mark: i'm mark crumpton. you're watching "bloomberg technology." here is a check of the word news. nikolas cruz, the former student charged with killing 17 people at a florida high school last month, remains silent during a court appearance today, so a judge entered a not guilty plea on his behalf. prosecutors filed formal notice of their intent to seek the death penalty on tuesday. fbi's acting deputy director tells lawmakers the bureau missed critical tips on its public access line prior to last month's school massacre in florida. on september 25, we received an emailed tip from a person in mississippi, who indicated that a person unknown to him posted on his youtube channel the following text -- "i'm going to

be a professional school shooter" from a person named nikolas cruz. mark: students across the united states took a stand and took a walk to protest gun violence. organizers hope it will be the biggest demonstration of student activism yet. in other news today, attorney general jeff sessions could fire former fbi deputy director andrew mccabe days before his scheduled retirement. the justice department believes mccabe was not forthcoming during an internal review linked to a clinton investigation. global news, 24 hours a day. i'm mark crumpton. this is bloomberg. "bloomberg technology" is next. emily: i'm emily chang.

this is "bloomberg technology." coming up, tesla's, turnover. -- tesla's talent turnover. three senior executives hit the road week before a critical profits report goes public. and a new frontier for venture capitalists. why start of investors are starting to look harder at america's midwest. but first, to our lead. elizabeth holmes has been accused of fraud by the sec in addition to the two-year ban she was already serving from operating blood testing labs. the suit and settlement announced wednesday. details how holmes and her chief deputy lied for years about their technology, snookered the media to get investors to hand

over more than $700 million to keep the closely held company afloat. recall the company claimed it could run multiple tests on just one drop of blood at a fraction of the usual price but was forced to shutter its lab after thousands of patient results had to be corrected. joining me now, the reporter who covers biotech and health care and our reporter who covers all things start up. olivia, remind us why this is also relevant and how theranos got into trouble. olivia: fascinating story and fascinating filing that was dropped today, accusing homes of fraud. if you step back and look at the company, holmes was promising several tests with the printable a finger. of

turns out you could not do more than a few dozen tests. they promised they would have $100 million in revenue in 2015. it turns out it was a little closer to $100,000. all sorts of bold statements. i think it is this symbol of silicon valley where companies feel the need to fake it until they make it and make bold promises and say those promises are a current reality. emily: max, i remember customers who came forward saying their tests were wrong. we are talking critical tests about one's health. what is the scale of fraud that holmes is believed to have committed? max: that is something that has gotten forgotten when you have such a long financial fraud focus. this company, in addition to defrauding investors, also ran what amounts to at the very least a badly run if not

fraudulent company, promising something they could not really deliver, and they went on to void a bunch of blood tests that people may have made health care decisions based on. that is why i think that this sec investigation is settled for elizabeth holmes, this might not be the end of the story for her or for theranos. they're still a chance there might be criminal charges filed as well. emily: i vividly remember when "the wall street journal" published its first investigation of elizabeth holmes and theranos in october 2015. she appeared at a "wall street journal" conference to respond. listen to what she had to say. >> i read what was written in the article. we disagree with it. we think it was false and misleading. i know what we have done, which is the decision to voluntarily work with the agency. we interact with them all the time. we have chosen to take a path

that is hard, and i believe in it incredibly strongly because it is the right thing to do, and i personally in arizona worked very hard to change the law to allow individuals the right to order lab test directly, and i cannot do that without knowing that the tests that are offered are of the highest quality. emily: the sec has sent as a result of this investigation innovators who seek to revolutionize and disrupt an industry must tell investors the truth about what their technology can do today, not just what they hope it might do some day. what is the sec actually saying? olivia: this is a huge statement from the sec, which usually does not make such bold announcements in the press. i think they are using this as an example for other large unicorns, especially ones staying private longer, to let them know they will not be able to get away with making false statements.

emily: walk us through what the penalty is. does the penalty seem reasonable? max: i was a little bit surprised. while it is definitely severe in certain aspects -- elizabeth holmes has to give up a large portion of her stake in theranos and will not have voting control of it anymore, but it is only a $500,000 fine from her personally. considering the scale, it really seems pretty surprising that it happened, especially when we recently had another health care fraud from martin shkreli, who got seven years in prison for what the government determined was a $10 million loss from investors. emily: what does it mean for theranos investors? olivia: i think we will see a lot more lawsuits. there's more to come.

the chips will continue to fall. actually, elizabeth holmes is one of the company's largest shareholders, so she is one of the largest investors herself and in many ways has been a victim of her own fraud. we know she does need to return $18.9 million to investors, but that is a small portion of the $700 million she raised, so i would not be surprised if there are more lawsuits and if various investors go after members of the board and if various members may have known what was going on at the company. emily: it's unclear how much theranos is one egregious example or if other biotech, health tech companies are out there pushing boundaries in a similar way. what is your sense of that and if there will be wider examination or wider crackdown on other companies in this space? max: i think i come down on the side that this was if not

isolated, definitely a particularly egregious and unique example. there's a gray area where fda scrutiny and approval for lab tests is not quite as rigorous or consistent as you might get for drugs and other things, and i think there's a lot of room in the sector for companies that have a better track record of explaining what they do and how they do it, as opposed to theranos, which was a lot more secretive. you will see a lot more scrutiny and a higher level of diligence, especially in cases like theranos where investors who were not really subject matter experts invested in a scientific task. one of the most recent health tech private investments was in a company trying to develop a blood test for cancer. there is still interesting science. people will invest, but they will definitely be a little more careful in the future.

emily: thank you both. we will continue to follow. speaking of the sec, a former equifax executive faces charges of insider trading. federal prosecutors announced a grand jury has indicted him for selling off nearly $1 million in equifax stopped just before the company's massive data breach was announced. he allegedly received information in late august alerting him to the breach, but the company did not disclose it until september 7. coming up, wework is leading the way in office space and wants to make a push in education. that's next. and if you like bloomberg news, check us out on the radio. this is bloomberg. ♪

emily: broad com may have dropped its $117 billion bid to buy qualcomm but is still moving ahead with plans to relocate from singapore to the united states. the chipmaker first designed to move in president trump blocked november. the deal on national security grounds, ending a bitter battle that would have resulted in the tech industry's biggest acquisition ever. by now, you are probably tired of hearing about wework's plans, but it announced new plans for the education industry. they launched the first u.k. , announcingrtnering

$1.4 million in scholarships. caroline hyde is standing by in london with more. caroline: thank you. we are joined by the managing director for europe, israel, and the pacific for wework. wonderful to have you here. education in london. why start here? you are what in washington. why offer education within wework? mr. miropolski: london was the logical next step for us. since we were founded in 2010, we have always thought about how we can have able be part of something bigger than themselves, how we can help them to create their life's work. as the future of life is changing, the future of education is changing, so london was a logical next step because it is our second largest market, and there is a very booming tech scene. caroline: for underrepresented

communities and technology, women and those not so financially sound, why offer these scholarships? just to get a thumbs up from the government and some diversity? mr. miropolski: our communities are very inclusive, and we see that there are underrepresented groups in tech, and we wanted to help them get the skills that will be required from the future of their work. caroline: london is an interesting market. i read a statistic, the number one private sector user of office space. how are you expanding here? where else will we see you popping up? mr. miropolski: we've been expanding very fast in london. we have currently 22 locations in london and another 13 that will be opening very soon. we are creating a network within london where people can work out

of one location or another, but what is also important is to connect with other wework members in a global community in over 60 cities in over 20 countries around the world. caroline: you are in charge of israel and southeast asia. where are the hotspots? mr. miropolski: i do travel a lot and i think we do have a lot of hotspots. there is a macro shift in the way people want to work and we are seeing the beginning of that shift. people want to have work that enables them to have meaning and purpose for life. this is happening all over the world. there are definitely markets that have been more established for us. at the same time, there are very fast-growing markets like berlin and southeast asia. caroline: what about acquisitions? are you a man having to do deals? we saw wework forming

partnerships. what companies are you lining up and how does that help what you are trying to achieve? mr. miropolski: every day, we wonder how we can offer the best services. apart from the space and community we offer, we are thinking what other services our members need. we are looking for natural extensions -- the education space, with meetup. caroline: where do you see acquisitions coming from? mr. miropolski: so far, they have been from all around the world. some recent ones have been from the u.s., but at the same time, even when we acquire a company in the u.s., we are thinking how we can offer certain services globally. caroline: it is fascinating you are in charge of israel as well. not a small chunk of change.

it's $1 billion of debt potentially from institutional investors. is this correct reporting, and why are you looking to the debt market? mr. miropolski: i cannot go too much into detail into the specifics, we are an international company operating in 60 different cities in 20 countries. the important thing is building the community and finding out what kind of services they need. sometimes in different countries, they often need different types of services, but for us, it is always important to be very close to our community. caroline: do you need more funding, deeper pockets? you've already got $4.75 billion coming from the vision fund. are we going to see wework needing more money? mr. miropolski: i think we will see wework expanding very fast across many different new countries as well, but at the same time, we will see new product lines. caroline: you are clearly a man who will be spending a lot of time on a plane.

it has been wonderful having you here. emily? emily: caroline hyde in london, thanks so much. coming up, lyft cuts a new deal with magna to develop autonomous cars. we will give you more on the race for self driving cars next. and on tv go, you can check out our charts and graphics. and you can check us out on twitter. this is bloomberg. ♪

emily: whatsapp is throwing a

new curveball into india's financial markets, launching a payment service allowing 200 million users to transfer cash to one another. mobile payments caught fire after the government took to a 86% of paper currency temporarily out of circulation, which also temporarily disrupted markets. lyft has struck a multimillion dollar partnership with north america's biggest automotive supplier, magna. as part of the deal, magna made an investment in lyft. magna has also committed to working with lyft to develop autonomous cars. magna is a supplier for companies as big as ford. eric: right. they are providing technology and supplies to these automakers, so the idea is they could work with lyft to develop

-- build onto a car to develop this technology. around san francisco, you see built on technologies, so it is sort of added on top of the car. emily: how does this fit into lyft's larger strategy? eric: lyft has a very partner-driven strategy. they want everyone to have self-driving cars. their fear is that if one company has the technology, that company has all the leverage and could build its own ride sharing network, but they want to facilitate getting that technology out there, which is why if you have a supplier like magna sharing intellectual property with lyft, they can go out and sell it. lyft can get their own version on their platform, so it allows them to stay competitive and facilitate it getting out there to everyone else. uber invested super heavily in building its own technology.

the acquisition of auto, which became a debacle, and the investments around carnegie mellon, so it has been a town of money building a huge, autonomous vehicle program of its own. emily: is it working? eric: it is so hard to judge right now, but they are continuing on it and we will have to see where they stack up. emily: when it comes to progress, uber, though, is certainly ahead of lyft? eric: in terms of its own proprietary technology, yes, but lyft has struck a ton of partnerships. it's a matter of if it will be more powerful to have your own technology or to have relationships with other companies that have that technology. emily: more broadly, tell us about how the uber versus lyft competition is shaping up since

new leadership at uber and lyft just got a big hire from tesla. eric: the chief operating officer came from tesla, so that was a big get. the competition continues. more and more, you here lyft trying to get to more than 50% of markets. now the question is -- are they going to get a larger share? that is the question. we will have to see if the brand lift that they got sort of carries lyft the on 33% to actually winning some market. emily: it recently opened its first international market, toronto. clearly, uber is around the world, though not always with success. will that be lyft's achilles' heel, or will this slower growth benefit them in the future?

eric: it is interesting, the story versus profit. it should benefit lyft that they're competing in a wealthier market where profitability is more possible. certainly, uber is spending hundreds of millions if not billions around the world, losing money competing. we reported they are in talks to sell their business in southeast asia. uber clearly is not necessarily thinking those investments are something it wants to keep spending money on. at the same time, uber will walk away with a large stake in those companies. so there is value to that, and we will see if lyft misses out. emily: eric, thank you very much. coming up, the majority of venture capital in the united states is funneled into

companies in california and new york, but the midwest, which has long been overlooked, may be the startup world's new darling. this is bloomberg. ♪

: it is 1129 in singapore. there is a choice to succeed gary cohn as economic advisor. he says he is honored to be offered the job. he also served as an advisor to president reagan. russia says the expulsion of 23 unjustified and shortsighted.

the expulsion is the biggest since the cold war. the u.k. has cut high-level contacts. fungal a merkel is starting her fourth term as german chancellor every this brings to an end six months of clinical drift. theyoalition is hoping have 399 of 709 seats. she hopes to give up the finance economy and foreign ministry to read >> government can asian stocks set for a second day of losses. pickups not really transmitting into the asian session. i want to highlight some equity movers. leading the event on the nikkei two rising after goldman

upgraded the stoxx. theworst two-day drop since summer of 1996 after hitting a record high. check out what is going on with china molybdenum him. a fresh all-time high. announced ahina deal to buy cobalt, which pushed up prices. you can see that. cobalt rising to a record. the line in yellow, jumping over 7%. china leaping ahead in the race to secure cobalt. in hong kong, we are seeing stocks swinging to gains. the biggest boost on gains. china unicom, our third session ahead of results. consumer companies, they are sliding, led lower.

concerns,n earnings generally upbeat. strong fourth-quarter sales. players seeing benefiting. the tapering of a discount. that is a look at the markets. emily: this is "bloomberg technology." i'm emily chang. more than half of venture capital invested in the united states goes to the national companies in california alone. but is more than half of innovation really happening here? an ohio-based venture capital firm hounded by two former sequoia capital partners has invested in 29 companies to date. chris olsen, drive capital partner and founder, joins us now from columbus. i'm thinking about companies like whatsapp that sequoia backed and sold to facebook.

how have the opportunities you found in columbus, ohio, compared to what you left behind in silicon valley? mr. olsen: it's a great question. they had dramatically exceeded expectations. when we first got here, we did not know how many companies we would see. we started out, we saw about 1800 companies a year. last year, we saw about 3500 investment opportunities coming into drive. these were inbound referrals, midwest technology companies. that compares to what a typical silicon valley firm would see is about 4000, so we're not quite as silicon valley's level, but there is a lot more here than even we first anticipated. emily: peter thiel is leaving silicon valley for l.a., calling it toxic -- peter thiel. do you agree or disagree?

mr. olsen: i don't know that silicon valley is over. the amount of $50 billion or so that gets invested into bay area companies from the venture world -- i don't know how that happened. what i do see is what is happening out here is just starting. what we are seeing today is a thriving ecosystem of lots of technology startups with real innovation and entrepreneurs and founders created next generation artificial intelligence platforms, next-generation agriculture, all kinds of things -- robotics -- where it's hard for me to look at what is going on here and say it's anything other than the frontier of innovation. i see what's going on here starting to catch up to what may be initially started in silicon valley. emily: the amount of investment in california and new york, a majority of investment in the united states -- is that a

mistake, or are companies in the midwest coming into their own and will garner a larger share of that investment going forward? mr. olsen: i can only tell you what we see in our portfolio. if i look at our portfolio now, we have raised about $500 million of following capital from the coast where venture firms from silicon valley, new york, boston, are flying on airplanes, coming here, saying they would rather invest in these companies in the midwest than they would in the ones in their backyard. that is a new thing and certainly is a growing number. that number for us continues to double on a year on year basis, so i think it is inevitable that more of these vc possible star staying here. you will find more founders getting more capital and the efficiency of that capital goes so much farther. we have also seen a lot of technology companies that may be

started on the coast. they are also moving their businesses here. seven companies in our portfolio have moved here. i think this is a trend you will read more about, and as these companies get bigger, they will be more in the newspapers than they have been in the past, and i think they will pay a lot more attention now. emily: talent must be a huge hurdle. you guys have just hired your female partner. mr. olsen: cheaper does not help. the midwest has always been cheaper than the coast. we don't have an ocean. the reason people should move here and join jobs in midwest technology companies is because they believe this is their opportunity of a lifetime, and if you are somebody who is highly skilled and highly technical and has the opportunity to work in any place you could work on planet earth, you are going to choose to go to the place where you personally

have the best opportunity, and people measure that in different ways. one of those ways is certainly with the amount of impact an individual can have in these companies. we have seen a plethora of companies like twitter, facebook, amazon, google -- go down the list of technology companies -- that are joining the senior leadership of our portfolio companies. that's great, but there's an awful lot of people in midwestern cities that are trained as engineers who have a fundamental understanding of these industries in which they have been working, and if they apply that to what is now a west coast approach to building startups, they can really unleash a lot of attention. we are seeing the numbers were today we have about 1800 people in our portfolio. that is up from about 900 a year ago, and that number will probably double again this year. access to talent here has actually been a lot easier than it is in markets that have a lot more startups competing for that

same level of engineers and the same level of senior managers. emily: we've been covering the sec accusing elizabeth holmes of theranos of fraud. so many investors were excited about her. is that a failure of silicon valley groupthink, and are you more protective given where you are? mr. olsen: i don't know what went on exactly, but you cannot just take technology and put an app in the app store and start to make bold claims the way you can for a videogame as you can are? mr. olsen: i don't know what in an industry like health care. we see that across our portfolio where companies that are in regulated industries like insurance or health care or financial services -- you need to invest early on in more regulation kind of support for your companies to make sure your

companies are compliant, that you are making claims that are accurate. in silicon valley, as technology sprouts into these industries where there is a lot of required regulation, it is incumbent upon them to have a higher bar for the claims that they are making. the downfall of this might not be that our revenue goes down. the downfall might be that someone gets hurt. there's an added responsibility to put the guard rails in place to make sure and customers are not hurt in that process. emily: chris olsen, thanks so much for joining us. coming up, the founder of taskrabbit talks about leaving the start of world and her latest passion project next. this is bloomberg. ♪

emily: leah busque broke into the startup world as the founder of taskrabbit. she has been an outspoken supporter of women in silicon valley and just launched a new organization called shine together to highlight stories about female leadership and growth. she joins me now and we are going to shine a light on shine together in a moment, but i want to talk about your transition from taskrabbit, which you ran for eight years, and joining fuel. what has that transition been like? ms. busque: it has been incredible. it has been an entire decade since i found the taskrabbit, and i realized that i am an engineer and passionate about emerging technologies.

to now transition to this next chapter where i get to stay at the forefront of emerging technologies every single day and meet with fantastic entrepreneurs has been a dream come true. emily: i'm sure you are drawing on everything you learned about the sharing economy and the gig economy. where are they going? ms. busque: one area i'm passionate about as an investor or consumer marketplace businesses, and they spanned the sharing economy, the gig economy. the future of work is changing, but there's lots of other marketplace models as well, so it's an area i'm spending a lot of time and focus in. my first investment at fuel is a company called work, which is a flexible jobs marketplace run by two fantastic women in new york city. emily: tell me about what you think is underappreciated and what is overhyped. what has potential and what has too much buzz?

ms. busque: my partner and i spent a lot of time building up networks here, operating here, learning how to build a start up in silicon valley. my passion is finding people that do not fit the mold in any category, in any area -- whatever the hype area is -- and shining a light on them and investing in them because they are the future of these companies. emily: we were just speaking with an investor at drive in columbus, ohio. "the new york times" just did a piece saying that silicon valley is over. do you see opportunity outside of silicon valley more than you see inside it at this point? ms. busque: i see opportunities in a lot of places where other

investors probably are not going to take the time to look. if that's geography, location, that could also mean pedigree, school, institutions. i sit on the board of a liberal arts women's institution in virginia. i think as an investor, if you want to stay current and stay with evolving technologies in the evolving landscape of technology, you have to be willing to look in all different types of places. emily: let's talk about overlooked women. you are launching a new thing called shine together, sort of an outgrowth of #metoo and #timesup, changing the conversation to a positive one. what are you trying to do? ms. busque: my partner and i had the idea that there was room for a positive conversation or

happen within this movement, so shine together is dedicated to celebrating and amplifying women's stories and really celebrating the everyday heroes that you might not typically hear about. emily: stories about harassment and sexism continue to pour out. we've got a new story out of microsoft that they got over 200 complaints from 2010 to 2016 about sexual harassment and discrimination. i keep getting questions about why hasn't the me too movement in silicon valley has not taken off more the way it has in hollywood. what needs to happen for that to happen, and will it happen? ms. busque: both jamie and i were deeply inspired by valerie jarrett, former senior adviser to president obama, and all the women in his cabinet and administration. they had made this pact basically to shine each other, to amplify each other's voices in meetings so that their ideas would be heard.

jamie and i thought -- what if you could take this concept and apply it and scale it across all industries, across all different types of conversations? that was really the precipice for the idea, so we got valerie on the phone and said, "tell us how you did this, and do you think we can scale it?" what we do in silicon valley is scale concepts and companies, and we are working to see if we can scale this idea of shining a light on each other. emily: leah busque of shine together and fuel capital, thank you for joining us. coming up, when it comes to retaining space rockets, elon musk is the king, but when it comes to retaining talent, that's another story. that's next. this is bloomberg. ♪

emily: after conquering reusable

space flight, elon musk is getting ready to take on comedy? after finding himself and tesla the butt of some satirical headlines like -- the billionaire has been hiring former staffers and writers of the same satirical website. no word on if the secretive new comedy project will make its debut before musk gets us to mars. when it comes to shooting a rocket into space and landing at back on earth, for elon musk, that is not a problem, but getting the model three out the door and holding on to tesla executives is not quite so easy. within the last two weeks, tesla lost two more top financial executives amid controversy on the model three. what can tesla due to take charge? how serious are these departures? max: it is important to remember

that tesla is not a normal company in any sense. elon musk is a very hands-on manager. he has a reputation for being a hands-on manager, and there's always been a little bit of this kind of churn thing going on. the other thing is we were sort of warned about this. musk has been talking about "production hell" and discussing various possible circles of production hell that they might be in, so the idea that you are losing some executives sort of makes sense and is maybe a sign that predicted thing is happening. on the other hand, this is going to be a huge of hell climb, and -- uphill climb, and if they are not able to keep people in that factory or managing the factory or running the business, that's going to be a huge problem and make it all the harder to get to these enormous numbers that they want to get to by the end of this quarter and later in the

year. emily: bloomberg has built a special tesla model three production tracker. how is the company doing? max: all credit to our colleague tom randall on this, but basically, we think that tesla, based on the vin's they have been putting out there to customers have been reporting to us and that they have been getting from the government, that they are doing a little less than 1000 a week. they are supposed to be up to 2500 by the end of this quarter, so they are a long way to go if you believe our model. we do not know how good the model is, but it is definitely a slightly discouraging sign. emily: thank you so much for that update. on a sadder note, stephen hawking, whose brilliant mind raged across time and space, though his body was paralyzed by disease, has died. he was 76 years old.

hocking passed away at his home in cambridge, england, according to a statement by the university of cambridge. three years ago, bloomberg took a look at the technology that helped hawking communicate his thoughts. take a listen. mr. hawking: medicine has not been able to cure me, so i rely on technology to communicate. >> that vital system has recently gotten an upgrade. tasks that used to take three or four minutes now take around 10 seconds. intel has been working with even hawking for decades, and the latest upgrade was over two of years in the making. >> we completely changed the way he is interfacing with these aspects of the system to have him not rely on the mouse. whatever he happens to be doing, we would serve the most logical things he might want to do.

>> the company who software runs predictive text has doubled his speech rate. it considers if there were errors and what he was last saying. it analyzes dozens of his documents, some published, others not. >> the tests we ran show that a given body of text made up of a certain number of characters, professor hawking would only have to enter around 15% to 20% of those characters, and the rest would be inferred. >> this is the crazy part -- everything stephen hawking does on his computer is triggered by one muscle in his cheek. an infrared sensor senses when his cheek muscle moves up, just as our smartphones can sense when we are close. >> you can actually today say yes or no by moving eyebrows. one of the things we have been

working on is using a camera system to detect different movements, so now he can undo things by saying no, rather than having to manipulate the whole screen to get to a backspace button, for example. >> intel is even trying to develop brain control interfaces to help people who can no longer move any muscles at all. it represents the next leap for assistive technologies. emily: that does it for this edition of "bloomberg technology." later, bloomberg technology editor michael mckee will be speaking with canadian prime minister justin trudeau. you don't want to miss that. this is bloomberg. ♪ retail.

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