tv Best of Bloomberg Technology Bloomberg June 29, 2019 4:00am-5:00am EDT
♪ this is the "best of bloomberg technology." coming up, shots have been fired between the u.s. and china in the global trade war. the tech sector in the crossfire. who is poised to win and lose? plus, facebook is putting together "an almost supreme court." new content oversight board will review controversial decisions about what goes up and what is to come down. a cyber strikes, iran and
downs a u.s. drone and the trump administration responds with a cyber attack. but iran has a cyber strategy of its own, how they are attacking u.s. banks online. the continued back and forth between beijing and washington has put tech in the crosshairs of the trade war, impacting companies like apple, huawei, and many more. howw article details china's a tech sector is mostly insulated from exposure to the u.s. on many fronts. but there is one area where it is still dependent, semi conductors. over the last decade, china has seen a surge in chip imports. for more on the ongoing impacts in both countries, we spoke to bloomberg tech's ian king. who covers the chip industry and cowrote the affirmation article and senior editor brad stone. ian: a satiric parts like
broadcom's switch chip, more common parts like an intel microprocessor, china really can't replicate those yet. they have been trying for years and it just has not come close. emily: why not? ian: it is difficult. when you are arranging tens of billions of transistors on something the size of a postage stamp, you have to kind of know what you are doing. and making them just costs so much money. they have just never been able to develop that skill set. emily: which companies in particular in china are the most vulnerable? ian: it is the biggest pc market. it is also home to some of the largest pc makers like lenovo. they need these products. huawei, it goes without saying. you cut them off, they wouldn't be able to make their core routers. they need memory chips, all kinds of things. things that we don't know about but that are absolutely essential. emily: brad, you have a piece out about how u.s. tech giants, even though they may be complaining about the trade war, are in the best position to whether it.
>> big companies like apple, they have the cash and negotiating power. apple supplier foxconn has already talked about moving production to other companies in southeast asia. india, malaysia, thailand, taiwan. of course, the trump administration would like to see it here in the u.s. that is unlikely to happen. but i do think they are worried we saw a bunch of letters go to the u.s. trade representative last week. apple sent a letter saying these tariffs are going to hit, iphones, macbooks, air,. -- air pods. they are saying it is going to hurt apple's global competitiveness. emily: this was right after a meeting between tim cook and president trump. as you mentioned, they do have the negotiating power and we don't know if that will pay off. brad: it has worked in the past. some of these product categories were on previous lists of tariffs as early as last year. they got off the list at the last second. i think the tech companies are hoping for that kind of reprieve.
we will see what happens at the g20. emily: meantime, huawei, they are dependent on u.s. chips somewhat. they do also make two thirds of their own chips, right? >> for smartphones. the key component of the smartphone is the nickel processor. they have been arguably the most successful company outside of apple for weaning themselves off of foxconn's technology, so they can supply themselves in that particular market very strongly. light --ad, there is a a line in your peace where you go " laptops, smartphones, toy drones. ?"ve they no compassion at all [laughter] brad: they are coming for our drones. emily: how would you break apple versus amazon, for example? amazon is shutting down its entire china marketplace next month. brad: would think amazon might not be that exposed.
our colleagues have a great story out today. these stories, they have no negotiating power, they are one or two people shops, they sell everything on the amazon marketplace. really it is the uncertain that is impacting them. they have no idea what is going to happen. they have to get their holiday orders in now. it is not that easy to look for another factory in india. emily: so what is their plan b? >> i think their plan b is to cut orders and raise prices. that will have an age thing impact on amazon's holiday quarters -- an interesting impact on amazon's holiday quarter. if selection is going down, prices are going down, it is another way the u.s. consumer is going to be hurt by the trade war. emily: china also depends on a lot of these companies in china. ian: apple is an example of that. yes, we by not need that many iphones, but so many people are employed directly as a result of the manufacturing chain.
that cannot help but impact the economy. you have all these relatively high paid jobs, tax revenue, if that starts to go away, that fundamentally undermines the chinese economy. emily: what is their plan b? >> what we try to show in the story to an extent is that a lot of people don't recognize just how powerful they are. when sanctions have been used in the past against countries like korea or japan, they are relatively small domestic economies. we use this statistic all the time. china mobile has more subscribers than the u.s. has people. there are people who have never looked at google search because they never needed to. there are people who are not using apps supplied in the u.s. because there are enough. -- i enough in the market on its own terms. emily: we don't know if the tariffs will go into effect at all. we still waiting for the meeting to happen. wonder, even if these
new tariffs did not go into effect, if the uncertainty has been so intense for this company that they are already moving to plan b and start making arrangements for the future? brad: what we have heard from our own reporting and that of others suggests that big companies like apple are looking at other sources of manufacturing outside china. it makes a lot of sense. the one thing i would say is that if you look at the market lately, i get the sense that maybe the market thinks there will be a resolution to this. otherwise, we would see a lot more volatility in the stock prices than we have seen. emily: are your sources optimistic or scared? ian: it depends whether you are talking about the market or the companies. if you talk to executives, the companies are not keen to go on the record about this topic, but they are saying look, this is the wrong way to go about things. we have so much to lose here. emily: bloombergs brad stone and
emily: former hp and ebay ceo meg whitman has taken her expertise to hollywood as the ceo of quibi. founded by jeffrey katzenberg, it will be mobile only subscription service in april next year. promising hbo quality episodes under 10 minutes. the company has already raised $10 billion from alibaba and major studios like disney, sony, lions gate and more and they plan to raise another half-million soon. we spoke at a tech conference on thursday. >> first was to explain what we
are doing and attract talent. it was, we don't know what it is. we don't know how it will work. it was harder to attract talent. now we have our own space, it is more accepted and understood. the second was we have done things differently from hollywood in terms of the deals and how long we have to make content. it is a different cadence so we have been able to get that done. it was harder. emily: people said 2020, it is like a lifetime from now. >> yes, but in hollywood but when you have to make all of this content, remember we are the first ott streaming service where you don't buy a library . you can't take an hour show and chop it into six 10 minute segments. it has to be written and shot for mobile in this format. that, you can of the past have told me that disney and netflix are not really competition. you are trying to do some a different, but you are fighting for mind share whether it is
them, youtube, instagram, snapchat. turmoil socialat media is facing right now is it , good for you? viewers will want to turn away? >> i don't know about that. we are creating an app that will give you alternatives in those in between moments, commute, waiting for coffee, in a doctors office. what we want to do is give you something that is fantastic in that 10 minute time slot. our target audience 25 to 35-year-olds spends five hours a day on the phone and the average session links that session length is 6.5 minutes. we have an opportunity to give them alternatives. emily: what about kids content? youtube, for example, has been under the gun, criticized, exposing children to horrible things. what are they doing wrong? >> we are not doing any kids, kids are not going to really be on quibi. this is 18 and up and we are going to make it clear this is an adult app.
maybe over time when we do something later, but right now it is adult, 18-44 with the target of millennials. emily: in general, you have to think about how healthy your content is. who the audience is. do you think youtube is making mistakes? >> listen, it is hard to argue with youtube's success, the most democratized platform in the world. we would not be here without youtube. they are doing the best job they can in an enormous uploading a -- of the video. i remember with ebay, listings were 100,000 a second. we have to have all kinds of things. i am certain they are taking responsibility to make it right. -- great. emily: you raised $1 billion. there were reports for another $1 billion, maybe closer to half a billion. how far along are you and those conversations? >> we have not started yet. we think we will probably go raise in the fall, early part of next year but $500 million -- we don't need it before we launch
but i do think it is wise when you can raise money and the markets are good to do that. ultimately, we will need that money to break even. we will start in the fall and look for an anchor investor to price this around. a lot of listing investors will want to keep their share. emily: have you sensed any givenainty or discomfort the trade war and what is happening? >> not so much for the investors in quibi but the business community in general is somewhat unsettled. you can see it reflected and the stock market and bond deals, there is no question there is an unsettled element around the world today. what business leaders like like more than anything else or that is predictability and certainty. that is not our world today. emily: if you were ceo of hp today, how worried would you be? >> i would be worried about a trade war with china. these companies are much in the
-- these companies that make things, much of the supply chain is in china. that is incredibly important and the ability to be competitive selling to other countries depends on being able to manufacture in low-cost locations. emily: how vulnerable you think these companies are right now? >> tech companies adapt and you can see people trying to figure out what they will do in terms of a trade war. everyone adapts and it is easier if there is more predictability. i can tell you that. emily: you have got a lot of chinese investors, partnerships with folks in china. do you have any concern that it could affect you should things continue to go south? >> our joint venture partner is alibaba. they are an investor in the platform. we have a great relationship. we don't think that will affect us. remember, a company like ours cannot go to china without a china partner. alibaba is one of the best we can be with. we are not worried about that at the moment but we will see what happens. you never know how this could escalate but we got a lot of
confidence. emily: traditional tech companies have struggled to break in to china. facebook, google -- ebay, as you know well. do you think entertainment could be a new way in for u.s. business and industry? >> american entertainment exists in china today. there are quotas on how much foreign content can be imported and there is censorship, but there is no question. i think the chinese entertainment industry is coming of age and growing. and i think there will be more opportunity for worldwide content into china over time. maybe not in the next couple of years, but listen. the china economy is growing, there is a middle-class emerging in a major way and they like entertainment. emily: that was quibi ceo meg whitman. coming up, facebook is building its own so-called supreme court for content moderation. but will that solve all its
problems? we discussed the plan next. and as a reminder, the boston pops fire spectacular is the country's largest and oldest fourth of july event. here is a taste of what to expect. [bombastic orchestral music] >> best day of the year! >> 3,2, -- crescendos] emily: do not miss the boston pops fireworks spectacular, only on bloomberg television.
emily: facebook is looking to create a new content oversight board. the social media giant is hosting a series of simulations across the globe as they plan an independent board to review controversial content moderation decisions. the board will provide final rulings on posts. this, as their control of global speech has been criticized. zuckerberg has mentioned the idea for independent appeals quote almost like a supreme court. we spoke about how it would operate. >> they want to be independent what we don't know exactly who
will be picked for this court, how big it will be, they say it will be around 40 people and then they break up into small groups of 3-5 to review individual cases. but how do you pick a group of 40 people that accurately reflects a 2.4 billion person community? emily: how do you do that if facebook is doing the picking? >> it is going to be very hard, and obviously, facebook is paying for this board so independence will be the question. that is inevitable in the situation. the point that kurt made is a good one, that facebook is now a global platform. they have many users in places like india, indonesia, other places that have different values than facebook in the united states that was founded largely by american executives. the question is will the board draw from people from those countries that are now basically facebook's future? emily: so, kurt talk to us about , these simulations that
facebook is conducting. a controversial decision comes to this group of people and then they debate. >> correct. i actually sat in on one that was at facebook's headquarters in california. it was interesting, about 30 employees. they presented them with a post that was controversial. someone had listed 70 different academics and accused them without proof of being sexual harassers. they left the list up and said to add more names to the list if you know someone else who is a sexual harasser. obviously, that is a dramatic and severe claim to make. facebook wanted its employees to discuss, is this the kind of post that should be left up or taken down? it was two hours long and they went through all of the different questions. and what they're trying to do is to get at how do people think about this stuff, what kind of questions do they ask so that when the real board has to make decisions like this, they are prepared. emily: so much of these
decisions are cultural. who are these people? are these all english-speaking people? how will they understand the nuances of the situation with the rohingya in myanmar? >> yeah, i think that will be really difficult. and what facebook has said as they talked about this out loud, and to their credit, they have sought input on this oversight board. what they have said is that this board would kind of tap outside experts. so if they are dealing with an issue that is culturally specific to germany or india, that they would seek experts in those areas. but let's not gloss over the fact that the vast majority of content decisions, judgment calls about what is ok to leave up on facebook, are made by this kind of low-wage contract workforce. not by this kind of high gloss supreme court type authority. more: and there has been reporting on this from the verge recently about the often horrifying situations that these
content moderators have to go through day in and day out. does that jive with your reporting? , it is a really terrible job. think about policing the internet from the most violent and graphic stuff and seeing that consistently. all day, every day, that is what these folks do. this board, to be clear, would not replace that job. what this board would do is say, hey, this is a decision our moderators made, let's review it and see if we agree with it now that we have a little more time to look at the fact or discuss it amongst the group. what they do is speak, something pops up, they have to watch it right away. does it violate the policy, yes or no, and make a decision. emily: there's a question of whether facebook should be doing this at all. facebook has made the argument that perhaps this should be a government decision. nick clegg, their new chief of policy, spoke to the bbc and
said i don't think it is in any way conceivable and i don't think it is right for private companies to set the rules of the road for something as tech serveshow society. you wonder, would they be better off having governments make these decisions? is that even plausible now? >> it doesn't really feel plausible, does it? i understand the position facebook is in. they created this platform, these platforms where many billions of people congregate every day. it turns out that facebook is a reflection amplification of the best and worst in humanity. and now that the genie is out of the bottle, they want to basically turn over a little bit of responsibility. i think what facebook wants in this engineering mindset is to give us a formulaic solution. if x and y happen, we do z.
i don't think we will ever be in a position where that is feasible, given that the internet reflects people and it --, you know, they can can't be reduced to formulas. emily: so, kurt, how comfortable is facebook and facebook insiders with this formula? proposed formula. >> i think they are very comfortable, they want this. mark zuckerberg does not want to be the one at the top of this foodchain saying, this is taken down, this stays up, ultimately that is my call. i don't think he wants that responsibility, actually, we know he doesn't because he has said so repeatedly. i think they see this as a very clean option for solving those problems that no longer puts it at their feet. emily: speaking of facebook, on wednesday, mark zuckerberg spoke at the aspen ideas festival in colorado.
he talked about election interference on social media and how the company has spent billions of dollars on security. he also talked about how facebook made a mistake in how they handled the infamous altered video of nancy pelosi. take a listen. took a while for our systems to flag that and fact checkers to rate it as false. , it took moreit than a day for our systems to flag it. during that, it got more distribution than our policies should have allowed. that was an execution mistake. what we want to be doing is improving execution. but we don't want to go so far toward saying a private company events you from saying something that it thinks is factually incorrect to another person. emily: still, facebook chose to leave the video up. they did flag it, but simply de-prioritize it. report from aew cybersecurity firm detailing attacks on iran.
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through their computer system. we spoke to the head of the global intelligence about those attacks. see a barrage of spearfishing emails from threat actors from iran and targeting multiple sectors, financial, government, media, education, likely others. ?mily: what are the objectives to cause disarray? >> the objective of most of them is to establish a foothold in the network. this could be just to collect information and intelligence. were tools and techniques precursors to more destructive attacks we saw in 2018 by the same actors. this could be a look at getting information. it's likely this is also a precursor to a secondary action. companies and organizations around the world should be on
high alert with a high level of vigilance. they: this is days after iranians shot down a surveillance drone. the president called off an attack in retaliation. ondid approve a cyberattack the missile defense capabilities. could that slow similes of these other cyberattacks coming from iran now western mark -- now? outhey are a means to carry the national security objective of nation. what we can expect to see going cyber as ansing in the face ofod escalating tensions between the united states and iran. out,: the group you call what do we know about them.
they -- >> they have malware against international control systems in 2018. they have a history of using destructive malware to carry out the objectives of iran. been other groups that are carrying out the same spearfishing attack, things that will help them get a foothold in networks to take it to the next level. vulnerable is u.s. infrastructure right now? which parts are most vulnerable? there are 16 different industries. they have strengths and weaknesses. what we are looking at is the out ahe director put
warning to all institutions, saying they should be on the lookout for heightened activity from iran in response to a lot of the tensions going on out. emily: we don't know everything the u.s. government does and cyber point -- in cyberspace. >> the united states has more mature and sophisticated capabilities. nationstates and their capabilities could make a real dent in the infrastructure of other countries. we should not consider it less of a threat. it's increasing sophistication from iran and the willingness to use cyber tools for destructive and espionage purposes. emily: how concerned are you based on the activity you've
seen about escalation, given that that we are going into a pivotal u.s. election cycle? see great interest in into thecountries outcome of elections, even china has taken steps to look at elections within asia itself. on intent to keep tabs election activity is present. whether it interferes with the outcome is another thing. iran wasly saw that trying to impersonate u.s. candidates, trying to create an authentic accounts to sway public opinion. they are attempting to influence the outcome of elections. emily: an aclu freedom of information request is revealed the nsa was improperly collecting records on u.s. calls and texts that it was not
authorized to last year. the secretive government agency began gathering data after september 11. that collection ended in 2015. to figure out how this new wave of surveillance happened, we spoke to the vice president of strategy at iron net, a cyber security firm. nsaas in charge of surveillance. it was modified in 2015 by the freedom act. the phone companies were put in charge of giving data in this new program. nsa innt to much data to the aftermath of this legislation. we have an error in over collection. it was made by the phone companies.
emily: how do you do this by accident? they are seeking specific information about terrorist threats. the phone companies are producing records. ofy pull a certain set records and they are attached to other records in their database. they provided, thinking they are providing the right stuff and they are giving too much. thissa itself identified was an over collection and took steps to stop the collection and said you need to fix the way you produce this information. we don't want this data. give us a step we are allowed to have. error, the nsais is not still doing this. this could happen again in the future. >> once important to note is this is not an intentional over collection or an effort to go too far. it's an unintentional error.
we have seen a lot of these. that way's in the calculus of the government continues the program, if they secret authorization of the program from congress. of bush and obama administrations, it was seen as a very productive program. there is debate about the cost of the program. that will continue going forward with the administration talking to congress about reacting the program. emily: that could still be happening. tell us about that argument. isthe data being collected phone calls between terrorists overseas and people in the united states. you can imagine those of the most important calls you want to know about. are these people involved in terrorist activities? what should we do about it?
it is the scope of content. it looks at metadata. who should not be collected against? there are some privacy enhancing elements that limit the scope of what you might do on content collection. about how valuable the program is, i think part of that is the understanding of how data collection works. it doesn't give you the obvious right answer. data about who might be doing bad things in the united states against americans. it's one element of a much larger argument. emily: there is a larger effort in this case to reduce the power of u.s. surveillance. hadour view, as someone who
thing?ht, is that a good are we more or less vulnerable than before? >> we see huge threats out of the world. to dow about china trying cyberattacks against u.s. companies. we've seen iran shoot down a u.s. drone. majorkorea is involved in cyberattacks. russia attacked ukraine and that affected international companies. we know people are getting aggressive in this space. that's going to make us a little more vulnerable. the trade-off between how vulnerable we are and the benefits is a hard when to make and one the government is looking at. we shouldn't just say there aren't very real threats against our nation.
close of its first $25 million fund backed by high profile investors. we spoke to the founder thursday. vice are interested in brands, whether it be nicotine, alcohol. is it hard to get someone to talk about the sigrid industry let alone invest in it. why'd you think this is an opportunity? we pitch them and none of them were allowed to invest. it was a market that was overlooked. it was a great opportunity to create an vehicle to invest in it. emily: how much money can you make on it? once the business? >> we are the first. tohold private equity funds
consumer retailers. emily: i wonder how hard it was to raise the fund from traditional investors. >> it was extremely difficult. i sent emails to 500 people. emily: how did you get there? have somethingwe no one else is doing. thean get in there and valuations are low. emily: san francisco isn't ignoring the e-cigarette market per se. they have just banned e-cigarettes. hometown of the biggest maker in the world, those of the
regulatory issues. that solutions tend to be the best long-term outcome. historically,em they cause consequences. it makes me worry. emily: we have the mayor of san francisco earlier. take a listen to what she had to say about e-cigarettes. >> the biggest problem i have is how many young people use this product and we still don't understand the impact of the product. provides theell fast and appropriate regulation of this product, that we should not allow them to be sold on the market. emily: we don't know about the health impact of e-cigarettes. they haven't been around long enough. are you concerned about backing things that could be leading to
a new generation of addicts? >> we believe it's really mature. we don't believe there is space. we are not focused on that. socialwhat about the implications of your investments? are you doing social good? >> that's why we only backed them, they understand the effect of their products. emily: how do you decide if someone is honest or not? >> you get to know your family and friends and how they want to operate a business. emily: where do you draw the line? >> we draw the line, we believe we don't invest in products who were intended to hurt somebody else. we would never invest in guns or bombs. only products that were invented for single use.
emily: where do you see the most opportunity? aboutare super excited nicotine. we see massive issues around e-cigarettes. a nicotine gum business that started recently. they been doing a great job in communicating the effects of nicotine, which are not as harmful. emily: how quickly do you think you will go through $25 million? >> it will be a five-year amount of time. you are one of the three richest men the world, you may not have a lot of regrets. bill gates says his biggest mistake came in mobile phone software. rubenstein that
they lost out to google in launching a mobile operating system. that, we wereeing distracted. we didn't assign the best people to do the work area the biggest mistake i made in terms of something that was clearly within our skill set, we were clearly the company that could have achieved that. we didn't. cost: he said the mistake billions of dollars and went to google for the android operating system. coming up, the high-stakes diamonds orsn't gold, but redwood trees. that's next. this is bloomberg. ♪
emily: when you think of poachers, you might think of people illegally hunting rhinos or elephants. in california, there is another insidious side to poaching. we are talking about exotic trees and plants from national force. it might be hard to abscond with a redwood, they are perching flora. they are turning to high-tech to thwart the thieves, using
sensors and hidden cameras. mcbride.with sarah there are so many thieves heading up the national parks and they are taking everything from the redwood to actresses. now, they have no choice. they have to use whatever they can and that includes tech. i just wrote a story about some redwood themes in northern california caught using a theork of hidden cameras in national park in arizona. they are injecting micro chips to deter thieves in those parts. in virginia and north carolina, they are dying the roots of ginseng that they can identify where it came from. the craziest, trees have dna.
they are dna testing. three years ago, people were apprehended. dealinge convicted maple trees in the northwestern united states, invented in federal court based on evidence of the trees'dna. they can match it to a tree stump in a force thousands of miles away. they know that piece of what it came from that tree stump. emily: how do they track down the feet? >> that person still has to be attached to the wood. emily: these are the cactus you see in pictures of the desert. once happening with these? ago, theyears
actually got a surprising amount of money, the going rate for those. if you have a 10 foot cactus, that's $1000. the rangers decided to implement a program of micro-chipping the cactus. they go around with the special guns and inject chips into the cacti. they can see if it came from the park. they think that's been a knot of a deterrent that people have stopped or at least not on the same scale as it was. emily: there's a rule for social media. >> that's hurting the park. in california, there has been assessed little succulents that grow on cliffs. thousands andht
thousands of those that people are trying to smuggle to asia. that's because of instagram thieves, everybody wants these little succulents. they can also catch people more easily thanks to social media as well. it cuts both ways. believe that we big brother is in the national parks, watching us when we go through our peaceful hikes? >> it even reaches into our national parks. yes we should. emily: once next here? we are talking about the national treasury. how well do park rangers think technology can help in cracking down? >> it's a catamounts game. they did not have cameras. they had to catch someone in the act trying to steal these pieces
of wood. there was no way they could get that person. chance ofave a decent getting them. i think the odds are good. more ofou can hear from the magazine editors on business week. the boston pops fireworks spectacular july 4, live only here on bloomberg. that does it for this edition of the best of bloomberg technology. tune in every day. we're live streaming on twitter as well. you can check us out there as well. you can follow our global network on twitter. this is bloomberg. ♪
taylor: from new york city for our viewers worldwide, i'm taylor riggs. bloomberg "real yield" starts right now. coming up, president trump and xi planning to meet with hopes that they hit pause in the trade war. failure to do so could hurt a global economy already showing signs of slowing down, adding pressure for a rate cut. the lower for longer narrative sending investors on a hunt for yield. the u.s. junk-bond market rising to fresh record highs. we start with the big issue. signs of optimism heading into