Transcripts For BLOOMBERG Bloomberg West 20160622

Membership in the eu. Rival camps are running neck and neck. Israeli Prime Minister Benjamin Netanyahu and u. S. Secretary of state john kerry are scheduled to meet in rome on sunday. From bloomberg world headquarters, im mark crumpton. Westmberg Max Bloomberg is quote is next. Im emily chang and this is bloomberg west. We will examine the potential impacts of a brexit at tech industry. And must lays defense having a hard time selling his 3 billion proposal for a teslasolar city merger of we will break down why some investors are skeptical. The Global Entrepreneur conference kicks off. With john interviews kerry and reid hoffman, we will hear from steve case. But first to our lead. Britain is on the brink of a monumental decision about whether to remain in the European Union. Campaigners issued 11 hour appeals in the socalled Brexit Debate with the mayor of london calling up the fight of our lives. His predecessor calls it the last chance to take back control. Polls waver between a dead heat and narrow lead for each camp. Joining us to put it all into perspective is alex webb who recently relocated here from england. It iseporter back incredible to even believe we are at this point. What does a brexit mean . There are so many huge things that could happen here. Businesses and Venture Capital in london, its going to be much harder for british businesses to grow and trade inside london. If you think about the broader implications, that could set off a chain reaction. The rest of the European Union space beginning to dislocate and everything we have fought so hard for over the last 50 years could quickly unravel emily i know that its difficult to put a number on coming people want to leave, but there are a lot of people who want to leave. What are the benefits of that . Guest the argument made is the famous red tape argument. Namely that theres a lot of legislation coming out of europe and a largely to do with finicky things like the size of the lightbulb or health and safety regulations and that makes it harder for Small Businesses to grow because they have a lot of regulatory hoops. Thats the argument and if its correct, it could have implications for startups and tech businesses but britain would have to come up with its own legislation. Emily there would be huge implications for the Global Markets and confidence and investing in europe. A big sector in the u. K. How would that impact that sector . Can london remain a superpower in terms of the Financial Sector or is everything going to move over to london does a few things really well. We saw the acquisition of magic pony for 150 million and we know that there are Great Companies that will be coming up but the question is will they stay in london or will they move somewhere else where they have access to a larger market . Emily a big issue is immigration and it echoes some of around immigration here in the united dates. Talk about the potential impact. N immigration in the u. K. , immigrants can move even more freely between borders and it has impact on skilled workers and talent. Not classifyd myself as a skilled worker but i have been a beneficiary of this. I lived in germany without a visa or anything. It allows perhaps lower cost labor to be shipped in from Eastern Europe and undercut labor costs. But if you think about the golden triangle, oxford, cambridge, london, where there is a lot of tech growth. They had a hugely diverse workforce. A lot of these people are coming from the eu and it makes it hard to bring this talent in. With my Previous Company headquartered in london, we have a huge number of people from all over london in our engineering team. The fact that we can move quickly and easily as always hugely attractive. It as i benefited from well when they had be highly gild Migrant Program and i was able to move there for my job. With this impact your decision to back u. K. Startups . Guest one reason i always liked investing in u. K. Companies as they have an International View from day one. They can trade in european borders and look to the u. S. And take advantage of that special relationship made appealing for top one of the big issues the leave campaign is trading on is that the u. K. Will continue to have a great relationship with the u. S. Something obama spoke about yesterday was that may not be the case. Would it be something i would do in the future . It definitely makes it harder. Emily could the vote drag out in any way . Guest there are places where some of the lost can chew and sees take longer to report their results. In someoften a race positions to report first. Polls tend to indicate that it is very close but there is always this untenantable element of people who are undecided and what they do when they are alone with the Balance Sheet is hard to tell for that hard to tell. Following thisbe all day tomorrow on bloomberg television. We continue our countdown to the brexit but first, a roundup of where u. S. Tech companies have cited in the debate. Microsoft is one of the Largest Companies to come out against the referendum. Microsoft says the u. K. Being part of the eu is one of several important criteria to make it one of the most and orton and attractive places for the arrangements we have made. Emily the leaders of cisco, ge, and others in the Business Community voiced support of a stay vote in the referendum. Still to come, brexit fever and the price of the coin. We will head to taipei for an explanation this hour. More than a are billion cars on the road worldwide today and only. 1 of them have a plug. Opec contends even in the year 2040, electric nichols will make up just 1 . But dont be so sure. Back electric vehicles will make up just 1 . We have the math on when oil markets might be headed for the big crash. The world is running out of oil. The idealhat was behind the peak oil hypothesis that dominated economic thinking for decades. But it turns out that with fracking, deepwater drilling and other things there is much more oil than we thought. The Peak Oil Theory isnt happening. But what about a sensitive running out of oil, we just stopped buying the stuff mark there buying the stuff . There one really and gas guzzling cars on the road today and only. 1 has a plug. Opec intends that even in 2040, electric vehicles will make up just 1 . But dont be so sure. Consider the s curve. Its used to describe new Tech Knowledge he like color tvs. Growth starts slow and when the product will he starts to connect come we have lift off. Eventually the market gets saturated at the top. Foricting and as curve electric cars is extremely difficult because we are making assumptions about demand for a type of vehicle that doesnt even exist yet. Cars with anil cars with a range of 200 or 300 miles. In the next few years, tesla, nissan and chevy plan on selling longrange electric cars in the 30,000 range. And other companies are investing on dozens of new models due out in the next four years. By 2020, some of these will be faster, safer, cheaper and then there gasoline counterparts. To start and oil crash, you dont need to replace all the cars on the road. You just need to reduce demand enough to cause a glut of unwanted oil. Consider the oil crash that started in 2014 caused by too much supply, when producers started pumping out a next her 2 Million Barrels a day. When electric vehicles are able to displace that much on the demand side, it could also cause a crash. When my that happen . Tesla is building factories to go from 50,000 sales to 500000 and 2020. Lets assume tesla can meet its forecast and assume other carmakers retained their market share for plugins. If each vehicle displaces 15 barrels a year, heres the impact. At this rate, we get the benchmark of 2 Million Barrels of oil a day displaced as early as 2023. That is an oil crisis and the thing is, its just the beginning. Its not at all unreasonable to assume that by 2040 nearly half the world is new cars will have a plug. You are skeptical. The price of electric cars still needs to come down and there are not enough fast charging stations for longdistance trips. Many drivers are still going to choose gasoline and diesel, but imagine a future where the rumbling streets of new york and new delhi all violent with electric engines. What if Global Demand for oil service to fall, at first by a trickle and then by a rush. Invested in oil will be lost while trillions in new energy will be one. The power of nations will be shuffled. Thats the promise of the new peak oil and it may be coming sooner than you think. Emily that was bloombergs tom randall reporting. Tesla shares closing more than 10 lower a day after elon musk forward a land to live the number one u. S. Rooftop solar provider by worth 3 billion. Elon musk said the deal was a nobrainer but investors are skeptical. Does it make strategic sense for tesla to buy solar city and what does it mean for the wider solar power sector . Im joined by cory johnson and liam jenning. You open your piece on the post merger with elon musk talking about this being part of the nonweird future, yet you believe its weird and he is letting on. Explain. very heavy on longterm vision. Renewable energy where tesla was not only going to sell you your nice electric vehicle but solar panels to go on your house and so forth. What wasnt there was a clear explanation of what the benefits of this deal would be to investors and what the savings would be. Why this idea that a onestop shop is needed in renewable energy. That was not clear either. Emily what are investors saying now that they had 24 hours to digest this . Cory it was interesting to watch the trade in solar city. First, it never reached in your near the bid price. Shares fell off a little bit today as people start to realize this deal might not even happen because it is so illogical. I was shocked to see so many analysts agree with me that this does seem illogical. Is af the concerns here lot of them lowering their numbers and a couple of cells out there, but theres a suggestion that solar city has really serious as a heart attack concerns about its ability to raise cash over the course of this year maybe merging it with a Balance Sheet might make tesla able to more easily borrow than solar city can. But maybe that is trouble because solar city is seen as being so toxic that could hurt tesla possibility tomorrow. Tesla does not have the money to hold the factories and cars it set out to build. That makes it even more difficult for tesla to achieve its goals which one analyst called unachievable, and that was a list analysts. Best elon musk is a guy known for taking on impossible tasks. That may not be enough to can and some that not a good idea, now . Hy both if you go back, stocks were flying high and both companies were burning cash and shareholders did not seem to s case, theesla stock is still rated high. Solar city can say the same. Strategy,ivid on its it has been dropping quite dramatically and it doesnt look like they can raise the capital they need. In pains tocall was point out that everything was fine at solar city and they could raise money if they needed to. The question you have to ask lowself is this is a very priced bid compared to solar citys history. If they really were fine, why would they go for this deal . It will be telling if they recommend this deal because it would be a sign they have lost faith in their own future. The Free Cash Flow burns are so disconcerting because it just this company wouldnt even survive or would at least have a lot of risk if the markets are not open for them. Emily thank you both. Up, the ipo market gets a test after a very slow start to 2016. Andill break down twee leo why the company is choosing to go public now. Emily Twilio Twilio the Communications Software provider, is pricing of ipo as investors it on this guidelines in an uncertain market. The announcement makes the San Franciscobased company just the Sixth Company to go public in 2016 compared to the 24 companies that went public i this time last year. Does it signals the end of the ipo drought . Joining us from the university of florida is jay ritter. What a day to go public, the same day as the referendum and u. K. That could have wideranging implications on the market. What do you make of the decision to do this now . I think they are counting on the fact that the tech market and being based in San Francisco is going to be shrugging off what happens in london. This is the first Silicon Valley backed ipo for the year. What does it mean for the Broader Market . Guest i dont think it means a lot. There have been a limited number of tech ipos but other Industries Including biotechnology have had a very limited number of ipos this year. Has not been profitable in the eight years of has an existence. Is that a red flag and mark guest yes. But the vast majority of tech stock ipos have not been profitable when they have gone public. Investors have cared much more about growth and rationally so if theyt of companies wanted to focus on shortterm profitability could become profitable by Cutting Research and Development Expense and not hiring as many people to cut their short term costs. Investors would much rather have a company with utter growth aspects. Is heavilyio dependent on facebooks whatsapp. How big a risk factor is that . It is a risk factor when youve got one big client, however facebook, whatsapp is a really important him a big player, so it is not rising that its having such a big market share. If this goes well, would that open the door for other Silicon Valley companies were not . Think theres going to be a big effect one way or the other. What is unique about twilio is that it is a b2b company, unlike facebook or uber, consumers are not the customers and the vast of b2b successful startups for the last 15 years have not gone public and remained as an independent company. Instead, they have sold out in trade sales and rather than growing organically, they become part of a Larger Organization and i dont think that longterm pattern is going to be changing top emily what your expectation for the number of ipos that will happen this year and will we see a big pickup next year . Guest the first part of this year has definitely been slow and i think there will be higher activity for the rest of the year unless the stock market takes a dive. Are gettingthink we to really high levels of ipo activity. Biotech prices are not as high as they were a year ago and biotech ipos have been a large fraction of the ipo market. I think we will probably come in Something Like 2010 or 2012 with less than 100 ipos for the year. Ritter,rofessor jay thank you very much. We will be following the ipo. Dont miss our interview with the ceo on the first day of trading. Mean forhat does the Venture Capital community we spoke with steve casey who talked about the global implications. If you like bloomberg news, you can listen on the radio. More bloomberg west, next. Mark im mark crumpton. Lets begin with a check of your first word news. Britain is in the final day of campaigning before its referendum on European Union membership. Prime minister David Cameron today urged the brits tuesday. Mr. Cameron jobs first. But the economy first, put your childrens future first. Put our future first as a country. The latest opinion polls show rival camps that and neck. The investigation into the crash of egypt air flight 804 is delayed by a damaged computer. Officials say a team of International Experts has to clean out salt from more than hundred elect trying circuits to determine what is preventing attempts from reading the flight were possible units. At least 90 people, mostly farm laborers, have died in lightning strikes in india for top 56 of those were overnight in eastern part of the nation. Lightning strikes are common during indias monsoon season. The senate narrowly defeated a measure brought by arizona senator john mccain that would have expanded the ei posture balance powers. It followed this months mass shooting in orlando. Former u. S. House speaker Dennis Hastert has reported to a federal prison facility in minnesota where he will begin a 15 month sentence after he admitted guilt in a hush money case in an effort to conceal past child molestation. It is 6 30 wednesday evening here and 8 30 in sydney. My colleague, paul allen, has a look at the markets. British referendum on Eu Referendum is weighing on pretty much everything right now. We saw u. S. Stocks down and as we look at new zealand, up and running for 30 minutes, it is barely moving. Is expected to show declines, but we are likely to see gains on the nikkei. Fall by. 7 ,ks did their first line of the week. Volumes off 17 below the 30 day average and the bank of jim and has been holding off on on purchases as this brexit hangs over markets like a dark cloud. One stock to watch is mitsubishi motors. They announced their first loss in eight years. Thats a one point 4 billion hit over the fuel economy scandal. This is the first opportunity for markets to react to that. Its a be she likely to face increased scrutiny in the future. Im paul allen in sydney, australia. Emily the Global Entrepreneurship summit is underway at denver university. Its the seventh installment of a conference hosted by president obama aiming to bring together entrepreneurs from around the world to talk about how startups can tackle global challenges together. We count we caught up with steve case at the summit and i began by asking how i possible exit by england would affect the Venture Capital community and Technology Industry. I think places like london are doing a great job. Startups there are doing a great job but it could lose some of that momentum and get much more complicated. Much more difficult in terms of dealing with crossborder issues. I will see what happens tomorrow willopefully the decision remain in the eu will prevail. Emily you Just Announced a new fund. How much do you invest in that . We did invest in a new company in switzerland because they were expanding in the United States and wanted help with some partnerships in the United States. Emily president obama has been doing this summit for a couple of years. How successful has the president been exporting an american brand of entrepreneurship . Think it was very helpful. I went last year when it was in africa and i think theres a sense entrepreneurship is alive and well and its important for the United States and the message we are trying to do everything we can to work entrepreneurs all over the world has they are the job creators that drive the Economic Growth that lead to stable democracies. Even africa, its remarkable how quickly it has transitioned from a decade ago. Most evil saw africa as a problem to solve. Many entrepreneurs from africa here its really staggering and bodes well for the future of that region and were a more prosperous, able world. To exportit important entrepreneurship or american entrepreneurship . Guest everywhere is different. Its an idea and a network i dont inc. People in length in nairobi or anywhere else be trying to replicate Silicon Valley but i think they can learn how there is a culture around risktaking and how people are willing to put risk capital into these earlystage companies and create a dynamic around it. Building does networks around the world are very important and i think you will see economies rise as a result. Entrepreneurs change the world and we want to make sure they have the opportunity says not just a few places that have the opportunity everywhere, everybody and thats what the global on jupiter summit helps to do. Emily what does a Hillary Clinton white house mean for entrepreneurship . Try to stay out of politics but i think she understands the importance of entrepreneurs. Donald trump does as well. That you made the point the president would be all about x orting democracy but now entrepreneurship. Why is that more of you . Guest its important to have a community that creates hope and opportunity. The best way to create jobs is held entrepreneurs who have ideas to create companies that can actually grow and expand and lift up. ,eve seen that in the country all entrepreneurs in baltimore and new york are creating companies that change the world and help to support their community. Microsoft and linkedin . Is that a thought . Guest i think microsoft sees it as a strategic value. I dont have all the details but it truck me as a smart, strategic move. Emily what does it mean for tech m a or the ipo market . I think things are heating up. You will see more and a day and more ipos. The private Capital Markets were pretty robust and late stage valuations were pretty high. It has come down a little bit and i think you will see an excel ration of both ipo and him and day. Emily that was my interview with steve case. We will have much more tomorrow from the Global Entrepreneurship summit. O not miss our conversations in this edition of out of this world a record at launch for the Indian Space Program for they launched payloads for the u. S. Comic canada, germany and indonesia. The Prime Minister congratulated the indian scientists behind the launch and applauded them for make for breaking new barriers. Russia holds the record for most satellites delivered in one launch. And it is trash day for the International Space station. A large cargo ship with space tray space station trash reentered the atmosphere today and burned up over the pacific ocean. It had been carrying more than 4000 pounds of garbage. To senda tk plans another cargo craft on a resupply mission next month. Do not forget to tune in tomorrow or our exclusive interview with u. S. Secretary of state john kerry from the global on her summit. No miss it at 5 00 new york time. At 5 00 newiss it york time. Emily israel has been warned this month, eric schmidt told investors in tel aviv, beijing and for the europe are poised to steal its nickname of startup nation. We have the report on israels shifting economy. Been poweringhas the israeli economy for the better part of two decades but the socalled startup nation may be experiencing a bit of stagnation. Between 1998 and 2009, tech growth exceeded gdp growth every year and managed to do so only once and israeli israel is slipping down and rankings and you have eric schmidt warning Northern Europe and beijing are becoming worthy contenders to the crown of startup nation. Israel was recently lost its coveted top spot it comes to the percentage of gdp invested in research and development. It has been supplanted by south korea. One of the Biggest Challenges is a lack of talent. Cantnot get them if it find them in this country. Its almost impossible to bring them in from out side the country unless they are jewish. Military isare, the likely to nab them for compulsory service. On top of that, you have erred in some regulations which can make the cost doing business for startups in this country greater than they are in other countries around the world. Thats not to say theres not a lot going for the israel tech scene. Youve got investment in tech still growing, particularly overseas and youve got Global Tech Companies and Venture Capitalists happy to put money into israel. The government and Officials Say they are not immune to the complaints and they are trying a hold it easier to get of talent and make it easier to do business, but if officials and ministers want to pepper every speech they give here and abroad with the fact that israel is the startup nation, then they are aware something needs to be done so countries run the world dont supplant israel but begin to call it the stagnation instead. That is our middle east editor in tel aviv. Sprint shares rose as much as 7. 5 marking a sevenmonth high in its Third Straight day of gains. The outlook comes on the heels of the south bank air apparent announcing his departure from the company. Coming up, brexit deaver may be handing bit coin a moment in the sun. We will explain the correlation. And dont forget to tune in this weekend when we bring you all of our best interviews from the week. Including our interview with men. The best of bloomberg wests this weekend on bloomberg television. Emily londons latest unicorn is urging people to press positive. Transfer wide allows customers to make inexpensive money transfers and is recommending users hold off on any transactions involving dish pounds until after thursdays vote. We caught up with the cofounder and ceo in our london headquarters. I think on the kind of broad scale, it would be a complete disaster for europe and. K. For brexit to happen weve built a great capital in london and if the u. K. Decides to leave europe, london would lose its position. There are a lot of things speaking for a single europe. We have one Regulatory Regime with access to 500 million consumers. It makes the whole market under. Europe is a 500 million market versus individual companies. If Free Movement of talent, they are recruiting from london, they can come from anywhere in interviews. Ut any if they were to lose seats, it would be a much different place. Theould you have started company and london if it was not part of the European Union . Guest no. Why not . Guest i dont think it would be a magnet for entrepreneurs if it wasnt. The status of being a finance capital would not have been achieved if it were outside of europe. To look around there are people who moved to london because there is Free Movement of labor and london is the tech capital of europe and all of these things are at risk. The future generation of these people would rather go into berlin, to paris, barcelona or stay home and stockholm. Advocates for the leave campaign say some of the concerns are overstated and went written was on its own that you could rewrite the rules. They say you could make it more tech friendly. Isnt there some promisor opportunity to create some new rules that are more favorable to the Technology Industry . Think theres a lot of Wishful Thinking in these statements and if we look at people who are favoring leaving, i dont think we see them as being optimists and we would probably see a change of government and im down all of that. That would probably fall through the cracks. With the polls showing it to , what how will europe respond . All europeans would get on the train friday morning. How it would be implemented, its very hard. We would start getting regulated on the european side. We would start thinking about what does this mean for our hiring. Thinking about how we set up our office in europe, whether we go to berlin or somewhere else. Over time, it might become our headquarters. Your businesses money transfer, linked to currency markets where there has been some volatility. Has that had any sort of material effect on your business . Guest we are seeing in the past a lot ofthat theres activity and lots of people are taking advantage of the uncertainty in making transfers which would have happened over the coming weeks or months. Forhe end, its not good consumers. We are not in the business of speculation. In that sense, its not great for our consumers but it has increased volumes. Another story we are following erickson and its anticorruption program. Investigators are hoping to get information out what they are embroiled in. Among the investors is minority of bank. Erickson shares tumbled, valuing company at 26. 5 million. In iceland, cutting fish is a tough job for humans. Factoryance visits a there to learn how the flex the cut is changing the dish slicing game forever. I traveled to a fishing village on the countrys sure to see how far icelands fishing industry has come. Boats arrive here every morning full of caught and redfish and then get transferred to nearby processing plants. Inside sits one of the most it dans fish slicing gear on the planet. Upuses algorithms to carve the fillets that end up on your plate. Ive prepped for the mechanized river of death with a mechanical engineer turned operations guru who has spent the last few months overseeing the installations of these machines. Meet the flex he cut. Fish tot xrays the spot bones and then a waterjet slices the fish with great precision. Dozens of programs run to slice the fish just as customers want. Tony stark wanted to make fish sticks, this would be his machine. What is the Key Technology behind that machine . To be able to see the full a and cut it every time the same. When you are doing the xray, t is the software doing . You need to be very accurate. Less than a second to. Ake the picture is everyone worried the machines are going to come and take your job question mark that is usually a worry when you have technology. We say we are actually creating technological jobs instead. Is that humans will find it tough to compete with these kinds of machines. Perhaps with a bit of luck, human touch will be required to the leftovers they hope to process next. Emily our very own ashlee vance. You can catch the next episode of hello world this friday. Time to find out who is having the best day ever its twitter. Close to announcing additional deals to stream or live events like sporting matches to political debates. The companyfter experienced higher than demand higherthanexpected demand. Twitter agreed to stream 10 nfl games during the 2016 season. Tomorrow, our interview with u. S. Secretary of state, john kerry, starting at 5 00 new york time and many more guests the airbnbincluding ceo. Thats all today from San Francisco. From our studios in new york city this is charlie rose. Charlie we begin with a look at Hillary Clintons speech in columbus, ohio. Her remarks criticized the Business Record and economic proposals of donald trump. Clinton employed his own quotes to destroy his economic ideas and warned of the potential to throw the country into recession. Hillary clinton liberal and conservative say trumps ideas would be disastrous