Transcripts For BLOOMBERG Bloomberg West 20141115

Silicon valley. First the cofounder and chairman of linkedin. A partner at greylock partners. A member in the paypal mafia. The Founding Team behind the payment service. I spoke with hofmann at the techonomy conference in Half Moon Bay in california and started by asking about paypals looming split from ebay and if some of the paypal mafia members should return to the company. To be successful at paypal, a leader has to say i understand these are the kinds of things that have gotten us to success and that these things have worked so far, but this new thing, which could involve a lot of technical change or a lot of organizational change to get there. And you will not be successful without a founder capable of doing that. I am surprised you have not met him yet. I know john lhas been talking to you and other members of the paypal mafia. I have heard the same from others, that they didnt get to meet him. It is a Public Company, because ebay is a Public Company, with the hiring process, so as soon as he could, he called me, and my schedule is also somewhat complicated, so we are having dinner in a couple of weeks. Im sure my schedule is one of those complicated things. But he was talking to me about what the characteristics should be, what kind of person he should be looking for, and he said, i think i found him in dan. But i have not met him yet. So you dont know yet how much confidence you have in him yet. Some people have said that paypal would be better off as a private company first. It doesnt mean the scrutiny of being a Public Company right away. How concerned are you about that . I would 100 agree that if you said youre going to operate paypal for the next five years and make necessary alterations, but doing it as a private company is better than a Public Company. However, the challenge is it is very difficult to get the right level of capitalization and the right framework to make that happen. So it is unclear if the capital setup for it would work. But if you operated as a private company, you are not doing Quarterly Earnings reports, you are trying to figure out how to do a massive investment over the first couple of years with a Much Stronger Company in five years. Because part of the problem with being public is that people say, sure, we want you to be public, but we also want your Quarterly Report to look good, and that creates a lot of tension the terms of risk taking and laying in longterm investments. And that is part of the thing that would be better for paypal to start out private, but that may not be feasible. How concerned are you that paypal will be more vulnerable to becoming an acquisition target right away like a google, apple, amazon, even alibaba . I think it certainly would be considered an acquisition target. Whether or not anything will happen will depend a little bit on what the strategies are, potentially acquiring companies and what the price point of a very valuable asset is. I think there is a lot of Good Strategies for an independent paypal that can then have a Network Effect across these companies and create a lot of value in the ecosystem. So i think that is a good universe to play that way, but i think it is also a question of if you integrate it with a google, or maybe there are some complexities around alibaba, but if you integrate it, maybe Something Interesting would happen, as well. Now, if you want my speculation, i have zero inside information. Of course i want your speculation. I think alibaba would go after the marketplace first. Ebay. Zero information. But if i look at how they are trying to play in terms of the global market, that might be the first step. I wonder if twitter is a company where we all know about the pressure that dick costelo is under. There has been a lot of talk about a management reshuffle there. Is that a place where a founder would be in a better position to lead . I think dick has a founders mindset. I think he is willing to take the criticism, and part of what you have to be willing to do is say, ok, i need to change this, and i know im going to get a lot of criticism doing it but im going to ignore it as i play, and i think dick is doing that. He is aware of the criticism. This is a way of getting it in advance, so is himself a founder of companies. He is capable of making that kind of decision about here is the new thing. Were going to bet entirely on this new effort. These sorts of things. I would say im bullish on dicks ability to at least bring the founders mindset, and i think he is thinking about the strategy. Why do you say at least . I wonder youre in a perfect position to know how difficult it is to grow users of a social network, right . And twitters user growth is slowing down. Does twitter need to be taking riskier bets . Do they need to evolve the product faster . I think it is unquestionable that they need to evolve the product. Yes, they need to evolve the product. If you see the lot of the changes that dick is making, its how can i figure my product strategy . How do i take those bets the right way with the organizaiton . Those were a lot of the shifts he has been making over the last six months. And they were saying, this is the horse i am betting on in order to make that happen. So how do you feel about not having made that investment now . Oh, well, actually it was twitter has always been one of the ones that i listed as when you say which ones do you wish you had made and you didnt and im still in the wish i had made and i didnt. Is twitter a company that you think can reaccelerate user growth, or is it reaching a plateau . I think it unquestionably can reaccelerate user growth. Is primarily a set of questions around product modifications, and i am not privy to any of their internal like i dont know what their secret strategy is. It could be great. Could be indifferent. I dont know. Im not saying that skeptically. Im just saying i dont know. But i think there is the raw basis of the asset can be built in interesting ways. Linkedin chairman reid hoffman there on everything from the future of twitter to the future of paypal. Up next, more on paypal when i speak with former paypal president david marcus. He will also tell us about his new job, growing facebooks messaging services. Welcome back to the best of bloomberg west. Im emily chang. Former paypal president david marcus is settling into his new role as facebook Vice President of messaging services. They have 500 million active users. I asked why he would leave a job as paypal president to become a Vice President at facebook. Here is what he told me about leaving the company. It is overrated because most of the things you do every day are not actually that much fun. That is the truth. Thats what you do for a living. You get to a place where, you know, there is nowhere up to go. And as a result, you have a lot of social pressure to stay in the job and continue doing the things you do. But you know, if youre an entrepreneur like me, youd rather go build things than manage things. Thats why i couldnt resist the opportunity to go build something large at a scale of over 1 billionplus people. I wasnt able to resist that. You were managing 15,000 people at paypal. You went to messenger. 100 people. That is awesome. That is great. How do you feel seeing everything that happened in the landscape, ebay planning to spin off paypao included. How do you feel about the decision . I feel great about it. Ive honestly never been happier. When im happy, i go to work every morning. We have a Phenomenal Team of young people who dont know what is impossible yet. We have an opportunity to go build something that we ship traditionally every other week to hundreds of millions of people. The feedback loop is extremely short. The impact is huge. Honestly, i am super happy. I have no regrets whatsoever. You took messenger when you first got there, how many users did messenger have . We dont trace the timeline. The last point in time was 200 million users, which i believe was in march. Now we are at half a billion. Half a billion monthly active users on facebook messenger. It was controversial, as we discussed. Facebook basically shut it down within the app, and forced people to start using messenger. Your job is to make that worth while. Yeah, and i dont see it that way. Messaging is actually a core product. It is not a feature of another product. If you want to be best in class, world class in messaging, you need to have a destination. A single purpose app to perform that. I think moving messaging out of the core facebook app was the right decision. Half a billion people use it monthly and they like it. We are just getting warmed up. Theres a lot more we will build in the app that will make it really, really good. Hopefully, it becomes the best way for you to communicate with the people you care the most about. And we will build tools for you to express yourself the best you can. Your goal is to make it a richer messaging experience. Tell me what more can we expect . What more features can you add to make it stand out from all the other messaging options out there . If you look at basic texting, it is very transactional. Ill be late or im late or im in traffic or dont forget to buy milk. It is very transactional. You cant have an enjoyable and rich conversation using text messaging. That is what we want to do. If you look at messenger right now, we have highdefinition goals, selfie cams, you can send video or videos of things around you. You can send voice clips. There are many, many ways you can interact with the people you care about. We are aiming to make that richer and richer in the next months and years to come. There are a bunch of ways we can do that. We are hard at work building those things. Where do you see the most potential for growth, when it comes to geography and demographics . Think growth in users is just like generally speaking, we are strong in north america, in western europe and the nordics. We are also very big in countries like brazil and india. We will continue developing. I think what happens whats the really important thing is for you to actually take those conversations you care the most about, from whatever messaging app or text messaging, and bring it inside of messenger where you can have a richer experience. We feel if he do that well, then the volume of messages on messenger will increase. The number of people on it will increase as well. You have Companies Like snapchat really focusing on younger users. Might you make this available to younger users . Younger than your typical Facebook User . By design, we are not going to design a specific thing for a younger demographic. We will figure out ways to open up messenger to more people over time. That can take many different shapes. We will see how it plays out. What about china . Is messenger something that could succeed in china were facebook has not . We need to sell the fact that we are available in china as a company, not just on a product basis. Hopefully in the years to come, we will figure out a way to enter the market. The messaging landscape in china is already extremely competitive. We chat is very strong there. We have a lot to do, and we have our hands full right now. In western europe, north america, and brazil, india, lots of countries. We are heads down, working on that. Have to ask you about paypal. Since it is now being spun off from ebay. How supportive are you of paypal being spun off as a Public Company . Is this the right decision . It deserves to be a standalone company. The big question is will it remain an independent company after it is spun off of ebay. That is the big question. Paypal is not a partner with apple pay. How big a problem is that for paypal . My understanding is braintree work with apple pay right now. I do not think that is a big problem. You have been clear that whatsapp and messenger will be separate. Can you envision a future where they are not . We dont spend a lot of time thinking about that. Right now whatsapp is on the path to get to one billion monthly active users. Once they passed a halfbillion mark, next up is one billion for us as well. We are approaching this in very different ways. I think thinking about rationalizing this right now would be a mistake. Whatsapp is fairly independent. Very independent. They are in mountain view, on campus. We are building different product experiences. I think some experiences will cater to some users, others to others. We will see how it plays out. In the future, do we have as many messaging options . Or do we use just a few. I think we use just a few. Right now, most people use a few. I think there will be fewer in the years to come. Because the market will rationalize a bit. Then you have an app that is supposed to help you communicate with all the people you have in your address book and beyond or an app that is awesome for communicating the people you care the most about. For now, were focused the most on that what is the most surprising thing about working with Mark Zuckerberg . He is very impressive. More impressive that you may think. A visiohary and at the same time executing well in the short to medium term pretty well. Generally youre one or the other and he is both. He is a very impressive person to work with and you know, im grateful that im here to witness those things and see that happening. David marcus, facebooks Vice President of messaging. When we come back, my interview with best selling author Malcolm Gladwell who is challenging the way we think about everything. Ill speak to him about the challenges facing the nfl. Welcome back to the best of welcome back to the best of bloomberg west. Im emily chang. Amazon and hachette have ended their monthslong feud over ebook prices. Before it happened, i spoke wiht bestselling hachette author Malcolm Gladwell. Here is what he told me about the impact the dispute has had on with amazon delaying many of his titles. The amazonhachette war is ongoing. Your books kind of caught in the middle. How are you feeling about this . It has cost me a lot of money. Thats for sure. It breaks my heart a little. I had thought of amazon as a partnership with writers and for a company to try to make a business point by turning its back on i have sold through amazon millions of books. I have contributed mightily to their bottom line. I would have thought they would have seen me as an asset. It brought people to their site in droves. And now they have turned on us. It is to say the least a puzzling strategy for a business to turn on its assets. I would love to have a conversation with jeff raises about the selfdestructive nature of this particular strategy. Amazon says books must be cheaper. Do you have any sympathy for their argument . Complete sympathy for it. I dont understand why to get to that preferred outcome. They have chosen to screw over the people who are bringing revenue to their business and customers to their site. It is just like lets have a conversation about what the price of a book is, but along the way, in order to have that this conversation, amazon is raising the price of my book and spending several weeks delivering it. Gladwell declined to comment on the ending of the feud to bloomberg west, switching gears, though, gladwell is known for challenging conventional wisdom when it comes to our thoughts and also had some harsh words for the National Football league, by far, the most popular Sports League in america. Take a listen to our conversation. One of the subjects you wrote about recently was the nfl. You said it will become a ghettoized sport as a result of concussions. Only poor athletes will be willing to play the game. The nfl has been settling with former players. Are they doing enough with current players . No. I think the sport is a moral abomination. The nfl just released that report, the actuaries report, theyre try to estimate what percentage of retired players will be in need of some kind of assistance, medical assistance from the league. They came one 1 3. Basically when you watch football on sunday, 1 3 of the players are incurring injury which will significantly impact their life. Can you point to another industry in america, which in the course of doing business, maims a third of its employees . This is untenable. Were not just talking about people limping at the age of 50. We are talking about brain injuries causing horrible protracted premature death. The idea that we are paying people to engage in a sport for our own entertainment that causes irreparable damage to themselves is appalling. What about how the nfl has handled the Domestic Violence issues . This is a sport that is living in the past. That has no connection to the realities of the game right now. No real connection to american society. If you look at that the whole ray rice issue was in a microcosm what is wrong with the nfl is that they are completely disconnected from the consequences of this sport they are engaged in. They are socializing young men into a culture of violence. Right . Is it all surprising that you see the kinds of corollary social damage surrounding players that we see . Not surprising at all. They are off on this 19th century trajectory, which is fundamentally out of touch. Your friend bill simmons called the commissioner of the nfl a liar with respect to the ray rice case. He ended up getting suspended for three weeks. Espn suspended him. Was that the right decision . No. Totally wrong decision. First off, if a sports columnist cant exercise free speech. By the way, calling him a liar, it is not like it came out of nowhere. One reasonable conclusion from the whole ray rice saga was that the commissioner of the nfl knew about the videotape and lied about it. Im not saying thats what he did. I dont know. Its a reasonable conclusion. I thought that in the course of expressing their opinions, sports columnists are allowed to draw conclusions. Apparently not. Apparently you get suspended for that. I thought that was an embarrassingly low moment. Do you think football goes away . I dont see how it doesnt. It will start to shrivel up at the high school and College Level and then the pro game i think will eventually wither on the vine. Boxing was one of the biggest sports in this country in the 1920s and 1930s. Where is it now . Sports dont exist forever if they cease to have some kind of compelling narrative. Footballs narrative is falling apart. Author Malcolm Gladwell there. Up next, when will robots take our jobs and when will private space shuttles take off . I asked a venture capitalist next. Welcome back to the best of bloomberg west, where we focus on technology and the future of business. Im emily chang. Companies like Virgin Galactic and spacex are leading the private sectors turns into space. Two rocket disasters in the last month are getting giving some investors some pause. I sat down with Steve Jurvetson and we talked about space. We talked about satellites and taking the internet to remote areas where it something that didnt make business sense 20 years ago makes sense now. No one satellites is saying just staying in one place. The latency is shorter. You can provide broadband for the entire planet. Every oil platform, every developing village. Broadband would be in most homes in america and would be dirt cheap. Who wins . They all went if its not neutral. If summary can provide a pipe to the home and village that is independent of the cable companies, that will be wonderfully democratizing. No one can part charge of face. Everyone every engineer within facebook and google realizes that would not be right. You are in investor in spacex and you launch rockets in your backyard, how concerned are you about the recent crashes in the same week . How much does that set back the private space industry . That was a tough week. My heart like everybody in this industry goes out to the test pilot that died in that unfortunate crash. Its those brave people who have the great stuff that have made this possible. If they were not putting their lives on the line, we would not be able to advance the science. The broader industry is not impacted by this. The failures were idiosyncratic to those rockets. Every evidence from the early investigations says the wing structure released to early and that led to disaster. It is easily fixed, it turns out. It is unique to that vessel. No other rock or plane uses that technology. Its not a failure mode that is generalized. They are going to fix that. They know how to make sure that never happens again. He is not just a space enthusiast, he is interested in the future of robotics. I asked him how robots will change our lives five and 20 years from now. In five years, we will see more of those Autonomous Cars driving around. People dont thing think of them about dont think of them as robots. If it werent for regulation and law, we would have a lot of those cars on the road already. We will see. I think they will be seeping into human consciousness. In 20 years, there are other robots in the workplace that you dont see. They are replacing monday and human labor and they will have a dramatic affect on the labor pool. They are being hired by the hundreds in china to replace sedentary workers that are just doing one task all day long for the entire career. I think they will lower the cost of products. They will lower the number of jobs we have on the planet area people will start to realize the just about every manual task will be done by a robot. There are conflicting opinions of how dramatic the changes going to be. We will have more free time or we need to worry about human extinction. I just heard the word extinction. It could be tragedy or nirvana. There really is a break in the past to the road that we are facing. No one debates isnt happening. It will have happened by then. Robots can do anything that a human could do and would be more effective and more accurate and just better at it if it is repetitive work of any sort. What does that world look like . It could be a world of abundance where everything costs one dollar a pound. With three Printing Technology and robotics, everything costs the same to make. That could be pretty amazing. That could be a life of leisure where we dont have to work. It could be like serfdom. Imagine what robots could replace . That is one nirvana that some people paint as a possible future. The other is an ugly transition from here to there were we never get to that great world because on the path to that we are losing jobs and the rich are getting richer and the poor cant find work. 80 unemployment, what does that world look like . If you need employment to live. That seems to be the path we are on right now. I think that is the current path. I hope that discussions like what we are having today in a political circles could stave that off. How can we help fix that problem . What changes it . It could. I dont see a lot of foresight happening in the regulatory world. I see a lot of debate. It is a system that was meant to be glacial. You dont see radical change in government unless its been overthrown. Can we provide the basic human needs almost for free . Education seems to be happening. Health care is the one, i want to invest in that. To try and provide Free Health Care for everyone forever. Why would you even want to do this . There is more money to be made in that Current Health care system. Think of a cell phonebased interactive system that could diagnose and care most diseases which involve medicine or nutrition or activity and not surgery. That could stave off people who cant afford health care. Who ball google is buying robotics companies. How much do they own a . They are going heavily into this. They have acquired a number of robot companies. The vast majority of employees have no idea why. That is interesting. I have some suspicions. What i do know is if they never release and editing product, the engineering trajectory is involving technologies that are Machine Learning and deep learning. They are like the human brain. That is applicable to many different things. It can make better ad matching. It could make a better autonomous car. It is a domain capability. Once you get better at being intelligent, you can do a lot of things and thats what they are doing. Steve jurvetson that was. The ceo of sony joins me next in an exclusive energy interview. Welcome back to the best of bloomberg west. I am emily chang. Sony just announce a new webbased tv series called playstation view. This comes one year after the launch of the playstation 4. I spoke about it with the ceo. It was a surprise announcement. Well be going into a beta Service Later this year in key markets like new york and los angeles. We hope to go commercial in 2015. It brings all of the tv that you want to watch across your Internet Service into your playstation and home. What kind of tv . We have contracts signed with a lot of the majors, nbc, fox, cbs area. Probably about 70 channels will be available. We are looking to bring every channel you expect. How difficult is it to strike those deals . It takes a long time. You are doing something completely new. Look at video and music, innovation occurs all the time. Innovation and television hasnt occurred in a long time and we are trying to do that. How much is this going to cost me . We want to bring that to you with as much transparency as possible. We want you to pay for what you watch and no what it is. There will be no contracts. No prescient . No price yet. You are also launching some exclusive content. We have a show called powers. Its based on a graphic novel. It will be only available across the playstation network. You are sharing some video of behindthescenes. This the same Production Company behind it that makes the walking dead. Love that show. We are able to partner with high production value teams. This is our first foray. We are very excited about it. We think it hits at the heart of the user base. The original content game is not an easy one. It is expensive. It does cost some money. Bringing together a huge base of users with the kind of video content, people dont play games 24 7. You have been a ceo of this division of sony for less than a year. You have been at sony for long time. Now that you are in this position, how are you putting your own stamp on the company . I have been with them for a long time. Bringing it now through my time working in japan and europe and working to the network division, allowing me to take that experience into playstation america. I think we have a long road to the place we need to be. You have sold 13. 5 million playstation 4s. What is it going to be by the end of the calendar year . It will be a larger number. How much larger . Sales are going great. We have been the topselling console for 2014. We have key titles coming out. There is a huge amount of activity that will be rolling into black friday and christmas. We are the topselling console worldwide. We want to maintain that market position. Sean layden. Coming up, tech billionaires want to promote the study of science and technology. Welcome back to the best of bloomberg west. I am emily chang. A splash of hollywood and Silicon Valley. Technology and entertainment celebrities walk to red carpet at the awards in mountain view. I was there and spoke with yuri milner. He helps bankroll the 3 million that every prize when it receives. He is a former physics student and he spoke about why the awards are so important. If we dont communicate the importance of science, we are facing a time when there will be no more funding. Ultimately, all the funding goes from people. This is how the budgets will be spent. If people are unaware of what scientists are doing, there will be a disconnect. You are seeing facebook and google becoming more interested in science and robotics and space. Are they the right companies to lead the charge . Can they leave innovation like einstein . Not really i think the companies you are talking about are leading the charge in applied science. This particular day is about fundamental science. What it means is out of her curiosity people are working day and night and trying to understand how everything works. Only then, after many years sometimes or hundreds of years, it goes into technology. The very first step is really always given by curiosity. If there was no maxwell, the maxwell equation we would not have radio waves and we would not be talking right now. People dont appreciate that. If you go backwards far enough, you will always find a scientist who conceived something very early on and many years later it translates into technology. This is about celebrating those people who are the cuttingedge of fundamental science and they are thinking about things not because they have an application or for recognition, they are just curious human beings. I know you live in Silicon Valley fulltime. What is more interesting as an area of investment when it comes to technology . China or Silicon Valley . Silicon valley is ahead of the game at this point. Most of the innovation is coming out of Silicon Valley. China is catching up quickly. There are a lot of innovative companies. They are charging ahead. They are making way for chinese entrepreneurs to move ahead. Wide you want to be a part of the next step . They have never confirmed that i am participating. Xiaomi is an amazing company. It is doing things that is very different compared to other hardware companies. I think this is the subject of the conversation for another time. Yuri milner is an investor in facebook, twitter, airbnb and more. It is not a joke there in funny or die may go up for sale and could fetch hundreds of millions of dollars. We will talk with the cofounder not named will ferrell next. Im here with bradley pitts. Thanks for joining me. I could watch this one over and over. Brad pitt and Zach Galifianakis. They are getting serious about evaluating its strategic options. One of those options is a possible sale with an asking price as high as 300 million. Cory johnson i spoke with randy adams, the ceo at wtf studios. It is significant. If you look at funny or die, it is one of the only nonyoutube content places on the internet. There should be a comedy site on the web and we should do that. We said thats great. We need the content. So we reached out and we got in touch with gary sanchez productions. They were open to the idea. We set it up and shot a few videos. In 2007, we launched it great we did not go on youtube. We did not do any big emotion. We put up the film of will as the landlord. We thought people watch it. Amazingly, we had 3 million views a day. We were just looking at video of a man Walking Around in new york and response to the viral video of a woman Walking Around in new york. Who do you think the possible buyers are . I couldnt comment on it. Im not privy to that at this point. I was on the board of directors until last year. When i stepped down because i started another Comedy Company that was more of an urban Comedy Company with marlon wayans, there are a lot of people out there that could buy them. Is there a notion that from the beginning this was a big site with lots of contributors and lots of content and would standalone . I think they just wanted to build something that had an audience and to entertain people. They hired on the head writer of saturday night live and a Production Company. They have been amazing over the last seven years. I dont think it was created or thought that they were building it to sell it. We are going to create a destination site that is comedy. It has people on it like Zach Galifianakis who is amazingly funny. I think we get to a point where they are producing tv shows and commercials. It will become hollywood 2. 0. It is the next generation of whats happening in hollywood. What are the best assets . Is it between two ferns . I think the best asset that they have is they have the ability to do quick turnaround and topical comedy. They can produce Something Like a man Walking Around new york the next day after the viral video hits. They can they have a large staff in Silicon Valley. They have all the creative staff here in hollywood. They are the goto place for people who want to promote something or build their brand. The asset they have as their brand. Funny or die, people are able to do something that nobody used to be able to do. That was randy adams and cory johnson. That doesnt for this edition of. You can catch us monday through friday at 1 00 and 6 00 in the east. We will see you next week. More people turn to United Health care for their medical needs than anyone else. United health care has never disappointed me. I have always been pleased with their service. Its a quality company. It is much larger than you think an