live from pier three in san francisco, welcome to "bloomberg west" where we cover the future of business. i am emily chang. google aims to conquer a search and the skies as well. it is working on drones that can make a delivery just like amazon. wings andto project whether you may get a drone delivered package on your doorstep. there has been buzz about bigger iphones. what about the other thing apple is going to unveil? a successful new product category for apple? well all of them enable mobile payments?

we look into the potential. and as burning man continues to burn in the desert, what is attracting those 70,000 people, including tech titans from all over the world? creator ofth the what makesfind out it popular. first, to the lead, it has been a dynamic week in the google-amazon rivalry. twitch and they are developing delivery drones like amazon. google has unveiled project wing. don't look for the technology any time soon. google says it will take a few years. but that it is possible. is to mention the technology several years away from government approval. craig johnson is with me in the studio and joining us from san diego is paul krukowski.

in new york, an attorney specializing in commercial drone law and a university of pennsylvania engineering professor. thank you for joining us. i will start with you, you think there is so much potential and that it is going to happen sooner than we think. >> absolutely. the potential for developing baton a miss aircraft -- baton a tonomous aircraft is there, in populated urban areas. paul, you are more skeptical about what google is doing. what is your take? i am a bullish about drones in general. i mean, in general, this is much more about proof of concept and

a little bit of a recruiting exercise. it is important for google to demonstrate constantly to would be hires it is that the leading edge, not just doing tedious stuff. some of this is a marketing movement. it is important to keep those things in mind and not expect anything in the near-term from google other than an even more attractive hire. >> how do you respond to that, vijay? >> the question is is it commercially viable? in certain areas, such as farming, delivery of high-value products, there is a business case to be made. -- thingsthree and they can do that other machines cannot do. given we are always short of people that are skilled, especially in countries like

africa and australia, there are lots of things you can do with the small vehicles. also the fact that technology is maturing rapidly. not just in terms of computing, but sensors, and the hardware we use. technology which the is gaining acceptance and socially and also from an economic standpoint, that rate is increasing dramatically. so i am very bullish on this. thes hard to predict where business case can be made. the only thing i'm sure of is that it can be made. i think the technology will be here sooner than we expect. do testing into australia because the laws the united states are too strict. what kind of legal challenges lay ahead for delivery jones? dismaying it is google had to go overseas to do testing.

we're talking about a company whose technology in search was developed with the assistance of the national science foundation. i think iso overseas really a step backwards for the country. with respect to regulation, we have a situation where there is no regulation concerning unmanned aircraft systems. while the faa has tried to come up with those rules, it has told everyone to stop using them for commercial or purses. -- purposes. >> does the data they gather in doing these kinds of tests help make the case and sort of be the information they can submit in the u.s. to try to get the approval? >> i would imagine that is the idea. part of the problem is that it has not been clear what exactly the faa has required in terms of data or testing that will give anyone the green light for using the systems. as we reduce the weight and altitude of these drones, the

safety case becomes clear. you are not going to pose a hazard if you are flying a couple of pounds 100 feet off the ground. >> this google effort was profiled in an atlantic piece today. lines, yeah,orite unicorns can also win the kentucky derby. google is saying this could be as innovative as the pony express. do you see that potential? for drones,ential the delivery cases tougher for me. you saw some of that in the article how they have to do these reverse sky hooks because as soon as we see a package we want to reach and grab it. to cutave a tendency your fingers off. they had to use fishing line to prevent us from sticking our hands in and losing fingers. keeping it away from consumers

as long as possible is going to keep the lawyers at bay and make the market progress faster. >> i love that paul is our unicorn expert. interns of the engineering challenge, what is the thing google is trying to solve in terms of the engineering challenge? about having this big question whether it is possible and they decided it is. what was the question that was answered? >> i think the technical challenges, how to navigate, they are going from point a to point b. commercial aircraft can do this today. the thing with package delivery and other applications, you have to navigate the last 100 meters down to the warehouse where the porch or what have you. that is where issues of safety come in. robote an aircraft or a

trying to censor the environment , try to figure out how to navigate in a safe way. we are not addressing the behaviors of consumers wanting to throw baseballs or what have you at these vehicles. so you really have to think about what kind of sensors need to go on board. to can we implement them avoid the kinds of things the faa is thinking about? combined witht, the fact you have to remember the copters actually burn about 200 watts per kilo they carry. any kind of sensor onboard, you are burning a lot of power. as we know from laptops and cell phones, one thing that does not act in our favor is the battery. it is a complex design problem to solve all of these

challenges. >> amazon and google have been secretive about their drone efforts. which company do you think is better equipped to win the drone delivery war? is it google or amazon or somebody else? delivery, i'm sorry, go ahead. >> paul. >> the drone delivery issue, amazon has all of the year jim c. they want to knock ups and fedex out of the middle of the loop -- the emergency. they want to knock ups and fedex out of the loop. it initially started with relief and disaster circumstances. so why give the lead to amazon in this one. >> vijay. who has a better chance? >> i agree with paul. the urgency is for amazon.

amazon has to step into the fray. google has an advantage from a technology standpoint. you think about how they think about the google car, the self driving car, and it is a car with a lot of infrastructure that is not on the car. navigateeing able to the last 100 meters. google has that. ground and it on the has a 3-d infrastructure. -- sixfor them to expend band this -- to expand this, is easier. so -- >> all right. vijay kumar, we could debate this for hours. thank you for joining us as well as attorney brendan schulman, paul kedrosky. more after this quick break. coming up, take a look at this, a mysterious white structure popping up in cupertino where

apple is hosting its september 9 event. what is that all about? we will have the details next on "bloomberg west." ♪

i am emily chang. this is "bloomberg west," streaming on your phone, tablet, and bloomberg.com. we are days away from apple's big event where the next iphone will be unveiled and now we have learned we will also see wearable devices. will apple's smart watch make its debut? paule back again with kedrosky in san diego as well as cory johnson. adam, what is this a big white building all about? have a structure, it could be a demo area after they

do this product unveiling, somewhere for people in the product.test on the i have not gotten the tour of it yet. 0 foot cube. >> it is where steve jobs unveiled the imac. >> they unveiled the macintosh, and also the imac after steve jobs came back and took over control of the company. >> could this event be as pivotable as though where? >> it certainly could be. i do not think that is the signal. it is a convenient location. they have a lot of important announcements. it is booked by intel next week. the spacet because they wanted is not available. there have been a lot of events at silicon valley. that is where the place where the hewlett merger -- the

hewlett-packard merger was approved. >> everything apple does is deliberate. i wondered if there is a bigger meaning. think?hat do you a brainwashing center to convince people they have to have another device on the rest. no, i'm not very excited. i don't know if you saw these toy this morning -- the story this morning, it may not even ship until january. so this is iphone ask in terms of trying to freeze the market more than anything else. apple does not have anything to ship yet, according to that story. if that is the case, relieve this is about staking a position than trying to keep everyone else from trying to gain a share, which is bizarre. it is not growing very quickly. >> what about the idea and of wouldips -- nfc chips

make mobile payments easier, you could just wipe your phone at a checkout counter. >> this is another one, there is an opportunity. there has been a lot of buzz about, if we could just make payments with a phone. it is something companies like google, ebay, have been trying to do. it has not taken off. foremost people using a debit card or cash works fine. they have is a stash of credit card numbers that few companies can rival. they are in a better position in that respect, then almost every company because they have that payment information and payment permission. they've also got their finger printing tech knowledge he which adds -- technology. they are set up in an interesting way to make nfc work, but it could be another zero billion dollar business, as

paul points out. >> how optimistic are you about nfc technology which has yet to take off in the united states? wishy-washy.f it depends on the day. in general i think in this fantastic. i want it to happen. when you try to explain it to normal people, they say i can do that with a credit card. take-up is going to be much different than the takeout for the technology around the world. there is a certain inevitability to it. i worry it will be slow. wishy-washy. that is why we love him. [laughter] >> that is about the commentator. >> paul kedrosky in san diego, thank you so much. adam satariano, we will be looking to you for more scoops as the days get closer. thank you.

a fight over leg room on a flight this week has turned into a social media uproar. how did twitter judge the guy who installed the knee defender? find out next. ♪

>> earlier united airlines granted a flight after a fight broke out between passengers. one man had installed a knee defender. the woman's seat was locked in an upright position and she threw her cup of water at him. fight diddid -- the not end. a debate about who was more in the wrong has broken out on social media.

twitter judge to the argument, cory is here as well. corey and i are split on this thing because he is tall and i am not and i think this thing is of noxious. >> i think it is obnoxious, too. >> tall people like me suffer. airplane, youn an have to realize you are in a cramped space. planes, all of these have had reclining seats our lives. for you to say it is obnoxious is obnoxious on your part. that is why the date on twitter suggested. if you look at thousands of people talking about this fight, 3-1 was the ratio blaming the guy with the knee defender versus the woman who threw the cup of water. >> short people are on twitter. >> you are way off. seriously, the

amount of leg room on the plains has shrunk over the last couple of years. the average space is 32 inches. that is down from what it was in years past. >> that is not the problem. >> it makes a difference when you only have three inches. it is a lot. >> originally on twitter, the fight was between which of these people were more at fault. and then the conversation switched. guy that talked to the invented the knee defender, he started waving the airlines. he was able to change the online conversation from who was wrong between these people to why the airlines are so bad. if you look at cory, he has been caught up into this. he is the example who instead of blaming the guy with the knee defender is blaming the airlines. forhat is a nice problem the long-term, but what is going to happen first, more space or

abandoning the knee defender? moretblue made their seats crammed in and now have expanded them and they have drawn a lot of customers. virgin america also does the same thing. they have more space. an average of 35 inches. they are pulling a lot of customers and for that reason. >> he should have bought a seat in first class. >> this was economy plus. they had spent more money. jetblue, a lot of their analysts say they would get more money if they were able to reduce the leg room because they feel like there is more revenue to be had and forget the customer pushback. it is the pushback from the stock market. fun to one will be follow. you are welcome on the show anytime as long as you take my side. all right? head of research for bloomberg tv. -- o noxious >>

bnoxious. i'm not going to change my mind. >> i'm fragile. do banksow much money and other companies need to spend to protect themselves? we look at the cost of cyber security next. ♪ >> bloomberg television is on the markets. i matt miller. let's get you caught up on stocks right now, you have the dow shifting down to the red, little change. 500 coming in under the 2000 level. it didn't have you bounced back under. still in the green. regardless of the movements we are seeing the last few days,

this is going to turn out to be the best month since february. august has not been bad at all for stocks. stay with us for more bloomberg television, "bloomberg west," more on the markets in 30 minutes. ♪

>> you are watching "bloomberg west," where we focus on the future of business. i am emily chang. has filed for an ipo with initial registration of $500 million. it has facilitated over one billion dollars in loans in the second quarter alone. what could lending club's ipo mean for the future of banking? cory johnson is with me and david golden from new york. company does something similar to what lending club does. what do you see as the potential

for peer to peer lending in the united states? like many industries, you're going to see alternative financing is going to disrupt the banks. especially the small businesses, similar to the lendingclub model. me about that, david. how is the lending environment for small businesses different than 2007? -- most have, when you banks can't make money providing alone for $10,000. they focus on larger loans so the risk is mitigated. what you find is they tend to put business owners as consumers. they are eager giving them a credit card or them to give a personal guarantee, which is

really a consumer loan. what you are finding is just like other industries, you're disrupt theology way businesses and consumers have done business, viewing their banks as a source of capital. >> it seems like it is not just on the side of the person borrowing the money, but giving arenate of return in an where it was not available to them. >> that is correct. thanks traditionally are taking deposits from the old granny putting in her savings and banks have to be careful where they are making their loans versus what you're going to see in the marketplace, a lot of individuals and institutions looking to lifeforms like lendingclub and others as a way to get a higher return on their investment. 's marketndingclub value is $3.8 billion higher

than 97% of banks. is that fair? >> it depends who you asking. obviously lendingclub is not valued at its profitability today. you are seeing a valuation based on future growth. uber and the transportation industry. lendingclub is almost like ebay. you have buyers matched up with sellers. on lendingclub the product is money. the buyers are the borrowers. wall street is looking at this not just as a bank or a financial institution, more of a technology play. >> there is so much more competition to lendingclub. i wonder if all of the lenders show up on that platform, do we expect those rates of return to the investor to come down?

because there's more competition? >> it is risk-reward. there comes a point whether on , you have to price the risk. it is no different than an auto insurance company. if a driver has five accidents, you're going to charge him a higher premium than a driver that may not have an accident the last five years. it is no different than how lendingclub operates. the greater role the risk of the lender or the source is taking, it has to be priced properly. or is a floor where there is not a return. the risk is too great without getting a property yield. we will goldin, continue to follow lendingclub's road to ipo. thank you. speaking of banks, jpmorgan and

four other banks were hit by russian hackers this month. sensitive data was accessed. how much do companies need to spend to protect themselves? olivia sterns has been looking at the cost of cyber security and joins us now from new york. preparing.d been they were spending like a quarter of a billion dollars. >> a quarter of a billion dollars by the end of 2014. that is up 25% from 2013. they're going to have 1000 staff dedicated to cyber security. it is rare they have gone public with this information because hump an israeli rate down specifically what they are spending on cyber security because any kind of information makes them more vulnerable to an attack. i did find information divided up i sector how much different sectors are spending. it turns out financials spent

more than $10 billion just behind them, health care, energy, defense, and just a fraction of that is spent on water and waste. that is interesting. financials are popular targets, and they are spending the most to defend themselves. >> one of the interesting these hacksppears are related. this was a larger attack. what are they doing to prevent this from happening again? >> the message you get from a lot of companies as they are well prepared against low and medium level threats. there comes a point at which the level of sophistication is such there is no amount of money they could spend to protect themselves. particularly if the hackers are sponsored by a foreign government. that expertise as such there is no amount of private money they could spend that would not put them out of business to defend themselves.

maybe it is not worth arming yourself to the teeth in that sense. from other numbers, we think about hacking, target is the number one company because they were publicly hacked last year. that was only the fifth biggest a data breach since 2005. the biggest one happened last ,ear, 200 million consumers then adobe, ebay, and heartland. target is the most public example. but banks are most vulnerable. >> target still struggling to pick up the pieces after the attack. olivia sterns, thank you so much. only a few days left of the annual burning man gathering. what does it take to pull off the event here after year? that and more when "bloomberg west" returns. ♪

>> i am emily chang. this is "bloomberg west." is showing big growth. shares are soaring after revenue was up 53% and the company posted a gain in profit. cory johnson is back with more. >> i think of viva as the salesforce as the pharma industry. right -- is that the right way to think about your company? >> the way to think about it, we are delivering the industry clad for life sciences. our customers are people like pfizer, novartis, and we are delivering cloud solutions to help them with their critical

problems. these companies are trying to extend human life. them do that by helping them with technology that helps them develop drugs faster and bring them to market more effectively. transform anto industry, a specific industry with clouds technology. study thata demonstrated this notion of how the software industry works. it really blew my mind about the specificity. industry specific software, 28% of all software sales. i'm amazed by that. that is bigger than the database market. the operatingan systems market. has this always been the case in what has been the trend in software? >> you know, what is happening, it is been the case, but accelerating. here is the point i tell people. industry-specific software is

four times as big as the erp market. with clouds software, you can tackle these problems more effectively and you can use the use of the clouds software to generate data. the value ofating industry. >> the 20% chart does not mean we have ford writing custom software for their auto plants anymore. we will see more of that in the future. ford writing custom software was not even included in the 28 percent. going forward, we are going to see less custom software. fromare using solutions veeva they can deploy in 12 weeks rather than developing it and taking two years. >> what is it about that industry, your industry, you've got to customize around? >> they have very specific

requirements about how to develop a drug. what kind of data they need to bring to the fda and what kind of audit trails. how do they promote their drugs? which type of doctors can they talk to? treat dangerous or controlled substances? they have a tremendous amount of legislation. these are life altering drugs. there is a certain way you have to be controlled about that. amazing to see where you guys have risen in the ranks and virtually no time. just a couple of years. you are top four among all companies offering software into the life sciences business. >> what we're doing is transformative. largely, before the industry clad, these companies were operating in a pre-internet mode. you are piggybacking on the

growth of the internet. >> it is transformative, for our customers to use the internet to collaborate with their customers and their partners in fundamentally new ways. that is a disruptive technology. that is causing excitement and growth about veeva. we announced we will cross the 300 million revenue mark. what is fueling our growth. >> thank you very much. emily? >> i want to check what is coming up at the top of the hour. mark crumpton is joining us from new york. what are you following today? >> we are following developments in ukraine. several foreign ministers russia in milan accused of invading eastern ukraine. mosquera should be hit with more sanctions. should be hit with

more sanctions. i will see you at the top of the hour. back to you in san francisco. coming up atne" the top of the hour. a lookie "spark" gives at the annual burning man gathering. we speak to the director about his film and the influence tech has had on this annual event when "bloomberg west" returns. ♪

>> labor day weekend is upon us. people, including many techies, will be spending the long weekend in the nevada desert for burning man. cory johnson is back with more. >> people talk about it as a life-changing experience. this wonderful documentary called "spark: a burning man isry" talks about what it

like to be there and carries that story forward. this is my conversation with steve brown. >> it is the story of a small group of artists from san francisco who have this dream of creating a place where people can be themselves without any judgment and the highest calling is to collaborate on art. we were filming the movie at a time when that community had gotten so big and world-famous, a global phenomenon and the question really is, what happens to those ideals and dream when you get big and famous? can you hold on to that dream? >> there is this element of the tech community. for a long time, i have known people who want to connect with something about silicon valley and happens at burning man. is there something about silicon valley at burning man? absolutely.

silicon valley is famous for innovation and new ideas. if you think about the root of innovation, great problems, necessity is the mother of invention is the old quote from plato. you say i'm going to go for my summer vacation, i'm going to build some crazy things in the desert. and then a giant dust storm comes up in the craze these challenges. spaceve a combination of to try something new and to do something crazy and at the same time, a lot of challenges and problems that are inspiring. withis ingenuity challenge the open canvas for creativity and expression and art. that is a real inspiration for people that come here. >> you have a background in technology. you have run a couple of startups before you got into filmmaking.

, i feel like the connection to the art world and the world of silicon valley is often not there. we see there is more connection with art and business. earning man is very much the opposite. talk to me about that. the don't think it is opposite. the roots of inspiration and innovation are the same. you have to take a risk to go into uncharted territory. you have to be unafraid of how you're going to be judged. you have to be unafraid of failure. people start companies and have a bigger dream and maybe it works. if it doesn't work, they start something new. by its nature, being in the desert, a lot of these things disappear. you bring them down. if you think about it, if you are trying to create some art project in the traditional

world, you will be judged by critics. if you are building something there, and you're going to burn it down, you can take risks. you don't have to worry about being judged. that isates a freedom what silicon valley represents to a lot of the rest of the world. so i see a very interesting fusion at burning man. rich, talk about the successful techies. they don't realize there are so many entrepreneurs who have started with nothing. that was their summer camp and their playground. >> what are the conversations like? what do people talk about? >> it is interesting because it has gotten so big and well-known, those conversations about burning man have changed a lot. when you are out there, you are in this harsh environment, you might be in the middle of a total dust storm, dressing up in

some crazy outfits, trying to ride your bicycle with no navigation across a two mile expanse to find your friends, and you run into all kinds of other people in that environment. you have no idea who people are back home. beingne is just a human and there is not this hierarchy we have in our society. >> i've heard stories about the fancy private jets to get there and so on. it suggests there is more of a tiered structure. wealthypeople hear that people are going to burning man and they are funding things there, they kind of bring all of their judgments from this world and what that must mean. i'm sure you can find anything you want to. , when youteresting

have somebody come in like that, maybe they are coming because they were curious. maybe they were swooping in for a couple of days. and then they get inspired and say, wow, this is different than i thought. think, interesting to what would i do if it wasn't about money or status or any of these things i'm being judged on? if i can just play. if i can go back to that creativitypark of and do something different. you see a lot of that. people really change from the experience. >> the most common conversation you have after somebody went there for the first time, i got this idea of something i want to build next year. because of that kind of feeling that comes from the success of burning man, creating this culture where you can leave all of your self-limiting beliefs and all of your baggage behind

and try something new. that is inspiring. that leads to a lot of new ideas. >> steve brown, director of "spark: a burning man story." you can leave all of your baggage behind, cory. just go to burning man. >> is that what is going to happen to my baggage? >> it is time for the "bwest byte." 59.99, the latest project from go pro. the fetch dog harness. the company released this product this week. it is go pro. >> i think you need to get this for your dog. >> bear would love it. my kids would love to see the world from his perspective. i would like to see what it looks like to go into the water diving after the ball. thank you for watching.

have a great long weekend. bye. ♪

>> from bloomberg world headquarters in new york, i am mark crumpton. this is "bottom line." today the united states and european union warned russia of further sanctions. detroit hits 275 elgin dollars bankruptcyexit from and we will look at whether an end is in sight for california's drought. to our viewers in the united states and those of you joining from around the world, welcome. will