2 | FORBES FEBRUARY 10, 2014
contents — FeBRUARY 10, 2014 VoLUMe 193 nUMBeR 2
100 | not as advertised
Google’s future is less self-
driving cars than Mad Men.
11 | FAcT & cOmmEnT
by steve Forbes
China is dependent on our fi scal health.
LEADERBOARD
14 | ARE YOU A STARTUp?
Have a genius idea? Follow the path to your future.
16 | HOnG kOnG’S RicHEST
Bets on Macau casinos pay o .
18 | HOT HOmES
The most expensive residences in your state.
Plus: A follow-up to our Isabel dos Santos
investigation.
20 | FRED SmiTH FLiES HiGH
The FedEx founder may be worth $2.3 billion,
but he wasn’t an overnight success.
22
| HiGHEST-pAiD nBA ATHLETES
The elite earn most of their dollars
from endorsements.
24 | SpEED DEmOn
The Ferrari 458 Speciale will change your idea
of what a supercar should be.
Plus: Up-and-Comers.

26 | AcTivE cOnvERSATiOn
Snapchat’s Evan Spiegel tries to have
the fi nal word.
cover photograph by matt Furman For Forbes
66 | steinhardt’s second act
From hedgie legend to ETF wise man.


4 | FORBES FEBRUARY 10, 2014
contents — FeBRUARY 10, 2014
THOUGHT LEADERS
28 | cURREnT EvEnTS
by david malpass
Five big steps toward faster global growth.
30 | cApiTAL FLOwS
by rob arnott
Thank heavens for those patent trolls.
32 | innOvATiOn RULES
by rich karlgaard
A story of transformation: the conviction key.
STRATEGiES
34 | cAn A TEAm
REinvEnT A ciTY?
We’ve seen time and again that it can’t.
That isn’t stopping the new owner of
the Sacramento Kings.
Plus: The latest NBA team valuations.
by tom van riper
TEcHnOLOGY
40 | cROwDSOURcinG cApiTALiSTS

Duolingo provides English lessons to millions
for free, as the nonprofit Khan Academy does
with math. But its founders want to make real
money so the service lasts.
by parmy olson
44 | TRickinG THE HAckERS
Backed with $26 million, a startup is using
hackers’ own tricks against them.
by andy greenberg
46 | nOw STREAminG AT GATE 22B
Travelers are demanding free airport Wi-Fi.
But who is going to foot the bill?
by alex konrad
EnTREpREnEURS
50 | GiRLFRiEnD pOwER
Why is Silicon Valley backing a small beauty
brand? Hint: Julep knows how to exploit
social media.
by carol tice
invESTinG
54 | SwinGinG AT STRikES
Most money managers live by the motto of go
big or go home. Beck, Mack & Oliver takes a
more civilized approach.
by steve schaeFer
58 | pORTFOLiO STRATEGY
by ken Fisher
All or nothing in 2014.
60 | invESTOR cHEckUp
by william baldwin

Bet against the government.
34 | caliFornia king
Vivek Ranadivé thinks his
basketball team can save
Sacramento.
54 | obvious proFits,
less obvious prospects
Value investor Zachary
Wydra plays directly from
the Ben Graham handbook.
50 | beauty secrets
Makeup maven Jane Park knows
how to profit from girl talk.
40 | proFiteering proFessors
Duolingo teaches its students English for
free, provided they also translate for free.

6 | FORBES FEBRUARY 10, 2014
contents — FeBRUARY 10, 2014
62 | ScREEn TEST
by marc gerstein
Quiet bargains.
AmERicA’S mOST
pROmiSinG cOmpAniES
74 | TOTALLY jUicED
At Suja two young entrepreneurs teamed with
some adult supervision and created one of the
fastest-growing beverage companies ever.
by j.j. colao

82 | SEcRET LivES
AnchorFree lets you access the Web
anonymously—anywhere, anytime. It’s great
for privacy. But, oh, those relentless ads.
by karsten strauss
FEATURES
66 | THE OncE & FUTURE kinG
Michael Steinhardt forged the model for making
hedge fund billions before exiting the game.
With WisdomTree, he’s back to upend Wall
Street again—this time, with the little-guy
investor at his side.
by michael noer
86 | BROOkLYn’S
BiLLiOnAiRE
Cash crisies, political grudge matches, suicide.
None of it has stopped David Walentas from
forging a ten-digit fortune by creating an entire
neighborhood in New York’s underdog borough.
And he’s about to do it all again.
by caleb melby
92 | AmERicA’S SEcOnD
RAiL BOOm
The relic of the 19th century will become
the most important logistics system of the
21st century—and it’s making billions for
Warren Buett and others. All aboard!
by zack o’malley greenburg,
joann muller and christopher helman
100 | GOOGLE wAnTS iT ALL

Forget wearable computers and self- driving
cars. The search giant’s dominance will
continue by sticking with its roots—taking
$20 billion out of the hides of some very
familiar companies.
by robert hoF
LiFE
106
| STALin’S BEDTimE
niGHTmARE
A onetime Soviet showpiece, the Ukraina is now
Europe’s poshest business hotel.
by kenneth rapoza
112 | THOUGHTS
On the Olympics.
92 | america’s new
train set
Ultra-fuel-ecient
locomotives are
making a killing by
hauling fuel.
86 | dumbo dreamer
Billionaire David Walentas reimagined a
grimy stretch of Brooklyn’s waterfront into one
of New York’s hippest areas.
74 | the right ingredients
Suja has carefully blended youthful passion
and seasoned management into one of
America’s Most Promising Companies.


Give your employees
the duck.
Anything else is just
chicken.
Call your local agent and visit
afl ac.com/business
The question is, who will you choose?
You could opt for a voluntary option from your
medical carrier, or you could offer coverage from
the number one voluntary provider
2
: Afl ac.
There’s no direct cost to you for offering it, and
getting started is as simple as adding a payroll
deduction. That’s why business owners like you
have chosen Afl ac for nearly 60 years. It’s also
why we’re so confi dent Afl ac is the right partner
for your business.
You can bet the farm on it.
Almost 60 percent of employees
wish their employers offered
voluntary insurance
1
.
1
2013 Afl ac WorkForces Report, a study conducted by Research Now on behalf of Afl ac, January 7 – 24, 2013.
2
Eastbridge Consulting Group. U.S. Worksite/Voluntary Sales Report. Carrier Results
for 2012. Avon, CT: April 2013. Coverage is underwritten by American Family Life Assurance Company of Columbus. In New York, coverage is underwritten by American Family Life Assurance
Company of New York. Worldwide Headquarters | 1932 Wynnton Road | Columbus, GA 31999

Z131175
11/13

CHIEF PRODUCT OFFICER
Lewis D’Vorkin
FORBES MAGAZINE
EDITOR
Randall Lane
EXECUTIVE EDITOR
Michael Noer
ART & DESIGN DIRECTOR
Robert Manseld
FORBES DIGITAL
VP, INVESTING EDITOR
Matt Schifrin
MANAGING EDITORS
Dan Bigman – Business, Tom Post – Entrepreneurs, Bruce Upbin – Technology
SENIOR VP, PRODUCT DEVELOPMENT AND VIDEO
Andrea Spiegel
EXECUTIVE DIRECTOR, DIGITAL PROGRAMMING STRATEGY
Coates Bateman
EXECUTIVE PRODUCER
Frederick E. Allen – Leadership
Tim W. Ferguson FORBES ASIA
Kerry A. Dolan, Connie Guglielmo, Kashmir Hill SILICON VALLEY
Janet Novack WASHINGTON
Michael K. Ozanian SPORTSMONEY
Mark Decker, John Dobosz, Luisa Kroll, Deborah Markson-Katz DEPARTMENT HEADS
John Tamny OPINIONS
Kai Falkenberg EDITORIAL COUNSEL

BUSINESS
Mark Howard CHIEF REVENUE OFFICER
Tom Davis CHIEF MARKETING OFFICER
Charles Yardley PUBLISHER & MANAGING DIRECTOR FORBES EUROPE
Nina La France SENIOR VP, CONSUMER MARKETING & BUSINESS DEVELOPMENT
Miguel Forbes PRESIDENT, WORLDWIDE DEVELOPMENT
Jack Laschever PRESIDENT, FORBES CONFERENCES
Michael Dugan CHIEF TECHNOLOGY OFFICER
Elaine Fry SENIOR VP, M&D, CONTINUUM
FORBES MEDIA
Michael S. Perlis PRESIDENT & CEO
Michael Federle CHIEF OPERATING OFFICER
Tom Callahan CHIEF FINANCIAL OFFICER
Will Adamopoulos CEO/ASIA FORBES MEDIA
PRESIDENT & PUBLISHER FORBES ASIA
Rich Karlgaard PUBLISHER
Moira Forbes PRESIDENT, FORBESWOMAN
MariaRosa Cartolano GENERAL COUNSEL
Margy Loftus SENIOR VP, HUMAN RESOURCES
Mia Carbonell SENIOR VP, CORPORATE COMMUNICATIONS
FOUNDED IN 1917
B.C. Forbes, Editor-in-Chief (191754)
Malcolm S. Forbes, Editor-in-Chief (195490)
James W. Michaels, Editor (196199)
William Baldwin, Editor (19992010)
8  FORBES FEBRUARY 10, 2014
FORBES
IN BRIEF
EDITOR-IN-CHIEF
Steve Forbes

FORBES (ISSN 0015 6914) is published semi-monthly, except monthly in January, February, April, July, August and October, by Forbes
LLC, 60 Fifth Ave., New York, NY 10011. Periodicals postage paid at New York, NY and at additional mailing oces. Canadian Agreement
No. 40036469. Return undeliverable Canadian addresses to APC Postal Logistics, LLC, 140 E. Union Ave., East Rutherford, NJ 07073.
Canada GST# 12576 9513 RT. POSTMASTER: Send address changes to Forbes Subscriber Service, P.O. Box 5471, Harlan, IA 51593-0971.
CONTACT INFORMATION
For Subscriptions: visit www.forbesmagazine.com; write Forbes Subscriber Service, P.O. Box 5471, Harlan, IA 51593-0971;
or call 1-515-284-0693. Prices: U.S.A., one year $59.95. Canada, one year C$89.95 (includes GST). We may make a portion of
our mailing list available to reputable firms. If you prefer that we not include your name, please write Forbes Subscriber Service.
For Back Issues: visit www.forbesmagazine.com; e-mail ; or call 1-212-367-4141.
For Article Reprints or Permission to use Forbes content including text, photos, illustrations, logos, and video:
visit www.forbesreprints.com; call PARS International at 1-212-221-9595; e-mail or e-mail
Permission to copy or republish articles can also be obtained through the Copyright Clearance Center at
www.copyright.com. Use of Forbes content without the express permission of Forbes or the copyright owner is expressly prohibited.

Copyright © 2014 Forbes LLC. All rights reserved.
Title is protected through a trademark registered with the U.S. Patent & Trademark Oce. Printed in the U.S.A.
FEBRUARY 10, 2014 — volUmE 193 NUmBER 2
Our Move
In Mobile
BY LEWIS D’VORKIN
Like a hangman’s noose, mobile focuses the mind. I
often say the $2 to $3 CPMs publishers frequently get
for smartphone ads will crush all traditional newsrooms
built for the era of $50 print CPMs—and most of them
still are, whether they admit it or not. The FORBES
contributor network was conceived, in part, as a new
content-creation model to oset such upheavals in the
marketplace. Next in line for disruption—and tied pixel-
to-pixel with mobile—is the article page. Spawned by a
print mentality, it must cope with both smaller device

sizes and a strong push by marketers for more compel-
ling ad positions.
That’s where content streams come into play. They are
today’s consumer experience of choice. You see them on
Facebook, Twitter and LinkedIn. Marketers—and by exten-
sion their ad agencies and p.r. firms—are focused on them,
too. Forbes.com has experimented with streams for the last
three years—on the home page, the channel pages and a
real-time page for 300 to 400 daily posts. Now the time is
here to re-architect Forbes.com for the era of streams.
Our new mobile site, launched two weeks ago, fea-
tures both vertical and horizontal navigation. Beneath
every post is a stream of headlines. The headlines in your
feed are dierent from those in mine or another person’s.
All streams include related or editor-selected headlines,
special features and stories that match an individual’s
consumption patterns. Tap the headline to reveal the en-
tire post. Tap the bio to reveal the author’s background.
Tap the sharing icon to push it to a social network. When
reading a post you’ll notice the ability to swipe horizon-
tally. Swiping takes you to the next item in the stream,
with slightly more information than simply a headline.
We call it the Info Card. Tap the headline to expose the
entire post or continue swiping through Info Cards.
This new navigational construct, with natural breaks
between headlines and Info Cards, opens up new ways to
monetize a small screen. BrandVoice, our industry-lead-
ing native advertising program, fits as neatly within the
streams as current and new types of display advertising.
Every move we make addresses the media industry’s

changing economics and technology. In doing so, we’ve
left nostalgia to others, preferring to create the systems,
processes and products that work for journalists, con-
sumers and marketers in a new era.
F


A HISTORIC
$
50 MILLION GIFT
ESTABLISHES THE USC MICHELSON CENTER
FOR CONVERGENT BIOSCIENCE
BUILDING UPON USC’S UNIQUE STRENGTHS AT THE INTERSECTIONS
OF ENGINEERING, THE BIOMEDICAL SCIENCES AND MEDICINE
The University of Southern California is rapidly accelerating journeys into greater understanding of living systems and
advances in lifesaving biomedical breakthroughs, thanks to a generous and visionary gift from Gary K. Michelson, M.D.
The new USC Michelson Center for Convergent Bioscience will provide a 190,000-square-foot, state-of-the-art research
facility for collaborative cross-disciplinary studies with far-reaching benefits to humanity worldwide. This $50 million gift
from Dr. Michelson reinforces USC’s commitment to innovative thinking, opening new frontiers for world-class researchers,
scholars and students from around the world.

USC.EDU/MICHELSON
Dr. Gary Michelson is a visionary philanthropist and retired orthopaedic spinal surgeon,
whose groundbreaking ideas and inventions have generated more than 955 issued or
pending patents worldwide. His prolific innovation in medical products and procedures has
made him a pioneer in the field of spinal surgery and one of the most admired medical
inventors of his generation.

new products and services. Prior to
WWI Britain ran mammoth trade

surpluses, which were far greater
proportionately than are those of
China. But the money didn’t sit in
the Bank of England collecting in-
terest. It financed a mind-boggling
array of railroads, companies and
agricultural enterprises all over the
world. Private entrepreneurs, not
government ocials, directed those
investments. British capital, for in-
stance, financed much of the industrialization
of the U.S.
• What would happen if China, to damage us,
decided to dump its trove of Treasurys? Prices
might wobble, but not for long. There are tril-
lions of dollars’ worth of financial securities
scattered around the world, and smart asset
buyers would gobble up Treasurys if they
thought they were underpriced. Moreover, the
Fed, which already has a bloated balance sheet
of $4 trillion, could easily absorb what China
owns in Treasurys—$1.3 trillion.
• If China did sell Treasurys, it would be paid in
dollars. Then what? Would it dump the dollars for,
say, yen or euros? The European Central Bank and
the Bank of Japan, not to mention the Fed, could
take countermeasures if they so desired, to make
sure currency ratios didn’t get out of line.
The idea that a government gains strength
by piling up dollars or other foreign curren-

cies is a mercantilist holdover from the 16th to
18th centuries, when France, Spain and others
thought amassing gold and silver was how a
country became wealthy. Trade, not hoard-
ing, makes for a powerful economy—an insight
Adam Smith understood but one that too many
people today don’t.
FEBRUARY 10, 2014 FORBES | 11
FACT & COMMENT — STEVE FORBES
FORBES
chinA iS dEpEndEnt
On OUR FiScAl hEAlth
BY STEVE FORBES, EDITOR-IN-CHIEF
“With all thy getting, get understanding”
China’s holdings in U.S. Trea-
surys, which reached record levels
in 2013, are setting o alarm bells.
They shouldn’t. They underscore
that Beijing is becoming more de-
pendent on the U.S. and the rest of
the world for its strength and pros-
perity. China’s military leaders may
not recognize that truth any more
than Germany’s military, its milita-
ristic Prussian aristocracy (which
had outsize influence prior to WWI)
and some of its intellectuals did in 1914.
Some points to keep in mind.
• If we and Beijing ever engaged in a mor-
tal confrontation, how much would China’s

holdings in American government bonds be
worth if we said the paper was no longer valid?
Beijing is a hostage to our willingness to honor
these obligations.
• China has not been a big buyer of our paper
for several years because of its concerns about
the dollar’s integrity.
• Chinese companies get dollars by selling us
products that they either made or assembled
from corporate global supply chains. Unless
China wants to sit on paper money, it will con-
tinue to use those dollars to buy stu from us,
in this case government bonds.
• The fact that the Chinese government is
amassing so much in foreign currencies—
$3.8 trillion at last count—means that China’s
capital markets are still primitive compared
with ours and Britain’s. That money is cen-
trally controlled instead of being in the hands
of numerous parties—banks, insurance com-
panies, venture capital funds, mutual funds,
private companies that wish to invest overseas
and so on—that would put it to work creating

12  FORBES FEBRUARY 10, 2014
FORBES
FACT & COMMENT — STEVE FORBES
Two recent comments underscore
the crisis in modern economies, a
critical situation that is at the heart

of the sluggish global economy and
that could, if not corrected, lead to
an ever uglier political environment.
The blame for the mess we are in lies
with John Maynard Keynes.
The head of the IMF, Christine
Lagarde, recently warned that falling
prices are threatening a fragile recov-
ery: “With inflation running below
many central banks’ targets, we see
rising risks of deflation, which could
prove disastrous for the recovery.” Her
concern echoes that of the European
Central Bank head, Mario Draghi, who
spoke around the same time about
deflation risks and declared that the
ECB will remain “accommodative.”
Classical economists going back
to Adam Smith have regarded the
production of products and services
as the “real economy” and money
and credit as the “symbol economy.”
In other words, money reflects what
people are doing in the marketplace.
Money and credit are tools of com-
merce. Keynes turned that thinking
on its head, audaciously asserting that
money and credit are the real drivers
of the economy. Control money and
you control the production of prod-

ucts and services. To classical econo-
mists this is like stating that the sun
rises in the West and sets in the East.
But thanks to the Great Depression,
Keynes’ heresy became orthodoxy.
Monetarism is a Keynesian ospring.
Keynes famously observed: “Prac-
F
Keynes’ Quackery
tical men, who believe themselves to
be quite exempt from any intellectual
influences, are usually slaves of some
defunct economist.” Unfortunately
too many government ocials and
economists, while not pretending
to be exempt from ideas, are today
slaves of Keynes’ misguided mon-
etary notions. Hence the current
orthodoxy: Pump out enough money,
and all will be well. The impact of
high tax rates, regulations that ham-
per enterprise and gum up the flex-
ibility of labor markets, and bloated
public sectors, which absorb and
waste resources that could be pro-
ductively put to work for everyone’s
benefit by businesspeople and inves-
tors, are downplayed or ignored.
What Keynes posited was the equiv-
alent of saying that manipulating scales

is the way to attack obesity. Money
is a measure of value. Like a clock or
ruler, it has little or no intrinsic value.
Its function is to facilitate commerce.
Completely alien to today’s finance
ministers, central bankers and most
economists is the idea that money
works best when it has a stable value.
The “deflation” that worries so
many of today’s economic worthies
is actually a reflection of a still slug-
gish economic environment, which,
in turn, is in no small part attribut-
able to credit markets that have been
warped by the suppression of inter-
est rates. When the price of borrow-
ing money is distorted, the financing
of productive commerce is hindered.
Vibrant economies, not central
banks, create real money, and wealth
is abundantly created when tax rates
Restaurants: Go,
Consider, Stop
Edible enlightenment from our eatery experts and colleagues Richard Nalley, Monie Begley, Randall Lane and Chef Je Lamperti,
as well as brothers Bob, Kip and Tim.
l La Ripaille
605 Hudson St., between Bethune and West
12th streets (Tel.: 212-255-4406)
It’s reassuring to know that this place has aged
gracefully and the fare remains first rate. The

mushroom soup is delicious, the chicken paill-
arde is pounded to parchment-thin perfection,
and the lemon tart special leaves you smiling.
l Villard Michel Richard
455 Madison Ave., between 50th and 51st
streets (Tel.: 212-891-8100)
Once the service is brought up to snu this res-
taurant will be deserving of Stars. Sublime: crab
cake, white bean soup, seared tuna served over
finely chopped potato salad, crème brûlée and
the incredibly rich chocolate bar.
l B Bar & Grill
40 East 4th St., at Bowery
(Tel.: 212-475-2220)
An indoor/outdoor garden and vintage decor
are appealing features of this popular and
happening Bowery staple. The burgers, the
fish & chips and the Cobb salad all evoke raves.
Brunch is also wonderful—and quite the scene.
are low, money is stable and regula-
tions are reasonable.
Blowing Smoke
New York City, Chicago and other
parts of the country are banning elec-
tronic cigarettes anywhere smoking
is prohibited. The nanny state nin-
nies pushing this are doing a severe
disservice to folks who are trying to
stop smoking or want the pleasure
of seeming to smoke without doing

it. These devices simulate smoking
by vaporizing a liquid that may or
may not contain nicotine, depending
on the “smoker’s” preference. They
aren’t traditional cigarettes, and the
vapor isn’t smoke.
So why the moves to ban them? Be-
cause using e-cigarettes sort of looks
like smoking, although anyone who
isn’t blind can easily see that these
aren’t the real deal. Prohibitionists
also cry that there needs to be more
scientific study, even though there
isn’t a scintilla of evidence that e-cigs
are as harmful as inhaling smoke.
Until there is definitive proof of ad-
verse consequences we should leave
e-cigs alone. After all, they are ideal for
smokers working to break the habit or
trying to avoid going back to it. It’s a
tool in the fight against cigarettes.
This mindless attack against e-
cigarettes is reminiscent of the assaults
against smokeless tobacco. Masticating
tobacco is repulsive and harmful, but,
again, it’s small beer compared with
cigarettes. However, such distinc-
tions are lost on the growing ranks of
behavioral dictators.