Transcripts For BLOOMBERG Best Of Bloomberg Technology 20171226

Exchange to fail. Its not a Merry Christmas for apple. Analysts have lowered iphone x projections for the First Quarter citing weak demand. Say 10 million fewer units will be sold in the First Quarter of 2018 compared to the current quarter. Worn cs shipments falling by 5 million. They blame the high price and lack of innovation. Lets give you a feel of whats going on here. And a few other elements are playing out. Australia and hong kong are closed. We did see quite a bit of pressure on selective chinese companies. The nikkei was lower as well. Turkish stocks having an astounding rally. S p futures unchanged. U. S. 10 year, 2. 48. Across in the commodities space, some important moves for wti. Had u. S. Rigs not adding anymore. Is at 1000 children 78 an ounce. Its not a Dollar Strength story. A little bit of anxiety coming from the catalog election. We have a few other elements as well. Dollar yen up. Currently that level is still a sixweek low. Policy getting back into focus for investors. Dollar rand is the headline in the emerging markets space. Close to the highest level in nine months. Watch out for the ruble as well and the south korean won. Be back with another update in the half an hour. Emily i am emily chang and this is the best of Bloomberg Technology, where we bring you all our top interviews from this week in tech. Coming up, uber has a new number two. Why the ceo tapped the former head of orbit to join his team. Plus, coinbases Insider Trading suspicion. The investigation into a sudden spike in bitcoin cash just before it was officially introduced on one of americas most popular cryptocurrency exchanges. And our exclusive interview with bank of america Ceo Brian Moynihan. Why he is skeptical about bitcoin. Emily but first to our lead and a bloomberg scoop. Uber has a new number two. The worlds most valuable startup has named Barney Harford its chief operating officer. Hartford is the former ceo of the Online Travel site orbitz. He is the secondprofile hire by the uber ceo. He has worked for and competed with khosrowshahi in the Online Travel sector. And it is an interesting move considering the other uber news out wednesday, the european top court has officially ruled the service should be regulated as a Transportation Company rather than a digital company. The ruling is aimed at uberpop which allows people to pick up passengers, the equivalent of uberx. We spoke with the capital managing partner from london along with Bloomberg Technology partner eric newcomer. Eric he has a long history with khosrowshahi. I think that is definitely helpful. This is sort of a loyalist you can bring in, a trusted hand. So i think that is part of it. Barney did a really good job at orbitz. It was a debt laden company. He was able to get a good exit of 1. 6 million. 1. 6 billion. And then, you know, the experience at orbitz and the expedia marketplace is relevant to uber. So, it is relevant expertise, having a Good Relationship already with the ceo, then he was doing this since october to feel the company out a little bit. Emily there were a series of tweets after your story to say uber already does more rides, more than the Worlds Airlines combined, providing flexibility to more people than any company in the world. What does the hire of a former Industry Expert imply about the direction they want to take the company . Eric he is still on the united board and really understands that business. I think it shows the global reach and seriousness of ubers business as an employer. For one. I think his tweets speak to the amount that he thinks of uber that has this Global Company that has a reputation for how it treats its drivers. That is a top priority for him, and the Airline Industry is a parallel that uber does not love. Because airlines have these huge, expensive planes, but barney also made the point to me that airlines are doing better these days, more profitable businesses, but certainly that expertise as a Business Model comparison, but also as a Similar Service industry is useful background to bring to uber. Emily i want to talk about this in the context out of this news of the e. U. That uber will now be regulated as a transport company and not a tech company, which is what they were hoping for. This is a big blow to uber. What does this mean . Reporter it is bad for uber because it means more regulation, the potential that they would have to pay their drivers more, have more rules about how they pay instead of a digital platform and super disconnected from the rules of local regulators. On the other hand, uber is already regulated as a Transportation Company in london and paris, two of its most profitable markets. It has already started to deal with this, and the ceos stands has been we are going to work with local regulators to allow them to regulate us as they want. Obviously we are going to have input. I think this is bad and uber is lobbying against it, but the company has already started to pivot to deal with what they saw coming. Emily as a longtime investor in europe, what do you make of this decision, given the challenges that uber is facing in london specifically where you are . Frederic it is interesting as it is basically a confirmation that local regulators in europe and i think it is the case across the globe are looking at these tech, Tech Companies and saying we have rules, and you have to operate in the context of those roles. So in the shortterm, it doesnt change too much for uber. Uber have to operate within those parameters, but it does cap the potential upside. The peertopeer service they were hoping to launch across countries, in certain countries, uber was hoping to enter with the just peertopeer, that will not be possible. That restricts the opportunity, and is an interesting time. As a user, and i keep hearing this, the uber experience for consumers has, over the past four to six months, been diluted. How to get cars, drivers canceling, it is almost as if the change of guard and the change of management and the relief of the pressure had an impact on the development of the customer experience. I think bringing new management that will sort of tighten the grip on the business again is highly needed, and in the short term, uber has got to focus on their core. Emily what signal does this say about the european regulators about the economy in general . There is talk it could be affecting Companies Like airbnb, in that it may be, in the future, regulated more like a hotel than a home rental site, as they would prefer. Frederic there is a sort of general move and orientation and realization across europe that many of the Tech Companies that are global that have very Successful Services have become dominant across europe, have done that by pushing the boundaries too much. Also lots of not paying their fair share of taxes. I think it is fair to expect. Yes, a tightening of the grip. Also a realization by the local authorities that they need to create a level Playing Field for the local operators as well. And for those certain rules but also some fiscal sort of discipline on top of this companies who have been able to use this as a place of doing things. We see a wave of change, and we expect, we see again, a wave of change, and there is demand from consumers, from politicians, from the local services and businesses to say pay, maybe we are being too open. We look at china, china has been very good sort of closing those doors. Maybe it is time for europe to do that as well. Emily so eric, we note that the ceo has been traveling a lot. He has been to london. How do you think this ruling will impact his strategy . Eric i think there is a lot of europe that still is to get figured out. Hiring barney, it is a statement, ok, internally, somebody else needs to run the internal business, because there is so much to do outside. The situation to do in southeast asia, gojek what is going to happen they are, similarly in india, all over the world there are these questions either strategic dealing with competitors or you know countries where the regulation still is not figured out. He is going to be the public face traveling around and either establishing better in markets, cutting deals, or making an apology as necessary. Emily that was frederic court, Felix Capital managing partner, and Bloomberg Technologys eric newcomer. This week, tech watchers finally got a glimpse of one of the most longawaited products. Secret a mixed reality headset. The steam punkesque goggles come with a controller and computing pack to wear around your waist. It is now facing increased competition from the likes of google and apple in augmented reality. Bloomberg has previously reported the gear will cost between 1500 and 2000. And speaking of gadgets, coming up, we will take a look at the big year in Consumer Tech from amazon, google, and apple. What worked, what didnt. What is worth your money . If you like bloomberg news, check us out on the radio. You can listen on the Bloomberg Radio app, bloomberg. Com, and in the u. S. On sirius xm. This is bloomberg. Emily facebook has introduced new features to curb abuse and protect privacy on the platform. New facial recognition features should help prevent unwanted contact when someone you have blocked sets up a new account or tries to contact you from another account they control. The feature also provides the option to ignore a messenger conversation and move it out of your inbox without having to block the sender. Meantime whatsapp was given a month to comply with french privacy law and stop transferring data from facebook users without their consent. The french Data Protection says it wants to ensure the highest level of transparency on the massive Data Transfer from whatsapp to facebook, according to a statement on its website monday. This comes after 28 e. U. Privacy watchdogs published a letter to whatsapps cofounder to reassert their concerns over changes to the privacy policy. Techs big three are constantly fighting for retail supremacy. So just how did google, amazon, and apple try to win your hearts and wallets in 2017 . A reporter takes a look. Reporter it has been a jampacked year for new tech products, and all of the big players are now vying for every part of your life. Google is no longer just a search engine. Amazon is more than a retail channel. And apple more than ever is going for the high end. They are trying to fight to be your number one, and they are releasing more and more products they have started for the ecosystem. Apple is going for the highend and an essential part of your life. The smart phone, with the iphone x is the biggest anticipated gadget of the year. The biggest iphone update in the companys history. So far it has been a hit with consumers so far. Apple expects a recordbreaking holiday quarter. Apple is looking to round out its hold on you with an apple tv, the apple watch, and the apple airpod which make a nice combo. Google wants to sell you a 400 super loud, highend speaker that works well with the pixel 2 phone. I wouldnt recommend the pixel 2 headbuds, but the speaker with stereo sound could be a better fit for your home. Amazon is trying to be everywhere in your room and has released several new speakers this year. My favorite, the echo spot. It is an alarm clock and nightstand device of the future. It is a solid holiday gift for the gadget lover in your home. The Top Companies are already looking towards next years holiday season. Apples home pod, google echo, and alexa will come out in early 2018 after being delayed. The iphone maker is working on its next iphone and an ipad with facial recognition for next year, bloomberg has reported. Google is working on a new phone speaker with a screen. Amazon of course is always working on new echoes. Happy holidays. Emily coming up, bitcoin hits another year on a bigger stage. Why this cme debut could play a defining role in the cryptocurrencys march to mainstream. One of the most popular cryptocurrencies on the planet is facing its biggest controversy. Why coinbase is investigating possible Insider Trading on its platform, next. This is bloomberg. Emily the worlds Biggest Exchange just joined the bitcoin revolution. Bitcoin futures started trading this sunday night on the cme after the cboe introduced similar derivatives of the volatile cryptocurrency. Cme is a bigger player in futures with many players expecting it to make a bigger splash. The exchange got off to a faster start with more efficient pricing. Its most active contract changed hands 21 times versus 570 during cboes debut. It is a huge win, because cmes contracts are five times more valuable. They are tied at five bitcoin versus only one with cboes futures. We caught up with our bloomberg editoratlarge cory johnson looking at ethereum and union square venture. Olaf so it is very, very important that these financial projects and hedging mechanisms are introduced for Institutional Investors. For a lot of these Institutional Investors, it is the first time they have been able to go long or short on bitcoin. Emily so, we have a chart here, showing how futures got off at the cme, at the cboe as well. Cory, what is your take on the significance of this week versus last week . Cory this is a product and exchange where a lot of big money trades. A lot of groups are unable to trade this for legal reasons. They dont actually trade the actual currency itself. This is the only product they can legally get involved with. That is based on a charter or where they are trading, so they can actually, a lot more money can be attracted to these cyber currencies without being involved in the cyber currencies themselves. Emily olaf, how does the last two weeks change what youre doing daytoday your hedge fund . Cory if you wish you were more long. Olaf there has been a huge amount of media interest in this area. There has been a huge number of consumer retailers coming online, just purchasing bitcoin and other cryptocurrencies. I think that we are seeing more and more institutional wall street players coming onto the scene and wanting to go long in this area. I just think it is great for the whole industry. It is really pushing things forward. Emily cory, you also have Td Ameritrade on friday saying they are getting into this. Cory right. Significant requirements, people have just got so much money behind this in order to trade this. It is not as simple as just trading a stock or currency. A lot of volatility around this. That is owing to the media around this. Emily olaf, you and i were talking before the show. The price has just soared. Every time you come on i say, are we in a bubble . The price keeps going higher. Does the rapid rise of the price make you question the legitimacy of the value here . Olaf what we are seeing in a way is not that dissimilar from the rapid rise you might see from other technologies. When you look at a breakout startup like uber, we are seeing a similar rapid rise there, but it is all happening in private markets that are relatively liquid. Here you are seeing Retail Investors with the ability to actually gain into that rise and see this viscerally day to day. It is not surprising to me we are seeing from other types of breakout industries. I do think this is much bigger than any individual company. It is not surprising to me at all we are seeing this type of growth. I think it feels somewhat inevitable to us that have been in this ecosystem for many years. Emily cory, do you agree with that comparison . Cory it is not just the coins, ethereum and bitcoin and ripple. There is a lot of junk out there. A lot of stocks are flying. I was looking at a Chinese Energy company today with the 18 employees and it has a 3. 5 billion valuation. The stocks went up 860 in the last week. That is a mania. That is not based on what is actually going on for this technology. It is just a mania of people. Olaf i think pushing behavior like that is the inability of Institutional Investors to get exposure. Because a lot of the Institutional Investors dont have the ability to buy the underlying assets. [speaking simultaneously] cory but whenever you see a mania, whether it is the dotcom boom, there were a lot of hucksters and people trying to take the money and bring it somewhere else. Uranium in the 1960s. It has been in real estate. There were people selling fake properties 10 years ago, buy to own, and i think we are seeing that in this general notion of cyber currencies. Once in a while you grab the real things like bitcoin and ethereum. And we can look at some fake things like some of the stocks that are running with no fundamentals whatsoever. Emily are you seeing anything that makes you uneasy, and if so, what . Olaf it is so emergent and so experimental. I think it is really good that money is flowing into things that are less sure. Emily not for the people who lose money. Olaf yeah, no, of course. Of course. I think my number one concern is people basically investing in things that they dont understand. This is complicated and esoteric technology. And i think that your kind of retail momandpop investor should be careful, particularly when they are investing in more experimental technologies outside of the bluechip cryptocurrencies like bitcoin and ethereum. Emily how long do you think it will be before we see more cryptocurrencies being offered . Olaf we will soon see dozens of crypto futures. Cory there is a stock flying through the roof with basically no financials. Some real frauds emerge. A Realty Income corporation traded at 50 million shares at 20 million violation two days ago. Basically the financials, the company that brought the ipo has censures against it from securities regulators, hundreds of thousands of dollars in fines. I dont think the people buying this dont have any idea of what the firms history is. They just want to get something near something blockchainy. And see it go up. Emily if there is some sort of crash or correction, how far out in is Something Like that . Olaf well, so if you kind of zoom out, cryptocurrency has been filled with these pretty massive corrections throughout its history. I think this is just a natural part of where there is a disparity between the number of people that see what feels like a somewhat inevitable future and then where the technology is. Cory bringing it back to the news of today, the trading of future contracts makes it less likely we will see downsides or any volatility because you will have shortsellers looking to cover the short position. You wont see those 20 corrections like we have seen in bitcoin many many times in the last couple of years. Emily we also dug into point coinbase this week as the company investigate allegations of Insider Trading on its platform. The alleged trading came hours before the Company Announced it would allow bitcoin cash. Meanwhile cryptocoins are gaining the attention of global institutions. Here is what bank of England Governor Mark carney have to say about bitcoin this week in london. It has increased significantly in value, but it is not connected to the core of the financial system. In general, it is not levered in orders of magnitude, it is less than the market cap, half the market cap of apple. If you have bitcoin and other major cryptocurrencies, it is that order of magnitude. It is more like an equity type risk type of spread around the world. Emily cory johnson joining us once again to wrap up all of this news is cryptocurrency. Cory this is the great fear of an unregulated market, which is someone will take advantage of that to do something illegal, or maybe not illegal, just really deceptive and take money from investors by taking the role of the market maker. It is the great fear for coinbase certainly and for anyone involved in this trading that the regulated trading we are used to that have investor protections built into it and centuries of investor protections built into it over time are not extant in the world of trading cryptocurrencies and someone could have jumped in and engaged in Insider Trading. Emily the fear is that coinbase employees are front running. Cory or someone. We know coinbase was being attacked by hackers. There were denial of service attacks across the industry. We dont know who couldve gotten into the systems. We dont know how the systems work. We know they are not regulated and are not monitored. I dont know if this gives a bad connotation. Anytime anyone uses regulation, in any context, we can at least think regulation exists as protection. The investor protections and the Market Monitoring that happens across most trading worlds, certainly the United States, doesnt happen with bitcoin. Emily so brian armstrong, the ceo of coin base, said they wont hesitate to fire anyone. There has been a lot of chatter about this. A Portfolio Manager tweeted, my own personal view that point base is a zero over the next three years doing sketchy stuff that will take them down in vuar. In a bust. That is strong. Cory it is strong. This is the issue. When you make a market, a fair and orderly market as the principle guiding rule and letting investors know they are going to get a fair and orderly market, no one is going to trade if they know they cant go anywhere else, number one, and they are going to get a bad price. The price is not fair. That could destroy the business of coinbase. This kind of reputational issue is extremely serious. Emily our bloomberg editor at large there, cory johnson. Still ahead, our exclusive interview with bank of america chairman and Ceo Brian Moynihan. Why he is skeptical about bitcoin. And a reminder all episodes of Bloomberg Technology are Live Streaming on twitter. Check us out, technology, weekdays at 5 00 in new york, 2 00 in san francisco. This is bloomberg. You are watching bloomberg. These are our first word headlines. Japanese inflation unexpectedly picked up in november, cork and similar prices increasing on a year earlier. That is less than half the rate targeted by the central bank and the doj governor has today admitted there is a long way to go and says he will continue to use powerful easing. Bitcoin bouncing back after warnings from financial authorities but elevated risks in cryptocurrencies. Israel has banned Companies Trading big one from the tel aviv stock exchange. The latest star wars movies led the north American Box Office this weekend, it topped 100 million for the second week in a row but sales were down 54 on its opening performance. A Box Office Guru says part of the fall is Christmas Eve on a sunday. We saw pressure on asian equities with hong kong and australia shut down tuesday. Linked to apple under pressure after concerns about how the iphone x will hold up with sales. In termsttle reaction of the inflation data out of japan as s p futures unchanged. U. S. Consumer confidence later on in the week with gold holding onto games. Gains. At 1. 1865. Urodollar not much of a change after the brief but dramatic slide on monday and fx price, the euro may rise your end if the german cpi figures come in strong. A live shot of downtown new york, a gorgeous site. Emily welcome back to the best of Bloomberg Technology. I am emily chang. Investment firms large and small are grappling with how technology can be used to disrupt the financial industry. And that includes bank of america. Under Ceo Brian Moynihan, the company has made strides in voicerecognition to improve the Banking Experience of their customers. Andat down with us discussed the transformation. Brian since ive been ceo, i had someone look this up the other day. We are about 25 billion in coding. So you start to think about that, that is a lot of future functionality improvements. The nature of this is about 2. 5 million a year. We are doing mergers. We are a technology company. We are a talented group of 200 something thousand teammates. And a bunch of huge ticket Computer Technology systems, and that is what we do. Ones and zeros, money is digital. The activity is digital, huge systems. Knitting that together is huge. For our customers and our teammates is huge. What will happen between the improvements in voicerecognition and Artificial Intelligence and data retrieval Wifi Networks being able to transmit on a wifi basis tons of data without the battery going down in 10 seconds, all of that together is important. Having all of the data in the world, unless the person is going to act on it as it, which requires the storage and retrieval of analytics and the distribution to an ipad in one of our branches, you have got to have it all come together. The advances are tremendous. And so i see that. When we think about erica, which is a voice activated, Artificial Intelligence agent [speaking simultaneously] brian working off the day, it will come out to the public in the next couple of quarters, but we think the next several questions will be answered quickly. But it is going to be, it takes high touch and hightech. We have a Million People coming into our branches everyday, we have to do a great job. We have many million mobile customers and digital, and we have to do a great job. A great job with erica in the build, we will interface alexa and the iterations here, but it is really using all the number one things is you have got to have the customer. Number two is you are investing far before to change the material. The digital wallets, apple pay, android pay, it is still a small percentage. It is growing. And someday a decade from now it will be a big number, but you have got to work, you have got to have it in order to make it go there. Zelle is tremendously important. It is growing 100 yearbyyear. It, but still, it is a minor amount of payments that go on in a consumers account, large because we dont know how to use it because we have got to help them use this. Tremendously great product for customers. We just have to drive it out there. So Technology Without that human adoption both from a teammate or not is important. We have investment lot, we will continue to invest in think of ourselves as a Technology Driven company. That requires us to invest in cyber to protect those assets, but when you put it all together at the end of the day, we are high touch and hightech. You cant do one without the other. 210,000 employees in bank of america, in five years, how many of your people will work here and how many will be tech people now . Is there a shift in the balance . Brian it is a little hard to say because there are 2000 more sales teammates from Third Quarter of 2017 while the headcount went down a few thousand people. And so as we downsize branches, we have upsized the number of people. Everybody is technology in the company, you have to be. If you go downstairs in the branch here, you will see they are working off of our ipads and doing what you can do yourself, because it is the fastest way to do it. So are they coding, no, but they are working on technology, working on algorithms, serving Customers Using technology. On the platform we have, automated rebalancing based on your risk perception, which is growing very quickly, it is a piece of technology, but people need to be behind it. They build it and also the answer questions about it because customers never appear they want to know exactly the right thing. They want to know, did i get this right . We have Financial Advisors any branches. In the branches. David you say money is ones and zeros. Does bitcoin have a future in bank of americas existence, and what is it . Brian you have to separate the question, think of all the different words, that is important and we have 37 patents already. We have to figure out ways to verify very complex transactions where a lot of information and money is moving together. When you talk about digital, one half of the money moving is moved digitally, one. One half. When you get to the anonymous currency, that is a different question, and that is a policy question of if we want an anonymous currency, the size and scale and scope. Then you see people struggle. Do you think we do . Brian i dont think so. The reason the 100 bill was to make money difficult to move through other than the verifiable system. I think that is a lesson for a a lot of economies have learned, the ability to find and track the money. It helps you find all kinds of interesting things, and that is important for Law Enforcement and other things. The speculation on what other people reflect on, you see great debates on it, but the idea of digitizing money is not new. The wire system, the aca system, but the question is what is exciting when you can walk around and go in shops for christmas and tap your phone or Something Like that as opposed to carrying dollars. Those are exciting things. If we get that last mile electronicfied, we can have money together, that takes the cake. At the end of the day with expenses, numbers next year, five of them will be going currency checks around the system. If i can take that down in a safe, verifiable ability to do it, know your customer amount, take that down, that is a valuable thing. We used to quote that we could ask them to destroy, we could pay them to print the money rather than cycle it in and out because it was cheaper to move it around. Emily that was bank of america Ceo Brian Moynihan speaking to bloombergs david westin. Disney and 21st century fox lost their bid to keep sensitive business documents out of the antitrust case that pits at t against the u. S. Justice department. Disney had sought to shield information relating to agreements with the company and fox have with paytv companies to distribute their programming as well as revenue from subscribers. They got 60 witnesses ahead of trial. This week, elon musk gave his phone number to his 16. 7 million twitter followers in what looked to be a message intended for john carmack, the cofounder of oculus. He said, do you have a second to talk, my cell is and wrote the digits. The tesla ceo quickly deleted the post. Meantime, tesla got big news this week. United Parcel Service has placed a reservation for 125 tesla semitrucks. That is the biggest preorder yet for the electric hauler for 2018. The new trucks will join upss existing alternative fuel fleet. Which is powered by electricity, natural gas, propane and other could nontraditional fuels. Earlier this year ups committed to growing its green fleet to reduce fossil fuel emissions 12 by 2025. Coming up, hong kong is revamping its ipo rules in order to lure a new group of companies to its exchange. Can they fix a situation like that can they prevent another situation like the alibaba listing . Amazon on track for another major milestone. For a u. S. Retailer, we will dive into their Growth Strategy over the next five years. This is bloomberg. Emily Softbanks Vision Fund is adding a fintech fund to its portfolio. Softbank is betting that tech can overhaul the Insurance Industry by leaving the 124 million round in new yorkbased lemonade, the company uses Artificial Intelligence and bot to minimize paperwork and speedup claims for renters and homeowners. Three years ago alibaba famously chose to list its ipo in the u. S. On the new york stock exchange, abandoning its plans to list in hong kong. Now the Hong Kong Stock Exchange is targeting the next alibaba by revamping its ipo rules. Hk exchanges ceo charles li sat down with bloomberg and said who they are trying to attract. Essentially, three key elements. One we are opening a new chapter of a bioTech Companies, so basically drawing some products that have not been approved. Of course they dont have any revenue yet. Rishaad but this is the thing where you said you are selling out because you are ending this profit requirement for a new ipo. Charles there is nothing required to have a profit. We already have a chapter 18, which is a mining company. There is no dispute there is value in there. But unless you build a railroad, you will not be able to sell your minerals. We do have prerevenue, preprofit concept today. Even in the main port today, you are able to list without a profit as long as you are big enough. But i think in this, in a new reform, bioTech Companies, there is a huge value that has been created in that space. And china is a massive healthcare market. So i think we really want to make sure we open for business for companies that are in the middle of, you know, Clinical Trials but not up to receiving approval to list. The three you are talking about. Charles do cost shares, the third is for companies that are already listed in the u. S. So u. S. Or u. K. Rishaad lets move to how this should improve your ipo pipeline. Do you expect me to be talking to you this Time Next Year and say, i have doubled the number of people coming . Charles we looked much broader than just the ipo market. Obviously, next year the ipo market next year will be transformative. Next year is going to be fundamentally different than what we have seen before. Thats great. In the end, we are trying to connect the market. We are trying to connect all markets, the Global Market with chinas market. We are also connecting chinese investors to, you know, global product. If we are able to introduce a complete new class of new economic, new economy companies, then our market is going to be fundamentally different. Coupled with the money coming from the north, that is to connect, and with the new economy, i think hong kong is going to be an explosive growth story for its financial market. Rishaad so when people want to come and list, they have got to be innovative. How do you define this . I am for it is complicated but in a nutshell. Charles in a nutshell we are not only thing you have to be at least new economy, meaning the technology, intellectual properties or whatever else. That in and of itself is not enough. We are going to publish a guidance letter that essentially trying to figure out why you particularly have to have this kind of a governance structure. Think of new economy as the definition and necessary condition. There are a lot of other factors we will be looking at. Emily that was charles li, hk exchanges chief executive speaking to bloombergs rishaad salamat. Still ahead, amazon could outdo its monster year. Why americas ecommerce game king could be on track to becoming the first u. S. Retailer to sell 1 trillion worth of products and services. Plus, espn is in need of new leadership after a shocking announcement. Just who will take the reins of the selfproclaimed worldwide leader in sports . That is next. This is bloomberg. Emily amazon had several milestones in 2017, including its share price hitting over 1000. The stock is up 54 for the year. The company could be on track to becoming the first u. S. Retailer to sell 1 trillion worth of products and services by 2025. This according to the latest report from Bloomberg Intelligence. We spoke with the analyst who wrote that report along with Michael Wolff, ceo of activate. Jitendra so if you look at the end markets that amazon can realistically target globally, excluding china, the size of the market is 10. 7 trillion today. Against that market where amazon is today, the Reference Point i would give you is if the Empire State Building was the market that amazon can target, amazon today is on the third floor, despite of the rapid growth of the last 25 years. What you end up seeing is that amazon, with its geographic expansion of prime, and their video strategy that they have, they will conquer a bigger portion of this empire, and the 1 trillion revenue seems very realistic if you look at the growth of the end markets they are participating in. Emily the third floor of the Empire State Building. Michael, would you agree with that . Michael i think they are higher than that. There are some reasons. Not justem is it is merchandise they are selling. A big piece is some of the other businesses, their Amazon Web Services which will continue to grow with the internet. They are going to be the one company that will challenge google and facebook in advertising. They have almost as many visitors in the United States as those two other companies. And then we look at it, amazon does not really release the numbers on the number of prime customers, but there is roughly 60 million prime customers. That is half of the u. S. Households. Nobody is even looking at the fact that they are likely to be able to raise prices on those customers. There is so many, so many tailwinds in terms of growth for this company that you could not be more excited about it. Emily jitendra, what do you think the biggest opportunities are . Jitendra if you look at what jeff bezos said a couple months ago, he was asked what could be the fourth pillar of amazon. He said alexa or video. Amazon studios. We think a video could be a very pivotal strategy for amazon because today amazon makes 90 of revenue only from five countries. Prime is available in six countries but prime video is available in 200, so what they want to do is make original content to bring in prime members to increase the engagement on the platform, get into the advertising business as well and probably down the line get into contentbased ecommerce. Emily hang on though. The head of Amazon Studios left after Sexual Harassment allegations. They havent had a huge hit this past year. You know, the main actor in transparent is gone. Where do you think the hits will come from . Jitendra they are hoping the new deals they said they signed up for, the lord of the rings, and regional deals in asia, india, and if you look at Consumer Service of why people are signing up for amazon prime, the number one reason is free shipping, and number two is video. It is becoming an important reason. Emily do you think video is as big an opportunity . Michael im not sure. They are spending a lot of money. They have got some shows. Like netflix, they are blowing a ton of money on this. Emily but netflix has had more success. Michael netflix has had more success. But there are other parts of amazon that people are ignoring or at least are not remembering. Twitch is a massive video platform. People forget twitch has tremendous amount of traffic and has been way under exploited. But video may be nothing more than a retention vehicle to get people to spend more time with the site and more with prime. And our activate forecast for 2018, we believe that speaker sales are going to peak next year, because you will have alexa built into every other device. So it is likely even though they are going to sell speakers, the price of those speakers is coming way down. Emily so jitendra, what do you think the main weaknesses are with amazon . Jitendra regulation is one, regulation, antitrust, but the bigger issue is because thirdparty sellers, the business is becoming bigger and bigger for amazon, the tax collection issue, that could be a problem. You have competition from walmart that could delay grocery plans or expansion in those areas. Competition and regulation are the top threats. Emily that was jitendra waal of Bloomberg Intelligence and Michael Wolff of activate. A surprising resignation shook up the Sports Entertainment world this week. John skipper has stepped down as the president of disney owned espn. In a statement, skipper said he has struggled with a substance addiction for years but has not provided specifics. A former espn president will take over as acting chairman on an interim basis. Since the news broke, bloomberg has learned disney will most likely look at to internal two internal candidates to replace skipper. Our media reporter lucas shaw joined us to discuss. Lucas i have spoken with a number of people at espn, people who do work for espn, everybody was very surprised by this. John skipper is one of the more candid and intelligent executives out there, not the kind of person you would expect to have a Substance Abuse problem. And there are people who worked very closely with him who had no idea that this was an issue. You know, there had been some rumors about his job security related to the performance of espn but nothing on a personal basis. You saw throughout the day a number of senior espn staffers, writers, tv hosts talk about what a great boss he had been and how supportive he had been. This came as a surprise. Emily all right, the timing is interesting, given what espn is grappling with. Who do you think might take over here . Lucas i would guess that the front runner is justin connolly. Who is the head of distribution, he oversees the relationships with paytv operators. They put george bodenheimer, a person who ran espn for a couple of times and is actually years younger than john skipper, back in charge for now. My guess is that is just a temporary thing. He left at the peak and probably doesnt want to have the stress of trying to fix some of espns problems. He is kind of like a comfortable placeholder that every body knows, who knows the business very well, knows the employees and everybody respects. That gives them time to figure out, do they want to hire someone internally, or do they want to go externally . I think connolly and shell may have gotten the job in two or three years when skipper was ready to retire and this move really forces their hand to try to figure it out a little bit sooner. Emily lets talk about the challenges facing espn. I sat down with bob iger a couple of months ago at the vanity fair new establishment summit and asked this question what his plans were for espn. Take a listen to what he had to say then. Bob espn is still a very, very healthy, very profitable business, one of our most profitable businesses. It has a stable of live sports that is licensed for a long period of time that is going to serve it extremely well that is serving it well today on a traditional platform. That is starting to serve it well on new platforms. And will serve it well for the foreseeable future. It is a product that is in demand. Emily that was an interview in may. Given this new twist, you know, how you think that impacts strategy Going Forward . Lucas the scary part about this timing for espn is they are in the middle of trying to build this Online Service that is the biggest new initiative at the company in a really long time. Espn is the most profitable Cable Network out there. Espn and fox news can probably fight for that crown. It has been the crown jewel at espn at disney for such a long time. It has just started to feel the effects of highlights being available across social media, of being able to watch live sports on amazon, on twitter. They are just trying to figure out how to reimagine that tv network while keeping the boat afloat. Emily all right. Emily that was bloombergs lucas shaw there. That does it for this edition of the best of Bloomberg Technology. We will bring you all the latest in tech throughout the week. Tune in each day 2 00 in san francisco. All episodes of bloomberg tech are livestreaming on twitter. You can check us out at technology weekdays. That is all for now. Have a wonderful holiday. This is bloomberg. Francine that bitcoin rallying as it seems under a fiveday slump. , the Russian Election commission refusing to register Opposition Leader as a president ial candidate while the kremlin says it is concerned the United States might expand sanctions. Y at apple as ifo projections show signs of lackluster demands. Welcome to bloomberg surveillance, tom keene and Francine Lacqua have the morning off. A quiet morning with which is no surprise. They have the nonessential employees. Looking at the bloomberg, a plethora of bitcoin stories, it seems to