Transcripts For BLOOMBERG Best Of Bloomberg Technology 20170312

We have all the highlights from this weeks google next conference. This week, wikileaks published thousands of documents taken from the cia that expose a massive toolkit of cyber spying techniques. Cia hackers have the ability to access information from what were believed to be secured messaging apps. They can also run malware on windows and tap into samsung tvs. According to cnn, an official criminal investigation has been open. Julian assange of said he will work with the Technology Companies to close the gaps identified. Hearing these calls from some of the manufacturers, we have decided to work with them to give them some exclusive access to the additional Technical Details we have so that fixes can be developed and pushed out so people can be secured. Caroline Julian Assange went on to say the disclosures show the cia has lost control of its Cyber Weapons arsenal. Today we have been getting statements. They took a stab at Julian Assange. That was pretty interesting. We heard from them saying that the American Public should be deeply troubled by any kind of leaks that wikileaks might be putting out there that could compromise u. S. Intelligence. While they have not confirmed anything with the leaks, they have come out publicly to us, telling us directly that they dont stand for any kind of, anything that would compromise the u. S. Ability to gather information. They have also tried to make clear that they are not allowed to do electronic surveillance on u. S. Soil. You see them pushing back at the accusations we have been hearing from these disclosures. Caroline we have been hearing Julian Assange weigh in on the webcast. Have a listen. The cia developed a giant arsenal that appears to be the largest arsenal of trojans and viruses in the world that attack most systems that journalists, people in government, politicians, ceos, and average people use. They didnt secure it. They lost control of it. Then, it appears to have covered up that fact. Caroline accused of losing control than covering up the facts, how dangerous could it be if the cia did leave these vulnerabilities open for others to find as well . Vulnerabilities, but the real aim is weapons. It is one thing to release the tools if you are wikileaks, but when you release the final abilities, those can be weaponize. We have seen within 24 hours of discovering a new vulnerability, especially if it is spread around the world, then attackers will use that vulnerability. 99 of major breaches happen because of an unpatched vulnerability. If wikileaks wants to be responsible for once, then they need to take great care and how they release the phone abilities. Caroline the fbi are now looking into how wikileaks came across this information. Right, wikileaks told us that this trove of code and malware and viruses and zero day security vulnerabilities was circulating for a long time among government hackers and contractors. They say one of those people handed that content over to wikileaks. The question is who could that have been. The cia will be making a list of who those people are and trying to find who that one person was that turned over this content. That is something we will have to wait to see if this will be happening, investigations, into this. Caroline this is a strained relationship between the tech giants and washington at times. Our minds go back to the San Bernardino shooting and the fact i dont like to allow back doors into their encryption. How do you think this puts the onus on the relationship Going Forward . I think government needs to make Strong National security decisions about what they need to provide Tech Companies. If indeed the cia did lose this information and knew it proliferated and hackers were using it, i would like to have seen an earlier disclosure and work with Tech Companies to help strengthen our defense. That is security, protecting the people in the u. S. , national security, especially something so important as a cell phone and our data, which is where we put everything we do and say these days. Caroline still ahead, alphabet ups its cloud game, adding customers and partners, but will it be enough to catch up with amazon and microsoft . Plus, blue origins reusable rocket is expected to debut before the end of the decade, and jeff bezos expounds on that vision. My longterm vision for blue origin is millions of People Living and working in space. We need a spacefaring civilization for a bunch of reasons, and that is the vision. Caroline disneys ceo bob iger is staying put on a panel of ceos to advise president trump. During a shareholders meeting, and activist requested that he leave the panel, suggesting his participation supports policies. Take a listen. I did not believe nor do i believe that my membership in that group in anyway endorses or supports any specific policy of the president or his administration. I think it is actually a privileged opportunity to have a voice in the room. Caroline speaking of president trump, he met to discuss immigration policy with the widow of steve jobs on wednesday. Critics have often cited steve jobs as an example of how the u. S. Has benefited from welcoming foreigners. An organization has supported immigrants and refugees affected to trumps immigration order. Google sees a competitive advantage over amazon and microsoft. At a Company Conference on wednesday, diane greene cited data that ranked google as the most reliable company. She went on to say google cloud is attracting clients such as ebay and verizon to a broad portfolio of products. The ceo said he sees Cloud Computing evolving into one of the companys core products, such as search advertising. Google cloud is a natural extension of our mission. We are just doing it for businesses. It means increasing the availability and lowering the cost of data storage. Caroline we also sat down with the chief scientist for Artificial Intelligence at google cloud come asking about the transformation of Machine Learning in cloud technology. I think it will be tremendous. I think not only cost savings because of the Machine Intelligence and data analytics, it will open up financial services. We can have Better Service in terms of personalized banking or in retail. We can have new ways of delivering products to customers. Ai and Machine Learning is huge. I deeply believe this is the driving force of a transformative time for our industry. Caroline is it why you went into business, academia, to come to google . I think you are totally right. I have been working with technology for 20 years, and in the field of ai and Machine Learning. I want the field to grow into this major force of our society and the future of our business, and i want to participate and contribute in this transformation. I thought hard about what can ai and Machine Learning contribute, and the keyword is to democratize technology. I dont want to technology to be in the hands of only a privileged few, so cloud is the best vehicle to democratize ai. It delivers the power of the technology to so many people and businesses. Caroline as Machine Learning and ai show what they can do, the question of ethics comes into Machine Learning as well. Is that something you think businesses and academia are keeping pace of . It is an important topic that we should invite the whole of society to participate. Every time there is a new Technology Transformation in our human civilization, that Technology Becomes a force of change in the way we live, work, conduct our business, do regulation, create policy. This is inevitable, but the important thing is that all parts of the society participate, whether as an educator or as a technologist, i care deeply about this. Caroline a cucumber farmer using google cloud, is the price going to continue to drop . Will the competition in the market help continue that . Im not a business person, so i wont talk about price. I dont think i have many things sensible to say, but what i want to talk about is that the competition will not just be price. It will be the product we offer, what we can give to the customers that they need. I know and we know the customers are going to need powerful, easy to use a i and Machine Learning tools, and that is what i will be focusing on. Caroline how do you think google cloud and ai Machine Learning elements of that are better than the rest . We need to look at google as a company, it has the deepest in terms of ai talent and technology. Before i joined google, i was in academia and i know some of my best students go to google, and i know my google colleagues, the engineers, researchers produce some of the most phenomenal work in Machine Learning and ai. If you look at what google brain is doing, the work they have been doing in health care, winning challenges in ai competitions. We look at our colleagues and many things, so i think google is unmatched in its ability of Ai Technology and Machine Learning technology. Caroline that is what continues to attract people such as yourself. I have to ask you about the ribbon. It is International Womens day. I look around us and it is not particularly filled with females. You are being charitable. I think we should acknowledge that the diversity issue in ai and stem continues to be an issue. Its not just gender diversity. There is other diversity. Caroline coming up, wikileaks exposes alleged cia spying techniques, and Samsung Smart tvs are getting unwanted attention. More on the south korean giants latest debacle. Plus, jeff bezoss space colonization dream gets its first paying customer. This is bloomberg. Caroline making waves in nevada, the company has revealed the first images of the first fullscale test track in the nevada desert. The goal is to get a test run in the first half of the year to prepare for the construction of its first commercial installation. Hyperloop one will focus on transporting goods, and eventually passengers, at high speeds. Blue origin saw a lot of action. Jeff bezos tweeted pictures of the new engines. They announced the rockets first paying customer. Blue origin has signed a satellite operator as its first client. This as the company prepares to launch more powerful rockets in the next decade. Jeff bezos announced the news in washington. A few months ago, we started approaching customers and the company was very interested right away, and it was, it is really a great partnership, because they have done so many new vehicles in the past, so we couldnt hope for a better first partner because theyre going to be able to help. Caroline bloomberg was at the satellite 2017 conference and joins us from washington. It is a huge step for blue origin as a company. This is a company that has lived on jeff bezoss dream, and now they have revenue in the form of a paying customer. It is notable that this announcement was made at satellite 2017. This is the First Step Towards more paying clients in the future. Caroline i believe they have already been a customer of spacex. How do space x and Virgin Galactic compare . We are seeing the Continual Development of new and more powerful rockets able to launch satellites to geostationary orbit. The rocket blew origin is working on, they say their launch contract is for 2021, so still a couple of years out, but it will be a powerful rocket on the scope of which we have not seen for quite some time. You are seeing jeff bezos expand to paying customers. Caroline there is a great story on bloomberg about taxpayers and how much they might be on the hook. Is this something you think is becoming known by the general public, or is this something private companies should look to themselves . The launch industry as an industry is familiar with mishaps, and whenever a rocket explodes, it is a setback for the industry because images of burning rockets dont do anyone any good. The insurance question is interesting. Often times there is dual insurance, the deals tend to be different for each provider, but what you will see Going Forward is bigger, heavier, more powerful rockets capable of launching heavier and grander payloads. If you are a satellite company, you have more options. So for the satellite industry, this is great for them because they have more options and there is more competition, which will lower the cost for everyone. Caroline great for satellites. What about great for the consumer desperate to get into space . Do you have any time frame for what blue origin is talking about . They are talking about taking tourists to the edge of space for weightlessness and in bringing them back. I dont know the timeline, but it is within the next few years. They have leaned on what they learn from test flights to develop the new rocket they are talking about. Caroline remind us of what jeff bezoss grandview is here. We know elon musk is a visionary, but what does jeff bezos hope to achieve . They are similar guys, both tech billionaires who made their fortunes in the internet, didnt immediately plow those fortunes into private space companies. Jeff bezos started blue origin 15 years ago, and they were relatively quiet until recently, but his vision is similar and he wants to have millions of People Living and working in space. Caroline it is more headaches for samsung. According to documents released by wikileaks, samsung tvs could be used to spy on users. They have a microphone which can pick up and transmit information while the device appears to be switched off. It says it is aware of the report and looking into the matter. The south korean tech giant is hurting from recent debacles, jay y. Lee preparing to stand trial for bribery and investment. There were many competing devices that were mentioned in that report from wikileaks from apple phones to android phones, but this is the last thing that samsung needs right now. They are trying to get back on track after the troubles with the smart seven. They are poised to introduce the next smartphone, so they dont need any more hits to the brand name. The wikileaks documents show the cia was using a program called weeping angel to convert smart tvs into something that looked like it turned off, but would be monitoring what is going on in the room, so not a good thing for them. Caroline not a good thing when it is a product element, and the helm of the company, jay y. Lee, facing court once again. Explain to us how much the investigation into the executives has broadened out. Thats right. Today we have the preliminary hearings for the trial. It is not clear whether jay y. Lee will appear, but attorneys for both sides will appear. One thing that is striking is how quickly the investigation is moving at this point. The special prosecutor was tasked with investigating these allegations of trading favors at the highest level of government, and only given 90 days to do that, which is quick by international standards. He asked for a 30 day investigation extension, and the same administration of the president who has been in peach denied him the extra 30 days to keep digging. They also wont let him into the president s residence to continue the investigation, so he is playing a quick game and now the trial will begin and move quickly. Caroline how is asia responding . The investor base, samsung is at all time highs, but is there concern jay y. Lee could end up in prison . It is a high hurdle to prove he personally was at fault in some of these payments. Samsung has denied any wrongdoing and said they did kill tens of millions of dollars in payments to this confidant president park, but said it is not an exchange, so there is a high hurdle to prove jay y. Lee was involved. The samsung business has continued quite strong, shares near an alltime high, chip and display business is doing well, so that has bolstered them come and now they will come out with this new smartphone at the end of the month. Caroline coming up, president trumps latest order puts the brakes on h1b visas. What does it mean for Silicon Valley attracting top talent . All episodes of Bloomberg Technology Live Streaming on twitter. Check us out at bloombergtechtv at 5 00 in new york and 2 00 in san francisco. This is bloomberg. Caroline welcome back to the best of Bloomberg Technology. Im caroline hyde. President trump took a second crack at his controversial travel ban, replacing the original and restricts entry to people from six predominantly muslim countries. Iraq was removed and the linkage amended to make clear that visa, green card holders and citizens will not be denied entry. The suspension of the 15 day Premium Processing program to pass track applicants for h1b visas, a process that Silicon Valley tech firms use to find the best talent. I believe what we are looking for right now is the beginning of the dismantling of this program, and i think that will work out or to the administrations goals, which is unfortunate. Caroline we know there are some key issues at the heart of it and, sometimes being misused. How can it be improved rather than dismantle . I believe one of the things we talked about the last time i was here that we can increase the threshold for hirings, so rather than a 60,000 minimum, move that to 120,000. The companies who need to bring in foreign talent can easily afford to pay twice what they are paying now. They can pay much higher expedited fees. That is good for the government, good for the economy. It will not take away jobs from people here. If people here are qualified for those jobs at lower prices, they will take them. The problem is that you reduce the number of tech talent that comes in, and you increase the pricing for those here. It will not create new jobs. Caroline how have your clients been reacting to this . Have they been trying to find talent ahead of any cutback . We know it starts in april and they are allowed a new allotment of people coming in on h1b visas, but how are they trying to maneuver . Everybody is frozen right now. We have seen this administration make bold moves, then retracted them, and i believe what we observe is everyone trying to understand the changes, how quickly they rollout, and how it will impact them. The announcements just made are being digested as we speak a man we will see what the tactics are. For a lot of companies relying on those expedited thesis, they will have a shortfall and have to deal with the fact they will have to find local talent, and it may not be the right talent for a time, but maybe worse, they move those roles offshore completely come in which case we all lose out. Caroline are you starting to see that or hear that voiced by clients . It is a simple equation. When you have a job that needs to get done and you can find people here to do it and cant bring people here to do it, you will go somewhere else. Caroline which countries do you think are being looked at the most . India comes to mind first because they have a very Large Population of educated people, but especially as you look in the data science realm and Machine Learning, more about Eastern Europe and russia in particular, but there are other places in Eastern Europe that have large swaths of tech talent, and we will see these jobs in the tax base go other places because somebody has to do the work. Caroline have you seen openings piling up . Is the Talent Crunch upon us . We have a freeze going on, but argue seeing it being demonstrated . I believe the Talent Crunch has existed for years and will continue to exist for years. I have not seen something happen in the last few months that makes it worse, but i do think we will see has the effects of this policy come into play, we will see rising prices. That is the first thing well see, companies will pay more for jobs that they were paying less for prior. Caroline the cost base going fire. Michael solomon, do stick with us, uber employs are starting to explore exits from the company. Last week, two executives resigned, and the company draws scrutiny of its every move. How does being under such a microscope impact employees . Michael solomon, lets bring you back, founder of 10x management. Are using a pool of talent coming from that business . I think we will see some big changes as result of what is going on at uber. When a company has a misstep, everybody can be forgiving, acknowledged that all companies and management make mistakes. When you have a second misstep, more people question whether this was a onetime anomaly, a trend, failing of management . When you have a third and fourth misstep within two weeks, you will see fallout from that. You will see people leaving. You will see lots of discussion about management and culture changes, and you will see people ready to go, because there is no shortage of jobs for these people. Caroline does it still look like a good place to work do think . Is it putting people off applying for jobs there . When people are leaving, do they want to brag they are there . Funny you should ask that. We have a returning client to us who has uber in his experience, somebody we have done work for in the past, and we had a long discussion about whether that is something we should list right now. When we started the discussion two weeks ago, it was an absolute yes, with me saying this is a big, Strong Company and the fact you work for them was a good thing and no one will hold you responsible for mistakes management made, but as the stories have continue to unfold and it seems like foible after affordable, you start to question that. I still think it is worthwhile to list it as a company. It is an amazing platform and amazing piece of technology, but from a cultural and management standpoint, i think that is a hard line to walk. Caroline coming up, our exclusive conversation with Sebastian Thrun and his take on automated driving. We speak to one of the biggest peertopeer lenders in the United Kingdom, how the company is faring after brexit and what is this is bloomberg. Caroline now Sebastian Thrun is known to be one of the most Innovative Minds in Silicon Valley. Now he has moved on to found udacity, the Online Education start up. The company Just Announced two new nano degree programs along with 19 new hiring partnerships. We caught up with Sebastian Thrun and asked how partnerships will help students land jobs at Companies Like facebook and google in the future. We have companies ranging from google x and irobot, companies that want the latest and best talent. There is a cap between the talent that exist today and the talent companies want. Udacity gives every person a chance to upscale themselves and get the right jobs. Caroline the timing is fascinating. Yesterday we were discussing the executive order i donald trump making it harder to get h1b visas. We have seen amazing talent in this country. Udacity makes education accessible and gives people skills that are leading edge. Udacity he trains more self driving car engineers than all universities combine. Companies like mercedes and tesla will end up hiring them. Caroline how much has there been a worry, concern that these Technology Degrees and Technology Schools havent always had the employee and indeed the amount of employment that many had hoped . As that tarnished udacity . Or do people understand the rates at which you can get people into the workforce . I believe our students. We are working really, really hard to keep costs down and get people jobs. Thats why we make money back guarantees. We hold ourselves accountable. The difference between us and everybody else is we devise our content directly from companies that hire those students. You go to top Companies Like amazon and facebook and asked them what would it take for you to hire a person, then they say they need to prove proficiency. Caroline talk to me about the rest of the world. We have seen tech talent coming to Silicon Valley, particularly india, china, and europe. Are those people going to remain and create jobs at home now if the visa applications become harder and moving to the United States becomes less palatable . The same talent is needed around the world. Every company now is a mobile company. Every company is a Machine Learning and big data company. Our students fine jobs in many other places. We opened up in saudi arabia. They are all online and speaking english, and we can empower women in saudi arabia that has not happened before. Caroline youre talking about saudi arabia, but are there other areas of the globe where you want to be . I would like to be in every household and make it free if i could. I would love to give more scholarships. The reason is that there is a huge inequality in the world. Africa, middle east, indonesia, south america, you have more than half the worlds population and you wont find a single top talent university. It does not mean they dont deserve education. It means they dont get it. We are bringing great education to all those people. Caroline you have had interesting competitions, and china in particular. Where do you think Silicon Valley needs to be worried right now in terms of competition and the talent of technologists and Technology Companies . China has done an extraordinary job in tech. If you look at the big Tech Companies, none are european. I think Silicon Valley will remain this force of crazy, disruptive innovation. I think the people who think new things and build something completely new tend to work with us and others. I think china is doing great job because the market is very large. That is why there are so many great chinese companies. Caroline will the u. S. Always been the number one market for you . I wish i could understand where the world is going, but i love the United States. I love what we do here. You can be an entrepreneur and invent new things here and get away with it, which is great. We are in some sense the university of Silicon Valley now, and you can just do this. Caroline do you think that is a risk under the new administration . I am still in my wait and see mode. There are many things to be set on both sides, but i think everybody, including the president has the good of this country at heart, and everybody i talk to really worry about how can we take the Great American workers and make them fit for 21stcentury technology. Actually i think udacity is Silicon Valleys response in part. To take everybody along and leave nobody high. Caroline that was udacity founder Sebastian Thrun. We have been focusing on Digital Lending with the peertopeer lending picking up steam. We look at some of chinas regulatory hurdles, then turned to the u. K. And u. S. A londonbased peertopeer lending operates in four countries. Sam hodges joined us for more. There are some big differences between the u. S. And u. K. Markets. The customer we are trying to service similar. It is an established Small Business owner looking for capital. The u. S. Market is bigger and fragmented, but over all a lot of the principles also apply well in the states. Caroline what about the growth targets for origination of loans . Can you paint us a picture of where it goes . We have grown the business and this year anticipate between 75 and 85 based on Strong Performance in 2016. We see a huge opportunity to serve Small Business customers across the state and are focused on delivering a high quality experience. Caroline what about the credit problems that struck Funding Circle in the u. S. In 2016 . How has the credit scoring changed . We grew our business through 2016. There were pockets and 2015, loans that underperformed, but going into 2016 and now, we feel positive about the overall performance. Our 2016 book is holding up well, and i think our institutional and individual investors are happy. Caroline you talked about Institutional Investors there, are we seeing a heavier weighting or similar waiting for Institutional Investors wanting to buy up the loans in the u. S. Visavis the United Kingdom . Here and the states, we have a number of large institutional players. Last week, we announced another 100 Million Dollar commitment from Community Investment management, and institution focused on social impact. The on that, we have a fractional marketplace with credit investors. Over time, what i anticipate is an even balance across those three legs of liquidity. Caroline would you ever get a banking license and make loans on your own . We are licensed in the u. S. The weight we have approached our Regulatory Framework is on a statebystate basis. We hold licenses in 13 states, and in other states, you dont have to be licensed or passport licensing from other areas, so we dont see a need to get a banking license in the United States. We have a framework that works well as it is. Caroline still ahead, the company focusing if you like bloomberg news, check us out on the radio. You can listen on the bloomberg app, bloomberg. Com, or sirius xm. This is bloomberg. Caroline peloton is one company taking advantage of the demand for on everything with proprietary bicycles that tap into classes from home. Convenience comes at a cost. Carol massar has the story. This may look like your average cycling class, but it is not to what you cant see are the hundreds of writers joining in from home. Last one. I need you to be magical. Peloton is one of Many Companies disrupting the fitness industry. Fitness is becoming more about on demand and all access. There is an increasing number of workout Companies Using technology to offer members unlimited streaming workouts that lets users take classes from different locations or in the convenience and privacy of their home. Peloton cofounder and ceo john foley. You can watch content where you are. I think peloton will help to pioneer it. Today, 26 billion dollars is spent annually on fitness and the u. S. Digital workouts are taking a chunk out of that number. On demand Fitness Services jumped to 8 of total spending on workouts last year, up from 5 in 2014. At peloton alone, sales doubled from 2015 to 2016. The company make 170 million in revenue last year, three times as much as the year before. Foley hopes 2017 will be the companys first profitable year. How do you see yourself . At our core, and innovation and technology company. Health and fitness . We are in the fitness category and the first to enter the category. Peloton has its own stationary bike that lets users tap into classes or a library of workout offerings at any time of the day in the privacy of their own homes. How many bike owners do you have . We are approaching 100,000 bikes in the market. Is that globally . It is effectively globally. We have bikes all over the world and are focused on selling the bikes in the states. There are rides where you can be in europe riding or part of a live class or download a menu of different types of classes. What gets the most use . Only 20 of the rides taken our live. I think the live experience is so much more fun. They can give you a shout out, look into the camera, and say you will pull us up the next hill, and it is very immersive. You are part of the theatrics and entertainment for a live class. On demand is 80 , and it tells you that people care about their instructor, their time, controlling that environment versus driven i o schedule. Have your own stationary bike and want access . There is a peloton app for that. Who do you see as your competition . We are rooting for the category. We love flywheel, yoga. What keeps me up at night is whether apple, google, or amazon were to enter our category. Those are the only three companies that could give us a run for our money. Ipo this year . No. Because . We are looking to do a fund raise in the next couple of months that would allow us to be as aggressive as we want and take our time considering the public markets. Next year maybe . May be. I read something about a 10 billion valuation in five years . Is that real . I would be disappointed if it werent real. It starts to be in the order of magnitude as the opportunity. It is on the low side of where we see the business going in the next 510 years. This april, an app that grants you access to classes plans on rolling out its own video on demand feature, joining other Companies Offering streaming since 2015. While currently only 15 of fitness consumers are working out on demand, its not expected to stay that way. In five10 years, we will see the Digital Fitness trend grow. The new entrants to the market will be in turn with technology, including augmented and virtual reality. Americans are living busier lives, so they want things to work into their schedules and their locations versus having to go somewhere. That is a dated concept. Caroline that does it for this edition of best of Bloomberg Technology where we bring you the latest in tech throughout the week. Tune in wednesday. Remember, all episodes of Bloomberg Technology our Live Streaming on twitter. Check us out at bloombergtechtv weekdays. That is all for now. This is bloomberg. Oliver Bloomberg Businessweek welcome to welcome to Bloomberg Businessweek. How smugglers are bringing illegal gold into miami and the United States and how technology is changing the tobacco into looking a lot more like Silicon Valley. All ahead on Bloomberg Businessweek. We are here with the editor in chief of Bloomberg Business week, megan murphy. In global economics, you take a