♪ emily: i am emily chang in san francisco. this is "bloomberg technology." coming up, president trump announces a deal to reopen the government for three weeks, ending a 35-day shutdown. we have all the details. facebook plans to merge whatsapp, instagram, and facebook messenger. could the move unsettle users and backfire with regulators? youtube is taking action to make conspiracy theory videos harder to find.

we will look at new policies to fight disinformation. our top story, the senate has passed a stopgap funding bill to temporarily end the government shutdown. president trump announced the three-week temporary bill ending the shutdown without the border wall money he demanded. take a listen. >> i will sign a bill to open our government for three weeks until february 15. i will make sure that all employees receive their back pay very quickly, or as soon as possible. it will happen fast. emily: this would mark the end of the longest shutdown in modern u.s. history, which has had impacts from air travel, ipo plans, and tax refunds. i'll reporter joins us now from capitol hill. we are waiting for the house to vote on this, but we are

expecting them to pass it unanimously. what is the latest? >> this will come as a relief to federal workers. the bill will allow the house and senate to talk about homeland security and border security until february 15. they will convene a formal conference committee. the house and senate will sit down behind closed doors and talk about how do we address the concerns about border security while respecting concerns that a concrete wall is not the thing to do here. ultimately, most of us think they will come out with a plan that includes fencing. trump will call that a wall. democrats will call it a fence. both sides will call it a day. they are relieved the government will reopen before beginning shutdown talks. they are worried about setting a precedent. they are feeling this is the best way to move forward. emily: on that issue of the wall

or fence and the technology behind it, here is more of what the president had to say. >> they are smart walls designed to meet the needs of front-line border agents and are operationally effective. these barriers are made of steel, have see-through visibility, which is very important, and are equipped with sensors, monitors and state-of-the-art drones. emily: are the democrats more receptive to this idea, whether the wall is smart or not? >> this is what democrats have been saying. they said they are for drones, technology, blimps even, expanding ports of entry to allow each customs officer to scan for drugs, improving imaging technology.

their message has been let's get the evidence from homeland security and find out what they need. there may be places where barriers work. they just don't like the idea of a huge edifice that would say we don't like mexico, a symbol of racism in the view of many democrats. there is hope they can do that and the talk of another shutdown want materialize, but the president has been unpredictable. we will see what happens. emily: how does the government actually get back online? >> as soon as the president signs the bill later today, the office of management and budget will issue a memo that all agencies need to begin restart procedures. they already issued a memo saying prepared to receive this memo. shift workers will be called back of those furloughed, and we

are inquiring when workers will be paid. in the past, they have not their pay until the next period, but the legislation signed this month should make it quicker. emily: what if we are back in the situation in three weeks? who has the upper hand? >> democrats clearly do. trump is unlikely to shut down the government again. most people in the senate republican caucus are against the shutdown. they were not for it in the beginning. they were giving mike pence a lot of grief yesterday on capitol hill. in the house republican caucus, the freedom caucus, which advocated the shutdown tactic,

is isolated. they don't have the power they did when they were in the majority. nancy pelosi is not gloating. she knows it can turn around issue tried to do a victory lap here and went overboard, so she is saying let's come to an agreement, be reasonable, and that bodes well for an agreement. emily: certainly a victory for the democrats and anybody getting a government paycheck. we have been following the impact of the shutdown on tech businesses, the u.s. ipo market, uber and lyft have filed to go public airbnb could follow, but the shutdown has put some plans on hold. what happens now if the government shuts down again in february? i want to bring in our guest. i think the government reopening is good news for the ipo market, right? >> it is. i was not hugely concerned anyway, especially as it relates

to the tech ipo market. these companies like to have a full year of financial statements when they go on the road, so march, april. a lot i currently know are talking about the summer. that said, this is better than the alternative, no doubt about it. emily: what happens if the government is shut down again and we get closer to that time frame that those companies are looking at? >> true, but this brief period should allow for the sec to catch up and get things back on track. it's going to be a big piece of the puzzle. ipo timelines are always complicated. i have been doing this for 15 years. i have yet to see one hit its original timeline. they are filled with curveballs. i am still confident that things can snap back into its regular cadence quickly.

emily: what is happening behind the scenes? our business executives nervous or jittery? >> i am getting questions about it, but it doesn't matter. it is noise. we have to be prepared one way or the other. you can't snap your fingers and make this happen. it takes six months to one year. the companies we are talking about later in the year will stay focused on what they do. emily: how concerned are they about broader market volatility, then the shutdown, and who knows what happens in three weeks? >> volatility is the enemy of the ipo. they have come down recently, but that was some of the concern towards the end of last year. it will make companies ask if this is the right path. that more relates to your typical uniforms. these monsters go when ever they want. volatility is not meaningless, but not that big of a deal.

emily: you think companies like uber could go whenever they want, the consumer understanding the companies? >> these high profile i'm a super exciting companies that everyone knows, loves, and uses come yes, they can write their ticket. emily: you said you have been optimistic that this would be a historic year for ipos. are you still optimistic? >> i am. there have been only four ipos of companies more than $10 billion. there could be four, 5, 6 this year. we are talking about a year like nothing we have seen before. emily: what could impede those plans? >> the volatility we talked about is not great. the longer things go, uncertainty is always a question

when you are talking about ipos. also, there is still an abundance of capital in the private markets. these companies don't have to go. nothing is requiring them to get out. the pressure in the traditional ipo was that it was the next significant capital race you needed to get to the next phase in the company's life, but it isn't what it used to be. emily: if these companies go public, will they be successful offerings? >> look, in order to be a successful ipo, if you have this great brand recognition, significant revenue growth -- revenue growth is the elixir of wall street, always has been, probably always will be. emily: not profits? >> when times get tight, they start to hear that more, but i have not heard that in the last couple of years.

those companies with key factors and a good story to tell, that is a good recipe for a successful ipo. emily: what about next year? >> i'm hearing companies that were originally talking 2020, 2021, saying may 2019 is the better time for us. emily: why? >> it feels like the appetite from the investment community is strong. emily: or maybe the devil you know is better than the devil you don't. >> completely agree. the longer you look out, the harder it is to gauge, but the ipo window is open, and will be for the next few months. emily: thank you very much. we appreciate those insights. thank you. now to a story we are watching, google lost walmart as a flagship partner.

the retailer also dropped out of google delivery services. it could be a blow to google's plans to challenge amazon. coming up, when three apps become one, mark zuckerberg's plan to bring instagram, whatsapp, and facebook messenger under one group. that is next. check us out on the radio, bloomberg app, bloomberg.com, and in the u.s. on sirius xm. this is bloomberg. ♪

♪ emily: one chat app to rule them

all heard that could be what mark zuckerberg is getting at after facebook is looking to merge whatsapp, facebook messenger, and instagram. what has changed? according to of facebook statement come of the following. people want messaging to be fast, simple, reliable, and private. we are working on making our products to be end-to-end encrypted. i want to bring in our two guests now. this is just the chat part of these apps, what it is a stark reversal to what mark zuckerberg said all along, that these would be separate and independent companies. why is he doing this?

>> several reasons. there is not a separate one app that will come out of this. they are integrating them behind the scenes. the apps can share data. as a user, you might not see much of a change. you might be able to message someone on whatsapp after a facebook marketplace post, and vice a versa. what is really interesting here is facebook will understand who their users are on these platforms that don't have stringent rules around real identity like facebook. on instagram, you can have multiple accounts. on whatsapp come all you need is a phone number. this will break down some confusion about who is who and make it clear to the company and its advertisers who they are targeting across the services.

emily: on facebook messenger, you are required to use your real name. users are not angling for facebook to become more integrated. many users like instagram and whatsapp are separate from facebook. what do you make of this move? >> you are right. they have appreciated it for a while. what this will do is give facebook that 360 view into its consumers, a deeper understanding and better targeting that it can relate back to advertisers. we all know facebook doesn't want to be just a nice entity. it is doing it for financial gain. this in proves its advertising. facebook will hit a wall, and has with facebook.com in terms of inventory. it's only place to go is not more advertising, but better advertising. this is how it will do it, giving advertisers a better view of consumers to at 360 understanding of these folks

across all of the apps. emily: is there any indication of what the employees think about this? the founders of instagram have left and were not happy. internally, do they like this idea? >> there has been a lot of tension at the organization about the idea of integrating more deeply. there are some clear reasons why. on instagram, if you have a user who has an anonymous account, imagine that account being shared with their parents on facebook, the main social network, maybe outing them as gay or something they don't want their parents to know at that moment. there are some real privacy concerns to open up this kind of data sharing between the apps. at the same time, facebook owns these properties anyway. these properties are sharing

data with facebook, so this makes it smoother to understand its audiences and the future of its business. facebook in the prior quarter for the first time announced 2.5 billion people around the world use the family of apps. emily: is it a good idea for facebook to be doing this as they faced concerns about data privacy and regulators are looking at whether to break facebook up? >> right. it is a pro-con situation. they are saying all messages will be encrypted, which is great, but the downside is it will make it harder to track bad actors using the messaging apps to propagate false information and fake news. it is a real give and take. we predict there will be

regulatory activity around facebook. we think they are getting tied up in politics, it put the writing on the wall. it will happen. we are seeing fines happening to google and facebook and other areas. we think it will happen freely soon. emily: i want to get your thoughts on mark zuckerberg's op-ed, at the same time the new york times broke the story about facebook planning to merge these apps. zuckerberg talking about privacy, but trying to explain basic parts of the business model and the which is interesting for a company around 15 years. >> facebook wants to set the terms of this conversation. in these op-ed's and in the congressional testimony, they repeat "we don't sell your data to advertisers." that diverts the conversation from the ada facebook is collecting and sharing. facebook does not want to share your data.

they want to keep it in an entity where they can charge access to it. the conversation of combining these apps behind the scenes come that is more about the information users are sharing with facebook. how much does facebook know that we don't know they know or we want them to know? that is a much more dangerous conversation for facebook to have in at a regulatory environment. the more they can say this is not about us sharing data with other people, the more they divert it from the real threat. emily: zuckerberg says people need clear choices on how their information is used. we believe regulations that codified principles across the internet would be good for everyone. that said, in this op-ed, he tries to explain facebook's business model. at times it sounds confusing. do you think he succeeded in what he was trying to do?

>> i think he is playing with the word "sell" a bit. do they sell data? probably not. do they monetize data? they certainly do. do they monetize data without consumers fully understanding how they do that? yes, of course. listening to those congressional hearings, having to slain over and over how things work, when the leaders of the free world on understand the business model, selling or not, monetizing are not, it makes you wonder exactly what is going on. emily: speaking of that, great piece for the center for investigative reporting today about how facebook reportedly, intentionally monetized or took money from children, from their parents credit cards that they did not know they were spending. check that one off. thank you both.

coming up, starbucks is doubling down on its digital strategy. we will hear from kevin johnson about how they intend to keep customers coming back. this is bloomberg. ♪

♪ emily: starbucks has put its recent sales slump behind it, beating estimates in key regions and the first quarter, including the u.s. and asia. the coffee chain has high hopes for its digital strategy. >> digital is a key part of our strategy. we work to extend the experience to a digital relationship with our customers. digital is a journey. technology is always changing. the way consumers use technology in falls. we continue to adapt. we launched our mobile app. we have 16.3 million active rewards members in the u.s. emily: the chinese telecom

company huawei dealt a blow from vodafone. vodafone will pause buying their equipment for its european networks while it talks with the company and various governments. the u.s. has been pushing allies to block them from fiveg networks over fears they could use equipment for espionage. coming up, silicon valley leans towards the democratic party. could the two come into conflict in the next presidential election? that is next. this is bloomberg. ♪

♪ >> this is "bloomberg technology." i'm emily chang in san francisco. the democratic party -- representative alexandria oh proposed a tax income for over $10 million. presidential hopeful elizabeth warren proposed her own health tax on those with $59 in assets. could this with $50 million in assets. here in san francisco, our own eric newcomer. >> silicon valley favors the democratic party. how much would the favor a more leftist democratic party echo

wrecks that is the question. behind closed doors you hear a lot of venture capitalists asking whether taxes and what free does traditional should really be the focus of the democratic message. on the other hand, and early uber investor who's made a fortune off that bet tweeted out in support of with dust of elizabeth warren while tax proposals say it was executed. some sets are more open to taxing wealth and others, they would like the message to focus on somebody else. >> jeff bezos would 04.1 billion dollars in the first year if elizabeth warren's wealth tax was passed. what -- what's the difference between that and alexandria cortez is proposing. >> is a lot bigger and more widespread what that would do is every year, tax anyone who is worth $50 million or more.

if you're a billionaire like jeff bezos, it goes to 3%. the tax affects a narrower group of people, because people are earning that $10 million, typically it's coming in the form of capital gains or what we form of capital gains or what we call ordinary tax rates. this plan by elizabeth warren would raise almost for us on $3 trillion raise almost $3 trillion. >> i interviewed priscilla, mark zuckerberg swihart about new housing initiatives that they are backing, facebook is backing to tackle the housing crisis. i thought it was a good example of the leftist sort of part.

take a listen to what she had to say. >> this is a problem that exists, it impacts the greater community. they want to be able to be a part of building the seattle or the bay area, a place that people of all different backgrounds can come and be successful. it's also understanding opportunities where they can be part of the durable solution. >> she's talking about why tech companies are becoming more supportive of these housing issues. the ceo of salesforce has been talking about how tech ceos aren't doing enough. here's what he had to say recently. >> the amazing thing is these committees can afford it. for us it's just a $10 million tax.

$10 million doesn't mean anything. that's less than a private pray that privately that jack dorsey's is going to fly around on. it's the money that we need -- private plane that jack dorsey is going to fly around on pit it's the money that we need -- around on. >> it takes to question how leftist silicon valley really? >> the question is what's the best way to help people? is it billionaires with their fortune committing to giving it a lot of away -- giving a lot of it away and having it flow to the government. it's going to be a debate about the best way to sort of take on these big projects. and where sort of philanthropy and sort of helping people is best originated. is it from the wealthy, who earned their money?

or is it the government who's going to allocated out itself? >> are there any -- >> our new tax id is part of the democratic platform? was elizabeth warren out on a limb? >> she is pretty left to the party. you can bet some sort of big tax increase, whether it be on corporations or on wealthy individuals, those are the two big costs of money. democratic tax points are going to include that. they have ambitious goals, whether it medicare for all, free college tuition. there's a whole ambitious agenda the costs a lot of money, a whole and more money than our system can produce. you are going to see a lot of new ideas. they're going to appeal to a populist base. you look at the 70% tax rate that was proposed. you have a majority of people supporting that.

you look at members looking at how can we get voters excited? you can bet those proposals will be tamed back. particularly because they will have some balance of powers between democrats and republicans. >> this -- are pretty but together this great tax chart. apple a $214 million tax break for a data center in iowa. amazon, 2.5 billion dollars tax break. there's a difference between corporations and individuals. do you see individuals being open to paying more taxes than the corporations? or what? >> when you look at corporations are very well connected and lobby very effectively.

they got those tax rate cuts down from 35% to 21%. democrats are going to creep up a little bit. maybe somewhere they had their way mid to high 20's. that's going to be tricky to get that through congress. wealthy individuals have lobbyists, they have groups there. it is such a small percent of the population on hold. what you hear in terms of public outrage, elizabeth warren only affects summary 5000 families. it's relatively small. you have to weigh all these things when trying to put it together. how you keep he just keep some of the people happy some of the time? >> it will be adjusting to see where silicon valley throws its weight behind. >> i think there will be the true believers. their candidates already have relationships in silicon valley. i think it will be fascinating to watch.

we're so early in the cycle. it's amazing to me we are talking about these already. there's plenty of time for the message to build in to see whether other democrats embrace a left tax policy or try to appease donors like they traditionally have. >> thank you both. intel shares fell the most in six months friday after the company issued a week 2019 forecast in its latest earnings report. the lackluster outlook marked a recent change. we spoke -- >> we are extremely excited by the end demand, the work flows, the consumer consumption of things that are driving the use of data continues to grow and be extremely strong.

we feel very good about are positioned in the market and the long-term trends. coming off of a record 2018, where our cloud business grew by 40% in the course of the year, will we see as a buildup of inventory in our customers, and what normally happens is they build the inventory, then they put it to use and consume it for a while, and then they come back and they build more. the reason they are building more as they see the workloads and the end demand continue to be extremely strong. what's going on right now? that going on right now as they are in the consumption digestion mode. there will be back in the second half of the year like they have been over the last seven years. we are very bullish on the long-term and going through a natural digestion after a fantastic 2018 performance for us. >> this isn't the cycle rolling over, this isn't the story beginning to turn?

>> we think that demand for data, which is driving the ultimate demand for servers in storage continues to grow and be extremely healthy. this is just the normal cycle we have seen over the last several years in terms of how they consume and then digest and that consume again. the end markets are very exciting, and the products we have during the course of 2019, very exciting as well. >> you have some formidable condemned others -- formidable competitors with good earnings this week. what are you doing to differentiate yourself and tell the intel market growth share story? >> first and foremost it starts with the size of the market read only look at the overall pan for silicon, it is a $300 billion market. and we are a large player with roughly 25% share.

we see significant opportunities to grow. when you look at the key requirements to position yourself for growth, we see six things from a technology standpoint. processed manufacturing, architecture, memory, interconnect software and security. we talked to our own customers that are increasingly important for them to solve growing demand to the end market. we have all those capabilities. we have been investing in those capabilities for a while so we can stitch together the technologies required not to have one product, but to stitch together the technologies that are solving our customers problems. we think we have the broadest, most diverse and best products in the industry.

>> intel interim ceo there. we discussed the continue challenge for traditional department stores, how one brick-and-mortar business is pushing into tech to succeed. that is next. this is bloomberg. ♪

♪ >> it's been a tough start to the year for u.s. retailers. the s&p 500 super composite deposit store index has fallen after macy's, nordstrom, and a number of free tellers -- of retailers posted week holiday sales. it shows how viable the promisor's art and customers change the way they shop. there on jupiter's kind breathes new life in the concept with technology. as part of our retail transformed series, emmett chandra spoke with the ceo of neighborhood goods, trying to revamp the traditional department store. >> we are not operating on a

wholesale basis. branscum and to pay fixed fee and we take a percentage of sales. there are 30 to 40 brands in our first location. will fluctuate. we have a modular architectural system that allows for brands that quickly move and resize the areas, all sorts of different purposes. they will be anywhere from two to 12 months. hopefully as we expand, move around that ecosystem. it's just a much different relationship. it's basically like opening up a pop-up. we are helping drive a huge amount of data where the opportunities reside around the business. >> technologies a huge part of where you can offer these brands. there's an app that allows

customers to navigate the story better. you're using cameras in a different way, to perhaps direct customers does of the they may or may not like. how are you leveraging technology? >> we have about 30 cameras in the room. what that's doing is it's not capture any person wally -- any personally identifiable data. for us, that means we can filter through e-commerce level, analytics and data brands that are accustomed to running the businesses in those sorts of figures. they can look at what particular areas are underperforming, particular product types that can be optimized. they may have an initial assumption that their audiences, women in their 30's, and find its women in their 50's. it allows for a really sort of responsive and really relevant

experience for the consumers as well as driving a huge amount of insight for the brands. we've launchgood is on the app store, allowing them to address with our store on their own time. >> is that funding that has really helped you sell the brands that are coming into the story? is that something that wasn't being offered anywhere else? >> i think of an element that has been popular. it's certainly not the core of it. i think they got excited about a traditional idea -- when you about traditional department stores. if you're a brand you care almost as much about yourself as he do about where your placement in the store is and how that may elevate your brand. that's an idea that's been fairly missing from most direct to consumer brands. >> this is summing that something it should be operating, happening in soho -- something that sounds like it should be operating, happening in soho you new york -- soho, new york.

>> it's a bit unorthodox and unexpected. it's an audience that has a huge amount of demand an appetite for the sorts of products and brands. will we see in general is the dallas, ft. worth area as a whole is in the top five markets or top 10 worst for most of these brands. you look at a market like that and this missed opportunity for them, where brands haven't gotten a physical presence there. some do that are a bit more advanced there is this area of its that care about them. we are looking at markets like that around the country and all sorts of different cities and areas and their respective satellites. anywhere from chicago to seattle and atlanta, d.c., boston, philadelphia, santa monica, all over the place.

>> your hearing about store closures. we'll cut of location would you be moving into? >> we are looking at a bunch of old department stores. our space has 14,000 square feet. i think we are having that we are aiming to have that size or larger. it is relatively difficult to have something that size and a lot of development. >> without your investors, you are back by -- they often focus on the digitally native brands. >> one of the first people my business partner and i spoke to, i think what we were fortunate to discover was there's a general appetite for a new retail experience. they are seeing a lot of portfolio companies with consumer venture funds and their

customer acquisition costs are rising for a lot of these bands. the customer value is dropping and visible retail is seen as a solution to that. you can sort of stumble into something and discovered on a much more organic basis. and from a loyalty perspective, you can sort of come back, you see it all the time. there is something subtle that is useful for the sorts of brands. >> matt alexander, neighborhood goods ceo along with bloomberg's emma chandra. which videos its targeting next. this is bloomberg. ♪

♪

♪ >> youtube is making changes to its recommendation algorithm. the company said it would stop recommending what it called borderline content. videos that include misinformation and conspiracy theories to the compass of the change would impact less than 1% of videos available on the site. i want to bring in -- who covers youtube for us as well. they say makes up less than 1% of the videos. but he gets 80% of the attention. what kind of borderline videos are we talking about here? >> they gave us three examples. there was one video that promised fake cures for serious illnesses. the other was flat earth, which is a conspiracy theory that has been hanging on remarkably, bridging popstar that pop-culture level. >> there are numerous videos on youtube claiming the earth is flat. >> a lot of people saying this

isn't a new problem, they've had this for years paid the other is 9/11 conspiracy videos. as long as youtube has been around -- what is happening to them in this new climate, there was a lot of attention on both sides. google has changed their recommendation rhythm in recent years and they are starting to prioritize things like they want youtube to videos to be watched longer. they key people watching more videos. the problem is you have this youtube rabbit hole more people will watch a certain video and no quickly go from something that's very slippery dust slippery with facts to something that's a flat out lie and information. now they've invented this new category called borderline, they are not removed, they don't violate the policies, they promised they are going to remove them from

recommendations. >> there have been justifications for leaving these videos on. who is that really hurting? other the -- these of the videos like conspiracy theories about 9/11, what would you to ever leave that on? >> he saw that with congress. there was a conspiracy theory about hilleary clinton getting a lot of momentum on youtube. youtube has historically been a free platform. if you are member years ago i stood up and kept the video, a very controversial video about islam. and they are concerned about where do we draw the line? if you take down certain videos, if you ban our policy around which those videos violate our explicit hate speech, then is a bigfoot video conspiracy theory? is a parody video conspiracy

theory echo youtube is always spouting this negative press it gets from one of their biggest constituents are the creators who produce youtube videos. there added money has gone down. i think that's where the company has seen all the attention and they are taking very slow steps. >> will this impact you significantly? >> one example i've heard is people that use youtube a lot of people that -- it's 1% in youtube world is a lot of videos. >> thank you so much. that does it for this edition of bloomberg technology. tech earnings will be in full swing next week. stay tuned for full coverage and analysis. we will have apple, facebook and amazon as they all report their results. you can check us out at

technology and follow our global news network on twitter. we will see you next week. ♪

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