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April 11 — April 24, 2016 | bloomberg.com

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Capital Creates
23.2 Trillion Steps
That’s how many steps Fitbit’s millions of users have
taken since the launch of the company’s first tracker.
Fitbit can help its users stay on top of their fitness
goals. And the company knows that tracking physical
activity can motivate its users to do more of it. When
the company asked Morgan Stanley to help it go public,
we were pleased to lead Fitbit’s IPO, raising more than
$841 million. The company is now expanding its reach
abroad and continuing to develop innovative products
that help make fitness more fun. Ready to take the next
step? So are we. Capital creates change.
morganstanley.com/fitbit

The statements “23.2 Trillion Steps” and “That’s how many steps Fitbit’s millions of users have taken since the launch of the company’s first
tracker” are as of September 30, 2015, and are based on Fitbit’s SEC filing on November 13, 2015.
Fitbit’s IPO raised more than $841 million, including primary and secondary proceeds, after exercise of the underwriters’ option to purchase
additional shares, as per Fitbit’s press release dated June 23, 2015.
© 2015 Morgan Stanley & Co. LLC. Member SIPC. CRC1331714 12/15
 PHOTOGRAPH BY JONNO RATTMAN FOR BLOOMBERG BUSINESSWEEK

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 Cover
Trail
April 11 — April 24, 2016
How the cover gets made

①
Opening Remarks Central banks did what they could, but they’re not miracle workers 8 “The cover is our fourth annual
Design Issue.”
Bloomberg View Rx for Greece’s latest crisis • The change Saudi Arabia needs 10
“We can shoot someone young-
Global Economics looking with chunky rimmed glasses
To see why Trump’s anti-Nafta talk touches such a nerve, visit Scottsville, Ky. 12 hunched over a drafting table, and
there’s a lightbulb over his head with
The labor force expansion: Growing, growing, gone? 13
rainbows shooting from the table.
Refugees are testing Sweden’s limits as a welfare state 14 This would beautifully and succinctly
The Philippines’ sturdy growth rate is in danger of slipping 16 communicate the concepts of hard
work, ideas, and creativity.”
Companies/Industries “Speaking of ideas, that’s probably
As TV production ramps ever upward, there’s a shortage of … everything 19 the worst I’ve ever heard. Think
Asia needs more pilots. Women to the front of the line 20 about it this way: What is the
fundamental job of a designer?”
In China, Mercedes and BMW spy Lincoln and Cadillac in their rearviews 21
Briefs: Twitter’s football grab; Pfizer and Allergan don’t mix 22 “Solving problems.”

Politics/Policy “And what problems would you

like to see solved?”
What’s so special about April 15? 24
I’m Bernie Sanders, and I approve this message. Now, back to the ballgame 26 “In the entire world?”
Oklahoma looks for a way to shore up Medicaid—without using the “O” word 26
“Let’s narrow it down. What
Anti-LGBT laws hit states right in the pocketbook 27
problems would you like to see

Technology solved within yourself?”

When Airbnb and Uber start earning money, taxing them will be tricky 29 “Insecurity, pessimism, fatigue,
loneliness, extreme physical
The Wirecutter reviews gadgets, and bigger rivals smell a moneymaking model 30
weakness, depression, anxiety,
Embark Veterinary will tell you more about your dog than you ever thought possible 31 overeating, paranoia, forgetfulness,
4 Innovation: Pantheris’s laser-guided catheter could be “a game changer for patient care” 32 chronic knee pain, sugar addiction,
joylessness, crippling fear of
Markets/Finance irrelevance, hypochondria, low IQ,
oily skin, inability to grow hair where
Want to get your money out of China? Consider a foreign insurance policy 34 there should normally be hair on a
Subprime may be out, but Wall Street finds another way to finance homebuyers with bad credit 35 grown man, clumsiness, obsessive
compulsiveness, constipation,
When it comes to retirement investments, advisers now must put clients’ interests first 36 narcissism, aulophobia, boredom,
Bid/Ask: Alaska Air snags Virgin; Cucinelli cultures up its workers 37 vacuousness, lack of empathy, body
dysmorphia, ineloquence, poor table
Design 2016 manners, difficulty hearing, Netflix
binge watching, sexual inadequacy,
Daniel Libeskind The architect, drawn to trouble spots, builds a museum in northern Iraq 40
overactive bladder, emotional
Paul Tazewell To fashion a costume, consider actor, set, and lights, and that’s just the beginning 44 dependence, shortness of breath
after walking up a short flight of
Never, Never, Never Design rules these all-stars refuse to break 47 stairs, envy, insomnia, bad posture,
inner rage, shyness, ADD, crying
Industrial Light & Magic Inside the xLAB, a virtual-reality test kitchen 48 during every episode of CBS Sunday
Dialogue Baiju Bhatt, Michael Goode, and Manoj Narang on free stock trading 49 Morning, apathy, impostor
syndrome.”
Dominique Crenn For this chef, “it’s not just putting food on a plate. It’s also storytelling” 50
“Let’s focus on a few that some
Helen Marriage The art of creating moments people will never forget 52 of the designers in this issue might
be able to tackle.”
Brad Sewell From a small FedEx box, a stylish chair—one you can build in three minutes 54

Craig Dykers, Neal Benezra San Francisco’s Museum of Modern Art gets a major makeover 56

Stewart Butterfield Pondering Slack’s future, via Slack 60

James Corner The High Line creator’s spaces look like they’ve always been there 62

Ida Benedetto, N.D. Austin Parties you’d love to be invited to, in places you probably shouldn’t be 64

Dialogue David Belo, John Dales, and Camilo Pardo on driverless tech 67

Janine Benyus Biomimicry 3.8 takes the best of nature and makes it better 68

Stephen Burks A studio visit with America’s hottest furniture maker 72

Dialogue Jane Chen, Leeda Rashid, and Casey Georgeson on saving premature babies 74

Oskar Smolokowski Can he revive the Polaroid era? Let’s see what develops 76

Yves Béhar … And five other design leaders offer their best advice 79

Sound Smart! Before attending a conference, master Designspeak 84

OUR WORLD REVOLVES AROUND
Welcome to our Business Class, where your comfort is our priority.
YOU
AIRFRANCE.US
 Index
People/Companies

A Regal Beloit (RBC)

Roberts, Gwynne
12
40 U
56
Abe, Shinzo 8 Robinhood 49 Uber 29, 67, 79
Absolut (RI:FP) 76 Roche Bobois 73 UnionPay 34
AccorHotels (AC:FP) 37 SFMOMA Rock, Michael 79 United Airlines (UAL) 20
Adecco (ADEN:VX) 13 Roitfeld, Carine 79 Urban Movement 67
Air France-KLM (AF:FP) 20 Rovio Entertainment 22 Urban Outfitters (URBN) 76
Airbnb 29, 37 Ruckus Wireless (RKUS) 37 Ustwo 82
Airbus Group (AIR:FP) 70 RWF World 40
Alaska Air Group (ALK) 37
V
Allergan (AGN)
Almeida, Manny
22
76 S Vanguard Group 36
Amazon.com (AMZN) 22, 30 Salzberg, Matt 31 Verizon (VZ) 37
Amblin Television 19 Sanders, Bernie 12, 26 Viamedia 26
American Express (AXP) 16 Saudi Aramco 10 Vietnam Airlines 20
Analytics Media Group 26 Savage, Dan 60 Virgin America (VA) 37
Antonelli, Paola 65 Schulman, Dan 27 Volkswagen (VOW:GR) 21
Apollo Global Sewell, Brad 55 Vox Media 30
Management (APO) 35 Sextantworks 65
Apple (AAPL)
Aquino, Benigno III
29, 73
16
Shaffer, Lisa
Shumlin, Peter
31
27 W
Arth, Kristine 83 Simpson, John 32 Wagstaff, Sheena 79
Artichoke 53 Slack 60 Walt Disney (DIS) 22
Atelier Crenn 50 Smolokowski, Oskar 76 Wells, Spencer 31
Austin, N.D. 65 Smolokowski, Wiacezlaw West, Kanye 79
Autodesk 79 “Slava” 76 Wintour, Anna 79
Avinger (AVGR) 32 Snohetta 56 Wirecutter 30
AwesomenessTV 37 Solic Capital 26 Wong, Ken 82
Staggs, Thomas 22 Wyndham (WYN) 29

B Starbucks (SBUX)
Studio Libeskind
22
40
Baker Hughes 22 Dedon 73 Hearst 30 Lieberman, Mark 26 Swift, Taylor 79
Baldoz, Rosalinda 16 Deep Root Analytics 26 Herchen, Stephen 76 Ligne Roset 73 Syngenta (SYT) 35
Bank of America (BAC) 35 DNA My Dog 31 Herman Miller (MLHR) 83 Lincoln National (LNC) 36
Bank of Japan (8301:JP)
Barzani, Nechirvan 40
8 Dobbs Beck, Vicki
Draghi, Mario
48
8
Hilton (HLT)
HNA Group
29
37
Lomography
Lofven, Stefan
76
14 T
Battery Point Financial 35 DreamWorks Animation (DWA) Home Servicing 35 Tazewell, Paul 44
Beecroft, Vanessa 79 37 Hong Kong Easiness Wealth
M Teenage Engineering 76

6
Belo, David
Benedetto, Ida
67
65
Driver, Adam
Dykers, Craig
65
56
Management
HSBC (HSBC)
34
16 Magna Seating (MGA) 12
Terex (TEX)
Tetangco, Amando
35
16
8
Janet
Benezra, Neal 56 Hulu 19 Mandarin Oriental (MNOIY) 21 Time Warner (TWX) 19 Yellen
Benyus, Janine 69
E Marriott (MAR) 29 Tradeworx 49
Bhatt, Baiju 49
I Mars Veterinary 31 Trump, Donald 12
Bin Salman, Mohammed
BioHaven Technology
10
71
EasyJet (EZJ:LN)
EBay (EBAY)
20
76 IBM (IBM) 27
Massey Energy
McCrory, Pat
22
27
Tsien, Matt
23andMe
21
31
XYZ
Biomimicry 3.8 69 Eclectic Encore Props 19 Iger, Robert 22 McDonagh, Sam 29 Twitter (TWTR) 22, 79 Xi Jinping 21, 34
Black, Leon 35 Embark Veterinary 31 Ikea 76 McGoldrick, Brent 26 2x4 79 Yellen, Janet 8, 13
BlackRock (BLK) 36 Embrace 74 Impossible Project 76 McKelvey, Miguel 82 Tysan Holdings (687:HK) 37 Zoomlion (000157:CH) 35
Blankenship, Don 22 Encycle 70 Industrial Light & Magic (DIS) McLaren Group 67
Blue Apron 31 Envira-North Systems 70 48 Merck (MRK) 29
Blueline 12 EVA Airways 20 Merkel, Angela 8
BMW (BMW:GR) 21 MetLife (MET) 36
Boeing (BA)
Botta, Mario
20
56 F MGM Resorts
International (MGM) 27 How to Contact
Boyko, Adam 31 Facebook (FB) 30 Milk, Chris 82
Boyko, Ryan 31 FedEx (FDX) 55 Morningstar (MORN) 36 Bloomberg Businessweek
Braeburn Pharmaceuticals 27 50 Cent 79 Mossack, Jűrgen 16
British Airways 20 Financial Engines (FNGN) 36 Müller Textil 12
Brocade Communications Flickr (YHOO) 60 Editorial 212 617-8120 Ad Sales 212 617-2900
Systems (BRCD)
Bryant, Phil
37
27
Ford (F)
Fox (FOXA)
21, 22, 67
19, 26 26 N Subscriptions 800 635-1200
Address 731 Lexington Ave., New York, NY 10022
Burberry (BRBY:LN) 21 Foxconn (2354:TT) 73 Derek Narang, Manoj 49
E-mail bwreader@bloomberg.net

PHOTOGRAPH BY JOHN FRANCIS PETERS FOR BLOOMBERG BUSINESSWEEK; GETTY IMAGES(2)

Burks, Stephen 73 Fried, Jason 60 Jeter Netflix (NFLX) 19, 50
Butterfield, Stewart 60 Fujifilm (4901:JP) 76 Neumann, Adam 82 Fax 212 617-9065 Subscription Service
BuzzFeed 30 Fuseproject 83 New Balance 76
PO Box 37528, Boone, IA 50037-0528
Béhar, Yves 83
J New York Times (NYT) 30
E-mail bwkcustserv@cdsfulfillment.com
G Nissan Motor (7201:JP) 27

CD Gawker Media 30
James Corner
Field Operations 62
Nooyi, Indra
Norton, Ed
27
65
Reprints/Permissions 800 290-5460 x100 or
businessweekreprints@theygsgroup.com
Campaign 55 Geely Automobile Jenner, Caitlyn 79
Capital Economics
Carney, Mark
8
8
Holdings (175:HK)
General Motors (GM)
21
21
JetBlue (JBLU)
Jeter, Derek
37
26 O Letters to the Editor can be sent by e-mail, fax,
Cast & Crew Entertainment Georgeson, Casey 74 JPMorgan Chase (JPM) 13, 16 Obama, Barack 26, 36 or regular mail. They should include address,
Services 19 Giudice, Maria 79 Oculus VR (FB) 82 phone number(s), and e-mail address if available.
Chanel
Chen, Jane
21
74
Glencore (GLEN:LN)
Glitch
37
60
K Onefinestay 37
Connections with the subject of the letter should
China National Chemical
Clinton, Hillary
35
12
Goldman Sachs (GS)
Gomez, Nico
13
26
Kandarian, Steve
Kaps, Florian “Doc”
36
76 PR be disclosed, and we reserve the right to edit for
sense, style, and space.
Coca-Cola Far East (KO) 16 Goode, Michael 49 Keys, Alicia 65 Pardo, Camilo 67
Colliers International (CIGI) 16 Google (GOOG) 29, 30 KKR (KKR) 35 Parker, Robert 21 Corrections & Clarifications
Condé Nast 30 Gore, Al 65 KMC MAG Group 16 PawPrint Genetics 31
Constellation Brands (STZ) 37 Grazer, Brian 65 Kouthoofd, Jesper 76 PayPal (PYPL) 27 “Burt’s Bees Goes From Big-Box to Upscale”
Corner, James 62 Gunnlaugsson, Sigmundur Kuroda, Haruhiko 8 PepsiCo (PEP) 27 (Companies/Industries, April 4-April 10, 2016)
Crenn, Dominique 50 David 16 Pfizer (PFE) 22, 29 should have stated that Burt’s Bees, though
Cruz, Ted 12, 26
L Philippine Veterans Bank 16
founded in Maine, is based in Durham, N.C. <BW> A
Cucinelli
Cuomo, Andrew
37
26 H Lam, Brian 30
Polaroid
Prisoner Wine
76
37 caption in “Testing Times for a Giant U.S. Co-op”
Daimler (DAI:GR) 21 Hadid, Gigi 79 Legendary Entertainment 35 Procter & Gamble (PG) 65 (Focus On/Agriculture, April 4-April 10)
Dales, John 67 Haggerty, Rosanne 81 Levi Strauss 27 Prudential (PRU:LN) 34
Dalian Wanda Group 35 Halliburton (HAL) 22 Li Yida 34 PwC 29 misidentified the photo as from 1931; it was shot in
De Ocampo, Roberto 16 Harry Winston 73 Libeskind, Daniel 40 Rashid, Leeda 74 the 1950s.
 Opening No heart is immune from the uplifting
tale of the Little Engine That Could—that
plucky optimist who, against the odds,
Remarks saved the day by chugging a stranded train
over a mountain. In the world of econom-
ics, our central bankers have become this
storybook overachiever. Ever since the
Central
2008 Wall Street meltdown, they have
tried, tried, and tried again to pull the
broken global economy into happier
times, undaunted by setbacks, criticism,
Bankers or the sheer weight of their burden. At
times that unstinting effort has made
them heroes, too. The now-legendary 2012
Aren’t
pledge by Mario Draghi, president of the
European Central Bank, to do “whatever it
takes” to save the euro quelled the market
turbulence that threatened to tear apart
Super- Europe’s monetary union.
Today, though, central banks look
more and more like the Engines That
Heroes
Couldn’t. Despite all their tireless per-
sistence, the world economy remains
stuck on the tracks, short of its ultimate
destination—a real recovery. The value
By Michael Schuman of the often highly unorthodox methods
central banks have employed along the
route will be hotly contested by econ-
omists for years, even decades. What’s
beyond question is that the institutions
just don’t possess the horsepower to
8 rescue the global economy.
That hasn’t stopped economists and
investors from pressing central banks
to do even more. Draghi in early March
dropped the ECB’s interest rates to record
lows and expanded an unconventional
bond-buying program—called quantita-
tive easing, or QE—aimed at tamping down
rates even further. The Bank of Japan is
widely expected to take more measures
to boost that slumbering economy. In the
U.S., the December decision by Federal
Reserve Chair Janet Yellen to raise the
benchmark interest rate, after seven years
near zero, has been criticized by some
analysts as a mistake, and she’s recently
signaled that interest rates would be raised
more slowly than previously anticipated.
The pleas for more central bank action
seem to make perfect sense. Markets in
the U.S. have been in turmoil, and the
economy, though stronger than most
others in the developed world, is defi-
nitely not roaring. Europe and Japan,
struggling to grow and combat deflation,
are in far worse shape. Under such cir-
cumstances, central banks usually ease
monetary policy, making money cheaper
Janet Yellen, Mario to stimulate economic growth and prices.
In the case of Japan, Marcel Thieliant,
Draghi, and others senior Japan economist at research firm
have limited powers to Capital Economics, insists that “more
stimulate growth easing is surely needed.”
Yet the fact that the world’s advanced
economies are in such feeble condition
argues that easier money won’t solve their
problems. After all, central banks have
already been gunning their engines at
full throttle for seven years. Interest rates
remain remarkably low—in Japan and the
euro zone, they’re at zero. The ECB and
BOJ have even resorted to negative inter-
est rates, actually charging depositors
for holding cash, in an attempt to force
banks to lend and businesses to invest.
And although the Fed wound down its six-
year QE program, the ECB and BOJ con-
tinue to buy bonds on a massive scale.
There’s no consensus on how much
these cash-injecting maneuvers have
aided the real economy—or helped at all.
Supporters of Fed policy, for instance,
insist that its easy-money strategy suc-
cessfully shepherded the U.S. through
the Great Recession and into a period of
stable growth with near full employment.
At worst, they contend, the Fed prevented
the economy from tumbling into an even
deeper downturn. Detractors, however,
blame the Fed for causing a litany of ills—
exacerbating income inequality, encour-
aging a spendthrift government, inflating
a stock market bubble, roiling emerging
economies—while contributing little to the
American revival. Even Fed officials don’t
agree about the effectiveness of their own
policies. One 2015 study, by researchers
at the Federal Reserve Board, figures that
the Fed’s program made a significant con-
tribution to reducing joblessness, while
another, penned by Stephen Williamson,
vice president at the Federal Reserve Bank
of St. Louis, asserted that “there is no
work, to my knowledge, that establishes
a link from QE to the ultimate goals of the
Fed—inflation and real economic activity.”
The limits of central banking are more
apparent in Japan. In 2013 newly installed
BOJ Governor Haruhiko Kuroda embarked
on a gargantuan stimulus program aimed
at smashing endemic deflation, encour-
aging borrowing and spending, and
restarting growth in an economy that’s
stagnated for more than two decades. But
no matter how quickly Kuroda has run his
printing presses, the impact on Japan’s
outlook has been negligible. The economy
tumbled into recession in 2014, and gross
domestic product has contracted for two
of the past three quarters. Prices, by one
commonly used measure, didn’t change
at all in February from a year earlier.
The ECB hasn’t fared much better.
In early 2015, Draghi caught up with his
peers and began his own QE program to
ward off a Japan-style deflationary spiral.
But prices in the euro zone receded
 0.2 percent in February. The zone’s GDP
expanded an uninspiring 1.6 percent in
2015, and the outlook for this year isn’t
expected to be any better, while unem-
ployment is stubbornly high at 10 percent.
Meanwhile, there are indications that
central banks have already gone too far. In
Japan, the BOJ’s policies have so distorted
prices that on March 1 the government
sold benchmark 10-year bonds at a nega-
tive yield for the first time. Yes, investors
made the otherwise illogical decision to
lend the government their money and pay
for the privilege of doing so. In turn, that
alleviates the urgency for the Japanese
government—the most indebted in the
developed world—to rein in its budget
ILLUSTRATION BY STEVE EPTING
deficits. Lawmakers and economists fear
that the use of negative rates in Japan
and Europe will damage consumer senti-
ment and the health of banks. Even other
central bankers are raising concerns about
their compatriots’ decisions. At a confer-
ence in Shanghai in February, Bank of
England Governor Mark Carney com-
plained that negative interest rates can
weaken currencies, helping countries to
benefit at the expense of others.
In the desperate quest to revive the
global economy, it seems we’ve all for-
gotten what we learned in college eco-
nomics. Monetary policy is and always will
be an indirect science. Central banks can
pump money into an economy, but unless
Just pumping money
into an economy is
useless if companies and
consumers don’t spend it
investors, companies, and consumers use
it to build factories, start enterprises, or
buy cars, the flood of cash won’t boost
growth. In the end, it’s the demand for
money that counts as much as the supply.
That’s exactly what’s gone wrong in
Japan. Deflation isn’t just a cause of the
economy’s paralysis but also a symptom
of deeper constraints on growth.
Japanese companies are too burdened
by high costs, wrapped up in red tape,
and wedded to outdated business prac-
tices to take advantage of cheap cash.
That shows printing money is no sub-
stitute for real economic reform. Prime
Minister Shinzo Abe has leaned on
Kuroda to solve economic problems he’s
been politically unwilling to tackle. The
reform arm of his policy platform, known
as Abenomics, did make some progress,
joining the Trans-Pacific Partnership free-
trade agreement, for instance, and bol-
stering corporate governance rules. But
it hasn’t seriously addressed major flaws
that hamper growth and welfare, such as 9
a dual-track labor market that condemns
too many workers to temporary jobs with
little training or opportunity to advance.
The same has happened in Europe.
Draghi’s exertions were never matched
by the euro zone’s complacent political
leaders. The austerity-obsessed approach
to debt crisis, imposed by German
Chancellor Angela Merkel, wasn’t offset
by growth-enhancing reforms at the
European level, such as removing remain-
ing barriers within the common market.
Individual nations, from Germany to
Greece, haven’t done enough to fix their
own economies. In the U.S., Yellen could
have benefited from a helping hand from
Washington, but Congress has been too
gridlocked by, among other things, the
ideological stubbornness of the Tea Party
wing of the GOP to take measures that
could boost the nation’s competitiveness.
So to be fair to Yellen, Draghi, and
Kuroda, we’ve expected too much from
them. Central bankers simply can’t solve
our economic problems on their own, no
matter how hard they try. Ultimately, the
poor post-crisis recovery was the fault of
political leadership. Central banks had the
power and will to step into the breach,
and they heroically took up the burden.
But it proved too heavy. Their engines
have just run out of steam. <BW>
 Bloomberg
View
Time Is Running Out
For Greece—Again
Lots of parties share the blame for another
impending crisis, but it’s the EU that has to act
The Greek economy is still in desperate trouble, and another
10 crisis is looming. If it happens, this could set back hopes of
recovery across much of Europe. The last emergency won’t
soon be forgotten—yet nothing is being done to avoid a rerun.
The latest quarrel between Greece’s government and the
International Monetary Fund, one of its official creditors, only
underlines the continuing dysfunction. The impasse has to be
broken. For that to happen, the European Union must take the
lead, rethink its position, and grant Greece debt relief.
Greece’s gross domestic product is still falling from year
to year. About a quarter of the population is out of work.
Depositors pulled an additional €500 million ($570 million)
out of the country’s banks in February, showing that last year’s
rescue plan has failed to restore confidence.
On July 20, Greece is scheduled to repay about €2.4 billion
of principal and interest on loans from the European Central
Bank and the European Investment Bank. The nation’s total
debt-financing needs in June and July exceed €10 billion—
money it doesn’t have, unless more bailout funds are released
by then.
As these pressures build, the IMF and the EU have been
trying to agree on a joint position. The IMF thinks Greece
needs debt relief; the EU is opposed. A transcript published by
WikiLeaks shows despairing IMF officials wondering whether it
might take another crisis to force Europe to act. At the moment,
that seems all too likely.
Greece accuses the IMF of acting in bad faith and says it’s
advocating another crisis—a plainly false interpretation that
testifies to the government’s own bad faith. It’s true, though,
that the IMF shouldn’t have been involved in the first place.
The EU has all the resources it needs to deal with this problem.
Part of the cost it will have to bear is sufficient debt relief to
make Greece’s fiscal position sustainable and to let a real eco-
nomic recovery begin.
To read Leonid
Bershidsky on the
Panama Papers and
Marc Champion on
Donald Trump’s NATO
question, go to
Bloombergview.com
By continuing to deny this, the EU does indeed risk provok-
ing another crisis. Add to this situation the possibility that the
U.K. might vote to leave the union this summer, not to mention
the continuing emergency over migrants. Of all these problems,
Greek debt is the easiest to solve. Yet Europe lets it persist.
Greece, to be sure, has its work cut out, even if granted debt
relief. It must continue reforming its public finances. It should
stop dragging its feet over selling state assets and allowing its
banks to mend their balance sheets by selling nonperform-
ing loans, even if the buyers are so-called vulture funds. The
creditors are entitled to insist on further effort—still, without
new debt relief, the EU is demanding the impossible.
There’s plenty of blame to go around—but right now it falls
mainly to the EU to stop the next crisis before it happens.
The Right Dream
For Saudi Arabia
Speed is essential for political and cultural
reforms, especially in the face of opposition
No one can fault Deputy Crown Prince Mohammed bin Salman
for lack of ambition. The 30-year-old son of Saudi Arabia’s king
has plans to sell shares in the world’s largest state oil company
and create the largest sovereign wealth fund. The idea is to
help the country diversify its economy. The fund would invest
around the world while helping Saudi Aramco expand beyond
oil and into construction, engineering, and other industries.
It’s a bold move, and its scale alone may help Saudis under-
stand the magnitude of the challenge they face.
At the same time, it will take more than this to produce the
change the country needs. Success requires moving fast on the
kinds of political and cultural reforms that usually take decades.
A population accustomed to relying on immigrant labor and
government assistance will have to work more and pay taxes.
At the same time, the state will have to be more responsive to
the citizens that it’s now asking to start businesses and fend for
themselves. It will have to provide them with better health care
and an educational system that helps them succeed in a new
economy. More women will need to work (and drive to work,
too). Fewer princes will be able to enjoy luxurious lifestyles at
state expense. And when there’s unrest, the government will
have to resist the temptation to buy off the opposition.
This is a tall order, to put it mildly. For Saudi Arabia to
become the kind of regional financial-services hub that Prince
Mohammed envisions would be harder still. Ultraconservative
religious leaders and much of his own family would fiercely
ILLUSTRATION BY MARK PERNICE
oppose the kinds of changes needed to make their country
attractive to employees of foreign companies.
The prince has moved surprisingly quickly to cut waste
and subsidies and is pushing for large-scale privatizations. He
deserves support. But he’ll also have to show he’s ready to do
what it takes to succeed—and sooner than he thinks. <BW>
 You can’t mine
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Global
Economics
April 11 — April 24, 2016
A Tale of Two
Nafta Towns
▶▶A relocated factory breeds anger in Kentucky and brings low-wage work to Mexico
▶▶“Nafta is the worst thing that’s ever happened to the U.S.”
Amid the rugged cattle farms that dot
the hills of southern Kentucky, in a
clearing just beyond the Smoke Shack
BBQ joint and the Faith Baptist Church,
lie the remains of the A.O. Smith elec-
tric motor factory. In the eight years
since it closed, the building’s blue-
metal facade has faded to a dull hue.
Rust eats away at scaffolding piled
up in the back lot, and crab grass
is taking over the lawn. At its peak
the plant employed 1,100 people, an
economic juggernaut in the tiny town
of Scottsville (population 4,226).
Randall Williams and his wife,
Brenda, were two of those workers. For
three decades they helped assemble the
hermetically sealed motors that power
air conditioners sold across the U.S.
By the end, each made $16.10 an hour.
That kind of money is just a dream
now. Randall fills orders at a
local farm supply store; Brenda
works in the high school cafete-
ria. For a while their combined
income didn’t even add up to
one of their old factory wages.
Just as the Williamses were
being told by A.O. Smith that
they’d be let go in 2008, a
young Mexican woman named
Zoraida González was hired
1,200 miles away in the hard-
scrabble town of Acuña,
just across the Rio Grande.
To replace its Kentucky
output, A.O. Smith ramped
up production in lower-cost
Mexico, a move facilitated by
the implementation 14 years
earlier of the North American
Free Trade Agreement.
González was brought in
to help handle phone calls.
Now 30 years old and in charge of
payroll, she makes about $1.75 an
hour, on par with wages earned on
the plant’s assembly line. It may not
seem like much by U.S. standards, but
to González the money has been life-
changing. It’s given her things she
says her mother never had: a washing
machine, cable TV, a minivan, and the
hope that her 11-year-old son, Angel,
will be the first member of her family
to attend college.
González doesn’t know much about
Nafta, and even less about Republican
presidential candidate Donald Trump
or the way he blames U.S. trade deficits
with Mexico and China for the loss of
jobs in America. But Williams sure does.
He caucused for Trump in Kentucky.
So did a lot of his neighbors. In Allen
County, a collection of eight towns
Williams
along the Tennessee border, Trump
won 42 percent of the vote on his way to
a narrow victory in Kentucky.
It was one of those kinds of results—
in the heart of Southern Baptist
country, where support was expected
to go to the socially conservative Ted
Cruz—that revealed the extent to
which Trump’s anti-free-trade tack
has touched a nerve with millions of
working-class Americans. “Nafta is
the worst thing that’s ever happened
to the U.S.,” says Beverly Anderson, a
Scottsville councilwoman who worked
at the electric motor plant for 28 years.
Before Nafta, trade between the
U.S. and Mexico was a relatively tame
affair. The two sides alternated between
deficits and surpluses—small figures,
typically no bigger than a few billion
dollars. U.S. exports quickly jumped
after the accord went into effect in 1994,
but the imports pouring in from Mexico
climbed faster, and by 2015 the U.S. was
posting a deficit of almost $60 billion.
Robert Scott of the Economic Policy
Institute, a think tank critical of free-
trade deals, estimates the deficit
with Mexico alone has cost 850,000
American jobs. This, in turn, has a
FROM TOP: MATTHEW BUSCH/BLOOMBERG; LUKE SHARRETT/BLOOMBERG
“chilling effect,” he says. “It actually
causes wage losses for everybody who
doesn’t have a college degree.” After
accounting for inflation, hourly pay at
U.S. factories has been stagnant since
the early 1970s.
Trump and, to a lesser extent,
Democratic candidate Bernie Sanders
have found so much success in express-
ing the working man’s anger
that no candidate, not even
Hillary Clinton, whose husband
signed the Nafta deal, is willing to fully
embrace free trade. Trump’s proposed

solution is to impose restrictions on
imports, a strategy backed by almost
two-thirds of Americans in a Bloomberg
Politics national poll conducted from
March 19-22. Little if any talk on the
campaign trail is dedicated to the
benefits of the surge in cheap imports,
such as subdued inflation that preserves
consumers’ purchasing power.
On the Mexican side of the border,
the benefits are clearer. Hundreds of
thousands of manufacturing jobs have
been created in the past two decades.
Acuña has some 38,000 factory workers
today. The town’s population is 136,000,
vs. 42,000 in 1980. While evidence of
sharp wage growth is hard to find in
these industrial communities, other
data underscore the role Nafta has
had in helping boost the lives of many
Mexicans: Gross domestic product per
capita has climbed 23 percent since
1996. More important, the decades-old
surge of illegal immigrants crossing the
border in search of work has receded.
Since 2005, more Mexicans have left the
U.S. than have entered it, according to
Pew Research Center.
Acuña is a sun-drenched, dusty town
carved out of the broad mesa that
stretches across northern Mexico. On
the opposite side of the border sits Del
New math for
Sweden’s welfare
state 14
Is a Filipino lifeline
fraying? 16
about the grind of
factory life. Not
González. Sure,
she’d like a bit
more pay and a
few more crea-
González
ture comforts,
but “we have food
to eat,” she says.
“We’re together,
we have work
and health.”
Back in
Scottsville, such
optimism is rare.
Politicians “keep
saying things are
going to get better,”
Williams says.
“They’re not going
to get better.” Jeff
Woods, another
Scottsville resident,
is still angry, too.
His mother worked 13
Rio, Texas, home to Laughlin Air Force at A.O. Smith. Today she’s a pharmacy
Base. Before the factories came, Acuña technician, making a fraction of her old
was best known for bars and strip clubs wage. “Somebody works there all their
that catered to off-duty U.S. airmen, a life, and you get to be fiftysomething
culture that rock band ZZ Top glorified years old and your income gets cut
in a raunchy, racially charged 1975 hit, in half because the place moves to
Mexican Blackbird. Mexico,” he says. “That’s not right.”
Some of those seedy elements �Thomas Black and Isabella Cota
remain, but they’re surrounded by
The bottom line The economics of Nafta have
block after block of residential and left some U.S. workers underemployed and angry
commercial developments. Next door while raising parts of Mexico out of poverty.
to the electric motor plant—which
Regal Beloit acquired from A.O. Smith
in 2011—there’s a Blueline factory,
where workers make paper products;
farther down the street, Magna Unemployment
Seating employees churn out car seats
and seat covers. Then there’s a textile
Finally, Some Force
operation run by Müller Textil, a In the Labor Force
Germany-based company. Neither A.O.
Smith nor Regal Beloit responded to
▶ There’s been a spike in Americans
requests for comment.
working or seeking jobs
Across town, González and her boy-
friend, Manuel Aragón, who works in ▶ “Essentially, we are at the peak”
the car seat factory, live with their two in the rate of participation
children in a subsidized-housing com-
munity. Kids play in the middle of the Emboldened by strong demand for
road. Dogs bark at passing strangers. workers, Americans have flooded into
The houses are almost all identical, the U.S. labor market over the past six
save the differing shades of pastel paint months at the fastest pace since at least
that coat the exteriors. 1948. Most have found work, while
Some in the neighborhood complain others are still looking. Either way,
 Global Economics
their presence allows employers to
hire more workers without having to get
into a bidding war with competitors.
The rapid expansion of the work-
force has helped justify the decision
of the Federal Reserve under Chair
Janet Yellen not to raise interest rates
in March. With plenty of workers avail-
able, companies can expand hiring
without having to jack up wages, which
could contribute to inflation. “Yellen’s
labor market call is panning out,”
Michael Feroli, the chief U.S. econo-
mist of JPMorgan Chase, headlined his
analysis on April 1. “Yellen wagered that
participation would pick up in a high
pressure labor market,” he wrote, “and
so far she’s looking pretty smart.”
Unfortunately, Feroli and many
other economists believe the surge
won’t last. They predict that as more
baby boomers retire, the share of the
population that participates in the
labor force will resume the downward
slide that began in 2000. That will
complicate the Fed’s job.
To grow without excessive wage
inflation, the U.S. economy needs a
14 big group of active workers as well
as a smaller group of people who are
available and looking for jobs. Those
two groups combined make up the
labor force—which has never added
more workers than it has over the
past six months. (It officially grew a
bit faster from late 1999 to early 2000,
but that was a statistical fluke related
to U.S. Census Bureau population
estimate revisions.)
Economists focus on the labor force
participation rate, the size of the labor
A Welcome Bounce in the Job Market
The share of the U.S. adult population that’s working
or seeking work has jumped lately.
U.S. labor force
participation rate
67%
Optimism about job
openings has brought
people flooding back
66%
into the labor force
65%
64%
63%
62%
1/2007 3/2016
force as a share of the entire civilian
population age 16 and over that’s not
in prison or other institutions. It rose
for 35 years as more women entered
the workforce, peaking at 67.3 percent
in 2000. It fell slowly until 2008, then
rapidly during and after the deep reces-
sion, touching bottom at 62.4 percent
last September. It’s now 63 percent.
JPMorgan’s Feroli estimates that
demographic forces will continue to
push down the labor force participa-
tion rate by 0.25 percentage points a
year. A strengthening economy should
help offset the drag for a while, but that
still leaves a projected annual decline
of 0.15 percentage points in the labor
force participation rate from here on.
“Essentially,” Feroli wrote in an e-mail,
“we are at the peak.”
David Mericle, a senior U.S.
economist at Goldman Sachs, reached
a similar conclusion in early March.
He broke down the decline and recent
rebound in the participation rate
into its various components, includ-
ing retirement, disability, discourage-
ment, and school enrollment. Some
discouraged workers on the side-
lines could still come back to work,
but otherwise, he wrote, “We now
view the cyclical participation gap as
within 0.1-0.2 percentage points of
being closed.”
The pessimists could be surprised
if more of the roughly 600,000 dis-
couraged workers reenter the labor
force. While their ranks have fallen
from 1.3 million in 2010, they could
drop further: There were fewer than
300,000 discouraged workers in 2000.
Less educated
Americans have
been reentering the
market
Change in labor force participation rate
Percentage points, September 2015
to March 2016
Bachelor’s degree or more
Less than high school
Men
Women
Black
White
0 0.2 0.4 0.6 0.8 1.0 1.2
Another source of workers could
be people working from their kitchen
tables or dens. Says Mike Wachholz,
president of Pontoon Solutions, a
human resources outsourcing firm
in Jacksonville, Fla., that’s a unit of
Switzerland’s Adecco: “More and more
of our clients are getting comfortable
with having workers who aren’t on site
or even in the region.” �Peter Coy
The bottom line The record expansion of the
labor force is good news, but don’t expect it to
last. Baby boomers are still retiring in droves.
Reform
Refugees Test the
Swedes’ Welfare State
▶ The influx spurs calls for wage
and housing reform
▶ “The government completely
lacks a plan”
In a Sweden grappling with a refugee
crisis, once-unimaginable changes
to the welfare state are being consid-
ered. The two areas that have gener-
ated the most intense discussion are
wages and housing. The government
faces pressure from the opposition to
interfere in the labor market, where
pay is traditionally set by employers
and unions and the state plays no role.
The argument for intervention is that
Sweden needs a lower minimum wage
to help create the jobs to absorb the
250,000 Afghans, Iraqis, and Syrians
who have arrived in the past two
years. At about 20,000 kronor ($2,453)
a month, Sweden’s collectively bar-
gained minimum wages are among the
highest in Europe.
Employers may be reluctant to hire
unskilled refugees at that rate. Three
of the four opposition parties that
ruled Sweden in a coalition from 2006
to 2014 are so worried about the bleak
prospects for migrants that they’re
prepared to legislate lower wages, a
DATA: BUREAU OF LABOR STATISTICS
big change in the context of Swedish
politics. “Politicians can’t stand with
their arms crossed and do nothing,”
says Mats Persson, a parliamentarian
for the opposition Liberals. “There’s a
high risk that the unions and employ-
1.4 ers won’t take the general public
 Global Economics

interest into account and that large

Accelerating
groups will continue to be left outside
the labor market,” Persson says. “The
government completely lacks a plan
time to value
for how newly arrived refugees will be
able to enter the labor market.”
The ruling Swedish Social Democratic
Party says there’s no need to change the
government’s role and that the system
of cradle-to-grave benefits supported by
high wages and taxes is robust enough
to absorb the migrants who’ve flooded
the nation of 9.9 million. Prime Minister
Stefan Lofven, a former head of the
metalworkers’ union, says the opposi-
tion’s proposals constitute an attack on
that model. He’s vowed to safeguard
the wage system and not to dismantle
the welfare state. What Sweden needs,
he says, is more workers who make the
welfare state function—especially teach-
ers and nurses—not lower salaries.
Strains are also showing in the
tightly regulated housing market
as the refugee influx aggravates an
acute shortage. The government has
started talks with the Swedish Union
of Tenants and the Swedish Property
Federation to change the way rents are
set. An estimated 700,000 additional
homes will be needed over the next
decade. Reinhold Lennebo, head of the
property federation, hopes the talks
will be the starting point for reform of
rent control: A quarter of all Swedes
live in rent-regulated housing. “We
have gigantic demand for housing in
Sweden, but no one has an incentive
to meet this demand,” he says. “Rent
control puts a lid on the market.”
The population increase has also con-
tributed to a severe teacher shortage:
Some 70,000 refugee children arrived
last year. Eight out of 10 elementary
schools are struggling to recruit staff,
according to the Swedish Association of
Local Authorities and Regions.
The overarching concern is getting
immigrants employed faster so they
Stand up infrastructure for new workloads
can pay taxes to finance the benefits in as little as 3 minutes. That’s the power of Hewlett Packard
the state provides. It will be tough. Enterprise Composable Infrastructure.
Only about 25 percent of the refugees
who arrived over the past eight years
have a full-time job, according to
Parliament’s investigation service.
Still, with the economy booming
because of recovering exports and
the central bank’s stimulus efforts,
the labor market is tightening. hpe.com/value
Unemployment among those born in
Sweden is a low 4.5 percent, and
© 2016 HPED LP. Numbers based on internal testing. Results may vary.
Global Economics
Quoted
“The cat’s out of the bag.
So now we have to deal with
the aftermath.”
Jurgen Mossack, partner in the Panama law firm Mossack Fonseca, which set up
thousands of shell companies in offshore tax havens. Their files were hacked and
published, revealing the names of prominent clients, including Iceland’s prime minister.
there are labor shortages in some
areas, according to Jesper Hansson,
head of forecasting at the National
Institute of Economic Research. “All
else being equal, we should be more
optimistic” about the employment
prospects for refugees, he says.
Tax increases may be needed anyway,
according to the Swedish Association of
Local Authorities and Regions. While
the tax base will grow in the coming
four years, local government spend-
ing will rise twice as fast. In Malmo,
Sweden’s third-largest city, the growth
in the number of schoolchildren and
jobless refugees is expected to result
in tax revenue that will fall 15 percent
below spending needs until 2030,
according to Mats Hansson, the city’s
long-term budget planner. “The
pluses and minuses don’t add up,” he
says. “That means we’ll need to con-
sider what we see as welfare. The risk
otherwise is that everything just gets
15 percent worse.”
Amid the debate about caring
for the newcomers, the national-
ist, anti-immigrant Democrats are
polling at almost 20 percent after
winning 13 percent in the last election.
In an April poll by Swedish pollster
SKOP, a record 64 percent of Swedes
said the country was headed in the
wrong direction.
Icelanders call for
the ouster of Prime
Minister Sigmundur
David Gunnlaugsson,
services, it isn’t such an
who stepped aside outlier. As multinationals
after the revelations.such as JPMorgan
He denies any Chase and American
wrongdoing.
Express expand there,
more than 1.4 million square meters
of office space will be added over the
next two years, says Julius Guevara, an
analyst at Colliers International.
The economy is on pace to grow
around 6 percent in 2016 and 2017, the
Asian Development Bank says, com-
pared with less than 5 percent for
Southeast Asia as a whole. While a
slump in China has hurt other Asian
countries, “the Philippines is ticking to
a very different rhythm,” says Joseph
Incalcaterra, an economist with HSBC.
That rhythm faces some disruption
as the May election to replace term-
limited President Benigno Aquino III
approaches. More than 2 million
Filipinos work in the Middle East, and
the economy depends on money they
send back. A slowdown in countries
hurt by low oil prices has pinched
remittances. Payments from the
“The Swedish model was a com- 10 million Filipinos who work abroad
petitive advantage when Sweden was rose just 4.6 percent last year, the
a homogeneous industrial society,” slowest since 2001.
says Andreas Bergh, an economist at A high-profile cybercrime case may
the Research Institute of Industrial also lead to tighter scrutiny applied
Economics. “But now it’s become to money transfers to the Philippines.
an obstacle as no one really knows In February hackers stole $81 million
who should take responsibility for from the Bangladesh central bank by
the changes that need to be made.” routing it from the U.S. Federal Reserve
�Amanda Billner to a bank in the Philippines. The
thieves then gambled $30 million of
The bottom line Contending with 250,000
refugees in two years, the Swedes find their long- the stolen cash at a Manila casino that’s
held belief in an equal society being put to the test. exempt from anti-money-laundering
laws because of a loophole created to
encourage investment in the tourism
industry. The rest of the money went to
other gambling operators, Julia Abad,
Developing Markets executive director of the Philippine
Anti-Money Laundering Council, said at
Is Depressed Oil About a Senate hearing on April 5.
To Spoil Manila’s Mood? The televised investigation hear-
ings have created a “global spectacle,”
Philippine Veterans Bank Chairman
▶ Remittances from the Middle East
Roberto de Ocampo said in a state-
are a large percentage of GDP
ment. “If we continue on this path, the
▶ “The gains we have had in the gains we have had in the past will be at
past will be at risk” risk.” Some foreign lenders have closed
the accounts of remittance companies
Manila used to be the city the Asian after implementing rules to fight money
economic boom forgot—overlooked in laundering and terrorism financing,
HEIÐA HELGADÓTTIR
favor of more dynamic spots in China central bank Governor Amando
and Thailand. But with the Philippine Tetangco said on March 29.
capital now a favored destination for Even as the economy has outper-
call centers and other outsourced formed most of Southeast Asia, the
 Global Economics

Philippines has lagged in attracting

Accelerating
foreign direct investment. That’s led
to chronic infrastructure problems.
Despite $4.2 billion in govern-
insights
ment contracts awarded since 2010
for roads, ports, and mass transit,
it’s still difficult to travel across the
country’s archipelago of 7,000 islands.
“Everything is running at overcapacity
right now,” says Antton Nordberg, an
analyst at KMC MAG Group, a Manila-
based real estate services company.
There hasn’t yet been a spike of
layoffs in the Middle East, but some
employers there may be freezing
salaries, Labor and Employment
Secretary Rosalinda Baldoz said in
February. Last month her depart-
ment teamed up with Coca-Cola Far
East to help women who return home
after working overseas. The program
offers entrepre-
GDP Growth neurship training
and other support
8% so returnees can
Philippines
start businesses.
For those who do
6% return, getting a job
in a factory prob-
Southeast Asia
ably isn’t an option.
4% Unlike other Asian
2013 2017 est. countries that rely
on exports, in the
Philippines factories don’t generate
much growth. Manufacturing makes
up just 20 percent of gross domestic
product, compared with almost
60 percent for services. The Philippines
“bypassed the whole manufacturing
thing,” says HSBC’s Incalcaterra.
For now, the growth of the outsourc-
ing industry can compensate for that
weakness, but call centers and other
outsourcing businesses are looking to
cut head count by using more automa-
tion. That could present a challenge
to Aquino’s successor. Still, Gareth
Leather, a senior Asia economist with
Capital Economics, writes in an April 5
7 of the 10 WorldÕs Most Admired Companies
report, “Whoever replaces Aquino will drive business decisions using
take over a country that is in better Data Analytics from Hewlett Packard Enterprise.
shape than it has been in for a long
time.” �Bruce Einhorn, with Norman P.
Aquino and Ditas B. Lopez
DATA: ASIAN DEVELOPMENT BANK

The bottom line The oil bust, plus a hacked

banking system, threaten remittance payments
from 10 million Filipinos working overseas.

Edited by Christopher Power hpe.com/insights

and Matthew Philips
Bloomberg.com
© 2016 HPED LP. Source: Fortune Global 500, Most Admired Companies 2015.
KN W
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 Companies/
Industries
April 11 — April 24, 2016
Hollywood Is
Running
Out of
Tombstones
▶▶The new golden age of television has brought shortages of studio space and production staff
▶▶“When it rains, it pours. That’s happening more and more often”
There’s a tombstone shortage in
Queens. Eclectic Encore Props,
a prop rental shop in the New York
borough, is down to its last fake memo-
rial, its stock of more than a dozen
having been signed out to TV shows
filming in the city. That’s left three
series vying for the remaining grave
marker. “They all need my tombstones
because they’re all shooting scenes in
a graveyard in the same week,” says
PHOTO ILLUSTRATION BY 731; PHOTOS; ALAMY (21); GETTY IMAGES (1)
Barry Godin, who works at the store.
“When it rains, it pours. That’s hap-
pening more and more often.”
An explosion in American television
production is threatening to overwhelm
filming facilities from California to
Canada to Georgia. Everything, includ-
ing props and construction crews,
has been scarce during the spring
pilot season, when dozens of episodes
of would-be series are churned out.
Vancouver ran out of studio space,
forcing casts to work in abandoned
buildings, such as the former nut-
processing factory where this season’s
Wayward Pines on Fox is being filmed.
The boom is fueled by the original
content ambitions of Netflix and Hulu
and by free-spending governments
competing to attract production jobs
by offering subsidies that can make
producing a show affordable even for
studios on a budget. “The demand
they’re creating is enormous,” says Ian
McKay, chief executive officer of the
Vancouver Economic Commission.
In Georgia, the third-most-popular
state for TV show filming after
California and New York, higher edu-
cation officials recently created a
certification program to fast-track stu-
dents to work on TV and film produc-
tion crews. That came after producers
of the Fox TV drama Red Band Society
arrived in Atlanta two years ago to
film but couldn’t find anyone to build
their set. They were forced to fly in
Can Asia’s female U.S. carmakers make
pilots fly higher? 20 a play for China’s
luxury market 21
Briefs: Twitter scores
an NFL deal; Pfizer
stays home 22
19
their own construction workers. Says
Justin Falvey, co-president of Amblin
Television, a producer of the show,
which was canceled last year after
one season on Fox: “In many of these
cities where you have these enormous
tax rebates, you’re battling to get the
best people.”
Equipment and personnel shortfalls
sometimes occur even in Los Angeles,
the biggest city in a state that in 2014
tripled tax credit assistance for pro-
duction companies, to $330 million
annually. The number of prime-
time scripted shows made in the city
last year was 129, and the number of
filming days for TV dramas has jumped
78 percent, to 4,374, since 2012, accord-
ing to FilmL.A., a nonprofit that pro-
cesses filming permits in the L.A.
area. If you’re a sound mixer or a prop
maker or a greensman, who ensures
the foliage in a frame looks native
to the region where a show’s set,
 Companies/Industries
46
Episodic series
produced in New
you’re hired. Teamsters Local 399 in production spending. York City in 2015, Earhart’s solo flight across the
Hollywood is even looking for people Georgia’s current up from 29 in 2014 Atlantic, women such as Kuo, a
to drive dressing-room trailers, known tax incentives started in 2008 after 36-year-old co-pilot on the Taiwanese
as “honey wagons,” after exhausting its the makers of Ray, about native carrier’s Boeing 747s, remain the
roster of regulars. Georgian Ray Charles, decided to film exception in the cockpit. Only
“Our people are busier now than in Louisiana because of its subsidies. “It 5 percent of pilots globally are female,
they’ve been since the 1990s,” says was a wake-up call,” says Lee Thomas, says Liz Jennings Clark, chairwoman
Edmond Brown, the business agent deputy commissioner of the Georgia of the International Society of Women
for Local 44 of the International Film, Music & Digital Entertainment Airline Pilots (ISWAP).
Alliance of Office. “We said, ‘Either we do the tax Asia’s rapid escalation in air travel
Lights, Camera, Theatrical Stage incentives or we won’t be in the film could force the industry to address that
Dollars Employees, which business.’ ” Last fiscal year, Georgia imbalance. The region is transporting
New York state’s film
and TV incentives show
represents about was the setting for 248 film and TV pro- 100 million new passengers every year,
how governments woo 6,000 entertain- ductions, including the CW Television says Sherry Carbary, vice president for
production work. ment business Network’s The Vampire Diaries and flight services for Boeing, which assists
Show me the money workers in the AMC’s The Walking Dead. Atlanta is airlines in training pilots. To transport
A 30 percent tax credit L.A. area. “That’s so busy it’s known as Y’allywood. To its new middle class, Asia will need
applies to all production solely because of address a space shortage, developers 226,000 more pilots in the next two
expenditures made in
New York, including
the tax credits.” are building a 270,000-square-foot TV decades, according to Boeing. “There is
wages paid to extras, The U.S. televi- and film studio on the site of a shut- such an enormous demand to meet the
plus pay for crew who sion industry aired tered former General Motors plant. growth that the gender bias will have to
aren’t actors, directors,
producers, or writers.
a record of more When Falvey’s company arrived in be pushed aside,” Carbary says.
A project gets an than 400 scripted Atlanta to shoot Red Band Society, the Vietnam Airlines, based in one of
extra 10 percent credit series in 2015, up production team was set to pay hand- the world’s 10 fastest-growing avia-
if filming is done in
upstate counties.
from 352 the previ- somely for a custom-built set. But tion markets, is creating more flexible
Putting in the time
ous year. In 2016, with 33 other shows shooting in the work schedules that take the demands
At least 10 percent of Netflix alone will city, all the construction workers were of family life into account. And fast-
principal photography devote $5 billion tied up. Importing an growing U.K.-based EasyJet has set up
20
days must occur on a
New York soundstage.
to program-
ming, whereas
$420m
The state’s annual
out-of-town crew was a
pain, but Falvey says he’s
a scholarship with the British Women
Pilots Association to underwrite the
It’s never too late
Time Warner’s funding cap for ready to work in Atlanta costs of training women pilots.
Shows that are shot
elsewhere but do post­ HBO plans to film and television again. “We were saving Recruitment ads for carriers such as
incentives
production in New York spend more $400,000 by not shooting British Airways increasingly feature
are eligible for as much than $1 billion on in L.A.,” he says. “Even if we have to female pilots, while EVA Air, which
as a 35 percent credit of
the value of the work. original series. fly in construction workers, that’s still has about 50 women among its 1,200
No taxes, no problem The produc- worth it.” �Gerry Smith pilots, has recruited from universi-
If the credit is larger tion incentives ties in Taiwan with ads showing Kuo.
The bottom line The U.S. television industry
than the taxes a war that’s helped produced more than 400 scripted series last year, “Finding capable flight crews isn’t
production owes, create the short- a record. That’s causing shortages. easy,” says Richard Yeh, who over-
producers pocket the
difference in cash. ages began in sees pilot training at EVA Air, which is
The longest paydays the 1990s, when trying to hire 100 pilots a year to
Credits of $1 million to Canada began meet demand. “We have to try to find
doling out sub- more pilots like Sophia.”

COURTESY EVA AIRWAYS CORP. DATA: CAST & CREW; MOTION PICTURE ASSOCIATION OF AMERICA
$5 million are paid out
over two years. Larger sidies to lure Airlines At flight training colleges in Asia, the
amounts are spread
studios across the number of female students remains
over three years.
border. Nearly
More Women May Sit low. Frequently less than 10 percent
Gimme cred
A show receiving 19,000 people In the Front of the Plane of the 200 cadets at Malaysian Flying
incentives must include were employed Academy Sendirian Berhad’s two-
a nod to New York’s film by the film and TV year program are female, says Stephen
and TV development ▶ Asia’s big air traffic increases
program in its credits. industry in British Terry, the principal. “Some carriers in
could open jobs for female pilots
Columbia last year. Asia won’t even consider hiring women
Aided by a favorable exchange rate, ▶ Limiting the “pool to mostly white pilots,” Terry says, and others prohibit
the number of productions shot in males has strangled growth” females to avoid mixed-gender crews
Vancouver jumped 40 percent. sharing bunk compartments on long-
In the U.S., 35 states offer production Sophia Kuo says she still hears the haul flights.
assistance, according to Cast & Crew whispers as she walks through inter- To qualify for a license to captain
Entertainment Services, which pro- national airports in her EVA Airways a plane, you need to read, write, and
vides payroll and management ser- pilot’s uniform: “Wow, we have female speak English fluently; have thousands
vices for the industry. Several states pilots.” “How does she fly an airplane?” of hours of flight time; have no crimi-
give studios tax credits, rebates, or “She must be really smart!” nal record or history of alcohol abuse;
grants of about 30 percent of certain More than 80 years after Amelia and be free of a long list of medical

conditions such as color blindness.
“Pilot personality traits and apti-
tudes are rare within the human pop-
ulation regardless of gender or race,”
says Mireille Goyer, founder of the
Vancouver-based Institute for Women
of Aviation Worldwide, which advo-
cates for more women in the cockpit.
“Arbitrarily reducing the potential pool
to mostly white males has strangled
growth and led to today’s situation.”
Some women face an historical lack
of support for those who want to fly
planes and raise a family. “Flying time
for female pilots may be limited due to
maternity leave or the fact they need
time to take care of their kids,” Luu
Hoang Minh, a Vietnam Airlines flight
crew deputy director, said in an e-mail.
He said his carrier, which has 11 female
pilots out of 1,058, takes these factors
into account and tries to arrange flying
schedules that help women balance
family obligations.
In Asia, where traditional attitudes
toward a woman’s role are strong, it’s
especially hard for women to get into
the cockpit, says Kit Darby, a former
United Airlines captain who works as
a consultant. Being a commercial pilot
is still viewed “as a single man’s game,”
he says. Even women who break in will
have to wait years to assume leadership
roles. Most major carriers require flight
captains to have at least 3,000 hours
of commercial flying experience—
not including flying time during flight
school. So women recruited today on
legacy carriers wouldn’t be ready to
take charge of a plane for 12 to 15 years,
says ISWAP Chairwoman Clark, a
EVA
Airways’
Kuo
captain with Transavia Airlines, a
subsidiary of Air France-KLM.
Still, some succeed. Vietnam Airlines
Captain Huynh Ly Dong Phuong says
her mother was initially reluctant
about her career choice, and she’s still
sometimes treated differently than
male peers. “My difficulty,” she said
via e-mail, “is making people accept
the fact I am a pilot first and a female
second, not the other way around.”
�John Boudreau and Nguyen Kieu Giang
The bottom line Only 5 percent of airline pilots
are female. Fast growth among Asia carriers could
reduce that imbalance.
Autos
Can Lincoln and Caddy
Find Fans in China?
▶ The U.S. luxury models aim to
grab sales from German brands
▶ “American cars … don’t have that
premium image”
At the entrance to a luxury auto
showroom in Shanghai’s Pudong dis-
trict, doormen greet potential custom-
ers. Visitors can relax in a tearoom or
enjoy a massage before checking out
the cars’ various colors and features
on a 46-inch interactive video screen
in the dealership’s Personalization
Studio. All this coddling isn’t to peddle
some German luxe sedan or Italian
sports car. This showroom, where each
Companies/Industries
customer is served by at least three
specialists—from the front desk, sales,
and the service department—is for
Ford’s Lincoln brand. “Our services
are of the same standard as a five-star
hotel,” says Wan Disheng, marketing
manager at Shanghai Yongda Lincoln.
Service—at-home test drives, live
videoconferences with maintenance
and repair staff—is a central piece
of Ford’s plan to boost Lincoln sales
in China. The
brand entered
<1%
the country in
October 2014
with only three
showrooms; by
yearend 2016,
Lincoln’s share there will be 60.
of the luxury Meanwhile, in
car market in China January, General
last year
Motors opened
a Cadillac factory
in Shanghai, its first built solely to
support the luxury brand in the
country. The $1.2 billion plant has
the capacity to produce as many as
160,000 Caddys a year, including the
new $68,000 CT6, a sedan GM plans to 21
also export to the U.S.
China has become the world’s largest
auto market, with 21.1 million cars sold
last year. Luxury sales account for only
9 percent of the total, or 1.9 million
vehicles, compared with 12 percent
in the U.S. But GM China President
Matt Tsien says luxury car sales will
hit 3.5 million vehicles annually by
2020. That would make the country the
world’s largest luxury market, he says.
Mainland buyers have traditionally
equated luxury with German name-
plates. Volkswagen-owned Audi
is China’s top luxury brand, with
30 percent of the high-end market in
2015; BMW is No. 2, with 25 percent;
and Daimler’s Mercedes-Benz line is
third, with 20 percent.
Cadillac is far behind, tied
with Chinese automaker Geely
Automobile Holdings’ Volvo
at No. 6—they each commanded
4 percent of the market last year,
according to Bloomberg Intelligence.
Lincoln had less than 1 percent.
“There really is a solid association in
Chinese consumers’ minds with the
premium German brands,” says James
Roy, associate principal of China
Market Research Group. “American
cars are viewed as fine and good
 Companies/Industries

and functional, but they don’t have

Briefs By Kyle Stock

that premium image.”
When Lincoln started looking at the
Chinese market in 2012, “we quickly
discovered the retail experience was

Touchdown for Twitter lacking,” says Robert Parker, president

of Lincoln China. His team consulted
with brands such as Chanel and
Burberry and enlisted staff from
luxury hotel operator Mandarin
● ● In its first broadcast deal, Twitter won the Oriental to train its salespeople
right to stream 10 Thursday-night NFL games in the in customer service. “Our focus
is around treating people better
coming season, which may help it recharge user than anyone else in the indus-
growth. Twitter beat out a slate of heavyweights Starbucks said it try,” Parker says. “My directive
would open its biggest is to focus on the consumer
including Amazon.com, paying about $10 million for store to date, a experience, and over time the
20,000­square­foot
the games, according to a person familiar with the space, in Manhattan’s rest will fall into place.”
Chelsea neighborhood, President Xi Jinping’s cam-
matter. The NFL said it turned down higher bids, where it will also paign against corruption and
roast beans.
because it likes Twitter’s facility with live events. conspicuous consumption
●Å● Pfizer and Allergan walked away from their $160 billion among officials may also provide an
opening for U.S. cars. “Consumers
merger after a U.S. Treasury Department action lessened the are trading down,” says Roy of China
financial appeal of the deal. Federal rules published on April 4 Market Research Group. “People are
not looking to be as obvious or flashy
would make it tougher to complete so-called inversions, when with their wealth as before.”
Zhu Qinglin, a fiftysomething exec-
U.S. companies use acquisitions to shift their addresses to utive with a state-owned power
22
lower-tax countries. An inversion with Ireland-based Allergan company, is looking for a car that
could have been worth up to a total of $35 billion in tax sav- makes less of a statement. “There are
too many people driving BMW and
The cost of a new Ford ings. ●✌● Thomas Staggs, Walt Mercedes in China, and they’re too
factory to be built in
Disney’s chief operating officer, eye-catching,” he says. Lincoln “is

$1.6
Central Mexico. The a luxury car, but not very known in
plant, which will make
small cars, is scheduled stepped down on April 4 as the China. I like that it’s kind of special
to begin operations in
2018 and employ 2,800 billion company’s board said it would and low-key.”
Cadillac’s Shanghai factory will let
people by 2020.
broaden its search for new chief the brand avoid the country’s stiff
executive candidates. He was auto import taxes, which can increase
the cost of a foreign-made vehicle by
being groomed to replace CEO Robert Iger, whose contract about 25 percent. Audi, BMW, and
ends in June 2018. ● ● Rovio Entertainment, the com- Mercedes all have local factories.
Cadillac could also benefit from the
pany behind Angry Birds mobile games, said it had a local popularity of sister brand
CEO Buick, which has been produced
$14.8 million loss last year. Game revenue Wisdom on the mainland since 1999.
“What you
was up, but expenses swelled in advance of have to accept “Everybody has a favorable view
in a capitalist society, of GM products in China,” says Steve
The Angry Birds Movie, opening on May 20. generally, is that … it’s Man, a Bloomberg Intelligence analyst.
like a jungle, where a
● ● The Justice Department sued oil- jungle is survival of Ford faces a much bigger challenge
the fittest.” trying to sell imported, heavily taxed
services company Halliburton to block its ——Don
FROM TOP; ILLUSTRATION BY 731; BLOOMBERG

Blankenship, Lincolns. “Ford,” Man says, “will need

proposed merger with rival Baker Hughes, former CEO of to do a lot of work.” �Bruce Einhorn,
Massey Energy, with Jing Yang and Gregory Turk
saying the $34 billion deal would hinder explaining
his philosophy The bottom line Lincoln and Cadillac have big plans
competition and bring higher prices and less in 1986; he was in China, long a preserve for German luxury cars.
sentenced on April 6 A corruption crackdown could help the U.S. brands.
innovation to the industry. The two compa- to a year in prison in
connection with a fatal
nies pledged to fight the lawsuit. 2010 mine accident Edited by James E. Ellis
Bloomberg.com
 Politics/
Policy
April 11 — April 24, 2016

Never a Convenient Time

For Childbirth, Death, or …
▶▶The due date for income tax returns is one thing that still binds Americans together
▶▶“If we moved the deadline, people would procrastinate”

24
 Sliders, knuckleballs, PayPal breaks up with
and political ads 26 North Carolina 27

When it comes to
paying for Medicaid,
Oklahoma ain’t OK 26

*THIS YEAR, TAX RETURNS ARE DUE APRIL 18 BECAUSE FEDERAL OFFICES IN
WASHINGTON WILL BE CLOSED APRIL 15 IN OBSERVANCE OF EMANCIPATION DAY. — Ben Steverman and Dorothy Gambrell
 Politics/Policy
Campaign Ads
Batter Up! But First,
A Candidate Message
▶ Fox Sports plans to bring politics
to America’s pastime
▶ “Everybody—mothers, fathers …
grandparents—is watching”
Derek Jeter’s final home game as a New
York Yankee drew a record audience
on the team’s YES Network in 2014, sur-
prising no one. But Stephen Ullman,
who oversees political ad sales for YES
Network majority owner Fox Sports,
was puzzled about why there was so
little campaign advertising during
the breaks, just a few weeks before a
gubernatorial election in New York.
Conversations with people overseeing
ad buys for Governor Andrew Cuomo’s
reelection campaign, which ran a
spot during the Jeter game, offered an
insight: Campaigns often don’t think
26 of local or regional sports channels
such as YES Network when they buy
airtime. Many advisers “sort of live by
the old dogma, which is that you’ve got
to start every political buy with buying
in the news,” says Jeff Link, chief execu-
tive officer of Analytics Media Group,
which advised the Cuomo campaign.
Ullman and Fox Sports are looking to
change that. Baseball’s season peaks in
late October, just before the presidential
election, but with primaries still to be
contested in major states including New
York, which votes April 19, the company
sees a chance to gain a bigger share
of the estimated $4.4 billion candi-
dates and super PACs will spend on TV
advertising this election. “Most home
team games are the No. 1 prime-time
program,” says Ullman. “Everybody—
mothers, fathers, daughters, grandpar-
ents—is watching.”
Fox Sports, a subsidiary of
21st Century Fox, sells ads for a group
of about 40 regional sports channels
across the U.S. After 2014, Fox Sports
commissioned Link’s Analytics Media
Group, which grew out of the 2012
Obama campaign, and Republican-
affiliated Deep Root Analytics to study
viewing habits. Advertisers already
like sports broadcasts, which people
watch live without skipping ads. The
researchers found that viewers of local
sports tend to be undecided voters—
exactly the people campaigns most
want to reach. They’re 2.5 times more
likely to trust candidates whose ads
they see during games, almost twice as
likely to remember them, and twice as
likely as people who watch local news
to vote for them. “It’s an untapped
resource,” says Brent McGoldrick, Deep
Root’s CEO. “TV media buyers tend to
buy what they know, so they literally
don’t have the data or they don’t really
know the people to contact to buy on
these programs.”
Just as analytics changed modern
baseball, the data-driven approach
to political ad buying pioneered by
President Obama’s 2012 campaign has
pushed candidates and outside groups
such as super PACs to look at buying
airtime beyond local news and syn-
dicated broadcasts. On April 4, the
day before Wisconsin’s primary, the
Fox Sports Wisconsin broadcast of
the Milwaukee Brewers’ opening game
against the San Francisco Giants was
peppered with ads for Ted Cruz and
Bernie Sanders. (The Brewers lost;
Cruz and Sanders won.)
Local broadcast stations captured
85 percent of ads
during the 2012 general
election, but according
to Kantar Media, that’s
shrunk to 70 percent
so far this cycle as cam-
paigns have increased
spending on local
cable and satellite,
which allows buyers to
target viewers in spe-
cific ZIP codes rather
than blanketing entire
cities. Sports events
“budgets are getting
much tighter right now for all of the
campaigns and the PACs,” says Mark
Lieberman, CEO of Viamedia, which
sells ad time on local cable networks.
“It’s really forcing the campaigns and
the PACs to spend on a much smarter
basis.” �Tim Higgins
The bottom line Regional sports networks are
looking to grab a larger slice of the $4.4 billion in
2016 campaign ad spending.
Health Care
Oklahoma’s Two-Step
To Avoid Obamacare
▶ Crashing oil revenue has the state
rethinking federal health-care aid
▶ “You mention ‘Medicaid
expansion,’ that’s dirty words”
Dwight Sublett has seen a lot of busts
in his 33 years as a pediatrician in
Stillwater, Okla., but this year ranks
among the worst. With oil hover-
ing at $35 a barrel, the state is facing
a $1.3 billion budget shortfall for
the fiscal year starting on July 1. On
March 29 the Oklahoma Health Care
Authority warned it would have to
cut 25 percent from reimbursements
to physicians, hospitals, and other
medical providers under the state’s
Medicaid program, SoonerCare.
The program covers a million poor
MIKE MCGINNIS/GETTY IMAGES; DATA: MACPAC, OKLAHOMA HEALTH CARE AUTHORITY; COMPILED BY BLOOMBERG
Oklahomans each year, more than a
quarter of the state’s population. “For
the rural physicians, this is going to be
a devastating blow,” Sublett says.
Across the country, Medicaid covers
71 million low-income Americans.
Medicaid is jointly funded by the federal
government and states, and it typically
accounts for 20 percent to 35 percent
of a state’s annual budget. The crash
in oil prices has made it harder for
energy-dependent states to come up
with their share. “These states that have
had fairly stable budgets—Oklahoma
would be the classic example—suddenly
they’re running really big deficits,”
says Gregory Hagood, senior managing
director of Solic Capital, an investment
and advisory firm that works with hos-
pitals in financial distress.
Oklahoma has declined to expand
Medicaid, leaving uninsured an

estimated 91,000 people who might
have qualified for federally subsidized
coverage under the 2010 Affordable
Care Act. “You mention ‘Medicaid
expansion,’ that’s dirty words in this
state” because of the link to Obamacare,
Sublett says. About 16 percent of
Oklahomans had no health insurance in
2014, compared with 10 percent of the
national population, according to the
Kaiser Family Foundation.
Years of tax cuts in Oklahoma have
contributed to the budget hole. The
top state income tax rate declined from
6.65 percent in 2004 to 5 percent this
year, eliminating $1 billion in annual
revenue, according to the nonprofit
Oklahoma Policy Institute. Tax revenue
will come in about 7 percent below
the level expected for the budget year
ending on June 30, says Nico Gomez,
chief executive officer of the Oklahoma
Health Care Authority, which over-
sees Medicaid. He’s preparing for a
15 percent cut in state funding next
year, though the precise amount is
uncertain. For every 40¢ the state cuts
from Medicaid, Oklahoma loses 60¢ in
federal matching funds.
Gomez says the program has already
reduced benefits to stay ahead of
budget cuts,
Medicaid including dental
participants care for pregnant
Oklahoma women. Last year
Under 18 64% he agreed to take
19-64 28% a pay cut, but he
65+ 7% acknowledges that
Total U.S. has mostly sym-
Under 18 54% bolic value, saying,
19-64 40% “12 percent of my
65+ 6% salary is not going
to save the budget.”
The state has also lowered reimburse-
ment rates for doctors and other treat-
ment providers several times. “We’ve
been through this before, boom and
bust. It feels different this time,” Gomez
says. “Right now it’s difficult to see
when we’re coming out.”
Gomez has proposed what he calls
a long-term solution. Under his plan,
about 350,000 Oklahomans who are
on Medicaid or uninsured would get
subsidized insurance through a state
program, Insure Oklahoma, that pre-
dates the Affordable Care Act and is
mostly funded by tobacco taxes. The
change would require approval from
administrators in Washington to free up
an infusion of federal Medicaid funds.
The proposal is broadly similar
to backdoor arrangements several
Republican-led states, including
Arkansas and Indiana, have used
to get federal funds for expanding
health coverage with private insur-
ance rather than Medicaid. Gomez
is quick to note that his proposal
would shrink the Medicaid rolls in his
state. “We’re not actually growing the
entitlement,” he says.
Health-care providers in Oklahoma
would welcome the move, whatever
it’s called. “We don’t seem to have
a problem in this state in accepting
federal dollars for roads or other pur-
poses,” says Craig Jones, president of
the Oklahoma Hospital Association,
which has pushed the state to take
advantage of federal money available
under the Affordable Care Act. “It’s
only because it’s tied to Obamacare
that people have had a real concern
about it.” �John Tozzi
The bottom line Facing a $1.3 billion budget
gap, Oklahoma is weighing how to get federal
Obamacare funds without expanding Medicaid.
Civil Rights
States Pay a Price for
Being LGBT-Unfriendly
▶ North Carolina loses PayPal over
transgender bathroom rights
▶ “We felt it was important to back
our words with actions”
In March, PayPal announced plans to
open an operations center in Charlotte,
creating 400 jobs in North Carolina.
Then the state enacted HB2, which
blocks local ordinances extending
public accommodations to lesbian, gay,
bisexual, and transgender people. The
target was a Charlotte measure that
would have protected the right of trans-
gender people to use public bathrooms
according to the gender they identify
with. On April 5, PayPal Chief Executive
Officer Dan Schulman announced he
was canceling plans to expand in North
Carolina unless the state overturns HB2.
“This law is against a core value of our
company, which is inclusion,” he says.
“We felt it was important to back our
words with actions.”
“I fear this law is Politics/Policy
undermining our
collective efforts to
advance North
Carolina’s PayPal isn’t
long-term interests alone. Braeburn
and I hope you will Pharmaceuticals
consider calling for
its repeal.” says it’s reevaluating
�PepsiCo Chief its decision to build
Executive Officer a $20 million facil-
Indra Nooyi
ity in North Carolina’s
Research Triangle area
because of the HB2 law. PepsiCo
CEO Indra Nooyi sent North Carolina
Governor Pat McCrory, a Republican, a
letter urging him to undo HB2: “I fear
this law is undermining our collec-
tive efforts to advance North Carolina’s
long-term interests and I hope you will
consider calling for its repeal.” More
than 80 corporate leaders have signed
a similar plea for repeal, saying it’s bad
for business. At a press conference,
McCrory said his goal was to guarantee
“the expectation of privacy” in schools
and other public places.
There are about 200 proposed bills
in 34 states that are considered poten-
tially hostile to LGBT people, according
to the Human Rights Campaign, which
is among advocacy groups opposed to
HB2. Governors in South Dakota and
Georgia this year both vetoed poten- 27
tially discriminatory legislation after
corporate leaders objected.
In 28 U.S. states, LGBT residents
aren’t specifically protected from
discrimination at work or in public
places. The next battle may come
in Mississippi. The same day PayPal
announced it was pulling out of North
Carolina, Mississippi Governor Phil
Bryant signed a bill that allows busi-
nesses to deny services to gay couples
on the basis of religious belief. MGM
Resorts International, which has
two casinos in Mississippi, objected to
the law, saying it will reduce tourism
and harm the state’s economy. Nissan
Motor, a large employer in the
state, also objected, as did IBM and
Levi Strauss.
Other states see opportunity.
Vermont Governor Peter Shumlin
tweeted at PayPal: “If you’re looking
for a tolerant state with a thriving
tech hub, we’d welcome you in VT.”
�Spencer Soper and Jeff Green, with
Margaret Newkirk and Jennifer Kaplan
The bottom line PayPal led companies putting
millions in development on hold unless North
Carolina repeals a law blocking LGBT protections.
Edited by Allison Hoffman
Bloomberg.com
 When will an
idea bring the
future forward faster?
When we connected the phone to the Internet,
it became a smartphone. Today, that same
restless vigor guides us as we innovate the more
intuitive Internet of Things, new horizons in
mobile experiences, optimized connectivity
and technology that learns and adapts to us.

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April 11 — April 24, 2016
Sharing Everything
But the Wealth
▶▶When Airbnb and Uber start turning profits, where will the tax money go?
▶▶“These companies are the future.▶...▶The lost revenue may be enormous”
Every time Ian Haines
rents out his spare room
in the Australian port city
of Albany, Airbnb takes
a 13 percent cut. Haines,
who’s semi-retired, uses
the extra money to supple-
ment his income running
a local farmers market.
He says he’s careful to pay
taxes on the Airbnb money,
because the San Francisco
company may report
the transactions to the
Australian government.
For Airbnb, things are dif-
ferent. Because it manages
its finances via units in
Ireland and tax havens
like Jersey in the Channel
Islands, only a small part
of its share of the revenue
is ever likely to be taxed
by Australia or the U.S.
A review of Airbnb’s over-
seas regulatory filings shows
it has a far more extensive web of sub-
sidiaries than it has publicly acknowl-
edged—more than 40 in all.
This is the challenge that Airbnb,
like Uber and other companies in the
PHOTO ILLUSTRATION BY 731; PHOTOS: ALAMY (14); GETTY IMAGES (1)
so-called sharing economy, poses for
the world’s treasuries. In the five years
since these businesses began their rapid
growth, some cities and states around
the globe have fought hard to make
them play by the same rules as tradi-
tional hotels or taxis and collect various
local taxes—often as not, they’ve lost.
As the new breed of companies moves
toward profitability, transforming
larger chunks of the economy, policy
experts say the battle is likely to shift
to the national level, where billions
of dollars a year in corporate taxes
could be at risk. (A source close to
Airbnb says the company will turn its
first profit this year.) Governments have
been slow to respond.
“These companies are the future,”
says Stephen Shay, a former top interna-
tional tax lawyer at the U.S. Department
of the Treasury, now teaching at
Harvard. “The nature of their business
and the structure of the companies can
allow them to essentially keep all of
their profits out of the U.S. Unless the
tax systems find a way to deal with this,
the lost revenue may be enormous.”
For years, pharmaceutical and tech
companies including Pfizer, Merck,
Google, and Apple have slashed their
U.S. federal tax bills by using offshore
Sites that pay the bills For the dog that
with links, not ads 30 has everything:
Genetic screening 31
Innovation: A laser-
guided catheter 32
tax havens and shifting profits
abroad. Airbnb and Uber are
starting to extend this strat-
egy across vast new fields:
PricewaterhouseCoopers
estimates that sharing-
economy businesses gener-
ated $15 billion in revenue
in 2014 and will take in
$335 billion in 2025, growing
largely at the expense of
companies that pay billions 29
in U.S. taxes.
It’s not always a zero-sum
game; the newer businesses
can expand the overall
market. The IRS, which has
been depleted by budget
cuts and lost several high-
profile corporate tax cases,
says it hasn’t tried to calcu-
late the potential revenue
loss. While Treasury has
proposed some measures
in recent years to curb tax
avoidance by digital companies—on
April 4, the department issued rules
limiting tax shifting through mergers—
partisan division in Congress makes
serious changes unlikely.
Airbnb officials declined to discuss
tax strategies. “We pay all of the tax
that is due in all of the places that we do
business,” says spokesman Nick Papas.
“When we make long-term business
decisions, we act in the best interest of
our community.”
Once it makes a profit, Airbnb’s cor-
porate structure will give it an array of
options to legally sidestep federal taxes
in the U.S. and elsewhere. Two of its
subsidiaries are in Ireland, where local
tax laws allow U.S. multinationals to
avoid both the 35 percent top rate
 Technology
Digits
Zero
The number of tech companies that went public on U.S. exchanges in
the first quarter of 2016, something that hasn’t happened since 2009
in the U.S. and Ireland’s 12.5 percent
income tax.
Money from Airbnb transactions
in 190 countries, including Haines’s
rentals in Australia, goes directly to a
payment center in Ireland. Airbnb col-
lects 6 percent to 12 percent of the
rental price, depending on cost, then
deducts 3 percent from the host’s take
before passing the money along. This
lets Airbnb shield most of its profit
from the country where the service
was delivered. (Airbnb Ireland pays the
30
Australian subsidiary a small fee for
marketing in-country, and the subsid-
iary pays tax on its profits.)
Irish law makes it easy for multina-
tionals to shift profits to tax havens by
assigning valuable intellectual property
rights there. Airbnb has two subsidiar-
ies, Airbnb International Holdings and
Airbnb 2 Unlimited, on Jersey, which
has no corporate tax. Tax experts say
that if Airbnb assigns its software IP to
a Jersey unit, the company could shift
much of the profit to the haven through
royalty payments from its Irish sub-
sidiary. Pharma and tech companies
have used similar strategies to cut their
overall tax rates to the low single digits.
The Australian Senate called local
managers to testify alongside Uber in
November at a public hearing on cor-
porate tax avoidance. Sam McDonagh,
Airbnb’s country manager there, tes-
tified that taxes never motivate the
company’s strategic choices. “The
No. 1 reason we located ourselves in
Ireland was for access to great talent,”
McDonagh said. The response from one
of the senators: “Come on!”
Whatever Airbnb’s motivation, the
result is tax-minimizing options unavail-
able to traditional competitors. While
Airbnb doesn’t own the properties
Typically, there are
one to three tech IPOs
in the quarter
rented on its site, it lists about 2 million
rooms—as many as the Wyndham,
Hilton, and Marriott chains combined.
Those three hoteliers averaged a com-
bined annual profit of $2.3 billion
from 2013 to 2015, according to their
Securities and Exchange Commission
filings, and paid hundreds of millions of
dollars a year in U.S. federal taxes.
Uber processes payments for
rides outside the U.S. through the
Netherlands, a company official tes-
tified at the hearing in Australia. Last
fall, Fortune reported that, accord-
ing to presentations to investors, Uber
had assigned its IP to the tax haven of
Bermuda, leaving less than 2 percent of
its net revenue taxable by the U.S.
Outside the U.S., there have been a
few recent attempts to crack down on
corporate tax avoidance. In January
the U.K. instituted the “Google Tax,” a
25 percent levy on any profit deemed
improperly diverted, and Ireland began
eliminating some loopholes, includ-
ing the infamous “Double Irish,” last
year. Google says it’s not subject to
the Google Tax, and accountants are
already pitching comparable alterna-
tives to the Double Irish in Malta and
the United Arab Emirates.
The Organisation for Economic
Co-operation and Development is craft-
ing more technical ways to block profit
shifting. “We can debate whether most
of the value of a platform is created in
Silicon Valley, where it was developed,
or in Ireland, where it is managed, or
wherever the service is delivered,” says
Pascal Saint-Amans, director of the
OECD Tax Centre. “You cannot reason-
ably argue that value is created in the
tax haven where the platform’s only
presence is a shell company.”
As home to most of the big
companies involved and the only
major country that taxes its multina-
tionals’ worldwide income, the U.S.
likely has the most at stake. In dead-
locked Washington, the Obama admin-
istration’s proposals have included a
minimum tax of 19 percent on U.S. cor-
porations’ global earnings, regardless
of whether the money ends up in the
U.S., as well as stricter limits on defer-
ral of overseas income and use of cor-
porate structures that leave some
income untaxed by any country.
“At some point, something has to be
done,” says Reuven Avi-Yonah, an inter-
national tax professor at the University
of Michigan Law School. “We just have
to hope that it happens before too much
revenue is lost.” �David Kocienewski
The bottom line Airbnb’s more than
40 subsidiaries may help the company lower its
tax bill in the U.S. and other countries.
E-Commerce
Links to a Sustainable
Media Business
▶ A gadget reviewer’s success with
commissions inspires copycats
▶ “We move as much product as a
place 10 times bigger than us”
Brian Lam doesn’t run many ads on his
gadget review site, the Wirecutter. He
doesn’t have to, because the reviews
themselves are loaded with links to
Amazon.com and other places where
readers can buy the name-checked
products. If you click through and buy
the item, Lam’s site gets a single- or
low-double-digit percentage of the pur-
chase price. It adds up: Quantcast says
the five-year-old site and its housewares
spinoff, the Sweethome, combined for
3.4 million U.S. visitors in March, and
last year its staff of 59 drove $150 million
in online sales and turned a profit,
according to Lam. “We move as much
product as a place 10 times bigger than
us in terms of audience,” he says.
While Lam didn’t invent this kind of
affiliate marketing, his site was the first
ILLUSTRATION BY 731
to make it a mainstream media success.
Some of the industry’s biggest names
have begun following Lam’s lead in the
past few months, including BuzzFeed

and Hearst. “Publishers know that
advertising is a difficult business to be
in if you’re not named Facebook and
Google,” says Brian Wieser, an analyst at
Pivotal Research.
The Wirecutter posts only a few
dozen articles a month: “The Best
Laptop,” “The Best Open-Back
Headphones under $500,” “The Best
Subcompact Crossover SUV.” Each, Lam
says, requires 20 to 200 hours of testing
and research, often including inter-
views with engineers or chemists. While
reviewing bike locks, one contributor
consulted a bicycle thief. While testing
waterproof iPhone cases, another con-
tributor swam a quarter-mile in the
ocean. “People trust us,” says Lam, a
former editor at Gawker Media’s tech-
nology site Gizmodo and Condé Nast’s
Wired magazine. “We earn that trust by
having such deeply researched articles.”
Lam brushes off concerns about
conflict of interest, arguing that the
Wirecutter has more incentive to make
sure readers buy the best gadgets
than a website with conventional ads.
If readers who’ve bought products
through Wirecutter links end up return-
ing them, the site forfeits its commis-
sion. “So the more we help readers, the
better our business does,” Lam says.
In February, BuzzFeed launched a
Facebook page called “Buy Me That,”
which promotes articles filled with
links. (Sample headline: “Here are
9 Affordable and Stylish Suits.”) The
company declined to comment.
Hearst, the publisher of Esquire,
Cosmopolitan, and Good Housekeeping,
in November introduced a website,
BestProducts.com, that publishes 10 to
20 reviews a day of electronics, fitness,
and parenting gear. “We wanted to
create something that’s engaging and
people find useful,” says Troy Young,
president of Hearst’s digital media divi-
sion. “If there’s another way to mon-
etize it beyond traditional advertising,
that’s an added bonus.” Young says tech
reviews yield most of the link-driven
revenue but wouldn’t disclose sales.
Gawker and Vox Media use
Skimlinks, an automated service that
links words in articles to the sites of
20,000 retailers. In February, Vox
posted a job listing for an editor who
can help readers “discover great prod-
ucts for purchase.” Gawker says its
five-person affiliate marketing team
drove more than $150 million in retail
Technology
sales last year. “It turns out we have a Embark Veterinary, will begin selling
growing audience interested in home testing kits designed to give U.S. dog
goods,” says Ryan Brown, Gawker’s owners scientific insight into their pets’
vice president for business develop- health, behavior, and ancestry. (Think
ment. “People buy mattresses from 23andMe for the furry, four-legged set.)
us.” Pivotal’s Wieser says affiliate mar- Using that data, the company also plans
keting may pay the bills for smaller to learn more about overall canine
operations but would likely have health and behav-
trouble replacing conventional digital ior. “We’re inter-
ads for most big publishers.
The Wirecutter is trying to expand its
audience, teaming up with the New York
$199 ested not only in
returning informa-
tion to owners but
Times to assess Wi-Fi routers and tricks actually improv-
for extending phone battery life. Lam’s ing the way dog
The price of
team is also widening the range of its Embark’s genetic genetic research is
reviews, covering dashboard cameras screening for dogs, done,” says Adam,
and windshield wipers. “You wouldn’t which delivers Embark’s chief
information on traits
think it makes a difference,” says Lam, and risks science officer and
who realized his latest blades had gone an assistant profes-
a year without leaving streaks. “I didn’t sor at Cornell’s veterinary college, the
know that windshield wipers could startup’s research partner.
annoy me so little.” �Gerry Smith Embark’s $199 genetic test will screen
dogs for more than 200,000 genetic
The bottom line The Wirecutter helped sell
$150 million in goods last year through affiliate links. markers and report the results to
Other media companies are trying to follow suit. owners through its website or app. The
data will include details about dozens
of physical traits, like how much a
puppy is likely to shed and its predicted
adult size, as well as its risk for more 31
Biotech than 100 different medical conditions.
Embark will also determine the dog’s
A Chance to See breed composition and geographic
Spot Sequenced origin. “We can trace the paternal and
maternal line back to the dawn of dogs,”
says Ryan, chief executive officer.
▶ Embark’s genetic kits test dogs’
Embark’s app will survey custom-
health, behavior, and pedigree
ers about their dogs’ lives, behaviors,
▶ “We can trace the … line back to and medical histories. As its cus-
the dawn of dogs” tomer base grows, Embark plans to sift
through this data in search of new con-
For Ryan and Adam Boyko, dog drool is nections between DNA and health
a family business. Over the past decade, or behavior. Is there a certain genetic
the brothers have traveled the variant that aggressive dogs tend to
globe, fetching thousands of share? Do yappers have different DNA
saliva samples from pups in than howlers? “We know abso-
Croatia, Fiji, India, Peru, lutely nothing about the genet-
Qatar, Uganda, and ics of barking,” says Adam.
a dozen other coun- Customers will receive
tries. They carried updates about new discov-
the samples back to eries, says Matt Barton,
Adam’s genetics lab at chief technical officer.
Cornell University, where The company’s research
they scoured the DNA could also have implica-
for clues about the history tions for human medi-
and evolution of man’s cine. Many of the genetic
best friend. mutations that under-
Now the Boykos want lie common dog dis-
to expand the pack. By eases—from cancer to
the end of spring, they compulsive disorder—
say, their new canine have been linked to
genetics company, similar conditions in
 Technology

people. And thanks to generations

Innovation of selective breeding, a small number

of genes explains much of the variation
between individual dogs, which means
it’s often easier to identify the genes

Laser-Guided Catheter responsible for complex traits in dogs

than it is in humans.
After licensing their initial sample
Form and function Innovator John Simpson
database from Cornell, the Boyko
The Pantheris catheter’s laser camera lets Age 72
brothers incorporated Embark last
surgeons see inside blood vessels as its cutting Medical doctor and chairman of Avinger, a
year. Co-founders include geneticist
instrument is removing fatty deposits, making 200-employee medical-device company Spencer Wells, who led a decade-long
it much safer than conventional methods of
treating peripheral arterial disease (PAD).
in Redwood City, Calif. study of human migration based on
DNA samples, and Ryan’s college buddy
Matt Salzberg, CEO of subscription-
1. meal company Blue Apron. Embark,
Funding Avinger
raised more than which has eight employees and is based
Origin Simpson $100 million in in Austin, has raised $1.8 million in
founded Avinger
in 2007, partly in
private investment venture funding to further refine its
before its $60 million
search of a way to initial public offering products. With more than 70 million
limit the number of last year. pet dogs in the U.S. and some 7 million
arteries damaged by
surgeons dependent
Exam A surgeon inserts the new pups acquired each year, the ser-
on external X-rays.
single-use catheter into a vice’s potential market is huge.
patient’s artery. A camera
near the front of the device Like the 23andMes of the world,
① uses laser light to create Embark is stopping shy of providing
video images with the help medical advice. It’s not giving diagnoses
of a computer and monitor
plugged into the device. and encourages customers to discuss
test results with their vets. It’s also not
32 the first to pitch consumers on canine
genetic tests. Paw Print Genetics sells
a $150 kit that screens dogs for more
than 150 different diseases and traits.
CEO Lisa Shaffer says Embark’s model is
interesting, but it isn’t clear whether the
2.
Market PAD afflicts company’s priority will be research or
1 in 20 Americans
older than 50, the
returning useful information to owners.
Clearance While viewing the National Institutes of Embark says its depth of data analysis,
monitor, the surgeon guides Health estimates— along with the app and its more thor-
the catheter to a blocked about 5.4 million
area and manipulates the tool people. The disease
ough testing panel, set it apart from
at its tip to remove plaque. typically causes leg cheaper rivals, which also include Mars
pain and increases Veterinary and DNA My Dog.
the risks of heart
attack and stroke.
Later this year, the Boykos plan to
add features that allow customers to
connect with other dog owners whose
pets have similar genetic backgrounds,
behavioral traits, or medical problems.
Eventually, the company expects to link
Early tests Clinical up with breeders to help them make
trials involving more matches that reduce the likelihood
than 300 patients
have resulted in zero
of puppies inheriting disease-causing
blood vessel damage, mutations in the first place. “We would
Simpson says. like to be doing research that’s benefit-
ing, ideally, millions of dogs,” Ryan says.
ILLLUSTRATION BY 731; COURTESY AVINGER

Next Steps Including, perhaps, those that haven’t

The U.S. Food and Drug Administration cleared Pantheris for PAD treatment been born yet. �Emily Anthes
in October. Simpson says Avinger is working to make the device smaller
The bottom line Embark says its DNA test can
and softer so it can also be used to treat the especially delicate coronary assess a dog’s risk for more than 100 different
arteries. “Pantheris is a major upgrade,” says Thomas Davis, a doctor treating medical conditions.
cardiovascular disease at St. John Hospital & Medical Center in Detroit. He
calls it “a game changer for patient care.” �Michael Belfiore Edited by Jeff Muskus
Bloomberg.com
 Markets/
Finance
April 11 — April 24, 2016

Hong Kong insurance agent Raymond

Ng sold HK$28 million ($3.6 million)

Getting Money in insurance policies to a mainland

Chinese client in March. It took more
than 800 credit card swipes to com-

Out of China, One

plete the transaction.
Ng is one of dozens of Hong Kong
agents—and maybe more—using this
and similar tactics to get around new

Swipe at a Time limits on mainlanders using credit

cards to buy insurance, according to
interviews with five agents working for
four different insurance companies.
Making multiple swipes can defeat a
cap of about $5,000 per transaction
set by Chinese authorities in February.
The country is trying to slow the steady
stream of cash going abroad and into
foreign currency assets.
“There are always ways around
new restrictions,” says Ng, who
spoke on the condition his
company’s name not
be used. “Chinese
34 customers are
accelerating the
pace of moving
assets outside
China, espe-
cially through
insurance
products.”
These
clients
are react-
ing to a slowing
economy and fears
that the yuan, which
was devalued in 2015,
could decline further.
Holding any kind of asset
denominated in foreign
currencies could protect
the purchasing power of
their savings.
Chinese citizens are allowed
to convert the equivalent of only
$50,000 of yuan per year to other
currencies. When they travel abroad,
including to Hong Kong, many of their
transactions using China’s UnionPay
ILLUSTRATION BY BRAULIO AMADO

credit and debit cards aren’t subject

▶▶Mainlanders come to Hong Kong to buy insurance
▶▶“Bring more than one credit card,” agents advise
to the limit. Hotel bills and luxury
goods aren’t included. Neither are
insurance policies for travel and
health, though they’re subject to the
per-transaction cap.
 A fiduciary is: (a) Your
friend (b) Your foe
(c) Who knows? 36

Bid/Ask: Alaska Air

beats out JetBlue
for Virgin 37

But mainland Chinese are coming
to Hong Kong to also buy life insur-
ance policies with an investment com-
ponent that can be cashed out in a few
years. The money can then be invested Insurance is shielded from seizure in
in property or other assets, raising
fewer questions about how it got out
of the mainland. Large portions of the
premium can be paid upfront. Sales
of insurance and related investment
policies to mainland visitors jumped
30 percent last year, according to Hong online payments, to buy life insur-
Kong’s insurance commission.
China views any purchases of
the investment-linked policies as a
violation of the controls on capital
outflow, said Wang Yungui, an official
of the State Administration of Foreign
Exchange, or SAFE, at a news confer-
ence in Beijing on March 22.
In practice, though, it can be dif-
ficult for regulators and credit card
companies to distinguish between
travel- and health-insurance policies
and life policies with investment com-
ponents, agents say. Swiping a credit
card dozens or even hundreds of
times isn’t illegal in Hong Kong, a ter-
ritory with a high degree of autonomy
from the mainland. When it imposed
the $5,000 limit, mainland regulator
SAFE said it would “closely monitor”
cardholders and insurers for multi-
ple swiping, but it stopped short of
banning the practice. A press officer
for UnionPay says it complies with
regulatory requirements by monitor-
ing transactions and analyzing data.
A spokesman for Hong Kong’s
insurance regulator declined to
comment. SAFE and the
People’s Bank of China, the
nation’s monetary authority, Digits
because they offer better beneficiary
payments and returns than mainland
plans. Hong Kong health-insurance
policies provide access to better care.
the event of a bankruptcy in China or
in criminal proceedings, which have
been intensifying under President
Xi Jinping’s anticorruption campaign.
The $5,000 cap was followed by a
ban on electronic transfers, such as
ance, according to notices seen
by Bloomberg News. Agents who
sell large policies “are likely doing
their best now to urge clients to buy
their products before more strin-
gent measures are put in place,”
says Steven Lam, a Hong Kong-based
insurance analyst with Bloomberg
Intelligence. Apart from swiping their
card multiple times, insurance buyers
can also ask relatives or beneficia-
ries to group together to pay a large
premium, agents say.
There’s even insurance tourism.
A Chinese company that brokers
insurance policies, Henan-based
Hong Kong Easiness Wealth
Management, offers travel to
Hong Kong, including free airfare
and accommodation. Customers
buying policies valued at more than
500,000 yuan ($77,000) get a first-class
ticket plus two nights in a five-star
hotel. Such a purchase would require
at least 15 card swipes. A trip was
scheduled for May, says Li Yida, the
company’s owner. China National
“We will guide them Chemical is paying seller-financed transactions is com-
through the
$46b
to take over seed and
herbicide company
whole process and swipe cards with
them,” he says. “We’ve told them
to bring more than one credit card,
as they will be able to try more
cards if one of them is not working.”
�Alfred Liu and Molly Wei
The bottom line Insurance policies in foreign
currency can help get around capital controls, even
with a $5,000 limit for each credit card swipe.
Real Estate
Buying a House
But Not the Title
▶ A private equity firm finances
deals for people with bad credit
▶ “It’s easier to take a property back
quickly,” says a consumer lawyer
Subprime mortgages have all but 35
disappeared, but buyers with bad credit
can still own a home. If they come up
with a nominal down payment and stay
current on monthly bills, they’ll get
title to the property—after as long as
30 years. One missed payment, though,
and their contracts say they could lose
all their money and be tossed out.
Historically, such deals have often
ended badly for low-income buyers.
Now some are being financed by Apollo
Global Management, an investment
firm that oversees assets of $170 billion.
Apollo’s investment in what it calls
paratively small, but it’s a step
Dalian Wanda Group

$113b
didn’t respond to requests Syngenta is paying
for comment.
The British insurer Prudential, $3.5b
for control of
which had previously prohibited Legendary
its Hong Kong agents from swiping Entertainment,
credit cards more than 10 times the studio behind
“What we’re in Jurassic World
for each client, removed the midst of is the
that ceiling as of March 21, largest portfolio
according to two agents briefed diversification
in history,” says
on the change. A spokes- Ellis Chu, head of Value of mergers with and acquisitions of overseas companies Crane manufacturer
man for Prudential declined China M&A at Bank announced by Chinese businesses since the beginning of 2016 Zoomlion is offering
to comment. of America
Hong Kong-issued policies $4.9b
of all sorts are also popular in China for U.S. rival Terex
 “The reason we
Markets/Finance went this route is
because I didn’t
think our credit was
up to par”
many other Wall Street firms
have been wary of taking.
Since the 2008 mortgage
crisis, major lenders have largely
shunned the riskiest buyers. Into
that void have come nonbank finance
companies. Apollo, headed by bil-
lionaire Leon Black, started its seller-
financing business in 2014 in one of its
real estate investment trusts. Through a
Baton Rouge, La.-based company called
Home Servicing, it invested more
than $40 million to buy and renovate
houses, mostly in the Southeast. Home
Servicing markets the homes along with
seller financing, which is also some-
times called owner financing, contract-
for-deed, or bond-for-title.
Whatever the name, the idea’s the
same: Buyers end up on a long, uncer-
tain path to truly owning a home, while
Apollo’s investors get a chance to profit
from borrowers who don’t qualify for
a regular mortgage. Through a spokes-
man, Charles Zehren, Apollo declined
to comment; Home Servicing also
declined to comment.
The agreements offer few of the privi-
36 leges of a mortgage or a rental contract.
In a mortgage, the buyer gets legal title
to the property; in a seller-financed con-
tract, the seller keeps it. Mortgage bor-
rowers can improve their credit with
on-time payments, but it’s unclear if
Home Servicing is reporting such pay-
ments to credit companies. In a
rental, a landlord pays for
repairs, taxes, and insur-
ance. Home Servicing
contracts make the
buyer responsible
for those costs.
While the con-
tracts vary by
state, dozens
reviewed by
Bloomberg show
that buyers don’t
own the home or
claim to the deed Black
until the full pur-
chase price is paid off, up to
30 years later. If buyers fail to keep up
to date on insurance or are more than
30 days late with a payment, they forfeit
any interest in the property and the
money put into it.
In most states, fewer consumer pro-
tections apply to this kind of transac-
tion than to a mortgage loan, says Sarah
Bolling Mancini, an attorney with the
National Consumer Law
Center. “Generally it’s
easier to take a property
back quickly if the bor-
rower defaults,” she says.
Such agreements may help some
buyers with few options. But similar
deals by other companies have a pred-
atory history, particularly in minor-
ity communities, says Sarah Edelman,
director of housing policy at the Center
for American Progress in Washington.
KKR is one other prominent firm to
invest in the business, with a stake of
as much as $40 million in New York-
based Battery Point Financial. “The
liquidity and reputation risk has scared
people off over time, but I think that
can change,” says Jeremy Healey, who
co-founded Battery Point in 2013.
If Battery Point sells a home fol-
lowing a default, it pledges to take
only the remaining amount of money
it was owed and refunds the delin-
quent owner any extra, according to
the company. It also says it’s working
to report monthly payments to credit
agencies so buyers may be able to
improve their credit and get mortgages.
KKR declined to comment.
Marie Simpson, 63, of Columbia, S.C.,
was introduced to Home Servicing by
“Buy, Don’t Rent” signs near the home
she rented. “The reason we went this
route is because I didn’t think our credit
was up to par,” says Simpson, who
works for the state’s probation
and parole department.
She and her husband
agreed in June to pay
$106,900 for a three-
bedroom house, almost
double what Home
Services paid for it less
than a year before,
according to public
records. The down
payment was $2,000,
Simpson says. The
interest rate comes to
7.9 percent; the average
rate for a 30-year mortgage
was 3.7 percent on March 31,
according to Freddie Mac.
Home Servicing uses the term “owner
financing” in ads; when Apollo talks
to investors, it calls it seller financing.
Such confusion over what to even call
the contracts is one reason Teresa
Bernhardt, a real estate lawyer in
Memphis, says she steers clients away.
While Simpson was moving into her
new home, she says she discovered the
air conditioner was broken and there
was no hot water. Though the company
has been known to make repairs, the
agreement was for the home “as is.”
Home Servicing sent a repairman,
Simpson says. “There are still things
that need to be done, but it takes time,”
she says. “We knew what we were
getting into.” �Heather Perlberg
The bottom line Mortgages are scarce for people
with poor credit, and Apollo sees an opportunity in
a controversial form of financing.
Investing
Holding Advisers to a
Higher Standard
▶ When it comes to retirement
accounts, the client comes first
▶ Advisers have to “start justifying
the fees that they charge”
How much jargon should a person
have to master to save for retire-
ment? Consider the word “fiduciary.”
According to a survey paid for by retire-
ment adviser Financial Engines, only
18 percent of adults were sure they
knew what it meant in the context
of investment advice. A fiduciary is
someone who legally must put the
client’s interest before his or her own.
Only some financial advisers, such as
registered investment advisers, are
fiduciaries. The others have to ensure
only that an investment is suitable—no
risky tech funds for an investor seeking
safety—but they can recommend an
option that pays a better commission.
Ian MacGregor, a consultant in
PATRICK T. FALLON/BLOOMBERG; ILLUSTRATION BY OSCAR BOLTON GREEN
Dublin, Ohio, wasn’t always aware
of the difference. He says his broker
would present him a choice of mutual
funds but tended to push ones with
upfront fees as high as 5 percent. He’s
since switched advisers. “There’s got
to be some way to protect the less
savvy investor from being taken for a
ride,” he says.
On April 6, the U.S. Department of
Labor unveiled a rule change, more
than six years in the making, to hold
more advisers to the tougher clients-
come-first standard. Using its power to
 Markets/Finance

regulate retirement and pension plans,

the department will define as fidu-
ciaries people and companies giving
advice on 401(k) and similar plans as
Bid/Ask By Kyle Stock

well as individual retirement accounts.

That’s a $14 trillion pile of assets. The
regulation will still allow brokers
to collect commissions, but they’ll
have to disclose conflicts of interest.
Strengthening customers’ ability to sue,
the rule also adds teeth to enforcement.
The rule was supported by President
Obama. The administration produced
a study showing that bad advice costs
retirees a collective $17 billion annu-
ally. Insurers, brokerage firms, and
fund companies bitterly opposed draft
versions of the rule, saying it will make
it too costly to advise people with
small accounts.
The standard will “force financial
advisers to change how they speak to
their clients and start justifying the fees
that they charge,” said Michael Wong,
an equity analyst at Morningstar, before

$2.6b
the final rules came out.
Companies such as Vanguard
Group and BlackRock that provide
low-cost index and exchange-traded 37
funds will likely benefit from the rule, Alaska Air Group books Virgin America. Alaska Air bested JetBlue
Wong said, because it forces advisers to in a feverish bidding war, as both companies maneuvered to lock up
justify higher-cost recommendations.
Insurance companies that sell retire-
Virgin’s lucrative routes in California and Mexico. The tieup will create
ment products may suffer, because they the No. 5 U.S. airline by traffic, so it’s expected to draw close scrutiny
often rely on a commission-based sales from antitrust officials. Virgin has won praise for its cabin perks since
force. The American Council of Life its 2007 launch, but it didn’t turn a profit until 2013.
Insurers has called the initiative “gov-
ernment at its worst.”

$2.5b
Some companies are already Glencore sells part of its agriculture business. The Canada
adjusting. Lincoln National has Pension Plan Investment Board bought 40 percent of the unit,
which processes and markets commodities like wheat and sugar.
been shifting its sales focus away from
investments called variable annuities

$1.2b
Brocade Communications Systems buys Ruckus Wireless.
with living benefits. MetLife Chief The deal brings expertise in Wi-Fi to a company that’s been
Executive Officer Steve Kandarian focused on networking hardware.

says the prospect of new rules “had an

$338m
HNA Group acquires Tysan Holdings. The aviation and shipping
impact” on his decision to separate the giant bought a 66 percent stake in the Hong Kong-based
company’s U.S. retail unit. Last year construction company, continuing its global shopping spree.
he likened the proposal to requiring a
Chevy dealer to recommend a Ford if
$285m
Constellation Brands downs Prisoner Wine. Constellation gets
five California wines that sell for $30 to $90. The distributor has
it’s a better fit for the customer. been stocking up on fancier, more profitable brands.
The rules take full effect in 2018, but

$169m
they’re likely to face challenges in both AccorHotels fights Airbnb. Europe’s largest hotel group
the courts and Congress. �Katherine bought Onefinestay, a U.K.-based platform for renting high-end
homes and apartments.
Chiglinsky, Margaret Collins, Robert
Schmidt, and Ben Steverman

$159m
Verizon buys into AwesomenessTV. The telecom will help the
youth-focused content company launch a mobile video brand.
The bottom line New standards for the DreamWorks Animation remains the majority owner.
$14 trillion retirement market could reshape
how investors get advice.

$1,141
Cucinelli invests in culture. The Italian fashion house, buoyed
by a 16.4 percent boost in revenue last year, will pay each of its
Edited by Pat Regnier employees an annual allowance to go to museums and theaters.
Bloomberg.com
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DESIGN
enmeshed with solving social and other problems. Doing the right
thing, they said, often leads to unexpected business opportunities,
some of which they will elaborate on at Bloomberg

ISSUE
● Interviews
in this special Businessweek Design 2016 in San Francisco, on April 11.
section have been
condensed and
All of which is to say, if you want to discover the Next Big
edited Thing, consider therapy—or just read on.
 KIND’
● Studio Visit

S Seven years ago an intermediary for the prime

S S E CR E
minister of Iraqi Kurdistan, Nechirvan Barzani, asked
the architect Daniel Libeskind to design a museum. It was to be
built in the autonomous region’s capital city, Erbil, in the north-
ern part of Iraq, and it would be the first, Barzani told him through
the intermediary, to tell the story of his people, an ethnic minority
E
that’s survived decades of violence and oppression. The prime minis-
ter imagined an institution that would confront past horrors—in partic-
ular, Saddam Hussein’s genocidal attack on the Kurds in the late 1980s,
which Kurds call the Anfal—as well as celebrate Kurdish culture. And it
would cement Erbil’s status as a world-class tourist destination.
At the time, in 2009, this seemed achievable. Parts of Iraq were still in
B
turmoil, but Erbil was attracting foreign investment and building shopping
malls and hotels. The city’s governor took to calling it the new Dubai. Even
in relatively peaceful times, though, a museum dedicated to Kurdish iden-
tity is a sensitive proposition. The Kurds, most of whom are Muslim, do
not have their own country. They live in a region that crosses the borders
of Iraq, Iran, Syria, and Turkey, and they’ve often been persecuted in all
four. So Barzani’s representative made an extraordinary request: He asked
I
Libeskind to keep the project a secret. The architect agreed, and over the
years he’s limited word of the project to senior staff, who were instructed
not to discuss it. When media or clients came through his New York studio,
L

staff scooped up the project’s designs and stowed them away in drawers
and cupboards until the visitors had left.
On April 11, Libeskind will speak publicly about the museum for
the first time, and during a recent interview he explained why he con-
vinced the Kurdish government that it’s time to unveil it. “In a time
of destruction, especially a time of cultural destruction, you have a
BY E L I Z A B E T

desire to build,” he says. Libeskind, who was the master planner of the
rebuilt World Trade Center, a few blocks from where we spoke in his
Lower Manhattan office, recalls the famous dictum by the 19th century
German poet Heinrich Heine: “Where they burn books, at the end they
also burn people.” Libeskind says: “When people start destroying build-
ings, next they will be destroying books, and they will destroy people. And
this is exactly what is happening.”
Two years ago this spring, it looked like construction on the 150,000-square-
foot museum—at a projected cost of $250 million—would begin, Libeskind says.
Three months later, Islamic State captured Mosul, about 30 miles west of
Erbil, and the government’s financial resources, and the building crews, were
redirected to war. The museum has been delayed since, while Islamic State

H
has destroyed more than a dozen Iraqi and Syrian her-
itage sites, including the city of Palmyra, which was
one of the best-preserved ancient cities in the world.
In Iraq, Islamic State pillaged and destroyed the
ancient Assyrian city of Nineveh near Mosul.
T
The
G REENSPAN Photograph
by
Jonno
architect of the World Rattman

Trade Center master plan reveals

his design for a museum in northern Iraq
 ● Jewish These sites served as gathering spots for mil-
Museum
lions of people and enabled mixing across ethnic
Berlin, 1999,
and religious boundaries. The United Nations
Libeskind’s first
constructed has called the systematic destruction of them
design
“cultural cleansing.”
In Libeskind’s view, a new museum can never sat on a wall overlooking the site, he sketched the ● Imperial War
Museum North,
adequately compensate for this loss, but it can help spare arti- fragments and imagined them coming together in Manchester,
facts from ruin, tell an ignored people’s story, and, poten- the center of the structure. Because the museum U.K., 2001
tially, create a new crossroads. “I mean, we watch helplessly will sit at the bottom of the Citadel, Libeskind also
as Palmyra is destroyed piece by piece. We watch the destruc- designed the building as it would be viewed from above. “It’s not
tion of world heritage,” he says. “I thought, You know, this is really a roof at all,” he says. “It’s a composition to be looked at.”
even more urgent now.” In addition to the four masses, the building’s design is defined
by a second architectural form: two bisecting paths. Michael

L
42 ibeskind has designed museums for cities across
Europe and the U.S. and established a reputation for
architecture that addresses mass murder. “I am not
Muslim. I am not Yazidi. I’m not Kurdish. I’m Jewish, but it’s
the same thing,” he says. His parents survived the Holocaust;
he was born in Lodz, Poland, in 1946, moved to Israel, and
then emigrated to New York. In 2010 he traveled for the first
Ashley, the project architect for Studio Libeskind, describes
this form as “a broken line between past and future.” The first
path, which Libeskind calls the Anfal Line, is made of concrete.
“It’s dark and heavy,” says Carla Switherack, the studio’s prin-
cipal in charge. “It’s representing the difficulties of the Kurdish
history.” The second path, the Freedom Line, ascends toward a
second-story, flame-lit garden

“We watch
time to Erbil, a city “that exceeds mortality,” as he puts it.
Erbil’s historic center, a large mound called the Citadel
overlooking the city.
Libeskind seeks to create
dating to the fifth millennium B.C., is a Unesco World an experience echoing that of
helplessly
Heritage site. Archaeological evidence suggests the
Erbil Citadel may be the oldest continuously
history, a technique he’s employed
in many projects. The Jewish Museum
as Palmyra is
inhabited site on earth. Libeskind also
visited towns that had survived the Anfal,
Berlin, the building that established his rep-
utation 20 years ago, utilizes the concept
destroyed piece
which destroyed more than 2,000 Kurdish
villages and killed almost 200,000 Kurds.
of “the void,” exhibition spaces empty of
artifacts to represent culture and ideas

by piece. …
“I knew about the Anfal,” Libeskind says.
“I come from this background. It was
that don’t exist because of the Holocaust.
Novelist Howard Jacobson wrote in the Guardian that
kind of like a repetition: the Jewish Museum Berlin is “an eloquent gesture of defi-
‘They took my brother
in the middle of the
This is even ance even as it commemorates loss.” In contrast to the void’s
straight line, “the Anfal Line doesn’t cut through very clearly,”
night. They killed his
kids. We don’t know
more urgent Libeskind says, “because this world is not over.”

now”
L
where he is.’ ” ibeskind repeatedly describes the vibrancy and cre-
Before his trip, ativity of Islam. Exhibitions at the museum will feature
Libeskind had studied the geography of the Kurdish diaspora; Kurdish textiles, pottery, and music. The architect’s
IMAGES COURTESY STUDIO LIBESKIND

he was taken by an idea of a museum composed of four irregu-
lar parts, or fragments, as he calls them, corresponding to the
four countries where most Kurds live. When he visited the muse-
um’s future site at the foot of the Citadel, he clarified this vision.
“I wanted to make the fragments a little bit more precise,”
he says, “because they’re not just cut out of a square. They are
cut out of topographical maps, of population densities.” As he
design celebrates Islam, too—the building is oriented toward
Mecca, and interior walls will feature traditional Kurdish motifs.
The structure will include men’s and women’s prayer rooms.
One doesn’t tend to hear cultural appreciation for Islam these
days, and when this is pointed out to Libeskind, he responds
energetically. “Islam is one of the great religions of the world,”
he says. “It’s not some small sect somewhere, which, as the
Republicans say, should be forbidden from coming into the P IR ATION INS
IN S

PIRATION
country. You just can’t pretend that that’s a solution. That build- N
ing walls and giving checkpoints are going to make you free in
ATIO
IR
the future. It just doesn’t work.” O N INSP
The Kurdistan museum will address Islamic State’s tactic of

I
● Libeskind also

AT
cultural destruction, but by celebrating Islam it will also chal- looked to Kurdish

I N S PI R
weaving …
lenge narrow understanding of the faith in Europe and the U.S.

INSPIRATI
Libeskind says these meanings are accidental; the project was
conceived years before Islamic State conquered Mosul. But ● … and pottery to
it isn’t lost on Libeskind that the museum’s construction has draw the facade’s

TION
been disrupted by some of the same forces of oppression it ● Local brickwork geometries
intends to document. It is, as he might say, another repetition. inspired the Kurdistan

O
museum’s terra-
N I N SP
To realize his vision for the museum, Barzani enlisted the

A
cotta roof RA I

R
services of Gwynne Roberts, a journalist-turned-filmmaker PI T IO
who’s been recording the region’s major conflicts for the NI
NSPIRATION I
NS
past 30 years. His production company, RWF World, which
will provide the museum’s multimedia content, has collected
scores of oral histories from Kurds testifying to the violence they experienced. Teams of Kurdish reporters and producers
at RWF World are in Iraqi Kurdistan interviewing people as
they return from the front, collecting more material for the
● Contemporary ● Military
Jewish Museum, History Museum, exhibitions. (Roberts is referred to within Studio Libeskind as
San Francisco, Dresden, “the client”—a reflection of Barzani’s effort to find a neutral
2008 Germany, 2011
party to help engineer a museum for his fragmented people.)
For now, the Kurdish government has no money for non-
military endeavors, and the nearby violence makes construc-
tion potentially unsafe. If money became available, would
they build despite the threat? Can the museum be engineered
to be safe from bombings or sabotage? “I don’t know of a
project [like this] that was built during a war,” Libeskind says.
“It’s hard to conceive.” Then again, in a time of destruction,
perhaps architecture becomes more vital. “People think archi-
tecture is a bunch of ice cream parlors and, I don’t know, some 43
gyms and nice places to take your girlfriend out or your wife
or your boyfriend,” he says. “But architecture is in the midst
of the turmoil of the world.” Unlike politics or war, though,
architecture is constructive: “It’s not a military art, it’s not a
political art.” Rather, Libeskind says, “it’s planting a garden.
It’s making a building. The power of architecture is the power
to do something good.” <BW>

● A rendering
of the museum
in Erbil, below
the city’s
famous Citadel
 INSIDE
● Process

Costume design is
like psychiatry, says ● Tazewell in the
fitting room at the

PAUL TAZEWELL,
Richard Rodgers
Theatre
Photograph by Tina Tyrell

who outfitted the

cast of Hamilton.
There’s a lot of
listening—to actors
and audiences.

T heater design is
particularly col-
laborative. My work’s
always informed
by what the direc-
44 tor wants, what the
piece is saying. It has
to jibe with what the set
and lighting design-
ers are doing. And it
has to make sense for
the actor who’s going to
realize who this person
is. I’m trying to make
decisions that will keep
it all together and make the most sense for an audience.

I
t’s an odd mash-up of working with my hands and fabrics,
researching and telling stories, working with people and
movement and acting, and being a psychologist.

I
sit in the fitting room with an actor who’s in a very vulner-
able place. Maybe they have no clothes on, and I’m trying
to get them to wear something that feels really foreign. We’re
 redefining how they see themselves day-to-day and as this
character. If they’re squirming around, I can read it on their face.

Y ou’re also thinking about the audience’s emotions. For

Hamilton, we made the decision to have the period rep-
resented from the
shoulders down, and
then everything from
the neck up was con-
temporary: A repre-
sentation of the actor
and what they brought
to t h e c h a ra c te r,
unadorned. We didn’t
want to get trodden
down by all the period
stuff, where you
start to not listen
to the story. Oak 45
Onaodowan [who
plays Hercules
Mulligan and James
Madison] used to
wear a ski cap in
rehearsal. So as an
experiment, I put it on
him. I said, “Can you
go out in that? Do the
scene in that?” He
● The cast
of Hamilton

OUT
onstage

was up for it.

S
o much of it is
getting out of the
way—stripping down the idea so it can breathe more. I can only
HAMILTON: JOAN MARCUS

rely on how I feel about it. That’s what I trust: if I feel a heartbeat
coming off of it. ——As told to Mark Leydorf
Watch the whole story at

slack.com/animals
A messaging app for amazing teams
of all shapes and species.
 RULES designers say they
● Strategies
The

NEVER break

1
START
Don’t
TALKING a design by

2 Design for the L O N G haul

3
INTERESTING
Make stairs more than elevators

4 Work to make
BIG S M A L L E R things

COLOR
47
5 Don’t use gradations when you can use a solid

6 Don’t fight gravity

7 Avoid“CLICK TO ENTER” or TINY GRAY TEXT

8 Incorporate a CAT into design once a month

9 y never
Never say
10 Design as a TEAM
ALAMY (3). GETTY IMAGES (3)

① DANIEL LIBESKIND, Studio Libeskind ② BAIJU BHATT, Robinhood ③ ④ CRAIG DYKERS, Snohetta ⑤ MARIA GIUDICE,
Autodesk ⑥ BRAD SEWELL, Campaign ⑦ STEWART BUTTERFIELD, Slack ⑧ BAIJU BHATT, Robinhood
⑨ VICKI DOBBS BECK, xLAB at Industrial Light & Magic ⑩ BRAD SEWELL, Campaign
 ● Studio Visit
● Diana Williams, a
● Visual effects
supervisor Tim
Alexander has worked
● Hilmar Koch, director of virtual
production, holds degrees in art
and mathematics and won an
Academy Award for developing ● John Gaeta, executive creative

A
L
on Harry Potter and the
Lucasfilm Story Group “ambient occlusion,” a means director, won an Academy Award
Goblet of Fire and Walt
member, reinvents the way of recreating how ambient light for The Matrix, for which he
Disney’s James and the
stories are experienced. reflects off surfaces. designed effects like “bullet time,”
Giant Peach.
● Bredow Earlier in her career, she an extreme visual transformation
generated scenarios of time to show what’s otherwise
for soldiers at the U.S. ● Dobbs Beck unfilmable, such as a flying bullet.
Department of Defense.

R L
E I
B A
E N
C
48
ovitz

L
Pe s c
Da v i d

E
By

To develop Star Wars and

Jurassic World in VR,
INDUSTRIAL LIGHT & MAGIC
has formed a supergroup
PHOTOGRAPH BY MOLLY MATALON FOR BLOOMBERG BUSINESSWEEK

S
tanding on the desert surface of Tatooine, you instinc-
tively duck as the Millennium Falcon swoops in for a thun-
derous and dramatic landing beside you. Through the
lenses of your virtual-reality headset, Han Solo’s starship looks
real. That’s because it is—in the sense that it’s rendered exactly
as it appears in Star Wars: The Force Awakens. Now, it’s the
star of Trials on Tatooine, a first-person virtual-reality expe-
rience created by Industrial Light & Magic’s Experience Lab
(xLAB), a supergroup of artists, engineers, sound designers,
and storytellers building the future of interactive, immersive
cinema. “We’ve assembled an extraordinary group of dream-
ers and rocket builders,” says Vicki Dobbs Beck, the executive
in charge of the lab. “The dreamers are constantly thinking
about what’s possible, and the rocket builders figure out how
to get us there.”
When Rob Bredow, chief technology officer of ILM’s parent
company, Lucasfilm, and his co-writer on Trials on Tatooine,
Pablo Hidalgo, envisioned the Millennium Falcon “landing on
your head,” the xLAB engineers had to customize the game
engine so the massive 3D model could render fast enough for a
dynamic and smooth virtual experience. Meanwhile, Skywalker
Sound, an audio design company, built a surround system that
rumbles like the Corellian freighter reputed to have made the
Kessel Run in less than 12 parsecs. “The way we do technology
development here is really hand-in-hand with the creative goals,”
says Bredow. “The R&D is always in service to the story.” <BW>
 Can stock trading be free?
● THE DEVELOPER
BAIJU BHATT created
ROBINHOOD, a
commission-free trading
app, to give everyone
access to stock markets.
Q: YOU’RE TRYING TO SIMPLIFY
WHAT CAN BE A PRETTY
COMPLICATED PROCESS.
A: Steve Jobs once said good design isn’t
just how something looks and feels but
how it works. We’ve tried to make that men-
tality part of our worldview. So, if you’ve
ever tried to open an account or trade a
stock on an online brokerage account,
it’s like a Rube Goldberg machine. It’s far
too complicated and often designed for
people who make those brokerages the
most money. What we’re after is something
much more basic that can provide access
to the public markets for everyone, not just
for people with lots of money.
Q: HOW DO YOU MAKE MONEY?
A: Robinhood collects interest on unin-
vested cash in customer accounts and
will roll out margin trading in the next
few months. Margin trading will drive the
lion’s share of our revenue, which is like
a loan that lets people have more money
to trade with.
Q: WHAT DID YOU FOCUS ON WHEN
CREATING YOUR INTERFACE?
A: Obviously, mobile came first. That had
as much to do with the ease of building it
as it did with the experience and audience
we were after. We wanted it to be simple;
we wanted it to be tactile— something
that gives people the sense that when
IMAGES COURTESY SUBJECTS
they open the app, they’re holding their
money right in their hand. We took advan-
tage of things like swiping up to push your
order into the market. The engine is very
complex, but we were able to put that
under the hood.
● THE DAY TRADER
Fees aren’t
an issue, says
MICHAEL
GOODE.
It’s “the
ability to
trade what
I want,
when
I want.”
Q: HOW DO YOU TRADE?
A: I typically trade about $20 million
in penny stocks a year. I use two
main brokers that charge me on a
per-share basis, so I end up paying
a lot of money on commission. On
a typical day I spend maybe $76 on
trading commissions.
Q: WHAT STRUCK YOU ABOUT
ROBINHOOD WHEN YOU
FIRST HEARD ABOUT IT?
A: It was nice to see someone come
in with a fresh idea to compete with
the established players. What I was
struck by at first was what a nice,
clean design they had. Brokers
typically put no thought into the
design and user experience. I have
a bunch of accounts I’ve opened
through the years, and even today
most of those retail brokerage web-
sites look like they’re straight out of
1996. … The act of placing a trade is
still way too complicated.
Q: WOULD YOU EVER USE
ROBINHOOD?
A: I’m not sure it fits my purposes as
a day trader. I talked about it recently
with some other day traders, and none
of them thought it was a good fit for
them. I use some of my own algorith-
mic trading programs, and Robinhood
doesn’t support those. Also, execu-
tion quality is super important for day
traders. What’s more important to me
isn’t the fees I’m paying but the ability
to trade what I want, when I want.
● Dialogue
● THE HIGH-
FREQUENCY TRADER
Zero commissions
alone might not
be enough to
attract young
investors,
says MANOJ
NARANG,
the founder
and former
CEO of Tradeworx,
a high-frequency
trading firm.
Q: IS THERE ROOM
FOR ANOTHER
ONLINE BROKER?
A: The one thing I am sure of is that
the established discount brokers
need some fresh competition.
49
Their trade commissions haven’t
budged for 15 years. There’s been
so much advancement in trading
technology and volumes. The big
institutional investors have bene-
fited from that and are paying a lot
less to trade. But the retail traders,
the average folks, have seen no
cost savings. And that’s because
the large discount brokers got
entrenched. I see this as a space
worth disrupting.
Q: WILL THIS WORK?
A: That remains to be seen. There
have been a couple attempts at
doing zero-commission trades
that didn’t work. I don’t know
that free commissions alone will
attract enough investors. What
makes me optimistic now is that
these guys are focused on mobile.
It’s cheaper to build apps than
websites. I feel like the model
could work if the business is lean
and efficient enough.
BY MATTHEW PHILIPS
 THE ART OF
● Still Life

● Some dishes can take months

to come to fruition, particularly the

THE MEAL
desserts. Walk in the Forest was a
three-month endeavor, because
Crenn and her team were quite
specific about how they
envisioned
it being
To please the palate, chef DOMINIQUE plated.

CRENN first captivates the eye

By Howard Chua-Eoan
Photograph
by
Aya Brackett

50

“The
visuals
must trigger
something
in your mind,
condition you
to what you
Dominique
Crenn was
born in France

experience.
and studied
ILLUSTRATION BY CREDIT TK

business. After
she moved to

It’s not just putting

the U.S., she found
her calling in haute cuisine.
STILLS: DAVID NICHOLSON

Her San Francisco restaurant

food on a plate.
Atelier Crenn has garnered two
Michelin stars since it opened
in 2011. Crenn will be featured
PHOTOGRAPH

It’s also storytelling.”

in the second season of
Chef’s Table on Netflix, which
starts on May 27.
 ● Pat Parker, a ceramicist in Florida, “I don’t want cooks to
designed the bowl to imitate the
grain and color of the trees in Brittany, be just workers.
where Crenn spent her childhood.
I want them to be thinkers.
● Sorrel extract, drawn from
the plant’s bitter stems, is I want them
to be proud
blended into a sweet mixture
that's frozen to create an
airy mousse.

about the
dishes
they create.”
● The mousse is sliced into
a cake-like square, set in a
ceramic vessel, and drizzled
with blackberry sauce.
● Next the cake is
decorated with dehydrated
blackberries that have
been cast in molds
and reconstituted with
cultured buttermilk, to
appear as if they’re
fresh-picked. ● The dessert becomes
even more of a woodland
fantasy when it’s finished
with fresh sorrel leaves
and pine nuts.

51

t ATELIER
CRENN,
diners are presented
A
with a poem, not a menu.
Each verse arrives as a dish
created by the chef’s team.
Walk in the Forest is a dessert
version of a savory dish the restaurant
PHOTOGRAPH ILLUSTRATION BY CREDIT TK

served when it first opened. Pastry chef

Juan Contreras suggested the revival. It evokes
Crenn’s memories of mushroom- and berry-hunting excursions in the French
woods with her father and brother. Customers, she says, are interested in the
narrative and the journey. “It’s all part of an expanse,” she says. The dessert has
“the texture, sweetness, and bitterness of what the forest is about.”
 le r
u tz

LL
● First Person
H
HELEN MARRIAGE’S

Tobi a s
public art

by
h

I
ap
P hoto
gr
brings people
together
for the fun of it

G
H
52

T
E
N P
 P
articularly in modern, 21st century life, and he rang me and said, “It’s a disgrace, that
we’re tempted to believe that every- bus.” And I thought, Oh, my God. It’s really not
thing runs to a timetable. If the train is road-worthy. And he said, “No, no. I just need
10 minutes late, it really matters. We get ter- to clean it.” And when we got it back it wasn’t
ribly agitated about the world not behaving. cleaned: He’d had it completely repainted;
But what I think is that nobody’s life is mea- he’d had the whole bus refurbished. It was
sured by routine. You don’t remember every 42 -ton his contribution to the project.
● The
day you got the No. 38 bus to work. The things you mechanica
l After the event, he disappeared, and I couldn’t
and a
remember are those special moments when you fell pachydermll girl find him for months. He didn’t answer his phone.
20-foot-ta
in love, or your kid was born, or you were chosen for ew a crowd of Then about six months later I called him for some
dr
the school play, or got a promotion. You remember almost a million reason—I think we’d been nominated for an
those moments. And along with a sort of trans- award—and I wanted him
formation of the urban landscape, what we’re to come to the ceremony. He
interested in with our company, Artichoke, is answered his phone at work,
interrupting the routine and creating shared and I said, “Where’ve you been?”
joy where people have a memory. And based on And he said, “Oh I didn’t tell you
the response, we’ve managed this with Lumiere, about the cancer, did I?” He’d been
David Best’s temple in Londonderry, or with The diagnosed with lung cancer three
Sultan’s Elephant, which we paraded through weeks before the event, and they’d
London in 2006. said, “Hospital now,” and he’d said,

W
nical
e have a track record now, but many “No, I’ve got this really ● A mecha
ores
er ex pl
of our projects were rejected for years important thing to do. sp id
in
Liverpool
before we could mount them. And I’ve I’ll come in when it’s fin- 2008; danc
ing
evolved an understanding of why people say no. It’s ished.” And he did our stick men
on
eet
fear, mostly, and not wanting to be accountable. Let event, he did this sym- Regent Str

someone else decide. And although there are no real posium, which he abso-
shortcuts around it, what I’ve found is that if you say lutely didn’t need to do,
something is happening, and I need you to help me, and the next day he went
people assume that some other authority has sanc- in and had half his lung
tioned your right to do this. Somehow, engaging chopped out. So his kind of commitment to what hap-
people in a task rather than seeking permission pened was absolute, completely absolute. Then he said
unlocks the whole thing. They don’t so much say this funny thing, he said, “As part of my professional
yes as stop saying no. development at London transport, I get opportunities 53

T
he most interesting example in The to do courses and classes.” And I said, “All right, what
Sultan’s Elephant project was the bus are you doing?” And he said, “I’m learning French.” So
planning manager of the London buses. while we can talk about affecting people on a macro level
He said, “I’m not moving the 38 bus for you and and changing the way cities work and whatnot, very often,
a bunch of Frenchmen.” Resistance, resistance, the stories are very personal and individual.

I
resistance. And over a series of strange and per- t’s also important that
r 2016’s
sonal incidents, we finally wore him down, and what we do goes away. ● Foie ndon,
Lum re Lo
he became the project’s biggest champion. Lots of people say, as Marriage
When we sent the they said about the temple asked Patriceshow
ner to
bus that the little girl in Londonderry, “Oh it’s Warretminster
Wes
[really a giant mari-
onette] rode around
“Somehow, such a shame. Why Abbey in a
don’t you leave it here different light
in, to be modified in engaging people forever? It’s so beau-
F ra n c e , t h e F re n c h tiful.” But actually they remember
company phoned me in a task rather it more because it’s gone. They
afterward and said, “We
can’t drive it back. It’s not a
seeking were present when it went up,
and when it burned down, and
road-worthy vehicle. We can’t permission all that stuff.
get insurance.” They cut the roof The thing about the temporary is it’s that
off, they’ve done various things. … unlocks the whole quality of, “Do you remember?” Just before we
So I called the [London planning
manager] and said, “John, could
thing. They don’t did The Sultan’s Elephant, there was this extraor-
dinary moment, unprecedented, when a whale
we, under London transport, so much say got lost and came up the Thames, and sud-
somehow insure this? Is there denly there was a whale outside the Houses of
some big organization?” And he yes as stop Parliament, and 100,000 people came
ARTICHOKE (2); GETTY IMAGES (2)

said, “I think I’m due a weekend in

France.” And so this guy who’d been
saying out of their offices and stood by the river,
just trying to catch a sight of this whale.
saying no, no, no, we flew him to France, no” I guess that’s sort of what we’re doing.
and he and his assistant—they were planners; We’re trying to create a moment where
they’d been bus drivers years ago—they drove 350 miles back people go, “Do you remember that moment?
in this funny old bus with no roof, and then he took it back, I was there.” �As told to Brad Wieners
 ● Test Drive

54

BUILD
A
What if heirloom furniture
came in a box smaller
than a flatscreen TV?

CHAIR
IN 3 By Bob
Parks
Photographs
by Caroline
Tompkins

MINUTES
 T
Brad Sewell is he FedEx box on the doormat is a welcome
a mechanical hit of dopamine, but its limits are strict:
engineer who
left Honda for
Length plus girth (a line measured around
Apple, where the center) can’t add up to more than 165 inches,
he looked afterwhich rules out most home furnishings. A startup
the alloy cases
for iPads and iPhones, before
called Campaign took this as its central challenge:
enrolling at Harvard for an MBA. Could it cram a full four-cushion sofa in just two
The flaws of modern dorm fur- such slender boxes? Curiously, the entrepreneur
niture gave him an idea that
couldn’t wait for graduation, so
who took this on wasn’t a furniture designer. Brad
he quit to found Campaign. Sewell is a skinny, 29-year-old left-brain-type auto
engineer from Ohio.
Sewell started Campaign in June 2014 with a crew
of engineers with backgrounds in everything from kayaks to con-
sumer gadgets. They quickly settled on California-milled steel
as the best material by weight and price, instead of the fiber-
board used in typical “knockdown furniture.” The skeleton of
the couch is fastened with a clever wingnut with folding flanges
that give the assembler extra torque when hand-tightening.
Then they employed their moms as product testers.
The first three pieces—a chair, a love seat, and the sofa—will
be available online in June at $495, $745, and $1,000, respec-
tively. A YouTube video reveals how, with no tools and a little
elbow grease, a customer can whip together the flop-friendly
midcentury modern couch. Bloomberg Businessweek
staffers tried the single-seater. <BW>

55

● Our art
department
built this chair in
3 minutes and
12 seconds
 ● Work in Progress

A MUSEUM
Photographs by
John Francis Peters

On May 14, the

San Francisco
Museum of
Modern Art
will reopen
after a two-
year, $365 million expan-
sion that doubles its
size. Architecture firm
SNOHETTA provided the
larger museum’s design.
Here, Snohetta founding
partner CRAIG DYKERS
56
and NEAL BENEZRA,
SFMOMA’s director, reflect
on some of the decisions
they made while “dancing”
with Mario Botta’s vision
for the original building—
and transforming it.
● DYKERS:
The new wooden
stairs will allow
more light into
the many
spaces adjoining
the atrium. In the
remainder of the Botta
design, the rooms have
been carefully protected
to maintain their original
● BENEZRA: One character.
of the things the new
PHOTOGRAPH ILLUSTRATION BY CREDIT TK

stairs do is provide a
perfect viewing area
for the two wing walls,
and thus another
opportunity to share
artwork in the free,
unticketed space for
our visitors.
PHOTOGRAPH ILLUSTRATION BY CREDIT TK

TAKES
FLIGHT
● Work in Progress ● CD:
Window
seats provide
views of the sur-
rounding downtown.
And the core galleries
are designed to limit
● NB: If you don’t the amount of visual
get the galleries right chaos caused by
when designing a new ordinary elements
museum, the project such as electric
fails, in my opinion. outlets or vents.
Snohetta worked
closely with me and
SFMOMA’s curatorial
staff to design purpose-
built spaces, perfect
for displaying art. The
new lighting systems,
minimalist design, and
flexible spaces respond
beautifully to our needs.

● NB: SFMOMA will ● CD: The Living Wall brings warmth

have six terraces at and natural beauty to the museum.
opening—one of them It’s planted with over 15,000 plants,
being the spectacular including 24 native plant species,
third-floor sculpture placed to get the appropriate
terrace with the Living amount of sunshine for
Wall, pictured here. their type.
These areas will offer
our visitors spaces
to rest and reflect,
enjoying fresh air and
sunlight to reinvigo-
rate them during their
time at the museum.

PHOTOGRAPH ILLUSTRATION BY CREDIT TK

 ● NB: The Roberts
Family Gallery is a
new space designed
to showcase contem-
porary commissions.
We’ll open with Richard
Serra’s Sequence,
a part of the Fisher
Collection, but every
two to three years we’ll
commission another
artist to create a
piece specifically for
this space.
● CD:
The satu-
rated colors of the
restrooms and soft
lighting are intended to
provide a contrast to the galler-
ies. Color is a subjective, mutable
perception. A fully immersive
space makes you aware of your
eyes adjusting, and so you
sense the color, and
your perception,
changing.
● CD: High
glass windows
expose the
artworks in the
Roberts gallery to
casual passers-by. It
is a generous and
welcoming signal
for the new museum.
● NB: Snohetta has
given us a building
that is wonderfully
San Francisco-
centric. The locally
manufactured panels
of the facade were
inspired by San
Francisco Bay’s
waters and fog. It’s
astounding the way
the changing light and weather
throughout the day are reflected
off its surface. We’re thrilled, too,
by how beautifully the new facade
complements and contrasts the
former Botta-designed building, and
how well it integrates us into the sur-
rounding neighborhood.
● Dialogue
SHOP TALK
Excerpts from an interview in Slack with
SLACK CEO STEWART BUTTERFIELD
After he sold the photo-sharing
website Flickr to Yahoo! in
2005 and gave up on Glitch,
a computer game, in 2012,
Stewart Butterfield and his
company launched the collaborative
messaging tool Slack. Today, 2.7 million people
use Slack daily; 800,000 of them pay for it. The
company has raised $540 million, most recently
at a valuation of $3.8 billion. We joined Butterfield
for an in-Slack interview. He’d just been in
Melbourne, where Slack opened its first office
Down Under.
Toph Tucker 4:29 PM Hi, Stewart!
It’s a pleasure
Stewart Butterfield 4:31 PM
G’day, mate!
TT 4:31 PM Congrats on Australia
and funding and generally being
a very successful person!
SB 4:31 PM Well, that is very kind.
TT 4:49 PM Are there particularly
exciting uses you see people
finding for Slack?
4:49
And: Do you care about having
a legacy through that?
SB 4:50 PM I think the examples I like
best are the ways in which people
have altered the ways in which they work,
even slightly. For example, eliminating the
daily “stand-up” meeting in favor of a round
of messages in Slack.
4:50
And the vain part of me would
like to have a legacy of some kind. …
I think most people want to make some
kind of dent in the universe.
TT 4:50 PM
4:53
Do you think group chat as a
mode of working can ever go too far? Like,
I bet you saw that Jason Fried post:
Group chat is like being in an all-day
meeting with random participants and
no agenda.
SB 4:53 PM
Oh, yeah—that was
preposterous.
4:53
It’s content marketing!
4:54
He is a very smart guy, but
either he’s missing something there or he’s
just talking up his book [Remote: Office
Not Required].
4:54
E-mail is also an all-day
meeting with random participants and
no agenda.
4:55
Except you happen to open
them all individually, and there’s a lot
more overhead.
4:55
Most physical workspaces
are all-day meetings with random
participants and no agenda.
TT 4:55 PM E-mail is batched at least,
offices … maybe offices just have
norms people are more accustomed to?
SB 4:56 PM But his ideal world there is
some platonic ideal—Nietzschean
übermenschen who just sit around
thinking genius thoughts all day and
don’t have any business talking to other
people. Designers? I don’t know.
4:56
In the real world, people
have to talk to each other to get
work done.
TT 5:00 PM What might Slack be or
mean to people in 5 or 10 years?
Is it group chat or something more?
SB 5:01 PM Well, we have never said
“chat,” and we never would.
5:02
That trivializes what people
actually do. Workplace communica-
tion is important to its participants. But
it already isn’t just people talking to one
another. It’s also giant flows of data and
information and a window into the work-
flows and business processes around
the company.
5:02
In our Slack instance
(430 employees and a couple hundred
active guest accounts) we do about 35k
messages a day from humans.
5:03
But there are another
150k-200k messages each day from
machines.
TT 5:03 PM Wow.
SB 5:04 PM So in 5 to 10 years, we’ll
see more and more of that. It
becomes “an operating system for your
team” … except now it’s much more literal.
TT 4:37 PM There’s this eerie
recurrence in your career of building
a microcosm, building a tool within that
game world, and then spinning the tool out.
4:37
Is that, like, how you think?
SB 4:38 PM Well, neither of them were
actually parts of the game.
4:38
In the case of Flickr, that’s a
story that was published at the time and
which we tried to get corrected, but …
¯\_( )_/¯
TT 4:38 PM I stand corrected!!
SB 4:39 PM Flickr was in fact something
we came up with that we could build
taking advantage of technical infrastructure
we’d already created, but which we could
finish (and bring to market) sooner.
4:39
And Slack was just a built-
from-scratch version of the jury-rigged
and hacked-together system for
internal communication we built while
working on Glitch.
4:40
So the common thing in both
cases was a desperate attempt to find
something to salvage from a bunch of
wasted work.
4:42
Reminds me of a point that
Dan Savage is fond of making, with
respect to romantic relationships:
4:43
“We think that the only ‘suc-
BUTTERFIELD: PHOTOGRAPH BY JENNILEE MORIGOMEN FOR BLOOMBERG BUSINESSWEEK; TUCKER: PHOTOS BY 731
cessful’ relationship is one that ends in the
death of one of the partners. Anything that
ends before one party dies is a failure.”
TT 4:43 PM Right, but there can never
be a true game never ending.
SB 4:44 PM But there can be successful
relationships that conclude before
either party dies. And it is much more
healthy to think that.
TT 4:51 PM One of my questions is,
“Are you happy?”
SB 4:52 PM I asked around in the room
here, and the consensus is, “I guess
you’re happy … fundamentally.”
4:52
But they see me being
angry sometimes.
4:52
I do think I am happier than
most people.
4:52
Or, more contented?
More at peace?
PASS THE LEVEL I CFA EXAM ®

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 By
● Technique Je

WE LIKE

ss
ie S
c anlon
TO WATCH ● Scenes from
Tongva Park in
Santa Monica

W
hen JAMES CORNER talks about land-
scape architecture, he doesn’t talk
about pathways or rose bushes.
He talks about people coming together to
observe other people. “Public spaces can be
colonized in time—not by natural processes,
but by people,” he says. “So understanding what
it takes to create an inviting space is a differ-
ent design practice from just doing cool
things with form.”

C
orner is the founder of James Corner Field
Operations, the firm responsible for New
York’s High Line, the much-praised park occu-
pying a formerly derelict elevated railway on Manhattan’s
far West Side. He approaches his work with the belief that
good design in public spaces makes a city more appealing, draws
both new residents and the companies that want to employ them, and
enhances the economic value of everything around it—a theory that’s
been more than borne out in practice. The High Line, Corner’s most
successful work, has thoroughly revitalized its surrounding area,
transforming it into a lively tourist attraction that drew 7 million vis-
itors last year and spurred billions of dollars in nearby development.

W
ith the help of his 60 employees spread out among
three offices around the world, Corner has given
similar treatments to Santa Monica’s Tongva Park
in California, San Francisco’s Presidio Parklands, Cleveland’s

PHOTOGRAPHS BY KEVIN PERKINS FOR BLOOMBERG BUSINESSWEEK

Much of Corner’s historic main square, and waterfronts in London, Seattle, and
work is about
Philadelphia. He’s also designed entire new cities in China.

W
creating
“heightened hile Corner is recognized for turning polluted or abandoned
dramatic set- postindustrial wastelands into thriving public spaces, the idea of
tings for public
life to play out” scenography is just as prevalent in his work. As he puts it, every site
is different, yet each has to serve as “the stage setting of everyday life.” At Tongva
Park, woven steel cabanas simultaneously afford park visitors
views out to the Santa Monica Pier and put those visitors on
display for drivers on Ocean Avenue below. “People actually
get married in those pods,” he says with mild amazement.

C
orner is well aware that, at the start of any
project, many locals assume that “some
designer is going to come in here and
f--- it up, some ego is going to come in and drop
something that doesn’t belong.” So he seeks to
design landscapes that seem so
natural they look as though
they’d always been there.
“These overdesigned
places are trying too
hard to look good,” he
says, “but they don’t invite
use.” His do. <BW>
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ON THE NETWORK OF YESTERDAY.
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business. Modern technologies have brought new opportunities
and new challenges, like BYOD and a mobile workforce, that
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built for a new kind of business. With $4.5 billion invested in our
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Business is committed to designing, building, implementing
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on app
ric ions pp 2016 Comca
ly © 2016
ply. Comca t All righ
omcast.
st.
st ev
ri hts reser
eser
res ved.
ed.

business.comcast.com/enterprise
estrict
Rest
 64
by Da n i e l S h e
P h o t o g ra p h a
● Test Drive
BY CA R O L I NE WI N T E

R
H
I D E A N D G O
PARTY IDA BENEDETTO
and N.D. AUSTIN open
people’s minds by
taking them to
forgotten
and often
illegal places
O
ne Wednesday afternoon last
fall, I found myself alone on a
decaying wooden shipwreck, sur-
rounded by fetid waters in Kill Van Kull
channel, nearly half a mile from New York
City’s shoreline. This wasn’t an accident,
but I can’t say I knew the rest of the plan,
because I didn’t.
Earlier I’d awoken to a text message
from an unfamiliar number: “Be at Snug
Harbor, Staten Island, by 2:30. Wear water-
proof shoes.” The message was signed “Ida,”
as in Ida Benedetto, a professional “experience
designer” I’d met roughly two months prior, at a
dinner party. A co-founder of Sextantworks, which
orchestrates events in unusual, often illegal loca-
tions, she and her partner, N.D. Austin, met me
outside a tent that afternoon, where the annual
Future of Storytelling conference was in full
swing. They walked me down an overgrown path,
through some bushes, and across a road to a
rickety dock, where a 17-foot motorboat was
waiting. “We’re gonna throw a little sunset
cocktail party on an old barge out there,”
Austin said. “If you don’t mind, we’ll drop
you off with some suitcases while we go
pick up the guests.” Fifteen minutes after
they’d left me alone, my phone went off
again. “Hey, turns out we won’t be back
for probably an hour and half—are you
cool?” Austin asked. “There’s whiskey
in the big suitcase. Maybe you could cut
up some limes?”
Benedetto and Austin are the kind of
people you trust when they ask you to
prep a bar by yourself on some flotsam
as multistory cargo ships motor past. The
duo has been hosting events like this soiree
since 2012. But it was their 2013 exploit, the
Night Heron, a speak-easy they opened inside
an empty water tower atop a vacant building on
Manhattan’s West Side, that first got the public’s
attention. “We had to hand-carry everything up 14
flights of stairs and then hoist it another 25 feet into the
tower with ropes and pulleys,” Austin recalls. That
included three salvaged pianos, which the team
took apart and made into the bar and interior
fixtures. The first guests were the pair’s acquain-
tances—not friends necessarily, just interesting
 people they thought would be game. Things exploded from
there. The Night Heron attracted fawning press attention from
the New York Times and the New Yorker, and Sextantworks
received a flood of inquiries from individuals and companies
offering to pay commissions. “That’s when we realized we could
do this full time,” Benedetto says.
She and Austin take inspiration from a long line of
urban explorers and experience designers, including San
Francisco’s Suicide Club, a secret society that
climbed bridges and staged elaborate games
in sewers; the Cacophony Society, a culture-
jamming group started in San Francisco in
the ’80s that midwifed Burning Man; and the
Jacuzzi Association, a group of extreme bathers
in Switzerland who once suspended a hot tub
below a bridge so they could soak while dan-
gling 450 feet above an Alpine gorge. “I’m
always pleased when people are doing crazy
things,” Austin says, “taking the fantastical and
making it real.”
For two people who’ve built careers on tres-
passing, Benedetto and Austin don’t exactly blend
in. Benedetto has a red bob, big gray-green eyes,
and stretched earlobes stuck through with thick,
green spirals—a look that dates to her days as a
teenage punk (during which she often went skinny-dipping
in New York City’s water towers). Austin, dark-haired with a
slight resemblance to Charlie Chaplin, wears a handlebar mus-
tache and, often, a tuxedo jacket paired with Carhartt pants.
Both are in their 30s. “N.D. likes to say that I’m the architect
and he’s the maestro,” Benedetto says. She covers most
of the team’s historical research and completed a wilder-
66 ness EMT license. Austin, who was raised in Alaska, leads
explorations, manages most location build-outs, and plays
the part of charismatic frontman.
Every Sextantworks project, whether it’s a paid commis-
sion or not, is evaluated based on a system the two developed
called GLIT, which stands for Generosity, Location, Intimacy,
and Transgression. Take Night Heron:
Location, intimacy, and transgression
are all more or less obvious. But it was
“The only
the generosity component that made the way these things
illicit venue one of the hottest spots in New
York. The first group of invited Night Heron work is if they’re
guests got in for free but had the option of
buying $80 pocket watches, each of which would
intimate and risky”
grant two people access to the next speak-easy. The price even-
tually climbed to $300 based on demand. Even Ed Norton and
Girls actor Adam Driver showed up. “We funded the entire
project through sales of pocket watches,” Benedetto says.
In 2013 the Future of Storytelling conference—which boasts
producer Brian Grazer, Museum of Modern Art design curator
Paola Antonelli, and Al Gore as board members—paid the two
$10,000 to dream up a rogue event for their VIP party at the
High Line Hotel, where they created a confessional booth
experience inspired by the location’s rectory vibe. In 2013 and
2014, Alicia Keys’s Black Ball, which raises money for AIDS
care and advocacy, hired Sextantworks to devise individual-
ized experiences for big donors and rethink its annual pledge
event. (“That year we saw a 76 percent increase in dona-
tions,” says Natalie Galazka, who helped produce the ball.)
Last year, Benedetto and Austin had two wealthy individuals
each offer upwards of $100,000 for extravagant, weekend-
long events. “We’re not allowed to disclose much information
about those,” Benedetto says. “But I will say that, at one of
them, 18 people ended up getting tattoos—including me.”
She and Austin met through a mutual friend in 2012 and ini-
tially found each other odd. “It took us some time to warm up
to each other,” Benedetto says. At the time she’d recently co-
founded Antidote Games—a startup that develops games for the
Innocence Project, a nonprofit that works to overturn wrongful
convictions, as well as the Red Cross and other human-
itarian groups—a venture very much in line with the
rest of her CV until then. After dropping out of Oberlin
College, she’d hitched a ride to Guatemala to photo-
graph ex-guerrillas running a fair-trade coffee busi-
ness. Later, while getting dual degrees
● The
invitation to
in history and design technology from
the Kill Van Kull Parsons School of Design, she landed
barge party a Fulbright fellowship to Ethiopia,
where she worked with a film collec-
tive run by AIDS orphans. Austin, who has a degree
in poetry from Amherst College, was working as
a freelance film editor and anonymously hosting
urban exploration events, such as a scavenger hunt
to the top of New York’s Williamsburg Bridge.
Eventually the two became friends and started
taking trips together. Driving through the Poconos
one night, they stumbled on an abandoned hon-
eymoon resort. “There were waterfalls and heart-shaped bath-
tubs and round beds,” Benedetto recalls. “We were like, ‘We’ve
gotta do something here.’ ” They invited seven couples, telling
them only to meet at 7 p.m. under New York’s High Line park.
There, the guests boarded an RV. “We arrived at this deso-
late place that was deserted and completely silent,” says a
JPMorgan business manager, who asked to remain anonymous.
“It was like ruin porn. We walked into this entrance hall, and
suddenly a big brass band started playing.” The experience—
dubbed the Illicit Couple’s Retreat—was so special, she says,
that she helped bankroll Sextantworks’ next project, a photo
safari through New York’s iconic Domino Sugar Factory.
Benedetto says they’ve been caught only once, during a
private commission, when security guards busted up a picnic
in a location they refuse to describe. “Everybody loved it,”
she says, noting that no one was arrested.
“The only way these things work is if they’re
intimate and risky.”
After slicing the limes, I dusted
off cocktail glasses and arranged a
makeshift bar atop a splintered wood
beam. It was a balmy afternoon, and I felt grateful for the
chance to be alone in New York City, even if the view of
industrial New Jersey wasn’t exactly pretty. I was half disap-
pointed when I saw Benedetto and Austin puttering toward
me, their boat full of party guests.
They’d organized the night’s event as a little treat for
some lucky Future of Storytelling attendees. The group
was handpicked by friends of Austin and Benedetto’s and
included a New Yorker cartoonist and a manager for Procter
& Gamble. It was a small crowd: five people, each of whom
had received a mysterious, sloppily handwritten invitation
to “a brief excursion.” Austin mixed Brazilian cocktails he
called ocasos, which means “sunset” in Portuguese. The
sun began to set. The Talking Heads played from a porta-
ble speaker fashioned from parts of a megaphone and an
old euphonium. “Wow,” said one guest. “This is definitely
the most interesting thing that’s happened to me in a while.
Who in the world are you guys?” <BW>
 Where is driverless tech going?
● THE FORMULA ONE
ENGINEER
At McLAREN GROUP,
DAVID BELO says,
automated systems will
allow drivers to push
the limits of their vehicles.
Q: McLAREN’S HERITAGE IS IN
RACING—IT’S HARD TO IMAGINE
THAT WITHOUT DRIVERS.
A: Yeah, the driver is the big part of the show,
and in many respects it’s what people go to
see races for. On the other hand, it’s also the
technical challenge—one of the biggest you
could aspire to solve as an engineer. The
spectacle is just as much about the fierce-
ness of competition between the drivers
as it is about the marvel of what teams are
coming out with this year. I think there is a lot
of excitement for autonomous driving within
Formula One companies for the same reason.
Something that has been traditionally such
a hard problem—driving—is now within our
reach with these interesting and complex
algorithms. At the same time, we don’t design
without the human in the loop.
Q: WHAT OTHER ADVANTAGES ARE
THERE TO DOING THAT?
A: Whether it’s Tesla or GM or Porsche or
a racing company, you have to take into
account that you’re designing this machine
for a human to exploit it. I think what makes
us and some of the other companies working
in this field interesting is we’re starting to use
vehicle simulators to understand how the
brain is interpreting a lot of the signals the
driver needs to interpret in order to react to
what’s happening in the car and change the
IMAGES COURTESY SUBJECTS
control of the car. That work is just as impor-
tant as developing the engine to produce
three more horsepower. The work interacts
to achieve a lap time that’s lower or to get a
passenger car from point A to point B with a
higher likelihood of no accidents.
● THE TRAFFIC
PLANNER
Driverless could mean
more road congestion
and new patterns for
pedestrians,
says JOHN
DALES of
consulting
firm Urban
Movement.
Q: HOW MIGHT DRIVERLESS
CARS CHANGE THE DESIGN
OF CITIES?
A: One of the obvious issues is,
assuming the cars are programmed
not to hit what they recognize as a
human being, there is a danger that
in busy areas cars would never get
through at all—they’d constantly
be stopping. Congestion problems
could actually get worse if pedestri-
ans were able to assert much more
priority. Most city authorities realize
that what you want is pedestrian pri-
ority in the center of cities, which are
the most complex busy places. But
to ensure that vehicles can travel
smoothly, we will have to control
pedestrian crossing movements in
a way we don’t at the moment.
Q: WHAT ARE THE OTHER
POTENTIAL UNINTENDED
CONSEQUENCES?
A: Well, if I’m in my driverless vehicle
and I can’t find a parking space, I
could jump out and just get it to circu-
late until I’m ready for it. Which would
add to congestion. Or I could drive
to work in the morning, send the car
home, and get it to come back for me
in the evening, and then go back in
it, so then you’ve got four journeys
instead of two. There’s the potential
to create more vehicle movements.
● Dialogue
● THE CAR DESIGNER
Car design
will be a
secondary
consideration,
says CAMILO
PARDO, chief
designer of
the 2005-06
Ford GT.
Q: WILL AUTONOMOUS
CARS BE DESIGNED MORE
CREATIVELY?
A: Once a vehicle is on the street, I
think federal laws are going to have
a hard time waiving anything. Even
if the autonomous vehicles have
safer drivers, you’re going to have
’60s cars on the street for years to
come, ’80s cars. They’re not going
to just disappear. A lot of other
factors are going to impact what 67
these autonomous vehicles look like.
Visibility from the inside out is not a
priority, especially if people aren’t
even facing the windshield; they could
be facing each other.
Q: STILL, IT’S NICE TO SEE OUT
OF THE CAR.
A: But it could be optional. You could
toggle it off or on, or you could be
more selective. … Also, if the cars are
going to be electric, then the front
of the car may not need so much air
coming in. This big grill that a lot of
vehicles use as an identity would be
eliminated. … If the vehicle is driving
itself and doesn’t need headlamps,
all it needs is marker lamps so other
people can see it.
A lot of autonomous vehicles will
fall into the fleet category: a cab
company or Uber, who will get rid of
drivers. They don’t care what it looks
like; they care what it costs. No one’s
going to have any passionate attach-
ment to the damn thing. It could be
more phone-booth-like, just so it
goes. And they’ll have advertisements
on the side. I think the appearance is
going to go south.
BY DRAKE BENNETT
● Technique

LIKE
NATURE

68

● Many insects secrete

a thin, oily film that helps them
adhere to surfaces, but the
porous surface of the carnivorous
PITCHER PLANT holds on to
water, rendering such adhesive films
useless. Harvard scientists created
Slips (slippery liquid-infused porous
surfaces), which REPELS BOTH
WATER AND OIL, as well as bacteria,
using the pitcher plant as their
inspiration. “We don’t want buildup
on surfaces for lots of reasons, whether
it’s on furniture, or the sides of tanks,
or on airplane wings,” Benyus says. “This
is a material approach that could be
applied in every industry.”
BUT
BETTER
JANINE BENYUS’s
theory of evolution
By Jessie Scanlon

69

J anine Benyus is
the co-founder of
Biomimicry 3.8, a design consulting firm
named not after proprietary software, but rather the 3.8 billion
years nature has been doing its own design R&D. The firm grew
out of her 1997 book, Biomimicry, which popularized the idea of
applying natural principles to product design, and its clients include
multinational corporations, city planners from around the world, and
several U.S. federal agencies. To Benyus, the idea of man vs. nature
is nonsense. “We are nature,” she says. “And once that separation
goes away, it puts us in the role of student rather than
conqueror.” For this issue, she shared some of what she’s
learned on her own and on others’ projects.
 G eck Interface
o TacTile
squares

fee
t
● Interface, one of the world’s
largest manufacturers of carpet tiles,
turned to Biomimicry 3.8 to find an
alternative to the glue it used to install
carpet, which put out TOXIC FUMES
and made replacement difficult.
For inspiration, Benyus and her team
studied the GECKO, whose feet
are covered in tiny hairs that create
an attractive force when pressed
down. With that principle in mind,
her team developed TacTiles, glue-
free adhesive squares that connect
the tiles at their corners. As a result,
“Interface was able to REDUCE ITS
ENVIRONMENTAL FOOTPRINT BY
95 percent,” Benyus says.

Whale
● Encycle develops technology to help commercial buildings improve
their ENERGY EFFICIENCY. Its core product is SWARM LOGIC,

B ees
a system of small wireless controllers that communicate with
one another and monitor buildingwide energy usage,
turning power-hungry devices on and off as needed.

Encycle The idea behind it is the same one BEES, ANTS, AND
SCHOOLS OF FISH use to communicate. “This is one of
the very first applications of what will become normal

Swarm
with the INTERNET OF THINGS,” Benyus says.
“When [things] communicate with each other,
what are the protocols that will be used?”

Logic ● Humpback whale flippers have bumps

called TUBERCLES along their edges,
which allow them to move efficiently through
water. Envira-North Systems is creating
industrial-size fan blades with whalelike
tubercles to REDUCE DRAG. “What’s cool
about it for wind turbines is that you can
operate at lower wind speeds,” Benyus says.
“That opens up the opportunity for wind
power in zones that are no-go now.”

Bo
ne
s

● The new lightweight cabin

partitions being tested in the
Airbus A320 optimize strength by
MIMICKING CELL STRUCTURE
and bone growth. Says Benyus:

Airbus
“When you get down to the level
of design principle, [bone growth]
really lends itself to algorithms.
The designers took that partition,

Group
which is a solid piece and pretty
heavy, and ran it through a
program that knows where the
lines of stress are going to be.

partitions
Based on that, the program takes
material away from where it’s not
needed and puts it where it is.”
 if sher Shinkansen train
K in
● Japan’s 500-series Shinkansen

g
commuter train was fast—but
it was also loud, especially as it
passed through narrow tunnels.
The engineer charged with
solving this problem happened
to be an avid bird-watcher. He
modeled his updated train design
on the long, narrow beak of the
KINGFISHER, which allows
the bird to dive into the water
without so much as a splash. “The
hidden benefit was that the train
went 10 percent FASTER, WITH
15 percent LESS ELECTRICITY
USE,” Benyus says.

Wetlands

BioHaven Technology
floating islands
tub
e rc

● BioHaven Technology’s MAN-MADE ISLANDS mimic the way natural islands CLEAN AND PURIFY WATER. “Often, we clean water
by putting in a chemical, or we’ll use one bacterial strain,” Benyus says. “That’s not how it works in the natural world. There is usually a
CONSORTIUM OF ORGANISMS that work together.” The islands, made of postconsumer plastic, support plant life on top, with their root
systems extending into the water and creating a habitat for SNAILS and other water-filtering creatures.
les

Mo
t he
ye

n v i r a -
E
N o r t h
s te m s ● The surface of a

Sy Air
nocturnal moth’s eye is
covered in NANO-SCALE

-
DOMES, shapes that

A l t r a absorb more light than

they reflect and help
conceal the moth from
Antireflective
fans
its prey. The shape can

film
be used as the jumping-
off point for all sorts of
technologies—“everything
from DISPLAY SCREENS
to CAMERA LENSES,”
Benyus says.

PITCHER PLANT: JORIS VAN ALPHEN. TILE AND SKELETON: PHOTOS BY 731. GETTY IMAGES (7). SCIENCESOURCE (2)
 ● Studio Visit

V I L L AG E Photograph by Ryan Pf

A
IT TAKES luger

72
A R M Y
T
B Y J A M ES
 Industrial designer ● Burks, with a weaver

STEPHEN BURKS
in the Philippines,
develops a pattern for
Dedon’s Dala line

can’t fully design

an object until he
meets the people
who will make it

“T
● An
his doesn’t Ahnda chair
under construction

necessarily have a at Dedon’s factory in the

Philippines, which employs

soul,” Stephen Burks says. He’s in 1,600 weavers who make

300 pieces a day by hand

his design studio in the

Williamsburg section of Brooklyn,
and the soulless object he’s holding is
one with which hundreds of millions
of people have a near spiritual
connection: the iPhone. Many fthe Studio Museum
urther uptown
criticisms are leveled against Apple, in Harlem. In addition 73
to Dedon, he’s worked
but bad design isn’t one. with French furniture
To Burks, the company’s mass on his $14,840 European
company Roche Bobois

market approach is all wrong. Traveler chair, Ligne

Roset on the $545
He goes so far as to say Apple Chantal table light ● A $2,500 Missoni

“is in trouble because and Harry Winston on

patchwork vase
(since discontinued), made out of fabric
scraps
it’s so opaque a giftanforalabaster jewelry box,

W
earing a dark the jeweler’s highest of high-end clients. His
blue Dries Van and generic.” studio turns out $700 stools and $500 bowls. “He paved
Noten suit and the way for the model of designer as entrepreneur,” says
Converse x Missoni sneakers, Constantin Boym, chairman of the industrial design depart-
Burks presents an alternative vision: He removes the seat ment at Brooklyn’s Pratt Institute.

cushion of a giant, $4,765 Ahnda wing chair, which he
designed for the German furniture company Dedon. He
points to its woven substructure, a cross-hatched maze
that supports the chair’s circular base. “I knew I wanted
this herringbone weave,” he says, running his fingers along
blue, gray, and black cords. “I had a sense of what I wanted
to do. But it couldn’t happen until I arrived at the factory.”
A
t this point, however, making a few very expen-
sive products for a few very wealthy people isn’t
satisfying. “We’re only catering to the rich,” Burks
says. “I’m beginning to understand that I have to have a par-
allel project which tries to consider how this plays into the
mass market.” The contours of that project are undefined:
The annual revenue of Stephen Burks Man Made is less than

T
his design philosophy can best be described as wait $1 million, he says, so he’s looking for business partners to
and see. Burks comes up with a concept, then lets help him expand.

H
craftsmen around the world help shape the object’s e’s positive he can apply the same methodology
final form—Foxconn it isn’t. “It’s about returning the hand to he uses in making objets d’art to making everyday
IMAGES COURTESY THE SUBJECT

industry,” he says. “That space between making and industri- objects. This includes “eyeglasses, watches, shoes—
alizing creates more potential for innovation.” we’ve already done an underwear collection,” he says. “Just

B
urks became the first African American to win the
National Design Award for product design in 2015.
He curated an exhibition at New York’s Museum
of Arts and Design and was featured in a solo exhibition at
because you have a product you need to sell to 100,000 people
doesn’t mean that all 100,000 have to be the same.” He picks
up a square, black, plastic hard drive. “Companies are still
making things like this. I mean, come on!” <BW>
 ● Dialogue
Saving premature babies
● THE SOCIAL
ENTREPRENEUR
JANE CHEN helped create
the EMBRACE Warmer
for premature babies. She
wants to expand its use in
the developing world.
Q: WHAT INSPIRED THE EMBRACE
WARMER?
A: There are 15 million preterm babies born
every year, and one of the biggest prob-
lems they face is staying warm while reg-
74 ulating their body temperature. In India we
saw there was often no electricity for incu-
bators, plus nobody was trained on how to
use them. Then I started going to village
settings. One of the first women I met was
a mother in South India who gave birth to a
baby two months premature. She took her
baby to a village doctor, who told her to go
to the hospital. The hospital was over four
hours away, and she didn’t have the means
to get there, so her baby died. We realized
we needed a solution that worked without
electricity and is easy enough for a mother or
midwife to use. We came up with the Embrace
Warmer. It looks like a sleeping bag for a baby
and uses a waxlike substance, which, once
melted, maintains the same temperature for
eight-hour stretches. We’ve helped more than
200,000 babies in 14 countries.
Q: WHAT’S NEXT?
A: It’s hard to just rely on donations. We still
are owed payments from two years ago that
we’re probably never going to get. We wanted
to implement a Toms Shoes model, which
is buy one, give one. We’ve just launched a
product line for the U.S. market called Little
Lotus. It’s a collection of swaddles, sleeping
bags, and blankets for healthy babies. On the
inside, they use microns of the same wax we
use in the Embrace Warmer to keep babies at
the perfect temperature. Parents are telling
us babies are sleeping longer. The for-profit
spinoff will hopefully fund the expansion of
the baby warmers in the developing world.
● THE INTERNATIONAL
DOCTOR
LEEDA RASHID has
seen how Embrace
can make a
difference
in places
such as
Afghanistan,
where she
runs a health
nonprofit.
Q: HOW DID YOU CONNECT
WITH EMBRACE?
A: My husband, who’s also a physi-
cian, and I looked through the tech-
nology and some basic research that
was already done at Stanford on the
Embrace, and we thought, my good-
ness, this is very appropriate for hos-
pitals in Afghanistan. Afghanistan is
notorious for poor grid access. If
you’re a hospital that happens to be in
a neighborhood that has a lot of rolling
blackouts, you’re not going to be able
to use a lot of the medical technolo-
gies out there. Through our nonprofit,
we’ve deployed upwards of 75 to
80 of the warmers [in Afghanistan].
We’re in four of the largest public-
sector hospitals. We’re at a little more
than 10,000 uses over the last three
years. We’re now working to do what
the minister of health wants. He says
the product needs to go out to rural
Afghanistan. That’s where a lot of the
deliveries are happening, and there is
virtually no electricity there.
Q: THE RURAL SETTING
MUST BE EVEN MORE
COMPLICATED.
A: Our first step is to start using them lives of babies around the world.
in public ambulances. On a recent
trip, I was assessing the ambulance
sites to see if Embrace can be used mas and aunts and uncles were
during delivery between someone’s just so touched. It’s an amazing
home, or from a rural clinic, to the way to connect with other
larger, district-level hospitals.
● THE CONSUMER
Little Lotus,
a spinoff
product,
will also
connect
moms
around
the world,
says mother of three
CASEY GEORGESON.
Q: HOW DID YOU LEARN
ABOUT LITTLE LOTUS?
A: I went to business school
with Jane. I was having my
third little girl. My little one was
about 3 months old when the
final product came out. We
had been using swaddles and
had just switched over to sleep
sacks, and that transition was
really hard. Jane sent me one,
and I was, like, OK, we’ll try it. I
was skeptical. I put it on her for
a nap, and I kid you not, she took
a three-hour nap. She had been
taking 30- to 60-minute naps.
Q: HOW DO YOU FEEL
ABOUT THE BUY-ONE,
GIVE-ONE MODEL
WITH THE EMBRACE
WARMER?
A: I gave a Little Lotus to my
cousin at her baby shower
two weeks ago. She opened it,
and I told her the story of how
Embrace is literally saving the
All of these moms and grand-
IMAGES COURTESY SUBJECTS
moms around the world.
BY KAREN WEISE
“It’s not just security. It’s defense.”
Cyber threats have changed, and the solutions need to
change too. The sophisticated techniques BAE Systems
uses to protect government and military assets are now
helping to defend businesses around the world.

Learn more at BAEsystems.com/cyberdefense

Copyright © 2016 BAE Systems plc. All rights reserved.

 ● Test Drive

RECLA
Can Impossible
Project CEO OSKAR
IMING
SMOLOKOWSKI
get us to smile
for the camera?
W Photo
hen Impossible Project, the company
founded to revive production of
Polaroid film, released its first batch of
product six years ago, the results were embarrass-
graph
ing. Pictures frequently had weird splotches on
them and occasionally leaked corrosive chemicals.
Sometimes an entire $21, eight-picture pack of film
s by M

would spit out of a camera at once. The photos that

did develop took as long as an hour to do so, which
is not very instant.
“The product was barely usable,” says Oskar
ark Pe

Smolokowski as he sips green tea at a New York City

bakery. The Impossible Project’s 26-year-old chief exec-
utive officer is in town to discuss launch plans for the I-1,
the company’s new camera, which goes on sale May 10.
ckmez

76
Priced at $299, the I-1 marries digital controls with analog
photography. The camera’s mechanics, right down to the
distinctive whine of the rollers that eject each photograph,
evoke Polaroid’s legacy, but Smolokowski is eager to point
ian

out that the I-1 is not a Polaroid product.

Until now, his Berlin-based company made film that
worked only in vintage Polaroid cameras. With the market

for contemporary instant-film cameras quickly growing into a
profitable niche for Japan’s Fujifilm and others, Smolokowski
is betting the I-1’s hybrid design will offer the first real chance
to decouple Impossible Project’s future from Polaroid’s past.
Like similarly triumphant narratives about the return
of vinyl records and independent bookstores, Impossible
Project’s story begins with the rapid collapse of a legacy
analog industry facing digital disruption. During
its heyday in the 1970s, Polaroid, based in
Cambridge, Mass., had as much as
$2 billion in annual sales (more
than $12 billion in today’s
dollars) and 50,000 employ-
ees. And, like Apple today, it was
the most admired consumer tech
company in the land, according to
Christopher Bonanos’s book Instant:
The Story of Polaroid. But decades of
mismanagement took their toll, paving
the way for the first of two bankruptcies
in 2001. As it bounced between owners,
● Herchen Polaroid quickly discontinued
helped work out cameras and film.
the kinks in the
film’s chemistry Florian “Doc” Kaps, an Austrian
biologist who at the time was
IN
working for Lomography, a Viennese company that markets
new versions of quirky Soviet-era film cameras, spied an oppor-
tunity. He approached Polaroid in 2005 with a marketing plan
heavy on social media and e-commerce. “They told me, ‘If you
really believe in this s---, you can be a distributor,’ ” he says. Kaps
began selling discontinued Polaroid film for more than twice its
original price on his website, unsaleable.com, along with old
Polaroid cameras he bought on EBay and refurbished. Three
years later, when Polaroid announced it would close its last
film factory, in Enschede, Netherlands, Kaps scraped together
€180,000 ($204,000) to buy the plant’s equipment and struck
a deal with the landlord to take over the lease. For an addi-
tional €1 million, he purchased Polaroid’s remaining film stock,
which he sold to finance the revival of the plant at a total cost of
€4 million. Unsaleable was rebranded Impossible Project, after
a quote from Polaroid founder Edwin Land: “Don’t undertake a
project unless it is manifestly important and nearly impossible.”
Making film is a delicate dance of chemistry and physics,
 performed entirely in the dark. The
Enschede factory had been one of the final
links in Polaroid’s production chain; it
assembled components from other
factories into film packs. A skel-
eton crew headed by engineer
André Bosman, a 30-year
veteran at the plant, set
out to reverse-engineer the
process. “If you think about the
development of Polaroid’s prod-
ucts, you’re talking about hundreds
of engineers and billions of dollars
in research,” Smolokowski says. “And
Impossible did this with five guys who didn’t
know the chemistry and only really knew how
to run the machines.”
Chief Technology Officer Stephen Herchen
● The I-1
camera, which explains that Polaroid’s film had three key
was used to take components: the light-sensitive negative, the
the photographs
positive on which the image was imprinted,
on these pages
and a pod that released the developer fluid as
the film passed through the rollers. By 2008
almost all the constituent elements, including custom dyes
and polymers, had either expired, been discontinued, or
been banned for environmental reasons. Impossible Project
set out to try to make a simpler black-and-white formula.
The product that debuted in 2010 worked, but barely.
“Let’s just call it experimental,” Kaps says with a smirk
and a shrug. To improve outcomes, the company began
issuing increasingly complex instructions to customers,
including orders to shield pictures from light by taping
a cardboard box onto the camera front.
At a friend’s urging, Warsaw-born Smolokowski
T
N
A
T
NS
v i dS ax
By D a
visited Impossible Project’s store in New York in 2012, where
he was living at the time, and picked up some film. Like other
millennial consumers behind the company’s growth, he liked
the crapshoot quality of the experience. “The pictures were
interesting and imperfect, and there was this engaging chal-
lenge of getting it to work,” he recalls. After meeting Kaps,
Smolokowski persuaded his wealthy father to make an invest-
ment of €2 million in the business in exchange for a 20 percent
stake. (A Soviet-era Ukrainian musician who later amassed a
fortune in the energy business, Wiacezlaw “Slava” Smolokowski
is Impossible Project’s largest shareholder.) Soon the younger
Smolokowski was working as Kaps’s assistant. In December
2014 he became CEO.
Film has experienced a small renaissance in recent years,
led by Fujifilm and its colorful Instax camera, which debuted in
1998 and uses a technology similar to Polaroid’s. The Japanese
company sold 5.5 million of the cameras last year, along with
an estimated 40 million packs of film. (Annual sales of Polaroid
cameras peaked at 13 million in the ’70s.) Marketing for Instax
targets young consumers and stresses the fun, novelty factor. “It’s
not nostalgic. It’s a new thing for them,” says Manny Almeida,
president of Fujifilm North America’s imaging division.
Impossible Project sold 28,000 refurbished Polaroid cameras
last year and more than a million film packs, according to
Smolokowski. The film is still a bit temperamental,
but faster: Black-and-white develops in
10 minutes, color in 40. He says
the company needs to
sell twice as much film
to be profitable—which
is very difficult with a
limited supply of vintage
cameras. “It’s a massive
hurdle,” he says as he
surveys Impossible Project’s
array of cameras at an Urban
Outfitters in Manhattan. A
nearby Instax display dwarfs it.
Two years ago, Smolokowski
arranged a meeting with Jesper
Kouthoofd, who runs the Swedish
design studio Teenage Engineering,
to show him blueprints for a camera
● Impossible
Impossible Project was preparing Project’s offices
for production. Kouthoofd, whose in Berlin
clients include Ikea, New Balance, and
Absolut, tore them apart, saying the camera was too retro—
another reheated Polaroid. The designer sketched up a concept
for Smolokowski, who persuaded his team to change direction.
The I-1’s minimalist form is dictated largely by function. Its
shape—a pyramid atop a rectangular base—is required to prop-
erly expose the film to light that enters the lens and bounces 77
off a 45-degree-angled mirror. The metal body is covered in
matte-black plastic; there are few buttons and no digital display.
Says Kouthoofd: “We’re trying to spark an interest in analog
photography, and I just tried to make it as simple as possible.”
What sets the I-1 apart from even the best vintage Polaroid
camera is the quality of its optics, the LED ring flash that auto-
matically adjusts to light and distance (and gives the camera the
look of a rotary phone), a highly accurate pop-up viewfinder
that looks like it belongs on a 19th century rifle, and the ability to
connect to a smartphone with Bluetooth. On a companion smart-
phone app, users can adjust aperture, shutter speed, and other
variables while employing complex effects with Instagram-like
simplicity. Smolokowski plans to open the app up to software
developers later this year. The I-1 was also designed to accept
a range of future accessories such as viewfinders and screens.
Smolokowski estimates Impossible Project could one day
own up to 10 percent of Instax’s market share, though he
prefers to target the higher-end, photography-focused con-
sumer that is the company’s base. “Eight years after saving
the factory, we finally feel able to have a product and camera
to give us a chance,” he says.
The stress of the upcoming launch is visible on Smolokowski’s
face. He claims to have no social life or romantic life. “He’s
180 percent dedicated,” says Kaps, who retains his shares in
the business but is no longer involved in day-to-day manage-
ment. “He wants to prove to the world that he can do it.”
When we’ve finished talking, Smolokowski unzips his back-
pack and pulls out an I-1 and a fresh pack of black-and-white
film. He pops it into the camera, and the motor buzzes to life.
He hands me the machine, and I aim at his face and press the
shutter. After a burst of flash followed by that trademark Polaroid
sound, a photograph rolls out. We wait to see how it develops. <BW>
America’s emblem
stands for great strength
and long life.

With that in mind, let’s talk retirement.

TM

Visit us at mutualofamerica.com or call us at 1-866-954-4321.

Mutual of America® and Mutual of America Your Retirement Company® are registered service marks of Mutual of America Life Insurance Company,
a registered Broker/Dealer. 320 Park Avenue, New York, NY 10022-6839.

Six in
d u st r y l e a d e r s o n s e r
●MAKE THE
COMPLEX CLEAR
BY MARIA GIUDICE
The VP for
experience
design at
Autodesk on
creating busi-
ness products that produce
emotional connections
Enterprise products can be so disrespect-
ful to the user. The message is, “You gotta
use these products, so screw you, suck it
up.” There’s this assumption: “Oh, our
products are so complex, they can’t be
simpler to use.” It’s all about being serious,
stable, performance-driven. Hey, that’s
table stakes! We have this opportunity to
really think about those products in a new
way and not hide behind the complexity.
Our job is to make the complex clear. This
is where we need to go.
I grew up in a time when we were
just grateful if things worked. We live
in a world where a whole population
expects good, fluid experiences. This
is where consumer and enterprise are
meshing. We always saw a line between
enterprise products that were powerful
and consumer products that were light-
weight and emotive. There’s a whole
t s , c
c l i e n
ving
population that
doesn’t see that.
They work at home;
they play at work.
That’s why I’ve been
thinking about emotions
and product design. That
connection goes way back in the world
of physical products. But emotion is
still not considered much in digital
products. There are exceptions—Uber
shows the tiny cars moving around your
phone’s screen. I might hate Uber as a
brand, and I know that the interface isn’t
even accurately mapping the cars on
my screen, yet it’s so comforting and
delightful to see the little cars! That’s a
product where people are considering
human emotion.
When we think about designing prod-
ucts well, the science behind creating
emotional connections to our products
is called anthropomorphism. We should
be designing interfaces as if they were
people. That changes the relationship
you have to the product. With artificial
intelligence, machine learning, the rise of
robots—all these things—the relationship
you’re going to have with digital devices
will be less directed and more about
co-creation. With traditional products
right now, we don’t know enough out of
the gate, so we give customers a 10-course
meal all at the same time. The more we
know about our customers, the more we
● Strategies
lf
ts e
ni
sig
de
nd
, a
e rs
to m
u s
know about what they need
next. The machine is going to
know so much about you and your
behavior that, rather than you telling
the machine what to do, the machine will
offer up what you should be doing.
●THE WORK IS
79
NEVER DONE
BY MICHAEL ROCK
The co-founder
and creative
director at
design firm 2×4
on learning to love
open-endedness
Crushed in the scrum behind the sound-
board at Madison Square Garden,
wreathed in smoke (theatrical and
otherwise), in the muddle of Kanye West’s
epic album launch-cum-fashion show—
an engineered spectacle that managed
to interweave multiple pop culture
narratives (Balmain-clad Kardashians,
Caitlyn Jenner, West’s feud with Taylor
Swift) with high-fashion royalty (Anna
Wintour, Carine Roitfeld), random
superstars (50 Cent, Gigi Hadid), and
high-concept performance art (Vanessa
Beecroft’s refugee-camp-inspired mise-
en-scène), all into one mind-boggling
agglomeration—I had an epiphany. And
like any good epiphany, mine came punc-
tuated by a bell.
About 20 minutes into the musical
portion of Yeezy Season 3, as West
 ● SKETCHBOOK
● Draw a map of your office.
previewed his
new album,
T h e L i fe o f
Ken Wong, lead Pablo, a famil-
designer, Ustwo iar Macintosh
alert chime blasted
through the massive PA
system. At first it seemed
like a random sound
effect, but then it was
clear: All 18,000-plus
of us crammed into
every inch of the arena—
many paying hundreds
of dollars for the honor—
Daniel Libeskind,
were listening to a guy
principal design play us some songs from
architect, Studio
Libeskind
his laptop … and he just
got an e-mail.
The seemingly unplanned
ping lent an unexpected air of
intimacy to the experience—as inti-
mate as any event can be when it’s
breaking Instagram and the New
80 York Times covers it live on its home
page—and underscored the ad hoc
quality Beecroft set up with her ragged,
tarpaulin-draped sets. West had gath-
ered his friends together to casually
● Who is the most trusted
adviser or prototype
tester outside your field?
Craig Dykers, founding partner and Wong
executive director, Snohetta
share his latest work in
progress, with a decided
emphasis on “in progress.”
For months leading up
to the event, the artist had
opened up his frenetic process
through a stream of Twitter postings,
public appearances, pronouncements,
feuds, tentative titles, playlists, cover
art, and bootleg tracks. Collaborators
were announced and reshuffled. Entire
songs were floated, discarded, and
reworked. The final download was
delayed, canceled, then offered in multi-
ple iterations. Tickets for the event were
announced online, then disappeared
entirely, then suddenly went on sale
three days in advance.
Although it’s easy to dismiss this as (a)
genius marketing or (b) massive disorga-
nization, by revealing the multitude of
radical revisions and minuscule tweaks
that go into crafting each work, West
draws his fans (and critics) into his cre-
ative process and rewards close, multiple
listens while reinforcing his reputation as
a hyperperfectionist craftsman. The blur
of information and process surrounding
the release of The Life of Pablo also sug-
gests a shift in the focus from finished
object to something more ephemeral: a
designed relationship.
It was purely coincidental—I think;
you never know these days—that as
West was arranging and rearranging the
dizzying array of elements that would
become the morphing coherence of The
Life of Pablo, the Metropolitan Museum
of Art was putting the final touches on
its own exegesis on the subject of the
“non finito.” Unfinished: Thoughts Left
Visible, the inaugural exhibition
of the Met Breuer, the
Metropolitan Museum
of Art outpost ded-
icated to modern
and contemporary
art, opened a few
weeks after Yeezy
Season 3 but could
have easily been
the setup for it.
The Unfinished
show includes
seven centuries
of art historical
Ida Benedetto, co-founder, Sextantworks
examples—partially completed paint-
ings, discarded sketches, rough studies,
and intentionally discontinued works—to
offer glimpses into artistic process and
question the notion that art can really
ever be done. The exhibition, notes
Met curator Sheena Wagstaff, “throws
into sharp focus the ongoing concern of
artists about the ‘finishedness’ of their
work, which, in the 20th century, they
co-opt as a radical tool that changes our
understanding of modernism.”
The Unfinished exhibition proposes
that unfinishedness in itself is a dis-
rupter. Incompletion opens a work
and reveals the always questing cre-
ative mind, befuddling our desire for
simple endings. As artists, writers, and
designers, we can work to disguise the
fact that our work is never really done,
or as West does, co-opt it as a “radical
tool that changes our understanding.”
That link between incompletion and
disruption is at the heart of a widely cir-
culated presentation by Kleiner Perkins
Caufield & Byers partner John Maeda
titled “#DesignInTech Report 2016.”
On Slide 14, Maeda draws a sharp dis-
tinction between what he calls classical
design and #DesignInTech—read: old-
fashioned designers vs. those who code.
He imagines the classical designer as one
for whom the attainment of a perfectly
finished state is the goal, whereas the
#DesignInTech lives only for the next iter-
ation. Further, he imagines the classical
designer’s level of confidence is “abso-
lute and self-validating”—he must know
different designers than I do—while the
#DesignInTech’s is “generally high but
open to analyzing testing/research.”
Using Maeda’s definition, West would
easily qualify for #DesignInTech status.
He reaches hundreds of millions, his
work is delivered over the Net, he’s
constantly evolving, and he’s open to
real-time feedback. But then again,
doesn’t that describe the state of con-
temporary design in general? Perhaps
what Maeda misunderstands is that
classical design is fast disappearing,
if it ever really existed, and the itera-
tive nature so emblematic in tech has
worked its way into everything we do.
The average life span of a contemporary
building is not millennia but something
short of 70 years, during which time it
will be repurposed over and over again.
No responsible designer can create a
 ● Fill in the boxes.
product without at least some planning
for its ultimate demise and recomposi-
tion. And if we have learned anything
about designing a brand, it’s that the
work is never done but instead is a
constant, iterative battle for relevance
and currency.
What West so vividly demonstrates
is that fixity is one of the casualties of Dykers Brad Sewell, founder and CEO, Campaign
our current moment. The unfinished is
inherently destabilizing. It makes us—the
audience, consumer, listener, reader,
whatever—question our own role in the
notion of completion. In the end, maybe
that bell wasn’t an epiphany after all;
maybe it was just a high-tech death knell
for something we used to call closure.

Oskar Smolokowski, CEO, Impossible Project Ignazio Moresco, head of design, TV platforms, Ericsson

Smolokowski Maria Giudice, vice president, Sewell Stewart Butterfield,

Autodesk co-founder and CEO, Slack

●HOMELESSNESS
IS BAD DESIGN
BY ROSANNE
HAGGERTY
The CEO of
Community
Solutions, a non-
profit that combats home-
lessness, on designing a
system that actually puts
roofs over people’s heads
Homelessness is what happens when
people fall through the cracks of differ-
ent systems, so if we’re to put an end to
it, we need to create integrated teams—the
81
Vicki Dobbs Beck, executive
Sewell
in charge, xLAB at Industrial
Light & Magic
goal and test their
way into a solution, but that’s
grounded in person-specific data,
so you can see if a situation is actually
working for certain users of the system.
Another design principle is the notion
of housing first—you redesign your
approach to getting people housing as
your first order of business, then help Smolokowski

U.S. Department of Veterans Affairs, the
mayor’s office, the nonprofits, the housing
authority. It’s only when you get everyone
together in the same room that you can
construct a well-performing housing place-
ment system that isn’t sending vulnera-
ble people down all sorts of dead ends.
Everyone at an initial meeting would
say, “We get that we need to collaborate,
but how?” We need a performance man-
agement system that helps a collection of
local organizations focus on a common
with the other issues that have been con-
founding them. Moving a single person
from homelessness would require more
than 50 steps. We worked with design-
ers to create a magnetic board that looks
like Chutes and Ladders. We asked people
to map out what’s required for a single
person to move from the point where
you identify them on the street to a stable
home. You’d see this crazy, winding trail.
Washington, D.C., looked at the Giudice
amount of time it was taking from when
 an apartment becomes available to a
lease-signing and turning over keys. They
created a day where they’d have all the
landlords and all the people who had been
matched to them show up and sign their
leases at the same time and get their keys.
Imagine that.
●EMPATHY IS
REQUIRED
BY KEN WONG
The designer of
the celebrated
game Monument
Valley on what’s
different about working
in virtual reality
Our idea at Ustwo was to make a virtual-
reality game timed to the release of the
Oculus Gear VR headset. But after eight
months, the game, Land’s End, wasn’t
coming together as a story or an experi-
ence. There were missing skills on that
team. There was no art director; there
wasn’t a voice saying, “You’re going to
82 encounter this beautiful moment, and
here’s how we’re going to convey it.”
Eventually I felt the need to put my hand
up and say, “Guys, I don’t think you’re
making the thing that you want to make.”
And we voted to kill it. For like 10 minutes,
we were just really sad. And then I said, “I
think what might be best for the team
is if I come in, change up the skill
● What’s a designed object you
covet that values function over form?
Baiju Bhatt, Benedetto
co-founder, Robinhood
● What’s a designed object you
covet that values form over function?
Bhatt Dobbs Beck
set, and bring a new perspective to this.”
Game design is a discipline that you
can get good at. It’s not about a person
getting their way all the time. It’s about
being tuned in to what makes a game
work, what makes an experience fun.
With our previous game, Monument
Valley, we made it short intentionally so
people could get to the payoff at the end.
For a lot of people, it’s the first game
they were able to finish. We got a nice
letter from a guy who had sustained a
brain injury; he used to really enjoy com-
puter games, but after that most of them
were too intense.
With Land’s End, we started fresh. We
threw away levels. We found that people
have a much poorer sense of space in VR
than they do in real life, so we had to get
better at creating landmarks and memo-
rable places and mixing things up, so you
go outside to inside, from cliff to gorge.
Originally, we had way more fantastical
levels, with floating chunks of rock. But it
felt like you were in a computer game. We
don’t want to remind you that you’re in
a game; we want to fool you just enough
that you’re like, “Oh, this is real, but it’s
the most fantastical real I’ve ever seen.”
Everything that you design in a video
game, it feels stronger in VR—having a
waterfall or a tower right in front of
you. Eye contact is a really intimate
thing. Chris Milk, an artist who works
in virtual reality, called VR an “empathy
machine”—it has the potential to show
you how someone else lives. Games
are just one application, and it’s kind
of obvious, but imagine how power-
ful VR can be for education, training,
Butterfield
Libeskind
design, tourism. We’re really happy to
be here at the ground level. That said,
my next game won’t be in VR. I’ve had
my taste, and I want to go and have
another adventure now.
●GOOD IDEAS
TRANSLATE
BY MIGUEL McKELVEY
The co-founder of
shared-workspace
company WeWork
on his residential
project, WeLive
When we started about seven years ago,
our plan was “We everything”: WeWork,
WeRestaurant, WeBarber, WeResort. We
started with WeWork because the only
buildings co-founder Adam Neumann
and I were able to get were office build-
ings. The response was so positive we
kept going. The WeLive building at
110 Wall St. was sort of knocked out by
Hurricane Sandy. We had a relation-
ship with someone, and they said, “Are
you guys interested?” When we saw it,
we were like, “Yeah, we’re interested,
but we have this other concept we’ve
been planning.”
A lot of things we’ve done at WeWork
carry over to WeLive—the primary one
being trying to understand how people
can have the personal space they need
but share. It’s sharing that goes beyond
the space, that flows into people’s social
engagement. It’s about trying to make
those opportunities part of daily life.
Let’s say there’s someone who’s 35,
and she’s successful, but she’s like, “I’m
ready to make the leap to start my
own company.” We want to give
her a workspace and a living
solution that allows her to take
that chance and to be supported
by people who are going to be
like, “That’s amazing! What do
you need help with? Who can
I introduce you to?” Being in
that environment is definitely
going to help you become
more successful.
● Fill in the blanks.
Giudice
In the office,
what we start with
is relatively simple.
You have a desk,
chairs, and lighting.
In an apartment, of
course, you need a Wong
living room, a kitchen,
a sleeping area, a bathroom. We had to
figure out a way to create those spaces in
our 200 units and give them enough char-
acter that they feel nice and comfortable
and warm and inviting. But we didn’t want
to go too far with the design that they felt
particular. We didn’t want someone to go
in and say, “Oh, I hate that color. I don’t
want to be in that unit.” So that was the
nuance to the WeLive design.
We had arguments about whether
people would do their laundry in the
building, because there are all these
new services where you can have your
laundry picked up. That was one where
it was back and forth. Like, what’s going
to happen? Is it going to be an empty
room, and no one is ever going to be in
there, and it’s going to become a total
failure? So far, it’s been great. We have
a cool laundry room that also has a pool
table and a pingpong table. It’s become
one of the beating hearts of the building.
●HOW TO HIRE
A DESIGNER
BY YVES BEHAR
The founder of
product and
brand design
firm Fuseproject
on creative
partnerships
① Hire a partner, not a vendor
Most clients understand this, but for
a collaboration to be successful, the
design team they work with shouldn’t
be selected only for their portfolio, but
also for the potential for a true partner-
ship. Any design process is a close col-
laboration, with a significant amount of
Benedetto
Libeskind
communication nec-
essary to get the best results. If
the partnership isn’t there, the results
will disappoint. If the partnership is
there, a designer will grow with you
and continuously optimize your busi-
ness. Mitch Pergola, our chief operating
officer at Fuseproject, says, “The key
to effectively working with an external
design firm is not only picking the right
skills and experience, but collaborating
with them like a partner. Neither of these
points are optional.”
② Share dreams—and nightmares
The design process is never the same
for any two projects, so it’s important
to be as clear as possible upfront. Not
only does this mean timelines, finances,
etc., but also what you expect from the
process and, crucially, context. If the
client can focus on defining the needs of
the business (which they should be best
positioned for), the designer can focus
on defining the solution (and, where
needed, challenge the brief ). The more
a client can communicate their context—
company culture, past successes and fail-
ures, the passions and aversions of their
audience and shareholders—the better
able the design team will be to solve
from this foundation. I often say, “The
more context the better.” I personally
benefit from all the data, the good stuff
and the ugly stuff, the realities as well as
the dreams.
③ Adopt a healthy sense of abandon
Here’s an interesting paradox: Clients
come to designers to push them out
of their box and yet struggle when the
design feels beyond their current reality.
The most successful projects I’ve worked
on have come from relationships in which
my client trusts me, trusts our design
strategy, and empowers us to guide them
into the future. And this sense of risk
and innova-
tion should exist
with every step of the process—from
conception through hitting the market.
“Trust that we have your best interests
in mind, because our partners’ success
is also ours,” says Kristine Arth, our
director of brand. Herman Miller, with
whom it’s been a privilege to work for
the last 14 years, previously established
long-term partnerships with Charles
and Ray Eames and George Nelson by,
in the words of Herman Miller founder 83
D.J. Depree, “abandoning ourselves to
our designers.” Don Goeman, the vice
president for R&D at Herman Miller,
demonstrated this deep trust when we
designed the Sayl chair and the Public
Office Landscape system.
④ Go long
It’s hard to know when the job is done.
But the truth is that design is never
done: The value of design grows over
time. Companies that succeed are ones
that constantly refine their products,
experiences, and offerings. We cur-
rently experience a circular feedback
loop with evolving customer needs:
Improving technology, growing brands,
and experience touch points are taken
into account regularly. The best thing
a client can do is find a partner who
understands their essence—why they
exist—and invest in a future together.
One amazing product is great, but
having a brand that’s cohesive, and
sustainably and organically growing, is
what we all need to build. Long-lasting
relationships—that’s an investment that
pays off handsomely for both outsider
and insider. In this current era of dis-
ruption, if a company isn’t actively cre-
ating its future, you can be sure of one
thing: Someone else will. <BW>
 T
By

M A R AT
Sam

S A
● Technique G
a n d ro b art

UN D Eva n Ap p l
e ga
t

O
A trip through the world of design can be a

e
S
fulfilling, rewarding experience—if you know the lingo. While the official values
of this place champion clarity, simplicity, and elegance, the real mother tongue is full of
doublespeak, chicanery, and obfuscation. Just ask staffers at Robinhood, who collect
their favorite catchphrases on a blackboard. Use them to navigate your way

E
through a land where things may not always be what they seem.

O
C FN EREN C

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Bloomberg Businessweek (USPS 080 900) April 11 – April 24, 2016 (ISSN 0007-7135) H Issue no. 4471 Published weekly, except one week in January, April, June, and August, by Bloomberg L.P. Periodicals postage paid at New York, N.Y., and at additional mailing offices.
PIVOT
● To flee, retreat; to
cower assertively. DATA-DRIVEN
● To spend money ● How you support
gathered for X on Y, CROWDFUNDING A/B TESTING
● Backup plan when the an idea everyone
citing excuse Z. ● When you give up on
bubble bursts. thinks is bad.
“Our pivot from mobile design and just see what
“Our crowdfunders are “Our decision to
BIG DATA payments to palm oil users dislike less.
mad we spent their reformulate Coca-
● Databases, plantations upset the “The A/B test results are
money on vision boards, Cola is entirely
but, you know, board, but ...” in: They hated when the
but luckily they can’t sue.” data-driven.”
sexy databases. app guessed their weight.”
“Our latest IDEATE
ROBINHOOD, a startup in Palo Alto ● To generate
Big Data push
an extensive
The “Wall of Buzzwords” at

records users’
heartbeats as action list of
they order our items requiring
pet portraits!” numerous
breakout
brainstorming
sessions.

MILLENNIALS
● A term used
to explain why
your app doesn’t
make sense to
anyone over the
age of 30.
“We’re targeting
INTERNET OF millennials, so
THINGS they’ll click on it
● Access points just to tell their
for Iranian friends it was
hackers. stupid.”
“The Internet
of Things will
revolutionize BETA
the way your ● Nonfunctioning;
icemaker seizes possibly toxic.
up due to (See also
driver errors.” LMAO and
schadenfreude.)
“It’s in beta, so
your phone may
DISRUPTION catch fire.”
● A slightly IMMERSIVE BURN RATE
different version ● Not crappy. ● Misunderstood
of something FULL STACK measure of time
“Is there a way BLOCKCHAIN-BASED
that already ● The new “vertically remaining until pivoting.
to make this ● Unusable; extremely
exists. integrated.” Connotes “We have a pretty
Boz Scaggs convoluted.
“Hydrox is going ambition; makes losing lots reasonable burn rate—we
fan site more “It uses blockchain-
to totally disrupt of money seem cool. UNICORN can stay in our WeWork
immersive?” based authentica—oh,
the chocolate- ● A nonexistent through next week.” you know, the preferred
cream- organism raised currency of Internet
sandwich-cookie on delusions. criminals. Anyway ...”
marketplace!”

“The product leverages secure, cloud-served blockchain

technology to delight our millennial user base with an immersive
user experience. Our data-driven development process
Want a billion incorporates industry best practices and is poised
dollars? Try this to take advantage of the coming wearables tipping
elevator pitch! point. Crowdfunding, the mentorship of our advisers, and
tireless iteration got us to beta, but now we’re looking for
serious investors. So the only question remaining is: How
many shares of CarWashFinder can I put you down for?”
Now is the
time for agility.
Now is the
time for

We are AT&T. Bringing things together is what

we do best. Today, our network, people, and
partners are giving companies the agility to
sense and adapt like never before. Discover
the power of &. Learn more at att.com/agility
©2016 AT&T Intellectual Property. All rights reserved.
All marks used herein are the property of their respective owners.
We create
chemistry
that makes
locked-in
flavors love
bursting out.

Once its packaging has been opened, food is often quick to lose the
freshness and aroma that make it so appealing. It’s important that
we get the most out of what we have available, as the world wastes
about one third of its food. Luckily, chemistry can make a difference.
We have developed a range of packaging products, sealants and light
stabilizers to protect food. Apart from offering a longer life span, they
seal in freshness. So food is still at its best long after the pack has
been opened. When less food goes to waste, it’s because at
BASF, we create chemistry.

To share our vision visit wecreatechemistry.com