tv Bloomberg Business Week Bloomberg March 11, 2017 3:00pm-4:01pm EST
oliver: welcome to "bloomberg businessweek." i am oliver renick. we are coming to you from inside the magazine's headquarters in new york. managing threats from north korea, and how smugglers are bringing gold into miami and how technology is changing big tobacco into looking more like silicon valley. all of that ahead on "bloomberg businessweek". ♪ carol: we are here with editor in chief megan murphy. in global economics, you look at the strain between china and south korea.
megan: this, comes from south korea's cooperation with the u.s. building the thaad, a shield designed to prevent a north korean missile attack. china, who is sensitive about border issues, sees it as a security threat and has urged its population to stop traveling to korea. for some areas, that was a huge part of their markets and is having a devastating effect on tourism and business is hit by china's approach. oliver: tell us about that tourism. there are some interesting examples of what chinese tourists do in korea. megan: it is a strange market where people go, karaoke, specific outlets catering to this market of chinese tourists and the strange activities they pursue in korea. these people who built up their entire business say 70%, 80% has declined. one person writes that it feels
like i'm staring down a dark tunnel. oliver: yikes. carol: china using the power of it its purse. megan: they goes back to tensions in the south china sea. oliver: in the market section, let's talk about stocks. in particular, there is something called recency buys, affecting how people view expectations. megan: i'm glad you brought it up. [laughter] we are in this prolonged bull market. we have seen outsized returns, and people are now thinking they will continue to get this outsized return. that is the phenomenon described aptly as recency. officials are saying don't expect 7% or 8%. it could be half that or lower in bonds and stocks if we see
the end of this bull market. since the trump administration, we have seen another pop in the market and how long that will last. i never get in the business of predicting the market. be my guest. [laughter] oliver: you look at the length of the bull market and time alone does not end bull markets, but the longer it goes, it does slow down and returns don't keep up. megan: particularly when you look at the outlook of not just the u.s., but europe and the challenges of the u.k., brexit, but also corporate earnings and whether that is sustainable. will we continue to see larger corporate earnings feeling the market? it is interesting, but this article is a warning to people who continue to pump money into the market thinking they will get the same kinds of returns.
l: let's talk about the cover story, it talks about cigarettes. megan: this is one of the stories i am proud of. it delves into something i think most people would never think, but the cigarette industry itself is admitting cigarette consumption will sunset and they have to move to other products. and this article draws a connection with silicon valley and cigarette companies attempting to reinvent themselves with marketing you are used to in tech companies, from how you consume tobacco as a product from he did sticks to the new contraptions used to inhale tobacco, to the research facilities they have set up. one part of the article describes these communities, fooling around with these heat sticks, part espresso store -- and it is fascinating putting a
hummingbird on the packaging and going in and eco-friendly direction with the industry. it is a must read. oliver: we did get details on the story from felix gillette. story is about this future of cigarette technology, and how big tobacco companies companies are excited about going digital. carol: is this above and beyond electronic cigarettes? >> it started with electronic cigarettes. i think what happened is that electronic cigarettes came out of left field. they were not created by the tobacco companies. and it was this market that sprung up overnight, and suddenly he grew into a multibillion dollar business, and from the big tobacco companies perspective, they saw the tobacco consumer was restless. it freaked them out a little bit. carol: restless meaning they were not smoking as much?
[laughter] >> they were looking at ways of consuming other products, and so they scrambled to acquire and launch their own e-cigarette brands. in the meantime, they have taken a step further where they are now really getting fully on their silicon valley, hosting ted talks, launching tech incubators and venture funds. carol: somewhere in flavor country, the marlboro man is turning over in his grave. you are talking specifically about phillip morris. that is the world's largest publicly traded company. let's focus on them. what are they doing? >> they are most excited about this new smoking-non-smoking futuristic tobacco gadget called the iqos. it is somewhere in between a traditional cigarette and an e-cigarette. it is basically a hybrid. oliver: explain what that is.
for those of you that do not smoke or smoke traditionally. >> i have not seen it before. you get these tiny rolled tobacco like miniature cigarettes, and then you jam one into this holder and it looks like some sort of futuristic pen device, and it heats the tobacco without combusting it. there is no smoke, no foot -- fire. in theory it is healthier than , smoking a traditional cigarette, and there are also flavored. but the difference between that and an e-cigarette is that it has some tobacco in it as opposed to nicotine. iqos does. it is this category called heat not burn. they are excited about it. actually they launched in 2014
, in japan and italy originally. it has a fan base that is growing. they have 1.4 million regular users now. they spread out across europe, interactively working to bring iqos to the united states. oliver: the e-cigarette is used as a former cigarette smokers who still want to smoke something. it is like a nicotine patch, replacement. phillip morris is saying you have this new delivery mechanism. let's ride with that idea and include tobacco in it. >> yes, exactly. that gives them an advantage in some sense over these e-cigarettes that you've seen pop up, because it does use real tobacco and has this whole decades and decades worth of learning about how to manufacture cigarettes incredibly efficiently, so they are putting that to use and
melding that onto the techie gadget, the cigarette device. oliver: turning high tech cigarettes into a cover image was the job of rob vargas. rob: thinking about how the tobacco industry wants to be more like silicon valley. a silicon valley icon is steve jobs, and the most recognizable cigarette images the marlboro man. we hybridized those. oliver: this is a combination. iqos device.e tell us about the color choice here. it is pretty straightforward. rob: i would say most people are familiar with the steve jobs image from the biography. we were looking at them side-by-side and wanted to get the color right, the hand
positioning, and the classic steve jobs glasses. oliver: this is very straightforward. it is just an image. i guess you feel like those are strong enough images that will people will recognize what you are talking about. rob: the headline is what you see on the back of your iphone, which is typically designed by apple in california, except in this case it is marlboro in virginia. oliver: up next, what may have been the boldest promise donald made, and purple drink, how a cough syrup cocktail went from hip-hop to mainstream. this is "bloomberg businessweek". ♪
oliver: welcome back to "bloomberg businessweek". i am oliver renick. peter coy wrote this week's opening remarks about how president donald trump is more likely to expand the national debt than eliminate it. >> the issue is not whether he pays off the national debt. the issue is how much it will go up. every time you run a deficit, you are adding to the debt. the trump budget as far as we can see and falls quite large budget deficits. think about it. he wants to preserve social security and medicare untouched, massive personal and corporate income tax cuts, get rid of some of the obamacare levies, and then raise defense spending. any one of these alone is a plausible goal, but when you put them together against a backdrop that we already have budget deficits --
the deficit is the annual go-between spending and revenue. revenue accumulates, and the last time we had no national debt was 1835. oliver: it has happened before? [laughter] >> for one year we paid it off, then we accumulated that again. oliver: what president has put them biggest dent in the debt. >> the debt became high and world war ii with a lot of for time spending, then as a share of gdp, which is an important measure, fell dramatically for decades. it is the ability of the country to carry that debt, so a large
economy can carry more debt than a small one. gdp is your savior. that is where it gets interesting with donald trump. carol: he thinks you can grow your way out of it. oliver: exactly. conceptually he is right, the best and least painful strategy, strong economic growth generates more tax revenue because people pay capital gains, wages, and the debt problem goes away by itself. so you might recall that during the campaign trump talked about 3% or 4% growth, occasionally numbers like 5% or 6%. carol: in your dreams. >> pretty much. we have been growing around 2%, and the congressional budget office says the next 10 years, the potential growth is about 1.8%. oliver: what kind of growth which you need, so basically if you are cutting taxes in order to be able to decrease the debt,
you would need to get a lot more of those taxes through the growth, right? so taxing at a lower rate, but if you are taxing more because there is growth, you can offset that. how much growth would you need? >> arthur laffer always said that we are at a point where higher taxes decrease government revenue because they choke off the economy. if we cut taxes come you have more revenue. that has pretty much been disproven. yes, there is an accelerating effect from lower taxes on growth, but it is not enough to offset the cut in taxes, so to answer your question, we would need infinite amounts of growth, because you're going in the wrong direction. oliver: the upcoming showdown in washington dc about a border adjustment tax proposed by the trump administration, and republicans crush class-action lawsuits. that is ahead on "bloomberg businessweek". ♪
>> the republicans in congress and the trump administration want to reform the tax code in the biggest way since the reagan administration. they want to do things like lower corporate tax rates, advantage companies that make things here and tried to bring back of these profits back to the u.s. how do you do that? paul ryan has come up with this border adjustment tax. you take the 35% corporate rate and brings it to 25%, but only applies it to domestic income. exports are exempt. what you have is a stark line that has been drawn down the middle of corporate america where companies that import a lot like walmart, the gap, best buy, they are saying no way. this will kill us. you have exporters like boeing that would love this because it would lower their tax burden significantly, so you have
political lines incorporate lines being drawn. carol: they project it would bring a lot of money over the next decade. >> right. the way to think about this is this is basically a way to get their tax overhaul done. they need money. they need it to be deficit neutral to do this complicated procedure roman numeral in congress that would allow them -- maneuver in congress that would allow them to do it without democratic votes. to do that you need to keep it deficit neutral. this comes up with an estimate of $1 trillion of tax revenue over a decade that would help offset the lost revenue from lower rates. your exporters love it, where is your retailers, it will immediately raise costs for retailers in the goods they bring in from overseas, and they argue it would raise prices on things like avocados, furniture, etc.
carol: it will. it is simple math. if something comes in with a tax on it, it will cost more. >> here is the trick of the whole thing, and economic theory that says if you do this, the dollar will appreciate over time. that will offset, increase the buying power basically of u.s. consumers and offset all of the ups and downs and even things out. that will take years. oliver: it will chip away on what the exporters make. >> without a doubt. it would disadvantage the competitiveness of u.s. goods overseas if the dollar is stronger. this idea that the dollar will rise and everything will even out is pure economic theory. there are vat taxes in europe, a border adjustment tax has never
been done in the real world. we talked to and midsize company that makes luggage and imports a lot of material from overseas. they say they would have to spend years to get suppliers to lower their costs. i would not be advantaged by a stronger dollar, and if i would be, it would be years and i would be profitless until then. oliver: also in the politics and policy section, the tort reforms pushed by pro-business groups and republicans alike. >> in 2005, a law was passed that restricted class-action lawsuits and made it easier for defendants to bring them from state court to federal court, but since then, it has become clear that that was not sufficient in the eyes of business in terms of restricting class-action, so business interests are going back this year and with the republican congress and a republican president, they are pushing a
group of bills, hoping to further curb class-action lawsuits and civil lawsuits in general. oliver: what are the requirements that this group was to put on legislation? >> there is a whole range of them. i will mention the significant ones. in terms of security class-action lawsuits, one of these bills would prevent a law firm from repeated the representing the same plaintiffs in class-action lawsuits. that may sound relatively obvious, unless less you know how securities class action lawsuits work in which you often have a small group that are repeatedly representing the same pension funds that are suing on behalf of their investors suing companies. so if this provision were to go into effect, it could be a death knell for that relationship between the law firms and the institutional investors who bring a lot of those cases.
carol: it does not sound like a big deal, but could be a big deal. >> exactly. in the field of consumer class-action lawsuits, one restriction is that legal fees would have to be based specifically on a percentage of the money that plaintiffs recover. that sounds reasonable on the face of it, but in fact, a lot of consumer class-action lawsuits seek to change corporate behavior, and the amount of money that the class members will get is the minimum or zero, and that could discourage noise from bringing -- lawyers from bringing the case in the first place if their percentage is based on zero. oliver: it is a way to disincentive finds plaintiffs or prevent certain cases? >> very much the former. it is a series of changes to incentives, because congress cannot outlaw class-action lawsuits. people have a right to bring
civil cases in federal court, but tinkering with the rules in many small ways it is supposed to make it much more difficult for a plaintiff's lawyer to say i will bring this case. carol: your story points out a provision of this bill, the broadest proposed which would allow class actions to move forward after a judge certifies that all plaintiffs suffered the same injuries. that is pretty difficult too. >> it is. the rules already require commonality among plaintiffs, but this would make it a stricter requirement that there be preliminary litigation over whether the injuries are very much the same in terms of their nature and scope, and that would be yet another disincentive to bring the cases in the first place. oliver: let's talk about one thing you mentioned here, which is the litigation industry. i found it to be an interesting phrase. i remember talking with friends not from the u.s. is that you
guys sue each other. this how we sure that you make sure people to not do wrong. is, there is a litigation industry where people make money off of this. >> there is. this is a facet of american life, particularly of business life, and companies are aware of their potential liability. that is why they have big in-house legal staff and risk compliance officers that make sure they behave themselves in a way that won't invite litigation, but there is no out that there is a litigation tax -- doubt that there is a litigation tax on business. that is just the nature of the beast in this country. oliver: up next, the arrest of a chilean smuggler and his role in distribution of illegally mined gold in the united states. a virtual reality from that helps you visualize the hack in -- firm that helps you visualize the hack in real time.
oliver: welcome back to "bloomberg businessweek." i am oliver renick. what a chinese company wants with the chicago stock exchange, and why the illegal gold trade ,as exploded in the past decade and using virtual-reality to catch hackers. all that ahead on "bloomberg businessweek." ♪ oliver: we are back with "bloomberg businessweek" editor in chief megan murphy to talk about must reads in the magazine. let's look at some market stuff come in particular transaction happenings in the stock exchange industry. megan: this involves the chicago stock exchange, which has long lumbered in the shadow of the big board.
they actually handle a very small proportion, but they are now in a transaction with a china-based company, a $27 million deal. and acquisitions company, which does not have any variance running an exchange, but the idea would be for the chicago stock exchange to focus on this thing, the smaller companies and giving access to capital for chinese companies. this is a small deal, but if this turns out to be a market for that and if it is an inroad, yes, it will be an important avenue for capital for these companies. on the flip side, it raises questions about whether they have aptitude, whether they have controls in place, whether investors will be fully apprised of the risks with these companies. carol: let's talk about something in global economics. we know the president wants to do these things to boost economic growth, but some of his measures may already be
impacting foreign tourism coming to the u.s. megan: the number so far in terms of the reports of how tourism will be impacted into the u.s. is quite grim, tens of millions of people potentially no longer coming to visit. look, can we connect this directly to donald trump? it is a sampling. and it is estimates. new york will be hit hard. the numbers show. people are alarmed about this. it is a direct loss of jobs if there is fewer tourists. tourism is a huge and vital place for job growth in this country. but we are looking at the trickle down and people are worried, mayors are worried, tourism officials are worried about it. disney officials are alarmed about it. so whether or not this is the yang of the trump affect, there is an impact in the tourism industry. oliver: tourism industry being heard by trump policies, turns out it's not such an enriching project for himself, given that
what he does is tourism. megan: that is another interesting thing looking at his business. we have sort of scene some of his cabinet members stay in his hotel and washington when they are in washington, but this has been one of the questions, will the trump brand rise or fall? on the back of the presidency. and his two sons are active in pursuing deals around the world , bringing a brand -- building a new hotel brand. it is interesting what happens there. in terms of tourism overall, the early numbers aren't great, but let's see what happens. let's see what happens. you never know if the greatest american renaissance is ahead of us. [laughter] we have to wait to see what happens with the renewed travel ban as well. let's talk about a story in the features section, gold smuggling, which i think i learned about for the first time. megan: who knew gold smuggling was this easy. [laughter]
this was a young guy who grew up and his father ran a pond shop -- pawn shop and started a small scale business. he decided he wanted to make it big and started gold smuggling. and what is fascinating about the article it really traces the , flow of gold from how cumbersome and how that process is from extracting it even legally, and him literally taking it it in backpacks and suitcases to miami. when he was first apprehended, he had 44 pounds of gold and a -- in a roller bag. who knew, you could not get through with a lighter through security. but with gold -- [laughter] it is a fascinating tale of this interesting corner of the smuggling market worldwide. carol: we got more from reporter michael smith on what it's like to be an international gold smuggler. michael: he is a fascinating character. he was raised in a family that
ran a chain and still runs a chain of jewelry stores in chile, and grew up in the business and started working with his father after his father got sick and dropped out of college to run the family jewelry store. he basically got himself into the global gold smuggling market that feeds the gold we use and everything basically. and it -- he basically created an enterprise, a multinational enterprise that ended up shipping tons of gold to florida, then into the global market. carol: i got to say, before reading your story, i never thought much about the gold market. how big of a market is and who is buying it? michael: if you look at studies done just from latin america, there is also smuggled gold from south america. there is almost 50 tons of gold that comes from five countries in latin america to the united states, gold not officially reported on the books if you
will, of the customs agencies in latin america. so it is basically illegally obtained gold that is legally brought into the united states and in turn sold into the international market. we are talking about two jewelry companies and in turn sold into the international market. -- to jewy companies mainly, but electronics companies. there is gold in our phones for example, and also all kinds of industry, so basically there is a huge demand for gold in the world right now. it has gone up i about 1000 tons of year in the last 15 years, and they need gold, and a lot of it comes from these illegal mines. oliver: i never really thought about gold smuggling. it makes sense that it happens, but i think, if you think of counterfeiting or printing fake cash, with gold, the illegal aspect, michael, tell us about the origin of illegal gold and what makes it illegal. michael: there are two elements,
and that in america, especially in the amazon -- we are talking about colombia, peru, ecuador, brazil, bolivia, you have vast regions of the territory that is rain forest, and in the rain forest, there is a lot of gold in the ground along rivers, and these territories are controlled by criminal gangs from drug trafficking organizations to smuggling groups to armed groups like the farc in columbia, and they basically control all mining done there on an unregulated basis. there are no worries about the environment or labor, and they basically get the gold out of the ground and have to bring it to market, so they find ways to lie about the origin of the gold and say it is coming from some legitimate mining operation when it isn't. and that allows them to exported by lying on customs forms on the
-- in the country of origin and in the united states to get it laundered so they can be sold legally. carol: what is fascinating is you tell the story through his eyes. here was a well-off city kid. the family had a gold business. and yet he went from being legitimate to being, dealing with illegal gold. how does that happen? michael: it happened because he is an ambitious young man, and when he got into the business, he seems to have a good sense of business and is an entrepreneur and decided he wanted to make more money, and he found out there are buyers out there willing to buy any gold you bring to them to feed this black market that exists. he found ways. it wasn't very hard. he started googling gold producers in peru. he had heard that in peru there is a huge underground black
market for gold, and he found a guy who introduced him to other people, and he started making buys. he found sellers and buyers and became the middleman and figured out how to do it and it didn't seem to be that hard come until he got caught. oliver: speaking of law enforcement, in the security section, a cybersecurity startup is using virtual reality to catch hackers. d. lawrence. >> it was obviously different, and something i could literally, visually understand, which is unusual. which is the whole point of it. because, often when you are talking to people about cybersecurity, you are talking to companies and people affected by cybersecurity. it is so hard to understand what they are talking about. you cannot picture it. but protectwise focuses on the presentation layer, the user
interface, to make it easier to understand what they are looking at when you're looking at a network. they started in 2013. their user interface has always been really cool. they hired this guy from hollywood who was involved in special effects from "tron legacy" to design the graphics. now they have developed a virtual-reality software so instead of looking at numbers and bar charts and graphs on a screen, you can put on a headset and fly through your network. and it is virtualized as a city, so something you would fly through. you would know your neighborhood. you would be like a policeman on the beat where you would fly around and notice if something is out of the ordinary. carol: how do you know something is out of the ordinary? what you see?
dune: it is set up like a cityscape. different neighborhoods are different business areas. it will depend on the corporate network, but say you have finance over here accounting , here, sales over here, and you notice that in sales this building that is normally blue, meaning there is nothing going red.here is no threat, is so then you zoom closer and see the other data about what is happening. you will know exactly what you're looking at because each structure has a different shape depending on what it is. like if it is a mobile device, it is hexagonal. if it is a cloud database, it is a different shape. and the width and height is based on bandwidth and net flow, so there is a lot of -- it is just making it more intuitive. and you can view it as superficial, but the idea is that right now it is very hard
carol massar and i talked with megan murphy. megan: this looks at the companies behind this mixture known as purple drank, a popular high in the hip-hop community in the south. this story focuses on houston and how it was an integral part, cough syrup, a component of that high you get by drinking this and how these companies, and it is a small corner of the overall drugs market, about a $15 million product, but these bottles of cough syrup trade as high as $1000, $2000, and are specific to their flavors and color. purple drank is what we focus on. there is also pink and women. and -- lemon. we laugh about it, but the country is in the throes of an opioid epidemic, unseen scale, a nd a threat to so many communities now.
this is under the radar percolating away in cities like houston, and law enforcement, how difficult it is to really combat this high as it spreads. carol: this is what i love about the reporting. it really digs into it. it is under the radar. it is not so well-known. you wonder about whether the corporate community, the drugmakers, how much they knew about it and the street value of this drug. megan: that is the thing. i mean, we went to so many companies. it is a small market and small number of producers who have been involved in producing this serve specific to this thing and how much they can do to combat it when it is off the shelf combinations. when they are aware of it, what they can do to limit street usage and trading in it. the bottles, this talks about how changing even the kind of bottled the syrup is made in gives it a different taste and makes it less valuable.
and how much drug companies are aware. it is not just this market, but other markets. can they control it? can you crack down on it? there are obvious legitimate uses for this product. so, it is a really fascinating thing. and what i like about it as well is it delves into a community, into this hip-hop community in houston who feels like they are being taken advantage of. oliver: tell us about that community. the reporter on this story did a great job. he is from texas and witnessed this firsthand. i remember the first time i heard about the product was when wayne got hospitalized, he was always talking about it. that has been how it has proliferated, its use and reference throughout hip-hop and big musicians. megan: that is the thing. you mentioned little wayne. this story goes into talking about justin bieber and he was a purple drank consumer, and its
prevalence and that community. specifict very community. there is artwork that features some of this in it. and really goes into it. as we said, it is that community, a community where a lot of things proliferate through the lyrics of music. through people, things are popularized through people people replicate what they see , people doing and what they hear people doing. and i think tim really goes into it and gives you a window into that very tight community in houston. oliver: up next, google learns it takes more than fast internet to build the next silicon valley. and the new faces designing nintendo's mobile future. this is "bloomberg businessweek." ♪
google's effort to provide high-speed internet has not been enough to inspire a startup akin to -- mecca silicon valley. >> google fiber is superfast internet. you can do all kinds of incredible things upload, , download netflix movies in the blink of an eye. if you have large files like photographs, no time spent at all using the internet, so it is noticeable and very fast. oliver: basically it went by the wayside. there was a lot of talk about how big it was going to be individual ages it was going to spur, but ultimately it has faded from the spotlight.
exactly would not say that. in the few cities where people do have it, they really love it. the thing is that google was going to roll it out in cities across the country, and it is in a few cities across the country, but the company which once was working superfast to get google fiber out across the country has pulled back a little bit, and in the cities where it did go in where people were initially so excited now they just have , faster internet and the allure has worn off a little bit. carol: let's talk about kansas city, kansas, the first city to get google fiber. very excited, it a lot of who hoopla, it did attract some entrepreneurs. tell us his story. sarah: there were quite a few
people who saw this and thought it would be great for their business to have google fiber and moved to kansas city to set up businesses, and one of them is this guy brandon schatz that heard about it and basically within days had driven to kansas city, kansas to check it out, then moved there and set up his business. he was the only person i could really find for whom google fiber actually had a business use case, because he has a sports photography platform, and he really needs high speeds, particularly for uploading photographs. but then i talked to other entrepreneurs who said they liked it but could not find a business use case for it, and even if they had it, their customers did not have it, so even if they found a way to move bulky files around, they would probably get clogged up on the customer end. a lot of the entrepreneurs who moved to kansas city moved away because they did not find it as useful as they helped.
-- hoped. oliver: what happened as those entrepreneurs came to places like kansas city? perhaps they could not find a business use case for google fiber, but tell us about how seed money went to these areas and whether or not it really ended up fueling growth in the start up space. sarah: right. in the startup community in kansas city, they were so excited and thought this would put us on the map, investors will come piling in, and it will kickstart our startup scene. the problem is it turns out that investors outside of almost everywhere except silicon valley are still fairly conservative. if you go to an investor in a place like kansas city and say i have this business idea. i don't really have much revenue yet. profit is years away and i don't have assets, the investor will
say thanks, i will invest in something else. in silicon valley, if they believe in your story enough and think there is a good market and you can pull it off, you might be able to get some money. and in kansas city, it turned out it was really hard. oliver: also in the technology section, details on nintendo's effort to bridge mobile gaming with the living room console. >> this is an effort by nintendo to build a hybrid home and mobile console from scratch. it is sort of a jumbo tablet detachntrollers that built onto the sides, and you , can pick it up to go with you when you want to go play in the park. you can play on the couch with it. oliver: what are the big bets nintendo is making? because for better or worse, they have been making big bets in the videogame space and they with wii whenthat
they said we think people will get up and move around and interact with games in a way that hasn't happened. what do they need to do differently to make the switch work? >> the wii u, the big bet was on the dual screen experience with controllers that had displays built into them and it would be enough of a differentiator that people would want something different than what they were used to from the xbox or playstation. the problem they ran into is they made it too difficult to program. it was hard to get outside developers to make games for it, and so they are hoping by turning the keys to a software-centric development team, they have built the switch such that it will be easier for outside companies to come in and make great games for the system. carol: take us inside the company. it involves, as far as i
understand in terms of developing switch, it was more software guys not hardware guys. , they brought in a younger team to develop the project so they could get right at the younger audience who would hopefully be buying it. >> correct. a lot of the nintendo lifers who had been principal developers turned the keys over to some of their earlier veterans of 3-d graphics development and of those people brought in a couple dozen mostly game designers in their 20's and 30's to throw ideas on the wall and figure out how they would use it in what capacity in the living room, and to translate that experience outdoors. and like with previous iterations of nintendo consoles, the hardware is not quite what you would expect as a fan of playstation or xbox. they are counting heavily on the software to be the big differentiator to make people want to keep playing with each other. oliver: "bloomberg businessweek" is available on newsstands now an online at bloomberg.com.
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