>> from our studios in new york city, this is charlie rose. charlie: joining me is matthew dowd from abc news. from washington, kerley -- carol lee from wall street studio. and out on from washington -- from bloomberg. i am pleased to have all of you on this program. other any consequences coming out of what happened last night with donald trump? al: the conventional wisdom is the donald trump did well, was shrewd, smart. well i think we have a three-way race.

and writing i think that was the the three-way of an i think that was the case 24 hours ago, and it will be the case in a little bit less than 72 hours. you dan: the debates have an impact for 12 hours, then people get back to normal and begin to in get back to normal and begin to make choices. will and turnout operations i you and crank up. you up. you you you you you will for theou you be in most part, it is still a you and i most part, it is still a trump-crews race. on -- trump-cruz race. charlie: it is said that you andcharlie: it is said that undecided voters wait until the last minute, obviously. and you 20% of caucus voters

and and and you 20% of caucus voters wait until the very end? al: i think this is an iowa election where turnout will matter. you if there is a huge republican turnout, 189,000, and would favor trump. that means he is bringing out are people who have not voted before. you before. a conventional turnout like a little -- might put a little edge for ted cruz. in charlie: tell me about marco and charlie: tell me about marco rubio and how he is coming on. >> the biggest winner of the debate was marco rubio. ted cruz really suffered in the in debate. marco rubio has an outside 19 chance at finishing second in iowa, behind donald trump it if and iowa, behind donald trump it if nine he does that, the race is over for ted cruz. marco rubio will finish with a and youmarco rubio will finish with a and and strong second. then, the two-person race and and andthen, the two-person race becomes between trump and rubio. you and rubio. charlie: if trump wins and i you and i what, he may be unstoppable.

he is forehead in new hampshire. i-91 up me you -- far ahead in new hampshire. are reading the carol: new hampshire is a very different race for the there's a little flexibility for some of those i-99 and who are not -- different race. there is a little flex for those who are not doing well in iowa. they are different delegates. you to win iowa and then new hampshire, he could still are not going very well in iowa in and breakdown in the later states. in states. charlie: the battle with fox news, was that intentional? and did he want to confront fox you did he want to confront fox news and show he is donald trump and and no one is bigger than him? you anybody? and dan: i think he is probably in the most politically astute and media savvy person that has run for president in years. charlie: astute? matt: and media savvy. he understands politics more than anybody running a campaign.

he understands media coverage and how it has changed dramatically. name is what donald trump has done is a limited -- is in you eliminate the republican and party as a vehicle and fox you news as a decider. if he secures the nomination, which, right now, he is favored will to do, the republican party turn in as it exists is no what longer in control the he will and in process.-- of the process. charlie: i used to hear people and in the say donald trump for and in my president is a terrible idea. terrible idea. and you and it's never going to happen. now they say, yes, it could happen, and yes, i might find basically happen, and yes, i might find myself, because of the alternatives, voting for you trump. and trump. dan: part of it has to do if dan: part of it has to do if eliminating in they think he is going to be the nominee, they must become comfortable with

him. determining him. at this point, he is favored to win the nomination. and win the nomination. if things change, and they do when the voters are heard from, you when the voters are heard from, there will be twists that we did not expect. and you we did not expect. and if he does not seem as you are you strong or formidable as he has for the last six months, you will get a reevaluation on the you you you part of a lot of you you are you those people are and you and saying "i think i you and saying "i think i can be comfortable with him." some will say they don't want to you and you mess the nominee. will mess the nominee. there are twists in this race depending on what happens the next few weeks. al: i think my pal is to quickly al: i think my pal is to quickly and you and you dismissing cruz. and you dismissing cruz. [laughter]

and al: i talked to a number of republicans who are anti-trump. anyone you know republicans who are anti-trump. you are one the rationale, when you talk to them, is that he does not believe in anything. maybe he doesn't believe in the in stuff he is saying, so it mining lightning mike brown won't be so bad. --matt: if you take a look at and and the process and how it unfolds, if donald trump wins, then goes in and wins new line 99 yards number hampshire, of green you let us keep in mind, no incumbent, no and you and mind, no incumbent, no non-incumbent president has you will you ever one iowa and new hampshire. neither bush didn't did mitt romney did it. and romney did it. as soon as february is over, it you is no longer a national primary. whoever has momentum in march is andwhoever has momentum in march is going to sweep the states. matt: i think what matters is you and you and youmatt: i think what matters is that these

processes are all moved by and processes are all moved by momentum. whoever has momentum on march 1 you will is going to win a you you you you you you you you majority of the and i you states, no matter and you states, no matter where they are. and carol: talking to you know what of carol: talking to you and republicans in you republicans in washington, they don't want ted cruz. a poll shows that voters feel that they are more increasingly comfortable and see themselves putting for donald trump. there are going to be a lot of twists and turns, and it remains to be seen how they will actually vote. charlie: if he wins in iowa, is

it his election to lose, and he will have to inflict the mortal wound on himself? al: two appointed as matthew andal: two appointed as matthew says that to a point -- to a point. you as matthew says, whoever and as matthew says, whoever wins, it can set up a different dynamic. we can sketch out where ever the race may go. until we know what the order until we know what the order you are feeling and you looks like, are how strong anybody really looks compared to the others, we in and in looks compared to the others, we are guessing about what the republican electorate, and what the republican electorate, down the line, is going to do. al: everything we have learned about american politics has been turned upside down. why shouldn't we think the next six months shouldn't be as surprising? in this is a crazy quilt year. matt: donald trump is wondering if you will get a mortal wound that will take them down. the matter what, nothing makes him go away. and what could taken down is not

in and donald trump. andnd you and you and you will and yound i you and youu and and you will you and you will and you and you and and you are a you a you a you want you

charlie: he says he could shoot somebody in fifth avenue. matt: 80% of his voters say he is solid. the person who could catch fire and take him out is marco rubio, not ted cruz. he is disliked by his colleagues and everybody in the establishment. the voters want to like you. if they come to the conclusion they don't like you, i think that is the path that takes donald trump. charlie: do you guys disagree with that?

al: if likability is so important, how come national that's how come nixon-- so important, how come nixon was such a national success? [laughter] dan: in iowa, we saw with john edwards in 2004, he came roaring up, almost beating john kerry. that was the rubio strategy, to hang back, to be there at the moment when people would say, "this guy might be the guy." he has run some very iowa-specific advertising, aimed at christians conservatives -- christian-conservatives. we will see to the extent to which it is extent -- we will see the extent to which it is successful. carol: in the media, we do not totally understand and have not predicted things correctly going into this cycle. it will be fascinating, what happens in iowa, what happens in new hampshire, and will probably -- we will probably learn that we did not what was going on.

charlie: what could the surprise be? carol: some evangelicals are breaking for trump because of the economy. the theory is that the economy is trumping what would be traditional religious value voters. if that is the trend moving forward, that could be an interesting dynamic. charlie: let me go to the democrats and hillary clinton

and bernie sanders. could there be another year of surprises on the democratic side? al: i think that sanders and clinton are locked in an almost dead-even race. i think, like the republican contest, it will depend on turnout. if there is anything approaching what barack obama achieved in 2008, 200 40,000 -- 240,000 turnout, i would put money on burning. -- on bernie. charlie: do you think the turnout for him might just be that? dan: in making a number of calls in iowa, we are in a situation. a race in iowa comes down to organization versus momentum. a week ago, clearly, you would've said bernie sanders has the momentum. you can see the size of the crowd is not diminishing. what he got in minnesota this

week was astounding. 20,000 people. there is a sense here that over the last three or four days, some of the momentum may have dissipated. take it for what it is worth. people believe that in the organizational battle, hillary clinton has a somewhat better organization. a slight edge. if sanders can create the momentum and find a way to get the new people, he has a chance to win. in both campaigns, there is a sense that right now, she has a slight edge. al: on each side, this could go into different directions. it could be a short process, with iowa setting it up to be short. if hillary clinton wins iowa, it is hard for bernie sanders to get oxygen. if he wins iowa, the process will go for a longer amount of time. the national polls will close. he will have won 2 states in a row. the fascinating thing is that we have not even mentioned it jeb bush.

-- mentioned jeb bush. bernie sanders will win more primaries and caucuses then jeb bush-- than jeb bush. this race has gone nowhere close to where anybody thought it was six months ago.

charlie: what surprise are you looking for, turnout? what? carol: turnout. it matters, as everybody was just saying. it matters in terms of hillary clinton vs. bernie sanders. is bernie sanders really organized? clinton had a lot of the obama folks working for her. whether or not bernie sanders and translate his enthusiasm into something actually on the ground, it is a big question. charlie: thank you so much. stay with me. having the expenses you have had in politics, the trunk sector-- trump factor. is this that he is a different kind of campaigner?

politically astute? is this a moment where the country and the personality came together? matt: all of those things, coupled with the fact that the establishment part of the party is completely disrupted, fractured. there are no longer really elders in charge of the process. we are at the point in the republican party where there is no longer control. this is a person who understands social media and how the press covers things. he understands it well and he does not rely on people. he relishes it. he has been more available to

the press than any other candidate. more than anybody. charlie: he says "i love polls." matt: he engages with conversation with the people in the audience. in these large gatherings, he is saying, "let's just talk about what is going on." he works off of notes on a piece of paper. lack of discipline could usually lead to errors, not talking about concerns of actual voters. but he has struck a chord, captivating thought in this country for a few years that he has dropped into. donald trump, for many people, represents a movement within the gop that you can go back to the country you have always loved. he acts like we can go back and be the country we once were. charlie: some people have said this may be the year trump gets the nomination, or even cruz. hillary clinton, having gone through a tough campaign year with real questions raised and some things hanging over her head having to do with the e-mails, this may be the time for a third-party candidate. mike bloomberg could afford it, could attract a lot of smart people to work with him.

matt: this is a perfect year and could be an accelerator for independent candidates. this will accelerate the process. the problem for the country is that if donald trump wins the domination -- nomination or hillary clinton, there will be two candidates that are disliked by the majority of the country and distrusted. we will tell the american public to pick these 2 who you don't like and don't trust. that creates the avenue for a third-party. i don't know if bloomberg fits that. i think there will be a lot of people considering that process. charlie: who's on the list? matt: the founder of starbucks. he has talked about community and these things bit the problem is the elect -- things. the problem is the electoral college. there is not a lot you can add up to make 270. you can complicate things and help somebody else win or send a

vote to the house of representatives. more so than 1992, this is the year for independent candidate. charlie: you think they could win? matt: it could certainly change the process. charlie: in the house, controlled by the republicans, the vice president selected by the senate, to those republicans have to vote for republicans-- do those republicans have to vote for republicans? matt: you must choose between the top three by law. i don't know which way they would go. they will actually think about

what would be the best president. this is a serious constitutional crisis, if at that point it goes to the u.s. house. charlie: what is the crisis? matt: nobody reaches a majority of the vote and the popular vote, the popular -- charlie: a constitutional crisis? matt: the question is do we have a structure that fits the

dynamic of the country, and people might wonder if we do. charlie: what happens then? matt: i hope they choose a popular choice and create a popular leader. charlie: is the mood of the country exasperation? matt: frustration, exasperation, anger. disenchantment with the way current politics runs. this model is going to have to change. the current clinical model will have to change. -- political model will have to change. charlie: we will be right back. stay with us. ♪ ♪

charlie: scott malcolm's and is a media fellow of the carnegie corporation. his latest book traces the growth of the internet and its response to intelligence needs. earlier this month, the intelligence agencies met with social media leaders. encryption is a concern for law enforcement. i am pleased to have scott malcolm's and at the table-- malcomson at the table. how did the internet begin and how was it tied into intelligence and military issues? scott: this is a story traced to the end of the second world war and the 1960's during the cold war. computing came out of the wartime experience of world war i. thomas edison had an interview with the new york times where he said "killing men in war is a

scientific proposition." that was a realization that donned on the great powers. he was thinking in particular of chemical war, a characteristic of the first world war, when the germans began chemical war. they were flat-footed and recognized their science quickly. immobilized the scientific -- they mobilized to the scientific community quickly coming out of the experience. in terms of computing, the first big innovation of world war i was in radio. there were engineers in britain who invented a one switch electrical switch capable of memory. all computers since then use a switch without which computers could not remember. the big american contribution also began in world war i, in terms of naval warfare. battleships were the major mega weapon of world war i. the power of guns increased steadily until ships could fire without seeing each other.

americans worked with the british to create a virtual reality of war so that they could imagine, successfully, where the enemy ship was going. that requires an enormous amount of information about each ship, computed rapidly. the phrase "computers" is used for people who do math. the people who made the tables of those information -- of that information were called "computers." there were 150 people employed as computers and the second world war. -- in the second world war. the machines were built by american engineers who could take those variables to introduce a higher accuracy of fire control. the machine, crunching its numbers at the center, started in world war i. the metaphor of using the computer to create a virtual environment to prevail militarily is a metaphor that continued when it was no longer battleships but airplanes and rockets and missiles and bombers and so on through the cold war.

that was the major string of development that goes on through decades. charlie: many people have seen "the imitation game" about alan turing. he needed a machine to break the code. is that an essential part of the history?

scott: not as essential as the movie portrays it. the work that was done in cryptography is definitely an important part of the history of digital computing. the history of the internet came later. the essence of it, which is a very american thing, the command and control system with the number crunching computer that is able to create the world so that you can hypothesize and make more accurate guesses, in the 1960's, what you had was a more familiar story, the desire of the military-industrial complex of the united states to develop systems which can anticipate the incoming bombers, the potential of nuclear weapons, and shoot them down before they get close enough to bring the payload to the united states. that is the ultimate form of the command and control method that started in 1916. that output in the 60's later

came through in darpa. charlie: did that developed the utopian vision of the internet? scott: that came out of the geek world of m.i.t. charlie: you hear that wherever it developed, i saw a recent documentary about steve jobs, and you hear a lot of it, steve, talking about the potential, the power, the "can you believe?" he had a mission to talk about the power of the computer. scott: he was a fantastic salesman. [laughter] scott: he loves narratives. there is a great bit in the book about his involvement in "blue boxes."

this is a crazy story. there were blind kids with a heightened sense of hearing who could hear tones in the phone lines, codes by the telephone company for sending signals. they could discover things and communicate and make free calls over phone lines. there was a piece in 1971 by ron rosenbaum about this. steve wozniak's mother sent him a copy of this, and steve jobs was fascinated. they built a machine to send the signals over the line and communicate. jobs was talking in the 1980's about -- by the way, these are illegal, these machines. in this interview, steve jobs was talking about what a fantastic, powerful feeling it was to communicate over these phone lines, to be able to talk

to people, communicate information. you were like, ok, that is steve jobs, a period of extreme awesomeness. "the power that you felt, that you could affect things all over the world, manipulate them control them." i think that is what meg lavinia is-- megalomania is. one of the dixiecrats of silicon valley in the 1970's and 1980's was the combined is so much creativity and a complete ignorance of its own will to power. the debt power was real power, going back to the real world. it wasn't just in the fantasy world of los altos. i don't know if any people appreciated it. if they had, it would not of been as successful as it was.

charlie: where came the merger between what goes on in the military and venture capital? scott: and the second world war, there was a man named george dorio, thought to be-- doriot, thought to be the father of venture capital. he was brought in by the president to be in charge of research and develop it for the military. he spent a fantastic amount of money, a lot of money on different projects, some work, some didn't. after the war, he started a non-venture capital company. his example migrated out to the west coast. the big example was that you

take money, you should it at a lot of different projects,-- shoot it at a lot of different projects, and the hope is that it kicks off. the people who built the industry in california had military experience. general anderson had directed a bombing campaign against germany. tommy davis had been sn odd-- an oss guy in burma. charlie: computer companies like hewlett-packard got a big start. scott: absolutely. the main thing is that in an environment of total war, you suddenly have an investor, so to speak, who is willing to spend a lot of money on a lot of projects without respect to hampering creativity.

it is not a big bother if fantastic sums are wasted. that is what wwii r&d was like. charlie: that history, where the united states held the key to cyberspace and holds the key, with the rise of china and other places, is there increased competition in cyberspace? scott: i would start in the 1980's and 1990's. the internet had been built, but no one cared. the research community, the army had gone tired of it. it was a scientific project among universities where they could talk to each other. a geek paradise. it remains that until it could be set free, politically, by the end of the cold war.

when that happened, it was possible to develop in a way that did not threaten the united states. charlie: you're talking about 1989 and 1990? scott: exactly. that's american perio-- that american period of hegemony made it possible for something as threatening as the internet to develop. no other state could develop it the way the west could-- the u.s. could. as the internet became politically and militarily and economically so important and threatening, the largest states reasserted their authority. charlie: they wanted to take away authority from the u.s.? what impetus of the snowden revelations activists-- what does the impetus of the snowden

revelations add to this? i'm asking these questions. america had a great degree of authority. scott: the question was in silicon valley itself. for a decade, there had been relative agreements between military intelligence agencies and the united states -- in the united states and the silicon valley companies. they could be negotiated privately. what snowden did was tell the whole silicon valley subculture that they were serving something that they had not been aware of.

charlie: a part of something they did not know? scott: yes, something political, contrary to their cyber dreams. charlie: some of them are libertarians, too. scott: absolutely. snowden had a huge effect, not the effect he intended. charlie: the whole recognition of what had happened. scott: the internet is being

divided. europeans feel justified in taking an active role in trying to shape the internet for their own identities and the world. ♪

charlie: whether it is russia or china, a big aspect is

sovereignty. the culture of china for example, there is a feeling that there is, in the political dialogue, it is none of your business. they don't want you coming in here and doing things could "-- things. "we want control." scott: there was a time where the cancellation in russia and china, the internet-- the calculation in russia and china, the internet was so out of their control. now, they have involved with all these different governments. charlie: they will try to restrain people in terms of what they can do and their power. scott: what you have now in china is that technology companies can rival american technology companies, in terms

of innovative ability. charlie: some say chinese governments hope those companies. -- help those companies. scott: no one is entirely innocent. [laughter] charlie: if the head of nsa makes the case that what china does that we don't do is that we are not acting in the interests of private companies, whereas the chinese government will encourage and be in favor of corporate espionage, espionage for the benefit of chinese corporations. the chinese deny that. there is concern among the american companies and american government. scott: admiral rodgers is better informed. [laughter] scott: the chinese government for corporate espionage? he certainly -- i don't know.

charlie: you know there is a concern. the chinese are doing things to benefit companies in china. i'm asking. scott: the bigger concern is, now, chinese companies are doing things to benefit the government of china. alibaba is not a tiny company. these are two efforts, here in china, to essentially use these companies to put in the information that chinese citizens use when they apply for bank loans into a system that produces a rating. this is so that people who could not get loans are able to get them. it puts the information into a system which the government controls.

the chinese government could not do that on its own. there's so much information from the citizens that they can be used by the government to be better. charlie: the theme of the splinter-net is that companies want control of the internet. scott: yes. there are ways to oppose that trend, to create brakes on it. the obama administration has been trying to come up with these, where you can at least limit the damage, retain some kind of broad public's fear online. -- public sphere online. this utopian moment work -- where cyberspace trumps the physical space and weary states fall along the way side, i don't think it is going to happen.

charlie: you say the trend is in the other direction. to what end? the internet will be splintered? scott: it will be splintered. the cat is out of the bag. charlie: people will try to get control of the internet. scott: exactly. these global geek subcultures will not raise the white flag. the global subculture is dedicated to open code and will not stop. they are preserving a public space for all of us. hackers are criticized, and of

course, a lot of hackers do terrible things. but, there is an underrecognized subculture that keeps this thing alive. i put a fair amount of faith in capitalism, that alibaba doesn't want to be a chinese company. they're building cloud computing centers around the world, not just because they want to sell chinese citizens. google, facebook, all these companies want to be global. one of the reasons it's reacted so strongly to these efforts in the post-snowden period is because of the enormous threat to their income. in some ways, this establishes a space of freedom. charlie: do you think apple is right? scott: apple is absolutely right.

mike rogers came out in favor of this the other day. he said arguments about no end to end encryption are not worth having. charlie: the debate about encryption is not worth having? i missed that. [laughter] scott: he was speaking to the lannett council of couple of days ago. these arguments over and to end encryption-- end to end encryption are not worth having. charlie: he attacked the apple encryption efforts, saying it is not up to silicon valley to decide. that it should not be a decision of silicon valley. you're nodding. how can i read your mind? scott: there are a lot of decisions that i suppose might be better left to a democratically elected

government. that isn't the way it works, not with the internet and companies on this scale. censorship. charlie: most of those people out there, my impression is that, and secretary clinton spoke to this end of the day -- spoke to this, that there is an effort to find common ground. it is not all or nothing. scott: that's right. these arguments have been going on since the 1990's. the clip or chip argument and the backdoor argument of the mid-90's and now respectively are not that different. this is an argument between companies and governments about who decides certain things.

charlie: so you are for the companies? scott: they have done a better job and are more motivated. they have a bigger interest. charlie: what does the cloud at -- add to all of this? scott: it doesn't make a big difference except for cyber security. you can look at information that is hard for an attacker to find. it is extremely important. charlie: you are a friend and advisor to the article and, and said, "technology does not work on its own, it is simply a tool, we harness its power." that seems to be an argument that the people should decide, not the company.

scott: i hate to be put in a position of disagreeing with that. charlie: that's what we do here. scott: look, look at the encryption debate. you have a number of different political factions, all for making different arguments, who are really demagogic about this question. they say that if they do not have encryption, everyone in your family will be unsafe. that is irresponsible. a corporation has a motivation to make sure that encryption does not happen. they have a commercial motive. they have a political motive to censor, to do all kinds of things, which can be powerful. if you have a plebiscite on every single piece of technology, it is not going to happen. charlie: you come at the end of

the day, you are saying rather than trusting the democratic process to do this, you trust a few corporate executives to do this. scott: i trust the worldwide geek culture that has demonstrated its commitment to open communication across borders for decades. charlie: the encryption policies come from those running the companies. this is not a culture. these are people. scott: this is what i am saying. these are lots and lots of people who have a track record of defending certain things, secure, open communication. they will continue to do that. the government motivation

generally goes toward, i mean, it is kind of obvious could china's government -- obvious. china's government is restricting as much indication as possible -- communication as possible. charlie: the interesting point that you make is that it is often authoritarian government that makes that point that they want to be in control. india is not an authoritarian government. scott: india's policies are a work in progress. as a whole, they have not shown a tendency toward censorship and toward surveillance that either russia or china has shown. charlie: scott malcolmson. thank you for being here. we will be right back. stay with us. ♪ charlie: tell us as much as you can. you are going to be at politico until the end of the campaign

season, the end of the election? mike: thank you for asking. i was at time magazine, and the idea of a website that covered politics seemed nutty and certainly risky. these guys saw the future in a way that i didn't. now, politico, which was three people in a sunroom in a van nuys house is now 450 people. all around the world in trenton, albany, tallahassee, and at the end of the election, i move onto another venture. the ceo and i and head of the business side and the guy who cracked the code on the subscription side of the

business, after the election, the three of us are heading to a new venture. we will be there for the election. we thought 2008 was the election of a lifetime. based on the conversation today, i think this is the election of a lifetime. charlie: people want to know, is there division within politico? is this because mike and jim want to do something on their own, of course the some different vision at politico? mike: there are stories online that there were differences between our publisher rob, from a great family who made political possible. robert is a big believer in the future of political. he made the expansion is in the states possible this year. he built what you saw, 350 people in d.c.

he is hungry for growth and wants more. jim wanted to start something of his own. it is a great opportunity, but first, i want to make politico as best as i can this year. we need to be at the top of our game, every day. i want to bring you and your viewers the best possible politico for this political year. charlie: thank you. we hope to see you this year and further. thank you for joining us, see you next time. ♪

kong.n here in hong ted cruz wins the iowa caucus ahead of donald trump and marco rubio. a tight contest for both parties, as the first-time voters have a say, with almost all the democrat votes counted, we are pretty much neck and neck. yes trillion central bank maintains a record low. -- the australian central bank maintains a record low. borrowing costs are down by 2% since 2011, all industries outside of mining. google's