EXCLUSIVE:
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TRUMP’S TOWERING TENANT CONFLICTS FEBRUARY 28, 2018
CRYPTO OVERLORD
CZ ZERO TO BILLIONAIRE IN 6 MONTHS
YOUR MONEY’S FUTURE REENGINEER YOUR RETIREMENT TOP WEALTH ADVISORS BY STATE TECH’S 50 TOP FINANCE STARTUPS
CRYPTO’S SECRET BILLIONAIRE CLUB MEET THE FREAKS, GEEKS AND VISIONARIES DOMINATING THE DIGITAL CURRENCY CRAZE
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FEBRUARY 28, 2018 13 | FACT & COMMENT // STEVE FORBES Don’t wreck the new boom.
LEADERBOARD 17 | 30 UNDER 30 Europe’s latest crop of young entrepreneurs, inventors and disruptors.
20 | NEW BILLIONAIRE: THE BIG WHEELER Ernie Garcia’s used-car kingdom. Plus: Another billionaire president—what are the odds?
22 | SPORTSMONEY: THE NBA’S MOST VALUABLE TEAMS A pro squad is now worth an average of $1.65 billion. Plus: Who’s richer—LeBron or Steph? The league’s highestearning players.
24 | THE 10-Q: GEORGE GILDER The technology prophet on Bell’s Law and Google. Plus: Utah’s charitable chemical king.
26 | FROM THE VAULT: GETTY’S MIGHTY GRIP,— JULY 15, 1957 By mid-century J. Paul Getty’s empire spanned continents and fueled industries.
28 | CONVERSATION Readers rap about YouTube’s top earners and our inaugural Just 100 ranking.
17 36
STRATEGIES 31 | OVER A BARREL In an exclusive interview, ExxonMobil’s new CEO lays out his plan to supply a growing world with energy—without destroying it in the process. BY CHRISTOPHER HELMAN
TECHNOLOGY 36 | DIGITAL MEDICI You no longer need to be rich to be an arts benefactor. But can crowdfunding site Patreon save creators from the starvation wages of online advertising? BY KATHLEEN CHAYKOWSKI
42 6 | FORBES FEBRUARY 28, 2018
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FEBRUARY 28, 2018
ENTREPRENEURS 42 | FAMILY TREE Jonathan Saperstein began his efforts to professionalize and dominate the nursery industry with a hostile takeover of a grower—from his dad. BY AMY FELDMAN
48 | CRACKING THE CODE Challenged by a female employee, Gusto, an HR-software unicorn in San Francisco, figures out how to hire women engineers. BY SUSAN ADAMS
FEATURES 79 | BEST-IN-STATE WEALTH ADVISORS In the age of robo-advice, meeting clients face-to-face can be a real competitive advantage. Here are the top-ranked advisors in all 50 states. BY HALAH TOURYALAI, MAGGIE MCGRATH AND KRISTIN STOLLER
85 | THE FINTECH 50 The future of your money. EDITED BY JANET NOVACK AND MATTHEW SCHIFRIN
88 | OPEN FOR BUSINESS Forget the international partnerships and the D.C. hotel. The surest way to put money into Donald Trump’s pocket is through his core real estate assets. More than 150 tenants—from foreign governments to big banks—throw him some $175 million a year without an accounting of who they are or how much they pay. Until now. BY DAN ALEXANDER AND MATT DRANGE
REENGINEER YOUR RETIREMENT
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97 | TRUSTS IN THE AGE OF TRUMP December’s tax overhaul is spawning new ideas for transferring big bucks and minimizing taxes. Procrastinators, beware: Your current estate plan may now be booby-trapped. BY ASHLEA EBELING
102 | LIVE WELL WHILE THE MARKET TANKS Here’s a spending formula to protect you in retirement from panic and from penury. BY WILLIAM BALDWIN
104 | THE HAIL MARY RETIREMENT PLAN Looking to turbocharge your retirement account? Put some crypto in your IRA, but only if you can stomach extreme risk and high fees. BY JEFF KAUFLIN
110 | SUNNIER DAYS ON SESAME STREET After a merger knocked him from his CEO’s perch, Jeffrey Dunn considered globe-hopping. Instead, he headed to Harvard and then on to retool an iconic not-for-profit.
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BY KERRY HANNON
FORBES LIFE 118 | SEPARATED AT REBIRTH Thanks to signature models, Rolls-Royce and Bentley are both enjoying a renaissance. But the iconic British automakers have traveled two very different roads. BY JOANN MULLER
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124 | THOUGHTS On value.
8 | FORBES
FEBRUARY 28, 2018
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INSIDE SCOOP EDITOR-IN-CHIEF
Steve Forbes FORBES MAGAZINE CHIEF CONTENT OFFICER Randall Lane EXECUTIVE EDITOR Michael Noer
Bringing Crypto Out of the Shadows
ART & DESIGN DIRECTOR Robert Mansfield FORBES DIGITAL VP, DIGITAL EDITOR Mark Coatney VP, INVESTING EDITOR Matt Schifrin SVP, PRODUCT AND TECHNOLOGY Salah Zalatimo VP, WOMEN’S DIGITAL NETWORK Christina Vuleta VP, VIDEO Kyle Kramer ASSISTANT MANAGING EDITORS Kerry A. Dolan, Luisa Kroll WEALTH Frederick E. Allen LEADERSHIP Loren Feldman ENTREPRENEURS Tim W. Ferguson FORBES ASIA Janet Novack WASHINGTON Miguel Helft SILICON VALLEY Michael K. Ozanian SPORTSMONEY Mark Decker, John Dobosz, Clay Thurmond DEPARTMENT HEADS Jessica Bohrer VP, EDITORIAL COUNSEL BUSINESS Mark Howard CHIEF REVENUE OFFICER Tom Davis CHIEF MARKETING OFFICER Jessica Sibley SENIOR VP, SALES, U.S. & EUROPE Janett Haas SENIOR VP, BRAND SOLUTIONS & STRATEGY Ann Marinovich SENIOR VP, CONTENT PARTNERSHIPS & STRATEGY Achir Kalra SENIOR VP, REVENUE OPERATIONS & STRATEGIC PARTNERSHIPS Alyson Papalia VP, DIGITAL ADVERTISING OPERATIONS & STRATEGY Penina Littman VP, SALES PLANNING & ANALYTICS Nina La France SENIOR VP, CONSUMER MARKETING & BUSINESS DEVELOPMENT Lisa Serapiglia DIRECTOR MEDIA PLANNING & OPERATIONS FORBES MEDIA Michael Federle CHIEF EXECUTIVE OFFICER Michael York CHIEF FINANCIAL OFFICER Will Adamopoulos CEO/ASIA FORBES MEDIA PRESIDENT & PUBLISHER, FORBES ASIA Rich Karlgaard EDITOR-AT-LARGE/GLOBAL FUTURIST Moira Forbes PRESIDENT, FORBESWOMAN MariaRosa Cartolano GENERAL COUNSEL Margy Loftus SENIOR VP, HUMAN RESOURCES 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)
FEBRUARY 28, 2018 — VOLUME 201 NUMBER 1 FORBES (ISSN 0015 6914) is published monthly, except January and July, by Forbes Media LLC, 499 Washington Blvd, Jersey City, NJ 07310, Periodicals postage paid at Newark, NJ 07102 and at additional mailing offices. Canadian Agreement No. 40036469. Return undeliverable Canadian addresses to APC Postal Logistics, LLC, 140 E. Union Ave, East Rutherford, NJ 07073. Canada GST# 12576 9513 RT. POSTMASTER: Send address changes to Forbes Subscriber Service, P.O. Box 5471, Harlan, IA 51593-0971. CONTACT INFORMATION For Subscriptions: visit www.forbesmagazine.com; call 1-515-284-0693; or write Forbes Subscriber Service, P.O. Box 5471, Harlan, IA 51593-0971. Prices: U.S.A., one year $34.99; Canada, one year C$52.99 (includes GST). We may make portions of our mailing list available to reputable firms. If you prefer that we not include your name, please write Forbes Subscriber Service (address above). For Back Issues: visit www.forbesmagazine.com; e-mail getbackissues@forbes.com; or call 1-212-367-4141. For Article Reprints or Permission to use Forbes content including text, photos, illustrations, logos, and video: visit www.forbesreprints.com; call PARS International at 1-212-221-9595; e-mail http://www.forbes. com/reprints; or e-mail permissions@forbes.com. Permission to copy or republish articles can also be obtained through the Copyright Clearance Center at www.copyright.com. Use of Forbes content without the express permission of Forbes or the copyright owner is expressly prohibited. Copyright © 2018 Forbes Media LLC. All rights reserved. Title is protected through a trademark registered with the U.S. Patent & Trademark Office. Printed in the U.S.A.
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IF YOU’RE LOOKING for the statesman of cryptocurrency, you could do worse than Joe Lubin, the soft-spoken founder of Consensys, which helps big companies with blockchain and launches products based on the Ethereum platform, which he cofounded. His peers apparently agree: When he sat down with me recently to discuss his concerns about our inaugural list of crypto-asset tycoons—we found ten who hover near $1 billion and another ten who could be on their way—he said he spoke for himself and others in the ranking. Lubin suggested that he and his ilk were simple programmers who weren’t looking for public attention. He made this argument at the World Economic Forum, as we sat in a private meeting room in the “Ethereal Lounge,” a three-floor building he’d quickly built out on Davos’ main promenade. For a week, thousands of the world’s economic elite flooded in for panels, powwows and free drinks and food. Next door, a giant Crypto HQ drew similar throngs. Hardly signs of a person or industry trying to remain private—a point Lubin, from his Davos perch, conceded. His second argument: How were we sure our numbers were right? Fair question, one we ask ourselves perpetually. During 36 years tracking the world’s richest people, we’ve honed our methods but kept the underlying philosophy consistent: Err on the conservative side. It’s an imperfect science—and in this instance we’ve adopted ranges to factor in the lack of transparency and wild volatility. Finally, Lubin brought up security: Since crypto sits outside the banking system, it’s more vulnerable to theft. True among the small fry, for sure. But those on this list (and we spoke with almost everyone on it) confirmed they’ve taken steps to protect themselves from hackers and thugs—breaking up passwords and storing pieces in safe deposits scattered across the country. Ultimately, Lubin, along with other members of the crypto elite I chatted with, acknowledged the importance of this project. While even the biggest crypto bulls will privately acknowledge that 95% of initial coin offerings are hype, scams or worse, a blockchain-enabled financial system of some kind is here to say. As in the dot-com boom in 1999, some of these crypto billionaires will bust, the Pets.com of their era. Others will weather the inevitable reckoning and morph into something stronger, crypto’s eBay or Google. Our list provides a snapshot of a pivotal moment, part of the transparency needed to pull crypto away from its provenance as the favorite currency of drug dealers and into the adolescence of a legitimate asset class.
—RANDALL LANE, CHIEF CONTENT OFFICER
Spotlight
ETHEREIUM MINING: Here is Powerful Ethereum Promax7 Miner 7.2 Review
C
ryptocurrency is thriving in different parts of the world, and this is because more people and businesses are becoming aware of its features and the numerous advantages its usage brings. One cryptocurrency that is performing tremendously well is Ethereum. Ethereum is a decentralized open source blockchain-based computing platform that also has a valuable coin called Ethereum (ETH) and is the second most valuable coin after Bitcoin. It will interest you to know that the Ethereum coins can also be gotten from mining. Ethereum transactions are usually contained within singularly specific blocks. Mining Ethereum requires the use of computers, powerful graphics card or a combination of graphics cards that are capable of computing algorithms that will get solved in order to generate Ethereum coins. There are a variety of miners that can be used, and these varieties and their performance are a function of the amount of money required to purchase them. Promax7 Ethereum Miner Of the many miners in the market, the best Ethereum miner so far is the Promax7 Ethereum Miner. The Promax7 Ethereum Miner is one of the latest innovations that was created using cutting edge technology and improving on efficiency and productivity while reducing the cost of maintenance as with other Ethereum miners within the same operational range. As it is, there is no competition with the Promaz7 Ethereum Miner, as it stands shoulder high than other miners, and is able to offer as much as 3710 MegaHash per second, which makes it the first ever cost-efficient and powerful miner. This mining hardware is becoming popular by the
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FORBES FEBRUARY 28,2018
CRYPTO MINER
day and takes advanced Ethereum mining to a whole new level, as the miner was built with amazing features that are capable of increasing the productivity of mining, while also increasing to output and rather than have a long investment cycle, a short one is gotten, hence the cost of running the mining process is reduced. Furthermore, the miner comes with an added advantage, which is its ability to perform multicoin functionalities; hence, the miner can work with every cryptocurrency mining algorithm (multi-algorithm), which invariably makes it possible for the GPU miner to mine different types of cryptocurrency. The Promax7 Ethereum Miner was launched in April 2018, and its already
in its second batch of orders, with 80788 units already ordered. The sales growth of the mining hardware is increasing, as the miner is becoming popular. Many people and companies are opting for this multicurrency mining equipment because its specifications indicate the hardware is not just powerful, but very efficient, and effortlessly functions more than is expected.
Multicurrency mining; aside from the mining of Ethereum, this miner mines altcoins like Zcash, Multialgorithm; this miner is capable of mining all algorithms.
Specifications Dimensions - 31” x 17” x 28” ETH 3710 MegaHash per second, ZCash 59484 Sol/s Ethernet: 1 x Gigabit with Wi-Fi connectivity Installed Memory: 32 GigaByte High Definition Multimedia Interface (HDMI): 1 x HDMI Port Power Supply: 4500 Watt (Inclusion of Smart Inverter Tech) Security: In-built Firewall Operating System: Optional Cooling: High-speed Jet Cooling Fans Warranty: Yes (180 Days)
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LeaderBoard THE 10-Q
RICHEST BY STATE rules that really favor big companies. It reflects their capability of lobbying and lawyering and litigating and finding a path through the mazes of rules. Your next book is called Life After Google. Why that title?
I’m convinced the Google paradigm of massive data centers and artificial-intelligence determinism will be transcended in the next era. Replaced by . . . ?
Technology prophet George Gilder believes Silicon Valley’s innovations benefit only a select few.
Your point being that we’re now past the ten-year point of Bell’s Law and the cloud.
It is not accelerating. It’s continuing to advance, of course, but I completely agree with Peter Thiel that technology progress is not inevitable.
And lo and behold, a new architecture is arising. It will solve the increasing concentration problem of the internet, which is porous security. It will be millions of small data centers around the world, many of them mobile, all using cryptography and a new computer architecture based on blockchains and other inventions.
What do you mean by that?
Why would Google not see this?
Recall Margaret Mead’s story of mariner tribes that once made their living building streamlined canoes to catch fish in huge volumes. Over time, they just forgot how to make the canoes. When Mead found them, they were sitting on the beaches looking at the oceans with no idea that canoes were the solution to their food shortage.
Google is trapped by its own illusion. The advances in machine learning that Google trumpets and preens about are really just advances in the speed of processing. When their Go-playing computer can play more Go games in a minute than the whole human race has played through all history, that’s not a great advance in intelligence. It’s the same intelligence just accelerated to terahertz speeds. And this creates this illusion for Google and others that machine learning can somehow gain consciousness and usurp humans.
Is progress in technology accelerating or decelerating?
But in our day, learning is stored forever on billions of devices. It’s not going to disappear.
We’re actually at risk of this kind of amnesia. We forget the real entrepreneurial sources of creativity and progress: invention, summed up in technological progress. It’s not good to have most of the stock market advance [coming from] five companies, which buy back their own stock and buy up the shares of their rivals. I’m talking about Google, Apple, Facebook, Microsoft and Amazon. How does big tech’s success hurt innovation?
Their success does not represent some fundamental change in technology. It reflects, rather, a vast enlargement of government regulations,
Artificial intelligence evokes both excitement and fear. Elon Musk, for one, is fearful.
Musk is a tremendous entrepreneur and a quite stale thinker. When he starts pretending that he’s an ethical visionary, that human life is just a simulation in a smarter species’ game . . . A rather demoralizing view of humanity.
It’s really nuts. It’s clinically crazy. Silicon Valley should stop trying to make human beings obsolete and figure out how to make them more productive again.
GEORGE GILDER 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. 24 | FORBES FEBRUARY 28, 2018
DESPITE HIS best efforts to give away his wealth, Jon Huntsman Sr. remains extremely rich. He and his foundation have donated $1.8 billion—more than 150% of his current net worth—most prominently to cancer research, having founded an eponymous Salt Lake City institute to study the disease in 1995. (It claims to have identified more cancercausing genes than any other such center in the world.) Huntsman himself has battled cancer four times, and both his parents died from it—experiences that have given him a clear-eyed view of mortality. When Warren Buffett invited him to sign the Giving Pledge in 2009, Huntsman replied, “You don’t have the formula right. It should be 80%. Why should someone who has $5 billion give away only $2.5 billion?” Huntsman, 80, first landed on The Forbes 400 in 1989, 19 years after founding his chemicals firm, Huntsman Corp. Today it’s a $9.7 billion (sales) giant; Huntsman remains a director, having handed the chairmanship to his son Peter in December. Another son, Jon Jr., Utah’s former governor, is currently the U.S. ambassador to Russia.
RICHEST BY STATE BY LUISA KROLL JONATHAN KOZOWYK FOR FORBES; ILLUSTRATION BY CHRIS LYONS
A NEW GILDED AGE
I’ll refer you to Gordon Bell’s law: Every ten years, the rate of progress predicted by Moore’s Law produces a hundredfold rise in computer cost effectiveness. Which then requires a completely new computer architecture.
UTAH
POPULATION: 3.1 MILLION 2016 GROSS STATE PRODUCT: $156 BILLION (3% GROWTH) GSP PER CAPITA: $51,243 (RANKS NO. 29 NATIONWIDE) NUMBER OF BILLIONAIRES: 2 RICHEST: JON HUNTSMAN SR. NET WORTH: $1.2 BILLION
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Someone has to manage all those robots in accounting. Why not you? Did you ever think you’d see the day when you’d be working side-by-side with robots? Would you be PGTXQWU QT GZEKVGF! +H [QWoTG C %GTVKƂ GF /CPCIGOGPV #EEQWPVCPV [QWoXG OCUVGTGF VJG OQUV ETKVKECN RTCEVKEG CTGCU KP DWUKPGUU 9JKEJ OGCPU [QWoNN DG VJG QPG FQKPI VJG OCPCIKPI #PF PQV VJG QVJGT YC[ CTQWPF 8KUKV WU CV EOCEGTVKƂ ECVKQP QTI VQ UGG KH [QW JCXG YJCV KV VCMGU VQ ECNN VJG UJQVU
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LeaderBoard CONVERSATION
OUR DECEMBER 26 issue debuted the Just 100, ranking the country’s best corporate citizens. Maggie McGrath’s cover story chronicled how the scrum to attract top talent has prompted American companies to shower their workers with perks and benefits—“Competition is the new union,” as we put it. Said M&A analyst Dinesh Advani, “Employees have the power to be your biggest promoters or your biggest detractors, and I know which I’d rather have.” (Cover star Brian Krzanich, CEO of top-ranked Intel, muddied his company’s victory with a post-press-time stock sale before news broke of a major Intel-chip security flaw in early January. Tsk, tsk, sir.) Krzanich’s actions aside, many readers clamored for further tales of corporate kindness. “Please keep writing about companies with heart,” offered Benita Lee. “We need to know they’re out there.”
THE INTEREST GRAPH TheyTube, YouClick: The internet’s top-earning entertainers far outclassed the competition in our December 26 issue, gaining nearly six times the page views of the runner-up.
’TUBE TOPPERS Readers marveled at the money made by the highest-paid YouTube personalities— one toy-testing tot in particular. KISHALAYA KUNDU, BEEBOM.COM: “YouTube means big money these days, and nothing exemplifies this more than Forbes’ recently released list of the highest-earning YouTubers.”
NATHAN MCALONE AND JOHN LYNCH, BUSINESS INSIDER: “YouTube has
become the de facto launchpad for the next generation of internet celebrities.”
@SKM353: “PewDiePie got canceled . . . but he still got paid anyway.”
1,122,645 views
The Highest-Paid YouTube Stars 2017
The NHL’s Most Valuable Teams 243,735
Just 100 2018
@||SUPERWOMAN|| (LILLY SINGH): “I’m very grateful that
64,410
Chris Cline Could Be the Last Coal Tycoon Standing 34,443 Unions Are Dead? Why Competition Is Paying Off for America’s Best Workers 33,693 BlackRock’s Edge: Why Technology Is Creating the Amazon of Wall Street 12,482
“This might surprise less-enlightened CEOs and investors: Treating workers right ultimately benefits shareholders after all.”
“Cline is amused by the popular misconception that coal is on its deathbed. Coal’s death—if it comes at all—will be long and slow.”
my passion has become my career. Looking forward to seeing more women on the list next year. Thank you @Forbes @WomenAtForbes @YouTube”
@SALLYMACFOX26: “@Forbes says a 6-year-old @YouTube star’s channel earned $11 million this year! Ryan tests new toys. So on top of the $ he gets toys! What’s my 6-yr-old doing? Our kids are slackers.”
LENNY, TODAYFM.COM: “This will have you grabbing a toy and the nearest child.”
What Do You Get a Billionaire for Christmas?
How to Make a Warren Buffett–Inspired Cocktail
THE BOMB 410 VIEWS
28 | FORBES FEBRUARY 28, 2018
“The program expands and contracts, from a holistic view of firmwide risk down to a single trade in a split second.”
THEQUINT.COM: “It’s time for some adults to slump into a pit of shame.”
BY ALEXANDRA WILSON QUICKHONEY
11,751
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CONGRATS
TO THE 2018 HONOREES Forbes and SHOOK Research have teamed up to host the second annual gathering of the world’s top preeminent wealth advisors and industry leaders. This exclusive forum—convening a group that represents nearly $1 trillion of assets under management—will provide the industry’s highest-level insights tailored for America’s most elite advisors.
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ing officer in 2015, they made it a priority to find a woman. Lexi Reese, a veteran of Google and American Express, is one of two women on the six-person executive team, and firmwide, women account for 51% of Gusto’s 525 employees. Even after Gusto began its diversity initiative, applications from women didn’t flood in. Gusto assigned two in-house recruiters to the job, and it hired TalentDash, a Singapore-based firm that sources talent, to look exclusively for women. Though hiring women engineers took more time, Kim says, Gusto never dropped its standards. “It bothers me when people say that prioritizing diversity lowers the bar in terms of the caliber of talent you’re able to hire,” he says. “That is simply not true.” Nor, he says, was there any pushback from inside Gusto. Gusto also addressed its compensation policy. Since 2016 its salaries have been audited by Mercer, a human resources consulting firm, which has found no gender pay disparity. Benefits include 16 weeks of paid leave for a primary parent, plus an additional $100 a week HOW TO PLAY IT BY JOHN BUCKINGHAM for groceries and food deliverAt Armonk, New York’s IBM, spreading the gospel of ies, $100 a month for six months diversity has been a priority during the tenure of chief of housecleaning and up to $500 executive Virginia Rometty. She wasn’t dealt a pretty for a baby-sleep coach. hand when she took the helm in 2012, but she has Gusto’s women-only replayed many of her cards well, buying back stock and cruiting effort lasted six boosting the dividend. She’s also invested heavily in IBM’s Strategic Imperatives business, which includes analytics, cloud, months. It stopped, Kim says, mobile and security and accounts for nearly 50% of sales. The stock because “we exceeded our has a 3.6% dividend yield and is a bargain at 12 times next year’s goals.” In 2015 Gusto was earnings. trying to hit 18% women enJohn Buckingham is chief investment officer of AFAM Capital and gineers, the proportion maeditor of The Prudent Speculator. joring in computer science as undergraduates, according to the National Center for Education Statistics, and ital and hit a valuation of $4.5 billion in 2015 beit reached 21%. Since then it has started stafffore running into regulatory problems relating a Denver office, where it aims to increase the ed to the way it sold health insurance. It sacked engineer head count by at least 25 this year and its CEO, reworked its business model and saw its valuation slashed to $2 billion. Gusto, meanwhile, where the company is reprising its women-only recruiting strategy. Now that 17 of Gusto’s 70 engrew less feverishly. By late 2015 it had raised gineers are female, it’s getting a little easier, says $176 million from firms like CapitalG (formerly Gusto’s HR head, Maryanne Brown Caughey. Google Capital) and General Catalyst, and 75 in“It’s kind of a domino effect,” she says. “Women dividual investors handpicked by Reeves, includknow they’re joining a welcoming community.” ing Ashton Kutcher and PayPal cofounder Max While Gusto has made progress, its engineerLevchin. That year it broke through to a $1.1 biling team has no Latinos and no African-Amerlion valuation. Forbes estimates Gusto’s annual icans. Kim says Gusto has two hiring goals in revenue at nearly $100 million. 2018: senior women and racial diversity in enAt the start, Gusto’s founders acknowledge, gineering. “The way we make progress is by fodiversity was on the back burner, and as it cusing on one problem,” Kim says, “and then we grew, they found that it didn’t happen organimove on to the next.” cally. When it came time to hire a chief operatlieve that diversity is in itself a core strength that will enable us to write better software and build better products,” he wrote. In line with more than 80% of startups, according to a 2017 Crunchbase study, Gusto’s three founders are men. Kim and Gusto’s CEO, Joshua Reeves, both 34, met as undergrads in Stanford’s electrical engineering department. They launched Gusto in 2012 along with Tomer London, 33, an Israeli immigrant who got to know Reeves while a Ph.D. student at Stanford. Like its boom-and-bust competitor, Zenefits, which launched the following year, Gusto sells cloud-based comprehensive subscription software to small businesses to help them manage employee records like payroll and health benefits. At the outset Gusto even had a similar name, ZenPayroll, which it changed in 2015 when it started offering a more complete selection of employee-tracking software. Zenefits attracted $584 million in venture cap-
FINAL THOUGHT
“Urging an organization to be inclusive is not an attack. It’s progress.” —DASHANNE STOKES 50 | FORBES FEBRUARY 28, 2018
MARGIN PROPHET
WAREHOUSE À LA CARTE Getting goods from supplier to store is a $163 billion global industry ripe for a rethink, says Sean Henry, the 21-year-old cofounder of Stord, an Atlanta-based on-demand warehouse service. So you’re a kind of warehouse Airbnb?
Customers choose us not just for our warehouses but for our software. The industry runs off emails, phones and faxes—the average warehouse order takes 25 minutes of human interaction. We said, “If we build software to give customers more transparency into trucks and warehouses, we can help them be more efficient.” How many facilities do you have?
In the ballpark of 160. We go to mom-and-pop operators and tell them Stord can give them access to customers that wouldn’t otherwise use them. How do you persuade them to adopt this new model?
Everyone’s competing on delivery speed against Amazon. We can integrate our software into their existing warehouses, then see where they need to add distribution points in Stord’s network for a better supply chain. How fast can Stord move?
If Walmart in Georgia orders 5,000 units from a supplier and that supplier needs a new warehouse in Atlanta, they can get it within 24 hours.
MARGIN PROPHET BY AMY FELDMAN LEFT: THOMAS KUHLENBECK FOR FORBES
Entrepreneurs
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JAPAN: LOOKS TO THE FUTURE Japanese Companies Ideally Positioned to Power a B2C Revival in 2018. Japanese companies face a unique and envyinducing opportunity in 2018. Those that are prepared to take on more risk in the markets while channeling fund stockpiles towards workers have the chance to kick-start the business-to-consumer (B2C) sector, after years of relying on exports and the business-to-business (B2B) market. At the same time, artificial intelligence (AI) and robotics are playing an increasingly important role in the workplace, and companies with the foresight to adapt to unfolding technological developments will be in the driving seat when it comes to cheaper unit-per-cost manufacturing. Japanese companies have built up inhouse fund stockpiles to levels now estimated to outstrip gross domestic product (GDP) by as much as a multiple of three. Those funds have been progressively squirreled away since the global financial crisis, mirroring moves by risk-averse individuals to remove funds from the markets and keep them in low-interest bank accounts.
Fresh Incentives But Japan now stands at a crossroads. The risk-off stance of both companies and individuals will be difficult to maintain amid a shrinking labor market, which has also seen a depletion of experience and talent as skilled labor retires without immediate replacement. Japanese companies that empower younger workers with greater upfront returns, in terms of higher wages, can help fuel a selfperpetuating consumer boom. This move would entail companies shifting away from the longstanding export and B2Bdriven economic model that has sustained Japan for decades, and reinventing themselves in a domestic-demand-driven B2C market. The ensuing multiplier effect would not only underpin statistics such as GDP but also boost loan demand and drive interest rates out of the deflationary zone.
Rise of the Robots AI and robotics will also play a greater and more influential role going forward. Gone is the idea of robots as slave machines in 1
Japan
AI-equipped robots such as Pepper (above) will have a huge role to play in driving growth over the next decade.
production plants. CEOs interviewed for this special edition agree that robots of the future will be more intelligent, more adaptable, and eventually able to anticipate human needs more rapidly and more selectively than humans can. Companies that develop and harness the effective use of such robots will be at the cutting edge of manufacturing by the end of the first quarter of the 21st century, particularly as they take in more young workers imbued with the values of the new millennium. Industry leaders will be those that not only effectively utilize AI and robotic power but also prepare their staff for the emerging
realities of this new world. Companies that develop managers and skilled labor capable of using robots as their servants, and not as their workplace masters, will also avoid the possible polarization in the workplace, where low-end labor may be forced to compete with robots for jobs. 2018 marks 10 years since the onset of the global financial crisis. Japanese companies have put this decade to good use, rebuilding balance sheets, creating new overseas markets, and replacing obsolete plants and equipment. It is now time to reopen the floodgates and power the potential of domestic growth.
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KIKKOMAN CORPORATION: MULTIPLE MILESTONES HIGHLIGHT A CENTURY OF QUALITY Global food giant Kikkoman Corporation just marked the 100th anniversary of its incorporation in Japan, but the company is even prouder of its achievements overseas. Yuzaburo Mogi, Honorary CEO and Chairman of the Board of Kikkoman Corporation, is a nigh ageless embodiment of his company’s philosophy, and also the firm’s most energetic spokesman. “This is a time of anniversaries,” Mogi says, beaming. “We just celebrated the 100th anniversary of the establishment of what is now Kikkoman Corporation. Although our business goes back centuries, we legally incorporated in 1917.” Asked about the company’s century of changes, Mogi says it’s more important to talk about what has not changed: “Our focus on consumers has been at the center of Kikkoman’s approach since the beginning.” He notes that even before its legal incorporation, the soy sauce brewer set up a research laboratory. “Our research facility worked constantly to improve and unify the quality of our
products,” he says proudly. “Quality for the end consumer became our guiding principle. And that has never changed.”
From Japan to the World Mogi notes that this year also marks the 45th anniversary of the company’s first overseas plant in Walworth, Wisconsin and the 20th anniversary of its Folsom, California plant. The two facilities have helped make Kikkoman a household name in North America. But Kikkoman is a Japanese company. Surely the Japanese plants are more important? “Kikkoman is a global company,” he corrects. “One with a proud Japanese heritage. But our overseas markets contribute more to our sales and profits. America is very important, and Europe and Asia are growing rapidly.” Mogi smiles again, for there are more celebrations to discuss. “At the end of last year we marked the 20th anniversary of our European flagship plant in the Netherlands, which is our production base for the region.” He points out that the European and American markets are vastly different. While the U.S. has regional variations in culinary styles, in general “American”-style cooking is more similar than different. Not so with Europe. “Each country in Europe has a different food culture, and some have more than one,” he explains. “Because Kikkoman is so highly consumer-oriented, that means respecting, celebrating, and becoming a part of 20 or 30 different food cultures. We are constantly developing recipes and different ways to use our products that will enhance each different local cuisine.”
A Taste for Growth
Yuzaburo Mogi, Honorary CEO and Chairman of the Board of Kikkoman Corporation
His approach must be working, because European sales have been growing in double digits for over a decade. Growth is the name of the game in Asia as well. Although the company now has factories and/or sales offices in
Taiwan, Thailand, China, the Philippines, and Australia, Kikkoman’s ongoing Asian expansion began with a plant in Singapore. However, Mogi says they are too busy meeting growing Asian demand to think about the 35th anniversary of this plant in 2020. “Asian consumers already have their own local seasonings that are similar to soy sauce,” he notes. “However, they are not accustomed to the richly flavored, aromatic sauce that is the hallmark of Kikkoman. We are already seeing solid growth in these markets, and I expect even greater results in the future.” For a company that has been around in one form or another for centuries, it is inspiring to hear the chairman talk seriously about “the next hundred years.” Mogi is constantly looking to the future, envisioning more growth in today’s markets and the prospect of opening up new markets in South America and Africa in the decades to come. But some things, he points out, will never change. “Even a hundred years from now, our focus will still be on the consumer,” he says.
Yuzaburo Mogi is a descendant of one of the founding families of Kikkoman, which is one of the oldest continually running businesses in Japan. He became company President in 1995, was named Chairman in 2004, and assumed the title of Honorary CEO and Chairman of the Board in 2011. Mogi holds an MBA from Columbia University. www.kikkoman.com Japan
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THK: BOOSTING GROWTH CAPACITY THROUGH AI AND ROBOTICS Akihiro Teramachi, Chief Executive Officer and President of THK Co., Ltd, is looking to increase his company’s growth capacity by leveraging Artificial Intelligence (AI) and robotics in the face of a shrinking labor market. THK, the company that pioneered the Linear Motion Guide mechanism, has also relocated its head office to strengthen group-wide cooperation, improve operational efficiency, and enhance business continuity planning. In addition, the company is investing in Japan,
China and Vietnam to maximize production in response to soaring demand driven by the rise of the Internet of Things (IoT), the automobile industry, and also as a result of the automation of production facilities. “We have our hands full just keeping up with demand,” says Teramachi. “In addition to the spread of IoT, semiconductor-related investment is expanding as a result of the increase in electric vehicles and advances in self-driving technologies. We are also seeing increased overall demand for our products given the steady growth in investment related to the automation of production facilities against a backdrop of labor shortages.”
Brave New World
Akihiro Teramachi, Chief Executive Officer and President of THK Co., Ltd.
Teramachi has triggered a major change in the company’s business style driven by AI, robotics and IoT as the third strategic pillar for THK. The challenge is to develop products that match changing needs, and to simultaneously consider sales-based uses and other applications. And yet, Teramachi is wary of over-reliance on AI and robotics. “If we allow robots to penetrate society in their existing format, they will not be in a position to purchase goods or services, leading to shrinking consumption, smaller markets, and an atrophied economy. In addition, humans would lose their position in the workplace. We must avoid this state of affairs,” he says. “Looking ahead, humans must actively trust their work to AI and robotics, and focus their efforts on high-value-added creative work in other areas where this is not possible, such as anticipating needs that others cannot see. The 10,000-plus employees of the THK Group may be forced to alter the way they perform their jobs,” Teramachi says. With robots gaining the ability to do tasks currently performed by mid-income class workers, Teramachi sees a high potential for the workplace to polarize, between low-salary labor hired at costs that undercut robotics, and high-income workers who need to be able to constantly think on their feet. “We
need to develop human resources capable of qualifying for this high-income group at THK, even while society becomes polarized,” he says.
Changing Minds Education, training and self-awareness are vital in this process, but one hurdle is that the global education system continues to revolve around the idea that humans are irreplaceable. Teramachi believes it is essential for people to be able to adapt to changes in society and the environment, and that we must develop an education system that supports this. “The good thing about the Japanese is that they are a close-knit, homogenous and dutiful society, which is extremely useful when it comes to ensuring quality and safety. On the other hand, these qualities can also impede the launching of, and reactions to, change. If the Japanese education system can be steered towards providing pupils with a sense of independence and self-respect, along with a healthy appreciation for change while maintaining its other positive points, then there is a good chance it can develop students capable of guiding global society in a better direction,” Teramachi says.
Akihiro Teramachi graduated from Keio University in 1971 and joined THK Co., Ltd. in 1975. He became a Director in 1982 and Vice President in 1994, before taking over as CEO in 1997. www.thk.com Japan
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launching redesigned versions of the cars that started this renaissance 15 years ago. For Rolls-Royce, it’s the 2018 Phantom VIII, the stately sedan that is the epitome of bespoke luxury. For Bentley, it’s the redesigned Continental GT, a refined Grand Tourer delivering a combination of performance and luxury. New Rolls-Royce Phantoms don’t come along very often: The 2018 model is only the eighth edition since the Phantom was introduced in 1925. Men as diverse as Fred Astaire and John Lennon owned Phantoms throughout its history. As with all Phantoms, the newest edition was designed for the rear passenger. When the coach doors gently close, you are embraced in a plush, silent sanctuary, soothed by a starlight canopy that can be customized to reflect your birth constellation. Up front, the Phantom’s dashboard can be transformed into a rolling art gallery, where owners can display works behind a single piece of glass that also houses the instrument cluster and a retractable infotainment screen.
AUTOS
But here is the proverbial fork in the road: While Bentley plans to accelerate growth by leveraging the engineering might of Volkswagen, including new electrified power trains, Rolls-Royce shares little with BMW. Instead, it has developed its own, scalable platform, which underpins the Phantom and future models, including Project Cullinan, its first four-wheel-drive utility vehicle, due to be revealed later this year. Bentley’s ambition is to grow sales to 20,000 vehicles a year, while Rolls-Royce aims to stay more exclusive, at fewer than 6,000. By comparison, Maserati sold 46,186 vehicles last year, Lamborghini just 3,104. At prices frequently north of $400,000, RollsRoyce can afford to thumb its nose at the notion of sharing platforms with a “mass-market” brand. Its biggest challenge is shedding the stodgy image still lingering from those notorious Grey Poupon commercials from the 1980s. Bentley, by contrast, occupies a unique middle ground between the highest-priced Mercedes-Benzes and the cheapest Rolls-Royce models. It’s done a good job of creating sex appeal, says Rebecca Lindland, a senior analyst at Cox Automotive, “but the reality is these brands have to make money.” With the average price of a Bentley around $250,000, you’d expect the company to be raking in profits. But its operating margin through September 2017 sank to 2.5%, well below that of proletarian automakers like General Motors and Ford. So modifying a Porsche platform Wheeling: Bentley’s Continental GT is designed for drivers, not passengers. could help Bentley keep costs down and And with the average age of Rolls-Royce buyers boost margins, as long as it doesn’t sacrifice its brand dipping to the low 40s (thanks to younger custom- DNA, notes LMC Automotive analyst Jeff Schuster. ers in markets like China), the new model was also Besides, he adds, “leveraging Porsche isn’t exactly engineered to be as pleasing to drive as it is to be slumming it in terms of technology and capability.” driven in. The Phantom floats along on an electriThe reality is both automakers have found vically controlled suspension, called Magic Carpet able business models. “If I compare the cars and Ride. And a new twin-turbocharged, 12-cylinder drive them, they are different,” says Wolfgang engine delivers 0 to 60 mph in 5.1 seconds. Dürheimer, the recently retired CEO at Bentley. Meanwhile, Bentley’s new Continental GT, like“Rolls-Royce is ultimate luxury. We are luxury and ly to start at around $240,000, was designed for a performance.” driver who loves performance, while still swaddling And Rolls-Royce doesn’t disagree. “We are passengers in luxury. Its twin-turbo, 12-cylinder en- operating in a completely different price segment gine powers the car to a top speed of 207 mph and than Bentley,” says CEO Torsten Müller-Ötvös. goes from 0 to 60 mph in a dazzling 3.6 seconds. Of course, in this rarefied air, where wealthy The dashboard also astonishes. An optional owners possess an average of seven cars, it’s not three-sided display rotates, allowing the driver to about price anyway. “Our clients have garages like choose between the sleek wood veneer, a 12.3-inch we have wardrobes,” Müller-Ötvös reasons. “For touchscreen and three elegant analog gauges. every occasion there is the right car.” FINAL THOUGHT
“Whither goes thou, America, in thy shiny car in the night?” —JACK KEROUAC 120 | FORBES FEBRUARY 28, 2018
THE HAUTE LIST
LAMBORGHINI TIME Fast times call for a watch built for speed. The Swiss watchmaker Roger Dubuis will begin a partnership with Lamborghini Squadra Corse this spring to produce limitededition watches. The Excalibur Aventador S is made in a carbonfiber case with a movement inspired by the engine block of the Lamborghini Aventador. (Another model is inspired by the Huracàn Super Trofeo EVO.) Like the legendary Italian sports car, the Aventador S timepieces will have very limited production and come with luxurycar sticker prices—88 pieces will be produced with accents of Lambo’s Neptune Blue and Giallo Orion yellow (retailing for $194,500) while an 8-piece orangeaccented edition will cost $216,000.
THE HAUTE LIST BY MICHAEL SOLOMON
Forbes Life
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THOUGHTS ON
Value
—BARBARA KINGSOLVER
“WHO STEALS MY PURSE STEALS TRASH; ’TIS SOMETHING, NOTHING.” —WILLIAM SHAKESPEARE
“EVERY ADVANCE IN KNOWLEDGE BRINGS US FACE TO FACE WITH THE MYSTERY OF OUR OWN BEING.”
“Statements of fact are after all statements, which presumes a number of questionable judgments.”
—MAX PLANCK
—TERRY EAGLETON
“Law, and force, and ether, and the like, are merely useful symbols, while the ignorant and the careless take them for adequate expressions of reality.”
“JUST BECAUSE PEOPLE THROW IT OUT AND DON’T HAVE ANY USE FOR IT DOESN’T MEAN IT’S GARBAGE.” —ANDY WARHOL
“Beauties in vain their pretty eyes may roll; charms strike the sight, but merit wins the soul.”
“LOOK BENEATH THE SURFACE; LET NOT THE SEVERAL QUALITY OF A THING NOR ITS WORTH ESCAPE THEE.”
—ALEXANDER POPE
—MARCUS AURELIUS
“Price is a proposed point of agreement between a buyer and seller. The proposal is the key. It is not a marching order.”
—THOMAS HENRY HUXLEY
“GOLD IS THE CORPSE OF VALUE. WEALTH STORED UP IN GOLD IS DEAD.”
—JEFFREY TUCKER
—NEAL STEPHENSON
“NETWORKS GAIN SOVEREIGNTY THROUGH THEIR OWN DIGITAL CURRENCY.”
“IT IS IN DIALOGUE WITH PAIN THAT MANY BEAUTIFUL THINGS ACQUIRE THEIR VALUE.”
—OLAF CARLSON-WEE
—ALAIN DE BOTTON
“One does not cease to treasure a gem simply because one owns another that is larger.” —MARIE BRENNAN
“THE ONE WHO GETS WISDOM LOVES LIFE; THE ONE WHO CHERISHES UNDERSTANDING WILL SOON PROSPER.” —PROVERBS 19:8
FINAL THOUGHT “Money’s merits are measured by its use, not amount.” —MALCOLM FORBES
SOURCES: OTHELLO, BY WILLIAM SHAKESPEARE; ANIMAL, VEGETABLE, MIRACLE, BY BARBARA KINGSOLVER; CRYPTONOMICON, BY NEAL STEPHENSON; THE RAPE OF THE LOCK, BY ALEXANDER POPE; MEDITATIONS, BY MARCUS AURELIUS; LITERARY THEORY: AN INTRODUCTION, BY TERRY EAGLETON; WHERE IS SCIENCE GOING?, BY MAX PLANCK; THE EVOLUTION OF THEOLOGY, BY THOMAS HENRY HUXLEY; THE TROPIC OF SERPENTS, BY MARIE BRENNAN.
124 | FORBES FEBRUARY 28, 2018
CLOCKWISE FROM TOP LEFT: UPPA/ZUMAPRESS/NEWSCOM; AGIP/RDA/GETTY IMAGES; PRISMA/UIG/GETTY IMAGES; PERRY REICHANADTER; PICTURES LTD/CORBIS/GETTY IMAGES; ETHAN PINES; PAKO MERA/ALAMY; THE PRINT COLLECTOR/GETTY IMAGES; COLIN MCPHERSON/CORBIS/GETTY IMAGES
“Value is not made of money, but a tender balance of expectation and longing.”
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