>> live from pier 3 in san francisco, welcome to "bloomberg west," where we cover innovation, technology, and the future of business. i'm cory johnson. we now know that the j.p. morgan chase hack was one of the biggest cyber crimes in history. 76 million u.s. households compromise, and we now know how. hackers broke in with the name and password of a single j.p. morgan chase employee. are there lessons for other businesses? we will explore.

some amazon warehouse workers are required to wait in long lines to go through security checkpoints at the end of their shift. should they be paid for this time? the print court will take up this issue. we will have a look at what this means for amazon, and why businesses are lining up to oppose this. hollywood has been making books into movies for decades, perhaps never more so than right now. more than two dozen films based on books will hit big screen this fall. if you liked the book, would you love the movie? and how is technology accelerating this trend? it is one of the largest cyberattacks ever. j.p. morgan chase discloses the size of its data breach. the bank says the data on 76 million households, and 7 million small businesses were accessed. of all u.s.6% households were affected. the reach affected people who visited the banks' website and

mobile app. there is no evidence that account numbers, passwords, and social security numbers were taken. all of this information was exploited with a single employees username and password, and wormed their way to the system to get what they were after. kedrosky, andpaul ken westin of tripwire security. you. we start with is this an unusual approach? >> not usually. especially with retail breaches we've seen, finding different side channels. in target, they compromised the system through a trusted business partner. target employees come in their home networks, those are going to be less secure than the corporate network. it makes it an easy target. l, two thirds of americans. that is an amazing number. >> it is to the point where you is to -- this year, it

the point where it is almost impossible be shocked anymore. the scale of these intrusions is gotten so large, you look at a number like this and say it is really big. but it is remarkable in terms of the duration of these things, it seems like they were in there for a month or possibly longer. that was a similar situation with home depot. scale, it'st the how long they are inside the systems before people notice. on both levels, that is remarkable. >> ken, when we look at the size of this, it is an amazing number. we have seen so many of these, we become inured at a certain point. jpmorgan came out and said we are spending more. i gave an exact number about how much they are spending. into the hundreds of millions last year, and yet they still got hacked. >> businesses need to be aware of that. we say it is not a matter of if you are going to be breached but when. this is a good example of that.

if attackers want in, they will find a way in, be it through remote ports, an application has a vulnerability, or people fishing. fishing attacks are very common. i think you can work it did some good things here. this could have been a lot worse. the information that was, mize promisedted to -- com was limited. no password information was compromised. they were able to protect the inside of the network, and secure their data. there are good things. it's not clear to me -- that is what j.p. morgan is saying, there is no evidence that further information was collected. not to force them to disprove a negative, but there is no evidence that that information wasn't collected. my understanding of what they have said so far is that, it

seems to be limited to some basic information. given the duration of the time inside the system, it is not clear to me that we have a really good handle on what information was collected. their reassurances seem fairly tepid. >> but we've seen in the past from a lot of these things is the drip of information always on the disastrously with target. everything week we would get new information that was worse and worse, bigger and bigger. and in fact, the initial promises that this wasn't that bad actually seemed to get worse. ken, is there any reason to think j.p. morgan is different? >> when there is an issue like this, when there is a breach, it is difficult for businesses to identify the scope of that breach. look along it took them to actually provide that information. they had security teams working on this for a long peripd of of time it.od

they wanted to wait before they could speak with confidence about what information was actually compromised. there's a chance that more information could have been compromised, but i like to believe them. >> ken, that is very kind of you. i would like to believe them too, but i probably won't. hackers get this information, monday and information to an e-mail, and a name attached. what's the risk? --y want after a phonebook? they weren't after a phonebook? the information they were after is injuries. targeted attacks, making e-mails that look like it came from j.p. morgan. even using their name. they have their phone numbers as well. there is a real risk here for

fishing attacks and identity attacks of j.p. morgan customers. >> paul, your take? >> expects phishing attacks. spends a great deal of money trying to prevent exactly this. think of companies that don't. you have to imagine the same intrusions are happening there on similar scale. and yet we haven't heard about it yet. we will eventually. my concern is it's not so much j.p. morgan anymore, but what this is telling us about the state of security across the board. eyes -- these guys are the best, think about what the regular guys are. and ken, thanks. iszons battle with workers headed to the supreme court. they could have huge publications.

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>> and cory johnson, this is "bloomberg west." has been fighting where all strikes in germany. labor disputes are starting with

u.s. for film and centers. centers.lment amazon requires their workers to wait in line at security checkpoints before they go home to make sure they haven't stolen anything. some people say can take as much as half an hour to get through. who are suing integrity staff solutions, saying they want to get paid for the time they have to wait to get out of work. they supply workers to these for film and centers. the supreme court says they will hear this case next week, on october 8. ush huddleston will join from d.c.. we also have paul kedrosky still with us. this is an intriguing case the goes back to some of the most basic precepts of employment law. >> that's right. thank you for having me. this goes back to the fair labor standards act.

in the 30's, the government said if you have someone working for you, you have to pay them for their time. that very quickly turned out to be not as simple as it might have seemed. in the 40's congress came back and said you don't have to pay people for the time they spend getting to the job, or going home from the job. then, another nine years after that in the 1950's, the supreme court says what does that mean? if you come in, and you are at work sharpening your knife before you clock in as a pusher -- a butcher, do you have to be paid for that time? the time you spend showering if you work in a battery factory, and you have sulfuric acid underclothes, that should be paid too. that up ton later, 25 minutes you spend waiting in line for security check, is that like the commuting time that you don't get paid for, or like that knife sharpening time that you do get paid for. and that is a question with

potentially billions of dollars at stake if it sets a larger precedent about how these checks are handled. >> paul, i'm interested in the notion that these -- and watching the ken burns documentary on the roosevelts, and teddy roosevelt's efforts to provide for worker rights in new york state and in the white house. issues, for more than 100 years ago, our issues today for tech companies like amazon. >> it is really remarkable. it's a great story from josh. how these oldoss labor standards now are kind of running into the malleability of work. what does it mean when people are telecommuting? what does it mean we have issues with respect to things like security? what is the nature of that between the border of work and nonwork? you can see the argument with

respect amazon is they want to believe this is closer to commuting than sharpening a knife. but the reason these acts existed was to try and attach value to people's time, so you wouldn't force them to spend half an hour standing in line in the morning, anymore than you would have one elevator going up to the bloomberg offices in new york, and everyone stands around for one hour. you want value attached to time, so employers are forced to act in a way that gives people their time to do whatever they are set up to do. i am sympathetic to the union case here. it seems as though amazon is not doing everything it can do two x but the process. >> i think these are nonunion workers. whenever i see song come out the other side, is it an accident? if you had to wait in the long line, they were already paying you, they would have long lines. >> by the same token, if you turn around and say it is

costing amazon money to have people standing in line if they have to pay them, so what will they do? they will put more people in place to check people. -- flipside argument is theft is not part of the job. we shouldn't have to pay you well we try to figure out whether or not you are stealing from us. it is an interesting balance. >> josh, what do you think? >> one of the points the plaintiffs make is that the point of the fair labor standards act was not just to make employers give more money. wasteo have do not employees time. if they were paying for that 25 minutes, if integrity, or indirectly, amazon who are paying for the 25 minutes, that it wouldn't beat wi-fi minutes. maybe they would stagger people shifts, maybe they would put in more inspectors. there is lots of negligence they

can go on when you have a precedent that you have people required by their employment agreement to stand somewhere for 25 minutes and not pay them for that time it. >> amazon was a late addition onto the suit. why was amazon not part of the original suit, and how were they added on? >> the key here is that all of this turns on a motion to dismiss on this particular lawsuit. the discovery hasn't happened. the question was whether the district court was right to throw out even the concept of paying for the security lines, or the appeals court was right to say to go forward. when it was filed, it didn't include amazon. the attorney has sense given the green light, amended the complaint. it has been consolidated with other similar lawsuits about integrity and amazon. the attorneys have discovered that amazon employees who are

directly applied by amazon are going through the same security checks and dealing with the same things. they have attempted to add amazon. with the cyprian court is looking at is the moment in time -- what the supreme court is is whether integrity could be forced to go to trial on this question of paying his workers. >> i agree with paul, it is a thought revoking the story. i will tweet it out right now. josh eidelson, thank you very much. as well as paul kedrosky. still ahead, from books to the big screen. how hollywood is turning "gone girl," into a blockbuster, and how technology helps advance that in the movie business. you can watch us streaming on your tablet, phone, bloomberg.com, apple tv, and amazon fire tv. ♪

>> welcome back to "bloomberg west." i'm cory johnson. hollywood has been making books into movies has the beginning of the movie business. how does technology apple fight this trend? there are two dozen films based on books hitting the screen this fall. "gone girl," is just one of those. why so many books and movies just now? >> we are seeing more than two dozen book titles heading to hollywood before the end of the year, including movies like "wild," and " alexander and the terrible, horrible, no good, very bad day o."

those films don't have as much but theygone girl," turned to the internet for box office boost. they get a bump from things like social media. i see big changes in any industry, i wonder what role technology has in this? technology plays a huge role in bringing these industries together. i interviewed the author and movie director who turned "addicted," into a movie. they said the internet has helped the registry, and help them be more intertwined. the internet has totally revolutionized what i do. sure it's been the same for you. became famous.i i didn't do any book signings for four years. all my initial interaction with people in my ability to sell books came from the internet. it's an opportunity to reach a lot of potential readers without

a new author having to go on extensive book tours. >> the internet has done a great but theythese two, told him in the interview it is a double-edged sword. you have things like cell phones onset. he says he has to coppin state cell phones -- confiscate cell phones. he worksgled movies on, and their clips online. internet can help, but it also can be a bit of a spoiler. overall, it is giving them a blueprint -- a boost. dress those inon the movies. shelti, thank you very much. bits andseen the fit the like are on the rise. what's the opportunity here, next on "bloomberg west." ♪

>> it's 26 minutes after the hour, which means bloomberg is on the markets. i'm matt miller. let's get you caught up on where stocks are trading. big gains today, more than 1% across the board. unemployment came in at less than 6%. jobs --o 48,000 new 248,000 new jobs. here are a couple of individual movers. check out the source database company. and cosmo pharmaceuticals. those two canceled merger agreement, citing tougher u.s. tax rules. they are now in talks to sell itself to someone else.

2% after an gaining increase in september sales. rose nearlyales percent last month. customers filled more perceptions. maybe not buying as many cigarettes as well. walgreens still has some of those smokes behind the shelves, where cvs doesn't have any. some take a quick look at of the indexes. the s&p is that 1967. the dow falling below 17,000. 4479 on the nasdaq. ♪

>> welcome back to "bloomberg west." innovation, technology, and the future of business. we focus on innovation, technology, and the future of business. i'm cory johnson. some of the loudest voyagers -- voices in venture capital say, these are blowing through too much cash. when the market turns, we will find out who has been swimming with other trunks on. many hybrid recoveries will vaporize. money is getting spent. some startups need help getting from point a to point b. martino, the super

angel. here is his definition. >> a super angel is one of the most unfortunate words ever selected for describing something. >> you are super. >> a super angel is actually an institutional venture fund of small size, a better name for it is a micro vc. this word i coined as a result of individual angels writing bigger and bigger checks, and making their own family office the bank. we are now stuck with a word that actually is the opposite of what it means. we are institutionalized feed funds. >> you guys are in this place. and the after the angel seed round. hey, i know this risk i come i have a great idea. big venture capitalists come in, you were almost on a bridge. it's almost like there are

two parallel universes of venture capital. you have the big firms, the sequoias, they are trying to write $30 million checks. and on the other side, you have micro vc firms. we are trying to put 500 -- $1 million in. views.ve two different one big concern among big venture capital firms is the burn rate is high. all this money in an early-stage company come of the burn rate will go up. in our world, that doesn't happen. when you put $30 billion in for a benchmark, you are in a different world. this is the big topic of discussion right now. >> i think the ocalan's is -- not just froms

the concern we were riding young founders -- when you are writing young founders checks with a lot of zeros. >> we have a very kind of blue operational orientation to the way we do things. we are trying to put that last amount of money in before the big firms come in. ceoe do this right, the actually has an interesting decision during our investment window. am i ready to go big? is this company who is figured it out, and now i need money to scale? by keeping it lean and mean, our founders have the option of getting profitable. this was not some that you could do back in 99, or 2000. >> we were saying isn't the point of the a round only going to a handful of the seed round companies? sort of a weaning process ? interestingt -- the

ring is the definition of a round is interesting. we are dealing with companies who are in their seventh institutional close. anderson harwood comes in and puts $20 million in and calls in series a. it's the seventh institutional close. in many ways, by the time the big firm comes in, that company dr-r ually deep risk -- e-ricked. go spend thean you money, it means you deserve the money. >> you change the negotiating stance. letguys have been there to them choose their terms. >> a lot of times as ceo will come to us the term sheet in hand from bigger firms. they will say hey, bullpen, and only this much money at. what if i hit a couple more quarters of sales milestones before i took this big-money? i want to have potentially

bigger offerings, and potentially more de-risked company. i level the founder comes in and says that to us. we know that is in the gist of the company. is ceo can decide whether it time to go big or not. that is one reason we have been successful. >> you also have a lot of cleaning up to do with a lot of these companies that have been founded on the back pockets of a couple of rich guys, where the paperwork is all over the place. the warrants in the convertibles, and who owns what, and how that will change with further rounds of investment, that's kind of a mess. >> in our first month we had 34 deals. in about seven of them, there was a salient mistake. not a minor mistake, the price was wrong, someone was not on its. the check was not in the round. doing this kind of cleanup at the bullpen stage, before the big money comes in, arms the companies to be better equipped to go in and not have the later round guys have to clean up the

mistakes. fundsnstitutional seed are one guy shops or family offices, it is not surprising there is cleanup that needs to be done before you're ready for the big rounds. >> they really do make a theater lunch at our desks at bloomberg. that was paul martino. always good to see him on the request. garman, fitbit, you name it. digital health gadgets are all the rage. the beginning of this year, digital health companies have raised $5 billion, twice the previous year. is the market really big enough for all of those companies? joining me is the cofounder of startup health, a global health care group. one of the global health care growth platforms? to helpglobal platform transform health care. we are building an army of logic for newer's and innovators -- entrepreneurs and innovators to

reinvent health care. we help companies during the first three years of growth. capital, we raise help provide resources that these companies need at the very beginning of growth. companies,hose basis, we had a basis executive on talking about the new basis watch. the company was sold to intel. intel certainly thinks there's something there. how big is this market? >> the market is huge. there has been $5 billion, as you mentioned, invested in 2014. that is double the size as last year. three and 47 companies have been funded today. we are seeing a moment of creative distraction where the entire industry is being reimagined by technology. >> we know health care is huge.

.itness isn't huge it seems like a lot of these devices -- i'm deke depth -- i'm d outcome about the get the huge business. >> that's why the apple watch announcement is so important. wearables are moving to the mainstream of. it started with fitness. my mother now wears a device, a fitbit. it started to break into the mainstream it. these wearable devices are being designed into our clothes, into our car seats coming to our refrigerators. if you start to look about where the market is going, in terms of health and wellness, it is much larger than just the fitness market today. >> how large how do you measure it? >> every aspect of our lives are being reinvented. if you think about the consumer

electronics market, you think about the automobile market, and how these companies are now essentially becoming health care companies. ford is designing sensors of your car seat, into the steering will, as an example. companies like google. >> sensors to measure what? rate, to level, heart measure your alertness and whether you were awake. >> that is pre-wild. from a started perspective, are the things you were able to take from one to the next, and apply some of those lessons learned? in health care startups today, one of the big differences from what is going on in internet tech or silicon valley is -- you really have to work with the established stakeholders in health care today. the large hospitals, the insurance companies, the government. it really takes being an entrepreneur to work with these

other very important stakeholders, so that you can grow and scale more quickly. >> when you look at the market, are there lessons the compan nies, my believe certain things to be true, and in the go through a thought evolution? >> i think one of the big lessons is how long it can take to get your first cap -- customer. they can take 12 to 18 months to validate your data get your first customer. the timeline can be a lot longer. there is a lot of challenges at the early stage. i think that is why organizations like startup health and other accelerators out there in the ecosystem are so important today. coming together as a community of entrepreneurs to really try to solve some of these big --llenges -- the long sale long scale cycles, the regulatory issues, it's easier

as an ecosystem of entrepreneurs working together to tackle the challenges. >> unity stoakes, probably the best name on the show today. thank you very much. has anyone seen my keys? i can't find my keys. if you are watching me find my keys, let me know. if only there was an app for that. we will be back with a maker of , that helpsd tile people find their keys another loss to stuff. that story is next on "bloomberg west." ♪

>> i'm cory johnson. this is "bloomberg west." tile, a stamp sized device that connect to your favorite things, like your keys, has an interesting phone app that has

expanded to the android platform. company has raised $13 million in financing, with a product that started shipping in may of this year. withevans joins me more to create the world's largest lost and found. i saw your year ago when i heard about your thing, your device. you didn't get it out until this may, i want to hear the story of this startup. >> thanks raven back on. -- for having me back on. we had additional manufacturing, with shipping last may. we shipped over 3000 units to about 30 countries worldwide. >> take starter funding. >> it was something like kickstarter. continuing to take preorders on our website right now. hoping to get through all of the back orders i this black friday. >> i found you guys because a friend of mine was like you are always losing stuff, you are going to love this thing. it's basically an rfid chip in

front of a cute little plastic thing. it uses bluetooth. basically you take a tile, you put it on anything you don't want to lose, like your keys or your wallet or purse. phone, if you are nearby, it can ring. if you are not nearby, you can see the last place you left it. lets you left your wallet or purse at a coffee shop. 20 minutes ago i left my purse there. in thee is somebody else coffee shop at that time, he will communicate through their phone, and show you in real time the location. it communicates completely silently, through anybody else's phone that has our app downloaded. >> you are creating a social network of people who lose stuff. we are building a network. you are creating a social network of losers. you should see my facebook.

you should do our marketing. >> it intriguing. it has to be impossible for you to measure what your potential market is. -- everyonet share who was ever owned a car. everyone who was ever lost anything. >> how you focus that. ? >> everyone we market you online, we look for the segments. >> we haven't released any percentages. a typical e-mail campaign might get a response of 50 basis points, maybe 1% response if you are lucky. you are getting better than that. >> we are getting better than that. on used cases.

we focus on keys, we focused on wallets, purses, cars. we make sure that every use case that we want the salt for israeli mailing it. we are marketing to approach it that way. does that change the way you run the business? >> two things we're doing with this. he raised $13 million, most recently, from gigi b capital. previously 3.5 from 10 sent. ,e are growing a network bringing this to android starting with the telik cs5. s five.y evans, with tile, thank you. let's take a look at the headlines making news. mark, what he was looking at? inpro-democracy protesters hong kong have canceled plans

for talks with the government, after demonstrators were attacked with hundreds of counter registers, at least 37 people were injured. facebook gets the green light to nation billionr dollars. the european union cleared the deal, saying he doesn't have antitrust concerns because the companies aren't close consignors. facebook got approval for the deal in april. marriott has been fined $6,000 by the fcc for blocking guest's wi-fi connections. three mobile hotspots were blocked in nashville. forcing guests to pay fees to use the hotel's network. marriott must stop using the wi-fi blocking technology. >> market, thank you. what about gold? it's kind of a shocker. >> it's interesting. they were talking about that on "surveillance," with tom keene. they pointed there was going to

be a significant shift in gold because what we saw with that jobs report. the implement rate is down below 6%. we are going to discuss gold, and whether it is time to say goodbye to the sat. some colleges are doing away with admissions tests. those stories and more when i join you at the top of the hour. >> mark, i can't wait to see that. facebook versus drag queens. next on "bloomberg west." ♪

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>> welcome back to "bloomberg west." time now for the bwest byte.

>> today's numbers 23. >> michael jordan's number. >> facebook was brought to their knees by drag queens. in 23 days. >> the issue was facebook kicking off drag queens from facebook. ago, reports started to come in that drag queens were using fake names on their profiles. >> duh. >> it spread across the country. #myobilize, and started a name is campaign. we got facebook's attention. >> there are issues about youacy and about what disclose and who is a right to privacy. >> they really want people to reflect their genuine identity on facebook so they can have an authentic relationship with people. in our meeting with them, they said we wanted us to be able to use our chosen names. we had a huge victory with our

meeting with facebook. haverk zuckerberg said you one identity, having two identities for yourself is an example of a lack of integrity. to me that shows he doesn't know much about drag queens, among other things. >>" is a few years old. i think you may have come around since then. it definitely proves they need to work on some of their policies, which they're going to do. before, when people reported profiles, there was no way to contested. it was their way of a highway. we will shut you down unless you change your name it. now, it you have a place to are genuinesee we real people. facebook has a huge as possibility. there are people who do creepy things on facebook. they are trying to keep the committee safe. no but he wants predators, spammers, and bullies on facebook. we are working together on this. the feels very exciting. -- fundamentally, part of the community is having a second identity.

>> i have been sister roma for years. that is who i am. facebook realizes that. it's a victory for people have room in identities come at a big presence on facebook. >> the market opportunity for facebook gets larger. >> exactly. >> sister roma, thank you. that's it for "bloomberg west," today. you can watch us streaming on your tablet, phone, bloomberg.com, apple tv, and amazon fire tv. ♪

>> i'm mark crumpton. the is "bottom line," intersection of business and perspective. more colleges scrap standardized test, as an admission requirements. resilience head to the polls for this weekends presidential election. had to the polls for this weekend's presidential election. to our viewers here in the united states, those joining us around the world, welcome. we