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tv   Bloomberg Business Week  Bloomberg  July 2, 2017 4:00pm-5:01pm EDT

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♪ >> welcome to bloomberg businessweek. it was not about the innovators around the world. including little ambition. >> and the future according to elon musk. >> all of that and much more on this week. -- this episode of bloomberg businessweek. ♪ now do this?
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>> technology has always been a franchise in bloomberg businessweek. we pride ourselves on the coverage. when we were thinking about redesigning a magazine, we wanted to keep global tech as fragile and make it more global than it was. companiesome of the and developments and people and innovators you may not have heard of. also, the future is closer than you think, whether that fish skin is used to treat wounds -- things that we thought were science fiction, not so much. we wanted to bring that to readers. >> this has to be one of because the stories uis -- you guys have had in one magazine. it is fun to read because the stuff is so exciting. about thatou heard
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really has you jazzed up? >> i think what is going on with satellites. i am 43 years old, i think a satellite are these huge things that are out there. we are talking about satellites that are the size of a boombox. they are not going up into space. you can carry them into a briefcase and wants them. it is just startup technology around space. there is a little bit that talks about how you can monitor what is going on in ukraine from a satellite the size of a trackback,nd really the visibility, we are being watched from everywhere. whether you take that is a good thing or a bad thing, it is happening. this really gets the heart of that race for space. how fundamentally it has changed and how chief it is. >> was cool about the issue is --
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up, andl round it hundred 40 million active users on tencent. it has the we chat app. in china, people spend an average of four hours on we chat. whethererything you do you order on a restaurant or talk with your friends, buy a new shirt, it is almost impossible to get into any aspect of commerce without having we chat now. you go to the two guys who moved it forward and you focus on martin lab who is the operation force behind tencent, this is the guy who -- when he was going on ake a presentation video, he played it so much that he got the seventh highest score on it.
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>> it took him two job offers to get there. that isf the things behind us, leave equity of $.10, to expandare attempts beyond that world and find out what they are going to do. brad: if you're not familiar with $.10 and you are interested in business and the internet, you need to learn about this company. it is side-by-side with alibaba. one of the technology giant of asia. prominently for the service we chat. what is we chat? i can draw parallels to whatsapp and facebook messenger but it is really so much more. in the u.s., we tend to have one app where everything we do online to buy movie tickets, we chat is the dominant way that
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people in china spend their time online, it is the internet bundled into a messaging service, you can get your news, you can search the web, you can talk to friends and contacts. you can orders up online, themmerce, it has become largest planet in the chinese internet solar system. , think 900 million daily users two thirds of -- they are spending about two hours a day each on it. it is a tremendous asset for the company. >> you talk about two individuals specifically were tied. you talk about the founder and then you also talk about the company, the president, these are two individuals who are not out there that much but they are crucial to this company.
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>> one of the five original founders, one of the wealthiest people in china, very quiet, does not do a lot of interviews, we jokingly referred to this photo with the chinese president of all the was technology execs lined up, this is about two years ago, this is a photo shoot, everybody is looking for the camera and smiling. down, they came at a bad moment. there's something are characteristic about it. he doesn't do a lot of interviews. we got this tremendous opportunity to talk to the second-in-command colleague and co-commander martin lab. we described him as the sheryl sandberg of $.10, he joined in 2004, before that, he was working at goldman sachs. he is someone who has really guided this strategy, guided the iternational expansion,
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helped steer we chat to what it is today. >> i want you to tell me a little bit more about this guy. this is a guy who was offered a job by 10 sent initially after the ipo and he said it was the second job offering. works we have a lot of fun talking to him, lu chen, one of the asian correspondent and i went to visit him in hong kong. this is a unique opportunity. he rarely talks. he reviewed his trajectory and journey into tencent. when he was first given this they tooky back when 10 sent public, they turned down the job, everybody was worried about this thing, could it overcome all of the pessimism and the market, it was a one trick pony, no pun.
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they were beginning to do deals with the mobilephone operators to get some subscription revenue. later, also why, a year martin lab accepted. with the covers, putting ever -- to be too specific, rocket lab was mentioned in one of the stories. abstract, it's not too specific but it also immediately get two to the point that this is a tech issue. >> i thought that we read so many of the stories and i had no idea what this is about. a lot of the rockets in this facility were a work in progress.
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they opened up and the axa got inside. >> it is interesting, it is not a lot of other stories around it. it is very clean. it is global technology. >> we have because of this cover flat. that gives you a limb more of what is inside and then when you open in magazines, you can see the shot of this man standing inside of these tubes. that is also what is here. >> up next, the middlemen between -- macron's plannuel to reform french labor laws. >> this is bloomberg businessweek. ♪
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♪ to boomerwelcome back business week. oliver: in the business section, the way it has worked in the u.s., pbm's negotiate drug practices with pharmaceutical companies. consumerked to pallbearer. >>, cemented managers work on behalf of health plans, unions, anyone who was providing a health plan to employees. pharmacy benefit manager is to represent the health plan and its dealings with drug manufacturers and to
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negotiate discounts which are referred to as rebates from the drug manufacturers. less than plan pays the publicly advertised list price. that is the first that in understanding what to do. it is a lot more complicated. >> how's that working out in terms of reducing cost? cost to someduce degree for the health plans. the seeking of the rebates has the prefers -- perverse side effect of causing drug manufacturers to raise their list prices so that the price is higher and they can take from that higher list price. >> it is bigger rebates to the pbm's and they keep a slice of that rebate. they are basically -- they have an incentive to see the list price go higher. that would all be fine if nobody actually paid list price but
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that is not the way the world works. a lot of people do pay list price. there may be nice more if the not -- if obamacare replaces the bill. those on shortf people, you pay list price, similarly, if you are a medicare recipient. there is a coverage gap in medicare where the recipient basically has to pay for their own drugs. >> you hit a certain amount in terms of cost for your own drugs. if you go about that, you pay list price. price, at first, it seems ok, here is the price that it takes to distribute this drug. i find it similar to when you go by phone. bones are very high at this price, they come from manufacturers but most people don't end up paying that.
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they get a plan at a discount. you really feel it when you say well, that's what they charge. who ends up paying that? >> the biggest group is the people that are uninsured. there is still 27 million americans who pay full price. moreover, remember that under obamacare, there is a provision of insurance but also, very high decibels. deductible,t your you are paying list price. but a lot ofe does people. >> what i love about your story is you given a personal edge. tell us a little bit about the story, -- quincy is diabetic.
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he is a restaurant worker in new jersey, he does not make a lot of money and for a. of years, about six or seven years ago, he had no insurance whatsoever, during that time, he had to skip on insulin. this had horrific effects on him, he went up -- he ended up going blind in one eye and needing a kidney transplant. under a newvered jersey public plan for the disabled but his coverage will expire at the beginning of next year and then his costs will be something like $300 per month for insulin. that is a very big burden for someone who is not making much more than minimum wage. >> emmanuel macron is wasting no time in tackling the most loathsome item on his economic home. editoralked to christina. >> you promise that it was a
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central part of his campaign. got thrown inly this week. two weeks since the second round of the election and he presented his proposal on tuesday. the 3000 page labor code, this is not an easy thing to undo, is it? >> they'll have to redo the whole thing, they need to make significant changes. it is not easy. we have seen three previous presidents in france attempt and fail. impactre issues that workers. >> down to the size of windows and offices, length of bathroom breaks, also, if you you know i french worker on the weekend, he does not have to reply to you, it is in his contract. >> what will he go after specifically? severance, it is the highest in europe.
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employees can easily drag companies into court and the court are very employee friendly. long asprocess that is well as expensive. the other big important issue is to allow companies to negotiate directly with workers. therance, that is 10% of workforce being unionized, still, they are bound by the sector wide agreements negotiated by the unions. life one of the first quarters of business for macron? the date was not so much centered on this. it is very much about foreign policy and immigration. thiswe are, attacking thing that is welded within society for decades. why is he choosing to go after this? france has unemployment that
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has hovered around 10% for five .ears for young people, it is even worse, it is 21 or 22%. what has happened in the absence of reform, more people have been relying on these temporary contracts. it is really hard as a young person, you cannot go and rent an apartment. you can show a landlord a temporary contract. jeff sessionsat has been up to since recusing himself since the russia -- from the russian investigation. this is bloomberg businessweek. ♪
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♪ >> welcome back to bloomberg
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businessweek. you can listen to us on sirius xm. oliver: you can also listen to us on the radio plus at and asia. section, jeffs sessions may not be involved in the russian investigation but he has been being himself busy trying to roll back a lot of obama era policies. >> it has been business as usual. times been using this where everybody is focused on the russian investigation to remake the justice department and move them in a direction that he wants them to move toward which is a focus on violent crime and a large part of this has been stripping back a lot of obama era initiatives and legal legacy. thealk to me about
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specifics of what he has been undoing in terms of the obama legacy. >> he has been rolling back charging policies, they have taken a softer approach to nonviolent drug offenders and ordering all prosecutors to penalty inharshest cases that they bring, this is a counter to the way prosecutions have been handled over time. he also has been taking a harder these settlements that we entered into with various cities over problematic police departments saying that he wanted to review all of those settlements, his view is that he doesn't want defense meddling and handcuffing police officials.
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wei think it is interesting, watched this trade going into the election based on what we heard in the campaign trail, specifically, to do a private prison. we have been moving away from that, jeff sessions moving relationships, the u.s. government having a relationship with private prisons. >> he has done this with a private prison memo last august by then deputy attorney sally h and it was to try and phase out the government must use of private prisons for a number of reasons. he has been able to come right in and issued his own memo and said that is gone. with the number of these issues, he has been able to quickly dismantle a lot of items that some veryin place, recently, others in place for
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several years. >> also in the politics section with $6 billion in debt, illinois is on its way to another credit downgrade. >> illinois is in crisis right now, we are on the verge of entering our third straight fiscal year without a budget. start fiscalto year 18 without a spending plan, billions of dollars in the red we are actually headed for another credit downgrade which has put us in junk territory. >> put a number on how much they are in debt. >> right now, because of the ongoing budget impasse, we are looking at about $15 billion of unpaid bills, that is a record, at the same time, our deficit is about $6 billion. if things keep going, this is effectively hemorrhaging cash. we would have to cut into things like core services. the debtmphasize that
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service is a priority and will continue to be paid regardless. >> these costs are going to keep adding up because if and when that denver does happen, suddenly, borrowing costs are even higher than they are ready cost will thatof put on us? >> it and went illinois goes to the bond market, they have a junk rating. illinois party has the highest spread. bloomberg checks about 22 states in illinois. in terms of those unpaid bills, we are looking at 800 million in insurance and late fees alone, that comes on top of any future bonding costs. >> they cannot fire for
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bankruptcy, this is in detroit which could file for bankruptcy. how did they get to this day? how are they constantly in the red? >> illinois has been running deficits since about 2002, at the start of 2015, tax increases started with about four or $5 billion. at that same time, the first republican to lead the state since 2310 office and he was trying to see how they could fill that deficit. he has pushed for structural reform in things like changes in acting term limits, are pretty tax reasons and the democrats have resisted. they haven't been able to come to an agreement or have a spending plan for about two years now. >> just ahead, we speak to best selling officers -- authors. >> every production about the
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future made by elon musk. >> this is bloomberg businessweek. ♪
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oliver: welcome back to bloomberg businessweek. rol: what elon musk has gotten wrong, right and what he has for the future. iiver: we have an interview in this week's bloomberg businessweek. ♪
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oliver: we're with megan murphy to talk about this awesome issue. analysisted input and from michael. he lived through asian crises and is getting worried. megan: the 1997 asian financial their was triggered by parents at the time spiraling. the point he made in this article which is a very good and important one is that it was predicated on an escorted her rise inextraordinary debt level. link is whats that is going on in china right now.
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is triggering the same kind of alarm about the intervention by the state, it should be an alarming sign that people forget the lessons of the 1997 crisis. wants shame ony you, pull me twice, shame on me. >> there is no question. what is always fascinating is the reported covered it. says the next crisis isn't going to be similar to the first. >> it may not be triggered by the same thing, it could be a shadow banking thing. the actual tipping point may not be something that we have seen before but there are signals that you can trace in the mortgage market. there are really alarming signs. if we look at those, we could prevent some of the chaos we have seen. >> everybody tries to explain it
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away. similar to election forecasting. oliver: he starts by putting the 1997 asian crisis into perspective. china is the second biggest -- omy in the world, this will have a more cataclysmic and systemic effects . >> whether or not they can retain the type of growth that howrest of the world -- dependent other economies are on china's continuing growth. we saw the commodities market grow up. we can't underestimate the importance of china. i think he is talking about
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domestic -- is actual not there something that they focus on so closely. is this the reality? that is the issue with china, it is a less transparent economy. >> it is a must read, also must read, you can do an issue without talking about elon musk. we saw is something that for the first time and it is unbelievable. it is everything elon musk is doing, how successful he has isn, human intelligence, it a map of everything he is doing, how his predictions have been right or wrong and we call it the future according to elon
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musk, this guy has done a lot of things in a lot of different areas. wife i love the analysis of where all have his promises were completed or fell short. we talked to reporter tom randall. >> elon musk is hard to keep track of, that is not because he is involved in summary desperate industries but also his communication style. he will make announcements about products. he doesn't have a company where you put out press releases. >> you under this is a new corporate mission. >> exactly. from what i have heard, they often throw employees for a loop saying that we do know that was coming. what we wanted to do was rigorously tracked some of the goals and pronouncement he has made for his various companies.
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>> tell me how you guys set up a coding system on how you were tracking all of these businesses. >> by now, we are tracking about 70 goals and this will expand over time to his for companies. he has tesla, spacex, he now has the boeing company. he also has narrow link -- a medical device company. >> i'm assuming you guys will continue this process? >> every time he makes any pronouncement, we track when he made pronouncement and when he set the goal for and then his progress along the way and when those goals move backward move forward. one of the amazing things that you discover going through all of these things is that these goals: to two categories. but thenoutlandish
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there is a category of things he has already accomplished. it wants seems outlandish. yet the sense that he is a competition pushing forward this vision and making it happen. >> he has had a lot of success there. >> if you look at his goals from early on, it has been slow going. from the beginning, he wanted to make reusable rockets. the falcon one was a single engine rocket that he wants to get up. a lot of these things have already happened but not at the timeline that he predicted he could do. -- culus whenever
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>> he is always moving behind his own schedule but way had everybody else's. works he has also talked about space tourism. >> he plans to put people into space next year. there will be two missions, one into orbit and then he must send forced be on the moon and back again in 2018. one of the interesting thing about the delays are that they seem to be getting a little bit better over time. there are only two or three projects that he is ever canceled. ask up next, the growing likelihood of a self-sustaining power source, there is a catch. >> this is bloomberg.
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♪ >> welcome back to bloomberg businessweek. you can find us online at and on our mobile app. >> a global network of scientists creating them in this clean energy. about sustainable fusion and it could be a reality sooner than you think. >> there is this really cool nuclear vision project going on. nuclear fusion is this holy grail of energy. it requires really cheap materials that exist everywhere, it is clean, there is no carbon emissions, it is really hard. >> that is a little too good to be true. this has been it work of decades, almost a century.
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>> what is so complicated? essentially, it is trying to create the sun on earth. that requires a ton of heat and a ton of pressure. two conditions and materials that are hard to control. have the sun on earth, -- how do we get that into usable energy with the applications that we use? toit is actually really easy harness into electricity when you can figure out how to generate the energy. the hard part is sustaining that nuclear fusion reaction for a long enough time where it actually makes economic sense. that is one of the problems that scientists are trying to figure out right now. they are trying to prove that you can generate more electricity using nuclear fusion
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than is required to kickstart the reaction. >> the blood been working on this forever. there is a global project going on, tell us a little bit about that. >> it stands for international thermonuclear experimental reactor -- zte are.just cause it eter.line you have china, russia, south korea and india. everybody is contributing funds, scientists and work. they have divided it up, it took a lot of negotiations to figure out who was going to do what. the way it works is the european union has the most number of countries. it is being built in the south of france. they contribute about 9% of the entire project and that includes
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designing and building the biggest electromagnets we have ever seen, the biggest and strongest. >> there is concern about a shortage of practicing dermatology in the u.s.. >> could ai doctors and mobile phones though the gap? we talked to editor jeff muska. he has no background in -- atology for he built an algorithm that is as certified 21 dermatologists in diagnosing skin problems. >> is starts to compare a real image on some level? >> this is narrow neck. as far as we can tell, this is the most calculated effort to mimic the effect of the human brain.
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>> does it work? >> to varying degrees. this particular set of image duplicated with probable results in analysis and the panel of two dozen trained rheumatologists -- dermatologists. >> how does he come about this if he doesn't heavy dermatology experience? what was the background? play --is a big day to data play. we are teaching computers how to detect cancer as well as train them in an effort to make telemedicine easier or allow diagnose diseases themselves. >> this focus on jobs, wages, the workplace and it had a great
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chart that looked at which jobs are most likely to be replaced by automation. andink with physicians surgeons, they are safe. it does sound like certain aspects of the medical community can be e -- easily be replaced by machine learning. we can already see what robotic surgery is like. >> there are parts of the process that can be automated to some extent. even doctors made it seem like they would be just as happy to have certain parts of the process -- >> when we were talking about , it was veryield withabout the precision which a doctor has to proceed to make it difficult for robotics to be replaced.
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an interest in this if that is going to be a viable replacement or alternative to a panel of 21 positions? >> the research -- it is still in the research journal phase right now. one big obstacle to trying to dermatologistsan -- we'll diagnose upping every year. there are only about 2000 or pathologist every year in the u.s.. the hope is to make it a little easier. this will allow them to get some of that. >> up next, how to harness smart machines and crowdsourcing for personal profit. oliver: this is bloomberg businessweek. ♪
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♪ >> welcome back to bloomberg businessweek. you can catch us on the radio on xm and on a.m. 11 and in asia on the bloomberg radio plus app. oliver: this is called the shame platform crowd. >> the technology has advanced faster than we expected. we thought we were pushing the envelope a little bit. being optimistic about it. we lowball it. the breakthroughs have happened in terms of getting machines to not just be able to make decisions but figure out answers on their own, this is breathtaking. we have been disappointed with the ability of witnesses and organizations to keep up with these changes.
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everyone underestimates the scale of tech progress. i think it is because technology is doing amazing things. want in a while, there is this technology search that you're not ready for. things come and go like this and you think it will china long, you think everybody is taking. our minds know this but our intuition is just lousy at things that go like this. we expect the world to go like this and these days it is not. >> it seems like the this is the technology to
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mention quicker that is further along that curve and is coming from the academic thinkers, what does it take to get the corporate side or the government side to catch up to that? >> it is not just the academic, it is the technology, they're making breakthroughs and what we are trying to do is identify the bits and pieces that are on the leading edge. they said the future is already here. we spent a bunch of time going out and identifying the people that were at of the curve. that is not enough, then you have to put that in some kind of framework. you can't randomly say give stuff away for free. if you -- if you understand two-sided networks, your understanding why that works, we took those leading edge that way and put them
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so other companies could make the right decisions. the reason we wrote this book is because we wrote the book to be this translation and make this weird world of strange business models comprehensible to organizations and institutions and to tell people that this stuff is being a permitted by your peers, here is some of the paragons. this is not going to leave you alone. >> but break it down. these are the three elements that you guys have to get into, talk us through these. there are three balances between mind and machine, product and platform, core and crowd and in each case, we are seeing a shift toward the second word in that pair. they are using machines to make more decisions. the second one is a platform revolution that has the crowd making decisions.
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>> what we learned when you are writing the book is that most companies in the established economy are still too fond of mind and they underwent a power of machines, they have a product orientation in a world that is moving toward digital platforms and they worked really hard on strengthening their core. , thesedervalue the crowd millions upon millions of random stranger weirdos. there are many. wikipedia, clinics, there are many ways of reaching out. people are still inventing ways of reaching them. thatve a digital network connects millions of brains on the planet. the leading onto to the north, leading businesses have found a new way to tap into all of that expertise. >> i think the traditional come have greatcovered
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brain is but they're trying to figure out how to compete in this marketplace. those are the ones that need to tap into this. >> one of the things that we do know is that when a really prevent technology shift happens, the expertise and the knowledge that you built up in the old regime, these are no longer assets. they could become handicaps. we believe we are rapidly heading toward that world. but some of these companies are doing it and effectively. this may be the oldest of the blue chips. they are tapping into the crowd. they're considering a new kind of icemaker and to fund that, they went to indiegogo, not because they needed the money but because they needed the knowledge from the cloud. it turned out to be a great way for them to take some of their core expertise and leverage it with a bunch of smart people all around the world. >> it initially makes no sense when one of the giants of the industrial era, --
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you think they have the tools. somebody running a $200 check. >> it is about finding a direction that they want to go. schedule of clear what demand for the product will actually be. in the old world, you can be in a focus group. you them up on kickstarter and indiegogo and in the world says i want one of those, that is a really clear signal of demand and some well-managed companies like ge are starting to tap into that. >> the expert you need is not the expert you know. it is not the matter that there are billions of people out there. the matter what company you work for, most of the smart people in the world work for somebody else. you want to tap into that. organizationsr
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have a different kind of expertise, they had diversity, they come at it from a whole different angle. there is a bit of groupthink, people only a certain technique, you get to a certain level with that but otherwise it starts to level off. you can look at it with fresh eyes and you will have a quantum improvement. >> bloomberg businessweek is available on newsstands now. an online at >> i love the story about nuclear fusion. the possibility of creating limitless clean energy. the thing is that the u.s. plays a big role and they may not get enough money. >> i loved the interview that we just had with andrew mcafee. fast, very smart, you learn a lot about these combinations in the economy and the machines and all of the
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things that we have been talking about in the past two weeks, all the impacts and technologies. it all comes together. ♪
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anchor: coming up on "bloomberg best," the stories that shook the week in business. the gop postponed a vote on health care reform. european markets try to stay in sync with central banks. >> the markets have reacted very strongly. 's comments suggest that august 3 is going to be quite a tricky meeting. anchor: italy commits billions to save two banks. the country's finance minister explains the deal and an exclusive conversation. >> it's not a bailout.


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