♪ carol: welcome to "bloomberg businessweek." i'm carol massar. jason: i'm jason kelly. we're here at bloomberg headquarters in new york. carol: this week in the magazine , contact high. warby parker's vision for glasses will work for daily wear lenses. jason: visa c.e.o. al kelly, no relation, says consumers are still swiping and tapping despite talk of a recession. carol: and then there's this week's cover story. google and the generals. the search giant wants to build its military business, its

employees, they do not. jason: much more of that ahead but we begin with our top stories. a busy week in d.c. with impeachment hearings. trade talks hitting a series of road bumps. so much more and legislation passed by congress, supporting hong kong protesters. let's break it down with ryan teague beckwith in d.c. so ryan, help us understand everything that happened there in the nation's capital. ryan: yeah. this was a long week. and i think the last news day was june 15, 2015. -- last slow news day was june 15, 2015. [laughter] this was a particularly newsy week. the sondland testimony from the ambassador to the e.u. on what day was that even? that's how long of a week it's been. jason: wednesday. >> the sondland testimony on wednesday established pretty definitively that there was at least one quid pro quo holding out the white house meeting in

exchange for investigations into the bidens. sondland testified that he was not definitively sure that there was a second quid pro quo on the aide but that establishes as a sort of pattern. and as the questioners, democratic questioners sort of made clear, a white house visit is an official act which would be the statutory term for something that could be considered a thing of value in a bribery case. so they could have an article of impeachment itself just on holding out the promise of a white house visit in exchange for a personal favor to investigating the bidens. carol: ryan you said a very long week and impeachment hearings going on and we also had trade talks again. and i feel like i've said this so much over last few years in terms of u.s.-china trade negotiations, two steps forward and one step back. where are we? ryan: i mean, it exists in a nebulous zone right now.

trump has been using twitter to argue that democrats should be somehow advancing a trade deal that he hasn't sent to them. i actually think that the impeachment means that both -- on the domestic side, that both trump and democrats will want to do it. for democrats, it's a way of saying look, we're not just out to get trump. we'll work with him on something we can agree on. and this is one of the few things that they both agree on and have made some progress on. like they agree on infrastructure. but they've made no progress on that. jason: speaking of agreement, ryan, a rare bit of agreement on capitol hill supporting the protests in hong kong amid these trade talks. what do you make of that? ryan: yeah. the hong kong is what complicates it obviously. i think if the situation there gets much worse, it could make it very hard to continue to have this level of agreement. no u.s. politician wants to be

speaking out against democratic protesters in any country, especially those who cite america as a role model and especially in a place like hong kong that's also strategically important. so if china takes too hard of a stance there, and things get really ugly, then that is probably the biggest risk to getting a deal. carol: i have to say, ryan, from those of us here in new york it really felt like a surprise when we saw congress passing that legislation. it was like wait a minute. where did this come from? what was the talk down in washington about the support by both the house and the senate in terms of those hong kong protesters? ryan: well, i mean, like i said, there is just certain things that you don't want to be on the wrong side of. and those are things that are going to -- anything that -- where americans broadly like that, anything where you think you could be hit by it and i also think just generally speaking that a lot of politicians down here genuinely side with the hong kong

protesters. think that they have a strong argument and that they're making a good case. and they want to support them. and they don't want to look -- they don't want the u.s. to look like it doesn't have their back. jason: all right. ryan teague beckwith, we'll leave it there. thank you very much for wrapping up a very busy week in washington. well, from d.c., to london, a story in the magazine on how brexit's chaos, it's opening cracks in the u.k.'s 300-year plus union. carol: this was also going on. this week a televised debate and an election campaign also picking up momentum. let's head to london and check in with tim ross. so much going on. busy here in the states. busy over in the u.k. let's talk about the election trail. news from there, there was a lot of momentum, tim, what's the momentum that we need to know about as investors? tim: at the moment, the conservative party is still ahead comfortably in the opinion polls of jeremy corbyn's labour party but in the first of the televised debates between boris johnson, the prime minister and tory leader, and jeremy corbyn

who is challenging him from a really quite hard left leaning socialist angle, they ended in a bit of a draw. it was a stalemate. everyone was really expecting johnson or most people were expecting johnson to do well. he's a famous campaigner. he won the brexit campaign for those pro-leave voters in 2016. he's won two terms as london mayor. and he was picked really by the tories as someone who could defeat corbyn but in that first debate on tuesday night, it was declared a draw really in the first opinion poll that was taken afterward. that hasn't really moved the dial in terms of where the party stands. but corbyn isn't doing terribly and johnson isn't doing brilliantly at the moment. jason: so as we look ahead, it feels like we're working under the assumption there is going to be some sort of brexit and as we think about the implications of that, there are real implications if you look especially north of where you are to scotland. and that figures into a much larger and maybe in some ways

more limited future for the united kingdom. tell us what you learned. tim: well, as in the magazine this week, we have a story about the future of the u.k. being at stake in this election. if for example the conservative party doesn't get that majority and if the labour party managed to squeeze into power with the support of potentially the scottish nationalists who are saying they would -- they would help get jeremy corbyn into 10 downing street, that who give the pro-independence campaigners in scotland a really big boost. the kind of boost they haven't really had since scotland voted in its own referendum in 2014. on the question of whether to break away from the u.k. nicola sturgeon is this sort of tough firebrand leader of the scottish national party. and she is very sure that brexit means scotland must now get a vote on its own future and whether to break away from the rest of the u.k. and if she helps jeremy corbyn get into power, he might just give her that vote. carol: and it's interesting

because in the story we talk about boris johnson who's talked about after we get through brexit that the united kingdom will be more united than ever. but really what's going on, it's a bigger question out there that will ultimately everyone come together or do we see kind of an undoing of the united kingdom as we've known it for such a long time? tim: well, it's when you have these seismic shifts in political debate and in political allegiance and people's identities change, you see quite often in referendums and we've seen that in scotland and we've seen that in the brexit aftermath across the whole of the u.k. that in the end, politics can change and countries can decide their own destiny in different ways. another case we looked at was the situation in northern ireland where for the first time really people are starting to talk a bit more about the question of whether the north should join up with the republic of ireland again. it's not in any way on the cards immediately but you can see the reality in which scotland goes first and then maybe a

unification referendum in ireland, too. jason: amazing, amazing. seismic shifts it feels like happening over in your part of the world. tim ross, thank you so much. joining us from london. coming up, here in the u.s., joy replacing gloom when it comes to the economy. it's done a 180. carol: completely. plus, visa c.e.o. al kelly no relation. he says consumers are still spending, swiping and tapping. jason: this is "bloomberg businessweek." ♪ carol: welcome back to

"bloomberg businessweek." i'm carol massar. jason: and i'm jason kelly. join us for "bloomberg businessweek" every day on the radio. that starts at 2:00 p.m. wall street time. you can also catch up on our daily show, via podcast. get at that at bloomberg.com or wherever you get your podcast. carol: and you can find us online at businessweek.com and on our mobile app. in the economic section, a global sigh of relief.

i'm just going to say. what a difference three months makes. sentiment has improved and we're also hearing less about the risk of a recession. jason: here's this week's "bloomberg businessweek" explainer. >> on august 14, all the indicators were bad ones. major u.s. stock indexes fell 3%. the bond market was signaling a recession was in the making. and the trade war between the u.s. and china wouldn't go away. hope you didn't panic and sell everything back then because the attitude has gone from doom to boom. american stock indexes are setting records almost daily. sentiment has changed, too. according to a bank of america merril lynch survey in august global fund managers, they overwhelmingly expected slower growth in the coming year. now november most of those surveyed expect stronger growth in the coming year. what's the biggest reason? a change in central bank policy. almost a year ago, the fed was planning on three quarter-point interest rate increases in 2019.

instead, it cut rates three times this year, two of them coming this fall. meanwhile, the european central bank has become more dovish, too. still economists aren't completely sold. they see in business investment lagging. they wonder whether the recent strength in the economy is sustainable sore the last gasp last gasp ofthe an expansion that's past its prime. carol: and if indeed the expansion is past its prime -- jason: we sat down with the economics editor behind the story you just heard, sultry sounds of his voice, peter coy joined us in studio. peter: that's the fly in the ointment of the consumer is really strong in the u.s. the u.s. consumer had to pick one force in the entire global economy, it's the u.s. consumer out there still spending but in a sustainable way. because real wages, adjusted for inflation, have been rising. and unemployment is super low. so people have spending power. they're not carrying a lot of debt. the question is can this keep going for a long time if

businesses are cutting back? because businesses cut back on spending, maybe they're going to cut back on hiring. maybe some of that -- the income of the consumer will eventually trail off. now, ed yardeni, one of the really smart guys on wall street -- carol: love it. peter: was telling me he thinks the downturn in capital spending is misleading because it's -- a lot of it has to do with the oil patch. and you know it is weak. carol: important, yeah. peter: you take that out things kind of look better in tech, health care, are doing relatively -- carol: finance, too. peter: finance. carol: which are key areas. peter: yeah. so -- but it remains to be seen. that's still an open question. jason: i do feel like we did hear some caution on earnings calls from c.e.o.'s. essentially saying you know what? i'm pulling back a little bit. or i'm not spending on that new factory or i'm not expanding, maybe as aggressively.

peter: right. right. jason: as i could. peter: historically capital spending is much more volatile than consumer spending. consumer spending is like yeah, tends to -- just rise gradually. so that's what you want to pay attention to, even as to the as big as consumer spending, it can kind of be the thing that was the tail -- the tail that was -- the tail that wags the dog. carol: and the magazine covered that. the longer you get into an expansion like here we are the longest u.s. economic expansion on record. peter: that's right. carol: the longer you're in it to keep it going that's where capital expenditures usually typically come in toward the end. and give it that last kind of oomph. and i wonder if that's the case here? peter: this has been such a long cycle. in its 11th year now. that capital spending has had its own mini cycles within that. we've had our ups and downs. and if we get another up here, it could really be good news for keeping this thing going. jason: and staying with economic growth and consumer spending -- carol: we sat down with al kelly for another addition of "businessweek talk."

>> despite all of this thought a recession coming we don't see it. our fourth quarter numbers which for us were september 30 numbers were better than the third quarter. the u.s. was up 8%. the international is up 12% excluding china. europe was up 13% when you exclude the u.k. which has done a little bit of self-inflicted wound. jason: what's wrong with everyone that we're talking so much about recession? >> it might be the cycle. a long time that we've had this upswing and people look at the history and say it's got to go down at some point. but the consumer has stayed extremely strong around the world. the only place we see any weakness is in the u.k. and as i said that's kind of related to the whole brexit situation. but or than that the world looks pretty darn good. jason: where are they buying? where is their money going? >> in our world there are a couple of things that are really driving the increases in the number of transactions we're seeing. one is obviously e-commerce.

people are jumping on their phones and jumping on their ipads and jumping on their computers. and buying. in big ways. we're seeing every month those numbers, the growth in e commerce is anywhere between two and three times the growth in the face-to-face world. every single month. we're also seeing people continuing to travel. there was a real downturn in travel back in december and january. if you remember, that's during the height of the u.s.-china trade talks. it was during the height of the brexit conversations. and then we had the 45-day u.s. government shutdown. and almost immediately consumers started to just stay at home and not travel. but we've seen that pick up, especially in the last six months. and that's always a good sign that when people are willing to leave their home country and go to another country, that's -- that's a very, very good thing. the other thing that we're seeing is an increased amount of smaller ticket items being used -- using digital payments. and a lot of that i think is driven by mass transit. carol: i agree. >> we are really excited about mass transit. just in the last 90 days, we've seen open systems in edinburgh and sao paulo.

we started in june in the m.t.a. in new york where only at 18 stations from grand central station to atlantic avenue in brooklyn but by the end of october, of 2020, the m.t.a. hopes to be in all 424 subway stops. carol: are people using it? >> absolutely. >> tap and go? >> tap and go. it's so convenient. it's better experience for the merchant. it's a better experience for the consumer. we hit a million transactions in the first seven weeks. and we had no -- and that's about 18 stations. and -- carol: and -- >> oh, absolutely, continuing to grow. tap to pay has grown hugely around the world with the exception of the united states. jason: right. coming up, pun alert. retail is in focus. carol: warby parker eyes another revenue stream. jason: this is "bloomberg businessweek." ♪ jason: welcome back to

"bloomberg businessweek." i'm jason kelly. carol: i'm carol massar. you can also listen to "bloomberg businessweek" on sirius x.m. channel 119 and on a a.m. 1130 in new york. 106.1 in boston. 99.1 f.m. in washington, d.c. jason: bay area in london and on d.a.b. digital and through the bloomberg business app. over in the feature section, warby parker focusing on contacts. carol: see what you did there the brand made a name for itself with affordable direct to consumer glasses and just like its signature frame, the focus will be on keeping the price point low. warby parker's co-founder spoke with bloomberg about the rollout. >> we're super excited to be able to produce daily contact lens. at a much better price point than you can find elsewhere in the market. and it's really the first opportunity for contact lens wearers that have been wearing

extended wear so -- two week or monthly lenses really their first opportunity to enter into an affordable daily contact lens. jason: and here's "businessweek's" austin carr on what it means for warby parker to become the warby parker of contacts. >> just a few years ago we were talking about the retail apocalypse and in many ways we're still talking about. this is the one store -- the company that sort of bucked that trend. they back in 2010, neil blumenthal and dave gilboa came up with this idea to disrupt luxottica this massive conglomerate in the eyewear space that was a monopoly, a lot of analysts think when it comes to distribution. carol: they own all of eyeglass manufacturers. >> ray-ban, sunglass hut, pearl vision, what have you and they marked up their frames massive rates. if you -- you buy ray-bans for a couple hundred dollars, they're pretty expensive. with warby parker one low price point of $95. it was just very straight for a direct to consumer marketing and sold online and then eventually moved on -- offline into

physical retail. and they've really become known as a sort of bespoke brand that has this end to end customer experience that's very seamless and a lot of copycats in that trend. jason: and it is this -- sort of threading of the needle as it were, getting toward where it feels like we are, especially high-end consumers who expect high touch retail, but also the convenience that you get from online. i mean, the process of warby parker is pretty great. >> what they became known for was this at-home try-in experience. you ever gone to a store and look in front of that little mirror, self-conscious, and you feel a little awkward doing that. they send you five pairs in the mail and you get to try them on for free. then send them back and they send the one you pick once you pay for it. a very seamless experience and been to the stores around new york they're beautiful, gorgeous, very seamless and it doesn't feel like a stodgy optometry office if you ever had that experience of being upsold by your doctor. jason: and you really went right there to one of the tensions of this story selling a razor online not that complicated.

selling socks online not that complicated. but when it comes to your eyes, it is a little more complicated. there is a whole sort of established way that people do this. carol: and if you screw up you can really screw up somebody's eyes. >> there can be infections. there can be eye disease. and so that's a big thing. a much harder category to get into but they think it's an $11 billion market. jason: the contacts. >> contacts category and eye exams. one of the big things they have to push into. although they've done prescription eyeglasses for many years, putting something on 0 piece of plastic, silicon on the end of your eye is more dangerous. especially when you're ordering these things online. they're also part of a big category that luxottica owns and they have people that prescribe to contacts. they own eye med the second largest vision insurer in the company. and they've locked warby parker out of the market and you can't buy your glass in network through vision insurance. and so they basically said we're going to do this on our own instead of just glasses we'll

also offer contacts and do the eye exams. they're tripling the number of optometrists on staff who are going to help with you your insurance and then hopefully sell you contacts from warby parker glasses downstairs. carol: one of the things you get into, austin, and looking to go from glasses now to contacts kind of build out the vertical if you want. if you want. but what's interesting is i think the question is are they expanding too late? here they created this model and they're spreading out do, they just wait too long to do this? >> i think that's a fantastic question and we note in the story one of their co-founders jeff rader left in the early days to launch another unicorn, which is harry's, the warby parker of shaving which has a $1.4 billion valuation. i think. and then a couple of their other executives went on to found a way which is the warby parker of luggage which has $1.4 billion valuation. so it's a really good question whether or not they waited too long. at the same time, they really pitched this idea that they -- don't want to chase the flash in the pan, you know, sort of different verticals. a lot of the v.c.'s that they were talking with in the early

days become the next shoe dazzle or groupon and we will be focused on this one thing and do it really well and expand a little bit more. and they pitched this as the anti-wework and don't want to be this crazy, you know, massive $100 billion overnight softbank investment. they want to be the mature step by step incremental growth company. carol: and i feel like that speaks to who these two guys are. you get into a little bit of how they managed this company, their approach. >> they're very -- if you spend time with neil and dave they're very precise. they're as precise as the prescriptions in their glasses. they really have this attention to detail. they're not, you know, the adam newman type characters that are going to sort of brag about tomorrow we're going to triple the size of this, and one of the guys said we're comfortable launching 33 stores this year, 40 next year, 45 the year after that. this is not we're going to launch 500 stores tomorrow. jason: and also interesting to think about this business, especially this expansion into

contacts and eye exams. and you alluded to this earlier, austin. is that people-intense he have -- people-intensive business. and in addition to the manufacturing, they're doing, you know, these are big jobs. a lot of jobs in a lot of ways. and high touch. >> it's not -- what they've also been pitching is it's not just the in-store experience. but all the under the hood refinements they have an optical lab where they do a lot of their manufacturing in upstate new york. that has about 100 jobs. and also pushing into telemedicine which is a massive category that we've seen other eyewear makers move into and that's the process of can you update your prescription using just your phone and a macbook? you can measure the distance between your laptop and your phone and you can check your eyesight doing an eye exam at home. and seems risky. carol: i know. >> but that could be the future. carol: right. >> they're pitching it as not a replacement but a complement to eye exams. some people think it's risky. a lot of optometry community really felt this is a bad move by the industry. but it seems to be where it's headed. jason: coming up, google wants to do business with the military. carol: it does indeed. some of its own employees,

however, do not. this week's cover story is coming up next. jason: this is "bloomberg businessweek." ♪ when it comes to using data, everyone is different.

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but create soft luxury brands. , there g those brands are big hopes. but you have other brands, uperbrands, superpowerful. such as chanel. seriously, i don't think for ese kind of brands, that here is magic.

you made to that your customers. this is the key to success. you >> a deal would benefit both sides. for louis vuitton, it would mean joining the jewelry department and tiffany could avoid the tricky task of executing a turn around of a u.s. recession on its own. i do wonder about being able to step away as part of the problem, we focus quarter to quarter so when you're doing renovations on stores or thinking about the future, you get a report card every three months and sometimes it makes it difficult for a publicly held company. will there be benefits from stepping away from the public spot light? >> for sure for any public

company to be reporting every quarter, there is, of course it's a check that you go -- have to go through every quarter. and take it seriously. of course you have to maximize

the profit for your shareholders. but this doesn't mean that is just the sum of 10 good quarters. you have to think about the next 10 years. >> having said that, because i listened to what they're saying, is there a benefit to stepping away and being part of a larger company where you're part of a portfolio and you can do the things you want to make sure that brand is around for another hundred years? >> honestly, i don't think we have ever diverted from doing the right thing nor other -- nor other nd brands. at quarterly results, i

don't think they did the wrong thing. we have for 45 years, of ourse. >> bloomberg business week is available on newsstands now. >> also available at business week.com and our mobile app. barclays has been in the news and i feel the story has gone under the radar and a great job by max and our team in london. and it speaks to a larger issue about accountability. it's a must-read. >> obviously there are different stories but the google story, the "cover story" is about google but also about what a company wants to be and its employees versus management and its goals and hopes and it is at its core. i found to be more serious story than anticipate. >> and about google in the new age and what it wants to be in its next chapter. a fascinating read. check out our apple podcast and

bloomberg.com. >> more bloomberg television starts right now.

scarlet: i am scarlet fu. this is "bloomberg etf iq," where we focus on the access, risks, and rewards of exchange traded funds. ♪ scarlet: america first no more. europe and emerging-market seeing inflows and catching a bid. the new face of active. professor victor chow has created an algorithm to identify stocks right for rebound and now he has his new system. and coffee prices may be grinding higher to deliver a much-needed caffeine hit.