♪ ramy: i am ramy inocencio, and you are watching "bloomberg west." president obama is heading to flood-ravaged louisiana on tuesday. at least 13 people have died in the floods,and the president has been criticized for not wrapping up his vacation earlier. he has said he wants to make sure that his visit does not interfere with rescue efforts. the white house has admitted that a $400 million payment to iran was contingent on the release of american prisoners, now being criticized by republican lawmakers. house speaker paul ryan accused the president of misleading the public, and donald trump says obama "openly and blatantly lied about the exchange."

trump campaign chair paul manafort has stepped down. the unexpected resignation comes after the campaign announced a major shakeup, the second leadership reshuffle in two months. manafort had also come under increasing scrutiny due to his past consulting for the former pro-russian president of ukraine. trump said in a statement he expected the resignation. the death toll from the terror attack in the french resort town of nice is now 86. the latest victim had been at a hospital, and died from injuries sustained during the july 14 massacre. he is the second hospitalized person to die in the attack. dozens more were injured when a tunisian living in france drove a truck into a crowd of people celebrating bastille day. islamic state claimed responsibility. global news 24 hours a day, powered by 2600 journalists in more than 120 countries. i am ramy inocencio. ♪ ♪

emily: i am emily chang, and this is "bloomberg west." a disappointment in court for uber after a california judge rejected a settlement with drivers. does it open the door to a trial? are there any silver linings? we will discuss. and it could be the biggest leak at the nsa since the 2013 revelations of edward snowden. we will introduce you to the "shadow brokers." and signs that xiaomi's grip on the chinese smartphone market is slipping. we will hear from vice president of global operations hugo barra about the outlook at home and abroad. first to our lede. lyft fails to find a buyer, according to the new york times. they have been said to approach several parties about a sale. apple, google, amazon, uber, and didi, although the most serious conversation happened with general motors. although they are not in immediate danger of closing, one source said they are unprofitable but they had a cash cushion of $1.4 billion. this comes after a report that

lyft rebuffed a takeover offer from gm. we are here with brad stone and joel rosenblatt. i want to start with you, brad. what is your analysis of lyft, trying and failing to sell itself, to a lot of different companies, including the archrival? brad: not a great report for lyft, but it has been a great month for uber. they did deal in china with didi, and this week they announced the rollout of the autonomous vehicle program in pittsburgh. lyft is challenged. there's a lot of ambiguity around its business. can it be a profitable number two in the u.s.? what does the market look like when companies have to get into profitability and they can't keep sinking money into discounts? it is not surprising that with all the uncertainty around the real strength of the business,

buyers would be a little hesitant right now. emily: lyft did have a global alliance with didi in other places. brad: it's a great level of uncertainty. the ceo of didi now sits on uber's board. so lots of questions about whether lyft, if that alliance is still in play and if it will impact the business. emily: let's talk more about the lawsuit. we got the news yesterday, but we are trying to digest what this means for uber. a judge, joel, has rejected a $100 million settlement that uber struck with drivers over a class-action suit in california. how big of a blow is this to uber? joel: it is not a blow, because in fact, there's some indications to me that uber was agitating for this to happen. the reason it is not a blow is

because, after they made the settlement, the ninth circuit agreed to hear uber's arguments that its arbitration clause should apply to its drivers, so now they can bet on this ruling, which seems to be forthcoming, it's not a sure thing, but they are betting the ninth circuit will uphold the arbitration clause, pushing all these drivers into private one-on-one arbitrations and decimating the class-action. let me add to that. the big legal story, as i understand it, is this probably decades-long trend in the u.s. courts to limit the rights of workers to organize and sue companies as class actions, and what companies have been doing is establishing arbitration clauses with not only employees, but also customers, and saying if you have a complaint, you have to take it up with the company in private arbitration. courts over and over have been applauding these rules, and the reason, my sense is the reason that the drivers' attorneys

settled was that the ninth circuit here in san francisco, the federal court of appeals, was indicating they were going to basically dissolve the class-action, in which case you don't have 400,000 drivers, you have something like a thousand people, drivers savvy enough to opt out and not sign the arbitration clause. so the settlement falls apart, but uber, like all the companies, still holds the upper hand, because it's ambiguous whether drivers are even allowed to sue them in this way. jill, tell me if you think that's right. joel: i think that's right. i think there is a little wrinkle in this case that poses potentially a very big threat for uber, which is that whatever the ninth circuit rules doesn't apply to lawsuits in state court under a special law, unique to california, in which they, the drivers could bring substantial penalties, very big penalties under labor laws.

so, the supreme court, if they were to take this out, that would apply to these drivers, but the ninth circuit ruling does not do the job for uber. this settlement falling apart opens the box, kind of rips the lid off of a bunch of lawsuits in state courts, where the cases can go forward and cause a problem. emily: so the best case scenario for uber, this means drivers cannot sue as a class action, and would have to sue them one-on-one? joel: we are not there yet, but that's the best case scenario. emily: the worst case for uber, the settlement is billions and billions of dollars, because the reason the judge rejected the lawsuit, he said the amount you would have to pay in reality is far greater than this. joel: and then the appeals court somehow does not overturn the district court's ruling that the drivers can band together, and the new have this potential multibillion-dollar settlement.

but history is not on the side of the drivers. these class actions have been overturned again and again. even in the case of federal express, which joel might have a better understanding, it went through this with its drivers which are also classified as contractors, and the plaintiff attorneys won that case but there was not much in the way of change. they changed a few things. fedex drivers are still contractors. not much changed. emily: they certainly don't get tips. thank you. brad stone, you will join me a little later in the show. joel rosenblatt, our legal reporter, thank you so much for breaking down this very complex story. more about uber, making plenty of other news this week. on thursday it launched an autonomous car pilot in pittsburgh, beating out the automakers and major tech players like google and apple. we will hear from one investor who has had a long relationship with uber. david cohen was part of uber's angel round before they had a single car on the road.

carolyn caught up with him. caroline: the start of accelerator and development program has been here in berlin for more than a year now. david cohen, the founder, was stopping to the city and told us some wise words he tells to entrepreneurs in germany, and also about a very savvy investment he made years ago. that was being one of the first in uber. david: i was talking to the companies. several of them were practicing their pitch, talking about what they do, very german-specific. i tell them, you are a player on the world stage, you know. this may be where you are starting,, but you need to frame division as a global vision. -- frame and the vision as a global vision. what you are doing matters. you are not just competing in one local market, one local language. so they will probably say, it is website dot de, but i say it is just website. it's a mentality that you are in the environment in germany all

the time, and that's what you are thinking about, but in order to be truly competitive, we teach them to think more globally. that's one thing that i noticed. caroline: is that relevant within the united states? david: the u.s. is a big market, so a lot of people, by comparison, it is more reach. so people assume, when they hear a pitch in the u.s., that it is a global company to begin with. when i first heard the uber pitch, where i am a super early investor, it was focused on san francisco, but you knew that the aspiration was always global. it is sort of in the language, and you hear it in subtle ways, and here it is the opposite. maybe sometimes you have too much market focus on one country, one language, one region, and you try to coach that out of them. caroline: you say the hottest deal is not always the best deal. is uber still a great investment? david: if you are investing today, no idea. if you were investing when i did in the angel round, good deal.

you never know, but so far, so good. it was not a hot deal when i invested in it. ryan graves, who i met early on, the first employee, was mentoring at techstars and they did not have any cars on the road, it was just an idea, but you were excited by the people and the vision. it didn't seem any better than any of the other investments are made the day i made them, so i was just fortunate to be involved. caroline: when you look at how uber is trying to navigate these markets, the regulatory environment, what can europe do? is europe listening? is the regulation playing ball? they are already in berlin, and having some pushback against uber, against airbnb. david: when i came here, i ended up in a taxi, but it was an uber taxi, so at least they are on the platform. therefore, it's a little more challenging to get around here.

i think, you know that some of the customs -- for us, coming here even as an example, we have spent more on dealing with the customs and the legal then we have anywhere else in the world. we are in a lot of places in the world. so just the processes in place. i don't think it's intentional. it is just an artifact of how the systems developed, but it sure feels some things could be simplified to support business that wants to be here. caroline: does that take the businesses, as uber is, as other local companies are, going out and speaking and lobbying? david: that ends up happening. one of the reasons it over -- one of the reasons uber has raised so much money is it is able to go out and convince people that this is safer, this is better, and anyone who has used the service knows it is.

it's a great innovation to have the ability to do it on demand like that. but i think you will be able to see a lot of money poured into convincing the world this is a good thing. caroline: should go public this year? -- should uber go public this year? david: i doubt it will. who am i to say what it should do? it would be nice to have some liquidity from getting so lucky with the early investment. i'm sure a lot of people feel that way. it's a very substantial company now, but a lot of people feel it still has upside, and obviously a lot of money is being poured into it. caroline: what was one company you wish you had had as a techstar company or are the proudest that it has been a techstar companies? david: there are so many companies you are excited to be associated with, companies that will hopefully eventually the multibillion-dollar public companies. digital ocean, class pass, there's just so many.

bb-8 in the "star wars" movie, that came out of techstars. huge growth. would have been great if uber went through our accelerator. we were able to invest in it through our early venture fund, but we are just thrilled to be involved with so many great companies that change the world and make it a better place. emily: caroline hyde, speaking with techstars cofounder david cohen. uber has been exceptional for a few reasons. the mega valuations. but after didi's takeover of the company's china operations, they now share a investor with their biggest rival. that is a rare phenomenon, as investors generally do not back competing startups. let's take a look. >> ride hailing has seen

explosive growth in recent years, making it one of the most lucrative segments in the tech startup space. together, the five biggest ride halos are valued at 115 billion dollars. by now, all kinds of backers have a slice of the ride hailing pie, even nontraditional investors like toyota, general motors, and apple. but a small group of 15 investors are in really deep with not one, but several stakes in the biggest ride hailers. softbank has invested in india, southeast asia, and the leading ride hailer in china. another hedge fund has stakes in didi and lyft. and didi now has been interest in every major ride hailer, including its biggest competition, uber. some of this was an attempt to fight back against the dominance of uber, who operate in 76

countries, lending firepower to rivals in regional markets. why does it matter? we know the recent sale of uber's business in china was first explored by investors who wanted a truce with didi in that market, and now after that multibillion-dollar deal, the global dynamics of the ride hailing market are in flux, and investors could see competing interests clash and there could be more consolidation. can uber still win big if it is sharing investors with its rivals? emily: coming up, it could be the biggest, most dangerous nsa leak since edward snowden's massive disclosure in 2013. we go to washington next. this is bloomberg. ♪

emily: it could be the national security agency's most significant leak of secret since edward snowden blew the lid off of their surveillance tactics in 2013. this group calling themselves "shadow brokers" posted two major files online, one is a free-for-all of tools and techniques the nsa compiled to break past computer system firewalls, including at companies like cisco and juniper. the other, according to the group, is an advanced set of cyber weapons that is encrypted and available to the highest bidder. there is still a lot we don't know about the leak and motivations behind it, but the information now out there could have serious repercussions for the companies that build the security infrastructure that the nsa apparently knows how to disarm. our correspondent joins us from washington to explain.

there's a lot we don't know here. most importantly, just how this information was obtained. was it in inside job, an outside job? some combination of inside and outside? >> it's true. it's very different than three years ago, when we found it about the snowden leaks. that was very easy. he came forward, and we knew how it happened. but there's a lot we don't know about this whodunit. first of all, it is really hard to hack into the nsa directly, so that's ruled out by a lot of analysts and security firms we spoke with. there's a lot of theories floating around. one could be that an nsa hacker left this toolkit of really prized code in a server they had been into, and maybe did not cover their tracks well enough, and an outside group was able to go in and get that. will another theory is, maybe even more nefarious, some but he had a usb drive and took it out

physically from the nsa. these are a couple theories floating around, but we don't have anything for sure. the nsa has not confirmed. but it's most likely not a direct hack into the nsa. emily: now, edward snowden has been tweeting about this, and of course we know that authorities have traced the hack of the dnc back to russian hackers. there is a suggestion that this could be russia's way of warning the united states not to do anything further or retaliate, because russia potentially thinks we have meddled in russian elections. snowden tweeted, why did they do it, no one knows. this may be in the calculus of how to respond to the dnc attacks, especially if they are targeting elections.

can you explain what snowden is trying to say here? nafeesa: we know snowden is currently in exile in russia. he came out with a series of tweets after the disclosure of these tools that were posted online by this group called "shadow brokers," and he is perhaps insinuating that russia may be behind this week, because of it being linked to recent hacks on, say, the democratic national committee, hillary clinton's campaign. because of that, he speculates it could be russia. in addition to that, we had analysts tell us as well, the countries and nation states that have this ability to do this level of hack and have the motivation to publicize it, kind of narrows down the list to russia and china. one analyst told me, the money is on russia but there's no hard evidence yet. if you look at motivation, look at the past track record, with russia being linked to some of the recent hacks we have seen

that have been directly involved in the u.s., that's what people are speculating it could be russia. but we still have a direct link yet. but at the same time, we have seen, we have seen russia being blamed for a lot of recent hacks, and there has been tension, hearing from high-level u.s. security officials who made a lot of public statements recently about russia, and there is tension with how putin is dealing with a lot of foreign-policy issues. so we see that, and any time i talked to any senior security officials, they always say on the record, russia is among the top cyber security nation-state threats to the u.s. emily: a lot of questions still remaining about that data that is now up for auction, and just how dangerous the cyber weapons could be. bloomberg's nafeesa syeed in washington, thank you. we will be right back. ♪ emily: a story we are watching,

a texas man who said the autopilot mode on his tesla model s sent him speeding into a guardrail does not plan to sue the electric carmaker. he admitted he was not paying full attention to the road and trusted the car to navigate a bend on the highway. tesla has stressed that the autopilot feature should only assist drivers who need to be prepared to take the wheel at any time. although the case is not as serious as a fatal crash federal regulators are investigating, it highlights a new challenge ahead for semiautonomous car crashes, finding the blame for the insurance claims. a unit of one auto insurance carrier has asked hazlett to tesla toked participate in a joint inspection of the car involved in the crash. coming up, is xiaomi really losing share? we will hear from the vice president of global operations, hugo barra. if you like bloomberg news, check out bloomberg radio. this is bloomberg. ♪ ,l ramy: i am ramy inocencio and

you are watching "bloomberg west." the white house says president obama will visit flood ravaged louisiana next tuesday. he has been receiving updates, but the president has come under criticism for not cutting his martha's vineyard vacation short to visit the state. 13 people have died in the floods. donald trump and mike pence have been surveying the damage, speaking with a group of victims and volunteers. mr. trump: i have a great history with louisiana. they need a lot of help. what happened here is incredible. i'm just here to help. ramy: louisiana governor john bel edwards urged trump to not turn the visit into a "photo

op," and he says the nominee should contribute time or donate money to the recovery. hillary clinton says she has talked with the governor by phone, and said on facebook that the relief effort cannot afford distractions and says the best way to help louisiana is to get them the resources they need. in california, more than 200 buildings were destroyed in wildfires. firefighters are making headway and the fire is 26% contained. 82,000 people have fled their homes. a top venezuelan government official says a list of people who signed a petition to recall president maduro will be handed over to ministries, recalling the list used by hugo chavez to bar people from loans. ryan lochte has apologized for not being "more careful and candid" and how he described events on sunday.

he did not go into detail about what happened or why he allegedly embellished details about interactions with security guards. fromces potential charges u.s. swimming as well as the ioc. in london after-hours service , finally arrives on the underground. overnight service on the tube launched friday after being delayed by a dispute with workers and political red tape. six trains every hour will run on the central and victoria lines, expected to boost the u.k. economy. 300 miles above planet earth, astronauts took a walk in space to install a new door on the international space station, the first critical step in welcoming commercial capsules. as soon as next year, the new port will allow astronauts with companies like boeing and spacex to enter the station. pretty cool stuff. global news 24 hours a day, by more than 2600 journalists. i am ramy inocencio. this is bloomberg.

♪ emily: this is bloomberg west. i am emily chang. beijing-based xiaomi continues to dispute that it is losing ground to local rivals. research released earlier from idc show second quarter smartphone shipments fell 38% in china. huawei and vivo and oppo took more market share. betty liu spoke to hugo barra. hugo: we are seeing a relatively flat year-over-year trajectory. which has to do with supply chain. we are a relatively young company. we have only been around for six years in china, and we are really working on wrapping up our supply chain.

-- working on ramping up our supply chain. what's interesting to look at, with our business in china in particular, is demand has never been as high as it is currently. we have seen preorders, pre-bookings for some of our latest flagship devices, at levels that we have never seen before. mi 5, our first flagship launch this year, we got 16 million preregistrations on day one. we launched another large device called the mi max, which on the first day had 15 million preregistrations. the challenge for us is to make sure we work our supply chain to meet demands, to meet demand much earlier in the lifecycle of a product. so from a demand perspective, our business has never been healthier in china. we really just have to make sure that our supply chain catches up, and this is perhaps the most important thing we have to work on as a company. betty: so you really attribute sort of the slower growth, or the flat growth as you described

it, really to a supply chain problem, and not because you are losing out to some of the domestic smartphone makers? hugo: that's right. we are seeing unprecedented demand for our products here in china, but also in overseas markets, especially india. so from that perspective, we are happy with the progression of our brand, with how consumers see us, and ultimately with demand in china, india, and other markets as well. betty: overall, global smartphone shipments have been declining. it's not looking that great. iphone sales are declining. do you see this stabilizing anytime soon? hugo: so the markets that we look at, betty, are really markets, beyond china, that are still in the hyper-growth phase. we are in an interesting position. if you look at our india

business, it is easy to understand. india is a fast-growing market. even though perhaps the overall smartphone market in india is not growing externally fast, it -- is not growing extremely fast, but the online market is doing very well. in india, for example, just over the last few quarters, our performance has been noticeable. some numbers came out from idc talking about how the note 3, one of our most important products in india, is the highest selling smartphone in the history of the online market in india. meaning no other smartphone has sold so many units, so much volume through the online channel, people buying phones over the internet, as this one particular product from us. in india, our business has been growing on average 72% year-over-year, which has really been extraordinary.

just for this one model alone, we shipped about 1.75 million phones in just five months. so it is a relatively new product doing extraordinarily well. so the part of the market we see, this online, internet market, from that perspective we are seeing very healthy growth. betty: what is your strategy in india? hugo: our strategy in india is quite similar to our strategy in china, if you look back a few years, in that we are a very young brand. we skew towards college students, recent grads, young professionals. we are an online brand, in that we communicate with our customers, we share news, we interact with them almost exclusively through social media, which is essentially are marketing channel. -- which is essentially our marketing channel. and then we also sell almost

exclusively online as well. we have our entire e-commerce platform deployed in india, and we work with all of the main online brands, like flip cart, amazon, and so on, to sell online. so we have grown to be essentially a house brand in india now, when you look at the online market. the customers were reading tech blogs and making buying decisions on the internet. that is very good positioning for us to have, because this is a really good future proof model, given that this is the direction in which retail, anywhere around the world, is heading -- online. emily: that was betty liu speaking with xiaomi's hugo barra. coming up, the former president of the rhode island school of design turned venture capitalist at kleiner perkins moves on to a startup. our conversation with john maeda. this weekend you can catch up , with our best conversations of the week this weekend. talking about a plan for fully autonomous cars by 2021, with mark fields. this is bloomberg. ♪

emily: a story we are watching. the music streaming wars are heating up. the wall street journal reports pandora will introduce an on-demand music service challenging rivals like spotify and apple music. pandora wants to launch the new service both in the u.s. and overseas, and is in the process of finalizing agreements with record labels. pandora could begin offering the new paid tiers as soon as next month. kleiner perkins caulfield byers'john maeda has left for a startup. he announced his move to automatic, a company that hosts a quarter of the world's's websites.

what is behind the career move? john maeda, global head of copy -- local head of computational design and automatic. brad stone is with me here as well. john, why go to automatic, of all the options out there? john: well, i met this man, matt, who got me sort of thinking about how i may have forgotten how important open source is. i have been so inspired understanding what he and his company stands for, and it made me want to fight for open source. brad: john, you spent two and a half years on sand hill road at kleiner perkins. tell us about the experience. what did you learn? john: it was amazing. i had heard of what venture capital does. i didn't know what it did, and i got to see, it makes these small little companies fly and take off.

it's like being in a spaceship factory. emily: so, obviously we are talking about what you decided to do. but what about the stuff you did not decide to do? why not go to a kleiner company? why not stay in venture capital? john: well, one thing i learned at kleiner perkins, is that a venture capitalist can serve the entrepreneurs best if they have been entrepreneurs themselves. i learned that from mike abbott. my partner there. so i really have to understand myself. i have been coaching all the startups, but i don't play ball myself, so i had to play ball. but i was looking for something that felt close to me. and in the 1980's, we talked about open source at m.i.t. all the time, when i was at m.i.t. back then. and here was a young man telling the open source is important, it was like going back decades ago to when i was maybe more pure, i guess, and i thought, i

want to fight. let's go. brad: by some accounts, 25% of the websites on the web are on automattic technology, wordpress. but it feels like people are gravitating more and more to social networks, contributing and adding content on sites like twitter and facebook. what do you think the future is of the independent blog, and what can you do at wordpress to nurture that? john: well, i think the future is quite clear. the walled gardens are getting bigger. i think it's important to have an alternative. if you recall, in the 1990's when the web was coming out, there was that menu item, view source, where you could look at somebody else's website, copy it, and improve it. if it was not for that, the web would not have expanded. so without the view source approach, the web cannot expand and get more diverse, so i think wordpress is important to make it even more better, is that a word, even better than in the past. and that invited me to come and

give it a go. emily: medium is a company that is of course disrupting things in this space. you did write a medium post earlier this year about diversity and inclusion in technology, and i'm curious, as now sort of an outsider-insider, what do you think the continued challenges are? what are the biggest problems that need to be addressed? john: well, i think the biggest problem to address is realizing it is an ecosystem change, a shift. we used to make software just for nerds. at m.i.t. we had a phrase, rtfm, read the "blank" manual, figure it out yourself. but now tech is used by everyone, so we have to have the ability of everyone to make software. that's happening at every company today. brad: emily mentioned medium. what do you think the contribution of medium has been from a design sense? you could questioned the impact it has had as a business, but

its designed sensibility seems to have permeated a lot of media sites. john: in silicon valley, it is clearly a favorite. also, they did the right thing of saying, i want to make things really easy to use. in design you can either strip away functionality and make something less powerful, or make it powerful and easy-to-use. wordpress is powerful, but how do you make it easy to use? that is what matt would like me to lead with, with the designers. emily: the big apple event is coming up, where we are expecting new iphones, new apple watches, but no major hardware design changes, at least this cycle. what do you think about what you have heard about the new products coming, and how might a lack of a design change impact interest in the product?

john: well, i mean, when we think about 2011 and what the world lost, when we think about apple, how it was built around one person's vision, i think design, the lead that apple has had is diminishing, and it's up to other companies to take up what jobs, believed in which is -- up to other companies to take in, whichbs believed is that design is the core. it can become a cultural inspiration, versus just easy to use, help you work better, help you live better. apple understood that under jobs. emily: always appreciate you putting it in the big picture for us. john maeda, global head of competition of design and inclusion at automattic. brad stone, you are sticking with me through the next block. coming up, we focus on the troubles of hyperloop one. this is bloomberg. ♪ emily: one story we are

watching, baidu is suing tencent for decimation, relating to a spate of article showing hijinks on restaurants related to baidu's food delivery service, including washing vegetables in toilets. they want the websites suspended and a public apology in national newspapers. about $75,000 in compensation also. still with me, brad stone on the stories are team has been working on. it has been a big week. some great stories from the team. first of all, hyperloop. the lawsuit against hyperloop by former employees is ongoing, but our reporter uncovered new details. what's the latest? brad: let's put it in context for the viewers. hyperloop one, an incredibly and dishes company springing out of an idea from elon musk, raised $100 million to hurtle people at supersonic speeds through a tube.

it is still a moonshot, but it is an and vicious company. -- but it is an ambitious project. sarah mcbride wrote a great story, looking into the dispute, which posed some very type a, aggressive personalities, all men, against each other. one guy, bam brogan, one of the cofounders and chief engineers, advocated for more control, more shares, against one of the brothers of one of the investors. his brother was brought in as the chief counsel. they butted heads. all sorts of incredible details, about why they collided, the small things. the engineer was actually hosting him in his house for the first month or so when he moved. some of the personal details. it does seem now, in retrospect, maybe brogan and some of the other employees wanted to break

away and form a rival company, and that they were laying the groundwork to do that, to steal some employees and engineers, and hyperloop one treated it as a secession, tried to tamp it down. no one came out of it looking great, to be frank, but it is still a young company. they want to have a big demonstration next year. they are talking about it as a sputnik moment. we will see. this will be settled in whether they can live up to the vision and the enormous money and resources and expectations they set. emily: another story, are start -- another story, our start of reporter has been breaking ongoing stories about hampton creek, the maker of hampton creek mayo. now it appears the sec is investigating. what's going on? brad: more context, hampton creek makes an eggless vegan mayo. we going to the phrase "eating -- we have coined the phrase

"eating your own mayo" for this, because what hampton creek was doing, to spark sales they were going and acquiring their mayo at whole foods, to stimulate demand. they were calling to stimulate demand. it is hard for any consumer goods upstart to get shelf space. so were they doing some growth hacking? where they overly aggressive? yes. the question is how far they went, and that is what the sec will look at. emily: and what is the difference between growth hacking and fraud? brad: we tend to idealize in silicon valley, and on the other coast it might be seen as an ethical lapse. they said that their campaign to buy back their own product was to spur demand and for quality assurance. they admitted it was to spur demand, but they argue it was limited. olivia collected a fair amount of testimony from former contractors that it was actually

quite a widespread program, and it will be up to the sec to look at it to see if they crossed lines. emily: the sec is also looking at whether they used company money to do the buybacks, whether there were issues of how they recognized revenue, but they will not necessarily face any enforcement case. lending club, another company dealing with a number of fraud issues. the ceo has resigned. the cfo is now leaving. now we have new details about how exactly they were not following the rules, like what? brad: this is a great feature story in business week by one of our reporters. to use the old metaphor, lending club was eating its own mayo. [laughter] insiders were going out and booking loans on the service, and this was a couple years ago, to spur demand and make volume look high so they could raise

another round of funding. they were doing something else. when certain customers tried to apply for loans and nobody bid on them, they were allowing the customers to anonymously split the loans into different tranches, and make it look like they were two separate customers. max has a great story about basically the whistleblower who started out is really a fervent -- the whistleblower who started really fervent fan of lending club and other peer-to-peer lending platforms as a way to make lending more egalitarian and pull it out from the big banks. he started out as an investor in the company. but he was looking at the data and saw the irregularities in the data sets, and why certain customers looked familiar to other customers. he found that these were the same borrowers, and lending club was either not vigilant or allowing it to happen in an effort to cook the books. emily: it doesn't make you feel super proud of silicon valley, these stories we have discussed. brad: they all reveal some of the pressures on these companies, you know. the limelight is on them.

they are making huge promises. they need to raise the next round of funding, and the pressure is on to make that line look like it is up and to the right. what we are seeing now as the fundraising climate changes, some entrepreneurs will go a little too far. emily: brad stone, our global tech editor. great work this week. time for this day in tech history. 12 years ago, google made its trading debut on the nasdaq, starting at $85 a share. the internet search engine of 2004 is a shadow of the tech giant economy has become. google went on to become a half trillion dollar market cap company trading near $800 million in two share classes, funding every thing from life sciences to driverless cars, and of course it has moved on to its new name alphabet. that does it for "bloomberg west." next week, don't miss our exclusive conversation with the cofounders of reddit, joining us on tuesday. that's all for now from san francisco. happy friday. have a wonderful weekend.

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