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Noted Hedge Fund Says Crypto Hasn’t Bottomed Yet

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Alex Sunnarborg is a founding partner of Tetras Capital, a New York City-based cryptocurrency hedge fund Forbes estimates to have $30 million in assets under management. Tetras is well known for a recent bearish bet it made: It shorted ether in May 2018, a month when the digital currency’s average price was nearly $700. Today, ether hovers around $100. Before Tetras, Sunnarborg did a stint in investment banking and founded crypto exchange and research app Lawnmower, which was acquired by CoinDesk in 2017.

Forbes: How would you describe your investment strategy?

Sunnarborg: In a bull market when everything is going up, especially when bitcoin is going up, altcoins generally will return more than bitcoin. In 2017 when we launched, we were looking to make altcoin trades. [Altcoins are generally considered any crypto asset other than bitcoin.] They historically have more volatility and higher betas.

In a bear market, altcoins are still trading at a higher beta, but to the downside. In 2018, bitcoin fell about 75%, but altcoins fell 95%. It’s funny how strongly they’re still correlated, yet altcoins have a higher beta. Today, if we’re trying to hedge our exposure to this space, before we short bitcoin we look at something with a higher beta.

Forbes: You shorted ether in May 2018, when it was trading above $500. Now ether is at $100. Obviously, that went well. Was it your biggest win for 2018?

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Sunnarborg: I would say so, yeah.

Forbes: Where’s the bottom for ether?

Sunnarborg: It’s funny, these cryptos don’t have a good way to come to a fundamental value. I can’t tell you ether is fundamentally going to bottom at $50. It was at $10 two years ago, right? These assets trade so much relatively to each other, so I think ether’s short-term bottom would be in line with bitcoin starting to turn. If bitcoin turned tomorrow and rallied, I think ether would, too.

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ForbesOver the past few months, we’ve seen issues with ConsenSys struggling and doing layoffs. Do you think that’s a bad sign for the future of Ethereum?

Sunnarborg: Yeah. ConsenSys is an integral piece of the Ethereum ecosystem. All the Ethereum decentralized applications and products it supports have had minimal user growth. A lot of them still haven’t launched and are still pretty difficult to use, and the daily active user counts are less than 100.

Augur has about $40,000 of money at stake across all its prediction markets, but the investors behind Augur have put up tens of millions. It has a market cap of hundreds of millions. There’s this massive disconnect between how much money is still tied up in these projects and how much people actually use them.

I’ve also noticed some Ethereum developers basically talking about building on some competing blockchains. People are talking about launching on Dfinity or Polkadot. At least at a high level, it does not look or feel good. It looks like a drop in momentum and steam.

Forbes: Are you currently short ether?

Sunnarborg: I don’t think I should comment on that right now. We have not held ether since we first published our short thesis in July 2018. We then went short ether, and we have taken that position off three or four times in 2018.

Forbes: Has bitcoin bottomed yet?

Sunnarborg: I don’t think so, and I think calling that is very difficult. That’s part of the reason I’m really thankful that we’re in the position we are right now. We can hedge ourselves, remain more neutral and not have to call that exact price or timing bottom. I’m not confident right now. Our portfolio is relatively neutral—we have cash and short positions.

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Forbes: What are you buying and holding?

Sunnarborg: Obviously, I’m a huge proponent of bitcoin. And if the market were to turn right now, what liquid altcoin sector would we even look at? We’re very biased against anything that did an ICO, because we think they’re pretty much all illegal securities offerings. Just by cutting that out, you are left with a very small handful of assets. A use case I still find interesting, because bitcoin doesn’t have that functionality yet, is private transactions.

Forbes: Among privacy coins, which do you like best?

Sunnarborg: I think Mimblewimble and Grin are pretty interesting—the fair launch process, the focus on privacy and the inflation. I think zcash and monero are both still interesting.

Forbes: Can you explain what Grin did to create a fair launch?

Sunnarborg: There’s only so many projects that don’t launch their blockchain or token without an ICO or some initial funding. Grin tried to use the ethos of bitcoin of saying there’s going to be a genesis block, and people are going to start mining the coin. There’s no way you can buy it or get access to this coin ahead of time. That’s very similar to how monero launched, and both of those attract a lot of interest from people in bitcoin, largely for that reason.

Forbes: What other factors do you look at?

Sunnarborg: Another huge thing for me is the security. So, things like that recent Ethereum Classic 51% attack (when users attacked the blockchain with computing power to spend the same coins twice, undermining the primary function of the blockchain). These blockchains where it’s possible to rewrite the blockchain for not that much money relative to how much you could make by double-spending—those are immediately not attractive. Unfortunately, in the crypto space, security and price are generally very correlated. So, as the price of ether falls, it gets less secure.

Forbes: I’ve seen you tweet about the virtual reality Ethereum-based platform Decentraland. Do you like that project?

Sunnarborg: I find the concept of digital land very interesting, because of its scarcity. I like the concept of digital scarcity. This land asset seems interesting as something I could own and build on, and maybe charge players a fee for. I could sell it to someone else in the future. The value actually makes sense to me. But there’s this other token in Decentraland called mana, which was created via an ICO. You have to use mana to buy land. I absolutely hate this token; it’s totally unnecessary. I think the ICO was just done to raise money. They sold these tokens, and then essentially, they’re backing into what to do with them.

Forbes: I’ve also seen you tweet about EOS and its growing number of transactions. Are you bullish on it?

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Sunnarborg: No. The one-year long, $4 billion-dollar ICO seems a little excessive to me. The whole governance system, with 21 block producers that can essentially make, vote, or deny everything, is a weird concept to me.

ForbesWhat should investors be monitoring for signals about where the market is headed?

Sunnarborg: One of the big, fundamental things I want to see is whether the Fidelity crypto trading product actually rolls out in March. And do people actually start to use it? A very similar question: What’s the status of trading platform Bakkt? Will it get approved, and are people going to use it?

And how does the composition of global exchange volume start to shape up from here? Does volume increase on regulated, brand-name platforms—platforms that the next wave of institutions would actually trust?

What I’m really looking for in all these comments: Will this market actually clean up? Can we start to trust crypto data more, like trading volume numbers? We need more regulated, trusted players to improve the trading venues, because I think right now the SEC and many people are scared of manipulation, hacks and very shady venues for trading.

What would be really good for a market bottom to happen would be for every potential bad thing to happen immediately. I would love to see the SEC come down on people really hard. One of the biggest problems in this space is there are so many bad actors, and so many were related to ICOs. The SEC just has such a massive task ahead of them.

One way to think about the bottom is that it happens when all the bad news gets washed out. At that point the only thing to do is go up, and you can’t really talk about any negative catalysts anymore, because they’ve all happened.

Basically, I think we’re pretty close to the bottom, and what would help is if some more of that clarity and action came out. It probably would have been helpful for the bottom if the VanEck exchange-traded fund would have gotten totally rejected; if the SEC slapped some more of these people around and essentially maximum pain came onto the market. At that point we would see where, if any, buyers jumped in.

Excerpted from the February 2019 issue of Forbes CryptoAsset And Blockchain Advisor.

-Jeff Kauflin; Forbes Staff

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The World’s Most Reputable CEOs 2019

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There was a time when it seemed Google could do no wrong—and then came “the memo.” Penned by a former software engineer critical of the company’s diversity initiatives, the now infamous 2017 document tarnished the tech titan’s reputation. But CEO Sundar Pichai emerged unscathed, thanks in part to the transparent way he managed the crisis.

Two years later, though, troubles ranging from employee protests over the organization’s handling of sexual misconduct allegations to data breaches widespread enough to warrant the shuttering of Google Plus appear to have proved too much for even the Valley’s most trusted leader, and as the business has faltered, so, too, has its CEO. 

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“Sundar Pichai, celebrated as the most reputable CEO in the world last year, didn’t make the top ten at all this year,” says Stephen Hahn-Griffiths of the Reputation Institute, a reputation measurement and management services firm. For the second year in a row, RI has published the Global CEO RepTrak, a study of chief executive reputation.

This year’s ranking reveals an average two-point increase in the reputations of the world’s CEOs, a trend that mirrors the one-point increase in the reputations of the world’s companies. The driving force behind both, Hahn-Griffiths says, is corporate responsibility.

“There was a time and a place when it was good enough for leaders to deliver on financial performance, new products and innovative agendas, but that paradigm has changed,” he explains. “Social responsibility, employee responsibility and environmental responsibility—that’s 32% of the weight of reputation of any given CEO.”

With that in mind, it’s no wonder that Pichai, whose identity as a leader is so inextricably linked to that of his company, fell from the top ten, and he’s far from alone: Eight of the CEOs who appeared in the upper echelon of last year’s list—including Kraft Heinz Company CEO Bernardo Hees, Mondelēz International CEO Dirk Van de Put and LinkedIn CEO Jeff Weiner—failed to return this time, their descents making room for the rise of some newcomers, among them Ben van Beurden.

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At first glance, the CEO of Royal Dutch Shell might seem an unlikely candidate to rank high on a list of this nature. After all, not only has the energy sector long been regarded by the general public as one without much of a moral compass, but the business Van Beurden leads isn’t counted among the world’s most reputable.

None of this is news to him, and since rising to the helm in 2014, he’s made rewriting the narrative a priority, and a public one at that. “Doing the right thing is the single biggest driver of reputation,” Hahn-Griffiths says. “His leadership style—lead from the front, not the back—says not only is he a highly ethical CEO, but he has empathy and the desire to make the world a better place to live.”

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Royal Dutch Shell CEO Ben van BeurdenAFP/GETTY IMAGES

From spearheading a campaign to reduce Shell’s net carbon footprint50% by 2050 to collaborating with organizations including the Task Force on Climate-Related Financial Disclosures and the World Resources Institute to ensure that his company’s plans become a reality, Van Beurden has acknowledged the elephant in the energy room—climate change—and has demonstrated his commitment to working to protect the planet against the threats his industry has helped create. “Energy is one of the least reputable industries,” Hahn-Griffiths says. “Shell really took a stand as a leader in climate change and alternative energy, and redefined what it means to be a good corporate citizen in the energy sector.”

The attention Van Beurden has paid to developing sustainable energy solutions is surely qualification enough to make him one of the world’s most reputable CEOs, but had he pursued these initiatives behind closed doors, would they have been enough to propel him into the top ten? It’s difficult to say, and the visibility of his leadership certainly didn’t hurt.

In fact, the more familiar the general public is with a CEO, the more likely he or she is to have a strong reputation. “The difference between having a CEO with whom the general public isn’t familiar is 10.3 points,” Hahn-Griffiths says. “Not only is that significant, but it translates into billions of dollars in market capitalization, just because you have a CEO at the helm who is visible.”

Worth noting, however, is that the association between familiarity and perception won’t exist if a CEO is known for all the wrong reasons. As in the case of Pichai, not all press is good press.

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The Estée Lauder Companies CEO Fabrizio FredaPATRICK MCMULLAN VIA GETTY IMAGE

For Fabrizio Freda, whose familiarity ensured his spot in the top tenfor the second year in a row, influence has always been a business imperative. Upon becoming the first non-Lauder to serve as CEO of The Estée Lauder Cos., in 2009, Freda was faced with a big branding challenge: convincing the Millennial generation that a 63-year-old cosmetics company might be relevant to them.

In order to successfully make the case, Freda just knew a brand makeover wouldn’t do, so he started on the inside, implementing a global reverse-mentoring program to promote perpetual learning and development for employees and prioritizing the hiring of more Millennials, who now reportedly make up 67% of the Estée Lauder workforce.

Such shifts have enabled the company to make attention-grabbing moves on the global stage, including the acquisitions of Smashbox, Becca and Too Faced, all Millennial-centric beauty brands, the latter of which boasts 12.5 million Instagram followers. “Part of his legacy is really making strides toward winning over the Millennial cohort,” Hahn-Griffiths says. “He’s taken a company that’s been around for generations and has made it relevant to emerging audiences around the world.”

And while not every initiative has gone according to plan—Estée Edit, a Millennial-focused line fronted by Kendall Jenner, was discontinued after just 18 months on Sephora’s shelves—those don’t seem to have hurt Freda’s bottom line; Estée Lauder’s market cap has grown from about $5 billion back in 2009 to more than $60 billion today.

“Without losing our advantages of scale and scope, we are instilling a more entrepreneurial mindset to ensure we stay agile and act decisively,” wrote Freda in a statement to Forbes. “This gives us the best qualities of a well-financed, structured organization with the challenger spirit of a startup.”

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Notably absent from this year’s list are women. That’s unsettling. Last year, The Campbell Soup Co. CEO Denise Morrison, who has since stepped down, was the only woman to make the ranks. RI attributes the lack of representation among female leaders to the fact that, on average, their familiarity with the general public is 12%, whereas that of their male counterparts is 15%.

But Hahn-Griffiths is confident that this trend will soon change, and he says GlaxoSmithKline CEO Emma Walmsley is the one to watch. “She’s the first woman to run a major pharmaceuticals company and has been really disruptive,” he says. “We anticipate the number of women CEOs to increase significantly, and we think Emma, who she is and what she represents, is a role model.”

-Vicky Valet;Forbes Staff

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Gene Hackers: The Young Biotech Entrepreneurs Looking To Make Billions By Editing Life Itself

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hen Rachel Haurwitz started her biology Ph.D. at the University of California, Berkeley, the award-winning biochemist Jennifer Doudna suggested Haurwitz investigate part of a bacterial immune system. She studied how microbes store genetic mementos of attacking viruses and recognize them to fight off future assaults. “It was an esoteric project,” Haurwitz says. 

It’s esoteric no more. This system, called Crispr, has become one of the hottest technologies in biology, with the potential to give scientists control of the building blocks of life and give investors rich rewards. Crispr had no obvious relevance to human health when it was first described in 1987, but Doudna, who won the Breakthrough Prize in Life Sciences for her Crispr work, and other pioneers have discovered ways to turn it into a gene-editing tool. Haurwitz and Doudna helped found Caribou Bio­sciences in 2011 to get in on the action. Haurwitz, still in her 20s, became CEO the next year. 

Haurwitz is not the only young entrepreneur who sees opportunity in gene editing. Doudna cofounded Mammoth Bio­sciences with some of her other doctoral students and two Stanford Ph.D.s. Trevor Martin, the company’s 30-year-old CEO, has raised $23 million from such investors as Apple CEO Tim Cook. In 2015, in Cambridge, Massachusetts, 29-year-old Luhan Yang founded eGenesis with her mentor, Harvard geneticist George Church, to use Crispr to help transplant pig organs into people. Omar Abudayyeh and Jonathan Gootenberg, also in their 20s, cofounded Sherlock Biosciences with another Crispr pioneer, 37-year-old Feng Zhang of the Broad Institute of MIT and Harvard.

“They may be young, but in both cases these are people at the top of their game scientifically,” Doudna says of her cofounders. “They’re fearless in all the right ways and very aware of the ethical challenges.”   

Given that no one had built a Crispr company until a few years ago, “there’s maybe more of an opportunity for people with nontraditional backgrounds,” Haurwitz says.

Crispr is an acronym for “clustered regularly interspaced short palindromic repeats.” It refers to the way bacteria store, in their genomes, snippets of viral DNA, like mug shots. Those markers are used to identify invaders that return, much as a human immune system uses telltale elements of a polio virus remembered from a vaccine.

If an invading virus matches a stored mug shot, enzymes associated with Crispr break the virus’ lethal DNA into harmless pieces. Doudna and others figured out how to use those enzymes to snip DNA at precise points in order to insert or modify genes. Thus does Crispr promise to make the expensive and buggy process of rewriting DNA easier, opening up new ways to treat dis­eases caused by genetic mutations, create cheaper diagnostic tests and engineer cells that kill cancer.

Eight years after its start in Berkeley, Caribou has raised $41 million and cut licensing deals—potentially worth hundreds of millions of dollars—with DuPont Pioneer, Novartis and others. It’s starting to develop medical therapies.

Haurwitz grew up in Austin, Texas, and earned a bachelor’s degree in biology at Harvard. She didn’t have a clear plan when she went on to UC Berkeley, but she thought she might later become a patent attorney. 

That thinking changed as her Ph.D. work got more exciting. Haurwitz and Doudna spent a lot of time talking about how they could repurpose Crispr for modifying genomes to cure disease. Program the naturally occurring Crispr system to cut the gene you want to modify, and it’s theoretically possible to use it to change the genetic code to either fix “misspellings” that cause illness or disrupt the production of an unwanted protein.

Caribou started out with the notion of making Crispr technology available for DNA editing in applications such as drug development, agriculture and basic biological research. Haurwitz’s cofounders didn’t want to leave academia and were “crazy enough to let a 26-year-old who had never worked for a company in her life take on the role of president and CEO,” she says. 

Haurwitz took a few business classes before getting her Ph.D., then pitched venture capitalists on funding a technology they didn’t really understand. Caribou was securing an exclusive license to some Crispr patents held by the University of California system and the University of Vienna. Still, “pretty much every VC we ­talked to kind of said, ‘Meh,’ ” Haurwitz remembers. This was 2012, and they thought she was overestimating Crispr’s potential. 

The papers that propelled Crispr into the limelight came the next year, and investor dollars and a wave of new companies quickly followed. Editas Medicine, cofounded by Sherlock’s Feng Zhang, raised $43 million to apply the technology to medical therapies. Next was Intellia Therapeutics, cofounded by Caribou, which raised $15 million in its 2014 launch. And Crispr Therapeutics, founded by Crispr pioneer Emmanuelle Charpentier, raised $89 million. The three went public in 2016 and now have a combined market capitalization of $3.8 billion.

Meanwhile, Haurwitz was being cold-called by plant-breeding and drug companies. DuPont led an $11 million investment in 2015. Caribou raised another $30 million the next year and has been able to sustain itself on that funding and payments from licensing and partnership deals.

Caribou licensed to Integrated DNA Technologies the right to sell biology researchers what they’d need for gene-editing experiments. Genus, an animal genetics firm, paid Caribou an undisclosed amount for the exclusive right to use its proprietary Crispr technology to engineer the genes of pigs and other livestock. Similarly, the Jackson Laboratory is paying Caribou to use Crispr to engineer new populations of research mice that model human diseases. 

Haurwitz will soon have to seek venture capital again, as Caribou has pivoted to drug development, which is expensive but potentially more lucrative. Her first focus: improve on existing cancer therapies that take patients’ immune cells and train them to attack cancer. Crispr, she says, could be used to edit the DNA of immune cells from healthy donors so that these cells could be given to any cancer patient. The company plans to start trials in humans next year. There’s competition, from Allogene Therapeutics and its partner Cellectis, which have a combined market cap of $3.9 billion.

Caribou is also developing a program in another buzzy area: the microbiome, or the many bacteria that inhabit all parts of the human body, particularly the gut. This time, investors know what Crispr is, and Haurwitz has already won some over. “She’s one of the few people that I’ve met in my life that is able to toggle between business talk and scientific talk in a heartbeat,” says Ambar Bhattacharyya, a Caribou investor at Maverick Ventures.

Beyond the competition, there is an intellectual property conflict. Overlapping patent claims from the University of California and the Broad Institute emerged for the foundational technology, which involves an enzyme called Cas9, used to cut DNA. A lawsuit between the institutions was decided in favor of the Broad, but the U.S. Patent Office has granted patents to both. UC’s patents claim broader rights than were demonstrated in its application, says Lisa Ouellette, a Stanford Law School professor, and could make them vulnerable to a legal challenge. (UC disagrees.)

Whoever owns the technology will command fat fees. Caribou might run trials related to a particular gene, but if other companies want to run trials related to other genes, they may have to approach Caribou, says Jacob Sherkow, a professor at New York Law School. “They’re going to have to pay handsomely.”

Legal battles aside, the new field risks public backlash. In November, Chinese scientist He Jiankui announced he’d used Crispr to tinker with the genomes of human embryos born as twin girls, thereby heightening pressure on ­Crispr scientists to consider the ethics of how they’re using the life-altering tech. Caribou’s license agreements include language to prevent its use on human embryos, Haurwitz says. 

Doudna says researchers need to vet the science of editing the genes of embryos, and then people need to discuss how to use it responsibly. “Are there real unmet medical needs that would require this kind of editing or not? I think that’s one question.”

Debate over the answer will shape Crispr’s path to commercialization, one that holds immense potential for its youthful founders—and the likelihood of yet more controversy and conflict.

-Michela Tindera;Forbes Staff

-Ellie Kincaid;Forbes Staff

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Amazon Surpasses Walmart As The World’s Largest Retailer

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It was bound to happen sooner than later: Amazon has surpassed Walmart as the biggest retailer on the planet.

The e-commerce juggernaut jumped 25 spots to #28 on Forbes‘ Global 2000 list of the world’s biggest public companies, as measured by a composite score of revenues, profits, assets and market value. That was sufficient enough for it to steal the title of the world’s largest retailer away from Walmart, which slipped five spots to #29 on this year’s overall list.

Amazon has continued to chart a path to retail domination, with the number of Americans who subscribe to Amazon Prime topping 100 million in 2019. The company has beefed up the benefits attached to its annual membership in an effort to make it a must-have in every household, such as offering special discounts at Whole Foods, investing heavily in television and movies and expanding free shipping. In April, Amazon said it would invest $800 million to make free one-day shipping the new normal, up from the standard two-day shipping the company offers now.

Thanks to investor enthusiasm in its breakneck growth, Amazon has a high-flying stock that has made its founder Jeff Bezos the world’s richest man and given it a market capitalization of over $900 billion, which is rivaled only by Apple. On this yardstick, it has long trounced Walmart, which lags behind with a market cap of less than $300 billion.

Amazon has been catching up on other measures, too. Its cloud computing business has practically been printing money and last year the company made a record-breaking $10 billion in profits. That is up sharply from $3 billion the year before and easily tops the $6.7 billion that fell to Walmart’s bottom line.

Nevertheless, Walmart remains larger on some counts: It still pulls in more than double the revenue and has more assets on its balance sheet due to the significant real estate that it owns. It also has 2.2 million workers, which is nearly four times the number of employees that Amazon has on payroll.

Behind Amazon and Walmart, the third-largest retailer on the planet is Chinese e-commerce giant Alibaba. Its core business is selling goods via the internet, but it has also invested heavily in areas like entertainment, logistics and payments. Sales grew 51% to $56 billion in fiscal 2019, driven by the spending of its 654 million active retail customers. While Alibaba is still seeing immense growth, its growth rate has ticked down amid an economic slowdown in China and an escalating trade war with the United States.

Home improvement stores like Home Depot (#126) and Lowe’s (#234) continue to do well, as do discount stores like TJ Maxx (#394) and Ross (#671).

Meanwhile, CVS fell out of the top three largest retailers. The drugstore chain lost $600 million in 2018, as its $69 billion takeover of Aetna and goodwill impairment charges in its long-term care business, Omnicare, ate into its bottom line. The company is now ranked #410 on the overall list, down sharply from #69 in 2017.

Other retailers are facing more existential problems. Victoria’s Secret parent company L Brands fell 230 spots to #1311 on the overall list as it faces mounting competition from upstarts like ThirdLove and True&Co and traditional players like Target and Chico’s. Bed Bath & Beyond, which is trying to ward off a group of activist investors intent on shaking up management, slipped 348 spots to #1997. The embattled Sears, recently out of bankruptcy, fell 166 spots to #1913.

-Lauren Debter;Forbes Staff

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