♪ emily: xiaomi may be a new kid on the block, but the chinese startup is no longer so little. at five years old, xiaomi rivals apple and samsung in the chinese smartphone market and is valued , at $45 billion. but worldwide, it is still not a household name. former google executive hugo barra intends to change that. born and raised in brazil, he left a top job as the public face of android to take xiaomi global. joining me today xiaomi vice , president of global operations, hugo barra. so great to have you here.

hugo: my pleasure. emily: how is your chinese? hugo: my chinese is coming along slowly. [laughter] maybe next time, we can do it. emily: i am going to hold you to that. that is a big promise. hugo: next time may be two years from now, three years from now. it is a hard language. emily: i understand they call you tiger brother. how did you get that name? hugo: our ceo, who is a social media rockstar, superstar did a simple post and said hey guys, hugo is joining us from google, we've got to give him a name. people went crazy. everybody started suggesting names. i had no say in it. you are tiger brother. emily: the big question is when , are you going to start selling phones in the united states? hugo: i would tell you if i knew. but i don't. we don't have a set date yet. you know, selling phones is a big step up. it is a huge marketing undertaking, you know, building a smartphone brand. operationally it is complicated , because you have to have after sales set up, customer support

set up, customer support said up. it takes a huge amount of work , plus localizing the hardware. we are going to work our way to that but we're not quite ready yet. emily: are you saying you will someday? hugo: we will someday, of course. absolutely. emily: what will it take? hugo: a team here, a sizable team to manage the process operationally, certification, ongoing engineering help. and so on. emily: months away, years away? hugo: it's no less than a year plus away. emily: no more than a year away? hugo: potentially much more than a year away. emily: you spent a long time at google. google is blocked in china, apps are blocked in china. is there a way forward for google in china? hugo: i don't know. it is a tricky issue. i do believe that it may not be the end of it. i personally don't think that it is the end of the road for google in china. purely thinking for how useful google is and the fact that , people in china who are at university study abroad. they depend heavily on google

even despite the fact that it is blocked. that i just think at the end of the day someone is going to , figure out a way to solve whatever issues exist to bring all of this innovation to the people in china. emily: how satisfied are you with the pace of innovation? hugo: i'm quite happy with the pace of innovation. i think especially because i understand how hard it is to make progress when you are supporting hundreds around the world. i think android is entering a new phase by expressing itself through some of the different screens in different types of devices. there is basically an entirely new and completely unexplored galaxy of options here. emily: google doesn't make money off of android. it isn't doing well in terms of advertising. xiaomi have built business is -- yummy have built businesses off the back of android. do you think making android open was the right call for google?

hugo: making android open was the only call google could have made on this. it would have been impossible to make the level of adoption would have seen from a close operating system. it just wouldn't go anywhere. plus, you would never be able to build such an amazing developer story. android is probably the best decision google ever made years ago. and, of course the fruit of that , will be around for many decades. emily: but how does google make money off of it? i mean they pay apple billions , of dollars to have google on the iphone. hugo: think of what would have happened if android wasn't open? if the apps that were loaded on phones running some alternative version of android were mandated by someone. think about what that would mean for google. it means that people would not necessarily make a choice of which browser to use which , search engine to use. when have a closed operating system which mandates certain behaviors, it is unfair. it would be unfair for google and basically anybody else. absolutely one of the best thing

s that ever happened in tech in the last few decades. emily: do you think google would close android? put up walls around it. hugo: google would never do that. there is absolutely nothing that would convince larry to do such a thing. emily: larry handed over a lot of control to sundar. what is your relationship? hugo: that was an amazing decision. in many ways he is capable, the , most well-rounded executive at google. he is a great product guy. he is a great business guy. it frees up time for larry to think about what should google be 10 years from now, how do we think about artificial intelligence, how does it affect design for future products? it is hard to do both of those things of the same time. emily: do you and sundar still have a relationship now that you are at xiaomi, do you guys collaborate? hugo: we do. we are an android partner, first and foremost. we try to be in front of the pack when it comes to upgrading the operating system and using all the innovations coming from google. we spend time together every few months or so when i come and visit. emily: would xiaomi ever build

its own operating system outside of android? hugo: we wouldn't for smartphones or tvs, or these products. simply because it doesn't make sense to do that. we would much rather use that engineering horsepower building interesting services and capabilities on top of android that add value versus starting again. everyone who has tried has completely failed. despite having many more resources than we would as a -- that we would have as a startup which we still are. , emily: johnny ives referred to xiaomi'shone, -- phone. he said you had stolen his design. how do you respond to that? ♪

emily: you were born and raised in brazil. you got into computers. you made it to m.i.t. you were class president. hugo: you should blame my mom for all of the above. [laughter] she really is the one person who pushed me all along and still

does by the way. emily: you founded your first company after college, a mobile speech recognition company that got bought by nuance communications. hugo: that is right, yeah. emily: that powers apple's siri. hugo: there is some amount of code. we don't know how much that made its way to the software that powers siri today. emily: you joined google in london. and you rose up through the ranks. became the public face of android. what was it like working for what was that ride like? what was it like working for andy rubin? hugo: i worked for a few really amazing executives and mentors and then of course andy, one of the most brilliant in tech ever,

a man so incredibly knowledgeable, and whose intuition about technology, thinking years and years ahead. i was lucky to be in the right place at the right time. emily: how did you come across this company called xiaomi? hugo: xiaomi was initially started by the two primary founders of a team of eight founders. ben was a colleague of mine at google. and then he left to do something ballsy and new. i tracked all of that very closely. it wasn't until a couple of years into the company's life when ben came to visit us at mountainview and brought their second-generation devices. it was when i powered the device on and played with it the first time that it dawned on me those guys were not joking around. emily: tell me your first meeting. hugo: our first meeting was a four-hour meeting which tends to be the case. very deep, involved discussions. he is that kind of guy. it was a dinner in beijing in late 2012.

and we spent time talking about everything really from mobile to internet to brazil and cars. i found him to be one of the most fascinating people that i've ever met. at the same level of somebody like andy rubin. his ability to understand consumers, think so many years ahead -- four hours flew by like 10 minutes. it was pretty amazing. and this was a translated conversation. emily: he did speak to in chinese? hugo: in chinese. yeah. emily: and ben translated. hugo: and ben translated. it was a surreal, but awesome experience. emily: you are a happy google employee. how do you decide to take this job? hugo: there was part of me that always wanted to try something. beyond that was a possibility that xiaomi may be doing something that would have a similar level of impact in the world. android itself did. emily: but how did larry take

the news? [laughter] hugo: larry of course reached out and was supportive but at the same time trying to see if that was really what i wanted to do. at the end of the day, everyone was supportive. in many ways, i was sort of leaving to continue what i had been doing for android. because xiaomi, if successful, would become one of the most important partners for the android team. it was like i was still in the family. emily: what are the differences? between working at a chinese between working at a chinese tech company and google? hugo: there is a lot in between the lines in the culture. you have to be sensitive with what you say in front of. xiaomi is a interesting mix of silicon valley work as hard as possible culture with traditional chinese culture. emily: what makes xiaomi different and unique from apple? hugo: it is really interesting hybrid of things that you would

see at apple, and absolute love for design and the culture of perfectionism. this is coming straight from our ceo. emily: is it a phone company, an electronic company, a software company, an internet of things company? [laughter] hugo: it is an internet company. emily: ok. hugo: that is how we define ourselves. that is the best way to describe xiaomi. we interact with our customers and users, or as we prefer to call them, our fans through the internet, through social media. we sell our products direct. we are the third largest e-commerce website in china. and the largest pure play by miles. and we design products taking a , lot of input from the community. probably about 50% of all of the new features, the new services we end up building as part of , our software came from the community. you can pinpoint it down to one user's idea. this is very unique. emily: you sell phones, high

quality phones basically at cost. but you make most of the money by selling services, right? hugo: we think of hardware as a platform. phones asf our a platform. we think of tv and tv box as a platform. on top of that, we have a number of services and apps that we built that we have worked with partners to integrate. which do work as a monetization channel for us. then, we have an ecosystem of gadgets and accessories which are products like power banks and headsets but all sorts of , other connected devices. we have an air purifier, we have an actual camera, we have a security camera. emily: how much money do you generate? you an idea, give this year, we estimate that we in netve $1 billion

revenues from services alone. emily: you are invested in 30 different startups. hardware and software companies and they partner with you. what is the actual relationship there? what cut do you get? what cut do the developers or makers of the product get? hugo: it is the unique model which i have not seen done , anywhere else. basically the way it works is we help these companies get started. in many cases we will put the founders together, work together and build this. we will get them funded to start with, then we will leave them alone to operate independently. and then, we pick the best product they make and we put our , brand on those products and sell it through our e-commerce engine, if you will. if these guys do a good job, they will enjoy success. some may go public before we do. the company that started our meband and other wearable products, they ship about one million of these a month, which makes them the small little chinese company, the most device company

in the world. emily: how is the money shared? hugo: they manufacture with a contract which we help them connect with, then they pay those guys and they sell it back to us and make a little bit of , margin. as simple as that. emily: how much? hugo: it varies tremendously. we make good margins through these products differently through our products. they make some margins. it is a good relationship. emily: so of all the things you do what is the biggest revenue , driver for xiaomi? hugo: the biggest revenue driver is still phones. it's still phones that drives most profits today without a doubt. but of course the trend over time is for our services strategy to really grow and become the main profit engine for the company. emily: international growth. where is it working, where isn't it working? hugo: so we are -- first of all, taking it slowly. we are paying attention to how we need to change things. we made our way to india and

indonesia, which are two significant markets. india in particular. emily: your model is being copied to a certain extent in other countries. can you see where there is a micromax in india, for example? [laughter] hugo: our model is being copied left and right. including india and others. and the way we respond to that is continue to evolve. companies that are copying us are really copying xiaomi from a year ago. emily: how does xiaomi live up to a $45 billion evaluation? ♪

emily: xiaomi has also been accused of copying. ives referred to xiaomi's phones as theft. he said you stole his designs. how do you respond to that? hugo: so this copycat melodrama boils down to one edge on one phone model which people said it looks like the iphone 5.

and i have been the first one to admit, yes, it does look like the iphone 5. the edge is present in many other devices. it was in many ways people projecting their bias against chinese companies on to us. people just could not bring themselves to believe that a chinese company actually could be a world innovator, could build amazingly high-quality products, and by the way, sell them for less than half the price. i think that drama has quickly started to vanish. and i would actually point out to the device you have, there is nothing you can point to that a resembled it. emily: you don't think it looks like the iphone 6 plus? hugo: it is white. [laughter] how else does it look like an iphone 6 plus? emily: emily: you said it comes down to one feature, but the criticism was the look and feel of the product in general. hugo: i don't think that is fair. every smart phone these days kind of looks like every other

smart phone. right? you have to have curved corners. you have to have at least a home button in some way. right? that is how interaction and design works. i just don't think we can allow companies to take ownership of things that just are how they are. right? and i think that if you look at what we have designed in the last 12 months, you will understand how much originality there is in what we do. and to be honest, i think you are going to see a lot more happening in the opposite direction. right? people taking inspiration on what we do. emily: the ceo is often compared to steve jobs. he doesn't like that comparison. but he wears the black shirt. he does the "one more thing." why does he do that? hugo: he's no longer wearing black shirts. [laughter] he wears a blue button-down shirt.

i think he has 50 of those. he wears them to the office every single day. one more thing was a joke. people took it way too seriously. we don't take ourselves seriously at all. that day that the keynote happened, the room exploded. emily: on a more serious note, it is been said one of the reasons you are not rolling out phones in the u.s. is because of intellectual property issues. how protected are you if you do start selling in the u.s.? are you worried about patent law and potentially getting sued? hugo: of course we are always worried about patent licensing and intellectual property. every company in this industry has had to deal with that. there are two things we are doing, which take time. one is systematically taking patent licenses around the world. you know, if it is a patent, of course it needs to be licensed. in that is what we are doing. it takes time. we are meticulously talking to everyone we need to talk to. secondly, we are building our own portfolio of patents. think of it as a war chest of sorts.

we are filing a lot of our own patents. we filed 2000 patents. which is actually a lot. we are acquiring patents. that is one of many factors that determines when we are ready to enter certain markets. emily: you and apple are jockeying for the top spot in china. what is happening is the smartphone market is saturated for the first time. how worried are you? hugo: what the data says is that china has already moved into a replacement market. what that means is that people already have a phone. they want to buy a new phone every year. the replacement is actually coming down. people are more anxious to buy a new phone more often. there is a tremendous amount of room for us, i think to grow even if the pie itself isn't growing. emily: would you ever make a car? hugo: would we ever make a car? we are not making a car just to be clear. [laughter] i think that is an extraordinarily difficult task. it is not something that we can build today.

we are not resourced. but why not? emily: you guys recently raised $1.1 billion. you are valued at $45 billion. why is xiaomi still a private company? hugo: i do think that is moving fast and being able to change direction quickly is important for us. when you are a public company, you are more restrained in your ability to do that, to massively allocate investment into something that may not pan out for some time. i think being more flexible and being able to move quickly is the reason why we will be private for quite a long time. emily: what does an ipo look like? answer to this question is five years away. he has been giving the same answer for the last couple of years. emily: how does xiaomi live up to a $45 billion valuation? hugo: there are so many services that people haven't even started thinking about. i think $45 billion is just the

beginning. emily: hugo barra, thank you for joining us. so great to have you. ♪

carol: welcome to "bloomberg businessweek." i'm carol massar. we are inside the magazine's newsroom inside new york. coming up in this issue, how to make millions from snapchat. also, software helping donald trump get ahead and the hollywood divorce lawyer that everybody wants. ♪ carol: i am here with ellen pollack, the editor of "limerick businessweek," and this is the room where you put the magazine together. ellen: it is. during the course of any week, we put layouts on the walls and this room gets unbelievably crowded with people in our department and editors and we all go over all of the layouts and discuss what they look like, , how they should change.