Drone, and the Trump Administration responds with a cyber attack. But iran has a Cyber Strategy of its own. How they are attacking u. S. Banks online. First, to our top story, the continued back and forth between beijing and washington has put tech squarely in the crosshairs of the trade war, impacting Companies Like apple, huawei, and many more. A new article in Bloomberg Businessweek details how chinas tech sector is mostly insulated from exposure to the u. S. On many fronts, but there is one area where it is still dependent semiconductors. Over the last decade plus, china has seen a surge in chip imports. Now more than 300 billion. For more on the trade wars ongoing impact on tech in both countries, we spoke to Bloomberg Bloomberg techs ian king and our Global Executive editor brad stone. Ian esoteric parts like broadcoms switch chip, more common parts like an intel microprocessor or an amd graphics chip, china really cant replicate those yet. They have been trying for years and it just has not come close. Emily why not . Ian it is difficult. When you are arranging tens of billions of transistors on something the size of a postage stamp, you kind of have to know what you are doing. And making them just costs so much money. They have just never been able to develop that skill set. Emily which companies in particular in china are the most vulnerable . Ian you name it. It is the biggest pc market. It is also home to some of the largest pc makers like lenovo. They need these products. Huawei, it goes without saying. You cut huawei off, they wouldnt be able to make their core routers. Without american technology. They need memory chips, all kinds of things. Things that we dont know about that are absolutely essential. Emily meantime, brad, you have a piece out about how u. S. Tech giants, even though they may be complaining about the trade war, are actually in the best position to weather it. Brad of course, big Companies Like apple, they have the cash and negotiating power. Apple supplier foxconn has already talked about moving production to other companies in countries in southeast asia. India, malaysia, thailand, taiwan. Of course, the Trump Administration would like to see it here in the u. S. That is unlikely to happen. But i do think they are worried. We saw a bunch of letters go to the u. S. Trade representative last week. Apple sent a letter saying these tariffs are going to hit iphones, ipads, macbooks, air pods. They are saying it is going to hurt apples global competitiveness. Emily this was right after a meeting between tim cook and President Trump. As you mentioned, they do have the negotiating power and we dont know yet if that negotiating power will pay off. Brad it has worked in the past. Some of these product categories were on previous lists of tariffs as early as last year. They got off the list at the last second. I think the Tech Companies are hoping for that kind of reprieve. Of course, we will see what happens at the g20 early next week. Emily meantime, ian, huawei, you mentioned they are dependent on u. S. Chips somewhat. They do also make two thirds of their own chips, right . Ian for smartphones. The key component of the smartphone is the nickel processor. They have been arguably the most Successful Company outside of apple in weaning themselves off qualcomms technology, so they they caneir own, so supply themselves in that particular market very, very strongly. Emily brad, there is a line in your piece that i loved where you say laptops, phones, my drone have these people no compassion at all . [laughter] brad they are coming for our drones. Emily how would you break apple versus amazon, for example . Amazon, fo is shutting down its entire china marketplace next month. Brad that is interesting, right. You would think amazon might not be that exposed. Actually, they have a huge business there among the small thirdparty sellers that sell on the amazon marketplace. Our colleagues have a great story out today. These companies have no negotiating power, they are one or twopeople shops, they sell everything on the amazon marketplace. Really, it is the uncertainty that is impacting them. They have no idea what is going to happen. They have to get their holiday orders in now. It is not that easy for them to go look for another factory in india. Emily right, so what is their plan b . Brad i think their plan b is to cut orders and raise prices. That will have an interesting impact on amazons holiday quarters this year. If selection is going down, and prices are going up, it is another way the u. S. Consumer is going to be hurt by the trade war. Emily ian, if prices rise, how does that ripple back and impact china . Because china also depends on a lot of these companies in china. For jobs in china. Ian apple is an example of that. Yes, we by not need that many iphones, maybe we can go buy them from xiaomi or somebody else, but so many people are employed directly as a result of the manufacturing chain. That cannot help but impact the economy. You have all these relatively high paid jobs, all of that tax revenue, if that starts to go away, that fundamentally undermines the chinese economy. Emily so what is their plan b . Ian their plan b, what we try to show in the story to an extent is that a lot of people dont realize just how powerful they are. When sanctions have been used in the past against countries like korea or countries like japan, they are relatively small domestic economies. We use this statistic all the time. China mobile has more subscribers than the u. S. Has people. To an extent, they are their own center of gravity. There are people who have never looked at Google Search because they never needed to. There are people who are not using apps supplied in the u. S. Because they are never needed, because there is enough in that gravitated market on its own terms. Emily we dont know if the tariffs will go into effect at all. We are still waiting for this meeting to happen between president s trump and xi at the g20, but you wonder, even if these new tariffs did not go into effect, if the uncertainty this sort of uncertainty has been so intense for these companies that they are already started moving to plan b and , realizing how vulnerable they are, and start making new arrangements for the future . Brad everything we have heard from our own reporting and that in asia and others, big Companies Like apple are looking at other sources of manufacturing outside china. It makes a lot of sense. The one thing i would say is if you look at the market lately, i get the sense that maybe the market thinks there will be a resolution to this. Because otherwise, we would see a lot more volatility in the stock prices than we have seen. Emily are your sources optimistic or scared . Ian it depends whether you are talking about the market or whether you are talking about the companies. If you talk to executives, they are not keen to go on the record talking about this topic, but they are saying look, this is the wrong way to go about things. We have so much to lose here. We want a resolution. Emily bloombergs brad stone and ian king. Coming up, the already competitive video streaming market is getting another player. Meg whitman tells us why her mobileonly platform quibi will stand out from the rest. And if you like bloomberg news, check us out on the radio. Listen on the bloomberg app, bloomberg. Com, and in the u. S. On sirius xm. This is bloomberg. Emily former hp and ebay Ceo Meg Whitman has taken her expertise to hollywood as the ceo of quibi, a new short form video platform startup. Founded by jeffrey katzenberg, quibi will launch a mobile only Subscription Service in april of next year, promising hbo quality episodes that run under 10 minutes. The company has already raised 1 billion from tech Companies Like alibaba and major studios like disney, sony, warner media, lionsgate, and more, and plans to raise another half a billion dollars soon. We spoke at a tech conference on thursday. Meg first was to explain what we are doing and attract talent. The talent was like, we dont know what it is. How do you know this is going to work . Harder to attract talent. Now we have our own space, it is much more accepted and understood. The second was we have done things differently from hollywood typically doing them, in terms of the deals and how long we have to make content. It is a different cadence so we have been able to get that done. That was harder. Emily right. I definitely heard folks say april 6, 2020 . That is like a lifetime from now. Meg yes, but in hollywood but whf this content, remember we are the first ott streaming service where you dont buy a library. There is no library to buy. You cant take an hour show and just chop it into six 10 minute segments. It has to be written and shot for mobile and for this format. Emily because of that, you have told me in the past that disney and netflix are not really competition. You are trying to do something different, but you are fighting for mind share whether it is them, youtube, instagram, snapchat. Do you think that turmoil social media is facing right now, is it is good for you . Viewers will want to turn away . Meg i dont know about that. What we are doing is creating a nap that is designed to give you app that is designed to give you alternatives in those in between moments, commute, waiting for coffee, in a doctors office. What we want to do is give you something that is fantastic in that 10 minute time slot. You know, our target audience, 25 to 35yearolds, spend five hours a day on their phone and the average session length is 6. 5 minutes. So i think we have an opportunity to give them alternatives that they dont have today. Emily what about kids content . Youtube, for example, has been under the gun, criticized for exposing children to horrible things. What do you think they are doing wrong . Meg we are not doing any kids,. Kids are not going to really be on quibi. This is 18 and up and we are going to make it very clear this is an adult app. Maybe over time when we do something later, but right now , this is adult, 18 to 44, with the target of millennials. Emily what about in general . Clearly, you have to think about how healthy your content is. Who the audience is. Do you think that youtube is making some mistakes there . Meg listen, it is hard to argue with youtubes success, the most democratized platform in the world. Frankly, we would not be here without youtube. They are doing the best job they can in enormous uploading of video. And i remember from ebay, listings were happening at 100,000 a second. So you have to have all kinds of things, and i am certain they are taking responsibility to and trying to make it great. Emily you raised 1 billion. Meg yes. Emily there were reports for you were going to raise another 1 billion, but you denied those. Maybe closer to half a billion. Dollars. How far along are you and those conversations . Meg we have not started yet. We think we will probably go raise in the fall, early part of next year, but 500 million is what we think we need. We dont need it before we launch, but i do think it is wise when you can raise money and the markets are good, and we should do that. Ultimately, we will need that money to break even. We will start in the fall and look for an anchor investor to price this around. And then i think a lot of our existing investors will want to keep their pro rata share. Emily have you sensed any uncertainty or discomfort from investors given the Political Uncertainty . The trade war and what is happening geopolitically . Meg not so much for the investors in quibi but the Business Community in general is somewhat unsettled. You can see it reflected in the stock market and bond deals, and these kinds of things. There is no question there is an unsettled element around the world today. What Business Leaders like more than anything else is predictability and certainty. That is not our world today. In today. D we live emily if you were still ceo of hp right now, how worried would you be . Meg i would be worried about a trade war with china. These companies that make things, much of the supply chain is in china. That quarter of trade is between china and the u. S. Is incredibly important, and the ability to be competitive selling to other countries depends on being able to manufacture in lowcost locations, like china. Emily how vulnerable you think these companies are right now . Meg what i know is that Tech Companies, they adapt, and you can see people trying to figure out what they will do in terms of a trade war. Listen. Everyone always adapts, but it is easier if there is more predictability. I can tell you that. Emily you have got a lot of chinese investors, partnerships with folks in china. Do you have any concern that it could affect you should things continue to go south . Meg yeah, so our joint venture partner in china is alibaba, and they are an investor in the global platform. Weve got a great relationship with alibaba. We dont think that is going to affect us. Remember, a company like ours cannot go to china without a china partner. And alibaba, we think, is one of the best that we can be with. We are not worried about that at the moment but we will see what happens. You never know how this could escalate, but weve got a lot of confidence in alibaba. Emily traditional Tech Companies have struggled to break in to china. They have been shut out of china. Facebook, twitter, google left china. Ebay, as you know well. [laughter] emily do you think entertainment could be a new way into china for u. S. Business and u. S. Industry . Meg american entertainment exists in china today. There are quotas on how much foreign content can be imported. Emily censorship. Is censorship, but there is no question that i think the chinese Entertainment Industry is coming of age and growing. And i think there will be more opportunity for worldwide content into china over time. Maybe not in the next couple of years, but listen. The China Economy is growing, there is a whole middleclass that is emerging in a very major way, and we know that they like entertainment. Emily that was quibi Ceo Meg Whitman. Coming up, facebook is building its own socalled Supreme Court for content moderation. But will that solve all its problems . Well discuss facebooks plan for an oversight board, next. And a reminder, the boston pops fire spectacular is the countrys largest and oldest fourth of july event. Here is a taste of what to expect. [bombastic orchestral music] best day of the year 3, 2, [music crescendos] [applause] emily do not miss the boston pops fireworks spectacular, live july 4, 8 00 p. M. Eastern time, only on bloomberg television. Emily facebook is looking to create a new content oversight board. The social media giant is hosting a series of simulations across the globe as it plans an independent board to review controversial content moderation decisions. The board will provide a final ruling on posts that have been appealed for removal or that may have been removed in error. This as Companies Continue to criticize the companys control of global speech. Zuckerberg has mentioned the idea for independent appeals process almost like a Supreme Court. Monday, we spoke to our guests about how it would operate. Kurt they want to be an independent group but we , dont know exactly who will be picked for this court, even how big it will be. They say it will be around 40 people, at least that is the idea for now, and then they would break up into small groups of three to five to review individual cases. But how do you pick a group of 40 people that accurately reflects a 2. 4 billion Person Community . That is one of the Biggest Challenges they have to deal with. Emily how do you do that if , especially if facebook is doing the picking . Shira yeah, it is going to be very hard, and obviously, facebook is paying for this board so independence will be to be theys going question. That is inevitable in the situation. The point that kurt made is a good one, that facebook is now a global platform. They have many users in places like india, indonesia, other and other places that have different values than facebook in the United States that was founded largely by american executives. And the question is, will the board draw from people from those countries that are now basically facebooks future . Emily so, kurt, talk to us about these simulations that facebook is conducting. A controversial decision comes to this group of people and then they debate. Kurt correct. I actually sat in on one that was at facebooks headquarters here in california. And it was interesting, about 30 employees. They presented them with a post that was controversial. Someone had listed 70 different academics and accused them, kind of, without any proof, of being sexual harassers. They left the list up and said , add more names to the list if you know someone else who is a sexual harasser. Obviously, that is a very dramatic and severe claim to make. So facebook wanted its employees the employees in the simulation to discuss, is this the kind of post that should be left up or is this the kind of thing that should be taken down . It was two hours long and they went through all of the different questions. And what they are really trying to do is to get at how do people think about this stuff, what kind of questions do they ask so that when the real board has to make a decision like this, facebook wants to be prepared for how it is going to operate. Actually operate. Emily and many of these decisions are cultural. Kurt totally. Emily who are these people . Are these all englishspeaking people . How will they understand the nuances of the situation with the rohingya in myanmar . Shira yeah, i think that is going to be really difficult. What facebook has said as they have talked about this out loud, and to their credit, they have sought input on this oversight board. And i think what they have said is that this board would kind of tap outside experts. So if they are dealing with an issue that is culturally specific to germany or indonesia, that they would seek out people who are experts in those particular territories. But lets not gloss over the fact that the vast majority of content decisions, judgment calls about facebook and what is ok to leave up on facebook, are made by this kind of lowwage contract workforce. Not by this kind of high gloss Supreme Court type authority. Emily and kurt, there has been more reporting on this from the verge recently about the oftenhorrifying situations that these content moderators have to go through day in and day out. I mean, does that jive with your reporting, your conversation s with some of these moderators . Kurt yeah, yeah, it is a really terrible job. Think about policing the internet from the most violent and graphic stuff you can imagine and seeing that consistently all day, every day. That is what these folks do. This board, to be clear, would not replace that job, unfortunately. What this board would do is say, hey, this is a decision our that our content moderators made. Lets review it and see if we agree with it now that we have a little more time to look at the facts or discuss it amongst the among the group. What they are doing is speed something pops up, they have to watch it right away. Does it violate the policy, yes or no, and make a decision. Emily theres a question of whether facebook should be doing this at all. Facebook has made the argument that perhaps regulation is needed. Perhaps this should be a government decision. Nick clegg, their new head of policy, spoke to the bbc earlier and said i dont think it is in any way conceivable and i dont think it is right for private companies to set the rules of the road for something as profoundly important as how tech serves society. And so you wonder, would they be better off having governments make these decisions . Is that even plausible now . Shira it doesnt really feel plausible, does it . I understand the position facebook is in. They created this platform, these platforms where many billions of people congregate every day. And facebook set the rules of the road. It turns out that facebook is a reflection, amplification of the best and worst of humanity. And now that the genie is out of the bottle, they want to basically turn over a little bit of responsibility. I think what facebook wants in this engineering mindset is to give us a formulaic solution, where if x and y happen, we do z. And i dont think we are going ever going to be in a position where that is feasible, given that the internet reflects people and people are you know, they cant be reduced to formulas. Emily so, kurt, how comfortable is facebook and facebook insiders with this formula . Proposed formula. Kurt i think they are very comfortable. They want this. They want this. Mark zuckerberg does not want to be the one at the top of this foodchain saying, this is taken down, this stays up, ultimately that is my call. I dont think he wants that responsibility. Actually, we know he doesnt because he has said so repeatedly. So i think they see this as a very clean option for solving those problems that no longer puts it at their feet. Emily bloombergs shira ovide and kurt wagner there. Speaking of facebook, on wednesday, Mark Zuckerberg spoke ceo spoke at the aspen , ideas festival in colorado. He talked about election interference on social media and how the company has spent billions of dollars on security. He also talked about how facebook made a mistake in how they handled the infamous altered video of u. S. House speaker nancy pelosi. Take a listen. It took a while for our systems to flag that and Fact Checkers to rate it as false. Once the Fact Checkers saw it and rated it, they were able to rate it within an hour, but it took more than a day for our systems to flag it. During that time, it got more distribution than our policies should have allowed. That was an execution mistake. I think what we want to be doing is improving execution. But i do not think we want to go so far towards saying a private company prevents you from saying something that it thinks is factually incorrect to another person. Emily still, facebook chose to leave the video up. They did flag it, but simply deprioritized it. Coming up, a new report from a Cybersecurity Firm detailing new attacks from iran in cyberspace. How vulnerable is u. S. Infrastructure . We will discuss. And bloomberg tech is livestreaming on twitter. Be sure to check us out and follow our global breaking network tictoc on twitter. This is bloomberg. At comcast, we didnt build the nations largest gigspeed network just to make businesses run faster. We built it to help them go beyond. Because beyond risk. Welcome to the neighborhood, guys. There is reward. Beyond work and life. Who else could he be . There is the moment. Beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. Take your business beyond. Emily welcome back to the best of bloomberg technology. I am emily chang. U. S. Intelligence is saying russia, china, and iran are all trying to sway u. S. Public opinion ahead of the elections, in some cases, through social media. This as tensions continue to mount between tehran and washington over the recent downing of a u. S. Drone, and the u. S. Has ratcheted pressure up on iran with new sanctions and a cyber strike. According to a researcher at the cybersecurity iranian hackers have stepped up against the u. S. In turn in recent weeks. That includes attempts to infiltrate banks and Government Agencies through their computer systems. Tuesday we spoke to sandra joyce, the head of that Global Intelligence firm, about those attacks. What we see is a barrage of spearfishing emails from multiple threat actors emanating from iran and targeting multiple sectors, so financial, government, but also media, education, and likely others. Emily what are the objectives . To just cause disarray . Sandra right, so spearfishing emails, the objective of most of them, is to establish a foothold in a network. This could just be to collect information and intelligence. What is disconcerting here is that these tools and techniques were actually precursors to more destructive attacks we saw in 2018 by the same actors. So this could be a look at just trying to get information, but it is likely that this is also a precursor to a secondary action. That is why companies and organizations around the world need to be at high alert, with a high level of vigilance. Emily now this is just days after the iranians shot down a surveillance drone. We know we have heard from the , president himself that he called off a physical attack in retaliation on iran but did approve a cyber attack on irans missile and defense capabilities. Could that slow some of these other cyberattacks coming from iran down . Sandra what we know is that cyberattacks are not a means they are a means to carry out the National Security objective of nationstates. What we can expect to see, Going Forward, is iran continuing to use cyber means as an asymmetric you know method in the face of escalating tensions between the United States and iran. Emily so the group you call out, apt33, what do we know about them . Sandra well, apt33 is the same group that launched malware, destructive malware that we saw against International Industrial control systems in 2018, in december of 2018. They are a group that has a history of using destructive malware to carry out the nationstate objectives of iran. That is not just apt33 that we have been looking at in this recent activity. There have been other groups, also from iran, that are carrying out the same type of spearfishing attacks, things that are going to help them get a foothold into networks to possibly take it to the next level. Emily so how vulnerable would you say u. S. Infrastructure is right now . Which parts of u. S. Infrastructure are most vulnerable . Sandra u. S. Critical infrastructure spans 16 different industries. Each one of them has different strengths and weaknesses. But what we are looking at is the dhs the assistant director christopher put out a warning to all u. S. Institutions saying they should be on the , lookout for heightened activity stemming from iran in response to a lot of the tensions that are going on now. Emily look, we certainly do not know everything that the u. S. Government does in cyberspace. But who has better capabilities . Iran or the United States . Sandra well, clearly the United States has more mature capabilities, more sophisticated capabilities. But that is not to say that other nationstates, and with their capabilities, couldnt make a real dent in the infrastructure of other countries. So we should not consider it less of a threat. What were are looking at is increasing sophistication from iran and the willingness to use cyber tools, both destructive and for espionage purposes to carry out their end goals. Emily now how concerned are you, based on the activity youve over the last just few days, about escalation, given that that we are going into a really pivotal u. S. Election cycle . Sandra well, what we are seeing is a great interest, russia, iran, et cetera, into the outcome of elections. Even china has taken steps to look at elections within asia itself, from what we have observed in cyber activity. So the intent to keep tabs on election activity is certainly present. Whether or not that activity is going to interfere with the outcome is another thing. We recently saw that iran was trying to impersonate u. S. Candidates, trying to create inauthentic accounts to sway public opinion. And in that way, they are attempting to influence the outcome of elections. Emily that was sandra joyce, head of fireeye Global Intelligence. Speaking of cyber tools, an aclu freedom of information request has revealed that the nsa was improperly collecting records on u. S. Calls and texts that it was not authorized to in october of last year. As you remember the secretive, Government Agency began covertly gathering data after september 11. That bulk collection ended in 2015. So to figure out how this new wave of surveillance happened, wednesday, we spoke to the Vice President of strategy at iron net, cyber firm started by a former director of the nsa. Prior to that, he was in charge of oversight of nsa surveillance for the House Committee on intelligence. [indiscernible] was modified in 2015 by the usa freedom act. And what happened here was that the phone companies were put in charge of giving data to the nsa under this program. And they over sent too much data, the wrong kind of data, to the nsa in the aftermath of this legislation. So what we have here is an error in over collection, an error made not by the nsa but by the phone companies. Emily how do you do this by accident . Jamil well look, the nsa is seeking specific information about terrorist threats. The phone companies are producing records. Sometimes what happens is they pull a certain set of records, and that records come attached with other records in their database. Unintentionally, they provide this thinking they are providing the right stuff, and it turns out they provided too much. It is interesting the nsa itself identified that this was over collection and took steps to stop the over collection and center phone companies that you need to fix the way you produce this information. Do not need or want this data. Give us the stuff we are allowed to have under the law. Emily can we trust, given all these issues, given this error, that the nsa is not still doing this . That the phone companies are not still doing this . And that this could not still happen again sometime in the future . Jamil i think what is important to note here is that this is not an intentional sort of over collection or an effort to go over the law by the entity or the phone companies. It appears to be an unintentional error. We have seen a lot of these over the course of this program, and that weighs in the calculus of whether the government continues the program, there has been debate whether to continue it, whether they seek reauthorization of the program from congress. Under both the bush and obama administrations, it was seen as a very productive program. In the sense that it was an Early Warning system against terrorism. So there is an ongoing debate, as there has been about the overall value and cost of the program. That will continue Going Forward with congress in the public eye and with the administration talking to congress about whether they want to reauthorize it. Emily right. There are still folks out there saying that this data is valuable and that this collection should still be happening. Tell us about this argument. Jamil part of what is going on here is the data being collected what is believed to be phone calls between terrorist targets overseas and people in the United States. As you can imagine, those are probably the most important calls you want to know about. If that is happening you want to , see are these people involved in terrorist activities in the United States and what should we do about it . It actually limits the scope of content collection, which is the really privacy intensive stuff. It looks just at metadata to see who the good targets for collection are and who should not be collected against. So in a lot of ways there are some privacy enhancing elements of Data Collection that limit the scope of what you might do on content collection. That being said, there has been some debate about how valuable the program is, did we get enough people, was it just additive to other collection things . Part of what that reflects is an understanding of how intelligence collection works. Intelligence collection doesnt always give you the obvious answer right here. It is a thing of bringing you an amalgamation of a lot of data to identify who might be doing bad things in the United States against americans. That is the key to this program. Its one element of a much larger effort as a means to protect us against foreign intelligence threats. Emily but there is also a larger effort, in this particular case as an example to sort of reduce the power of u. S. Surveillance. And in your view, as someone who had oversight over the nsas actions, is that a good thing . Are we more or less vulnerable than we were before . Emily emily, jamil emily, we are seeing all sorts of huge threats out in the world today. We know about the efforts by china to conduct cyberattacks against u. S. Companies and the like. We have seen what iran has done in the physical space, with oil tankers in the persian gulf and shooting down a u. S. Drone. We know north korea is involved in major cyberattacks, including wannacry. And russia with the attacks which anniversary is tomorrow, my birthday, russia attacked ukraine and that affected international companies. We know that people are getting aggressive in this space. If we are going to reduce our collection capabilities, whether they are against foreign terror targets or foreign nations, that is going to make us a little more vulnerable. The tradeoff between how vulnerable we are and whether we get these benefits from cost savings or privacy benefits is a hard one to make and one that the government is constantly looking at. But we shouldnt just say that there are not very real threats against our nation, which there are, and it shouldnt be that we should always be reducing our collection capabilities. That can have negative effects, too. Emily that was jamil jaffer of ironnet. Coming up one new venture fund is tapping into a unique consumer market. Vices. Why vice ventures is not shying away from controversial investments like psychedelics and alcohol. Next. This is bloomberg. Emily traditional Venture Capital funds usually stay away from controversial products. Things like nicotine, cannabis, gambling, psychedelics. But one rising venture firm is tapping into these moral gray areas. Founded in 2018, vice ventures aims to be the premier partner for Early Stage Companies operating in vice categories. Seeking to grow Good Companies that operate in some might say not so good industries. The firm announced thursday the close of its first 25 million fund, backed by high profile investors, including Marc Andreessen. We spoke with vice ventures founder Catherine Dockery thursday. We are mostly interested in brands, in vice brands, whether cannabis brands, nicotine brands, alcohol brands. Emily so, why . It is hard to even get someone to come on and talk about the ecigarette industry, let alone invest in it. Why do you think this is an opportunity . Catherine so i really see these as an opportunity and i saw that as i was interviewing at venture firms. We pitched all of these Recession Proof Industries and none of them were allowed to invest because they had this vice laws. For me, i saw it was a whole market that was overlooked. It was a great opportunity to create a committee around vice and a vehicle to invest in it. Emily how much money can you make on it . I mean obviously as you mentioned, they are recessionproof. But you know what is the , business . Catharine the business is we are the first check into these businesses. So if they sell to any private equity funds, to consumer retailer, to consolation, to canapes, to anyone. Emily so Marc Andreessen invested in your find. I wonder how hard it was to raise a find from traditional a fund from traditional investors. Catharine it was extremely difficult. I cold emailed over 550 people in order to get in touch with even one. Emily so how did you get there . What was the sell . Catharine the sell is that we have a very unique thing that nobody else is doing. Everyone has ignored it to date. We can get in there when the valuations are low. You see that valuations are high upon exit for vice companies. Emily so San Francisco isnt ignoring the ecigarette market, per se. In fact, the city has just banned ecigarettes. We are still waiting for the mayor to sign that bill. But in the hometown of juul, the biggest ecigarette maker in the world, those are the regulatory issues you are going to be up against. What is your take on that . Catharine i tend to think that Binary Solutions dont tend to be the best longterm outcome. I said that because you look at substance bans historically, they tend to cause unwanted consequences. So it kind of makes me worry about an allout ban of anything. Emily we actually had the mayor of San Francisco at the bloomberg players tech summit earlier. She sat down with brad stone. Take a listen to what she had to say about ecigarettes. The biggest problem i have is how many young people use this product, and we still again, we dont understand the impacts of this product. So i think that until the fda provides the facts and the appropriate regulations of this product, then we should not allow those things to be sold on the market. Emily we dont know about the Health Impacts of ecigarettes. They just havent been around long enough. Are you concerned about backing things that could actually be unhealthy or leading to a new generation of addicts . Catharine no. So we believe the ecigarette market is really mature. We dont think there is a lot of space for new companies to start there, so we are not focused on that. Emily what about the social considerations for your investments . Are you thinking about the social implications of whether or not you are doing social good . Catharine yeah, of course and that is why we only back truly intellectually honest founders, who understand the effect of their products and dont fail to communicate any of those affects. Emily how do you decide if someone is intellectually honest or not . Catharine you spend a lot of time with them. You get to know their family and you get to know their friends, and you get to know how they want to operate a business. Emily where do you draw the line . 3d printed guns . There is a lot of there is a lot , of vices out there. Drugs . Where do you draw the line . Catharine we draw the line we believe we dont invest in products who are intended to hurt somebody else. So for example, we would never invest in guns or bombs or pepper sprays. We only invest in products that are intended for single use. Emily what is next . Where do you see the most opportunity . Where are you going to put the money in your first fund to work . Catharine yeah, so we are super excited about harmreducing nicotine. We see massive issues around ecigarettes. We think there is a way to solve that without creating a lot of harm for consumers. Emily like what . Catharine like a gum business, a nicotine gum business that was started recently. They been doing a great job at communicating the effects of nicotine, which actually are not as harmful in its purest form. Emily you have got 25 million. How quickly do you think you will go through that and need to raise more from traditional investors again who might be skeptical . Catharine i thing it will be a fiveyear period that we will be able to prove. Emily that was vice ventures founder catharine dockery. When you are one of the three richest men the world, you may not have a lot of regrets. But microsoft cofounder bill gates says his biggest regret ever came in mobile phone software. Monday, gates told David Rubenstein at a bloomberg event in washington that microsoft lost out to google in launching a mobile operating system to compete with apple. Bill we missed being the dominant mobile operating system by a very tiny amount. We were distracted during our antitrust trial. We didnt assign the best people to do the work. So it is the biggest mistake i made, in terms of something that was clearly within our skill set, we were clearly the company that could have achieved that. And we didnt. Emily gates added that mistake cost billions of dollars that eventually went to google for its android operating system. Coming up, the highstakes world of plant heists . Find out how the hot new theft isnt diamonds or gold but redwood trees. Thats next. This is bloomberg. Emily when you think of poachers, you might think of people illegally hunting rhinos for their horns or the massacre of elephants for their ivory tusks. But in california, there is another insidious side to poaching and one you might not expect. We are talking about thieves who plunder exotic trees and plants from national forests. While it might be hard to abscond with a giant redwood, poachers are targeting flora like slabs of pearls or segura cacti. Park rangers are turning to hightech to thwart the thieves, using hidden cameras, sensors and rfid. Tuesday, we spoke with bloomberg techs sarah mcbride, who wrote all about it in this weeks heist issue of Bloomberg Businessweek. Sarah there are so many thieves now hitting up our national parks, and they are taking redwoodng from the burrell flats you mentioned to ginseng in the southeast. So now the rangers have no choice. They have to use whatever they can to fight back, and that includes tech. So i just wrote a story about some redwood thieves in Northern California who were caught using a network of hidden cameras in Saguaro National park in arizona. They are injecting microchips into the cacti to try to deter thieves. And in those parks in virginia and north carolina, they are dyeing the roots of ginseng, so that if they find ginseng for sale, they can immediately identify where it came from. In the craziest i had no idea trees have dna. Emily right, i was going to ask you about the dna testing. Sarah right. So three years ago, some people were apprehended and convicted of stealing maple trees in the northwestern United States. Convicted in federal court based on evidence of the trees dna. They can take a tree or a piece of wood and match it to, say, a tree stump in a forest thousands of miles away. And they know this piece of wood came from that tree stump. Emily so then how do they track down the thief . Sarah whoever was trying to sell it. So that person still has to somehow be attached to the wood. In the case of maplewood, it is often sold for guitars and things like that. Emily all right saguaro cacti, i had to look it up. These are the cacti you see in pictures of the desert. Sarah the iconic woody woodpecker cacti. Emily exactly. What is happening with these . Sarah a few years ago, there was a spate of theft of those cacti in arizona. And they actually, you can get a , surprising amount of money 100 a foot is the apparently the going rate for those. So if you have a 10 foot cactus, thats 1000 right there. So the rangers decided to implement a program of microchipping their cacti. They go around with these special guns, inject chips into the cacti, and then they can swipe an rfid over any cactus and see if it came from the park. They think that has been enough of a deterrent that people have stopped or not on the same scale as it was, poaching those cacti. Emily there is even a role for social media here. Sarah yes, there is. That is in ways hurting the parks. Here in california, there has been a spate of thefts of little succulents that grow on cliffs. They have actually caught thousands and thousands of those that people are trying to smuggle to asia where they have become a big thing, and that is because of things like instagram feeds, where everybody now wants these little succulents. Right. But they can also catch people more easily thanks to social feeds too, so it cuts both ways. Emily so interesting. Should we assume that big brother is even at the national parks, watching us when we go on our peaceful and leisurely hike through the redwood forests . Sarah unfortunately, the surveillance state even reaches into our national parks. So yes, yes, we should. Emily so you know, what is sort of next here . Obviously, we are talking about the national treasures. You know, how well do park rangers think that technology can help in cracking down on these practices . Sarah its a cat and mouse game. But for example with redwood burrells if they didnt have , the hidden cameras, unless they caught somebody in the act of actually trying to steal these pieces of wood, which are hundreds, sometimes thousands of years old, there was no way they could get that person. Now they have a decent chance of getting them. So i think the odds are good. Emily that was bloombergs sarah mcbride. And you can hear from more of the magazines editors and reporters every saturday and on sunday businessweek on bloomberg television. And a reminder, do not miss the boston pops fireworks spectacular, july 4, live, 8 00 p. M. Eastern time only here on bloomberg. That does it for this edition of the best of bloomberg technology. We bring you the latest in tech throughout the week. Tune in every day. 5 00 p. M. In new york, 2 00 p. M. In San Francisco. Were Live Streaming on twitter as well. You can check us out there, technology. And be sure to follow our global breaking news network, tictoc, on twitter. This is bloomberg. Ahn along withry paul allen, counting down to asias major market open. Shery here are the top stories we are covering in the next hour. Back on track, the u. S. And china talking trade once again as President Trump throws halloween throws huawei a bone area president makes history at the dmz, the first u. S. Leader to set foot inside north a,