Transcripts For BLOOMBERG Bloomberg BusinessWeek 20161009 :

And i want to take a look at your focus on section, and it is all about design this week. You take a look at zambias diva centers. What are they . Ellen they are small storelike places that were set up by an ngo with the help of idea. Org. And they are meant to bring young women in and explain to them about Birth Control. Turns out so many young people in zambia get pregnant. They dont really have enough information about Birth Control. The way they are reaching them is by doing things like padding and putting on nail polish and a way of making it an easier conversation. They are doing it in urban areas and they are finding it is really working. David 30 of women under the age of 18 get pregnant, and that is astonishing. How did they come up with this idea to do it this way . They could have gone just on a campaign of information. How did this idea come about . Ellen they realized what they were doing when they said we want to talk about reproductive planning, they did not want to talk about that. But when they did it this way, they were very responsive. And maria stokes international, the ngo, has a lot to do with idea. Org. Carol they had personalities connected with different forms of contraception, very clever. Ellen they put personalities to the characters with, are you a risk taker, are you consistent, and they helped matchup girls with the right kind of Birth Control or young women, i should say. David in the market and finance section, you look at Deutsche Bank. The last few weeks have been grim for the future of that bank. There is rumor of a settlement of about a 14 billion. It is a bank that is not in great shape right now. Ellen it is really having problems. 14 billion is a lot of money, no matter how you look at it. And it has other problems creeping up on it. There are investigations in the uk and u. S. About whether Deutsche Bank helped clients move assets or money laundered for clients in russia in violation of sanctions. Sanctions and Money Laundering rules. So they have looming problems. They dont have some of the resources of banks that have a sort of bigger Wealth Management component, etc. It has created a problem for the German Government where Angela Merkel has made it a big point that they do not do bailouts. The question is, how are they going to come back . A lot of bankers are being very supportive of Deutsche Bank. But it is murky, the future is murky, and they will be facing more problems. Carol it is tough for some european banks. They are lagging behind what has gone through the u. S. Financial system, some restructuring. Getting rid of assets. They are a little bit of behind. Ellen they are a little bit behind. They do not have the Retail Banking to kind of bolster them. Obviously Interest Rates are really low. That is a problem for them as well. And it is just a continuing problem. David this is a lot of work for john cryan, britishborn but speaks german, he has been trying to turn this company around. He has been having difficulty doing it. Ellen he really has. The other bankers have been very supportive, he has only been in the ceo job for about a year, and he is confident that they will be ok and has been saying that the plummet in the stock prices because of speculators, which has been a lightning rod because they were saying, the government officials were saying that the bank was too speculative anyway. So he has his hands full. Carol i feel like the story will be around a little while longer, in terms of the future of the bank. Lets talk about Global Economics. In that section this week, you look at what is going on with wind farms. There is a real resurgence in the United States. Ellen windfarms wind is the fastestgrowing source of alternative energy in the United States, and that has turned out to be a big boon for rural areas, especially with areas especially rural areas that are down on the luck because farmers in some of these areas are having such a hard time because corn prices have dropped. They are having trouble making a go of it. And what they are finding is they can lease their land to windfarms, and it is changing lives. We talked to a number of farmers for whom this is allowing them to hold on to the family farm for another generation. It means they dont have to sell off their land. It has allowed a few to actually be able to retire. It has been a big economic boon to these communities. David i was going to ask you about the cover story this week, the fight against zika continues. You profile it in an innovative way, and how people are doing it. Ellen we look at a Company Called oxitech and basically it has come up with mosquitoes that mate with other mosquitoes and the bar by doesnt survive. The larvae does not survive. It kills off mosquitoes after a generation and generations of mosquitoes are extremely short. And they do it without irradiating the mosquito. It is a process that involved genetics and a little bit of antibiotics. They have met big resistance in key west and areas near key west as they try to test it out. It has been used in other countries and elsewhere, and it looks like it may be successful, but in key west and, as i said nearby, there has been a huge amount of resistance. They are saying, you do not know what will happen. You dont know what the side effects are. So theyve been sort of stymied. Carol i spoke to a reporter bob coulter about what was going on. This is a mosquito that if you have ever been worried about malaria or zika or dengue, it is you already know what it is called. It is famous for going anywhere and everywhere that pesticides cant seem able to reach, and that is why it is so dangerous, and that is why the diseases it carries keep spreading. Carol certainly we are all on alert when it comes to mosquitoes thanks to zika. You write about sterilizing insect populations. This is not a new thing, people have tried to do this before. Scientists have been trying to find ways to wipe this species of mosquito out. Obviously there are pesticides. Ddt did not quite work, but they still use spray. They wanted to do something more sophisticated, they wanted to sterilize the insect. And so for years, they have tried radiation, but the problem with radiation is it is a blunt instrument and wise up weakening the mosquito so much that it does not even try to breed, so it cannot compete with regular mosquitoes out there. Carol there is a new method. And that is what you go into depth talking about. Oxitec . That is right. It is a Biotechnology Company out of the uk. They were recently acquired by intrexon, which is run by the billionaire investor r. J. Kirk. This company specializes in crazy science projects like the apple that never gets brown. You know, genetically modified stuff. Oxitec has been working on the genetically modified mosquito that has kids, but those kids never get past the larva stage. They are Strong Enough to breed, but when they do breed, the new mosquitoes never mature, they never become adults, they never fly around, they never bite anybody. Carol sounds like a smart idea. This is the male mosquitoes that do the heavy lifting . The females are the ones that bite. The males are the ones that seek out the females. Their idea was, what if we only genetically engineered the males with a super powerful gene that made their kids not able to grow up, and then send them out to go out and do our work for us and find females that are hard to find, mate with them, and then those, you know, the fruit of their loins no longer becomes an issue for us . Carol it sounds like it should work, and there has been some small areas of the world where this has been tested. Does it work . Long before zika was known to be such a horrible thing, dengue was the real target in tropical climates and difficult areas. Oxitec was testing this in brazil and malaysia and panama. And in grand cayman. Carol which is where you went. Thats right. Bloomberg businessweek, i hung out in grand cayman, ran around in a van as they tested released genetically modified mosquitoes mostly outside the van, but some stayed inside the van. Carol how did that go . At first i was worried that we were going to get eaten alive by mosquitoes inside the van. But i was reminded that these were males that do not bite. It was just a mess inside the van. It was interesting because the locals know about it and they would glance over and say, oh yeah, here come the mosquitoes. They did not bat an eye. Carol you mention all these places where they are testing it. What about the United States . Well, nothing is happening here. For years because of the dengue outbreak a few years ago in the florida keys, oxitech has been trying to be in the keys. They proposed it as recently as 2011, but the locals in the keys have been fighting it tooth and nail. What is happening in america when it comes to genetically modified miskitos is that the cutting edge of science is going headtohead with the gmo protest movement. There have been protests against oxitec in Great Britain and the cayman and other places. But this is america, where the and the mediald and activism really winds up getting more of a voice, and so they have been successfully fending off oxitech for years. Carol the concern is we do not know the longterm effects of geneticallymodified organisms, so that is some of the worry. Right. You have got unintended consequences here. The picture we just painted of this amazing science project that could get rid of mosquitoes, it sounds wonderful, but what if someone told you it was coming to your neighborhood and that nobody had ever taken a look at what happens neighborhoods after this treatment, three years later . Four years later, five years later . We know that in the history of all things, there are unintended consequences. There was a time when we thought that radiation did not have much of an effect, and then years later, we see people having health effects. David turning from zika to the frankenfly cover, we turn to our controversy, we turn to our creative director. Yeah, so we are learning about how to make a zika cover you have not seen before. The obvious thing is to show mosquitoes, but we do not necessarily want to be alarmist because zika has been around for a while. It has been a concern for a while. This is specifically about the new potential combatant for it. Carol have to do with sterilization. They genetically modify males and they release them so that they mate with females and then basically their offspring dies. It is pretty morbid. David lets talk about the line that you have to toe here. Zika virus is a serious thing. You want to have some fun with it, but you have to tread cautiously. Like i said, the story is not necessarily about the victim. You know, it is specifically about this lab oxitec which has developed the sort of geneticallymodified mosquitoes, and some of the concerns that is raising, some of the communities specifically in the florida keys where it is being tested. When we honed in on that, we can sort of separate from sort of all the bad stuff that has been happening. Carol you do it like a dating kind of thing. I mean, when i first read the story, it was kind of shocking. Like you know, it is obviously a good thing to get rid of zika by any means necessary and miami being safe, but it is also a bit shocking about how harsh this seems. It is kind of like in the insect world, kind of like the worst date ever. So i basically created a dating profile for the genetically modified mosquito. Carol not quite tender, it is not like swipe right, get rid of zika, swipe left it is loosely referencing dating apps. Yeah, it is sort of like a, gets a reference from a lot of different sources. David up next, what revelations about parts of Donald Trumps tax returns may tell us about the state of tax policy, overall. Carol who gets a fair shake and who does not. David welcome back to bloomberg businessweek. This weeks opening remarks focus on the broader implications of what we are learning about Donald Trumps tax records. Carol i spoke to reporter jesse drucker. Jesse donald trump is not the first president ial candidate who has resisted releasing his tax returns. He is the first one in many decades who has not released any returns at all. You know, mitt romney resisted for a while and eventually released two years of returns. There were a lot of calls for him to release earlier returns from years that were not leading up to the presidency, i. E. The years when he would have had incentives to clean up his returns. But trump is the first one since ford who has not released a single tax return. Carol right, really fought back, although a piece of it came out courtesy of the New York Times. Jesse right, so we have gotten glimpses of pieces, and at this point it is five years of returns we have gotten glimpses of. A couple of years in the 1970s and a couple of years in the 1990s. We have not seen those returns, but basically what the Washington Post and politico have reported is that as a result of information he provided in his tax returns to casino regulators in new jersey. Carol because he had to. Jesse because he had to, and that information has become public. What is interesting about those releases is that they essentially show us the same thing we have seen in the most recent one, which is no taxable income and therefore no income taxes. Carol we are talking about he is saying he lost money like almost 1 billion. How do you do that . Jesse so, it is pretty simple. I will give you the simplest example, it was not quite that simple probably, but imagine he borrowed 900 million to fund his casino and real estate empire. The money was not coming in to serve as the payments on those loans, and he defaulted on the loans or he worked out something with the lenders so he would not repay the 900 million. Carol so these are his personal taxes, corporate taxes . Jesse it is a little complicated. Donald trump and the corporate entities donald trump runs were in some ways synonymous for many years because they were largely structured as partnerships that were entirely or nearly entirely owned by donald trump. So the way to think of it it is that the trump corporate entity, its results for the most part flow onto Donald Trumps personal tax returns. Carol interesting. I mean, what he did, and i guess this is what we are trying to understand, is not illegal. Jesse right. Here is the punchline or the i think most interesting thing about this. So lets take with the New York Times reported and kind of an packet unpack a little bit. Basically they said he reported a loss of a little over 900 million, in theory because of the way the tax rules work, he is able to take deductions equal to 900 million. He is able to take that 900 million and deduct it over 18 years, or up to 18 years. So if he earned 900 million over the course of 18 years, he can be able to completely wipe out his income Tax Liability by taking a deduction equal to the amount that he earned. In other words, the loss that he generated was equal to the amount he made. This is theoretical. If you think about it for a second, you can say, that is not objectionable. I lost a ton of money, i should be able to take that as a deduction and cancel out my Tax Liability. Carol if he lost the money. Jesse the difference with donald trump is that he almost certainly, for the most part, was not losing his money, he was losing other peoples money. And so, the benefit that he, in all likelihood, was able to take advantage of and i have to hedge this because we have not ishe entire return that he was basically able to lose other peoples money, but then he could take the deduction. Carol how does that happen, or is that illegal if that indeed happened . Jesse no, no, that is legal for a couple of reasons. This gets unbelievably complicated, but to keep it carol tax law, complicated . Jesse i know. Hard to believe, right . If you are normally if you stop paying a loan let me back up for a second. If a bank loans you 1 million or gives you a mortgage to buy a house, you dont owe taxes on the receipt of that money. Because it is a loan, you are repaying it. If something happens and they forgive the loan, normally you owe taxes on what they have given you up to that point. Because it is income. It is no different than your employer giving you money. It is no longer considered a loan because you have kept the money. Normally that gives rise to what is called cancellation of debt income. There are some exceptions to that. One exception is if you are insolvent, and another example is in 1993, Congress Gave a benefit to the thenstruggling commercial real estate industry, which is to say if the loan that went bad was a real estate loan, then you would not have to count that as income. So in all likelihood, he was taking advantage of this. Carol what i love about your story is that you realize whether it is donald trump or mitt romney, that there are loopholes or Tax Strategies that there is a small part of our income strata, if you will, that can take advantage of these while most americans cannot. Jesse that is the most interesting thing we saw, both in 2012 and with Donald Trumps partial return here, which is both show examples of how people at the very top of the strata have available to them things that are either straightforward tax Code Provisions, like the one that donald trump probably took advantage of, or in the case of romney, more complicated trusts that they can use to avoid income taxes, gift and estate taxes, strategies and Code Provisions not available to most americans. David up next, could patagonia save the world . How the companys threeyearold futa startup plans to tackle climate change. Carol welcome back to bloomberg businessweek. I am carol massar. David i am david gura. You can also listen to us on the radio on sirius xm channel 119, am 1200 in boston, am 960 in the bay area. In the features section, patagonias plans to combat climate change. Carol it is all about a shift from Birth Control<\/a>. Turns out so many young people in zambia get pregnant. They dont really have enough information about Birth Control<\/a>. The way they are reaching them is by doing things like padding and putting on nail polish and a way of making it an easier conversation. They are doing it in urban areas and they are finding it is really working. David 30 of women under the age of 18 get pregnant, and that is astonishing. How did they come up with this idea to do it this way . They could have gone just on a campaign of information. How did this idea come about . Ellen they realized what they were doing when they said we want to talk about reproductive planning, they did not want to talk about that. But when they did it this way, they were very responsive. And maria stokes international, the ngo, has a lot to do with idea. Org. Carol they had personalities connected with different forms of contraception, very clever. Ellen they put personalities to the characters with, are you a risk taker, are you consistent, and they helped matchup girls with the right kind of Birth Control<\/a> or young women, i should say. David in the market and finance section, you look at Deutsche Bank<\/a>. The last few weeks have been grim for the future of that bank. There is rumor of a settlement of about a 14 billion. It is a bank that is not in great shape right now. Ellen it is really having problems. 14 billion is a lot of money, no matter how you look at it. And it has other problems creeping up on it. There are investigations in the uk and u. S. About whether Deutsche Bank<\/a> helped clients move assets or money laundered for clients in russia in violation of sanctions. Sanctions and Money Laundering<\/a> rules. So they have looming problems. They dont have some of the resources of banks that have a sort of bigger Wealth Management<\/a> component, etc. It has created a problem for the German Government<\/a> where Angela Merkel<\/a> has made it a big point that they do not do bailouts. The question is, how are they going to come back . A lot of bankers are being very supportive of Deutsche Bank<\/a>. But it is murky, the future is murky, and they will be facing more problems. Carol it is tough for some european banks. They are lagging behind what has gone through the u. S. Financial system, some restructuring. Getting rid of assets. They are a little bit of behind. Ellen they are a little bit behind. They do not have the Retail Banking<\/a> to kind of bolster them. Obviously Interest Rates<\/a> are really low. That is a problem for them as well. And it is just a continuing problem. David this is a lot of work for john cryan, britishborn but speaks german, he has been trying to turn this company around. He has been having difficulty doing it. Ellen he really has. The other bankers have been very supportive, he has only been in the ceo job for about a year, and he is confident that they will be ok and has been saying that the plummet in the stock prices because of speculators, which has been a lightning rod because they were saying, the government officials were saying that the bank was too speculative anyway. So he has his hands full. Carol i feel like the story will be around a little while longer, in terms of the future of the bank. Lets talk about Global Economic<\/a>s. In that section this week, you look at what is going on with wind farms. There is a real resurgence in the United States<\/a>. Ellen windfarms wind is the fastestgrowing source of alternative energy in the United States<\/a>, and that has turned out to be a big boon for rural areas, especially with areas especially rural areas that are down on the luck because farmers in some of these areas are having such a hard time because corn prices have dropped. They are having trouble making a go of it. And what they are finding is they can lease their land to windfarms, and it is changing lives. We talked to a number of farmers for whom this is allowing them to hold on to the family farm for another generation. It means they dont have to sell off their land. It has allowed a few to actually be able to retire. It has been a big economic boon to these communities. David i was going to ask you about the cover story this week, the fight against zika continues. You profile it in an innovative way, and how people are doing it. Ellen we look at a Company Called<\/a> oxitech and basically it has come up with mosquitoes that mate with other mosquitoes and the bar by doesnt survive. The larvae does not survive. It kills off mosquitoes after a generation and generations of mosquitoes are extremely short. And they do it without irradiating the mosquito. It is a process that involved genetics and a little bit of antibiotics. They have met big resistance in key west and areas near key west as they try to test it out. It has been used in other countries and elsewhere, and it looks like it may be successful, but in key west and, as i said nearby, there has been a huge amount of resistance. They are saying, you do not know what will happen. You dont know what the side effects are. So theyve been sort of stymied. Carol i spoke to a reporter bob coulter about what was going on. This is a mosquito that if you have ever been worried about malaria or zika or dengue, it is you already know what it is called. It is famous for going anywhere and everywhere that pesticides cant seem able to reach, and that is why it is so dangerous, and that is why the diseases it carries keep spreading. Carol certainly we are all on alert when it comes to mosquitoes thanks to zika. You write about sterilizing insect populations. This is not a new thing, people have tried to do this before. Scientists have been trying to find ways to wipe this species of mosquito out. Obviously there are pesticides. Ddt did not quite work, but they still use spray. They wanted to do something more sophisticated, they wanted to sterilize the insect. And so for years, they have tried radiation, but the problem with radiation is it is a blunt instrument and wise up weakening the mosquito so much that it does not even try to breed, so it cannot compete with regular mosquitoes out there. Carol there is a new method. And that is what you go into depth talking about. Oxitec . That is right. It is a Biotechnology Company<\/a> out of the uk. They were recently acquired by intrexon, which is run by the billionaire investor r. J. Kirk. This company specializes in crazy science projects like the apple that never gets brown. You know, genetically modified stuff. Oxitec has been working on the genetically modified mosquito that has kids, but those kids never get past the larva stage. They are Strong Enough<\/a> to breed, but when they do breed, the new mosquitoes never mature, they never become adults, they never fly around, they never bite anybody. Carol sounds like a smart idea. This is the male mosquitoes that do the heavy lifting . The females are the ones that bite. The males are the ones that seek out the females. Their idea was, what if we only genetically engineered the males with a super powerful gene that made their kids not able to grow up, and then send them out to go out and do our work for us and find females that are hard to find, mate with them, and then those, you know, the fruit of their loins no longer becomes an issue for us . Carol it sounds like it should work, and there has been some small areas of the world where this has been tested. Does it work . Long before zika was known to be such a horrible thing, dengue was the real target in tropical climates and difficult areas. Oxitec was testing this in brazil and malaysia and panama. And in grand cayman. Carol which is where you went. Thats right. Bloomberg businessweek, i hung out in grand cayman, ran around in a van as they tested released genetically modified mosquitoes mostly outside the van, but some stayed inside the van. Carol how did that go . At first i was worried that we were going to get eaten alive by mosquitoes inside the van. But i was reminded that these were males that do not bite. It was just a mess inside the van. It was interesting because the locals know about it and they would glance over and say, oh yeah, here come the mosquitoes. They did not bat an eye. Carol you mention all these places where they are testing it. What about the United States<\/a> . Well, nothing is happening here. For years because of the dengue outbreak a few years ago in the florida keys, oxitech has been trying to be in the keys. They proposed it as recently as 2011, but the locals in the keys have been fighting it tooth and nail. What is happening in america when it comes to genetically modified miskitos is that the cutting edge of science is going headtohead with the gmo protest movement. There have been protests against oxitec in Great Britain<\/a> and the cayman and other places. But this is america, where the and the mediald and activism really winds up getting more of a voice, and so they have been successfully fending off oxitech for years. Carol the concern is we do not know the longterm effects of geneticallymodified organisms, so that is some of the worry. Right. You have got unintended consequences here. The picture we just painted of this amazing science project that could get rid of mosquitoes, it sounds wonderful, but what if someone told you it was coming to your neighborhood and that nobody had ever taken a look at what happens neighborhoods after this treatment, three years later . Four years later, five years later . We know that in the history of all things, there are unintended consequences. There was a time when we thought that radiation did not have much of an effect, and then years later, we see people having health effects. David turning from zika to the frankenfly cover, we turn to our controversy, we turn to our creative director. Yeah, so we are learning about how to make a zika cover you have not seen before. The obvious thing is to show mosquitoes, but we do not necessarily want to be alarmist because zika has been around for a while. It has been a concern for a while. This is specifically about the new potential combatant for it. Carol have to do with sterilization. They genetically modify males and they release them so that they mate with females and then basically their offspring dies. It is pretty morbid. David lets talk about the line that you have to toe here. Zika virus is a serious thing. You want to have some fun with it, but you have to tread cautiously. Like i said, the story is not necessarily about the victim. You know, it is specifically about this lab oxitec which has developed the sort of geneticallymodified mosquitoes, and some of the concerns that is raising, some of the communities specifically in the florida keys where it is being tested. When we honed in on that, we can sort of separate from sort of all the bad stuff that has been happening. Carol you do it like a dating kind of thing. I mean, when i first read the story, it was kind of shocking. Like you know, it is obviously a good thing to get rid of zika by any means necessary and miami being safe, but it is also a bit shocking about how harsh this seems. It is kind of like in the insect world, kind of like the worst date ever. So i basically created a dating profile for the genetically modified mosquito. Carol not quite tender, it is not like swipe right, get rid of zika, swipe left it is loosely referencing dating apps. Yeah, it is sort of like a, gets a reference from a lot of different sources. David up next, what revelations about parts of Donald Trumps<\/a> tax returns may tell us about the state of tax policy, overall. Carol who gets a fair shake and who does not. David welcome back to bloomberg businessweek. This weeks opening remarks focus on the broader implications of what we are learning about Donald Trumps<\/a> tax records. Carol i spoke to reporter jesse drucker. Jesse donald trump is not the first president ial candidate who has resisted releasing his tax returns. He is the first one in many decades who has not released any returns at all. You know, mitt romney resisted for a while and eventually released two years of returns. There were a lot of calls for him to release earlier returns from years that were not leading up to the presidency, i. E. The years when he would have had incentives to clean up his returns. But trump is the first one since ford who has not released a single tax return. Carol right, really fought back, although a piece of it came out courtesy of the New York Times<\/a>. Jesse right, so we have gotten glimpses of pieces, and at this point it is five years of returns we have gotten glimpses of. A couple of years in the 1970s and a couple of years in the 1990s. We have not seen those returns, but basically what the Washington Post<\/a> and politico have reported is that as a result of information he provided in his tax returns to casino regulators in new jersey. Carol because he had to. Jesse because he had to, and that information has become public. What is interesting about those releases is that they essentially show us the same thing we have seen in the most recent one, which is no taxable income and therefore no income taxes. Carol we are talking about he is saying he lost money like almost 1 billion. How do you do that . Jesse so, it is pretty simple. I will give you the simplest example, it was not quite that simple probably, but imagine he borrowed 900 million to fund his casino and real estate empire. The money was not coming in to serve as the payments on those loans, and he defaulted on the loans or he worked out something with the lenders so he would not repay the 900 million. Carol so these are his personal taxes, corporate taxes . Jesse it is a little complicated. Donald trump and the corporate entities donald trump runs were in some ways synonymous for many years because they were largely structured as partnerships that were entirely or nearly entirely owned by donald trump. So the way to think of it it is that the trump corporate entity, its results for the most part flow onto Donald Trumps<\/a> personal tax returns. Carol interesting. I mean, what he did, and i guess this is what we are trying to understand, is not illegal. Jesse right. Here is the punchline or the i think most interesting thing about this. So lets take with the New York Times<\/a> reported and kind of an packet unpack a little bit. Basically they said he reported a loss of a little over 900 million, in theory because of the way the tax rules work, he is able to take deductions equal to 900 million. He is able to take that 900 million and deduct it over 18 years, or up to 18 years. So if he earned 900 million over the course of 18 years, he can be able to completely wipe out his income Tax Liability<\/a> by taking a deduction equal to the amount that he earned. In other words, the loss that he generated was equal to the amount he made. This is theoretical. If you think about it for a second, you can say, that is not objectionable. I lost a ton of money, i should be able to take that as a deduction and cancel out my Tax Liability<\/a>. Carol if he lost the money. Jesse the difference with donald trump is that he almost certainly, for the most part, was not losing his money, he was losing other peoples money. And so, the benefit that he, in all likelihood, was able to take advantage of and i have to hedge this because we have not ishe entire return that he was basically able to lose other peoples money, but then he could take the deduction. Carol how does that happen, or is that illegal if that indeed happened . Jesse no, no, that is legal for a couple of reasons. This gets unbelievably complicated, but to keep it carol tax law, complicated . Jesse i know. Hard to believe, right . If you are normally if you stop paying a loan let me back up for a second. If a bank loans you 1 million or gives you a mortgage to buy a house, you dont owe taxes on the receipt of that money. Because it is a loan, you are repaying it. If something happens and they forgive the loan, normally you owe taxes on what they have given you up to that point. Because it is income. It is no different than your employer giving you money. It is no longer considered a loan because you have kept the money. Normally that gives rise to what is called cancellation of debt income. There are some exceptions to that. One exception is if you are insolvent, and another example is in 1993, Congress Gave<\/a> a benefit to the thenstruggling commercial real estate industry, which is to say if the loan that went bad was a real estate loan, then you would not have to count that as income. So in all likelihood, he was taking advantage of this. Carol what i love about your story is that you realize whether it is donald trump or mitt romney, that there are loopholes or Tax Strategies<\/a> that there is a small part of our income strata, if you will, that can take advantage of these while most americans cannot. Jesse that is the most interesting thing we saw, both in 2012 and with Donald Trumps<\/a> partial return here, which is both show examples of how people at the very top of the strata have available to them things that are either straightforward tax Code Provisions<\/a>, like the one that donald trump probably took advantage of, or in the case of romney, more complicated trusts that they can use to avoid income taxes, gift and estate taxes, strategies and Code Provisions<\/a> not available to most americans. David up next, could patagonia save the world . How the companys threeyearold futa startup plans to tackle climate change. Carol welcome back to bloomberg businessweek. I am carol massar. David i am david gura. You can also listen to us on the radio on sirius xm channel 119, am 1200 in boston, am 960 in the bay area. In the features section, patagonias plans to combat climate change. Carol it is all about a shift from Outdoor Clothing<\/a> to food. I spoke to reporter and editor brad wieners. You write about patagonia, and they are getting into the food business with patagonia provisions. What exactly are they doing . Brad at first blush, it looks like they are doing some sort of a trail food. They have done a smoked salmon in a foil, prune and nut bars, certain things you would take on a trip when you are wearing your patagonia. As they explained to me, it is really about shelfstable goods entering the markets with stuff that is not perishable. And it is about stuff that they have done some real Due Diligence<\/a> on the sourcing to make sure it is environmentally sound. Carol this is a company that is definitely known for their pricey parkas, but they are also known for their concerns about the environment. It is part of their mission, and they are bringing that into what they are doing in the food area. Brad in some ways, that is exactly right. They are taking what they have learned from organic cotton and sourcing, you know, sort of torturefree goose down and even taking petroleumbased rubber out of dry suits and wetsuits for surfing. Taking that knowledge, going deep into your supply chain, and applying it to food, seeing if they can scale that now. Carol you spent some time with the people involved in this, including the founder and the person who is driving patagonia provisions. What did you kind of get from them about their approach and how they are going about this . Brad for the founder, this is a legacy play. You know, he probably wrote his legacy on some granite laws and waves in the past. He is a celebrated outdoorsman. But he thinks that food can make the bigger difference. He wanted his company to be an example of how you can improve the environmental welfare, but you know, stewardship, but there is a limit. Especially with synthetic fibers, like those parkas are made of. There is a limit to the footprint, there is going to be one always. But with food, they are finding that with this practice that they tout, regenerative agriculture, that you could actually grow some food that is good to eat but also restores the soil. Carol that is what i like about your story. You talk about patagonia and i was really kind of intrigued. I have done some things with chipotle who are very concerned about the impact that production has, but this regenerative agriculture. They are very involved with this. Brad they want to be. The question i think that is raised is whether or not it can scale. Carol right. Brad but what they are interested in doing is seeding these projects that might bring a new wheat into our supermarket that is not there yet. Adding diversity. The big idea is to try to do agriculture more the way nature does it, and in a way, when you hear that, you get why patagonia, a company that celebrates being in the wild, wants to do that. You did great with down parkas, stick with that, but when you want to take pressure off of wild places, you have to intensify agriculture. Carol up next, china gets a new tech billionaire, and it already won a big war with uber. David google wants in on amazons territory. We will have the companys answer to echo. David welcome to bloomberg businessweek. Im david gura. Carol and im carol massar. The google phone that they hope will be an iphone killer. David and problems with the prius in the u. S. Carol an exclusive interview with the chinese tech billionaire that won a 1. 5year battle with uber. David all that ahead on bloomberg businessweek. David we are here with the editorinchief. Ellen pollack. So many mustreads in this issue. Lets talk about the Global Economic<\/a> sector. A lot of people were in mexico talking about the donald trump and his candidacy. Here, all of the interest in donald trump is making it easier for the mexicans and that u. S. Mexicans living in the u. S. To send more money back . Ellen right, and that means value of the peso has dropped against the dollar. That means you can buy more with u. S. Dollars sent to mexico. What is happening is that is good for immigrants sending money home. It has allowed people in mexico to take care of their needs better, to take care of their houses better. It is sort of a weird byproduct of the trump candidacy. Carol it is helping the folks in mexico. Ellen not just the folks in mexico, but illegal immigrants. I talked to one who is able to send, you know, get more money to his family because of it. Maybe people dont realize it is because of trump, but they are aware of the Conversion Rates<\/a> and are taking advantage of the Conversion Rates<\/a>. Carol we love watching the peso effect, the mexican economy is not great, so this is helping them out. Ellen it is and im sure that is not what he intended. Carol you look at what seattle is looking to do, safe places for heroin addiction. Ellen it has been tried in canada, and elsewhere but not in the u. S. The idea is to avoid overdoses and prevent deaths. They are considering setting up centers allowing addicts to shoot up in a supervised way. It is not meant to encourage drug use, but if there is an overdose, people will be helped as opposed to being left to die. And Law Enforcement<\/a> is on board with the idea. David lets talk about the controversial nature of this. The mayor of seattle is saying if we can help people, why wouldnt we help people. It has been tried and it is not without controversy. Ellen it is very controversial, federal drug laws are pretty strict. Many states have said marijuana is legal but it is still a violation of federal law. There is a question on if the feds will crack down on it. David is it a problem in seattle . Ellen it is a big problem everywhere. Really. David the founder of didi, tell us about him and the company he founded. Ellen he founded a Company Called<\/a> didi means hong kong taxi, its a a competitor to uber. They played hard with their homegrown competitors and uber. Uber in china through in the towel. They invested in didi and sold their operations to them. They are gone. Didi is one of the few companies that has been able to mount a very successful fight against uber. Carol almost shocking. This is a gentleman that does not do many interviews. Brad stone went to beijing and caught up with him. I spoke with brad. You call the founder of didi the ubertamer . Brad right, so he is the one entrepreneur who beat back uber. The story is remarkable. Uber is six years old. Didi is four years old. The story starts in alibaba in china where cheng wei is a midlevel sales manager. But he is working for an executive. They are, along with other executives, brainstorming startup ideas. Early 2012, they see the activities of a british ride hailing Company Called<\/a> halo. Halo was working with a licensed taxicab in london, the black cabs to create an uberlike experience. Cheng wei wonders, why cant we do this in china . So he leaves alibaba, his boss invests 100,000 in this company. To their horror they realize there are at least 30 other companies in china that has done this too. No one just clones companies in china, it is a mass migration of entrepreneurs into an idea. They start in 2012 in beijing. It is called hong kong taxi. They basically try to uberize the yellow stripe taxis in china. Carol do they have any advantage . Like as you said, i mean there were other companies though, it was a crowded space. Do they have advantages over their competitors . Brad they did. One of them was they were taking the halo approach to work with licensed taxis. There were a number of companies that took an uber approach trying to work with licensed chauffeurs of town cars or limos. There were not enough of those cars in beijing. So right away, those companies had trouble. Some had more early investment from Silicon Valley<\/a> venture capitalists trying to replicate ubers success in china. Didi took a more licensed approach with yellow cabs. That worked better. They had the mentality of alibaba. They called each other classmates, as they do at alibaba. They talked creatively about problems. They would see competitors get an exclusive contract to talk with cabdrivers at airports. They would work the bus stations. Instead of giving away iphones, they did not have the money for that, they targeted young people. They gave apps to young drivers. I would say that early was their advantage. Things did not take off until 2013. Cheng wei is having problems fundraising. And basically, to his horror, he realizes alibaba has invested in a competitor. What happens, long story short, they scurry to the alibaba archenemy. Tencent, a social network maker, videogame maker. That is when things take off. Alibaba and tencent are archenemies and competing to funnel volume in payment services. When those giants fight each other, that is when they take off. David google is going after the apple iphone. Mark was there when google unveiled its pixel smartphone. Carol google announced new phones. But the strategy with the new phones is different than the past. Tell us about it mark right. Google has done phones before, but it has not been their own. After talking to executives today, we learned they have a new strategy. Prior to this, they have been proponents of a nexus strategy. They bought the software and worked with them to bring their software to their hardware. They partnered. Basically now, google has a new program called made by google with a pair of new phones starting at 649. They are called the pixel and the pixel xl. They look like iphones but they run a new version of android and new functions like google assistant. The strategy is that google worked to develop its own supply chain. Google is also doing custom work in terms of the silicon chip sets inside the phone. Theyre looking to the future and how to build more custom work and a successful unit. Carol why is google, who has had a successful model, putting out the Android System<\/a> for other hardware makers to work with and come up with devices, why is google in the hardware game . Mark the iphone from apple has been extremely successful. Why . Because of the premium price point and premium features. For google to keep its own software, android, its key Services Like<\/a> gmail, google maps, google voice very , prominent, they have to come out with their own hardware to promote these features. The time was right given that google is solidifying its services lineup. Carol google is going headto head with apple in the smart phone market. I get it. Google also though, you know, announced another product today going headtohead with amazon with its echo. Amazon has headed out for a few years. Google is introducing its own kind of home speaker market. Mark amazon echo has been surprisingly popular. Apple is working on its own amazon echo competitor. Earlier this year google , announced google home, a speaker system for the home. Today, they gave more details like the ship date, pricing etc. , it will be a key accessory for the home when it comes out ahead of christmas. But next year is when it will be more powerful. Some google executives were talking about the Company Working<\/a> on 2 Software Development<\/a> kits one for apps , and one for hardware around the house. This means developers from Companies Like<\/a> uber, twitter, and facebook can create applications for google home to interact with their services via google hardware. The other platform involves other hardware. Companies like phillips can make Software Packages<\/a> making existing Accessories Compatible<\/a> with google home. So i can say, google, turn on the lights, and i will interact really well through the speaker. Carol it is interesting to see them going, as i said before, you know, going headtohead with apple in the phone market, and going after the amazon echo as well. What does this do to its relationship with hardware makers it has worked with for years, samsung or lg . Does it kind of complicate that relationship potentially . Mark potentially. Google explained theyre going about this with a careful balance. The android division, the platform at the heart of the company that is on 1. 5 billion devices, players in china, india, around the world, there will be a firewall. Like samsung and lg is treated as equals on the android platform, so is this hardware. Just like samsung gets treatment from google, so will googles own software division. It is very interesting. The key is believing what google says about the firewall, and trusting that there will be a firm line between google s Platform Company<\/a> and googles hardware division. Carol why it is not so easy being a prius these days. Carol welcome back. Im carol massar. David and im david gura. Carol toyota failed to win over American Consumers<\/a> with the recently redesigned prius. The business has changed a lot over the life of the prius. When you thought about cool and wet everybody even in Silicon Valley<\/a> was driving and hollywood stars, this was the car. Now, that position is taken by tesla. The same way that hybrids were considered to be revolutionary at the time, people think about that as electric vehicles. People want to move on to what is new, hot, cool. That has been to the detriment of the previous. The prius is not that cool. The other thing is they redesigned the prius to sort of make it appeal to a wider range of people. The redesign went from what was admittedly not a good looking car to what is now maybe a little more out there than the typical person may want for this type of vehicle. It is very flashy, sort of angular, you know, sort of look that is not particularly popular with u. S. Buyers. Carol not a good thing. People who have owned a prius are not necessarily buying another . This is one of the big changes, it used to be that more than half the people who had a prius would buy their next car as a prius. Now, that has fallen to the lower 40s in that is not a good sign longterm. We just had the car numbers out through september. Now, we are dropping down 25 on the value of prius sold in the volume sold in the u. S. Carol when prius came out, you mentioned like 20 years ago, it is hard to imagine. But you also mentioned they are coming out with a less expensive model. But there are more choices when it comes hybrid electric vehicles. A lot more choices. In 2011, there were three all electric or hybrid vehicles. Now, there are 33. A big difference. And so, everybody has one. Plus, the competition, if you really loved toyotas, it is competition in the brand. The rav4 has its own hybrid version. Carol what does toyota say . That the prius is not as popular as it used to be . Well, they say it has nothing to do with redesigning the car to make it look somewhat strange to a lot of people, but it has to do with cheap gas. You know, the big appeal is it gets a great mileage. If gas is cheap, people want an s. U. V. Carol the redesign, they sell this in japan. It is extremely popular there. I mean, that is the thing. The prius came back this year to be the bestselling car in japan. Now, the brand is the 31st selling car in the u. S. I mean, there is a big difference in the style. I asked a coworker, what do you think of this . They said, i like it. It is like fast and furious tokyo drift. And i thought, that might be one of the issues here. There seems to be a big difference between what the younger drivers in japan want versus what the younger drivers sort of ecologically oriented drivers here want. Carol it is hard when you have tesla on the other end of the spectrum, beautiful design inside and out. Some pushback. I have been in a prius. It is small. It is cozy. The other thing is so Many Americans<\/a> have gotten used to larger cars and suvs with a lot of Storage Space<\/a> and room. It is difficult for what started as a subcompact that is now a compact to midsized car on the but still without a lot of room. Carol toyota is not giving up on prius . No. It is a big deal for them. If you think hybrids will be the main high mileage, lowgas car for a long time, you just have to make it look better. David next, new devices could be used to revolutionize digital payments. Carol chuck e. Cheese gets some new cheddar, you know what i mean. You know chuck e. Cheese is a mouse. That is coming up next. David welcome back to bloomberg businessweek. Im david gura. Carol im carol massar. You can also listen to us on xm radio, in new york, in boston, and washington, d. C. , and in the bay area. David the focus on the design section, a studio with an idea for creating a physical dimension for online payments. Ever since people started using credit cards, it is easier to spend money without thinking about it. You do not have to go to the atm and put cash in your wallet. Every time you spend money, you could take out your card, spend it, maybe not keep so much track, especially if you are buying things you couldnt really afford. Carol yeah, so you write about an individual that notices with his own daughters. It has disconnected us from money. A designer with two daughters. He has two daughters, when he would give them allowances when they were younger, he would give them cash. They would sort of meticulously budget. They would keep track of everything and were learning life lessons. When they were teenagers, he switched from cash to a debit card. They were constantly going broke. They could not keep track of their money. He started thinking, is this because my girls are older and less responsible, or the way they are spending money. He decided to do an experiment. Carol what was the experiment . He came up with a device that is like an elongated token. He calls it the scrip. It is a demonstration device. It is sort of a digital wallet that you have to manually load money onto, swipe your finger across it, and think about the money you are spending in the same way that you have to think about pending bills to the clerk. Carol it is a fixed amount . On the scrip, right . Yes. And every time you spend money, it says you just spent 350, here is your new balance. Carol did he test it with his daughters . Did it make a difference . He said he was worried about constantly giving life lessons and the rolling their eyes. Carol you are right. There has been research that has looked into the disconnection from money, especially with credit cards. There has been a lot of research that shows people are less responsible with credit cards, even setting aside the fact you can spend money you dont actually have. Just the action of paying with a card as opposed to paying with cash you spend more value those purchases less. You have that abstraction. There is a disconnect. Carol what are the chances of it being put into use . I think it is an uphill battle. Companies that design payments like it when you spend money. I asked about this. He said, yes, you know, we did not look for a partner. We have not found it would one. Probably be hard to find one. We did not find one. There are some niche cases where this might come up. If there are places looking to help people budget money, they can offer this to make you more mindful. That is one case, but i do not think it will become the replacement for the increasingly is your way to pay cash. Carol taking us to chuck e. Cheese. David here is editor julian goodman. You are right. Carol you write about chuck e. Cheese. Anyone who has kids, you have probably spent time there. There are changes. What is going on . They are phasing out the famous tokens with chuck e. s face on them. They are phasing them out and going to an allcard system. Carol that is a big change. Tokens have been part of the fun. Exactly. Since the late 1970s when the company was founded. For chuck e. Cheese they are a moneymaker because you give money up front. Then you get tokens. Whether you spend them or not chuck e. Cheese keeps your , money. They still have value. You can still trade them in for credits on your card. So, it is for the benefit of the chamber easier for them to keep track of. Carol as a parent, many times i have walked home with tokens, and then i forget to bring them back. This is nicer. And if you lose your card you can get the credits returned to you. So, you know, it is a little bit nicer and smoother and it is making use of better technology. Carol having said that, some people collect tokens. Some of them are collectible. Because there are variations. There have been many designs. They used to be printed with the name of the location they were destined for. There is one almost mythical set that was printed for a california restaurant that were misprinted and had to be returned to the chuck e. Cheese mint. A handful were saved from the melting pot. They go for almost 1000. Carol what was your favorite story . David Deutsche Bank<\/a>. There are so many stories the last few weeks. This ties them together and looks at the proposed settlement with the doj at 14 billion and the debate in the bank with investors about the size of it. Looking at the condition of the european bank. It is not in great shape. You have john cryan has a fiveyear plan. One year into it, but still a lot more to do. How about you . Carol i loved his story of going to beijing and talking to the founder of didi. I thought we got insight to the competition between didi and uber. A lot of the information about kind of the back and forth, the growth of the ridehandling services in the chinese market. How didi beat uber, which is phenomenal. A lot of nuggets in that story. I really liked it. Bloomberg businessweek is available on newsstands. David and online. Carol more Bloomberg Television<\/a> starts now. Coming up on bloomberg best, the stories that shaped the week in business around the world. The pound takes a pounding and the hint of an ecb taper sends the market running. Market spinning. Job cuts at european banks, google leaps into hardware, and a message in the september u. S. Jobs report. If you are janet yellen, call it a goldilocks job report. Not too hot, not too cold. A fed hawk warns a hike may come in september","publisher":{"@type":"Organization","name":"archive.org","logo":{"@type":"ImageObject","width":"800","height":"600","url":"\/\/ia801600.us.archive.org\/12\/items\/BLOOMBERG_20161009_120000_Bloomberg_BusinessWeek\/BLOOMBERG_20161009_120000_Bloomberg_BusinessWeek.thumbs\/BLOOMBERG_20161009_120000_Bloomberg_BusinessWeek_000001.jpg"}},"autauthor":{"@type":"Organization"},"author":{"sameAs":"archive.org","name":"archive.org"}}],"coverageEndTime":"20240626T12:35:10+00:00"}