Transcripts For BLOOMBERG Bloomberg West 20140102

Can Ceo Reed Hastings do to keep the momentum going . A massive snowstorm is west butng the mid businesses hoping to stay ahead with new smart files. A problem that will not vanish anytime soon for snapchat. Hackers broke into a database and swiped 4. 6 million user names and phone numbers. The information was published on redditt. The site was later taken down. In august, they were warned that they were vulnerable. At butched out to snapch have not yet heard back. Is aar to talk about it security and private researcher at the American Civil Liberties union. He is in washington, d. C. Joining us from cleveland is the ceo of tusted sec. This is a bad incident primarily because users are using the service because they think the company protects their privacy and security, but they has learned that snapchat taken a cavalier approach to their User Security and data. This should cause every user to question the entire purpose of the service. Securityes snapchats compared to other companies . Companies respond to the requests of security researchers , disclose them, and many of them even pay fees to researchers who report things in the right way. In contrast, snapchat ignored a report by security researchers. Ofit seemed like these kinds things are happening over and over again. Is there anything that users can do to protect themselves . When you are using a site you are depending on the security around the website and the protection mechanisms they have in place. Twitter and facebook has a lot of security features and snapchat is just becoming popular. The fact that it was ignored since august is alarming. But i do not think this is the end of snapchat. They will learn from this, but it does look really sloppy for how they handled this overall instant. I know several people who were on the list, and even though it had been taken down, it was republished. What can snapchat do to fix this , to make sure Something Like this does not happen again . The cat is out of the bag in terms of the data out there now. The real question is whether snapchat will overhaul its approach to security and respond in a meaningful way to the reports of security researchers in the future. The company did not take those reports seriously tom and they need to engage in some soul searching to figure out what went wrong and address issues like this in the future. Did put out a blog post alluding to the possibility that this could be an issue. David, what is your take on their response, acknowledging this can happen, yet, they say they have added additional safeguards, but it happened anyway. I would be really wary. The type of exposure identified look at they had access to the backend database which is running the application. When you have that level of access, i would be cautious about believing what they say ahead of time. Maybe give them some time to digest what happened, and to strengthen their security. This is a problem for a lot of applications. Only two days into 2014 and skype with microsoft was preached. This is a big problem that we are facing. It will be a big problem in 2014. David, as you mentioned, this happens every so often. It happened with yahoo , so what can companies and users do other than not using these websites . The main emphasis of these corporations need to be protecting customer information. It needs to focus on two areas where hackers focus on. Otherplications and things. These to be a call to action to focus on web application security. All of these things that hackers do our years old. These vulnerabilities are 15 years old. It is just programming things the right way to stop them from happening. 2014, call to action on web applications. Chris, you are one of the first experts at the ftc advising on privacy issues. What would be some of your advice today . So,f snapchat has not done they wanted to hire some good lawyers, an investigation by the state attorney generals, and perhaps a few classaction lawsuits. They will need to up their security game and see the advice of highly qualified legal counsel. Thank you so much for weighing in on the subject. Omething we will continue to cover. Another Security Breach we have been talking about is target. Lawmakers want to ask questions about the data breach that may have compromised 40 million accounts. We are in washington. What are senators hoping to get out of this hearing . It was only a matter of time before congress turned its attention to the credit card breach and now Senate Banking Committee Members robert menendez, chuck schumer, and mark warner have called on Committee Leadership to hold a hearing as soon as reasonably possible on the safety of Consumer Financial data. The point of the hearing, does Congress Need to pass tougher Cyber Security rules . Senators want to examine whether Market Participants are taking appropriate actions to safeguard consumer data against fraud and identity theft, and specifically in targets case, how did hackers penetrate their system, and why did it last more than two weeks . No date on when the hearing might be. The senate is out of session until january 6. What kind of power does congress have in this space, or is it more of a public grilling . Expect to lawmakers make an example out of target but what is less clear is what congress will be able to do. As you know, they had little luck passing any cybersecurity reforms. This latest letter to the Banking Committee urges the federal trade commission to investigate the breach. Standing outside of a target store last week, senator menendez said they need to know if the ftc has the teeth to hold retailers accountable with fines and penalties. He has suggested they drafted legislation to give the ftc that power. The u. S. Trails other countries in switching from magnetic credit card strips to embedded chips that are harder to compromise. The current target for switching over is not until the year 2020, so we could see that sped up in mind of the breach. There are a few Options Congress can take without tackling the bigger issue of cybersecurity. In the meantime, we will be waiting for hearings like the one being called for and those ongoing investigations. Thank you so much for that update. They have warned riders about higher prices this year, but it did not stop the backlash over its surge in pricing see pricing policy. You can also watch us streaming on your tablet, phone, and on bloomberg. Com. To bloombergk west. Im emily chang. Read 433eessen did not months but he has been bigtime in the new year. Year,rst tweet this hello, is this on . He also called 2013 the best year in Human History and talked about education. Of course, we will keep monitoring his account, looking to more entertaining tweets. Has come under a lot of fire lately with its pricing policy where customers are charged more when demand is higher. That led the ceo to warn users ahead of new years eve that they would have to pay more for a ride home during peak hours, but the complaints are rolling in on twitter. Matt miller is following the story from new york. Uber warned passengers in advance that raising would be in effect. You do have to agree to search pricing before you take a ride. Is this unfair . Not at all. I would question the intelligence of people who are concerned about this, although i think people are intelligent in different ways, so i will not do so. It tells you on the screen the exact amount. That you will experience on the right you are about to take. You have to not only agree to it, but you have to type in the. Umber so that you are aware unless you are a robot, you have to process this information before you get in the car and agreed to pay the fare. If you have an issue with that, why wouldnt you travel in a different way . I went out on new years eve, taxis, the car service we have here at bloomberg, and i paid for all of those things. Wasing full well that uber doing search pricing, i took different modes of transportation. I do not know why it is hard to make those decisions, or that you can regret something you agreed to doing ahead of time anyway. It does not make much sense to me at all. Prices were definitely cheaper if you hold the different people across the other applications, other than uber. Why cant uber consider Something Like that, capping the price as opposed to the usual price . The great thing about the lyft policy is that the extra charge goes directly to the driver. Or problem is not that uber that its new competitors you searching, but the problem is that not everyone uses search pricing. If all modes of transportation we used had surge pricing, it would drive up the supply of people willing to drive in those times and drive down the demand of people willing to pay money to take that kind of transportation. Surge pricing that you would get than be 1. 1, 1. 2, rather three times or seven times. If everyone used this economic model, things would work out a lot better. Uber has been tweeting back at some of these complaining passengers. I would not quite call them apologies because they basically say, we warned you. Do you think there is a tone deafness coming from uber . This is a real sticker shock when you look at these receipts. No. You do not get the shock when you get the receipt, you see it before you book the car. I saw one guy saying he was an mba, from harvard, whatever. There are other modes of transportation in boston to take advantage of. You do not have to use uber just because it is cool and then get angry because you paid a price that you agreed upon but then decided was too high the next day. Certainly another story that we will follow in 2014. Thank you. Cards turned into a house of cash for netflix. Welcome back. Netflix is coming off of a better year in 2013. What does it do for an encore . Jon erlichman is in l with todays new hollywood. Netflix will be spending a lot in 2014. Absolutely. If you think about 2013, it was the year where they focused on the brand. They like to position themselves as one that people will gravitate towards. You may not need netflix, but we will give you a lot of reasons why you will. That with thew rollout of those original series, like house of cards. There is stuff here that you can get that you cannot get anywhere else. And as they introduced new pricing tiers, they are sending the message this is not an all youcaneat buffet at one price. Because we have this exclusive content, if you are watching at home with multiple viewers, there will be some different pricing packages. Of course, making this your focus is not cheap. As they continue with this in 2014, there are spinning big spending plans. The company has talked about the content cost being 3 billion dollars or so. Half 1 million in marketing cost as they continue to grow. And then they continue to spend on the technology. It is ease of use that generally makes people adopt products like what netflix is offering. Netflix has always been pretty brazen about talking about its competition, addressing the competition. Who are the big rivals this year, is it still hbos . The company likes to present hbo as its largest rival. Some say it is netflix versus the cable industry. Becausetalks about hbo hbo continue to do what netflix is doing now, this idea of getting it loose of content. Amazon and hulu will continue to be a part of the conversation in terms of the new Media Players to watch. They are spending so much to build their business around the world, you have to think about competing services in other markets. Now tv in the u. K. That is where there could be some more competitive battles in 2014. Thank you. So what do people behind the cameras think of the netflix strategy . Filmmaker ken burns says he loves the access to the content it provides, but is he happy about his films being on netflix . Take a listen. My traditional platform has been, for 30 years, distribution on pbs, which reaches the largest number of eyeballs. Every kid in america when i grew up had memorized the primetime schedule. Now we have hundreds of choices. We cannot possibly memorize and have appointment tv. I am thrilled with the access, thrilled with the idea that i can fly across the country and watch episodes of house of and that is terrific. Finally we yielded to the idea that the customer is king, not the programmer. This is liberating. We have been convinced sort out that it works. Everything is in flux. Modelis not really the that sends us into the future with any real confidence the way that we used to. Now we are in a new area in which the middleman rates the lines share. There are too many middlemen getting too much stuff on the cheap. Netflix is going to make a deal with pbs and we get a larger share of that because we are the most watched of the pbs shows, butg with downton abbey, it does not completely offset what the old hardcopy sales represented. There is a coming struggle. When those United Artists get together, as they did early on in the old hollywood system, what will happen . That will be an interesting turn of events, when the folks who are there say, this is not as good for us as it is for the people who are not doing anything other than pressing send. Documentary filmmaker ken burns, talking about netflix and tensions to come. It is time for on the markets. York. Get back to new first day of trading for the year. How is it looking . It is a little bit lower. You potentially have this the first day of the year, where you have things from last year reversed. Somont mining is up today, you can see the reversal happening after that record setting year for the snp and the dow, both closing and records. A big mover today. They were cut over at cowan. Sprints bidthat for tmobile is not likely to get government approval without making significant adjustments to divestitures. We are back in two minute. This is the Early Edition of bloomberg west. Im emily chang. Headlines. Erg top december was a big month for u. S. Manufacturing. It expanded at the second fastest pace in more than two years according to the institute of supply management. An increase in Construction Spending helped fuel the gains. 30 people have been killed after a bus plunged into a gorge in western india. Police say the bus hit a truck, causing the driver to lose control. India has the worlds deadliest roads with more than 100,000 killed in crashes annually. The 52 passengers aboard the russian ship stock on their ship in ice have been rescued. The russian crewmembers will remain on a chinese ship in antarctica until the ice breaks up. A blizzard warning has been issued in the areas of the northeast as a powerful winter storm approaches the region. Prepare for the storm which is expected to blanket some areas with as much as one foot of snow, officials are turning to technology. Michigan, minnesota, nevada, and new york will be deploying smart piles that will measure weather conditions and will help to prevent accidents and save millions in maintenance costs. What can we know about how this Technology Works . There is Sensor Technology that can detect the weather conditions mile by mile. If you are talking about a crew plowing roads, getting the information to them is what is most important. Once they have an idea of the conditions they will face, they can do a more effective job in terms of clearing the roads and salting the roads. , talking tooiled you from sunny san francisco, but can you talk about the forecast, what does it look like tomorrow . It is turning colder here in new york. The windchill factor is already in the single digits. Around it will go to zero. Looking at negative temperatures into tomorrow. The bitter cold comes in tomorrow night. Boston has a foot of snow in their forecast, so imagine how brutal it will be. Out on long island, it will feel like negative six. In greenwich, connecticut, it will feel like negative one tonight. I want to talk about what else is happening. A lot of snow coming in tonight. You can see this moisture coming into cold air. When a storm gets as big as this one, airlines are affected. Its take a look at some of the cancellations we have seen so far into chicago, quite a bit. 190 flights canceled. Cleveland and newark have also canceled flights. Airports will get worse tonight. How much snow are we looking at . It depends on where you are. Areas into eastern massachusetts will see the most of it. That is where we have a blizzard warning. In terms of the heaviest snow, eastern Plymouth County as well as cape cod. It will be a blowing, drifting snow event. San francisco is a Perfect Place to be. You will not be contending with this, that is for sure. Thank you so much, meteorologist donnie schneider. Tech start ups have seen the incredible runup in valuations in the last year. All raising funding and multibilliondollar valuations. This before most have notable sources of revenue. So are these valuations cause for concern . Alescine and cristina took the question to former paypal ceo william harris. He now runs Digital Wealth Management Firm personal capital. His thoughts and whether we are seeing a tech bubble. It is getting frothy, but it is different from 1990. It is not as extreme, first of all. Second, the increase in 1999 was all tech, on the nasdaq. They went up three times the rest of the market. Today it is broadbased. About the weather and all the Digital Technology we have. Digital is everywhere. Where is your red flag on digital . It is real, the whole thing. Just think about this one thing. How much time do you spend with people while they are looking at their phone . It is constant. The world has changed. Changed, buthas what is the singular biggest risk to sing Silicon Valley enthusiasm . Overestimating the impact of social media. The valuations are so incredibly high and they have yet to come into their economics. What about the infrastructure . We had a conversation about this , linking in, like oil pipelines, the Cisco Systems of the world, into your programs. What about the infrastructure . Think the infrastructure is coming along fine. Particularly, people trying to innovate, it is so much easier to innovate today. You can get it up and running in a heartbeat. Think of it as the fixit for your cars. Saving you money on the roads. You can also watch us streaming on your tablet, phone, and on bloomberg. Com. This is the Early Edition of bloomberg west, im emily chang. Is cutting the price of its motorola phone to 390 nine dollars without a contract, down from 400. The metronome plugs into your car to collect gas mileage time spent commuting, how the engine is running, all viewable on your fitbit application. This allows users to pay for insurance by the mile. Metromiles ceo is with me now. How exactly does this work . Our goal is to make any car into a connected smart card. We do that pride running this device called the metronome. It is only contained. It plugs into the diagnostic port underneath your and it uses that as a power source and pulls the data from your car and it connects to the servers. Car made after 1996 has this. It is easy to find. It automatically connects and you are off and running. What kind of information can this give me . Here is the app on and off both him on an iphone. For thatee the miles trip, fuel efficiency, the cost of gas, and then you can see all of the trending data as well, how much you are spending on a weekly or monthly basis. It is designed to help answer questions like what is the best time to leave for my commute, how much time and money did i save . What can i do to change the way i am driving to change improve my gas mileage . Can it tell you what is wrong with your car . Those light in your dashboard are so annoying. There is a light on and is pulling up the code. It can tell you what that means. In this case, your gas cap was not secured properly. Metronome and the app is available in washington, oregon, and california. We have another product that we developed as well, available in oregon and washington. Innovation and cars takes forever, it seems. The lifecycle of a car is so long. Google is working on self driving cars, apple talking about cars, automakers. Where do you see the smart car going . What are cars going to be able to do in the future . There are 250 million cars on the road today. Forshould not have to wait the next 80,000 to be able to take advantage of that information in those cars. That is one of the things we are trying to do, give people the ability with a free device to plug into your car, get that information, and look at what we can do to tip the balance of power in favor of the consumer and give them control over those services they need to operate that car. Where do you think the innovation will come from, the automakers, apple or google, or from independent Companies Like yours . One of the things we saw with the mobile revolution was walled gardens do not work. With a lot of the auto manufacturers, they are building walled gardens around connected services for their cars. We want to make it available for everyone. Example, how can we change the way that those systems are delivered . When you turn off your lights, do you pay for electricity . No, that would be ridiculous. So, the idea of, when your car is parked, should you pay or insurance . His is a typical person drives very little during the week. Mostly uses the car for errands and recreations on the weekend. Someone like this we can save about 400 on insurance. Is it best part of this is free but you make money on insurance. The device and app is pretty. By showing people what they can save, we can convert them over to the insurance product. Forward, we look at what other products and services we can deliver on that pipe warm, looking at maintenance and repairs, services, government fees. Although sorts of things. Once you unlock that data and put it to use for the consumer, you can change the Windows Services work. What about innovations in parking . It is one of the things we look at. Of the miles trayvon in downtown areas is people look for parking. We are looking at things like how we can solve those problems, because we know where they are driving to, what their behaviors are, the app can make recommendations on where i should park. We know where you are parked, you are about to get a ticket. Lets notify you ahead of time so that we can solve those kinds of problems. Metro mile ceo, thank you for joining us. Tom snapchat success monetization, social media was big in 2013. What will next year bring you . Welcome back. Im emily chang. From the twitter ipo to the rise , 2013 was a big year for social media. Apps have taken over the way people communicate. Snapchat is the big story of the day. They are interesting because it is ephemeral, changed the way that teenagers are messaging with each other. But it goes beyond u. S. Teens and messaging. You have Companies Like wehcat in china. In japan, one company has totally taken over. You even have business messaging apps. More efficienth and safe to communicate with coworkers. Talk. Co for free. People like messaging apps because people can keep their bills down, but there are some skyhigh barriers to entry. How do you stand out . There are commonalities in all of them. You have to be able to do that in a safe and secure way. It has to be immediate. Snapchat was the one that came up with the interesting innovation, the ephemeral, it deletes within six seconds. That innovation, even though it was small, changed everything around messaging. Lets talk about another theme, the shared economy. You are connecting with somebody, airbnb. What happens to that story in 2014 . It only will get bigger. I love the collaboration space. Underutilized assets and people are now able to make money. Lyft is a great example. You can become a driver for those companies and make money. They arereat because taking locationbased technology and matching it up with cashless payment. And there are ratings, so you know they will act in a more professional way than, lets say, a cab driver. I love airbnb because it is a quick way to make money. It is also great for the Business Traveler who may not be able to get a hotel at a reasonable price, or maybe you are at a conference and there are no hotels available. Task rabbit is also great. We had to get a christmas tree. I said 25 if somebody would deliver a tree. Come ier hours later got a tree and they get 25. Do you think the Big Technology Companies May make any acquisitions of these businesses next year . The most interesting one is uber and reported valuation of 4 billion in the next round. They could get so big at some point that who can buy them, but at some point, they could become one of the biggest Integration Companies on earth. What about a businesslike interest . P where does that business go in 2014, what will we be watching . I think he will start to see monetization. They have garnered a huge amount of eyeballs and traction, but there, likeies out nelo, are perfectly positioned. You have invested in the company . Yes. How do you become the pinterest for the Younger Generation . Wanelo speak the same language that teenagers speak. If you and i were to go on there, it does really appeal to there, youyou are on understand this is what they are looking at and buying. It take their experience and brings it online. Welcome back. Im emily chang. Coming up on a later edition of what does thet rose bowl major sportscasters . The business of ballgames. So bummed about stanford losing yesterday. Oh, well. Thes 50 six minutes past hour, which means it is time to go on the markets. If you look at markets today, a different story from last year with the 29 gain in the s p 500, closing at a record in 2013. Now we see a little bit of a pullback. Not unusual the first day of the year. People looking to the jobs report for direction on these markets. In terms of individual movers, sun power. Ford is claiming a hybrid vehicle with their solar cells in their roof. The car will not be available for sale soon, but shares are getting a charge, so to speak, on the news. Ann, the parent of and taylor, is getting a boost after a recommendation to buy. Shares are trading higher by the most since august. For the first time in 44 years, Warren Buffett will likely miss his selfimposed goal of increasing richer hathaways net worth at a faster rate than the s p 500. Raising questions about some of the investments he has made over the past year. The goal here is the net worth, the book value of the company outpaces that of the s p 500. He was doing alright until this past year. Not just all right, a stunning record. Of the fiveyear periods he did it. We do not have the final data because berkshire has not posted their 2013 results, but the analyst estimates show that he probably felt short. The measurevalue is of the worth of the company, versus its stock price. At the end of september, the 6,766,put in a 120 which is an 80 gain over that fiveyear period. Was 100 28 , so there would have been some catching up to do. That is what the estimates point out. Even with an appreciation in their stock portfolio and other things that buffett has done come it was a pretty wide goal. What is this about . Done soat the s p has well, or about things that have gone wrong in the berkshire portfolio . Definitely part of it, the fact that the s p 500 is up so much. Holderse longtime they know for a while, it is a heavier lift. When you have a 290 billion company, to have a yearover year percentage gains that you have had for five decades have a you have to create an enormous amount of value. 2012, they created Something Like 24 billion in absolute terms of value, but that still was not enough to match what the s p 500 did. Point,s a stunning data when you look at the progress and trajectory of what Warren Buffett has been able to build over the last several decades. Thank you so much. Not quite meeting the target, but he is not used to that. Say, investors not to displeased without longterm record. He usually makes his targets. Investors not to displeased with that longterm record. Thank you so much. We will check on the markets again in 30 minutes. Money moves is next. Welcome. We focus on alternative assets. We show you what investors and entrepreneurs are doing, as well as what is going on in hedge funds, private equity, real estate, and more. Today, and media entrepreneur is my guest