emily: president obama hosts a private dinner for chinese president xi jinping tonight. first course on the menu -- cyber security. ♪ emily: i'm emily chang and this is "bloomberg west." watson is moving west -- ibm is betting big on the artificial intelligence that won jeopardy. plus watch out apple -- a circular smart watch just announced that is thin and sleek. and you won't want to miss my interview from tech crunch disrupt.

all of that ahead. first to the lead -- in washington tonight, the chinese president sits down for a private dinner with president obama. there will be more than food on the menu. the two men will attend a formal state dinner tomorrow, but observers say tonight's get together will allow president obama to have a much more frank discussion about the issues confronting both nations. one of the talking points will be cyber security. president obama is expected to bring up cyber attacks. how do you expect the dinner to proceed tonight? are these dinners constructive? guest: that is what the white house said. the president gets to talk with out many people in the room and

discuss the issues that face both countries. cyber security is an issue both countries are facing and president obama says he will be frank in his discussions over the concerns he has that china is backing and supporting the hacking of u.s. companies. emily: what is going to happen when it comes to cyber? are we going to see a deal and how effective would it be? guest: that is a tough one. the chinese president doesn't even agree to the fact that mark halperin china is supporting hacks on u.s. companies. so that is the first step -- getting the chinese to admit they are evening doing it. we may see something that starts along the lines of an arms deal. we may see a framework for what both countries say they are not going to do, but in terms of a full arms agreement on the cyber, it is going to be difficult and the administration

says it will be a while before we see something along those lines. emily: what really happens at these state enters? -- state dinners? is it going to end up with them smoking cigars the back room or is this much more formal than that? guest: they have had a couple of these dinners in the past. in 2013, the two residents sat down in last year in china, they did. they do have a rapport and they do know one another, so this is an opportunity to have an informal discussion. but with the number of tough disagreements between them, you don't see things becoming too informal. president obama says he has a number of issues he wants to bring up and will have frank discussions. they will have an informal discussion, but everyone knows they will be talking about serious issues. emily: we will be watching to see what comes out of this dinner. thank you very much for that report. turning to venture capital --

sequoia capital is one of the most sought after investors in silicon valley and one of the most exclusive. i got a chance to speak to roelof botha, a member of the paypal mafia and early investor in youtube. i started asking him about all the new money from foreign investors to hedge funds chasing tech deals. guest: there have always been tourists. there are always people who come and go depending on the macro environment and interest rates. we don't pay too much attention to be honest. emily: let's talk about the macro environment. in 2008, sequoia said good times. that's when uber and airbnb were conceived. do you stand by that? roelof: i don't think anybody could have seen how aggressively governments reacted to monetary policy.

if you think about the poly, because you were unlucky and running out of money at the wrong time. many of the greatest companies have been born in tough times. entrepreneurs are serious and are not doing it because it is fashionable. emily: if you said rip good times in 2008, what is it today? roelof: if you look at companies right now, it's certainly not a marker when it comes to technology stocks. people point to anecdotal examples of private companies they think are overvalued. i'm sure some of them will be proved overvalued, but i'm not

sure you could point to something systemic that cuts across all the companies. i see how they get written up and people don't know the details. i remember being at paypal and reading the articles and one title was "earth to palo alto." nobody knew what we were building and today it is a $30 public company. billion it is always good to raise money when you don't need it. it's probably a good time to think about raising money. you might have a lower valuation than you might have achieved later and any macro economic

shifts. but i don't think there is a rush because of a fear of an imminent meltdown. emily: when companies are you most excited about and what will you stay away from mark what is overvalued and what is undervalued? roelof: hard to tell. we love the theme of the rise of the developers. we are investing in a company that helps with containerization and data centers. there is a lot of reinvention taking place in enterprise software. software defines networking. we are excited about a company in the 3-d printing space. these are some of the scenes we are excited about. i'm going to meet some of the tomorrow who is coming up with an idea in an area i have never thought about.

that is part of the fun, always keeping an open mind. emily: you were one of the earliest investors in instagram and they just announced they 4.5 million monthly users. -- what do instagram you see as instagram's trajectory going forward. how much of this is due to facebook and how much of this would have happened anyway? roelof: facebook has been a wonderful acquirer and has given the team the resources they need to scale. it has given them room to be able to continue to flourish, but they were already on a tear by the time they were acquired. i think they have a very bright future in front of them. emily: with square, are you convinced you have your ceo jack dorsey for the long-term? roelof: no comment. emily: if he said i want to do both? what would you say? i think he is the founder of both companies. i don't think it is for

me to judge and tell him he can't do it. emily: there's so much debate about what makes a good investor. and reason for what it's says founders and ceos make the best investors. what do you think? roelof: i'm not sure there is a need for that. it's not the individual, it is the key. having individuals with different types of backgrounds people who have been general , managers or maybe have engineering or leadership roles. it is that complement at a team level that helps make fabulous investing decisions. emily: coming up, ibm opens a brand-new headquarters for its think like a human software. the father of watson tells us how it could soon turn a profit.

plus, new gear out of the oculus 's conference in hollywood. the ceo tells me about his latest product. ♪

emily: ibm is opening a new west coast hub for watson right here in san francisco, part of an expanded effort to get developers using the artificial intelligence system in their own apps. john kelly leads the watson team

and stopped by to explain his plan for san francisco. john: watson is no longer one machine. it has a platform in the cloud and we wanted to come where the developers were so we had an ecosystem on top of our platform. developers will be working on the watson platform and the startups out here will be all over watson as they now have local access to it. emily: you talk about watson incorporated into apps in terms of vision and discovery. what can it do now that it couldn't before? john: it can now speak. it could read before. it has ingested wikipedia and all the world's medical records. but watson now has the ability to look at images and understand damages. in health care, we are in the process of acquiring one of the top holders of medical images.

watson will learn from those images and help doctors such as radiologists give a better diagnosis more quickly and precisely. so giving watson site. next, we will give him other senses in the world of the internet of things. emily: you are trying to grow the number of developers using watson. how fast is that number growing? john: we have hundreds of partners and thousands of developers on a platform. we have several dozen apis that developers can get on and that will grow to hundreds in the next year or so. emily: what are you doing to attract more developers to the platform? john: first of all, we make it free. as they get to market, we share the value that has been created, but the on ramp is very easy. emily: are these new expansion isn't part of a new investment in the watson group or is it part of the $1

billion you committed to last year? john: this is part of the $1 billion we have been saving for this area. emily: how much have you spent so far? john: we spent a substantial amount of money since the beginning of this program and the system is progressing fabulously. the business is growing exponentially. watson is part of the $17 billion analytics business and is the fastest-growing portion of that business. emily: this is a big bet for you on watson's future and the future of ibm. when do you see it as a big driver for the business? john: it is already incremental. it is growing it is in our very rapidly. fastest-growing segment. emily: what does incremental mean to you? john: these are above our core existing businesses.

all new. this is a whole new era of computing. we still have many programmable systems, but this is a whole new era. all incremental. emily: do you see it getting to $1 billion in sales and if so, when? john: yes, and as soon as possible. emily: there are still questions about the financials behind watson. when do you see watson becoming profitable? john: watson is a heavy, heavy investment for us right now. if you look at the performance of watson, it is surpassing anything we have seen before not only in our business but any other as a service business. the growth is exponential and with these new businesses, we think it will be a huge engine for ibm going forward. emily: so are you saying in the near term or is this five or 10 years out? john: near-term.

emily: how does watson compare to everything else you have worked on at this company? john: i've never seen anything like watson in my career. a system that can sit by us and reason with us and help us make better decisions. watson will not be parked in a glass house computer room or confined to a mobile device. it's going to be everywhere in our lives going forward. emily: ibm senior vice president, john kelly. you can catch the full interview on bloomberg.com. now and update from oculus -- the company unveiled a new $99 headset powered by oculus technology. it works with samsung phones and you can buy it in time for the holidays. but it is not the highly anticipated rift headset oculus is making itself. i spoke to brendan iribe today and asked why he's pushing ahead with both products.

brendan: we think it's going to be very big. you will have mobile vr at a lower price point, accessible for a different audience and it's going to be super compelling and we will play them both. emily: while we don't have an exact sales date, he confirmed it is on track to be ready to be shipped in the first quarter of 2016. you can catch my full interview with the ceo of oculus at bloomberg.com. coming up, pebble unveils a new smart watch. it's lighter, thinner and round. eric migicovsky is with me in the studio, next. ♪

emily: it is time now for the daily byte -- one number that tells a whole life. today's numbers 25 million. that's how much money at&t has spent preparing for pope francis' visit. that's big considering they spend $16 million on the super bowl. that's to cover all of the hope -related selfies and tweet. most will be used to boost coverage so those can be uploaded without a disruption in coverage. verizon has spent about $24 million. now to pebble, introducing its

first round face smart watch. it is lighter, thinner and only cost $249 versus $349 for the cheapest apple watch. while pebble has already sold 95,000 watches, it has fallen to third place in sales. can pebble catch up? joining me now is the ceo of pebble, eric migicovsky. you are wearing the new watch. we have mallory come our floor director wearing the watch. give me the specs. eric: it is the thinnest smart watch in the world and just 38 millimeters in diameter. it feels like a real, classic watch and that's something our designers and engineers worked hard to make sure it had that feel.

emily: can you explain the rose gold? what is it about rose gold? eric: we were looking at the trends and we started thinking about what would make a smart watch look like a classic watch on your wrist? we make rectangular watches -- that has been our go to for the last three years and we've seen a lot of people make rectangular watches, but one of the best ways to camouflage the tech and get it on your wrist is to make it look like a classic watch. emily: who are you targeting? eric: we are targeting people who were not interested pebble before. there are a ton of people who have put pebble on the wrist and there are over a million pebble users around. but for this, we are explicitly saying who else could be interested in pebble? emily: arguably, you are trying to get more women to buy pebble. >> this is the smallest and

lightest smart watch on the market. it just so happens that some women have smaller risk than men and this is important for us because it is the design, the look, but also the feel. emily: you are first to market with a smart watch. i came down and saw you when you were in a garage and apple watch didn't exist. now you are in third place and have to catch up. how do you see yourself reclaiming market share? eric: apple, when they move into a market -- i don't think anybody could have sat in the chair and said that apple would not have been able to sell millions of watches. but i think that's not really the point. we've have -- we've been working on this for seven years and we are looking at the next seven years of smart watches. apple has made it extremely clear what they are doing. they are building a watch that looks like the rolex of smart watches with prices starting at $400 or $350. that is not what we have been building. we have been building products

that are fun, colorful, affordable, entry level cross-platform products. , i think we are positioned to be like the swatch of smart watches. emily: the swatch of smart watches. ok. let's talk about battery life. two day battery life. the big question around the smart watches is how often am i going to have to charge them. i'm not wearing my apple watch because i forgot to charge it. often times i go for it and i just can't wear that day. how do you improve and the battery life? eric: we have announced a range of products. we have products that go up to 10 days and i think that is the , big message with this watch. we know millions of people are using pebble but we really wanted to build our option. for us getting double on to more and more wrists meant looking at the size and shape and how it fits on other people's wrists. we have products that start at

$99 that do tracking. that ranges up to $250. emily: in the beginning, you could not keep up with demand. how are you doing on supply versus demand? eric: we sold almost 100,000 watches. it took a while to catch up it was a fair amount of demand. i'm not personally manufacturing the watches anymore. we have a talented team. we are now in best buy, target and it is spreading. >> great to have you back here on the show. i like it. it looks good. that does it for this addition of "bloomberg west." up next we , have a special report on janet yellen speaking at umass amherst. that's next. ♪

>> from our studios in new york city, this is "charlie c rose." >> the pope arrived. he met president obama. the pope appealed for action. trip istalk about the allen. the cbs news rome correspondent traveling with the pope on his plane. anthony is the director of