tv Bloomberg Business Week Bloomberg January 27, 2018 3:00am-4:00am EST
>> welcome to bloomberg businessweek. i'm carol massar. we are inside the magazine's headquarters in new york. week's issue, the next generation of digital currency. america eyes energy independence, and an inside look at one of london's most secretive members clubs. all that ahead on "bloomberg businessweek." ♪ carol: we are here with the editor in chief of "bloomberg businessweek." a lot of good stories this week.
i want to start with finance, first of all, the digital currency world. while we spend time talking about bitcoin, there's another that you guys have been looking into. reporter: part of this is the crypto boom and maybe the receding of said boom that has created a lot of confusion. it seems like bitcoin is a hot thing, and then ethereum and ether. where i supposed to get into am this? another one that has caught a lot of attention recently is ripple, so we wanted to take a hard look at ripple. one of the things we did is, in talking to the banking community -- because ripple says it is a banking solution -- they say you don't know what this is for. xrp, the digital currency affiliated with ripple, the thing is sort of like, what is this going to be for? there's still reason to be really skeptical.
carol: it makes you scratch your head a little bit because we know the financial community says we are new to digital currencies, doing collaborations or looking at blockchain's. we know there's activity, momentum, yet that's interesting. reporter: what is going to stick and what is going to be real, and what is the application for it? with ripple, they say one thing the company is very enthused about is the potential -- thing the company says they are very enthused about it but the potential client base is not. >> another finance story this week. it's doing with climate change. it's taking a look at the rating organizations and how they're starting to incorporate disaster scenarios. >> it's big business in all this. what this really boils down to, the rating agencies come as we have known for history, i have been on both sides of it. this is a chance for them to step up to the table and maybe reevaluate some of the things i have been doing.
carol: it makes sense. if you look at some of the weather situations we have had, hurricanes, floods, fires, this is adding up to a lot of costs impacting cities in the country. reporter: and it could potentially get worse. it shows productivity on their part to address some thing that could be snowballing. carol: they missed enron, they did miss the subprime mortgage meltdown. you wonder where they are in this curve. reporter: and this is maybe showing that they've recognized some errors of their past ways and they are actually trying to chart a new course. carol: speaking of new course, the cover story this week takes a look at the new world energy order. who would have thought that the u.s. might be a leader when it comes to oil domination?
reporter: this is a story i was really excited to get in the magazine, and the moment i heard about it i was like, let's do it. there's a stat we found out that the u.s. is almost on the brink of passing and million barrels of oil a day. carol: give us some perspective on that. reporter: we've not had that number since the nixon administration. carol: the long time. reporter: we are talking decades, and it shows how dominant the u.s. has become in producing oil, not really challenges the geopolitical order of things. opec and russia are less relevant, and as the price of oil has climbed up to $65-ish, we are talking 10 million barrels of oil a day. that's a disruptive element. at the same time, this is oil. should we be doing this? this is good for the world? . carol: you have an administration and president talking into expanding and offshore drilling, going into the arctic national wildlife refuge.
there's implications of that. reporter: there's a job element to this, the economic growth that comes with it, which is why we boiled it down to our cover line, "good for the u.s., bad for the world." carol: want to go back to what you say about geopolitical considerations. we have kind of been tiptoeing around being in oil supplying nation, which has put us at a disadvantage when it comes to dealing with other parts of the world, particularly the middle east or russia. reporter: it really shows american ingenuity as well. fracking -- and this is largely via fracking -- this is a technology that has been around for a bit, but we have perfected it and moved it into a place that kind of makes us the envy of the world. and it is true, it is the driving force behind all of
this. carol: what is it going to mean for the middle east specifically? there's another story this week that takes place in saudi arabia, the corruption crackdown, and that is a country that is trying to evolve and dig about the past -- and think about the path forward because they've been hurt by declining oil revenues and other situations. what does it mean potentially for relations with the middle east? reporter: i think for the u.s. it just shows we are inching towards energy independence. we are not there yet, but between the growth and renewal -- growth in riddles and everything, this is a viable diversification -- in renewables and everything, this is a viable diversification. keep in mind saudi aramco ipo, we don't know if it will be this year or next year, it will be the biggest ipo ever. they are not going away anytime soon. carol: making oil a cover star was the job of creative director. >> oil stories are particularly challenging because every
business magazine has done in many kinds of the past. we wanted to get at what made this story different. it is not only the fact that there's an oil boom in america, but the repercussions in the rest of the world, which are not great. carol: exactly. there's a good and bad side to this. guest: exactly. we didn't want to make it this big celebratory thing or just show a shining oil barrel as a new hope for the american economy. we wanted to show both sides that, and we did that mostly by making the headline large, was fairly clearly get that that. carol: but if you look at the
magazine one way and then flip it the other way, is the whole idea that there's two sides to the story. guest: exactly. it is obviously very intentional that the boom for the u.s. is just a puff, and at the bottom in the murky oil in red type is a little more sinister, that it is actually better -- bad for the world. carol: coming up, a look inside saudi arabia's ritz-carlton jailhouse. this is "bloomberg businessweek." ♪ ♪
carol: welcome back to "bloomberg businessweek." you can also find us online at -- at bloomberg.com. since november, some of saudi arabia's richest and most prominent citizens where held captive at a ritz-carlton as part of an anticorruption purge. bloomberg news was among the very few invited to tour the hotel. here is matthew philips. reporter: it was unannounced and happen overnight. hundreds of people were rounded up, some of the most prominent, richest members of saudi arabia's princes and billionaires and cabinet officials, and put in the
ritz-carlton in riyadh, one of the worlds nicest hotels. it is a five-star prison, and they've been there since then. no access has been granted to anybody since then. they are slowly making their way through this group of people and coming up with settlement terms, and they let our reporter in over the weekend, who wrote this, who is based in dubai. they said, we want to bring you in and talk to you. he quickly flew to riyadh, went on a sunday night around midnight. he describes the scene. it is kind of eerily empty and there are saudi officials around the lobby with arabic music being piped in. they are kind of going through a headcount. the attorney general of the country is sitting on a couch by himself, and basically looking at who has been released, who remains, and how much they actually expect to net from
this. the number is pretty shocking, about $100 billion a settlement deals that they've been able to negotiate with these people. carol: huge question i have when i was reading the story. now you've told me how he got access to the hotel, why did they let him in? reporter: that's a great question. he is one of the few journalists who's actually been granted access to this. the whole hotel has been a lockdown compound. they are winding this thing down, and their story is that this is great for investor confidence, a clearly long overdue anticorruption crackdown, although there are those who think that it's a
little bit of that, but also this naked political purge that the crown prince mohammad bin salman, the young prince, organized behind the scenes. carol: he has really been embracing change, bringing about modernization to saudi arabia, allowing women to drive. he's really been trying to move the country forward. at the same time there was so much secrecy in this crackdown, and it doesn't seem like a lot of transparency since november about what was going on. reporter: that's right. that's the big question, how the markets and investors feel about this? right now as davos is going on, the ceo of saudi aramco, the ipo of which is a big part of the kingdoms economic revitalization, is they are talking about how this is great for investor confidence. see, the country is cracking down on corruption. however, there's another undercurrent of this that is a little more and if areas. there is no transparency here.
we were unable to meet any of the detainees. in fact, one of the most prominent of the detainees, the richest saudi, we don't know where he is. there are a lot of conflicting reports about where he is. we have sources telling us he is still at the ritz, and sources telling us that he's been taken to another site and is still in negotiations, and that he balked essentially at the kingdom's plans to take control over his $9 billion holding company. carol: in the economic section, cows are considered sacred by many in india's hindu majority, but that is causing issues with the country's plans to expand its milk industry. reporter: groups have had much more activity around the dissipation of bovines. carol: talk about the stuff that
has come out of the government that has ramped up the protection of cows. reporter: in may, the government issued a ban on the transport and sale of cows at animal markets because they said the treatment was particularly bad in those settings. the india supreme court stopped the ban from taking effect, but the message that seems to go out to people who support protecting cows was that this is a priority for the government. in effect, it is being enforced by vigilante groups have been targeting cattle traders and sometimes transporting a cow from one village to the next can get people to become targets for these attacks. carol: people have been killed over this. reporter: yes. last year there were i think almost 200 attacks, and 11 of them were deadly. it is gruesome.
but modi has come out against the vigilante groups, but there's still the feeling that there's this sentiment that is taking root. carol: what is happening -- and you guys write about this in the story -- for farmers in india, a lot of them are actually abandoning their cows and opting for water buffaloes to produce milk. reporter: 20 million cows are being abandoned in india right now because if you are a dairy farmer -- and we are talking about india having the largest dairy industry, $53 billion industry -- a lot of it is very small farms and small herds. if you are a farmer and that cow is no longer producing milk, you would send it to get slaughtered and recover the cost of raising it.
certainly you really can't afford to pastor it forever. most of them -- to pasture it forever. most of them can't, so they are letting them loose. that creates problems for other farmers because they eat crops. that is why we are seeing these rescue shelters like the one in new delhi. there's about 5000 new ones that have cropped up since 2011 to take care of this growing population of stray cows. carol: up next, the deal that bought u.s. lawmakers time to keep the lights on. plus, how hedge funds secretly manipulate the government to make investments go their way. this is "bloomberg businessweek." ♪ ♪
carol: welcome back to "bloomberg businessweek." i'm carol massar. you can also listen to us on bloomberg radio on sirius xm channel 119. in the featured section -- the futures section, dci group and how it helps hedge funds influence lawmakers. reporter: this is a health subcommittee of the house of foreign affairs. what can we do to try to build prosperity and economic growth in latin america? their lead witness is this guy, james k glassman, this silver haired washington wise man who's a former top ranking u.s. diplomat. founded a think tank.
he has this incredible resume. he published in the new republic and "the atlantic" in the old days, so really incredible guy. he comes in and has these very specific points to make about latin america. he says argentina is mistreating its bondholders and it needs to change. he says now puerto rico is threatening to do the same thing to investors in this public utility that it had. and by the way, there's also this tax dispute with this bank in puerto rico, and the government is wrong there. they need to fix that. oh, and isn't that what happened to the general motors bond owners? all these general topics -- carol: but very specific. reporter: yes. and at the same time he is speaking -- and this doesn't come up at the hearing -- he is working for this company that is essentially a kind of affiliate
or front group almost four a public affairs firm that represents people in all four of those cases. carol: this company is called dci. it sounds like somebody we in the media would want to talk to when it comes to latin america because he sounds very informed. why does he have access? just because lawmakers reach out to him? reporter: that's a good question about how that hearing up together. i don't know if we will ever know the full story, but james glassman has been, since about 2000, taking positions, thousands of other beds and -- of op ads and testimony before congress, and writing studies. during almost all of that time he's been working for one company or another that is affiliated with this one public affairs firm that has clients who have interests that line up with the positions he's taking.
carol: tell us about this company, dci. who are they? you say they are public relations firm, yet as they say they work -- as you say they were pretty closely with the hedge fund community. reporter: this kind of covert influence operation has been around washington for a long time. people call it astroturf thing -- astroturfing sometimes. what is relatively new is a new client base coming in of hedge funds. rather than, say, tobacco or telecom companies, you have a hedge fund that makes a bet in the market, buy a stock or bond, and government has an opportunity to make a decision that could make the value of that bond or stock go up, and so the goal of these campaigns is to influence government not to benefit a company, but to essentially benefit the price of a security.
carol: interesting. through policies or policy changes. so what is the difference -- as you said, companies have been sending people to talk to lawmakers, testified before committees, doing lobbying or a long time. it is kind of a way of doing business. what is different about the way massive companies would do it and what hedge funds are doing? reporter: the you think about the interests of hedge funds and how they are different from corporations, exxon mobil, there's been certain kind of regulations they disliked. they disliked them in the 1980's, 1990's, and today, and probably 10 years from now. that is just part of being an oil company. there's a certain kind of regulations that you see as unhelpful. very different from a hedge fund, which might make a bet in the market, pursue a lobbying campaign to make that that's payoff, and then turn around and sell that security at any point,
maybe go short. it kind of makes corporate lobbying seem quite. carol: staying focused on capitol hill, we take a look at how a land made up of immigrants is fighting so much over immigration. >> this is fairly new for the u.s. to have this kind of partisan divide. you sort of take it for granted on a day-to-day basis. carol: so republicans and democrats alike are ok with immigration and immigrants. guest: right. neither party was all in, strong in favor, but kind of very close. what has happened since then in the past dozen years, democrats
have taken a much more favorable, and republicans a little less. not way less. what has happened is that that has made immigration into a wedge issue for both parties that they can use to try to drive and consolidate the people on their side and try to pull them away from the other side. carol: how did this happen? guest: that's a great question. i think there's a lot of factors that went into it. one is that organized labor, the afl-cio, was traditionally a little anti-immigration on the grounds that the incoming workers would be taking jobs away from -- especially on the low skilled and of things. around 2000 or so, they
reassessed and said actually, a lot of people who are in our unions now are themselves immigrants, and some of them are undocumented. maybe our interests have shifted and what we should be trying to do is make sure that employers don't discriminate against those people. we don't want huge numbers of them coming in, but -- that was one big change. carol: it is interesting you talk about the report and party and the business groups that are out there when it comes to issues like taxes. reporter: and the reality -- and deregulation, for example. the powerful voices in washington are the business roundtable and the chamber of commerce, both are quite open to immigration. they see it as a force of, like the japanese said, vitality. they put out the press releases, but they are getting ignored by the republicans on capitol hill and the white house. carol: just ahead, nigeria goes old-school when it comes to cryptocurrency fraud protection. and a look at the cost of free speech.
"bloomberg businessweek." still ahead, china defines the laws of economics. in the u.s., citizen schools there is a cost of protests and counter protests. and the private british club hoping to plant flags in new york. that is all ahead on "bloomberg businessweek." ♪ carol: we are here with the editor-in-chief of "bloomberg businessweek," joel webber. there is feature story on china
and it talks about how they are maybe getting around the laws of economics. joel: the chinese, i think it is just a fascinating story. we can basically do a china issue every single week. i think this is a particularly interesting one because there is a lot of questionable data. when we were talking about this story, i said i think the thing that really resonates with me about this is that the writer basically says we don't understand why this is happening, and yet maybe they had actually figured out something that no one else has figured out, which is part of a conversation i think we haven't had before. carol: there's some basic rules of economics. you guys talk about their growth, still there but slowing down dramatically. joel: it is almost too perfect. carol: and talk about a steady line, their mountain of debt continues to grow.
some would argue you need to overhaul their system. joel: this is probably the year of leveraging, which is an ongoing conversation i know bloomberg news will be focused on and "business week" as well. that is ultimately what the economic story is here. what everyone is trying to raptor had around, what is the outcome going to be here? every other time something like this, a debt grows like this, it ends badly. carol: you think about they dole out a lot of subsidies to corporations. they are continuing to that, if not ramping it up. tighter controls if you look at the internet. so what do the economists that you guys have talked to say? joel: there is this other theme that i think is really important with china, which is almost the further you get away from beijing, sort of the more bearish people get about china, which is interesting sort of
subtlety to this conversation. he come i would think, falls in that camp, and yet he says i've always been a bear on this, yet have i been wrong? he is saying, let's talk about this. carol: you think about some of the things china does. when there is a problem, they got a ton of money they can throw at it, and they thrown a lot at something like infrastructure. joel: maybe their version of capitalism is maybe a better, different version of hours. carol: is that the next big financial crisis? joel: if it were to be, what would it look like? is it as global as the financial crisis we had 10 years ago, or is it a different version of that? there's a lot of other people who have commented on that, but it doesn't look like it is an impending situation at the moment.
carol: another feature in the magazine this week is about the cost of free speech. joel: this is just a fabulous idea, a photo essay that started about a year ago with the march in washington. we had a photographer who basically started to photograph all of the various marches. in addition to the marches, things like charlottesville. we were there throughout this tumultuous year photographing it all, and then susan berfield did this amazing piece to a company that, which is, what is the cost of free speech? when there are rallies and stuck in a what happens to businesses? what happens to overtime -- and stuff, what happens to businesses? what happens to overtime? it is a fascinating undercurrent that we are allowed to have free speech, but what are the economics of it? carol: we have more on this from
susan berfield. reporter: this is a photo essay. a photographer went around for the past year shooting some of the rallies and events that we know about, charlottesville, berkeley, and then a lot of rallies and protests in smaller towns, mostly centered around white nationalists or extremely conservative people coming into town, and the counterprotesters that also amass and what happens in those situations. carol: specifically you talk about one individual who came to florida, the university of florida, richard spencer. tell us about him. reporter: he i think takes credit, probably rightly, for coining the term "all right.
-- "alt-right." he is a white nationalists that runs something called the national policy institute. he has tried to come in the past year, go on to public university campuses to speak, and that has caused universities a lot of grief in trouble and sometimes expensive. carol: and he actually rented the space where he was going to speak at the corner of the campus. the campus did not invite him, correct? reporter: correct. the university of florida gainesville did not invite him, did not want him to come, try to stop him, but he has first a minute rights at a public -- first amendment rights at a public university to rent the space. he paid roughly $10,000 for the dorian itself and for security within the auditorium. carol: what do you mean he has the right to rent space at a public university? reporter: the first amendment guarantees the right of free speech in public spaces. unlike private universities, public universities cannot turn people away because they are
controversial, because their speech is hateful, not even necessarily because their speech could potentially incite violence. if the speakers themselves inside violence, that is something different. carol: the university of florida gainesville knew that this was going to be potentially -- there could be right it's people that , were going to be coming to protest his speech, so they had to prepare. reporter: imagine, you know, charlottesville was middle of august. richard spencer was there. it was the unite the right rally. violence, death, injuries. a few weeks after that, the university of florida here's that richard spencer, the same guy, was to come to their campus. they begin preparing. initially they do try to turn him away. he threatens a lawsuit. they realize they are not going to have ground really to turn them away, so they begin planning, and they really draw
on law-enforcement from throughout the state. they also deal with richard spencer and his group and try to understand how many people they are bringing. they are trying to understand the counterprotesters that are going to come. the university president estimates they spent $600,000. the event was two hours on a thursday afternoon, but it practically shut down the campus. in the end, he came, got on stage, and was shouted down, and left the stage early. carol: up next, nigeria battles bitcoin scans and the challenge of getting millennials to love slot machines. this is "bloomberg businessweek." ♪ ♪
carol: welcome back to "bloomberg businessweek." i'm carol massar. in the technology section, bitcoin scans have become commonplace in nigeria, so a group of traders are taking matters into their own hands. here's editor jeff muska. reporter: nigerians became ridiculous interested in bitcoin for mixed reasons. many became victims of multiyear ponzi schemes that, over the course of a year and a half or so, stole about $50 million worth of money in bitcoin. the push into bitcoin came as the local government started to
crack down on the scheme and bar local banks from dealing with the originators. if you want to buy in, just buy in in bitcoin. this is really the origin of nigerians taking alternative currencies seriously as a way to make money and score value. carol: let's see some numbers behind it. nigerians are trading about $4.7 million worth of bitcoin every week from 300,000 per week about a year ago. that is a pretty tremendous ramp-up. reporter: absolutely. currency exchanges and crypto traders who say it them years and years to get up to 10,000 customers now say they've added 90,000 in the past year.
carol: this story takes a look at exchanges that have been created by people in terms of monitoring and managing bitcoin. tell us about that. reporter: in nigeria, where the local exchanges are becoming flooded with people who are new to cryptocurrencies, and scammers have flooded into the marketplace. the most common way to try to rob people in nigeria of their cash are either by what's known as cloning profiles of existing reputable traders, photos from the internet, maybe some identifying information and just passing it off for long enough
to pass a cursory background check, or by the same token trying to arrange for payment in the local currency and then disappearing once they got the money. >> not a sophisticated way of scamming people. reporter: the way that took her in see just the way decorative currency aficionados have responded -- the way that cryptocurrency aficionados have responded are, in most cases, people with generally a handful of people in charge of acting almost as trusted bankers hand verifying peoples passports or id information, and in some cases holding the money in escrow in certain transactions. carol: in the small business section, the company gatling on getting -- company gambling undimmed people in their 20's to -- gambling on people in their 20's to play slot machines. reporter: it's been a slow recovery from the great recession when people realized they could cut back on gambling.
the big challenge for the industry is younger people just aren't playing as much of their parents or grandparents, particularly slot machines. it has been sort of a 1%, 2% growth nationally, driven a lot by new properties opening up all around the country. carol: it is interesting you go to vegas -- and i am not a gambler -- but there's great shows to see, places to eat, and the younger generation embracing that part of it. reporter: exactly. people tell you in vegas it is about 65% non-gambling revenue, a total reversal from a decade ago. steve when just said he's building two new hotels. that's because he makes a lot more money on hotels. carol: let's talk about slot machines because casinos make a lot of money on slot machines. how are companies, howard -- how are casinos adapting to slot machines -- i don't think the slot machines out there to attract millennials? -- adopting the slot -- adapting the slot machines out there to attract millennials? reporter: the idea is that they
are on a screen long enough that when they go out, they don't want to look at the screen and push a button. they are looking for devices that are more interactive, that create an opportunity for people to play with their friends or spouses, so these games are looking a lot more like arcade games than slot machines. carol: tell us about the cofounder of gambit gaming and what he is doing. reporter: he was previously an electrical engineer that ran a company that made these ticket receipt printers for the slot machines, how you got your winnings. he decided he would start a new company to address this issue and get people more active in the casino gaming floor so he's , come up with these ideas, and a sort of learned a lot in the process. some of his original assumptions haven't panned out. he thought these devices -- and one game is a video poker game that looks like a table, you have four people standing around
it and get a couple of cards, and then cards pop up in the middle of the table and everyone competes to grab the card they want and get the ace or whatever -- again, and directive fun -- again, interactive fun communal thing that while you're gambling, the assumption was that you would put these in bars where young people hang out and it would be a big hit. not the case because the people at bars are watching sports, flirting with somebody. they are not interested in gambling. so really, the machine on a traditional casino floor did a lot better revenue wise. these are some of the things they are experimenting with and working with caesar's and mgm and some of the biggest casino operators. carol: up next, the engineer creating technology that help american olympians go for the gold. and the best place to network in london may be coming to new york. this is "bloomberg businessweek." .♪ ♪
carol: welcome back to "bloomberg businessweek." i'm carol massar. you can also listen to us on sirius xm channel 119, in boston, washington, dc, the bay area, and london. and in asia on the bloomberg radio app. in pursuits this week, the game changer is a bioengineer and the training gear he created for olympic athletes. >> we're talking hundreds of a second faster, and that could be different between finishing in first for the gold medal and forth for no medal at all. carol: talk about the individual whose very much involved in making sure the u.s. athletes are really high tech.
it is not like it is one of the well-known big tech companies. it is an individual working out of his house. reporter: he heads the u.s. -- the usoc's technology and innovation. he goes around to the olympic committees and says, hey, what can i do? what do you need from a tech perspective that might make that 1% difference? for example, the ski team told him recently our athletes are having a hard time visualizing the slopes. what can you do for that? he and his team built a vr platform that has all the slopes they would be competing on in one headset, and a skier sitting on his couch between workouts or after dinner can pop on a headset and visualize that slope in pyeongchang where he or she will be racing in the olympics. carol: so they do kind of test runs. reporter: exactly. you can mentally see the exact run you are looking for, etc. that can be the difference
between winning first or getting fourth. there's a lot that he and his team are working on. some are things like that, others are totally cutting edge, not available to the public yet kind of stuff. it is fascinating. carol: also in the story you talk about what he did for the u.s. women's cycling team. reporter: that is what he actually said he was most proud of. they worked with an eyeglass company to create connected sunglasses. projected on a screen inside the sunglasses was how fast they were going, what their power output was, their heart rate was. they are seeing all of it, and that lets them -- obviously it is more efficient because he don't have to look down. if you are a serious cyclist, you know exactly the power range you want to be in, that most efficient and best performance zone, and he has built those for
the ski team this year. in the goggles when they are training, it is a similar kind of technology, and that is the kind of stuff that can make that tiny difference. carol: who is he? he is a game changer in the pursuit section this week. reporter: he's a biomedical engineer who started a few different sports wearable companies in europe. he was working with the italian ski team and a few other of italy's politics team. the usoc based in america were looking for a guy to head their division that has the expertise to do stuff on his own. not just partner with people, but maybe in the time he has it all up some things by himself. they enticed him to come over. he's now out in silicon valley, obviously the cradle of tech and innovation. those are his people out there. carol: originally he went to their offices in colorado. reporter: i think it was pretty
clear that he's probably best suited to be out closer to all the companies that the usoc is working with. carol: what was most striking with you in talking to him? reporter: the most amazing thing to me, i think a lot of these things he is working on are things being developed by massive companies, moonshot laboratories. we've heard under armour and nike and adidas talk about tech for years, a future where the shirt you are wearing tells you what you are eating, your heart rate and he has already built that. there are libyans that will be competing in south korea that there are olympians -- there are olympians that will be competing in south korea that are wearing that stuff already. >> what it's like to be a member of the exclusive club in london and its plans to expand in new york. here's editor chris rovzar.
reporter: i was just there two weeks ago. it is the most fun club, a private of that has restaurants, meeting areas, lounge areas, and a very cool nightclub downstairs. it has been hot since it opened in 2012. carol: it is a private club. reporter: a private, members only club. only certain people can get through those doors, and that makes it even more cool. recently they announced they are going to move to new york and take that format, which costs them $50 million to build it in london, to here in new york. carol: members only clubs have been around forever. reporter: totally true. london, new york, a lot of pleases have these private clubs that are members of only. you go in, oftentimes you have to wear a blazer. they have health clubs, fancy dining rooms, but have become kind of old-fashioned and they aren't super fun. the thing with this and soho house is that they really went for a younger audience. the entrance fees are in the $2000, $3000 range as opposed to
much higher for some other clubs. because of that they are attracting a really cool crowd and have this prolonged energy. carol: and a prolonged waiting list. reporter: yeah, and it discriminated against bankers in some cases. they really want creative types, whatever that means. they really sort of try to curate the membership to create something that seems really cool. carol: it is interesting, the club in london has george clooney as a member. reporter: they got some big deal people and backers. these are all backed by vc's and big international investors because this is actually a great value proposition. carol: talk about the value proposition. it sounds like if you got an annual membership you got cash flow right away from day one. reporter: you got the real estate play, or you own real estate in cool neighborhoods, which is a long-term table. -- long-term gamble. and because you book memberships, you have cash flow.
you have these fees from a few thousand people who don't really even use the space, so your day-to-day stuff actually profitable. carol: the other thing we see along this line is you also have high-end co-working spaces. reporter: these places are admittedly a little snobby, and their primary competition is co-working spaces that have gotten kind of fancy. that is kind of a competition, and those also have total international financial backing. those are big investments. carol: anybody think they are tied to the economy? they are in london and moving to new york like ok, things are going really well. i just wonder what happens maybe in a downturn. reporter: we've noticed this with restaurants too. the move back to fancy exclusive experiences as opposed to shared plates and communal things, people really want fancy now. carol: "bloomberg businessweek" is available on newsstands now,