Forbes june 16, 2014 USA

northwesternmutual.com Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company, Milwaukee, WI NM and its subsidiaries.. Northwestern Mutual is the ma

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JUNE 16 • 2014 EDITION

MARY BARRA

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2 | FORBES JunE 16, 2014

64 | ms fix-it

Mary Barra just became

the most powerful woman

in corporate America

First order of business:

Refurbish General Motors.

11 | Fact & cOmmEnt

by steve forbes

Sino-Russian gas pact! Yawn.

lEadERBOaRd

14 | michaEl’S immORtal mOnEy machinEThe King of Pop can’t be stopped A third of his

$2.8 billion career earnings have come in the f ve

years since his death.

16 | SummER REadSToo persnickety for Thomas Piketty?

Brave enough to read The Conf dence Code?

20 | tEll uS EvERything:

JESSica SimpSOn

22 | BiZ QuiZCan you ace our plutocrat photo puzzle?

24 | EyE-pOpping pOpEyESSteve Wynn’s $28 million Popeye isn’t the most expensive art world Gazookus

24 | thE $4.8 BilliOn BREakupElena Rybolovleva was just awarded the largest divorce settlement in history But can she collect?

26 | activE cOnvERSatiOn: can nOvaRtiS kill cancER?thOught lEadERS

by christopher helman cover photograph by jamel toppin for forbes

MOVADO TC ULTRA-THIN CASE DESIGN IN STAINLESS STEEL WITH

MODERN BLACK DIAL MOVADO.COM

JARED ®

THE GALLERIA OF JEWELRY

to the West

by parmy olson

48 | hwang’S wORldTim Hwang plants ideas all over the Internet, even if he has to scam a little bit to make them stick

64 | pOwER ShiFtMary Barra made history by working her way into Detroit’s car-guy club and becoming the frst female CEO of General Motors Now can

she fx the company?

Plus: The World’s Most Powerful Women

by joann muller

76 | gEEk chicThese six e-tailer entrepreneurs ofer

a stylish retort to the oft-heard lament:

“Where are all the women in tech?”

by caroline howard

42 | cute attacks!

Jeanie Han hopes your kids

will start blowing their cash on

imported digital doodads.

14 | earnings

from the crypt

Death becomes him.

38 | heartland hero

David MacNeil believes

in clean car foors and homegrown jobs.

50 | dmi’s sunny bajaj

“I’ve drunk tequila

with Samsung, with

Good Technology

You can be serious

but have a little fun.”

Insights Platform

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6 | FORBES JunE 16, 2014

contents — June 16, 2014

100 | banking for

dummies

Brian Moynihan’s strategy

for Bank of America: Keep

it simple.

108 | hot mukul

Nicaragua’s frst ultraluxury

resort boasts a private beach club, a

walk-in humidor and a David McLay

Kidd golf course.

96 | slim chance

Fitness franchise Curves

needs all the help it can get.

by daniel fisher

100 | utility playEROther than cutting costs and strengthening capital, Brian Moynihan has no grand plans for Bank of America Amen to that.

by halah touryalai

FRanchiSE ScOREcaRd

92 | hOuSE callS

As more of the population ages and tries to avoid nursing homes and hospitals, fast-growing Right at Home ofers help with basic chores or medical care Plus: America’s best and worst franchises.

by carol tice

96 | cRaSh diEtOnce the largest ftness franchise, Curves has been shedding thousands of units and enraging many franchisees Can the new owners turn it around?

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juNE 16, 2014 — volumE 193 NumBER 8

of May 51% of visits were mobile—39% smartphone, 11.5% tablet What’s it all mean? Making money in the media business increasingly means fnding ways to tap consumer interest in online streams

I’ve been focused on the fow of content for some time,

at my startup and now FORBES I’ve watched readers move across our magazine, its app and Forbes.com via desktop, tablet and now smartphones I see the fow—mainly on phones—as a new opportunity to serve both consumers and marketers If done right, editorial, native ads, marketing messages and promotions can live together, even serve one another, all within the fow

In some ways Facebook and Twitter paved the way They buried the adage ad agencies recited like lemmings: Readers don’t scroll The trick for news outlets is to con-struct a mobile fow that appeals to visitors but also sup-ports video, sponsorships, interstitials, galleries and more

It takes the right publishing tools, collaboration with the sales and marketing teams, and integration with an ad server Maybe most challenging: getting editors to think like marketers of content, not simply creators

The task fts nicely with the newest trend Text-based social feeds, a popular kind of fow, are becoming more visual (think Facebook’s Paper app and TwitPics) We laid the groundwork with headline text modules within mobile streams In the last months we’ve supplemented these headlines with visual modules promoting our ebooks Smartphones present news organizations with interlock-ing challenges On computer ad exchanges, mobile rates go for less than $1 CPM Desktop rates are $3 Each is a far cry from premium digital ads sold by humans—$15 to $30 on desktops—and $40 to $50 for print ads That means the cost

of quality content in the fow must come down

Print to digital Narrowband to broadband Desktop

to mobile Journalists need to pay attention to the phone fow It might help save their jobs—maybe even jolt their metastasized culture into change F

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Investment Services, LLC, broker-dealer, registered investment adviser, subsidiary of NM, member FINRA and SIPC NCAA is a trademark of the National Collegiate Athletic Association.

Follow fi nancial principles, not fads or trends.

Create your fi nancial plan with a Northwestern Mutual Financial Advisor Together, we’ll design a disciplined andbalanced approach to protecting, accumulating and managingyour wealth, so you can take advantage of life’s opportunities

Who’s helping you build your fi nancial future?

northwesternmutual.com

Together, we’ll create a blueprint to guide your fi nancial life.

Get the guidance you need to navigate the fi nancial world

At Northwestern Mutual, we take a disciplined and balancedapproach to fi nancial planning Together, we’ll help build your

fi nancial future on time-tested principles, not market trends

Who’s helping you build your fi nancial future?

Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company, Milwaukee, WI (NM) and its subsidiaries NCAA is a trademark of the National Collegiate Athletic Association.

northwesternmutual.com

BY STEVE FORBES, EDITOR-IN-CHIEF

“With all thy getting, get understanding”

weakened themselves with idiotic economic policies of excessive taxation, unstable money, stifing regulations and bloated public sec-tors The U.S will deal with those artifcial obstacles decisively after the 2016 elections The 2014 mid-term elections will start the process

of regeneration Europe, or at least parts of it, will reluctantly follow suit, just as it did in the 1980s, after Ronald Reagan slashed taxes, con-quered infation and pushed deregulation

As for China’s obsession with securing ral resources, its ofcials should read Adam Smith to understand that trade is the source of wealth A large, fast-growing economy, barring times of war, guarantees that resource compa-nies will beat a path to your door to sell their wares They want your money

natu-After A decAde of

negotia-tions Russia and China announced

a 30-year, $400 billion natural gas

deal Vladimir Putin is portraying

the agreement as another brilliant

coup: Russia gets a large, long-term

customer and demonstrates that,

despite its aggression against Ukraine,

it’s not only not isolated

diplomati-cally but also has a new and powerful

strategic ally, which has the

second-largest economy in the world

Save all the breathless hype Putin is

natu-rally spinning the pact as an “epochal event,”

but in truth it’s really no big deal Divide that

$400 billion by 30 years and you get an annual

average of $13 billion The size of the global

economy today is almost $80 trillion Seen in

that context the contract rates barely a

foot-note AT&T’s proposed acquisition of DirecTV

merits more attention

Strategic alliance? The deal with China

un-derscores Russia’s core weakness Despite its

immense resources and highly educated

popu-lation, which includes a considerable

num-ber of capable scientists and mathematicians,

Russia has a shockingly small economy that is

amazingly dependent on the export of oil, gas

and a few other natural resources

This state of afairs is testimony to bad

gov-ernance In our high-tech era Russia should be

a powerhouse instead of a cipher The country

can cause considerable mischief, but if the EU

and the U.S ever get their economic, military

and diplomatic acts together, they’ll easily be

able to checkmate Moscow Russia’s neighbors

are all too aware that alignment with Putin

means stagnation and oppression

The U.S and Europe have gratuitously

An unheralded hero in the fght against Soviet communism during the Cold War, Ken Tomlinson died on May 1, at age 69, from cancer Ken played critical roles in two underappreciated organiza-tions, Voice of America and Radio Free Europe/

Radio Liberty, that were crucial in undermining what Ronald Reagan rightly called the Evil Empire

Totalitarian regimes like the Soviet Union and Maoist China need to have a monopoly on infor-mation to maintain absolute control If people have no way of getting the truth and are denied accurate news about the world and what’s hap-pening in their own country, efective opposi-tion becomes well nigh impossible

That’s why Moscow regarded VOA and RFE/

RL as lethal foes They provided a

critical lifeline of information to the

people of the Soviet Union and the

puppet regimes in Eastern Europe

The Soviet government spent

consid-erable resources jamming these radio

broadcasts and engaged in major

pro-paganda eforts to undermine support

for them in the West It understood

that the battle of ideas is fought each

and every day and that communism

couldn’t survive such a confrontation

Amazingly, most diplomats,

for-eign policy gurus and politicians

grossly underestimated the impact

the allegedly “soft power” of

radio broadcasting had in

bat-tling the U.S.S.R

One notable exception was

a former radio broadcaster,

Ronald Reagan When he

be-came President, Reagan moved

to beef up and revitalize these

neglected, rundown and—in

the halls of

Congress—politi-cally unpopular institutions

To this end, he persuaded Ken

Tomlinson, a superb journalist

rap-idly ascending the editorial ladder

at Reader’s Digest, to head the VOA

Ken did so for two years, achieving

great success in updating equipment

and improving programming The

Soviets were not pleased

Not long after Ken returned to the

Digest, Reagan prevailed upon him to

join the Board for International

Broad-casting (BIB), the oversight agency for

RFE/RL Moscow hated these entities

even more than it did the VOA because

they were “surrogate” broadcasters,

i.e., the programs were tailored to

each country, as if they were

broad-cast from inside the borders

I was privileged to chair the BIB

at this time, which is how I came to

know Ken well RFE/RL were under

constant attack from the American

and European left, as well as from

the U.S State Department, which

continuously tried to sabotage our

budgets and our mission Ken was

absolutely critical to fending of

these attacks and, indeed, to going on the political ofense He had superb political instincts and a keen sense of how to fght the endless bureaucratic battles with State and other govern-ment agencies He also possessed practiced insights in dealing with the eye-rolling challenges, especially per-sonnel issues, of managing the Radios themselves He was fun to work with:

Like Reagan, he had an ample store of good political stories and anecdotes

Ken’s tireless eforts during these years, along with those of others, were not for naught In 1989 the Evil

Empire collapsed, and in 1991 the Soviet Union itself broke up into 15 diferent countries (which Putin is now working to reunite) The unrav-eling started in Poland, thanks to the brave work of Solidarity, which was led by a shipyard worker named Lech Walesa When asked what role Radio Free Europe had played in these ex-traordinary events, Walesa answered with a question: “What is the Earth without the Sun?”

Ken left the BIB in 1994, but dent Bill Clinton brought him back into public service in 2000, naming him to the board of the Corporation for Public Broadcasting

Presi-All of the U.S government’s overseas broadcasting eforts had been united into a single agency, the Broadcasting Board of Governors In 2002 President George W Bush named Ken chairman, a position he held into 2007 Despite scant political help, Ken started a TV broad-casting station aimed at the Middle East

He also managed to add more

broad-casting to Iran and other trouble spots in the region But Washington’s obtuseness over the importance of these eforts was pervasive, as it always has been If Ken had had czar-like powers he would have accomplished much more—and civili-zation today would be a lot safer As it

is, the Iranian popular uprising in 2009, which could have grown into a Solidari-ty-like movement had Obama not made clear he didn’t want that to happen, had some of its roots in the work Ken did

In 2003 Ken was elected chairman

of the board of the Corporation for Public Broadcasting, which oversees the money Washington spends

on public television and radio Ken courageously attempted to introduce some political balance into the programming and ran into vicious opposition He was hit with numerous—and base-less—attacks on his policies and his integrity Shamefully, neither the White House nor congres-sional Republicans efectively covered his back politically dur-ing these fghts

Ken was a constant friend When

I sought the presidency in 1996, he and his beautiful and gracious wife, Rebecca, were unstinting in their ef-forts to help out

Ken’s life is an inspiring model for young people He was hardworking and ambitious (his father died at a young age, and Ken knew he’d have to make it on his own), courageous (he never shirked a battle because of the odds), principled (his love of country and the values that make it great were unshakably deep), tenacious (when hit with a setback, he never stayed down), shrewd (he had good tactical sense when pursuing a goal or fght-ing a political battle, knowing when

to be indirect and when to make a frontal assault), religious (his moral compass never wavered), devoted

to family (Will and Lucas refect the superparenting skills of Ken and Rebecca) and, best of all—well, not quite—a lover of baseball

Ken and sF with Poland’s president lech Walesa.

F

Inspire Change

By Thinking Like an Entrepreneur

After attending the Forbes Women’s

Summit: Power Redefned in New York, I’ve returned to my offce energized and inspired It was an honor to share ideas with some of the most savvy, forward-thinking women

in leadership today

During the summit, it was my pleasure

to present the frst Northwestern Mutual Excellence in Entrepreneurship award to Ingrid Vanderveldt A lifelong entrepreneur, Ingrid is the frst ever Entrepreneur-in-Residence at Dell Inc., where she oversees Dell’s entrepreneurial initiatives globally, including the Dell Center for Entrepreneurs and the $130 million Dell Innovators Credit Fund, which she created

Her vision is to empower a billion women

by 2020 That effort includes giving them tools; she envisions a world where every woman has a mobile device It also includes giving them knowledge Ingrid works to facilitate opportunities for girls and women for learning, growth and entrepreneurship

I believe that each of us—in our own way and in our own world—can effect positive change by embracing the kind

of entrepreneurial spirit Ingrid strates At Northwestern Mutual, we encourage employees to act like owners

demon-We embrace change, celebrate our successes and promote experimenta-tion Whether you own a small business

or work for a large company, a key component of success is to think like

an entrepreneur by applying new and creative thinking to solve problems

I love Ingrid’s story because it shows the signifcant impact we can have when

we embrace our power and help those around us do the same Women in lead-ership roles can be uncomfortable with power, and may resist using the power

of their position for fear that others will view them as autocratic or bossy

I studied this topic for my doctoral sertation, and came to realize that the appropriate use of power—including the power afforded by leadership positions like mine and Ingrid’s—is essential for success Ideally, people will follow your lead not only because of your position, but also because they respect you and feel empowered to carry out your vision There’s much we can learn from Ingrid Vanderveldt, whether we’re leading a team of thousands or a household of four To be successful, you have to think like an entrepreneur Decide what’s important and fnd a way to make it hap-pen Lift the limitations you may have imposed on yourself Welcome new approaches and ideas And, perhaps most important, don’t be afraid to use power—and to empower others—to make your world a better place

dis-Ingrid Vanderveldt, Entrepreneur-

in-Residence, Dell Inc., winner of

the Northwestern Mutual Excellence

Senior Vice President, Human

Resources, Facilities and

Philanthropy, Northwestern Mutual

Learn more about leadership ment and thinking like an entrepreneur

14 | FORBES JUNE 16, 2014

LEADERBOARD

Keeping Score on Wealth & poWer

1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 0

The King of Pop’s posthumous

album Xscape sold 157,000

U.S copies in its opening week

Not bad, but it’s barely a blip

in his $2.8 billion

infation-adjusted career earnings,

one-third of which has come in the

fve years since his death

efort, Of the Wall, sells

7 million copies in the U.S by

1982—at the time, the most

ever by an African-American

artist.

1983 There were 9.1 million cars sold in America in 1983—and more than 10 Million

copies of Thriller

The album has sold an estimated 100 Millioncopies worldwide since its release.

1989 The Bad Tour grosses $125 Million on sales of 4.4 Million tickets If he had gotten the $220 per head Jay Z and Beyoncé are charging for their upcoming summer concerts, Jackson would have grossed

$942 Million, more than any tour in history

1985 Jackson buys the Beatles’ publishing catalog for

$47.5 Million His investment is now worth about

$1 billion—more than twice what he would have made if he’d bought General Electric stock instead.

1988 Jackson purchases Neverland ranch for $17.5 Million; insiders say it could now fetch $100 Million on the open market, nearly twice what David Gefen paid for his new Hamptons mansion.

1984 After his hair catches fre during a Pepsi commercial shoot, he parlays the cola company’s lawsuit fears into a

$5.2 Million endorsement deal plus $1.5 Million to establish the Michael Jackson Burn Unit in Los Angeles.

1 Career earnings adjusted for infation;

showman stands still for

72 seconds at the start

of his Super Bowl XXVII

halftime gig That’s more

than $8 Million of silence,

judging by recent ad rates

2001 Jackson’s last studio

album, Invincible, costs as

much as $40 Million to record, more than the current GDP of island nation Tuvalu.

2009Jackson dies on June 25, dramatically boosting his popularity By the end of the year 8.3 Million of his albums are sold in the U.S., more than any artist and nearly twice as many as runner-up Taylor Swift.

1995 Receives a $115 Million advance payment for merging his ATV publishing catalog, which contains the bulk of the Beatles’ biggest hits, with Sony’s catalog

The deal represents a fvefold increase in value over Jackson’s purchase price a decade earlier.

1993 Thirteen-year-old Jordan Chandler accuses Jackson of molestation and eventually settles out of court for $20 Million; the collateral damage to the Dangerous Tour proves equally costly.

1994 Jackson marries Lisa Marie Presley in a secret ceremony; the duo divorce two years later Jackson consistently outearns her father from beyond the grave.

Based on research from senior editor Zack O’Malley

Greenburg’s Michael Jackson, Inc., which

was published by Simon & Schuster/

“new” album, Xscape, to

number two on the charts.

2010 Jackson’s estate releases posthumous album

Michael after signing a new,

ten-year $250 Million deal with Sony— the biggest pact

in music history.

2013 The King of Pop easily outearns Madonna, the world’s highest-paid living musician, thanks in part to Cirque du

Soleil’s shows One and Immortal.

1990 LA Gear signs Jackson

to a sneaker deal worth

$20 Million —$2 million

more than Nike’s initial

payment to Michael Jordan.

16 | FORBES JUNE 16, 2014

1

Sales rank of Thomas Piketty’s

Capital in the Twenty-First Century among all books

ever published by Harvard University Press. 

FLOW CHART

WHICH BUSINESS BOOK

SHOULD YOU READ THIS SUMMER?

Too persnickety for Thomas

Piketty? Brave enough to read The

Conf dence Code? Or should you

just chill out with Stress Test?

Are you a capitalist?

Are you reasonable? by Matt TaibbiThe Divide

Thrive

by Arianna Huf ngton

Lean In

by Sheryl Sandberg

The Confi dence Code

by Katty Kay and Claire Shipman

Think Like a Freak

by Steven D Levitt and Stephen J Dubner

David and Goliath

by Malcolm Gladwell

Flash Boys

by Michael Lewis The Wolf of Wall Street

by Jordan Belfort

Capital in the Twenty-

Do you like books by former traders?

Hell no!

Yes

Yes Yes Yes

Oui!

What else do

Do you like the

French?

Economists

Is fi nancial inequality a good thing?

With big hair?

Likable ones?

Obviously

No

No Nah

No one makes more from

the election of

business-friendly Prime Minister

Narendra Modi than oil

tycoon Mukesh Ambani,

india’s richest man

Jimmy Iovine

+$170 millionNET WORTH:

$970 MilliON

Apple’s likely $3.2 billion buyout of beats looks certain to boost the value

of the stakes of record executive iovine and his rapper cofounder, Dr Dre

Rupert Murdoch

+$600 millionNET WORTH:

thanks to the Super bowl.

Evan Williams

battery factory, expanding

production to China and

designing a minivan that

goes sports-car speed.

Darrell Cavens

as a billionaire ended after the company announced a quarterly loss.

FiGuRES REFlECT THE CHANGE iN vAluE OF PubliCly TRADED HOlDiNGS FROM APR 30 TO MAy 20

SourceS: InteractIve Data vIa FactSet reSearch SyStemS; ForbeS.

since our feature

story on the WWE’s Vince McMahon came out he has lost more than $750 million, including a pile-driving

$350 million in one day as shares in his WWE took a beating in the wake of a TV deal WWE had signed with NBCUniversal That brutal day in May knocked McMahon out of the billionaire ranks WWE’s shares were up 89% in the frst three months of

2014, and McMahon’s net worth peaked in mid-March at $1.6 billion

World’s Most Ethical Companies, Ethisphere Magazine, Quarter 1, 2014 From FORTUNE Magazine, February 3, 2014 & February 27, 2014 © 2014 Time Inc FORTUNE 100 Best Companies to Work For and World’s Most Admired Companies are registered trademarks of Time Inc and are used under license FORTUNE and Time Inc are not affi liated with, and do not endorse products or services of, Afl ac Afl ac’s family of insurers includes American Family Life Assurance Company of Columbus, American Family Life Assurance Company of New York, Continental American Insurance Company and Continental American Life Insurance Company.

Z140349 4/14

We couldn’t have done it without you.

Our customers are at the heart of everything we

do, and it feels good to be recognized for just doing what we believe We help you protect your employees — without impacting your bottom line.

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Our customers are at the heart of everything we

do, and it feels good to be recognized for just doing what we believe We help you pr employees — without impacting your bottom line.

Learn more at af ac.com/business

LEADERBOARD The most expensive item of clothing in $188

Macy’s Jessica Simpson Collection—a

sleeveless Sequin Panel Sheath dress. 

FacebooK / Kristi marcy how do you handle bad business decisions?

being in the public eye for so long, i’ve made a ton of mistakes and everybody knows about them but i don’t look at my mistakes as any sort of failure but as a lesson to be learned

twitter / @treystaFFordypr:

what drove you toward entrepreneurship?

My business is the heart of who i am i want to make every woman feel confdent in what she’s wearing and in her shoes and, i mean, i have been every size on the planet i understand women and i know how to dress them.

tUmblr / @bravegirl18

is your celebrity your biggest selling point?

My brand has surpassed my name and my celebrity i want every woman to feel comfortable and trust what she’s buying she knows when she buys a Jessica simpson shoe that she’s going to be able

to dance all night long We try to stick with trends that we think will last throughout the years We don’t want to be too fashion-forward

if we’re relatable, accessible and afordable, who needs a trend?

HI

AR CA

CO

CT

DE

FL GA

ID

IL IN IA

MN

MS MO

MT

NE NV

AK

WV

WI WY

HigH-end Housing didn’t

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sales prices for the top third of the

residential real estate market from

the bottom in November 2011 to

March of this year for America’s

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LEADERBOARD Number of years a large statue of Popeye has 77

stood in front of City Hall in Crystal City, Tex.,

which hosts a Spinach Festival every year. 

24 | FORBES junE 16, 2014

Las Vegas casino

magnate Steve Wynn just

paid $28.2 million for a

6-foot-5-inch Jef Koons

sculpture of Popeye That’s

a lot of spinach, but it’s not

the most valuable piece of

art featuring the tough

Ga-zookus These two pieces—

one in a German museum—

would likely fetch more if

they ever came up at auction

The nasTy diVorce between Russian billionaire Dmitry Rybolovlev and his

wife of 27 years, Elena, reached a crescendo in May, when a Swiss court ruled that

Rybolovlev owed her $4.8 billion in cash, real estate, art, child support and alimony

Her lawyer was quick to label it the “most expensive divorce in history.” Maybe, but

only if she can collect: Not only have the couple been battling in various

jurisdic-tions for nearly six years already—and Dmitry’s lawyers vow to fght for another

ten—but since selling his fertilizer business for $6.5 billion in 2010, a bunch of

his $8.8 billion fortune has been sunk into ultraluxe real estate owned by legally

opaque LLCs and trusts These three are currently being contested in U.S courts

Maison de L’Amitie

rybolovlev bought donald trump’s palm Beach

home for $95 million in 2008 through a limited

liability company After elena fled for divorce in

2008, she sued him in palm Beach for ownership

of the property he countered, saying it didn’t

be-long to him her lawyers deposed him in london

and claim he admitted to providing the money

for the purchase and its maintenance.

15 Central Park West

A company that dmitry’s camp says is tied to his daughter ekaterina paid $88 million in February

2012 for former Citi chairman sandy weill’s tan apartment elena then fled a complaint alleging her ex had paid for it using assets acquired during their marriage, in violation of a 2010 swiss Court order he made a motion to dismiss, saying he’s not subject to jurisdiction in new york no ruling yet

manhat-Kilauea, Hawaii

Another llC paid $20 million in August 2013 for actor will smith’s three-bedroom home on the hawaiian island of kauai and then transferred it

to a trust elena sued, claiming dmitry was hiding the money the court dismissed the action, saying that it would not enforce a temporary order; she appealed and will now ask it again to reconsider based on fnal judgment from the swiss court

Elena Rybolovleva

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Andy wArhol

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thought leaders

jonathan bush — the apothecaryHealtH care reform:

Disruptors NeeD Not Apply

Jonathan Bush iS CEO OF athENahEalth aNd aUthOR OF Where Does it hurt? An entrepreneur’s GuiDe to

FixinG heAlth CAre.

F

For example, as they stand now, rules require that ACOs be at least 75%

provider-controlled, so physicians must do the heavy lifting when starting one The reality is that, once formed, an ACO requires extensive management, technical resources and granular in-sight into, and analysis of, patient data

Many of these requirements are yond the realm (or interest) of your av-

be-erage physician That’s made some dependent physicians fee to hospitals and large health systems for employ-ment, an avenue they see as their only way into shared savings models This rampant physician employment trend

in-is not only reducing patient choice in health care, it is also driving up cost—

the very opposite of the intended efect

of ACOs

The ACO model, if meant to survive and thrive at mass scale, is ripe for disruption Most independent physi-cians want to focus on what motivated them to attend medical school in the frst place: caring for patients They

are not interested in jumping through administrative hoops to form an ACO, only to then analyze steady streams of data on thousands of patients, to then track and submit data to satisfy dozens

of quality measures, to then process and divide group bonus payments And no one wants them doing this work, either Especially when there are operational experts and technology in-novators at the ready to do these tasks more efciently and at scale

Our nation’s care providers are being squeezed at every angle as they navigate through the very narrow re-quirements set up by the government

to participate in new care models If the government truly wants to defne the ACO model as an innovative care delivery mechanism, it must let inno-vators swirl around it to tackle and im-prove upon the concept’s early phases Yes, at the core of an ACO is the work

of the physician, but any nonclinical work that a physician can’t or doesn’t want to do, including formation of an ACO in the frst place, should be al-lowed to be managed, processed and completed elsewhere

Unfortunately, ideas like these are too often met with skepticism

in Washington, D.C One of the few points of agreement in that town is that health care is barreling down an unsustainable-cost path This is a real-ity that cannot be addressed by main-taining the status quo We need to let innovative solutions and efciency in the door Can we persuade our policy-makers to let the disruptors swirl?

the ACo moDel, iF meANt to survive AND thrive, is ripe For DisruptioN

It Is axIomatIc in the

technol-ogy sector that disruptors fuel the

breakneck pace of innovation These

are thinkers and dreamers who look at

the established players and the status

quo and see, clear as day, that there is

a better way They see a better way of

programming thermostats, controlling

light switches, listening to music and

doing a million other daily tasks, and

our lives are infnitely better for it

For reasons that keep me up at

night and make me want to bang my

head against a wall, it seems similarly

obvious that disruption in health care

might as well not exist Sure, our

expe-riences with health care are horrible

expressions of our humanity and it

seems that there must be a better way,

but the message from all sides is loud

and clear: Disruptors need not apply

The Afordable Care Act includes

a program that creates Accountable

Care Organizations, or ACOs, where

this antidisruptor sentiment could not

be stronger ACOs, purported to be an

innovative care delivery and payment

model where physicians better

coor-dinate, are more accountable for care

management and can even proft from

savings they create, are inadvertently

too closed and inefcient

Owing to their complex nature it

is very hard for ACOs to be fnancially

and clinically successful In part this is

because the program is largely closed

of from the types of innovation and

work fows that could hardwire ACOs

to bud, evolve and improve Rather

than introducing a good model and

letting industry iterate around it in a

hundred diferent ways, the

govern-ment too tightly defned exactly how

an ACO must form and operate

I’M NOT JUDGED BY

THE THICKNESS OF

MY WALLET.

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thought leaders

rICh Karlgaard — INNoVatIoN rules

versities and colleges appeared on the verge of French-like suicide Student hissy fts at Brandeis, Haverford, Rut-gers and Smith caused either an invita-tion for an honorary-degree candidate

to be withdrawn or the invited mencement speaker at those schools

com-to bow out In the case of Smith the irony was thick Smith, a women’s col-lege, had invited IMF Chief Christine Lagarde, who ranks ffth on the 2014 FORBES Most Powerful Women list,

to speak The Smith students accused Lagarde of patriarchy Go fgure

Make no mistake: The expensive liberal arts colleges in America are going down—fast and hard Schools like Haverford and Smith are ex-tremely vulnerable The return on

a four-year $250,000 investment in such colleges will be poor in future years Their brands have become laughingstocks Harvard, Stanford, Berkeley and Princeton are protected because they are true universities

Their engineering departments and graduate schools for medicine and business are (for the most part) iso-lated from the ideological nonsense found in liberal arts schools Caltech

buys and sells

if colleges were stocks

Rich KaRlgaaRd iS thE pUBliShER at FORBES hiS latESt BOOk, the soft edge: where great companies find lasting success, camE OUt iN apRil FOR hiS paSt cOlUmNS aNd BlOgS viSit OUR wEBSitE at www.foRbes.com/KaRlgaaRd.

Colleges rise Colleges fall

Let’s look at France and the U.S to

see how they fare

In May 1968 student riots broke out

in universities across France What

followed was a general strike of 11 mil-

lion workers The government of

Charles de Gaulle nearly fell, and the

French economy slid into recession

At frst the rioting students

en-joyed the support of the French

population More liberty, more

equal-ity, more fraternity—who could argue

with that? French higher education

had always been a bit stufy,

hier-archical and pompous Maybe the

students were correct

Then the facts emerged The

stu-dent uprisings had not been, as the

French people were led to believe,

spontaneous afairs They had been

organized by French communists and

student anarchists months before The

student organizers made a huge public

relations mistake by going on

televi-sion They “behaved liked irresponsible

utopianists who wanted to destroy the

‘consumer society,’ ” wrote historian

Mattei Dogan The students quickly

lost the support of the French people

A silly spring fing? Kids being

kids? French higher education was

permanently damaged by the 1968

riots In the 2013 Academic

Rank-ing of World Universities by the

Center for World-Class Universities

of Shanghai Jiao Tong University,

France had no schools in the top 35

and only 4 in the top 100

Which were the ten top-ranked

universities? In order: Harvard,

Stan-ford, UC Berkeley, MIT, Cambridge,

Caltech, Princeton, Columbia,

Chi-cago and Oxford

In May 2014 several American

uni-and MIT are pure plays in science uni-and engineering and thus are protected

three cheers for state U.

If colleges were a stock market, I’d short the heck out of Haverford, Brandeis, Smith and their ilk I’d want

to own those American universities

in the Global Top Ten I’d also buy America’s great public universities known for their strength in science and engineering: Michigan, Texas, UCLA and the like And I’d be biased toward universities with a land-grant history These often have the word “State” before “University.” Most were started

in the latter half of the 19th century to provide educations in agricultural and other practical sciences I’d buy Iowa State for ag science, Oklahoma State for oil and gas engineering, and Mon-tana State for its tech hub in Bozeman.I’d also buy community colleges They’re the great untapped resource

in the U.S today There are two kinds

of community colleges: One is a low-cost feeder system to four-year universities; the other is a high-tech trade school Both kinds are wonder-ful American assets

Lastly, I’d buy some for-proft online universities The University of Phoenix is reinventing itself as a cor-porate-employee trainer Solid idea: Employers know what they want Ashford University has a Forbes M.B.A program, so I vouch for that! Northcentral University, where I’m giving a commencement speech, is an impressive up-and-comer

Don’t despair for American higher education: The fools will perish, and the golden age will burn brighter.f

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of coal to the surface, another team mans the

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There have been more people

who have stood on the moon

than where you’re going,” says

Dave Dillon, safety

representa-tive at Deep Mine 41, operated

by Alpha Natural Resources in the

south-western corner of Virginia Dillon is a

third-generation miner, but he still gets excited

showing of the coal face, where a

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tungsten-carbide-tipped teeth claws

bitu-mining

Coal Case

By Christopher helman

Share prices have plunged as draconian regulations and falling natural

gas prices cripple U.S miners Looks like a perfect time to buy

human relations: alpha Ceo Kevin Crutchfeld addresses miners

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eration market, coal’s biggest customer The price of Appalachian coal burned for electric-ity is down 25%; metallurgical coal is of 44%, thanks to a drop in Chinese demand U.S

usage slumped in recent years from 1.1 billion tons a year to about 900 million No surprise that shares of coal companies have fallen faster than canaries in an unventilated shaft

Since last year Patriot Coal and James River Coal have gone bankrupt Since peaking in early 2011 Peabody Energy is down 75% and Arch Coal of 89% Alpha has plunged 94%—

the whole company now worth a small tion of the Massey acquisition

frac-It would be all too easy to assume that Alpha, and coal, is on its deathbed But de-spite fears of global warming coal remains the fastest-growing fossil fuel worldwide, thanks to China’s sprawling economy and fears of nuclear disasters in places like Ger-many and Japan, which mothballed nuke plants after Fukushima Coal’s share of the domestic power-generation pie has bounced back to 42%, from a low of 36% in 2012, amid a rebound in natural gas prices over the past two years Solar and wind energy may grab headlines and taxpayer subsidies, but coal’s share of U.S electrical genera-tion remains nine times greater than that of those two combined “Declaring the death

of coal is premature,” says Bob Yu, analyst at

are increasingly important jobs in a region

that has seen thousands of layof s and the

closure of dozens of mines “If the price isn’t

right, we’ll leave it in the ground for another

day,” says Kevin Crutchf eld, CEO of Alpha

Investors have been saying the same thing

about shares of Alpha and its fellow miners

lately Based in Bristol, Va., the company has

endured a nightmarish few years In 2010

Crutchf eld looked on as 29 miners of

Appala-chian rival Massey Energy died in an explosion

at the Upper Big Branch mine in Montcoal, W

Va He had coveted Massey’s high-quality

re-serves of metallurgical coal, used in

steelmak-ing, and in 2011 (amid record-high

metallurgi-cal coal prices) he led Alpha to double down,

acquiring Massey for $8.5 billion He should

fed by fears of global

warming and a

plen-tiful supply of

clean-er-burning natural

gas that’s stolen share

in the electrical

gen-mining

strategies

“I see coal making a comeback

The best thing for coal will be when we start exporting natural gas.”

miners earning $80,000 to $100,000 have been laid off by the thousands amid the industry’s implosion.

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36 | FORBES JUNE 16, 2014

Redinger, managing director at KeyBanc tal Markets, who has done investment bank-ing work for coal utilities and solar developers alike “The best thing for coal will be when we start exporting natural gas.”

Capi-And the outlook for Alpha? It’s improving

Despite his horrid market misread with the Massey deal, Crutchfeld remains convinced that he can create value and that the tough part is behind him Massey was a “reputa-tionally challenged entity,” he says “But we felt that given our management structure and moral compass that we could take that on and we could change it.”

That’s been true, but it has not come cheap Alpha spent more than $500 million

to settle Massey’s legacy—everything from federal fnes to shareholder suits Crutchfeld permanently closed Upper Big Branch and added new safety measures at other Massey mines, like sensors that monitor air fow and methane buildup After the acquisition Alpha had 14,000 employees Having closed

64 out of 150 combined mines, it’s now down

to 10,400 Alpha sufered a net loss of $2.4 billion in 2012 and $1.1 billion in 2013, but in the past quarter operating income (excluding costly depreciation and depletion charges) has fnally turned positive again A dim light at the end of a long tunnel, but a light nonetheless

Bentek Energy, a division of Platts

Last winter’s polar vortex demonstrated

coal’s continued importance in the U.S As

ferce cold gripped the Northeast, natural gas

ran short, and prices spiked from $4.50 per

1,000 cubic feet to more than $70 in some

areas Had coal-fred plants slated for

clo-sure in the area already been shut down, the

result would have been blackouts in subzero

weather By the time winter was over, coal

in-ventories had fallen to ten-year lows Back in

2012 it cost $10 more to generate a megawatt

hour of electricity from coal than it did from

gas Now, according to Bentek, that’s fipped,

and coal is $12 per MWh cheaper

That doesn’t mean the industry will roar

back to life While coal prices have likely

bot-tomed out, the road to recovery will be slow

To ensure long-term success the industry will

need to meet proposed EPA regulations

re-quiring coal-fred power plants to install

mul-timillion-dollar scrubbers to clear emissions

of sulfur dioxide and nitrogen oxide

Con-struction of new coal plants will be banned

unless they can match the lower emissions of

plants burning natural gas

A turning point should arrive in 2016

That’s when the U.S is likely to begin

export-ing natural gas, which will raise its current

price and give coal a chance to compete “I

see coal making a comeback,” says Andrew

mining

strategies

“The industrial age emerged literally in a haze of coal smoke, and in that

smoke we can read much of the history of the modern world.” —BarBara Freese

final thought

rock Bottom?

They’re all risky beTs, buT given how far some coal sTocks have fallen,

even small rebounds would pay nicely aT This poinT here are six To waTch:

stock coal production performance (short tons 1-year 3-year per year)

Coal produCtion refleCts 2012 results, aCCording to u.s energy information administration

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“It was an evolutionary step and an investment in our future in branding the WeatherTech name and getting it out to all of America,” says Weather-Tech CEO and founder David Mac-Neil, 55, when asked why he shelled out $4 million to put the ad, which was based on his own experience,

on TV “And it helped us get across

a message that is near and dear to me: the importance of U.S manufac-turing, our industrial infrastructure, using American raw materials and hiring American workers.”

Not that MacNeil is some istic super patriot While there are sound operational reasons for keep-ing his manufacturing local, for him

jingo-a big drjingo-aw for mjingo-aking his $150 (on jingo-averjingo-age) foor mats in America is that in an age of out-sourcing, “Made in the U.S.A.” sells And MacNeil has bet big on that approach He employs 1,000 workers at six factories and 400,000 square feet of factory space in subur-ban Chicago He forges all of his own tooling for 18,000 diferent parts, including pickup-bed liners, mud faps and other auto accesso-ries WeatherTech designs its packaging and prints all of its materials in-house, right down

to a tiny product catalog the size of a pocket map with one of MacNeil’s American-manu-facturing screeds on the inside cover They ex-port to 21 foreign markets around the world The company is the largest consumer of sheet plastic in America After nearly a decade of double-digit annual growth, sales were about

$400 million last year, with estimated pretax

Three minutes into the second

quarter of the Super Bowl, soon after a Bank of America ad fea-turing a new song by U2 and Tim Tebow shilling for T-Mobile, a curious 30-second spot broke the slick run of corporate pitchmen It looked like a local cable ad: A banker, a lawyer and a guy in a hard hat stare straight into the camera and tell an en-trepreneur aiming to manufacture products, hire workers and build facilities in the U.S that

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