Bitcoins shadow. Analysts have a lower iphone x shipments projections for the next quarter. The iphone high price and a lack of groundbreaking innovations. Ork cited the iphone x was released six weeks after the iphone eight. Bere were concerns that may they got too close to samsungs phone. Competition is another part of this . Exactly. Particularly in china, a lot of the local manufacturers are coming out with products that have very similar features. Nobody quite yet has the Face Identification or the sensor that the iphone has. That has not been enough to. It is usually a big part of apple strategy. With these phone releases, and has generated the potential for new applications, but we have not seen that. There are not a lot of applications for the Face Identification. The phone has a lot of interesting features, but there are not really any uses for them yet. Secretive about what they have in the pipeline, in terms of hardware. When they unveiled the phone in september and it was released and november, that is not a huge timeframe for developers to start coming up with new tools. It could be that in the coming year we seek far more interesting applications that use these sensors. Will never know the mix between iphone eight and iphone x, but if they sell more iphone x, both the top and bottom line are going to do well. There is always this chatter saying that china or india are not going to bite this expensive phone by this expensive phone. What we have seen is the opposite. The iphone eight is largely the same form factor, shape, and design as the iphone 6. There is not a whole a lot of change between the three generations of bones. Phones. The price point is still pretty high. The components are very cheap for them. Betters margins might be on the iphone 8 . Not that they might be better. You are still predicting the biggest they are still predicting the biggest firstquarter that apple has ever had. Absolutely. Apple itself does not break out any iphone revenue numbers. So what we are going to be the forecast might already take into account some of the demand. That was Bloomberg Technologys alex. We spoke to gene munster. Numbers forke the face value, for the production and the march quarter, that would imply about 50 of the phones and the next year will be the iphone x. 1000. One is over number i think expected, one. Number two, i think it is a positive. Take us back to the Fourth Quarter of 2017 for a minute. They brought the iphone x and iphone 8 at the same time. Do we have any indication whether they made up the disappointing sales with the iphone x . We have a bit of an indication by looking at the supply. The suppliers have been struggling to keep up. If you look at the u. S. Inventory, we checked this everyday. About 140 stores in the u. S. , and there are just reaching full supply. If there was not a lot of demand for this phone, the iphone x, you would have more of a supply. I think the numbers are going to reported in the next three weeks, and i think they would do better than expected in terms of the iphone x. If i was going to boil the whole apple story down, it is this idea that the average price selling price of the iphone is going to go up. There are reports that in fact there is some resistance on the price, because as you say it is over 1000. Do you know if customers are getting pricesensitive when it comes to apple . Is tight, which is an indication that demand is good. Asps are going to go up meaningfully, we think they will be of greater than 15 this year. The vast majority of people who buy iphones, greater than 80 globally, by on a monthly basis buy it on a monthly basis. Mean that apple has to sell less of those iphone xs if there isps are going to go up . If you look at your bank for your book, your phone is the highest utility that you are going to get for any technology. I think people recognize that. People recognize the value bet they are getting. What about overseas . China has been a big target for apple. The we have a sense of how they are doing, for example, in a china . We dont have as good of a sense there. They did exceptionally well in china and the last. I suspect that the iphone x is going to do well in china, but then competition will probably chip away. That was gene munster. Coming up, big tech, big gains. Facebook, google, and amazon allsop doubledigit gains this year. Ubers biggest roadblocks for 2017. This is bloomberg. Cory to close out 2017, Tech Companies are holding on to some historic gains. It was driven by fastgrowing sales, record profits, and hopes of continued growth. A day of reckoning could come and 2018 thanks to government oversight. I love the way that you have covered these companies, because you are looking at a lot of these very Big Companies with a skeptical eye. When you look at them, who is at the top . It has been an interesting year. All of these companies have posted tremendous financial successes and have definitely grown much bigger than what many thought at the beginning of the year. At the same time, we saw all of this regulatory scrutiny across all the companies. The elections certainly did not help with that scrutiny. As we look into 2018, i think , because handicap it amazon is likely in the driver seat when it comes to favorable winds with the regulatory environment. As you move it the list, i think google is next. Then you have a facebook. From bothrawing ire sides of the political spectrum, which i think will get worse as we approach the midterm elections. That scrutiny will only get worse from here, at least from a headline perspective. Twitter, facebook, youtube, part of google. Do you think that actually hurts Financial Results . Over the weekend facebook introduced this feature that let or find out if you retweeted reposted something from a fake news site. I thought it was an interesting response, but done very quietly over the weekend. It is full steam ahead for all these companies. Facebook continuing to gain share versus traditional media outlets. Google, the same story there. Twitter is trying to carve out their own path, but at the end of the day, these current needs these companies will continue to grow. To affect their Financial Results. You have to think about it from a stock perspective, the degree of multiple expansion that is in their. We have the earnings power, but at the same time valuations have been steadily rising for all of these companies. That is something that investors will definitely need to consider. Do we separate investment results from some of these other companies . You mentioned legal problems ot looming for amazon. Amazon comes into your business model, every ceo in america is scared of that, whether it is a small or a large business. I wonder if regulations will concern amazon. I think it will come, but later. Right now you are in a situation where you have amazon moving closer to all of the federal agencies. You have them shopping around their second headquarters, where all of these sitters are citiesng to get that are clamoring to get that. They are going to make political problems. You also have all of these centers that are going to open up from a headline perspective, new jobs, and whatnot. Once you triggered some major todlines such as reaching up 1 trillion in value, i think that will reopen the floodgates for regulators. Regulators are focused on things that could potentially affect the election. If this is actually an issue, they ftc would have scrutinized the whole Foods Acquisition more than just a one sentence was e, which we think you are putting your faith in government regulators . Really, james . I am just saying that there are priorities and incentives. What are the regulators incentivized to do . To attack the things that can affect their political prospects. I will give you that. Im just giving you a hard time. The bigger story for 2018 is that all of these companies have been growing in their own right. You will see them start to encroach on each others territory. You have the google versus amazon battle brewing. You have the google versus facebook battle brewing. I think those battles will continue to escalate. Will there be a zero sum type of aspect . I think that will be interesting. It is curious that with the duopoly in advertising of facebook and google, you have amazon growing a big advertising business. You seeices like echo, Companies Like amazon getting into search in their own way. Exactly. You are eliminating the need to search on google explicitly. When you look at google, the product listings have been the bread and butter for the company in recent years. When you look at the content side of the equation, amazon is likely going to be the biggest content spender in the industry, potentially even eclipsing netflix. That was. Noxiousgies most product of 2017 maybe have been fake news. We are going to look at fake news and what social Media Companies can do to contain it. 2017 is the year that we realized how quick and easy spreading misinformation on social media. Before the u. S. President ial election, fake news was a get rich scream get rich quick scheme. We also learned that it was a tool to disrupt this marcus lee disrupt democracy. Postss done with 80,000 boosted by 100,000 in advertising spending. These ads are just the tip of a very large iceberg. At resulted and google, facebook, and twitter all testify in hours of congressional hearings about russias tactics. The spread of a fake news became a global issue in 2017. France and germany successfully fighting and their own election. Other governments are using facebook as a tool to spread propaganda. Just what can we do to raise thisand due to rein and . Social media about Companies Taking too many liberties and going to far with their censorship. Twitter said that they shut down thousands of accounts. No matter what the sites do, one thing is for sure. Fake news is going to get harder to stop. Facebook often argues that it is a technology company, not a media company. To take on a news and 2018, it may have to be both. That was bloombergs sarah frier. Coming up, we will talk about punctuated equilibrium. A big idea that helps explain innovation. Indepth look at ecommerce giants, amazon. This is bloomberg. He has been part of the fabric of Silicon Valley for a while now. Of c3iot. The ceo he is focused on what he calls the digital transformation. He has some big ideas. Would are working with some of the Worlds Largest corporations to apply cloud computing, artificial intelligence, and take advantage of the internet of things to basically engage in what is being called digital transformation. Basically taking advantage of companies and always digital . Now using this new function of Information Technology that has come online in the 21st century to change everything about the way they design products, deliver products, deliver services. This is like nothing we have seen before. I love your idea about how we look at technology to see new things. There is this idea of punctuated equilibrium, which basically says that by the time you have seen it, it is too late. The big changes and evolution happen even faster than we can record them. Geology come if we see a new plant or animal species, the big change of this coming to him coming into existence has a ready happen. The same idea applies to technology . I think so. We are seeing a next initial wth rate in the exponential growth rate in the adoption of these new technologies. The other aspect of this that i could not quite explain it like you, i have been in business for a few decades now. As we have moved from computing to the internet, all of these decisions were made by the cio. Now all these digital transformations are driven by the ceo. I took a page out of evolutionary biology. If you look at the early editions of the origins of species, darwin thought that speciation of the planet what have a continuous function. Constantly t right. It wasnt until this century that evolutionary biologists said that it did not happen this way. Speciation was not a continuous process. Ofre is this concept punctuated equilibrium. 400g back, even in the last years, we have had six mass extinction events. When therecent being meteor hit the earth. This massave extinction event, you have a massive speciation. That is good for us. On inike what is going the corporate world. Since 2000, 50 2 of the fortune 500 companies have disappeared 52 of the fortune 500 companies have disappeared. Some have gone away through and runs have gone away because of fraud. Hewlettpackard or maybe ibm is next, who knows. Then you have what you talk about everyday on the show, is this mass speciation that is going on. Companies with this new dna, the airbnb, the cougars ubers, the amazons. Wouldg change was there when there was no iphone and now we have one. The big change is the one that matters. The Telecommunications Industry is the way that you and i know it when we are growing up, is gone. Are there still companies out there that can reinvent themselves enough to survive this new digital age . I think if you look at what is going on, it is in the funniest of places. Now in rome, department of defense. These are companies the department of defense does not have a choice, it has to evolve. These are ceos, you say, why is the ceo at the table making these technology decisions. He or she was never there before. The fear is that you either get on the train or you are going to be on the tracks. Nobody ever got fired for buying ibm, maybe somebody will buying ibm now. If you are a walmart and youre looking at amazon coming down the tracks, you are in a world of hurt. Buying ibm now. You dont a debt, you dont change, it is not going to end well. It sounds like what you are talking about with artificial intelligence, youre really talking about process. It changes everything. I used to think that the internet of things was about the. Ensoring of value change it is a change in the form factor of computing devices. Smart meters, cars, thermostats, refrigerators, everything is a computer. The power of the network is the function of 50 billion notes squared. That is a pretty Artful Network par 4 network. Bitcoin is not the highest rising cryptocurrency. That distinction belongs to ripple. Ofeminder that all episodes Bloomberg Technology are online. This is bloomberg. Cory welcome back to the best of Bloomberg Technology. Dahlia exploded last year, up more than 21,000 , more than any other cryptocurrency. The ceo of ripple joined us. Ripple has functionality that bitcoin can only dream of. Inthere is a lot of hype this space. There is a lot of reality. Ripple is very focused on how we , it is a multichilean dollar problem. If we can reduce the friction, using Blockchain Technology can create value for consumers. Cory anyone who has traveled overseas and goes to an atm machine, and cease fees often from the same bank they use from their native country knows what a problem misses. You are looking far beyond that. Even within the Banking Community there are banks that sit atop the payment structure. All the other banks pay them to the global liquidity required for commerce, small business, retail. Across the board it is amazing we live in a world where to send money to london, the fastest drive to jfk and fly the money to london. That is crazy. We cannot move our own money in realtime. The cost can be real high. Cory it is a fascinating thing. Be as easy as sending an emailed. When you make the sale for this business, or to whom do you make a sale . Business ofe selling technology to banks. Part of that is software sale. Part of it is for customers who take advantage of a digital asset, that means instead of offunding the trillions dollars banks have what other banks, they prefund that amount, it is dormant cash sitting there. With Digital Assets you can make that more realtime to make a payment across a border into another currency in realtime. Today ripple is doing that into mexico. We see that expanding with other partners and customers overtime. Cory i want to take you to the bloomberg terminal. We created this monitor of cryptocurrency on the bloomberg we listen to prices. Lo and behold, number two is ripple. That hasok at what done over the last year, holy cow. That is a stunning gain particularly in the last few weeks. Of . 23, ight now. 23, how mccoy and this ripple own right now . 61 of them. Ut x rpn the year of crypto has outperformed any other digital asset. That gives you 75 billion of coin right now . That gives us a huge Strategic Asset to accelerate the vision we see. Me, this is about an opportunity to participate in a division we have for some time. There is excitement about Digital Assets broadly. Specifically because people have realized we have real customers. We have the bestperforming technology. You have talked about this. To complete a bitcoin transaction takes about 40, and transaction costs. Cory and it is slow. Xrp takes three or four seconds and costs fractions of a penny. There is a lot of utility you can have from bitcoin. It is not going to be a payment solution. There, but if we talk about other use cases, in all these assets, it comes back to what is the utility. If you are sitting on 75 seeion of an asset, do you a scenario where you will sell any of that . We use some of it day by day and week by week to invest in the ecosystem. In december we publicly produced a Quarterly Report on what is going on in the xrp markets. We want to make sure we have tight liquidity tween xrp and fiat. We want to go into the mexican peso. We want tight spreads between the mexican peso and xrp. Work with exchanges globally to make sure there is good liquidity to deliver on that. Cory that was the ceo of ripple. Cyber currency are unprecedented. Among the biggest, hong kong blockchaink ubi internet. I talked about the blockchain bump. This is a prime example of what is going on the past month or two. There is a juice maker that puts blockchain in its name. Bra maker thatts puts blockchain in its name. Cory a sports bra . Who would have thought blockchain could happen get could help the manufacturing of that. Blockchain, adding that to the name is like the late 90s early 2000s when companies were adding. Com to their name even though they have note nothing to do with the internet. Their stocks with surge. It is deja vu all over again. Cory i would look for t