Transcripts For BLOOMBERG Bloomberg West 20160528 : vimarsan

Begin in august. The state of michigan is paying all the water bills for flint residence this month. Hell wait toays debate the official president ial nominee and not candidate bernie sanders. The senators campaign released a statement reiterating its interest in debating trump, saying the campaign has received two offers by tv networks. Global news 24 hours a day powered by our 2400 journalists in 160 news bureau around the world. I am mark crumpton. Bloomberg west is next. Emily im emily chang and this is bloomberg west. Coming up, the plot thickens around the 81 million heist be a bangladesh central bank. Is the infamous group behind the sony hack behind it . Plus well speaking to a former employee about his experiences in the facebook unit. Plus are cell phones increasing our risks of cancer . Some scary findings for the very first time. But first to our lead and i report from the Cyber Security firm that suggests a recent hack on the central bank of bangladesh in which delrds 81 million was stolen. This may be just the latest in a string of attacks on a swiss network. The report links the bangladesh breach to an october attack on a bank in the philippines and the same group are blamed for stealing millions from an ecuadorean group. So how vulnerable is the rest of the financial industry . Im joined by symantecs technical director and security c. E. O. Eric, i will start with you. So your research linked the swiss hack of the central bank of bangladesh to this philippines bank. Tell us more about the connection you found . Thanks, emily. Yes, we found the malicious applications in bangladesh as well as vietnam and in the philippines now had similarities and shared code with code used in south korea to wipe a variety of banks and broadcasters there as well as the sony attack. Emily the chairman of the s. E. C. , mary jo white, has said she believes Cyber Security may be one of the biggest threats to the industry. She says policies and procedures are not tailored to their speck rinks. So how do you think, how vulnerable is everybody else . Two great questions. It really doesnt matter who is behind it. Thats for Law Enforcement to figure out who the criminals are. What does matter is that this organization has been broken into, and whether its lazarus or somebody else, theyve exposed flaws in how they handle their swift data. I think the criminals did something intelligent in going after easy to pick institutions without a lot of international stature. Its a really elegant hack. What it really proves, the swift is 32 years old and its based on a 1970s and 1980s trust model where banks were very small entities. No one predicted in 1973 that today a bank would have thousands of partners. Every bank is highly porous. You have so many mobile employees. Very few organizations have done a proper risk analysis. Theyre still working on 5, 10, 15yearold risk models that need to be updated for the modern era. Emily what is the evidence that this particular hack could be linked to north korea and this particular group linked to the sony attack . Yeah, well, specifically the code inside the incident in bangladesh, there was a little bit of code inside there and its been traced back to multiple other attacks including the sony attacks. The sony attacks were attributed by the u. S. Government to north korea. You cant tell if it is north korea itself, but the fact that this is potentially a nationstate really raises the bar now, changes the threat model. Weve never seen a nationstate go after direct financial gain in the past. Typically theyre things like espionage or sabotage against other countries. Now we have one going after financial gain directly. Emily what do you make of that . It does seem particularly unusual for a statesponsored attacker especially to go after money rather than data . I agree. I dont know that this is north korea or somebody else doing it. It could be it was sold or licensed to somebody else. At the end of the day, who is behind it is really not my concern. How we can protect our clients and the industry is what we focus on. At the end of the day it doesnt matter if a kid carjacked your car or a sophisticated gangs. What is important is theres been a breach of multiple organizations and every Organization Needs to review their policies and protections and decide what is the comfortable level of risk for them. A lot of reluctant because it is painful, expensive and at the end of the day its usually embarrassing and thoughtprovoking because most people dont realize just how open and vulnerable they are. Emily could other big banks be at rive, like the fed . Yeah, absolutely. This is not the first time. Weve seen banks including u. S. Institutions breached in the past. This simply raises the stakes now. They tried to transfer 1 billion. They were only able to transfer about 80 million out of bangladesh. They need to review their security even more so today than before. Emily so where do you think this money could be going . And if somebody is holding on it this money, isnt that something that could be easily tracked down . I agree. The biggest challenge they have is not getting too greedy. Had they actually not committed the typo and gotten the 1 billion, id be really curious to see how they could launder the money. There is an old saying in criminal organizations, its not how much you steal, its how much you get away with. Unless they have already built an infrastructure for serious largescale Money Laundering through panama, caymans, or elsewhere the it could be a trial run for much larger thefts or could just be a gang of opportunists who planned really well and attacked lowhanging banks that got caught with their security around their ankles. Emily interesting. Thank you both for sharing your thoughts with us today. A story we will continue to physical. To follow. Shares of apple fell slightly in trading friday after the shares were slashed. But before that the shares had been making a bit of a comeback. Apple considered a bid for timewarner last year, sparking immediate action in timewarner stocks. It sounded like a oneoff comment in a single meeting that didnt go very far. If you look at apple and the scale. Businesses that they would want to be looking at, i would think if theyre looking to get into video they would be looking at a platform more than a content business. Emily coming up, does twilios i. P. O. Mean something . And how to make your own music videos. Work, work, work, work. Emily one of the largest strikes in u. S. History is over. Verizon reached a deal with its two labor unions on a new deal. This means 32,000 land line employees may return to work next week. Full terms were not disclosed. The Company Likely did not add any fios or broadband customers during the strike. It may way on the monthly jobs report set to release next week. Rare i. P. O. In the technical landscape. Twilio filed papers with the s. E. C. It works with major tech players like uber. It plans to list on the New York Stock Exchange under the Ticker Symbol twl. The slowest i. P. Rate since the recession, 73 Companies Went public lick in the same period last year. When you look at the financials of twilio theyre losing money. Did they want to go public or did they have to, max . Probably a little bit of both. Normally when there is a little bit of risk in the market and people are nervous, a business to business play that doesnt have the vicissitudes of having to mace off is preferred and theyre trying to get debt or suck it in and jump out this and hope that the i. P. O. Market is kinder to them than subsequently to folks who went out in 2015. Emily there have only been a couple tech i. P. O. s next year and out the next six months, maybe six more. Will twilio open the door for other companies . Or are they just not going to go . Definitely an all eyes scenario. If this is a runaway success, it will inspire folks who are in need of going out but havent yet. Some got their first funds 10 years ago, which means theyre sitting there and need and want liquidity. But we dont know how many are out there. Its a little more secretive approach than it used to. We do not expect 2016 to be one for the record books. Emily reports are that they hired bankers to look into this. The only company we think may actually go public is bluecoat, and what do you actually watch . Any specks . We definitely watch nutanix. There is going to be activity at some point. There are a lot of Big Companies that would have been public in other eras, nearing or over 10 years in age. Normally the v. C. Funds that back these companies have about a 10year duration with two plus companies. They can add a year without runing a foul of partners or investors. We see a lot of big names that would normally be public, like uber or lyft. We definitely think nutanix has a chance to come out. Private company multiples are a little bit higher than Public Company multiples and we need to see that worked out better than it was last year before the key names that can track their own course are ready to hold their breath and jump here. Emily as always, max, thank you so much for joining us. Thank you. It was a pleasure to be here. Emily in this edition of out of this world, space x has Just Launched its fifth rocket of the year. Landed it on a barge 400 miles off the florida coast eight minutes after liftoff. They had already successfully landed three of the rockets. The falcon 9 blasted off carrying a commune satellite, taking space,closer to their ultimate goal. No other company has managed to launch an orbital rocket. Astronauts tried to figure the bigelow air space pod approximate with air on thursday but gave up after two attempts. Officials say friction between the two layers kept the chamber from expanding to its 10foot size. Its hoped it will one day help astronauts orbiting earth. Coming up, a c. E. O. Wlage the allimportant question for Tech Companies these days. The shift to the cloud . Emily a potential deal in the making. Marchetto shares soared friday on two separate reports of a potential acquisition of the cloudbased software. Street insiders cited people familiar with the matter saying microsoft is ready to bid. Bloomberg had reported earlier this month that they were exploring a potential sale. Their customers including charles schwab. One of its smaller rivals was also out with results. Today, netap was out with earnings. While the initial selloff didnt last long, shares were still down about 20 from a year ago. Joining us with more on the health of netap, george kurian. Thank you for joining us. Thank you. Theres been a lot of changes in the market, one the move from solid state or flash storage and then how people want to manage data and the cloud. Weve seen real strong acceleration in that part of the business. Emily youre saying that this is just temporary for now . Weve laid out a plan to transition from the Pure Products which were the pro dominant part of our business a couple years ago to the strategic products the were really pleased with the strategic products. Emily the problem is there are a lot of competitors now. How do you compete . Its always been competitive. The most important thing when you think about competition is think, focus on the customer. Were enabling them to take advantage of. New ways to manage datea. Hike hybrid clouds. What we allow them to do particularly is to store their data protected and to meet the requirements of data sovereignty. Emily theres been a slowdown . Certainly in the macro environments. And that does affect peoples planning for the rest of. Fiscal year, so they do transformative projects that move their business forward. Were really focused on capitalizing on those trends and growing with them. Emily one of your most direct rivals is e. M. C. , which is about to merge with dell in the largest merger in tech history. What do you think of that . Its a very commex complex transaction. Its a great deal for the investors but were not sure its great for the customers. With you saw some of that in the results of the Fourth Quarter this year. Emily its interesting because h. P. Went in that direction, then now went in another direction. Is that good . We believe that in times of really rapid market change, focused companies are set up better because you can rapid lir respond to customer requirements. Thats what were doing. Were pivoting to where customers warrant to take their i. T. Journey. Emily we talked about the lull in the industry. What is your take on what you have seen in the Public Markets and what impact thats hag having on the private side . You have to have really great resources, a scalable Business Model and many of the private Companies Just arent ready to be in the market. Its vetting out the real strong, survivable players from the weak ones. Emily it certainly seems like amazon is just so far head of everyone else. We think its the first inning of a nineinning ballgame. Hybrid clouds are being built around the world. The data rules that Different Countries demand different ways in different parts of the world and thats something were helping our derls companies do. We announced a large win for our Telecommunications Provider in the Pacific Region which allowed them to, their customers to take advantage of all the different clouds, whether the alibaba, amazon, or googles cloud. Thats a very important part of the world going forward. Emily thats net aps george kurian. Thank you very much for joining us on the show. Thank you. Emily thermal fisher will continue to beef up its suite of testing and other services. The deal expected to close early next year. The shares rose almost 14 on the hope that the deal with go through. Coming up, his take on the trending topics in controversy. That is next. Mark i am mark crumpton. You are watching bloomberg west. President obama made history friday in japan. He became the first sitting american president to visit hiroshima, where the u. S. Dropped the first atomic bomb in 1945. The president said the bombing shows that mankind has means to destroy itself. President obama we come to ponder a terrible force unleashed in the not so distant past. We come to mourn the dead, including over 100,000 japanese men, women, and children. Thousands of koreans, a dozen americans held prisoner. Mark it is estimated the hiroshima blast killed 140,000 people. The president met with those who bore witness to the bombing. Survivors praised mr. Obama for, as one said, touching peoples hearts. Without apologizing u. S. Action in world war ii, the president said the hiroshima bombing demonstrated that mankind does possess the means to destroy itself. Japans Prime Minister shinzo abe says he will decide this summer whether to go ahead with the planned increase in the sales tax. In the past he said the tax hike would be delayed only if there was a major earthquake or a huge corporate collapse. At the g7 meeting, abe warned the Global Economy faces a significant risk of another crisis. Russian president Vladimir Putin is criticizing western policy towards moscow during a press conference in athens with greek Prime Minister alexis tsipras. President putin described a u. S. Missile Defense System in romania as a threat to russian security, telling reporters of course it is a threat to us. It can easily be modified to have an aggressive capability. The Olympic Committee says that athletes from the 2012 games have failed doping retests. The ioc keeps doping samples for 10 years. The government is out with a forecast for the atlantic hurricane season. There is a 45 chance it will be normal. Last year was slightly below average with 11 named storms including hurricane joaquin, which killed 33 sailors. The new season begins tuesday and ends on november 30. Memorial day weekend flyers say security lines are moving faster than expected. Bombsniffing dogs are being used at busier airports to speed up lines. From bloomberg World Headquarters in new york city, i am mark crumpton. Emily facebook has concluded there is no evidence of bias against conservative stories in its trending topics unit, but questions over its power in media persist. Facebook maintains trending topics are determined by algorithms, but humans make the algorithms and certain decisions in the process. Joining me to discuss, one of those humans, jonathan koren, a former Facebook Software engineer who worked on the algorithmic system for the trending news section. He joins us from beijing. With me in the studio is mark milian. Thank you so much for joining us. What exactly was your role in the trending topics group . Jonathan i worked on the algorithmic personalized ranking. For those who have not been following this completely, people are kind of in the middle of a threelayer sandwich. There is the algorithmic portion that determines what kinds of topics are trending and people go through that list and decide, yes, this is one we want to potentially show to people. The third layer was my layer, which would say that of the things people had marked as yes, these are things facebook would potentially show to the audience, i would then choose what would be the top five or top 10 whatever that you would actually see listed on the site. Emily so a human would make the final decision . Jonathan the ultimate decision, what i actually saw, was by a computer. If you look at this, you would have thousands of things detected and then a human would cut that down to a few hundred or so that could potentially be shown and the algorithm i worked on would actually show the top five, top 10. Emily first of all, did you ever feel there was bias against any topics, specifically conservative news . Jonathan no, i never saw anything like that. There certainly isnt a conservative penalty in the algorithmic ranking, there was never anything like that. We talked about having a mix of topics, such as we wanted more hard news topics, sports topics, entertainment news, things like that, where you didnt want to have it just be constantly we didnt want it like the wall street journal but we also didnt want it to be a People Magazine type thing. We wanted a mix of everything. Emily at the same time, you wrote a post where you talked about how even if an algorithm determines what is trending, a human makes the algorithm, and you said in the post, confronting the many limitations, technical and human, ai is not magic pixie dust that makes the problems go away. It automates poorlydefined goals with all the assumptions and biases therein. What do you mean by that . Jonathan what i mean by that is well, what i mean by that is that there seems to be an assumption that we will throw enough data at this problem and things will magically work out. We will get the best results for everyone. But that is not really what goes on. When we talk about that we want to show the best things to people, we want to show what is most relevant, most informative, most endearing, whatever type of quality you want to put. When it comes down to it, we say well, we dont want to show nothing but sports, so let that be some number. We look at it and say what gets the clicks is most important. But that isnt always what captures the value of what we want is. Sometimes, well if you liked it or it is close to you, it must be important to you. Mark when you are involving humans throughout the process, that inherently leaves the possibility that humans will introduce their own biases. This is a criticism lobbed at the press itself, but when you consider that facebook is a Company Based in california, many people working on the system were young kids just out of college, most likely liberal leaning california residents. Doesnt the entire way the system is built lead to the possibility that they may be accidentally introducing their own biases . Jonathan i think the type of biases that the company is wanting towards is more middleoftheroad, vanilla, nonconfrontational thing. This is one of the reasons there is the list they talked about in the gizmodo article and facebook confirmed that these are a list of approved sources. Those approved sources are there because theyre considered to be sources that are in the mainstream. These are things that the audience actually reads. We talked about having, oh, if it is a National Trending topic, it needs to be shown on so many of these things, like 10 major news outlets. These were all mainstream news outlets. These were not like fringe news things. Things like the New York Times, the washington post, things like that. Inherently, there are those who say that the New York Times is biased. Well, maybe, maybe not. It is kind of the general consensus that yes, it is the party the paper of record. And so that is a thing that they want to have this kind of trying to go to a neutral thing, neutral voice, but that voice is not necessarily neutral. Emily i thought it was interesting that Mark Zuckerberg revealed that fox news has more interaction on facebook than any other media outlet by far. Jonathan i would not be surprised. They have a very vocal and active audience. They play that very well. I mean, that is part of the media game. More power to them. Mark so you werent sort of making the editorial decisions per se but you worked specifically on the algorithm. I want to ask a general question about the concept of algorithms, the way it applies to Google Search results and the facebook trending topic. Can the algorithm be nonbiased if it is coded by people . Jonathan i mean, it does what you say it does but that doesnt mean it is doing it correctly. A lot of these things tend to be statistics. There is truth to the old saw that there is lies, damned lies, and statistics. You pick the data you get and that will inform it. We have seen propublica had an article out early this week about some algorithm being used to determine recidivism rates and it turns out it appears to be biased. According to propublica. What you say you are optimizing for is maybe not what you are optimizing for and what the data is doing, there may be biases in that. It is easy to make an algorithm that socially is not appropriate. Emily ok. Im sure this is something we could debate for hours but we will have to leave it there. Former Facebook Software engineer jonathan koren, and Bloomberg News tech editor mark milian, thank you both. Do cell phones cause cancer . A Government Program wants to end the argument once and for all. Emily the longrunning debate on whether cell phones are harmful to our health has reignited. Research from the National Toxicology program in the u. S. Has linked cell phone radiation to cancers in the brain and heart. The study is one of the biggest programs undertaken aimed at confirming the Science Behind the issue. We are joined from philadelphia by our Bloomberg View columnist faye flam. For many years they said there were not risks from cell phones and the high risk of cancer. What do you make of the new study . Faye well, it is one of many, many studies, so you have to look at it in context. It is like the studies that show coffee is either good or bad. Dozens of studies have been done. Some of them have shown a possible very small effect. Others have shown nothing. I think if you put it into context, this is just another one that may show a small effect but it hasnt been replicated. And it is also in lab rats, not in people. Emily well, it is interesting that they find the tumors only occur in male lab rats, not female rats. What do you make of that . Could you be more likely to get cancer from cell phones if you are a man rather than a woman . Faye well, i think these results can be hard to interpret. I dont know with any of it can be automatically extrapolated to humans, especially considering its just a few rats. The statistics werent overwhelming in the study. So i wouldnt necessarily take it to mean that men should worry more than women about cell phones. There was also another interesting thing i noted in the results, which is that the mice that were exposed to the radiation actually live longer than the mice in the control group. Emily but interesting, they didnt release a lot of data about the mice that were involved in this particular study. Do you see any nearterm action here, any new Health Standards . What happens next . Faye i dont think that this is likely to lead to new Health Standards. This has always been a controversial issue. There are people that are true believers. The bulk of the Scientific Community has never really been convinced because the studies are, for the most part, show the effects are either not there or negligible. And there is no really good mechanism. I think people hear the word radiation and they tend to assume that this is something we know causes cancer. It really all depends on the energy of the radiation. The energy of radiation from your cell phone is not the type of radiation that is known to cause cancer. Emily all right, well, it is certainly something we will continue to follow. Faye flam, our Bloomberg View columnist, thanks so much. An update on a story weve been following this week. Peter thiels war on gawker media is drawing sides. The ebay cofounders First Look Media is publicly throwing support behind gawker in its appeal over the judgment awarded to hulk hogan. Peter thiel financially backed hogans suit against gawker involving a sex tape that was published. In a statement from general counsel, it says First Look Media is organizing an amicus effort around these concerns and we will be paying close attention as this case moves into the appeals phase. To be clear, this is about press freedom, principles on which our company was founded and about which we care deeply. Coming up, step aside, beyonce. A bit of friday fun as we look at my efforts to become the next singing superstar. Emily the shanghaibased social platform musical. Ly gives fans a tool to take lipsynching to the next level. I asked ceo alex zhu to explain why this app is taking the u. S. Teenage audience in particular by storm. Alex we have a lot of features relating to social interaction between user a and user b. One of the features our users talk about a lot basically, if i create a video based on a specific song, another user can create their version of it and the app will combine two videos into a single video. It looks like a collaboration between user a and b. This generates a lot of conversations between the user and it came from this social interaction. Emily you have a background in enterprise software. You worked at sap for years. You had a completely different vision of this and what it became. Alex i spent a lot of time on sustainability applications but my passion was always in Consumer Technology and especially in social media. I want to study the humanities, the psychological factors, and how we can make an application that allows people to meet and make some magic together, right . In 2014, i was working for sap in the area of education, doing some research on how the education industry will be transformed by new technologies, especially mobile applications. And my friend was based in shanghai and he was also doing something related to education, and we came up with an idea to make an education social network. Emily move back to china alex right, right. Emily you started the app, and it became something completely different. Alex we pitched the idea to vcs and we got money, we built a team, spent six months on the obligation, but that Education Network idea didnt take off. So we had to find something new to work on. This something new has to be based on the Lessons Learned from this previous failure. We got the Lessons Learned. If you build ugc, User Generated Content community, the content has to be extremely light. The creation and consumption has to be within seconds. Second, if you want to build a community that grows fast, it has to be something related to entertainment, because by nature, people want to get entertained. Education a lot of people are passionate about learning, but it is just a niche. The last Lesson Learned is that it is always young people who are early adopters of new social media. We have to focus on young people. Emily you have completely unknown teenagers becoming stars on this app with millions and millions of followers. What do they do to gain that following . Are they on this everyday multiple times a day . Alex when it gained popularity last year, the primary use at that time was lipsynching and dancing. Millions of teens came to the app doing lipsynching and dancing. Those videos were hilarious. If you watch those videos, those teens have invented a new body language, this and that. Very entertaining, and using the entertainment factor we were able to build the social graph. People started following each other and having conversations. Once you have the social graph, you notice the behavior has changed over time. Emily you have ariana grande, meghan trainor, jason derulo on the platform. How much time and investment are you putting into getting famous people . Alex a lot of musicians, artists, it came automatically. It is a new platform that allows artists to promote their songs and engage fans in a new way. Emily but you do have a team in San Francisco focused on this. Alex small team based in San Francisco dealing with artist relationships. Emily do you see yourself competing with snapchat . Alex no, we dont. We think what we are doing is unique. There is no direct competition. But we always want our user base to spend more time on the app so in that sense we are competing with all apps from a timespent point of view. That is how we look at it. Emily you are based in china. What is it about a chinabased app that speaks to u. S. Teens . Alex i think today, especially for mobile applications, it becomes more globalized, especially if you can gain traction without having to spend a lot of resource in doing marketing and promotion. It doesnt matter where the team is based. As long as you understand the psychology of your user base, as long as you have constant interactions with some users and get feedback, i think it doesnt matter. Emily musical. Ly cofounder and ceo alex zhu. Tech insider reports that toyota is close to buying boston dynamics. Earlier this year bloomberg reported that its current owner google was looking to sell because it wasnt developing products that could quickly brought to market. Toyota is pushing into the robotics world, working on selfdriving car technology, investing 1 million recently in a new Robotics Institute based outside of boston. Before we go, we will leave you with one story we are geeking out about. Facebook and microsoft are teaming up to build an undersea cable to deliver fast Online Services to customers. It will stretch 4100 miles from Virginia Beach to bilbao, spain. It is designed to have a bandwidth of as much as 160 terabytes per second, the highest capacity of its kind. Construction will begin in august and is expected to be completed by october next year. That does it for this edition of bloomberg west. Tune in this weekend for the best of bloomberg west. You will see all of our great interviews from the week. Have a wonderful long weekend, everybody. We will be back on tuesday. The following is a paid advertisement for timeless music collection. It is the attitude. The killer guitars. American woman, stay away from me. American woman, mama, let me be mark goodman those