>> 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. i'm emily chang. every weekend we bring you the best of west. two major chinese tech companies are waiting to go public. twitter of china has filed for an ipo. alibaba is starting its ipo

process, choosing the united states over hong kong. alibaba could be valued as much as $200 billion by the end of it. i spoke with our editor cory johnson, bloomberg editor paul sweeney and another executive who also helped bring google to china. i started by asking how significant it is that alibaba is going public in the united states? >> we have been anticipating it. it pays back yahoo!, who has a big stake in them. the second thing is that they have been acquisition free. going public will provide more currency for them to make more acquisitions. they have spent a billion dollars worth on acquisitions in the last year.

we just heard they took a stake in any video and movie production company. it is been watching a lot of stuff in the mobile area. >> what kind of numbers do you expect to see? >> some of the numbers are staggering. i think where investors will start is with the overall chinese market. there is over 600 million registered internet users in china. that is growing dramatically. e-commerce is a bigger part of the overall retail sales environment in china. than it is in the u.s. it is a big base to start with and of course, corey, as you know, investors want to see some serious topline and bottom-line

growth. to support the valuation. >> cory, isn't ali baba's sales growth rate -- slowing down? >> how much of a slow down is the question. is the growth organic? is the business truly growing. one of the concerns is that the tier one, the four big cities in china, and tier two have seen a lot of growth for these e-commerce, online, social businesses. after you get past those cities, there's not a lot a lot of growth in china. not all of china is available to them. >> that is not unlike what we're seeing in the united states. the same is happening to twitter. talk about the significance of both ali baba and weibo.

looking to go public at the same time. what advantage do they see? >> the market in the u.s. is a little better for shares, for controlling the company. moreover, this shows that for ali baba to grow when it gets that big, they have to start to load for other growth areas. like international. there is speculation that they will start to look at u.s. markets and u.s. businesses. very selectively. >> this is a big question. is this a business that is set up to do business in the u.s.? particularly given that a lot of the infrastructure -- you see amazon and ebay building up physical infrastructure. can ali baba still get into that game in the u.s.? i think they can do so over selectively. ali baba has been focusing on cross-border growth. it started to take chinese merchant goods internationally. that is the business model. per capita income increases. and also goods from china

exporting to the u.s.. >> alibaba has quite an operation in the united states. we don't talk about it a lot, but on the b-2 be side, u.s. businesses actually get their goods through alibaba.com. whether it is a random ingredient to some kind of lotion that they can't get in the united states. they get that on alibaba.com. maybe it comes from tie haiti or something like that. paul, what do you think about the extent of ali baba was potential -- of alibaba's potential? to grow even more globally, further infiltrate the u.s. and other markets? >> the primary reason for the u.s. offering was simply the the control. jack ma only owns 7.4% of the

stocks. one of the benefits is to make this company, a lot of people outside of china don't know this. the global offering is a way to introduce it to other parts of the world, investors, other potential partners. even though the growth outlook in china is extraordinary and is considered a long-term growth story, clearly, ali baba will be more competitive than in their core chinese market. >> that was sweeney. up next, yelp chairman, yahoo! board member talks about how tech can solve societies against against -- biggest problems. ♪ >> this is the "best of

bloomberg west." so world issues, crisis in ukraine, a multinational search for a missing jetliner, nsa and

the spying controversy. the list could go on. what are the biggest problems in the world to solve? can technology fix them? our editor at large cory johnson and i spoke with max levchin. paypal cofounder and yelp! chairman. >> is a specific color to it. it is focused around the notion of data as the raw material to be used to solve problems. the process always works around, and by process i mean we sit around the table and brainstorm. it is a little more loose than that. what i like to think to do -- what i like to think we do is we figure things out. what did we not know that is just about to happen.

what does that tell us? what does that teach us? what is the set of information that is just about to happen or has happened. mixed with that we have a question that we love asking. what does this problem -- just fill in the blank, food or water or energy. i would like to imagine that 20 or 30 years from now, the civilization is thriving, we are good, we are building exciting things. 30 years from now, this problem is solved. what happened between now when things look so dire and 30 years out. when it looks great. what took place? this must have happened or this was invented. who is doing these things? can we be doing these things? if not, who is? we look for investable opportunities. that is a really uplifting process. here are the top 10 things that will happen in the next 30 years where we solve this thing called cancer. >> take me through -- how does that look on your daily calendar? what is the agenda for that kind

of meaning? that is a work process that for a few people go through. >> i wish i had more time to do it. when it does come together, i found that we are more productive when we are not in our office. sometimes it makes sense -- when we brainstorm, we brainstorm floor to ceiling with scribbles and crazy ideas. we have a lot of interesting toys in the office. sometimes we do things on the 3-d printer. takes too long, but most recently, we found ourselves going to strange, interesting places that are not our office. >> like? >> sometimes we are out by the pier. that time we talked about what happens to video. video on mobile is an interesting thing. it's a little bit more --

>> so someone said, here are the 10 questions we will deal with tonight. please be prepared to talk about video and mobile. we will be at pier seven. >> almost, except much of it shapes itwself. the starting point is important. if everyone shows up. if someone says i have this thing and everyone starts hacking in or supporting it -- >> you are originally from the ukraine. technology has been used on both sides, by government and by protesters. can technology help in this situation or are there limits to what technology can do? >> technology was very central. if you look at the organization of the protesters, it is further further -- it is very clear that conventional proto-violence -- there was a fair amount of violence, but it was not nearly as scary as it could've been. i grew up there.

i've been on that square many times. this is very close to home. the only part of my family that lives there is in crimea right now. this is very raw. fortunately there is not as much bloodshed as i expected. having said that, it doesn't look like technology makes that much of a difference. we are spending our time looking at ukraine and ukraine looks back at us. it looks like people on the ground are still very decisive. >> there was a cyber attack element to this. it coincided with the russian troops moving in. >> exactly. i think we live in a world where every armed conflict will include a cyber component. that is just your irrevocable. >> how could a giant plane disappear without us being able to locate it? >> i don't know. i am more involved with the ukrainian situation.

disappearing planes usually take three or four days to get out of the public consciousness. here we are two weeks later. i hope they do find it because i think there are bigger issues to track in the world. >> what about flight data? >> that's what i was about to say. the reason we haven't found it is not because lack of technology to search for planes, it is lack of technology in the pit. the permission to use an ipad that united airlines gave a few months ago was great. that thing should be wrapped in sensors. planes should never be allowed to disappear from radar. radar does not reach to the ground. all the statements to silicon valley person sound ridiculous. why do i not have a high-speed internet connection to a huge number of satellites that are sitting much closer to this plane than the terrestrial network?

the fact that we don't have the conductivity -- the connectivity on these flying fortresses is the real problem. you should look at the regulations that were written in the 50's or 60's and say that is stupid. we should allow for regulations. the overwhelming power of the faa can all be struck down. it just should be allowed. >> paypal cofounder max levchin. coming up, secret sharing apps and his latest investment. ♪ >> welcome back, i am emily

chang. >> from paypal, to linkedin, two square, he has worked for some of the top companies in the world. now keith rabois is leading his investments. we spoke about his take on the latest trends. >> there's a lot of interesting innovation, so we focus venture capital on the next generation. by the time it is in the public domain it is too late. i think mobile search will be reinvented. all the way search works on the web is broken on a mobile device. the question is who will figure it out first and be popular with users. i think you're obviously seeing a proliferation of new apps that are powered by a address book. i think that will continue. secret, whatsapp, lot of things are more important than the friend graph on facebook.

the address book is more interesting. >> how big a threat? >> very serious. fundamentally, they're somewhat fortunate that apple doesn't lay lay -- play in the social space and know how to massage the address book. >> they have, little bit. >> but the leadership does not obsess on this. the message platform could be a significant threat to all of the social platforms that exist out there. >> they had a battle early on with at&t and face time. they are building a fiber infrastructure quietly so they can carry their own messages, which i see as interesting in the world of google fiber versus verizon versus comcast. suddenly you have fiber laid by apple. it is an interesting quiet dynamic. >> then they need to layer the ui layer on top. if they hire someone like david sacks, they could be a corporate threat to facebook overnight. >> what do you think of nsa profiling? desperate?

>> i don't know, it is hard to tell. buying instagram was brilliant. at that price it is a lot more complicated. it is a bold bet. i don't know if i would've made the same decision. it will take a couple years to figure out. >> what you make of the fact that facebook seems to be buying versus holding innovation. they're not working. >> i think that his long-term pretty scary. cisco has played a strategy well. >> you could argue that there hasn't been any actual return to investors, that they have minted stock to take out acquisitions. taken free capital. there hasn't been a tremendous return over the course of the last five or 10 years. >> it is a fair point. same criticism of salesforce. there hasn't been a lot of innovation.

i think that is true, too. it is almost always better to grow by innovation. i think it is scary when you start depending upon acquisition too much. that said, google has had a very eclectic but insightful mix of acquisition and internal innovation. they have purchased things like android. there purchased things like youtube, which is very successful. >> manipulating the sales at salesforce? >> the sec has some concerns with their accounting. they are not breaking down revenue with the granularity that you would expect from other tech companies. >> they have to use software to figure out where the revenues coming from. >> when you look at google versus facebook versus apple, who are the better innovators right now? >> earlier stage companies. apple has had a legacy of

incredible innovation. i suspect there is another generation or two of innovations that we cannot even imagine yet and that will wow when they are shipped. i think the iwatch will be very successful. some version. apple thrives when you force the physical constraints and push the cutting edge of science. that is where apple is at its best. they will have to do that given the formfactor limitations inherent in a watch. amazon has been innovating in various other dimensions that haven't been predictable. i think it is possible for a public company to innovate very successfully. most of the core innovation are building things from the bottom up. >> you mentioned secrets in passing. help me get my head around secrets. >> i think it is interesting. there is going to be more anonymous, pseudonymous transactions. reddit is a very vibrant community. if you look at their metrics, they are on par or better than

twitter's. hacker news is very influential within a tight community of startups, based on pseudonyms. i think other products have done this historically well. obviously, a community can air air -- can err on the side of the mob. the people creating antimatter will thrive. >> one person tweeted these kind of apps can ruin lives. there's a lot of negativity. some things are wrong, some things are very mean. what is up with that? >> there is a lot of thigns wrong on a tech blog, there is certainly some very mean content and comments on a tech blog that it absolutely. building a business like secret

successfully is difficult. when i said it was misunderstood, i meant reflexive actions. misunderstood the quality that can be empowered. if it is just your friends and friends of friends, the content is really the result of people you know. maybe you should have different friends. maybe you should edit your address book. think about who you're spending your time with if you don't like the content area when you're adding content from strangers, then you are playing with a lot of fire. secret does a lot of both. -- does a little bit of both. when you steer more towards friends and friends of friends, the content will be better and more elevated. >> up next, what will facebook be doing with whatsapp, its 19 billion dollar purchase. one of facebook's former

developers joins us when we return. ♪

>> i'm emily chang. facebook made a huge bet buying whatsapp for $19 billion. is it the right that? -- the right bet? i spoke up -- i spoke with a man who is the managing director of draper fisher. i talked to him about mark zuckerberg buying whatsapp. >> it shows that mark is really everything i hope he continues to be for a long time, which is making big bets, proving that he has the ability to pull them off right. getting the deal done in one month, and then showing the conviction afterwards and not backing down. >> $19 billion, is it worth it? >> is hard to say, but if you look at some of the different comps are active user, i think the market possibility is that

it could replace mobile. how big is that? the mobile carrier market is a trillion dollar business. could whatsapp take a percent of that? i think it has a real shot. >> when you're at facebook, were you aware of whatsapp? was mark aware? when do you think they started following it really closely? >> i think we were always aware of it. 80%+ of its users are outside of the united states. they are very aware of other companies, but i think it was a serious observation based on the whole category. you have nearly 200 million active users. there is a phenomenon going on. ultimately, they realized the right way to win in this market was to buy whatsapp. >> why did you buy this for this

much money and what does he plan to do with it? >> i think the reason he bought it was that he got the deal done. when he wants to do something fast, and that is definitely a hallmark of facebook that speed is important, you have to give them something and you have to prove that it works. price was compelling. i think he is going to be transparent. you can't do a deal this size without knowing what your plan is. whatsapp should thrive independently and should be allowed to grow. over time, the way it compliments facebook is it is much like instagram. facebook is put itself in a position to have the must-have communication and social applications on mobile. that is a huge franchise to own and leverage. >> do think there will be advertising? will there be in app purchases?

where does whatsapp go from here? >> i think he and mark had that conversation. that that wasn't the path. anything can change in the future. i expect him to monetize through subscriptions or through directly charging carriers. in some model that is not advertising, not distribution. >> does this in any way dwarf instagram? >> i don't think so. >> so beyond is on the board and kevin is not. >> when instagram was purchased, i believe they had 30 million active's on the deal. when they closed it was more like 100 million. facebook is just under a billion mobile active users. i think it is just a different time and a different scope of acquisition. i think both of them are going to equally be important. >> what you think of this idea about facebook working on more standalone apps like paper? it looks really great when it

came out, but now people have already forgotten about it, it seems. >> one of the challenges with a portfolio of apps strategy is getting distribution and engagement. there are not a lot of mobile apps that people open every day. on the flipside, the design principles behind mobile is single-purpose apps are really powerful. i think that user behavior is really dictating facebook strategy to build what customers want. that is ultimately how they succeed. they are adopting the strategy. there are other challenges they are taking on. they don't get free distribution automatically by putting in a free app. >> coming up, can technology

improve education? the founder and ceo of online using site -- online learning site udacity will be here next. ♪

>> welcome back to the best of bloomberg west. the internet has been promising to revolutionize education in one way or another since its inception. the old school classroom has still won out. enter udacity -- gives students access to coaches and mentors. i spoke with the founder and ceo sebastian, who also invested in google's driverless car. i asked him how many people are using udacity and how.

>> we have about two million students. the students are from all over the world. bangalore is the second largest city, new york is the largest. silicon valley, brazil. they all want to learn and get a job. the number one reason to come to udacity is to get a job. we teach you cloud data and big tech. machine learning. >> most popular classes? >> coding. you go from no experience whatsoever to building your version of google. >> is there a notion that vocational education is the focus here? is there interest in the arts? if there is, how do those students differ? >> i'm very interested in the arts and humanities. the truth is, many of our partner companies feel that the type of skills that kids have leaving college and not a good match for what they need in the workforce. at this point you spend more than one years searching for your first job. more than half the kids coming

out of college are unemployed or underemployed. that mismatch is big. a lot of companies like at&t and google are stepping up and saying let's take education into our own hands and offer what people really need. >> so google and at&t are teaching the classes? >> yes, with us. if you go to class, you will organize a rock concert using a particular app. google has several classes underway. mobile web, game developments. you learn a lot about computer science along the way. >> in terms of working with other companies, how does that change your business model? where is the revenue and god for forbid in the prophet? -- and god forbid, the profit? >> we have a business model where partner companies pay us to make classes with them.

>> available to everyone, or just those students? >> everyone. these companies pay us to make the content because they really care about getting the content. we have a free model which helps students raise the ceiling and learn more. we do this by having a buddy with you that as a mentor. we do projects with the students and these projects are very demanding. they really learned that stuff much more deeply. that is for charge and we keep the cash. >> you tweet that, right? initially everything was free, and now some of it you have to pay for. it is still a lot cheaper than what you would get in a traditional classroom like a masters in computer science from georgia tech. >> the everything free thing had its problems. you are limited. hands tied. you couldn't do much in terms of retaining students and motivating them. we said ok, free is our basic. if you want to teach yourself it is democratized.

it's available. if you really care about the context in which you can learn something, come to us and we will help you. costs are about 10% of her regular college class. >> it would cost $45,000 to get a masters degree at georgia tech. with udacity, $6,000. >> there is no reason why education is so expensive. we should really go back to the basic services and focus on the student. make the product engaging. when you do this, you arrive at maybe $150 a month or so, which is a good rate. >> do think they are all overcharging? >> i am not saying they are overcharging, but i think you can get an education much more effectively for a lower price point. it is absolutely doable. our model is such we can keep a surplus. >> in my days as a hedge fund manager, i spent a lot of time and money shorting the stocks of for-profit education companies. i was shocked to see default rates and the number of students who dropped out after only a couple of years.

they seemed to be even worse for online. when you look at those models, because surely you did in planning, what did you say? >> it started out much more positively. i wanted to educate firefighters and do social good. then the government made title four money available. paid for signing up. these universities involved really started to maximize the intake of students. >> some of them have 40% of revenues going towards recruits. an abomination. >> we have a marketing budget of zero dollars at this point. everything is viral. we try to be very honest about what we charge and what we give back. we have the most engaging product at a price point that doesn't even require title iv.

$150 and you are in. >> isn't theirs a better model because it might lead to more net income? >> i do not care about net income, i really care about helping students in the world. i want everybody to have a chance. it is much more important to me than maximizing income. >> the rates for online courses are still lower than traditional schooling. how do you overcome that and where do you see this going in the future? everybody wants education to be more affordable and more accessible. yet people are not necessarily taking advantage of it. >> the first classes were really lousy. i was troubled by this because student engagement in the class and the dropout is not a good result. i made this very well-known. certain people resonated with this. now, about 10 times as high, and we are still optimizing. some people do drop off because

the costs are low and it is easy to get in and they find they are more busy than they thought they would be. overall, i think they're getting to the point where they match what a good college can do. >> i know you're big into artificial intelligence. when you look at the education industry, how does it look different in 10 years? how would it look for my child in 18 years? >> you have a lot of time. >> will it be dramatically different? >> the most important change is that i wanted to be available to everyone in the world, africa and india. every place, so everyone has a fair chance. i wanted to be lifelong. i want to move away from the idea that education is a one-time thing that you do after high school and then you have everything you need for the rest of real life. so many people in their career need more education. >> udacity ceo and founder sebastian thrun. we will hear from reverend jesse jackson next. ♪ >> welcome back to "the best of

bloomberg west," i'm emily chang. jesse jackson is launching a new campaign for more diversity in technology targeting some of the biggest companies in silicon valley. we spoke to him outside and hp shareholders meeting in santa clara. take a listen. >> we are here because diversity diversity -- it's a matter of justice. whether it is ebay or amazon or apple, there are no blacks and latinos on their boards. there is no shortage of people

who are qualified to serve on their boards. we are looking for a just and fair two-way trade relationship. >> you also called for more minority owned investment firms to be participating in ipos, debt offerings and so on. why is that such a focus? >> because of the chance for economic development. twitter had several billion-dollar ipos with no black or latinos or women involved. verizon was a 6 billion deal. no blacks, no latinos, no women involved. exclusion patterns limit those who are locked out, locked in. we must fight for a one big america. we do not know how good baseball could be until everybody could play. the same with business. a black and a white kid leave stanford. the white kid goes to silicon valley and the black kid goes home. that is not fair. we should do better.

-- we must do better. >> is quite shocking to see how white silicon valley can be. at the same time, hewlett-packard has a female ceo, they have a female cfo. i'm going to read a statement that they provided for us. hewlett packard said "while we agree that diversity is important, we are puzzled by reverend jackson's sudden interest, we are the largest company in the world with a female ceo and cfo." why hp? >> we fight for racial and gender justice. we fight to get him to make america better. we want blacks, latinos, asians, women to do well. if we can buy the product

together, let's share leadership together. it is a net gain. >> there are some fairly shocking statistics. >> i have the highest regard for whitman -- they can even deny something is wrong when you look at all white male order order -- board of directors. a couple of women in 2014. this week we are marching for the right to vote for nine years ago. you couldn't vote bilingual. we are a better nation than that now. this company should reflect that better america. >> silicon valley does certainly not reflect that. venture backed companies, only one percent of those companies have a black founder. 83% of the ceos are white. within silicon valley, 18% of computer science degrees are awarded to black and latinos.

9.2% of tech industry workers are black and latino. a lot of computer science degrees are not resulting in black or latino workers. >> even the "wall street journal" said that our government has not been making capital available. that's why blacks remain locked inthe bottom of our economy. you do business with the people that you know and trust and like. the system is built on capital and trust and credit. we can't get the capital, can't get the trust, can't get the credit, can't grow. we simply want to grow. that is america's growth. >> you said something about meg whitman paving the way for marissa and cheryl heard what did you mean by that? >> there are some black women that have benefited from the growth.

that's a good thing. our quest for black and latino and women growth, fighting marginalization has been a consistent one. here we are today. you think of a market of 300,000 employees at hp. 220,000 around the world. the board does not look like the marketplace. the marketplace has talent and money and growth. the company should look like the marketplace, global and american marketplace. we simply demand justice and fairness. >> do you think the reason is racism? >> or cultural, however you put it. the result is exclusive. exclusion represents limitations. people who are unemployed should be working to do what? to buy products. we want young people to learn how to do apps. we should have a pipeline between palo alto and stanford.

right now, being a meaning participant -- being a meaningful participant should be all of our goals. >> it is interesting with computing, goin more to mobile and cell phones and smart phones. that is putting some of the most powerful computers ever invented in the hands of more people of all races, creeds and religions. do you see -- >> there is a suggestion that you can't find qualified blacks or qualified latinos. this is simply not true. there are qualified blacks and latinos they could recommend, and women. guess what? more market, more money, more talent, more growth. everybody wins. >> have you done work in silicon valley in the past? if so, what? >> we have challenged them on involving more people

vertically and horizontally in their companies. for the most part it has not happened. it must happen. now, with the growing gap between more and more -- to billionaires having more and more, middle-class sickens because of drugs out and guns in. there must be some democratization of capital, not just the right to vote. >> reverend jesse jackson with our own cory johnson. that does it for the best of bloomberg west. you can watch it weekday's at 1:00 and 6:00 p.m. eastern time. also streaming on your phone, tablet, bloomberg.com and apple tv. ♪

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