tv Bloomberg Business Week Bloomberg August 26, 2018 4:00pm-5:00pm EDT
simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. ♪ taylor: welcome to bloomberg businessweek. i'm taylor riggs. this week, an exclusive interview with the ceo of snap. at harley we look davidson and their new strategy to revive sales.
>> it is an iconic american company, called out in many ways by the president. its main challenge, appealing to millennials. taylor: they are having to go abroad to get those buyers. >> the story is about harley davidson and how the company has been trying to transition into a new phase of its life span. getting new riders, younger riders, not necessarily american, but obviously, the company is famous for and its core group is still baby boomers who ride for fun on the weekends or cross-country. i had to hang out with them. taylor: what was that like? before we get to how the company is changing, i went to know who they are now because they are a very iconic american brand and they are known for being a nationalist all-american with a very certain demographic. claire: harley davidson has been around since 1903, the only u.s. motorcycle company that has been in operation that entire time.
their second longest competitor has been defunct since 1953. they have been the only one for a while. they supplied motorcycles in both world wars, elvis presley rode them, evel knievel, the terminator. they have become this iconic american brand and the image we have of the harley-davidson rider -- there are a couple of them. they are a little nuanced, but they are the baby boomer weekend riders with the leather jackets with the harley on the back, and then the outlaw bikers who became famous in the 1950's and 1960's, like the hell's angels. og groups, which are the harley groups, they feel like those guys give them the bad name but for those who are not into biker culture, you cannot tell the difference -- it is hard to tell the difference because they both have jackets. i went out with the nicer, law-abiding weekend riders and for the most part, their version
of motorcycling is called touring or cruising. you ride long distances, and you go 100 miles, and they just went up on a weekend, lovely, went to a bar and had some drinks and rode back, and that is what they do. younger people don't tend to ride motorcycles that way. jason: how do younger people ride motorcycles? claire: the shorter answer is that most don't anymore. that is the overarching problem, but obviously, people do. there are adventure bikes, which you can take on road or off-road. people like racing. essentially, harley became known for these long-distance rides and that is what they do best or had been doing best, but millennials are in their 30's, they have a lot of debt. those bikes are expensive. the highest price ones are up to
$45,000, average is $15,000. jason: still a lot of money. as you point out in the survey, more than an iphone. claire: definitely more than an iphone. and this is not a primary vehicle. this is a secondary vehicle that you are riding for fun. you are essentially buying another car on top of what you normally drive. millennials don't have the time, the money, they are just not as interested in it partially because of the biker stereotype and that has been a real problem for harley for a while now, but it became a real problem during the recession. jason: we are here with the creative director. chris, great cover this week. harley davidson, very clever. how did you come up with this? chris: we had all of these ideas and there is so much imagery to work with with harley. you have the bikes, the bikers. we gravitated to the idea of playing with the biker vest and we took some of these classic harley patches or motifs and
flipped them to be millennial -focused or where harley needs to push its audiences to keep selling bikes. taylor: i love that dynamic. the image looks very classic harley davidson stereotype and then when you look the individual patches, it has the future growth where they need to be with the millennials. chris: we had a lot of fun putting together what the different pieces would be. the shoot was great. it was a fun project to work on. jason: it must have been fun for everybody to work off each other and try to one up each other on the most clever idea. the eagle with the avocado was my favorite. my life partner is on the back -- it is great. chris: it was fun. usually on the cover, you get one good joke and this one we had the opportunity to have a bunch. it was fun. jason: moving over to europe, you had fun turning a classic french phrase on its head. chris: yeah, and this came from one of the editors.
we tried a different bunch of laugh lines, but this worked best with the story. we had beautiful photos on the tarmac at charles de gaulle and the whole thing came together. taylor: those are real french words. as we learned, which makes it better. chris: i think the real ones helped a lot. jason: probably a good idea. thank you so much. next, a pair of legal bombshells dropped at the same time this week. the fallout may be considerable for trump and the gop. taylor: as americans job market is hot, pay isn't. we dig into the mystery of weak wage growth. jason: this is "bloomberg businessweek." ♪
taylor: and on our mobile app. in the remarks section, trump biographer tim o'brien talks about what a disaster tuesday was for the president. jason: it was a remarkable day. we spoke about what this means politically going forward. when thewas this buzz manafort-gates and came down. indictment came down. eight guilty out of 18. there's a question after -- a question as to whether the prosecution will want to retry 10. we got more buzz after cohen. the white house has been basically preparing for mueller for a year-plus. stuff didn't come out
of left field but it has been fast tracked in a way that it took members of the media by surprise. there was a sense that things were getting to a point with cohen that he was going to get arrested soon. it had been a few weeks since he released that tape where he had the president being taped in his office talking about cash payments. something felt imminent. it wasn't necessarily a -- necessarily a plea deal we were expecting. the ramifications are massive. taylor: what are those ramifications? any sort of reaction or change in strategy from the gop or democratic side? think about the legal ramifications first, then political. the legal ramifications are a little unclear because the doj that says the
president can't be indicted. there's a lot of speculation about how this could be addressed from a legal standpoint and what sort of jeopardy this puts the president in. when we think about previous political and legal crises out of the white house, mainly with bill clinton and richard nixon, we had these two narratives, one being political and one being legal. they were deniable from the president's standpoint on both counts, and till they touched. in every case, they touched. with nixon in watergate, with clinton and lewinsky in whitewater. this is the week in which day koch with trump. touched withhey trump.
sense ofot a confidence right now with the legal team. kind of aani, there's sense he has not been well-suited. there are also political considerations to be made. the impact this has on the midterm, whether this changes the conversation, particularly , in the one democrat had house races but also -- particularly from the one democrats are having come in house races but also senate races. candidates in the senate who might be facing tough reelections in trump country may be a little shy to jump into issues of impeachment. use her troopsll on this in the house. the gop, how do you think they react as we get closer to
the midterms? >> i think there's a way it can try to activate their voters around this and get the base out. if you like our guide trump, his tax policies, his tariffs, what , fordoing on immigration example, he is under threat. get out and defend these districts in the house and senate. i think it becomes a deployable kind of issue for both sides. really what we have got this week was the first time where we can go from the theoretical threat of impeachment to the actual tangible one. a very hot labor market but wages aren't moving. it stands to figure almost certainly in the midterms, as well. taylor: "bloomberg businessweek" dove into three major key industries where you would think wages would be growing, even though they are not.
>> we wanted to drill down on an industry level into three areas where we knew about worker shortages, where we had been hearing about them for years, where wages have not gone up. that led us -- we looked at all the data, got them together, and that led us to childcare workers, construction workers, and truckers. those are three industries where we consistently hear folks say there aren't enough people but pay has been really stagnant. taylor: we talked a lot about the trucking industry and the heightened cost the industry is facing, so what did you learn in that industry, for example? jeanna: trucking has consistently baffled everyone, i think, because you hear so many stories about folks not being able to find workers, folks driving up prices and then when you look at trucker wages, they have not been going up. we found there are a bunch of structural things that have been holding back trucker wages from the way folks lease their trucks to the simple fact that it has
taken a long time for trucking companies to become comfortable raising wages as a way to attract more workers. we think we are on the leading edge of being about to see wage hikes. jason: the companies have not been comfortable, why? they don't see the revenue growth coming that would allow them to offset the higher costs? jeanna: one thing we found across all these industries is there is an element of feeling there might be untapped labor pools out there. a lot of folks have been turning to unconventional work or some -- unconventional workers who might not technically qualify for the work in a loose economy, but can be enticed into it in a tight one. trucking is an interesting one because it is a semi-qualified career. you have to have a cdl, so it has an extra entry barrier and i think trucking companies are saying, we are scraping the bottom of the barrel. there aren't a lot of people who will get into this difficult line of work that is poorly -- that is relatively poorly
compensated unless we offer a reason to do so. jason: let's turn to construction. what did you find? jeanna: this is my colleague's report out of atlanta. it is a tight labor market, everyone is conscious they are having trouble pulling people off the sidelines, but they have run out of people there and still refuse to give wage increases. he is like, why aren't you raising wages? what he heard was even if we raised wages, we won't get people, so why would we pay more? jason: wow. taylor: that is interesting. jeanna: which i thought was fascinating. there is a real belief among those he was talking to that there are just not qualified workers who will be enticed into this difficult labor no matter what they offer to pay them. taylor: what about childcare? that is another sector you have heard anecdotes there are shortages, but not quite seeing the increase in wages. jeanna: the reason i was interested in childcare is it is -- a, we don't have an unemployment rate on childcare but we noticed the number of people working in it has
declined. at the same time, we hear people saying i can't find childcare. i had to stay home from work because i can't find someone. we were really curious about this. what is going on in childcare is families aren't earning anymore, even if they are working, they are not able to pay more for childcare. -- to pay anymore for childcare. mom and dad might have jobs, but if they are still earning tepid wages just keeping up with inflation, they can't raise wages for the people they are directly employing to watch their children. there is this natural ceiling on what childcare workers can earn and, in a hot economy, other jobs are driving them away from that industry. jason: next, immigration has helped fuel sweden's economic boom, but the issue is dividing voters on the eve of an election. taylor: and a touchy political -- and contract labor in silicon valley is now a touchy political topic. jason: this is "bloomberg businessweek." ♪
jason: welcome back to "bloomberg businessweek." i am jason kelly. taylor: i am taylor riggs. you can listen to us on radio on sirius xm channel 119, and on am 1130 in new york, 106.1 in boston, 99.1 fm in washington, d.c. and am 960 in the bay area. jason: and in london on dab digital. in the technology section, we go to silicon valley. uber drivers, google, software engineers, microsoft testers, they are contract workers essential to business there. taylor: and they are fighting to be considered full-time employees. we got the lowdown from josh. josh: throughout tech, we have seen debates over who is the boss. where you have workers who have create a lot of wealth for well-known companies but according to that company don't work for them directly.
whether the company says they are employed by a third-party like a temp agency, or self-employed. this debate happens at uber about drivers, at amazon about warehouse workers, and at microsoft in a dispute that we've got a new perspective on through freedom of information act request about a few dozen workers who were testing apps for bugs and were employed according to microsoft by a contract company, line bridge technology. jason: what happened? what is the crux of the dispute between these two? josh: in 2014, these few dozen workers successfully unionized. it was a union victory that is pretty rare in software for a group of temps to win the union election and get a chance to bargain collectively.
not with microsoft, but the company they were getting their paychecks from. things took a darker turn for those workers a couple of years later when in 2016, they found out that the entire bargaining unit was being laid off and all those jobs were being eliminated in washington state. the union filed a charge with the national labor relations board alleging first this was illegal, they were being retaliated against, and second, that microsoft was liable, as well. microsoft was in legal terminology called a "joint employer," a company that has enough control about a group of workers that it is responsible if the law is violated against them. taylor: this brings out the broader problem that it is not only microsoft, but a lot of other companies that are spending time and energy and money lobbying to make sure they can maintain their rights and have employees perhaps not be able to unionize. what is that bigger fight? josh: that's right.
here in california, there was a state supreme court victory for people that wanted to make it easier for workers to be treated as employees of big companies. that state supreme court victory made it harder to treat people as independent contractors is being challenged by a coalition of companies that are pushing for the legislature, the governor to unravel it. meanwhile, in washington, d.c., you have democrats sponsoring legislation that would make it easier to force companies to bargain collectively with workers they say are not their employees. you have the national labor relations board moving to undo a precedent from the obama era that makes it easier to get companies considered a joint employer. for example, to potentially get mcdonald's considered legally an employer of workers in franchise stores.
hot topic that states, federal, workers, labor advocates, are locked in combat over and will be for some time. taylor: we go from silicon valley over to sweden. they are taking in a flood of migrants that is helping fuel economic growth. jason: economic gains that may be turning to a political strain on the eve of an election. taylor: we heard from christina lindblad. cristina: we interviewed several people but we built a lot of the story around one person. we interviewed a gentleman who had come over from syria. he had quite a lot of skills. he had an mba from lebanon and a career that had spanned many countries, work in equities and real estate. he talks about how difficult initially it was to find employment, but then he got hooked up with a program that offered this crash course. it is a mini mba. it is a program through an
economic school in stockholm and that was the clinch. he now works for a company. -- he now works for delooioit. we have heard stories where people have had difficult transitions into the labor market, but successful ones. then we began to look at how the country stacked up against other european countries in terms of observing new arrivals into the workforce. jason: pull back a little for us and put sweden in that context. this idea of nationalism versus immigration. nationalism versus globalism. it is a theme you guys are looking at almost every week, it feels like, in a somewhat provocative way and the surprise here is how immigration is essentially countering, it seems, some pretty grim demography from a labor perspective. cristina: sweden's labor force is aging. the country has vacancies of 100,000 that it is struggling to fill.
new arrivals are not always good matches for jobs, but in the welfare state, which in sweden includes elder care and health care, there are many job openings they have been able to fill. at the same time, there is an election on september 9. a national election. right now, the polls show that a party that is a nationalist, anti-immigrant party, they want a complete ban on asylum-seekers, not immigrants, per se, is going to get about 20% of the vote, which will make it difficult for establishment parties to form a stable government. let me say that all parties in sweden now have some rhetoric about putting controls on immigration. we are talking about a country of less than 10 million people that absorbs 600,000 new arrivals in five years. we hear a lot about italy and germany, but in terms of if you looked at the percentage of population, it is huge.
taylor: there are also some challenges absorbing a large amount of people, like you said. but it does help their economy, as well. walk us through some of the statistics about how they are able to boost the economy and some of the challenges of absorbing that massive population. cristina: we looked at growth and saw that in the first two quarters of the year, 3%, which is almost one percentage point above the eu average, is how much sweden grew. we also looked at labor participation rates for foreign-born workers, which is how sweden classifies this population. that was 82%, 4% above the eu average. though there are other numbers that tell the story is not completely rosy. unemployment among new arrivals is something like 20%, which is much higher than the national average in the low single digits. jason: next, air france falls out of fashion. its first non-french ceo tries to restore the brand to its former glory.
♪ jason: welcome back to "bloomberg businessweek." i am jason kelly. taylor: i am taylor riggs. still ahead in this week's issue, we look at wildfires. there were more of them a century ago, but they are worse today. jason: we also take a closer look at snap. its ceo, looking inward to change the company's culture. taylor: this week's european cover story all about air france klm. jason: this is an iconic brand known for its supersonic flights, fancy flight attendant
uniforms. got a new ceo. he's got some headwind. taylor: we got the scoop from reporter matt campbell. matt: air france klm is one of the largest carrier groups in -- airline groups in the world, appointed a new chief executive, a guy named benjamin smith who was the number two at air canada. that followed three months of really leaderless stasis and pretty severe crisis, especially at the air france part of air france klm, which has been suffering terrible labor discord that has grounded a lot of flights, cost the company an inordinate amount of money, and created something of a mess for this very large airline at the heart of the summer travel season. this is a company that is in some amount of turmoil, trying to arrest that turmoil and doing so in a very difficult market, where any misstep by a big airline can be exploited ruthlessly by all the budget carriers. jason: talk to us about where
air france sits in the french imagination, because it does play this role that draws the attention of both the everyday french person as well as the government. why is that? matt: well, jason, look. it is a very historic company. all the big airlines to some extent are historic, but air france is especially so. it has been an ambassador over the years for french style, uniforms by dior, what is billed as the best of french gastronomy in the sky, and probably more importantly french technology. france, to this day, is a big power in the world of aerospace and air france has been at the vanguard of that for the better part of a century. in the 1950's, it flew the caravelle, the first mass-market short-haul jetliner.
after that, it flew the concorde which was a joint franco british project. it was one of the major users of the a-380 assembled in france. this is a company that is very much identified with france's sense of itself as a technological and industrial power on the leading edge of technology. jason: and the government owns or controls a fairly substantial piece of the company? or controls it? matt: that's right, with 14% and more in voting rights. the upshot is nothing significant can happen at air france without the government agreeing to it. that doesn't mean the government is the only voice that matters. delta airline owns a large chunk of air france, as does china eastern. those are both air france's partners in sky team, one of the three global airline alliances. it is a fairly complex governance picture, and that is before you start thinking about the klm parts.
there is still a dutch voice within the company. two major operating units that are very different. jason: we're here with joel weber, the editor-in-chief at "bloomberg businessweek." a lot going on this week. the u.s. cover, harley davidson. how did that come about? joel: this is a story we have been interested in for a time because we know harley has a conundrum on its hands. they have older riders, boomers have been buying bikes from harley for years, but then they stopped around the great recession. boy, here is this conundrum. how do you grow this brand when boomers aren't buying bikes? this is when they have been wrestling with for a while and the new ceo took over and they come up with this strategy, announce it, and trump brings out tariffs that directly affect their business. that is a conundrum and a challenge for any business leader, no matter the industry, should be interested in because it could happen to you. taylor: it is also a challenge to market a brand abroad that is so identified with american culture and american nationalism.
how do you can do that? joel: that is one of the strategies they realized. they had to go abroad. people were buying motorcycles, but not the u.s. they looked like bmws and hondas. low and behold, harley actually has an amazing engineering tradition that they doubled down on. they came out with these bikes and they are bringing them out in a couple of years, and they look nothing like harleys. really this is one of the ideas we came back to with this story. harley's future may not look like its past. jason: let's move to a newer ceo, the european cover is on air france klm. new guy. joel: brand-new guy, canadian. first non-french ceo to run air france. we had some fun with his cover. it is really iconic. it is really about air france needing a revolution and this might be the guy to do it because the last guy -- it was almost like brexit where the last ceo put his whole reputation on the line with the referendum and employees ousted him. it is so french.
taylor: there is so much turmoil within france and klm and there is also turmoil with issues they have to face externally hitting the airline industry, and you were able to capture that. joel: this is a company that at one point, outfits were made by dior, the first class meals were insane and they still are, and yet that business model does not stand up when low-cost carriers are basically owning the skies. on top of that, as we know with all things french, there are labor unions that are incredibly powerful. that has made this business model be a very difficult project. [laughter] jason: the news cycle was upended this week on tuesday afternoon with a verdict in the paul manafort case and a plea in the michael cohen case in new york. how did you deal with that? joel: we stepped back from it and i think this is throughout the bloomberg news room, the
overall narrative has become one of, is this going to be an inflection point? this has been a teflon president. nothing has stuck to this guy . yet, here is the moment in time where we have convictions of two people and these are the most prominent cases that have been pursued. will this prove to be an inflection point? if that proves true, what is next? you could go forward, extrapolating into the midterms, if democrats win over the house in congress, what might happen? could this lead to impeachment hearings? what does that mean for the business community? jason: great issue. joel weber, thanks so much. next, a few things you might not know about wildfires. taylor: plus, the family tea room stands the test of time. jason: this is "bloomberg businessweek." ♪
jason: welcome back to "bloomberg businessweek." i am jason kelly. taylor: i am taylor riggs. you can find us online at businessweek.com. jason: and on our mobile app. the giant wildfires in california and western states seem to be getting worst, but are not new. taylor: they were more widespread in the 19th century than now. justin: there is a lot of stuff burning, basically, and acres burned in wildfires, and also, the damage. nothing this year has been anything like the fires in the california wine country last year in terms of burning people's houses, but obviously, it has gotten worse over the last couple of decades. taylor: talk us through where we started from. in your story, you go from 1861 through the 1900s. we hear about it more. it feels worse than it was since then, but what does the research say?
justin: i actually go back 3000 years. [laughter] there was a study in 2012 that took charcoal sediment throughout the western u.s. and came to the determination that the first half of the 20th century was the least wildfire prone period in the last 3000 years in the western u.s. the reason is because we learned how to fight wildfires with airplanes and put tons of money into it. more and more people were living on the edges of forest, and it became more important. there was a whole smokey bear philosophy of wildfire, we've got to put it out right away. that helped lead to the issue now. another finding of that 3000 year study shows we have a massive fire deficit basically, and it has been getting warmer -- another issue is climate change. throughout the western u.s., average temperatures are up two degrees over 30 years.
because of the firefighting efforts of the last 50 years or so, there was a lot more stuff out there to burn. it is getting hotter, and there are more people living on the edge of these fire prone areas. so it is really getting much worse. it is just kind of fascinating that it was really bad in the late 1800s and early 1900s, too. taylor: also in your story, you walk us through the top wildfires in history. you talked about america's next top wildfire in 1991. justin: the worst wildfire for property damage, according to the semi official steps, is still the oakland and berkeley firestorm of 1991, where a fire in the berkeley hills ended up jumping into some neighborhoods in berkeley and over the 24 freeway into oakland and caused billions -- i can't remember, i
think it is $2.8 billion in current dollars damage. the fire last year that destroyed a bunch of santa rosa will probably come in much higher than that. it is not fully accounted for yet, but sonoma county where santa rosa is, people have filed $7 billion worth of insurance claims from wildfires in the last year. taylor: in the solution section, when i think rome, i think coffee. turns out we are talking about a tea house that was founded in victorian times. jason: 125 years ago, four generations later, at the foot of the spanish steps. it's a great story. >> it is such a surprising story, right? you are in italy, at the bottom of the spanish steps. you can picture the cafe with the espressos or cappuccinos, and there is babington's, which has been around for over 100 years and has been a family run business over four generations and through two world wars.
it is this delightful story of two young women who did that typical rite of passage trip in the late 1800s and traveled to rome. they came from well-to-do families in the u.k., and took tea with a them because how are we going to find good tea when we go to italy? over the course of their lives, they loved italy. they fell in love with the place, and they established this tea house, babington's. it is really remarkable. it has definitely evolved into some other things, but is true to its core as a tea house and is run today by two great-grandchildren of the two women who traveled. one of the two women who traveled to the u.k. back in , is it 1893? i am not remembering right now. it is really amazing, and i think it is also -- there is this whole culture of tea and there are so many tourists in rome, and i think whether it was after world war ii, when there were a lot of americans or even
brits in rome, so they would go to the tea house. whether it was later on in the 1950's when films were being made at the big studios in rome, so audrey hepburn was going to have her tea there or elizabeth taylor, or whether it was tourists from parts of europe or the world where their culture is more about drinking tea and they want to go have this delightful cup of tea. taylor: we go from tea to tofu. i personally love tofu. i'm from california. and you take us out to west oakland. what is behind this new tofu startup? dimitra: it has been around for a little while, and the founder came from vietnam. he worked in finance for 15 years after coming to the united states in the early 1980's. he went to columbia, got a bachelors and masters degree, worked for big banks and in finance, and then started to pivot when he was feeling he
wasn't finding the tofu he remembered from home. really, what he describes as very exceptional. so soft, so creamy. words that real tofu aficionados use like "elegant." he started developing his own in his kitchen. he would go to the farmers market. he was in palo alto, started selling it, and there was interest in demand. -- and demand. he decided, you know what? i am going to make the shift and create this business. jason: and then we turn to ice cream. expansion was the flavor. you see what i did there? dimitra: i do see what you did there. with mcconnell's ice cream, where we present a photo essay in the magazine and more about it online, michael palmer took over the business. he bought it in 2012. this was founded in 1949 in santa barbara. they had a small dairy, the mcconnell's in santa barbara, and decided to make high-quality ice cream.
all-natural, no unnatural ingredients. all handmade. the flavors were simpler then. they would make everything. then, it was bought a couple times by others who were not part of their family, though it was always a family run business. as it is now by michael palmer and his wife. michael palmer looked around and said, i have a dairy. it would great if i want to keep this really local. he grew up in santa barbara on this ice cream. he knew it very well. but what if you want to expand? and scale up? so they had to build a new dairy and they did in oxnard, about half an hour from santa barbara. you find mcconnell's across the country in whole foods, so we thought we would end on an ice cream story at the end of summer. jason: next, how the ceo behind snapchat is hoping to change the company by changing himself. taylor: and how technology could be disrupting diamonds forever. jason: this is "bloomberg businessweek." ♪
taylor: welcome back to "bloomberg businessweek." i'm taylor riggs. jason: i'm jason kelley. you can listen to us on radio on sirius xm channel 119, and on am 1130 in new york, 106.1 in boston, 99.1 fm in washington, d.c. and am 960 in the bay area. taylor: and in london on dab digital. jason, we go over to the features section and take a deep dive into snapchat. he had the disastrous app redesign. they cannot turn a profit, but they are trying to re-vamp their image. jason: a lot of it falls on the ceo, evan spiegel. what he's doing is looking inward to change the culture of the company. max: the writer of the story got a special invitation to something called counsel, which is a sort of regular meeting.
they have had -- i think somewhere around 700 of these this year, so we are talking everyday kind of meeting where a group of snap employees get together and share. it is a very -- snap is a los angeles based company, a very california thing. there is a sharing stone they pass around. i think it is a purple amethyst. this is something snap's ceo evan spiegel learned in a new age class and has brought to the company. the reason this matters at all, besides being amusing and sort of weird, is snap is really trying desperately to grow up and get better at communication. evan spiegel has been very secretive, sort of aloof from his own employees and the outside world, and with competition from facebook and instagram, which is a facebook property, they are having to change. jason: comically secretive, almost. why?
does it go back to evan? max: yeah, and this was sort of a strength snap had. this was a company that didn't act like a normal social media company. it acted more like a fashion brand or something. facebook was in the bay area. snapchat is in l.a. facebook is in these corporate offices, snapchat has been historically in these small buildings and some houses, even, in venice. which is a hip neighborhood in l.a. i think it all goes back to the culture and for a while, that worked. snap had this cool factor, but they have just been swallowed both by facebook's ability to copy them and facebook's capacity of bundling data with these product. advertisers on facebook have been able to target ads specifically. snap has been late to the game. jason: let's talk about the
facebook rivalry because i convened a small group of experts last night as i was reading this story. a couple of teenagers, and i was telling them about this. they were saying as users of both that instagram has done a pretty brilliant job of copying the best features of snap, and they rightly said instagram only has to be good enough to keep you on the platform. it doesn't have to be better. max: it is pretty stunning because people, even a couple years ago, thought as instagram is a mainly photo sharing thing. you put a cute filter over your photo and share this glossy thing. now, younger people are seeing it more as a video sharing platform. basically, exactly what snap was. instagram -- it is called stories. which is not coincidentally the
name of the snapchat product. [laughter] it's the same thing. as a result, this has been a boon to facebook, which has seen traffic on its main app seeming to flatten out a bit and it has been bad for snapchat. jason: in the pursuit section, lab grown diamonds making their way to the consumer market. taylor: and it is all about the technology behind it that has improved in recent years. chris: a few years ago, there was a stigma around lab grown jewelry. people sort of thought it was fake. they thought it was q bigs or conan. neah -- zirconia. this year, the ftc changed the definition of a diamond. they took the word natural out of it. you can grow a lab grown diamond as a diamond and that is a game changer for the industry. jason: the other game changer was de beers, who everyone knows in this business, entering the lab grown sector in a major way.
>> de beers, "a diamond is forever." maybe a diamond was made a couple of years ago. they stayed out of the lab grown business because their big businesses mined diamonds and as they saw small startups having success, they came in and undercut them. they are launching a brand called lightbox, low-cost diamond jewelry to compete with self purchase items like accessories and skin care. a normal lab grown diamond is about 30% less cost than a mined diamond. de beers' are 50%. they are undercutting these existing businesses. taylor: it is interesting because that's a company in both markets, so i wonder why the shift? they feel like they are cannibalizing some previous business or are responding to something customers want because of sustainability issues? chris: there competitors think they are deliberately trying to undercut them. but they say they are responding to consumer demand. not only are lab grown diamonds
sustainable, they have no issues with child labor or environmental destruction, but they are also cheaper, and millennials don't seem to care as much. a recent study showed 70% of millennial's would have a lab grown diamond as a primary stone in an engagement ring. that is often people's first major diamond purchase. millennials are open to it because it is ecologically friendly and not problematic. jason: consumer sentiment may be driven by some celebrities who have thrown their weight and money behind this new trend toward lab grown. chris: totally. leonardo dicaprio, an activist on many fronts, was one of the first to get behind it. he invested in a company called the diamond foundry, which makes lab grown diamonds. recently, swarovski, who have been using lab grown diamonds for a long time in jewelry on the red carpet, they got penelope cruz to do a collection with them. that really helps. you see someone stylish like penelope cruz wearing lab grown jewelry on the red carpet saying
this is important because it is sustainable, you want to know where the gemstones come from that is meaningful. , that is a lot of times the only way people are exposed. taylor: you've got to take a look at some of them. how did they look? can you tell the difference? chris: you can't. one of the producers of lab grown gems, who sells mined gems , was like, we never have them on the table at the same time because they are identical. a company lent us a bunch of diamonds to shoot. you can see on the first page of pursuits, they are big, they are beautiful, and there is literally no difference except for where they came from. taylor: "bloomberg businessweek" is available on newsstands now. jason: and at businessweek.com and our mobile app. what is your must-read? taylor: i really like the air france klm story because we talked about the internal pressures that they are facing, as well as some external problems they are dealing with. jason: a new ceo at the helm with a lot on his plate. speaking of ceos, my must read was evan spiegel, the ceo of snap. really taking us inside the company and everything that needs to happen culturally to improve the company's performance.
emily: i'm emily chang, and this is "best of bloomberg technology," where we bring you all our top interviews from this week in tech. coming up, microsoft takes over six websites created by a group with ties to the russian government and plans to meddle in the u.s. midterm election. more manipulation on social media. facebook and twitter take down hundreds of a counseling to russia and iran. and as elon musk faces scrutiny from the sec, investors and