Bloomberg Businessweek Weekend - November 16th, 2019

but that's cool. But there are things that I learned about that maybe I didn't even think I needed to know. We're also going to talk about Nike. We're going to talk about we work two companies in the midst of sort of challenges of their own, multiple challenges going on for those companies. Plus it might be my favorite story of the week, Jason. Open source software has gone from a joke to the engine of the world technology and it's hidden in an Arctic cave. Yeah, who knew that.

If you really wanted to understand where the world might go in case of disaster, it's hidden in a cave way way way up north. But first up, Jason, it's one of the biggest stories of the week and of the year. I know you guessed it. It's trade. So kayleie trade. Obviously, it's a market driver, it's a business driver. It's a headline driver. To say the least, this trade war between the U S and China. Trade writ large. It feels like one of the only things we talk

about ever. Sean Donnan, that's all he does. He is obsessed with trade, and that's why we love him. We love catching up with him, and his story in the magazine this week really talks about the contours of this trade deal, and maybe the contours aren't quite as ambitious as we once thought they might be. He joins us from Washington. So Sean, tell us where we are and

how big or how small this deal looks. Yeah. What we really tried to do with this piece, my colleague Jenny Leonard and I, who cover this on a day to day basis, is to step back and and really look at the the arc of this thing. And we have gone. It's worth remembering from a carefully craft did plan to take on China and force some really fundamental structural changes in China's economic architecture to what now is shaping up as a pretty narrow deal and some more

talks to come. And we really have gotten there as a result of Donald Trump and his unpredictabilities, what some would say his impetuousness, uh, and all of those tariffs that he has thrown on the table that have really changed the game here, and they're going to have lasting consequences for what is really the most important economic relationship in the in the world. Well, and what exactly are

those lasting consequences going to look like? Because as this narrative is drawn out for the better part of eighteen months now, it now kind of looks like maybe we're just going to get back to where we were at the start of all this rather than some more fundamentally different than we were at the beginning. Yeah. So I think there's two big consequences here. One is is kind of the hard economic consequence, uh, the disruption that we've

had from from this trade war. There are now tariffs from the U. S side on three sixty billion dollars in imports from China. That's about seventy or so of those imports. Uh. That is a big drag for a lot of businesses who rely on components from China or do manufacturing in China. UM, it also is UH has hit the more broadly business sentiment, and the risk is

also a consumer sentiment down the line. There's a reason we were talking about fears of recession here in the US in August, and one of the big reasons was the trade wars, the second big consequences. Everyone agrees that the US or a US administration, whoever was in the White House, had to take on China and really had to kind of renegotiate the rules of the relationship. Donald Trump went all in on that in some pretty brutal

tactics when it comes to international economic diplomacy. There's nothing blunt or than a tariff when it comes to negotiating these things. And UH, he raised the stakes. And the question is has he delivered, will he have delivered? And what does that mean for the future. Can another American president come in and repair the relationship or have another go at it? And that is really going to define

the relationship going forward. We've got a new level of hostility between Washington and Beijing that we really didn't have three or four years ago. Well, and Sean, you know, one of the things you mentioned in your piece talks about the relationship and some of the moments along the way that the President and the administration have had with business leaders, you know who have stepped in at times to maybe try and convince him to do something different

than what he was thinking. And these are well known names, the CEO of Walmart, CEO of Blackstone, CEO of Best Buy, UH and others. What role has business played, if any, in shaping this narrative, Well, we know that there's there's been two parallel conversations that have gone on between the president and his aids and between President UH and people he respects and counts on for advice in business. It's not just those he as you mentioned, It's Steve Schwartzman UH.

It's also people donors like Sheldon Adelson and UH and mainstream business figures like Tim Cook from Apple, who really has all along been lobbying for the Trump administration to take a more cautious approach or to be careful what path it goes down because it does a lot of manufacturing in China and also relies on China in a big way as a market. So you know, Trump set

out to disrupt this economic relationship. That also means disrupting business relationships, and business has really been trying to kind of restrain him or at least put him on a path uh to getting some meaningful changes that they do want.

The businesses have long complained about things like the licensing process in China, the subsidies that big Chinese state owned companies benefit from also private sector companies, and that kind of unfair competition that you get from China, the intellectual property theft, and and and so on. Again. The big question as we kind of near the one year to go to the election, is has Trump's China gambit paid

off for businesses? Has it really changed the equation? And that's Sean Dunn and talking about his story on trade with Jenny Leonard and Kaylee. One of the things that I really liked about this was if you've been following this, and especially if you haven't, it's a great summation of both the strategy and the tactics, the twists and turns

that this huge trade conversation has taken. It's a really great reminder of the fact that where we are now is nowhere even close to where we began about eighteen months ago. All Right, Jason, I got to start off with saying, I love the headline on this next story. India's series of enguished Trolls and princesters to become the world's most popular YouTube channel. So here to tell us more about it is Lucashaw from Los Angeles. He co wrote the story with another reporter, I mean, Lucas tell

us more about T Series. It's a Bollywood company, it's a film studio. It owns a bunch of music. What's their deal. It is the largest record label in India. It controls anywhere from thirty of the market, which in India is one of the most music craze countries in the countries in the world. All their biggest movies, or at least most of them feature singing and dancing in a way that the movies you'll see in the US and Europe don't. And what T Series has done over

the past few years is kind of twofold. One is they've really expanded their film production, so they're you know, they started off buying the right to soundtracks, which is this weird business in India where before the movie even comes out, you sort of buy the right to release that soundtrack. Probably only one in every ten or twenty actually hits, but if that one hits, you make a lot of money. And that's how they that's in many

ways how they started. Then they start making their own movies, kind of leveling up, and they also expand did heavily on YouTube, and over the past few years, as YouTube and internet more broadly in India has taken off, T Series has been one of the biggest beneficiaries. You know, they went from having just twelve million subscribers a couple of years ago to now having I believe a hundred seventeen million, which is more than than any channel by

quite a bit. Well, and Lucas, one of the things you guys point out in the store, which I found so fascinating and didn't know before, is really just the way that media and music are consumed in India. To your point, it's it's just totally different and in some ways not hard to get your head around, but surprising. Yeah. I mean, one of the quirks from earlier in T series history is, you know, the music industry in the

US and Europe. You sort of went from buying c d s, which was really the golden age of the music business because you'd pay twenty dollars for a whole CD, you probably only wanted three or four songs. Then you had piracy sort of disrupt the model. Then you know iTunes came along and it made it so that you could buy an individual song instead of having to buy the full album. That digital storefront in that we had

in the West never really happened in India. So they went from hind of cassettes and CDs to having ring tones. For a really long time, was the one way that you could listen to music online. That was at one point T series is biggest line of revenue. And then it went into streaming, which is where we are now.

But whereas paid streaming has become k of the biggest money maker for the music business in the US, Europe and in parts of Latin America, getting people to pay in India, which is a much poor country, has been a difficult proposition, which has enabled YouTube, which is really the biggest free music streaming service in the world, not

just in India but everywhere. Think about the way people use YouTube in the US, in England, across Europe, music is the number one category and YouTube, but in India that is magnified times ten times A hundred and so if you look up globally the top like the top fifty music channels in India in any given week, excuse me, the top fifty music channels in the globe in any given week, about half of them are from India. I mean,

how much more growth can they get on YouTube? Because and India has a lot of people, A lot of people are usually connected, but a lot of people aren't yet there should be plenty of growth kind of ahead of it. So far, I believe there are six hundred,

six hundred fifty million Indians connected to the Internet. But this is a country with more than one point three billion, close to one point four billion people, growing at a rate where it's expected to surpass China's the most populous country in the world in in just a few years. And T series will will definitely reap the benefits of that. You know, YouTube has I think two three hundred million

monthly active users in India. India is now the number one market for YouTube in the world, and most people at at YouTube and in the music industry expect that to grow. That's why you've seen Spotify, Apple Music, a lot of paid streaming services launched in India, in the past few years because they expect the number of people listening to music over the Internet to skyrocket well. And for foreign companies coming into India, does that pose an existential threat to those like T series or is that

an opportunity for them. I think it's more of an opportunity. You know, there is certainly a threat as as companies like Netflix trying to make Indian originals. Maybe those movies are more popular than T series, but for the most part, they're gonna rely on T series to try to get fans. You know, T Series sees its future is having this this virtual cycle where they let's say they have a movie coming out that they're making. They upload a video to YouTube that's a song from that movie or that

teases that movie. It gets a ton of attention. They make money from that from advertising that promotes this movie, which then becomes a hit, and it leads yours back to the YouTube channel to more music. And if you listen to big tech companies Netflix, Amazon, you know, this is a little bit Pollyanna Pollyanna ish of them, But they like to talk about how they're connecting people around the world two different types of culture and serving as

these bridges. Sometimes that's not true. But in the case of T Series, it's a really great example where YouTube has taken a record label from India, made it the number one channel in the world. And while the majority of its viewership comes from India, T Series told me that thirty of their viewership comes from outside of India. That can be the diaspora in the UK, US, Canada and it maybe even just fans who decide they really

like Bollywood right well. And it's such an interesting observation too in this week where Disney Plus is launching, and I feel like we're talking in a whole different way about business models, consumption of media, global brands, as you say, And so given that, where does this company sort of fit in to the global landscape as all of these companies have increasingly wide ambitions, I think they become a

major supplier. That's at least the ambition, right is they They say that they're already talking to both Netflix and Amazon about selling them shows. Disney Plus, which launched in the US this week, is going to expand globally. It's going to go to Western Europe, it will probably go

to parts of Asia at some point. Although Disney has its own streaming service in India called hot Star, and they'll just be a desire for local language programming because as we have services that exist all around the world as a recognition that US programming alone is not enough.

It's something that Netflix has really been a leader in. Yes, Netflix has hundreds of original series and movies and documentaries that are in the English language, but they're also going to make more than a hundred shows next year that are in other languages, and that can be in Swedish, it can be in German uh, and then it can also be in Japanese. And T Series is there to to supply anybody who wants to come along and buy from them. I don't think the company sees itself as

competing as owning its own platform. If you will, you know, STI has no interest in going head to head with YouTube. YouTube is just it's best distribution vehicle right now. Spotify as another distribution vehicle for it, and at another and maybe down the line that will be Netflix, Amazon, Disney Plus and so on. That was Lucas Shaw chatting about his T Series story and Jason. This was so interesting to me because it's a Bollywood film studio it's a

music owner and it's a YouTube channel. I mean, they have so much going on here well, and it's one of these reminders as well, this notion that Bollywood what a massive industry, but also the size and scope kids lead of the Indian consumer economy. I think we underestimate or even forget how powerful that is for global companies and domestic companies there in India, especially considering only about half of them or even online to this point. So

it's definitely an interesting story to watch. Eben O v

Williams is here the sneakers arms race. What's going on? Yeah, So a couple of years ago, Nike released a running shoe that was significantly better than any other running shoe on the market from a from a speed and a recovery standpoint, and it became a big deal for you know, average joe runners like the three of us, but it became a bigger deal in competitive and professional circles where you know, the difference between a lot of these runners

can be seconds over an entire marathon. Uh, Nike shoe which builds itself as four percent more efficient you know over a marathon, that's a couple of minutes, right, that's a huge gap. So the shoes became a huge deal in the professional world, where the people who are wearing them were setting records and winning races, and a lot of the people who were not wearing them, we're not having the same success. So I guess the question is is that fair? Yeah, so this is the major question.

And as a caveat, you know, every other shoe company right now is working to reproduce what Nike has. There's a carbon fiber in these shoes. The four ft is a little steeper, so it kind of rocks you forward. It's new lightweight foam. You know. I've spoken to a number of designers at a number of other companies. Everyone is working on replicating exactly what Nike did. Um. But as they do that, Nike is working on whatever it

thinks is faster and faster UM. And I think the fear in the industry is that, you know, Nike, he's a thirty six billion dollar revenue a year company. Most of these companies saw cony Brooks much much, much, much smaller, um that that Nike may be able to kind of keep iterating their way ahead of the pack and therefore

consistently have the fastest shoes on the market. Well, and you make a really important comparison in your story back to something I think we all remember from the Olympics a few years back, which was those sleek swimsuits that led to a bunch of records being broken and then ultimately got bamned. Exactly. Yeah, back in the you know, eight two thousand's before um, those long speedo swimsuits which

Michael Phelps was wearing. Over a hundred world records were broken in those suits, and the governing body for swimming came out and said, listen, we can't do this anymore. You know, the swimsuit can't cover this amount of your body. You know some of the materials in that suit, you

know that we're helping with buoyancy. Can't do that anymore. Uh. The reason why I think the shoe story is so interesting right now is because the I double a f tracks governing body is now looking at this exact thing. You know, they've convened athletes and scientists and sports ethicists and they're getting together right now and they're saying, listen, what do we or do we do anything to kind of clarify our rules because right now the rules are

very very vague and opaque. Well, and that begs the question how hard of a line is that to draw? When it's a okay, performance enhancement, it just makes you run better. To this is now putting others at a competitive disadvantage. We really need to read this. Yeah, and that's a great question. And it's not as easy as maybe it was for the swimming governing body. Right, they

could theoretically outlaws some of the materials. I've heard people say there shouldn't be allowed carbon fiber plates and shoes. Other people say, you know, the four foot and hell height, or maybe the springing and the efficiency. There's different kind of metrics you can maybe used to draw the line. The funny thing is everyone in the shoe world wants no restrictions, right, whether you're Nike, whether you're Brooks, whether

you're scconi. Everybody says, you know, we want to be able to create great technology and if it continues to make runners faster and faster, great And the truth is that that helps other runners, right that if you go to starting lines of the marathon, so many people are

in these Nike shoes because they're faster and they're more efficient. Right, So Adidas, so all these other companies, even if you're not Nike, just feel like, listen, if I can make a better shoe, it's going to help me sell them to the masses, not just to put them on the on the feet of Olympians. And that helps my business as well well. And it's interesting to you think about other sports, especially that are widely played by consumers, whether

it's tennis or golf. I mean, the technology revolutions in those sports have been massive over the last fifty years. Yeah, and and the really fascinating thing. And track is also a good exam right. You know, if you go back eighty years, they were running on cinder block track, right, and now they're running on a much faster surface. Um. But the main difference to that, to me is that that was a lot of those were were technology iterations that were available to everybody. Right. As soon as the

track got better, everyone got faster. Right. This is a situation where if you're a Nike athlete, you got faster the moment Nike put out these shoes. But if you were a Brooks athlete, or you were an athlete of a different company, you know, you're kind of waiting for the engineers at your company to make you as fast as the as the other person got boosted. And this

is the fear I think. I spoke to Ryan Hall, who's a former professional runner, and one of the things he was saying is that he fears that if Nike continues to make the fastest shoes, everyone who wants to be on the podium at the Olympics, at trials, at World Championships is going to be wearing Nike. And when Nike fully curbs the market on athletes, they kind of have already, but once they fully do it, then they can essentially set the price for whatever they want to

pay these guys. And that's Evan nob Williams talking about Nike, and it's applicated for Nike, right, Kaylee, in the sense that they are so closely associated with running the roots of the company are there. It's been a huge driving force for them. But a new CEO coming in is going to have to deal with controversy in many forms. And it's so interesting to think about what the company is going to look like going forward, especially it's running program.

How do they rebuild it? What does it look like? So Kayley, this week's cover story. It's about the ultimate backup drive. A cave in the Arctic holds the world's most important code. Bloomberg's Ashley Vance takes this inside with GitHub CEO Not Friedman. So we're here in Salvard at seventy eight degrees north latitude, at the site of the future. In GitHub Arctic Code Vault. He's depositing six thousand of the most popular open source projects in an archive inside

this mountain. Open the vault. This is how it works. The data is stored on a reel of film coated with iron ox side powder. The information can still be read by a computer or, if need be, by a human with a magnifying glass. How long will this last? Were confident for a thousand and we're aiming now to do a research project to document two thousand, two thousand years. Do you think this could last years? Let me catch

you up on who that is. That's company. Get hub is the main place people go to write open source code. Tens of millions of people hop on geth hub and create the applications that make the world tick, which is why not wants to protect it from terrorist hackers, electromagnetic pulses, and other unforeseen disasters. I mean, this is real one of the get hub Arctic code fault, and we're gonna put it here in small bard under the ice in

the next two thousand years. I think twenty years ago, if you told someone that twenty years in the future, in the year all of human civilization will depend on run on open source code written for free and put into almost every product in the world, I think people would say, like that's crazy, like that's never gonna happen, like that software is written by big professional companies and uh, and yet here we are, and so how much of this is just making sure we could restore our way

of life. I'm over all pretty optimistic about civilization, Like I think we can bet that, you know, humans will be thriving for a long time on planet Earth. And so another way to think about this is it's just like a time capsule, Like there's this amazing moment in history where the whole world is starting to run on software, and that software is made out of open source. Open

source is sort of being everything that's actually advanced. With a look at protecting open source code in an Arctic cave and Jason, what really struck me is that the people who create this code. They're not paid to do it, they're not employed by any of these companies, and yet it's used by Apple, Twitter, Google, even in cars. It's wild well and in a post apocalyptic world, this could be the foundation for where we go from here. It's

time now for another edition of Business Week Talks. This week we that would be me and Carol Masser spoke with Imran Kahan, the former chief strategy officer over it Snap. He's now the CEO of Veri, a shop. He talked about surviving the wrath of Jeff Bezos. Here's that conversation. So tell us a little bit about what you're doing a very because do you think about Amazon constantly when you're thinking about strategy for you guys, Uh, I fundamentally

believe that one company cannot solve all problems. And I think if you look at e commerce right now is ten percent of overall retail sales and um. And there's

a funny story. In two thousand four, I was a research channelist and I went to see Netflix and read Hastings told us that when he reached seven point five percent penetration in the Bay Area, first Blockbuster was shut down and he told us that when I get to seven and a half to ten percent penetration nationally, the Blockbuster will go out of business, and that exactly happened.

And then in advertising business, when Google and Facebook got ten percent of digital ad dollar, we saw an excellented disruption. And now digital advertising is forty percent of all advertising. And if you look at online retail is now ten percent of overall retail sales. So I believe that in next ten to fifteen years, online retail of it. So we're going to see excellent depreciation because the seven and a half to ten percent is the magic number when

things start really falling apart. And so how do you capture that slice of it? You've been doing this even live for just a few months. Now, what are you learning about the marketplace that maybe you didn't know going into it? Yeah, I think in marketplace what's really missing is a lifestyle e commerce destination. Right, So if you

need your commodity disposable utility product, Amazon is phenomenon. And if you need your luxury product, you know, like you want to buy Lucci Bucchie bag or weave a turn bag that you buy once a year, or you are a point one percent of world's population. That's all you buy. You know, you have a great relationship with those very expensive brands. They think about it for your everyday luxury product, you know, for everyday lifestyle product, there is no real

destination to go. You know, you go to other brick and motor stores, or you go to this boutique place. Uh. And that's also happening at a time that we're seeing explosion of director consumer brands. Right everybody is built saying direct to consumer brands. So there is no place for consumers to go find discover new brands, find the brands all out and discover new brands. So we are creating a brand discovery platform where you can find all the

cool brands for your everyday luxury plant. And with the convenience of Amazon, we now have the fastest free, fastest free online shipping in the marketplace, free one day shipping. We put our customers Support number on the top so that if you are going to call, you can talk to our customers, you know, and I read every customers support emails, and so we really stand for convenience, we stand for quality, and we stand for discovery. One of

the ways that you are of grabbing share. It seems that through influencers that is well known to a lot of the influencers in this room. What have you learned about them? Because it's not so easy to identify the right people to figure out the right essentially business model around that, and it's not inexpensive. Sometimes, yeah, we're not doing that much with you know, uh, influences. To be completely honest with you, I have a philosophy is do

completely opposite what the world is doing. You know, if you look at in New York City, you will see our outdoor campaign in the taxi top or if you take the subway, you know, you will see a very sharp brand train. You know. I think so fundamentally, I believe that consumers are smart and if and they understand the authenticity, you know, and and and the thing is that if influencers are too commercial and they're promoting too much of the product, I think it doesn't convert very well.

So you really really have to understand that when you engage with the influences is an authentic relationship, because I think you really really have to appreciate that if you push your product in an inauthentic way, it's actually a huge turnoff for consumers because consumers know that you're trying to do them right. You know the bus When we started the company, we call it very Shop and what is very Shop Verified shop because we wanted to build trust.

You know, the world is going from fake news to fake people to fake product, and we wanted to build this trusted platform. And and so you want to do marketing that you want to engage in a marketing in the trusted way? And is it right? One million shoppers or not yet? By the by the end of the year, you have a free one day shipping right now, but no in terms of the number of shoppers that are on your site right now? Oh yeah, I think by year and we'll have a million unique shoppers on a

monthly basis. Alright, so we need to switch. Yeah, we gotta switch. Um. When you talk about turnoffs, one of the biggest turnoffs it feels like for the market this year and for a lot of people, was we work. You've got some thoughts on this. You've been watching this market as a banker, as an executive, as an entrepreneur. What happened? What went wrong? As you just still it down with we work? Um, the one word is corporate grid. Right. Uh. I think the key thing is whenever we give someone money,

you give them your trust. It is a fundamental thing that people don't appreciate that that when an investors are forget about investor your friend or your parents or your uncle or and investors give you money, they give you the trust and and when you take that money, you have a responsibility. You have a responsibility to live by the trust they give it to you. And and I think oftentime we saw that the corporate executives don't appreciate

the trust that investors give it to them. And and uh at we work, we saw the gross, gross negligence of that trust and they by Adam Newman executive level, yes, and the corporate greed is to a level that fundamentally I didn't see the since the world of well, what about the role of soft bank in this, right, the big investor obviously, and we work, and what about the role of investment bankers? Certainly when they tried to take it public and obviously all of a sudden, all these

issues came out. Yeah, you know, responsibility of investment bankers. So two different questions, you know, I think, look, I think soft bank as an investors, you have to make two decisions right. One you have to analyze the investment as a scandal and investment opportunity. And we can argue whether we work with a good investment or a bad investment from an investment lens perspective, But what soft bank?

And as an investors, you always have to trust the management and you give them the money, and if they don't follow through it, you know, I think it's very difficult for an investors. So I actually sympathize with slob Bank. I know everybody blames Sobbank, but I actually sympathize with subbank because they gave money to someone who completely tar around and trying to I didn't respect their trust. And Uh.

With regards to Investment Bank, look, I think you know, clearly Investment Bank could have hired standard of due diligence. But you know the good news is they did the due diligence and they disclosed all this information we found, Like, do you feel like it was too late in the process. This is a company that was around for a while.

I think Investment Banks they couldn't have disclosed before the filing anywhere because the company would not let them disclose it and that was very shop co founder Imran Khan speaking with Carol Master and myself at Bloomberg's Sooner than You Think Summit, just a couple of weeks ago. As so many things seemed to do these days, this next story started with a tweet, a series of tweets. Really uh,

and it was all about credit cards. It took on a life of its own over the next several days, ensnaring in some ways Apple, Goldman, Sachs, the credit card industry, misogyny, algorithms, all of it. Uh. We're gonna get into that with Shri Nadaraja and he covers Goldman and Wall Street for Bloomberg. This credit card hailed as this revolutionary thing, and yet over last weekend it took on a different tone. What happened, right?

I mean this all started with a series of tweets from a tech entrepreneur, David Hanson, who applied to the Apple Card and started complaining that his credit limit was twenty times the size of his wife's credit limit, even though both of them share the same finances, have joined accounts, same spending power, had the same income. When it came to the field, when Apple Card was trying to determine the credit limit, and yet there was this huge disparity.

Post immediately gained traction online. A lot of people shared similar experiences and to add insult to engineer and perhaps the embarrassing bit here for Apple was Apple co founder Steve wasn't the exit Wait a minute, I faced the same issue before you know it, a regulator saying we want to figure out how these credit risk assessment tools work. We're going to probe Goldman, and we're going to probe this Apple god issue to see if there are some

biases in the algorithm. So as an algorithm, But how much blame does Goldman have to take here? Is it just the algo or you know, is there something that Goldman can really do to fix this? Look In many ways, I truly believe that Apple and Goldman to market names in the world of tech and finance. But what you have here is those two have become lightning rods over

an issue that has been bubbling for a while. People have tried to figure out as there has been this mission creep off tech in the financial services space is trying to figure out that innovation keeps up with the important regulatory factors need to make sure that it doesn't come with its own set of biases. Computers are supposed to stamp out human risk and those errors, but in other ways, are they sort of reinforcing some of the issues we faced for a long time. And that's what

folks are trying to figure out. So it's possibly not just limited to Goldman. It probably affects a largest set of the credit card industry. But for Goldman, this is baptism by fire. Remember they haven't done this for long. Consumer facing businesses are new for them, and that's why maybe they are facing this sort of a unique challenge in a way right and and taking a step back. I mean, let's remind people this card was hailed in

many ways for all the reasons you just described. Treat this notion that Apple of course, anything it puts its name on, if it's getting into a new business, people are paying attention Goldman, as you say, getting into the consumer business in a new and different way and partnering with Apple. This was unveiled by relatively new CEO David Solomon, I believe, with Tim Cook at a big Apple UH meeting, which have you know, sort of drama and pomp and

circumstances all their own. What was this meant to be in the market, This card, this is supposed to be something revolutionary in many ways, right. Both David Solomon and Tim Cook in their respective learning school all said this is the most successful credit card launch ever. I mean, they didn't really back it up with many statistics, but for now we'll take them for what they said. It's

only two months in. We we've seen that they've already made more than ten billion in loan well not loans, but credit lines, so it's clearly had a good start. This was supposed to be the time when they could sort of unwind and celebrate the fact that they got a good launching instead facing this sort of mini crisis. What actual tangible penalty perhaps could Goldman actually face here? Of course they're being probed, but is there a law that they are potentially breaking and that they're going to

get in trouble? Part of and trying to answer that question, you also have to think about what's the precedent here? And I have to think that when you're looking into Gothmic fairness, this all has to be fairly new. It's people have been talking about it for a while, but it is starting to gain more attention now. In June, you had lawmakers and d C saying, we want to make sure that fair lending practices are being applied, uh, and make sure that there are no issues with that.

So you don't really know why, Hey, this is gonna be a ten million dollar fine or fifty million all fine, slap on the race or something worse. We really don't know anything about that. And what makes it worse is Goldman, for instance, says, there's no discrimination. Guys, we're not, you know, classifying by race or gender and taking decisions according to that. There is no intentional bias on our part. But consumer advocates are saying that's part of the problem. It doesn't

have to be intentional bias. If it was intentional bias in a civil society, hopefully it's easy to spot and root out. It's the unintentional bias that's harder. It becomes deeply entrenched and by the time you become alert to the problem, you can't just flick a switch and say, you know what, let's reverse all this. And I think that's that's the issue that Goldman and Apple have to

deal with here. That's the issue A lot of the financial services companies have to deal with going forward as they embraced technology more and more because it does obviously come with several benefits. Well, and another question that's just raised for me and all of this, says Jason said, the inputs matter, but also algorithms kind of can teach themselves. I mean, how do you control a self learning thing? That's actually very fascinating because a lot of the discussion

has revolved around this. You obviously control the fact as you put into the system, but many data scientists who have been binding on this on social media have said it is very hard to sort of reverse engineer why a decision was ultimately made as to why did the machine spit out the decision it did. You have a general sense, but it's very hard to get a very

precise sense. And that's Shrie not a Rajan covering a Goldman a different way this week, at different type of story because this collaboration Kayleie with Apple much heralded, very successful in some ways, but man, that story really took a turn. I mean, this was supposed to be what they were calling the most successful credit card launch of

all time. Maybe that's not the case, all right, Jason, we've been talking a lot about we Work lately, and it's not just about corporate governance, a soft bank confusion, in anything like that. Now we're going to talk about toxic phone booths, which is a sentence I never thought I would say. I didn't either, And when this story first broke a couple of weeks ago, I just thought, Wow, these guys can't catch a break. And then it just

becomes this emblem. In many ways, Ellen Huett has been following every twist and turn in and out of the phone booth as where she joins us from San Francisco. So talk to us about these phone booths, because it's become kind of a thing. Yeah, and and same same as you said, Jason. I also had this thought when

I first read about the phone boosts. You know, they announced this issue first in mid October, that they had, you know, thousands of phone booths that potentially had elevated levels of formaldehyde, which is a carcinogen um in their offices in US and Canada. I remember thinking like it was on top of so much other bad news about we work. You you had to feel pretty bad for them. It seemed like an issue, but uh, you know, as we spent some time in the weeks following trying to

figure out what exactly happened. You know, I think you can trace some of the uh, some of the forces at play at we Work that led to possibly this outcome of of these toxic phone booths. So this, you know, the story starts, at least from our point of view in October when this announcement was made, But the story in many ways actually begins a lot earlier, which is when we Work decided to design in house their own

sound insulated phone booths. So these are important pieces of furniture for we Work offices because their offices are usually open plan. You know, if any of you working in an open plan office, you know, it can be hard to make a private phone call that other people can't here, and maybe if you don't want to bother your neighbors or anything like that. So so we Work makes these phone booths that are sort of single person only. They're about the size of say an airplane bathroom, and have

a door that fold in the same way. You can step inside, sound insulated and you can make phone call or maybe like take a meeting. And and they were setting these up, you know, along hallways and in corners of their offices to give people uh private space. And they were so important to we work that we work decided to actually start designing them themselves in house, as opposed to like buying them elsewhere. Um and and they

were at first very proud of this. You know, there are other stories, and there's a past story and Fast Company from about a year ago in which one of their executives talks about how great it is that they did this their own design for the phone booths. Um and it turns out, you know, it gets a little you know, we we did a lot of research and reporting and discovered, you know, there's kind of a complicated

supply chain at play. But basically we worked designs the phone booth and then gets manufacturers in different parts of the world to make the phone booth. And one of their manufacturers, or maybe the only one in the U. S And Canada, was a company called Premier XD. It's a company that makes commercial fixtures for the likes of Starbucks and other companies. You know, those kiosks that you

might see in like a grocery store. They were making these phone booths and they um, you know that this was not you know, publicly known, but something that we talked about with former employees and that kind of thing. And they were making these phone boots. Everything seemed fine until early summer when one of we Work's biggest customers, UBS, which had used we worked, to redesign one of its

headquarters in New Jersey. Some of the employees at the UBS office noticed this phone booths smell funny, like there's a weird smell when I'm in them, or maybe I have some eye irritation, and they alerted their managers. Company did a test and found these elevated levels of formaldehyde.

So this is early summer, and keep in mind, we worked and announced the formaldehyde issue until mid October, so there's several months at play here where there's UM, there's just you know, UBS had told we work at the issue. We work actually starts talking to vendors in August about maybe replacing or replacing future phone booths with new ones. UM and then it kind of and actually in September, Premier, the maker of the phone boots, actually suddenly shuts down

with no warning. Some of its workers are less stranded with no severance. Uh, there's all sorts of there's kind of a like in in the background, like a series of events that leads up to the announcement of the phone booth. And that's kind of what we get into in this story. Well, and now we work as reinstalling phone Boost of the exact same design, just now a different manufacturer. By telling people won't wait, don't go in yet, we're not entirely sure they're safe. They're still holding some

of the existing phone booths for further testing. I think, you know, into their credit, they're being very careful, but it does seem like they also took some time to announce to their major you know, to their customers in their coworking spaces, that that there was an issue with these phone booths. And so there are customers who are upset.

They feel like their health has been put at risk by something that they totally didn't expect, which was the phone booth that they use at work, maybe to get a private moment or to take a phone call, or to hold meetings in I mean, can you talk about the uphill climb that the future CEO of the companies has to face here? I mean, what do where do they start? It just seems like such a difficult job

and one that will be watched very carefully. I think we've seen similar pattern play out with Dara across Broshai at Uber. You know, he's taking over the troubled company from a very public CEO, someone who had a lot of ties to the spirit of the company as the founder, and then um, you know, was sort of outstand in

a dramatic way. So anyone who steps into the top job that we work is certainly going to be thinking about what happened at Uber and and they're going to be facing I think similar problems having to establish kind of a new culture that still feels you know, um, comforting to existing employees and making them want to stay because there you know, as the company gets ready to um continue to do layoffs, they are facing really bad morale.

You know, every time I talked to current WE Work employees, they tell me people aren't coming into work, People are scared, people are feeling unmotivated, and you can't blame them. They have had a lot of shifts of leadership at the top. The future of the company feels unsure, even though of course leadership is saying we're going to continue on and we're going to become profitable and the company's product is

still really strong. You know, I think most employees believe that, but you have to imagine a lot of them are scared for their personal futures. So I think the new CEO is going to have to figure out how to motivate workers, how to cut a lot of costs, how to get um you know, future investors thinking that this company still has a lot ahead of it. And that was Ellen Hewitt. I mean, Jason, it's just hit after

hit after hit for we Work at this point. And add to that, Kaylee, the news from Friday sources telling Bloomberg that we Work is drawing scrutiny from the SEC over whether the company violated financial rules in the run up to its failed I po. Yeah, there is still the open question of where does we Work go from here and what's it going to look like at the end of the day. Earlier this week, I had a

chance to sit down with Admiral Mike Mullen. It was ahead of the second Annual Summit on Security hosted at the nine eleven Memorial and Museum, and Bloomberg, we should point out, was a media sponsor of that event. Mullen he served as the Chairman of the Joint chiefs of Staff for pre students Bush and Obama from two thousand seven to eleven. He was in the situation room with President Obama when Seal Team six killed the world's most

wanted terrorist, Osama bin Laden. Well, we had been hunting for Bin Laden for intensely for years and um and I think just the fact that it took so long, Uh, it took a decade to to get to that culminating point is indicative of how difficult to target he was and the care with which he took to hide and those around him. Um. Uh And it was an incredibly intense effort to do that. Obviously, we were doing other things. We had a war in Iraq, we had a war

in Afghanistan, but we never lost focus. And in one of the one of the groups I'd like to give credit to, uh there was a special I think run on CNN a few years ago the four ladies in the agency who in the late eighties really started and stayed after Bin Laden when they had no resources. Nobody was paying much attention to him, and so it had been going on for a long long time. Uh and uh and and then it culminated obviously in better intelligence

and in the last few months. Really I didn't get involved until January in terms of what the possibilities might be. And that was right because one of my concerns was all of our concern was if there had been any indication that we knew he would have he would have left. And in fact, his his principal advisors were telling him in that time frame that we actually killed him, it was time to go. They were concerned he'd been there

too long and they needed to move. So had it not happened that night, it could have been another decade before we found him. And what was that night? Like? People asked me of that famous picture, uh, And one of the reasons I think it's famous is because it really does capture the moment and it was very, very tense. That said, it was a decision, and it was a courageous decision from my perspective on a part of President Obama because we didn't actually know he was there. We

had lots of circumstantial evidence. I viewed it as a bet the presidency. UH. Decision that the president made um and UH. And the night itself, the actual night of the killing, was we were into that operation, uh, you know, for two a couple of days at that point, so it had it had been going for some time, and there had been rehearsals and lots of preparation go on for literally four months in the event that we could

pin him down. So uh we we had planned uh this down to a level of detail that would in the end allow us to kill him. But one of the things I'm I like to remind people of is that same night in Afghanistan, there were fourteen other missions similar to that that were that were carried out. And while strategically this one certainly had the highest risk, but we have done thousands and thousands and thousands of these missions over the course of the years that we had

been fighting. So I had every expectation that if he was there, we were going to either be able to capture or kill him. That said, it was tense, and it wasn't over until it was over. And by that I mean literally not just the killing him or getting them out and getting him back into Afghanistan, taking his DNA and positively identifying him, getting him on a helicopter, flying him through Pakistani airspace, and getting him out to

a carry at sea. Where he could be buried consistent with his beliefs, his religious beliefs, which is what we did. And when you think about that moment and you fast forward to today, what has it ultimately meant for the war in terror which has not ended in many ways and has only become in some ways more complicated. Well, I think it in terms of having a huge impact

on the Alcada organization. It did when you take out a leader like that, just as the very recent killing of bagh Daddy has had a big impact on the ISIS organization. But it doesn't make the ideas go away. It doesn't make the aspiration go away. Uh, And it hasn't with al Qaeda, nor has bagh Daddy's death done that with ISIS. And so I think we have to

stay at this. We still we still are in a situation where where we are seen as the evil empire, if you will, from the terrorists perspective, and they continue to come after us. And that was old Mike Mullen, former Chairman of the Joint Chiefs of Staff. You can hear our entire conversation. It's this week's Bloomberg Business Week Extra podcast, and I should point out Michael Bloomberg, the founder and majority owner of Bloomberg News parent Bloomberg Gulp.

He is the chairman of the nine eleven Memorial and Museum. So Kaylee, the holidays are right around the corner. What a shopping list we have here in Bloomberg Pursuits. I want everything on this last If you buy everything on the list, you end up broke. So it's just an inspiration list, all right. So that's Chris Rouser, he's here with us, the editor of Pursuits, walking is through it all. So where do you want to start because I'll take

one of each. Yeah. So we every year we try to think of a theme for our gift guide, and this year the theme is things that are handmade. Um, it's always nice to give someone something that you know a lot of time went into it, maybe a master craftsman worked on it. So on the first page of the section, we have this amazing marketry poker set. So it's a box with eight with a bunch of pieces, like eight hundred pieces cards and stuff. And it's all made with market tree, which is a little slivers of

wood which are inlaid into the box. Um, and it's uh, you know, it's pounds. It's not cheap, but it's one of fifteen, so you know, not many people will have it, and so how do you go about acquiring one of these if there's only fifteen out there? So super competitive? You reach out to the artist, Alexander Llewellen. She's in the UK, and you know she's making fifteen of these, but she she makes other versions. She also makes backgammon sets and stuff. So you reach out, see what she's

got and uh, give it to a friend. Alright, So a fan favorite, apparently down on the pursuit's desk was the claw for crustaceans. It's the pick of the critter. You know, uh, what is this? Okay, So, if you are a mainer like me, you've grown up eating lobster and you've probably used many different kinds of lobster picks. They're a little narrow forks that go into like the legs are a narrow part of the shell to pull out meat. A lot of them aren't actually that well designed.

Often you get them their plastic in a restaurant. So this jeweler, Janey Cruise Garnett, who works out of the Upper East Side, came by the office and was showing us her wear since she had these silver hand carved lobster picks, which are so ingenious and also expensive. They have a little clamshell carved into them so you can put your thumb in it. They're very textures so they

don't become slippery when they get covered in butter. And at the end of the little fork they have a little harpoon hook which is really which actually most lobster picks don't have, so when you reach in to get the meat, it comes out really easily. I know that sounds crazy, but if you're a lobster person, this item does not exist anywhere else and it's perfect. So you've had the chance to eat lobster with set items, yes, and it makes a difference. Yeah, I mean it's you know,

it's a special occasion item, right. They are made of silver and there are two five dollars each, so it's you don't want to lose them, right, Yeah, So you're that that's a table setting that is gonna set you back before you even go by your lobster, right, Yeah. And those are the time of things that go missing after a dinner party totally. You know, you're serving some nice wine all right, So maybe while you're doing all that, you're playing a record because not Yeah, you know vinyl

every year it gets bigger and bigger. Um. And so we found a record player that's handmade that is heavier than ever. It's actually seventy two pounds and it's made by this guy, Tyler Hayes. The company is B D DW in Philadelphia and he hand makes every part of it. The platter is marble, which is why it costs, which is why it's so heavy. Um. And the carcass, which is what they call sort of the exterior is made of wood. It's hand painted. It's really beautiful, got an

incredible sound, and it makes a very impactful gift. Well, and it's a design piece just as much as it is an audio piece. It looks very cool. It looks like it's at a Star Wars kind of and it'll set you back just to meet. Yeah, it's a bargain for sure. Also want to smell good, of course, but this really you headline this a drop of perfume, You really are talking about a very small amount is a

very small amount of perfume. The perfume company is called Regime de Fleur and they source these really exotic ingredients from around the world, and they're so rare that they actually can't make the perfume every year because they can't get all of the ingredients necessarily to buy this little tiny bottle. It's two inches high. It's like the size of a paper clip. But it has a very strong, very beautiful scent that's very unusual. And the bottles are

hand painted by the artist. And it'll set you back dollars for eight millileaders. This is a real problem. This is shocking. I mean, you get how many uses out of this? You only use a very very small amount, so it actually lasts a long time. And think about how long it takes you to get through a bottle of perfume. Actually it takes a long time. Alright, your listeners, you cannot you cannot see Jason's face, but it is my skeptical face. I think is the way to put

all right. So, after all that, I would love a drink, just a nice drink, but it doesn't I can't just have my drinking just anything. Yeah, So we found this company St. Louis, which since eighties six has been making has been handmaking glassware for like French Royalty. UM and they just started. They made a collection of glassware that they're just releasing for their first time altogether. UM and

it's they're really beautiful. They're sort of colored glass. And we recommend that you maybe give the glasses to somebody with a bottle of auk, which is a new kind of liquor. It's made by a liquor company called Empirical Spirits UH and it's UM. It has a sort of a mescal ish flavor. It's very smokey. It's distilled with UH with passia chili's UM. It's not actually a mescal, but it tastes like it. And it's just an unusual thing.

And it's just great to give somebody. If you're giving somebody a glass or a bowl, it's great to give something to go into it right well, and on those glasses too, just because this is all about those handmade gifts and the craftsmanship. It takes fifteen workers ten days to shape one of these. This is intricate stuff. Yeah, yeah, you know people are gonna put it in a special place. And the glasses cost for a set, Yeah, for the set, Okay,

so that's just a bargain, all right. I want to go deep on this one because both Kaylee and I when we saw this next one, immediately went to frank House of Cards. This rowing machine, I think that was from season one actually was when you first see him, and it is an arresting just piece of art in some ways that also doubles as a rowing machine. Right. So there are these water Rower Inc. Is this company and they make uh, these rowing machines that are made

with Appalachian hardwoods. And then the drum actually where the normally it's a fan in the wind or in the air, is actually filled with water. So as you saw a House of Cards, when Frank is rowing, it has a sort of soothing wishing sound. It's really beautiful. Um. And you know these are becoming increasingly popular and popular, and rowing is becoming increasingly popular. It's because of cross fit. It's also there's a bunch of rowing gyms, so you're

seeing more and more of these than houses. And it's so you know that's that's expensive, but it's not crazy for a piece of gym equipment less than a pelton. So there you go, less than a pelton. Uh, and it looks lovely and as you say, and I'm sure you guys considered a lot of different because I know you like exercise in the section, you probably considered a lot of different things. And this, as you say, sort of checks all the boxes around craftsmanship. Yeah, it really does.

It's except for the plastics for the drum with the water, everything is handmade, so they're all a little bit unique. And I am a Finnish junkie like Jason is, and I hate rowing actually in college and I promised myself I never would do it again. But I've been on one of these and they are really beautiful. And can you row vigorously on it without you know, fearing damn?

Oh yeah, they're like indestructible. Wow. All right, So if you row it off, I'm going to skip ahead because what you're rowing off could be one of the most exquisite and ridiculous pastries that I have ever seen in my life. You did not bring us any which is a strike against you. It did not last long, and I'm sure it went fast on the desk. Tell us, just give us the size and scope of this pastry.

So a Queen emmon is Um is from Brittany in France, and it's basically a Croissance, but it's sort of shaped in like a muffin shape, but it's formed like a croissant, which is layers of dough and butter. But then they also add a ton of sugar in there, so it's

like a butter sugar bomb. And normally you get them kind of muffin size, but at men Raies of up Bread in San Francisco they make it um like cake size, so you get sort of an eight in huge one, and since there's so much sugar on the bottom, it all caramelizes, so it's actually like sort of an ice skating rink of sugar on the bottom. And actually by weight, so it's fives and by weight it's fifty butter and sugar,

so there's two grams of sugar in these things. There's a DRAMs of sugar and a hundred grams of butter. Not at all unhealthy. You gotta row a lot plastic. You have no idea because I didn't bring you. Yeah, I really do have no idea. Interesting, yeah, interesting, um, all right, So if you're not rowing and you're not eating, maybe you're playing golf. That's sort of a middle ground. They're a beautiful putter or a set of putters that you feature in the magazine. Yeah, so you know, we talked.

We talked about a lot of sports equipment, and with golf clubs, there's a lot of physics that go into the swing clubs, right, so there's kind of mathematics that go into it. Um. But potters you can be a little more creative with because it's actually much more personal preference.

You're not swinging that much. Um. And so we found this potter which is hand forged, and it has these inserts that are made through a Japanese process called makum gan a uh and it's it's basically a process of folding together different kinds of different metals over and over and over and the it's so there are these inserts made through that process in the back of the putter, and they look really beautiful. And it's a process that

was used on the hilts of samurai swords. So if you the more and powerful you were, the more times the medal was folded. Um and that. So you know, it's not really used much anymore, but it's in use in these putters, and people really become attached to it. That was pursued editor Chris Rouser and Jason, I did some math. Are you ready for this? Yes? If you buy one of each thing on that list, how much you think that's gonna cost you more dollars? Are someone

extra special for Christmas? Alright, it's gonna wrap up Bloomberg Business Week's weekend podcast. Thanks so much for joining us. I'm Jason Kelly and I'm Kaylee Lines and for Carol Masser. Be sure to tune into Bloomberg Business Took Radio live Monday through Friday, starting at two pm Wall Street Time. And if you can't catch us live, get our daily

podcast for the right home. Get that at Bloomberg dot com or wherever you get your podcasts, and you can get this week's edition of the magazine on newsstands now. We'll be back right here next week at the same time. This is Bloomberg