tv Bloomberg Business Week Bloomberg June 12, 2016 4:00pm-5:01pm EDT
sheelah: welcome to bloomberg businessweek. in this week's special technology double issue, silicon valley is serious about flying cars. how intel makes chips, and how to shoot like steph curry. i am here with the editor of bloomberg businessweek, ellen pollock. we are talking about the annual tech issue. before we get into the tech and cool things, talk to us about the opening remarks column.
i read a really closely. it's about venezuela. they are having serious economic issues. pertaining to the weather. can you explain that? reporter: we have written a lot about venezuela, and shove it is. now we are looking at how the weather can make bad problems even worse. obviously, the economy is a mess. but the weather change with el niño, and there has been devastating droughts, which has obviously affected the economy. >> what are the repercussions for average venezuelans? reporter: they are adjusting, they have to adjust more to all the problems. it has actually affected not just agriculture, which is a big problem, and shortage of food, but even hydroelectric power. there are more power outages, to the extent that the president has said, you should use your blowdry or less often. it's making a lot of problems
worse, and people are likening it to what happened in syria, where a terrible drought made things worse. sheelah: there's a lot to get through in this tech issue. what is through what the inspiration issue. is there a theme that unified the stories? reporter: it is really about inventors. last year, we looked at code, and this year we decided inventors was the way to go. so people with crazy ideas and dreams, and how they make their crazy ideas and dreams into reality. it is very global. we are looking at investors all over the world. sheelah: there's one really interesting piece about cairo, and a handful of very brave innovators trying to develop new technology. can you walk us through that piece? reporter: a group of guys basically created a facility, and overgrown garage, where you can go and make stuff and invent
stuff. it is part incubator, part maker place, and they are working on all kinds of products. it is very hard, because in egypt there's a lot of police surveillance. they worry about terrorists, opposition to the state. so you could be walking around with a piece of equipment, and stopped by the police. it is a hard place to be an inventor, but they are going to do it. sheelah: moving over to silicon valley, a lot of this tech innovation is happening that you highlight an issue. there's this show stopper piece about flying cars and whether that is actually something that may become reality. ellen: it's a crazy story. who doesn't want their own personal flying car? it is all about being able to avoid traffic, go up in the air, and go wherever you want. among the people behind this is larry page from google. sheelah: pimm fox and i spoke to the reporter. reporter: we colloquially call them flying cars. really they are personal
electric autonomous aircraft. that sounds crazy. in fact, there's a saying in silicon valley. they promised us flying cars, and instead we got 140 characters. that saying include a little bit of disappointment, implants disappointment about the valley, that they have not given us, or follow through on the science fiction dreams we were served at children. my colleague and i started researching this a couple of years ago. we got a with that they were actually some flying car secret projects out there in the valley. what we learned this year is that two of those projects are personally financed and backed by larry page, the ceo of alphabet, the cofounder of google. it is a moment of such credibility for this old idea that we have people like larry page that believe this is now possible, and we can get into why it is possible. but there are very credible
efforts that are looking at basically changing the way we get around, and the way we commute. we thought shining a spotlight on these efforts would be perfect for this invention issue that is published this week. tier question, houston will these be practical? probably not right away. there's a reason it is in the invention issue. it is still kind of a far out idea. but the reason we highlight it is because a lot of change since people started dreaming of this aircraft. we have better motors, better materials, faster computers. it's a couple years out we have interesting places and experts who think it might be feasible in the next 10 years. >> i wonder if you could describe some of the technology going into these personal electric flying vehicles, and where does it come from? it can just come from a clean slate. there must've been a lot of work done previously.
reporter: i guess i will highlight two areas. they have kind of evolved to the point where there is excitement. one is electric motors. you have to give a lot of credit to elon musk and tesla for basically pioneering a new generation of engines, that have very high efficiency, great fuel efficiency, and we are now able to manufacture them at scale so the price has come down. the second area is autonomous computers. there's a lot of attention to autonomous vehicles. we sort of think about that as it may be more solvable problem, but when you think about aircraft, a lot of the things cars have to deal with like pedestrians, the quality of the roads, traffic -- those are not going to exist in the skies. to some extent, this is an easier problem to solve than
autonomous driving. the development of olives -- artificial intelligence and autonomous driving systems, coupled with advanced materials and electric motors has made it more feasible. >> do you sense investors in silicon valley are seeing this as an actual real sort of viable investment opportunity, or is this just a matter of a handful of guys trying to realize their childhood napkin sketches, and they just have the money to burn? reporter: i think that's probably right. i might not put it in those exact terms, but i would put it in the same bucket as just aces -- jeff bezos' company blue origins, or spacex. it is probably motivated less by profit-seeking than it is by changing the world, and creating a new, may be safer form of transportation. these are ultimately going to
have to be businesses, but silicon valley is -- and people like larry page, have the fortune of having a lot of resources, and being able to expand some of them on these childhood visions. sheelah: turning all these high-tech stories into eye-catching images is the job of creative director rob vargas. i spoke with him about how he developed the cover image. >> we came up with this very simple image, having an artist rendition of what these inventions would look like. obviously, we did not have access to the actual car larry page is funding. so without of the fact that all these ideas started in someone's imagination. drawings are very naive and childlike and reference that aesthetic. so it's basically the simplest form of what a flying car can be. sheelah: there's a lot of interesting elements around the edge. i'm intrigued by the baby. >> there is a baby inside the issue. there is a man in new zealand
who is developing a cheap baby incubator pretty much in his garage. i will point you to that story. sheelah: interesting. what about over here, are these all pertaining to specific stories? >> yes, each drawing pertains to stories. we pick the ones that we could illustrate something. like the paintbrush refers to the material photo essay, that has the blackest black. leaf -- we have a weed leaf. we have a coffee mug for space coffee. we have my favorite one, steph curry kind of multiplying himself, which would be cloning him or cloning his skills in other people. we have the mercedes logo for the timeline we have about competitiveness. finally, we have the corn that references the tractors. sheelah: up next how mercedes and bmw have trying to out invent each other and which company is currently in the lead.
sheelah: welcome back to "bloomberg businessweek." i am in for carol massar and david gura. you can find us on the radio on sirius xm channel 119 and a.m. 1130 in new york and a.m. 1200 and boston, sm 99.1 in washington, d c and a.m. 960 in the bay area. a look at the -- in this week's double technology issue, a look at the century-old ravioli -- rivalry between mercedes-benz and bmw. here's reporter sam grobart. sam: we have a century old rivalry.
the two competitors are mercedes-benz and bmw. this is the year where bmw is celebrating its 100th anniversary. so that's 100 years of two of the top german automakers going toe to toe and always trying to outdo each other in the luxury car market. sheelah: they have been tracking one another in terms of their developments. what aspect have the companies had on one another? has it been motivating? is it driven innovation and both? sam: absolutely. it has been a competition that has benefited all of us. luxury carmakers are the ones that pioneer a lot of the technologies that ultimately filter down to the mainstream. that is important when it comes to safety systems. originally, the first antilock brakes were on a mercedes. bmw pushed on four-wheel-drive. when you start, you have to go with your highest margin of profits but eventually, we all benefit from that so the
competition has pushed both companies to come up with new ways to improve the automobile which in turn benefits all of us. sheelah: i noticed that bmw, i think it was, started to introduce an electric car a few years ago? can you tell us how that worked out? tap into it -- what happened to it? sam: in 1976 at the munich olympics, bmw which is headquartered in munich, showed off a prototype of the electric vehicle. it was a standard bmw sedan but the engine had been removed and very very large and heavy batteries were put in place. it had almost no range whatsoever. obviously, it was not considered a viable car for many decades. however, it was the beginning of a tradition at bmw that led to some vehicles coming out not too long ago like i-3 and i-8 which were groundbreaking, and has given bmw a good footing when it comes to the future of electric
transportation. sheelah: how has tesla built on what bmw introduced? sam: in 1976, elon musk was one year old. sheelah: a wee boy barely standing up. sam: at that point, engineers realize that electric propulsion could be a reality sometime in the future. i'm sure elon would say his work is based on all of the work before hand including those before him, -- before him, including those engineers at bmw and other companies. sheelah: i am intrigued by the fact that both of these companies grew up around the same time and in the same place. i was wondering what you thought about that. is there something about german culture that contributed to this? is this surprising that this happened? sam: it makes some sense to me. germany has had a long-standing scientific and engineering
tradition that goes back centuries. they also have an enormous number of universities. you don't hear a lot about them. there are not necessarily one or two huge ones. but they are everywhere. the opportunity for people to learn about physics and chemistry and those other sciences is very prevalent. for these two companies to come up in germany makes a fair bit of sense. people like daimler and others were the original people who invented the automobile so it would stand to reason that the surrounding area, there would be a cottage industry of new companies to exploit that. sheelah: up next, the high-tech that makes monsanto a takeover target and the game of thrones-style battle at the united states postal service. ♪
sheelah: welcome back to "bloomberg businessweek." in the companies and industries section, how bayer's $62 billion bid for monsanto is a play for the company's technology. pimm fox and i spoke to our reporter. >> anyone driving past the field and see the farmer on their chapter has iconic images and the simple life. if you go into a tractor these days, especially in places like the u.s. corn belt, and other places, that tractor has an area that looks more like the, cockpit of an airplane. big data is doing a lot to transform farming, especially in the last five years, as they use precision guided agriculture that helps him decide where to plant their crops and how much seed to go into the ground, what fertilizers to apply.
even the tractor itself can steer itself in some ways, turning the farmer into an autopilot. sheelah: can you describe who the leaders are in this area? you mentioned monsanto. are there others pushing into this space right now? >> this is becoming one of the big agricultural areas. it is actually a subtypes in some of these big agricultural mergers. you take a look behind the scenes at dow chemical and dupont korma --, or bayer and monsanto and you see this battle for big data. it makes sense of farmers are using more integrated data to make their farming decisions. they can go to one company that can be one stop and get you your planting data, the weather data, whatever. you saw this in 2013 when monsanto took over climate corp. which was doing interesting work in aggregating weather but also companies like dupont pioneer stepping up their game. you are seeing this investment in buying up smaller startups by the big players, and a big they
are starting to emerge among themselves, all in the sense of harnessing this data that promises to increase agriculture's presence in the coming years. pimm: how does this play out for companies like deere and caterpillar? the precision of the equipment? >> id., this is a case where they can get a farmer to actually invest something during a tough economic time. when you look at profits and -- in u.s. agriculture, we are seeing a 14 year low. farmers are looking at ways to be more efficient. buying precision guided technology can save them money by cutting down on the amount of seed and fertilizer and pesticides they need to buy. a company like deere can make the equipment the farmer can put onto their tractor that allows them to boost their yield and cut their cost in other areas. it makes farmers spend money but they are spending money to save money and improve their
performance. that is an important selling point in tough economic times. pimm: do farmers typically do work at night with this new technology? >> it is interesting you say that. farmers have often been people who have been prisoners to the weather and time of day. you have seen tractors with headlights for many years. again, you are right, if you steer it in the dark but you have the technology that knows what to do and the monitors give you the readings of what's going on in your field, yeah, that helps you a lot during planting and harvesting. those are very tight time windows especially when you get to areas with more extreme climates. that seems to be everywhere in recent years. you want to be able to harvest at just the right time. this gives you the precision as well as the ability in terms of
steering your equipment to be able to make those decisions and be proactive to get the best crops. sheelah: in the politics and policy section, the congressional fight over the u.s. postal service, we spoke with devon leonard. sheelah: the board of governors of the postal service sounds like kind of a sleepy gig, but in fact it is a hugely influential body overseeing an enormous budget. can you describe what they do and the amount of money is at stake? >> even though the mail is down and they have problems and deficits, the postal service still sent 154 billion pieces of mail on a budget that was $69 billion. the postal service is supposed to sign off on that and oversee that. it's a nondescript board with people you've never heard of. but it is really important. unfortunately, the board itself is going the way of the mail now. pimm: why is the board not being populated as has been previously stipulated? what is bernie sanders' role in all this? >> the president of the united states appoints the members of the nine members of the board of governors, the other two are the postmaster general and her deputy. the senate has not approved a president since 2010. in the last couple of years, bernie sanders has blocked a
number of appointees. his policy director spoke to me about it. he's going public with it. pimm: why is he blocking the appointees? >> there is one guy who served under ronald reagan, who was a supporter of privatization. sanders doesn't like him. there's another guy tied to payday loans industry. sanders does not like to put banks in postal services, so he doesn't want him. and there's another guy who wants to cut mail delivery and have people receive their mail scanned and the unions don't like them either. there's a hold on those three guys, and nobody can go forward. there are stuck because of that. sheelah: sounds like another example of congressional dysfunction. kind of a familiar story. is there any hope of this getting resolved or the blockade being lifted, or will it be total paralysis? >> is a possibility, because there's talk of postal reform in the house and senate, but there has been talk of postal reform for the last couple of years. nothing has moved forward. the presidential election will probably take up everybody's
bandwidth. in the meantime, there's only one presidential appointee left. only three members of the board of governors are left. james bilbrae served for a decade and his term will be up at the end of the year. then there will be two members, and the problem is there needs to be one appointee. otherwise it is just the postmaster general. it is unclear. usps says they can keep functioning, but the chairman of the board says maybe they can't. i think things will get worse. wechsler's possibility because there is talk of postal reform. it has been talk for last couple of years and nothing is moving forward. we're moving to a presidential election will probably take up everybody's bandwidth. +in the meantime, there's only one presidential appointee left. only three members of the board of governors are left. james bilbrae served for a decade and his term will be up at the end of the year. then there will be two members, and the problem is there needs to be one appointee. otherwise it is just the
pollock. there are more must reads in this issue. you know, next we are going to turn to an interesting story about the next debt crisis. i thought the story was bananas. to be honest, i had no idea that so many companies were on the brink of financial disaster because of their reckless borrowing. can you tell us about that? ellen: in our last financial crisis, consumer debt and mortgages were the problem that created the crisis. now people are worried there is a lot of corporate debt and that's because interest rates are low so companies get a lot of borrowing. now they are loaded with debt. there is sort of this worry. with all the uncertainty of the economy, the question is are there going to be more defaults? is it going to spark another crisis? sheelah: what does it mean when companies are borrowing money? it sounds like instead of using that money to invest, they are
doing share buybacks, doing things to boost short-term earnings. what is the long-term effect? ellen: economists are worried because instead of investing in equipment which would boost the economy or research and develop and investing which would create more value, they are doing share buybacks and acquisitions. we have written about how some companies are sitting on piles and piles of cash like apple and some other companies. in fact, if you separate the big mountains of cash, a lot of companies don't have much cash. so, the question is how will it pay back that debt? sheelah: there is another interesting story about how scientists and innovators are trying to address the crisis of caffeine in outer space. something i could really relate
to. i understand the company has developed coffee that will work for nasa? can you explain? ellen: this is an issue that was very important to me even though i don't personally intend to go to the space station. this is for astronauts at the space station and when they want a cup of coffee, that is a problem because there is no gravity, and the coffee floats around. it is sort of a mess and a space disaster -- sheelah: a nightmare. ellen: for me, it would be a nightmare if i had no cup of coffee. the scientists at nasa believe you want to keep astronauts happy and you want something that makes them happier to be in space. they have created this elaborate system. they have had all these engineers working on this so they can make a cup of coffee. without it becoming a space mess. sheelah: there is another delicious story about intel and how it has developed a newer and faster chip. ellen: that story is something we wanted to do for a long time. usually chip makers do not want you hanging around their fabs, as they are called, because they
have clean rooms and you have to put on garb and there are trade secrets. you have to have your whole body covered. these rooms are even cleaner than operating rooms. they have to be completely sterile. we have the opportunity and convinced them to let us in and see how you put the chip together. it is just sort of this -- even if you don't think about chips in your daily life, it's a fascinating story. sheelah: pimm fox and i talked to the reporter who did the story. max: i got very close to the clean room. but i was not allowed inside. to get into the clean room there is nfl level of verification. i did get to look at a through a window which is the closest anyone from the outside has gotten since president obama visited in 2011. back in the 90's, intel was more open about their manufacturing process but things have gotten
more competitive. the business climate just isn't what it was. we really had to work to get the access we got. pimm: you did not take it personally in other words? max: no, i felt grateful. pimm: what did you see? what is the basis of the story? how do you create a new computer chip? max: we think it is the riskiest bet in business. it's more expensive than making a plane. it takes about three times as long as making a plane. the process from start to finish takes nearly a decade depending on where the technology is. but in short, designers create a layout for the billions of tiny transistors and puts those on a chip about the size of a postage stamp. that has to happen with incredible accuracy. any little speck of dust will mess it up and cost intel money.
it's one of these great modern marvels that no one appreciates or thinks about. if you are happy about facebook or uber, it's the chips making those possible. sheelah: could you pull back the camera and describe -- there are microprocessors and -- in everything we use now. how integrated are these into our world? they are everywhere? max: they are everywhere, your phones, your computers, a smart watch. the thing that people don't think about is that they are in data centers. when you use your phone to hail an uber most of the action is taking place in these giant server farms. there is a lot of rocket science going on at intel and some of these companies that create these data centers to make sure it happens as quickly and efficiently as possible.
a single xion chip takes 60% more energy to run than a large refrigerator. like the refrigerator in your home. when you do a google search, it can do thousands of those. -- you are using really thousands of those. they have to be as efficient as possible and that's why intel has been as successful as it is. it is the world's largest chipmaker and it's selling 15 -- $16 billion a year worth of these chips and half of that is profit. it's about extreme efficiency. sheelah: it seems like the rush is to build the fastest chip. pimm: moore's law, right? sheelah: moore's law. what can affect the speed? this is the arms race.
max: every year, this group of -- at intel, some are in washington, they wear the big white outfits, they are fighting a war with the laws of physics. in the late 90's, everyone thought that soon we will might be able to make chips smaller because of quantum effects. basically, the size gets so small that electrons don't behave the way we expect them to. and for the last 15 years, basically every few years, intel comes up with solutions that violate the laws of physics or what we understood them to be. this has been going on like clockwork. you have this giant company and the giant research mechanism that has pulled this off. intel has struggled lately. they just laid off 11% of their workforce. that is in part because people have begun to question how long they can keep this up. the intel ceo i spoke with feels this will go on for another
decade. every year it's very hard. sheelah: it can be exciting to talk about the next thing in tact, but even more exciting, it is talking about images. we will talk to a photo editor in the issue. >> the most exciting piece was the photo essay we did on innovative materials that are being created. there was a range of them. there is a polymer that goes on glass to repel liquid and stains. there is something called second skin. the item that started the project was a thing called vanta black, which was designed to be the blackest black, that absorbs almost all of the light that goes near it. starting with that concept, we set out to find a number of different inventions that are new materials in development and photograph them as abstracts and present them with the potential they have to change the way you jump in shoes or the way water comes off the side of a plane or to make fabric that can conduct electricity and record data.
that was pretty exciting. the photographer went to nasa and m.i.t. and places in london. it was an exciting project. sheelah: the reporter described this vanta black, was this a -- and she said if you had a watch made of that color, it would look like a void, a black hole on your wrist. did that present sort of a special challenge to the photographer? it sounds like it would be tricky. >> we wanted to photograph it against a black background. usually you use paper or sometimes velvet or something. .the photographer had painted a awooden backdrop, and placed it on. when the pictures came in, you
sheelah: welcome back to "bloomberg businessweek." i am in for carol massar and david gura. this week's double technology issue, a profile of eric ries in his crusade to get wall street to have more ipos in a long-term stock exchange. pimm fox and i spoke with the reporter. >> eric ries is a guy who was a household name in silicon
valley. he's probably the person that they look most to as someone who has developed a methodology called the lean startup. he wrote a book in 2010 that talks about how you should best build your start up in a lean way, putting your product in front of people as much as possible. -- as soon as possible. it is something silicon valley and startups have really taken to heart. at the end of his book, he floats this provocative idea about redoing the public markets in some way such as making a new stock exchange. sheelah: can you describe this idea of a long-term exchange? it is sorted intriguing. we have become very short-term oriented in terms of observations of the markets. traders are focused on quarterly earnings so what would a long-term exchange do exactly? >> the way he put this together is one in which you would change the dynamic of the public market as we know it today by making these incentive structures within the listing standards. if you have a company that wanted to advertise in the markets, like, even though we
are public we will focus on long-term innovative budget. we will list on this long-term stock exchange. and within the listing standards, you have these reforms that allow for both company management and investors to work together to achieve long-term goals. he has several different reforms he has put forth. one of them, for example, this idea of tenured voting, where investors who have helped stocks longer continue to accrue more voting power. if you want to buy this stock and sell it again right away, you could, but you would not have as much of a say in corporate governance as those who had committed long-term. there are various examples like that that he hoped would make the exchange dynamic different than the ones today. corporate governance as those who had committed long-term. there are various examples like that that he hoped would make the exchange dynamic different than the ones today.
sheelah: if you still have not heard of wechat, that is going to change. wechat is all the rage in china and our reporter took it for a test drive. >> this looks a lot like whatsapp. if you just pulled it up. the basic screen is messaging and then they have a moments screen, which is kind of like a facebook post. then there are all these other services. if you wanted to transfer money to your landlord, you could do that through wechat. if you wanted to buy train or plane tickets, it's a couple of clicks. if you wanted to pay traffic tickets, it you wanted to report a harassing phone call, you could do that through city services offered through wechat. i think it is something like 350 cities in china that offer services for the wechat. it's primarily in china. that is where it started. there is sort of a walled garden in china, right? because a lot of major tech companies are banned from china like facebook or youtube.
it sort of created this walled garden for wechat to grow up and and is dominated. -- grow up in and is dominated. sheelah: in your piece, you say it kind of rolled up paypal, yelp, facebook, uber, expedia, and others into one different from -- one function. that's a lot of different functions. do you see that potentially working here? >> maybe not all of that, but i think that's where messaging platforms are moving in that direction. they are trying to get you to stay inside the app to shop and interact with your hotel customer service line. you never have to be on the phone again. you can just do it through a message. it would make things a lot easier if you could go to it through one app as opposed to getting out of that app and going to another and another
sheelah: welcome back to "bloomberg businessweek." in this week's double technology issue, the startup that could be helping nba star steph curry hit those three-pointers. pimm fox and i spoke with the reporter. >> he is basically the vanguard of an explosion in three-point shooting. pimm: tell people about three-point shooting. some of them may have been left behind before the three-point rule.
>> the three-point rule came in for 1979. 23 feet, nine inches away. he made 402 of them this year, which is more than 100 more than the most in a season before that. the previous record was his and the previous record before that was his. this is in keeping with the nba in general, the amount of offense that comes from a three-point shot, has come from 2% when they brought it in, to now a quarter of all scoring. so shooting is everything. shooting has become everything. i looked at this new tech that has isolated the arc of your shot, the angle of entry is a key factor in scoring success. they say this is tech the warriors now use this. sheelah: what have they learned that his technique. the secrets they unlocked with this technology. >> they have been looking at shooters from grade school to the nba for like 15 years. it started in silicon valley. this guy was trying to teach his daughter how to shoot with
better arc. he was also a physicist i training, an engineer. he was trying to show her that -- he set up a rake on a doll to show her. this being silicon valley, he's the -- this is alan marty and he went to two of his pals. a rocket scientist and machine vision that. they started working on this company. they figured the idea entry would be 45 degrees, and then they tested it. it turned out to be true over millions of shots. curry happened to use one of these machines a couple of years ago in a practice jim. -- gym. his angle was 46 degrees which was above ideal but if you are an elite athlete, you can afford -- the window was wider for you. it also may be the case that he shoots higher to get it over taller players. they now have a shot tracker you
can use to get instant feedback in the gym while you are shooting. i went and tried one out. the university of virginia has it here it it tells you. you shoot that shot and you hear right away whatever the computer voice tells you what your angle was. they also now have a version of this product it is out there where the nba teams started testing it that gives you feedback on all of that, very precise data. over thousands of practice shots, you can see what your average arc and where was from different spots, and how deep it fell to the rim, and where was the center. how far off center was it? this is very granular, specific shooting feedback technology. at the elite level, it fixes small problems and for high schools and even lower, it can help get people on the right track to shooting with proper technique. sheelah: "bloomberg businessweek," is on newsstands line -- now and available online.
up on bloomberg best. the stories that shape so weekend business around the world. shareholders get another dose of bad news. the ecb stimulus program enters uncharted territory. transformation nation. saudi arabia steps up its economic makeover. tensions swell in the brexit battle. arguments for and against. >> leaving the european union would be a terrible idea. >>