emily: live from pier three in san francisco, welcome to "bloomberg west." i'm emily chang. here's a check of your bloomberg top headlines. global selloff spilled over to the u.s. today, sending u.s. stocks down the most in three weeks. investors digested a handful of economic reports, looking for clues of the next rate hike. the cost of living rose in march and a separate report shows consumer confidence improving this month. president obama is warning that if the u.s. cannot come up with a trade deal with other pacific nations, china will step into the void. the president spoke today at a white house news conference with the italian prime minister.

president obama: i did not get elected because the sponsorship of the business roundtable or chamber of commerce. the reason i'm doing it is because i know this is an important thing to do and i know it sends a signal throughout asia that we are out there competing and we are going to help maintain international rules that are fair for everybody. emily: obama is seeking to close a deal with 11 other nations that would cover 40 percent of global trade. the u.s. trade representative is going to tokyo this weekend for talks. mike huckabee is testing the waters for a white house run. huckabee says he formed a presidential exploratory committee in early april and he will announce his candidacy in early spring. the baptist pastor turned the minister would join senator ted cruz, rand paul, and marco rubio in competing for the republican nomination.

teva pharmaceuticals is said to be weighing a takeover offer. a tie up would create a global generic doug -- generic drug giant. teva has not made a formal approach, but mylan is aware of the company plus interest. a shakeup at jay-z's music streaming service, title. the company is replacing ceo andy chen with peter const at. peter was overseeing tidal under his previous owner. cuts have come just three weeks after tidal's star-studded launch. it has been an uphill battle for comcast is the telecom giant seeks approval for its $45 billion merger with time warner cable. the deal, first proposed last february, faced regulatory scrutiny from the department of justice and the fcc. sources told bloomberg that

staff attorneys are nearing a recommendation to block the merger. what does the news mean for technology companies that depend on these internet service providers to reach their customers? our bloomberg west editor at law joins us. -- editor at large joins us. susan crawford, thank you for joining us. what does this mean for innovation? susan: in order for anyone to reach a customer, to start a new business in the united states, you need to have internet access. through this merger, comcast would control north of 50% of high internet capacity in the united states. the justice department has concerns about the antitrust elements of the merger. comcast would be in the position to control, constrain, squeeze

do all kinds of things to online businesses with that amount of power. cory: this is really a look at specifically the competitive issues here but not the issues around customer service. we know comcast ranks dead last in customer service. yesterday there was a report on the show that most people would completely give up tv that would never want to give up their netflix. i wonder if that's part of the same thing, or if this isn't something the doj would look at at all. susan: the fcc has defined there is a public benefit to the merger, not just that it doesn't harm people, but that it affirmatively helps them. given the customer service record of comcast and given the problems with making sure that comcast is passing on any of its lower prices internally to customers, the fcc has major concerns about the merger itself. emily: the comcast ceo has been out there, meeting with tech company ceo startups, asking

them questions about what comcast's role in the future should be, not only if this merger doesn't happen, but the fact they pursued that at all, how does this affect comcast? susan: with this merger, it would get added scale, saving a lot of money a year. it already in its footprint has dominant control over all high-capacity connections. having the merger knocked down still leaves comcast in an extraordinarily powerful position. cory: when you look at this deal, there are two arguments i would like you to comment on. while yes, they would have a broader footprint, they would not actually be on top of each other in any market. they would not be suspending service in any markets. effectively the choices consumers have, it would not be the same choice. time warner customers would still be picking time warner and

people in comcast areas would be picking comcast. since there is no overlap, this isn't about offering more to consumers. susan: that's right. the argument is because we already divided the country, the competition would not be further reduced through the merger. they are right. they are in an environment in which no one competes with them other than verizon files on a nationwide level. verizon has been careful to choose selected markets. comcast faces neither competition or real oversight at this point. competition would not be reduced, but it's already pretty bad. emily: what does it mean to companies who are trying to break into this market, like an apple, or even start up, a company started by the former hulu ceo raised a huge amount of money to create a short form video subscription company. susan: this is like chris christie and the george washington bridge.

all those companies need to cross through comcast's arms to get to customers. that means they will have to pay whatever comcast wants in order to connect their networks, in order to get their packages over to customers. that is a real risk for innovation in america. on a large scale, comcast has no incentive to upgrade its services to fiber and provide that at a reasonable cost. the whole country is stuck at a second rate cable service and real risks to innovation and economic growth because of the power of the cable industry. emily: that is quite a metaphor, susan. cory, what do you make of that? cory: it's not like george washington crossing the delaware. net neutrality and the settling of title ii rules that the fcc decided takes away one of the risks here that comcast can somehow keep amazon or prime or

netflix at bay. net neutrality rules seems like they have cleared that up and said, comcast or comcast time warner as one giant company, could not do that. emily: cory johnson, our editor at large. susan crawford, always great to have your very nuanced perspective here on "bloomberg west." coming up next, the runaway train of late stage startup funding. plus, brian grazer on how he stays curious and creative. ♪

emily: this is "bloomberg west." i'm emily chang. the video startup vessel run by the former hulu chief just raised $58 million to fund raise its business for short form video. this brings vessel's funding to

more than $184 million. here is the crazy thing. back in october, he told the "wall street journal" he was raising money not because he needed a, but because the company was in such high demand with investors that it would take 60 years to burn through the $120 million he had at the time. today he told "the new york times" he felt he had a fiduciary responsibility to take the money if it was offered on favorable terms. should companies take as much money as there offered? it is a question richard hendrix pondered the question on the latest episode of "silicon valley." >> i was thinking, what if you had asked for less? >> what? >> what if you had gone to someone and asked for less than what they offer this first round? >> then we wouldn't have faced that down round and we wouldn't

have had to settle for acquisition. all that money -- emily: does this actually happen? i spoke with our partner at red point ventures and cory johnson, our editor at large. >> our fund structure is such that a handful of companies need to pay off, a handful of winners need to pay off for the companies that don't generate revenue. we encourage our companies to be aggressive and grow quickly. the only time you would be in a position where you would give a smaller amount of money to down run is when you are trying to support a company for a relationship. emily: what is your take on vessel announcing $57 million round? this might be the fastest growing startup of all time if

you're looking at the valuation number alone. thomas: it's the fastest company to $10 million in recurring revenue. these companies are growing fast, they are potentially disruptive. that is a phenomenal positive attribute of the environments. the questions about the environment are, there's three times as much capital being invested by venture investors last year than there has been over the last 10 years. the size of these rounds are the size of these ipo's. we found there were 211 ipo sized private financings last year compared to 15 to 20 ipo's. it used to be that you had the same number of ipo's as financing. now you have 15 or 16 times the number of private financing. cory: i think one of the big differences in the ipo market isn't the size of the deals, it's the collapse of the growth action. the city used to be full of alex

brown, all those firms are gone. those are the firms that used to do $100 million ipo's and help companies launch. those banks are gone. the trading spreads are gone that used to support those banks. the research has stricter and better rules. there is no way for companies to go public at that early stage. thomas: the further complication is the private markets are valuing these businesses at twice the multiple that public markets are. emily: you call it the runaway train of late fundraising. should companies not be raising so much? thomas: companies should be raising capital. stewart when he said it's my fiduciary responsibility to take this money at this valuation he's being right. i think he's totally right. emily: how concerned are you that valuations are getting so high they are untenable?

thomas: there are definitely forces in tension. there's a lot of positive forces and lots of negative forces. on the whole, we are going to see an unbelievable exit environment over the next couple of years. we are going to see great and enormous business is being built great we are also going to see a lot of -- cory: when i talked to founders and stuff, it's interesting to me when you have more experienced founders, they will think about subsequent rounds and they will dilute themselves more and do smaller rounds because they are thinking, we thinking, we need up side for our employers. we need our software engineers to believe they are going to get rich by working here. if we do round at $30 billion, how is uber going to hire their next head of software when there might not be a lot of room to grow after $30 billion? thomas: we are seeing competition inflation.

we saw that salaries have increased by 50% in the last eight months. cory: that's huge. thomas: salaries across the board have increased 25% to 50%. one, there is increased competition because of the number of companies raising capital, and two, it creates much more demand for these employees. i'm sure there's a component of it, which is the equity part of these compensation packages aren't nearly as attractive they would be with a lower valuation. emily: what makes you say, that is just too much? is that the trend? everything is so expensive. i talked to many investors on and off the record who are saying, we are not investing in anything because it's too much right now. thomas: bill gurley called this the risk bubble. when i joined the venture business, red point, in 2008 price the amount of money we would pay for a company was

around 10 to 15 million dollars. we would put in 3 or 5 or by 20% to 25% of that business at $12 million to $15 million. now, we consistently save $15 million series a's. there has been a 4x to 6x expansion. cory: you still making those investments. emily: are there startups that you think are overvalued at the late stage private rounds? thomas: it's about how much risk and investor wants to take. there's lots of investors in the market that are taking lots of risk. if you have a bull market, a phenomenal ipo like you have in 2000, i think they will be handsomely rewarded. emily: thomas tunguz, partner at red point ventures. coming up next, we sit down with

brian grazer to talk about how he stays curious and creative. ♪

emily: curiosity may have killed the cat, but it can also make your career. for the past 30 years, the man behind classic films like "apollo 13" and "a beautiful mind" have been hosting weekly curiosity conversations with individuals he admires. brian grazer's chats with steve jobs, 50 cent and hundreds more have inspired his films. he shares his stories in a "the

new york times bestseller. brian: i been sitting here watching your show for the last half hour and you are in san francisco and it involves technology, but i'm in the movie business or the storytelling business and everything is a story. whether it is your previous interview which i watch, or it's a narrative like empire or any show i'm producing, there is a story involved. stories get created out of curiosity. even apple computer has a story that drives it. there is a story that is part of his legacy. i do these one-on-one meetings. i've done them for over 30 years every two weeks with no agenda and no ask. i will every two weeks meet someone who is expert in science, medicine, technology, religion, all art forms, and i do it for my own edification, to expand my world. for 20 years i never told anybody except the person i was trying to meet, but it's just to enlarge my world so i can curate my life or story or stories better.

to create or find more original stories, instead of living in your bubble, you want to get outside that bubble and learn more. the book itself can teach you immediately how to put that to action and expand your life emotionally, intellectually, or your relationships better orbiting around you. cory: people talk about the conversation. we want to continue the conversation. but it's never a conversation. it is iterative throwing something against the wall and walking away from it. what do you think happens in a conversation that does not happen when you're on facebook or texting with someone? brian: the internet is the most fantastic tool in the world. in a conversation, there's a question and answer. between the question and answer, there might be an hour of conversation.

in that conversation, there's possibilities for disappointment. you read more information. you create a connection with somebody based on that information by the nuance, body language. your best dates you ever had did not come between you and your computer. it came between you and somebody else. i won't make any judgment about that, but your best date comes from that interaction that becomes biochemical. it changes your molecular structure, which doesn't really happen between you and your iphone. i think they work so well together, but i think you learn different information when you are having a conversation. beyond that, you're creating it -- creating intimacy and chemistry between someone you are with, whether it is with

someone you are working with in the tech business. not until i asked my son something specific, where something builds between us, do something connect and i get real answers. emily: academy award-winning producer brian grazer. mark zuckerberg is playing defense today. this as companies defect from facebook's internet.org, for fear it could undermine net neutrality. times group withdrew from the process, expressing concern to choose which acts -- apps and services would have access. mark zuckerberg saying in a blog post that internet.org does not undermine neutrality, and some activity is better than none. in february he told that it would be good for local operators. take a listen. >> you offer a little bit of the internet for free, and more people access the internet. more people start paying for

data, once they understand what they would use the internet for, and people understand why they would want to pay for data. these operators end up making more money. they can take that money and reinvest it to build that better infrastructure for everyone in their country. ♪

reporter: by now you know his story, but mark zuckerberg may not be finished changing the world yet. since taking facebook public, his bets have only gotten bigger, spending billions expanding his empire into photos, messaging, even virtual reality. internet.org may be his most audacious bet yet, featuring an epic battle with google, drones,

lasers, and stratospheric hot air balloons to bring the internet to the furthest corners of the earth. winning billions of new users in the process. our guest today is facebook founder and ceo mark zuckerberg. emily: first of all, you are a year and a half into this now. tell me your vision, and tell me what inspired you to do this. mark zuckerberg: would people are connected, we can do great things. we have the opportunity to get access to jobs, education, health, the medication. we bring the people we care about closer to us. it makes a big difference. the internet is how we connect to the modern world. but today worldwide, only a little more than one third of people have any access to the internet at all. it is around 2.7 billion people. that means that 2/3 of people don't have any access to the internet. that seems off to me. there are all the studies that show in developing countries

more than 20% of gdp growth is driven by the internet. if we connected one billion more people to the internet, there would be 100 million more jobs created and more than that would be lifted out of poverty. there is this deep believe at facebook that technology needs to serve everyone. connectivity cannot be a privilege for people in the richest countries. we believe connecting everyone in the world is one of the great challenges of our generation and that is where we are happy to be able to play what ever small role we can. emily: what has been your single greatest achievement and your greatest setback? mark: what we have really learned is there are a few major barriers to connectivity. they are not necessarily what you would have thought up front. the first one is a lot of people don't have any access to a network. even if it had a phone and could pay for data, there would be no equivalent of a cell phone tower near them to access that. that's what a lot of people

think about when they think about not having connectivity. there are projects like satellites and drones we are working on that can help create connectivity in areas where there are not that today. that's important. only 15% of people are not connected because of a technical barrier. the next barrier is affordability. a lot of people who have access can't afford to pay for it. the solution for that is to make it so the network infrastructure that operators are using is more efficient, the apps people use consume less data. there's a lot of work going into that. we made the facebook app on android. i think use is five times less data than it did last year. that directly goes towards being more cheaper for people to use. it turns out that the biggest hurdle actually isn't technical or affordability.

it is the social challenge where the majority of people are not connected are within range of a network and can afford it, but they don't know why they would want to use the internet. if you grew up and you never had a computer and you've never used the internet and somebody asked you, too you want to buy a data plan, your response would be what is a data plan and why do i want to use this? this ends up being the biggest challenge and the one where we can have the most value by giving people free basic services by working with operators and governments, and helping people understand what they can use the internet for to be an on-ramp for everyone. emily: facebook is a for-profit company. why call it dot org? is this a nonprofit? is this charity? mark: if we were primarily focused on profits, the most reasonable thing for us to do would be to focus on the first billion people using our product. the world is not set up equally,

and the first billion people are using facebook have way more money than the rest of the world combined. from a business perspective, it doesn't make a huge amount of sense for us to put the emphasis in this that we are right now. the reason we are doing it is two things. one is mission, we are here to connect the world. you can't do that if 2/3 of the world does not have access to the internet. we just turned 10 as a company. in our next 10 years we want to take on some really big challenges in the world like helping everyone get online. that is an important thing for us and a lot of other internet companies. over the long term, it could be good for our company as well, if you look at it on a 10, 20, 30 year time horizon. a lot of these countries and economies will develop and over time they will be important. most people who are running businesses don't make investments for 30 years down the line. emily: you said when you spoke to david kilpatrick, you could

not construct a short-term model by which this becomes profitable. do you have a better idea now when this will become profitable? mark: no. the reality is that if a lot of people can't afford to pay for data access in these places, there probably aren't big ad markets and it probably isn't going to be particularly profitable in the near term. we will probably lose a bunch of money because supporting facebook is a service of storing photos and content people want to share. we probably won't offset it by making much. emily: you said connectivity is a human right. you want to do good things. if that's the case, why not give access to the complete internet? why just a few specific apps? mark: it comes down to the ethics of how this works. it turns out that most of the internet is consumed by rich media, especially videos. if you look at things like text, text messages, search or wikipedia or basic financial or health information, that can be delivered for relatively cheaply

and can often consume less than 1% of the overall infrastructure. if you are thinking about building something that operators will offer for free, it needs to be cheap for them to do. we figured out a series of services that people can offer and it's profitable for the operators. the model we consider this to be most similar to is 911 in the u.s. even if you have not paid for a phone plan, you can always dial 911. if there's a crime or a health emergency, you get basic help. we think there should be an equivalent of this for the internet as well. even if you have not paid for a data plan, you can always get access to basic health information or education or job tools or basic communication tools. when we launched in zambia, hiv is a really big issue, so the one of the services the government wanted to include is information about hiv.

in different places, there are going to be different tools to include in this kind of 911 for the internet. emily: we have spoken to top ad execs want to advertise to developing markets. they're excited about the potential to advertise to people through internet.org. how does that benefit users? mark: i'm not sure it's a big part of the solution in the near term. we need to work out a model with operators and governments and local partners that is profitable for them so they can continue growing the internet. what we found with some of these early countries we have worked in, indonesia, the philippines zambia is you offer a little bit of the internet for free and more people start using data, more people access the internet and can use these tools, but more people start paying for data what they understand what they would use the internet for, and these operators and up making more money. then they can take that money and reinvest to build better internet infrastructure for

everyone in the country. that ends up being very important. a lot of what we focused on for the last couple of years is just how do you build a model that is sustainable for everyone and delivers free internet to people. originally we thought working with other kinds of partners would be important. at this point, we think we have a sustainable model that is working in various countries right now. a lot of countries are coming online and operators are coming to us to roll out the internet.org model. emily: does that mean no advertising? mark: i don't think it's necessary to make this a cheap model. in a lot of these countries, there is not a big ad market yet. it's not that we won't do it eventually, a right now for a business, the main thing we need to do is continue making -- we are focused on the quality of the ads and business experience, and doing that in the u.s. and europe and asia and a lot of places there is going to be the biggest driver of our own

profitability and revenue, not trying to make ad markets of countries just coming online. emily: once you get people connected, once you have the power to reach them, how do you use that power? mark: are you talking about us specifically? emily: i'm talking about facebook. mark: for us it's about enabling people. we worked in zambia. within weeks we started hearing these amazing stories coming in of people using the internet. an expectant mother using the internet for the first time to look up safety and health information for how to raise her child. a poultry farmer using facebook, setting up a page in order to sell multiple times more chickens that he had been able to before. a university student using the internet, using wikipedia to look up the information and save money on books that she needed for an exam. within weeks, these new experiences start to come back. that is what we are here to do.

the internet is a big enabler and it helps connect people to the modern economy. if we can help do that, that's amazing. emily: what is the likelihood that internet.org could help you get back into china? ♪

emily: what kind of data are you gathering about these users and how do you use that data? mark: i don't think it's any different from how people use facebook normally. the biggest thing we've had to do to make internet.org work is connect with the different operators in these different countries, to make it so that people have an easy way to buy data when they want to do more things. you might be browsing facebook and see a link to news or you see video you want to watch. we make it so if you tap on that, it's very easy to write in line, pay, and it makes it so people can discover why they would want to consume content on the internet.

it makes it so air tell and our partners can make more profit so they can continue investing in building a faster and broader internet for everyone. emily: google is working on project loon and google fiber. what do you think of google's approach to connecting the world? mark: connecting everyone is going to be something that no single company can do by themselves. i'm glad that they and a lot of other companies are working on this. internet.org is a partnership between a number of different technology companies and nonprofits and governments. there are folks who are doing things they are contributing to internet.org, companies doing things that are separate. there is a lot of technology that is going to need to be developed to build -- tackle all three of those major barriers i talked about. technical, making it so everyone has a network near them, affordability so the network is efficient, and social, so people have the content they need to want to get online and consume all this. i'm very positive on it.

emily: have you had any talks on google about potentially partnering with them? would you ever partner with google? mark: our team is in contact with them frequently and i talked to a number of folks over there. when we launched in zambia google was one of the services in the internet.org suite. that is valuable. in addition to health services and education and jobs and different government services and communication tools, people need to be able to search and find information. whether we work with google on that or others, it's an important thing and i would love to work with google. they are a great search project. emily: bill gates criticized project loon, saying, when you die of malaria i'm sure you will look up at that balloon and i'm not sure how it will help you. how do you respond to that? mark: bill and i have had a few conversations about this. i think the reality is that people need a lot of things in order to have good lives.

health is obviously extremely important. we've done a number of things at facebook to help improve global health and work in that area and i'm excited to do more to mac. it's not an either/or. people need to be healthy and have the internet as a backbone to connect them to the global economy. the internet creates jobs. it is one of the things that facilitates health. in the most recent ebola outbreak, asked folks involved in containing the outbreak in what can we do to help, and the number one thing they said was help us get connectivity. we need to be able to wire up these different ebola treatment units to make it so we can coordinate the response and so people know and can count the people who have come into contact with folks who have ebola. it is not an either/or. i'm certainly not here saying connectivity is more important than health. i hope we can help out with all these things over time.

emily: one of the things we've been finding, we have been getting notes from zambia. i believe it was 200,000 new facebook users through internet.org, but 300 people using everything else. how much do people really care about the free basic services as much as they care about facebook? mark: one of the reasons it makes sense for facebook to do this is because it is one of the big services people want to use. one of the main reasons people get online in developing countries is so they can connect with people, and messaging services like whatsapp and facebook messenger and social networking services are some of the most important services that people want to use. it's not that surprising, but people are using these other services as well. emily: messenger is part of the suite in some places. will whatsapp be part of the suite as well? mark: it's different on a country by country basis. in different countries, most of them have the equivalent of 911 that has different things.

first some, it is just about health and crime. some things have more in it than the u.s. does. in each country the governments and local operators are going to need figure out what services they want to include. emily: google has android. how do you overcome not coming -- not having the hardware? mark: our strategy is to build things that people really want to use. facebook is the most used app. whatsapp and messenger and instagram are some of the next most used apps out there. as long as we are building services that people really want to use and that help people's lives, is not as big of a deal. it's a little bit stressful, we feel we can help people out more or deliver our services better if we had more partnerships with the operating systems we were using to build our stuff, but it's not something i'm that stressed about at this point because as long as we stay focused on building our own stuff, i think that's the right

thing for us to stay focused on, not worrying what other people are going to do. emily: you said you hope for more than a billion people by 2020. ♪

emily: so drones and lasers -- you have a lab working on this -- when will facebook drones and lasers be ready for launch? mark: we will be testing some in the near future. i would be mistaken if i give you an exact date on this, but that is one of the big technical barriers. there's a lot people who don't live within range of a network and drones and satellites and laser communication is one way to do it, microwave communication is another, are going to be some of the solutions for providing more cost effective connectivity to people where there are no existing cell phone towers or

infrastructure. emily: facebook will be ramping up spending. how much of that is going to internet.org and these efforts in the nasa jet propulsion lab, where you are working on all this other cool technology? mark: we are investing a bunch in this. emily: we are talking about china. your mandarin has gotten pretty good. what is a likelihood internet.org could help you get facebook back into china? mark: i don't know. that is not something we are focused on right now with internet.org. there are countries where they reach out to us and say, connectivity is a national priority, and a lot of people in our country use facebook, and if there's a way to work together to do that. for example, in malaysia, i was meeting with one of the leaders in the government there, and making sure everyone in a country is connected is one of their top national priorities.

similar in indonesia. india as well. there are lots of priorities around making sure everyone can get connected. it makes sense for us to try to prioritize countries that are reaching out to us proactively for this. emily: how will you judge that this has been a success? 10 years ago your vision was to get one billion people on facebook. people thought that was so audacious. if that's not audacious, what is it? mark: the goal is to make it so that a person can walk into a store and basically in any developing country by a phone and get access to some free basic internet services. that is the primary goal for people around the world. once we have made it so the system is working in every country, that is step one, and step two is making sure people use it, which will be its own multi-year challenge. the internet is one of the best ways to teach people. a secondary goal is to make it

so that this is a profitable thing for the whole international operator community. that is how you make this sustainable. this can't be something that is just charity for these operators around the world. this will work if providing free basic services actually ends up being a way for them to get more paying customers and more people online, then they can spend more money to invest and build faster networks and reach more people. the signs we have from the early countries we are in suggest both of those things are going to be true. that is what i look forward to over the next 10 years. if we can make it so free basic services are available in 100 or more countries and one billion or more people can get connected, that will be a huge win for all these people who will now have access to new information on jobs and health care and education and communication tools they did not have before. emily: you said you hope for more than one billion people by 2020. do you think you can get there?

mark:. we will see. emily: thank you very much mark. ♪

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