♪ emily: i'm emily chang and this is "the best of bloomberg technology." where we bring you all of our top interviews from the week in tech. coming up, apple missed on revenue. investors are concerned with falling iphone sales and business in china. we will break it all down. plus, as facebook nears 2 billion monthly active users, could an ad slowdown be nearing? we will hear from sheryl sandberg on the social network's earnings report ahead. and our extended sitdown with

twitter coo and ceo anthony noto about the company's latest media deal and capitalizing on trump. first to our lead. apple shares dropped after reporting quarter earnings with iphone revenue falling short. the iphone has always been the moneymaker for the company, but sales were basically flat year-over-year. not terribly surprising, given the anticipation for the next iphone launch in the fall, where we are expecting a big design overhaul. apple also announcing it generated $7 billion in revenue on services, which is 18% growth from a year ago. this as the sector's ceo says he expects to double over the next four years. we spoke with our bloomberg contributor david kirkpatrick and an analyst. david: when you look at the quarter overall, it was fairly mixed. the one negative with the iphone numbers. but it's one of those quarters

where you can only put so much emphasis on the iphone. you of course have that major launch later this year, and we think the entire miss here can be attributed to the fact that consumers are holding off for the next generation iphone. so, overall, you are seeing a little bit of a hit on the stock price, but it is something we would look past. emily: i did speak with luca maestri, who talked up channel inventory. they sold 1.2 million iphones worth of channel inventory, which if you consider those numbers, that brings the number slightly up. david, what is your take? david: well, if i understand correctly, the sales outside of china actually grew, and cook said it is because they are seeing anticipation of future product being a problem. it's amazing to me how in china they are even more status conscious and technology conscious than almost any other part of the world and they love apple even still. i would say take a big picture view. this is not that big of a deal.

i mean, if this company can make the move to services and software, which is a big shift they have to make to get their multiple up, then they are going to have a wonderful future, and i think they will come out with a great phone. emily: let's talk about china. we saw a 14% year-over-year decline. i talked to luca maestri about this, and he was saying they see a lot of positives, the best-selling smartphone in china is also doing extremely well, their services hitting an all-time record, and he also said that we expect our performance in china to continue to improve over the fiscal year. he said the second half of last year they saw a greater decline in the have seen so far in the first half of this year. angelo, talk to us about what's happening in china and whether or not you are concerned. angelo: i think when it comes to china, consumers out there are more price sensitive. i think you have a lot more

options these days coming out of china, given the emergence of many device manufacturers and the local china region. that being said, when you look at how apple has recently performed in the mainland china region, they have done very well. it's more along the other areas of china like taiwan, among other areas, that have really taken the hit for apple in that business. but overall, at least it is performing better than it did earlier last year. that's positive and we do think business starts returning to growth as you progress later into the year and start seeing aesthetic changes to the next generation device. emily: overall you are also seeing a greater shift toward the larger sized iphone. luca maestri pointed out that this is the first time the iphone has a dramatically

different feature in the updated camera, and the fact that more customers are buying the bigger phone means the average selling price is going up. i want to talk about what's going on with capital. it was to the share buyback, boosted the capital return, but there's a lot of speculation about whether or not apple will bring cash back to the united states. $257 billion apple has in cash overseas, and there is a big question about what's going on with the trump tax plan and whether or not that will impact apple. david, what are your thoughts on this? >> well, i continue to be amazed that a company could be this big, this profitable, and have problems like they have. i think they will need to be seen as patriotic, and if there's a chance to bring money back, they will do that. but to me, i would go back to what i said before. the real question, if i was an investor in apple, and i know recently beenhave

can theybout this, is shift to be seen as more than just a device maker? their multiple is so low compared to facebook and google, that they have got to find a way to change that delta. they don't even have to make a very big difference for their stockholders to see an incredible increase, even from this astonishing 700 billion market cap. yes, they will bring money back. they have 250 billion to play with, it's astonishing. but the bigger questions are longer-term. ♪ emily: coming up, twitter is rolling out serious plans to live stream content and news, music, and sports. our extended interview with twitter ceo and interim cfo anthony noto, next. plus, microsoft officially launches its laptop to battle google for classroom supremacy. we will discuss that later this hour. this is bloomberg. ♪

♪ ♪ emily: a spacex falcon nine rocket successfully launched this monday, carrying a classified payload for the u.s. military. as with previous spacex launches, the rocket booster landed back on earth. they first accomplished this feat in december, 2015. landing, refurbishing, and using rockets is a key to the company's long-term vision. twitter wants to be the place to go for all your live video needs. on monday, the social media company announced it will be expanding its livestream import folio with new partnerships. bloomberg news is among their partners. we spoke with anthony noto and asked about the work that has gone into making these deals happen. >> we have had two quarters of great success, and on the back of what we delivered in the first quarter of 2017, we decided we will go all in, and push really hard with our partners to take on live streaming content to the next level across sports, news, entertainment. we will build significant

audience and we are seeing great interactivity on twitter. what'sl is to be happening. live makes us better at what's happening in gives us more comprehensive selection to drive more discussion and we can personalize it to the individual user. it's a perfect fit for twitter and we are delivering a unique experience. i think these deals are a real testament to the success we have with this product, great quality video and the best conversations. emily: let's talk about the ad strategy. what are the biggest growth opportunities and how do you scale? >> it's about the audience, what does the audience on twitter want? for 11 years they have been talking about life events as they unfold and tv. what we wanted to do with this strategy is bring that strategy onto the screen and consolidate experience.screen

that drives more selection, more discussion, and the content is distributed even faster. we saw that the road the fall in 2017. we want to take it to the next level. we want to be the place where people see what's happening in sports, news, and entertainment. these deals reflect the dependability. with bloomberg, we launched a 20 24/7 network in the fall, we are excited about that. it will strengthen both of our companies. and we also announced a sports network, live games, live analysis, live highlights. emily: during the earnings report, you said it would be a long road to revenue growth. when do you see turning revenue around? >> we don't, today, have visibility on revenue improving. that is based on a number of factors. first, we need advertisers to recognize the significant much moren roi,

attractive than it was months ago. not only is our audience accelerating for the fourth consecutive quarter, but prices are down 60%. we need to grab them and get their attention so they see that. part of today was making sure they understood how that significant improvement. the second part is how can they be a part of what's happening. we think we are unique in that. twitter is what's happening and we also have an audience of influencers. as soon as brands can become what's happening. emily: let's talk about user growth. you added 9 million users last quarter. where is that coming from? is it coming from donald trump? >> we talked about two factors. the primary factor was the benefit from organic growth, and seasonality and the second was product and marketing. product has started to impact our growth to the last four quarters. it has been a long time since the has been the case. in the first quarter the product improvement was the largest contribution that it has had in a very significant period of time. we can't causally say is newsworthy events are driving the growth because we don't have

something to measure that, but we did analyze quarterly factors. ome correlated factors. there was an increase in new and resurrected users in accounts that follow news and politics, but beyond that it is hard to measure that specific impact. emily: is there any way to give us more color on whether it is the president using the platform itself, or his followers, greater engagement with the president himself. >> i would say product has been the consistent trend. we will continue to analyze the data. listen, twitter benefits when influential people use our platform to tell what's happening. we encourage that, we love the discussion, we love the conversation that is happening. the more it happens, the better it will be. we would love it if every world leader used twitter as their primary mechanism to talk to their constituencies. emily: sources have told me you are like the soul of twitter right now. obviously, we know you have been working very hard. twitter is navigating some rough patches. how would you describe how you

approach your job as coo and cfo? explain this idea of being the soul of the company. >> the first thing i would say is that i love working with jack and the rest of the leadership team. we approach running the company as a team that is focused on specific priorities, and we divide and conquer. at the end of the day we divide up priorities amongst our team i wouldn't want to work with anyone else than what i working with right now, including jack. he is an inspiration. he stood up, no rehearsals, just delivered the heart and soul of twitter. i live and breathe every day to help that vision come to life. that is what made twitter so special these last years. emily: what is it like working with a guy that is ceo of

another company? >> it can be daunting, and it can be inspiring. jack is there for 100% of the decisions. he has insights and license to make decisions that none of us as executives or outside executives could eve rmake. it's a powerful relationship to have with the company, and i think it has made us better in the last two years he has been at the helm. emily: on that note, we talk about the potential drawbacks. are there any benefits that come with that? >> the media wants to ask us about having it. i don't ever think about it until the media asks me. when i have something to talk to jack about, we talk about it. we are together for 100% of the decisions and at the end of the day that's what the company is all about. emily: you are still looking for a cfo. any progress? >> we are still looking. once we have news we will share that with you. emily: ok. twitter hired banks last fall to explore a sale.

what's the latest? >> the latest as we haven't commented on that situation. the board understands their fiduciary duty. they understand the great progress. four quarters of daily active users growth. i have been around the internet sector since 1998 and i have seen a lot of companies come and go. i can count on one hand the companies that have the deceleration that twitter did, to accelerate for four consecutive orders is an outstanding thing. emily: coming up, breathing easy for another quarter. confirming a highly anticipated mass-market sedan is on track to begin production on time. and if you like bloomberg news, check us out on the radio. you can listen on the radio app, bloomberg.com, and in the u.s., on sirius xm. this is bloomberg. ♪

♪ emily: a story we are watching, hedge fund manager david einhorn is putting a target on tesla, saying the markets are too

optimistic about the company's prospects for expanding electric car sales. he also said stockholders put irrational faith in ceo elon musk. >> investors remain hypnotized by tesla's ceo. the company will be able to mass-market volumes and margin that justified current valuations. the enthusiasm for tesla and other bubble stocks is reminiscent of the march 2000 dotcom bubble. emily: but the bulls have reason to stay bullish with the latest earnings report at wednesday. tesla says initial production of its highly anticipated model 3 is on track for july. still, the company reported a bigger loss than expected in the first quarter. we spoke with jamie butters in detroit, who covers tesla for bloomberg news. >> fans of elon musk have a lot to be happy about. this is a company that so often has to delay product launches, and this time they are able to say, two months away, they are on track. they are going to go into production in july, get the 5000

per week this year, 10,000 per week next year. suppliers are ready. a lot for them to be happy and excited about. but of course, it's not the most explicit of earnings reports. the bears are kind of winning out. the shares are down, there is vagueness about guidance on the full-year outlook, and why the spending was not as heavy as had been anticipated. a lot to chew on. emily: the model 3 will be the first mass-market car. you wonder if owners of the car will be as forgiving as owners of the model s or model x. in terms of quality expectations for the model 3, how optimistic are you? >> it's paradoxical, right? because you expect a $100,000 product, or any other product, to be much better than one that sells for half or a third of that.

but i think there is this issue that when somebody buys a model 3, it might be there only car, whereas somebody who is buying a model s, they have other cars and they can hire a ride. whereas some 30-year-old who is barely able to buy a model 3, then, if it is in the shop, they're really left out -- i don't know that they will be that much more judgmental, but they will be in deeper trouble if there are breakdowns. the kinds that have happened with other tesla models. emily: let's talk about tesla compared to the other automakers. it is now the most valuable automaker by market cap. are investors to optimistic about tesla, like einhorn said? >> well, that's the beauty of the marketplace, right? they get to debate it out and they do it with their dollars. we still see about 20% of

tesla's float is shorted. there are a lot of people who agree with mr. einhorn, that based on its fundamentals, it shouldn't be worth more than gm or ford. but it is all on this possibility, what he could bring, if the model 3 is a success, and if it builds beyond that in becomes a truly global maker of electric vehicles, and if it can do so profitably. selling the model s and x, the gross profit margins are pretty darn good. but can you do that when you are selling $50,000 and $30,000 cars? will there really be an ongoing 100,000 unit market worldwide, even with china in the next? is there going to be enough demand, year after year, decade after decade? that is the real test. but those who believe in it, this is like henry ford in 1915. if you could get in with him forty yearsor would.the ipo, you

that's how they are seeing it. emily: let's talk about cash burn. is that a concern? >> always. this quarter wasn't bad, they consumed about $600 million in cash, they raised $1.2 billion. but elon musk had said they 'd need to spend about $200 billion to launch the model 3, before they started making it in full production. they only spent about half a billion, which may be $1.5 billion of the second half's billing, may be some of the overhang causing anxiety and pushing the stock price down. emily: that was jamie butters with bloomberg news. now to slack, whose ceo is going against the grain, saying the u.k. will remain a key market, regardless of brexit. stewart butterfield spoke exclusively with him in london ahead of the official opening of

the u.k. hub capital. he talked about why the company is laying down roots there. >> we have a lot of customers, and ones that i think most viewers in the u.k. would recognize, retailers, -- retailers like lush, broadcasters like sky, sage software. we want to have a relationship with them and other customers yet to come on board. it is much easier to physically be here. it is a sales-led office with customer success teams. we're still going to grow. >> one of the things we see a lot of techs do is base themselves in ireland. problem much less of a regarding brexit. we have had a lot of conversations and stories about

companies considering other countries around the european union. did you consider that? did you consider ireland? >> we already have a pretty large office in dublin can have for about a year and a half. we are continuing to grow their. -- there. eventually we will open offices on the continent, just because we have offices in every country in europe at this point. we have seven offices in five countries around the world, and we will be expanding at a good clip over the next 18 months or so. >> one of the topics there has been a lot of discussion about over the last 100 days or so is hiring in talent under the trump administration. i'm curious, is that something that has been affecting you, or that you will have to think more carefully about over the coming months and years? >> we started off with an office in san francisco and vancouver, canada. vancouver is a great city for a large u.s. tech companies having trouble bringing people in, they bring them to vancouver.

that has been part of our stock share from the beginning. it has had less of an impact for us. we also have offices in dublin, as i mentioned, mahlberg, toronto. the immigration issues -- people who work at slack as citizens are more concerned than r.i.m as --than i am as chief executive of the company, there is an air of uncertainty when it comes to trade policy, tax policy, when it comes to immigration. and, in that context they can be difficult for businesses to make decisions. there is obviously also -- luckily, communications software will be needed either way. emily: that was stewart butterfield, ceo of slack. one disclosure, the venture capital arm of bloomberg lp is an investor in slack. a story we are watching, facebook is stepping up its review of controversial videos,

including videos portraying crime and suicide, this after recent murders in cleveland and thailand were both posted on the site. mark zuckerberg said the company will hire an additional 3000 workers on top of the 4500 reviewers already employed. facebook has been criticized for not doing enough to prevent such videos from spreading. we spoke with the facebook ceo after earnings came out wednesday. sandberg says the social network doesn't take crime or fake news lightly. >> we haven't seen impact on revenue, but we take all of these issues seriously. we know people want accurate news on facebook, and we have announced a number of steps, including disrupting the economic incentives and stopping the spread of false news. we take this seriously. emily: we will bring you more of my interview with sheryl sandberg ahead, along with a full breakdown of facebook earnings. plus, square hit the sweet spot with earnings this week, but is it sustainable?

we will hear from the cfo of square, next. and a reminder that all episodes of bloomberg technology are streaming live on twitter. check it out. with days, 5 p.m. in san francisco. this is bloomberg. ♪

♪ emily: welcome back to the "best of bloomberg technology." i'm emily chang. this week, facebook execs tried to temper enthusiasm about and growth. we spoke to coo sheryl sandberg who said this about ad load. >> we carefully track the impact of ads on the user experience. we have been doing that for the past several years. we have said that ad load is up from a few years ago when we have been able to do this by improving the quality and relevance of the ads. where we are focused is continuing to improve that at quality and relevance.

emily: still earnings report , showed a strong user base and the social network now has 1.49 billion users and they could hit 2 billion total users by next quarter. we spoke with deborah hall williamson, who specializes in the demographics of social users. >> every quarter it seems like facebook has another great quarter, and it's kind of hard to see where there might be problems. the revenue number looks great, the user number looks great and there's a lot of momentum at facebook. but by the same token, you just mentioned sheryl sandberg's comments about ad load. we heard about this for some time and what it's really starting to show is that facebook is looking for its when it comes to

revenue. the newsfeed has been its main source of revenue for five years, and now it is looking for other things. emily: the next act might be instagram, facebook's next facebook. 700 million users. take a listen to what sheryl sandberg had to say. >> instagram is a very important mobile ad platform. along with facebook. we are seeing strong growth in the increasing visualization of ads. that is part of why ads on instagram are so appealing. and the fact that you can buy them the facebook ad system on facebook, on instagram, the same targeting a measurement gives as that platform a lot of ability to deliver results for marketers. i think it's early, but we are also seeing advertisers pretty excited about ads in stories, which has a heavy visualization and a nice ability to reach people.

emily: that said, they still don't breakout instagram revenue, which ask me wonder why not? at what point does instagram meaningfully contribute to this, to the point where they are willing to show us the numbers? >> i think it's already meaningfully contributing to facebook's revenue. our forecast is that instagram will have $4 billion in ad revenue and that's going to be over 1/10 of facebook's total revenue. we have a number of $36 billion for facebook ad revenue. it's already a big contributor. it's probably not the reason why they are not sharing the exact numbers, but i do think instagram is a really interesting platform for marketers. they are still really intrigued and they really want to learn and they really want to learn more about how to reach the , youth audience that is so prominent on instagram. emily: they are experimenting with different forms of video advertising. take a look at what sandberg had to say about that.

>> right now, we are the testing phases of outbreaks and we are excited to be testing them. it's going well so far, but it's the early days and we will see. emily: mark zuckerberg has been against pre-roll ads, but mid-roll ads like a commercial on television. how optimistic are you for a future source of revenue in that? deborah: mid-roll ads and pre-roll ads have been really successful for other platforms like youtube. it makes a lot of sense for facebook to get involved in mid-roll. i agree that pre-roll is not the right format for facebook, but i feel like as facebook starts to roll out more video programming within its platform, including advertising within it, i think advertisers are going to be very intrigued by it. video advertising in general is growing enormously. advertisers want to find new places to spend those dollars and i think facebook will

probably benefit. emily: that was e-marketer and principal analyst. staying with earnings square , climbed over 9% to an intraday record after a reported first-quarter results this week. the company run by twitters jack dorsey wound larger merchants and impressed with options like caviar and instant deposit. still some analysts are , skeptical about long-term growth, debating whether there guidance and estimates. we spoke with the square ceo for an interview. take a listen. >> i think there are a lot of growth drivers in front of us right now. i never went under sell the core. what we do in terms of small businesses, merchants coming onto the payment system for the first time. still a ton of opportunity. 20 million small businesses and in countries like the u.k. was in the same thing coming too. the product is resonating with larger businesses, international, we are in five

countries in total. and then finally the other products we built are starting to really gain a lot of momentum. capital, caviar, and so forth. emily: let's talk about the expansion. what is learned from your lunch in the u.k. in the midst of brexit? >> we love the u.k. market, 5.5 million small businesses, incredible revenue that they generate is the lifeblood of that economy. what we see a similar to the u.s., half of them don't accept credit cards. we know they are missing a sale. in terms of brand, it is the same propositions as in the u.s. what is different from us from the u.s. launch is we launched with full products. not just payments and point-of-sale, but invoices, and the whole platform, so you can be off-line and online. that is very different to us to come to a market so fully featured from the get-go and what we're learning is that now we are seeing businesses of all

sizes coming to square right from the beginning. emily: what are the biggest risk factors with international expansion? >> i think ultimately it is about making sure we can maintain our culture and the brand we have built so strongly in the u.s., because you need to make sure that culture is staying quite strong. i think secondarily, every market is different, so while you want a strong maintaining of the culture and the value and so on, you also have to allow international markets to be a little different. i was in australia this quarter. the australian market leans more into being more quirky and funny and competitive in how they brand. something we wouldn't do here in in the u.s., that what we are comfortable doing in australia. we have to allow our country managers leeway to do with ac to -- to see what they do to really

grow the market. emily: how far upmarket does square want to go? we know you experimented with starbucks, that is now off the table. would you ever get back to something like that? >> i do not think there is a point where we could not go further. the key is making sure that we do it much more in a methodical way, upmarket. it seems like bigger customers like the small guys come to us. the brand resonates. the key is making sure that we are not customizing software for bigger companies. this is where the api platform comes into its own. if you are a bigger merchant and want to do something innovative and new with your checkout, north face is a great example at a ski resort, square can work really well for you. but we need to allow them to work back into their system, because they cannot rip and replace all at once. square, we not quite at that scale yet. emily: that was square cfo sarah frier.

the new york times says the first quarter was the best ever for subscriber growth. the paper said it added a net 308,000 digital subscriptions, continuing its momentum from the previous quarter. it focuses on reaching younger readers. with our mike services like spotify or its recent decision to join the discovery platform. we speak with microsoft's yusuf mehdi on microsoft's fight for the classroom. plus, later this hour, we will take up president trump and the innerworkings of facebook. this is bloomberg. ♪

♪ emily: a serious bidding battle for straight best medications. verizon offered a takeover proposal, giving at&t three days to match the new offer. would be aight path

big blow to at&t and straight path is one of the biggest holders of spectrum approved for fifth generation use, and at&t is eager to use those airwaves to build the leading 5g network. it is back to school for microsoft. they have announced the launch of the surface laptop. it is aimed at college students. the device is a departure from the other hybrid. we got an exclusive sneak peak of the computer at the company's redmond, washington headquarters. >> this laptop could shake up the market with its $90 price point and new technologies with a cool new look. it's lighter than a macbook air coming in at 2.76 pounds. it is also draped in durable fabric you normally find in

high-end cars. there is even battery life that needs others. >> we don't want to worry about battery life. >> it has a new operating system, windows 10s, a nod to the mercedes s class. it's optimized for the new device, and microsoft says it won't slow the computer down over time. >> if you are from a dead power down, it will turn on right away. >> microsoft has tablets and a surface. the surface laptop is their first pure laptop. users have a lot of options. you can boss around cortana. it has the touch train -- touchscreen of the surface tablet. >> at also has a mouse you can buy separately.

i don't think most ebola need it. set to go flat. the mouse turns off, it integrates with your product and you are right into the mode you want to be in. emily: that was our bloomberg technology reporter mark rubin. joining me is yusuf mehdi. tell me about this new laptop. why could it take on chrome book? >> one of the things we are excited about with microsoft education overall is a couple new things. a new version of windows is designed to be more streamlined, simple, and give you better performance. a range of new devices. it starts at hundred $89. -- $189. it is called windows 10s. a range of new devices from partners, starting out at $189 with an hp stream, giving you things like pen touch inc. and the ability to run minecraft. and further up, it's the perfect balance of personalization and performance in a 14.5 hour, 2.5 pound form factor.

we think it is very compelling for people in higher ed. , we know they don't have the web-based that chrome books are used for. >> it is actually better. what windows 10s does, it is all of windows as you know it. you can do things like vr, 3d, pen and ink, but also the apps that come from the store, but none of the drawbacks of chromebooks. you get to work off-line. 4.4 billion dollars in the world do not have an internet connection. you get full office. you get the ability to run minecraft. you get rich experiences. that's how it sets us apart. emily: do you think you can get a share of the apple market? >> i think it has better value and battery life than any mac. it is faster and thinner. the combination of all those things with windows, it is very differentiating. emily: apple fans might say they are not so fond of the features

of windows 10s. what do you say to those people? >> the good thing is, with competition you can choose. apple makes great products. we admire that. with windows 10s, you can do things you cannot do on other products. virtual reality is really happening on windows. the 3-d capability, if you like touch, if you like pen, these are unique things on the laptop you cannot get. emily: surface sales declined considerably. it is getting a little old. what is the hardware strategy? >> a couple fold. surface creates new categories of computing. you see that with surface book, surface studio, even surface pro. what we want to do is grow the overall windows ecosystem. hp, dell, lenovo. and that has happened. in the last year we've grown , share because of surface. the last quarter we have seen more price competition. we are in the middle of a transition. the surface laptop is new today.

you might expect to see an update to surface pro four coming soon. emily: the ceo of microsoft said cloud first. cloud seems to be going really well. give me the progress on mobile first. where are we going? >> the way i think about mobile first is, we are all in on mobile in the sense that all of our software will run on any device you own. office will run on iphone and android. minecraft will run on iphone and android. our management tools run across all of those devices. we embrace the world as we see it today, which is that people use multiple devices and use windows pcs, laptops, and notebooks. emily: windows 10, give us an update. >> windows 10 has been doing great. it has been been many months since we reported we had over 400 million monthly active, 300 million plus use it every day. for three and a half hours. it is the fastest adoption in corporations ever seen, and we are seeing great deployment. new applications coming. we couldn't be more thrilled. emily: yusuf mehdi, thank you.

still ahead, our interview with the social capital founder. his take on everything from president trump to the embattled uber ceo. this is bloomberg ♪

♪ emily: a story we are watching, it looks like jared kushner, president trump's top adviser and son-in-law, omitted a few items in his government disclosure forms, namely his stake in a real estate tech company. according to "the wall street journal," he admitted his stake in cadre, which has ties to goldman sachs and investor george soros. an attorney says the revised version will be made available in once ethics officials have looked into it. social capital founder and ceo chamath palihapitiya is one of silicon valley's most candid and tech leaders. i this week, we spoke with him

to get his take on some of the top tech headlines. we started by asking him about concerns about trump's policies. as >> it's really not the policies, quite honestly, but the unintended consequences, and specifically what i think is in really scary is about what the long-term impact to human capital are in the u.s. if i had to use a sports analogy, if your job is to win a championship, you try to draft and recruit from free agency the absolute single best players in every position you can, put them on the field or the court to win. similarly, the united states, up until quite recently, has been that equals lint for human capital. if you were very good or really good at anything, you wanted to come here. the early data is starting to show signals that is changing. i think that is bad. that is irrespective of any ideology. we want the smartest and best people here working on behalf of americans and america. anything that impacts that has

long-term negative consequences to gdp and value creation. emily: how is he impacting venture-capital so far? >> on that human capital side, we are seeing businesses having a terrible difficulty recruiting people. that means wage inflation, which doesn't really add anything, because that means you are burning money without incremental productivity. two, you are starting to see competitive business is be creative in increasing velocity outside the u.s., in canada, and china, and india. that is generally bad if you think about businesses that could theoretically be built here, where the value is then captured within the u.s. emily: do you think the u.s. could lose -- >> i think it is losing it. we saw a report today that said mba programs, they have seen the most market decline in applications from foreign applicants. in the short term, that might be good, but in the long term, the

reality is there are some free agents we should be poaching from other countries and putting them on our team. emily: you spent a lot of time with mark zuckerberg in the early years navigating rough times at facebook as the company matured and zuckerberg matured, do you see parallels with what's going on with uber and travis kalanick? >> it's hard to know because i'm not in the situation at uber. here is what i will tell you about facebook. in those moments where we pushed certain boundaries and the way we build and design certain products, or how we were exploring the consequences and reach of privacy, and we had hands slapped or we learned things, we internalized the cost benefits and the trade-off of the potential of what we wanted to build, and the impact of that to humanity versus taking a methodical approach. since then, i have to say facebook has been basically flawless. i think the opportunity for them to realize is that their ego is not as important as the impact.

the minute you make that transition, there's just a different caliber of individual, particularly at senior ranks, that you will attract and will want to work with you on those kind of problems. it seems from the outside, there are early signals that transition is happening. i hope it's working. the human potential impact of uber is undeniable. emily: what are your recommendations to travis specifically? in your position outside the boiler room, as an observer. >> i think that when you are in a company that is that iconic and unique, the biggest thing you have to do is become a lot more introspective, and inside-out validated. when stars and famous people and rich people and ceos call you and want to spend time with you, and take you out to invite you to things, all this external validation that makes you feel important, you have to ignore it. in fact, you have to run away from it. you have to spend time with your engineers in the boiler room of making the product every day.

when you strip yourself of the outside validation, you learn to validate yourself inside out. i'm not saying he hasn't done that, but what i will tell you is if you can make that transition, you can become an extremely powerful ceo. i think mark is an example. emily: my colleague, brad stone, wrote a book comparing uber to airbnb. i will put the question to you like this, uber or airbnb? >> if you had to pick a more natural monopoly with pricing power at scale, i think it is airbnb. the reality with uber is that it is a fundamental consumer surplus business where there is still risk that the entire business model is about cost of capital. in the world of autonomy, what you have is the ability for new entrants with huge balance sheets -- google, apple, facebook, companies you never would have imagined competing with you, could because it's a function of having enough money to buy another autonomous cars because you already have the customer reach. you can then model the demand

well. in a market like that, there is potentially value erosion overtime, because you have more players, not less. in the case of airbnb, what they really have to navigate is cost-effective customer acquisition at scale. instead of having many problems and many potential competitors, airbnb has to solve internal capability issues. if they solve that, it is probably the next massive company to come out of silicon valley. emily: you are bullish on amazon, and you spend a lot of time at facebook. amazon or facebook? >> the thing i think about is you have to find eventually be -- have to fundamentally be in the largest most unconstrained market possible. when you look at the world where dollars are spent. advertising is a $200 billion plus market. it has created $1.1 trillion value between facebook and google. it's incredible. emily: but facebook is running out of space to put its ads. >> but at the end of the day, the thing that is fundamentally unconstrained is consumption by consumers. wherever there are people making

more money than they spend, they will find a way to allocate whatever is left over to buying things. to the extent that buying things is the most important part of gdp in america, and usually in most developed nations, so the company that dominates selling you things you want to buy will probably be the largest thing in -- company in the world. i would have to pick amazon. emily: that does it for this edition of the "best of bloomberg technology." next week, we're taking the show on the road to boston, broadcasting from different locations every day. we will have an exciting lineup of guests, including exclusive interviews with marty walsh, charlie baker, harvard president drew faust, and general electric's ceo. that's all for now. this is bloomberg. ♪

♪ >> there were two incidents where you almost lost her life. over the a.m.nt trace. you showed of you could do push-ups. general petraeus, the only time i ever stopped at 50. you had never before had people working with you where you were killed in time that -- combat. the president calls and ask you to do something you do it. people would recognize me if my tie was fixed.