emily: i am emily chang and this is "the best of bloomberg west," where we bring you all of our top interviews. the company faces the challenge of profitability. lost atsaid to have least $1.2 billion so far this year. what does that say about the business model? tim cook rks five years at the helm of apple, taking a look at his tenure.

the front page of the internet is answering your questions, talking to the cofounders of reddit. uber is our lead, making an about-face on its profitability in the u.s. after touting earlier in the year that it made money the company is said to have posted a huge loss in the first six months, as much as $1.2 billion. eric newcomer broke this story. >> uber has a lot of money in the bank. they have a credit line of $2 billion and $1.2 billion in loans. they have the money. it is more when can they turn around their burn rate? it is something they can do with the question is whether it will be as big of a business as it is today if they have to pull back on their losses. emily: where are these losses coming from, china, subsidies? >> definitely subsidies, china

mostly. they have lost at least $2 billion. they were getting ready to negotiate with didi to get a deal and they had as much market share to say they deserve a bigger stake in the company because they are a bigger stake in the market. emily: these are subsidies to drivers. can they ease off and remain competitive? >> when they are competing with another player, drivers are super price-sensitive. you can see drivers with both apps going back-and-forth so you really have to make sure you are giving drivers the best pay if you want them to work for your service. emily: didi is going to give uber a billion dollars for its china business. how much will the losses change or subside once uber is no longer in china essentially? >> it is hard to say.

just the first quarter of this year uber was profitable in the united states and now they are losing a billion dollars. they could lose their profitability very quickly by saying instead of taking 20% of bookings from drivers, they will take 15% and things skyrocket. it would be hard to guess exactly what is going to happen because the competitive environment is so fluid. billionvaluation is $69 of from 62 and a half billion. explain that number to me. 62 and a half is what is called the pre-money valuation, the valuation that investors agree to but you get all this money and added up and get the post money valuation. we were 60 -- sitting at $68 billion and didi posted $1 billion. my favorite part is

whether you talk about whether there is precedent and it is hard to recall whether there was a company that lost this much this fast. ago.n lost a lot 16 years >> and they laid off about 50% of their workforce. precedent for a company to lose money this fast even if it has this must potential? a bunch ofed academics and a lot of them pointed to amazon. eraoked at cosmo, the.com of lost phantoms. even when you look at public chip makers it is fine -- hard to find companies that have invested as much as uber. big is not buying manufacturing facilities or anything like that. we are spending money on subsidies that go away after they have spent them so it is really unprecedented. marked his 50k

year anniversary at the helm of the world's most valuable company. -- px onari explains kari explains. in august 2011, tim cook was taking over from a legend. withoutestors feared steve jobs at the helm apple would be headed to decline, but now five years on, cook has defined apple in his own ways. business boomed under his leadership, market cap doubled surpassing exxon mobil to become the world's most valuable company. 2012, under pressure from activists shareholder carl icahn he granted shareholders their first dividend in 17 years and a $10 billion buyback scheme. apple's cash holdings nearly

doubled to $232 billion. with 93% of that money held has taken heat from regulators and the u.s. senate accusing apple of using subsidiaries to reduce its tax bill. now to product, under tim cook apple's story is still about the iconic iphone. apple sold its billionth unit. investors are waiting on another major product win, especially since the company has seen iphone revenues declined for the first time ever in the first two quarters of this year. some investors think apple is over dependent on the iphone and worry about the impact of cooling demand in china. and then there is tim cook the person. in october 2014 he became the gay ceoh profile openly

and has since become an advocate for lgbt communities. he has also faced off against the fbi over iphone encryption. epi --d -- hired former and setting ambitious recycling targets for apple's old devices. with tim cook hitting his stride, let's see what apple's next five years will look like. pittsburghng up, sales driving dreams, the city's pilot with uber and how the city plans to rate make itself -- remake itself as the manufacturing hub of the future. ♪

emily: just last week we found out that pittsburgh is uber's city of choice.

ride specially modified volvo suv's and they will be supervised by humans in the drivers seat for the time being. we sat down with the mayor and talked about when he first began talking with uber. >> the initial conversations happened almost 18 months ago. cityhad been looking for a to basically create an innovation center for a time as vehicles and started talking with purdue university and the city. over the course of the past six months we have been advancing the driverless cars in limited areas of the city, and over the course of the past few weeks will take it to the next level which is the ability to actually and useup on your app autonomous vehicles as part of your uber experience. emily: why do you want pittsburgh to be the guinea pig?

it is exciting technology but it is unproven. .> it is and it is not it has been over a decade that carnegie mellon university has been using them in the city of pittsburgh. night i having travis and his team come and pick me up and take me home. there is no difference in a car, safetythe same time, comes first. there will be a driver in the driver seat and a second person in the other seat. the technology has been there for quite some time. it is just now time to take it to the streets. emily: how do the residents of pittsburgh feel? >> this is an issue we have been working with through gerber and the department of transportation uber andh gerber --

the department of transportation .ecretary the pennsylvania department of transportation again mandating and putting requirements to look at safety first. ,hether it is inoculations whether it was aviation, or now with mobility and autonomous vehicles, there is always a test period, and it has the positives and negatives that come with it. emily: give us some legal clarity on how exactly this will work. how does the city see uber's cars today? >> presently there are autonomous vehicles on our streets not only through uber but through carnegie mellon university. every car that is being produced now out of detroit and the world is being equipped with sensors, and those cars will have the ability to speak with each other. in the future, in the next few

years, vehicles will also be talking to the traffic signals. there will be sensors that cities put up, and the whole idea of mobility will shift. this is just the first shift of aat will be the next 10 years radical change in what we view urban transportation. emily: you mentioned there will be two drivers in the car. at some point will it be legal to drive without that safety driver? do you see this as a job killer or job creator? >> uber has employed over 500 people from around the world to work on this project and i anticipate in the next few years over 1000 people will be employed. emerge seeing a new city where uber, google, microsoft, oculus, all these companies are creating a global innovation center in pittsburgh.

the cities that get out in front will be the leaders of industry and cities where others will locate. when i want to see happen in pittsburgh is that we not only build the technology but start manufacturing the parts as well, advanced manufacturing being another part of this. it will be a critical component in building an industry for all. emily: that was the pittsburgh mayor. as the battle heats up, here is one statistic to consider. uber is the most used taxi out in 108 countries. uber has quite a lead. it is installed on 21% of all android devices in the united states compared with 3% for lyft. still, they have struggled in asia where local operators reign supreme. the rapidly changing transportation situation with

anthony foxx, our exclusive interview next. ♪

emily: the race for driverless cars is heating up with automakers in detroit embracing innovative technology from silicon valley including self driving cars, connected cars, smart sensors. what does autonomous driving regulation look like and when will it come? transportation secretary anthony foxx said we can expect it ahead. we sat down for an exclusive interview. piloting these automobiles in real time is going to be part of how we learn how to make them even safer overtime. we are working on guidance to our department that i think will help the industry understand what we expect from a safety

standpoint. and we a burgeoning area are going to work to make sure everyone is safe. emily: you said you will be putting the guidelines out over the summer. any concrete things you can share? secretary foxx: what we are trying to do is to try to lay out a framework that will make sure the industry understands the department's point of view and what our expectations are. the states have played a significant role in operating cars and we will talk about that, and how our approach may or may not change. emily: why just guidelines rather than explicit rules and regulations? secretary foxx: i think there will be rules and regulations to follow that we are at the beginning point of very very quick dash of a very quick it isortation --

important that the stakeholders can see where we are headed so they can plan accordingly and more details will be filled in. emily: u.s. investigators are investigating the death of a tesla driver using autopilot at the time. do these features make us safer, and how much safer? i do, i do think there are technologies that will do better. deaths on our highways last year and we want to those numbers to go down. autonomous and connected cars can reduce by as much as 80% the fatalities that occur. that is the signal we are sending to the industry. emily: last month you alluded to premarket steps when it comes to self driving state -- technology . what might those entail? secretary foxx: when i would say is the problem we are trying to

solve is along with the disruptive technology of autonomous vehicles, connected vehicles, there is the possibility we get a wide range of entrance into the market while trying to build new automobiles. right now we have a self certification system where the industry automakers see our standards and are required to follow those but they self certify, so we do not meet until after something has gone wrong. wewe shift to this new era, have to have a conversation about whether we should be doing something different on the front end to make sure the vehicles are safe. toly: what are the negatives self driving cars, do you see any? secretary foxx: i think there are an awful lot of positives. i think there are places where we do not know, we do not know. what we are trying to do with these guidelines is contemplate that there will be learnings overtime but we know that safety

has to be thought about at the very beginning of the development of this technology, and manufacturers will have to proveuge amounts of -- to they can make the standard. emily: how worried are you about car hacking? secretary foxx: it is a concern that we as the government have and the industry has. like to see the industry doing even more together to make sure that across the system we are getting great safety. emily: we are seeing a lot of tieups between detroit and silicon valley, google and lyft. do you see any concern about these big companies coming together around regulations? obviously i have to be careful not to put my thumb on the marketplace but it is an interesting convergence of the technological edge with the

conventional automakers. i think there is some symmetry that folks are seeing where on the technology side, folks out here are not as used to building cars and putting cars on the a veryhich is complicated business outside of the leading edge of technology. that are being harvested and incorporated into vehicles all the time so it is really not that surprising to see that trend occur, that i think you are going to continue to see a wide spectrum of entrance into the automobile market. our exclusive interview with u.s. department of transportation secretary anthony foxx. jude, sayingt their devices are vulnerable to hacking. news, like bloomberg check us out on the radio. you can listen on the bloomberg

app, bloomberg radio, and serious acts am -- sirius xm. ♪

welcome back to "the best of bloomberg west peter: i am emily chang -- the best of bloomberg west." of thousands tends of americans are living with ticking time bombs in their checks, pacemakers that could be hacked by low-level hackers. they found that saint jude stood .ut above the rest in a bad way erik schatzker sat down with carson block and asked about the ethics of publishing information that could be dangerous in the wrong hands. >> someone might make the argument that if you kept your hands -- kept your mouth shut,

everyone would be safer. this is a dangerous world and that he believe that state actors are aware of this already, we have to be more concerned with nonate actors. believe that the balance of interest is clearly in informing people of the risks and holding the company accountable so that something can be done. i do not believe that sticking one's head in the sand and pretending a problem does not exist in hoping nothing goes wrong, i do not believe that is the ethical course of action ever. in a public it forum as opposed to a private channel? carson: we do not have confidence that saint jude would do anything to make patients aware of this. erik: why not just informed the fda? carson: there is a researcher named billy rios who identified flaws in the insulin pump, informed the fda, and became

very frustrated because nothing happened and he went public. fda, it sounds as though they are more concerned about cyber security and more attuned to the risks, but i have never dealt with the fda and again, we feel it is important that users know, and we do not necessarily have confidence in saint jude and maybe even some of the institutions of government that the right thing is going to happen. saint jude is a large company. is very politically connected and could bring a lot of pressure to bear on the fda if there was a private channel discussion. erik: how many people are at risk? carson: the number of implantable device users, we do not know how many still have devices but over the past, since 2008, looks like there have been

in the u.s. about 1.1 of these devices implanted including crt's. people should really read our report because there is important detail that we cannot get into here. one of the things that is an important caveat is that men testedsted -- medsec pacemakers. because of lack of device availability they were not able to test those so the crt portion remains theoretical. if the fda is not creating -- treating cyber security as a critical issue why should investors feel any different? guidance,at is draft which they have given the industry time to comment on and there will be a version that goes effective that should largely resemble that. generally over 90% of medical device recalls have been

initiated by manufacturers. that is probably because there is this damocles where the fda says if you do not recall this, we will so you should look like you are wearing the white hat. that guidance shows the fda's current thinking on cyber security, and it is really important for people to understand that in that guidance, there is actually an example of an implantable cardiac device that is compromised, where the sdis -- where the fda says this would be an uncontrolled risk that would mandate some sort of remediation. based on that draft guidance, it is clear to us, our interpretation of the draft guidance, that the saint jude implantable devices fall far below the standard established by that draft guidance. when we say we think they are at substantial risk of having to recall their devices, it is

based on looking at that which does illustrate the fda's thinking. erik: as you pointed out these are draft guidelines and have yet to be finalized and we do not know what the calendar for that is. in the meantime, what reaction are you hoping for? look, there is what we hope happens and there is what probably happens. i have been publicly shorting companies for six years. very seldom have they ever said, some of this criticism is valid. we are expecting to be told patient security is number one, these guys are short-sellers, they are looking to profit on price decline, etc. erik: a wolf in sheep's clothing. carson: that is probably what saint jude is going to say. they could take it seriously and investigate this and without

kicking and screaming, recall the devices and stop selling them until they fix the problems. erik: what if that does not happen? carson: we are hoping that the fda says you need to recall these devices. emily: muddy waters founder carson block with our very own erik schatzker. besides the ethics of possibly tipping off hackers to this, there is the answer of why. earlier matt miller and scarlet fu asked justine bow to clarify her firm's business arrangement with muddy waters. >> what we are interested in achieving is mitigation. what you are interested in achieving is profitability for your company, right? you go to carson block and publish the short before going to saint jude. >> we think carson has a history

of holding large companies accountable and that is why we are excited to partner with muddy waters. not only do we want saint jude to respond with urgency, we want the public to be aware. they have a right to know about the risks and we felt very strongly that st. jude medical were likely to shut this up and potentially do nothing about it once again. edsec is for profit. >> we are a research company. we incur a lot of expenses. this is not software only. of course we are looking to recover our costs but our motivations here are to hold st. so thatical accountable mitigations can be effected as quickly as possible. it is not going to be a small theseaking because of

inherent vulnerabilities throughout the ecosystem, and to draw attention to the public eye so that patients are aware of the risks associated with the technology suite coming out of st. jude medical. >> what do you think about the company's response, saint jude comes out and says the allegations are completely untrue. he says there are several layers of security measures in place. measures onecurity an ongoing basis >> >>. i do not know what kind of security assessment work to have been conducting but we have found vulnerabilities on the ecosystem. together by chaining these on our realities together, put together three different texan areas which we have reproduced internally -- tech areas which we have reproduced

internally. we have definitely verify the existence of these vulnerabilities present in st. jude medical equipment that is being deployed today. you're monetizing your research and have a business arrangement with muddy waters. tell us how you would make money off of passing on information to muddy waters. -- moneyke information regardless of whether they go through with the short and make money or is it only if they make money? >> we are paid on a fee basis and as consultants, and our compensation with regards to our arrangement with muddy waters, is connected to his arrangements. emily: coming up, reddit cofounders join us to answer your questions live right here on bloomberg west. this is bloomberg. ♪

emily: now two hours special on reddit.

this week we caught up with alexis ohanian and steve huffman and answered your questions live on "bloomberg west." they write over 300,000 posts a day but believe it can be so much more. listen in on our exclusive conversation. >> the biggest thing we have been focusing on the last year is building the team at reddit, really getting the company in a position to build and execute all of our dreams so we have hired a lot of people and rebuilt pretty much every team at reddit. we shipped more in the last quarter than i think in the entire year before that. emily: what do think the biggest things are on the to do list? alexis: we have got work to do but we have made a ton of progress in short order. the team has shipped fast improvements in mobile web,

native mobile, and there is more to go. the growth speaks for itself. emily: we have been taking questions from reddit, one of looking forward, how do you plan to monetize the reddit community and how does the decision to become profitable change the way web businesses are operating? >> how do we monetize reddit, for us it is ads. that makes the most sense to us. it is the space we were previously living in and that has been getting better and better. emily: give me some color on this. advertising on reddit is a little bit different than you would see elsewhere online because it is a little bit different. an advertiser elsewhere, they are yelling at the customers, trying to say the message in the flashiest way possible but on reddit you can make a genuine

connection. it is more akin to speaking with a customer in their home. when they speak to them authentically you can get a real connection. emily: here is another 1 -- are you worried about competition? reddit has gone unopposed for a decade. are you worried? not think a lot about competition and we never really have. we are so focused on providing that great user experience. so muchhere is competition for mind share, from everything from twitter to facebook to snapchat. steve: one of the best pieces of advice i was given as if you spend all your time looking into the rearview mirror you will drive into a wall. we just look at how can we do

the best thing for our users and communities and that has always been our guiding light. emily: like many websites, read its primary business model is being challenged by ad blocking software. what advice do you have? alexis: never lose track of why your users are coming to your site. if you ever start sacrificing that, that is when you will start having a bad time. this is the zeitgeist for a quarter of a billion people and in a lot of ways it is a brand's dream come true. now reddit is where the conversation happens and where brands can participate with it. emily: how do you balance the true to the user and not letting things get out of control, and turning this into a real business? that has been a challenge, correct? steve: yes and no.

a way to advertise on reddit that is not subtracted from the user experience. when you make a real connection, because customers need something from a brand, that can be a powerful thing. what we try to think about is how do we do that in a way that it does not subtract from the content and make sure the ads are targeted in reaching the wrong person, so they do not feel like they are at the expense of the user experience but neutral or positive. alexis: reddit is in a fortunate position because a company like coca-cola can run an ad during the super bowl, and the engagement on that content was higher than organic content on reddit. if a brand is coming correctly they cannot only make a great investment but are making a real influence. it, they i understand

give you free reign. you wish over the last decade they have been more involved and help you build up the business? steve: in a lot of respects they were. when we sold the company in 2006 i think we were both 22. we did not know a lot about running a business and at the time i regretted it. when i reflect on it now, being was a good home for us to learn how to manage and grow, and now that we are independent again we can bring those lessons back to reddit. i am not actually certain reddit would have survived without that. emily: alexis ohanian and steve huffman, cofounders of reddit. we will continue this exclusive conversation as we dig into reddit's privacy policy and do not track tool, and problems of harassment. this is bloomberg. ♪

emily: now back to our special on reddit. the company stands on internet privacy and free speech has made it a pioneer. it can prevent third-party analytics from being loaded during their time on the site, but the program does have its critics, being called a greeting -- breeding ground for trolls. >> a lot of it is simple technology changes. on spam, it is finding where it is coming from and eliminating it. letting users block other users has had a big impact. we have a long way to go but we are making steady process -- progress. alexis: about a quarter of a billion people will hit reddit this month and out of all of the content they are producing, only so inf it gets reported

that context it is a pretty remarkable environment. emily: some of the criticism, april say it is a hub for trolls to organize and spread -- critics say it is a hub for trolls to organize and spread. you and i have talked about this. how are you balancing not alienating your core users and cleaning up the site? >> our core users are overwhelmingly good and we have actually eliminated a number of communities over the last year, some of it more dramatic than others. now that we have set the tone with the community of what is isepted and what is not, it about setting boundaries and policies and enforcing it consistently. emily: in the week leading up to this we were taking questions on reddit and unfortunately a lot of the usernames were to unfortunate to use.

how are you making reddit safer for women especially, in particular? >> it is a big thing that is on our mind. we are trying to make reddit as comfortable -- users as comfortable as possible. we are making sure we are connecting people with their home on reddit. it is not an easy problem but i think we have made strides towards it. women, i norst days, anyone who is not just a straight white guy -- minorities, anyone who is not just a straight white guy. alexis: one out of three americans who are going to hit reddit this month are going to hit reddit this month. we are talking about a large and diverse population and we are doing better and better every day. we did not have a trust and safety team a year ago and we do now. steve: one of the largest

women's communities online is on reddit through x chromosomes. emily: reddit has taken some idea oftands on the consumer privacy. what can you share that may change the minds of businesses who have not yet caught on to the importance of consumer privacy? anyt is important for business to have a good relationship with their customers so for us it is about maintaining trust. it is very much about minimizing surface area so if the government comes asking for data, we do not ask for a lot. it is really up to the users to share with us what they want. if we were to get attacked by hackers or that kind of thing, our philosophy is do not ask for a lot, do not take a lot, and just do the right thing for them

. that makes good business sense for any company that cares about its customers. reddit tread the balance between privacy and freedom of speech and demand's from the government and law enforcement and outside parties? i would say privacy and freedom of speech are not conflicting. that is always been important to us. freedom of speech, we believe it is important for everyone on reddit to be able to express themselves freely. that is a powerful thing when people come to reddit seeking relationship advice or help with suicidal thoughts or coming out for the first time. when it comes to law enforcement, hold a very high bar for what we respond to. we make sure the requests are valid and we push back in many cases when they are not. a week ago we were sued by atlantic records looking for

user data. it is not something we hand over easily. emily: reddit has been known as the full paid -- first page of the internet. you delved into original content. how are those experiments going? .lexis: well so far read it has always been the hub for those looking to create original content and we have double down. publishers, newsrooms were starting their day reading their beat on reddit. they would try to turn that into content they would publish on their own site. by eating the dog food ourselves, we realize these are the publishing tools we need to be building. theof that at the end of day builds the relationship with the very people who do the best job of spreading the message. emily: in two years, where do you see reddit? what are you? steve: we should be

significantly bigger, revenue should be up significantly, and we should have made progress against the biggest problem we have, how do you connect the first time reddit visitor with their home on reddit? we have thousands, i think 45,000 active communities on reddit. there is something for everybody and making that connection, that is the big challenge. alexis: the magic behind reddit lays in that pseudonymity. you can be your selves. , youan be the yankees fan can talk world politics. if we do our jobs well, kinds of connections people will make will be as strong or stronger than the connections they make on other social networks where it is more about showing your very narrow, filtered, best self. emily: that does it for this edition of the best of bloomberg

west. on tuesday when the twitter cofounder joins us for the full hour on "bloomberg west ," at 6:00 p.m. eastern, 3:00 p.m. pacific. ♪

david: welcome to bloomberg businessweek. i am david gura. carol massar is on assignment this week. secret surveillance program. a plan has been flying over the city since january and recording pretty much everything. the technology behind bitcoin. world war ii grave robbers and what is being done to stop them. all of that and more ahead on "bloomberg business week." ♪ i am with the editor in chief of "bloomberg business