>> from pier 3 in san francisco, welcome to "bloomberg west" where we cover the global technology and media companies that are reshaping our world. i'm emily chang. every weekend we'll bring you the "best of west," the top interviews with the power players in global technology and media companies that are reshaping our world. let's get straight to the rundown. a white house advisory panel is calling for significant limits on government surveillance including stopping the n.s.a. from collecting and storing billions of phone records.

angry customers after rates surge in a snowstorm. we debate. and google now owns the cheetah. big dog and other robots from boston dynamics as it bias yet another robotics company, all part of a project led by andrew ruben. we begin a debate over government surveillance. this report is the work of an advisory panel appointed in august. the panel says surveillance should continue but with significant restrictions. their 46 recommendations include making it harder for the fed to get access to phone records by having phone companies or a private third party store call data. the government would have to get a court order to access the records. the panel is calling for new criteria for eavesdropping on foreign leaders.

so what could these panel recommendations mean for the relationship between government, tech and your security? i spoke with a c.e.o. and former n.s.a. cybercenter employee, bob stazio and daniel o'connor at the computer and communications industry association. i began by asking bob about the risks of cushing surveillance practices. >> i believe really what it does s slows down the process >> hijackers were communicating with i believe elements in yemen. following that, we were not able

to collect that intelligence and nalyze it. analyze because it was emanating from within the united states. after that, the 9/11 report, a recommendation was made to change some of our collection ability in order to catch intelligence items of that value. if we swing the pendulum the other way too much into the privacy realm, i think it might slow down our ability to find things like that. >> so you think if these recommendations are implemented as is, that they would be dangerous? >> not all of them would necessarily be dangerous. as i was saying with my pendulum analogy, following 9/11, we swung the pendulum from privacy to security. there is always that balance between privacy and security and we are trying in this recommendation to point to the needle to the preferred area where it would be the sweet spot. what this does is it goes more

towards the privacy area and may sacrifice some speed in our ability to process information. >> daniel, you're part of a lobbying group advocating. -- advocating for privacy. the privacy groups want more privacy and protections. how is it being perceived in the technology community so far today? >> thanks for having me on. it's a great step forward and it's a 300 page document. my colleagues and a different tech companies are going through this as we speak but it's important to start this in balancing security and privacy. after all, your viewers know that international markets represent some of my member companies biggest targets right now. it's important for internet users across the globe to get his right. it could be a vast blow to our

economic security and that's another thing we have to consider. is not just national security but the health of the u.s. economy going forward. >> you represent facebook. mark zuckerberg has said the nsa blew it. what do you think he thinks about these recommendations? are they strong enough in the direction he thinks they should go in? >> it is a good start. i'm not going to speak for mr. zuckerberg, but there are important things on the table. it makes it harder to collect nd analyze metadata and it requires a court decision from the other day that said it's a violation of the fourth amendment. another thing i like about this, and needs to go further but it's good to start this conversation. it discusses international users. facebook and google have half of their revenue coming from overseas. if their users do not feel like google and facebook can be trusted with their data, then it is going to be a huge blow to

their business and bottom line. the other day, cisco released in its quarterly statement that their overseas sales have already been affected and there is a new study that shows the damage to the u.s. cloud computing and hosting economy could be over $30 billion over the next five years. it's important to get this right. >> in terms of getting it right, my question for bob, are we going to swing the pendulum towards privacy until something bad happens again and it will go back in the other direction? > that is a possibility. i believe nsa and the intelligence community has a lot of oversight. there is an executive and legislative oversight over the intelligence community and certainly the nsa. you have to realize the people behind the scenes are constantly trying to move this process and balance as time goes on. when a large global event occurs

like this, for the snowden documents, this is a catalyst in order to swing the pendulum back towards privacy just as 9/11 was a catalyst to swing the pendulum back toward security. that's how the process works but it's happening in smaller iterations all the time but we just don't hear about it in the public every day. >> you wonder how we find a balance. you worked inside the nsa at the cyberunit for years. what you think the nsa is doing wrong? >> i was not really on a decision-making authority to determine where we were able to stop our privacy limits but i really think it's one of the best methods we have for handling this very difficult problem. there's really no better way than we've come up with. it's a challenge to try to protect the united states, try to protect u.s. persons because the problems are not going away. there are threats out there and

they happen every day. in my opinion, this was a very balanced in a calculated measure with a lot of oversight. >> that was daniel o'connor of the computer and communications ndustry along with bob stasio. what is the social network doing to appeal to marketers and keep users happy? that is next on "bloomberg west." ♪

>> i'm emily chang. this is "bloomberg west" on bloomberg television, streaming on your phone, tablet and bloomberg.com. facebook is getting into video ads as the company looks for new ways to make money. select users will select ads for the new film divergeant. the ad will play without sound just like videos from friends do

now. the sound will only be turned on if the users clicks on the sound. cory johnson drilled down into how this could change facebook's dvertising business. these ads could generate up to $2.5 million in one day. these would be short ads, 15 seconds. the audio only happens when you click on the ad. the hope would be this would be another tool. >> let's take a look at how facebook ad revenue has grown since its i.p.o. mobile has become a bigger piece of the pie, but what else? >> we have seen some consistent growth. the numbers at facebook are big. we'll thump in with other things like 2013 but it is nothing like it of the kind. the company did $1.8 billion just in advertising revenue in

the most recent quarter, 13 weeks. this is a huge business. the growth, you can see working with mobile advertising. the year over year growth in this segment, also impressive and really growing at a faster and faster rate. so it is big and getting bigger at a faster rate. >> now how could video aths impact the growth that we have -- ads impact the growth that we have seen? >> fundamentally, it is to get more ads and more con assumption of ads and a higher revenue that costs more for advertiser to run them or marketer. seeing that value increase. that is one of the metrix that has continued to get better for this company, including on mobile. >> that was our editor at large, cory johnson. i spoke more about their ads ith sean amos.

i began by asking him if can do this right without getting any backlash. >> they know their users are a number one priority. unlike other platforms, their users take the experience personally. they know they are going to get it right. they have been testing in in rolling it out. they are out toing the fact that users can psychological past these things quickly if they don't like them in their feed. the audio is off. the bigger issue is will fans and users engage with them. not will they be upset by them. >> will they? do you think they will? >> it depends how brands treat the video content. if they are going to throw up a tv ad, probably game other. if they are looking for a unique content that works on the platform, you can't treat every platform the same. a tv ad is not a 15-second spot on facebook. they are willing to take chances and risks. if they are willing to play with the platform, its can be a

winner. >> by taking risks, what do you mean? what kind of things work? >> all things work. look at what g.e. did with their vine videos? just a simple task and tip. not necessarily ground-breaking but it is pretty useful and cool and innovative. the trick is just really reading the audience and platform and stepping outside the comfort zone a little bit to use the tools that facebook has given them to try something that may be a little bit new territory for them. >> now the tv advertising market is almost $70 billion. how much could facebook conceivably steal? >> they want all of it. >> of course they do. >> this is a message that every igital platform is seeing now. youtube. they all want brands to believe that tv is dead and over. all the dollars should come to where the engagement is. facebook does a really good job of targeting their audiences.

but tv is still a massive juggernaut and to say it is dead is a little misleading, i think. >> shawn amos, the c.e.o. and founder of fresh wire. u bench r made some writers very angry last weekend. is surge pricing a smart strategy? we have an uber investor next on "bloomberg west."

>> welcome back to "bloomberg west." i'm emily chang. this is "bloomberg west" on bloomberg television, streaming on your phone, tablet and bloomberg.com as well as apple tv. bloomberg caught some heat this week from writers after some of them on the east coast paid as much as three to four times the normal rate for rides during the

snowstorm. in reaction to the complaint, uber tells "bloomberg west" surge pricing helps to get more cars on the road quickly when demand outstrips supply. users are clearly notified and must acknowledge the elevated pricing within the oonch pp before they can request a car. for more, i spoke with cory johnson and the managing director at menlo investors. i asked whether paying $35 a mile is fair. >> that is not the right question. it is more important to make sure that you have a car to take you home than what it costs. what uber is trying to do with surge pricing is to make sure that the car is on the road. what is worse than paying $35 is not getting home during a snowstorm. i think it is -- the question is

that enough demand for drivers to get on the road. is it fair to ask someone to go and drive, put themselves and the car at risk? well, you need to give people an economic incentive to be out there and to be sure that the drivers are out there so that you can get home safe. >> is it fair to ask is it fair when it comes to a small business? should we be talking about the ethics of it? >> your questions are so unfair, emily. it is funny that you mention the safety of the driver. i was a taxi driver in new york a long, long time ago. i was telling a driver, i was in the back of an uber car. i told the driver the story of the day i left the house in a snowstorm taking a cab to my taxi garage, the cab did a complete 360 spinning out in the snow. i said i'm not driving in this. i think that is a reasonable question. on some level, the fare is

whatever is legal and what your customers will pay for. i think there is a bigger question here about what a developing brand chooses to do. if a developing brand says to its customers, we're going to take, how much money have you got? that is what this thing costs. that creates a different relationship with the brand. uber is making a calculated decision that they will not alienate people with these things. there are people up and down the eastern seaboard and were dedicated users were you recollected about this and i'm sure uber lost some customers because of this surge or gouge-like pricing. >> you know, it is one thing to make sure there are enough cars on the road and then it is another thing to make sure that your customers trust you. how important is trust and does surge pricing as high as $35 a mile undermine trust in the company? >> trust is super important. uber who has been in an

car knows how courteous the drivers will. -- are. is it more important to make sure that $200,000 drug is there so you can get better? for relative it is of mine who take that drug, that is a lifesaver. they don't think about how much it cost. they think about the fact that they can live an extra year. i think about the fact that i can go home, be with my kids, not what it costs. >> i had the c.e.o. of uber on recently. we talked about how much they take. let's take a listen to that interview. >> it depends on the percent on the particular project. it is generally 20%. >> you take a 20% cut? >> that's right. it depends on the product. that is essentially the mar zwhrain most of the trips happen on. >> so it takes about a 20% cut.

what about capping surge pricing? just going two, three times higher than usual, rather than four, five, seven? >> i don't know. that is a decision that management makes and they have been careful about making sure they do it at the right level. they are trying to make sure there are enough drivers available. the idea of capping the surge means they could limit the drivers. when this is going on, you want to get as many cabs on the road so that people can go home and the surge pricing allows you to get drivers back on the road. >> why can't uber pay drivers more? why don't they take a smaller cut when there is a snowstorm? charge esn't the rich me less? why does the pharmaceutical company charge me for this drug. they should give it away for free. if they give it away for free,

nobody builds the next drug. we need to have a mechanism to drive the behavior. >> cory, jump in here. i totally think that drivers and passengers should be completely safe and that, you know, putting their lives at risk, they should be compensated for it. is there a better way than this? >> i don't care about people, i just care about businesses. you know -- i think this is an interesting choice for the business to make here. if commerce, it is not about affordability. let me bridge in an example of someone who can afford it. jessica seinfeld, wife of jerry seinfeld. she paid $450 to take her kids to a bar mitzvah and drop them off. her friends were saying things like o.m.g., these people are crooks. that is a calculated risk that the people are taking. if they are going present something to their customers at

a fixed price. a mcdonald's value meal, it is 99 cents. you know what you're going to get. we're not going to change the price if you're more hungry. that is one choice a business can make. the use of this technology allows uber to scale production instantly in a time like a big snowstorm or something like that, but there is an interesting risk on the back of that. all of cap lism on the backs of -- >> cory, that it is choice that uber made last weekend. is that really the right choice? >> i don't want to comment on a specific situation because i don't know. >> that is not the only person that, you know, was upset. there were many, many people. >> i have no doubt that people took that journey and didn't realize what the price was and i'm sorry they didn't have a good experience, but am i super glad that there is someone out there willing to get drivers out

so that she can get to a bar mitzvah so that i could get home. the alternative is nobody is out there to get you home. >> you don't think there is an upper limit to how much it should cost? >> every time you pull the uber ad, you have a choice. you could say not for me today. >> right. people can't do the math in their head like that. it doesn't say from point a to point sbnch this many miles. >> that is a key feature in the app. look, i'm with everybody. i want to have everything cheap. in fact, i wish the government could -- everyone could be rich. that would be great. unfortunately that is not how the capital system works. >> i take uber many times. i use it for work a lot. i use it for other things. yesterday i was going from san francisco to the valley which is a longer ride than usual. i called uber taxi because i thought it would be cheaper. if you use it to go more than 15

miles outside of san francisco, it is 1 and a half times surge pricing. the driver told me he would not charge me because he knew i would have no idea that that was the case. is that fair? >> it is not fair ever for someone to be charged something that they didn't know what the charge was. lu lots of times user wror, i think the company is trying to do a better and better job of making sure. are there mistakes? sure. am i sorry that you didn't have a good appearance? i definitely am. what i think the company has done a better job of is try to make sure there are cabs available. there is no options, there is an option to get me home. >> that is the managing director at menlo ventures. google is expanding its arsenal of robots with a new acquisition. find out why boston dynamics and its wildcat robot is a smart

target for the search giant next on "bloomberg west." ♪

>> maybe respond a disaster

scenario. these are robots that can interact with the physical world and a powerful and capable way. yes, that would be relevant to the military. there are a range of civilian applications. anything that involves going into the field, disaster response situations. >> interesting. i want to bring in jon erlichman. john cummings 02 googles head of acquisitions. you spoke about what they could be working toward. a long-term global manufacturing supply chain. what is looking most likely at this point? that theyople joke can track down some of those drones.

i think what is really important here is there are a couple thinks a highlight. google does make a lot of excellent -- acquisitions. they make them in a lot of areas. we should not be trying to tie this to what google has been traditionally. many of the deals that google was doing were built in a moat around its advertising business. things like doubleclick and youtube. the deals they do now are coupled with some of the things we talk about like driverless call -- cars. google fiber, all of these are google looking for its next leg of growth. a lot of times a conversation of what google is becoming is more like a new version of ge. they're looking for new legs of growth. way is opposed to the exact to tie this to what they have been in the past. the answer is, we do not know yet. they have a lot of read --

robotics deals. they are ambitious and always have been. they're trying to figure out where its future is going to take it tied to the technology that i can buy. >> you mentioned that the founder must be very passionate about this company. he gave up his tenure at m.i.t. to work in this. what do you imagine compel them to sell to google? imagine.t m.i.t. faculty want to have an impact on the world. my best guess is it would help create a better impact. i view this as a long-term investment in hard technology and robotics. if i use the analogy of the self driving vehicle, that has been a big success for google. procedures that project is the best people in the world to lead that effort.

acquisition and so the other recent acquisitions, they have so the top superstar talent in the world. i don't know where it might lead in terms of the very short-term. in the long term, it is an investment in court fundamental technology. i have to think that has a value. ofthat was john leonard m.i.t.. in a bid to get more people involved in computers, everyone from athletes to tech leaders sat down for an air -- our. theave the founders behind initiative and we will see how successful it is then.

>> i'm emily chang and mrs. bloomberg west on blumberg television, streaming on your phone or apple tv. from chris bosh to ashton kutcher, tech giants dedicated one hour to learning or teaching computer science last week.

it was the hour of code initiative. even president obama urged kids to take part. >> learning the skills isn't just important for your future is important for our countries future. if we want were to stay on the cutting edge, we need young people like you to master the tools of technology that will change the way we do everything. >> the nonprofit organization got 15 million students and 170 countries to sit down for an hour coding lesson. one in five students in the united states participated. in one hour of code translate to many more hours of computer science education? i spoke about this to the cofounders. at theweek ago, i was team and we had 25,000 classrooms signed up. and all i could think of was one of the servers can't handle this?

no website in history had done this. >> i love that you had more girls participate in this hour of code than in the last 70 years. experiencels computer science last week than in the history of computer science in the united states. are you encouraging boys and girls club? how do you get teachers to do that, going forward. >> one of the things we do is we do not recruit the students, we recruited teachers. teachers in the classroom have an even number of boys and girls. we do not have to go after the girls. they brought in and equal ratio. this experience has given us renewed optimism and the potential of the american teacher. >> other people you recruited mark zuckerberg, bill gates, jack dorsey. have they given you any feedback

about this process? i know zuckerberg has been there from the beginning. you are identical twins. has hady we have asked such open arms embracing it. it is good for america and it is good for our children and good for jobs and the economy. very few people think this is a bad idea. it was against teaching technology to kids? how do you get their continued support? i do get them to keep coming back and helping you? do you need that? >> we have a long-term plan. it started about a year ago. we went to start summit to change the peer science and america. this is not an easy task. schools do not have to teach it. there are not enough teachers to teach it. the kids don't want to take it. state education centers don't recognize it. we have a long-term plan where we have to change the schools

and make it cool. the hardest part of that is how the medical. -- how to make it cool. a class they don't want to take? or are they excited about it? >> teachers have been getting calls from parents saying that the girls of been doing it all weekend long. turn one hour of code into many hours of code? howdy do this over many years? >> we partner with school district. we do this in the chicago and new york. we announced a program to give classroom awards to teachers, 1000 dollars for every teacher that takes a critical man puts it in the classroom. with the support of many tech companies plus the support of bill gates and jeff zucker berg. -- mark zuckerberg. >> define schools are open to

this? >> school district always have and redhe bureaucracy tape. there have been others are not very easy. have saidd oakland this sounds interesting, but they're not necessarily interested. >> code.org cofounders. orders for a three g smart phone that looks like the iphone 5 s. china mobile says it has no deal with apple just yet. we dig into what is taking so long next. ♪ >> welcome back, i'm emily

chang. it turns out apple and china largestthough large -- mobile carrier the world do not

have a deal to announce. no deal has been reached and the talks are ongoing to andy i add the iphone to china mobile's service. willeal with china mobile add 750 million customers. it could mean billions of dollars to apple. i started by asking why is this taking so long? a certainly, there has been 4g is not ofctor, noble in china until recently. >> but they just got a license. >> users can take full advantage of the iphone service. mobiletion is that china is the world's largest carrier. they are the largest carrier in

china by far. they might've been in portable to deal with. -- class of two titans. they're trying to get at this agreement. happen.ng the deal will it is a matter of getting to the details. >> what are the details? >> this has to do with the economics. lete seen china mobile other handset providers use 4g. the deal iselieve imminent. >> you set up google in china. how is the chinese government to work with? when it comes to a major u.s. corporation, how does this work? a couple of things that are interesting about china. everybody is fascinated by this. china is so large that it is an

ecosystem within itself. the government has a set of policies and practices to a non- chinese businessperson would seem different. it is like japan was in the 1980's. having been in business there, you have to appreciate that china has its own echo system. you have a different set of partnerships and protocols. you have different integrations you have to do. you can't walk into a set up shop. the other two major carriers already do sell the iphone. this is the beijing website. this is for china mobile. it is taking orders for a phone tom off phone and there are pictures of this phone on the website and it looks exactly like the iphone 5 s. it is in the five colors that it comes in. what are they doing? >> is almost like a silhouette.

performer goesre on stage. star, orame means a bright star. what they're saying is we have a star that is about to be unveiled. here is silhouette. place your orders now. >> this seems a little dangerous if the deal hasn't been done? >> which is why people think it would be announced today. >> what is the timeframe? is this a matter of when and not if? >> i don't have any information on that. everybody believes it is imminent. certainlyom us, we -- salesarge amount of of got up in the last month or so because the other two carriers are carrying it. stimulatehis will

apple's echo system in china and globally. >> what does it mean for the other smartphone makers? if this does actually happen, how does it affect samsung or shall me? >> android has a huge market share in china. and the gameon will be on. china mobile is the biggest carrier in the world and the largest in china by far. this gives you a sense of how big they are. analysts would say that doing this deal would give apple 17 million new users next year. how big is 17 million? the entire country of spain has about 19 million smartphone users. like adding the country

of spain to their echo system. that is the managing director . silicon valley's architecture evolution is up next. we will look at the plans for tax stylish new headquarters. ♪ >> welcome back, i'm emily

chang. facebook began in mark zuckerberg's harvard dorm room. apple computers were built in steve jobs's grudge. they're not known for the architecture of their office space here that is about to change. for the first time in history, some of the biggest companies in technology are embracing defining themselves through ambitious new corporate headquarters. amazon, apple, facebook are all planning new projects. what does that say about technology?

in january of vanity fair, they speak with tori johnson -- cory johnson. >> the most amazing thing about silicon valley is it looks like any other place. you have stanford in the mountains and is nice. suburb.it is a but now you expect magic but it isn't there. >> it is kind of amazing. i was a money manager for a while. companies would never make headlines. inevitably they were in stripmall's or little places where you could park your car and derby 30 people inside. these are ordinary office parks and stripmall type places. silicon valley is opportunistic. they started in garages and with a move to the next level, took what office space they could

find. it was random for a while. >> one of the things that your tellsmissed is and influence. culturee a corporate around being cheap and not flashy in any way. >> i think you're right there. that set the tone. some of the big companies, once they grew big like intel did not do anything except expand the boring big buildings they had. >> there was taking advantage of what grand rapids was offered in terms of furniture. these were cubicles and more cubicles. now we have the situation where it is highlighted in your story that steve jobs final appearance presenting this incredible design. i say incredible because it is hard to imagine. >> it's at the tone for everything. he knew had up the ante.

he upped the ante in technology and the design of objects. he wanted to do it in architecture as well. apple's headquarters are a little bit different from most of the others. it is a little bit sleeker. to build but he wanted seven that would transcend the setting into an architectural scale. >> the plans are on an old hp site. it is probably not ironic. wonder, this is hard building to imagine working in. be soove it's going to great. i admire the ambition of it. i am pleased that steve jobs wanted to raise the level of architectural ambition in silicon valley. i don't think he fully understood that a building is not a gargantuan thing.

it is not object. it is more complicated and involves more inconsistency. and a certain amount of mass. him enormous donut. it is bigger than the pentagon. to dot think it is going so much to encourage interaction, which is what he and the architect say it is designed to do. >> what we have frank gehry working on a facebook project and we have an amazon project that you are not fond of, i thought it was interesting that you looked at twitter as the most interesting and important future of architecture and technology. >> what twitter is doing as a work environment is really good, but not that different in itself. a lot of the other companies have designed loose, lively pleasant somewhat unstructured

work environments for themselves. the real thing that makes twitter significant is they took over three floors of an old furniture mart. it is an old industrial warehouse type building in downtown san francisco. >> it is urban. silicon valley hates people outside of seven cisco. -- san francisco. old silicon valley hated the city and what it represented. 30 the workers who are under all want to live in the city. then want to live in the valley. number of the startups today are in the city and not in the valley. we are at the beginning of a seismic shift. >> that was paul goldberger. best ofoes it for this

bloomberg west. you can watch bloomberg west monday through friday at 1:00 p.m. eastern. you can always catch bloomberg tv streaming on your phone, your tablet, or at bloomberg.com. ♪ the opinions do not reflect the

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