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tv   Bloomberg Business Week  Bloomberg  July 2, 2017 8:00am-9:01am EDT

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carol: welcome to "bloomberg businessweek." we have profiled the most prolific innovators and innovations around the world. oliver: including tencent's global ambitions. carol: and the future according to elon musk. oliver: all that and more on "bloomberg businessweek." ♪ carol: we're with the editor in chief of "bloomberg businessweek" all about global technology. why now do this?
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megan: technology has always been a franchise that "bloomberg businessweek." it is something we have distinguished ourselves on. we pride ourselves on the covers, the stories we are able to tell. we really wanted to keep global tech as a franchise and even make it more global than it already was. what you see in this issue are two themes. one is here are some of the companies in developments and entrepreneurs that are changing the world, like tencent. and also, the future is closer than you think. whether that is fish skin being used to treat wounds or the race for space, things we thought were science fiction almost are not so much. we wanted to bring that to readers. oliver: this has got to be one of the coolest array of stories you guys ever had in one magazine.
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we want to keep this sort of business economic thing open, but the stuff is so exciting. what to you is most exciting that maybe you had not heard about or got you jazzed up? megan: i think the space piece. ashlee vance talks about satellites. i'm 43-years-old and i still think of these satellites as these huge behemoth things. we are talking about satellites the size of a boombox. an old radio. they are going up in the space and think you can almost carry into a briefcase. the start of technologies around space and how it is capturing satellite imagery. that they can monitor events going on in ukraine from a satellite the size of a briefcase and track that visibility. we are being watched all the time from everywhere. whether you think it's a good thing or a bad thing, it is happening. i think this really gets to the heart of that race for space and
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how fundamentally it has changed and how cheap it is getting. carol: you mentioned companies you know, but there are companies that you don't maybe focus on. tencent. it's one of those stories. obviously, they have the wiichat thing. everything.ed in megan: they have 940 million active users. it obviously has the wechat app, its main thing. in china, people spend an average of four hours on it. it's embedded in everything you do from ordering in a restaurant or talking with your friends to buying a new shirt. it is almost impossible to get into any aspect of commerce without having wechat. we go to the guys who have really moved it forward. martin lau, the driving operational force behind tencent. this is a guy when he was going to make a presentation to buy a videogame, played the videogame so much he eventually got the 97th highest score. he is a former banker with a list of credentials as long as your arm. in charge of a company
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fundamentally reshaping the way people live their lives. carol: and it took two job offers to get in there. megan: exactly. oliver: what i found interesting was the juxtaposition between ubiquity of tencent in another part of the world, and then now there is attempts to expand beyond that world. to find out what they are going to do, we talked to brad stone. brad: if you're unfamiliar with tencent and are interested in business or the internet, you need to learn about this company. it is side-by-side with alibaba one of the technology giants of asia. known most prominently for the messaging service wechat. what is wechat? if you're not familiar with it, i could draw parallels to whatsapp or facebook messenger, but it really is so much more. in the u.s. we tend to have one app for everything we do online, to buy movie tickets or make payments or message with our friends. wechat is like the dominant way people in china spend their time online. is really the internet bundled
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into a messaging service. you can get your news, search the web. you talk to friends and contacts, but there are apps within the app for dating, buying tickets, ordering stuff online, e-commerce. it has become really over the past five years or so the largest planet in the chinese internet solar system. that is the best way to describe it. i think 900 million daily users. almost two thirds of chinese internet population. and they are spending about two hours a day each on it. it is a tremendous asset for the shenzhen-based company tencent. carol: you talk about two individuals closely tied to tencent. they are not really out in the public that much but crucial to this company. the founder and the
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president. brad. that is right. man, -- pony ma, one of the five original founders, one of the wealthiest people in china, very quiet, does not do a lot of interviews. we jokingly referred to this photo with the chinese president, with all the world's technology executives lined up, this is about two years ago. there was a photo shoot. everybody is looking at the camera and smiling, and pony ma is staring down. there was something very characteristic about it. he does not do a lot of interviews. no one at this company does. we got this tremendous opportunity to talk to the second in command, pony's collaborator martin lau. we described him as the sheryl sandberg of tencent. before that he worked at goldman sachs and he helped take tencent public. he guided the international expansion, created a culture at
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tencent, and help steer we chat to what it is today. carol: i want you to tell me more about this guy because he is obviously important to tencent's next step. he was offered a job and said no thanks. it was the second job offering? brad: we had a lot of fun talking to him. lulu chen, one of our asian tech correspondence and i went to visit martin lau in hong kong. this was a unique opportunity. he rarely talks. we sat in their hong kong office and he reviewed his trajectory and his journey into tencent. when he was first given the opportunity by pony ma back when they were taking tencent, he turned down the job. could it overcome the pessimism in the market? it was a one trick pony, no pun intended.
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they were doing deals with mobile phone operators in china to get the prescription revenue. that is why there was optimism around the ipo, and why it year later when they made the offer, martin lau excepted. oliver: turning the future of technology into the cover image was the job of rob vargas. rob: with these special issues we don't want to seem like it's about this one story. we shot the facilities for company called rocket lab, which was mentioned in one of the stories. there was a shot inside the rocket we felt was nice. kind of abstract. it is not too specific, but it also kind of immediately gets you to the point that this is a tech issue. carol: when i first looked at it, i had read some of the stories, but i had no idea what this was about. how did you get that picture? rob: a lot of the rockets in the facility were in progress. we got inside and shot it.
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that is what we ended up with. carol: it is not what you put a lot of other mentions in the other stories on there. it is very clean. it'sou are just saying global technology. rob: exactly. we have the cover flap with the table of contents. they give you more of what is inside. when you open the magazine, you see the shot of the man standing inside these tubes. that is also what is here. ♪ carol: up next, the middlemen behind drug price hikes. oliver: also, emmanuel macron's plan to update french labor laws. carol: this is "bloomberg businessweek." ♪
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♪ carol: welcome back to "bloomberg businessweek." i am carol massar. oliver: i am oliver renick. you can also catch us online at businessweek.com. health insurers hire pharmacy benefit managers to negotiate drug prices with pharmaceutical companies. carol: that has led the price hikes and lawsuits. >> pharmacy benefit managers work on behalf of health plans, employers, unions, anyone providing health plans to employees. the role of the pharmacy benefit manager is to represent the
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health plan in its dealings with drug manufacturers and to negotiate discounts, which are referred to as rebates, from the drug manufacturers so the health plan pays less than the publicly advertised list price. that is the first step in understanding what they are going to do. it gets a lot more complicated after that. carol: how is that working out in terms of reducing costs? paul: it does reduce costs to some degree for the health plans, but the seeking of the rebates has the perverse kind of side effects of causing drug manufacturers to raise their list prices, so the list price is higher and a rebate can be taken from the higher list price. give a bigger rate to the pbm's, so the pbm's reap a slice of that rebate. they have incentive to see the list price go higher so their percentage rebate goes higher. that would all be fine of don't actually paid the list price, but that is not the way the world works. in fact, a lot of people do pay
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list price. if you are among the millions of americans who still lack health insurance at this moment, and there may be millions more of those people if the republican obamacare repeal and replace bill is enacted, if you're one of those uninsured people, when you go to the pharmacy you pay list price. similarly, if you are a medicare recipient, there is a coverage gap in medicare where the recipients have to pay for their own drugs, again, you will pay the list price. carol: and a medicare recipient, if you go above that, all of a sudden you have to pay list price. >> correct. oliver: at first it seems here the price it takes to make the drug and distribute it, but i found it similar to when you go and buy a phone. phones have a very high list price from the manufacturer. ultimately, most people don't pay for that because they get a plan, get a discount.
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it is analogous that you feel it when you have lost your phone a couple of times and you say this is what they charge. who falls into that gap and have to pay the list price? paul: the biggest group of people who are uninsured. even after obamacare was enacted, there was still some 27 million americans who pay full price. moreover, under obamacare there is more provision of insurance, but often with high deductibles. let's say you have a $4000 deductible, $5,000 deductable, $6,000 deductible, until you hit your deductible, you are paying list price.
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list prices do bite a lot of people. carol: what i love about your story is a given a personal edge. you talk about about david hernandez. tell us about his story. he is someone who is diabetic. paul: he is diabetic. he is a restaurant worker in new jersey, so he does not make a lot of money. for a period of years he had no insurance whatsoever. during that time he had to scrimp on insulin, and this had horrific effects on him. he went blind in one eye and ultimately needed a kidney transplant. he now is covered under a new jersey public plan for the disabled, but his coverage will expire at the beginning of next year. then his costs will be something like $300 a month for insulin. is a very big burden for someone who is not making much more than minimum wage. carol: in the economic section, french president emmanuel macron is wasting no time tackling the most explosive item on his economic policy agenda. oliver: that would be france's famously rigid labor laws. >> he promised labor reform as a central part of his campaign.
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it is about two weeks. actually, the new assembly got sworn in this week, so two weeks since the second round of the elections. he presented his proposal on tuesday. carol: wait, it is a 3000-page labor code. this is not an easy thing to undo, is it? >> they are not going to revamp the whole thing, but they want to make significant changes. it is not easy to do. we have seen three previous presidents of france try and fail. carol: there are a ton of issues that impact workers. >> everything is codified, down to the size of the windows in offices, the length of bathroom breaks, and if you email a french worker on the weekend, he does not necessarily have to reply to you. it is in his contract. carol: what is he going to go after specifically then? >> one issue is the cost of severance. the cost itself is not the highest in europe, but employees can easily drag companies in the courts.
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the courts are very employee friendly. it is a process that is long as well as expensive. the other big important issue is to let companies negotiate directly with workers. in france, less than 10% of the workforce is unionized, but still companies are bound by these sector wide agreements that are negotiated by unions. that would give companies a lot of flexibility if they can deal directly with workers. oliver: why is one of the first orders of business for macron, because i feel the debate throughout the election campaign was not so much centered on this. the economy comes into account, but it was about foreign policy and immigration. and here we are attacking this thing that is well rooted within society for decades. i mean, why is he choosing to go after this? >> a lot of people have identified it as a key economic impediment.
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france has unemployment that has hovered around 10% for five years. germany and spain both saw unemployment fall after they introduced their own labor reforms. for young people, it is even worse. 21% to 22%. how it has happened in the absence of reform is that more companies have been relying on these temporary contracts. it is really hard as a young person. you cannot go and rent an apartment, never mind buy, by showing a landlord a temporary contract. oliver: up next, if you've wondered what jeff sessions has been up to since recusing himself on the russian investigation, we will tell you. carol: illinois's budget woes go from bad to worse. oliver: this is "bloomberg businessweek." ♪
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♪ oliver: welcome back to
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"bloomberg businessweek." i am oliver renick. carol: i am carol massar. you can listen to us on radio on sirius xm channel 119, a.m. 1200 boston, 91 fm in washington, d.c. oliver: and in asia on the bloomberg radio plus app. carol: in the politics section, jeff sessions may not be involved in the russian investigation. oliver: he has been trying to roll back a lot of obama era policies. >> for the attorney general, it has been pretty much business as usual. he has been able to use this time while everybody is focused on the russia investigation to kind of remake the justice department and move them in a direction that he wants them to move towards, which is a focus on violent crime.
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a large part of this has been stripping back a lot of obama era initiatives and legal legacy. carol: talk to me a little bit more about the specifics of what he has been undoing in terms of the obama legacy. >> sure. he has been rolling back charging policies that have sort of taken a softer approach to nonviolent drug offenders and essentially ordering all prosecutors to charge the harshest -- go for the harshest penalties in cases that they bring. this is kind of a bit counter to the way prosecution have been handled over time. he also has been taking a harder stance and harder look at these settlements we entered into with various cities over problematic police departments, saying he wants to review all the settlements because his view is that they don't the fed meddling and handcuffing police officials. carol: i think it's interesting. we watched this trade going into
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the elections based on what we heard on the campaign trail, some of the rhetoric there, specifically to do private prisons. we have been moving away from that. jeff sessions is moving us back towards a relationship, the u.s. government having relations with private prisons. tom: he has done a number of these things with the private prison memo coming out last august by then deputy attorney general sally yates. it was to try to phase out the government's use of private prisons for a number of reasons. but he has been able to kind of come right in and sort of immediately issue his own memo saying that is gone. with a number of these issues, he has been able to quickly dismantle a lot of items that have been in place, some very
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recently, others in place for several years. oliver: also in the politics section, with $6 billion in debt, the state of illinois is on its way to another credit downgrade. carol: here is elizabeth campbell. >> illinois is in crisis right now. we are on the verge of entering her third straight fiscal year without a budget. if lawmakers and the governor don't come together by july 1, we are going to start fiscal year 2018 without a spending plan, billions of dollars in the red, and the state is in big trouble. we are actually headed for another credit downgrade which has put us in junk territory. carol: but a number on how much they are in debt. >> right now because of the ongoing budget impasse, about $15 billion of unpaid bills. that is a record. at the same time, our deficit is in the neighborhood of about $6 billion. if things keep going, the state comptroller says we are effectively hemorrhaging cash. the comptroller has said we will have to cut into things like core services. she did emphasize that debt
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service is a priority and will continue to be paid regardless. oliver: these costs will keep adding up because if and when the downgrade does happen, that takes it down to junk. that is the first state that ever happened to. what kind of yield does that bring us to? what kind of cost will put on the state? >> if illinois goes to the bond market again, if they have a junk rating, borrowing costs will go up. illinois, according to bloomberg data, already has the highest spread on its bonds compared to venture debt. it has the highest spread over triple-a bonds. in terms of the unpaid bills, we are looking at about $800 million in interest and late fees alone. and that comes on top of any future bonding costs when they go to market. oliver: as a state, they cannot file for bankruptcy. this is not to try it could file for bankruptcy. how did they get to the state? why are they constantly in the red? >> illinois has been running deficits since 2002, but at the start of 2015, tax increases
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expired, leaving the state with a hole of about $4 billion to $5 billion. they did not cut expenditures connected with the declining revenue. the governor, the first republican to lead the state since 2003, he has been battling the democratic-controlled legislature over that deficit, and they can't agree. he has issued what he calls structural reforms. things like changes enacting term limits, property tax freezes. the democrats have resisted and they have not been able to come to an agreement or pass a spending plan for two years now. carol: we speak the best selling authors of the second machine age of other new book, "machine platform crowd." oliver: every prediction of the future made by elon musk. carol: this is "bloomberg businessweek."
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♪ oliver: welcome to "bloomberg businessweek," i am oliver renick. carol: i am carol massar. it is the 20th anniversary of the asian financial crisis but many unlearned lessons. oliver: and what elon musk is working on for the future. carol: the new tech challenges facing businesses today and how they can be overcome. it is all ahead in this week's bloomberg businessweek. ♪ oliver: we are back with bloomberg businessweek editor in
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chief megan murphy to talk about must-reads in an awesome issue. let's talk about the opening remarks. you solicit the input and analysis for michael schuman who lived through asian economic crises and is getting a little bit worried about what might be next. megan: this goes back to the 1997 asian financial crisis, one that a lot of people have forgotten because it was so vastly outpaced by 2008. the 1997 asian financial crisis which was triggered by a deep linking of their currency at that time is what he is making a point in this article, a very good and important one, it was predicated on an extraordinary rise in debt levels as a percentage of gdp. he traces that again to the extraordinary rise in debt we saw before the global financial crisis in 2008, and where he takes that link is what is going on in china right now as the debt level rises, that this is triggering the same kind of alarm bells with some of the
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corporate action. if people forget the lessons of the 1997 crisis, they have been replicated. carol: it is so much, i feel like for me once, shame on you, and fool me twice, shame on me. megan: what is always fascinating to me as a reporter who covered the financial crisis is that we do not learn the lessons, and everyone says, the next crisis will not be similar to the first. it may not be triggered by the same thing, it may be a hedge fund or shadow banking thing. the cause of the last crisis with the housing market, but the tipping point may not be the same thing we have seen but the signals, there are signals you can trace within the mortgage market and the auto loan credit market right now. if we look at those, we may be able to prevent some of the chaos. we do not seem to learn our lesson. carol: everyone just explains it away. megan: and everyone is wrong,
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similar to election forecasting. oliver: i guess one of the big elements is he starts by putting in the 1997 asian crisis into perspective, what happened. and i like that by the time you get to the end of the remarks it has gone into a conversation about china which is the second biggest economy in the world. any type of potential similarities between what happened in 1997 in china will probably have a more cataclysmic and systemic effect. megan: people have already been looking so closely at china, and you hear about soft landing, hard landing, whether they can maintain the type of growth. how dependent global economies are on china's continued growth. he is pointing to in their domestic economy, the levels of debt are concerning. some of their state intervention
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and how they have massaged the economy, how they massaged the numbers, either there is reality and true translation, that is the issue with china. and that is the issue with china, it is a less transparent economy. and so whether or not these warnings will tip into something more serious is something that people should watch for. carol: no doubt about that. that is a must-read. also a must read, going back to global technology, cannot do an issue without talking about elon musk. you have some fun with him. megan: this is something we saw weeks ago for the first time, and it is an unbelievable business graphic. and it basically charts everything elon musk is doing, how successful he has been from space to burrowing tunnels under the ground to human intelligence. it really is a map of everything he is doing, how far he is going, how his predictions have been right or wrong, and we call it a future for elon musk.
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to elonure according musk." this guy is doing a lot of things in a lot of different areas. oliver: the future and the past, i love the analysis of where all of his promises were completed or fell short. we talked with reporter tom randall. tom: elon musk is hard to keep track of, not just because he is involved in so many industries doing so many different things, but also his communication style. he will make announcements about products and goals for his companies through twitter or through public appearances, or like speaking in the middle east or hong kong. he doesn't have a normal communication kind of style where you put out press releases and track your goals. carol: and do wonder, how much is this a new corporate mission or he was thinking about something. tom: and i have heard it often throws employees into a loop, saying, we did not know that was coming so soon. what we wanted to do was rigorously track some of the goals and pronouncements he has made for various companies, and
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see how he follows his own goals and predictions. carol: tell me how you guys kind of set up a little bit of a coding system on how you were tracking his businesses. tom: right. right now we are tracking about 70 goals and this will expand over time significantly, through his 4 companies. he has tesla, spacex, he now has the boring company and neuro link. that is a medical device company in the early stages. carol: i assume on the web you will continue this process? tom: absolutely. every time he makes a new pronouncement we track when he made the pronouncement and when he set the goal for, and his progress along the way.
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and when the goals get moved back or forward. one of the amazing things that you discover going through all of these things is that these goals fall into two categories. one is things in the future that seem kind of outlandish like they will never happen, and then a category of things he has already accomplished that once seemed outlandish. so you really get a sense that he is accomplishing, pushing forward the vision of the future of his own and making it actually happen. carol: let's talk a little bit about spacex. let's start there. i mean, he has had a lot of success. tom: absolutely. but if you look at his goals from earlier on it has been slow going. carol: lay it out for us. tom: so, from the beginning he wanted to make reusable rockets and wanted to hit the falcon one with a single engine rocket that he wanted to get up, and he was going to have the falcon five and falcon nine, and had ideas about putting humans in space and delivering people to the space station. now, most of these things have already happened, but not the timeline he initially predicted. carol: it is so funny you say that, because i feel like anytime we talk about elon musk there is a lot of respect and awe, but he didn't quite, he is
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like a year later or two later. tom: he is always moving behind his own schedule but ahead of everyone else's. carol: he has talked about space tourism. where is he on that? tom: he plans to put people into space next year. there will be two missions, one just into orbit and he wants to send tourists well beyond the moon and back again. he wants to do it in 2018, so we will see if he can hit that goal. one of the interesting things about musk's delays, they seem to be getting better over time. if you look at tesla, on average he is about 50% later on any prediction than he originally forecast, or about six months. carol: but does he get there? he ultimately gets there. tom: he does ultimately get there. there is only two to three projects he has ever canceled. carol: the growing likelihood of a self-sustaining power source as early as 2025, but there is a catch. oliver: also, will a dermatologist ai mean fewer jobs for humans? ♪
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♪ oliver: welcome back to "bloomberg businessweek," i'm oliver renick. carol: i am carol massar. you can also find us online. oliver: and on our mobile app. carol: in the technology section, the global network of scientists working on creating limitless clean energy. oliver: we are talking about sustainable fusion and it could be a reality sooner than you think. >> there is a really cool nuclear fusion project going on, and nuclear fusion is basically this holy grail of energy. it requires cheap materials that exist everywhere, it is clean, there are no carbon emissions, but it is really hard. oliver: that sounds too good to be true. >> it is actually. this is been the work of almost a century and we are still not close to having an actual plant. carol: what is so complicated about it? jing: so, essentially what nuclear fusion is trying to do is create the sun on earth, and that requires a ton of heat and pressure. and you put these materials in these conditions that are hard to control. just figuring out how to contain them took decades. oliver: once you have the sun on earth, let's walk through the theory. carol: it will be an easy task. [laughter] oliver: right. you have the sun on earth and then step number two is what? how do we harness that into usable energy for products and
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applications we use? jing: the funny thing is is that it is actually really easy to harness into electricity once you can figure out how to generate the energy. the hard part is sustaining that reaction, that nuclear fusion reaction for a long of time where it actually makes economic sense and that is one of the problems scientists are trying to figure out, to prove you can generate more electricity using nuclear fusion than is required to kickstart the reaction. carol: people have been working on this forever, a decade easily. there is a global project going on. tell us about that. carol: who is involved? jing: you have several different global entities. the european union, u.s., china, russia, south korea, japan, and india. carol: and everybody is contributing funds and scientists and work? jing: exactly. it took a lot of negotiations to figure out who exactly was going to do what, and the way it works is the european union takes up the biggest chunk of it as they have the most number of countries. it is being built in the south of france and the u.s. is contributing about 9% of the entire project, and that includes everything from designing and building
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essentially the biggest electromagnets we have ever seen, the biggest and strongest. oliver: there is concern about a shortage of practicing dermatologists in the u.s. carol: and so, could ai doctors and mobile phones fill the gaps? >> there is a stanford phd student who at 26 with no background into mythology or medicine to speak of, builds in medicine toology or of, builds an that proved just as capable as a panel of 21 certified or motel just in diagnosing malignant lesions. carol: you put images into a
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computer or a machine and it starts to compare a real image on someone? >> this is the kind of ai called a neural net. as far as we can tell, it is the most complicated effort to mimic the effects of the human brain or how it operates. oliver: the brain, right? >> it tries to mimic the brain. carol: does it work? >> this particular set of image searches anyway supposedly can duplicate with comparable results, the analysis of a panel of about two dozen trained dermatologists. oliver: how did he come about this if he does not have the dermatology experience, does not have medical experience? what was the background here? >> this is sort of a big data play, is what we would tell you. the assignment was to try to teach computers how to detect cancer as well as train physicians to make telemedicine easier, and allow people to eventually sort of diagnose diseases themselves. carol: it is interesting, in last week's issue of bloomberg businessweek it focused on jobs, wages, workplace, and it had a great chart that focused on which jobs are most likely to be
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replaced by automation. but i think it was physicians and surgeons were kind of safe, but it sounds like certain aspects of the medical community can easily be replaced by machines, machine learning, ai. we have already seen robotic surgery taken place. jeff: there are certain aspects that can be automated. and even doctors our reporter talked to made it sound like they would be just as happy to have parts of the diagnostic process automated, or to use these kinds of algorithms to basically see more patients. and spend more time with them. oliver: i remember when we were talking about the surgeon and the medical field replacement, it was very much about the sort of precision with which a doctor has to proceed in a surgery that makes it difficult for robotics to replace, but this sort of identifying the problem, the
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early stage being able to look at the imagery, who is taking an interest in this if that is going to be a viable replacement or alternative to a panel of 21 physicians? jeff: this sort of thing is still at the research journal phase right now. to your point, carol, one big obstacle to try and make actual human dermatologists obsolete is that for about 5 million american patients who need a dermatologist who does something to them versus diagnosing something, there is about 12,000 dermatologists in the u.s. but the hope is that this will make it a little easier for people who need dermatology treatment to get some of that. carol: up next, how to harness smart machines, web platforms, and crowdsourcing for personal profit. oliver: andrew mcafee, next. carol: this is "bloomberg businessweek." ♪
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♪ carol: welcome back to "bloomberg businessweek," i am carol massar. oliver: i am oliver renick. you can also catch us on the radio at sirius xm. 99.1 fm in washington dc. carol: in london on dab mux3 and in asia on the bloomberg radio plus app. oliver: in the pursuit section this week, the latest book by andrew mcafee. carol: it is called machine platform crowd and we caught up with them. >> technologies advanced faster than we expected. we thought we were pushing the envelope a little bit being optimistic. we lowballed it. the breakthroughs that have happened in terms of getting machines to not just make decisions but figure out answers on their own have been breathtaking. at the same time, we have been kind of disappointed with the ability of businesses, organizations, and the government to keep up with these changes, so we are glad we tried
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to write this book to close that gap. >> we wrote this book about how with the second machine age, everyone underestimates the scale and pace of tech growth. carol: why is that? >> we underestimated the scale and scope of progress. technology is just doing wonderful things. every once in a while there is a technology surge that we are not ready for. and eric and i believe we are living through one of those times. >> it has been said that the greatest failing of the human mind is the inability to understand the exponential function. you know, things kind of go like this and when you are in the flat part of the curve you just kind of chug along. and then when it turns up, everybody gets taken by surprise. even though we are expecting the curve to kick in. >> we went to m.i.t. and we studied those exponential curves. our minds kind of know this but our intuition is just lousy at things that go like this. carol: still suspect. >> we expect things to go like this and these days it is not. oliver: it seems the impetus is coming from the theoretical, the technology that is advancing
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quicker and that is further along the curve coming from the academics and the thinkers. what does it take to get the corporate side or the government side, the policy side to catch up? >> it is not just the academics, it is the technologists. they are making breakthroughs and what we are trying to do is identify the bits and pieces of companies on the leading edge. it has been said the future is already here, just not evenly distributed yet, so we spent time going out identifying people ahead of the curve. but that is not enough. then you have to put that into some kind of a framework so people can take that knowledge and apply it to other situations. you cannot randomly say, you have to give away stuff for free because other people are doing it. sometimes it actually does work and if you understand two-sided networks and economic platforms you can understand why that works. we took those leading edge companies and put them into frameworks so that other companies could make the decisions.
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>> the reason we wrote the book is to address your questions and eric and i wrote this to do some kind of translation and make the weird world of technology and strange busines models comprehensible to institutions and organizations. >> to tell people, this stuff is being implemented by your peers. here are some of the paragons -- >> by people that want to disrupt your industry, this is not going to leave you alone. >> by people coming out of left field. carol: let's take a step back. break it down. machine, platform, crowd. these are the three elements. talk us through the three. >> there are three balances between mind and machine, product and platform, or core and crowd. and in each case, we are seeing a shift toward the second word in that pair. so using machines to make more decisions whether it is data-driven decisions or machine learning. the second one is a platform revolution overtaking products and the third is using the crowd
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to help make decisions as opposed to a small group of core people. >> what we learned when we were writing the book is that most companies in the established company today are still too fond of minds. they have worked hard on strengthening their core and they undervalue the crowd, millions upon millions of random stranger weirdos. carol: like wikileaks. not wikileaks, wikipedia. >> wikipedia. >> linux. >> there is many ways of reaching out to the crowd and people are still inventing them. and they are powered by the fact that we now have a digital network that connects not millions, but billions of brains on the planet in a way we've never been connected before. the leading entrepreneurs and leading businesses have found a new way to tap into that expertise. carol: but have they? i think of traditional companies we cover that have been around for decades, for more than 100 years, great brand names trying to figure out how to compete in
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this marketplace. those are the ones that need to tap into this. >> that is exactly right. one of the things we know from business history is when a really profound technology shift happens, the expertise and knowledge that you build of the -- that you build up in the old regime are no longer assets and could become handicaps in the new world enabled by a new generation of technology. we believe we are rapidly heading into that new world. >> but some of these companies are doing it effectively. we start the book with the example of ge, maybe one of the oldest of blue chips and they are tapping into the crowd to help identify new products. a new kind of icemaker, believe it or not, and to fund that they went to indiegogo, not because they needed the money but because they needed the knowledge from the crowd. and it turned out to be a great way for them to take some of their core expertise and leverage it with a bunch of smart people around the world. >> and it initially makes no sense for one of the giants of the industrial era, you would think they have the tools.
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and probably enough cash, they would not need them to release a new product. >> that is where they add value. with that direction of where people want them to go. >> it is a big part of it. >> in the old world you could be in a focus group and launch some kind of analysis. and in the new world, you slap together some kind of prototype and the world says, i want one of those. that is a really clear signal of demand and some well-managed companies like ge are starting to get into that. carol: in chapter 11 you say something like the expert you need is not the expert you know, the whole idea of, you need to go beyond your world to figure out things. >> exactly. it is not a matter that there are billions of people out there who can potentially contribute. bill joy said no matter what company you work for, most of the smart people work for someone else. [laughter] >> so you want to tap into that. but it is more profound. people in other organizations have a different kind of
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expertise, there is diversity. they come at a from a whole different angle. inside your own organization there is a bit of group think, there is a bit of people honing a certain technique and you get to a certain level but it starts leveling off after a wild. off.ter a while it levels look at it with fresh eyes and you can have a quantum improvement. carol: "bloomberg businessweek" is available on newsstands right now. oliver: and online at businessweek.com. i love this issue. carol: me too. oliver: were you able to pick a favorite? carol: if i had to pick one of them, i love the story about nuclear fusion, the possibility of creating limitless clean energy. it is wild. the thing is, the u.s. plays a big role and it is curious whether or not we will get enough money to do what the u.s. needs to do. oliver: a good chunk of cash. carol: how about you? oliver: i love the interview we just did, two brilliant guys, very smart and you learn a lot about these things like the combination of the economy and the machines and all of the things we have been talking about the past two weeks, the impact of the technology and
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what it is going to mean. important lesson for business executives. carol: it all comes together. oliver: more bloomberg television starts right now. ♪
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♪ emily: i am emily chang, and this is the best of "bloomberg " where we bring you all of our top interviews from the week in tech. another cyber attack cripples companies. chris young joins us with his take on the latest ransomware and how to contain the threat. plus, google search for answers and an appropriate

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