or other information generated by the Fidelity Retirement Score regarding the likelihood of various investment outcomes are hypothetical in nature,
do not reflect actual investment results, and are not guarantees of future results. Results may vary with each use and over time.
Guidance provided by Fidelity through the Fidelity Retirement Score is educational in nature, is not individualized, and is not intended to serve as the primary basis for your investment
or tax-planning decisions.
The Fidelity Retirement Score is a hypothetical illustration and does not represent your individual situation or the investment results of any particular investment or investment strategy,
and is not a guarantee of future results. Your score does not consider the composition of current savings and other factors.
There is no opening cost or annual fee for Fidelity’s traditional, Roth, SEP, and rollover IRAs. A $50 account closeout fee may apply. Fund investments held in your account may be
subject to management, low-balance, and short-term trading fees, as described in the offering materials. For all securities, see Fidelity.com/commissions for trading commission
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Investing involves risk, including the risk of loss.
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Fidelity Brokerage Services LLC, Member NYSE, SIPC. © 2017 FMR LLC. All rights reserved. 773776.2.0
Ideas change the world.
2 0 1 8 L U X U RY C A R G U I D E

F E R R A R I AT 7 0
PLUS:
T HE YEAR’S MOST
OUTRAGEOUS
OPT I O NS

A SPIN
WITH
DJ KHALED
WHAT DRIVES HIP-HOP’S HIGH ROLLER
(AND VICE VERSA)
2018 CAR GUIDE

HOW DJ
KHALED ROLLS
FOR HIP-HOP’S BIGGEST HITMAKER, LIVING EXTRA LARGE IS A MAJOR KEY—
FROM HIS BEATS TO HIS BOASTS TO HIS BODACIOUS CAR COLLECTION.
BY ZACK O’MALLEY GREENBURG

A
s DJ Khaled careers through the midday traf-

STYLISTS: DAVID AUGUST HEIL AND JAMES FREEMAN OF DAVID AUGUST INC.; GROOMING: JC HAMMONS.
WOOL, CASHMERE AND MINK SUIT WITH VELVET TRIM BY DAVID AUGUST ($6,500).
MATCHING CHILDREN’S SUIT ($3,800). SKY-DWELLER WATCH IN EVEROSE GOLD BY ROLEX.
fic clogging New York’s Columbus Circle—
one hand on the wheel of a black Rolls-Royce
Dawn convertible, the other raising an iPhone
to stream his exploits via Snapchat—he lays out
the aggressively optimistic, blustery, motivational, tautological
and oddly compelling philosophy that guides his vehicular pref-
erences and his life in general.
“You can want a Hyundai, if that’s what you want. Me, I want
a Rolls-Royce,” he explains. “I want the drop-top Dawn. I want
a Wraith with stars on the roof. I want Phantoms with footrests
to massage my toes. That’s what I want, and that’s because we
the best.”
As the car pulls up to a stoplight, Khaled looks back at his
phone. “Forbes magazine wants to talk to Billy,” he enthuses, using
his latest self-assigned nickname, meant to signal his billionaire
ambitions and music-chart prowess. “Billboard Billy!” He’s got the car keys: DJ
I gently note that the light has turned green. Khaled in his 2016 Rolls-
Royce Ghost with his son,
“I was ready, my brother, I was ready,” he says, lowering his Asahd, who has a toy Rolls.
phone. “So where we going?” Above: Khaled’s new pur-
He already knows, of course. We’re off to go car shopping chase: the 2018 Phantom VIII.
at the Porsche and Bugatti dealerships a little farther down-
town. Khaled’s career, meanwhile, is going the opposite direc- past 12 months alone—more than enough to nurture his Rolls-
tion: all the way up. His last two albums, Major Key, in 2016, and Royce habit. Khaled’s collection, spread across homes in Los
this year’s Grateful, have both gone to No. 1, thanks to collab- Angeles and Miami, includes a 2017 convertible Dawn like the
orations with Drake, Rihanna and Justin Bieber. He also owns one he’s piloting today (“I always want to feel like I’m at home”),
several businesses named after his We the Best catchphrase, in- a 2017 Arabian-blue Wraith coupe (“It’s my everyday car”), a
cluding a record label, a publishing company and a headphone 2016 metallic-black Ghost sedan (“I sit in the back seat . . . that’s
line. He collects six-figure nightly fees for DJ gigs and millions when I’m my business”) and the recently unveiled $430,000
more from deals with Mentos, Champ Sports, Apple and other Phantom VIII, which claims to have the “most silent” interior
brands—arranged by himself and Jay-Z, who signed on as his of any car in the world (“I’m gonna be one of the first to get it,”
manager last year after seeing Khaled become a social media Khaled says proudly).
superstar with more than 15 million followers across Snapchat, “What I love about Rolls-Royce is, you look at me, it’s like
Instagram and Twitter. you’re looking at a Rolls-Royce,” says the bearded, barrel-chested
“What we are seeing from Khaled now is really who he is; the 41-year-old Khaled. “It’s just powerful; it’s smooth; it’s iconic.”
cameras are just capturing his natural state,” Jay-Z wrote in a sec- It’s that sort of unbridled self-assurance that has fueled his
tion of Khaled’s new bestselling book, The Keys. “That’s why the steady rise and enabled his late-blooming trajectory. Born
world is so drawn to him.” Khaled Mohamed Khaled in 1975 to Palestinian immigrants in
With that success comes scads of cash—$24 million over the New Orleans, he grew up in Florida, where he started DJ’ing and

58 | FORBES OCTOBER 24, 2017


THIS PHOTOGRAPH AND COVER PHOTOGRAPH BY ETHAN PINES FOR FORBES

selling mixtapes as a teenager. Employing the fake-it-till-you- ment, I just had the mentality—I gotta be in that whip,” he says.
make-it ethos often celebrated in the hip-hop world, he made a “Image is everything.”
down payment on a new $30,000 red BMW M3 in 1991, tricking For Khaled, that meant retiring cringeworthy aliases like Ter-
it out with a state-of-the-art speaker system. ror Squadian and Arab Attack and settling on his current nom
One day, Khaled was cruising around Miami when he started de DJ. After hosting radio shows in Miami in the late 1990s
to smell smoke. He pulled over and got out of the car, thinking and early 2000s, he released his first solo record, Listennn . . .
one of his amps might have blown. It was a good thing he did: the Album, in 2006, featuring appearances by stars such as Lil
The car soon caught on fire, he says as we weave through mid- Wayne, Kanye West and John Legend. The album underscored
town in the Dawn. (“DJ Khaled, we the best, baby!” screams a Khaled’s primary talent—not singing, rapping or even produc-
passerby. “That’s right, we the best!” he replies, barely interrupt- ing, but bringing together an ensemble cast of popular perform-
ing the flow of his story.) “The car blew up,” he continues. “No ers—and went to No. 12 on the charts.
lie. Like a movie.” Khaled celebrated by buying a Bentley coupe and then almost
For his next car purchase, Khaled scaled back considerably, immediately upgraded to a baby blue Rolls-Royce Phantom, which
buying a used Honda Civic for about $12,000. By 1995, he was cost him $400,000. He supported his new hobby by churning
gaining traction as a DJ and producer, opening for legends like out platinum singles such as the 2010 earworm “All I Do Is Win,”
Notorious B.I.G. and Nas, and he soon got himself back into which featured T-Pain, Snoop Dogg, Ludacris and Rick Ross.
an M3—this time a blue one. “Even if I couldn’t make the pay- “My Phantom was the hottest Phantom in the game,” he says.

OCTOBER 24, 2017 FORBES | 59


2018 CAR GUIDE

“After that, I didn’t stop. I’ve been Rolls-Royce ever since.”


Khaled says the reason he loves the brand is that he
feels equally comfortable driving or being driven in a
Rolls; he usually has a driver operate his Ghost and pi-
lots the Wraith himself. And, yes, there are stars on the
ceiling; contrary to popular belief, it’s a standard option,
not a custom request.
While some ultraluxury brands have alienated hip-
hop’s new elite (in 2006, one of the executives behind Cris-
tal champagne famously told The Economist, “What can
we do? We can’t forbid people from buying it,” prompt-
ing a Jay-Z boycott), Rolls-Royce has wisely embraced its
popularity among rap stars. The company sometimes pro-
vides Khaled with vehicles when he’s traveling for high-
profile events, and Rolls has been rewarded with product
placement in his videos and social media feeds.
“He’s an enthusiastic, evangelical Rolls-Royce owner,”
says Gerry Spahn, head of communications for the
Americas at Rolls-Royce, “and we’re thrilled that he
wants to be associated with the best of the best.”
If Khaled’s automotive preference isn’t clear from the
composition of his collection (his only luxury cars with-
out a Flying Lady on the hood: a Cadillac Escalade and
a Range Rover), he makes it clear as we pull up to the T HE FAST A ND
T HE LUXURIO US
Bugatti dealership. He refuses to go inside, despite the
fact that we’d planned test-drives ahead of time. (“I’d
rather be in a Rolls.”) After some prodding, he agrees to A GUIDE TO THE BEST HIGH-PERFORMANCE SPORTS CARS,
visit the Porsche showroom next door. GAME-CHANGING SUVS AND SOPHISTICATED SEDANS FOR
Upon entering, I ask Khaled what he thinks of the 2018. PLUS: THE YEAR’S MOST OUTRAGEOUS EXTRAS.
mahogany Cayenne E-Hybrid SUV on display. “What’s BY JIM GORZELANY
that?” he inquires. I point to the vehicle next to him and

U
explain that its motor is powered by both gasoline and ntil autonomous cars end the many joys of driving, auto-
electricity. His response: “I don’t know nothing about it.” makers are treating passionate motorists to a bounty of
We stroll through the showroom, shifting gazes from a performance-minded models with remarkable technolo-
gleaming Panamera 4 sedan to a lean Macan GTS SUV gy for 2018—and beyond. Engines that generate 500, 600 and even
close to 800 horsepower propel the latest sports cars, while some of
to a menacing 911 GT3 that goes from 0–60 in 3.2 sec-
the raciest sport-utility vehicles can reach 60 mph in a car-pool-de-
onds. But he doesn’t even want to go for a test-drive.
fying 4 seconds. New sophisticated chassis-control systems allow
“I’m a big boy,” he says. “That interior got to be fit for a
drivers to adjust a vehicle’s ride and handling abilities, from aggres-
big boy, you know what I’m saying? . . . Maybe you should
sive to relaxed, at the twist of a dial. And the array of safety and
buy me one, and I’ll tell you how I like it after that.” convenience features offered also breaks new ground.
The only car Khaled really wants is the one he’s al- Here’s a look at some of the hottest upscale cars and crossover
ready ordered: the new Phantom, redesigned for only SUVs debuting for 2018 that will all but ensure you’ll garner both
the eighth time since its debut in 1925. The mansion- bragging rights and prime valet-parking spots in the months ahead.
on-wheels comes with a 7.5-liter, 563-hp, V12 twin-tur-
bo engine, Eames-chair-inspired seats and even a dash- SP ORTS CARS AND EXOTICS construction and comes with
board “gallery” designed to accommodate slivers of aerodynamic exterior enhance-
bespoke artwork. ments, along with a hand-built
For DJ Khaled, though, it’s not just the physical ap-
Brawn and Beauty 577-hp twin-turbocharged V8 en-
MERCEDES-BENZ gine under its long hood. Essential-
pointments that inspire his loyalty to Rolls-Royce. The AMG GT R ly a street-legal racer, the GT R can
company impressed him, he explains, by sending him a hit 60 mph in just 3.5 seconds and
MERCEDES’ DYNAMICALLY de-
free Rolls-branded child seat when his son, Asahd, was signed sports car gets a perfor- reach a felonious 198 mph.
born last winter. mance infusion with a new top-of- VITAL SPECS: 4.0-liter 577-hp twin-turbo-
“When he turns 16,” Khaled says, “I’m getting him a the-line AMG GT R coupe version charged V8 engine; seven-speed dual-
clutch automatic transmission.
Rolls-Royce out the gate.” F that makes added use of lightweight PRICE: $157,000.

60 | FORBES OCTOBER 24, 2017


MERCEDES-BENZ AMG GT R

Bullish on Power
LAMBORGHINI
HURACAN
PERFORMANTE
BECAUSE TOO MUCH is never
enough, the new Performante en- HEADING FOR
hances the Lamborghini Hura- O P E N S PAC E S
cán’s already astonishing abilities For 2018, BMW vehicles in-
with a retuned V10 engine that corporate the Parkmobile
puts a stampeding 640 horses on app, which helps drivers re-
the pavement. Built with extensive serve and pay for parking in
use of aluminum and carbon fiber 250 cities across the United
to keep its curb weight to a mini- States and Canada. The ser-
mum, the angular all-wheel-drive vice can locate parking on
Huracán Performante can reach and off the street, and re-
60 mph in just under three sec- serve a space at airports and
onds. A new “Ala” active-aerody- events. Users receive a range
namics system adjusts air valves in of choices based on GPS co-
the front and rear spoilers to ac- ordinates, and can both pre-
centuate cornering downforce or select parking times and ex-
simply boost the car’s top speed. tend sessions remotely via
VITAL SPECS: 5.2-liter 640-hp V10 en- the companion ParkNow
gine; seven-speed dual-clutch auto- smartphone app.
matic transmission. PRICE: $274,390.

ALFA ROMEO STELVIO

LAMBORGHINI HURACAN PERFORMANTE

F E R R A R I AT 7 0
Ahead of
the Curves The legendary sports-car maker Ferrari is celebrating its anniversary with a pair of rolling works of art: the
Portofino and the 812 Superfast.
AUDI TT RS The company’s founder and namesake, Enzo Ferrari, began his automotive career in 1929 as a sponsor for
AUDI PREMIERES the quick- amateur race-car drivers and, within a decade, was heading up Alfa Romeo’s racing department. In 1939, Fer-
est production version yet of its rari left to produce his first racer, the Tipo 815, and built the first road car to wear the Prancing Horse logo in
curvaceous TT sports coupe for 1947, the V12-powered 125 S. Today Ferrari remains one of the most successful names in Formula One racing
2018. A turbocharged five-cyl- and is rolling out two new models for its 70th anniversary.
inder engine propels the top Named for a fishing village on the Italian Riviera, the picturesque Portofino replaces the California in
TT to 60 mph in a brisk 3.6 sec- Ferrari’s lineup for 2018. Coming with a retractable hardtop for four-season fun, the curvaceous Portofino
onds, while a rear-biased all- starts at around $225,000 and packs a
wheel-drive system and magnet- 592-hp turbocharged V8 engine that
ic ride suspension help it handle enables a leap to 60 mph in just 3.5
the curves with a well-balanced seconds. Not fast enough for you? At
abandon. Inside, the driver is in about $335,000 the low-slung Ferrari
full command with Audi’s inno- 812 Superfast coupe backs up its im-
vative Virtual Cockpit, a config- modest moniker with a riotous 789-hp
urable wide-screen electronic in- V12 that can make the 0–60 mph run
strumentation panel. in an adrenaline-pumping 2.9 seconds.
VITAL SPECS: 2.5-liter 400-hp turbo- And that’s without turbocharging or
charged five-cylinder engine; seven- FERRARI 812 SUPERFAST supercharging.
speed dual-clutch automatic transmis-
sion. PRICE: $64,900.

OCTOBER 24, 2017 FORBES | 61


2018 CAR GUIDE

H I G H WAY H E R O RANGE ROVER VELAR

Cadillac brings semiautono-


The Posh
mous driving to the CT6 sedan Performer
for 2018 with its new Super RANGE ROVER
Cruise system. It enables VELAR
hands- and foot-free driv-
LARGER THAN ITS automotive
ing over well-marked multi-
cousin, the evocative Evoque, the
lane highways by incorporat-
new five-passenger Velar is sim-
ing auto-steer lane-centering
ilarly stylish. It offers a choice of
and auto-braking/accelerat-
three available engines: a peppy
ing functions with advanced
four-cylinder and downright ag-
LiDAR-scanned mapping. But
gressive V6, along with a fuel-fru-
there’s no sleeping behind the
gal turbodiesel. All-wheel drive
wheel: The system keeps an
comes standard and can be bol-
electric eye on the driver to
stered by an array of available trac-
ensure that he or she is moni-
tion-enhancement technologies.
toring the road in case there’s
Proving the Velar is about more
a need to take over, giving a
than just its good looks, it can tow
series of audible and visual
up to 5,500 pounds with the V6 sedan is longer, lower, wider,
warnings if necessary. SEDAN S
and makes hooking up a trailer lighter and now engineered for
easier via a rotary-dial-controlled a more engaging driving expe-
Advanced Tow Assist function. Leading rience. A twin-turbocharged V6
VITAL SPECS: 2.0-liter 247-hp turbo-
charged four-cylinder, 3.0-liter 380-
the Charge produces a V8-like 415 horse-
power, with a forceful 442
hp V6 or 2.0-liter 180-hp turbodiesel TESLA MODEL 3 pound-feet of torque. A racier F-
four-cylinder engine; eight-speed au-
tomatic transmission. PRICE: $49,900. THE SMALLER AND less expen- Sport rendition and a hybrid ver-
sive alternative to the all-electric sion with an electrified V6 pow-
Tesla Model S arrives for 2018, and ertrain are also part of the lineup.
SP O RT- UTI LI TY
V E HI C LE S
The Cool Cat promises a range of 220–310 miles A new Intuitive Pedestrian De-
JAGUAR E-PACE on a charge, depending on the bat- tection system can apply the
tery pack. It features an unclut- brakes and steer automatically to
JAGUAR ADDS A SMALLER, but
Il Magnifico no less lively, alternative to the F-
tered five-passenger interior with
a large tabletlike display up front,
avoid a person in its path.
ALFA ROMEO Pace SUV for 2018: the curvy and and offers Tesla’s Autopilot system,
VITAL SPECS: 3.5-liter 415-hp twin-tur-
bocharged V6 engine; ten-speed au-
STELVIO compact E-Pace. A choice of turbo with semiautonomous driving ca- tomatic transmission. PRICE: $78,000
NAMED FOR THE highest paved four-cylinder engines generate 246 pabilities. A dual-motor, all-wheel- (estimated).

mountain pass in Italy, the adven- and 296 hp, respectively, with all- drive version is expected later in
turous Stelvio is Alfa Romeo’s first wheel drive standard; the latter 2018. But unless you already have
crossover SUV. Taller and room- can be fitted with Jaguar’s Active a deposit down, you’ll have to wait A Welcome
ier, but otherwise bearing a close Driveline Technology, which can
send 100% of the rear-axle torque
12 to 18 months for delivery. Wagon
family resemblance to the athlet-
to either wheel for quicker han- VITAL SPECS: Electric motor, single- PORSCHE PANAMERA
ic Giulia sedan upon which it’s
dling. Options include an Adap-
speed transmission, 220 miles per SPORT TURISMO
based, the Stelvio is motivated by charge. PRICE: $35,000.
a choice of a lively 280-hp turbo- tive Dynamics active-suspension IN WHAT ONCE WOULD have
four engine or a pazzo (crazy) Fer- system and a Configurable Dy- been regarded as heresy, Porsche
rari-based twin-turbo V6 in the namics system, which allow the Raising introduces a new station wagon
driver to choose a more passive or version—make that a “shooting
top Quadrifoglio model.
assertive operation.
the Flagship brake,” in European carspeak—
VITAL SPECS: 2.0-liter 280-hp turbo- LEXUS LS of the Panamera for 2018. Com-
charged four-cylinder or 2.9-liter 505- VITAL SPECS: 2.0-liter 246-hp or 296-
hp twin-turbo V6 engine; eight-speed hp turbocharged four-cylinder engine; A REDESIGNED VERSION of ing with all-wheel drive, the Pan-
automatic transmission. nine-speed automatic transmission. Lexus’ large-and-in-charge LS amera Sport Turismo offers a
PRICE: $41,995. PRICE: $38,600.
choice of four powertrains, in-
cluding a gas/electric plug-in hy-
brid with a combined output of
462 hp. Oh, and there’s a generous
45.7 cubic feet of cargo space with
the rear seatbacks folded flat.
VITAL SPECS: 3.0-liter 330-hp turbo-
charged V6, 2.9-liter 440-hp twin-
turbo V6, hybrid 2.9-liter 462-hp
twin-turbo V6 or 4.0-liter 550-hp
twin-turbo V8; eight-speed dual-
clutch automatic transmission.
PORSCHE PANAMERA SPORT TURISMO JAGUAR E-PACE
PRICE: $96,200.

62 | FORBES OCTOBER 24, 2017


THE

WAY

WE
BY STEVEN BERTONI

AT $20 BILLION,
WEWORK IS THE MOST
VALUABLE STARTUP IN
AMERICA OUTSIDE

WORK
OF UBER AND AIRBNB.
THE BET: RATHER
THAN JUST BUILDING
CO-WORKING SPACES,
IT’S GOING TO CHANGE
JAMEL TOPPIN FOR FORBES

EVERYONE’S OFFICE
EXPERIENCE.
Cubicle killers:
WeWork cofounders
Adam Neumann
(left) and Miguel
McKelvey have
built an office-
space powerhouse
by combining
communal vibes
with capitalist drive.

A
dam Neumann, the frenetic
cofounder and CEO of We-
Work, was pacing back and
forth in his office in New
York City’s Chelsea neigh-
borhood, ignoring the heavy bag, the Pelo-
ton spin bike and the generously stocked bar
in favor of something more urgent: the clock.
Softbank boss Masayoshi Son, Japan’s wealth-
iest man and one of the world’s great inves-
tors, had promised the 38-year-old former
Israeli naval officer two hours of his time for
a full-blown tour of the co-working innova-
tor’s headquarters. And he was an hour and
a half late.
“Masa arrives, looks at his watch and tells
me, ‘I’m so sorry, but I only have 12 min-
utes,’ ” Neumann says in a raspy voice. And
after precisely 12 minutes of walk-around,
Son said he had to go.
But he offered Neumann a chance to join
him in his car. Neumann grabbed his pitch
deck and climbed into what would become a
$20 billion ride.
Son told Neumann to put away his pre-
sentation, pulled out his iPad and started
sketching the outlines of an investment. “I
thought the valuation had been too high for

OCTOBER 24, 2017 FORBES | 65


FUTURE OF CITIES

a company its size and WE ten times bigger than your ing it a price-to-sales ratio higher than
that someone could original plan. If you think what a more conventional growth com-
easily copy it,” Son tells WORK in that manner, the valua- pany might garner as a multiple of cash
Forbes. “But no one tion is cheap.” How cheap? flow. But this “energy and spirituality”
could. The idea was “It can be worth a few premium seems high no matter how
easy to talk about but hundred billion dollars.” you measure it. Son’s $20 billion valu-
hard to execute—Adam ation translates to $133,333 per mem-
proved he can do what he says.” THE CRAZIEST ONE OF ALL would ber (even though the ability to walk
As the ride ended, Son signed seem to be Son, once you try to figure away at any time is part of the model),
his name on the iPad sketch, drew out exactly what he’s valuing at $20 bil- each of whom generates $8,000 a year
a line beside it and handed Neu- lion—a figure exceeded only by Uber on average. It values each foot of space
mann the pen. “Even today, I still get and Airbnb among U.S. startups (dig- it rents at $2,000, compared with, say,
goose bumps thinking about it,” Neu- ital intelligence outfit Palantir has a $325 to buy Class A real estate in a tech
mann says, holding up his lanky fore- similar valuation to WeWork). It’s an hub like Austin.
arm to show that the hairs are stand- office company . . . that doesn’t own Even before Son came along, the
ing straight up. “Half an hour later, he any offices. Like Uber and Airbnb, likes of Benchmark, Fidelity, Goldman
emails me this.” Neumann retrieves on WeWork is essentially a middleman, Sachs and JPMorgan had put $1.55 bil-
his iPhone a photo of the digital cock- renting space from others at whole- lion into WeWork based on the idea
tail-napkin contract—a tangle of lines sale and then upcharging for cool that traditional metrics don’t reflect its
laying out a global partnership, with design, flexible leases and built-in disruptive model. “They create a vibrant
Neumann’s scrawled signature in blue services like internet, reception, mail- and fun environment and fill it with ex-
ink beside Masa’s in red uppercase. room and cleaning. (Free coffee and cited people to energize the work expe-
The backseat term sheet emerged beer, too.) WeWork’s value-added is of- rience,” says Benchmark’s Bruce Dun-
from the lawyers as a two-part deal: fice culture—at massive scale. Starting levie. Jamie Dimon, JPMorgan’s CEO,
Softbank would invest $3 billion directly with one New York City space in 2010, calls WeWork a way of life: “They’ve
into WeWork ($1.3 billion via a tender the company now has 163 locations— built a hybrid hospitality-and-tech
offer of existing employee stock and $1.7 company that’s entirely different from
billion in new equity). A separate $1.4 anything in real estate.”
billion was to be spread across three But servicing startups will get you
new entities to expand WeWork across “ I N A FI GHT, only so far. Their bet—and especially
Asia: WeWork Japan, WeWork Pacif-
ic, WeWork China. Neumann’s team
W HO W I NS — Son’s—is that WeWork can change how
pretty much everyone experiences an of-
would build and manage the offices, and T H E SM A R T GUY fice. Over the past couple years, WeWork
Softbank would handle the local rela- has signed up companies like GM, GE,
tionships. Valuation: $20 billion. We-
O R T HE C RAZ Y Samsung, Salesforce, Bank of America
Work, which straddles real estate, hos- GUY ?” and Bacardi. Earlier this year, WeWork
pitality and technology, was now worth allotted an entire building in Greenwich
about the same as hotel operator Hilton Village to IBM, and now big companies
Worldwide and more than commercial generate 30% of monthly sales.
real estate giant Boston Properties and a figure that has tripled since the end “It’s now a core real estate solution
social media sensation Snap. of 2015—spread across 52 cities world- for our people,” says Matt Donovan, who
At the deal closing in Tokyo in wide. Its 2,900-plus employees man- runs marketing for Microsoft’s Office
March 2017, Neumann was joined by age 10 million square feet for 150,000 365 brand and has put more than 300
his cofounder and fellow billionaire, members who pay anywhere from $220 employees into WeWork locales. “They
Miguel McKelvey, a sinewy 43-year-old a month for the use of a common area get access to different locations, plus in-
former University of Oregon basket- to $22,000 for a 50-person office. sight and feedback from other WeWork
ball player. “Masa turns to me and asks, “No one is investing in a co-work- members who use our products.”
‘In a fight, who wins—the smart guy or ing company worth $20 billion. That For growing companies WeWork of-
the crazy guy?’ ” Neumann says. “I say, doesn’t exist,” Neumann says. “Our val- fers a way to enter new cities without
‘Crazy guy,’ and he looks at me and says, uation and size today are much more the hassle of scouting locations, negoti-
‘You are correct, but you and Miguel are based on our energy and spirituality ating contracts, designing the space and
not crazy enough.’ ” than it is on a multiple of revenue.” hiring vendors. “There is no reason to
“I told Adam not to be proud that That’s most certainly true—the rent office space,” says Josh Kushner, the
WeWork was growing organically with- company is on track to do an estimat- founder of the VC firm Thrive Capital
out a large sales force or spending big ed $1.3 billion in revenue in 2017 (with and cofounder of Oscar Health, which
marketing dollars,” Son says. “Make it operating margins around 30%), giv- launched its Los Angeles market from

66 | FORBES OCTOBER 24, 2017


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FUTURE OF CITIES

WE
WORK

Torre Bellini, Buenos Aires Weihai Lu, Shanghai

La Fayette, Paris Fulton Center, New York

a WeWork site. “It’s a one-stop shop. “The only reason we are headquartered employees from 15 countries to the
in New York is because we were there
Business is hard enough, and these guys first, not because we are an American
English countryside for three days of

WEWORK PHOTOS CLOCKWISE FROM BOTTOM LEFT: BENOIT FLORENCON; MECHI FAHS; SETH POWERS.
take out all the friction.” company,” Neumann says. dancing, crafts, company presentations
and plenty of booze (some 3,000 We-
WITH ITS SPRAWLING MANSION, an- gle from a full-size trapeze. On the other Work members will join the party half-
cient stone walls, fish ponds and acres side is a strobing Coachella-worthy way through).
of tightly mowed fields, Eridge Estate, stage, where indie band Florence and Neumann, who has never met a mi-
a one-hour train ride south of Lon- the Machine will later play to a crowd of crophone he doesn’t like, takes the stage
don, is straight out of Downton Abbey. 5,000-plus. a half-dozen times. Channeling Tony
But in mid-August, the tidy, aristocrat- Packs of twentysomethings tour Robbins, he talks about finding your
ic park—where Henry VIII led royal the scene in jeans, galoshes and tight superpower, explains that if you have a
deer hunts—looks as if the freewheeling T-shirts printed in half a dozen lan- higher purpose the money will follow
Burning Man tribe has invaded from guages: English block letters, Japanese and encourages everyone to carry the
across the Atlantic. characters, Hebrew script. Branded on love and vibrations of camp back to the
More than 1,200 tents, trailers and the back of each shirt is the word “We” WeWork offices.
tepees have sprouted in the meadow. enclosed in a white circle. Welcome to For a cynic, it’s easy to dismiss Sum-
There are food trucks and beer trucks “WeWork Summer Camp.” mer Camp as the cash-burning boon-
and dozens of bars. On one edge of the Summer Camp started in 2012 as doggle of an overheated startup. To
field (near the roller disco, rock-climb- a gathering of 300 customers and em- Neumann it’s a distillation of what We-
ing wall and a building façade that reads ployees in upstate New York. For this Work does. “Culture is our intellectu-
“Mac ’n’ Cheese”) amateur acrobats dan- year’s gathering, WeWork flew in 2,000 al property,” he says. “Summer Camp

68 | FORBES OCTOBER 24, 2017


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FUTURE OF CITIES

is a way of telling our WE surveying a headquarters tions pinned on a Google Map. We-
employees they are ex- overflowing with free cof- Work’s proprietary software turns the
tremely important, WORK fee, beer and snacks. “I’d hippie-sounding special sauce into data.
even though some- eat bowls of soft-serve ice Finger taps reveal updates on construc-
times it doesn’t feel that cream until I felt sick.” A tion, deliveries and maintenance. A
way. And there’s a team gifted student, the 6-foot- swipe gives you data on potential new
around you here that 8 McKelvey played basket- neighborhoods, listing public transpor-
believes in the mission.” ball at Colorado College before transfer- tation, coffee shops, gyms and near-
Mixed in with executive presenta- ring to the University of Oregon, where by retail brands that signal a ripe loca-
tions and workshops are paddleboard- he juggled big-time college sports and tion (Equinox and Urban Outfitters are
ing and poetry, basketball and basket demanding architecture studies. strong indicators). “They have to buy
weaving, a class on wild foraging and The two met in New York through aluminum and glass, build desks and
another on how to infuse vodka with a mutual friend and bonded quickly make sure the plumbing and the air-
almost anything. There is finance team over their backgrounds and competitive conditioning and the Wi-Fi all work,”
flip cup, real estate versus legal depart- streaks. Neumann had started a baby- Benchmark’s Dunlevie says. “It’s a grub-
ment kickball, an international soc- clothes company, Egg Baby (a big sell- by, execution-sensitive business.”
cer tournament (which the U.K. squad er: pants with built-in kneepads called WeWork has built a complex tech-
wins), a talent show, and a music set by Krawlers), subletting part of his space nology and logistics system to handle
TenaciousWe, an employee band. to make rent. McKelvey was an archi- all that grubbiness, and in September,
“Both Adam and Miguel come from tect (grinding out store designs for cli- it opened ten new locations, more than
community upbringings and under- it launched in a typical year until 2014.
stand the power of it,” says Michael In some ways WeWork looks less like
Gross, the former Morgan’s Hotel CEO a property manager than like an air-
and current WeWork vice chairman. “It “ L AND LOR DS line—squeeze in the maximum number
helped them survive.”
JUST S E L L of seats while providing enough ame-
nities and perks so that no one hates
NEUMANN AND MCKELVEY grew up A LUM I NUM . flying coach. A single extra desk, over
on opposite ends of the world, but their the span of a decade, can translate into
childhoods, critically, were transient WE M AKE about $80,000 in sales. But unlike, say,
and communal. Neumann was born I PHONE S .” a Boeing 777, with its standardized
in Israel to a pair of doctors who di- space, each project has unique dimen-
vorced when he was young. He lived in sions and demons. WeWork has opened
13 places during his first 22 years, in- in former customs houses, breweries,
cluding two years in Indianapolis and a ents like American Apparel), and Neu- warehouses and, in Shanghai, an old
stint on a kibbutz where his mother was mann talked up a plan to rent cheap opium factory.
the doctor. Severely dyslexic, Neumann space that they could divide and upsell To make the most of every millime-
couldn’t read or write until third grade as offices. ter, WeWork uses 3-D scanners to mea-
but still won entrance into the Israeli Neumann persuaded his landlord, sure space and builds virtual-reality
Navy’s elite officer program. After serv- Joshua Guttman, to rent him a floor models to help design each floor before
ing, he moved to New York to live with in Brooklyn, and they launched Green turning a single screw. Heat-mapping
his sister Adi, then a professional model Desk—an earth-friendly co-work- technology tracks traffic and usage to
and a former Miss Teen Israel. ing space. It was a hit. Neumann and find the right balance of shared space,
McKelvey, meanwhile, was raised in McKelvey looked to expand to Manhat- desks and conference rooms. “Land-
Eugene, Oregon, in a collective of ac- tan. Guttman instead wanted to fill va- lords just sell aluminum. We make
tivist single mothers who valued causes cant space in his Brooklyn buildings. iPhones,” says Dave Fano, the growth
over cash. It was a childhood in which They sold him their stake for $3 mil- officer and resident mad scientist.
homes changed often and boxes of fed- lion and bet their winnings on a Manhat- Scale has created price advantages
erally funded food arrived at the front tan co-working play based on the lessons and provided WeWork with unique ex-
door. In the family Volvo, McKelvey learned from the kibbutz and the collec- pertise. Since 2010, Neumann’s team has
would drop rubber balls through the tive. Real estate meets culture. That was installed 9.6 million pounds of alumi-
rusted-out holes in the floor so he could 2010; seven years later, their combined num framing, hung 12 million square
watch them bounce behind the car. stake in WeWork is worth $4.3 billion. feet of glass walls, laid 8.8 million square
He loved the annual trip to the King’s feet of oak flooring and built 12,000
Table buffet. “It was a privilege to eat as IN THE HEART OF WEWORK head- phone booths. WeWork does everything
much as you wanted rather than scrap quarters sits a 60-inch touchscreen itself: location scouting, contracting, in-
for what you could get,” McKelvey says, monitor with the company’s 163 loca- terior design. It even makes the thou-

70 | FORBES OCTOBER 24, 2017


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FUTURE OF CITIES

sands of braces that se- WE the culture we talk about.” to hundreds of spaces and serve mil-
cure the miles of glass Neumann says he owes lions of members. “We did an enor-
walls that WeWork in- WORK the change to his wife, Re- mous amount of financial modeling—
stalls. This year, in- bekah, who served as We- how they can grow, the margins they
creased tech efficien- Work’s first brand offi- can generate, the cash flows they can
cy and massive buying cer and pointed out the create,” he says.
power have pushed the flaw after a month watch- To Neumann this technology-driv-
cost of adding a new desk down 45%, to ing her husband in the office. Neumann en efficiency will become a product all
$8,550. took the criticism to heart. “I met with its own, something like a WeOS, which
Solving the construction side looks my spiritual teacher and went to a ther- will make WeWork indispensable even
easy compared with the human prob- apist. I realized that if I came from a to companies that don’t have an inter-
lems that arise when a company grows positive place, not only will everyone est in co-working. Instead, WeWork
from 2 people to more than 2,000 in feel better and I will feel happier, but will be able to design, build out and run
seven years. Neumann has recruited the company will work better.” their offices. Additional revenue can
seasoned executives from real estate, come via renting WeWork’s tech stack
hospitality, media and tech to man- DURING THE 12-MINUTE tour that con- and staffing WeWork managers to fos-
age the once scrappy startup, includ- firmed enough for Son to eventual- ter community and keep the space run-
ing CFO Artie Minson (Time War- ly write a $4 billion check, Neumann ning smoothly. For companies, it’s a
ner), president Rich Gomel (Starwood), had time to show off just one space: way to inject the WeWork vibe into
COO Jennifer Berrent (WilmerHale), WeWork’s R&D center, which is part staid offices. For WeWork, the program
vice chairman Michael Gross (Morgan Apple Store, part Home Depot. Laptops, takes the asset-light model a step fur-
Hotels) and chief product officer Shiva touchscreens and iPhones are wired ther by deemphasizing its biggest cost
Rajaraman (Spotify, YouTube). to doors, lamps, fixtures and dead- and risk—long-term office leases.
There have been growing pains: a To pull off both WeOS and its con-
public scuffle with a cleaners union in tinued global expansion, WeWork must
2015; leaked documents showing low- solve what Neumann calls “the tril-
ered forecasts in 2016; layoffs that hit lion-dollar question”—how to keep
7% of the staff that same year. For- “ N E UM ANN each WeWork feeling authentic and ar-
mer employees have sued the com-
pany, claiming they were overworked
R E A L IZ E D THAT tisanal as it reaches McDonald’s-size
scale. “We need to pay attention to the
and underpaid. Partly in response to M OTI VATI NG whole space—every room, chair and
these problems, McKelvey has recent-
ly taken the role of “culture officer”—a
W ITH FE AR table—so it feels uplifting and inspir-
ing,” McKelvey says. “We have to train
soft-sounding, ironic title at a company I S NOT our team members to run the space
that claims culture as its core product. and promote community. If we do all
He oversees HR, training, compensa- EFFECTIVE.” that, we create this positive energy that
tion and benefits for thousands of em- inspires people.”
ployees deployed across countries, lan- For Neumann it all goes back to the
guages and customs. kibbutz of his youth. He remembers
Neumann, for his part, has bolts. There’s a test desk that, like a driv- that it was hard to make friends at first.
swapped a macho, military style for a er’s seat, adjusts to saved height settings However, his family had the only VCR,
more professional stance. “He’s real- with the swipe of an ID. Next to it, a and Neumann finally got some kids to
ized that motivating with fear is not prototype phone booth matches lighting come to the house to watch movies.
effective. He used to think fear was a and temperature to the user’s preference. But the VCR was gone. His mom had
positive thing,” McKelvey says. “Adam A keyless entry system, which costs taken it to the hospital for a 24-year-
now understands that treating people about $3,000 off the rack, has been re- old cancer patient with little time left.
with dignity and respect, and fueling placed by a $400 WeWork version pow- “The other kids were extremely under-
them with positive energy, is a much ered by a cheap Raspberry Pi computer. standing, and we still ended up hanging
better way, and he has an incredible WeWork plans to turn each office out together,” Neumann says, tugging
ability to do it.” into one giant connected device that at his T-shirt, his face reddening and
Asked about this shift, Neumann adapts to each user and sends constant his eyes tearing up. “The funny thing is
spends a moment contemplating the feedback to WeWork’s mission control. that everyone soon completely forgot
surface of his desk. “How many orga- For Softbank vice chairman Ron Fish- about the VCR. And then one day, two
nizations are going to be comfortable er, who sits on WeWork’s board, this months later, we came into my house
with a cofounder saying that to a re- tech leap drove the investment, since it and the VCR had returned. Nobody
porter? I’m good with it—it’s kind of will allow WeWork to efficiently scale had to ask why.” F

72 | FORBES OCTOBER 24, 2017


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So much stuff
gets returned
that retailers and
manufacturers
don’t know what
to do with it all.
Optoro CEO Tobin
Moore wants to be
the guy who helps
them figure it out.

The Point of
All Returns
HOW OPTORO IS BUILDING A BILLION-DOLLAR BUSINESS HELPING
COMPANIES COPE WITH AMERICA’S MOUNTAIN OF REJECTED MERCHANDISE.

BY SUSAN ADAMS
DAVID YELLEN FOR FORBES

OCTOBER 24, 2017 FORBES | 75


OPTORO THE NEXT
BILLION-DOLLAR
STA R T U P S

Unicorns
On Deck
Every year for the

I
past three, Forbes has
n Optoro’s 300,000-square-foot gone looking for 25
warehouse outside Nashville on a
young U.S. companies
stiflingly hot afternoon in late Au-
with a strong shot at
gust, Susan Cohan scans the bar
code on a cardboard box holding
reaching a valuation of
97 pink crocheted bikinis. The tops
$1 billion or more. Last
were priced at $27.99 and the bot- year’s list included
toms at $19.99 at one of Ameri- hot companies like
ca’s best-known big-box retailers. the crowdfunding
But the suits had failed to sell. Op- site GoFundMe and
toro’s software tells Cohan to route online retailer Boxed.
the box to Bulq.com, a website run This year, with the
by Optoro that sells in bulk to mom-and-pop dol- help of TrueBridge
lar outlets and online discount stores. The bikinis Capital Partners, we
will fetch 20% of retail, says Tobin Moore, Opto- asked venture firms
ro’s 35-year-old cofounder and CEO. “People aren’t which companies they
going to be buying bikinis in September,” he notes. thought most likely to
Those bathing suits and the 50,000 other boxes of hit the billion-dollar
returned and rejected stuff sitting in Optoro’s ware- mark soon. Then we
house represent a pounding headache for retailers cut that list down to
and manufacturers. Of the $3.3 trillion Americans a final 25, evaluating
spent on merchandise in 2015, they returned 8%, or strategies, funding and
$260 billion worth, according to the National Retail competitive challenges
Federation’s most recent figures. That doesn’t count as well as estimating
items, like the pink bikinis, that never leave store current revenues.
shelves.
(For more about
As e-commerce sites like Amazon and Zappos
our methodology,
force competitors to match their free returns and full
refunds even for damaged goods, retailers are des-
go to forbes.com/
perate to find a way to salvage value from the stock
entrepreneurs)
that comes flooding back. Estimates of e-commerce
returns vary from 25% of all goods bought online to
upwards of 50% for apparel.
According to Moore, Optoro offers the best solu-
tion. The algorithms powering its cloud-based soft- BetterCloud
ware suck up data about prices set by other online FOUNDER: David Politis (CEO)
vendors selling the same or similar returned or over- EQUITY RAISED: $47 million
stocked items, and its scanners instruct warehouse ESTIMATED 2017 REVENUE: $21 million
workers to route each item or group of items to the
LEAD INVESTORS: Accel, Flybridge Capital Partners
channel that will recover the most cash.
The preferred option is sending returns back to WHAT IT DOES: Makes software that lets IT departments manage em-

store shelves, but that’s only possible for less than ployees’ cloud-based applications. At first, BetterCloud focused
only on Google’s productivity suite. But in 2015, CEO Politis decided
10% of the merchandise Optoro processes. Retailers
to blow up the business and start over. Politis rebuilt it to manage
have already sifted out most of the 20% of returns any software used in business, from Slack to Zendesk. BetterCloud
that they can restock (including unopened goods laid off much of its customer-facing staff and spent $35 million re-
in pristine condition that are still part of the sea- tooling over two years.

76 | FORBES OCTOBER 24, 2017


Bright Health
Kyle Rolfing, Bob
FOUNDERS:
Sheehy (CEO), Tom Valdivia
EQUITY RAISED: $240 million
ESTIMATED 2017 REVENUE: $45 million
LEAD INVESTORS: Bessemer Venture
Partners, Greenspring Associates,
New Enterprise Associates

WHAT IT DOES: Provides health insur-


ance. Sheehy, former CEO of United-
Healthcare, teamed up with two other
health care heavy hitters to start
Bright Health two years ago. The Min-
neapolis-based firm’s advantage: its
founders’ backgrounds and its strate-
gy of partnering with specific provid-
er groups. Bright Health launched in
Colorado early this year in partnership
with Centura Health and covers 11,500
people. As it expands to new markets,
including Arizona and Alabama, it ex-
pects subscribers to top 40,000 next
year. The company has shifted its focus
from individuals covered under the
Affordable Care Act to the Medicare
Advantage market. “We expect to be
in 10 to 15 markets over the next sever-
al years,” Sheehy says.

Cohesity
FOUNDER: Mohit Aron (CEO)
EQUITY RAISED:$160 million
ESTIMATED 2017 REVENUE: $50 million
SPIRE LEAD INVESTORS: Artis Ventures, GV,
Mini-satellite moguls (from left) Jeroen Qualcomm Ventures, Sequoia Capital,
Cappaert, Peter Platzer and Joel Spark. Wing Venture Capital
Cappaert taught himself technology as a
teen, building his own electric-guitar effects WHAT IT DOES: Makes systems that help
pedals. See p. 90. companies store and recover backup
data like inventory logs and person-
nel records. Founder and CEO Aron,
44, struck gold with his first unicorn,
Blend data-storage provider Nutanix, which he launched in 2009 and took
public seven years later. Today, Nutanix has a market cap of $3.3 bil-
Erin Collard, Nima Ghamsari (CEO),
FOUNDERS:
lion, making Aron’s 9% stake worth $290 million. An Indian immi-
Eugene Marinelli
grant, he earned a Ph.D. in computer science at Rice, then worked as
EQUITY RAISED: $160 million a lead developer on Google’s File System storage product. In early
ESTIMATED 2017 REVENUE: $27 million 2013 he launched Cohesity, based in Santa Clara, California. The
LEAD INVESTORS: 8VC, Founders Fund, Greylock Partners, company’s 300 customers pay an average of $225,000 for its prod-
Lightspeed Venture Partners uct, which includes a combination of servers and software.

WHAT IT DOES: Makes cloud-based software that lenders use to


originate mortgages online. CEO Ghamsari, 31, says the old process Farmers Business Network
was “broken.” Applicants, for instance, would disclose how much
they earned and, a week later, get a request for a pay stub; after FOUNDERS: Charles Baron, Amol Deshpande (CEO)
TIMOTHY ARCHIBALD FOR FORBES

that, their employer would have to confirm by phone. Blend goes EQUITY RAISED: $84 million
through payroll processors like ADP to condense those steps into ESTIMATED 2017 REVENUE: More than $60 million
one. Today, Blend works with about 30 mortgage originators, in- LEAD INVESTORS: Acre Venture Partners, DBL Investors,
cluding Wells Fargo, U.S. Bancorp and Mason-McDuffie Mortgage. It GV, Kleiner Perkins Caufield & Byers
also plans expansions into student and auto loans. While other fin-
tech companies have become loan originators, Ghamsari wants to WHAT IT DOES: Uses data analytics to give farmers price information
focus only on technology. on supplies. It also sells seeds, fertilizers and pesticides online.

OCTOBER 24, 2017 FORBES | 77


FORBES

BrandVoice WITH INFINITI

SMART
MOTION
The New
Body
Language BY JOE MULLICH

Above: Cavan Canavan; Right: Canavan (L) and Grant Hughes, Cofounders, FocusMotion

S
ure, step trackers and calorie as claimed, surely they could provide
counters are helpful. But what if more useful information than how many FocusMotion calls partners. The Black
you want be sure your bicep curl calories he burned on his morning jog. Mamba himself, former Los Angeles
form is correct? Or get an alert when your Could all this smart wearable technology Lakers star Kobe Bryant, gave Canavan
muscles are tired? These are the questions be, simply, smarter? the stamp of approval — he invested in
that inspired Cavan Canavan to become a In 2012, Canavan and Grant Hughes FocusMotion in August 2016 and joined
movement detective. founded FocusMotion, a machine-learning Canavan and Hughes for a photo op at
As the wearable tech trend took hold software company that captures and the New York Stock Exchange.
in the mid-2000s, Canavan had mixed crunches data on all types of human It’s been a heady ride for Canavan, who
feelings. The Georgia Tech graduate and movement. It not only helps people says he “saw the puzzle pieces of what was
PHOTOS COURTESY OF RYAN YOUNG

then-athletic shoe designer was excited improve bench presses and yoga poses, happening with wearables and put them
about footwear sensors that counted the but also guides warehouse workers to lift together.” He talks modestly about his orig-
number of steps a person took. But the boxes with less strain. inal prototype being made “from duct tape
athletic side of the former high school with wires sticking out and blinking lights.”
soccer/basketball player wanted deeper Kobe And The Dodgers But his passion and geek roots become
insight about his fitness. The Los Angeles Dodgers are among evident when he discusses “dark data” —
If wearables were as groundbreaking the fitness tech trendsetters that the nearly limitless amount of information

78 | FORBES SEPTEMBER 24, 2017


our bodies produce with every subtle move- said. “That’s what we were up against; we which partnered with FocusMotion on
ment that is not being collected. had to collect all of the data ourselves.” its study with the NIOSH to reduce
The technology is similar to voice rec- unsafe postures in the workforce; and
ognition software that lets devices make Shake, Rattle And Code Nadi X, a line of technology-enthused
sense of words. Voice recognition apps In the summer of 2012, Canavan went yoga pants that help people perfect
capture sound wave data from the human to a gym and began gathering data with their downward facing dog.
voice to interpret talking speed. Through some hardware and sensors he fashioned
body sensors, FocusMotion captures data for the task. His voice rises with excite- Deeper Data Dives
from waves that emanate with each ment when he recollects the moment of Larger players in the athletics industry
movement. From there, the data flows realization when the data from a weight- are studying the technology as well.
into a phone or other device to translate lifter began to indicate unique properties The Los Angeles Dodgers did a pilot
it into advice people can use immediately
at the gym, on the track or anywhere else
they’re getting a sweat on.
It may sound straightforward, but
of fatigue — such as duration increase,
consistency fall-off and shakiness —
when he had reached his limit of reps.
program with FocusMotion to measure
how motion tracking positively impacts
athlete training and recovery.
‘‘
‘‘
the obstacles are huge: A speech
recognition program has to be able to We are on the threshold of being able to ... find out
understand that a word spoken with
a New York, Midwestern or Southern
things about our bodies we could never see before.
accent is the same word. A movement — CAVAN CANAVAN
program has to detect slight differences
in the way people move, such as know- “We were able to see that wave in an The Cleveland Clinic is studying
ing which hand goes down first to start Excel spreadsheet, and at that moment I whether FocusMotion technology is as
or end a pushup. This requires massive knew wearables could be used for more effective as manual measuring techniques
amounts of movement data from many than counting steps,” Canavan said. to diagnose and treat shoulder pain suffer-
people. When Canavan started on his “Soon we collected all this hidden data ers. Canavan hopes the study scientifically
quest, there was virtually no data avail- about movement that no one else had.” validates the company’s ability to precisely
able on human movement. Its vast database lets FocusMotion track detect range of motion.
someone’s repetitions of an action, as well As sensors become more powerful,
Body Waves: How They Work as technique and rest time, and compare Canavan believes his constantly evolving
the data to a template of the ideal motion algorithms will offer some jaw-dropping
Voice Recognition for that action. FocusMotion doesn’t insights. He imagines a time when a
Apps capture sound wave data from the create the wearable devices or apps that person’s movement data collection starts
human voice to interpret talking speed customers use. Instead, it licenses the at childhood to determine, say, what
technology to hardware makers and app baseball position he or she should play
developers. After FocusMotion debuted in high school. Canavan anticipates
at the 2015 Consumer Electronics Show, uniting movement and medical data to
it teamed up with Fitocracy, a popular unlock secrets about health and fitness.
sound fitness app that helps people reach their “Wearables have stagnated,”
waves
fitness goals through communal support Canavan said. “Many companies have
and personal coaching. only done step tracking for a long time
Motion Tracking The Fitocracy app had already been because it’s a simple algorithm that
Captures data from waves that emanate gathering simple measures such as how consumes very little battery power. But
with each movement many calories someone burned after a now we are on the threshold of being
stint on a treadmill. With FocusMotion able to take deeper dives into the data
motion
waves it added strength-training data, includ- as we move into multi-device and
ing exercises performed and number multi-sensor systems and garments,
of repetitions, which had never been and find out things about our bodies we
available on a fitness app before. could never see before.”
“If you were designing Siri, imagine Other leading digital health and
Infiniti Voice:
building a speech algorithm where no one fitness companies using FocusMotion To read more stories about other fitness tech
had ever recorded a spoken word,” he technology include Kinetic wearables, innovators, visit forbes.com/sites/infiniti/

SEPTEMBER 24, 2017 FORBES | 79


OPTORO THE NEXT
BILLION-DOLLAR
son’s offerings). The next best choice: either return items to STA R T U P S
manufacturers or sell them directly to consumers on Opto-
ro’s discount-goods site, Blinq.com, or through online stores
Optoro runs on Amazon and eBay, which Moore says can Flexport
bring in 70 cents on the retail dollar. One example in the
FOUNDER: Ryan Petersen (CEO)
Tennessee warehouse: a wireless, rechargeable Solar Stone
EQUITY RAISED: $94 million
garden audio speaker in the shape of a big gray rock that re-
tailed for $129.99. It’s destined for sale on Blinq.com for ESTIMATED 2017 REVENUE: $500 million

$88.49. Optoro’s software also routes goods to other chan- LEAD INVESTORS: First Round Capital, Founders Fund, Y Combinator

nels, including recyclers and charities. WHAT IT DOES: Provides automated freight-forwarding and tracking
Before he launched Optoro seven years ago, Moore says, services. In the $9 trillion global logistics business, companies rely on
most big retailers relied on a hodgepodge of inefficient middlemen called freight forwarders to track their goods. The freight
channels that funneled goods to a series of middlemen forwarders use antiquated tools such as faxes and phone calls. In
2013, Petersen, now 37, founded Flexport in San Francisco. His goal:
who in turn sent them to discounters like Big Lots or Ollie’s
offer software that lets customers track and control their cargo à la
Bargain Outlet as well as to flea markets and pawn shops. FedEx. Flexport has 450 employees in nine offices, including Atlanta,
Through the old system, retailers sometimes recouped as Amsterdam, Hong Kong and Shenzhen, China, and warehouses in Los
little as 5 cents on the dollar of retail sales. Often, they sim- Angeles and Hong Kong, where customers can consolidate cargo.
ply chucked returns in dumpsters and paid
to have them carted away.
Moore, tall and lanky in a white oxford-
cloth shirt, navy-dyed jeans and brown lace-
LEESA SLEEP
up dress shoes, started Optoro’s precur-
Mattress-market insurgents
sor out of his Brown University dorm room David Wolfe (left) and Jamie
in early 2004. Ebay wasn’t yet a decade old, Diamonstein want $1 billion in
sales within five years. See p. 86.
and he saw opportunity in helping sellers list
used goods on the site. For a 30% cut of the
sale price, he’d stand in as the vendor, tak-
ing care of everything from product pho-
tos and descriptions to pricing and shipping.
He roped in Justin Lesher, a friend from his
days at the Washington, D.C., all-boys prep
school St. Albans, who operated out of his
dorm room at Penn.
After graduating that spring, the two
moved in with their parents in D.C. and
went without paychecks for two years. They
ran the business out of an attic above the
garage at Moore’s house before opening a
1,200-square-foot storefront in Georgetown.
The following summer Moore persuaded
another St. Albans friend who had just grad-
uated from Brown, Adam Vitarello, to back
out of the job he’d accepted at AIG and help
run the business, which they’d named eSpot.
(Vitarello is now Optoro’s president; Lesher
left the company in 2011.)
For funding, they borrowed $350,000 on
37 zero-interest credit cards. They got lucky
with local press coverage and scored some
big sales, including a 1965 Mustang and a
$100,000 Rolex. Neighborhood retailers
DAVID YELLEN FOR FORBES

started using eSpot to sell returns and ex-


cess inventory. That led to a lightbulb mo-
ment. “We realized big-box retailers had
the same problem those small retailers had,”
Moore says. “We saw a massive problem

80 | FORBES OCTOBER 24, 2017


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OPTORO THE NEXT
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that had no one focusing on it and no good solutions.” STA R T U P S
But Moore’s timing was terrible. In 2008, the financial
crisis had hit and banks had hiked the rates on eSpot’s zero-
interest cards to 30%. Facing bankruptcy, Moore worked up
an elevator pitch and start-
ed trying to raise money.
He struck out at more than
100 investor meetings in the
D.C. area before he land-
ed his first angel, Nigel Mor-
ris, the cofounder of Capital
One Financial Services, who
pledged $1 million through
his investment firm, QED,
in Alexandria, Virginia.
“Nigel liked that we were
leveraging data and analyt-
ics to make changes in an
old industry,” Moore says.
They hired three developers,
who spent nearly two years
coming up with a scanner
and software system, and in
2010 they launched the new
business as Optoro.
Moore likes to talk
about Optoro as if it’s the
only company to have mas-
tered what’s known in busi-
ness lingo as reverse logis-
tics (“There’s no technology
PILLPACK
platform that does what we
T.J. Parker (right), with cofounder Elliot
do”), but the Reverse Lo- Cohen, learned the business he’s trying to
gistics Association, a trade disrupt while working in his father’s phar-
macy. See p. 88.
group with more than 100
members, has been around
since 2002. According to RLA executive director Tony Sci-
arrotta, retailers and manufacturers spread their business Fundbox
among numerous players, many with niche specialties. Like FOUNDERS: YuvalAriav, Tomer Michaeli,
Texas-based HYLA Mobile, which takes returned mobile Eyal Shinar (CEO)
phones from manufacturers like Samsung and retailers like EQUITY RAISED:$108 million
Best Buy and sells them for big discounts on the interna- ESTIMATED 2017 REVENUE: $55 million
tional market. In 2015 FedEx acquired a large Optoro com- LEAD INVESTORS: General Catalyst, Khosla Ventures, Spark Capital
petitor, Genco, for $1.4 billion.
WHAT IT DOES: Provides short-term financing to small businesses.
Confident to a fault, Moore regularly pitches Optoro at
Fundbox intends to reduce the cash-flow headaches of small com-
RLA’s annual conference in Las Vegas. In 2012, he signed panies, both those waiting for payment and those that need short-
his first big retail client, BJ’s Wholesale Club, a Costco rival term credit to pay what they owe. Fundbox started as an invoice-
that sells discount goods to members through its network financing company, lending money to small businesses against
of warehouses in the eastern U.S. The BJ’s contract helped their accounts receivables at rates lower than those for cash ad-
Moore’s second push to raise money. In late 2012, he per- vances and without prepayment penalties. Its new model, expected
JONATHAN KOZOWYK FOR FORBES

suaded Grotech, a D.C. venture firm, to lead a $7.5 million to launch in 2018, is meant to work like a credit card for business-
to-business transactions. A company that owes money has Fundbox
investment, and seven months later, Revolution Growth,
pay the invoice. The company that is owed gets its cash immediate-
the VC firm headed by billionaire AOL cofounder Steve ly (minus a small interchange fee). Meanwhile, the first company has
Case, led a $23.5 million round. “This market is so big and 60 days to repay Fundbox before being charged interest. With U.S.
will continue to grow,” says Revolution partner and Optoro businesses doing some $41 trillion in business-to-business transac-
board member Ted Leonsis. “It won’t be a zero-sum game.” tions a year, the potential market is enormous, but setting up such

82 | FORBES OCTOBER 24, 2017


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A total of $129 million in investment capital has poured STA R T U P S
into Optoro, including participation by Generation Invest-
ment Management, the London-based venture group co-
founded by Al Gore, whose managers liked Optoro’s pledge a network is hard. Fundbox’s success depends on the accuracy of
to keep merchandise out of landfills, and a $46.5 million its big-data-driven credit analysis. Shinar, an Israeli immigrant who
has an M.B.A. from the University of Pennsylvania and previously
round in December 2016 that included UPS, which plans to
worked at Battery Ventures, has been testing his approach for four
pitch Optoro’s business, where appropriate, to its thousands years. Fundbox’s loss rate, he says, is currently around 1% and de-
of retail customers, says Ken Rankin, the company’s director clining every month.
of corporate strategy.
Moore concedes that some companies, in particular Am-
azon and its subsidiary Zappos, have effective internal sys-
Ginkgo Bioworks
tems for processing returns. Amazon, however, has used FOUNDERS: Jason Kelly (CEO), Reshma Shetty,
Genco (now called FedEx Supply Chain). Amazon also uses Austin Che, Barry Canton, Tom Knight
liquidators to clear bulk merchandise from its warehouses. EQUITY RAISED: $154 million

And Amazon offers used and so-called open-box goods di- ESTIMATED 2017 REVENUE: More than $20 million
rectly on its site. LEAD INVESTORS: Senator Investment Group, Viking Global
Investors, Y Combinator
There is plenty of other reverse-logistics business to be
had, though retailers and manufacturers don’t want to talk WHAT IT DOES: Makes custom-designed living cells for companies
about it. They’d rather consumers focus on acquiring new in the fragrance, food, agriculture and pharmaceutical industries.
things and don’t want to draw investors’ attention to the Using DNA that it designs and manufactures, Boston-based Gink-
go programs cells to produce everything from the enzymes need-
money pit dug by returns and overstock in search of buy-
ed to make cheese and yogurt to the essential ingredient in peach
ers. Of Optoro’s 30 clients, only a handful, including Home flavoring. For French fragrance firm Robertet, Ginkgo makes mi-
Depot, Best Buy, Target and Jet.com, permit Optoro to crobes that generate rose oil. According to CEO Kelly, Ginkgo is
make their relationship public, and none would agree to an poised for growth, with 44 cells in the works for 25 customers that
on-the-record interview for this story. will pay both R&D fees and royalties. In 2009, Kelly and three other
Like his clients, Moore won’t share Optoro’s numbers, ex- MIT Ph.D.s teamed up with their MIT mentor, engineer turned syn-
cept to say that he expects next year’s revenue to double this thetic biologist Tom Knight, and launched the company, which re-
lied on government grants to develop its technology for the first five
year’s, which is on track to double last year’s, and that Opto-
years. In 2014, the company went through Silicon Valley accelerator
ro will process goods with a total retail value of $1 billion in Y Combinator and kicked off its first commercial products. Ginkgo’s
the coming year. Optoro collects revenue several ways. Most 170 employees work with an army of 60 software-directed robots.
customers who use the software pay
monthly licensing fees. When it sells
goods on Blinq and Bulq, Optoro takes
between 15% and 50% of the amount
it recovers for its clients, which ranges
from 20 cents to 70 cents on the retail
dollar. Forbes estimates Optoro’s 2017
revenue at more than $50 million.
With a growing staff of 220 in its head-
quarters in central Washington, D.C.,
and its contract deal with the 100-plus
workers in its rented Tennessee ware-
house, overhead is substantial, and
Optoro is spending its investment cap-
ital on growth. “We’re not in profit-op-
timization mode,” he says.
Moore is aiming high. Off the rec-
ord, he ticks off the names of major re-
tailers whose business he believes he
can capture and existing clients he
thinks he can persuade to use more of
DAVID YELLEN FOR FORBES

Optoro’s services. “Our technology is


highly valuable to people who work on ZOLA

a massive scale,” he says. “If they put A lesson Shan-Lyn Ma (with cofounder
Nobu Nakaguchi) says she learned while
us in place, overnight we can provide a pitching male VCs her online bridal regis-
ton of value.” try: “Don’t be overly modest.” See p. 90.

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porate phone systems. CEO Pope, 39, and his cofounders set up the
STA R T U P S
company in 2006 and, unlike other fast-growing tech firms, largely
avoided venture funding. Today Jive employs about 600 people and
counts companies like WellSpace Health, Ex-
pedia and Chop’t among its customers.

Leesa Sleep
Jamie Diamonstein,
FOUNDERS:
David Wolfe (CEO)
EQUITY RAISED: $30 million
ESTIMATED 2017 REVENUE: More than $150
million
LEAD INVESTORS: One Better Ventures,
TitleCard Capital

WHAT IT DOES: Makes mattresses and sells


them online and at West Elm stores. CEO
Wolfe, a veteran of direct-to-consumer mar-
keting, and Jamie Diamonstein, a third-gen-
eration mattress executive, founded Leesa in
2014. It’s one of dozens of companies upend-
ing the $15 billion industry. “Everybody recog-
nizes that traditional retail foot traffic is down
dramatically,” Wolfe says. “It is happening re-
FLEXPORT ally quickly.” Leesa, based in Virginia Beach, is
a B Corp, with a clear social-impact strategy:
As an importer of dirt bikes, ATVs and
scooters from China, Ryan Petersen saw It donates one mattress for every 10 it sells—
close-up how technologically primitive it has given away about 20,000—and works
the cargo-tracking business is. See p. 80. with more than 50 homeless shelters.

Interactions Livongo
FOUNDER: Glen Tullman (CEO)
FOUNDER: Michael Cloran
EQUITY RAISED: $142 million
EQUITY RAISED: $163 million
ESTIMATED 2017 REVENUE: $36 million
ESTIMATED 2017 REVENUE: $100 million
LEAD INVESTORS: General Catalyst, Kleiner Perkins Caufield &
LEAD INVESTORS: Comcast Ventures, Cross Atlantic Capital Byers, Microsoft Ventures
Partners, NewSpring Capital, Revolution Growth, Sigma Partners,
SoftBank Capital WHAT IT DOES: Sells a service that helps diabetics manage their dis-
ease. Launched in 2014 in Mountain View, California, the company
WHAT IT DOES: Makes software for robo-voice customer-service sys-
makes a glucose monitor that sends patients’ insulin levels to the
tems. Interactions’ selling point: Its software, powered by artificial
cloud, where its technology returns results and treatment instruc-
intelligence, includes a human element. When the software fails to
tions to the monitor’s screen. When a reading indicates a serious
understand a thick accent or muffled word, a human steps in to trig-
health threat, a Livongo diabetes specialist calls the patient with-
ger the correct response. Among its more than 50 customers: Hyatt
in 90 seconds. Most of its 200-plus customers are self-insured em-
hotels and health insurer Humana. In 2014, Interactions, based in
ployers, including AT&T, Boeing and Exxon Mobil. A veteran CEO
Franklin, Massachusetts, acquired a division of AT&T Labs, including
and entrepreneur, Tullman, 58, has a son who was diagnosed with
its speech-recognition technology and 40 staffers, in a stock deal
type 1 diabetes at age eight. Tullman’s mother also suffers from the
that gave AT&T a stake in the company.
disease.

Jive Communications Looker


FOUNDERS:Matthew Peterson, John Pope (CEO), Mike
Sharp, Andrew Skeen, Brent Thomson, Stephen Todd FOUNDERS: Ben Porterfield, Lloyd Tabb
EQUITY RAISED: $178 million
EQUITY RAISED: $19 million
ESTIMATED 2017 REVENUE: $70 million
ESTIMATED 2017 REVENUE: $100 million
LEAD INVESTORS: CapitalG, First Round Capital, Kleiner Perkins
LEAD INVESTOR: North Bridge Venture Partners Caufield & Byers, Meritech Capital Partners, Redpoint Ventures
JAMEL TOPPIN FOR FORBES

WHAT IT DOES: Makes a cloud-based system that integrates voice, WHAT IT DOES: Makes business-intelligence software that consoli-
video and other communications applications. Based in Orem, dates data from multiple applications. Looker’s software promises
Utah, Jive is one of a handful of major players, such as RingCen- to take all of a company’s data and make it centrally accessible so
tral and Fuze (on last year’s Next Billion-Dollar Startups list), jock- it can be analyzed for trends and opportunities. The company has
eying for position in the $40 billion-plus market to replace old cor- more than 1,000 corporate customers.

86 | FORBES OCTOBER 24, 2017


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STA R T U P S
SEATGEEK
Jack Groetzinger (left) and Russ
D’Souza hated buying concert and
Optoro sports tickets. “The whole experience
feels broken,” D’Souza says. See p. 90.
FOUNDERS: Justin Lesher, Tobin Moore (CEO), Adam
Vitarello
EQUITY RAISED:$129 million
ESTIMATED 2017 REVENUE: More than $50 million
LEAD INVESTORS: Grotech Ventures, Revolution Growth, UPS

WHAT IT DOES: Helps companies recoup money from returned and


overstocked goods. See story, p. 75.

Orbital Insight
FOUNDERS: James Crawford (CEO)
EQUITY RAISED:$79 million
ESTIMATED 2017 REVENUE: More than $20 million
LEAD INVESTORS: GV, Sequoia Capital

WHAT IT DOES: Uses machine learning and artificial intelligence to gath- Plaid
er information from satellite images. From Chinese construction growth FOUNDERS: William Hockey, Zach Perret (CEO)
to environmental changes to old-fashioned parking-lot car counting, Or-
bital collates information for investors and governments. It has more EQUITY RAISED:$60 million
than 75 major customers to date. The company is working on a new ESTIMATED 2017 REVENUE: $40 million
project to improve flood models for insurance companies. LEAD INVESTORS: Goldman Sachs, New Enterprise Associates,
Spark Capital

Outreach WHAT IT DOES: Makes software that helps technology startups and
banks work together. Perret and Hockey, who appeared on Forbes’
FOUNDERS: Wes
Hather, Gordon Hempton, 30 Under 30 list in 2015, started a company to help consumers bet-
Andrew Kinzer, Manny Medina (CEO) ter use financial data. They soon realized there was a need for soft-
EQUITY RAISED:$60 million ware that could connect consumers, financial institutions and de-
ESTIMATED 2017 REVENUE: $27 million velopers. “We found we could have so much more impact on the
financial-services ecosystem by building the infrastructure,” says
LEAD INVESTORS: DFJ Growth, Mayfield Fund, Trinity Ventures
Perret, now 30. Plaid’s products provide authentication of accounts
WHAT IT DOES: Sells subscription software that helps salespeople man- and routing numbers, income validation and real-time balance
age their work flow. In 2011, Medina, an immigrant from Ecuador and checks. Among its customers: Venmo, Robinhood, Coinbase and
former director of business development at Microsoft, and his cofound- Clarity Money.
ers launched Seattle-based GroupTalent, a service that matched com-
panies with tech professionals looking for work. By 2014, the compa-
ny had run aground, so CEO Medina and his team decided to scrap
Postmates
their original plan and sell the software they’d developed to manage FOUNDERS:Bastian Lehmann (CEO),
their sales work flow. The product tracks research, appointments and Sean Plaice, Sam Street
calls, and sends automated follow-up emails to prospects. Relaunched
EQUITY RAISED:$278 million
in mid-2014 as Outreach, the company has 1,500 customers, including
General Electric, CenturyLink and the San Francisco Chronicle. “This is ESTIMATED 2017 REVENUE: $300 million
my first and last startup,” says Medina, 43. “I have one good idea.” LEAD INVESTORS: Founders Fund, Spark Capital

WHAT IT DOES: Provides a delivery service for restaurants and


PillPack other businesses. Since launching in San Francisco in 2011, Post-
mates has spread to 250 cities across the U.S. Customers order
FOUNDERS: Elliot Cohen, T.J. Parker (CEO) food and other goods through a website or app. Postmates
EQUITY RAISED: $118 million charges businesses a 15% to 25% commission on each sale, plus
ESTIMATED 2017 REVENUE: More than $100 million a $4 or $6 delivery fee to customers. In addition to its 550 em-
ployees, the company relies on a courier workforce of more than
LEAD INVESTORS: Accel, Astral Capital, Atlas Venture, CRV,
Founder Collective 100,000 independent contractors. To beat rival delivery startups
like Grubhub and DoorDash, it has launched new services like al-
JAMEL TOPPIN FOR FORBES

WHAT IT DOES: Mails medications to patients packaged by the day and cohol delivery in six states, including New York and California.
time they should be taken. Founded in 2013 (Parker was on the 2015 Also in the works: a fleet of robots to replace human couriers in
Forbes 30 Under 30 list), Pillpack has its main pharmacy in Manches- some markets. German-born CEO Lehmann, 39, expects the com-
ter, New Hampshire, and offices in Park City and Salt Lake City, Utah, pany to become profitable in 2018. He says the company may go
and Somerville, Massachusetts. It has more than 500 employees and public next year.
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88 | FORBES OCTOBER 24, 2017


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tries their sons’ company serves. A computer scientist with a degree
STA R T U P S
from the University of Southern California, Kuzoyan, 34, teamed
up with Stanford grad Mahdessian, 32, and launched ServiceTitan,
based in Glendale, California, in 2012.
SeatGeek
FOUNDERS: Jack Groetzinger (CEO), Russ D’Souza Spire
EQUITY RAISED: $160 million FOUNDERS: Jeroen Cappaert, Peter Platzer (CEO),
ESTIMATED 2017 REVENUE: $70 million
Joel Spark
LEAD INVESTORS: Accel, Founder Collective, EQUITY RAISED:$110 million
Glynn Capital Management, Mousse Partners, TCV ESTIMATED 2017 REVENUE: $39 million
WHAT IT DOES: Runs a mobile-based events ticket marketplace. LEAD INVESTORS: Promus Ventures, RRE Ventures, Shasta
Ventures
D’Souza and Groetzinger quit management-consulting jobs in
2008, and hit on the idea of aggregating tickets to sports, concerts, WHAT IT DOES: Builds and launches small satellites called CubeSats,
Broadway shows and more that were selling in over 100 secondary about the size of a wine bottle. Spire has launched 51 CubeSats. It is
marketplaces like StubHub. Last year, SeatGeek moved into primary focused on tracking the movements of ships and helps catch the oc-
ticketing, hoping to disrupt an area dominated by Ticketmaster. Its casional pirate. Spire also provides weather information to customers
new SeatGeek Open platform allows performers and teams to sell like the National Oceanic & Atmospheric Administration.
tickets directly through apps and websites that fans already use.

Vlocity
Segment
FOUNDERS: David Schmaier (CEO), Craig Ramsey
FOUNDERS: CalvinFrench-Owen, Peter Reinhardt (CEO), EQUITY RAISED:$105 million
Ian Storm Taylor, Ilya Volodarsky
ESTIMATED 2017 REVENUE: $75 million
EQUITY RAISED: $109 million
LEAD INVESTORS: Accenture, Salesforce Ventures, Sutter Hill
ESTIMATED 2017 REVENUE: More than $45 million
LEAD INVESTORS: Accel, e.ventures, GV, Kleiner Perkins Caufield & WHAT IT DOES: Sells cloud-based customer-management software
Byers, Thrive Capital, Y Combinator Continuity Fund for industries like insurance and telecommunications. Vlocity traces
its roots to the 1990s, when Schmaier and Ramsey worked at Ora-
WHAT IT DOES: Makes systems that help companies collect and an- cle with Marc Benioff, who went on to found Salesforce. The idea for
alyze customer data. When Reinhardt and his cofounders posted Vlocity: software that runs on top of Salesforce’s products to man-
their idea on Y Combinator’s Hacker News in December 2012, the age relationships in industries with the worst reputations for cus-
community responded with a resound- tomer service. Launched in 2014, Vloc-
ing yes. “I don’t think anyone had re- ity has 80 customers in 20 countries,
ally built a product around this con- including MetLife, T-Mobile and the
cept,” recalls Reinhardt, 28, a Forbes City of New York. Salesforce’s venture-
30 Under 30 alum. Today Segment has capital arm was an early Vlocity inves-
175 employees, mostly in San Francis- tor, and Vlocity’s headquarters are in
co, and counts Gap, Crate & Barrel, Au- Salesforce’s San Francisco building.
todesk and Instacart among its custom-
ers. It’s planning new products and an
office in Europe. Zola
FOUNDERS: Shan-Lyn Ma (CEO),
ServiceTitan Nobu Nakaguchi
FOUNDER:Ara Mahdessian EQUITY RAISED: $41 million
(CEO), Vahe Kuzoyan ESTIMATED 2017 REVENUE: More than
$120 million
EQUITY RAISED: $98 million
LEAD INVESTORS: Canvas Ventures,
ESTIMATED 2017 REVENUE: $39 million Lightspeed Venture Partners,
LEAD INVESTORS: Battery Ventures, Kevin Ryan, Thrive Capital
Bessemer Venture Partners,
Iconiq Capital WHAT IT DOES: Runs an online wed-
ding registry. Zola holds no invento-
WHAT IT DOES: Sells cloud-based sub- ry, leaving that risk to its more than
scription software for home-service 500 vendors, including KitchenAid
businesses like contractors, plumbers and Dyson. Two innovations it brings
TIMOTHY ARCHIBALD FOR FORBES

and electricians. Among ServiceTitan’s to the $19 billion industry: Couples can
nearly 1,500 customers: plumbing fran- choose when to receive their shipment
chise Mr. Rooter and George Brazil, a and can digitally exchange unwant-
LIVONGO
large provider of plumbing services and ed gifts in advance. Ma, who previously
heating and air-conditioning systems. The glucose monitor Glen Tull-
man’s company makes gives dia-
ran Gilt Taste, says she learned what to
The founders’ fathers are both Arme- betics quick, personalized advice do and what not to do from that shut-
nian immigrants who work in the indus- like “Get some carbs.” See p. 86. tered online retail site.

90 | FORBES OCTOBER 24, 2017


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insurance industry in Iowa? It’s simple. Iowa has built a business environment
that breeds success. We believe in working hard. And living well. It’s a healthy
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* 2016 SOURCE: TEConomy Partners


92 | FORBES OCTOBER 24, 2017
A Cut
Henry Davis made
a billion-dollar fortune
by carefully growing
his family’s small-scale
slaughterhouse into
one of the country’s
top suppliers of high-
quality beef. It’s always
been quality over
quantity, and Greater
Omaha’s customers like
it that way—even when
they can’t get all the
meat they want.

Above
BY CHLOE SORVINO
JAMEL TOPPIN FOR FORBES

OCTOBER 24, 2017 FORBES | 93


SMALL GIANTS: GREATER OMAHA

H enry Davis glides


his knife through a 40-ounce tomahawk ribeye, its bone
running from his fingertip down to his elbow. He cuts into
the meat to check how the chef at Spencer’s steakhouse in
downtown Omaha has cooked it. It’s a touch more than rare,
and the cool, marbled center is exactly to his liking. Davis
is more than a Spencer’s regular. He is the owner of Greater
Omaha Packing, one of the top slaughterhouses in the coun-
try. The three-inch-thick steaks he and his three guests are
into one of the country’s richest butchers, worth an esti-
mated $1 billion. He has big plans ahead, but nothing that
will compromise his high-quality beef.
“We are a country of meat eaters. It’s a spiritual experi-
ence for a lot of people, and Greater Omaha has been able
to respond to the needs of the people. They want good
steak,” says Bob Oros, an independent beef analyst.
Greater Omaha is intentionally lean. The nation’s top
four suppliers, JBS USA Holdings, Tyson, Cargill and
eating were hand-delivered to the kitchen, fresh off the line National Beef Packing, account for about 75% of the U.S.
of his Greater Omaha plant a few miles south. market in terms of revenue; Greater Omaha, the next big-
On this hot summer night in June, Davis, a 66-year- gest, has 2% (see chart, p. 96). It sells 700 million pounds
old who wears thin-rimmed silver glasses, is in a celebra- of beef a year, a tiny
tory mood. Just the day before, his 97-year-old company slice of the 25 billion
shipped its first box of beef to China since 2003, mere We don’t pounds processed in
hours after the USDA finalized a new trade deal that re- the U.S. annually.
opened the $2.5 billion market to American butchers. His
want gigantic Despite being one
plant was one of two slaughterhouses in the U.S. initially customers. The of the oldest beef
approved to ship to China, and his beef arrived first. He packers in the coun-
celebrated by taking 30 Chinese trade representatives
big chain stores? try, Greater Omaha
to Spencer’s. (Donald Trump eventually took credit for We don’t have has opted not to grow
this coup in July, claiming in a speech that Davis hugged
him for getting China approved. Davis, whose immigrant
enough beef. If too big. It operates
just one plant and
grandfather started Greater Omaha, says he did thank they run a sale, it chooses not to sell to
the president and shook his hand, though there was no
embrace.)
would be too big big chains like Costco,
Wal-Mart and McDon-
China is the latest frontier for Greater Omaha, which a percentage of ald’s (JBS and Cargill
was the first to sell U.S. beef in Japan (2008) and Saudi our product. are the fast food giant’s
Arabia (May 2017). Also the biggest American seller in the hamburger-meat sup-
European Union, it now exports to 69 countries. Despite pliers). It also keeps
the huge potential of these markets, Davis sets limits and daily production to 2,400 cattle. “We don’t want gigantic
is wary of selling too much to any one customer—be it a customers. The big chain stores? We don’t have enough
local restaurant distributor, a small supermarket chain, a beef. If they run a sale, it would be too large of a percent-
hotel group or even a country. Last year, exports accounted age of our product. I don’t want that,” Davis says.
for just 16% of its $1.4 billion in sales. “I’m very careful This approach allows Davis’ cattle buyers to be ex-
how I do that,” Davis says. “We don’t get overdependent on tremely choosy. Its buyers select each steer—either Angus
any market or any raw material or any customer.” or Hereford breeds—individually from independent
His thoughtful approach and decision to carefully carve ranches that feed cattle by hand. “The truth is we buy
out a high-end, more profitable niche has helped him grow the fact that hand-fed cattle are better than machine-fed
the business tenfold since he took over in 1987. It’s been cattle,” says Angelo Fili, Greater Omaha’s 61-year-old,
enough to turn Davis, who owns 100% of the company, tobacco-chewing executive vice president. “A company

94 | FORBES OCTOBER 24, 2017


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SMALL GIANTS: GREATER OMAHA

THE CALF AMONG STEER


THE FIFTH-BIGGEST BEEF SUPPLIER IN THE NATION, GREATER OMAHA IS LESS THAN A FOURTH OF THE SIZE OF THE NEXT LARGEST BEEF
PLAYER. THE COMPANY LIKES IT THAT WAY, CHOOSING TO KEEP PRODUCTION AT 2,400 CATTLE A DAY AND FOCUSING ON HIGH-END
CUSTOMERS. THAT’S HELPED FATTEN ITS OPERATING MARGINS TO 6%, ROUGHLY DOUBLE THE INDUSTRY AVERAGE.

4. National Beef Packing


5. Greater
$7 billion
Omaha
$1.4 billion

1. JBS
USA Holdings
2. Cargill 3. Tyson
$20.5 billion
$15 billion1 $14.5 billion
6. All the rest
$17 billion1

U.S. firms’ 2016


beef sales:
$75.5 billion1

1
FORBES ESTIMATES OF 2016 BEEF REVENUES.

that does 30,000 cattle a day, they’re already going to get industry average of 3% and better than that of JBS, Tyson
some cattle that are prime, and they’re gonna get some ani- and National Beef ’s meat businesses (privately held Cargill
mals that are raw. We’re after the higher-end stuff.” To that also won’t confirm). “The big packers have to compete
point, nearly all its cattle come from Nebraska and Iowa. with us. We are agile,” Davis says.
Nebraska, in particular, has become a preferred spot for

G
cattle raising, thanks to its climate and excellent grassland, reater Omaha’s story starts with an immigrant in
which sits atop the largest aquifer in the country. Greater search of a better life. Davis’ grandfather, Her-
Omaha claims that helps ranchers raise cattle superior to man Cohen, fled the Russian empire to America
those from drought-prone states like Texas and California. in 1905 at age 11 to escape discrimination and pogroms.
Greater Omaha also tailors cuts directly to a custom- Cohen served in the U.S. infantry in World War I and
er’s specifications, sending them pounds of just one cut, reentered civilian life with $100 in his pocket. In 1920, he
such as Porterhouse, or having a Muslim imam bless steer moved to Omaha, keen on investing in beef. At the stock-
PETER AND MARIA HOEY FOR FORBES

to meet halal standards. Its steaks are served at some of yards, Cohen would pick a single steer every day, butcher
the nation’s top eateries, including Peter Luger, Minetta it himself and then sell the beef, while a partner sold the
Tavern and Marea in New York City, French Laundry in hides. The small operation grew slowly to a few animals a
Napa Valley, Ruth’s Chris Steak Houses and Wolfgang Puck day. Cohen’s youngest daughter, Florence, married Davis’
restaurants. These prime cuts help fatten the company’s father, Pennie, who joined his father-in-law’s business
bottom line, giving it an operating margin estimated to be in 1945 and soon became president. They kept it simple,
6% (Davis won’t comment). That’s much higher than the butchering the meat into hindquarters and forequarters

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sections only, which would be sold to a butcher who would which the company still uses today, Davis focused first
cut the meat into ready-to-cook sizes. It was a good time on building software that would analyze data such as how
to be in the business, as America doubled its beef con- many pounds of meat were shipped and what percentage
sumption in the prosperous years following World War II. of fat each animal had. For the first time, the company
Families spent nearly one fourth of their food budget on could predict the number of cattle needed for the next
meat in 1950, according to the American Meat Institute. week, how much each truckload cost the company to pro-
Davis was born in 1951 and witnessed the glory years cess and how much it would make from a sale to a meat
of Omaha’s beef industry. He grew up walking through purveyor.
the livestock auctions on the exchange floor and attending Davis took over
meetings with his father and other Omaha slaughterhouse as president in 1987,
managers. When he was 4 years old, Omaha beat out Chi- We are a when Greater Omaha
cago to become the nation’s top spot for beef processing.
He later spent summers at the plant doing everything from
country of was bringing in $130
million in sales a year
buying cattle to butchering meat on the assembly line. meat eaters. from about 650 cattle
By the 1970s, Omaha had lost its edge. Slaughterhouses It’s a spiritual a day. He soon revolu-
hightailed it out of the city to be closer to rural feedlots. tionized the company
Davis joined the business full-time in 1973 after graduat- experience for by jumping on a trend
ing from the University of Denver with a degree in busi- a lot of people, Iowa Beef Packers had
ness and a minor in computer science. At the time, Greater started. IBP (acquired
Omaha had 40 employees and processed 232 steer a day. and Greater by Tyson for $3.2 billion
“We were too small to have roles. Everybody did every- Omaha has in 2001) had invented
thing,” Davis recalls. boxed beef, in which
As a young exec, Davis had big ideas. He purchased the been able to one cut of beef, like loin
company’s first computer, a Polymorphic System 8813, for respond to or rib, was packed in
$5,870 in 1980. There was no software available to help the vacuum-sealed packages
slaughterhouse track receivables and project future sales, their needs. and shipped in boxes
so he wrote it himself. “We had a good business model They want a that were more manage-
back then, and I wasn’t going to change my business to fit able for a grocer or a
the software,” Davis says. good steak. restaurant distributor.
As he started to write the code in a Unix shell script, Previously, packers sold
only larger hindquarters
and forequarter cuts.
More butchering meant
higher prices, and Davis
launched a produc-
tion line for boxed beef
in 1992. “Most of the
industry followed along.
Those that didn’t are
no longer in business,”
Davis says.

D
emonstrating
his own agility,
the lean, 5-foot-
8 Davis whips his Mer-
cedes Benz S550 Coupe
onto L Street, just a few
blocks from Omaha’s
JAMEL TOPPIN FOR FORBES

historic ten-story Live-


stock Exchange Build-
ing. Davis drives this
car to work most days
A USDA grader examines Greater Omaha’s meat for color, marbling and texture. but also owns a 1965

98 | FORBES OCTOBER 24, 2017


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INNOVATION SHOWCASE
PROMOTION

NIGERIA:
TRANSFORMATION PRESENTS OPPORTUNITIES
By Paul Trustfull

Nigeria and its central bank are working toward greater economic stability, a task that includes shoring up infrastructure, expanding
public-private partnerships, reviving agribusiness and diversifying exports.

of GDP growth per year, Emefiele reports.


The study also indicates that about US$93
billion per year would be needed to tackle
the region’s infrastructural challenges.
Although Nigeria has relatively better infra-
structure than many of its African peers, its
core stock of infrastructure is estimated at
about 25% of GDP. Given that most middle-
income countries of Nigeria’s size have core
infrastructure of about 70% of GDP, the
African Development Bank estimates that
Nigeria has an infrastructure-funding gap of
US$300 billion.

This presents major investment


opportunities in the areas of infrastructure.
Nigeria seeks to construct and rebuild
basic infras tr uc ture including roads,
bridges, airports, railways and information
tec hnolog y. Beyond t he b enefit s of
immediate job creation, infrastructure
improvements will act as a catalyst to the
movement of goods and services across the
country.
Godwin Emefiele
Nigeria is also looking to explore
oppor tunities for public-private
In mid-July, the International Monetary country’s external reserves to safeguard the par tnerships for similar oppor tunities
Fund (IMF) predicted that the Nigerian international value of the legal tender cur- in infr as tr uc ture projec t s that could
economy would expand by 1.9% in 2018. rency; promoting a sound financial system offer returns to investors and help drive
It also projected that Nigeria would exit its in Nigeria; acting as Banker to the Govern- economic growth across the country.
current economic recession this year with ment; and providing the fiscal authorities
a slim economic growth of 0.8%. Nigeria with economic and financial advice. Policies Seek to Stimulate Economy
is undergoing structural transformation
and challenges instigated by internal and Emefiele says strong policy coordination is Fiscal policy for Nigeria looks to stimu-
external developments. needed among those guiding the nation’s late household consumption and business
direction: “In Nigeria, this would include investments. These two make up more than
Godwin Emefiele, Governor of the Central fiscal, monetary, exchange and trade poli- 85% of Nigeria’s GDP by expenditure. Work
Bank of Nigeria (CBN), and his Deputy Gov- cies, which must be targeted at protecting is underway to ensure that fiscal policy is
ernors are steering the nation’s financial farmers, companies and industries that are targeted at improving productivity of labor,
system through the economic turbulence. committing resources to support the gov- increasing disposable income for work-
Since Emefiele assumed office in June 2014, ernment’s drive to diversify the economy ers and deploying resources to create an
he and his team have charted a course to away from oil and fossil fuels.” enabling environment for investors.
greater stability and growth.
Focus on Infrastructure Investment Agriculture remains the largest employer
In line with the provisions enshrined in the of labor in Nigeria and contributes about
CBN Act (2007), CBN has remained focus A recent World Bank study estimates that 24.2% of its GDP. “The CBN has both a
on the bank’s core mandate of ensuring Sub-Saharan Africa’s infrastructure deficit direct and indirect rationale to ensure
monetary and price stability; issuing legal — especially in power and transportation — that this sector is revived in a significant
tender currency in Nigeria; maintaining the costs the region about 2 percentage points way,” says Emefiele. “The CBN’s Anchor

1 Emerging Markets
PROMOTION

Christine Lagarde and Godwin Emefiele

Borrowers’ Programme, together with “From preliminary analyses of global trade determined administration that believes in
other initiatives like the Commercial Agri- trends and discussions with potential trade diversification.”
culture Credit Scheme and NIRSAL (the partners, it is now increasingly evident
Nigeria Incentive-based Risk-sharing Sys- that Nigeria can benefit significantly from Services for Investors
tem for Agricultural Lending), are proving tapping into the market for certain high-
to be successful in several states. To date, demand goods,” Emefiele says. “For exam- The Nigerian Investment Promotion Com-
the Bank has committed close to N29 bil- ple, the demand for Halal meat and sesame mission (NIPC) coordinates, monitors and
lion in the Anchor Borrowers’ Programme, across the Gulf Cooperation Council (GCC) provides necessary assistance and guid-
with active participation across 24 states of countries is huge. The demand for cashew ance for the establishment and operation
the Federation.” nuts and shea-nut butter across the world of enterprises in Nigeria. It serves as the
is rising. Nigeria has comparative advan- gateway to investment in Nigeria for for-
In Kebbi State, for example, over 78,000 tage in all these products, and can quickly eign investors and Nigerian investors, and
smallholder farmers are now cultivating tap into the vacuum created from the sharp is Nigeria’s window to the international
about 100,000 hectares of rice farms, with fall in availability of these products from investment world. Its One-Stop Investment
an expected yield of over one million met- other major suppliers.” Centre (OSIC) was established in 2006 to
ric tons of rice this year. facilitate investment in all sectors of Nige-
Another area of oppor tunit y ripe for ria’s economy. For more information, visit
“T h e p o s i t i ve i m p a c t of c at al y zi ng expansion is the flourishing entertainment www.nipc.gov.ng.
domestic agricultural production is that industry. The rate of movie production in
we restore wealth and create employ- Nigeria in fact now surpasses that of mov-
ment in our rural communities,” Emefiele ies produced in China annually. Opportuni-
notes. “The CBN remains committed to ties in the industry have drawn the inter-
doing more in the identified crops such as est of Huaxia Film Distribution Company,
rice, maize, sorghum, tomatoes, cassava, the second-biggest movie distributor in
cocoa, cotton, dairy and groundnuts. We China, reports Nigeria’s Ministry of Infor-
also need to find ways to make land cul- mation and Culture. Alhaji Lai Mohammed,
tivation much easier, especially for small- Minister of Information and Culture, wel-
holder farmers. In this regard, NIRSAL comed the Chinese movie group to invest
can assist with technical knowledge and in some critical aspects of the creative sec-
deployment of relevant GIS and satellite tor, including the establishment of cinema
imaging that will realize this within a short houses, studios and exhibition centers.
period of time.”
The “pioneer status” recently granted
Diversification Is Key to the creative sector will enable inves-
tor s to b enefit f rom t a x incentives.
Non-oil exports present another area of “Nigeria is ready to receive investors
opportunity. Diversified exports can help in the creative industry, having created
Nigeria bolster its reserves while also cre- the enabling environment for invest-
ating jobs and engendering broad-based ments through favorable economic poli- Godwin Emefiele and Paul Trustfull
economic growth. cies,” says Mohammed. “We have a very

2 Emerging Markets 2
SMALL GIANTS: GREATER OMAHA

Lotus and a 1966 Alfa Romeo. His most prized automobile eight-story cold-storage warehouse. Using artificial intel-
is a 1966 Ford GT40, the first American race car to win ligence, robots will pull the boxed beef off shelves and
at Le Mans, which is estimated to be worth millions. He fulfill orders. The new warehouse will open up space in
raced the car the next year at Pebble Beach and won in his the existing plant to allow Davis to come up with ad-
class. He says he’s stopped racing old cars after seeing too ditional high-margin items. He’s already planning on
many crashes and now races a modern Porsche. doubling his ground-beef production to an estimated 70
Davis is taking me for a drive through Omaha’s beef million pounds annually by next year. Greater Omaha has
history, pointing out streets that used to be filled with also started selling to meal-delivery outfits like Amazon-
blocks of stockyards and thousands of cattle. He slows the Fresh and Hello Fresh as well as offering direct-to-con-
Merc as he nears the former Livestock Exchange Building, sumer steaks, called TenderAge. (It couldn’t use the name
now a brown-brick landmark sometimes used for wed- Omaha Steaks, as it’s already taken by a rival.) The steaks
dings and events. “There used to be 36 packers here,” he it sells online are some of its most expensive and premium
says with a nod before turning into his own headquarters. cuts: $320 for eight 14-ounce ribeyes or $180 for eight
Pointing to a red-brick building on his right, he adds, 6-ounce filets.
“That was one right over there.” Just four packers are left Davis says he will never abandon his restaurant cus-
in Omaha, and Davis’ plant, still in view of the exchange tomers, a business that is still quite lucrative. Pat LaFrieda
building, is the city’s largest. Meat Purveyors, for instance, which sells to thousands of
Davis’ office is 200 yards from the main packing floor, restaurants around
just past the sales department. Inside, his desk is crowded the country, has been
with three computer monitors. One shows the movements The slaughter- ordering from Davis
in the beef futures market, another is open to his email, for decades. “Greater
and the third is used to access the internet and work on house’s Omaha actually se-
spreadsheets. There’s also a tablet and a smartphone for 400,000-square- lects product specifi-
when Davis needs more bandwidth. “Every morning I get cally for us, and that
up, I can’t wait to go to work,” he says with a grin from foot stainless- means the world to
behind his desk. steel plant is us,” LaFrieda says.
Most days he dons his white smock and hairnet and Lawry’s, which
steps into the freezing-cold 400,000-square-foot stainless-
pristine and operates ten restau-
steel plant, which is open to visitors ranging from curi- there is no odor. rants and buys more
ous chefs to family ranchers. He and his executive team than 750,000 pounds
designed it themselves in the late 1990s. He didn’t hire
The rooms have a of meat a year, con-
an engineer because they “knew this better than anybody lablike quality. curs. Executive chef
else.” The renovation was necessary in part because of the Ryan Wilson says
growing size of the steers. The average weight of cattle he’s been transition-
has nearly doubled in three decades as more are being fed ing all his locations to exclusively use Greater Omaha
corn rather than grass. “When cattle got bigger, all of a beef, despite the fact that the prices are a bit higher and
sudden they didn’t fit through the line,” Davis says. that he can’t always get as much as he wants. “You often-
Each day 2,400 cattle are brought in from the out- times have to pay more of a premium up front,” Wilson
side pens and slaughtered here. Then their carcasses are says. “But I think it’s worth it,”
rigged to a machine that strips off hide in one fast pull. Despite the demand, Davis says, he has no plans to
From there the meat is chilled for two days while a USDA open another plant. He’s toured two that were modeled
official inspects the marbling and marks each with a after his but wasn’t interested. He also turned down buy-
grade—select, choice or prime. The meat then winds its out offers, including two since the trade deal with China.
way through conveyor belts and machines spread across “I don’t open that door because the plant’s not for sale,”
several rooms, as the beef is separated into sections. At he says.
the very end of the line, butchers cut to order. In a new Davis has no heir apparent and no succession plan.
$12 million addition, the beef trimmings are ground into Divorced in 2006, he has two children in Chicago: a
fresh (never frozen) hamburger meat. (The trimmings are 26-year-old daughter who is a psychotherapist and a
also sold to distributors who resell to places like Five Nap- 23-year-old son who just started law school. Davis says
kin Burger and Five Guys.) Contrary to expectations, the neither has any interest in coming back to Omaha like
plant is pristine, and there is no odor. The vast stainless- he did. He’ll figure out what that means for the business
steel rooms have a lablike quality to them. when the time comes but doesn’t think that will be any-
Davis designed the huge space to be flexible, and time soon: “I’ve never enjoyed this more in my life. I’m
he’s investing $40 million to erect a 65,000-square-foot not giving this up. You’re not getting me out of here.” F

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THERAPISTS
Trillions in wealth will pass to the next generation in the coming
decades. America’s Top Wealth Advisors are finding that sound
investment and tax advice often takes a backseat to family therapy.
BY ANTOINE GARA, ASHLEA EBELING AND LAUREN GENSLER

C
alifornia sunlight is flooding into the Beverly Hills of USC, had little interest in the family electronics business and
conference room where Amir Mossanen typi- seemed to be drifting from startup to startup.
cally holds his family sessions over pizza and soft Mossanen questioned the young heir about his business
drinks. He opens a cabinet to show off the little ideas, his dreams and goals, his plan B if his startup didn’t work
rewards—a deck of cards, a miniature stagecoach out and what he expected in terms of family assistance. Then
figurine—that he gives to those who open up about Amir had another heart-to-heart talk with the parents, encour-
their lives. Mossanen, 42, is not a psychologist but a Wells Fargo aging them to let their son continue on his entrepreneurial
TIM PANNELL FOR FORBES

financial advisor with $1.8 billion under management. quest. It ended with the creation of the Tinder dating app, the
Several years ago, Mossanen held what some might consider crown jewel of Match Group, a Nasdaq-listed company with a
a family intervention with one of his best clients, an Iranian market value of $6 billion.
immigrant couple living in the Bel Air section of L.A. They “I think Amir helped my parents more than me,” says Tinder
were worried about their youngest son, who had dropped out founder Sean Rad, 31. “The family business never really reso-

104 | FORBES OCTOBER 24, 2017


nated with me, and I wanted to follow
my own path.” In 2016, he delivered
America’s
a commencement address at USC’s
undergraduate business school, as his
Top 100
parents watched.
Gone are the days when asset al-
location, investment selection and tax
Wealth
planning—all essentially commodities
now—proved an advisor’s worth. But
Advisors
$30 trillion will pass to the Millennial Every client loves her financial advisor
generation in the coming decades, and when the market is hitting new highs.
according to the seminal work Philan- But what sets the best advisors apart
from the rest has little to do with stock
thropy, Heirs & Values by Roy Williams
picking. These days the name of the
and Vic Preisser, seven out of ten estate game is the personal touch, with an eye
transitions fail—meaning family wealth toward managing all aspects of a client’s
and/or harmony declines. That has financial life, persevering through market
given advisors a new mission and a way downturns or even acting as the voice
to keep their hold on the $7.8 trillion of reason during nest-egg-threatening
of high-net-worth business. If financial family disputes. —Halah Touryalai
advisors ignore the needs of spouses and MIN.
ACCT.
the younger generation, industry con- TEAM
SIZE FOR
NEW
sultant Cerulli Associates warns, the as- ASSETS1 BUSINESS2

sets they manage will sink when wealth 1 Jeff Erdmann $6.2B $2.5M
MERRILL LYNCH PBIG GREENWICH, CT
is transferred.
2 Christopher Errico 2B 2M
Mossanen realized this in 2010, UBS PRIVATE WEALTH MGMT NEW YORK CITY
when a prospective client who was 3 Brian Pfeifler 4B 25M
selling his business for $400 million MORGAN STANLEY PVT WEALTH NEW YORK CITY
4 Andy Chase 10.1B 500K
said his biggest concern wasn’t whether MORGAN STANLEY PVT WEALTH MENLO PARK, CA
he could manage his new wealth but 5 Patrick Dwyer 3.1B 10M
whether it would leave his adult son MERRILL LYNCH PBIG MIAMI
Freud meets finance: Wells
directionless. Finding no satisfactory 6 Mark Curtis 20B 5M
Fargo advisor Amir Mossanen. GRAYSTONE CONSULTING PALO ALTO, CA
“[Families] lash out and cannot off-the-shelf answers, Mossanen built
7 Rod Westmoreland 2.4B 10M
make decisions together.” his own program, done in nine two- MERRILL LYNCH PBIG ATLANTA
hour-long sessions, to teach families to 8 Charles Zhang 2.6B 500K
ZHANG FINANCIAL PORTAGE, MI
open up about their wealth and avoid
9 Greg Vaughan 15.4B 10M
the secrecy and resentment that inevitably bubble into a crisis. MORGAN STANLEY PVT WEALTH MENLO PARK, CA
His program begins with seminars on investing and credit, and culminates with 10 Robert Skinner 12.4B 5M
intimate tasks like defining individual goals and forecasting possible costs or risks. FIRST REPUBLIC INVST MGMT MENLO PARK, CA

Every family member has to answer the same questions. Mossanen tries to bring out 11 Ric Edelman 19.5B 5K
EDELMAN FINANCIAL FAIRFAX, VA
disagreements and even records sessions to be replayed later. This gauntlet takes two 12 Rob Clarfeld 6.1B 5M
years, with a big payoff: The patriarchs and matriarchs have opened up about their CLARFELD FINANCIAL TARRYTOWN, NY
wealth, and the younger generations have a framework for making good use of it. 13 Lyon Polk 5.6B 10M
MORGAN STANLEY PVT WEALTH NEW YORK CITY
“[For many clients] the golden rule is he who has the gold makes the rules,’’ Mos-
14 Andy Burish 4B 500K
sanen says. “Then when the dictator is no longer, they lash out and cannot make UBS FINANCIAL SERVICES MADISON, WI
decisions together. The kids have been suppressed because they weren’t allowed to 15 Shelley Bergman 2.2B 3M
decide anything for themselves. They’re like people who have been holding their MORGAN STANLEY NEW YORK CITY
16 Ron Carson 8.5B 0
breath for too long.” CARSON WEALTH MANAGEMENT OMAHA
Of Mossanen’s 53 clients, 20 have participated in his novel program. Wells Fargo 17 James Hansberger 2.2B 2M
(which has 13 advisors, including Mossanen’s team, on Forbes and Shook Research’s MORGAN STANLEY PVT WEALTH ATLANTA

2017 list of America’s Top 250 Advisors) plans to roll out his family process nation- 18 Richard Saperstein 7.7B 5M
HIGHTOWER/TREASURY PARTNERS NEW YORK CITY
wide. “Our clients are literally knocking our doors down, demanding help in this area,” 1
ADVISORS ARE JUDGED ON INDIVIDUAL CONTRIBUTION, BUT TOTAL TEAM
says Katherine Dean, recently named head of Wells Fargo’s Family Dynamics business. ASSETS ARE SHOWN; IN SOME CASES SIGNIFICANT, NONCUSTODIED
ASSETS ARE NOT INCLUDED BECAUSE OF VERIFICATION DIFFICULTIES.
UBS, too, has a dedicated unit working on family coaching. “We’re in the hu- 2
MINIMUM ACCOUNT SIZES ARE GENERAL, SINCE THEY CAN VARY
DEPENDING ON A RANGE OF CIRCUMSTANCES.
AMERICA’S TOP 100
WEALTH ADVISORS

MIN.
ACCT.
SIZE FOR NESTOR VICKNAIR
TEAM NEW
ASSETS1 BUSINESS2 VMT WEALTH MANAGEMENT, MERRILL LYNCH, HOUSTON
ASSETS UNDER MANAGEMENT: $4.9 BILLION
19 Steve Hefter $2B $3M
WELLS FARGO ADVISORS HIGHLAND PARK, IL Hurricane Harvey’s havoc couldn’t keep Vicknair, 54, from
driving his Jeep through Houston’s flooded streets to his
20 Marvin McIntyre 2.7B 2M downtown office.
MORGAN STANLEY PVT WEALTH WASHINGTON, DC
“We stayed on top of the markets while checking in with
21 Raj Sharma 6.4B 5M our clients,” he says. “Some had evacuated and needed
MERRILL LYNCH PBIG BOSTON emergency funds, and others even had transactions based
22 Randy C. Conner 4.8B 500K elsewhere in the country that still needed to close.”
CHURCHILL MGMT GROUP LOS ANGELES Such personal attention defines Vicknair’s 25-member
23 Martin Halbfinger 1.6B 5M practice. Five years ago, he met with a client who had
UBS FINANCIAL SERVICES NEW YORK CITY terminal cancer, with six months to live. While working on
estate planning and discussing his life, the client expressed
24 David Hou 12.4B 5M a wish to talk to his estranged son one last time after a
FIRST REPUBLIC INVST MGMT LOS ANGELES
falling-out 30 years prior.
25 Reza Zafari 15.5B 10M “We ended up finding his son in Oregon after three
MERRILL LYNCH PBIG LOS ANGELES weeks of searching,” says Vicknair. “They talked on a
26 Richard Jones 15.5B 10M conference call and ended up staying in touch through the
MERRILL LYNCH PBIG LOS ANGELES rest of the father’s life.” —Jonathan Ponciano
27 Colleen O’Callaghan 2.4B 25M
MORGAN STANLEY PVT WEALTH NEW YORK CITY
JEFFREY AND BRIAN WERDESHEIM
28 Thomas Moran 3.6B 2M THE SUMMA GROUP, OPPENHEIMER & CO, LOS ANGELES
WELLS FARGO ADVISORS NAPLES, FL
ASSETS UNDER MANAGEMENT: $1.5 BILLION
29 Saly Glassman 4.8B 5M For the last 25 years, the Werdesheim brothers have cultivated a
MERRILL LYNCH BLUE BELL, PA
power roster of clients in L.A.’s entertainment and athletic circles.
30 Paul Pagnato 1.7B 500K Calling in favors from their network is key. When a client’s
PAGNATOKARP RESTON, VA father was having heart problems, Brian phoned a doctor pal
31 John Waldron 1.4B 2M and helped him jump a months-long waiting list at UCLA Medical
WALDRON PRIVATE WEALTH PITTSBURGH Center for a ten-hour quadruple-bypass surgery. A former NFL
32 Raj Bhatia 1.5B 10M owner confessed he didn’t know how to help his struggling
MERRILL LYNCH PBIG CHICAGO teenager, so the brothers called in a college-prep advisor and
identified a learning disability. The teen was then enrolled at
33 Kevin Peters 1.1B 4M a high school for musically gifted students and attends USC’s
MORGAN STANLEY PVT WEALTH PURCHASE, NY
Thornton School of Music on a scholarship.
34 Rebecca Rothstein 4.2B 2.5M It is in life’s twists and turns, rather than the stock market,
MERRILL LYNCH PBIG BEVERLY HILLS, CA where the Werdesheims deliver true alpha. “We’re not usually
35 Jon Goldstein 5.7B 20M going to make a difference in someone’s life because of a
FIRST REPUBLIC INVST MGMT MENLO PARK, CA percentage point here or there,” says Brian. “We’re trying to solve
36 Paul Tramontano 5.7B 25M the problems that keep them up at night.” —L.G.
FIRST REPUBLIC INVST MGMT NEW YORK CITY
37 Brian Frank 1.6B 2M LORI VAN DUSEN
MORGAN STANLEY PVT WEALTH ATLANTA
LVW ADVISORS, PITTSFORD, NEW YORK
38 Gregg Fisher 2.1B 0 ASSETS UNDER MANAGEMENT: $2 BILLION
GERSTEIN FISHER NEW YORK CITY
Since the start of her career as a financial advisor in 1987,
39 Michael Poppo 1.3B 5M Lori Van Dusen has known that investment advice doesn’t
UBS FINANCIAL SERVICES NEW YORK CITY exist in a vacuum. A long-distance runner and bikram yoga
40 Brent Brodeski 5.2B 500K devotee, she has taken a holistic approach. “We provide
SAVANT CAPITAL ROCKFORD, IL integrated fiduciary advice around a client’s ecosystem,”
41 Martin Eby 2.7B 5M Van Dusen says. Moreover, she identifies with the issues
WMS PARTNERS TOWSON, MD her ultrarich business-owner clients face, including creating
a succession plan and deciding which passions to pursue
42 Jordan Waxman 1.7B 10M after a business is sold. (Among Van Dusen’s own passions:
HIGHTOWER/HSW NEW YORK CITY
socially conscious impact investing.) In January, she
43 Mark Schulten 2.6B 250K merged her practice with Flynn Family Office, more than
WELLS FARGO ADVISORS LONG BEACH, CA doubling her firm’s footprint. Says FFO founder Rick Flynn:
44 Jason Katz 2.2B 0 “She’s a workhorse with a desire to build a company that’s
UBS FINANCIAL SERVICES NEW YORK CITY sustainable beyond us.” —A.E.
45 Susan Kaplan 1.7B 1M
KAPLAN FINANCIAL SERVICES NEWTON, MA
46 Drew Zager 4.6B 5M
MORGAN STANLEY PVT WEALTH LOS ANGELES manities and the emotional business,” says Judy Spalthoff, head of family and philan-
47 David Singer 2.5B 5M thropy advisory at UBS Americas.
MERRILL LYNCH PBIG CINCINNATI After Ted Merchant, a cofounder of HealthCare Partners, sold the company to di-
48 William Greco 4.7B 500K alysis giant DaVita for $4.3 billion in 2012, he asked Forbes’ 55th-ranked advisor, Drew
UBS FINANCIAL SERVICES HARTFORD
1
ADVISORS ARE JUDGED ON INDIVIDUAL CONTRIBUTION, BUT TOTAL TEAM
Freides of UBS Private Wealth Management, to help his three adult children adjust.
ASSETS ARE SHOWN; IN SOME CASES SIGNIFICANT, NONCUSTODIED
ASSETS ARE NOT INCLUDED BECAUSE OF VERIFICATION DIFFICULTIES. “When you’re dealing with these dollar numbers, we’re living at fairly high altitude, and
2
MINIMUM ACCOUNT SIZES ARE GENERAL, SINCE THEY CAN VARY
DEPENDING ON A RANGE OF CIRCUMSTANCES. we need to get used to the thin air,” says Merchant, 69.

106 | FORBES OCTOBER 24, 2017


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ACCT. ACCT. When the Merchants’ now 35-year-
SIZE FOR SIZE FOR
TEAM NEW TEAM NEW old daughter seemed to be floundering,
ASSETS1 BUSINESS2 ASSETS1 BUSINESS2
Freides arranged for her to attend UBS’
49 Peter Rohr $3.9B $10M 79 Jeff Grinspoon $1.1B $1M philanthropy program for young heirs.
MERRILL LYNCH PBIG PHILADELPHIA HIGHTOWER ADVISORS VIENNA, VA
She decided to dedicate herself to not-for-
50 Ron Basu 3B 2M 80 David Kudla 1.9B 200K
MORGAN STANLEY PVT WEALTH NEW YORK CITY MAINSTAY CAPITAL MGMT GRAND BLANC, MI profit work. The family is now building
51 Michael Klein 3.8B 10M 81 Eric Gray 12.6B 10M a 3-acre community called Villa de Vida
BAIRD MILWAUKEE MERRILL LYNCH PBIG LOS ANGELES
in San Diego County to serve adults with
52 Mark Douglass 14.9B 10M 82 Troy Griepp 8.1B 10M
MORGAN STANLEY PVT WEALTH MENLO PARK, CA MORGAN STANLEY PVT WEALTH SAN FRANCISCO
special needs, something they decided
53 Thomas Keegan 14.2B 10M 83 Jeffrey Colin 6.9B 5M should be a priority because Merchant’s
MERRILL LYNCH PBIG NEW YORK CITY BAKER STREET ADVISORS SAN FRANCISCO eldest son has autism.
54 Alan Whitman 1.4B 100K 84 Robert Gallo 1.4B 500K Some advisors, such as HighTower’s
MORGAN STANLEY PASADENA, CA MERRILL LYNCH WALNUT CREEK, CA
55 Drew Freides 3B 10M 85 Debra Wetherby 4.2B 10M
Jordan Waxman, ranked No. 42 on our list
UBS PRIVATE WEALTH MGMT LOS ANGELES WETHERBY ASSET MANAGEMENT SAN FRANCISCO with $1.7 billion in custodial assets, find
56 John Olson 2.1B 1M 86 William Corbellini 2.9B 3M that a rigid structure around family deci-
MERRILL LYNCH NEW YORK CITY MERRILL LYNCH PBIG DALLAS
sions works best. Last summer, he oversaw
57 Andy Berg 4.1B 2M 87 Lori Van Dusen 2.2B 2M
HOMRICH BERG ATLANTA LVW ADVISORS PITTSFORD, NY the third out of what will be five “board
58 David Ellis, III 1.4B 2M 88 Jeffrey Kobernick 3B 5M meetings” for the family of MSNBC host
UBS PRIVATE WEALTH MGMT CINCINNATI UBS PRIVATE WEALTH MGMT NEW YORK CITY Chris Matthews, his wife, Kathleen (for-
59 Michael Valdes 2.8B 5M 89 Rob Sechan 3B 5M
MERRILL LYNCH PBIG TAMPA UBS PRIVATE WEALTH MGMT NEW YORK CITY
mer congressional candidate and current
60 Randy Carver 1.1B 500K 90 Ron Weiner 715M 1M chair of the Maryland Democratic Party),
CARVER FIN./RAYMOND JAMES MENTOR, OH HIGHTOWER/RDM WESTPORT, CT and their three adult children. The goal of
61 Laila Pence 1.2B 2M 91 Scott Magnesen 3B 250K these annual Nantucket retreats is to offset
PENCE WEALTH MANAGEMENT NEWPORT BEACH, CA MORGAN STANLEY OAK BROOK, IL
the fears of passing down a fortune. “How
62 Sal Tiano 2B 2M 92 Noel Weil 10.5B 10M
JP MORGAN SECURITIES PALM BEACH GARDENS, FL MERRILL LYNCH PBIG NEW YORK CITY to speak with our children about money
63 Peter Princi 1.2B 2M 93 Jonathan Beukelman 1.1B 2M caused us great anxiety,” the Matthewses
GRAYSTONE CONSULTING BOSTON UBS PRIVATE WEALTH MGMT LINCOLN, NE
say in an email. In year one, the Mat-
64 Louis Chiavacci 2.4B 10M 94 Jesse Bromberg 993M 2M
MERRILL LYNCH PBIG CORAL GABLES, FL MORGAN STANLEY SAN FRANCISCO
thewses listed their critical family informa-
65 Adam Carlin 2B 7.5M 95 Robert Waldele 2.8B 5M tion—trusts, wills, foundations and asset
MORGAN STANLEY PVT WEALTH CORAL GABLES, FL MERRILL LYNCH NEW YORK CITY portfolios—on a single page but didn’t
66 Brian Hetherington 2.4B 10M 96 Shawn Fowler 1.9B 5M share it with their heirs.
MERRILL LYNCH PBIG NEW CANAAN, CT MORGAN STANLEY PVT WEALTH DENVER
67 Hank McLarty 1.6B 1M 97 Elaine Meyers 2.2B 10M
During the second retreat, each of their
GRATUS CAPITAL ATLANTA JP MORGAN SECURITIES SAN FRANCISCO adult children presented a proposal for a
68 Kevin Myeroff 1.1B 0 98 Craig Chiate 2.8B 20M philanthropy project, and its budget, in
NCA FINANCIAL PLANNERS CLEVELAND UBS PRIVATE WEALTH MGMT LOS ANGELES
Shark Tank fashion. Addressing philanthro-
69 Terry Cook 977M 10M 99 Greg Miller 2.6B 500K
UBS PRIVATE WEALTH MGMT BELLEVUE, WA WELLESLEY ASSET MGMT WELLESLEY, MA py first helps families define shared values
70 Don d’Adesky 3.5B 1M 100 Louise Gunderson 771M 1M and mission, Waxman says. In year three,
AMERICAS GRP/RAYMOND JAMES BOCA RATON, FL UBS FINANCIAL SERVICES NEW YORK CITY the Matthewses agreed on other priorities
71 Nestor Vicknair 4.9B 3.5M
MERRILL LYNCH HOUSTON
(such as having the educations of grand-
72 Joe Montgomery 1.1B 5M children fully paid), and the parents finally
WELLS FARGO ADVISORS WILLIAMSBURG, VA
73 Richard Pluta 862M 5M
Methodology showed the document listing their assets
The ranking, developed by our partner
to everyone. This year, they will be refining
MERRILL LYNCH NEW YORK CITY
Shook Research, is based on in-person critical issues like family governance. “Our
74 Gerard Klingman 1.5B 2M
KLINGMAN/RAYMOND JAMES NEW YORK CITY and telephone due-diligence meetings children are engaged, more knowledgeable
75 Chuck Bean 1.2B 1M and a ranking algorithm for advisors and more prepared,” the Matthewses say.
HERITAGE FINANCIAL WESTWOOD, MA who have a minimum of seven years of
Since 2003, Waxman has overseen
76 Clarke Lemons 1.7B 1M experience. We consider client retention,
WATEROAK ADVISORS WINTER PARK, FL industry experience, compliance
similar services for three to four families
77 Brian Strachan 914M 1.5M records and firm nominations as well as a year among his 90 clients, untangling
MORGAN STANLEY PVT WEALTH BOSTON quantitative criteria such as assets under issues of trust and control. “The goal is to
78 Thomas Sullivan 2.3B 1M management and revenue generated for create generations of stewards of wealth,”
MERRILL LYNCH GARDEN CITY, NY
their firms. For the full list and more, see Waxman says. This extra service costs
1
ADVISORS ARE JUDGED ON INDIVIDUAL CONTRIBUTION BUT TOTAL TEAM
www.forbes.com/top-wealth-advisors.
ASSETS ARE SHOWN; IN SOME CASES SIGNIFICANT, NON-CUSTODIED AS-
SETS ARE NOT INCLUDED BECAUSE OF VERIFICATION DIFFICULTIES. $16,000 a year, but, he says, “the return is
2
MINIMUM ACCOUNT SIZES ARE GENERAL, SINCE IT CAN VARY DEPENDING
ON A RANGE OF CIRCUMSTANCES. kind of infinite.” F

108 | FORBES OCTOBER 24, 2017


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THOUGHTS ON

Work
“Office life typically
proceeds behind
a mask of shallow “ALL LABOR
cheerfulness, leaving
workers grievously
HAS DIGNITY.”
unprepared to —MARTIN LUTHER KING JR.
handle the fury and
sadness continually
aroused by their
colleagues.” “Anyone can do
—ALAIN DE BOTTON any amount of
work, provided
it isn’t the work
“People don’t he is supposed
choose their
careers—they are to be doing at
engulfed by them.” the moment.”
—JOHN DOS PASSOS —ROBERT BENCHLEY
“One never notices
“Every man’s work, whether what has been done; “I HAVE FOUND
it be literature or music or
pictures or architecture or one can only see what SOME OF THE
anything else, is always a BEST REASONS
remains to be done.” I EVER HAD FOR
portrait of himself.”
—MARIE CURIE REMAINING AT

PICTURE COLLECTION/GETTY IMAGES; JOHN SPRINGER COLLECTION/CORBIS/CORBIS/GETTY IMAGES; DAVE PICKOFF/AP; ANN RONAN PICTURES/PRINT COLLECTOR/GETTY
—SAMUEL BUTLER
THE BOTTOM

CLOCKWISE FROM TOP LEFT: MONDADORI PORTFOLIO/GETTY IMAGES; ULF ANDERSEN/GETTY IMAGES; CULTURE CLUB/GETTY IMAGES; HOWARD SOCHUREK/THE LIFE
“DILIGENCE IS THE MOTHER OF GOOD SIMPLY BY
FORTUNE, AND THE GOAL OF A GOOD LOOKING AT THE
INTENTION WAS NEVER REACHED THROUGH MEN AT THE TOP.”
—FRANK MOORE COLBY
ITS OPPOSITE, LAZINESS.”
“The price

IMAGES; MOVIESTORE COLLECTION/ALAMY; PRISMA/UIG/GETTY IMAGES;WOLVERHAMPTON CITY COUNCIL/ARTS AND HERITAGE/ALAMY


—MIGUEL DE CERVANTES
one pays for
“THIS BECAME A CREDO “THE THREE MOST pursuing any
OF MINE: ATTEMPT THE profession
HARMFUL ADDICTIONS or calling is
IMPOSSIBLE IN ORDER TO
IMPROVE YOUR WORK.” ARE HEROIN, an intimate
—BETTE DAVIS CARBOHYDRATES AND knowledge of
A MONTHLY SALARY.” its ugly side.”
—NASSIM NICHOLAS TALEB —JAMES BALDWIN

“HOW CAN I TAKE


AN INTEREST IN
MY WORK WHEN FINAL
I DON’T LIKE IT?” THOUGHT
—FRANCIS BACON
“Fill today with
“A SLUGGARD’S APPETITE IS NEVER FILLED, BUT THE work; fill tomorrow
DESIRES OF THE DILIGENT ARE FULLY SATISFIED.” with hope.”
—PROVERBS 13:4 —B.C. FORBES
SOURCES: NOBODY KNOWS MY NAME, BY JAMES BALDWIN; THE ALGONQUIN WITS, BY ROBERT E. DRENNAN;
THE TIMES BOOK OF QUOTATIONS; THE WAY OF ALL FLESH, BY SAMUEL BUTLER; DON QUIXOTE, BY MIGUEL DE
CERVANTES; THE PLEASURES AND SORROWS OF WORK, BY ALAIN DE BOTTON; ESSAYS, BY FRANK MOORE COLBY;
THE AUTOBIOGRAPHY OF MARTIN LUTHER KING JR.

110 | FORBES OCTOBER 24, 2017


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