tv Bloomberg Business Week Bloomberg August 27, 2016 7:00am-8:01am EDT
david: welcome to bloomberg businessweek. i am david gura. carol massar is on assignment this week. secret surveillance program. a plan has been flying over the city since january and recording pretty much everything. the technology behind bitcoin. world war ii grave robbers and what is being done to stop them. all of that and more ahead on "bloomberg business week." ♪ i am with the editor in chief of "bloomberg business
let's start with a section about preschool in japan. there is such a conversation about universal pre-k, that is something that is not possible in japan. why? ellen: there is this big shortage of women in the workplace and the prime minister is hoping to get more women actually working, and more women would like to work but there is a huge childcare issue. there are not enough nursery schools and the nursery schools are just sort of mired in regulation, and the teachers are paid very poorly so the teachers are constantly dealing with paperwork, etc. they do not want to do it anymore so they are trying to recruit more teachers and they in fact are building more nurseries schools, but it is tough to make it all come together. david: high yield investment programs, something i have not heard of before, talk about about that.
are online programs that invest in various things and promise really outrageous returns. really many of them are ponzi schemes so they are paying old investors with new investors' money. a lot of investors know that in their whole idea is, i'm going to put my money in and try to get my returns out the for the but theyng collapses, are essentially old-time ponzi's with a twist of being online. david: amazing gamesmanship of when to get out. he says, if i were not doing this somebody else would. ellen: there are all kinds of sites that support, they are aggregators, they provide support for these online site so it is a whole industry around them. as usual there are people who think they can outsmart the market. david: the cover story is about
persistent surveillance systems that is surveilling baltimore, not 24/7 but many hours. then: monti heard about company and this guy had been in the military, created a system where you flew over parts of iraq and were able to figure out who was setting off these roads that bombs. when he left the military he wanted to try to sell it to state or local governments and has been trying to do that for several years. he ended up giving baltimore a six-month try and the advantage is well you do not see faces, you can follow these little dots that are people theoretically who are fleeing crimes, etc. david: interesting tension in the piece between these municipalities and citizens and privacy advocates who say this is too much. ellen: there has sort of been this uproar where people are
saying, you are violating my right. you should have at least told us we were being spied on. of -- kindme quite of a big deal in the police department say they wants to continue doing it because they can follow these. faceo not see the person's but can follow their form as they flee a crime. david: i spoke to monte rio. what is it looking for? >> it is a technology that this guy, the founder of persistent surveillance technologies, created originally to try to track people who were planting .oadside bombs in iraq he was with the military when he developed the technology. the way he described it, it is like google earth with tivo capability. it is this array of cameras that
attached to the bottom of a plane and they fly over a city in a circle essentially. hoursane will stay up for and hours at a time, up to 10 hours a day. those cameras are capturing an image of an area that is 30 square miles, so it is one enormous image. ground cans on the look at the image which is updated every second, and they can zoom in on particular areas. any crime orif incident is reported at a certain location they can go down to that location, zoom in, and then using that tivo like capability they can rewind and go forward in time for when that in the event occurred, or go backwards. the investigative possibilities this opens is, say there was a shooting at a corner in the city. police can figure out what time
that shooting occurred, go back into the footage and look at that particular corner, and they can identify for example a vehicle that drove up to that corner at that time. and then going backwards they can rewind and basically tell where that vehicle came from, or they can go forward in time and say where the vehicle went. police or military investigating incidents like that, it can be a valuable tool in determining where suspects came from and went to. david: reading this that felt like a show like csi realized where investigators are able to zoom in and follow something maybe not real-time but shortly thereafter. this has been implemented in a number of cities, in los angeles and baltimore roast recently. talk about the way it has been received in baltimore where crime has been an issue for some time. on a: it was used
short-term trial basis in other cities, for example in los angeles county only for about nine days. baltimore is the first city where it has been used on anything near a long-term basis. it was started in january and it has not been publicized. this has been a program that has not been debated publicly. the funding for this came from a private donor so there were no public funds expended so there were no public hearings held to debate the program. it has been done very quietly and baltimore since january. they took a couple of weeks off but for about eight months, this has been happening. been, basically it has been in existence, in operation but out of the public eye. david: how do you create a cover that captures the scope of that
story? i asked rob vargas. rob: it is not what they see that from the same perspective so we had a couple of great aerial shots of baltimore. it is all about aerial surveillance, and from there it was a model -- about coming up with a good cover line. david: talk about it. rob: this kind of surveillance is constant and originally it was not being done with people's knowledge. i think one of the editors came up with a line, it is not spying, it is always watching. this is happening around the clock and that is not something that most people are used to hearing about. we just came up with a deck uncovering baltimore's secret security program which has not been something in the public. takingnew roles may be the wind out of renewable energy projects, and making a red state
david: welcome back to "bloomberg businessweek." i am david gura. you can listen to us on the york,on and 1130 in new and 1200 in boston. in the politics and policy section, stormy skies could be on the way for renewables. so muchs been enthusiasm from the obama administration about new solar and wind projects. to haven't they materialized
the degree i assume the administrative -- administration would have wanted? lands for on public the administration came and said, we wait -- want to make public land a great place to cite wind. many of these are still in the process of the developed. the environmental review process for these projects is a lengthy one. it can take 18 months to get through a required environmental review and could take a while -- permit could take a while to obtain. they still have to go through years of scrutiny. david: the administration seems to be aware of this, and has proposed a way of cutting through that red tape. what do they propose? jennifer: the proposed rule is designed to speed up the process, the permitting process
by basically frontloading a lot of the environmental analysis that developers end up having to undergo after they get a lease or right-of-way to develop a project. the idea is that at the interior department, regulators would in concert with wind and solar developers, decide on prime real estate saying these are areas that have really strong wind or intense sunlight, but are also relatively free of environmental conflicts. they do not have a lot of danger that endangered animals running around or clear environmental issues that could create real problems down the road. the idea is to frontload that environmental work and then subject these projects to competitive leasing instead of the current process, which is a first-come first-served approach where developers are racing to get to the agencies. the tracks would be sold at a competitive lease sale, and
auction much like the way oil and gas rights are sold on public land today. the federal government probably would see more money coming in. this is taxpayer land so that is something they are excited about, but it also means that these projects probably would be moving through the pipeline quicker. david: you mentioned oil and gas drilling, something that has gone on for some time and you have a corpus of rules that center on that. when you look at regulations for wind and solar, is there an argument to be made that they have not caught up yet like to have for oil and gas? jennifer: for the bureau of land management, it is really with wind and solar working with an old regime. wind and solar developers get now when they get a right to develop public land is a right-of-way, a right-of-way authorization, the kind of
permit or authorization used for ditches or pipelines. oil and gas developers are getting actual leases that have more firm rates that cannot be changed as frequently. the terms are more locked in. been working with an old regime and trying to adapt it for this 21st century energy, and this is evidence that the administration thinks that needs to be changed. david: democrats have georgia on their minds. i spoke with margaret newkirk about whether it could go blue this november. of georgia turning blue have been going since 2008. what is the difference for democrats? margaret: they have been talking about this for a long time and it has not come true. the big difference this year is
probably donald trump and the idea that he is losing some of his republican and galvanizing the democrats face without helping them much. they have also been working to reach out to the new minority voters they have been unable to turn into actual voters, the growing population. david: bearing that in mind that this is about donald trump, how much confidence does it give democrats there would be a measurable effect? again they else runs may have a shot of winning democratic votes again. arearet: political experts still saying the real switch in georgia is going to be in 2020, and it remains to be seen whether this will accelerate it. they are opening offices all around the state for the first time in years trying to cement that in. they really want to win the governor's office in 2018 so
that they can have a veto on any redistricting map that comes out of republican legislature. but it remains to be seen. the general consensus is that 2020 is the magic year. democratat would a learned from that race, the fact that she did not win? margaret: i have heard to things and one is that she did not get enough white vote but the other is they are still having this problem turning out the population, that they are trying to reach this new demographic shift that they think will put them in power. . talked to one legislator she had 1040 asian american voters and only 10 voted. those are bad turnout numbers. david: up next, block chain technology. enthusiasts say it could destroy our corporate hierarchies.
david: welcome back to "bloomberg businessweek." in david gura. we take a deep dive into the technology behind it point. sounds a block chain could end companies as we know it. at the risk of embarrassing myself, what is block chain? >> it is a chain of blocks. david: now i do feel embarrassed. >> each block is a bunch of data recording other data and it sits out there in the ether, not just on one person server.
it exists in mirror image all across the internet so it is secure by the very fact that it is shared. there is nobody in control who can mess with the digit and change them around. cryptography, guarantees it cannot be easily modified. you have to really put a lot of effort into securing this stuff so the idea is that it creates trust. if something exists on a block chain, as i said in the article, it is true with a capital t. david: this is the skeleton around which bitcoin is built. byer: bitcoin is fascinating itself but i think what is more fascinating is the technology underlying it, block chain. it has more uses than just a digital currency and i would argue it could even be the
beginning of sort of the disintegration of the corporation as we know it. usid: spell that out for because what you described is a very egalitarian sounding system. if there are any number of uppanies, investors lining to harvest this technology, how do you square that? peter: because there are various transition periods, you plug it into your existing business. it makes a bank run more efficiently because they can have a better idea of the reliability of their customers and they can do transactions other banks, in a reliable way. what i'm talking about is 10, 20 years down the line to a point where corporations start to not need to exist in the form they exist today. right now, why does a company exist?
this goes back to 1937. the theory is it is too hard to do transactions at an arms searching,s, contracting, and coordinating. he would rather do it in where you can use a command and control system. you have a boss who tells you, i want you on tv this time, this place, and you do it because you are getting paid versus printing in an outside person who has to be brought along, have to do a separate contact -- contract. what locked chain does is extend with the internet has already allowd to do, which is more transactions to be done in that arm's-length way in a very simple, low friction way. david: why is the international space station running on chips that are more than 30 years old? ian king has that story.
anyone whould assume watches science programs on tv or science fiction that there is something incredible going on here, that nasa has invested massive resources and this but in reality, not so much. something that might have gone in your laptop in 1985 if you have a laptop is running that. david: nothing less than a pentium 386? ian: there was not even pentium. it was just a 386. why is nasa still using technology that is decades old? that is at the heart of the question that we addressed. everybody with a laptop or smartphone once the leading asked -- bleeding edge, the best performance they can get and they will not tolerate a second delay. nasa has a completely
different set of priorities. this is a terrifying and difficult environment, the worst in the universe for human beings as well as electronics. everything we send out has got to be rock solid. that procurement cycle, their attitude is completely different . everything is built around safety and nothing can go wrong. reliability, and you mentioned the roughness of on the space station. what are the challenges that nasa faces? ian: the primary one is radiation. it is basically creating small nuclear reactions in the cells of your skin. arguably for semiconductors, it is even worse. that is micro electronic switches that thrive on changing very small voltages to represent
we are here with the editor in chief of bloomberg businessweek, ellen pao like. in the small business section, essentially food halls popping up in london. what are they doing? ellen: it is a company called london union that is about 18 months old. they are setting up kind of like food trucks but they are food halls. in new york we have smorgasbord but in other parts of the world there are other kinds of market. their twist is they are open at night so what kind of has a party like atmosphere. outcan try out pizza, try christy duck with cheese. duck with-- crusty cheese. david: what do these pieces look
like? of spartan late appointed. ellen: they are kind of like bare-bones. the first one i think was founded in london and was called dalston yard. it faced an old warehouse and they brought in food stalls. it is sort of like a fair, kind of. the features section, an amazing piece about a guy who set up a wine shop in the bay area and a website, and began to attract a lot of attention for the prices he was charging. before we get into what he ended up doing, how did he become so successful? free: he was offering arrival wine so you can buy it before it was shipped. often he would let you store it in his warehouses for free, and the prices were always good so
he attracted people who were actually collecting expensive wine. they would buy ahead of time and what they slowly started finding was that the deliveries were slower and slower. eventually, it turned out that he was not really buying all the wine he said he was, and he was filling orders as people want to deliveries rather than pre-buying. no one could really understand how his prices could be so low. they were low because he was not on the up and up. david: ultimately this becomes a legal case. how did that happen? ellen: people were spending huge sums of money and at the end, customers were so angry that at one point someone came into the shop and said to the salespeople, he owes me wine, i am taking this now, you call the
police. david: no one called, right? ellen: no one called. david: another piece is about a group in latvia who roamed the countryside exhuming bodies of people who died in world war ii and re-burying them. talk about what they are up to and the attention they face from people collecting world war ii memorabilia. german soldiers died in latvia and the surrounding area, and in many cases when people went home after the war they would bury the soldiers where they were. occasionally they were exhumed, usually by accident. there is a volunteer group that wants to give these people a dignified burial and let their families know that their bodies were finally, many years later, found, and they create cemeteries. they are doing this on a
volunteer basis but meanwhile there is a huge market and nazi memorabilia so often it is a fight of who is going to get there first, the bounty hunters or the people digging the graves. david: thomas rogers road along with some of those volunteers. at the center of this piece is a market for world war ii memorabilia. we will get into that in a second, but you hitch a ride with folks who traversed the countryside in latvia. what are they looking for? thomas: they are a group of volunteers based out of riyadh. they are able to find the remains of both german and soviet soldiers so they can be and the lovedied ones and relatives of these people can be informed what happened to them. it is also to prevent some of these people who are digging up
relics for monetary reasons. in case they come upon it they might not report it or in some cases they might even rob the items that are in the body. they want to keep that from happening so they exhume these bodies. the history, us of the world war ii history in latvia. ofre is a quotation from one the menu profile, in latvia it is normal for you to have dead soldiers on your yard, indicating it is pretty commonplace. situate the history for us. thomas: one particular part of focus especially was the of extreme fighting toward the end of the second world war. the soviets came in before the nazis and then came back from the opposite direction. when they invaded the second time a lot of german soldiers were trapped in the west of
latvia, and about a hundred thousand were killed. but because the soviet authorities after the war were not especially interested in exhuming the soldiers and reburying them, a lot of them ore left as they were found people found bodies in their backyard and bury them where they could. a lot of these bodies are left likephazard resting's across certain parts of latvia. david: what motivates members of this group who travel the countryside digging up these bodies and reburying them? thomas: i think on one end, a lot of these people are amateur collectors who spend time looking for items and once they had a certain number of collectible items they decided to go further and start looking for bodies. they were motivated by helping
the families of these people find some sort of closure. it is very moving to see these people come out of the mud who have been stuck in a pit in a forest for 70 years. i think for them it is a very emotional and serious endeavor. david: by our pension funds finding regulate -- fighting to help them? why series may need an assistant. -- ♪
legislation to make the fee structure more transparent? i asked neil weinberg. >> the fees can be quite substantial, or than 100 times what you pay for a mutual fund. one is a so-called management fee which is similar to what you pay with a mutual fund. to be pretty high, in the range of about 2% which is expensive for a mutual fund. chargede other fees known as a carry and fees are charged to the actual company that these funds invest in. it would be as infidelity fidelity was not only charging you but charging general motors for investing in general motors. david: why is there so much secrecy surrounding some of these fees? guess it is because they can, and the high fees and lack of disclosure, critics would say
certainly has helped create many of the billionaires we have around us in new york who have made their money from private equity. the fees are high and have been poorly disclosed, and the securities and exchange commission has found in many cases the fees that are disclosed do not even tell you how much you are actually paying, which can be a lot more. david: the sec has pointed that out, what has it done to these funds vis-a-vis these fees? neil: the states have appealed to the sec. to make stricter disclosure rules. the sec does not appear to be taking any action on that score but what they have done is taken a close look at the industry on a fund by fund or company by company basis. what they found two years ago is that more than half of the private equity funds that they looked at were overcharging their investors.
this is something which might be akin to theft or embezzlement in another industry but here we just call it overcharging. david: what has happened at the state level? what have states done about this? when the sec014 came up with these rather disturbing findings, what happened in a number of states is that they have come up with legislation, and this is typically a state assembly man or woman will come up with a greater try to create disclosure. this creates a number of problems. it is a very powerful industry and in many cases there is a limit to the power of state assembly meant. there is also the threat that the pension funds that that state runs on behalf of its own workers they get kicked out of these funds. it may be that a large private equity company says if you are going to force us to disclose our fees we will just operate in
49 others. david: big tech companies in a race to improve their virtual assistants. what is at stake? a computer is program that you interact with, your voice. siri, where you are supposed to be able to ask about the weather or set a timer or return some bit of information. dream, that is the version we have now, but the dream that a lot of people see is you being able to do things like turn down the lights or ask it to do more complicated things like maybe book me a vacation later in the month or the year, something like that. more complex tasks then we can do now. this: so integral to doing
thing is having a microphone that can pick up what you are saying and that is what you write about. what has been the difficulty in developing something that works effectively? kind of it is interesting because we have the technology right now to make a very sensitive effective microphone, but the problem is you run into these trade-offs. when you are talking about consumer technology, it has to be small, very low on power, and reliable. obviously all of those things are important when you are talking about smaller devices and mobile devices so that is interesting. as far as the microphones themselves, especially with voice interaction, you want to be able to recognize a voice or any other sort of input, as clearly as possible. you want a really high signal-to-noise ratio which means the microphone has a better chance of distinguishing the signal, whether that be your
voice or some other input, from the noise. maybe that is the noise around you or the noise generated by the microphone itself. you also have this thing called an acoustic overload point. when you go to a concert and try to take some video with your phone and a lot of times the audio comes through and it is a wall of really bad sound. bringing that acoustic overload point is one way to compensate for that. david: the former ceo of weight watchers thinks he has found a better way to keep america healthy. jersey mike's is upping at sandwich game. all that is next. ♪
david gura. a look at what is on the menu at snapped kitchen, the latest venture from the former ceo of weight watchers. let's start first with what snapped kitchen is. leslie: i would say the biggest difference is it is a grab and go concept so you can be in and out of that place really quick. they also have a lot of diet , vegan, options gluten-free, vegetarian, all the things people are looking for. david: who is the target customer? leslie: it is the millennial but also someone who is a little bit older and looking to feed their family or the himself for the week. you can go in on a sunday night or monday and pick up lunch or pick up all your meals for the whole week.
they even have a few kid options. the ceo used to be at weight watchers and his tenure did not end well. what makes people think this time is going to be different? leslie: he mentioned they are similar companies and that the people working there are focused on food and health. kitchen is more about the food and having fun with food, and not necessarily being on a diet or the deprivation mindset which may be got to him a little bit at weight watchers. david: is company has been around for six years. when you look at where it is now, is it a company talking about an ipo, talking about expanding quickly in the near term? leslie: it is still pretty early but the ceo david kerch off has mentioned it is a possibility in the future, not that this would be something in the near term but something a little ways out,
and some of these concepts do well on the public market. they are attractive to investors. david: jersey mike's, a fast casual restaurant is eating away at subways market share. what is jersey mike's compared to say a subway? >> that is similar, you get your subs and you order by number. it is a little bit more expensive, the ingredients are more high quality, and they have hot subs they cook on a flat grill as opposed to heating up in a microwave. very much what it is trying to convey, the cheese and meat is sliced in front of you. felix: it is somewhat theatrical, to show you that i am preparing the food.
it is fun watching them slice them eat right in front of you. david: is it part of a bigger trend in that regard that it is doing that? felix: i think the same thing is happening in fast food sandwiches that has been happening in fast food burgers the past couple of years. there has been a trend toward fast casual and so-called better burgers. mcdonald's has been floundering a little bit and you see chains like shake shack, five guys eating up market share and that has been going on for a while, and now i think you are seeing the same thing in sandwiches. profits have been declining and you have a number of subway chains gaining. jersey mike's is growing the fastest. in north carolina there
was a jersey mike's a couple of decades back. why has this company been so slow to expand? felix: they started franchising in i think the mid-1980's. the carolinas was one of their zones, the san diego area, but they did not have much of a national profile. i think part of it is people's tastes have just caught up with what they are doing. there is a demand and people are willing to pay a couple more dollars for lunch if they feel like they are getting a better sub. way, i think they are capitalizing on what is happened to the industry as a whole. they are also starting to advertise nationally and they are sort of coming out a little bit in a way that years ago, they cap such a low profile. david: we have talked to you earlier about viacom. how did you come to write about this piece? felix: i just ate at jersey mike's.
>> coming up, the stories that shaped the week business around the world. a big deal makes headlines well another megamerger makes progress. we will bring you up to speed and fed watchers everywhere have their eyes trained on jackson hole. >> it's time to move. >> there's a cost to having read this low for this long. >> i don't take the committee is risking a lot by being cautious. >> another busy week of earnings reports. >>