♪ emily: i'm emily chang, and this is "the best of bloomberg technology," where we bring you our top interviews from this week in tech. coming up, facebook ceo mark zuckerberg wraps up his grilling before congress. the biggest takeaways from those who hold the power in washington. plus, a bloomberg exclusive. our conversation with anthony noto on his plans to rewrite the rules in the online loan refinance or and revamp the culture. and it's the big apple versus silicon valley. we explored the new york tech

scene with the ceo of the fin tech startup, betterment. but first, it has been a long week for mark zuckerberg. still, he emerged mostly unruffled after two hearings before congress. he generally kept his cool, even as lawmakers downplayed his apologies over failures to protect user privacy and his assurances to do better. some coming up the facebook ceo with stern words. take a listen. >> how can consumers have control over their data when facebook doesn't have control over the data itself? that is my concern. >> who was going to protect us from facebook? is also a question. >> mr. zuckerberg, i think your cozy community, as dr. martin jamieson recently said, is beginning to look a lot like "the truman show," where people's identities and relationships are made available to people who they don't know. >> your platform is still being used to circumvent the law and allow people to buy highly addictive drugs without a prescription. with all due respect, facebook

is enabling an illegal activity , and in so doing, you are hurting people. >> you said everyone controls their data, but you are collecting data on people that are not facebook users, and you are collecting their data. emily: so where does the social network go from here? we posed that question to roger mcnamee, and our very own sarah frier. >> so all those times during that 10 hours of testimony that zuckerberg said, i will have my team follow up with you on that, now that is happening. the congressmen are getting their questions to facebook staff, facebook staff has to go through and meticulously answer them all, then we will get some really interesting answers that take a little longer than those five seconds zuckerberg had to respond. >> and he said i will have my team follow-up with you many, many, many times. roger, i'm sure you were

listening. how satisfied are you with what you heard from mark zuckerberg, and how satisfied were you with the questions from lawmakers? >> i would give both mixed results for reasons that i think are obvious about the structures of the hearings themselves. during the senate hearing, in the first hour and a half, there were at least a dozen different issues that senators raise, areas of serious concern, and that helped mark respond because he did not have to worry about prosecutorial technique being applied at him, hammering at the same issue over and over. he was able to say i will get back to you and move on to the next topic. the problem with that, and this is where i think he has a real issue here, is that facebook may be like a rock, but this scandal is like water pouring over it. it will erode the rock. in the trust of facebook is in severe jeopardy right now, and

mark and sheryl have no one to blame but themselves. they have handled this thing in a cavalier fashion, and it is really serious. we are talking about democracy, about civil liberties, about the rights of human beings in places like myanmar and the philippines. they have to be more focused. emily: that said, mark zuckerberg told us that it hasn't had a meaningful impact on usage. sheryl sandberg told me and sarah frier that only a few advertisers have caused spending. then we had this opinion survey. how do we make sense of that? >> i don't know about the opinion survey. it's really easy to say you deleted the app whether you have or haven't. i would be stunned if we don't see a change in usage, both in the march and june quarters, because of this in north america and western europe. i just think the erosion of trust is so staggering at this point. from facebook's point of view,

they -- it goes after just what the business really is, and i think they have forgotten that they don't have a birthright here. they require consumers willingness to work with them. mark's responses to a lot of those questions, particularly senator dick durbin's question about his hotel room, would you divulge where he had stayed, and then the representative's comments about the business model and the inherent invasions of privacy, those things are a tell. they give consumers a sense, wait a minute, they view us as fodder fuel for their profit, , they don't view us as customers, or even human beings. emily: there was another issue that came up several times, specifically in the house hearings, where the questions were, rightfully and luckily, more pointed and better informed than in the senate hearing. representative kathy castor asked this of mark zuckerberg, about what happened, and how does facebook track users off facebook, including users who have never signed up for facebook?

take a listen to that exchange. >> you are collecting personal information on people who do not even have facebook accounts, isn't that right? >> congresswoman, i believe -- >> yes or no? >> congresswoman, i'm not sure that's what we are tracking. >> know, you are collecting -- you have already acknowledged that you are doing that for security purposes and commercial purposes. you are collecting data outside of facebook. when someone goes to a website and it has a facebook like or share, that data is being collected by facebook, correct? >> congresswoman -- >> yes or no? >> that is right, that we understand -- in order to show which of your -- >> so for people who don't even have facebook, i don't think the average american understands that. emily: roger, is it true that several other internet companies do similar things like google, and if so, what is so bad about this?

>> so i think there are a million things that are wrong with it. yes, lots of internet companies do it. i use a product on my phone and on my computer to block trackers exactly like this. it is simply frightening. for any given page or land on, -- i land on, there will be between half a dozen, 15 different trackers of people attempting to insert into my browser as i'm searching around the web. in my mind, the whole thing is a massive invasion of privacy, predicated on a lie, on this notion that none of this is really going on. as consumers begin to understand the degree to which they are being used as fuel for business models, that they have no real benefit from, i think that is -- again, the trusts the roads a lot further and it goes way beyond facebook. i think facebook is in the crosshairs because of its impact on elections is so great, but in

reality, in every day life, google has a profound impact, instagram, snapchat, and especially youtube have an unbelievable impact on society and on mental health. emily: but roger, one of the reasons people are really upset with facebook in particular is because facebook is going out there and saying you are in control of your data, we built this for you, you own everything you do on our platform, it's all about you. this questioning from castor really caught at that point for zuckerberg. it's not your choice to share your data. facebook is tracking data on people who don't even have accounts. >> i think you are exactly correct, exactly correct. and i think representative castor -- that was a brilliantly well-informed question from a legislator charged with protecting the public interest.

we all owe her a massive thanks, because she and literally a couple dozen other members of congress, did us a public service. they exposed a lot of the nonsense that is going on, and one representative asked an important question, senator blumenthal, senator klobuchar. it was a really long list -- senator kennedy. when i look at this, the problem is that we were asleep. we love the products, we love the convenience, we love the fun, we love the kitten photos, but at the end of the day, in order to monetize that, these companies got involved in surveillance, and the surveillance they did is every bit as intrusive as what a spy agency would do. the difference is that they are not doing it for the national interest, but for profit. emily: roger, you will stay with us. sarah, i have to let you go, but before you go, you are following up on things in the hearing that were surprising, like cambridge

university and what zuckerberg had to say about that, that they are investigating whether something bad is happening there. what else are we, the bloomberg news team, looking into? >> one of the important points in the testimony was that ai was going to solve everything. all these questions about whether facebook is treating its content the right way, whether there are biases, taking down hateful content fast enough, they offered ai as a solution to all of that. ai is trained by humans, that have the same biases as any of us, and it's not going to end well. emily: that was roger mcnamee and bloombergs sarah frier. google's youtube is being accused of violating u.s. law on children's privacy. a coalition of child advocacy has asked the government to investigate. the groups say youtube uses the information to illegally target ads. youtube said in a statement that

it will look into the complaint to determine if improvements are necessary. coming up, our exclusive conversation with anthony noto on how he is shaping the company's future, now that he is at the helm. and later, we will hear from representatives from california and new jersey, their reaction to the facebook hearings and thoughts on the future of tech regulation. this is bloomberg. ♪

♪ emily: in the battle for e-commerce supremacy in india, walmart may be about to leave amazon in its wake. india's leading e-commerce company is said to be leaning towards selling to walmart, according to people familiar with the matter. both are bidding for a controlling stake at a $20 billion valuation, $8 billion more than their 2017 valuation. if completed, it would give walmart a major stake in an emerging market of 1.3 billion

people. michelle gill, a former goldman sachs executive, is the next cfo, filling the role that has been vacant since last summer. it is the first major appointment by the new ceo anthony noto. they also announced they surpassed half a million users. we caught up with him in san francisco to talk about his plan since taking the helm at sofi. >> we have to continue to build on our core loan products and student loan refinancing, personal loans, mortgages. we need to continue to build out. the real opportunity is to add financial services product, including sofi money, sofi wallets, the ability to invest with us, and sofi credit card, and sofi advice. much of 2018 will be building those products, while still making sure core products perform well. emily: you have been there six weeks. what is it you want to do differently? >> the most important thing we

do as a company is built a cold sure we are proud of, the culture that is welcoming and inclusive, a culture that reflects society. we have to have a diverse employee base if we will serve our members, and our number one core value is that members' interests always come first. to serve them well, we have to reflect society, and we have to have a diverse employee base. emily: you mentioned culture. the former ceo left amid sexual harassment allegations, the cfo , as well. employeesalf a dozen have stepped down as a result of the chaos. when you walk into a company, what is your first order of business, knowing that the culture has been toxic for a really long time? >> sure. we focused on three things in my first six-weeks. one was re-forecasting 2018, making sure we are aligned in our top priorities, building objectives. third, critically important to your question, what core values do you want to have as a company? we are building of a process

that took place after the change in management called one sofi, and i have worked with leadership teams to define our core values. they will build the foundation of the culture we are trying to build. next important step is educating the company on the core values, the behaviors that we accept, and expect, and rewarding those that are culture carriers. and punishing those that are not culture carriers. we will have no tolerance for employees that can't help build a great culture. emily: you just hired a cfo, michelle gill, from goldman, which is interesting, since goldman is increasingly your competitor. is this an effort to take on the goldman -- or the rest of the financial world? >> not at all, it is an effort to build a diverse company. and hiring the best leaders. michelle is a unique combination of a phenomenal leader, a financial expert, and the culture builder, and that set her apart from the rest of the candidates. we saw a great slate of candidates, so we are pleased we are able to hire michelle.

i did not know her prior to the process, and i really enjoyed the hours i spent with her, talking about the vision for the company, where we can go, and building a strong culture. that's a rare combination, we are lucky to join our team. emily: you have had a couple stumbles. the ipo, for example, has been delayed a couple times. why is that, and what are the challenges? >> it is important to recognize the incredible success the company has achieved, $12.9 billion of funded volume last year, up more than 60%. the company not only achieved positive, growing the top line, but also free cash flow. and gap profitability. we want to build on that success in 2018. one important area is the culture and building that foundation, but we have to invest in these other products that create more of the daily habit and more of a recurring revenue stream to a compass the -- to accomplish the overall mission, which is to help people achieve financial independence. aily: do you see sofi as

public company, and if so, when? >> it is not a priority in 2018, but we want to make sure we put in place the building blocks, strengthen our core products, invest in new products, and most critically, building up the membership experience. our ability to achieve an emotional benefit and rational benefit is bringing an emotional experience. so, two years? three years? what's a reasonable timeframe? >> i am not putting a time frame on it as much as i am conditions. emily: mark zuckerberg is testifying this week in d.c. before congress. facebook is in the middle of a huge controversy, and speaking of facebook, twitter has been dragged down as facebook has over the last few weeks. where did facebook go wrong? >> it's a very complicated situation for them in particular. i'd have to spend more time with you to go through my thoughts on it. i can say is what we are focused on, which is making sure we have

the right core values and leadership at the top of the company to ensure that our members are never surprised, to make sure their interests come first, which involves not just transparency, but also information and education. as long as we put their interests first, in addition to the information, and making sure they are educated in what they are doing, we won't surprise them and will avoid the pitfalls we are hearing about. emily: do you think tech needs to be regulated? >> i think an industry is regulated when they can't adequately abide by some standards that they established in running their business. if the leadership can step up in different companies, the right consumer environment, then they will do it themselves. there's no need for an outside source then. emily: the financial industry has been regulated for a long time, and some would say tech cannot regulate itself. so does that mean tech needs regulation? >> tech is a pretty broad term, from software to hardware, to consumer technology and media.

in the media landscape, there's a fair amount of regulation. the ftc, some of the other important regulatory bodies, do provide regulation that they all have to comply with, including personal, private information. there are new areas that require greater scrutiny, and leaders within the industry should focus on solving those areas. where there isn't transparency and there needs to be. emily: that was anthony noto. coming up, for smart capital is one of the biggest cc firms in new york. we will talk about the investment climate in new york versus silicon valley. this is bloomberg. ♪

♪ emily: apple is launching two versions of the iphone 8, the second year in a row it has

rolled out a new version. the new color option could boost sales of the overshadowed iphone line, part of the product red initiative, which donates a percentage of sales to fight hiv and aids. we have been covering all the angles of the unprecedented testimony of mark zuckerberg in washington over the last two days. since the cambridge analytica data scandal broke, it has put serious pressure on the staff, wiping out its gains in 2018. but what about investor sentiment in the private market? we discussed. >> i think the sentiment in the public market mirrors very much the private market. yes, yesterday people were pleasantly surprised that mark was able to handle the scrutiny and held his own. you saw that in the public markets. in the private market, we feel the same way. the overarching question is whether or not there's going to be increased regulation. i think he made a good point

that increased regulation for bigger companies like his are going to be able to weather the storm. the smaller companies, that becomes a much bigger burden. there is a question there, but ultimately, i do not see any slow down in private market investing. if not, a continued acceleration. emily: these questions you are asking about -- how are you collecting this data? is this really not necessarily legal, but does this meet our moral standard of what is possible? >> privacy has always been a concern, and these are questions we ask when any company is collecting personal data. it is how do you use the data? facebook is taking the stance that they are a tool company, and that piece wasn't important, or wasn't part of their purview. it puts increased scrutiny as

companies grow. emily: is the public market volatility in the tech market impacting private valuations at all? >> we haven't seen it. if anything, private company valuations have been steady, if not accelerating. emily: we often compare new york to silicon valley. new york, there are a lot of exciting things happening in the tech scene, but there hasn't been that multibillion dollar exit. when will that happen? will that happen? >> we are seeing a continued acceleration. there has been a lot of buzz in the market about new york and how it will grow. we have seen over the last five years a big increase in not only the number of companies that have been founded here, but the number of exits. we have also seen a nice pipeline of potential companies that will exit at multiple billion-dollar valuations, whether it is health, there are some in the pipeline.

the other question is where those venture dollars go. i get asked a lot, is new york a real market? is it a computed market? i say almost every single deal we have looked at over the last two years has had silicon valley competing for them. emily: you are first mark capital's first female partner, which is awesome. i just wrote a whole book about diversity in silicon valley. some of the things i have heard anecdotally is that new york feels like a more inclusive place. i talked to many on to produce who left silicon valley to come to new york and keep building the companies here. do you think there's any truth to that idea, that new york is less of a brotopia than silicon valley proper? >> new york has always been a melting pot. not only for the people here but the industries. we know that 40% of tech workers here are women, 20% are people of color.

that's a dramatic difference than silicon valley. so yes, i believe here it is a little more diverse. there is access to different types of talent across many industries. emily: but what still needs to happen? it is certainly not enough. >> certainly not enough, that's true. it's still a developing market, so we are seeing really nice trends here. i think we will continue to see more dollars come in, in the third quarter of 2017, we saw more dollars coming to new york. 4.2 versus 4.1. i think we will continue to see that trend. emily: coming up, washington's reaction to facebook ceo mark zuckerberg's testimony. and a reminder, all episodes of "bloomberg tech" are live streaming on twitter. check us out at technology

weekdays. this is bloomberg. ♪

♪ a♪ emily: welcome back to the "best of bloomberg technology." i'm emily chang. mark zuckerberg's time on capitol hill in his testimony is over, and a new bill has already been introduced to protect consumer rights. the consent act would require the ftc to create new online privacy protections for users of sites like facebook and google. congressman ro khanna of california's 17th district joins in the heart of silicon valley -- district in the heart of silicon valley joins us to discuss what new laws might be to come. ro: i was pleased that mark zuckerberg agreed to testify that he subjected himself to five hours of testimony, both in the senate and the house.

this was long overdue. facebook should have been testifying much earlier. i am pleased that he is at least open to well-crafted regulation. i was concerned with two areas. it seems like the senate as a knowledge gap. many of the senators have not used facebook or twitter, and it was apparent after they asked their first question. they were unable to press mark zuckerberg or get into the depth. it is not zuckerberg's job to clean up the mess, but it is also congress's job to pass laws, and provide strong protection for the american public. there was not sufficient commitment or discussion about what an internet bill of rights would look like. emily: what should congress do? ro: i think that there is some very common sense things that we should do. you ought to have a right to

know your data. if you want to know your financial information, you can go get your credit report. you can know who has asked for that credit information, who is trying to get information about you. you should have the ability to do that with all of your data. you should be able to inquire facebook, twitter, google, or cambridge analytica to give you a report of your data. we have these rights for health also. second, you should be able to update your data. third, you should be able to move, and delete your data. europe has a comprehensive set of these rights. i think the european regulation goes too far, but we should take some of those principles and have a robust framework here in the u.s. emily: we're talking about a massive data breach that happened on facebook's platform, on facebook's watch. we are talking about an election that was meddled in by state actors on facebook's watch. in both cases, facebook had

warnings and new about these issues before the company revealed them to the public. where did facebook fall short, in your opinion? ro: they clearly did fall short, and they need to assume responsibility. first, they fell short in disclosure. all of the reports i read suggest a should have -- and they knew about this breach back in 2015. they did not notify the users or the ftc. they did not notify the press. had they done that, a lot of the harm might have been avoided had -- avoided. they clearly did not have sufficient oversight. to be played in rubles, and have russians buying advertisements, and that not setting off alarm bells is deeply concerning. they allowed false propaganda to spread and go viral on their social media site without any verification. i am glad they are now owning up to their mistakes. i still believe in the power of social media to do good, but there were clear abuses and they need to be transparent going

forward, and make real efforts to fix it. that is not enough. congress also needs to regulate. we cannot rely on the self-regulation of facebook or tech companies. emily: a lot of the questions today focused on facebook's tracking of users, including users who never signed up for it in the first place. should facebook be able to track user behavior across the internet, off of facebook, even if they do not have a facebook account, which means they could never agree to the terms of service? ro: this is exactly why we need an internet bill of rights. for example, if you use firefox, the mozilla browser, facebook would never be able to do that. firefox contains your data. if you use the safari browser, they may give the cookies, or that data to facebook if they have agreements with facebook. you actually have to go change on your iphone the default settings on safari to say no, i

do not want my data shared. this is where members of congress need to be using these platforms more. they don't have to be computer scientists or coders, but they have to understand what these platforms do. we need to have laws saying that we need to move to a world more like like mozilla firefox. contained have data so facebook cannot do these searches. it is why you can go on the internet, surf the internet and want to buy ties, and then suddenly on facebook you start seeing advertisements popping up with ties, and they are marketing to you. you say, why is that happening on facebook? that is because facebook often has information that advertisers have shared with them. i do think that an internet bill of rights would stop that from happening. emily: you said that we cannot leave the security of our elections up to an internet entrepreneur. facebook says it is working on be an placeat will

before the midterm elections to prevent what happened in 2016 from happening again. do you believe them, and if not, how concerning is that and what facebookess do present at this point to make sure it doesn't happen again? ro: i do believe they are acting with good intent, but think

at this point to make sure it doesn't happen again? ro: i do believe they are acting with good intent, but think about this, emily. they have grown from a platform of a few thousand people to 2 billion people in 12-14 years.

long time, and i felt a need to break through. we are regulated by the fcc. emily: does that same regulation need to apply to tech? >> i think regulation needs to apply to every industry. i think over time, most of the tech industry is doing brand-new things, and you need brand-new regulations to protect consumers. emily: has the facebook scandal affected how you think of user data? >> because we have always been highly regulated, we have always had to think about checking user data. if you think about the traditional advisor relationship, you would bring a shoebox full of receipts and papers and handed over to your advisor to help make a plan. we have automated the process and made it digital, and seamless.

we have to take great care with that financial data. we never sell your data. whenever rent your data to anyone else. no one else has access to what. we do not use any proprietary passwords. known else can user data. emily: it was john stein, the ceo of betterment. coming up, overseas european regulators are keeping a close eye on the mark zuckerberg's testimony on capitol hill. we will take a look at what is facing the social media giant in europe. this is bloomberg. ♪

emily: finally, one more conversation on facebook. there have been heated reactions to ceo mark zuckerberg's appearance in washington, including those in the eu you.

eu, and europeans do not seem convinced. -- took to twitter, citing zuckerberg's pledge that he would accept responsibility for his company's failure. bloomberg gadfly's alex webb in new york and caroline hyde in london joined us to weigh in. alex: that has driven us a new set of regulations on the european level, the general data protection regulation. more broadly looking at facebook in europe, there has always been a certain question mark about why these companies need so much data. welluestion is, are they after the horse has bolted? i think there is that certain sort of -- in that respect. emily: interestingly, the

-- mark zuckerberg has said that he thinks that europe's data privacy rules and gdp are is a standard that should be applied around the world and facebook will apply it around the world. this is whether or not lawmakers in the u.s. decide to do it. also very interesting that mark zuckerberg was one of the cambridge analytica 87 million, so his data was potentially misused as well. what should we make of this leadership shuffle over there? give us some more context. caroline: we have to remember that cambridge analytica still feels that it has done nothing wrong. we keep on hearing from the company throughout the testimony of mark zuckerberg. they have been claiming that they have not broken any laws. they have taken to twitter saying this. they are saying that they did not use this 87 million user data treasure trove in the 2016 presidential election or in the eu referendum. i think that is why there is so much reshuffling at the top of cambridge analytica.

the channel four news had secret video footage they took of him bragging about some of the more questionable tactics that he used in his ad campaigns with cambridge analytica. he has now fully resigned. the chief data officer who was acting as ceo has gone back to his usual role. i think there is more confusion at the helm of cambridge analytica. emily: speaking of confusion, zuckerberg said that they are looking more deeply at cambridge university and whether there is something bad going on more broadly. what did he mean by that? caroline: shock, horror, at the very heart throwing them under the bus, it would seem. it would seem very vanguard of the academic institution at the heart of the u.k. he is saying whether they are going to investigate researchers at cambridge university.

remember, aleksandr kogan was at the university when he was inventing the apps and getting information from users. notably, there was really firm rhetoric coming from cambridge university itself in response to this. i said that the reason they said they were really surprised that the reason mark zuckerberg has not overall known what was going on at the university of cambridge. he himself is saying that you need to understand whether something bad was going on at the rate university and whether it required stronger action from facebook. in response, cambridge university said look, we have made them aware. not only have we were in them a letter asking them to provide evidence against aleksandr kogan. he was working at came rate university at the time they are . also saying, we did publish evidence against aleksandr findings of our data and research since 2013.

emily: we know that a facebook executive will be testifying in the u.k. in a few weeks. how will it be different from what we have seen here in the u.s.? alex: i think there were a lot of lawmakers asking questions and they were constrained by time. it was very hard to pose follow-up questions. in the u.k. that is not going to be the case. there are fewer people in the select committees, and some more time. i think that gives him a far greater opportunity to take into hopefullygritty and get more substantial answers, which mark zuckerberg was not able to deliver in the states. emily: that was bloomberg's alex webb and caroline hyde. that does it for this edition of the "best of bloomberg technology." we will bring you the latest of tech during the week. tune in every day, 5:00 p.m. in new york, 2:00 p.m. in san francisco. that is all for now. this is bloomberg. ♪

♪ juliette: coming up on "bloomberg best," stories that shaped the week in business around the world. volatility in geopolitics. investors weigh the risks as global leaders weigh action. >> all on the table. >> ryan's departure is expected. >> dangerous game of one-upsmanship. it is also a heavy risk of escalation. juliette: deutsche bank and volkswagen make changes while mark zuckerberg gets grilled on capitol hill. >> has he had an easier time than he was expecting to have. juliette: march minutes open a window onto jay powell's first fed meeting. and an exclusive conversation with robert kaplan.