emily: i'm emily chang and this is "bloomberg technology." sector closes the book on the first half of 2018 with a major standouts and disappointments, we recap the highlight so far. plus, facial recognition technology is here but not without his controversies. we will discuss one major issue. and debate how this technology should be used. and we take a closer look at

facebook's challenging rollout of new ad rules. andpublishers push back could it have an impact on the social networks revenue? our top story. chinese smartphone maker xiaomi raised $4.7 billion after pricing is ipo at the bottom of the range. $54y are pricing it at million, and it remains the biggest ipo in the region in two years. here to discuss the ipo and how it fits into the global tech landscape, we've got our guests. what do you think about the price? >> the smartphone is highly competitive. in fact, supercompetitive. apple has clearly said they are not interested in market share only. they want profitable market show. some of the statistics, whether it be a phone made by xiaomi, opo, a lot of these brands we may not see up and down the streets in america are

growing very fast globally. the question is is profitable share growth. that is what apple is focused on. you cannot leave your home without it. it is part of your dna today. emily: do you expect xiaomi to really stand out or just be one of many? >> i think it will draw a lot of media and investor attention, a name that maybe not everybody globally knows about. eir market share is very strong. in the u.s., you do not see them frequently. this we think will bring more attention to it. we do want to note that we believe that apple has always seen the sound the radar screen. years ago, there were other companies that were supposed to dethrone apple. we firmly believe apple is a stock you want to buy at home right now and there will always be competition, whether we talk about xiaomi, vivo, all of these other brands, there is a lot of competition. emily: you do have a note out on

iphone pricing, despite the market saturated, despite the fact that apple's own iphone sales are potentially plan eauing, youlat are optimistic. >> when you buy a new apple phone, people are doing in app purchases on their games and buying apple care. emily: services revenue is never going to outpace hardware revenue. >> you are right. regarding the company's total units, they will grow low single digits. we see the surprise is going to be on the trailing model, the iphone 7. in india and in china, not so much the iphone x, we have in the u.s. emily: tell me about this $1 trillion market cap gola. al. not beentold me he has thinking about it.

do you see apple getting there and went? $200 pricingave a target on it. that puts you at $1 trillion market cap. with that we think they will get there but it will not be the next a you wake up and it is there. they need to keep innovating, they need to keep coming out with new products. you think about their wireless earbuds, those are doing fantastic and people love them. that type of innovation is continuing, looking to the second of of this year, we expect them to launch three new phones. we expect them to be well received. importantly, they are growing in emerging markets. we do see $1 trillion on the horizon but we do not think it changes the story. they: meanwhile, we are in middle of a trade dispute with china, verging on a trade war. >> yeah, regardless of one's political views, trade wars are terrible for technology and the consumer. any increases in costs are bad.

it causes the consumer to pause, to delay, to figure things out. what he is seen in the past if you look at global pricing, apple has put through those higher cost to the consumer. they have not taken their costs lower. we believe trade wars are bad. apple had a global supply chain, whether in the u.s., asia, taiwan, they can shift their production as needed. but trade wars are bad for technology and the economy. emily: it has been a volatile first half of the year for tech. is that going to continue in the second half of the year, or will it slow down? >> actually, we think the volatility will continue. the political uncertainty, you wake up every day something new is changing. we're at midterm elections that are happening now. we have a lot of uncertainty. and there is a lot of new,'s exciting technology trends to come out in the second half of the year, whether it be the car of the future, artificial intelligence, robotics. there is a lot of exciting

things coming out of technology. we are not in a mature sector. a lot of innovation is there. with that comes the innovation and the volatility of the winners and the losers. emily: what about m&a? disney is close to nabbing fox's entertainment assets. comcast still circling the white. -- the wagon. will its bark m&a momentum? tax think m&a given the repeat you asian roles are going to continue to rise. mega m&a fors year 2018. you think about looking at apple, they typically by several companies. most of them are private because of someone has a technology that is better, you can buy then cheaply. apple has over $200 billion of cash and they are returning $100 billion to shareholders. tim cook said their first priority is to innovate. that will happen, but m&a is on the horizon. emily: what could they be looking for? this is a company that did not

make big buys. they did buy beats. where do you expect them to be looking? 3 billion was the biggest acquisition they have ever done. the first thing they are going to do is innovate their products and looking into new areas such as content, whether it be streaming video, audio, music, things like that in getting into your home or. a lot of people do not use apple tv or apple music it we think those areas they are looking into also. emily: citigroup managing director, thank you so much. exciting year ahead. all right. andng up a.i.'s race gender bias, how a new frontier in tech has a big misidentification problem next. if you like louvered news, check us out on radio, listen on the bloomberg radio app and on sirius xm. this is bloomberg. ♪

spacex has successfully launched its 15th resupply mission for nasa to the international space station.

packed with supplies and hardware. space-x has confirmed in a tweet the dragon spacecraft is in good orbit. reported to be traveling on board a passenger we discussed yesterday. an a.i. robot developed by ibm called simon. the floating basketball in space will be with 15 astronauts aboard the international space station. while a.i. may be floating in space on orders -- on earth there have been more concerning uses of the technology. yes, it can be used for fun for is,ding out tweets and emoj but when it comes to using facial recognition, there is a problem. available software for microsoft misidentifying darker skinned females at a higher rate than any other group. according to an m.i.t. study, that group is misidentified 35% of the time. darker skinned men, 12% of the time. a huge problem.

to discuss, we are by the ceo of the facial recognition company chyros. he joins us from miami. also with me in the studio we have a reporter writing about this for bloomberg. i want to start with you. you have a fascinating story. a soonish you are getting ready your own technology coming realized it would not work on your own face. >> imagine a child is not know who you are, that is how it felt, unsettling. emily: what did you do about it? >> so, i was there with another person i employ, pitching a large cruise line. we had her, a white female, sit in front of the machine, let it do facial recognition on her. a tough day for me. emily: you talk to companies like ibm and microsoft that have the very same problem. what are they doing about it?

>> that's right, when the repurchase -- the reports first came out that haidi lighted this in separate, the report found that dark skinned females were decide in a fight -- miss identified 35% of the time. in the past four months, ibm and microsoft have been working to decrease that. the way they have been doing that is by expanding the data sets they use to train the algorithms. algorithms cannot see what they have not been taught to see. it is increasing the number of brown and black faces along with all of these white ones to do a better job. as of the time we published, sarlier this week, the error dropped. for ibm, it reported it was down to 3.5%, and for microsoft it r dark skinned female spirit however, there is a catch. the catch is that is not these results have not been independently verified, number one.

number two, it is not out in the real world. meaning they are doing a set of 150 facialmatch not images to the 7 billion people on the earth or the one million in a certain data set of suspects. emily: there are some real concerns about this technology being used in law-enforcement, the lapd is already using it. it can be used for good. in maryland it was used to identify the shooter and the capital gazette shooting. brian, what is your take on whether this is really ready for prime time and used by the government? >> we're thinking about, it is not appropriate lee is for facial recognition in the law enforcement space. it is just not there yet. one of our concerns is different populations, dark brown folks, black people are going to be either misidentified, nine identified or misidentified at a higher rate.

therefore, you are more likely to be said, you are the person that committed that crime. if you are black or brown. that's not acceptable. emily: brian, it is it possible to get to zero percent bias? >> it is possible. glass half,e, a full person. i think we are still a few years off. emily: even if we do -- can we still trusted? >> there are many people with the eff and the aclu saying that if you get to zero percent error rate, even then, what type of society will that be, when you can do real-time surveillance and it is 100% accurate? according to the algorithm the burden will shift to the innocent to prove they are not who the system says they are. beenappen -- have

concern. for example, amazon and employs put pressure to stop the use in orlando of the recognition system. and orlando police department agreed, ok, we are not going to do it. it's still being used in washington county. in oregon, however. emily: there is a huge uproar about that. not law-enforcement, what are the best uses of this technology and will it really improve our society? >> we're not going to do facial recognition for government but we are going to do it for business. when there is a benefit to someone, like unlocking your phone, reasonable. doing a transaction on block chain, totally reasonable. when there is some benefit and awareness on both sides, completely appropriate. you.: great reporting by i know you're going to continue to follow this. we will discuss this controversy

around facial recognition later in a show with matt cagle, an attorney at the aclu, and talk about amazon specifically. now, coming up, finding a unicorn in china. how vc firms are competing to lend the next billion dollars startup next. this is bloomberg. ♪

emily: in a crowded china vc market, one firm has become one of the fastest-growing. peter mavs spoke with bloomberg's-- mckenzie in shanghai on how he manages to compete with the giants. >> venture business is quite promising in china. growing even faster than the u.s. reselling we found that the ma--

recently we found that the main companies that started saying we were not a global market. for example, we were investing at an early stage. at that time, the funders told us we want to put the bike all over the world. we want to power those young guys who really have the dream or the ambition to be, to change the world, to really make a difference. >> the mo-bike investment that you may, that has raised your profile. >> yeah definitely. >> how pleased where you with the way it turned out? would you have preferred the company spend a bit more time growing prior to it being acquired? >> we actually expected a ipo for this company. in the end, the position is on the company. our opinion of this

company and in the end we respect the decision of the shareholders, of the funders. >> and what return did you make from your mo-bike investment? >> over 10 times. so, in less than two years, so we are happy on this. >> h ow competitive is the vc market in china? >> very, very competitive. it has 10,000 vc's in china, registered vc's in china. and there are a lot of individuals who have money, they called themselves -- top 5% of the firm, they earn 95% of the money. ms, the rest of the fir only get 5% of the money. it is a real competitive industry, not like real estate. the top 100 guys, nice. no rooms we -- rules we can follow, no machines.-- no ro

utines. we need to be very innovative, try to stay within the 5%. >> a big question on many tople's lips is who is going be the next baidu were alibaba or tencent? who do you think has the potential? which startups in china are likely to make it big? hauright now, i think to c probably has the best chance. if you asked me this question, what company can beat the bat? on the social app, they can get large user base quite fast. fast enough that there's no way to copy. >> 10 senate alibaba by far the biggest investors -- tencent and alibaba by far the biggest investors. how are they shaping the landscape? >> i think they feel really inches about the startups. they are really worried about

some innovative companies -- and some day beat them. so, that's why they make a lot of investments to make sure that something does not happen. when you worry about that, that is something, going to happen someday very soon. emily: that was panda capital's peter mao. more from our venture china series. and a look at china's unicorns. has invested in 15 startups valued at $1 billion. the founding partner tells us how changing chinese consumer trends are driving his investment strategy. two main focus is for us. the first is the so-called new consumption. china is currently going through and a consumption upgrade, be it e-commerce a retail business for the other area is artificial

intelligence. we believe these technologies will improve facilities, infrastructure, so that they can better fulfill the people's demand of clothing, eating, housing and transportation. >> what is the most dangerous area for a venture capitalist to invest in in china today? >> for example, one of the models we do not think that is promising is -- buying products from overseas and selling them to domestic consumers. at one time, almost every single vc made investment in this area, but we didn't. we had not seen a difference in those company so we decided to hold our money. nowadays, a lot of such companies no longer exist. another example is the self-service good shells who are really popular among investors not long ago. bet their vc's have money in those startups. we do not think that model is viable, and now the front runners in this area are struggling. >> you led the first round of

funding for pind -- which was worth $1.5 billion last year and now is worth $15 billion. how does it feel to watch a company grow so quickly in such a short amount of time? >> it's still a start up despite the fact it is growing really well. we still look at it in a very rational way. foras been there running three years and it requires a longer time to continue to develop. >> do you think it can survive competition? >> of course, i believe it can. otherwise, why invest in it? emily: that was gaorong's -- speaking to bloomberg in beijing. . coming up, we have gotten complaints. that is the assessment sara sandberg game when asked about the company's new ad campaign. we'll discuss the bumpy rollout. and bloomberg tech is live streaming on twitter. be sure to follow our global

news network at tictoc. this is bloomberg. ♪

emily: this is "bloomberg technology." facebook's ad rollout has been bumpy as they verify new ads. this is a critical part of facebook's business. even sheryl sandberg says this has been bumpy. reporter: she says there have been delays, publishers, nonprofits, book authors, anyone who wants to promote something about what of these broad political issues facebook is

wanting to put in the ad archive. the archive will be the searchable database of political ads we can go back to for several years. but a lot of these advertisers, especially smaller ones, have been totally blindsided because they did not consider what they were doing to be political. political issues include anything from education to poverty to emigration, and that is a very broad set of things. it's not just candidates running for office. emily: news organizations have been pushing back on these new rules. is anything changing? sarah: facebook says what they are going to do is divide them from the rest of the political ads in the archive. they do not really want to draw that hardline and say this is news and this isn't because there's a lot of news on facebook that is slanted or, you know, for a political -- a particular gender or something

masquerading as news that isn't and they do not want to be the ones to say, this site is not news, but the site is. it's a very tough call for them to make, so they are defaulting to making everyone go through these rules. here is the thing. if you want to be verified as a political advertiser on facebook , you have to not only send in the last 4 of your social, you have to receive a piece of mail from facebook to a residential address. these things take time. it causes delays for advertisers. not so badly that it screws up facebook revenue, but it definitely causes frustration for businesses across the country. emily: facebook has said over and over again it will not impact revenue. it will not impact engagement. will it impact revenue? will it impact relationship? sarah: i think it impacts the relationship. she said it will not having

meaningful impact on revenue. that could mean that it is a smaller impact. anything that affects publishers here or small businesses here, in this testing ground -- this is where it needs to work. facebook says they will roll this type of ad archive out to other countries in the coming months. they are going to have to figure out how to smooth this process, though sandberg says it is a necessary delay. emily: hang on, because there is another story i want to talk to you about. "the washington post" reporting that facebook and twitter have been holding secret meetings with the trump administration. for more on that i also want to bring in our correspondent who covers corporate influence for bloomberg. what do we know about what has happened here?

>> well, and facebook are essentially taking a page out of the typical washington playbook. they are meeting with the critics. conservatives have been raising concerns that the social media platforms are biased against conservative voices. what we see is twitter ceo jack dorsey has been meeting with top trump aids, compensators -- top trump aides, commentators to build trust with conservative voices here in washington. emily: sarah, what is your take on this? we saw in congressional hearings, lawmakers repeatedly asked about facebook bias against conservative views and mark zuckerberg really pushed back against that. what you make of the olive branch? sarah: if we are talking about this we need to talk about it responsibly. if you look at the news organizations in general that

have benefited from facebook's algorithm change in january, one of the top beneficiaries has been fox. if you look at what has happened on facebook's platform, there is no hard evidence you can point to that conservative content has been suppressed in any way more than liberal content. but there is this larger fear of what these platforms have in terms of control of what we read and see and hear peru's thing updates on our -- as we peru's -- we're perusing updates on our friends. that is real. that is something these executives want to address concerns about. they need to meet with these critics to lock them understand how the platform's work. this is not just about facebook and twitter. there is a large amount of

distrust in the media and society. there was a recent poll that said that two thirds of people do not believe the news they get in social media and he more. i am all about critical thinking when you're reading the news, but if it is legitimate news from standard publishers, are we operating in a bind that were everyone has a different set of facts? that could be a hindrance. emily: naomi, it is hard to imagine president trump leaving twitter, but you think there is a concern he could leave the platform given that he drives engagement? naomi: i don't think that's a realistic possibility. even if he did leave twitter, the fact is a lot of politicians and voices have gotten so big, even if he left i doubt it would have a major impact on the company. emily: what is next, naomi? in terms of these meetings, do we expect engagement to continue? emily: yes. --

naomi: yes. the election was unexpected for tech companies and washington at large. i think what you will see is tech companies will increasingly be reaching out to republicans on the hill to form these relationships and essentially try to convince them this is what we are doing to address the concerns you have raised -- whether that is russian manipulation of a platforms, the mixture of the algorithms. whether it is the issue of political ads. it will continue those conversations with republicans and democrats. and to build up those relationships in an effort to stop any potential regulation. emily: all right. bloomberg's naomi nix and srah frier. thank you. another shakeup at twitter.

it's a move to better integrate the platform's design and video offerings. the former periscope ceo will become the sixth head of product since 2014. possibly a sign there will be greater emphasis on video. mike montano has been promoted to oversee all of engineering. coming up ai versus civil liberties. is new technology infringing on your rights yet that we will ask the aclu next. a quick programming note. remember to turn into the boston pops fireworks special on this fourth of july. you can watch right here on bloomberg television, listen on bloomberg radio, or catch anywhere on bloomberg.com. ♪

emily: we are continuing our look at the biases in artificial intelligence and the pitfalls. recognition is not only gaining notoriety. it is being used by law enforcement to track civilians. maryland authorities say that they use facial recognition software to identify the gunman that killed five people at an annapolis newspaper. the aclu calls amazon's recognition software that it claims can five -- find 100 people in a single photo

dangerous. the aclu revealed this and the orlando pd has stopped using that software. my next guest discussed recognition -- recognition in a blog post for the aclu last month. he joins us now. why is this such a problem, matt? matt: people should be able to walk down the street without being watched by the government. face recognition technology allows the government to track where we are and what we do, whether we go to the church or an abortion clinic. that is not some think they should be able to do. emily: what about the argument this could be a powerful tool for catching criminals or terrorists? matt: there's a lot of unanswered questions about whether this technology works reliably. multiple studies have shown that they are biased against people of color and women and just this

week appointment ceo of official recognition company has said that this technology is not ready for prime time, the government should not be using this. it is important have a debate about this technology before we rush forward and use something that can be turned against immigrant communities and protesters and people going about their daily lives. emily: ok, but if they can directly, correctly it in five people, could it be h will enforcement or is it still dangerous? matt: that is not a question the aclu should answer. right now, we have over 150,000 people signing petitions, saying that this technology is rushing forward without public debate, without rules to prevent its use. in a political climate where protesters are being villainous, immigrants are being targeted, and that is not the time to roll out a dangerous, untested, unproven surveillance technology. emily: do you think is possible that the government could use

this in a way at all that is safe? matt: we have seen again and again when surveillance technology is rushed out with the political debate -- to solve crime or tract of chemicals -- it quickly slides down into uses targeted against muslim americans, people of color. it's important that there's an informed public debate about how this can be used and how it can be abused in communities. emily: take a listen -- we had a guest on earlier talking about the government's potential role in ai. take a listen. >> we needed public-private partnership and how to use ai. the issues like transparency, how the algorithms are used, we need to be clearer about how these companies are using them and are they respecting the core

values of society? emily: taneja from general catalyst there, matt. what are the values we need to talk about? how can we find resolution on this debate? in your view, something that would not violate rules? matt: right, right now the technology companies' secret rules are driving the debate. i think the person is exactly right. we need a conversation about the values of transparency, equality, and anti-bias that need to be built into these tools. right now these tools are being built by technology companies that may not have the expertise to know what it means to provide officers with dangerous technology that can make or break a slate -- a split second decision about really important public safety issues. before we hand officers technology that can harm public safety, we should have a conversation about what is happening under the hood. emily: part of the problem --

was at chapman, our bloomberg tech reporter has said, there are no standards law enforcement. this is all happening in real time. this seems to be the future. this is where technology is going. apple uses this technology to unlock every single iphone. how do we avoid this? matt: yes, yes, right now is the time to have the debate about what the proper limits should be on this technology. communities deserve answers before dangerous tools are rolled out on the street and secret out rhythms are relied on. our elected representatives should participate in this debate and people who care about this should join the consumers that reached out to amazon and are asking them to take this issue seriously. emily: california governor jerry brown just signed a sweeping data privacy law that allows consumers to opt out of the sale of their personal information. they can have their data delete

and they have the right to know what is thing collected on them. the tech is not happy about this, but i assume you think this is a step in the right direction. matt: we actually think that is a first step, but this bill does not go far enough to protect californians' privacy rights. it is essential that consumers have a robust privacy set of laws that protect them and help stop future abuses of their data and help them address those uses. we do not think this goes far enough to protect and does not go far enough to provide consumers with the right tools to address those harms. emily: matt cagle of the aclu, thank you so much for joining me. matt: thank you so much. emily: coming up, india was not even on netflix's radar, and now it is key. that's next on bloomberg. ♪

emily: netflix is coming for europe's tv giants. as streaming companies like netflix intensify their push to win new viewers. netflix is beginning an all-out assaults. they have 12 additional series fans this year, up from one in 2014. this is a big goal, considering

even aggressive analyst forecasts suggest they will reach 3 million by 2020. why is netflix so optimistic you about its presence in the country? let's bring in our entertainment reporter lukas shaw, who covered this in this week's edition of "bloomberg business." give us some insight. it all has to do with internet acyclic. aboutsiness of netflix is delivering people this better tv product than they are getting at home and often cheaper. so what we have seen in india is a complete revolution to how many people of access to it, where is five years ago there were maybe 5, 10 million who had broadband. now there are 50 million by some estimates and when you consider mobile broadband, there are 250 million people who constrained

you are able to stream different video because mobile broadband moretter and more, yeah, available. [laughs] more available. yeah, more available -- so, obviously every region has its own preferences. what is netflix's plan to appeal to viewers in india? >> the same plan they have everywhere else. they are rolling out their first drama series next month based on an epic novel. they have released a few of their own movies there and have a lot more coming up and cheer next year they will release 16 or 17 original pieces of programming for india, which is the fastest ramp up they have at any country. emily: the indian film industry rivals hollywood in size.

would netflix be striking some partnerships here? >> netflix is not so concerned with making deals with bali -- with bollywood. at the start, they want to differentiate themselves by going for something different. they will partner with all of the biggest players in the region, or at least the talent that wants to work with them. they are looking to convince actors, actresses, filmmakers that making shows for tv is just as good, just as popular, and just as premiere as making movies. emily: what is pricing going to be like? >> at the moment it would be 500 rupees.o 800 that's a lot more than your average pay tv, which is three dollars, four dollars, five dollars, more in line with high-end tv. netflix has countered that it is similar to high-end movies. pricing is one of the biggest hurdles.

it's something reed hastings has been asked about, something that executive tips -- executives, analysts have said that netflix will have to lower its prices. netflix has been steadfast. they say they have a one price fits all model, given patricians -- given fluctuations in currency and they do not want to change that. emily: all right, lucas shaw for us in hollywood. finally, the crowded bike sharing market. hello bike is now worth $2.5 billion. the ceo told bloomberg from shanghai how his company stacks up against the competition. >> we believe we have definitely surpassed our competition which used to be much bigger than us, last year. >> where do you see how a bike -- hello bike going in the future? >> we do not want to be limiting

ourselves to only bike sharing, but bike sharing is a very important sector for us. once we feel we have enough user base, we will go vertically upstream to do other segments, which is natural. >> the most recent round of financing valued hellobike at more than 2 billion u.s. dollars. you talk about this expansion which would sound like you would be more fund-raising. do you have any more plans in that area? >> we will be doing that through generated cash flow and also if you want the extra financing. -- the external equity financing. >> can you talk more about the internal cash flow, what does it look like directionally? >> it's really healthy. i would say we were under pressure last year. the market, someone much bigger initiated the pricing war.

people are more rational. and we definitely followed also that sort of trend, basically increasing prices in more simple terms, right? that actually helped us. we just have to be very strong. >> can you describe that? can you describe that anyway -- double-digit? >> definitely more than double digits. we are mainly working on providers, working with onshore. >> is an ipo something that is possible in the near future? >> first of all, we have to be ready for that. when i say we have to be ready, our user base, our competitiveness, our market share leadership will have to be further solidified to make it

happen. emily: that was the hellobike cfo. that does it for "bloomberg technology." that is all for now. we will see you next week. ♪

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