>> 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. here's a check of the bloomberg top headlines. oil prices down again today. briefly trading below debbie try crude, brent down 2% to $46 a barrel. wti holistic line. besides the u.s. will soon loosen crude oil exports. deutsche bank considers job cuts and possible sale of assets. the co-ceo undertakes a broad

strategy review in the face of falling revenues. shares are down 33% over the past year. the biggest incline among the global investment banks. from seattle to mars, no we are not talking about the space needle. we are talking about elon musk. spacex will build an engineering hub in seattle, charged with building satellites. the revenue and communications from the satellites may eventually help his company go to mars. he says he is optimistic that spacex will settle a lawsuit over satellite launching protocol. an russian billionaire is putting things up for sale. he hired partners to sell the nba franchise. it's more than the $2 billion steve ballmer paid for the los angeles clippers. now's the lead -- president obama making a new push to get cyber security legislation passed in congress. the bill has been at a

standstill since 2011. it encourages right at companies to share threat information with the government. here's the president during a meeting with congressional leaders. >> one of the things we will talk about his cyber security. with the sony attacks that took place, with a twitter account that was hacked by islamist jihadist sympathizers yesterday, it just goes to show how much more work we need to do both public and private sector. >> president obama is about to give further details when he speaks to the national cyber security to medications integration center. joining us as ken weston from tripwire security. and hugh thompson, chief security strategist for blue coat systems. what do you expect? 10 --ken, what do you expect?

>> their broader partnership with private industry is a big thing. if they can make the laws a lot easier for companies to share their information, think it's good. a lot of industries have already been sharing threat intelligence information, financial services for example. it will be interesting to see how that plays into what obama is going to be talking about. our company is going to need to share information with the government as well? some industries may have issues with that. >> we talk a lot about best practices, when it comes to a cyber attack. how many companies observe the best practices after a cyber attack? >> is a little scary to think about, actually. it depends on the industry. if you look at financial services, they have done a good job. when you get into retail and some other organizations, they really haven't done a good job at all. sharing information is one

thing, actually deploying good security frameworks, following best practices, implementing good security policies -- that is something that needs to be of limited. it's scary to see how many businesses really fail to even focus on some of the fundamentals of security. >> from your perspective, what is the one thing you think companies are doing after a hack that they need to do more of? >> thanks for having me. i think one of the biggest challenges is companies don't expect to be hacked. if you expected to be hacked, you would put in tools and processes and procedures to allow you to do things like forensics very quickly and recover from those attacks. the single biggest thing they are not doing is putting in those mechanisms to fail, but to fail in a way that you can recover quickly. i think attacks are becoming a reality for almost every industry, almost every type of company. i think president obama's

remarks are going to go a long way to help further that. >> do you think that just the attention or just the requirement to sort of share that information is going to make companies give attention to this issue and spend more money on the front end? >> i think so. i think security has entered the dinner conversation at home over the holidays. my mom knows the difference between a firewall and a wall on fire. over the last two years, that's pretty substantial. i think the awareness of security as they are. things like the sony attack ring it into the forefront. i think what president obama needs to do is come out and give people an easy mechanism for sharing. i think technically, we have done a lot on that front. we added protocols, things like sticks and taxi that allow us to share threats. but we do need that backing from

the government to be able to clear away legislative issues and liabilities, that's what i'm hoping to hear today. >> ken what's the one thing you think the government could do to make companies stronger in the face of a cyber hack. ? >> threat intelligence is one side of it. i think assisting with proper frameworks, they've actually, with some frameworks not just for government, but also for private industry. i think assisting private industry with better security frameworks and more guidance as to how they should be securing their networks -- threats are one thing. but we have to be more on guard with our defenses as well. >> i wonder what the president focusing on this he's touching an issue with business leaders that don't give him a lot of love. >> i think over the last year, we've really seen security move

from something that was i.t.'s responsibility and into the boardroom. we are even seeing play on the political stage as well, where we have nation state actors trying to target corporations as well as industrial systems. we have seen it go from damaging systems, stealing data for financial gain, but i think within the next year or so, we are actually going to see physical damage to industrial manufacturing systems and things like that. it's good to see that obama is focusing on security. >> why haven't we seen that kind of damage before? what changed? >> if you wind the clock back five years ago, most of the attacks were by cyber criminals. these are folks that are looking to deal -- steel monetize will data. critical numbers, social security numbers, things they can easily sell in the black market. now we are starting to see more and more of these hacktivist

attacks, motivated by ideology or political leanings. we are starting to see nationstate attacks. the difference is it has changed targeting. if you are a cyber criminal looking for a bunch of social security numbers or credit card numbers, you go after the big banks and the big banks have known they have been a target for a long time. if you are a hacktivist, or nationstate, you might start going after utility company for example. a power company. these are industries that really haven't spent a lot of time, energy, effort on security. i think we are seeing the broadening of security inside the industry. >> thank you both very much. web van had choppers dancing in the first dot com boom. as in stuttgart figured out the key to avoiding local delivery?

that story is next. ♪

>> i'm cory johnson, this is "bloomberg west." instacart has a $2 billion valuation. the fundraising was led by kleiner perkins. with competition from tech giants like amazon and google, and the ghosts of grocery delivery past, what makes instacart different? >> grocery shopping is getting an overhaul. a whole raft of companies are entering the grocery delivery business like instacart. i decided to try instacart work. >> you are overdressed. >> we can fix that. ♪ the app is visible part.

select your groceries, hit order. the hind scenes, it's complicated, and uber-like. partners had to stores like whole foods, and cosco. they check each portion and skin every item as they go. making sure they get the right stuff. instacart makes money by charging for dollars to six dollars in order, sometimes charging customers more than they pay, they actually went to the store. special checkout lanes feed their purchase. the operating 15 markets and is growing quickly. history is littered with the wreckage of failed delivery startups like cosmo, urban fetch, and web van. but this uber-like outsourced smartphone model may give instacart a better ending.

so i have some thing i can do maybe if this tv thing doesn't work out. what makes it different from the likes of web van? joining me as general manager heather. thanks for giving me a job. >> for a short time. >> i got this web van tattoo across my chest. >> will have to get you a carrot tattoo. >> web van was raising a ton of money, goldman sachs favorite pic, and it went to nothing because of this huge instructor play. yours is very different. >> very different. we don't have never structure that web van had. smartphones are prevalent now both for the consumers to be able to place their order from smartphone ipad their devices. and then personal shoppers use this smartphones actually do the grocery shopping for the customer. that's a big changes well.

>> i can tell you how many venture capitalists have sat in that chair and read i'm sick of hearing about the uber of this and the uber of that. but it really is a uber like model. the consumer uses the technology on the front end. >> is very convenient for the customers to be able to place their order from local stores that they know in their neighborhood. and having fulfilled by one of our personal shoppers, who was doing this is a job supplemental to maybe something else they are doing on the side. >> one of the interesting things, going through the experience, was that certain items didn't scan correctly, or certain items weren't available as requested by the customer. it really involved that person who knows what they are doing, shopping for the goods and services. was that a learning experience for the company? >> i think so. had to ensure that we are training our personal shoppers

in such a way that they are providing a great experience for our customers, but also picking the right produce or being able to make decisions for the customers as a personal shopper. to make sure the customer is getting what they are looking for. >> i learned how to find out if a pair -- pairre is right. if you charge a price for an item, based on what you charge does is to cart --instacart take a cut? >> we're working with our partners to have price parity across the board, and not have any differences in prices for the customers, whether it's in a charge or down charge. but there are circumstances on occasion where there are differences in prices for the

customer. >> with his influx of money would you see a situation where you would take advantage of commonly ordered items and acquire those in size so you could lower the cost of delivering to the customer? where's that never going to be part of your model. >> we're looking to use the new round of funding for three different things -- that agree expansion, geographic expansion, technology enhancements. not really changing the model itself and how we make money or serving our customer. >> so category expansion, such as -- >> looking beyond grocery giving other retailers the opportunity to deliver their items to their customers in an hour. >> how do you decide what kind of categories work? why do groceries work? it's a fairly low ticket item. what is it about groceries that work? one other verticals against it because of that? >> it's one of the most cognitive verticals out there.

-- complicated verticals out there. it's a way to get it off the ground go comp located, and do easier along the way. >> what is it about those articles that look interesting? i do tell if something looks interesting to do or good to do very excuse isn't it. >> we need sandy delivery. >> i was at the whole foods they say as long as you were at whole foods, pick me up something for dinner. >> customers can put in special requests. the shopper will get it for them. >> innovation, technology, and the future of business. instacart manager, thank you. amazon is hoping to cash in on woody allen. we tell you about his new gig,. ♪

>> i'm cory johnson, this is "bloomberg west." after a disappointing 2014 amazon investors have a reason to cheer. analyst layout a bullish case as they upgrade amazon's shares. scarlet fu breaks it down for us. >> the stock lost 22% last year the worst annual performances 2008. it's down in 2015, but that may change. mark may says cc valuations reported that $300 price level. he said topline growth remains strong. there's reason to believe that sales support these numbers. and markets are ready to reverse this recent trend. the amount of money that jeff bezos spent on video content in 2014, not likely to get worse. it could even get better.

the bottom line is 2014 may have been the low water margin. over the last five years, the expanded steadily from 2011 to 2013, this bundle -- they stumbled last year. citigroup predicts margins could expand to a 20% for the school year. -- this full year. the share price has performed over the past 12 or 14 months, there's reason to be optimistic. >> optimism blooms this time of year. thank you. amazon changed a little bit this week, they got some attention from hollywood and they are hoping to get a lot more for their next hit. the company has decided to sign it woody allen to create his first-ever tv series, fresh off the momentum from his first golden globe win over the weekend, transparent. what kind of name is amazon making itself -- making for itself in original content? paul, it's interesting to me that amazon had toward success,

because we have no idea how the business is doing streaming this content. >> i think this was huge for amazon. it gets so much attention of the golden globes. it certainly is transparent, getting the win in that category was very big. obviously having jeffrey jill solly, the producer. they are bring a lot to the table. i think talent is becoming very agnostic, in terms of the platforms in which they share their wares, so to speak. for woody allen he's an icon. a huge name it. for amazon to packed with woody allen is a big deal. that raises awareness for amazon in a major way. this is an iconic director, known obviously for his film work on the big screen.

his movies of denver well on the small screen as well. this is a great move by amazon. >> i wonder about something else. woody allen is sort of the classic case of a director whose work some people like and most people don't. some people even love, and most people don't. i wondered this is proof that there is room in this new distribution strategy for the long tail, for the things that some people will love and most people won't. but the economy is there now and economics are there when they weren't when we had a few challenge -- if you channels on which to watch things. >> that's a great point. woody allen is very polarizing for a lot of different reasons. both in front of the camera and behind the camera, and in his personal life. but no question that platforms like amazon can take a chance by putting woody allen in charge of a tv show, something he has

never done before. they have the bandwidth, they have the breadth of audience, where this just brings attention to them. that's part of bringing attention to their roster, so to speak. if you look at netflix with "orange is the new black," and "house of cards," the fact that these various entities have the resources and now have the bench so to speak, talent to create this original talent. which is getting noticed by the critical side of things, the critical community with awards and such. this is for amazon, great step towards building that roster. of having great actors, writers directors, producers. the name woody allen, like him or don't like him, he is a big name it. everyone knows who he is. it brings a awareness of amazon. >> paul dergarabedian thank

you. ibm broke the record for the most patents granted to a single company in one year come again. more than 7500 new pounds last year -- what does that mean for ibm's revenue growth? we talk about the next on "bloomberg west." ♪

>> you are watching "bloomberg west," where we focus on innovation, technology, and the future of business. i'm cory johnson. ibm tops the patent charge with -- patent charts. is the 22nd straight year that ibm has been granted more pounds than any other company. ibm has been the worst-performing stock in the dow for two years in a row. hence good, company bad? do intellectual property and r&d help the bottom line? chris joins me from chicago. alex covers ibm from new york as

well. you wrote the story, pointing this out that a big focus for the company's patents. >> they have been a big focus for the company, 22 years of leading this recipient winners list here. for them, traditionally, patents are thought to signal where future renovation my comment. new ideas, new things, staking their claim and using their big research force to figure out what is next. the question for ibm is can they use these patents to write these constantly falling sales they have had? the report next week and potentially a third-year patents. in terms of whether or not they are actually making products that their customers want with these patents -- it's a big question for them at ibm. >> chris, let me ask you -- i want to say and mention good r&d good, we just do the technology show.

but it does beg the question of what are the real values of these patents from ibm? >> it is largely a numbers game. when you talk about 7500 patents, that's a lot of patents in one year. keep in mind, the u.s. patent office granted a record amount also. so some degree of in-line with the growth you are seeing at the patent office. the growth in the patents they are securing, i think it does serve the three main business models with respect to outgoing licensing, reducing litigation costs, and providing them design freedom. all three of those are served by having a large amount of patents. they are light years ahead of the second-place finisher. i think there is value the disturbing that. i do understand the point about the depth in respect revenue. but they are betting across a lot of different technologies, a lot of it is growth opportunities with respect to cloud computing and cyber security, and also cognitive computing. i think the thought is that the

fed will play dividends in two to five years. >> i remember once, long time ago, reporting on hewlett-packard. alex, i remember a guy in r&d at hewlett-packard telling me it was tremendous pressure from the ceo at that time to issue patents, so they could put out press releases about patents before he felt things ready. i wouldn't the ibm results and wonder if we are seeing the same thing, where the emphasis is to say we have a lot of patents rather than come up things the company can market and sell. >> the researchers are passionate about what they do. they are focused on creating new technologies, the idea of furthering the human good by technology. but when it comes back to the top of the chain it, to the ceo she needs to make sure she is managing these people these 430,000 employees in a way where you are turning these new inventions and ideas into actual commercial products they can sell. when you look at cloud, they talk about these 3000 cloud

patents. that scenario they are trying to build out, they have been late in doing that. they have their own smart cloud platform, they ended up showing that down in buying software in 2013. to build their cloud of the structure. whether these two decades of patents have actually led to the kind of really big things they want to sell, they did go into the mainframe, they didn't go in hardware and software they are selling. again, you have to prove that these new ideas can sell to the customers. >> chris, i wonder -- the example of twitter comes to mind. they went public and were criticized for its lack of patent protection with fewer than one dozen patents when they went public. then they acquired hundreds of patents from ibm. >> that's right. i think this notion that started companies don't need ip, where there's a movement afoot is a

little bit of a myth. even twitter itself, as overtly anti-patent as they may come out, i think their actions have largely spoken and told a different story from the get-go. they have been aggressively acquiring intellectual property, both with respect acquisitions -- 900 patents just after their public offering in 2013. but also a lot of patent applications in the pipeline. keep in mind that twitter is a young company, coming out in 2006. the patent process itself takes anywhere from three to five years from filing to issuance. a of pending applications are in the pipeline of things we're going to see coming forward. as far as ibm, expect them to be on the list next year. they do also have a healthy pipeline of patent pending applications coming to the system. >> alex, you noted in other stories you have written that while ibm spends money on r&d on a blank piece of paper basis the percentage of revenues is a lot less than a lot of big

companies in silicon valley. >> is about 6% of the total sales are year. when you look at oracle and microsoft, the average around 13%. ibm is doing great things, they are coming out with these new inventions. the criticism from investors is that where they are allocating capital may be a little too much on these buybacks and share dividends with $19 billion in dividends in the last year. more that should be going over to the patent side. ibm might be challenged with that patent pipeline moving forward. you've seen cases move through the supreme court, you've seen the handoff office get more stringent on software patents. this big sticker number they are coming out with, we might actually end up seeing more tightness in terms of the number. >> how does ibm uses patents in terms of litigation and pursuing their rights as patent holders? >> they are largely a defensive

back is in, as far as asserting patents, the last two years they haven't had a single case where they filed and have asserted their own patents. it's always been a defensive measure. a few companies want to lock horns because some are within their 50,000 active patents. i'm sure they could dig up a few they can assert as a counterclaim. you are seeing much more as a defensive measure, but for licensing efforts and for companies who are going into new areas they are about five years ahead of the game. the twitter example is perfect. years ago, you couldn't build a desktop or portable computer without running a fellow at least one ibm patent. it might be said to be chasing rainbows but it only takes one rainbow to find the pot of gold. >> the three of us need to sing "rainbow connection," together. our poor viewers, we won't do that. thank you, very much.

ack eat -- cke restaurants is turning to technology to rent of its business. details on what makes those burgers so yummy, next. ♪

>> i'm cory johnson, this is "bloomberg west." cke restaurants, you may know them from racy advertising were great burgers, they are teaming up with microsoft to let customers place their own orders. joining me, their ceo.

andrew, thank you for joining us. talk to us about this technology, and what it means for you guys. >> is windows 8.1 driving a dell touchscreen kiosk. you can go in and order, you can order yourself, select what you want, hold the pickles or add extra bacon, it's very easy to use. the microsoft technology has really enabled an incredible system for us. you can order it goes direct to the cook. you eliminate the middle man or woman who may not get your order right. how many times have you ordered a burger without tackles and got -- without pickles and gotten pickles? people use credit cards and debit cards, which tend to lead to higher tickets. they are also just enjoying playing with the technology, it comes addictive -- it becomes

addictive. as you mentioned, we are the racy ads and the big, juicy, delicious burger brand. we have to keep up with millenial's, and they want the same kind of technology they have their lives and their work and personal lives. it has been a plus in the tests. >> i do want to return to the racy ads. i wonder with the technology how much to this -- does this lower costs? >> given the higher orders we are getting, the higher tickets, and the efficiency to go into the restaurant -- we are actually able to allocate labor better. you get shorter wait times, consumers aren't waiting so long for their products. you can improve service. over time, there will be savings and labor. right now, it's in tests. we are in 30 restaurants. we don't have people used to using it to the extent yet where

you have big labor savings. i think of her times that could be -- i think over time, that could be labor savings. there are some cost savings. >> let's move on to other technologies. i feel like every business in the world is being changed in some interesting behind-the-scenes ways by technology. for you specifically, when it comes to marketing, with those ads -- have those turned into opportunities for social media marketing or other marketing venues because of their iconic success? >> the open up a really interesting avenue for us in the marketing. when we are doing technology, we are partnering with great companies like microsoft, which was very easy to work with. on the marketing side, one of the ways you measure in this day and age how much your ads are being seen by people aren't only the paid time you get on television, there's also what's

called earned media credits, which means every earned media credit is a set of eyes that you see your ad that you don't pay for. if you were running an allen bloomberg, that would be earned media credit. if it is on youtube or one of the late-night shows covers it. and add that is very popular you might get 150,000 earned media credits, maybe 250,000. we did an ad with kate upton they got 2 million earned media credits. -- 2 billion earned media credits. >> 2 billion people saw the ad, and you didn't pay for it. >> outside the united states, we are in 31 countries. the international aspect is very important. it really is a meaningful -- >> here's my question. where does this add turn itself into a technology play?

is there ways to use technology to get more play from that ad? >> if you have touchscreens and advertise -- in restaurants, you can run advertisements on them. we put them on facebook, we post them on youtube, we have an app you can go to and see the ads. it really becomes much more facile to get your ads out to young technology oriented people you have content they want to see. that's the key here. it's not like when everyone used to sit and watch leave it to beaver, and you had to watch what you had to watch because you had to get up to change the channel. now you have content that draws people in. advertising draws young, hungry guys into our ads. we have the content they look for online and every place they can find it. it's been a big benefit for us. >> very interesting. ceo andrew puzder thank you. "online," is coming up. mark, what is coming up?

>> we look at 2015 politics. president obama met with congressional leadership today. are there areas for cover lies or will the stalemates of 2014 carryover into this year? new jersey governor chris christie gives his state of the state address next hour. is it the opening salvo in a 2016 presidential campaign? mark halperin and al hunt will join me. i will see you in a few minutes. back to you in san francisco. >> sounds good. companies like twitter have been central to the tech boom of. is it good for a city like san francisco? what lessons to other cities have to learn from what's happening in the bay area. that's next on "bloomberg west." ♪

>> i'm cory johnson, this is "bloomberg west." the milken institute has been an

interesting study that says that san francisco is the top-performing u.s. city thanks in large to its booming technology economy. ice -- i spoke with the milken institute's chief research officer. >> you have a unique innovation ecosystem here in san francisco. it's a dense urban area lots of talented people, many of them immigrants with advanced degrees in engineering but also in software development. it's the interaction and close conductivity between universities and the business community, the r&d community, and the ability to bring ideas to the market place and turn them into profitable companies. that's the difference. >> for a long area -- a long time, the bay area had a suburban culture. you have the venture capitalists , and the big pension investors over time who learned about

those venture capitalists giving the money to launch and help people go to start new companies. something different as happened in the last 10 years, they have come to san francisco. they have come to san francisco why? >> they want to be in a dense urban environments. >> it's always been young and urban. what is different now? >> you have a mayor in san francisco who has been trying to promote start of growth in the city, and certainly the previous mayor was trying to do that. >> they developed different kinds of economic centers in the city around technology. >> you have biotechnology here in mission bay. it's a very diverse -- once you start adding additional mixes into the technology base you find this cross-fertilization that starts to occur. there is no magic formula, it's hard to predict when it is going to happen and where. you hit a point where there is a

critical mass, it builds on itself. san francisco has done that over the past five years. it is remarkable. >> why is growth happening in 2008, 2010 when it started to pick up in the city, versus 1999, when there was a tremendous boom. a lot of interest, people coming from all over to this area. >> is largely related to the explosion of the creative side of technology as opposed to the hardware side. there is still software, but it's less information to medications technology, the hardware the routers come the switches. it's the content that you put through the pipes. the creativity that occurs when you have a critical mass of talented people. >> why does the milk and institute do this work -- the milken institute do this work? >> we are trying to demonstrate to areas around the country are to be economically successful you need to be making these decisions and investments strategically planning out how

you develop your economy, your economic base, the diversity and understand that unless you are creating some of these technology companies, or tracking them from other places as well, you are simply not going to be one of the top economies. we are trying to aid them in understanding how these changes are affecting them and what they need to do to be part of that economy. >> what is the one thing that other cities are most reluctant to do in luring these kinds of companies? >> we have seen this reluctance to look at small companies and startups as being the future. what i mean is there are still tendencies for economic development -- >> if google wants to move to memphis, we will give them a deal. but if two kids and a dog want to -- >> their parts of the country that don't adhere to that philosophy. if you could bring in google and apple, they would give them incentives.

but if it's two guys in a dog, -- and a dog, and a lady, they are not going to help them. google brings in 500 pulleys that the headline. you don't make headlines with two guys, a lady, and a dog. >> that was ross devol. now it's time for the bwest byte . we only have you outdoors. >> 150, the number of lights university of cambridge researchers need to know you better than one of your family numbers. >> 150 facebook likes -- >> they process that, and they could beat your family members. >> i'm that revealing. >> exactly. to beat your coworkers, it's 10.

they like openness or extroverted nest, they can kind of assess whether you were an extrovert better than your coworker could based on what you like on facebook. >> i would think my coworkers like me better. [laughter] it's fascinating, it shows you how marketing is better. maybe they don't targeted that will. if they have all that information, you would think the ads would be more tailored. >> they are getting better. >> thanks for coming out with the bwest byte. you can always get the latest headlines on your phone, tablet, bloomberg.com, bloomberg radio. there's more "bloomberg west," tomorrow. ♪

>> from bloomberg world headquarters in new york, i'm mark crumpton. this is "bottom line." to our viewers in the united states and those of you joining us from around the world welcome. have full coverage of the stocks and stories making headlines on this tuesday. shall be holiday reports on the push for u.s. companies to share data breach information with the federal government. peter cook at the white house