oliver: welcome to "bloomberg businessweek." i am oliver renick. the satirical newspaper 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 looks at how stents which are relatively cheap, not a huge amount of money.

>> this is a so -- this is a -- thisat looks sad isn't a huge amount of money. , theyou have a stroke speed of which they can get to and alleviate that pressure, that bleeding on the brain is crucial to recovery. what this article talks about is the injection of these metals that are used to take the clock out. 116 strokesly about and stroke specific tears in the u.s.. are usually the first responders and will make a decision and evaluate someone if it is a minor stroke. if you don't go to one of the specialist centers you are more likely to get a drug. what is showing is if you can get there quickly they are more

effective and do lead to better recovery. even with the baby boomer weeration growing older, aren't able to get this stent recovery and treatment out. >> let's go to the global economic section. a lot of americans don't really know the implications of this magazine and all those elections. >> we will just call it the dock. it is a fascinating story for two reasons. huges proven to be such a effect in this presidential favorites moving down and public scandals the left making a

sudden surge. the other thing that is fascinating for our industry is -- it makes about 25 million from a print publication. it has a long tradition. essentially a private eye, which is a u.k. private -- u.k. publication. this election cycle in france, they are the ones who first uncovered fillon paying his wife and a job -- leader at the polling of the time. they say they are there to serve me neither on the left nor the right. >> let's talk about a story in features. years, $1 eight trillion. >> this is the latest in a long

line of pieces. this has gone through so many iterations. whether dr -- whether they are at -- they are aircraft carriers or air force -- we forget there are basically four service stations in the u.s.. each of them wanted different capabilities. i couldn't believe it when i aad that this can land like hairy year hovercraft. the technical requirements and each level of service coming in drives the price up so much and no one can make this decision where what you designed seven years ago doesn't work in what we're seeing now.

oliver: there are a lot of cool details on the tech with economic implications. we spoke with reporter paul barrett. >> the f-35 is perpetually in focus because it is the single largest procurement ride the pentagon ever. once you fold in the upkeep of the plane in the future, it will approach and exceed $1 trillion. there is going to be attention to the program and we took a look at it again. president trump has been focusing on it. first down playing it and insulting it. declaring that now that he is involved it is a fantastic fighter jet. we discovered it has some performance problems. cliques tell me about his problems and the cost and how long this has been going on. withis contract began

boeing and lockheed. the idea is a sort of three and one bargain. >> one plane fits all with some minor changes. >> that is the way the pentagon was going to be about to afford a massive replacement of cold war era planes. the original plan was for 2100 of these planes to be built for all three of the services. almost inevitably, a plan that large with that much play in it ran into problems, the degree of which designers call commonality among the three variants of the planes turned out to be something approaching 25% as

opposed to 70 or 80%. costs began to overrun their targets by the billions of dollars and delays mounting to seven years. model thatuild one can be tweet for different parts of the military, but men -- but it ended up making three different planes. you have to have different changes for each plane. where is it right now in terms of what it was supposed to be? >> the program for development and acquisition would cost something like $200 billion. that figure is closer to $380 billion. that is about a 38% increase when you adjust for inflation.

the figure the taxpayer should want to be paying attention to is how much this will cost to sustain the plane, to keep in shape and well-maintained. that amount could easily exceed $600 billion over time. a who is really to blame for sluggish u.s. car plans and h&m chasing its shopper's parents.

oliver: welcome back to bloomberg businessweek, i am oliver renick. how changing consumer tastes is affecting u.s. car plants. >> it is always a supply and 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

genetically so we are seeing , -- 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 corollas, ford focus. those cars are not selling like they have been selling for years and years. they have been displaced by suv's. oliver: i like the story. 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. the prius is smaller. it provides and is used as a family car.

these are mainstream family sedans replaced by the compact crossovers, a honda crv or ford escape, smaller than a big truck 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? or is 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. oliver: 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 is there, whether or not to meet 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 nobody is no one is planning to build a new one billion-dollar plant. oliver: 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. the slightly more expensive 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 brands are a part of h&m. this is going to be a store, a new store, called arket, will have a higher price positioning and have clothing for men, women, and children, simple close versus fashion. they will also sell products from other brands. oliver: i liked that you go into the etymology behind the name, 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? >> i don't think so. right now what we are seeing is that premium niche brands and lifestyle brands, brands that offer instead of a trend or fashion, instead a total package for a certain aesthetic. we think somebody is interested 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. oliver: up next, how to hack 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 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. >> a hackathon does not mean breaking into something. hacking means to put something together out of existing pieces to create something new, so like a marathon building session that lasted from 24-48 hours. oliver: not all hacking is bad.

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. you are talking about how it has become a replacement for full-time jobs. tell us how who is going to hackathons, how they are making money. >> for some 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 rights, but to your point, for prizes, and some prizes can get big. oliver: are we talking about students, engineers that have graduated? who are the participants for the groups you are watching? >> i watch both. there are academic hackathons sponsored through major league hacking, like sports for programmers.

i think there was 170 of them scheduled for 2017 calendar 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 companies like 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. there is another type where large prizes are at stake, salesforce famously threw 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 just threw one, ibm, watson ai x prize. oliver: also, taser was to change its name and what it is known for. >> taser has been around for 20 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 company 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 tased. so they started to develop a standalone body camera. the first 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. trying to protect themselves and 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." ♪ oliver: welcome back to

"bloomberg businessweek." i am oliver renick. north carolina is eyeing $100 million in savings. 3m finds out what is in the 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. megan: he is taking an active 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 to a maximum of $100 million and 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 on a pretty good tear, but this debate over what you are paying for these asset management fees is on a 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. one of the markets they have moved into was security monitoring, ankle bracelets. this is a growing market as prisons try to move the population out. as we all know, there is a shortage of prison cells in america. for 3m, the technology they were using did not sink up in massachusetts where they had a large contract to supply ankle bracelets. it came down to something very pedestrian, a 2g model not compatible with some providers and a 3g system.

offenders would not be registered on the network, and when they were not registered, 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. >> the 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 gas, 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. carol: it is a huge business, a $6 billion business for all the

companies involved, but take a step back. 3m worked to fix the 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 had was an 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. at the time, 3m's device was only compatible with the at&t network and the t-mobile network. the problem was there were rapid upgrades in the cellular network systems, upgrading to 3g. at the time, the product was only 2g. the product was not compatible with verizon, so these offenders were wearing the ankle monitors and they were not able to connect over the cellular network or not able to obtain a gps satellite signal, so it would generate an alert sent to the monitoring center. the alerts weren't due to the fact that the offender was doing

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. oliver: there has to be some serious legal investigation happening here. in your story, you mentioned some lawyers representing offenders who have been subject to a return 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 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 suggests trump associates, either affiliated with the campaign or administration, had any knowledge of these facts 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. oliver: so, part of the general confusion in the public trying to suss out what has happened is 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 trump made 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. >> it raises questions about who he is serving. is he serving as a member of congress or serving the executive. carol: this makes the senate committee investigation that much more important. >> that is the main act. the two chairman there, they 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 the cia is -- 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 binders, thick binders of what is probably some of the most secret information that exists inside the intelligence community. a lot 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. oliver: that is cool because you 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 the depression, and he calls this the birth of predatory lending, this period from the industrialization 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. i tend to look at supply and 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 high on loans, and there are

demand from borrowers who are in some cases desperate, then there is the supply from lenders who may or may not have enough money to supply, so why would rates be high? there's just not enough money round, which is usually not the case. the other is the person barbering is a risky prospect. or maybe it is they are not able to get a better deal. maybe they are an alcoholic, the 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? >> as america moved west, the sellers preceded the banks. there were no organized banks out west of ohio 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. oliver: so then that also begs the question, you have lenders and sharks, but there is a gray area in between. in the book, how does he assess at what point you become a shark? >> it is kind of both. one problem was that a lot of states set a ceiling on lending 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 money, so they left the field 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. they came up with a uniform small lending law that try to deal with that and tried to say we were not tell you to abolish these usery laws 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. oliver: 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. as you know, most of us use our phones, and those are kind of limiting if you care about photography, and what light had to do is figure out how do we take the dslr, the fancy cameras, and put it into more of 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?

>> i think that is how they are hoping people are interpreting this. there is something like 1.3 trillion digital images produced recently, i fourfold increase in the last five years. most of the 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. the dslr camera has -- you have 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. let's talk about these guys. who is in charge of this company? it is engineering and design. >> these 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. there is this guy, an industrial 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 know nest, he is associated with that product. gopro cameras, mp3 players, but nest is his breakthrough. oliver: "bloomberg businessweek"

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