♪ >> from pier 3 in san francisco, welcome to the best of "bloomberg west," where we focus on innovation, technology and the future of business. i'm cory johnson. every weekend we bring you the "best of west," the top interviews with the power players in global technology and media companies that are reshaping our world. to the lead story, president obama addresses issues critical

to the technology and business community in his annual state of the union address this year. net neutrality was one focus but the president said a lot about cyber security. the u.s. could be at greater risk for an attack if his cyber security bill is not passed he said. >> we are making sure our government integrates intelligence to combat cyber threats just as we have done to combat terrorism. tonight, i urge this congress to finally pass the legislation we need to better meet the evolving threat of cyberattacks, combat identity theft, and protect our children's information. that should be a bipartisan effort. >> but will companies support the legislation which mandates the sharing of information between businesses and the n.s.a.? talk about a guy who has worked both in law enforcement and in big business, chad fulgham chief strategy officer of tanium and a former c.i.o. of the f.b.i. he also worked at i.b.m. and lockheed martin. i asked him if the sony hack could change the way they look at cyber security. >> i think it has changed. the threat landscape, if you look back 10 years to 20 years

ago, people tried to hack for notoriety and publicity. today, it is about money. if you have information that is valuable to someone, they will come after you. right now, organizations need to do everything they can to safeguard information and be able to react when they do experience a breach. >> what in the president's legislation is best about what could be found? >> it is a noble first step. i think the administration -- >> that means you think it stinks. >> well, last night we heard the president talk about cyber security just a little bit. but to get into the state of the union, that is a big deal. when has that happened before? the president has to talk about all kinds of different things going on in the world and cyber finally got the first notice that this is important and we need to come after this as a team. both the government and commercial.

>> from a legislative standpoint, we have so many companies in silicon valley whose businesses have been harmed, they say, by the n.s.a.'s policy of vacuuming up information and it has hurt their ability to sell internationally. those companies don't want to have to share with the n.s.a. and f.b.i. and the president suggests they have to do that and it would help them protect themselves. what do you hear your customers starting to say about cyber security protection plans? >> i sat with the director for three and a half years and i remember when i would go out and visit companies or conferences and people would bring up the n.s.a. or some type of information gathering would come up and i would say you've got to realize, think about being an f.b.i. agent. you have to balance trying to stop bad things from happening and put bad people away. but it's the only organization that is there to safeguard your civil liberties. think about you being in that job and saying i want to try to stop that thing but we need

access to information. if we are going to try to live in a safer world, we are going to have to empower some organizations to go after people who want to do harm to americans and allies and our businesses. >> there is an old "new yorker" story that says there's more new york city police officers than f.b.i. agents. i was starting to think about what their capabilities are to fight cyber terrorism. does the f.b.i. have enough resources? >> the new york city police have more police officers in the city than all employees at the f.b.i. we are a very small group, but very dedicated. these men and women go out every day trying to protect our citizens, trying to do their best. i will tell you, i got run into programs -- i can't talk to you about the programs there but i

got run into programs where i would sit there and look at the person briefly and go who thought that up? some of the things you see in movies and tv, we have those tools. >> tanium chief strategy officer chad fulgham. talking about net neutrality, in the state of the union, the president also spoke about net neutrality. this comes as house and senate subcommittees hold hearings on the issue. the f.c.c. is set to unveil its own net neutrality rules in weeks. i talked to michael beckerman, president and c.e.o. of the internet lobbying group formed by google, facebook, yahoo! and other tech giants. here is what he had to say. >> the interesting thing from our conversation, maybe it was only two or three months ago. we were talking about are rules needed at all? today the conversation is how do you put those rules in place? now you have republicans and democrats agreeing that rules are needed. the question is what is the mechanism and the tools needed? >> who has changed their mind in

where elected officials have gone on both sides of the fence. it wasn't too long ago they were saying no change was needed. >> the republicans have taken real steps forward but the f.c.c., chairman wheeler is five weeks away from voting on rules. i think we will have a chance to see what rules come out of the f.c.c. in five weeks. it is certainly heartening for all of us to hear republicans and democrats say enforceable rules are needed to protect an open internet. >> spoken like a washington veteran. so what is it that made the republicans who were against this change their mind and decide there for some sort of regulation on the internet? >> the one piece you were talking about in the previous segment is -- should the f.c.c. reclassify broadband providers as a telecommunications service versus an information service? >> title ii -- let me paraphrase it -- it essentially says companies have a responsibility to the public and have to offer

services in a fair and open way even though that might raise costs. >> exactly. that is essentially right. that has been the sticking point for republicans and democrats. we saw in the hearing this morning, but i think paul mizer from amazon nailed it from the consumer standpoint -- and from our standpoint. we are results oriented, we want to make sure at the end of the day that the internet is open and for 99.9% of internet users, they don't care about how it happens. it is congress or the f.c.c. what section of the statute it comes from. they want to make sure they are protected. there is no blocking and no discrimination. the internet is open. applies to wireless as well as a wire line. >> that does raise the cost for companies like time warner and comcast and beyond. a lot of money has been lobbied on that side of it. comcast spends more than any other company. the internet association they've spent a lot of money lobbying as well with google spending $13 million and facebook spending $7.4 million

and right on down the line. amazon, yahoo!, ebay, all spending money on lobbying. are they getting what they are after? are they getting the attention of those lawmakers? are we seeing the results in those hearings today? >> i think today the conversation has shifted. there is broad recognition that internet users need to be protected. i would rather have the conversation on how to we protect users rather than have the conversation be should we protect users? >> michael beckerman, c.e.o. of the internet association. up next, we're going to pivot back to securities talking about with one of cisco's top executives and co-founder of the security firm lookout. that is next on "bloomberg west." ♪

>> this is the best of "bloomberg west." i'm cory johnson. cisco has just released its 2015 annual security report. here is a key takeaway. 75% of think their security tools or varied or effective and they use only standard protocols to prevent breaches. i talked about this paradox with cisco's john stewart. >> it is a combination of elements. the first is with an industry that is only about 25 years old, we're looking at an experience that hasn't been built up through all the companies. there is a perception and reality gap where top leaders will see the strategies and operations will be concerned they have not gotten over the goal line.

>> is this bravado, or do they just want to say this because they do not dare tell anyone they think their systems are weak? >> even i have got a little bit of that confidence factor where you do not want to start off by saying, hey, we got it all wrong, let's go from there. i think it is just a matter of where the gap has got to be closed. this is one of the things in the security report we published. there is widening gaps between a whole series of things. partly the understandings at the top and the understanding at the operations level. >> so, the bosses do not get it less than they did not get it last year? >> partly it is more bosses get it at all. it is starting to turn into a place where the board room is having conversations about cyber which is relatively new. >> i think the sony hack has -- there is a lot of reasons. one is the embarrassment factor, the notion that the corporation became the target of a powerful nationstate. north korea is a joke in many governments. there was a new york times story

yesterday. they invested a lot of money in going after attacks like this. that must have scared the beejezus out of the board that pays attention to these things. >> i think it is a combination of factors. i will say it this way. there has been a series of elements that the corporate directors have talked to boards about the f.c.c. and has weighed in and said there is a particular risk factor for these businesses and it is increasing. the volume of the attacks, the number of companies, the number of situations receiving press, and the fact we are having a national dialogue about it completely tells you that boards are getting more and more aware. >> your report is fascinating. it talks about threat intelligence. what is the nature of the kinds of threats we are seeing now? is it fair to say that most of them look like this? >> yeah, most of them look like this. then there are the small ones that have heavy impact in high-impact situations. what most look like -- and we all experienced this in our

day-to-day life -- you get spam e-mail. the technique being used to deliver it changed last year and the quantity went up by 250%. that changed the entire modality of getting the use the user. >> what changed? >> technically -- >> feel free to geek out on us. this is "bloomberg west." we can handle it. >> i understand completely. it used to be the instrumentation protecting companies, was when you got volume. tons of it was bailed. if one got in, great. that kind of email coming from those places -- >> so, if we see 300 e-mails that advertise viagra, we know that is spam, so we reject them all. >> and then e-mails that come from sites where it is obviously generating it, you block it. what happened last year is i decided i am going to send the order for e-mails from 1000 different rights, very small very low. very difficult to detect because they are not hitting that volume

attack or hitting those bad known addresses or bad sites. now it gets to the user. when it gets to the user, then it is game on. if you actually double-click like we all do and you double click on the wrong thing, then i might be able to involve you in an attack on the organization you work with. >> that was other john stewart. i recently talked to lookout's co-founder and talked about the most dangerous threats to our mobile phones. >> i think the largest threat to most individuals is downloading bad apps to their phones. they can take your phone hostage and make you pay to get it back. >> getting hacked or attempts coming their way.

>> we estimate 60 million android users around the world. 7% of our users in the u.s. got some sort of malware on their phone. one of the biggest trends now increasing, we have this trend we call ransomware. it may be an app you download to your phone. it is most commonly seen in pornographic apps. people are doing something a little bit dodgy on their phone. as soon as you install it, it will take over your phone, lock you out, and charge you several hundred dollars to get access back to your phone. >> this is only happening on the android phones, not the iphone? >> yeah. since androids are so much more popular in the world, they can infect the most vectors. we see ios risk now being what android was in 2010. the bad guys are just starting to target.

>> and in china more people are breaking their phones and trying to get around the protection anyway. >> yes. many people will download apps from a little stall. plug it into a laptop. they are bypassing a lot of the app store protections. >> there is a big business on the other side of that. what is that business? who are these hackers and how big is that industry? >> it is very big and very broad. it is like trying to classify all crime in the world. crime can take many different flavors. what we see for most individuals is the risk of bad guys stealing their data. trying to get them to pay money on their phone bill or for ransom. for businesses -- >> i don't care about people. i care about businesses. because that is what the show was for, to help people understand how technology is changing business. >> absolutely. what we have seen is historically and i see you have a separation between enterprise technology and i.t. technology.

with mobile, people are bringing their personal phones to work more than ever. what we see, when we talk to chief security and information officers, their biggest concern is people bringing malware that they may have downloaded an app on their personal phone, then bringing it into the internal corporate network. you have all of this investment in firewalls and corporate infrastructure and one bad phone -- >> we have seen a really dramatic thing in the last few weeks really. the north korean attack, the presumed north korean attack on sony. it was really targeted at that business. it was not something an individual got involved in. are we seeing a changing threat across the board and who is doing that and what they are after? >> for businesses, two major actors are cyber criminals and state-sponsored actors, but sometimes they blend together and it is hard to tell. there really has been a large growth. >> give an example. >> in the case of google. google widely reported they believe they were hacked by

china, as far as a state-sponsored attack. whereas in other cases, you have anonymous banks being targeted often by eastern european criminal gangs. for a business, this is a big problem. anytime there is a large amount of resource being put on targeting them, it raises the bar. while android, for example, we see a lot more threats to the average user, where the bad guys are targeting a metric ton, ios versus android, if they are targets attacks, they are equally at risk. >> amazon's latest venture feature films. can they compete with major studios or are they just spending more money, good after bad? that story is next on the best of "bloomberg west." ♪

>> i'm cory johnson. this is the best of "bloomberg west." amazon aims at hollywood after winning two tv awards at the golden globes. they announced they are going to produce 12 feature films a year. the movies will first be released in theaters and then on amazon prime. can amazon really make it big on the big screen? i spoke about that with a former studio executive and n.y.u. film professor. >> this is a continuation of a trend that is new in the past few years. there is a new frontal assault on the traditional theatrical movie business where theaters would have the right to show movies without any competition from other distribution sources. with growth from netflix amazon, streaming in general that is called into question now.

right now the theater owners are not going to give, it seems but eventually i think it is going to change. this is part of an evolutionary process that is going to change the way movies are distributed. right now, as you know, the audience or the viewers have changed their viewing habits. people are, thank god, still going to movie theaters, but they are also watching movies on their laptops and tv sets. >> theology aside, why do you say thank god? >> i happen to be a traditionalist in terms of i really enjoy seeing movies in a movie theater. i think there is something about that experience that is thrilling, exciting and fulfilling. on the other hand, i've got to competing thoughts here. the growth of places like amazon, netflix, hulu plus, it means there are far more outlets

available to the creative community to create content and more opportunity to create content and more ways to get that content to the audience. then i think one of the significant things of the amazon decision, they made it very clear they were going to make a certain kind of movie. in other words, they are talking about movies in the $5 million to $25 million budget range. primarily, you're talking about independent movies like "grand budapest hotel" or "bird man." we're not talking about "transformers." so the creative community response to that. >> don't rip on the "transformers." wasn't that made by an n.y.u. graduate? [laughter] >> i'm just making a comparison. >> this opens up amazon to awards. does that change the marketing aspect if the movies are actually any good? >> amazon already saw that it got a huge benefit from one of its tv shows, "transplants"

getting the golden globe award. they got a huge buzz and huge publicity off of that win. it was the first time a show like that had won a golden globe. when you're doing lower budget indie kind of movies, part of your strategy is to do imaginative or original material that will appeal to certain niche audiences and get awards that will encourage people to go see it. on the flip side, i thought last week what was interesting, you could see the power of the oscar nominations when you have the success of "american sniper." it broke all kinds of box office records when it got the six nominations. that can be helpful. >> i remember when i was an undergraduate at n.y.u., film students running around talking about a graduate student named spike lee. he had made "barbershop."

i wonder what your students think of movies that are going right online and think of things going to youtube -- if they are still thinking about feature films or if they are thinking about doing things on youtube? >> i think young filmmakers today have to adopt a multipronged strategy. obviously i would say they would still like to have theatrical releases for their movies, but they also recognize the value of youtube and online to get noticed. when you are a young filmmaker today, you can get the attention of hollywood without actually going to hollywood or getting an agent or studio behind you. if you can create something that stands out and is original and simultaneously build a social media following, you can get discovered in some ways easier today than when i came up in the business in the 1990's. >> chairman of n.y.u.'s tisch school of the arts program.

still ahead, the world's largest online platform for cool pictures just got bigger. we'll talk to the c.e.o. of shutterstock. the global boom in the selfie. next on the best of "bloomberg west." ♪

>> you're watching the best of "bloomberg west." we focus on innovation technology and the future of business. let's take a look at the big picture by turning to shutterstock. the online marketplace for millions of royalty-free stock photos ranging from celebrities, the royal baby to sports. shutterstock has been on a shopping spree of its own lately with the latest acquisition of the british image library called rex features. that cost them $33 million.

they also bought a music library called premium beats for $32 million. joining us is shutterstock founder and ceo jon oringer. how do you see your market? >> people that use shutterstock our businesses. we sell images to companies of all sizes to sell their products and services to advertise their products and services. we have been expanding into video over the years. we have been expanding into audio for commercial rereleased stock music. and we purchased an editorial agency called rex. and expand further into music with premium beats. >> are these sort of and-one offerings, or have they folded into a single offering for a with premium beat? single kind of customer? >> today there are individual offerings, but we plan to merge them into one. you can access them from the shutterstock website. they are sold under very simple licensing terms. royalty-free so you can use them however you like to sell your product or service. we plan to make it easier for companies to access these

assets. >> rights are always an issue particularly when you talk about things like music and we look at those images of athletes. those things are hard to come by. what do you do to police those rights or manage that issue? >> it is different if ever every asset type. they each have their own difficulties. for our core project, it is a crowd-sourced product so we have 70,000 contributors that upload images every day. we get about 60,000 images every day added to our library. on the video side, anyone can contribute stock video and we sell it to all agencies and even hollywood studios. with music, it is a little more complicated. you kind of have to know the creator, the producer. all the people along that worked on that music. the reason why we purchased premium beat was to accelerate the entry into that market because the video commercial licensing space has grown so quickly and people who need video also need audio.

>> jon, i came across a statistic that i tried to fact check. i couldn't so it was probably made up. that more images have been taken in the last two years than the previous hundred years of photography. do you see that in some way? do you know what those numbers are like? are selfies filling the world with more images? >> i believe it. we are all photographers today. everybody is running around with a camera that can shoot very high quality images in their pocket. you can upload them instantly and get feedback on those images instantly and get kind of tips and tricks from people online as a way you can kind of accelerate your way to a professional a lot quicker than you were able to this the days of film. carrying around an s.l.r. around with you. >> i grew up in rochester, new york. kodak was everywhere.

the george eastman museum was every kid's school trip. it is sort of amazing what happening in the world of photography. >> it is interesting. it the entire spaces being democratized. it was kind of difficult to become a professional photographer 20 years ago. it was very expensive. lenses cost thousands of dollars and you had to develop film that took weeks before you learned kind of what you are doing wrong. you had to keep shooting and developing. interpreting. that process has now been accelerated into the split-second. you can instantly know what you need to get better at. today we have 60,000 photographers around the world creating amazing images for us. we have hundreds every day. >> that was jon oringer, founder and c.e.o. of shutterstock. in with the new, out with the old. could new enterprise technology companies bring an end to the

reign of cisco, microsoft and i.b.m.? that story is next on "bloomberg west." ♪

>> this is the best of "bloomberg west." i'm cory johnson. with advancements in open source software, mobile, cloud computing, the enterprise business is going through massive change. the new kids on the block are leading the way. case in point, i.b.m.'s fall in sales, failing to adapt to the cloud despite billions of dollars in effort. i spoke with mike volpi, general partner at vc firm index, an investor in enterprise companies and a former chief strategy officer at cisco. >> i think we're at a point in time where enterprise tech has been around for a long while. it has built some great names out there. i.b.m., microsoft, cisco.

>> you're going to start with cisco? >> i always give my old employer great credit. i think we're at a point in time now where there are a set of new transformative trends, technologies, technology disruptions that are happening and we're setting the seeds for the next generation of companies. 20 years from now when we're on the show talking again, we'll be talking about a different set of names. probably the root s of that happening is happening just now. >> it is interesting that some of the companies are having success, you know, amazon maybe is an outlier, are new companies. why is it some of the companies -- we're talking about the things you know best. why are the new companies succeeding when the old companies can see those trends? >> it is fundamental in some of the older companies need to hold on to their existing business models. if you're trying to build a service that is cloud-based, a server company is going to suffer. some of these new technologies

have been adopted by younger companies and company who are willing to take the risk of a technology that might not be perfectly secure or totally mature but they are willing to go out and build components for that. sometimes those things are destructive or they are painful for incumbents who have a certain profitability and business model they have built up over the past 20 years. >> some of those categories, starting with enterprise security that you guys have focused on a lot. >> security is obviously we're going through the sony hack at the end of last year. it is probably one of the biggest scenes here that we're seeing. security has always been a problem or an issue for enterprises, but historically, these threats have been burglaries or thefts of a few credit cards. the sony hack could have torn the company apart. cyber threats are elevating

themselves to the level where they are company destructive. >> is the same dynamic in place where big incumbent companies can't respond to the changes? it was always we will respond to the newest, latest threats of what we do. >> well, yeah. most of those companies, especially the bigger companies, they will throw a suite of solutions at the problem but they are not looking really at the latest threats and the latest hacks that are happening. new kinds of attack services exist. whether it is mobile or cloud, another attack surface. all of these new attack surfaces, they don't see them as much as some of the younger companies like lookout, for example, who are completely focused on the mobile side. >> infrastructure, something you know well from your days at cisco. i have a hard time figuring out which infrastructure companies

matter and which ones don't. >> again, you have to look at the underlying themes that are transformative. disk-based media to flash. it was a consumer trend. it is now becoming an enterprise trend. >> the solid-state drive that made the macbook air so skinny is happening at the back end. >> these are big storage systems. few companies have taken a big risk -- they say we're going strictly with flash. >> a few years ago, people would have pooh-poohed that idea. today they are doing great. there you see fundamental transformative themes that are happening in the infrastructure business. >> one of the reasons it is happening quickly the s the data architecture is changing. you can write to multiple drives. if one fails you have another one that is instantly available. >> you a lot of other benefits too. some of the flash technologies which allow it to be cheaper cooler, etc., etc.

in the data architecture side, what you actually see happening is first of all we have a big problem that we have a lot more data to deal with. orders of magnitude more data. storing, you have to make it a lot cheaper. managing it is a lot harder. you need a whole new suite of technology. they can't keep up with it anymore. that's opening the road to technologies like hadoop. it provides the ability to discover the right amount of data and right point amid this vast universe of data. >> that was mike volpi from index ventures. coming up, ford. how the auto company is teaming up with technology companies to bring us the state of the art cars. we're talking with ford ceo mark fields next on the best of "bloomberg west." ♪

this is the best of "bloomberg west." tech companies have been giving an unusual focus to cars self-driving cars, connected cars, wi-fi-enabled cars. car companies are also paying attention to technology. case in point, ford opened an innovation company in silicon valley. matt miller was at the center of the action in palo alto with an exclusive interview with ford c.e.o. mark fields. >> this is right for our business. we really want to be viewed as part of the ecosystem here. it just as the work that we do we want to be viewed as part of the neighborhood. this is an area where it is a marketplace of ideas, and ideas come up in coffee shops. they come up in meet-ups, etc. for us to be here, we think it's

important for us to drive innovation and drive a lot of progress that we have laid out. we want to lead in these areas. >> automakers and the media focus on the car and when i look around here and got a little tour a moment ago, it is clear that you are focused on a lot more than just that. >> that's why we call it ford smart mobility. the holistic view includes mobility, autonomous vehicles, the connected car. customer experience and how technology will enable that going forward. by taking a holistic view, we can take the view of what is the whole experience. not only is it just an auto company, which is very important, but it is also a mobility company.

we want to drive the business forward. we want to make the world a better place, and in that is their business opportunity for us beyond our traditional business. >> you're doing experiments all around the world, i think in 20 different cities as far as different kind of mobility solutions, you are putting sensors on bicycles. pedal bicycles. and i asked my tour guide, is ford going to make a bicycle? he said electric bikes are very big in asia. is there a time where ford will make products that go beyond mustangs and explorers? >> potentially. we're not going to be getting into the train business or large bus business, but we are thinking about mobility in a more holistic way. it may open opportunities to provide solutions to how they get around from point a to point b. we're seeing trends as a business. it is very important for us to

look at trends and project 15 years out. we're seeing trends around these growing megacities or these cities of 10 million or more people, we are seeing the trends around the growth of the middle class around the world and increased concerns about air quality. for us, we want to ask ourselves