♪ carol: welcome to "bloomberg businessweek". deep entangled relationship between hollywood and president-elect trump's pick for treasury secretary. bever: net look once to amazon, google, and facebook combined. carol: how sleepless nights led to the birth of one pillow king. oliver: all that ahead on "bloomberg businessweek". ♪ oliver: we are with the editor in chief macon murphy. carol: you guys take a look at

something that is paypal for india. this is a story that goes to the scramble in india. they extinguish their two largest bank notes to combat corruption and frog in that market, but what it has really led to in this country and developing countries, the push for digital payments, what kind of space this is. the story captures that it is still wild west. we described it as a lot of people now pushing into digital payments, people don't even have cell phones. they're going straight from not even having a bank account or cell phone to processing all their payments online digitally. it is a multi-trillion dollar market and shows how for people who are brave and innovative, how they get that technology, there is huge opportunity.

is a big point of conversation, the advent of fake news. combating it.le it has become a big deal and played a central role in the election. ofan: it cuts to the heart oil i think continues to be seen seerberating as we president-elect trump getting ready to take office. said, it's not clear whether this has all been around, a new phenomenon, or whether we are capturing this facebookn because of and social, which allows you to self select the news you are getting. it is something that everyone is it is to combat, but trying to figure out our people out there," as it in for stories beyond their general reach or they won a tailored list of

stories their friends have sent them. it is limiting those circles. one of the most fascinating ,hings when you look at 2016 you can map out where trump did better, hillary clinton did social whether you map media and what kind of stories they read. that was some of the best indicators and some of the states where we saw the biggest surprises. carol: which is what is interesting in this section. you look at a company, story full. thing yous is the have to be careful love, how you determine what is fake and what is not. this is what people are grappling with. will we say that is wrong or right, or how do we do the metrics, a fact that is wrong,

totally made up. what's the motivation, the algorithm, the perspective. defining challenge for our news industry because people have shown a willingness, aptitude, and desire to tailor their news based on what they want to read. carol: the cover story, great story, great deep dive into netflix. megan: it is a great story because what you learn in this story is that it focuses on brazil. it givesreat is that you that flavor in terms of brazil and its media presence is run like a 1940's system,d-style studio the number of people who watch, how they are cast, a family-run industry and so incredibly common it. who are that people

brave, innovative, that is a market that you think would be difficult for a company like netflix to crack, and they are cracking it and peeling open a market that is dominant and traditional in a way, and it is a story about what disruptive business models can do. oliver: we had to send somebody to brazil. a domesticwas company for the first three quarters of its existence, then in 2010, it made its first expansion outside the u.s. with a streaming service in canada. in 2011, it made its first big splash in latin america. they introduced the service to 43 different companies at the same time, so that is a good place to start to get a sense of where netflix is going.

the key to their future is replicating that success all around the world. ,f you listen to reed hastings he stresses international and talks about companies like google and facebook. entrepreneur and started a bunch of companies, and his belief is that netflix can use the internet to build the most popular network in the like facebook change the way people interact online. netflix has the same opportunity in television because most of the existing companies aren't viewing the internet as this transformational as he thinks it will be, and to get a sense of how netflix is approaching that international marketplace, i went to latin america, and the biggest country was brazil, where netflix struggled at first for the first couple of years, then it has become a huge story, their biggest market after the u.s., the u.k., and canada. hired a big brazilian star

and created content there in brazil, not shipping it in from elsewhere. >> right, if you have seen escobar,out pablo the guy who plays pablo escobar is one of the biggest stars in brazil. i can member a friend of mine went down and lived in rio and came back and all he could talk about was this movie, so that was a huge hit in the brazilian market. when i was in a cab in san paolo , i was explaining to my driver that i was there to report on 's first series, but she thought i was thinking of narcos. showetflix has macon a

filmed in brazil, starring only brazilian actors, called 3%. >> what they are doing in brazil , is it working for netflix? are they adding subscribers and seeing the growth they need to grow into a $55 billion valuation on the company? >> netflix does not break out areperformance, but there analysts who track this, and my sense is that looking from reports and talking to people is that it has been successful to a point. netflix has 4 million or 5 million customers in brazil, which is bigger than a lot of internet tv services in the u.s., but it is ultimately a small fraction of the potential market in brazil. they have the strong base of fanatics and early adopters, much like the u.s. and before had 25f cards, they

million subscribers by that point, and now netflix once to supercharge it and take it into the mainstream. netflix was popular in some paolo and rio. there are fans in other areas, but if you ventured into the center of the country, you would find fewer people who are using it because they can't access it or because some of the marketing has not gotten to them. oliver: turning it into a cover image was the job of -- carol: netflix is expanding its business around the globe, so what went into making its cover. >> they are using brazil as this testing ground. we ended up with this option because it gives at the global nature of their plan. netflix logo, which is very no recognizable, but we

translated it into 12 different languages. oliver: the story focuses on brazil as a market to expand in, and what you have done is taken one point and said this is exemplary of what they will do across the world. >> their plans are huge. , wherent to be in india it is difficult for a company like them to thrive, and they are sort of pushing themselves in brazil. carol: if we do translate these, ay something else? >> we had an international team of fact checkers. it is out in the world now, so i'm sure we were here about it. oliver: the english netflix is not on there. them.ctly, we do mention carol: any other ideas you are

playing around with? arte had one idea which the department loved. people -- hing that carol: i had to google it. it had a one version brazilian flag and chill. but becausede it certain people did not understand the context, they were not necessarily thrilled about it. movies how blockbuster and hollywood could spell trouble for donald trump's pick for treasury secretary. carol: those stories are next. this is bloomberg. ♪

carol: welcome back to "bloomberg businessweek". i am carol massar. oliver: i am oliver renick. for treasurypick secretary facing scrutiny over his ties to a hollywood production studio. >> we rode a story about his entanglement with this company called relatively media, this highflying movie studio run by this charismatic jet setting guy. got involved with this company and a bunch of different ways at the same time, and it all went south and the company went bankrupt. oliver: let's start with the relationships. tell us about the relative timeline in terms of when he started, when he was with onewest, and when he got out of each one? >> steven mnuchin is a goldman

sachs guide by background. became a hollywood financier and produced movies like avatar, 40% of avatar, a huge home run for him. at the same time, he was a banker and bought this bank in southern california that had failed, turned it around, and turned it into a commercial lender. onewest.d it because he had a background in movie finance, he got onewest into the business of loaning money to hollywood. it made a big loan for this relatively media, and their relationship became closer with the ceo of this company, ryan cavanaugh. carol: talk about the particulars. steven mnuchin was also cochairman of relatively media. >> eventually.

as far as we know, the loan from and 2012 was one of the first connections, but subsequently a friend, jim wyatt , formerly ran one of the biggest talent agencies in town, goes on the board of relativity and onewest at the same time, then steven mnuchin goes in, buying a corporate jet with ryan cavanaugh, so they personally owned this company that owns together, engine jet and it is zooming around from aspen to cobble some lucas to maui. he basically blends money to the company through the so i'm inside lending if you will.

nothing illegal in terms of doing that, but actually having a degree of ownership in the company is where things get hazy. >> that's right. they mays their first loan in 2012. it was not an inside loan. oliver: until he went on the board. is something that federal regulators look carefully on. using depositors money to make a sweetheart deal for the benefit of the people who run the bank, so they look closely at this. as far as we can tell, this never ran afoul, and regulators never took any action against onewest over this. fast forward they get the jet together, onewest make some more loans, and all of a sudden steven mnuchin shows up as cochair of relativity and takes a stake and the company that at one point amounted to 14%, plus

he has a hedge fund company where he is representing other investors, and they take a stake pointativity, so at one he is wearing four hats in the relationship. carol: headhunters, paid vacations, bonus checks, these old no longer the perks of wall street in silicon valley. food chains are fighting over workers instead. carol: you kickoff your story talking about the sick, who is she? she is a restaurant manager in albuquerque, new mexico. she runs a gas station because worker demand for these type of workers, restaurant, retail, is so high right now. oliver: obviously the demand is , but is it being

.xacerbated by a lack of supply what is the need to approach people from other places? >> this industry in general before this labor crunch, it is a high churn type of industry. workers come and go. this is being exacerbated by the andunemployment rate increasing minimum wage across the u.s. too. carol: the fast food industry, the restaurant industry finding their labor pool is tight, so what are they doing to bring workers to their places? >> they are doing everything from quarterly bonuses to bonuses for training different people, other employees, things you would not think of maybe paid days off,,

even having the managers around more, making sure they know people by face and name and recognize them for doing a good job. oliver: is this happening at the fast food chains, wendy's, mcdonald's, stuff like that? is it also happening at the fast casual places? at faste seeing it casual places and all the way up to full service restaurants like an olive garden or something like that, where you require different servers to bring the food to you. it is tight across the whole industry. thel: when we look at economic data and labor market, we have been waiting for wages to be higher. oliver: we got a big boost with the most recent number. exactly, that is a good thing for workers, but i think the flipside for companies is not so good because it raises their labor costs.

>> exactly, a lot of them are having to eat that cost, seeing profit go down, because it is so competitive. the consumer is still uncertain because of the election last and there was a lot of competition from prepared food places like grocery stores, so a lot of the restaurants can't even raise prices. carol: brexit claims another victim in u.k. diplomacy. oliver: the pipeline that may run afoul of one of trump's biggest promises, the wall between the u.s. and mexico. this is bloomberg. ♪

oliver: welcome back to "bloomberg businessweek". i am oliver renick. carol: i am carol massar. you can also listen to us on

serious xm channel 119, a.m. 1200 and boston, a.m. 960 in the bay area. oliver: in london, and in asia on bloomberg radio plus app. carol: in the global economic section, the resignation of a diplomat reveals divisions over brexit. is the uk's new man in the european union, the permanent representative of the u.k. to the european union, the footsoldier on the front line in theresa may's brexit battle, working behind the scenes, trying to sound out other member countries to identify how these negotiations can go, trying to cut the deal, doing a lot of the legwork that the government needs him to do to get that deal signed. carol: his predecessor just quit

unexpectedly. >> that's right. sir ivan rogers was doing the job before tim barrow, he completely shocked theresa may, not expecting him to go, so this created a sudden vacancy. that is not the hole in your leftwant with 10-11 weeks before the formal start of negotiations. , hisr: mr. barrow background, and does he have the tools to wade into unprecedented waters? >> he is an experienced diplomat, cut his teeth working in the u.k. embassy in moscow around the time of the fall of has seen somee interesting times as a diplomat and has experience working in brussels, so that will be useful

for him in his job ahead. he is described by colleagues as a real professional, someone who will work well with ministers while gaining them good, independent advice, and critically the real thing he will need will be clear direction from london about the kind of aims that he has to have in those negotiations, what sort of deal is it that the u.k. government wants to get. carol: well, good luck with that, right? theresa may is not quite sure what she wants. >> this could be hinting at one of the biggest problems for tim barrow. may has been reluctant to give any indication of the deal she wants. she will tell her opponents and negotiations exactly what she wants, making it less likely she will get it. that is theresa may's argument,

but 10 barrow, unfortunately his predecessor made the point as he resigned. obviously there is a ton of diplomacy that has to be done. there is a lot of politics involved, but at the same time payingt of the world is attention. does mr. barrow have the background or people advising he can keep those results in mind going through this process? big team ofave a people to work with and be plugged into the u.k. treasury and draw on resources there that will be crucial for him to have any chance of succeeding, but there is no question that he has an enormous steep learning curve. carol: up next, a scandal at south korea's giant retirement fund.

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strong and secure. good for a door. and a network. comcast business. built for security. built for business. oliver: welcome back to "bloomberg businessweek". carol: still ahead, did the create theat davos environment for donald trump to come to power? a former drug addicts idea turned multimillion dollar pillow empire. oliver: all that ahead on "bloomberg businessweek". ♪ oliver: we are back with megan murphy. lots of must reads. one with a bit of scandal and

south korea. tell us about their pension problem. this is fascinating. it is a glimpse into a country wracked by this scandal and crisis over its pension fund, collusion about directing money in this pension fund. this has been a long-running issue there. there has an tremendous political and economic headwinds there, but it gives us a glimpse don't get a lot of that impact you see with this and how unusual this is, how public it has been, and how serious it is for that country. relationships.e megan: very cozy. carol: talk about cozy and look at and policy, you another border issue for donald trump that has to do with the natural gas pipeline that snakes its way to west texas into

mexico. it is and ought group of characters, carlos slim, donald trump, and what it is looking at is this window into what we will be focused on for the next four has thisen somebody diversity of business interests, investments in the pipeline that goes to mexico -- carol: like donald trump has. megan: exactly. how do get away from that? principles was building this border wall with axico and here we have pipeline going through and there is a financial interest. what will be interesting is on peeling those layers and looking his ownow much does business interest impact not his decision-making, but it is complex. going on there. there is a lot of stuff that people don't even know about, and this is one example of

everything you think you may be true. oliver: there are a lot of political themes in the story that deals with the new governor of west virginia. had troubleustice because when he first started his candidacy, he ran in this trump world where trump went to west virginia repeatedly. this was a main battleground. trump, the promises he made to that industry, which anybody knows is facing an immense struggle. are weory shows where going to be able to keep those promises, is jim justice going to keep those promises? or ist industry viable that a subsection of the population who look at the

promises made to them and will hold him to account and say all those things you said about revitalizing industry, the challenges it faces and whether that is a credible promise. carol: a lot of challenges. more on west virginia and its governor. >> the new governor, jim justice, is an interesting guy. he is the wealthiest man in the state, owner of coal mines and other business interests, including the west virginia resort. change from he republican to democrat to run steered awayut he from hillary clinton and emphasized his friendship with another billionaire real estate mogul, and that is donald trump. carol: heard of him. >> right. he resembles trump in a number of regards. very large family-run

business that has operated with the cooperation of his adult children. he has said he will not divest empire in west virginia. he a long with trump promised the people of west virginia and the people of appalachia that they would bring back the coal industry, which would be a true feat. carol: i have been to west virginia. 40-50 years, this was a bustling area between the coal, chemical companies, but a very downtrodden, even if you go to the capital. thehe chemical industry, steel industry, they largely fled decades ago, and more recently, coal has been weakened because of competition from wyoming and montana, and more recently because of environmental concerns that have

the partin a shift on of utilities to natural gas, which not quinn's a densely also has been an expensive in recent years because of its plentiful supply. for all those economic and social reasons, coal has been down and out. oliver: it's not just the clean energy alternatives. is it cheaper? are there more resources in those western states? >> western state competition is on call it self. somewhat cleaner in wyoming and montana than the main but the overwhelming force that is hurting coal is the availability of cheap and plentiful natural gas.

carol: it doesn't make sense for coal to come back. does justice followthrough bringing back an industry that in many ways is dying. ? has one main answer. the reason coal is in dire theits is the epa, environmental regulation, and if his friend, soon to be president , donald trump will reign in the epa, then coal lives to fight another day. in my article, i show how unlikely that is. first of all, because environmental regulation is a factor, not the primary factor that has cause coal to have a

tough time. beyond that, he points out that metallurgical coal will have a come back, he believes, if the economy and places like china, india, and elsewhere recover. exported to coal is those countries for use in steelmaking. are international gatherings of liberal elites going to solve problems or create more? ♪

oliver: welcome back to "bloomberg businessweek". i am oliver renick. carol: i am carol massar.

the world economic forum davos gets underway next week. oliver: we talked to simon kennedy. ,> this takes place in davos switzerland, europe's highest for and well-known firs snow and skiing. the global elite gather, bankers, academics, policy makers, all head to this alpine retreat and discuss economic and financial affairs and the challenges facing the world. that this seems like year they will obviously be discussing some of the major elections around the world. >> one of the things about davos is that it has become the grounds for globalization, the place where free movement of people, money is encouraged and celebrated.

obviously that worldview has taken a bit of a shock in the last year with elections of figures such as donald trump and protection is to topics such as brexit forcing their way into the headlines, so it is a bit of a reality check this year for , thatlegates of davos worldview is perhaps under attack. carol: in some ways, what has been promulgated, has that caused the backlash against the establishment that we have seen around the globe? >> certainly, this is an elite meeting, and it has been a thisng that has promoted worldview over many decades now of globalization, the importance of technology, and now in the forum, in some ways it is to acknowledge that it has been threatened and people are not so happy about that blueprint for

how the world economy works, and you are seeing that at the ballot walks, so it is a question for the delegates. they thought they would always have the solution, but now they are the problem. in to: this is wrapped the populist movement where you have seen the populist shift away from those elites. in thee well described story by samuel huntington, the late harvard presser, who described the davos man. who seesa person beyond borders, who sees the importance of a global answer and global flows in capital markets and the like. it is a moniker not done as a tribute, but was adopted by people who would say you are a davos man or woman, and perhaps

a thing not to be proud of these days. you are almost having to apologize for to some extent. oliver: that is interesting because there is an elite group here, but at the same time, there are some of the people who will be enriched with power as we have seen with the wall street heavy administration here, banker-friendly, are these going to be people who feel like targets are people who could potentially benefit from the new leadership? >> these are people who will be trying to work out a business angle, and angle where they can benefit, sort of neil ferguson, he was saying that by the time davos rolls around, everyone will be a fan of donald trump as they work out how they can benefit from the policies he introduces. some of the policies he talked

about, or some of the rhetoric, translating into policy he hopes to introduce, and certainly one place where you can see that is wall street. when he looks at lower , there is a feeling of relief on wall street that he might be good for their stock price and good for banks in general. there is a case to be made that the delegates of davos won't suffer too much from this populist uprising. oliver: how one idea from the world economic forum is trying to succeed where others fail. carol: at least when it comes to insurance. is covering a farmer for disruption.her directio you have a crop insurance program that gives farmers $10 billion a year, a way to hedge

financial risks for folks and agricultural. you have this catastrophic risk that gives you stability and the banker knows you will be able to pay off the loan. for poor countries, you don't have the same network. in sub-saharan africa, credit risks become another part of the many risks they face. oliver: this is this is branching out into emerging economies. what is behind the shift? >> when you look at africa's agricultural potential, is the last frontier. the gameever played where you make it into a tower? --butltural is like jingo underpinning all of this is financial stability.

could givence farmers that stability that would allow their potential to explode and lift a lot of people out of poverty and feed the world at the same time. carol: you talk specifically about a group of insurers who have created a consortium to provide this insurance to farmers in africa. >> right, blue marble micro insurance, a consortium of eight major insurers. with theed in davos idea of creating this financial stability that could help african agricultural expand. it is about putting people into these networks to get loans, crops, grow better develop infrastructure, and build that tower. oliver: some good news that good things come out of davos. framingthese companies it so it is still advantageous, and big companies find it useful

use of their time to do this and some of these areas that are very underdeveloped? we are notke sure certain this is a good thing coming out of davos. it just kicked off in november, and they're not trying to support the people living on less than a dollar a day. these are for farmers who they feel can prosper or expand, who may be living on nine dollars or $10 a day. you are creating this market that allows these farmers to become more prosperous and buy more product from aig, crop insurance, other policies. building that marketplace from the bottom up and coming in on the ground floor so you get that brand identity, awareness, and , using things

like mobile phones to pay bills on time. carol: micro insurance has worked in other parts of the developing world. >> there are simply some development challenges in sub-saharan africa that are unique to the region. because you don't have the stability of governments, you don't have the weather data or the risks to build an insurance policy on. satellite technology and geo-mapping is helping a lot in that area. you have not had these larger networks that these farmers can plug into. aiver: how the pursuit of good night sleep gave rise to the looking. carol: this is bloomberg. ♪

oliver: welcome back to "bloomberg businessweek". i am oliver renick. carol: i am carol massar.

you can listen to us on radio on sirius xm 119, 99.1 in washington, d.c. in london, and in asia on the bloomberg radio plus app. section, the features the unlikely rise to success of america's looking. he is the my pillow guy. if you listen to radio or watch cable television, he's in my twitter feed now, he is a mail order pillow guide. my husband actually bought a bunch of those paulo's. they are everywhere. they are ok. he sold 26 million and isnting, but his story incredible, a reformed crackhead . he is not shy about it, who

almost ran his pillow start up into the ground and is now a full on mogul. carol: he was a drug addict for a long time. >> he owned lunch carts and a bar owner, started using cocaine and always had this dream of inventing the world's greatest pillow. aiver: he literally did have dream. isn't that what he says spurred the idea? >> exactly. now he talks more about prayer, but he said the original vision came to him in a dream. he felt like he would invent the world's greatest pillow and solve everyone's pillow problems. he went obsessively about trying to create a kilo. oliver: it was very much trial and error. workedigured out what best was phone, so he would by phone and he and his son would

care the foam into shapes, try that, try another phone, and tell he struck on something that worked, then he's darted selling it to people. carol: it was not so easy initially. he ended up going to a lot of home fares? and lot of inventors product makers have this experience he went to stores and said this is the greatest pillow and they were like thanks. he took a chance on a kiosk at a mall. it was a big failure, the one person took the pillow, then he sold it at a home show, so he was going to fares and home and theoing very well company was expanding, but it was not growing precipitously. oliver: that is an important part of the story, that he did

not get rid of his drug addiction and then start his business. he was running the business and trying to start it up while dealing with these addictions. what eventually broke that mold? doing, years, he was throwing pillows in his trunk and driving around america and selling them at fares. he was very good pitching the pillow, but he did not know how to grow the company, and it did not help he was a drug addict. problemsme personal and he went from powdered cocaine into crack and went on this epic binge and got cut off by his crack dealer, which is probably a low point for most people. carol: there are ethics among drug dealers. >> who knew? he was on them for another six months, but decided at that point that i have to change startedthen the company

taking off. tribune did aolis story about him, and that helped a lot. >> the business section did a profile, local guy invents the low, your quirky business story, and the web sales went up. local guyut obsessively comes up with this pillow, start selling it, people up his, and that blew online sales and he started placing newspaper ads saying i can copy this story and place it all over the country. then he did an infomercial, and that is what blew up the company. carol: "bloomberg businessweek" is available on newsstands now. oliver: and online at bloomberg.com. let's talk about our favorite story. carol: i like the story about

the pillow. i am from a with the infomercials. about his found out back story. i had no idea he was a drug addict for so many years and really struggled with that, lost his home, wife, but did create this incredible business, and the story takes down into it. i have a couple of my pillows on my bed, but i felt like i got a feel of how he created his company. oliver: you always see the infomercials and never know what goes on behind the scene. carol: how about you? oliver: i liked davos. this is the big economic forum that happens every year, sort of thought-provoking and business provoking. however, what they ultimately came to do was to create that globalization, and it will be interesting to see what comes

out of it. carol: especially as so many --at davos miss the donald trump connection. oliver: more bloomberg tv starts right now. ♪

♪ >> coming up on "bloomberg best ," the stories that shaped the week in business around the world. the president-elect meets the press. hearings heat up on capitol hill. >> the plan at this point is just to trust donald. >> he is not moving where he needs to move. >> contention is an understatement. chinanomic news from causes global concern. >> i think you are seeing a bumpy road. politics might be about to change the game for drug companies. leaders in the industry tell us what they are expecting. >>