♪ emily: i'm emily chang in san francisco. this is "bloomberg technology." president trump signs an order to prioritize artificial intelligence. -- to help the u.s. stay ahead of china. and inside an apple so-called black site. new report reveals the not so glamorous working conditions for the tech giants contractors. and the new york city mayor defending the deal to bring amazon to the big apple, but will the backlash spill over?

president trump wants u.s. to be a leader in artificial intelligence for years to come. he has signed an executive order to launch what he calls the american ai initiative. it comes less than a week after the president stressed that investments in cutting-edge industries in the future for the united states. our reporter covers tech corporate lobbying in d.c., and we have the ceo and cofounder of open ai that wants to secure an open and symbiotic relationship. how big a deal is this executive order? >> we will see how the impacts play out, but we are excited to see that the administration is declaring ai an important initiative. south korea has a billion dollar industry, france invested $1.8 billion. many companies in china are investing. if you look at the investment

around the world, is something the u.s. should be taking note of. emily: china has accelerated its investment 10 times in recent years. is it all about u.s.-china competitiveness? >> the white house declined to say it was about china, but the message was pretty clear. it is working that you're talking about these hard numbers, china accelerating 10 times in the provinces that are finding it. we don't see anything like that in this executive order. it's about making r&d funding for artificial intelligence a priority, but they don't say how much of a priority it should be and they don't appropriate action moneys. the power of the purse is congress, so we cannot totally blame the white house for not putting money into this, but i think it is worth noting that they are not putting a lot of hard funding totals or even suggesting that. greg: to the extent that it becomes an arms race, that

something that is very scary. i think we've seen in recent years that getting technology is transformative, but where there are national stakes at play, it's hard to make sure those will benefit society in a good way. it's more about making sure we set up the international dynamic so there is coordinated competition so we can coordinate on safety. the executive order does a good job of saying we do need to coordinate internationally and this is something we need to pay attention to. we don't know what magnitude yet. emily: one and part had this to say about the comparison between the u.s. and china on ai. take a listen. >> china is not going to surpass

the u.s. for another 20 years, with or without any regulation. the u.s. is so far ahead in research. however, in implementation, china has everything it needs. there is nothing the u.s. can do that will slowdown china. so it's kind of pointless in ai to look at how to regulate it. emily: is coordinated competition really a possibility between the u.s. and china in the current environment? ben: it remains to be seen how much they can really do that, given what is going on. it is interesting they are not talking about export controls or ip. that is something the u.s. used to try to constrain china on. in the escalating trade war that we have, in some ways it doesn't talk about the larger competition between the u.s. and china for who is going to control between first century

and the 22nd century of tech right now. i do think it is worth noting there is a lot less optimism that the u.s. will be dominant here in washington. to hear that china is 20 years out, that's not something you hear a lot of. you hear a lot more warnings that we are falling behind and it is time to step up and train that workforce and make those investments. emily: china is father behind on research but not implementation, is that accurate? ben: the u.s. let in science in the 1950's-19 70's. we have 19 different native languages that people grew up speaking. we really were able to get the best people from around the world. as long as we keep doing that, the u.s. will be ahead. emily: i want to talk about importance of building the workforce for ai.

listen to what one guest had to say. >> the more voices you have in the room when you're making solutions for the future, the more likely you are to find something that is compelling. the fact that study after study find that many women have completely different attitudes to privacy, data, and security, means that unless you have all those voices in the room, you're not developing for everyone. emily: it's no secret that the tech industry is very male-dominated. will we be able to get the right workforce in place to build the ai of the future and make sure that all perspectives are built into this new technology? >> our goal is to make sure that artificial intelligence benefits everyone. on today's trajectory, we are not looking good on diversity, making sure we have the right kind of people at the table.

it is up to organizations, the whole industry is responsible to make sure we are helping to bring everyone in and educate the future workforce and stakeholders. we have programs like open night scholars were reeducate people who are just coming into the field. within three months, people can become core contributors. emily: what should we be looking for next, now that this executive order has been signed? ben: a couple of things. where is the money going to be coming from? for right now they will probably have to locate it in their budgets, which is interesting. the other thing i'm watching is where is the industry going to come from? this is the targeted funding and education. i think they would want a little more of that, but that is another thing i will be watching.

maybe a third thing will be, how do you train the workforce, not just for the folks who are doing ai in the future, but those people who will be losing their jobs when they are automated by this. emily: ben brody in washington and greg brockmann, glad to have good people working on this. thank you so much for being here. coming up, apple's fancy cupertino campus offers many luxuries for its employees, but a smaller campus for contractors tells a different story. we will discuss the working conditions at apple's so-called black site,. this is bloomberg. ♪

♪ emily: most apple employees enjoy various perks at its

luxurious headquarters, but not all of its workers are benefiting. just six blocks away, the iphone maker operates a smaller facility for its contractors. according to workers there, the environment is far from ideal. several former contractor spoke to bloomberg, describing challenging conditions, including inadequate facilities, feelings of job insecurity. one described the conditions as dehumanizing. joshua, what exactly did you find here? joshua: it's on a place in sunnyvale called hammer would avenue. they are referred to as a black site. there are several hundred employees there, mostly contract employees although there are some full-time apple employees there as well. the contractors i spoke to described a pretty unhappy work environment. all of them said they kind of

took these jobs in the hopes of may be a foot in the door at apple. that seemed very unlikely once they actually got there. instead, they work for a company called apex systems which seem to always hold over them the idea that they may not make it through the day. there was a lot of secrecy that just made it feel weird. most people i talk to were unhappy about it. emily: a quote from a former contractor to you, it was made pretty plain that we worked at will and they could fire us at any time. there was a culture of fear that i got infected by and probably spread. then we have a statement from apple, we will work with apex to

review their management systems, including recruiting and termination protocols to ensure the terms and conditions of employment or transparent and clearly communicated to workers in advance. is apple and outlier here, or is this a common situation for larger tech companies, many of which rely on contractors? joshua: one reason i was interested in this story is because apple is not really an outlier here. as you said, the tech industry relies heavily on contractors and has for quite some time. in different versions, contractors it all the major tech companies tell similar stories about this. they often feel like they are in a lower tier. i don't think it is something the company's necessarily dispute. they say these are not people who work for us, we basically don't know about the specifics of how they are being managed. we have contracted with the company to get the work done. the question is, how much should they be responsible if those conditions are not up to the standards they hope to maintain in the own place of work. emily: there has been some

movement among google contractors to work together as a group, to advocate for their rights. is there any sort of sense that is apple contractors might do something similar or organize? joshua: there has been some talk. it is hard for contractors to organize in any way. there's a lot of job insecurity, which means you cannot take many risks or do anything that will make you seem like a troublemaker. most of these people don't work at apple for very long. the contract is for 12 months. some stayed for short extensions after that. when you're going to be in a place for a year or a year and a half, you don't really have the incentive to try to improve things over the long-term. emily: tell us more about what apple is saying about the story. joshua: apple has set a couple of things. as you said, they said they would talk to apex about how the job was presented.

specifically, some practices around hiring and dismissal. they also made the point that they are not aware of some of the specifics of the complaints about the management and conditions. apex is a contractor, which means they are in charge of their employees. it is apple's stance that since there may have been some things that happen, it is not on us, that could happen to anybody. emily: joshua, great reporting their, good story to check out. both uber and lyft have received initial feedback about their confidential ipo filings. the move by the regulator puts the ball back in the company's court to submit new draft for review. each had been impacted during the partial u.s. government

shutdown. what do we know about this feedback from the sec? >> we know the ball is in the court of uber and lift. it's going to be on them when they get something back from the sec, and whether they are open or closed because of the government shutdown. it will continue to affect the timing here. emily: how did the partial shutdown impact is companies? eric: the companies have not been that clear on timing. in the case of lyft, we had reporting that they were targeting march and april. it seems like in the case of lyft, they are still on track, barring any other change in strategy or a further government shutdown. emily: there are a lot of unknowns, including whether the government will stay open for

the next few weeks. if another shutdown happens, what does it mean for uber and lyft? >> a government shutdown could delay things because the companies are waiting for feedback. but the companies have strategic questions. they have always had to make decisions about whether they are ready internally. those questions are ok to the public and they still have to make them. the government shutdown is just an additional variable situation where there are lots of questions. emily: in terms of when they go public, are we still looking at march-april? eric: that is the best reporting we have and i would bet on that. on the uber side, this year, they talked about the first half. i think that is still very possible, but i think uber feels more flexibility to watch the markets and see what the

situation is. lyft still wants to go out before uber and make sure some of the key metrics, that they get to define nose and not have uber cloud the whole story. i think we will see that aggressive timeline and uber is plain net a little more closer to the vest. emily: interesting. eric newcomer, thanks for joining us. coming up, sonos shares hit hard by inventory concerns. will discuss with the ceo, next. this is bloomberg. ♪

♪ emily: sonos shares tumbled, even as results topped estimates. both remain broadly positive on the speaker company's future. this comes as the space continues to be filled with hot competition from amazon, apple, and google. patrick, good to have you here in the studio. you have only been public for a couple of orders but you had your second-most operable quarter ever, yet investors were disappointed by something they heard. what is driving investment in the stock? patrick: we are still a young, public companies so investors are still looking to see how we performed over a long time. hardware companies have not always fared so well. other companies have not persevered over the long-term.

emily: the speaker market has exploded with competition. amazon, apple, google, some more successful than others. who do you think of as your main competitor? patrick: a lot are helping more people get into the habit of listening out loud. there have always been bluetooth speakers and those kind of things. that is for google and amazon and those players have played in time. we are the option for those who get a taste of voice assistant or a music streaming service and want to listen on something a little better. emily: is anyone company taking more shared than others? you can listen to alexa on your sonos speakers. patrick: we worked with spotify, sirius xm, apple, you name it. we build products that are built to last for a long time and they work with all the services. you are not trapped in one ecosystem. you can always get whatever you want. that is why we are able to hit record sales last quarter. emily: amazon and google have

sold a lot of speakers. that is some in choosing a specific ecosystem. patrick: that's right, but the nice thing is you're using one of those products and you want to get something for another room of the home or you want something that looks or sounds better, and that also works with apple or google. that's where sonos comes in. emily: jpmorgan thinks apple should buy sonos. patrick: we are working hard to make sure we do the right thing to consumers. emily: would you be open to a deal if an offer at itself available? patrick: we would have to look at that and consider any offer, but i'm focused on making sure we are a successful public

company for the long-term. emily: tell us what you are seeing and what is plan b? patrick: we have been in china for a long time. every component is there as well. last week there was some noise that was incorrect about what we are doing. certainly we have had a global expansion plan for a while. a always want to be in the places where your customers are. we have always thought about taking our supply chain outside of china, not leaving china but augmenting it. we have accelerated those plans on the back of the tariffs noise, but that is something -- we have been working on that for months. we have a lot of customers in north america and europe so we want to be geographically close to those locations. emily: have you seen any impact as result of the trade war? patrick: we have not. we have been in a good position. emily: what would the timeline before moving to different

locations? patrick: that's something we would want to be a to do late this year or early next. we had a great january. i think it got overblown, quite frankly. emily: talk about new product launches beyond speakers. patrick: we are focused on new homes in new countries. today only five countries represent 80% of our sales. job number two is new products. we been focused on the home. now we are looking inside the home. you think about auto, headphones, commercial. there are other areas with unique possibilities. we are also looking at what services we can offer customers as well. what would be a great thing for listeners?

emily: would you ever become a content provider like spotify or apple? patrick: a lot of companies are doing that very well. we are looking for things to do for listeners that are different from other companies are doing today. emily: thanks so much for stopping by. coming up, a better idea of how bad the numbers for apple in china were last quarter and just how far they trail their rivals. that is next. later, amazon's search for a second headquarters may not be over just yet. backlash in new york may have the tech giant backing out. we will discuss. this is bloomberg. ♪ the latest innovation from xfinity

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technology." i am emily chang in san francisco. globalake a look at the tech stories. >> self-driving startup has raised financing from softbank. it's tech uses unmanned road vehicles to run errands like picking up groceries to delivering dinner. the startup has raised $1 billion from investors including softbank. states are considering

a response against the chinese link to hacker group after u.k. officials presented evidence of an alleged cyberattack by the group. areils of the hack classified, but the u.k. evidence is related to u.s. government against the hackers. the u.s. accuses them of a decade-long espionage campaign. we have a more clearer indication of how global smartphone slowdown affected apple, especially in china. 20% inshipments limited the fourth quarter of 2018, contrast that with the domestic chinese market dropping 10% in the same time. rival saw it surged 23% in the same quarter. those are the top global tech stories. emily: i want to stick with apple's iphone woes.

trends, notting , at did apple fall sharply the same time that while way rose. huawei rose. then we have huawei rising 23%. we have significant, apple was hit as we knew it would happen. huawei is pushing sales. worse.d have been

>> is it the china slowdown story about reticence of the consumer to spend big bucks for expensive phones, or is it a cyclical story for apples last cycle? >> i think it is a combination of the last two, people are holding onto phones longer because phones are more expensive. people cannot want to pay a thousand dollars up to $1500 on an annual basis to upgrade phones, especially if there are no major new innovations. when they did increase the price, it was one of the .iggest in iphone history the price jump did not make sense. what about the

speculation that this could be a sentiment issue tied to the u.s.-trade war. they speculated about an informal boycott in the u.s. products or apple products in china. it does not jibe. >> i agree with you. i do not think the boycott is a real thing creating an impact. 20% slowdown because of a boycott, maybe we could get away with 1% to 5%. 20%, thatking about is way more significant than a boycott. that is just one of several factors. >> i wonder if patriotic consumerism contributed to how did, probably the

most challenging period for that company. with that, we saw what is happening between the u.s. and canada with huawei's cfo. on that 1% to 5% impact on a boycott for apple, that would have the same effect percentagewise on people buying more huawei devices. i do not think most consumers care about those things. emily: what will you be watching the rest of the year? market share shifts are fascinating. it does not give you indication about what is next. will it get worse for apple? >> these come in waves. i think when samsung announced their new phone on that very 20 we will see a spike. then when apple comes out with the iphone 11, or whatever they choose to call it, with new features in september and

october, you will see another spike for apple. we are having these issues compounded by the iphone x not being significant. that is not something likely to repeat anytime soon. the 2019 iphone upgrade will be than thetable upgrade iphone x was. in 2020 we are expecting a bigger upgrade with 3-d camera, apple andbig year for a new design. longer-term, they are not in topliney on china growth. what are they relying on in terms of services and other geographic opportunities? >> i think there were big

opportunities in a few markets, there is south america, russia, africa, india, growing emerging markets besides china that have not been tapped. peaked in china, there are other markets they can go after, and they know this. they have talked about africa and india on earnings calls. they have mentioned south africa and russia and eastern europe. these are places they do not have much penetration, but they can. it will come down to iphones geared for those regions, they will have to play with the pricing and marketing and thoseonality to go after markets. they will have to realize consumers do not want to spend north of $1000 on a phone. they are trying to mitigate the lack of subsidies from recent years, but bringing down prices, giving up a little margin here or there in favor of volume

could help the company long-term . they know this better than anyone, they have been running this for decades. tim cook has been ceo for 10 years. they will fix it. >> thank you so much for joining us. ahead.re stick with us. this is bloomberg. ♪

emily: new york city mayor bill de blasio says securing tens of thousands of amazon jobs is mission-critical. de blasio spoke at a testimony hearing with the new york state assembly. sitesre were a variety of

, it became clear during the process that the company preferred long island city site. that is an area that has been developing, and there is an opportunity to develop more for what we care about. we care about more jobs for new yorkers and creating affordable housing, fixing our infrastructure. this is part of the city that is important to the future of the city. i want to emphasize as i looked at this situation, one of the biggest companies on earth offering the opportunity to ,ring 25,000 to 40,000 jobs this was a national competition. do i think it should be structured that way? no. it should not be cities competing with cities.

but i was at a gathering and heard a powerful point from a , senator bernie sanders, who said if we are going to solve that problem that requires national legislation to stop that were companies can set city against city. that said, we had a choice to make, and i think 25,000 to 40,000 new jobs, higher-level jobs that new yorkers want, that are available to a wide range of new yorkers, half the jobs in the tech sector are available to people who do not have a four people, it, we want was mission-critical that the city get those jobs rather than the cities that i thought were well situated. we believe a careful tracking of the competition, there were

several cities poised to win, and we had to strike the right balance. mayor billyork city de blasio there. i want to stick with amazon and long island city. what is your take on the controversy and whether amazon will back out of new york? >> i do not think they want to. that would be a big retreat, but onhas become a referendum amazon in general. you have new york city council members talking about recognition, facial recognition and if amazon should sell it to governments. you have amazon as a nonunion ugh these are blue-collar jobs.

it is not comfortable or what jeff bezos had in mind. very uncomfortable for them and threatening to pull back. that feels like a negotiating tactic. emily: we spoke to one of the state senators who had the vote on the committee to decide yet youea or nay. listen to what he had to say. is a type of extortion by amazon that got us in this mess. they think they can sit there and dictate terms and hope governments bend to their will, and it will not work. emily: by threatening to pull out, that is extortion. does this uncertainty have any impact on the company? >> not really, and i cannot think of another company that has two headquarters.

it is an odd thing to begin with. how many companies do this? walmart is in one place, boeing has one headquarters. the idea is that amazon would have a material economic benefit . i think that is true. leverage,negotiating and nobody is forcing new york city to do this deal. an impacthink it has on the company overall, i just found it amusing that they felt a need for a second headquarters. emily: i am dying to hear what you think about the bezos blackmail revelation. you have covered amazon for a long time. for many years, he gave off the impression of a family guy, hates the spotlight, does not do then he is but since in a number of different

industries, and then comes out with this blog post. what the you make of this evolution? >> amazon used to be the thing that we would talk about, and now you hear the news about jeff partly a virtue of how important and intertwined amazon has become in our lives. he has the mantle of the wealthiest person in the world, and his ownership of the washington post is a complex a fire. -- complexifier. he wants to focus on doing the right thing, and it is clear this negotiation and extortion attempt from ami rubbed him the wrong way and forced him into taking this enormous risk that personal information might come out. he is passionate about journalistic values and privilege, and he wants to take a stand. emily: could this have any

impact on the company? >> it could if it leads to distraction by senior management, yes. amazon has created so much value it is becausers, of the consistency of the management team. they have done an enormously impressive job across multiple industries. that is a rare thing, succeeding in retail, cloud, advertising, vastly different industries. it is never one person but the team he has built up, the top 15 to 20 executives are impressive. if something like this comes across and distracts senior management and bezos, shareholders should be concerned. this situation is complex, and on one hand you have jeff bezos sang he does -- ou have jeff bezos

saying --i did not realize the wall street journal trafficked in warmed over dribble from supermarket tabloid. what do you make of that? call, oner earnings of the reporters tried to ask if this would impact the ownership stake, whether he would have to sell shares, and the cfo mercilessly shot down the question. they do not want to have to -- they are trying to have it both ways. figure and does not want to does invite any scrutiny, and he is offended about how ami has gone about it. they are not clearly talking about a public-private situation. emily: meantime, business is

proceeding. amazon is buying a wi-fi router system. terms not disclosed, but they have a major wi-fi device in over 100 million households, the .lexa if you do not have good wi-fi, you do not have good alexa. that they will get into more physical devices, this is the third, the fifth attempt. if you want to be in the home, and amazon wants to get more into that and build brand awareness -- i do not know if alexa devices have led to more sales, but they have led to more loyalty and customer satisfaction. between a clear synergy that and these alexa devices. irony can you see any

--they are expanding into different categories, amazon does its own kind of surveillance. bezos is talking about blackmail of a different kind, but do you think there is a risk of bezos and amazon being called out for that? if they make mistakes. there have been a few high-profile ones. i was thinking of alexa turning over a private conversation to a contact. they call that a snafu and apologize for it. if those were to found not to be missing data for advertising purposes, they open themselves to charges of hypocrisy. as for now, i do not see that yet. could, it is a trade-off.

if you want more personalized services, you have to give information. the ads are targeted because there is a trade-off, you are allowing them to track your information. same thing for amazon. hopefully the recommendations are better because you supplied them, some people will cross the line. i am sure we will deal with this issue for the next five years. whether they get into the amazon hasosshairs, generally been good. people'sthey are in homes, the more they have access to data, there was greater. >> thank you both. we will wait for this saga to unfold. reddit users have taken to the platform to protest tencent's investment, how it could impact

green speech. this is bloomberg. ♪

emily: reddit announced it has raised $300 million in new funding, including funding from tencent. usersrked backlash from concerned about censorship. joining us is selina wang. it is an unlikely source of funding for a website that private self on free speech. what is driving this? reddit is blocked in china, but this is not too unusual for tencent. they are the largest investor in stake, andth a 50% they are in tesla and spotify and uber. with reddit it makes sense when you look at the gaming.

a lot of it are games they have a stake in like fortnight. those are popular among reddit users. reddit did not give us a comment on free speech issues. presumably they do not intend to do anything differently. selina: there are users frustrated about this investment, and thousands of comments on leaks to stories about investment. some users have pointed out that tencent is an investor in a lot of tech companies that have not seen changes with censorship or content since they invested/ , but it is a concern for users. rules tencent follows the the chinese government has put out. selina: it follows rules within the borders of the country it operates in.

it will not meddle with spotify or snapchat abroad. it is worth pointing out it is about a $150 million investment valuation. million it has a reputation for being a passive and stable investor. for reddit, it provides expertise and has become the juggernaut in china. emily: we will be watching reddit threads to see how this pans out. that does it for this edition of "bloomberg techology." we are live streaming on twitter. this is bloomberg. ♪

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