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Speaker 1: Broadcasting live to New York Coomberg to Washington, d C

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Speaker 1: Bloomber to Boston BLUEMBERG twelve one to San Francisco Bluemberg

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Speaker 1: nine to the Country Series Exam Channel one ninety and

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Speaker 1: around the globe the Bloomberg Radio plus Aben Bloomberg dot Com.

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Speaker 1: This is Bloomberg Surveillance. Good Morning A seven thirty on

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Speaker 1: Wall Street at Michael McKee along with Tom Keene. Lot

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Speaker 1: going on today, some concerns about earnings driving the markets lower,

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Speaker 1: also questions about the economy. We have data at eight

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Speaker 1: ADP Report eight thirty. A whole host of data tell

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Speaker 1: you about earnings. Are coming out this morning. Time Warner

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Speaker 1: uh the cable company, posting first quarter earnings, beating estimates.

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Speaker 1: Profit excluding some items a dollar forty nine a share

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Speaker 1: that's better than the dollar thirty that have been forecast.

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Speaker 1: Revenue seven point three one billion. Seven point two nine

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Speaker 1: was the estimate. Royal Dutchell first quarter a profit beat estimates.

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Speaker 1: Fift did fall but one point six billion, exceeding the

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Speaker 1: one point one eight billion average. Sochen unexpected increase in

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Speaker 1: first quarter profit. They made more money on consumer banking,

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Speaker 1: but we'll cut more at the investment bank, and we

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Speaker 1: thought we'd passed this along Apple. You listen to streaming

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Speaker 1: music there, They're gonna make big changes in that streaming service.

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Speaker 1: The first iteration of the project tepid reviews. The number

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Speaker 1: of executives brought in to revive the company's music strategy

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Speaker 1: have departed. There is obviously a question about the stocks.

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Speaker 1: So Apple is going to make some changes. We are

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Speaker 1: reporting now. Let's check out with Michael bar and get

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Speaker 1: the latest world and national headlines. Life Mike, thank you

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Speaker 1: very much. Republican presidential front runner Donald Trump is singing

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Speaker 1: the praises of Ted Cruz, who was now dropped out

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Speaker 1: after losing the Indiana primary. Trump last night called Cruise

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Speaker 1: a tough competitor. Although John Kasy still remains in the race.

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Speaker 1: Trump is all but certain to lead the Republican Party

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Speaker 1: into the fall presidential campaign. For the Democrats, Bernie Sanders

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Speaker 1: upset Hillary Clinton in the Indiana primary, but Clinton maintains

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Speaker 1: her commanding lead for the nomination. Officials say three people

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Speaker 1: are dead after a small plane broke up in midflight,

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Speaker 1: scattering debris across the residential Long Island neighborhood. The National

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Speaker 1: Transportation Safety Board says the pilot of the aircraft reported

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Speaker 1: in an issue with his instrument Panela before the plane

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Speaker 1: went down Tuesday afternoon. The plane was on a route

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Speaker 1: to Connecticut from Myrtle Beach to South Carolina when it crashed.

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Speaker 1: President Obama heads to Flint, Michigan today, where he will

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Speaker 1: talk about the water contamination crisis. Global News twenty four

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Speaker 1: hours a day, powered by our twenty four hundred journalists.

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Speaker 1: I'm Michael Barr. Mike. Thank you, Michael. Now let's check

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Speaker 1: in which on stas get the latest Bloomberg NBC Sports update.

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Speaker 1: All right, thanks Mike. The Islanders now know what it's

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Speaker 1: like to be on the winning end of the playoff overtime.

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Speaker 1: They won three OT games in round one, but last

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Speaker 1: night and Brooklyn, they left three different leads slip away

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Speaker 1: and they keep that. Coop Drop scored thirty eight seconds

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Speaker 1: left to tie the game and it was off to

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Speaker 1: sudden death. Call for Porter by Job the right side

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Speaker 1: cross off for star over try water for trying boil.

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Speaker 1: The Tampa Bay Lightning win games three and against the

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Speaker 1: Lightning at two one series lead. Game four is Friday,

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Speaker 1: the Stump Merrill led Yankees. The last time a Yankee

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Speaker 1: teams started the season this poor league eight and sixteen.

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Speaker 1: Six straight loss was four one at Baltimore's Mark Trumbo

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Speaker 1: homer twice off Luis Severino and now Alex Rodriguez ad

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Speaker 1: it for an m R I at his injured hamstring.

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Speaker 1: Mets had only one hit lost to Atlanta three nothing,

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Speaker 1: shut down by Matt Whistler got his first win beating

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Speaker 1: Matt Harvey. Is now two and four. Mets and Braves

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Speaker 1: play a day game today at City Field. With the

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Speaker 1: Bloomberg NBC Sports update, I'm John's dashall. Thank you, John.

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Speaker 1: This headline in the Intercontinental Exchange is not going to

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Speaker 1: make an offer four or the London Stock Exchange means

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Speaker 1: Deutsch Bors wins stocked down now by six percent in

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Speaker 1: Europe the London Stock Exchange, since there will not be

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Speaker 1: apparently a competing offer to Deutsche Bors. This is Bloomberg's veillance.

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Speaker 1: I Michael looking along with Tom Kane. We're watching futures improved,

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Speaker 1: but that's from a very low base. As they say,

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Speaker 1: SMP features still down by twelve point six tenths of

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Speaker 1: a percent down, Futures off eight nine half a percent

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Speaker 1: in Europe. The stock six hundred is off by three points.

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Speaker 1: That's nine tenths and the foot seat, you know, reflecting

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Speaker 1: what's happening with the London Stock exchanged down seventy seven

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Speaker 1: one three on the day time. Now for the Bloomberg

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Speaker 1: nj I T STEM Report, brought to you by New

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Speaker 1: Jersey Institute of Technology. Investing more than a hundred and

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Speaker 1: ten million dollars a year, it applied research to solve

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Speaker 1: problems and improve life. Learn more at Stories of Innovation

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Speaker 1: shan dot m j I T dot edu. Here's Michael,

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Speaker 1: good morning. Here's what's making news in science, technology, engineering,

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Speaker 1: and math. New research on the deadly Ebola virus boasters

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Speaker 1: the Obama administration's argument that it's dangerous to take money

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Speaker 1: for fighting ebola. To combat the latest public health threat,

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Speaker 1: the mosquito born Zekea virus, government scientists have found genetic

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Speaker 1: evidence that people can be persistently infected with ebola virus

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Speaker 1: for almost a year without chewing symptoms before another outbreak

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Speaker 1: of the potentially deadly disease occurs. The latest study counters

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Speaker 1: the argument many Republicans have made that federal dollars allocated

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Speaker 1: for Ebola could be diverted immediately to combat the Zeka virus.

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Speaker 1: Microsoft is boosting its rivalry with Google Box and drop

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Speaker 1: Box with new software to help employees work together and

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Speaker 1: share files, looking to expand a three billion dollar annual

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Speaker 1: business and update share Point, a non cloud program that's

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Speaker 1: been seen lately as Passe and scientists had expected to

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Speaker 1: see this, just not so soon. They're seeing part of

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Speaker 1: the Limestone framework for a coral reef in the Upper

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Speaker 1: Florida Keys eating a way by sea water that is

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Speaker 1: increasingly acidic because of global warming. The discovery is outlined

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Speaker 1: in a new study by a biological oceanographer at the

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Speaker 1: University of Miami. He calls it a leading indicator that is,

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Speaker 1: in his words, telling us about something happening early on

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Speaker 1: before it's a crisis. That's this morning's Bloomberg and j

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Speaker 1: I T Stem report. Michael, thank you very much, Bob

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Speaker 1: boom Johnny is now rich lesser. He is with the

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Speaker 1: Boston Consulting Group. He's a president and CEO actually the

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Speaker 1: Boston Consulting Group, and as such he gets to talk

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Speaker 1: to CEOs around the country on a regular basis. They

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Speaker 1: actually pay you to come in and talk to them.

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Speaker 1: We have to bag them. They pay you, maybe you

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Speaker 1: could work for us, You could be our booker and

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Speaker 1: get get some of these CEOs to come on, because

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Speaker 1: we're really interested in what people are thinking about the

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Speaker 1: global economy. Now, what we're really interested in is why

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Speaker 1: they're sitting on their wallets. I mean, nobody is investing anything.

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Speaker 1: Productivity almost making a big deal this on the on

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Speaker 1: the television version of surveillance this morning. Productivity is uh

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Speaker 1: in the dumper. And as long as productivity is down,

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Speaker 1: living standards don't go up. What's what's on CEO's minds

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Speaker 1: these days? I think CEOs are focused on three big

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Speaker 1: topics right now. One is finding growth in a world

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Speaker 1: where growth is just harder to find in in today's

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Speaker 1: where most of the economies of the world are are

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Speaker 1: not growing or growing below their potential, and and so

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Speaker 1: getting better insight into customers driving innovation, thinking about how

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Speaker 1: to leverage digital and that in that space is one.

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Speaker 1: The second is transformation, but not just with a short

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Speaker 1: term outlook, but around a medium term. How do we

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Speaker 1: win in the medium term, How do we fund that

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Speaker 1: journey in a world of activist investors and enormous short

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Speaker 1: term performance pressures. How do we get our organizations right

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Speaker 1: for that, and then the final is digital. And there's

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Speaker 1: just a huge focus right now on digital from an

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Speaker 1: innovation standpoint, from a rewiring the company's standpoint, from big

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Speaker 1: data and advanced analytics. And I think that combination is

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Speaker 1: having companies feel pressured. But but a big search is

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Speaker 1: the search for opportunities. Well, let's take those sort of

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Speaker 1: one by one and let's go backwards. Digital. Um, yes,

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Speaker 1: the future, But are people spending money? Are they frozen

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Speaker 1: because they haven't figured out exactly how to make money

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Speaker 1: off of digital yet? I think I think the investment

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Speaker 1: mindset right now is high. I do think it's I

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Speaker 1: wouldn't say it exactly as you did, but I would

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Speaker 1: say that many companies are in the phase of trying

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Speaker 1: to figure out how they're going to do this. If

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Speaker 1: you start with banking around the world, banks are viewing

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Speaker 1: digital as probably the the along with dealing with the

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Speaker 1: regulatory environment, probably the biggest challenge that they're trying to

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Speaker 1: sort out right now, and both about how they rewire

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Speaker 1: themselves to dramatically improve productivity and how they connect to

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Speaker 1: their customers differently, and how they deal with the world

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Speaker 1: of fintech. But that's banking. If you go to auto,

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Speaker 1: it's around connected cars and electric vehicles and sharing ride sharing.

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Speaker 1: I mean, in each industry, this digital agenda is a

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Speaker 1: huge one. I think we're early on in it. So

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Speaker 1: this is coming, in other words, huge profits, huge gains

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Speaker 1: in stocks, and huge gains in productivity that benefited everybody

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Speaker 1: as people bought PCs for the first time. But we're

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Speaker 1: not seeing that now. So is that that you're saying

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Speaker 1: that's coming. I think we're early on in the S curve.

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Speaker 1: We're seeing a ramp up, but we are early on

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Speaker 1: in the S curve of how digital flows out across

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Speaker 1: businesses and across many sectors. In the years I had.

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Speaker 1: The big question around this is how it will flow

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Speaker 1: into the economy and into the workforce, because in fact,

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Speaker 1: in many ways the disruptions that the next wave of

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Speaker 1: technology will bring will be across entry level jobs. That's

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Speaker 1: in both services and in manufacturer That's what you have

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Speaker 1: to ask, is this going to be something that increases

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Speaker 1: the top line or fixes the bottom line because you

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Speaker 1: cut costs, it has the potential to do both. In fact,

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Speaker 1: a lot of our work right now is around innovation

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Speaker 1: around new products and services and even new business opportunities

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Speaker 1: built around digital. So it is clearly around both fronts.

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Speaker 1: But the productivity side is a really big one. And

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Speaker 1: if you look at some industries, particularly service driven industries,

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Speaker 1: the potential to use technology in very different is substantial.

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Speaker 1: There's a lot of value created for customers in this

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Speaker 1: having changing the experiences, letting people lead an integrated online,

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Speaker 1: offline world. It's but but there will be a pressure

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Speaker 1: on workforce and what's getting underplayed right now on a

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Speaker 1: lot of the public discourses, in the political campaigns and

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Speaker 1: elsewhere is just this massive need for investment in human

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Speaker 1: capital and helping people prepare for this world. We'll talk

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Speaker 1: about that a little bit more coming up in just

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Speaker 1: a moment. We're talking with Rich Lester. He's the president

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Speaker 1: and CEO of the Boston Consulting Group. It's a different

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Speaker 1: world out there, and CEOs have a different take than

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Speaker 1: perhaps we've seen in recent decades. We'll get more on

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Speaker 1: that coming up here on Bloomberg Surveillance. Well, speaking of

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Speaker 1: what's happening in the political world, it looks like we

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Speaker 1: have our nominees pretty much in place. Chris Krueger of

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Speaker 1: Goggenheim Securities will join us talk about what the general

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Speaker 1: election campaign will look like. Global Business News twenty four

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Speaker 1: hours a day at Bloomberg dot com, the Radio plus

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Speaker 1: Mobile Act and on your radio. This is a Bloomberg

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Speaker 1: Business Flash and I'm Karen Moscow. This update is brought

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Speaker 1: to you by c g M, a Chartered Global Management accountant.

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Speaker 1: The c g M a designation and program deliver critical

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Speaker 1: skills your finance team needs to succeed. Learn more at

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Speaker 1: c g M. A dot org slash radio price Line

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Speaker 1: Group projecting earnings for the second quarter that fell short

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Speaker 1: of analysts current estimates due to an earlier Easter holiday

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Speaker 1: this year, and as the company boosts investments. The shares

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Speaker 1: are falling down almost eleven percent in early trading time. Warner,

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Speaker 1: owner of cable channels like CNN, posting first order earnings

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Speaker 1: that beat analyst estimates. It shares around one and a

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Speaker 1: half per cent. Stocks are falling around the world. An

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Speaker 1: emerging marketing current emerging market currencies falling to a one

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Speaker 1: month low after a Federal Reserve official raised concern investors

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Speaker 1: had become too complacent in their belief that US interest

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Speaker 1: rate raises will stay on hold. SNP eveny futures are

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Speaker 1: down about thirteen points and now eveny futures down ninety

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Speaker 1: nas doc EUMNY futures down thirty the decks in Germany's

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Speaker 1: down eight tenths percent. The ten year treasury that'll change

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Speaker 1: yield one point seven nine percent. Nimex screwed oil at

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Speaker 1: three tenths per cent or fourteen cents to forty three

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Speaker 1: eight a barrel. Comex gold is down nine tenths per

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Speaker 1: cent or eleven dollars nineties cents. The euro and dollar

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Speaker 1: fourteen ninety six, the en one oh six point six two.

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Speaker 1: That's a Bloomberg business flash. Tom and Mike Cararosco, thank

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Speaker 1: you very much. We're talking with rich Lesser. He's a

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Speaker 1: Buston Consulting Group president and CEO. We're talking about CEO's

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Speaker 1: view of the world and why at this point they're

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Speaker 1: having trouble investing to improve productivity, etcetera. And uh, we

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Speaker 1: we talked to someone about technology. But uh, what also

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Speaker 1: called my air was when you said it's very difficult

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Speaker 1: in this world for people to deal with the pressure

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Speaker 1: from activist shareholders and the short term is um that

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Speaker 1: has arisen out there. And I was talking with a

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Speaker 1: senior feed official the other day who said they see

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Speaker 1: that and that concerns them that everybody is trying to

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Speaker 1: make the number for the next quarter rather than thinking

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Speaker 1: about what's good for the long term health of the company.

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Speaker 1: So I wouldn't go that far. I would say that

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Speaker 1: right now, CEOs in many industries are are trying to

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Speaker 1: work through a transformation agenda that is both about how

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Speaker 1: do they win in the medium term and how do

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Speaker 1: they fund that journey and how do they build the

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Speaker 1: organizations that they need for the future, not what they've

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Speaker 1: had in the past. So it's not just short term,

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Speaker 1: but there is an intense focus that if you want

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Speaker 1: to prepare yourself to win in the medium term, funding

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Speaker 1: that journey in a way that's credible in a world

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Speaker 1: with very strong near term and performance pressures is really important.

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Speaker 1: And um, you know, we talk often our clients about

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Speaker 1: almost a d I Y activism that you have to

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Speaker 1: look at yourself through the way the outside world world

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Speaker 1: in this world, and that means what is your value

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Speaker 1: creation path? How do you articulate that clearly with the

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Speaker 1: right milestones and be able to show that you're both

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Speaker 1: driving performance in your term and positioning to win in

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Speaker 1: the medium term, that's a tough term. Well, it's hard

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Speaker 1: because you you you can't just write off a couple

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Speaker 1: of quarters and say this is an investment that's gonna

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Speaker 1: pay off a year, two, three, four or five down

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Speaker 1: the road. Well, I think the very long term first year. Absolutely,

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Speaker 1: you can't write off quarters. But the second thing is

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Speaker 1: as you make the investments, the ability to sharply indicate

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Speaker 1: the value, the value proposition associated with that, and how

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Speaker 1: that creates shareholder value, and with milestones that are visible

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Speaker 1: and trackable, that pressure is just much higher now than

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Speaker 1: it was the sausage making for you, as you've got

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Speaker 1: to attract best and brightest, it's hugely a competitive x

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Speaker 1: number of school. As you go to on your website,

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Speaker 1: you like everybody else, use all the right words, the

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Speaker 1: transformer and the explorer, the hard charger in the change leader.

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Speaker 1: All that's great, except the clients who go out to see,

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Speaker 1: I want to do one thing, cut costs. How do

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Speaker 1: you take the modern verbiage of strategy and even strategy

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Speaker 1: over the tactics and translated to CEOs who say we

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Speaker 1: got to take x percent off the operating line right now?

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Speaker 1: To me, it's a baffling time for that, But I

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Speaker 1: think you're framing the way CEOs look at the world

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Speaker 1: right now too narrowly. Um I we don't see that.

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Speaker 1: We do see a pressure to drive near term performance

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Speaker 1: and to drive productivity. Often it's by making some very

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Speaker 1: substantial changes to the business model in a world of

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Speaker 1: digital in a word, where you can leverage technology differently

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Speaker 1: from the factory floor to the internal administrative operations. But

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Speaker 1: we also see enormous pressures define growth right now, Where

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Speaker 1: do you find emen A or do you actually go

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Speaker 1: out and make so this is so, this is the challenge.

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Speaker 1: I think for many companies they realize that M and

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Speaker 1: A can be part of that journey, but that the

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Speaker 1: big thing is how do you unlock innovation that's a

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Speaker 1: customer value added? But you're a Baker scholar from Harvard.

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Speaker 1: There isn't an NBA course in the world that says

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Speaker 1: long term M and A adds value. I mean, it's

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Speaker 1: a really suspect path. I I think M and A

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Speaker 1: on average doesn't add value. M and A done done well,

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Speaker 1: can I add substantial target? Pay the right price? And

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Speaker 1: then you have to do the integration right. And we

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Speaker 1: see a lot of situations where clients actually do come

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Speaker 1: out ahead and are able to create by you. But

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Speaker 1: but I would agree with you that if the path

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Speaker 1: is only an M and a path that is unlikely

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Speaker 1: to create shareholder value versus driving growth and unlocking consumer

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Speaker 1: What word drives you nuts now? Within consults speak, synergy

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Speaker 1: drives me nuts? Paradigm I want to throw a cooney

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Speaker 1: and brick its somebody. What's the word now that drives

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Speaker 1: your nuts? Within the consulting sitegeist? I think, uh, you're

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Speaker 1: allowed to say power point or power point absolutely does

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Speaker 1: drive me us. I think that our clients just don't.

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Speaker 1: I mean, they want to engage in real discussion and

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Speaker 1: they want to make hard change happen. And I think

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Speaker 1: a big discussion in our work, and in fact, I

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Speaker 1: think a lot of the reasons that clients value the relationships.

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Speaker 1: They want people who are rolling up their sleeves with

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Speaker 1: them to make change happen and make hard change happen,

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Speaker 1: and getting into long presentations is frequently not. The little

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Speaker 1: secret here is if they bring out a PowerPoint, me

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Speaker 1: and Michael McKee stand up and walk out of the room.

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Speaker 1: They have their place. They have their place. But the

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Speaker 1: most important thing is are you focused on the right

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Speaker 1: issues and are you making the hard choices to move

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Speaker 1: things forward? And I think that's the world right now

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Speaker 1: we have it appears now mens for the presidential campaign

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Speaker 1: in the fall, we've talked without a lot of investors

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Speaker 1: who say, what down in the markets, yet, what about

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Speaker 1: in the in the c suite? Are people making investments,

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Speaker 1: making political plans, you know, making plans at all around

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Speaker 1: what the policy of the US government maybe come next January.

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Speaker 1: I don't think that that's yet entered the boardroom. I

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Speaker 1: think there's too much uncertainty. I think there's a lot

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Speaker 1: of frustration right now that this campaign has focused on uh,

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Speaker 1: demagoguing sort of comments from the left, from the far

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Speaker 1: from the right around business and banks at one end,

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Speaker 1: around um uh immigrants or or trade on the other.

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Speaker 1: And I think that right now, what business leaders want

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Speaker 1: is a stable environment that will promote investment and recognize

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Speaker 1: how important it is to find growth. And frankly, the

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Speaker 1: grid luck we've had for the last few years has

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Speaker 1: just made it very hard to get good policy on

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Speaker 1: on immigration, trade, corporate tax, uh, investing in human capital.

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Speaker 1: I mean, on so many dimensions that business leaders would

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Speaker 1: say are foundational to support growth in the years ahead.

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Speaker 1: The question is whether the fall campaign will have any

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Speaker 1: of that come to the fore will be focused on others.

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Speaker 1: Do you hear any talk of business actually getting involved,

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Speaker 1: organizing and getting involved pushing for one or the other policy.

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Speaker 1: I think the business community has been I think generally

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Speaker 1: active in wanting a set of policies the support trade,

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Speaker 1: support a good immigration policy that allows us to bring

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Speaker 1: highly skilled workers into the country and help spur growth

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Speaker 1: and innovation, around investing in human capital, around investing in infrastructure.

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Speaker 1: Whether those messages breakthrough in the cloud of you know,

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Speaker 1: all the political discourse, that's a different question right now.

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Speaker 1: I don't think our audience truly understands the impact of

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Speaker 1: what you have wrought. There is a thing called the

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Speaker 1: BCG may Tricks. It's a movie coming Memorial Day. Tell

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Speaker 1: them it might have been in if I remember. The

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Speaker 1: BCG matrix was about recognizing the need to not just

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Speaker 1: harvest harvest cash from one business and plow it back

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Speaker 1: into that business, but to look at a portfolio and

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Speaker 1: the places that were fast growing and stronger. You get

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Speaker 1: an A plus. I've been at the place. If I

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Speaker 1: couldn't answer that question, I set you up for this

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Speaker 1: Are you beautiful? You beautifully prescribed? The challenge? Tim Cook

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Speaker 1: has an Apple what's your what's your prescription for Apple Computer? Well,

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Speaker 1: first of all, what they've done is just remarkable, and

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Speaker 1: they've shown in the past the ability to innovate against

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Speaker 1: you know, environments where people were starting to write them

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Speaker 1: off or going forward. But of course the next challenge

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Speaker 1: is when you've got a company of that size, unlocking

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Speaker 1: the next growth levers is not so easy. So what's

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Speaker 1: your prescription? You got one minute? Look, we're moving to

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Speaker 1: a highly high a connected world and a world we're

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Speaker 1: always on and Apple has the potential be a strong

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Speaker 1: platform across many many industries and deeper in the business

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Speaker 1: world as well. And the word that I don't hear

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Speaker 1: enough in the media of the analysis of this is

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Speaker 1: the net present value of the ecosystem. This word ecosystem

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Speaker 1: is not and their system and the ability to extend

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Speaker 1: it is unique. But the challenge when you are at

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Speaker 1: a company that size to find substantial growth is a

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Speaker 1: big challenge. So but but look they've done it before.

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Speaker 1: We'll see we'll see why chemical engineering over mechanical engineering.

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Speaker 1: Why should people be a chemy? Well, today, my I

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Speaker 1: was a U of M guy. My son is now

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Speaker 1: you have M. He's doing computer science. So that's the

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Speaker 1: world of today. What I really You let him do

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Speaker 1: that and not not go through Morrison avoided organic chemistry

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Speaker 1: and the rest of it. I didn't like organic chemistry.

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Speaker 1: That I did like I did like the balance of

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Speaker 1: science and engineering. I thought that was the right combination,

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Speaker 1: and I went to R and D. After that of

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Speaker 1: finding insights and unlocking things with both the theoretical and

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Speaker 1: the prob quickly has your son getting that balance in

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Speaker 1: computer science. He's loving it so far. But he just

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Speaker 1: finished his freshman year, so he's got a way to

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Speaker 1: send him to Tom's house. Tom needs somebody to program

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Speaker 1: his VC all exactly. He's doing a lot of that

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Speaker 1: in our house. He should be taking kemy or exactly.

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Speaker 1: But I'm happy to be in the business right code

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Speaker 1: on the side. Richard Lesser, BCG with perspective on STEM

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Speaker 1: Stay with us another hour of Bloomberg Surveillance