>> welcome to bloomberg businessweek, coming to you from inside the magazine headquarters in new york. on this double issue on cities, is there is an overflow of bicycles in beijing, lyft in san francisco, and mapping the underground of new york city. all of that i had on "bloomberg businessweek." ♪ >> we are here with bloomberg businessweek editor-in-chief

megan murphy. let's talk about a story in japan. this is interesting because there is quite a bit of potential turnover and tension within the political structure in japan. >> shinzo abe, the prime minister of japan, is a man of personal fascination to me only because i think people still underestimate the scale of the challenges facing him economically and demographically. she has one of the biggest problems in japanese politics, which has traditionally been accusations of cronyism and corruption. >> it got a lot steeper. >> we can overemphasize how steep the economic challenge has been. he is famous for his three errors. he has reduced unemployment, but low deflation and persistently low inflation continues to hobble the japanese economy, which has demographics tremendously unfavorable in terms of its elderly population. it takes a social security bill to take care of them as they get

older. they faced tremendous challenges on that, and things he have tried to jolt the economy have been uneven in terms of impact. there are issues of cronyism with a school that was potentially connected to his wife, some other people in his cabinet have done on things that have caused scrutiny as well. she has jettisoned some of them and approaching traditional humility. can he marshal his forces to continue this relentless ruthless focus on the economy? defense is another issue. we see tremendous instability with north korea. he has it from all sides. >> japan is different from the u.s. in which he has to call an election. he has a tough decision when to do that. >> i have one answer, theresa may in the u.k.. >> learn from the mistakes of others. he -- in order to a company whose economic goals, he needs more time.

>> anytime you can call an election, it is a bargaining game you can win or lose. that is the issue he faces. japan is complex right now. the instability in the region is causing new tensions to service and politics. he needs to keep focus on the economic issue, not just for the political, but for the health of the economy going forward. >> an asian city we want to talk about, beijing. this is a cool look at the combination of venture capital money sloshing around and a lot of people sloshing around trying to get to work. >> and a lot of bikes now. for anyone that has traveled to beijing, the likes are only present. -- bikes are omnipresent.

no venture money has funneled in. we have pictures of hundreds and hundreds of bikes. it is a fascinating 10 of how it is improving transport and accessibility in livability. whether or not it is sustainable in terms of venture money, i'm not sure. >> we got the details from the beijing commit. >> infrastructure and transportation, a huge part of our major cities and how they are rethinking that is the global story. one thing you are starting to

see not just in the u.s. with programs like city bike in new york, across the world you are starting to see a lot of vc money pouring into infrastructure. specifically things like bicycles. china in particular has this insanely red-hot venture funding universe. there are a couple companies now competing to get dominance in the bike sharing market. >> this is pretty interesting. and take some different angles. the economic side, the start upside, and the transportation side. there has been so much upheaval within the transportation industry in major cities, whether it is uber, whether it is thinking about city bikes, these programs. obviously if someone in the u.s. -- people in china are seen riding bikes. people ride bikes everywhere. this is maybe one of the areas they want to disrupt. how did you learn about this? >> christina larson, who works for bloomberg and lives in beijing, does what many of us do, which is take the subway to work. as anyone who does that, the new york you will know it is not the most pleasant experience.

>> i thought my experience was bad. i was reading her description, which is pulitzer material in terms of describing how terrible it is to get on the subway in beijing. it speaks to just how crowded it is. >> it is like mortal kombat every morning. in an attempt to free herself from what was about a 50 minute commute, she started to look at her other options. in beijing it is a most impossible not to notice the mountain of bikes piled up outside every single subway station. all across chinese cities you have about 3 million bicycles that are essentially don't. -- essentially dumped in front of the stations. it is a most and ironing that to get into the subway you have to navigate around these bicycles. she decided, let me try this out. and in doing so started to

explore the market for bicycles. there are two main companies competing. one is called mobike. they really can't compete on price. the price for a single ride is $.15. what they are competing on is essentially availability and convenience. the companies just dump more and more bikes in hopes there is is the one you select. -- theirs is the one you select. >> the price is incredible. talk about how the app or program works. from my reference point in new york, it is the city bike reference where you sign of for a year membership at a certain cost, then you are able to pick up a bike at myriad bike stands throughout the city. there is usually a time limit. you have to check in and make sure you are not driving away with the bike.

you can do that as many times as you want as long as you have that membership. what about this program? is a similar? it sounds like it might be more chaotic. >> uses that it uses an app to scan a qr code. the barrier to get onto one of these things is very low. when you see they are dumped, the company's not care that much about the quality of the ride or maintenance of the bike. once you are on, you're basically dodging traffic in cities like beijing, and dumping the bike somewhere else. you are not locking it into some subway station, so it is more chaotic. >> of the next, elon musk's hyperloop surprise. and investors see dollar signs in america's aging roads and bridges. ♪

>> welcome back to "bloomberg businessweek." you can also find us online at business week.com and our mobile app. startups trying to build their own mass transit systems about to have one big rival in elon musk. here's reporter sarah mcbride. >> he says he wasn't connected

involved himself, but he put out this paper in 2013, and it was kind of a gift to the entrepreneurial community. everyone else could take his idea and run with it. it seemed like he had never quite let loose of the idea. in the back of his mind, it was always there. in december he said he started the boring company. if you are already building a tunnel company, why not throw in a hyperloop too? surprise -- now after years of saying he wasn't going to build the hyperloop himself, turns out he changed his mind. >> i remember when he first started talking about the hyperlink, to put pretty much -- hyperloop, he put everything online. he pretty much emptied his brain into a pdf document. >> a number of companies seemingly with elon musk's blessing, because he said he

wasn't going to do it himself, went out raised capital, and a number of them are very far along. in particular this company called hyperloop 1, which has raised almost $200 million and has a prototype it is building. there are a few others as well. there is htt, another la-based company. another one in the netherlands. a lot of people fought they could get into this field. there is room for a lot of players perhaps. now you have a for medical competitor -- formidable competitor in elon musk. >> it sounds from the name, hyperloop is not trademarked. i'm just curious. it seems attached to elon. >> here is the thing, he came up with the name.

i guess if he had been paying attention, you would guess he was not prepared to give up the name. even before he released his paper on how to build a hyperloop, he filed for the trademark. when he filed for a trademark, a service mark in this case -- he did not file it and forget it. he kept renewing the application every so often. apparently he was doing that because earlier this year the government in the u.s. gave him the service mark to hyperloop. now he has that and potentially anyone else using that name in a way that he doesn't like, he could assert his right to the trademark. >> speaking of mass transit, and the politics section, australian firms want to help the u.s. rebuild its crumbling infrastructure. >> it is a group of australian politicians and business executives who come to the u.s. and have lobbied the trump administration to basically do a plan they put in place in australia a couple years ago

called asset recycling. i will tell you what it is. >> please do. i am trying to wrap my head around it. it is not the most straightforward concept. >> here's what you do. in australia they put a plan in place in 14 where the federal government put up a few million dollars to incentivize the state government to auction off essentially public assets -- airports, torvalds, pieces of the power grid. you take that money that you get by leasing or selling these assets and you reinvested in a new construction project such as the sydney metro. it worked for a couple years. it was shut down prematurely

when the new administration came into power in 2015 in australia. the brains behind that plan was at the time a guy who was the australian treasurer. he is now the australian ambassador to the u.s. and he thinks it is a good idea for the u.s. he has a relationship with mike pence and the president. he has brought with him some business executives from australia who are lobbying the administration to do something similar here. >> we definitely want to get to the australian point and why they are so keen on doing this. on the sf recycling element, walk us through an example. let's say a toll booth or highway. it sounds like an interesting concept, leasing a public entity like a tollbooth. what is the typical timeframe in which somebody leases that? is it depending on the length of the project, on how much revenue they need? >> it is case by case. for example in indiana in 2015, the indiana toll road was bought out of bankruptcy. the lease on that road was

brought out of bankruptcy by, as it turns out, an australian consortium of investors called ism. i think they paid $5.7 billion for it. you get that cash flow as the investor. if you are a pensioner and you have all this money from pensioners and you need to invest in something long-term, and you want a steady stream of revenue or cash flow, this makes a lot of sense. there are certain cases in the u.s. where this has blown up, this is not going so well. the most infamous example was in chicago in 2008. the city decided to sell off all its city parking meters to get a one-time cash flow, or one-time payment. it ended up raising the cost of parking in chicago and costing

the city about $1 billion of lost parking fees over a 10 year period. there are plenty of examples in the u.s. where this has not worked out so well. as you can imagine in the broader privatization conversation, democrats are not exactly fans of this. >> up next, mapping new york's labyrinth of underground pipes. and what to expect as the trump administration slows down scientific research. ♪

>> welcome back to "bloomberg businessweek." you can catch us on the radio on sirius xm and a.m. 1120 in new york and 106.1 fm in boston, 91 fm in washington dc and afm 60 in the bay area. and in asia on the bloomberg radio plus app. since donald trump became

president, federal research and develop contracts have tumbled. >> the goal here was to try and find out what is happening right now inside federal agencies. there is a debate in congress over spending levels for next year. right now there is no new budget that has been passed yet. we found spending on research and development has already started to slow down inside federal agencies through contracts. contracts are awarded based on money that congress approves and obligates. but agencies have to decide how to award those contracts, and the pace at which they do it.

in theory they have one fiscal year to spend the money congress gives them. we used data to see how much money is being awarded in research contracts by federal agencies. there has been a pretty significant slowdown since trump became president. the top line number is about 16% to 17% compared to last year. epa, department of energy, much bigger drops. anywhere to 0.25% to a half. >> we talk about r&d, it is the money they are investing to develop their product or potential product. when we talk about the federal government spending on r&d, give us an example of where that money goes. >> it can be systems to improve the way an agency doesn't job. -- does its job. it can be technology the market doesn't have yet. it can be weapons, it can be ships, it can be drunks, it can be software. -- drugs, it can be software. in general and the government spends money on research and it

is doing that because the private sector is not there yet. either they need the government is trying to meet is not commercially viable, and so the government spends that money first and the private sector will follow. it is an indicator if federal r&d spending goes down, it could ripple through the economy. oliver: how do these contracts get presented to the government, and i am wondering if there is a branch of the government -- you have a new administration saying this is where the r&d money goes, or is it a case-by-case basis where these opportunities are put on the table and the appropriate party decides? is someone taking responsibility for this? chris: at a high level congress decides how much money a given agency gets for the fiscal year. and the agency is in charge of spending its r&d money, what sort of needs it as, what companies should get them. when the process breaks down is agencies see the conversation between the trump administration and congress with deep cuts in spending.

it seems as though they get shaken. they see that cuts are coming down the road. one argument is that they prepare for those cuts by slowing down spending now. the reason is if the next budget for the year starting in october has anything like the drastic cuts in trump's proposed budget, that will make it hard for agencies to keep doing what they are doing. the argument goes they are trying to prepare for those cuts by slowing down the spending of the money they already have to smooth the glide path to next year. oliver: in the special city section, subterranean cartographers are bringing life to the dark tunnels underneath new york city. greg: i have been to meet someone who was retired from the mta, which runs the subways in new york city at a conference i spoke at. he mentioned he knew someone involved in the city that is now

retired that has been working on, the way he put it, the most realistic map of new york city. i said, what do you mean? he said it is a map of the underground infrastructure. i thought i misunderstood at first. i assumed that must already exist. i assume of course we must know. how could the city work if we didn't know anything? he said it is this thing that has been going on for a lot of years. everybody knows where something is, but nobody has the same complete picture. it makes things very complicated. oliver: right now it is more of the situation if you are a company or institution that has something underground, you know where that is, but not what everyone else is.

how do you drill down to the -- no pun intended -- specificity to see all of that without a life-sized map? greg: there are two challenges, one political and the other technological. the political is more complicated. you have to convince all of these stakeholders that control their own part of the underground that they should share that data. especially after 9/11 that has become a much more from issue -- frought issue. a lot of the problem is just getting that data and integrating it, putting into the same standard, that what is considered here for one person is the same spot for someone else. for data that is not there, you have to use things like remote sensing to figure out what is underground. it is incredibly complicated because things are stacked on top of each other. it is not just a matter of two dimensions, but three. oliver: there is a certain limit to what things can go

underground, for a shallower limit than aboveground. when you think about mapping cartography advances, google earth and satellite imagery over the past decades, we can see everything down to inches on the surface. reading the story, is it too late? to go underground it seems there is a real effort to make this work. greg: it is not too late among the it is definitely a challenge. it is the next frontier literally and figuratively in mapping. satellites have made it so that we can map almost everything above ground. ways don't travel through the ground like they do through light and air. it is very difficult to know what is underground. there are a lot of people looking at this new york project as a blueprint for the future. it is not the first, but once it happens for real it will be the best. >> he german auto-parts maker whose future is crowded by an exhaust problem. and look at left behind in lyft's san francisco parking lot. ♪ ♪

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>> welcome back to bloomberg businessweek. what bosh needs to do to free itself from its diesel emissions scandal. the parking lot challenge. all of that is still ahead right here on bloomberg businessweek. ♪

>> we are back with bloomberg businessweek with megan murphy. german engineering and automotive's fraught -- automotives. >> this is a tale of their potential involvement in the d so emissions scandal in germany evens a bit. they are a company perhaps not well known to some, it is an it controlsmarvel, many cars. in the internet of things, the way this world is moving forward in terms of how we interact with the wider what -- wider array of things we use on a daily basis. the issues surrounding them is were they involved in terms of the devicesw about vw was installing in its cars to wereisola missions test's? they complicit in it, how much

did they know, when did they know and they are facing a state of lawsuits that they not only new but they insisted on it. they have so far settle for $300 million and are hoping to draw the line and walk away. it remains to be seen. >> you touched on this idea that i was compelling. they are at the intersection of engineering vehicles and electronics but also connect to that he, they want to do a lot with that. are the scandal surrounding the emissions test enough to potentially put that on hold? >> having covered them for a long time in europe as well they got a head start on connectivity and looking at this in a holistic way.

they were integrated because of the dominant auto industry which was ahead of the game because it is treated almost as an appliance maker. is in theme forefront. so they have a head start and engineeringh an behemoth in terms of the talent. they are going to have to sweat it out. they have huge aspirations of being a google like juggernaut. one of the stories we face is companyg with the true and we are going to see that play out in the next decade. >> let's do a tangent. i never even consider driving a

car in new york because of a potential solution bounced off the walls a little bit. tell us about this. >> many years ago this was a problem in terms of everyone driving in. people drive other places and they wanted to incentivize train travel and other forms of transport. they found the model was very successful. they developed an internal market where people could sell their spots. it was working very well. when they try to roll this to other companies they got shut down. broader by to get broader success. >> for the content of that story we talk with the reporter

joshua. >> it's interesting because it's a metaphor for how people think about parking in general. ahead what seemed like a great 53efit it was a parking lot spot. the company said free parking. people were pumped. didn't used to drive started driving. they thought i will get a spot. you pass up a free parking spot? in a nutshell this is how people think about the problem of city parking in general. let's start charging market rates. it got too crowded.

you didn't know if you're going to find a spot or not. >> they don't know if they can fit their car in. >> they are just circling the mission. that was not a good look. >> a really great cartoon with the story, dorothy does a great job and the way she depicts this traffic jam is people in their cars doing their daily routines, getting ready for work. san francisco has already basically incentivizing people to move out. how do they do that. >> the plan was to start charging essentially what the market would bear for the spots. they started at $200. if you didn't buy a spot. -- by a spot you got extra there wastion credit

a controversial idea at first. maybe you want to get a spot but now it is like you can definitely get a spot that you have to pay $200. one complaint was people talk about lift as this highflying tech startup. you have these 200,000 dollars per year engineers. there are a lot of customer service folks, people who didn't make a lot of money. >> the side effects was the class structure they established. >> that was the worry. i'm not a millionaire and -- and it createdasking this tension.

they started the program and things started to run very smoothly a lot. that is kind of the point. it was supposed to -- it's supposed to make you feel a little bit of pain for driving or at least paying for what you are getting. >> this is one of those economic puzzles you read about in freakonomics or study in school because it is applying economic incentives and essentially a supply end a manned to solve the problem through money basically and through charges. was it successful for them? >> the people i talked to thought it was successful. there was actually a secondary market that arose. if you need a spot for one day -- if you aren't going to drive spot,ay and you rented a

you could sell it for 10 books or you could just give it away to someone. they found they really needed the spot in the they were willing to pay little bit they could get it. >> up next, boardroom of the living dead. we will explain and will be the next tech ipo. ♪

>> you can catch us online. we got the scoop from reporter jeff green. this has been an issue going

back 10 years at least. they pretty much favor the directors but not much has changed in the last decade. >> how does that work if you are a leader of a company? ceos, let's say a company goes through turmoil and we got to move on to something else. how could they potentially still stay? >> it depends on the company. they are devoted by the shareholders. most companies require a pull a reality. didn't matter how many people voted against you. is a democracy, we should have something approaching

majority vote. do notpany said if we get enough votes we will submit a resignation more than half of the companies require if you don't get a majority of the vote you need to summit a written resignation. problem is you just need to submit it. legal -- that's with a discretionary element comes into play. what is the legal backing? do these companies have a case to court or push back against the ceos that do this. is this what they are lobbying for -- to have this sort of authority? >> it's the board of directors themselves doing it. in the past and entire board of directors has not received enough votes, the entire board of directors of directors has resigned and the entire board of directors has reviewed resignations. that's usually what happens, a director will resign.

they put together a statement they put out as an ak thing. for the financial fiduciary interests of the company, the best thing is for the interest -- we saw the vote but we don't agree with it. in most corporate structures that is perfectly legal. the only alternative you have us to do an expensive proxy fight. in most cases that is not what people are going to do. i think probably putting it in perspective is a good way to assess how this plays out. give us an example on where this actually happened in a company. >> there is a company called neighbors, which is a drilling company. they are lead director has been 2012, 2013, 2014, 2016. he continues to stay. and one director has been voted off four times.

areceo changes, there issues about compensation. it really is a statement if the director does not get enough votes. majorityn't get a you're really an outlier. even 20% against you said something. leave.ority says please >> filesharing company job boxes making more money and is making more money profitable. >> we reported sources close to the plans. they have talks of komen sacks potentially about leading it.

they are the largest filesharing company. ambitions.uch bigger >> they are about to go public and bring a whole mother realm of scrutiny. they can compete with these big giants. >> i think this is a company that has had a rare bit of growing pains already and a fair bit of scrutiny. they want to get more into collaboration, creating a pitch, or a sales

sharing with other people to work on it together. that's a pretty core business to microsoft and google. those are newer businesses for them. .ot the revenue generators they have a product called paper. they always have these big companies to compete with. we asked that very question and there are so many collaboration projects. now doesn't right really get the job done. he gave a humorous example of if -- wein were to arrive wouldn't have relativity.

productivity and software works right now, they spend a lot of time working about work. he thinks the dropbox would cut through some of that. he will have to convince people his vision is better and create products in a competitive market. >> if robots are becoming primary caretakers in space. this is bloomberg businessweek.

>> welcome back, you can also catch us on the radio at sirius xm and channel 119. boston and a.m. 960 in the bay area. asia on the bloomberg radio

plus app. >> on about how to do different kinds of things in space that are more dangerous that we used to. a we talk about how to demise -- how to the minimize the risk. happening bylot computers. advancement wehe have made has been greatly anded towards automating limiting what humans have to do when they are out there. >> there is a lot of automated flight telemetry. to a great degree the missions are guided by robotic masters. the other piece is being able to

automate or remote control. >> tell us what the effort is for the medical side in terms of the medicalo treat space. >> his take is basically for the time being and for the foreseeable future view aren't going to get a human element out of it. both treating minor, -- minor trauma.

>> it seems like a lot of calculation is checked by man. >> a human set of eyes being the last one. getting aood story little off. ending up being put away. >> is there a certain point where it feels like there will limit in termsa of what will be automated in space. about the astronauts. about the limits of our artificial intelligence in the moment.

we start to think about hitting deeper into space or missions to mars or setting up perhaps colonies on the decades future. it seems pretty reasonable to assume. >> in the city section a proton -- how hele developer looks to add las vegas to the list. >> he is one of the most underrated in the world. he's the mastermind behind hotels that you and i and anyone else would recognize. he was at the origination of the hotels. guy who created nomad here in new york. recently he is open to gigantic projects that is really reinvigorating the city.

a total dead zone in london. he takes these areas and revitalizes them. >> andrew doesn't have the typical background. he didn't start learning to become a general manager and working his way through a typical hotel. it comes from a law perspective. he began by finding deals for some of the great hotel ea's in the last 30 or 40 years. people who may not be like a household name, but he created starwood hotels. was originally his real estate developer, his go-to guy to figure out what properties were sweeping up and what could turn a profit area -- profit. >> any idea where he has his eye on now? everything has become a

pretty exciting area. did he give you any heads-up? touch.id have a midas not all his projects are necessarily going in the exact same direction as what he has done in the past. i think in his mind he is taking a different approach. he saw the london opening of the net, which is a gigantic hotel. you can imagine those grand huge buildings and with the stature and scope of that project was like. this is a departure for sunday a who has focused on boutique hotels in the past. you can make a big hotel that doesn't feel like vegas. >> he's going to be involved, it sounds like from the reporting, with mgm. ofwe can return to this idea

his identity to strike amazing partnerships. he has partnered with mgm to create an extension of the nomad. he is alsoroperty opening as a brand in los angeles, in downtown los angeles, in a really beautiful undervalued despite having beautiful turn-of-the-century got big buildings and all of that. seems like it is going to be 3000 room, multi-concept resort, this is pretty major. >> this is not going to look significantly different than anything you have seen. it's not a new build, it is not changing the skyline of the las vegas strip. inside it will be familiar to people who have been to the nomad here in new york and people who like good hotels around the world.

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