tv Best of Bloomberg Technology Bloomberg August 20, 2017 9:00am-10:00am EDT
♪ emily: i am emily chang, and this is the "best of bloomberg technology" where we bring you the top interviews in tech. we explore the business world's relationship going forward. after the events in charlottesville, the tech industry is being tested over hate groups online. alibaba delivers blowout numbers.
sales jumped more than 50% thanks to its robust e-commerce business. now to our lead story. president trump said he is ending two advisory committees after multiple c.e.o.'s stepped for as trump faced blowback sufficiently condemning white supremacists. the president made the .nnouncement on twitter it is a serious turnaround from the tweet that trump posted on tuesday. several c.e.o.'s left the council earlier this year following disagreements over the president's approach to immigration and climate change. tech'sed us to weigh relationship with the white house.
>> i think the president is clearly struggling with lots of issues. first of all, i think the president is sort of a sociopath. i think he is revealing under pressure more of his characteristics. under pressure and stress, people tend to reveal their natural characteristics. at the end of the day, when he gets attacked, he will punch back. we saw this on the debate stage, and none of his opponents were willing to punch back and put him in his place. now, this is playing out on an international stage, and it is really not helping him. emily: where do you draw the line on free speech? what counts as crossing the line? >> people have the right to protest. they do not have a right to be violent, instigate violence, and they do not have the right in to have the president of the united states defend them. when i was growing up, this nazi party marched in illinois.
the courts projected the right to march. the president of the united states denounced them, and it was a one-day story. right now, the president is not willing to take sides. free speech does not give you the right and protect you from people having an opinion, and you should clearly be on the side of freedom and liberty. emily: what you make of the calculation that these c.e.o.'s are making when they say they are out of the councils? >> there's a difference between partisan and policy behavior. i don't think c.e.o.'s can engage in partisan behavior. this was not a partisan issue. even conservative members of the republican party were explicit in denouncing what happened in charlottesville. this is not a partisan debate. this is basically president trump and a small sliver of his party. emily: what is your take on how tech companies should handle speech like this?
google shutting down the youtube channel? facebook deleting posts related to the topic? >> i think most of the content companies have to be very careful. as they start deleting certain viewpoints, they run the risk of liability. once you start taking down pieces of content, you are technically liable for all of the content on your site. there is some constraints about the content, particularly inciting violence. outside of that, it is a difficult place to be. most technology companies can not censor legally. i do not think content should be censored. emily: what is your take on the google engineer who was fired after he sent out a memo circulated widely in the company suggesting there are biological reasons for the underrepresentation of women in
tech and leadership? >> he made several points and one of which i agree with. i agree google is an intellectual monoculture. what fraction of silicon valley employees voted for trump? probably 2%. point thanifferent the employee differences at google. i am not an expert on google or biology. i think google is taking some risks in being draconian about some views. if i were running the company, i think it is ridiculous anybody spends 10,000 words and and entiren company. i think there is a general rule people should not be able to take business time and distracts 70,000 employees, regardless of their views.
james theid speak to day after he got fired. take a listen to what he had to say. >> it is hard to regret it because i do believe that i am trying to make google and the world in general a better place by not confining us to our ideological echo chambers where only one side of the story can be heard. emily: so, ideological echo chamber, political views are one thing. what if that political view excludes half of the population? >> i think the company has the right to say that you cannot express any range of views on particular topics. for example, it would not be appropriate to publish a wide religious document on any side and publish it to the company. after they allow people to have a format and mailing list, they are playing with fire when it comes to saying certain views
are acceptable and not. it might be more acceptable in saying that religion, politics, and other topics like that do not belong in the company. abortion would offend both sides right away and distracts people from work. it would be acceptable for a c.e.o. to say we are not having emails on abortion in our company. that is not the reason for our existence. emily: should he have been fired? >> no. italy: why not? >> if you look at google's culture, the emails are wide ranging. without changing the policy, fundamentally i believe those mailing lists are right ranging them -- wide ranging and wild. -- ink it is far too far think it is fine to fire someone for distracting people. emily: cisco narrowly beat out estimates for earnings and
revenue in its latest results. the company is touting a major turnaround in the networking business moving from hardware to software. cisco's machines form the backbone of the internet. the company predicted revenue may fall as much as 3%. daybreak" team spoke with c.e.o.'s about the efforts and the current local climate. >> we said we are going to begin to shift to a more software subscription model. we have made unbelievable progress. just this past quarter, 31% of our revenue was from recurring which is up from last year. we have our software deferred revenue grew 50% and eclipsed $5 billion for the first time. two quarters ago, it eclipsed $4 billion for the first time, so that is moving rapidly. of our software business, 51% of our software business now is
from subscriptions. we have made a great deal of progress. the strategy we laid out is working. i'm very comfortable with where we are and pleased with what our team has accomplished. i am a long-term investor. i believe in you. i want you to succeed. what are you telling me to look at to know when it will turn around? what is on the dashboard there to show me that it is working or maybe not working? >> first of all, we provided some new metrics that indicated that this transition is working. ,etrics like recurring revenue percentage of our software business coming from subscriptions, the size of our software business. and if you look at our software business and compared to other software companies, you might be surprised at how big it is. looking at the growth of the deferred software balance and percentage of our software, we
provided a lot of metrics we are reporting on quarterly basis to help you feel better about it. at the same time, we are executing on our financial model. last year in the midst of this transition, we had record cash flows, record earnings per share. we are executing on behalf of our shareholders as we go through this transition. >> over the last couple days, many american c.e.o.'s of some of the biggest companies in this country have distanced himself from the president of the united states after comments he made following ugly rallies over the weekend. is this an administration you can still work with? >> first of all, hello, jonathan. the events of this past weekend, first and foremost, it is frankly incomprehensible that we are in 2017 and having these discussions. i think most of america and cisco absolutely abhors racism,
does not stand for it, does not stand for neo-naziism and white supremacy at all. that is true of cisco as well. have communicated that clearly with our employees this week as we have gone through this. the second thing is we still have a lot to do in this country. we still need to drive gdp growth. if you look at where the country relative in the latest numbers, there are other regions of the world which are starting to grow faster than we are. it is great that they are growing, but we should be growing faster in the united states an. we need job creation and tax reform. regardless of what is going on, we cannot abdicate those things done. finally, from a country perspective, we have to find a way to focus more on the things that actually unite this country. the things that make us great and not focus every day on the differences of opinion and things that divide us.
i think that is what is most important. it is incumbent upon business leaders here to continue to work on making sure the things this country needs to be successful in the next few years, that we are still playing a role in making that happen. emily: that with cisco c.e.o. chuck robbins. bitcoin continues to surge. this time past $4000. what is driving the demand? we will discuss. tech firms are stepping up the policing of hate speech online. we will talk about the review of their policies. this is bloomberg. ♪
monday's rocket carried a dragon capsule loaded with over 6400 pounds of cargo destined for the international space station. the dragon will spend the next couple of days in orbit before meeting up with the station on wednesday. bitcoin continues to show no signs of slowing down. the cryptocurrency soared past $4000 for the first time this week. the rally comes after a split last week that threatened to jeopardize its growing mainstream interest. caroline hyde caught up with the president of an online platform that allows users to buy and connecting toby their bank accounts. >> we are seeing the market respond to a real improvement and leap forward in the technology that stands behind bitcoin. segregated witness is an improvement to the core protocol that could have bitcoin processing the same number of
daily transactions that we have seen from the likes of visa and mastercard. caroline: what about geopolitics? there was a lot of talks of deals being done in south korea and with ethereum as well. are there geopolitics at stake driving it higher? >> i think with other digital currencies, they are all influenced by the macroeconomic factors at work. a good example is what we saw just last week at fidelity, one of the largest brokerages here in the u.s. they are doing and integration so all coinbase customers can attach it to their accounts. it is those types of partnerships, international exchanges like what is going on with korea, japan, parts of europe. these are all factors which influence traders and the corresponding price of bitcoin. fidelity is one of the
institutional investors ahead of the game when it comes to digital currencies. they are mining their own bitcoins and also pushing technology to help users access their account. why are some institutional players reticent to get in? why do they need more trust to build in exchanges such as yourself? bei think the c.e.o. will looked back on as a bit of a visionary. she sees something ahead that is exciting. while others may not be moving quickly in this space, they are absolutely investigating it. helping ranji dax -- helping to run g dax, i am on the front with hedge funds and proprietary trading funds. they are asking us to help them understand the moment. watershed moment is when we see
more clear, consistent regulation in the u.s. and abroad. the confidenced of institutions to start trading this asset. that is at the forefront of every decision we make, how would become the most compliant institutional customer provider in the space. caroline: you deem yourself the most trusted digital asset exchange. are you concerned about a hack which occurred back in may? it was a small one, i understand, but there are issues about liquidity. how do you settle these concerns to ensure it can keep growing on a taking on more demand? >> to be clear, it was not a hack. it was a byproduct of a thinly traded asset. we can see movements very quickly in the marketplace when customers place large buy or sell orders which is what happened in may and june. we have recommitted to providing
stability, transparency, and the market integrity that institutional traders require. we do that partly through the new fund-raising round. having raised $100 million, we are able to reinvest into the team and customer support operations to provide world-class service to customers. caroline: the individual who lost $8,000 because of his verizon phone, that was not a hack? >> oh, i see. what we call that is an account takeover where individuals will get targeted to have their phone ported or her password compromised. that helps to proactively notify customers when we see things happen. we have a number of proprietary steps internally that when we look at something suspicious, we locked down the account and help
the customer as well. caroline: you have $100 million. you have plenty of priorities. customer support, engineering. what about the expansion of the cryptocurrency you currently accept? you are looking into bitcoin cash. are there any more to be added to the portfolio? thoughtful ande provide a curated selection of digital assets customers can trade. gdax, there will be more than on coinbase. want to get our product to the place for customers are getting the experience they expect and we have a stable performance exchange. once we accomplish that, we will ing to add more digital assets. emily: that was adam white speaking with caroline hyde in
emily: pandora media will have a new c.e.o. the company has announced they have hired robert lynch. he is the fourth leader in less than two years charged with reviving the struggling music company. the appointment is effective september 18. pandora also said the former c.e.o. of sony entertainment will join its board. two of the top players in the nba helped kick off the
inaugural players technology summit in san francisco. the summit brings together top leaders in tech, venture capital, and sports to exchange ideas and expertise. in our exclusive interview, cory johnson caught up with steph of thend andre iguodala golden state warriors. he started by asking about steph curry's investment in pinterest. >> it is something i like to use. it is something my wife uses. for me, there is an opportunity there. a couple years back, i was waiting to get some skin in the game. it is not something i am involved in day to day. it is something i am involved in just to see the growth of the company and to have that feedback of seeing how the company is doing and keeping track on that. besides the company i started, that was one of my other early investments i can follow and grow with. it has been fun.
i learned from that. hopefully, i can continue to grow my expertise in the investing game. you are all over the place with your investments. you have invested in shaving and grooming product companies. you have invested in a company that sounds like it is competing with bloomberg. >> it is a bond trading platform you can do over your phone. we you think about silicon valley, you think about disruption, efficiency. that is what it is. bond trading has not changed since the beginning of time. you think about the eddie murphy movie, "trading places." so, that was something posed to
me as how to disrupt that market. the vision was great by the man who started it. i have had really good conversations with him about it. that is how i got into that. this whole thing started for me with an e*trade account. i started investing in a lot of tech companies and things like that. that is what drove my business partner and myself into the space. it was perfect for us to be aligned with a company like truman. cory: when you think of the history of athletes and investing, the bad stories are the ones that make the news, but there are some bad stories. your father was in the nba. many athletes have had fathers who were great athletes themselves. your father was a fantastic rescue ballplayer. but they also raised their kids with lessons of the guy i used to play with that blue everything. we have come a long way from
charles barkley and his car wash investment. now, it seems a lot more sophisticated. >> i think so. we have been blessed to play this game and make a significant amount of money with the responsibility of what you do with it. you want to grow the money in a smart, responsible way. things have changed. the tech industry is booming. to find open doors to access that world is huge. to find advisors and people close to you that you can trust to give you the guidance and wisdom. not blindly throwing money at a company or idea and hoping it takes off. it has to be smarter than that. emily: coming up, tech firms are taking a closer look at the policies regarding hate speech. we will hear from the c.e.o. of cloudflare about the bigger implications.
emily: welcome back to the best of bloomberg technology. tech companies from airbnb to facebook are going on the offensive against white supremacists and not seize in the wake of the violent rally in charlottesville, virginia that left a woman dead. the web security company decided to end its business with the daily stormer, a known neo-nazi website. it was a surprise move. cloud flare was criticized for providing service to alleged terror groups in 2013. the ceo joined us to discuss. >> the daily storm or was a unique incident and it was the exception that we needed to
rethink the rules. not just with clout flare but with the tech industry in general. this came on our watch list. a few months ago, we started to get reports that they were harassing people that were submitting abuse reports throughout platform. earlier this week they were bragging on their bulletin boards that the people of clouflare were supporters of theirs. we think the content on the site was important -- of torrent --abhorrent. who can regulate what content is online?
i sit in a privileged position, i can make a decision that they shouldn't be online anymore. i'm not sure that i am the right person to make that decision. emily: we should take a moment to talk about what cloudflare does. >> we make sites faster, we help them stay online, we stop big cyberattacks launched on them and we see a huge portion of the internet. most of our big customers are fortune 500 companies. we have small customers like the daily stormer that get attacked all the time, the reality of the internet today is that it has become a dangerous place. if you don't have a major network sitting in front of your infrastructure and you do anything which is controversial online, hackers will be able to knock you off. emily: the reality of the internet is the daily stormer's online, a not see hate group online, there are others online -- are there others that are up
and running thanks to cloudflare. >> we still think this is a right policy -- emily: this was a one-time thing. >> this is a way for us to say, let's stop and think about, what is the right place for internet content to be regulated. google terminated the daily storm or from using their registrar service but they did not kick them off their ip. it tells me that not that google made a mistake but where in the internet back, something is being restricted or controls, matters. the rules for facebook or twitter or youtube are inherently going to be different you from a company that runs a network like cloudflare level three. we need to have that
conversation, where's the right place for content to be regulated and how will they make those decisions? emily: this company has been called terrors'helper. have do you respond to those accusations? >> the nature of being neutral is that there will be someone who you upset all the time. we have a project called project galileo. emily: terrorism is different than upsetting someone else. >> when we hear that there is analogous in, something that is terrorist, or illegal, we turn to the experts, law enforcement, regulators, -- what would you like us to do? that feels like the principle of due process. they are politically enshrined organizations that can make his decisions.
as opposed to these decisions being made based on the political whims of me or mark zuckerberg or jeff reseau czar -- jeff bezos are. emily: you think they need to be regulated? >> we need to have a conversation between different stakeholders. technology companies, content creators, consumers, regulators, civil society organizations. you him at this point it is the wild west. people are making decisions and they are not transparent. this has been framed as a freedom of speech issue. i'm a son of a journalist. i think free speech is critical. the uniquely american concept and idea -- on the other hand due process is something that spans the globe and something people believe in. that requires transparency and accountability and you can understand what is going on. i don't think that is necessarily what is going on with technology companies right now. emily: you warn that this is dangerous territory -- what is the worst-case scenario?
>> that you have a cabal of five to 10 tech executives who are choosing what content can and cannot be on the internet based on their own political and personal agendas. or what their economic incentives are. that again is something that, even as someone who sits in that privileged position, i am worried about as an internet consumer. it is important that there is accountability when technology companies make these decisions. emily: these people -- not seize would find each other -- nazis would find each other at the internet did not exist. people argue that this resource of the internet allows them to grow and to breathe more. do you think that by taking a moral stand, even if it is a stand that these companies have not taken before, they can actually make a dent in the fight on terror?
can tech companies make a difference with their policies and if so, does it make that moral choice worth it? >> i am that censoring content makes it go away. on the other hand, i do think that taking content and saying, this is something we support them believe in and we will help promote that is important. emily: isn't that the opposite? a double-edged sword? promoting things you like verses condemning things you hate? >> people learn to hate.
if we can teach them how that is not a productive and part of a modern civil society than that make sense. what we do at cloudflare, we work with over 100 civil society organizations that might be under attack. it might not be from hackers or might be from governments, lgbt groups in the middle east or human rights workers in china -- where they might be trying to be silenced, trying to make sure they stay online. that is the role technology companies can play in saying, here is a way, an alternative way of looking at the world which is more progressive and aligns with the moral values. emily: are you still uncomfortable with the decision you made about the daily stormer? >> absolutely. again, i woke up one morning and got sick of these jerks using our platform. i flipped a switch and they were no longer on the internet. i'm not sure that is the power and individual, especially not an individual who has political legitimacy to them, and should be making. emily: that was cloudflare ceo, matthew prince. a 2% stake in blue apron. shares are down since the ipo in june. it owns nearly 600,000 shares in farmers market.
a $300 million windfall after selling a stake in whole foods in july. china's largest online marketplace boosted its dominance in e-commerce. we will break down alibaba's results next. apple is making an original push -- a push into original program in order to compete with netflix and amazon. this is bloomberg. ♪
we spoke about the results and alibaba's future. >> anyone who grows this size but at the same time we feel vindicated because for the last two years we have been saying it it was great and a lot of people had skepticism given the stock market crash of two summers ago. it has grown and grown. emily: i want to take a look at how revenue growth has progressed. take a look at your bloomberg -- showing revenue growing over the last several quarters. the company executives spent a lot of time on the call talking about a new retail strategy. another area they are expecting significant growth. what is that mean? >> alibaba like amazon and other e-commerce giants have been talking about the future of commerce is when you combine off-line shopping with online shopping.
alibaba wants to leverage consumers as well as data to deliver a mobile app that offers a seamless experience when you are in a brick-and-mortar store. a lot of alibaba's acquisitions have been billions of dollars poured into this off-line commerce. we talked about this new concept, incubating for the past two years, rolling out more than 10 stores around china. you take the app, walking to the store, scan the goods, check out with alipay, have your own food delivered to your home in 30 minutes. they are betting on this type of strategy to drive growth in the future. emily: how do you compare what alibaba is doing with the supermarket stores which double as warehouses?
with amazon? >> in china, e-commerce, retail -- the penetration rate is -- at over 3% a year, you need to figure out a way to tap the other 85% in the off-line business. they are doing this through the app. look at what is happening in japan over the past 20 years. most westerners have not been to tokyo. see the subway stations. you see tons of stores inside. in tokyo you can check in your luggage at the airport and get it sent to your hotel. china has learned from that and applied it to e-commerce. emily: i feel like alibaba is taking on grocery at the same time that amazon is.
how do the efforts compare? >> if you look at the market in china, in 2016, it is billions of dollars. the chinese consumers are very used to paying with their smartphone. making payments wherever they go. they go to the store and see something they like, they can make a purchase. the warehouse can send it to their home in the next 30 minutes. that kind of delivery and service level is something we don't see in the u.s. and more and more in china. emily: cloud revenue and other growing parts of alibaba's business, they are losing money there. talk to us about cloud computing? >> they reached a milestone. more than one million paying customers but growth slowed. digital media entertainment -- we also saw triple digit to just
30% which is still good but in comparison to previous quarters it is considerably less. a lot of the reason for the growing costs is with the cloud area, they need to spend on data centers and with the entertainment division they are spending very heavily on content. there is a big war being waged. they are all getting higher and higher prices for content. it is likely those losses will continue to widen before they get better. emily: is it warranted or will it continue? >> there is a chance that e-commerce will move from 15% to 30% over the next 20 years. as such, that will be a good foundation for growth for alibaba. emily: airbnb says asia represents the biggest opportunity on the planet.
we caught up with the company's cofounder and chief strategy officer in singapore. >> asia travel is a big deal. we have been promoting airbnb in a number of countries. singapore and australia were very ubiquitous. we are well known there. given investing in china. chinese travelers are going all around the world. the fastest-growing segment. the number one spenders on international travel. we are running a big campaign are now. growth in singapore and elsewhere is happening as a result of chinese travelers using airbnb to tour the world. >> you have airbnb wannabes, tied up with expedia -- today it has 450,000 listings and growing. you have become competing -- you have started competing. >> they have started focusing on domestic travel.
our strength is international travel. we have been marketing airbnb for a way to chinese people to explore the world. none of the local competitors in china have that. we make sure we play to our strength and not engage in direct competition. >> are you adopting a different strategy compared to in asia compared to the u.s. and europe? it seems like airbnb is low-key on the side of the world. you are aggressive in your marketing strategy elsewhere. >> in every part of the world we are trying to partner with governments. that is the new model. new policies have to be passed to realize the full potential of home sharing. we do that government by government. we have seen big success in japan recently. they have passed a new national law basically saying home sharing up to 180 days is now legal. japan has been our number one destination in asia for a number of years.
>> but even for japan and is a matter of implementation and that is a work in process -- progress. singapore basically passed a law saying it was illegal to rent a place for less than six months. what is your take on regulations across the board in all of asia? a more competitive marketplace? >> it is not a simple topic. this will play out over time. we try to be as proactive and a partner to governments as much as possible. figuring out exactly the right model and all the implementation details will take time. it is not a one and done type of situation. things will continue to evolve, even here in singapore. >> give us a sense of how important the asian market will be in the future? how do you see asia contributing to your profitability going forward? >> huge. the fastest-growing region. from a low base, quickly catching up.
this is not been the story for three years. our top growing origin region. if you look at the industry numbers it. is the biggest opportunity on the planet china specifically but if you look at southeast asia in general all the numbers are promising. emily: that was the cofounder and chief strategy officer at airbnb. apple is said to be throwing down the got let with a big-time investment in original programming. with other giants in the space will it be too little too late? you can listen on the bloomberg radio app, this is bloomberg. ♪
♪ it is the fourth-largest jumbo deal year to date, frist market for a for amazon's 2014. apple is out to make a splash in hollywood. they plan to spend $1 billion on original programming next year. that's according to people familiar with the matter. the company is creating a new la-based team and hiring to top sony execs to lead the effort. bloomberg techr reporter alex webb who covers all things apple.
>> they have a office in los angeles. and from apple music they have been doing small things in television programming. it reports to the head of apple services. they have a big wedge of cash amount to spend on original content. >> ahead of the earnings call a couple weeks ago, we have just learned they are getting started. subscriptions continue to move along and video will be a contributor overtime. how big a contributor? >> replacing revenue which is basically being lost from itunes. when was the last time you bought a film on itunes? >> i do all i can do not buy them. >> amazon and netflix are lugging that gap. it serves to glue people to their products, iphones, ipads.
you will be able to watch these films on pcs, you will probably not be able to watch them on an android phone or roku. >> house of cards, game of thrones arena? >> we weren't quite sure a few months ago what the ambitions were. this shows the extent of those ambitions. they said we will see what happens with the early shows and then take steps to see what is possible. they hired two prominent executives from sony who were behind it breaking bad. that gives a scale of what they are going for. >> what do we know about them? >> they are prominent guys. i can't name everything they have worked on but breaking bad is the most prominent. >> not a bad record.
>> when we spoke to jimmy back in april, he said they were aiming to have 10 original shows by the end of the year. we know three or four of those. it could be that some of those are substantial. to put it in context, the billion dollars that apple will spend in the next 12 months, that compares to $4.5 billion that amazon will spend and $6 billion that netflix will spend. it is a big some but not as big as the competitors. >> we have been looking at planet of the apps, it did not get the best reception. how much success of they had? >> there have been pickups. it is hard to know when it comes to viewership. this is been geared toward getting people to apple music. they don't necessarily have these experts, in productions, in procuring projects -- that is
what they are doing now in bringing this talent from sony and elsewhere. full credit to the wall street journal. they broke this first. they were saying they are hiring aggressively in the space and trying to expand says essentially -- trying to expand substantially. emily: that does it for this edition of bloomberg technology. tune in every day. all episodes of bloomberg technology are live streaming on twitter. check us out at bloomberg tech tv on weekdays. that is all for now. this is bloomberg. ♪
♪ emily: he was tapped to be heir to the softbank empire. he was raised the son of an indian officer and he came to the u.s. for grad school. in 2004 he got the job of a lifetime. larry page and sergey brin hired arora to help move google into an online ad powerhouse, making him one of the most sought after