tv Bloomberg Business Week Bloomberg May 22, 2016 8:00am-9:01am EDT
ellen: he disappeared for a few months and came back looking refreshed. and he is sort of making moves like he may be gandhi and nehru and numbers of his family before him. carol: does he have support? ellen: it's not clear. the congress party was trampled. it is sort of looking ahead. will he ultimately gain the power is the a question. david: you look at the demand for satellites. it was the providence of the government for a long time. now you have companies getting satellites into space.
ellen: elon musk is landed a rocket back to earth. most people think it's about what is going on in space. it's about what is going on down here. the increased demand for wi-fi, the increased demand for internet connection, and especially for those of us who go on airplanes and have the connection, satellites can cure that. for satellite companies, most of the business will be beyond launching satellites. carol: in the markets and finance session, what does buffett want to do with yahoo!? we are talking about warren buffett. ellen: he always said he didn't want to invest in ibm, said i do not want to get involved in tech companies. he stayed away. david: the deviled with ibm for a while. ellen: he finally did invest in
ibm. mostly he stayed away from tech. this looks like it's an exception. what we say is it is a really. if you look at yahoo! in certain ways, it's really a media company. carol: and he likes media properties. david: and he is the savior of some newspapers not long ago. stan gilbert. a lot of bids for this company. anybody gaming out how likely he is to go get it? ellen: he is against verizon so you don't know. buffett is a next project getting in there and figure out ways where he can profit because of the size of the d can muster. he has a lot of money to put the work. david: cover story this week, so much about the price of pharmaceuticals. you look at charities that help people pay for co-pays and how a lot of pharmaceuticals are working with them. ellen: drug prices having going up for a while. there are charities that been developed that can help people who can't swing the cost of these rising drug prices who use co-pays. what happened is that the charity pays the co-pay, and with a lot of these patients medicare pays the rest. what is good about this for drug companies is that if they just give people the drugs, that is it. but if they donate to these charities, they more than make up for it when medicare
reimburses for the price of the drug. carol: and we have a reporter. ben: what they do is they help patients who have insurance already. drug prices are getting so expensive they are stepping in and the individual portion of these drug costs, maybe 10% of a drug might cost $10,000 or $15,000 a year. they help you with that particular payment. so therefore you can stay on the drug and afford a $100,000 cancer drug. carol: it sounds like a great thing, helping people who could not afford medicines otherwise. but what is interesting is -- these co-pay charities -- where are they getting the book of their money? ben: that is something that struck us.
it is coming from the pharma industry. it is a circular flow of money. pharma companies give huge contributions to these charities. an unnamed company gave $170 million to one of these charities in 2014. that money just gets allocated back to patients quite often who were on that company's drugs. the money circles around and goes back to themselves. david: let's give them the benefit of the dought here, we think there is some benevolence there. there are also economic motivations? ben: absolutely. what we have seen is an astronomical rise in drug prices. this works for drug companies as long as it does not erode their patient base. a big chunk cannot afford the drug and won't be signing up to take it, they will start to lose revenue. they need to find a way where they can raise the prices of drugs, yet keep their customer base from eroding. carol: you profiled one company in particular, patient services incorporated. they are one of the players.
tell us about the history. ben: we look at them because they are the grandfather of this. they have been around for 27 years. most of these other charities have been around the last 8, 9, 10 years. and so, yeah, we have to look in the founding father of the industry, a man named danny. how he went about starting this in his back story. they are quite interesting in that they have been at this for so long and sort of a market mover. they were the first charity to say, let's focus on medicare patients. not only the private insurance patients, but the ones on government-funded medicare which is a prickly area because you are not actually supposed to help medicare patients pay their drug costs. that is considered a kickback under federal rules. what they have done is found a way to get government permission to do this as long as they don't have significant sway over their operations. it's a touchy and prickly area.
patient services inc. sort of spearheaded the way into the next area. david: charities like this one have grown apart because of legislation passed decades ago? ben: they really took off with the creation of the medicare part d benefit. giving drug benefits for medicare patients. basically, drug companies are legally allowed to directly subsidized patients. anybody on private insurance, if you could help step in and pay the co-pay, that is allowed. in the medicare market that is not allowed. you need this conduit, which is turning out to be these charities. and so when medicare part d was created, these charities came out of the woodwork and started up. some were actually founded by the drug industry itself.
carol: illustrating our cover for big pharma's relationships can be challenging. >> this is a cover we started to design before he got the actual story. carol: really? david: is that common? >> it is 50-50. we knew that big pharma was donating to charities they getting the money back in the government and there was something a bit sketchy about that. we started this graphic cover which just said how big pharma is robbing the u.s. government. we were happy with that for a few days. we were like, oh, this is pretty much done. then we sort of realized they are not robbing anyone because they're not doing anything illegal. carol: and it is helping people if you look at the story. >> we had to give it a bit. we decided to go a bit more hyperbolic route to this happy pill. we started with the headline "big pharma is here to help," and they contradict that point a bit. then we eventually morphed into
a lower headline. it is one big long headline that it happened it is basically like not that visible if you're standing a few feet back. carol: it's really colorful. how do you figure out how to get people's attention? >> with this sort of first part of the headline is "big pharma is here to help," we just wanted the image to play at that. we thought the bright color and the hearts would sort of plant that. david: there is some silliness to this as well. >> extremely silly. this story in itself is obviously not silly, but in order to bring you in -- there was a lot to explain on the cover. we had to boil it down to something that is eye-catching and the details of it later on. david: how to build your business without a sales force.
♪ carol: welcome back. david: in this week's technology section, some small businesses with these huge 50%. cards of up to carol: we've been talking about all these merchants that bought new machines to accept the chip. it takes some training. but in another higher fees involved. david: it goes back to software problems. that was a huge struggle for a lot of businesses. it took a lot of time to process these cards. the transition has been a rocky. carol: visa and mastercard are the ones benefiting by the higher fees, but you can change
the software in the machines and the fee will be reduced. david: you have a lot of small business owner saying debit card fees were already high, even with a software glitch is getting higher and higher in their less interested in it that can debit cards. it's posing a huge problem potentially for customers. carol: we have got a story about the innovative sales strategy going on at business software maker. david: you mean sales without a sales force. we talked to dina bass. >> they are a company called atlassian, they have been an ipo in the last couple of months. they sell project tracking and collaboration software. they do it in a more of a grassroots way. they try to put all the information you could possibly need to buy on their website. you go there and purchase. it's very different. there are lots of companies that do that kind of thing but generally speaking and enterprise software that bigger businesses use, the more traditional models have this large enterprise sales force. the stereotypical thing when you think of ibm or oracle. these quota carrying salesman. rushing to make their numbers at the end of the quarter. that is something they have never done.
it managed to grow quite rapidly and sales save money on the salesforce. people think about whether they could do this to some extent. david: how replicatable is what they have done? they are based in australia. they did not have the pressure from venture capitalists back in the company from the get-go. dina: i think that is part of the question. most think it is not possible for a company to replicate what atlassian has done, at least not to that extent. atlassian is fairly religious about this. they don't have any salespeople, so much so that a customer we spoke to that reached out to them a couple of years ago and wanted to purchase them and they said could you send me a salesperson. they said we don't do that kind of thing. it is hard for other companies to do that. even atlassian admits there is software where this will not make sense. once every 10 year level
purchase. it will be a hard thing for them to do. you also have this kind of different model. they grew up in sydney. most of their business is global. they have a significant office here in san francisco. they were self-funded off the cofounder's credit cards. they did not have the pressure from venture capitalists who wanted them to grow faster and do things differently. that enabled them to take this track. the co-ceo told me it gives you a more steady, predicable growth rate. it's a little bit slower than what some venture capitalists would like. he likens the idea of salesforce to taking adderall when you are not going to prepare for the test. this sort of jolt. it is a low-quality high. it doesn't really change or improve matters. it gets you through the quarter.
♪ david: welcome back to "bloomberg businessweek." carol: you can listen to "bloomberg businessweek" on sirius xm channel 119. david: why some companies listed in the u.s. are finding it difficult to return home. >> these chinese companies are losing value here. they think they are not well understood by wall street investors. last year you saw a rally on
china's mainland stock market. every thing but so attractive to people think they can make more money and valuations in the exchanges are much higher than what they get here. carol: what are they doing specifically? bonnie: so basically, they have a whole bunch of management executives that are buying back their own shares. but they are trying to do is a list in the u.s. market in and try to sell shares back in shanghai locally. david: a lot of people don't understand what they do here in the states. give us a sense of what these commodities are and how they operate. bonnie: mostly our internet technology related chinese companies so we have got momo, a dating app like tinder, and a second largest search engine in china. and then a lot of social networking. carol: officials have been worried about the capital flows,
if you will, coming out of china. correct? so are they looking to kind of stop this? bonnie: i would say this is a secondary concern of chinese regulators. the first one is about the stock market stability, the influx of chinese companies that were previously listed overseas, all of a sudden they wanted to go back to china altogether. that would dilute share prices and stability is a top concern of the chinese government and regulators. carol: so they want to reign this in? >> that is what they have been talking about. they have been raising questions about wall street investors and investors at home about these investors. david: with the government like to have chinese companies listing overseas? would the government like to have companies listing in
shanghai? >> i think they have different views about it, and a couple of years ago all of these technology-related chinese companies, they sort of have to go overseas because foreign investors have limits to invest directly in shares of those companies. these days, because of the valuation, more and more these chinese companies want to go back. david: up next, why china is getting the cold shoulder down under. carol: the national geographic channel is planning its next act. all that ahead on "bloomberg businessweek." ♪ okay, ready?
♪ david: welcome to "bloomberg businessweek." carol: we are inside the magazine headquarters. david: still ahead in this week's issue, martha beck's life coaching industry. carol: the united states postal service looking for a lifeline. david: what does james murdoch have planned for national geographic? carol: it is all ahead on "bloomberg businessweek." ♪ david: we are here with the editor of "bloomberg businessweek." so many more must-reads in this section. ellen: i don't want you to get nervous, i just want to do a check on how you are feeling.
david: it is better. there is a story here in the global economic section about the chinese finding australia much less inviting. elln: a lot of chinese people are trying to get their money out of china and they are buying real estate in the u.s. and also in australia. the housing market in australia is pretty tight, prices are going up. david: it is a hot market. ellen: it's a very hot market. australians are not happy about that and they are putting in place all kinds of rules that makes it hard for them to buy. carol: the banks are pushing back. ellen: the banks are changing their rules so they are not lending as much to the chinese, and so does the government. the government has a rule that the chinese are not supposed to be able to buy pre-existing homes, only new homes. is this really very protectionist kind of attitude about chinese investors and homes. carol: let's talk about the focus on section. you guys key in on the cloud and specifically take a look at many industries that have been exploiting technology. david: what is block chain technology? ellen: everybody knows.
carol: everybody talks about it without understanding it. ellen: it has to do with bitcoin. i think the way to think about it is as a digital ledger that involves lots of different computers. if you think about it too much it might make your head swirl. a digital ledger. carol: but it is not just, financial industries are tapping into it but other industries. ellen: all kind of industries think it can be useful to them. they are thinking it may replace in some cases regular web services and they are all experimenting with it. a lot of financial firms and real estate firms as well, and it is now a bigger business than the actual bitcoin industry itself. it is developing and you are going to hear more about it. you just have to pretend you understand what it is. carol: now we know. david: and the technology section you look at how google is investing in 911 services. some of this has been thrown into a great deal of uncertainty as people move away from landlines. ellen: in rural areas, dialing
911 may not help you and what services are doing is going into rural areas and there is a service from google. they are giving phones to volunteers. so when there is an emergency, they are contacted. they put in a code saying i am coming and because there are phones in those areas, it is much easier to get help to people who need it. carol: kind of brilliant. right? ellen: it seems like something that needs to be done and google is investing in. carol: if you take a look at the national geographic channel, which has really evolved over the years, what is the future? ellen: it is changing. there was always some tension between national geographic and the national geographic channel. they were run by fox. geographictional it.ety had a role in
and they felt the fox people were going a little too wild doing reality shows. david: making money. ellen: making money, and the money was helping, but they thought there was a diversion in interest. suddenly, fox expressed interest in buying the whole thing, including the magazine. and they were worried because rupert murdoch has questioned whether climate change exists, etc., and they found that his son who runs fox is an sort of and environmentalist. david: james murdoch. >> the main thing in the assets is the tv network, which was started as a joint venture with then news corporation, now 21st century fox. back in 2001. there is a whole lot of things in the whole national geographic diaspora, book publishing, merchandise, licenses, travel business. there was a whole bunch of different aspects. carol: i think what is fascinating is how rupert murdoch and 21st century fox
came to own national geographic. talk to us about that. felix: initially, back in the fall, there was an announcement made that national geographic was selling all of its media properties to this new for-profit venture called national geographic partners. and 21st century fox was going to pay the society $725 million and become the majority owner, and basically take control of all of the media brands. at the time people watched and said, you are selling everything to rupert murdoch's business? that is terrible. these are odd bedfellows. like, what is going to happen? there were a lot of jokes going on about the national geographic was going to become sort of anti-scientific. it was going to be cover stories
like "the joy of coal." [laughter] felix: it is interesting because i think a lot of people did not know that there was this relationship between these two organizations that dated back almost 15 years when the two started the national geographic channel in 2001. david: there were complaints before this arrangement about where the tv network in particular was headed, it may be did not have the seriousness or the scientific of the magazine. felix: in the big picture, the channel was a great success for both organizations since 2001. i mean, it made them a lot of money at a time when the magazine was losing readership and losing revenue. it really replaced that as the economic engine keeping the national geographic society at large. it was also profitable for 21st century fox, but there were all of these sort of issues and cultural clashes over the years in particular about the programming on the national
geographic channel. there were a lot of people inside the society who felt this is slightly off-brand. we are getting into all of this reality tv. there is shows about people chasing ufos. what happened to our focus on science? carol: where is jacques cousteau when you need him? felix: right, basically when you talk to the people that are running the national geographic channel said, we are in the tv business. reality tv was bigger the time. everybody is chasing after the shows, and if you look in the period from 2001 to 2004 when a guy named david lyle came over from fox to national geographic, that was the most excess full period they have had with the national geographic channel. there were shows like "wicked tuna," "doomsday preppers." they got pretty significant following. never got as popular as discovery, their arrival, but
but it was doing pretty well. internally there were all these clashes in terms of, is this what we want. carol: talked about the role of james murdoch. rupert murdoch, i think you said his father calls him a -- felix: tree hugger. james murdoch took over 21st century fox and i think that made a big difference to a lot of people within the national geographic society because if you look at james murdoch's politics versus his father's, there were certain people who had qualms about rupert murdoch, in particular his skepticism about global warming. that did not sit well with a lot of people of the society. in comes his son, james, and he is very environmentally progressive. him and his wife have a foundation that is dedicated to protecting natural resources like fisheries and advancing scientific education. really sort of very similar to the values of at the national geographic society promoted. actually, in the spring of 2015, the new ceo of the national geographic society held this off-site retreat for the board of trustees in washington, d.c., and that was the first time that
james murdoch got in the room with all of them. everybody met and all got along pretty well. carol: from the national geographic society? >> yes, and a couple of weeks later, the deal was announced. carol: up next, software hillary clinton hopes will land her in the oval office. david: the longer the modernizing united states postal service. carol: a pioneer that is making life coaching a mainstream profession. david: all of that ahead on "bloomberg businessweek." ♪
radio, sirius xm channel 119. carol: and the features section this week is a profile of martha beck. have you heard of her? david: she is the life coach's life coach. carol: she is the ultimate. she has written books, had had seminars, met with oprah. i have heard about life coaches but it feels like they are becoming a little bit more legitimate. david: there is something very california. it starts with her at a conference training other life coaches. she makes millions of dollars a year doing this. carol: there are about 41,000 around the world and they are bringing in about $2 billion in revenue. there is really a lot of people catching on to it. there is something about an "integrity cleanse." integrity check. you were kind of true to yourself. the writer who wrote the story
went to the conference and she had a moment in the story. it was kind of interesting. david: one of the ways hillary clinton plans to get to the white house using big data. we talked to tim higgins. tim: we saw the explosion during barack obama's campaign and in 2012, ways of motivating potential voters, finding them, and getting them to turn out. david: a big part was through e-mail. as a reporter i was on these lists and i was amazed at how flip some of the subject lines were, how some more personally directed at me seemingly. david, do this and that. david, go here. there is a lot of research and technique that goes into e-mailing like that for a political campaign. tim: it is not just a guy in the corner tapping out e-mails. there's testing and motivation behind each of the messages, and seeing what does do well and what doesn't. the amounts asked for play into the psychology of giving, that sort of thing. the way you respond may trigger another kind of response down the road and it is part of a bigger picture of how a campaign will try to essentially market itself to its supporters and potential supporters. >> speaking of a campaign doing just that, it is hillary clinton.
she is working with a company. what exactly are they doing? tim: this is interesting because she is not really talking about all of the details. we are on the outside looking in and we are seeing things. we are looking at some job ads where clearly she is trying to build the data army that barack obama had. one of those key people went off and started a startup a few years ago that found some funding from eric schmidt of google, and is essentially trying to provide the guts of that obama data machine to hillary clinton's campaign, and to nonprofits who want to get into this data engagement, digital engagement field. david: as you point out, it occupies a special position, it is not a for-profit company. tim: they are a for-profit
company. they are trying to make money, but they want to be in the place where they are helping nonprofits. they eventually see potential in the corporate world as well to essentially social impact space where tying into doing good, if you will. carol: from new technology to antiquated. the opening remarks facing the u.s. postal service. devon: one of the amazing things about the postal service is we think of it as sort of a big mess, kind of a basket case, it has not always been like that. people used to be amazed by the postal service and marvel. throughout the 19th century, there was no other big organization. there were no ibm's or ge's, so it was one of the biggest things in america there is the biggest employer in the federal government. people were fascinated by it and for a good reason, too, it
worked back then -- really well. david: i still marvel when i send a letter at how inexpensive it is. has that always been the case? when you look at all as to get a letter from one place to another. devon: in the very beginning, it was very expensive because the way they priced it, you had to pay by the sheet and also by the distance. also, you did not pay. the person -- if i sent you a letter, you would pay. david: credit on delivery. [laughter] devin: you might have looked at it and you might have handed it back. david: don't accept the call. devin: it was not until the 1840's that they change the system all the way around, introduced stamps, people started using envelopes. all the things we think about using the mail. it's only been around for 160 years. carol: if it was a harvard business study of how to run a business, this would be how not to run a business. they were not in control of being able to price with a do. devin: they are still not in control and this is what i'm writing for this issue. in the opening remarks here it if he noticed, april 10, the postal service lowered the price
for first-class stamps. david: bad news for everyone who is putting his retirement in forever stamps. [laughter] devin: the whole thing, the forever stamp was supposed to be a forever stamp and no matter what happened to the price, it would not go up. now if you bought forever stamps before april 10, you lost money. carol: what is the future of the u.s. postal service? does it continue like it is today or become something different? devin: i think it has to morph and if you look to europe, the postal services have changed. deutsche post has privatized and the actually own dhl. carol: that is right. devin: you have the postal services in scandinavia, they have closed the government run post offices for the most part and they provide postal services and stamps and convenience stores. there is a way ahead. at some point, these things are going to have to happen here are just like they have happened in other countries. it is just a question of when congress and the white house sort of decides they want to do with this.
shelly: every couple years, this comes up. this is a big market. obesity rates are growing. as is something important and it fades away and comes back and i wanted to find out why that is the case. it turns out it is just seen as an ancillary business, it is not a core. whatever a company or retailer is not doing well they will push it aside. when they start doing well are some new ceo comes along, they will open it up again and push it aside. carol: even though it makes money. shelly: but it is harder. it requires a different staff in some cases. david: i find that so fascinating that factories would say they are not equipped to make clothing that is plus size. what is the issue? what is the difficulty? shelly: the issue was, we keep hearing it's more expensive. some places actually charge you more for plus size is which i think is also interesting. even from the very beginning, when you are just designing the clothes, you need multiple fit models because it is just if it is just a regular size two or
size four, you keep grading it up. by the time you reach size 16, there are a whole different set of considerations that come into place so you have to have multiple cuts. you cannot just sew together four pieces of fabric. it's actually eight pieces of fabric or something like that. when you get to the factories, just like u.s. retailers are not set up necessarily to sell to plus size retailers, factories are not meant to make these kinds of clothes. if you are making clothing for h&m and gap and nike and you only have demand for little bit of plus size you might not necessarily have the capabilities. carol: >> we are talking a lot about brick-and-mortar, but what about the online world? has that embraced plus size retail? shelly: going back to your earlier question on where our plus size shopper shopping, online has been a huge growth area. they do not have to deal with the stigma of going into the stores from an emotional perspective. from a practical perspective,
there is also just a lot more variety online. carol: in the etc. section, a look at the growing feminine hygiene market. david: we spoke to reporter jennifer miller. jennifer: it is something like $15 billion globally and in the u.s. i think it is something like $4 billion. but it has not changed very much in the last 50 years. now we are seeing a lot of new companies. david: why are there so many new companies? jennifer: i think it has to do with women being fed up in which the way these products have been marketed to them historically. carol: probably by men. jennifer: probably by men. carol: sorry david. jennifer: we are talking about very large companies that are selling a kind of period utopia, call it, that to when women get their periods, it is great and wonderful and we
are prancing around in a field of flowers, and wearing white spandex. and we are very happy about it. of course, no woman actually feels that way. carol: there are companies that are also being kind of socially responsible and giving back. so there is that mission as well. jennifer: all of these companies have made a social mission. they have woven it into the fabric of their company and that is really how they are selling their products. the idea is that you are confronted with a company that, you are getting your period, here is this new product but you should know there are disadvantaged women all around the world who do not have access to the same products that you do, so buy from us because we are going to give something back. david: and perhaps pay premium to do that. jennifer: and pay a premium to do that. the organic tampons are roughly three dollars to four dollars more a box. the period underwear run between $24 and almost $40. carol: a big difference. jennifer: it is really first world women, affluent women who
can afford to buy those things. david: a guide to picking out the perfect summer sandals. carol: here is editor bret beacon. bret: think of it as a summer sneaker substitute. if you were going to throw on a nice pair of dress sneakers, try a pair of sandals. you would be surprised, they can go with outfits that are not just a t-shirt and shorts. carol: any rules? for wearing a mandal. bret: make sure that your pants hit just before the top. you do not want it sagging. david: at the ankle. bret: also, take care of your toes. if you will be in the office or around the public, you want your toes to look professionally manicured. david: you have a number of these in the section and these are kind of chunky. these are not light mandles. bret: they are meant to get you through the day, and they range from $50 for a tivo through more more than $1000 for a valentino.
david: bloomberg businessweek is available on stands. carol: also online and on bloomberg tv. what story did you like the best? david: i really liked the story about national geographic. i think the magazine, the yellow border, the photos. more than 100 years. i had no idea about the tv arm programming was doing and this wrinkle with fox getting involved, james murdoch. super fascinating. carol: i love the story about warren buffett because he has not dug into investment technologies. he may be making a bid for yahoo!. david: join the club. carol: i feel like he is changing his tune. the oracle of omaha is doing something different. i thought it was interesting. david: thank you very much for watching. carol: we will see next week. ♪
♪ emily: i'm emily chang and this is the best of "bloomberg west." coming up, the google developer conference is all about ai and vr and we hear about the company's newly announced android tv set-top box. plus, facebook faces a fallout of accusations they're trending topics section is biased. and, he handpicked a man to lead microsoft. we will speak to john thompson about microsoft, and brexit. first, the highlights from google's development conference. e