January 21. Heres a time line on what we know so far. 3 17 p. M. Local time websites began to be affected. 3 3 p. M. , millions of users at that point were unable to access various websites. By 4 00 in the afternoon, connections started to be restored. However, at some places in china it seemed like the internet was out for many hours. Weve seen reports out for up to eight hours. Our editor at large, cory johnson, with me now here on the set. Part of the reason there may be such a discrepancy in the time is some of the servers in china may not have refreshed after eight hours in those second and thirdtier cities. Fundamentally, i think what happened the last 24 hours we had arguably the biggest shutdown in the history of the internet and that speaks also to the growth of the internet, when the internet was smaller in years past the shutdowns wouldnt have been such a big deal. But this is a huge deal for the chinese economy and also speaks a lot to the Technology Culture and what it means for the impact of technology in china, happening really today and people reassessing what that means. In china so many people rely on the internet, unable to get Business Done and unable to work and has had a big impact on a lot of people and companies in chi. Obviously we know the great firewall in china has been erect for many, many years. We know facebook and twitter are still blocked. But what were talking about here is every single dotcom address in the country, there have been a number of there has been a lot of speculation why this happened. Some people saying its a massive cyberattack and what played out in the Chinese Media and the Chinese Foreign ministry basically said, we were attacked. However, other experts are saying it appears as if the Chinese Government was trying to block a website but instead rerouted traffic to all to that particular website. Every incredible source is saying it wasnt hackers attacking china but quite the opposite, it was china trying to use its sensorship tools to keep certain sites away and made mistakes in that process and rerouted traffic to places they didnt want the traffic to go at all and crashed the internet for the entire country. Its showing a great risk chinese businesses are facing, that the Chinese Government is inflicting on its own country and own economy by erecting this great chinese firewall. On that note i want to bring in a couple experts, Jordan Robertson who covers cybersecurity for us here at Bloomberg News as well as mr. Chang covering the collapse of china. You lived in hong kong for almost two decades and i lived there several years. Whats your take on what actually happens here . Well, i think essentially what we saw was the chinese sensors killing themselves. This is like a weapon of mass destruction. Theyve gotten so sophisticated, their tools are so comprehensive when someone makes a mistake it has nationwide implications. Some people are saying the great 2003 blackout in north america was caused by a chinese hacker making a mistake, they did it to us and looks like now theyve done it to themselves. Jordan, youve got two potential theories here, that it was a massive cyberattack or the Chinese Government did it to themselves . Theres an amusing aspect to the question. When we talk about hacks we think of external hackers but when i saw the report, it was the hack themselves. With the government creating this censorship it has created a weapon that can easily backfire and in this case it did. You enter the u. R. L. In the wrong line of some system within the centralized sensorship apparatus and out goes the internet. Its their own fault, really. Is it possible in the United States, is the internet so centralized somewhere someone can make one mistake and this would happen . Not in the same way. The internet is actually very fragile so mistakes like these happen all the time. There was a famous example in 2008 where pakistan was trying to block access to youtube and wound up sending 2 3 of the worlds youtube traffic to pakistan where it was sinkholed. 2 3 of the world couldnt get access to youtube because pakistan was trying to block it. The underlying infrastructure of the internet is fragile and this incident exposes that. Maybe more so in china because in one sense all of the traffic going into one of the most populous countries in the world is essentially being routed through one central set of rules and when those rules change as they did yesterday, this is what happens. I think what it highlighted, also, you saw it in wall street, you saw all the Chinese Companies that came to the u. S. To raise money and you see these stocks really selling off today. The list of stocks sold off this morning and was very aggressive initially. But a company y. Y. Down 5 and baidu down 5 and other companies, all down 6 . I think all this morning, with some justification, it isnt just nervous trigger fingers, this exposes the big risk Chinese Technology companies have because theyre operating behind this great wall. You wonder, what are the implications of Something Like this. Obviously u. S. Businesses had major difficulties operating in china and the Chinese Government has effectively shut them out. But, you know, in terms of Chinese Companies, this is having a huge effect on them as well, especially today. Well, certainly, because anybody who works in china knows there will be many times during the week where you will not be able to access a site. And you know, this is really related, i think, to the problems in the Central Government right now. This attack or this problem occurred at the same time where we had this report by the International Consortium of investigative journalists about the offshore assets of senior chinese leaders. So there are coincidences in china. Its a big country. But i think these two incidences are actually related because they occur very close in time to each other. When you look at the chinese leadership, theres been a lot of discussion, are they going to be more conservative or open than their predecessors and there was hope they could be more open. Certainly the events of the past year make it seem like theyre almost moving backwards. Is that the case . Theyre certainly moving backwards because under chinas ruler that came into power in 2012 weve seen much more censorship, not just the internet but also expression. We have all these trials going on 6 anticorruption activists and this is an Important Development because there was hope when ping became chinas ruler and now there is no hope. When you look the way the internet is built in china, is there hope it cant be stopped, that the openness thats inherent in the way people communicate openly on the internet, that this is showing the limits of that and the Chinese People, because theyre starting to rely on it for business, for work, for commerce, as they cant gordon, let me ask jordan first. Weve got gordon and jordan. But you know how much the internet is built. There is no centralized choke point in the u. S. Like there is for china. Despite that fact, theres an irony in this incident that the site they were trying to block, that the Chinese Government was trying to block, was a site that helps chinese users get around the great firewall. This shows theres a lot of interest in these technologies and a lot of Internet Users in china are able to circumvent the firewall. I lived there three years and it was standard, everyone had a v. P. N. Or Virtual Private Network and you easily could get around the firewall and use facebook, use twitter, for example. This is something the government has to address because you cant control the internet in this way forever. As more people want access to these services, theyll to reconcile what their values are in relation to the internet. Does the Chinese Government think they can stall out the growth of facebook which has been incredible, the growth of twitter which has been so strong as well, not anywhere near so strong but that the chinese homegrown social networks will be the social networks of the future . Right. Or will the global reach around china, if you will, of both twitter and facebook, eclipse the growth of the Chinese Social Network . We were talking to an expert earlier this week who says he thinks its a little too late for facebook, even if they were let back in the country, these other social networks have grown so vast it would be impossible for facebook to take hold that kind of way. We have discussed this fact there are a lot of motivations for what the Chinese Government presumably is doing in terms of controlling the internet but one of them could very well be to boost up these, you know, chinese businesses, and theyve certainly benefited from the Chinese Government shutting these other companies out, but at this you know, in a situation like this, youre seeing the backlash. Gordon, let me ask you, do the Chinese Companies we see this with the problems that u. S. Companies are having with the n. S. A. s rules. Do the Chinese Companies, the chinese entrepreneurs, have much pull with the Central Government in china . Will they be able to raise their voices and say hey, you screwed up and ruined our business . Theyll be able to do that but in the balance of power, clearly the party is much more influential. Weve seen, for instance, all of the big vs, all these people on the twitterlike Service Really be humbled the last three or four months and many being paraded on chinas Central Television and this was the idea of trying to control expression in china so essentially, yes, entrepreneurs are influential but certainly dont have that political power yet. The one thing thats really important, though, is that most Chinese People want Free Expression and eventually they will prevail. I recently spoke with the c. E. O. Of baidu, one the largest Search Engines in china, and he said we follow the law and dont censor things willynilly based on our personal desire to, were following the law, pointblank. If we didnt follow the law, we would be shut down. Jordan robertson covers security for Bloomberg News and gordon chang, author. Well continue this conversation after this quick break. Also coming up, why is top talent such a top priority for Tech Companies . And how important are engineers in particular . Well dig into the value of a good engineer with twitters former head of engineering mike an ots later in the show. Mike abbots later in the show. Welcome back to bloomberg west, im emily chang. We turn to our top story, what caused chinas internet outage and just how powerful is the great firewall . With us from new york is gordon chan, author of the coming collapse of china who lived and worked in china for many years and cory johnson along with jordan. You mentioned some upcoming challenges at baidu and this company benefited from the Chinese Government control on the internet, Companies Like google leaving the country because they dont want to deal with censorship issues that come with operating in china. Tell us more about these potential challenges coming for baidu down the road . We have to remember baidu was helped because the Chinese Government undermined google which was the dominant Search Engine and today google shares have fallen by a half or so and baidu is up. The problem is peoples daily, the flagship publication of the communist party has been hinting about getting into the search market. I think its plans are on hold but if it does ever go forward, baidu will be at risk because bay shing will do to baidu to what they did to google before and thats a real risk for baidu. How active is the chinese Central Government in planning the businesses or helping to grow the businesses that are in china . And how could todays events, the events in the last 24 hours, change that . Basically in the chinese Central Government, theyve been very active in planning the economy full stop. Clearly it has tried to make sure homegrown competitors will be able to develop sufficiently. Planning the economy is one thing, right . Every Central Government does that. Planning the success of specific businesses with specific technology is a whole different thing. And they certainly do that because you see when Foreign Companies come into a market, they become too powerful, one way or another, theyre attacked, especially we saw this with the pharmaceuticals, with tetra pack in packages and a number of other companies in the last six or seven months and thats really been to help local competitors. This is very much a part of what the chinese Central Government does. A lot of other governments do it as well but china is much more effective at doing this than other governments. On that idea of Internet Freedom, we in Silicon Valley think are very idealistic about the need for Internet Freedom everywhere. Almost everybody i talked to who is an expert on china says look, the internet in china isnt going to become more open or liberal any time soon. Theyre not going to reverse their policies. In fact, it looks like its only getting worse. We hear a lot here in Silicon Valley about the need of technology to expand Free Expression and expand freedom. We hear it from Companies Like facebook and google and a pretty selfserving argument and what is a mask for what is a tremendously profitable business even if its incremental improvements we see in china from pressures that arise from things like outages, whether its pressure from businesses or consumers, those are incremental changes that some point in the future might lead to to gordons point the notion of freedom will prevail has been the central theme of u. S. Policy towards china over the course of the last 80 years. So the notion it will prevail, were about three or four generations into that and dont know the internet is making it faster. The Chinese Government is certainly trying to keep it from happening. When i lived in china and covered china, i had this conversation with so many different people and nobody is optimistic. They say that this could take decades if this ever happens. Thats really a drag. It is. Let me ask, jordan, in terms of the way the technology works, could the n. S. A. s involvement in deep involvement in all aspects of internet traffic pose similar risks . Or if not, why . Any time you Central Control anything this risk occurs. The n. S. A. , their big strategy is to attack the nodes where communication is centralized so the channels and the cables where communications flow. So they insert themselves at kind of the key points where our internet traffic goes. So potentially if something goes wrong in one of those operations, we could see damage to the global internet. Its a pretty wonky, obscure topic but thats where the n. S. A. Really lives. We like wonky and obscure. What youre saying essentially is the n. S. A. s approach is to be at every intersection. Every important intersection. And chinese approach is to be on every street . They essentially want to be in the same place. The n. S. A. Would love to be inside the chinese firewall at the place this error occurred and they may well be. The n. S. A. Is kind of the equivalent we have in the u. S. , its not a centralized system of control but these are the centralized systems where all internet traffic travels from. Is it possible the n. S. A. Could have made a mistake like this . In the United States or wherever they are . If youre thinking about Something Like sabotage, if the n. S. A. Were inside the chinese firewall and wanted to do Something Like this, its really kind of a sexy proposition that Something Like this could happen. But any time you set up a system like this, this is the risk you run. I think we started all the conspiracy theorists talking just then. Yeah, were here to help. Jordan robertson who covers security for Bloomberg News and gordon chan, author. Were getting new details and will bring you anything new as we have it. Coming up well tell you about Software Technology that could be the n. S. A. s worst nightmare, speaking of the n. S. A. , that is next. Bloomberg west is brought to you by exxonmobil. Welcome back to bloomberg west. Tonight on a special titans at the table, betty liu has an exclusive interview with two powerful men, bill gates and mike bloomberg. These titans are tackling the myth that poverty and disease cannot be eradicated. Thats tonight at 9 30 p. M. Eastern time and pacific here on bloomberg television. Everyone is familiar