tv Bloomberg Technology Bloomberg July 18, 2018 5:00pm-6:00pm EDT
emily: i'm emily chang. and this is "bloomberg technology." google slapped with a $5 billion fine from eu antitrust regulators. european union competition commissioner joins us ahead. plus, he is known for not holding back. we will hear from the former microsoft ceo and current l.a. clippers owner, steve ballmer on
leadership in tech,. and sports. country's 2025 in jeopardy? our top story, a record google wishes it had not set. there are european union -- the european union has fined the company $5 billion. the eu says illegal practices on android mobile devices push google services in front of users. google was ordered to change the way it puts search and web browser apps on android smartphones. joining us from brussels, bloomberg's caroline hyde. him right up with after this decision was made. what were the key takeaways? caroline: the key takeaway was the force of the way he described this, very serious
illegal behaviors. you don't hear that very often about such a significant company. the size of the finest so eye-popping -- fine is so eye-popping. they have $100 billion in terms of cash and short-term investments, but it is a record-breaking number. trying to describe why to vindicate this sort of amount, because of the dominance in search the rewards -- that rewards google. they get a lot more chunk of change in terms of digital advertising revenue. thiss why they would weigh $5 billion. she is talking tough while there are such strange relationships between the eu and the u.s. emily: talk to us a little bit more about what the real impact will be here on google. it sounds like a lot of money, but for a company of that size, it's a drop in the bucket. caroline: you are right, but now it is whether they change the
business model. they have been given just 90 days to change the way in which they currently tie and the likes of google search and the chrome browser into deals with mobile phone makers and telecom operators, that they have to -- all of it has to be unwound within 90 days, otherwise they will be find even more, up to 5% of -- be fined even more, up to 5% of average daily revenues for each day they don't rectify this. in addition to last year's ruling, they never gave a descriptive ideal of what google should go out and now due to change their business model, so i really pressed her on that. here is what she said. >> the obvious minimum is that the contractual restrictions, that they disappear. because you find a lot of these things in the contract, can't do this, can't do that, but it is for google.
that's their responsibility to make sure this infringement comes to an effective end, and that makes -- remains to be seen in what choices they make. caroline: she wants a change of contracts. that was clear. how do you make sure this is effective, with the previous, last record fine, 2.4 billion euros, in terms of the practices of shopping and google. they once again -- many complained some of the tactics they have used, the way in which they had changed their business model has not rectified the situation at all. how can she ensure competition will improve? take a listen. >> it's important to see in the follow-up of the first google decision that we have taken no position yet, and that is for
good reasons, because we cannot say that google is complying with the decision. that's very much an open question. we would do the same thing. we will monitor if google lives up to this decision. caroline: there's your hint. i think she's saying, we are monitoring how google has responded to the previous fine and the previous desire to change the way in which they promote their own shopping websites over and above other competitors, and at the moment, we can't say whether they comply. this is availed through -- a veiled threat. you have to comply to this new area of concern, the android operating system. emily: google disagrees with this decision and says they will appeal. what exactly does google need to do now? caroline: google has already come out and not only do we see a lengthy blog post coming from the ceo of google, also trying to educate or try to put their point of view across in this statement, for example, saying
that today's decision rejects the underlying business model that supports android, which has created more choice for everyone, not less. these numbers become far cheaper because the phone makers didn't have to invest in making operating systems of their own. they feel they benefited the consumer. what if potentially the change in the business model -- the operating system can no longer be free if they can't lock in revenues by ensuring google search is the favorite search engine within the phone? this is a key question to how google reacts. clearly, they feel they have done the economy and the industry a favor rather than been a curse. emily: google now has 90 days to end their now illegal conduct. appeal aside, what's been the reaction in brussels? caroline: it's been a slight shock. yes, this is an eye-popping fine. , yes they have to change --
yes, they have to change their business model. is it too little too late? they feel perhaps that google has now got 90% in terms of market share. can this change matters now? notably, perhaps even if the fine isn't eye-popping, it doesn't always help rectify the competitive landscape. i caught up with one company affected by the previous ruling on google shopping. this is a ceo saying, look, maybe we need to go even further in terms of the way google has to change. >> we want to see a competitive marketplace. at the moment, google doesn't seem to be able to do that. the construct -- a lot of us say, look, maybe the only way to do that is to break them up. we are not the only one saying this. "the boston globe" two months ago. the chief economist of the competition authority saying only the other week that this is
the only way to force google properly to fix these markets. caroline: i put that to the competition commissioner, as to whether or not google should be broken up. is that the only way you can do it? she thinks that would push the discussion into the long weeds. it would take too long to make the market competitive. overall, she feels that these companies do benefit the consumer, in terms of making good quality products. they need to apply by the letter of the law, in her mind's eye. interesting to see how the u.s. reacts and whether u.s. regulators start looking quite so closely. emily: that is the question. caroline hyde, great interview. thank you so much. you will talk about this much more later in the show with one of the lawyers who brought the complaint in this particular case. sticking with google, the company will be folding its nest unit into the google homes devices division. in doing so, google has removed the ceo of nest. google acquired nest in 2014.
more clear for users. it also has to clarify whether someone is a private or professional host. is helping finance a lawsuit from a host who is accusing city officials of retaliating against him for speaking out in support of home rentals. our next guest, elad gil, served as an advisor to airbnb, as well as a slew of other companies. he was vice president of twitter and helped launch google maps. he has just written a new called -- new book called "the high-growth handbook." thanks for joining us. preventedairbnb have some of these legal and regulatory issues at the start? in order to grow in the early days, this company kind of circumvented the law. >> i don't know much about the specific case of airbnb now. as companies grow in scale, they run into regulatory issues over
time, in part because they are entering new markets where they met -- may be less familiar. other companies in the same industry start to react. in some cases there may be a lobby or something that exists for a company that may go against it once they start to get market share. emily: is there a way companies can be better prepared for regulatory issues? we see scooter companies exploding across the country and raising into the same controversy. >> there are two or three things they can do. bring on a regulatory person early. the reason they did that is because the coin and cryptocurrencies were a new thing. they wanted to have somebody on board early. they were thoughtful about the rate -- regulatory environment. emily: if you are an operator and an investor, now an author -- in this startup book space, you have peter teal, -- thiel.
i'm sure you're familiar with these. what makes the "high-growth handbook" different? >> those focus on the early stages. i'm focused on the later stages. as your startup starks to work and you are going from 100,000 people -- 100 people to 1000 people -- as your startup starts to work and you go from 100 people to 1000 people. this book is focused on those types of issues. emily: you talk about mega funds . how is the fact that there is so much money out there right now changing the competitive landscape, for better and worse? elad: softbank is 12 times larger than sequoia's newly announced fund, so it is in a class of its own. there is a lot of primitive rounds happening. venture capitalists -- preemptive rounds happening. venture capitalists are writing
much bigger checks than they normally would. second is the rise of secondary. softbank famously bought out another fund. it was a great example of liquidity happening much earlier than an ipo, a way to circumvent an ipo. emily: is this good or bad for companies? is there a concern that the companies -- employees will lose their motivation and enthusiasm? elad: i think it's both good and bad. half of the unicorns that exist today shouldn't be valued at what they are at. they are overvalued. emily: is airbnb one of those? is uber? elad i don't: -- elad: i don't believe so. there's a great thing from warren buffett, the markets are a long-term weighing machine.
emily: what's your advice to companies trying to set a valuation, and they all want to push it when it comes to the valuation, about how it could come back to bite them '-- bite them? elad: overvaluing makes exiting hard. tillcompanies had to wait their fundamentals caught up. the past two -- path can get worse. emily: are there any specific examples, like dropbox? elad: spotify famously went through the mechanism it did to avoid the covenants it had with its own early investors. there are different companies that have had to adapt to this. emily: was that good or bad for spotify employees and investors? elad: the stock is trading at a good spot. it seems like employees have not turned over were sold much of the stock.
it seems like it has overall work for them. -- worked for them. emily: always in the news, right now fighting fake accounts, harassing accounts, hostile accounts. they say they are cracking down on 10 million accounts per day. this is top of mind with the midterms coming up and the meddling that has happened in the 2016 presidential election. do you think this is something twitter can get under control? .lad: it's an ongoing arms race the more technology you come up with, there is technology on the other side that it's adapting. twitter has done a nice job of trying to clean up some of the accounts it has. i've been impressed by the new features they have been adding. they added the capability to thread tweets together in a tweet storm. emily: what about facebook? do you think facebook will recover from this recent data scandal. people anecdotally,
don't use facebook anymore or they are angry at facebook, yet executives tell us is not making a dent in advertising or engagement. facebook has built a franchise that will survive this storm. they have sent a message about how you should be thinking early about some of the broader societal issues you are going to impinge upon through your company. it's been a good lesson for everybody to watch. emily: i went straight to the page in your book about diversity and building diverse teams. what's the biggest mistake companies are making right now that's holding them back from being able to really change the makeup of their workforce? elad: in the book, we talk with a woman who has a great view in terms of how you increase the diversity. you want to make sure you have diversity at all levels, at the board. firstany i cofounded, our board member was a cofounder of blackrock.
we included about a dozen female angels in our very first round of financing. starting early and being very thoughtful about how you have it permeate every aspect of what you're doing as a company. it's not just about who you hire. it's about thinking about it holistically. emily: elad gil, investor, entrepreneur, and now author, thank you so much. coming up, steve ballmer sits down with david rubenstein to talk about microsoft's complicated relationship with facebook, amazon, and more. that's next. this is bloomberg. ♪
emily: steve ballmer became a viral sensation after taking over microsoft in 2000 and leading high energy, arm waving motivational speeches, like this one. he oversaw the computer company after bill gates' retirement and during a particularly difficult time. his reign followed the first dot-com crash.
today, ballmer remains microsoft's largest shareholder, owns the l.a. clippers, and has a net worth of $40 billion. gates, amazon, and missing out on facebook. >> in the year 2000, you become the ceo. retire,ides to sort of became the chief software architect, but no longer ceo. you now can run the place. were you surprised that bill decided to retire? steve: i was surprised. bill had asked me to be president in 1998, and i said fine. that was another number two position, and i was fine with that. bill came to me and said, hey, will you be ceo? i asked him, do you really want me to be ceo or do you want me to be a figurehead? just tell me. he says, no, i really want you to be ceo. was i ceo? bill stayed working every day
till about 2008. i would say i didn't feel like a total ceo probably until bill wasn't working there every day in 2008, because there was a lot of shared responsibility. david: let's talk about some of the things that happened while you were ceo. steve: we were saying what's the path for software into the living room. the only path that was really clear at the time was the video gaming systems. there was no way to be in the videogame business and not build the hardware. we had been in the hardware business in a small way. we had our mouse product, a few other products along the way. frankly, i think we probably in many ways should have done more hardware sooner. david: you made another investment at a time that was criticized, an investment at a company called facebook. you invested about $300 million or so. why did you do that and did you regret not trying to buy the whole company?
steve: i did try to buy the whole thing. zuckerberg came up to seattle. we met down there. i put a concrete financial offer on the table. ross perot tried to buy microsoft from bill gates in, like, 1979, and bill said no. founders really have a lot of love and passion around their stuff. i think it was 2009 and i offered 20 plus billion dollars, something like that, and mark had absolutely no interest. david: couple other businesses -- i think the smartphone business, that apple has now pretty much perfected in the united states, you were skeptical that would be a great business. do you think microsoft should have gotten into that business earlier? steve: we could have and should have. that' -- i blew that. david: one of the other things that happened during this peer of time when you were ceo was -- ime when youof t
were ceo west cloud computing. are you surprised amazon built this? steve: they've had more success than i anticipated. i didn't sell them short. i'm not saying i was completely dubious. it is very hard sometimes for big companies to do something very different. i call it doing a second trick. at the time, i would call amazon a one trick pony. it was doing this retail stuff, doing an awesome job. but to do a second trick, you don't get a lot of companies who do that. that doesn't mean microsoft is out of the game. we started this thing called azure and office 365. my successor has taken the thing to very much new heights. david: right before you left, you tried to buy and ultimately they completed the nokia trent -- acquisition. it was an effort to get into smartphones, and it didn't work out. why do you think it didn't work out? steve: number one, maybe it was
late. number two, after i left, the company went ahead and bought it, i don't think there was the same level of enthusiasm at the board level and management level for scalin ug up and investing there. david: you ultimately decided to leave. your successor is satya nadella. were you surprised when he was selected? steve: no, he was the recommendation that i made. he was the recommendation that bill gates made. i thought he was a candidate to replace me, which is why we moved him into his last job, which was running one of the big decisions -- divisions. i was that he got the job. he's done a great job. emily: steve ballmer, former ceo of microsoft, now owner of the l.a. clippers, with david rubenstein. watch the full interview wednesday at 9:00 p.m. eastern. next, opening up the android market. what does the eu decision against google mean for its competitors, smartphone makers,
emily: this is "bloomberg technology." i'm emily chang. googles $5 billion antitrust fine has caught the headlines, but what does it actually mean for the android that form and -- android platform and the smartphone makers that deploy it? the lead counsel for fair search, the industry group that brought the very original complaint against google to the 's, also counsel to the eu antitrust case against microsoft which concluded in 2009 and required microsoft to change its business practices. will this latest decision have a similar result? also joining us in london, alex
webb, who argues in his latest column that google has escaped microsoft levels of antitrust pain. how so? >> as he will know well, microsoft had to as a consequence of the agreement it reached with the commission offer users a choice whenever they were installing windows in their computer. they had to decide which browser would be installed. google, because it doesn't actually own the interface with the user -- android isn't made by google. it is not being forced itself to provide that would've option. installs a provider default browser. you brought that the original complaint, are you pleased with this result? >> yes, we are pleased.
we think this will open up competition in the mobile landscape. it's true it could have gone further, but the microsoft division was one that was agreed to by microsoft. this is a good decision. emily: the money is one thing. another.egulations are for google, is the money really a big deal, or is it the other thing that google now has to comply with? >> the money really is a drop in the ocean. .5 billion google has cash reserves of $103 billion at the moment. it doesn't make a big chunk. -- take a big chunk out of that. the bigger question is how it will respond. it will potentially reduce its access to data if people do start using alternative search engines, browsers.
that data is essential to google's ad business, allowing it to serve the kind of ads which match user interest and user browsing behavior. emily: a lot of google competitors are happy about this ruling. one longtime google rival, of course, is oracle, which is one of your clients. in the past oracle has signed on to letters supporting eu actions against google and briefed european regulators on google policies. how much has oracle been behind sowing this antitrust backlash? >> oracle has most certainly been involved. it has been far from alone. there have been a number of other companies large and small that have been deeply involved. emily: what is the bone that oracle in particular has to pick with google?
>> oracle has concerns about google's data related practices and the conduct that the european commission has condemned today has enabled google to commandeer a great majority of data relating to individuals use -- individual's use of their android mobile phones. oracle is involved in that area. sometimes the competition has been excluded and we would like things to be opened up there. , a smallerlla browser, is one of the companies that is happy about this result. --k to us about how this now google is appealing, we should say. this now could open up room for some of these smaller competitors. >> as much as google has said it is going to appeal, that doesn't necessarily mean that it will put a stop to the 90-day deadline they have to be in
accordance with the law, with european law. there is a slight possibility that a court will delight that -- delay that 90 day deadline, .ut it seems very slim after that, google will have to start paying fines if it doesn't meet the standards that have been set. crucially, this is not going to affect anyone's phone they have in their hand right now. it's really about new phone sales and the agreements they have behind the scenes with those phone makers. they agreed that phone makers might make it easier for them to preinstall other applications on their phones, but given that they are set of to have google already, that probably means phones that will be sold still hold all of the google apps they have right now. the consumers are probably safe until a next-generation comes out. emily: other companies, including oracle, expedia, microsoft, google competitors
that have been behind some of these complaints to the eu -- how much of this is about competitors getting backâ google? -- back at google? how much is it about the eu and the competition commission seeing a problem? >> anyone can bring a complaint to the commission, but it's up to the commission to decide whether to pursue them. the commission most certainly anyd not perks to -- pursue case against anyone, including google, unless it found that there was genuine consumer harm. quite clearly, that is what happened here, as happened in every such case. emily: do you see more action coming. the european commission has taken quite a hard line on especially u.s. tech companies that we don't see from .egulators in the united states >> i would not be surprised to see more. there is one more google case in the pipeline. there could be more google cases
coming down the road. i think it is important to note has although the commission acted against american technology companies, it generally has a more robust antitrust enforcement policy with respect to dominant companies and in areas where european companies come in, energy, financial services in europe [no audio] what are some other big potential cases on the horizon? actually,ically, we've heard about google's new adsense case which is forthcoming. more interesting outside of europe will be the extent to which perhaps regulators in india, for instance, other geographies follow the lead of what's happened at the commission level. google, of course, has any number of other tech companies looking for its next one billion users, users in india,
sub-saharan africa. if these sort of patterns emerge there, google already has a dominant position in europe. it is quite hard to displace it. getting in quite early to these other regions could create a real problem for them. that's the sort of regulation i'm particularly keen to follow. emily: thank you so much. the nsa and cyber command are working together to thwart any potential russian meddling in the upcoming u.s. midterm elections. the move comes as president trump has admitted he accepts russian -- reports of russian interference in the 2016 election. congress is seeking measures to allow the president authorized cyber command to disrupt any russian manipulations outside
the united states. work, up, zte is back to but it's missing a key component -- workers. we did stress -- we discussed the latest. a startup on the verge of transforming the entire transformation industry by -- transportation industry by creating self driving robot taxis. we go behind the scenes. this is bloomberg. ♪
."oken in anger this apology follows increasing calls from investors and employees for musk to focus on tesla's work and take a break from twitter. player inoup, a major the one belt, one road -- company is involved and $50 billion worth of land reclamation projects across southeast asia and possesses what it says is leading technology in the world reclamation market. how his company will take advantage of china's ambitious plans to fund rapid growth -- >> open bracket -- [speaking
chinese] >> places like southeast asia and the middle east are now seeing really strong demand. vietnam, like indonesia, and bangladesh have only just begun nationwide construction of highways, power plants, and ports. we see the biggest business opportunities in places like hong kong and singapore which have large populations, but limited space. they are desperate for land. we have 500 open projects with a total value of $15 billion. we are very excited about the prospects for our business. >> we know singapore is in the process of a significant land reclamation project. are you involved in that? how significant is that opportunity for your company? singapore has articulated several land reclamation projects. we are working with the government on new experimental projects, where we will extract mud from under the sea and use
it for reclamation using our own technology. if troops successful -- if this proves successful, we will win the whole contract, we are confident. lagoon tod from a create some 500,000 square kilometers of new land. this will provide living space for roughly 200,000 low income citizens. >> how would you characterize the financing environment? are you partnering with development banks, private investors? >> the philippine government will not provide direct funding for the project but they will give us ownership, of a portion of the land created. we hope to use that asset to generate revenue for our business. has issued a loan of $300 million for this project. we have secured investment from chinese companies. >> what percentage of your revenues do you expect to arise from projects link to the belt and road initiative -- linked to
the belt and road initiative? >> 80% of our revenue is generated along countries in the belt and road initiative. we aim to grow 30% to 50% per year. >> plus the timeframe for taking thecompany public -- what's timeframe for taking the company public? >> the most important thing will be using our land to reclaim land -- our technology to reclaim land from the sea. >> to what extent is this a catalyst for companies like yours? >> we try to set up regional offices in different parts of the world. we've already done so in singapore, dubai, panama. in china, we have built an r&d center where we are actively training talent so that we can expand to more countries step-by-step. emily: that was xu shilong, geoharbour group founder and
chair. on how the ongoing standoff between the u.s. and china could derail the initiative, we are joined by peter elstrom. obviously, many of the companies, peter, as a result of this initiative in china, are thriving. how does this stand up -- this trade war impact them? peter: they need to be aware of the potential problems with the trade tensions with the u.s. in terms of tariffs, it will cause certain things to get more expensive. the real challenge for some of the chinese technology companies is if they are not able to get the components they need from the u.s., the supplies they need from the u.s. we saw this with zte in particular, where they were not able to get semiconductors from the u.s. and some optical component parts, so they are aware of that.
in the meantime, the 2025 initiative is moving forward in the cities which are really responsible for implement in this. they are moving very aggressively. look upto nanjing to close at their efforts to foster some of these key technology efforts. they focused on artificial intelligence and semiconductors. they are very aggressive. the party chief talked about the financial incentives they give. it goes beyond free rent and tax holidays. they will also pay companies for setting up r&d centers. if you are a venture capital firm they will give you money -- firm, they will give you money to go there. they will in some cases compensate you if you lose money as a venture capitalist. there are questions about whether it will be effective in terms of building competitive technology sector, but they are trying very hard. emily: the u.s. has meantime lifted the ban on zte, but do you think the fear factor from the united states and among u.s. lawmakers is only going to get
worse when it comes to chinese tech companies? peter: it is certainly an issue. we are looking more closely at zte's business. our reporters found zte is struggling to get all of its employees back into the factories to restart operations because they are out in the countryside. zte is not known for paying the highest wages in the industry. they are reluctant to come back in case there are other problems, in case things don't start as smoothly. on the other side, for customers, it's another big challenge. telecom systems are not like smartphone systems that you buy once and you don't worry about for a while. they are years long projects. if you decide to hire zte to build your telecom network, you want to make sure they have access to the best technology for a long. -- long. -- long period of time. there is a risk they will not get people that they actually need. emily: all right. bloomberg's peter elstrom for us
passengers to safety in case of emergency. in the crowded self driving space, one company stands out by building an autonomous vehicle from the ground up. meets thece cofounders, who plan to make their robotic cars the go to rideshares of the future. >> we all make poor life choices. take these two guys, for example. they are the founders of a self driving car company, and they decided it makes sense to try to compete against -- automation.ves it's rivals are adding self tech -- self driving technology to existing cars. they are making a new type of vehicle for the self driving age. basically, they are making a robot. itits early incarnation,
looks like the love child of "the matrix," "mad max," and "transformer" franchises. this is a well-known designer and ad guy who one day had an epiphany, a vision of the future -- >> i saw the >> he had a vision of the future that was filled with robotic vehicles. he said he needed to find a brilliant computer scientist for six months and ended up finding jesse. >> that was jesse levenson, a stanford graduate who was sought after by google.
that was my signal to get him. >> a lot of colleagues have run off to companies to retrofit a car. what jury you to this approach? clear that this would be a transformative technology for the society. it was not enough to solve the technology. you need a product and a business that makes sense and tim shared his high-level vision for what this could be. at was a system for autonomous robotic vehicles that could be summoned like a lyft or uber. >> we have a clear vision at that this would take us
into robotics and autonomous transpotation -- ortation. to the aire me station where i am about to get a test drive to see how they handle. is with dualrain voltage and low voltage and you can see them driving without any human intervention. this is vh4 and vh5. do you want to go for a ride? goes out and tries to dodge them and i get to do the whole test sitting backwards because tim thought it would be funny. give controloke, i my life over to the ai.
>> it doesn't get old. >> you see the robots going through the course at 45 miles throughand the vh5 goes it at 70 miles an hour. ande have dual steering direction. >> is it it madness to take on the automotive and tech companies at the same time? yes. of course it is. t the robotics rideshare of the future. >> you can watch more on bloomberg.com.
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