But the apple watch was not in attendance, but it was felt. Especially when the smart watch is due sometime later this year. Can this smart watch be a big hit . I spoke with gene munster and asked him how apple sizes up the market for its watch . Well, were thinking about it now as a smart watch market. Not a broader watch market. That is going to be a much smaller initial market. We have been surveying a lot of people. About 10,000 people in the u. S. And asked them about their interest level in buying an apple watch. Some did not know what the watch looked like. The ones later on did know. The interest level was very low. Surprisingly low. It runs about 10 of iphone owners say they are going to buy the watch. As this sets up, it is clearly the big topic. I think it is going to take some maybe more powerful apps to really drive the value for consumers to understand why they need the watch versus just using their phone. Specifically, you do as much work as anyone i know on the sell side. I feel like trying to figure out what trends to tie it to. You tried to tie it to some of these trends. Fitbit, some people wear their heart rate monitors. Do you take that and multiply it . What sort of logic do you attach to that growth rate . We think the general wearables market is a good starting point. There is around 5 million of those per year. It is a good starting point. This is not the phone market. This is not a billion units a year kind of a market. The value, the power of the apple watch is going to go beyond fitness. It is going to be a platform. To answer your question, we kind of start with a base level of how many other fitbit units are out there, and then we think about a bigger number because it will be an expanded size. We think a good way to think of this is a section of what the current iphone users are. The big picture of this. Think about this as probably somewhere between 10 million 20 Million Units in the first year. That is compared to about 200 million iphones. Much smaller. Maybe down the road, it could be a 50 million type of business but it is not going to be a 300 million type of business for apple. Ever . I think it would be tough. I dont want to say ever. You dont want to bet against it. Probably down the road, that that is a possibility but not in the near term. My question is what is the what is the thing that is going to make it incrementally where youll say oh, my god. This is taking off. Like what is the one thing that could change that . Well, if you look at the most basic level and think about the watch part of that. Obviously people use their phone as their watch. You think about the watch, the pocket watch was basically eliminated when the wristwatch came out. There is a lot of utility in having some things readably accessible on your wrist. The value is going to come from things that can be easily accessed, whether it is apple pay, opening locks. They use the starwood example, you can go check in your hotel. You dont have to check in with anybody. You just go to your room and wave your watch. Eventually you can do that with your car assuming that the battery holds up and you can access your home. I think some of the value on it is some of those everyday things that are kind of annoying that you take out of your pocket. You have to take keys or your phone out of your pocket. Putting that on your wrist. I think that is going to be some of the initial big value. Longer term, health and wellness is going to be something bigger. It is up to App Developers to build those applications. We talk about the price point for the entry level model. I wonder this is going to be a regular quiz on bloomberg west for the next few weeks or months. The costly edition. How much will the apple Edition Watch cost, gene munster . We think it can be well above 1,000. Probably 1100 or 1200. It is going to be a big ticket item. I think that the average price of an apple watch is probably around 500, 550. Much higher than the 350 entry leve. I wonder if apple is thinking about a very different way to market products. They are thinking about retail multiple price points and limited runs, very different from steve jobs approach of one great device for everyone. They definitely want to make it so it is personalized. Part of that is having the detachable bands that you can dramatically change the look of the watch by changing out the bands. They have more of this personalization than they have with any other product. I would agree with that. I think they still want the basic platform and the real substance of the technology to be mainstream or to be consistent across the board, but i think the ability to personalize it is one of the key differences between the watch and other apple products. That was gene munster. Meanwhile apple rival samsung has seen its smart phone dominance erode, but is the Company Already making a Successful Transition to its next phase and next multibillion business . Were going to explore samsung next. This is the best of bloomberg west. Im cory johnson. Samsung Electronics Said it saw a 37 drop in Fourth Quarter profit and 12 drop in revenue as smart phone sales continue to stall. Dig a little deeper, there may be a silver lining. They are investing another 15 billion in a new chip plant. On top of that, samsung has made a huge push into the internet of things devices. By 2017, 90 of all samsung products will be i. T. Devices. That includes all of our televisions. So this is question. Has samsung found a new multibillion focus for all of its businesses . I spoke with brian blair. It is a very profitable business. The volumes are substantial from just apple alone. I think a year ago it was 70plus percent of their business. I think what they have to do is find some new areas of growth. You mentioned earlier the internet of growth. Their booth is about 50 yards behind me, and the internet of things connected appliances is a huge trend for them. In addition to foundary and the internet of things, i think samsung is looking for new areas of growth. They think its the internet of things, but it would be nice if the foundary business could grow for them as well. What do you think a chip costs . An iphone a6 or a7 chip, whatever the new one is. What do they get for the internet of things chip . 85 for an iphone and then a couple of dollars . You know what . I think about it more like 25 30 for a base band chip and probably 5 for an internet of things chip. You bring up a good point. A discrepancy in the average selling price. The difference is if we see connected device throughout homes over the next two years, the number actually will be bigger than even this 1. 5 billion unit smart phone market. I agree. The a. F. Ps are small but the opportunity is substantial over the next several years. But if there is that difference, they would have to sell 600 more of those chips than the phone chips they are selling right now. That is quite i guess i wonder is the center of samsung going to be chips . Not devices . I think it could shift to chips. They are hoping it is going to be both. They are showing connected dish washers over there. A lot of different appliances. You have maybe one or two smart phones in your home. Maybe four if you have kids. How many appliances do you that are connected . Probably 50, if think about connected chip opportunity. If we all have connected device throughout our homes over the next five years, then the internet of things will be bigger than smart phones and it will be a substantial opportunity for samsung. I need someone to load my dishwasher. Not to run it with a chip for me. You mentioned the oculus it really was an oculus device that they said was made by samsung. It wasnt any special samsung stuff. It may have changed. Did you see anything that was ridiculous over at that samsung booth . Well, the connected dishwasher is interesting. I would not call it ridiculous but i wonder about connecting some of these device. Lights. Refrigerator, that could be good but i didnt see anything that ridiculous. Everybody is doing curved screens right now. I think they are beautiful but im not sure it is enhanced experience that it is going to drive huge demand over the next several years. A lot of these Panel Companies are making the bet that that is the next thing. Nothing ridiculous. Samsungs version sounds ridiculous until you actually use it. When you try it, it is amazing how good it is. It is a truly immersive experience. I think that could be huge and facebook feels the same way. To find out more about samsungs potential i spoke with crawford del prete. Here is some of that conversation. They are rising a sizable check to get into a space. What i heard over and over and also from jawbone in that is we will be an open platform. We were all comers. We want to connect everybody together. I think it is a shot at apple and a shot someone at android. And basically it is their way, when you dont have a massive base to try to bring people to the party as quickly as possible. If samsung is shooting android, is samsung shooting themselves in the foot . I think what they are trying to do is say any work breaks out between nest products on apple products in the future, that is fine. Were going to connect everybody and everybody is welcome in our play on the i. O. T. It is not necessarily a shot at your phone business. They want to continue to be investing in the phone business with android. They do not want to go on a proprietary direction. It is not dissimilar to what microsoft is trying to do with their wearables. Basically support all platforms because they want to be relevant in each of the large ecosystems. It is helpful that samsung is describing this not as i. O. T. But as sensors, but the platform is more open than the i. P. Base. What are the other technologies that are helping this now . We have been hearing about this from c. E. S. Forever. Yeah. There is a lot of different technologies that are going to come into play. Some of them will be 2. 5 gigahertz wireless. Some will be things like traditional wifi. You are seeing some interesting technologies from broadcom about stepping up their ability to project images over wifi, which is part of it. I think the core what happened is missing from the message is that the customer cannot be expected to figure out all the problems in their life and stitch them together in open platforms. That is where apple and google will go in and say we will solve the backend technology. You dont have to learn about five gigahertz wifi. You can basically have it work. I think samsung may be rushing to a world where it works seamlessly and the customer kind of loses in that experience. That is the problem. Samsung is saying we want to connect everybody. Where does that leave the customer . They are their own systems integrator. That was crawford del prete. From the gold rush of 1849, to the tech boom of the 1990s San Francisco has a lot of experience with boom and bust. What lessons do they hold for the latest Technology Boom . Im going to ask former mayor willie brown next. Im cory johnson. This is the best of bloomberg west. It is boom time here in San Francisco. At least when it comes to unemployment. The Unemployment Rate was 4. 4 in november. The lowest since before the recession. In the city, 90,000 jobs have been added in the last four years. Office rents are poised to overtake manhattan in price. But the price of that growth and the technologyled growth led to a whole new set of problems including constraints on housing and office space. I spoke with former San Francisco mayor willie brown. He was in the office during the boom and bust over the dot com era. Listen to what he had to say. It is what every mayor in america would love to have. That is the problem you want. You want unemployment under 5 . You want help wanted signs all over your town. Coupled with that, however, is the need for you to make sure that affordability is not totally and completely ignored. You need to make sure that the gap between those who earn it and those who need it are, in fact, coming closer together. So, the city and county of San Francisco, with mayor lee saying jobs, jobs, jobs in his first term, he is now talking affordability in his second term. Believe me, that is a far more pleasant response kind of thing to do than to be worrying about trying to create jobs. So what lessons you took this city through the dot com boom and the dot com bust. What did you know about the statistic when he left office, 10 years ago tomorrow . That you left office. There was no question that the day that i left it was clear the concept of all this newness, all of this new economy where almost no products were produced, was simply the foundation of what we are now benefiting from. We have all kinds of things going on. Throughout the world there is a working relationship and there is a product being produced. That did not happen in the first boom. Only the creativity and the brainpower were there. In addition thereto in the first boom, people did not move from Silicon Valley and relocate. That is what characterizes it interestingly to me, this is very much an urban phenomenon. Not suburban. Which is what the biggest part of the dot com bubble produced. Correct. Therefore the people that want to live in San Francisco and work in San Francisco and spend their money in San Francisco suddenly youre not in the boom and bust cycle as we were in the old days. Yet, we still have a Football Team setting up in the suburbs there in santa clara. I think that Football Team is now having second thoughts. Have you noticed that their fortunes were not nearly as positive as they were at candlestick. [laughter] does this feel different to you . They are buying. They are spending. They are having their kids in the schools. They are doing the kind of things you need to do on the give back with tipin points and other organizations of that nature. It is dramatically different. That is former San Francisco mayor willie brown. One of the companies setting up shop in San Francisco is the grocery delivery startup instacart. It raised another 210 million in funds. They get groceries to the customers in less than an hour. How is it going to compete with other big tech giants . Amazon and google are entering the same arena. I think of the analogy of the casinos in the early 1980s. The casinos had a lot of people coming in and out into not know who they were. They actually created carts. Now instacart is able to give Grocery Stores data that other companies cannot capture. Really . That is interesting. I see it show up at my house. It is a popular company in the johnson household. I also got an instacart delivery yesterday. I did the whole thing, put on the green tshirts, delivered groceries. Its interesting, these Big Companies like whole foods costco are not trying to do this themselves. Why not . Its hard for a Large Company to get out and do it. Plus instacart has a different model where they are bringing together a marketplace of personal shoppers who want to work. Maybe they have different jobs more flexible hours, and they are pairing it with different kinds of Grocery Stores. So they are not holding inventory. They are not holding inventory, they do not have warehouses, they do not have employees, they have an uberlike model where they have regular people. It is an open model like uber where the picker uses a smartphone and uses their own car. Absolutely. They can log in and out of work when they want to. Youre getting at this idea of being able to deliver something to somebody and capture that data and create that customer relationship. The other piece that is a key strategic advantages they are already profitable, but you can also start to spin up newer cities faster. They are already profitable . Really . That is interesting. Is that what you want this early in a company . I dont think it hurts especially in this kind of environment. It does not hurt. Interesting. Look at all the cities that instacart is in, boston, new york, d. C. , portland, austin los angeles. Im a very early smalltime investor, but in the history of knowing the founders, and i have been with them for years, every time they have said something about their impatience and i thought in my head no way they have proven me wrong every single time. They think they know a secret about building a big independent company like uber. That would be an interesting strategy. They are facing some serious competition from amazon doing grocery delivery. When i was out yesterday with the instacart delivery, we saw the google delivery guy going by, and there is a lot of that stuff going on with all the other Companies Competing with instacart. Its tough. People want to deliver within the 48hour window. 48 hours, it is really how to get something soon. The instacart starting with groceries is how to get something to you in an hour in more cities. If you look at the footprint of google shopping express now, amazon express now, its not the same as instacart and that is because the model is different. I was also impressed with instacarts quality of produce figuring out how the touch the bottom of a pear to see if it is ripe yet. Those are the things that make a difference. They have people who are trained. Coming up, protecting peoples online data. One of the most pressing issues in technology today. When will we see a big breakthrough . Well find out next. Youre watching the best of bloomberg west. Consumer privacy is a major concern everywhere you turn. For more, business weeks brad stone spoke at the Consumer Electronics show. How can the internet not sacrificed Consumer Privacy and security . I think Companies Need to do the following things are in it first, they need to think about security by design. Companies need to think hard about how to embed security. They need to think about longstanding privacy principles. Companies need to be thinking hard about whether or not they to be collecting as much data do you really need it . If you store a lot of data there is possible intrusion. I think transparency and getting consumers greater control over their personal information is key. I think