Transcripts For BLOOMBERG Bloomberg BusinessWeek 20170703 :

Editorinchief of bloomberg businessweek. I love this issue. Why now . Technology other was that franchise of bloomberg businessweek, is something weve always dissing was ourselves on and we pride ourselves on the axis. When we were thinking about redesigning the magazine, we really wanted to keep global tech as a franchise and make it even more global it already was. You see two themes. Here are some of the companies and developments and innovators you may have heard of who actually are dealing with the world and the future is closer than you think. Whether thats fish skin used to treat wounds or the race for space, things that we thought were Science Fiction almost are really happening. We wanted to bring that to readers. Oliver this has to be one of the Coolest Stories you ever had in one magazine. We want to keep the sort of business economics saying, but it is so easy to read because this is so exciting. If you havent heard about it or something that really digest up got you just up. Issue, ashlee vance goes into issues. I still think of satellite as these huge mishima things up there. Satellitesng about that are the size of a boombox. A radio that are going up into space. Things you can carry in a briefcase and watch 100 satellites, companies with Startup Technology around space and capturing satellite imagery. As a little bit that talks about how you can monitor whats going on in ukraine from a satellite sizable briefcase and really track that. We are being watched all the time from everywhere. Where you think is a good thing were a bad thing, its happening. I think this really gets the heart of that race for space and how fundamentally a has changed and how cheap it is getting. Cool you mentioned whats about this issue, its companies you know and companies you know maybe focus on asia. . 10 is one of those. Use 940 million active users. And this is the most staggering statistic. App, and ine chat china, people spend an average of four hours. Its embedded in everything we do, from what you order a restaurant to talking with your friends, to buying a new shirt. Its almost impossible to get to any aspect of commerce without having we chat. And we go to these two guys who really move it forward, and we focus on my glaucoma the driving Operational Force behind tencent. This guy playing a videogame so much that he eventually got the 97th highest score in it. And a listman banker of credentials as long as your arm. Carol agent two job offers to get them there. Things ine of the thought was interesting was the juxtaposition between the ubiquity of tencent in a whole other part of the world, and then now their attempts to expand beyond that world, to find out what they are going to do. We talked to reporter redstone. Brad if youre not familiar with tencent and you are interested in business with the internet, you need to learn about this company. It sidebyside with alibaba, one of the Technology Giants of asia. Theyin shenzhen, china and are known most prominently for the messaging service we chat. I could draw parallels a whatsapp or facebook messenger, but it really is so much more. In the u. S. , we tend to have one app for everything we do, to buy movie tickets or make payments, and we chat is like the dominant way that people in china spend their time online. Internet bundled into a messaging service. You can get your news and search the web and talk to friends and contacts and their apps within the app for dating and buying tickets and ordering stuff online, ecommerce. It has become over the past five planetr so the largest in the chinese internet solar system is the best way to just ride it. I think 900 million daily users. Thirds of the chinese modulation spending about two hours a day each on it. It really is a tremendous asset for the shenzhenbased company, tencent. Carol you talk about two individuals closely tied to tencent. Pony ma, the founder of the companys president. These are two individuals were not out of the public eye, but crucial to the company. Brad moneyball is of the five original founders and one of the wealthiest pony ma one of the original founders and one of the wealthiest in china. He doesnt do a lot of interviews, we jokingly referred to this photo with the chinese president , all the World Technology execs lined up, that two years ago. This was a vote of the made the rounds. Everybody is looking at the camera and smiling, and pony ma is staring down. They caught him at that moment, but it was something very characteristic about that. He doesnt do a lot of interviews. Nobody at this company does. We got this tremendous opportunity to talk to the second in command, his colleague and cocollaborator, martin lau. He is the Sheryl Sandberg of tencent. 2004, before that he was working at Goldman Sachs and helps take tencent public. He really guided the strategy and guided the international expansion, created the culture at tencent and helped steer we chat to what it is today. Carol its funny you say that, i want to tell me more about this guy, hes very important. This is the guy he was offered a job by tencent after the ipo and said no thanks. It took the second job offering. Brett we have a lot of fun talking to him. One of our asian tech correspondent and i went to visit martin lau in hong kong and this is a unique opportunity. Withrely talks and we sat him in their Hong Kong Office and he reviewed his trajectory and his journey into tencent. Its true, when he was first given this opportunity by pony ma and his cofounders back when they were taking tencent public, he turned down the job. Everybody was a little worried about this thing. Could it overcome all of pessimism in the market . It was a one trick pony, no pun with the founders name, but they were beginning to do deals with mobile phone operators in china to get some script in revenue and thats why there was some optimism around the ipo and why year later when pony ma made this operation to martin lau, he accepted. Oliver turning the future of technology into a cover image was robert is. Rob vargas. Rob whenever wide to see like it just about this one story. We shot with this Company Called rocket lab and it was his one shot of the inside of the rocket that we felt was nice, kind of abstract. Its not too specific, but also kind of the regular gets you to the point that this is a tech issue. Idl i first thought read so many of the stories i had no idea what this is about. How did you get that picture . Rob a lot of the rocket in this facility were in progress and a lot of them were opened up and you could kind of see the depths of it. We ask a got inside and shot the depths of it. Notl its not like you but not like you put a lot of other stories on there. Its very clean. Rob you have a sample of contents which gives you a little more of whats inside and then when you open a magazine, you see the shot of a man standing inside these tubes, thats also what is here. Carol up next, the middlemen behind drug price hikes. Oliver emmanuel macrons plan to reform french labor law. Carol this is bloomberg businessweek. Carol welcome back to bloomberg businessweek. Im carol massar. Oliver im oliver renick. Tetris online at businessweek. Com. Carol and on the mobile app. Hires Health Insurance pharmacy managers to negotiate drug prices with pharmaceutical companies. That hased carol led the price hikes and lawsuits. Pharmacy benefit managers work on the behalf of health care employers, unions, anyone who is providing health plans to employees. The rule of the pharmacy benefit manager is to represent a health plan in its dealings with the drug manufacturers, and to negotiate discounts, which are referred to as rebates from the drug manufacturers, so the health plan, which might be employer or Insurance Company pays less than the publicly advertised list price. That is the first step in understanding what theyre going to do. Carol lets get into competitions. How is that working in terms of reducing cost . Cost fordoes reduce the health plan, but the seeking of the rebates has the perverse side effect of causing drug manufacturers to raise their list prices, so the list price is higher in a remake can be taken from the higher list price. Carol so they get a bigger rebate. Paul they keep a slice of that rebate, so they are basically they have an incentive to see the list price go higher, so their percentage rebate goes higher. That would all be fine if no one paid list price. Its not the way the world works. A lot of people do pay the list price. If you were among the millions of americans who still lack Health Insurance at this moment, and there may be millions more those people if the republican obamacare revealing replace is enacted, if you go to the pharmacy, you pay list price. If you are on medicare recipients, theres a coverage gap, where the recipients basically have to pay for their own drugs, and again, you will pay the list price. Carol you hit a certain amount of costs as a medicare recipient and if you go above that, you have to pay list price. At first it seems like the price it takes to make this drug in distributed, etc. , i found it similar to analogous maybe when you going via phone. Phones have a very high list price that comes from the manufacturer. Most people dont end up paying that because they do plan at a discount and it is sort of analogous in the sense that you really feel it when youve lost your phone couple of times and you say this is actually what they charge. Who ends up paying that falls into that gap where they have to be the list price . Paul the Biggest Group is people who are uninsured. Even after obamacare was enacted, there were still some 27 million americans who pay full price. Moreover, remember that under morecare, there is provision of insurance, but often with very high deductibles. So lets say it today, you now have a 4000 deductible, 5,000 deductible, 6,000 deductible. And to exhibit electable, you are paying list price. They do bite a lot of people. You give yourthat story a personal edge and you David Hernandez and tell us about his story. He is diabetic. Paul he is diabetic, a restaurant worker in new jersey and he does not make a lot of money. , six or seven years ago, he had no insurance whatsoever. During that time, yet described imp onhad to scr insulin. He ended up going blind in one eye and needing a kidney transplant. Covered under a new jersey public plan for the disabled, but this coverage will expire at the beginning of next year and then his costs will be Something Like 300 a month for insulin, which is a very big burden for someone who is not making much more than minimum wage. In economic section, french president in annual macron is wasting no time in tackling the most explosive item on his Economic Policy agenda. Famous leverage labor laws. We talked editor kristi noem life. Reform asised labor part of his campaign. The new assembly got sworn in this week, some two weeks since the second round of elections and he presented his proposal on tuesday. Carol 3000 page labor code, not an easy thing to undo. Theyre not going to revamp the whole thing that, but they want to make significant changes. Weve seen three previous president of france try and fail. Theres a kind of issues that impact workers. Cristina everything is codified, the size of windows, the length and bathroom breaks, and if you mail a French Worker on the weekend, he does not have to reply to you. Its in his contract. Carol what is he going after specifically . Cristina the cost of severance. The cost itself is not the employees europe, but can easily drag companies into court and the courts are very employee friendly. Its a process thats long as well as expensive. Is other big important issue to let companies negotiate directly with workers. In france, less than 10 of the workforce is unionized, but still, companies are bound by the sector wide agreements that are negotiated by the unions. That would give companies a lot of flexibility to deal directly with workers. Oliver why is one of the first orders of business for theund four macron debate was not centered so much on this. The economy comes into account definitely, it was very much about Foreign Policy and integration. And here we are attacking this thing is well rooted within society for decades. Why is he choosing to goes after this . Cristina a lot of people identified as it he economic impediments. France has an employment has hovered around 10 for five years, whereas germany and spain both sought employment fall after the introduced their own labor reforms. Assault unemployment fall after they interviews their labor reforms. What happened is more companies have been relying on these temporary contracts and it is really hard as a young person, you cannot go in russian apartment, never mind by one, by showing a landlord a temporary contract. Oliver have you wondered what Jeff Sessions has been up to since he recused himself from the Russian Investigation . We will tell you. Carol illinois budget woes go from bad to positively junk. This is bloomberg businessweek. Oliver welcome back to bloomberg businessweek. Im oliver renick. Carol im carol massar. You can listen to us on the radio on sirius xm radio, a. M. 300 in boston, 91 fm in boston in washington, d c. Oliver in asia on the Bloomberg Radio plus that app. Carol Jeff Sessions may not be involved in the Russian Investigation. Oliver he has been keeping himself busy trying to roll back obama era policies. For the attorney general, its been business as usual. Thiss been able to use time when everybody is focused on the Russian Investigation to really kind of remake the justice departments and move them in the direction that he wants them to move towards, 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. Talking about the specifics of what he has been a doing, in terms of the obama legacy. Hes been rolling back charging policies that have taken a softer approach to nonviolent drug offenders and essentially ordering all prosecutors to charge the harshest go for the harshest penalties in cases that they bring. This is kind of a bit counter to the way prosecutions have been handled over time. And he also has been taking sort of a harder stance and a harder look at these settlements that we entered into with various over Problematic Police departments, saying he wants to review all the settlements, because his view is he doesnt want the feds meddling and handcuffing police officials. Think isat i interesting, we watched this trade going into the elections based on we heard on the campaign trail, some of the rhetoric there, specifically, to do it with private prisons. Weve been moving away from that and Jeff Sessions is moving us back towards the u. S. Government having a relationship with private prisons. Tom hes done a number of these things with a private prison augustey came out last by then Deputy Attorney general sally gave, it was to try and phase out the governments use of private prisons. But heber of reasons, has been able to come right in and immediately issued his own memo saying thats gone. With a number of these issues, he has been able to sort of quickly dismantle in a lot of items that have been in place, some very recently, others in place for several years. Also in the politics section, with 6 billion in debt, the state of illinois on his way to another credit downgrade. Carol heres reporter elizabeth campbell. Elizabeth we are in the verge of our street Third Straight fiscal year without a budget. Bythey dont come together july 1, we start fiscal year 18 without a spending plan. Billions of dollars in the red and the states in big trouble. We are for another credit downgrade, which puts us in job territory. Carol how much is illinois in debt . Elizabeth because of the ongoing budgeting, we are looking at about 15 billion in unpaid bills, and at the same time, or deficit is in the neighborhood of about 6 million. If things keep going, the comptroller said the state is effectively hemorrhaging cash. Cutre soon going to have to into thing like core services. She did emphasize that debt service is a priority and will continue to be paid, regardless. Servicethey say debt will continue to be a priority, but these costs are going to keep adding up because even when the downgrade does happen, that takes it down to junk, the first date it has ever happened to. Borrowing costs go even higher. What kind of yield is that bring us to . What kind of cost is that when on the state as a burden . Elizabeth if and when illinois votes for the bond market again, if they have a junk rating, borrowing costs are going to go up. Illinois already has the highest spread on its bonds compared to debt. I check about 22 states illinois has the highest spread over aaa bonds, and in terms of unpaid bills, we are looking at 800 million in interest in late fees alone and that comes on top of any future bonding costs when they go to the market. They cannot file for bankruptcy, this is in detroit, which could. How did they get to the state, where they constantly in the red . Has been illinois running deficit and since 2002, but at the start of 2015, tax increases expired, leaving the state with a hall of about 4 million to 5 billion, and they didnt cut expenditures to match up with that declining revenue. At the same time, for his republicans leave the state since 2003 to office and he has been battling with the democraticcontrolled legislature over how to fill that deficit and i just cant agree. The governors push for what he has called structural reforms, things like changes in an acting term limits, property tax freeze is in the democrats have resisted. The been able to come to an agreement or pass a spending plan for about two years now. Carol weve been to bestselling authors of the second machine age about their new book, machine platform crowd. Oliver every production about the future made by elon musk. Carol this is bloomberg businessweek. Oliver welcome to bloomberg businessweek. Carroll the 20th anniversary of the Science Fiction<\/a> almost are really happening. We wanted to bring that to readers. Oliver this has to be one of the Coolest Stories<\/a> you ever had in one magazine. We want to keep the sort of business economics saying, but it is so easy to read because this is so exciting. If you havent heard about it or something that really digest up got you just up. Issue, ashlee vance goes into issues. I still think of satellite as these huge mishima things up there. Satellitesng about that are the size of a boombox. A radio that are going up into space. Things you can carry in a briefcase and watch 100 satellites, companies with Startup Technology<\/a> around space and capturing satellite imagery. As a little bit that talks about how you can monitor whats going on in ukraine from a satellite sizable briefcase and really track that. We are being watched all the time from everywhere. Where you think is a good thing were a bad thing, its happening. I think this really gets the heart of that race for space and how fundamentally a has changed and how cheap it is getting. Cool you mentioned whats about this issue, its companies you know and companies you know maybe focus on asia. . 10 is one of those. Use 940 million active users. And this is the most staggering statistic. App, and ine chat china, people spend an average of four hours. Its embedded in everything we do, from what you order a restaurant to talking with your friends, to buying a new shirt. Its almost impossible to get to any aspect of commerce without having we chat. And we go to these two guys who really move it forward, and we focus on my glaucoma the driving Operational Force<\/a> behind tencent. This guy playing a videogame so much that he eventually got the 97th highest score in it. And a listman banker of credentials as long as your arm. Carol agent two job offers to get them there. Things ine of the thought was interesting was the juxtaposition between the ubiquity of tencent in a whole other part of the world, and then now their attempts to expand beyond that world, to find out what they are going to do. We talked to reporter redstone. Brad if youre not familiar with tencent and you are interested in business with the internet, you need to learn about this company. It sidebyside with alibaba, one of the Technology Giants<\/a> of asia. Theyin shenzhen, china and are known most prominently for the messaging service we chat. I could draw parallels a whatsapp or facebook messenger, but it really is so much more. In the u. S. , we tend to have one app for everything we do, to buy movie tickets or make payments, and we chat is like the dominant way that people in china spend their time online. Internet bundled into a messaging service. You can get your news and search the web and talk to friends and contacts and their apps within the app for dating and buying tickets and ordering stuff online, ecommerce. It has become over the past five planetr so the largest in the chinese internet solar system is the best way to just ride it. I think 900 million daily users. Thirds of the chinese modulation spending about two hours a day each on it. It really is a tremendous asset for the shenzhenbased company, tencent. Carol you talk about two individuals closely tied to tencent. Pony ma, the founder of the companys president. These are two individuals were not out of the public eye, but crucial to the company. Brad moneyball is of the five original founders and one of the wealthiest pony ma one of the original founders and one of the wealthiest in china. He doesnt do a lot of interviews, we jokingly referred to this photo with the chinese president , all the World Technology<\/a> execs lined up, that two years ago. This was a vote of the made the rounds. Everybody is looking at the camera and smiling, and pony ma is staring down. They caught him at that moment, but it was something very characteristic about that. He doesnt do a lot of interviews. Nobody at this company does. We got this tremendous opportunity to talk to the second in command, his colleague and cocollaborator, martin lau. He is the Sheryl Sandberg<\/a> of tencent. 2004, before that he was working at Goldman Sachs<\/a> and helps take tencent public. He really guided the strategy and guided the international expansion, created the culture at tencent and helped steer we chat to what it is today. Carol its funny you say that, i want to tell me more about this guy, hes very important. This is the guy he was offered a job by tencent after the ipo and said no thanks. It took the second job offering. Brett we have a lot of fun talking to him. One of our asian tech correspondent and i went to visit martin lau in hong kong and this is a unique opportunity. Withrely talks and we sat him in their Hong Kong Office<\/a> and he reviewed his trajectory and his journey into tencent. Its true, when he was first given this opportunity by pony ma and his cofounders back when they were taking tencent public, he turned down the job. Everybody was a little worried about this thing. Could it overcome all of pessimism in the market . It was a one trick pony, no pun with the founders name, but they were beginning to do deals with mobile phone operators in china to get some script in revenue and thats why there was some optimism around the ipo and why year later when pony ma made this operation to martin lau, he accepted. Oliver turning the future of technology into a cover image was robert is. Rob vargas. Rob whenever wide to see like it just about this one story. We shot with this Company Called<\/a> rocket lab and it was his one shot of the inside of the rocket that we felt was nice, kind of abstract. Its not too specific, but also kind of the regular gets you to the point that this is a tech issue. Idl i first thought read so many of the stories i had no idea what this is about. How did you get that picture . Rob a lot of the rocket in this facility were in progress and a lot of them were opened up and you could kind of see the depths of it. We ask a got inside and shot the depths of it. Notl its not like you but not like you put a lot of other stories on there. Its very clean. Rob you have a sample of contents which gives you a little more of whats inside and then when you open a magazine, you see the shot of a man standing inside these tubes, thats also what is here. Carol up next, the middlemen behind drug price hikes. Oliver emmanuel macrons plan to reform french labor law. Carol this is bloomberg businessweek. Carol welcome back to bloomberg businessweek. Im carol massar. Oliver im oliver renick. Tetris online at businessweek. Com. Carol and on the mobile app. Hires Health Insurance<\/a> pharmacy managers to negotiate drug prices with pharmaceutical companies. That hased carol led the price hikes and lawsuits. Pharmacy benefit managers work on the behalf of health care employers, unions, anyone who is providing health plans to employees. The rule of the pharmacy benefit manager is to represent a health plan in its dealings with the drug manufacturers, and to negotiate discounts, which are referred to as rebates from the drug manufacturers, so the health plan, which might be employer or Insurance Company<\/a> pays less than the publicly advertised list price. That is the first step in understanding what theyre going to do. Carol lets get into competitions. How is that working in terms of reducing cost . Cost fordoes reduce the health plan, but the seeking of the rebates has the perverse side effect of causing drug manufacturers to raise their list prices, so the list price is higher in a remake can be taken from the higher list price. Carol so they get a bigger rebate. Paul they keep a slice of that rebate, so they are basically they have an incentive to see the list price go higher, so their percentage rebate goes higher. That would all be fine if no one paid list price. Its not the way the world works. A lot of people do pay the list price. If you were among the millions of americans who still lack Health Insurance<\/a> at this moment, and there may be millions more those people if the republican obamacare revealing replace is enacted, if you go to the pharmacy, you pay list price. If you are on medicare recipients, theres a coverage gap, where the recipients basically have to pay for their own drugs, and again, you will pay the list price. Carol you hit a certain amount of costs as a medicare recipient and if you go above that, you have to pay list price. At first it seems like the price it takes to make this drug in distributed, etc. , i found it similar to analogous maybe when you going via phone. Phones have a very high list price that comes from the manufacturer. Most people dont end up paying that because they do plan at a discount and it is sort of analogous in the sense that you really feel it when youve lost your phone couple of times and you say this is actually what they charge. Who ends up paying that falls into that gap where they have to be the list price . Paul the Biggest Group<\/a> is people who are uninsured. Even after obamacare was enacted, there were still some 27 million americans who pay full price. Moreover, remember that under morecare, there is provision of insurance, but often with very high deductibles. So lets say it today, you now have a 4000 deductible, 5,000 deductible, 6,000 deductible. And to exhibit electable, you are paying list price. They do bite a lot of people. You give yourthat story a personal edge and you David Hernandez<\/a> and tell us about his story. He is diabetic. Paul he is diabetic, a restaurant worker in new jersey and he does not make a lot of money. , six or seven years ago, he had no insurance whatsoever. During that time, yet described imp onhad to scr insulin. He ended up going blind in one eye and needing a kidney transplant. Covered under a new jersey public plan for the disabled, but this coverage will expire at the beginning of next year and then his costs will be Something Like<\/a> 300 a month for insulin, which is a very big burden for someone who is not making much more than minimum wage. In economic section, french president in annual macron is wasting no time in tackling the most explosive item on his Economic Policy<\/a> agenda. Famous leverage labor laws. We talked editor kristi noem life. Reform asised labor part of his campaign. The new assembly got sworn in this week, some two weeks since the second round of elections and he presented his proposal on tuesday. Carol 3000 page labor code, not an easy thing to undo. Theyre not going to revamp the whole thing that, but they want to make significant changes. Weve seen three previous president of france try and fail. Theres a kind of issues that impact workers. Cristina everything is codified, the size of windows, the length and bathroom breaks, and if you mail a French Worker<\/a> on the weekend, he does not have to reply to you. Its in his contract. Carol what is he going after specifically . Cristina the cost of severance. The cost itself is not the employees europe, but can easily drag companies into court and the courts are very employee friendly. Its a process thats long as well as expensive. Is other big important issue to let companies negotiate directly with workers. In france, less than 10 of the workforce is unionized, but still, companies are bound by the sector wide agreements that are negotiated by the unions. That would give companies a lot of flexibility to deal directly with workers. Oliver why is one of the first orders of business for theund four macron debate was not centered so much on this. The economy comes into account definitely, it was very much about Foreign Policy<\/a> and integration. And here we are attacking this thing is well rooted within society for decades. Why is he choosing to goes after this . Cristina a lot of people identified as it he economic impediments. France has an employment has hovered around 10 for five years, whereas germany and spain both sought employment fall after the introduced their own labor reforms. Assault unemployment fall after they interviews their labor reforms. What happened is more companies have been relying on these temporary contracts and it is really hard as a young person, you cannot go in russian apartment, never mind by one, by showing a landlord a temporary contract. Oliver have you wondered what Jeff Sessions<\/a> has been up to since he recused himself from the Russian Investigation<\/a> . We will tell you. Carol illinois budget woes go from bad to positively junk. This is bloomberg businessweek. Oliver welcome back to bloomberg businessweek. Im oliver renick. Carol im carol massar. You can listen to us on the radio on sirius xm radio, a. M. 300 in boston, 91 fm in boston in washington, d c. Oliver in asia on the Bloomberg Radio<\/a> plus that app. Carol Jeff Sessions<\/a> may not be involved in the Russian Investigation<\/a>. Oliver he has been keeping himself busy trying to roll back obama era policies. For the attorney general, its been business as usual. Thiss been able to use time when everybody is focused on the Russian Investigation<\/a> to really kind of remake the justice departments and move them in the direction that he wants them to move towards, which is a focus on Violent Crime<\/a> and a large part of this has been stripping back a lot of obama era initiatives and legal legacy. Talking about the specifics of what he has been a doing, in terms of the obama legacy. Hes been rolling back charging policies that have taken a softer approach to nonviolent drug offenders and essentially ordering all prosecutors to charge the harshest go for the harshest penalties in cases that they bring. This is kind of a bit counter to the way prosecutions have been handled over time. And he also has been taking sort of a harder stance and a harder look at these settlements that we entered into with various over Problematic Police<\/a> departments, saying he wants to review all the settlements, because his view is he doesnt want the feds meddling and handcuffing police officials. Think isat i interesting, we watched this trade going into the elections based on we heard on the campaign trail, some of the rhetoric there, specifically, to do it with private prisons. Weve been moving away from that and Jeff Sessions<\/a> is moving us back towards the u. S. Government having a relationship with private prisons. Tom hes done a number of these things with a private prison augustey came out last by then Deputy Attorney<\/a> general sally gave, it was to try and phase out the governments use of private prisons. But heber of reasons, has been able to come right in and immediately issued his own memo saying thats gone. With a number of these issues, he has been able to sort of quickly dismantle in a lot of items that have been in place, some very recently, others in place for several years. Also in the politics section, with 6 billion in debt, the state of illinois on his way to another credit downgrade. Carol heres reporter elizabeth campbell. Elizabeth we are in the verge of our street Third Straight<\/a> fiscal year without a budget. Bythey dont come together july 1, we start fiscal year 18 without a spending plan. Billions of dollars in the red and the states in big trouble. We are for another credit downgrade, which puts us in job territory. Carol how much is illinois in debt . Elizabeth because of the ongoing budgeting, we are looking at about 15 billion in unpaid bills, and at the same time, or deficit is in the neighborhood of about 6 million. If things keep going, the comptroller said the state is effectively hemorrhaging cash. Cutre soon going to have to into thing like core services. She did emphasize that debt service is a priority and will continue to be paid, regardless. Servicethey say debt will continue to be a priority, but these costs are going to keep adding up because even when the downgrade does happen, that takes it down to junk, the first date it has ever happened to. Borrowing costs go even higher. What kind of yield is that bring us to . What kind of cost is that when on the state as a burden . Elizabeth if and when illinois votes for the bond market again, if they have a junk rating, borrowing costs are going to go up. Illinois already has the highest spread on its bonds compared to debt. I check about 22 states illinois has the highest spread over aaa bonds, and in terms of unpaid bills, we are looking at 800 million in interest in late fees alone and that comes on top of any future bonding costs when they go to the market. They cannot file for bankruptcy, this is in detroit, which could. How did they get to the state, where they constantly in the red . Has been illinois running deficit and since 2002, but at the start of 2015, tax increases expired, leaving the state with a hall of about 4 million to 5 billion, and they didnt cut expenditures to match up with that declining revenue. At the same time, for his republicans leave the state since 2003 to office and he has been battling with the democraticcontrolled legislature over how to fill that deficit and i just cant agree. The governors push for what he has called structural reforms, things like changes in an acting term limits, property tax freeze is in the democrats have resisted. The been able to come to an agreement or pass a spending plan for about two years now. Carol weve been to bestselling authors of the second machine age about their new book, machine platform crowd. Oliver every production about the future made by elon musk. Carol this is bloomberg businessweek. Oliver welcome to bloomberg businessweek. Carroll the 20th anniversary of the Asian Financial<\/a> crisis. Wrong, what hes done right, and what they are working on for the future. Things thatacing can be overcome. Thats all ahead in this weeks bloomberg businessweek. Oliver we are back with megan murphy to talk about more must reads in an awesome issue. What are some of the opening remarks here . You solicit the input and the analysis from Michael Shuman<\/a> who economicough asian crises and is getting a little bit worried about what they might do next. Then this goes back to 1997 Asian Financial<\/a> crisis as one that people have forgotten. And whattpaced by 2008 we call the Global Financial<\/a> crisis. But it was triggered by baht. Ing of the thai it spiraled. On an predicated extraordinary rise in debt levels as a percentage of gdp. He traces that again to the extraordinary rise in debt before the Global Financial<\/a> crisis. And as that debt level rises, this is triggering the same kind of alarm bells, some of the massrate action for numbers that should be an alarming sign. And people forget the lessons of the 1997 crisis, they have been replicated. Only once, shame on you, for me twice, shame on me. Fascinating to me is the reporter that covered the financial crisis, that we dont learn the lessons. It will not be similar to the first. It may be a type of hedge fund, a shadow banking thing. The auto loan credit market, for example, right now. If we look at that, we may be able to prevent some of the chaos we have seen. Carol and everybody tries to explain it away. Megan and everyone is wrong. Of the biguess one elements of this is that he starts by putting in the 1997 asian crisis into perspective, what happened there. The time you get to the end of his remarks, its gone got into a conversation about china which is the second biggest economy in the world. Any type of potential similarities between what happened in 1997 and china will have cataclysmic and systemic effects. Megan people have been looking so closely at china. You hear soft landing, hard landing, if they can maintain the type of growth that is sustaining them. How dependent the economies are on chinas continued growth. So we cant underestimate the importance of china. Is, hes really pointing to in the domestic economy, those levels of debt are concerning. Massage the economy, the numbers, if there is reality and transparency into things like growth rate and business consumption. Is this a reality . That is the issue with china. A less transparent economy. And if it will tip into something more serious. Carol it is a mustread this week. Going back to global technology, you can do an issue without talking like elon musk. You have fun with him. Something we saw weeks ago, and unbelievable business graphic that charts everything elon musk is doing, how successful hes been from space, ted luck, tunnels under the ground, human intelligence. Its a map of everything hes doing, and how his predictions have been right or wrong. This guy is doing a lot of things in a lot of different areas. Past, the future in the i love where his promises were completed or fell short. Elon musk is hard to keep track of. Not just because hes involved in so Many Industries<\/a> that are doing so many different things, but his communication styles. He will make announcements about products, from public appearances, a ted talk, speaking in the middle east or hong kong. He doesnt have a normal Communications Software<\/a> company where you put out press releases and track old. Is this a new Corporate Mission<\/a> or he was thinking about something . It often throws employees into a loop. We did not know that was coming in to play so soon. We wanted to rigorously track some of the goals and pronouncements hes made from his various companies, and see how he follows his own goals. You guys set up a coding system for tracking these businesses. We are tracking about 70 goals and this will expand over time, significantly, through his for companies. He has tesla, spacex, he now owns the boring company, and narrow link. Neuro link. Carol i assume that you will just continue this process . We track when he made the pronouncement and when he set the goal for. And his progress along the way. These things seem outlandish and never happen. And then a category of things hes already accomplished that once seemed outlandish. You get a sense that he is accomplishing this vision and making it actually happen. Lets talk about spacex. Hes had a lot of success there. If you look at his goals early on, hes kind of slow going. Carol late that out for us. He wanted to make reusable rockets and hit the falcon one with a single engine rocket that he wanted to get up and would have the falcon five and the falcon nine. Deliver people to the space station. Most of these things of already happened. But not in the timeline that he initially predicted he could do. Whenever we talk about elon musk, there is respect and all but he did not quite its like a year later or two years later. Hes moving behind his own schedule but ahead of anyone elses schedule. Carol he has also talked about space tourism. He plans to put people into space next year. One into orbit and sent tourists beyond the moon and back again. We will see if he can hit that goal. One of the interesting things , they seems delays to be Getting Better<\/a> over time. Look at tesla, on average, hes 50 later than he originally forecast. Carol but he gets there. He gets there. There are only two or three projects hes ever canceled. Carol the growing likelihood of a selfsustaining power source in 2025. But theres a catch. Oliver and will a dermatologist ai mean more jobs for humans . Oliver welcome back to bloomberg businessweek. Carol you can also find us online at businessweek. Com. Oliver and theyre mobile app our mobile at. Pp. We are talking about sustainable fusion and it could be a reality sooner than you think. There is this really cool Nuclear Fusion<\/a> project going on. It is the holy grail of energy, requiring really cheap materials that exist everywhere. It is clean, no carbon admissions, but it is really hard. Oliver it sounds too good to be true. Ofthis has been the work decades, almost a century. What is so complicated about it . Jing it is trying to create the sun on earth and it requires a ton of heat and a ton of pressure. You put these materials in these conditions that are really hard to control. Trying to contain them took decades. Oliver once you have the sun on earth, just walk through the theory here. Useful that into how do we harness that into Usable Energy<\/a> . The funny thing is that its really easy to harness into electricity once you figure out how to generate the energy. A hard part is sustaining that reaction for a long enough time, where it makes economic sense. That is one of the problems scientists are trying to figure out right now, to prove you can generate more electricity using Nuclear Fusion<\/a> that is required to kickstart the reaction. People have been working on this forever. Decades, easily. Tell us about the global project. Jing International Thermonuclear<\/a> oliver experimental reactor . Jing everyone just calls it iter. Thehave global entities, European Union<\/a>, you have the u. S. China, russia, south korea, japan, india. Carol everybodys catch a bidding funds, scientists, and work . They divided it up and it took a lot of negotiations to figure out who is doing what. The European Union<\/a> takes of the biggest chunk of it because the have the most number of countries. Abouts. Is contributing 9 of the entire project, and that includes everything from designing and building the biggest magnets we have seen. There is concern about a shortage of practicing dermatologist in the u. S. Carol could ai doctors fill the gap . At 26 with no background, they built an algorithm from an image search on google that proved just as capable as a panel of 21 certified dermatologists. Carol you scan enough images into a computer, machine, whatever. And it starts to compare a real image . It is called neural net. Complicated effort to mimic the effects of the human brain. Carol does it work . To varying degrees. It can duplicate the comparable results of the analysis, a panel of two dozen trained dermatologists. Oliver how did he come about have thee doesnt dermatology experience or the medical experience. It was sort of a big data play. The assignment was to try to teach computers how to detect cancer as well as trained physicians to make telemedicine theor allow people shot called is using it themselves. We focused on jobs, wages, the work place. And it had a great chart that looked at which jobs are most likely to be replaced by automation. Physicians and surgeons were kind of safe. It sounds like aspects of the medical community can easily be replaced by machines, Machine Learning<\/a>. Ai. There are parts of the process that can be automated to some extent. Talk to doctors will said they would be happy to have parts of the diagnostic process automated. For be able to use these kinds of our rhythms to see more patients. When we were talking about the surgeon in the medical field replacement, it was very much precision in which the doctors have to proceed that makes it difficult for robotics to replace. The early stage for it, being able to look at the imagery. Take a look at the interest of it will be a viable replacement or alternative. A panel of 21 physicians. To your point, the one big obstacle trying to make actual human dermatologist obsolete is that for 5 million american patients who do need a dermatologist to do something to them versus diagnosing, there are only 12,000 in the u. S. But the hope is that it will make it easier to get some of that. How to harness crowdsourcing for personal profit. This is bloomberg businessweek. Carol welcome back to bloomberg businessweek. Im carol massar. Oliver im oliver renick. You can catch us at 1130 in new york. It 91 fm in washington, d. C. Carol and in london and in asia on the Bloomberg Radio<\/a> plus app. Oliver a review of the latest books by andrew mcafee. With two caught up authors. Technology advances faster than we expected. We thought we were pushing the envelope a little bit and being optimistic about it. We lowballed it. Breakthroughs of happened in terms of getting machines to not just make decisions but figure out answers on their own. Disappointed with the ability of businesses, organizations, and government to keep up with these changes. We are glad we tried to write this book to close the gap a little bit. We underestimated the scope because technology is doing amazing things. There is a Technology Search<\/a> we are not ready for and we believe we are living through one of those times. The greatest feeling of the human mind is the inability to understand the exponential function. Things go like this and when youre part of the flat curve, it will took along and when it turns up, everybody gets taken by surprise even those expecting that to kick in. Who went to m. I. T. But thes know this, intuition is lousy at things that go like this. We expect the world to go like this, and these days, its not. Oliver it seems that the infamous and the phthisis further along the curve and then is coming from academics and thinkers. What does it take to get the corporate side to catch up with that . It is really the technologists. They are making breakthroughs and were trying to identify the bits and pieces of the company on the leading edge. We spent a bunch of time going out and identifying those people that are ahead of the curve. You have to put that into some kind of it so people can take that knowledge and apply it to other situations. He cant just give away stuff for free because other countries are doing it. But sometimes it does work. Theif you understand economic platform, you understand why that works. We took those leadingedge companies and put them into the framework so that other companies could make the right decision. This bookson we wrote was specifically to address your question. To make this weird world of Exponential Technology<\/a> and strange Business Models<\/a> comprehensible to organizations and institutions. This stuff is being implemented by your peers. Competitors, people that want to disrupt your industry. People coming out of left field that you never seen before. These are the three elements you guys get into. Talk us through these. There are three big rebalancings between mind and machine, product and platform, core and cloud. Theee the shift towards second word in those pairs. Making more decisions whether it is datadriven or this Machine Learning<\/a> revolution. The second one is a platform revolution and the third one is using the cloud to make decisions including a small group of people. We learned that most companies in the established Economy Today<\/a> are too fond of mines and undermine the power of machines. They have product orientation. And they worked really hard on strengthening their core process and their core capability. They undervalue the crowd. The millions of random stranger weirdos. Tangle, wikipedia, x. People are still inventing new ways of reaching out and are powered by the fact that we have a Digital Network<\/a> that connects not millions, but billions of brains in a way weve never had them connected before. The leading entrepreneurs and businesses can tap into that expertise. Carol but the traditional ,ompanies that we have covered great brand names, but they are trying to figure out how to compete in this marketplace. Those of the ones in particular the need to tap into this. We know that when a profound technology shift happens, the expertise, they are no longer assets. They can become handicaps. We believe we are rapidly heading into that new world. Anwe start the book with example of ge, may be the oldest and bluest of blue chips. They are tapping into the cloud to identify new products. That, they went to indiegogo. Not because they needed the money, but they needed the knowledge from the crowd. And it turned out to be a great way for them to get some of their core expertise and leverage it with a bunch of smart people around the world. No sense for one of the giants of the Industrial Area<\/a> era. Is it about finding the direction that their customers and people want them to go . It is a very clear signal of what the demands for the product will actually be. You could be in a focus group and launch some kind of market analysis. You slapped together prototype and you put it up on kickstarter , indiegogo, and the world says, i want one of those. It is a clear signal of demand and wellmanaged companies are starting to tap into that. The expert you need is not the expert you know. You have to go beyond your world to figure out things. As bill joy once said, no matter what company you work for, most of the smart people in the world worked for someone else. That,ore profound than the people and other organizations have a different kind of expertise. Inside your own organization, theres a bit of groupthink and people getting a certain technique. Get someone from outside the organization to look at it with fresh eyes, you get a quantum improvement. Islumbered businessweek available on newsstands now. Oliver i love this issue. There is so much good stuff here. Story,if i had to pick a i love the story about Nuclear Fusion<\/a>. Creating limitless green energy is wild. The u. S. Plays a big role and its curious if we will get enough money to do with the u. S. Needs to do. Oliver i loved the interview we just had with and or mcafee. Very smart and learned a lot. The machines and all the things we been talking about the past two weeks. It all comes together. Oliver more Bloomberg Television<\/a> starts right now. This is Bloomberg Television<\/a>. It we have breaking news this hour. A car crashed into a crowd at bostons Logan Airport<\/a> and 10 people have been taken to hospital with Emergency Services<\/a> saying injuries are of varying severity. Driver error is being investigated as the cause. Reserve chair janet yellen hospitalized over the weekend visiting london. She was treated for an infection and admitted friday, discharged today. She says shes returning to washington and expects to receive her schedule this week. Tesla reports secondquarter deliveries are","publisher":{"@type":"Organization","name":"archive.org","logo":{"@type":"ImageObject","width":"800","height":"600","url":"\/\/ia600401.us.archive.org\/18\/items\/BLOOMBERG_20170703_180000_Bloomberg_BusinessWeek\/BLOOMBERG_20170703_180000_Bloomberg_BusinessWeek.thumbs\/BLOOMBERG_20170703_180000_Bloomberg_BusinessWeek_000001.jpg"}},"autauthor":{"@type":"Organization"},"author":{"sameAs":"archive.org","name":"archive.org"}}],"coverageEndTime":"20240628T12:35:10+00:00"}