Dodge taxes. Day,l news 24 hours a powered by over 2400 journalists in 150 bureaus around the worl. , emily im emily chang, and this is bloomberg west. The latest from facebook, are they really facing a decline, and what type of hardware can they work on . All of that, i had. Plus, a serious setback, ban onors calling for a elizabeth home, and an a longawaited draft of encryption legislation that would force companies to comply with court orders for data. We will break down all the details. Worse to our lead, reports that u. S. Regulators are looking to ban Elizabeth Holmes from the company for two years. The president would also be barred, according to the wall street journal. They had a letter for centers to medicare services, proposed her from banning receiving payments for medicare. Over the last few come months, the tests were not as accurate as they should be. York, is with us from new and max mason from our fast commentary section, as well, and greg ingles, chief executive from a firm that audits last. And our guest host for the hour, keith rabois. Sheila, i will start with you. Have spoken at length with various people from the company. How serious is this . Potentiallys devastating information for them. They have proposed sanctions, send out this letter on 18th of march. Theyre basically saying that they have not taken adequate steps to address insufficiencies that they found in their main lab. They were expecting at them and of their year, they sent the company a letter with five things they wanted addressed, including hemoglobin testing. Now theyre saying the laboratories obligation of compliance is not credible, and evidence of correction is not acceptable. They are basically telling are unhappyt they with how the company is addressing their concerns, and theyre threatening one of the harshest sanctions that they can place to revoke their license and put them out of business. A spokesperson says this is hypothetical. If sanctions are imposed, it could take months. The fact is, we have not received sanctions. Greg, you read through the entire report. What is your reaction . Greg frankly, anyone who is ever audited a lap, and we have several of our senior inspections go over the finding, and had a discussion, they take a while. A lot of the beginning of the documentation books about 150 pages of citation. We are pretty ry. And jive and d it is across multiple departments, not just Standard Operating Procedures not being followed, but multiple Quality Control fails. It is as bad as we have ever seen. That is where it stands. Is mostly centering around the competency of the personnel. 20, 25 page to a report. A lot is rectified in the paperwork process, but there are some fundamental things that are very, very wrong. The supporting documentation was not there to address the deficiencies. And that is why they were upset. Keith, this was a 10 billion company. Investors put money into the , and did not have visibility into what is going on. It does not make Silicon Valley look very good. Inth this company is novel a few different ways. They were not operating in the greatest zone, from what i could tell. Companies and startups should take advantage of ambiguity, but there is a difference between violating a law, and violating regulations intentionally. Flunked labsay they 101. Right, and that is not ok for any starter. But they should do more like uber has done, where there is a gray zone. Acceptable forly startups, that is how we get innovation in america and the world are aware there is a clear line, you cannot violate that line, ever, especially in a federal area. The burden is so high in this particular case. This is a really significant sanction. Is other is in this company anomalous, there were no other traditional Silicon Valley bcs around. This did not go through standard that the things we invest in every day would. That is one of the variables that is unique. Emily it is interesting, max. Theranos has failed to provide evidence that the tests actually work. That is the main thing regulators want. What is your take on what is going on here . Max it shows a pattern of behavior from the company, all that observers have ever wanted purity ofd data, studies, things that are really standard in the medical establishment, and especially, should be, for anything having to do with peoples health. The company says they will continue to provide data, submit to studies and medical conferences. That they have never given a timeline or unleashed visibly to the public. This latest round of allegations and the potential expansion of their license, i think the time a black boxcontinue with their data is running out for the company. Max, sheila, greg, thank you all. Keith, youre sticking with me. Phase two of the Facebook Developers process included a Virtual Reality headset, a selfie pick, and a room full of voters. Theirrviewed the ceo on ambitions and potential sharing problems, next. Emily turning now to facebook, shares of the social media giant flunked at one point, amid heavy trading volume, among comments that spending on facebook was down 18 from the quarter before. They recovered after ad parlor clarify, just a junior level employee made that comment, and his data was incomplete. He did not provide proper context. Such a briefing will not happen again. In the meantime, their Developers Conference continued, with Mike Schroepfer talking about zuckerbergs 10 year plan. There was the potential of social, Virtual Reality. I caught up with him later and talked about a new hire, for building eight. We are super fortunate to have her. There are so many things for us to do, so many things we want to embark on that we have not done yet. She is going to start kicking off some of those new initiatives. She has not gotten in the tolding yet, but we hope achieve this ambition. Emily she worked at google. Broadly, do you see her working beyond these actual scenes . She is going to be building things, everything we do is to connect the world. There is a lot under that umbrella. She will be doing things you have not seen from us, maybe like oculus, it will be confusing in the beginning, because people will be putting together the pieces. But it will all come together for our mission. I want to talk about personal sharing, because we have heard it is down on faith, as opposed to news, or article sharing. What is actually happening with personal sharing, and what are you doing algorithmically, what do you want to be happening with other types of sharing . So many things are happening at once. Youre seeing the rise of live video, people watching a lot of live video. The same thing happening where people are sending lots of private messages, the other whatsapp messenger. It will be interesting to see how this all shakes out. Emily what is the ideal mix . What you going for . Mike the right medium for the right conversation. There are times you want a long conversation, times when you want to share something with all your friends, and times when you want to share something with it the whole world. There is probably a proper experience for each of those that we want to make our own. Algorithmically, what do you want . Are you algorithmically doing things to encourage more personal sharing . It is like an existential problem, because you actually have power over what people see. Algorithmically, how are you handling that . Mike there is lots to do, all the time. You measure the results of these and all sorts of ways, including user settings, where he asked people if they like the stories they saw, do you want to see these things instead . T of the goal is to get give people what they really want. Here are all the possible things you want to read, what are the things you actually want to see . Productst build people like, it is a competitive market, and people will see other things. Emily doesnt that change all the time . Mike people did not know they wanted video and mobile, and now they do. Youre seeing immersive the video and the are vr, something we could have only dreamed of. Emily do you worry that this could hurt personal sharing, and what makes facebook rate . Mike i dont think so. To watch something on tv, or go to a concert, humans are pretty natural about finding different groups they want to interact with. I think we can build products that hit all of those interactions are interactions. Emily lets talk about ai. It is taken longer than we have expected. Mike it is not taking longer than expected, i talked about some of the technology we have been employing to make this work really well. Different of that is about this, it is a mix of humans and Artificial Intelligence to read what you can do is unlimited, you can do anything you want. There is a much Broader Service that develops, these technologies we will need over the decades. Emily facebook has built multiple platform products, mass distribution, and then changed the rules, to cut down on bam, for example. But there are still investors out there that are skeptical. Should we invest our time in facebook . How concerned are you over that . Mike developers are smart and will use the tools for them. This is a challenge in the entire ecosystem. How did they get featured on an app store or get more downloads . That is a very competitive market, very tough. New channels are interesting for people. We are seeing tremendous pickup apps, ways for people to get reengaged. If we provide the right tools, to give people distribution, they will use it. Emily on the other hand, i have seen an uptick on messenger itself. What are you doing about that . Mike a lot of the work we are and other in ai systems, im not sure if your experiences are indicative of what others have seen, but if there are 20 billion messages a day, we do our best. Emily my interview with ceo facebook Mike Schroepfer. I want to pick up keith with this idea of personal sharing. Because you have something to say about it. First of all, you chuckled when i asked what was the ideal mix. You said it is what people want. What is your reaction to that . Keith it is the best possible case mike is making, a difference between a private content shared between friends and family, to more broadly applicable content, where there is life streaming or very very private messaging. That is the best case. Without a doubt, a year ago, there was a significant decline in sharing new content on facebook. The executives on facebook went into a panic from the very top down, to remedy this. So it is not something they are not concerned about. They send the bat signal internally. If you open your facebook app, you will see all the recent photos you have taken our populated any courage encourage you to share that. Facebook has a clever growth team, with very smart people working on encouraging users to share more. The market is always based on sharing. But maybe it has to change over time, but it will change, if sharing continues to decline. Emily Facebook Says it sharing overall, is still strong. Said, and if there is a decline, facebook becomes a wellcurated twitter. You said true, but a total sharing is in decline, which it has been for over a year, facebooks statement says sharing rates are on par. And you said that that was misleading, and talk about some of the panic, and say you might short twitter and facebook. Keith obviously misleading, if you make the number one priority sharing. It depends on what methodology you use. Back in the day, we could calculate what percentage of our users came from ebay in five different ways. Some were positive, some were worse. There is always room for how you describe the data publicly. That is why i say it is arguably misleading. Content unique to me and my crowd is on the decline. What is not there, is the total mix of sharing, how that is calculated, and what it is improvement including. Is it including messenger . We would not assume that, by intent. It changes the nature of facebook, and the longterm viability of facebook. Emily interesting. My colleague was recently speaking with someone no longer invested in facebook, and asked if you would like to invest again today. Take a listen. Yes, i would be. How about twitter . Companies as we are out of some of the positions, im following the very closely not really interested in twitter at all, it seems from that statement. What do you see on the path for twitter, and for facebook, overall user growth on twitter has plateaued, and on facebook, things are changing. The whole idea of what facebook is. It is dangerous when you have a monopoly, a Network Effect very it may take a while for people to figure out how to take advantage of that, or what it means for users. For example, private sharing may be better for snapchat, and public sharing better for things like twitter, which have a followmodel. I would rather send this to the broadest possible audience, which is better for twitter and facebook. Shifts, the how it structural advantage of Many Companies may shift, also. They may be right about shorting twitter, but it could also be better for twitter if all the istent shared in the world mostly around politics and peoples perspectives on society, rather than things intimate to themselves. Emily interesting. Rabo with me for thei hour. S detailed next. Emily turning now to the broader markets, u. S. Stocks climbed the highest in four months. Ramy inocencio joined us in new york, with what tech movers moved particularly far. Ramy basically, it was a broad green across the board. Numberse where the stand. S p 500 up 1 , but that was the least of the gainers. Of higher, the nasdaq of the most, at 1. 5 . That is its highest since new years eve. Good chinese data that we thought, as well as earners of these estimates over a jpmorgan. Lets take a look at some of the biggest point gainers at the nasdaq. This is where they are. Apple up by 1. 5 , but amazon even be that, up by nearly 2 , alphabet of by 1. 2 . All seeing gains not seen in the past two or three months. That, i mentioned good chinese data. What we are seeing, hearing the are, chinesebased stocks going above because of that data. 3 or even 5 in particular, the reason for this is because of chinas overseas shipments. In march, they rose youre on your. That is a sign that chinas economy could be strengthening. Also, i want to look at a couple of stocks in the playful sector. First to activision, writing a little more than 5 here. That is because of an upgrade to people boosting the target from five dollars and up. A record year for blizzard, based on a new game. And they are optimistic on call of duty. Most sinceying the july of 2014, up by a little more than 19 here. The news off of this, is a rare defection from apple to gopro. Longest serving designers could be pushed by gopro to be a little more classy, get some of the magic back. Emily . Emily all right, new yorks ramy inocencio. Up, draft encryption legislation is out, mandating that companies would have to comply for court orders requesting access to data. Mark after months of mounting evidence, scientists are ready to say definitively the zika virus spreading across the americas is spreading birth defects. The virus is linked to a spike in microcephaly, which causes babies to be born with of normally abnormally small heads. The virus has been reported in 33 countries. Louisianas governor has issued an executive order banning discrimination based on Sexual Orientation or gender identity. The order includes an exemption for state contractors that are religious organizations. The south korean president s ruling party suffered a setback in parliamentary elections, failing to win a majority in the national assembly. And is limited to one term was trying to gain a large enough majority to execute key legislation. A Committee Vote was canceled for tomorrow on a plan to help puerto rico restructure its 70 billion debt. The white house warns without congressional help, puerto rico faces economic collapse. Say assisting the u. S. Territory would set a bad precedent. Dayl news 24 hours a powered by 2400 journalists and 150 news bureaus around the world. I am mark crumpton. It is after 6 30 wednesday night. 8 30 in sydney. Paul allen joins us with a look at the markets. Paul another strong day on wall street. The s p 500 erased losses for the year. Investors were expecting great things from the asian pacific. New zealand is looking flat right now. Asx aftercted on the iron ore pushed above 60 a ton. It will be interesting to see how sustainable that is. Is strengthening yen expected to hold Profit Growth on earnings which began four years ago with shinzo abes policies. The bank of japan governor is speaking in new york within the next hour. , we arein australia expecting unemployment data for march. It is expected to show an increase to 5. 9 . Though, it is notoriously volatile. I am paul allen for bloomberg tv in sydney, australia. Emily turning to encryption. And diannechard Burr Feinstein have released a draft of a bill that would require companies and individuals to comply with court orders to protect citizens from criminals and terrorists. Feinstein said, we need strong encryption to protect data and we need to know when terrorists are plotting to kill americans. They are soliciting input from the public before introducing the bill. As the public and private sector grapple with the fallout from the debate and a death to a new normal of tighter encryption. Ski, joined by luke dombo former attorney general for national securities. It has been exciting and dramatic times in the world of cyber law. What is your reaction to the encryption bill . Should companies be required to fulfill all Data Requests . Guest first, thanks for having me. It is a very emotional debate. I have not reviewed the proposal. I understand that many Industry Groups have come out against it. Essential thatbe any legislation have broad support to have any chance of passing in the end. Emily what is a realistic and productive way for Tech Companies to work with the government . Guest many have been trying to work with the government. I think the answer is to find a balance between privacy and security. It is not something that is completely out of reach. Whether this is the right approach remains to be seen. Emily in june 2014, apple and turned on encryption, making things more difficult for lawenforcement. When you are at the doj, what was the reaction . Guest i was close to these cases. I do not want to talk about one particular case. It is very difficult as a gene