♪ >> i'm emily chang and this is the best of bloomberg technology , where we bring you all of our best interviews from the week. earnings season is in full swing with ibm and delivering a strong results. does it signal a bullish order for tech? davos,kes a splash at giving new details about the self driving cars. we bring you our highlights with their ceo. and netflix's hollywood milestone, they get their first

ever best picture oscar nomination, cementing their place in the film industry. first, shares of ibm rose the most in a decade after the company gave a positive forecast and fourth-quarter results beat analyst estimates. morgan stanley calls of the cleanest quarter in years next to growth in the cloud and ai. discuss, we caught up with bloomberg intelligence senior analyst. >> the surprise was a division called global business services. they saw some strong consulting numbers, which means that spending is strong and they follow affect from a strong 2018. emily: ibm has been saying that the cloud would it be big -- would be big, but there was a whether ibm as to could keep up with the nimble competitors.

is this proof they can live up to the promises? test will be when the red hat acquisition is close and they offer more products. their cloud revenue is somewhere between 10-20% depending on the quarter, far lower than players like amazon and microsoft growing at a much faster pace. on the infrastructure and application side, companies like salesforce are growing north of 20%. in contrast, ibm being such a small player compared to all of them, its growth rate is ok. it is not great. emily: for years, ibm has also been touting other initiatives like watson, like the weather channel, like quantum computing. the question is always when will this add to the bottom line? the ibm ceopoke to and she had specifics over whether quantum computing revenue would be impactful. take a listen.

>> what is a timeframe until quantum produces commercial results? >> we are probably in a 2-5 year time frame he will start seeing commercial businesses doing commercial applications, that means revenue. emily: is this going to be a big business? >> it could be a decade away. you and if you could come up with a billion dollars or so, it would take seven years together. it would be a very small drop. we said washings that when the acquisition is closed, they give you a lot more software products and make them a lot more relevant when it comes to private or hybrid cloud. emily: i have a chart here looking at the three most valuable companies, apple, amazon, and microsoft. you can see the blue and yellow lines. amazon and microsoft surging ahead, taking the market cap crown from apple.

, there is a growth in services. have what it takes, what investors are optimistic about? as far as cloud is concerned, we think ibm is a district third or fourth we cannot really make when it comes to private installations or hybrid cloud. that is where the spending will go for the next several years. in our view, microsoft is well-positioned. they can help ibm's strategic positioning. when will they close and there won't be a competing bid? >> that is a tough question, i won't be the right person to answer that. but having said that, we won't see any its of this point.

close, it gives , make some relevant again when it comes to next-generation computing. emily: the world economic forum took place in davos earlier this week and tech was at the center of the conversation. top executives mike sheryl sandberg joined several world leaders to discuss problems. global tech sent us this report wednesday from the scene. on thesportation was agenda at the world economic forum in davos. i sat down for a panel discussion with hoover's ceo, ceo, and the boeing ceo. alle were no regulators, so of them were able to wax optimistically about the future of mobility. we talked about autonomous

driving, air taxis, drones, and the hyperloop. they are all eager to change how people view their companies and to bring a new solutions to moving around in cities and around the world. it is difficult to pinpoint one consistent theme when it comes to technology at davos. the topics and panel discussions have ranged widely from the impact of facial recognition technology to privacy in the digital age to the demographics of the gate workforce. -- gig workforce. ans always provides opportunity for ceos to signal virtues and talk about passion. one ceo spoke about the responsibility he believes ceos have to get back. bill gates is here talking about his objectives in terms of global health. about sandberg is talking the way she thinks publishers can succeed on the facebook ecosystem. there was a clear

sense that tech ceos were here to apologize for the impact they had on democracy. prevailingthere is a sense that the world problems, dysfunction in washington dc, the brexit stalemate, that the world's problems have equipped -- eclipsed the problems of silicon valley. this is brad stone from bloomberg, reporting from the world economic forum in davos. emily: tesla announces cutbacks on production of certain vehicles. will profitability be under pressure? and if you like bloomberg news, check us out on radio, the bloomberg app, bloomberg.com, and in the u.s. on sirius xm. this is bloomberg. ♪

emily: tesla has announced it is reducing the hours they are producing the model three sedan, adding concerns about demand for their higher-priced and more profitable cars.

workers at the tesla factory last week were very concerned that layoffs were in the works because they had heard reduction of model -- production of model x is would be cut back. then, musk said he would lay off 7%. this is the first time they are actually hitting production workers, not the salaries like sales and marketing, but people who actually work in the factory. now we are hearing that as an expert action has been cut back. surprising,at because they didn't drop the lower-priced model and all is on the model three. emily: is this the sign that scaling up and high prices, large margins, is all of this coming to a head? s andcould be the model ask have been in production -- and x have been in production for 7 years.

most people who want one have one, and the price difference is just not as large as he used to be. emily: in addition to the production cut, there was also the price and cut. demand is coming to a ceiling? >> perhaps. we'll find out more when they report earnings. do many model exes -- x's they have to sell this year? >> we also heard that europe and china might offset some slowdown in the u.s.. now we are seeing the slowdown, weak retail sales, is this going to hurt that prediction? >> china has always been a wild card for tesla because of the tariffs and trade war. strong brand, but everyone is concerned about the chinese auto market slowing down. how fast are they going to get this factory up and running? >> we saw apple get hurt by china revenue forecasts.

is there a sense of the growing nationalism, in addition to the slowdown, could hurt these numbers? >> it could, we don't have a clear indication yet. tesla had a very warm reaction when they went to shanghai, so the sense is they are actually racing to build so they can start production. emily: how does that factor into all of this? you have job cuts, production slowdown, and then this $5 million plant in shanghai. >> we don't have the details as to how it is being financed about the rumor is largely due -- through local chinese debt. they have to build that planned to avoid the tariff issue, which makes the cars cost prohibitive. recent negative annals reports by tesla, they keep getting beat, the shares he falling. what is making investors the most skittish? >> for the long time, the narrative was that they were a growth company, they spend a lot, but they are growing,

growing, growing. now the demand question has really up for grabs -- is really up for grabs, because this is the first time they have pulled back on production. >> when we talk about production, how much of those layoffs is increasing efficiency and how much is not selling enough? >> that is an interesting question. we don't have details from california as to which positions were cut, but certainly, production hours and production go hand-in-hand. on one hand, if you're incredibly efficient, you don't need as much labor, but also if you are not making enough cars -- making -- selling as many cars. in june, he said it was a hard decision but he would do it said he never had to do it again, month later, another 7%. a lot of these folks are people who made it to the first round of layoffs in june thinking they were safe, they turned down other job opportunities. this game is a real surprise. >> and in that announcement,

musk said it would be a difficult road ahead. what are some of the turning points we are expecting to see? >> they really need to get this $35,000 car which they have been promising. until that is out, they will be in trouble. that is what people have been waiting for four years. it to everyoned they could. hulu is responding to a netflix price hike by lowering the price of their subscription by 25% six dollars and month. just last week, netflix raise the cost to $13 a month. coming up, a new report from you marketer outlines why chinese growth is still booming despite a slowdown in the region. later, our exclusive conversation with priscilla chan about zuckerberg's latest push to impact the housing crisis in

san francisco. this is bloomberg. ♪

emily: this week, huawei's that the chair waiting on the ongoing trade war. >> we have seen the damaging effects that many of us companies and some other sectors have had from the trade war. technology industry is highly reliant on the global supply chain and ecosystem. we are probably suffering the most right now. us allies arell being urged to avoid using their equipment due to fears of espionage.

i spoke with the china digital economy fellow on tuesday to discuss your -- to discuss. >> they have stated they want chinese global brands competing in high tech sectors. so it is a real blow for aweianies like quality -- hu which have managed to be global companies. many are beginning to reevaluate their plans to move into markets are subject to u.s. influence. emily: there is certainly an argument to be made that regional economies are more closely intertwined than we understand. i have a chart here that shows that manufacturing slowdown in china, that actually impacts the united states economy. does he have a point when he says that the trade war is going to be damaging or global tech -- for global tech? >> the tech sectors are highly interconnected, globally.

when we look at unwinding supply chains, walking back are into the, global partnerships, this is not easy to do. there are a number of companies reevaluating reordering take away from china, but there are some things that are not possible. but these conversations are going on. >> canada also reviewing the access of huawei to their five g network. we were able to catch up with their foreign minister, have a listen to what they have to say. >> canada has spoken to united states about the case. it is a decision for the united states to seek the extradition of someone from canada, that is up to them. and then they have to make the case for the extradition in our legal system. 's csoting huawei extradited could take years. will this be a thorn in relations? >> for the last couple of weeks,

there have been a lot of rumors. if she actually going to be extradited, will she be released? it is so sensitive because of the trade negotiations, but the reality is that even if she is released, u.s. ambitions to dismantle huawei are much bigger. there is a global effort to take them down, and we will see it even if the case drags on. >> but it was not just about huawei. last year, we saw that ban against zte which nearly crushed the company. huawei has some vertical integration, so i wonder how well positioned they are in overcoming this. zte was so dependent on the u.s. market that a denial and abrupt the company to its knees. it is not as grave for huawei,

but when we talk about the data states going to allies and telling them to block them from their network, that is crippling for the company. sacks,that was sam fellow at new america. china will edge of the unites states as the biggest retail market in the world. online sales are a big part of their growth, with a large percentage estimated to come from e-commerce. bloomberg spoke with a principal keter onat e-mare wednesday. >> it is dampening our growth forecasts a bit, we are bringing it down to 7.5%. i will still run ahead of gdp growth, and certainly, a strong growth rate on a very large number. a big part of what is driving it is the growth of the inner future. and engageome online

in commerce for the first time. >> a great deal of that has to do with mobile penetration. there's some sense of saturation limit comes to retail sales online. >> about one out of every three dollars in retail will be transacted online. incredible, that number for mobile commerce surpassed 80%. so in the u.s., eight out of every $10 were about half of the percentage. that is fueling the growth we are seeing. and if you look at mobile in the context of all of retail, it will be upwards of 30% of all spending. i spoke to alibaba's president last year and he mentioned that big-ticket items are slowing, that areas like cosmetics, fashion, and apparel are going strong. is that a broader trend you are seeing? yeah, trying to rein in

credit and china will affect big-ticket purchases. we saw a slowdown in the smartphone market already. that is something that is obviously of concern and can push of those numbers quite a bit. we are seeing the u.s. being bolstered by high ticket purchases and e-commerce. i think the reverse is happening here in china. longest time, it feels like these behemoths like alibaba have had a head scratching moments when it comes to international expansion. how to navigate a structurally, domestically chinese phenomenon elsewhere in the world. but i want to bring up this chinesetriguing, internet users more than doubling the entire u.s. population. when you look at statistics like this, do they actually need overseas markets? >> they can certainly grow to be huge. in fact, we are forecasting that alibaba's gross merchandise

trillion, surpass $1 which is really incredible to think about. obviously, that is not all fall there is ae, but huge amount of volume. do they need the other markets, no, but if they're going to continue to grow, they want exposure. is that we are seeing these companies can expand somewhat into other parts of asia, but it gets harder and harder as you start thinking about other markets in europe and north america. shows the the data small players are starting to eat into alibaba's business. you will see this company reached almost $70 billion in 2018. what are the smaller players doing that alibaba and others are not? >> all of the players, even alibaba is going to grow 20%, so the market is growing, but it is eating into their chairs.

duo is an interesting example, it is like groupon on steroids. it took this group buying phenomenon and translated into ,verall and tier three markets so they are very aligned with the fastest-growing segment of the population. that has really fueled incredible growth. when we think about the fact that the company was founded in 2015 and is already going to take 7% of the e-commerce market overnight. , despite the broader economic slowdown in china and growing nationalism, are you still seeing international retailers wanting to double down to reach those large, growing middle-class consumers? >> it is always a double-edged sward. -- sword. going into an always be difficult. inry company wants to go often finds that it is a little

more difficult and you will see pullbacks. they will continue to try, i don't know how successful they will be. we will have to see what happens there. bigndrew, what is the next thing we are not already talking about in this space? isi think pinduoduo something that is new and novel and has taken off. so i'm wondering if we will begin to see these new flavors of retail. not just that target this segment, but brings in the mix to precipitate a new form of buying. that is what i am looking at, usually you have followers and have a real success story. so what is the next one that will take shape? will take shape in china or other parts of the world? emily: that was andrew glicksman -- lipsman with e-marketer. up next, we talked to priscilla chan and the new housing initiative. he also talk about how difficult it is to run a philanthropic

organization tied to facebook. bloomberg tech is live streaming on twitter, and follow our global news network on twitter. this is bloomberg. ♪

emily: welcome back to the best of bloomberg technology. the philanthropic organization started by mark zuckerberg and his wife priscilla chan is having a fresh effort to reduce the housing shortage in san francisco where an explosion of tech have exacerbated inequality and in affordability prices for middle and lower income residents. i spoke with priscilla chan and fred blackwell about the project in an exclusive interview. priscilla chan: i was really intimidated and i tried not to get involved. is beyond what any

individual organization can tackle. i realized, working as a pediatrician and educator, it is the common denominator for society. when you look at a child who is not getting enough sleep, they cannot focus in the classroom and often times it comes to a kid not having a safe place to sleep, not having a place to store their medication or rest at home. i realize that all the issues we care about in order to make sure our children are healthy and successful do boil down to housing. we spent a lot of time working with fred, religious groups, talking to businesses, community organizers, what could we do together and how can we lever policy? because we are small. we can contribute and do our best but how can we build a

partnership that encompasses all of the stakeholders involved in the bay area. emily: some people think a small number of wealthy people architecting policy is a scary thought, it works when you agree but also much when you do -- don't. priscilla chan: we have had the opportunity to work closely with groups,th faith-based this is not something one individual group came up with but a collaborative of folks that have come together with different viewpoints around some consensus about what needs to get done. emily: how much affordable housing will this kind of money create and how does the compared to what the area needs? fred: between the investment fund and policy fund, we will be able to produce 8000 units of affordable housing. also, stabilize many more households than that.

not only are we talking about supporting the production of new housing but also talking about the preservation of existing affordable housing. programappen ambitious about protecting those vulnerable to gentrification and displacement in the bay area. together this will have substantial impact. emily: businesses are involved, facebook, microsoft just announced a 500,000 -- eight initiative in seattle, why are tech executives putting their muscle and money behind it now? priscilla chan: the real is asian this is a problem that impacts the -- this is a problem that -- the realization that this is a problem that impacts the community. place where a people from different backgrounds can come and be successful. looking atnding that

opportunities like the partnership where they can be part of being a durable solution. going at it alone is a challenging thing and the fact that the partnership has spent all of this time defining what is possible and what the needs are. i think having different voices and stakeholders involved is attractive for everyone. community leaders want to know that business is involved and business wants to know that folks who are close to the problem and organizing and advocating for the long-term they can invest in. that collision of brilliance is exciting about the partnership. emily: amazon has been an interesting case study because they left seattle to look for a second headquarters in part because they are blamed for the housing crisis and new yorkers do not want amazon to come to their city. how much is take exacerbating the housing crisis -- tech

exacerbating the housing crisis? fred: the participation of the tech sector and how it has evolved, when we started these conversations, there was a sense that these kinds of issues were somebody else's problem. what is happening is that folks in the corporate sector and tech sector specifically are starting to see this as a business problem, a situation where it is hard to recruit good workers, people are getting job offers in the bay area and they will look at craigslist and say, no thank you. [laughter] fred: this is not just a social problem, this is a business problem as well. , the it has taken a while tech sector is starting to take

in more, not only what the contribution has been to problem, but understanding a solution. emily: we use the word crisis, what happens if these policy changes do not happen and the things you're calling for do not work? fred: the list is long to tell you the truth. i will start with the corporate sector and the economy in the bay area. ofhink we are on the brink killing the goose that laid the golden a. if the trajectory stays the way it is, people will make different decisions about how -- where they will locate their businesses and people will start leaving the bay area because it is too expensive, business cost are just too high. emily: a hundred percent of your time at czi and it has evolved considerably. how difficult is it to run a philanthropy connected to the facebook brand given the concerns about privacy and data?

priscilla chan: we have made tremendous progress in figuring out where our nation is at at czi in the philanthropic space. i want to emphasize the fact we are small compared to the fields we are working on and not working on issues that are brand-new. we are focused on science, teacher and prevent and manage all disease, making sure students have access to high-quality education, focusing as an opportunity, thinking about how we can unlock the opportunity that is lost in our criminal justice system, immigration system, housing. these are big problems compared to what we are able to do in a given year. emily: at the same time you are trying to do this good with the wealth facebook has created, people blame facebook for a lot of bad things, they want leadership changes.

how do you reconcile that? priscilla chan: we have built a two separatet czi, organizations. what isworking on happening with facebook and we have the opportunity to make sure we internalize those losses. we have an independent organization with strong leaders that are dedicated to this work in the long term. we are excited about the opportunity to be best in class and learn those lessons alongside facebook, while building our own organization. emily: there is overlap so chan zuckerberg san francisco general hospital has your and mark's name, some say his name should be taken off in light of the current scandals. how do you respond to that? priscilla chan: san francisco general hospital is a place physician,w up as a

as a woman that cares for families and children. i slept many nights rushing through the emergency room to the delivery room and see how important the hospital is as a safety net resource to everyone in this community. i could not be more proud and honored to be able to support the work that goes on there because i have worked alongside all of those doctors, nurses, technicians. i want to see that hospital succeed and am willing to do what is necessary to make sure that community has what it needs. to putproud to be able machines into the surgery units to get the imaging units in place because i have seen firsthand how challenging it can be when you do not have the right resources to serve our cities most vulnerable. emily: the data issue is important. can you reassure people their

data is protected, it is not going back to facebook? priscilla chan: our organizations are completely separate, there is no sharing of data. data incredibly seriously. in our education work, we signed on to the gold standard of student and family privacy policies. in science, we have committed to open standards and work closely with scientific leadership to make sure everything we engage with is treated with the highest level protection. that is a core competency we need to be serious about and take the responsibility very seriously. we have teams across the organizations thinking about how to be the best stewards of this so we can bring the promise of technology beyond getting pizza to this office immediately.

the problems of technology should also be applied to making sure we are advancing science, that we are allowing students to reach their highest potential. promise ofe technology beyond the consumer world to a place where we can have real social impact. emily: that was my conversation with priscilla chan, founder of the chan zuckerberg initiative and fred blackwell, ceo of the san francisco foundation, catch the full conversation online. starbucks is expanding its ts,ivery service with uber ea delivering san francisco and expand to other cities in coming weeks and says it plans to bring delivery to nearly a quarter of u.s. coffee shops in seven cities in spring and will test programs in other countries is year. starbucks had 95% of its menu will be available through uber eats and as a high-profile brand to uber following the deal with

mcdonald's in may. coming up come as the world's population grows, could digital ids benefit those falling through the cracks in society? later, netflix is dominating the oscars, how hollywood is reacting to the sweeping of the industry. this is bloomberg. ♪

emily: as the world population top 7 billion people, more important on how to identify and try people around the globe, a new report outlines the benefits of adopting a digital id which can impact government benefit, health care, financial services, and jobs. a partner at mckinsey spoke to us about the report on wednesday. is easy to.s. it take identification for granted but if you go to developing countries, one billion people who have no form of legal identification. they cannot interact with the government or open a bank account, if they wanted to start a business or register it, they could not. billion people in the world have id but they do not give full functionality. for you or me, i forget passwords regularly, i forgot two this week and it is hard to interact with companies. we wanted to say, given those challenges, what is the benefit of an identification that can allow you to identify yourself

through digital channels? >> it would make all of our easier's do not remember a million password but the digital id program in certain countries, it has been in for mated with mixed results, where it -- has it been successfully done? >> it is in the early stages. if you look at estonia on the small side, a small country with all of their population using a digital id. on the larger side, india has 1.2 billion people right now on a digital identification system. >> in your research on seven countries with full ip coverage could economic -- unlock s, how does that value creation happen? >> we looked at seven countries, china, ethiopia, nigeria, the u.s., and the u.k.,

across all of those countries, there are six kinds of ways in which individuals interact and where value can be created through hundreds of use cases. i interact as a consumer with a company. another is i interact with a worker with my employee, and i have a micro-enterprise and want to start a business. i will interrupt as a taxpayer or a beneficiary with my government or just be a citizen. >> any digital national id program, the world's largest, shown to be compromised, what are the greatest risks with privacy, identity fraud? is an important question because on the one hand there is a potential for enormous good that can be unlocked by a digital id. there are risks and the risks of misuse. the july the be a dual use technology, something like nuclear energy where there is potential to unleash a huge amount of potential value but there is also potential for downside if it is in the wrong hands. things like a proper governance, the right legal framework, and

very careful controls and rules around privacy and user consent are incredibly important. for cicely be things needed to allow the benefits to be realized. >> they have called digital id one of the gravest risks to human privacy and identity. how do governments live in -- limit that downside? >> governments need to look at for id in the digital world -- there are a lot of governments that are currently working as in california, even in at the right ways to set up legal frameworks around how data can be shared and what sort of consent people need to get in order to get those benefits. technology can help but not the solution alone. you need the legal framework and the right governance. >> one of the differences in the way emerging economies versus developing economies should

implement these programs? will developing companies -- emergence countries about -- >> they are going from places where you have -- let me give in a statistic, 45% of women low income countries do not have a legal form of identification. compared to 30% of men and developing countries, you have a huge gender gap and often of instances where not enough people are included and digital id provides this mechanism for inclusive growth and allowing people to access the digital world there. >> how will technologies like improving facial recognition, fingerprint scanning, iris scanning? >> the technology answer is they are getting cheaper and better at producing -- reducing false positives and false negatives, making sure they are identifying the right person. to technologies really need

go along with the right protections for their use. >> and what countries have you seen the private and public partnership help to achieve this digital identification? estonia is a good example, the government in many ways is the real driver but what they do enables at ellis its the participation of the driver sector tremendously. you have a country like sweden, in sweden, there is an identification program that was started by a consortium of banks that has worked together to establish this program that has been used for certain public purposes. emily: that was olivia white. to improve its delivery service and will test a fleet of robots in the seattle suburbs, the e-commerce giant announced a trial of amazon scout, and autonomous delivery device the size of a cooler that rolls along sidewalks at a walking pace.

it will use six robots at the moment to navigate around obstacles like people and pets. netflix continues its campaign to dominate the entertainment industry and we will discuss the strategy as awards season you to. up.wards season heasts this is bloomberg. ♪

emily: netflix has one more reason to break in hollywood as they scored 15 oscar-nominated, including best picture for roma which got 10 nominations including best director and cinematographer, tying with the favorite for the most nods. this recognition amid news they are joining major hollywood studios in the motion picture

association of america. we discuss. >> it is hollywood's highest prize voted on by a large group of the industry but the industry itself, not some group of journalists like the golden globes. it really is representation that netflix is considered one of the -- i do not want to say one of us because it does not include me, but one of hollywood. there are up to 10 that can be in the best picture nomination. it is a black and white film. very little dialogue. there are no stars. itself, thehe film cinematography, directing, the acting, it is a raw film. it says a lot about the -- what

they have done, the director, to make the film, to market his film, it says a lot to filmmakers and creators who may be hesitant to go to netflix. >> the theater companies, amc, regal, excluding roma from their all-star showcases, only having the ones that have traditional theatrical release, 90 days from being available to the public, amc say for more than a decade movie lovers have enjoyed our best exercise guest to catch up year theythis nominated a film never licensed to play in our theaters and is not included in the amc best picture showcase. is that a little sour grapes or do they have a point? is this coming to a head? >> it is not sour grapes, just

their stand, they do not want to cave in any capacity when it comes to this exclusive run they have and the window of three months. it has little down, back in the day it used to take forever because dust before you could see a movie at home and now it is three months and usually disney movies, the big superhero movies that last the longest before available at home. netflix did part with a strategy of roma and gave it three weeks before it let it stream at home. even then the big theaters were not going to show it. a lot of people, when the film is nominated, or when it wins, they can see it at home but may choose to go out as a date night , go and see it at the cinema and pay for popcorn. they are choosing to not show it. of -- theort

principle. it is going to be a big question in the next year, two years, other streaming platforms come online, will it come to a head. that does ita for the best of bloomberg technology, we will bring you the best of tech throughout the week. we are livestreaming on twitter. follow our global rigging news network. this is bloomberg. ♪ place, the xfinity xfi gateway.

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>> i am scarlet fu and this is bloomberg etf iq. ♪ economics professor q, thes to etf i relationship with etf are complicated. ,rom despair to you for your the price action and sentiment the last two months is testing investor conviction, a behavioral scientists explained what really happened in