oliver: welcome to "bloomberg businessweek." i am oliver renick. the satirical newspapers striking fear in the hearts of french politicians. what the maker of post-it notes is doing for government issued ankle bracelets. finally, the most expensive mistake for the u.s. military. ♪ carol: we are here with megan murphy.

megan: this is a story that stents which are relatively cheap, not a huge amount of money. this be have a stroke, they can alleviate that pressure, bleeding on the brain but whatl to recovery, this article talks about is how the injection of these metal stents are not common because 100 50re only stroke-specific care centers in the u.s.. paramedics are usually the first responders and will make a decision and evaluate somebody. if you don't go to one of those specialist centers, you are more likely to get a drug. the stents are more effective

and lead to better recovery than the drug, but with our aging population and the demographics growing older, we don't have an -specific centers. oliver: there is an interesting story that a lot of americans don't know the implications of this magazine in france. tell us about -- megan: use your french year. duck, it is a fascinating story because it has proved to this a huge effect in election. the favorites moving down, scandals uncovered, the left

making a surge, but also the that it is as print publication with a minimal makes 25resence and million dollars from a print publication. similar long tradition, to private eye or spy magazine, trafficking in tidbits about the elite. first ones who uncovered that fillon was paying his wife. they have gone in and taken down power. they say they are to serve neither the left or the right, and they have proven that. program, eight years, $1 trillion, and still there are questions. megan: this is the latest in a

long line of great pieces exposing inefficiencies in the pentagon process. this is one that has gone through so many iterations. the issue when you are redesigning aircraft carriers, f-35, air force one, so many people want different demands from what this product is. there are four service divisions in the u.s.. each one wanted different capabilities for the plane. this plane can land like a harrier hovercraft, essentially come down like a helicopter. the technical requirements and each level of service coming in and demanding different things rove the price have come a the contract, complicated it -- , the the price up

contract, complicated it. oliver: we talked to two reporter paul barrett. is perpetually in focus because it is the single largest procurement ride the pentagon ever. ofe you fold in the upkeep the plane in the future, it will approach and exceed one train dollars. $1 trillion. president trump has been focusing on it, talking about it a lot, first down playing it and insulting it in his fashion, declaring now that he is involved that it is a fantastic fighter jet. look at whether it is a fantastic fighter jet and discovered it has some performance problems. carol: tell us how long this has

been going on. began with a competition between boeing and lockheed, and lockheed was declared the winner and had the opportunity to build the f-35. oneidea was that it was common plane that could be tweaked to be suitable for the air force, the marine corps, and the navy. that was the way the pentagon was going to afford a massive replacement of cold war era planes. for morenal plan was than 2400 of these planes to be built for all three services that fly fighter jets. 2000'sinevitably in the as a plane with that much money ran into problems. the degree of commonality among the three variants turned out to approaching 25% as

opposed to 70% or 80%, which was theoriginal plan, so economies of scale when out the window quickly and costs began delaysrun targets and set income now amounting to seven years. oliver: it was let's build one model, but essentially making three different planes. >> that was basically it. oliver: that contributes to the prize because you have to have changes for each plane. so where did that bring the total cost to now? theriginal estimates were program for development and acquisition would cost of $200 billion. that figure is closer to $380 billion. you have to factor in inflation, so that is a 38% increase, but the biggest cost and the figure

taxpayer should pay attention to is how much it will cost to sustain the plane and keep it in shape and keep it well-maintained and fly. that amount could exceed $600 billion over time. oliver: up next, who is to blame for sluggish u.s. car plans. this is "bloomberg businessweek" ." ♪

oliver: welcome to "bloomberg businessweek." how changing consumer tastes is affecting u.s. car plants. supply andways a demand issue in the industry. it takes years to build factories, and they try to produce hundreds of thousands of vehicles all the same, and they have to project those years out,

and consumer taste can swing dramatically, so we are seeing sales pass that the come and the decline has come from midsize cars such as the camry, accord, compact cars, civics and .orollas, ford focus those cars are not selling like they have been selling for years and years. they have been displaced by suv's. the story.ike it is directing go straight to the numbers. give us some perspective on those numbers. that is basically that sedan market. >> those are mainstream, family cars. the malibu and fusion are midsize sedans, the same size as a camry or accord. ius is smaller.

and is used as a family car. these are mainstream family sedans replaced by the compact crossovers, a honda crv or ford truck, smaller than a big suv, but something more like an old station wagon used to be. oliver: if you are donald trump or are looking at the industry as an analyst, what does it tell you when demand shifts? there is demand, but just different types of vehicles. what does it mean for american manufacturing? what those cars be coming from somewhere else, american-made? break that down. >> the big issue and debate

investors have with the market is whether this is a little bit of a softening and a plateau where we have had record sales for the last two years, and unprecedented streak of seven years of sales growth, so now it looks like we are over the top. will it be a traditional cyclical contraction? it going to bump along for another three years or so? a lot of folks in the industry are confident things will stay where they are on a volume basis, maybe eat into some of those profits. we have seen warnings from ford and the like about how much tougher of the competition is getting, so maybe volume stays high, but the profitability shrinks. those numbers are the demand side equation.

the supply side of the equation, how does that factor into this in terms of whether the supply to meet, whether or not that volume, carmakers need to build new plants, hire people? >> because we see that sales have stopped growing, it will not keep going straight line up to 20 million a year or something. people are putting the brakes on manufacturing plants. the expansion plans that have been planned are going forward and they are executing, but no one is planning to build a new one billion-dollar plant. h&m is going after a slightly more mature audience. >> it is the world's second-biggest retailer by sales. it is a big fast fashion brand

and became known of the past few decades for being able to quickly copy runway trends and sell them in their stores and a cheaper version am a but they also have known as a value retailer with a low price point where a lot of young consumers shop. oliver: there is one in our building. it is a great place to grab a quick shirt if you need. that has been their market, find what is popular, make it accessible, and make it accessible to younger people. as you point out, that is changing. >> right now and they are working on developing other brands that have a premium positioning. expensively more brands are able to attract older customers, people with more purchasing power, and that can be interesting for h&m because the value space has a lot of competition in it. oliver: when we talk about h&m, the new products, this will be

under a different brand. this will not necessarily be h&m . tell us how it breaks down in the organizational structure. >> most people probably won't he able to tell that the secondary are a part of h&m. store, aoing to be a new store, called orchid, will have a higher price positioning and have clothing for men, women, and children, simple .lose versus fashion they will also sell products from other brands. oliver: i liked that you go into name,ymology behind the which speaks to the essential nature of those clothes.

what about companies like michael kors? as they expand, they lose that appeal. is the opposite the case? so. don't think right now what we are seeing is brands andm niche lifestyle brands, brands that offer instead of a trend or fashion, instead a total package for a certain aesthetic. is interestedody in the outdoors, or a young family in the city that likes rings that are clean and minimalist, which is may be the target of this new concept. that is a space were you have more power to create something new. to hackup next, how your way out of a full-time job. taser changing its name and more. this is bloomberg. ♪

oliver: welcome back to "bloomberg businessweek." i am oliver renick. you can also catches on the radio. -- catch us on the radio. in the technology section, some of the country's top coders have found a way to avoid the nine to five. >> hey hackathon does not mean breaking into something. somethingans to put together out of existing pieces , so like something new a marathon building session that

lasted from 24-48 hours. bad.r: not all hacking is these are engine years that our building projects and doing it as part of a tournament. tell us where these events began. >> anyplace with a large area like an auditorium or conference hall, wi-fi and bathrooms, fair game. oliver: and a supply of doritos and red bull. about how it has become a replacement for full-time jobs. tell us how who is going to hackathons, how they are making money. people, -- i would not say it is super widespread,

for there are people who have made a full-time living, supplementing contract work. typically what will happen is they will go online or hear from friends that a hackathon is occurring, and based on how close it is to them, whether they have to pay for airfare or not, they will get together a team and bring their sleeping bags, usually not their toothbrushes, laptops, sensors, phones, power cords, show up and start hacking for bragging point, for to your prices, and some prices can get big. oliver: are we talking about students, engineers that have graduated? who are the participants for the groups you are watching? >> iwatch both. there are academic hackathons sponsored through major league

hacking, like sports for programmers. was 170 of them calendar for 2017 year, so that happens at universities all around the united states and even the world, so 170 in north america alone for 2017, and there are more in addition to that. that is the academic type, and typically those are for bragging rights and to look appealing to recruiters, because large tech facebook, uber, google, microsoft, ibm all go to these hackathons to keep their eyes on the next up and rising talent and promote their technology. whereis another type large prices are at stake, salesforce famously through one in 2014, a $1 million first

prize. they discontinued that because they did not get out of that hackathon what they wanted to, but other ones have continued like hasbro, procter and gamble watson aigh one, ibm, x prize. was to also, taser change its name and what it is known for. around for 20een years. everybody knows the stun gun. for years, they have been trying to come up with a second revenue stream that could match that. they finally hit their stride with police body cameras.

their husband public demand for police body cameras, and they were one of the first companies to have a viable product that could be rolled out at scale. the doj put money find this. they have a division that makes police body cameras and all the associated cloud computing software needed to manage the digital footage people have, so basically that has been the fastest growing part of the company and they see that as a way to expand, so they announce this plan to change their name from taser to axon. they really see the future of the company. everyone is still committed to the taser, but they see growth potential coming from the body cameras and this digital management of evidence and digital life of a police officer. oliver: this is very

interesting. i feel like there are very few instances where the name of the .ompany is the product what was it along the way that happen, an opportunity? where is the impetus for the change coming from? they were facing a lot of lawsuits and a lot of public scrutiny for injuries and death. there was a lot of debate about cause and effect, but they were facing scrutiny regardless. they developed a taser camera that activated when the gun was activated, but in only captured the moment when they were

tasing someone. it was a highlight reel of people getting tas3ed. they started to develop a standalone body camera. one was clunky and had three big components and took a while to get what is now the axon line. they have two versions, a body camera that mounts on the chest, and one that mounts on oakley glasses. themselves andct customers from lawsuits is what first got them into the body camera line, but then they just got the product in good shape right when ferguson happened and this greater scrutiny on policing exploded, so it was good timing for them in that sense. oliver: up next, the state of

north carolina says no thanks to money managers. 3m struggles in a high-stakes market. this is "bloomberg businessweek." ♪

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you wouldn't pick a slow race car. then why settle for slow internet? comcast business. built for speed. built for business. oliver: welcome back to "bloomberg businessweek." i am oliver renick. north carolina is eyeing $100 million in savings. is in theut what market for ankle monitors. potential ties between the white house and russia. all that ahead on "bloomberg businessweek." ♪ oliver: we are back with megan murphy to talk about must reads in this magazine. let's go to the markets section.

active versus passive investing, but specifically about one treasure who is taking a passive approach to a pension fund. activehe is taking an approach to making his management passive. this is an interesting character, the treasurer of north carolina. his view is we are being ripped off by these heavy fees that we pay for active management funds. we want to take that number down million and of $100 shift our management to passive management. we have talked about this. this is not a shift that is new. we have warren buffett as a public champion of this shift, and this is something we have seen in pension funds, shifting this way. this is a microcosm of a larger shift going on. carol: not always so easy

because there are some long-term contracts. >> what he says is they are arguing they are a most-favored-nation and this is a bad move. long-term contracts are difficult to unwind to get the assets out, but when we see the markets doing what they are doing, which is continuing to be tear, butty good this debate over what you are paying for these asset is on ant fees state-by-state and a municipality by municipality argument now. oliver: we talk about a macro top-down conversation. this is a look at what it means to make the switch. let's talk about a story and the features section, 3m in a role

that will surprise a lot of people, the industry for ankle bracelets. megan: we all know 3m for the posted note, scotch tape, and a company founded on innovation and engineering wonders. this is a company that pioneered giving its employees time off to think about new, breakthrough things. they have markets moved into was security .onitoring, ankle bracelets ass is a growing market prisons try to move the population out. as we all know, there is a shortage of prison cells in america. the technology they were using did not sink up in massachusetts where they had a large contract to supply ankle bracelets. something very 2g model not to g moda

compatible with some providers and a 3g system. offenders would not be registered on the network, and registered,re not alerts would be sent to law-enforcement that they were in violation of their parole, but many times law-enforcement would be so inundated by these alerts that it led to even more confusion and more arrest warrants, and people in some cases being put behind bars because of this wrong technology. company is a very fast multinational industrial company. most people know about posted notes and scotch tape, but they make industrial products in all kind of industries from oil and ,as, mining, to medical devices so one of the industries they have gotten into is the safety

and security business, and as part of that, they have recently over the past 6.5 years in involved in the electronic monitoring device business, which is essentially the ankle monitors used to monitor prisoners, parolees, people on probation. oliver: as it turns out, maybe they are not as good at making and maintaining ankle bracelets as they are posted notes. jokes aside, this is a serious consequence attached to this when these things don't work. >> that's right. it has been an uphill battle for them. this is a business that is far afield from their core competency, so it has been a struggle. the technology has evolved over the years. they may be didn't adapt the newest technology at the quickest pace, which has with

them in a couple of difficult situations. business, a a huge $6 billion business for all the companies involved, but take a step back. fix the. worked to situation, but take us back to clinton, massachusetts where they were overwhelmed for years by problems with these bracelets. unfortunately it seems to have led to people out on parole, alerts going off when they shouldn't have in being put back in prison. that's right. this is the pinnacle of the problem they have experienced. right after they acquired the business, the technology they n older technology that was designed and only compatible on certain sailor networks, so the way the device works is that it collects satellite signals for gps, then it stores the data on the device and a sensor to

the offender monitoring center. it is almost like placing a phone call, an order to transmit the data from the device to the authorities monitoring the offender. washe time, 3m's device only compatible with the at&t network and the t-mobile network. were rapid was there upgrades in the seder network .ystems, upgrading to 3g at the time, the product was only tw2g. the product was not compatible zon, so these offenders were wearing the ecole monitors and they were not able to connect over the seder network or not able to obtain a gps it would signal, so

generate an alert sent to the monitoring center. the alerts weren't due to the doinghat the offender was something wrong, that they were violating terms of their parole are trying to mask the cellular network, so what happened is as they were trying to figure out how to handle this, a lot of people ended up being arrested. they would simply issue arrest warrants because the authorities could not figure out if it was a technical glitch related to the networks not functioning properly or because the offender was actively trying to do something that required them to be in violation of their parole. be somethere has to serious legal investigation happening here. in your story, you mentioned some lawyers representing offenders who have been subject to jail or parole

violation because of this technical glitch and faulty product, so what's happening in the legal battle right now? >> it is on a case-by-case basis. a lot of the people -- you need to keep in mind who the audiences audience is, because a lot of the people are criminals. these are not the most say free bunch of people. a lot of them have committed serious crimes, including murder, sex offenses, so they are not the most sympathetic crowd and often don't have the resources to follow through on these types of things, but there are several people who have looked into lawsuits or who have challenged the accuracy of the monitor in court, and honestly there have not then at lot of victories. so it is too soon to say how this will evolve, but definitely

there are criminal defense attorneys who have had dozens of these cases and who have represented people, and primarily they try to get them off rather than say we will challenge the accuracy of the device. what they have been doing up to this point is challenge the accuracy of the device and saying my guide does not deserve to be in violation of parole. he should not have spent a night in jail, so i think that is where it is at at this point. oliver: up next, the complex investigations into donald trump's ties with russia. this is "bloomberg businessweek." ♪

oliver: welcome back to "bloomberg businessweek." i am oliver renick. in the politics and policy section, the investigation into

russian interference in the election. i talked to matt phillips. >> in january, the intelligence community by order of the obama administration concluded that russia did attempt to interfere with our collection, and did so to benefit president trump. it is the job of now we have two congressional investigations, senate and house, it is the job of the fbi that we know very little bit about actually, the job of these investigators to answer the question whether there is any evidence that ,uggests trump associates either affiliated with the campaign or administration, had these factse of laid out by the intelligence community that russia willfully interfered with our election. the real dynamite of this is going to be whether they find

any evidence that ties this directly back to the president, but there are a lot of questions beneath that about whether any of his associates with the campaign or the administration had any knowledge of or had any dealings with these russian hacks. the generalpart of confusion in the public trying issuss out what has happened you mentioned these parallel investigations, one in congress and the fbi. what do we know about the difference between the two and who is spearheading each? >> we have two congressional investigations, both armed with subpoena power to bring people into a public hearing. we have the house and senate, the house has lost a lot of credibility because of the committee chairman, who was a member of the trump transition and has been trying to it seems

pull this investigation away from questions about russia and trump associates into the round of looking at the allegations of the president obama wiretap. he is trying to pull this into that direction -- carol: it is unusual for the committee to go to the white house and read the president and not the committee. about whoes questions he is serving. is he serving as a member of congress or serving the executive. this makes the senate committee investigation that much more important. >> that is the main act. , theyo chairman there have what seems to be a pretty good relationship. they have been out front and saying we want to be as transparent as possible about this, but thought this was going

to wrap up by summer are long gone. this thing will take months and months. we will not have any report before the end of the year, if that. what is interesting is their ability to access this raw intelligence that exists inside -- every day, the senate investigators, seven staffers who work for this committee, every day they are going to the cia to go into a secure room and go through of what thick binders is probably some of the most secret information that exists inside the intelligence community. of this raw intelligence is probably transcripts intercepted by the nsa. they can bring no electronic devices into this room. they are literally going through by hand hard documents, reading them. this takes months and months. they are negotiating with the

cia to get a computer put in the room. that is the level of low-tech analysis the senate is having to rely on. because you is cool have a story that goes with the chart that talks about the details of the investigation and how it works. those folks in that room, what are they looking for? how do they know when they find it? those are questions i don't think i have answers to. they are looking for any evidence -- right now they are probably trying to wrap their heads around what the intelligence says. some of this is raw intelligence that is intercepted transcripts of phone calls, and some of it is analysis that is done. they are trying to get their heads around the totality of it. what they are probably looking for in a low-tech way are the incidental names that are popping up of people who are associated with trump who happen to be on the phone with targets

of this surveillance, which typically were russian agents. oliver: up next, the sometimes gray area between lindner and loan shark. plus, the designer behind the nest thermostat has some big ideas for cameras. this is "bloomberg businessweek." ♪

oliver: welcome back to "bloomberg businessweek." i am oliver renick. you can also catch us on the radio. economics editor, loan sharks

and the birth of predatory lending. >> loansharking is charging high interest rates on loans. a professor at manhattan college looks at in the united states from after the civil war through and he callsn, this the birth of predatory lending, this period from the ation of america through the great depression. oliver: you will want a higher interest rate if you're going to take more risk? >> that gets into my take on the book, which i feel he does not quite nail it may be because her right about economics. supply andook at demand is the key determinants of any price. interest rate is the price of money, so i tend to think what is causing the rates to be this there areans, and

demand from borrowers who are in some cases desperate, then there is the supply from lenders who enoughmay not have money to supply, so why would rates be high? just not enough money round, which is usually not the case. the other is the person barbering is a risky prospect. they are not able to get a better deal. alcoholic, thean link between loansharking and alcoholism, or a new immigrant to this country that does not speak the language or know what the terms mean. carol: how did the birth of predatory lending come about? america moved west, the sellers preceded the banks. there were no organized banks all the way out

to california, so people got money wherever they could, and loan shark sprang up to supply loans where conventional banks would not lend or had not yet gotten to. also begs then that the question, you have lenders and sharks, but there is a gray area in between. in the book, how does he ss at what point you beat -- assess at what point you become a shark? >> it is kind of both. one problem was that a lot of on lendinga ceiling rates. it could only be 6% or 7%. remember, you have to take inflation into account. 6% or 7% is nothing especially for a small loan where the carrying costs is expensive, and it was not high enough for the standard lenders to make any

the fieldthey left open to loan sharks who were the only ones willing to supply money in those cases. one of the innovations that came around in 1907, the russell sage foundation. a uniformup with small lending law that try to deal with that and tried to say we were not tell you to abolish you have in the books, but give sort of a waiver in certain cases that would allow the rate to go up as high as 40%, which is pretty high, but it was enough so the conventional established lenders with good lending practices, know your customer laws, were able to supply the market and ace out the loan sharks who were charging hundreds of percent. also, a superstar tech

designer inspired by smartphones when he designed the l16 camera. >> the company is called light. they are trying to revolutionize the way we think about sophisticated camera technology. ourou know, most of us use phones, and those are kind of limiting if you care about hadography, and what light to do is figure out how do we take the dslr come the fancy into more ofput it a smart phone or smart tablet format. oliver: i think the concept is really interesting because essentially what happened is we took photos and a certain way, then the advent of the smartphone, specially iphone. basically we swung all the way to where everybody was taking

pictures to their phones and now it is winging back to the middle now? they arek that is how hoping people are interpreting this. there is something like 1.3 trillion digital images produced recently, i fourfold increase in the last five years. images as you know from your instagram feeder pretty bad. oliver: it depends on who you follow. >> if you care about photography, the idea is we can do better. the problem is packaging. -- you havemera has to strap it over your shoulder and have these lenses and have to have a bag. what they are trying to figure out to do is eliminate all that stuff. oliver: it is disrupting the disruptive technology. .et's talk about these guys who is in charge of this company? it is engineering and design.

are guys in their 50's, photo enthusiasts, they came up with the idea. they said, we have this great idea. how are we going to make this thing into a product that people want to buy? a big question. , an industrialuy designer, probably best known for doing the nest thermostat in 2011. he has also worked on other products, including latter stage gopro cameras. they found this guy and said here is a box of parts and idea, figure out how to package it. oliver: what is his background? isn't nest where he built a name for himself? >> if you are in the industry and no nest, he is associated with that product.

players, but, mp3 nest is his breakthrough. oliver: "bloomberg businessweek" is available on newsstands now and online at bloomberg.com. bloomberg television starts right now. ♪

♪ michael: coming up on "bloomberg best," the stories that shaped the week in business around the world. barclays' ceo gets into the hot water. united airlines take some heat after a shocking video. banks are fired up for the start of earnings season. >> the main street side is not as strong. michael: janet yellen says the fed is ready to change its focus. while the fed's james bullard's focus is on the balance sheet. christine lagarde goes over what keeps her up at night. >> who do you think will be the next french president?