>> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. >> i'm emily chang. .acking and airplanes supposedly secure websites, all big topics. at the annual black hat conference this week, we hear about the security threats as 8000 hackers from around the world head to las vegas. chances are you play it, or you know someone who does. we are talking about the kim kardashian game, one of the most downloaded apps. players help kim hit a list status. -- a-list status.

apple is facing more challenges in china as the company's off the have been left chinese government's procurement list. apple failed to submit documents that included a pledge not to violate double interest, according to government officials. this coming after china said it would vet technology companies for potential national security breaches. of theto our lead story day. security a major issue in the world. president obama has authorized airstrikes on extremist positions in northern iraq. we will have more on the technology behind the strikes coming up. i want to talk about another important form of security, keeping your data safe in cyberspace. there has been breach after breach in the last year or it that target impact impacting as many as 100 million customers

this week. russian hackers stole 1.2 billion user names and passwords. it is not just data being swiped. at the 17th annual black hat security conference this week, hackers and showed how to break into everything from airplanes to webcasts. what new threats did they reveal? studiohnson here in the and with us, david kennedy, who has been at black hat all week long and is now gearing up for the devcon conference, another security conference in vegas this weekend. he joins us via skype. hacking an airplane? is that possible? >> it appear so. there is a security researcher ruben who looked at the in-flight wi-fi, which is what allows you to communicate with your laptops. normally the systems are supposed to be independent and separate. unfortunately, it looks like they put the communication [indiscernible] on the same as in-flight wi-fi

and you can hack into the system, causing a blackout on a plane itself, or even [indiscernible] there wasn't a lot of security put into these in-flight wi-fi systems or the actual dvr systems they have inside the airplanes themselves. >> for a skilled hacker, do you think this is pretty easy to do? >> that's the problem with this. aree are things that default passwords, passwords that are known that you can log into. arendt a security practices. you don't even need to be a skilled attacker to hack into these in-flight wi-fi systems. they are shows is that sourcing these products from a lot of different companies and not even testing the security around them. connected toe systems like that are starting to introduce risks to airplanes. >> what is the state-of-the-art right now? the 17th annual conference --

every year there are more of freak out tales wo and intrigue. what is the state of the art of packing right now? >> devcon and black cat are the biggest -- black hat are the biggest conferences of their kind in the country. we're seeing breaches happen all the time. as technology progresses and ws, we will continue to find more and more security exposures and not enough being done to protect it. that is the big theme this year, we are not doing enough to protect consumer data, privacy and health. there's a lot of concern that we are not doing enough to protect people themselves from [inaudible] >> what about safety? you have been talking about planes. there was one really shocking presentation. are you saying that anyone with the skills and the will could take down a plane midair? >> reuben did not go as far as

saying you could take down a plane. being able to manipulate [inaudible] cause a lot of issues. placing fake coordinates or new coordinates can cause some issues. [inaudible] you can definitely do some things that would cause a plane to divert or go somewhere different. what this shows is much larger. just by looking at the in-flight wi-fi, he found issues. what other things are out there that you can take control of that are core to the plane's operation? we need to hold these companies liable to make sure they protect the airplanes themselves, which it doesn't look like they are doing right now. >> seems a little scary to me. >> it is a little scary. in terms of mobile, i wonder if the more places we see computing happening, we see explosion in risk as it goes not just to planes, but everyone with phones, everyone with tablets, and that increases vulnerability.

>> it does. moree starting to move to wearable devices. things like the fit bit or the galaxy gear, or apple will be releasing probably the iwatch -- we are making technology integrated into every aspect of our lives. you're going to continue to see a lot of these technologies be taken. anything from eavesdropping on your conversations to taking the date on your phone, your tablets -- right now there is not a lot to do when it comes to protecting by yourself because the companies have not built into these products. >> google and yahoo! teaming up to make e-mail more secure and spy free. what do you think of this, given that you work for the nsa. is this even possible, and how might this partnership work? >> what they're looking at doing is implementing pretty good which is a known type of encryption that is

considered relatively strong and secure. some of the best cryptographic breakers that you can possibly find. this shows that companies are starting to take privacy seriously. [inaudible] now there are some competitors working together to make sure that information back and forth his son securely. taken securely. [inaudible] googlenteresting to see try to protect your privacy when they can monitor inbox, all your communication themselves. it is a catch 22. i think they're upset the nsa was spying on their internal communications as well. >> david kennedy, i know you are going to be at devcon this weekend. kardashian is adding a new title to her resume. videogame icon.

"hollywood"shian's tears of the charts. -- tears up the charts. ♪

>> welcome back to "bloomberg west." i'm emily chang. kim kardashian has found major success in the gaming world. the reality star has let her likeness to "kim kardashian, hollywood does go -- which lets users post for magazines and go on dates to achieve a-list status. 30%es soaring more than since its release. cory johnson still with us. the ceo, executive producer of the game -- it was your idea to include kim in this game. tell us how successful this game

has been. it has been number one in the apple app store several times over the last six weeks since the game came out. you have made millions of dollars on it already. give us the numbers. >> pleasure to be here, emily. this will probably be our biggest game of the year. this is our biggest casual game ever. it is our best reviewed game at 160,000 five-star reviews. it has consistently hung out in the top five. the first game in a year that has made that high as a new entrant. >> pretty difficult to knock out other top games. it was your idea to get her involved. how did you get her involved and how involved has she personally actually been? >> 18 months ago i went down to hollywood and did four or five partnerships. we did a james bond partnership, and "terminator" partnership. >> you got to meet james bond

and the terminator? >> with the kim kardashian partnership. the idea was to take and a proven game that we knew that would monetize and at her branding to it or it she really adopted the idea quite quickly. she has been very involved. she and i have probably achanged two, three e-mails day. we probably talk on the phone every few weeks about new content updates, new events, new clothing -- >> that she come to you with ideas? >> it is a bit of both. sheis busy, certainly, but has been great to work with. she's incredibly responsive. she really knows her fan base. she is unique because she is a one-stop shop ranting, promoting, approving partner for glu. >> last time i saw you, you had just returned from her home. you are for to the game as a "she."

the chasing of the female game player has been a longtime problem for the videogame industry. is that who is playing your game? what do you know about this game engine that is attractive to women who play the game? >> we believe it is a majority female. but it is no means likely the super majority. you would be surprised at how broad the base is. it is a narrative-based role-playing game. it caters for a broad demographic. there are young and old, people who are fans of kim, even just fans of making adult decisions like who are you going to date, who are you going to work with. guys definitely play this game. it has a very progressive tone. same-sex couple is a choice you can make in the game. the art style has worked well for a broad base. there are millions of people downloading and playing this game. >> what is the key to getting women to play this game? is it just about him, or is there more towards -- more to it ? >> is the maxtor of aspiration

-- it is a mixture of aspiration of her fan base, and it is not a dungeon crawler, it is not a combat game, there's no shooting. we make those games. kim, if he stays as high in the charts, i'm sure we will get there at some point. it is a great job of catering for the deeper gamer who wants to play all the content, and the gamer who just wants to play five or 10 minutes a day. admittedly watch "keeping up with the kardashians," maybe, occasionally -- >> who doesn't? >> there has been some criticism of the game. some players said they were tricked into tweeting about it. some people say they were tricked into spending money or their kids spend money and they did not realize it. how do you respond to that stuff? i don't want anyone know that i'm going to be playing this game. no offense. >> [inaudible]

admits that they are loyal followers of the show. best and google have the reputations in the consumer channel base, protecting all demographics, particularly younger ones, minors and so on. they are tight on privacy controls. we don't know exactly who is playing the game. when you have a game in the top three that high up, it is probably doing half a million installs a day, sometimes more. the sheer number of people playing this means there is always going to be one parent who probably has forgotten they have given their child the password to their phone, maybe for some other reason. maybe two minutes later they then buy something in the kim game. we have not seen issues on these fronts. the game would not have such incredible reviews if there was anything more than a random -- >> the tweeting is not -- >> .0001% kind of issue.

>> are you going to get kanye involved? >> we have defined a new genre here. most of hollywood is interested in doing something similar, given the size of the success. it's not that easy. when i went to find a partner for this game engine, kim was top of the mind for me because her fan base and her personality and brand is so unique. her fan base's aspiration is to make it in hollywood. that is what the game is about. not everyone else's fan base is the same. it's not clear how we branch out from here -- >> who is an ideal new character for you, new celeb? >> we will look at other genres that don't compete with kim. maybe the music space, the sports space. we want to work with someone who has a big social following. million twitter followers. >> kanye is a musician. >> and you know where he lives. >> she knows where he lives, surely.

a criteria we will have to filter through carefully. we don't have endless studio capacity. >> what about other characters in the kim game, like khris or khloey kardashian, beyonce and jay-z? since they did not show up at the wedding, there could be some sort of -- >> i'm not sure she will approve that. that's not the tone we are going for. go a think the game will long time, and we will update it pretty aggressively. we have added a new location every month -- actually, every two or three weeks. we have done paris, we had in mexico. bringing out london today. we will keep that up. trying to keep the game mirroring her real life is something that is unique about the overall experience. masi, ceo of glu mobile, take you for joining us.

is apple a threat to the chinese government? afterears china think so apple products were removed from the government's buy list. ♪

>> welcome back to "bloomberg west." i'm emily chang. look out, "game of thrones." there is a no-show -- new show appearing on stars. it is called "outlander,"

adopted from the popular book by diana gabble done. the show is set in 18th century scotland and combines fantasy with period drama. >> i think it is a great story. we are based on a series of books that have a significant fan following the love this story and these characters for a long time. is beautiful. it is a handsome production. we should it on location in scotland. we take advantage of the light and scottish scenery. it is a gripping story, great characters, and beautiful things to look at. >> "outlander" premieres tomorrow at 9:00 p.m. eastern on starz. xaomi.not just 10 apple computers, including the ipad and macbook, are said to have been excluded from the list of products that. can bebought with public funds

-- that can be bought with public funds. developed to been protect china's security and national security interests. does that mean they think apple is a threat to national security? >> one of the ways this list is compiled, the products that appear on this list have to open themselves up quite literally and demonstrate all the ways the product is made, which apple is not comfortable doing. competesn that china with a lot of the very country,ies inside the whether through the acquisition of raw materials, or understanding how the technology works -- apple, there's a lot of back-and-forth between china and apple. apple was unwilling to give up every last product to the government. xaomive companies like and others making lenovo, making giant phones for china.

>> this means that apple products cannot be bought with public chinese government money. >> right. >> how much is this going to hurt apple? how much does the chinese government by apple products anyway? >> in terms of government spending, it is about the same as the u.s. in terms of percentage of gdp. we do know how important china is to apple. le comingales of app into china in the past two years has become a significant part of apple's overall revenue picture. we have seen a growing dramatically over time. there has been a really important profit center for apple. a lot of that money is made in china. it is a huge market for apple. much of that market is not the government, it is the consumers. >> thank you, something we will continue to watch. the u.s. military has just conducted airstrikes and iraq.

up next, some of the advanced technology the military is using . you can also watch us streaming on your phone, tablet, bloomberg.com, and apple tv. ♪ >> it is 26 minutes past the hour. bloomberg television is on the markets. i'm julie hyman. a rally ina bit of today's session after declines we had seen in recent days. stocks building on earlier gains. we do see a little bit of an easing of tensions between russia and ukraine. in terms of individual stocks, so the bees is one of them. the auction house missed analysts' estimates for second quarter, both earnings and sales . the company also received smaller commissions on its sales

due to strong competition and the items it put up for bid. shares of monster beverage are lower. becoming was raised in terms of his recommendation to neutral after posting second-quarter earnings that beat estimates. we will be back on the markets later. more "bloomberg west" next.

>> you are watching "bloomberg west." we focus on technology and the future of business. i'm emily chang. the u.s. military has some of the most advanced technology in the world, and that technology is once again being used in iraq. hours after president obama authorize limited airstrikes to jets dropped, bombs. isis extremists were using the artillery to shell positions where kurdish capital,

some u.s. personnel are also stationed. the airstrikes, after isis seized large amounts of territory in northern iraq. joining me to discuss technology being used in these airstrikes is ricki ellison, chairman and founder of the missile-defense advocacy alliance. think you for joining us. this story developing as we speak. is it unusual to get this much detail from the department of defense about what exactly they're doing in iraq, what technologies being used in these airstrikes down to what type of bombs are being dropped? >> as part of the deterrence of the groups that are fighting to explain to them that we have the capabilities to technically take them out, to hopefully withdraw them before we [inaudible] decisive action. >> how do these bombs work? we hear their laserguided. what does that mean? >> the bombs will have some

programming exactly on the location where they will be heading. they will be dropped. they will be going in that direction. usually they will have special forces or ground forces that would be lasering the exact target they want to hit. that information gets fed to the bomb and the bomb goes into that laser-guided position and strikes that. it is a very surgical technology. it has been developed over the past 10 years in afghanistan to reduce collateral damage on civilians. >> so this is technology that has been used over the last decade in other situations in other conflicts? perfected,een especially in afghanistan. we have been able to in our artillery rounds go from 100 yards down to within 10 yards of accuracy. ofhas been pushed because the civilian sensitivity of collateral deaths to try and exactly pinpoint what you want to target and take it out

without killing civilians. >> what about the defense systems on the jets themselves? we saw a commercial airplane shot down over a war zone in ukraine. what keeps the u.s. jets safe? >> i'm pretty sure they would have calmed the entire area to get rid of any type of air defense systems that may have been in place before they would have put those type of planes in the operating area. cleanse the area for any kind of radar or anti-air defense systems that would have been in place. the planes also have toabilities inside them, countermeasures that can dissuade any type of heat sinking or radar seeking missiles. believe,retty safe, i in this situation with the type of fighters they are fighting. iswe have heard that isis fairly well supplied. they have control of a major dam.

what kind of equipment or defense do the insurgents have against these kinds of airstrikes the u.s. has started? >> i don't think they have much. it is air superiority, that we own that sky. system a complicated they would have to acquire, and they would have to be trained on to be able to apply that. i know there are systems in syria. in the systems you saw that happened over in ukraine, that sophistication that would have been needed to have an opportunity to shoot down a u.s. aircraft -- i don't think they have that source or availability of that type of weapon. where guidedf missile technology is going, how is it evolving? what is the next frontier of the next innovation? it is going down to the cost of engagement. you try to reduce the amount, the expenditure, the amount of bombs or artillery you're using to hit a target.

to get that technology to be able to be as accurate as possible so you can only use one strike, one hit without the damage is where we are going. there is nobody else in the world better than the united states at this technology, because of what has happened in afghanistan and how we have had to use that aspect of it. the other, bigger technologies would be using the laser as a weapon to take down rockets, mortars, missiles, planes. that will be further down the pace. they are looking at systems that can be the cost of half a cup of diesel fuel to shoot a deadly laser. that is one of the big technologies that our country is working on. >> how many years off mike that technology be? >> we have demonstrations in place today. it depends on how much investment we put in as a

country into the systems. i think there could be something available within the next four years that could be in the battlefield, that could take out rockets and mortars and so forth. we have had those lasers. ships that are in the gulf that can take out rubber rafts and so forth -- there are a lot of things here. there are power issues, cooling issues with that system that has got to be developed. are these technologies coming from traditional military firms, defense contractors, or are they coming from startups, upstarts, and companies out there that are developing new things? this is most likely coming from defense industry aspects. it takes quite a lot of capital and resources to be invested in this type of directed energy capabilities that we are doing. >> we know this is the kind of

technology being used in the airstrikes right now. if this expands, can you imagine what other technologies they may employ to get the job done that they feel needs to be done. >> that is where the future is. it is a speed of light weapon that is unlimited. if the cost of engagement. tois really trying understand how you can put it inside an atmosphere. once a ray of light goes, there is no end to it. you have got to make sure that you are covered. i think that is where we are going to go as a nation down the line to be ahead of everybody else. to take oute missiles, planes, but also to be used offensively. >> rick ellison, chairman and founder of the missile defense advocacy alliance. we are continuing to follow what

is happening in iraq. we will bring you latest updates throughout the day. makespical storm iselle landfall in hawaii. one robot is navigating the stormy waters, gathering information and tweeting critical data. we will hear all about it next. ♪

>> i'm emily chang. this is "bloomberg west." camecal storm iselle ashore on hawaii this morning, downgraded from a hurricane shortly before hitting land. the storm has forced more than 800 people into shelters. thousands are without power. it down trees and power lines have cut off access to parts of the island. another hurricane is quickly coming up behind it and could make landfall this weekend.

robotics,y, liquid has sent its robot, the wave glider, straight into the heart of the storm, gathering critical data and live tweeting its findings. joining me in the studio, cory johnson. liquid robotics president and ceo. thank you for joining us. i'm from hawaii. i have spoken to my friends at home. they have boarded up their windows. they have bottled water. i'm curious to know what the waveguide or can actually do in a hurricane. you have 11 robots out there right now? >> that's right. we have 11 wave gliders in the water around the big islands. >> what do they do? >> they are collecting information, wind speed, wave heights, current, temperature. get better ato hurricane intensity forecasting. we are right on the surface of the ocean, collecting all this

data. we are right on the surface, gathering real-time data. we are piping that data back to shore. >> what kind of data to scientists and not know about what happens when a hurricane comes across the water? >> this is the first time anything has been right on the surface of the ocean, collecting data in real-time. you cannot put a ship out there. you can put buoys out, but they are not in the deep ocean where most hurricanes are formed. there are two and a half million miles of area where all the hurricanes are formed in the pacific, and there's no measurement all out there. we can have wave gliders in the middle -- >> you find out things like wind and temperature changes? >> yes. satellites are 250 miles up. error metric pressure, wind speed -- we are collecting it on the surface. >> are you giving this to

meteorologists? >> absolutely. we're publishing all this information. you can tweak the wave glider. you can ask it to take -- tweet the wave glider. you can ask you to take a picture. you can collect weather data and that sort of thing. >> this is the first hurricane that has come close to hitting hawaii in more than 20 years. i remember the last hurricane. i imagine what you can do now is so different from what you were able to do then. what is the potential for this technology? what else can it do? i swam with the waves a couple of years ago in hawaii. i know it has come further since. >> we do a lot of work with the defense department. we can put sensors on the wave glider. we can go into the water. it is wave-powered. there is no engine, no fuel. it is solar powered. we drive communications technology, satellite. there is a java based system on

board. the is why we can tweet wave glider. fleets of these wave gliders can collect information from the ocean. the ocean covers 71% of the earth's surface. we know less about the ocean than we do about space. terms of deploying these all over the place, what do these cost? >> right now they are about $300,000 per vehicle. it depends how many sensors you put on the platform. ship and you go 50 miles, one hundred miles offshore, it is $150,000 a day to run that ship. two days at sea pays for a single wave glider. >> there are other things you're using the technology for, such as oil spills. what else? >> defense, oil and gas. there's a lot of regulation in the oil and gas business.

if an oil company caps a wellhead and it is leaking, you want to know that. waverunner can detect oil at the surface. general marine security. a lot of the pacific island nations, a big problem is illegal fish poaching. we have wave gliders detecting surface ships and saying, there is somebody in your water who probably should not be. >> hurricane julio also coming up. how indestructible are these? how much can they withstand? >> what is the most extreme conditions they can withstand? >> three weeks ago we went through a super typhoon in the south china sea. there were 45 foot waves, 180 mile per hour winds. >> a five-story wave? >> that's right. we have been through 15 hurricanes and typhoons. the biggest one was three weeks ago, which was crazy. >> and it survived? >> it survived. it was transmitting the whole time. >> were the pictures anything to

see, or just water all over the place? >> that when did not have a camera. it had all the other sensors, but that particular one did not have a camera. >> fascinating stuff. what about discovery for oil and gas? reallyrent technology is weird, the sonar guns that are tried like water skiers -- dragged like water skiers. >> we help new seismic survey, where we are listening in shallow areas and sensitive areas. they wave glider is from top to bottom from the float at the surface, and the wing racks below the surface, it is about 20 feet in total. we can go in shallow areas. listen. the easiest analogy from what a wave glider does in these instances is it adheres to the ocean -- hears the ocean. seismic survey ships go through and they fire off these canons. we can aid in that process. sin, thank you so

much. we have a live shot of turtle bay, the island i grew up on. this is a few islands down from the big island of hawaii, where tropical storm iselle hit directly. now all of the islands in the path of hurricane julio, which could make landfall this weekend. still unsure about how hard it is going to hit land. it could be traveling more north of the island. there is a satellite shot from up above, as we were just discussing. some of the rarest minerals on the planet are used to create some of tech's top items, from smartphones to solar panels to electric cars. what are the hottest rocks in tech? ♪

>> welcome back to "bloomberg west." i'm emily chang.

what are these elements, and hundred -- how do they get into your phone? cory is back with more. >> a company called american elements sells nearly every element in the periodic table. michael, good to see you. this is something we don't talk about much, the actual physical stuff that goes into all of the technological devices we talked about in the show all the time. i was a changed over the last 10 years -- how has that changed over the last 10 years? >> if you ask people 10 years ago if they were into high technology, they would say, i write computer codes. not recognizing that the valley south of you is not called algorithm valley. it is called silicon valley. it was material science that began the computer age. now we are in a period where you reflect on guys like elon musk,

who went from paypal to building spaceships and electric cars, that people are finally inventing things. innovation is now the buzz word. when you talk about inventing things in modern times. >> i read a great piece that talked about how rare some of these rare metals are. it specifically talked about the notion of innovation. to use 14ers used elements. today they are using four to five times that. if we had to go back to the older era, we would go back to slower machines. where do these newer elements come from? butll over the world, fascinating thing is that due to plate tectonics, they tend to be concentrated in special areas. your viewers will know the word [inaudible] 14 series of elements. they essentially all come from

china. china just won the plate tectonic russian roulette game. they have a monopoly on those materials. has changed the game a while back when they said, we are going to raise the price of exporting these raw materials. if you want to make something that requires some, you could make them in china for less company or you could pay more money for the export. they're saying [indiscernible] is it because china is trying to capture this manufacturing? >> if you accept the ruling of the wto and the loss on the appeal that occurred yesterday, it is all about try -- trying to create a price differential to control his industries. that is the way it felt. we were involved in china long before that began, when they were private lands. it was quite clear that the process was to drive jobs. proof that it was

about economics, not ecology. >> if you have a super mining industry, you might create tens of thousands of jobs. if you pass the advantage down the supply chain, that is millions of jobs. it is jobs-driven decision. cars, for example -- the electric car uses a lot more rare materials, a lot more kinds of minerals. what things are in electric cars that are not in other kinds of cars? >> the most powerful magnet known to man, one of the rare earth. >> and the glass polish? >> cerium. you have the nickel metal hydride batteries. >> and the cell phone also. we have had a lot of fun on "bloomberg west" with prying apart the new phones and looking at what is inside.

when we look inside of a cell phone, what kind materials are being used that were not being used before? >> europium, which is what creates the color screen, was the first rare earth to be used. you have europium. you have new jini m, which runs the vibrator. the glass.rium in you have a bunch of other optical materials, turvey him. american elements ceo, we appreciate your time. >> cory johnson, our editor at large, thank you. and thank you all for watching this edition of "bloomberg west ." get all the latest headlines all the time on your tablet, your phone, bloomberg.com, and bloomberg radio. ♪

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>> from bloomberg world headquarters in new york, i am mark crumpton. this is "bottom line," the intersection of business and economics with a mainstream perspective. -- main street perspective. today president obama authorizes targeted airstrikes on islamic militants in iraq. hoping the economy of texas. to our viewers here in the united states and those of you joining us around the world, welcome. we have full