Quarter ever, with sales of 9. 3 billion and a 2. 6 billion profit. The competition from Cloud ComputingCompanies May have constrained sales and record results disappointed wall street, the stock selling off after hours. Oracles troubled hardware units fell by eight percent. Google has unveiled a new developer project for wearables with a focus on smart watches. They say they are partnering with a range of companies, including lg, samsung and fossil. The first smart watches will hit the market sometime later this year. The Washington Post is starting a new pilot program, giving subscribers of other newspapers full access to its website and mobile apps. This kicks off with six major newspapers signing on. Its a move by jeff as is to attract new digital traffic. First, weve got a special show for you today. Cory johnson is with me in the studio as well as a partner at coastal ventures, celebrating one year as a Venture Capitalist. How is it going so far . Im investing in an amazing number of companies. We are trying to keep up with the entries. It has been an entire year. The Venture Capital list is interesting. You get to meet the most ambitious people in the world. The hard part is to discern which one is sublime and which one is ridiculous. How do you do that . When i was on a portfolio side of things, it was keeping up on 30. 18 is a lot of companies to keep track of. If you did 30, i have 12 more. I had a history and things i could dig into that you do not have as a Venture Capitalist. That is true, but a lot of investments ive made have a common denominator. There are Common Elements of local, social, community, payments so you know what you are looking for. When you are making an investment further away from your core expertise, thats much more ethical will stop you have to spend more time figuring out what matters and what doesnt. You were the ceo at square, a member of the paypal mafia. A Longtime Company operator. How does that differ from what you are doing now . I know you did a lot of angel investing before becoming an official vp. What is different about your job now . The biggest thing, is it is not your baby. You have a lot of babies. You have a lot of babies, but they are not yours. When you see people on the street using your product, its incredibly rewarding. All of the sacrifices are rewarded when you see normal people who have no idea you have involvement with the Company Using your projects. You are running a team in a company, mentoring people, mixing dna. Its a lot like being the general manager of a sports team. As a Venture Capitalist, you are just editing at the senior level. On the other side, if you are intellectually curious, its awesome. Its like reading the world book encyclopedia everyday will stop you just read a different volume every day. Everything from databases to rockets to photo sharing back to rockets or automotive or engines will stop it is incredible. You nearly took a job at air b b. I wont comment. I could imagine i dont think its news. Speaking of the sharing economy, uber, lift and sidecar you are a big investor in lyft. Seattle is limiting the number of cars for uber, lyft and sidecar. They can each only have 150 cars on the road at any given time. Also joining us is the ceo of sidecar from vancouver. But lets start with you. How big a blow is this . I think history is on the side of these companies. Ultimately, real americans and real people all throughout the world love these products. At the end of the day, regulators will always cave to what real people want. Its just a temporary inconvenience in my view. Do you think it is temporary . We certainly hope so. Yesterday with that city council vote, innovation lost and the taxi industry won a battle. This is a longer war and the people really love sidecar and these other services. We will win the longer war. But youre right, it was a big setback yesterday. Speaking as a former taxi driver, i wonder about the response of the taxi industry. Whether were they really focused on the industry and shutting down you and your competitors . Yes. If you read the text of this legislation, it explicitly says one of the reasons they are creating it is because of competition with the taxi industry. Thats why they have created a cap of 150 drivers for each company. The only rationale for doing that is to protect the existing industry. These taxi lobbies have a lot of influence. Drivers actually come off great under this new system because now they have choices. They dont have to just operate under the oldfashioned taxi system. They have new systems like sidecar. What about the safety issues . Im a huge uber user. There are times when they have taken me the wrong way down a oneway street. Has that ever happened with the taxi . New york city taxicabs are a classic example. They certainly violate the speed limits and take clever routes, sometimes approved, sometimes not approved. The zero defect standard is ridiculous. Theyll have accidents, crazy drivers, people who violate load regulations. I think the comparison should be compared to what people do every day. This is archaic. When this stuff started, it would have been ok for ac to experiment and say we will allow for 150 to see the incidence of driver error and number of complaints. There are so many cities across the United States and now the world using these products to scale, so theres no need to limit the experience in seattle and figure out whether users will be happy and drivers will be safe will stop will be safe. When i was a new york city cab driver, i would admit to going the wrong way down a oneway street once at least. Have you guys done comparisons . There are requirements in certain cities to have a certain amount of training. A certain degree of safety and training is probably necessary. At sidecar, we are incredibly proud of what has happened on the safety front. We are pioneers in creating this entire category of having background checks and Million Dollar insurance policies. Will stop but what is unique to sidecar, uber and lyft, if you look at the actual Safety Record and not the rhetoric in the press, people use, the drivers drive as if they are driving their own car, because they are driving their own car. It is a very safe system. The vast majority of people who ride feel it is safer than a taxi. The safety argument is used a lot by the taxi industry, but the bottom line is these services are actually safer because you are being tracked by the phone, youve got a record of the transaction, and there is the safety of the crowd and other people have rated this driver. By the way, the rider is also rated, so it is safer for the driver. I was just in austin for sxsw. It was raining and lyft and uber had trouble operating. It was so hard to catch a cab that you often felt stranded. Do you feel these regulatory issues will go away . We see tech friendly cities the very unfriendly to these services. Austin has always been this way. It has not changed and got worse. In seattle, the new development. But if you look at all of the cities, their welcome this to Tech Innovation and car service sharing has been incredible, mostly because at the end of the day, consumers love the service. Consumers vote with their feet. If they have an unsafe ride, they can stop at any time. Nobody requires them to use it and people will pick the services that provide a return on their time they appreciate. Let talk about uber versus lyft versus sidecar. Uber clearly has the upper hand right now. I would not agree with that. Lyft has a model that appeals to one segment and its a more friendly experience. You have a conversation with your driver, its a more social experience. You also have people driving their own cars which creates a Different Community dynamic. Theres a segment that appreciates that verses like sitting in the back like a vip, like you or me in a different service. But even drivers tell me the pink mustache is annoying. What if it rains . But it gives a sense of credibility to the company. When you are first trying lyft the first time anyone has said a pink mustache gives credibility. I wonder if there is the wall street journal just compared all three of us and find that sidecar is the winner because of the eta. Its a ride where you get a choice and its very different from uber and lyft. Users will vote with their feet and i think their growth rates are astounding. I did not read the wall street journal study. I know my friends generally choose uber and lyft, not sidecar. I wonder if it ends up being like a New York Stock Exchange the place where the most trades happen bring the most supply and it might be a winnertakeall. I would imagine that uber is making that argument. This is something debated all day long over coffee and drinks. There are some elements that are absolutely true. When you have a market in liquidity, winnertakeall dynamics take hold. But, if you take different population segments where people prefer sitting in the back versus a conversation if you have different driver appeal, lyft and sidecar have different degrees of flexibility. So, if you have these discrete elements of the market, its difficult to have a winnertakeall situation. You think all three can and will coexist in a big way . I suspect there are probably two that are longterm or viable. You could see pockets new york city is a very special market in transportation. London is a very specific market where the dynamics are different. Its not that you have a global winnertakeall. Which two . As you know, i am biased. Hang on i just want to hear keith say which two . I believe lyft will do well and uber is clearly doing well. He has put you at number three. Im sure you dont like that. The bottom line is if you were to look back at other industries, in the beginning it looked like it was winnertakeall like facebook, but it does not end up being that way. There are lots of opportunities when theres a big market. There are ways to differentiate, and as people look at sidecar and compare it to the experience of lyft and uber, like the wall street journal did, they will find that sidecar is the clear winner. People have to give it a try and they will see. We will be watching. Thank you for joining us. Keith rabois will stick around through the show. We will talk about your expertise, and mobile payments. Welcome back. Im emily chang. With me is cory johnson and my guest, keith rabois. We are talking about mobile payments, which have doubled between 2012 and 2013. You are one of the big emerging players in this industry. You power lyft, right . We work with lyft and sidecar. Paypal powers uber . That is the case today. Tell us what other platforms you power, because you are behind the scenes. This is a platform for all sorts of Internet Companies and internet commerce. We work with side products side projects, startups, and Public Companies. Some of the ones getting a lot of attention right now are the new mobile First Companies and folks like lyft, and sidecar those we tend to talk about in startup land. Just to explain a little further, its a little different than just a thing that happens at the payment spot. Well stop and we are not talking about some kind of crossfit wing and throwing the barbell up. We are not doing crossfit or batteries. Maybe it is more akin to the visa than paypal. The focus of stripe is the idea that a lot of internet commerce is not happening yet that should be. Look, on a macro basis only 2 of Consumer Spending happens on the internet today. We think of internet commerce as mature, ibut we are actually in really early stages. Because it is hard to turn back to the phone or a friday marketplace like lyft or sidecar to operate, because the existing infrastructure is not set up well. We think there is a ton of opportunity to increase that 2 . We talk about the idea of increasing the gdp of the internet. That is stripes focus. You are a longtime expert, but you passed on stripe when you first saw it. I did. Big regret . Yes. Why did you make the decision to pass on income on the other side . It was a good thing to do in life. It took a lot of money. The real reason is, i dont think i appreciated how much mobile was going to explode in 2009 or 2010, as opposed to substituting all the transactions occurring on paypal and other products to a new product, which is difficult for anybody as opposed to unlocking a new opportunity. Its a lot easier to build a company from scratch off of a new wave, and i missed the new wave. But i dont think anybody saw it back then. What is your number one question for stripe as an investor . Startups are mostly about not screwing up in some ways. You are growing really fast and learning really fast, and customers are demanding things. You are evolving internally very fast, and deferring mistakes is really important. Thats why you see in the media, things occasionally break open, and linkedin had three ceos. Take paypal, we had in the first year, we had three different ceos. It is a very complicated thing, to build a company in a massive market. Just doing those things well usually yields excess. How do you make sure you dont screw up . We focus on every day. I think Payment Companies are particularly difficult. In some sense, its remarkable we get to be the company that does this, and we were founded in 2010. We have all of the challenges any other hightech startup has, but you have to contend with international expansion, dealing with regulators in other countries, and substantial capital requirement. The opportunity means you can change what has happened in the shape of internet commerce, but its an even harder market to exist in than most. We have been lucky that the folks who have joined us so far have been up to the task. We will continue this conversation after the break. We will discuss the competitive landscape, next. We are talking about mobile payments here on bloomberg west. Keith rabois joins us. He passed on an initial offering from stripe. It is supercompetitive. How does this evolve . Is it winnertakeall or is it different . I think there is kind of a solipsism in technology companies, where we think a Single Company can do everything in a space, and its kind of ridiculous. A Media Company thought it might have an internet play. We are on one thing, and that is enabling new internet commerce. These new services and websites, if you look at paypal, square, google, and so forth, they are focused on much broader things. Square is doing peertopeer. Stripe is just this particular segment of internet commerce accepting payment from consumers around the world. I think that focus is beneficial. When you look at the history of companies that do really well, that focus turns out to help. Thank you. We will continue this conversation with keith rabois after the break. You are watching bloomberg west, where we focus on technology and the future of business. Our special guest host for the hour is keith rabois. You have worked at some of the hottest Tech Companies ever. What do you think is hot right now . There is a lot of interesting innovation going on behind the scenes. We focus on the next generation and the next next generation. By the time things are in the public domain, it is already too late. The way search works on the web is broken on a mobile device. Whos going to figure that out first and be popular with users . You are seeing a proliferation of new apps powered by the address book instead of facebook, and that will continue. Secret, whatsapp the address book is much more interesting. If you dont have a monopoly on the front apps, that poses a threat to facebook in the next five years. Ask how big a threat . Very serious. Fundamentally, we are somewhat fortunate apple does not play in the social space and know how to massage the address book. They tried a little bit. The leadership at apple does not look at this. It could be a threat to all the social platforms. With the battle they had with at t and facetime, they are building a fiber infrastructure, quietly so they can carry their own messages, which i see as interesting in the world of google fiber versus verizon versus comcast. Suddenly, you have fiber laid by apple. They need the social layer on top of it, so they hire someone like david sacks and turn it into facebook overnight. Also former paypal mafia. What do you think of that . Desperate . I dont know. It is hard to tell. Buying up instagram was brilliant. Absolutely one of the best Business Decisions ive seen in my entire life. Whatsapp is a more complicated decision. I dont know if i would have made the same decision. It will take a couple of years to figure that out. What do you think of the fact that facebook seems to be buying versus building innovation . I think longterm that is scary. Cisco has played this strategy well and it can be done. You could argue not well. You could argue there hasnt been actual return to investors theyve minted stock to give out and have bought back shares to keep the flow lower, but there has not in a tremendous return in the past five years. A similar thing could be leveled at salesforce. I think that is true, but there i think that is true, but there is some precedent by growing by acquisition but its almost always better to grow by innovation. It is scary when you depend on acquisition too much. Google had a very eclectic but insightful mix of acquisitions, so they purchase things like android which is absolutely indispensable. They purchase youtube which is very successful. Manipulating financials at salesforce . I think there is an argument about how they are accounting and the sec has some concerns. They are not breaking down revenue with the granularity you would expect from other technology companies. When you look at google versus facebook versus apple, who are the best innovators right now . I think earlier stage companies, generally. Apple has a legacy of incredible innovation and i suspect theres another generation or two of innovations we cant even imagine yet. We will be wowed by them when they are shipped. I think the iwatch will be successful. Apple fries where you push the physical constraints. They will have to do that to keep the form, factor and limitations of a watch. Amazon has been innovating in various other dimensions that would not have been predictable. I think it is possible to innovate successfully. Most of the core innovation and people we are looking f