tv Bloomberg Technology Bloomberg September 15, 2017 11:00pm-12:00am EDT
condolences. the u.n. has condemned north korea's latest missile launch after the u.s. ambassador to the u.n. said washington is not planning for the retaliation. h.r. mcmaster added there is a military option for north korea, though it is not the preferred route. president trump will meet with leaders of south korea and japan at the united nations general assembly in new york next week in the wake of that launch. that is according to an administration official. the united states continues to lean on china to use its oil deliveries as leverage to deter pyongyang. global news 24 hours a day. i am alisa parenti. this is bloomberg. "bloomberg technology" is next. ♪ ♪
cory: i am cory johnson in for emily chang and this is "bloomberg technology." bitcoin's surge coming to a painful end amid growing warnings of a market bubble. silicon valley's waning political capital. the scandal the latest in setbacks. bloomberg's unprecedented access into china's biggest online commerce company. our exclusive interview with alibaba founder jack ma. bitcoin's magical summer is coming to a crashing halt. the cryptocurrency has dropped more than 26% since hitting an all-time high of nearly $5,000 on september 1. the drop is due to the moves by china's policymakers restricting the trading of bitcoin and outlawing the initial coin
offering. prices have been recovering somewhat. the market as a whole has taken a hit over the past couple of weeks knocking about $50 billion off the total of cryptocurrencies. jamie dimon shared his thoughts about the state of the cryptocurrency market. >> for bitcoin, my view is you can create a significant number of cryptocurrencies with the central bank behind it. it is probably going to become ubiquitous. cory: brad garlinghouse and sonny singh. this move in china has backed up everything you have been telling me for the past three to four years. then we saw a big selloff. you might have expected a
selloff at some point. it has been dramatic. what do we know about bitcoin's influence in china? >> china is important to bitcoin. it is one of the four largest companies with bitcoin trading. it changes a lot. definitely very important. two of the top 10 largest exchanges are in china. the government of china banned initial coin offerings. it was getting to a frenzy in china so the government shut it down versus regulating it. now the rumor is they have given the bitcoin exchanges the order they have to shut down as well. this is where you see the selling happened. this has happened before. they start regulating more, adding more restrictions and rules, and then they bring them back live again.
cory: i know ripple deals with bitcoin. what does it mean for countries, places like china? to use these cryptocurrencies as a way to move money and solve problems? >> that is at the core. him and when you see real-world use cases, you can use cryptocurrency to solve real-world problems and make payments more efficient. you can make security settlements more efficient. there is real value in those tokens, in bitcoin. i believe it is not just speculation. i think bitcoin has become the store of value. gold historically has been a store of value. that is a $9 trillion asset. bitcoin is a store of value, the digital store of value.
today, $65 billion asset. there are other digital assets. one of them is the one ripple uses, xrp. i believe the more utility you drive, the more demand you will drive. increasing demand will drive the price up. cory: they are being put to use more as speculative instruments. people don't really understand what bitcoin is so they compare to some other currency. then this price rise in bitcoin over the last year, it looks like things we have seen before. we have created a chart that shows this where you can look at the rise, the bubble in the nasdaq in the early 2000's. we have seen that before. since i don't understand what it is, it is the dot-com bubble.
we have seen a movie like this before. convince our viewers this is different. >> i think most people know about bitcoin because the price rises, they buy it and hold it, and their speculation. at bitpay, we will process over $1 billion this year in payments. it is also businesses where it is cheaper and quicker than a wire. we can move it in one day for a 1% fee. we are the largest processor of bitcoin in the world. we convert it for them into fiat currency. large global brands have their suppliers and pay them in bitcoin. cory: last time we talked on incory: last time we talked on bloomberg radio, we talked about
the necessity to change it but they were not going to accept it. the bitcoin community has accepted it. >> the bitcoin community has accepted a fork today. there are rumors of another fork in the future. bitcoin is not going to be the panacea to solve all transactions. payments is something we think about a lot at ripple. it bitcoin transaction takes on average four hours. that is a pretty long time. it is faster than a wire transfer. it is slower than using your visa. xrp can process transactions in three to four seconds.
comparing the bubble, i think there are things we can point to, to say this market has been volatile, a lot of things can change. i think it is very different. we both have been following this a long time. "newsweek" had a cover story about half the internet was going to fail. jamie dimon saying that bitcoin is a fraud is like the "newsweek" cover. i don't think "newsweek" understood. i think there are aspects happening in digital assets and blockchain that will permeate our lives more broadly than people can embrace. cory: bitcoin at some level is in competition with the business jamie dimon has, recording transactions, being a middleman. cryptocurrency takes a lot of that business away. if you are jamie dimon you might
be concerned about cryptocurrencies being accepted in the markets. >> i think there is a lot of truth to that. for jamie dimon to talk about that, if i were a shareholder in j.p. morgan i would be glad he is doing that because it is in his best interest to protect the establishment. he sits on top of the oligopoly in terms of how payments work today. most banks do not want to see that happen. you see very innovative banks leaning in aggressively. there are a lot of banks not putting their heads in the sand and i think they will be served well. blockbuster put their heads in the sand. they could have been netflix. they have the relationships with customers, the movie studios. but they put their heads in the sand about what the future of the internet would enable. they are gone and netflix is a valuable company. >> you see all of the banks wanting to partner up. even though jamie is saying those things, his internal team is trying to figure out how to leverage the technology.
cory: it does seem like he knows on one level what he is talking about. so good to see you. always a pleasure. thank you very much. cities are making a pitch to convince amazon to build a second headquarters in their city. the city is highlighting the example of google with 5000 employees for the big apple. amazon solicited proposals are a second location that could mean 50,000 jobs and could last 15 to 17 years. washington is in competition with other big cities including boston and chicago. facebook opening its first artificial intelligence research lab in canada. the social media giant investing more than $5.7 million for ai research.
it chose montreal because of students and professors surrounding the area with the universities and strong startup culture and favorable government policies. it will start with 10 researchers and aim to grow to 30 in the coming year. coming up, the political backlash against silicon valley heating up. can tech giants turn the tide? we will discuss next. "bloomberg technology" is live streaming on twitter right now. check it out weekdays at 5:00 in new york, 2:00 on the west coast. this is bloomberg. ♪
the move comes after the cofounder stepped down at the fintech startup amid allegations of sexual harassment. he has been said to have engaged in at least one inappropriate relationship. the suit is the latest in a string of high-profile, unethical behavior across silicon valley. the issue of fake news, the issue of dodging taxes, companies drawing criticism from liberals and conservatives. today, facebook said it will no longer allow advertisers to target based on how they describe their education or employer. at least for a while, after finding out advertisers were targeting users who expressed interest in finding anti-semites. joining me now, sarah frier. i will have you paraphrase that story. brilliant reporting again. >> they did a great job.
it is very easy to target people by anyway you can imagine of describing themselves. in your profile on facebook, you might say your employer is bloomberg and your education or prior life was in hedge funds or whatever it was. some people mix stuff up and say their education is jew-hating and their employer is the nazi army or whatever. what people were able to do is target ads to those self-reported categories. when the ad was out, the facebook system approved it automatically, and they were off to the races. cory: one could target information to anti-semites, for
example. >> they were able to see this duplicated on google and twitter. these categories are populated automatically by how people describe themselves on google based on the search terms people use. it is a system that facebook has not touched. cory: they said they were going to stop it, for now. >> until they solve the problem, they are shutting down all targeting by interest and education. you cannot target ivy league grads who have jobs in consulting, which somebody might want to do. cory: will this hurt facebook revenue? >> it could. it is a popular way of targeting. in a college student community, you want to target students to come to your store. they have got to figure it out
because this effort by propublica has exposed the problems with these self-service advertising systems. cory: it comes on the heels of the revolution facebook said some secret fake russian groups used us and pumped our consumers by giving them probably fake news. >> something people do not understand about the russian effort is they could have done it through facebook and gone through sophisticated sales channels, but probably not. probably, they used a self-service targeting platform just like propublica did in this story. it shows how easy it is to use facebook to target in very specific ways, in specific regions, specific interests. you would not have to have that much extra access to facebook to
pull it off. cory: the injury to our society is important. after the last election, i read a terrific piece in "the atlantic" talking about the role of racism in the election of the notion people could have been targeted to bring out the worst demons. intensely motivated to do something, and facebook helping them to do that is a damning notion of what the technology of facebook can do. >> this is a moment of reckoning for these tech companies. previously, they might have said we are a reflection of what happens in the world. there are all sorts of people, 2 billion people plus who use facebook. and some of them are good people, some are bad people. bad things will happen. now we are getting to the point where we are questioning, what is the responsibility of these
tech companies to try to think about the best cases for how their platforms may be used in ways that might hurt democracy, in ways that might manipulate people, in ways that may be untraceable in a campaign situation. if you are a tv station, you have to report to the government all of the election-related ads. if you are facebook, you do not. this is a trying time for these companies to try to explain themselves as neutral platforms where everything is populated by the community and policed by the community, to now saying we do have a responsibility here. we need to take some action above and beyond to stop this. cory: if they want to. >> whether or not they want to, this is a moment where they could be regulated. cory: sarah frier, thank you very much. coming up, the electric car industry getting a supercharge
cory: this week is electric future week at bloomberg. a lot of news in the electric car industry this week. lithium etf's are feeling it as the third best traded fund. it is up as much as 10% this week. maybe because china said it will set a deadline for automakers to end sales of fossil fuel vehicles. that would be most vehicles. joining us to talk about the electric industry, mark wakefield. the conversation tends to be all about tesla. talk about competitively where will be in 24 months. who will be out there making electric cars?
>> the talk is often about tesla. the chinese news was big. it is not new news in one sense because china has been pushing all of their automakers to move heavily toward electric cars. what we have seen in our electrification index where we look at not just how many vehicles produced at how much range is being sold, a better weighting of electric cars, we saw a number of chinese vehicles pushing hard and having about half of the amount of launches between here and 2020, half of the launches will be from chinese automakers. cory: what do you mean? how many launches are we talking about? give us a sense of the global automobile history and how it compares. >> right now, it is very small him for the global industry. about 1% of the overall industry. still a small percentage. china is probably going to be the one that takes electrification faster, sooner.
europe is what we believe to be next. north america next. you will have different penetration rates in each of those. in china, we see 49 of the platform launches that could have multiple vehicles on it. of the 103 platforms being electrified between now and 2020, 49 are from chinese oem's. cory: what about europe? what is happening in europe with audia, volkswagen, jaguar, b.m.w., mercedes? >> europe is number two. very big differences between one country and another. france has a lot of longer-range electrification. it is taking it quite seriously. you have small, fairly wealthy countries. norway is a prime example having almost 11% electric cars at the moment. you are seeing europe take it quite seriously, particularly in city cars and small range cars
outside of france. cory: it is interesting. i don't have a sense of where the automakers are in terms of what their plans are to release vehicles. you're talking about the market underlying that. i wonder who the winners and losers might be. >> people are nervous about going too fast, too soon because it is costly at the moment. an electric vehicle does not cost the same as an internal combustion vehicle at the moment. it depends on the use case. some delivery trucks, some small cars might get cost neutral in the next decade. some other cars in the later part of the next decade. it depends on the battery price for dominantly coming down. at the moment, they are much more expensive. automakers are a bit nervous about it. some are taking a longer term back and going heavily into it. some are taking more of a wait and see. cory: mark wakefield, thank you very much.
>> welcome to china, the birthplace of alibaba. the past 18 years have been transformative for alibaba, china, and the global internet economy as a whole. we were here for the 18th birthday bash. packed in with 40,000 employees into an outdoor stadium. we spoke exclusively with executive chairman jack ma.
the cofounder. and the group c.e.o. >> everybody has a big chance to go digital. but people need to change. >> three leaders driving alibaba, the global disruptor. it was a humble beginning for jack ma as he cofounded alibaba. few chinese were even connected to the web. enthusiasm for dot-coms bubbled abroad and alibaba wanted in. when the bubble burst, many plans were put on hold. when an employee was suspected of contracting sars, the executives were quarantined. they then drove ebay out of china and led to the phenomenal success of the single-day shopping extravaganza and the
launch of many new businesses. the rise of alibaba has been no small feat. the next steps may be even more demanding. >> i think the challenge is getting bigger, much bigger than the early days. the early days to me were like [indiscernible] we competed with ebay. we saw sars. there are a lot of things we can learn from other companies. today, the things we are doing, there is nothing to learn from. everything, we are the pioneer, we are the leader of this industry. the thing that drives you is the mission. there is not a textbook you can
read. i don't think anybody could have imagined the kind of scale we have reached today. i think we are very lucky to have participated in the confluence of china's economic growth and also the rise of technology. >> this is the best reflection of the landscape change, even the landscape change in china and the consumer lifestyle change in china. 500 million customers in china. today, even more. more and more overseas customers joining the event. >> when i started with alibaba, the gdp per capita of china was $870. today, it is over $8,000. it is a 10x increase. we have been very fortunate to be in this environment and road that wave. >> we want to enable your small
business, young people, and enable globalization. that is our direction. on the way there, we have more product. >> today if you look at the volume of the package on our platform, it is about 55 million a day. we strongly believe this will go to one billion some years later. a day. >> i'm telling my team it is like the way you climb mountains. when you are only 1000 meters high, you enjoy it. it is fun. when you go across 4000 meters, you don't have enough air. you don't have a lot of people working together with you. you don't have anyone to share your thoughts and worries. now we are probably like 5000 or 6000 meters high. we are getting lonely.
without a strong mind and mission, it is difficult for it to continue to work. having faith, resistance in china for what you are doing. >> i recently interviewed him. we all know about his comments of the internet economy destroying manufacturing. do you think there is an old guard in china that does not understand the new economy? that they will have to adapt? >> of course, we have had this kind of resistance in the past 18 years almost every day. we see people like him a lot. but you know, this is the evolution, revolution of technology. people like the older tycoons of the old economy, in the early days, they destroyed a lot of lower level companies. we are helping manufacturing.
we sold more than $500 billion u.s. products last year. 70% of them, we are helping to sell the manufacturing. we don't produce. without us, these 70% of the $500 billion manufacturing products would never be able to reach the consumers. >> will you facilitate reform at state-owned enterprises from outside? vested interests want to keep the status quo. >> we are pushing that. this is why a lot of banks do not like us in china. we are not interested in buying the banks to change it. the china banks react very quickly in the past three to five years. these banks changed their services so fast. they put so much resources and technology on serving people better. you don't have to buy a bank to change one bank. when a tiger is following you, you can run much faster. >> you are asia's richest man.
are you still in your mind an entrepreneur? >> i never think i am the richest man. i don't spend money. i don't have time to spend money. people say you can spend money better than the other guys. how much money can you spend in your life? >> coming up, alibaba broadens its scope investing heavily in southeast asia as well as brick-and-mortar under its new retail concoction. and jack ma sizes up one of his chief competitors. >> he did not have experience at globalization, not like us. ♪
♪ >> having conquered e-commerce, alibaba is broadening its ecosystem by investing in cloud computing, logistics, digital entertainment, and even brick-and-mortar retailing through its supermarkets as well as the cashless and cashier-less convenience stores. it begs the question, is alibaba moving away from its long standing model? >> when you are strong, big, think about it. you need having things. for today's alibaba sites, you should not leave the other model to the others. you have to do it because the infrastructure is building up.
you have to invest. we want to change the consumer experience. you now have this growing middle class in china whose expectations and demands are being elevated. >> online and off-line, we cannot separate. they need to do the digital transformation. all the chinese retail formats will be upgraded or redefined. i think of it as our baby. we want to incubate a successful model. we try to empower our off-line partners to upgrade their business. the most important thing is to embrace change. >> what we can do is serve an him>> what we can do is serve an in-store purchase. you can also walk in and eat right there. if you do not feel like going into the streets or to the store, you can stay at home and order everything on your mobile phone and it gets delivered to you in 30 minutes. >> everything that is done, it
in-store purchase, eating, or online purchase the served from the same store location. >> heavily investing in southeast asia and india. can this new model be implemented? will you implement that as you expand in southeast asia? >> i would say yes. new retail is not only applicable to china. it is applicable to all markets globally. >> i think southeast asia over the next five or 10 years will be a game of penetration with e-commerce taking more share of overall retail. today, i think as a whole market, southeast asia is probably less than 3% e-commerce penetration. specifically to indonesia, this year, they will have less than $15 billion of gmp for the whole country so there are a lot of growth opportunities.
>> always think about the future. on the alibaba site today, you have to think about what you can do in 10 years. there is competition. alipay has been lonely running around for 10 years, no competitor. it is good for alipay but not good for the mission we want to do. when tencent came in, at the beginning, alipay we have a competitor. when you are asking people today, they know there's somebody who we can work together with an influence more people and make the market bigger. this is the fun part. i think tencent pay is learning a lot from us. we are learning a lot from them. if we can work together getting the whole society cashless, the whole society will trust him
credit. that will make the market much bigger. >> what will be the criteria for you for your rush into southeast asia? that is the new horizon. you have bought stakes in one that has stakes in singapore. you are an investor in indonesia. you have gone into india. i hear that you are looking at bigbasket. there seems to be a land grab in southeast asia. will you get the penetration and growth through the infrastructure and alipay, or is it to get the e-commerce platforms because penetration is so low in southeast asia? >> it is not a globalized alibaba. we have globalized infrastructure.
we are not interested in going to markets and getting some market share there to be the largest e-commerce company. we are not interested in that. they need a payment system. they need a logistics system. they need the platform system so they can sell things globally. we are interested in trading and e-commerce. i don't think tencent can do that. we have been doing that for 15 years. it would probably be good on the payment, especially good for wechat that chinese people use a lot. it does not have any experience at globalization, not like us. >> all of the data you are collecting by creating this ecosystem, and because you like partnerships, you have partnerships but you are all collecting data. do you run the risk of down the road having a dispute over the ownership of that data?
you want to be a data company. that is your biggest asset, right? >> there are two issues with data, security and privacy. these two issues are always a problem. you have to be very careful about the security of the data and the privacy of the data. based on that, you have to go forward. when you are worried, you have to go where you have a problem and solve the problem. >> how valuable is that data? it must be extremely valuable. >> the data is so new to everybody. him him it takes time to educate. if the data does not flow, meaningless. i think today, it is good everybody, every government
starts to worry about data and pay attention to data. how to offer the data in the proper way to improve society, improve people's lives, that is something in the next five or 10 years that will be critical. in the beginning, nobody cared about data. just like the last century, at the beginning, nobody cared about oils. now everybody cares about oils. for oils, they have the wars. >> alibaba's shares are on a tear. does he think we are headed for another bubble? >> it is easy to survive today. ♪
♪ >> alibaba was founded at the turn-of-the-century amid the global rush into dot-com. alibaba even opened an office in california ready to ride the wave. jack ma saw the business models of others and correctly predicted the.com collapse in 2000. are we facing a similar kind of tech bubble right now with the billion-dollar unicorns and inflated tech scene? are there any similarities? >> no. >> none? >> not that much. i think the challenge at that time, a lot of people did not understand how powerful internet is. how to do internet. people just jumping in and starting to do it. for a lot of people, they have crazy ideas but did not know how to operate. today, everybody knows the internet is powerful and will change human history. >> i look at it from the very
long-term perspective. if you take a step back and look at alibaba who went public in 2014, our stock price at the ipo was $68 a share. today, it is at the current level about 2.5 times increase. but look at our revenues. during the same three years, our revenues have tripled. so our stock price has not even caught up with our revenue growth yet. same thing, facebook. when they went public, they had about one billion users. now they have 2 billion users. if you look at the long-term perspective, these large-scale internet companies continue to grow and there is no reason why they would stop growing. >> i think the infrastructure of the internet, the infrastructure of technology is much better than 10 or 15 years ago. if you are not that greedy, if
you are not that stupid and greedy, it is easy to survive today than yesterday. >> are you concerned about the heightened capital controls in place and the crackdown on irrational purchases in entertainment, sports, non-core businesses? is this going to be a deterrent for outbound investment? >> not really. and i think it depends on how you do it. for alibaba, it is our strategy. we never think we should dump money in the outside world. in the older days, when you go to a country the most important thing is the money site. we think we should share technology. we are lucky we are a global company. >> there is a little bit of sentiment. it is understandable when you see a large trade deficit. but to us, we look at it.
it does not really affect us because the trade flow that we are talking about is selling american products into china. we are steadfast focused on that strategy. in the other direction, i think some retailers, traditional and online in the united states, will suffer first if there is a trade war based on trade tariffs. >> we never changed our u.s. strategy. we want to help u.s. companies sell to china and asia. this is what we think. we don't want to go to usa and be the local company. there is amazon, ebay, nice companies already all over usa. >> you don't to take on amazon doing what they are doing? >> no. >> how about entertainment, in hollywood? you had a partnership with
amblin and steven spielberg. you have been patient. what is your strategy with one of the best names in hollywood? >> first important is our entertainment is focused on our strategy. in the next 10 years, we know we will be very profitable. we will be very good at doing e-commerce, logistics, financing, data. but 10 years later, what is the new business alibaba should be focused on to stay happy and healthy. double h is our direction. you want to be happier and healthier the matter how rich. in entertainment should be part of the business. >> we don't view it as a separate business. we view it as an investment to acquire paying customers on our
ecosystem. >> it is ok to continue to incur losses as long as it builds the customer base and ecosystem? >> yes. i think a lot of things china entertainment can learn from hollywood and partner with them. should not think this is good, let's buy it. this is a strategy of 10 years for ali entertainment. don't worry about it. a lot of people criticized us. we have been criticized for 18 years and never stopped. you know where you are going. >> where do you see alibaba and what kind of company do you see alibaba will be in the next 18 years, 18 years from now? >> i would say alibaba is not a simple company. alibaba is an economy. it is an ecosystem to empower businesses to do the digital transformation. of course, we want to be bigger.
but i think the most important thing is quality. >> i think the business mix will change. it will always change because we will follow what our customers want. but the important thing is alibaba 5, 10, 20 years from now will be the same company when it comes to our mission, to make it easier to do business anywhere. >> we can improve globalization instead of killing globalization. when trade stops, war starts. we could never fight with fists. this is the mission. this is the responsibility for alibaba to improve globalization. >> thank you so much.
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