The worlds biggest maker of Security Software has posted declining revenue. Stocks are down this year. Board member Michael Brown will be an interim director. A former microsoft employee has been charged with revealing trade secrets from the company, including code. According to federal officials, the Russian National admitted that he provided the information to a french blogger. Google has enhanced Gmail Security features. 100 of gmail messages will now be sent via an encryption. No one can read your messages. Documents leaked by Edward Snowden allege that the nsa was intercepting google transmissions. Cory johnson is with me now. Air b b is set to raise 450 million. Those are amazing numbers. Raising 450 million is an incredible thing. The notion that they would have a Company Valued at 10 billion before the ipo is unheard of. Air b b is always on the list of tech ipos. Instead they are raising money. I wonder what that says about the companys readiness. The fact that Texas Pacific is involved with this deal, this might be the last funding round before the ipo. Given the frothiness of the markets right now and the receptiveness you think they would want to take advantage of this. Paul kedrosky is joining us now from san diego. What is your take on this fundraising . I think you will see both. I am with cory. This is a preipo round. A bunch of folks want to be on board before air b b goes public. I have no doubt that that is the plan. People are putting a bunch of capital in and they are planning to take it out again in six months. That is a good trade for them. We have seen some interesting investment over the last few years. Things like t. Rowe price and fidelity. Now Texas Pacific. This is not really their style. What do you make of it . It is not. It is oddly reminiscent of the stuff we saw in the last bubble. You had a lot of people who have lots of cash that they want to put to work. They thought it was a guaranteed return if they put it in preipo. That idea that we are seeing the same kind of hot money show up, it is worrisome. I am not troubled by the valuation. Here is a company that will be larger worldwide. It is stunning, the growth that they have had in terms of the total revenue worldwide. It is remarkable numbers that they are posting. They are absolutely trashing their competitors. You have a twofor going on here. Lets talk about home away. Air b b is valued at more than some of these major hotel chains. We have not seen any of the financials. How do we know for sure that it is really worth 10 billion . You dont. We havent been offered an opportunity to invest. We do not have to make that call. With respect to the size, and the total number of transactions theyre doing, those numbers are the kind of numbers you would you from a global chain on par with hilton. The nice thing about air b b at home away is that they democratize home rentals. You rent whenever you get on the way. I get to earn a little yield on my condo in San Francisco or wherever. That opens up the market. Not to be a skeptic, but his idea of evaluation compared with hotel when the hotel has hard assets, is an interesting one. You can flip it around and say that one of the great attributes of air b b is that they do not have to deal with the same sort of things. They will never have to repaint the rooms. You will never have people say, i want to stay on the floor that was just renovated. That never exists. It changes their expenses. I know we talk about a bubble. 19 billion. They do not make any money. Literally. Do you see any trends that are worrisome when you talk about the amount of capital that is out there chasing these Tech Companies . For sure. I see it in other sectors where it is less obvious to me how they will earn a return. I do not see the same problems at air b b that i would at many other companies. I am more troubled by the stuff i see happening with the internet of things. We see people funding deals at very expensive valuations. They are ignoring the fundamental problem that they are just moving atoms around. There is a lot more froth on that side. You are trying to earn a return on this kind of business. What about the regulatory issues . Air b b has had major legal challenges. Uber has challenges all over the world. What happened in seattle where they are limiting the number of drivers on the road. How do we know that regulators are ultimately going to give us that . I do not think we know that. We know that a politician will gravitate toward that first. Over time, and whether it is three months or three years, marketing is inevitably opening up. Whether it is the market of car rentals, or the availability of air b b housing rentals. There is a force at this point. Therell be too much pressure from people to make it happen. I also wonder about the business. It is taking away a very profitable area with minimal revenues. I wonder if air b b have a similar deal. It is not that they are competing with the hotel business, but they are eviscerating it. One of my favorite pitches from start ups is somebody who can take an existing 10 billion business and turn it into a 100 billion one. The competitor cannot compete. Paul kedrosky, thank you. We will continue to follow air b b of course. Coming up is our special guest host, max levchin. I am here in the studio with cory johnson. We have a special show today. We have a special guest host, max levchin. He has an incredibly impressive bio. He is the cofounder of paypal and the chairman of yelp. He is also the founder and president of hvf. It is a struggle to keep up. How do you keep track of it all . It is primarily adhd. [laughter] how involved are you in all of these things . It really varies. I am a Firm Believer in a narrow focus. I realize that there are different kinds of focus that i enjoy and need to have in my life to enjoy. Glow is pure joy. It is a good for humanity project. Being part of that makes me wake up and sing. It is my regular job. Hvf is where i go to brainstorm. I can think about mining asteroids for gold or whatever. Intellectual oasis. We will talk about that later in the show. Do you think your work on something in been you take a role where you need to get operational details . You approach it from different sides . It is the latter. Being able to scratch the operational itch makes me pretty good board member. My job is not to say how to do. It is to find a Good Management team. I can tell people to tell me what they have. I will not tell them how to do it. I want to get your thoughts on the alibaba story. Obviously theres been a flurry in the messaging space. What is your take on that . There are different layers to that. The most obvious layer is everyone who does not have a mobile social graph says they need one. Facebook said, here is the price, and its huge. That is obvious. The more interesting question to me is with Facebook Alibaba and enormous companies that are very successful, are they capitulating . Are they admitting that it is not easy for them to build a social graph during this transition to mobile . The fact that they have to acquire one. Is facebook defensive . It is both. It is very valuable. It is also very valuable to them as they firm up their grip on the rest of the world. It is very international. I think it is genius. The calculation that Mark Zuckerberg made was around how much the market cap would be. The price is probably just paying it forward. Will they have a profitable business and messaging might move that way anyway . It might eat away the margins of the phone carriers . This communication would happen at a facebook platform as it moves away from carriers . Facebook has aspired to be a communication utility. Any Successful Network becomes a communication utility. That is a threat. Instagram, whatsapp, all the different free sms platform. Can you envision a future in which facebook is not the dominant social network . I suspect that they are getting towards being the dominant social network. The fact that they are so diligent suggests that they are intending to be the dominant. There are other types of things that might become social Networks Like whatsapp. It makes you wonder if Something Else might come along like facebook. Anytime the giants are not as strong as they seem to be, there is an opportunity for runners. Coming up, we will talk about carl icahn changing his tune. We will discuss the paypal mafia, next. Im emily chang. This is bloomberg west. We are talking about paypal is cory johnson and max levchin. Carl icahn has a new proposal for paypal. He is calling for an ipo. Ebay says that the company should stay together. It is great to have you both here. Im curious to hear your thoughts. Max, what do you think about this new idea . As i mentioned, i learned this from you in the break. I am making up my mind as i go. But that is why we love you. I thought, this is not a bad idea at all. You have the commercial part that is instrumental to paypal success. The separation between paypal and ebay commercially is a terrible idea. Splitting a portion out and giving them a trackable motivation to innovate seems pretty good. I would say that carl icahn pulls a good one out. Some people think they should separate. What do you think . It is plausible that they will work separately in the short term. The strategic product planning takes years to go to fruition. It is probably worth more in the long term combined. It will come down to if they are still able to execute the longterm product planning. I would err on the side of that. The flywheels would be preserved. When i look at this deal, i understand why ebay wants paypal. I do not understand why paypal would want ebay. A decade ago, it was pretty clear. It is different now. Theres still a tremendous in the manufacturing of american businesses, this is where they hatched and grew. They figured out the details. They sold their products. For every truism about how ebay has been completely dominated by paypal, there are new sellers that are coming in. Paypal is there at the door as they are hatching. That is very valuable for paypals growth. Could this flourish everywhere . This is not just a case of paypal being part of ebay. I do not think it is great for paypal. I do not think it is bad for paypal. Paypal needs to separate from ebay to cash in on opportunities outside of ebay. What about the innovation case . Many people have made a case that paypal has not innovated when it comes to rot. What do you think . There are lots of different scales. When you shake things up, you are likely to get some innovation. Whether it will result in more innovation over the next few years is hard to say. There is a lot of synergy between paypal and ebay. There are a lot of things that ebay does overseas that could be beneficial to paypal. There is a lot of deep product stuff that we do not know about. That innovation could be disruptive. Max, you are spending the majority of your time on a payment company. What is paypal missing . I do not think paypal is missing that much. It is an excellent payment system. I am working on a company that has payment products. We are trying to be a blender and build a modern 21st century creditissuing bank. They would offer markets and processes a payment system. We are different. We do not say that we are paypal 2. 0. We could be a provider to merchants that choose is paypal. If you look at paypal. It looks like it was written in c 15 years ago by a bunch of university students. As it goes on, there is now hope for a lot of that to be blown up, rewritten, and rebuilt. I wonder if it is about keeping at the hands of amazon for someone who looks at the ebay empire and wants a piece of that . Do you look at the corporate machinations and see that happening . I do not think so. I do not think about who owns pieces of it. It comes down to innovation and what is the best way to move things forward. There are other companies in the space. There is room for ebay and amazon to innovate. I doubt that the decisions are being made to prevent ebay from interacting with paypal. We will talk about wearables next. We will talk about the future of Wearable Technology next. Welcome back. Im emily chang. Fitbit is facing a lawsuit after users say that it caused blisters. They say that fitbit sold a dangerous and ineffective product that injured customers. The company unveiled the product in october. We reached out for comment, but did not hear back. Google just unveiled android wear. It is a new version of android designed for Wearable Technology. Cory johnson joins me. We also have paypal founder max levchin. You guys have apps for wearable devices. I trimmed it down to just the jawbone. I was rocking the fitbit and the jawbone for a year because i could not decide which one i liked better. We had the chief Financial Officer from garmin on last week. They are doing a lot of business in wearables. Why do you think this business is blowing up . There are a million great reasons. The battery life is extending. There is lowenergy transmission. Lets reflect on the lawsuit. I think this whole thing is bonkers. The Class Action Lawsuit is coming out against fitbit for a subtle reason. The people who are buying it are still buying the old devices. These are the Health Conscious 1 . Most of the general populace is unaware of these devices. There are 99 more people who would benefit from these devices. They could get thinner and healthier. Any form of Class Action Lawsuit is ridiculous. These people are early adopters. It might burn your hand sometimes, but you chose to try it. I wish i exercised as much as you said. I were these today for you. I am not compelled to wear them on a daily basis. Can this go mainstream . Some people say that these will become part of our clothes and everything we wear. You have been working with wearables for two decades. It will shock your readers to know that i do not exercise all the time. The mainstream potential for wearables is bigger. The potential is huge. The potential for making yourself smarter. You have information right when you need it. It is the year were two away from becoming mainstream. It is intriguing to me how much is in the phone. We see a lot of endurance apps. These sensors in the smartphone are changing quite a bit. You work in this arena, what is the phone lack . What would show up in a wristband . The major change people have then in their hanh all the time. A splitsecond of having to take it out of your pocket and look away makes a huge difference. If you look at the continuum of when software was written on desktop computers, you only use it for a couple hours a day. Then you have laptops and you are using it twothree times a day. Then you into phones and you into using software 2030 times a day. Now we are going to watches. You will be using products hundreds of thousands of times a day. That changes everything. \ it seems like google with android has a head start. We are still waiting. The android announcement is massive. There is an enormous infusion of interest. People are committed to android. Now they can go for anything that runs on the largest mobile operating system. It is an enormously intelligent decision. Max levchin is with us for the hour. We will say goodbye to him now. Coming up, we will talk about health care technology. What if you skipping the gym cost you money . That is next. You are watching bloomberg west. Im emily chang. From Wearable Technology to health care technology, many new apps are helping people improve their health. You may get a financial incentive to exercise and eat healthy. Our guest host for the hour, max levchin, was an early investor. He is with us in the studio. Tell us about pact. Pact is an app that helps people live healthier with positive and negative incentives. At the end of each week, if you do not meet your goals, you pay into the pool. That is your reward for everyone else who does meet their goal. Ok. Why . It is brilliant. I think the future of health care, the Affordable Care act notwithstanding, is about changing the cost structure. People have to become healthier. Adding a bite to a cost of eating badly, that is a great idea. I think a mobile app that tracks your performance with a financial component is everything i love. When you look at these kinds of investments, do you think, i want a Health Care Investment . But it has to be different. The way we ran across pact was that we were brainstorming ways of creating financial incentives to exercise. You do not have the motivation to wear these things all the time. If you hit your wallet, more people will do that. There is a company that does this. We got in touch and the rest is history. How much do you make if you fail . I am not sure i would want to bet on myself. I would bet on cory. You would be surprised how powerful the incentives are. We are more likely to be motivated by loss, then gain. By having five dollars on the line, people meet their goals within a year. We hate losing. It is especially true people in silicon valley. I have noticed that the purchasing of something, a lululemon purchase, or this jawbone device, it gives me going further for another few weeks or another few miles. That makes all the difference. I would like to point out you are thinking about this from a Bigger Picture perspective. There are things like glow. You are trying to Lower Health Care costs. This has the ability to do that. All of these products in their later stage versions look like new products. They look like toys. We ultimately underwrite a portion of the cost of treating fertility, which is a fundamental issue to address, and pact is about wellness and fitness. All of these things ultimately lower the cost of being healthy. That is the role of an insurance company. We spread the risk. Were trying to lower the risk and spread it. From a portfolio perspective, does pact become a thing . And you have bundled together. That is taking it too far. We became very passionate about this notion of infertility and the fact it is not covered by traditional insurance. We want to balance the space of Health Insurance and look for other companies. How do you gauge the size of the mark