>> live from pier three in san francisco, welcome to "bloomberg west." secretary assistant of the treasury and no republican candidate for governor of california is with us. he will -- we will talk to him about everything from the elon musk battery factory to the silicon valley gentrification wars and the overall state of california's economy. tom films like "armageddon"

"transformers" john frazier figured out how to flip cards pray we will bring you a closer look at the technology that he has developed. microsoft chairman john thompson is speaking exclusively to bloomberg television about the future of the company. cory johnson joins me now in the studio. you know him from covering him over the years. is the chairman of microsoft and took over for bill gates. i think the role of john thompson at microsoft cannot be overstated. they clearly made some really big non--microsoft like decisions at the board level not least of all making the decision about a senior leadership change. john thompson was the guy directing the board to make the decision that put pressure on steve ballmer and will force him

out even though he is one of the largest shareholders and one of the original microsoft guys. clearly, john thompson had a big role in being successor. >> how involved was he in nadella to be the ceo? >> he was part of the process. we saw is that anytime a name came up in the press -- i suspect those names came up because people threw them out there and made up the names -- the board took the step to say we are considering that person or we will. we know about lots of people who were interviewed and went far along in the process. wentems like the board through some really rigorous work to determine both the direction of the company what kind of person they wanted to run it. >> we asked john thompson earlier today what the biggest challenges are ahead for microsoft. >> the issue for us is about focus.

one of the reasons why we chose sasha nadella is he has a strong technology background and understand exactly what needs to happen to move microsoft forward. we are excited to watch the next few months unfold as he builds his strategy to redirect the company. >> so much of that strategy will focus on the cloud or get the types of companies that find the cloud attractive, they want fast service providers, quick service providers, flexible service providers -- how is microsoft going to be more nimble to cater to that consumer? microsoft has certainly demonstrated an ability to provide a cloud-based platform on which others can build applications. on top of that, office 365 is a very successful cloud-based application. the combination of those two things provide the foundation on which microsoft can clearly grow its cloud-based business.

the other dimension of microsoft strategy is focusing on how we become even more relevant to and the devices and services strategy launched about a year ago is very much a part of that and it will be interesting to see how sasha augments that as we move forward. >> you are the head of a struggling company, symantec, what lessons will you bring to microsoft as its new chairman? c> i don't know if symante struggle. to $6w from $600,000 billion in 10 years. we were flat the last year and 43 years in this industry has led me to believe that nothing is more important than focus. >> what do you make of his comments? nadellacited aboutsasha but in terms of why he is the next guy to take microsoft to the next level -- >> microsoft finds itself in a

moment of existential crisis. the world in which microsoft came to dominate was essentially world built on pc's with their software running them. they fought to get that and then they fought the wars of the wordprocessing andexc el. there are all these programs out there that has significant market share that microsoft beat down and then they sat on that world and let the rest of computing of all -- we've all around that. around that. they realize now we are moving and microsoft has had some strong efforts. when you hear john psalms and -- john thompson talk about azure and as a focus for the future for the company, you can see they are starting to understand the future of microsoft will be very different from the past. >> some people say microsoft will have to make very tough choices and that might involve

or should involve splitting the consumer and enterprise is nice. what do you think? it would be very drastic and different from the microsoft we know. >> this same board that picked an insider to run the company is the same board that oversaw this reorganization nine months ago. it does not involve a spinoff. >> it did involves steve ballmer. >> that was a time when the heat was already on him. the company was not going to go through its just reorganization in the last 20 years without full approval and involvement of the board particularly if they had doubts about the ceo. and he for are a spinoff are not likely to happen soon if ever because it is still an inside job. it is still a guy from the company coming to run the company and the same board that made the decision about the reorg. it's not like an outsider who has a very different idea how to organize the company. >> we will be watching john

thompson spea ewi bloomberg tel. up next, neil cash kerry is joining us on "bloomberg west." he is known as the architect of -- nowow soon to be running for governor of california. ♪

"bloombergback to west." california governor jerry brown just made it official yesterday -- he is seeking a record fourth term. he will be running against neel kashkari, potentially a republican candidate for governor. he is often called the $700 billion man known as the architect of tarp, former assistant secretary of the and member of pimco.

he joins me now. you very hip to the new technology these days. you are big on twitter and instagram and you take s a lot of reverseelfies. >> i want to take one of you. >> you're also an engineer by background. you used to work at nasa. >> my first job in california was for a nasa contractor. how could that have helped you as a politician? >> it helped me in washington because policymaking is problem-solving and when you try to unravel a problem, that's what engineers do all day. my engineering helped me when i was in washington. >> you welcomed jerry brown on twitter and you twisted " even though you don't want to house them, we will give the 24% living in poverty of voice." >he has record approval ratings. what makes you think you can win? >> he has high approval because people generally like him but only about 1/3 of voters think he should be reelected.

for millions of california families, they are looking for work and their kids are graduating with student loan debt and no jobs. the education system in california is ranked 46th in american we are number one in poverty. 24% of california's live in poverty and governor brown does not even acknowledge them. we have to change that and we can do better. >> your best known for tarp. detroit tarp money to with no strings attached and you gave money to take banks, the one percent, how do you justify that to the people who could be voting for you? >> it was critical when we face the worst economic crisis in american history since the depression, we got republicans and democrats to work together and protected the taxpayer. when we put out 422 billion dollars under my program, we got every single dollar back and we even made a routine that envelop rocket for the american people3 there is no row gram in american history that is ever done that. >> you made your campaign sample

and said it is about jobs and education. you talk about tax incentives and regulations. what kind of tax incentives would you pursue and how much would they cost? >> there is a contest among all 50 states to compete to bring jobs to their states. we are not competing. we are asleep. governor brown is not traveling to other states to bring factories here. elon musk just two days ago announced his new gigafactory - >> up $5 billion battery factory not to be built in california. >> not even considering california. i don't fault him for making a wise business decision but went to improve california's economic climate so we are in the hunt. if you look outside these windows, we have some natural advantages in california. i like to joke that nobody wants to move to texas. people of california. we don't need to be the cheapest place in the world but we need to be competitive and were not. >> apple is building a factory in arizona, samsung in texas --

how would you get them to choose california instead? >> first of all, the regulatory litigation complex in sacramento is out of control. hundreds of new rules and regulations every year, like a giant ball of yarn that gets bigger. we need to reign that in. legislators want to go the new arena, they exempt their arena from the environmental review because they know it will take years and cost more money. if it's good enough for their projects, why isn't it good enough for apple? why isn't it good enough for the new elon musk factory? why did they play by a harder set of rules? that's not fair of me to change that. >> what about tax incentives? >> i think we need to look at it. we don't have to out-texas texas, but we can create incentives to bring factories to california and come up with ways of those factories to pay back to the taxpayers. what we did in washington as we use taxpayer money than we got the money back to protect taxpayers. there are programs like that we

can look at in california to make this cost-effective. >> incentives like what? >> i was in alabama recently and i have a looming automobile sector. they createdand long-term incentives to bring the first few auto factories to alabama. then they'd developed a skilled labor force and more auto company said we want to tap into those skilled workers and they started building more factories. i want to bring manufacturing back to california. it's great that apple and tesla and other high-tech companies design great technologies here but let's produce them here, too. if we do that, we can bring down 17%. we have 17% of california's that need work and we can bring that down and put people back to work. people say split california into six states. is a greattim draper guy but i like california the way it is. i want to bring major economic and political change to california. if we do that, i bet he would be happy. >> what about the minimum wage?

there is pushed to do that nationwide. you want to help the poor, wouldn't that help them? >> increases are very well-intentioned and great for the workers who salaries go from low to high but is devastating for those workers out of work who were making eight dollars and are now out of a job and the cbo analyzed that there are consequences to minimum wage increases. to me, better way of raising everyone's wages is to bring more factories to california so the man are woman working at mcdonald's can go down the street and apply for that much better job at the factory. if we do that, everybody's wages will increase. >> i will talk to you more about this after a quick break. republicanri, gubernatorial candidate in california, much more to come. ♪

>> welcome back to "bloomberg west." we returned to our conversation republicanashkari, candidate for governor of california. i want to talk to you about the tensions around inequality in the bay area. there is this war on the one percent. tom perkins compared it to the persecution of jews in nasty germany and apologize for using that metaphor but said he believes the 99% is demonizing the one percent 20 comes to protesting. what do you think? >> i think this is all about her lack of opportunity. when we have economic growth combined with a completely failed education system, inequality expense. and make abreak down fair societies make sure kids are getting a good education. i have visited some great schools that have taken the most disadvantaged kids and opened their future through great education.

it would put people back to work and we fix the schools, we truly have a meritocracy. >> the tech immunity has traded more jobs in the last few years just in san francisco by that apparently has not been enough to keep these tensions from simmering. >> it's true and it's because california schools are ranked 46th in america. around the bay area, so much success but yet so much failure nearby. failing schools where kids are not adding a fair chance to participate in this american dream. >> what is the responsibility of tech companies to the non-ytech community? >> i think we all have a responsibility to each other. >> what should the googles of the world be doing? >> continuing to invest in america. nn and it that sergei bri the leadership of google have had so much success? they got a great education. many tech founders and ceos are

donating money to education nonprofits. they know that education is the key to the future. governor brown says we are doing great in california yet our schools are ranked 46 america unless we get every -- must give every kid in california a good education, we will not be in the running. without more spending there were not be more spending on schools. . >> the money is going to fund pensions and other budgetary needs. weise then 40 odeon dollars on k-12 i only half of that money is getting into the classroom. have a that is going into administration and bureaucracy. this is not about throwing more money into a leaky bucket. governor brown does not want to do the hard work of fixing the structural problems in our education system. he wants to pour more water into that leaky bucket. >> you said the high-speed rail plan is the crazy train. what's the alternative? >> we have many needs in our

state -- jobs, water, the drought -- who can argue that spending almost $70 billion on the crazy train and ask any sense. i live in orange county and it takes me two hours to drive to los angeles in the morning. congestion is a problem getting from l.a. to san francisco is not that hard. most californians agree with me. >> what would you have done differently when it came to the drought? what about the budget? >> once we are in the middle of a drought, there is limits to what the governor can do to fix the drought. we should have been building more water storage for years. we should be building more storage right now so that the next time we have a drought maybe 10 years from now, we are prepared. the drought is a lack of preparation. in terms of the budget, governor brown is patting himself on the back but the budget is in balance because the stock market went up last year. he had nothing to do with that and if the start arc it goes down this year, that surplus will evaporate. >> the legislature is controlled

by the democrats and you are a republican. how would you put sure agenda through? >> if i'm the lead candidate for governor and if i run a good campaign, i want to help other republicans get into the state senate and get into the assembly so that democrats are longer have a super majority. we need a vibrant two-party system in california. government works better when we have a two-party system. in washington, we work with all parties. i work for president bush and president obama asked me to stay. we can get republicans and democrats to work together if we provide leadership. >> your former bosses at pimco have been in the news. mohamed el-erian left of reported disagreements. when you were there, what was their relationship like? >> it was very constructive. they worked well together and i work closely with both of them and i have respect for both of them. pimco is a great firm with a great bench. >> why did you leave? >> to explore running for governor of california? i had a great experience there. >> according to reports, they

disagreed over everything i'm a trading, personnel, new products. >> i don't think that's true. i think this is overblown. did anyone go back and say steve jobs was too demanding a boss? bill gross has a 40 year investment track record and no one should question that. >> how much freedom did fund managers have to make decisions that differed from his new? >> a ton, the equity managers that work for me had complete control over their portfolios. pimco is worried about greece, then equity manager would not start buying greek stocks. short of extreme positions, the equity managers have full discretion. >> does he mind of people make i can take with them? >> i looked them in the eye every day and it was not an issue. >> you wrote a note cutting entitlements, do you still believe that? >> we need to have an honest conversation about that, all the commitments we have made.

in california, we on the hook for more than $500 billion of unfunded liabilities and governor brown has not acknowledged the magnitude of those liabilities. when he to have an honest conversation about what we can afford and start a process. >> if sheryl sandberg wanted to run for governor, what would you think? >> i would welcome the challenge. republicanhkari, gubernatorial candidate in california, thank you so much for joining us. >> thanks for having me. >> oscars are this weekend but it is not just movie stars that are being honored. special effects play a big part in making big bucks at the box office. we will show you how some of them are made. ♪ >> bloomberg television is "on the markets." we are looking at stocks caught up in a huge rally with the s&p 500s up 7/10 of one percent. the chicago purchasing managers index offset a revision

lower. for further gdp just fourth-quarter gdp pushed investors lower. we will be "on the markets" again 30 minutes. ♪

>> you are watching "bloomberg west." apple is holding its annual shareholder meeting today where the full apple board was also reelected and all management proposals approved. ceo tim cook said apple evan update on its cash policies within 60 days. activist investor carl icahn had been pushing apple to buy back more stock dropped his plan to force a vote on the issue and has turned his attention to ebay. the days of rapid growth that twitter may be over. of internet users

access twitter once per month but new projections expect that are afraid to slow from 19% in 2013 to below 10% in 2015. a 2018, it estimates only 65 million americans will login into the short messaging service. facebook's audience is already twice that size today. a british man charged with hacking into the federal reserve's computers faces up to 12 years in prison. the u.s. attorney's office in new york city announced the charges in unsealed indictments thursday. the 28-year-old man allegedly hacked the fed computers between october, 2012-february of last year and posted personal user information online. the crypto currency can unity is watching the drama unravel with mount gox as they file for bankruptcy in ne in japan. they are being sued for misappropriation of user

property and the proposed class action case filed yesterday seeks to represent all u.s. users who lost money. can this lawsuit hold any weight? are these guys ever going to get their money back? >> the big question for this issue is where drew the coins go? -- where do the coins go? the losses will try to figure that out. >> but there is no regulation. what is the recourse? >> imagine the owners of that coin who said hold this money and the guy holding the money said it just disappeared. that is the issue. the big issue will also be what happens going forward with uncovering this and figure out what is going on. mark williams is joining us from boston. as a former regulator and commodity trader, i'm wondering

what you make of the role of a trading operation like my. gox in bitcoin. >> it is not even a trading operation. no controls. it's a mess. clearly it represents to the market that are there other coinanges out there in bitcv world that are run this way? investors lost tons of money. examiner in the past, i wonder what kind of specific legal protections are legal requirements banks have that are different than what these kind of exchanges have that might have served as a model? banks themselves have a control system with internal policies and procedures. they have an external auditors that come in and they also have regulators that come in and find them if they are not complying with the high standards. compare that to what we have in

bitcoin world. , many of themges with different levels of standards and we also see that there is no control environment in place. we had cyber hackers come in for up to two years to steal these coins buried not only did they still customer coins, but they still 100,000 coins specifically from the owner of gox. >> what is the likelihood that these people will ever get their money back? there is no regulation and there are no safeguards so why should they? >> right, that is the sad story. there is no consumer protection whatsoever. without that protection, these investors could lose everything. most probably they have lost everything. bitcoin itself is not traceable. once these transactions are done, they are irreversible. it's anonymous so clearly is

hard to track down the culprits and it is hard to get the money back. seems that the most basic legal principle is virtually impossible because of the weight bitcoin is operating. there is no location in place for such currency. >> that's correct. there is no legal structure over the top of it as well as any sort of regulation over it. the chance of getting money act is quite low. what's interesting about this story is the fact that this is really bitcoin being tested in the real world. although the protocol is claiming to be strong, the infrastructure around the protocol, the industries that support the structure up your to be weak. that chain is only as strong as its weakest link and that is

what we see with mt. gox. >> i don't really care about the guy that lost the money because i'm a mean person. i do care about the structure. this points out the risk with bitcoin and how it is different than other things because of its anonymity which is what makes it attractive that it creates an inherent risk in the product. cannot ever get away from that? three things have to happen -- it has to be regulated, there has to be a high standard set. this currency is nation less. it has to be a global high standard and thirdly, we've got to get away from these anonymous coins. has happened here. criminals were very efficient and fast to transfer the value without the customers even knowing and now the customers have zero ability to get that money back. >> thank you, mark williams.

>> we will continue to follow that case as it unfolds. coming up, have you wondered how cars in movies like "transformers" get flipped through the sky? i am not driving them but we will show you the technology that makes that possible. ♪

>> welcome back to "bloomberg west." the oscars are on sunday. have you ever heard of thescitech awards? they honor innovators who dream of cool stuff for films. this year they gave a lifetime achievement award to the special-effects guys behind pneumatic car flipper. jon erlichman joins us now from l.a. and can tell us what this is. >> i had never heard of it myself.

tools are created on film sets on the fly and they always think of ways they have to dream up these new things. this one had staying power because it generally works within a film's budget. this is the back story -- if you saw paramount's "transformers" you might recall a sea of exploding cars. you can say that this is not cgi. you've got all color cars flipping and even school buses. the device that makes it happen is the pneumatic car flipper. oscar-winner john fraser helped dream it up or michael bay when he was shooting "armageddon." >> this is michael bay's favorite toy. >> a car is placed on top and it looks like a car jack but it is loaded with high pressure nitrogen which pushes into a piston which throws the car as far as 25 feet. >> you want to get as much of

that air in that cylinder as much and as fast as you can. that's what makes it work. . 3, 2, 1 that's how you flip a car. >> before car flipper scum of the industry to look choice was a canon. he rents the flippers to productions around the globe for a couple of hundred oxidative. >> this is the most economical way to do this. if you install a cannon in a car, that will cost you $2500. times that by 25 or 30 cars, it gets expensive. >> if you want to get fancy -- >> you can take a cable and wrap it around the car. it will go to hundred feet. you pull on that-speed accelerator. >> once you flip the car what do you do with the car? >> these cars will all go towrecker and in four more

years, then made look like a bobsled. >> i have to say that when i was standing a few feet away and they were going to flip, i was getting a little wimpy and i felt i needed safety goggles but there is good precision with this thing. >> so nobody is dying as a result of this? >> no, absolutely not. one reason this came about in the first place was the filming of the movie "armageddon" in downtown los angeles and many people lived in that area were concerned about noise. they want to control over the process. this provides a little bit of science behind the filmmaking process and makes it easier. >> i understand that some other fighters behind the scenes are protesting or planning to protest outside the oscars on sunday? >> it's a a deal in the city. there is concerns about the

studios cutting costs and cutting jobs in the production side. they have gone to other cities or other countries and as a result, there has been bankruptcies and some companies have fewer productions and there is no bigger stage than the oscars they want to get the word out about that. >> hang on, i want to bring in michael bolt, the executive director of far side which predicted correctly five out of the six winners in the top oscar categories last year. michael joins us now from l.a. as well. michael, what are you guys used to predict the oscars? >> it's great to be here and thanks for having me back. it's a good place to start. there are five things we look at anytime we make a prediction. the social media and two, betting markets and that catches the wisdom of the crowd. we look at the nominees previous wins and nominations and also the guild awards leading up to

the academy as well as other awards like the critics choice and golden globes. >> best picture? you say 12 years a slave, what about "gravity?" >> it is an exciting race because it is a tossup. this year, they split down the middle the key awards leading up to the oscars and most importantly, they tied for the pga's, the producers guild award is the most important predictor of who will win. it's anyone's guess at this point. >> what do people in hollywood think about a company using big data to predict the most coveted award in your territory? >> i think it's pretty incredible technology and it is true. it's tough to say this year. walk away with the best picture award. the studios generally bet on newspaper ads. they spend millions of dollars on them.

at the end of the day, it's not what the crowd hangs, it's what a few thousand people who vote on these movies think. it's a very subjective process. this is an objective way of measuring a very subjective game. >> let's run through them -- best director? >> alphonso cuaron for "gravity." i am 100% behind this. sandra a look talked about how space made her queasy all the time. i get a little motion sickness just pushing my kids at the playground on the swing. i felt great throughout that whole movie about the technical feat. >> i thought it was spectacular. best actor? you guys saved matthew mcconaughey? leo is the crowd favorite. he is blowing up social media but the numbers are not behind him. the key awards leading up to the

oscars reflect how the small group of voters will react and they're all going for matthew mcconaughey so we are 100% behind that pick. >> his performance i would say was almost shocking. i did not know he had that in him. what are they saying in hollywood about him versus leo? >> he is in a great spot. if i was going to bet on the oscars, i would bet on matthew mcconaughey. there are certain studios that can be in a position to benefit from some of these smaller films. who bennett's ?-- who benefits from these >> he benefits as well as the studio. >> best actress? kate blanchet? she is thesmine" front runner and it is a packed race with meryl streep, amy adams, judy dench and many people who have been there before. kate blanchet definitely has the edge with all of the wins she

has picked up in the awards season or it >> best supporting actor? jared leto? >> he has not made a movie in five years and has been focusing on music and comes back and gives an incredibly compelling dallas buyersn " club." everybody loves him and he's got this one wrapped up. >> his speech at the golden globes was very moving. we will be watching to see if you can get six out of six correct this year. thank you for being with us. >> thanks so much for having made. >> we will be back with more after this break. ♪

>> welcome back to "bloomberg west." google wants to you your phone 3-d vision. they announced project tango. what is that? >> it is a smart phone with tons of cameras and sensors and all kinds of different things and we

are seeing these things as they start to be added to all sorts of phones. and we have a guest with us now to talk about it. >> john leonard is a mechanical engineering professor. seeing about what we are that is so very different. whateat to talk to you -- google is doing is taking technology that has been around a while, localization and mapping developed primarily for robots and sticking it on a smart phone. what's exciting is ringing 3-d perception of our physical environment onto a phone. gpsrtunities like indoor and the ability to build 3-d maps in real time and localized people or devices and then add on information about the world like the location of objects and behavior of people, it's a really exciting space and will

bring search into the physical everyday environment. >> let's break this into two things -- one is the technology and the other is the data. let's start with technology. what is the technological innovation that is very different that we are seeing with this? is bringingference it all together, the level of integration. some of the things they have been doing with laptops or more computing but in terms of packing it in such a small device, that is the key innovation. it is challenging because as you move a device through the world, it accrues uncertainty. map, you could localize yourself but we don't have a map in our house. the key trick of this simultaneous localization of mapping is to localize the mapping. slam?s called >> simultaneous localization and

mapping. i have dedicated my academic career to this for over 20 years. the google self driving car project inventor was one of the key proponents of slam. a lot of this academic work is getting into real physical devices that can be deployed in people's houses. >> i started slam magazine but it was about basketball. what about the data? there seems to be a common thread through all these projects at google. >> the opportunity to capture so much data about the physical world and register it and remove the uncertainties and stitch it all together -- it opens pretty amazing possibilities. imagine going through a shopping mall or through a big warehouse officer a big environment and being able to

determine the physical locations of objects and register that together. you could have the equivalent of what i call robot googleor google for the physical world to locate object and the possibility to combine them with the cloud, things like where are my car keys -- it could be like search but for the physical world. >> john leonard, thank you very much. " it is time for the bloomberg west" byte. today, is our third anniversary of starting the show. >>it is! forget?p o>> did you >> we had hair changes. >do we have a shot of cory johnson? >> there was no goatee but there was a tie. >> congratulations. >> happy anniversary, emily

chang and jon erlichman. >> you are always innovating. iteration. always an you will not know unless you try. you have to take big risks. >> i can't believe it's been three years. >> it has been incredible. we need aree that facial hair montage from cory. >> i would say that your here and appearance has changed the least. >> yes, he is a bengal. >not me. >> it's been a wonderful three years and it's been so exciting to do this show. >>'s interesting to watch the stories we started years ago. adaptedd story has been since we started those stories. >> what will my hair look like in three more years? >> those are among the big questions. >> thank you and i'm looking forward to doing three more years with both of you. thank you all for watching this

edition of the show and i hope you'll watch for three more years. ♪

>> the u.s. economy grows, but at a slower pace than estimated. we will meet the special effects expert who sends cars flying. your viewers here in the united states and to those of you joining us from around the world, welcome. we have full coverage of the stocks and stories mak