♪ emily: i am emily chang and this is the "best of bloomberg west." coming up, peter thiel speaking -- on everything's everything from marissa mayer's' performance as yahoo! ceo to the bubble that may be everywhere. we will bring you the highlights of my exclusive interview. how does one spot the next elon musk? i will speak to the venture investor, who is on the search for the next big entrepreneur in china. why the whole media world should

be afraid of snapchat. first, my interview with peter thiel. we spoke earlier at the lend it usa conference. we had a far-reaching conversation. peter thiel spoke out on everything from marissa mayer's performance, to his fear of china, the lack of women in tech, and the bubble that may be everywhere. plus, he also told us how he really feels about college education. take a listen. 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. of course, you have to travel a crazy amount to do that. which is why most of the venture capitalists do not want to do that. there is this question, should we be doing more things in other places, and is there some place with a cost-of-living that gets so prohibitive that it makes

sense to look at things outside? or are the network effects so powerful they dominate everything? the last 15 years, the network effects have dominated, so maybe there is a point where it shifts. that is a question we are looking at. we are certainly, sectorally -- i do think two-thirds or three-quarters will be next-generation i.t. we have done a lot in various forms of synthetic technology. there are all these kinds of categories that will continue to be big. we will continue to do things in all of these non-i.t. areas. we have done some things in the biotechnology and spacex. there are some very big challenges in investing in those areas. they tend to be contrarian. they tend to be rather unexplored.

we are looking at those as well. emily: you just hired your first woman partner. what is your take on the continued lack of women in the venture capitalist industry? why are there not more? what is the industry's responsibility? : we all have the responsibility to do more. we all need to be doing more. we have two women in senior roles. i always think that in the context of the debate -- it is that the disparities are really big. i do not know if 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. it is not like there isn't a huge disparity in male or female chess players, but it does not quite matter as much as 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 so much, 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, but, by my count, only two of them -- two out of 150 had women cofounders. emily: yahoo! is a company that was once very important to silicon valley. in a week, yahoo! is accepting bids to buy all or part of the company. you told me two years ago that yahoo! is not a tech company anymore. how do you see this playing out for yahoo? what do they become? peter: it is still a very big media company. by the way, i think marissa has done a terrific job there. it has been an incredibly hard

company to run, and she has been by far the best ceo they have had, maybe ever. i think jerry yang was very good 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. it is like, even marissa cannot get this restarted, we are not going to hire someone else. the logic is, you already have the best person, if it is not working, maybe look at other possibilities. it is a very difficult space, where there is always this old media and new media dynamic that is quite tricky. if you're 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 challenge is, yahoo! was a new media company in the 90's. at this point, it is actually more of an old media company. it is the most challenging place to be. structurally, it is a very tough place. emily: 80 fellows or so have raised $140 million in venture capital. you are giving the commencement speech at hamilton college. what will you say to those graduates? how have your views of education evolved 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 need more people to start good companies. i think also, the sort of super track dynamics have gotten us to a very bad place, where education has become a substitute for thinking about the future. 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 live in a society where there is a lot of 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 more dramatic version, as i have said, the colleges are as corrupt as the catholic church was 500 years ago. you have this priestly or professorial class that does not do much work. then, you basically tell people that, if you get a diploma, you are saved, otherwise you go to hell. you go to yale or you go to jail. [laughter] peter: 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 that 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: that was my exclusive interview with peter thiel. coming up, the search to find the next elon musk is on. we will hear from glenn on how serial entrepreneurs stand out from the pack. later this hour, 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 futuristic conditions. ♪

emily: we heard this week from g-v capital. the money will be used to crossed four funds, including

$250 million set aside for early startups in china. ggv says, they are seeing more 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 for us, like consumer and online and mobile services, like e-commerce, connected devices, and robotics, and clouds. we are looking for companies in those sectors. in china, we are seeing lots of entrepreneurs that are coming around for their second or third stint, as entrepreneurs or people who have had experience. it really is a richer ecosystem

of entrepreneurs in china for us to go back. emily: one of our columnists wrote a new article saying, everyone knows the asia startup bubble has to pop. what is your response to that? what are you seeing on the ground? glenn: we are focused on the venture capital ecosystem, the startup ecosystem in china and in 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 applications in china today, china leads the world 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. ingre are more phd's graduat in china than any other nation. the pool of entrepreneurs that are doing interesting things in china is continuing to grow.

for us, 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. companies are having trouble raising money. bill gurley of benchmark capital spoke to techcrunch today, and said that billion-dollar funds suck, and then everybody went out and raised billion-dollar funds. he is referring to this report by the kauffman foundation that says venture capital is just not good place for institutions to invest, especially in the bigger funds. what is your response to that? glenn: we agree, he is absolutely right. large funds tend not to do very well. if you break down the funds we have raised, ggv 6, looks just like ggv 3, 4, and 5. in terms of size. we will invest 70% and 80% of

those funds in a and b deals. 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 tried to break up our funds into smaller, more manageable funds, along the lines of what bill suggests. emily: we will talk about uber and lyft later in the show. lift has partnered in china. who wins? do you see a duopoly, or something else? glenn: 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. in china, it is a mirror image. didi is the dominant player, and will continue to be the dominant player. uber has built a good business in china, but they are definitely the number two. we are investors in didi and we think the prospects are bright for the company. emily: you see a winner take most market in ridesharing? glenn: you tend to see that some of that, and that is why we are excited to be 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 in one sentence for you?

my interview with facebook's cto mark schroepfer on their future ambitions, next. later in the show, it may be the most exciting business, but it is also the most risky. we spoke with jackie reses. ♪

emily: facebook held their developer conference with ceo, mark zuckerberg, taking the stage to land his 10 year strategy. later in the conference, chief technology officer, mark schroepfer, added some meat to the bones on that plan. showing the potential of social virtual-reality with a virtual selfie stick demonstration. i caught up with mark

schroepfer, and spoke with him about a recent hire. mark: we are super fortunate to have her, and she will be filling in a lot of the parts of our 10-year vision. there are so many things we want to embark on, and she is going to start off those initiatives. it is a little early to talk about what she will do. she has not gotten into the building yet. we will be building a new team to help achieve this 10 year mission. emily: she worked at darpa and then google, do you see her working beyond and outside of these actual scenes? outside of the obvious facebook venture? mark: she is going to be building things that are mission aligned. everything we do is to connect the world. there are a lot of things under that umbrella. she will be doing new things you have not seen from 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 do you want to be happening with personal versus other kinds of sharing? mark: you are watching the rise of live video. you are seeing a lot of things happening, where people are sending private messages. and is via what's app messenger. there are a lot of different shifts happening, and it will be interesting to see how this shakes out. emily: what are you going for? mark: 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.

we want to make sure it is the right emily: on the personal one. algorithmically, what you want? are you algorithmically doing things to encourage personal sharing? it is like an essential problem, because you have power over what people see. algorithmically, how are you handling that power? mark: i think there is a lot that we do in newsfeeds all of the time. we measure these results in different ways, including user studies. that is where we ask people, do do like the stories that you sell? would you like to see these things instead? the end goal is to get to the perfect mix of what people really want. if i could show you, here are all the possible things you could read, what do you want to see? that is the end goal. if we do not build products that people like, then they will go use other things. emily: what people want -- does that change all of the time? mark: people do not know they wanted video on mobile five years ago, and now you can. we are seeing the rise of vr,

that was something we could only dream of years ago. now, you can do that, dol. too.ou can do that, emily: are you worried that the rise and broadcast -- in broadcast could hurt personal sharing, or hurt what makes facebook great? mark: 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. emily: let's talk about a.i., it is taking a bit longer than we expected. what is the hold up? mark: 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. what you can do with it is kind of unlimited. 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 developers huge opportunities for distribution, and then changed the rules to cut down on spam. there are still developers that are skeptical. should we devote our time to facebook? how concerned are you about that? mark: i think developers are smart, and will use the tools that are right for them. they are going to find ways to get distribution. 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. that is why it i think channels, like messenger, will be new channels for people. we have seen a lot of pickup in engagement ads. as a way for people to get their

app on the phone or get it reengaged. 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 itself. what are you doing about that? mark: 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 like 20 million to 60 million messages a day. we were to make that better. emily: when we return, social media mastermind gary boehner check gives us his take on how the world should be afraid of snapchat. if you like bloomberg news, check us out on the radio. you can listen on the bloomberg radio lap, bloomberg.com, and in the u.s. on sirius xm.

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i am emily chang. let's look at the world of social media. gary boehner check is an early investor of companies from twitter to facebook to tumblr. i sat down with him, and asked him to test his theory. i began by asking about yahoo!'s current predicament, and how much of it is marissa mayer's fault. gary: she has done a lot of things. the punchline is three years. that is a big ship. it depends on how you look at it, but i would say it is enough time. year one, year two, you are unwinding things. wall street-based companies have it different. the truth is, you are playing a game of 90 day terms. if i got to run yahoo! and i had 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 for me to judge. i don't look at the wall street ceo, the way i look at a pre-ipo's ceo. emily: yahoo! is for sale, but she believes she could turn it around, if she had more time. gary: i agree. these are big companies. i think of private equity seven-year terms on wall street -- three years, big companies, it would be nice if they can have 10 years to prove it. but you don't. emily: verizon is proceeding with a bid. is that the right thing? for yahoo!, verizon, and marissa? gary: i am not going to come on this show in cry or ceos of fortune 500 companies. they always do ok whether they win or live's. -- win or lose. where there is a lot of meritocracy, whether you do a good job or bad job, you get paid well. so, i do not know.

to me, i knew marissa from afar. i don't know her. for her own operation, wants and needs, ego, feelings, it might not be good. she probably would like to see it through. for verizon, i think this may be doubling down on things that aol has brought to their table. as far as yahoo!, it is a convoluted situation. this is where i would say marissa maybe left something on the table, without knowing if she could or couldn't do this. if you need to break out, you cannot go safe. you have to be aggressive. those are things you need. for verizon, it feels right because i do believe some of the aol content things within the pipes have brought them value. the individual pieces of yahoo! could be valuable. emily: was tumblr the right bet? gary: no, it was the right kind of bet, but not the right bet.

they ended up being the wrong bet, because i thought there was more room to go, and they missed their opportunity to go the way they needed to a year or two earlier. so no, it was not the right bet. emily: our conversation touched on twitter. using gary's thesis that ceos need to take responsibility i , asked him if it was fair to say that twitter's user are down -- user growth is down due to jack dorsey. gary: he has not been in place long enough. if we are going to go on this thesis, he 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. i was an early investor from the outgoing cto. it changed my life.

it is like my high school crush. emily: what would you like to see happen? they bought the nfl streaming rights. gary: i love that. have a huge impact on the television industry. it will make everyone understand netflix is not the only over the top network. once people realize what is happening, where facebook and snapchat are dangerous for abc, nbc, bloomberg television, everyone else because anybody , can play over the top on the internet. i think it is the twitter-nfl internet deal will be something we all look back on. it is one of the important moments of where the world was going. they have to kill the 140 character limit. i think it is a romantic thing. it is a romantic point of view. i think they need to have a stream a new speed. , they need to curate their

content. moments isn't enough. what do you mean? think it should default into not showing you everything, and if you want to go the other way, cool. if something happens, which is what twitter is best for, they should go to old school breaking news. they need to go back to old twitter. if i was running product, i would go to a curated feed. that is what needs to happen. what facebook and instagram is doing is right. it keeps people on it for longer. that is data, not my opinion. emily: they have moved towards an algorithmic timeline. gary: not as default. when 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. emily: what about facebook? they are making a big play for live. you normally think of twitter as live. now, they are paying publishers to do live video on facebook. facebook has by all accounts

been winning at everything, whether it is video or advertising. gary: it is the best. emily: can they win at live? there is a report that publishers have seen traffic decline on facebook. gary: i don't know if there is a company that i am more bullish on. i don't know if there is a management team i have more confidence in. i knew them early on. i am not super close to it. i am watching it from afar. you also invested early on. gary: not super early. it would have been better if i were earlier. i think, mark zuckerberg offering $3 billion for snapchat eight months ago has to solidify him as one of the strongest ceos of this generation. emily: what about snapchat? does it change the social media landscape? gary: it is the darling of the dance now. i believe it is proven to age

up. i feel comfortable predicting a lot more of your grandmothers and older uncles are going to be on it. emily: could snapchat kill twitter? what does snapchat threaten? gary: everybody. they are playing for attention. they threaten this show. they will threaten the magazine, the billboard that is highly overpriced out there, because everyone in the passenger seat is looking at their phone. it is attention arbitrage. 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 at square, but it is also the most risky. we talked about lending to small businesses. ♪

emily: with all of the buzz, i got to speak to the woman spearheading square's entry into the business of lending to small some buddies. i spoke to jackie reses. take a listen. jackie: there are a bunch of kinds risks that we manage. first there is credit risk. we use machine learning models to underwrite our merchants, so we can provide them with a loan in the first place, and make sure they are in a position where they should be taking capital. second, because we have the data on how big they are and how they are growing and how seasonal their sales are, we are able to offer the right size loan to a merchant. it is important to us, from a

credit quality point of view, it is the right loan to the right merchant. so that they can help their business grow. the second risk is market risk. that is on the investor side. on the market side, we are part of wall street. we sell our loans to investors, and we also take a small portion of those loans on our balance sheet. we are not a balance sheet heavy business, and we are thoughtful about what amount of loans should be sitting on our balance sheet, relative to what is being sold externally. emily: they say wall street does not understand their business. does wall street understand square's business? jackie: we are only recently a public company. we have had our first quarterly earnings.

we obviously went through the ipo process. i cannot say whether wall street understands us or not. the thing we can spend the most time on is building a good business. i think, financial technology is a relatively new type of technology. there is an evolution of understanding and appreciating for models that work and do not work. i think there will be a bifurcation, as we come through this credit environment of business models that have stood the test of time. over the last cycle and are evolving as strong business models. emily: square capital is a small part of square's overall business. less than 5%. under the software and data services bucket. how big of a business does this have the potential to be, relative to the overall? jackie: the small business lending market is huge. it is a multiple billion-dollar industry.

within that, the most important part is what type of lending environment is there for 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. i do think, for those loans to very small businesses, you have not 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 since 2011.

emily: yahoo! is accepting bids to sell. the deadline is next week. verizon, some private equity firms, maybe even the daily mail looking at making bids on yahoo!. what is the best, most likely scenario here? how does this play out? jackie: i do not work at yahoo! anymore. 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 assets and the nature of the business and appreciates that and helps foster the business within yahoo!, which are really able to grow, going forward. emily: do you think it is possible to turn yahoo! around as an independent company? jackie: there are a lot of good businesses at yahoo!.

i do not work there anymore, but i do think there are a lot of good is this is at yahoo! that are right for growth. 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 separate it from some declining assets, which are in a structural decline. emily: what is it like going from working under someone who runs one public company to two public companies? jackie: square is lucky to have jack as our ceo. he is a unique visionary. one of the things he is amazing at is making us stay true to who square is. emily: my interview with jackie reses. coming up, the draft encryption legislation is out, mandating companies would have to lie, -- have to comply with 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 input from the public before formally introducing the bill. the government and private sector are grappling with the apple standoff with the fbi and to adapt to a new law with tighter encryption. i was joined by luke donboski. luke: it is an emotional debate. i understand many industries have come out against it. it will be essential that

any legislation have broad industry support in order to have a bipartisan bill that has any chance of passing in the end. we will see how it turns out. emily: what is a productive way for tech companies to work with the government? luke: many have been trying to work with the government. the answer is to find a balance between privacy and security. it is not something that is out of reach. whether this is the right approach remains to be seen. emily: in june 2014, apple released ios eight and turned on basically encryption. making things more difficult for law enforcement. when you were at the doj, what was the reaction? luke: i was close to these cases, so 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, very fleeting, anonymity is easy

to have on the internet. it was another challenge in the ability to make the cases, but it does not mean it cannot be made. emily: you have dealt with data breaches from target to sony. it has been interesting when you look at the financial performance of these companies, it has not changed. what has been the real cost of the data breaches? luke: we are moving out of the shock and awe phase of this, where a major data breach is a surprise to anyone. it seems like there one in the news every week or every day. we are moving into the liability phase. we are starting to see privacy lawsuits, shareholder suits against companies, regulators jump in and bring heavy fines. it is only going to increase. what is important to know is, companies can prepare for these things and lower their risk up front. emily: you were involved in

negotiations with the chinese government over these issues. what about china's pledge to stop hacking u.s. companies? do you believe china has followed through with that? luke: i should say, at first, i was very excited that they were able to strike the agreement. i was a part of the negotiations. it was a huge breakthrough for for theo governments first time ever to say nationstate hacker should not be used to steal economic advantage and trade secrets from private companies. it is a huge step in the right direction. it was an agreement that that will bring the rest of the world together on this important issue. emily: we do not yet know if they have stopped. are they standing by with what they agreed to? luke: it is too early to tell. i think china will take a positive stance.

i think it is a very constructive move, 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? luke: cyber crime is prevalent in many countries. it used to be dominant in eastern europe. the russians were particularly strong in cybercrime. it has gone way beyond that now. we see groups in the united states, africa, asia, all participating in sophisticated in sophisticated -- are dissipating in sophisticated cyber crimes. emily: what are companies telling you? are they being attacked by nationstates? what are they seeing? luke: they are being attacked. they do not know if it is a cyber criminal or a nationstate. many companies are unsure what

to do. they are pouring a lot of money at this issue. with proper planning and a targeted device up front, they can manage and reduce risk. that is a positive thing. lessons have been learned that we can apply to manage risk. emily: what is your take on the panama papers? luke: it shows a trend many of us, who have been in the cyber security area for a while, already know. firms, hedge funds, they are providing services where they hold valuable client data, and they are increasingly becoming targets. law firms cannot assume that, because they are helping a client, that they are not also a target. emily: my interview with luke donboski. that does it for this issue of "the best of bloomberg west." we will have more coverage of developments as yahoo!.

the luminary events for the legacy internet company. eric will be joining us on monday to break it down. we will see you then. ♪

♪ tumbles after talks fail to reach agreement. high assurges to a investors seek safety. chiefs see finance stormy waters ahead. on thers voting impeachment of the brazilian president. .elcome to "first up" i am angie lau.