We will take you inside the group that makes decisions. Is the latest bitcoin bump here to stay or just another bubble . The clock is ticking on President Trumps next round of china tariffs. A proposed new wave of tariffs set to go into effect as early as next month end half of those 300 million of targeted goods are tech related. A new article details how chinas Tech Industry is mostly insulated but there is one area where it is still dependent, very dependent. The semiconductor chip. Chinahe last decadeplus, has seen a surge of semiconductor import. We have bloomberg techs ian king, who covers the chip industry and the cooffer of the the coauthor of the fermented article. And we have brad stone. Ian a satiric parts like broadcoms switch chip, more common parts like an intel microprocessor, china really cant replicate those yet. 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. 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. Huawei, it goes without saying. They wouldnt be able to make their core routers. They need things we dont know about 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. Brad 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. Letters go to the u. S. Trade representative last week. Looks, air pods. They are seeing it they are saying it is going to hurt apples global competitiveness. Emily as you mentioned, they do have the negotiating power and we dont know if that will pay off. Brad it has worked in the past. Some of these product categories were on tariffs over the last year. I think the Tech Companies are hoping for that kind of reprieve. We will see what happens at the g20. Emily huawei, they are dependent on u. S. Chips somewhat. They also make two thirds of their own chips, right . Ian smartphone. The key component of the smartphone is the nickel processor. They can supply themselves in that particular market very strongly. Laptops, smartphones, toy drones. 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. Would think amazon might not be that exposed. 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 to get their holiday orders in now. Think their plan b is to cut orders and raise prices. 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. On a china also depends lot of these companies in china. Ian apple is an example of that. Yes, maybe we dont need that many iphones, but so many people are employed directly as a result of manufacturing chain. You have all these relatively high paid jobs, tax revenue, that fundamentally undermines the chinese economy. Emily what is their plan b . Ian a lot of people dont wreck guys just how powerful they are dont recognize just how powerful they are. When sanctions have been used in the past, they are relatively small domestic economies. The mobile company has more subscribers than the u. S. Has people. There are people who have never looked at Google Search because they never needed to. They are not using apps supplied in the u. S. Because there are enough. Emily we are still waiting for this meeting to happen between President Trump and xi. You wonder, even if these new tariffs do not go into effect, if this 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 reporting is that Big Companies like apple are looking at other sources of manufacturing outside china. If you look at the market lately, i get the sense that maybe this market thinks there will be a resolution to this. Otherwise, we would see a lot more volatility in the stock markets than we have seen. Ian it depends whether you are talking about the market or the companies. The companies are not keen to go. N the record emily what is next . Brad i think all eyes are on the g20. I think the tech market has proven their case that this will be difficult for them and bad for the american customer. If the Trump Administration takes that into account, i think we see some form of resolution, maybe shortterm relief to some of these product categories. Emily thank you both. Amazon Web Services Says it has fixed an issue that impacted conductivity between some Customer Networks and multiple regions. External with an provider outside of its networks monday. It says conductivity to other providers was not impacted. Coming up, facebook is building its own socalled Supreme Court but will that solve all of its problems . We will discuss facebooks plan for an oversight board. If you like bloomberg news, check us out on the radio, the bloomberg app, bloomberg. Com, and in the u. S. , on sirius xm. This is bloomberg. Facebook is emily looking to create a new content oversight board. They are creating a series of simulations across the globe as they plan an independent board to review content moderation decisions. The board will decide on appeals for content that may have been removed. Zuckerberg has mentioned the idea for independent appeals process is almost like a Supreme Court, quote unquote, his words. The Supreme Court is nominated by president s and confirmed by congress. How would this be put together . , that is the biggest question that they want it to be an independent group but we dont know exactly who is going to be picked, how big it will be. They say it will be around 40 people and then they break up into small groups of 35 to review individual cases. You pick a group of 40 people that actually that accurately reflects a billion people . Emily how do you do that if facebook is doing the picking . Andt will be very hard obviously facebook is paying for this board so independence will be the question. 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. Will the board draw from people from those countries that are now basically facebooks future . Emily talk to us about these simulations that facebook is conducting. A controversial decision comes to this group of people and then they debate. Kurt i sat in on one that was at facebooks headquarters in california. It was about 30 employees. They presented them with a post that was controversial. A person had listed 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. 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 for up or taken left down . The kind of questions they ask so that when the real board has to make decisions like this, they are prepared. Emily some of these decisions are cultural. Are these all englishspeaking people . How will they understand the nuances of the situation with the rohingya in myanmar . Shira facebook has said to their credit, they have solid input on this over have sought input on this oversight board. They are dealing with an issue that is culturally substantive culturally specific to germany or india, that they would seek experts in those areas. The vast majority of content decisions, judgment calls about what is ok to leave up on facebook, are made by this kind of lowwage contract workforce. Emily there has been more 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. Kurt it is a really terrible job. Think about policing the internet from the most violent and graphic stuff and seeing that consistently. The board would not replace that. Ob lets review it and see if we aree with it now that we have little more time to look at the fact or discussing the group. Does it violate the policy, yes or no, and make a decision. Emily theres a question whether facebook should be doing this at all. Facebook has made the argument that perhaps this should be a government decision. New chief ofheir policy, spoke to the bbc and said he doesnt think it is right for them to set the rules for the road as far as how tech serves society. You wonder, would they be better off having governments make these decisions . Is that even plausible now . Shira it doesnt really feel plausible, does it . I understand the position facebook is in. They created these platforms where many billions of people congregate every day. A turns out that facebook is reflection amplification of the best and worst in humanity. 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, give us a formulaic solution. Z. X and y happen, we do i dont think we will ever be in a position where that is feasible given that the internet reflects people and they can be reduced to formulas. Emily how comfortable is facebook and facebook insiders with this formula . Proposed formula. Kurt i think 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. We know he doesnt want that responsibility 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 when might this be put together . Kurt the goal is, by the end of the year, the first version of the board. If it still works, we still could be talking about it decades from now. Emily we will see. Thank you both. Toing up, spotify downgraded underperform. We will speak to an analyst who says the Music Streaming Company could have issues down the road to profits. Check us out on twitter technology. This is bloomberg. Companies extended losses after amazon announced it launched a beauty store. As 4. 5 for much its biggest intraday, intraday decline since may 31. Taking a stand on the Music Service spotify. They have downgraded the stock fromderperform to 110 125. An analyst wrote that he simply doesnt see a path by which spotify can generate a level of gross profit demanded by the street. Kevin, walk us through your argument. I guess the argument comes down to the question, is there a path for the level of gross profitability that current street estimates are calling for . If you look through kind of what the stock has done recently, the move from hundred 20 to 150 that has150, we think to do with content costs and the ability to drive high revenue ancillary market streams. We think they will disappoint investors in a way that will lead shares lower over the near term. Longerterm term, we remain concerned as well over the degree of competition and spotifys leverage over the labels that control many of their costs. Emily which competitors specifically . It is really apple music right now, right . Kevin in the United States, it is really apple music. Market by market, it is a whole host of competitors. India, indonesia, turkey, brazil, there is usually a close second or leading competitor that doesnt get reflected when you look at the global averages. The market is far more competitive than indicated by those numbers. Contenthat kind of thats are you most skeptical of . They have doubled down on podcasts. Kevin podcasts could drive growth. It is a question of scale. Podcasts as a share of listening has gone from 2 to 4 . We are really not at the point where that kind of growth at that limited scale is going to move the needle for shares or the financials. That is where we are struggling. It is a Good Opportunity but not probably big enough to satisfy the demands of investors over the medium term. Emily we have been talking a lot about direct listings, especially with the direct listing of slack last week. Spotify is fairly flat from where they started trading on day. Of course, they got to capture all of the gains from the Reference Price and the opening price. That said, in reality, shares are flat. You think the direct listing was a good call . Kevin is a good question, one that companies probably need to consider. We have seen slack do it, seen spotify do it. I would not say there is a blanket statement as to whether one is better than the other. It is probably more for individual companies and boards to decide. Emily what do you think spotifys path to profit is . Is there one, with apple having a deep cash pile and the benefit of being on the iphone . Kevin that is the question. Our big concern is that spotify will ultimately prove to be a pure play on a loss leader category. When we look at the deep deeppocketed competitors, apple, amazon, google, broader ecosystems and not having to generate profit from streaming music on a standalone basis. We struggle to see a way in which the industrylevel profit will be attractive. Spot is a pure play on that industry. It is a key question of what the key driver is. The Management Team and bulls will turn to a twocited marketplace, high leverage promoted revenue. That is worth exploring but is unproven. We are skeptical but obviously theres room for debate. Emily kevin, thanks so much for sharing. Forng up, a notable year tech on public. What happens after . We will discuss, next. This is bloomberg. Bloomberg technology. About. 5 of work closed on opening day and is not just slight that might be in the midst of a correction. Over the last three market sessions, others have been lagging behind the s p. Our next guest is a board and has in the Company Invested in stripe, medium, and other things. Good to have you. Invested at about eight 1 billion valuation and you are now 15 or 20 times that, not bad. How does it feel getting to this moment when there was a point when Stuart Butterfield wanted to give all his money back to investors. Its been a wild ride with slack. Its been almost five years since we invested in the company and that was the early days of what slack actually is now. Wet pivoted into the product now know. Its been a while ride over relatively short time to get the company out there is a public company. But it has been a great ride. Emily me the people who use slack love it. How does it continue to tell that story to corporate america, to Traditional Companies that may not understand slack. The story has basically been the same from the getgo go. Everyone understands the opportunity within the office space to facilitate better communication. Everyone has used email since the dawn of Internet Time at the very least. When there is new technology coming into play, its a compelling opportunity for Different Companies to figure out ways to utilize that. That is the prime example were seen across the board. They have been spearheading the way. Is a hugeere opportunity beyond what they have done so far in terms of market penetration. Emily why did they choose a direct listing . Why was at the right call . You dont need to raise money from the Public Markets. Raise a lot ofan money in the private markets. They have done a good job utilizing that money and being able to spend it in a prudent manner and get to the point they are out without needing to go to the Public Markets for the fundraising events and just using it for other opportunities as a Mature Company that is ready to go. We were talking earlier while it has, continued to do relatively fine, they havent taken off or dived. Slack lost that momentum by choosing this route rather than the traditional one . Without speaking to the go forward plan first site directly, i think there remains an immense opportunity that the company had for years and years. When you look at just one week in the events in the lifecycle of the company, there is a broader picture you have to zoom out to look into. This was an important milestone for the company to get to this point. Now that they are beyond it, there is a whole bunch of different paths to go down. Emily tell us about the other bets you have made on media and content, for example. With media in general, we look at it not so much from an overall perspective of trying to replace what has been out there. Granuleat it at a more granular level. Medium which is trying to reinvent the Business Model for media as it has been subscription, on with no add base revenue. Emily you are a former journalist. The content investments are fun and interesting, but are they really going to pay off . Enterprise software can be more rewarding. Going back to the level of more granular bets within the media, i think people are looking for more and more, just being able to drill down into topics. At a fundamental level, Everyone Needs information and they will need a way to get to that information. You are seeing more and more that people want deep dives into certain types of information, not necessarily a publication that does everything but really focuses. Emily what do you think about apple news . There has been criticism that they are taking a large cut. The resourcesave to make something look nice on apple news. Its interesting from the perspective of how many apple devices there are out there. When you have a preinstalled application and access to a billion potential devices, that is compelling. They have the Business Model to figure that out. Theyve moved into the apple news plus arena and they are trying to sell t