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Contents // AUGUST 23, 2016 VOLUME 198 NUMBER 2 ON THE COVER COVER PHOTOGRAPH BY ETHAN PINES FOR FORBES. 62 | INSTAGRAM’S BIG PICTURE Instagram is emerging as Facebook’s KEVIN SYSTROM WEARS A growth engine, making Mark Zucker- WOOL SPORT JACKET BY BOGLIOLI, SILK POCKET berg’s purchase one of the greatest tech SQUARE BY BRUNELLO deals of all time. But no tears for the CUCINELLI AND COTTON photo-sharing app’s cofounder, Kevin SHIRT BY CANALI. Systrom. He’s building an empire—and just made himself a billionaire. STYLE DIRECTOR: JOSEPH DEACETIS; STYLE BY KATHLEEN CHAYKOWSKI ASSOCIATE: JUAN BENSON. 72 | LIQUIDITY AS A SERVICE Wall Street’s newest profit center? Turn- ing America’s top wealth advisors into the lender of choice for the ultrarich. BY ANTOINE GARA PLUS: AMERICA’S TOP 100 WEALTH ADVISORS4 | FORBES AUGUST 23, 2016
AUGUST 23, 2016 13 | FACT & COMMENT // STEVE FORBES 40 The sources of our discontent. 44 LEADERBOARD 48 18 | MEET THE NEIGHBORS: 834 FIFTH AVENUE 6 | FORBES AUGUST 23, 2016 Across from the Central Park Zoo sits a limestone edifice that’s one of Manhattan’s toniest addresses. For just $120 million you can move in. 20 | NEW BILLIONAIRE: RIGHT PLACE, RIGHT TIME How exactly has Parsley Energy’s Bryan Sheield managed to prosper so thoroughly amid the oil slump? Location, location, location. 22 | HIGHER-ED BILLIONAIRE FACTORIES Which colleges minted the most members of the 2015 Forbes 400? Plus: Getting pedagogical with the top 30-under-30 education reformers. 24 | BUSINESS LIBRARY: THE HIGHEST-PAID AUTHORS Well-heeled wordsmiths who spin a good yarn—and earn a few bucks. Plus: How badly does literary scandal sink sales? 26 | COUNTRY CASH KINGS As C&W edges closer to the mainstream, top country artists now fill large venues they’d never previously played. And in comes the income. 27 | RICHEST BY STATE: TRUMP’S ENERGY SVENGALI Harold Hamm, Oklahoma’s wealthiest man, is also an unoicial advisor to a certain presidential aspirant. Plus: The U.S.’ most grateful grads. 28 | SPORTSMONEY: THE MOST VALUABLE TEAMS Bofo TV deals mean there’s never been a better time to own a major sports franchise, as valuations surge. And just look who’s the new No. 1. 30 | LUXURY LINEAGE: CAESARS PALACE As the venerable Las Vegas institution turns 50, a brief chronicle of its wacky, opulent and spectacular five-decade history. 32 | FORBES @ 100: WALL STREET’S WILD RIDE The junk-bond reckoning would come later. In late 1984 the party was only getting started. Its garrulous host: one Michael Milken. 33 | CONVERSATION Kim Kardashian on the cover of FORBES? Readers take their swipes— and credit Ms. K.’s business acumen. Plus: Ogling The Celebrity 100. THOUGHT LEADERS 34 | CURRENT EVENTS // AMITY SHLAES Brexit Abbey. 36 | INNOVATION RULES // RICH KARLGAARD Three vacation books. STRATEGIES 40 | MONSTER GAME The inside story of how Pokémon Go was created by a Google exec who got lost within the giant search company and how he persuaded his bosses to let him—and all those creatures—go free. BY RYAN MAC TECHNOLOGY 44 | FIND.ME.HERE. National postal services and e-commerce firms could soon be delivering to billions more people thanks to What3Words’ clever address system. BY PARMY OLSON
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AUGUST 23, 2016 ENTREPRENEURS 72 46 | THE FRAUD DETECTIVE 86 Alex Algard risked everything he owned to turn his struggling business, 108 Whitepages, into a fast-growing tech company he expects to generate8 | FORBES AUGUST 23, 2016 $150 million in revenue next year. BY AMY FELDMAN 48 | THE CANADIAN DREAM With Victory Square, Shafin Tejani is weaving together a startup ecosystem in Vancouver that has real advantages over its neighbors to the south. BY ROBB MANDELBAUM INVESTING 50 | JUICE YOUR 529 Our state ratings, plus seven strategies to help you get the most from your college savings. BY WILLIAM BALDWIN 54 | THE LITTLE PEOPLE GET HEDGE FUNDS What happens when small investors get cut in on exotic short-selling strategies? BY WILLIAM BALDWIN 56 | PORTFOLIO STRATEGY // KEN FISHER Earnings growth you can depend on. 57 | FINANCIAL STRATEGY // A. GARY SHILLING The Brexit efect is just beginning. 58 | SCREEN TEST // MARC GERSTEIN Finding high income in value stocks. FEATURES WITH KPMG THE GREAT REWRITE: REVERSING CLIMATE CHANGE 70 80 | FROM RARE TO GREAT BioMarin became one of the world’s most valuable biotechs by jettisoning costly distractions and focusing on one thing: treating some of the rarest diseases on the planet. BY MATTHEW HERPER AND SARAH HEDGECOCK 86 | TURNAROUND U. As hundreds of venerable institutions of higher education limp along, struggling to pay their bills, a new breed of innovative, activist college presidents are rethinking the business of education. BY MATT SCHIFRIN 100 | THE FINANCIAL INDUSTRY’S THERANOS? A charismatic founder, a star-studded board and investor list, a $5.6 billion valuation—Mozido has everything a unicorn could want except a cohesive product. Now with a cash flow crisis, federal subpoenas and employee layofs, it’s hard to see how this ends well. BY NATHAN VARDI LIFE 108 | BIG HOUSE ON THE PRAIRIE After a multimillion-dollar renovation, Ted Turner’s New Mexico estate, Casa Grande, is now a luxury vacation rental—bison included. BY ANN ABEL 112 | THOUGHTS On education.
INSIDE SCOOP EDITOR-IN-CHIEF The Perception And Our Reality Steve Forbes BY LEWIS D’VORKIN CHIEF PRODUCT OFFICER Lewis D’Vorkin SOME NEWLY RELEASED FORBES magazine sta- tistics landed in my e-mail box last week. The numbers FORBES MAGAZINE transported me to a media galaxy far, far away—one that EDITOR many in our business today never knew or would recog- nize. The year was 1985, when Rolling Stone launched its Randall Lane highly acclaimed perception/reality advertising cam- paign. A print ad featured a Volkswagen van with flower- EXECUTIVE EDITOR power decals and the headline “Perception.” Next to it Michael Noer was a sports car and the headline “Reality.” More than 60 ad executions like it were to come over the next five ART & DESIGN DIRECTOR years. The goal: to show that the music magazine was as Robert Mansield influential with yuppies as it was with hippies. The re- sult: Rolling Stone flourished, with ad pages rising 58%. FORBES DIGITAL VP, INVESTING EDITOR Well, today is not then. Digital media have made sure the magazine business will never be what it was. Still, the Matt Schifrin numbers I saw tell a powerful story about how FORBES is perceived by today’s new readers. In a world of social SENIOR VP, STRATEGIC PARTNERSHIPS media, websites and apps, our 98-year-old belief in entre- Andrea Spiegel preneurial capitalism is very much alive and well in print with a new generation of doers. VP, DIGITAL CONTENT STRATEGY Coates Bateman Last issue, I published a chart we’re quite proud of. According to MRI, an industry research firm, our maga- VP, PRODUCT DEVELOPMENT zine readership has been on the rise while all our com- Salah Zalatimo petitors have seen declines. In fact, six of our ten most- read issues—topped by the issue with Ashton Kutcher on VP, WOMEN’S DIGITAL NETWORK the cover, which garnered 8.8 million readers—came in Christina Vuleta the most recent calendar year. ASSISTANT MANAGING EDITORS MRI’s new stats help explain why. From spring 2009 Kerry A. Dolan, Luisa Kroll WEALTH to spring 2016, the magazine’s Millennial readers (18–34) rose 50%, the largest gain for any of the 144 MRI-mea- Frederick E. Allen LEADERSHIP sured magazines, which as a group fell 13%. All competi- Loren Feldman ENTREPRENEURS tors in our category were down double digits as well. Tim W. Ferguson FORBES ASIA Bentley or Tesla readers—we’re thrilled to have both. F Janet Novack WASHINGTON Michael K. Ozanian SPORTSMONEY Mark Decker, John Dobosz, Clay Thurmond DEPARTMENT HEADS Avik Roy OPINIONS Jessica Bohrer VP, EDITORIAL COUNSEL BUSINESS Mark Howard CHIEF REVENUE OFFICER Tom Davis CHIEF MARKETING OFFICER Jessica Sibley VP, SALES EAST & EUROPE Janett Haas VP, SALES, WESTERN & CENTRAL Ann Marinovich VP, ADVERTISING PRODUCTS & STRATEGY Achir Kalra SENIOR VP, REVENUE OPERATIONS & STRATEGIC PARTNERSHIPS Alyson Papalia VP, DIGITAL ADVERTISING OPERATIONS & STRATEGY Penina Littman, DIRECTOR OF SALES PLANNING & ANALYTICS Nina La France SENIOR VP, CONSUMER MARKETING & BUSINESS DEVELOPMENT Michael Dugan CHIEF TECHNOLOGY OFFICER FORBES MEDIA Michael S. Perlis PRESIDENT & CEO Michael Federle CHIEF OPERATING OFFICER Terrence O’Connor CHIEF ADMINISTRATIVE OFFICER Michael York CHIEF FINANCIAL OFFICER Will Adamopoulos CEO/ASIA FORBES MEDIA PRESIDENT & PUBLISHER, FORBES ASIA Rich Karlgaard PUBLISHER Moira Forbes PRESIDENT, FORBESWOMAN MariaRosa Cartolano GENERAL COUNSEL Margy Loftus SENIOR VP, HUMAN RESOURCES Mia Carbonell SENIOR VP, GLOBAL CORPORATE COMMUNICATIONS FOUNDED IN 1917 B.C. Forbes, Editor-in-Chief (1917-54) Malcolm S. Forbes, Editor-in-Chief (1954-90) James W. Michaels, Editor (1961-99) William Baldwin, Editor (1999-2010) AUGUST 23, 2016 — VOLUME 198 NUMBER 2FORBES (ISSN 0015 6914) is published semi-monthly, except monthly in January, March, April, July, Augustand September, by Forbes Media LLC 499 Washington Blvd., Jersey City, NJ 07310. Periodicals postagepaid at Newark, NJ 07102 and at additional mailing oices. Canadian Agreement No. 40036469. Returnundeliverable Canadian addresses to APC Postal Logistics, LLC, 140 E. Union Ave., East Rutherford, NJ 07073.Canada GST# 12576 9513 RT. POSTMASTER: Send address changes to Forbes Subscriber Service, P.O. Box5471, Harlan, IA 51593-0971.CONTACT INFORMATIONFor Subscriptions: visit www.forbesmagazine.com; write Forbes Subscriber Service, P.O. Box 5471, Harlan, IA51593-0971; or call 1-515-284-0693. Prices: U.S.A., one year $59.95. Canada, one year C$89.95 (includes GST).We may make a portion of our mailing list available to reputable firms. If you prefer that we not include yourname, please write Forbes Subscriber Service.For Back Issues: visit www.forbesmagazine.com; e-mail [email protected]; or call 1-212-367-4141.For Article Reprints or Permission to use Forbes content including text, photos, illustrations, logos, and video:visit www.forbesreprints.com; call PARS International at 1-212-221-9595; e-mail http://www.forbes.com/reprints;or e-mail [email protected]. 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FACT & COMMENT“With all thy getting, get understanding” THE SOURCESOF OUR DISCONTENT BY STEVE FORBES, EDITOR-IN-CHIEFTHE WORLD is unraveling, and only ƀLJIsolationism. Barack Obama deeplythe U.S. has the power and moral believes the leftist canard that thestature to stop a slide that could have U.S.—and before us, the Europeancatastrophic consequences. Hardly a imperialist states—is the source of allday goes by without a hideous, unnerv- the world’s woes. Pull back from theing event—another barbarous Islamic world and the rest of the planet willterrorist attack, an aborted coup in sort itself out. It might be a messyTurkey that has become a pretext for its process, but someday it will end wellIslamist leader to make himself a dicta- and people will be happier.tor in all but name, China’s increasedaggression to illegitimately seize But the 1930s showed us what hap-control of the South China Sea, Putin pens when aggression is not forcefullyputting the squeeze on former pieces of the old Soviet countered. That’s why the U.S. hasempire. The global economy continues to sputter; the been the free world’s leader since WWII. No otherIMF has once again lowered projected growth rates for democracy has the strength and global reach to dothe remainder of this year and for 2017. The long eco- this job. Expensive? What we spend on defense todaynomic stagnation is fueling fiercer political resentments is a fraction of what fighting a major war would cost,as radical, authoritarian parties gain strength in Europe. not to mention the horrific loss in lives. Not letting a hostile or potentially hostile power dominate a region There are two principal sources of this global malaise. or the world has been the foundation of the extraor-ƀLJThe economy. Forget the nonsense chatter about “sec- dinary expansion in global prosperity since 1945,ular stagnation” and other seemingly portentous forces fueled by international trade. If we continue Obama’sthat supposedly doom us to sluggish or nonexistent isolationist policies, the world will turn into a moregrowth. We aren’t doing well because of government pol- dangerous and less prosperous place.icy errors—excessive taxation, regulation and spending. Which brings us to Donald Trump’s musings onIn political and economic circles the biggest cause, mon- NATO, one of history’s and freedom’s most amazingetary policy, gets no mention at all because policymakers success stories. It is the essence of simplicity: An attackand observers think it’s a tool for growth. The central on one member is an attack on all. NATO stayed thebank policies of quantitative easing and zero interest hand of the Soviet Union, and it is the reason that Putinrates have perversely skewed credit markets in a way hasn’t been even more aggressive against the formerthat is deflating economies, not stimulating them. Gov- Soviet states of Lithuania, Latvia and Estonia, not toernments and corporations have access to cheap money, mention such onetime Soviet satellites and now NATOwhile the most dynamic, creative parts of the economy— members as Poland. Under NATO’s security umbrellasmall and new enterprises—sufer short rations. Europe became a prosperous, inward-looking conti- nent instead of a cockpit of big-power politics. War Pro-growth structural changes in fiscal and mone- between Germany and France today is inconceivable.tary policy would lead to rapid revivals of dead-in-the- Yes, our allies should spend more on defense. Butwater economies. the profound, fundamental point is this: Their safety is our safety. The U.S. is not some for-hire global pro- Such reforms do not include blowing up the global tection agency.trading system with new tarifs and other barriers to As the U.S. under Ronald Reagan did in the 1980s,commerce. There are plenty of remedies on hand todayto deal with actual trade abuses. AUGUST 23, 2016 FORBES | 13
FORBES STEVE FORBESFACT & COMMENTwe must take the lead on pro-growth tion of interest rates, combined with essential to guiding the economy.reforms, such as a massive tax cut the excessive regulation of banks, has Nonsense. Since when has suchand stopping the central bank’s per- caused bank lending to small and new central planning ever worked?versions of our credit markets. Other businesses to wither. Startups, es- Economies aren’t like an automo-nations will follow suit, just as they sential to job creation and innovation, bile whose speed can be regulateddid more than three decades ago. are a fraction of what they should be. by an accelerator. By such logic the Working capital to finance invento- Fed should have the power to decree And we must also actively engage ries has become less available and, price reductions for everything: Cutwith the world—not trying to remake contrary to the Fed’s motives, more all prices by 50%, and watch theit in our image but ensuring that the expensive. Ditto the money for expan- economy boom as people are therebybad actors are kept at bay. sions. Remember, bonds are instru- stimulated to buy more stuf! ments for large, established businesses,Price-Fixing not for the everyday enterprises and But isn’t cutting the cost of money startups that are crucial to a well- a crucial tool for fighting reces-by the Fed functioning and expanding economy. sions? No. Economies, if not hobbled by structural barriers, will recoverThe focus on whether the Federal Whether it fully appreciates it or quickly enough on their own.Reserve will raise interest rates raises not, the Federal Reserve has gonea question no one thinks to ask: into the business of credit allocation. But what about the Great Depres-Should the Fed—or any other central Uncle Sam and large corporations sion? That catastrophe wasn’t causedbank, for that matter—be in the busi- find credit all too easy and cheap to by some inexplicable failure of freeness of manipulating interest rates in obtain, while the rest of the economy markets but by disastrous govern-the first place? sufers. Apple has cash and financial ment policies, namely the collapse instruments totaling more than of global trade, which was triggered The answer is no. $230 billion, yet it has been issuing by the U.S.’ enactment of the sweep- History shows that since Roman tens of billions of dollars in bonds ing Smoot-Hawley Tarif Act and thetimes—and even before—price con- to engage in financial engineer- retaliatory trade restrictions of othertrols don’t work. They deform mar- ing, namely buying its own stock nations that followed. The debaclekets, doing far more harm than good. and raising its dividend. Earlier this was worsened by countries respond-President Richard Nixon imposed year Exxon Mobil sold $12 billion ing to the downturn with massivethem in the early 1970s, and the result in bonds for buybacks, and other tax increases (the U.S. hiked its topwas disastrous, especially in the en- companies have done the same for income tax levy from 25% to 63% andergy field. When Ronald Reagan, soon the purpose of purchasing their own boosted excise taxes on an array ofafter taking oice, removed oil-and- equity. And why not, when money is items such as movie tickets).gas caps, the price of oil plummeted at virtually giveaway prices?and the gas lines disappeared. Time Before the Depression central banksand time again we’ve seen the baleful Noted economist David Malpass, raised or lowered the rates charged toimpact that rent controls have on the a fierce and longtime critic of what banks that borrowed from them onlycreation of new, afordable housing. the Fed and other central banks have to keep their currencies fixed to gold. Setting interest rates is no di erent. been doing, has pointed out thatThey are the price that lenders pay the proportion of bonds to the U.S. The most constructive act the Fedborrowers for money. The question economy’s total credit has surged could put in place would be to declareis, how much damage will the central from 39% a decade ago to 53% today. that at a date certain—say, a few weeksbank’s machinations wreak on the Manifestly, this isn’t healthy, as the from now—it would cease interest rateeconomy? global economic situation testifies. manipulation. Borrowers and lenders That question has become espe- The reliance on central banks to gin alone would determine the price ofcially acute since the economic crisis up growth has allowed governments money. The only rate the Fed wouldof 2008–09, when the Fed went from to avoid making badly needed struc- set would be its discount rate—that is,suppressing short-term rates to sup- tural changes, such as cutting tax the price it charges financial institu-pressing long-term rates as well. The rates, reducing bloated public sectors, tions that wish to borrow from it.Bank of Japan (BOJ) has been playing liberalizing antigrowth labor lawsthis game since the 1990s. Today the and easing sufocating regulations. None of this, of course, would takeBOJ and the European Central Bank away from the Federal Reserve’s role(ECB) have gone to negative inter- Economists will cry that interest as lender of last resort.est rates on bonds. The impact of all rates are diferent, that manipulat-this has been horrible. The manipula- ing the price of lending money is Freeing interest rates from these current shackles would beneficially impact today’s warped, ill-function- ing credit markets. F14 | FORBES AUGUST 23, 2016
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LeaderBoard This is pay dirt—a chunk of West Texas oilfieldAUGUST 23, 2016 bored out of the earth two miles down. At834 FIFTH AVENUE: PARKSIDE PARADISE 18 Parsley Energy, BryanWHICH COLLEGES CREATE THEMOST BILLIONAIRES? 22 Sheield’s geoscientistsHIGHEST-PAID AUTHORS 24 test these core samples toSAD SONGS, BIG BUCKS 26TRUMP’S ENERGY SVENGALI 27 help figure out where toTHE WORLD’S MOST VALUABLE SPORTS TEAMS 28 drill next in the PermianHAPPY 50TH, CAESARS PALACE 30 Basin—America’s mostFORBES @ 100: JUNK BOND HEYDAY 32 profitable oilfield, which has made the 38-year-old Sheield into a billionaire. PAGE 20PHOTOGRAPH BY DARREN CARROLL FOR FORBES AUGUST 23, 2016 FORBES | 17
LeaderBoard Charles SchwabMEET THE NEIGHBORS PURCHASE PRICE: $27.7 MILLION (2007)ParksideParadise Miriam Haas PURCHASE PRICE: $12.5 MILLION (2010) The billionaire investing guru scooped up the ninth-floor pad even though he already owned a smaller penthouse six floors above. Three years later he sold the place to Miriam Haas, matriarch of the Haas family and a board member at Levi-Strauss, the jeansmaker founded by her late husband’s great-grand-uncle.ACROSS THE STREET from Philippe Lafontthe Central Park Zoo sits834 Fifth Avenue, a limestone PURCHASE PRICE:sanctuary of Manhattan’s elite $27 MILLION (2012)for nearly a century. Almost He’s one of billionaire Julianfrom the moment its doors Robertson’s tiger cubs,opened in 1931, the Art Deco- and when the closing bellstyle masterpiece has been one sounds, Lafont, who nowof the city’s most prestigious runs Coatue Management,addresses. Gaining access to can return to either his834 Fifth—home today to bil- two-story duplex or hislionaires and Wall Street exec- apartments on the fifth andutives—is tough; the moneyed tenth floors—all three ofbastion has just 24 units. One which he bought in 2012.is newly available followingthe death of Salomon Brotherslegend John Gutfreund thispast March. Even by New Yorkstandards, the property hasan eye-watering asking price:$120 million.18 | FORBES AUGUST 23, 2016 John Gutfreund LISTED PRICE: $120 MILLION (2016) As a bond trader, Gutfreund knew no limits, and he lived that way, too—a marble- ensconced existence within a two-story, 12,000-square-foot apartment. Among its extravagances: 12.5-foot-high ceilings, a walk-in steel safe, a butler’s pantry and walls adorned by meticulously preserved 17th-century leather. Beyond the 7 bedrooms and 10 bathrooms lies a 50-foot-long living room made homey (a little) by two fireplaces. “I’ve been doing this for 30 years, and it’s the most special Fifth Avenue ofering I’ve ever encountered,” gushes John Burger, the apartment’s listing agent. It’s currently the most expensive residential property on the market in New York City.
Mark Rachesky BY CHLOE SORVINO BRYAN CHRISTIE DESIGN; PORTRAITS BY BRIAN TAYLORPURCHASE PRICE: $33.5 MILLION (2007)The former Carl Icahn lieutenant and current Lionsgatechairman picked up his duplex near the height of the market. Len Blavatnik PURCHASE PRICE: $77.5 MILLION (2015) Billionaire Blavatnik’s purchase of his 14-room duplex (from New York Jets owner Robert Wood Johnson IV) set a Manhattan co-op record. What the Ukrainian-born billionaire got was 6,700 square feet, 5 bedrooms, 5.5 bathrooms and 3 maid’s rooms. Hamilton “Tony” James PURCHASE PRICE: $24.9 MILLION (2011) The billionaire chief operating oicer of the Blackstone Group owns a two-story duplex near the apex of 834 Fifth. J. Tomilson Hill PURCHASE PRICE: $30.5 MILLION (2015) A few floors below Tony James lives Hill, Blackstone’s billionaire vice chairman. His 2-bedroom apartment (reportedly with 11.5-foot-high ceilings) boasts a terrace, wood-burning fireplaces and a wine vault. Anne and Robert Bass PURCHASE PRICE: $42 MILLION (2012) The billionaire couple (his Oak Hill Capital Partners manages more than $40 billion) snagged the 12th-floor unit in 2012. Laurie Tisch PURCHASE PRICE: $29 MILLION (2009) Tisch, whose father, Preston Robert Tisch, helped build Loews hotels, occupies a 13th-floor co-op that has featured an Alexander Calder mobile in the living room. Wendi Murdoch PURCHASE PRICE: $44 MILLION (2005) After splitting with her media-mogul husband, Rupert, in 2014, Wendi retreated to the 20-room, 8,000-square-foot penthouse he lost in the divorce. The place once belonged to Laurance Rockefeller, grandson of Standard Oil’s founder. AUGUST 23, 2016 FORBES | 19
LeaderBoardNEW BILLIONAIRERight Place, Right TimeOil has tanked. Lucky for Bryan Sheield that hiswells are in one of the best places left to drill.BEFORE THE BIG PLUNGE in oil prices, Bryan Sheield had few months, pushing Sheield’s 20% stake north of $1 billion. BY CHRISTOPHER HELMANalready decided to move the headquarters of his Parsley Energy Sheield, 38, founded Parsley during oil’s record run in 2008 DARREN CARROLL FOR FORBESfrom dusty Midland, Tex. to a brand-new oice tower in hipperAustin. Now he’s a little sheepish about his bird’s-eye view of after taking over 109 old Texas oil wells that his grandfather hadkayakers on the Colorado River. “This is a $100-a-barrel-of-oil drilled around Midland back in the 1960s and ’70s. There was stilloice,” he says. Oil sells at half that today, so how exactly has he plenty of oil underneath those wells, and Parsley picked up moregotten so comfortable in his new seat of power? leases for a song during the brief price crash in 2009. Five years later, Sheield took the company public. Parsley controls 120,000 acres in the Permian Basin, whichstretches from West Texas into New Mexico. You can still turn With Grandpa Joe’s wells smack-dab in the middle of one ofa profit there with $50-a-barrel oil thanks to existing pipeline- America’s last prosperous oil patches, Parsley has sold more thanand-drilling infrastructure. Plus, much of the basin’s reserves had $1 billion of new stock in the past year to finance its ambitiousremained out of reach until recent technological advances made it production goal: a 50% increase from a year prior, to 34,000possible for Parsley and others to drill horizontally. That lucrative barrels per day. “We are fortunate—lucky,” Sheield says. “Itcombo has enabled shares in the company to double over the past comes down to having the best rock inside the best play in the United States.”20 | FORBES AUGUST 23, 2016
LeaderBoardSCORECARD 30 UNDER 30 LIBBY FISCHER $809 BILLION Quick Studies WHETSTONE EDUCATION | 28 Teacher-performance data are Aggregate net worth of the A-plus innovations from members of the often measured nonuniformly, then 134 billionaires who attended the FORBES 30 Under 30, in 30 words or less. stored haphazardly, rendering the schools that produced the most info useless to school administra- members of the 2015 Forbes 400. CONNOR tors. Whetstone’s platform, now in use at 300 schools, organizes it and 1. UNIVERSITY OF PENNSYLVANIA DIEMAND provides analysis. 21 YAUMAN alumni among The Forbes 400 PHILANTHROPY UNIVERSITY | 28 2. HARVARD After a stint at online- education pioneer 14 Coursera, Diemand- Yauman struck out on 2. YALE his own to cofound Philanthropy U., which 14 ofers virtual training for NGO leaders in 4. STANFORD developing economies. 13 ZACH LATTA 5. UNIVERSITY OF HACK CLUB | 18 SOUTHERN CALIFORNIA Nerds, unite! Hack Club helps high schools form 11 coding clubs, providing software and guidance to 6. CORNELL budding hackers (about 1,500 so far) who don’t want 9 to join the lacrosse team. 7. PRINCETON HEEJAE LIM 7 TALKINGPOINTS | 29 Lim’s tech helps teachers commu- 8. COLUMBIA nicate via translated text messages with parents who don’t speak 6 English. To date, TalkingPoints has enabled more than 100,000 8. DARTMOUTH conversations. 6 ESTHER 8. UNIVERSITY OF MICHIGAN TRICOCHE 6 NEWSCHOOLS VENTURE FUND | 29 11. DUKE At NewSchools Venture Fund, 5 Tricoche invests in entrepreneurs who 11. MASSACHUSETTS INSTITUTE make better tech OF TECHNOLOGY tools for public schools, includ- 5 ing for teaching English as a second 11. UNIVERSITY OF CALIFORNIA, language. LOS ANGELES 5 14. MICHIGAN STATE 4 14. NEW YORK UNIVERSITY 4 14. UNIVERSITY OF CALIFORNIA, BERKELEY 4 JERELYN RODRIGUEZ 30 UNDER 30 BY KATHRYN DILL ILLUSTRATIONS BY PATRICK WELSH THE KNOWLEDGE HOUSE | 27 Rodriguez’s South Bronx organiza- tion preps teens for STEM jobs, pro- viding classes in Web development and the basics of entrepreneurship to New York’s young adults. It hopes to expand nationwide.22 | FORBES AUGUST 23, 2016
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LeaderBoard 1. JAMES PATTERSON Publishing’s richest penmanBUSINESS LIBRARY (and his co-writers) cranked out more than a dozen books in our scoring periodThe Highest-Paid Authors (June 2015 to June 2016). His latest endeavor: BookShots, bite-size bargain novellas aimed at boosting readership among the screen-obsessed masses.1. JAMES PATTERSON $95 MIL2. JEFF KINNEY $19.5 MIL 4. JOHN GRISHAM3. J.K. ROWLING $19 MIL The king of the airport4. JOHN GRISHAM $18 MIL bookstore is one of the few5. STEPHEN KING $15 MIL seasoned scribes who can still5. DANIELLE STEEL $15 MIL sell more than a million copies of a doorstop hardback like his recent Rogue Lawyer.5. NORA ROBERTS $15 MIL8. E.L. JAMES $14 MIL 8. E.L. JAMES9. VERONICA ROTH $10 MIL Reportedly tied up a tidy share of the profits from9. JOHN GREEN $10 MIL9. PAULA HAWKINS $10 MIL 2015’s Fifty Shades of Grey movie. She also sold 168% more units than a year ago, thanks to the release last year of Grey, a retelling of the erotic novel from the male protagonist’s perspective.12. GEORGE R.R. MARTIN $9.5 MIL 9. PAULA HAWKINS12. DAN BROWN $9.5 MIL Her novel The Girl on the Train is the latest literary phenomenon12. RICK RIORDAN $9.5 MIL with a calculating female character to hit the bestseller list. It sold 11 million copies worldwide; a movie version hits theaters in October.THESE WELL-HEELED wordsmiths Patterson topped our list for the third straight year, earn-earned a combined $269 million over the last 12 months, ing $95 million, while children’s author Jef Kinney (Diary ofproving that the written word isn’t dead—although television a Wimpy Kid) placed a distant second, earning $19.5 million.and movie adaptations often help drive sales. To wit: Game ofThrones creator George R.R. Martin benefited from clamor- Near-misses include kids’ favorite Rachel Renée Russellous interest in the hit HBO series based on his fantasy novels, (Dork Diaries) and The Martian scribe Andy Weir; newly ofwhile Zoo, a thriller from the inescapable James Patterson, the list are Gone Girl’s Gillian Flynn, The Hunger Games’ Su-scored a second season on CBS. zanne Collins and mystery novelist Janet Evanovich, who all saw sales of their catalogs take a dive.FALSENARRATIVESWhen a book’s ostensiblefacts are shown to be false, BY NATALIE ROBEHMED THEO WARGO/GETTY IMAGES; OLIVER BERG/DPA/NEWSCOM; MARTINA SALVI/REX/NEWSCOM;the revelation can damage an GREG MORTENSON GENE LESTER/GETTY IMAGES; SCHICCHI/ROPI VIA ZUMA PRESS/NEWSCOM Three Cups of Tea: Oneauthor’s reputation—and his Man’s Mission to Promote SOMALY MAM JONAH LEHRER Peace … One School at The Road of Lost Innocence: Proust Was asales. Gay Talese has surely The Story of a Cambodian a Time (2006) Neuroscientist (2007),hoped he’ll slip the noose Heroine (2008) Imagine: How Creativity Reports in 2011 allegedever since reports surfaced in philanthropy tale Human-traicking Works (2012), How We victim’s memoir notlate June that his new work, JAMES FREY contained inaccuracies quite from memory, Decide (2009), TheThe Voyeur’s Motel (which A Million Little Pieces and Mortenson’s charity per 2014 accusationswas published just two weeks Decisive Moment (2009) (2003) misused funds. that she denied. “Self-plagiarism”later), is marred by substan- Drug “memoir” exposed 15,600 discovered in 2012.tial inconsistencies. Bad news as largely fiction in 2006. SALES, MONTH BEFORE SCANDALfor publisher Grove Atlantic 710,000 100 25,000and for DreamWorks, which 5,100 SALES, MONTH BEFORE SCANDAL SALES, MONTH BEFORE SCANDAL TOTAL SALES, MONTH BEFORE SCANDAL SALES, MONTH AFTER SCANDALreportedly spent $1 million 310,000 100 15,000on film rights. This isn’t the 3.05 MILTalese family’s first brush with SALES, MONTH AFTER SCANDAL SALES, MONTH AFTER SCANDAL TOTAL SALES, MONTH AFTER SCANDALscandal: Gay’s wife, Nan, was TOTAL SALES BEFORE SCANDALthe publisher of A Million Lit- 2.04 MIL 40,000 314,000tle Pieces, James Frey’s 2003 74,000“memoir” of drug abuse. TOTAL SALES BEFORE SCANDAL TOTAL SALES BEFORE SCANDAL TOTAL SALES BEFORE SCANDAL TOTAL SALES AFTER SCANDAL 863,000 400 37,000 –98% TOTAL SALES AFTER SCANDAL TOTAL SALES AFTER SCANDAL TOTAL SALES AFTER SCANDAL TOTAL SALES CHANGE –58% –99% –88% TOTAL SALES CHANGE TOTAL SALES CHANGE TOTAL SALES CHANGE24 | FORBES AUGUST 23, 2016 All earnings are for fiscal year June 1, 2015 through May 31, 2016, before taxes and other fees. All book-sales data are sourced from Nielsen BookScan, which tracks 85% of the domestic print market.
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LeaderBoardUNICORN METER ENTERTAINMENTStale Start Titans of TwangGROCERIES-IN-A-BOX startups AS NASHVILLE’S sound becomesare food-fighting—and Instacart ever more mainstream, our annualalready looks like a combatant past Cash Kings ranking finds countryits sell-by date. So says a FORBES music’s top earners filling arenaspoll of our Midas List, a group of the once reserved for more traditionalworld’s greatest venture capitalists. acts, collectively earning a half-billion dollars over the past year. 4 FUTURE BLUE CHIP 1. GARTH BROOKS $70 MIL 8. CARRIE UNDERWOOD $26 MIL COUNTRY CASH KINGS REPORTED BY ZACK O’MALLEY GREENBURG WITH CHERIE HU 3 TEN-BAGGER ETHAN MILLER/GETTY IMAGES; KEVIN MAZUR/GETTY IMAGES; PAUL MORIGI/GETTY IMAGES His comeback tour, now in its second year, might Onetime American Idol champ played 66 shows over 2 SOLID EXIT well extend into 2017. the past year while tending to other interests: Calia clothing line and appearing in Olay skin care ads. INSTACART 2. KENNY CHESNEY $56 MIL 0.8 9. BLAKE SHELTON $24 MIL Next album: Cosmic Hallelujah, an appropriate 1 BUYOUT BAIT reaction to selling out summer stadium shows the Earned millions more from touring and his slot on way Taylor Swift or the Rolling Stones might. The Voice than he did from his music. 0 TOTAL WRITEOFF 3. LUKE BRYAN $53 MIL 10. KEITH URBAN $22 MILSCORECARDWARREN BUFFETT Ball-cap-clad Georgia native regularly grosses seven His latest album, Ripcord, debuted at No. 1 on the–$2.9 BILLION figures per city on tour. country charts in May. Still makes most of his money from touring and American Idol.NET WORTH: $65.7 BILLION 4. TOBY KEITH $47.5 MILThe Oracle doles out billions to 11. FLORIDA GEORGIA LINE $20 MILcharity in Berkshire Hathaway shares, His red Solo cup runneth over: Keith has earnedboosting his lifetime giving to an more than $450 million pretax since 2007. Duo’s 69 shows as part of their Anything Goes tourestimated $28.5 billion. Amazon’s Jef grossed $29.5 million across North America.Bezos briefly overtakes Bufett as world’s 5. JASON ALDEAN $36.5 MILthird-richest, a title they will likely trade 12. RASCAL FLATTS $19.5 MILback and forth in the coming weeks. The only country star who has a stake in Jay Z’s Tidal music-streaming service. Even after decades together, the trio still has what it takes, pulling in upwards of $500,000 a night. 6. ZAC BROWN BAND $30 MIL 13. DOLLY PARTON $19 MIL After completing its fourth major-label studio album last year, the Grammy-winning act hit the road and Timeless star sings, plays guitar and owns a theme played 65 concerts in 12 months. park, Dollywood, in Tennessee’s Smoky Mountains. 7. SHANIA TWAIN $27.5 MIL 14. BRAD PAISLEY $18.5 MIL Las Vegas headliner can fill up the Colosseum at With 71 shows over our scoring period, the guitar- Caesars Palace, a rare feat for a country artist. slinging singer plucked his way onto the list again; his newest single is a collaboration with pop star Demi Lovato. 15. MIRANDA LAMBERT $18 MIL Often opens for Kenny Chesney; tours on her own, too. Her endorsement deals include Red55 Wine, and she also has a clothing line, Pink Pistol. Earnings estimates are from the 12 months ending June 2016, a measure based on touring data from Pollstar, music sales data from Nielsen and interviews with industry insiders. 26 | FORBES AUGUST 23, 2016
COLLEGES RICHEST BY STATE True to Their School Oklahoma DETERMINING WHICH colleges provide the best return on POPULATION: 3.9 MILLION investment shouldn’t be as complicated as theoretical physics. It requires just two variables: the median amount of a school’s 2015 GROSS STATE PRODUCT: donations per student over a decade and the percentage of graduates who give back to their school every year. $180 BILLION (1.3% GROWTH) GSP PER CAPITA: $46,129 These figures form our annual Grateful Grads Index of private nonprofit colleges: The top ROI schools are those with (RANKS NO. 38 NATIONWIDE) alumni who have both the means and the desire to give back. The first metric uncovers the highest-profile institutions; the RICHEST: HAROLD HAMM, $13 BILLION second sheds light on smaller liberal-arts schools that attract a lot of giving but fewer blockbuster gifts. For the full list of 200 WHEN DONALD TRUMP needs a briefing on the state of Amer- universities, visit forbes.com/gratefulgrads2016. ican oil and gas, he calls Harold Hamm. “He absolutely gets it,” says Hamm, the 70-year-old CEO of Continental Resources. COLLEGE 10-YEAR 3-YEAR AVG. “He believes in American energy for America’s future.” MEDIAN ALUMNI DONATION U.S. frackers and drillers, Hamm contends, could double PER STUDENT PARTICIPATION domestic oil output to 20 million barrels per day within a dec- RATE ade: “Every time we can’t drill a well in America, terrorism is being funded.” Trump liked Hamm’s message enough to give 1 PRINCETON UNIVERSITY $29,330 47% him a prime speaking slot at July’s GOP convention. “It felt 2 DARTMOUTH COLLEGE 28,695 43 like being the ringmaster at a circus,” Hamm says the day after 3 WILLIAMS COLLEGE 22,891 51 his speech. “It’s not the Rotary.” So what about reports that 4 BOWDOIN COLLEGE 22,502 45 Hamm is the leading candidate to become The Donald’s secre- 5 CLAREMONT MCKENNA COLLEGE 23,276 38 tary of energy? “I’ve never talked to Trump about that. I have a 6 AMHERST COLLEGE 21,320 46 full-time job. I haven’t given it a minute’s thought.” 7 DAVIDSON COLLEGE 19,708 45 The 13th child of Oklahoma sharecroppers, Hamm recallsCOLLEGES BY MATT SCHIFRIN; RICHEST BY STATE BY CHRISTOPHER HELMAN AND CHASE PETERSON-WITHORN 8 YALE UNIVERSITY 31,936 32 picking cotton barefoot as a child. He started working at a gas JAMEL TOPPIN FOR FORBES; JASON MERRITT/GETTY IMAGES 9 DUKE UNIVERSITY 30,725 29 station at 16, then cleaned oil refinery tanks and hauled water 10 WELLESLEY COLLEGE 17,451 53 in trucks. Since drilling his first well in 1971, Hamm has built 11 STANFORD UNIVERSITY 30,826 28 Continental into one of the 12 UNIVERSITY OF NOTRE DAME 18,576 35 nation’s biggest independent 13 WASHINGTON AND LEE UNIVERSITY 17,155 38 oil companies. The recent 14 BROWN UNIVERSITY 22,542 26 price drop had personal con- 15 HAVERFORD COLLEGE 15,182 42 sequences for him: With his 16 MIT 45,501 24 fortune falling in tandem, he 17 CARLETON COLLEGE 14,876 44 didn’t stuf as much money 18 SWARTHMORE COLLEGE 14,743 39 into super PACs in this elec- 19 MIDDLEBURY COLLEGE 15,314 35 tion cycle as he usually does. 20 POMONA COLLEGE 14,843 37 As for his business, shares 21 BRYN MAWR COLLEGE 15,789 29 of Continental hit a six-year 22 UNIVERSITY OF CHICAGO 24,511 21 low in January before nearly 23 CALTECH 53,845 20 tripling in the wake of oil’s 24 UNIVERSITY OF PENNSYLVANIA 19,070 22 partial recovery. 25 HARVARD UNIVERSITY 25,122 19 SCORECARD LORENZO AND FRANK FERTITTA III +$820 MILLION EACH NET WORTH: $2.3 BILLION EACH Fifteen years after paying just $2 million for a nearly bankrupt Ultimate Fighting Championship, the brothers announce they are selling the league to a group of investors (billionaire Michael Dell among them) for roughly $4 billion— the largest transaction in sports history. AUGUST 23, 2016 FORBES | 27
LeaderBoard 9. NEW YORK GIANTS Tim Mara paid $500 to found the football team in 1925; his heirs sold a 50% stake to the Tisch clan in 1991 for $75 million. The two families split ownership to this day.SPORTSMONEYThe World’s Most Valuable TeamsTHIS IS A TERRIFIC TIME to own a professional sports team: Blockbuster television deals inked overthe last several years have turbocharged franchise values across the major sports. The 50 most valuableteams are now worth an average of $2.2 billion, up 26% over just a year ago.With 27 teams among the top 50, the NFL reigns supreme. Although they haven’t reached the SuperBowl in two decades, Jerry Jones’ Dallas Cowboys top the list at $4 billion, thanks in part to revenuefrom premium seating ($125 million) and sponsorships ($120 million) that are football’s highest.This is the first time since 2010 that a soccer franchise didn’t come out on top. (Manchester Unitedwore the crown from 2010 through 2012; Real Madrid did so the last three years.) For much more,including the full roster of 50, visit forbes.com/most-valuable-teams. 25. GREEN BAY PACKERS 14. LOS ANGELES DODGERS The Pack are the only publicly owned The 2015 squad was the first in Major franchise in U.S. pro sports, with League history with a $300 million payroll; the team has led baseball in 360,760 shareholders. The franchise’s 13 championships (4 in the Super Bowl attendance three years running. era) are the most in NFL history. 2016 OWNER(S) VALUE 1-YEAR BY KURT BADENHAUSEN, MIKE OZANIAN AND CHRISTINA SETTIMI RANK TEAM ($MIL) VALUE GIANTS: AL BELLO/GETTY IMAGES; MADRID: MATTHIAS HANGST/GETTY IMAGES; ARSENAL: STUART MACFARLANE/ARSENAL FC/GETTY IMAGES; KNICKS: NATHANIEL S. BUTLER/NBAE/GETTY IMAGES; 1 DALLAS COWBOYS CHANGE PACKERS: WESLEY HITT/GETTY IMAGES; DODGERS: JIM MCISAAC/GETTY IMAGES; RED SOX: BILLIE WEISS/BOSTON RED SOX/GETTY IMAGES 2 REAL MADRID Jerry Jones $4,000 25% NFL 7. NEW YORK 3 BARCELONA soccer 4 NEW YORK YANKEES Club members 3,645 12 soccer KNICKS 5 MANCHESTER UNITED 12 Kicked of a 6 NEW ENGLAND PATRIOTS Club members 3,549 6 MLB 20-year local 7 NEW YORK KNICKS 7 soccer TV deal with the18. BOSTON RED SOX 8 WASHINGTON REDSKINS Steinbrenner family 3,400 23 MSG network 9 NEW YORK GIANTS 20 NFL this past season; After last-place finishes in 10 LOS ANGELES LAKERS Glazer family 3,317 19 NBA the first year 2014 and 2015, the Bosox 10 SAN FRANCISCO 49ERS 33 NFL was worth opened their cofers to Robert Kraft 3,200 4 NFL $100 million. 12 BAYERN MUNICH 69 NBA sign ace David Price 13 NEW YORK JETS Madison Square Garden 3,000 NFL 2. REAL MADRID (above) to a seven-year, 14 LOS ANGELES DODGERS$217 million deal, the richest Dan Snyder 2,850 The 11-time Champions contract ever for a pitcher. 14 HOUSTON TEXANS League champs had revenue 16 CHICAGO BEARS Mara family 2,800 23. ARSENAL 17 PHILADELPHIA EAGLES of $694 million in the 18 BOSTON RED SOX Buss family 2,700 2014–15 season, the most of The Gunners were the 18 CHICAGO BULLS biggest movers on the list, 20 SAN FRANCISCO GIANTS Denise DeBartolo York, 2,700 any sports franchise. jumping 13 places from a 21 CHICAGO CUBS John Yorkyear ago. The club received 22 BOSTON CELTICS the biggest cut of Premier Club members 2,678 14 soccerLeague TV money this year: 23 ARSENAL 44 NFL 24 LOS ANGELES CLIPPERS Woody Johnson 2,600 4 MLB $148 million. 25 GREEN BAY PACKERS Guggenheim 2,500 Baseball Management Robert McNair 2,500 35 NFL 44 NFL McCaskey family 2,450 37 NFL 10 MLB Jefrey Lurie 2,400 15 NBA 12 MLB John Henry, Thomas Werner 2,300 22 MLB 24 NBA Jerry Reinsdorf 2,300 Charles Johnson 2,250 Ricketts Family 2,200 Wyc and Irving Grousbeck, 2,100 Robert Epstein, Stephen Pagliuca Stanley Kroenke 2,017 54 soccer 25 NBA Steve Ballmer 2,000 42 NFL Shareholders 1,95028 | FORBES AUGUST 23, 2016
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LeaderBoardLUXURY LINEAGE 2016Caesars Palace Over its five-decade existence Caesars has changed hands several times; owners have included Hilton, ITT and Harrah’s, which paid $9.4 billion inA brief history of the legendary Las Vegas 2005. Today the hotel is owned by Caesars Entertainment Corp., withhotel, which turns 50 this month. minority stakes held by Apollo Global Management and Paulson & Co. Although the casino group filed for Chapter 11 bankruptcy in 2015, Sarno’sJAY SARNO CHANGED LAS VEGAS forever in August grand vision still reigns. Last year the hotel opened a Mr. Chow restaurant,1966 when he opened its first themed resort: Caesars Palace. and the Colosseum theater is now headlined by Celine Dion, Elton John andBorrowing elements from the Roman Empire, Sarno fol- Mariah Carey. Fifty years on, the bacchanal continues.lowed the principle that no amount of excess was enough.In its first 50 years Caesars Palace has expanded from an 2009opulent 14-story hotel with 700 rooms to a small city with sixtowers, 4,000 rooms, a 636,000-square-foot shopping mall, a As part of their bachelor4,300-seat theater and nearly a dozen celebrity-chef restau- weekend in The Hangover,rants. You can also still do a little gambling there. Bradley Cooper and crew checked in to Caesars Palace, 1964 where Zach Galifianakis’ Alan asked the immortal Using a $10.6 million loan from the question: “Did Caesar live Teamsters Central States Pension Fund, here?” He did not. Atlanta hotelier Jay Sarno leased land on the Las Vegas Strip owned by Kirk Kerkorian to build his new hotel, originally called the Desert Cabana. Four years later, with Caesars Palace a success, he purchased the plot from Kerkorian for $5 million.1966Even though rooms were still being built, Caesars Palace openedits doors on Aug. 5 with a lavish $1 million party attended byguests such as Johnny Carson and Jimmy Hofa. The Teamstersboss didn’t stay long. The next day Hofa’s suite, the new resort’sbest, was given to a 24-year-old up-and-comer who would laterbecome an emperor of Las Vegas: Steve Wynn. 1967 1992 On Dec. 31 Caesars Palace hosted the Caesars opened a 280,000- first of many spectacles when Evel square-foot luxury shopping mall Knievel convinced Sarno he could and featured the first celebrity-chef jump his motorcycle over the hotel’s restaurant in Las Vegas, Wolfgang fountains. Knievel, shown above, landed Puck’s Spago. The Forum Shops badly, crushing his pelvis and femur, was later expanded to 636,000 and remained in a coma for a reported square feet and now includes more 29 days. In 1989 his son Robbie Knievel than 150 boutiques, including successfully completed the jump. Cartier, Tifany & Co. and Van Cleef & Arpels. 1970 BY MICHAEL SOLOMON Frank Sinatra moved his act WARNER BROS./EVERETT COLLECTION; from the Sands to Caesars UPI/NEWSROOM; LAS VEGAS NEWS BUREAU (2) Palace in 1968. The next year30 | FORBES AUGUST 23, 2016 Jay Sarno sold Caesars for $60 million to Stuart and Cliford Perlman. On Sept. 6, 1970 Sinatra, who was earning $100,000 a week, got into an argument with casino manager Sanford Waterman, who pulled a gun. Sinatra wouldn’t perform at the venue again until 1974.
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LeaderBoard SIGN OF THE TIMESFORBES @ 100 Mao Who? As FORBES’ September 2017 centennial approaches, China’s initial embrace of we’re unearthing our favorite covers. capitalism centered on four “special economic zones,” andWall Street’s Wild by late 1984 companies such asRide: Nov. 19, 1984 Coca-Cola and Eastman Kodak had signed contracts for projects worthTHE FAST-MONEY ERA of the 1980s quickly $385 million ($893 million today)came to resemble, well, a carousel. Seated on it to enter those areas and gainwere corporate raiders such as Victor Posner, access to an enormous untappedCarl Lindner Jr. and the Belzberg brothers (Sam- market: 1 billion Chinese.uel and William). At its controls: Drexel BurnhamLambert’s 38-year-old superstar, Michael Milken. Milken’s marvelous money machine ran onjunk bonds—a $41.7 billion market ($96.7 billionin 2016 dollars) that had grown 340% in five years.He helped executives put together deals, and oftenthose clients became investors in future Milken-led oferings. “Incestuous? That is one way of put-ting it,” concluded the story’s authors, Allan Sloanand Howard Rudnitsky. “There is nothing illegalabout this. It is simply a case of one hand washingthe other—to [everyone’s] mutual profit.” The government disagreed. When a politicallyambitious prosecutor named Rudy Giuliani neededa poster boy for the decade’s excesses, he set hissights on Milken, who would plead guilty to fraud in1990 and serve 22 months in prison. Since then hehas devoted himself to philanthropy.FAST-FORWARDAll in the Family1984: Saul Steinberg(below) ranks as one ofAmerica’s most fearedtakeover artists. Even afailed Walt Disney Co.assault results in amultimillion-dollar score. 2016: There’s still a FIGURE FROM THE PAST BY ABRAM BROWN Steinberg on Wall RON GALELLA/GETTY IMAGES; DENNIS MICHAELS/NEWSCOM; Street—no, not Videotape Visionary ANTON STARIKOV/ALAMY; PATRIZIA WYSS/ALAMY Saul, who died four years ago. His son A handsome Californian has a big Jonathan (above) runs idea that will change the world: WisdomTree, a low-cost It’s the stuf of Oscar legend … ETF provider with an and is exactly what happened with investment philosophy Mel Harris. The Paramount exec in total opposition to pushed the studio to rethink the wheeler-dealer Saul’s. videocassette market. At the time, movies on tape had prohibitively high prices—starting around $50, some $116 today—as studios focused on the rental market. Harris recognized the potential in retail and traded profit for volume. By reducing the price of, say, Star Trek II: The Wrath of Khan, Paramount made less money per unit, but many fans were willing to watch Spock die (spoiler, sorry!) over and over again.32 | FORBES AUGUST 23, 2016
CONVERSATION FAME AND FORTUNES NATALIE ROBEHMED’S July 26 cover Readers greeted our annual profile of Kim Kardashian—highlighting her ranking of the 100 top-earning $45 million in earnings from her mobile game, celebrities not with envy or scorn a new frontier in monetizing one’s celeb- but mostly with admiration—as rity—ruled some readers’ feathers. “Forbes well as huzzahs for the unheralded covering anything Kardashian may just be handlers who help make such an error in judgment,” said Draggan, one of extravagant incomes possible. many such comments at Forbes.com. But oth- ers were quick to come to Kardashian’s (and HELLO! MAGAZINE: “If there our) defense. “She’s redefining what it means was any doubt that Taylor to be a reality star, as well as what it means to Swift is an unstoppable force be a businesswoman,” wrote Jamie Primeau in entertainment, Forbes’ list at the women’s news-and-culture site Bustle. is proof that the singer is the Kardashian countered the charge that she’s real deal.” unworthy of serious attention. “Such a tremen- dous honor to be on the cover of @forbes,” she JOSEPH MURAWSKI, VIA tweeted. “#NotBadForAGirlWithNoTalent.” LINKEDIN: “Is it weird that I’m in my mid-40s and I like Taylor Swift’s music?”THE INTEREST GRAPH GERARDO “G” ALAMO, VIA LINKEDIN: “Incredible career.Judging by clicks and eyeballs, readers of our July 26 issue were keeping up with the [Dwayne Johnson, a.k.a. theKardashians—and every other famous name in a magazine full of them. Rock,] never stops working and branching out. That isKim Kardashian West, Mobile Mogul something to be inspired by.” 194,837 viewsThe Global Celebrity 100 “Youngest daughter MIKE POMERANZ, FOOD & 137,249 Jane Goldman, WINE’S FWX: “Ryan Seacrest plummeted of the list entirely.America’s Richest Real Estate Family Doesn’t Want You to Know Who They Are who oversees daily Sounds like there’s at least one 70,726 operations, is the person on earth lamenting the only female billionaire end of American Idol.”Bigbang Theory: How K-Pop’s Top Act Earned $44 Million in a Year running a real estate 49,950 HOWARD P. VOGEL, VIA portfolio.” LINKEDIN: “I have loadsCannabis Capitalist: Scotts Miracle-Gro CEO Bets Big on Pot Growers of respect for celebrities 39,405 “ ‘We made more who work hard, are humble, than Maroon 5?’ appreciate their fan base andInside Google’s and Microsoft’s Race to Catch Amazon in the Trillion-Dollar Cloud says the band’s keep their political opinions to front man. ‘Did not themselves.” know that. My mom is in charge of my DAVID LAMB, VIA LINKEDIN: “The Rock is an incredible earnings.’ ” example of pivoting from one career to another and 39,133 “His latest idea: ‘Invest how your second act can be BY ALEXANDRA WILSONThis Utah Company Has Emerged as the Biggest Smart Home Player half a billion in the pot greater than your first.” business,’ he says. ‘It is 29,719 the biggest thing I’ve AUGUST 23, 2016 FORBES | 33New York’s Four Seasons Restaurant to Auction Modernist Furniture Collection ever seen in lawn and garden.’ ” THE BOMB 806 VIEWS
THOUGHT LEADERS AMITY SHLAES // CURRENT EVENTSBREXIT ABBEY AMERICANS DON’T HESITATE to Sybil, expires from complications of eclampsia. THOMAS KUHLENBECK FOR FORBES express strong views when it comes to At Downton Abbey faraway courts rate as guns, wars or taxes. But they turn humble when the matter is international eco- unreliable as faraway doctors. Lord Grantham nomics. If business leaders, Davos geeks, judges his valet Bates to be innocent of a the Treasury secretary and the President charge of murder, but a British court convicts condemn Brexit, U.S. citizens do, too. him. Later, information materializes that ex- After all, Americans aren’t sure why Brit- onerates Bates and vindicates the patriarch. ons voted to leave the EU or what they themselves make of the Brexit drama. Europe, by contrast, favors faraway law over local law, custom and regulation. A pre- There is, however, a British show Brexit-vote EU plan to ban some popular ap- Americans do understand and, indeed, pliances, including a tea drinker’s favorite, thelove. It is Downton Abbey, one of the cheesiest, most anachronistic and high-powered electric kettle, set Britons aboil.most popular historical drama series in television history. You could hear Downton Principle III: Suspect high taxes.the sighs across the Lower 48 last March when the image of the rump of The unexpected death of a Downton heirLord Grantham’s light yellow Labrador rolled for a final time in the final triggers a tax liability so great that it jeop-episode of the final—and sixth—season. This spring was also the time when ardizes the estate anew. Today Britain’s taxthe formal contest between “Leave” and “Remain” opened, but public tele- burden represents 33% of gross domesticvision fans scarcely noticed, so busy were they snatching up Downtoniana. product. Britons don’t love the idea of going Still, Downton Abbey and Brexit do have something in common. to, say, 45%, France’s level.Indeed, to trace the principles that animate Downton is to understand Downton Principle IV: Look West. In thismore of what drives Britons who voted Leave. show Europe is where young men go to dieDownton Principle I: Property comes first. Really first—before free- or vacation; the U.S. is a source of ideas anddom, equality and love. As the show opens, every character, down to those occasional and crucial capital infusions.the last footman, knows that the Downton estate has stayed together Downton Principle V: Britain improvesonly because Lord Grantham in his youth took the drastic step of Britain best. Lord Grantham tempers his ob-marrying a Cincinnati dry-goods heiress. noxious Toryism over the seasons, eventually So precious is the accumulation of capital that the characters all noting, “If we don’t respect the past, we’ll findaccept (not agree with) the rule of “entail,” under which the entire it harder to build our future.” This shift so en-estate must pass, part and parcel, to a male descendant, even if that dears viewers that they forgive even the worstmeans skipping the daughters of Lord Downton and handing over the anachronisms (Edwardians said “pander,”mansion to a third cousin once removed. In the Downton narrative not “suck up”; light yellow Labradors weren’tthe resounding emphasis on property benefits all, leading (eventual- common until much later). Downton evolvesly) to justice, equality and romance: Lord Grantham long ago came to from “Little England” toward meritocracy.love his dry-goods lady, the beautiful Cora. And the next generationof Crawleys get to stay in their house because that third cousin in the To be sure, other impulses, including un-end marries a Crawley daughter. staged, unexpected populist rage and great The EU respects no entail. Indeed, the Charter of Fundamental concern about immigration, motivated Brex-Rights relegates property to a status so low it would make Thomas Jef- it. Yet often pro-Brexit citizens articulate theferson uncomfortable. “Dignity,” “equality,” “solidarity” (“What’s that?” connection. One of these is Downton’s creatorone can hear Lady Violet demanding) and “freedoms” get marquee sta- and screenwriter, Julian Fellowes. “I believetus. Property rights are minor, buried in a mere article—and No. 17 at that. we should be out. It’s about philosophy,” Fel-Downton Principle II: Downton (Britain) takes care of its own. When lowes has said.Lord Grantham ignores his own instincts and calls in a specialist ratherthan the family doctor to attend the birth of a grandchild, he is punished In short, Americans have something to con-with tragedy: The specialist makes the wrong call, and the baby’s mother, fess, if only to their TV sets. If they approve of Downton Abbey, they understand—and perhaps even approve of—Brexit. But no one said the globalists upstairs have to know about that. FAMITY SHLAES, PRESIDENTIAL SCHOLAR AT THE KING’S COLLEGE AND CHAIR OF THE COOLIDGE FOUNDATION BOARD; PAUL JOHNSON, EMINENT BRITISH HISTORIANAND AUTHOR; AND DAVID MALPASS, GLOBAL ECONOMIST, PRESIDENT OF ENCIMA GLOBAL LLC, ROTATE IN WRITING THIS COLUMN. TO SEE PAST CURRENT EVENTS COLUMNS, VISIT OURWEBSITE AT WWW.FORBES.COM/CURRENTEVENTS.34 | FORBES AUGUST 23, 2016
LAUREN CONRAD WANTS TO SAVE THE SEA TURTLESFishing nets used to catch some of our favorite seafood catch, injure and killthousands of sea turtles every year. For species like the Kemp’s Ridley, extinction istoo close for the government to ignore the problem. Stand with Lauren and Oceana.Help save sea turtles at www.oceana.org/saveseaturtles
THOUGHT LEADERS RICH KARLGAARD // INNOVATION RULESTHREE VACATION BOOKS UNDER NEW leadership (as of February agent and, by his early 20s, director of mar- THOMAS KUHLENBECK FOR FORBES 2014) Microsoft is on a roll. Its stock has keting for American Apparel. After burning crushed that of other tech giants and the out—which every executive at American Ap- market. Microsoft’s late-start catch-up to parel seems to do—Holiday became a writer, Amazon in cloud services is remarkable. working at the corner of history, philosophy and human potential. Curious to know how CEO Satya Nadella has steered Microsoft from its Holiday is a fan of Spartan stoicism, which recent near total reliance on Windows is the spirit of Ego Is the Enemy. Like Dweck, and Oice to its new focus on mobility Holiday ofers a clear path to success and and the cloud, I and some FORBES col- performance improvement: Make your life leagues sat down with him for nearly an about your work, not about yourself. Don’t let hour in late June. The conversation was your ego overrate your capabilities or blindof the record, but Nadella did drop an intriguing nugget. He said that you to criticism. In the same way Dweck layshe subscribed to Stanford professor Carol Dweck’s mind-set theories. into John McEnroe, Holiday lays into How- In 2006 Dweck wrote a book titled Mindset: The New Psychology ard Hughes, whose ballooning self-regardof Success (Ballantine Books, $16). She laid out a simple yet powerful became detached from the necessity of hardidea: People with a fixed mind-set stop improving, despite their tal- work and honest assessment. The damageents; those with a growth mind-set keep evolving. With its relentless was done well before Hughes went insane.focus on Windows and Oice, coupled with its strong bias for havingthe highest-IQ employees, Microsoft created a fixed mind-set about Knight’s Shoe Dog is the best memoir Iwhat kind of company it was and what its employees could achieve. recall ever reading. As a business biography it In her book Dweck ranks with such recent works as Neal Gabler’sofers former tennis pro Walt Disney and Walter Isaacson’s Steve Jobs.John McEnroe as an But as a personal memoir Shoe Dog reaches aexample of a talented depth of emotional honesty that even the bestperson with a fixed mind- biographies haven’t touched.set. McEnroe was highlygifted but hated to prac- Knight ran track at the University oftice. He also hated the Oregon. At Stanford’s Graduate School ofstrength and flexibility Business he wrote a paper on how the Japa-training embraced by current stars like Roger Federer that might have nese might get into the U.S. sporting goodsextended his career. For McEnroe it was all about his talent. His iden- market. After a stint in the U.S. Army, Knighttity was his talent. When someone of lesser talent beat him, McEnroe traveled to Japan and became a U.S. distribu-would explode in rage or find ways of blaming others, with oicials tor for Onitsuka Tiger (or Asics, as the shoe isoften taking the brunt. known today). That was in 1962, but it wasn’t Growth, writes Dweck, is about curiosity, experimentation, hard until 1971 that Knight started to make his ownwork and learning. Repeat the cycle. Repeat again. Never stop repeat- shoes under the Nike brand. Despite a growthing the cycle, or you’ll stop growing. Now that you know Microsoft’s rate that doubled annually, Nike was perpetu-Nadella is a big fan of Mindset, you might want to read it again. ally cash short, until its IPO in December 1980 Two recent books to also take along on your late-summer vacation: (by coincidence, the same month that AppleEgo Is the Enemy by Ryan Holiday (Portfolio, $25) and Shoe Dog: A IPOed). In Shoe Dog Knight takes readers onMemoir by the Creator of Nike by Phil Knight (Scribner, $29). the roller coaster of Nike’s big successes, gut- Ego Is the Enemy packs a ton of personal performance tips, insight ting failures and near extinction.and wisdom into a small book. Even more remarkable is the author.Holiday, 29, is a college dropout who became a Hollywood rock music These are my reading suggestions for your August vacation. But as a future vacation idea,RICH KARLGAARD IS THE PUBLISHER AT FORBES. HIS LATEST BOOK, TEAM GENIUS: THE NEW SCIENCE OF HIGH- try a Forbes Cruise for Investors. As StevePERFORMING ORGANIZATIONS, CAME OUT IN 2015. FOR HIS PAST COLUMNS AND BLOGS VISIT OUR WEBSITE Forbes says, we’ll give you investing tips thatAT WWW.FORBES.COM/KARLGAARD. might well pay for the cruise. Go to moneyshow .com and click on Cruises. Scroll to the Forbes cruises in November 2016 and March 2017. F36 | FORBES AUGUST 23, 2016
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BEFORE YOU DECIDE 2016ELECTION COVERAGE THAT’SON THE MONEY
Verticals IVYSAUR BUTTERFREEAUGUST 23, 2016 #2 #12Gotta catch ’em all: Therewere 151 characters in theoriginal set of Pokémon in1996. Players in the UnitedStates can currently captureup to 142 of these pocketmonsters in Pokémon Go,the suddenly everywheremobile-gaming sensation.PAGE 40PIKACHU JIGGLYPUFF ODDISH #25 #39 #43MEOWTH SNORLAX TECHNOLOGY MAPPING THE PLANET #52 #143 WITH WORDS 44 ENTREPRENEURS REINVENTING THE PHONE BOOK 46 CANADA’S MOST INNOVATIVE INCUBATOR 48 MONEY & INVESTING GRADING 529 PLANS 50 WHEN HEDGING FAILS 54 AUGUST 23, 2016 FORBES | 39
STRATEGIES NIANTICMonster GameThe inside story of how Pokémon Go was created by a Google execwho got lost within the giant search company and how he persuadedhis bosses to let him—and all those creatures—go free.BY RYAN MACIt’s not hard to spot players of the most down. But Google had the wisdom to let popular smartphone game of all time. Hanke seek outside investors and spin the They have a peculiar way of carrying company out. That paved the way for Hanke their devices in front of them with one to approach Nintendo and the Pokémon hand, says John Hanke, the technology Co., which oversees the brand’s intellectual whiz behind Pokémon Go, as we stroll along the property, and make the smartest mobile- waterfront of San Diego’s Seaport Village the gaming deal of all time. day before his appearance in front of 7,000 fans at Comic-Con. For Google the arrangement has worked out in spades. Google owns just under 30% “They’re playing,” says the 49-year-old, of Niantic, whose game might hit $5 billion nodding at a couple holding hands while in annual revenue, according to a Macquarie their eyes fixate on their phones. “That guy Group analyst. standing with the backpack. Those people sitting over there.” “If Google kept it all to themselves, I’m not sure you would have Pokémon Go, at least Since its July launch Pokémon Go, a free not at the speed at which we got it,” says Gil- “augmented reality” game by Niantic Labs man Louie, a Niantic board member. in which players capture virtual characters mapped to real-world locations, has piled up Hanke has long loved videogames, having superlatives. Apple said the game had more taught himself to code his own on his Atari downloads in its first week than any other 400 computer in Cross Plains, Tex., a town of app in history. One in ten Americans plays 1,000 with a single stoplight. A self-described Pokémon Go daily, according to App Annie, “hick from the sticks,” Hanke graduated from and SurveyMonkey estimates that the game the University of Texas, Austin and eventu- is hauling in as much as $6 million a day from ally wound up at Haas Business School at in-app purchases in the U.S. alone (the game UC Berkeley with a view to starting a gam- is available in 37 countries). Beyond the num- bers, Hillary Clinton has invoked the game on the campaign trail, Justin Bieber has gone Poké-hunting in Central Park, and a reporter was publicly chided for playing it at a State Department briefing. It almost didn’t happen. Just 12 months ago Hanke was an increasingly restless Google employee (he launched Google Earth, among other things) and his company, Niantic, was an overlooked gaming skunk- works lost in the search giant. As Google reorganized itself into Alphabet, Nian- tic looked likely to be rolled back into the company’s Android division or simply shut40 | FORBES AUGUST 23, 2016
ing company. Not long after arriving there, Brin began using Keyhole to zoom in on the Twenty years after he joined a classmate’s startup, Archetype backyards of the people in the room while Nintendo released Interactive, whose only title, Meridian 59, advocating for the acquisition of the startup. the original game, is considered the first 3-D massively multi- In October 2004 Google, which had just gone Niantic CEO John player online role-playing game. (They sold public, purchased Keyhole for about $35 mil- Hanke is cashing in the company on the day of their B-school lion in stock. on global Pokémon graduation.) nostalgia. Hanke thought he’d stay at Google onlyTIMOTHY ARCHIBALD FOR FORBES After starting and selling another gaming for a matter of months, but he remained for firm in 2000, Hanke cofounded Keyhole, a more than a decade as one of the two heads geospatial software firm that provided users of the company’s geo team. In his time there with satellite imagery of any locale on Earth. he oversaw the 2005 launch of Google Earth, That technology caught the eye of Google negotiated the placement of Google Maps on cofounder Sergey Brin, who was infatu- the original iPhone with Steve Jobs and built ated with maps. In one meeting with Google Maps into Google’s second-largest product by CEO Eric Schmidt and other executives, traic, behind search. AUGUST 23, 2016 FORBES | 41
STRATEGIES NIANTIC But by 2010 Hanke wanted out and meeting. Hanke wanted to know if Pokémon BY THE RAINER GROSSKOPF/GETTY IMAGEShoped to reignite his passion by explor- would be interested in making an actual mo- NUMBERSing the possibility of combining maps with bile game. By May 2014 Hanke was in a con-gaming. Persuaded to stay at the company ference room with Pokémon CEO Tsunekazu AT YOURby Google’s other cofounder, Larry Page, he Ishihara, flanked by translators and discuss- SERVICEwas given personnel and resources to cre- ing, of all things, Ingress. A devoted Ingressate a secret gaming division within Google’s player, Ishihara immediately grasped how BUSINESS SERVICES—San Francisco oice. Hanke named his powerful location could be for a mobile game ADMINISTRATIVE WORK,company Niantic Labs, after a ship that had involving Pokémon. With the blessing of MIDDLE MANAGEMENT, LAW,taken miners to the Bay Area during the the late Nintendo CEO Satoru Iwata, Hanke MARKETING AND MORE—1849 gold rush. began development of Pokémon Go that sum- NOW MAKE UP THE LARGEST mer, agreeing to split game revenue with the HIGH-WAGE PORTION OF After dabbling in an augmented-reality Pokémon Co. and Nintendo. (Hanke declined THE ECONOMY, EMPLOYINGproduct that allowed users to learn about to reveal the specific terms.) NEARLY 20 MILLION AT ANcity landmarks via mobile devices and the AVERAGE SALARY OF $30 ANill-fated Google Glass, Niantic released Meanwhile, back in Silicon Valley Niantic’s HOUR. TECH-RICH METROSIngress in late 2013. It was Hanke’s first at- position within Google had become tenuous. HAVE CREATED THE MOSTtempt at a location-based game and allowed As the company decided how to reorga- SUCH JOBS SINCE 2010. THEplayers on two teams to claim certain loca- nize itself into Alphabet, Google’s leaders TOP FIVE METRO AREAS:tions around the world using their phones. wondered what to do with the “danglingAlthough it gained traction with serious chad” of Hanke’s group. There was talk 1.gamers, Ingress was not considered a break- of rolling the company into the Android NASHVILLE, DAVIDSON,through inside Google. group, though the idea of falling back into the bureaucracy of Google’s massive orga- MURFREESBORO, By the spring of 2014 Niantic CEO Hanke nization had little appeal to Hanke. FRANKLIN,was dreaming of applying location-based TENN.gaming to a well-established intellectual Instead, he broached the possibility ofproperty that would entice more users. Both a spinof and was given permission to go BUSINESS SERVICESMario and Donkey Kong were considered, out and seek funding for an independent EMPLOYMENT GROWTHbut one name that kept coming up was Poké- company. He met with several venturemon, a franchise that hit Millennials hard capital firms—among them Andreessen RATE, 2010–15in the late 1990s with videogames, trading Horowitz and Kleiner Perkins Caufield &cards, movies and a television cartoon. As Byers—though all balked at the company’s 47.2%of May 2016 Pokémon products had grossed valuation of around $150 million. One inves-$45 billion in lifetime sales. tor from those meetings recalls that Hanke 2. discussed only Ingress and made no men- SAN FRANCISCO, Fortuitously, an engineer in Hanke’s for- tion of the upcoming Pokémon title. Eventu- REDWOOD CITY,mer Google Maps division named Tatsuo No- ally Hanke was able to cobble together a $35mura was quietly concocting a plan around million round at an even higher valuation SOUTH SANPokémon, but for an entirely diferent reason. (around $175 million) from Google, Ninten- FRANCISCO,With April Fool’s Day approaching, Nomura do, the Pokémon Co. and angel investors—had an idea to ofer mobile users a way to no big VCs invested. CALIF.hunt for Pokémon while perusing GoogleMaps. Through a friend he was able to set In defense of those that passed, Pokémon 45.7%up a meeting with the Pokémon Co., an en- Go is barely a month old and history hastity that is partially owned by Nintendo and not favored mobile-game makers like Zynga 3.conveniently shared the same oice complex (Farmville) and King.com (Candy Crush), AUSTIN,with Google Japan in Tokyo’s Roppongi dis- which serve as a warning to any viral-game ROUND ROCK,trict. “Their CEO liked the deal immediately,” maker. At this point Hanke is just trying toNomura remembers. “There was not any real keep the servers running. With bags under TEX.negotiation.” his eyes, he’s had little time to do much of anything else, not even play his own game. 42.3% The success of the April Fool’s prank What level is he at?caught the eye of Hanke, who reached out 4.to Nomura to see if he could set up another “I’m, like, level 5,” he says sheepishly. SAN JOSE, SUNNYVALE,FINAL THOUGHT SANTA CLARA, “After a certain point, money is meaningless. It’s the game that counts.” —ARISTOTLE ONASSIS CALIF. 36.4% 5. DALLAS, PLANO, IRVING, TEX. 28.9%42 | FORBES AUGUST 23, 2016
TECHNOLOGY MAPPINGFind.Me.HereBillions more people could finally get home deliveries ifthe world adopts What3Words’ clever address system. BY PARMY OLSON and have cut missed Chris Sheldrick’s startup deliveries by 83% since has divided the globeIn a fast-growing suburb outside New January. What3Words into a grid of tiny blocks, Delhi, young women hail pink motor- has raised $14.5 mil- including this square in cycle taxis through an app called Bikxie. lion from investors Hyde Park, London. Launched in January, Bikxie has a novel like Intel Capital and feature: It pairs women drivers with Aramex, the Middle women customers. And soon it will have an- East’s equivalent of other. Its users in Gurugram, where rapid con- FedEx, which has struction has created a confusing mess of loca- asked big local retailers tions, won’t need a street address. Instead, says to add a What3Words Bikxie founder Divya Kalia, riders will simply box to checkout pages. type three ordinary words to identity the nine- In all, more than 250 square-meter parcel of land where they want businesses globally use to be dropped of. For example, the entrance to What3Words, though Bikxie’s oice in New Delhi is artichoke.recruit- it isn’t profitable yet. er.snif. Beyond India, FORBES’ New Jersey headquarters is gold.wink.flesh. The front door Sheldrick, 35, to the White House? Length.grab.torch. wants What3Words to become a global stan- Bikxie is pulling this data from a unified dard, the comprehen- global addressing system devised by a company sive fix to the addressing problem that several fittingly named What3Words. The London- national governments, like Ghana’s, have tried based startup, launched in 2013 by Chris Shel- and failed to solve. He started the company drick, a former music and events organizer, after seeing some of his musical acts get lost in has divided the entire planet into 3-meter-by- Italian villages and miss their gigs. Latitude and 3-meter squares (the size of a small bedroom) longitude coordinates failed to solve the prob- and assigned each a three-word string. The lem. Mess up one of the 18 numbers, and you goal: Make it easier to find the homes of the could end up 20 miles from your destination. more than half of humanity who live in poorly marked areas, like many urban slums, or are In January 2013 he began discussing the among the 4 billion people who have no ad- problem with Jack Waley-Cohen, an old friend dress at all. Much of Costa Rica, for instance, from his chess team at Eton, the elite British doesn’t have street names or house numbers. boarding school. “If only someone could make GPS coordinates easy,” he remembers say- “In some countries home delivery for post ing over tea in his London flat. They needed a doesn’t happen,” Sheldrick says. “People are sequence of, ideally, three things, “something used to going, ‘I live behind the yellow lamp- everybody could remember,” he adds. post near the cofee shop.’ ” Words would do the trick. The pair divided In Rio de Janeiro’s favelas, a local mail-de- the globe into 57 trillion squares that require livery company, Carteiro Amigo, already uses about 40,000 diferent words to identify them What3Words to find homes. Mongolia’s national all. They assigned short words to locations on postal service signed up last May to use the land and longer ones to those on bodies of water. system for deliveries to the country’s 3 million citizens. Drivers with Direct Today Couriers To turn this clever idea into a business, in the U.K. use a What3Words-powered app44 | FORBES AUGUST 23, 2016
mit to a little-used system. TRENDING (Sheldrick won’t say how many people currently WHAT THE 45 MILLION use the technology.) But FORBES.COM USERS there’s the tantalizing ARE TALKING ABOUT. future prospect of robots FOR A DEEPER DIVE GO TO using Sheldrick’s system FORBES.COM/TECHNOLOGY to make deliveries. When Amazon announced it COMPANY was testing drones, “very quickly the cogs turned in DOLLAR SHAVE my head,” says Sheldrick. CLUB The other challenge Unilever buys itself is making money. Shel- a billion close trims, drick won’t disclose how picking up the online much it charges clients men’s-grooming upstart or the total revenues, but for $1 billion cash—or FORBES estimates the considerably more than startup has brought in less than $1 million in its first two bits. three years. What3Words licenses access to its for- PERSON mula, which converts GPS coordinates into three- JORDYN CASTOR word addresses. Some pay extra for software that The computer engineer, hosts the formula on their 22, has been blind since own system, so that, say, users of a mapping app birth. She’s honing won’t have to look up the Apple’s VoiceOver address online. speech technology, she says, to “help change Not everyone thinks the world for people the system is necessary. with disabilities.” Starship Technologies, an Estonian startup that deploys and coordinates self-driving delivery IDEA robots for companies in the U.K., Germany and Switzerland, recently talked with What3Words. OBESITY: THERE’S “Robots don’t understand street addresses,” says AN APP FOR THAT Starship COO Allan Martinson. “We may use What3Words as part of that address, but it must Might games with ever- be widely used.” Starship’s sensor-laden robots greater player mobility— already create their own maps across city streets, even if they don’t reach he adds, just like Google’s Street View cars do. Pokémon Go’s dizzying Amazon’s drones may end up doing the same. Either way, the startup may not remain in- popularity—help kids dependent for long. “What3Words is a perfect control their weight? candidate to be taken over in a couple of years,” PHOTOGRAPHED BY LEVON BISS FOR FORBES. Sheldrick eschewed the open-source approach says Martijn de Wever, founder of Force Over CHRIS SHELDRICK WEARS A JACKET BY GIEVES & HAWKES; SHIRT BY JAEGER; PANTS BY TIGER OF SWEDEN; embraced by some other location-based enter- Mass Capital, which recently invested. He sees prises, choosing instead to patent-protect the Google, Apple or Amazon being particularlySHOES AND BELT BY TODS. STYLE DIRECTOR: JOSEPH DEACETIS; STYLE ASSOCIATE: JUAN BENSON. word-assignments and algorithm. His team interested. “They could integrate it fully within packed the formula into 10 MB of space, mak- their current mapping technology.” ing the service easy for businesses to incorpo- rate into their apps, run from their own servers and use in areas with no mobile data coverage. Sheldrick now faces several challenges. One is getting people to adopt a completely new way of defining location. That’s a big ask, isn’t it? “There’s plenty of behavior-changing platforms,” Sheldrick says, noting that Airbnb seemed creepy at first but is now second nature to travelers. “As you get more businesses push- ing this, it becomes de facto,” he says. “We’re talking to all the large global logistics firms.” Business customers like Aramex are crucial to helping What3Words get companies to com- FINAL THOUGHT “My country is the English language.” —KILDARE DOBBS AUGUST 23, 2016 FORBES | 45
ENTREPRENEURSThe FraudDetectiveAlex Algard risked everything he The son of a Swedish father and a Korean Sitting pretty: Alex Algardowned to turn his struggling business, mother, Algard was born in Stockholm, moved left Goldman SachsWhitepages, into a fast-growing tech to Vancouver as a teenager and studied eco- because he was makingcompany he expects to generate nomics and engineering at Stanford. During the$150 million in revenue next year. dot-com boom, he landed an internship with more on his side venture. Morgan Stanley in Silicon Valley. While there, BY AMY FELDMAN in 1996, he had an idea for an online directory RICK DAHMS FOR FORBES and thought to call it Whitepages.com after theEvery day thousands of consumers soon-to-be-obsolete phone book. When he typed go to Under Armour’s website and in the URL, he saw a “coming soon” notice, so he click “buy” on a T-shirt or a pair of contacted its owner and flew to Los Angeles to running shoes, transactions that negotiate the purchase, paying just $900. total an estimated $500 million ayear. To those customers it may seem as if their After graduation Algard took a job as a juniortransactions are processed instantly. But in that analyst at Goldman Sachs in New York, tinker-half-second or less, Under Armour, with the ing with the online phone directory in his lim-help of a Seattle-based tech company calledWhitepages, makes the decision whether totrust the consumer and complete the sale. Under Armour is just one of more than 2,000businesses, including Wells Fargo, Saks andAmerican Airlines, that rely on Whitepages’subscription-based service, Whitepages Pro,to assess millions of transactions each day. Is abuyer trying to pass of a fraudulent credit card?Or using a prepaid phone card and shipping to aMail Boxes Etc., a red flag for fraud? As busi-nesses crank up their online sales—and consum-ers move to mobile phones, which are tougherto connect to real addresses—the database thatWhitepages began building nearly 20 years agoas a simple online phone directory has becomeincreasingly valuable. It has taken most of those 20 years for AlexAlgard, Whitepages’ 42-year-old founderand CEO, to transform what started as a sidehustle into a real business with $70 million inrevenue last year. That transition required gutsand a steadfast belief in the business. In 2010the company’s two biggest clients cut back, itsrevenues plunged, and its investors decidedthey wanted out. “I was dreading going toboard meetings,” Algard says. “We were fight-ing about whether to invest in the business. Itwas a very painful process.” And there was noguarantee the business would survive.46 | FORBES AUGUST 23, 2016
E-COMMERCEited free time. In those days, before the advent sure on us to magically go find profit. It really GO,of open-source technology and cloud-based got to the point where I was thinking we would CONSIDER,software, building a database of phone num- end up suing each other.”bers would have been prohibitively expensive, STOPso he wrote some code that pulled data from By 2012 Algard saw two options: He couldAmerican Business Information (now part of find a buyer for Whitepages, or he could come HOW TO HIRE AInfogroup) in real time. It cost just $5,000 a year up with some $80 million to buy out the VCs FELONin licensing fees and allowed users to search na- himself. He chose the latter. While Whitepagestionally rather than having to go state by state. had cash on hand he could put toward a deal, ZANE TANKEL, CEO OF he was still roughly $30 million short. To bridge APPLE-METRO, WHICH Before long Algard’s hobby, which generated the gap, the company took out a bank loan—and OWNS 36 APPLEBEE’S ANDrevenue by displaying ads, was producing more Algard pledged his family’s house, savings ac- 2 PIZZA STUDIOS IN NEWincome than his day job. Eleven months into his counts and other personal assets as collateral. YORK CITY AND ENVIRONS,career he stunned his colleagues and bosses by “That’s a ballsy move that I really respect,” says HAS BROUGHT ON DOZENSquitting Goldman to pursue the dot-com dream. Whitney Bouck, chief operating oicer at Hello- OF FORMER INMATES AND(Some at the firm were further stunned when Sign and a Whitepages board member. (“We’re PROMOTED MANY TOthey mistyped his URL and found themselves on glad this worked out well for Alex and our inves- MANAGERIAL ROLES.Whitepage.com, then a porn site.) tors,” said a Providence Equity Partners spokes- person; TCV declined to comment.) đHIS ADVICE: Whitepages quickly became a cash cow.Consumers could save on directory-assistance The deal left Algard with the task of turning LEARN THEIRcharges by looking up numbers online, and Whitepages into a sustainable business. Now “AHA” MOMENTadvertising followed. An early win came from fully engaged, he shifted the company’s business Pre-promotion, Tankeldeals that rewarded Whitepages.com generous- model, culminating this year with turning of the does a surprise in-personly for forwarding searches for local businesses advertising on the consumer side—Whitepages’ interview to ask when theto Yellowpages.com and Superpages.com. The primary source of revenue—and switching to a employee realized he wascontracts produced $15 million a year by 2005, subscription model. For a monthly fee of up to ready to go straight. Heand those results attracted investors. $29.95, users can get details on anyone they’re expects a reply from the trying to find, including mobile numbers and gut: no smooth talk, no In 2005 Technology Crossover Ventures bankruptcy records. For business users, Algard(TCV) and Providence Equity Partners invest- created Whitepages Pro. “It keeps our fraud đplatitudes.ed $45 million for a minority stake. Revenues rates low, which is really, really important forcontinued to grow almost efortlessly, reaching our business,” says Matt Oppenheimer, CEO of PRUDENCE AND$66 million in 2008. But online business models currency-transfer startup Remitly. GUIDANCEwere changing, Google was horning in on localbusiness search, and the company’s fortunes Algard’s early insight was to link people’s Tankel spends his dayswere tied to the contracts with Yellowpages and identities to their mobile phones rather than visiting restaurants,Superpages. “We saw the writing on the wall,” to their landlines and to work the data into ansays Max Bardon, who served as Whitepages’ “identity graph” that ties together phone num- schmoozing workers—CEO during a period when Algard stepped bers, addresses, e-mail addresses, social net- and keeping tabs on theirdown to focus on a second fast-growing startup, working profiles and the like. He has also spunan online community for car enthusiasts. “We of a division that uses the phone data to identify progress and setbacks.started building our own business-search capa- mobile-phone spammers. Called Hiya, the spin- “My role is to keep thembility instead of outsourcing to those guys.” of has deals with T-Mobile and Samsung. đmoving forward.” But the new model required better engi- Algard refused to say what impact he expectsneering and design, and couldn’t match the these changes to have on revenue this year but WORKPLACE, NOTeasy revenue—and 99% profit margins—of the did say he expects it to surpass $150 million next JAILHOUSE, MORESbusiness-search deals. When Yellowpages and year. A poker player, he says he has no regrets Tankel once hired a dozenSuperpages cut back, their payments dropped about borrowing millions to buy out his inves- former inmates at onefrom $33 million in 2008 to $7 million in 2010. tors, though the company is still paying of the location. They hung out“It felt like an asteroid had hit us,” says Algard, loans and his house is still on the line. “You must together, swapping prisonwho had by then returned as CEO and had to try take risks to win,” he says. “If you do not take tales, until one by oneto calm his VC investors. “They put a lot of pres- risks, you do not win.” they went back. LessonFINAL THOUGHT learned. “They’ve got to get absorbed by the “Telephone books are, like dictionaries, already out of date the moment they culture,” he says. “Theyare printed.” —AMMON SHEA can’t be the culture.” —A.F. AUGUST 23, 2016 FORBES | 47
ENTREPRENEURSThe Canadian DreamWith Victory Square, Shafin Tejani is weaving together a startup ecosystemin Vancouver that has real advantages over its neighbors to the south.BY ROBB MANDELBAUMShafin Tejani often uses the pronoun asked a couple of graduate students to demon- Shafin Tejani takes a RICK DAHMS FOR FORBES “we” when discussing his exploits as strate a device they had designed to test glucose di erent approach to the founder of more than 20 startups levels. “I saw the market size and the market startups: “I go in planning and an investor in dozens more, as in opportunity,” Tejani says. “Diabetes is global. to win every time.” “We’re making a big push into Eu- It’s borderless.” rope.” Technically he is an executive committee of one, but he is building a team of sorts. It’s also out of his comfort zone, which is why he sought the counsel of Elliott, a clinician He recently sat down for a meeting in a with two decades of experience. Ultimately the conference room in the Vancouver oices of BC doctor expressed skepticism, but Tejani had Diabetes, the practice of Dr. Tom Elliott. While woven another strand into the web of startups Tejani is investing about $400,000 in a ven- he is building. In the past two or three years, ture with Elliott to develop a genetic test that he has seeded an eclectic portfolio featuring predicts how diabetics will respond to the drug some of Vancouver’s top young entrepreneurs. liraglutide, his real purpose on this day was to Through an investment entity called Victory get Elliott’s reaction to a product demonstration. Square, he has supplied time, knowledge, sup- port services, access to his network and finan- Thirty-nine and preternaturally afable, Te- cial assistance—generally not more than several jani, who greets almost everybody as “brother” hundred thousand dollars—to some 16 startups. —partners, friends, the waiter at lunch—had48 | FORBES AUGUST 23, 2016
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