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HOW POPEFRANCIS PLANSTO RESTRUCTURETHE VATICAN’SSCANDAL-PLAGUEDFINANCES AND
GENERATEMORE MONEYFOR THECHURCH.
HOLYREFORMERMEXICO
OPENS UPTS OIL
BUSINESSBy Jeffrey Ball
SECRETS
FROMGOOGLE’S
STEALTHSKUNKWORKS
By Miguel Helft
WINNEBAGO
RIDES AGAIN By Erika Fry
FORTUNE ’S
100 FASTEST-GROWING
COMPANIES
SHOULD YOU
BUY STOCK IN PRIVATE
COMPANIES? By Jen Wieczner
By Shawn Tully
DISPLAY UNTIL
SEPTEMBER 8, 2014
FORTUNE.COM
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In U.S. cities, 30% of traffic is caused by drivers looking for parking. This
means increased CO2 emissions and less time spent at local businesses.
Streetline, Inc. is solving the problem with innovative technology and
a free app that helps people find parking. Citi provides the company
with financing that reduces up-front costs, making the technology
more practical for cities to adopt. Now, with Citi’s support, Streetline is
expanding globally.
For over 200 years, Citi’s job has been to believe in people and help make
their ideas a reality.
citi.com/progress
© 2014 Citibank, N.A. Member FDIC. Equal Opportunity Lender. Citi and Citi with Arc Design are registered service marks of Citigroup Inc.
The World’s Citi is a service mark of Citigroup Inc.
8/9/2019 Fortune 1 September 2014
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ON THE COVER
ph otograph by
STEFANO SPAZIANI
FORTUNE.COM
3
103
Fortune’ s 100Fastest-GrowingCompanies
The public companieswith the most stellarthree-year profit,revenue, and stockgrowth. Our 2014 listbegins on page 112.
By Scott DeCarlo, Douglas G. Elam, VivianGiang, Kathleen Smyth,and Niamh Sweeney
90
The Dramaof Mexico’s(Black) GoldSeventy-six yearsafter nationalizingits oil business, Mexicoinvites foreign compa-nies back to drill.What will it mean formighty Pemex—and forthe nation’s self-image?
By Jeffrey Ball
104
WinnebagoRolls Again
The iconic maker ofmotor homes is onthe rebound. Willbaby boomers restoreit to its full glory?
By Erika Fry
80
GoogleDoes DARPA
The famously innovativesearch company hastaken a page from thePentagon’s radicalideas factory. Here’swhat’s brewing inSilicon Valley’s coolestskunkworks.
By Miguel Helft
66
This PopeMeans Business
The wildly popularFrancis is more than apontiff of the people.He’s an elite managerwho’s reformingthe Vatican’s troubledfinances.
By Shawn Tully
September 1 2014 Volume 170 Number 3
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FORTUNE.COM
4
INSIGHTS
57
Sheila Bair
Why getting rid of thecorporate income
tax makes sense.
58
Becky Quick
Dear Washington:Heal thy taxsystem.
60
Nina Easton
Electoral madness? The GOP is drivingHispanic voters outof the party.
14 MACROCloser Look
Europe’sseparatist storm.
By Vivienne Walt
18 MACROBriefing
The NFL goeslong—way long—on a digital app.
By Daniel Roberts
18 MACROBriefing
Geneticallymodified corn’sswift dominance.
By Robert Hackett
20 MACROWorld’s Greatest
Leaders
Cancer warriorKathy Giusti.
By Geoff Colvin
22 MACROPro-Files
Chicago Bearslegend GaryFencik now aimshigh in the realmof private equity.
By Rich Cohen
29 MACRONew Energy
New York’s$1 billion bet onclean energy.
By Brian Dumaine
32 MACROGlobal Power
Profile
Turnaround proDave Lewis is
Tesco’s new CEO.Will he rethink thesales game?
By Mehboob Jeelani
34 MACRORoad Warrior
Travel tips fromdrummer MarkSchulman, whohas toured withCher, Pink, andStevie Nicks.
By Robert Hackett
37 VE NT UR EHow We Got
Started
iRobot brought usmachines to clean
houses, defusebombs, and diag-nose patients.
Interview by Dinah Eng
42 VE NTURE Verne Harnish
Five ways to getorganized andimprove yourefficiency.
45 TECHCognitive
Computing
Digital Reasoningis using military-
grade tech tohelp banks sensetrouble before ithappens.
By Clay Dillow
51 INVESTMarkets
Should you buystock in privatecompanies?
By Jen Wieczner
8 EDITOR’S DESK
12 LETTERS
120 BING!
September 1 2014 Volume 170 Number 3
illus t r at io n b y EDDIE GUY
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It’s not about how far you go. It’s about how you go far.2015 FUSION + HYBRID.
EPA-estimated range of 567 mi.; 44 city/41 hwy/42 combined mpg, 13.5-gallon tank. Actual mileage will vary. EPA-estimated range of 492 mi.; 22 city/33 hwy/26 combined mpg, 16.5-gallon tank, available 2.0L EcoBoost® FWD. Actual mileage will vary. Range calculation based on fueleconomy.gov.Actual range varies with conditions such as external elements, driving behaviors, vehicle maintenance and lithium-ion battery age.
A 46-mile trip
to watch
your daughter’s
soccer game.
An 86-mile
trip to watch
your son’s
basketball game.
A 123-mile trip
to watch your
other daughter’s
sofball game.
A 12-oot walk
to the couch, because
ree weekends
don’t come that ofen.
http://fueleconomy.gov/http://fueleconomy.gov/
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FORTUNE.COM
6
TAKING A BITEOUT OF APPLE
THIS DOESCOMPUTE
With Fortune.com’s recentredesign, we shuffled a fewthings around. Philip Elmer-DeWitt is still covering the insand outs of Apple every day,
just no longer under the Apple2.0 moniker. You can keep upwith Phil’s musings by headingto fortune.com/ped. Followhim on Twitter:@philiped.
First came Term Sheet. Thenthere was Broadsheet. Sheetis happening again, for thetech crowd. We’re pleasedto introduce Data Sheet, adaily newsletter dedicated to
business technology. HeatherClancy will tell you what’sgoing on in the enterprisetech space: the news youshould know, trends youshould follow, and events
you should attend. Subscribeto Data Sheet by going tofortune.com/getdatasheet.
OUR FASTEST-GROWING COMPANIES LISTLETS YOU KNOW WHAT BUSINESSES AREEXPERIENCING EXPLOSIONS OF GROWTH.ONLINE, WE’LL HAVE EXTENDED PROFILESOF THE TOP COMPANIES, ALONG WITH THE
ABILITY TO SORT AND FILTER DATA. YOU’LL ALSO BE ABLE TO LOOK AT THE EVOLUTIONOF WINNEBAGO RVs THROUGH THE YEARS,
AND TAKE A VIDEO TOUR OF HIGH-END RVs.
NEED FOR SPEED
SEE IT ALL AT FORTUNE.COM/FASTESTGROWING
September 1 2014
Leave the page and head to the screen: Get more from Fortuneon the web and tablet.
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Meet the flavors of the world
emirates.com/us
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andy serwer
Managing Editor
FORTUNE.COM
8
THIS IS MY LAST ISSUE as the managing editor of Fortune. Alan Murray will be the
new editor. I congratulate him and wish him well.
My departure has made me sentimental: I’ve been listening to the Carpenters’
“Yesterday Once More” and some neoclassical Stravinsky, Symphony of Psalms.
(Who wouldn’t?) But mostly, leaving has made me think about Fortune over the
years, my amazing colleagues, and the remarkable work they have done.
I have been editor since October 2006, for 162 issues including this one, but I’ve been at Fortune much longer than that, starting as an intern in December 1984.
Over that 29½ years I’ve worked on thousands of articles—including all those in
my daily blog, Streetlife, which I fired up in 1997. I’ve helped cover three recessions
(including the recent Great Recession), the roaring ’80s, the roaring ’90s, a number
of stock market dramas, 9/11, and seven presidential elections. Then there are the
people we’ve written about along the way: the raiders of the 1980s, the super-CEO
era of Jack Welch and Roberto Goizueta. There’s the great Warren Buffett, and in-
delible people like Steve Jobs, Bill Gates, Marissa Mayer, and on and on. Besides my
colleagues and bosses at Fortune and Time Inc., there were hundreds of incredible
characters and great talents. There’s so much, looking back, I’m just beginning to
sort it all out at this chapter-ending moment in my life.
What will I take away? What did I learn? Here are a few things that have oc-curred to me already:
That you have to balance the idea that nothing really changes with the notion that
everything is changing fast—especially the ever-evolving Internet of everything, the
biggest change-agent to hit the global economy in our lifetimes. While Facebook,
Spotify, Uber, Yelp, and the like—which many of us use multiple times every week, if
not every day—are completely new, really cool, and producing all kinds of au courant
lessons and rules, it doesn’t give anyone a license to engage in illegal, conflicted, or
amoral behavior “in the name of the revolution.” If they do, journalists should call
them out on it.
That with so much information available so easily to so many, hard-nosed report-
ing and critical thinking become more important than ever.
That Watson, HAL, and all the artificial intelligence in the world will never rep-
licate the most important human decision-making, or if the computers ever do, we
will have already been taken over by machines, à la some sort of Will Smith movie.
(By the way, I’ve always loved the phrase “artificial intelligence.” I know a few peo-
ple… Oh, never mind!)
That the only thing that makes any organization differentiated and thereby sus-
tainable is a supertalented group of people—which ultimately can be held together
only by culture. And I’ve come to realize that that’s what Fortune has: a passionate,
creative, collaborative, high-bar culture that nurtures one of the most singular groups
of journalists on the planet. And the
beneficiary of all this has been you, O
reader. Our culture created the envi-
ronment that allowed us to deliver all
that remarkable Fortune storytelling
and content to you. I’m optimistic that
the digital revolution won’t change anyof that. In fact, with all the clutter out
there, it only makes what Fortune stands
for more important.
I’m sure more things will occur to
me at some point, but that’s it for now.
Thanks to everyone who worked at For-
tune during my tenure, and thanks to
all of you who have read our work.
¡Buena suerte, amigos!
September 1 2014
FAREWELL, AND THANKS
photograph by RICHARD PHIBBS
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My business card says Founder.
So everyone thinks all these folks
work for me. Everyone is wrong.
These people carry this business
on their shoulders. Every day.
Good times and bad. No matter
what they are up against.
These people don’t work for me.
I workfor them.
© 2014 Sprint. All rights reserved.
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September 1 2014
FORTUNE.COM
10
FOUNDER Henry R. Luce, 1898–1967
CHIEF CONTENT OFFICER Norman Pearlstine
CHIEF EXECUTIVE OFFICER Joseph Ripp
EDITORS AT LARGE Peter Elkind, Shawn TullySENIOR EDITORS Scott DeCarlo (lists), Andrew Nusca,
Roger Parloff (legal affairs), Jennifer Reingold, Christopher TkaczykSENIOR RESEARCH EDITOR Marty Jones
SENIOR WRITERS Miguel Helft, Jessi Hempel, Michal Lev-RamCOLUMNISTS Sheila Bair, Stanley Bing, John Cassidy, Bethany McLean,
Dan Primack (fortune.com), Becky QuickWRITERS Scott Cendrowski, Beth Kowit t, Tory Newmyer
WRITER-REPORTERS Daniel Roberts, Jen WiecznerREPORTERS Douglas G. Elam (lists), Erika Fry, Colleen Le ahey, Anne VanderMey
CONTRIBUTORS Jon Birger, Susan Z. Callaway, Katherine Eban, Dina h Eng, Kate Flaim,Edith Fried, Scott Gummer, Marc Gunther, Verne Harnish, Paul Keegan, Elaine Pofeldt,
Janice Revell, David Sloan, Lawrence J. Shine, Richard K. Tucksmith, Vivienne Walt (Paris)COPYROOM Carol Gwinn (copy chief ), Ben Ake (deputy), Jonathan Brown,
Maria Carmicino, Judith Ferbel, Lauren Goldstein, Edward Karam, Kathleen KentEDITORIAL ASSISTANTS Nancy La Porte (assistant to the managing editor),
Kelly Champion, Zhang Dan (Beijing)TECHNOLOGY SUPPORT Lamarr Tsufurra (associate director), Arthur Wilson Jr. (manager),
Ian Ahye, Kevin Kelly, Gary Lou, Alex Martinez, Aleksey Razhba, Armando RiveraPRODUCTION Carrie Mallie (associate operations director), Gary Kelliher, Elizabeth Mata,
Mary Michael (managers), Nelson Luk (director, Asia)
INFORMATION GRAPHICS DIRECTOR Nicolas Rapp ART STAF F Michael Solita (art director), Chad McCabe (tablet art director),Rose DeMaria (associate art director)PHOTOGRAPHY STAFF Alix Colow (deputy photo editor), Armin Harr is,Neil Harris (associate photo editors), Michele Taylor (photo assistant),Hildegarde P. Vilmenay (office manager)PREMEDIA Richard K. Prue (executive director), Angel Mass (manager)
FORTUNE.COM
MANAGING EDITOR Megan BarnettDEPUTY MANAGING EDITOR Megan McCarthySENIOR EDITORS Stephen Gandel, Roland Jones, Verne Kopytoff,Heather Muse, Scott Olster, Geoffrey Smith
EDITOR Nin-Hai TsengSENIOR WRITER Philip Elmer-DeWitt
WRITERS Ben Geier, Erin Griffi th, Tom Huddleston Jr., Laura Lorenzetti, JP Mangalindan,Christopher Matthews, Claire Zillman, John Kell, Benjamin Snyder, Phil WahbaINTERACTIVE DESIGNER Analee KasudiaPHOTO EDITOR Jaclyn LoRaso VID EO Mason Cohn (senior producer), Sierra Jiminez (associate producer)
FORTUNE EDITORIAL
MANAGING EDITOR Andy SerwerDEPUTY MANAGING EDITOR Clifton Leaf
SENIOR FEATURES EDITOR Timothy K. SmithSENIOR EDITORS AT LARGE Geoff Colvin, Brian Dumaine, Nina Easton, Adam Lashinsky, Carol Junge Loomis, Patricia Sellers, Allan Sloan, Alex Taylor III
ASS IS TANT MAN AGI NG E DIT ORS Leigh Gallagher, Brian O’Keefe (international editor), Nicholas VarchaverCREATIVE DIRECTOR Brandon Kavulla DIRECTOR OF PHOTOGRAPHY Mia J. Diehl
ADV ERT IS ING SAL ES ATLA NTA / WAS HIN GTO N, D .C. : Greg Bowerman (executive director, multimedia),Lisa Danielczyk (Washington sales director), Anna Ryder, Vornida Seng, Eric Shaver
BOSTON: AnneMette Bontaites, Melissa More (directors), Cailin TraversCHICAGO: Jacie Brandes (executive director, multimedia),
Katie Groon, Sarah Matteson, Gina Milkovich, Laurie Minor, John WinterhalderDALLAS: Jacquelyn Olson (August Media)
DETROIT/CANADA: Shauna Haras (executive director, multimedia),John Wattles (sales manager), Amy Kirk
DÜSSELDORF: Thomas Stickelmaier (director), Christiane PloogGENEVA: Irina Hartmann (director)
JAPAN: Kotaro Aikawa (regional director)LONDON: Tim Howat (director), Christian Cecchi, Kelly Goodwin
LOS ANGELES: Jack Vincent (multimedia director), Lexie Adams, Brad SouvaNEW YORK: Lindsey Kintner (multimedia director), Elsa Della Rocco, Mark Isik, Erik Kelliher,
Tim Mullaly, Matthew Ry ter, Tess Skoller, Chris Wolfe, Steven ZampieriHONG KONG: Judy Fong, Elizabeth Kwong
PARIS: Magali Bois-O’Neill (director), Sandra LitasSAN FRANCISCO: Rick Gruber (executive director, multimedia), Vicki Gomez,
Lindsey Lee, Monica SemblerSINGAPORE: Linda Lim, Karen Mong
INTEGRATED MARKETING Dana Kelly, Hulya Niver (executive directors),Christine Fulgieri, Giselle Aranda, Donatella Zamora (senior managers), Stephanie Andersen,
Michael Hayden, Alex King, Hermela Nadew Asia: Audrey Yeong, Florence Thote, Rosa Chow (senior research manager)
Europe: Phil Cutts (brand development director), Daphne Vandeborre (creative director)DIGITAL PLANNING AND CLIENT SERVICES Karen Szeto (director),
Fabian Fondriest, Colleen Tully
CREATIVE SERVICES Hollie Vose (executive group director), Maryellis Bunn, Jonah Copiaco,Miika Grady, Clarice Lorenzo, Paton Roth, Natalie Ryan, Cindy ShiehLIVE MEDIA Delwyn Gray (senior executive producer), Kristen Leoce (executive director),Janine Lind, Katie O’Connell, Allie Schnall, Virginia Slattery, Elisabet TorrentsCONSUMER MARKETING Eric Szegda (VP, retail), Adam Kushnick (finance dir ector),
Jennifer Levin (director), Courtney Andrews, Laura Applestein, Berkeley Bethune, Eunice Chi,Nancy D’Auria, Nancy He, Alexandra Litv inovsky, Stephanie Moloney, Corey Schneider,Michael Trobagis, Greg WachtelEUROPE: Harvey Gidley (associate circulation director)HONG KONG: Rick Kam, Susie Pattison (directors)CONSUMER INSIGHT Andrew Borinstein (executive director), Joel Kaji (senior director),Mac Dixon (senior research manager), Brian Koenig (senior associate research manager),Rachel Lazarus (associate research manager)PUBLIC RELATIONS Kerri Chyka (executive director), Vidhya Murugesan (senior manager),Daniel Leonard (manager), Kelsey Rohwer (junior publicist), Emmanuelle Saliba (coordinator)FINANCE Wajeeha Ahmed (executive director), Parniyan Gutierrez (director), Arbena Bal,Catherine Keenan, Kari Kus, Daniel Seon (managers), Jason Glassman, Michael Hymanson,Jessica Pirro, Parth VedawalaCONTENT MARKETING AND STRATEGIES Diallo Hall (director of content),Lawrence A. Armour, Alec Morrison (editors), Peter Franco, Gregory Leeds,Cindy Murphy (directors), Ron Moss (associate director), Joel Baboolal,Jennifer Hwang, J. Thomas Lewis, Roger Greiner, Blair Stelle, C. Tasha SterlingPRODUCT DEVELOPMENT Brett Krasnove
FORTUNE.COM
VP, G ENE RAL MAN AGE R Howard ManusBUSINESS DEVELOPMENT Mark Beavers (director) ADV ERT ISI NG O PER ATIO NS Donna L. Clarke (executive director)
THE FORTUNE|MONEY GROUP
GROUP PUBLISHER, NEWS AND BUSINESS Jed HartmanPUBLISHER, FORTUNE Eric Danetz
ASS OCI ATE P UBL IS HER Michael Schneider VIC E PR ESI DEN T, AD VER TIS ING SAL ES , MONEY Tony Haskel
VIC E PR ES IDE NT, D IG ITAL PL ANN ING AND CLI ENT SE RVI CES Brian Maher ASS OCI ATE P UBL ISH ING DIR ECT OR , AS IA Ang Khoon Fong
VIC E PR ES IDE NT, C ONF ERE NCE S Peter Granath
TIME INC.
EXECUTIVE VICE PRESIDENTS Jeff Bair stow, Lynne Biggar, Colin Bodell, Teri Everett, Greg Giangrande, Lawren ce A. Jacobs, Todd Larsen, Evelyn Webster
EXECUTIVE VP, GLOBAL ADVERTISING SALES Mark Ford SENIOR VP, ADVERTISING SALES & MARKETING Andy Blau (finance), Priya Narang (marketing) VP, S ALE S David Watt VP, D IGI TAL Dan Realson VP, C RE ATIV E DI REC TOR Cara Deoul Perl VP, M ARK ETI NG A ND S ALE S DE VE LOP MEN T Cheryl DiMartino
VP, DATA BAS E MA RKE TIN G Mary Wojciechowski VP, M ARK ETI NG A D SO LUT ION S Steve Cambron VP, F INA NCE Lori Dente VP, V IDE O J.R. McCabe VP, R ESE ARC H & I NSI GHT S Caryn Klein VP, D IG ITAL AD O PER ATIO NS Nancy Mynio VP, Y IEL D AN D PR OGR AMM ATIC Kavata Mbondo
CONSUMER INSIGHT Barry Martin (VP)
INFORMATION TECHNOLOGY Colin Bodell (CTO and EVP), George Linardos, Erynn Petersen (SVPs), Linda Apsley, Neil Bailey, Jonathan Fein, Robert Ferreira, Amanda Hanes, Leon Misiukiewicz, Ben Ramadan, Scott Smith, Jimmie Tomei (VPs)
GROUP PRESIDENT Todd Larsen GROUP PUBLISHER Jed HartmanSENIOR VICE PRESIDENT, DIGITAL M. Scott Havens SENIOR VICE PRESIDENT, CONSUMER MARKETING Nate Simmons
SENIOR VICE PRESIDENT, FINANCE Elissa Fishman VIC E PR ESI DEN T, CO MMU NIC ATIO NS Daniel Kile VIC E PR ESI DEN T, CO NSU MER MAR KET ING Lydia Morris VIC E PR ESI DEN T, LI VE M EDI A Lisa Cline VIC E PR ESI DEN T, OP ER ATIO NS Robert Kanell
VIC E PR ES IDE NT, C ONT ENT MAR KE TIN G AN D ST RATE GIE S Newell Thompson VIC E PR ES IDE NT, H UMA N RE SOU RCE S Roxanne Flores DEPUTY GENERAL COUNSEL Amy Glickman
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Make your investing more
TAX EFFICIENT.Create a plan to help defer,
manage, and reduce taxes.
Mobile
Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.
Fidelity does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice.Consult an attorney or tax professional regarding your specific situation.
*Fidelity Investments received the highest numerical score among full-service brokerage firms in the proprietary J.D. Power 2014 Full ServiceInvestor Satisfaction StudySM. Study based on responses from 4,479 investors measuring 15 investment firms and measures opinions ofinvestors who used full-service investment institutions. Proprietary study results are based on experiences and perceptions of consumerssurveyed in January–February 2014. Your experiences may vary. The experiences of these customers may not be representative of theexperiences of all customers. Visit jdpower.com.
Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917
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FORTUNE.COM
12
ARTFUL DODGERSRe “Positively Un-American” (July 21):
Is the problem with companies leaving
the U.S., or is the U.S. government
failing to provide a competitive and
advantageous marketplace? The gov-ernment, like companies, has to adapt
to compete with low-tax countries such
as Ireland and England.
Matt Gerken
Coral Springs, Fla.
Thanks for continuing to keep the
spotlight on Medtronic and the other
tax evaders. If having your headquar-
ters overseas is such a great move,
then why don’t the executives of the
company move over there as well? Golive in Ireland or wherever, but don’t
be showing your face at the local coffee
shop here in the U.S., where the rest of
us are still paying our taxes.
Harley Reed
Plymouth, Minn.
I am glad when moves like the Med-
tronic deal get some close attention. I
have served on the board of directors
for several corporations, and I have yet
to see any tax-centered moves make
real money for the companies. Not
only are these moves un-American,
but when all of the costs are consid-ered, they are also frequently stupid.
Fred Zimmerman
Minnetonka, Minn.
I don’t understand why writer Allan
Sloan and others believe that corpora-
tions should act altruistically, while
individuals can do whatever they want.
If you want to rail on someone for
not acting in the interests of America,
criticize the people who have driven
manufacturing out of America by in-sisting on buying foreign-made goods
because they are less expensive.
Randy Lowry
Lebanon, Tenn.
CONSUMERS ARE HURTINGThank you, Sheila Bair, for pointing out
what has been obvious to wage earn-
ers for decades (“Corporate America
Needs to Raise Wages. Why? It’s Good
for Business,” July 21). Given the cover
story (“Positively Un-American”) in
the same issue about corporate taxavoidance, the irony is that corporate
interests could easily be aligned with
those of employees if the government
lowered the corporate tax rate.
Conor Carlin
Plymouth, Mass.
It struck me that your publication has
an elegant solution if you are seri-
ous about this matter: Simply include
metrics on the Fortune 500 that list
the lowest hourly wage paid to any oftheir employees and something that
ranks them in the quality of health care
benefits offered. Bosses will fall over
themselves to not be at the bottom.
Paul Rotstein
New York City
HE’S GOT IT RIGHTHow does Intuit stay successful (“Brad
Smith: Getting Rid of Friction,”
July 21)? I recently contacted cus-
tomer support regarding an issue with ViewMyPaycheck. An agent responded
on LiveChat within one minute and
quickly resolved the problem. And he
was pleasant to boot! Note to airlines:
If you’re looking for best practices,
have your employees imitate customer
service reps at Intuit.
Ken Haseley
Rocky River, Ohio
LETTERS TO THE EDITOR
Please include your name, address, and daytime phonenumber. Letters may be edited for clarity and space.
MAILFortune Letters, Time & Life Building, RockefellerCenter, New York, N.Y. 10020
EMAIL [email protected]. Letters sent to this emailaddress may appear in these pages or on Fortune.com.
SUBSCRIBER SERVICES/NEW SUBSCRIPTIONS
For 24/7 service please use our website: fortune.com/ customerservice.You may also call 800-621-8000 or write toFortune, P.O. Box 30604, Tampa, Fla. 33630-0604.
September 1 2014
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Legacy. It’s not just a sedan. It’s a Subaru. Well-equipped at $21,695 †
Beneath the sculpted lines of the all-new 2015 Legacy ® lies the best-kept secret in the
business. Subaru Symmetrical All-Wheel Drive and an astonishing 36 mpg.* Combine that
capability with one of the most spacious interiors in its class,** and you’ve got something
you won’t find in other sedans. Love. It’s what makes a Subaru, a Subaru.
Subaru and Legacy are registered trademarks. *EPA-estimated hwy fuel economy for 2015 Subaru Legacy 2.5i models. Actual mileage may vary. †MSRP excludes destination and deliverycharges, tax, title, and registration fees. Dealer sets actual price. 2015 Subaru Legacy 2.5 i Limited pictured has an MSRP of $26,495. **Based on manufacturer-reported interior volumesaccording to the EPA’s Midsize Car class as of 7/1/14.
It’s always the quiet onesthat surprise you.
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MACROCloser Look
SCOTLAND
Independent before 1707, when the
United Kingdom of Great Britain wasformed, Scotland is putting the
question of whether it should separatefrom Britain to a vote on Sept. 18.
A
FLANDERS
In elections this spring, the nationalist
New Flemish Alliance Party gained anumber of seats in Belgium’s federalParliament but have tabled (for now)
the idea of secession.
B
NORTH CYPRUS
In 1983, the Turkish-speakingpopulation in the north
declared itself a separate nationfrom the Greek-speaking south.
Only Turkey recognizes it.
C
A
B
J
C
L
K I
H
F
DM N
E
CATALONIA
In the 12th century the county ofBarcelona and the Kingdom of Aragon
united and had political sovereigntyuntil the War of the Spanish SuccessionCatalan nationalists still mark the day o
defeat in 1714: Sept. 11.
D
The higher the number, the more realistic the chance of the region seceding
and gaining general recognition of independence, according to experts.
1 2 3 4 5
SCALE
FORTUNE.COM
14
IN THE MOVIE Braveheart, the 13th-century Scottish
warrior William Wallace (in the form of Mel Gibson)
gallops across the green Highlands exhorting people
to fight the English and shouting in Gaelic, “ Alba gu
bràth!” or “Scotland forever!” Seven hundred years
after that conflict, passions are running high again,
as about 5.2 million Scots prepare to make their most
crucial political decision in memory on Sept. 18: whether to declare their independence from Britain.
It’s a vote that could rip apart Europe’s third-biggest
economy and jolt nations across the region. Much as
in Wallace’s time, the issue pits the dreamers against
the doomsayers (minus the bloodshed) and threatens
to end an alliance that has lasted for centuries.
“Scotland has been a nation for a very long time,” says
Duncan Ross, a professor of economic history at the
University of Glasgow. “We should have the right to
decide how to rule ourselves.”
Scottish voters decide this month whether to split from Britain.Catalans in Spain have called fortheir own independence vote soon.
Can the continent weather theseparatist storm? BY VIVIEN NE WALT
The DisunitedStates ofEurope
reporting by PREETISHA SEN and ROBERT HACKETT
graphic by POP CHART LAB
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KOSOVO
Kosovo, now recognized by the U.S.and most European nations as a
legitimate nation, unilaterally declaredindependence from Serbia in 2008.
N
BASQUE COUNTRY
In July the separatist group ETAcompleted the “dismantling” of its
military wing, following through on a2011 pledge for a permanent cease-fire
with the Spanish government. Theterror campaign had claimed at least
800 lives since 1968.
M
REPUBLIC OF SRPSKA
Some predict that this Serbian entity within Bosnia and Herzegovina
could be the next Eastern Europeantrouble spot after Crimea.
E
TRANSNISTRIA
The region, on the border between
Moldova and Ukraine, which has asizable ethnic Russian minority,declared independence in 1990.
The claim is not widely recognized.
L
CORSICA
The Mediterranean island, controlled byFrance, enjoyed a 14-year flash of
independence—in the 18th century. This year the main separatist group
announced a plan to demilitarize.
H
PADANIA
In Italy’s 2013 general election, thelocal pro-independence party in
this northern Italian regiongarnered just 4% of the vote.
K
KURDISTAN
While they have some regionalgoverning authority, the Kurdishpeople—who reside in a regionthat spans parts of Syria, Iraq,Iran, and Turkey—have been
pushing hard for an independent
Kurdistan since World War I.
G
GREENLAND
Greenland residents voted for greaterself-governance in 2008. The
Greenlandic-speaking population seemscontent with the status quo as a territory
of Denmark, which provides theice-covered island with financial help.
FVENETO
Since 2010 cries for Venetian independencehave gotten louder. In March separatist
Venetists claimed a resounding victory in aself-declared referendum.
I
FAROE ISLANDS
The most notorious outbreaks of violence in this autonomousterritory of Denmark are the
annual “dolphin grind,” a massslaughter of pilot whales.
J
DISTINCT
LANGUAGE(S)
INDEPENDENCE
TALKS UNDE RWAY
HISTORY OF
VI OL EN CE
HISTORY OF
INDEPENDENCE
SOME AUTONOMY
NO W
INDEPENDENCE VOTE
SCHEDULED OR HELD
LEGEND
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16
Perhaps so. Yet for Europe the ques-
tion is, At what price? The intense
nervousness over how the Scots might
vote extends far beyond the territory’s
rugged mountains. Many in Europe
fear that Scotland’s independence fervor
could ripple across the continent, wherea number of separatist campaigns have
simmered for years. The hotspots range
from the mountainous Basque region
at the border of Spain and France to the
Mediterranean island of Corsica to the
lowlands of Belgium, where many in the
Flemish majority want to say tot ziens
to their French-speaking countrymen.
Some of these movements have a history
of violence; several more seem merely
rhetorical—and, well, quixotic (inde-
pendent Venice?). But taken together,the sovereignty pushes are yet another
reminder of how tenuous the notion of
one cohesive “European Union” truly is.
The sense of Europe splintering at
the edges has deepened with the soar-
ing popularity of anti-EU parties like
France’s National Front and Britain’s
Independence Party, which want their
countries out of the Union. And even
if Scotland’s independence vote fails,
Britain could be forced to offer Scots far
greater autonomy, including perhapsmore control over their budget—
something that could further compli-cate the EU’s already plodding econom-
ic policymaking. With each new voice
at the table, says Steven Blockmans of
the Center for European Policy Studies
in Brussels, “it becomes more and more
difficult to align everyone’s interests.”
When British Prime Minister David
Cameron agreed in 2012 to a Scot-
tish referendum on independence, the
odds seemed remote that voters would
choose to split from Britain after 300
years of albeit awkward union, aban-doning the U.K.’s modern military and
its permanent seat on the UN Security
Council. Yet as the vote has drawn
nearer, Scots increasingly seem eager
for far-reaching change, with recent
polls putting the ditch-Britain vote at
40%. “People on the yes [for indepen-
dence] side are fighting for something
they believe in passionately, while on
the no side, the feeling is, ‘Why change
countries?’” says John Curtice, profes-
sor of politics at Strathclyde University.“There is an asymmetry of passion.”
Those in favor of independence saythat Scotland should commit a portion
of its North Sea oil earnings to funding
public health, pensions, and educa-
tion—as oil-rich Norway does—rather
than let British lawmakers divvy it up.
Supporters also say they’d evict the
Trident nuclear submarines stationed on
the Clyde River should there be a split.
Sure, a new Scotland would be small.
But it would still dwarf several other EU
countries, including Malta, Cyprus, and
wealthy Luxembourg (pop. 530,000).“This notion that you have to be part of
a big country is just not true in the EU,”
Ross says. “Some of the most successful
EU countries are small, like Denmark.
And if some of our decisions turn out not
to be right, we’ll deal with it.”
Whatever the outcome of Scotland’s
vote, few places will feel its impact as
strongly as Spain’s autonomous Cata-
lonia region 1,000 miles away. With
7.5 million Catalans speaking their own
language and running a large economyin northeastern Spain, the separat-
ist politicians in Barcelona command
huge support. Spanish Prime Minister
Mariano Rajoy has vowed to block Cata-
lan plans for a Nov. 11 independence
referendum and to ignore the results.
So far, Rajoy’s tough talk has helped
stoke separatist feelings in Barcelona,
with pro-independence parties argu-
ing that recession-hit Spain sucks away
Catalan resources. “Catalonia suffers
fiscal drainage of €8 billion to €11 billiona year, if not more, from Spain,” says
Manuel Manonelles, director general
for European and Multilateral Affairs in
Catalonia’s government. Like other Cata-
lans, Manonelles sees answers to their
political frustrations in one far-off place:
Scotland. “The British people are giving
a good example of democratic spirit” in
allowing Scotland’s vote, he says. “We’re
watching the referendum closely.” So,
too, is the rest of Europe. For updates on the Scottish referendum and other EU news, check out
Scots who favor splitting off from Britain “arefighting for something they believe in,” says one
professor. “There is an asymmetry of passion.”
September 1, 2014
Former British cabinet minister Alistair Darling (right) took on pro-independence leader AlexSalmond in a blister ing TV debate on Aug. 5. “If we decide to leave, there is no going back,”said Darling. “There is no second chance.”
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Building you a better network.SM
Visit a Store ATT.COM/network 1.866.MOBILITY
AT&T is thenation’s most reliable
4G LTE network.So you can stream the action from virtually anywhere.
Based on 3d party data re nationwide carriers’ 4G LTE. LTE is a trademark of ETSI. 4G LTE not avail. everywhere. Screen images simulated. ©2014 AT&T Intellectual Property. All rights reserved. All other marks used herein
the property of their respective owners.
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September 1, 2014
Macro
Herbicide-tolerant
Insect-resistant
2000 2005 2010 2014
Both
93%
0
20
40
60
80
100%
U.S. GMOcorn adoption
FORTUNE.COM
18
briefing
There was a time when football was
on Sundays, and only Sundays. Then,
in 1970, the National Football League
began putting games on Monday nights.
By 2006 it had games on Thursdays and
Saturdays too, because, heck, why not?
Now the biggest cash cow in Ameri-
can sports is betting that the broadcast
bunch isn’t nearly big enough—that
fans want football content nonstop. Andthat’s what they get with the league’s am-
bitious new video offering, NFL Now.
Launched in August, the platform
runs on a wide range of devices and of-
fers quick-burst news segments, practice
footage, game recaps, and even old Super
Bowl highlights—everything, that is, ex-
cept the thing fans have most clamored
for: a live stream of current games. The
main app is free, but a $1.99-per-month
premium version promises bonus good-
ies like the entire vault of Hard Knocks,
the HBO/NFL Films reality series.
There’s plenty of competition for
online sports video already. Last fall
Major League Baseball rolled out fancy
new video-tracking technology to caterto statheads. ( Fortune’s parent company,
Time Inc., also launched an app for
sports clips, 120 Sports.) But the NFL’s
effort stands out for two reasons. First
is that the league is truly going all in:
Each of the 32 teams has committed to
sending 150 minutes of video footage per
week to the platform—a deal largely put
in place by Brian Rolapp, EVP of media
for the NFL, and New England Patriots
president Jonathan Kraft, who co-chairs
the league’s digital-media committee.
Second is that the NFL is actually
trying to fit its digital buffet to its users’
taste buds. Taking a page from the
recommendation engines of Pandora,
Netflix, and Amazon, NFL Now claims itcan learn what type of video content you
like best. Such technology is tricky to get
right, of course. If it works, it may well be
the secret sauce that entices viewers. If
it doesn’t, count on seeing so much Tom
Brady training-camp footage that you get
that not-so-great buffet feeling.
It’s harvest time: the moment to reap what gene engineers have sown.
This year genetically modified corn will account for 93% of the crop’s
acreage in the U.S., up from 25% in 2000. Some added genes enable the
corn to produce pest-killing proteins; others shield it against herbicides.
Most of the nation’s corn is “stacked” with both types of modification.
“It’s like bundling TV, phone, and Internet,” says Jorge Fernandez-
Cornejo, a USDA economist. The stacked corn offers better yields (171
bushels per acre, vs. 134 bushels for conventional corn), according to
USDA data. But the war is hardly over. There are indications that pests
are evolving resistance to these tactics already. Who’d have guessed it?
Nature has that whole adaptation thing down cold. — Robert Hackett
ARE YOUREADY FOR
SOME24/7FOOTBALL?
THE GOES
LONG—WAY LONG—
ON A DIGITAL APP.
By Daniel Roberts
GMO CORN: HIGH AS AN ELEPHANT’S EYE
The New England Patriots work out at their practice field next to Gillette Stadium.
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USB cords not included. FORTUNE and The 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 serv ices of, Delta Air L
WORK DOESN’T STOPJUST BECAUSE THE BATTERY DOES.Just because you remembered to bring your phone doesn’t mean you
remembered to charge it. That’s why we’ve put a USB port at every
seat on every long-haul international flight, so it can stay powered for
the whole trip. Because when it comes to power, why let a little thing
like 30,000 feet stand in the way?
DELTA.COM
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September 1, 2014
MACRO
Sponsored by FORTUNE.COM
20
See the full interview on our tablet edition. Andview this and other great leadership videos on
Why has your foundation
been so much more
effective than most
other disease-focused
charities?
Because we run it like a busi-ness. I took all the business
practices I learned at Merck,
Gillette, and Searle and
brought them to this non-
profit entity. I knew we had
to establish a vision. We had
to write a strong strategic
business plan, and we were
very disciplined about that. I
had to find the absolute best
partners and team to work
with us and then executenot only flawlessly but also
urgently for the patients
we were representing. The
cancer research system was
broken, and somebody had
to fix it.
What was wrong with it?
It was built ages and ages ago.
Back in the day, it was fine
to say all our scientists are
going to work in their singleareas, and we’re going to ask
them to continually publish
to get promoted and to fill
out cumbersome grants to get
funding. Those things are not
exactly nimble, and research
is changing so quickly now.
We were creating all these
islands, and in a very uncom-
mon cancer we needed col-
laboration in a desperate way.
Every medical center wouldsee a handful of myeloma
patients, so you’d never have
one center doing enough to
make a big difference. We
had to bring them together.
And you found a way to
do that?
We did. We started by build-
ing the first centralized tissue
bank in multiple myeloma,
and today that tissue bank
houses 4,000 samples for all
of our scientists to use. Once
we had this high-quality
tissue, which is the name ofthe game in cancer research,
we called the Broad Institute
and TGen [Translational
Genomics Research Insti-
tute] and said, “We want to
sequence our genome.” We
were the first to sequence our
own genome in myeloma.
What are the lessons for
leadership?
The most important thing aleader can do is set the vision
and don’t stray. We said, “We
are a research foundation.
Our mission is to accelerate
cures.” Many times people
came in and said, “Why
don’t you try this on the ad-
vocacy side,” or “Do this on
the policy side.” Every time,
we came back to, “We are a
research foundation focused
on new treatments andcures.” That tunnel vision
helped us tremendously.
Any lessons for thinking
about one’s own life?
Every time I go back to the
Dana-Farber Cancer Institute
to wait for my test results,
and I wonder if I’ve relapsed
or if I’m doing okay, I don’t
think about my company. I’m
proud of everything we’vedone, but at the end of the
day it comes back to family.
I’m still a wife, a mom, a sis-
ter—all of those things. If I’ve
learned anything, it’s to live in
the moment, and the gift that
cancer gives you is, you just
assume I’m only here today,
and I am going to seize that
moment and cherish it.
When Kathy Giusti learned in 1996 that she had multiple myeloma,
a rare blood cancer, she was told she couldn’t expect to live much
more than three or four years. Two years later Giusti, a pharma-
ceutical executive with Searle at the time of her diagnosis, startedthe Multiple Myeloma Research Foundation. Now six new drugs
are approved for treatment of the disease, and the MMRF played
a role in advancing all of them, with more in the pipeline. Life
expectancy for many patients has doubled. Giusti, who has been
in remission since a 2006 stem cell transplant from her twin sister,
talked recently with Fortune about fixing the cancer research
system, lessons for leaders, and more. Edited excerpts:
Kathy Giusti: Cancer WarriorHow one former pharmaceutical execchanged the way that patients and drug companies work together. By Geoff Colvin
wor l d’s gr e at e s t l e a de r s
Giusti at herConnecticuthome in August
phot og raph b y CHRISTOPHER LANE
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MACRO
FORTUNE.COM22
Transitions—that’s all life is: story time to blocks, school
to work, retirement to dead. For many former pro athletes,
though, there’s one transition that’s about as disorienting asthey come: the seismic shift from the last season of play to
the first year of “real job.” It’s like a mobster giving up the life.
Just ask one of Chicago’s famed “Hit Men,” Gary Fencik,
who spent 12 seasons roaming the secondary as an All-Pro
safety for the Bears. “I still have fun, but nothing will ever
replace the excitement of football,” says Fencik, now 60. “You
always miss the immediacy and clarity of the game. You go
to work on Sunday, and
three hours later someone
has won and someone has
lost. There are no postponed
meetings, no wait-and-sees.
It’s happened, and either you
were good enough or not.”
Fencik, the Bears’ all-time
interception leader, proved
to be plenty good enough—
and the feat is somewhat
more remarkable given that
his NFL career almost didn’thappen. Coming out of Yale
in 1976, he was taken in
the 10th round of the draft
by the Dolphins and then
cut that August. Fencik
was all set to go with his
backup plan, enrolling in a
junior banking program at
Citibank in New York. But
before heading to Manhat-
A ‘HIT MAN’ AIMS HIGH
For more great business stories in our Pro-Files series,check out both Fortune.com and SI.com.
Pro-Files
a new series
from the
editors of
and
LEGENDARY CHICAGO BEARS SAFETY IS STILL KNOCKING
’EM DEAD—THESE DAYS IN THE REALM OF PRIVATE EQUITY. By Rich Cohen
The interception king atChicago’s Soldier Field in July
photograph by MEGAN BEARDER
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FORTUNE.COM
23
tan, Fencik, who grew up in the Chicago
suburb of Barrington, flew home to see
his folks. While there, the 22-year-old
Ivy Leaguer got a call from Jim Finks,
then the Bears general manager, who
invited him to stop by Lake Forest for a
tryout. (He made quite the impression:The rookie played in 13 games that same
season.) Yet even after signing with his
beloved hometown team, Fencik contin-
ued to plan for that “other life,” the one
he’d begin after hanging up his cleats.
“One of the benefits of going to Yale is I
had roommates, classmates, even team-
mates who were going to med school,
law school, business school,” he says, “so
I never stopped thinking about what I
was gonna do after football.”
The planning took on more urgencyin 1979, when he suffered a series of
minor calamities: breaking his arm
opening day, shredding a knee, busting
up an ankle. He found himself in an
operating room, staring at the ceiling,
acutely aware of his football mortal-
ity. Around that time an old friend and
mentor called and said, “Gary, you need
to start thinking about what happens
later.” Fencik enrolled at Northwestern’s
Kellogg School of Management soon
after. In 1985, as the Bears made theirrun, he was spending two nights a week
studying finance: “’85 was good,” he
says. “I completed my MBA, we won the
Super Bowl, and I met my wife.”
Two seasons later his gridiron days
were done, and it was time to start that
other life. Even with the MBA, and the
Yale pedigree, and all that mental prepa-
ration, however, it was hard to make
the transition. He did some work as a
football analyst—a season doing color
commentary alongside James Brown onCBS, then three more years on Chicago
radio—and tried selling commercial real
estate too. Then, in the summer of 1992,
Wells Fargo recruited him to run its
new investment-management office in
Chicago, the latest outpost in the bank’s
growing asset-management division.
The 38-year-old Fencik was suddenly
a VP at a major bank, and though he
wasn’t tasked with actually managing
any customer’s money—Fencik’s princi-
pal role was business development—he
was now responsible for a territory that
spanned 10 Midwestern states.
A few years later he jumped over to
a private equity firm, Brinson Partners,
then a unit of UBS Global Asset Man-agement. There he met Bon French, a
former investment star at First Chicago
who was one of Brinson’s top dealmak-
ers. French saw in Fencik a “very well-
rounded” guy who “understood deeply
how the investment world works.” Fen-
cik had it all, French says: He knew to a
fine degree how various asset classes—
stocks, fixed-income investments, real
estate, hedge funds, private equity—
meshed together. And he was a natural
at helping clients build portfolios withthe right asset allocations.
So when French became CEO at
Adams Street Partners, a rival private
equity firm, he didn’t wait long before
recruiting the Bears’ power defender.
Fencik, who joined Adams Street in
2000, now heads global business de-
velopment and marketing for the firm,
which has 130 employees and manages
more than $25 billion for institutional
clients. (He won’t discuss specific clients
or financial metrics, he says, becauseof compliance issues. But in March
the firm pulled off a trifecta of sorts:
Three companies that it funded through
venture capital or private equity invest-
ments launched IPOs on successive
days—Paylocity and Borderfree on the
Nasdaq and Q2 Holdings on the NYSE.)
The 6-foot-1 safety, who played with
a famously concussive style, turns out to
have a soft touch with both clients and
co-workers. “Gary is someone who can
ask probing questions without putting
the person on the receiving end on the
defensive,” says French, who marvels at
how well the former pro managed the
transition from tackling to term sheets.
“It is fascinating to me how he can moveseamlessly and easily from one world to
another,” he says. Fencik, for his part, is
quick to credit his successful post-NFL
reinvention to lucky timing. “I think it
would be harder today,” he says. “Unlike
when I was playing, football’s pretty
much a full-time job. I think it would
be even more difficult today to go to
business school while you’re pursuing
an athletic career. I was very fortunate
that my dad was an assistant principal
when I was growing up—education wasalways important.”
Fencik understands why so many
athletes have trouble making a similar
leap. “I can’t speak about every profes-
sion, but when it comes to finance,
there is a period of time when you are
supposed to be paying your dues,” he
says. “Most people do that in their
twenties. If you’ve played 10 seasons of
pro sports, you’re going to be doing it in
your thirties or forties, which is tough
and lonely.” That said, his own days onSoldier Field helped prepare him for
business too. “There are lots of clichés,
but some are true,” he says. “I go to
meetings where they talk about goal
orientation, teamwork, holding people
accountable, and I laugh ’cause it’s like,
‘Well, yeah, I’m back in football.’”
The most important lesson he learned
during his pro career, notably, came not
from succeeding but rather from coming
up short. “At one time or another, most
of us who played in the NFL were the best player on a team,” he says. “Then,
one day, unless you’re a freak of nature
like LeBron James or Walter Payton,
you are no longer the best.” Part of the
answer, he says, is “to study and work
and figure out how to play better than
you are.” But perhaps a bigger part is re-
discovery. “As you get older,” says Fencik,
“you have to learn how to be yourself all
over again.”
September 1, 2014
“I go to meetingswhere they talk aboutgoal orientation and
teamwork,” he says.“And I laugh ’cause it’slike, ‘Well, yeah, I’mback in football.’”
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LET’S GO.
LET’S FIND MORE WAYSTO USE LESS FUEL.
Today, we’re not only working to find more energy, we are helping inspire ways to use less. That’s why for over
25 years, the Shell Eco-marathon has been challenging schools and universities around the world to design, build
and test ultra-energy efficient vehicles. At this year’s event, Mater Dei High School achieved 2,471 miles pergallon with their prototype vehicle, “Supermileage 2.” This spirit of innovation is spreading. In 2015, the Shell
Eco-marathon will move to Detroit, Michigan, a city with a history of mobility engineering and innovation, and an
ideal place to drive the world further toward a sustainable energy future. www.youtube.com/shellletsgo
8/9/2019 Fortune 1 September 2014
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September 1, 2014
MACROn e w e n e r gy
FORTUNE.COM29
The solution to global warming is obvious—reduce green-house gas emissions. Accomplishing that goal, however, re-
quires radical action. Few understand that better than Richard
Kauffman, an ex–Goldman Sachs and Morgan Stanley banker
whom New York Gov. Andrew Cuomo appointed last year
as the state’s first energy czar. Kauffman has visions of New
York as a 21st-century clean-tech powerhouse. But for now,
he admits, it remains more of a 20th-century energy dinosaur.
“We’re not on a sustainable path either environmentally or
economically,” says Kauffman of his state. “We’re not install-
ing enough renewables, and we’re not getting the economic-
development boost that a
transition to a new-energy
economy can provide. We
need to rethink what we do.”To kick-start that process
of reinvention, Kauffman
has taken some radical
actions of his own: Earlier
this year he rolled out a
state-owned financing
startup with $1 billion in
assets called N.Y. Green
Bank. The hope is that,
through strategic lending,
the state can give the private
sector the incentive to helptransform New York State’s
power system. If it works,
the project could provide
a template for other states
to follow. According to the
OECD, N.Y. Green Bank is
only the second state-run
institution of its kind in the
U.S. Connecticut launched
a green bank in 2011 but
on a smaller scale, with
$117 million in net assets.New York’s list of energy
challenges is long. It lags
behind California and other
big states in the adoption of
renewables. Last year, for
instance, the Golden State
installed 2,621 megawatts of
solar energy, compared with
New York’s paltry 69 mega-
watts. New Yorkers pay some
of the highest electrical rates
in the nation. At the sametime, the state’s utilities are
struggling. Electricity de-
mand is weak, and the cost
to maintain an aging grid is
rising. The price tag simply
to keep New York’s anti-
quated grid running over the
next decade is an estimated
$30 billion.
Gov. Cuomo has given
Kauffman the clout to make
big changes. As New York’s
chairman of energy and
finance, he has the swayand the budget to push
for change in almost every
aspect of the state’s energy
system. He has already
launched a multifront of-
fensive. Kauffman is push-
ing for regulatory reform
that would encourage the
state’s utilities to run more
energy-efficiency programs
and make smart-grid
investments to reduce loadand the need to maintain
expensive backup power
plants. He’s also pushing for
utilities to invest more in
clean, distributed energy.
Other states have tried
such measures with only
moderate success. Although
wind and solar power are
growing quickly, their share
of the nation’s total power
generation is only about4%. Kauffman is hoping the
Green Bank can push New
York way past that level in
coming years. The bank,
funded by a surcharge paid
by utility customers, aims to
help finance clean-energy
projects throughout the
state. The Green Bank plans
to announce its first invest-
ments this fall.
When he took the energyczar job, Kauffman, 59,
brought with him a strong
belief that the government
was lousy at picking win-
ners and losers. (Consider
the Energy Department’s
disastrous $535 million
investment in solar-panel
maker Solyndra.) He began
searching for private sector
A $1 Billion Beton Clean Energy WITH ITS NEW “GREEN BANK,”NEW YORK AIMS TO BOOSTSOLAR, WIND, AND SMART-GRID TECHNOLOGY. By Brian Dumaine
As the first-ever energy czar of New York State, ex–Goldman Sachsbanker Richard Kauffman has the clout to make major changes.
photograph by REBECCA GREENFIELD
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n e w e n e rg y
September 1, 2014
MACRO
States with the largest growth in photovoltaic solar in 2013 CALIFORNIA 2,621MEGAWATTS
ADDED
421335
237236
146917569
56
ARIZONA
HAWAII
GEORGIA
MASSACHUSETTS
COLORADO
TEXAS
NEW
YORK
NORTH
CAROLINA
NEW
JERSEY
SOURCE: SOLAR ENERGY INDUSTRIES ASSOCIATION
FORTUNE.COM
30
solutions to the state’s energy problems. “It’s going to be
the markets that will give customers what they want,” saysKauffman. “I have no idea what new energy systems are
best. Apple, for example, allows outside programmers to
make apps for its products because that’s the way innovation
happens—you open up competition.”
So the Green Bank will not dole out grants or fund risky
clean-tech startups. Rather, it will offer “gap” financing. That
means providing loans, debt guarantees, and other financial
products to help private sector bankers fund more clean-
tech deals—whether for solar, wind, smart-grid technology,
battery storage, or energy-efficient buildings. Says Douglas
Sims, the director of strategy and finance at the Natural
Resources Defense Council and an adviser on the project:“They will provide comfort to private lenders who want to
employ capital in this space. They’re enablers. To me, that’s
the most radical thing about it.”
While large-scale wind and solar projects can typically
get financing, Kauffman says that there are many smaller
clean-tech projects that are viable but just can’t find the
right debt structure. For example, universities, hospitals,
and municipalities that want to install solar systems or
energy-efficiency technology often have good credit ratings
but don’t have the upfront capital. A bank might be willing
to offer a 10-year loan, but the organizations might need a
15-year loan to make the debt service more affordable. Sothe Green Bank could step in and provide the financing for
years 11 through 15. Another area where it could help is in
solar installation. Companies such as SolarCity, Sunrun, and
Sungevity have little trouble raising financing for residential
customers who have top credit scores of around 700, but
they find it much harder to
raise money for leases orloans for those with scores
of 650—even though these
customers are considered
creditworthy. The Green
Bank could guarantee the
financing on those deals.
Perhaps the biggest im-
pact the Green Bank could
make is in securitization.
(Think mortgage-backed
securities with better due
diligence.) So far the bondmarket has been largely
absent when it comes to
financing renewables.
Why? Big banks don’t like
to dabble in small loans.
The Green Bank plans to
securitize clean-energy
projects—bundling 40 or
50 solar loans, each worth
about $1 million, into one
security and then selling
the $50 million bond toinstitutional investors. That
would open an entirely
new source of capital for
the sector and spur growth,
Kauffman believes.
As promising as the Green
Bank sounds, some in theenvironmental community
worry that even $1 billion
in capitalization won’t be
enough to turn New York
green. After all, energy is an
extremely capital-intensive
industry.
But Kauffman believes
that the first step is for the
Green Bank to show that
it can make money. If the
bank is profitable, it will beself-sustaining, he argues.
And it can leverage that
$1 billion in a way that
would have a significant,
long-term impact on the
clean-tech industry. “We
want to get a market rate
of return and then step out
of the way,” says the energy
czar. “We want to be on the
frontier of new markets,
providing the necessarysupport to get the private
sector fully engaged.” And
if that happens, Kauffman’s
radical plan might make a
real impact.
“We want to be on the frontier of new markets, providing thenecessary support to get the private sector fully engaged.”
—Richard Kauffman, New York State’s energy czar
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LET’S KEEP THE LIGHTSON WHEN SHE’S YOUR AGE.
What sort of world will this little girl grow up in? Many experts agree that it will be a considerably moreenergy-hungry one. There are already seven billion people on our planet. And the forecast is that therewill be around two billion more by 2050. So if we’re going to keep the lights on for her, we will need to
look at every possible energy source. At Shell we’re exploring a broad mix of energies. We’re making ourfuels and lubricants more advanced and more efficient than before. With our partner in Brazil, we’re alsoproducing ethanol, a biofuel made from renewable sugar cane. And we’re delivering natural gas to morethan 40 countries around the world. When used to generate electricity, natural gas emits around half theCO2 of coal. Let’s broaden the world’s energy mix. www.youtube.com/shellletsgo
LET’S GO.
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global power profile
September 1, 2014
MACRO
FORTUNE.COM32
He found an outdated Unilever
product from the 1960s—a toiletseat—that happened to be named
Ariel del Plata, and began an ag-
gressive ad campaign with posters
of toilet seats bearing the name
Ariel. P&G eventually pulled its
product from South America.
According to insiders, Lewis is
also known for successful team
building. He doesn’t drive luxuri-
ous cars and is often seen in jeans
and casual shirts that make him
look like a local “Yorkshire lad.” At Unilever he gave company-
branded rugby shirts to em-
ployees and would host guest
speakers to counsel staff on team
spirit. “No doubt there are strong
threads of creativity running
through his work,” a Tesco execu-
tive told Fortune.
No word yet on any plans to res-
urrect the toilet seat strategy.
With $103 billion in revenue, Tesco, the world’s
second-largest general-merchandise retailer, be-
hind Wal-Mart, and the biggest food producer and
retail brand in the U.K., earned the No. 63 spot on
this year’s Fortune Global 500 list. But lately the
company has been struggling to stay on top. Forthe past two years the retailer has grappled with
falling profits, struggled to stabilize prices, and lost
market share to discounters and online grocers.
Founded in 1919, Tesco has grown to a be-
hemoth of 6,784 stores in 12 countries. It’s no
longer just a grocer, but a giant retailer, with gas
stations, an online marketplace, DVD rentals, and
financial services. In recent years it has diversified
by veering into tech—first with a tablet computer,
the Hudl—and in early 2014 revealed plans to
begin manufacturing a smartphone to compete
with Samsung.Tesco’s new CEO, Dave Lewis, a 49-year-old
strategy expert who hails from Yorkshire, began
his career at Unilever in 1987. While at the con-
sumer products giant he oversaw business seg-
ments in South America, Southeast Asia, and the
U.K. Most recently he was president of Unilever’s
personal-care unit, which includes the Dove
and Vaseline brands and accounts for 40% of its
$66 billion in annual revenue.
When he starts next month, Lewis will be the
first Tesco CEO to come from outside the company,
a surprise to industry watchdogs. “He clearlyknows nothing about retailing,” says Nick Bubb,
an analyst for London-based Retail Think Tank.
“But he certainly knows how to win price wars.”
Price wars—one of the larger issues Tesco
hasn’t solved—continue to plague the industry as
grocery discounters, such as Aldi and Lidl, have
usurped the low-priced market, and fewer shop-
pers return to bigger chains like Tesco.
In May, Tesco reported a 6% decline in annual
profit—its worst performance in the past 20 years—
and the company’s stock has
fallen 46% from a high of $702in 2010. Lewis will have to re-
think its identity since the brand
no longer caters to low-income
shoppers, nor falls in the high-
price category shared by Marks
& Spencer. “He must take some
extreme steps,” says a former
Tesco exec.
While at Unilever, Lewis
made deep cuts to keep costs
low. As part of a restructuring
in 2007, he axed employeesand managed to slash 40% of
expenses, earning him the nick-
name Drastic Dave.
But Lewis has also garnered
praise for his creative approach.
While he was working in South
America, competitor Procter &
Gamble launched detergent brand
Ariel. Lewis mounted a radical
counterattack to lampoon P&G:
Retail’s Newest Strategist TESCO’S BOARD PICKED TURNAROUND PRO DAVE LEWIS AS ITS NEXT
CEO. WILL HE RETHINK THE SALES GAME? By Mehboob Jeelani
Lewis is known forhis approachable
management style.
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road warrior
September 1, 2014
MACRO
Schulman is the author of
Nerve Breakers: Conquering
Life’s Stage Fright.
FORTUNE.COM34
HOTELS SOMETIMESHAVE HIDDEN WI-FITHAT IS LESS POPU-LATED THAN THE ONEEVERYONE ELSE IS ON.
I’LL JUST CALL DOWN AND SAY, “DO YOUHAVE ANOTHER WI-FI,SOMETHING THATISN’T LISTED?” OFTENTHEY DO—THEREWILL BE AN EMPLOYEEWI-FI OR A BUSI-NESS WI-FI THAT YOUCAN TAP INTO.
I DRAW INSPIRATIONFROM EVERY MONU-MENT AND EVERY
STARBUCKS. I REMEM-BER BEING IN PARISWITH FOREIGNER ANDWANTING TO WRITE,SO I TOOK MY IPAD,LAY UNDER THE EIFFELTOWER, AND WROTEFOR TWO HOURS. I’LLOFTEN POP DOWN TO
A STARBUCKS ANDWRITE SOME MUSIC.
SKYPE IS THE GREAT-EST THING. VIDEO-CHAT IS A LIFESAVER.I CAN’T IMAGINE WHATLIFE WOULD HAVEBEEN LIKE 20 YEARS
AGO—TO NOT SEE MYKIDS. GOING THREEMONTHS WITHOUTSEEING MY FAMILYWOULD BE REALLY
VERY CHALLENGING.
I’m on the road sometimes
80% of the year. A tour is
a very well-oiled machine.
My job is easy—I just come
on and play my instrument.
That they can set up the
entire stage in eight hours,
rip it down in three, and do it
in another city back to back
is astounding.
East Coast is that they’re
on the West Coast, so I can
sleep later. Because, let’s
face it, with my lifestyle, I do
have to stay up late.
If there’s a screaming baby on
a plane, I put in my custom-
molded in-ears, turn on a
bit of music, and fall asleep.
They’re molded for my ears,
so they sound fantastic. You
can get an audiologist to
a 20-megabyte download
speed than a perfectly warm
shower and a half-megabyte
download speed.
Clem Burke, the drummer forBlondie, did a study. He put
gadgetry on his body, and
researchers determined that
a drummer who plays two
hours of rock or pop music
can burn as many calories as
a professional soccer player.
After the shows finish, we
usually get a bus that leaves
at about midnight. Depending
on how far it is from the next
city, I could get in anywhere
from three in the morning to
11 in the morning. Then I’ll do
my best to get back to sleep.
Generally, my protocol is I
wake up, have some coffee,
then get to the gym and get
some exercise in.
Sometimes I’ll wake up early
and sacrifice my own sleep
so I can see my 4-year-old
daughter on Skype before
she goes to school. The good
thing about being on the
take the molds and then go
to Jerry Harvey Audio, which
makes custom-molded in-
ears. They sound better than
the top-of-the-line Beats.
A strong Wi-Fi signal can be
more important than a hot
shower because that’s your
lifeline. I always pay to have
the most expensive Wi-Fi. If
they have a premium service,
I always pay for that. And if
it’s anything less than pre-
mium, I ask for my money
back, and they always give it
to me. I would rather have
I’m developing a program
about taking the concept
of innovating as a creatorand using what I know as
a musician to get people
in the corporate world to
learn how to jam and get
into that transcendent in-
novative head space.
Touring With Superstars PROFESSIONAL DRUMMER ANDCORPORATE SPEAKER, HAS BEEN ON THE ROAD
WITH CHER, PINK, AND STEVIE NICKS. By Robert Hackett
A 27-year-veteran touring drummer, Schulman, photographed in Los Angeles, returns to the road with Cher in September.
For travel tips from tour dancer andchoreographer Jamal Story, visit
photograph by KENDRICK BRINSON
8/9/2019 Fortune 1 September 2014
33/120
Live the M life at this MGM Resorts International®
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8/9/2019 Fortune 1 September 2014
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2000 20102005 2014*
0
0.5
1.0
$1.5 billion
Annual robot orders
$1.6
VENTURE
September 1, 2014
FORTUNE.COM
37
THE NOTION OF ROBOTS in
everyday life was long the stuff of
The Jetsons and Star Wars. But
Colin Angle, 47; Rodney Brooks, 59;
and Helen Greiner, 46, brought such
inventions into real life through
their company, iRobot. Its Roomba
Aye, RobotsRobotics are
projected toachieve recordsales this year.
How iRobot brought us machines to clean houses, defuse bombs, and diagnose patients. Interview by Dinah Eng
From R2-D2 toPractical Robots
From left: Brooks, Angle,and Greiner with a robotthat can be thrown into aninaccessible or perilouslocation to send backvideo or information.
How We Got Started
* 2 0 1 4
p r o j e c t e d .
c h a r t
s o u r c e : r o b o t i c
i n d u s t r i e s a s s o c i a t i o n
photograph by HARRY GOULD HARVEY IV
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VENTURE
September 1, 2014
FORTUNE.COM
38
built for demonstrations and to inves-
tigate new technologies. Starting the
company was a way to build robots that
would actually be used by people.
Brooks: We started with no clearidea of who our customers would be.
We had no capital, so we did contract
research for people. The three of us
made a good team. Colin did the
electrical, Helen did the mechanical,
and I did the software. We had to move
quickly to come up with new solutions
for our clients. Projects ranged from
making toys for Hasbro to military
robots for the government.
Angle: The name iRobot comes from
Internet-connected robot. We felt that would be the future of the business,
so we changed the company name to
iRobot in 2000. It’s taken us a long time
to realize that dream. In the past year we
came out with RP-VITA, used by doctors
to remotely diagnose stroke patients and
treat those in the ICU and ER.
Greiner: Large companies may do
innovation and disruption in the labs,
but they have trouble pushing it out
into the real world, in part because
it’s potentially disruptive to their own business. When you’re a small com-
pany like iRobot, you really push on
one thing, and that helped us get from
research to mainstream products.
Brooks: At one point I spent a lot of
time in China, figuring out how to do
low-cost manufacturing, which led to
being able to make our Roomba vacuum
cleaner cheaply. In 2001, Electrolux had
introduced the Trilobite, a robot vacuum
vacuum cleaner is well known, but
other inventions have graver functions:
PackBot, a robot used by the military
to defuse bombs in Afghanistan, and
RP-VITA, used by doctors to remotelydiagnose and treat patients. Once funded
with credit cards and savings, iRobot is
now profitable: It generated $487 mil-
lion in revenue and $27 million in earn-
ings last year. The founders’ story:
Rodney Brooks: I grew up in Ade-
laide, Australia. No one in my family
had finished high school, and I was
smart at mathematics, so I became an
academic and got my Ph.D. in com-
puter science at Stanford. I didn’t setout to be a businessperson.
Colin Angle: I grew up mostly in
Schenectady, N.Y. From an early age,
building and creating things was a real
passion for me. I fixed a toilet when I
was 3 years old. My mom was a single
parent, and when the toilet broke, I’d
just read Richard Scarry’s How Things
Work in Busytown, and said, “Mom,
if you read me the words, I’ll fix the
toilet.” Sure enough, I figured out what
was wrong. If I was told to go make the bed, I’d immediately think, How could
I build a robot to do it?
Helen Greiner: I was born in Lon-
don and grew up on Long Island. My
dad brought a computer home in 1978,
when I was 10, and it became mine.
Then I saw Star Wars and fell in love
with R2-D2. He had such personality.
MIT was the only school I applied to,
and that’s where I met Colin.
Brooks: I moved to MIT from Stan-
ford in 1984 to teach, and became the
founding director of MIT’s Computer
Science and Artificial Intelligence Lab.
Angle: In 1988 a friend was going tointerview for a job building robots with
Rod, so I went too. We were asked to fill
out a form about electromechanical de-
vices we’d built. An hour later I had an
epiphany that this is what I love to do.
Brooks: Colin was one of three un-
dergrads I hired, and the project I gave
him was to build a walking machine.
Angle: I built Genghis, a six-legged
walking robot. Rod did the high-level
intelligence, and I built the low-level
software, electronics, and sensing. Ithelped earn Rod tenure, and I won the
Adler Prize for outstanding thesis in
electrical engineering. That was the be-
ginning of a wonderful partnership that
led to building Attila, a prototype for a
rover that could explore another planet,
for NASA’s Jet Propulsion Lab [JPL].
Greiner: During graduate school
Colin and I both worked at JPL one
summer. I had two internships there and
did my master’s work at MIT and JPL.
Angle: One day Rod said, “I’m think-ing of starting a robot company.” I said,
“Okay, I’m in.” So in 1990 we founded
IS Robotics Inc., focusing on building
practical robots. We needed more of a
team, so we brought Helen in.
Greiner: I’d started another com-
pany to commercialize JPL technology.
I thought the opportunity to work with
Colin and Rod was an even better one,
so I jumped in. In academia robots are
how we got started
310-SUGV This remote-controlled machinecan be used for militaryreconnaissance or toremotely view a dan-gerous scene withoutrisking lives.
RP-VITA Say ahhh: This
device allowsdoctors to
see (and beseen) and treatpatients from a
distance.
0510-PACKBOT Used todetect and defuse bombs,it was also used to explorethe earthquake- andtsunami-damaged Fuku-shima nuclear reactor.
ROOMBA iRobot’sbest-known invention,
this circular vacuumnavigates a room on
its own. It also plays arecurring, supporting
role in YouTube vid-eos in which cats are
seen surfing them.
8/9/2019 Fortune 1 September 2014
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8/9/2019 Fortune 1 September 2014
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VENTURE
September 1, 2014
For a gallery of past and current iRobot products, go to
FORTUNE.COM
40
makers in the Pentagon. She succeeded
in getting contracts that typically wentto companies larger than we were.
In 2003 we brought in Vice Admiral
[Ret.] Joseph Dyer, and Helen moved
to chairman, focusing on partnerships
and acquisitions.
Greiner: People remembered me
because I’m female. I was the robot
lady. People have figured out that
women buy 80% of things in this coun-
try, and not having women involved in
developing and marketing products is
shooting yourself in the foot.Brooks: In 2008, I decided I want-
ed to begin a new venture, so I started
Rethink Robotics. We build factory
robots that a person can learn to train
in just a few minutes. In May 2011, I
stepped off the iRobot board.
Greiner: After 18 years at iRobot,
I wanted to get back to pushing the
boundaries with innovative things, so
I founded CyPhy Works in 2008 and
stepped down as iRobot executive
chairman in 2011. At CyPhy Works, we’re building UAVs [unmanned aerial
vehicles], which are flying robots. Most
people call them drones.
Angle: People are fascinated by ro-
bots because they’re machines that can
mimic life. We’ve gotten the industry to
where it’s starting to fulfill its promise.
Brooks: When I came to the U.S. in
1977, there were three operational re-
search robots in the world. Now iRobot
has delivered millions of robots. That’s a
big change, and I’m very proud of that. Angle: We’re facing an emerging
global crisis of caring for our aging
population, and we need new technol-
ogy to help people continue to live
independently in their homes. I think
that’s the true promise of robots.
Greiner: I’m proudest of the lives
saved by our PackBots and getting ro-
bots into millions of homes. iRobot is
one of the biggest overnight successes
that was 12 years in the making.
cleaner in Europe, but theirs cost 2,000
euros, and ours sold for $200. Angle: The first two or three years,
it was just Rodney, Helen, and me. We
hired five or six people and built slowly
after that. We went 6½ years never
starting the month with enough money
in the bank to make payroll, but we al-
ways made it. There was nothing stable
about anything we were doing.
Greiner: We’d put our expenses on
credit cards and didn’t pay a lot of bills.
Angle: We figured out which suppli-
ers had not put us on a credit hold and went to them for parts. We survived by
getting paid half upfront for building
robots we’d sell to research labs. People
were rooting for us to succeed because
they want robots to live up to the
promise of The Jetsons. At the 12-year
mark, we made about $15 million.
Brooks: That’s when I knew we
were on to something that could be
sustainable. It’s only fairly recently
that we’ve had lower-cost computer
components available. The cellphonemarket has brought down the cost