♪ corey: welcome i am cory johnson. the best of to bloomberg west. we will hear from bill gurley and hans. more mergers may be on the horizon. a veteran dealmaker. the next big deal of the drop. an entrepreneur making space history. the first private company

cleared for a lunar mission at why they are backing space express over spacex. uber sold its chinese operations to its rival. uberrounder joining the board. a 20%ill give uber stake in didi. we asked bill gurley how he felt about the deal. , hase company, uber immense respect for the market opportunity in china. it will likely be the largest ridesharing market in the world. because of a lack of car ownership historically as a percentage of the population, you might have something similar to leapfrogging lake cell phones versus landmines. it is an interesting market that we were excited to be a part of. something that

is a win-win for both companies. corey: what is uber's involvement going to be? a they going to participate in any way or just be an observer? all, a largerst of percentage of employees will now be a part of the team. you will have the best of china didi working together to serve that community better. they will have a closer relationship and in the past. i think that is by direction. corey: they will continue, is it active management? will the existing employees go over and communication happen, but not the active uber management of didi?

we are a minority shareholder. they will run didi and we are thrilled to be an investor behind them. all i was insinuating is because the relationship is closer, i expect there will be opportunities to work together going forward. corey: this is interesting. one thing that came out was the notion that uber is profitable in the major developed markets it has been running markets pairwise been hard in china? >> there's fierce competition. over the past few years we have been remarkably in crest with didi andhas done with i have been the toughest competition from a global perspective. into the capital availability that has been out there, it has led to an aggressive competition that has led to requiring investment rather than profit.

as travis said in his blog post that has been out there, if you really want to serve the interest of the consumer, long-term profitability has to be a part of it. uber has looked at individual markets differently. i interview my drivers how their business works, how many rides, and the average cost. the drivers take a different cut . the prices can be quite low. uber takes a hyper local focus when it launches in different localities. is that fair to say? bill: absolutely. every market is different. if you want to be successful in any local market, you have to serve that market specifically. corey: do you think the competition is in the domestic thatt where didi has changed? do have partnerships with didi outside of china?

bill: that has not been a particular point of focus from the deal. i would suggest that what you will see going forward is didi integrating uber china employees observing that community. is the single largest ridesharing opportunity on the globe. see us focus will our resources on areas outside china. i am hopeful that with the chinese opportunity cemented through the partnership, we have the ability to work harder at making our product better for consumers and drivers everywhere else on the planet. corey: which is a bigger deal in terms of profitability? the uber black business or uber more ridesobably has and a lower cost per ride? bill: they are equally important

. you can think of it as any company that serves high-end opportunities and low end. the higher end opportunities will have more profit per ri de, but the vast majority is at point, half the price of a taxi. what we have found over the years is that the more we lower the price, it is a very scholastic market would demand surges upward. consumers can envision themselves relying on this in more use cases in their daily lives. pool,products like uber which are complicated to deliver because of the algorithms to make that work at scale, you reach price points that compete nicely with car ownership. ber investing all that it can in the algorithms that allow us to drive price points down.

we want to be the price leader in the market. corey: you told me a long time , when it came into the san francisco market, the first market, in short order it was not only competing with black car services, but there were more cars on the road after uber then before uber. what about changing consumer behavior now that there are more before.ing offered than is that limited to big cities or all the markets? bill: i will share some numbers. based on the data that i have, the ride sharing market in san francisco is 10x what the taxi market was. i think some of the people have misperceived this as a taxi alternative. moving tot is vast the point where we are competing with the notion -- i think of

it on a miles traveled basis. when you look going back to the china opportunity, you look at the fact that you do not have a sick car ownership like you have in the u.s. this will be the way that you solve mass transportation problems. corey: that is the view from the uber side. what about the did set -- the didi side? we were joined from taipei with the context on the asian ridesharing market. you heard real girlie say that it was very different. i'll start with you. i will let you take a victory lap. it is interesting to me the notion of the deal changed. when uber offered to invest in didi years ago, they said no. what are the dynamics on the ground of what is happening with that business? i will address that question

several ways. we are involved with the alibaba deal in 2005. by those tot, joining forces, alibaba went from $5 billion to 10 years later being $200 million in market cap. again gigi the -- ggv has been entered mental in sector by sector with the internet services. we view that with we saw them become one company since we invested. we think at some point the structure with didi and uber working together would make sense. we promote a deal of this direction. it is very gratifying to see that uber has come around and travis has made a decision. corey: travis, the ceo of uber.

on the ground, same question. uber became so attractive that rather than take uber's money, didi wanted to take uber's business? really what was happening in china was that investors like hans'investors were essentially getting involved in a massive transfer of wealth from investors to drivers. lots of pressut releases over the years talking about how many people they employ. former soldiers, former steelworkers, so forth -- really good for the economy. that is part of the spin. there is a lot of reality to that. the feeling on the ground is that didi was always going to win. 's 20% whether or not uber to 30% of the market would sustain them. it is a winner take all type of

model. standing in beijing or somewhere else, and you want a car, you will go to the one with the most cars. at will not open 2 apps the same time. it was putting in the money so you get the winner take all scenario. in the end uber investors realized that is how it would play out and they had to get out. "yep" from i hear a you in the middle? do you agree? hans: i introduced them to one of the founders of didi in 2013. uber was dominant worldwide and nowhere in china. the deal back then what have eight cents and saved money, but it was too early for uber as a company to think about that. when a chinese startup decided to move and expand, they moved quickly. they worked 24 7, 6 to seven days a week. the u.s. company will come in

and want to play in the winner take all market. they have to go to china much earlier. if it is too late, it makes more sense to team up with the local leader. corey: i'm struck by the similarities. the similarities of the yahoo!/alibaba-. you're had a foothold, then they gave up and got a alibaba as a result. do you think that is the model here, or secondarily, the model that we might see going forward with u.s.-chinese partnerships? is disruptingrnet off-line industry. it started with e-commerce versus retail, now ride sharing orsus automotive ownership existing transportation services. the efficiency that ridesharing can bring is critical.

inchina, car ownership cities like beijing and shanghai are 20% to 30% versus 80% to 90% in the u.s. is terrible.stion what is a good solution? right sharing is critical to complement the public transportation strategy. coming up, projected global payments sitting down with sarah fryer. this is bloomberg. ♪

biggestquare saw the intraday move since november. the shares up 18% on thursday after proving this quarter that jack dorsey's mobile payment company can serve more than taco trucks and baristas. it showed it can attract bigger

businesses. 61% increase from large sellers. we asked sarah frier about big business relationships. sarah: it is an important trend we are seeing. larger businesses grew 61% year over that comprises 42%. it is becoming very material for us. why is that happening? large businesses want ease of use. they want to be able to buy a plug and play system that is fully integrated. cohesiveought them the hardware, software, and payment working together. large businesses want asked access -- want fast access to capital. whether it is taking a capital loan, they want that as well. also the brand is resonating. they see it. readers,arly new they're seeing it in stores that look like them. that word-of-mouth is a very powerful way that square grows

in markets. sweetre do you think the spot is? small business, large business? sarah: we have done a nice job of saying business is up to 20 million in revenue. there is no magic, but sometimes it is good to draw a line at what you're targeting. $20 million business probably has multiple locations. like blue bottle coffee in japan and the u.s. they probably have employees and the countertop. square can service a business up to that stage. we do not want to totally cut it off there. we find big multinationals want to utilize square to bring more mobile into their environment. the container store is a good example. they're doing your closet, but they want to get paid at your home. mobile, ease of use, the elegance of the design, it all resonates and we will push that into bigger businesses. emily: i want to ask about

starbucks, a bigger's nest and blue bottle. you are in talks to extend the partnership, but there is debate on how good the partnership has been for square. starbucks, specifically, the extension is for a short time. they assumed that they would have transitioned off of us by q3. it looks like it will take longer, so i do not want to make it seem like we are doing something that has longevity. it comes back to you we think that our sweet spot is businesses up to $20 million in revenue. there are 6.5 trillion in gross receipts in businesses up to $20 million. at 12.5 billion in gp the, analyzing 60 billion. find new need to market opportunity, it is about doing more in the core market. emily: would you say the starbucks deal was good or bad for square? sarah: it was great at that

time. it put us on the map. this little start up, wow, they're processing all the electronic payments for starbucks. we have done that consistently years now.y for 4+ it helped the company grow up. we learned a lot doing it here and we learned what we are good at, where we should cut off and say we will do businesses up to this size. that is also good for the growth of the company. corey: that was square's cfo sarah friar. tech megamergers roll in. we hear about the likely targets, and who the bidd eers could be. and a gloomy global outlook. we ask peter thiel backing donald trump.

corey: this week kicked off with big deals. chinall of uber's business to didi. what is driving this recent boost in deal making? how much m&a is in the pipeline? we went to roger mcnamee of silver lake. roger: the thing to recognize is and acquisition activity, when it rises, it is a signal that the environment is difficult for earnings. >> what is happening fundamentally? roger: you have europe, not only because of brexit, but europe is slow and the brexit will add drag. china has shifted phases and things are not as robust. looking at the s&p 500 in the united states, half earnings come from outside the u.s. have bad trends in

europe and asia, it margins for the s&p 500 companies have peaked. there is analytical support for that notion. against that model, how will people keep stocks up? the smart thing is to buy earnings. if you want to buy a new story, by things that give investors hope about the future, and have them focus less on current results, m&a is a great way to do that. i look at microsoft's acquisition of linkedin as a good example. they have had a good run. it was not obvious where the next growth would come from. it is not obvious that linkedin can provide it. it changes the story. if you are a full on microsoft going in, it gives you more to be bullish about. emily: are you a bull on the deal? roger: no. emily: why not? roger: first, i want to applaud the management of linkedin. they went from nothing to tens

of billions of dollars in value. they sold the company and got paid for creating this. fory: didn't they sell it far less than it was worth six months before? roger: they sold it for less than it was priced at, there is no evidence they sold it for less than it was worth. , to get $26t billion worth of value, that will require gymnastics. i do not know they cannot do it, but it is not a sure thing. linkedin is tiny, scale wise, in comparison to microsoft. it is not obvious that this provides the left that microsoft needs to keep going, but it changes the story, therefore it will probably work. which of these companies do you think will be acquired, or will they be acquired, in 2016 or soon thereafter? gopro? roger: i doubt it. buyers, but i are

don't think so. i think they are independent. it is not obvious to me where is a great fit. --pinterest.t roger: probably. i could see a lot of buyers rest is a that pinte great addition to their portfolio. i would rather own pinterest then yahoo!. emily: lyft? roger: they're kind of doing it now. emily: partnering with the gm. roger: i think that is the great strategy. my fear is that when lyft and uber enter the market the pricing was so compelling entry of millions into the market but did not create a business model with what i would describe as adequate margins to provide return on capital invested. i do not know how to get out of that box. that suggests a sale

would be in the interest of everyone. emily: pandora. you are a musician. roger: i don't know on pandora. music industry feels to me to be an ever shrinking business. of allk of a imagination participants has been staggering. 25 years ago they had the entertainment field to themselves with the exception of television and movies. that was the last time they innovated, creating the music video and putting it on mtv. they have done nothing that has customer value added. video games, the internet, smartphones, social networking -- these are other forms of entertainment. music guys expect to be as paid as ever, i don't see it happening. i can imagine a consolidation of pandora, but not an acquisition that provides a great day for anyone. emily: twitter? by who? roger: i don't know. i think twitter has enormous value.

i think the issues they face internally, they do not appear to have an internal solution. i keep hoping they will. i think the product is extraordinary. emily: allergy talk about instagram. you were an early investor of they spoke. instagram now doing disappearing stories like snapchat. you can instagram for 24 hours. is that blatant copycating? roger: why are those two things inconsistent? they are not. it is important for any business to recognize when they are at a disadvantage. this was not a patentable copyrightable technique. customers clearly love that. cory: how pokemon go affects the earnings of the big game companies. a status update on take to -- take 2. check out the bloomberg advantage, the radio show that i do daily.

you can download the bloomberg radio app, go to bloomberg.com, or serious xm station 119, or iheart radio. ♪

cory: welcome back to "best of bloomberg west." cory johnson in for emily chang. pokemon go is in the game business. ea, zynga, and activision come out with fresh numbers and we will take a look at what is shaping the industry. we talked to the former eap ceo and our own bloomberg intelligence. >> let's look at zynga, the number of users has fallen.

what did you see there? >> a big part of the new ceo is part of the story. he just came in from electronic arts as the head of mobile. his story is stabilizing the user base, stabilizing the revenue, and cost cuts. he delivered on cost cuts and it looks like they are almost all of that. but the user base is still declining. and that is what jobs the topline and bottom line. so they need to get that stabilized. cory: it strikes me that as we look at this, going to zynga, the constant turn over. that cannot make things easy in terms of working there, either for developers, people in sales, or anything else. >> right, when they are in turn around mode like this, it is inevitable that there will be confusion and changing priorities and whatnot.

i will say that it seems like zynga likes ea and they have brought on executives from ea, so perhaps we will get more consistency over the next year. >> i think you need to tie these into the macro trend of the industry. you have the seachange from consul based to mobile. zynga isomething that trying to execute in. even with them about -- is a shift from the 3-4-minute experiences to the immersive multiplayer experiences, like pokemon go. it is a whole new style of play that was not there three months ago. when they launched in the last quarter they were very much old-style games. a beautiful game, but the type of game you will you expected to see last year or the year

before. can they leap ahead in the way that pokemon go did? cory: and they want to make a profit. they will spend money on the ipo and run out of runway. the numbers looked better before they went public. you know, eventually they will have to sustain the profits. >> they are in a platform transition. it was built on the facebook platform and they are trying to reinvent themselves and they are still making the transition. time will tell. they need to just not catch up, catching up in the game industry never really means anything. they have to leap ahead. do they have the right strategy to put themselves ahead of the pack? cory: who is the best hit maker these days? >> you know, the biggest companies are still the best. i think what really matters when it comes to generating hits comes down to intellectual property. pokemonthe reason that

is such a big success is because it is pokemon. there is nostalgia. you look at ea and the star wars mobile, that is good for them. the best companies have the best ip. corey: i disagree. i think it is about gameplay. you can have the best ip in the world, nintendo has had pokemon for a long time and they have not been able to make anything of it until this showed up. i have not played the game, but i have watched my kids play a little bit. the game has people literally out on the streets with excitement. >> i think ip does help. there are many apps, so to get that initial set of users, ip will help. i think today, as we heard earlier, it is about building the player base and ongoing engagement and micro-transactions. ip only gets you through day one, not month one or month to. that is why you're seeing big

launches even on pc are all about that. on mobile increasingly it is more similar to the pc game market than the console game market. ongoing revenue and multiplayer play matters. cory: does pokemon go change, becae companies that plan so far in the future with new ideas, those are hard to break into the game industry and it takes time. is it different for pokemon go? >> i do think that augmented reality is at the start of a steep growth curve, so there will be a lot of copycat games out there. we mentioned vainglory. you will see derivative type ar games. leveraging ip. i also agree that you really have to have a great degree play mechanic and a plan for upgrading the apps to keep the user base happy and the wallets open.

cory: coming up, we talk about venture capitalists on the appetite for big risks. this is bloomberg. ♪

♪ cory: welcome back to "best of bloomberg west." our weekly text. we will call it series a. this week, geoff lewis and keith rabois talk about black swan ideas. the investment in strife and key spring, lift, airbnb. and also played management roles in paypal and square. geoff is in pioneering efforts to legalize weed. we came by and started about talking about the challenges into backing radical ideas.

philosophy is more micro. i believe the right founder, right product, right time. a specific idea and specific founder. the combination of the two leads me. very much a top-down thinker and sees future ways of technology before most people in looking for substantiation's of that. i've in six years ago he predicted health care would be more about math than biology in the future. if your son or daughter wanted to be a doctor they would be better off learning math and computer science rather than biology and chemistry. that was radical six years ago, but is playing out. i became a fan and made several investments on that tsis. the reason i made investments is because the right founder with the right background of the right product ran in. he started with a top-down view. emily: we wanted flying cars we got 140 characters.

you take big risks and big bets. how would you compare? >> of philosophies are similar in that we want things that will lead to radical breakthroughs. we are willing to back up the truck into these things. airbnb, stem center north of 30 and are million dollars, multiple rounds. , backing and to companies that are working. at the same time, we are agnostic where we will find those things. the collection of people on the team have different backgrounds. we just added syan who is interested in film, photography, media. she is a prolific angel investor. we have scott nolan a fac -- scott nolan of spacex. we only will define these breakthrough companies is you can have no rules. emily: we talked about the u.s.,

but what is going on globally? >> i do not think it changes anything for us as investors. on brexit, it is too early to know the impact. emily: in silicon valley, we have been following the ceremony's story very closely. thatder, do stories like change the appetite for risk it all? are you see the spectacular implosion of a company that had so much potential he potential. >> not for us. we tend to be focused on our own internal debates. if you were in our investment team meeting, a lot of things we're thinking about internally and what is happening externally, we try not to get overly distracted. more broadly, people are more risk-averse. emily: david sachs you are close friends with, he is pushing back on the idea that zenefits and theranos are in the same boat. are there any lessons to be learned there?

>> similarly, we try to be as lack of consensus and lack of derivative from other people's views when we make investment decisions. if you follow other people's views, you will yield the same returns, which are mediocre. so, you cannot get trapped into what other people think and it is very dangerous and seductive at the same time. you try to be disciplined. risk was priced out of a lot of rounds for the last four years, effectively people were not plotting the risk to the valuations, it is hard to compete in that environment. you have the same view of a company that nobody is applying the risk at discount. that has come back to normal, i think. there is much more discounts. it is being applied to most rounds now. where we are interested for our own reasons, the offer is pretty competitive, where two years ago it could have been 50% less than others were willing to pay. emily: you tweeted now is a good

time to start a consumer internet company. some would say that we are past that. why now? >> you want to avoid things where there are buzzwords. i think, right now the buzzwords are ai, machine learning. there is a range of them. we invested in ai in 2011. right now, things are on the consumer side. you just had dollar shave club get acquired. you have things like pokemon go. that is not a startup but it has captured the imagination. there is actually still really big areas unmined in the consumer internet. emily: uber just sold part of their business to didi. waving the white flag. what happens to lyft? >> we invested in 2012. uber was bigger and they have

had more money. they have always been bigger and have had more money. lyft has been underestimated every step of the way, they had a great july and they have been underestimated. we are proud investors in it. emily: do they get bigger? or do they get bought? >> i invested way back. i go back to the original story. but i think that they should be a sustained, independent business. i think that while uber got distracted with a lot of international forays that have not worked out, they have snuck up on uber with a significant market share. auditing my friends and a at widely available services i , think lyft is pretty permanent. cory: coming up, the billionaire

investors making space history, clear for each of to the moon. this is bloomberg. ♪ investors making space history,

cory: a milestone for space history this week, aviation officials granted the first private company the permission to leave earth's orbit and land on the moon. moon express was founded by the cofounder of infospace. we started by asking all about the milestones they are aiming for. >> going to the moon is symbolic of what a small group of people can achieve. of course we are going to the moon and yes it is a literal , moonshot. but what it means is, the things that can only be done by the superpowers. imagine only three superpowers have ever landed on the moon. no private company has done it. and when we land, not only do we become the first private company to do so, we become the fourth superpower. to me, that more than anything else shows that it inspires people to say, if the man who

grew up poor in india can come to this country and achieve the big dreams of landing on the moon what is my moonshot? , emily: you have something on elon musk? >> we love him. we love richard branson. they are still doing suborbital. when you leave earth's orbit and the come the first company in it isrld to do so, interesting. we became the first and only company ever to have received permission to leave earth's orbit. people think everyone is going to space. what they do not realize is everyone is going to the space station, that is in earth's orbit. we will be the first to leave earth's orbit. emily: what are you planning to do once you get there? >> we plan to go in the second half of next year. that is when we plan to go to the moon.

sometime in the fall of next year. we are starting to look for the minerals on the man. looking for platinum-grade materials, looking for rare earth elements, and looking for helium 3. that is the best resource for clean energy. a small quantity of it could power the planet for billions of years. emily: why is this important to space exploration, research, and the future of humanity? if we became a multi-planetary society. you have to learn to live on the -- live off the planet. even if you want to go to mars like elon musk wants to do, the best training is living on the moon. once you learn to live off of the planet, you need to learn to live without all of the things we have, the infrastructures here. , and once you live on the moon, you can go beyond, to mars. we know there is plenty of water on the moon. intoif we could convert it

hydrogen and oxygen, that could become fuel for the rockets and for humanity. emily: do you want to start a colony on the moon? >> it is about living on the moon, creating a colony, and that is the basis for us to live on mars. we also want to reduce the cost of going into space. one way to do that is instead of getting all the fuel from earth, what if we had a fuel depot on the earth orbit and the moon orbit. so that you can refuel on the way. emily: you are planning to send robots first, but then you plan to send humans. what is the timeline for that? >> initially, we will send robots. building ato self-driving car, you are building a self-driving spacecraft. there is no gps on the moon. obviously, in the next 10-15 years we can send a human to the moon. >> tell me about how you worked

to get government approval. grantedovernment never approval because no one asked and no one thought to do that. emily: you are saying that they said yes because nobody ever asked? say noy department would because it is valid why they could say no. no one could say yes. we ended up going to the white house which called a meeting with the department and found a solution. we were the only company asking for it. they said based on all of the things we want you to follow, you actually fall into the guidelines and we will give you a one-time approval. in the meantime, we will figure out what happens next. emily: you will go to other planets? >> absolutely. pluto and beyond. cory: that was the cofounder of moon express. that does it for this edition. tune in next week when we talk to the cofounder of alibaba on thursday, at 9:00 a.m. eastern.

6:00 a.m. on the west coast. this is bloomberg. ♪

♪ it is just after 8:00 a.m. in tokyo, the start of a busy week in the asia-pacific, trade data as theina and japan first major markets open. this is "daybreak asia". ♪ it is more of the same, a bloomberg survey expects the boj to increase its stimulus program. china's of stability, reserves little changed as the