from pier three in san francisco and bloomberg headquarters in new york, this is "bloomberg the mediare we cover and technology companies that are reshaping our world. i'm emily chang. let's get straight to the rundown.

why is it your data safe with some of the biggest american retailers? on the heels of the target breach, name and marcus also says it is a -- neiman marcus also says it is a victim. and it is an app that many had given up on, but now foursquare has features to tell you what is good nearby and send you on the spot. we have more on the turnaround. and it is more than just robots. we explore artificial intelligence in a special weeklong series, starting with a look at how ibm is betting watson can do so much more than when jeopardy. -- then win at jeopardy. i'm here with sam grobart, senior writer for bloomberg is this week. he will be with us all week long. great to have you on the show. -- top story of the day. the fallout from the target breach has gotten even bigger. as many as one hundred 10

million customers may have been affected. credit card numbers, debit card numbers, personal information like phone numbers, e-mail addresses stolen. target is getting pretty long on the details. the ceo came out today. click status correct. -- >> that is correct. make an announcement today. many are thinking it is a ram scraper violation. >> what is that? >> generally speaking, the transaction you make with your credit or debit card at a store is pretty secure, pretty well encrypted. however there is this one moment when the data at the backend server of the merchant is unencrypted. memory forn the ram a millisecond. pre-k's this is all of our information in plain text. >> that is right, wide-out in the open, no protection. millisecond, and then it goes away. >> but long enough. >> long enough if someone were to put a piece of software there

to collect the data, then naked collected into a long list with all of the information, the payment, the credit card number, and the bad guys could extol traded with all of the data had been collected from the merchant. allould ex filtrate it with of the data that had been collected from the merchant. that even if target had the best mechanisms in place, it may not have been prevented. target is trying to change the conversation and talk about what they can do in the future. >> that is right, and there will always be a cat and mouse game. there will be merchants, hackers -- >> the merchant will get better, the hackers will get better. >> right, and you can make yourself less of a target. this gets into the issue of chip cards, credit cards and have a microchip inc. landed in the card itself. which means that when you use them, not only do you swipe them

with a magnetic strip, you also have to use a pin number because the data is stored on the card. >> in europe, they don't have these kinds of problems because they use this kind of card. >> europe has been using these chip card since 2002. here in the united states, chip card penetration is only between one percent to five percent. thet is encrypted on card, why is that such a big heal? it makes it hard to create fraudulent credit cards. remember, when hackers collect all of this data is then they are generally creating fake credit cards on the black market. >> let's talk about why there are not more chip cards in the u.s. a blog post today where he said that target would helpse a coalition to protect about -- protect from scams.

could that be chip and pin? of at to bring in the ceo cyber security firm that helps security analyze their vulnerability. he joins us via skype. first, what do you make of this information from target that this happened through the pos terminals, that malware infected those terminals and got a hold of data in its unencrypted state? >> target is in the worst of all positions and they are definitely not alone. the reality is that those point- of-sale computers are the hardest to protect. they are the ones being analyzed by low-wage employees. they are hard to manage. operatingunning old systems, some of them operating with windows xp, which is 15 years old at this point.

it is bad that it happened right before christmas, but he came out and said this is not just our problem. this is everybody's problem. the payment method you mentioned, chip and pin, he mentioned it as well. but he is probably looking at anything including bit point, ,obile devices, google wallet which are very popular with consumers in getting away from the traditional credit card. at some level, they have blamed the critic art companies for not moving forward with a more secure system. -- the credit card companies for not moving forward with a more secure system. >> let's talk a little bit about chip and pin. why don't more american merchants use this technology? is it because of the credit card companies? opinion, it is. the credit card companies have never pushed it as a standard.

they have never really wanted to go that direction. and of course, they have to educate the american public that it will be done this way from now on. and maybe chip and pin is not what they want to go with. thatreat thing about it is there is a global standard. if you have a much more powerful computer, like a mobile device, sometimes you can leapfrog the pin so that when you make a payment, not only is that encrypted between you and the credit card processor, but it is also only that one time. even if someone steals the database, they have not gotten anything out of it. that is where we want to be as consumers. >> let me ask you if i can -- part of the problem is that they credit -- there are many parties in the credit card business. there are a lot of players that you have to get on board and that makes it difficult for

everybody to jump onto one standard, correct? >> that is true. we are a much bigger place. we are the largest single market in the world and there is a lot of momentum that goes into it. when we create a method of payment that is easy as credit involve a lotges of things moving together. it just hasn't happened until now. back, tried a few years and now target is, we will really address it and go with chip and pin, or anything better. >> is chip and pin failsafe? >> it is not. >> is there anything that is failsafe? >> there is nothing failsafe from someone extremely determined. but there are things that make this problem disappear from able database perspective, which is what you are seeing here. database perspective,

which is what you are seeing here. are talking mobile device security, which is a separate game. it sounds a little bit likely talk about home security. if somebody really wants to break into your house, they can do it. but if you get an alarm system and put a sign out front, you can make your house more of a risk to a thief than the house next door, and thereby reduce your overall risk. >> exactly. we have been doing a poor job of reducing risk. instead we rely on the fbi and secret service to take the criminal to court. which is clearly not working. they are running ragged trying to do this one case at a time. that is what the target ceo really wanted to say, that we need to move to a better model as a country. it is not that complex. >> david, thank you for joining us for this conversation. this is just the beginning of a very long investigation. we still don't even know who did this. >> exactly, those people are

still at large probably. today,n, on both coasts talking about bloomberg east here in new york city. does dennis crowley of foursquare ever feel pressured to move to silicon valley? the foursquare ceo is with us next. ♪

>> welcome back. i'm emily chang. we are bloomberg east today. sam grobart is here with us all week long. we are talking about the tech scene in new york. apparently, office space for tech companies in new york has more than doubled in the last year, according to data from jones lang. we are not just talking about manhattan, but also brooklyn booming as well. maybe new york 10 compete with san francisco for office space, but what about talent -- can compete with san francisco for office space, but what about

talent? you are kind of like the cards -- godfather out here, aren't you? >> i don't know about that. i have been in the tech scene for multiple years here in new york. i think i have seen it through a number of different stages. >> have you ever felt pressured to move to silicon valley echo >> that is the question we always got when we started foursquare. why are you in new york? because we live here. really built a strong rockstar engineering team in new york. >> you have said you have seen a number of ways in the tech scene here in new york. how would you describe his current one compared to the last one? >> it seems like it has gotten these waves and they would get built up and then go away. it seems like this version of the tech scene is one that is a -- he here to stay for a while.

there are multiple generations of entrepreneurs now. there are a lot more bc's and a lot more resources. and a lotorevc's more resources. >>. you often see -- you don't often see a startup in new york break through. twitter and snap chat, and they are in l.a. tumbler, yahoo! bought that. it is just a matter of time. if you compare the new york scene to silken valley, silicon valley is decades old. if you give it a little bit of time, you will start to see more of that. there are a lot of exciting companies in new york. between tumbler and at the end of an mongo, -- between tumbler an mongo, there

are a lot of interesting companies. seeing some in brooklyn as well as manhattan. i'm presuming that is because that is where people live. >> it is where people live and the real estate might be a little cheaper. if you live there, it is more accessible to you. we were fortunate enough to get a fantastic space down and so -- down in soho. i imagine a lot of people are looking for that same kind of space in brooklyn as well. >> and there are many that are expanding here, facebook, google, yahoo! -- and we will be talking a bit more later in the show about artificial intelligence. but there is something like an artificial intelligence center. >> and to get to your point about resources, there is also an academic immunity with and wine you -- with nyu and columbia. not the same at stanford and cal, but still good schools owning a lot of graduates out

that may want to stay around here. >> -- putting out a lot of graduates that they want to stay around here. coastviously, the west may have been someone's first choice. but now it is a decision to make. if you are coming out of school, for example, in boston, do you want to stay in new york? not to mention, wall street was snapping up a lot of engineers. people are not as entrenched with the world of finance anymore -- entranced with the road of finance anymore. space in particular, we were doing a lot of things around the data and analyzing that data. it's helpful to have those folks. >> i want to talk about trends. you are on twitter and big on instagram. what do you think is going on across the social landscape? is snap chat a fad, or here to say -- stay? >> it is hard to say.

i am not a huge snap chat person personally, but there are people who gravitate towards that or instagram or twitter. they find the tools that they are comfortable with. people ino different different groups and everybody finds the tools that they tend to gravitate towards. >> do you think they were right to turn down $3 billion from facebook e >> op-ed piece -- from facebook? stick it had people understand.n they have a big idea what they're going to do, and i respect that. >> we are on with stephen crowley, the ceo of foursquare. we will talk more about his turnaround plans, coming up. ♪

>> welcome back. i'm emily chang with sam grobart here on the set in new york. we are talking about foursquare. foursquare has had its doubters. a company -- the company last year raised $41 million in debt and another $35 million in funding. the ceo, dennis crowley is here with us as well. you are using it to institute your new school -- new foursquare. it is or the discovery app. tell us more. >> it has always been about location discovery. the two things we figured out last year was how to monetize the users that were starting to use the products to find new businesses, and the second big piece of that is exploring

ambulatory location. you don't have to check-in everywhere you go most of your device can understand that you have ended in a new city or in a different part of town, or you are in a bookstore you have never been to before. what can we do with those interactions? continuing to raise financing and getting the company well- sured is our way of making we continue on the road map toward that execution. >> and what can you tell us about growth? last ar-- we talked at the beginning of the year and at the end of the year. washat -- and both times it about 6 million check-in. is that growing? >> yes, it is. it is starting to shift a little bit. >> i will confess, i was never a huge foursquare user originally. i did not really care about checking in. i'm married, i have kids and i'm not really worried about going out anyway. but when i can use it as a recommendation and i realized it was not so much broadcasting my

presence, but i could see what my friends liked and where they had been, that seemed more in line with what is happening going forward now. time get new users all the that say that check-in is not so much for me, but i use it all the time for discovery. one of the things i'm most proud about that we us, list this year is the ability for foursquare to recognize a place. if you walk into a new restaurant downtown or a clothing store, we can alert you without even having to use foursquare that there is a special. you could save 20% if you use your index. -- your american express. you about the things that are really interesting. that is a powerful thing. we are the only -- one of the only companies that can do that right now. >> you guys are expecting to make a lot more money this year than last year. how? >> we have been building tools

that are really effective at helping drive customers into local businesses. one of the things we did better than anyone else is we can improve the effectiveness of the ads that we are running. local merchants have not had a way to generate that. we can say, here are the number of people that came into your shop and ended up checking in. thatis something we can do no one else can do because we have all of those check-in's. >> can you give us the numbers of what you are expecting this year? >> one of the things is being a private company is we do not have to share a lot of that. >> well, you don't have to. >> i can tell you that laster was a great year for us in terms of building these products and generating revenue and getting them out in the market. every quarter, we have doubled revenue all the way through 2013 and we are correcting great things this year, too. one thing his wearables. do you imagine foursquare having a big future in wearable

technology e >> -- wearable technology? >> our thing is not so much that thing you have to pull out of your pocket every time, but what other displays can we work with? what can we do with displays on the wrist, or google app? if you walk into a new place or land in the new city, we can buzz you and tell you about interesting places nearby. >> the next block is about artificial intelligence. we are back with foursquare ceo dennis crowley. minutes past the hour and that means bloomberg tv is on the market. i'm julie hyman. let's take a look at where stocks are trading right now because they have taken a turn for the worst in the last 30 minutes or so. worse in the the last 30 minutes or so.

we are going to continue to see tapering, perhaps more aggressively than people were estimating. that seems to be affecting stocks to the downside right now. ♪

>> you are watching "bloomberg west" and i'm emily chang with your top headlines. sprint is the last of the four majors u.s. wireless carriers to announce an upgrade program and now is the first to end it. it just ended its program just four months after launching it, no explanation giving. -- given. fighting taxi companies around the world, and the latest -- the ground is in latest battleground is in france. fiveofounder of five by

and the cto of flight were in the car saying they were shaken up, but not heard. apparel site. groupon buys ideally for $43 million. groupon says it has seen growing demand for these types of products. we are with sam grobart. we are kicking off a special series today, artificial intelligence, beyond robots. talking about how big companies are using it to dramatically change the way we communicate. here with us is david, and artificial intelligence scientist and the creator of , the computer. this whole idea of a personal robot is age-old, but how did watson as we know it come to be? artificial intelligence

research is about breaking new ground and new challenges. the executives of ibm thought, can we create a computer that can compete with humans at incredibly hard and challenging human tasks? like jeopardy. it was an amazing opportunity for a scientist like myself to say, yes, we can do this. life, it's been about, can we get computers to mimic the way we think? uniquet one of the things about watson is its e >>ty with language absolutely. computers are going from data jockeys to thought partners. it is not just about moving bits from place to place, but understanding the meaning behind it. meaning willhe trump data. there is too much out there. how do i get an understanding of its?

>> when it comes to language and understanding, where would you say we are? are we at the toddler stage, the adult stage? we have seen it go from watson but it seemsiri, there is a long way to go. >> there is a long way to go. some things are extremely sophisticated that would take a very smart person hours and hours, if not weeks, to stitch them together and figure out. and in other areas, it will seem very stupid. process the data very differently than humans do. we get mored, can of a convergence? can we get machines to think more like humans? can they process the data in a similar way? we are not there yet. there is a lot of work to do in that space. >> and the ceo of foursquare is with us as well. i know this is something that you think about a lot in terms of contemplating the future. about thee think

intersection between people asking computers questions and asking them for advice, versus computers being proactive and recognizing your context and saying, oh, i know you did not ask me for anything, but i sense something is going on. >> and management dialogue and tuning into that context. artificialways that intelligence will progress is to get computers to start to process like humans. they have to collaborate together. it is this joint intelligence idea. i the computer have to learn from you, and the human has to learn from the computer. an interaction as you both work together to solve a problem. that is where this style of learning will change. >> can watson feel? can watson sent in motion? asking a really weird question. >> and is that a problem? >> computers and humans are really not the same thing. when you and i talked, we are using language as this elaborate

indexing system for a shared experience. that shared experience is a human experience. you have gone through life and learn things. when we speak, i don't know if you really -- the only way i know you are understanding my words is because you are nodding. that is feedback to me. maybe my ward -- my words are pointing into her brain somewhere and we have this common understanding. computers don't have that shared experience. they've got massive amounts of data, but no human experience. >> there is nonverbal communication happening. >> exactly. it is nonverbal, and usually contextual. you are using all kinds of information around you. foursquare, and you want to capture more and more context, because the more and more features that can allow you to narrow in by -- on what you mean by a particular word or phrase is good for the dialogue between a human and a machine. >> have you seen the movie

"her"? >> i loved it. it created a thought-provoking and seemingly plausible possible future where a computer has a sense of humor and understand what you are saying. >> humans are the source of meaning. we are the source of what is funny. we are the source of what is beautiful. we are the source of what is elegant. computers can start to learn to detect that meaning, but they are not the source of that meaning. for example, watson can detect a pun. but it is not laughing at the pun. it can tell you it's a pun, and you should laugh at it. [laughter] >> what are the things that watson will never be able to do? >> i think you want to be really careful of saying never.

>> that is why it is such a good question. >> it is a good question. to move from a shallow understanding of lynnwood that we have today with things like watson to a deeper understanding , where computers can really get deep meaning and dialogue and are going tothings have to change and advance quite a bit. a view is when we see interaction between a human and a machine that is quite intimate, in other words, you are walking and -- working in solving a problem together. you do not know the answer, but you have an access to an enormous number of features. computer -- the computer can process things that you cannot. you complement each other. and through that process, the computer is learning new things, learning how you interpret that information as it is helping you with the data that you need to solve it. it will create this joint

intelligence. that is really cool to me. >> can i ask you another question? we were talking it for you came on about new york city as an existing and growing hub. watson is moving the operation here. let's be clear, i am not a spokesperson for ibm. >> you used to work for them. news when you did. and that is fantastic. i think they made a big investment in watson and they made a big investment in ai and for me to see -- for me, who has , to in ai since forever select and of investment pop-up is fantastic. >> how do you see the googles, facebook, amazon staking out their territory in ai? >> and the foursquare. >> let's not forget the foursquare.

but that is a great question. -- >> that is a great question. web search has no choice but to get smarter. there is too much data. it will have to synthesize and understand reason. it will have to start answering your questions and give you the exact information you need to solve the problem. >> brute force will not solve your problem. >> exactly. it is beyond the shallow recognition into the deep understanding. >> how do you think we will interact with a lot of these? mostly voice, typing, more proactive? >> it will be next. i think it will be multimodal, because there are so many different ways to interact. mia my car? am i sitting at my desktop -- am i at my car, my desktop? there are some things that are so much easier to do than typing.

and in other things, touching. you will see multimodal interactions. >> how do you see ai in the future of foursquare? >> that is what we are trying to do with our proactive recommendation. instead of asking things all the time, it can start to detect, oh, you are with some friends, walking this direction, never been in this neighborhood. what might be something you would be interested in? >> you are collecting enormous amount of data. >> yes, we are listening to the sensors him as many as possible, and trying to push the information out that we think will be relevant to the user. it is really a form of the ai that we've been talking about. >> david, i know you don't work for ibm anymore, so maybe you can speak more freely about this. ibm is good -- is betting big on watson. they have found it very big -- difficult to turn into a business. customers are saying it takes watson too long to learn the

information that we need and that it is an arduous process for ibm to input all of the information necessary in order for it to synthesize it and answer questions correctly. what kinds of challenges will ibm run into when it comes to turning this into a real business? >> or are a lot of challenges, but at the same time i think that ibm has -- there are a lot of challenges, but at the same time i think ibm has a leg up. you have to have some patience. it is a challenge customizing it and tuning it, but over time, the expectation is that it has to this way ultimately. through more and more sophisticated learning algorithms that will make it cheaper and cheaper to customize and apply this technology. we are not quite there yet, but we are on the road. that is what ibm and others have worked toward. how do we make it cheaper and easier to apply these solutions? we work on how do

those learning algorithms? those have to be extremely powerful and they have to take advantage -- this is my big thing -- they have to take advantage of continuous collaboration with humans. it's not like, let's go train it in the closet. it's got to continually learn through interacting with humans, jointly solving those problems. >> and it will be a long process, apparently. david, thank you. areis crowley, i know you literally getting on a plane after this. thank you so much for stopping by today. industryst in the auto defending on detroit for this year's auto show. we will speak with the ceo of mercedes-benz usa next. ♪

>> the auto show is happening right now in detroit and one of the big themes this year is affordable luxury cars, high-

tech luxury cars, too. matt miller has been at the auto show all day long talking to the biggest names in the industry. how is it going? >> it is going fantastically well. i'm having a lot of fun here come as you might have guessed. i'm here with steve cannon, head of mercedes usa, north america. let me ask you, first, about -- when i think about silicon , a lot of them are getting into the sea class, getting into the cla because they have done well and they think it may be a little ostentatious to get the s class already and it is the biggest hit. but these guys want a smaller vehicle. -- >> these guys want the smaller vehicle. >> and like me, i wanted most powerful four-cylinder out there, and that is it. >> we are bringing those younger folks in. and more importantly, eight of the 10 people that have -- eight

in 10 people that have bought a cla have never been in the franchise before. it has done exactly what we want it to do. >> and you are starting in tuscaloosa to build the sea class. -- see-class. -- c-class. you are the number one in luxury cars last year in the u.s. >> we have done very well. therew 14%, and we outgrew luxury market. a really good year based on rocksolid products. the s class launched this past year and it is arguably the best car in the world. rave reviews from everybody. the smallest blogs to the biggest car magazines loved it. is one of the most technologically advanced cars out there. >> what is so neat about it is that intelligent drive will be

available in the sea class, a car that will be in the mid 30's. spendingthe days of $75,000 or $100,000 for a car to enjoy the latest breakthrough in technologies. class --s -- the sea- c-class will have the latest technology. eventually, three hundred 60 degrees around you with a stereoscopic camera. it makes a 3-d picture of its position in space will stop and that responds accordingly. it is technology on the road in its best form. >> how long before i get on the road and just press drive? ofit is only a matter commercializing the technology blocks that are in place. and then making it affordable.

and then it will have to be insured. i think inside 10 years is the timeframe when you might be able to put it in your navigation and off you go and have a nice chat with whoever you are driving with. >> thank you for being with us. 10 more years come a emily, before you can have your car commute to work for you. >> that will be a long wait. will be talking about the golden globe's amy poehler and tina fey. they were fantastic. ♪

>> a lot of our shows are actually on netflix this year. house of cards, oranges the new black. enjoy it while it lasts, netflix, because you will not be feeling so smug in a couple of years when cap chatted up here

getting best drama. >> amy poehler and tina fey hosting the golden globes in beverly hills. nbc said it has its highest ratings in 10 years. robin wright won the golden globe for best tv drama. she is in the original series on netflix, house of cards. jon erlichman is with us from atlanta. netflix got a lot of nominations, but they only won once. was it a good night for them? >> it only takes one to keep the conversation going, i guess. that would be the spin on it. what is so amazing about that show, "house of cards" is that bey did not know they would eligible for awards when they started it. and then they ended up winning one, so they got an emmy. and then they got a golden globe because of robin wright.

willig benefit short-term be the second season of the show will be debuting in about a month's time. their view is this keeps the name of the show in the media, and maybe those who have not watched it yet will watch and get interested in the second season. >> a lot of people don't realize that "house of cards" was not netflix's first original series. cominglittle hammer, back for a third season. but it did not get great reviews. some think it should not have a third season at all. >> we do not know what the ratings are for any of these shows. netflix is not share that information with us. but obviously, it found an audience. zandt a to stevie van couple of years ago here on

bloomberg. he was looking pretty smart about netflix being a global platform and people would be watching it on their devices. i will tweet out that video for people who never saw that. you want smart people in the new blog -- the new hollywood, stevie van zandt is your man. >> that was a good interview. now it is time for the bwest byte, one number that tells a whole lot. sam, you are part of the byte today. what have you got? >> 191 million. a research firm called avi estimates the number of paid subscription users around the globe will get to that number by 2019. we are nowhere near that number right now, but we say this the team behind beats by dr. dre came out with their own music service. they are going after that --

those people that might be willing to try something other than spotify. >> i am a lazy listener. i am a laid back kind of girl. i like pandora. i don't like to do too much. but you listen to all of these things. >> i do, but then again, it is sort of my job to. for all of the streaming services out there -- remember, it is spotify, artie oh, google, sony. no one has cracked it, and i think it is something to do with ease of use. you go to some of these or sophisticated services and they seem to have modeled their interfaces off of itunes. it is kind of like building a new cruise ship and saying, i'm going to base it on the titanic. it is really collocated. if beats can pull it off and make it more intuitive, they may have something. >> if you are going to pay for it, i will say it has to be good. all for watching this edition of "bloomberg west."

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>> welcome to "money moves," where we go this on alternative assets. we show you what investors and entrepreneurs are doing, as well as what is happening in hedge funds, private equity, and more. elliott management taking aim at juniper and works. more on the push for cost cuts, dividend buyouts. big data needs big earnings. crowd sourcing from independent analysts to make