Transcripts For BLOOMBERG Bloomberg West 20151130 : vimarsan

Court today. Accused of killing three people, including a police officer. Those are your first word stories. More at bloomberg. Com. I am emily chang. This is bloomberg west. Coming up, cyber monday sales surge. Targeting Neiman Marcus and even paypal. Plus, amazon reveals a new drone prototype for its planned 30minute Delivery Service and here is the man behind 30 billion startups. First, what is shaping up to be a recordbreaking day for Online Shopping. Sales this cyber monday expected event hit 3 billion, capping weekend,sive Holiday Consumer spending 8 billion online. This morning, targets website was overwhelmed by demand and shoppers were greeted with this message, apologizing for delays. At the impacting paypal. Neiman marcus, its website crashed twice and was down almost all friday. Joining us now, shannon pettypiece, our correspondent. Ontributor i was one of the shoppers who tried to buy something from Neiman Marcus on friday. I did not go back. Break it down for us. What went wrong . At target, the company says that they got twice as much traffic today as in their previous record, which was on black friday, so just a surge in demand. Itsurse, these days, 2015, companies are supposed to be able to handle this, but target said they just cant handle the demand. They were metering people, queuing people into the website. At no point were people completely locked out, but they were queuing people to slow down the flow of people in. The big deal people wrapped her, wars. F star 15 off sitewide. That was some big savings folks were after. Target and Neiman Marcus, companies that have struggled with hack attacks in the past. What went wrong at Neiman Marcus . For the site to be down for multiple hours . Stilln newman market does not know. They are still trying to get to the bottom of this. Due do not believe it was to a nefarious influence like a hacker. Think oft necessarily Neiman Marcus as a place people are rushing to on black friday to get their deals. They are one of the leaders in online retailers. David, what is your take . Retailers are still trying to figure out how to manage the transition. David i think we are entering digitalybrid hybrid physical culture. They want more traffic on the website. That is where the future lies. But they have all of the investment in physical stores, they have to continue making that. Out of its an interesting thing. You and i have talked before about how it is surprising that not more is digital compared to the way that you and me spend all of our time shopping on amazon, multiple parts of amazon. But i think what were really seeing here is the transition of the economy and some companies are just not ready. Emily right, david, and i think i am spending a few more hours than you on Online Shopping. Thanks for that update, shannon pettypiece. David, youre going to stay with me. We will talk about another one of my favorite subjects. Diamonds. Blue nile is taking a product most peopleld think want to buy in person and turned 400 market cap business. Kanter is here. How do you prepare an Online Shopping business for today . Harvey being a reference 15 years gives us a leg up. Ecommerce continues to evolve. We pressure test their system. We go through a series that targets traffic twice as much. Pressure test a number of different times and experiences to make sure we can withstand, not just the traffic, but the checkout process from start to finish. Emily how much of a spike do you see over the Holiday Weekend . We had a solid start. We have seen increases in revenue and traffic yearoveryear. Theres a long way to go with three weeks left. The time needs to evolve before we know how it all ends up. Emily we have been talking about how it has been more like black november then let friday. Deals every single day for the last month. Entice shoppers when sales are happening so much more often . Great question. The reality is blue niles business is based on everyday value. Our core businesses engagement. We never promote it. Its our price today, tomorrow, and a year from now. We continue to drive that every day volume everyday value message. What if my questions about amazon, as it garners more information, people will go to it for convenience. What is your thought about that . Policy wee return have, the certification, the certification is the Gold Standard for diamonds. We can deliver overnight. In most case, you can have a custom ring delivered i 10 30 a. M. The next morning. Emily i know you are opening web rooms, which is basically a physical showroom where consumers can go and look at diamonds. When it comes to physical stores, i was at the mall over there was noand one there. What is the point of having a physical web room anymore . The web room gives the consumers the ability to see, feel, and touch the engagement ring. We have seen quite the opposite. We have to make appointments for people to come back. Its similar to what david talked about. It fundamentally brings a different cost structure to the retail business. We have a selection of product, about 400 styles in the store. A hybrid with the physical world . Harvey very much. Emily can you give us numbers on transactions . Going in, making the purchase, do they go in, think about it . And warby parker have done similar things. If they are too busy to go to a physical store, why would they do that . This is our second round. We had a test store in nordstroms. We wanted to tease it out even greater. Are seeing what we are heightened levels of purchasing where people are buying in the shop while they are there. About 40 percent of the people are walking by the storefront and recognizing we are a Jewelry Store and walking in. And those 40 have become customers. It is changing the dynamics of what we are seeing. We are doing quite a bit of business. We will open three or four stores and bring to market a greater level of experience and testing in this process. Emily all right, harvey kester, ceo of blue nile. Thats the retail perspective. I want to talk more about delivery. Easy post is an apt platform that bridges the gap between companies and carriers like ups. David from patrick still with us. This is your busiest time of year. What you do to hear up for today . Guest most of the major Ecommerce Companies are locking up september at the latest, but getting that for the holidays, so you do not have one of these target, Neiman Marcus problems. So they would not have had a problem . Guest their shipping would have gone through, that is correct. Emily you are like a middleman . Guest yes. Emily what you make of the problems . 0 i think a lot guest i think a lot of the problems are focused on web uptime. You see 40 of their volume in the last quarter. Its a challenge to scale up your infrastructure for three months of the year, never mind one month of the year. Ofid david, what you make Companies Like ship, post mate, flex. Space beinga hot disrupted over and over again. How do you see this playing out . Ups and fedex are extremely Strong Companies that have continued to evolve. I do not think they will be pushed out. But clearly, this is becoming a differentld, and services are necessary as we have different needs that are emerging through offline and online purchasing. I would be curious what the retailers need an intermediary for though. Of thein terms of some new startups in this space, i think it is great for the shipping industry to have people coming in and innovating. We have a ton of options that are really costeffective in this market. If we really have to have it in an hour, i think it is great. A lot of people do not want to pay the onehour delivery fee. To pay any not want delivery fee. Why does a company like jet i you . Why are you a Standalone Company rather than something another company should own . Guest we make all of the Ecommerce Companies ship effectively. We have a marketplace effect where the more companies, the more data, the better we can ship effectively. Emily what are you doing for the next two weeks . Are you hiring additional workers . How do you accomplish this seamlessly and make sure your customers do not have the problems other Top Companies are having . On the shipping side, we see very high uptime. I have quite a few. Ok, you are sticking with us. Both of your sticking with us. We will be talking about amazon and drone delivery. Amazons delivery prototype is out. Will it take flight in your neighborhood . Amazonsw headset drone delivery system. They delivered a new helicopter design. They will use the drone to deliver packages in less than 30 minutes to read when will Amazon Prime Air get off the ground . My guest andw, David Kirkpatrick and the ceo of is imposed. We have seen the video for the first time. What you think about how it looks . Think amazon is creating a good dialogue around of being able to carry things. It is key to deploy this kind of video around christmas. Indeed. T is does it look realistic . Christian coming from a place of experience building these things, there are a lot of challenges. Just not there today. In order for this to be effective, you need far Better Battery Technology and the ability to carry at least 50 pounds. On the operational side, you have safety issues. You have the ability to carry multiple orders at the same time. On the regulatory side, there is that this the future will be allowed given how heavy these things are going to be and the potential for them to fall out of the sky is very high. Emily they say they are working on technology that will sense options in the sky. Jerrett, what you think . I think its exciting. Is it possible . Its like you said on 60 minutes last year. Its five to 10 years out. Now it is six to 10 years out. Emily david, get in on this. Ford it is tremendous pr amazon. Here we are, talking about them. But there are people in the world today delivering things using drones. I have heard about it in europe. I think it will happen quicker in europe than in the u. S. , because frankly, the laws are much more accepting of that sort. F i looked at the video. It seems super pie in the sky to me. I totally by this point of all tothe technical difficulties make it really reliable. But i think we will move toward a world where this kind of thing that comes more routine. Four to nine years, a little pessimistic, but not your yet. Emily christian, you make drones and drone software. Are you looking at delivery . During the early days dowe talked into people who logistics. Ones that are very popular today. And the challenges are not in order for you to beat the Ground Transportation and all of that, you have to be able to carry 50 pounds. To carry 50 pounds, you increase the size of the battery, the at thatthe motors, and point, you have a massive piece of metal flying around. It makes it far more dangerous. Is drone regulation right now . The faa as to a decision. You have commercial drones. A lot of people find drones under their tree this year. What is important is the faa is focused on keeping everyone safe. Everything put out is with the mindset that we want to avoid as much as possible having people hit other people with them. I think on our side, the commercial side, we are focused on our partners to work with the faa to make regulatory changes so we can work in job sites where we have far more Dangerous Things roaming around then in the consumer world. Emily its fun to talk about at least. We will see. , thank you for joining us. David to patrick, you are sticking with me. We will have more bloomberg west. Emily billionaire tech titans combatning forces to climate change. Bill gates joins a group of investors including Mark Zuckerberg, jeff bezos, and jack ma to launch the Largest Coalition for clean energy. The aim is to speed governmentfunded research. Theing me, the captain of team and David Kirkpatrick. Tom, how are these investments being structured . Its quite interesting. It is a combination of public and private. You have a 2 billion fund. What they are trying to do, very innovative, take the risk, almost like a Silicon Valley startup. Then you have tony seven governments promising to double their r d budgets into clean energy. Emily a lot of big names. How big is the commitment . Is 2 billion dollars. Bill gates said, hey, im going to put up 1 billion of my own money. You lookdrop back and at these billionaires, you look at jeff bezos, zuckerberg, bill gates, their total net worth is about 200 billion. You are looking at 1 of that. But absolutely a massive number. Emily david, what you make of this . The name is interesting. This is the name of a separate prize that zuckerberg and yuri milner answered a friend have for science. Seems to me that zuckerberg may have had a bigger role in this. These people really care about energy, but it really surprises people a wide range of are involved. Its really an interesting group. Strong it makes a very statement that is desperately needed. Lets face it. We are in deep trouble on climate change. I almost said the other word. We have to do something about it. Is the approach for the coalition and how will they make progress, tom . One thing that needs the reassuring, as david just said, the quality of people involved. Bill gates pushing this forward. He gave a speech today, next to him, obama, modi emily but what is the approach . Tom for the fund itself, it will be tied up with the university of california. Its not really clear. Just looking for risk, and in some cases, i think billionaires will invest individually. Emily all right, lets hope they make some profits. Thanks for that update. You. Kirkpatrick, thank great to have you on the show. Up next, it is a startup that helps give life to startups. Video an interview with the ceo of y combinator. Emily i am emily chang. This is bloomberg west, we are joined now by david inglis. Good morning. Take you through some of the stories we are watching in asia. Employees at honda will have to work longer. They are working to tackle the aging population by raising the retirement age. It will allow staff to work from home. Honda is one of the Biggest Companies to attempt to deal with the aging issue. Nine out of 10 japanese countries still have a retirement age of 60. Staying in japan, the worlds biggest pension plan has posted the first Quarterly Results since 2000 eight because investments lost 64 billion in the recent selloff. Pensionrnment Investment Fund said there is no need to review strategy. The fund has more than one trillion dollars invested and it was the first loss since a doubled things in october last year. Here is something that is new but not surprising. Been elevated to the elite group of reserve currencies after the official approval of the imf. The dollar,oining the euro, the sterling and the yen. It is integrating itself into the global economy. The imf says it meets the standards and it will have a 10. 9 weighting. Finally, lets talk about samsung. They are preparing for a shakeup. The annual reshuffle is expected to be more wideranging than usual and will include samsungs construction at ship holding arms after suffering losses. It is the first chance for the vicechairman to make results after the executive phase last year. He is there because of his ailing father and he is expected to take over one day. Emily . Do we have any idea what to expect with the executive changes in samsung, in the Mobile Division . David in a recent report coming sayingkorea, this is that the mobile heads will be in place. We are getting word that we are expected to see these headlines drop in the next 30 minutes. It is important to see which guys will be put in place. Emily, back to you. David inglis in hong kong. That is the first word news. Emily welcome back to bloomberg west, i am emily chang. Helper starting Companies Like airbnb at dropbox. I sat down with the y combinator ceo sam altman. Sam there is no clear upper bound other than the community. University has certainly managed to be a lot bigger than we are now. Emily when is it too big . Started to community break down, that would be the time to adjust its. But right now it is a network and network gets more powerful with the number of growth. You guys doing to constantly maintain the balance and maximize what makes y combinator great without losing any of what makes it great. Sam great question. We pick three funders. We pick founders. Collection and Selection Process wrong, we could fall apart lately. Raised 700ave million for the late stage fund. How is it going so far . Sam we have only made a handful of investments, may be three large investments this year. It seems to be going really well. There is a lot of turmoil from the tech press and in the tech markets. In that sense, it has been a good time for us to be decisive and investing companies that we believe in. How to bell learning a late stage investor. It is very different than what we normally do. Normally we are making hundreds of Investment Decisions a year, and now we are only making a few on the later stage side. A bad thing on the early stage side was to miss a company that will be great and the a bad thing now is to invest in a company that turns out to be terrible. It is going well so far. Emily how do you manage the signaling problem . If a Y Combinator Company asks for late Stage Funding and you pass, that doesnt look for a formerly y c backed company. Sam we debated this for months. We said wed only raise this fund if we could get really comfortable. So we have put a selfimposed limit on ourselves that we would only looking companies with over 300 million valuations. Below that, it is out of the continuity fund. Above that, it doesnt matter so much. Limit on ourselves specifically to address the signaling problem. Emily why see has funded some of the most popular companies. It is also criticized of becoming part of the hype. How do you advise your company to manage that . Remind our to companies again and again that intermediate valuations dont matter at the height doesnt matter. The only thing that matters is if over a decade or more, you create a lasting value. So we tell the startups to ignore the hype and the valuations because the only thing that matters is how much value you actually create. All of the noise in the First Six Months is completely irrelevant. And there are companies that get a lot of hype. And those can be not too satisfying. Emily lets talk about a few years into a companys lifecycle, a company like benefits or drop ox. Ox. Dropbp companies that people say got ahead of themselves with valuations. What do you think . Sam i try not to Pay Attention to the turnaround valuations. One of the nice things about investing in startups is that they are illiquid. There are downsides to that but one of the things that are good is that we dont have to worry about the fluctuations from month to month or year to year. We just try to buy stock at a reasonable price. So long we hold it for that we will go through multiple business cycles, up and down and up and down. And eventually market gets the price right. So one of the things that is really nice about the way we invest is that we get to ignore all of those questions about whether something is 20 overpriced or 20 underpriced. We wont get it right every time but we dont have to stress too much about the turnaround in the meantime. Emily you and i have already talked about the bubble. I know this is not your favorite question. But you now think we are in a bust. What evidence do you see . Sam i think we are in a bust in centering in certain areas. You can point to certain areas emily like what . Sam im not going to fall for that. [laughter] at earlyou look valuations and the index across the y combinator and companies, you will be pretty happy with how that is going. If you look at a company like apple that is trading at a single digit cash forward number, i think that is a bubble. There are good deals and bad deals. Emily what about what happened with square . The valuation that they have in the Public Market is lower than what they were able to raise privately . Sam there are two versions of that story. There is one where they raised 6 billion at the last round and there is another version of that says there was a company that didnt exist for years ago and now it is worth 4 billion. I think a lot of companies will do far worse than layoffs. Lots of previously highflying companies will go bust entirely. That has been happening since the beginning of time. It doesnt make something a bust it just means that some companies do well and some companies do badly. Average, the index valuation keeps going up then you dont call that a bus just because some companies die. It is actually good when some companies die. It is the sign of a healthy market. Dying thannies were it would be more accurate to call it a bubble. Here on bloomberg, you are part of a speaker series. What do you think new york has to do more of to be taken more seriously in the tech scene . Can Silicon Valley be recreated anywhere else . New york is taken extremely seriously. If you look at the great tech a companies created in the last decade, Silicon Valley has a huge lead. The thing that would help the most with new York Companies is that the longterm attitude that investors and employees in bringing that mentality to new york . Be super successful and make a ton of money but it will take 10 years . That would go a long way. Emily sam altman, president and cofounder of y combinator. Blackberry is choosing privacy over potential profit. They are preparing to shut down the operations in pakistan after refusing to allow the government to Access Private messages. Last july, pakistan asked blackberry for access to the servers, but without a solution, blackberry will leave. Shares of blackberry finish slightly higher today. Weighs in on, the pfizerallergan megamerger. Emily tomorrow on bloomberg, do not miss james tatian at 7 00 eastern. Later, an exclusive conversation with jack lew. Now, to pfizer and allergan. Week,nnounced a deal last that would be the biggest drug company. Most of the deal allows on in version structure, allowing them to take advantage of lower tax rates in ireland. Now me now to check to discuss is Beth Seidenberg. A doctor, you have founded multiple companies and then went into this. This is your wheelhouse. What do you make of this deal . Beth thank you for having me, great to see you. Is an interesting deal. There are economic drivers around the taxes and the ability to have a domicile and on the silent in ireland. There are synergies with the portfolio. What is exciting is that this is a contrary in view. There are a lot of things that come out of a large merger. What we need with biotech, we need innovation. We need great people and we need product. And when you have an acquisition like this, there will be a few layoffs. The good news is with biotech, those are potential nextgeneration ceos. Those are people who can go into the growth stage. We also will have products that will spit out these companies. We started a company five years ago called sorrow. Bought they had a similar acquisition. It was called amend. They spun back out and started a new company and out as a Public Company with a 2 billion market cap with great innovation. And a product that would have sat on the shelf has moved forward. Emily is it a good or bad idea for innovation . Beth there is always a balance in all of these things between d. O. I. And already and rn from King Pharmaceuticals and going back many years to pharmacy a and the r and d budget has been stable. About 1. 5 budget is billion dollars per year and when you put them together, they will spend about 8 million a and d. Rmb on r charlie being how do you see it affected, Smaller Companies competing for business . Companies willer benefit because there will be great people coming out of this merge. He will have thousands of people out of work who can now go into biotech companies. Theyn the Large Company will have to figure out what the priorities are. When youlear to me, look at the timeline, which programs will survive. The ones that arent going to survive will have someone who has a catchers mitt. Emily there has been a lot of m a recently, why is that . Beth there has been. They had patent expiration and they had a lot of drug pricing pressure. Now the same is happening in the biotech world. You see Companies Like amgen and they need to buy that to balance the patent expirations. That company doesnt have a marketed product but it fills a pipeline void. Actually, the whole ecosystem is working together. It is creating innovation but in different pockets. To getso are you rushing a new drug to market because you see all of this activity out there . Do you see it as a possible benefit . ,eth the larger question is overall, for the biotech companies, the share prices have gone up on average about 4 . For biotech entrepreneurs, it can be a good thing. Pfizer now has more cash offshore that they can leverage to buy new things. M a indo you see more 2016 . Beth absolutely. Largest5 has been the m a. T of largescale we are projecting to see the same thing in 2016. It is a macro dynamic. The biotech industry is a big one and they see passant expirations coming. They need new products and theyre going to get that by acquiring Smaller Companies. Emily all right, Beth Seidenberg is sticking with us. If you are a working parent at facebook, Mark Zuckerberg is the parent of the year. He recently announced that he will take two months of paternity leave following the birth of his baby girl. Parentalending the leave policy from two months to four months. It begins january 1. Emily we are watching fitbit today, they are finishing up after Matthew Mcclintock upgraded the stock saying there is strong growth protection growth potential. Target said the Fitbit Charge has been one of the most popular gift items this season and best buy added that shoppers bought twice as many wearables on thursday and friday than they did last year. With wearables, we have been talking about the impact of the pfizerallergan merger. Seidenberg, is beth what do you think about wearables . Fitbit has been up and down and up today. What is going on . Beth wearables are here to stay. People want to measure how they are doing. Issue in is a huge this country with obesity and diabetes. We will talk about that later. To manage those conditions you need to know what you are doing. And people are getting used to tracking their steps and their weight loss and being able to manage themselves. One of the key questions is, what do you do with the data . Is it something that you want to do every day . A lot of people get bored and stop using them. But then there are people who need these devices to actually keep themselves healthy. And now the question is, can we take the data and put it in the to inform physicians to help manage the patients . I want to talk about some of the things in your portfolio. One of them are them is cancer treatment. What progress are you seeing . Beth we have a long way to go but one of the big things we are seeing is immuno oncology. The immune system usually keeps this in check. We had a right through class of therapies, and those are now able to harness the immune system to kill and take care of cancer. We have a couple of companies that we are excited about. One is working on small molecule pills. Re going to have cancer cured anytime soon . Beth we will have one cancer at that will be manageable and you will not die for your die from your cancer. Emily you are looking at Digital Therapeutics and redefining benefits. Beth yes. Digital therapeutics, there is an important area in diabetes. It is a disease that you have to be managing every day. But right now, we have oneway devices. Labonte bill has put together a is hightech and sink your data in the cloud. There are coordinators who can message you when you need help. Emily i know you guys arent an but theren zenefits, is no question in their future. Do they get ahead of themselves . Beth they are more and hr platform that does benefits. Company thater new just got taken out of self mode and they are focused on benefits. What they are focused on is creating a marketplace that is personalized Digital Exchange that midsize employers can have their employees utilize. Emily we have been talking about evaluations being bullied. Are you seeing that in the biotech . We have seen the highs and we are testing some of the lie some of the lows now. We are calming down. Beth seidenberg, great to have you. That is it for today. We will see you tomorrow. We live in a pick and choose world. Love or like . Naughty or nice . Calm or bright . But at bedtime. Why settle for this . Enter sleep number. Dont miss the ultimate sleep number week going on now Sleepiq Technology tells you how you slept and what adjustments you can make. She likes the bed soft. Hes more hardcore. So your sleep goes from good to great to wow give the gift of amazing sleep, only at a sleep number store. This week only, save 50 on the ultimate limited edition bed. Hurry, sale ends monday. Know better sleep with sleep number. From our studios in new york city, this is charlie rose. The cei eo the cia has played a pivotal role against terrorism. The agency has faced some of the most somber decisions in history. Cia in the crosshairs is a new documentary. Ceostroduces all 12 of the of the operative