Transcripts For BLOOMBERG Bloomberg BusinessWeek 20160704

Hearing. What it does is leave many people influx. David a huge disappointment to the president. A signature achievement of his tenure thus far. Ellen it is all frozen at the moment. Or a lot of it is frozen. Taking it out of the political realm for a moment, for companies, it is a problem. They have employees who are here on visas and have immigration issues. They have trouble planning what to do with their talent. It is not just a social or political issue. David it is a business issue as well in a lot of Global Economic news. A number of pieces in the magazine, including one by editor in chief john micklethwait. Ellen we have an entire section devoted to brexit. It is a huge deal. We have an interesting essay by john micklethwait, the editor in chief from Bloomberg News who writes about it from his personal point of view, since he is british. We have an interesting story also on internal u. K. Politics, which is a mess. David talk about johns piece which remembers him remembering his gap year. He was asked about the political turmoil in the u. K. Then. Ellen it is an incredibly charming story. He talks about meeting a guy named milton, who was asking him about the u. K. And asking him about the conditions in the u. K. And then tried to tell him how things would change under thatcher. It was only later he realized it was the eminent economist milton friedman, which is really a nice story. But he turned out to be right about what he thought about what thatcher would bring in. David what does john think about this vote . Ellen i think he thinks it is a setback. I think he thinks it is the end of classical liberalism that the u. K. Has enjoyed. I think he thinks it is a mistake. He takes us through the history of the change in the u. K. Overtime and what this means. It is a special perspective that we are happy to give. David and liberalism, he notes, has not been entirely great for the u. K. Ellen right. He says it is better for people on the upper end of the economic spectrum rather than people who are less fortunate. David your economics editor looks at the vote. Peter coy takes a step back and says longterm, that may not be that big of an issue. Ellen peter says down the line, it may not be a total divorce. And as little more optimistic then some and basically says it is not over yet. David i sat with peter coy. Peter if i were a brit, but what is done is done. It is not all bad. First, britain was already the core of the European Union. It was not in the euro currency, which is supposed to be good be all and end all of the European Union. All countries are supposed to be going in that direction. Written had opted out from that. They kind of only had one foot in the water. Peter right. The other thing they did not go into is the schengen agreement. They did and still do have free movement, as long as they are in the European Union of member country people. But anyone from outside of the Schengen Area who gets in does not have immediate access to britain. So in those ways, they are already out and what we are talking about is another step back for them. To some further fringe of europe. One thing, as a plus for them as you wrote in your piece about david cameron, the Prime Minister pointed out that the u. K. Economy is doing ok. Peter they had a buffer. The funny thing about it is if it is true their economy is pretty decent, why did they pull out . To me, it is about two things. One is the fear of the big draws on their budget to finance and other problems. And then immigration, uncontrolled immigration. They worry about people from Eastern Europe coming in. So even though they could control the flow from, say, syria, they could not control the flow from, say, romania and poland and lithuania. So those two things. But if britain was a successful economy, as you say, how about the countries that do not have successful economies . Or how about the countries like germany, which resemble britain in the sense that they are contributors to the eu. You see these different sets of countries in the eu, both seeing the brexit as precedent for why they should stay in the eu. The uks pretty wellpositioned and the economy is pretty strong, but in the near term, there is so much uncertainty. We have heard about that a time since the vote. How much will that flag the economy . Peter it hit the stock market really hard. It is going to probably put a crimp on investment for some time to come. That is why a lot of people are predicting a recession for britain. Goldman sachs, for example, is forecasting that now. To me, that is not the big story. The big story is that longerterm impact. And Something Like stepping out of the eu is not just one of these cyclical things for a story for a day or a week or a month. It could be in semipermanent new condition. So can britain and the eu find a new modus vivendi, where they may not be as tightly linked as before but still manage to trade. Carol it is tricky. Other members of the eu who may be questioning, if the eu makes it too easy for the u. K. To leave but still have the liberties of it, it may make them leave as well. Peter it is true. What is surprising is the germans have been surprisingly open to cutting some type of deal with the brits. German industrials see britain as a big export market. They do not want to give that up a they may be putting that as their number one priority and worrying somewhat less on the longterm repercussions. Carol up next, another scandal in britain. David and the doctors allegedly bilking the u. S. Out of more than 100 billion. David welcome back to Bloomberg Businessweek. I am david gura. Carol i am carol massar. You can also find us on sirius fm at 119. David in this weeks features section, an investigation into the uks biggest insidertrading case. Suzi the u. K. Regulator had not prosecuted anyone criminally prior to 2009. Insider trading was what they grabbed on to the show that they were looking at institutions. This is one of the first investigations they opened in 2007. It took a while to come to fruition because of various Judicial Court issues, but this is their landmark case. Around seven people arrested in 2010. It really took the city by surprise. This had never happened before. A number of these people were caught up in those raids. The recent outcome is what we have seen. Two convictions a mixed result. Carol going through your story, i felt like you needed an organizational chart to understand how it played out. There was one man who was interesting was a man who went by the nickname of fatty or mad punter. Suzi iraj parvizi was a largerthanlife guy. You had the bankers who were from prestigious firms, used to dealing with established ceos. Then you have this underbelly financers who were cutting their teeth on sort of have you heard this, have you heard that, and placing huge spreads effectively professional gamblers who were using stocks and shares. Iraj parvizi describes himself as a professional gambler. He did the horses, played poker. For him, stocks and shares was another way to gamble. Carol and he was quite a character in the courtroom. Suzi absolutely. He is the son of an iranian diplomat. Part of the persian revolution. He was in england. He dropped out of school and started working dead end jobs. And a chance meeting put them in the business world, getting a sense of what it was to make real money. From there, he became a selfmade man. Buying thoroughbred horses, establishing restaurants and boutiques to become this huge character. Carol the u. S. Government is accusing hundreds of nurses and doctors out of scamming the government from billions. Peter this was the annual takedown, as they call it, by the department of justice and the office of inspector general. Every year, they save up some of the Health Care Fraud investigations they have been working on, and a time of them for a big june smash. This year was the biggest yet. They are getting more aggressive. There is more money being spent on Health Care Fraud investigations. They ranged all over the country. I think there were about 30 states involved. I think there are about 37 different judicial jurisdictions. These are doctors, nurses, pharmacy executives. There is a lot of compound Pharmacy Companies have been involved in terms of investigating fraud. It ran the gamut. David this is an annual event. We have seen a policy shift. You write about that. What has changed . Peter last september, the department of justice issued guidance to all of their lawyers, saying no more deals with individuals in investigations of large corporate fraud. Or even small corporate fraud. They will not make a deal that says ok, the company may have committed medicare fraud, you may have been writing prescriptions or housing nursing home patients or doing unnecessary things, bilking taxpayers for money, and letting off the executives or doctors or individuals culpable. In the past, that ability for prosecutors to make deals in these kinds of investigations led to a lot of settlements, and it was helpful. It provided leverage for the government has say we will let your ceo walk, let the doctors walk. There may be evidence they were involved, but you pay us x Million Dollars and agree to some sort of Corporate Compliance in the future, and no one will be charged. Well, the department of justice announced that will no longer be the case. Now it takes special permission from washington to do a deal that lets an executive or anyone else walk and just hold the corporation liable. They want individuals in the dock for medicare fraud. David up next, under armour reinvented its supply chain, and baltimore says thank you. Carol welcome back. I am carol massar. David i am david gura. Carol in this weeks features carol welcome back. I am carol massar. David i am david gura. Carol in this weeks features section, how under armour is changing its supply chain. We spoke to reporter rachel monroe. Rachel they are building a new club in baltimore, which is the heart of their new headquarters, which is a huge, new neighborhood that kevin plank is essentially building from scratch. It is part of a 20 year plan to really reshape the company. David talk a bit about the growth the company has seen the last two decades. It has gone from kevin plank literally driving up and down the east coast to a really big enterprise. Rachel i think he said he put 100,000 miles on his car that year. Under armour has taken over adidas, so they are the second biggest Athletic Wear Company in the u. S. They are projected they had 4 billion in revenue last year. It is growing every year. Breathing down nikes neck. Carol talk to us about kevin plank. No one at the company will say nike, but he is looking to reinvent the supply chain. Rachel he is very passionate about the idea of how can he do things better. That was the idea behind the company from the beginning. Making a better shirt rather than the shirts Football Players were sweating in. He would do that with local to local manufacturing. The idea was to revamp products to bring in more technology. Production moved more close to the point of sale, rather than having an 18 month supply chain and shipping things back and forth across the ocean. David he is opening a Innovation Center in baltimore, where under armour was based. You had an amusing anecdote in the piece about a call he makes to network news executives. Kind of amazing. Rachel he was watching the news one morning and realize that when they showed the weather on the today show or Something Like that, they were showing new york, d. C. , philadelphia, but not baltimore. So he did whatever they had to do to get baltimore on the weather. He is always thinking like that. Always thinking about the brand. Not only of his company but the city where the company is based. Carol quickly, the company has been around 20 years. Is this a step for the next 20 years in the company . Rachel yes, i think they are thinking about how they can beat nike. Carol in this weeks etc. Section, we got a handy guide to happy hour areas. Bret there are a ton of things you can do with your coworkers, your family, by yourself. If you give it a little bit of thought, you can plan some pretty fun stuff. There are Concert Series all over the country. There is a great one in brooklyn and in millennium park. There are wine sipping events, if you want to have a little all call. You can go to houston and watch 250,000 bats fly. It is something different, something to switch up during the work week. David and the happy hour can often lead to the work dinner, which usually takes place at the restaurant you probably would not want to go to. You are sitting outside as well. Bret right. When entertaining clients, you go to the steakhouse, it is what they want, fine. But we previewed five restaurants that are known for al fresco dining. If you have to entertain clients, there are plenty of places to do it outside. David still ahead, happy hours with alcohol. Carol and the geneediting company and their scientific breakthrough. You guys be good. Ill see you later [ bark ] [ bark ] bye. See ya pal. Ever wonder what your pets do when you leave home . [ laughing ] aw you cutie pie. Aw. Aw. Aw. Aw. [ barking ] [ washing machine running ] partys on know what your pets are up to with xfinity home. Xfinity. The future of awesome. See the secret life of pets, in theaters july 8th. Welcome to Bloomberg Businessweek. Carol we are coming in from inside the magazine and others. Delahunt, the real cause for donald trump taxpayers. Kickstarter gets creative. David a scientific breakthrough. Carol all of that is ahead on Bloomberg Businessweek. David there are so many must reads. Lets start in the finance section. Big news a few months ago about saudi arabia going public. There were plenty of people with a keen interest in how that is going to happen. And when it will happen. The issue for them if its passed Investment Banking around the world not having the strongest of years, so saudi arabia is talking about selling assets. And the possible ipo, which is valued at trillions of dollars. Trillions. So for investment banks, there is a lot of work to be done it. Done. And the whole idea of the crown prince who is a very important leader, is he wants to create the Worlds Largest fund, they will be doing that with investment. You have a lot of bankers visiting. David the brexit section, you look at where Financial Firms might go if they leave london. A lot of banks are saying now that the United Kingdom is exiting, where could they go. Dublin is one of them. A place for taxes are more favorable. Ellen all of those bankers working in the city can speak the same language in dublin. That is a big plus. There is frankfurt, which is a big Financial Capital and it is important. David negative marks for not having a very fun nightlife. Ellen it is no berlin. David paris is a city that is also being floated. They would like to get those things back those banks back. They could actually recruit some of these banks. Ellen its a silver lining, but not for the u. K. David amsterdam . Ellen amsterdam is a short flight away from london. Luxembourg as well. Its a short flight away. It is convenient to city hop in europe and the food is great. And there are all of these cities that are willing to take advantage of what could be a big vacancy. David there is a piece on crisper. Cannot really underestimate how big it has been for medicine and agriculture, a new way of changing the way that genes work. Ellen its a huge breakthrough. It involves using the way the body, or genes, naturally attack viruses and snip them out. I am simplifying this, when you combine it with certain proteins, you can program this function to trim out pieces of dna that are irregular and put the dna that together or stitch it with another piece of dna. It uses a guiding piece of rna. Its really complicated. David and we talked about it could revolutionize everything. It could be as big a deal as the transistor was. It is a foundational technology, a process that bacteria used to fight off viruses. But now scientists believe they can edit genes easily had cheaply. You know about the genome. You know about gene editing and gene therapy. But crisper takes it to another level. There are hobbyists laying around with this in their homes and its like copy and paste on a word processor. Carol bring back the woolly mammoth. There are some real applications in terms of what can be done. You write about it as the discovery of the century. But there are some key players, so i guess, who gets the credit . Who gets the monetary reward . David which would be sizable. Investors are not wasting any time. They are putting money in various startups. And the two scientists competing over the patent, they are behind startups as well. And so you have got not just scientists, that businesses behind the scientists, and then investors behind the businesses placing bets on who will end up with the patent. David is it about the money . Or if it will be such a huge thing to harness the Science Behind it . I met both scientists. I set down with them. These are very nice people. They are on other side of the country. And i think they like each other. Carol they each lay claim to it. Robert long story short, she found a way to apply this thing that existed in bacteria and make it something that you can manipulate crazy easily. And he argued that he was able to do it with the human cell. Celebrities says they have the Building Blocks of it and another person says they put the blocks in the right order. Its really up to the Patent Office to figure it out. They dont really care who invented it. They care who files first and he filed first. But he filed an expedited one. It gets thornier and thornier. Its technology and patent law in the same story. It is a heavy lift. But it is fun. David brady time they were on the same enterprise, working on the same enterprise. Robert they were part of the m tedrea that consulted with a company. The Company Still exists now, with a 100 million ipo. The second he got the patent, she left that company and helped found a therapeutic company, right down the road in Kendall Square in cambridge. So they are civil. They see each other at conferences, but they are competing for a patent. And competing for investment. Carol couldnt they share . Robert they might. The Nobel Committee typically only gives out to three people. There are other names in the mix. In terms of the patent, that is often how it results itself with arrangements. That may happen or it may not. In april, they filed in court saying they have talked about settling and decided not to. So they will let it ride for now. David looking at the possible applications going forward, its not worth thinking about the ethical implications. Where are we in terms of the development of this tech technology, houston could we use how soon can we use it for treatment . Or to treat diseases . Robert there has been nothing close to human trials. Sean parker is funding a nonprofit one. They are going to try to do human trials and cure one particular disease. That has not been cleared by the fda. Things are moving in that direction in terms of working with humans, but nobody has actually tried it with the human body yet. David why Donald Trumps rallies are so expensive to taxpayers. And why airlines are trying to recruit pilots. We are the story that is changing everything. David welcome back. Carol you can find us on radio on channel 119, and in new york. David the politics and policy section, the real cost of Donald Trumps rallies. Carol we spoke to reporter, kate smith. Kate the rallies you see, they are costing quite a bit of money. And more so than they ever really have. So donald trump is having big rallies that are costing tons of police overtime, additional personnel, and security. So all kinds of costs. David who is shouldering that cost right now . It is the taxpayers . Its not the campaign . Kate i talked to 50 different towns. I talked to them about their experiences and the rallies and only one of them said they had been reimbursed by the campaign. They got a check a couple of days prior to me calling them. He said he had to do a double take when he saw the check in the mail. Everyone had either not submitted a reimbursement because they have no obligation its not the campaign . Kate i talked to 50 different towns. I talked to them about their experiences and the rallies and to reimburse for the cost. And then the other ones that had submitted reimbursements have not gotten anything yet. Carol why hasnt this issue come up before . Kate its not the First Political campaign. It has not been an issue for a couple of different reasons, just the nature of the rallies, the mood. Very different than what weve seen in prior cycles. When you compare hillary to donald trump in this election cycle, the way they go about these rallies are completely different. And this is one thing i found this fascinating. And that is, multiple towns of kind of have kind of talk to me about the process. The campaign will call you. It will be a couple of days prior. Thats no exaggeration. For the level of security required, they have to do this in two days. Let alone, they actually run a town and they have other duties. Carol they are responsible for doing this. Kate and the secret service. Hillary would come in. Her campaign will come in and say we will be visiting you on saturday and its wednesday. We would like a venue of 200 people. And they will say, ok maybe the veterans hall. They distribute 300 tickets. Assuming a lot of people will not come. So the Donald Trump Campaign, from what i am hearing, the staffers will call and say we are visiting. What is your biggest venue . They say maybe the high school, it fits 1800 people. Then they distribute unlimited tickets and there is no cap. And so what will happen is, they in one town distributed 6000 tickets to an event that could hold 1800 people. It is just an Amazing Campaign engineering right have thousands of people who have driven who knows how long to get there and they are physically put right next to all of these antitrust protesters. So of course you will have optics of all the people trying to get into the rally against angry protesters. It is so obvious. You have a lot of extra Police Needed to handle that situation. Whereas, again with the clinton campaign, everyone got in. Carol right. David i wonder what the Donald Trump Campaign said about this. Keeping in mind what you just said, it could be an easy argument to make my why would we be on the hook for this but there are antiprotesters there wreaking havoc . Kate its not their fault. When i reached out to the Donald Trump Campaign, the campaign is responsible for the security inside the venue. They have to handle all of that and pay for the venue. Which, i mean, it isnt that expensive. Everything outside come up or the Campaign Laws outside, or the Campaign Laws in the u. S. , it is the responsibility of the town. There is a process by which you can submit however much it costs. The campaigns are under no obligation to do so. Carol a dilemma facing airlines. David there is a pilot shortage. We spoke to a reporter. Mary currently they are fine. In terms of the number of pilots available, it is more the Regional Industry that is being hit by the shortage of pilots. What is of concern is the forecast that in four years the Major Airlines like united and delta will start feeling the shortage of pilots and by 2026, the shortage will reach 15,000 pilots. David i wonder what the Donald Trump Campaign said about this. Keeping in mind what you just said, it could be an easy argument to make my why would we be on the hook for this but there are antiprotesters there wreaking havoc . Kate its not their fault. When i reached out to the Donald Trump Campaign, the campaign is responsible for the security inside the venue. They have to handle all of that and pay for the venue. Which, i mean, it isnt that expensive. Everything outside come up or the Campaign Laws outside, or the Campaign Laws in the u. S. , it is the responsibility of the town. There is a process by which you can submit however much it costs. The campaigns are under no obligation to do so. Carol a dilemma facing airlines. David there is a pilot shortage. We spoke to a reporter. Mary currently they are fine. In terms of the number of pilots available, it is more the Regional Industry that is being hit by the shortage of pilots. What is of concern is the forecast that in four years the Major Airlines like united and delta will start feeling the shortage of pilots and by 2026, the shortage will reach 15,000 pilots. David what happened, this used to be seen as a good job. You could be making six figures and making 300,000 by the end of your career. A what changed . So what changed . Mary one thing was the change in flight hours. That is before you could become a first officer. It was increased to hold six fold. It is hard to get that flight time and expensive. Before that, there was a downturn in the industry after 9 11. There were bankruptcies and mergers. They werent hiring very many people. And you had people who look at the career and said i know this guy who was a first officer at american. I dont want to go into that job and those things started to combine and made the career a lot less attractive than it was at one time. Carol are the younger generations interested in being pilots . Mary they have done studies. They show that only 60 of the kids who think they want to go into being a pilot as a career, only 60 of them say they want to stick with that career. So what some of the airlines are doing are they are going down to colleges. They are even going to Elementary Schools and they are trying to generate more interest in the career. They are working with flight schools. And with the regional carriers, they want to help the pilots more. The guys and girls that want to be pilots, they could help them financially. They want to give them incentives like a signing bonus. David did the airlines see this coming . They have mandatory retirement ages. Mary there is always that fear of a bubble. The retirement age was extended to 65, so that was supposed to help with the bubble. Now they are coming upon a time in 2026 where half of the current pilots will be eligible for they will have to retire because they are 65. So that will be about 15,000 of the 30,000 pilots in the industry. Carol kickstarter finds a way to make its investors happy. Without going public. David and happy hour outside the bar. Carol welcome back. David in the technology section, kickstarter is forging its own path. Joshua they would not give me any particulars about the financials. Neither would any of the people who received the dividends. Carol they dont have to. Joshua they are a private company. They dont have to. And they said they will stay that way. That is a reason that they gave out the dividends as well. Kickstarter has said its not interested in going public they are not interested in being acquired. Carol thats interesting. They are running the business differently than others. Joshua if you were going to pick a company to have done Something Like this, they would have been on the top your list. Top of your list. They donate a specific portion of profits, i think 5 , to charities that are likeminded. They have made into their financial documents that they wont be too clever with their taxes. They will just pay them. Carol what is going on in the world . It is interesting. Does it question the traditional model that has been out there for so long with the endgame being an ipo . Joshua its essentially a rejection of the vc model. Which is, you put a bunch of money into companies, nine out of 10 just dies. And the 10th one is usually about by google or goes public. And kickstarter says we are happy to just move along. We do not need to have astronomical growth. We dont need to reach these arabian heights. We have a Good Business and we like what we are doing and its sustainable. Carol Venture Capital is ok with this . Joshua their main cap is fred wilsons. He said he wanted to experiment with something different. He knew from the beginning that this was the deal with kickstarter and he said it was ok. I talked to some other venture people who were not invested in kickstarter. They said they were intrigued, but they said its an anomaly. They would not want to work under this model. Carol thats what i think when i read your story. There are going to the other companies that will follow like kickstarter. What is the expectation . Joshua there will be an increasing number of companies that try this. Especially in that part of the industry, where they see themselves as the dogooders. They are not a cold, hard profit machine. That is part of their company. Carol helping other people get off the ground. Especially in that part of the. They just want, i got the sense that companies are interested in this, but it will be a small part of the industry. David moving happy hour outside. Carol here is brett. Brett there are many things you can do that dont involve alcohol. We have many of them in the section this week. And happy hour does not have to happen after work. If you know that you cannot get out at a reasonable hour, switch up your routine in the morning. Dont drink between 7 00 and 9 00. David wise advice. Brett thats wise advice. You can try nitro coffee. Which is coming to 500 starbucks. Its delicious. They do it in houston right now. You can workout. Instead of taking the run on the treadmill, in chicago you actually can go to the roof of a hotel and do a cardio workout up there. In los angeles, instead of being stuck in traffic, you can take the new light rail line. You can bring a certain order surfboard on there and it is super cheap. David you asked her colleagues to chart out how they spent their evenings. One of them walked the dog. There are other things you can do besides going to the bars. Brett you dont have to put that much time into it. One of the things we are trying to stress is be conscious of how you spend your time. You can walk a friends dog. You can go to an art park. One of our editors went to play basketball and then got frozen yogurt. They really changed up their night. Carol Bloomberg Businessweek is on news stands now. David what was your favorite story . Carol i had no idea about the pilot shortage. It is really impacting regional carriers. And we talked about how millennials, they are not getting into being a pilot anymore. David not a desirable career. Carol and expensive. How about you . David i really like the piece on what could be this immense breakthrough in medicine and agriculture. I love the back story about how the two sides are fighting it out over who found it first. Universities are fighting it out as well. Very cool. We will see you back here next week on Bloomberg Businessweek. Shery coming up on bloomberg best, the stories that shape the weekend business around the world. The shock of the u. K. Brexit vote, who is in charge . Jeremy corbyn was a resounding defeat. David cameron for heavens sake man, go. United kingdom will not be the last member state to leave the European Union. The European Union is in mortal danger. Shery initial market turmoil warn investors