Table of contents for October 28, 2013 in Forbes

It’s just a number, but it’s a big one. Last month Forbes.com hit a record 51 million unique monthly readers as measured by Omniture, a widely used industry reporting tool. Com-Score, another measuring service, puts our worldwide audience at 26 million. By either count the number of monthly readers has risen more than 200% from three years ago. The FORBES model for journalism in the digital era disrupts 100 years of traditional media thinking on how to cover the news. We have a core group of experienced, salaried reporters and 1,200 expert contributors (many part of an incentive-based program). They’re all building individual brands and communities under the FORBES umbrella brand. Just as unique is our BrandVoice advertising program. It offers marketers the same publishing tools our writers use to…

WINNERS Mark Zuckerberg +$4.7 BILLION NET WORTH: $23.5 BILLION As Wall Street’s infatuation with Facebook continues and the stock keeps rising, Zuckerberg makes his fourth straight appearance as a big gainer. Jeff Bezos +$2.6 BILLION NET WORTH: $29.8 BILLION Amazon trades at an alltime high as it introduces three new Kindle Fire models, while its founder officially takes control of the Washington Post. Phil Knight +$1.3 BILLION NET WORTH: $17.7 BILLION Nike’s stock soars after the company posts impressive quarterly earnings and is made part of the Dow Jones industrial average. LOSERS Micky Arison –$560 MILLION NET WORTH: $5.3 BILLION His holdings in Carnival, the world’s largest cruise company, tank with lower quarterly earnings and weak bookings—see “That Sinking Feeling,” p. 102. Richard Hayne –$180 MILLION NET WORTH: $1.6 BILLION…

IF THE JUSTICE Department succeeds in getting JPMorgan to pay $11 billion for alleged misconduct in the housing market collapse, it will be just one of eight billion-dollar mortgage-related settlements regulators have struck with the four biggest U.S. banks in the past two years. The others all involved charges of widespread mortgage and foreclosure abuses or robo-signing. Of course, the banks portrayed them as altogether great news. $11.82 BIL BANK OF AMERICA, 2012 (14% of revenue) “… extends our ongoing commitment to help homeowners who are struggling to make their mortgage payments.” $5.35 BIL WELLS FARGO, 2012 (6.2% of revenue) “Wells Fargo’s adherence to responsible lending and servicing principles has resulted in delinquency and foreclosure rates below industry averages.” $5.29 BIL JPMORGAN, 2012 (5.5% of revenue) “… will help keep…

NO LONG-TERM SOLUTION to the problem of international terrorism is likely until Russia and China join the U.S. and other Western powers in devising one. China is not unwilling. Its leaders have many powerful motives to come in from the cold and become respectable members of society. What’s required is time, patience and the kind of diplomatic intelligence once so plentifully supplied by Henry Kissinger. The difficulty is Russia and, in particular, its entrenched leader, Vladimir Putin. He rose through the ranks of the KGB and since worming his way into power has become the most difficult, dangerous and unassailable master of Russia since Joseph Stalin. Is he as evil? Many think so. Other things being equal, he’s a natural ally of terrorism. Putin’s character is seen in the way…

Bill Pulte bounded into the middle of the street, grinning as he surveyed the unfinished neighborhood around him. Like so many subdivisions built over the years by Pulte Group, the 500-lot area was thrumming with contractors, trucks and earthmoving machines. If there’s one thing Pulte Group has mastered over 60 years, it’s building homes efficiently. Indeed, the Pulte name has been synonymous with home building since 1950, when Bill’s grandfather, also named Bill, constructed his first bungalow on Detroit’s east side. Since then Pulte Group has delivered more than 600,000 homes in 28 states, and its stock is worth some $6.5 billion. Bill’s father owns Boca Raton-based Mark Timothy, which builds $50 million mansions. But here in the Brightmoor section of Detroit the 25-year-old family scion isn’t building houses. He’s…

Hollywood is schooled in the ways of video pirates, from file-sharing sites like the Pirate Bay to street-corner DVD sellers. Rarely, though, do Tinseltown’s targets warmly invite studios to a “Go to Hollywood” seminar on U.S. soil. Future TV is dedicated to innovatively propelling the growth of the OTT [over-thetop] ecosystem,” read an invitation sent in August to six major studios for a seminar in Los Angeles. “Hollywood, we are coming!” How do you say “chutzpah” in Chinese? Future TV is one of seven firms licensed to stream content into Chinese homes via the Internet to set-top boxes and smart TVs. (“Over-the-top” refers to video delivered outside of a cable or satellite service.) It claims to off er 1.5 million hours of content, of which half is high-definition. But among…

LONG BEFORE FOLKS fretted the demise of “quantitative easing,” I fretted its existence. It proved the reverse of its image, an antistimulus, and we’ve done okay not because of it but despite it. With its demise forthcoming, I’m bullish on banks, relative to the market. Why? Banking’s core business is simple: Take in short-term deposits, make long-term loans. The spread between short-and long-term interest rates pretty well reflects future gross operating profit margins on new loans (effectively cost versus revenue). The bigger the spread, the more profitable future loans will be, all else being equal. Ending so-called QE steepens that spread by definition, since it stops the Federal Reserve’s buying of long-term debt (thus lowering future long-term debt prices and pushing rates higher). As the spread rises, so will bank…

IT’S EMMYS NIGHT AT the Nokia Theatre in Los Angeles, and as showtime approaches, a mosh pit of bluechip television stars jostles backstage. Conan O’Brien and Robin Williams, Alyson Hannigan and Jim Parsons, Jon Hamm and Sarah Silverman—all spiffed up and squeezing past one another and a few score of other celebrities in the narrow corridor between the producers’ station and the green room. “This can’t be fire safe,” grumbles Hamm, the Mad Men heartthrob, as he shoulders through the throng. Maybe not, but a team from Twitter faces a more immediate problem. They spent months negotiating with CBS and Emmy executives for access that resulted in a “Twitter Mirror” set up just outside the green room entrance, steps from the stage. A tricked-out looking glass with an iPad embedded…

1 QUESTCOR PHARMACEUTICALS ANAHEIM HILLS, CA PHARMACEUTICALS $621 51% 41% 2 GRAND CANYON EDUCATION PHOENIX, AZ HIGHER EDUCATION $558 39% 104% 3 PROTO LABS MAPLE PLAIN, MN CUSTOM ARPTS MAKER $143 30% 51% 4 INVENSENSE SAN JOSE, CA SEMICONDUCTORS $225 86% 205% 5 STURM, RUGER & CO. SOUTHPORT, CT GUNS $595 24% 54% 6 EPAM SYSTEMS NEWTOWN, PA INFORMATION TECHNOLOGY $493 30% 39% 7 CIRRUS LOGIC AUSTIN, TX SEMICONDUCTORS $866 36% 124% 8 U.S. SILICA FREDERICK, MD INDUSTRIAL MINERALS $487 14% 61% 9 FLEETCOR TECHNOLOGIES NORCROSS, GA BUSINESS SERVICES $804 20% 20% 10 ANNIE’S BERKELEY, CA FOOD PRODUCTS $175 17% 204% 11 NIC OLATHE, S K COMPUTER SERVICES $238 20% 19% 12 AMERICAN PUBLIC EDUCATION CHARLES OWT N, VW ONLINE EDUCATION $328 35% 31% 13 BOSTON BEER BOSTON, MA ALCOHOLIC…

Ten-year-old InvenSense rarely causes a ripple on anyone’s radar. But on Sept. 20, as Apple’s iPhone 5s hit retail shelves, industry players speculated that the San Jose, Calif. components maker had hit pay dirt, muscling out larger rival STMicroelectronics. Weeks before the release, anticipating that long-awaited debut, investors bid up the stock 15%. InvenSense plays in the $9 billion niche of the semiconductor market called microelectromechanical systems (MEMS), sensors with moving parts so small they can be seen only through a microscope. The components tell your smartphone or tablet if it’s being tilted, twisted, shaken, turned left or right and how fast; compass sensors indicate which way is north and help power onboard GPS. As tech bloggers ripped open the latest iPhone to anatomize its guts, a ritual known as…

Question: What does the Gowanus Canal have in common with a wild hog population in Alabama and a spruce bark beetle infestation in the forests of the Alaskan Peninsula? Answer: each represents an environmental problem affecting communities—in Brooklyn, New York, in Moulton, Alabama, and in the tiny bush village of Kokhanok, Alaska. Moreover, each is a challenge that has global ramifications. Pollution in the Gowanus Canal is a microcosm of global water treatment problems. Feral hogs and spruce bark beetles are examples of invasive species that are laying waste around the globe, sometimes as a result of climate change. But perhaps the most impressive thing about these challenges are the practical, hands-on solutions that have been proposed for them by students and their teachers, based on the application of STEM—science,…

FINAL THOUGHT Where are most of the millions of new jobs? An overwhelming percentage has been, and is being, created in companies with fewer than 100 employees. —MALCOLM FORBES No one is born a CEO, but no one tells you that. The magazine stories make it sound like Mark Zuckerberg woke up one day and wanted to redefine how the world communicates [by creating] a billion-dollar company. He didn’t. —DREW HOUSTON The essence of success is that it is never necessary to think of a new idea. It is far better to wait until somebody else does it, and then to copy him in every detail except his mistakes. —AUBREY MENEN There are 100 men seeking security to one able man who is willing to risk his fortune. —J. PAUL…

WHEN PRESIDENT OBAMA takes time out from stonewalling congressional Republicans over the continuing budget resolution and raising the debt ceiling to pick a nominee for the next Federal Reserve chairman, the U.S. Senate should be prepared to ask that candidate hard, critical questions and to reject the person if satisfactory answers aren’t forthcoming. To “stimulate” the economy our central bank, at the direction of Ben Bernanke, has undertaken unprecedented actions that have immensely harmed credit markets, thereby retarding recovery. They have the potential to inflict even greater damage on us and the world than the 2008–09 crisis. Without congressional authority the Fed has assumed enormous economic powers. Even worse, despite the Fed’s manifest failures before and after the economic crisis, Congress has granted it other powers that threaten our economic…

STOCK OF his pharmaceutical company, Insys Therapeutics, has quintupled since its May IPO, catapulting him to billionaire-ship at 70. Insys produces drugs to alleviate cancer patients’ symptoms; he’s its founder and executive chairman, and his stake is now worth more than $600 million. He also owns more than $400 million of drugmaker Akorn. The first member of his family to go to college, he arrived in America from India in 1964. His career took off when he joined LyphoMed, a struggling pharma company, in 1978, worked his way up to general manager, turned the business around and sold his share of it in 1990 to net $100 million. He has been a serial entrepreneur ever since. “This is the country you can do it in. Nowhere else,” he tells FORBES.…

As the Jobs Act opens up crowdfunding, these entrepreneurs stand ready with fast-growing networks for raising cash. Naval Ravikant ANGELLIST In September Ravikant’s AngelList, a matchmaking site for entrepreneurs and would-be investors, raised $24 million and launched AngelList Syndicates, where accredited investors can create and lead fundraising rounds for individual startups. 4-Hour guru Tim Ferriss raised $250,000 in under an hour to invest in startup Shyp. AngelList takes a cut. Stephan Vermut PROSPER Chris Larsen cofounded Prosper in 2005 as the first peer-to-peer lending marketplace. Vermut, founder of Merlin Securities, took over as CEO this year. The company has raised $126 million ($25 million in September alone) from Sequoia Capital, Accel Partners and Benchmark Capital. It facilitates personal loans of from $2,000 to $35,000. James Beshara and Khaled Hussein CROWDTILT…

FOR 182 YEARS, from 1789 to 1971, the United States embraced the principle of stable money—in practice, a gold standard system. During that time it rose from a not-very-promising experiment in government to a global superpower. The U.S. was the most successful country of the 19th and 20th centuries. The last two decades of the gold standard era, the 1950s and 1960s, were especially prosperous. The middle class achieved an unprecedented level of material affluence. Over the 42 years leading to the end of the Bretton Woods gold standard system in 1971—even beginning in the rather inauspicious year of 1929—per capita GDP, as measured in ounces of gold, rose by 223%. What about the 42 years since 1971? In 2012 per capita GDP, as measured in ounces of gold (the…

PRESIDENT OBAMA’S signature health law achieved a major milestone on Oct. 1, when its subsidized insurance exchanges went online. But ObamaCare is already reshaping the health insurance landscape. If you want to track how well the law is working, keep an eye on three aspects of it: Is it driving up the cost of insurance? According to the Congressional Budget Office, 25 million Americans today shop for health coverage on their own. That figure could hit 46 million by 2017, as ObamaCare’s exchanges get under way. But a critical problem is emerging with the exchanges. The health law imposes a battery of new regulations, mandates, taxes and fees upon the individual-insurance market. According to research conducted by my colleagues and me at the Manhattan Institute and published at Forbes.com, many…

WHEN ENTREPRENEUR BART LORANG met his future wife in 2010, he fell in love with her address book, too. “She had pruned and preened it every week, and it had updated titles and photos and e-mails and phone numbers for pretty much everyone she knows,” he says. “I wanted that address book. I wanted a perfect address book that just worked.” So he created a startup called FullContact, which aims to gather a person’s contacts in one place and automatically update them everywhere at once by reaching out to Facebook, Twitter, Gmail, iCloud and other Internet sites to grab the latest publicly available information. It would be a step ahead of Plaxo, now a subsidiary of Comcast, which hosts 50 million address book accounts. Pitching the promise of doing for…

FEW WERE SURPRISED WHEN small-cap stocks fell hard during the financial crisis. They are generally considered the riskiest group in the equity markets. In fact, during 2008 and early 2009 valuations for highgrowth small caps dropped to their lowest levels in 30 years. But as the market rebounded and our economy grew stronger from 2009 to 2012, investor appetite for risk—arguably more important than individual stock fundamentals during some periods—helped kick prices back up to more normal valuations. These days a different dynamic is in play. With valuations no longer at bargain-basement levels, earnings growth will be the driver for high returns. For companies under $1 billion in market capitalization and with annualized growth rates of 30% or more, the average forward price-to-earnings multiple is now 16.1—a shade above the…

WHETHER THEY’RE PROMOTING THEIR SHOWS OR JUST THEMSELVES, MORE THAN 150 MILLION FOLLOWERS ARE LISTENING. Jennifer Lopez @JLo Followers: 24.3 million Recent tweet: “I know it’s been a long wait, but #AStepAway is coming soon to @mynuvotv!! Can’t wait for you to get to know @jlodancers! #BestInTheBiz” Oprah Winfrey @Oprah Followers: 21.4 million Recent tweet: “So many people do that hold their feelings inside. and the truth is vulnerability is where your true power lies. #FixMyLife” Ashton Kutcher @aplusk Followers: 15.1 million Recent tweet: “Yesterday was today’s author and today will be tomorrow’s but we each hold our own pen.” Tyra Banks @tyrabanks Followers: 10.8 million Recent tweet: “So you know when you’re soothed by the sound of a fountain but then are like, ‘That kinda sounds like a toilet’”…

MIKE FIFER, STURM, RUGER & CO. (NO. 5) the most important incentive is profit-sharing for all our employees and contractors. We allocate 15% of pretax profits every quarter. the first year it averaged less than 5% of pay. Now it’s more than 30%, and everyone is pulling together in the same direction. BRYAN SHINN, U.S. SILICA HOLDINGS (NO. 8) recognize the small things. you don’t have to wait until someone has a major accomplishment. Don’t be afraid to challenge the rules or do something unconventional around reward and recognition. just calling somebody up to say, “thank you,” or finding out what they like to do in their spare time and rewarding them with it—that really goes a long way and can be tremendously motivational for a team. JIM KOCH, BOSTON…

Late on Valentine’s Day Micky Arison, Carnival Corp.’s billionaire chairman and CEO, finally lost his grip on his company. Three tugboats were dragging the Carnival Triumph into Mobile, Ala. to unload 3,143 exhausted passengers after a fire destroyed the ship’s power and propulsion systems, leaving them stranded at sea for five days. Raw sewage leaked from toilets. The air-conditioning stopped working. Passengers moved their mattresses into hallways, away from the smell and the still heat of their rooms. Signs on the deck, painted on sheets and robes, sent desperate messages via the voracious media: “We R Not OK,” “R.I.P. Triumph” and one particularly apt pun, “Ship Happens.” Yet Arison, who inherited the cruise industry’s juggernaut and expanded it by buying up smaller rivals, was nowhere to be seen. The Miami…

Halfway through business school, Rob Cherun thought he was destined to work at McKinsey & Co. The elite consulting firm spent thousands to underwrite his tuition at Stanford a few years ago, certain that the wavy-haired Canadian would join right after graduation. But Cherun changed his mind. Even though a consulting career seemed safe and prestigious, he declared: “I wanted more volatility in my life.” Today Cherun is holed up in a gritty industrial suburb of Toronto, running UCIT Online Security. It’s a small but fast-growing construction-surveillance company that Cherun bought soon after earning his M.B.A. If McKinsey stopped by, its consultants might snicker at the peeling paint in UCIT’s offices, the industrial-grade Coke machine in the hallway or the mud-splattered GMC Terrain in the parking lot. Cherun has jettisoned…

THANKS TO the government, U.S. banks are back on a solid footing. Return-on-average-assets, shown in the center of each bubble, and stock prices have rebounded impressively since the depth of the financial crisis. But trillions in stimulus spending has done little to revive banks’ core mission—lending money—with the ratio of loans to deposits still falling. The only thing that has consistently grown, in good times and bad, is bankers’ pay, represented by the ever-expanding colored circles.…

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 firm she launched in 1993. Women’s Wear Daily has named her one of the 50 most influential people in fashion. Before THE VERDICT JA: Driving people to a new product, you need to look a little more forward. This does that. KI: Now he’s the epitome of power dressing, rather than letting an overpowering outfit wear him. JACKET JA: The navy and the brass buttons feel a little nautical…

$120.3 BILLION Aggregate net worth of the 20 youngest billionaires (under age 45) on The Forbes 400. THE RICHEST AMERICANS FORBES, OCTOBER 7, 2013 16,755,508 VIEWS ON Forbes.Com Our annual list of the 400 wealthiest Americans put Bill Gates, worth $72 billion, on top of the heap for the 20th straight year. Altogether the 400 were worth $2 trillion, as much as the entire economic output of Russia. “This astounding figure further outlines the growing gap between the exceptionally wealthy and the rest of the country,” complained Britain’s MailOnline, but FORBES Editor Randall Lane pointed out to CNBC that “you look at this list and most of the people are just people with ideas…. If you have a good idea and you stick to it you can make a fortune.”…

IN 2012 CBS SPORTS ranked the top college basketball teams of all time. Heading the list, ahead of the legendary 1968 and 1972 UCLA Bruins and the 1996 University of Kentucky Wildcats, were the 1975–76 Indiana University Hoosiers. Coached by Bob Knight, the Hoosiers went 32-0 and crushed the University of Michigan in the 1976 NCAA championship game. Many insiders, including those winning Hoosier players, believe Indiana’s 1974–75 team was even better. That year the Hoosiers went 31-1. They lost an NCAA tournament regionalfinal game while playing largely without their star player, Scott May. He had broken his arm and could play only seven minutes. By the mid-1970s—and after the retirement of UCLA’s John Wooden following the 1975 season—Bob Knight had become the best-known active college basketball coach in the…

Jon Oringer marches along the gutted 21st floor of the Empire State Building and ducks out a window onto a deck to pose for a magazine shoot, snapping his own photos as the photographer snaps photos of him. Starting this winter, the entire floor (and an identical one below it) will play home to Shutterstock, Oringer’s 295-person photo website whose shares have more than tripled to a $2.5 billion market value since their debut on the NYSE last October. It’s an appropriate headquarters for New York’s first tech billionaire ($1.3 billion, to be exact) as he looks to ride the proliferation of screens, smartphones and bandwidth to turn Shutterstock into the world’s largest marketplace for buying and selling images. Right now that title belongs to the Carlyle Group-owned Getty Images,…

The next big thing in the $1.5 trillion exchange-traded funds business is being cooked up in a small office sharing an entrance with a beauty salon in the bucolic town of Bedminster, N.J. There, in a loftlike space outfitted with whiteboards, comfy chairs and a pool table, the four principals of Precidian Investments run what amounts to a lab for designing and patenting new forms of ETFs. Few investors have heard of them, but to mutual fund firms like Fidelity and American Funds, Precidian may well be the messiah of new growth. Precidian has devised a new structure that would essentially enable old-school mutual fund companies to offer ETF versions of their existing actively managed funds. Despite the growth of indexing, actively managed stock-picking funds still dominate the mutual fund…

CONGRESS HAS PLACED some of your money on a bait pedal. Can you deftly remove it without getting trapped? I think you can. The bait is something called a Roth conversion, wherein you pay taxes on retirement savings now in return for a permanent tax shield on the portfolio. It’s a scary business, since you could be injured by future tax law changes. But this is an occasion to take a calculated risk. I’ll assume that you have both assets in a tax-deferred IRA or 401(k) and some spare cash outside that account. Say you have a $50,000 slice of your retirement pot that you might convert, you are in a 40% tax bracket (federal and state combined) and you have $20,000 sitting around. If you do the conversion, $50,000…

Two weeks into his new job, Stamps.com’s CFO Ken McBride started slashing the first of 485 workers-87% of the staff. It was October 2000, six months after the initial popping sounds of the dot-com implosion, and the electronic-postage company was spurting gobs of red ink. Just a year earlier Stamps.com had gone public, raising a staggering $450 million in two offerings. Back then investors didn’t seem to care that the company had lost $56 million on revenue of $358,000 in 1999; they bid up the share price to $88. But within a year the price had fallen to $2.25. Almost the entire senior management had quit. Hundreds of Aeron chairs sat empty in the company’s 90,000-square-foot headquarters in Santa Monica, Calif. Stamps.com finished out 2000 losing $213 million on $15…

When CEO John Foraker describes his 14-year stewardship of Annie’s, he sounds like he’s losing his mind. “I live in a state of paranoia,” he says of competitors that nibble like piranhas at his “healthy” food products. “I’m as obsessed with the big CPG companies as I am with the up-andcoming brands”—Kraft Foods on one side, smaller consumer packaged goods like Back to Nature Foods on the other. As they say in Catch-22, “Just because you’re paranoid doesn’t mean they aren’t after you.” A little maladjustment goes a long way in this business. Over the last five years sales have steadily grown at a 17% average annual clip. In the latest 12 months Annie’s earned $11 million on $175 million selling nearly 150 healthier alternatives to junk food. (While its…

At 27 Calvin Hunt finally stumbled across his first great opportunity. The Atlanta native and lifelong fishing fanatic had graduated from Florida State in 2008 directly into the teeth of the Great Recession. A shot at a dream job in the corporate headquarters of Hatteras Yachts in North Carolina vaporized as the tanking economy swiftly decimated the luxury-boat business. Instead, for nearly four years Hunt toiled at a Hatteras dealer in Orange Beach, Ala. servicing old boats, struggling to sell new ones (“I think I sold three the entire time I was there”). By the summer of 2012, his interest in the marine business effectively scuttled, Hunt had relocated to Austin, Tex. to attend an unusual one-year M.B.A. program focused on entrepreneurship at the Acton School of Business. “The goal…

There’s a great joy in creating a product outdoors in one of the most beautiful places in the world,” says Bill Price, a onetime private equity hawk turned stealth wine mogul. “This morning I was out in a vineyard to see if we were ready to pick, and the fog was burning off and the sun was coming up and the birds were chirping. Pretty great way to spend your workday.” Price, 57, one of the founding partners of private equity giant Texas Pacific Group (TPG)—“I was the ‘Pacific’ part,” he says—spent several careers’ worth of more conventional workdays before following his passion into the California wine business. Today he controls seven wine brands and five vineyards, but for a player of his stature he is almost invisible to outsiders.…