>> live from pier 3 in san francisco, welcome to "bloomberg west" where we cover the global technology and media companies that are reshaping our world. our focus is on innovation, technology, and the future of business. let's get straight to the

rundown. google's eric schmidt meets with president obama to talk about nsa surveillance. and weighing in on the nsa revelations. then we will talk about the wordprocessing app, quip. blocked access to twitter in turkey. this is after ignoring a court order to remove content. many are outraged. many feel that the president circumvented the block and tweeted that the ban is unacceptable. there will be a more personalized app. it will be from the career history, seniority, and connections to show more relevant articles. it will be released in the third quarter. microsoft outlines its policy on when it can search user e-mail accounts after revelations that it scanned the e-mails of a blogger who had microsoft trade secrets. microsoft will not search e-mails unless there would be a court order.

even if the search takes place, it will only look at relevant information. now to the top story of the day. tech executives, including eric schmidt, are meeting with president obama today at the white house to talk about the nsa and government surveillance. marissa mayer was also invited but could not make it on such short notice. megan hughes is in washington. has this meeting been going on for two hours now? >> we understand from sources inside that the meeting has wrapped up. we have not seen the ceos leave just yet. it is not exactly clear. we know the meeting started at 4:00. it lasted for more than one hour. we do not have a readout of what was said. we do have a better sense of who was inside. there were six tech ceos joining the president today. mark zuckerberg, eric schmidt,

reed hastings from netflix, the leader of dropbox, among others. microsoft, linkedin, twitter. none of their ceos were at the meeting. the ceos that were there gave the president an earful. a lot of concerns from the tech community about how this is impacting their business and their brand. we have been hearing more from mark zuckerberg. he and the president spoke over the phone earlier this month. that was about some of his concerns. he put up a facebook post saying there needs to be more transparency or people will believe the worst. and new revelations from edward snowden that the nsa was posing as facebook to get into some user computers. certainly, a lot of tension there, emily. the other thing significant is the timing.

the president is going to be getting recommendations about how and if to change that metadata phone storage program. you can bet the ceos also had a lot to say to him about that and how that should be done. emily? >> the president met with tech executives a few months ago about the same issue. what has changed since then? >> number one, zuckerberg was not at that meeting. sheryl sandberg was at that meeting, representing facebook. certainly, the dynamic between those two will be interesting to see how that plays out. big picture here, a lot has changed since then. that was a listening opportunity for the president. we heard the president speak on this issue several times since then. he gave that big speech back in january where he defended the program, saying that he believes that it is necessary, that it is lawful, though he did say there would be changes along the way.

there is certainly a lot more feedback from the things that he said thus far. >> quickly, what can you tell us about the deadline for the recommendations coming up? >> this is going to be coming from attorney general eric holder who has been consulting with other intelligence officials, basically, evaluating what should be done with the phone metadata, who should be storing it, if it is going to be a third party. that is what they will discuss next friday. >> let's take a closer look at one of the key types of data that has been collected. telephone metadata. this is information about who you are calling and for how long. government officials say this data is not that revealing, it does not have names or specific details about identity. but two stanford researchers conducted their own study that analyzed metadata alone. they discovered that produces immense had serious medical conditions, own firearms, and one of them had an abortion.

all of this was from the metadata collected. one of those researchers is in the studio. both researchers are with us today. he is with a training school for cyber security experts who eventually go to agencies like the nsa. patrick, let me start with you. what was the impetus for your study? >> the major program that was revealed was this metadata program, where the government was collecting citizen metadata, who people are calling and how long the coalesce for without

warrants? >> most of the justification was that phone metadata does not have personal information. this is not accurate. but there was not a lot of proof at the time. we built an app that allowed people to volunteer their phone data to us so that we could analyze it and get a ground truth about what you are able to learn about somebody from metadata. >> and you got 550 participants. who are these people who said, yeah, sure, take a look at my phone? >> anyone who uses facebook or their phone can upload their information. if they're from all over the country. most of them do not know each other. they certainly do not know us. >> you ran the numbers through yelp, google places, facebook directories, and you found detailed information about people. that they were suffering from medical conditions. that somebody had firearms. that somebody had an abortion. just from phone numbers? >> one of the ideas that the government puts forth about why this is not private is that there are no names and numbers.

the idea is that if you call number x, it is just number x. no big deal. but there are ways you can determine who owns or numbers. they can look it up. they can see that is a business that has firearms or but his beats and sexual health, that sort of thing. you can combine this information to learn a lot about a person. >> what do you make of this study, especially given the fact that the government has emphasized over and over again, look, it was just phone numbers. it is not that big of a deal. >> it is wonderful to bring to light what can be founded the metadata. the reality is that it is a tiny number of items that might be true. we cannot guarantee any of their findings are true. they could've called the abortion clinic because somebody

else was involved in it. there were implications we got by knowing the numbers. but it was such a tiny fraction of the data. unless somebody was actually focused on the person, my sense is that this is a very small problem in a much bigger set of issues. but the research was great. >> patrick, your thoughts? >> that is true. you would have to look at a person's data to determine the sort of information precisely to find these things out. the important thing is that there are not legal or technical limitations on what the government can do to prevent this. well it is probably true that the government is not looking closely at a lot of people's data. they certainly could. and nothing is stopping them, at the moment. >> allen, would you make of the second meeting between president obama and the tech ceos? people of expressed continued

frustration. but what does the president have to gain, at this point, from meeting with them again? >> i think they have something to gain. the company said something to gain, in meeting with the president. i think that is the order of have this meeting came about. even though the president called it. the companies need cover. at the real issue for the companies is not the privacy issue. the real issue is a business issue. meaning, they are losing money and other countries that are using nsa access to data to explain why are they not getting context. the business we have to do is to make it clear that these companies are not giving up data that they are not giving up everywhere in the world. the reality is that most countries demand any company that does business there follows their roles, including access to data.

this is not a u.s. problem. it is the disclosure that made it a problem. the companies need cover. this is, in a sense, theater to say, we are going to do a better job. we are going to fix it. i gives the company something to argue with when they are doing business with companies and governments in other countries. >> there are renewed concerns about what companies did not know and what they do and do not have? the new search that microsoft did on a personal account. and testifying that google and yahoo! did know and did cooperate with praise him. i recently sat down with eric schmidt, the executive chairman of google and asked him about the nsa. take a look. >> what is the state of google's relationship with the nsa? >> what relationship? [laughter] >> they didn't knock. they didn't call. they didn't send a letter. they just visited. >> do you believe him? >> i believe he is telling the truth. what i don't believe he knows is

all of the activities of the others at google who are having interactions with government intelligence agencies. he is not in those discussions, so he does not have a clue about them. he could say that with purity and truth. >> you are saying that you think google did know about prism and did help? >> let me break this up. telecommunications companies, companies that do a lot of business with the federal government knew that they were subject to disclosure, lawful disclosure, according to the government, and that they had to do it. this was handled down low in the organization by complaints people. it did not tend to get up to the top because it was not a public issue. i think he just was not aware of that in the telecommunications part of the world. to the extent that he is running something that doesn't actually interact with the government,

that part of it, to the stent of the government broke into his system, if they did, that is a problem that has to be covered under, was it lawful? he might not have known about nsa breaking into systems. >> fascinating research from you guys. if you have a chance, definitely look up the study. really interesting. thank you for joining us. are you waiting for the release of the next iphone? a lot of people are. one analyst calls it the mother load of upgrade cycles. we will talk to him next. ♪

>> welcome back to "bloomberg west". i am emily chang. one analyst says this release of the iphone will be the mother load of all upgrades. why is this the mother load? what are the bells and whistles of the cycle? >> it will have a lot of bells and whistles. at the end of the day, the most important thing is the larger canvas. we were in barcelona a few weeks ago and surveyed the 20 new high-end smartphones. all of them have a five inch to six inch screen. apple still at four inches is not up to par yet. we think that the larger form factor screen is still the biggest deal, by far. >> how much bigger would be? >> 4.7 inches and 5.5 inches. that is a step up.

i think that will be a welcome expansion. >> we recently did a survey monkey survey that said that people were not that interested in that. what they really cared about was the battery. will the battery be better? >> when you have larger screen that increases the surface area and provides more opportunity to put your batteries in the back. i think that battery life will improve on the iphone6, versus the other products. that will be something we are monitoring closely, along with the cost of manufacturing the phone. the screen will be more expensive. the larger battery will be more sensitive. hopefully, everything else will come down and cost, so we can

have this with good margins for the iphone family. >> the samsung galaxy has bells and whistles. you can drop it in water. are android users going to migrate to apple because of the iphone? >> i almost migrated to the samsung because of the screen. i didn't because it was a sticky process. the formfactor on the iphone is going to be up to current standards. i think this is going to be a phenomenal opportunity for the company to reaccelerate the revenue and earnings growth.

apple is underrated by the investment community today. we are pretty optimistic today on apple. >> when are the two new iphones going to be released? >> that is a good question. the current track is for late september, early october. that is the launch cycle of the iphone and ipad. they generate about 80% of apple's gross projects. we think they should split this up. we would prefer to see the iphone migrate to an early launch in late june or early july. that is how it originally started back in 2007. at is our anticipation, our hope. we will know within three weeks or four weeks, whether that will be the case. it will either be the summer or in the fall timeframe. >> brian marshall, senior managing director at isi. thank you. one san francisco startup is hoping that dog owners will join the fray. that story and more when "bloomberg west" returns. you can find us streaming on your tablet, phone, and bloomberg.com. ♪

>> welcome back to "bloomberg west" today and i am emily chang. you've heard about wearable technology. what about wearable technology for dogs. there is a fitness tracker that goes right on your dog's collar.

there is the pitbull watch. then there is wearable tech for your dog. >> it is about communication between pet owners and their pets. it improves the relationship and bridges that gap. >> here is how works. attach this disc to the collar, and it starts collecting data. how much sleep he gets, for example? then they compared data to similar docs. >> i like to keep them as healthy as i possibly can. >> the cost, $130. that may sound crazy, but it turns out that dogs are not just man's best friend, but also one of man's biggest expenses. in 2013, americans spent the day $5 billion on their pets.

then there is the ripple effect. pet owners can use whistle to see if their dog walker to the shorter route. and they can use it to share comments with owners. >> when i go back and and put in a picture from the day, it illustrates the whole story. they made a deal with petsmart for exclusive rights. >> many reasons why national retailers want to work with whistle is that they want to bring the googles variants into their stores. with the average american household spending more than $1500 a year on their four-legged friends, whistle will find itself running with the big dogs sooner than expected. >> coming up, as mark zuckerberg visits the white house, we speak to the former cto of facebook to find out what facebook know about the nsa. regular is joining us next. you can also watch us streaming on your tablet, phone, and bloomberg.com.

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>> you're watching "bloomberg west" where we focus on innovation, technology, and the future of business. i am emily chang. several people are joining forces with others to invest in an artificial intelligence company. according to the wall street journal, the three of them put in a $40 million investment to work on replicating the neo

cortex. that is the part of the rain that controls the body. that is one of the hot areas and tech right now. this is happening with u.k. deep mind and other companies. quip is an app for mobile, tablet, and desktop that allows you to create and share document without a device. bret taylor is here. you left weeks after the ipo. was that a difficult decision to make? >> it was difficult. facebook was a defining company for me. >> come on. you like cofounded google maps. >> i did. it is interesting when you're reporting directly to the ceo and when the company is going through an emotional time both positive and negative,

especially if facebook did it was interesting for me to do. i phoned a lot of deep relationships, particularly with mark zuckerberg and sheryl. we saw that in huge parts of the world people were only use facebook on their phones. and most of africa, people had never seen facebook on a desktop computer. i saw the numbers and how dramatically there were shifting. i realize this was one of the technology shifts that was as important as the shift from the mainframe to the pc. we will look back and everything will change. what is interesting is that very few people are working on that software. all of the great apps on my phone were messaging, social networking, photos, and it looked at tools like microsoft office and they hadn't changed in 30 years. i thought this was too big of an opportunity to pass up. >> did they try to get you to stay? >> they did. but the wonderful part about having a close relationship is that they are supportive.

they were not happy about it, but they were supportive of me and the company. >> what is your vision here? are you guys trying to be microsoft for the mobile era? >> that is our ambition. we want to do what office did for the pc. what is cool about the platform shift is that when you go from something with a keyboard that is tethered to your desk, do something that you use with a touchscreen, that you can use anywhere, that is always connected to the internet, is that i do not think it will look the same as it did during the pc era. i think that in the next week microsoft will release office for the ipad. i think the thing can look for is is it a superficial port of the pc software to the new device. is that that is not what people want to need. our product has messaging into the documentation process.

you do not have to go back and forth e-mail. it pushes into your pocket like blackberries do. communication is more important than the document itself. if you think about it, unless you are a lawyer, you probably haven't sent a memorandum in a while. you probably just use e-mail. we hope to change the way the product looks, not just ported. it is symbolic in a lot of ways. one of the trends that i think is driving investment in companies like ours is the influence of consumer software on enterprise software. it comes from the fact that if you do not like software, for the first time, you will just go to the app store and get something else. all of us use text messaging for work. it was not approved of by the i.t. department. we just did it anyway. that is driving demand for good products in companies, rather than sales driven products and companies. i think it means that products like quip, which are user-friendly and which people are seeking out themselves, are

driving the decisions for the first time in a long time. >> what about gmail? more companies are using google docs because it is easy and there? >> i think google is a competitor of ours. i think they are competitor of everything, to be perfectly honest. [laughter] but i see them fighting much of the same battles that we are fighting. moving companies away from the traditional installed pc software. like many complex business relationships, on one hand, on some of the frontlines where competing with, i think the more companies who move into the cloud and embrace this new class of applications, it actually helps our company, as well. >> you are charging businesses

a subscription. but it is free for personal use. >> every single one of our paying customers found us. our sales process was just following up and saying you're ready like it, just use it more widely. our relationship is not convincing people that our product is good. just convincing them that they should deploy it more widely. >> how many customers do you have? >> we are not releasing those numbers yet. we have a large amount of customers. there is a technology company that is one of our customers in the valley. our first paying customer was an asbestos removal company in colorado. it was a neat experience to have our first paying customer outside of the beltway, if you will.

i think it reflects the fact that for a lot of these companies where people are in the field, were people of ipads and spotty internet, they are seeking out something that works in that environment. we are extremely popular in schools, as you can imagine. a lot of ipads are giving that that's to students. it is all about collaboration. our product is a perfect fit for that. we have only been on for seven months though. but we will release more broad numbers later. >> the former cto facebook and

>> welcome back to "bloomberg west" today. i'm emily chang. facebook has been buying up other companies. they bought whatsapp for $19 billion.

when facebook bought whatsapp, did that surprise you? >> i think it surprised everyone in the valley. i read it was the largest acquisition of a company like this in history. on the other hand, it did not completely surprise me that mark was interested in messaging and whatsapp, in particular. having worked at facebook, there are a few key parts of it that everyone needs. messaging, profile page, and photos. and if you look at facebook, that is how people are using the product. i think that the facebook activity reflects those values, that those are the important parts of the facebook experience. they got instagram and whatsapp because they were incredible companies. >> does it worry you that facebook has not been able to build whatsapp itself? they tried a standalone app with paper, which came out with great fanfare and disappeared. is there a difference with

buying versus building innovation? >> technology is defined by how rapidly changes. i think the most successful technology companies are defined by how rapidly they can change technologies. the one thing i think facebook has culturally is a willingness to change. i remember when i was there early in my time at facebook, we would redesign the new profile page seemingly once a year. there would be protest groups, people extremely angry that we had gone into the living room and shuffled around furniture. on the other hand, i think a reflects the fact that the company is not wedded to the way things are currently done on the product experience. >> does that come from mark? >> i think it does. most founder driven companies

like facebook are like that. it comes from the top and he comes from mark. it is a part of the culture are now. i think that culture was initiated and created by mark. facebook will execute well in certain areas and not another areas. the fact that they are ambitious and willing to correct mistakes through the changing products or doing acquisitions, i think it reflects a fundamental strengths of the company, in a lot of ways. >> what chance do you see that facebook will not be the dominant company in the future? >> a good question and almost impossible to predict. the adage in silicon valley is that the startups that disruptor company are things you have not even thought of. companies like snap chat are like that. the first time somebody

describes it to you, you are like, what? i do not know what you're talking about. if they are tapping into a new way of doing things and a new technology. it is hard for me to predict. i look at the great companies in silicon history like intel, google, and facebook, they are willing to change. the famous intel story is going from selling software to doing other things. there are structural risks, like with any technology company. on the other hand, i think that aspect of the company is very unique. i think that its peers have those qualities. they tend to be the mainstream, enduring technology companies of our lifetime. >> let's talk about the nsa. mark zuckerberg is in washington. he is been vocal about the way the government blew it. what do you make of him putting himself out there like that from a company that has been real about their problems with privacy?

>> i can comment in broadly. the challenge for silicon valley companies and the wake of the nsa revelations from snowden is that we are all over. we are use all over the world. that is the norm for mobile companies and internet companies. the problem for us is that our customers are spread throughout the world. it is really hurting our business. it is hurting the perception of american companies. it is hurting the perception of cloud-based services. that is really challenging for businesses. i think the dialogue is really healthy because there are important national security considerations, but at the same time american businesses are global businesses. they're both very important. i am really happy that there are discussions going on right now. >> when you were there what did facebook know?

what did you know? was there a backdoor? >> i cannot comment on that and i do not have personal knowledge of anything as it relates the nsa? >> what about quip? how will you deal with documents that could be sensitive? >> the type of information we are dealing with tends to be much more private and much more constrained to a single company. you do not have the same types of sort of challenging interactions that the social networks and other public forums have. we have seriously talked about hosting data in europe and asia so that customers for whom this is important over the long-term have the options of where their data is stored, which is not a conversation we would have considered two years ago. but i think that reflects how structurally disruptive these revelations have been. >> quip ceo, bret taylor. great to hear what you think about the tech landscape. also the former cdo of facebook. ali baba getting into the mobile messaging market, investing money in tangle. we will speak to the cofounder

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>> welcome back to "bloomberg west" today. i'm emily chang. linkedin, jeff weiner has a 100% approval rating. larry page ranked 10th with 93%, as well. tim cook with 92% approval. marissa mayer had 79% approval rating, ranking at number 49. $280 million. that is a massive investment. alibaba bought tango at a valuation of a billion dollars. >> with all the attention about

the mobile messaging space, i think we really felt that we needed to be prepared and capitalize for the long-term. bringing in a major investor, it is almost like inheriting a crystal ball where you can look into the future and see what one-year or two years down the road is going to be like. there's been so much innovation over there. >> a lot of attention is being paid to ali baba. i think the ipo will open the

market to see what ali baba is. do they see this as a way into the messaging market and internet market? >> i think people are realizing how strategic mobile messaging is. these are apps that you are checking 20-40 times a day. there is great opportunity to grab the mind share of the consumer. >> i wonder if this opens up the chinese market to you guys in a bigger or more meaningful way? >> it absolutely does. as a silicon valley startup, there is a presence in beijing, china. we have been going back and forth. our presence in china has been limited. i hope that we expand over there. we want to be global, and china is a mega market. >> yes, there are a few people there. [laughter] do you look at global markets in different ways? >> we do. we are often in 224 countries and 16 different languages, also. for example, in the middle east, tango does extremely well with was a dominance.

with the social networking experience that people have. for that reason, we are set up to be used in that way. that shape the way that we have gone about this. >> your early investor, a friend of mine, a venture capitalist, has been really excited about this. there are other companies in the mobile messaging arena. how do you distinguish in that arena what you are doing versus whatsapp or another company? >> there are a hundred other messaging companies out there. >> our approach has been unique. we offer free communications and phone calls, and video calls. we also have service or people can spend time and have fun. they can look at pictures of their friends. they can play games together. they can share music clips with each other. we really think that the

additional content is something that our members have enjoyed tremendously. it is similar to the approach that asian messaging companies of taken. where the only one in the west to be set up in that way. i think it is a good match for the u.s. market. >> where were you when you heard about the price for the whatsapp acquisition? >> i was at my desk. i did almost fall over. putting things into perspective, that deal made facebook instantly become the largest carrier in the world. in some way, it is a bargain they got. they got a user base twice the size of twitter for half the price. >> i wondered when i started to think about this, it may me think about the business and a different way. i wonder what this really means. as you pointed out, the carriers, because of the success of these free apps, really decline in their ability to charge money for texting. >> it is an interesting point. already today, i think that twice as many text messages are being sent on mobile messaging services like tango.

they are all in carriers like at&t and verizon. the market has changed quite a bit. >> that is the tango founder and ceo. now it is time for the bwest byte, one number that tells a whole up. jon ehrlichman is in los angeles. >> i have a double b for you. a bitcoin byte. 200,000. they filed for bankruptcy protection because it lost 850,000 bitcoins. it recovered 200,000 bitcoins. people are talking about it, saying these are stolen. these were lost in an old digital wallet, an old storage file. some of the early exchanges had a messy procedure going on. woops, we put 200,000 somewhere and now we found them because

there are lawyers breathing down our necks, and we need to find them as soon as we can. >> this is so baffling. they could say $450 million worth of bitcoin disappeared. but after we filed for bankruptcy we just discovered 150 million more. how strange is it that a virtual currency can disappear? >> when you're talking about an exchange that moved into this, those are the early realities. a lot of people are trying to go to the next generation of exchanges. >> thank you. thank you for watching. we will see you later. ♪

>> this week on "political capital" -- russian experts talk about what's next there. jason furman on the economy. julianna goldman on the keystone pipeline. and we debate romney's strong words. we begin the program with former deputy secretary of state and president of the brookings institution and one of america's foremost experts on russia, strobe talbott. you know putin. what do you think his appetite is?