Forbes USA 02 December 2013 (e magazine full)

Full E-magazine Forbes English version (copyright)

Muhammad Yunus

Microloan pioneer, Nobel laureate— and Forbes’ lifetime achievement award winner for social entrepreneurship.

Liberia’s president, a Nobel Peace Prize winner, embraces altruistic capitalism.

p 98

ENTREPRENEURS

CAN SAVE THE WORLD

GOVERNMENTS CAN’T ERASE POVERTY

NOR CAN BIG CORPORATIONS

THESE ARE THE PEOPLE AND IDEAS THAT ARE DOING IT.

DECEMBER 2 • 2013 EDITION

SPECIAL PHILANTHROPY ISSUE

Ray Chambers

From The Forbes 400

to the world’s point man on malaria and AIDS.

p 109

Jef Skoll

Taking action by telling stories.

p 54

Patrice and Precious Motsepe

The first African billionaires to

join the Giving Pledge.

p 112

Francine LeFrak

How a failed movie turned into

a job program for Rwanda’s poor.

p 110

EXCLUSIVE:

THE TOP 50 PHILANTHROPISTS WHO ACTUALLY GAVE MONEY(VERSUS JUST TALK ABOUT IT)

ROBIN HOOD, REINVENTED:

WALL STREET’S FAVORITE CAUSE CHANGES COURSE

PORTFOLIO:

THE BUSINESSPEOPLE TURNING AROUND POVERTY IN AFRICA

BILL GATES AND BONO:

ON THEIR ALLIANCE OF FORTUNE AND FAME PLUS: BONO’S ODE

TO WARREN BUFFETT

Liesel Pritzker Simmons

The anti-Paris Hilton: An

heiress focuses her inheritance

in the North Delegates’ Lounge

of the United Nations.

Grow Appalachia’s community gardens.”

John Paul DeJoria, CEO and Co-founder

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4 | FORBES DECEMBER 2, 2013

66 | special report: philanthropy

Using the tools of capitalism to save the world’s poorest people.

cover photograph by michael prince for forbes

13 | FACT & COMMEnT

African innovators developing technology

to make essential tasks easier.

Plus: FORBES makeover.

26 | THE wEALTHiEST AFRiCAnS

Ten tycoons in retail, oil, cement and more.

28 | ACTivE COnvERSATiOn

How powerful is Vladimir Putin?

66 | when bill met bono

Fame, fortune and f nding

solutions A conversation.

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ESQ fuSion AnD CATALYST

A NEW PERSPECTIVE ON MODERN DESIGN MEN’S FUSION DUAL-TIME WATCH AND NEW CATALYST ™ CHRONOGRAPH.

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36 | THE ESpn OF viDEOGAMES

Twitch has big-league audiences watching e-Sports online It has big advertisers, too.

by david m ewalt

42 | BiGGER THAn CRAiSinS

Ocean Spray has a Yankee knack for squeezing new dollars out of the same old cranberries.

by alexander konrad

TECHnOLOGy

46 | pAnDORA pLAyS niCE

The service that musicians love to hate just wants the same deal as Apple.

by connie guglielmo

EnTREpREnEURS

50 | AnD BABy MAkES   MOnEy

4moms develops high-tech gear for infants Without a key pivot, it might still be making

showerheads.

by karsten strauss

54 | pOwER OF THE STORy

In Hollywood—or anywhere—narrative is still the best way to inspire and compel change.

by jeffrey skoll

invESTinG

56 | “yOU wAnT A STOCk LikE

MERyL STREEp”

Bill Smead likes to buy big brands that others

have given up on

by abram brown

58 | niCE TRiCk FOR GOLD TRADERS

Smarting from a gold buy? Be clever with your

capital loss deduction.

Next great spectator sport? Videogames.

56 | contrarian’s closeup

Mutual fund star Bill Smead nabs

large companies on the cheap.

114 | contented castaways

A $9 million cruise business.

booze-46 | changing its tune

Pandora’s music royalty war.

* Certain banking and brokerage accounts may be ineligible for real-time money movement, including but not limited to transfers to/from bank IRAs (CD, Money Market), 529s and Credit Cards and transfers from IRAs, Loans (HELOC, LOC, Mortgage) and accounts held in the military bank Merrill Edge is available through Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S), and consists

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The link between Bill Gates and Bono?

A capitalist’s outlook on solving global poverty

by randall lane

Paul Tudor Jones spent 25 years building a great American foundation Now he’s upending it.

Liesel Pritzker Simmons ignited the breakup of one

of America’s great family fortunes What she’s done with the money is actually far more interesting

When the young and the afuent want to blow of steam in style, they head for Yacht Week.

by j.j colao

On philanthropy.

78 | an education

Can Paul Tudor Jones fx America’s

broken public schools?

98 | nation builders

FORBES convenes a

philanthropic SWAT team

to help a troubled country.

86 | she’s all in

Liesel Pritzker Simmons,

Africa’s activist impact investor

Spreading

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2013144

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dEcEmBER 2, 2013 — volumE 192 NumBER 8

Please keep the conversation going.

This issue marks a step forward in honoring that quest A century ago, after America’s legendary genera-tion of industrialists had created unprecedented fortunes, these great entrepreneurs—led by Carnegie, Rockefeller and Morgan—turned their formidable problem-solving skills (and the entitlement to give that comes with mak-ing money yourself ) on the era’s great social issues With innovations in technology and fnance creating a wave of disruptive megabillionaires, we’re now living through a second golden age of philanthropy And with the planet, and its problems, now stitched together in ways incon-ceivable in Carnegie’s time, this one has the potential to

re-be still more profound

Governments no longer seem capable of executing big ideas Ditto for major corporations It’s left to entrepre-neurial capitalism to innovate And modern- day philan-thropy taps the same skills, substituting public good for profts in instances where there’s not yet an economic interest to do the right thing

We centered this year’s issue on solutions for extreme poverty, from America to Africa While that’s a noble goal worth focusing on, it’s also a prism to view the larger scope

of philanthropy, whatever your interest There are lessons here for anyone who believes in market-based, permanent answers to large-scale problems F

EDITOR’s nOTE: Cognizant of the reaches of line surveillance—and, more concretely, the fear engendered among some people who provide us information, we have introduced a Web-based system for securely, anonymously sharing material with our journalists We’re calling it SafeSource.Anyone can visit safesource.forbes.com and use the anonymity software Tor to upload sensitive doc-uments or messages for our reporters If it all sounds paranoid—well, that’s the idea We want our sources

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Unifying business communications

for the new way to work.

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BY STEVE FORBES, EDITOR-IN-CHIEF

“With all thy getting, get understanding”

The sick notion that more tion is good for growth is epito-mized by the Phillips Curve, named after a New Zealand economist who posited that if you want low unem-ployment you must generate some infation and, conversely, if you want to reduce infation you must engineer higher levels of unemploy-ment But the Phillips Curve has been refuted in countless studies over the years, including a number conducted by Nobel Prize-winning economists

infa-No matter; it’s today’s dogma

Money is a measure of value, just as inches and minutes are measures of length and time Money facilitates transactions—buying and selling—

between willing parties It’s a claim on products and services, and it’s infnitely less cumber-some than barter Changing the intrinsic value of money no more leads to sustainable growth than would changing the number of minutes in an hour or how many inches constitute a foot

John Maynard Keynes rightly labeled tion as a form of taxation, and a particularly in-vidious one It arbitrarily produces winners and losers, with no concern for efort and reward or for meeting the needs and wants of customers

infa-It rewards speculation rather than such tional ways of getting ahead as hard work, sav-ing and innovating, thereby undermining social trust and demoralizing a society

tradi-Nevertheless, central bankers like Ben nanke and his putative successor, Janet Yel-len, claim we need more infation, preferably

Ber-an Ber-annual rate of 2% to 2.5% That level would cost a family making $40,000 annually an extra

$800 to $1,000 a year in higher prices If you ever run across a central banker or an economist

The resounding vicTory

of N.J Governor Chris Christie has

people speculating about the 2016

presidential race, particularly on the

Republican side, since it’s a given

among pols and pundits that

Hil-lary Clinton’s nomination for the

Democrats is a foregone conclusion

(it isn’t, but that’s another

discus-sion) The ObamaCare debacle and

the foreign policy crises resulting

from the President’s weakening of

American power will be in the forefront

So will the economy And it’s in this area that

candidates must exhibit an understanding that

has dangerously eluded too many policymakers

and economists: Most economic thinking today

is bankrupt This intellectual exhaustion and

sterility have been graphically exhibited recently

by several news stories, a U.S Treasury

Depart-ment report and a tax proposal by the IMF

The New York Times and the Wall Street

Journal ran front-page articles and The

Econo-mist a cover story on a topic that is truly bizarre:

The world economy is sufering because we

don’t have enough infation The Journal piece

focused on Europe: “Too little infation will

threaten Europe’s fragile recovery The latest

numbers signal that dangerously low infation—

which Japan struggled with for two decades

and the U.S central bank has labored in recent

years to avoid—is at Europe’s front door.” The

Times story was equally strange: “There is

growing concern inside and outside the Fed that

infation is not rising fast enough Economists,

including Janet Yellen, President Obama’s

nominee to lead the Fed starting next year, have

long argued that a little infation is particularly

valuable when the economy is weak.”

as a way to stimulate the economy, and that, too, has failed Instead of a vigorous expansion, the move hurt the economy by distorting credit mar-kets Rent control damages housing markets; the Fed did the same with our capital markets

Another example of economic illiteracy was a U.S Treasury Depart-ment report that sharply criticized Germany’s supposedly destructive economic policies Every six months the Treasury issues an analysis of

whether countries are using their currencies

to gain a competitive advantage over U.S ex-ports This report har-rumphed that Germany was guilty of relying on exports for most of its growth and that this was hurting its neighbors and, indeed, the whole world “Germany’s anemic pace of domes-tic demand growth and dependence on exports have hampered rebalancing at a time when many other euro-area countries have been under severe pressure to curb demand and compress imports

in order to promote adjustment.”

Adam Smith had it right more than

two centuries ago with The Wealth of

Nations, in which he pointed out that

with trade, both sides get something from the exchange; otherwise, they wouldn’t go through with it

Trade enhances wealth Look at the incredibly intricate global sup-

who shares this weird view, ask that

person which elected body gave the

Fed—or any other central bank—the

authority to impose such a tax

In the early part of the last decade

the Federal Reserve and the U.S

Treasury Department instituted a

weak-dollar policy, which led to the

housing bubble, the boom in

com-modities, the infation in farmland

prices, hothouse growth in the

fnan-cial sector and a bubble in bonds—

and, perhaps, stocks But just as many

doctors in the mid-19th

century fercely resisted

Lister’s germ theory by

refusing to wash their

hands before

surger-ies, these policymakers

remain wedded to their

malignant theories

The idea that

infa-tion can be controlled

like a thermostat or the

accelerator of an

auto-mobile is preposterous

A central bank can

cre-ate bank reserves, but

how they’re employed in terms of

creating credit is out of its hands In

the 1970s the velocity of money—that

is, how many times a dollar is spent

during the course of a year—turned

out to be beyond the control of our

central bank, which was one reason

that infation reached such

danger-ous levels The Federal Reserve has

tried a new trick with its so-called

quantitative easing programs of

pig-ging out on long-term bond purchases

to suppress long-term interest rates

FACT & COMMENT — STEVE FORBES

ply chains that make possible such products as the iPad Folks at the Treasury Department don’t know this basic fact: Countries don’t trade with each other; companies and indi-viduals do Treasury assumes that a merchandise trade surplus is equiva-lent to a company making money and that a defcit is equivalent to sus-taining a loss If that were true, how did the U.S become the mightiest economy in the history of the world while running trade defcits for 350

of the past 400 years?

The fnal example of the lectual illness of economics today is

intel-a proposintel-al fointel-ated by the IMF thintel-at countries quickly introduce a one-time wealth tax of 10% Put aside the fantasy of “one-time.” Where in the world did the supposedly bright lights

of the IMF get the idea that ing capital on a scale like that would aid economic growth? Sorry, IMF pooh-bahs, without capital creation and investment, we don’t expand.The recipe for sustained prosper-ity is simple: stable money, low tax rates, and reasonable rules and regu-lations, a.k.a the rule of law Fooling around with money is like fooling around with weights and measures

destroy-It harms commerce—and much else.Many times candidates allow themselves to be overawed by highly credentialed economists They shouldn’t—just as efective Presi-dents such as Lincoln didn’t allow impressive-looking generals and admirals to overawe them regarding the military F

Edible enlightenment from our eatery experts and colleagues Richard Nalley, Monie Begley, Randall Lane and Chef Jef Lamperti,

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mega macau

Macau’s casino chiefs are transforming what was

once muddy swampland outside the Chinese gambling hub

into a Vegas-style casino capital Sheldon Adelson, the head

of Las Vegas Sands, ignited the building spree in 2007 when

he opened his Venetian Macao on what he named the Cotai

Strip “Everyone thought it was headed straight to the

bank-ruptcy court,” he says “Now if people could cut of their arms

to get a spot on Cotai, I’d have a warehouse full of arms.” Last

year the Chinese city’s casinos pulled in $38 billion from

gambling (six times the Las Vegas Strip) Once six new Cotai

casinos come online, that number could break $50 billion

Galaxy macau: Hong Kong billionaire Lui Che Woo controls the Strip’s largest plot and will complete his expansion there in 2015 He bought the neighboring Grand Waldo for more than $400 million this year, and his Cotai properties made $4 billion in gambling revenue

ciTy of dreamS: This resort, opened in 2009, had gambling

revenue of $4.5 billion in 2012 It’s owned by Melco Crown

En-tertainment, a joint venture between Australian billionaire James

Packer and Lawrence Ho, the son of casino pioneer Stanley Ho.

STudio ciTy: Melco’s newest property, costing $2 billion, is

slated to have a Hollywood theme and open in mid-2015.

mGm china: A $2.5 billion venture between MGM Resorts and

Hong Kong’s richest woman, Pansy Ho (Stanley Ho’s daughter),

the MGM China will have 500 gaming tables, 2,500 slots and

1,600 hotel rooms Its sister, the MGM Macau, situated

down-town, made $2.7 billion from gaming last year.

Wynn Palace: American casino billionaire Steve Wynn is building a $4 billion, 2,000-room Cotai Strip casino resort that’s scheduled to open in 2016 His Wynn Macau, down- town, pulled in $3.4 billion in 2012.

SJm holdinGS: Macau kingpin Stanley Ho, who’s been in the game for four decades, is planning a casino with 700 tables, 1,000 slots and 2,000 hotel rooms His 17 other casinos and gaming parlors altogether brought him $10.2 billion in gambling revenue in 2012.

TaiPa: A new high-rise residential area Its fast growth is fueled by the casino boom.

By Michael Roney

Strategic Giving With Donor-Advised Funds

D onor-advised funds have signifcantly outpaced traditional nonprofts and foundations to become

philanthropy’s fastest-growing vehicle for giving.* A case in point is Schwab Charitable™, which has more than $5 billion in assets under management In the past year, Schwab Charitable has doubled its new accounts and reported 55% growth in assets under management.

Why the surge in popularity? There’s no doubt that donors

increasingly recognize that these charitable accounts offer

advantages in convenience, giving power and tax benefts

“Donor-advised funds are simple, effcient and tax-smart for

people of all income and wealth levels,” says Schwab

Chari-table President Kim Laughton “Our chariChari-table account sizes

range from $5,000 to more than $500 million.”

Why Choose a Donor-Advised Fund?

Compared to a private foundation, the difference in

adminis-tration is huge “Private foundations can be two or three times

as expensive to maintain and operate,” Laughton points out

“They require more administration, including up-front legal

setup and an annual tax fling; they have lower deductibility

limits; and they value some donations at cost basis, while

donor-advised funds can use fair market value.”

Contributions to donor-advised funds, which are

regis-tered as public charities, generate tax benefts immediately

“Donations of appreciated assets can be particularly

valu-able,” notes Laughton “You can enjoy a current-year

market-value tax deduction and avoid payment of capital gains taxes

on their sale, which allows you to give more to the charity.” The higher deductibility limits of donor-advised funds make them well suited for donating complex assets—for example, privately traded stocks and partnerships (such as shares in

a company), as well as real estate, collectibles or artwork Grants can be recommended for as little as $50 to any public charity (501(c)(3) organization) at any time

pRoMotion // pHiLAntHRopY

pHiLAntHRopY // pRoMotion

Simpler and More Convenient

Donor-advised fund accounts are simple for both donors and

charities “As a donor, you see your charitable account along

with all of the other investment or bank accounts that you

might manage online The management and processing—

all of the grants, contributions and tax forms—are handled

by the system, and you can access reports at any time,”

Laughton explains “Charities beneft as well: They

under-stand that clients who have donor-advised funds tend to be

some of their better prospects for future giving; and

donor-advised funds can easily process appreciated and complex

assets, which can be a burden for a charity Additionally,

some foundations have made the decision in the past few

years to convert to donor-advised funds after realizing that

the time, expense and compliance risks associated with their

traditional organizational model were distracting from their

charitable goals.”

Laughton characterizes legacy giving with donor-advised funds

as “wonderfully simple.” When completing the donor-advised

fund application, you can name family members, friends or

advi-sors to become succesadvi-sors and managers of your account or

you can distribute the account to your favorite charities

“In 2011, we launched the Charitable Legacy Program, which

allows donors to name charities to receive donations not only

at the time of their death, but for a period of years after their

death,” she says “If you’ve got quite a bit of money and you

want to support a charity over a long period of time, you can

explicitly request that and easily change those instructions at

any time during your life.”

A Strategic Win-Win

With their fexibility, high value and convenience, donor-advised

funds can offer a win-win for donors and charities alike That

helps explain why Schwab Charitable has facilitated over $3.6

billion in grants to charities on behalf of its donors

There hasn’t really been a better time for charitable

giv-ing As Laughton points out, “The robust markets and recent

increase in the highest income and capital gains tax rates

are making the value of the charitable deduction even higher,

allowing people enhanced rewards for strategically managing

“Donor-advised funds are

simple, efcient and tax-smart charitable

accounts for people of all income

and wealth levels.”

Kim LaughtonSchwab Charitable President

*National Philanthropic Trust 2012 Donor-Advised Fund Report

Since inception, Schwab Charitable, a leading national advised fund, has given $3.6 billion dollars to charitable organiza- tions For more information about how a Schwab Charitable account can be part of your financial plan, please call 800-746-6216, or visit schwabcharitable.org.

donor-A donor’s ability to claim itemized deductions is subject to a variety of tations depending on the donor’s specifc tax situation The tax information herein is general in nature and not intended as specifc, individualized advice Where such advice is necessary and appropriate, donors should consult with their tax and/or legal advisors.

limi-Tax deductibility limits are different by asset type Contributions that exceed Adjusted Gross Income (AGI) limitations may be carried forward and deducted for fve years The donor must obtain a qualifed appraisal and fle IRS Form 8283 for all gifts other than cash and publicly traded securities Your ability to claim itemized deductions may be subject to further limitations depending upon your specifc tax situation Please consult your tax advisor Schwab Charitable is the name used for the combined programs and ser- vices of Schwab Charitable Fund, an independent nonproft organization Schwab Charitable Fund has entered into service agreements with certain affliates of The Charles Schwab Corporation.

(1213-7670)

Building Your Giving StrategyLaughton suggests building a giving strategy in four steps:

Understand your motivations and values Begin by

considering your life experiences and what’s important

to you What has touched you? What experiences have you had? to what charities do you enjoy giving? What challenges do you see in your community or in the world where you’d like to make a diference?

Assess your financial resources How much can you

aford to give? Do you have any assets that perhaps can be used for charity, such as appreciated stock on which you really don’t want to be paying capital gains?

“Many people regularly set aside a certain amount of money for retirement or education goals each month,” Laughton says “You can think about charitable giving

in the same way.”

Choose your level of involvement “Some people

want to roll up their sleeves and spend a lot of time with the charities they support and may want to get their families involved,” says Laughton “others may not have the time or the interest to do that and just want

to give away money as efciently as possible Either way, a donor-advised fund can be very supportive.”

Pick your recommended charities once you’ve set

up the donor-advised fund, you can identify your ferred charities and then monitor grants at whatever frequency you wish “it’s sort of an iterative process, because you may know exactly where you want to give, or as time goes on you may have new causes and charities to add to your list,” says Laughton

pre-1

2

3

4

The activist investor’s 2013

run continues as Icahn

Enterprises posts strong

quarterly results that leave

shares at their highest price

since 2008.

Evan Williams

$1.8 billion, the biggest tech IPO since Facebook.

Jef Bezos

Facebook reports stellar

quarterly earnings but

spooks investors by also

reporting a decrease in

daily users, especially

younger teens.

Elon Musk

Ð$340 MILLION

NET WORTH:

$6.9 BILLION

Investors slam the brakes

on Tesla Motors when the electric car maker reports production fi gures that fail to meet Wall Street’s expectations.

Reid Hof man

NET WORTH OF EVAN WILLIAMS IS BASED ON TWITTER’S OPENING PRICE

FIGURES REFLECT THE CHANGE IN VALUE OF PUBLICLY TRADED HOLDINGS FROM OCT 23 TO NOV 6

SOURCES: INTERACTIVE DATA VIA FACTSET RESEARCH SYSTEMS; FORBES.

0.5%

Carl Icahn’s current

ownership stake in Apple—

worth roughly $2.5 billion.  

How much money did you give to

charity last year?

capital community

what happens when

meets

RingSide creative finds financial solutions close

to home Finding the funds needed to grow a business can be a challenge When looking for capital to expand their integrated media studio, RingSide Creative, LLC turned

to Fifth Third Bank and the Michigan Economic Development Corporation — securing investments of over $7 million This allowed them to refinance their acquisition and equipment costs and increase staff by nearly 15% It’s another example

of how investing in more than just a business is Pure Michigan

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22 | FORBES dEcEmBER 2, 2013

2.2 MILLION

ChryslerÕs new-vehicle sales in 2012, up

66% from 2009, when Sergio Marchionne was named the company’s chief executive.  

Patrick MutahiMVERIFIED

Verifying documents can be a huge undertaking in kenya Mutahi, 24, and two colleagues decided to do something about it, founding mVerifed last year Using web and android interfaces, mVerifed checks real estate and auto titles, diplomas and more against data stored online by kenyan government agencies it charges $10 a document and has screened 29,000 of them so far.

Stella Njoki and Kariuki GathituMPAYER

the M-pesa system has revolutionized money handling in kenya by replacing cash payments with mobile phone transactions, but it didn’t work well with bank accounts until Gathitu, working at kenya’s equity bank, joined njoki to start Mpayer in 2010 Mpayer now processes more than $70,000 a month for hundreds of small businesses, charging for monthly subscriptions plus 2% transaction fees.

Ayodeji AdewunmiJOBBERMAN

adewunmi was a student at nigeria’s obafemi awolowo University in 2009 when he and two friends launched what has grown into sub-saharan africa’s most popular job search engine companies pay to post job listings at Jobberman.com; users apply for those jobs for free More than 35,000 have found employment through the site, and it gets 1.5 million

Our fashion pros streamline the Italian auto exec’s wardrobe

JosePh abbouD: the award-winning designer and

entrepreneur got his start at louis boston before serving

as director of menswear design for ralph lauren

he launched his namesake brand in 1987 and is currently

the chief creative director for Men’s wearhouse.

kathy irelanD: the supermodel turned supermogul

is the chief executive and chief designer of kathy ireland worldwide, a design and marketing frm she launched

in 1993 Women’s Wear Daily has named her one of the

50 most infuential people in fashion.

the verDiCt

Ja: the irony here is that we’ve actually

made an italian mogul look italian, both

modernized and cool.

ki: a great suit for a great leader—

defnitely relaxed, defnitely confdent

and defnitely driven.

ensemble ki: the crisp dress shirt with a gray

tonal suit and sweater give him an approachable, sophisticated, in- style look.

Pants

Ja: the pants are too full, and navy blue pants

go with nothing, unless they’re your suit pants.

JaCket Ja: the sport coat has a beautiful

soft shoulder that feels sive, and i love the oxidized metal buttons.

expen-sWeater

Ja: he looks sloppy you have to be

careful about clothes getting too tight,

but they have to show the form.

ki: that shapeless sweater does nothing

for his physique.

glasses ki: a sophisticated ft for his face and a

stunning contrast to his gorgeous silver hair.

Ja: they’re a little more fashionable but

not too much.

the “after” iMaGe is a siMUlated iMaGe of what serGio Marchionne woUld look like if he had actUally participated in the forbes MakeoVer, which he did not nor does he endorse any prodUcts pictUred here.

MONTBLANC NICOLAS RIEUSSEC

CHRONOGRAPH AUTOMATIC

A tribute to Nicolas Rieussec, the inventor of the first patented chronograph

Montblanc Manufacture Calibre , second time zone with day and night display Crafted in the Montblanc Manufacture in Le Locle, Switzerland.

M O N T B L A N C C O M

Executives in the banking and fnancial services industry are

more positive about their company’s growth prospects than

their peers in construction, healthcare and real estate A Forbes

Insights/Zurich in North America survey found that 78% of

them predict revenue increases over the next three years This

compares with 72% in construction, 59% in healthcare and

50% in real estate The respondents included more than 400

executives in the four industries who work at companies with

annual revenues of between $25 million and $750 million A

key fnding: Some 86% of the fnancial sector executives believe

their company recognizes the importance of aligning its

strate-gies with risk management—and 79% say it actually does align

them, an impressively close margin

A breakdown shows that 64% of these executives anticipate

revenues to increase by 3% to 15% Over half of them (51%) say

organic growth, which includes acquisition, is the best path to

the future, followed by new marketing (30%) and new products

(35%) Penns Woods Bancorp, which runs the 13-branch Jersey

Shore Community Bank in rural Pennsylvania, has adopted all

three of the above strategies The purchase of Luzerne Bank,

another community operation in the Keystone state, will help

Penns Woods grow organically by adding eight branches to its

portfolio In addition, CEO Richard A Grafmyre will be

refo-cusing both his marketing and the services he ofers “Our

small-business commercial group was our fagship product until

a few years ago, and now all residential products are on the table,”

he says David Desjardins, CEO of the Acadia Federal Credit

Union in Fort Kent, Maine, is also committed to an organic

growth strategy, one that will pull more members into his three

branches His marketing plans include ofering video service via

ATMs that business and private customers can use to talk to

his bankers and make transactions Like many in the fnancial

sector, these two institutions are staying close to home, though 40% of fnancial exec-utives surveyed are eyeing the Midwest for expansion

The state of the U.S economy continues to afect strategic thinking Grafmyre believes most banks are through the worst, but he says “an elon-gated, sideways recovery” is putting a continued stress on his business customers

Grafmyre also fags computer hacking as a threat, to his bank and to the industry as a whole Chris Taylor, head of Financial Institutions at Zurich in North America, points out that hack-ing isn’t the only technology risk the sector faces A majority of customers access their accounts via a mobile device—and more than half of them fail to protect themselves with a password, he says, even though cell phone thefts are increasing

Regulation, meanwhile, is fading as a threat, according to 56%

of the respondents, but it still casts a shadow That’s one reason Grafmyre has limited Penns Woods’ expansion to Pennsylvania:

he doesn’t want to cross state lines until the Dodd-Frank reforms have completed their shakeout (Grafmyre, Desjardins and Taylor were interviewed separately from the survey.)

About 70% of all respondents reported their company had sufered fnancial loss because of miscalculated risks But not Grafmyre “We stuck to what we do best, got our arms tightly around compliance and have tried to do the right things,” he explains In short, he successfully mitigated the risk of regulation and compliance, identifed by executives in his industry as the biggest barrier to risk management

The financial secTor feels good

abouT The fuTure—and managing

The risks ThaT come wiTh iT

Zurich neither endorses nor rejects the recommendations of the discussion presented Further, the comments contained in this briefing are for general distribution and cannot apply to any single set of specific circumstances If you have a legal issue to which you believe this article relates, we urge you to consult your own legal counsel.

*The complete study is available at www.forbes.com/forbesinsights/Zurich_Risk

Ranking risk exposure and risk management in the financial sector

The biggest risk to your company • Financial (38%)

The top barrier to efective risk management • Lack of understanding of how to mitigate risk (36%)

How diferently you would manage risk over the next three years • No diûerently (41%)

The risk most deserving of your personal attention • Regulation and compliance (58%)

Banking & Financial Services

26 | FORBES DECEMBER 2, 2013

1

Number of African countries whose

GDP declined between 2002 and 2012

(The country is Zimbabwe.) 

the wealthiest africans

ten countries, including, for the frst time, Algeria Here are the top 10

For the full list visit forbes.com/Africa

2 Johann rupert

Source: LuXuRy GooDs country: south AFRIcA

his main asset is 9% of compagnie Financière Richemont, which owns luxury brands

such as cartier, Van cleef & Arpels, Jaeger-Lecoultre and montblanc.

3 nicky oppenheimer

Source: DIAmoNDs country: south AFRIcA

he sold his 40% of the family diamond business, DeBeers, to mining behemoth

Anglo American in July 2012 for $5.1 billion in cash.

4 nassef sawiris

Source: coNstRuctIoN country: EGypt

the chief executive of orascom construction Industries added Bill Gates as an investor

in January In April orascom agreed to pay Egypt $1 billion to settle a tax dispute.

5 mike adenuga

Source: tELEcom, oIL country: NIGERIA

his company Globacom has 25 million mobile phone subscribers in Nigeria and Benin

he also owns an oil exploration frm, conoil producing.

6 christoffel wiese

Source: REtAIL country: south AFRIcA

he sells groceries through shoprite holdings (Africa’s largest food retailer) and clothing

through pepkor, which owns 7 discount fashion brands.

7 isabel dos santos

Source: tELEcom, DIVERsIFIED country: ANGoLA

the eldest daughter of Angola’s president owns 25% of the Angolan mobile telecom frm

unitel, transferred to her by her father, and has stakes in several portuguese companies.

8 issad rebrab

Source: FooD country: ALGERIA

An accountant by training, he founded food producer cevital in 1998 It had $3.5 billion

in revenues in 2012 his 5 children all work at the company.

9 mohamed mansour

Source: DIVERsIFIED country: EGypt

his family’s mansour Group is prospering despite turmoil in Egypt, thanks to its

caterpillar dealerships in 8 countries It also owns metro supermarkets in Egypt.

10 othman benJelloun

Source: DIVERsIFIED country: moRocco

his holding company, Financecom, has interests in banking, insurance and telecom in

morocco BmcE bank, which he runs, operates in 18 countries, mainly in Africa.

1 aliko dangote

Source: cEmENt country: NIGERIA

his Dangote cement has operations in 8 countries and plans for new plants in kenya and

Niger In may he announced he would build a $9 billion oil refnery and petrochemical

complex in Nigeria It will be the country’s frst and Africa’s largest. total net worth of the 50 richest

youngest

38 mohammed dewJi, 38

$500 million

Source: DIVERsIFIED country: tANzANIA

number of women

2

number of newcomers

8

country with the most in the top 50 south africa

14

biggest gainers

by dollars and percentage,

2012 to 2013 aliko dangote

+$8.8 bil

isabel dos santos

+600%

top sectors diversified

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Barack Obama is no longer the world’s most powerful

person, FORBES decreed in its ffth annual ranking He

has been bested by Russian President Vladimir Putin, who,

the editors wrote, “has solidifed his control over Russia …

while Obama’s lame duck period has seemingly set in

ear-lier than usual for a two-term president.” The Independent

saw in the choice “a fundamental truth about the nature

of power. … Power resides in the perception of power

or, put another way, of the readiness of an individual or

state to use it Obama’s performance of late, not least

over Syria, suggests he is uncomfortable in that role

No such doubts surround Putin.” Or as Michael Graham

at Fox News put it, “If you’re a small country … if we get

mad at you we send John Kerry over with an annoying

plate of cheese The Russians get mad at you, bad things

happen.” Seumas Milne, at The Guardian, concluded that

“the U.S corporate media is in a panic about declining

American power. … The likes of FORBES are delighted

to have the chance to brand Obama a lame duck.” The

Baltic Times suggested that Putin had pulled a fast one:

“Russia is making a large show of strength in the world

to divert attention from its various domestic

prob-lems Putin’s rationale is that the stronger his country

looks on the outside, the longer it will take the rest of

the world to realize the weaknesses on the inside. … In

short, Putin is enjoying the moment while he can.” So

how much did Putin enjoy the honor bestowed on him by

FORBES? “The Kremlin declined to comment on the

news,” Radio Free Europe reported “Putin spokesman

Dmitry Peskov said he did not know what Putin thought

of topping the list but said the president ‘does not fuss

about things like that.’ ”

TwiNS USE SMELLS FOR MARKETiNG

@TiEUJAMES

Humans can recognize 10,000 scents, recall smells with 65% accuracy after a year So, why are scents underleveraged?

MicHAEL DELL BUYS DELL HAwKEYE

It’s very ironic: Michael Dell is hoping to pull a Steve Jobs with his return to the company he founded And his comeback plan is to become more like Apple.

DALE DURBiN

Dell was never a visionary like Jobs, just a good old PC engineering geek When he returned in 2007, not much changed as cost reduction and investor maximiza- tion continued. … The geek became the baron.

about our annual list of the top-earning dead celebri-ties The King of Pop made

$160 million in the past year—more than any other celebrity, dead or living

“Seeing Jackson ing this list is a refection not only of his business acumen … but also the loyalty and devotion of his fan base,” observed

head-commenter Pendragon

Loyal, devoted fan Jaris32

suggested, “The next

thing the estate needs

to do is make a Michael Jackson theme park.”

Examiner.com provided seven steps for becom-ing a rich dead celeb-rity yourself, including

“have talent” and “ruin your talents.” Its fnal

step: “Follow FORBES

on Twitter: only to see how other celebrities are much better of by being dead Get inspired.”

FAvORITE TWEET

@jack (Jack Dorsey, Twitter cofounder, sent Mar 21, 2006):

just setting up my twtter top: AHMED ABDELR

active conversation

60 YEARS

Age difference between the youngest of FORBES’

World’s Most Powerful People (Mark Zuckerberg, 29) and the oldest (Saudi Arabia’s King Abdullah, 89).  King Abdullah

Is your business

a new business?

IBM, the IBM logo, ibm.com, IBM SmartCloud, Let’s Build A Smarter Planet, Smarter Planet and the planet icon are trademarks of International Business Machines Corp., registered in many jurisdictions

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Amity ShlAeS, DiRECtOR, thE 4% gROwth pROjECt, gEORgE w BuSh inStitutE; PAul JohnSon, EMinEnt BRitiSh hiStORian anD authOR; lee KuAn yew, FORMER pRiME MiniStER

OF Sing apORE; anD DAviD mAlPASS, glOBal ECOnOMiSt, pRESiDEnt OF EnCiMa glOBal llC, ROtatE in wRiting thiS COluMn tO SEE paSt CuRREnt EvEntS COluMnS, viSit OuR wEBSitE at www.FORBES.COM/CuRREntEvEntS.

F

Ask not whAt your history can

do for you Ask what you can do for

your history

That ought to be the motto for

biog-raphers on the 50th anniversary of the

death of President John F Kennedy

After all, Kennedy’s death

repre-sents an opportunity to retrieve new

knowledge of this popular

Presi-dent Buried under a progressive

monument built by such historians

as Arthur Schlesinger Jr., Kennedy

cries out from the grave for a second

look at his record Yet to date most

historians and textbook authors have

contented themselves with carving

details onto the Schlesinger

edi-fce The latest troop seem happy to

march around the Kennedy

tomb-stone, sounding triumphalist bugles

This matters because it sustains a

fal-lacy: that Democratic policy today, so

progressive, is identical to Kennedy

policy and that today’s policy will

yield the same splendid results that

Kennedy policy did

All the more brilliant, then, is JFK,

Conservative (Houghton Mifin

Har-court, $27), Ira Stoll’s new biography

Stoll cracks the surface of

progres-sive nostalgia and digs up facts that

others have left covered over He

shines his miner’s fashlight on

mate-rial that challenges the progressive

stereotype and brings to light nuggets

of information and resources that no

one else has retrieved

In an early speech, “Why I Am

a Democrat,” Kennedy explained

simply: “Because I was born one”—in

other words, “an accident of birth.”

Given that accident, JFK opted for the

most conservative and Jefersonian

defnition of Democrat he could fnd, that which “stood frmly opposed to

a strong centralized government … It championed states’ rights, and strict constitutional interpretation.”

SchleSinger tomb

While a congressional candidate, Kennedy campaigned for public aid for parochial schools His rhetoric

as a young congressman and senator rings extreme to modern ears One speech transcript reads, “Enslaved nations can be free and independent again, only in the atmosphere of a peaceful world, and not in the ruins

of another World War.” Stoll covered edits that show where the hawkish Kennedy struck out con-ciliatory bits and added a denuncia-tion of communists’ “denial of God and freedom.” He warned early and clearly that we were losing China to Mao and poured his fury on the head

un-of President Harry Truman And in March 1947 he went after a union leader in tones that most Americans think unique to Senator Joe McCar-thy: “Why didn’t you stop working

there and start working some place else? Do you know of the slave labor

in Russia?” Kennedy at times even talked like McCarthy, speaking of a

“commie strike.”

Stoll’s fndings also counter the frequent argument that Kennedy proved soft, or went soft, after he be-came President The standard picture

of the Kennedy economic policy is of

a Keynesian Camelot, “Keynesian” here meaning always favoring big spending and larger government A hard-currency hawk, JFK expressed views on spending reminiscent of Calvin Coolidge: “I don’t believe in big expenditure for its own sake.” He agreed to allocate hundreds of millions

to the space race only to beat the

Sovi-et Union: “Otherwise we shouldn’t be spending this kind of money, because I’m not that interested in space.”

A true Keynesian treats ment spending and tax cuts as the same thing—more cash for consum-ers Kennedy drew a distinction and favored tax cuts, saying, Lafer-esque, “The soundest way to raise the revenues in the long run is to cut the rates now.” When Kennedy’s star Keynesian, John Kenneth Galbraith, insisted on opposing tax cuts, Kennedy ignored him As Galbraith reported,

govern-“The President told me to shut up.” The point isn’t whether Kennedy had progressive traits It’s that Democrats have betrayed Kennedy by using his name to apply policies he abhorred

In his day Kennedy shot down those who abused his name, saying, “I’d

be very happy to tell them I’m not a liberal at all.” Now, thanks to Stoll, he can tell them again

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32 | FORBES DECEMBER 2, 2013

thought leaders

rICh Karlgaard — INNoVatIoN rules

into the organizational vernacular until the 1970s Oddly late, don’t you think?

Why these appeared in the 1970s is anyone’s guess Maybe the turbulent economy or the fracturing of social cohesion—conditions that exist today—

caused researchers and management theorists to look deeper into why some teams fail and others succeed

Scale but Stay focuSed

When you look deeper into teams within companies, one factor stands out as a predictor of success: size

There’s a right size for every team, and it’s almost always smaller than you think Jef Bezos of Amazon likes

to use the “two-pizza rule” for egy and development teams If it takes more than two pizzas to feed the team, the team is likely too big Bezos didn’t invent the term; it seems to have frst appeared at the Xerox Palo Alto Re-search Center (PARC) in the 1970s Re-call that Xerox PARC during the 1970s invented three of modern computing’s key pillars: the graphical user interface, printer languages and local area net-working This alone is a good reason to pay attention to the two-pizza rule

strat-The surface reason most often cited for using the two-pizza rule is that it keeps teams agile and fast—and it does But there’s a deeper rea-son it works When teams consist of

a dozen people or fewer, each team member is more likely to care about the others, and members are far more likely to share information They are also far more likely to come to the aid

of another team member If the sion is important enough, they’ll even sacrifce themselves It’s no surprise that the basic unit of the U.S Army’s special forces is the 12-person Op-erational Detachment Alpha Soldiers will jump on a grenade to protect their fellow soldiers The principle works in business, too In a small team a marketing associate will stay

mis-up all night to sharpen another team member’s presentation An engineer will get his hands dirty to ensure the product is perfect at launch

Alas, this unity tends to fall apart

as teams scale up At 100 people you sort of care about your team members, but it’s not top of mind More people than that, and team unity becomes a daunting challenge This is why SAP’s co-CEO Jim Snabe looked at his com-pany’s 20,000-employee software- development team and decided to break it into small units of 8 to 12 people This is why FedEx’s founder, CEO and chairman, Fred Smith, runs his 300,000-employee global power-house out of a three-story building in a sleepy Memphis ofce park

In the case of SAP and FedEx, scale is a wonderful thing But scale can hurt focus The best leaders keep their teams small and agile

team management

think small and agile

Rich KaRlgaaRd iS thE puBliShER at FORBES FOR hiS paSt COluMnS anD BlOgS viSit OuR wEBSitE at www.FORBES.COM/kaRlgaaRD.

“In May 2010, two months after

the Afordable Care Act squeaked

through Congress, President Obama’s

top economic aides were getting

worried Larry Summers, director of

the White House’s National

Econom-ic Council, and Peter Orszag, head of

the Ofce of Management & Budget,

had just received a pointed four-page

memo from a trusted outside health

advisor It warned that no one in the

Administration was ‘up to the task’

of overseeing the construction of an

insurance exchange and other

intri-cacies of translating the 2,000-page

statute into reality.”

So began a devastating Nov 2

story in the Washington Post It gets

worse The smartest people in the

room—Summers, Orszag and health

care advisor Zeke Emanuel—had

urged Obama to appoint an outside

leader with expertise in business,

insurance and technology The plan

was defeated by loyal Obama

staf-ers They wanted to do it themselves

Obama listened to the wrong team

In an age of swiftly moving

technol-ogy, teams become more important,

not less That’s because humans don’t

evolve at the rate of Moore’s Law

We’re the slowest-moving parts in any

complex organization—the “gating

factor,” in the parlance of engineers

Teams can make us smarter and faster

But only if we get our teams right

Builders of the Egyptian pyramids

understood teams So has every

mili-tary leader in recorded history What’s

astonishing is how recent the idea

of teamwork is in business Readers

with a long memory, or an itch to read

back through decades of management

literature, will know that terms such

as “teamwork” didn’t begin seeping

F

On a cold morning, the Red Cross

was there for Angelina and her family

with shoes, warm clothes and shelter

Every 9 minutes, we help a family

after a home fire

Donate at redcross.org Thanks to the generous support of

Funded by CSAA Insurance Group, a AAA Insurer

34 | FORBES DECEMBER 2, 2013

thought leaders

steven F hayward — CaPItal Flows

With the budget and debt

ceil-ing fght behind us for the moment,

immigration is back on the agenda

The issue currently splits

Republi-cans But Republicans are missing a

huge opportunity to split the left over

immigration if they’d only look back

to the way Ronald Reagan thought,

and more important, talked about

immigration

With a little imagination

Republi-cans could create problems for liberals

and ofer attractions to immigrants

consistent with conservative

princi-ples Liberals have either forgotten—or

more often tacitly reject—many of the

reasons immigrants want to come to

America

The policy debates over border

se-curity, amnesty and employment

veri-fcation are important, but they miss

a more important dimension of the

story Reagan appreciated that

Ameri-ca is a nation of immigrants, but more

than that, he understood that the great

attraction of immigrants to America

was not simply greater economic

op-portunity but the dream of freedom—

the American dream—that the nation

represents The promise of America is

not just a better material life but that

you can become an American

Becoming an American is much

more than simply getting a legal

docu-ment attesting to the bearer’s

privileg-es of citizenship Here’s how Reagan

explained it in a 1988 speech:

“America represents something

universal in the human spirit I

re-ceived a letter not long ago from a man

who said, ‘You can go to Japan to live,

but you cannot become Japanese You

can go to France to live and not

be-come a Frenchman You can go to live

in Germany or Turkey, and you won’t become a German or a Turk.’ But then

he added, ‘Anybody from any corner of the world can come to America to live and become an American.’ ”

A person becomes an American by adopting America’s principles, espe-cially those principles summarized

in the “self-evident truths” of the Declaration of Independence, such

as “life, liberty, and the pursuit of

happiness.” Carl Friedrich wrote that

“To be an American is an ideal, while

to be a Frenchman is a fact.”

As an immigrant friend once put it

to me: “I was always an American; I was just born in the wrong country.”

Most of today’s liberals, especially the guilt-ridden “multiculturalists,” no longer believe these principles This suggests the legislative strategy for Republicans The GOP should include language in the legislation’s preamble stating that the object of immigration

reform is to welcome a new generation

of immigrants to become Americans

by learning and embracing America’s core principles Even though such

“legislative intent” language has little formal legal force, just watch how the left reacts against the suggestion of in-cluding it “America,” G.K Chesterton observed admiringly, “is the only na-tion in the world founded on a creed.” Let’s get back to teaching that creed to arriving foreigners

Reagan once remarked, “Latinos are Republicans They just don’t know

it yet.” That’s true only if conservatives ofer something liberals can’t ofer: independence and real opportunity rather than dependence and group identity I can imagine Reagan today going beyond his public teaching about the deep meaning of citizenship and proposing something bold like a new

“Homestead Act for the 21st century,”

in which striving immigrants along

with other low-income Americans could be given the opportunity to ac-quire housing in depressed urban and rural areas similar to the Homestead Act of the 1860s In fact, “urban home-steading” might become a central part

of the “path to citizenship.”

In that same speech where gan talked about how immigrants could become authentic citizens, he also reminded us: “You can’t be for big government, big taxes and big bureaucracy and still be for the little guy.” Let’s have an immigration bill that refects that idea

Rea-The Shining CiTy Of

ExcEptional immigrants

Steven F Hayward, a FORBES COntRiButOR, iS thE authOR OF thE twO-vOluME The Age of ReAgAn

(haRPERCOllinS, 2008) anD alSO thE viSiting SChOlaR in COnSERvativE thOught anD POliCy at thE

thE promisE oF amErica is not just a bEttEr matErial liFE but that you can bEcomE an AmericAn