We speak with the vp of augmented and virtual reality. And rapid climate adaptation. Billionaire bill gates wants to help invest nearly 2 trillion over the next decade to help the world become more resilient. His thoughts on and potential solutions for Climate Change. Wework, it was the roadshow that was not this week. One of the most anticipated debuts of the year is now postponed until october. The shared Office Space Provider is looking for time to calm investor doubts about its dropping valuation, governance problems, and financials. Remember that, at this was one point, supposed to be a 47 billion company. That number is now 15 billion and could be perhaps even smaller. Joining me to discuss this all was phil hazlett, cofounder and chief revenue officer at equity is zen, a marketplace for preipo shares. And bloombergs crystals the. They have a lot to address before they can go out to the investors and ask them for their money. Like you said, they were looking for a 47 billion valuation, and now we are hearing it could be as low as 12 billion to 15 billion. They have actually made a lot of changes to Corporate Governance, but investors are looking at valuations, whether they will improve financials, and whether more changes are needed to the Corporate Governance structure for them to be convinced about the valuation they want to get. Taylor this morning, they spoke with gene munster, who cofounded loop ventures. He had comments as a related to the valuation part of wework. Take a listen. The valuation is really a wakeup call to private investors that the Public Markets are holding them accountable. And the specific reason i think this report reflected that was the amount of cash burn. What is a consistent theme and your setup addressed this. Companies are losing a lot of money, not surprising are being , held to lower valuations. In the case of wework, it is 1. 5 billion in the year, more than what tesla lost, to put that in perspective. Taylor react to these comments on valuation. Phil i would say wework is kind of in a space of its own. Having lost 2 billion in 2018. I think of a mix of lyft, uber, and wework planning to come public in 2019, i think we are have seen the largest losing companies coming out of the preipo tech space. Amongst these types of groups of companies, we also see plenty of companies that are burning only 100 million, 200 million in cash. Wework is an exception to the norm, but writing off 37 billion of value over a period of three weeks to four weeks will catch the attention of a lot of Capital Venture investors. Taylor we can joke about how you Value Company using a discounted cash flow to evaluate a company that does not have cash flows. But on a serious note, how you do you value this company . Phil sure. With wework, the first thing we looked at is multiples of revenue. The first thing we found, they some of their competitors were trading at 1 or 1. 5 times their revenue. Wework earned revenue in 2018, so to come out at that evaluation seemed ludicrous. The toughest thing for wework is trying to explain and defend itself as a Technology Company where in reality it is really a Real Estate Company that happens to have some technology bells and whistles. This is a wakeup call for them to recalibrate those expectations may be in q4 or may be in taylor talk to me more 2020. About that valuation. What did the private market see that the Public Markets are missing . Phil one of the interesting things we saw in equities, where we see a lot of preipo secondary flow before companies go public is there actually was not that much interest for wework, particularly at the valuations that had obtained from softbank and other investors and primary capital raises. We saw much healthier markets for companies that went public recently in 2018 and 2019, Companies Like docusign, copmanies like slack, that were little bit more popular with investors. We would have expected to see something similar for wework because the brand is so ubiquitous. However, there was a little bit of hesitation at that lofty valuation. When you get north of 20 billion in valuation, you are not talking about hundreds of unicorns anymore. The number of decacorns or whatever you want to call it drops precipitously. In particular when you have that kind of valuation coupled with losses north of 2 billion, it was kind of a recipe for disaster. One thing i think about is we have been in very much a bull market not only in public stocks but also in private companies, and that has led to founderfriendly terms on how they raise capital. At some point, you are going to have the pendulum swing. And i think, when you have this kind of headline, a cut in valuation will really start to shift those kind of numbers over to investors that are going to start task for more Corporate Governance, more reasonable valuations, and other parts within the cap structure that they will get more comfortable with. Taylor when we were talking about bondholders, you mentioned that a 6 billion financing was contingent upon raising 3 billion in that ipo. Assuming that doesnt happen, when does wework need to get more cash and where do they get it . Crystal i think the very simple answer to that question is that always need to get more cash as soon as possible. If, say, the ipo does not happen by the end of the year, they may look into tapping through talking through softbank to get more funding. There were some talks about softbank being willing to put in another couple hundred Million Dollars into the country. But that would not move the needle. They definitely want to do an ipo to recapitalize. Here, anyil, quickly ideas on when is the drop dead deadline for raising more cash . Phil i have to think they want to push this over to 2020. But with only about 3 billion or 3. 5 billion of cash available to them, things could really get messy starting in q1 , of 2020. Particularly if lenders have promised capital if they raise their ipo before 2019. It will put them in a tight bind. If i were them, i would spend the next quarter really tightening the belt, trying to overhaul spending, show great numbers after q4, try to renegotiate with some of the banks. Taylor that was phil haslett, cofounder and chief revenue officer at equityzen and bloombergs crystal tse. Apple said in court it was unfairly painted as a tax dodger. In luxembourg, an apple lawyer says, in fact that the company , is the Worlds Largest taxpayer. Apple is urging the e. U. General court to overturn an order from the European Commission that it pay a record of 13 billion in back taxes to ireland. Bloombergs maria tadeo filed this report from luxembourg. Maria apple is coming facetoface with european regulators in the biggest tax case in the world. The company has appealed a 13 billion euro fine dictated by the European Commission in 2016. The idea behind it, according to the europeans, is that apple received special tax treatment from the irish government, which allowed the company to pay artificially low taxes. Apple says this was not the case and has appealed that decision. And if you were hoping to get a sorry moment from the company, that was certainly not the case. That said it is a company pay the most taxed in the world. The actually claimed the decision from the europeans lacked any logic or sense, and they also believe the numbers here were tweaked in a way that presented apple in a bad light in front of the public. Essentially, the goal was to portray the company as paying no taxes. When you look at the european side to the story, they will tell you they still believe they are right. They will tell you that it is pretty obvious that apple has set out a tax structure in europe to pay the least amount possible. And they do believe if the , arguments are validated and they are vindicated by the courts, they can continue to get tough on American Tech Companies to make them pay more in europe. Of course, those tax cases happening as tensions continue to play out between the United States of america and europe over big american tech. The president of the United States, donald trump, has said many times that this is only happening because europeans cannot compete on the innovation so compete on the taxation. When it comes to the e. U. They , deny this is the case. They just want everyone to pay their fair share. Fromr maria tadeo luxembourg. Coming up, part of our exclusive interview with ibms ceo. Why she thinks blockchain is all about trust. And if you like bloomberg news, check us out on the radio. Listen on the bloomberg app, bloomberg. Com, and in the u. S. On sirius xm. This is bloomberg. Taylor ibm announced wednesday it would open the First QuantumComputation Center in an effort to expand its fleet of Quantum Computers and further realize the business potential of the next generation technology. The realworld application of quantum and blockchain is something that Caroline Hyde covered when she sat down with ibm ceo ginni rometty. Ginni we look at the future, technology is coming. Were all about applying them to business, but we build some of the worlds leading technologies here. Yes, cloud and ai, everyone talks about that. Artificial intelligence and cloud. Much more to be done on that, by the way. But we will park those for a minute. The next two blockchain and quantum. People overestimate them in the beginning and then underestimate them in the long term. But blockchain if you said, ginni, what is one word you would associate with blockchain . I would say trust. Crypto is a use, put that aside. What blockchain should do it will put trust between parties who dont even know each other. It would make trusted transactions. And it will do what the internet did for communication between lots of parties. If i can, one, trust and blockchain because what it allows you to do is you and i can share a transaction together. I dont have see anything you dont want me to see. And once the transaction is completed, it cannot be erased. So think of a ledger, right . Why do we each keep our own checking accounts . Do we trust what the bank says . Today, we probably do. In the old days, we would each balance our checkbooks and the like. If i said to you, hey, 100, you would say i would check my own notes. So it is the same idea. And a big application is food safety. One out of six people get sick all over the world get sick from food safety, its a big problem. You have seen it with recalls on the spinach and the like. We started something called food trust. Think about this on walmart, carrefour these are competitors out in the world all being willing to join on. Nestle, unilever, driscoll what they are doing is saying we will all put our data on here about what row on the farm this came from. So from farm to fork. So when there is an issue, and my goodness, we have done millions and millions of transactions already through this, i can pinpoint where the bad spinach is versus call it all back. Because a third of food is wasted in this world. Can you believe it . To me, that is one. And quantum. To jump over to quantum. Just like with blockchain, i said think about the word trust, quantum will solve problems today that traditional computers, no matter how fast they are, cannot solve. Because traditional computers are 1s and 0s. Quantum bits have infinite states. They are for the kinds of problems that, even if you had the best computer you could , never model it. It would run forever. I am exaggerating a little bit on that. Theres a reason lets take wetlands in biology as an example. It is an approximation. They cant get an exact simulation done. Is t quantum will do the very first things will be drug discovery, material sciences. Risk management, logistics. These are incredibly different. If you were to want to truly model him molecule of caffeine, you would need a computer a 10th the size of this planet. If you actually wanted the actual simulation. So we are ready with our quantum systems. We have made commercial ones available through the cloud. Because they operate at colder than outer space, that is what quantum is. Think like you got daimler working on new materials like batteries in cars. Jpmorgan is working on things like how to price different kinds of options. How to look at risk differently. And drug discovery. So we have got a huge network of clients, and now is the time to start to get used to it. Now you say the word trust. I would add one other side of quantum. There is a dark side. One dark side of it is that quantum can break traditional encryption that has protected most of the world. We announced the new systems some new systems last night that two are prepared for quantum already. And already, our security that runs all of those missioncritical systems are quantumsafe. And so we have been equally building something called lattice photography, a kind of encryption that quantum cannot break. In this, to me, goes back to responsible ownership. If im going to build a tool that is that powerful, i owe it to society to make sure that i also address the downside. So we put as much effort into that to prove to then prevent that thing from being that powerful. Taylor that was part of bloombergs exclusive interview with ibm ceo ginni rometty. Then, coming up, listening in. Facebook confirms it will resume collecting and transcribing user some user audio clips from its inhome video devices. Device portal. We hear from facebooks Vice President for augmented and virtual reality. And later, corporate ventures Data Analytics company slumps. We will get details with the ceo. This is bloomberg. Taylor facebook confirmed this week it will resume collecting and transcribing some user audio clips from its inhome video device portal. I spoke to the Vice President for augmented and virtual reality, Andrew Bosworth at the , launch of a new generation of portable devices. Take a listen. Andrew we are so excited about our new products. We have a 10 inch and an eight inch screen. They are oriented towards connecting people with the ones they love the most through video calling. These were designed to look like picture frames, so they can fit into anyones home as naturally as if they were picture frames. They will even show pictures were not in use. Taylor and another cool thing you guys are launching is the tv portal as well. Tell me about that. Andrew yeah. Portal tv takes advantage of the biggest screen in most people homes, the tv, and turns it into a really immersive video calling device. Taylor one thing that stuck out to me was the price point, which 149, feels like youre are really try to push into what is a competitive space. You have roku, appletv. How do you out . These devices are focused on how do you stand out . Andrew the most important thing is connecting people together. All of these devices are focused on connecting you content of which is great and useful. What comes to connecting with the people you care about, that is what was missing. With portal, you can use facebook messenger, whatsapp to connect with the people you care most about in a rich, immersive way with cameras that follow you around the room and our handsfree and you and your kids can connect with your grandparents or your friends without having to worry about holding a phone and your arm getting tired and trying to fit everyone into the shot. Taylor you mentioned cameras. Taylor i have to bring up on the portal there was that button where you could turn the camera off. Privacy has been a huge concern. Was not the focal point of making sure it was very easy for me to turn the camera on and off . Andrew yeah. When you are introducing new devices people have never experienced anything like portal. It has a camera and a microphone. We wanted to make sure everyone felt really comfortable and in control of the experience. So these generation of portals not only have controls to turn on and off the camera and microphone they have integrated , shutters that cover the camera so you can see that it is not seeing you. Taylor what about the microphones . Andrew the microphones have an active light so you know they are disabled. Alternatively, you can leave it on if you want to use assistance like alexa. Or hey, portal. Taylor so if i say, hey, portal, am i still being recorded . Andrew if it hears they wake up sends thel it recording of the voice clip up to the servers to get an answer back to you. If you have it enabled, we may renew the voice recordings to improve the quality. But you can also disable those on the device itself or your facebook activity log. Taylor privacy, data, all of that has been a big focal point of facebook. It is now the right time to be launching new products where there is a camera, where there is a microphone . Because right now there is so much scrutiny and arguably the least amount of trust in facebook. Andrew i think now is the best time to launch a product like this. Connecting with someone you care about is the essence of what facebook does, and thats what these devices are centered around. Video calling with the people you care most about. We have taken every precaution we can to make sure people feel comfortable with the devices in their homes and the control they have over those devices. By think when they have the experience of connecting with somebody they care about who does not live nearby, they will experience something special. Taylor it also comes at a time when antitrust scrutiny is at the highest. Looking at big tech. When you think of facebook, a lot of people think of the app and software. Is now the right time to expand your tentacles and showing regulators how big you are, going into tech, homes, and tv . Andrew this category is so new. Smart displays have only been in the market for two or three years now. I think it is really early. Toryone ones wants experiment and see what kind of value can create. It is not very big yet but it is , growing yearoveryear. If people decide they are excited about video calling, and we think they will be, portal will be a great fit for them. Taylor joining me to discuss this further is Bloomberg Technology reporter kurt wagner, who covers facebook. First, i wanted to talk about the privacy issues that are going on. Frankly, that opt out button is not an o