>> live from pier three in san francisco, welcome to "bloomberg west." we cover innovation, technology and the future of business. prime minister benjamin netanyahu is visiting silicon valley today. he will be joining us live to talk about israel's booming tech scene and his views on silicon valley. we will also be speaking with the cofounder of andreessen horowitz about the three big trends he is watching in the world of startups. we want to talk about

developments at microsoft as the new ceo puts his new management team in place, the best-known manager arguably steve balmer passed hast the baton in terms of the ceo title is speaking out about some of his regrets about microsoft's shifts into hardware. we are also getting fresh details from bloomberg news on what was happening in the board room as steve balmer push to get that nokia deal done. ari leavy is a bloomberg news technology editor and joins me here in san francisco with the latest on the story. ari, let's start with what we are learning about that process of steve balmer pushing for this bigger move into hardware, trying to get a nokia deal done. it sounds like board members were not so sure about it. >> the surprise would be if there was not a lot of debate in the board room about this.

a $7 billion deal for a handset maker, for a company that is trying to shift into the next generation of software and devices. they are buying one of the legacy players. a lot of boardroom drama taking place around this deal. ballmer was a big supporter of this. was it his last best effort to maintain a hold of the company? in some ways that is how it is sounding now. there are some board members who are opposed from the get-go. >> maybe if we can get a sense of what seems like regret in terms of when microsoft made its move into hardware from steve balmer, we should listen to what steve balmer said over the last 24 hours. in terms of the tricks microsoft has had over the years, maybe versus the kinds of tricks apple had in its bag. >> in a lot of businesses, you are forced to do your second trick or you die. if you don't do your second trick, you should do every trick.

the history of business is most people do one trick. they run with it as long as that trick works and then they fade out. we were fortunate. we came up with a second trick. how do you take microprocessors and push them in and do the backend automation of business? >> obvious comments to make now, but interesting to hear them from him. >> most people listening to that who have been following microsoft, their reaction would be, what was the second trick. was it video games, cloud, tablet. they tried a lot of second tricks. they had one great trick for several decades. they have had other successful products. as far as being ahead of the curve on everything else, they have not. >> ari leavy joining us with the latest on microsoft.

cory standing by with benjamin netanyahu. >> benjamin netanyahu here visiting silicon valley. from one tech center in israel to the tech center of silicon valley. there are so many technology companies coming out of israel. what did you learn? >> i learned there in israel and for good reason. they find a lot of people there who are giving them new applications, a lot of ideas. right now the future belongs to those who can innovate. the future will belong to those who can innovate even more. a lot of israelis' companies are here. i want to make sure that cooperation increases. i think it really gives a competitive advantage. >> you struck a deal with governor jerry brown to have a

more formal relationship, to try to do what? >> anytime you have bureaucracies either side that are holding back development, let's first help them by not interfering with them. second, the thing we can do is government. california has a big water problem. we in israel do not have a water problem. how is it possible? our rainfall has dropped by half in 65 years. our population grew tenfold in our economy grew 70 times. how come we don't have a water problem? we use technology to solve it, recycling and desalination and drip irrigation. these technologies could be used by the state of california to eliminate its chronic drought problem. >> desalination has been a controversial thing.

>> use solar energy. that is what we do. >> do you expect this to be a two-way street as well? what do you expect to get from silicon valley? >> i would like to get all the venture capitalists, and technologists to come to israel and see how they can find not only soulmates, but our entrepreneurs and technologists to cooperate with them. you do not insulate yourself, cloister yourself in this global world. you open up, and preferably to the smartest brands anywhere you can find them on the planet. in california and israel are two of the greatest hubs of technology innovation and entrepreneurship. let's make our work even better. >> a lot of telecommunication in particular coming out of israel,

a lot from founders and entrepreneurs who started in the military and learned a lot about telecommunications. i wonder with this newfound focus on spying by the nsa and distrust of what companies are doing with data turned over to the government, is there something you can do to reassure people that the equipment they buy from israeli technology companies will not be used for spying for the military purposes of israel? >> we are doing the opposite. my point is to build in israel a global center for cyber security. to prevent the spying, prevent piracy, prevent sabotage. you have bank accounts. you have electricity. you have to protect them. traffic systems, aviation systems. all of these could be individually and national infrastructures could be in

peril by cyber attacks. we need to create the ability to protect individuals and countries. in israel we have such a capability. we are among the top in the world. i have made it easier for israeli startups. we have hundreds of startups. i have made it easier for them to join other companies by relaxing the limitations of proprietary knowledge so they can participate. i think this is a fantastic business opportunity. >> the hostilities we have seen in ukraine, we are getting hints there have been some sort of telecommunications attacks, possibly the russians as well. i wonder if there's something in particular that is israeli about

focus on mission, orientation to tasks that might lend themselves to certain types of startups. >> what we find is what you would called time-to-market is much shorter. we don't have time, we don't have a choice. we have people working in small teams in the have to get results. once they finished their service they take that tradition out to the marketplace and they are very brazen. this is something we encourage in the military, out-of-the-box thinking. it is a laboratory for ingenuity and innovation, cutting corners. sometimes you have to cut corners. get the result. get me the outcome. that's a very valuable thing. we have very smart people. we select from most of the population the smartest people, young men and women, put them

through a few years on the information highway and other things. you're looking at a 21-year-old kid with technological experience. it's hard to match, even in the big companies you see here. that comes out later in being knowledge workers or knowledge entrepreneurs or both. >> we have seen a lot of little companies get acquired before they get to any size. is that good or bad? when you imagine your economic goals for these companies, where would you like them to be? giant behemoth like a google? >> small googles will be fine. that requires marketing reach. we have brilliant people. they develop these startups. startups used to be that if they sell at $100 million, they were wildly successful. now they sell in the billions.

i'm not sure there is a cure for that. i'm not going to legislate and tell them, you can't do that. it seems to be our lot to keep on producing these mushrooms after the rain. somebody else picks the mushrooms. that's ok. it has happened in several of our companies. overall, israel is the laboratory of the world. the laboratory of innovation. >> are there concerns about currency issues? if they are denominated in shekels, they have an effect on the currency. >> it makes the gdp bigger. >> thank you very much. >> thank you. >> that was cory johnson speaking with israel's prime minister, benjamin netanyahu.

a couple of the headlines, netanyahu saying he wants to see a global cyber security center in israel and suggesting that israeli companies can play larger role in solving some of the issues here in california, such as the drought. one other story we are tracking today, can a stick change the future of television? roku is a company thinks that is possible. here is a company that is battling with apples and the apple tv product and google, with google chrome cast. today unveiling what they call a streaming stick for $50 that plugs into your television and gives you access to a different world of tv programming from what you would traditionally get on cable. cliff edwards covers the company and he joins me now. let's talk about this device from roku. what are your thoughts on it? >> it's an iteration of a stick they had out already. they are emulating the chrome cast. you plug this in and get your

stuff right to your television without any cords and cables. >> we had a chance to speak with the ceo today. the size is something that people prefer, even though we have come to see the streaming devices as being like hockey pucks because of apple tv and roku. does that jive with what you hear? >> sure. what they're trying to do is fill out all the checklists. some people do want that little set type box. some people want this interim thing where you can plug it in and take it with you when you go on vacation and some people are going to buy the roku televisions that have it built directly into third-party televisions. >> i want to talk about that part of the story. the ceo of roku spoke to us earlier today. one of the questions i asked him, given that this device seems clearly aimed at what google has -- they look similar.

some have made the argument that if you live in the world that is android, you have android devices and you end up using android or google related services like google play. you might be more inclined to use chrome cast over what roku is offering. here's what he had to say to that. >> the biggest thing about chrome cast is it does not come with a remote control. customers you -- like to have a mobile phone as an option. they also want to have a remote control. we have apps for android, for ios the run on mobile devices. the remote control is our big differentiator. >> does it come down to something like the remote control? >> the remote control is important but another set of distinction between the two is that chromecast has those apps built in. the roku streaming stick has those apps build into its stick.

two different models. they look the same but slightly different. >> roku is considering an ipo. there is a part of their business that does not get as much attention as the devices. they license their software, especially to smart tv manufacturers that are looking to have a good interface, something that is strong, but maybe they can't build on their own. i did ask, if people can buy what roku offers, what does that mean for the market for smart tv's. he argued that the smart tv market is growing and will continue to grow just as these devices and their sales grow too. would you agree with that? >> sure. most of the televisions now are smart televisions. the question is, do people start using those apps beyond the netflix's of the world. >> you mentioned netflix.

disney a key partner of netflix. this week we saw disney and dish announced a very big partnership which will certainly allow dish to have access to disney content. maybe in some new forms, may in internet television down the road. what is a company like roku think about a deal with disney and dish? >> they already have dish world on their app list. this would give them the opportunity to expand that list and give people the opportunity to buy these boxes as opposed to cable boxes. >> when you think about a company like netflix which you also cover, and trying to shift or be available through cable -- really trying to muscle its way into that whole cable world -- what do all these players think about that? >> netflix is about making themselves available on any device and very easily being accessible on those devices.

with players like roku they want to get as many of those services on their boxes possible. >> thank you very much. bloomberg news reporter cliff edwards joining us. a quick programming note. emily chang will be speaking with eric schmidt and google ideas director jared cohen. you can catch the full conversation tomorrow on "bloomberg west." 1:00 p.m. and 6:00 p.m. eastern. ♪ >> welcome back.

i'm jon erlichman. elon musk to make a push to enter the pentagon satellite launch market while sitting next to his biggest competitor, who joins us now. any sparks fly between the two rocket chiefs? >> yeah. we had elon musk of spacex making the point that he wants to join military and spy satellites launch programs. right now it is dominated by united launch alliance. today musk said that he was vying for a table, sitting next to u.l.a.'s ceo. he said that using spacex would save the federal government $1 billion in tax savings for

taxpayers every year, and he did that while sitting next to a competitor and said the current state of the market is unsustainable. >> the air force and other agencies are paying too high a price for lunch. the impact was protectable. space launch innovation stagnated, compared to competition. prices elevated to levels that general shelton have called unsustainable. >> at issue is the evolved expendable launch vehicle program, a $70 billion program that is the federal government's answer for reducing the cost of military satellite launches. right now that is dominated by united launch alliance because spacex, although it's trying to get a spot in the certification program, does not have the approval to do so. u.l.a. has for years held the monopoly. it's a joint venture between

defense giants, lockheed martin and boeing. today the ceo says that he does not think that breaking up that monopoly in the name of competition will really have that big of a payoff. take a listen. >> they are important questions about how competitions will be structured. to ensure they are fair and open, and whether competition will actually save the savings promised. ultimately the question is whether savings from competition will be sufficient to offset the cost of duplicating existing capabilities. >> that is a sentiment not shared by the pentagon. they will later this year be opening up 14 more missions, four new entrances like spacex to take a chance of entering that market. >> any talk about russia today? i know that he told our rachel

crane, embarrassing the u.s. has to thumb rides to russia. did that come up at all? >> it did. musk pointed out that united launch alliance, the engine is actually manufactured in russia. seizing on everything that is happening right now, the proposed economic sanctions, he made the point of saying that to him it's crazy the united states would consider awarding millions, hundreds of millions of dollars of contracts to united launch alliance, not opening up for competition when he at spacex is able to say everything they produce is actually made in the u.s. that was one point he did capitalize on today. jon? >> how long before spacex could join the military satellite program? >> that's a bit up in the air right now. elon musk was encouraged after

today's hearing. he thinks it's a good sign that lawmakers seem to be on board, seem to see things from his point of view that we need to have more competition, it should lower costs in the long run. that is something to be determined. right now it looks like as soon as october 1 begins, we could see this opening up. before it can happen, spacex will need to get certification, eelv certification that it does not have. good news last week, the air force announced its launch of the falcon nine in late september would count towards one of the three necessary launches to receive that certification. that was a big move in the right direction and that momentum was certainly something that he brought with him today on the hill. that's what we can say for now. one thing to point out is that this hearing is not quite over just yet, because it is a hearing that will keep on giving.

one thing the subcommittee chairman said in his remarks was that they were doing something a little bit unorthodox this time. they wanted both ceo's to submit 10 questions that they want the other ceo to answer. those responses will be coming in later and will be added to the record of this morning's testimony. that is something that will be interesting to look through in the days ahead. jon? >> no kidding, and also to find out in terms of how this affects their overall business. he was also talking about the success they have had in delivering cargo. thank you very much. as we had to break, a quick programming note. emily chang will be speaking with google executive chairman eric schmidt and google ideas to rector jared cohen from the oasis summit in los angeles tonight. you can live stream it on bloomberg.com at 7:00 eastern time. catch the full conversation

tomorrow on "bloomberg west" 1:00 p.m. and 6:00 p.m. eastern time. still ahead, andreessen and horowitz cofounder ben horowitz. ♪ >> you are watching "bloomberg

west." i'm jon erlichman in for emily chang. let's get to your top headlines. target is searching for a new chief information officer after the data breach exposed personal information of tens of millions of customers. the new executive will replace beth jacob, who has just resigned. verizon wireless tops its rivals in network performance, according to a new study. in a six-month review of reliability, speed, data and call quality, verizon scored 90 out of 100. at&t was second.

sprint and t-mobile way behind with scores in the 60's. facebook stepping up enforcement of posts talking about gun sales. facebook says it will delete posts when users declare a willingness to break the law, transporting a gun across state lines. facebook will also send messages to people posting about selling guns, reminding them to follow the law. if it is a successful company in silicon valley, chances are andreessen horowitz is already an investor. the firm has had stake in facebook, twitter, and pinterest. cory johnson sat down with an horowitz and asked him how the writing process has helped him become a better investor. >> the big thing is people often feel like they know me before they meet me. that's a big advantage. if they see you, you express

yourself, if you put yourself out there and then they go, i know this guy. they come to see us and say, ben, i already know you. the first time i met my friend i was like, i already know you. i have listened to your albums, nas. he said, it's great that you know me already. >> that is why it's good to be real. when you had that experience with someone, they're having the experience with the real you. >> that is what is hard in writing. that is something that people appreciate about the blog and the book. it is the honest side of it. i'm not trying to cover-up all the things i did wrong. i am trying to say this is what happened.

>> what are the commonalities of entrapreneurs of this technology area that is different than the last one? >> because getting started is easier, in a lot of ways they are younger, which is a strength and weakness. the strength of being young is you don't have the old paradigm in your head. it's very easy to break it, which is a big deal in technology companies and innovation. the disadvantage is that you are young. there's a lot of stuff that you don't know and there's a lot of wisdom that you don't have, and that can lead to doing things that have very dangerous long-term consequences for yourself and the company. >> what specific things are they weak at because they are young? >> what building a company is

about and what it means to the people who work there. it's great you have an idea. i'm doing a company, it's great. but that isn't really what it's about. what it is about is a group of people trying to produce something different or bigger than themselves. if you go out and you recruit a bunch of super talented people to come work for you, it can't be -- i tried that and it didn't work, or it can be, and that team who could have been working during those years you were paying them nothing is not going to want to work for you again and they will not say nice things again and you have created that amount of misery. that's not really something you should take so lightly. in the old days, that kind of thing did not happen the way it does now. >> talk about your firm in the way it is organized.

there is credit for completely changing the way venture capital works. you have made some important changes. what do you think are the important things are different about the way your firm is set up? >> to me the most fundamental thing is when i was an entrepreneur, venture capital was very oriented around finding an entrepreneur with a brilliant invention and assembling a team to build the company against that invention, and particularly bringing in an experienced ceo to run the company. whether that happened or not, that is what they were good at. they were good at recruiting. i think that when we came in, our whole idea was, let's assume we want the founder, inventor to run the company. what kind of firm do you need to build to enable that founder to learn to be ceo and become a very confident ceo?

and for the structure of the firm and the way we talk about things and the kinds of partners we have, are all geared to enabling to become a ceo. that is had probably the highest impact. you see other venture capital firms at least going, we're going to give the founder -- we understand the value. >> do you see other vc's changing their approach as a result? >> definitely. >> i'm thinking more in terms of the actual structure of your firm. the pay for partners is lower than it might be at other firms. money spent on doing other things, like what? >> the structure of the firm is designed for that. if you are a founder ceo, there are two things you lack. technologist, i invented something. i've never been a ceo and i want to be ceo. you don't have the ceo skill set. for the ceo skill set, we required that all our partners

the founders or ceo's. that partner, they have experienced the can teach you to do that job. the second thing is that you don't have as a network, you do not know all the best people in the media, you don't know all the best engineers, executives. and you don't have access to all the big companies you might want to do deals with. the way we have structured the firm is, we pay much lower general partner salaries and we use that money to build out people who run those networks and help you look like a giant ceo even though you've never met any of those people before. >> i will have much more from our interview right after this break. ♪ >> i'm jon erlichman.

this is "bloomberg west,"

streaming on your phone, tablet and on bloomberg.com. we turned back to our cory johnson interview with ben horowitz, cofounder of andreessen horowitz and the author of a new book, "the hard thing about hard things." cory started out asking him what makes andreessen horowitz different from other vc firms in silicon valley. >> we have been able to compete really well. a lot of it is people know us because we write about what we think about building a company, which was relatively -- we are not the only ones doing it for sure, but a relatively new thing in venture capital where we say, this is what we think about building a company. this is what we think about investing. this is how we think you should lay somebody off. that's a different kind of thing. that has let them get to know us, and combined with the philosophy of how we can help makes us very competitive.

>> we started "bloomberg west" three years ago. i think mark was our first guest on this show. three years ago last week. we stumbled around and decided that social media, the cloud and mobile were going to be the three things we would focus a lot on. who knew it would be that -- i wonder if you see new things emerging. >> crypto currency, drones, 3-d printing are interesting areas starting to emerge. they have potential to be transformational. >> 3-d printing is a 20-year-old business. >> the patents have expired. there was no innovation because it was locked down completely. the patents expired. i want to say two years ago. that has created a whole new set of companies, people going after it. >> is the industry big enough? will there be demand for that kind of stuff?

>> i think so. i'm 3-d faxing. just the ability to put manufacturing in anybody's hands so anybody can make anything is something that has never been possible before. >> the focus on these new things, does that mean we have seen the extent of some innovation around social media? >> [indiscernible] i think there are still things going on there. it's a different environment than it was in 2005 or 2006.

i would hesitate to say it's over. i think you have to be careful about that. >> whenever i'm in new york, i hear about silicon alley. you hear about, this is the new silicon valley in texas. why is silicon valley continuing to draw the best and brightest? >> it is a network effect. if you look at five companies worth $5 billion in tech come from silicon valley, and you name five in new york, it's hard to find although new york is doing well. it's a network effect. if you're a world-class engineer, where should you go? the overwhelming answer is silicon valley, and as a result, all of the best executives are in silicon valley, or all the ones who know how to scale

companies are in silicon valley. there's a predominant amount of money in silicon valley and so forth and the culture itself is very conducive to building companies. all those things combined to make silicon valley a very strong network. it's kind of like hollywood. digital cameras, how hard is it to make a movie? you can make a movie in idaho. but even getting the best key grip or whatever is going to be like, you're not going to get somebody as good as the guy in hollywood. you start out at a disadvantage. >> what is the cultural -- you grew up in the bay area. it is a unique place. >> there is tremendous awareness. technology, everything kind of matters in the landscape. what is going on and programming languages, what is going on in tools to build the environment,

what's going on in database technology, what's going on in cloud computing? what are the advances? silicon valley, that is everyday conversation all the time. you are in the flow. if you are outside of that, it's not as big a focus. it puts all the burden on you. it's not just in the air. that kind of thing is just different. in the same way in hollywood, everybody knows everybody. every actor in every party. it's a different kind of a thing. >> that was ben horowitz, general partner and cofounder of andreessen horowitz, speaking with cory johnson. bloomberg lp, the parent company of this network, is an investor in andreessen horowitz. our own emily chang will be speaking with google executive chairman eric schmidt and google

ideas director jared cohen in los angeles later today. live stream it on bloomberg.com at 7:00 eastern or catch the full conversation this thursday, "bloomberg west" 1:00 and 6:00 eastern time. coming up, google's investment arm makes a big investment in auction.com. ♪ >> welcome back.

i'm jon erlichman. this is "bloomberg west." you can catch our early edition, 1:00 p.m. eastern time. the idea of online marketplaces is not new. there have been a lot more specific online markets that have developed. auction.com is a great example in the business up property and real estate. google capital just invested $50

million in the business. the president of auction.com joins us now. the stat that caught my eye about auction.com is that it sold upwards of $7 billion in real estate online. what kind of property is this? >> everything from single family home to a 70 million-dollar commercial property and everything in between. the internet is very good about bringing buyers and sellers together and making things transparent and efficient. >> the business model for you is you take a five percent cut of the transaction? >> yeah, we take a commission on the transaction and it varies based on the price of the real estate. >> this is a different business than zillow. if we were talking travel, i think you guys would use the comparison of being more like priceline with zillow being more

like trip advisor. >> this is something we see in the internet space again and again. companies are vertical and they are complemented by businesses. >> i do end up using a service like zillow. would there be a benefit to you guys being involved in the whole process of people trying to find the property and then pulling the trigger? >> it's a very complementary relationship with companies like zillow. a lot of content that is useful for home buyers and sellers and we complement that by curating the marketplace and allowing buyers to see everything on the market, along with the sellers to see the buyers that are interested. >> you have a $50 million investment from google's investment arm.

they will have a seat on the board. what is the game plan? >> this is about more than money. our goal was finding a strategic partner and we view google as world-class in mobile, online marketing. those are areas that are very valuable to us. >> as you heard about google's interest did you think, are they angling to buy us? >> this is about a partnership, about us looking to tap into the expertise of a world-class internet company and google capital has built a world-class team for us to leverage. >> i think about things like foreclosed properties, which there are still a lot of them, and it's a gray zone in terms of learning about it. how much of that inventory do you guys end up selling? >> we sold 30,000 properties last year and one of the things we focus on is providing the most amount of information to the potential buyer so there is less risk in the transaction.

the marketplace includes proposed properties and nondistressed properties as well. >> if i were to try to think of the craziest properties that have been purchased through auction.com, anything come to mind? >> it was amazing to us to see a $70 million commercial building. this is people clicking on the mouse, one to $2 million per click to buy a large building in southern california. >> in the past they would have done what? >> there's a traditional process. the process of going off-line. the alternative is paper, pencil on the fax machine. we bring technology to that process and make it efficient for everybody. given a worldwide distribution. that is what makes it better for all participants. >> whenever we see these kinds of investments, we ask the question, what is the goal with auction.com?

>> we are focused on keeping our heads down and building a great business and democratizing the real estate transaction, allowing anybody to participate in buying and selling by taking the risk out of that transaction. that is what we are focused on. >> thanks for joining us. the president of auction.com on google's capital investment in the company. the bwest byte is where we focus on one number that tells a whole lot. joining us today, ari leavy. what you have for us? >> 250,000. the amount of money in dollars that the twins are willing to pay to go to space. he is sending residents of the world like you and i who can afford it to go to space. they are doing it in bitcoins.

>> you can pay in bitcoin? >> if you have $250,000 worth of bitcoin. >> they go over the history of marco polo and columbus. my biggest question is, are they angling to do some space rowing? how cool would that be? the twins are out there. i don't know. they are very gung ho about this. >> it's a natural progression of history. rowing in space is something they will be talking with richard branson about in the coming months. >> thanks a lot. you can get the latest headlines at the top of the hour on bloomberg radio and all the time on bloomberg.com/technology. we will see you tomorrow. ♪ >> the following is a paid

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