Transcripts For BLOOMBERG Best Of Bloomberg Technology 20170506

Sandberg on the social Networks Earnings report ahead. And our extended sitdown with anthony noto about the companys latest media deal and capitalizing on trump. First to our lead. Apple shares dropped after reporting quarter earnings with iphone revenue falling short. The iphone has always been the moneymaker for the company, but sales were basically flat yearoveryear. Not terribly surprising, given the anticipation for the next launch in the fall, where we are expecting a big design overhaul. Apple also saying you generated also announcing it generated 7 billion in revenue on services, which is 18 growth from a year ago. This as the sectors ceo says he expects to double over the next four years. We spoke with our Bloomberg Contributor David Kirkpatrick and an analyst. David when you look at the quarter overall, it was fairly mixed. The one negative with the iphone numbers. But its one of those quarters where you can only put some so much emphasis on the iphone. You of course have that major launch later this year, and we think the entire myth here can the entire miss here can be attributed to the fact that consumers are holding off for the next generation iphone. So, overall, you are seeing a little bit of a hit on the stock price, but it is something we would look past. Emily i did speak with luca maestri, who talked up channel inventory. They sold 1. 2 million iphones worth of channel inventory, which if you consider those numbers, that brings the number slightly up. David, what is your take . David well, if i understand correctly, the sales outside of china actually grew, and cook said it is because they are seeing anticipation of future product a problem. Its amazing to me how in china they are even more status conscious and technology conscious than almost any other part of the world and they love apple even still. I would say take a big picture view. This is not that big of a deal. If this company can make the move to services and software, which is a big shift they have to make to get their multiple up, than they are going to have a wonderful future, and i think they will come out with a great phone. Emily lets talk about china. We saw a 14 yearoveryear decline. I talked to look a my street maestri about this, and he was saying they see a lot of positives, the bestselling smartphone in china is also doing extremely well, their services hitting an alltime record, and he also said that we expect our performance in china to continue to improve over the fiscal year. He said the second half of last year they saw a greater decline in the have seen so far in the first half of this year. Angelo, talk to us about whats happening in china and whether or not you are concerned. Angelo i think when it comes to china, consumers out there are more price sensitive. I think you have a lot more options these days coming out of china, given the emergence of many Device Manufacturers and the local china region. That being said, when you look at how apple has recently performed in the Mainland China region, they have done very well. Its more along the other areas of china like taiwan, among other areas, that have really taken the hit for apple in that business. But overall, at least it is performing better than it did earlier last year. Thats positive and we do think business starts returning to growth as you progress later into the year and start seeing aesthetic changes to the next generation. Emily overall you are also seeing a greater shift toward the larger sized iphone. Luca maestri pointed out that this is the first time the iphone has a dramatically different feature in the updated camera, and the fact that more customers are buying the bigger phone means the average selling price is going up. I want to talk about whats going on with capital. It was to the share buyback, boosted the capital return, but theres a lot of speculation about whether or not apple will bring cash back to the united states. 257 billion they has in cash overseas, and there is a big question about whats going on with the trump tax plan and whether or not that will impact apple. David, what are your thoughts on this . Well, i continue to be amazed that a company could be this big, this profitable, and have problems like they has. Like they have. I think they will need to be seen as patriotic, and if theres a chance to bring money back, they will do that. But to me, i would go back to what i said before. The real question, if i was an investor in apple, and i know some investors have been talking about this, is can they shift to be seen as more than just a device maker . Their multiple is so low compared to facebook and google, that they have got to find a way to change that delta. They dont even have to make a very big difference for their stockholders to see an incredible increase, even from this astonishing 700 billion market cap. Yes, they will bring money back. They have 250 billion to play with, its astonishing. But the bigger questions are longerterm. Emily coming up, twitter is rolling out serious plans to live stream content and news, music, and sports. Our extended interview with twitter ceo and interim cfo anthony noto, next. Plus, microsoft officially launches its laptop to battle google for classroom supremacy. We will discuss that later this hour. This is bloomberg. Emily a Spacex Falcon nine rocket successfully launched this monday, carrying a classified payload for the u. S. Military. As with previous lodges, the as with previous spacex launches, the rocket booster landed back on earth. They first accomplished this feat in december, 2015. Landing, refurbishing, and using rockets is a key to the companys longterm vision. Twitter wants to be the place to go for all your live video needs. On monday, the social Media Company announced it will be expanding its livestream import folio with new partnerships. Bloomberg news is among their partners. We spoke with anthony noto and asked about the work that has gone into making these deals happen. We have had two quarters of great success, and on the back of what we delivered in the First Quarter of 2017, we decided we will go all in, and push really hard with our partners to take on Live Streaming content to the next level across sports, news, entertainment. We will build significant audience and we are seeing great interactivity on twitter. Live makes us better at whats happening in gives us more comprehensive selection to drive more discussion and we can personalize it to the individual user. Its a perfect fit for twitter and we are delivering a unique experience. I think these deals are a real testament to the success we have with this product, great quality video and the best conversations. Emily lets talk about the ad strategy. What are the biggest Growth Opportunities and how do you scale . Its about the audience, what does the audience on twitter want . For years they have been talking about life events as they unfold and tv. What we wanted to do with this strategy is bring that strategy onto the screen and consolidate it. That drives more selection, more discussion, and the content is distributed even faster. We saw that the road the fall in 2017. We want to take it to the next level. We want to be the place where people see whats happening in sports, news, and entertainment. Esports. E sports these deals reflect the dependability. With bloomberg, we launched a 20 47 network in the fall, we are excited about that. It will strengthen both of our companies. And we also announced a sports network, live games, live analysis, live highlights. Emily during the Earnings Report, you said it would be a long road to revenue growth. When do you see turning revenue around . We dont, today, have visibility on revenue improving. That is based on a number of factors. We need advertisers to recognize the significant increase in live, much more attractive than it was months ago. Not only is our audience accelerating for the fourth consecutive quarter, but prices are down 60 . We need to grab them and get their attention so they see that. Part of today was making sure they understood how that significant improvement. The second part is how can they be a part of whats happening. We think we are unique in that. We also have an audience of influencers. As soon as brands can become whats happening. Emily lets talk about user growth. You added 9 million users last quarter. Where is that coming from . Is it coming from donald trump . We talked about two factors. The primary factor was the benefit from organic growth, and the second was product and marketing. Product has started to impact our growth to the last four quarters. It has been a long time since the has been the case. In the First Quarter the product improvement was the largest contribution that it has had in a very significant period of time. We cant causally say is newsworthy events are driving the growth because we dont have something to measure that, but we did analyze quarterly factors. Dr. Some correlated factors. There was an increase in new and resurrected users in accounts that follow news and politics, but beyond that it is hard to measure that specific impact. Emily is there any way to give us more color on whether it is the president using the platform itself, or his followers, greater engagement with the president himself. I would say product has been the consistent trend. We will continue to analyze the data. Listen twitter benefits when , influential people use our platform to tell whats happening. We encourage that, we love the discussion, we love the conversation that is happening. The more it happens, the better it will be. We would love it if every world leader used twitter as their primary mechanism to talk to their constituencies. Emily sources have told me you are like the soul of twitter right now. Obviously we know you have been , working very hard. Twitter is navigating some rough patches. How would you describe how you approach your job as coo and cfo . Explain this idea of being the soul of the company. The first thing i would say is that i love working with jack and the rest of the leadership team. We approach running the company as a team that is focused on specific priorities, and we divide and conquer. At the end of the day we divide up priorities amongst our team i wouldnt want to work with anyone else than what i working with right now, including jack. He is an inspiration. He stood up, no rehearsals, just delivered the heart and soul of twitter. I live and breathe every day to help his vision come to life. That is what made twitter so special these last years. Emily what is it like working with a guy that is ceo of another company . It can be daunting, and it can be inspiring. Jack is there for 100 of the decisions. He has insights and license to make decisions that none of us have. Its a powerful relationship to have with the company, and i think it has made us better in the last two years he has been at the helm. Emily on that note, we talk about the potential drawbacks. Are there any benefits that come with that . The media wants to ask us about having it. I dont ever think about it until the media asks me. When i have somebody talk when i have something to talk to jack about, we talk about it. We are together for 100 of the decisions and at the end of the day thats what the company is all about. Emily you are still looking for a cfo. Any progress . We are still looking. Once we have news we will share that with you. Emily ok. Twitter hired banks last fall to explore a sale. With the latest . The latest as we havent commented on that situation. The board understands their fiduciary duty. They understand the great progress. Four quarters of daily active users growth. I have been around the internet since 1998 and i have seen a lot of Companies Come and go. I can count on one hand the companies that have the deceleration that twitter did, then Theresa Lorraine then to resell a rate. And then to accelerate for four consecutive orders is an outstanding thing. Emily coming up, breathing easy for another quarter. Confirming a highly anticipated massmarket sedan is on track to begin production on time. And if you like bloomberg news, check us out on the radio. You can listen on the radio app, bloomberg. Com, and in the u. S. On sirius xm. , this is bloomberg. Emily a story we are watching, Hedge Fund Manager David Einhorn is putting a target on tesla, saying the markets are too optimistic about the companys prospects for expanding electric car sales. He also said stockholders put a irrational faith in ceo elon musk. Investors remain hypnotized by teslas ceo. The company will be able to massmarket volumes and margin that justified current valuations. The enthusiasm for tesla and other bubble stocks is 2000iscent of the march bubble. Emily but the bulls have reason to stay bullish with the latest Earnings Report at wednesday. Tesla says initial production of its highly anticipated model 3 is on track for july. Still, the Company Reported a bigger loss than expected in the First Quarter. We spoke with jamie butters in detroit, who covers tesla for bloomberg news. Of elon musk have a lot to be happy about. This is a company that so often has to delay product launches, and this time they are able to say, two months away, they are on track. They are going to go into production in july, get the 5000 per week this year, 10,000 per week next year. Suppliers are ready. A mod for them to be happy and excited about. But of course, its not the most explicit of Earnings Reports. The bears are waiting out. The shares are down, there is vagueness about guidance on the fullyear outlook, and why the spending was not as heavy as had been anticipated. A lot to chew on. Emily the model 3 will be the first massmarket car. You wonder if owners of the car will be as forgiving as owners of the model s or model x. In terms of quality expectations for the model3, how optimistic are you . Its paradoxical, right . Because you expect a 100,000 product, or any other product, to be much better than one that sells for half or a third of that. But i think there is this issue that when somebody buys a model 3, it might be there only car, whereas somebody who is buying a model s, they have other cars and they can hire a ride. Whereas some 30yearold who is barely able to buy a model 3, then, if it is in the shop, theyre really left out i dont know that they will be that much more judgmental, but they will be in deeper trouble if there are breakdowns. Emily lets talk about tesla compared to the other automakers. It is now the most valuable automaker by market cap. Are investors to optimistic about tesla, like einhorn said . Well, thats the beauty of the marketplace, right . They get to debate it out and they do it with their dollars. We still see about 20 of teslas flow shorted. There are a lot of people who agree with mr. Einhorn, that based on its fundamentals, it shouldnt be worth more than gm or ford. But it is all on this possibility, what he could bring, if the model 3 is a success, and if it builds beyond that in becomes a truly global maker of electric vehicles, and if it can do so profitably. Selling the model s and x, the Gross Profit Margins are pretty good. But can you do that when you are selling 50,000 and 30,000 cars . Will there really be an ongoing 100,000 unit market worldwide, even with china in the next . Is there going to be enough demand, year after year, decade after decade . That is the real test. But those who believe in it, this is like henry ford in 1915. If you could get in with him then, you totally what. Emily lets talk about cash burn. Is that a concern . Always. This quarter wasnt bad, they consumed about 600 million in cash, they raised 1. 2 billion. But elon musk had said they d need to spend about 200 billion to launch the model 3, before they started making it in full production. They only spent about half a billion, which may be 1. 5 billion may be some of the overhang causing anxiety and pushing the stock price down. Emily that was jamie butters with bloomberg news. Now to slack, whose ceo is going against the grain, saying the u. K. Will remain a key market, regardless of brexit. Stewart butterfield spoke exclusively with him in london ahead of the official opening of the u. K. Capital. He talked about why the company is laying down roots there. We have a lot of customers, and ones that i think most viewers in the u. K. Would recognize, retailers, retailers like losh, broadcasters like sky, sage software. We want to have a relationship with them and other customers yet to come on board. It is much easier to physically be here. A sales lead office with Customer Success teams. Were still going to grow. One of the things we see a lot of techs do is base themselves in ireland. We have had a lot of conversations and stories about companies considering other countries around the european union. Did you consider that . Did you consider ireland . We already have a pretty large office in dublin can have for about a year and a half. We are continuing to grow their. There. Eventually we will open offices on the continent, just because we have offices in every country in europe at this point. We have seven offices in five countries around the world, and we will be spreading at a good clip over the next 18 months or so. One of the topics there has been a lot of discussion about over the last 100 days or so is hiring in talent under the trump administration. Im curious, is that something that has been affecting you, or that you will have to think more carefully about over the coming months and years . We started off with an office in San Francisco and vancouver, canada. Vancouver is a great city for a large u. S. Tech companies having trouble bringing people in, they bring them to vancouver. That has been part of our stop share from the beginning. It has had less of an impact for us. We also have offices in dublin, as i mentioned, mahlberg, toronto. The immigration issues people who work at slack as citizens are more concerned than r. I. M as the chief it than i am as chief executive of the company, there is an air of uncertainty when it comes to trade policy, tax policy, immigration. In that context they can be difficult for businesses to make decisions. There is obviously also luckily, Communications Software will be needed either way. Emily that was stewart butterfield, ceo of slack. One disclosure, the Venture Capital arm of bloomberg lp is an investor in slack. A story we are watching, facebook is stepping up its review of controversial videos, including videos per train crime in suicide, this after recent murders in cleveland and thailand were both posted on the site. Mark zuckerberg said the company will hire an additional 3000 workers on top of the 4500 reviewers already employed. Facebook has been criticized for not doing enough to prevent such videos from spreading. We spoke with the facebook ceo after earnings came out wednesday. Sandberg says the social network doesnt take crime or fake news lightly. We havent seen impact on revenue, but we take all of these issues seriously. We know people want accurate news on facebook, and we have announced a number of steps, including disrupting the economic incentives and stopping the spread of false news. We take this seriously. Emily we will bring you more of my interview with Sheryl Sandberg ahead, along with a full breakdown of facebook earnings. Plus, square hit the sweet spot with earnings this week, but is it sustainable . We will hear from sarah friers, the cfo of square next. , and a reminder that all episodes of Bloomberg Technology are streaming live on twitter. Check it out. With days, 5 p. M. In San Francisco. This is bloomberg. Emily welcome back to the best of Bloomberg Technology. On emily chang. This week, facebook try to timber enthusiasm about and growth. We spoke to coo Sheryl Sandberg who said this about ad load. We carefully track the impact of ads on the user experience. We have been doing that the last several years. We said it from a few years ago when we been able to do this by improving the quality and relevance of the ads. We are continuing to improve that ad quality and relevance. Emily ad Earnings Report showed a strong user base and the social network now has 1. 49 billion users and they could hit 2 billion total users by next quarter. We spoke with deborah Hall Williamson who specializes in the demographics of social users. Every quarter it seems like facebook has another quote great quarter and its kind of hard to see where there might be problems. The revenue never looks great, the user number looks great and theres a lot of momentum at facebook. By the same token, you just mentioned Sheryl Sandbergs comments about ad load. We heard about this for some time and what its really starting to show is that facebook is looking for revenue. The newsfeed has been its main source of revenue. Emily the next act might be instagram, facebooks next facebook. 700 million users. Take a listen to what Sheryl Sandberg had to say. Instagram is a very important mobile ad platform. And we are seeing strong growth in the increasing visualization of ads is part of why ads on instagram are so appealing. And the fact that you can buy them the facebook ad system on facebook, on instagram, the same targeting a measurement gives that platform a lot of ability to deliver results for marketers. I think its early, but we are also seeing advertisers pretty excited about ads in stories, which has a heavy visualization and a nice ability to reach people. Emily that said, they still dont breakout instagram revenue, which makes you wonder why not . At what point does instagram meaningfully contribute to this, to the point that they are willing to show us the numbers . I think its already meaningfully contributing to facebooks revenue. Our forecast is that instagram will have 4 billion in net revenue and thats going to be over 1 10 of facebooks total we have a number of 36 billion for facebook and revenue. Its already a big contributor. Its probably not the reason why they are not sharing the exact numbers area i do think instagram is a really interesting platform for marketers. They are still really intrigued and they really want to learn more about how to reach the youth audience that is so prominent on instagram. Emily they are experimenting with different forms of video advertising, take a look at what sandberg had to say about that. We are the testing phases of outbreaks and we are excited to be testing them. Its going well so far, but its early days we will see. Emily Mark Zuckerberg has been against preroll ads, but midroll lands like a commercial on television. How optimistic are you for a future source of revenue in that . Midroll ads and preroll ads have been really successful for other platforms like youtube. It makes a lot of sense for facebook to get involved in midroll. I agree that preroll is not the right format for facebook, but if you like us facebook starts to roll out more video programming within its platform, including advertising within it, i think advertisers are going to be very intrigued by it. Advertisers want to find new places to spend those dollars and i think facebook will probably benefit. Emily that was an emarketer and principal analyst. Square climbed over 9 to an intraday record after a reported firstquarter results this week. The company run by twitters jack dorsey wound larger merchants and impressed with options like caviar and instant deposit. Some analysts are skeptical about longterm growth, debating whether there is more upside. I think theres a lot of Growth Drivers in front of us right now. I never went under sell the core. What we do in terms of Small Businesses, merchants coming onto the Payment System for the first time. Still a ton of opportunity. 20 million Small Businesses and in countries like the u. K. Was in the same thing coming too. The product is resonating with larger businesses, international. We are in five countries in total. And then finally the other products we built are starting to really gain a lot of momentum. Capital, caviar, etc. Emily what have you learned from your lunch in the u. K. In the midst of brexit . We love the u. K. Market, 5. 5 million Small Businesses, incredible revenue is the lifeblood of that economy. What we see is similar to the u. S. , half of them dont in terms, its the same Value Proposition in the u. S. We watched with a really full vascular products. Not just payments and pointofsale, but invoices, and the whole platform, so you can be offline and online. Is your different to us to come to a market so fully featured from the getgo and what were learning is that now we are seeing businesses of all sizes coming to square right from the beginning. Emily what are the biggest risk factors with International Expansion . Its about making sure we can maintain our culture and the brand we have built so strongly in the u. S. , because you need to make sure that culture is staying quite strong. Every market is different, so while you want a strong maintaining of the culture and the value and so on, you also have to find International Markets to be a little different. I was in australia this quarter and the Australian Market leans more into being more quirky and funny and competitive and how they brand. Something we wouldnt do here in the u. S. That are more comfortable doing in australia. We have to allow our country managers leeway to do what they think is right to really grow the market. Emily how far upmarket does square want to go . We know you experimented with starbucks, that is now off the table. Would you ever get back to Something Like that . I do not think we view it at a point where we could not go further. The key is making sure we do it much more in a methodical way, upmarket. It seems like bigger customers like the small guys come to us. The brand resonates. The key is making sure that we are not customizing software for bigger companies. This is where the api platform comes into its own. If you are a bigger merchant and want to do something innovative and new with your checkout, northface is a great example at a ski resort, square can work really well for you. But we need to allow them to work back into their system because they cannot rip and replace all at once. Square, we not quite at that scale yet. Emily that was square cfo sarah frier. The New York Times says the First Quarter was the best ever for subscriber growth. The paper said it added a net 3008 digital subscriptions, continuing momentum from the devious quarter the previous quarter. It focuses on reaching younger readers. With online version of like spotify or joining the discovery platform. We speak with microsofts yusuf mehdi on microsofts fight for the classroom. This is bloomberg. Emily is a serious bidding battle for straight best medications. Verizon offered a takeover proposal, giving at t three days to match the new offer. Losing this would be a big blow to at t and Straight Path is one of the biggest holders of spectrum approved for fifthgeneration use and at t is eager to use those airwaves to build the leading 5g network. Back to school for microsoft, the behemoth has announced the Service Laptop is aimed at College Students loyal staff will come the devices of archers computer tablet hybrid. Bloomberg tech got a sneak peek at the new device, take a look. This is the new microsoft Service Laptop. We got an exclusive sneak peak of the computer at the companys washington headquarters. This laptop could shake up the market with its 990 price point makes with new technologies in a cool new look. Its lighter than a macbook air coming in at 2. 76 pounds. Its also draped in durable fabric you normally find in highend cars. Theres even battery life that beats macbook air. We dont want to worry about battery life. It has a new operating system, windows 10 s, and a nod to the mercedes s class. Its optimized for the new device, and microsoft says it wont load on the computer overtime. If you are from a dead power down, it will turn on right away. It has detachable keyboards and the surface laptop is microsofts first pure laptop. Users have a lot of options. You can boss around cortana, it has a touchscreen. If you have a surface pen, you can use it. The mouse turns off, its bluetoothbased it integrates with your product and you are right into the mode you want to be in. Emily that was mark rubin. Joining me is yusuf mehdi. Tell me about this new laptop. Why do you think it could take on chrome book . One of the things we are excited about with Microsoft Education is a couple new things. A new version of windows is designed to be more streamlined, simple, and give you better performance. Its called windows 10 s. A range of new devices from partners, starting out at 189 with an hp stream, giving you things like pen touch inc. And the ability to run minecraft. And further up, its the perfect balance of personalization and performance in a 14. 5 hour, 2. 5 pound form factor. Emily windows 10 doesnt have all of windows as you know it. You can do things like vr, 3d, pen and ink, but also the apps that come from the store, but none of the drawbacks of chromebooks. You get to work offline. You get full office. You get the ability to run minecraft. You get rich experiences. Thats how it sets us apart. I think it leapfrogs the chrome book. Emily do you think you can get a share of the apple market . I think it has better value and battery life than any mac. It is faster and thinner. The combination of all those things with windows, it is very differentiating. Emily apple fans might say they are not so fond of the features of windows 10s. What do you say to those people . The good thing is, with competition you can choose. Apple makes great products. We admire that. With windows 10s, you can do things you cannot do on other products. Virtual reality is really happening on windows. The 3d capability, if you like touch, if you like pen, these are unique. Emily surface sales declined considerably. What is the hardware strategy . A couple fold. Surface creates new categories of computing. What we want to do is grow the overall windows ecosystem. Hp, dell, lenovo. The last year, weve grown share because of surface. The last quarter we have seen more price competition. We are in the middle of a transition. The surface laptop is new today. You might expect to see an update to surface pro four coming soon. Emily the ceo of microsoft said cloud first. Cloud seems to be going really well. Give me the progress on mobile first. We are all in on mobile in the sense that all of our software will run on any device you own. You own. Office will run on iphone and android. Minecraft will run on iphone and android. We embrace the world as we see it today, which is that people use multiple devices and use windows pcs, laptops, and notebooks. Emily windows 10, give us an update. Its been doing great. Its been many months since we reported we had over 400 million monthly active, 300 million plus use it every day. For three and a half hours. It is the fastest adoption incorporations ever seen, and we are seeing great deployment. New applications coming. We couldnt be more thrilled. Emily yusuf mehdi, thank you. Still ahead, the social capital founders take on everything from President Trump to embattled uber ceo. Emily a story we are watching, it looks like jared kushner, President Trumps top adviser and soninlaw, omitted a few items in his government disclosure forms, namely his stake in a real estate tech company. He admitted his stake in cadre, which has ties to Goldman Sachs and investor george soros. An Attorney Says the revised version will be made available once ethics officials have looked into it. Social capital founder and ceo Chamath Palihapitiya is one of silicon valleys most candid tech leaders. We spoke with him to get his take on some of the top tech headlines. I asked him about concerns about trumps policies. Its really not the policies, but the unintended consequences, and specifically what i think is scary is about what the longterm impact to Human Capital are in the u. S. If i had to use a sports analogy, if your job is to win a championship, you try to draft and recruit from free agency the absolute single best players in every position you can, put them on the field or the court to win. Similarly, the united states, up until recently, has been that equivalent for Human Capital. If you were very good or really good at anything, you wanted to come here. The early data is starting to show signals that is changing. I think that is bad. That is irrespective of any ideology. We want the smartest and best people here working on behalf of americans in america. Anything that impacts that has longterm negative consequences to gdp and value creation. Emily how is he impacting venturecapital so far . On that Human Capital so far, we are seeing businesses having a terrible difficulty recruiting people. That means wage inflation, which doesnt really add anything, because you are burning money without incremental productivity. Two, you are starting to see competitive businesses be creative in increasing velocity outside the u. S. , in canada, and china, and india. That is generally bad if you think about businesses that could theoretically be built here, where the value is then captured within the u. S. Emily do you think the u. S. Could lose i think it is losing it. We saw a report today that said mba programs, they have seen the most market decline in applications from foreign applicants. In the short term, that might be good, but in the long term, the reality is there are some free agents we should be poaching from other countries and putting them on our team. Emily you spent a lot of time with Mark Zuckerberg in the early years navigating rough times at facebook. As the company matured, do you see parallels with whats going on with uber and Travis Kalanick . Its hard to know because im not in the situation at uber. But heres what i will tell you about facebook. In those moments where we pushed certain boundaries and the way we build and design certain products, or how we were exploring the consequences and reach of privacy, and we had hands slapped or we learned things, we internalized the cost benefits and the tradeoff of the potential of what we wanted to build, and the impact of that to humanity versus taking a methodical approach. Since then, i have to say facebook has been basically flawless. I think the opportunity for them to realize that their ego is not as important as the impact. The minute you make that transition, theres just a different caliber of individual, particularly at senior ranks, that you will attract and will want to work with you on those. Those kind of problems. It seems from the outside, there are early signals that transition is happening. I hope its working. The Human Potential impact of uber is undeniable. Emily what are your recommendations to travis specifically . In your position outside the boiler room, as an observer. I think that when you are in a company that is that iconic and unique, the biggest thing you have to do is become a lot more introspective, and inside out validated. When stars and famous people and rich people and ceos call you and want to spend time with you, and take you out to invite you to things, all this external validation that makes you feel important, you have to ignore it. In fact, you have to run away from it. You have to spend time with engineers in the boiler room of making the product every day. When you strip yourself of the outside validation, you learn to validate yourself inside out. Im not saying he hasnt done that, but what i will tell you is if you can make that transition, you can become an extremely powerful ceo. I think mark is an example. Emily my colleague compared uber to airbnb. I will put the question to you like this uber or airbnb . If you had to pick a more natural monopoly with Pricing Power at scale, i think it is airbnb. Uber is a fundamental consumer surplus business where there is still risk that the entire Business Model is above cost of about cost of capital. In the world of autonomy, what you have is the ability for new entrants with huge Balance Sheets google, apple, facebook, companies you never would have imagined competing with you, could because its a function of having enough money to buy another Autonomous Cars because you already have the customer reach. You can then model the demand well. In a market like that, there is potentially value erosion over time, because you have more players, not less. In the case of airbnb, what they have to navigate is costeffective Customer Acquisition at scale. Instead of having many problems and many potential competitors, airbnb has to solve internal capability issues. If they solve that, it is probably the next Massive Company to come out of silicon valley. Emily you are bullish on amazon, and you spend a lot of time at facebook. Amazon or facebook . You have to find eventually fundamentally be in the largest most unconstrained market possible. When you look at the world where dollars are spent, advertising is a 200 billion plus market. It has created 1. 1 trillion value between facebook and google. Its incredible. Emily but facebook is running out of space to put its ads. But at the end of the day, the thing that is fundamentally unconstrained is consumption by consumers. Wherever there are people making more money than they spend, they will find a way to allocate left over to buying things. To the extent that buying things is the most important part of gdp in america, and usually in most developed nations, so the company that dominates selling you things you want to buy will probably be the largest thing in the world. I would have to pick amazon. Emily that does it for this edition of the best of Bloomberg Technology. Next week, were taking the show on the road to boston, broadcasting from different locations every day. We will have an exciting lineup of guests, including exclusive interviews with marty walsh, charlie baker, harvard president drew faust, and general electrics ceo. Thats all for now. This is bloomberg. Coming up on bloomberg best, the stories that shaped the week in business around the world. The fed meets, but doesnt move. Brexit talks take a tougher tone and President Trump tells bloomberg what is on his mind breaking up the big banks. He gave us a sense there is a decision or something eminent in terms of handling wall street. Money managers talk exquisitely about their business. Were seeing money come out of active management heading towards passive structures. Give me a sense of what you learned from valeant . It is very expensive