>> live from pier 3 in san francisco, welcome to "bloomberg west," where we cover innovation, technology, and the future of business. i'm emily chang. i had on bloomberg west, the supreme court refuses to hear google's challenge to data collection. the court left in place a lower coats -- courts ruling. they are accused of collecting google name and passwords. they insist they did not violate the federal wiretapping act. -- aereo is currently

mapping out its next step after going dark. facebook is under fire after conducting a study on users without telling them. researchers manipulated the newsfeeds of some 689,000 users to determine whether positive or negative contact influenced them. one of the study's author says already apologized. google will have to face a class-action lawsuit over its street view data collection. this after the supreme court refused to consider google's appeal of a lower court's ruling, allowing the privately -- privacy lawsuits to go forward. they accuse google of collecting passwords and usernames wall street in -- while shooting images for street view. google says it was a mistake, but insist the images did not violate federal wiretapping laws. cory johnson is with me in the studio, and joining us from

washington is the electronic privacy institute director. what is google's liability here? how bad you think this is? >> i think it is a serious decision for google. essentially, the supreme court left in place the decision that found the company had violated the federal wiretap act. this review vehicles that were supposed to be taking pixel -- pictures of houses were also capturing wi-fi can occasions. when people learned about that, they charged the company was violating federal wiretap law. >> what exactly was google doing here? some of the things they were collecting sounds ominous. all unencrypted information. >> and doing it as they would have cars patrolling the streets not just of the u.s., but of the world. as they were driving down the street and taking pictures of everything around them, everyone walking down the street, everyone's homes -- they were also secretly gathering wi-fi

hotspots. not just location hotspots, but the actual ip addresses of some of the advices. they wanted to know what computer you are using, what your home router's ip address number was, and where it was physically located. how that looked on the map. -- in some to know cases, were able to determine user names of the devices that were running them up. courts on both sides of the atlantic have declared this act to be illegal. >> i said it was a mistake -- they said it was a mistake. does that mean is was an accident? >> this was a plan. . n. there were so many incidents were google has been involved with gathering information and sharing it with the world. think of the original mission statement. every google person has been on a mission, to organize the world

information and make it conversely accessible and useful. some of that information doesn't want to be gaggle -- gathered. mission is business statement is to go an do these things, they will run into problems. >> market, what are the consequences here. ? thiser court will hear suit. what counts is that they face? class-action lawsuit, which means that many people have been brought together to bring this claimant. the supreme court has left in place the legal basis for the claim, which means google can be looking at substantial monetary fines. i think it is unlikely they will go to trial in a case like this. the facts are not favorable. it would be easy for the plaintiff to show that the wiretapping activity it was alleged had in fact occurred. and with the legal basis for the

place, it would almost certainly prevail in trial. it means you'll likely see a settlement. the two parties will sit down and try to figure out what a reasonable amount is to dispose of the various claims now pending against the company. rc, when you look at all of the acquisitions that google has done in the last six months -- people,es that can find drones, military robots, nest audiovisual surveillance -- what does this mean for other google projects? does this make those acquisitions less valuable? or make them unable to use them in other ways that might not have been implied? >> i think the decision is a good reminder that there are boundary lines out there for google that they really cannot cross. a lot of the data collection

they are able to do -- as long as it is internal. but when they are violating the wiretap act, collecting information through wire transmissions, then clearly they are creating a business model that is going to subject them to liability. i think it will cause the company to pull back a little, look a little more closely at what limitations privacy laws do impose. i think from the users perspective, that's not necessarily a bad thing. reasonably, those laws are protecting important interest. do want to be able use our wi-fi routers in our homes without worrying that others will be intercepting our private communications. at the same time, i think companies should be free to innovate. a way toe have to find allow companies such as google to continue to innovate, while respecting these important privacy date cards. -- safeguards. rc, thank you so much.

we will continue to follow this. coming up, do not miss my interview with reid hoffman. we discussed everything from his to hisk, the alliance friend that paypal, and the paypal mafia. take a listen. >> macroeconomics, financials, a bold model. of interestingn business models, things like potato. -- big data. >> more on my interview with links -- reid hoffman.

>> i'm emily chang, and this is "bloomberg west." eo is ceasing business after

is art ruling that massive setback for consumers. ereo is busy mapping out its next step. know when totors invest, or when they might lose? our guest has weighed these risks. raised $85ust million. how do you make these choices when it comes to accompany -- a company. ? >> think about commercial drones as well. everyone chooses the market they will create or disrupt. you have regulations to deal with. haveis area, they must chosen to go after able writers

thinking there was a shot. -- table providers. in the case of commercial drones, we have a service called red cap. , but as theer driver, not the car that is available to you. risks that you will tackle, and you hope that it will come under favor. >> is the notion that there are different types of religion where risks -- in certain industries, those are federal. , to medications, that's one set that's a lot of regulations. you can take them one at a time. >> i think it is a fair way to split the challenge. i would go after the local ones, you only have to tackle them one at a time. faa, fda, they are more challenging. you hope that progress will win eventually.

>> hope is not a plan though. >> no. but there is a lot of luck involved with making a company a success. regulation, you look at the risks you took. you say this what happened in the past, this is the way the agencies are looking at those kinds of progress is. you hope for the best. abouthave been talking valuations. do you think any of these revelatory issues could truly slow them down? become their fatal flaw? >> i don't think so. they now average the scale where you can actually go to the local government, they can go to federal institutions and make their case. eo, they weref aer too small. they hadn't made a dent in the market. airbnb.assed on

was there a reason? >> when i met them, they were called air bed-and-breakfast. the pitch was, so you go to a conference in the u.s. , you bringth someone an air bed, it's a cheaper way to have accommodations. .> air beds >> i passed on uber as well. when we were got -- when uber got their valuation, you could feel the funk in the valuation system. everyone who passed on uber -- >> what is that feeling like when you pass on something that you could have made a lot of money on? >> that is our job. our job is to see everything that is sort of interesting. and then make a decision that hopefully we will be the right decision.

obviously, in the case of -- then, uber, airbnb thing is, airbnb and uber are profits on paper. linkedin is real. >> you just raised more money. we talked about valuations, and how money rushing into the market is driving up valuations. when you are seeing us on tv talking about money rushing into the market, you're saying it's not happening yet. what was the fundraising process like right now? how was the rest the world investors seeing early-stage investing right now? >> despite the overall note that exist in the market, where you have a literally 135 microphones that are investing. when i started, there was one. it is a different landscape. people look at the brand we have

built, the portfolio with these companies. we've actually made quite a bit of progress with the portfolio. we have a lot of winners. they will make a lot of money for our investors. we look at this brand we have built, and they say we want to be part of that. it's not easy to get money from people. >> cory just that it doesn't end well. do you think it is not going to end well? all of the prices going up? >> you have a lot of capital chasing deals. people will lose a lot of money. i think there is a lot of discipline. prices have gone up in strange ways. but at the end of this, you look at the market. there is a finite amount of capital going into things. that is where the regulation is happening. some companies give very high valuations.

the mean valuations haven't moved up. after raising his fourth fund, thank you so much for joining us. is under fire after conducting a psychological study on its users. details on that experiment and facebook's response, next on "bloomberg west."

>> welcome back to "bloomberg west." i'm emily chang. sunday marks the anniversary of the iphone, and how far we have come since 2007.

there have been eight models, and sales past the 500 million mark. roll out a new ad called parenthood, looking at all of the ways that iphones help parents. release theected to next iphone in september. google has gone to cuba. havana in traveled to a push for a free and open internet. he says our visit concerned -- affirmed it that the government efforts are needed to open the country to the west. he called the internet of cuba trapped in the 1990's. turning now to facebook. i can do this and 12, the social network conducted a controversial experiment. they alternate algorithm on nearly 700,000 user accounts to see whether it can alter their emotional state by omitting

positive or negative post in each newsfeed. but what about the legal and ethical issues of the study? me, and aon is with social media expert from chicago. how does this strike you? google is running 2000 experiments at anyone one time. is this any different? >> i don't think it is. we're seeing comparative advertising. they are saying how can we mimic real users and their data to get what we need, which is more interaction and engagement with the site? what is distasteful about this is the covert nature of this. an experiment on such a grand scale, and it was not disclosed to the user base. it doesn't smell good, or taste good. but essentially, there is no real overt legal problem. the terms of use allow for the minute relation of this data or internal research purposes. that facebook is boasting of its abilities to be a mood altering drug -- even if

users sign up for it by accident, it's kind of disturbing. >> absolutely. one of the things we know about social media sites is that they tend to shift their policies and their practices based on the user backlash. this is a 2012 study, i think they have done a really poor job of managing the publication and results of that study. like see that users don't ,hat they are being manipulated if they're only being screened disclose certain poster others, you might see a departure from facebook decide like instagram or other new platforms. >> would it be any better if they did this and didn't tell us about it? obviously the terms of use permit this, but couldn't they run this every search for internal medicine at -- internal benefit? >> for every one of these

studies, there is a million others that we don't know about. one would be an amazon pricing structure, where they offer different prices for the same goods based on demographics. resumable, consumers found out. a backlash, amazon.net press, and vowed not to do that type of testing again. it was amazing that they showed how successful this was. ,sers of seeing negative stuff without any more interaction with other people, found themselves posting more negative stuff. now i know why i was in a bad mood for six months in 2011. >> it has been a documented thing. there are books and studies independent of facebook that demonstrate the impact that social media has on people's moods. some people have addictions, they can get off, others need affirmation about their own lives. social media does permeate a lot

of what we do. depending on what the giant ands to do with that data, our emotions, the ramifications could be profound. whatd to be vigilant with the terms of use. if there are changes we don't like, that we may have to think about leaving the network in finding another one. >> dolly, attorney, thank you so much for sharing your thoughts with us. >> thank you so much. >> my interview with reid hoffman. i asked him why he is still as active as he is today at linkedin and greylock working seven days a week. >> how do you have a life that you were proud of, that you think what you did in the world was worth it? it was worth the hard work, sweat and tears. these are not easy things to do. >> more of my interview with

reid hoffman, next. ♪ >> it's 26 minutes after the hour, which means bloomberg is on the markets. i'm julie hyman. let's take a look at where stocks are trading. we have the nasdaq leading with gains of about one third of 1%. manufacturing data is missing. that helps account for some mixed xers that we are seeing. in terms of individual stocks, mankind is on the list. biotech companies are surging after inhaled diabetes treatment received a strong approval from the fda advisory committee. mankind says it will need a partner before it launches the treatment. that partnership as well as postapproval data will be the next likely catalyst for that stock.

we will be looking at the markets once again a little bit later on. "bloomberg west," will be right back. ♪

>> he's been called the start a whisper. reid hoffman is the executive chairman of linkedin i'm a and an investor in some of the most successful companies of all time, including facebook. he was and on track to be an entrepreneur. a student of philosophy, hoffman at one point pursued a career in academia. but he took his first job out of school at apple, and then joined the paypal mafia. now a partner at greylock, hoffman sits on seven boards. he is the author of the start up of you, and now a new book come

, "the alliance." >> you have no shortage of jobs. why did you write this book? many circumstances, employers and employees are lying to each other. careerion is the modern is changing. there are career tracks that are changing. how do you get that investment future, between the employer and the employees. the answer is an alliance. itt transforms your career, makes you employable, and transforms the company. >> you say people should be honest from the start, how honest should they be? >> something i learned from one of our executives -- when he's interviewing people, before they joined the company, he asked

them what job they want after linkedin. that's part of his interview. that's a level of transparency -- we are committed to your career. we wanted to be transformative for your career is. >> when you feel your something you don't like -- what if you hear something you don't like? may think this alliance may not work. >> the comparison to the military -- do people really feel that way about their companies? that patriotic? >> we want people understand, it's not daily employment. it is an investment. it should be transformative. light --rms should be the right way to think about it. >> what other companies are doing this well? >> google, for example. we normally think about these as stints, orve year

the person actually learns a job , chief something significant, proves himself, and then goes to do something else. ebay focuses a lot on how to we bring the relationship of folks who have graduated together. they have the external network tied in. places like ge, in terms of what they do in executive rotation. how do you then groom all kinds of stars to be an executive at this huge industrial conglomerate? >> what is silicon valley get that other industry's don't get? that r&dn valley gets is not just holing up in a lab and inventing something, and then set off -- and then there it is. it's actually being present an interactive in the network around innovation. people hold up steve jobs and say he was sit in the back room.

but he was talking to people constantly. what can be done here, i mentioned learning about this, i about this. ,t's a combination of intense titian and intense cooperation. >> linkedin is a paradox. it makes a people for -- it makes it easy for people to find opportunities, and makes it easy for companies to lose good people. >> when you have a transparent ecosystem, the quality opportunities, the high culture companies will benefit. the talent will flow to those. but overall, it creates massive benefits for individuals and for the companies that have interesting opportunities. that is a good thing. >> you have a statement of alliance at the end of a book that people can use as a guide. isn't it just a promise, and a promise can be broken? >> promises can be broken, just like any relationships. sometimes a friendship ends, it

happens. but if you lived your whole life like -- french of may end, so i won't have any friends -- that would be terrible. >> companies sometimes have a founding myth that boeing's -- boils down into legend. myth is as -- my manifest destiny march towards talent. but how do we come towards people, how to we help that? software. entrepreneurship. that is the myth and reality. >> let's take a break. we'll be right back.

>> let's talk about how you got there. you grew up in berkeley. what did your parents do? >> both lawyers. -- the legal

profession is the one that people most often leave. when people asked me when i was 12 when i wanted to be, the answer was not a lawyer. i didn't actually know what i wanted to be. i kind of got the independent bug a little early. i was going to a school that was called a college preparatory school. a friend said they were going to a school in vermont. i could go andt, be independent. i could be exploring my own life. so i applied to that school, and got in. without either of my parents knowing. >> you apply to a boarding school without her parents knowing? >> yes. >> what kid were you in high school? >> i was a pretty strange individual. for example, i usually would have one or two friends in most of the different cliques. i had a friend or two in the

jocks, a friend or two in the artists. it was all very individual. i did have -- i was part of a fantasy role-playing group. >> what is that? >> dungeons & dragons. the way i got into dungeons & dragons -- my dad, when i was nine, hired a babysitter that introduced me to dungeons & dragons. creating new world, thinking how stories come together. >> you went to stanford. you majored in symbolic systems. what is that? >> it's a unique major. if the science of artificial intelligence. it's a debt deeper -- -- step deeper. part of what is performing the world's this notion of system assemblage. whether it's computer programs,

models of how we think -- i think i was the eighth or ninth person to have that major. >> so while you are at stanford, you met peter killed -- peter. and i had both been told about each other by people we knew. i was told he was really right wing, i was -- he was told i was really left-wing. we grabbed coffee, i think we argued for eight hours. we said that was fun, let's do that again. >> you went to oxford and studied philosophy, why? >> if i'm an academic, i can write about both of these adjusting questions. i'm fascinated about how people think and reason. how we communicate. the i realized was -- course of becoming an academic professor was to be a very narrow scholar. on wanted to be an expert

the thing that only 10 to 20 people in the world knew about. what i wanted to do was how to help millions of people? within six months at oxford, i knew that i wasn't going to be an academic. i was going to come back here. >> that is when you decided to be a mantra for newer. -- an entrepreneur. -- thinking myself of myself as an entrepreneur came later. can dabble in the near death spiral. did you meet steve jobs? during the weple have no idea what we're doing, no good plan to adapt during the future. i went there because i loved apple products. i learned to program on the apple computers. >> you started your own company. you started a social network before social networks. >> social net had some of the ideas.

it had the idea of having a profile, the idea of discoverability. it had the idea of having social controls on how you would meet strangers. but he didn't have the fundamental network idea. it didn't have the fundamental real identity idea. >> he went on to the paypal mafia. how did that happen? peter, and he said, we are going to sell paypal. we don't have a this is model. but it would be really useful for us, because you know all of this stuff. could you come help us organize and sell it? i could be helpful, i would be happy to help. but we didn't end up selling it. , we sold to ebay after we took it public. it turned into a three-year tour of duty. the paypal story is long. >> and legend. >> what did it start being called the mafia? >> it been with the fortune article.

i am always hesitant about the term. mafia implies dark rooms. extortion. these kinds of things. it's clever, gets repeated. tight,eople are really it's much less evocative. the network is what i would call it. it probably started six to 12 months after the ebay acquisition. >> linkedin, tesla, youtube, yelp, yammer, and spacex. all founded by members of the paypal mafia. what was special about all of you? elected a lot of people who were young, and intense, and were entrepreneurial themselves. then they were bought by ebay. so all of these folks were like, what do i do next? some of them go to youtube, some go to spacex, some of them do

yelp, i do linkedin. had thisbecause we intense experience together, we all still have really tight networks. we are calling each other going, i'm thinking about doing this, what do you think? >> when you call for what? >> macroeconomic bold models, i will call peter. the intersection of interesting business models or business technology, i call max. for a willingness to just think super big, with risk as not available, elon. >> what do they call you for? >> laughs. >> i have heard you are funny. >> occasionally. a few of the valley. who wereing about x, the right people to talk to about x? >> you were instrumental in the

sale of ebay. was it the right decision? ebay and paypal have had an interesting decision. some other members of the paypal mafia think they are better apart. >> it was the best decision at the time it. to really get to the right level of mass of the payments transaction system, it required a much closer connection with ebay. now that it has gotten to a certain level, is it better or inside or outside? the argument with is for example, there is still a lot of density of value between ebay and paypal. on the other hand, maybe paypal should be like a bank. ebay is not a bank holding company. the natural evolution is ahead there. that's also possible with the right management team. >> it's time for a quick break, we will be right back. ♪

>> after paypal, you could've retired a few times over. other mammals of the paypal mark for -- other members of the paypal mafia bought fancy cars. >> a funny story on the car. i was taking about by an audi. it's a really nice car. and then i got pinched by a friend of mine on a startup. with a rather buy this car, or invest in the startup? was the cheapest nice car i could buy, because i would rather spend my money investing in these companies. so i bought an acura. >> then you decided to buy something new trade >> in 2002, silicon valley concluded the unit was over. i said, no, it's just beginning. the current companies are great.

but they are only going to be some of the great companies created. i took two weeks in australia, said what is my best idea, and said linkedin is still a valid idea. i should start that. i started investing in companies like facebook and flickr tom and a number of others. i said let's go all in. >> the early years were hard. tell me about that. >> i don't know how many viewers will remember this, but friends are was all the rage. i would say, this is what linkedin is. and they would say, you are linkedin ash you are friends tour, but for business. dster, but for business. and friend said it won't work. but i said i think it will. >> did you come close to giving up? >> never. >> it took five years to turn a took some hard

steps, including stepping down. ego, but hard for his what gives is the best possible chance to realize something? i have come to realize that i'm passionate about scale, impact in the world, solving his problems, about under viewership -- entrepreneurship. i'm not passionate about running a business. i know it's important, but it's not the problem that i wake up thinking about. as a game together with jeff, interimd i can help you , running the stuff that you feel challenged about. jeff is enough of a product guy, he could do this job. we get along very well. he knows that when it comes down

to things like building organizational cultures, or thinking about how do you really make up an executive staff work really well together, or how you identify a plus talent. we solve these problems together. betweenpent your time greylock and linkedin? 7070.s i work seven days a week. >> you have had so many wins already. why do you do all of this? >> how do you have a life that you are proud about having lived? that you think that what you did in the world was worth it? >> you think about steve jobs, mark zuckerberg. is there a magic than the founder brings that would be lost if you weren't here? >> i think so.

every founder is useful. that commitment, that willingness to take bold risks. >> you joined greylock is a partner in 2009. you have a unique investment philosophy. the best countries to invest in are the ones you don't agree with. >> whenever one says yes, this is a good deal, then that is a deal that happens. are whenever one votes for the deal. the really bold deals that transform industries are the ones that initially seem a little crazy. a little out there. linkedin in its early days. they end up growing to something that is great. >> and you guys disagree on facebook and airbnb? >> a partner said this is going to be the death of greylock. with airbnb, a variety of the -- people are really going to rent out the rooms? -- neck would be weird?

isn't that going to be weird? but it turned out ok. >> you have been called the startup whisperer. what is that involve? >> i'm not quite sure. people who use that term -- by being an entrepreneur myself, by being able to spent in a lot of their early stage companies -- it's not that i know everything. i know some things that are useful. >> we live in an age of four increasingly powerful platforms. do you worry at all that anyone of them could become too powerful? >> yes. but not specifically each one of them. moore's a general system. when you have a navigation of platforms, you have to worry about leaving room for innovation. i worry about that on a general basis. not on those specific for companies. i talked to all of the ceos of those companies.

they are all trying to build great products and do great things. >> richard branson has a private island. steve ballmer is buying a sports team. what do you do? with all of the money you have made? >> most of it is still in linkedin stock. i am building the world with linkedin. i serve on a number of different nonprofit boards. i try to finance projects that i think are interesting. >> will be caesar at something else -- another company? >> probably not. pretty closely with them, but there is a long way to go with linkedin. i would say that is unlikely. you will soon partnering with a bunch of great young entrepreneurs, and trying to figure out how to build new things. >> reid hoffman, thank you for joining us. it has been a pleasure. >> thank you. ♪

>> from bloomberg world headquarters in new york, this is "online," the intersection of business and economics with a main street perspective. today the supreme court narrows a contraceptive coverage requirement and health care law. argentina faces its -- faces its second debt default in 13 years. gm says they will pay all claims related to ignition switch flaws. to our viewers here in the united states and to those of you joining from around the world, welcome, we have full coverage of the stories making heads