Oliver we are here with megan murphy. To talk about this weeks issue. First off, jumping into a story that you wrote about, they storm that donald trump tweeted trump caused when he tweeted about taiwan . Megan this continues to reverberate days later. We had a call that ended 40 years of the approach of not trying to recognize taiwan but trying to bolster taiwan. And trump shows he is not afraid or not going to be reined in. When this initially came out it seems like a pr gaffe. This is actually a yearlong lobbying effort. We see people close to trump advocating for him to approach taiwan. And a tougher stance on china. China immediately came back and said that he was criticized the editorially on their front pages. When you think about the respect to china and putting in the trade tariffs, for your big first move to be a diplomatic call to taiwan, it shows people what the administration will look like. Carol another country in turmoil italy. It isnt just about the political situation. I think the bigger story is what is going on with italian banks . Megan the referendum was interesting in the sense that this has been priced in with the markets. Renzi getting the reform he needed and you are exactly right. Italian banks, most importantly the largest bank in italy, have had multiple bailouts. And it is really trying to go back and raise more capital. To stave off another round. This is a bank that has long been in trouble. One that has always been referred to in surveys as the capitalization of european banks as the weakest. And there isnt the issue of turmoil, in the sense of what is going to happen to the banking industry, but it does put the situation in a political vacuum. And what people are looking at, although we have seen bank shares rising, what this means in terms for the euro and the effort to make a more recognized effort for banking stability . That is what people are really looking at. Oliver lets go to corporate politics. Google x tell us about the cover story . Megan it is such a great piece of work. The group of engineers and the people who have long done moon shots. Whether that is google class or internet in the sky through balloons or a lot of the other ideas that they are passionate about with changing the world in a big way. Google brought in the former cfo of Morgan Stanley who is taking a business look at these ventures, saying, how do we justify this . Google is going through an existential crisis. Carol we caught up with a report you talked about the other bets. Larry page shocked the world by deducing this new structure. Where google would be a Berkshire Hathaway with all of these subsidiaries and the big question is, how do you continue to do all of the crazy stuff that google has been doing . And maybe the second question is, it do you want to do that stuff . Google makes all its money in a specific way. Advertising, search and youtube. And it has 100 other businesses. A lot of which make great products but very few make money. The other bets . It sounds almost derogatory. But yes. So google class was one of them. Its not around anymore. When you think about why they did this reorganization, partly because of this experience. It was a pretty interesting product that was badly marketed. You could imagine if they hadnt put googles name on it, if they hadnt had the big launch. But there is a fashion week show where they walked the show wearing it. It helped heighten the sense of disappointment when people got the device and realized that they couldnt do that much with it. And if you look at alphabet and google, they have been awesome at making Cool Technologies but not so great at turning them into businesses. So a good idea but too soon . Theyre spending a lot of money on this but it kind of sizzles. It kind of depends on what you are talking about. There were marketing issues. With the self driving car, google has seen to be ahead of the Game Technology wise, but in terms of the business seem to be falling behind uber and tesla. I think there is a question of whether they have a Business Strategy besides the technology. So i think that is what it comes down to. Smart engineers and theyre trying to get better about bringing product to market. Oliver lets talk about the fun stuff. We heard about google x which is shrouded in secrecy. At the end of the day, theres some pretty cool stuff. The core things are the self driving car, loon, balloon powered internet you can think of these as little satellites that they float in the stratosphere and the other big one is weighing, delivery drones. Theyre doing tests in virginia where they are delivering chipotle. But the plan is that they will deliver lots of things. And they are bigger than your average drone. Oliver and theyre probably a handful of other products that got killed along the way . We know there was something called foghorn, a plan to bring hydrogen fuel. There was a blimp, a cargo blimp and there was a plan to build giant tvs. That they also seem to have killed. So what theyre trying to do is be a little bit smarter. In the past, google would just invest in cool things. But now they say, is this cool and is it a business . If it is just cool then they are trying to be smart about the investments. Carol there has been no new moonshot for two years. Is this a result of the chief Financial Officer . They have said to my cowriter and i that it is just a coincidence. It does feel like there have been a conscious effort to pull back. We expect that the next moonshot will probably happen with robotics. They acquired a big mass of robotics companies. And this is part of the weirdness of google in the past, they didnt really have a clear mandate. And what theyre trying to do no is get those into shape and i would guess if we hear from them in 2017, it will involve robots. Although i dont know exactly what they will be doing. It is possible that they will decide that the robot thing, we need to keep working. Oliver up next, a box retailers have found a new way to ring money out of the small towns that they operate in. And donald trump. Corporate taxes and how the rest of the republicans around him feel. Oliver welcome back. In the industry section, make big box retailers are finding a new way to lower Corporate Taxes. But it comes at a cost but not to them. Carol you write about something called the dark store theory. What is that . A new way that retailers are trying to argue their property taxes being appraised. The traditional method that cities and towns have used to figure out how much the bigbox retailer is worth, you look at how much the land is worth and how much it cost to build it and then they mark off for depreciation. Ws would build a store for 10 million. For tax purposes, it is worth about 10 million. But with the retailers arguing, it is that the store should be valued at what it would be worth if it were sold. So if loews closed that store and is set how much would that , sell for . And with the comparable sales data, they say no, that store with sale for 3 million or 2 million. A huge difference. There are comparable sales out there that they are using. Vacant stores that they are saying hey, that is how much it is really worth. It doesnt matter that it was worth 10 million for us to build, if you sell it on the open market, 3 million. The cities are fighting it. Obviously, this is a huge difference in property taxes. They say it is not a fair comparison, it is a city company in a different community. Oftentimes they were closed because they were in a less desirable area. So that is the property tax story. Oliver tell us the specifics about what did the determination was the outcome . Marquette, michigan it is , remote town. Lumber, an unlikely place for these battles to play out but loews built the store around that amount, and years later they came back and said, we built this 10 million store and you help to pay for the infrastructure and the utilities based on the assumption of what we would be taxed out that weve actually done thinking and it turns out based on what other stores have sold for, this store is only worth 3 million. Loews won the argument in front of the michigan tax tribunal. Judges agreed with them. And this town has lost hundreds of thousands of dollars in property taxes from loews. And then other big box retailer said they would do the same thing. So target, best buy, kohls and Car Dealerships in this town have made the argument, well, i know it cost as much to build the store but comparable sales, Car Dealerships dont solve it very much. And that county has now lost 2 million in property taxes. They do not have a 2 million is a a chunk for them. This isnt orange county. They do not have a next or 2 million around. They do not have an extra 2 million around. So they have been tightening the Purse Strings and cutting back on things. The Fire Department puts off new equipment they were planning on buying and the Fire Department will end in the red. They dont have extra money. Next year theyre looking at cutting back on hours the sheriff patrols the township. All sorts of Little Things you wouldnt even think about. Oliver moving to Corporate Taxes. In the opening were more remarks section, and editor is looking at the proposals donald trump has said about Corporate Taxes through speeches but mostly through his tweets. He had a series of tweets, six, a lot for him, about companies that move jobs overseas. He said, if youre going to do that, dont expect you can just bring products back into the u. S. If you do that will put a 35 tax on you. And this struck a lot of republicans wrong. People in his own party, including kevin mccarthy, who said hey, there are better ways to do this. A junior House Republican said, does it make venezuela great . Republicans tend to be a party of, set rules and let businesses comply with the rules and get things done. Not a party of having the president come in and make decisions, daytoday about who wins or loses and that is how things seem to be going under the future trump administration. Carol i love it that you say, tax policy is complicated. Both sides agree something needs to be done but it isnt something that can be done in 140 characters or less. This is a complicated issue. And it is where we need a leader to look at tax policy in a smart way. My article is not tax policy overall. Business tax policy, which is complicated enough. It is broken. We have the highest or one of the highest among major countries Corporate Tax rates. And yet, the amount we collect as a share of gdp is below the average for the rich countries. So clearly, something is wrong. We know the wellknown story of the profits being held overseas because people dont want to pay the high tax rate. Something has got to change. My article is about the house gop plan called a better way. And actually, it makes a lot of sense, what they are talking about. It is moving to a tax plan that is new, it is pretty innovative, it is called destinationbased cash flow tax. A change from the Corporate Income tax would have beneficial effects. And interestingly, it has bipartisan potential. A prominent economist wrote a piece on it few years ago, endorsing this kind of tax. Oliver this is a big topic. A ton of strategy reports i have been getting from the equity market strategists talking about what this Corporate Tax policy could do in terms of earnings. But what is interesting is that paul ryan has a book and donald trump tweets. What is the in between . A matter of doing the math are trying to figure other ways . People focus a lot on the number. They said the house plan is at 20 and donald trump is at 15 and maybe we will end up at 17. 5 and call it a day. That is the wrong way to do think about it. These numbers are not comparable. The trump plan is not a comparable Corporate Income tax rate. And the host gop plan is something different. In fact, because it is structured so differently, you could have substantially higher rate on it without causing the negative effects. Oliver up next, we follow the money and connect the dots. And we put dollar Donald Trumps conflict of interest together. Plus, the coalition who may be best situation to deal with the trump white house. Oliver welcome back. You can also catch us on the radio. And also on 99. 1 fm in washington, d. C. And in london and in asia. In the politics and policy section, Donald Trumps presidency will be unprecedented in a lot of ways. Not the least of which will involve his potential conflict of interest around the world. The daunting task of putting this allinone place. He has been just interests all over the world. And you guys headed out. How widespread are they . Zero the philippines businesses set up to do business , in china even though they are not yet. You have argentina, panama, azerbaijan basically any place where donald trump has been able to find someone willing to pay for his name to put on a luxury building in an upandcoming city. He is trying to do business there. Oliver where do we even start with this in terms of figuring out the previous reporting that youve done there has been no , precedent for this. So how do the powers that be figure out where to begin . How do you handle this . So what were waiting on now is december 15, donald trump will tell us what he is going to do to handle this. This will be the first concrete sign that we have other than Rudy Giuliani saying the kids will run the business as to what they will do to try to mitigate perceived or actual conflicts of interest. Oliver so the onus is on him right now to take leadership on front . This entire it is. And hisounting on him hopes to make his presidency successful. If he doesnt do anything, all these questions that people have been filling the void will follow policy. If he changes relationships with taiwan, as he did this week why , is he doing that . Is it because he wants to have a business there . That is the kind of thing that will dog every action his Administration Takes Going Forward if he doesnt create a credible barrier between himself and his business. Carol how do you do that . As president , your hand will touch of them ultimately. As you lay out and the map, he has businesses everywhere. How do you avoid talking to officials in scotland where there are golf courses or even in the United States where he redid the Old Post Office . How do work that these relationships. The government owns the post office so how does that work . It feels very overwhelming. And when you talk to the barack obama and george bush administrations who have been commenting a lot on this and this is why they say he has to sell. He has to put it ipo and get rid into of it because otherwise there is no way to separate. From what we have seen, i dont think were going to get that. Carol so much of his business is licensing deals. Where somebody paves to have his name on a building. He talks about his brand and how it is even more valuable now. That is a lot of his financial worth. Thats the fascinating thing. Those deals cause the most conflict. They do create a pretty free and ready stream of cash flow for him while the deals are in effect. But even if he were to sell that small portion of his business, the majority of what makes the Trump Organization tick, the most boring assets, stake in buildings, trump tower and the , American Golf courses, you could do a lot to mitigate a fractional loss by getting rid of the International Licensing deals. But who wants to own the ability to license the donald trump name when they dont get to control what he does . Oliver up next, a researcher turned venezuelan whistleblower. Plus, the drug that could help kick an opioid addiction. Oliver welcome back to Bloomberg Businessweek. Venezuela has a lot of enemies in washington but a few are more connected than committed to and then we will look at if it is a cure for opioids. All of that ahead on bloomberg this week. Business week. Carol we are here with the editor in chief, megan. So many must reads. A great medicine and some say a deadly drug. Its really gets to behind the scenes of what plays out across the industry, this regulatory battle between people who have a product or use a ,roduct they find is helpful huge andt is been a emerging crisis with people being addicted to opioids. Here is the substitute that some people take and allow themselves to win themselves off opioids or make their pain go away even more effectively. The regulatory battles that have gone on an follows one womans journey as she became a kratom user into taking this on the role in making sure she would baby to get it. A fascinating glimpse into a agencies can change her life in ways you did not expect for oliver lets shift to another great story about an interesting character. Nigel, tell us what he is up to. Farage, this is a great story. Nigel farage and donald trump, they struck up a very quite unlikely, a natural friendship, so to speak, about populist figures from both inner countries. Nigel left as leader of the u. K. Love poland as a buffoonish type character, led a populist revolt , the man who was a big, big force behind a driving brexit likes to callrump him a self brexit times five. This piece says it is the nigel we have come to know, telling the supporter he needs to leave to go smoke. World, he is really pushing for a bilateral trade between the u. K. And u. S. And obama said famously, some people in britain said he overstepped his perimeter, he set the u. K. Would go to the back of the queue. And they did vote for a brexit and theresa may is working to force trade relationships not only with america by other countries. You have nigel farage, was one of the leaders behind the brazen movement, saying i want to really force of this trade agreement and it is a great story that shows how the unlikeliest of characters is putting on a whole new face to the public. Carol this have to do with another interesting individual, the guy who was a lowlevel researcher at the imf and is not at the epicenter of a covering the things bad in venezuela. Megan someone who do not cultivate this and do not look for this, just became this almost receptacle of people comic to him with stories of corruption. Drug venezuela and venezuelan ustry and it shows throughout venezuela and venezuela industry and it shows it is a personal thing for people. Yes, maybe they are looking to leave the country, but what made them, forward to talk to him was what they knew, they were disgusted by what they were seeing. It is well worth a read, getting behind a scenes look, how upset some people are. A lot of great interviews in the story and we spoke to reporter ethan. Looking at howut it helps you understand how venezuela has fallen apart over the last couple of years. We found ourselves with him and find ourselves completely fascinated by his world. Brokerbecome a kind of breaking people who want to give testimony or feel they have no chance no choice, u. S. Who are pursuing drug trafficking. Carol i feel like he is in the middle of it. Take a step back, a lowlevel employee at the imf, how did he come to become at the epicenter of that bad in venezuela . Ethan he was, he had come here as a young graduate to study english and expand has arises from venezuela. And he came in 2000. And he started working at he met a guy at a party became, an israeli guy, who went to work for a Consulting Firm that was wasd by big bank that worried money comment through a bank they wanted to buy in panama had uranium money which would violate u. S. Sanctions against iran. From there, he became a freelancer and kind of had a knack of looking at to these things. Where did his business start to prosper . Who get from contracts . Ethan what happened, he had been an intern after the oil company before coming to america and when this guy called him and said were looking into whether the company is involved in uranium money through panama, he called a friend of his and it all started for open to all. A whole bunch of documents and he worked the story. It was part out of patriotism, he was not making money. Ultimately, he realized that u. S. Agencies would pay him to bring these folks and he could act as an intermediary, helping the people wanted to talk, how to deal with u. S. Agencies and the agencies paid him. Of then, those folks, some them were wealthy, were willing to help pay him to get them out. He went to work as a consultant for big banks and hedge funds. Carol you say he brought two dozen elites from venezuela to the United States to tell about what was going wrong in venezuela, specifically with her giant oil company. Youre talking about former generals. Former ministers for you very serious people who some of them had been involved or seen bad stuff. Some were simply being pursued by the regime in venezuela. And martin became a guy they know who had links to u. S. Agencies and became their intermediary. He also has a very charming manner and he has he also sees you down and often they would meet at a caribbean island and he would download what you knew as someone wanted to get information out. He would figure out where it could go and he ended up being this amazing intermediary. Carol you met him . Ethan i spent many hours with him. Carol what is he like . Ethan he is a very interesting guy. This world seems like an underworld. Martin is very charming and i think he is both sort of a bulldozer and a pussycat at the same time. He can get his way with also sorts of moves you through his sincerity. You do not have the feeling he is out to screw you, to be perfectly honest. Part of it if he is very upset at what has happened in venezuela and he wants to have the government be moved out. Oscar bait up next, the list to allat off the bank of her bank the live to what one upstart is doing. Oliver welcome back. In the focus on Small Business section, Technology Opens up about the challenges of quickly building a robust and Diverse Workforce. Carol messer and i spoke to the reporter. Carol Silicon Valley has been under pressure to have a more Diverse Workforce if you look right now, that is not what they have. That started a couple of years ago in 2014, a lot of pressure on big tex companies, google, apple, facebook, to release demographic data. Something people were calling for an going to shareholder meetings. Google was the first to do with. And they put out there numbers, slicing and dicing the by different racial groups and gender and the company overall. A bunch of other Large Tech Companies followed and their representation of white people and asian people a very few blacks and latinos and a lot of the man, around 70 men to women. Flagr lets talk about technology that is growing that plays a major role in this story. Why did you focus on them . Ellen they are interesting when it comes to discussing diversity. Who has run by a man been around the valley for a long time and he cofounded flickr. It is a new project that started in 2014. It had been built before. They were a small team where this was going on and they saw these Large Companies with a time who at the time release their numbers and said we have we have a chance to start early and hiring from a much wider can makepeople, which it easier for us to continue and that pattern. They are an example of what i would call a second guard of companies that started prioritizing diversity. A focus of Small Business section, a small maker in brooklyn with big ambitions. Here is the reporter. It is a Startup Company that makes Energy Drinks and tea from that plant that comes from ecuador. A brooklynbased company and they are trying to create a more Natural Energy drink option purred oliver of course it is brooklynbased. Tell us the science. Jennifer it has a whole lot of caffeine but the way it hits you , so ive heard, is slower, so the way coffee hits you right on, the plant is a slower build. It has been dropped by indigenous populations near the amazon for a long, long time. The founder, tyler gage, experienced this in his studies when he was in college and said it is an amazing plant and i need to bring it to the u. S. , to this market. Asol he went to ecuador said heres what i want to do and they laughed at him. Jennifer he said i want to set up a supply chain and bring the plant in the u. S. And i want to pay you to grow in for me. Said, this isthey something would have had forever and not something valuable to the u. S. Consumer. Oliver how come nobody tried to commercialize it before . Jennifer it was out there nobody to did vantage for oliver how to tyler stay stumble across it . Jennifer he was working for an ethno botanist. He went back to school and traveled back and forth to peru and ecuador and ended up, he was in a class, he went to brown university, he was in a class where they were focusing on entrepreneurship. Basically, the goal, come up with a business plan. Interninged to go for this plant it will beverage. Carol he is the ecuadorian government, they have invested a lot of money. Invested 500,000 right at the beginning. Eight years in and you can see in certain foods, Corporate Headquarters like google and amazon and they are rapidly trying to expand. They feel like they are in start up mode. To the growers, it is light visit huge american company. All of her bank the glamorous point oliver the glamorous point. Leonardo dicaprio, channing tatum, what is up with a hollywood support . Jennifer i think it is the story. Tyler started a nonprofit along with the company from the beginning. As are supporting these indigenous growers who would otherwise have to grow other left and lessd of in less than humane environments. It is a great beverage. It is also a great story, the humanitarian effort. Celebrities really like that. Most prolifics startup evangelist has a new product that may be a tough sell. If you are a fan of elf on a shelf, why not try mitch on a bench. Oliver welcome back to Bloomberg Businessweek. You can listen to us on the radio on sirius and am 11 in new york. The bay area. Session nology section, a kingpin of israels redhot texting. Carol messer and i spoke to a reporter. Carol gabrielle, you told about israels most prolific startupman. Who is the . He is many things break an entrepreneur, a venture capitalist. He is somebody who comes from outside of the lit of telik , he is from aviv the south. He never went to college. Is had tremendous success in getting tons of money and attention from his ventures. As you describe 10 oliver as you described him, and is like a title, it is not really all of these different titles, not really who you think about as a venture to belist, but he seems sought after and doing some of the big deals in israel, which is a bully area. Which is a huge area. Gabrielle what he asked is adds is marketing prowess and celebrities. One of the things i talk about in my piece is no one had really gone in and seen what is going on behind the rings of how he does this. He does not always raises much money as you think he does. One of the examples in the story, he had a startup that was a war to be instagram and i think he had the idea, he never heard of instagram. Mobley. Its first round of funding race 4 million and little Leonardo Dicaprio was one of the investors. That showeddocument the leonardo put in nine dollars. Oliver it is gabrielle technically, he puts money in. You could argue having a super celebrity with a photo sharing mobile app, it is valuable. , he gavean impression an impression it was more. Oliver he had a little problem with the dicaprio and how he uses a photo sharing service, right . Gabrielle mobli is basically on is last legs and got crushed by instagram. One of the things he talks about, why didnt mobi go well . He wanted himdo, to post selfies on the beach. Having that celebrity paparazzi. Leonardo, was very into saving wildlife would oppose stuff related to his flickr the around saving philanthropy around saving animals. Moshe hogeg did not think it was enough to bring eyeballs. Carol talk about the other startups. A luxury phone. The yo app. Oliver i heard about the yo. It was a phenomenon. Gabrielle the yo app is a testament it is a certain amount of genius. It has been derided the sign of a bubble or the stupidest thing ever, we are talking about it. I havent on my phone. What is going to get attention . The next product that wants to be the big hanukkah toy, mensch on a bench. We spoke to the reported. This guy was in a store a couple of years ago with his son and he said i want a elf and he say you can have mensch on a bench elf on a shelf and you say you can have mensch on a bench. Is sparking the idea. Elf on a shelf was graded a decade ago by a mother and his two daughters. Enter to daughter. The elf watches over the children and reports to send if they are not he or nice. Nice. Ughty or it is effective. The elf reports back to center. Oliver it goes on a couple of weeks before christmas. Matt they show up before christmas it has really taken off. It has expanded into close. Clothes. It is a christmas tradition. This guy, neil hoffman, worked in the toy industry and was at a Nordstrom Department store a couple of years ago and his son, he is from an interface marriage. He is jewish. He said i want elf on a shelf. Hes a you can have mensch on a bench, it came out of nowhere. He said maybe it is a business opportunity. He did a kick starter. Off. Ok the big thing was it got a shark tank, and got 2 investors. It got a lot of exposure it took off from there. The story i did was that, would you do from there . You get a big boost from shark tank and retailers get interested, what happens next . He destroys expand the brand. There are 2 new characters. Hannah the hanukkah hero and a jewish grandma. Found i am already on amazon buying it. I am curious because the funding process is sort of tech savvy and modern funding in terms of getting recognition. It turns into a business through andums like shark tank facebook and getting the word out. It seems very interesting or a case study of building a company and the 21st century. Matt he basically is the kick raced 22,000 and he put in 10,000 to get the product launched. He was a pretty savvy guy and he relies shark tank had a Christmas Special each year and he knew that what a jewish product. He said i have a good idea because of a social media buzz they got a shark tank. He has a marketing background. He knew with social media and he knew his product was a quirky thing that will probably get a lot of buzz. He got it on facebook and a local tv station picked it up and then he is on today show. You do not need a bunch of money behind you. She had an idea spun from his son. Company is projected to raise 1 million next year. Liver Bloomberg Businessweek is available on newsstands. More Bloomberg Television starts right now. The following is a paid program. The opinions and views expressed do not reflect those of bloomberg l. P. , its affiliates, or its employees. The following is a paid advertisement for time life music collection. Do you remember your first dance . Your first kiss . Your senior prom . And falling in love for the first time . What wonderful memories they are. Sherry can you come out tonight tonight the light of love is in your eyes
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