Transcripts For BLOOMBERG Bloomberg West 20160810

Russian president putin promising a response to an alleged terror plot in crimea, saying the move Ukrainian Forces to carry out subversive actions was criminal, stupid and an attempt by ukraine to distract its people from its economic problems. Emily im emily chang and this is bloomberg west. Coming up, reinventing the macbook pro. Why tinker now . Coinns learned from the breach the Hong Kong Exchange crawling back from the brink after a massive attack costs. Nvestors 71 million and the magic of earlystage investing we will hear how to spot diamonds in the rough. Bloombergs lead first report details of a longawaited up eight to apples macbook pro line. The new notebooks will be thinner, including touchscreen strip and will have more powerful processors to appeal to video editors and engineers. It has been four years since apple gave the macbook pro this kind of attention. The book would usher in a post pc land. Our reporter who broke the news joins us now with more details. Great to have you back. What do we know . How are they going to be different . Guest this is a significant refresh to the macbook pro. This version will be quite a bit in her and have some new ports. Some of the bigger changes involve the keyboard and track pad. Its going to be a bit larger, which is good for manipulating with the mouse. The keyboard will have a screen at the top which is a high resolution, very efficient screen that doesnt use a lot of battery life and replaces the function row. The volume button guest the media controls. Now the screen can change the controls based on what we are doing. Lets say you are in itunes watching a movie. You get controls optimized for media, but lets say you are doing Something Like Video Editing. You get copy and paste and things like bold and italicized. Its a very new concept. Emily the interesting thing is that its software so apple can up dated. Guest if apple comes out two years now and you want to get a quick button to access it, they could do it the a software up eight and you dont have to buy a new computer to get that in. Emily six years ago, the ipad was the new hot thing, but sales are falling and macbook sales are still going up. This shows the resiliency of the mac and the night and the note look lineup in particular. The ipad has been falling the first few quarters. They have actually sold double the amount of ipads as max last quarter, which is one of the smallest ratios and years. But revenues are pretty much the by a few Million Dollars. It shows the mac and ipad have which is a huge change after steve jobs and tim cook and these apple executives were pushing the ipad as a lap top replacement. Taking what is clearly working and improving it. They found a product that has very high margins, so they are going to capitalize on it. Emily what does this mean for the ipad . Ofn i talked to the cfo apple after earnings, he said the ipad pro is doing well, especially among business users, but is it past its prime . Guest if you look at sales, it intod at the end of 2013 2014. I think you can look at it as passing its prime, but it is also before its next prime. I think a year from now, it will be the hit story again when they start taking advantage of the capabilities. The ipad pro is a great device from a hardware perspective. Its processing speed and theoretical power are on par with some of the latest macs and pcs from the windows world. The problem is the software that dont allow things like advanced photo management or Video Editing that people could be comfortable with. I think apple knows that and at some point, we are going to see the differences between a mac and i had learned even more than they do today. Until that time comes, its important to have something that meets the needs of nationals. Emily who is going to buy this . Guest gamers to a video editors, people who do lots of photo editing, people who like to do high quality and detailed sketches, people who are into technology and want the latest technology. That brings more advanced technology to be used by more people. You and i are very used to keyboard shortcuts but a lot of people need a guide. Up there display it for you and will make things easier for a lot more people. Emily they have been in advanced testing for the last year but were not going to see it in september. Guest apple is planning an iphone, unveil the new but it does not sound likely that the macbook will appear there. If testing and distribution emily wepossibly but dont think so. Im expecting another scoop tomorrow. Turning now to a stock were watching j. D. Com soaring its china a second largest retailer, posting a loss that narrowed substantially. The company is traditionally focused on electronic gadgets but has revamped its mix and is selling more things on behalf of thirdparty merchants. Chinas Biggest Ecommerce Company is that to report firstquarter results later this evening. Results will look at it different. The sec opened a probe into their Accounting Practices and alibaba said with reporting metrics and five new categories to better understand the business. Their core ecommerce, Cloud Computing, and media entertainment. Toer things, analysts point Cloud Computing as alibabas key to growth. It could generate 3. 3 billion in sales. For reference, alibaba posted less than half of ilion dollars in Cloud Computing revenue last fiscal year. You can see year on year growth in Cloud Computing and internet infrastructure is deadly increasing. Also keep an eye on the margins. Alibaba is consolidating to of it moneymaking acquisitions. Analysts expect these businesses to put pressure on margins this year but eventually for a few years. You can see the pressure on growth margins here, particularly last quarter. Another line to watch is how much money alibaba is generating her user. We are looking at revenue per active accounts and you can see in the same time last year, they made 8. 89 per account. We will dig into all of this and much more tomorrow morning. Later tonight, i will speak to the Olli Rehn Alba cofounder for the latest results. Coming up now self driving cars have pushed the Auto Industry to its a good year them a day in a decade. We are exploring the uptime is driving revolution, next. This is bloomberg. Emily team usa has an unlikely partner in his quest to capture olympic go m w is using Technology Developed for itself driving system to help olympic swimmers up their game. It hopes to provide data about swimmers movements in the water, leading coaches provide instant feedback. Bmw is not just helping in the pool, they are unveiling a new racing wheelchair for the paralympics. The self driving revolution is spurring a wave of consolidation. The total value of deals has exceeded 74 billion compared to an average of 17. 7 billion for the last 10 years. Joining me to discuss the heavy traffic and auto deals ahead of bt and a former racecar driver. What is driving all of these deals . For a whilee heard now that cars are becoming computers on wheels, but thats becoming more the case as we get autonomous technology. If you think of what the future of cars will be, its a computer. The components of cars are going 40,000 to 10000 and a lot of it will be replaced with software. For these companies that are in the technology, if its not something they are a debt that, they want to consolidate and partner with the people ahead of the game so they can keep their footing as one of the largest suppliers. Emily what kinds of things are in demand . Alex here we are in Silicon Valley and this is the hub of it. It is the Self Driving Technology and Companies Like tesla that are leaps and bounds ahead of everyone else. Everyone is a little live behind the eight ball trying to catch up because these are not necessarily Technology Companies to begin with. To partner with these different Technology Companies that can provide that information and deliver them the capabilities they need to keep on pace. Some specifics are a huge thing. Almost every area of the car has to be covered in sensors and cameras. It has two since the surroundings of the cars and the cars have to speak to one another. They have to be able to talk to things like traffic lights in the reading has to communicate in one big network. You are looking deep into the future. Theres so much happening and you have to be so far ahead of the game if you are not in it now, by the time we start realizing that technology in our everyday life, if they are not 10 years ahead, they have the bus. D. C. More partnerships between Silicon Valley and detroit . Guest absolutely. Everyone is looking at Silicon Valley. If you look at tesla, that is why they have such a head start. Its scary for a number of the big automakers and you have gm who are certainly taking this seriously. Firstill be one of the longrange electric cars when that comes out with the volt, so they are certainly trying to take it seriously. Egg manufacturers that have done it a certain way for so long and all of the sudden, the next five years, we will see more change than we have in the last 50. Emily we have been talking a lot about elon musks vision for the future. Do you believe in a solar powered electric car . Alex i do. You hear uber talking about rideshare everything is going to be rideshare and ownership is going to die. I and my company dont believe that at all. It can complement each other but elon musks Master Plan Party was if you own a car for the 90 of the time when you are not using it, that car could be leased out to the network and you can actually earn money when that car is out there picking up people and you can be thanking off of that. Thats the future because ownership will go down. Autonomous vehicles in theory should not crash. There will be a set cost, but ownership should reduce cost the same way ridesharing will ultimately save people money. I dont get is going to kill ridesharing or ownership. We agree with the tesla master plan that ownership will be alive and well. Its just going to be a very different model of what ownership means. Thank you so much for joining us. Car technology, smart cars and other technologies are the fastestgrowing part of the u. S. Wireless inter industry. Carriers, the internet of things has become a major source of Revenue Growth when handset related businesses are weakening. At t is adding connected cars at twice the pace. Coming up, the Hong Kong Bitcoin exchange resumes trading after a multiMillion Dollar hack. We will tell you what is he done to keep the currency exchanges safe. Is the Consumer Internet startups face getting saturated . Where to investors see the seeds of opportunity. Emily tv executives are sounding the alarm about the overs by of content as netflix was another record year of reduction. Netflix will make 500 original programs and netflix alone will make 71 of those shows, not even counting the growing number of kid series, movies and foreignlanguage programming. A veteran fox executive warned we are ballooning into oversupply. I continue to believe theres a greater supply of tv than can be produced profitably. A week to bitcoin after the exchange was robbed of 71 million, trading on the plat form has resumed. It brought back memories of a leading exchange where stock investors blamed disruptions on technical issues and cyber attacks. What have we learned from the latest incident . Joining me now is joyce of lang. Lostunderstand it, you money in the hack. How much did you lose . I lost a few thousand dollars u. S. I have positions on all the exchanges. Exactly happened here question what went wrong . Guest what went wrong as we are dealing with new technology. Its notew technology, as if we have been doing this for 50 years. Once you have new technology, things will go wrong. It turns out that hackers found a hole in it and stole one third of the money before anyone realized the money was gone. Is one of those things where we look back and see what went wrong and what went right and how to fix it and make it better for next time. Investors losing 36 of their deposits. How is it different . Far as difference is as anyone can tell, no one is covering anything up. Everyone is trying to be honest and work this out. Know haveeople we done something wrong are the people who stole the money. Everyone is trying to work through the losses as best they can. One of the things that this has made clear is that its hard to tell the difference between a good at coin company and a bad one guest . I would say this is new technology and it is one of those things where you have to realize there are risks and if you are not comfortable rolling your own parachute, you should be doing something else. Bitcoin is new technology. Its like writing an airplane in 1915. Several decades from now it will be mature and safe, but right now it is really new technology. Its a good idea if you are interested to find out as much about it, but its not something you want to put all your money in. As technology improves, dont hackers improve and arent some of them just always one step ahead . Guest its not just about hackers. Its about people and processes. As we learn how hackers work and how the system works, we can improve our processes. We have a Major Exchange that fell down, but at coin keeps rolling along. That is interesting because if you look at 2008 when Lehman Brothers went down and we are still trying to recover from it. The other thing we are learning is all the major banks have been asked to explain what happens if they lose 30 of their capital and they cant. But we are in a situation where a Major Exchange has lost 40 of its capital and we are going through a Legal Process by which legal things will happen. Scarlet what can exchanges due to improve security . Guest its not a matter of just the exchange. Its a matter of the user. Dont put any money on the exchange that you are not exchanging. Its better to hold your bit point in a hardware wallet that you can control. You can move money across different exchanges and if one exchange goes down, you do not suffer a total loss. Emily is that a good longterm plan market sounds like stuffing money under your mattress. The good and the bad thing is nobody is going to get a government bailout. Risks andly see the if you understand the risks and can manage the risks yourself, it is a good ring to be in. Its your responsibility to understand whats going on not government insured. You are not going to get a bailout from the government if something goes wrong. Emily the chief science officer at Bitcoin Research laboratory joining us from hong kong. Coming up, the magic of earlystage investing we will hear from two veteran investors about how to spot the diamond in the rough. You can check us out on the radio and on the Bloomberg Radio app, bloomberg. Com and on serious xm. This is bloomberg. Hey hows it going, hotcakes . Hotcakes. This place has hotcakes. So why arent they selling like hotcakes . With comcast Business Internet and wifi pro, they could be. Just add a customized message to your wifi pro splash page and youll reach your customers where their eyes are already on their devices. Order up. Its more than just wifi, it can help grow your business. You dont see that every day. Introducing wifi pro, wifi that helps grow your business. Comcast business. Built for business. Mark im mark crumpton. Lets begin with your first word news. Donald trump made a Campaign Stop in virginia and spoke at a rally telling the minors that their livelihoods are in jeopardy if Hillary Clinton becomes president. Mr. Trump im not like a neutral for the minors. Lary will be a horror sure a horror show and i will be an unbelievable positive, but this is the last shot. The minds be gone. The mines will be gone if she gets elected. Precise forn was saying they would put a lot of coal miners and Coal Companies out of his this. A new poll has mrs. Clinton with a 52 lead over likely voters over donald trump. In a fourway contest, she has 44 . Libertarian gary johnson has 10 and the green partys jill stein has 4 . Wants ton chancellor tighten security after a rash of attacks last month. Along the among the proposals, speeded up deportation for immigrants accused of terror activity. Veterannders, a 30 year of espn and one of its most respected journalists is dead. The networks that he died early this morning of unknown causes. He was a native of canada and was one of espn buzz was visible faces, hosting sportscenter. Im mark crumpton. This is bloomberg. Its just after 6 30 in new york. Its 8 30 in sydney, australia. Im joined by paul allen for look at the markets. Good morning. Lets start off with the new Zealand Dollar, up by more than 1 after the reserve bank of new zealand cut the cash rate by 25 basis points thats right come a cash rate cut and the new Zealand Dollar went up. In a recent press conference, the governor saying nothing really surprising anymore. There are numerous factors the ,n the reserve banks control including an unwillingness to raise rates anytime soon. The bank of korea holds a hearing and little over two and half hours. All 19 economists say curry will hold the cash rate there. Take a look at the markets currently a little weaker, expect things some week this. Allen for bloomberg tv in sydney australia. Emily this is number request. Im emily chang. Its time for our weekly deep dive into tech investing in venture capital. We are looking at earlystage investing. Im joined by two veteran investors. Jess has been known as a super angel, acting events from fit it. And the big facebook investment, which i think will go down in history. I want to differentiate the name of this series is called series a but we are not necessarily talking about series a investing. Investing, series a but first of all, at that early stage, how do you find companies to invest in . Are these ideas chasing you or are you chasing them . Us. T they come to we have a Broad Network of friends we have invested with who say this is an interesting opportunity and they send it to us the a email and then we look we will meet and go through the investment strategy. We see 3000 of those referrals. Ratio. We have a similar we may invest and 25 or 30 and a lot of them are coming through people we know. We will also see businesses that have already launched and do a fair amount of reading to figure out what is going on. Emily and the size of each investment is like guest . In 2we will be involved million or 3 million and we will write a Million Dollar check. For us, it is all about the value added that the investors can bring to the founders and our job for the eight teen or 24 months is to get the companies to be series a ready. Here are the critical hires that weve made in the progress on sales and marketing and we are basically seeing with all of those hurdles met, you guys should invest. Know . How do you what are you looking for . Are you looking for the idea . Guest it is a set of. How unique and exceptional the founders are. What is the passion that drives them to hold this rod at, either the hard science or something truly differentiated. We dont want to be like we are going to invest in the 10th version of the ondemand product or something name your favorite. We want to invest in large opportunities because of the company succeeds, we want to see a path to 100 million in revenue. If you get there, you can go ipo and we will look at how this company can be help. Is it really something we should do or is it something we can really do much with . Finally, is one of us going to spend the next five or eight years to work with this team to build this story the way i did with it did . For greatare looking founders going after Healthy Markets with a unique insight. Youre looking for markets with some sort of fundamental change going on there we believe theres a unique opportunity for these teams to go out and do something different. Alot of it comes back to unique insight the team has for not only is there an opportunity but is it the right folks to go after it . Emily i was speaking to Mark Andreessen and he said the hardest thing to do is stay openminded and not immediately think its never going to work. Notdo you make sure you are pattern matching ideas . Guest its hard. A lot of it is about pattern matching. You have to filter through thousands of opportunities. Theres also a lot of false positive data as well where you or your firm invest in a Company Recently that was poorly timed. Is you try to not over emphasize particular pieces of data that they not be relevant for any particular opportunity. Emily this term pattern matching is like a doubleedged sword. It describes what vcs do when they are investing in founders and not investing in women or in minorities. How do you make sure youre not pattern matching . Have 30 of the founders of our most recent fun are female, so we are really happy with that. Emily is that something you actively tried to do . Guest as an input as an industry, we do need to get better at it. Founders, they were very comparable reaching out to us. I have a female partner and you just have to work hard and show you are very open to those and that is true to minorities and we are nowhere near as accessible with minorities. And it justsee us your ideas and then you have them go through the same process. Something and look at the idea and say this is insane. This was just know. Their lawyers have tried to have the meet with the team three times and the third time i said yes, it was already too late. Donty companies that make sense and you have two move them out as soon as possible, you have to have the intellectual curiosity to say i would say no but maybe i should spend more time. We had the notion where we ask spend half an hour with them and either cooperate or tell me what you think. Pattern matching gets thrown around a lot. Emily everyone is looking for the next mark zuckerberg. A young whitehave male from an ivy league institution, thats a flawed of roche. If you pattern matching as here is a person who has a unique hasnt in a way that been done historically where there is an opportunity for the web has how evolved, we are trying to pattern match a stunt founders and their insights. Well all grew up with different circumstances and folks are able to reflect on the circumstances and identify opportunities at a lie to a whole wide demographic. Whereas someone who sits there and says i want to found a company, now let me go find a good idea. That tends to be the opportunities that are more cookiecutter as opposed to finding a unique insight. Once you are invested in a company, at what point do you want to see traction . At what point is the pressure on . Guest we will invest in the founders with a couple of whichers with a product is already in alfalfa top some types of companies cheat to start and build up. You can prove there is a willingness to pay for a certain type of customers, so you do a little bit of that work. Real minimums no if we get the revenue, that is the cherry on it. Emily when do you want to see cash flow positive . Guest it depends heavily on the business and what the opportunity is. Facebook took a long time before they started monetizing their business but a lot of people built a unique opportunity whereas on the flip side, if you are selling tools and enterprises, you might want to see a willingness to pay earlier because not only does it demonstrate a revenue model, demonstrates they are committed to and plummeting your Tech Knowledge he. Some of it depends on the business they are going after and some of it depends on the bar the founder sets. The more money they are spending it, the more they raise and the more pressure they put on themselves that they do have a ticking clock because they are burning money and running quickly toward a rick wall as opposed to the teams that are in experimental mode. It might be a science project at this point and we are going to try to figure out if there is a commercial application here. Do you live up to those expectations . Quick marshall break and we will come back to that. We will be back in the moment and talk more about the environment. This is bloomberg. Emily this is bloomberg west. We are picking up our weekly roundtable series a. You have had a couple of wins in the last few. You invested in jet and xl which just got hot by walmart. These huge make of acquisitions in the consumer space . Think what is exciting as you have these companies with billions of dollars on their allen sheet recognizing a great way to innovate is to look at companies with unique insight. They are not the traditional tech acquirers or types of companies that would get acquired. When it comes to their business been donech had not previously, these guys are reselling razors that you can buy on amazon for less money, whats the opportunity here . They ended up holding a connection with their customers that was attractive to unilever. On the jet side, a lot of people kind of scratch their head, but they are focused on an audience that is not your typical amazon customer. A lot of people store it first base on price first and can you second. Emily here is what i scratch my head about this is a barely oneyearold to me that got bought for 3. 3 billion. How can it be worth that much . Guest sometimes the value is based on what the opportunity is with the acquirer. Another example is facebook buying oculus. Or gm buying a company like cruise. If you are one of these businesses, for walmart, they andgetting threat by amazon their ecommerce growth has slowed in recent years. Instead of doing smaller act as the shins which may not move the needle for the business, they make a boulder move and work for a company like jet which has a fresh brand that appeals to a younger demographic. Buty these are huge exits, there are companies that had big ambitions to be independent businesses. Or ipos woulda be the next exit strategy . The ipo market has been very challenging. Au cant there isnt like pressure to go out in this environment where there has been a lot of awesome m a. Up to thosepening you areities given once out as an ipo, you need to look 20the average performance of 14 and 2015 ipos. A payback. Ou look at i know a couple of my guys who say i would rather look at m a. Do you prefer companies go the m a route . You get a faster return and its more a search engine. Dont necessarily have control over whats going to happen. We are focused on building strong, durable businesses. Facebook had several opportunities to sell early on and we are happy they did not. Having a public currency has helped them be aggressive with things like whatsapp and instagram. Emily what about in this particular environment where it seems like the funding environment is tightening up and people are getting more picky . Guest being a Public Company is a really hard existence. If you have one bad quarter, it can take a long time to get things back on track. It depends on what is the setup for m a . If you a if you are able to approach it from a position of power, you can set it up running a business under the umbrella of the acquirer. If you look at the founding teams of things like dollar shave and jet have, they are not going to put some office on the side to use. At the end of the day, it is the founders choice. Its hard to push someone down one path or another because acquirers can tell if someone doesnt want to be there. ,ut if you are building strong durable businesses, whether youre going to have m a offers approach you are just keep growing the company and think about liquidity down the road, thats the kind of flexibility we want our founders to have. Despite everything you said around the investors employment on the founders investors influence on the to think you are going as an investor that you will make the argument that ultimately you will go with him or her. Likewise, if theres a greater opportunity to sell, you will do the same. It is our job to present the pros and cons and support and work with others. Emily we are going to talk about where you see the most promise in the Consumer Internet space. Coming up, well have more with series a. Emily welcome back. Continuing our weekly investment roundtable, series a. The last question talking about the Consumer Internet, its kind of controversial in some of said its an oversaturated market. Some say the best time to start a Consumer Internet company. What do you think are the hottest trends in consumer unit . It does feel like the 2004, 2005 environment before the social environment took off. The things im most focused on our underlying changes in demographics. You have a lot of Technology Focused on your Silicon Valley tech crowd and thats permeating broader and you think about things like uber and what that has not to people not just from a consumer perspective but a new way of working. Theres a lot of opportunity where you have people across all kinds of demographics, having opportunities and access to things they didnt have five or 10 years ago for top guest we tried to apply Consumer Market place concepts to those changes and see how the supply chain dynamic applies. We have a couple of ideas of where these can replicate and i have been spending a lot of my time with consumer hardware. It will change the lives of hundreds of millions of people who have the disease or asthma, so it has the potential to be like fitbit. Emily looking forward to finding out what that is. Thats it for this edition of request your go tomorrow, i will sit down with the alibaba chair after earnings. This is bloomberg. E announcer from our studios in new york city, this is charlie rose. Charlie david brooks is here, a columnist for the new york times. Will bed to character released in paperback in september. He has been writing about the president ial election and the unprecedented candidacy of donald trump. 50 Republican Former National Security official signed a letter warning trump would be the most reckless president in american history. Senator Susan Collins also announced she would not vote for trump. I am pleased to have them here to talou