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tv   Bloomberg Business Week  Bloomberg  September 24, 2016 3:00pm-4:01pm EDT

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we are inside the magazine's headquarters in new york. >> so many issues, including an investigation into the hop -- into the helicopter killing of u.s. troops. new credit card causing as much hype as the new iphone. >> on ahead on bloomberg businessweek. carol: we're here with ellen pollock. in a feature section we take a look at bloomberg's list of the most influential people when it comes to the markets. >> this is something bloomberg has done for six years.
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it has been in markets and we if you talked to various experts within bloomberg news editors and reporters about who they thought was influential this year. >> there are interesting people outside the world of finance. >> john oliver is among them. if you look at the store he did -- the story he did on puerto rican debt, and got an unbelievable number of hits online. most people know about that of john oliver. fewer hedge funds managers are not doing so dramatically well. it is an interesting and diverse list. david: at the top list is theresa may.
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there is a profile of for in the global economic section. there's so much to do with the uk referendum, now they are moving toward article 50. >> the story is how they are --ling her teresa may be be.resa may because she is contemplating article 50. she says she needs to make decisions. she has a lot on her plate, including whether or not they can come up with a trade deal before they actually exit. once she is there she is there. carol: you guys take a look at sam son and their mistake, and it all has to do with apple? >> kind of. they realize the apple was going sevene out with the apple
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and it wasn't going to have a tremendous number of features. they hoped to release the note in hopes of stealing some of their thunder. it looks as though it did not turn out so great. they did the recall and the $2 billion figure is the cost of the recall, which is substantial. david: there is so much enthusiasm about the product from samsung. this company is facing a really to -- ng, having carol: and will consumers now want the phone? david: a new card from chase, the car that everyone has to have. tell us about it. >> chase hit on some magic formula. , the chasehis card sapphire reserve, to be the hot card. david it's designed to be the : hot card.
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>> it's designed to be the hot card. it's a little heavier. when you put it on the table it has a little more weight to it. although not for everybody because they ran out of the metal they were using. carroll: we heard about the heft and the cachet of the car. >> if a credit card could the it credit card, it could be this. it moves around but chase has got it. they had the last one. they have moved on. this is a $450 annual fee. you will get $300 reimbursed to you every year for travel expenses. it knocks the fee down to 150. you get triple points on dining and travel. if you sign up, you get 100,000
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points that can be transferred to other airlines or used to book travel, dining, or entertainment. >> is it truly perfect card? >> it is certainly being accepted that way. people that follow the credit card market will sign up for new cards and have been rushing to chase. carol: they do charge an interest rate. >> it is a standard credit card. they are not giving you free money. it has the same kind of interest rates you may expect from any other typical card, 16% to 23%. people who get this card pay their balance in full. they are not paying close attention to the interest rates. what they want are the rewards. and that is what chase has served with abundance. >> chases kind of caught
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unawares, even though it has all of these perks. demand is way bigger than they thought it would be. >> three things have disrupted the order of operations. in 2014 after the target data breach when chase had to reissue millions of newly numbered cards. the second one was in year later. after the car was announced, they use up the entire inventory of link metal cards. they ran out of all of them. plastic on the outside with a metal core. out of all of them within two to three weeks. was posted last 12 months. carol: it is kind of cool. this is not the first card to have that. they have been other metal core or fully metal cards is well.
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it also has the metal core and people seem to like it. david: who is chase going after here? you mention people who pay off their balance fairly well. carol: younger. has turned out to be younger. that wasn't necessarily the plan. it turns out this card would turn older than chase sapphire preferred, with the majority of applications they have been getting has been from millennials. it is supposed to be someone well-to-do, who in 2016 has a conception of wealth that is perhaps different than 10 or 20 years ago. they want to feel sensible and they want to feel intelligent. it is not so much about the flash of the card as it is that it is a good value. turning their success in
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the cards was -- how did they get to cover? >> we threw in a couple of ideas. this is a votto tory story about the credit card company. we usually are more critical. we didn't want to seem like just an ad for the company. we pulled some reference from children of the corn. we saw how much people love their card, that kind of x -- that kind of up session, lending themselves to conveying that. models.lose to 20 and we did some touching to get their eyes glowing. stealing from american express.
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actuallyhere are charts where american express has gone down. it kind of reverses the idea toward american express. >> it doesn't have the creepy feel. it achieves that. >> any other options? might have thought about doing that. , we had another simple idea printed out a tall version of the card and had people "make love" to it, if you will. >> up next, how democrats plan to turn parts of nebraska blue. >> why the countries facing its first recession since 1991, crisis in nigeria next.
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welcome back to bloomberg businessweek. david: am 1200 and boston, 91 fm in washington dc and am 960 in the bay area. how hillary clinton aims to take advantage of the fact donald trump is not made much of a footprint in nebraska. carol: you write about the blue dot in nebraska. perhaps it is more formally known as cd two. >> it is the second congressional district, comprising mostly of omaha. it is the most reliably democratic part of the state. david: how long has it been that way?
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>> nebraska can split electoral votes. so he actually won the electoral vote. 2008 is when people started paying attention to it being a democratic stronghold in the state. as far as how far back that has gone, omaha is certainly the most urban part of the state. david: after the election is over with, what happens you go explain what you mean by that. >> rather than a portion of the votes with a winner take all system as the other 48 states do, whoever wins the statewide popular vote gets two electoral and beyond that, whoever wins each congressional district gets that districts vote. >> it is a way for candidates to pick up votes on the way.
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so strategic that hillary clinton is spending time in that state, traditionally a red state. >> obama spent a lot of time in the state. and it paid off. not spend as much time there in 2012. mitt romney was a pretty friendly candidate to that area and now for the clinton is back. in 2012 was in nebraska , so the conversations i was having then was with a lot of farmers about the keystone xl pipeline. it struck me that was becoming a ase political issue for them they were weighing who to vote for. the big issuesf that folks in this congressional district care about? >> as far as my conversations, it seems trade was a big deal.
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conversations we were having with the finance chair of the republican campaign who is -- he is talking to more republican sympathetic voters. it does seem trade is a big issue. between 2008 it now got redistricted. it is harmful to the democrats , youse a lot of people have a lot of hispanic families. that has been a challenge for hillary clinton. the crisisa look at that is brewing in africa's economic engine. >> we spoke with matt phillips. lower oil prices has heard lots of companies and countries. there is a bigger problem going on right now. >> you are getting fewer dollars per barrel.
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double inproblem is that production is down 30% since the beginning of the year. militants have stepped up attacks. they have targeted pipelines and export terminals. government would basically pay them not to attack this infrastructure. but the government doesn't have the ability to do that anymore. back intove gotten the game of attacking pipelines and export terminals. really affecting nigeria's revenue. >> they always say nigeria is this x factor. what kind of affect is this having? this political discord on the market? from 2 millionne barrels per day to 1.4 million barrels per day. they have been producing 2 million barrels per day from us 30 years.
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the government has never had to deal with a decline in revenue like this. it makes up more than one third of their economy. >> it is more serious than that. they sell oil and use those dollars to pay for food. >> even though they could grow it, it has always been a problem with cheap oil. the tide has exposed a lot of this dysfunction. things a whole lot worse. they can pay for things like rice and manufactured goods. inflation has skyrocketed. it has fallen 40% against the dollar only since june.
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for long-time investors, they look to nigeria with a lot of optimism. are they beginning to pull out of nigeria? is a country that grew 8% on the back of higher oil and high commodities. aliens of dollars of foreign money flooded into nigeria. the construction companies doing deals with the government. they are now concerned with taking government contracts, because they don't think they are going to get paid. are being told that the work week was cut from five to three days. the government is telling civil servants go out and farm. the great lakes retailers are going to verify that your -- cotton sheet is really a --
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welcome back to bloomberg businessweek. andoll: in a companies industries section, we take a look at the approach retailers are using to verify the quality of cotton they are selling. talk to us about applied dna scientist. >> they are a small biotech company. completely unsuspecting. this is their nondescript biotech incubator. they are doing dna testing on cotton with the same sort of precision that you would find at an fbi crime lab looking for dna
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of a criminal at a crime scene. the dna they are looking for is to determine whether a retailer is getting a premium or egyptian cotton that they are telling customers they are getting. or if they are getting the mainstream cotton that's mixed in. they are trying to figure out if the premium is actually what it says. >> it reminds me of the olive oil scandal. why was there a need to do this? >> the open secret is as egyptian con production has been decreased in recent years because of a lot of poor management, cotton had a few rough years because of the california drought. this demand from retailers and consumers.
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mainstream cotton was getting mixed in. it was not egyptian at all. they keep up and meet that demand. they spent years and tens of millions of dollars developing ways to test the dna to give retailers and assurance that what they are getting is actually what they are telling. story -- a lot of con product is mislabeled. found 83% of products is this really soft cotton. 83% of that is not 100% cotton. it is some sort of blend or mixture. >> would i notice this if i went
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out and bought egyptian cotton sheets? >> so doesn't even matter? it depends on if you are a cotton enthusiast. they believe egyptian cotton has longer fiber. when you are spinning the cotton into a thread, you get a tiny spin thread that you can't get. you would get a higher thread count. >> you can tell a difference in finished cotton. but the thing is you often pay a premium for these different tires. >> a lot of this has come about found outrget
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egyptian cotton sheets were not 100% egyptian cotton. customers were paying a pretty hefty premium because they believed these to be softer. it was a stronger fiber. retailers were paying more for it. someone was shaving some cost in making a good process. >> a new type of underwear that gives men the support they need. >> let's get to the editor. >> you often look how excess resources and brand takes off. this week it is a particular brand of men's underwear. it. me about
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>> they have an innovation and underwear, very interesting story. carroll: they are doing so well. >> they happen pretty incrementally right now, what we have done is basically try to insert mesh panels in men's underwear to make the more comfortable. forfounder was fishing salmon and basically was saying i'm hot and sticky, i need to reinvent men's underwear. some $20,000 into this company. the revenue was up 250%. >> the others are coming in. you have a lot of people trying to innovate in this space. people think the consumer must be ready to buy something new.
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we can actually make a cool looking brief. of makers are seeing the opportunity and what they are doing is try to make it more comfortable. the vibe out there is men's underwear is uncomfortable. i thought, fine, every day. >> what are their plans for expansion. >> they are catching on at nordstrom's. they started the ship globally. it actually worked with the company that spun off. it has a complete called my package. we tried innovate around the look and feel of this. >> how venezuela's government is still in power despite the massive chaos. investigation uncovers
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one tragic consequence of the u.s. government budget standoff.
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david: the scandal involving hampton creek is bigger than reported. carroll :why some u.s. troops are being forced to fly in deadly helicopters. all that head on bloomberg businessweek. david: welcome back. we are here with ellen pollock from bloomberg businessweek. let's start with a story in the market about wells fargo. the chief executive has not had a good couple of weeks. he was called to washington.
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>> he was grilled by senator elizabeth warren and he's in trouble because the bank created all kinds of fake customer accounts to make them look better in a certain quarter. they fired a lot of employees the question is what did they do with the executives? david: elizabeth warren stressed that executives should have something taken away. >> the clawbacks became a big thing after the financial crisis. it became a big issue during that period afterward. both in the united states and europe. and we do a story that basically in the context of what is going on, wells fargo talks about how difficult it is to do clawbacks and the various ways it can be done. but it's not as simple as it seems and sometimes there is litigation that is not
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necessarily worth it. is goingnezuela through a lot of hard times. people are hungry. >> people are expecting some kind of blowup, some kind of change in leadership. but maduro is in there firmly. we go there and ask the question, why is he still there and the answer is, he's not likely to go anyplace anytime soon. that's in part because he has a lot of control over the judiciary and military. david: this country has been suffering because of the price of oil? >> the price of oil is down they rely on that. they are having trouble importing food, which they need to do. david: one of your staff writers go down to washington, d.c. and looks at two military helicopters that are in pretty bad shape. this has to do with sequestration from a few years ago. >> there were some pretty tragic accidents involving these
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massive helicopters which can pick up a hungry --a humvee. they are massive pieces of equipment and they have been used for a long time. the result is they are getting old and not functioning as well as they should be. there have been some really tragic crashes. the question is why in a lot of it comes down to maintenance. david: the budget for maintenance was curtailed because of the budget cuts. some interesting how paul talks to generals, talks to the pentagon. there is no easy solution. >> there is no question it's a maintenance issue. they say they will come up with the money and have increased the budget but this has been going on a long time and it does not look like it will be replaced anytime long. >> we talked with reporter paul baron. there are two helicopters in your piece.
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>> the sea dragon is the largest, most powerful helicopter in the military fleet and drags minesweeping equipment at it has been an used since the 1980's. it's a cold war era aircraft. it is quite old and in some cases feeble. carol: then there is the super stallion? >> that is for the marine corps and is used to transport marines and heavy equipment. it can, through an external lift , it is an armored vehicle that can lift 26,000 pounds. it's a strong aircraft. carol: my understanding of helicopters are the small ones that hold a handful of people but this is a different scale. >> these helicopters are 100 feet long, 30 feet high, carol: and can hold how many people? >> the super stallion can hold 55 marines.
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david: you detail a number of instances involving these aircraft. what have we seen happening? >> there has been a very worrying number of fatal crashes. a number of them were because the aircraft are very old. things like wires are rubbing up against fuel lines and causing the escape of fuel and leading to internal fires that lead to a crash. in january of this year, 2 of the marine super stallions ran into each other a couple of miles off the coast of hawaii and went down and killed 12 marines and one incident and that episode is being investigated and we don't know exactly what went wrong there. three days before that accident, the commanding officer of the squadron was let go because the squadron was not prepared enough
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for this general mission. carol: the equipment is old. why hasn't the government replaced it? >> different reasons in different instances. the navy sea dragon has this very particular mission of dragging minesweeping equipment. the navy has not come up with a better technology to do that. smaller helicopters are not strong enough to drag this equipment and robotic devices that have been designed to operate off of new warships have not been proven effective. the helicopter stays in use but what they call the community, the pilots and maintainers, that community has not been adequately invested in as the navy admitted during my reporting. they admit there has been degradation of the community. carol: there is also a deeper look at the controversy
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surrounding hampton creek. >> hampton creek is a company that has the mission of replacing animal proteins with plant proteins. on a global scale, that's an incredible concept. as the world's population grows and developing economies continue to grow, the appetite for animal protein is so large it might be unsustainable. hampton creek is jumped on that mission to try to solve that problem. many people are thinking about this problem like bill gates and peter thiel. they are in the right place but how they are getting there is very interesting. carol: this is a silicon valley darling that was well on its way to becoming a unicorn, very revered and respected. >> absolutely, the ceo told his staff he was moments away from
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raising $1 billion valuation but that has been put on hold with the criminal investigations. we are trying to figure out if there is any movement but our senses there has not been. david: with broad strokes, give us a sense of the criminal investigation. >> there is a criminal investigation as well as an sec inquiry. our understanding is they are looking into whether or not the company purchased its own product and did not disclose that to investors which is something bloomberg first reported in august. carol: you are talking about buybacks but they were actually buying back products in their was a group of people that josh tetrick, the founder called them creekers? who are they and what did they
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do? >> the program is over 100 people. these are people who were hired to do in-store demos to help with the company's outreach. it's the guerrilla marketing of the company to be in stores across the company talking to customers to get them to try the product. it was a robust program that had success. we have a lot of e-mails and receipts that shows that these people were paid to purchase the product. usually, the entire shelf of the product in order to boost sales. they had two jobs at one job they were the hampton creek uniform and the other they did not and were told to lie about what they were doing. carol: up next, a company making it possible to buy a self -- to build a self driving car. ♪
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carol: you can also catch us on the radio and a.m. 11 30 in new york. david: if apple and uber start building a car, they might start at magna international. >> it's basically a car parts supplier. they've got a bunch of different units. they are a six-year-old canadian company but the interesting part of that business for this new generation of cars is that contract assembly business.
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they help ease production bottlenecks for other car companies. it means they are interesting to anyone trying to get into the automotive industry have no experience in building cars. david: there's a new interest in san francisco in building cars, what's the niche this company has found? >> the value proposition is not only the do they build the cars but they help you develop them if you want to create a new vehicle. they will have engineers sit there with you to develop process and source the components you need and work out how to do it cost-effectively and they specialize in high-end vehicles. that's why they work with the likes of bmw and mercedes and jaguar. given the kind of players we
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could see come to market like apple, these are premium brands and therefore that's why magna might have a good sales proposition. carol: they are the fourth largest among automotive suppliers or i'm wondering about the first three. do they have to worry about competition? >> for now, magna is the fourth biggest but it's the biggest contract assembler. the bigger companies in the space can supply automotive components. they do not have the expertise of building a whole car not yet. they might think this is attracted to get into. the other players in the contract assembly business, they are quite small and do not have big engineering teams. the business as a whole, contract assembly, has been in decline for much of the past decade until this prospect of
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new technology and trends. david: how did they decide to get into this? >> this contract assembly business is something they have been doing a while and it's based around a company -- a factory in austria going back 16 years or so which was building cars already under contracts for other people. it was part of chrysler for a while and they got rid of the factory and mangino bought it and kept building mercedes g class automobiles. they are telling shareholders this could be a big opportunity and they could be the foxconn of north american auto industry. carol: what does it mean for the large car manufacturers out there? these guys work with magna.
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>> one of the big product lines is automotive cameras which are used in self driving vehicles and they supply those two ford and gm and a number of others. there is a slight shift of economics in the car industry. the value in the traditional car industry was the drivetrain. now, the value is slightly different, more in the software. it used to be the core confidence at bmw or ford or gm to build the engine and now that will be increasingly commoditized moving to electric vehicles and they will add their value with the software. that makes it tough to compete with new entrants because
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software is their expertise and has been for decades. there is a huge talent race to ensure that carmakers have the best software program and to create the most compelling future experience. carol: up next, the brains behind spotify. ♪
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carol;: welcome back, the 50 most influential market movers.
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david: we sat down with the editor. let's start at the top of the list. theresa may is number one? >> we will be talking about brexit for a long time. this is a woman who almost by accident and now the fate of europe's biggest financial center rest largely in our hands. when she triggers article 50, of the key things will be whether all the financial firms that made their headquarters in london will be able to continue doing business in europe freely and that will be a big negotiation. carol: a prominent woman at number one and 2 -- hillary clinton is number two. do you think about that when you are putting this list together?
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>> initially, we were looking at the polls and wondering who should be number two. it's a tie and people are looking at hillary clinton to see which camp has more influence over her whether it's her wall street benefactors and her previous jobs or whether it's the bernie sanders people she has been courting. david: we know of hillary clinton and donald trump and theresa may but what was your criteria for picking the folks who made this list? how do you get on this list? >> we start by going around bloomberg in new york and our bureaus and asking for nominations. we end up with a list of 100-150 people and then we pick a smaller panel of people and we asked them to vote in the names and then we went out it down to 50. the ranking is more art than
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science. with an emphasis on performance in the last year. this is not a lifetime achievement award. carol: even if they screwed up in the last six months? >> yes, and some people were on last year who are not this year. you will notice that there are not that many hedge fund managers. that industry is not having a great year. david: there is a profile of making spotify a success. >> the issue with streaming music as you can listen to almost any song that has been recorded immediately on your phone but it's too much music and you are overwhelmed. most people listen to the same old stuff and how do you wind up listening to new music? that's what spotify is coming up with. they put a recommend new music every week that you would actually like.
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i think the recommendation services, you might've heard of before but it's like the old amazon. david: they are recommending things via algorithms. >> amazon uses algorithms as well but they recommend music you have met her by artists you are not familiar with but they have a system where they pay attention to what you are listening to and they have a database full of music and analysis of peoples play lists. they have 2 billion playlists. they have a good database to draw from.
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carol: they really thought about their discover play list. they do it once a week on monday and it's curated. >> i mentioned this at a meeting a couple of people came up to me and said i love that service and that's why i stayed a subscriber. i had not looked at spotify in about a year. i joined apple music. it is kind of amazing. they add a couple of songs like covers or artists you are familiar with. it's kind of contagious. 40 million users have tried it during the time that discover weekly has been around. they have gained something like 25 million new users.
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they are not saying that's why that happened but it must've had something to do with that. david: who is running this for them? >> a 36-year-old whose career has been a music discovery. he worked at the echo nest of that developed lots of algorithms. he does not claim that he invented this thing that he is the guy who is a product to guy. that is a term. he figured out how to help people want to use this thing. people at spotify said to give everyone a personal playlist every day. you don't want to hear 30 or 40 new songs each day so they came up with monday and 30 songs. some people wanted to recommend 100 songs. it makes it digestible and
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approachable and that's sometimes the problem with the services is they can work but you get overwhelmed. this is different. carol: in your story you talk about an automobile worker becomes a dj. thanks to spotify, he is now touring europe. they find new, new music. >> they say it's not the people spending more time on spotify now that the discover weekly is popular but they are spending time with artists and listening to newer artists. that's good if you are an automobile worker in sweden. it has ramifications for the broader music industry and who will be the gatekeeper of the future. carol: i'm going to talk about
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magna international. this company supplies automobile manufacturers with everything. they are looking at driverless cars and how they might be ultimately working with apple or over or google perhaps. --uber or google. david: i thought the spotify story was great. all the work they're doing to introduce new music to people. i'm one of the people was looking for new music. finding a way to make sense of that is a challenge. carol: i thought you might have a composition. a lot of great stories in this issue of bloomberg businessweek on stands now. ♪
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