Woodside abandoned its takeover id in australia. Oil search down by more than 15 . Lets look at the markets. Hong kong currently closed for lunch. This is how they finished up in their morning sessions. This is the picture in singapore, tokyo and mumbai. The nikkei 225 brushing off better news coming out of the Growth Numbers that we had today. It is a global selloff taking place. Im back in half an hour. Time now for bloomberg west. Mily im emily chang and your this is bloomberg west. Coming up, the fight against islamic state. Privacy versus security. Tesla has been on a hiring bin ng the last five years. And the real money behind Virtual Reality. A look at the market some experts say will hit 70 billion in the next few years. First to our lead. The white house is urging Silicon Valley to join the fight against islamic state. In a televised address, president obama urged companies to do their part in preventing terror attacks. Theve ordered them to Waiver Program under which the terrorist it will make it harder for them tos came cape from justice. Hillary clinton says Tech Companies need to deny online space to terror groups. Take a listen. Hillary clinton were going to need help from facebook and twitter. They cannot prevent the recruitment and actual direction of attack or the celebration of violence by the sophisticated internet user. They are going to help us take down these announcements and appeals, particularly as they get up. Emily joining us now is michael riley. Thank you so much for joining us. So far what this is been a the action to president obama and Hillary Clintons remarks . Obviously this is a continuing conversation but they are stepping up the rhetoric here. Certainly on the encreppings issue. Who along with companies in Silicon Valley thought they won this debate in october has been cautioned. They have seen the ground shifts over the last two months as you see attacks in paris and San Bernardino. It has caught them by surprise a little bit. The other side, the senate republicans, mitch mcconnell, his answer was bring it on. If you want powers to allow u. S. Law enforcement to intercept encrypted messages, we will get them to you. That is a sign that the republicans think they can use this as a political edge in the next election because obama has conceded a lot of ground to the keck Tech Companies. Emily encryption is one thing. Bring us up to date on what we know about the San Bernardino attackers. What they posted on facebook and what facebook did about pitcht face book and other social media has become in the words of a lot of politicians to command control of terrorism. There is a lot of recruiting that goes down the line. Some of that is encrypted and it becomes hard for Law Enforcement to dip in whenever they want. In san berno. One of the terrorists used facebook to declare her devotion to the islamic state. But there was also a lot of communication and interaction with other groups andy haddists through social media and online. I think this is just again the larger problem of this really is an easy very like easy to use and in some ways protected form of command and control for jihadists. What Hillary Clinton and others are saying we have to get a control on this thing. There is an other side of it. It is in some ways open to kind of watch the terrorists. The f. B. I. , a lot of them say wait a second. We dont want this taken offline. They will go to some place that is more encrypted. Emily that is interesting. Now i want to talk about this further. Tara who bring in previously worked at the c. I. A. As brian white who also worked at the chertoff group. Brian, do you think at this point, the Tech Companies are going to more . The first is about encryption. Emily they said no no. They have already said no. I think it is clear to me that it is increasing. Especially in europe. The europeans i think may go forward band more aggressive. If that happens, then that really presents a problem because they are not going to produce two phones. They are not going to produce two types of email systems and they are going to have to deal with occurring in the e. U. If im in one of those u. S. Tech companies, im going to seize control of it now. Particularly the brits. Hey have said this very often. David cameron is very aggressive on this. Emily how helpful or unhelpful are facebook and twitter in situations like this . Social media is one of the many types of intelligence to be monitored. Its called open Source Intelligence along with more classified form s of human intelligence and signal intelligence. The problem right now is not just the encryption side of the equation, but using it for propaganda and recruitment purposes. While the companies are doing a lot to crack down on it, twitter has suspended thousands and thousands of accounts. At the end of the day it becomes a cat and mouse situation or whackamole. You take down the accounts as they pop up. It is a constant battle. From the tech company side, there are three areas of concern. Theres privacy concerns over whether or not they can shut down or monitor accounts, there is a price concern, people might stop using the platforms overall, and freedom of speech issues. At the end of the day, there are also practical concerns. This is not an Automated System taking these down. They rely on being alerted by individual users. It is it tedious and painstakingly difficult process. They have hundreds of millions of active users. Its not easy for the Tech Community to do. Emily given all those concerns and difficulties, is there a middle ground . What should these companies do . She has it exactly right. Its a slippery slope. What we should do is expect that usbased Companies Take a role to stop this type of activity online. When they suspect somebody is using facebook or twitter to solicit and recruit, they are much more active in taking it down. They more go ahead and you have not rove that you are inciting terrorism, rather than proving that you are. Are they going to listen to other governments that they do business with . The companies are in a very hard position here. Emily an oped today touches on these issues, saying its not just transmitting information from place to place without regard for who is typing on their keyboard are reading on their screen. The people who use any technology, technology doesnt work on its own after all, its just a tool and we are the ones who harness its power. Hes saying the tools are within reach, but the power of the internet can go into the hands of the wrong people. Tara, obviously eric schmidt, chairman of google, what is a company like google to do . What is the middle ground . There are a few steps that could be taken that are middle ground measures. At the end of the day, its going to require publicprivate partnerships. You need people in the state department who are tracking violent extremism working closely in conjunction with analysts and individuals and Companies Like twitter and facebook. This is not something that can be solved by siloing their efforts. These companies have tried to comply with government requests. It has been surging in the past year or two. They are making i think a good faith effort, but at the end of the day, they do have some conflicting motivations. Private companies have different incentives than the government, but everybody wants to keep people safe and not have a horrific attack like we saw in paris or in california. I think what is going to be required is some sort of systematic organizational overhaul where we can work more closely and in greater coordination. There are probably some different organizational models that the government should be looking at. Maybe getting employees rotating in from the private sector and trying to make better connections between these two ealms. Emily youre very outspoken about this. You had your own sticky situation on twitter over the weekend. Can you tell us about that . I have received my twitter handle was used in a tweet itself, whether i was speaking on a panel about isis. A follower tweeted and i reported it and the account was suspended within less than 24 hours. That relies on the user taking the action. Its not like twitter can monitor millions of accounts and have a systematic way of going about this, unless they use some , which of algorhythm would take down more content than intended. I think they are doing their best, and it falls on users to report these things that crossed the line for twitter to take action on them. Emily obviously twitter has pledged to crack down on harassment and its been very difficult. I still get harassing tweets all the time. How do you see this playing out . Do you see the Tech Companies eventually capitulating . I think you will see a statement of principles. They are doing a lot. They are really stepping forward. Its when they are not doing it in public and transparently, it can come back to bite them. As the pressure on Tech Companies increases, the statement of principles defining how they view the is and what their rules and thresholds may be. It differs from company to company. What may be read to incite terrorism on facebook may not be read the same way on twitter. It would be interesting if the Tech Companies came together and really challenged themselves. They have to put it out so people understand and can read it. They can move on to other avenues and thats bad for basic intelligence collection. We need tighter coordination ith Law Enforcement. The director said hes expecting ore tips to come in. At the end of the day, it comes down to the cliche that it requires a whole government of effort to really stop this from happening. Emily brian and tara, thank you both so much for being here today. Verizon could be in the market for another oldschool internet portal. At an Investor Conference in new york, the cfo said the Company Might buy yahoo if it is for ale. Its still not clear what Marissa Mayer and the rest of the yahoo board are planning but verizon would look at a deal if it makes sense for shareholders. Verizon bought aol earlier this year as part of its push into mobile video advertising. Yahoo has both content and add technology, two things that attracted verizon to aol. The last big tech ipo of the year is set to happen later this week. This time its coming from down under. Nasa has liftoff, some surprising supplies that are en route to astronauts from the space station. Emily adobe will release fourthquarter earnings this week. Analysts are looking for the Software Company to report revenue of 1. 6 billion. Last quarter of adobe shares dipped after the Company Revised its fourthquarter outlook lower. A few other big things in tech o watch for this week. Joining me, alex, i want to start with you because were going to see the last tech ipo of the year. On the verge of making australian corporate history by going public. What is this company and what do they do . They started making tools for developers to help them manage when they create software. The Company Started 13 years ago and since then they have built out into a kind of Team Collaboration company. Their big Software Helps developers create pplications. Confluence helps sharing. Hip chat is kind of a messaging tool that is sort of like slack are along those lines. 13 years later the company is going to ipo and investors are excited about finishing the year with what has been a slow year for ipos. Emily ive heard of it as the Great Australian hope. Is there a dearth of tech ipos coming out of australia . There are not a lot. From some of the people on the ground, there has been some criticism about there not really being as much support from the government for Tech Companies as you see here or in Silicon Valley or in london. This is the one people are pointing to. It has been an interesting company. Its a tech company that has only taken a little bit of funding. It was valued at a little more than 3 billion in the last private round and now it is pushing a valuation of 4 billion at the market range. It has in profitable for four years. That is something we have not always seen from Tech Companies out of the u. S. It is a unicorn among unicorns in australia, but one that has built kind of a mature business. Emily alex, bring us an update when they go public. Take you. Jack clark is also with me in he studio. You are going to be taking off for canada this week, and you going to the biggest a. I. Conference of the year. Jack i will be flying to montreal in canada to see over 2000 of the top representatives of industry that will be talking about making computers think for themselves. Emily what is so important about this conference . Everyone comes together from the private companies and academia. Its where Mark Zuckerberg chose to announce the formation of facebooks a. I. Research group. The company demonstrated their gameplaying a. I. For the first time. Emily what are the biggest themes in ai in the coming year . Robots, getting a. I. To go from apps that we use online to industrial robots and factories around the world. That will make a big impact on business. Emily what about the big Companies Like google and facebook and what they are doing with a. I. . Will we see their efforts come to fruition . We have already seen it. Googsle had smart reply and inbox. I can get an email and respond using a. I. Next year we will see more of that and we will see more speech and language technology. Emily jack clark, bring us back news from montreal. Thank you so much. Thank you. In todays emily edition of out of this world, 7700 pounds of equipment and science experiments are on their way to the internationals ace station. The article payload blasted off from cape canaveral, the latest unmanned supply run. An important delivery. A string of commercial supply runs have failed recently. It was last attempted in october 2014 and ended in a fiery explosion 15 seconds after liftoff. A russian cargo rocket failed in pril and spacex also lost a rocket in june. Microsoft hollow lens visors will allow controllers on the ground to see what astronauts are seeing and potentially could be used for realtime training between Mission Control and the iss. Coming up, electric car maker tesla has more than 1600 job openings. Will all the new hires hurt the companys push for profits . Emily if you are looking for work in the San Francisco bay area and you know anything about cars, you might want to send our resume to tesla. The company is in the middle of a hiring spree with more than 1,600 openings. They have been adding headcount for years, growing from 899 to over 14,000 this year. What does it mean for turning a profit . Founder elon musk said he wants tesla to hit profitability by the Third Quarter of next ear. Its shocking how quickly they have grown over the last few years. Thats right, in 2010 they ended the year with 899 employees. Now they have over 14,000 in just under five years. Emily where are they hiring . All over the world they are hiring engineers, they are entering new markets, opening a new store this week in mexico city and edinburgh. As they ramp up sales they have to have Service Operations to service all the cars. Emily what does it mean for profitability . No one cares if amazon is profitable, so does it matter . I think in the longterm it matters. Investors are wondering at what point tesla becomes profitable. Elon musk said them to become number one. He is the companys largest investor and has a long time horizon. Everyone keeps talking about teslas cash flow and a lot of the cash flows going into hiring people. Emily when you look at the numbers, what is the likelihood that that profit comes by the First Quarter of next year . A lot of it depends on sales this quarter. Theyre hoping to sell between 17,00019,000 cars. Which would get them to at least 50,000 for the year. Emily next year we are looking over to a cheaper model tesla. What are going to be the big milestones . The big milestones will be getting the xl out in greater numbers, entering new markets, and another model due in late 017. Emily this weekend was my first time in a tesla. The guy was driving for uber. Its pretty awesome. Thanks so much for stopping by. We will talk about Google Ventures, next. Its 12 30 here in hong kong. An update of the top stories. Beijing in choking smog and under the highest ever warning, red alert. Live images at the moment. It will remain in effect until at least thursday when a cold front will clear the air. School activities and all outside construction work have been cancelled. Healthy people are warned to avoid the open air. 54 billion which is less than expected, exports falling for a fifth month and imports dropped for a 13th. The industrials slowdown community and demand hasnt picked up to compensate state intervention. Rate cuts havent managed to stimulate a recovery. The japanese government is breathing a sigh of relief as the economy there sidestepped in the quarter. Expansion is beyond boundless expectations. The government will compile an extra budget after the bank of its record stimulus program. Commodity prices have further to fall. Oil remains at a sixyear low and australias declines plunk. G iron ores here is juliette. As you mentioned, not a lot for investors to be really buoyant about today. We have those falling commodity prices, also trade data out of china showing a further slowdown there and selling right across the region. 1. 3 . Nghai marker, down as you can see, we certainly are seeing it take control here. The nikkei 225 in japan losing all of yesterdays gain. At was despite the revised g. D. P. Number and down another 3 4 of 1 . Every sector in the region is lower, really led lower by the oil and gas prices, 3 . Lets have a look at some of the big losers. Falling to a 10year low down almost 5. 5 with the petroleum and oil search in focus, woodside abandonning that 8 million takeover sending its share price plummeting and all of those energy players, coming under pressure as well. There is a little bit of an pside and that is in those airlines. Also having a very solid day. We are counting down in hong kong and also china at the top of the hour. Emily are we approaching Virtual Reality. The total value of the v. R. Market could hit 70 billion by 2020. That is 10 times what they expect the industry to generate next year. Thank you so much for joining us. When i heard that number, i said that sounds really high. What do you guys think . I think its really reasonable. Emily they said it is an understatement. It could be higher. The way we look at the market is Virtual Reality really is a new competing paradigm, just like mobile was and p. C. S were. 2020, an awful lot of company you will look at and wont say thats a Virtual Reality company, outside games and entertainment, but using Virtual Reality models. Emily what do you think of the timeline . Its reasonable as well. It will take the next couple of years for people to get hardware in their hands to consume these type of experiences. He power of it is clear. We have been running second life and Virtual Reality will take it to whole another level. Creators of second life cashed out 60 billion and thats a small beginning of what is to come. Now, i was recently speaking with the c. O. E. About this very question. Of course, theyre hoping to get their headset out early next year, long awaited. Here is his take on Virtual Reality and when it will be mainstream. We definitely believe that the mass market, there is going to be a lot of adopters, early adopters of v. R. If youre looking at the kind of smartphone scale. Youre looking at billions of users out there, thats going to take a long time. Emily he says its going to take a long time. In terms of getting hardware into peoples hands, i have ried oculus and sony project morpheus. These headsets are quite expensive. Who is going to buy them . Gamers were obviously buy them early on. Specialists that need them to do their job more efficiently, in the business of architecture or other situations where you can visualize 3d space. Companies to have more effective meetings will have them in Virtual Reality. For specific reasons, people will get them much easier. General consumer adopt will take longer. There are a lot of nishioka special businesses that can take advantage of this to do business more effectly. Eric, is there a Tipping Point . Is it when oculus comes out . Its too early for the Tipping Point. You hit on the crux of the problem. If you look at oculus, you need samsung, p. C. , for you need the newest phones. Google cardboard is a very short experience. The first forays into the market will be the things you use for small periods of time that will have low adopter bases. They will learn what the right experience is and for the next iteration of hardware. Emily creating a v. R. System, you couldnt find a commercially viable option. What is different this time. The hardware immersion makes it much more appealing. A lot of learning, a lot of technologies coming together. What we did 10 years ago was quite early. Technology is catching up so that it is possible to create these immersive and comfortable experiences that you could not ave done five years ago. Emily what do you think, eric, are people going to be buying more of these expensive headsets like oculus or do you think something more like cardboard, a better version of it. Cheaper headsets is going to be . Hat takes this i think the numbers and scale are going to be more normal, for sure. If you are interested in Virtual Reality though, and you are not a gamer, you will probably come through the obile pathway because spending 1,000, 1,500, 2,000 on a most probably outs the people in this space. But we do think people want to find a pathway to the hardware, so it is really just a matter of time. Emily i had a conversation with brian grazer, and i asked if we were in a tv bubble because there are so many scripted programs, most nonscripted, distribution channels, platforms. I said is the tv bubble about to burst . He said i dont know if the bubble is about to burst, but there is so much content, and what will change that is a new platform like Virtual Reality. O you think vr can do what tv did for tv for the smartphone did, is it that epic . Its going to be epic. Like we all said, its going to take years. Its a platform that going to be around for decades. Its still early, but it is going to fundamentally change the way we do everything, teach, learn, socialize, do business. Its going to impact almost everything. I think there will be more units, but ultimately, the incredible immersion you can get from the high end gear is going to take hold. Its a matter of time. Its not 10 years, but in five years, i would expect it to of substantial reach. Emily what order do you see happening, gaming first and broader entertainment . How does this play out . I think gaming first because that is the market that has been most exposed to the technology and the market that can get the hardware they need. If you want to use oculus, you need a gaming p. C. By definition, gamers are going to be early adopters in the market. But to the point about your video about video, by 2020, you will be able to put on a Virtual Reality headset and the quality of the video on the screen will be just as high as your hdtv at home. Emily and it will be like you are in the audience. You will be able to watch it with anyone in the world. Emily looking forward to t. Thanks for your time. Now to Google Ventures where i was speaking to brian grazer earlier. Formerly it was renamed just to j. V. Today. The vc firm is investing less and backing fewer companies, they say. They have invented invested 20 less in 2015. They backed 34 Companies Instead of 57 last year. Theyre also abandoning the idea of running a separate fund for overseas investing. The move came only 18 months after setting up their First International fund and an office in london. The ceo says they want to have more flexibility and where they invest, so they will be pooling their investments into a single vehicle next year. This comes on the heels of the whole alphabet situation. Bill merits will be joining us tomorrow. Do not miss that exclusive conversation right here on bloomberg television. Up next, netflix is stepping up its frenemy status. How the Company Plans to expand in 2016. Also they say the best things in life are free, but not in drop box. They are announcing shutdown of two of its free mobile apps. Emily tomorrow on bloomberg go, do not miss mark trudeau. 7 30 kelloggs chairman and c. E. O. John bryant. Dropbox is changing its course after introducing to consumer friendly apps last year. Now they are pulling the plug. The first app displays a image in a drop box account. The other is an email and task manager called mailbox. What is the new direction . What does this mean . Joining us is a Bloomberg News reporter who covers dropbox for us. I was a carousel user and was devastated by this news. I brought my whole family onto carousel. Drew was very excited. We were very excited when we talked about it. What happened . I think part of the problem is drop box has these use competitors in photo management. Google, apple, hard to compete. Its also a matter of focusing in. I think dropbox had the sort of tangential products that some people like yourself loved but that a lot of people were not using and are not really core to their business. Emily i sat down with the ceo on studio 1. 0. At that point they were staying the course to this strategy. Take a listen to what he said. We want to do more and more to help people over time. Its exciting. Ailbox has been a new way of dealing with an overflowing inbox on your phone. Carousel, our idea with that is to have a photo app that lets you have your whole life in your pocket wherever you are. For me, i have every photo you have ever taken in my life with e wherever i am. Emily i know they were tangential, it seems like kind of a big shift. Part of the idea was creating a family of apps like Mark Zuckerberg was doing at facebook, and now that seems to ot be what they are doing. He seems as a product visionary who is following startups, where new consumer apps are going. At the end of the day, drop box had to say we make most of our money from businesses, specifically businesses working together in teams. You need to use drop box. Emily so, is dropbox becoming more like box . Are they more similar . Drop box has 400 million users and growing. Theyre much, much bigger than box. Just in scale theyre bigger. And i would say they use the Consumer Option to sell into businesses which is very different from box. Emily dropbox keeps coming up as one of those companies that isnt living up to its valuation, its unicorn tatus. What more do we know about how well drop box business is doing . Drop box got a dollars 10 million valuation early on. And since then it has gotten a lot of falcon. Fidelity marked it down. Another mutual funds that it is worth maybe half that. I have written a story saying they got out a little ahead of their skis, but i think there is still business there. I think there is still a lot for them to do. Emily thanks so much for joining us. We did get a statement from dropbox saying over the last year and a half we have learned that the majority of our users prefer the convenience and simplicity of the original torage we had in mind. Netflix, the plan at an Investor Conference in new york. Next year, netflix will release 31 original series, 12 documentaries, 10 feature films. As netflix gets deeper into the original content game, our networks becoming more hesitant to license their content . Im joined by a columnist at bloomberg gadfly. I love your opening line. You say good news, hollywood, netflix is less interested in buying your movies. Its not necessarily great news for all of the other content producers out there. It has been a slow revaluation of the relationship with netflix if you are sitting in the shoes of companies that make tv and movie content. Netflix pays a lot of money to license their tv shows and ovies. On the other hand, Media Companies are starting to think, you know, we made a deal here. He devil people are canceling cable subscriptions and not watching traditional television, and that is how most media makes their money. Mily is netflix becoming more like a studio then someone than somebody who licenses content . Yes, and they have been going that way for a long time. Netflixs original business was shipping dvds by mail. They got questions from the beginning about how long this was sustainable. They shifted their model to streaming video, mostly bought from traditional Media Companies. 90 plus percent bought from traditional Media Companies. They set a goal for themselves of having Something Like half of their spending on content on programming to be from their own pockets, their own original series, their own original movies, rather than purchase content they can not necessarily rely on. Emily 5 billion on original programming. They are also spending big to increase their international presence. How is the business of netflix looking . I think it depends on if you are a longterm believer in netflix or not. They have basically said we have put profits on hold for a while while we expand into International Markets which are very promising growth markets. If you look at their cash flow and profits, they dont look very good, but if you think the netflix strategy is ultimately smart, becoming more of a global company, becoming more eliant on its own content, this is a reasonable shortterm hit for netflix to make. Emily thank you so much for oining us. Breaking now, speaking of Virtual Reality, the vr wars ontinue. Xenomax has deposed Mark Zuckerberg against oculus. They sued them claiming theft of intellectual property. Facebook bought oculus last year for 2 billion. Coming up, can a pill really make you smarter . Sounds like a scifi movie. One company in San Francisco ays this is the real thing and indegreesin horowitz is investing in it. If you like Bloomberg News, check us out on the radio, at bloomberg. Com and on sirius x. M. Emily what if you could take a pill that would make you more alert and help you boost your memory and focus . Sound too good to be true . One Company Thinks its possible. They founded a company that makes these pills. They are leading a 2 million seed round in the company. Joining me is the cofounder. The pills are called rise, sprint, jan. What is in them and how do they ork . They are smart drugs, compounds that affect and enhance different aspects of cognition. One of the most popular stimulants today is a cup of coffee and caffeine. It works and it only affects a single aspect of cognition. Emily so what is in the ill . The fda generally regarded as a safe compound. In our sprint product there is caffeine, stack is what we call blend of different nootrotropic compounds for specific cases. Emily what are the compounds . Are they all natural . Some are all natural and some are synthetic as well. Emily you are profiting but reinvesting the money in r d. What other types of things are you working on . We are super excited about the notion of personalization. How can we personalize . We look at genomes. My d. N. A. Is different than your d. N. A. In my d. N. A. , it will tell me how i react to caffeine or respond to different nutrients. Second is environmental factors. Your schedule, your stress levels, your daily routines are different from mine. It stands to reason we can optimize according to your regimen. Emily we have been talking a lot about issues with the fda. You have had issues with the fda. Are you concerned about dealing with a Regulatory Agency like that . I follow that story because i think its pretty interesting but i am not qualified to talk bout it. I think they were fairly secretive in their approach. We have taken the opposite stance here. We are open source and very transparent. Ou can look at the exact ratio on compounds of the ingredients we use and all of the ingredients are fda generally egarded as safe. We want that discussion. Emily thank you for joining us. I will keep my eye on you guys. Thats it for this edition of bloomberg west. Too many a guest from Google Ventures, g. V. , excuse me, exclusive tomorrow. You have seen it all. Miracle pills, crazy workouts, and the incredible claims of crazy weight loss. Quit wasting your time and money and get the body you have always wanted by doing it the smart way. With wondercore smart. It is the revolutionary fitness breakthrough designed to target your core