tv Best of Bloomberg West Bloomberg August 28, 2016 9:00am-10:01am EDT
♪ emily: i am emily chang and this is "the best of bloomberg west," where we bring you all of our top interviews. uber faces the challenge of profitability. uber is said to have lost at least $1.2 billion so far this year. what does that say about the business model? tim cook marks five years at the helm of apple, taking a look at his tenure. the front page of the internet is answering your questions, talking to the cofounders of reddit.
covering everything from ad blocking technology to free speech on bloomberg. first to our lead, uber is making an about-face on its profitability in the u.s. after touting earlier in the year that it made money the company is said to have posted a huge loss in the first six months, as much as $1.2 billion. eric newcomer broke this story. >> uber has a lot of money in the bank. they still have $8 billion in cash. they have a credit line of $2 billion and $1.2 billion in loans. they have the money. it is more when can they turn around their burn rate? it is something they can do with the question is whether it will be as big of a business as it is today if they have to pull back on their losses. emily: where are these losses coming from, china, subsidies? >> definitely subsidies, china
mostly. they have lost at least $2 billion. they were getting ready to negotiate with didi to get a deal and they had as much market share to say they deserve a bigger stake in the company because they are a bigger stake in the market. emily: these are subsidies to drivers. can they ease off and remain competitive? >> when they are competing with another player, drivers are super price-sensitive. you can see drivers with both apps going back-and-forth so you really have to make sure you are giving drivers the best pay if you want them to work for your service. emily: didi is going to give uber $1 billion for its china business. how much will the losses change or subside once uber is no longer in china essentially? >> it is hard to say. just the first quarter of this year, uber was profitable in the united states and now they are losing a billion dollars.
they could lose their profitability very quickly by saying instead of taking 20% of bookings from drivers, they will take 15% and things skyrocket. it would be hard to guess exactly what is going to happen because the competitive environment is so fluid. emily: evaluation is $69 billion of from 62 and a half billion. explain that number to me. >> 62 and a half is what is called the pre-money valuation, the valuation that investors agree to but you get all this money and added up and get the post money valuation. we were sitting at $68 billion and didi posted $1 billion. emily: my favorite part is whether you talk about whether there is precedent and it is hard to recall whether there was a company that lost this much
this fast. amazon lost a lot 16 years ago. >> and they laid off about 50% -- 15% of their workforce. emily: is there precedent for a company to lose money this fast even if it has this must potential? >> i e-mailed a bunch of academics and a lot of them pointed to amazon. i looked at cosmo, the dot com era of lost phantoms. together they only lost like $1 billion. even when you look at public chip makers it is hard to find companies that have invested as much as uber. uber is not buying big manufacturing facilities or anything like that. we are spending money on subsidies that go away after they have spent them so it is really unprecedented. emily: tim cook marked his 50 year anniversary at the helm of
the world's most valuable company. >> in august 2011, tim cook was taking over from a legend. many investors feared without steve jobs at the helm apple would be headed to decline, but now five years on, cook has defined apple in his own ways. business boomed under his leadership, market cap doubled surpassing exxon mobil to become the world's most valuable company. in march 2012, under pressure from activists shareholder carl icahn he granted shareholders their first dividend in 17 years and a $10 billion buyback scheme. apple's cash holdings nearly
doubled to $232 billion. with 93% of that money held offshore, cook has taken heat from regulators and the u.s. senate accusing apple of using subsidiaries to reduce its tax bill. now to product, under tim cook apple's story is still about the iconic iphone. in july, apple sold its billionth unit. investors are waiting on another major product win, especially since the company has seen iphone revenues declined for the first time ever in the first two quarters of this year. some investors think apple is over dependent on the iphone and worry about the impact of cooling demand in china. and then there is tim cook the person.
in october 2014 he became the most high profile openly gay ceo and has since become an advocate for lgbt communities. he has also faced off against the fbi over iphone encryption. he hired former epa head, and setting ambitious recycling targets for apple's old devices. with tim cook hitting his stride, let's see what apple's next five years will look like. emily: coming up, pittsburgh self driving dreams. we hear from the mayor about the city's pilot with uber and how pittsburgh plans to remake itself as the manufacturing hub of the future. ♪
modified volvo suv's and they will be supervised by humans in the drivers seat for the time being. we sat down with the mayor and talked about when he first began talking with uber. >> the initial conversations happened almost 18 months ago. they had been looking for a city to basically create an innovation center for a time as vehicles and started talking with purdue university and the -- for autonomous vehicles, and they started talking the carnegie mellon university and the city. over the course of the past six months, we have been advancing the driverless cars in limited areas of the city, and over the course of the past few weeks did it take the next level which is the ability to actually call it up on your app and use autonomous vehicles as part of your uber experience. emily: why do you want pittsburgh to be the guinea pig? it is exciting technology but it is unproven. >> it is and it is not.
it has been over a decade that carnegie mellon university has been using them in the city of pittsburgh. in the past six months, uber has been all over the city with her. i was the first person to use the vehicle itself. i ended the night i having travis and his team come and pick me up and take me home. there is no difference in a car, and at the same time, safety comes first. there will be a driver in the driver seat and a second person in the other seat. the technology has been there for quite some time. it is just now time to take it to the streets. emily: how do the residents of pittsburgh feel? have you talked to them? >> we have not pulled them -- polled them. this is an issue we have been working with through uber and the department of transportation secretary. they are utilizing a lot of cyber security expertise that pittsburgh provides.
the pennsylvania department of transportation again mandating and putting requirements to look at safety first. whether it is inoculations, whether it was aviation, or now with mobility and autonomous vehicles, there is always a test period, and it has the positives and negatives that come with it. emily: give us some legal clarity on how exactly this will work. how does the city see uber's cars today? >> presently, there are autonomous vehicles on our streets not only through uber but through carnegie mellon university. what is interesting to understand as well about this -- every car that is being produced now out of detroit and the world is being equipped with sensors, and those cars will have the ability to speak with each other. presently, they could already do it. in the future, in the next few years, vehicles will also be talking to the traffic signals. there will be sensors that cities put up, and the whole
idea of mobility will shift. this is just the first shift of what will be the next 10 years a radical change in what we view urban transportation. emily: you mentioned there will be two drivers in the car. a main driver and a safety driver. at some point will it be legal to drive without that safety driver? do you see this as a job killer or job creator? >> uber has employed over 500 people from around the world to work on this project and i anticipate in the next few years over 1000 people will be employed. you see the transition emerge from heavy industry city 30 years ago the winter economic collapse. you are seeing a new city emerge where uber, google, microsoft, intel, disney, oculus, all these companies are creating a global innovation center in pittsburgh. the cities that get out in front
will be the leaders of industry will be the leaders of industry and cities where others will locate. they will be the cities where the town will locate. what i want to see happen in pittsburgh is that we not only build the technology but start manufacturing the parts as well, advanced manufacturing being another part of this. it will be a critical component in building an industry for all. emily: that was the pittsburgh mayor. as the battle heats up, here is one statistic to consider. uber is the most used taxi out -- app in 108 countries. uber has quite a lead. it is installed on 21% of all android devices in the united states compared with 3% for lyft. still, they have struggled in asia where local operators reign supreme. still ahead, we stick with car tech and discuss the rapidly changing transportation situation with anthony foxx, our exclusive interview next. ♪
emily: the race for driverless cars is heating up with automakers in detroit embracing innovative technology from silicon valley including self driving cars, connected cars, smart sensors. one major question still remains -- what does autonomous driving regulation look like and when will it come? transportation secretary anthony foxx said we can expect it ahead. we sat down for an exclusive interview. secretary foxx: piloting these automobiles in real time is going to be part of how we learn how to make them even safer overtime. we are working on guidance to our department that i think will help the industry understand what we expect from a safety
standpoint. this is a burgeoning area and we are going to work to make sure everyone is safe. emil you said you will be putting the guidelines out over the summer. any concrete things you can share? secretary foxx: what we are trying to do is to try to lay out a framework that will make sure the industry understands the department's point of view and what our expectations are. the states have played a significant role in operating cars and we will talk about that, and how our approach may or may not change. in some places where we think it should change. emily: why just guidelines rather than explicit rules and regulations? secretary foxx: i think there will be rules and regulations to follow, but we are at the beginning point of very very quick dash of a very quick transportation -- it is important that the stakeholders can see where we are headed so they can plan accordingly and more details will be filled in. emily: u.s. investigators are investigating the death of a
tesla driver using autopilot at the time. do these features make us safer, and how much safer? secretary foxx: i do, i do think there are technologies that will do better. we had 33,000 deaths on our highways last year and we want to those numbers to go down. autonomous and connected cars can reduce by as much as 80% the fatalities that occur. that is the signal we are sending to the industry. emily: last month you alluded to premarket steps when it comes to self driving technology. what might those entail? secretary foxx: when i would say is the problem we are trying to solve is along with the disruptive technology of autonomous vehicles, connected vehicles, there is the possibility we get a wide range
of entrance into the market while trying to build new automobiles. secretary foxx: i do, i do think there are technologies that will do better. right now we have a self certification system where the industry automakers see our standards and are required to follow those but they self certify, so we do not meet until after something has gone wrong. as we shift to this new era, we have to have a conversation about whether we should be doing something different on the front end to make sure the vehicles are safe. emily: what are the negatives to self driving cars, do you see any? secretary foxx: i think there are an awful lot of positives. do not know, we do not know.e what we are trying to do with these guidelines is contemplate
that there will be learnings that come about over time but we know that safety has to be thought about at the very beginning of the development of this technology, and manufacturers will have to have huge amounts of vigilance on that issue to prove they can make the standard. emily: how worried are you about car hacking? secretary foxx: it is a concern that we as the government have and the industry has. i would like to see the industry doing even more together to make sure that across the system we are getting great safety. emily: we are seeing a lot of tieups between detroit and silicon valley, google and lyft. -- gm and lyft. google and fiat chrysler. do you see any concern about these big companies coming together around regulations? secretary foxx: obviously i have to be careful not to put my thumb on the marketplace but it is an interesting convergence of the technological edge with the conventional automakers. i think there is some symmetry
that folks are seeing where on the technology side, folks out here are not as used to building cars and putting cars on the road, which is a very complicated business outside of the leading edge of technology. there are ideas that are being harvested and incorporated into vehicles all the time so it is really not that surprising to see that trend occur, that i think you are going to continue to see a wide spectrum of entrance into the automobile market. emily: our exclusive interview with u.s. department of transportation secretary anthony foxx. coming up, shorting saint jude, saying their devices are vulnerable to hacking. if you like bloomberg news, check us out on the radio. you can listen on the bloomberg app, bloomberg radio, and on sirius xm. this is bloomberg. ♪
emily: welcome back. renowned short seller carson block set sights on a new target. saint jude medical. he warns that tends of thousands of americans are living with ticking time bombs in their checks, pacemakers that could be hacked by low-level hackers. they found that saint jude stood out above the rest in a bad way. erik schatzker sat down with carson block and asked about the ethics of publishing information that could be dangerous in the wrong hands. >> someone might make the argument that if you kept your hands -- kept your mouth shut, everyone would be safer. this is a dangerous world and that he believe that state actors are aware of this
already, we have to be more concerned with nonstate actors. but we believe that the balance of interest is clearly in informing people of the risks and holding the company accountable so that something can be done. i do not believe that sticking one's head in the sand and pretending a problem does not exist in hoping nothing goes wrong, i do not believe that is the ethical course of action ever. erik: why do it in a public forum as opposed to a private channel?
carson: we do not have confidence that saint jude would do anything to make patients aware of this. erik: why not just informed the fda? carson: there is a researcher named billy rios who identified flaws in the insulin pump, informed the fda, and became very frustrated because nothing happened and he went public. i think the fda, it sounds as though they are more concerned about cyber security and more attuned to the risks, but i have never dealt with the fda and again, we feel it is important that users know, and we do not necessarily have confidence in saint jude and maybe even some of the institutions of government that the right thing is going to happen. saint jude is a large company. i am sure it is very politically connected and cod bring a lot
of pressure to bear on the fda if there was a private channel discussion. erik: how many people are at risk? carson: the number of implantable device users, we do not know how many still have devices but over the past, since 2008, looks like there have been in the u.s. about 1.1 of these devices implanted including crt's. people should really read our report because there is important detail that we cannot get into here. one of the things that is an important caveat is that men --medsec tested pacemakers. because of lack of device availability they were not able to test those so the crt portion remains theoretical. erik: if the fda is not creating -- treating cyber security as a critical issue why should investors feel any different? carson: that is draft guidance, which they have given the industry time to comment on and there will be a version that goes effective that should
largely resemble that. generally over 90% of medical device recalls have been initiated by manufacturers. that is probably because there is this damocles where the fda says if you do not recall this, we will so you should look like you are wearing the white hat. that guidance shows the fda's current thinking on cyber security, and it is really important for people to understand that in that guidance, there is actually an example of an implantable cardiac device that is compromised, where the sdis -- where the fda says this would be an uncontrolled risk that would mandate some sort of remediation. based on that draft guidance, it is clear to us, our interpretation of the draft guidance, that the saint jude implantable devices fall far below the standard established by that draft guidance. when we say we think they are at
substantial risk of having to recall their devices, it is based on looking at that which does illustrate the fda's thinking. erik: as you pointed out these are draft guidelines and have yet to be finalized and we do not know what the calendar for that is. in the meantime, what reaction are you hoping for? carson: look, there is what we hope happens and there is what probably happens. i have been publicly shorting companies for six years. very seldom have they ever said, some of this criticism is valid. we are expecting to be told patient security is number one, these guys are short-sellers, they are looking to profit on price decline, etc. erik: a wolf in sheep's clothing.
carson: that is probably what saint jude is going to say. they could take it seriously and investigate this and without kicking and screaming, recall the devices and stop selling them until they fix the problems. erik: what if that does not happen? carson: we are hoping that the fda says you need to recall these devices. emily: muddy waters founder carson block with our very own erik schatzker. besides the ethics of possibly tipping off hackers to this, there is the answer of why. earlier matt miller and scarlet fu asked justine bow to clarify her firm's business arrangement with muddy waters. >> what we are interested in achieving is mitigation. >> what you are interested in achieving is profitability for your company, right? you go to carson block and publish the short before going to saint jude. >> we think carson has a history of holding large companies accountable and that is why we are excited to partner with muddy waters. not only do we want saint jude
to respond with urgency, we want the public to be aware. they have a right to know about the risks and we felt very strongly that st. jude medical were likely to shut this up and potentially do nothing about it once again. >> medsec is for profit. >> we are a research company. we incur a lot of expenses. this is not software only. of course we are looking to recover our costs but our motivations here are to hold st. jude medical accountable so that mitigations can be effected as quickly as possible. it is not going to be a small undertaking because of these inherent vulnerabilities throughout the ecosystem, and to draw attention to the public eye so that patients are aware of the risks associated with the technology suite coming out of st. jude medical. >> what do you think about the company's response, saint jude
comes out and says the allegations are completely untrue. he says there are several layers of security measures in place. we conduct security measures on an ongoing basis. >> i do not know what kind of security assessment work to have been conducting but we have found vulnerabilities on the ecosystem. we put together by chaining these on our realities together, put together three different
tech areas which we have reproduced internally. we have definitely verify the existence of these vulnerabilities present in st. jude medical equipment that is being deployed today. >> you're monetizing your research and have a business arrangement with muddy waters. tell us how you would make money off of passing on information to muddy waters. do you make information -- money regardless of whether they go through with the short and make money or is it only if they make money? >> we are paid on a fee basis and as consultants, and our compensation with regards to our arrangement with muddy waters, is connected to his arrangements. emily: coming up, reddit cofounders join us to answer your questions live right here on bloomberg west. this is bloomberg. ♪
this week we caught up with alexis ohanian and steve huffman and answered your questions live on "bloomberg west." they write over 300,000 posts a day but believe it can be so much more. listen in on our exclusive conversation. >> the biggest thing we have been focusing on the last year is building the team at reddit, really getting the company in a position to build and execute all of our dreams so we have hired a lot of people and rebuilt pretty much every team at reddit. we shipped more in the last quarter than i think in the entire year before that. emily: what do think the biggest things are on the to do list? alexis: we have got work to do but we have made a ton of progress in short order.
the team has shipped fast improvements in mobile web, native mobile, and there is more to go. the growth speaks for itself. emily: we have been taking this -- questions from reddit, one of the first -- looking forward, how do you plan to monetize the reddit community and how does an the decision to become profitable change the way web businesses are operating? >> how do we monetize reddit, for us it is ads. that makes the most sense to us. it is the space we were previously living in and that has been getting better and better. emily: give me some color on this. steve: advertising on reddit is a little bit different than you would see elsewhere online because it is a little bit different. an advertiser elsewhere, they are yelling at the customers, trying to say the message in the flashiest way possible but on reddit you can make a genuine connection. it is more akin to speaking with a customer in their home. when they speak to them authentically you can get a real connection.
emily: here is another one -- are you worried about competition? reddit has gone unopposed for a decade. are you worried? alexis: we do not think a lot about competition and we never really have. we are so focused on providing that great user experience. emily: there is so much competition for mind share, from everything from twitter to facebook to snapchat. steve: one of the best pieces of advice i was given as if you spend all your time looking into the rearview mirror you will drive into a wall.
we just look at how can we do the best thing for our users and communities and that has always been our guiding light. emily: like many websites, read its primary business model is being challenged by ad blocking software. what advice do you have? alexis: never lose track of why your users are coming to your site. if you ever start sacrificing that, that is when you will start having a bad time. this is the zeitgeist for a quarter of a billion people and in a lot of ways it is a brand's dream come true. now reddit is where the conversation happens and where brands can participate with it. emily: how do you balance the true to the user and not letting things get out of control, and turning this into a real business? that has been a challenge, correct? steve: yes and no. there is a way to advertise on
reddit that is not subtracted from the user experience. when you make a real connection, because customers need something from a brand, that can be a powerful thing. what we try to think about is how do we do that in a way that it does not subtract from the content and make sure the ads are targeted in reaching the wrong person, so they do not feel like they are at the expense of the user and experience but neutral or positive. alexis: reddit is in a fortunate position because a company like coca-cola can run an ad during the super bowl, and the engagement on that content was higher than organic content on reddit. if a brand is coming correctly they cannot only make a great investment but are making a real influence. emily: as i understand it, they give you free reign. you wish over the last decade
emily: now back to our special on reddit. the company stands on internet privacy and free speech has made and it a pioneer. it can prevent third-party analytics from being loaded during their time on the site, but the program does have its critics, being called a greeting -- breeding ground for trolls. back to the exclusive interview. >> a lot of it is simple technology changes. on spam, it is finding where it is coming from and eliminating it. letting users block other users has had a big impact. we have a long way to go but we are making steady process -- progress. alexis: about a quarter of a billion people will hit reddit this month and out of all of the content they are producing, only .02% of it gets reported so in that context it is a pretty remarkable environment. emily: some of the criticism, april say it is a hub for trolls
for to organize and spread -- critics say it is a hub for trolls to organize and spread. like a virus. you and i have talked about this. how are you balancing not alienating your core users and cleaning up the site? >> our core users are overwhelmingly good and we have actually eliminated a number of communities over the last year, some of it more dramatic than others. now that we have set the tone with the community of what is accepted and what is not, it is about setting boundaries and policies and enforcing it consistently. emily: in the week leading up to this we were taking questions on reddit and unfortunately a lot
of the usernames were to offensive to use. how are you making reddit safer for women especially, in particular? >> it is a big thing that is on our mind. we are trying to make reddit as welcoming as possible. are making sure we are connecting people with their home on reddit. it is not an easy problem but i think we have made strides towards it. but there's still plenty of work to be done. emily: not just women, i nor days, anyone who is not just a straight white guy -- minorities, anyone who is not just a straight white guy. alexis: one out of three americans who are going to hit reddit this month are going to hit reddit this month. we are talking about a large and diverse population and we are
doing better and better every day. we did not have a trust and safety team a year ago and we do now. steve: one of the largest women's communities online is on reddit through x chromosomes. emily: reddit has taken some strong stands on the idea of consumer privacy. what can you share that may change the minds of businesses who have not yet caught on to the importance of consumer privacy? >> it is important for any business to have a good relationship with their customers so for us it is about maintaining trust. trust that we will do the right thing that their data. it is very much about minimizing surface area so if the government comes asking for data, we do not ask for a lot. we don't require e-mail addresses. it is really up to the users to share with us what they want. if we were to get attacked by hackers or that kind of thing, our philosophy is do n ask for a lot, do not take a lot, and let users be themselves and just do the right thing for them. that makes good business sense for any company that cares about its customers. emily: how does reddit tread the balance between privacy and
freedom of speech and demand's from the government and law enforcement and outside parties? >> i would say privacy and freedom of speech are not conflicting. that is always been important to us. freedom of speech, we believe it is important for everyone on reddit to be able to express themselves freely. it is good for the world. you can be your true self. that is a powerful thing when people come to reddit seeking relationship advice or help with suicidal thoughts or coming out for the first time. very powerful things that people experience on reddit. when it comes to law enforcement, hold a very high bar for what we respond to. we make sure the requests are valid and we push back in many cases when they are not. a week ago we were sued by
atlantic records looking for user data. it is not something we hand over easily. emily: reddit has been known as the full paid -- first page of the internet. when you guys came back it was really the idea to turn it into a full-fledged media empire. you delved into original content. how are those experiments going? alexis: well so far. it has always been the hub for people looking to create original content and what we are doubling down on our publishing tools. many publishers, newsrooms were starting their day reading their beat on reddit. they would try to turn that into content they would publish on their own site. by eating the dog food oursels, we realize these are the publishing tools we need to be building. all of that at the end of the day builds the relationship with the very people who do the best job of spreading the message. emily: in two years, where do you see reddit? what are you? are you the full-fledged media empire? steve: we should be significantly bigger, revenue
should be up significantly, and we should have made progress against the biggest problem we have, how do you connect the first time reddit visitor with their home on reddit? that is the big challenge. i believe everyone has a home somewhere. we have thousands, i think 45,000 active communities on reddit. there is something for everybody and making that connection, that is the big challenge. alexis: the magic behind reddit lays in that pseudonymity. you can be your selves. you can be the yankees fan, you can talk world politics. you can learn about new communities. if we do our jobs well, kinds of connections people will make will be as strong or stronger than the connections they make on other social networks where it is more about showing your very narrow, filtered, best self. emily: that does it for this edition of the best of bloomberg west. tune in on tuesday when the twitter cofounder joins us for