>> only a few people got jobs. >> there is a piece on banking in silicon valley. how hot theoften

real estate market is. you have banks bending over backwards to help these very young millionaires. medium prices for houses in the bay area. over one million dollars. there are a lot of people who have only acquired wealth recently or are on the verge. they are creating this white glove service to let them in. sometimes a very quick turnaround. maybe even shorter on when you get your mortgage. a lot of these business people have shares. is not all liquid. ellen: it is not all liquid. in any case, they are making it a lot easier to get a mortgage than it would be for you, david. david: that is true. is there any risk? have loans giving to

people who are rich on paper, any chance they are going to go far? >> in some cases, they are not met -- they are not asking for much of a down payment. that brings to mind what happened during the housing bubble where there were lax standards for making loans. the lenders in this case say we are not giving loans to everybody we are being careful. but wherever you find standards being loosened, or an over eagerness to lend, you have to think, is this going to lead to a bubble? david: the cover story is on facebook. big investment in virtual reality. in occulus. sarah frier goes to meet with mark zuckerberg who is incredibly engaged with this. as a topic, as something facebook is going to be invested in. ellen: so our raiders had a very fun time at facebook if you ask me. he went in visited with zuckerberg and he is all in on

oculus. they bought the company. the founder was a guy named palmer lucky. a great name. david: good name. >> great name. they added executives. he is not running it but he is still working there and zuckerberg sees huge potential. not just in films but they are open to finding other uses. they are going to sell the hardware which is a new for them. i think the hope is that every facebook user will eventually want and oculus. david: i spoke to reporter, sarah frier. >> if virtual reality is the next big platform for communication for humanity, then zuckerberg wants to own it in a way that he can influence how everything works down to the hardware so that it can be something truly social. so, you know, if you use a controller in and avr world, you should be able to point to

things and give people thumbs up. they should do things like eye tracking and mouth tracking that allow you to have real conversations and develop avatars in the virtual world. other companies like htc, playstation, they are making virtual reality devices that are so far pretty successful. they are focusing more on the gaming aspect. while zuckerberg sees gaming as a gateway drug for virtual reality, he thinks the ultimate experience that facebook can own is this shared presence where you and i on opposite sides of the country can feel like we're in the same room. even though you and i run up sides of the country right now, we can feel like we're in the same room. david: i was struck as you spoke with your interview with zuckerberg how quickly he became philosophical. this is something he really thought a lot about. he is really a visionary of what

virtuality could or might be. >> this is something he really cares about deeply and would like to invest in. he told us that even as this hype cycle does its course, even as all of these people in venture capital are investing in virtual reality, all these studios, and a lot of it because of facebook's $2 billion acquisition of oculus, even after all of that dies down, facebook will soldier on. and continued to champion this for the long-term and make it a very integrated part of what facebook does, which is connecting people in the world. and that will be difficult. and it will be hard for the , business side to see a return on investment for that sort of thing because it will require a lot of research and a lot of manpower and it will require facebook to build a hardware product which they have never had to do before. i mean, they have had to build

hardware for their data centers, but they never had to build a consumer product that people buy in the store and bring home and use. david: where are we in this process? again they have the oculus rift. , there were imperfections with that. to get to this new reality, are we five years out, 10 years out, 50 years out? sarah: the way that zuckerberg explains it is we are in the palm pilot era. if this is mobile phones, we are in the brick phone. we're just getting started in virtual reality. in the future, zuckerberg takes us all the way into things like telepathy. maybe that is the next step. i mean, he is not hitting. he actually thinks this is something that will change the way we communicate and feel a

sense of presence and shared experiences. what he is seeing out here. if somebody told you in the year 1999 that your device would have you know, your radio in an and your phone and your while it and everything and it would all just be there under one cell phone you might have been like ok yes, maybe in years. but it happened quickly. he doesn't think this will happen quickly on a year to year, quarter to quarter scale. he thinks it will happen broadly you know over a decade. , carol: how do you make virtual reality come to life in a cover? david: we spoke to the creative director. robert vargas. carol: what went into the cover? robert: initially we were thinking that shooting mark, but not on negotiation processes work out as we like. we decided to take a fun approach in photoshop. in so we took an image of mark, an image of a pair of hands, and a guy wearing binoculars to make it look like mark is putting the oculus on someone.

and it sort of kind of reflects our line in the story that they do want to give everyone -- and oculus. oculus. david: the device is still a pretty nascent vr system that looks crazy. >> the media has covered that it is quite dumb, but in its simplicity, you get the crucial elements. carol: i think zuckerberg might take exception with them being called nerd goggles. because he sees them as a really cool thing and he says they are a big part of the future. >> they could be, but their current status in society is that they are not embraced by everyone. they sort of to me to have a similar feel to google glassware only a select group of people -- it doesn't necessarily have a terrible connotation but it's not quite a mass product yet.

david by having mark zuckerberg : do this to someone, it captures the thread about this being his real dedication and devotion to getting vr to bigger things. robert: i think that comes through a little bit. he is investing a lot in this. it comes through in the article that it is somewhat of a personal investment. carol: his face shows a lot of enthusiasm. up next, berlin imports the silicon valley lifestyle. kind of. david: what were donald trump executive doing in cuba during the embargo? carol: the high-tech here that olympians are wearing in rio this summer. david: all of that and more ahead on bloomberg businessweek. ♪

♪ david: welcome back to "bloomberg businessweek." carol: you can find us on radio and sirius xm channel 119, on am

1130 in new york, and other stations around the country. in the technology section we talk about berlin envious of tech scene.ey's >> is developing a lot in a virtual period of time. decade ago there were a few dozen startups in berlin and as of now there are more than 2500. it seems like it is an outgrowth as much as anything of the starving artist culture that was endemic to berlin after the cold war. the proliferation of cheap rent and uninhibited party culture and the fact that you can play foosball at work and a lot of these warehouses has helped attract a crowd that is not as

bound to a career at siemens or one of the big companies as they might have been in the past. david: you look at this referendum a few weeks ago on eu membership. does berlin see that as an opportunity to attract some of the startup talent? >> as of a few days after the brexit vote, a local political party from berlin paid to set up a truck rolling through london with the words on it, "keep calm and moved to berlin." but the regional government just approved another 10 billion euros in funding for startup subsidies. david: how important is that the existence of this scene today? >> and seems like it is still fairly important because the startup community in the investment community is still pretty young. there isn't that much of a generational authority on reinvestment or that many examples we can turn to.

david: does this community look to silicon valley for a model of what it could become? >> undeniably from the t-shirts that the startup founders are wearing and the attention that they pay to executives when they come in to give a speech. david: you pose a question at the end of the piece that is this sustainable to continue on and on? what will have to be possible for berlin to continue to make that possible? >> they will need some breakout hits, companies that can compete on a global scale was startups coming out of america, china and others in the world that have the reach and the talent to really compete globally in a way that europe has struggled to. carol: next, why the democratic national committee did not fix the e-mail leak that they were told they had. ♪

♪ david: welcome back to "bloomberg businessweek." i'm david gura. carol: in the politics and policy section, an investigation into the hacking of the democratic committee. david: why the dnc did not react when security officials found a security breach. we talked to editor allison hoffman. ic nationale democrat committee actually invited in richard clarke who had been a counterterrorism and cyber security expert under bill clinton and president bush. he was a longtime washington establishment figure. he has a firm that does security consulting. they invited his people in and said do a review and let us know what our risks are. the team was there for two months. discussed $60,000 which is not so much not so little. carol: they did a deep dive? >> what they found was nothing good.

they found that the dnc had old firewalls and old systems which is not totally surprising and they did not have the most up-to-the-minute security on individual computers and that they were at risk for being phished, which can happen to any company or person operating in the world today. carol: and they did nothing. >> and they did nothing. fast forward to this week. the convention gets underway. on friday before the convention started we had this leak of 20,000 internal e-mails. we know that the people who leaked those e-mails were published on wikileaks. the hackers were already in the system as what has been determined. we knew in march the hack could happen. that the hackers had been in there and when in fact the

security review was done, they were already in their. the good harbor team was not looking for hackers. they were generally looking at where the exposure was. it turns out that the hackers were already in at the time poking around. we don't know exactly when the e-mails were taken, but if the dnc had listened to the report from last fall, they might have found these hackers earlier. carroll: shame on them. history has kind of change because of these e-mails being made some public. >> absolutely. the e-mails were embarrassing as any internal office units would be. carol: the timing was impeccable. >> the timing was calculated. we know that julian assange on purpose said that he wanted to damage hillary clinton. he really timed the release of these e-mails right before the convention. carol: why did he want to do that? >> it is not clear. he seems to have a personal grudge against clinton specifically. she was secretary of state when wikileaks was putting out internal documents from the u.s.

government and he is still hold up in the ecuadorian embassy in london. maybe that has something to do with it. carol: and these conventions when these political campaigns go on there is so much physical security at these events but what about cyber security? is this not high on the list? >> not only can imagine that it shouldn't be. we know the donald trump does not like to use e-mail and his campaign is very small. it's possible that it is only by luck that they have not been exposed to this. david: a photo essay takes us behind the scenes of the democratic national convention in philadelphia. >> the thing that comes across to me is this debate that we saw on monday about the future of bernie sanders and hillary clinton here in the party. how do you choose to capture that? >> the interesting thing about this convention, in direct comparison to cleveland, is that the sites were quite close.

a lot of the protest activity and official events were close. in philadelphia, things are more sprawling. if you cover a protest by city hall, it is quite a haul to get back to the convention center. so he definitely wanted to capture a lot of the protests that were taking place in the lead up, given the leaks from the dnc. david: focus in prime time are among these big party leaders, bill clinton among them, but this is not a photo squarely focused on clinton himself. carol: you do not get that it is clinton right away. bill clinton. >> no. will get it the day after the convention is closed. we want you to see something that would not have come through and the wire photos. a picture that makes you look and lets you discover.

carol: how did you choose because there were so many prominent speakers. you had michelle obama, president obama. you had elizabeth warren and high-profile individuals. >> we kept bill clinton partly because the secret service agent in the foreground really gives you a sense of the scale of the place and it makes a nice frame but for the most part we were not so interested in showing people but more in showing the gladhanding and the moving. there is still an element of wheeling and dealing and we were really try to get at that. you can see nancy pelosi getting miked up for an interview or jesse jackson or robbie fielding questions. that, i think is so much of what happens and we wanted to reflect. david: text is important. you're showcasing the signs people are carrying. >> definitely.

as propaganda, this change maker sign that was distributed to the whole room. as bill clinton is making his speech. in one way, is very powerful, but that is also clearly a message they are pushing. it is well orchestrated, particularly at this time. you saw the same thing with the michelle obama signs. then seeing this slapdash dem exit by bernie supporters is an interesting counterpoint that there is still an insurgent element. david: up next just how dangerous it is to clean up rio vision narrows at beaches. carol: that is next on bloomberg businessweek.

david: i'm david gura. carol: and i'm carol massar. david: the dangerous and deadly business of planning up rio's beaches. and why the u.s. and japan may lose access to economic zones. carol: that is all ahead on "bloomberg businessweek." ♪ >> many must resist the issue. in the company section, a piece that looks at black executives at the biggest companies in america. there has actually been a decline since president obama came into office. alan: -- ellen: the troublesome part of it, if you look at the pipeline for executives, people at levels who could soon be chief executives, there isn't, there aren't significant numbers of black executives in the pipeline.

david: the opening remarks section deals with columbia. when you look at how many internally displaced persons in columbia, it is the second biggest nation in the world. that surprised me. ellen: it also surprised me. the interesting thing about colombia is the are trying to do something about it, and they have a program where they are trying to look at families that lost their homes and see if they are due to the political displacement and result of the civil war, and get them homes again. it is complicated. they need to look at records and find land. and only something like 3.4% of the families have been resettled, but it is an organized effort. >> what brought this about? there was news with a deal. ellen: of course, this kind of

situation is have an many countries. if you think about what syria will be look like when the civil war is over, there will be so many people who would have been displaced. there are places in africa with the same thing has happened. the question is, how will they get resettled? it may be that in the end, columbia can show the path. david: the summer olympic games in rio are a few days away. one of the stories told us how polluted the body of water in rio is. you have a feature in this week's issue about a woman who is having a hard time getting it cleaned. she was murdered in her car in broad daylight. what do we know about why that happened? ellen: priscilla was an executive and a government office, or an agency that was a quasi-public agency charged with using money from the international development bank to try to clean up the bay. brazil had promised to get rid of something like 80% of the feces.

she was charged with looking to make sure things ran efficiently, and that there was not corruption. and she was hard to deal with, she was a tough person, and would really clamp down on people and check things out. and she made some enemies. and she ended up dead. she was shot in her car 13 times by someone who clearly knew her routine. she was about to get out of her car and take a subway to work. we look at how and why that happened. >> i talked to a reporter. >> she came from a very humble background. she was raised on the edge of one of the most rough and tumble neighborhoods. she pulled herself up by the bootstraps in a way that does not happen in brazil.

david: and found dead, shot 13 times. that case still open? >> it is still open. it was a clear hit and it is something that does not happen often here. she was getting ready to go to work. it was clear -- robbery was not a motive. it wasn't a traffic argument. she was parked. the cops have ruled out -- they had one suspect in her personal life and they ruled them out. the mainline of the investigation is related to her work. david: you mentioned she was working on cleaning up that bay in rio. how monumental is getting it cleaned up? >> it is a little tough to say. the state water and utility say half of the sewage that goes

into the bay is treated. more say it is like 20%. police have opened up an investigation in that utility for charging millions of residents to treat their sewage and not doing it. david: a lot of foreign money pouring into rio to make it happen, especially the start of the rio games. why has it been so hard to get this bay cleaned? >> when priscilla came with the new coordinator, they found aims in complete disarray. he says as much. where the account begin to differ is her former colleagues, friends, family, say she was put in charge of going through these contracts, finding irregularities. really halting the advance to make sure these contracts were done in the right way and people were not stealing money. whereas, the coordinator, and a former coordinator, says that was not her job. he disputes that.

so, as of now, we are less than six months away until this alone actually -- this loan actually expires. for $450 million. they have spent 13% of it. in part, because of this intense scrutiny, and also working with her boss, working in his service, they were both implementing a lot of checks and balances, and that slowed things down tremendously. >> rio and the olympics, athletes will be wearing high-tech gear by sponsors. >> there is a special kind of fellowship you develop. you mentioned the nba. these guys usually play against each other and now they are playing together for their country. there is no purse at the end of the olympic games. it is not a tournament to help you pay the bills.

at least immediately. it could lead to sponsorships down the line so it can be very important to an athletes career. david: you look at the triathletes. they have a customized bike. how much say does she have in what she rides or wears? how much of that is determined by the u.s. olympic committee? >> it really depends on the individual athlete. the women's rugby team, they have a degree of more choice. their outfits are sponsored but their shoes are not. one of the athletes, i will not -- i will not say which. we shot her wearing the wrong watch. a watch from a company she was not a sponsor for. david: is there something in common then motivates all of these athletes? you point to one who is from flint, michigan. >> a lot of them seem to really

like their sport. like the idea of performing well and performing on behalf of their teammates, too. it was a fun section this week. i feel like i made friends. carol: up next, the dispute over the south china sea could see the u.s. and japan losing territory. david: plus citibank shrinks it , --its global footprint. we will talk about their new strategy. ♪

♪ carol: welcome back to "business week." i'm carol massar. david: and i'm david gura. you can listen to us on the radio. carol: in the global economic section, a look at what is in

risk over the south china sea. >> there is an application for the night stayed and 4 --for the united states because we have a 200-mile exclusive economic zones projecting from our zones where we have exclusive use of fisheries, an exclusive right to drill for oil, mining, and those claims extend only if it is a habitable piece of land. david: meaning was exactly? >> meaning you can live on it, and that it could sustain human life without outside intervention. you could grow crops and have freshwater. the decision of the south china sea implies, that is a high bar to meet. and some of the islands around which the u.s. has an enormous

zone, might no longer be entitled to it if they do not follow the guidance of the tribunal. david: looking at the mass, an incredible amount of ocean could be called into question. >> believe it or not, it is bigger than the land area of the united states. it is huge. and, so yeah, it is a big deal that has not gotten a lot of attention, but will over time, especially if some enterprising lawyer goes ahead and uses. this is not officially a precedent, but written in a thorough way. for example, japan has the in the island that is like the size of this studio, into yet they have 200 miles in every direction of around it.

keep the taiwanese out. keep the chinese out. keep the koreans out. other countries are crying foul. they will probably be citing it, is not a habitable place. what could happen is possibly negative. the united states is a pretty good steward of its fisheries. they make sure they don't get overfished. that is hard to do if the exclusive zone goes away and this becomes open seas, a free-for-all, and hard to control someone coming in and getting enormous amounts of fish. forever.ng a fishery carol: here is a reporter. >> the banks that had global empire was citigroup and hsbc.

these were mergers of banks that were present in previous qualities -- colonies of the british empire and other places. and in some cases, providing typical banking services to everybody. small, large, whatever. but now, everybody is pulling back and saying we really want to focus on the most profitable client and the most profitable sense. citibank is still bolstering they have 80 trading floors around the world. but they don't want to be everybody's bankers to everyone. david: it has reduce the footprint somewhat. >> in turkey, citigroup had 50

branches. and they were in all the major cities and small places. now they have a handful of branches, which only do corporate banking. david: we had this financial crisis in 2008. how much is this a philosophical one, versus them realizing there is a new regulatory regime and it is more difficult to be in that kind of business? david: the cost of doing business is more tangible. the shareholders need to have a bigger stake in what is going on and have to take a bigger risk and what's going on. before the crisis, average shareholder's equity was 2% of total assets. that was nothing. in that case, you don't have to worry about how much capital you

have to put into turkish business. you do not have to worry about that. they were just like ok, if we open branches there, we make some money, doesn't really return our investment back? return on investment was not. not as big of a deal. now, when you have to have capital in your global business as well as in every country because of all the regulations apply to all the banks around the world, each of those countries need to have a lot more capital. then the economics of it does not look quite as attractive. avon: up next, local tv news at speeds up the dial. carol: and what a trump executive was doing during the embargo. ♪

♪ carol: welcome back to "bloomberg businessweek." i'm carol massar. david: and i'm david gura. i talked to reporter tim higgins. >> we have seen one third of the ad dollars for local campaigns newscasts across the country. david: is this led by supply or demand? are they saying you could more tv news on, there will be more time for people to buy and they will buy it? >> that is a good question. campaigns want to be on local tv, local news, "wheel of fortune," "jeopardy." you can have more time in local news. the question is is if that extra hour will bring in more revenue? car dealers want to reach those

higher educated, maybe higher income people that tend to watch local news. david: square something, tim, if you would. it seems like the trend in political advertising has been to target. though as small as possible. counterms to be running to that. >> you are right. of 2012 was how the obama campaign targeted specific, potential voters through various, shrewd, buys on local cable. it is kind of the rule of thumb in political campaign management. in so many political operations, they just naturally gravitate toward local news because in part, that is what the candidate is accustomed to watching.

if he or she is turning a local tv, they want to make sure they see their ad because he are seeing their competitor's adds there and feeds into that. at the end of the day, tradition drives a lot of this. that said, you are seeing some campaigns becoming more sophisticated and try to target these other stations. as you get closer to election day, people are spending lots of money and just saying, get rid of all the money we have. david: and the features section, an investigation and what trump executives were doing. doing in cuba during the embargo. >> people who are responsible for fighting and developing golf sites around the world began traveling to cuba for this purpose and looked at various sites that could be potentially golf sites. one of them, who is trumps environmental consultant, has been to the island he told me roughly a dozen times over the last five years. could a company like the

tribal go down and work on one of these projects? obligatedort of a answer. basically, the result of the obama administration loosening up in january 2015 is generally viewed to permit companies to go down to cuba companies to go down to cuba without any prior permission, and suss things out. it is on the honor system. they do not have to apply for a specific license to potential -- explore potential business opportunities. depending on how far down the road they get, they would then, certainly before finalizing any kind of deal, would have to come to the u.s. treasury department, and get approval with a license to consummate a business still deal in march. both starwood and marriott announced they received approval to do deals like that. so, if the trump organization wanted to pursue something like this seriously and legally, they

would at a certain point would have to get a license from treasury to finalize a deal on the island. david: the trump organization has properties in golf courses around the world. what has donald trump and members of his organization said about their designs on cuba if anything? trump spoke very briefly about this. he said he agrees with the liberalization of cuba. he basically said i would not do it under the current law which touires u.s. investors partner in whatever ventures they do on the island. in response to our reporting, eric trump, his son, who oversees the company golf developments, say they are monitoring the state of the marketing cuba. that is the extent of what they have said publicly. david: how might all of this

change if donald trump is elected president? what would that mean for the company and the company's interest in getting into the cuban market? >> who knows? we would have sort of an unprecedented situation. there would be a billionaire businessman with interest all over the world, who is then the most powerful policymaker in the world in a position to really influence policies that are affecting his businesses. the short answer is, who knows? but it is not difficult to see how there is tremendous potential for conflicts of interest. carol: bloomberg businessweek is available on newsstands now. david: what is your favorite story? carol: facebook. zuckerberg. how he sees it as something with the sports community connecting the world. david: feeling philosophical about it as well. carol: how about you? david: i liked the story about

becoming a technology city. especially in the wake of the eu referendum in the u.k. carol: it is a great story. we'll see you next week. ♪

♪ emily: i am emily chang. this is the "best of bloomberg west." coming up this week, the end of yahoo! as we know it. we will hear from the ceo, marissa meyer. verizon beating out the other suitors for yahoo!. the verizon executive vice president and aol ceo both join us on the deal. plus, facebook blows past second-quarter earnings estimates thanks to a surge in mobile ads. first, to our lead story.