>> live from pier three in san francisco, welcome to "bloomberg west." we focus on innovation technology, and the future of business. i'm cory johnson. here's a check of your bloomberg top headlines. u.s. stocks started off the week on a rocky note. dow, nasdaq sliding. energy stocks taking it on the chin. oil extended its losses by tipping below $46 a barrel. that is down from $100 last summer. san francisco fed presidents says raising interest rates in june will be a close call even with strong job growth.

the obama administration has admitted a mistake by not sending a top official to march in paris yesterday.. press secretary john ernest said security would be too challenging on short notice for either president obama or vice president biden to go. the sitting ambassador france was the representative among dozens of world leaders. take one name off the list in the race for people who might succeed president obama. paul ryan says he will not run for president in 2016. he wants to focus on his work in congress. jeb bush has formed an exploratory committee and mitt romney told donors he is thinking about a third run for the white house. new numbers from idc and gartner are painting some different pictures on the state of the pc market. according to gartner, shipments

actually grew 1% in the fourth quarter. idc said shipments fell in the fourth quarter as business spending slowed down. they agree that lenovo is the world's top pc maker. the u.s. military is hit with a cyber attack. the attackers claim to be with the islamic state. the accounts were suspended but not before messages like "american soldiers, we are coming." the cyber caliphate continues its cyber jihad. this is at the same time president obama was announcing new cyber security proposals at the ftc. >> under the new standard that we are proposing, companies would have to notify consumers of a breach within 30 days.

in addition, we are proposing to close loopholes in the law so we can go after criminals even overseas. other proposals include a consumer's privacy bill of rights. joining us to wrap up all theses developments in the world of cyber security is bloomberg whitehouse correspondent phil mattingly. and our cyber security expert chris hadnagy. the hack today was just as the news crossed. what do we know now? >> us central command lost control of their twitter account for about 30 minutes. over the course of the last couple of hours the white house has been trying to play down what this actually was. the defense department spokesperson calling it a prank, saying it was more of an annoyance than anything else. the white house saying this is not a major data breach.

what it absolutely is, is a bit of a pr loss for the u.s. one other issue here, that the personal information of senior officers in the military was also posted by this group at the same exact time. the pentagon says they have referred that matter to the fbi and the fbi has now started a criminal investigation. a hairy couple of hours but nothing major according to officials. definitely a criminal investigation is ongoing. >> is this anything major? usually when a government official says that, i assume it is something major. >>in the past, there are one of two ways it can get compromised. either they guessed a really easy password or it was a fishing e-mail. it does offer a big problem, if it was a phishing e-mail that

caused the compromise of this account, there may be other residual effects on that network where the account was compromised that they really need to check into. >> when hackers are trying to guess passwords, is it as simple as running a program that slams it with hundreds of thousands of passwords in short order, or is it more complicated than that? >> with the apple attack we saw recently, that was the case. most accounts now after you try four or five times, it locks you out. more often than not, it is profiling the account online maybe finding the password or trying numerous passwords over days or longer without getting the account lockout until you guessed the right one. >> in the world of business and government there has been an alarmingly large number of hacking attempts, it may be doubling in the last year. is this proof that the white house is just normal, or is it

notable that this happened just as the president was talking about cyber security? >> it was great timing. you pointed it out earlier that this might not be coincidental at all. this is a big week for cyber security at the white house. he has a number of cyber security proposals that he plans on announcing. the white house actually had a cyber event in november of last year. the federal government is not immune. they are getting hit as much if not more than some private companies. if nothing else, it underscores this is a major problem and not just one that lawmakers and federal officials can bat around. there is serious recognition to the white house that something needs to be done to counter it.

>>why is the white house focusing on this week of all things? >>the cyber security issue is something the white house has cared about since 2010, when they started making a big push on it. they have done a lot through executive action, they have just not been able to shake loose the pathway forward in congress. from what i've heard over the last 48 hours, is they saw what happened to sony and have been paying close attention with what happened with target, jpmorgan and home depot. they know the u.s. and citizens are paying very close attention to this. they thought maybe this is the way to elevate the issue and get people to pay close enough attention to put pressure on lawmakers. there are a lot of bills on the table in congress to try to remedy some of the major concerns, but no real push to move them forward.

i think the white house thinks politically maybe this is the way to do it. this is their avenue to start that process. >> the two options you put on the table, either a phishing attack or dumb passwords. is there sort of a morning after that could happen here? what would a dumb password tell us about the way the administration is dealing with this? >> if it's a dumb password, i don't know how you could fix that. that's human error. what we've seen for probably over seven years now is probably something like the most popular password being the word password. it has been talked about nonstop to where you would hope that someone who is running a government twitter account would realize that using weak passwords is not the case. but more importantly if it is a phishing e-mail, there could be a lot of residual effects on the network. there may be trojans or other malicious software with that same phishing e-mail.

if it is a credential harvesting e-mail, there may be other credentials that were harvested or password reuse. we see that too often when it comes to weak passwords. >> i'm interested in your work because there is a big notion in the world of cyber security about sigint versus humint, so the signal information versus human information. when you look at the world of cyber security, how important is the human section of that, the human information that leads to cracking cyber security problems? >> this has been the biggest topic especially starting in 2015. last year, when you look at the attacks that occurred -- let's just mention some like sony, target, and home depot. every single one of them had a

human portion to it. some type of information gathering was done with that. as we analyze breaches that are occurring in the corporate world, what we are seeing is that the human portion, the social engineering portion is getting bigger and bigger. there is no risk for the attacker, they can have spoofed phone lines. phishing e-mails are easy and free to send. and results, instead of spending 100 hours hacking at something they can get passwords and credentials in a matter of minutes. it's a huge problem and we're seeing an increase, not a decrease this year. >> i wonder your opinion about this notion that-- i look at what happened to france, the terrorist attack. they spent so much money on signal intelligence, so much money on the tools to fight cyber security, and yet they missed this, maybe because they did not have enough money left over for the human intelligence

approach. >> we see corporation spending hundreds of thousands or millions of dollars on firewalls, all sorts of systems that they think will fix the problem. but now you have your human network and they're not spending money on education and testing and auditing to fix the human problem, just looking at the way your employees use social media and e-mail. those simple things that could really fix a lot of these problems. >> thank you very much, we appreciate your time. bloomberg west will be right back. ♪

>> this is "bloomberg west." pfizer will now have unprecedented access to dna data

for about 650,000 people. the drug company has struck a deal with a genetic testing startup. 23 and me gives access to the largest dna database of its kind. it could be a breakthrough, but also raises questions. we have the director of business development. this is exactly the kind of thing it seems like 23 and me can sort of lead to. >>this has been the vision from the beginning. we would empower people by giving them direct access to their genetic information and the tools to understand it. we would invite these people to help us build a massive database for researchers. >> let's back up and talk about how it works for those who do not know the technology. using simple dna testing or identifying technology, what is

the elevator description of it? >> people can order from 23me.com, they spit into a tube, and then we look at hundreds of thousands of points in their dna and give them an interpretation of what it means about their ancestry and they can access that information over time as we learn more. >> there is also a suggestion of disease prevention for the individual, but also the gathering of data that can be used anonymously, you guys say. how is it anonymous? >>its anonymous in that people their genetic information and health information they provide about themselves is kept separately, from their name, address, or anything personally identified. that information is aggregated together across many people. >> the notion that there are certain genetic tests that are precursors to different types of disease, and yet, you have had issues with the fda about sharing with people, suggesting it is just that. >> one of the founding principles of the company is if you want to move to a system

that is, rather than being reactive, actually preventive, people are going to be empowered with information about their health and one important use of information is through your genetics. that is something the company is really striving to move forward. >> you guys have made the information available to researchers in the past, academically. how is what you are doing with pfizer different than what you have done with researchers in an academic environment? >> for patients who have a particular illness, those illnesses will be treated by the companies that make medicine. pfizer is a tremendous company. they make drugs to treat many conditions. it is unprecedented the way they will be able to access information from people who have consented for that. and across a lot of different areas. studying everything from obesity, to chronic pain, to lupus in their development. >> it is nice of you to do this.

what does your business get out of it? >> this is important to us in order to be a sustainable business. we need partners like this. >> can you get into apiece of drugs developed? >> i'm not able to disclose the financial details of the collaboration. >> wouldn't that be the kind of thing you would want to have as an option on the success, and therefore, is this the kind of thing you would only want to do a few deals? >> i think it is important to have a lot of people accessing this data. 23 and me signed 14 partnerships in 2014. we have only announced a couple of those so far. the database is massive, we are sitting on a tremendous amount of information and we want as many smart people as possible mining that data. pfizer makes a lot of drugs for a lot of conditions but not everything. >> are there certain conditions you are targeting because the economics change once the data

is available. so they might not be pursuing something like lupus, because there are only so many patients, but there are more, to develop because they have got data now? >> the goal for us is to make the overall process cheaper. nine out of 10 drugs fail in clinical trials. that is likely because not a lot of human data goes into the development process before you put it in a human being. >>last question. how long will it take before we start to see some drugs come out of it? >> i hope we will start to see things soon, in years rather than decades. >> five or 10? >> i would like to see it earlier, on the five side. >> thank you very much. we will see you right back here. ♪

>> the motor city is abuzz for the north american international auto show. stealing the spotlight, the volkswagen golf, beating out the new ford mustang and the hyundai genesis to be the north american car of the year. matt miller now with us from detroit, and he has got a special guest, volkswagen of america president and ceo michael horn. matt? >> yes. i'm joined here by michael horn. it has been a surprising year for the volkswagen golf. i think of this as a car from my youth, but it is a new generation, the 7th, and it is winning all of these awards. what is going on? >> you did your homework. we have won 10 awards before this morning, we also won the north american car of the year. we are really exhilarated and excited. it is great feedback from the american markets, consumers as

well as the media, the press the journalists, that we are right on with this car in terms of its packaging, design, fun to drive, as well as value. >> it comes at a time when volkswagen brand sales have fallen. the larger group achieved a record this year worldwide with more than 10 million cars. but the brand itself has had weakness here in the u.s. do you think this is the kind of kick in the butt you need to turn it around? >> i think we kicked ourselves in the butt last year because in the total of the year, we were down 10%. in the first nine months, 15% down. in the fourth quarter, we were up like 4%. this is due to the success of golf and the jetta facelift, very well received, and which carries the same dna as the golf. >> you have also behind us a new concept for a crossover suv here.

tell us about it and do you need to add more of these to your lineup? >> as we announced the middle of the last year in july, we built the midsize suv in chattanooga tennessee as of the end of 2016, this will be our platform, and the spec here is on the same platform, but it is a coupe, a two row, lower roof, less exterior size. but in this context, we have two objectives, to show you a future perspective of how this will look like, and we will test your reactions here because we think about building this one as well. >> so it is a separate project from what you will definitely build in chattanooga. this is possible on how we will receive it. 10 rewards on this, we will build it as well. >> it is a strategy. regardless of dna, we want to

carry it out, not only the midsize suv, but also in compact suv in north american markets. then we have to make derivatives of those here. this is a good example. >> let me ask you one final question. here on bloomberg west, we focus on technology and you're one of the only carmakers that has taken apple's technology as well as google's technologies and your own and put them on the infotainment system. >> yes. we are very happy. we have received the award of the best of the best from ces. this is not future and long-term, but we bring a totally new generation of infotainment features, much faster, bigger screens. you can pair all of your major smartphones directly with the system.

no hassles. it will be great. >> michael horn, thank you very much. back to you. >> matt miller, thank you very much. more after this. ♪

>> you watching "bloomberg west." i am cory johnson. president obama wants to send qualified american students to community colleges for free. the plan would cost $60 billion over the next decade. the feds would pick up three quarters of the tab and the states the rest. the plan is subject to approval by congress, which tends not to approve a lot of things. joining us from new york chegg's ceo dan rosensweig. this is a broad and big idea. >> it is very ambitious and i

appreciate the objective to lower the cost of education, which has been rising 6-7% every year for the last 10 years, and not for any good reason because the results are terrible. anything that could lower the cost of college education is worth considering. the challenge is that i'm not sure that congress is likely to pass it. >> when you say results have been terrible, are you talking about dropout rates of community colleges? or just rising tuition across the board? >> all of it. $1.3 billion of student loan debt. that is a disaster that is waiting to happen. it is a bubble that is going to explode. we have less than 40% graduation rates, the average time to graduate a four-year school seems to be six years. over 40% of people do not graduate at all. everything we keep raising the prices on and investigating have not resulted in a better outcome for the economy and particularly for students.

for me, the more people who get involved in education, the better. if 50% of them will not graduate, what will we do with the 50% who are saddled with those loans, do not have a degree, and then will go out and try to get a job? i do not think this answers the bigger problem, but i do think it is the right kind of discussion to be having at this point, which is how we get education to work with american families. >> if paying for those through federal grants and so on does not do it, what does improve those results? >> unfortunately, n business you tend to rationalize to be competitive. there has not been a lot of pressure on the school to change the way they do business. as college loans have increased, the tuition can increase. we need to find a way to cap what we give, not because we want fewer to go to school, but

we want the school to rationalize the costs. we need to look at the curriculum. i love liberal arts, my daughters go to liberal arts schools, they're doing phenomenally well, they will graduate with critical thinking but we also need to be thinking of practical learning skills. if you cannot use microsoft office, if you cannot query a database, you cannot get a good job in a company and your career. we need to look to expand the curriculum. it is still shocking to me we have not really pushed, i'm surprised the president did not push for more online learning. we can use fewer institutions and fewer professors to teach online than ever before. there are a number of things we can do and should do. >>maybe because the preponderance of online education, has been the for-profit schools that offered really crummy results at a high

price and left a lot of unpayable student loan debt behind. so online education has not shown the great success that it might get otherwise. >> you're absolutely right, those have been very difficult for students, families, the economy. very low graduation rates when they the graduate, low employment rates. they have the lowest tuition on paper but the highest debt per student. clearly, for-profit institutions leveraging low-cost college loans to make money are not the right answer either. but the capability online for the institutions we are talking about, there are 4000 colleges over 1000 online degree programs people to take already. if you take just community colleges, where millions of students go, we should be able to let them take courses day and night, anytime, so they do not have quit their jobs, professors

have been trained with the right information, the right way. we can combine the online effort with community colleges effort and lower the cost, increase access, and improve results, which is at the end of the day what we all care about. >> what is the percentage of digital business for chegg compared to the traditional textbook business? >> it has grown astronomically. it is now over 30%. we are expected to be over 40% next year. online textbooks, our tutoring business we acquired, all of those are growing extraordinarily fast with high gross margins. the transformation we talked about a year ago is not only underway, but it is succeeding.

we have estimated which was about zero three years ago will be about $90 million this year growing at a huge rate. the business has started. the students really embrace it. today's generation, my two daughters, they are dean's list doing a great job at school, but they have never known a day without the internet, broadband, iphone, netflix. they expect to be able to learn online and do their homework online and get tutoring online. they expect to be able to learn online. companies like chegg are giving it to them. learning to more communities and more people, online ought to be the area of focus, not just bringing more people in where they have to leave their jobs and take time out of their work. >> i things that are online, because they are in new york surrounded by the freezing cold for a change. thank you very much. five years after a massive earthquake, put one million five

people out of their home, is this country opened for business yet? we will talk with a telecom mogul next. ♪

>> today is the five-year anniversary of the 7.0 magnitude earthquake that devastated haiti. now the government says the company is open for business. stephanie ruhle traveled to haiti to see for herself. i am so anxious to see this. it is a place i visit and a place that has seen unbelievable suffering in the past century. >> indeed, it has. it has such a far road to go. haiti's government has been saying it is open for business. i went to see the digicel, the largest cell phone carrier in

haiti, and meet with their founder, denis o'brien, an irish billionaire who basically showed up in haiti, drove around, and said nobody has got a cell phone here. there is an opportunity and it proved to be a huge one for him. take a look. >> we just drove around in a taxi. we are looking at people buying on the street tonight. no one had a phone. >> it is amazing. throughout the developing world, haiti has been one third of 12.8 million users. aside from the fact there are digicel signs everywhere, it as though even the poorest people -- remember people are living on $2.50 a day, they have digicel phones. i went out to a guy with nine kids who lives in a cinderblock home with no running water or electricity walking through the

farmland there a machete in one land. his cell phone rang. he said to me, his most important possession is his phone. for denis o'brien it has been a big success story. >> is that a one off, where there is no room for anything else, or other kinds of technology companies that could succeed in haiti? >> in terms of technology, digit --digicel invested in a tablet maker employing a number of haitians, but you're right, can haiti actually succeed in other industries? the infrastructure is a disaster. rubble is gone from the streets, but there is a horrible power grid and very little running water. even people who want jobs have to walk two hours to get to the job because there is no public transportation. no board of education, no hospitals. denis o'brien claims there are opportunities and you just need to look for them.

listen. >> i am beating the drum loud, because there is this kind of view that caribbean companies --countries are corrupt and it's difficult. if i talk to an indian or asian investor, ok, they will not be looking at the problems. they want to know the opportunities. whereas americans and europeans would say, look at all the problems, how do we get over the problems? to be honest, they will miss out on the opportunity. >> i mean, cory, you cannot necessarily argue with the guy. he has built a massive business there. he also gives a lot back to the country. it is clear there are huge problems. is there corruption? no doubt. but it is a workforce that is highly motivated, clearly inexpensive, they have got a five dollar a day minimum wage two thirds of the country are unemployed or underemployed. it is a boat ride from miami. if you look at it that way, it is a great opportunity. are people going to lean in and really invest?

>>i remember i was there a long time ago, one of the biggest businesses around, was a factory where they were stitching baseballs by hand. that is what they wanted to show off as opportunities for a world business. they lost the baseball business. all they had were people that knew how to sew baseballs. what do people of haiti get out of investments? >> right now, the average haitian is responsible for nine family members. they do not have education or health care options. the answer is, let's try to get them jobs. the guys are not paying minimum wage. they are paying above minimum wage. and people like being there. >> i cannot wait to see. >> you are not watching football tonight, cory. >> there is a football game tonight? i am unaware of this. the thing to watch tonight is haiti, open for business, 9:00 on the east coast and on the west coast. open for business, a fascinating country and a fascinating culture.

great language. >> spacex successfully docked but the mission did not go according to plan. the plan was to land a reusable rocket on a floating barge. how big of a blow was the failure? we will talk about that all next. ♪

>> i am cory johnson. spacex capsule arrived carrying groceries. belated christmas presents and other supplies. perhaps the big news is the attempt to land the reusable rocket on a floating platform was not successful. spacex ceo elon musk tweeted -- close but no cigar this time. it bodes well for the future. joining me is the former commander of the international space station, chris hadfield. first, chris, explain a little bit. the first section of the rocket, which fell off as the rocket started to reach orbit, was the parts they tried to land on the autonomous spaceport drone ship

which i would call a big barge but the capsule made it to the space station. let's talk about the autonomous drone ship first. >> isn't it just a barge? >> what is sophisticated about it is it can hold position using a bunch of different propellers underwater. using a gps, it can stay in one place very precisely, which is what you need when that piece of the rocket ship is coming back and trying to land on it like a big broomstick landing, imagine if you could balance a broomstick while out at sea. the barge just came back into port yesterday. they came close, but not perfect yet. >> describe the process to me and what you see? >> we did exactly the same thing when i was on the space station. it is really precise.

the unmanned space ship launched a few days ago gets close to the space station and then shuts everything off their once it is perfectly there, the two of us orbiting the world together, you reach up quickly with a great big robot arm, and in this case, it was a guy on board named butch wilmore. he reached out, held, and grabs onto the spaceship, plucking a dragon out of the air, and then pulling it down. right now up on the space station there, opening the hatches, and getting us all the christmas presents and everything else. two tons of stuff was inside. >> there are always mystery experiments. what do we know about the experiments they're doing and how does it work on there are

scientific permits that are part of the cargoes? >> this particular dragon spaceship is carrying here is that support about 250 different experiments. some of them being how the gases and liquids are transported in the atmosphere, to try to understand atmospheric physics better, experiments studying radiation, studying crew health, months and months worth of experiments on board, as well as food, clothes, all the things you need to live out in space. it is an amazing little ship especially in the fall with the competing ship accident with orbital sciences. everyone was really counting on this one, really nice this morning for which to reach out and grab it and get the hatch open. >> indeed let's talk about why the landing of the first stage of the rocket is so important to this space industry? what is it that is so groundbreaking? and why has no one been able to

do it in the past? >> imagine if every time you got an airliner, when he landed, it had to throw a three quarters of the airliner and build it over again. the cost of each flight would be huge. but if you could reuse that every single time, if you could, like an airliner does, landed -- land and --land it and all he has to do is refuel it and make sure it is serviceable, it decreases the cost significantly. up until now, the first stage, a part of the rocket that gets you above the air and gets you going fast, that first stage has always been thrown away because it is simpler. but now, maybe our ability technology, computers, are far enough along to land it. we would like to land it on land. you do not want your first test where it will probably not work right, you do not want your

first test where it crashed on the ground, so spacex put it safely out at sea, they're trying to land that first rocket, sort of like a big telephone pole to come back. once they do that, we will give it a try on land. once that gets proven, it will decrease the cost of going to space significantly, and also open things up. it is an important bit of technology to make space access more affordable and therefore more capable. >> the cynic in me says if it is proven. thank you for joining us. we appreciate that. the bwest byte was the focus on one number that tells us a whole lot. telling us a whole lot is shelby holliday from new york. what have you got? >> the bwest byte today is 20, the number cents the price of apps are increasing in canada at the app store.

if you are buying the apps in canadian dollars, you will be paying 119 instead of $.99. the move comes at an interesting time, after apple had a tremendous year with its app store. marks one of apple's biggest global reactions to currency fluctuations in recent years. though the company tweet prices a couple of years ago for some countries, this is the first time they ever touched prices in canada. obviously, the u.s. dollar has remained strong. u.s. currency has declined against the u.s. dollar. for now, apps in the u.s. are staying at $.99. that is pretty amazing. what else can you buy for $.99 these days? i do not even think the dollar menu in new york is $.99. >> $.99, the greatest advertising gimmick ever created. the strengthening of the u.s. dollar, you do not think about how much it means for technology. so many technology companies like hewlett-packard, mike ibm -- like ibm like oracle

, themselves, but for apple, particularly focused on retail as good as the idea of , $.99 is, maybe their damaged by the strong knowledge. on some level, the marketing value is lost. >> that is exactly right. apple says 60% of the revenue comes from overseas. they're selling more apps overseas and more hardware overseas. we saw them recently raise the price of the iphone in russia. this move is raising speculation that maybe they will change iphone prices around the world. you never know. >> they will probably have to with the rising dollar. all kinds of weird effects when we see the currency trading. it will be harder to sell overseas. thank you. you can always get the latest headlines on your phone, your tablet, on bloomberg radio. more "bloomberg west" tomorrow. ♪

>> it has been five years since haiti was hit by a devastating earthquake. >> we lived one of the worst moments in our history. it was an armageddon-like situation. >> the government says the country is moving forward and haiti is open for business. >> we want to attract more businesses. maybe what we are doing today will show the government that they need to come here and help people to have electricity running water. >> there are people living in the streets and the country still has horrible infrastructure problems.