>> live from pier three in san francisco, "this is bloomberg west." i am emily chang. first a check of your top headlines -- new details on yahoo! as government surveillance and court filings just, yahoo! says the u.s. government threatened to find a company to hundred $50,000 per day if it did not turn over user.data related to national security these requests eight back to 2007 and 2008 and yahoo! turned the information over and was not find.

alliance data is buying at technology firm conversant for 2.3 billion dollars. they personalize internet ads and target users. alliance data manages credit cards and loyalty programs and will use the acquisition to expand its digital marking business. -- marketing business. there is a deal to buy eucalyptus, cloud-based company previously allied with amazon. hp is paying less than $100 million. to our lead story -- 13 years after the september 11 attacks, the united states is back on the offensive confronting terror groups like the islamic state. last night, president obama announced a broad-based coalition to confront the group. > i have made it clear that we will hunt down terrorists who threaten our country where ever they are. that means i will not hesitate to take action against isl in syria as well as iraq. this is a core principle of my presidency. if you threaten america, you

will find no safe haven. >> while the fight against terror continues, technology is changing everything from the way we gather intelligence to the way terror groups broadcast their messages embracing social media. joining me now is michael chertoff. is the former secretary of the u.s. department of homeland security with us from washington. thank you so much for joining us. what was your reaction to the present speech yesterday? >> i think it laid out at least the general grammar cover strategy which has to include not only air attacks in iraq and syria directed at isis but also helping to put ground forces in with our allies. i think we will need to have

some capability on the ground in terms of gathering intelligence and helping direct some of these operations. a key part is also going to be dealing with terrorist financing and travel. all of those elements are good. i would be careful in promising that there will not be any boots on the ground. it's a little hard to see how this will develop and we may need to put special forces or special operations personnel into the actual theater of combat. >> what role as technology playing in this fight? how has our technological capability improved since we started fighting al qaeda 13 years ago? >> 13 years has been almost a revolution and war fighting. it's because of the use of technology. our ability to use precision weapons, to target people who are dangerous, our ability to coordinate intelligence collection and real-time operations like we saw in the

operation that a laminated osama -- even in a bit of osama bin laden. those have been giant steps forward. back several years ago when we were actively engaged in combat in iraq, we were remarkable and the precision and speed of our targeting against critical terrorist leaders because of the ability to marry the technology of intelligence and the technology of our operations. the bad news is the bad guys have also developed technology and got better and bomb making and better use of social media and have gotten better at communicating. there was a news story that they have schooled themselves on what edward snowden released to better defend themselves against us which would be another negative consequence of what edward snowden did. there's no question the trap -- the technology has transformed the battle. >> it's amazing what has gone on in terms of social media. i think of terrorism 1.0 with osama bin laden handing off a videotape to al jazeera and that so they got the message out. we understand that isis has this program they use that people

sign up for to spread the twitter message. they broadcast so much information about themselves in social media. is there a suggestion that there is an offensive capability as well? >> absolutely, this is a war of ideas, not just a war that occurs in the physical realm. part of what isis and terrorists try to do is to enlist others in their cause and frighten those they oppose. they have been quite effective in using social media as a recruiting tool. we can do some of the same things to push back. some years back, there was a live chat with zawahiri where he talk to muslims around the region and around the discussion, there was real pushback and people criticized him for the fact that innocent muslims are being killed. if we are smart about it and we work with our allies in the region, there are ways to use

social media effectively but it cannot be just the united states imposing its view on everybody else. it has to be working with those who are part of a big community in the region to come up with an alternative vision of what the future may be. >> is using technology risky for them? does it leave behind digital evidence that would make it easier for us to track them down? >> of course, when they leave digital fingerprints, that creates the possibility of following the anger pranced. -- those fingerprints. i don't want to get into specifics but there is a certain risk to them. there is also the risk that what they put out will actually offend people. there have been some religious leaders in the region who have now spoken out against what isis does pointing to the fact that they are killing other muslims. that really undercuts a lot of their appeal. as with most technology, it's a

two way sort = - -swoprd, it can be dangerous in the wrong hands. >> i was struck early this week when isis after twitter shut down a bunch of sites, isis threatened twitter executives. is that a real threat? >> i'm sure the intent was to make it a real threat. whether they have the capability of carrying that out is a different question. it shows their mentality. they only have one mode and that is to threaten and kill. i don't think it's particularly effective in this case. it underscores the importance they place on social media. this is what keeps them going. a lot of what they are trying to do is to construct an image that they have momentum on their side and they have gotten their side. both of those are false but in order to project that false image, they need to be able to use the media. >> also or recruiting. -- four recruiting area they are using social media for recruiting to literally direct new personnel to the battlefield.

>> that's absolutely right. that's not a new story. we saw that when anwar al-aki was alive use the media to recruit people. it's also available through -- to them for purposes of training and encourages people to carry out operations. in many ways, it's the essence of terrorism, the public face of what they do is a critical element of their strategy. >> there are those who believe that because of our technological capabilities and because we have gotten so much better at intelligence gathering, we should focus on that and forcing terrorist attacks before they happen rather than military force. what do you think? >> no defense is perfect. you've got to have layers of defense. as we said 10 years ago, we are much that are off fighting the

fight over there than over here. while we have done a lot in order to be able to detect terrorist fighters coming into the united states, it's not perfect. in fact, to be honest, some of our intelligence capabilities actually have been degraded by some of the controversy we have seen around nsa and by the fact that the release of information that was classified has helped the enemy come up with countermeasures. even with perfect intelligence, we still need to keep the enemy on the back foot. if they are worried about themselves, they are not planning to attack us. that's what we saw in afghanistan. i think that is got to be part of the strategy here. we cannot allow them to have

safe havens as the president said last night. >> what you think of a company where customers they have includes the fbi in the military. this is a company that they and the cia. this is a company that they sickly synthesizes and analyzes data to try to prevent things like the next 911. they believe they may be able to stop the next 9/11 if they have not already. >> without getting into specific companies, there is no doubt that one of the things we see coming out of the tech community out west is the increased ability to use analytics to master and analyze huge amounts of data. what's clear about the world we live and now is we are collecting some of it to death so much data about travel and transportation and communication and the flow of money. we have surveillance that collects enormous amounts of video. it's useless if you cannot assemble its and integrate it and make sense out of it. that's why big data analytics companies are very hot right

now. people see there will be a continuing need to digest the data we are collecting at an x potential rate. >> do you think big data could somehow make military force obsolete? >> you always need to do something with the data in the end. if it is not operational, it's just information without any consequence. it will allow us to be more precise with their military targeting and be able to be more focused in terms of the kinds of assets we deployed. i don't think it's ever going to do away with the fact that if you want to take out your enemy, you got to literally take them out. >> 13 years ago today, we had a lot of the data about the 9/11 attackers but did not put together. >> as we pause to remember that

day and i remember it vividly because i was on duty on that day, you are exactly right. in the end, if information is sitting in a repository on the it's useless. the key is to see its significance and connect the dots and then take action before the threat actually materializes. that will be the imperative we face over the next 13 years. >> former homeland security secretary michael chertoff, thank you so much. up next, alibaba is on track for a record-breaking ipo but how does the company work? we will show you coming up next.

>> this is "bloomberg west." the alibaba roadshow has role to the west coast, in adelaide -- in l.a. today today, day four , of the roadshow. the e-commerce china has been pitching potential investors with videos. later, it will go to san francisco before going back to asia and europe next week. it is aiming to raise more than $21 billion in the ipo which would be a u.s. record. for more on alibaba, sam grobart took a look at just what it is really all about. he walked us through the

experience first hand as he ordered his signature salmon colored pants from alibaba.com. >> everybody has been talking about alibaba from silicon valley to wall street. alibaba is pretty huge. for starters, it's the world's largest e-commerce company. last year, there were more than $248 billion in transactions on alibaba's site which is more than amazon and ebay combined. more than 80% of all e-commerce in china happens on alibaba site and its ipo might be the biggest in world history. those are just numbers. what makes alibaba more interesting is that this chinese company can connect you with millions of manufacturers around the globe, people making just about anything. i wanted to put them through

their paces. i wanted to use the site to help me find a manufacturer who could make me something -- pants seemed like a good idea. to reach those manufacturers, i had to create a buying request, form that describes what i want to be made. within a day of posting my request, i have replies from manufacturers in china, india, pakistan, and the czech republic. to whittle that down, i first ditched any replies from companies that were not alibaba gold suppliers. gold is a tier manufacturers can pay for and it means they have submitted to some background checks to ensure they are not running a scam. among the remaining companies, i judged their responses on basics

like price and delivery times but also in how well written their responses were and other things like whether they included a picture of the pants. it's like online dating. ultimately, i decided to work with a manufacturer in pakistan. i know what you're thinking -- how can i be sure the suppliers were not a bunch of sweatshops? i checked with the u.s. department of labor's international labor affairs bureau which tracks labor abuses around the globe and they give this project a clean bill of health. to get started, my guy in pakistan needs to get some money. this can happen in a couple of different ways. alibaba has an escrow service called ali pay which holds your money and real is -- and

releases it to the manufacturer when you're happy with what you order. you can also pay a manufacturer directly using western union or wire transfers. how much money are we talking about? let's start by considering what i'm asking for. i'm looking for pairs of pants in four different colors in multiple size combinations and i want more than one of each. that right there gets me to 280 pairs of pants and a nine dollars per pair, my total cost is $2520. my costs did not end there. getting the pants airships to me would cost another $1983. that would get my pants on from

pakistan to new york in about two days. how did it all go? remarkably simple, it was like combining a craigslist ad with the giant 3-d printer. 25 days and 4500 dollars after i started this process, i got exactly what i was looking for, a big mess of pants. and they came out fine but what do i do now? on the one hand, i have enough pants to last me for the rest of my life or i could share them with 279 of my closest friends. i guarantee there is not a pair on the street like them. >> bloomberg businessweek's sam grobart. he is -- sam, i am still waiting for my pair of purple pants. a quick reminder, oak coat bloomberg west w"ill bring you "the alibaba story", a half-hour special. that is airing tonight at 9 p.m. eastern time and pacific right here on bloomberg television. seven-time grammy winner pharrell williams has plenty of things to be happy about. he will tell us about his latest project in tech, media, and music next.

? >> welcome back to "bloomberg west." pharrell williams is having a massive month. he is having a massive career. he kicked off the nfl season with a performance of "happy,"

launched a new fragrance and partnered with twitter. we sat down with him to learn how he is building his empire and using technology to do it. we have more from new york. what is he like? >> he's really cool. he is an a credibly tech savvy celebrity. his website is called 24 hours of happy and helped launch his song to the top of the charts and he performed at the itunes music festival is promoting twitter to provence -- to promote his new album and fragrance. i asked him what technology will blow up in 2015? >> it's not about the technology, it's about the user. that's what you will see. all technology has some sort of obsolescence built into it. it does not need a main thing. it's not about what people will be using is why they will be using it. that's the essential question. >> will people be using tech to buy things? the announcement of apple pay and the twitter buy button could help celebrities like pharrell williams to make a fortune and that's what we will be looking for in the next couple of

months. >> as if he's not making a fortune already. isn't he the latest judge on oh quote the voice?" >> yes, i'm trying to figure how much he makes and is rumored to be about $8 million for a boat the voice." -- for "the voice." i asked him what he thinks will happen and where tek will take things in the season. he had an interesting answer. >> technology f is aeral animal running wild and it's hard to predict what it will do. as all things in the animal kingdom, it is born with instinct and can only go so far. >> then if you are pharrell williams and smart you will adapt and change and go with the flow.

you keep on making money. >> apparently he was born with instincts. thank you for that interview. apple's big announcement of apple pay it the mobile payment world by storm. does pay paul -- does paypal testis paypal see this as a threat or a friend? ? >> it's time for bloomberg television to go "on the markets ." let's show you where the session is. most of it has been in the red for the day. the s&p 500 and the nasdaq ended in positive area. the s&p is still within one percent of its all-time record high that it hit last week. we want to take a look at the pounds today which rallied against most of its peers after a poll in the daily record newspaper put the pro uk lead in the scottish referendum. until now, it has been the best

currency among developed economies. the british economy has broken out ahead of other g7 countries.

>> you are watching "bloomberg west." i am emily chang. pandora has just signed a major licensing deal with bmg. the deal brings songs from the bmg catalog to pandora including songs from the on-site, -- from beyonce and bruno mars. and frank sinatra. it demonstrates that pandora and the music industry can find common ground. apple pay is ready to launch in just a few weeks. paypal will be supporting the service however, paypal is not on apple's initial list of official apple pay partners. does this spell problems for the future of paypal? here with us in the studio is the owner of braintree. why isn't? paypal or brain tree

on the official list ? >> if you look at the list of partners there are a lot of , players that are not there. most notably the vast majority of major retailers are not there. walmart and best buy have said they are not doing it. it is interesting as a product. if you look atnfc, it has been around a decade and is not really gotten traction. there are major unanswered questions about the security and who will be responsible for fraud. until those questions get answered, a lot of the merchant population will be sitting this out. we have always been an open platform and we support a

variety of payment messages -- methods. we set for merchants who want to use us, we will support those transactions. we are one of the only players that is across the ecosystem from the consumer to merchants. we said we will support these transactions. until many of these questions around security and who holds the responsibility for fraud, you will see a lot of these players in the ecosystem waiting for those to be answered. >> does the security inherent in it change the reluctance of some retailers who might be willing to accept this because they know it's lesser? >> i think that's a question that a still left to be answered. >> you can answer it now. >> it's hard to speak to these as to how well the biometrics will work. there has been some of this before of the fingerprint scanners which are utter but are not foolproof. -- are better but not foolproof. many questions are still there. it is still open as to who will be responsible for any problem. it's also about what happens when an account gets hijacked.

these things happens and when that happens, even though this rides on top of tokenization, virtual credit card number. >> when the transaction happens, rather than having the credit card number, a one-time token number passes. >> however, that makes it so one of the accounts gets attacked, you don't have to reissue plastic cars but at the same time, that gets picked up after many transaction so who covers the loss on that fraud? that is one of the big unanswered questions. >> there are questions about the future of paypal where apple pay

succeeds. we spoke with the stripe ceo yesterday. it is on apple's list of official partners. take a listen to what he had to say. >> it raises an interesting sort of strategic misalignment at a macro level between paypal and apple. paypal is a while at wal -- system designed to the 1990's. let -- you should not need another while at -- while it's wallet. the fundamental idea behind apple pay is that you should not need another wallace. you should not need to go somewhere else. you should just authenticate with your fingerprint and the transaction is done. >> how do you respond to that? >> i don't know if patrick uses itunes. one of the things that many people don't appreciate is that while paypal functions across the ecosystem and its unique and is the only fire at scale that functions from this consumer to

merchants inheriting a between, along with being the world's w widely usedallet, paypal is also a claimant does a payment form. the button you push maybe itunes but paypal is very common with the number of transactions. we can say we accept other payments. we support another of other transactions. we said we will make it seamless to accept a number of wallets and payments and we think there will be proliferation. >> including apple pay. >> exactly right. >> however, apple is encouraging people to use the official partners, right? does that mean it's risky to develop more apple pay-using braintree? >> absolutely not, apple says here are providers we recommend that we work with any card player out there. they strongly recommend that

someone is on the list. if you look at what's happening, you are requesting a tokenize card number from apple. there is not a lot more there than that. the tokenize card numbers, we support those today as part of the standard that has been public for a while. we support that standard and have been a pioneer for years.

we, more than anybody else, have driven these kind of things. from that perspective, we are that are prepared to handle these in any others in the industry. >> there is one credit card ago to more than the others in my wallet. because i have made that choice, is there a new rattle among the -- is there a new battle among the apple partners to be that dominant card? the way apple play works is you select one payment system as your principal payment system. i think it's about the potential for some card to take over your wallet. >> that is an issue they are thinking about. i think the bigger question -- you had pharrell williams earlier and he said it's not about the technology, it's about the users. they are the consumers and the merchants. the big questions are, as a consumer, is tapping easier than swiping? consumers are the chances become that for large time and largely the answer has been no. on the merchant side, what to the merchants get out of this?

-- what do the merchants get out of this? for a merchant, swiping is pretty easy and there are not major problems with swiping and these issues around security and fraud. unless it becomes a clear consumer value proposition and the merchant knows that i'm covered on security and fraud and i have a high-quality, lower-cost way of doing things, merchants will be reluctant as well which is why you sought most major retailers is not part of the announcement. let's talk about merchants like as an example when they talked to us about this. is uber going to use braintree? are you at risk of losing your iphone customers? >> this is why we can say that from day one, we will support apple pay transactions. >> so still using braintree for apple pay? >> uber has been a customer for us for a long time. any of our customers who want to use apple pay, we can handle those transactions as we always have been. >> will uber? >> we have confidentiality agreements but for any of our clients, it will work seamlessly the same way they pass a card

number two us to handle today, we will process apple pay like any of those. >> you're not nervous or worried about paypal's future? >> this is something we have been planning for for a long time. if you look at the things we put out, we were pioneering one touch mobile payments, we talked about delivering a payment method and one touch payments with their own wallet with but we built a platform to accept other while it's. we expected this. we will make it easy for them to accept. in this case, apple has gone after just the front of the transaction. they are going after the plastic card factor and they left everything else to the rest of the ecosystem. the other 99% is what we do so we are supporting those and

monetize those the same way. this is something we plan for for a long time and built it at of the rest of the industry so we feel this is the way we expected the industry to play out and that's why we support it. >> you have to be thinking about the future and who your partners will be. why are other companies not choosing braintree? >> across those, take social commerce, we have been a big player there for a long time. social commerce on ven mo, which was worth $5 billion, mobile commerce, social commerce, one of the most successful from a social commerce perspective so we have it up later there for quite a long time. it is early days for a lot of these and most of these players are saying this is our first step.

we are going to expand that. i would not look at the first movements here versus how this plays out long-term. we play across the ecosystem as a global provider and we can solve a lot of these things. >> we know david marcus, the former head of paypal has left. when will was see a new head of paypal and who will it be? john donahoe is running ebay and paypal. who will be the new head of paypal? >> he has done a great job. that's no surprise. much of what has happened to paypal over the last couple of years is the reinvigoration of product started with john donahoe. it has been seamless with john coming in. he spoke in public about taking his time in the awful about finding a replacement. -- he will be awful about finding a replacement. none of us are in a rush because -- he will be thoughtful about finding a replacement he is doing a great job and we are still putting out great product. we are having fun with john. >> braintree ceo, will ready, thank you for joining us today. >> coming up up, more of "bloomberg west."

>> this is "bloomberg west." it is called farm to fridge grocery, and organic food delivery startup that delivers farmers market to your door. the company cut his delivery of its own, receiving $20 million in funding. -- got a delivery of its own, $20 million in hunting our . our editor-at-large cory johnson sat down with longtime tech it then stir and partner danny rimer to hear more about the deal. >>good egg is a good name but it's the farmers market

delivered to your home. you ordered goods from a supplier like independent farmers i guess delivered to your home overnight. >> so with its the notion of taking what's out there. >> it's providing the communication between the local customer and the local supplier for superior food. >> are we getting to a point where some of the technological startups might be of limited focus but potentially more profitable? >> this is obviously a massive market because it's food. we are banking on the fact that people are going to want to have healthier food and no who is creating the food or farming the

food and delivering it on a national basis. this would not have been possible without the internet but it is interesting how it is a local play on a grand scale. >> it is interesting to see companies like opentable. i love that uber was taking the opentable model. who would ever think it would become this big? how do you trace this? >> this might not be as much as a sharing economy as uber where you have excess capacity. it is grating a marketplace -- it is creating a marketplace where you enable farmers who have never been able to get their food to a consumer to leverage the internet and get it there.

>> it takes a while to grow something and that's the difference. it takes a while to feed a cap. -- to feed a cow. you can have all the iphones and ipads but you still have to feed a cow for years. >> thank god. what good eggs is doing is making sure the local food, the farmers market, higher-quality food, is delivered to the home and the suppliers love it because rather than selling to a wholesaler or to whole foods where they are getting hits on march on have to provide a -- hit on margin and have to provide certain amount of inventory, this is real-time inventory. they have been growing the cow and they might decide that they will make some stake out of it, there's only so many stakes they can sell. >> when you look at an investment like this, it's very early stages. how do you start to address

things like valuation? you guys must be getting killed on valuations? >> the $.12 in revenue happens less. nevertheless valuations are , getting much deeper. -- steeper. you and i have talked for many years. the difference now is that there is customer paul. -- pull. companies are getting so big so quickly that valuations are creeping up faster. it's not on the promise of usage. it's actually already there. in the grand scheme of things, business will be worth what a business is and we have to do a good job of evaluating what that valuation should be. >> what kind of deals are you looking for? are you looking for value? are you looking for places where other people are not looking? >> we are clearly not value investing. we are the guys who look for lightening in the bottle and hope it will work out. this is risky investments. the theme we have been focused on good eggs is a good example

of this post -- is social responsibility being integral to the business model. the millennial generation more than any other wants to make sure that the business is doing good not just being a business. they don't want to provide them their own business. >> these are consumer facing businesses. >> yes, in many cases. many companies have a social phenomenon as part of the business model from the get go. >>bill gurley talks about how uber's numbers, the number of black cars in san francisco was x before uber and the worry was that competition would take more of that that they have just added to that. they might have doubled more them number of cars on the war -- on the road. do you see that in these other investments? >> definitely, pull. the more people interested in

the service, the more people can make their passion into their vocation. we see people used to do some things with a passion on weekends make it their primary career. as a result, the market is expanding dramatically. >> do you feel one of the things you bring to the investors is to help that investment port to europe? >> yes, mike volce is doing a phenomenal job with us. the first port of entry post-us is europe. they have money and is the closest from a cultural standpoint. absolutely, that's what we do. we help them dominate their core market and bring it overseas. >> 10 countries are getting the iphone 6 and six plus in over a week but one very important market have to wait. find out why apple is delaying iphone sales in china next.

>> welcome back, it is time for the bwest byte - >> the number nine is the number of entries the new iphones will -- the number of countries the new iphones will be released in on their first day of orders tomorrow. >> everyone thought it would be 10. >> the number was 10 because they listed 10 places but among

the countries they listed u.s., canada and others but they list puerto rico is a country and it's my understanding that puerto rico is part of this country. i think they want people to think that with every iphone release it is 10 countries. >> 10 countries and territories but china will not get it. >> hong kong was in on the release of the last phone but not china. >> china mobile said they were going to be saying it and stores -- selling it and stores in china have prepared for it but apple did not give an explanation. it might have something to do with regulators in china not approving the phone. >> it might likely be part of supply and availability in the mine have enough to hit the chinese market. >> china will have to wait. thank you all for watching this edition of "bloomberg west." you can see headlines all the time, we will see you later. >> from pier three in san

francisco, welcome to a special edition of "bloomberg west, the alibaba story." if we fight in the ocean, we will lose. but if we fight in the river, we will win. over the next half hour, we take you inside the ali baba group to find out how this company founded by 18 people in jack ma's tidy apartment has grown into a company that has grown bigger than amazon and ebay combined.