emily: this is what happened the last time we interviewed stewart butterfield. [laughter] [crosstalk] emily: oh my goodness, it's jared leto, everybody. yep, jared leto, the actor, who is also a tech investor, photobombed our chat with stewart butterfield, the seemingly quintessential serial silicon valley entrepreneur. but butterfield's story is anything but. in fact, he founded both of his companies by accident. flickr sold to yahoo for $27 million in 2004. today, slack, a workplace collaboration app, is worth more than $7 billion and it's now battling microsoft, google, and facebook. joining me today is the slack ceo and cofounder, stewart butterfield.

stewart, thank you so much for being here. stewart: my pleasure. emily: you had an unconventional childhood. your parents were hippies and chose to raise you off of the grid in british columbia. what was that like? stewart: i was a pretty little kid. so i am not 100% clear on it. it was, in many ways, an idyllic childhood. i was raised in a log cabin. it's a great story because i kind of sound like abraham lincoln with no running water until i was three and no electricity until i was four. my father was from new york, and my mother is from montreal, and they really had no idea what they were doing. it was pretty easy to grow a big zucchini, but you cannot live off zucchini. [laughter] stewart: but when i was about five, we moved to the city so i could go to a school.

it was a more normal experience. emily: your birth name isn't stewart, it's actually "dharma," which means "the way." stewart: yeah, it's a complicated concept, but central to hinduism and buddhism. emily: how did that shape you? and what kind of a kid was dharma? stewart: i was very curious. my mother tells this funny story. round the mile away from us there was another family and they had a son who was maybe six months younger than me, and his name was noah. he was the only other kid i knew. it turned out that i understood "noah" to mean "other child" and she took me on a train to see family back east. i've never been anywhere where there were so many people around.

so i go on the train, and i was wide-eyed and went, "noah, noah," i didn't realize there were other children, so that was a little weird. emily: so, given that seeing other children was a rare occurrence, when did you see a computer for the first time? stewart: by 1980, we had an apple 2e. and i was super into it. so, seven, i'm in second grade. i was in the first class in my school to have computers in the classroom. in apple basic, you could pretty easily do some basic graphics. you could make this little square this color. make this square, this color. so i made kind of an interactive multimedia experience for the other children, which was flags of the world, but only the super easy flags, like france and russia. basically any tricolor, big horizontal bars, not like brazil or mexico or any of the fancy flags. emily: you studied philosophy. in college. you wanted to be an academic? stewart: so, really big into computers when i was a little kid. but when i was an adolescent, i lost interest. it wasn't until i arrived in university and i discovered the internet, this is a 1992, before the web started taking off.

suddenly, i was back into computers because of networks. because of the internet, as soon as the web became popular, i taught myself html. i taught myself how to make a web pages and that was my summer job. by the time i finished my masters degree, i had no idea what i was going to do. except be an academic. because the big five philosophy firms aren't always hiring. it was 1998, and the dot com kind of initial boom was in the upswing, and i had some very marketable skills. emily: and so instead, you joined a startup. stewart: it was called communicate.com. it's too long of a story, but by the end of february 2000, a couple of weeks before the crash, i quit. i couldn't stand working there anymore. it was driving me crazy, i thought i was walking away from about $10 million in equity, and it ended up getting bought out for $35,000, which was $35,000 more than anybody else made if you stuck around.

and it was started by the person i sat next to my first day at this job, and i convinced him to quit. he had been running the app as kind of a hobby, so we started it up as a business, so we did. emily: and that actually sold, for a decent amount of money. you made something. stewart: i made something, and that was pretty fast, but now, it's 2001, and that trough ended. worldcom and enron are happening, and not long after, 9/11. and the economic outlook was pretty dark. the nasdaq was down 80%, s&p 500 was down 65%. and not a lot of optimism about the internet, but there was this burgeoning movement of self-expression online, which was blogging. from the late 1990's until the early 2000's, there was just such an active community of people who were really innovative, but there were also these relationships. it kind of hearkened back for me to what i had seen 10 years

prior when i first got online, and that has been a theme for the whole career. started a company to build a web-based massively multiplayer game. emily: a never-ending game, it was literally called game never-ending. stewart: exactly. and this was 2002, and guessed that people were investing in that at that time, can you guess? emily: unlikely. [laughter] stewart: definitely, there was an audience for that, a pretty small audience. we had raised a little bit of friends and family money, and put our own money into it. and we got to the point where the only person who got paid was the one person on the team who had kids. and we just couldn't do it, so we ended up making flickr which was, obviously, like a big turn. emily: so, in the wreckage of the dot com bust, you basically started flickr by accident. stewart: yeah. emily: what made you see that flickr could be something? stewart: desperation. fundamentally, we had developed a bunch of technology for the game that we thought was really interesting in its own right, instead of an inventory of items

in the game world, you had a shoebox of photographs. and it was really cool from a tech perspective. it demoed really well and people were super impressed. i didn't know you could do that in a browser. it wasn't really a great product, because you had to be online with the other person to share photos with them. emily: but the concept was very new. i mean, it sounds obvious today, photo sharing. stewart: the constant theme from 1992, to the game never-ending, flickr, is really this idea of use of competing technology to facilitate human interaction. and in some sense, i am agnostic about what the purpose of that is. it could be for play, it could be for creative expression, or for work. emily: are you agnostic about the result? because it could also be for

good or for bad. stewart: yeah, i think technology gives us options. there is going to be good or bad things that people do with it. part of the reason to have a career is right now -- when i was born and when i grew up, you and me are the last generation of human beings who will know life both before and after the internet. despite the fact that there are some negative consequences, like people now have better technology, so they can do the some bad things that they did before, with bigger consequences. it's a huge plus, and i think as a species, we should be grateful that we got the internet. emily: flickr was so hot that a year after you launched, yahoo! bought it. you sold it for $22 million to $25 million. is that the right number? stewart: i don't even remember at this point, but around there, yes. emily: you move to yahoo!, and you became like a dot com star. stewart: it was kind of the first thing that was like a phenomenon since the original dot com crash. in 2004, we were on the cover of

"newsweek." me and my now-ex-wife, katerina, the cofounder. that issue came out, i was in new york city at jfk, and i get through security, go to the gate, and i see there's that magazine. like, it's out now. i grabbed a stack of them and put them on the counter and the woman scanned the first one, she scanned the second one. and she said, honey, these are all the same. [laughter] stewart: i said, i know, i know, that's ok. and she looks up at me and it looks up at the magazine and she realizes it's me and got so excited. and then she reads the thing. i don't remember exactly what it said, but it was like, flickr and web 2.0, how flickr and myspace are changing the web. she was crestfallen. [laughter] emily: you talked about how one of the strengths of flickr was the culture, and how caterina would welcome every single user. today, that doesn't happen on facebook and instagram and in fact, online hate is a huge, huge problem. do you worry about hate on social media? stewart: yeah, i do. one of the things we say in my

company is that your culture is the worst behavior you're willing to tolerate. not everyone tolerates the worst behavior on twitter, but collectively as a society, as a business, as a culture, we tolerate it in a sense that it hasn't been eradicated. it shifts the boundaries of what's acceptable in a way that kind of encourages more bad behavior, and i think it probably has a negative impact. on the other hand, i think the net impact is hugely positive. i think it connects people in a way that they never would've been connected before. i think twitter, in particular, which gets a lot of criticism, has really been outstanding in amplifying the voices of people who would otherwise not be heard. emily: but it's also amplifying negative voices, as well. and should they be doing more to stop that? stewart: they probably should. my point is jus that it's not like an obvious, terrible thing that as a society, we would be better rid of, but people used to say terrible, nasty things on

the radio, and used that to incite both mobs but also political movements that were super damaging later on. as human beings, we take a little while to figure out how to use technology, and sometimes it takes generations. right? we have to figure out how to move technology towards the consequences we want and away from the consequences we don't want. 10 years ago, 20 years ago, we would have been public long before we got to this stage. ♪

emily: you left yahoo! you and caterina broke up. a lot of things changed. stewart: mmhmm. emily: but history actually repeated itself. stewart: yep. emily: you started another game. that failed. and you started another company by accident. stewart: yep. so, it was me and three other members of the original flickr team who all worked at yahoo!. we all left, and we said, this

time, we can't fail. there's 10 times more people online. hardware is 90% cheaper than it used to be, everybody has faster computers, the internet is faster, and we are all more experienced. and we definitely failed again. so, we moved to a more ambitious project, and we were able to raise more money. emily: this was glitch. stewart: this was called glitch. we were working on the game, we were using irc. irc, for those people aren't familiar, is basically instant messaging. and it's based on what they call "channels." it's like a chat room. you can give it a name, you use a hash symbol to give a name to the channel, which is where twitter got its hashtags from. unbeknownst to us, we are developing this in the background, but in a totally subconscious way. it was so irritating to have a problem, and then we would address it in a number of minutes and then get back to what we were doing.

and we'd let that kind of cook. emily: so, what was the moment you realized that slack was a thing and glitch was most certainly not? stewart: it happened the other way around. there was a moment, late at night, i hadn't been able to sleep well for a while. i was just really worried. the was always just one more thing we could try. and it was always like one more thing that would make a difference. again, it was a little too weird, a little bit esoteric, a little bit too unfamiliar for people. and i just realized, i don't believe it can work anymore, so the next morning, i told the board and i told the cofounders that we have to shut it down. while that was happening, we were like, what do we want to do next? we all wanted to work together, and we realized we had never worked with the system like this, which we had developed inside the company that was making glitch. maybe that was something that other people would want. emily: slack now has eight million daily active users, three million paid users, 70,000 paying teens, 65% of fortune 100

companies. stewart: yes. it's not what i expected. and the potential seems, like, unlimited. emily: so, what are the goals now that you far outpaced your own expectations? stewart: well, i mean, i think we're unbounded in terms of our opportunity. and we're unbounded in terms of resources. and the market is just way bigger than we thought. there are, ex-china, maybe 200 million people in the world who will inevitably be using slack or something like slack. so we don't necessarily win, but the advantages are just so big. everyone will eventually switch, and there are 100,000 plus people using slack every day inside of ibm, but there's also farms and dental offices and small tax preparers. there are police departments using it, the norwegian department of welfare and labor uses it, most all academic labs in san francisco, uc berkeley, stanford, uses it. the federal government. the range of utility was way greater than we thought when we first got started. emily: so, you've raised hundreds of millions of dollars, and in the past, you said it was easy money, you didn't need it. is it that easy to raise now, or how have economic conditions changed? stewart: certainly not for us. i mean, i think what's happened

is there has been an increasing separation between the most successful companies, and everyone else. vc markets still seem pretty hot in the broad sense. i worked through the dot com crash. i literally and personally held shares in lehman brothers the weekend they went bankrupt. i didn't think that stocks could go to zero, but they can go to zero. so, i'm conscious of the cycle. emily: so, you're holding it for a rainy day? stewart: yeah, it's a great hedge against significant market conditions. emily: now, microsoft has free team, facebook has workplace, they are built as a slack killer. stewart: yep. emily: is that cutting into your share at all? stewart: no. it hasn't really shown up in,

like, actual usage of customers yet. where it does show up is in the sales process. i think what will be really interesting is, you know, people talk about new microsoft versus old microsoft. where i think that will make a big difference is what the policies are for customers. first of all, that's good validation for us, and second of all, we are way ahead on the product side. emily: so you're not worried about it? stewart: no. emily: ok. you said you're getting the company ready to go public but you're not necessarily going public. where are you now on that? stewart: i think we're kind of in the same position. it's difficult to contemplate. there are not many outcomes where we don't end up going public. i don't have any kind of timeline. we're not in a rush to achieve that. it's an unusual circumstance because i think 10 or 20 years ago, we would have been public long before we got to this stage. you know? like, we're a big company with

hundreds and millions in revenue, and we're still private. emily: would you consider selling? i mean, we've chased speculation of there's a buyer out there for slack at this insane valuation. stewart: there are definitely people who'd be willing to buy it. it doesn't work that way in private companies. it's a much kind of circumstance conversation. hey stewart, if you would be interested in talking about how companies can work more closely together, we would be interested in having that conversation, or something like that. and if we don't respond positively to that, like if we don't say, yeah, it sounds great, let's talk about it. there is no offer. nobody ever says, here is a check, do you want me to sign it? we are so optimistic about the future and having so much fun. i personally would like to do this for 20 more years. it doesn't make sense to sell it. and also, i feel like, when i say unbounded potential, i mean we should end up as big as microsoft if we are able to execute in a way that i hope we can. by the time i figure something

out, suddenly we are 50% bigger and that doesn't work anymore. ♪

emily: you haven't shied away from speaking out against president trump. you spoke out against candidate president trump. when i interviewed you for my book, i remember you talking about how you thought the world was getting better, and then the day after the election, you realized it wasn't getting better. what do you think about the world today? stewart: that's pretty dramatic of me. i like to think about this in terms of policies at this point. and there are all kinds of policies, which i think are worth vigorous opposition, for different reasons, right? so, immigration policy, for example, both on moral grounds and understanding of what made this country great historically. at the total other end of the spectrum, the trade policy is something that could have a really significant, damaging effect on both the american and the world economies. i still think we're going to have some repair to do, but 10, 20, 50, 100 years from now, i

think we'll be in better shape than we were. emily: you've come out in support of planned parenthood, you spoke out against the travel ban. when you make and take these political stands, how do you decide to do that? is it a personal thing? you have a company -- stewart: i think we have to pick our battles as the company. i think as individuals, we are absolutely free to make our own choices. i to try to separate my activities as an individual person from those of the company. emily: i know you're nervous about being held up as a model for diversity, but the truth is, your numbers are far above the industry average when it comes to diversity. and you, personally, decided very early on in the slack's life-cycle to make it a priority. what was the spark that sort of brought you that realization? stewart: first of all, it wasn't just me. it was a company-level decision. and it was when we were around 30 people and we were looking

around and it was looking like any other tech company. it just caused a lot of conversation about what we can do to make a difference. the real impact was more likely to come in building an inclusive culture, one where all different types of people can thrive, where critically, people are less likely to fall out of the industry. because the longer someone from an underrepresented group or a woman in technology stays in, the more success she has in her career, the greater the odds that she's going to bring people from her network. that she will be a mentor, that she's going to be a role model. that is the way we are going to get lasting change. we don't have it figured out, but what we've seen happen is we have made some positive moves and we've taken a very open, experimental approach to things were willing to try to increase both diversity and inclusion. and as a result of that, we have attracted a lot of people, and success begets success. emily: 43.5% of your workforce is female, versus 30% industry average. your numbers are way better

across the board, whether it's women, african-americans, others. facebook and google, meantime, just released their diversity reports, and the numbers have barely moved. how can the rest of the industry move this in a substantial way, and what is your advice to young entrepreneurs who are starting at the beginning? stewart: well so, the second question is much easier, which is start as early as possible. which i guess answers the first part of the question, which is once you get really big, it's hard to move things on a percentage basis. i think people have unrealistically high expectations of what kind of change we can see in the short term, but in the long term, i think we will see a much bigger and more profound change that anybody realizes at this point. emily: slack is dramatically changing the future of work. in many ways, slack increases flexibility, but it also means we're connected to work all the time. do you think about the irony of that? stewart: yeah, absolutely. i think about all of this stuff. when your company has cultural really serious cultural problems, slack can exacerbate it. it can actually make it worse.

if there's a high level of trust and respect, high-level communications, slack can make it even better. i think what's interesting about the future of work is, when you look at people in their individual functional roles today versus a few decades ago, they are just massively more powerful in their ability to get things done. but where we haven't seen as dramatic and improvement and what ends up being a limiting factor on performance is communication, how difficult or hard it is to gain the alignment you need. because the difference between the best and worst performing teams is far greater than the best and worst performing individuals. but we've concentrated most of our effort on individual worker productivity and time management skills and life hacks and to-do lists, getting things done, stuff like that. and far less on what is probably the more important thing to change is the degree of transparency, clarity around goals, trust, respect, alignment. the output there can be an order of magnitude or several orders of magnitude greater. emily: how do you see your role changing over the next five, 10,

20 years? you said you want to keep doing this? stewart: i feel like i am perpetually behind where we should be because we're growing so fast. we've only been in the market for 4.5 years, and by the time i figure something out, suddenly, we're 50% bigger and it doesn't work anymore. i am sure i would not have said this out loud, if you had asked me two years ago what my job was as ceo, but what i would've thought privately inside my own head is, i would have said that my job is to be the smartest person either in the company or in the room, or whatever, and make all the important decisions. that's definitely not the job. but the fundamental responsibility is to increase the performance of the organization as a whole. in an environment where you have no limit on the opportunity or no limit on the resources available, it's really just a matter of figuring out how to amp it up, how to grow more quickly, how to make customers happier, how to do all of that better. and the continual learning and improvement for the whole organization is going to be the driver of our success. emily: we'll see how amped up

you are in five years. stewart: yeah. emily: stewart butterfield, thank you so much for joining us. great to have you. ♪

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♪ announcer: from bloomberg headquarters in new york and london, here are tom keene and francine lacqua. tom: we say good day to all of you around the bloomberg world. tom keene in new york, francine lacqua in london. one of our favorite moments of the year, talking about year past. more than any year, looking forward to next year. this year it was nuts.

francine: [laughter] this year was nuts and it's nice to have this with you, tom. every time i think we're like an old married couple. we fight talks about the , markets, fights. it's nice to spend a little bit of time to discuss what 2018 was and what 2019 is going to bring. for many investors, 2018 closes with a sigh of relief. deutsche bank has called it the worst rout since 1901. trade wars, populism, and a broad based drop in global growth are just a few of the thing weighing on investor sentiment. after a year that wiped almost $15 trillion of the global stock market, what is in store for 2019? we are joined from new york by the chief equity strategist at blackrock, the head of commodities research at goldman sachs, and also simon french, panmure gordon's chief economist .

a look ahead to 2019. as tom was saying, it has just been a whirlwind of things. is it monetary politics? geo policy? >> what has been really hard for investors is to isolate one of those factors. you have asked me the question, i will give you a direct answer. i think after an extraordinary period of 8, 9 years of quantitative easing by the central bank, it topped out earlier in the year at about 1/3 of market capitalization of all equities. now we are starting to see that go into reverse. for the first time since the start of 2015, we are no longer seeing monetary policy become that tailwind. that means investors can just take returns based on central bank activities for me that was the thing that changed in the second half of the year. the question going into 2019 is

whether that needs to come back on if growth starts coming back to the downside. francine: what do you worry about the most in markets? we had a snowball effect that started with emerging markets, and i guess tempers were tapered. are you concerned that there's anxiousness on the markets that comes to the floor in 2019? >> this is the year where almost nothing worked. the playbook that everybody was working off of, whether looking at historical returns or what might be a safe asset in this environment, weren't really successful. i think this has really weighed on sentiment as we ended 2018 and approach 2019. one of the things that really strikes me is that while we were adjusting to quantitative tightening, adjusting to a more normal or kind of neutral monetary policy, and while growth was slowing sequentially in some regions, but accelerated by fiscal stimulus and tax cuts

in the u.s., there was also this massive uncertainty around trade, the relationship between the u.s.-china, and what feels like this pressure de-globalize that will be present in 2019. that really got reflected in asset valuation. tom: jeffrey currie, what i love in your work is the rigor you bring when you talk in chicago. always rigorous insight. as you frame a model for next year, where do you start in framing next year's model? >> going back to micro, it's always look for the margin of adjustment. where was the margin of adjustment this last year? you had high oil, strong dollar, rising rates. the three are unsustainable. one of them had to give, one of them had to adjust. we thought the dollar would be the one to adjust but it ended up being oil and commodities. rates are still at relatively high levels. when we look at the next year,

what do we think is going to change? you think about commodity, they are the late cycle play. they did work up until four weeks ago. when you think about the outlook going forward, the problem is that people cannot handicap the risk associated with geopolitical events. we are talking about markets in this sector. how should you frame what should i do with my money with the cacophony just described? tom: you handicap the risk in there, you fold it into asset allocation. my tactical allocation is a presidential tweet. >> that's right. >> that's how it is every day, it seems. >> you can really seek higher quality assets, look for the companies that can grow in all parts of the cycle in the equity market. and really think about where will the growth countr -- growth come from. you have to balance out the time

horizon and think about quality. francine: we also had a yield curve inversion. when you look at market volatility, when you see a market correction, is it a good indication of a possible recession, or at least economic slowdown? >> that's why it's dominated conversations in the second half of the year, because you have an inversion signaling with an average of about five to six quarters in advance, an inflationary environment in the u.s. economy. the obsession with that is because it has been a

because it has been a historically great indicator. i think the jury remains firmly out as to what the quantitative easing has done to the shape of at this point in the cycle has historically been defensive, have already been bid up. you are paying quite a premium to get exposed to that at this point in the cycle. francine: can you say with certainty that the slowdown we saw in the oil prices is only a supply question? should we not worry this is a demand problem coming from emerging markets? >> if you look at the shifting fundamentals, it primarily came from what happened with the lack of the iranian sanctions biting on overall supply. the pullback in prices we've seen more recently is driven around demand concern. the fundamental shift, the actual one was physical due to iran. the concerns that have been driving prices lower is around demand. we don't think there is evidence of physical demand weakness, which is why we are positive on oil commodities going into 2019. tom: it's always about use of cash.

did you see a change in use of cash in the last quarter of 2018? can you predict something different about share buybacks or about dividend dynamics for 2019? >> i think for the entire course of 2018 people were hoping there would be a significant tick up in capex investment. the only sectors we saw an increase were those that we already expected to spend. spending is not going to be particularly robust. we will have much more of the behavior we've had postcrisis, which is very cautious spending focus on buying back shares when prices get a little bit low for the management team and board's liking, and i think a very defensive posturing. tom: what i find amazing here is the european reality of negative interest rates. once again, we are here in the vicinity of 119 with negative interest rates. it's a chronic issue. >> it is a chronic issue and i

think the date in everybody's diary is in october, the replacement of mario draghi at the helm of the ecb. this is somebody who is synonymous with those negative policy rates, and the degree to which his successor wants to move away because of the financial stability damage that is potentially going on beneath the surface in terms of capital allocation. i think we will write the history books, won't we, of what this experiment with extraordinary monetary policy, we will write those in the years to come. we may find that the demand side focus has led to a misallocation of resources that means we are starting to impinge on the route desire for productivity growth that is going to drive out into a sustainable recovery. francine: thank you all. kate moore, jeff currie, and simon french all stay with us.

the perils of politics. how president trump's trade policy -- and theresa may's brexit gambit. there's a date for the big vote, but what will it mean for her future and the future of global markets? this is festive bloomberg. ♪

♪ >> now back to "2019: a look ahead." here are your hosts, francine lacqua and tom keene. francine: welcome back to 2019, a look ahead. tom, i feel like we should have a glass of something in our hands. tom: good idea. francine: a scathing back and forth over trade policies has been one of the themes of 2018. president donald trump made reducing the u.s. export/import balance with china one of his primary goals. so far that has not happened.

now the u.s. trade deficit with beijing has widened to the highest in a decade and the slumping yuan remains another cause of concern. from new york, we are back with kate moore, jeff currie, and simon french. kate, do you worry that we are going to talk about trade tensions and trade wars for the next 20 years? kate: i do worry about that. we outlined in our 2018 year ahead, so a year ago, that trade was the biggest risk to global markets and risk appetite, but i have to tell you, i probably underappreciated the impact it was going to have on valuations and how heavily it is weighing on corporate investment decisions, even at this point. even if we get some sort of resolution in the next couple of months, let's say we come to an agreement on tariffs, the chinese offer a lot of concessions, we actually end up

having lots of productive handshakes between trump and xi, i think this trade conflict, the deglobalization and the decoupling, particularly of the tech sector between the u.s. and china, is here to stay, and i think that is going to have an impact on investment opportunities. francine: in the world of commodities, how much does it have to do with trade and the geopolitics surrounding this back-and-forth between the u.s., and how much does this have to do with the chinese economy slowing down by itself? jeff: the biggest impact is actually via de-stocking. over concerns about the future, strong dollar, higher rates, tighter financial conditions. eventually they are going to get to a level that they will have to restock. we think that is going to be the theme in 2019. is that hey, you can't continue on forever trying to avoid this trade war. it will force action on the overall market. tom: simon french here with us from panmure gordon.

simon: the bilateral battle we are currently seeing between china and the u.s. risks the area that is most exposed to trade, which is the eurozone. therefore, what is a multilateral battle for economic hegemony is an economic cold war. it risks pulling in some victims that sit multilaterally, and the breakdown of what has been a rules-based system that served the economy relatively well is a legacy that is bigger than premier xi or president trump. tom: one of the essays i really touted this year was on mercantilism. jacob viner, who was a giant in chicago years ago, power versus

plenty. is it a mercantile age? can we break this nascent mercantile cycle that we see coming out of president trump, and frankly out of the populism we see in this slow growth? kate: populism is here to stay globally. we are seeing this evolution in trade, evolution in international relations. going back to my chicago days, i actually wrote my graduate work on how capital is allocated in china much differently than in emergent economies or japan. how they think about data, culture, how they think about sharing and social connections. tom: they don't do the microeconomics of professor currie, do they? kate: change is the way they operate, and i think we need to recognize china has not developed in the way that the west may have expected in the post-wto era, and that is really shaking up the relationship. that is not going anywhere in 2019 or onward. there is just now a reality we

face this change. francine: are the markets really equipped to try and deal with populism? it seems every time there's a populist headline, the market doesn't really know how to trade it. kate: the longer we go through this period of political uncertainty, the longer i expect valuations to stay more towards the middle of the historic range rather than the end of the range. francine: we have italy, france, germany. how weak will europe be in 2019? simon: it will be a slow growth economy. whether that is due to prevailing demographics and structural challenges, rigidities in that economy, or whether this is something far more malign. i think it will take its cue from the state of global trade and the degree to which that can provide a kind of stimulus to keep growth at the kind of levels the eurozone needs. i think also, one of the things we need to think about in 2019

is looking for national champions, the kind of investment strategy where a corporate entity that gets effectively air cover from its government, from its legislature is the type of thing that may outperform over a repeated number of years if we are moving from multilateralism to unilateralism. tom: we have symbolism here with brexit and the north sea. jeff currie, the north sea i guess is a depleting asset. there was a heyday, but do you look at the united kingdom as a depleting nation? can they find a pastor becoming some form of national champion for 2019, and frankly three years out from there? jeff: if we use your analogy of the north sea, i think their ability to grow the supply is not part of the world is really going to be a function of this whole idea of a need for investment and long cycle activities. i go back to the point kate was

making about investment. all it's been is in short cycle. things like shale in the united states at the expense of long cycle activities. whether it's gold mines, copper mines, deepwater oil. tom: where are you on gold this year? jeff: 13.25, another 10% from these levels. i think, you have a lot of fear out there for the real kicker for gold needs to be em. tom: i just want to ask about gold, because we have this beautiful gold backdrop. kate moore with us, simon french, and jeff currie. coming up, we are going to look about the chart of the year. we are going to look about the economic underpinning of your 2019. please stay with us. ♪

♪ announcer: now back to "2019: a look ahead." here are your hosts, tom keene and francine lacqua. tom: welcome back to "2019: a look ahead." thrilled you are with us here. real smart conversation. jeffrey currie with us of goldman sachs, head of commodities research. kate moore of blackrock, their chief equity strategist. simon french with panmure gordon. i want to go right to the chart of the year. twin deficits. never have it done before a chart to try to look to 2019, chart to try to look to 2019, 2020 and on. the gray line that's sum of trade deficit to gdp. the sum of fiscal deficit to gdp.

it is becoming reagan-esque. isn't it? kate: yes, and there are not enough people looking beyond 2019. i wonder if one of the surprises for next year is this is going to be something that we are singularly focused on. it has a significant impact on bond yields and the yield curve and ends up playing through all risk assets. tom: jeffrey currie of goldman sachs, and others looking at economics and the government crowding out the private citizen. is that upon us? jeff: it goes back to this whole long cycle, short cycle. this is starting to effect a lot of the a lot of different industries because you are not getting what you need. francine: i am going to ask you an oil question. do we care about opec in 2019, or do we only care about russia and shale oil? jeff: you care about opec in the first half of next year as you

look out towards the end of next year, we go back to what we call the new oil order, which is a substantial oversupply market from the likes of what you just said, shale and russia. if we look over the first six months, they can cut production. one of the key reasons why is the shale guys are constrained by pipeline capacity. that was the story of last year. it will still be the story until you get to the third quarter of next year, at which point you unleash the shale ability for it to really grow quickly. francine: simon, should the oil people, the market, the consumers, worry about recession in 2019? what is the probability of 2019

recession? simon: we got it down to 10%. we don't think the -- look at the policy backdrop. we've got real interest rates negative across most of the developed world, just marginally positive in the u.s. economy. you have a lot of the bank recapitalization that took place the decade after the financial crisis has now plateaued. the third part of this is a lot of the fiscal consolidation. it is now over, and indeed the fiscal stance of tom's chart shows this is quite a stimulus, and actually a lot of profiling, 4% to 5% of gdp, is predicated on gdp growth. that has to be profiled back toward 2% because the sugar rush of the tax cuts and the anticipation of an effort -- of an infrastructure program is simply not going to come through to deliver that on a sustainable basis. tom: in the time we've got here, let's be proactive and look at opportunities for 2019. kate, this is what you do. what is the opportunity in the markets for 2019? kate: i think emerging markets require a lot. tom: go long em. you are brave.

kate: i'm also looking at fundamentals. we haven't seen huge deterioration in terms of the earning profiles. valuations have adjusted. sentiment has been tepid at best. we are seeing a huge amount of small policy stimulus across many different emerging markets that we think will support growth. tom: ok, jeff, your opportunity for next year? jeff: same idea. we like the base metal complex the most for all of the exact same reasons. tom: brazil? jeff: brazil we are going to take out of there. i like iron ore, copper, nickel. we think all of them have been beaten up. they're sitting on cost support at this point, and the fundamentals haven't deteriorated that much. francine: what do you hate for 2019? simon: i'm going to answer tom's question. what do i love? i love u.k. equities. you know why? this was a three standard deviation move on that asset class following the referendum. tom on radio, head of the brexit

referendum said, if the u.k. were to leave, will you be selling your braces on the london market because the u.k. economy is going to go to hell in a handbasket? it did not happen. that is a significant discount. some of the political fog will clear. tom: jargon alert, braces are suspenders in the united states. [laughter] tom: thanks to all of our wonderful guests with us today. thank you so much for being with us. francine, it's been wonderful. wonderful year. does everyone know the people behind us? how they make this happen? francine: they are amazing, and they will be back in 2019 weekdays for our show. it has been fun, tom. happy new year. tom: it has been wonderful. happy new year to you as well. we say happy new year, and a good 2019 from all of us at bloomberg. ♪

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best,ing up on bloomberg the year's most compelling conversations on finance in asia. >> technology is very cold, people say. we have to make the organization warm. speaks about philanthropy in life after alibaba. >> i think it is my responsibility to share. >> investors hope 2019 will be china's grand opening is a land of investment opportunity. the forecast.day

>> the reality is the u.s. and china need each other. this is a symbiotic relationship. >> in politics around the region, there were inspiring surprises. should not try to dominate the whole world. they were practical adjustments as traditional alliances shifted and strange. >> we want to make sure if the world sneezes, new zealand is not catch a cold. >> governor kuroda explains why he feels policy has worked. >> it has been successfully resumed. seenlook at the asian ipo in 2018. >> not only do we hope for several unicorns. $10 billion or higher. >> that is all ahead on this edition of bloomberg best.

hello and welcome. i am yvonne man. on this special edition of bloomberg best, we will look byk on 2018 in asia revisiting some of the most interesting interviews with policymakers and leaders in business. we start with jack ma. he has built china's largest personal fortune. inspired by examples like bill gates, he has been turning to charitable giving. he spoke to bloomberg's tom mackenzie in september about his vision of philanthropy. company like alibaba, we have so much resources, talent. we have 600 million people using us almost every month. i worry if we do not put those kind of love, respect,

responsibility into our business value these things to our employees, alibaba could destroy lots of things. do good things, do bad things. technology is very cold, people say. you have to make the organization warm. people are warm. >> are you succeeding? said shouldago, i put 0.3% of the total revenue of philanthropy in the philanthropy, protective environment, education. nobody cared. alibaba had no revenue. the board said go ahead. now we have such a big revenue, and i say we have to do this. it is not 0.3% of the profit. it is the revenue. >> how do you bring that to play in your vision for transforming education? everything we talk to

students in the past 100 years is about knowledge, science, industry. in the future what we teach the kids is about innovation, creative, constructive. how can you do things that a machine cannot do? that is about education. i am thinking about that all the time. >> that would be a big focus for you. >> i can be a teacher and a mentor to many young entrepreneurs. i do not, self a successful business people, but i have a successful life. i have gone through tough decisions, tough days. these can be very good for many young people. i am not going to teach math. i am not going to teach english, business in the schools, but i am going to teach young people how to face challenges. >> when you communicate with your counterparts in the west, can that help bridge divides?

>> i think so, and i hope it will. there was one thing we all have in common, people in china and america, we all have the heart of love and respect and trust. this is the common language we should have. as i said, the first technology revolution cost world war i. the second caused world war ii. now we have the third technology revolution. if there is a war, the world should fight against poverty, disease, environment. it should be together. we should fund the common things we're working toward. it is easy to complain. it is easy to think of points, say thist somebody to is the problem. if we work together, it is opportunity for all of us. >> in the same conversation with

tom mackenzie, jack ma talked about life after alibaba. shortly afterwards, he announced plans to step down as chairman of the company in 2019. tom what he planned to do in the next chapter. >> i have plans on education. i think education is so critical for the future. education, environment, these are two things i focus on a lot. there is no one thing is the most important. the most important is everyone do something. >> to what extent he you think your identity as an entrepreneur has been shaped by your first job, which is as an english teacher? >> people don't like me talk a lot. i speak in china because i am a teacher. the only thing i can do is share. i learned so much from alibaba. i learned from the alibaba journey in the past 19 years.

i think it is my responsibility to share. whether people like it or don't like it, agree or disagree, that's ok. the thing is you have to share. society give me so much resources, so much experience, you should not waste it. share with the others. maybe it is a professional disease i've got, teaching. >> do you miss teaching? would you like to be back in the classroom? >> i miss very much. i came to the business field by accident. i just came, started doing the work. i think very soon i will go back to education. this is something i have more dofidence, i think i can much better than be the alibaba ceo. >> that would be quite something. >> i love that. this is why i prepared the jack ma foundation, had the masters, kindergartens, all these things i have been preparing for 10 years. this is something i want to

devote most of my time when i retire. >> when could that be, that transition? >> very soon you will know that. >> this would be used a thing away from your executive role to focus solely on the jack ma foundation with a focus on education. would you look at the bill gates model? >> i think there are a lot of things i can learn from bill gates. many years ago, people say, jack, bill gates. i say i can never be as rich as bill gates, but one thing i can do better than him, i can retire earlier than him. i can do something for the education field unique, different. still ahead on the year in conversation in asia, plenty of politics with prime minister's speaking their minds. >> president trump. >> i believe he is --

>> 2018 was a year of trade tension between the u.s. and china. what everyone was talking about. >> the danger about this is the impact it has on expectations, sentiment. >> this is bloomberg. ♪

>> this is bloomberg best. reviewing the years top interviews on bloomberg television in asia. investors watched with interest to see whether china's government would follow through with pledges to liberalize the nation's economy, including relaxing rules on control of joint ventures. with j.p.xclusively

morgan chase ceo and chairman jamie dimon. what we want is simple, 100%. i think that is better for the chinese. joint ventures, a lot of these are hard to govern, badly run, not very successful, don't set the highest standards. for example, where does the research get done? if you saw something somewhere, you can sell here, but you can't sell there. the fees.o negotiate once we have 51% and 100%, you have the full faith and jpmorgan coming in, recruitment, training, bringing multinationals around the world here, bringing chinese multinationals outside. we have regulators on both sides of the world we have to deal with. that is part of the process. >> do you see this as a

step-by-step process, 51-49, and after three years, maybe 100% ownership? >> yes. >> where are you in that process? >> we are in the process. >> what is your time frame? >> it is the same. i am not worried about it. we have to make sure we have all the ducks in the row. >> what is the chief priority? last year you said joint ventures by nature are sloppy corporate government. >> yes. know thetrol where you other owners, that is a different thing. >> that actually works? china'sism about economic reforms were soon eclipsed over anxiety over trade wars as washington and beijing socked each other with tariffs. impact ofiscussed the tariffs on china's gross

economic productivity. here is an opinion on trade from high-profile guests that joined us this year on bloomberg television. believe there are solutions to the trade issue. launching a trade war is not the solution. if anything, it will make things worse. >> do you expect to see a slowdown in chinese investment in the u.s.? >> this year will certainly be slower. thanwas already lower 2016. 2016 was a huge year. i suspect 2018 may be even lower. we will certainly be more proactively looking for deals in europe. we are doing a lot in japan in the last 1012 years -- 10 to 12 years. at the end of the day, capital can go wherever it is welcome. >> over the next five years,

china is going to import $8 trillion of goods. because of the trade war, they put the page down because of retaliation. this is going to hurt everybody. this is going to close off a lot of opportunities for producers in the u.s. >> alibaba said they plan to create one million jobs in the u.s. jack ma warned that would not happen if they move ahead with the trade war. are you worried about that, those jobs will not be created? >> jacquetta set we are not going to create one million jobs, we could possibly create 10 million jobs if the trade flows are open. if there opportunity for small businesses that are being shut off because there is a trade war, then the consequences would be quite severe. clearly infractions

that need to be corrected. there are clearly certain industries in certain countries different points of time that are not playing by the rules. that needs to be fixed. the global trade is a strength for global economic growth. it has brought so much prosperity around the world. the u.s. is now talking about tariffs, i think $50 billion on imports from china. that is on a base of $500 billion of imports. importsthat reduces import by 20%. is that really going to change everything? is that that important? i believe the rhetoric is punching above its weight relative what the administration is trying to do. i think what they are trying to do is correct where there have been obvious infractions or inconsistencies. i hope they are not trying to

enter into a major global trade war rebalancing because i don't think it is in the global interest, or the u.s. interest. the u.s. is 5% of the world's population, 25% of the world economy. >> are you able to say who has more to lose when it comes to this trade friction? winners and to pick losers when you are talking about an $18 trillion economy economy whenillion the third biggest economy in the world's $4 trillion. it is a rapidly evolving relationship. surplus onns a trade services. clear that there is a winner or loser to be had. it is finding where there is obvious -- global market trade demonstrablytive

for the u.s. and china. >> i believe the situations get worse. donald trump is not going to give in, and it is going to china in terms of being crippled trade imbalance. the trade imbalance is the biggest of any other country the u.s. has. i believe it will be a real problem with china going forward. the good news is that some emerging market countries will benefit from this. just to give an example, soybeans. a big exporter of soybeans to china. .rgentina could benefit unfortunately, argentina is suffering from a drought. they had a downturn in soybean production. generally, you can see winners and losers coming out in the emerging market arena. >> have you ever known any time

like this at the moment, and we are in uncharted territory i suppose, then how do you look at it from a fund management perspective? >> we are going to have to be focusing very much on individual countries and companies to see were the winners and losers are going to be. it is going to be a very interesting time in the next year or two. >> if you look at trade as a whole, trade is at record levels. it is not as if trade has gone down. the danger about this is the impact it has in expectations, sentiment, and you are seeing a little bit of that. the fundamentals seem to be fine. sentiment is getting to a dangerous zone. >> it takes time for the actuality to hit people as well. 2019, how do you prepare for it, and what do you do in particular? >> it is a combination of things

we're looking at carefully, which is rates rising in the u.s., which will have some impact on emerging markets, and we have seen a little bit of this combined with the geopolitical situation around china and u.s. i would not center that just around trade. i think it is a broader geopolitical issue around china and u.s. there is some noise coming out of europe, whether it is brexit or italy widening their spreads. you see a combination of those things, and you need to keep an eye on that. and it has been 10 years without any significant recession in the u.s. or around the world, so i better prepare for all sorts of scenarios. >> much more to come as we revisit all of the top interviews from bloombergs asia coverage in 2018. next, a conversation with the

prime minister of -- >> we are geographically isolated, but linked to the world. highlights from the year in asian ipos. >> we are a trade company that can do e-commerce and internet. >> this is bloomberg. ♪

>> you are watching a special edition of bloomberg best, highlighting conversations from the year 2018 on asian business, finance, and politics. i am yvonne man. exception. was no it was one of the signatories to the proposed trade agreement.

bloomberg spoke with the new zealand prime minister in november during the conference in november. >> we are a trading nation. we are geographically isolated and linked to the world through our trading ties. that spacentaining is incredibly important. that means we have a job to do as well. discussing for a couple of years now how to create greater inclusion and prosperity from our trading agendas. how do we make sure more people benefit from trade? we have seen in some corners of the world they push back domestically from people who do not see those benefits and see the cost of globalization. we are trying to build on that mandate of trade for all. the trade rules we have agreed to and expand those trade options but take upon ourselves the domestic response

ability to see everybody's well-being lifted. convinceu manage to the u.s. to make an exemption when it comes to steel? >> i am such a broken record. i use every opportunity to raise it. we happen to be one of those u.s. tradesnd the with us. i did raise it. it was a conversation amongst other things. -- andhave talked about it has been stolen. countries wanted to push it through by this year. what caused the stall? >> my understanding is would have roughly seven chapters that are looking good. i think there is still a bit more conversation to be had around this. it is about balancing pace

quality. we want to see these additional benefits derived from our sect. that is why we will be pushing to lock in what has been negotiated but see if we can push further. it is a significant agreement. i think it will demonstrate the benefit that can be derived from this region. isis there concern that rcep being driven by china? >> no. that is not a concern from our perspective. our consumers are saying to make sure we don't start all the four -- quality workdays. -- qualityer pace for pace. >> what are the indications you are getting in your conversations with the rest of the global leaders? perspective,estic it is having an effect in the sense that business confidence

might be affected by looking out and seeing what is happening as a result of the trade conversations going on, that it might be having an impact on global growth. from our perspective, we want to make sure the world sneezes, new zealand is not catch a cold. there is something to be said about the architecture we sign up for around trade. we will keep heart around abiding by trade and agreements and norms we have signed up to. coming up, more geopolitics. a nationd to imagine experiencing a more eventful year than malaysia 2018. we covered a right angle of it. >> what was squandered from the people, the wealth of this nation. wealth of we are the

the world should be shared. >> this is bloomberg. ♪

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leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. of bloomberg best, wrapping up 2018 biplane back the top interviews. electionseld national with the ruling party expected to hold the monopoly of power. the incumbent prime minister was facing corruption allegations for his role in the scandal. vote, he before the sat down for an exclusive interview and offered his side of the story. ? started with the business

model itself. it's not sustainable. issue for what is a business issue. my opponents wanted to use it to change a democratic government between election cycles. that's why they created this issue. meanwhile, a rationalization program is working well. $13 level has gone down to billion. we've got enough assets to carry our debts. >> what do you say to those about the funds? what is your response? >> there is no evidence of that.

you just can accuse somebody of being a thief unless there is evidence. quote, we have to act on evidence. they could not find evidence of wrongdoing. that is a politically motivated statement. >> the funds did end up in your account. clear, there has been no wrongdoing. i stand by it. the government has, with a statement admitting it is a donation. the facts speak for themselves. it's been turned into a political issue. >> you regret what happened. would you have done anything differently? >> yes. i would have not had that kind of business model, i would make

sure. we all learn from our mistakes. not detract on the huge number of successes we have had in other areas. upset, thenning opposition led by the former prime minister toppled him and ended his long dominance. he is 92 years old and has agreed to step aside to allow the coalition partners to become prime minister. he spoke after the election. they discussed if they would hold me prime minister accountable for the financial abuses. can't think about what will happen. many people are asking.

this would not of happened without the instructions. level, it'sl forgiven. what he squandered from the people and the wealth of the nation, he has to answer. >> how much can the current government achieve in the next five years? can dismantle the compromise corruption. sure the policies

are efficient and disciplined. that is a major breakthrough. i think it would feel great. a major part would be played extremely well. economy andng the settling accounts are among the new government's top domestic priorities. there are foreign policy policies to be worked out as well. in june, they discussed these topics in an exclusive interview. >> >> chinese investors wanting

set upg in technology plans here. that is welcome. >> some argued that because of china's rise, there needs to be a balance. that could come from india as well as japan. should not tryy to dominate the world. the wealth of the world should be shared. >> your personal thoughts on president trump? hehe is material in that changes his mind within 24 hours. meet, and want to then they met, he thinks president kim is a great person to do business with.

>> can you trust a man who changes his mind about issues and the policies every other day? >> you need to be cautious. you need to know if this is for real or not. >> how would you deal with president trump? >> like with any normal person. to deal, everybody has with their own weaknesses. we have to deal with them knowing that. orderyou think the world will change with a leader like trump? withem to have issues nafta. concerned it will turn around and be a trade issue with malaysia? >> if it's a good proposal, why

not? it must be balanced. i don't believe in absolute free trade. when it's between the week in the strong, you need to have some protection for the week. >> you share waters with singapore. our relations better now? >> we are going to avoid the fact that they are our nearest neighbor. can do that. >> what are the issues? what is the sticking point? >> well, they're still paying $.03 for 1,000 gallons. and once the 1,000 gallons is done, we can buy back 10% of

that. at the same time, they can sell 1,000 gallons for 17 singapore dollars. that is a lot of money. >> is there a resolution in sight? where are negotiations right now? >> we'll sit down and talk with them like civilized people. yvonne: still to come on this special edition of "bloomberg best," the governor of the boj talked about central bank communication and admits it's not always crystal clear. >> maybe the market people have not understood exactly what we have been doing. yvonne: this is bloomberg. ♪

yvonne: this is "bloomberg best." i'm yvonne man. we're looking back at 2018 and asia business, finance and politics through the lens of the year's best interviews. while the federal reserve and the european central bank began to at least signal moves towards

policy normalization in 2018, the bank of japan has given little indication that it's preparing to wind down its stimulus program. at the imf and world bank meeting in october, kathleen asked of the governor what investors could expect from the bank going forward. >> at the last policy meeting, at the end of july, we decided basically two things. one, we will continue the current extremely accommodating monetary policy for the time being. because, yes, the economy improved greatly. the economy is growing 1.5%. unemployment rate is 2.4%. the corporate sector is enjoying profits.

but inflation rate is still less than 1%. far away from the 2% tariff. so that we have to continue the current conditions for some time, longer than we anticipated. that is one point. continuation of monetary easing. the second point is things we have to continue much longer than we originally anticipated. we have to avoid side effects, some negative impacts on the financial sector. particularly in the market. since we introduced the controls, saying that 10-year rates be targeted around 0%, markets took it so -- ha ha! the fluctuation was plus-minus 10 basis points.

so because of so narrow structure, sometimes there are sellers and no buyers, buyers but no sellers. so this kind of market dysfunction is not good. so we declare that we would allow much wider fluctuation, although the 0% interest rate target would not be changed. but the rate could be fluctuated much more widely, depending on economic inflation situation. so one is continuation of very accommodating monetary policy. the second is, since we will

continue this monetary policy for some time, we have to avoid the side effects, like the market dysfunction. kathleen: tapering, you're probably sick of hearing that, because you say we have not changed anything. we have just adjusted to keep the policy for sustainable. however, 80% of economists surveyed by bloomberg say this is still tapering. the target is 80 trillion yen, just down to about 40 trillion. you have this tweak to allow the range to be wider. is this a question of miscommunication? what is it the markets don't understand? >> i think it's not miscommunication but maybe the market people have not understood exactly what we have been doing. i mean, just two years ago, september 2016, we introduced so-called controls. so we switched the monetary operation target from the amount

to control, saying that the 10-year rates be around 0%. so that it became invariable. it is not the target anymore. so the actual amount certainly have been with fluctuation, to around 43 yen. but around 0% interest rate, 10-year interest rate, have been well-kept. that is the operating target. so of course it's necessary to target 10-year rate around 0%.

but the amount of the purchase is not operating target anymore. so that is the one point. second is, as i said, from the outset, we didn't intend to make jgb10-year rate exactly 0% with some fluctuations. but fluctuation has been successfully reduced by market participants. so we told them that -- [laughter] it could be fluctuating much wider, depending on the economic circumstances. but at the same time, we stick

to the 0%. kathleen: so what -- when you're actually someday ready to exit, is it -- what will the signal be? what kind of thing, changing the interest rate? changing bond purchase? >> i think the amount of purchase is no more market operating target. it's only the control. so minus 0.1% on the demand deposit held, and 10-year rate, which is now around 0%. so the control is the main tool of current monetary. so when, of course, we discuss exiting from the current extremely accommodating monetary policy, when the 2% interest rate target is met or is close to be met, of course we can change the target, monetary operating target, of interest rate.

in due course. but at this moment, inflationary rate of 1%, so that we would continue the current control, at the current level of interest. ♪

yvonne: welcome back to this special edition of "bloomberg best," summing up the year in conversation with a focus on asia. let's look back at some of the year's ipo action, including smartphone makers and food delivery. executives from two companies spoke with us on the day of their debut.

>> we are a new species. we are an internet company that can do e-commerce and wealth at the same time. i don't think there's anything like us on the market before. >> and how are you gonna go from getting about 80% of your revenue right now is in hardware. and they want to build out the ecosystem of services, video, music and other things. how are you going to, and over what time frame do you see the revenue mix changing? >> so internet services for us is first and foremost to provide a better user experience. we have found it's a very highly monetized source for us as well. last year, we were at about 8.6% of our revenue, internet service as a whole. by the first quarter, this has risen closer to 10%. so the trend is this is becoming a bigger part of our revenue going forward. >> he also said he wants to get eventually more than 50% of revenue from overseas markets.

and i would assume, not just selling hand sets from services. india, you're doing well. but where would the priority be and how would you crack the u.s. market? >> i think for internet services, the priority is always to make sure that the user experience is good. we are starting to do this internationally. we think over the course of the next two years, we're going to extend this as well. >> every day, 30 million people order food from us. i think it is a huge market, because everyone needs to eat and most people eat three times a day. so now, i think we are going to really have an even bigger platform. so i think it is going to become one of the most important technology companies in people's lives in china.

>> now that you're listed between market share and profits, what are you prioritizing? >> so, if you look at our business, we have a business that's more mature. for example, the in-store business is already quite profitable. and it is still growing. also, we have our largest food delivery growing super fast. it's very close to even. on the third, we have new initiatives. because we believe we are going to build the largest e-commerce platform for local services. i think we are going to become a more mature business. at the same time, we are going to invest in our new initiatives, invest for the future. yvonne: what does the future look like for chinese tech companies? the ceo and chairman of sinovation talked about the public and private funding environment for firms that hope to compete with silicon valley.

>> not only do we hope for several unicorns, we hope for a decacorn. that is $10 billion or higher, because that's really going to be the one driving the return. tom: what is exciting you now in terms of tech in china, where do you want to be putting your money? >> retail, health care, education, has all opportunities that china could disrupt with both tech and also in each of these three cases, perhaps having a late mover advantage of skipping a generation. tom: how would you describe the funding environment now in china, in the vc sector? >> funding environment is a little tricky. last year, there was a lot of money in both u.s. dollars and currency. this year, i think the supply is getting more constrained due to the deleveraging efforts by the banks, as well as the stagnant stock market that's limiting the wealthy from doing more investments from their own pocket or their corporate pockets. so the funding is tighter.

but u.s. funding is still plentiful. that is foreign investors from u.s. and europe, i think people are looking now at china with a lot less of the skepticism we saw a decade ago. at this moment, i think we've gone past the era of huge amounts of money. it's coming down a bit. and some companies are having trouble raising money and justifying the valuation, so we see a very healthy correction happening. tom: there was a lot of excitement this year for some of the tech listings, and then there was the disappointment. what is going on? how do you read that? are these companies going to market too early? >> no. i think these are good companies. i think the issue is there's -- there was a clear misalignment of the prepublic companies and the public company valuations.

i think the late-stage investors value the company's higher than the public market or wall street or chinese analysts. and that is what caused the price to come down. i think a little bit similar to when facebook went public, some eight years ago, there was a similar thing. but i think, you know, these companies are solid companies. their prices may need to correct due to the public market valuation and other issues, but if you give it another two, three, four years, the great majority will do very well, just like facebook has. yvonne: that wraps up our special edition of "bloomberg best." hope you enjoyed these conversations from bloomberg television's coverage of business and finance in asia during 2018. we look forward to bringing you more interviews, analysis and interviews in the year ahead. thanks for watching. i'm yvonne man. this is bloomberg. ♪ amazon prime video is now on xfinity x1.

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best," the most compelling conversations on business and finance in the americas. volatility returned with a vengeance in 2018, creating opportunities for some and anxieties for others. >> the market may be wrong now. >> long-term, the market is always right. alix: trade was a topic of constant conversation. nafta nations managed to work through their differences. through their differences. >> there is an eminently achievable win-win-win out of nafta. alix: there was more aggression between the u.s. and china. >> the only way we will get foreign countries to lower their inordinate barriers is by making it more painful for them. al