>> live from pier 3 in san francisco, welcome to the late edition of "bloomberg west," where we cover the global technology and media companies that are reshaping our world. our focus is on innovation, technology and the future of business. flying robots are coming. the faa approves drone tests in six states. we will tell you which states got the green light. user backlash over its pricing policy, uber has posted a holiday guide.

can this save the company's reputation? we sit down with google's executive chairman, eric schmidt. find out what he sees as the future of technology innovation. drones have captured the world's imagination, especially after jeff bezos talked about amazon's test of delivery drones. drone flights cleared a big hurdle. alaska, nevada, virginia, texas, north dakota, as well as new york. we will see drones all over the place. it will allow the faa to test performance in different climates. >> this is technology that shows great promise, but it also brings with it significant challenges. it provides a structured

framework where we are able to conduct research, test operations, and understand how we can safely integrate these aircraft into the national airspace. >> when are we going to see drones buzzing around? we have a special roundtable joining us. in washington, al levin. al, when we look at this, is the business impact going to be sudden? >> that is a good question. the applicants for the test sites felt it would have an important economic impact, bring jobs, new business. we have seen some precedents over the years with technology sites around the country, but it is not entirely clear.

>> i feel like in the history of aviation development in this country in the last 70 years, it has all been about military and war to develop different sorts of aircraft in fighting battles. is there a notion that the purpose of this is commerce? >> even before that, congress mandated these test sites because the lawmakers believe there is tremendous potential for growth, commercial use of these unmanned vehicles. if you think about it, everything from delivering pizza and books to flying large cargo jets -- that will not be for a long time, of course. there is tremendous potential for this.

>> are there particular industries -- years ago, i went to a colorado oil and gas geologist convention and there was some specialty hardware to monitor pipelines, are those the kinds of businesses we are likely to see? or will we see package delivery? >> what you mention is in the more near-term than some of these other uses. there are power grids, pipelines all around the country that periodically they need to fly over and determine if they are safe. if you could do that with an unmanned vehicle, it could be much cheaper than the existing means of checking these out.

a lot of people are looking at that. >> tom is the nevada governor's guy in charge of getting this effort, developing this. why does the governor of nevada want this? >> thank you very much for the invite. the industry got its start here almost 25 years ago. we are robust, a huge military presence in nevada. the platforms and technology had its birthplace here 25 years ago. as industry starts looking at these commercial and civilian applications, it was important for us to be able to leverage those assets that exist and to

be able to -- now that we have done all of this for the military, there is a great opportunity for civilian and commercial application and we want that industry to continue to be located here in the state. >> you have boeing, very active in washington. what is it about nevada, what kind of business will you help develop? >> our birthright comes from the testing. admittedly, we are not as robust as we would be in other states for the manufacturing. when you consider what is in california, lockheed martin, boeing in the northwest, that is

where the vast majority of the manufacturing of the defense platforms has taken place. what we do here in nevada extremely well is offer up a testbed and testing services and the ability for those companies, but companies like air environment and a lot of those industries and entities looking at strictly commercial civilian applications. they cannot test those traditional dod assets, so they need a place to be able to vet those technologies. the ability to offer that up and the ability for -- you can test what you need to test here and we can provide the services for you and provide the expertise. >> how were the other states chosen? >> congress mandated that the faa choose a variety of

geographic regions, a variety of climates, a variety of air traffic conditions to give them a good base of what to expect around the country. you have north dakota which is a remote prairie area, but situated next to the university of north dakota which has a strong aviation program. you also have texas, new york, etc. they tried to get a good cross-section of the country. >> thank you very much. we appreciate your time. from drone testing to self-driving cars, that is coming up next on "bloomberg west." ♪

>> uber is warning riders it will cost more money to get a car on new year's eve. uber's cofounder posted a video today. take a listen. >> if you are at a party at 1:00 a.m. and you would like to get home economically, wait until 3:00. if you can wait until 3:00, it will go well. if you need a ride between 1:00 and 3:00 a.m., uber will be very reliable, but it will be a pricey ride and you will have to expect that. >> i want to bring in ari levy.

i do not really care about the users in this story. i care about the decision that uber has made for their business. is this damage control? >> no matter what you think about the business or their decision, they are being transparent. if you are upset because we are implementing search pricing, at least we are being upfront. there are always issues about getting around on new year's eve. public transportation is slow. never enough taxis. we will put tons and tons of cars out there. understand that we are putting those cars out there. >> it is interesting to me the business is so elastic that for

the first time in history, we have the ability to create something on-demand like cars when the demand is so high. >> i spent eight years in new york and the advantage to public transportation is that it was supposed to be running frequently. the trains would be coming more frequently, whether there a lots of drunk people or not. it was going to be difficult to get a cab. had there been the ability for me to go on a smartphone -- >> when i was a yellow cab driver in new york, i would put the off-duty light on. i wonder if there are long-term risks to their business by alienating customers. >> there is a bigger risk. if they are disruptive to the

cab industry and if the cab industry starts to go away, you have created this private market that only works at peak hours. what happens to your rider that really needs to get home from work? >> thank you very much. self-driving cars are going to be allowed on michigan roadways. companies can test autonomous vehicles within the great state of michigan. could this new legislation give the old carmakers an advantage in this new industry? john leonard joins us via skype. he has researched this topic for more than 25 years. this has always been about 25 years away.

>> it has been an exciting year. a lot of this has to do with google. they made such a big splash. giving a blind person a ride in a self-driving car. that created a wave of momentum. >> michigan has been playing catch-up for at least 30 years. are they afraid google will get way ahead in the same way that japan got ahead in the 1970s? >> there are two different approaches. the national transportation safety administration has come up with levels. a level four vehicle would be fully autonomous. you could take a nap or read a book.

the level three technology is more of an evolution from existing active safety systems in which the u.s. carmakers and europe and japan have had a tremendous record of technological progress. the conventional car companies, it is adding to existing safety systems. google is going more for long-term change towards a transformation of the transportation system. >> all things being equal, when you talk about a crash, i would rather have ford and chevy in charge of this. i want to get back to this notion of levels. this notion that this level three, a car that is a little more tricked out.

this is taking that to one more step. what is the crucial trigger? >> a big issue in the technology is mapping. with very accurate maps, it enables the car to localize itself more concisely. it is gps on steroids. that simplifies the computer algorithms and it enables more hands-off operations. the more traditional safety systems, adding in things like adaptive lane keeping. without the mapping technology, it is a key instrument that google seems to have, a big leap ahead of most of the others.

>> thank you very much, john leonard. eric schmidt making his predictions for 2014. could it be cars? you will hear from him next. ♪

>> the netflix ceo is getting a raise. hastings will receive a salary of $3 million next year. netflix is making some changes to the way it's prices its plan.

jon erlichman has more on today's new hollywood. this has been thought that this could happen any day. >> this helps us tell the difference between netflix subscribers and users. 40 million subscribers, but someone shares a netflix account with friends or family. over the years, netflix has been ok with that. $6.99 for a single-user. it is the holidays, a lot of people just got new tablets and

they may be signing up for netflix. this is a good time for them to be testing the new pricing packages. >> we were talking about netflix and his contention is that it is the only game in town. if anyone can afford content costs, they will be able to do it. doing away with their poison pill, less likely the company will get taken out. >> we were talking about apple's lackluster stock performance. netflix was at the opposite end of the spectrum. it seems like a different story than it was in november of 2012 when carl icahn bought his stake in the company and they adopted this hostile -- this poison pill. >> jon erlichman, thank you very much. google has been in the headlines a lot. google glass getting a lot of attention.

what is ahead in 2014? eric schmidt gave bloomberg his predictions. >> i am eric schmidt. the biggest change for consumers is going to be that everyone will have a smartphone and the fact that so many people are connected to a supercomputer means a whole new generation of applications around entertainment, education, those kinds of things. the trend has been that mobile is winning and it has now won. people are moving to this new architecture very fast. the ability to find people, talk specifically to them, judge them, rank what they are doing, it changes every business globally. the biggest disruption that we do not know what will happen is in the genetics area. the ability to have personal

genetics records and the ability to gather all of the gene sequencing. at google, the biggest mistake i made was not anticipating the rise of the social networking phenomenon. not a mistake that we will make again. we were busy working on many other things, but we should have been in that area and i take responsibility for that. google benefits from transitions from traditional industries and even when things are tough in the country, because -- it is smarter to move your advertising from others to google so we win whether the industries are in good shape or not.

the key limiter on our growth is our innovation -- how smart are we? how clever are we? ♪

>> you are watching "bloomberg west." i am cory johnson. elon musk's spacex has planned their first rocket launch of the year for friday. it will be carrying a satellite. on the verge of a record-breaking year, u.s. and canadian theaters will surpass last year's record sales of $10.8 billion.

president obama a busy man, but still has time for the boob tube. one of his favorite shows? "breaking bad." the massive breach of data at target reminds us the hacker economy is thriving. some of that credit card information made its way to the black market. jon erlichman is back. what do we know about this digital underground? >> it is amazing to talk so much about the hacking activity. in cases like the target example, this data is going to the black market, or you have all sorts of pricing.

it is very elaborate and it depends on what exactly you are able to sell. an actual credit card number might get you a few dollars. as soon as you are able to provide more specifics, the good stuff that helps you to determine who the card owner is and to avoid those security walls that are put up by the providers of the cards, all of a sudden you are generating triple that amount of money. you are talking about millions of users and some big numbers. >> i'm trying to imagine how that whole business works. >> just as an elaborate plan as

those hacking the data, they will take that credit card, a debit card as well, and try to move money. put it on a gift card and go out and spend on a variety of things the store has. it is all about moving the money quickly so it is harder for the authorities to target you. they are using some of the newer currencies available, like bitcoin. they are not using credit cards and debit cards to buy the stuff on the black market. >> a lot of companies are ready to benefit from this increased concern. >> a lot of people will watch this idea of the smart card technology. a lot of usage of smart card

technology in europe, try to keep the hackers away by having more in-depth cards. companies have dominated that area. it has not taken off in the u.s. as much, but will those companies grow? it depends on whether there is wider adoption in the united states. >> intel is bettbig g wearable computing. intel is backing recon instruments. joining me is the cofounder and ceo. we met a few months ago at the intel event. the intel guys are very excited about the potential for your business. he was not just talking about ski goggles.

>> this technology can go really far. we have always focused on athletes. we are creating targeted software experiences that provide relevant information. >> for example, your ski goggles, those goggles are interesting, they have the heads up display. >> the heads up display is on the right eye. you can still focus on where you are going. you will see the dashboard with the metrics that mean something to you. >> cycling as well seems like an obvious one. >> cycling is the leading use case. >> any piece of equipment you

can possibly sell. >> sailing, there are many out there. >> google glass has this notion that it has gotten a lot of attention. i find it impractical, ridiculous looking. what is the approach compared to what you are doing? >> google glass has some challenges in terms of privacy concerns and social acceptability. a lot of smart people at google so they will overcome the challenges. people want something that is fashionable. they will have to overcome this.

for us in sports, it is a little bit different. it has to look good. we have a market that we have validated already with our snow goggles. we have sold 50,000. >> that is a lot. >> we work with oakley to bring this to the consumer. we understand the need for individualization and fashion. that is a lesson that can be learned. >> is it going to be necessary to be focused on small verticals? opentable works for restaurants. it is not for booking everything. are you going to need this

specialization to be useful? >> we are trying to bring that crucial data to our attention when it would otherwise not be available. it is easier, but still challenging, but that is how you would build it. >> a very cool company. 2013, a crazy year in technology. what were the top five tech stories? we will ask the yahoo! chairman maynard webb next on "bloomberg west." ♪

>> to our special year-end series, we take a look back at the stories and trends that shaped the year in technology. emily chang sat down with maynard webb.

we asked him about his top trend for the year. he picked security. >> security is going to be with us for a long time because people want more freedom and some governments want more access to information. it is something we battle for quite a while. >> some people have been more vocal about it than others. mark zuckerberg said the government blew it. >> i would love to tell you what i think, but our board policy is to let yahoo! talk for the board. >> one of the things you point out when it comes to security is the rise of disappearing information and companies like snapchat.

it is a whole new trend or not everything needs to be permanent. not all information needs to be preserved online forever. >> people are going to be more terrified. look at cryptocurrency, that is making sure you have a different way to exchange money that is not controlled by governments. >> do you think companies like snapchat are here to stay? >> kudos for the growth that snapchat has had. it is too early to tell whether they will be around forever. the issue of privacy is going to be something people are very concerned with for a long time. >> what are the opportunities for companies out there? >> the industry needs to continue to raise their game to do a great job and to ensure people are secure as they go

about their business. there is a ton of opportunities for small companies to go into niches. this is a growth, a ton of opportunities. >> let's talk about the biggest growth stories of the year. in consumer technology, it seems like consumer tech made a comeback. what do you think about that? >> alibaba is blowing the doors off. every time you turn around, their valuation is being raised by analysts. the twitter ipo was a great example of a hot company. the consumer is doing well. the enterprise space had an amazing year. i do not believe there is a company the size of salesforce

that has ever grown at those rates. >> do you think the consumer comeback will continue into 2014? do you think consumer technology -- there is always talk about a bubble, about valuations being too high, will they be justified in 2014? >> i think it depends on which investment you are talking about. valuation is a tough deal, but i believe we will see more growth in consumer tech. >> any areas in particular? >> i am focused on mobile. i do believe monetization on mobile is going to catch up with what is going on the web. take a look at -- they are doing great and i look at the mobile experience.

the fancy is pinterest for men. i am sure they market it another way. >> fancy is maynard webb. stay tuned for more right after the break. ♪

>> back to our special year-end series as we wrap up 2013. we are taking a look at the stories that helped shape the year in tech. maynard webb spoke with emily chang about security. let's move to another big story, the rise of mobile. >> it grew tremendously in 2013 and i think it will be an even bigger story in 2014. development is starting to happen first on mobile devices

and experiences are real. big data is another big trend around mobile. i believe monetization on mobile will begin to catch up with monetization on the web as well. >> mobile has become on par with the desktop and the web. will it surpass? >> it has the potential to surpass, but it is not there yet, but it is coming. >> one of the things we have been talking about with big data, there is a lot of data and it is out there, but how do we use the data and analyze the data and make it valuable? >> that is the most important thing, the synthesis. how do you serve it in a relevant fashion?

i spend a lot of time on the big data pieces and on the synthesis and who delivers what to whom. >> your next top story is that people don't just matter, they still matter. >> the discontent with companies -- i wrote a book on this topic earlier this year -- people are more dissatisfied than they have ever been. >> why? >> they are counting on companies -- the age of the paternalistic company is long gone and people are now on their own more than ever. there is this disconnect with how companies work and how people want to work. if they do not speak to

somebody's soul, they get dissatisfied. a lot of people look to the company to solve that. i try to coach people to be the ceo of their own destiny. we need more focus on this more than ever. understand what success looks like for you. take control of your own life and your own career and understanding that you have to get voted on and understanding that you have to get rehired. >> interesting. last story, the rise in the sharing economy. >> i saw a company an hour ago that was an interesting mesh of sharing and mobile where they are building a free mobile network.

you share your phone and network access with other people to make everybody else's network better. we have all of these idle assets and people are thinking differently -- >> can it really be done well with everything? >> not with everything, but with a lot more than we think. >> since we are talking about uber, the pricing strategy has been under fire. there was a big snowstorm in new york, they charged up to $35 a mile. surge pricing is to attract more drivers on the road. is that fair?

>> if you treat people correctly at all times, not just when you have a chance to take advantage of them, it is a better long-term growth strategy. i am an investor in relay rides, which is sharing your own personal car. i understand that you can get opportunistic pricing. it leaves people sometimes with a bad taste. i would ask they take a look at their strategies and ensure that they do what they should do for the long haul to retain customers, not just when you can optimize. i think they did something different for sandy when they were working hard -- >> they have done promotions and things like that in the past.

it is winter on the east coast, right? what should they do in a situation where there is a typical snowstorm? >> find a way -- if they have enough drivers willing to go do that, if they can make good money and satisfy demand, i would like to see that. if they're in a situation where there are not enough supply of drivers, maybe the economics have to change. >> that was maynard webb. tune into "bloomberg west" tomorrow. the bwest byte, one number that tells us a whole lot. >> 13. 13 concert tours this year that generated $100 million or more. it was a big year.

bon jovi and beyoncé topped the list. >> i was hoping you were going to let me guess. >> keep going. >> i saw pictures of the beebs. >> what about jay-z and justin timberlake? >> they did not get into the 100 million. big overseas demand, which really helps. beyoncé got some help from emily chang, obviously. >> don't we all? >> $2.4 billion, the overall box office or concert tickets for the top 20. >> thank you very much.

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