Transcripts For BLOOMBERG Bloomberg West 20140603

Networks. Google and marking the 25th anniversary of the team and square crack down. Many apple users go outside apple to edit photos and share files, but apple is looking to combat that. Calling feature like skied and features that take on dropbox. Theyre trying to make it easier for developers to develop on their platform, introducing the swift programming language. They also make a big push into the smart home and health arenas. To a longtime apple follower. Have watching been watching the company forever. What is your take . I thought that apple failed to be apple. It succeeded at being the apple we all knew before expectations were inflated that apple had to change the world every time it had one of these events. They are a victim of their own success, that this used to be a conference for this Tiny Community in the world of david against was goliath. Forveryone got excited because you could do interesting new things, but now everyone expects apple to unveil some world changing thing every time they hit the stage. This one felt like the ones of old where they were fixing a lot of things they should have fixed, addressing a lot of opportunities that people felt they had not addressed, and taking on competitors who might have been more nimble over the past 510 years. I remember when youre writing for mac week. That the problems are nowhere as bad at apple, but there are some serious notes. Photodid not get their stuff quite right, that is why instagram exists. Everything that made big news were things that apple really needed to address. Competitor watch a like dropbox run away with it, they cannot watch google, on the side and have google drive that works better than their icloud. They cannot lose music, and they cannot lose photos. They have lost music already. We will see. They may have, streaming ran away with it. Me like an apple conference of old. A lot of people got super excited, but the people who were not techies were saying what is the big deal . I was struck by the cloud thing. Themembering back to failures of mobile me, icloud, of dot mac. There have been so many failures that i think it is hard for me to take it seriously. Apple is not very good at consumer software. This idea that you all of the sudden turn music into software was a big deal, and apple was winning. But then all of the startups around the world started to out innovate apple. I think theyre laying down the foundation, but it is a wait and see period. Good time for them to lay groundwork in the ways that they did not have to before, or is this sticking to their original . It is both. They have to lay down the groundwork and continue to be the number one place were Smart Developers want to develop. But they also have to start recognizing that some of the things that the internet has brought out has been worth embracing. That they need to open up. It is a small thing, but they are allowing thirdparty keyboards. Apple was very persnickety about controlling things like input keyboards, and now they say there is Something Better to do. Lot about your company and your conference visit, and how you address a very different world of innovation than apple historically has done. I wonder if you see connections . Absolutely. Conferences tend to be very haveal vertical, but we realized that technology is horizontal, affecting all businesses. All of these new businesses that are innovating can be nontechnology businesses. Need to broaden their market and be in all different areas and not just have this tack thing that comes out. They need to work across the industry. Even when they were there screwed up,r most they were so focused on getting pcs into businesses instead of letting it go in education where it is doing well. And now it is the internet broadly. We are things that innovation industries, it is not about being a startup in the internet space. That needs to embrace innovation and extend what they are about tied being more open. Is that why they are so focused on going to the companies in the different cities . Getting inside, understanding that it is sharing information and being collaborative care that is what happens when people connect in small settings rather than big ballrooms where everything is overproduced. It does not bode well for apple about but we will say. We will see. Thank you for joining us. How did this guy stay under the radar while developing malware . We will also have a very special conversation with Goldman Sachs ceo Lloyd Blankfein. We will be talking about entrepreneurship and growing the nations Small Businesses. Welcome back to bloomberg west. Federal agents have busted a Hacking Network that may have cost more than 100 million in losses in the u. S. It affected over a million computers, putting them in control of hackers in the russia n and ukraine countries. They would take control of files and then demand a ransom from consumers. Doraises an issue, how hackers like these guys stand or the radar for so long from and what does this tell us about other hacking groups that could be hiding in the shadows . The targetunde hack. Does what we know about target change a lot in the past year . It does. If you look at the past couple of years, the types of attackers better out there, there is a lot more sophistication from a lot of new countries like russia. The russian business network, the mafia organizations that are in that market are very aggressive. Cardvolume, low credit activity. We are seeing a lot of attacks on debit courts now cards now. A lot has changed. With the have had a theory that one of the reasons we see him so much hacking out of Eastern Europe is because during the soviet unions existence and of sending the best , they hadover there , andise their intelligence they had to be good because they had very little time and computers. Why do we see so much out of the eastern bloc . The talent is amazing. If you look out of the western market, the sophistication that they have, they are very stealthy him a very sophisticated. This is different from the Chinese Market, where they are splash. They make a big i think you hit on something that is important, it is hard to arrest and indictees individuals because they are often protected in these markets around the world. The indictments of the Chinese Military are not going to have an outcome or arrest officially. We will not be able to send anyone with a search warrant. Lets talk about china and how that differs for your company. Do you have to have very different kind of action for your client when youre looking at the risks from chinese hackers as opposed to Eastern European . Has beenan market about economic attacks, the Chinese Market has been about espionage. How do those look very different . Calleds a concept advanced persistent threat, that has evolved under the china market because it is persistent over a long. E, with the idea of stealing intellectual property. We see a different type of hacker focused on spearfishing, finding an individual, and stealing information. Result, different success. Deal, imexpensive not going to predict the stock price, as that tells us more than i know what but it has declined. To fight help you things better because it is better technology, or because it was more of a consulting business that will get you into places and give you billable hours . It is really three things. The people are amazing. They are the best resp onders in the world. Those personnel are very unique and talented. The other two pieces are technology, the advanced consulting model in automation, so they can respond in an instant. And the third is intelligence. They have putat out are very powerful and very good at understanding the attackers. The condemnation was a deal for our shareholders combination was a deal for our shareholders. Does the margin structure look like it is very rough . To be aave to build up onestop shop that handles all sorts of threats . Or is there a specific area . Massive inrtunity is the Cyber Security area. I would wonder how you find out which problems to solve. What we see is that all of the companies that are breached, they put out a quick report. Thehows you that most of defense architecture that is there is not working. A new company like ours can come along and solve these problems across 67 countries and 20 industries across the road, that is an opportunity. The losses have widened on a gap aces, but if you look at the bottom line, it is a powerful company. Go big or go home. We appreciate it. Today we will have a conference of look at the business of Cyber Security speaking with mike rogers and his first ever televised interview. Dylan had, some of the Google Services like gmail, calendar, have all been disrupted in china. We will find out why, next. Welcome back to bloomberg west. Its attackcalating on google ahead of the 25th anniversary of tiananmen square. Services are all disrupted over the past few days. The transparency report shows that gmail traffic was down 50 over the weekend. There are no technical problems on our side. Talk to me about why google is such a focus of the great firewall of china. I dont know if they are a focus per se, the truth is sources like facebook and beener up an have blocked for a long time. Google comes and goes. News here than it is for the average chinese user. Of all users on Google Search . Google search. The other services are in use, but it is unreliable. This great fire. Org says that this is the biggest sort of attack or shutdown of the worldwide aspect of the web in china than we have seen. Interesting about it it is a blanket sort of shut out of any google service. Lots of sites that use those words jumbled to sign in our on google, so they are not working. It is a blanket attack. I think the daytoday impact is much less than it would have been a few years ago. What other sites are blocked . Just in general, there are is very heavy censorship, including on all of the chinese services. For the course, although it seems like it has been particularly severe this year. By thes really struck news that facebook was going to have at least advertisers and marketers in china that would be able to use facebook very i could not facebook. I could not figure out if that a thawing, or could be a writer threat to sensors . That reality, i think allamerican Service Companies face a big problem because china is such a huge market and they cannot grow there. Any noise is welcomed by investors, but im skeptical that any of those services will be broadly available. China needs the u. S. More than the u. S. Needs china. Market. Is a much bigger for chinese products than the then china is for the u. S. Products. Is that china has built up their own web company. Alibaba. Aw they arguably have more reach outside of china than any other company. There are so many people in china and the market is so huge that it is like this alternate reality where there are Huge Companies that are not in u. S. Companies. They are two world in a lot of ways. What does it mean that the down . Ssaging apps are china . Ing out of it is very interesting to the way that people interact on mobile. It is very different in china then here, it is more messaging centric on these private channels where the u. S. Has been using facebook and twitter where it is a broadcast. Different cultures result in different products. Indeed did they do. Indeed they do. Thank you for joining us. Coming up next, Lloyd Blankfein. It is 26 minutes past the hour which means it is time for our markets check. These are your markets, down across the board, i will not sensationalize this. We are coming off of record highs, a massive cell this morning sell this morning. Posted underoth than estimated gains better than estimated gains. Bloomberg west will be right back, i will be back to the next couple of hours bringing you the markets. Lock into a very special conversation here on Bloomberg Television and radio. Im stephanie ruhle. The celebration of Small Business is what brings together Lloyd Blankfein and mike bloomberg, founder of bloomberg lp. Today they honored the recipients of the Goldman Sachs Small Business program. Welcome. Thank you. When we think about your careers, you were not born and bred a Goldman Sachs banker, you started a tech company. Tell us your story. How did you get from the beginning to where you are now. We are celebrating entrepreneurs, of which mike is a terrific and fabulously successful one. Butined an ongoing concern, i grew up in brooklyn, east new york, i lived in the projects. I went to Great Schools and came out, and practiced law for a while and then tried to get a job at wall street because i thought it was the most interesting and exciting place to go in new york city. I thought i could not get a job anywhere, for reasons that were very appropriate at the time. I got a job at a Commodity Trading firm which is on the lower prestige end of that gradient. That firm was acquired by Goldman Sachs them and that is how i got my job at Goldman Sachs. You had to have been extraordinarily scrappy to get to the top. Like a lot of people you had to be one of those salmon that made it upstream. You got turned down by Goldman Sachs back in the day. I did, and then i got fired by salomon brothers. But things work out. 30 years ago, what was your motivation . What did you want to become . I do not remember sitting schoolut of graduate saying i knew what i wanted to do. I was supposed to go to vietnam, but at the last minute they would not take me because of flat feet. A friend of mine said to go to wall street and talk to Goldman Sachs. Said who do what do they do and who are they . Got a job fornd i 15 years and it was interesting. That, hiset through career and mine have been very similar. Neither of us are slow, diplomatic type of people. We say what is on our minds of every once in a while you wish you had not come every once in a while everyone hate you for it. But at least people know that is what you mean. You, what did you feel 30 years ago, what did you want to become . Did you want to be the ceo . To be perfectly honest, i walked in the first day and set i hope it makes her the second day. I dont know if i believe that. , theres a lot of mythology in the world. A lot of people think this, but he was an entrepreneur that went all in on a big idea. I joined a class of other people who were striving, and of the 30 people who started with me, i knew there would be only 20 them and after another year there would only be 10, and i kept wanting to fool them for another year. What is your advice to Small Business founders today . Towork hard, youre going need some luck, but the harder you work the luckier year you will get. I do not have anything in common and people who sits there say it is all terrible. Get on it, be honest, look in the mirror and say why did it not work out . It was the wrong place, wrong time, maybe the wrong template. Maybe i can afford to try again, maybe i cannot. But people need to be honest with themselves. I take a yellow pad, draw a line down the middle, and do the pros and cons. I get done i rip it up and throw it away because i worked out in my mind what is real and what is not and what i can present to people. When you look at mistakes, is there a piece of advice you wish you god as you were climbing up the ranks . I had gotten a vice not to be intimidated, to break all of the myths that are out there. you were once intimidated . Yes. It is not a vice, not a bad thing to be intimidated, but instead of paralyzing you, it should prepare you to over prepare, to rehearse, to review one more time. A badot think it is thing. If it paralyzes you, it can intimidate you from going on and that is a bad thing. Havef the things that i learned, and i think that the mayor see as clearly, how terrific these people all our. Are. They are all fantastic. You would think that the 3500 we have rna brought to the program could be exactly like the dozen we talked to today. Todayhis program has done is give a mini mba to get stories from other negotiate,rs, how to hundred of business plan, how to learn from others. It takes away the mythology, and they say i cannot do what the done, to breaks that and say that they can. I do not know of any business were sales is not a big part of it, or cooperation and collaboration is not a big part of it. If you are a monk with a vow of silence, maybe, but an author has to work with that editor, you have to talk to your publisher, and you have to deal with your family. World, and i think it is good, where you do not do anything by your self. Personworks for just one or themselves, nobody does anything independently. Family, your your outside life, your business life. Moreu think that is today than ever, to be part of a collaborative environment . Back in the day on wall street it was a survivalist of the fittest mentality. It is not the beall endall. You could be the top, getting person, but you have to be really good at other things. Unique, you do not have to have the best sales personality, but you have to be really good to rely on the world beating a path to your door. I do not remember being in a world where wanted to be the person next to me. If you wanted to advance, you worked hard. Was never expected, it was just the way it was. You never wanted to beat your competition . It was teammates, not competition. You work with other people. One of the ways to really get ahead is to give credit to somebody else. What i say that i did not do it, lloyd did that and he involved you, i am tell telling everybody it is me as well, but i have now made a friend and you respect me because i have shared the credit. I,you say me, me, me, i, nobody likes you and nobody respects you. They think you are exaggerating everything. But to get credit elsewhere, the thought of are they exaggerating never comes up. We will have more of our schools of conversation and a moment exclusive conversation in a moment. This is Bloomberg Television and radio, i am stephanie ruhle. We are here with Lloyd Blankfein and mike bloomberg. Technology was going to be the future of the financial industry, and today 25 of your employees work in tech, your chief Technology Officer is one of the highest ranking people in your organization, yet if i called three other banks and said who is your cto, they would say i do not know. What do you to know about text that the financial industry does not . I cannot see how everybody does not know this by now. Are a technology firm, we are a platform. These days, if you walked around you would see a lot of people waving their arms, creating the prices him and distributing them by price over telephone. By they get interpreted algorithm, they get distributed electronically, the orders are electronically, and it drives the whole backend operation into the books and records of their company and our company. We are a technology firm, and it does not stay still. To drive thenology business, to comply the business, and to make a Risk Management, and a couple of other layers. Thehe results of that are beneficiaries are the investors and the issuers. Enormous have an number of different options if you want to finance, and for an you have a periphery of different products that can give you different profiles to exposure risk and opportunities you want. My recollection is on a 50 stock the commission was . 75 from the buyer and the seller. Make a fortune. Today the spread is almost zero, and and commissions are fractions of a penny. The public has benefited from all of this. That does not mean that they will do right and wrong in their investment decisions, but the friction has been taken away. Friction,money in the but the good part of that is they have to come up with new products that have a market, that people did not know they needed, but now have the option to use and they use it. It is hard to argue that everybody does not benefit. Greaterllows for volumes to occur, and more tightness of spread so people can go in and buy a security, change their mind without adverse consequence, and also manage their positions more safely than they could have. The job creation that comes out of this throughout the world. People could not have started companies. We always want to rip ourselves, but today a lot fewer people go to bed hungry, and go to sleep outside. Like the fact and he keeps going up. It is not just one thing, but the ability to move capital around and to use it to create jobs, build schools, cure cancer, those kinds of things, it all comes together. As Goldman Sachs becomes a technology platform, is the future for bloomberg and goldman to be partners . We have been partners of separate companies for different years, but we are a client of bloomberg, and they spend a lot of time trying to rent is paid our needs. In some cases respond to what we say we need, but they get there before we realize it. Who is a competitor and who is a partner gets blurry. Competitor on one products, a customer on another, a vendor on another. The world is more complex then one buyer and one seller. Thatarket determines that, is what capitalism is all about. What about Risk Management . When did you go pumping a risk taker to being a risk manager . They go together. If i had to use one designation and its Risk Management. We are the other side of what our clients what to do and we have to manage the inventory. Clients under u. S. And sell us things that could take a month to get out of. They may have been thinking about selling that security or that item or commodity for a month, and we have minutes or last to figure out what the price of that thing is and how long we have to hold it. Maybe we can sell something similar to it to generate a hedge against it that is not precisely selling commodity risk. But reduces our that is what we are supposed to be and are good at. Sexier than what wall street used to be. What gets you excited today . That is what wall street always did. We are with bigger size and audience and a bigger market, so the precision with which we have to approach management, and the speed we have to get out of our risks because of the size and very often the volatility of the market makes the adverse consequences of being wrong or slow that much greater than it used to be. That is coming from the fact there are much greater volumes, and fewer players, the markets have consolidated. It used to be if you went and looked at a zone of all of the companies that were Capital Markets banks have a generation ago, you would find a list that is substantially longer than today. It gives the opportunity for jobs, and better quality of life and longer life around the world. On one littleus thing, but unless you have Financial Institutions that have the wherewithal and are willing to take risks, society cannot grow. This constant whipping of the banks and everybody says that was a risk that was an appropriate, i think everybody wishes that they had known that that risk was inappropriate, but it did not seem like it was inappropriate at the time or they would not have done it. What is the conversation going to change . When are we going to tell the rate American Banking story again . About corporate responsibility, about lending to Small Businesses, about creating jobs . Cycle is enormous. Wall street will come back, because if we do not we do not have a future. Wall street is made of a bunch of people who think this is an opportunity and what to work hard. That is part of the ethic of wall street. Abuses,ll always be there will always be bad apples, cannot have anything big in a city of 60,000 people you may have somebody get arrested every day. In this industry it is many times that size, theres always going to be somebody who does something stupid. Nevertheless, it is the willingness of people to put their capital up and add their expertise which gives us the ability to grow. We have to take a quick break, and we will be back in just a moment. This is Bloomberg Television. N radio and radio gentlemen, we are talking about advice for Small Businesses. How about advice for those just graduating school . You spoke at harvard commencement last week. These millenials have lots of opinions and big dreams, but they do not sound like great listeners. Being a mind i remember great listener just like i remember doing a great athlete, but i have a feeling were all lying. Do you feel this dinner ration wants to work hard generation wants to work hard and learn . They see Mark Zuckerberg and others. Doing that is like winning the lottery, you have to work your way up, there is going to be a struggle of ups and downs. That is just the way the world works. I do not know people who have been successful without a lot of downs in their careers. It does not give you pause to hear from young people who want to not work on the weekend, who do not want to work for the man, who want to be part of a community . It is darwin at work. What you mean . They will not be successful. You can always buy a lottery t, but if youre going to get into Goldman Sachs or at bloomberg or at the local corner store, you have to work very hard. You have to work collaboratively, cooperatively, you have to be honest, and you have to be flexible. If you want to tell me that you do not want to do that, i would not want to hire you. I want to know what you want to do. Write letters, i typed them out again and again until i caught them right, i eventually got a job and work my way up. Every summer i had a job in college, and high school i had parttime jobs. Did not know when he buddy anybody. Whosely people we knew names were in the paper were in the obituary or crime sections. I did not know when he buddy, and you just go out there and do it. I think that that opportunity is there. I do not think that most kids fit into this millenial that is too good for this. Them,re are a handful of they are in for a rude awakening. At eliteare students schools who do not want them theiring at commencements. That aref the things being done, and some of the things that are being said are ageappropriate, and if you look at what people are doing as opposed to what they are saying i complained like crazy about the long hours i had, the time i spent as a lawyer when i started out. I complained for hours and hours about how late i had to stay, but i worked. I think today they are doing the same thing, the equivalent thing. Time proofreading things, delivering things, collating things, that does not have to be done today but they are working equivalently, absorbing a lot more information , distributing with a lot greater effect. I get older every year, but the kids starting out stay the same age. I always talking to this group that is coming in and they seem to be equivalently motivated and anxious about their careers. What motivated you today . If you like what youre doing, you do more of it. The more you do, the more successful you are, which gives you reason to do it. If you dislike something, it is exactly the reverse. The piece of advice i would give to any young kid who gets a job is you have to go in and work harder. I always made sure i was the first one in in the morning at the last one to leave in the afternoon. Does your fire come from philanthropy . It comes from people. Philanthropic stuff, and i love being with my doctors and doing a lot of things. Daughters and doing a lot of things. We are so lucky, and i do not have sympathy for people who complain. There are people who are really unlucky, and our sympathy needs to be with them. But the complainers, they do not know how lucky they are. They should try they should try to live somewhere where they cannot speak their mind or marry who they want or decide their own destiny. When people vote with their feet, america is the place they come. What are you excited about right now . Both of you. I would say, in my job, i would say, in my job, when things are going well, i can never imagine leaving it. When things go badly, my sense of responsibility takes over and i could not imagine leaving it. It is a very hard thing to do. I either love what i do because it has given me a lot of exposure to great people and influence. And when things are bad, my sense of obligations take over. And when there is a crisis, that is when the adrenaline gets going and deep down inside, you just want to go in there. Well today, nobody has a better job than me. Thank you both very much, Lloyd Blankfein and mike bloomberg. Im stephanie ruhle. You are watching Bloomberg Television. From bloomberg World Headquarters in new york, im mark crumpton. This is bottom line. The intersection of business and e