matt: on comes to silicon valley. -- god comes to silicon valley. we will look at who they are trying to recruit. -- the the gun -- the pentagon comes to silicon valley. matt: this is "bloomberg west" east coast. defense secretary ash carter speaks with emily chang about building a better relationship with the tech immunity and building robot soldiers. is there a cyber security bubble? and the pentagon unveiled a plan for high-tech flexible electronics. all that ahead on "bloomberg west."

first, to the lead. ash carter said he has a lot to learn from silicon valley. secretary carter is in the valley trying to build a strong relationship with the tech community. emily chang sat down with carter for an exclusive interview. emily joins us now. tell us all about today's event. emily: right now, secretary carter is in a two-hour meeting. we will be speaking with mark andreessen. the thing he is trying to accomplish is to rebuild the relationship between the pentagon and silicon valley to recruit engineers who want to work for the government. and change the perception is have,ilicon valley people to protect users from the u.s. government given that this is a post-snowden revelation era.

he is a scouting new technologies. we talked about drones. keep in mind this is a secretary that has 16 months left in this administration. why should the leaders commit to him and now? what can he accomplish in a time? what would be tangible proof that his efforts would be working? take a listen. >> we will be making investments, private public partnerships and direct investments as we have for , decades going back to the air jet engines and satellite medications right up through the internet. we need to be a technology leader to protect our country and we can be a technology leader only if we partner with folks out here. emily: you understand this stuff . what are the key technologies and assets you can get that you're not getting from current defense contractors? carter: a lot of brand-new stuff we do get.

but i find the defense department over the years has gotten a little too bureaucratic. a little too slow for the pace of people out here. both on the people level, some are not acquainted with us and what we do, and some of our community have never understood the technology community. unique technology area we have , so much to learn from the cutting edge. we do not build anything in the pentagon. we count upon private industry and private initiative to create the technologies that, next to the wonderful people in uniform make our military the finest fighting force we have seen. next to them, technology is what made us great. emily: google has been buying some robotic companies. they have a human weight robot, hhm robot -- a cheeta robot.

when will we see self driving cars in the field on a mass scale? sec. carter: i think we will see them soon. we already have drones, helicopters, undersea vehicles, true autonomy is another step. i was on a briefing from a set of advisors, and i studied all summer the question of autonomy and autonomous vehicles. you will see them driving underwater in doing all sorts of things like patrolling cyber networks to defend them. all those things will be done at -- done autonomously or in a very creative man-machine combinations. we need to be part of that revolution. much of it occurs right here and that is another reason for my visit. emily: do you see a future of robot armies? sec. carter: i certainly see robots in the field. it will be a long time before

humans are entirely removed from conflict. also we are always going to want human decision-making and responsibility when it comes to the use of force. emily: what about drones? they have been used in the military for a long time, but now you have amazon facebook, , google making their own drones. do think you can learn anything? sec. carter: sure, we know a lot, but we can learn a lot also. we do a lot of logistics. that may seem one thing to you, but -- that may seem mundane to you, but if you are fighting in afghanistan or iraq or syria, where getting forces and equipment in and out is vital, we learned something from them and areas like warehousing and inventory management. that again may seem monday and, but were -- that may seem mundane, but remember we are spending the taxpayer's money. we are trying to do it more efficiently. emily: give us a sense of the

severity on the attack on the unclassified e-mail system of the joint chiefs of staff, and how has that prompted you to ask silicon valley for help? sec. carter: it is a sign that we are not nearly where we need to be, at least in the defense department. we have known for decades that information technology will be critical to our military edge. we have a lot to learn. clearly. the joint chiefs of staff network, it was not exploited in a dangerous way, and it resulted from a very simple operator failure, someone opened an e-mail they shouldn't have. something that mundane could affect that important a network shows you we are not where we need to be. that shows you that we need to be on the cutting edge of cyber defense.

as is the place where cyber defense is defined. we need to do that in partnership with silicon valley. emily: mark zuckerberg called u.s. surveillance a threat to the internet. what do you want from a mark zuckerberg, what do you want from tim cook? sec. carter: i am with them a 100%. we are trying to find a solution that will allow people to make use of this technology in a way that is good for humankind and at the same time we do need to protect ourselves against terrorists, child pornographers, criminal networks, drug runners. on and on. there has to be a certain amount of public order as well as private freedom.

i don't think we can strike that balance in washington, we can only do so by talking to the greatest leaders and minds in this field. emily: you're working on the 2017 budget, the last budget you will have a big impact on. what needs more money? what needs less money? should there be a site -- should there be a cyber security arm of the military? sec. carter: it needs more money. even in an era where there is a lot of budget turmoil. we need to invest more in cyber. emily: how much more? sec. carter: the tricky thing is cyber investments is not so much the money, it's the people. it is finding good people that is challenging for us as we try to do cyber defense. hiring those people, training them, deciding what mix of

uniform, government, and industry people we should have on our cyber force that is more , challenging than the dollars. emily: on the issue of recruiting, secretary carter is going on to linkedin after his meeting at enough a research center to focus on recruiting, how they can better recruit engineers and get people to want to work for the government. by the way, the director of the nsa was also out here in silicon valley. the fbi has been out here. you have the highest levels of the government coming out to rebuild this relationship. matt: were they at the hacker conference as well? that seems like a great place to recruit. emily: interestingly after the , snowden revelations, federal agents were banned from the hacker conference. recently they have allowed more federal agents back in, but it will be a long time before this trust is restored between the security community and the government. matt: fantastic exclusive get,

awesome job out of the west coast, emily chang. time for a status update on the ashley madison three. the ceo -- ashley madison story. the ceo stepping down after a month after he million accounts were stolen by hackers. e-mails shows the company may have created take e-mail -- fake female profiles and very few real women were actually using the site. let that be a lesson to you. up next, one of the hottest cyber security startups in silicon valley. the co-founder dishes on the blooming evaluation on his industry. and facebook cracks down on video pirates. we will check on how after the break. stay with us on "bloomberg wes " ." ♪

matt: this is "bloomberg west" and i am matt miller. we just heard emily chang's interview with secretary carter on silicon valley. she is still standing by. meeting with the ceo and cofounder of a company called titanium. he tells me he has met with secretary carter four times in

the last year. that goes to show how much effort the secretary is putting into rebuilding these bridges. a very hot cyber security company right now reported to , have a $3 billion valuation. it does a lot of work with the government. i asked him what that is like. >> the government is the most interesting customer we can have. they are the biggest, by far in a scale standpoint. many have interesting problems. what you see in the government from a separation standpoint in all of the complexity is about as interesting as it gets. emily: another part of secretary carter's agenda is to rebuild in a post snowden era. there's a lot of discussion about the government. how difficult will be a -- how difficult will that be to do? we hire many people based on the idea that we can help dod and intelligence. it turns out in many cases many

of our engineers really want to help the men in the field be more active and more effective. there is some trust that needs to be built around the nsa. the flipside is there is a lot of goodwill that already exist and we need to capitalize on , that. emily: you worked on the technology before you started selling. tell me about that. >> there is a myth you can build this minimum viable product and started selling to people and it will only take six months. in our business, you really have to get it right the first time. we spent five years with engineers building it and working with customers in lamps -- in labs and production to make sure it was working. that is what has allowed us to go from zero dollars in sales in 2012 to over $200 million this year. the technology works and that

takes a long time. emily: what is so special about it? this is a crowded market. >> if you look at our customers customers they do not know how , many computers they have. much less what they are doing or their data. i have talked to ceos who said they have 2000 or 4000 computers. if you don't know how many computers you have, you have no prayer of securing them. you can start analyzing against all the things you want to make secure. operations are being done correct way, the right processes are running. we have customers who have gone from 80% compliance to 99.7% compliance in just weeks. that is what this company does. emily: it seems like a crowded market. very niche, and valuations are getting high. >> when i am seeing our companies that are raising money

on an idea and never execute on it, and ironically raise more money to execute on it and do it later. there is so much interest in this area that any good idea is being funded to the point where it can keep on zombie-ing for ever. that is called a nonprofit. they should reincorporate as nonprofit. real will be a consolidation in our space around technologies that really work. there's going to be a change in funding. the venture community will recognize there is a pattern here they do not want to continuously promote and that will be good for our customers. many are struggling to figure out what is real and what is not. emily: how do you imagine this consolidation playing out? >> in many cases they do not have much technology behind them. emily: would you say we're in a cyber security technology

bubble? >> there are a number of companies that don't deserve to exist. they will shake out. we may not be in a bubble. there will be some companies that will break out and become 20 or $30 billion companies. but the flipside is, a lot of the companies funded today don't have anything worth funding. emily: can you tell us more about your own fundraising plans? there are reports you are raising money again, up to $3 billion valuations. those reports are inaccurate. but in the coming days or weeks or months you will get the real story. emily: you're not raising money or the valuation is not correct? >> one of those. emily: how about this -- there have been warnings from others that are concerned that startups are prioritizing growth over profitability. how are you prioritizing growth? >> we have been growing year-over-year and we have been profitable every quarter.

i will say being profitable as a startup is hard but it is worth it. it forces discipline. many of these things are throwing things against the wall and seeing if they stick. we have never allowed ourselves to do that at our company. the company is better for it. of tanium cofounder not mincing words. there will be a lot of dead unicorns out there. in this case, cyber security unicorns. it will be adjusting to watch matt. matt: very interesting indeed. thank you emily for that. facebook beefing up its tools to spot pirated videos. so-called free-booting has become an issue. facebook has a content matching system that will spot copied content quickly with audible magic.

finding videos that shouldn't have been uploaded. some similarities to companies like youtube and twitch, but it could take time before it is all in place. hp, and boeing team up with the pentagon on a new innovation hub. we'll talk to the director on "bloomberg west." end as we had to break -- and as we had to break, we leave you with footage of boeing's new drone killing laser. it will be used in place of traditional missile defense systems. ♪

matt: time now for the daily byte. today the number is 67 million. that is how much money a swedish raised withrtup has

participation from intel capital. the card reader works with a chip and pin and also doesn't mobile from apple pay -- also does mobile payments from apple pay and google wallet. it gives them a $5 million valuation and the plane to use the money to keep expanding into europe. turning now to flexible hybrid electronics. hub is made up of 162 companies like hp and qualcomm. it will receive $171 million funding putting $75 million from the department of defense itself. emily chang is with dr. malcolm thompson. emily: dr. thompson, thanks for joining us. you are going to be running this new center. you are the former cto of xerox. using a number of technologies developed over the years, probably seen the relationship change between silicon valley

and the government. give me some realistic examples of where we will see what you are working on in military applications. >> imagine putting a thin-film film of electronics all over an aircraft wing. you stick it to the outside of the aircraft wing and it measures stresses in the wing. you look at the plane and the wing flaps. it better be flexible. emily: when will we see that? >> very soon you will see some thing like that, in the next year or two. there are some examples we saw in the announcement when the air force brought some wings with some of that stuff on it already. emily: they also talked about incorporating sensors into military uniforms, for example. a company like apple, as part of this partnership -- what does a company like apple contribute to this? >> every company contributes differently.

what it helps to understand is what their customers are wanting. they don necessarily tell us everything -- they don't necessarily tell us everything about the next product. but what they will do is say hey, this is just an example. emily: give me an apple example. >> i want some thing that is stretchable. i want stretchable electronics. ever try putting a bandage over your elbow? it better be stretchable. that is an example of something. you want to find out how you are feeling and want to see if something is infected and want to continuously monitor it. we're working on stretchable electronics, especially when it is connected to the human body. emily: what are your deliverables, in 30 seconds? >> are deliverable is to create

a roadmap of technology and find out where all the gaps are that are preventing things being manufactured. we go out and put out a proposal and we get all these companies working on those gaps. now,ually 2-3 years from there will be a much more complete ecosystem and people will be manufacturing these things in much higher volume. emily: dr. malcolm thompson, head of the new tech alliance in silicon valley. thank you so much for joining us. as soon as he gets out of his meeting with the defense secretary, we will have that for you guys on monday. we will continue to follow the secretary on linkedin as he continues to rebuild this bridge between the pentagon and silicon valley. matt: what an incredibly military addition of "bloomberg west." don't miss emily's full convertion with mark andreessen.

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lizzie: i am lizzie o'leary. john: and with all due respect to carly victorino, whose car killed a deer. we thought it was demon sheep who had you all freaked out. ♪ -- carly fiorina. lizzie o'leary is guest hosting sports fans. lindsey graham lectures and trump economics, 101. but first, team clinton gets cost -- gets