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tv   Bloomberg Business Week  Bloomberg  April 24, 2016 8:00am-9:01am EDT

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carol: ahead on bloomberg businessweek. there is a great article this week about controlling the cost of borders. ellen it: it it is the part
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where all of the borders were taken down when the european union was formed so there could be a unimpeded flow of goods and people. workers can cross orders. of all ofn the wake the terrorism some of the borders are going back up. >> view profile eight hundred and guy trying to get to the border. it is causing problems. ellen: it takes longer for goods to get places. is that it could cost $500 billion in extra cost of gdp because people cannot get -- a lote borders will
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of construction. 30 years ago. >> in the original container put along the damaged plant was not going to last forever. so they have been building a new plant they call the arch. to deal with evaluating the deep 3 and radiation. -- the debris and radiation. the completion of this incredible equipment. it is the business of the town. carol: and the ukraine. dealing with the political environment. ellen: the ukraine is in the middle of this war with russian-backed rebels and the
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country is a mess. the government is a mess. costing huge sums of money and they are getting international aid. process anda long the radiation is a serious problem. some of the construction is already done but there is more to be done. carol: your cover story is getting a lot of attention. it talks about saudi arabia's prince. he is officially the deputy crown prince, which puts him second in line to the throne. over the past year, has been given a portfolio, by his father over the economy, the oil he wants to modernize saudia arabia. the 30-year-old son of the king. he has consolidated power. deputyofficially been
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crown prince, which puts him second in line to the throne. over the past year, he has basically been given a portfolio by his father over the economy. the oil industry, the defense ministry, and he is unveiling biggestpretty much the redo of the saudi economy for decades. he grew up wanting to be the next steve jobs. in the interviews he has given us, he talked a lot about technical revolution, what it means for people his age, 30-year-olds who constituted more than half the population in saudi. the biggest scoop to come out of this interview is -- we always knew they were under pressure over the past year or so, they are running out of finances. they had several hundred billion dollars of foreign reserves. what they told us is that a year
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ago, they realized their burn rate was giving them to a place that they would be bankrupt by early 2017. the imf was telling the world they would be out of it by 2021. they thought they had five years. the world thought they had five years. what was actually true was that they had less the in two. over the past 10 months, prince mohammed has significantly reduced spending and putting a lot of efficiencies in place. we sat down with his financial advisor who was going through some of the details on how inefficiently the kingdom was spending money, basically through the boom years of 2010 to 2014, when oil was hovering in the $180 range. it was not being accounted for very well. he has done a lot in that regard to slow the burn rate from, i think it was, $30 billion a month to around $8 billion. that does not mean that brought that down. and the span of five or six years, with the country to a position where the only pillar
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of the economy is oil. it is a big one, but no longer the majority. he wants to try to compel foreign investment. to create an job opportunities by expanding the private economy, which is not very existent right now. >> he is also thinking about the rights of women, social reforms. women driving, that is something that has not happened in that society. ann's not really even been considered. >> he is smart enough to realize there are third rail issues that will take time. that is certainly one of them.
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one of the quotes he gave us -- women enjoy rights in islam that they have not gotten in our society. that is really interesting and cuts to the core of saudi society. on the one hand, very wealthy and well-off, and yet strictly religiously conservative. you have a generation that i think sees themselves in prince mohammed and increasingly finds embarrassment as they go around the world. with the role of women in society there. >> he is pushing for so much innovation. do we have any sense of how warmly the people of saudi arabia are responding to that? >> it depends on who you talk to. the royal family is not a few people. there are thousands of people in the royal family and are paid out of a kitty that sits between the treasury and aramco. a lot of people will be getting a lot less money down the road.
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but i think a country with a population of their to million, where half of them are educated. let's remember, all of the efforts over the past 20 years or so, that this kingdom has made to educate their people. they are educated and there is not enough to do. for the first time, someone in power is talking about these things. >> behind every cover story, there is a story itself. >> the photo director hired a very seasoned photographer who -- to photograph and to document how the prince goes about running his country. he came back with various options of the prince looking very relaxed, on an ipad, sitting in his living room, and --hout his like -- sort of
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traditional headdress and kind of like clothing you would associate with a figure of such power. >> he went for the closer shot that we don't normally see, right? >> right. that only is this a much more graphic image of the young prince, you can also see that his facial features are just relaxed and something unexpected from such a powerful person. and, we are also used to seeing powerful figures baines did in opulence. and, we are also used to seeing powerful figures bathed in opulence. we went for this more unusual shot. what do you want to convey for someone who sees this cover? >> we opted for a smaller typographic treatment. the first thing you see, you see the prince is very young. as you read the language, he is in charge of such a big task. >> up next, if you want to know how you can't order a trump and
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vodka, we will tell you. plus, gamers turn gamblers. >> all that ahead on "bloomberg businessweek." ♪
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♪ carol: welcome to "bloomberg businessweek." i'm carol massar. david: and i'm david gura. there is a special this week on s that are using trump's name but are not sanctioned. one of them is trump champagne. trump coins as well, a guy who makes no bones about all the money he has. he is not sanctioning that either. we hear all about the wall. a few people having a little fun with that. three examples of a lot of people using the trump name without donald trump's permission.
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carol: he has patented a trademark office for people wanting to use the trump brand. a lot of people wanting to capitalize off of his popularity. david: the whole process of doing that takes about a year or so passed the election. -- so we would be passed the election. carol: and the features section, there is a story about failed trump vodka. we spoke to a reporter. max: when i wrote about how donald trump had this magnificent rise thanks to the of his realebt estate empire. very amazing rise. what a fall in the 1990's. but when he rebounded, he came back as a different version of himself. he often was merely loaning his name out, meaning he was not building buildings called trump. it also meant he was licensing trump pinstripe suits and donald trump, the fragrance. at the end of 2005, trump vodka.
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david: and what was the market supposed to be for this vodka? max: very high and. -- high end. the best. they got a little ahead of themselves. they did not even have a bottle to put it in. carol: they did not have a distillery. >> they found one in the netherlands. it was this small, struggling distillery. david: what happened here? it was a hit to begin with, but had a rather short life. >> it sold 40,000 bottles in the first few months. people were excited. it was a spectacle. there were parties and hollywood and miami beach, trump tower. so, it started off well. those good times did not last. by the end of 2007, there was a line that says we are going to move our bottle production to china. just to cut costs. maybe not the end of the world, but a sign that things were not good.
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as a financial crisis started, you can see, look, the bigger bottle will be less profitable. there are less direct sales. you could see the trickle of that news as the crisis got worse. david: is this a real relic, or a thing of the past? >> i heard there was trump vodka for sale. but because the distillery i told you about, ended up going bankrupt in 2010. trump ended up suing saying he was not getting the money he was promised. carol: so donald trump even sued. >> donald trump did not own the vodka, he was only supposed to be paid money.
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or about half of the profits. he said that the company was not paying him, so he sued and trump vodka is appeared in the u.s., except for this brilliant liquor salesman who just saved a bunch. david: how much did he sell it for? >> about $30. carol: restaurants find inspiration from the grocery store. all that, coming up next. ♪
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david: welcome back to "bloomberg businessweek." i'm david gura. carol: and i'm carol massar. a look at how herbalife has helped well-known athletes. david: here is reporter matt
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townsend. >> any company trying to create a brand and sell products, the associate themselves with high-profile people. that has basically got an associated with people and david beckham and one of public figures light or secretary of state madeleine albright -- public figures like former secretary of state madeleine albright. david: you mentioned soccer? >> herbalife has a big presence into latin america and further into asia. what is the most popular sport in all these places? david: soccer.
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>> by far. those are places where herbalife has seen a lot of growth. carol: the logo is on the jerseys, so they are front and center. >> a big deal was with the la galaxy. in the got david beckham, who was really, really popular. he was the most popular person in soccer wearing an herbalife shirt when he was on the galaxy. david: who is driving this branding shattered? >> the ceo, michael johnson. he came in the middle of the last decade from disney and said, let's turned this company, known for weight loss shakes come into a sports performance brand. he has done that by associating them with athletes, mainly soccer. to branch out into other products. they do things like sports nutrition, protein powders, energy drinks. they really see herbalife is a sports performance brand.
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almost, and they have even said that someday they would like to have their logo as sort of an herbal leaf, unlike nike. carol: part of the argument, by having people liked david beckham another well-known people, it does give the brand some legitimacy. >> right. one of the things he talks about is, you know, the big lie is easier to believe then be little line. than the little lie. herbalife has all its credibility. it is a publicly traded company. it has people liked madeleine albright speaking on its behalf. it helps perpetuate -- this big thing, what he says is a pyramid scheme.
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he says they are legitimate company. he is out to make good on his investment. carol: in this week's etc. section, a profile of restaurants is on the forefront of an interesting trend. >> chefs want suppliers to be able to not only give them food to serve in the restaurant, but to sell for people to take home because they don't have the capacity to do it. across the country, we are seeing this from everything from time places to seafood restaurants. david: is this stuff that you take home and heat up? or are we talking about like a charcuterie platter. >> they sell something called a sunday gravy you can take home and heat up. [laughter] >> i mean, if you are really hungry, you can scoop it out. but you probably want to heat that up. in virginia, you
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can get an oyster role -- roll then getstaurant and oysters to go. carol: it is happening around the country. >> and it makes sense. if you really liking what you have and want to try it at home, the restaurants give you the option to do it. carol: the debate on how to classify uber drivers. all that ahead on "bloomberg businessweek." ♪ show me movies with explosions.
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david: i'm david gura. carol: and i'm carol massar. david: where amazon chooses to provide same day delivery. carol: how to resuscitate the cap? it is all ahead on "bloomberg businessweek." ♪ david: we are here with ellen pollock. anymore must reads, starting with a feature on amazon. the graphic accompanying it are so amazing showing the delivery areas for amazon. >> this was a project some of the graphics team at bloomberg and the editors and reporters at bloomberg businessweek, what we did was look at where amazon's one-day delivery service is, their prime one-day delivery service.
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david: something they are really pushing right now. ellen: yes. something they are really pushing. we looked at where the services were available and matched it to u.s. zip codes. what we found was that in many cities, several cities, there were areas that were largely populated by black consumers who are not eligible to get the service because they only delivered to other parts of the city, and they didn't serve these areas. david: net especially stark in washington,y, and d.c. ellen: boston and atlanta. there is a hole in the metal that is a largely black community where you cannot get the service. there was no evidence at all that amazon was out to discriminate in any way.
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they were looking at data. the story said something about how if you are only looking at data and not looking at the people, you can and up under serving black communities. it raises a lot of questions. leaders will have to take away they wish. but there are some stark examples. amazon says they had no intention of disseminating. carol: interesting. also interesting in the company's ending industries section this week, you take a look at the gap and breathing new life into the gap. this is something we have been talking about for white some time. ln: they have had quarter after quarter of disappointing result. but the problem that they are facing is that they are known for basics. and people loved them for basics. but many other retailers have gotten into the basic business.
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and that is their problem. thinking about all be times i walk into the gap and then walk right out. ellen: they were doing well when colored it denim came in. they went into the gap and spent money on colored denim. the plain t-shirts, you can get a lot of different places. david: paul barrett looks at frank. they are trying to eroded through the court system. ellen: first republicans try to eroded in the legislature. that really did not work. now there are all kinds of litigations to try to water it down or change it. david: we talked to the reporter about his piece on dodd-frank. people who are
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trying to make a substantive point instead of merely symbolic gestures are looking consistently to the courts where they have had some success. there has not been any success in knocking don-frank back legislatively. carol: what have they had success on? >> most recently in quite significantly, a federal district court in washington reversed a very important decision by the financial stability oversight council. david: explain what that is first. >> and that is a council of 10 of the treasury secretaries for david: ahead of the fed, everybody. oversight council had .esignated metlife they are so big and so interconnected that their failure could bring down the system. aig is one of these.
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prudential is one of these, and so forth. but the federal judge said that the council had been arbitrarily capricious and exercising its authority and imposing this on metlife. the potential significance of that is it could undermine the council's authority in future cases because the judge said they had to wait more carefully the potential financial affect on the institution and question, and that is a difficult thing for the council to do. david: part of what is gotten a lot of attention is the consumer financial protection. that has been a target. >> it has been. there is a case pending before the d.c. circuit of federal appeals court in washington dc in which a mortgage lender
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called phh, that it had arranged for kickbacks and mortgage reinsurance. it is a rather complicated case in the underlying sense. but the agency imposed a disgorgement penalty of $109 million. in attacking this phh went well , beyond trying to get the judgment against it reversed and challenged the very constitutionality of the cfpb. carroll: not what is fascinating is the cfpb was set up to be a consumer watchdog. the whole idea was to protect consumers and now they are getting pushed back. >> and they are getting pushed back and the argument against them is that they are two independent. by being unaccountable, the director of the agency, as you
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say, is able to draw his funds from the federal reserve. the appropriations process. secondly, can only be removed for cause by the president. he does not serve at the pleasure of the president. he cannot be removed. secretaries can be removed any time. this is being toggled together into a constitutional argument. the panel of the d.c. circuit that her the argument said it was quite sympathetic to the constitutional argument. what they will do about that is not 100 set clear. certainly, in theory, there is a next essential -- existential threat.
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carol: a focus on uber and the fight on how to classify its workers. >> uber and companies like it contender employees are independent contractors. they are not in a legal sense, the boss of the workers. david: what would it mean to uber if a court said, they are not independent contractors, they are your employees. how does that change the financial picture for uber? >> since the 1940's, u.s. law has provided a host of protections to people who are employees. ranging from benefits like minimum wage in overtime to be right to band together in forth a company to bargain collectively with you. so, it would be a real change in the business model. carroll: what to do the workers want to hear? >> there is a range. one driver was quoted, they feel-like they are the boss. other drivers have said, this is not a small business i am doing by being an uber driver. i do not have no control of how
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much i charge or can give my business card the next time you need a ride, or any control of any kind of things a small businessman would have over the business they were running. we are at the early stages of this. you have had it will come down -- you have also had agencies in various states across the country come down in different slip on appeal of one side or the other. do these people get unemployment benefits? then an employee would qualify for and and independent contractor would not. the teamsters have been one of the key forces in putting forward this bill that passed citywide in seattle that would create a union-like structure for these drivers. it would not change their status under the law to employees, but it would create a whole new set up where people, even if they are treated as independent
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contractors, could come together if they show they wanted, force a company liked uber to negotiate with them. that is a model now being considered in the legislature at the statewide level in california. david: next up on "bloomberg businessweek" how turntables are becoming mainstream. and up market. gameus, an electronic competition. all of that ahead. ♪
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♪ carol: welcome back to "bloomberg businessweek." there is a story about a vegan cheese maker. david: vegan cheese? [laughter] carol: right, there are a lot of
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vegans who would like to have cheese, but they can't. anything connected with an animal. this is a company based in silicon valley. they are kind of disrupting the cheese market if you will. instead of using animal enzymes, our stomach enzymes, they are using plant enzymes and getting equipment from france to do it. it is really interesting. they have caught the attention of folks from whole foods. lastgot into whole foods they did a personal tasting with john mackey one of the ceos of the company. david: they plan to grow if the vegan cheese catches on. carol: it is a huge market. the can she's is less than 1% of the cheese market. they are hoping to grow and the popular among various consumers. david: also, a company profiting on the popularity of old-school turntables.
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>> crossley is the largest turntable manufacturer in the world. last year, they sold one million turntables. that is the fifth of the market. david: they have gotten a lot of people interested in the final -- in vinyl. what is their bread-and-butter? >> these are the turntables you see at urban outfitters, target, walmart. they are the inexpensive, retro turntables that are plug and play with speakers attached and don't require any setup. you buy it, take it home, and put on your copy of "dark side of the moon."
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>> a point of punctuation was when they got a call from restoration hardware. what did that mean for the business? >> it changed it more for the dynamic of the customer, the demographic. prior to that, modern marketing concept was using the brand to sell turntables to the group that was still using them. this was older baby boomers who were nostalgic and wanted to use the records piling up in their basements and garages. so they sold old wooden jukebox-style turntable that appealed to dad. they were selling it at the skymall catalog and jcpenney. of the the unsexy side business. when restoration hardware came
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calling in 2000 and one as a client, what it did, it started promoted and marketing the crossley turntables as a fashion accessory for largely female buyers. that was one of the factors that push the vinyl revival into the mainstream. david: this new turntable, you mentioned, vinyl has become a fashion accessory for a lot of people. is there evidence that with a higher end turntable that they will be successful and people will want to spend more money on a crossley turntable? >> is certainly remains an open-ended question. crossley, because of their mass success selling inexpensive turntables, has a reputation of a company that sells fun, but cheap stuff. in the audiophile community, those who really know their stereos and are serious record collectors, they are kind of spies because they can do damage to records. what crossley is doing is trying to get those users, those familiar with their branding already, to trade up and stay with the brand. they had a huge installed user base something around 5 million crossley users over the past decade bought their turntables.
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but will that take -- will those people make the leap when they decide to trade up and gain a greater appreciation for fidelity sound, or have the disposable income to do this? david: how gps may be rewiring our brains. all that straight ahead on "bloomberg businessweek." ♪
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david: "bloomberg businessweek." welcome back to "bloomberg businessweek." i'm david gura. carol: i'm carol massar. david: here is a reporter. >> the pro-videogame circuit has been dominated by a couple of big games. one game is counterstrike, which will be the subject of turner's new sports league, that will be the first entry into making television. david: what is it? [laughter] david: counterstrike global initiative.
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>> there are two taints. -- there are two teams. by the standards, it is easy to understand, there are two teams, a terrorist team and a counter insurgent team. you try to get rid of the other team's layers. it is very popular. it is one of the main gains that is used in these tournaments. carol: they have virtual weapons that has created a secondary market. there is a lot of gambling going on as well, right? >> the particular type of gambling the goes on is interesting because they use virtual weapons that you could win in a game but could also buy through websites. those are essentially used as kind of like poker chips. so on these websites, you could say, i think team a is going to win. it all seems very nice and
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abstracts, but there is a very liquid secondary market where those guns and knives are at cash value. you are essentially betting money even though it feels abstract. david: is this raising eyebrows with regulators? >> as far as i can tell, it is not raising eyebrows among regulators, in part, it is really down there in the subculture. fantasy sports, they really put it in everybody's face. it was on tv all the time. it involved football. people understood that. in this, you have to understand what this professional videogame circuit is. and then this kind of elaborate process through which you are taking guns and turning them into money and out of money and betting on things. it is a little bit mind blowing. carol: the gambling is illegal? >> it is unregulated. sports betting is unregulated. sports betting is illegal in the united states. it certainly seems illegal. it has not been tested in united
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states. in court. valve doesn't say much. system thattup a has allowed this to happen. in the past, you have seen other game companies really make it impossible for you to take items within the game and get cash for them. they have made technical barriers. they have made it against terms of services. valve is on the opposite way. they actually encourage the cash trade with their weapons. carol: they promote it? >> they encourage it. they say it promotes engagement. they certainly have set up a system where it is possible. carol: a new report how gps may be changing the composition of our brains. gps. gps, according to some very
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suggestive research, fundamentally altering the structure of our brains. if you think about it, we have been basically shutting them off and allowing gps to tell them where to go, which is often why we end up driving our cars into lakes. [laughter] david: do you even have a map in your car anymore? carol: no. i put in addresses and kind of follow it. even though i am saying, wait, i usually go this way. the history of gps is pretty interesting. >> it was invented by the air force. the air force brass decided not to fund it because the already had a navigation tool. they said, it is pretty good. the military tried to keep the best version for itself and give civilians a degraded version of it. it wound up not being that big of a deal. that you know,es like magellan and companies of that nature. if you are launching a missile, you can use a downgraded version.
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david: bloomberg best is available online and on newsstands. carol: we will see you back your next week. ♪
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♪ emily: i am emily chang. this is "best of bloomberg west." we bring together the top interviews from the week in tech. coming up, my interview with the president of didi chuxing, the leading player in china's ride hailing space and a competitor with uber. we hear how the company plans to keep uber at bay. the third season of "silicon valley" premieres on sunday. we will hear from dick costolo, a consulta f


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