Section. Carol i enjoyed it and learned a lot. It is this weeks cover story. Bloomberg businessweek editor joel weber joint is now. Private equity touches us in so many ways. Joel we couldnt keep listening to jason go on and on. When we got together about the different ways private equity touches us, we realize there was a bigger story here, which was in the last decade, since the financial crisis, nobody won this decade as much as private equity. Jason now weve got questions and thats how this story shaped up. You posed them to a lot of us in the newsroom. Joel we realized there was a lot of different places we want to go. The fact d. C. Has carried interest. So far, thats bit untouchable. If things change in d. C. , we might see that change. Carol we did see lobbying in terms of private equity firms. They are spending tons of money. Joel tons of money. Also returns. Everyone wants big returns. A World Without yield anywhere, how do i get roi . Private equity promises that. Jason some institutions have been happy from a return perspective. Its grown so massive, but that scale and that size, there are a lot of consequences, some intended, some not. Joel for the average consumer, you dont know the different ways private equity can touch her life. From the cups of coffee you drink, to your pets, to even light, if you have a pension, the whole point of the pension, youve got to get the returns. Private equity is one of the places people turn to. Jason one of the things we talked a lot about is their influence around the world, the individuals who run this firm, they are in the midst of the most important conversation of our time. Joel donald trump talking to Steve Schwarzman about china. Something else we notice, private Equity Industry dominated by men. Carol exactly. I love the coverage because i do feel we need more transparency. Joel its what we set out to do. Carol its a great cover story. Joel weber, thank you so much. More on equity later on. We turn to the week so far in politics. Jason an ongoing impeachment inquiry, subpoenas for Rudy Giuliani and the state department, and as 2020 looms, that big election, Elizabeth Warren taking a step forward in some polls. Carol josh greene joining us from washington. Josh, what a week its been, and i think were starting to figure out, will this have some applications for the 2020 elections . Josh well, i think almost certainly will. Its funny, every week we finished by saying what a week in washington. Yet this one stood out apart from earlier ones because we now have a fastmoving democratic impeachment inquiry that is very serious moving forward, very quickly, has ensnared the president and a lot of his cabinet officials. Democrats seem to think this week they have momentum going forward. Theres a good chance they are going to impeach the president. What effect that will have on the election, on the markets, nobody has any idea. The big news affecting markets was the slow down in manufacturing data and the rising chance of a recession, anything involving donald trump. As ive learned through hard experience in washington, never assume anything. Next week could be different. This week, impeachment took center stage. It is dominating everything. Jason ive got to ask you, as Elizabeth Warren has been assented, i think to that cover story you wrote where you reminded all of us, hey, dont sleep on Elizabeth Warren here. Josh no, ive been bullish on Elizabeth Warren since before it was popular. I pitched that cover story in september when she was in single digits, got some quizzical looks from my editor. Part of the reason we did that was because warren has a lot of candidate skills. Theres a lot about what shes doing that appeals to grassroots democratic voters. I see it on the ground when i travel with her in iowa, new hampshire. Now i think were seeing that reflected in the polls. Especially as joe biden has started to stumble, Bernie Sanders had a health scare, warren is the one who has now emerged, were calling her in washington a cofront runner. But if you look at the polls, she may be a narrow front runner overall for the nomination. Carol thats what i want to follow up on. You spent time with various candidates. Joe biden, this story, every time you talk about president trump, joe biden also comes up, and of course his son. What does this mean for him . Is he done in terms of this campaign or that is too soon to call . Josh i dont think joe biden is done by a long measure. Trump, despite the fact hes gotten himself in a lot of trouble, did this in part because he was trying to advance a story he believed would damage his chief rival, joe biden. We can see from poll numbers its put trump and some kind of jeopardy. We dont yet see in the poll numbers that it has cost biden. Politico came out with a poll showing 40 of voters still consider biden to be the most electable democrat. Thats actually up a tick from the last time. It isnt hurting biden yet and hes not just a viable democratic candidate, i think, but certainly one of the two most likely to win the nomination. Carol josh greene in washington, thank you so much. Jason Rudy Giuliani at the center of the impeachment inquiry. Carol weapons manufacturer staffed by trump supporters, selling attack drones to the u. S. Government. Jason this is Bloomberg Businessweek. Carol welcome back to Bloomberg Businessweek. Im carol massar. Jason im jason kelly. Join us every day on the radio. Carol you can also find us online and on our mobile app. In our politics section, president trumps attorney Rudy Giuliani has not been charged with any wrongdoing. His actions are at the heart of the impeachment inquiry. Jason Stephanie Baker has been following this story closely. She joined us from london. Stephanie this how subpoena for communications and documents from Rudy Giuliani will be central to the impeachment inquiry. They have asked for documents and Communications Related to a long list of the ukrainian politicians and businessmen he has done consulting contracts with, as well as politicians he has met with up to the crucial call between trump and the ukrainian president , volodymyr zelensky, which is at the heart of the impeachment inquiry. He has resisted, or he seems to be resisting efforts to disclose those communications. He hasnt said officially whether or not he will comply with the subpoena, but he has intimated that there are attorneyclient privileges at stake here. And i think thats going to be a difficult one for him to fight, given that much of what theyve asked for doesnt really pertain to his role as a lawyer for donald trump. Carol and thats what complicates this whole situation youre right about. His role within the white house, its ambiguous, right, official, not official. There are times he said he spoke with understanding or an ok from the state apartment. His role is a weird one. Stephanie exactly. And thats why this will be so fraught. Hes cycled in and out of the white house wearing multiple hats while he was defending trump in the special counsels investigation into Russian Election should russian interference in the election russian interference in the election. He was wearing the hat of trumps personal lawyer, unpaid. At the same time, he was continuing with his private Security Consulting work. And then later, when muellers report was released, we learned he was effectively trumps shadow diplomat, making overtures to ukrainian prosecutors, as well as ukrainian aides around the ukrainian president. And so whether or not he will be able to withstand this subpoena and effectively fight it off really depends on which rudy are we talking about . Which hat is he wearing . And that will be interesting to follow. Carol what are you hearing about his ability to claim hey, i am the president s lawyer, attorneyclient privilege. How much will that maybe not protect them going forward, certainly with the inquiry . Stephanie hes been on cable news shows talking about this for months. Its hard to claim attorneyclient privilege on issues where hes actually commented at length in the press. And two, i think its hard for him to argue, or he will argue it, but i think it will be difficult for him to argue that this really pertains to an ongoing, or at the time, that it pertains to an ongoing legal matter for his client, trump. At that point, the Mueller Investigation had wrapped up and his role was unclear. So, it depends on which lawyer you talk to. I think some of it may be protected, but others i think wont. The question is, will the house investigators have the stamina and the wherewithal to fight it out . And it could take a long time. Carol the other thing really interesting is you mention, as you said earlier, that Rudy Giuliani kept working his business, right . He didnt stop any of those relationships or contracts. And some of those contracts included a few in ukraine, correct . Stephanie yes, so i wrote a story for businessweek about Rudy Giulianis Security Consulting business and how he was continuing to do that while serving first as trumps cybersecurity advisor and personal lawyer. And hes continued to do that, both in the ukraine i think the last meeting he had on the Ukrainian Security contract was in march, 2018. If it had gone further than that, we dont know. But he has continued to do business around the world and that is the subject of this house subpoena. They want records of his business dealings with these ukrainian businessmen and records of any payments he has received. Carol heres a story thats got a little bit of everything in our Technology Section. Jason one of techs most controversial startups, founded by a gamer, backed by one of president trumps favorite billionaires, and makes drones that destroyed drones sold to the u. S. Military. Carol heres joshua with that story. Josh the company is called andrew and it describes itself as aspiring to be the operating system of the defense department, which would basically be the software that kind of connects all the systems, whether those are surveillance cameras and dashcams on jeeps or aircraft carriers. And so thats a big goal, but theyve started small, as you do. Their first appointment was with customs and Border Protection on the Mexican Border. Which is, in and of itself, a pretty controversial place to start, and things have taken off from there. Every ingredient of controversy is here. The founder is a guy named Palmer Luckey. He founded the oculus rift headset. Theres this piece of technology, bought by facebook for 2 million. Right before the election, pick came out that Palmer Luckey was secretly finding a group that was posting insulting billboards of hillary clinton. Suddenly he disappeared. He said he was fired. Mark zuckerberg said he was not fired for political reasons. Its been a snafu for facebook. Palmer luckey has this reputation as the trumpiest reputation in Silicon Valley. Then he starts a company, whose first project is surveilling the Mexican Border right at the time the trump border policies are really building up. And that immediately fed into a debate on should tech be refusing to build things like this . Then you have the trump administration, already causing trouble in Silicon Valley and border surveillance, and they jumped into that. Jason one of the models of Silicon Valley of late is being connected to founders find and the folks associated in that orbit. How does that play into this story . Josh Founders Fund is the Investment Fund founded by peter thiel, who backed the president and the 2016 election. Hes the other technologist most associated with donald trump. And he has an uneasy relationship with peter thiel. Ive talked to them a lot. They really want to say he had nothing to do with this story. They say its just an Investment Fund and they happen to be one of our investors. They really want to play it down. At the same time, this fits into some of his other business interests. Carol talk to us about the work theyre doing. The story opens up with one of the engineers and hes playing around or showing how their drones can work. Tell us about that. Josh yeah, so the actual project my story focuses on is called an interceptor and its basically a drone that at honestly, will fly into other drones and not them out of the air. The idea is that cheap drones are being used in increasing number of military ways. Carol as we saw in saudi arabia. Josh as we saw in saudi arabia, although those are larger drones. We have seen them used in excess nation at times, in assassination attempts, in various attacks. The idea is we could build drones and put the software on the and tell them anything that reaches this airspace, ran into it until it falls down. And they think this is a cheap and relatively easy solution to patrol borders, military bases, and maybe other places. They had discussions from selling them to clients. They have put their foot slightly into another hot button debate in Silicon Valley, which is whether we should build autonomous weaponry. And if so, what regulations and so on should be in place . His answer is clearly yes, we should build this weaponry. They refer to it as a semiautonomous weapon. At the moment, they do have safeguards in place. You do have to identify the target and show them a picture and ask someone whether or not to attack. Carol also an investor in lp. Just to put that out there. Jason coming up, delta climbing higher. The ceo talks about expanding the companys global footprint. Carol inside wework. How the Company Contributed to its fallout. This is Bloomberg Businessweek. Jason welcome back to Bloomberg Businessweek. Im jason kelly. Carol im carol massar. You can listen to us on the radio in new york, one of 6. 1 in boston, 91 fm and washington, d. C. Jason a. M. 960 in the bay area, on london in dab digital radio, and on the Bloomberg Radio app. Carol we caught up with delta, and its been outperforming its peers and doing deals. Well hear from him in a moment. Jason lets hear from someone who will talk to us about one region were delta was doing great, and now may need to make moves. Kailey and delta is making moves, 2. 25 billion investment, the biggest carrier in latin america. Take a look at how delta has performed. It is a higher growth area and at one point earlier, its all doubledigit sales growth. But the pace has slowed to one put 5 year on year in 2018. Now the deal may make delta the largest carrier in south america, replacing them to capitalize on higher growth and see sales growth start to improve. Carol and expand their growth. Thank you. Delta is among the worlds Biggest Airlines and has invested to strengthen those ties, and that includes the recent deal we just talked about. Jason delta ceo told us what it takes to win abroad and if he sees more consolidation in the industry. Ed i dont think youll see consolidation in a meaningful way. You may see it and other parts, maybe not participating relative to delta. Internationally, i do think youll see it. In europe, youre already seeing it. Youre seeing bankruptcies. Well see consolidation trends. On the global scene, thats where weve invested. Weve invested in our partners. Its more to have influences within our Global Network of carriers. Youll see more from delta potentially, but i dont think on the u. S. Side. Jason what do those partnerships look like now . And what might they look like in the future, either geographically, or are there new or Different Things you can try to create that family, as it work . Ed sure. One of the things that has not been successful are the alliances. Sky team alliance, i dont think weve brought a lot of great value to customers. I dont think weve brought great values to our member airlines. Were going at this thing in a different approach, making bilateral investments in the most important partners. We under 49 of virgin atlantic, the two closest carriers to either side of the country. Were invested in air france, klm, invested in gold in brazil. As a consequence, what you see is this network of influence that were having within those companies. This Companies Want to know what delta has learned about Operational Efficiency and prowess. We want to learn what it takes to win those local markets. And then over time, while we cant own them in terms of consolidation, we can have meaningful investment that we created an network of carriers that will be uniquely tied, where you have delta as the centerpiece. Thats our goal. When you think of the longterm, we serve 200 million customers a year. If you look at the customers from all those carriers, youre up to over 500 million customers here. Theres never been a Network Airline network. Forget consolidation, that delivers that kind of value across geographies. We have an opportunity to create that. Jason do you have people knocking on your door saying why dont you come over and speckle that magic dust on me . Ed theres a lot of questions at all times. We answer every not. Sometimes we say every knock. Sometimes we say no, we cant do that. Theres a strategy thats unique. I think thats an advantage for delta. Jason lets talk about your customers, both business and consumer. I dont want to put words in your mouth, but a little bit of weakness from