tv Bloomberg West Bloomberg April 10, 2015 1:00pm-2:01pm EDT
cory: live from pier three in san francisco, welcome to "bloomberg west," where we focus on innovation, technology, and the future of business. i'm cory johnson. general electric is exiting most of its finance businesses. the company will sell $26.5 billion worth of real estate to wells fargo and blackstone as it undertakes the broadest restructuring of its ge capital unit here is ceo jeffrey immelt. >> this is an excellent time to sell financial assets.
this demonstrates that our platform could be worth more outside of the company. cory: shares respond in the most in five years. blackstone group also redefines excel trust. they have malls in the southwest and the southeast. the deals cement blackstone's position as the world's biggest private equity investor in real estate. before the deal, they oversaw $85 billion in real estate assets. hillary clinton will make it official sunday and announce her candidacy for president of the united states with an online video. she will then head to iowa and new hampshire. she is forgoing the typical big announcement and is instead meeting with voters in small groups. the u.s. senate is working on a bill that would give congress the authority to review and iranian nuclear deal.
such a bill would allow congress to block the obama administration from lifting sanctions on iran. there is former u.s. ambassador to israel martin indic on when a deal could get done. >> if it continues to be the case that the both sides want a deal, it is more likely that they will get a deal. i suspect it will not be my the june deadline and it will drag but eventually there will be a deal. cory: that said, there are questions about leadership in iran once the deal. both the ayatollah and the president have warned they will not accept a deal that does not lift all sanctions against iran. no key and may help -- sell its -- nokia may sell its maps business. they are attracting interest from other companies and private equity firms.
now to the league. preorders have started for the apple watch. apple's first entirely new product since the ipad. already they will have to wait many months with some additions unavailable to ship until june. there were lines that apple locations around the world including australia and japan but we did not see the great lines that we have become accustomed to in the past. perhaps because you cannot buy the watch today. apple is encouraging people to make appointments for those tryouts before the shipping date. one of the people that tried it out was our bloomberg reporter as well as the author of "1% windfall." i have long believed that the lines in front of apple were purely a pr gimmick, but the press, including us come
intuitively show up every time they release a new product to use those lines to make it look like the products are popular and cannot manage the demand. >> apple is going for a different kind of marketing strategy. apple wants their customers to be happy into to feel like they have access to the product. you can go in the store and look and try them on and demo everything and then place your order online. you will not have any unhappy customers waited in line and go home empty-handed. cory: as part of that image restructuring, price is an interesting part of this product. we have never seen a product -- i am thinking of macs with everything stuffed into it could never cost $17,000. now they are selling a $17,000 gold watch. how are they using price to convey image? >> it is an interesting point. apple is pioneering the merger of technology with fashion.
one apple really understands is that there is a wide spectrum of taste. this is why they have gone from this pricing strategy, the range of $349 to $17,000 in which i think is a mistake and a detriment to the future of the watch. cory: why? >> first of all, we know apple suffers from the curse of awesomeness. the initial reviews have been good and encouraging but at the end of the day, we know apple will come up with a bigger and better version probably within a year if you look at the cycle of the new phone. the big question is forget about $70,000, are they going to be spending even $1000 for a watch which is, in essence, disposable? in one year, it will look a little outdated and technology will be inferior. so it's a the question and this is further compounded by the fact that we upgrade our iphones
all the time but that is because they are subsidized by carriers and you will not have that subsidy right now. so the big question with this pricing strategy is, are people going to say, this is cool, i went to the store and saw it -- but then are they going to sit back and say, should i buy it now or in a year? that is the problem they are facing with the strategy. cory: i don't know anyone that knows more about pricing than you, rafi, but, stephen, what do you think? >> it is a true luxury product. there is no feature upgrade and going for the $17,000 apple watch edition over going for the $600 one. there are a few upgrades in the glass and the case over the sport, but even within the addition the difference in price between the sport than and the leather with a magnetic clasp is $7,000.
even brands like rolex and omega are not charging $7,000 for a leather band with a gold clasp. >> it is great there are a lot of people out there looking at the much and everything but we have to remember apple is the largest company in the world with $183 billion worth of revenue. you need something bigger than sort of diehards and deep pocket people buying the in the first version, to really get the watch going and be the next growth engine of apple. from a pricing standpoint i think they need to focus more on the mass market instead of the high-end $17,000 watch. cory: that is my point. i don't think they are focused on the $17,000 watch. i think the $17,000 watch yes, there is demand for it
apparently, but i think it is a gimmick. it is a way to say, this thing is really cool, but i don't think anyone thinks that they will sell 51% of their watches of the $17,000 model. it is an image leader. the same reason why they bought ads in "vodue" instead of -- "vogue" instead of somewhere else. you can go and buy a polo suit for $5000. to help them sell shirts. >> first of all, we have to remember that suit is timeless so to speak, versus a new apple watch which, in the year is somewhat disposable. that is a big difference.
second, and most importantly they should really be focusing on the mass market. it is great to have a $17,000 watch and we are talking about it a lot, but i would narrow the range -- i would have gone down to $249 and up to $2000, and even offered a monthly payment plan to make misting of it being disposable a little easier. one other point that i would have done i would have bundled this with the iphone 6. most of the six sales are done. it would be a nice counter to this & galaxy released today to also come out and say we have this new apple watch and we are bundling it with the iphone. cory: stephen, what do you think the role the high-end watch does to pull consumers to this product line? stephen: i think it is a marketing tool. i agree with rafi it will not
be their biggest seller, but they are using it as a way to get exposure. when you have people like phare ll wearing it on tv, you have these public figures wearing them, it gets exposure for the watch in general. kind of a trendy fashion item. they need this to become a massmarketing that everybody wants and feels they need to have if it is going to move the needle at all for apple. cory: i also think demand is so important because you have all these companies writing apps for the products. even bloomberg is writing apps for the product. we want to see what the use case is. are you saying the high price watch will prevent that from happening? >> i don't really understand how seeing pharrell having a $17,000 award will affect the decision
cory: i'm cory johnson. this is "bloomberg west." how the apple watch could be a major player in payment. and we will speak to the cast of "game of thrones" about tech. first, a check of your bloomberg top headlines. goldman sachs is giving lloyd blankfein a long-term compensation, $7 million in bonuses to be paid out over eight years. the new bonus brings his total
cops to 31 million last year making him the highest-paid u.s. bank ceo. china started using a new tool to disrupt access to foreign websites. researchers at the university of toronto say the deployment of a new system represents a significant escalation of the chinese government possibly firewall of china. this one is nicknamed great canon, and was used in a recent attack. amazon gets approval to test on delivery drones. the faa has given them a waiver for flights as far as 400 feet off the ground and as fast as 100 miles per hour. earlier approvals work for no use because it applied for specific drones which amazon no longer uses. imagine making all your payments with the flick of your wrist. making it easier to use apple pay is one of the main features with the apple watch, which is now available for preorder.
let's take a deeper look at apple pay. one of their big partners, first data, handle nearly half of their debit and credit card transactions in the u.s.. here is the ceo and president of the company. >> it is crazy, 40-year-old company, 6 million businesses as our clients and we are the indefensible -- indispensable component in the payment space. i don't know why people don't know is better, but over the past few years, our job has to move away from that anonymity and bring it in prominence to silicon valley, financial systems, as well as the world. cory: one of the biggest things in your business, your ability to get the money from the banks to the -- from the consumer to the bank to the merchant, controlling the process and behind the scenes. >> this is waterfront property.
this is what we refer to it. we happen to be there. we issue 800 million cards, we have 4000 banks as customers merchants that are dependent on the authorizations of those transactions to the security and trust that goes with that. and the settlement and payments that go with it. we are the next is in the middle of the activity. cory: consumers are starting to see some of the innovations going on in the industry and i don't think they have any idea of what they are about to see. in october, there is a change in the law. merchants that don't accept the cards with a chip in it will be liable on there and -- end for fraud and theft. that means we will have a huge up sale of point-of-sale systems throughout the country. >> exactly right. in october 2015, the liability is driving large and small businesses to rethink things.
they need to re-terminalize. in most technology curves, you need to move to the forefront rather than catching up to the current thing. very common in europe, you did a credit card into a terminal, the chip will be read and that will stop counterfeiting and fraud. people also moving to encryption and tokenization. at first data, we build a product line from a point-of-sale terminal all the way down to a dongle to provide that capability and in the overall capability of business. cory: talk about apple pay and how important that is. tim cook was boasting that two thirds of all transactions were done with apple pay in the first
quarter. >> they see the total volumes more than we do, but apple pay has been one of the few things that i can remember in history where the improvement and security interest for the commerce and community experience. you do not usually see those things at the same time. cory: so when the security gets better the customer expense doesn't. >> in this case, every transaction is completely encrypted and tokenized, which makes it one of the most secure digital payments in the industry. any issues that have been written about as it relates to security issues are much more about the registration process and the upfront card fees, but the actual transaction itself is as secure as it can get. cory: rather than every transaction being connected through the system as it moves to the bank, being connected to the consumer, it all becomes a token, completely anonymous transaction. >> that token cannot be
connected to accept for the person doing the authorization. or reused. there is nothing ever in clear text. cory: does this mean that you will make more money? >> we will make more money. our customers will make more money if we make commerce secure. safe, trusted commerce will increase the drive. casual move to non-cash methods. i think the consumer experiences will get better and better. we bought companies in the loyalty space, give, and even point-of-sale. we are seeing the uptake significantly across the board because people are making the leap to not only drive secure transaction but build in consumer experience, for loyalty, business intelligence and forget thinking ability. cory: you have a long history of working on wall street trading systems. trading system do a lot of things but ease-of-use is not what they are known for. how does that translate to what you're doing at first data
working with small and medium businesses who wants to go see? >> the idea is high frequency low latency capabilities. moving through the transaction as quick as possible. build good strategies to make sure fraud and security are out of that system. it is the same with payments. reduce fraud, improve the safety of the transaction split-second capability for optimization. along the way, build a series of capabilities and enhancements. in this case let businesses grow. cory: the first data president. up next, "game of thrones" and technology. they are not oxymorons. we will ask the actors what their characters would do with new technology. ♪
cory: this is "bloomberg west." i'm cory johnson. a big day for hbo launching service providing service without a cable subtraction. >> we want our subscriber to say over the course of the month this is more than worth it. if we provide all kinds of flexibility for how you get that service going forward, we think this is multilateral. it is not binary. either you are streaming service or you are locked into an old ecosystem. cory: you can catch the full interview on "charlie rose" tonight. new streaming service and "game of thrones" coming back with a new season this week. i caught up with the actors ahead of the premier and asked what their characters would do if they had access to high tech smartphones "game of thrones in the land of."
>> this is a funny thing. it took two episodes to get to king's landing. now we have four seasons tried to get back again. maybe she could do it with a map. >> maybe a relaxing game would be good. something with cute characters or something may soften him somewhat. cory: is angry birds to o angry? >> definitely. >> he would not know how to use an iphone. he is not that chart. >> probably will listen to some slow dance or power balance. >> i think she would die. >> i would probably reverse it and he would check out the makeup. i don't think he would get along with it. i think he would break it. >> any kind of gps would have
cory: this is "bloomberg west," where we focus on innovation technology, and the future of business. president obama spoke to roll caster over the phone to patch up a medic ties. there is a chance of a informal meeting. secretary of state john kerry met with his cuban counterpart bernard rodriguez. >> in country after country, the people of the americas have strengthened their democracy and taken steps to ensure the fundamental freedoms of their citizens. cory: the state department
called the meeting lengthy and very constructive. hillary clinton makes it official on sunday, she is running for president. she will make the announcement on video before heading to iowa. clinton enters the race as an unprecedented front runner facing little to titian for the democratic nomination. china's central bank pumps 62 billion dollars worth of loans to banks in the first quarter of the year in an effort to boost the economy. last year china had its weakest full year of economic growth in more than 20 years. richard that president jeffrey lacquers as he is still in favor of raising interest rate in june. he said today that he thinks recent soft figures in the economy will only be temporary. last month policymakers were split on the beginning of rising of rates. one of new york city's most expensive home purchases ever. a group of investors including bill ackman paid $91.5 million for a duplex penthouse at 157
tower manhattan. it is a luxury sky stripper overlooking central park west. bill ackman told "the new york times" that it was the mona lisa of apartments. why did linkedin spend $1.5 billion on the online education site lynda.com? who better to ask in the linkedin ceo jeff weiner. >> it is an enterprise business and a consumer business with a seduction model. it works for individuals, companies that want to invest in their employee basis. a big portion of our current customer base is universities administrators professors and the students of those universities. it is a broad cross-section of folks and is increasingly international as well. lynda.com is currently producing content in english, german french, spanish, and japanese. we are excited about expanding our global footprint. cory: you give them helpful
guidance about what the business is doing. growing at 20% clip. about a third of that is a corporate business. do you see the corporate aspect of this becoming a bigger aspect of the lynda.com business because it will be matched with your sales team? >> it is growing faster than the consumer piece today but that is often the case with smaller bases. there are strong synergies with our platform in both segments with regard to individual members, we think it aligns well with our seduction model and we are looking forward to a number of different point of integration. with regard to the enterprise business, we have thousands of customers a global sales force with regards to our talent solutions business. we think there are exciting opportunities grow the business. cory: when i look at this, it is something that your guys would take and run with it. do you think that it would by itself?
>> we will see. it is the intention to continue to invest. we think there are some simple wins in terms of integration that we're looking forward to testing. slide chair is reaching tens of millions of people every month. we have a repository there of 18 million presentations and videos . when you are doing a search for a specific knowledge base, you can imagine a lynda.com learning module with related coursework. the same would hold for a job seeker. we know what skills you have as a job seeker, we know the skills of the job that you are interested in looking for, we can see if there are any gaps in encourage you to get that skill. people who have been promoted into similar roles have certain skills that you may not have and we can suggest that you learn those skills. there are a married of examples where there are straightforward integrations like that. cory: i am also imagining a data component were you layer on a geography. i want to move in denver and i
am good in oil but not gas. you can coach me up on that as a potential job applicant. >> bring you on as a product manager. any locality, we have talked some time now for realizing our vision to build the world's first economic graph, to map the digital economy p one of our favorite use cases is, in any given locality, to measure the passes growing jobs and the skills needed to retain those jobs, the aggregate skills of the workforce, and measure the get. with the content that lynda.com offers, we can suggest to the workforce or any individual within a locality, here is a skill that you need, so it is not just about the jobs that once were, but training you for the jobs that will be. cory: explain the idea of the economic graph. we hear about the social graph facebook mapping the connections of the networks we have as friends and family. what is the economic graph? >> it is essentially a digital
mapping of the global economy. historically, the value that linkedin has been able to create today is oriented around relationships tween professionals. it is a professional graft. the economic graph takes no professional relationships and build on that. we want to map the global economy digitally. that would require a profile for every member of the global workforce, all 3 billion-plus people, a profile for every company in the world, over 700 million in the world, a digital representation of every job in the world, full-time, part-time, for-profit volunteer we would like there to be a digital representation of every skill required to obtain those jobs a presence for every university in higher education that offers the ability to acquire those skills to obtain those jobs, and then we want to make it easy for every individual company and university to share their knowledge in the event that they
would like to do so. we want to take a step back and allow capital all forms of capital, intellectual, working, and human capital, to close to where it can best be leveraged. the hope is to lift and transform the global economy. cory: is that all? that is enormous, wonderfully ambitious. >> it is, and that is something that we have been talking about for years. when we first started talking about it, it was a vision. what has happened over time, we have been successful at generating traction on each of those pillars in terms of laying the right foundation, building the right infrastructure. with our acquisition of lynda.com, we take the skills pillar and go beyond the data to understand what skills our members have and what skills they need and now we can offer the content that enables them to acquire the skills. in many regards, this is the last piece of the puzzle. at this point, it is a question of scale and time. cory: the guidance you gave us
was that operating margins for lynda.com was about 5% to 10%. with all those things working with it, it suddenly becomes not just a bigger business but a more profitable business, where the operating margins are closer a few years out closer to 20%? >> we have not released details yet. we will be able to provide more in the way of guidance on our next earnings call. what we can say is there is tremendous potential for many of the reasons we have discussed this far, like our sales footprint tens of thousands of customers we have, our pre-existing membership base, our suspicion model. one of the things we are most excited about is the extension of this platform on a global basis. you think about china where we have 9 million members. that is up from 4 million in february of last year. india, our second largest market in the world, 30 million members. the opportunity to bring the lynda.com library to these markets and extend beyond its
cory: this is "bloomberg west." i'm cory johnson. vinod khosla talks about education. first, some top headlines. an exceptional heat wave is intensifying the drought in california. the last month was a full 4.5 degrees above the average and is having a big impact on some producers. >> it's a big problem for us as a company and as humanity. this is the beginning of some
major challenges we will face. it is not just the water drought, but also beehive collapsing, climate change. cory: more than 44% of california is now in a declared exceptional drought meeting crop losses or water shortages within the top 2% ago -- percentile. philadelphia shows many of its residents cannot get an answer when they call their home tom cable company. there are current negotiations over a franchise the new. comcast said that it would triple the staff that response to customers on social media. silicon valley does not have a better-known investor than vinod khosla. sun cofounder. we caught up with and talk about education startups. >> previously, there was this old view of technology applied to education, you always heard about pcs in classrooms that
there was no notion of let me create something for the student, for the teacher, for interaction. now with clout and mobile we have gotten the basic infrastructure to do all kinds of interesting things. if you look at something like twitter or facebook what they are about is taking a person and addicting them to the application. i think that ecosystem has been enabled for entrepreneurs to come in and start addicting students to learning. i think it will happen. cory: where do you see that happening, have you made investments in this arena yet? vinod: we have made some investments. for example, a little ecosystem the professors use in colleges to essentially have a class forum, a place where they can
get help from peers, other classmates, teachers, teacher assistants. before we invested, i looked at my son's enrollment in three classes. he had 3000 interactions on piazza. cory: where is he? >> he is doing computer science and his progresses were using it. 3000 individual reactions across those courses. that is way more engaged than any classroom you could imagine. the founder of piazza started with the idea that people needed to interact in a forum, lots of your help, and that then becomes a way to expand. imagine you can do assessment through tests.
normal classes, a professor gives tests. but if he knows every interaction the student had in class, a system could get much better assessment of how much the student understands -- cory: and not just the score on the test. vinod: what kind of questions do they ask, what kind of comment do they make two other people's questions? all of that becomes -- i think all of this will change. mostly college education at piazza. teachers and other people who are passionate have created over 100,000 pieces of content to attach to. all of high school education is about 2000 concepts you have to learn. somewhere between 2000 and 4000, depending on how you divide them up. for each of those, there is our -- are 100,000 elaborations that
have been created, we call them modalities. these modalities -- ok, you describe photosynthesis. can i see a simulation or a video, can i play with what happens if the sunlight is late evening versus the morning? being able to run those experiments right on your ipad or android tablet, those kinds of things are what is getting students engaged. imagine that much content -- we were talking about mcgraw-hill. they don't have people that could author that much content but the community has authored it because they started with a complete set of textbooks for basically middle school through k12 -- 6 to 12 education. because they had that platform
people are now adding to it. there are great simulations that you could play with to say why is the summer and winter different in the southern and northern hemisphere? you can run a model and see how the earth is going around and actually see it. cory: that was vinod khosla. "bottom line" with mark crumpton is with us at the bottom of the hour. mark: president obama is in panama city attending the summit of the americas. the highlight of the trip is an expected face-to-face meeting with cumin president raul castro. will the meeting for the ease relations between washington and havana? relations that have been strained for over half a century. rene hernandez is covering the summit for us. i will speak to ted cohen of brookings about what is at stake as the regional leaders meet. back to you. cory: thank you. coming up, the secret sauce behind dreaming music -- streaming music.
cory: i'm cory johnson. this is "bloomberg west." spotify, serious, milk music, they are all streaming music, but streaming the music themselves is up to a service that delivers them from the cloud. phil good to see you. i'm so fascinated by your business. we met in las vegas last year. how do you describe what you do? >> thank you for having me back. we spend the last eight or nine years going all over the world ingesting high resolution audio from all of the music libraries, over 200 countries, bring them into the cloud and preparing for this moment right now where we can work the world's first music cloud. cory: so everything you do is awesome? >> 25 years ago, when i started
writing software for rolls-royce , the way we used to approach software that is you select a database from oracle or microsoft and you build everything else. the world has come such a long way in software engineering since then. you just don't do that approach anymore with fantastic platform like amazon web services which we integrate with hundreds of difference -- cory: all for the purpose of streaming music? >> today is all about integration. you have to be careful about what software you write. when we just launched with samsung in asia is the worlds first music as a service platform making it completely easy for anybody who wants to deliver high-quality -- if you look at as services move into high-resolution like tidal, 41 million files which are very
hard to deliver globally very fast. cory: higher resolution than pandora or spotify. what is your role with tidal? >> we do not have one yet. jay-z is a creative genius. he has proved that time and again with his music. as he gets more involved in the tidal service he will find out there are multiple components behind it. the content has to be right. exclusives are going to help to some degree. but the technology behind it is absolutely critical. it is hugely complex. if you build all of that yourself, you should leave that creative part to us the genius of the back end technologists, and that is what people like serious xm and samsung focus on. they focus on the value-added piece. we do the complex stuff behind the scenes. cory: do you think tidal will
therefore be limited not only because they are not using you but the depth of catalog, they cannot get unless they sign up with someone like you? then they could get 41 million songs, and not just 10 artists. >> i think tidal will be a fabulous success. that is why we are helping him along the way. cory: also working with neil young and his service. last time i talk to you, i listened to led zeppelin at an audio level i had never heard before. >> the whole music industry is pivoting right now. for years, it's been operating -- not realizing it is a digital business. now this is a pivot point for the music industry. with our platform, music as a service for the first time, it means it can truly turn into a digital business. ultrahigh quality music is one example of how companies are
using our platform and focusing on the value-added. cory: really cool stuff. phil sant giving us at least 40 million tunes to listen to thank you. time to focus on the bwest byte. today we are going solo. the number is 3. as president ford said, our long national nightmare is over. emily chang returned from maternity leave on monday. we will get back to her sitting in the seat and i will welcome that. it will be good to have her back. thanks to everyone for putting up with me for the past few months while she is away. thanks to the staff and richard morris for producing the show. it has been a blast. emily will be back on monday and thank goodness. the latest headlines all the time on your phone, tablet bloomberg.com and bloomberg radio. emily chang is back on monday. see you then. ♪
mark: from bloomberg world headquarters in new york, i'm mark crumpton. this is "bottom line." to our viewers here in the united states and those it be joining us from around the world, welcome. we have a full coverage of the stocks and stories making headlines on this friday. shannon tells us how psychiatrists are failing the patients who need them the most. special coverage of