to getting answers. "activecore, how's my network?" "all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. ♪ emily: i am emily chang. this is bloomberg technology. drones flying over a u.k. airport creating chaos during peak holiday travel. authorities are launching a criminal probe. a big investment by big tobacco pushes it valuation of e-cigarettes to $38 billion, more than spacex or target. is it worth it?

and 2018, the year apple lost its mojo? we will see if they can reclaim their hype around signature products in the new year. the index gained 35% halfway into 2018 but now looking like they will finish lower than they started. the index made up of popular tech giants including facebook, apple, amazon broke through a key support level. has been theu biggest laggard, falling 30% this year. joining us to discuss, mike regan. walk us through the losses and whether there is expectation this volatility in tech in particular will continue. >> tech gets most of the blame for the stock market selloff by merit of being the heaviest weight in the index. i don't think you need to look

at the entire market and blame it entirely on tech. if you look at the performance of all the sectors since the last record of september, it is energy, industrial, consumer discretionary shares that are performing the worst area tech -- the worst. tech is down but it is not just the tech story. we really have to look at the entire market climate in order to figure out when tech can bottom. emily: what are folks saying about the prospect for the big unicorn ipo's next year? lyft, uber, airbnb? >> this is a big issue. sort of the stereotype is investors get nervous when a come into the market. that has been credited with being the downfall of the dotcom

bubble. so many stocks, it is a supply and demand issue. when you flood with new supply of stocks, it weakens the overall market. goldman sachs, a few others are predicting 2019 has the potential to be the biggest year for ipo's on record. i think of it as the famous meme where the guy is walking with his girlfriend but checking out the other woman. investors have walked with the faang stocks hand in hand, and you wonder if they will start checking out the new ipo's coming to market and do some damage to the rest of the legacy tech that is the heavyweights in the index. emily: investors are going out, then where are they going? is into one place simple cash. money market mutual funds. buy short-term funds. if you look at that over the last few weeks and months, it

has gone parabolic. more than $3 trillion in total in money market neutral funds. the reason is the short-term treasury bill rates have gone -- more,re yielding 2.25% or and in this environment where everybody is worried about the future, it is attractive with that yield to park your cash especially at year-end where investment managers want to present a clean sort of risk free edition two investors given volatility. all eyes on 2019. you will chart the path forward for us. thank you so much for stopping by. how will the tech volatility impact to the private market? here is grant brown from new york. at 120ted two new funds

$2 million and $60 million. how is the public market volatility impacting your strategy? >> thank you for having me. it is great to be here. in terms of our strategy, we are looking to be consistent through downturns and bull markets as well, you see great companies being founded through the recession, airbnb and uber, and you see what is in the pipeline for ipo's which have been founded since the bull market in 2008, 2010. we raced the first fund. we are looking at the earliest stage of funding area we are coming in, a first institutional partner. there might be a couple people raising ideas up to $10 million. we have a long way to go until the company thinks about ipo. we think five to seven years but that has been pushed out even longer from the amount of financing available for late

stage companies. you think about these private with, these mega-around $100 million plus that we have seen about 100 over the last ipo's.mpared to 20 and is enabling companies to remain out of the public markets and private for longer. when they go public, they do larger ipo's. you see this with a lot of the pipeline next year. our strategy, we look at making 20 investments year in terms of following on. i think we think 2019 is remaining true. there will be people founding new companies in markets. we will be excited. emily: you have got later stage companies that will be looking for exits. are you concerned about what might mentioned, a flood of ipo's being a precursor to another bust?

less so. comparing it to the dot-com bubble, you have some substantial revenues, highly engaged in loyal customer base is, and many of them profitable. you have businesses that if they choose not to go public are still sustainable and have other options. you have a healthy m&a market. depending next year, it will continue as well. emily: you invest across the country, but there is a focus in new york. when will new york have the $10 billion tech company? graham: we have it if you count we work. it is a matter of time as the ecosystem matures. you are seeing many companies passing the $1 million market, great exits over the last year, flat iron. there is virtuous cycle.

founders, employees reinvesting into the ecosystem and more and more partners in new york from the investing side. many of the peers as well continuing to support the ecosystem, so you are going to see more and more of the companies going out of new york. it is a matter of time. in terms of $10 billion plus companies, we have we work. emily: what is hot, what is not for 2019? graham: we are excited about health care and what is happening in that market. you look across our portfolio, brands andinvest in understand brand building -- building really well. a big part of that is improving customer experience. you see health care approaching 20% of gdp. you have misalignment incentives with people and the actual

customer.ho are the you have a lack of customer centric model. you're seeing interesting things that the industry starts to adopt technology from a sort of customer management standpoint, then new models of care that improves access to health care and affordability as well. york,e one company in new ai, and ai health care business called k health that helps to empower consumers to make smarter decisions about their health and set of having a search at google and then arriving at the fact they need er.o to the eight er -- the it takes patient data and routes them through the most intelligent process. we see that for 2019 as well. emily: health care is the one to watch. graham, thank you for joining us. facebook is working on a cryptocurrency that will let users transfer money on

whatsapp. bloomberg is reporting the network will first focus on the india market in order to minimize -- india market. facebook is doing something pegged to the u.s. dollar. one of the busiest airports in the u.k. thrown into chaos after drones disrupted flights. how should the industry be held accountable? check us out on the radio, listen on the app, bloomberg.com and in the u.s. on sirius xm. this is bloomberg. ♪ ♪

outcome on emily: "and as was fun to mess with an london gatwick open to while still on the hunt for -- london gatwick opened while still on the hunt. the event shows how easily drones can cause massive disruptions. for more on what happened, we have the cofounder with the person who makes commercial drones. not great in the midst of holiday travel. what do you think should be done to prevent things like this from happening? >> we have to stop treating drones as if they are two ways. they require knowledge of the law and physics to fly them. toy stores don't seem the right place to have these. the second thing is there is lots of different kinds. we don't distinguish between drones that are a go kart and

drones that are like a 14 wheeler truck because the industry has not differentiated enough. we don't know which one is being used and if it has been handmade. it has been modified in some way. the batteries don't even last that long. they areey have a lot, stationed around, or somebody is replacing the batteries and putting them in the air but no matter how you look at it, it does raise the point every drones should have a beacon or signifier on it that permits it to be tracked and detected which it currently doesn't require. emily: drones are likely under a lot of trees, so do you think they should be sold as toys or two novices at all? novices at all? >> in the u.k. next november you

will have to be registered. no matter what age, you are held to be liable for the legal environment. they cannot be flown above 400 feet. they shouldn't be flown beyond a certain distance legally under the faa or caa. if you put a drone in the hands of a kid, do they know this? the answer probably not. that is one thing. this was something different, someone who made a deliberate effort to do a repeated attack on one of the biggest airports in the world and disable it area when i worked for president george w. bush, one of my issues with terrorism to the u.s. economy in the aftermath of 9/11, this falls into that category of someone deliberately trying to be as disruptive as possible. we don't know why and what kind of drone they are using that it raises the question about drones in the environment without the right control and without anything to signal they are there. emily: should airports have more

authority to disable drones? >> you can try and shoot it down but a high-powered rifle, that bullet will go maybe five miles. you will hit a lot of things you don't intend to. it is hard to hit one in midair especially at night. you have to hit it in the right place. that option isn't easy. using a net, not easy. you are talking about airports that cover many square miles. jamming devices are logical m the aircraft as well. we need better systems in place. the australians were good in technology-- drone at the commonwealth games. but it costs something to have protections in place. emily: do you worry this will

hurt legitimate use of drones, one of the things your company is trying to do? >> it will increase the attention of focus. in the drones we make, they can't be used unless they have permissions. you need an id, password, they are tracked 24/7, we know where they are. they are meant to be flown autonomously. you are alerted if they are not. companies that want to use them for legitimate business tasks will want a higher degree of over thesend control so no one can take it and hot dog with it or do something like we have seen. if it makes the industry more focused on the difference between what is a go kart and a ford and the 4 -- fiat and a land rover, that is good. if it gets everything more focused on the danger to aircraft and say these are aircraft as well, that is a good

thing for the drones. emily: will be watching to see if those drones are located there is a cofounder of h robotics. a bad year for facebook continues amid new data breach revelations and lawsuits. what does it mean for leadership next? you can check us out at technology and follow the global breaking news network on tictoc on twitter. this is bloomberg. ♪ his is bloomberg. ♪

emily: facebook under fire about concerns of violating user privacy, not fighting misinformation and election meddling fast enough, facing government scrutiny after reports from the new york times showing it shared more personal data that disclosed in deals with companies. all of it calling facebook leadership into question. sheryl sandberg has shouldered much of the blame.

joining us to discuss, megan smith, who served as chief technology officer under president obama. she worked at google and recently started shift seven where she has committed to filling stem jobs. with facebook and google in the spotlight, do you think somewhere along the way of these companies went wrong when it comes to their social responsibility? >> these are the challenges of our time. you can use technology for good, you can use it for bad. what we need from these leadership teams across the board is a lot of focus on what will they do to support users with more transparency. this is troubling about people not knowing about the data sets being shared with partners and that also control. you can think about the europeans are doing an amazing job now about the digital self and personal privacy.

this is not property, this is your self in a digital form. people need more control. that is an urgent need. all of these management teams need to step up to this. emily: the have also been calls for mark zuckerberg to resign and sheryl sandberg. do you think that is a solution? comment onhave a that. what needs to happen is across the board we need a couple of things. one would be more technical people actually in the government side and regulation side and areas of the nonprofit so we can have conversations about what we will do to get creative. i like the work from the europeans. some of the work at shift 7 -- if you type. how do you team up as technical colleagues and stay on the harder issues not necessarily

but areas ofcars privacy, foster care, and tech could be applied to anything. media,ng around tech and what you talked about, we can use technology to solve more problems than just this area, so let's not just monitor regulate it and fix this area and focus on it, let's also apply it to other harder challenges. emily: you focused on trying to fill these stem jobs and how to get women in those jobs and underrepresented minorities. women and men have different views. do you think is silicon valley had more diverse workforces these companies would be better run? megan: definitely. we know it is not about winning and men -- women and men but broad perspective, people of all

backgrounds and socioeconomic backgrounds. better decisions, better financial decisions, the data is there from the research. we need to get it done and need leadership teams to prioritize. they don't care enough and are not moving fast enough. there about the technology but not a lot of progress. time is up. we need to do this. we are also working on what you see on screen. we are working with caa and have published a study about what we see in movies and tv. what you see, you need to see it to imagine it. we talked about media and geena davis' work. 15-one boy programmers to girl programmers are that teaches -- it is terrible. what can we do to help media represents women?

the study is about female lead films making more money at the bronx -- the box office across every budget level from 2014 to 2017. emily: you found that movies starring women make more than women -- movies starring men. megan: correct. looked at the data, look at films and data sets, who is first on the call sheet. if it is female lead versus male lead at all box office levels, they made more money. so there is a lot of common wisdom in this. it is more risky -- the data doesn't say that. dellyou heard of the back cdel test? it is a funny test. over 300 films, these top grossing films, over 40% of them couldn't pass this little test. it is there is to women in the

cap -- two women in the cast, they have a conversation not about a man during the entire movie. we found if you can pass the moree test of having dimensional women, you actually make more money every single box office level. so getting this through is economic opportunity for the country. you want the confidence of everyone. you can see it, you can imagine it. it relates to diversity in tech and every single field. to that.en and the industry can get more money, as you have found. always great to have you here. .eo of shift7 companies pouring billions of dollars into instagram-sponsored posts, but one shows they may not be reaching legitimate audiences. that is next. this is bloomberg. ♪

bloomberg technology, i'm emily chang area the rise in social media has brought about a marketing transformation. companies are turning to instagram to reach their audiences and drive sales. a new study shows the brands spent 2.1 billion dollars on post on instagram. it is not all genuine engagement. the study found that 11% of the engagement for the posts were generated by fraudulent accounts or bots. is our guests.

>> we realized brands are spending millions and millions of dollars on instagram. they are looking to reach millennials to get that engagement because the millennials are not watching tv. what they are missing is, bots are coming in and pretending to generate the activity. huge: that's not a surprise. it is the number surprise you? >> that is almost a quarter of a billion dollars wasted by advertisers. these brands are spending money on instagram looking to reach millennials. they are just not getting that. brands don't think -- realize they're wasting money. >> it's not just the fake followers. we have all seen those. it's the fake engagement. the fact that bots are

commenting and liking and sharing things and there are all these inauthentic networks of activity. emily: how have brands responding? >> they are excited because they are looking for data or someone to say what is my actual roi? they are cautious about how do we continue to police what's going on? they have platforms like mote and will verify. native content, these into graham post, you don't have anything from a brand perspective. was a story about how aspiring influencers are producing fake sponsored content to boost their credibility. explain this. >> it is a fake it till you make it mentality. that -- thisying is the new reality tv. everyone is running their own

personal brand show online. having sponsors there might convince other sponsors to come. that is what they are doing. this happening on instagram all the time. i have seen these groups on facebook where people have followed trains. if you follow me i will follow you. we can comment on each other's posts. there are instagram engagement say commenteople within a minute and we can boost each other. there are lots of ways to gain these systems which makes it hard to understand how the money is working. emily: it undermines instagram's business model because now it is facebook's main hope in terms of ads. what is instagram's -- what is it doing to combat this? >> want to draw a distinction

between the influencers and how you can buy ads. what instagram has done is they have tried to get rid of bots but it is a never ending battle. a big purge, then they will find another way to come back. there is always going to be some percentage of engagement that is fake. hear that ited to is a quarter of a billion dollars. emily: we are consistently asking is this bad news going to hurt facebook or instagram or at will advertisers take their money elsewhere? we hear that there is nowhere else to put your money. you think brands are going to orve these platforms continue on the same path? >> i think they're going to continue because there is nowhere else to go. when you are trying to release the millennial did demographic,

where did you go? emily: is there really nowhere else to go? and snapchatwitter and tictoc. when you try to figure out how to reach people in this mode, there is just instagram and pinterest. those are the people who are toring brands in a native their own personal desires way. advertising and personal content gets intermixed, the ftc has tried to make rules about this. people don't follow them. fascinating story. the fake comments and likes. thank you so much for stopping by. coming up, apple has lost some ground since becoming the first company to hit $1 trillion. we will talk about how they can get back on track in 2019.

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2018 was a banner year for apple. hitting $1 trillion afterion, shares pullback concerns about slowing demand from the iphone. be next you're going to

better for apple? >> i am not a financial analyst. the big thing apple has going for it is a lot of the fluid customers waiting to buy whatever apple lunches next. i was talking to one of the large carriers on the phone and they said 70% of their base is apple. that is not a bad problem to have. isly: this is a company it still fully reliant on the iphone. two thirds of its revenue, trying to make a transition to a services model. can they do it? >> yes but it will take a while. appleould be tougher for because the reality is, i agree with what julie said, people are looking for the next thing apple makes but they don't have anything coming that will have a big impact. emily: i have a chart here showing how dominant the iphone still is. smartphones, it gets

interesting into areas. 5g and foldable. apple is not going to be there. emily: apple has decided not to double down on 5g next year. they are waiting another year. the iphone cannot be folded. because of that focus and the desire for something interesting from a hardware perspective, it will not be there. margins are lower on services than on hardware. that is why the market is starting to react because they are saying if you move to a services model, what does that do for long-term profitability? emily: are you excited about the double phones? >> no. it's a guy thing. it doesn't have to fold for me because i have a purse. emily: is it going to be a little blip or a thing?

>> foldable phones are not new. the mass market could be new. 5g, but what about it enables is virtual reality. while we can say that is exciting, we still need content and a business model. there has to be something there for that technology to carry and deliver an amazing experience. working one is content, but it is still a tilt in the water. it is a very competitive environment. apple has to be more willing to accept users from other platforms. they started to show that with apple music now working on the echo. that was important. there are a lot of services they have offered up until now that have only been the best experience if you are an apple person. there is a much wider world out

there. that is a philosophical change they have to make. emily: i want to talk about trade. apple is facing potential tariffs. in the trade war on the iphone. we have seen a much more diplomatic tim cook. is apple going to escape this one? >> i don't think so. that is why there are a lot of concerns about the smartphone market. i saw my old friends saying they think 2019 could see some growth in smartphones. modest.be you have seen a lot of challenges. apple tried in india. they have tried in other parts of the world. there are only so many people who will spend a thousand dollars for a phone and most of them have it and they don't feel

the need to upgrade. emily: do you think political issues will impact the market for apple in china and india? >> one of the things bob is pointing out is they have a very fluid base of people who can afford a thousand dollars for an iphone. what we are seeing is, there is not a big one hit wonder like the iphone sitting on the horizon. it is going to be more connected devices, more products and services and more of a portfolio of services and hardware that drive their revenue and growth. thing and wet one all needed. it is harder growth. >> i completely agree. the issue is as far as the street and investors, that is a harder story to understand.

it puts more questions in people's minds. that is how we are seeing the market react. emily: we will have to have you back midyear next year. have a wonderful holiday. ahead, juul is one of silicon valley's most private customer -- companies. this is bloomberg. ♪

juul deal with all tria just transformed the layout.

the altria deal makes juul more valuable than other closely held companies like airbnb, spacex but still less than uber. more valuable than target, ford, lift. >> it is crazy. this is a company that started selling in 2015 so it is remarkable that the sales have exploded. themselves asd the cure-all to tobacco addiction and now they are aligning themselves to big tobacco. products are on the shelves next to cigarettes. talk about the safety issue. >> this is the real problem. nobody knows because it has not been around long enough. ited on what we now know,

doesn't look like a great thing. we do know that they are a lot safer than cigarettes currently because you are not getting the tar burning affect you get with a traditional cigarette. we don't know how the vapor affects the lungs. feelis why a lot of people this is an unconscionable company. some people have gone so far as to call it evil. to get anhave tried expert on the show and you have told us a lot of people don't want to be associated with it. >> investors don't want people to know they are investing. these people are becoming multimillionaires overnight. promised to give employees cash as a bonus. that is 1.3 million dollars per employee. morethink they are giving money to people who have been at the top the longest. it is a remarkable amount of

cash. $2 billion to 1500 employees. people are making a lot of money in san francisco. get throughthis antitrust? >> they believe it will. about the company story. it is based in san francisco and started three years ago. >> it actually started eight years ago. two guys at stanford design school came up with the idea. they were addicted smokers and they didn't want to be smoking cigarettes all the time. they developed the e-cigarette. until not hit the market 2015. at that point, it exploded. one mistake that they made was advertising on instagram with young models. that they are going after adult addicted smokers, the 40-year-old is not using

instagram. did not align with their mission. they have been getting in trouble for that. --ly: are they concerned this is a special report. the senate taking about. this procedural measure at the beginning because as you know we have been reporting about a possible partial government shutdown. president trump has been insistent that lawmakers allocate $5 billion for a border wall with mexico. some of the members of the senate have left town and they have been returning for this vote. the president said he would be proud to shut down the federal government if congress did not allocate the funds. today, the bill signing ceremony, the president seemed to reverse course saying that it is totally up to the democrats as to whether or not we have a shut down.

screen, mitch mcconnell. toenough seven democrats pass the proposal. at 60. and a presidential signature. as a result, the senate has voted to proceed the legislation before us in order to preserve maximum flexibility for productive conversation to continue between the white house and our democratic colleagues. democrats will work with the white house on an agreement that can pass of houses of congress. and, received the president's signature. colleagues, when an agreement is reached, it will receive a boat here on the senate floor. i move to concur in the house [laughter]o the

to hr 695. >> the motion is pending. [laughter] [laughter] as we said you president trump a week ago, his wall does not have 60 votes here in the senate. let alone 50 votes. that much is now clear. offered to keep the government open including a bill proposed by senator mcconnell. we are willing to continue discussions on those proposals with the leader, the president, the speaker of the house, and the leader of the house. all five are necessary to get something done. i yield the floor. president, the senator

from tennessee is recognized. >> i want to thank the two leaders for what they have done today. even though some people may not understand what just happened. has beenstanding that reached and i want to set -- thank senator flake and senator johnson and others is that we are not voting on anything else in this chamber relative to this issue until a global agreement has been reached between the president and these two leaders and the leader of the house. there will not be test votes. there will not be a tabling boat. the vice president has been here with his members negotiating already. what this does is push this ahead to a negotiation that yields results and does the best we can to keep from shutting down the government or if it doesn't shut down, shutting down very briefly. i want to thank the two leaders

for agreeing to go forward in this manner. it allows us to move forward in a positive way. yet, it keeps negotiations alive . only a bill can pass this chamber that has all of their agreements and i thank them for going forward in this manner. >> the senator from arizona. .> i think the two leaders ensurewho have worked to that the next vote that we have in this chamber will be on an saidment as senator corker not a test about, not a cloture vote. do with not ato allo demonstrate that not republicans would be for the house bill either. there is no path forward for the house bill. to anly path forward is bill that has an agreement between the president and both

houses of congress. the next time we vote will be on the agreement, not another test vote. with that, i yield back. >> senator from tennessee. that the senator from delaware be recognized. senators andthank the leaders for their discussions. the vice president, thank you for his presence today. in my own view, a government shutdown ought not be a part of budget negotiations anymore than chemical weapons should be a part of warfare. to make theted government run for taxpayers. not to shut it down. my hope is that this will put us on a path toward a result and recognize the president's desire for increased border security which we support.

which many democrats support as well. what i would like to do is say a few words about what was described in a famous movie in which jimmy stewart played mr. smith goes to washington. thecracy's finest show, right to talk your head off. the legislative filibuster. well senatore says alexander you just announced you are not going to run for reelection in two years so you are going to change your -- change your tune, i am not changing my tune. i have asked to include in the record remarks that i made in 2011. at the heritage foundation about the tradition of the legislative filibuster, the best known part of the united states senate. story, like to tell a mr. vice president. in 1978, a young utah senator

came here. he was conservative, he did not know what he could not do. the democratic establishment on their most important issue. orrin hatch was the senator. he is our longest serving republican senator and he is retiring. if what he decided to do was to challenge the democratic leadership who wanted to pass organized labor's major objective of the time, something would have changed the relationship between employers and employees for years to come. that was ae, 1978 democratic president, jimmy carter. republican62 senators, more than enough to pass a bill. there were 292 house members. been antch had not young and if he had no more about what he was doing, he probably would not have tried

this. he did try it. he won. he offered 1200 amendments. senator byrd, the majority of the senate, tried six times to cut off debate. we call that cloture in the senate. he did not get 60 votes. six different times he tried to cut it off. the end result was that the minority view -- the republican view at that time prevailed. present andmocratic house and senate. that happened before. it happened in the 1960's. the leader of the senate had even fewer republican senators. inn orrin hatch did his work the 1970 eight, there were 38 republican senators. dirksen had fewer than that. lyndon johnson, the american

labor movement decided they wanted in effect to make it illegal for any state to have a right to work law. that is what they wanted to do. they thought they could do it. except, the legislative filibuster was in place. >> you are looking at life pictures from the senate floor. lamar alexander addressing his colleagues. the senate voted to begin debate on a house past stopgap bill to keep the federal government open. the deadline has been looming for the past several days. there has been back and forth between democrats and republicans on the hill. fromlleague joins us now capitol hill with the latest. please refresh us. what did we just see? light at least on procedure. flakers corker and changed their vote so that they

could have a procedural vote to get the process moving again. that is important because they said there needs to be a global agreement before they move ahead. that means the leaders of both parties with the white house will have to figure out what level of funding would be acceptable for the wall for all parties involved. >> the irony here is that senator corker and flake are retiring. this is not something where people can say politics did or did not have anything but at this point in their careers, since they are stepping off the stage as it were, they had nothing to lose in reaching across the aisle to try to find a solution. have been in the most likely to resist some of president trump's earlier initiatives. they are the ones who are usually the first to speak out against the president from the republican party in the senate.

i am here where members are