Transcripts For BLOOMBERG Bloomberg West 20160514

Has opened hearings that could lead to the impeachment of the irs leader. They will look at targeting of conservative groups. Latimer putin is promising that russia will take steps to retain strategic parity. Rizals new finance minister brazils new finance minister promises to reform the countrys pension system. Brazil is in its worst recession since the 1930s. Im mark crumpton. Bloomberg west is next. Brad im brad stone and for emily chang. This is bloomberg west. Coming up, apple drops a billion dollar, investing in one of ubers rivals. What this means for apples Current Mission and its relationship with the Chinese Government. And hypersonic pods a step closer to becoming reality . We have the details. Tesla shifts reduction into production into ludicrous mode as ceo elon musk promises to deliver half a million cars by 2018. Can he get there . We will discuss. But first to our lead apple dropping 1 billion on ubers rival in china and its a big deal for several reasons. This is one of apples biggest deals ever, second only to its acquisition of beats in 2014. It also came in just teed of it also came in 22 days. The president of the company met tim cook only about a month ago. And it could be a public show of goodwill to the Chinese Government. Later, we will dig into what edge this gives didi in its battle with uber. Brian white defended his buy rating on apple on surveillance this morning. Guest it allows apple pay to spread through china. It builds up goodwill with the Chinese Government and its an interesting area and theres a lot of discussion of apple on this course. Apple involved in baton of the scars. Involved in autonimous cars. Brad joining us, an early investor in didi and bloomberg reporter alex webb, who covers apple. This is an unusual deal for apple. What did they do it . In china, apple has lagged behind the public support and building that the Chinese Government expects that companies from outside coming in should be a part of. Achieving this is a positive for apple. Its very, very visionary. Brad some people are interpreting this as a show of goodwill. Why does apple need to show goodwill toward the Chinese Government . Hans its a very big market. Whether it is the taiwanese, hong kong, earlier now with the americans and europeans, this is a strategy the Chinese Government has adopted. Brad apple is not doing poorly in china. 59 billion dollars in sales last year in china. Really better than any other American Technology company and there is a history of failure there. The iphone sales are down in china. You mentioned services being closed down there. What is the state of the what do in china and you think tim cook is thinking there . Apple has enjoyed stratospheric growth in china. It has hit a hurdle. Growth has slowed. This is clearly a play on one level at least to build the Services Revenue in this country, if they can push apple pay. We dont know the details. If they can push apple pay, and can help drive the growth. Brad what are we likely to see . Apple Services Like apple pay. What else being pushed out to didi users . Hans you campaign for products,. You can pay for our ducks you can pay for Services Utility bills, and we pay or we have alipay. With didi, there are millions and millions of ride today. That the payments and apple is part of that. For apple pay to be more popular in china, it means and at where people will want to use a payment solution. This is one way of doing that and its definitely worth monitoring. Brad there are other bigname investors. Hans having apple featured more prominently makes a huge difference. We will have to see how the market will evolve. And also with cars, right . You need somebody who is a lot of cars or works on a lot of cars. Didi is the next guy you should be thinking about. Brad uber and google, there are problems in the relationship, but i get your point. Alex, this is a small amount of the cash apple has on hand. Does this mean you will have more nights and mornings like the one you had covering this . Alex for the sake of my peace of mind, i hope not. A person i was talking to earlier joked is a pretty good way to hold your money offshore. There are so many ways that this can be appreciated. To the skepticism of some analysts there is access to didi, also a huge upside for them. It makes sense and thats a small bet. Brad how did the market react . Alex ambivalent. Like you said, a billion is nothing compared to what they actually have in the bank. A but it is a valuable chunk of cash. Brad we will talk more about what this means for didi, but didi has raised a tremendous amount of money. We are talking about just 3 billion just this year. Talk a little bit, hans, about what difference this makes to didi. Hans uber is making a huge push in china. Did understands that. Travis is trying to do stuff brad who is travis . Ubers ceo. Hans thats right. Its touching different aspects. Youve been to china. You know how congested traffic is. Whenever anyone shops like American Consumers with the car, its extremely unbearable in china. So some kind of ride sharing scheme is needed. Didi is needed. But you will be fighting against uber. You need allies and support. At some point, i still feel the best solution is what alibaba and yahoo did years ago, what jerry yang came up with. Im expecting Something Like that. It could come in the future. We will see. Brad ok, alex webb, thank you. Hans is staying with us. Another revolving door intact. Tech. Nba legend Magic Johnson is stepping down from the board of square less than a year after joining. Magic wants to focus on his new project jlc loop capital partners. The fund has raised a quarter of a billion dollars this year. Johnson is being replaced with the former transportation secretary to the united kingdom. Up next, the billiondollar blow to uber. We will focus on what china from number one right handling service gains from the deal with apple. And another of elon musks projects the future for electric cars. The hurdles that tesla must overcome. Brad continuing with our top story, apples billiondollar investment in didi chuxing. Didi was already a powerhouse in the ride hailing industry. The company says it owns 99 of the market for hailing cabs. Existing backers include chinas against internet companies. Perhaps its biggest competitive advantage against uber, a fourway partnership with other car sharing services, all of whom helped the company fend off its biggest rival, uber. Last month, emily chang asked didis president about comparing with uber. Guest i would rather focus on ourselves rather than her. Rather than looking at others. I think the industry is in an infancy stage. For us, it is more focusing on what we have to achieve brad . Achieve. Brad here to discuss, hans and tim higgins in washington. Thank you for joining us. Uber wants to get into 100 chinese cities this year. Didi is in 400. Does didi have a shot in china . Hans i am biased because i am invested in didi. What er has uber has done in china is impressive. Uber has to fight like a Chinese Company would. Its impressive. That having been said, didi has been around longer, knows china better, and has more coverage in cities with quite better service. It will be interesting to see what uber does after a few more years. Brad when we look back at this story, will china be its waterloo . Hans i like what jerry yang did when he was a yahoo when he did the deal with alibaba, joining the forces of two companies to do better in china. Is it possible for uber no. The possibility exists. Brad a uberdidi peace treaty and china, youre predicting . Hans there is uber eats, and what do you do . Beyond just people. Allou want to battle on fronts . Look at the dominant players in key countries. But thats really up to travis, the ceo of uber, to see what he wants to do. Brad tim, in washington, so many chess moves on the chess board right now. With an eye to the future of Autonomous Cars do you think apples investment in didi is related to apples plans to develop an apple car . Tim its definitely one of those relationships like it out down the road. When we talk about the future of cars and ride handling programs, it is seen as a way this Technology Goes more mainstream. We see gm getting into lyft earlier this year. You saw uber developing its own Autonomous Car abilities. The idea it can make it go mainstream and that is an expensive oneoff item in the corner that does not get traction. Brad hans, you mentioned the state of traffic in china earlier, something out of an apocalyptic movie sometimes. What are the possibilities for Autonomous Vehicles on chinese roads . Do you think didi and apple had that in mind . Hans you cannot drive two days out of seven days. The Traffic Congestion problem is getting bigger and bigger. So car sharing has to be part of that. Will this be part of that . I think so. We will probably see adoption in the u. S. First. But i think there is the motivation china to coordinate the cars out there. Brad they talked about Autonomous Cars and that technology is captivated the chinese market, but the chinese Auto Industry is so young. What is the possibility for a Chinese Car Company to lead in this area . Tim you bring up an interesting point with congestion. If you look at the size of the market there, automakers have been selling more and more. You look at the most recent figures. 80 cars for every 1000 old. Its a must 100 per thousand people. Its still really juvenile there. The idea that the market can be changed, that you bring the latter of consumerism, as you see in the states. Consumers might be interested in having personalized transportation through an atomic through an Autonomous Car rather than i need to buy a car because that is the thing Autonomous Car rather than i need to buy a car because that is the thing to do there. Brad tim, gm made a big investment with the Ridesharing Company lyft. How do you think that they were looking at this deal today . Tim maybe they felt like they got a deal in lyft, i dont know. Gm is a big deal in china. Its a big market. A big market for its fuutre. Future. You would like to see them do this there. They rolled out there early autonomous project called nv several years ago at the world expo in shanghai. It attracted a lot of people there, a lot of excitement. A lot of excitement they had not gotten in the states with this kind of program. Brad hans, quick last question for you are we going to see a didi ipo . Hans they are focusing on what they can do in china. The global lines between lyft and didi in china and also in india that would be interesting. This has gone global. Penetration has gone global. It will be very interesting for the next five years to watch more developments like this happen. Brad ok, i look forward to continuing the conversation. Tim higgins and hans thank you. Why a manager from argentina is why the u. S. Ambassador to argentina is visiting Companies Like tesla. He visits us next. Brad turning now to investments in south america. The u. S. Ambassador to argentina is wrapping up a weeklong visit to the west coast. Its all in an effort to expand tech partnerships between american and argentine firms. The ambassador to argentina joins us now. Tell us about this trip. What is the mission . Guest i have been thinking about this for a year because i am from southern california. The idea was to focus on innovation, technology, and renewable energy, especially energy. What is happening in los angeles on the whole state is amazing. Right now argentina gets 1 , more or less, from their energy from wind and solar, and we are nearly 50 in the next four years from wind and solar. We can bring a high delegation of Corporate Leaders to develop these partnerships and linkages. Brad tell me more who was with you on this trip. Ambassador mahet we had a real mex. We had a woman who was the president of a subsidiary. All kinds of industries. Agriculture, technology, and it was a really broad section. And for the first time ever, the argentine government is attracting the private sector into government. The chairman of shell. There were many leaders who came from the private sector. They are embracing the idea that argentina should focus on not just business, but technology and disruptive technology. Brad, my understanding is that it has been characterized by great turbulence. Is that over . Ambassador mamet sure. Many companies have been doing business there for a while. Many have been there for 100 years. This new government though, it was really an upset election. Not just on the city level. We have these relationships with all of these partners. Part of it is generational, i think, and part of it is a real desire to even out that curve and embrace technology. Technology in general has not kicked into the economy just yet. But its about to. Brad where is argentina right now in upgrading its infrastructure . Ambassador mamet they can raise money to do infrastructure projects. Roads, Water Treatment plants. You had this week push this big push. Its a big deal. Phone calls to drop. But you have government officials at all levels understanding they have to quickly get were california is right now. Brad argentina is surrounded by countries who are growing more quickly. What is argentinas pitch visavis its neighbors . Ambassador mamet i talked to companies that are extremely concerned about brazil, for example. If you look at emerging markets around the world, the biggest returns are coming from argentina with a government that is trying to create a transparent, stable, longterm, Good Environment to invest. We are seeing companies all the time coming down to get the lay of the land and sea a good place to do business areas like i said, there are over 500 companies there. Brad ok, thank you for your time. We are looking forward to the results all of your tour. Coming up, elon musk looking to rocket passengers from San Francisco to l. A. In less than an hour. It may be one step closer to reality. That is coming up next. [ soft music ] e. T. Phone home. When you find something you love, you can never get enough of it. Change the way you experience tv with xfinity x1. Shoah, ha ha. Ew artist. Show me top male artist. My whole belieber fan group. Its not a competition, but if it was i won. Xfinity x1 lets you access the greatest library of Billboard Music awards moments, simply by using your voice. The Billboard Music awards, live sunday may 22nd, 8 5 pacific, only on abc. Mark im mark crumpton. Youre watching bloomberg west. Lets check your first word news. It says that home in equity prices could drop sharply. Were not doing it out of politics. This is not the job of the imf. We are doing it because it is a significant bounce, and its not just a domestic issue. Its a bigger issue for many of you. But its an international issue. Mark britains socalled brexit referendum is june 23. It is likely to feel a cold chill from the rest of europe if it leaves. That is according to the irish Prime Minister. If the british electorate were two to decide to leave the european union, we would stand up for britain at a european level, but i could not determine the outlook of the response from the other 26 countries that had arrangements at britain, what they would be at that stage. Mark Prime Minister kenny says that ireland has reached out to its citizens living in the uks in the u. K. So they know what the consequences of a brexit would be. Canadian Prime Minister Justin Trudeau traveled to afford Fort Mcmurray to assess the damage from the wildfire. More than 88,000 people were evacuated. Donald trump picked up what could turn out to be a lucrative endorsement. Casino mogul Sheldon Adelson says he is backing trump. He writes, the alternative to trump being elected is frightening. In 2012, adelson and his wife contributed 93 million to super pacs supporting republican candidates. The white house talks to the leaders of five nordic countries. The agenda included environmental and economic and refugee issues. President obama they are extraordinary countries, and most importantly for our areoses here today, they extraordinary friends. Mark the heads of denmark, finland, iceland, norway, and sweden are being celebrated at a stat dinner. A new jersey woman and her children claimed a 429. 6 million powerball jackpot, choosing a lump sum over an annuity so the payout is 284 million before taxes. I am mark crumpton, reporting from new york. This week, the hyperloop, elon musks future idea of rocketing city to city in supersonic pods, may have come closer to reality. They are two main groups, Hyperloop One which tested a new propulsion system in a public demonstration that saw a sled accelerate to 116 miles an hour in 1. 16 seconds, and there is hyperloop transportation technologies, a crowd sourced project that said it licensed a levitation system from Lawrence Livermore national lab. Here to tell us more, dirk ahlborn. And dana hall who covers everything elon musk. Thank you both for joining us. Dirk, lets talk a little about what we saw this week. Mainly from the competition. Did Hyperloop One raise the bar this week . What did they show . Dirk i think they did a really great event. The system they showed is a propulsion technology, which is fairly common, but still a great step for the overall hyperloop community. A big part of it is creating awareness. Definitely great. Brad talk a little bit about your announcement this week. What is passive Magnetic Levitation Technology . Dirk first of all, you mentioned we are crowd sourced, which is correct. But we are still a normal company, just using a completely new approach to innovation, using crowdsourcing to get the best ideas and opinions and innovations into our company. Thats how this happened, with the Lawrence Livermore technology, brought to us by our community. It is a Magnetic Levitation Technology. The levitation occurs through movement. So the faster the pod moves, the levitation occurs through the magnetic field, which is also much safer because, if anything were to happen in another Magnetic Levitation Technology, if you lose electricity, the pod would immediately touch back down. In our system, it only touches back down when it slows down. Brad everybody wants to know when we will be hyperlooping between San Francisco and l. A. And other cities. Lets listen to the ceo of Hyperloop One addressing the timeline issue this week. At sign continues to be a fullscale demonstration this year, beginning to identify the most viable and supportive projects in 2017, beginning construction in 2017 and 2018, deploying the first of the Cargo Systems in 2019, and then the first passenger systems by 2021. We are still on that schedule. We see great interest around the world. Lets see what happens when we evaluate the opportunities from the Hyperloop One global challenge. Maybe that project already exists. Brad does his timeline seem aggressive to you . Talk about your own timing for hyperloop transportation technologies. Dirk we started in 2013, so i dont think it is fair to compare the two efforts. We have two years of advantage, so we arty have the technology to build and move passengers. We filed Building Permits at the beginning of the year in california. We did the land surveys in the mapping, so now we are getting ready to actually start construction,. I hope later this year it depends on the county, and environmental studies. The building process will probably take until the end of 2018, beginning of 2019. Brad what are the physics and engineering challenges that need to be overcome before we can have a real fullscale hyperloop . Dirk from the challenge is itself, i think everything, at least on our end has been solved. Obviously theres always smaller elements, but you want to be sure you build the safest and most comfortable system possible. When you work on a passenger system, safety comes to mind first, so you have to make sure that it is much safer than anything you know, and right now our system is 10 times safer. We are looking for technologies that achieved even higher reliability. Brad what is the competition with Hyperloop One . Is this a friendly rivalry . Dirk we started in 2013, and for two years we were the only Company Working on the project. It was really clear, we needed to create a movement to make this happen. It has been attempted several times in the past. We had a project in switzerland, and even two projects in the 1960s in america, and they have always failed. So part of the movement is there is more than one company trying to make this successful, and i think it is great. The markets are big enough for several players. Obviously, we did not like the name choice. It was very similar to ours. They changed that now so it is Hyperloop One. I think that is awesome. I think every step forward is great for the overall hyperloop community, and making it become a reality much faster. Brad dirk ahlborn, ceo of hyperloop transportation, thank you so much. Dana, what did hyperloop show this week . Dana there is a lot of interest in the concept. The real moment will come when there is actual human beings riding in it, and we are still several years from that, but you had experts and transit experts flocking to nevada to see a short demonstration. Brad somebody jokes they had built what appears to be a theme park ride, and that everyone was giving some undue adulation. But there was more to it than that. Dana it was a fairly short test. There wasnt a human being in bit. Just showing the repulsion system. But it really is a movement. There are engineering students at colleges around the world who are all excited about the idea. And you have a lot of excitement around hardware, which we have not seen in quite a while. A return to building infrastructure, which is exciting. Brad elon musk, who originated this idea, or at least the enthusiasm for it, is he backing either of these technologies . Dana he is staying out of it, which is pretty interesting, and a challenge for both companies. Two startups trying to further his idea, but he is not backing either one. The question is, will he us some point . Right now his real interest has been furthering hyperloop Competition Among college students, sort of like what spacex is doing. Later this summer, spacex is having its own hyperloop competition at headquarters in hawthorne, so there is a third wave that spacex is more directly involved in. Brad thank you. Coming up, another of elon musks grant projects, a future full of electric cars. We look at the hurdles tesla must overcome next. Dont forget to tune in this weekend. We will bring you all the best interviews with our field trip to boston. Conversations with leading figures at, harvard and m. I. T. And of course mayor marty walsh. The best of bloomberg west this weekend on bloomberg television. Television. Brad turning to another of elon musks moonshot ideas. How can tesla meet its goal of delivering 500,000 electric cars by 2018 . Elon musk announced in even more ambitious production schedule on the most recent Earnings Call earlier this month. We are advancing the q3, for the model 3, both substantially. The overall volume plan, with tesla aiming to get to half a million run rate in 2018 instead of 2020. This is based off of a tremendous amount of demand for the model 3, which is a fraction of the demand we will have when people fully understand what the car is capable of. Brad musk is already talking about raising more capital, but that is only one hurdles tesla needs to overcome. Dana hall is with me. First off, what is the giga factory . Why is it so important to the future of tesla . Dana it is teslas battery plant under construction east of reno, nevada. This is key to the future of the company, because the model three is supposed to be a cheaper car and it cannot get cheaper unless you drive down the cost of the batteries. They will bring battery production inhouse and drive down the costs of batteries by more than 30 . Brad you visited this enormous facility in the nevada desert. Tell us about what you saw, and how you got there. Dana reporters have been badgering them for access for months. I got to drive a model s there, which has autopilot. I drove it from my house in oakland to reno. Brad what does that mean . Dana your hands are on the wheel, but the car can steer for you. And its pretty good. Even at night, on roads that were not greatly marked, autopilot is a great technology. The giga factory is enormous. When its finished, it will be 5. 8 million square feet. Brad how complete is it . Dana only 14 finished. So you sort of drive into the desert, turn into this industrial facility, and then you see the building. You realize, this is actually only 14 of it. They will build more. So they are building it in a modular fashion so they can begin production before it is complete. Brad musk has talked about needing to raise more capital to finish the facility. What does that mean, and how will it impact test the shareholders . Dana tesla has always been very longterm in terms of their thinking, and most Retail Investors are in it for the long haul. On the recent Earnings Call, musk said they will need or capital. They are doing all these crazy things. Building the gigafactory, 1500 job listings they will need serious cash. Some analysts say 2 billion, 3 billion. The question is when are they going to actually do it. Brad the 500,000 cars metric, they are saying 2018. Dana the thing that has everyone flabbergasted, they only had 50,000 deliveries last year, so it is a hockey stick. In terms of their production ramp. Brad do you really feel this is make or break for tesla . Dana i do. In terms of bringing the model 3 to market at a price point consumers are expecting. Yeah. Mean, 400,000 people forked over 1000 to reserve a car, and they have been promised it will be 35,000. So if tesla cannot deliver at that price point, you will see cancellations. Brad give me one detail from the tour of this massive construction site that stands out. Dana all the Conference Rooms are named after metal. Lithium, cobalt, graphite. Brad dana hull from bloomberg, thank you very much. Now to a story were following. Could we see another billionaire turned reality tv star on a ticket to the white house . Mark cuban is presenting his thoughts on how Hillary Clinton should pick a running mate. Cuban said i would get a Vice President ial candidate who is someone like me, who would just throw bombs that donald. Cuban mentioned he and the Presumptive Republican nominee have a lovehate relationship. Coming up, we break down the biggest events in tech from this week. After the resignation of lending clubs ceo, what is next for peertopeer lending . And for more of our best interviews, check out the studio 1. 0 podcast. Why is peter thiel comparing Ivy League Schools with the Medieval Catholic Church . Check it out on itunes cloud on monday. Brad from claims about conservative bias in facebook trending articles to the sudden resignation of Renaud Laplanche as lending club ceo, there has been no shortage of tech news this week. Joining us now, executive Technology Editor tom giles. Lets start with facebook. Bias in trending topics why is that a big deal . Tom what a week facebook has had. How badly was it handled prwise . The question over bias is a really big deal. This is something used by just about everyone you know, so if theres a concern about whether they are influencing, whether there is a bias in what you see on facebook, and a lot of people will be concerned about how useful this is as a service. People go to facebook it has morphed so much over the years from being a place where we just like what other people are doing, look at pictures we still do that stuff, but now we increasingly go to facebook to get informed, to find out about was interesting, what people are reading, whats going on out there. Brad let me play devils advocate. A lot of newspapers have bias, and people can gos else if they somewhere else if they dont like a certain take that a publication has. So why is it a big deal that facebook might have some bias . Tom you know going to a particular newspaper, you kind of know, theres a contract you have is a consumer, i know what the biases are. I know if i read the sun in britain, there will be a certain point of view. On and on the list goes. Whether it is liberal or conservative. People go to facebook, and theres no expectation of there being a political bent. Theres no sense of, they will only give me conservative stuff, only liberal stuff, only radical stuff. It is a melting pot for a lot of views. Think about your interaction with a lot of other people on facebook. You are friends with people today who you are probably politically aligned with, but you are also friends with people in high school with whom our views have probably diverged over the years. So its this place it is one of the few places, if you think about it, where you are interacting from people from a really wide array of political beliefs. Brad you said you did not think that facebook handled this well. As i recall, they said the story was wrong, Mark Zuckerberg said we will look into it and meet with conservatives. It felt confusing. Tom it snowballed. It started out with the gizmodo report. Initially the guy in charge of this service came out and really downplayed the extent to which there is human involvement in aggregating and placing stories into the trending stories module. As the week progressed, though, facebook kind of came out and made it clear through its own documents that there is a human element. Its not just all robots. Its not just all algorithms. And then, thirdly, Mark Zuckerberg came in and said, i am getting personally involved. So there has been this escalation. Not to mention the fact you have had conservative voices, one senator in particular, coming out and saying, we really want to see an investigation here. One thing i will caveat here, im not sure it is the governments responsibility to dictate. Facebook and do whatever it facebook can do whatever it wants. The question is that facebook needs to be upfront about it. Brad we will see how facebook handles that. Also this week, Renaud Laplanche stepped down as ceo of lending club. Shares collapsed after they disclosed. How is my french on the pronunciation of the name . And lendingclub, is the whole industry of peertopeer lending can people trust it . Tom theres a big reexamination going on, not just of lending club but of the entire category. They came onto the scene several years ago with a lot of fanfare. The idea, if you think about it, makes a lot of sense. Its a way for you as an individual to make a loan to someone else. Maybe some of you know, but maybe someone you dont know. Maybe make a little extra money. And for the borrower, it is a way, an alternate form of lending. Brad but it has revolved into something much more traditional. Tom the banks and Financial Services companies have become a bigger and bigger source of this lending. Exactly. It is not an alternative anymore in many instances. Now, when you have an instance asking about the ceos investment in a particular client or company, and questions about whether these loans were dated incorrectly, it raises questions. Brad can they recover . Tom its very iffy. Im leaning toward no. Brad tom giles, executive editor of bloomberg technology. Thank you very much. That does it for this edition of bloomberg west. Next week we will be broadcasting live from google i o. And, dont miss our guests. Thats all for now from San Francisco. This is a paid advertisement from the new face of time life, starvista entertainment. Announcer it came out of the church. It was raw, emotional, seductive, romantic, and gave us a new sense of pride in the statement made in america. It was the soul of the 1960s. This little heart of mine been broke a thousand times each time you break away i feel youre gone to s