♪ the "best ofs bloomberg west." on thehiel speaking out bubble that may be everywhere. we will bring you the highly -- highlights of my interview. investorto the venture who is on the search for the next big entrepreneur in china.

why the whole media world should be afraid of snapchat. my interview with. teal. .- with peter teal he spoke out on everything from performance, to his fear of china, the lack of women in tech, and the bubble that may be everywhere. he also told us how he really feels about college education. peter: the big thing has been to focus on silicon valley and i keep wondering whether we should try to look at some places outside silicon valley and he have to travel a crazy amount to do that. most of the venture capitalists do not want to do that. there is this question, should we be doing more things in other place and is there some

with a cost-of-living get so senseitive that it makes to look at things outside? or are the network effects so powerful they dominate everything? maybe there is some point where it chips. totallyertainly sex certainly sectorally -- we have done a lot in various forms over the years. we will continue to do things in all of these non-i.t. areas. there are some very big challenges in investing in those areas, they tend to be contrary ian.-- contrar

you just hired your first woman partner. why are there more women in the vendor capital industry? peter: there is always an opportunity to do more. more. need to be doing i always think the context in the debate comes up -- it is that the disparities are really big. they have to be 50-50 or we need to have a quota, but you have glaring disparities. and there is something about tech that matters a lot.

the only industry that is really working in the u.s. i think it is in this broader context -- when people tell me that silicon valley focuses on this too much. i tell them it is because silicon valley matters and the disparities are really big. the other day i was looking at the unicorn list of 150 startups and i may have missed one or two him up but by my count, only two of them -- two out of 150 had women cofounders. that washoo!, company once very important to silicon valley, yahoo! is accepting bids in a week to buy the company. how do you see this playing out for yahoo!? what do they become? peter: it is still a very big media company. i think marissa has done a

terrific job there, it has been an incredibly hard company front and she has been by far the best ceo they have had, maybe ever. was very goodyang as the founder ceo, and i think marissa was far and away the best of the other people they had. i think it is in the context of how good marissa was. even if marissa cannot get this restarted, we are not going to hire someone else. the logic is, you already have is nott person, if it working, maybe look at other possibilities. it is a very difficult space where there is always this old media -- new media dynamic that is quite tricky. if your in the old media, you want to be in a place that is really old, like doing radio or

billboard advertising. things that are so far away that there is no competition. the parts of old media that were the most challenging were the ones that were relatively close to new media. newspapers and magazines felt very similar to the things you could read on the internet. the challenges, yahoo! was a new media company, at this point it is actually more of an old media company. it is the most challenging place to be. and,: you are five years 80 fellows or so have raised $140 million in venture capital. you are getting the commencement speech at hamilton college, what will you say to those graduates? how have your views of education of alt through this process? peter: i have to be careful what i say there.

i have never said that there is a one size fits all approach. people mischaracterize my view that everyone should drop out of college and start a company. i do not think everyone should be starting companies. a lot of companies do not work. we did more people to start good companies. i think this -- the sort of super track to dynamic have gotten us to a very bad place where education has become a substitute for thinking about the future and the k-12 system is geared toward college. the problem is, life does not end in college. hopefully you live for a long time after that and do many things after college. there is a strange way where we lived in a society where there is anxiety about the future.

we put more money into education for the last 30 years as a way to deal with this anxiety. if you get into the right college, you will be saved, if you do not, you are in trouble. that is the dramatic version i are asid -- the college corrupt -- colleges are correct -- as corrupt as the catholic church was five years ago -- 500 years ago. you basically tell people that if you get a diploma, you are .aved, otherwise you go to hell you go to yale or you go to jail -- that is sort of a --[laughter] we need to push back on this idea that the only way you get saved is in the catholic church, 500 years ago, or today, by getting a diploma from college. i hope in the future there will be many different kinds of

productive things for people to do. my goal was to not start a new startup church or something like that, it was not to have this alternate one size fits all thing. i think the future will be much more heterogenous with more ways for people to be successful. emily: coming up, the search to find the next elon musk is on. we will hear from glenn on how entrepreneurs stand out from the pack's. we get our first glimpse of what social virtual-reality could be like at the facebook developer conference. we will hear more on the company's ambitions. >> welcome back to .

emily: we heard this week from china capital. the money will be used to

crossed four funds, including $250 million set aside for early startups in china. moreb says they are seeing opportunities there. think of founders like elon musk and jack dorsey. i spoke to glenn solomon. glenn: we want to invest early with them across sectors of focus, like consumer online services like e-commerce, connected devices and robotics and clouds. china, we are seeing lots of entrepreneurs that are coming around for their second or third or peopletrepreneurs who have had experience.

columnistsof our wrote a new article saying, everyone knows the asia startup bubble half to pop. what is your response to that? what are you seeing on the ground? glenn: we are focused on the startup ecosystem in china and the u.s.. for us, what really matters is the rate of innovation and the opportunity for companies to build businesses that can grow fast. in china, we see that continuing at an incredible pace. if you look at patent china leads, today, in patent applications and has for almost the last decade. there are more patents filed in china than in the u.s. and japan combined. pairs -- ofon two entrepreneurs that are doing

interesting things -- that is where we look for new investments. emily: we are seeing a lot of venture capital firms raising billion-dollar plus funds even though we are supposedly heading into a downturn. benchmark capital spoke to crunch mark and said that , andon-dollar funds suck then everybody went out and raised billion-dollar funds. venture capital is just not good place for institutions to invest, especially in the bigger funds. what is your response to that? when: we agree, he is absolutely right. if you break down the funds we , looks just ggv 6 4, and 5.,

we will continue to invest with larger opportunities. in things we have done, like airbnb. in addition to that fund, we have raised 250 million in a separate vehicle, focused on seed investing. we have try to break up our funds into more manageable funds along the lines of what bill suggests. emily: we will talk about uber and lyft later in the show. they have partnered in china. who wins? the ridesharing market is a marketplace business where liquidity really matters. those businesses tend to be dominated by the leader in the market. in the u.s. uber is the leader.

lyft is clearly a number two. image.a, it is a mirror uber has built a good business in china, but they are definitely the number two. we think the prospects are bright for the company. emily: you see a winner take most company -- market in ridesharing? some: you tend to see that of that is why we are excited to be in the market leader in china. being the leader in those types of businesses is very important and that is what we try to focus on when we make investments. emily: that was glenn solomon, managing partner at gvv. up next, keynotes at the facebook conference including a virtual reality headset.

is that enough silicon valley? my interview with mark zuckerberg on the future ambitions, next. later in the show, it may be the most exciting business, but it is also the most risky. rhesus. with jackie ♪ emily: facebook held their

conference with ceo, mark zuckerberg, taking the stage to land his 10 year strategy. later in the conference, chief technology officer, mark, added some meat to the bones on that plan. stick virtual selfie

demonstration. >> we are super fortunate to have her and she will be filling in a lot of the parts of our vision. there are so many things we want to embark on, she is going to start off those initiatives. we will be building a new team to help achieve this 10 year mission. emily: she worked at google, do you see her working beyond these scenes? outside of the obvious facebook venture? >> she is going to be building things -- all of -- all things that will connect the world. she will be doing new things you have not seen for us that may be

confusing in the beginning as people put together the pieces, but it will all come together for our mission. emily: we have reported that personal sharing is down on facebook as opposed to news or article sharing. what is actually happening with personal sharing and what are you doing? what the you want to be happening with personal rep versus -- personal versus other types of sharing? >> you are watching the rise of live video. you are seeing a lot of things happening where people are sending private messages. there are a lot of different shifts and it will be interesting to see how this shakes out. emily: what are you going for? >> the right medium for the right conversation. there are times when you have a one-on-one conversation. there are times when you want to share things with all of your friends, and sometimes when you want to share with the whole world.

i think there is a product experience for each of those. are you algorithmically doing things to encourage personal sharing question mark it is like an essential problem because you have power over what people see. how are you handling that power? >> i think there is a lot that we do in newsfeed all of the time. we measure these results in different ways, including user studies. the end goal is to get to the person -- the perfect mix of what people really want. if i could show you, here are all the possible things you could read, what the you want to see? that is the end goal. want -- doeseople that change all of the time? >> people do not know they wanted video on mobile five years ago, and now you can.

we are seeing the rise of vr and now you can do that too. emily: are you worried that the rise could hurt personal sharing or hurt what makes facebook great? >> i think we all have different modes we operate in. you want to chat with friends, watch something on tv, go to a concert. humans are natural at finding the groups they want to interact with and i think we can create products that hit those interactions. let's talk about ai, what is the hold up? >> we wanted to see what it was like. i talked about some of the technology we have been deploying to automate this and make this work well. the thing that is different, it

is a mix of humans and artificial intelligence. you can ask anything you want. that is a broader service and allows us to develop these technologies we will need over the next decade. emily: i want to talk about developers because facebook has brought multiple platform products giving huge distribution and then changed .he rules to cut down on spam there are still developers that are spectacle -- skeptical. how concerned are you about that? >> i think developers are smart and will use the tools that are right for them. this is a challenge in the entire ecosystem. you talk to a developer and ask how they get featured on an app store, that is a competitive market. i think channels like messenger will be new channels for people. we have seen of pickup in

engagement ads. if we provide the right tools to give people distribution, they will use it. emily: i actually have seen an uptick in spam on messenger it self. what are you doing about that? >> a lot of the work is there to help with spam. i am not sure your experience is indicative of what others have seen. it is something 20 billion -- 60 million messages a day, we were to make that better. we return, social media mastermind gary boehner check -- mastermind gary gives us his take on how the world should be afraid of snapchat. "best of bloomberg west continues after the break. ♪

emily: welcome back. let's look at the world of social media. an early investor of companies from twitter to facebook and twitter -- from twitter and facebook to tumblr. with him and asked him to test his theory and asked about yahoo!'s current predicament and how much of it is marissa mayer's fall. she has done a lot of things, the punchline is three years. that is a big ship. enough time, year one, your two, you are unwinding things. wall street-based companies have it different. you are playing a game of ninety-day terms. and i hado run yahoo! my life to run it, i would be

doing a lot different behavior. the pressure of what wall street wants hurts the ceos to do short-term behavior. it is harder to judge. i don't look at the wall street ceo, the way i look at a pre-ipo's eeo. for sale, butis she believes she could turn it around if she had more time. gary: i agree. three years, big companies, it would be nice if they can have 10 years to prove it. you do not. verizon is proceeding with a bid. is that the right thing gary:? ?ary where there is a lot of meritocracy, whether you do a

good job or bad job, you get paid well. knew marissa from afar. i don't know her. for her own operation, wants and needs, ego, feelings, it might not be good. verizon, this may be doubling down on things that aol has brought to their table. yahoo!, it is a convoluted situation. marissa may be left something on the table without knowing if she dn't do this.d d rising, it feels right. i think some of the aol content things within the pipes have brought them value. the individual pieces of yahoo! could be valuable. the right tumblr

back? no, it was the right kind right t, but not the bet. tily: our conversation ouched on twitter. i asked him if it was fair to are downtwitter's user due to jack dorsey. had a nice run. the product did not innovate enough. they got to make moves. the product has flaws. i am sitting with you now because of twitter. it put me on the map.

it changed my life. emily: what would you like to see happen? gary: it will make everyone understand netflix is not the only over the top network. facebook and snapchat are dangerous for everyone because anybody can play over the top on the internet. twitterit is the internet deal, something we will all look back on. 140 have to kill the character limit. it is a romantic point of view. a new speed.have

it should default into not showing you everything and if you want to go the other way, cool. happens, which is what twitter is best for, they should go to old school breaking news. was facebook and instagram is doing is right. moved towardsve and out the rhythm timeline. gary: not as default. there is an incident or game, they can go into breaking news and open it up to be the water cooler that it is. that is my two cents. what about facebook. they are paying publishers to do on facebook.

gary: it is the best. win out live?y there is a report that publishers have seen traffic decline on facebook. there is a't know if management team i have more confidence in. it from afar. marx zuckerberg offering $3 billion for snapchat has to solidify him as one of the strongest ceos of this generation. emily: what about snapchat? gary: it is the darling of the

dance now. to ageve it is proven up. i feel comfortable predicting a lot more of your grandmothers and older uncles are going to be on it. what does snapchat threaten? gary: attention. that is all they are playing for. everybody in the passenger seat is looking at their phone. all of these people are playing for the same thing. snapchat is the first thing to come along since instagram that is a beast of attention play. emily: coming up, it may be the most exciting business that square, but it is also the most risky. we talked about lending to small businesses. ♪

buzz, iith all of the got to speak to the woman --spearheading square. i asked her how she manages to -- how she plans to manage risk while --. >> first there is credit risk. we use machine learning models to underwrite our merchants so we can provide them with a alone in the first place and make sure they are in a position where they should be taking capital. datad, because we have the on how big they are and how they are growing and house these in all their sales are, we are able

to offer the right size loan to a merchant. helpll goals are to merchants grow. it is important to us, from a credit quality point of view, it is the right loan to the right merchant so they can help their business grow. risk.cond risk is market that is on the investor side. on the market side, we are part of wall street. to investorsoans and take a small portion of those loans on our balance sheet. heavy not a balance sheet business and we are thoughtful about what amount of loans should be sitting on our balance sheet relative to what is relevant to our companies. they say wall street does not understand their business. does wall street understand square's business? publicre only recently a

company. i cannot say whether wall street understands us or not. the thing we can spend the most time on is building a good business. evolution of understanding and appreciating for models that work and do not work. there will be a bifurcation as we come through this credit environment of business models that have stood the test of time. square capital is a small part of the business. less than 5%. big of a business does this have to be and relative to the overall? the small business lending

market is huge. within that, the most important is what type of lending environment is therefore businesses? the interesting thing to look at, to paint the picture of how large this is this could be is the last few years in the lending market. after the credit crisis, that was the time when there was a marked bifurcation of lending. between those businesses that did $1 million or more in sales and those that did a million or less. have not loans, you seen growth. that part of the business has been left out of the market. there is an opportunity to provide credit, and responsible credit, to small businesses who have not been able to participate in the market. yahoo! is expecting -- is

accepting bids to sell. what is the best, most likely scenario here? i don't work at yahoo!. there is very little i can say about what is happening. it will be wonderful to see yahoo! in the hands of a strategic acquirer. that is my personal opinion. there is a core business there that can be fantastic and it would be wonderful if a telecom provider who appreciates the nature of the business and appreciate that and withinster the business yahoo!, which are really able to go forward. d you think it is possible to turn yahoo! around as an independent company? >> there are a lot of good

businesses at yahoo!. for growth and you are seeing the growth within the overall context of yahoo! sales. i hope they have an opportunity to take the good that is there and separated from him of the declining that's which are in a structural decline. emily: what is it like working from someone who runs one public company to two public companies? square is lucky to have jack as our ceo. is thing he is amazing at making us stay true to who square is. coming up, the draft encryption legislation is out, mandating companies would have

court orders requesting access to data. moving into that next. ♪

emily: turning to encryption. the release of a draft of a bill that would require companies and individuals to comply with court orders, saying measures are needed to protect people from criminals and terrorists. the senators are soliciting opinions from the public. to adapt to a world of tighter encryption. >> it is an emotional debate. many industries have come out against it.

it will be essential that legislation have broad industry anyort in order to have chance of passing in the end. protect -- as a productive way for tech companies to work with the government? been trying to work with the government. the answer is to find a balance between privacy and security. that is outmething of reach. whether this is the right approach remains to be seen. apple in june 2014, released ios eight and turned on scripture and. when you are at the drg a -- at the doj, what was the reaction? >> i don't want to talk about one particular case, but it is difficult as a general matter to solve cyber cases.

the evidence is fast-moving, fleeting, anonymity is easy to have on the internet. it was a challenge in the ability to make the cases, but it does not mean it cannot be made. emily: you have della data breaches from target to sony. changedt actually performance. what has been the real cost of the data breaches? we are moving out of the shock and all phase of this were a major data breaches acer rise to anyone. moving into the liability phase. privacytarting to see lawsuits, shareholder suits against companies, regulators bring heavy fines. it is only going to increase. what is important to know is companies can prepare for these things and at lower their risk

up front. involved inere negotiations with the chinese government over these issues. what about china's pledge to stop hacking u.s. companies? you believe china has followed through with that? >> at first i was excited si were ablema and to break through negotiations. it is a huge step in the right direction. the restought a lot of of the -- are they standing by with

a agreed to? to tell.early i think china will take a positive stance. especially as china moves from a manufacturing economy more to an innovation economy. intellectual property will be more important for china to protect. emily: what other nationstates are you worried about? cyber crime is prevalent in many countries. it used to be dominant in eastern europe. it has gone way beyond that now. we see groups in the united states, africa, asia, all participating in sophisticated cyber crimes. mpanieswhat are co telling you? >> they are being attacked. many companies are unsure what

to do. they are pouring a lot of money at this issue. ath proper planning and device up front, they can manage and reduce risk. that is a positive thing. lessons have been learned that we can apply to managed risk. emily: what is your take on the panama papers? >> it shows a trend many of us already know, law firms, hedge funds, they are providing services where they hold valuable client data and they are increasingly targets. law firms cannot assume that because they are helping a client that they are not also a target. my interview with luke. that does it for this issue of "the best of bloomberg west." we will see preliminary bids

coming in for yahoo!. eric will be joining us on monday to break it down. we will see you then. ♪

carol: welcome to bloomberg businessweek. stars of the annual design conference. how states are paying the price for allowing discrimination, and why central bankers may be running out of ammo. let's go meet the editor. i am here with the editor, alan .ollack you highlight super thinkers, thinking on the -- working on the next big thing. thnc