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tv   Bloomberg Technology  Bloomberg  December 19, 2016 5:00pm-6:01pm EST

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the truck jumped the sidewalk and drove into the crowd. the passenger inside of the truck was among those killed. they are trying to figure out if this was an accident or an attack. the white house condemns the death of the russian ambassador to turkey. he was several minutes into a speech when a man shot eight shots at him. that is according to an associated trust photographer in the room. the gunmen was killed in the hall where the attack occurred. says that the shooter was a police officer. a manhunt is underway in switzerland after a suspect shot in a training station.
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day,l news, 24 hours a powered by journalists and analysts in 120 countries. .his is bloomberg bloomberg technology starts right now. >> this is bloomberg technology. apple and ireland wage war on the european union. we will have the latest. taking it slow after a rough year to push back ipl. we will hear from the ceo. tumbles afters the company released a game for smartphones. why super mario run may not be
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so super. apple is having a tax sale and they say that there is no basis in fact and they are confident the ruling will be overturned. the fight between apple, ireland, and the commission has been building. explainedvestigator why this fight will be a long one. >> we will continue to disagree on the decision because of the fact that we have legal traditions and i have learned that, in the united states, it a ise order of the day for an is to negotiate tax breaks with the state where it is situated and we have had a prohibition to do that and a clash to understand how this should be played out. >> we are joined by david spent years ate
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the treasury department. also in new york, our guest host for the hour, david kirkpatrick. with me in the studio is cory johnson. bring me up to speed. apple is appealing and we had a release of a statement today. : it explained the history of this tax regime and the different pieces of apple and which pieces of apple should be considered irish, were considered irish, and are. there are two ways to look at the news of the day. one is the backwards-looking thing and how they paid taxes being different, as it relates to getting taxed in ireland. if you want to understand what is happening, the document is a fascinating read and gets into the us business of apple,
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claiming certain parts of their business, not really being in ireland and they shouldn't be taxed there because they would be taxed somewhere else. the question is what businesses are irish and deserve to be taxed in ireland. us a sense of apple claiming they were selectively targeted by the european union. do they have a case? >> something of a case. it is true that the state 80 investigation is focused, to some extent, on u.s. companies. on the other hand, it is probably also true that u.s. companies did the world in aggressive tax planning and i do not find it particularly surprising that the commission would begin by focusing on these companies. caroline: give us a sense of your reading of the tea leaves.
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is there warfare going on? that is it.hink it is a confusing situation, where apple has been aggressive and structure themselves when they face these tax jurisdictions. that theynteresting are so fine-tuning of their own structure, when they are simply trying to do business around the world. it is legal, and the united states. it turns out to not be legal in europe and, in a world where these companies have to carry the flag around the world, we have to question, as a country, they areto our benefit aggressive in other jurisdictions. >> give us the shareholder opinion here. the shareholder would say that it is the corporate obligation
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to prioritize profits. >> with a donald trump presidency, we may have a big tax repatriation and you have intel, apple, and others that have a structure set up to make the best of keeping the money overseas. one wonders, if they are so entrenched in these battles, if the repatriation holiday may not be a big deal and they may not bring cash back, because they found another way to get around these laws. question for the administration. there has been a discussion about the oecd lining up to see how they can tackle rules and regulations and get all countries saying from the same sheet. agreement on the tax
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practices? >> what is missing in the apple debate and, this partly answers a large part of your question, the oecd reaches consensus at a high level of generality and the issues come up at a factual level. applying concepts to facts at hand is a challenge. i don't think it is possible to reach international agreement on these issues we're talking about and, notwithstanding the decision of the commission today pages, it is pretty slim on facts of what happened. it has history about the dispute, the oecd, state aid, a , tough reading
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for most. i was looking at what happened and, you look in vain to find booked these companies half of the profits. apple hadsion says $54 billion in profits in 2015 booked -- >> i thought it was fascinating reading, for that same reason. i agree that they did not lay it out, chapter and verse, but there was a detail and it was interesting to see so much profit assigned to that particular region, when they obviously had a global business and it was not all happening out of ireland. caroline: what are the broader expectations? who will win in this argument and what does it mean for
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amazon, starbucks, other companies that are being analyzed by the commission? >> in the rational world -- we don't live in a rational world -- apple wins the dispute with the commission. the commission advocates assigning all this excess profit to the branches that apple had inireland and the branches ireland had nothing to do with most of this money. the commission and the united states look at the world in different perspectives. the commission sees these companies booking billions of dollars and they see a branch in ireland and no head office. therefore, all the profits should go to ireland. that is what the commission says. the united states sees asi as a
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branch, part of a bigger company, aoi, which has operations all over the world. it is much more complicated than the commission sees. think you are going to see similar, but not identical, structures, maybe southern island, as well. they will pose similar questions. you, do youfrom think this is on the agenda of concerns for executives in the u.s.? they are asking themselves if they have been behaving appropriately at the scale they operate at and you are seeing a fundamental clash between a group of companies, of which apple is one, but also facebook and others, but they think that
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gift to the world of business and the european union thinks of them as aggressive companies and they wish they had european competition. they demand a rigorous set of parameters for behavior and we are seeing a recalibration of the relationship between these global companies and the regulatory authorities of the world, generally. this is a piece of evidence of that. caroline: we will see how the customers respond. david, thank you for your time today. we have cory johnson with me in the studio and david kirkpatrick is staying with us. mike and what is in store for his ipo timeline. that is next.
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caroline: the softbank executive is making good on a promise to the united states that the bank will invest in a broadband access company as part of a pledge to donald trump. the investment is expected to create 3000 jobs in the united states in the next four years. raised $1.2says it billion from softbank. sofi is on the hunt for new funds. they are looking to raise to
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bolster their place in the lending industry. they company is one of the fastest-growing online lenders they have spread into new products, like mortgages and personal loans. joining us is the cofounder, mike. knowre a man and you investments from softbank. the money toutting work, at the moment? mike: it was wonderful working with softbank and we are using the money for the balance sheet. a thing we learned about lending was a need to have a balance sheet and we have benefited from having the capital and we continue to expand, as we are profitable. >> is that why you are raising
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more money? >> we are looking for additional partners to help, from a loan-buying standpoint. in 2017, we will have $20 billion of loans and that is a lot of favor we have to place. we have deep-pocketed relationships with investors and that is a catalyst. caroline: we talked about how you started in student loans and now you are in mortgages. what other products are online? have mortgages, wealth management, and other asset management businesses. in 2017, one of the biggest a credit card that will deliver solutions for members inside the database, so they don't have to go anywhere
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else. caroline: i come from europe and i was banking in germany and we have seen plenty of others startups. is this where the competition is or is it from the banks? mike: we see more competition from the banks and we are going it isa rich target and very important to the banks. whether it is student loan refinancing or personal loans and mortgages, we are seeing this differentiate through the value proposition. propositione value differentiates with different products and how long until you take an international expansion? mike: we deliver into that
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market and it is the same value proposition and it delivers speed and transparency for this millennial type customer. caroline: what you have done to set yourself apart is foster the careers of some of the students, having entrepreneurs doing meet and greets. how do you scale that and how much is it hurt by things like the lending club not doing well in the press. -- the press? investors at my house and we have a lot of trouble. we have 10% of member base go to the off-line events, where we help people navigate salary renegotiations or get employed. or, dating events. hopefully, people create more household units i can sell
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mortgages to. it is important and it is part of our differentiation. withe set up these events our support. it is not a situation where everybody goes to my house. caroline: back in the day. mike: back in the day. caroline: you're looking at crowdfunding and getting a little bit worried and we are talking about the united kingdom, which is a forward-thinking and open regulatory environment. where'd you see regulation changing here for your business? mike: the occ has initiative to do lending charters and that is a step in the right direction and we can move away from the regulation that we have to have a unified national regulator and we hope that more that comes, as regulators get more more comfortable with the industry and the people involved. ?aroline: ipo mike: we want to go public and
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it is important for the business. today, we have a luxury of being profitable and we have the luxury to determine when we do that and we will do that, when it makes the most sense. caroline: i look for it you coming back on. mike, thank you for joining us. headlinesa few catching our attention and we have to get you up to speed. it highlights how this industry sees massive changes, extended technology. chrysler announces a hybrid minivan. that would join a self-driving fleet. shutting down self driving technologies in the car. assigning drivers --
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nonetheless, blackberry is opening up a research and there is a possibility for the former smartphone-maker. we will talk to the ceo about this on bloomberg television tomorrow at 11:15, eastern time. stay tuned for that. publ ahead, coming to a near you, a beer brewed by ?rtificial intelligence all st
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>> the first beer brewed with artificial intelligence is for sale in the united kingdom. the beers were created with feedback from a mobile application.
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we are finding out if they can make a really great beer. ♪ >> how do you like your beer? dark? brewers have been trying to find the perfect recipe. could it be that computers do it better? how youre talking about do it more constructively. we said it was in front of us. they developed and out the developed a they method for feedback for a better year. them to adirects survey that asked them about .heir taste preferences the artificial intelligence bit comes next. >> there is a reinforcement algorithm and the algorithm has
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all the information and it comes back with the recipe, giving the brewer a recipe. >> the human brewer acts as a last line of defense. >> it can be something that throws a random thing at us and some of it is just not possible. that is where the human aspect is. >> they brew the beer and they drink it. >> it is kind of like cranberry. --oyou use the album >> the feedback can be fickle, but features tailoring of products. what's in the future, the same
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technique will be used for things like coffee and chocolate. future, you, in the can give your feedback on just about anything, for what that's worth. >> do you think he cracked his phone before or after the beer he sampled? coming up, a record-breaking tax bill. the case is far from over it it could drag on for years. that all the episodes are on bloomberg technology.
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>> you're watching "bloomberg technology." russian president vladimir putin speaking on russian tv said the killing of their ambassador was
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a provocation and a derailing of russian-turkey ties your -- ties. -- the ambassador was at an exhibition in turkey's capital one of man shot him. says the shooter was a police officer. federal prosecutors who handle terrorism cases are taking over the investigation after a truck rammed into a christmas market in berlin. jumped a sidewalk and drove into the crowd. a suspect has been arrested. a manhunt is underway for a gunman who stormed into a zurich somalifrequented by immigrants and opened fire, wounding three people. authorities say it is too early to determine any links to terrorism. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries.
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i am corny collins, this is bloomberg. 9:30 a.m. in sydney. here's a look at the markets. the new zealand market is open, slightly firm. tracking a leave from wall street. it remains to be seen how asian markets will react to the events in europe overnight. one outlier in new zealand is 12%e group, that plunged after it warned pre-christmas sales have not been very good. they also warned first quarter profit could be down as much as 50%. there was a bank of japan action was expected but we will be looking closely for comment on the bond curve, yields have risen sharply on the
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bank of japan tenure debt. comments from for governor kuroda. we also have the minutes from the meeting any or -- earlier in the month. not expecting any fireworks from matt. -- from that. i am james thornhill in sydney. "bloomberg technology" is next. ♪ caroline: this is "bloomberg technology," i am caroline hyde. adam setting the stage for a giant legal battle around the
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globe that could last several years. matt lawson is covering the case for us and joins us from washington along with david kirkpatrick. let's first stick with matt. tech companies move at the pace of lightning speed, but it seems that legal disputes never do. how quickly could this be resolved? matt: the next up is an appeal from the european commission decision that goes through the general court in luxembourg and appeals take two years or longer . after that, another opportunity to appeal, and that could take another two years. five years that people keep fighting and there is no ultimate resolution, and that looks like it is the way things
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are going. caroline: david, you're talking to technology chief executives, leaders of business, is this decisionsthat puts at risk or are we focused on donald trump potentially helping companies repatriate some of this money? is a strong, enthusiastic view in business generally which you have reported on a lot in the last few days and weeks. i think there is another trend happening, which is there is a global shift in the attitude toward really large, commercial entities and large, global businesses. it is more critical, more skeptical, and i think what 's -- seeing in the eu excuse me, barrage on internet
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companies, we see a lot of big investigations and fines against google, facebook, amazon, etc. i think it is a shift type to the hole inequality discussion. the big companies will have a higher standard of behavior they will have to follow, so companies need think about it in those terms. agree?e: matt, do you will this have an effect on other companies? we know starbucks, ikea and other companies are being analyzed. for results looking to come out. a lot of multinational conglomerates and companies that have subsidiaries in ireland are trying to take advantage of disparate tax laws that may be -- maybe smaller corporations cannot. a talked about this being
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little bit of a texan almond, they can take advantage of some of the perceived loopholes like the apple case. i think you get a little bit of the sense of, when you are looking at the regulators, they be there is somewhat of an injustice in the way that an electoral property is taxed and the way these large multinationals can move pieces around the chessboard. this is a question as to revenue sitting overseas, it should be taxed somewhere. how.uestion is, where and caroline: with it remaining overseas, what does that mean for tax reform changes coming from president-elect donald trump? a greatthink that's question. he is made comments about a one-time repatriation, trying to get companies to bring those
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dollars back to the u.s. patente considering a tax box, which would allow them to tax an electoral property at different than corporate revenues and that would provide some incentive to essentially establish ip licensing subsidiaries or licensing units in the u.s. that might be beneficial. there always r&d offsets and tax credits. numbers in thee tens of billions of dollars that are potentially going untaxed by what we are seeing as u.s. based companies. caroline: always great to get your viewpoint. thank you very much. david kirkpatrick sticking with us for now. we will be tackling a new subject, shares a nintendo tumbling almost 7% in tokyo -- lukewarmown reviews for the new game. it was supposed to be a
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watershed moment for them, their first foray into mobile gaming. it has an average rating of 2.5 stars out of five. uses are complaining that the $10 price tag to unlock the game is too steep. stars, what you think is behind it david? because am not shocked when you think about the world we are in, you have to do something fundamentally different on this new platform of a smartphone. so reason pokemon go did well is because he was a fundamentally new use for the smartphone, putting augmented reality functions into a game and getting people out in the streets, really a whole new kind of human behavior as a result of the game. this is just taking a good old nintendo game and sticking it on a smart phone. it does not strike me as hugely innovative. caroline: does the star reading matter?
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i think they will get to drop the price or do something else with a product, but they can do it overnight. it would not surprise me if the price went down. a 2.5 star rating is very negative. it is more than it reflects that the word on the street is negative, and that is what is going to hurt them. they are not going to sell a lot at $10 apiece. caroline: david kirkpatrick, ceo of technology. coming up, we will bring you one of our best interviews of the year, our in-depth chat with brian chesky, ceo of airbnb. this is bloomberg. ♪
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caroline: airbnb is developing a service for booking air travel. it is said that development of the feature is in its early stages. spaceant to move into the that puts the home rental service in a greater competition with expedia and priceline. help travelers make razr on the survey -- restaurant reservations and other services. they've made focusing on investment huge priority. numbers are better than many big theirompanies, 42% of employees are women. emily chang set down with brian chesky back in march and asked him why he is making diversity a priority and how his workplace has benefited. brian: i think it is never too
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early to focus on diversity. the more diverse you are, the more successful you are. i think airbnb more than anybody else, it is in our dna. on new year's eve, 1.1 million people were living together. these people came from 190 countries in the world. is bringing people together who are not like each other. our mission is to feel like you can go anywhere and you feel like you belong. diversity goes hand-in-hand with that. we have to have people feel like they are welcome and included, they cannot all look and feels the same way. i want to talk about how that applies to women specifically. your workforce is 46% female in the united states, far better than most other tech companies. what is the benefit of having closer to 50-50 for men and women? brian: we have a basic
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principle, and that is if you have an office or a workforce, it should map to your community and the country you are in. i think many people -- none of us truly represent proportional demographics of the country wherein but we're trying to move toward that. there's no question that creativity comes from a breadth of ideas converging together. if you only have the same views and perspectives, you will be so limited. that was airbnb ceo brian chesky speaking with emily chang in march. breaking giant wells fargo is charging into the biggest asset management battleground, exchange traded funds. the bank is considering launching its first etf next year. is it too little too late? it's competition has a major leg up in the market. joining us is dani burger and
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david kirkpatrick. dani, or now? -- why now? dani: specifically, it is this new breed of etf they are looking at that is really taking off. this is the hot new product. wells fargo wants to be part of the next generation of investing and this is something they will have to be in. a lot of people are surprised it has taken until this year, actually within the next 3-6 months for them to launch these products. caroline: they are trying to differentiate themselves. talk much the way they are doing that. dani: these are quantitative-based etf's built on computer algorithms. we have smart data that takes
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the idea of etf's but doesn't use market cap waiting. it says, i'm going to pick the spot -- stocks with the most momentum, i will pick the cheapest. then you go to multi factor which takes those things and lumps them together. idea whoselly an time is come and this is where wells fargo is entering. if you look here, you can see assets are growing, but not as much as smart in a market as a whole. goldman sachs really has the lead. that will be their biggest competition but they are hoping that by getting into this front, and they can differentiate themselves. caroline: maybe a bit of a me, too from wells fargo. david: i like to apply algorithmic approaches to tools you can get access to. these techniques have been confined historically to highest network individuals, the biggest
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institutions. this is a great way for ordinary people to invest in a much more sophisticated fashion. basically, it allows the software to assemble packages of stocks that wouldn't -- ableally be a symbol to be assembled. this is much more sophisticated. it is not just an etf of grocery store companies, it is an etf of copies that have gone up on certain conditions and down and in relation to something else. ani: i think that is compelling for these companies. there was report taking some of the best investors over the years and they found you could break it down using algorithms. people who before could not have dreamed of having an investor like warren buffett working for them, they can buy these products and get essentially the same return. caroline: active versus passive.
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does it surprise you that wells fargo is the last one in on etf? talking about wells fargo is sensitive because they have made mistakes in recent years in their larger business. it is interesting that they would not have been, in the advance of this movement, given that they are in the thick of the tech community. there are a lot of startups that certainly are pressuring companies like wells fargo and i'm glad they are finally responding. i think you'll see a lot of innovation coming from tech when it comes to investing. schwab has taken on robo investing and robo managers and have had quite a bit of success with that. the big companies, getting into this. investors are getting more choices and i love to see automation serving individuals
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at a time when society is worrying more about how automation is going to replace jobs. at least there is a positive is starting to be visible to ordinary people. caroline: great point from david kirkpatrick. dani burger, thank you very much. still ahead, we will continue to see unicorn valuations, or will be -- we in 2017? this is bloomberg.
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caroline: as 2016 winds down, tech nasa valuations are diverging. some believe that uber and snapchat's valuation is fair and some think it is a bubble. are at theee that we highest level of fund formation and company formation, but at the same level i believe we are at the highest level of
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innovation disruption i think that will continue going forward. a lot of these companies will not be able to be funded going ,orward, but the few that do there will be a cross-section that will create interesting things that change the way we work and operate. emily: a lot of comedies have delayed going public. there has been a rise of unicorns out there. how do you feel about that? i believe is there should be fewer instances of unicorns out there, primarily because the majority happens under $1 million a very few companies are going public. if a company expects to be a uniform, there better be a high possibility they will go public given their is this model, otherwise if their growth moderates, which happens to everyone eventually and they are not profitable, they will not be able to go public, their valuations will get crushed. feels like there has been
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more of a focus the past few years on optimizing valuations. we hope that changes going forward. emily: you guys are investing in a number of capital funds. they have a lot of unicorns in their portfolio. is that concern you? tul: dave had a unique ability to invest in these iconic, elite companies, whether it be facebook, airbnb, uber. for those managers and those companies, there is a market for those companies to go public, but for the broader venture community, and less you are in those iconic companies, we believe that m&a is the most likely outcome. david horwitz has one fund in particular that made a big splash and there is some controversy about how good their returns have been so far. you have the concerns about the performances?
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atul: we don't have significant concerns, they are delivered very good returns over the course of the firm's life partly because they have been able to invest in some of the elite companies i just mentioned. we are very bullish on them. when they enter the venture capital game, they really changed the dynamic by offering services such as recruiting, pr and even a sales pipeline by introducing strategic's to company. almost on a daily basis, they will bring strategics to meet their portfolio companies, and for a number of them, those introductions have come a significant portion of the sales pipeline. that is a game changer. we hear that over and over again. overall we are very pleased, they have had great returns and invested in some of the iconic companies in our changing venture capitalists operate. you are seeing other firms mimic these types of services. emily: i'm curious how you decide which venture funds to invest in and how venture compares to the other vectors your focused on.
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atul: we invest in venture capital and growth equity. primarily technology in some health care. we look at venture capital firms and are modeling five plus funds. a number of our managers had developed net funds to us with shorter timelines to liquidity and lower risks. we're looking at five x plus funds for venture. mentioned, the top 10 firms, they've been able to get into these elite companies and they have been able to deliver those returns by being in those iconic companies. outside of the top 10 firms, we are looking for firms that can deliver multiples of their funds on just 500-$1 billion of exit. going into 2017, what is your you on consumer tech?
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atul: we invest across the spectrum of consumer and enterprise. we are bullish across the board. i think with the consumer in general, we like to see companies that are a bit more durable on the enterprise side, companies that continue to do well year-over-year while on the consumer side there's more volatility. with consumer tech and enterprise. that does it for this edition of "bloomberg technology ." be sure to turn in tomorrow and i will bring you the highlights ,f my interview with john chen and the director of quint institute. he will join us to explain how they are fighting against fake news on social media.
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♪ >> from our studios in new york city, this is "charlie rose." with presidentin obama's final press conference of 2016, held this afternoon before departing for his annual family vacation to hawaii. here are excerpts. president obama: once we had clarity and certainty around what in fact had happened, we publicly announced that, in fact, russia had hacked into the dnc. at that time, we did not attribute motives


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