♪ ♪ >> i'm brad stone in for emily chang. this is the best of bloomberg technology, where we bring you all of our top interviews from this week in tech. coming up, "we just became a real car company." those are the words of tesla's ceo elon musk after reaching his goal of building 5,000 model 3's, but questions swirl surrounding the car's quality. plus, dell is going public, offering a cash stock deal worth $21.7 billion, entering a new stage of a multiyear turnaround

plan. and more institutional investors are diving into cryptos and coinbase is taking customers. how one of the world's biggest crypto exchanges plans to sign billions under management by the end of the year. but first to our top story. tesla engineered a late quarter production burst with the model 3 but delivered fewer sedans in the second quarter than expected. however, the late surge has thousands more of the cars in transit towards buyers. and for the first time, tesla exceeded their target of building 5,000 model 3's in a single week. yet on tuesday, analysts questioned claims that the cars were of the same quality of those made inside the plant and the stock tumbled. we spoke with an investment officer on monday, along with

bloomberg businessweek's max chafkin in new york. >> the stock is down because of auto trade issues more than it is up because of tesla meeting the milestone, but it is up in the morning. and i think the fact they have now produced 5,000 model threes in the week is very powerful and very positive. >> the big question is, is this sustainable? all-nighters, tents outside the factory. 5,000 cars is a great accomplishment, but is this a company that can routinely make 5,000 model 3's every week? >> i believe they can. i believe the factory has more than enough capacity. they are in a facility that once produced over 1,300,000 cars when it was a gm factory in the '70s. so more than enough capacity.

plus today, they have one of the most advanced auto assembly lines ever made, so i think they will be able to sustain production level and takes tesla to the next level from a niche car producer to a mainstream auto manufacturer. >> max, you have covered tesla four years. elon musk tweeted on his 47th birthday that he had spent the night in the factory. i mean they can't take a break, right? there's a lot of pressure on this company. is this the turn-around that some tesla watches hope it is? >> you have to hope the way that elon musk has been living where it seems like he is up all night, sleeping in the factory. you have to hope he will take a day or two and just rest. all of these tesla employees, as indicated that we published, have been basically working nonstop. i think what they are doing now is not sustainable. the hope is, as time goes on, they will be able to improve their robotic manufacturing and

that will get them up to 5,000 cars. the idea is to get the same kind of production number without looking and feeling like you have been punched in the face every day, which is kind of what is happening. >> elon tweeted, or he emailed employees, we have just become a real car company. that is ironic considering their market cap exceeds many traditional car companies like gm and ford. why did he write that? >> well, because this is a transformational car. it takes them from a niche car producer, initially selling 20,000 a year, to get into 100 which could be 12 months from now, if they maintain this production rate, producing over 600,000 cars a year which makes them a real company and is then able to fill

what is very strong demand. and then they will allow production of the truck next, so they are evolving. but i think they view themselves more as a technology company, rather than a pure car company, because they sell solar panels and battery wells. >> if you are a tesla customer who has had an order for a while on a model 3, does it concern you that, perhaps, your automobile was made in a tent outside the factory? do we know whether tesla has cut any corners on the quality of these automobiles? ivan: time will tell, but the overall quality is very high. the customer satisfaction level is high, enthusiasm is high. and really, the strength in the car is its simplicity and its power, the design, the technology. they have had very few

mechanical or technological issues and they fix a lot. they monitor all the cars and fix a lot of the software issues by pushing down software updates from satellite, so they are always adjusting and improving the cars. >> max, elon's twitter feed has been a joyful circus show over the past few weeks. i don't know, does the company have to grow up? or will we continue to be entertained? by elon and his pushback on some of tesla's critics? >> i have to say i think the real car company thing he was sort of joking. i think elon has felt for years that tesla is a real car company and that was kind of a dig at skeptics. one thing that is noteworthy about this big push to hit 5,000 is this is the first time i can think of where elon musk has really sort of paid attention to what wall street and outsiders are saying. outsiders said you have to hit this milestone and he said "ok.

i'm going to do whatever it takes. as he said in the e-mail we're going to fly production lines in cargo planes, we're going to build this giant tent, we're going to do everything we can. that's kind of interesting. it strikes me as a concession he has made to wall street and the outside world where he has to start acting more like a conventional publicly traded company. >> you mentioned some of the upcoming milestones. the new benchmark they will have to meet. are they going to have to go back to the capital markets and raise more money to do things like a truck? >> absolutely, and they should. however, the meeting of this 5,000-car milestone will make it a whole lot easier. if they indeed become profitable by the end of the year or are on track to do so by the end of the third quarter, it will make it much easier to raise capital. but yes, building cars is a capital-intensive process.

and they will have to and should raise money. every time they have come to the capital markets, they have been well received. i think they will come at the end of the year. >> max, last question to you. we started by talking about the underwhelming market reaction. has some of the halo, the glow faded from elon? are the markets looking at tesla maybe a little bit differently? >> no, i don't think so. i think the reason for this muted reaction was that it was a terribly kept secret. and i think by design, if you are reading his twitter feed, they are telegraphing this for about a week. basically, people knew they would hit it. there was just a question of how they were going to. and we still do not know how exactly they hit this milestone, but you have to think this is a

big moment for elon musk, for tesla, and for electric vehicles in general. 5,000 cars is nothing to sniff at. >> okay, ivan feinseth of tigress and bloomberg's max chafkin, thanks for joining us. coming up, what is old is new again. this company is being taken back to the public. next. and if you like bloomberg news, check us out on the radio on the radio app, bloomberg.com, and on sirius xm. this is bloomberg. ♪

♪ brad: the world's largest private tech company is going public, again. dell is promising to return to the public markets by buying their tracking stock in a deal valued at $22 billion. in january of this year, ceo and

founder michael dell preached the benefits of remaining private. >> as a privately controlled company, your horizon is very different. and so you reimagine your business. you think about your business in years and decades. and it allows you to reconceptualize how you are investing and what the real priorities are. brad: bloomberg technology's nico grant covers dell and joins us in the studio, and in new york, opinion columnist brooke sutherland has been writing about the move. nico, let's start with you. this is not a traditional ipo, yet they are going public. >> this is a direct listing that would be more akin to say, spotify. we saw that recently. the idea is that dell gets all

of the benefits of going public with none of the drawbacks. you are not seeing michael dell going on some roadshow and convincing investors to invest. you are also seeing it gives him a tremendous amount of control. it helps to simplify the corporate structure because tracking stocks are very unusual. it was meant to mirror the value of vm ware, a software maker that they had a controlling stake in. it gets rid of that, and they have more direct control over vm ware and also get the valuation benefits, the share benefits, without traditional drawbacks. brad: brooke, you call this the path of least resistance. why? brooke: because the thinking amongst vm ware shareholders was they wanted this to remain a publicly listed, independent entity. they did win that today at the cost of an $11 billion special dividend that will fund the cash component of the buyout offer for the tracking stock.

they pushed very hard for that, they were vocal in wanting vm ware to remain an entity they could invest in as a standalone. as i argue in my piece, winning that is not necessarily the best outcome. i really view this as an intermediary step. it does help dell simple find -- simplify their structure, but does not go far enough. you still have vm, as much as shareholders want to push back, it is very much a part of dell. they have a majority shareholder that calls the shots, and most stocks with that dynamic content do trade at a discount. brad: nico, we just heard michael dell singing the praises of a private company. that was not a long ago. what has changed? >> i saw him in april singing the praises of being a private company. i think what's changed is a couple of things. if we consider the timing, it comes five months after they said they were considering strategic options, and five years after the company started

this big turnaround when they decided to go private. it saw the hardware landscape was changing around it and it needed to try to figure out how to catch up. it felt the easiest way was with the least amount of scrutiny. and so i think michael dell is feeling more confident that he has in a while. we saw in the last quarter they had double-digit gains, particularly in servers and storage. it has been a good i.t. spending environment after years of middling or declining i.t. purchases. and so he thinks now is the time to get all of the benefits. it could even include m and a benefits, he could do a share swap in the future without having to trade cash. that is a precious resource. they do have to pay down $40 billion of core debt. brad: brooke, it does seem like we have seen this before. del famously belly flopped as a

public company as the cloud transformation swept over the executing space. are you confident it is different this time around? brooke: you know, i think the proof is very much going to be in the results. i mean, i think we have to see how they handle this. i mean to me, it does not solve their problems. a lot of the reason they were looking at these transactions in the first place is because the company is burdened with a significant debt load from their 2016 purchase of emc. it has to find a way to deal with that, and a lot of the thinking was they could use of vm ware's balance sheet to shoulder the burden. now, obviously, that's not happening. as nico said, this does not rule out the option of merging down the road, so this is more of a intermediary step. brad: so what is then the next step? a potential

merger with vm ware? sell more stock to the public? brooke: potentially, but we have to get this deal done. i will point out, dell are paying a premium. and you are talking about a very material discount to where vm ware shares are trading. there are some big holders of that stock. elliott is one of them, carl icahn said he is a holder. is this going to be good enough for them? this is something we're going to have to watch. brad: nico, last question, talk about the competitive environment they face. you've got hpe and net app, the big cloud providers like amazon and microsoft. how does del fare as a public company considering the competition? nico: comparison to hpe, one of the closest companies, they will get this done in the fall, trade higher and with more momentum that hpe which has been challenged. i think part of that is because of the close integrations with the software makers. dell also, we have to remember,

leads the market in so many categories when we think about hardware. and they are leveraging the end vm ware as much as possible, which has a lot of credibility amongst companies that want a modern infrastructure when we think about i.t. and so i think that when it comes to public clouds, dell probably will not see their explosive growth and should we see the i.t. spending environment sort of cut back a little bit for the hardware vendors, dell's stock will take a beating. brad: that was bloomberg's nico grant and brooke sutherland. coming up, e-cigarette maker jewel is seeking more than a billion dollars. we discuss how they are expanding while traditional tobacco fades. this is bloomberg. ♪

♪ brad: electronic cigarette start up juul is raising billions. that is according to people familiar with the matter. the funding would value the company at $15 billion, making them more valuable than some of silicon valley's biggest names. that's a huge jump for a company less than three years old. bloomberg technology reporter olivia who broke the news joins us now. thanks for joining us olivia. a lot of people probably haven't heard of them. tell us what it is and why they're raising so much money now. olivia: they were created as a replacement to the regular tar-burning cigarette. the people who created it came out of stanford and thought they will create this product that will be better for you. it doesn't have the tar, it uses a vapor that you inhale the nicotine. they thought they were doing something really great for the world. the problem is teenagers love juul.

it has become extremely popular in schools and become a controversial product. so there are a lot of investors who are unwilling to invest, but we are seeing a lot are because they are raising $1.2 billion. billion.y over $16 >> that's extraordinary and one of the numbers in your story that jumped out at me is that they have captured 68% of the u.s. e-cigarette market. that is with companies like phillip morris trying to get in here. what did juul do right? olivia: it is remarkable, they launched in 2015 and already have 60% of the vape market. they're also replacing traditional cigarettes. we have seen phillip morris go down 28%, british american tobacco down 28%, japan tobacco down 15%. what we are seeing is e-cigarettes are growing.

they grew about 3.5 percentage points this year and cigarettes went down 4% points. people aren't necessarily quitting smoking. they're just replacing traditional cigarettes with vaping. brad: the fda is looking into this. they are asking how juul markets to teenagers. what are the regulatory challenges for them? olivia: in april, the fda knocked on juul's door and said we need to know more about this product. what are the health concerns, provide us with your research. you also need to provide us with your internal marketing materials. what are you talking about in meetings, are you trying to target children? that's sort of like an adacious ask. they, of course, said they are not targeting children. you have to be 21 years old to purchase. >> even though they've had candy flavors. >> they've taped that down. there is another company called candy pens, it is interesting they have targeted juul because there are other companies with

more kid-friendly flavors and colors. brad: what about health questions are they likely to get? they can say this is a healthy alternative but still, not good for you. olivia: some health experts say it's not bad and much better than smoking a cigarette. others are saying it causes this problem called "popcorn lung." i'm still trying to understand, wrap my head around. brad: but not good. olivia: doesn't sound good. it is relatively unknown. it is a new technology, new product, but we know it is extremely popular. and one to watch, this company is on a rocket ship. >> they are raising $1.2 billion. what are they going to do with this? olivia: they are planning to expand outside of the u.s. it's sold in israel. they want to go to asia and south america. brad: thanks to bloomberg's olivia zaleski here in san francisco.

chinese smart phone maker xiaomi raised billions. they are priced at $54 billion, roughly half the initial target. still, it remains the largest ipo in the region. emily chang spoke with jim suba, managing director at citigroup, about the ipo and how it fits into the global tech landscape. >> the smartphone industry is highly competitive, super competitive. in fact, apple has clearly said they are not only interested in market share, they want profitable market share. so some of the statistics, whether it be a phone made by xiaomi, vivo, wawe, a lot of these brands we may not see in america are growing fast globally. the question is profitable share. that is what apple is focused

on. we expect the world to be competitive in smart phones. you cannot leave your phone without it. it's part of your dna and who you are today. emily: do you expect xiaomi to stand out? or just be one of many? >> i think it will draw a line media and investor attention. a name that not everybody globally knows about. in asia, their market share is very strong. in the u.s. you simply don't see them very frequently. this we think will bring some more attention to it. it will help us stand out, but we do want to note that we believe that apple has always seen this on the radar screen. years ago, there were other companies that were meant to dethrone apple, and we firmly believe apple is a stock you want to buy. there will always be competition, whether we talk about xiaomi, huawei, other brands. there is a lot of competition out there. >> and you do have a new note out on iphone pricing. despite the market saturating, despite apple's own sales are potentially plateauing, you are still optimistic. why?

>> we are. one thing is to note that apple services are really growing. when you buy a new phone, people are doing in-app purchases on games, on purchasing. as well as buying apple care. >> but services revenue is never going to outpace hardware revenue. >> you're correct about the total amount of company. but in terms of units, we think they will grow low single units. the surprise will be on the trailing model, the iphone 7. in india and china, not so much the iphone x. brad: that was emily chang speaking with jim suba of citigroup. coming up, back to tesla's newly released production figures. why hitting this much-lauded milestone could be a double-edged sword for the car maker. and bloomberg technology is livestreaming on twitter.

check us out at @technology and be sure to follow our breaking news network @tictoc on twitter. this is bloomberg. ♪

♪ brad: this is "the best of bloomberg technology." i'm brad stone in san francisco. back to tesla, elon musk hit his long-delayed target goal of producing 5,000 model three sedans in a week. musk went to great lengths to hit his mark, including constructing a giant tent housing an assembly line. now, the ceo has the challenge of winning over doubters who say this is just not sustainable and he made need to address the accusation made tuesday that the

model 3 cars made on a tent covered production line were not of the same quality as those made at the plant. we caught up with bloomberg opinion's liam denning. >> fair play to the company, they hit their 5,000 a week targets like they said they would. and i think a lot of a bulls will take comfort from that, but i think it misses the bigger picture, which is, you know, to be a profitable carmaker, which tesla have yet to prove they can be, they need to have sustained, high-volume, high-quality production. and hitting that target in one week at the end of the quarter, kind of in a repeat of what they did first quarter, it does not prove that. it hits a moment in time, one target, but it doesn't prove yet they are on that sustainable footing. brad: you noted in your column that the burst week at the end of the quarter seems to set a new baseline for tesla's weekly production. are you confident they can do that now with the 5,000 model threes per week? >> it is tough to say.

what i observed there, just going on the last three quarters, what they have done is hit these burst weeks at the end of the quarter and that sets the average for the next quarter. based on that, you might think they can keep going at 5,000 a week. in fact, in today's release, they talk about getting to 6,000. but i think the issue is can they do it profitably? and if i think about for example the tent you highlighted, this second assembly-line they put up, it looks like they made about 1,000 cars on that, give or take. and if they are working 24/7, which they seem to be doing, that equates one car every 10 minutes. and that is nowhere near what you need to be getting for a profitable mass-market carmaker. brad: liam, tesla was so focused on this 5,000 cars per week goal, it really came to define what observers of tesla were looking for. what is the next milestone or benchmark that people will be looking for to grade elon's

performance at tesla? >> two things will be interesting. one is obviously the results that come out in a month. there, we will see what the cost of the burst has been in terms of profitability and cash flow. obviously, the other big one coming up is the company insists they will get to gap profitability and some form of positive cash flow, it is not clear what, later this year. i mean, that is really the key to this company. it needs to show it can actually turn a profit, produce a mass-market car, and, you know, become self-funding. becoming self-funding is the key here. brad: profitability and self-funding. bloomberg opinion's liam denning, thanks for joining us. coming up, one of the world's largest cryptocurrency exchanges is going live with a new custody service. details on coinbase's new customers next. this is bloomberg. ♪

♪ brad: just last week, coinbase custody accepted its first deposit and is now open for business. the cryptocurrency exchange says 10 hedge funds and family offices have begun using the custody service. the goal is to safeguard digital tokens in a manner similar to traditional securities. coinbase aims to have 100 large institutional customers by the end of the year with as much as $5 billion under management. joining us now with more detail is adam white from coinbase. host ofh us is the

miss?" joe weisenthal. adam, let's define our terms. not everyone is familiar with what custody means, with what cold storage means. adam: in the simplest terms, it is a way for institutions to store their currency in a safe and compliant manner. when people look at the space, there has been a history of security incidents, and we have made security our number one goal. what we heard as we move into the institutionalization of the space, large hedge funds and large brokerages said they cannot trade cryptocurrency until we have a safe way to store it. we announced at the end of last year we would begin building, and we launched today and are already serving 10 hedge funds. brad: crypto prices have had a rough ride this year, characterized by volatility for a number of years. have investors stayed out because of the absence of the kind of service and will this rectify the rough waters that bitcoin and other assets are in?

adam: in fact, it is the opposite. what we've seen with this recovery, we saw the price of bitcoin touch $20,000, the market cap of all digital reach $800 billion. that has since recovered, and we found institutions are more eager than ever. one thought is maybe this is a train we missed. maybe this was the emergence of a new asset class that we're behind. they have an opportunity to get in and are watching them do it thoughtfully through services like coinbase. brad: joe, do you agree with that? if you are a big institution, have you lost your appetite for investing and trading in cryptocurrencies, considering the depreciation in value? joe: yeah i find adam's answer to be interesting. probably one of the most important questions or themes

for the whole space. there is no doubt that the second half of 2017, particularly the last few months, there was so much interest in that institutional money. this wall of money that was supposed to come in. and it does seem like platforms like coinbase is what everyone said was missing. that as soon there is custody, that as soon there is custody, that is, as soon as there is custody and a little bit of legal clarity things like that, then that money would be coming in. and i have been fascinated to see this year, the build-out of the institutional infrastructure, not only coinbase's and others, totally coinciding with this relentless selling. almost no news whatsoever has boosted the price of any cryptocurrency for any length of time. so really, the exact opposite of the second half of 2017, where it is clear the infrastructure is being built out and the capacity of that institutional money has expanded but it has not boosted the prices at all. brad: adam, is demand from institutions the same as it was when you announced that last year? adam: absolutely, it is greater than ever. what we find with institutions is they do not move fast, they are thoughtful and deliberate. they do reverse diligence on our

form. we spent a lot of time with our institutional coverage group in our new york office meeting with institutions day in day out. educating them on who we are, the processes we use. they really dig into things like cold storage. they say how do you do cold storage? how do i make sure my funds are safely secured? and we bring in things like a faraday cage to make sure the random number generator we used to decipher the keys was military grade, best in class. these are the questions we spent a lot of time on. >> what kind of competition do you see from the traditional custodians like j.p. morgan? adam: we tend to not focus on competition, more on our customers. certainly, there is an opportunity for coinbase to work with others. when you look at what institutions want they do not want just one custodian, they want to store across a few best in class custodians. so we are in conversations with others in the space. just like we are with regulators and our customers constantly.

brad: joe, pretend adam is not here and tell me what you think of coinbase's competitive situation amongst the traditional custodians. joe: well, i think it is fascinating the way you seem to have two different clusters of companies reaching towards the center. so obviously, you have upstarts like coinbase and like others who, all the time, seemed to be making inroads to resemble more legacy banking institutions, more legacy brokerage institutions. you have entities like circle and square. on the other hand, you have these legacy organizations which, for a long time, were skeptical about the whole space. they are dipping their toe into diving into crypto services. it does feel like a bigger battle is coming and it is unclear which side will win. something i am curious about from adam is there is a debate about how this space will evolve ,whether it will be

bitcoin centric or whether there is room for lots of different coins and protocols. i am curious whether the institutions that are signing up early on for the new coinbase service, how interested they are in holding a multitude of different coins? adam: joe, it's a great question, and it is spot on. what we are hearing from our clients is they want us to expand to more countries and add more assets. right now, we are supporting 4 assets. with plans to add more. as your colleague at bloomberg announced today with the introduction of this, we are starting with four assets but with plans to expand to asia, we will offer many new assets. brad: adam, i will give you the last question. the price of bitcoin and other crypto assets has been on a steady decline all year. is this the kind of thing that is needed for a restoration of trust in crypto currencies? adam: you know this better than anyone, markets are not always

rational. right? and i think to work in this space, you have to have a 20-30 year vision. our ceo said we have been working in the many years, we see the market reacts, and every time, it gives us an opportunity to stay focused on the mission. that's to help to create an open financial system and to continue to invest the resources to bring this asset class main stream. for us, we tend to look at other metrics, like the number of developers working in the space, the new teams launching, the number of daily transactions. all those numbers continue to move up and to the right so we're very optimistic. brad: that was adam white, vice president and general manager of coinbase institutional and bloomberg's joe weisenthal. coming up, ai versus civil liberties. is this technology infringing on your rights? we asked the aclu next. this is bloomberg.

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♪ brad: we are continuing our look in the biases of artificial intelligence and the pitfalls that can come from this new technological forefront. facial recognition is not only gaining notoriety for misidentifying based on gender and race, it is also being used as a tool by law enforcement to track people. maryland authorities recently said they used facial recognition software to identify the gunman who killed five people at an annapolis newspaper. but there is also a growing voice speaking out against its

use as a surveillance tool. the aclu calls amazon's recognition software, that it claims can find 100 people from a single photo, "powerful and dangerous." that software is being used by the orlando police department until the eclu revealed its use. orlando p.d. has since stopped using the software. our next guest revealed the use by law enforcement in a blog post last month. he is a technology and civil liberties attorney for the aclu and spoke with emily chang. >> people should be able to walk down the street without being watched by the government. face surveillance technology allows the government to track where we go, what we do, whether we go to a church or an abortion clinic and that's something that the government should be able to do and again, and again, when we see governments deploying this technology, they're doing it without rules to prevent abuse. emily: what about the argument this could be a powerful rule

-- tool for catching criminals or terrorists? matt: there are a lot of unanswered questions about whether this technology works reliably. multiple studies have shown this is biased against people of color and women, and just this week, a prominent ceo of a facial recognition technology said the government should not be using it, this technology is not ready. so right now, it is important that there be an informed debate about this technology before we rush forward with something that can be turned against immigrant communities, against protesters, and against activists. emily: okay but let's say, hypothetically, if they work out these issues of bias, if they can identify people, is this something that could be a valuable tool for law enforcement, or is it still dangerous? matt: that is not a question we should answer. right now, what we are hearing from communities across the country, over 150,000 people signing petitions asking amazon to drop this tool, is that this technology is rushing forward without public debate, without rules to prevent use, in a political climate where protesters are being villainized, immigrants are being targeted,

and that is not the time to roll out a dangerous and untested and unproven surveillance technology. emily: is it possible for the government to use this in a way, at all, that is safe? matt: we have seen with surveillance technology, when it is rushed out with public debate, initial uses to quote unquote "solve crime" or track down criminals quickly slides into uses that are targeted at muslim americans, immigrants, and people of color. it is important that there is an informed public debate about how this could be used and abused in communities. emily: that said, take a listen. we had a guest on earlier talking about the government's potential role in ai. listen to this. >> we need a public-private partnership and how we use ai. it is the early days in ai, but having said that, issues like transparency and explainability of these algorithms, we need to

be a lot clearer about how these companies are using them. are they respecting the core values of society. emily: our guest from general catalyst. what are the values we should be talking about? how can we find some resolution on this debate that, in your view, would not violate civil liberties? matt: right now, we are seeing that technology companies' secret algorithms and secret conversations of these tools are driving how they are used. and we have no idea what these systems look when we open the hood. i think that person is exactly right, we need to have a conversation about the values of transparency, equality, and anti-bias. they need to be built into these tools. these are being built by technology companies who may not have the expertise to know what it means to equip officers with dangerous technology that can make split-second decisions

about public safety. before we hand our officers technology that can harm public safety, we should have a conversation about what is happening under the hood. emily: part of the problem is there are still no standards for law enforcement in place. this is very much happening in real time. i guess that said, this seems to be the future. this is where technology is going. apple uses this technology to unlock iphones. how do we avoid this? it's happening. matt: right now is the time to have a debate about the proper limits on this technology. communities deserve answers before dangerous tools are rolled out on the street and secret algorithms are relied on. so right now is the time to have a debate. our elected representatives should have a debate, and if people care, they should join the 150,000 consumers who asked amazon to take this issue seriously.

emily: california governor jerry brown signed a sweeping data privacy law, which allows consumers to opt out of the sale of their personal information. they can have the data deleted and have a right to know what is being collected. big tech not happy about this but i assume you think this is a step in the right direction. matt: we actually think it is the first step but this bill does not go far enough to protect californians' privacy rights. in the wake of the scandal, it is essential consumers have a robust set of laws that protect them and help them stop teacher -- future abuses of their data and help them address the actual abuses. we do not think this measure goes far enough to protect those rampant abuses of information, and we don't think it goes far enough to provide consumers with the right tools to address those harms.

that's an acknowledgment shared across the industry right now. brad: that was emily chang speaking with matt cagle of the aclu. voice activated speakers are becoming a more prevalent part of people's lives and the king of the smart speaker market is the amazon echo. according to emarketer, 47 million americans will use one once a month in 2018, putting amazon's market share at 67%. but that is expected to drop to 61% by 2020, but still almost double its biggest rival, google. and more and more of that user base is using smart speakers as a teaching tool. that is something our next guest is making happen. ian fried was the former vice president at amazon where he led the teams that worked on kindle, echo, and alexa. he is now working at bamboo learning, a company he cofounded that is teaching kids all about music using you guessed it amazon's alexa. ian: bamboo learning is a brand-new startup i cofounded. it is set up to create applications that are fun and interactive to teach kids as

young as 6 all the way through teenagers and also adults different things they might like to learn casually in five minutes or less. brad: music theory and learning music, as i recall from my brief attempts as a kid, is very visual, right? you are reading music, hunting for the keys on a keyboard or the strings on a guitar. so why is a voice-activated speaker the right forum for learning music for kids? ian: that is a great question. a few things. one, it is supplemental to perhaps taking music lessons. and one of the interesting things my cofounder learned is music teachers often won't teach younger children how to play an instrument until they can learn to read. and she and i both believe that

children as young as 6 should be able to learn about music. so we have some examples, actually, of a 6-year-old learning with bamboo music and deciding, after interacting with bamboo music and doing the questions and answers that we have interactively, that she would like to take a lesson. so she is now learning the ukulele, and she is not yet a strong reader, but she is already learning how to play music based on starting with bamboo music. brad: bamboo music now joins thousands, or even tens of thousands of other alexa skills. for those folks who aren't part of the audience of bloomberg technology, how do they find it?

i guess i'm asking you this as a former amazon executive. how does amazon solve the discoverability problem with the echo, considering now this explosion of new apps that are available for the device? ian: well, it's a great question. each application developer -- so we at bamboo learning have to do our own job at getting the word out about bamboo music, so that's part of it. but amazon just created this new feature so that when you talk to your echo and would like to try out, for example, bamboo music, all you have to do is say to an echo -- alexa "enable bamboo music." and it will start the skill. it will start explaining how it works. we have to do our job, and amazon is increasingly finding ways to make the skills more available to customers. you can also just go to the amazon store and search on bamboo music and find it that way. brad: we don't have a lot of time left, but i want to ask you about your personal journey. you've gone from being an inventor of the echo to a developer for it. why leave amazon to go do this?

ian: great question. i had an incredible time at amazon, worked there for over 12 years. and i learned quite a bit across the board, the business, technology, etc. i just felt it was time to try something new. i wanted to get back to doing coding, which i haven't done in a couple decades. and it just started as kind of a fun project. and then with my cofounder, who is an absolute expert in k-12 education and music, we thought it would be really fun to educate through the bamboo music skill. brad: that was bamboo learning ceo and cofounder, ian freed. and that does it for this edition of "best of bloomberg technology." we'll bring you the latest in tech throughout the week. this week, we have full coverage of xiaomi's public listing. tune in for full coverage each day at 5:00 p.m. new york and

2:00 p.m. san francisco. this is bloomberg. ♪

welcome to bloomberg businessweek. i am carol massar. jason: i am jason kelly. carol: a conspiracy to put a president on trial. in europe, contemplation on what the continent will be like without angela merkel. jason: and we go digital. we look at something happening all around the world, cash getting stolen using the internet. carol: ed robinson has more.